T&D JUMRANI SUMMER 2014-15

QUASI DELICTS AND TORTS DEFINED AND DISTINGUISH

G.R. No. 97336 February 19, 1993
GASHEM SHOOKAT BAKSH, petitioner,
vs.
HON. COURT OF APPEALS and MARILOU T. GONZALES, respondents.
Public Attorney's Office for petitioner.
Corleto R. Castro for private respondent.
DAVIDE, JR., J.:
This is an appeal by certiorari under Rule 45 of the Rules of Court seeking to
review and set aside the Decision 1of the respondent Court of Appeals in CAG.R. CV No. 24256 which affirmed in toto the 16 October 1939 Decision of
Branch 38 (Lingayen) of the Regional Trial Court (RTC) of Pangasinan in Civil
Case No. 16503. Presented is the issue of whether or not damages may be
recovered for a breach of promise to marry on the basis of Article 21 of the
Civil Code of the Philippines.
The antecedents of this case are not complicated:
On 27 October 1987, private respondent, without the assistance of counsel,
filed with the aforesaid trial court a complaint 2 for damages against the
petitioner for the alleged violation of their agreement to get married. She
alleges in said complaint that: she is twenty-two (22) years old, single,
Filipino and a pretty lass of good moral character and reputation duly
respected in her community; petitioner, on the other hand, is an Iranian
citizen residing at the Lozano Apartments, Guilig, Dagupan City, and is an
exchange student taking a medical course at the Lyceum Northwestern
Colleges in Dagupan City; before 20 August 1987, the latter courted and
proposed to marry her; she accepted his love on the condition that they
would get married; they therefore agreed to get married after the end of the
school semester, which was in October of that year; petitioner then visited
the private respondent's parents in Baaga, Bugallon, Pangasinan to secure
their approval to the marriage; sometime in 20 August 1987, the petitioner
forced her to live with him in the Lozano Apartments; she was a virgin before
she began living with him; a week before the filing of the complaint,
petitioner's attitude towards her started to change; he maltreated and
threatened to kill her; as a result of such maltreatment, she sustained
injuries; during a confrontation with a representative of the barangay captain

of Guilig a day before the filing of the complaint, petitioner repudiated their
marriage agreement and asked her not to live with him anymore and; the
petitioner is already married to someone living in Bacolod City. Private
respondent then prayed for judgment ordering the petitioner to pay her
damages in the amount of not less than P45,000.00, reimbursement for
actual expenses amounting to P600.00, attorney's fees and costs, and
granting her such other relief and remedies as may be just and equitable.
The complaint was docketed as Civil Case No. 16503.
In his Answer with Counterclaim, 3 petitioner admitted only the personal
circumstances of the parties as averred in the complaint and denied the rest
of the allegations either for lack of knowledge or information sufficient to
form a belief as to the truth thereof or because the true facts are those
alleged as his Special and Affirmative Defenses. He thus claimed that he
never proposed marriage to or agreed to be married with the private
respondent; he neither sought the consent and approval of her parents nor
forced her to live in his apartment; he did not maltreat her, but only told her
to stop coming to his place because he discovered that she had deceived
him by stealing his money and passport; and finally, no confrontation took
place with a representative of the barangay captain. Insisting, in his
Counterclaim, that the complaint is baseless and unfounded and that as a
result thereof, he was unnecessarily dragged into court and compelled to
incur expenses, and has suffered mental anxiety and a besmirched
reputation, he prayed for an award of P5,000.00 for miscellaneous expenses
and P25,000.00 as moral damages.
After conducting a pre-trial on 25 January 1988, the trial court issued a PreTrial Order 4 embodying the stipulated facts which the parties had agreed
upon, to wit:
1. That the plaintiff is single and resident (sic) of Baaga,
Bugallon, Pangasinan, while the defendant is single, Iranian
citizen and resident (sic) of Lozano Apartment, Guilig, Dagupan
City since September 1, 1987 up to the present;
2. That the defendant is presently studying at Lyceum
Northwestern, Dagupan City, College of Medicine, second year
medicine proper;
3. That the plaintiff is (sic) an employee at Mabuhay
Luncheonette , Fernandez Avenue, Dagupan City since July, 1986
up to the present and a (sic) high school graduate;

4. That the parties happened to know each other when the

manager of the Mabuhay Luncheonette, Johhny Rabino
introduced the defendant to the plaintiff on August 3, 1986.
After trial on the merits, the lower court, applying Article 21 of the Civil Code,
rendered on 16 October 1989 a decision 5 favoring the private respondent.
The petitioner was thus ordered to pay the latter damages and attorney's
fees; the dispositive portion of the decision reads:
IN THE LIGHT of the foregoing consideration, judgment is hereby
rendered in favor of the plaintiff and against the defendant.
1. Condemning (sic) the defendant to pay the plaintiff the sum of
twenty thousand (P20,000.00) pesos as moral damages.
2. Condemning further the defendant to play the plaintiff the
sum of three thousand (P3,000.00) pesos as atty's fees and two
thousand (P2,000.00) pesos at (sic) litigation expenses and to
pay the costs.
3. All other claims are denied. 6
The decision is anchored on the trial court's findings and conclusions that (a)
petitioner and private respondent were lovers, (b) private respondent is not a
woman of loose morals or questionable virtue who readily submits to sexual
advances, (c) petitioner, through machinations, deceit and false pretenses,
promised to marry private respondent, d) because of his persuasive promise
to marry her, she allowed herself to be deflowered by him, (e) by reason of
that deceitful promise, private respondent and her parents in accordance
with Filipino customs and traditions made some preparations for the
wedding that was to be held at the end of October 1987 by looking for pigs
and chickens, inviting friends and relatives and contracting sponsors, (f)
petitioner did not fulfill his promise to marry her and (g) such acts of the
petitioner, who is a foreigner and who has abused Philippine hospitality, have
offended our sense of morality, good customs, culture and traditions. The
trial court gave full credit to the private respondent's testimony
because, inter alia, she would not have had the temerity and courage to
come to court and expose her honor and reputation to public scrutiny and
ridicule if her claim was false. 7
The above findings and conclusions were culled from the detailed summary
of the evidence for the private respondent in the foregoing decision, digested
by the respondent Court as follows:
According to plaintiff, who claimed that she was a virgin at the
time and that she never had a boyfriend before, defendant
started courting her just a few days after they first met. He later

proposed marriage to her several times and she accepted his

love as well as his proposal of marriage on August 20, 1987, on
which same day he went with her to her hometown of Baaga,
Bugallon, Pangasinan, as he wanted to meet her parents and
inform them of their relationship and their intention to get
married. The photographs Exhs. "A" to "E" (and their
submarkings) of defendant with members of plaintiff's family or
with plaintiff, were taken that day. Also on that occasion,
defendant told plaintiffs parents and brothers and sisters that he
intended to marry her during the semestral break in October,
1987, and because plaintiff's parents thought he was good and
trusted him, they agreed to his proposal for him to marry their
daughter, and they likewise allowed him to stay in their house
and sleep with plaintiff during the few days that they were in
Bugallon. When plaintiff and defendant later returned to
Dagupan City, they continued to live together in defendant's
apartment. However, in the early days of October, 1987,
defendant would tie plaintiff's hands and feet while he went to
school, and he even gave her medicine at 4 o'clock in the
morning that made her sleep the whole day and night until the
following day. As a result of this live-in relationship, plaintiff
became pregnant, but defendant gave her some medicine to
abort the fetus. Still plaintiff continued to live with defendant and
kept reminding him of his promise to marry her until he told her
that he could not do so because he was already married to a girl
in Bacolod City. That was the time plaintiff left defendant, went
home to her parents, and thereafter consulted a lawyer who
accompanied her to the barangay captain in Dagupan City.
Plaintiff, her lawyer, her godmother, and a barangay tanod sent
by the barangay captain went to talk to defendant to still
convince him to marry plaintiff, but defendant insisted that he
could not do so because he was already married to a girl in
Bacolod City, although the truth, as stipulated by the parties at
the pre-trial, is that defendant is still single.
Plaintiff's father, a tricycle driver, also claimed that after
defendant had informed them of his desire to marry Marilou, he
already looked for sponsors for the wedding, started preparing
for the reception by looking for pigs and chickens, and even
already invited many relatives and friends to the forthcoming
wedding. 8

Petitioner appealed the trial court's decision to the respondent Court of

Appeals which docketed the case as CA-G.R. CV No. 24256. In his Brief, 9 he
contended that the trial court erred (a) in not dismissing the case for lack of
factual and legal basis and (b) in ordering him to pay moral damages,
attorney's fees, litigation expenses and costs.
On 18 February 1991, respondent Court promulgated the challenged
decision 10 affirming in toto the trial court's ruling of 16 October 1989. In
sustaining the trial court's findings of fact, respondent Court made the
following analysis:
First of all, plaintiff, then only 21 years old when she met
defendant who was already 29 years old at the time, does not
appear to be a girl of loose morals. It is uncontradicted that she
was a virgin prior to her unfortunate experience with defendant
and never had boyfriend. She is, as described by the lower court,
a barrio lass "not used and accustomed to trend of modern urban
life", and certainly would (sic) not have allowed
"herself to be deflowered by the defendant if there was no
persuasive promise made by the defendant to marry her." In fact,
we agree with the lower court that plaintiff and defendant must
have been sweethearts or so the plaintiff must have thought
because of the deception of defendant, for otherwise, she would
not have allowed herself to be photographed with defendant in
public in so (sic) loving and tender poses as those depicted in the
pictures Exhs. "D" and "E". We cannot believe, therefore,
defendant's pretense that plaintiff was a nobody to him except a
waitress at the restaurant where he usually ate. Defendant in
fact admitted that he went to plaintiff's hometown of Baaga,
Bugallon, Pangasinan, at least thrice; at (sic) the town fiesta on
February 27, 1987 (p. 54, tsn May 18, 1988), at (sic) a beach
party together with the manager and employees of the Mabuhay
Luncheonette on March 3, 1987 (p. 50, tsn id.), and on April 1,
1987 when he allegedly talked to plaintiff's mother who told him
to marry her daughter (pp. 55-56, tsn id.). Would defendant have
left Dagupan City where he was involved in the serious study of
medicine to go to plaintiff's hometown in Baaga, Bugallon,
unless there was (sic) some kind of special relationship between
them? And this special relationship must indeed have led to
defendant's insincere proposal of marriage to plaintiff,
communicated not only to her but also to her parents, and (sic)
Marites Rabino, the owner of the restaurant where plaintiff was

working and where defendant first proposed marriage to her,

also knew of this love affair and defendant's proposal of marriage
to plaintiff, which she declared was the reason why plaintiff
resigned from her job at the restaurant after she had accepted
defendant's proposal (pp. 6-7, tsn March 7, 1988).
Upon the other hand, appellant does not appear to be a man of
good moral character and must think so low and have so little
respect and regard for Filipino women that he openly admitted
that when he studied in Bacolod City for several years where he
finished his B.S. Biology before he came to Dagupan City to
study medicine, he had a common-law wife in Bacolod City. In
other words, he also lived with another woman in Bacolod City
but did not marry that woman, just like what he did to plaintiff. It
is not surprising, then, that he felt so little compunction or
remorse in pretending to love and promising to marry plaintiff, a
young, innocent, trustful country girl, in order to satisfy his lust
on her. 11
and then concluded:
In sum, we are strongly convinced and so hold that it was
defendant-appellant's fraudulent and deceptive protestations of
love for and promise to marry plaintiff that made her surrender
her virtue and womanhood to him and to live with him on the
honest and sincere belief that he would keep said promise, and it
was likewise these (sic) fraud and deception on appellant's part
that made plaintiff's parents agree to their daughter's living-in
with him preparatory to their supposed marriage. And as these
acts of appellant are palpably and undoubtedly against morals,
good customs, and public policy, and are even gravely and
deeply derogatory and insulting to our women, coming as they
do from a foreigner who has been enjoying the hospitality of our
people and taking advantage of the opportunity to study in one
of our institutions of learning, defendant-appellant should indeed
be made, under Art. 21 of the Civil Code of the Philippines, to
compensate for the moral damages and injury that he had
caused plaintiff, as the lower court ordered him to do in its
decision in this case. 12
Unfazed by his second defeat, petitioner filed the instant petition on 26
March 1991; he raises therein the single issue of whether or not Article 21 of
the Civil Code applies to the case at bar. 13

It is petitioner's thesis that said Article 21 is not applicable because he had

not committed any moral wrong or injury or violated any good custom or
public policy; he has not professed love or proposed marriage to the private
respondent; and he has never maltreated her. He criticizes the trial court for
liberally invoking Filipino customs, traditions and culture, and ignoring the
fact that since he is a foreigner, he is not conversant with such Filipino
customs, traditions and culture. As an Iranian Moslem, he is not familiar with
Catholic and Christian ways. He stresses that even if he had made a promise
to marry, the subsequent failure to fulfill the same is excusable or tolerable
because of his Moslem upbringing; he then alludes to the Muslim Code which
purportedly allows a Muslim to take four (4) wives and concludes that on the
basis thereof, the trial court erred in ruling that he does not posses good
moral character. Moreover, his controversial "common law life" is now his
legal wife as their marriage had been solemnized in civil ceremonies in the
Iranian Embassy. As to his unlawful cohabitation with the private respondent,
petitioner claims that even if responsibility could be pinned on him for the
live-in relationship, the private respondent should also be faulted for
consenting to an illicit arrangement. Finally, petitioner asseverates that even
if it was to be assumed arguendo that he had professed his love to the
private respondent and had also promised to marry her, such acts would not
be actionable in view of the special circumstances of the case. The mere
breach of promise is not actionable. 14
On 26 August 1991, after the private respondent had filed her Comment to
the petition and the petitioner had filed his Reply thereto, this Court gave
due course to the petition and required the parties to submit their respective
Memoranda, which they subsequently complied with.
As may be gleaned from the foregoing summation of the petitioner's
arguments in support of his thesis, it is clear that questions of fact, which
boil down to the issue of the credibility of witnesses, are also raised. It is the
rule in this jurisdiction that appellate courts will not disturb the trial court's
findings as to the credibility of witnesses, the latter court having heard the
witnesses and having had the opportunity to observe closely their
deportment and manner of testifying, unless the trial court had plainly
overlooked facts of substance or value which, if considered, might affect the
result of the case. 15
Petitioner has miserably failed to convince Us that both the appellate and
trial courts had overlooked any fact of substance or values which could alter
the result of the case.

Equally settled is the rule that only questions of law may be raised in a
petition for review on certiorari under Rule 45 of the Rules of Court. It is not
the function of this Court to analyze or weigh all over again the evidence
introduced by the parties before the lower court. There are, however,
recognized exceptions to this rule. Thus, inMedina vs. Asistio, Jr., 16 this Court
took the time, again, to enumerate these exceptions:
xxx xxx xxx
(1) When the conclusion is a finding grounded entirely on
speculation, surmises or conjectures (Joaquin v. Navarro, 93 Phil.
257 [1953]); (2) When the inference made is manifestly
mistaken, absurb or impossible (Luna v. Linatok, 74 Phil. 15
[1942]); (3) Where there is a grave abuse of discretion (Buyco v.
People, 95 Phil. 453 [1955]); (4) When the judgment is based on
a misapprehension of facts (Cruz v. Sosing,
L-4875, Nov. 27, 1953); (5) When the findings of fact are
conflicting (Casica v. Villaseca, L-9590 Ap. 30, 1957; unrep.) (6)
When the Court of Appeals, in making its findings, went beyond
the issues of the case and the same is contrary to the admissions
of both appellate and appellee (Evangelista v. Alto Surety and
Insurance Co., 103 Phil. 401 [1958]);
(7) The findings of the Court of Appeals are contrary to those of
the trial court (Garcia v. Court of Appeals, 33 SCRA 622 [1970];
Sacay v. Sandiganbayan, 142 SCRA 593 [1986]); (8) When the
findings of fact are conclusions without citation of specific
evidence on which they are based (Ibid.,); (9) When the facts set
forth in the petition as well as in the petitioners main and reply
briefs are not disputed by the respondents (Ibid.,); and (10) The
finding of fact of the Court of Appeals is premised on the
supposed absence of evidence and is contradicted by the
evidence on record (Salazar v. Gutierrez, 33 SCRA 242 [1970]).
Petitioner has not endeavored to joint out to Us the existence of any of the
above quoted exceptions in this case. Consequently, the factual findings of
the trial and appellate courts must be respected.
And now to the legal issue.
The existing rule is that a breach of promise to marry per se is not an
actionable wrong. 17 Congress deliberately eliminated from the draft of the
New Civil Code the provisions that would have made it so. The reason
therefor is set forth in the report of the Senate Committees on the Proposed
Civil Code, from which We quote:

The elimination of this chapter is proposed. That breach of

promise to marry is not actionable has been definitely decided in
the case of De Jesus vs. Syquia. 18 The history of breach of
promise suits in the United States and in England has shown that
no other action lends itself more readily to abuse by designing
women and unscrupulous men. It is this experience which has
led to the abolition of rights of action in the so-called Heart Balm
suits in many of the American states. . . . 19
This notwithstanding, the said Code contains a provision, Article 21, which is
designed to expand the concept of torts or quasi-delict in this jurisdiction by
granting adequate legal remedy for the untold number of moral wrongs
which is impossible for human foresight to specifically enumerate and punish
in the statute books. 20
As the Code Commission itself stated in its Report:
But the Code Commission had gone farther than the sphere of
wrongs defined or determined by positive law. Fully sensible that
there are countless gaps in the statutes, which leave so many
victims of moral wrongs helpless, even though they have actually
suffered material and moral injury, the Commission has deemed
it necessary, in the interest of justice, to incorporate in the
proposed Civil Code the following rule:
Art. 23. Any person who wilfully causes loss or injury
to another in a manner that is contrary to morals,
good customs or public policy shall compensate the
latter for the damage.
An example will illustrate the purview of the foregoing norm: "A"
seduces the nineteen-year old daughter of "X". A promise of
marriage either has not been made, or can not be proved. The
girl becomes pregnant. Under the present laws, there is no
crime, as the girl is above nineteen years of age. Neither can any
civil action for breach of promise of marriage be filed. Therefore,
though the grievous moral wrong has been committed, and
though the girl and family have suffered incalculable moral
damage, she and her parents cannot bring action for damages.
But under the proposed article, she and her parents would have
such a right of action.
Thus at one stroke, the legislator, if the forgoing rule is approved,
would vouchsafe adequate legal remedy for that untold number

of moral wrongs which it is impossible for human foresight to

provide for specifically in the statutes. 21
Article 2176 of the Civil Code, which defines a quasi-delict thus:
Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
is limited to negligent acts or omissions and excludes the notion of
willfulness or intent. Quasi-delict, known in Spanish legal treatises
as culpa aquiliana, is a civil law concept while torts is an AngloAmerican or common law concept. Torts is much broader than culpa
aquiliana because it includes not only negligence, but international
criminal acts as well such as assault and battery, false imprisonment
and deceit. In the general scheme of the Philippine legal system
envisioned by the Commission responsible for drafting the New Civil
Code, intentional and malicious acts, with certain exceptions, are to be
governed by the Revised Penal Code while negligent acts or omissions
are to be covered by Article 2176 of the Civil Code. 22 In between these
opposite spectrums are injurious acts which, in the absence of Article
21, would have been beyond redress. Thus, Article 21 fills that vacuum.
It is even postulated that together with Articles 19 and 20 of the Civil
Code, Article 21 has greatly broadened the scope of the law on civil
wrongs; it has become much more supple and adaptable than the
Anglo-American law on torts. 23
In the light of the above laudable purpose of Article 21, We are of the
opinion, and so hold, that where a man's promise to marry is in fact the
proximate cause of the acceptance of his love by a woman and his
representation to fulfill that promise thereafter becomes the proximate cause
of the giving of herself unto him in a sexual congress, proof that he had, in
reality, no intention of marrying her and that the promise was only a subtle
scheme or deceptive device to entice or inveigle her to accept him and to
obtain her consent to the sexual act, could justify the award of damages
pursuant to Article 21 not because of such promise to marry but because of
the fraud and deceit behind it and the willful injury to her honor and
reputation which followed thereafter. It is essential, however, that such injury
should have been committed in a manner contrary to morals, good customs
or public policy.

In the instant case, respondent Court found that it was the petitioner's
"fraudulent and deceptive protestations of love for and promise to marry
plaintiff that made her surrender her virtue and womanhood to him and to
live with him on the honest and sincere belief that he would keep said
promise, and it was likewise these fraud and deception on appellant's part
that made plaintiff's parents agree to their daughter's living-in with him
preparatory to their supposed marriage." 24 In short, the private respondent
surrendered her virginity, the cherished possession of every single Filipina,
not because of lust but because of moral seduction the kind illustrated by
the Code Commission in its example earlier adverted to. The petitioner could
not be held liable for criminal seduction punished under either Article 337 or
Article 338 of the Revised Penal Code because the private respondent was
above eighteen (18) years of age at the time of the seduction.
Prior decisions of this Court clearly suggest that Article 21 may be applied in
a breach of promise to marry where the woman is a victim of moral
seduction. Thus, in Hermosisima vs. Court of Appeals, 25 this Court denied
recovery of damages to the woman because:
. . . we find ourselves unable to say that petitioner
is morally guilty of seduction, not only because he is
approximately ten (10) years younger than the complainant
who was around thirty-six (36) years of age, and as highly
enlightened as a former high school teacher and a life insurance
agent are supposed to be when she became intimate with
petitioner, then a mere apprentice pilot, but, also, because the
court of first instance found that, complainant "surrendered
herself" to petitioner because, "overwhelmed by her love" for
him, she "wanted to bind" him by having a fruit of their
engagement even before they had the benefit of clergy.
In Tanjanco vs. Court of Appeals, 26 while this Court likewise hinted at
possible recovery if there had been moral seduction, recovery was eventually
denied because We were not convinced that such seduction existed. The
following enlightening disquisition and conclusion were made in the said
case:
The Court of Appeals seem to have overlooked that the example
set forth in the Code Commission's memorandum refers to a tort
upon a minor who had been seduced. The essential feature is
seduction, that in law is more than mere sexual intercourse, or a
breach of a promise of marriage; it connotes essentially the idea
of deceit, enticement, superior power or abuse of confidence on

the part of the seducer to which the woman has yielded (U.S. vs.
Buenaventura, 27 Phil. 121; U.S. vs. Arlante, 9 Phil. 595).
It has been ruled in the Buenaventura case (supra) that
To constitute seduction there must in all cases be
some sufficient promise or inducement and the
woman must yield because of the promise or other
inducement. If she consents merely from carnal lust
and the intercourse is from mutual desire, there is no
seduction (43 Cent. Dig. tit. Seduction, par. 56) She
must be induced to depart from the path of virtue by
the use of some species of arts, persuasions and
wiles, which are calculated to have and do have that
effect, and which result in her person to ultimately
submitting her person to the sexual embraces of her
seducer (27 Phil. 123).
And in American Jurisprudence we find:
On the other hand, in an action by the woman, the
enticement, persuasion or deception is the essence
of the injury; and a mere proof of intercourse is
insufficient to warrant a recovery.
Accordingly it is not seduction where the willingness
arises out of sexual desire of curiosity of the female,
and the defendant merely affords her the needed
opportunity for the commission of the act. It has
been emphasized that to allow a recovery in all such
cases would tend to the demoralization of the female
sex, and would be a reward for unchastity by which a
class of adventuresses would be swift to profit. (47
Am. Jur. 662)
xxx xxx xxx
Over and above the partisan allegations, the fact stand out that
for one whole year, from 1958 to 1959, the plaintiff-appellee, a
woman of adult age, maintain intimate sexual relations with
appellant, with repeated acts of intercourse. Such conduct is
incompatible with the idea of seduction. Plainly there is here
voluntariness and mutual passion; for had the appellant been
deceived, had she surrendered exclusively because of the deceit,
artful persuasions and wiles of the defendant, she would not
have again yielded to his embraces, much less for one year,

without exacting early fulfillment of the alleged promises of

marriage, and would have cut short all sexual relations upon
finding that defendant did not intend to fulfill his defendant did
not intend to fulfill his promise. Hence, we conclude that no case
is made under article 21 of the Civil Code, and no other cause of
action being alleged, no error was committed by the Court of
First Instance in dismissing the complaint. 27
In his annotations on the Civil Code, 28 Associate Justice Edgardo L. Paras,
who recently retired from this Court, opined that in a breach of promise to
marry where there had been carnal knowledge, moral damages may be
recovered:
. . . if there be criminal or moral seduction, but not if the
intercourse was due to mutual lust. (Hermosisima vs. Court of
Appeals,
L-14628, Sept. 30, 1960; Estopa vs. Piansay, Jr., L-14733, Sept.
30, 1960; Batarra vs. Marcos, 7 Phil. 56 (sic); Beatriz Galang vs.
Court of Appeals, et al., L-17248, Jan. 29, 1962). (In other words,
if the CAUSE be the promise to marry, and the EFFECT be the
carnal knowledge, there is a chance that there was criminal or
moral seduction, hence recovery of moral damages will prosper.
If it be the other way around, there can be no recovery of moral
damages, because here mutual lust has intervened). . . .
together with "ACTUAL damages, should there be any, such as the
expenses for the wedding presentations (See Domalagon v. Bolifer, 33
Phil. 471).
Senator Arturo M. Tolentino

29

is also of the same persuasion:

It is submitted that the rule in Batarra vs. Marcos, 30 still subsists,

notwithstanding the incorporation of the present article 31 in the
Code. The example given by the Code Commission is correct, if
there wasseduction, not necessarily in the legal sense, but in the
vulgar sense of deception. But when the sexual act is
accomplished without any deceit or qualifying circumstance of
abuse of authority or influence, but the woman, already of age,
has knowingly given herself to a man, it cannot be said that
there is an injury which can be the basis for indemnity.
But so long as there is fraud, which is characterized by
willfulness (sic), the action lies. The court, however, must weigh
the degree of fraud, if it is sufficient to deceive the woman under
the circumstances, because an act which would deceive a girl

sixteen years of age may not constitute deceit as to an

experienced woman thirty years of age. But so long as there is a
wrongful act and a resulting injury, there should be civil liability,
even if the act is not punishable under the criminal law and there
should have been an acquittal or dismissal of the criminal case
for that reason.
We are unable to agree with the petitioner's alternative proposition to the
effect that granting, for argument's sake, that he did promise to marry the
private respondent, the latter is nevertheless also at fault. According to him,
both parties are in pari delicto; hence, pursuant to Article 1412(1) of the Civil
Code and the doctrine laid down in Batarra vs. Marcos, 32 the private
respondent cannot recover damages from the petitioner. The latter even
goes as far as stating that if the private respondent had "sustained any injury
or damage in their relationship, it is primarily because of her own
doing, 33 for:
. . . She is also interested in the petitioner as the latter will
become a doctor sooner or later. Take notice that she is a plain
high school graduate and a mere employee . . . (Annex "C") or a
waitress (TSN, p. 51, January 25, 1988) in a luncheonette and
without doubt, is in need of a man who can give her economic
security. Her family is in dire need of financial assistance. (TSN,
pp. 51-53, May 18, 1988). And this predicament prompted her to
accept a proposition that may have been offered by the
petitioner. 34
These statements reveal the true character and motive of the petitioner. It is
clear that he harbors a condescending, if not sarcastic, regard for the private
respondent on account of the latter's ignoble birth, inferior educational
background, poverty and, as perceived by him, dishonorable employment.
Obviously then, from the very beginning, he was not at all moved by good
faith and an honest motive. Marrying with a woman so circumstances could
not have even remotely occurred to him. Thus, his profession of love and
promise to marry were empty words directly intended to fool, dupe, entice,
beguile and deceive the poor woman into believing that indeed, he loved her
and would want her to be his life's partner. His was nothing but pure lust
which he wanted satisfied by a Filipina who honestly believed that by
accepting his proffer of love and proposal of marriage, she would be able to
enjoy a life of ease and security. Petitioner clearly violated the Filipino's
concept of morality and brazenly defied the traditional respect Filipinos have
for their women. It can even be said that the petitioner committed such

deplorable acts in blatant disregard of Article 19 of the Civil Code which

directs every person to act with justice, give everyone his due and observe
honesty and good faith in the exercise of his rights and in the performance of
his obligations.
No foreigner must be allowed to make a mockery of our laws, customs and
traditions.
The pari delicto rule does not apply in this case for while indeed, the private
respondent may not have been impelled by the purest of intentions, she
eventually submitted to the petitioner in sexual congress not out of lust, but
because of moral seduction. In fact, it is apparent that she had qualms of
conscience about the entire episode for as soon as she found out that the
petitioner was not going to marry her after all, she left him. She is not,
therefore, in pari delicto with the petitioner. Pari delicto means "in equal
fault; in a similar offense or crime; equal in guilt or in legal fault." 35 At most,
it could be conceded that she is merely in delicto.
Equity often interferes for the relief of the less guilty of the
parties, where his transgression has been brought about by the
imposition of undue influence of the party on whom the burden
of the original wrong principally rests, or where his consent to the
transaction was itself procured by
fraud. 36
In Mangayao vs. Lasud,

37

We declared:

Appellants likewise stress that both parties being at fault, there

should be no action by one against the other (Art. 1412, New
Civil Code). This rule, however, has been interpreted as
applicable only where the fault on both sides is, more or less,
equivalent. It does not apply where one party is literate or
intelligent and the other one is not. (c.f. Bough vs. Cantiveros, 40
Phil. 209).
We should stress, however, that while We find for the private respondent, let
it not be said that this Court condones the deplorable behavior of her parents
in letting her and the petitioner stay together in the same room in their
house after giving approval to their marriage. It is the solemn duty of parents
to protect the honor of their daughters and infuse upon them the higher
values of morality and dignity.
WHEREFORE, finding no reversible error in the challenged decision, the
instant petition is hereby DENIED, with costs against the petitioner.
SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.

Gutierrez, Jr., J., is on leave.

G.R. No. 74761 November 6, 1990
NATIVIDAD V. ANDAMO and EMMANUEL R. ANDAMO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT (First Civil Cases Division) and
MISSIONARIES OF OUR LADY OF LA SALETTE, INC., respondents.
Lope E. Adriano for petitioners.
Padilla Law Office for private respondent.
FERNAN, C.J.:
The pivotal issue in this petition for certiorari, prohibition and mandamus is
whether a corporation, which has built through its agents, waterpaths, water
conductors and contrivances within its land, thereby causing inundation and
damage to an adjacent land, can be held civilly liable for damages under
Articles 2176 and 2177 of the Civil Code on quasi-delicts such that the
resulting civil case can proceed independently of the criminal case.
The antecedent facts are as follows:
Petitioner spouses Emmanuel and Natividad Andamo are the owners of a
parcel of land situated in Biga (Biluso) Silang, Cavite which is adjacent to that
of private respondent, Missionaries of Our Lady of La Salette, Inc., a religious
corporation.
Within the land of respondent corporation, waterpaths and contrivances,
including an artificial lake, were constructed, which allegedly inundated and
eroded petitioners' land, caused a young man to drown, damaged
petitioners' crops and plants, washed away costly fences, endangered the
lives of petitioners and their laborers during rainy and stormy seasons, and
exposed plants and other improvements to destruction.
In July 1982, petitioners instituted a criminal action, docketed as Criminal
Case No. TG-907-82, before the Regional Trial Court of Cavite, Branch 4
(Tagaytay City), against Efren Musngi, Orlando Sapuay and Rutillo Mallillin,
officers and directors of herein respondent corporation, for destruction by
means of inundation under Article 324 of the Revised Penal Code.
Subsequently, on February 22, 1983, petitioners filed another action against
respondent corporation, this time a civil case, docketed as Civil Case No. TG748, for damages with prayer for the issuance of a writ of preliminary
injunction before the same court. 1
On March 11, 1983, respondent corporation filed its answer to the complaint
and opposition to the issuance of a writ of preliminary injunction. Hearings

were conducted including ocular inspections on the land. However, on April

26, 1984, the trial court, acting on respondent corporation's motion to
dismiss or suspend the civil action, issued an order suspending further
hearings in Civil Case No, TG-748 until after judgment in the related Criminal
Case No. TG-907-82.
Resolving respondent corporation's motion to dismiss filed on June 22, 1984,
the trial court issued on August 27, 1984 the disputed order dismissing Civil
Case No. TG-748 for lack of jurisdiction, as the criminal case which was
instituted ahead of the civil case was still unresolved. Said order was
anchored on the provision of Section 3 (a), Rule III of the Rules of Court which
provides that "criminal and civil actions arising from the same offense may
be instituted separately, but after the criminal action has been commenced
the civil action cannot be instituted until final judgment has been rendered in
the criminal action." 2
Petitioners appealed from that order to the Intermediate Appellate Court.

On February 17, 1986, respondent Appellate Court, First Civil Cases Division,
promulgated a decision 4 affirming the questioned order of the trial court. 5 A
motion for reconsideration filed by petitioners was denied by the Appellate
Court in its resolution dated May 19, 1986. 6
Directly at issue is the propriety of the dismissal of Civil Case No. TG-748 in
accordance with Section 3 (a) of Rule 111 of the Rules of Court. Petitioners
contend that the trial court and the Appellate Court erred in dismissing Civil
Case No. TG-748 since it is predicated on a quasi-delict. Petitioners have
raised a valid point.
It is axiomatic that the nature of an action filed in court is determined by the
facts alleged in the complaint as constituting the cause of action. 7 The
purpose of an action or suit and the law to govern it, including the period of
prescription, is to be determined not by the claim of the party filing the
action, made in his argument or brief, but rather by the complaint itself, its
allegations and prayer for relief. 8 The nature of an action is not necessarily
determined or controlled by its title or heading but the body of the pleading
or complaint itself. To avoid possible denial of substantial justice due to legal
technicalities, pleadings as well as remedial laws should be liberally
construed so that the litigants may have ample opportunity to prove their
respective claims. 9
Quoted hereunder are the pertinent portions of petitioners' complaint in Civil
Case No. TG-748:
4) That within defendant's land, likewise located at Biga (Biluso),
Silang, Cavite, adjacent on the right side of the aforesaid land of

plaintiffs, defendant constructed waterpaths starting from the

middle-right portion thereof leading to a big hole or opening, also
constructed by defendant, thru the lower portion of its concrete
hollow-blocks fence situated on the right side of its cemented
gate fronting the provincial highway, and connected by
defendant to a man height inter-connected cement culverts
which were also constructed and lain by defendant cross-wise
beneath the tip of the said cemented gate, the left-end of the
said inter-connected culverts again connected by defendant to a
big hole or opening thru the lower portion of the same concrete
hollowblocks fence on the left side of the said cemented gate,
which hole or opening is likewise connected by defendant to the
cemented mouth of a big canal, also constructed by defendant,
which runs northward towards a big hole or opening which was
also built by defendant thru the lower portion of its concrete
hollow-blocks fence which separates the land of plaintiffs from
that of defendant (and which serves as the exit-point of the
floodwater coming from the land of defendant, and at the same
time, the entrance-point of the same floodwater to the land of
plaintiffs, year after year, during rainy or stormy seasons.
5) That moreover, on the middle-left portion of its land just
beside the land of plaintiffs, defendant also constructed an
artificial lake, the base of which is soil, which utilizes the water
being channeled thereto from its water system thru interconnected galvanized iron pipes (No. 2) and complimented by
rain water during rainy or stormy seasons, so much so that the
water below it seeps into, and the excess water above it
inundates, portions of the adjoining land of plaintiffs.
6) That as a result of the inundation brought about by
defendant's aforementioned water conductors, contrivances and
manipulators, a young man was drowned to death, while herein
plaintiffs suffered and will continue to suffer, as follows:
a) Portions of the land of plaintiffs were eroded and
converted to deep, wide and long canals, such that
the same can no longer be planted to any crop or
plant.
b) Costly fences constructed by plaintiffs were, on
several occasions, washed away.

c) During rainy and stormy seasons the lives of

plaintiffs and their laborers are always in danger.
d) Plants and other improvements on other portions
of the land of plaintiffs are exposed to
destruction. ... 10
A careful examination of the aforequoted complaint shows that the civil
action is one under Articles 2176 and 2177 of the Civil Code on quasi-delicts.
All the elements of a quasi-delict are present, to wit: (a) damages suffered by
the plaintiff, (b) fault or negligence of the defendant, or some other person
for whose acts he must respond; and (c) the connection of cause and effect
between the fault or negligence of the defendant and the damages incurred
by the plaintiff. 11
Clearly, from petitioner's complaint, the waterpaths and contrivances built by
respondent corporation are alleged to have inundated the land of petitioners.
There is therefore, an assertion of a causal connection between the act of
building these waterpaths and the damage sustained by petitioners. Such
action if proven constitutes fault or negligence which may be the basis for
the recovery of damages.
In the case of Samson vs. Dionisio, 12 the Court applied Article 1902, now
Article 2176 of the Civil Code and held that "any person who without due
authority constructs a bank or dike, stopping the flow or communication
between a creek or a lake and a river, thereby causing loss and damages to
a third party who, like the rest of the residents, is entitled to the use and
enjoyment of the stream or lake, shall be liable to the payment of an
indemnity for loss and damages to the injured party.
While the property involved in the cited case belonged to the public domain
and the property subject of the instant case is privately owned, the fact
remains that petitioners' complaint sufficiently alleges that petitioners have
sustained and will continue to sustain damage due to the waterpaths and
contrivances built by respondent corporation. Indeed, the recitals of the
complaint, the alleged presence of damage to the petitioners, the act or
omission of respondent corporation supposedly constituting fault or
negligence, and the causal connection between the act and the damage,
with no pre-existing contractual obligation between the parties make a clear
case of a quasi delict or culpa aquiliana.
It must be stressed that the use of one's property is not without limitations.
Article 431 of the Civil Code provides that "the owner of a thing cannot make
use thereof in such a manner as to injure the rights of a third person." SIC
UTERE TUO UT ALIENUM NON LAEDAS. Moreover, adjoining landowners have

mutual and reciprocal duties which require that each must use his own land
in a reasonable manner so as not to infringe upon the rights and interests of
others. Although we recognize the right of an owner to build structures on his
land, such structures must be so constructed and maintained using all
reasonable care so that they cannot be dangerous to adjoining landowners
and can withstand the usual and expected forces of nature. If the structures
cause injury or damage to an adjoining landowner or a third person, the
latter can claim indemnification for the injury or damage suffered.
Article 2176 of the Civil Code imposes a civil liability on a person for damage
caused by his act or omission constituting fault or negligence, thus:
Article 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this chapter.
Article 2176, whenever it refers to "fault or negligence", covers not only acts
"not punishable by law" but also acts criminal in character, whether
intentional and voluntary or negligent. Consequently, a separate civil action
lies against the offender in a criminal act, whether or not he is criminally
prosecuted and found guilty or acquitted, provided that the offended party is
not allowed, (if the tortfeasor is actually charged also criminally), to recover
damages on both scores, and would be entitled in such eventuality only to
the bigger award of the two, assuming the awards made in the two cases
vary. 13
The distinctness of quasi-delicta is shown in Article 2177 of the Civil Code,
which states:
Article 2177. Responsibility for fault or negligence under the
preceding article is entirely separate and distinct from the civil
liability arising from negligence under the Penal Code. But the
plaintiff cannot recover damages twice for the same act or
omission of the defendant.
According to the Report of the Code Commission "the foregoing provision
though at first sight startling, is not so novel or extraordinary when we
consider the exact nature of criminal and civil negligence. The former is a
violation of the criminal law, while the latter is a distinct and independent
negligence, which is a "culpa aquiliana" or quasi-delict, of ancient origin,
having always had its own foundation and individuality, separate from
criminal negligence. Such distinction between criminal negligence and "culpa

extra-contractual" or "cuasi-delito" has been sustained by decisions of the

Supreme Court of Spain ... 14
In the case of Castillo vs. Court of Appeals, 15 this Court held that a quasidelict or culpa aquiliana is a separate legal institution under the Civil Code
with a substantivity all its own, and individuality that is entirely apart and
independent from a delict or crime a distinction exists between the civil
liability arising from a crime and the responsibility for quasi-delicts or culpa
extra-contractual. The same negligence causing damages may produce civil
liability arising from a crime under the Penal Code, or create an action for
quasi-delicts or culpa extra-contractual under the Civil Code. Therefore, the
acquittal or conviction in the criminal case is entirely irrelevant in the civil
case, unless, of course, in the event of an acquittal where the court has
declared that the fact from which the civil action arose did not exist, in which
case the extinction of the criminal liability would carry with it the extinction
of the civil liability.
In Azucena vs. Potenciano, 16 the Court declared that in quasi-delicts, "(t)he
civil action is entirely independent of the criminal case according to Articles
33 and 2177 of the Civil Code. There can be no logical conclusion than this,
for to subordinate the civil action contemplated in the said articles to the
result of the criminal prosecution whether it be conviction or acquittal
would render meaningless the independent character of the civil action and
the clear injunction in Article 31, that his action may proceed independently
of the criminal proceedings and regardless of the result of the latter."
WHEREFORE, the assailed decision dated February 17, 1986 of the then
Intermediate Appellate Court affirming the order of dismissal of the Regional
Trial Court of Cavite, Branch 18 (Tagaytay City) dated August 17, 1984 is
hereby REVERSED and SET ASIDE. The trial court is ordered to reinstate Civil
Case No. TG-748 entitled "Natividad V. Andamo and Emmanuel R. Andamo
vs. Missionaries of Our Lady of La Salette Inc." and to proceed with the
hearing of the case with dispatch. This decision is immediately executory.
Costs against respondent corporation.
SO ORDERED.
Gutierrez, Jr. and Bidin, JJ., concur.
Feliciano, J., is on leave.
G.R. No. L-21438
AIR FRANCE, petitioner,
vs.

September 28, 1966

RAFAEL CARRASCOSO and the HONORABLE COURT OF

APPEALS, respondents.
Lichauco, Picazo and Agcaoili for petitioner.
Bengzon Villegas and Zarraga for respondent R. Carrascoso.
SANCHEZ, J.:
The Court of First Instance of Manila 1 sentenced petitioner to pay respondent
Rafael Carrascoso P25,000.00 by way of moral damages; P10,000.00 as
exemplary damages; P393.20 representing the difference in fare between
first class and tourist class for the portion of the trip Bangkok-Rome, these
various amounts with interest at the legal rate, from the date of the filing of
the complaint until paid; plus P3,000.00 for attorneys' fees; and the costs of
suit.
On appeal,2 the Court of Appeals slightly reduced the amount of refund on
Carrascoso's plane ticket from P393.20 to P383.10, and voted to affirm the
appealed decision "in all other respects", with costs against petitioner.
The case is now before us for review on certiorari.
The facts declared by the Court of Appeals as " fully supported by the
evidence of record", are:
Plaintiff, a civil engineer, was a member of a group of 48 Filipino
pilgrims that left Manila for Lourdes on March 30, 1958.
On March 28, 1958, the defendant, Air France, through its authorized
agent, Philippine Air Lines, Inc., issued to plaintiff a "first class" round
trip airplane ticket from Manila to Rome. From Manila to Bangkok,
plaintiff travelled in "first class", but at Bangkok, the Manager of the
defendant airline forced plaintiff to vacate the "first class" seat that he
was occupying because, in the words of the witness Ernesto G. Cuento,
there was a "white man", who, the Manager alleged, had a "better
right" to the seat. When asked to vacate his "first class" seat, the
plaintiff, as was to be expected, refused, and told defendant's Manager
that his seat would be taken over his dead body; a commotion ensued,
and, according to said Ernesto G. Cuento, "many of the Filipino
passengers got nervous in the tourist class; when they found out that
Mr. Carrascoso was having a hot discussion with the white man
[manager], they came all across to Mr. Carrascoso and pacified Mr.
Carrascoso to give his seat to the white man" (Transcript, p. 12,
Hearing of May 26, 1959); and plaintiff reluctantly gave his "first class"
seat in the plane.3

1. The trust of the relief petitioner now seeks is that we review "all the
findings" 4 of respondent Court of Appeals. Petitioner charges that respondent
court failed to make complete findings of fact on all the issues properly laid
before it. We are asked to consider facts favorable to petitioner, and then, to
overturn the appellate court's decision.
Coming into focus is the constitutional mandate that "No decision shall be
rendered by any court of record without expressing therein clearly and
distinctly the facts and the law on which it is based". 5 This is echoed in the
statutory demand that a judgment determining the merits of the case shall
state "clearly and distinctly the facts and the law on which it is based"; 6 and
that "Every decision of the Court of Appeals shall contain complete findings
of fact on all issues properly raised before it". 7
A decision with absolutely nothing to support it is a nullity. It is open to direct
attack. 8 The law, however, solely insists that a decision state the "essential
ultimate facts" upon which the court's conclusion is drawn. 9 A court of justice
is not hidebound to write in its decision every bit and piece of
evidence 10 presented by one party and the other upon the issues raised.
Neither is it to be burdened with the obligation "to specify in the sentence
the facts"which a party "considered as proved". 11 This is but a part of the
mental process from which the Court draws the essential ultimate facts. A
decision is not to be so clogged with details such that prolixity, if not
confusion, may result. So long as the decision of the Court of Appeals
contains the necessary facts to warrant its conclusions, it is no error for said
court to withhold therefrom "any specific finding of facts with respect to the
evidence for the defense". Because as this Court well observed, "There is no
law that so requires". 12 Indeed, "the mere failure to specify (in the decision)
the contentions of the appellant and the reasons for refusing to believe them
is not sufficient to hold the same contrary to the requirements of the
provisions of law and the Constitution". It is in this setting that in Manigque,
it was held that the mere fact that the findings "were based entirely on the
evidence for the prosecution without taking into consideration or even
mentioning the appellant's side in the controversy as shown by his own
testimony", would not vitiate the judgment. 13 If the court did not recite in the
decision the testimony of each witness for, or each item of evidence
presented by, the defeated party, it does not mean that the court has
overlooked such testimony or such item of evidence. 14 At any rate, the legal
presumptions are that official duty has been regularly performed, and that all
the matters within an issue in a case were laid before the court and passed
upon by it. 15

Findings of fact, which the Court of Appeals is required to make, maybe

defined as "the written statement of the ultimate facts as found by the
court ... and essential to support the decision and judgment rendered
thereon". 16They consist of the court's "conclusions" with respect to the
determinative facts in issue". 17 A question of law, upon the other hand, has
been declared as "one which does not call for an examination of the
probative value of the evidence presented by the parties." 18
2. By statute, "only questions of law may be raised" in an appeal by certiorari
from a judgment of the Court of Appeals. 19 That judgment is conclusive as to
the facts. It is not appropriately the business of this Court to alter the facts or
to review the questions of fact. 20
With these guideposts, we now face the problem of whether the findings of
fact of the Court of Appeals support its judgment.
3. Was Carrascoso entitled to the first class seat he claims?
It is conceded in all quarters that on March 28, 1958 he paid to and received
from petitioner a first class ticket. But petitioner asserts that said ticket did
not represent the true and complete intent and agreement of the parties;
that said respondent knew that he did not have confirmed reservations for
first class on any specific flight, although he had tourist class protection;
that, accordingly, the issuance of a first class ticket was no guarantee that he
would have a first class ride, but that such would depend upon the
availability of first class seats.
These are matters which petitioner has thoroughly presented and discussed
in its brief before the Court of Appeals under its third assignment of error,
which reads: "The trial court erred in finding that plaintiff had confirmed
reservations for, and a right to, first class seats on the "definite" segments of
his journey, particularly that from Saigon to Beirut". 21
And, the Court of Appeals disposed of this contention thus:
Defendant seems to capitalize on the argument that the issuance of a
first-class ticket was no guarantee that the passenger to whom the
same had been issued, would be accommodated in the first-class
compartment, for as in the case of plaintiff he had yet to make
arrangements upon arrival at every station for the necessary first-class
reservation. We are not impressed by such a reasoning. We cannot
understand how a reputable firm like defendant airplane company
could have the indiscretion to give out tickets it never meant to honor
at all. It received the corresponding amount in payment of first-class
tickets and yet it allowed the passenger to be at the mercy of its
employees. It is more in keeping with the ordinary course of business

that the company should know whether or riot the tickets it issues are
to be honored or not.22
Not that the Court of Appeals is alone. The trial court similarly disposed of
petitioner's contention, thus:
On the fact that plaintiff paid for, and was issued a "First class" ticket, there
can be no question. Apart from his testimony, see plaintiff's Exhibits "A", "A1", "B", "B-1," "B-2", "C" and "C-1", and defendant's own witness, Rafael
Altonaga, confirmed plaintiff's testimony and testified as follows:
Q. In these tickets there are marks "O.K." From what you know, what
does this OK mean?
A. That the space is confirmed.
Q. Confirmed for first class?
A. Yes, "first class". (Transcript, p. 169)
xxx

xxx

xxx

Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga

and Rafael Altonaga that although plaintiff paid for, and was issued a "first
class" airplane ticket, the ticket was subject to confirmation in Hongkong.
The court cannot give credit to the testimony of said witnesses. Oral
evidence cannot prevail over written evidence, and plaintiff's Exhibits "A",
"A-l", "B", "B-l", "C" and "C-1" belie the testimony of said witnesses, and
clearly show that the plaintiff was issued, and paid for, a first class ticket
without any reservation whatever.
Furthermore, as hereinabove shown, defendant's own witness Rafael
Altonaga testified that the reservation for a "first class" accommodation for
the plaintiff was confirmed. The court cannot believe that after such
confirmation defendant had a verbal understanding with plaintiff that the
"first class" ticket issued to him by defendant would be subject to
confirmation in Hongkong. 23
We have heretofore adverted to the fact that except for a slight difference of
a few pesos in the amount refunded on Carrascoso's ticket, the decision of
the Court of First Instance was affirmed by the Court of Appeals in all other
respects. We hold the view that such a judgment of affirmance has merged
the judgment of the lower court. 24Implicit in that affirmance is a
determination by the Court of Appeals that the proceeding in the Court of
First Instance was free from prejudicial error and "all questions raised by the
assignments of error and all questions that might have been raised are to be
regarded as finally adjudicated against the appellant". So also, the judgment
affirmed "must be regarded as free from all error". 25 We reached this policy

construction because nothing in the decision of the Court of Appeals on this

point would suggest that its findings of fact are in any way at war with those
of the trial court. Nor was said affirmance by the Court of Appeals upon a
ground or grounds different from those which were made the basis of the
conclusions of the trial court. 26
If, as petitioner underscores, a first-class-ticket holder is not entitled to a first
class seat, notwithstanding the fact that seat availability in specific flights is
therein confirmed, then an air passenger is placed in the hollow of the hands
of an airline. What security then can a passenger have? It will always be an
easy matter for an airline aided by its employees, to strike out the very
stipulations in the ticket, and say that there was a verbal agreement to the
contrary. What if the passenger had a schedule to fulfill? We have long
learned that, as a rule, a written document speaks a uniform language; that
spoken word could be notoriously unreliable. If only to achieve stability in the
relations between passenger and air carrier, adherence to the ticket so
issued is desirable. Such is the case here. The lower courts refused to believe
the oral evidence intended to defeat the covenants in the ticket.
The foregoing are the considerations which point to the conclusion that there
are facts upon which the Court of Appeals predicated the finding that
respondent Carrascoso had a first class ticket and was entitled to a first class
seat at Bangkok, which is a stopover in the Saigon to Beirut leg of the
flight. 27 We perceive no "welter of distortions by the Court of Appeals of
petitioner's statement of its position", as charged by petitioner. 28 Nor do we
subscribe to petitioner's accusation that respondent Carrascoso
"surreptitiously took a first class seat to provoke an issue". 29 And this
because, as petitioner states, Carrascoso went to see the Manager at his
office in Bangkok "to confirm my seat and because from Saigon I was told
again to see the Manager". 30 Why, then, was he allowed to take a first class
seat in the plane at Bangkok, if he had no seat? Or, if another had a better
right to the seat?
4. Petitioner assails respondent court's award of moral damages. Petitioner's
trenchant claim is that Carrascoso's action is planted upon breach of
contract; that to authorize an award for moral damages there must be an
averment of fraud or bad faith;31 and that the decision of the Court of
Appeals fails to make a finding of bad faith. The pivotal allegations in the
complaint bearing on this issue are:
3. That ... plaintiff entered into a contract of air carriage with the
Philippine Air Lines for a valuable consideration, the latter acting as
general agents for and in behalf of the defendant, under which said

contract, plaintiff was entitled to, as defendant agreed to furnish

plaintiff, First Class passage on defendant's plane during the entire
duration of plaintiff's tour of Europe with Hongkong as starting point up
to and until plaintiff's return trip to Manila, ... .
4. That, during the first two legs of the trip from Hongkong to Saigon
and from Saigon to Bangkok, defendant furnished to the plaintiff First
Class accommodation but only after protestations, arguments and/or
insistence were made by the plaintiff with defendant's employees.
5. That finally, defendant failed to provide First Class passage, but
instead furnished plaintiff only TouristClass accommodations from
Bangkok to Teheran and/or Casablanca, ... the plaintiff has
been compelledby defendant's employees to leave the First Class
accommodation berths at Bangkok after he was already seated.
6. That consequently, the plaintiff, desiring no repetition of the
inconvenience and embarrassments brought by defendant's breach of
contract was forced to take a Pan American World Airways plane on his
return trip from Madrid to Manila.32
xxx

xxx

xxx

2. That likewise, as a result of defendant's failure to furnish First Class

accommodations aforesaid, plaintiff suffered inconveniences,
embarrassments, and humiliations, thereby causing plaintiff mental anguish,
serious anxiety, wounded feelings, social humiliation, and the like injury,
resulting in moral damages in the amount of P30,000.00. 33
xxx

xxx

xxx

The foregoing, in our opinion, substantially aver: First, That there was a
contract to furnish plaintiff a first class passage covering, amongst others,
the Bangkok-Teheran leg; Second, That said contract was breached when
petitioner failed to furnish first class transportation at Bangkok;
and Third, that there was bad faith when petitioner's employee compelled
Carrascoso to leave his first class accommodation berth "after he was
already, seated" and to take a seat in the tourist class, by reason of which he
suffered inconvenience, embarrassments and humiliations, thereby causing
him mental anguish, serious anxiety, wounded feelings and social
humiliation, resulting in moral damages. It is true that there is no specific
mention of the term bad faith in the complaint. But, the inference of bad
faith is there, it may be drawn from the facts and circumstances set forth
therein. 34 The contract was averred to establish the relation between the
parties. But the stress of the action is put on wrongful expulsion.

Quite apart from the foregoing is that (a) right the start of the trial,
respondent's counsel placed petitioner on guard on what Carrascoso
intended to prove: That while sitting in the plane in Bangkok, Carrascoso
was oustedby petitioner's manager who gave his seat to a white man; 35 and
(b) evidence of bad faith in the fulfillment of the contract was presented
without objection on the part of the petitioner. It is, therefore, unnecessary to
inquire as to whether or not there is sufficient averment in the complaint to
justify an award for moral damages. Deficiency in the complaint, if any, was
cured by the evidence. An amendment thereof to conform to the evidence is
not even required. 36 On the question of bad faith, the Court of Appeals
declared:
That the plaintiff was forced out of his seat in the first class
compartment of the plane belonging to the defendant Air France while
at Bangkok, and was transferred to the tourist class not only without
his consent but against his will, has been sufficiently established by
plaintiff in his testimony before the court, corroborated by the
corresponding entry made by the purser of the plane in his notebook
which notation reads as follows:
"First-class passenger was forced to go to the tourist class
against his will, and that the captain refused to intervene",
and by the testimony of an eye-witness, Ernesto G. Cuento, who was a
co-passenger. The captain of the plane who was asked by the manager
of defendant company at Bangkok to intervene even refused to do so.
It is noteworthy that no one on behalf of defendant ever contradicted
or denied this evidence for the plaintiff. It could have been easy for
defendant to present its manager at Bangkok to testify at the trial of
the case, or yet to secure his disposition; but defendant did neither. 37
The Court of appeals further stated
Neither is there evidence as to whether or not a prior reservation was
made by the white man. Hence, if the employees of the defendant at
Bangkok sold a first-class ticket to him when all the seats had already
been taken, surely the plaintiff should not have been picked out as the
one to suffer the consequences and to be subjected to the humiliation
and indignity of being ejected from his seat in the presence of others.
Instead of explaining to the white man the improvidence committed by
defendant's employees, the manager adopted the more drastic step of
ousting the plaintiff who was then safely ensconsced in his rightful
seat. We are strengthened in our belief that this probably was what
happened there, by the testimony of defendant's witness Rafael

Altonaga who, when asked to explain the meaning of the letters "O.K."
appearing on the tickets of plaintiff, said "that the space is confirmed
for first class. Likewise, Zenaida Faustino, another witness for
defendant, who was the chief of the Reservation Office of defendant,
testified as follows:
"Q How does the person in the ticket-issuing office know what
reservation the passenger has arranged with you?
A They call us up by phone and ask for the confirmation." (t.s.n.,
p. 247, June 19, 1959)
In this connection, we quote with approval what the trial Judge has said
on this point:
Why did the, using the words of witness Ernesto G. Cuento,
"white man" have a "better right" to the seat occupied by Mr.
Carrascoso? The record is silent. The defendant airline did not
prove "any better", nay, any right on the part of the "white man"
to the "First class" seat that the plaintiff was occupying and for
which he paid and was issued a corresponding "first class" ticket.
If there was a justified reason for the action of the defendant's
Manager in Bangkok, the defendant could have easily proven it
by having taken the testimony of the said Manager by
deposition, but defendant did not do so; the presumption is that
evidence willfully suppressed would be adverse if produced [Sec.
69, par (e), Rules of Court]; and, under the circumstances, the
Court is constrained to find, as it does find, that the Manager of
the defendant airline in Bangkok not merely asked but
threatened the plaintiff to throw him out of the plane if he did not
give up his "first class" seat because the said Manager wanted to
accommodate, using the words of the witness Ernesto G. Cuento,
the "white man".38
It is really correct to say that the Court of Appeals in the quoted portion
first transcribed did not use the term "bad faith". But can it be doubted
that the recital of facts therein points to bad faith? The manager not
only prevented Carrascoso from enjoying his right to a first class seat;
worse, he imposed his arbitrary will; he forcibly ejected him from his
seat, made him suffer the humiliation of having to go to the tourist
class compartment - just to give way to another passenger whose right
thereto has not been established. Certainly, this is bad faith. Unless, of
course, bad faith has assumed a meaning different from what is
understood in law. For, "bad faith" contemplates a "state of mind

affirmatively operating with furtive design or with some motive of selfinterest or will or for ulterior purpose." 39
And if the foregoing were not yet sufficient, there is the express finding
of bad faith in the judgment of the Court of First Instance, thus:
The evidence shows that the defendant violated its contract of
transportation with plaintiff in bad faith, with the aggravating
circumstances that defendant's Manager in Bangkok went to the
extent of threatening the plaintiff in the presence of many
passengers to have him thrown out of the airplane to give the
"first class" seat that he was occupying to, again using the words
of the witness Ernesto G. Cuento, a "white man" whom he
(defendant's Manager) wished to accommodate, and the
defendant has not proven that this "white man" had any "better
right" to occupy the "first class" seat that the plaintiff was
occupying, duly paid for, and for which the corresponding "first
class" ticket was issued by the defendant to him.40
5. The responsibility of an employer for the tortious act of its employees
need not be essayed. It is well settled in law. 41 For the willful malevolent act
of petitioner's manager, petitioner, his employer, must answer. Article 21 of
the Civil Code says:
ART. 21. Any person who willfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
In parallel circumstances, we applied the foregoing legal precept; and, we
held that upon the provisions of Article 2219 (10), Civil Code, moral damages
are recoverable. 42
6. A contract to transport passengers is quite different in kind and degree
from any other contractual relation. 43And this, because of the relation which
an air-carrier sustains with the public. Its business is mainly with the
travelling public. It invites people to avail of the comforts and advantages it
offers. The contract of air carriage, therefore, generates a relation attended
with a public duty. Neglect or malfeasance of the carrier's employees,
naturally, could give ground for an action for damages.
Passengers do not contract merely for transportation. They have a right to be
treated by the carrier's employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from such employees.
So it is, that any rule or discourteous conduct on the part of employees

towards a passenger gives the latter an action for damages against the
carrier. 44
Thus, "Where a steamship company 45 had accepted a passenger's check, it
was a breach of contract and a tort, giving a right of action for its agent in
the presence of third persons to falsely notify her that the check was
worthless and demand payment under threat of ejection, though the
language used was not insulting and she was not ejected." 46 And this,
because, although the relation of passenger and carrier is "contractual both
in origin and nature" nevertheless "the act that breaks the contract may be
also a tort". 47 And in another case, "Where a passenger on a railroad train,
when the conductor came to collect his fare tendered him the cash fare to a
point where the train was scheduled not to stop, and told him that as soon as
the train reached such point he would pay the cash fare from that point to
destination, there was nothing in the conduct of the passenger which
justified the conductor in using insulting language to him, as by calling him a
lunatic," 48 and the Supreme Court of South Carolina there held the carrier
liable for the mental suffering of said passenger.1awphl.nt
Petitioner's contract with Carrascoso is one attended with public duty. The
stress of Carrascoso's action as we have said, is placed upon his wrongful
expulsion. This is a violation of public duty by the petitioner air carrier a
case of quasi-delict. Damages are proper.
7. Petitioner draws our attention to respondent Carrascoso's testimony, thus

Q You mentioned about an attendant. Who is that attendant and

purser?
A When we left already that was already in the trip I could not
help it. So one of the flight attendants approached me and requested
from me my ticket and I said, What for? and she said, "We will note
that you transferred to the tourist class". I said, "Nothing of that kind.
That is tantamount to accepting my transfer." And I also said, "You are
not going to note anything there because I am protesting to this
transfer".
Q Was she able to note it?
A No, because I did not give my ticket.
Q About that purser?
A Well, the seats there are so close that you feel uncomfortable and
you don't have enough leg room, I stood up and I went to the pantry
that was next to me and the purser was there. He told me, "I have
recorded the incident in my notebook." He read it and translated it to

me because it was recorded in French "First class passenger was

forced to go to the tourist class against his will, and that the captain
refused to intervene."
Mr. VALTE
I move to strike out the last part of the testimony of the witness
because the best evidence would be the notes. Your Honor.
COURT
I will allow that as part of his testimony.

49

Petitioner charges that the finding of the Court of Appeals that the purser
made an entry in his notebook reading "First class passenger was forced to
go to the tourist class against his will, and that the captain refused to
intervene" is predicated upon evidence [Carrascoso's testimony above]
which is incompetent. We do not think so. The subject of inquiry is not the
entry, but the ouster incident. Testimony on the entry does not come within
the proscription of the best evidence rule. Such testimony is admissible. 49a
Besides, from a reading of the transcript just quoted, when the dialogue
happened, the impact of the startling occurrence was still fresh and
continued to be felt. The excitement had not as yet died down. Statements
then, in this environment, are admissible as part of the res gestae. 50 For,
they grow "out of the nervous excitement and mental and physical condition
of the declarant". 51 The utterance of the purser regarding his entry in the
notebook was spontaneous, and related to the circumstances of the ouster
incident. Its trustworthiness has been guaranteed. 52 It thus escapes the
operation of the hearsay rule. It forms part of the res gestae.
At all events, the entry was made outside the Philippines. And, by an
employee of petitioner. It would have been an easy matter for petitioner to
have contradicted Carrascoso's testimony. If it were really true that no such
entry was made, the deposition of the purser could have cleared up the
matter.
We, therefore, hold that the transcribed testimony of Carrascoso is
admissible in evidence.
8. Exemplary damages are well awarded. The Civil Code gives the court
ample power to grant exemplary damages in contracts and quasicontracts. The only condition is that defendant should have "acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner." 53 The
manner of ejectment of respondent Carrascoso from his first class seat fits
into this legal precept. And this, in addition to moral damages.54

9. The right to attorney's fees is fully established. The grant of exemplary

damages justifies a similar judgment for attorneys' fees. The least that can
be said is that the courts below felt that it is but just and equitable that
attorneys' fees be given. 55 We do not intend to break faith with the tradition
that discretion well exercised as it was here should not be disturbed.
10. Questioned as excessive are the amounts decreed by both the trial court
and the Court of Appeals, thus: P25,000.00 as moral damages; P10,000.00,
by way of exemplary damages, and P3,000.00 as attorneys' fees. The task of
fixing these amounts is primarily with the trial court. 56 The Court of Appeals
did not interfere with the same. The dictates of good sense suggest that we
give our imprimatur thereto. Because, the facts and circumstances point to
the reasonableness thereof.57
On balance, we say that the judgment of the Court of Appeals does not suffer
from reversible error. We accordingly vote to affirm the same. Costs against
petitioner. So ordered.
Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Zaldivar
and Castro, JJ., concur.
Bengzon, J.P., J., took no part.

G.R. No. 84698 February 4, 1992

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, JUAN D. LIM,
BENJAMIN P. PAULINO, ANTONIO M. MAGTALAS, COL. PEDRO SACRO
and LT. M. SORIANO, petitioners,
vs.
COURT OF APPEALS, HON. REGINA ORDOEZ-BENITEZ, in her
capacity as Presiding Judge of Branch 47, Regional Trial Court,
Manila, SEGUNDA R. BAUTISTA and ARSENIA D.
BAUTISTA, respondents.
Balgos and Perez for petitioners.
Collantes, Ramirez & Associates for private respondents.
PADILLA, J.:
A stabbing incident on 30 August 1985 which caused the death of Carlitos
Bautista while on the second-floor premises of the Philippine School of
Business Administration (PSBA) prompted the parents of the deceased to file
suit in the Regional Trial Court of Manila (Branch 47) presided over by Judge
(now Court of Appeals justice) Regina Ordoez-Benitez, for damages against
the said PSBA and its corporate officers. At the time of his death, Carlitos was

enrolled in the third year commerce course at the PSBA. It was established
that his assailants were not members of the school's academic community
but were elements from outside the school.
Specifically, the suit impleaded the PSBA and the following school
authorities: Juan D. Lim (President), Benjamin P. Paulino (Vice-President),
Antonio M. Magtalas (Treasurer/Cashier), Col. Pedro Sacro (Chief of Security)
and a Lt. M. Soriano (Assistant Chief of Security). Substantially, the plaintiffs
(now private respondents) sought to adjudge them liable for the victim's
untimely demise due to their alleged negligence, recklessness and lack of
security precautions, means and methods before, during and after the attack
on the victim. During the proceedings a quo, Lt. M. Soriano terminated his
relationship with the other petitioners by resigning from his position in the
school.
Defendants a quo (now petitioners) sought to have the suit dismissed,
alleging that since they are presumably sued under Article 2180 of the Civil
Code, the complaint states no cause of action against them, as jurisprudence
on the subject is to the effect that academic institutions, such as the PSBA,
are beyond the ambit of the rule in the afore-stated article.
The respondent trial court, however, overruled petitioners' contention and
thru an order dated 8 December 1987, denied their motion to dismiss. A
subsequent motion for reconsideration was similarly dealt with by an order
dated 25 January 1988. Petitioners then assailed the trial court's disposition
before the respondent appellate court which, in a decision * promulgated on
10 June 1988, affirmed the trial court's orders. On 22 August 1988, the
respondent appellate court resolved to deny the petitioners' motion for
reconsideration. Hence, this petition.
At the outset, it is to be observed that the respondent appellate court
primarily anchored its decision on the law ofquasi-delicts, as enunciated in
Articles 2176 and 2180 of the Civil Code. 1 Pertinent portions of the appellate
court's now assailed ruling state:
Article 2180 (formerly Article 1903) of the Civil Code is an
adoption from the old Spanish Civil Code. The comments of
Manresa and learned authorities on its meaning should give way
to present day changes. The law is not fixed and flexible (sic); it
must be dynamic. In fact, the greatest value and significance of
law as a rule of conduct in (sic) its flexibility to adopt to changing
social conditions and its capacity to meet the new challenges of
progress.

Construed in the light of modern day educational system, Article

2180 cannot be construed in its narrow concept as held in the old
case of Exconde vs. Capuno 2 and Mercado vs. Court of
Appeals; 3hence, the ruling in the Palisoc 4 case that it should
apply to all kinds of educational institutions, academic or
vocational.
At any rate, the law holds the teachers and heads of the school
staff liable unless they relieve themselves of such liability
pursuant to the last paragraph of Article 2180 by "proving that
they observed all the diligence to prevent damage." This can
only be done at a trial on the merits of the case. 5
While we agree with the respondent appellate court that the motion to
dismiss the complaint was correctly denied and the complaint should be tried
on the merits, we do not however agree with the premises of the appellate
court's ruling.
Article 2180, in conjunction with Article 2176 of the Civil Code, establishes
the rule of in loco parentis. This Court discussed this doctrine in the aforecited cases of Exconde, Mendoza, Palisoc and, more recently, in Amadora
vs.Court of Appeals. 6 In all such cases, it had been stressed that the law
(Article 2180) plainly provides that the damage should have been caused or
inflicted by pupils or students of he educational institution sought to be held
liable for the acts of its pupils or students while in its custody. However, this
material situation does not exist in the present case for, as earlier indicated,
the assailants of Carlitos were not students of the PSBA, for whose acts the
school could be made liable.
However, does the appellate court's failure to consider such material facts
mean the exculpation of the petitioners from liability? It does not necessarily
follow.
When an academic institution accepts students for enrollment, there is
established a contract between them, resulting in bilateral obligations which
both parties are bound to comply with. 7 For its part, the school undertakes
to provide the student with an education that would presumably suffice to
equip him with the necessary tools and skills to pursue higher education or a
profession. On the other hand, the student covenants to abide by the
school's academic requirements and observe its rules and regulations.
Institutions of learning must also meet the implicit or "built-in" obligation of
providing their students with an atmosphere that promotes or assists in
attaining its primary undertaking of imparting knowledge. Certainly, no
student can absorb the intricacies of physics or higher mathematics or

explore the realm of the arts and other sciences when bullets are flying or
grenades exploding in the air or where there looms around the school
premises a constant threat to life and limb. Necessarily, the school must
ensure that adequate steps are taken to maintain peace and order within the
campus premises and to prevent the breakdown thereof.
Because the circumstances of the present case evince a contractual relation
between the PSBA and Carlitos Bautista, the rules on quasi-delict do not
really govern. 8 A perusal of Article 2176 shows that obligations arising from
quasi-delicts or tort, also known as extra-contractual obligations, arise only
between parties not otherwise bound by contract, whether express or
implied. However, this impression has not prevented this Court from
determining the existence of a tort even when there obtains a contract.
In Air France vs. Carrascoso (124 Phil. 722), the private respondent was
awarded damages for his unwarranted expulsion from a first-class seat
aboard the petitioner airline. It is noted, however, that the Court referred to
the petitioner-airline's liability as one arising from tort, not one arising from a
contract of carriage. In effect, Air France is authority for the view that liability
from tort may exist even if there is a contract, for the act that breaks the
contract may be also a tort. (Austro-America S.S. Co. vs. Thomas, 248 Fed.
231).
This view was not all that revolutionary, for even as early as 1918, this Court
was already of a similar mind. InCangco vs. Manila Railroad (38 Phil. 780), Mr.
Justice Fisher elucidated thus:
The field of non-contractual obligation is much broader than that
of contractual obligation, comprising, as it does, the whole extent
of juridical human relations. These two fields, figuratively
speaking, concentric; that is to say, the mere fact that a person
is bound to another by contract does not relieve him from extracontractual liability to such person. When such a contractual
relation exists the obligor may break the contract under such
conditions that the same act which constitutes a breach of the
contract would have constituted the source of an extracontractual obligation had no contract existed between the
parties.
Immediately what comes to mind is the chapter of the Civil Code on Human
Relations, particularly Article 21, which provides:
Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good custom or public

policy shall compensate the latter for the damage. (emphasis

supplied).
Air France penalized the racist policy of the airline which emboldened the
petitioner's employee to forcibly oust the private respondent to cater to the
comfort of a white man who allegedly "had a better right to the seat."
InAustro-American, supra, the public embarrassment caused to the
passenger was the justification for the Circuit Court of Appeals, (Second
Circuit), to award damages to the latter. From the foregoing, it can be
concluded that should the act which breaches a contract be done in bad faith
and be violative of Article 21, then there is a cause to view the act as
constituting a quasi-delict.
In the circumstances obtaining in the case at bar, however, there is, as yet,
no finding that the contract between the school and Bautista had been
breached thru the former's negligence in providing proper security measures.
This would be for the trial court to determine. And, even if there be a finding
of negligence, the same could give rise generally to a breach of contractual
obligation only. Using the test of Cangco, supra, the negligence of the school
would not be relevant absent a contract. In fact, that negligence becomes
material only because of the contractual relation between PSBA and
Bautista. In other words, a contractual relation is a condition sine qua nonto
the school's liability. The negligence of the school cannot exist independently
of the contract, unless the negligence occurs under the circumstances set
out in Article 21 of the Civil Code.
This Court is not unmindful of the attendant difficulties posed by the
obligation of schools, above-mentioned, for conceptually a school, like a
common carrier, cannot be an insurer of its students against all risks. This is
specially true in the populous student communities of the so-called
"university belt" in Manila where there have been reported several incidents
ranging from gang wars to other forms of hooliganism. It would not be
equitable to expect of schools to anticipate all types of violent trespass upon
their premises, for notwithstanding the security measures installed, the same
may still fail against an individual or group determined to carry out a
nefarious deed inside school premises and environs. Should this be the case,
the school may still avoid liability by proving that the breach of its
contractual obligation to the students was not due to its negligence, here
statutorily defined to be the omission of that degree of diligence which is
required by the nature of the obligation and corresponding to the
circumstances of persons, time and place. 9

As the proceedings a quo have yet to commence on the substance of the

private respondents' complaint, the record is bereft of all the material facts.
Obviously, at this stage, only the trial court can make such a determination
from the evidence still to unfold.
WHEREFORE, the foregoing premises considered, the petition is DENIED. The
court of origin (RTC, Manila, Br. 47) is hereby ordered to continue
proceedings consistent with this ruling of the Court. Costs against the
petitioners.
SO ORDERED.
Melencio-Herrera, Paras, Regalado and Nocon, JJ., concur.

G.R. No. 156109

November 18, 2004
KHRISTINE REA M. REGINO, Assisted and Represented by ARMANDO
REGINO, petitioner,
vs.
PANGASINAN COLLEGES OF SCIENCE AND TECHNOLOGY, RACHELLE
A. GAMUROT and ELISSA BALADAD, respondents.

DECISION

PANGANIBAN, J.:
Upon enrolment, students and their school enter upon a reciprocal contract.
The students agree to abide by the standards of academic performance and
codes of conduct, issued usually in the form of manuals that are distributed
to the enrollees at the start of the school term. Further, the school informs
them of the itemized fees they are expected to pay. Consequently, it cannot,
after the enrolment of a student, vary the terms of the contract. It cannot
require fees other than those it specified upon enrolment.
The Case
Before the Court is a Petition for Review under Rule 45,1 seeking to nullify the
July 12, 20022 and the November 22, 20023 Orders of the Regional Trial Court
(RTC) of Urdaneta City, Pangasinan (Branch 48) in Civil Case No. U-7541. The
decretal portion of the first assailed Order reads:
"WHEREFORE, the Court GRANTS the instant motion to dismiss for lack
of cause of action."4
The second challenged Order denied petitioner's Motion for Reconsideration.
The Facts

Petitioner Khristine Rea M. Regino was a first year computer science student
at Respondent Pangasinan Colleges of Science and Technology (PCST).
Reared in a poor family, Regino went to college mainly through the financial
support of her relatives. During the second semester of school year 20012002, she enrolled in logic and statistics subjects under Respondents
Rachelle A. Gamurot and Elissa Baladad, respectively, as teachers.
In February 2002, PCST held a fund raising campaign dubbed the "Rave Party
and Dance Revolution," the proceeds of which were to go to the construction
of the school's tennis and volleyball courts. Each student was required to pay
for two tickets at the price of P100 each. The project was allegedly
implemented by recompensing students who purchased tickets with
additional points in their test scores; those who refused to pay were denied
the opportunity to take the final examinations.
Financially strapped and prohibited by her religion from attending dance
parties and celebrations, Regino refused to pay for the tickets. On March 14
and March 15, 2002, the scheduled dates of the final examinations in logic
and statistics, her teachers -- Respondents Rachelle A. Gamurot and Elissa
Baladad -- allegedly disallowed her from taking the tests. According to
petitioner, Gamurot made her sit out her logic class while her classmates
were taking their examinations. The next day, Baladad, after announcing to
the entire class that she was not permitting petitioner and another student to
take their statistics examinations for failing to pay for their tickets, allegedly
ejected them from the classroom. Petitioner's pleas ostensibly went
unheeded by Gamurot and Baladad, who unrelentingly defended their
positions as compliance with PCST's policy.
On April 25, 2002, petitioner filed, as a pauper litigant, a Complaint5 for
damages against PCST, Gamurot and Baladad. In her Complaint, she prayed
for P500,000 as nominal damages; P500,000 as moral damages; at least
P1,000,000 as exemplary damages; P250,000 as actual damages; plus the
costs of litigation and attorney's fees.
On May 30, 2002, respondents filed a Motion to Dismiss6 on the ground of
petitioner's failure to exhaust administrative remedies. According to
respondents, the question raised involved the determination of the wisdom
of an administrative policy of the PCST; hence, the case should have been
initiated before the proper administrative body, the Commission of Higher
Education (CHED).
In her Comment to respondents' Motion, petitioner argued that prior
exhaustion of administrative remedies was unnecessary, because her action
was not administrative in nature, but one purely for damages arising from
respondents' breach of the laws on human relations. As such, jurisdiction lay
with the courts.
On July 12, 2002, the RTC dismissed the Complaint for lack of cause of
action.
Ruling of the Regional Trial Court

In granting respondents' Motion to Dismiss, the trial court noted that the
instant controversy involved a higher institution of learning, two of its faculty
members and one of its students. It added that Section 54 of the Education
Act of 1982 vested in the Commission on Higher Education (CHED) the
supervision and regulation of tertiary schools. Thus, it ruled that the CHED,
not the courts, had jurisdiction over the controversy.7
In its dispositive portion, the assailed Order dismissed the Complaint for
"lack of cause of action" without, however, explaining this ground.
Aggrieved, petitioner filed the present Petition on pure questions of law. 8
Issues
In her Memorandum, petitioner raises the following issues for our
consideration:
"Whether or not the principle of exhaustion of administrative remedies
applies in a civil action exclusively for damages based on violation of
the human relation provisions of the Civil Code, filed by a student
against her former school.
"Whether or not there is a need for prior declaration of invalidity of a
certain school administrative policy by the Commission on Higher
Education (CHED) before a former student can successfully maintain an
action exclusively for damages in regular courts.
"Whether or not the Commission on Higher Education (CHED) has
exclusive original jurisdiction over actions for damages based upon
violation of the Civil Code provisions on human relations filed by a
student against the school."9
All of the foregoing point to one issue -- whether the doctrine of exhaustion
of administrative remedies is applicable. The Court, however, sees a second
issue which, though not expressly raised by petitioner, was impliedly
contained in her Petition: whether the Complaint stated sufficient cause(s) of
action.
The Court's Ruling
The Petition is meritorious.
First Issue:
Exhaustion of Administrative Remedies
Respondents anchored their Motion to Dismiss on petitioner's alleged failure
to exhaust administrative remedies before resorting to the RTC. According to
them, the determination of the controversy hinge on the validity, the wisdom
and the propriety of PCST's academic policy. Thus, the Complaint should
have been lodged in the CHED, the administrative body tasked under
Republic Act No. 7722 to implement the state policy to "protect, foster and
promote the right of all citizens to affordable quality education at all levels
and to take appropriate steps to ensure that education is accessible to all." 10

Petitioner counters that the doctrine finds no relevance to the present case
since she is praying for damages, a remedy beyond the domain of the CHED
and well within the jurisdiction of the courts.11
Petitioner is correct. First, the doctrine of exhaustion of administrative
remedies has no bearing on the present case. In Factoran Jr. v. CA,12 the
Court had occasion to elucidate on the rationale behind this doctrine:
"The doctrine of exhaustion of administrative remedies is basic. Courts,
for reasons of law, comity, and convenience, should not entertain suits
unless the available administrative remedies have first been resorted
to and the proper authorities have been given the appropriate
opportunity to act and correct their alleged errors, if any, committed in
the administrative forum. x x x.13"
Petitioner is not asking for the reversal of the policies of PCST. Neither is she
demanding it to allow her to take her final examinations; she was already
enrolled in another educational institution. A reversal of the acts complained
of would not adequately redress her grievances; under the circumstances,
the consequences of respondents' acts could no longer be undone or
rectified.
Second, exhaustion of administrative remedies is applicable when there is
competence on the part of the administrative body to act upon the matter
complained of.14 Administrative agencies are not courts; they are neither part
of the judicial system, nor are they deemed judicial tribunals.15 Specifically,
the CHED does not have the power to award damages.16 Hence, petitioner
could not have commenced her case before the Commission.
Third, the exhaustion doctrine admits of exceptions, one of which arises
when the issue is purely legal and well within the jurisdiction of the trial
court.17 Petitioner's action for damages inevitably calls for the application
and the interpretation of the Civil Code, a function that falls within the
jurisdiction of the courts.18
Second Issue:
Cause of Action
Sufficient Causes of Action Stated in the Allegations in the
Complaint
As a rule, every complaint must sufficiently allege a cause of action; failure
to do so warrants its dismissal.19 A complaint is said to assert a sufficient
cause of action if, admitting what appears solely on its face to be correct, the
plaintiff would be entitled to the relief prayed for. Assuming the facts that are
alleged to be true, the court should be able to render a valid judgment in
accordance with the prayer in the complaint.20
A motion to dismiss based on lack of cause of action hypothetically admits
the truth of the alleged facts. In their Motion to Dismiss, respondents did not
dispute any of petitioner's allegations, and they admitted that "x x x the crux
of plaintiff's cause of action is the determination of whether or not the
assessment of P100 per ticket is excessive or oppressive."21 They thereby

premised their prayer for dismissal on the Complaint's alleged failure to state
a cause of action. Thus, a reexamination of the Complaint is in order.
The Complaint contains the following factual allegations:
"10. In the second week of February 2002, defendant Rachelle A.
Gamurot, in connivance with PCST, forced plaintiff and her classmates
to buy or take two tickets each, x x x;
"11. Plaintiff and many of her classmates objected to the forced
distribution and selling of tickets to them but the said defendant
warned them that if they refused [to] take or pay the price of the two
tickets they would not be allowed at all to take the final examinations;
"12. As if to add insult to injury, defendant Rachelle A. Gamurot bribed
students with additional fifty points or so in their test score in her
subject just to unjustly influence and compel them into taking the
tickets;
"13. Despite the students' refusal, they were forced to take the tickets
because [of] defendant Rachelle A. Gamurot's coercion and act of
intimidation, but still many of them including the plaintiff did not
attend the dance party imposed upon them by defendants PCST and
Rachelle A. Gamurot;
"14. Plaintiff was not able to pay the price of her own two tickets
because aside form the fact that she could not afford to pay them it is
also against her religious practice as a member of a certain religious
congregation to be attending dance parties and celebrations;
"15. On March 14, 2002, before defendant Rachelle A. Gamurot gave
her class its final examination in the subject 'Logic' she warned that
students who had not paid the tickets would not be allowed to
participate in the examination, for which threat and intimidation many
students were eventually forced to make payments:
"16. Because plaintiff could not afford to pay, defendant Rachelle A.
Gamurot inhumanly made plaintiff sit out the class but the defendant
did not allow her to take her final examination in 'Logic;'
"17. On March 15, 2002 just before the giving of the final examination
in the subject 'Statistics,' defendant Elissa Baladad, in connivance with
defendants Rachelle A. Gamurot and PCST, announced in the
classroom that she was not allowing plaintiff and another student to
take the examination for their failure and refusal to pay the price of the
tickets, and thenceforth she ejected plaintiff and the other student
from the classroom;
"18. Plaintiff pleaded for a chance to take the examination but all
defendants could say was that the prohibition to give the examinations
to non-paying students was an administrative decision;
"19. Plaintiff has already paid her tuition fees and other obligations in
the school;

"20. That the above-cited incident was not a first since PCST also did
another forced distribution of tickets to its students in the first
semester of school year 2001-2002; x x x " 22
The foregoing allegations show two causes of action; first, breach of contract;
and second, liability for tort.
Reciprocity of the
School-Student Contract
In Alcuaz v. PSBA,23 the Court characterized the relationship between the
school and the student as a contract, in which "a student, once admitted by
the school is considered enrolled for one semester."24 Two years later, in Non
v. Dames II,25 the Court modified the "termination of contract theory" in
Alcuaz by holding that the contractual relationship between the school and
the student is not only semestral in duration, but for the entire period the
latter are expected to complete it."26 Except for the variance in the period
during which the contractual relationship is considered to subsist, both
Alcuaz and Non were unanimous in characterizing the school-student
relationship as contractual in nature.
The school-student relationship is also reciprocal. Thus, it has consequences
appurtenant to and inherent in all contracts of such kind -- it gives rise to
bilateral or reciprocal rights and obligations. The school undertakes to
provide students with education sufficient to enable them to pursue higher
education or a profession. On the other hand, the students agree to abide by
the academic requirements of the school and to observe its rules and
regulations.27
The terms of the school-student contract are defined at the moment of its
inception -- upon enrolment of the student. Standards of academic
performance and the code of behavior and discipline are usually set forth in
manuals distributed to new students at the start of every school year.
Further, schools inform prospective enrollees the amount of fees and the
terms of payment.
In practice, students are normally required to make a down payment upon
enrollment, with the balance to be paid before every preliminary, midterm
and final examination. Their failure to pay their financial obligation is
regarded as a valid ground for the school to deny them the opportunity to
take these examinations.
The foregoing practice does not merely ensure compliance with financial
obligations; it also underlines the importance of major examinations. Failure
to take a major examination is usually fatal to the students' promotion to the
next grade or to graduation. Examination results form a significant basis for
their final grades. These tests are usually a primary and an indispensable
requisite to their elevation to the next educational level and, ultimately, to
their completion of a course.
Education is not a measurable commodity. It is not possible to determine who
is "better educated" than another. Nevertheless, a student's grades are an

accepted approximation of what would otherwise be an intangible product of

countless hours of study. The importance of grades cannot be discounted in a
setting where education is generally the gate pass to employment
opportunities and better life; such grades are often the means by which a
prospective employer measures whether a job applicant has acquired the
necessary tools or skills for a particular profession or trade.
Thus, students expect that upon their payment of tuition fees, satisfaction of
the set academic standards, completion of academic requirements and
observance of school rules and regulations, the school would reward them by
recognizing their "completion" of the course enrolled in.
The obligation on the part of the school has been established in Magtibay v.
Garcia,28 Licup v. University of San Carlos29 and Ateneo de Manila University
v. Garcia,30 in which the Court held that, barring any violation of the rules on
the part of the students, an institution of higher learning has a contractual
obligation to afford its students a fair opportunity to complete the course
they seek to pursue.
We recognize the need of a school to fund its facilities and to meet
astronomical operating costs; this is a reality in running it. Crystal v. Cebu
International School31 upheld the imposition by respondent school of a "land
purchase deposit" in the amount of P50,000 per student to be used for the
"purchase of a piece of land and for the construction of new buildings and
other facilities x x x which the school would transfer [to] and occupy after the
expiration of its lease contract over its present site."
The amount was refundable after the student graduated or left the school.
After noting that the imposition of the fee was made only after prior
consultation and approval by the parents of the students, the Court held that
the school committed no actionable wrong in refusing to admit the children
of the petitioners therein for their failure to pay the "land purchase deposit"
and the 2.5 percent monthly surcharge thereon.
In the present case, PCST imposed the assailed revenue-raising measure
belatedly, in the middle of the semester. It exacted the dance party fee as a
condition for the students' taking the final examinations, and ultimately for
its recognition of their ability to finish a course. The fee, however, was not
part of the school-student contract entered into at the start of the school
year. Hence, it could not be unilaterally imposed to the prejudice of the
enrollees.
Such contract is by no means an ordinary one. In Non, we stressed that the
school-student contract "is imbued with public interest, considering the high
priority given by the Constitution to education and the grant to the State of
supervisory and regulatory powers over all educational
institutions."32 Sections 5 (1) and (3) of Article XIV of the 1987 Constitution
provide:
"The State shall protect and promote the right of all citizens to quality
education at all levels and shall take appropriate steps to make such
declaration accessible to all.

"Every student has a right to select a profession or course of study,

subject to fair, reasonable and equitable admission and academic
requirements."
The same state policy resonates in Section 9(2) of BP 232, otherwise known
as the Education Act of 1982:
"Section 9. Rights of Students in School. In addition to other rights,
and subject to the limitations prescribed by law and regulations,
students and pupils in all schools shall enjoy the following rights:
xxx
xxx
xxx
(2) The right to freely choose their field of study subject to
existing curricula and to continue their course therein up to
graduation, except in cases of academic deficiency, or violation
of disciplinary regulations."
Liability for Tort
In her Complaint, petitioner also charged that private respondents
"inhumanly punish students x x x by reason only of their poverty, religious
practice or lowly station in life, which inculcated upon [petitioner] the
feelings of guilt, disgrace and unworthiness;"33 as a result of such
punishment, she was allegedly unable to finish any of her subjects for the
second semester of that school year and had to lag behind in her studies by
a full year. The acts of respondents supposedly caused her extreme
humiliation, mental agony and "demoralization of unimaginable proportions"
in violation of Articles 19, 21 and 26 of the Civil Code. These provisions of the
law state thus:
"Article 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith."
"Article 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage."
"Article 26. Every person shall respect the dignity, personality, privacy
and peace of mind of his neighbors and other persons. The following
and similar acts, though they may not constitute a criminal offense,
shall produce a cause of action for damages, prevention and other
relief:
(1) Prying into the privacy of another's residence;
(2) Meddling with or disturbing the private life or family relations
of another;
(3) Intriguing to cause another to be alienated from his friends;
(4) Vexing or humiliating another on account of his beliefs, lowly
station in life, place of birth, physical defect, or other personal
condition."

Generally, liability for tort arises only between parties not otherwise bound
by a contract. An academic institution, however, may be held liable for tort
even if it has an existing contract with its students, since the act that
violated the contract may also be a tort. We ruled thus in PSBA vs. CA,34 from
which we quote:
"x x x A perusal of Article 2176 [of the Civil Code] shows that
obligations arising from quasi-delicts or tort, also known as extracontractual obligations, arise only between parties not otherwise
bound by contract, whether express or implied. However, this
impression has not prevented this Court from determining the
existence of a tort even when there obtains a contract. In Air France v.
Carrascoso (124 Phil. 722), the private respondent was awarded
damages for his unwarranted expulsion from a first-class seat aboard
the petitioner airline. It is noted, however, that the Court referred to
the petitioner-airline's liability as one arising from tort, not one arising
form a contract of carriage. In effect, Air France is authority for the
view that liability from tort may exist even if there is a contract, for the
act that breaks the contract may be also a tort. x x x This view was not
all that revolutionary, for even as early as 1918, this Court was already
of a similar mind. In Cangco v. Manila Railroad (38 Phil. 780), Mr. Justice
Fisher elucidated thus: 'x x x. When such a contractual relation exists
the obligor may break the contract under such conditions that the
same act which constitutes a breach of the contract would have
constituted the source of an extra-contractual obligation had no
contract existed between the parties.'
"Immediately what comes to mind is the chapter of the Civil Code on
Human Relations, particularly Article 21 x x x."35
Academic Freedom
In their Memorandum, respondents harp on their right to "academic
freedom." We are not impressed. According to present jurisprudence,
academic freedom encompasses the independence of an academic
institution to determine for itself (1) who may teach, (2) what may be taught,
(3) how it shall teach, and (4) who may be admitted to study.36 In Garcia v.
the Faculty Admission Committee, Loyola School of Theology,37 the Court
upheld the respondent therein when it denied a female student's admission
to theological studies in a seminary for prospective priests. The Court
defined the freedom of an academic institution thus: "to decide for itself
aims and objectives and how best to attain them x x x free from outside
coercion or interference save possibly when overriding public welfare calls
for some restraint."38
In Tangonan v. Pao,39 the Court upheld, in the name of academic freedom,
the right of the school to refuse readmission of a nursing student who had
been enrolled on probation, and who had failed her nursing subjects. These
instances notwithstanding, the Court has emphasized that once a school has,
in the name of academic freedom, set its standards, these should be

meticulously observed and should not be used to discriminate against

certain students.40 After accepting them upon enrollment, the school cannot
renege on its contractual obligation on grounds other than those made
known to, and accepted by, students at the start of the school year.
In sum, the Court holds that the Complaint alleges sufficient causes of action
against respondents, and that it should not have been summarily dismissed.
Needless to say, the Court is not holding respondents liable for the acts
complained of. That will have to be ruled upon in due course by the court a
quo.
WHEREFORE, the Petition is hereby GRANTED, and the assailed Orders
REVERSED. The trial court is DIRECTED to reinstate the Complaint and, with
all deliberate speed, to continue the proceedings in Civil Case No. U-7541. No
costs.
SO ORDERED.
Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur.
Corona, J., on leave.
G.R. No. 110295 October 18, 1993
COCA-COLA BOTTLERS PHILIPPINES, INC.,
vs.
THE HONORABLE COURT OF APPEALS (Fifth Division) and MS. LYDIA
GERONIMO, respondents.
Angara, Abello, Concepcion, Regala & Cruz Law Offices for petitioner.
Alejandro M. Villamil for private respondent.
DAVIDE, JR., J.:
This case concerns the proprietress of a school canteen which had to close
down as a consequence of the big drop in its sales of soft drinks triggered by
the discovery of foreign substances in certain beverages sold by it. The
interesting issue posed is whether the subsequent action for damages by the
proprietress against the soft drinks manufacturer should be treated as one
for breach of implied warranty against hidden defects or merchantability, as
claimed by the manufacturer, the petitioner herein which must therefore be
filed within six months from the delivery of the thing sold pursuant to Article
1571 of the Civil Code, or one for quasi-delict, as held by the public
respondent, which can be filed within four years pursuant to Article 1146 of
the same Code.
On 7 May 1990, Lydia L. Geronimo, the herein private respondent, filed a
complaint for damages against petitioner with the Regional Trial Court (RTC)
of Dagupan City. 1 The case was docketed as Civil Case No. D-9629. She
alleges in her complaint that she was the proprietress of Kindergarten

Wonderland Canteen docketed as located in Dagupan City, an enterprise

engaged in the sale of soft drinks (including Coke and Sprite) and other
goods to the students of Kindergarten Wonderland and to the public; on or
about 12 August 1989, some parents of the students complained to her that
the Coke and Sprite soft drinks sold by her contained fiber-like matter and
other foreign substances or particles; he then went over her stock of
softdrinks and discovered the presence of some fiber-like substances in the
contents of some unopened Coke bottles and a plastic matter in the contents
of an unopened Sprite bottle; she brought the said bottles to the Regional
Health Office of the Department of Health at San Fernando, La Union, for
examination; subsequently, she received a letter from the Department of
Health informing her that the samples she submitted "are adulterated;" as a
consequence of the discovery of the foreign substances in the beverages,
her sales of soft drinks severely plummeted from the usual 10 cases per day
to as low as 2 to 3 cases per day resulting in losses of from P200.00 to
P300.00 per day, and not long after that she had to lose shop on 12
December 1989; she became jobless and destitute; she demanded from the
petitioner the payment of damages but was rebuffed by it. She prayed for
judgment ordering the petitioner to pay her P5,000.00 as actual damages,
P72,000.00 as compensatory damages, P500,000.00 as moral damages,
P10,000.00 as exemplary damages, the amount equal to 30% of the
damages awarded as attorney's fees, and the costs. 2
The petitioner moved to dismiss 3 the complaint on the grounds of failure to
exhaust administrative remedies and prescription. Anent the latter ground,
the petitioner argued that since the complaint is for breach of warranty
under Article 1561 of the said Code. In her Comment 4 thereto, private
respondent alleged that the complaint is one for damages which does not
involve an administrative action and that her cause of action is based on an
injury to plaintiff's right which can be brought within four years pursuant to
Article 1146 of the Civil Code; hence, the complaint was seasonably filed.
Subsequent related pleadings were thereafter filed by the parties. 5
In its Order of 23 January 1991, 6 the trial court granted the motion to
dismiss. It ruled that the doctrine of exhaustion of administrative remedies
does not apply as the existing administrative remedy is not adequate. It also
stated that the complaint is based on a contract, and not on quasi-delict, as
there exists pre-existing contractual relation between the parties; thus, on
the basis of Article 1571, in relation to Article 1562, the complaint should
have been filed within six months from the delivery of the thing sold.

Her motion for the reconsideration of the order having been denied by the
trial court in its Order of 17 April 1991,7 the private respondent came to this
Court via a petition for review on certiorari which we referred to the public
respondent "for proper determination and disposition. 8 The public
respondent docketed the case as CA-G.R. SP No. 25391.
In a decision promulgated on 28 January 1992, 9 the public respondent
annulled the questioned orders of the RTC and directed it to conduct further
proceedings in Civil Case No. D-9629. In holding for the private respondent, it
ruled that:
Petitioner's complaint being one for quasi-delict, and not for
breach of warranty as respondent contends, the applicable
prescriptive period is four years.
It should be stressed that the allegations in the complaint plainly
show that it is an action or damages arising from respondent's
act of "recklessly and negligently manufacturing adulterated
food items intended to be sold or public consumption" (p.
25, rollo). It is truism in legal procedure that what determines the
nature of an action are the facts alleged in the complaint and
those averred as a defense in the defendant's answer (I Moran
126; Calo v. Roldan, 76 Phil. 445; Alger Electric, Inc. v. CA, 135
SCRA 340).
Secondly, despite the literal wording of Article 2176 of the Civil
code, the existence of contractual relations between the parties
does not absolutely preclude an action by one against the other
forquasi-delict arising from negligence in the performance of a
contract.
In Singson v. Court of Appeals (23 SCRA 1117), the Supreme Court ruled:
It has been repeatedly held: that the existence of a
contract between the parties does not bar the
commission of a tort by the one against the other
and the consequent recovery of damages therefor
. . . . Thus in Air France vs. Carrascoso, . . . (it was
held that) although the relation between a passenger
and a carrier is "contractual both in origin and in
nature the act that breaks the contract may also be a
tort.
Significantly, in American jurisprudence, from which Our law on
Sales was taken, the authorities are one in saying that he

availability of an action or breach of warranty does not bar an

action for torts in a sale of defective goods. 10
Its motion for the reconsideration of the decision having been denied by the
public respondent in its Resolution of 14 May 1993, 11 the petitioner took his
recourse under Rule 45 of the Revised Rules of Court. It alleges in its petition
that:
I.
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE AND
REVERSIBLE ERROR IN RULING THAT ARTICLE 2176, THE
GENERAL PROVISION ON QUASI-DELICTS, IS APPLICABLE IN THIS
CASE WHEN THE ALLEGATIONS OF THE COMPLAINT CLEARLY
SHOW THAT PRIVATE RESPONDENT'S CAUSE OF ACTION IS
BASEDON BREACH OF A SELLER'S IMPLIED WARRANTIES UNDER
OUR LAW ON SALES.
II.
CORROLARILY, THE HONORABLE COURT OF APPEALS COMMITTED
A GRAVE AND REVERSIBLE ERROR IN OVERRULING PETITIONER'S
ARGUMENT THAT PRIVATE RESPONDENT'S CAUSE OF ACTION
HAD PRESCRIBED UNDER ARTICLE 1571 OF THE CIVIL CODE. 12
The petitioner insists that a cursory reading of the complaint will reveal that
the primary legal basis for private respondent's cause of action is not Article
2176 of the Civil Code on quasi-delict for the complaint does not ascribe
any tortious or wrongful conduct on its part but Articles 1561 and 1562
thereof on breach of a seller's implied warranties under the law on sales. It
contends the existence of a contractual relation between the parties (arising
from the contract of sale) bars the application of the law on quasi-delicts and
that since private respondent's cause of action arose from the breach of
implied warranties, the complaint should have been filed within six months
room delivery of the soft drinks pursuant to Article 171 of the Civil Code.
In her Comment the private respondent argues that in case of breach of the
seller's implied warranties, the vendee may, under Article 1567 of the Civil
Code, elect between withdrawing from the contract or demanding a
proportionate reduction of the price, with damages in either case. She
asserts that Civil Case No. D-9629 is neither an action for rescission nor for
proportionate reduction of the price, but for damages arising from a quasidelict and that the public respondent was correct in ruling that the existence
of a contract did not preclude the action for quasi-delict. As to the issue of
prescription, the private respondent insists that since her cause of action is
based on quasi-delict, the prescriptive period therefore is four (4) years in

accordance with Article 1144 of the Civil Code and thus the filing of the
complaint was well within the said period.
We find no merit in the petition. The public respondent's conclusion that the
cause of action in Civil Case No. D-9629 is found on quasi-delict and that,
therefore, pursuant to Article 1146 of the Civil Code, it prescribes in four (4)
years is supported by the allegations in the complaint, more particularly
paragraph 12 thereof, which makes reference to the reckless and negligent
manufacture of "adulterated food items intended to be sold for public
consumption."
The vendee's remedies against a vendor with respect to the warranties
against hidden defects of or encumbrances upon the thing sold are not
limited to those prescribed in Article 1567 of the Civil Code which provides:
Art. 1567. In the case of Articles 1561, 1562, 1564, 1565 and
1566, the vendee may elect between withdrawing from the
contract and demanding a proportionate reduction of the price,
with damages either
case. 13
The vendee may also ask for the annulment of the contract upon proof of
error or fraud, in which case the ordinary rule on obligations shall be
applicable. 14 Under the law on obligations, responsibility arising from fraud is
demandable in all obligations and any waiver of an action for future fraud is
void. Responsibility arising from negligence is also demandable in any
obligation, but such liability may be regulated by the courts, according to the
circumstances. 15 Those guilty of fraud, negligence, or delay in the
performance of their obligations and those who in any manner contravene
the tenor thereof are liable for damages. 16
The vendor could likewise be liable for quasi-delict under Article 2176 of the
Civil Code, and an action based thereon may be brought by the vendee.
While it may be true that the pre-existing contract between the parties may,
as a general rule, bar the applicability of the law on quasi-delict, the liability
may itself be deemed to arise from quasi-delict, i.e., the acts which breaks
the contract may also be a quasi-delict. Thus, in Singson vs. Bank of the
Philippine Islands, 17 this Court stated:
We have repeatedly held, however, that the existence of a
contract between the parties does not bar the commission of a
tort by the one against the other and the consequent recovery of
damages therefor. 18 Indeed, this view has been, in effect,
reiterated in a comparatively recent case. Thus, inAir France
vs. Carrascoso, 19 involving an airplane passenger who, despite hi

first-class ticket, had been illegally ousted from his first-class

accommodation and compelled to take a seat in the tourist
compartment, was held entitled to recover damages from the aircarrier, upon the ground of tort on the latter's part, for, although
the relation between the passenger and a carrier is "contractual
both in origin and nature . . . the act that breaks the contract
may also be a tort.
Otherwise put, liability for quasi-delict may still exist despite the
presence of contractual relations. 20
Under American law, the liabilities of a manufacturer or seller of injurycausing products may be based on negligence, 21 breach of
warranty, 22 tort, 23 or other grounds such as fraud, deceit, or
misrepresentation.24 Quasi-delict, as defined in Article 2176 of the Civil
Code, (which is known in Spanish legal treaties asculpa aquiliana,
culpa extra-contractual or cuasi-delitos) 25 is homologous but not
identical to tort under the common law, 26 which includes not only
negligence, but also intentional criminal acts, such as assault and
battery, false imprisonment and deceit. 27
It must be made clear that our affirmance of the decision of the public
respondent should by no means be understood as suggesting that the
private respondent's claims for moral damages have sufficient factual and
legal basis.
IN VIEW OF ALL THE FOREGOING, the instant petition is hereby DENIED for
lack of merit, with costs against the petitioner.
SO ORDERED.
Cruz, Bellosillo and Quiason, JJ., concur.
Grio-Aquino, J., is on leave.

G.R. No. 138550 October 14, 2005

AMERICAN EXPRESS INTERNATIONAL, INC., Petitioner,
vs.
NOEL CORDERO, Defendant.
DECISION
SANDOVAL-GUTIERREZ, J.:
This is a petition for review on certiorari of the Decision1 of the Court of
Appeals dated April 30, 1999 in CA-G.R. CV No. 51671, entitled, "Noel

Cordero, Plaintiff-Appellee versus American Express International, Inc.,

Defendant-Appellant."
Petitioner is a foreign corporation that issues charge cards to its customers,
which the latter then use to purchase goods and services at accredited
merchants worldwide. Sometime in 1988, Nilda Cordero, wife of respondent
Noel Cordero, applied for and was issued an American Express charge card
with No. 3769-895901-010020. The issuance of the charge card was covered
by an Amex Cardmember Agreement. As cardholder, Nilda, upon signing the
back portion of the card, manifested her acceptance of the terms of the
Agreement.
An extension charge card, with No. 3769-895901-01010, was likewise issued
to respondent Noel Cordero which he also signed.2
On November 29, 1991, respondent, together with his wife, Nilda, daughter,
sisters-in-law and uncle-in-law, went on a three-day holiday trip to Hong
Kong. In the early evening of November 30, 1991, at about 7:00 oclock, the
group went to the Watsons Chemist Shop located at 277C Ocean Gallery,
Kowloon, Hong Kong. Noel picked up some chocolate candies and handed to
the sales clerk his American Express extension charge card to pay for his
purchases. The sales clerk verified the card by making a telephone call to the
American Express Office in Hong Kong. Moments later, Susan Chong, the
store manager, emerged from behind the counter and informed respondent
that she had to confiscate the card. Thereupon, she cut respondents
American Express card in half with a pair of scissors. This, according to
respondent, caused him embarrassment and humiliation considering that it
was done in front of his family and the other customers lined up at the
check-out counter. Hence, Nilda had to pay for the purchases using her own
American Express charge card.3
When they returned to the Excelsior Hotel, Nilda called up petitioners Office
in Hong Kong. She was able to talk to Senior Authorizer Johnny Chen, who
informed her that on November 1, 1991, a person in Hong Kong attempted to
use a charge card with the same number as respondents card. The Hong
Kong American Express Office called up respondent and after determining
that he was in Manila and not in Hong Kong, placed his card in the "Inspect
Airwarn Support System." This is the system utilized by petitioner as a
protection both for the company and the cardholders against the fraudulent
use of their charge cards. Once a card suspected of unauthorized use is
placed in the system, the person to whom the card is tendered must verify
the identity of the holder. If the true identity of the card owner is established,

the card is honored and the charges are approved. Otherwise, the card is
revoked or confiscated.4
When the Watsons sales clerk called up petitioners Hong Kong Office, its
representative said he wants to talk to respondent in order to verify the
latters identity, pursuant to the procedure observed under the "Inspect
Airwarn Support System." However, respondent refused. Consequently,
petitioners representative was unable to establish the identity of the
cardholder.5 This led to the confiscation of respondents card.
On March 31, 1992, respondent filed with the Regional Trial Court, Branch V,
Manila, a complaint for damages against petitioner, docketed as Civil Case
No. 92-60807. He prayed for the award of moral damages and exemplary
damages, as well as attorneys fees as a result of the humiliation he suffered.
The trial court found that "the inexcusable failure of defendant (petitioner
herein) to inform plaintiff (respondent herein) of the November 1, 1991
incident despite sufficient time was the proximate cause of the confiscation
and cutting of plaintiffs extension card which exposed the latter to public
humiliation for which defendant should be held liable."6 On February 20,
1995, the trial court promulgated its Decision, the dispositive portion of
which reads:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the defendant, ordering the latter to pay the former the following
amounts, namely:
a) The sum of P300,000.00 as and by way of moral damages;
b) The sum of P200,000.00 as exemplary damages;
c) The sum of P100,000.00 as and for reasonable attorneys fees; and
d) The costs of the suit.
SO ORDERED."7
Upon appeal, the Court of Appeals rendered the assailed Decision affirming
the trial courts Decision with modification in the sense that the amounts of
damages awarded were reduced, thus:
"WHEREFORE, in view of the foregoing, the appealed decision dated February
20, 1995 of the Regional Trial Court of Manila, Branch V, in Civil Case No. 9260807 is hereby AFFIRMED, subject to modifications with respect to the
amount of damages awarded, which are reduced as follows:
(a) Moral damages from P300,000.00 to P150,000.00; and
(b) Exemplary damages from P200,000.00 to P100,000.00.
No pronouncement as to costs.
SO ORDERED."

Hence, the instant petition raising the following issues:

"A. Whether the lower courts gravely erred in attributing the public
humiliation allegedly suffered by Cordero to Amex.
B. Whether the lower courts gravely erred in holding Amex liable to Cordero
for moral damages, exemplary damages and attorneys fees."8
Respondent filed his comment contending in the main that the petition raises
questions of fact beyond this Courts domain.
While it is true that under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, this Court may review only errors of law, however, this rule admits
of well-known recognized exceptions, thus:
". . . (1) the conclusion is a finding grounded entirely on speculation, surmise
and conjecture; (2) the inference made is manifestly mistaken; (3) there is
grave abuse of discretion; (4) the judgment is based on a misapprehension of
facts; (5) the findings of fact are conflicting; (6) the Court of Appeals went
beyond the issues of the case and its findings are contrary to the admissions
of both parties; (7) the findings of fact of the Court of Appeals are contrary to
those of the trial court; (8) said findings of fact are conclusions without
citation of specific evidence on which they are based; (9) the facts set forth
in the petition are not disputed by the respondents; and (10) the findings of
fact of the Court of Appeals are premised on the supposed absence of
evidence and contradicted by the evidence on record."9
In this case, the inference made by the courts below is manifestly mistaken.
Therefore, we are justified in reviewing the records of this case and rendering
judgment based on our own findings.
In his complaint, respondent claimed that he suffered embarrassment and
humiliation because his card was unceremoniously confiscated and cut in
half by Susan Chong of Watsons Chemist Shop.
Respondent anchors his cause of action on the following provision of the Civil
Code:
"Art. 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this
Chapter."10
In order that an obligation based on quasi-delict may arise, there must be no
pre-existing contractual relation between the parties. But there are
exceptions. There may be an action for quasi-delict notwithstanding that
there is a subsisting contract between the parties. A liability for tort may

arise even under a contract, where tort is that which breaches the contract.
Stated differently, when an act which constitutes a breach of contract would
have itself constituted the source of a quasi-delictual liability, the contract
can be said to have been breached by tort, thereby allowing the rules on tort
to apply.11
Furthermore, to constitute quasi-delict, the fault or negligence must be the
proximate cause of the damage or injury suffered by the plaintiff. Proximate
cause is that cause which, in natural and continuous sequence, unbroken by
any efficient intervening cause, produces the injury and without which the
result would not have occurred. Proximate cause is determined by the facts
of each case upon mixed considerations of logic, common sense, policy and
precedent.12
According to the trial court, petitioner should have informed respondent that
on November 1, 1991, a person in Hong Kong attempted to use a charge
card bearing similar number to that of respondents card; and that
petitioners inexcusable failure to do so is the proximate cause of the
"confiscation and cutting of [respondents] extension card which exposed the
latter to public humiliation for which [petitioner] should be held liable."13
We cannot sustain the trial courts conclusion.
As explained by respondent himself, he could have used his card upon
verification by the sales clerk of Watson that indeed he is the authorized
cardholder. This could have been accomplished had respondent talked to
petitioners representative, enabling the latter to determine that respondent
is indeed the true holder of the card. Clearly, no negligence which breaches
the contract can be attributed to petitioner. If at all, the cause of
respondents humiliation and embarrassment was his refusal to talk to
petitioners representative.
That respondent refused to talk to petitioners representative can be gleaned
from the testimony of Mr. Chen Heng Kun a.k.a. Johnny Chen during the
deposition in Hong Kong,14 thus:
"Question No 9 : Was AEII required under its existing policies and/or
membership agreement with its cardholders to advise said cardholders of
their card have been put under the support INSPECT Strictly Question (for
identification) cardmembers before approving any charge?
Mr. Johnny Chen : Under the existing policies of AEII, we dont have to inform
the cardholders if they have to pass the INSPECT Strictly Questions (for
identification).
Question No 10 : If the answer to Q9 is in the negative, please explain why
not?

Mr. Johnny Chen : The reason why we dont have to are because, first, we are
not terminating the service to the cardholder. Second, it doesnt mean that
we are going to limit the service to the cardholder. Third, as long as the
cardholder can present an identification card of his membership, we allow
him to use the card. He can show this by telephoning the company or by
presenting us his passport or travel document. When Watson Company
called AEII for authorization, AEII representative requested that he
talk to Mr. Cordero but he refused to talk to any representative of
AEII. AEII could not prove then that he is really the real card holder."
Mr. Chen Heng Kun was briefly cross-examined by respondents counsel,
thus:
"Question No 10 : Question 9 is objected to since the best evidence would be
the membership agreement between plaintiffs and AEII."
Significantly, paragraph 16 of the Cardmember Agreement signed by
respondent provides:
"16. THE CARD REMAINS OUR PROPERTY
"The Card remains our property and we can revoke your right and the right of
ay Additional Cardmember to use it at any time, we can do this with or
without giving you notice. If we have revoked the Card without cause, we will
refund a proportion of your annual Card Account fee. We may list revoked
Cards in our "Cancellation Bulletin", or otherwise inform Establishments that
the Card issued to you and, if you are the basic Cardmember, any Additional
Cards have been revoked or cancelled.
"If we revoke the card or it expires, you must return it to us if we request.
Also, if any Establishment asks you to surrender an expired or revoked Card,
you must do so. You may not use the Card after it has expired or after it has
been revoked.
"The revocation, repossession or request for the return of the Card is not,
and shall not constitute any reflection of your character or credit-worthiness
and we shall not be liable in any way for any statement made by any person
requesting the return or surrender of the Card."15
To be sure, pursuant to the above stipulation, petitioner can revoke
respondents card without notice, as was done here. It bears reiterating that
the subject card would not have been confiscated and cut had respondent
talked to petitioners representative and identified himself as the genuine
cardholder. It is thus safe to conclude that there was no negligence on the
part of petitioner and that, therefore, it cannot be held liable to respondent
for damages.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court

of Appeals in CA-G.R. CV No. 51671 is REVERSED.
SO ORDERED.

G.R. No. 80194 March 21, 1989

EDGAR JARANTILLA, petitioner,
vs.
COURT OF APPEALS and JOSE KUAN SING, respondents.
Corazon Miraflores and Vicente P. Billena for petitioner.
Manuel S. Gemarino for private respondent.
REGALADO, J.:
The records show that private respondent Jose Kuan Sing was "side-swiped
by a vehicle in the evening of July 7, 1971 in lznart Street, Iloilo City" 1 The
respondent Court of Appeals concurred in the findings of the court a quo that
the said vehicle which figured in the mishap, a Volkswagen (Beetle type) car,
was then driven by petitioner Edgar Jarantilla along said street toward the
direction of the provincial capitol, and that private respondent sustained
physical injuries as a consequence. 2
Petitioner was accordingly charged before the then City Court of Iloilo for
serious physical injuries thru reckless imprudence in Criminal Case No.
47207 thereof. 3 Private respondent, as the complaining witness therein, did
not reserve his right to institute a separate civil action and he intervened in
the prosecution of said criminal case through a private
prosecutor. 4 Petitioner was acquitted in said criminal case "on reasonable
doubt".5
On October 30, 1974, private respondent filed a complaint against the
petitioner in the former Court of First Instance of Iloilo, Branch IV, 6 docketed
therein as Civil Case No. 9976, and which civil action involved the same
subject matter and act complained of in Criminal Case No. 47027. 7 In his
answer filed therein, the petitioner alleged as special and affirmative
detenses that the private respondent had no cause of action and,
additionally, that the latter's cause of action, if any, is barred by the prior
judgment in Criminal Case No. 47207 inasmuch as when said criminal case
was instituted the civil liability was also deemed instituted since therein

plaintiff failed to reserve the civil aspect and actively participated in the
criminal case. 8
Thereafter, acting on a motion to dismiss of therein defendant, the trial court
issued on April 3, 1975 an order of denial, with the suggestion that "(t)o
enrich our jurisprudence, it is suggested that the defendant brings (sic) this
ruling to the Supreme Court by certiorari or other appropriate remedy, to
review the ruling of the court". 9
On June 17, 1975, petitioner filed in this Court a petition for certiorari,
prohibition and mandamus, which was docketed as G.R. No. L40992, 10 assailing the aforesaid order of the trial court. Said petition was
dismissed for lack of merit in the Court's resolution of July 23, 1975, and a
motion for reconsideration thereof was denied for the same reason in a
resolution of October 28, 1975. 11
After trial, the court below rendered judgment on May 23, 1977 in favor of
the herein private respondent and ordering herein petitioner to pay the
former the sum of P 6,920.00 for hospitalization, medicines and so forth,
P2,000.00 for other actual expenses, P25,000.00 for moral damages,
P5,000.00 for attorney's fees, and costs. 12
On July 29, 1987, the respondent Court of Appeals 13 affirmed the decision
of the lower court except as to the award for moral damages which it
reduced from P25,000.00 to P18,000.00. A motion for reconsideration was
denied by respondent court on September 18, 1987. 14
The main issue for resolution by Us in the present recourse is whether the
private respondent, who was the complainant in the criminal action for
physical injuries thru reckless imprudence and who participated in the
prosecution thereof without reserving the civil action arising from the act or
omission complained of, can file a separate action for civil liability arising
from the same act or omission where the herein petitioner was acquitted in
the criminal action on reasonable doubt and no civil liability was adjudicated
or awarded in the judgment of acquittal.
Prefatorily, We note that petitioner raises a collateral issue by faulting the
respondent court for refusing to resolve an assignment of error in his appeal
therein, said respondent court holding that the main issue had been passed
upon by this Court in G.R. No. L-40992 hereinbefore mentioned. It is
petitioner's position that the aforesaid two resolutions of the Court in said
case, the first dismissing the petition and the second denying the motion for
reconsideration, do not constitute the "law of the case' which would control
the subsequent proceed ings in this controversy.
1. We incline favorably to petitioner's submission on this score.

The "doctrine of the law of the case" has no application at the aforesaid
posture of the proceedings when the two resolutions were handed down.
While it may be true that G.R. No. L-40992 may have involved some of the
issues which were thereafter submitted for resolution on the merits by the
two lower courts, the proceedings involved there was one for certiorari,
prohibition and mandamus assailing an interlocutory order of the court a
quo, specifically, its order denying therein defendants motion to dismiss. This
Court, without rendering a specific opinion or explanation as to the legal and
factual bases on which its two resolutions were predicated, simply dismissed
the special civil action on that incident for lack of merit. It may very well be
that such resolution was premised on the fact that the Court, at that stage
and on the basis of the facts then presented, did not consider that the denial
order of the court a quo was tainted with grave abuse of discretion. 15 To
repeat, no rationale for such resolutions having been expounded on the
merits of that action, no law of the case may be said to have been laid down
in G.R. No. L-40992 to justify the respondent court's refusal to consider
petitioner's claim that his former acquittal barred the separate action.
'Law of the case' has been defined as the opinion delivered on
a former appeal. More specifically, it means that whatever is
once irrevocably established, as the controlling legal rule of
decision between the same parties in the same case continues to
be the law of the case, whether correct on general principles or
not, so long as the facts on which such decision was predicated
continue to be the facts of the case before the court (21 C.J.S.
330). (Emphasis supplied). 16
It need not be stated that the Supreme Court being the court of
last resort, is the final arbiter of all legal questions properly
brought before it and that its decision in any given case
constitutes the law of that particular case . . . (Emphasis
supplied). 17
It is a rule of general application that the decision of an appellate
court in a case is the law of the case on the points presented
throughout all the subsequent proceedings in the case in both
the trial and the appellate courts, and no question necessarily
involved and decided on that appeal will be considered on a
second appeal or writ of error in the same case, provided the
facts and issues are substantially the same as those on which the
first question rested and, according to some authorities, provided
the decision is on the merits . . . 18

2. With the foregoing ancillary issue out of the way, We now consider the
principal plaint of petitioner.
Apropos to such resolution is the settled rule that the same act or omission
(in this case, the negligent sideswiping of private respondent) can create two
kinds of liability on the part of the offender, that is, civil liability ex delictoand
civil liability ex quasi delicto. Since the same negligence can give rise either
to a delict or crime or to a quasi-delict or tort, either of these two types of
civil liability may be enforced against the culprit, subject to the caveat under
Article 2177 of the Civil Code that the offended party cannot recover
damages under both types of liability.19
We also note the reminder of petitioner that in Roa vs. De la Cruz, et
al., 20 it was held that where the offended party elected to claim damages
arising from the offense charged in the criminal case through her
intervention as a private prosecutor, the final judgment rendered therein
constituted a bar to the subsequent civil action based upon the same cause.
It is meet, however, not to lose sight of the fact that the criminal action
involved therein was for serious oral defamation which, while within the
contemplation of an independent civil action under Article 33 of the Civil
Code, constitutes only a penal omen and cannot otherwise be considered as
a quasi-delict or culpa aquiliana under Articles 2176 and 2177 of the Civil
Code. And while petitioner draws attention to the supposed reiteration of the
Roa doctrine in the later case of Azucena vs. Potenciano, et al., 21 this time
involving damage to property through negligence as to make out a case of
quasi-delict under Articles 2176 and 2180 of the Civil Code, such secondary
reliance is misplaced since the therein plaintiff Azucena did not intervene in
the criminal action against defendant Potenciano. The citation of Roa in the
later case ofAzucena was, therefore, clearly obiter and affords no comfort to
petitioner.
These are aside from the fact that there have been doctrinal, and even
statutory, 22 changes on the matter of civil actions arising from criminal
offenses and quasi-delicts. We will reserve our discussion on the statutory
aspects for another case and time and, for the nonce, We will consider the
doctrinal developments on this issue.
In the case under consideration, private respondent participated and
intervened in the prosecution of the criminal suit against petitioner. Under
the present jurisprudential milieu, where the trial court acquits the accused
on reasonable doubt, it could very well make a pronounce ment on the civil
liability of the accused 23 and the complainant could file a petition for

mandamus to compel the trial court to include such civil liability in the
judgment of acquittal. 24
Private respondent, as already stated, filed a separate civil aciton after such
acquittal. This is allowed under Article 29 of the Civil Code. We have ruled in
the relatively recent case of Lontoc vs. MD Transit & Taxi Co., Inc., et
al. 25 that:
In view of the fact that the defendant-appellee de la Cruz was
acquitted on the ground that 'his guilt was not proven beyond
reasonable doubt' the plaintiff-appellant has the right to institute
a separate civil action to recover damages from the defendantsappellants (See Mendoza vs. Arrieta, 91 SCRA 113). The wellsettled doctrine is that a person, while not criminally liable may
still be civilly liable. 'The judgment of acquittal extinguishes the
civil liability of the accused only when it includes a declaration
that the facts from which the civil liability might arise did not
exist'. (Padilla vs. Court of Appeals, 129 SCRA 558 cited in People
vs. Rogelio Ligon y Tria, et al., G.R. No. 74041, July 29, 1987;
Filomeno Urbano vs. Intermediate Appellate Court, G.R. No.
72964, January 7, 1988). The ruling is based on Article 29 of the
Civil Code which provides:
When the accused in a criminal prosecution is
acquitted on the ground that his guilt has not
been proved beyond reasonable doubt, a civil action
for damages for the same act or omission may be
instituted. Such action requires only a preponderance
of evidence ...26
Another consideration in favor of private respondent is the doctrine that the
failure of the court to make any pronouncement, favorable or unfavorable, as
to the civil liability of the accused amounts to a reservation of the right to
have the civil liability litigated and determined in a separate action. The rules
nowhere provide that if the court fails to determine the civil liability it
becomes no longer enforceable. 27
Furthermore, in the present case the civil liability sought to be recovered
through the application of Article 29 is no longer that based on or arising
from the criminal offense. There is persuasive logic in the view that, under
such circumstances, the acquittal of the accused foreclosed the civil liability
based on Article 100 of the Revised Penal Code which presupposes the
existence of criminal liability or requires a conviction of the offense charged.
Divested of its penal element by such acquittal, the causative act or

omission becomes in effect a quasi-delict, hence only a civil action based

thereon may be instituted or prosecuted thereafter, which action can be
proved by mere preponderance of evidence. 28 Complementary to such
considerations, Article 29 enunciates the rule, as already stated, that a civil
action for damages is not precluded by an acquittal on reasonable doubt for
the same criminal act or omission.
The allegations of the complaint filed by the private respondent supports and
is constitutive of a case for a quasi-delict committed by the petitioner, thus:
3. That in the evening of July 7, 197l at about 7:00
o'clock, the plaintiff crossed Iznart Street from his
restaurant situated at 220 lznart St., Iloilo City,
Philippines, on his way to a meeting of the Cantonese
Club at Aldeguer Street, Iloilo City and while he was
standing on the middle of the street as there were
vehicles coming from the Provincial Building towards
Plazoleta Gay, Iloilo City, he was bumped and
sideswiped by Volkswagen car with plate No. B-2508
W which was on its way from Plazoleta Gay towards
the Provincial Capitol, Iloilo City, which car was being
driven by the defendant in a reckless and negligent
manner, at an excessive rate of speed and in
violation of the provisions of the Revised Motor
Vehicle (sic) as amended, in relation to the Land
Transportation and Traffic Code as well as in violation
of existing city ordinances, and by reason of his
inexcusable lack of precaution and failure to act with
due negligence and by failing to take into
consideration (sic) his degree of intelligence, the
atmospheric conditions of the place as well as the
width, traffic, visibility and other conditions of lznart
Street; 29
Since this action is based on a quasi-delict, the failure of the respondent to
reserve his right to file a separate civil case and his intervention in the
criminal case did not bar him from filing such separate civil action for
damages. 30The Court has also heretofore ruled in Elcano vs. Hill 31 that
... a separate civil action lies against the offender in a criminal
act whether or not he is criminally prosecuted and found guilty or
acquitted, provided that the offended party is not allowed, if he is
also actually charged criminally, to recover damages on both

scores; and would be entitled in such eventuality only to the

bigger award of the two, assuming the awards made in the two
cases vary. In other words, the extinction of civil liability referred
to in Par. (c) of Sec. 3 Rule 111, refers exclusively to civil liability
founded on Article 100 of the Revised Penal Code; whereas the
civil liability for the same act considered as a quasi-delict only
and not as a crime is not extinguished even by a declaration in
the criminal case that the criminal act charged has not happened
or has not been committed by the accused . . .
The aforecited case of Lontoc vs. MD Transit & Taxi Co., Inc., et al. involved
virtually the same factual situation. The Court, in arriving at the conclusion
hereinbefore quoted, expressly declared that the failure of the therein
plaintiff to reserve his right to file a separate civil case is not fatal; that his
intervention in the criminal case did not bar him from filing a separate civil
action for damages, especially considering that the accused therein was
acquitted because his guilt was not proved beyond reasonable doubt; that
the two cases were anchored on two different causes of action, the criminal
case being on a violation of Article 365 of the Revised Penal Code while the
subsequent complaint for damages was based on a quasi-delict; and that in
the judgment in the criminal case the aspect of civil liability was not passed
upon and resolved. Consequently, said civil case may proceed as authorized
by Article 29 of the Civil Code.
Our initial adverse observation on a portion of the decision of respondent
court aside, We hold that on the issues decisive of this case it did not err in
sustaining the decision a quo.
WHEREFORE, the writ prayed for is hereby DENIED and the decision of the
respondent Court of Appeals is AFFIRMED, without costs.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

G.R. No. 48541 August 21, 1989

BERNABE CASTILLO (In his own behalf, and in behalf of SERAPION
CASTILLO, who has since then become deceased, and EULOGIO
CASTILLO, his minor child) and GENEROSA GALANG
CASTILLO,petitioners-appellants,
vs.

THE HONORABLE COURT OF APPEALS, JUANITO ROSARIO and

CRESENCIA ROSARIO, respondents-appellees.
Lino R. Eugenio for petitioners.
Eduardo G. Rosario for private respondents.
FERNAN, C.J.:
In this petition for review on certiorari, petitioners seek the reversal of the
February 13, 1978 decision of the Court of Appeals in CA-G.R. No. 52567-R,
entitled "Bernabe Castillo, et al. v. Juanita Rosario, et al," affirming the
dismissal by the Court of First Instance of Manila of the complaint for
damages filed by petitioners against private respondents. Said dismissal was
decreed on the basis of the evidence before the trial court as well as the
decision of the Court of Appeals in CA-G.R. No. 07684-CR, entitled "People v.
Juanito Rosario."
Petitioners and private respondents figured in a vehicular accident on May 2,
1965 at Bagac, Villasis, Pangasinan, which caused injuries to their persons
and damage to their respective vehicles.
The parties have conflicting versions as to what actually transpired on that
fateful day; each party pointing to the negligence of the other as the
proximate cause of the accident. Thus, as expected in cases like this, the
main issue is: Who was at fault? According to the petitioners, the accident
happened as follows: 1
On May 2, 1985, at about 2:00 o'clock in the afternoon, petitioner
Bernabe Castillo was driving his jeep with Plate No. J-4649 '64
Manila on the right lane of the McArthur Highway with Generosa
Castillo, his wife, father Serapion Castillo, seated in front and
Eulogio Castillo, then a minor child, as passengers, bound and
northward for Binmaley, Pangasinan at the rate of 25 kilometers
per hour. Just past San Nicolas bridge, Villasis, he noticed, from a
distance of 120 meters more or less, a speeding oncoming car
with Plate No. L-27045 '64 Cavite, along the same lane (facing
north) he was driving, overtaking a cargo truck ahead of it. He
switched on his headlights to signal the car to return to its own
right lane as the way was not clear for it to overtake the truck.
The car turned out to be driven by the private respondent,
Juanito Rosario, with his wife, Cresencia Rosario. The signal was
disregarded, as the car proceeded on its direction southward on
the right lane (facing north).lwph1.t In order to evade the
impending collision, petitioner Bernabe Castillo swerved his jeep

to the right towards the shoulder and applied on the brakes, and
leaving his feet on it, even, immediately after the impact. The
car rested on the shoulder of the right lane. The jeep's rear left
wheel was on the road, leaving short tiremarks behind it; while
the car left long tire-marks, specially its left rear wheel. The jeep
suffered a shattered windshield, pushed-in radiator. The left midportion of its bumper badly dented. The car had a flat tire on its
right front wheel; its right fender badly dented as the headlamp
on top of it. The bumber stooped downward, because it went thru
under the bumper of the jeep.
The driver of the jeep, including his passengers suffered physical
injuries. Bernabe Castillo, with the patella of his right knee,
fractured, suffered serious physical injuries, in other parts of his
body. Serapion Castillo whose head crushed through the
windshield, was nearly beheaded, while the other two
passengers suffered multiple slight and less serious injuries.
Private respondents, on the other hand, have their own version of the
accident and thus asseverate as follows: 2
Sometime in the early afternoon of May 2, 1965, the private
respondents, together with their small daughter, were on their
way from San Carlos City (Pangasinan) to Olongapo City where
they resided at the time and where Juanito Rosario, a member of
the US Navy, had been temporarily stationed. They rode in the
family car. (TSN, C. Rosario, p. 35; J. Rosario, pp. 2, 12 Annex "D",
"Request for Admission")
At or about 2:30 p.m. of the same date, as Juanito Rosario who
was driving the car, and his two passengers, were along
MacArthur Highway in Barrio Bacag, Villasis, Pangasinan, going
towards the south, they saw ahead of them a big heavily loaded
cargo truck. (TSN, B. Castillo, p. 532, Annex "B", "Request for
Admission") The truck was moving very slowly because of its
heavy load so that Juanito Rosario decided to overtake it. But
before doing so, he first saw to it that the road was clear and as
additional precautionary measure, he blew his horn several times
at the time he was overtaking the truck. (TSN, Juanito Rosario,
pp. 4, 11; C. Rosario, pp. 31-41, Annex "B", "Request for
Admission")
Then as the car was about to overtake the slow moving cargo
truck, the car's front left tire suddenly burst due to pressure

causing the car to swerve to the left and naturally making

steering and control difficult. Because of the tendency of the car
to veer towards the left due to the blown out tire, the driver
steered the car towards the direction where he could find a safe
place to park and fix the tire. He finally brought the car to a halt
at the left shoulder of the road (facing south). (TSN, C. Rosario, p.
31; J. Rosario, pp. 4, 17, Annex "D", "Request for Admission")
But barely had the said defendant parked his car on the left
shoulder of the road and just as he was about to get off to fix the
flat tire, the car was suddenly bumped by the jeep driven by
Bernabe Castillo which came from the opposite direction. (TSN,
C. Rosario, p. 32; J. Rosario, p. 6, "Request for Admission") Both
vehicles were damaged, the car suffering the heavier damage.
(Please see Annex "C", "Request for Admission") Passengers of
the jeep sustained injuries while those of the car were badly
shaken.
On June 30, 1965, a civil case for the recovery of damages for the injuries
sustained by petitioners and for the damage to their vehicle as a result of the
collision, was instituted by the petitioners in the Court of First Instance of
Manila. While this case was pending, the Provincial Fiscal of Pangasinan filed
an information dated September 29, 1965 against Juanito Rosario, private
respondent herein, for double physical injuries; double less serious physical
injuries; and damage to property thru reckless imprudence, in the Court of
First Instance of Urdaneta. Respondent Juanito Rosario was prosecuted and
convicted by the trial court in the criminal case. He appealed to the Court of
Appeals, which rendered a decision 3 acquitting him from the crime charged
on the ground that his guilt has not been proved beyond reasonable doubt.
In the meantime, private respondents thru counsel, filed a "Request for
Admission" 4 on April 3, 1972 in the civil case, requesting petitioners to admit
the truthfulness of the facts set forth therein as well as the correctness and
genuineness of the documents attached thereto. On May 5,1972, petitioners
filled a "Manifestation", 5 admitting the allegations in the "Request for
Admission" with some qualifications. Later, both parties submitted their
respective memoranda.
On the basis of the testimonies and evidence submitted by the petitioners,
as well as the records of the criminal case attached in the "Request for
Admission" of the private respondents, the Court of First Instance of Manila
rendered a decision 6 on December 28, 1972, dismissing the complaint of the
petitioners against private respondents as well as the counterclaim of private

respondents against the petitioners. On January 24, 1973, petitioners

appealed to the Court of Appeals. On February 13, 1978, the Court of
Appeals affirmed the decision 7 of the Court of First Instance of Manila.
Hence, the present petition for review on certiorari. 8 The petitionersappellants raise in issue before Us the following questions, to wit:
1) Is the decision of the Court of Appeals, where its dispositive
part, or "fallo", states that the guilt of the (appellant) accused
was not proved beyond reasonable doubt final and conclusive, on
an action for damages based on quasi-delict?;
2) Are the testimonies given in a criminal case, without strict
compliance with Section 41 Rule 130 and without opportunity to
cross examine the witnesses who made these testimonies,
admissible evidence in a subsequent case and can be the basis
of a valid decision?;
3) Is an action for damages based on quasi-delict barred by a
decision of the appellate court acquitting the accused, the body
of which lays the blame on the plaintiff but in its dispositive part,
declares the guilt of the accused not proved beyond reasonable
doubt ? 9
The main thrust of this petition for review which stems from a cause of action
based on quasi-delict or culpa aquiliana (being a recovery for damages
arising from the vehicular accident), is that petitioners were deprived of due
process because their civil action was decided on the basis of private
respondent Juanita Rosario's acquittal in the criminal case for reckless
imprudence.
There is no dispute that the subject action for damages, being civil in nature,
is separate and distinct from the criminal aspect, necessitating only a
preponderance of evidence. According to a number of cases, 10 a quasi-delict
or culpa aquiliana is a separate legal institution under the Civil Code, with a
substantively all its own, and individuality that is entirely apart and
independent from a delict or crime. A distinction exists between the civil
liability arising from a crime and the responsibility for quasi-delicts
or culpa extra-contractual. The same negligence causing damages may
produce civil liability arising from a crime under the Penal Code, or create an
action for quasidelictos or culpa extra-contractual under the Civil Code.
Therefore, the acquittal or conviction in the criminal case is entirely
irrelevant in the civil case. 11
In the case of Azucena v. Potenciano, L-14028, June 30, 1962, 5 SCRA 468,
470-471, this Court held:

... in the criminal case for reckless imprudence resulting in

serious physical injuries ..., the judgment of acquittal does not
operate to extinguish the civil liability of the defendant based on
the same incident. The civil action is entirely independent of the
criminal case according to Articles 33 and 2177 of the Civil Code.
There can be no logical conclusion than this, for to subordinate
the civil action contemplated in the said articles to the result of
the criminal prosecution whether it be conviction or acquittal
would render meaningless the independent character of the
civil action and the clear injunction in Article 31, that his action
may proceed independently of the criminal proceedings and
regardless of the result of the latter.
But this rule is not without exception. Thus, Section 2 (c) of Rule 111 of the
Rules of Court provides:
Extinction of the penal action does not carry with it extinction of
the civil, unless the extinction proceeds from a declaration from a
final judgment that the fact from which the civil action might
arise did not exist.
In a previous case, CA-G.R. No. 07684-CR, People v. Rosario, the Court of
Appeals after a painstaking analysis of. (a) the testimonial evidence; (b) the
relative positions of the two vehicles as depicted in the sketches; (c) the
distance of each of the two vehicles from the cemented edge of the road; (d)
the point of impact; (e) the visible tire marks, and (f) the extent of the
damage caused upon each of the two vehicles, ruled that it was the driver of
the jeep and not the accused driver of the car who was negligent and
accordingly acquitted the latter. 12
Negligence, being the source and foundation of actions of quasi-delict, is the
basis for the recovery of damages. In the case at bar, the Court of Appeals
found that no negligence was committed by Juanito Rosario to warrant an
award of damages to the petitioners.
Respondent Appellate Court states:
In acquitting defendant-appellee Juanito Rosario in CA-G.R. No.
07684-CR on October 28, 1968, this Court held that the collision
was not due to the negligence of Juanito Rosario but it was
Castillo's own act of driving the jeep to the shoulder [of the road]
where the car was that was actually the proximate cause of the
collision.' (Ibid., p. 183) With this finding, this Court actually
exonerated appellee Juanito Rosario from civil liability. Since
plaintiffs-appellants' civil action is predicated upon Juanito

Rosario's alleged negligence which does not exist, it follows that

his acquittal in the criminal action, which is already final, carried
with it the extinction of civil responsibility arising therefrom.
(Corpus vs. Paje, 28 SCRA 1062, 1064, 1067; Faraon vs. Priela, 24
SCRA 582, 583; De Soriano vs. Albornoz, 98 Phil. 785, 787788;
Tan vs. Standard Vacuum Oil Co., 91 Phil. 672, 675). 13
It was the Court of Appeals findings that the collision was not due to the
negligence of Juanita Rosario but rather it was Castillo's own act of driving
the jeep to the shoulder of the road where the car was, which was actually
the proximate cause of the collision. With this findings, the Court of Appeals
exonerated Juanito Rosario from civil liability on the ground that the alleged
negligence did not exist.
As earlier stated, the questioned decision of the Court of Appeals was an
affirmation of the decision of the Court of First Instance of Manila. During the
trial of the case before the Court of First Instance, the private respondents
were not present, in view of the fact that they were out of the country at that
time. Their counsel introduced as part of their evidence, the records in the
criminal case, in accordance with Section 41, Rule 130 of the Rules of
Court. 14 These records were attached to their "Request for Admission" and
were substantially admitted by petitioners. The said records were mostly
composed of transcripts of the hearing in the criminal case. Petitioners
raised, as one of their objections, the propriety and correctness of admitting
and adopting these transcripts as part of the record in the civil case.
According to them, this is a violation of Section 41, Rule 130 of the Rules of
Court, on the ground that petitioners were not given the opportunity to crossexamine. We have to disagree. A careful reading of the transcripts would
reveal that then counsel for petitioners, Atty. Nicodemo Ferrer, actively
participated during the proceedings of the criminal case. He raised various
objections, 15 in the course of the trial. Petitioners, therefore, thru counsel
had the opportunity to cross-examine the witnesses.
Thus, the admission of the said testimonies cannot be set aside.
Finally, in a long line of decisions, this Court has held time and again that the
findings of facts by the Court of Appeals are conclusive and not reviewable
by the Supreme Court. 16
In Macadangdang v. Court of Appeals, 100 SCRA 73 and Tolentino v. De Jesus,
56 SCRA 167, it was held that:
Findings of fact of the Court of Appeals are conclusive on the
parties and on the Supreme Court, unless (1) the conclusion is a
finding grounded entirely on speculations, surmises and

conjectures; (2) the inference made is manifestly mistaken; (3)

there is grave abuse of discretion; (4) the judgment is based on
misapprehension of facts; (5) the Court of Appeals went beyond
the issues of the case and its findings are contrary to the
admission of both appellant and appellee; (6) the findings of
facts of the Court of Appeals are contrary to those of the trial
court; (7) said findings of facts are conclusions without citation of
specific evidence on which they are based; (8) the facts set forth
in the petition as well as in the petitioner's main and reply briefs
are not disputed by the respondent; and (9) when the finding of
facts of the Court of Appeals is premised on the absence of
evidence and is contradicted by evidence on record.
Finding that the questioned decision does not fall under any of the
exceptions cited above, we find no cogent reason to disturb the findings and
conclusions of the Court of Appeals.
WHEREFORE, in view of the foregoing, the petition is hereby denied. No
pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

G.R. No. L-24803 May 26, 1977

PEDRO ELCANO and PATRICIA ELCANO, in their capacity as
Ascendants of Agapito Elcano, deceased,plaintiffs-appellants,
vs.
REGINALD HILL, minor, and MARVIN HILL, as father and Natural
Guardian of said minor, defendants-appellees.
Cruz & Avecilla for appellants.
Marvin R. Hill & Associates for appellees.
BARREDO, J.:
Appeal from the order of the Court of First Instance of Quezon City dated
January 29, 1965 in Civil Case No. Q-8102, Pedro Elcano et al. vs. Reginald
Hill et al. dismissing, upon motion to dismiss of defendants, the complaint of
plaintiffs for recovery of damages from defendant Reginald Hill, a minor,
married at the time of the occurrence, and his father, the defendant Marvin
Hill, with whom he was living and getting subsistence, for the killing by

Reginald of the son of the plaintiffs, named Agapito Elcano, of which, when
criminally prosecuted, the said accused was acquitted on the ground that his
act was not criminal, because of "lack of intent to kill, coupled with mistake."
Actually, the motion to dismiss based on the following grounds:
1. The present action is not only against but a violation of section
1, Rule 107, which is now Rule III, of the Revised Rules of Court;
2. The action is barred by a prior judgment which is now final and
or in res-adjudicata;
3. The complaint had no cause of action against defendant
Marvin Hill, because he was relieved as guardian of the other
defendant through emancipation by marriage.
(P. 23, Record [p. 4, Record on Appeal.])
was first denied by the trial court. It was only upon motion for
reconsideration of the defendants of such denial, reiterating the above
grounds that the following order was issued:
Considering the motion for reconsideration filed by the
defendants on January 14, 1965 and after thoroughly examining
the arguments therein contained, the Court finds the same to be
meritorious and well-founded.
WHEREFORE, the Order of this Court on December 8, 1964 is
hereby reconsidered by ordering the dismissal of the above
entitled case.
SO ORDERED.
Quezon City, Philippines, January 29, 1965. (p. 40, Record [p. 21,
Record on Appeal.)
Hence, this appeal where plaintiffs-appellants, the spouses Elcano, are
presenting for Our resolution the following assignment of errors:
THE LOWER COURT ERRED IN DISMISSING THE CASE BY
UPHOLDING THE CLAIM OF DEFENDANTS THAT I
THE PRESENT ACTION IS NOT ONLY AGAINST BUT ALSO A
VIOLATION OF SECTION 1, RULE 107, NOW RULE 111, OF THE
REVISED RULES OF COURT, AND THAT SECTION 3(c) OF RULE
111, RULES OF COURT IS APPLICABLE;
II
THE ACTION IS BARRED BY A PRIOR JUDGMENT WHICH IS NOW
FINAL OR RES-ADJUDICTA;

III
THE PRINCIPLES OF QUASI-DELICTS, ARTICLES 2176 TO 2194 OF
THE CIVIL CODE, ARE INAPPLICABLE IN THE INSTANT CASE; and
IV
THAT THE COMPLAINT STATES NO CAUSE OF ACTION AGAINST
DEFENDANT MARVIN HILL BECAUSE HE WAS RELIEVED AS
GUARDIAN OF THE OTHER DEFENDANT THROUGH EMANCIPATION
BY MARRIAGE. (page 4, Record.)
It appears that for the killing of the son, Agapito, of plaintiffs-appellants,
defendant- appellee Reginald Hill was prosecuted criminally in Criminal Case
No. 5102 of the Court of First Instance of Quezon City. After due trial, he was
acquitted on the ground that his act was not criminal because of "lack of
intent to kill, coupled with mistake." Parenthetically, none of the parties has
favored Us with a copy of the decision of acquittal, presumably because
appellants do not dispute that such indeed was the basis stated in the court's
decision. And so, when appellants filed their complaint against appellees
Reginald and his father, Atty. Marvin Hill, on account of the death of their
son, the appellees filed the motion to dismiss above-referred to.
As We view the foregoing background of this case, the two decisive issues
presented for Our resolution are:
1. Is the present civil action for damages barred by the acquittal of Reginald
in the criminal case wherein the action for civil liability, was not reversed?
2. May Article 2180 (2nd and last paragraphs) of the Civil Code he applied
against Atty. Hill, notwithstanding the undisputed fact that at the time of the
occurrence complained of. Reginald, though a minor, living with and getting
subsistenee from his father, was already legally married?
The first issue presents no more problem than the need for a reiteration and
further clarification of the dual character, criminal and civil, of fault or
negligence as a source of obligation which was firmly established in this
jurisdiction in Barredo vs. Garcia, 73 Phil. 607. In that case, this Court
postulated, on the basis of a scholarly dissertation by Justice Bocobo on the
nature of culpa aquiliana in relation to culpa criminal or delito and
mereculpa or fault, with pertinent citation of decisions of the Supreme Court
of Spain, the works of recognized civilians, and earlier jurisprudence of our
own, that the same given act can result in civil liability not only under the
Penal Code but also under the Civil Code. Thus, the opinion holds:
The, above case is pertinent because it shows that the same act
machinist. come under both the Penal Code and the Civil Code.
In that case, the action of the agent killeth unjustified and

fraudulent and therefore could have been the subject of a

criminal action. And yet, it was held to be also a proper subject of
a civil action under article 1902 of the Civil Code. It is also to be
noted that it was the employer and not the employee who was
being sued. (pp. 615-616, 73 Phil.). 1
It will be noticed that the defendant in the above case could have
been prosecuted in a criminal case because his negligence
causing the death of the child was punishable by the Penal Code.
Here is therefore a clear instance of the same act of negligence
being a proper subject matter either of a criminal action with its
consequent civil liability arising from a crime or of an entirely
separate and independent civil action for fault or negligence
under article 1902 of the Civil Code. Thus, in this jurisdiction, the
separate individuality of a cuasi-delito or culpa aquiliana, under
the Civil Code has been fully and clearly recognized, even with
regard to a negligent act for which the wrongdoer could have
been prosecuted and convicted in a criminal case and for which,
after such a conviction, he could have been sued for this civil
liability arising from his crime. (p. 617, 73 Phil.) 2
It is most significant that in the case just cited, this Court
specifically applied article 1902 of the Civil Code. It is thus that
although J. V. House could have been criminally prosecuted for
reckless or simple negligence and not only punished but also
made civilly liable because of his criminal negligence,
nevertheless this Court awarded damages in an independent civil
action for fault or negligence under article 1902 of the Civil Code.
(p. 618, 73 Phil.) 3
The legal provisions, authors, and cases already invoked should
ordinarily be sufficient to dispose of this case. But inasmuch as
we are announcing doctrines that have been little understood, in
the past, it might not he inappropriate to indicate their
foundations.
Firstly, the Revised Penal Code in articles 365 punishes not only
reckless but also simple negligence. If we were to hold that
articles 1902 to 1910 of the Civil Code refer only to fault or
negligence not punished by law, accordingly to the literal import
of article 1093 of the Civil Code, the legal institution of culpa
aquiliana would have very little scope and application in actual
life. Death or injury to persons and damage to property- through

any degree of negligence - even the slightest - would have to be

Idemnified only through the principle of civil liability arising from
a crime. In such a state of affairs, what sphere would remain
for cuasi-delito or culpa aquiliana? We are loath to impute to the
lawmaker any intention to bring about a situation so absurd and
anomalous. Nor are we, in the interpretation of the laws,
disposed to uphold the letter that killeth rather than the spirit
that giveth life. We will not use the literal meaning of the law to
smother and render almost lifeless a principle of such ancient
origin and such full-grown development as culpa
aquiliana or cuasi-delito, which is conserved and made enduring
in articles 1902 to 1910 of the Spanish Civil Code.
Secondary, to find the accused guilty in a criminal case, proof of
guilt beyond reasonable doubt is required, while in a civil case,
preponderance of evidence is sufficient to make the defendant
pay in damages. There are numerous cases of criminal
negligence which can not be shown beyond reasonable doubt,
but can be proved by a preponderance of evidence. In such
cases, the defendant can and should be made responsible in a
civil action under articles 1902 to 1910 of the Civil Code.
Otherwise. there would be many instances of unvindicated civil
wrongs. "Ubi jus Idemnified remedium." (p. 620,73 Phil.)
Fourthly, because of the broad sweep of the provisions of both
the Penal Code and the Civil Code on this subject, which has
given rise to the overlapping or concurrence of spheres already
discussed, and for lack of understanding of the character and
efficacy of the action for culpa aquiliana, there has grown up a
common practice to seek damages only by virtue of the civil
responsibility arising from a crime, forgetting that there is
another remedy, which is by invoking articles 1902-1910 of the
Civil Code. Although this habitual method is allowed by, our laws,
it has nevertheless rendered practically useless and nugatory the
more expeditious and effective remedy based on culpa aquiliana
or culpa extra-contractual. In the present case, we are asked to
help perpetuate this usual course. But we believe it is high time
we pointed out to the harms done by such practice and to restore
the principle of responsibility for fault or negligence under
articles 1902 et seq. of the Civil Code to its full rigor. It is high
time we caused the stream of quasi-delict or culpa aquiliana to
flow on its own natural channel, so that its waters may no longer

be diverted into that of a crime under the Penal Code. This will, it
is believed, make for the better safeguarding or private rights
because it realtor, an ancient and additional remedy, and for the
further reason that an independent civil action, not depending on
the issues, limitations and results of a criminal prosecution, and
entirely directed by the party wronged or his counsel, is more
likely to secure adequate and efficacious redress. (p. 621, 73
Phil.)
Contrary to an immediate impression one might get upon a reading of the
foregoing excerpts from the opinion in Garcia that the concurrence of the
Penal Code and the Civil Code therein referred to contemplate only acts of
negligence and not intentional voluntary acts - deeper reflection would
reveal that the thrust of the pronouncements therein is not so limited, but
that in fact it actually extends to fault or culpa. This can be seen in the
reference made therein to the Sentence of the Supreme Court of Spain of
February 14, 1919, supra, which involved a case of fraud or estafa, not a
negligent act. Indeed, Article 1093 of the Civil Code of Spain, in force here at
the time of Garcia, provided textually that obligations "which are derived
from acts or omissions in which fault or negligence, not punishable by law,
intervene shall be the subject of Chapter II, Title XV of this book (which refers
to quasi-delicts.)" And it is precisely the underline qualification, "not
punishable by law", that Justice Bocobo emphasized could lead to an ultimo
construction or interpretation of the letter of the law that "killeth, rather than
the spirit that giveth lift- hence, the ruling that "(W)e will not use the literal
meaning of the law to smother and render almost lifeless a principle of such
ancient origin and such full-grown development as culpa aquiliana orquasidelito, which is conserved and made enduring in articles 1902 to 1910 of the
Spanish Civil Code." And so, because Justice Bacobo was Chairman of the
Code Commission that drafted the original text of the new Civil Code, it is to
be noted that the said Code, which was enacted after the Garcia doctrine, no
longer uses the term, 11 not punishable by law," thereby making it clear that
the concept of culpa aquiliana includes acts which are criminal in character
or in violation of the penal law, whether voluntary or matter. Thus, the
corresponding provisions to said Article 1093 in the new code, which is
Article 1162, simply says, "Obligations derived fromquasi-delicto shall be
governed by the provisions of Chapter 2, Title XVII of this Book, (on quasidelicts) and by special laws." More precisely, a new provision, Article 2177 of
the new code provides:
ART. 2177. Responsibility for fault or negligence under the
preceding article is entirely separate and distinct from the civil

liability arising from negligence under the Penal Code. But the
plaintiff cannot recover damages twice for the same act or
omission of the defendant.
According to the Code Commission: "The foregoing provision (Article 2177)
through at first sight startling, is not so novel or extraordinary when we
consider the exact nature of criminal and civil negligence. The former is a
violation of the criminal law, while the latter is a "culpa aquiliana" or quasidelict, of ancient origin, having always had its own foundation and
individuality, separate from criminal negligence. Such distinction between
criminal negligence and "culpa extracontractual" or "cuasi-delito" has been
sustained by decision of the Supreme Court of Spain and maintained as
clear, sound and perfectly tenable by Maura, an outstanding Spanish jurist.
Therefore, under the proposed Article 2177, acquittal from an accusation of
criminal negligence, whether on reasonable doubt or not, shall not be a bar
to a subsequent civil action, not for civil liability arising from criminal
negligence, but for damages due to a quasi-delict or 'culpa aquiliana'. But
said article forestalls a double recovery.", (Report of the Code) Commission,
p. 162.)
Although, again, this Article 2177 does seem to literally refer to only acts of
negligence, the same argument of Justice Bacobo about construction that
upholds "the spirit that giveth lift- rather than that which is literal that killeth
the intent of the lawmaker should be observed in applying the same. And
considering that the preliminary chapter on human relations of the new Civil
Code definitely establishes the separability and independence of liability in a
civil action for acts criminal in character (under Articles 29 to 32) from the
civil responsibility arising from crime fixed by Article 100 of the Revised Penal
Code, and, in a sense, the Rules of Court, under Sections 2 and 3 (c), Rule
111, contemplate also the same separability, it is "more congruent with the
spirit of law, equity and justice, and more in harmony with modern progress"to borrow the felicitous relevant language in Rakes vs. Atlantic. Gulf and
Pacific Co., 7 Phil. 359, to hold, as We do hold, that Article 2176, where it
refers to "fault or negligencia covers not only acts "not punishable by law"
but also acts criminal in character, whether intentional and voluntary or
negligent. Consequently, a separate civil action lies against the offender in a
criminal act, whether or not he is criminally prosecuted and found guilty or
acquitted, provided that the offended party is not allowed, if he is actually
charged also criminally, to recover damages on both scores, and would be
entitled in such eventuality only to the bigger award of the two, assuming
the awards made in the two cases vary. In other words, the extinction of civil
liability referred to in Par. (e) of Section 3, Rule 111, refers exclusively to civil

liability founded on Article 100 of the Revised Penal Code, whereas the civil
liability for the same act considered as a quasi-delict only and not as a crime
is not estinguished even by a declaration in the criminal case that the
criminal act charged has not happened or has not been committed by the
accused. Briefly stated, We here hold, in reiteration of Garcia, thatculpa
aquiliana includes voluntary and negligent acts which may be punishable by
law.4
It results, therefore, that the acquittal of Reginal Hill in the criminal case has
not extinguished his liability for quasi-delict, hence that acquittal is not a bar
to the instant action against him.
Coming now to the second issue about the effect of Reginald's emancipation
by marriage on the possible civil liability of Atty. Hill, his father, it is also Our
considered opinion that the conclusion of appellees that Atty. Hill is already
free from responsibility cannot be upheld.
While it is true that parental authority is terminated upon emancipation of
the child (Article 327, Civil Code), and under Article 397, emancipation takes
place "by the marriage of the minor (child)", it is, however, also clear that
pursuant to Article 399, emancipation by marriage of the minor is not really
full or absolute. Thus "(E)mancipation by marriage or by voluntary
concession shall terminate parental authority over the child's person. It shall
enable the minor to administer his property as though he were of age, but he
cannot borrow money or alienate or encumber real property without the
consent of his father or mother, or guardian. He can sue and be sued in court
only with the assistance of his father, mother or guardian."
Now under Article 2180, "(T)he obligation imposed by article 2176 is
demandable not only for one's own acts or omissions, but also for those of
persons for whom one is responsible. The father and, in case of his death or
incapacity, the mother, are responsible. The father and, in case of his death
or incapacity, the mother, are responsible for the damages caused by the
minor children who live in their company." In the instant case, it is not
controverted that Reginald, although married, was living with his father and
getting subsistence from him at the time of the occurrence in question.
Factually, therefore, Reginald was still subservient to and dependent on his
father, a situation which is not unusual.
It must be borne in mind that, according to Manresa, the reason behind the
joint and solidary liability of presuncion with their offending child under
Article 2180 is that is the obligation of the parent to supervise their minor
children in order to prevent them from causing damage to third persons. 5 On
the other hand, the clear implication of Article 399, in providing that a minor

emancipated by marriage may not, nevertheless, sue or be sued without the

assistance of the parents, is that such emancipation does not carry with it
freedom to enter into transactions or do any act that can give rise to judicial
litigation. (See Manresa, Id., Vol. II, pp. 766-767, 776.) And surely, killing
someone else invites judicial action. Otherwise stated, the marriage of a
minor child does not relieve the parents of the duty to see to it that the child,
while still a minor, does not give answerable for the borrowings of money
and alienation or encumbering of real property which cannot be done by
their minor married child without their consent. (Art. 399; Manresa, supra.)
Accordingly, in Our considered view, Article 2180 applies to Atty. Hill
notwithstanding the emancipation by marriage of Reginald. However,
inasmuch as it is evident that Reginald is now of age, as a matter of equity,
the liability of Atty. Hill has become milling, subsidiary to that of his son.
WHEREFORE, the order appealed from is reversed and the trial court is
ordered to proceed in accordance with the foregoing opinion. Costs against
appellees.
Fernando (Chairman), Antonio, and Martin, JJ., concur.
Concepcion Jr., J, is on leave.
Martin, J, was designated to sit in the Second Division.

G.R. No. L-68102 July 16, 1992

GEORGE MCKEE and ARACELI KOH MCKEE, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, JAIME TAYAG and ROSALINDA
MANALO, respondents.
G.R. No. L-68103 July 16, 1992
CARMEN DAYRIT KOH, LETICIA KOH, JULIETA KOH TUQUERO, ARACELI
KOH MCKEE, ANTONIO KOH and ELIZABETH KOH TURLA, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, JAIME TAYAG and ROSALINDA
MANALO, respondents.
DAVIDE, JR., J.:
Petitioners urge this Court to review and reverse the Resolution of the Court
of Appeals in C.A.-G.R. CV Nos. 69040-41, promulgated on 3 April 1984,
which set aside its previous Decision dated 29 November 1983 reversing the
Decision of the trial court which dismissed petitioners' complaints in Civil

Case No. 4477 and Civil Case No. 4478 of the then Court of First Instance
(now Regional Trial Court) of Pampanga entitled "Carmen Dayrit Koh, Leticia
Koh, Julieta Koh Tuquero, Araceli Koh McKee and Elizabeth Koh Turla vs. Jaime
Tayag and Rosalinda Manalo," and "George McKee and Araceli Koh McKee vs.
Jaime Tayag and Rosalinda Manalo," respectively, and granted the private
respondents' counterclaim for moral damages, attorney's fees and litigation
expenses.
The said civil cases for damages based on quasi-delict were filed as a result
of a vehicular accident which led to the deaths of Jose Koh, Kim Koh McKee
and Loida Bondoc and caused physical injuries to George Koh McKee,
Christopher Koh McKee and petitioner Araceli Koh McKee.
Petitioners in G.R. No. 68102, parents of the minors George Koh McKee,
Christopher Koh McKee and the deceased Kim Koh McKee, were the plaintiffs
in Civil Case No. 4478, while petitioner Carmen Dayrit Koh and her copetitioners in G.R. No. 68103, who are the wife and children, respectively, of
the late Jose Koh, were the plaintiffs in Civil Case No. 4477. Upon the other
hand, private respondents are the owners of the cargo truck which figured in
the mishap; a certain Ruben Galang was the driver of the truck at the time of
the accident.
The antecedent facts are not disputed.
Between nine and ten o'clock in the morning of 8 January 1977, in Pulong
Pulo Bridge along MacArthur Highway, between Angeles City and San
Fernando, Pampanga, a head-on-collision took place between an
International cargo truck, Loadstar, with Plate No. RF912-T Philippines '76
owned by private respondents, and driven by Ruben Galang, and a Ford
Escort car bearing Plate No. S2-850 Pampanga '76 driven by Jose Koh. The
collision resulted in the deaths of Jose Koh, Kim Koh McKee and Loida
Bondoc, and physical injuries to George Koh McKee, Christopher Koh McKee
and Araceli Koh McKee, all passengers of the Ford Escort.
Jose Koh was the father of petitioner Araceli Koh McKee, the mother of minors
George, Christopher and Kim Koh McKee. Loida Bondoc, on the other hand,
was the baby sitter of one and a half year old Kim. At the time of the
collision, Kim was seated on the lap of Loida Bondoc who was at the front
passenger's seat of the car while Araceli and her two (2) sons were seated at
the car's back seat.
Immediately before the collision, the cargo truck, which was loaded with two
hundred (200) cavans of rice weighing about 10,000 kilos, was traveling
southward from Angeles City to San Fernando Pampanga, and was bound for
Manila. The Ford Escort, on the other hand, was on its way to Angeles City

from San Fernando. When the northbound car was about (10) meters away
from the southern approach of the bridge, two (2) boys suddenly darted from
the right side of the road and into the lane of the car. The boys were moving
back and forth, unsure of whether to cross all the way to the other side or
turn back. Jose Koh blew the horn of the car, swerved to the left and entered
the lane of the truck; he then switched on the headlights of the car, applied
the brakes and thereafter attempted to return to his lane. Before he could do
so, his car collided with the truck. The collision occurred in the lane of the
truck, which was the opposite lane, on the said bridge.
The incident was immediately reported to the police station in Angeles City;
consequently, a team of police officers was forthwith dispatched to conduct
an on the spot investigation. In the sketch 1 prepared by the investigating
officers, the bridge is described to be sixty (60) "footsteps" long and fourteen
(14) "footsteps" wide seven (7) "footsteps" from the center line to the
inner edge of the side walk on both sides. 2 Pulong Pulo Bridge, which spans
a dry brook, is made of concrete with soft shoulders and concrete railings on
both sides about three (3) feet high.
The sketch of the investigating officer discloses that the right rear portion of
the cargo truck was two (2) "footsteps" from the edge of the right sidewalk,
while its left front portion was touching the center line of the bridge, with the
smashed front side of the car resting on its front bumper. The truck was
about sixteen (16) "footsteps" away from the northern end of the bridge
while the car was about thirty-six (36) "footsteps" from the opposite end.
Skid marks produced by the right front tire of the truck measured nine (9)
"footsteps", while skid marks produced by the left front tire measured five (5)
"footsteps." The two (2) rear tires of the truck, however, produced no skid
marks.
In his statement to the investigating police officers immediately after the
accident, Galang admitted that he was traveling at thirty (30) miles (48
kilometers) per hour.
As a consequence of the collision, two (2) cases, Civil Case No. 4477 and No.
4478, were filed on 31 January 1977 before the then Court of First Instance of
Pampanga and were raffled to Branch III and Branch V of the said court,
respectively. In the first, herein petitioners in G.R. No. 68103 prayed for the
award of P12,000.00 as indemnity for the death of Jose Koh, P150,000.00 as
moral damages, P60,000.00 as exemplary damages, P10,000.00 for litigation
expenses, P6,000.00 for burial expenses, P3,650.00 for the burial lot and
P9,500.00 for the tomb, plus attorney's fees. 3 In the second case, petitioners
in G.R. No. 68102 prayed for the following: (a) in connection with the death

of Kim McKee, the sum of P12,000.00 as death benefit, P3,150.00 for funeral
services, P3,650.00 for the cemetery lot, P3,000.00 for the tomb, P50,000.00
as moral damages, P10,000.00 as exemplary damages and P2,000.00 as
miscellaneous damages; (b) in the case of Araceli Koh McKee, in connection
with the serious physical injuries suffered, the sum of P100,000.00 as moral
damages, P20,000.00 as exemplary damages, P12,000.00 for loss of
earnings, P5,000.00 for the hospitalization expenses up to the date of the
filing of the complaint; and (c) with respect to George McKee, Jr., in
connection with the serious physical injuries suffered, the sum of P50,000.00
as moral damages, P20,000.00 as exemplary damages and the following
medical expenses: P3,400 payable to the Medical Center, P3,500.00 payable
to the St. Francis Medical Center, P5,175.00 payable to the Clark Air Base
Hospital, and miscellaneous expenses amounting to P5,000.00. They also
sought an award of attorney's fees amounting to 25% of the total award plus
traveling and hotel expenses, with costs. 4
On 1 March 1977, an Information charging Ruben Galang with the crime of
"Reckless Imprudence Resulting to (sic) Multiple Homicide and Physical
Injuries and Damage to Property" was filed with the trial court. It was
docketed as Criminal Case No. 3751 and was raffled to Branch V of the court,
the same Branch where Civil Case No. 4478 was assigned. 5
In their Answer with Counterclaim in Civil Case No. 4477, private respondents
asserted that it was the Ford Escort car which "invaded and bumped (sic) the
lane of the truck driven by Ruben Galang and, as counterclaim, prayed for
the award of P15,000.00 as attorney's fees, P20,000.00 as actual and
liquidated damages, P100,000.00 as moral damages and P30,000.00 as
business losses. 6 In Civil Case No. 4478, private respondents first filed a
motion to dismiss on grounds of pendency of another action (Civil Case No.
4477) and failure to implead an indispensable party, Ruben Galang, the truck
driver; they also filed a motion to consolidate the case with Civil Case No.
4477 pending before Branch III of the same court, which was opposed by the
plaintiffs. 7 Both motions were denied by Branch V, then presided over by
Judge Ignacio Capulong. Thereupon, private respondents filed their Answer
with Counter-claim 8 wherein they alleged that Jose Koh was the person "at
fault having approached the lane of the truck driven by Ruben Galang, . . .
which was on the right lane going towards Manila and at a moderate speed
observing all traffic rules and regulations applicable under the circumstances
then prevailing;" in their counterclaim, they prayed for an award of damages
as may be determined by the court after due hearing, and the sums of
P10,000.00 as attorney's fees and P5,000.00 as expenses of litigation.

Petitioners filed their Answers to the Counterclaims in both cases.

To expedite the proceedings, the plaintiffs in Civil Case No. 4478 filed on 27
March 1978 a motion to adopt the testimonies of witnesses taken during the
hearing of Criminal Case No. 3751, which private respondents opposed and
which the court denied. 9 Petitioners subsequently moved to reconsider the
order denying the motion for consolidation, 10 which Judge Capulong granted
in the Order of 5 September 1978; he then directed that Civil Case No. 4478
be consolidated with Civil Case No. 4477 in Branch III of the court then
presided over by Judge Mario Castaeda, Jr.
Left then with Branch V of the trial court was Criminal Case No. 3751.
In the civil cases, the plaintiffs presented as witnesses Araceli Koh McKee,
Fernando Nuag, Col. Robert Fitzgerald, Primitivo Parel, Eugenio Tanhueco,
Carmen Koh and Antonio Koh, 11 and offered several documentary exhibits.
Upon the other hand, private respondents presented as witnesses Ruben
Galang, Zenaida Soliman, Jaime Tayag and Roman Dayrit. 12
In the criminal case, the prosecution presented as witnesses Mrs. Araceli
McKee, Salud Samia, Pfc. Fernando Nuag, Dr. Ramon Panlilio, Dr. Robert
Fitzgerald, Dr. Roberto Yuson, Dr. Hector, Ulanday, Pfc. Benigno de Leon,
Marina Bolos, Primitivo Parel, Rogelio Pineda, Benito Caraan and Eugenio
Tanhueco, and offered several documentary exhibits. 13 Upon the other hand,
the defense presented the accused Ruben Galang, Luciano Punzalan,
Zenaida Soliman and Roman Dayrit, and offered documentary exhibits. 14
On 1 October 1980, Judge Capulong rendered a decision against the accused
Ruben Galang in the aforesaid criminal case. The dispositive portion of the
decision reads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered finding the accused Ruben Galang guilty beyond
reasonable doubt of the crime charged in the information and
after applying the provisions of Article 365 of the Revised Penal
Code and indeterminate sentence law, this Court, imposes upon
said accused Ruben Galang the penalty of six (6) months
of arresto mayor as minimum to two (2) years, four (4) months
and one (1) day of prision correccional as maximum; the accused
is further sentenced to pay and indemnify the heirs of Loida
Bondoc the amount of P12,000.00 as indemnity for her death; to
reimburse the heirs of Loida Bondoc the amount of P2,000.00
representing the funeral expenses; to pay the heirs of Loida
Bondoc the amount of P20,000.00 representing her loss of
income; to indemnify and pay the heirs of the deceased Jose Koh

the value of the car in the amount of P53,910.95, and to pay the
costs. 15
The aforecited decision was promulgated only on 17 November 1980; on the
same day, counsel for petitioners filed with Branch III of the court where
the two (2) civil cases were pending a manifestation to that effect and
attached thereto a copy of the decision. 16
Upon the other hand, Judge Mario Castaeda, Jr. dismissed the two (2) civil
cases on 12 November 1980 and awarded the private respondents moral
damages, exemplary damages and attorney's fees. 17 The dispositive portion
of the said decision reads as follows:
WHEREFORE, finding the preponderance of evidence to be in
favor of the defendants and against the plaintiffs, these cases
are hereby ordered DISMISSED with costs against the plaintiffs.
The defendants had proven their counter-claim, thru evidences
(sic) presented and unrebutted. Hence, they are hereby awarded
moral and exemplary damages in the amount of P100,000.00
plus attorney's fee of P15,000.00 and litigation expenses for (sic)
P2,000.00. The actual damages claimed for (sic) by the
defendants is (sic) hereby dismissing for lack of proof to that
effect (sic). 18
A copy of the decision was sent by registered mail to the petitioners on 28
November 1980 and was received on 2 December 1980. 19
Accused Ruben Galang appealed the judgment of conviction to the Court of
Appeals. The appeal was docketed as C.A.-G.R. Blg. 24764-CR and was
assigned to the court's Third Division. Plaintiffs in Civil Cases Nos. 4477 and
4478 likewise separately appealed the 12 November 1980 decision to the
appellate court. The appeals were docketed as C.A.-G.R. No. 69041-R and
C.A.-G.R. No. 69040-R, respectively, and were assigned to the Fourth Civil
Cases Division.
On 4 October 1982, the respondent Court promulgated its decision 20 in C.A.G.R. Blg. 24764-CR affirming the conviction of Galang. 21 The dispositive
portion of the decision reads:
DAHIL DITO, ang hatol na paksa ng naritong paghahabol ay
Aming pinagtitibay sa kanyang kabuuan. Ang naghahabol pa rin
ang pinagbabayad ng gugol ng paghahabol.
A motion for reconsideration of the decision was denied by the respondent
Court in its Kapasiyahan promulgated on 25 November 1982. 22 A petition for
its review 23 was filed with this Court; said petition was subsequently denied.

A motion for its reconsideration was denied with finality in the Resolution of
20 April 1983. 24
On 29 November 1983, respondent Court, by then known as the
Intermediate Appellate Court, promulgated its consolidated decision in A.C.G.R. CV Nos. 69040 and 69041, 25 the dispositive portion of which reads:
WHEREFORE, the decision appealed from it hereby reversed and
set aside and another one is rendered, ordering defendantsappellees to pay plaintiffs-appellants as follows:
For the death of Jose Koh:
P 50,000.00 as moral damages
P 12,000.00 as death indemnity
P 16,000.00 for the lot and tomb (Exhs. U and U-1)
P 4,000.00 expenses for holding a wake (p. 9, tsn
April 19, 1979)
P 950.00 for the casket (Exh. M)
P 375.00 for the vault services (Exhs. V and V-1)
For the death of Kim Koh McKee:
P
P
P
P
P

50,000.00 as moral damages

12,000.00 as death indemnity
1,000.00 for the purchase of the burial lot (Exh. M)
950.00 for funeral services (Exh. M-1)
375.00 for vault services (Exhs. V and V-1)

For the physical injuries suffered by George Koh McKee:

P 25,000.00 as moral damages
P 672.00 for Clark Field Hospital (Exh. E)
P 4,384.00 paid to Angeles Medical Clinic (Exhs. D, D1 and
D-2)
P 1,555.00 paid to St. Francis Medical Center (Exhs. B
and B-1)
For the physical injuries suffered by Araceli Koh McKee:
P 25,000.00 as moral damages
P 1,055.00 paid to St. Francis Medical Center (Exhs. G
and
G-1)
P 75.00 paid to St. Francis Medical Center (Exhs. G-2
and G-3)

P 428.00 to Carmelite General Hospital (Exh. F)

P 114.20 to Muoz Clinic (Exh. MM)
For the physical injuries suffered by Christopher Koh McKee:
P 10,000.00 as moral damages
P 1,231.10 to St. Francis Medical Center (Exhs. L and
L-1)
P 321.95 to F.C.E.A. Hospital (Exhs. G and D-1)
In addition, We award P10,000.00 as counsel (sic) fees in Civil
Case No. 4477 and another P10,000.00; as counsel (sic) fees in
Civil Case No. 4478.
No pronouncement as to costs.
SO ORDERED.

26

The decision is anchored principally on the respondent Court's findings that it

was Ruben Galang's inattentiveness or reckless imprudence which caused
the accident. The appellate court further said that the law presumes
negligence on the part of the defendants (private respondents), as
employers of Galang, in the selection and supervision of the latter; it was
further asserted that these defendants did not allege in their Answers the
defense of having exercised the diligence of a good father of a family in
selecting and supervising the said employee. 27 This conclusion of reckless
imprudence is based on the following findings of fact:
In the face of these diametrically opposed judicial positions, the
determinative issue in this appeal is posited in the fourth
assigned error as follows:
IV
THE TRIAL COURT ERRED WHEN IT HELD THE (sic) DRIVER OF
THE TRUCK STOPPED HIS TRUCK BLEW HIS HORN SWITCHED ON
HIS HEADLIGHTS AND COULD NOT SWERVE TO THE RIGHT.
Supportive of plaintiffs' version, principal witness Araceli Koh McKee testified
thus:
Q What happened after that, as you approached the
bridge?
A When we were approaching the bridge, two (2)
boys tried to cross the right lane on the right side of
the highway going to San Fernando. My father, who is
(sic) the driver of the car tried to avoid the two (2)
boys who were crossing, he blew his horn and
swerved to the left to avoid hitting the two (2) boys.

We noticed the truck, he switched on the headlights

to warn the truck driver, to slow down to give us the
right of way to come back to our right lane.
Q Did the truck slow down?
A No, sir, it did not, just (sic) continued on its way.
Q What happened after that?
A After avoiding the two (2) boys, the car tried to go
back to the right lane since the truck is (sic) coming,
my father stepped on the brakes and all what (sic) I
heard is the sound of impact (sic), sir. (tsn, pp. 5-6,
July 22, 1977); or (Exhibit "O" in these Civil Cases).
xxx xxx xxx
Q Mrs. how did you know that the truck driven by the
herein accused, Ruben Galang did not reduce its
speed before the actual impact of collision (sic) as
you narrated in this Exhibit "1," how did you know
(sic)?
A It just kept on coming, sir. If only he reduced his
speed, we could have got (sic) back to our right lane
on side (sic) of the highway, sir. (tsn. pp. 33-34 July
22, 1977) or (Exhibit "O" in these Civil Cases) (pp.
30-31, Appellants' Brief).
Plaintiffs' version was successfully corroborated to Our satisfaction by the
following facts and circumstances:
1. An impartial eye-witness to the mishap, Eugenio Tanhueco,
declared that the truck stopped only when it had already collided
with the car:
xxx xxx xxx
Tanhueco repeated the same testimony during the hearing in the
criminal case:
xxx xxx xxx
Tanhueco could (sic) not be tagged as an accommodation
witness because he was one of the first to arrive at the scene of
the accident. As a matter of fact, he brought one of the injured
passengers to the hospital.
We are not prepared to accord faith and credit to defendants'
witnesses, Zenaida Soliman, a passenger of the truck, and
Roman Dayrit, who supposedly lived across the street.

Regarding Soliman, experience has shown that in the ordinary

course of events people usually take the side of the person with
whom they are associated at the time of the accident, because,
as a general rule, they do not wish to be identified with the
person who was at fault. Thus an imaginary bond is
unconsciously created among the several persons within the
same group (People vs. Vivencio, CA-G.R. No. 00310-CR, Jan. 31,
1962).
With respect to Dayrit, We can not help suspecting (sic) that he is
an accommodation witness. He did not go to the succor of the
injured persons. He said he wanted to call the police authorities
about the mishap, but his phone had no dial tone. Be this (sic) as
it may, the trial court in the criminal case acted correctly in
refusing to believe Dayrit.
2. Exhibit 2, the statement of Galang, does not include the claim
that Galang stopped his truck at a safe distance from the car,
according to plaintiffs (p. 25, Appellants' Brief). This contention of
appellants was completely passed sub-silencio or was not refuted
by appellees in their brief. Exhibit 2 is one of the exhibits not
included in the record. According to the Table of Contents
submitted by the court below, said Exhibit 2 was not submitted
by defendants-appellees. In this light, it is not far-fetched to
surmise that Galang's claim that he stopped was an eleventhhour desperate attempt to exculpate himself from imprisonment
and damages.
3. Galang divulged that he stopped after seeing the car about 10
meters away:
ATTY. SOTTO:
Q Do I understand from your testimony that inspite of
the fact that you admitted that the road is straight
and you may be able to (sic) see 500-1000 meters
away from you any vehicle, you first saw that car
only about ten (10) meters away from you for the
first time?
xxx xxx xxx
A I noticed it, sir, that it was about ten (10) meters
away.
ATTY. SOTTO:

Q So, for clarification, you clarify and state under

your oath that you have (sic) not noticed it before
that ten (10) meters? (Tsn. 3 to 5, Sept. 18, 1979). (p.
16, Appellants' Brief)
Galang's testimony substantiate (sic) Tanhueco's statement that
Galang stopped only because of the impact. At ten (10) meters
away, with the truck running at 30 miles per hour, as revealed in
Galang's affidavit (Exh. 2; p. 25, Appellants' brief), it is well-nigh
impossible to avoid a collision on a bridge.
5. Galang's truck stopped because of the collision, and not
because he waited for Jose Koh to return to his proper lane. The
police investigator, Pfc. Fernando L. Nuag, stated that he found
skid marks under the truck but there were not (sic) skid marks
behind the truck (pp. 19-20, t.s.n., Nov. 3, 1978). The presence of
skid marks show (sic) that the truck was speeding. Since the skid
marks were found under the truck and none were found at the
rear of the truck, the reasonable conclusion is that the skid
marks under the truck were caused by the truck's front wheels
when the trucks (sic) suddenly stopped seconds before the
mishap in an endeavor to avoid the same. But, as aforesaid,
Galang saw the car at barely 10 meters away, a very short
distance to avoid a collision, and in his futile endeavor to avoid
the collision he abruptly stepped on his brakes but the smashup
happened just the same.
For the inattentiveness or reckless imprudence of Galang, the
law presumes negligence on the part of the defendants in the
selection of their driver or in the supervision over him. Appellees
did not allege such defense of having exercised the duties of a
good father of a family in the selection and supervision of their
employees in their answers. They did not even adduce evidence
that they did in fact have methods of selection and programs of
supervision. The inattentiveness or negligence of Galang was the
proximate cause of the mishap. If Galang's attention was on the
highway, he would have sighted the car earlier or at a very safe
distance than (sic) 10 meters. He proceeded to cross the bridge,
and tried to stop when a collision was already inevitable,
because at the time that he entered the bridge his attention was
not riveted to the road in front of him.

On the question of damages, the claims of appellants were

amply proven, but the items must be reduced. 28
A motion for reconsideration alleging improper appreciation of the facts was
subsequently filed by private respondents on the basis of which the
respondent Court, in its Resolution of 3 April 1984, 29 reconsidered and set
aside its 29 November 1983 decision and affirmed in toto the trial court's
judgment of 12 November 1980. A motion to reconsider this Resolution was
denied by the respondent Court on 4 July 1984. 30
Hence, this petition.
Petitioners allege that respondent Court:
I
. . . COMMITTED A VERY SERIOUS AND GRAVE ERROR WHEN IT
TOTALLY REVERSED ITS DECISION BY MERELY BASING IT FROM
(sic) A MERE "PRESUMPTION," TOTALLY DISREGARDING THE
PRIVATE RESPONDENTS' DRIVER'S ADMISSIONS AND
CONFESSIONS, WHO EXCLUSIVELY COMMITTED THE PROXIMATE
CAUSE OF THE ACCIDENT (sic), FURTHER, IT ALSO DISREGARDED
THE EVIDENCE ADDUCED AND FOUND IN THE RECORDS;
THEREFORE, RESPONDENT COURT'S RESOLUTIONS (ANNEXES A
and B, PETITION) ARE CLEARLY ERRONEOUS, PURELY BASED ON
SPECULATIONS, CONJECTURES AND WITHOUT SURE FOUNDATION
IN THE EVIDENCE.
II
. . . GRAVELY ABUSED ITS DISCRETION AND ERRED WHEN IN
EFFECT IT DISREGARDED A DOCTRINE LAID DOWN BY THIS
HONORABLE COURT BY STATING AMONG OTHERS, "IT CANNOT
CATEGORICALLY ADOPT THE FINDINGS OF GUILT IN THE CRIMINAL
CASE WHERE THE DRIVER OF THE TRUCK INVOLVED IN THE
ACCIDENT WAS INDICTED.
III
. . . PATENTLY COMMITTED GRAVE ABUSE OF DISCRETION AND
MADE A MISLEADING PRONOUNCEMENT, WHEN IT HELD: "IT IS
THUS INCUMBENT UPON THE PLAINTIFFS-APPELLANTS
(APPELLEES WRONGLY MENTIONED IN THE RESOLUTION) TO
PROVE THEIR ALLEGATIONS THAT THE PROXIMATE CAUSE OF THE
ACCIDENT WAS THE NEGLIGENCE OF PRIVATE RESPONDENTS'
DRIVER.
IV

. . . COMMITTED ANOTHER GRIEVIOUS (sic) ERROR; COMMITTED

GRAVE ABUSE OF DISCRETION AND CITED ANOTHER CASE
WHICH IS CLEARLY INAPPLICABLE TO THESE CASES.
V
. . . COMMITTED A PATENT ERROR AND GRAVELY ABUSED ITS
DISCRETION IN ADOPTING THE FINDINGS OF THE TRIAL COURT
WHICH ARE CLEARLY ERRONEOUS AND CONTRARY TO THE
EVIDENCE FOUND IN THE RECORDS, SPECIALLY THEY (sic) ARE
CONTRARY TO THE ADMITTED FACTS AND JUDICIAL ADMISSIONS
MADE BY THE PRIVATE RESPONDENTS' DRIVER.
VI
. . . EXCEEDED ITS JURISDICTION, COMMITTED GRAVE ABUSE OF
DISCRETION AND GRAVELY ERRED WHEN IT AWARDED DAMAGES
TO THE PRIVATE RESPONDENTS WHEN SAID AWARD IS NOT
SUPPORTED BY EVIDENCE, IN THE RECORDS, AND SAID AWARD
IS NOT ALLOWED BY LAW AND THE CONSISTENT DECISIONS OF
THIS HONORABLE COURT.
VII
. . . EXCEEDED ITS JURISDICTION, COMMITTED GRAVE ABUSE OF
DISCRETION AND GRAVELY ERRED WHEN IT ERRONEOUSLY SET
ASIDE ITS DECISION AWARDING DAMAGES TO PETITIONERS
WHICH IS CLEARLY IN ACCORDANCE WITH THE EVIDENCE, THE
LAW AND JURISPRUDENCE RELATIVE TO THE AWARD OF
DAMAGES. 31
In the Resolution of 12 September 1984, We required private respondents to
Comment on the petition. 32 After the said Comment 33 was filed, petitioners
submitted a Reply 34 thereto; this Court then gave due course to the instant
petitions and required petitioners to file their Brief, 35 which they accordingly
complied with.
There is merit in the petition. Before We take on the main task of dissecting
the arguments and counter-arguments, some observations on the procedural
vicissitudes of these cases are in order.
Civil Cases Nos. 4477 and 4478, which were for the recovery of civil liability
arising from a quasi-delict under Article 2176 in relation to Article 2180 of the
Civil Code, were filed ahead of Criminal Case No. 3751. Civil Case No. 4478
was eventually consolidated with Civil Case No. 4477 for joint trial in Branch
III of the trial court. The records do not indicate any attempt on the part of
the parties, and it may therefore be reasonably concluded that none was
made, to consolidate Criminal Case No. 3751 with the civil cases, or vice-

versa. The parties may have then believed, and understandably so, since by
then no specific provision of law or ruling of this Court expressly allowed
such a consolidation, that an independent civil action, authorized under
Article 33 in relation to Article 2177 of the Civil Code, such as the civil cases
in this case, cannot be consolidated with the criminal case. Indeed, such
consolidation could have been farthest from their minds as Article 33 itself
expressly provides that the "civil action shall proceed independently of the
criminal prosecution, and shall require only a preponderance of evidence."
Be that as it may, there was then no legal impediment against such
consolidation. Section 1, Rule 31 of the Rules of Court, which seeks to avoid a
multiplicity of suits, guard against oppression and abuse, prevent delays,
clear congested dockets to simplify the work of the trial court, or in short,
attain justice with the least expense to the parties litigants, 36 would have
easily sustained a consolidation, thereby preventing the unseeming, if no
ludicrous, spectacle of two (2) judges appreciating, according to their
respective orientation, perception and perhaps even prejudice, the same
facts differently, and thereafter rendering conflicting decisions. Such was
what happened in this case. It should not, hopefully, happen anymore. In the
recent case of Cojuangco vs. Court or Appeals, 37 this Court held that the
present provisions of Rule 111 of the Revised Rules of Court allow a
consolidation of an independent civil action for the recovery of civil liability
authorized under Articles 32, 33, 34 or 2176 of the Civil Code with the
criminal action subject, however, to the condition that no final judgment has
been rendered in that criminal case.
Let it be stressed, however, that the judgment in Criminal Case No. 3751
finding Galang guilty of reckless imprudence, although already final by virtue
of the denial by no less than this Court of his last attempt to set aside the
respondent Court's affirmance of the verdict of conviction, has no relevance
or importance to this case.
As We held in Dionisio vs. Alvendia, 38 the responsibility arising from fault or
negligence in a quasi-delict is entirely separate and distinct from the civil
liability arising from negligence under the Penal Code. And, as more
concretely stated in the concurring opinion of Justice J.B.L. Reyes, "in the
case of independent civil actions under the new Civil Code, the result of the
criminal case, whether acquittal or conviction, would be entirely irrelevant to
the civil action." 39 In Salta vs. De Veyra and PNB vs. Purisima, 40 this Court
stated:
. . . It seems perfectly reasonable to conclude that the civil
actions mentioned in Article 33, permitted in the same manner to

be filed separately from the criminal case, may proceed

similarly regardless of the result of the criminal case.
Indeed, when the law has allowed a civil case related to a
criminal case, to be filed separately and to proceed
independently even during the pendency of the latter case, the
intention is patent to make the court's disposition of the criminal
case of no effect whatsoever on the separate civil case. This
must be so because the offenses specified in Article 33 are of
such a nature, unlike other offenses not mentioned, that they
may be made the subject of a separate civil action because of
the distinct separability of their respective juridical cause or
basis of action . . . .
What remains to be the most important consideration as to why the decision
in the criminal case should not be considered in this appeal is the fact that
private respondents were not parties therein. It would have been entirely
different if the petitioners' cause of action was for damages arising from
a delict, in which case private respondents' liability could only be subsidiary
pursuant to Article 103 of the Revised Penal Code. In the absence of any
collusion, the judgment of conviction in the criminal case against Galang
would have been conclusive in the civil cases for the subsidiary liability of
the private respondents. 41
And now to the merits of the petition.
It is readily apparent from the pleadings that the principal issue raised in this
petition is whether or not respondent Court's findings in its challenged
resolution are supported by evidence or are based on mere speculations,
conjectures and presumptions.
The principle is well-established that this Court is not a trier of facts.
Therefore, in an appeal by certiorari under Rule 45 of the Revised Rules of
Court, only questions of law may be raised. The resolution of factual issues is
the function of the lower courts whose findings on these matters are
received with respect and are, as a rule, binding on this Court. 42
The foregoing rule, however, is not without exceptions. Findings of facts of
the trial courts and the Court of Appeals may be set aside when such
findings are not supported by the evidence or when the trial court failed to
consider the material facts which would have led to a conclusion different
from what was stated in its judgment. 43The same is true where the appellate
court's conclusions are grounded entirely on conjectures, speculations and
surmises44 or where the conclusions of the lower courts are based on a
misapprehension of facts. 45

It is at once obvious to this Court that the instant case qualifies as one of the
aforementioned exceptions as the findings and conclusions of the trial court
and the respondent Court in its challenged resolution are not supported by
the evidence, are based on an misapprehension of facts and the inferences
made therefrom are manifestly mistaken. The respondent Court's decision of
29 November 1983 makes the correct findings of fact.
In the assailed resolution, the respondent Court held that the fact that the
car improperly invaded the lane of the truck and that the collision occurred in
said lane gave rise to the presumption that the driver of the car, Jose Koh,
was negligent. On the basis of this presumed negligence, the appellate court
immediately concluded that it was Jose Koh's negligence that was the
immediate and proximate cause of the collision. This is an unwarranted
deduction as the evidence for the petitioners convincingly shows that the car
swerved into the truck's lane because as it approached the southern end of
the bridge, two (2) boys darted across the road from the right sidewalk into
the lane of the car. As testified to by petitioner Araceli Koh McKee:
Q What happened after that, as you approached the
bridge?
A When we were approaching the bridge, two (2)
boys tried to cross the right lane on the right side of
the highway going to San Fernando. My father, who is
(sic) the driver of the car tried to avoid the two (2)
boys who were crossing, he blew his horn and
swerved to the left to avoid hitting the two (2) boys.
We noticed the truck, he switched on the headlights
to warn the truck driver, to slow down to give us the
right of way to come back to our right lane.
Q Did the truck slow down?
A No sir, it did not, just (sic) continued on its way.
Q What happened after that?
A After avoiding the two (2) boys, the car tried to go
back to the right lane since the truck is (sic) coming,
my father stepped on the brakes and all what (sic) I
heard is the sound of impact (sic), sir. 46
Her credibility and testimony remained intact even during cross examination.
Jose Koh's entry into the lane of the truck was necessary in order to avoid
what was, in his mind at that time, a greater peril death or injury to the
two (2) boys. Such act can hardly be classified as negligent.

Negligence was defined and described by this Court in Layugan vs.

Intermediate Appellate Court, 47 thus:
. . . Negligence is the omission to do something which a
reasonable man, guided by those considerations which ordinarily
regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do
(Black's Law Dictionary, Fifth Edition, 930), or as Judge Cooley
defines it, "(T)he failure to observe for the protection of the
interests of another person, that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such
other person suffers injury." (Cooley on Torts, Fourth Edition, vol.
3, 265)
In Picart vs. Smith (37 Phil 809, 813), decided more than seventy
years ago but still a sound rule, (W)e held:
The test by which to determine the existence of
negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged
negligent act use that(reasonable care and caution
which an ordinarily prudent person would have used
in the same situation?) If not, then he is guilty of
negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary
conduct of the discreet paterfamiliasof the Roman
law. . . .
In Corliss vs. Manila Railroad Company,

48

We held:

. . . Negligence is want of the care required by the circumstances.

It is a relative or comparative, not an absolute, term and its
application depends upon the situation of the parties and the
degree of care and vigilance which the circumstances reasonably
require. Where the danger is great, a high degree of care is
necessary, and the failure to observe it is a want of ordinary care
under the circumstances. (citing Ahern v. Oregon Telephone Co.,
35 Pac. 549 (1894).
On the basis of the foregoing definition, the test of negligence and the facts
obtaining in this case, it is manifest that no negligence could be imputed to
Jose Koh. Any reasonable and ordinary prudent man would have tried to
avoid running over the two boys by swerving the car away from where they
were even if this would mean entering the opposite lane. Avoiding such
immediate peril would be the natural course to take particularly where the

vehicle in the opposite lane would be several meters away and could very
well slow down, move to the side of the road and give way to the oncoming
car. Moreover, under what is known as the emergency rule, "one who
suddenly finds himself in a place of danger, and is required to act without
time to consider the best means that may be adopted to avoid the
impending danger, is not guilty of negligence, if he fails to adopt what
subsequently and upon reflection may appear to have been a better method,
unless the emergency in which he finds himself is brought about by his own
negligence." 49
Considering the sudden intrusion of the two (2) boys into the lane of the car,
We find that Jose Koh adopted the best means possible in the given situation
to avoid hitting them. Applying the above test, therefore, it is clear that he
was not guilty of negligence.
In any case, assuming, arguendo that Jose Koh is negligent, it cannot be said
that his negligence was the proximate cause of the collision. Proximate cause
has been defined as:
. . . that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury,
and without which the result would not have occurred. And more
comprehensively, the proximate legal cause is that acting first
and producing the injury, either immediately or by setting other
events in motion, all constituting a natural and continuous chain
of events, each having a close causal connection with its
immediate predecessor, the final event in the chain immediately
effecting the injury as a natural and probable result of the cause
which first acted, under such circumstances that the person
responsible for the first event should, as an ordinary prudent and
intelligent person, have reasonable ground to expect at the
moment of his act or default that an injury to some person might
probably result therefrom. 50
Applying the above definition, although it may be said that the act of Jose
Koh, if at all negligent, was the initial act in the chain of events, it cannot be
said that the same caused the eventual injuries and deaths because of the
occurrence of a sufficient intervening event, the negligent act of the truck
driver, which was the actual cause of the tragedy. The entry of the car into
the lane of the truck would not have resulted in the collision had the latter
heeded the emergency signals given by the former to slow down and give
the car an opportunity to go back into its proper lane. Instead of slowing
down and swerving to the far right of the road, which was the proper

precautionary measure under the given circumstances, the truck driver

continued at full speed towards the car. The truck driver's negligence
becomes more apparent in view of the fact that the road is 7.50 meters wide
while the car measures 1.598 meters and the truck, 2.286 meters, in width.
This would mean that both car and truck could pass side by side with a
clearance of 3.661 meters to spare. 51 Furthermore, the bridge has a level
sidewalk which could have partially accommodated the truck. Any
reasonable man finding himself in the given situation would have tried to
avoid the car instead of meeting it head-on.
The truck driver's negligence is apparent in the records. He himself said that
his truck was running at 30 miles (48 kilometers) per hour along the bridge
while the maximum speed allowed by law on a bridge 52 is only 30 kilometers
per hour. Under Article 2185 of the Civil Code, a person driving a vehicle is
presumed negligent if at the time of the mishap, he was violating any traffic
regulation. We cannot give credence to private respondents' claim that there
was an error in the translation by the investigating officer of the truck
driver's response in Pampango as to whether the speed cited was in
kilometers per hour or miles per hour. The law presumes that official duty
has been regularly performed; 53 unless there is proof to the contrary, this
presumption holds. In the instant case, private respondents' claim is based
on mere conjecture.
The truck driver's negligence was likewise duly established through the
earlier quoted testimony of petitioner Araceli Koh McKee which was duly
corroborated by the testimony of Eugenio Tanhueco, an impartial eyewitness
to the mishap.
Araceli Koh McKee testified further, thus:
xxx xxx xxx
Q Mrs. how did you know that the truck driven by the
herein accused, Ruben Galang did not reduce its
speed before the actual impact of collision as you
narrated in this Exhibit "1," how did you know?
A It just kept on coming, sir. If only he reduced his
speed, we could have got (sic) back to our right lane
on side (sic) of the highway, sir. (tsn, pp. 33-34, July
22, 1977) or (Exhibit; "O" in these Civil Cases) (pp.
30-31, Appellants' Brief) 54
while Eugenio Tanhueco testified thus:
Q When you saw the truck, how was it moving?
A It was moving 50 to 60 kilometers per hour, sir.

Q Immediately after you saw this truck, do you know

what happened?
A I saw the truck and a car collided (sic), sir, and I
went to the place to help the victims. (tsn. 28, April
19, 1979)
xxx xxx xxx
Q From the time you saw the truck to the time of the
impact, will you tell us if the said truck ever stopped?
A I saw it stopped (sic) when it has (sic) already
collided with the car and it was already motionless.
(tsn. 31, April 19, 1979; Emphasis Supplied). (p. 27,
Appellants' Brief). 55
Clearly, therefore, it was the truck driver's subsequent negligence in failing
to take the proper measures and degree of care necessary to avoid the
collision which was the proximate cause of the resulting accident.
Even if Jose Koh was indeed negligent, the doctrine of last clear chance finds
application here. Last clear chance is a doctrine in the law of torts which
states that the contributory negligence of the party injured will not defeat
the claim for damages if it is shown that the defendant might, by the
exercise of reasonable care and prudence, have avoided the consequences
of the negligence of the injured party. In such cases, the person who had the
last clear chance to avoid the mishap is considered in law solely responsible
for the consequences thereof. 56
In Bustamante vs. Court of Appeals,

57

We held:

The respondent court adopted the doctrine of "last clear chance."

The doctrine, stated broadly, is that the negligence of the
plaintiff does not preclude a recovery for the negligence of the
defendant where it appears that the defendant, by exercising
reasonable care and prudence, might have avoided injurious
consequences to the plaintiff notwithstanding the plaintiff's
negligence. In other words, the doctrine of last clear chance
means that even though a person's own acts may have placed
him in a position of peril, and an injury results, the injured person
is entitled to recovery (sic). As the doctrine is usually stated, a
person who has the last clear chance or opportunity of avoiding
an accident, notwithstanding the negligent acts of his opponent
or that of a third person imputed to the opponent is considered in
law solely responsible for the consequences of the accident.
(Sangco, Torts and Damages, 4th Ed., 1986, p. 165).

The practical import of the doctrine is that a negligent defendant

is held liable to a negligent plaintiff, or even to a plaintiff who has
been grossly negligent in placing himself in peril, if he, aware of
the plaintiff's peril, or according to some authorities, should have
been aware of it in the reasonable exercise of due care, had in
fact an opportunity later than that of the plaintiff to avoid an
accident (57 Am. Jur., 2d, pp. 798-799).
In Pantranco North Express, Inc., vs. Baesa,

58

We ruled:

The doctrine of last clear chance was defined by this Court in the
case of Ong v. Metropolitan Water District, 104 Phil. 397 (1958),
in this wise:
The doctrine of the last clear chance simply, means
that the negligence of a claimant does not preclude a
recovery for the negligence of defendant where it
appears that the latter, by exercising reasonable care
and prudence, might have avoided injurious
consequences to claimant notwithstanding his
negligence.
The doctrine applies only in a situation where the plaintiff was
guilty of prior or antecedent negligence but the defendant, who
had the last fair chance to avoid the impending harm and failed
to do so, is made liable for all the consequences of the accident
notwithstanding the prior negligence of the plaintiff [Picart v.
Smith, 37 Phil. 809 (1918); Glan People's Lumber and Hardware,
et al. vs. Intermediate Appellate Court, Cecilia Alferez Vda. de
Calibo, et al., G.R. No. 70493, May, 18, 1989]. The subsequent
negligence of the defendant in failing to exercise ordinary care to
avoid injury to plaintiff becomes the immediate or proximate
cause of the accident which intervenes between the accident
and the more remote negligence of the plaintiff, thus making the
defendant liable to the plaintiff [Picart v. Smith, supra].
Generally, the last clear chance doctrine is invoked for the
purpose of making a defendant liable to a plaintiff who was guilty
of prior or antecedent negligence, although it may also be raised
as a defense to defeat claim (sic) for damages.
Applying the foregoing doctrine, it is not difficult to rule, as We now rule, that
it was the truck driver's negligence in failing to exert ordinary care to avoid
the collision which was, in law, the proximate cause of the collision. As
employers of the truck driver, the private respondents are, under Article

2180 of the Civil Code, directly and primarily liable for the resulting
damages. The presumption that they are negligent flows from the negligence
of their employee. That presumption, however, is only juris tantum, not juris
et de jure. 59 Their only possible defense is that they exercised all the
diligence of a good father of a family to prevent the damage. Article 2180
reads as follows:
The obligation imposed by Article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for
whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in
any business or industry.
xxx xxx xxx
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
The diligence of a good father referred to means the diligence in the
selection and supervision of employees. 60The answers of the private
respondents in Civil Cases Nos. 4477 and 4478 did not interpose this
defense. Neither did they attempt to prove it.
The respondent Court was then correct in its Decision of 29 November 1983
in reversing the decision of the trial court which dismissed Civil Cases Nos.
4477 and 4478. Its assailed Resolution of 3 April 1984 finds no sufficient
legal and factual moorings.
In the light of recent decisions of this Court, 61 the indemnity for death must,
however, be increased from P12,000.00 to P50,000.00.
WHEREFORE, the instant petition is GRANTED. The assailed Resolution of the
respondent Court of 3 April 1984 is SET ASIDE while its Decision of 29
November 1983 in C.A.-G.R. CV Nos. 69040-41 is REINSTATED, subject to the
modification that the indemnity for death is increased from P12,000.00 to
P50,000.00 each for the death of Jose Koh and Kim Koh McKee.
Costs against private respondents.
SO ORDERED.
Gutierrez, Jr., Feliciano and Romero, JJ., concur.
Bidin, J., took no part.

G.R. No. 141538

March 23, 2004
HERMANA R. CEREZO, petitioner,
vs.
DAVID TUAZON, respondent.

DECISION

CARPIO, J.:
The Case
This is a petition for review on certiorari1 to annul the Resolution2 dated 21
October 1999 of the Court of Appeals in CA-G.R. SP No. 53572, as well as its
Resolution dated 20 January 2000 denying the motion for reconsideration.
The Court of Appeals denied the petition for annulment of the
Decision3 dated 30 May 1995 rendered by the Regional Trial Court of Angeles
City, Branch 56 ("trial court"), in Civil Case No. 7415. The trial court ordered
petitioner Hermana R. Cerezo ("Mrs. Cerezo") to pay respondent David
Tuazon ("Tuazon") actual damages, loss of earnings, moral damages, and
costs of suit.
Antecedent Facts
Around noontime of 26 June 1993, a Country Bus Lines passenger bus with
plate number NYA 241 collided with a tricycle bearing plate number TC RV
126 along Captain M. Palo Street, Sta. Ines, Mabalacat, Pampanga. On 1
October 1993, tricycle driver Tuazon filed a complaint for damages against
Mrs. Cerezo, as owner of the bus line, her husband Attorney Juan Cerezo
("Atty. Cerezo"), and bus driver Danilo A. Foronda ("Foronda"). The complaint
alleged that:
7. At the time of the incident, plaintiff [Tuazon] was in his proper lane
when the second-named defendant [Foronda], being then the driver
and person in charge of the Country Bus with plate number NYA 241,
did then and there willfully, unlawfully, and feloniously operate the said
motor vehicle in a negligent, careless, and imprudent manner without
due regard to traffic rules and regulations, there being a "Slow Down"
sign near the scene of the incident, and without taking the necessary
precaution to prevent loss of lives or injuries, his negligence,
carelessness and imprudence resulted to severe damage to the tricycle
and serious physical injuries to plaintiff thus making him unable to walk
and becoming disabled, with his thumb and middle finger on the left
hand being cut[.]4
On 1 October 1993, Tuazon filed a motion to litigate as a pauper.
Subsequently, the trial court issued summons against Atty. Cerezo and Mrs.

Cerezo ("the Cerezo spouses") at the Makati address stated in the complaint.
However, the summons was returned unserved on 10 November 1993 as the
Cerezo spouses no longer held office nor resided in Makati. On 18 April 1994,
the trial court issued alias summons against the Cerezo spouses at their
address in Barangay Sta. Maria, Camiling, Tarlac. The alias summons and a
copy of the complaint were finally served on 20 April 1994 at the office of
Atty. Cerezo, who was then working as Tarlac Provincial Prosecutor. Atty.
Cerezo reacted angrily on learning of the service of summons upon his
person. Atty. Cerezo allegedly told Sheriff William Canlas: "Punyeta, ano ang
gusto mong mangyari? Gusto mong hindi ka makalabas ng buhay dito?
Teritoryo ko ito. Wala ka sa teritoryo mo."5
The records show that the Cerezo spouses participated in the proceedings
before the trial court. The Cerezo spouses filed a comment with motion for
bill of particulars dated 29 April 1994 and a reply to opposition to comment
with motion dated 13 June 1994.6 On 1 August 1994, the trial court issued an
order directing the Cerezo spouses to file a comment to the opposition to the
bill of particulars. Atty. Elpidio B. Valera ("Atty. Valera") of Valera and Valera
Law Offices appeared on behalf of the Cerezo spouses. On 29 August 1994,
Atty. Valera filed an urgent ex-parte motion praying for the resolution of
Tuazons motion to litigate as a pauper and for the issuance of new summons
on the Cerezo spouses to satisfy proper service in accordance with the Rules
of Court.7
On 30 August 1994, the trial court issued an order resolving Tuazons motion
to litigate as a pauper and the Cerezo spouses urgent ex-parte motion. The
order reads:
At the hearing on August 30, 1994, the plaintiff [Tuazon] testified that
he is presently jobless; that at the time of the filing of this case, his son
who is working in Malaysia helps him and sends him once in a while
P300.00 a month, and that he does not have any real property.
Attached to the Motion to Litigate as Pauper are his Affidavit that he is
unemployed; a Certification by the Barangay Captain of his poblacion
that his income is not enough for his familys subsistence; and a
Certification by the Office of the Municipal Assessor that he has no
landholding in the Municipality of Mabalacat, Province of Pampanga.
The Court is satisfied from the unrebutted testimony of the plaintiff
that he is entitled to prosecute his complaint in this case as a pauper
under existing rules.
On the other hand, the Court denies the prayer in the Appearance and
Urgent Ex-Parte Motion requiring new summons to be served to the
defendants. The Court is of the opinion that any infirmity in the service
of the summons to the defendant before plaintiff was allowed to
prosecute his complaint in this case as a pauper has been cured by this
Order.

If within 15 days from receipt of this Order, the defendants do not

question on appeal this Order of this Court, the Court shall proceed to
resolve the Motion for Bill of Particulars.8
On 27 September 1994, the Cerezo spouses filed an urgent ex-parte motion
for reconsideration. The trial court denied the motion for reconsideration.
On 14 November 1994, the trial court issued an order directing the Cerezo
spouses to file their answer within fifteen days from receipt of the order. The
Cerezo spouses did not file an answer. On 27 January 1995, Tuazon filed a
motion to declare the Cerezo spouses in default. On 6 February 1995, the
trial court issued an order declaring the Cerezo spouses in default and
authorizing Tuazon to present his evidence. 9
On 30 May 1995, after considering Tuazons testimonial and documentary
evidence, the trial court ruled in Tuazons favor. The trial court made no
pronouncement on Forondas liability because there was no service of
summons on him. The trial court did not hold Atty. Cerezo liable as Tuazon
failed to show that Mrs. Cerezos business benefited the family, pursuant to
Article 121(3) of the Family Code. The trial court held Mrs. Cerezo solely
liable for the damages sustained by Tuazon arising from the negligence of
Mrs. Cerezos employee, pursuant to Article 2180 of the Civil Code. The
dispositive portion of the trial courts decision reads:
WHEREFORE, judgment is hereby rendered ordering the defendant
Hermana Cerezo to pay the plaintiff:
a) For Actual Damages

- P69,485.35

1) Expenses for operation and medical

Treatment
2) Cost of repair of the tricycle
b) For loss of earnings

- 39,921.00

c) For moral damages

- 43,300.00

d) And to pay the cost of the suit.

- 20,000.00

The docket fees and other expenses in the filing of this suit shall be
lien on whatever judgment may be rendered in favor of the plaintiff.
SO ORDERED.10
Mrs. Cerezo received a copy of the decision on 25 June 1995. On 10 July
1995, Mrs. Cerezo filed before the trial court a petition for relief from
judgment on the grounds of "fraud, mistake or excusable negligence."
Testifying before the trial court, both Mrs. Cerezo and Atty. Valera denied
receipt of notices of hearings and of orders of the court. Atty. Valera added
that he received no notice before or during the 8 May 1995 elections, "when
he was a senatorial candidate for the KBL Party, and very busy, using his
office and residence as Party National Headquarters." Atty. Valera claimed

that he was able to read the decision of the trial court only after Mrs. Cerezo
sent him a copy.11
Tuazon did not testify but presented documentary evidence to prove the
participation of the Cerezo spouses in the case. Tuazon presented the
following exhibits:
Exhibit 7-B - Courts return slip addressed to Spouses Juan and
Hermana Cerezo;
Exhibit 8

- Decision dated May [30], 1995

Exhibit 8-A - Courts return slip addressed to defendant Hermana

Cerezo;
Exhibit 8-B - Courts return slip addressed to defendants counsel,
Atty. Elpidio Valera;
Exhibit 9

- Order dated September 21, 1995;

Exhibit 9-A - Second Page of Exhibit 9;

Exhibit 9-B - Third page of Exhibit 9;
Exhibit 9-C - Fourth page of Exhibit 9;
Exhibit 9-D - Courts return slip addressed to Atty. Elpidio Valera;
and
Exhibit 9-E - Courts return slip addressed to plaintiffs counsel, Atty.
Norman Dick de Guzman.12

On 4 March 1998, the trial court issued an order13 denying the petition for
relief from judgment. The trial court stated that having received the decision
on 25 June 1995, the Cerezo spouses should have filed a notice of appeal
instead of resorting to a petition for relief from judgment. The trial court
refused to grant relief from judgment because the Cerezo spouses could
have availed of the remedy of appeal. Moreover, the Cerezo spouses not only
failed to prove fraud, accident, mistake or excusable negligence by
conclusive evidence, they also failed to prove that they had a good and
substantial defense. The trial court noted that the Cerezo spouses failed to
appeal because they relied on an expected settlement of the case.
The Cerezo spouses subsequently filed before the Court of Appeals a petition
for certiorari under Section 1 of Rule 65. The petition was docketed as CAG.R. SP No. 48132.14 The petition questioned whether the trial court acquired
jurisdiction over the case considering there was no service of summons on
Foronda, whom the Cerezo spouses claimed was an indispensable party. In a
resolution15 dated 21 January 1999, the Court of Appeals denied the petition
for certiorari and affirmed the trial courts order denying the petition for relief
from judgment. The Court of Appeals declared that the Cerezo spouses
failure to file an answer was due to their own negligence, considering that
they continued to participate in the proceedings without filing an answer.
There was also nothing in the records to show that the Cerezo spouses
actually offered a reasonable settlement to Tuazon. The Court of Appeals also
denied Cerezo spouses motion for reconsideration for lack of merit.
The Cerezo spouses filed before this Court a petition for review
on certiorari under Rule 45. Atty. Cerezo himself signed the petition,
docketed as G.R. No. 137593. On 13 April 1999, this Court rendered a
resolution denying the petition for review on certiorari for failure to attach an
affidavit of service of copies of the petition to the Court of Appeals and to the
adverse parties. Even if the petition complied with this requirement, the
Court would still have denied the petition as the Cerezo spouses failed to
show that the Court of Appeals committed a reversible error. The Courts
resolution was entered in the Book of Entries and Judgments when it became
final and executory on 28 June 1999.16
Undaunted, the Cerezo spouses filed before the Court of Appeals on 6 July
1999 a petition for annulment of judgment under Rule 47 with prayer for
restraining order. Atty. Valera and Atty. Dionisio S. Daga ("Atty. Daga")
represented Mrs. Cerezo in the petition, docketed as CA-G.R. SP No.
53572.17 The petition prayed for the annulment of the 30 May 1995 decision
of the trial court and for the issuance of a writ of preliminary injunction
enjoining execution of the trial courts decision pending resolution of the
petition.
The Court of Appeals denied the petition for annulment of judgment in a
resolution dated 21 October 1999. The resolution reads in part:
In this case, records show that the petitioner previously filed with the
lower court a Petition for Relief from Judgment on the ground that they

were wrongfully declared in default while waiting for an amicable

settlement of the complaint for damages. The court a quo correctly
ruled that such petition is without merit. The defendant spouses admit
that during the initial hearing they appeared before the court and even
mentioned the need for an amicable settlement. Thus, the lower court
acquired jurisdiction over the defendant spouses.
Therefore, petitioner having availed of a petition for relief, the remedy
of an annulment of judgment is no longer available. The proper action
for the petitioner is to appeal the order of the lower court denying the
petition for relief.
Wherefore, the instant petition could not be given due course and
should accordingly be dismissed.
SO ORDERED.18
On 20 January 2000, the Court of Appeals denied the Cerezo spouses motion
for reconsideration.19 The Court of Appeals stated:
A distinction should be made between a courts jurisdiction over a
person and its jurisdiction over the subject matter of a case. The
former is acquired by the proper service of summons or by the parties
voluntary appearance; while the latter is conferred by law.
Resolving the matter of jurisdiction over the subject matter, Section
19(1) of B[atas] P[ambansa] 129 provides that Regional Trial Courts
shall exercise exclusive original jurisdiction in all civil actions in which
the subject of the litigation is incapable of pecuniary estimation. Thus
it was proper for the lower court to decide the instant case for
damages.
Unlike jurisdiction over the subject matter of a case which is absolute
and conferred by law; any defects [sic] in the acquisition of jurisdiction
over a person (i.e., improper filing of civil complaint or improper
service of summons) may be waived by the voluntary appearance of
parties.
The lower court admits the fact that no summons was served on
defendant Foronda. Thus, jurisdiction over the person of defendant
Foronda was not acquired, for which reason he was not held liable in
this case. However, it has been proven that jurisdiction over the other
defendants was validly acquired by the court a quo.
The defendant spouses admit to having appeared in the initial hearings
and in the hearing for plaintiffs motion to litigate as a pauper. They
even mentioned conferences where attempts were made to reach an
amicable settlement with plaintiff. However, the possibility of amicable
settlement is not a good and substantial defense which will warrant the
granting of said petition.
xxx
Assuming arguendo that private respondent failed to reserve his right
to institute a separate action for damages in the criminal action, the

petitioner cannot now raise such issue and question the lower courts
jurisdiction because petitioner and her husband have waived such right
by voluntarily appearing in the civil case for damages. Therefore, the
findings and the decision of the lower court may bind them.
Records show that the petitioner previously filed with the lower court a
Petition for Relief from Judgment on the ground that they were
wrongfully declared in default while waiting for an amicable settlement
of the complaint for damages. The court a quo correctly ruled that such
petition is without merit, jurisdiction having been acquired by the
voluntary appearance of defendant spouses.
Once again, it bears stressing that having availed of a petition for
relief, the remedy of annulment of judgment is no longer available.
Based on the foregoing, the motion for reconsideration could not be
given due course and is hereby DENIED.
SO ORDERED.20
The Issues
On 7 February 2000, Mrs. Cerezo, this time with Atty. Daga alone
representing her, filed the present petition for review on certiorari before this
Court. Mrs. Cerezo claims that:
1. In dismissing the Petition for Annulment of Judgment, the Court of
Appeals assumes that the issues raised in the petition for annulment is
based on extrinsic fraud related to the denied petition for relief
notwithstanding that the grounds relied upon involves questions of lack
of jurisdiction.
2. In dismissing the Petition for Annulment, the Court of Appeals
disregarded the allegation that the lower court[s] findings of
negligence against defendant-driver Danilo Foronda [whom] the lower
court did not summon is null and void for want of due process and
consequently, such findings of negligence which is [sic] null and void
cannot become the basis of the lower court to adjudge petitioneremployer liable for civil damages.
3. In dismissing the Petition for Annulment, the Court of Appeals
ignored the allegation that defendant-driver Danilo A. Foronda whose
negligence is the main issue is an indispensable party whose presence
is compulsory but [whom] the lower court did not summon.
4. In dismissing the Petition for Annulment, the Court of Appeals ruled
that assuming arguendo that private respondent failed to reserve his
right to institute a separate action for damages in the criminal action,
the petitioner cannot now raise such issue and question the lower
courts jurisdiction because petitioner [has] waived such right by
voluntarily appearing in the civil case for damages notwithstanding
that lack of jurisdiction cannot be waived.21
The Courts Ruling

The petition has no merit. As the issues are interrelated, we shall discuss
them jointly.
Remedies Available to a Party Declared in Default
An examination of the records of the entire proceedings shows that three
lawyers filed and signed pleadings on behalf of Mrs. Cerezo, namely, Atty.
Daga, Atty. Valera, and Atty. Cerezo. Despite their number, Mrs. Cerezos
counsels failed to avail of the proper remedies. It is either by sheer ignorance
or by malicious manipulation of legal technicalities that they have managed
to delay the disposition of the present case, to the detriment of pauper
litigant Tuazon.
Mrs. Cerezo claims she did not receive any copy of the order declaring the
Cerezo spouses in default. Mrs. Cerezo asserts that she only came to know of
the default order on 25 June 1995, when she received a copy of the decision.
On 10 July 1995, Mrs. Cerezo filed before the trial court a petition for relief
from judgment under Rule 38, alleging "fraud, mistake, or excusable
negligence" as grounds. On 4 March 1998, the trial court denied Mrs.
Cerezos petition for relief from judgment. The trial court stated that Mrs.
Cerezo could have availed of appeal as a remedy and that she failed to prove
that the judgment was entered through fraud, accident, mistake, or
excusable negligence. Mrs. Cerezo then filed before the Court of Appeals a
petition for certiorari under Section 1 of Rule 65 assailing the denial of the
petition for relief from judgment. On 21 January 1999, the Court of Appeals
dismissed Mrs. Cerezos petition. On 24 February 1999, the appellate court
denied Mrs. Cerezos motion for reconsideration. On 11 March 1999, Mrs.
Cerezo filed before this Court a petition for review on certiorari under Rule
45, questioning the denial of the petition for relief from judgment. We denied
the petition and our resolution became final and executory on 28 June 1999.
On 6 July 1999, a mere eight days after our resolution became final and
executory, Mrs. Cerezo filed before the Court of Appeals a petition for
annulment of the judgment of the trial court under Rule 47. Meanwhile, on
25 August 1999, the trial court issued over the objection of Mrs. Cerezo an
order of execution of the judgment in Civil Case No. 7415. On 21 October
1999, the Court of Appeals dismissed the petition for annulment of
judgment. On 20 January 2000, the Court of Appeals denied Mrs. Cerezos
motion for reconsideration. On 7 February 2000, Mrs. Cerezo filed the present
petition for review on certiorari under Rule 45 challenging the dismissal of
her petition for annulment of judgment.
Lina v. Court of Appeals22 enumerates the remedies available to a party
declared in default:
a) The defendant in default may, at any time after discovery thereof
and before judgment, file a motion under oath to set aside the
order of default on the ground that his failure to answer was due to
fraud, accident, mistake or excusable negligence, and that he has a
meritorious defense (Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]);

b) If the judgment has already been rendered when the defendant

discovered the default, but before the same has become final and
executory, he may file a motion for new trial under Section 1 (a) of
Rule 37;
c) If the defendant discovered the default after the judgment has
become final and executory, he may file apetition for relief under
Section 2 [now Section 1] of Rule 38; and
d) He may also appeal from the judgment rendered against him as
contrary to the evidence or to the law, even if no petition to set aside
the order of default has been presented by him (Sec. 2, Rule 41).
(Emphasis added)
Moreover, a petition for certiorari to declare the nullity of a judgment by
default is also available if the trial court improperly declared a party in
default, or even if the trial court properly declared a party in default, if grave
abuse of discretion attended such declaration.23
Mrs. Cerezo admitted that she received a copy of the trial courts decision on
25 June 1995. Based on this admission, Mrs. Cerezo had at least three
remedies at her disposal: an appeal, a motion for new trial, or a petition
for certiorari.
Mrs. Cerezo could have appealed under Rule 4124 from the default judgment
within 15 days from notice of the judgment. She could have availed of the
power of the Court of Appeals to try cases and conduct hearings, receive
evidence, and perform all acts necessary to resolve factual issues raised in
cases falling within its appellate jurisdiction.25
Mrs. Cerezo also had the option to file under Rule 3726 a motion for new trial
within the period for taking an appeal. If the trial court grants a new trial, the
original judgment is vacated, and the action will stand for trial de novo. The
recorded evidence taken in the former trial, as far as the same is material
and competent to establish the issues, shall be used at the new trial without
retaking the same.27
Mrs. Cerezo also had the alternative of filing under Rule 6528 a petition
for certiorari assailing the order of default within 60 days from notice of the
judgment. An order of default is interlocutory, and an aggrieved party may
file an appropriate special civil action under Rule 65.29 In a petition
for certiorari, the appellate court may declare void both the order of default
and the judgment of default.
Clearly, Mrs. Cerezo had every opportunity to avail of these remedies within
the reglementary periods provided under the Rules of Court. However, Mrs.
Cerezo opted to file a petition for relief from judgment, which is
availableonly in exceptional cases. A petition for relief from judgment
should be filed within the reglementary period of 60 days from knowledge of
judgment and six months from entry of judgment, pursuant to
Rule 38 of the Rules of Civil Procedure.30 Tuason v. Court of
Appeals31 explained the nature of a petition for relief from judgment:

When a party has another remedy available to him, which may either
be a motion for new trial or appeal from an adverse decision of the trial
court, and he was not prevented by fraud, accident, mistake or
excusable negligence from filing such motion or taking such appeal, he
cannot avail himself of this petition. Indeed, relief will not be granted to
a party who seeks avoidance from the effects of the judgment when
the loss of the remedy at law was due to his own negligence; otherwise
the petition for relief can be used to revive the right to appeal which
has been lost thru inexcusable negligence.
Evidently, there was no fraud, accident, mistake, or excusable negligence
that prevented Mrs. Cerezo from filing an appeal, a motion for new trial or a
petition for certiorari. It was error for her to avail of a petition for relief from
judgment.
After our resolution denying Mrs. Cerezos petition for relief became final and
executory, Mrs. Cerezo, in her last ditch attempt to evade liability, filed
before the Court of Appeals a petition for annulment of the judgment of the
trial court. Annulment is available only on the grounds of extrinsic fraud and
lack of jurisdiction. If based on extrinsic fraud, a party must file the petition
within four years from its discovery, and if based on lack of jurisdiction,
before laches or estoppel bars the petition. Extrinsic fraud is not a valid
ground if such fraud was used as a ground, or could have been used as a
ground, in a motion for new trial or petition for relief from judgment.32
Mrs. Cerezo insists that lack of jurisdiction, not extrinsic fraud, was her
ground for filing the petition for annulment of judgment. However, a party
may avail of the remedy of annulment of judgment under Rule 47 only if the
ordinary remedies of new trial, appeal, petition for relief from judgment, or
other appropriate remedies are no longer available through no fault of the
party.33 Mrs. Cerezo could have availed of a new trial or appeal but through
her own fault she erroneously availed of the remedy of a petition for relief,
which was denied with finality. Thus, Mrs. Cerezo may no longer avail of the
remedy of annulment.
In any event, the trial court clearly acquired jurisdiction over Mrs. Cerezos
person. Mrs. Cerezo actively participated in the proceedings before the trial
court, submitting herself to the jurisdiction of the trial court. The defense of
lack of jurisdiction fails in light of her active participation in the trial court
proceedings. Estoppel or laches may also bar lack of jurisdiction as a ground
for nullity especially if raised for the first time on appeal by a party who
participated in the proceedings before the trial court, as what happened in
this case.34
For these reasons, the present petition should be dismissed for utter lack of
merit. The extraordinary action to annul a final judgment is restricted to the
grounds specified in the rules. The reason for the restriction is to prevent this
extraordinary action from being used by a losing party to make a complete
farce of a duly promulgated decision that has long become final and
executory. There would be no end to litigation if parties who have

unsuccessfully availed of any of the appropriate remedies or lost them

through their fault could still bring an action for annulment of
judgment.35 Nevertheless, we shall discuss the issues raised in the present
petition to clear any doubt about the correctness of the decision of the trial
court.
Mrs. Cerezos Liability and the Trial Courts Acquisition of
Jurisdiction
Mrs. Cerezo contends that the basis of the present petition for annulment is
lack of jurisdiction. Mrs. Cerezo asserts that the trial court could not validly
render judgment since it failed to acquire jurisdiction over Foronda. Mrs.
Cerezo points out that there was no service of summons on Foronda.
Moreover, Tuazon failed to reserve his right to institute a separate civil action
for damages in the criminal action. Such contention betrays a faulty
foundation. Mrs. Cerezos contention proceeds from the point of view of
criminal law and not of civil law, while the basis of the present action of
Tuazon is quasi-delict under the Civil Code, not delict under the Revised
Penal Code.
The same negligent act may produce civil liability arising from a delict under
Article 103 of the Revised Penal Code, or may give rise to an action for a
quasi-delict under Article 2180 of the Civil Code. An aggrieved party may
choose between the two remedies. An action based on a quasi-delict may
proceed independently from the criminal action.36 There is, however, a
distinction between civil liability arising from a delict and civil liability arising
from a quasi-delict. The choice of remedy, whether to sue for a delict or a
quasi-delict, affects the procedural and jurisdictional issues of the action.37
Tuazon chose to file an action for damages based on a quasi-delict. In his
complaint, Tuazon alleged that Mrs. Cerezo, "without exercising due care and
diligence in the supervision and management of her employees and buses,"
hired Foronda as her driver. Tuazon became disabled because of Forondas
"recklessness, gross negligence and imprudence," aggravated by Mrs.
Cerezos "lack of due care and diligence in the selection and supervision of
her employees, particularly Foronda."38
The trial court thus found Mrs. Cerezo liable under Article 2180 of the Civil
Code. Article 2180 states in part:
Employers shall be liable for the damages caused by their employees
and household helpers acting within the scope of their assigned tasks,
even though the former are not engaged in any business or industry.
Contrary to Mrs. Cerezos assertion, Foronda is not an indispensable party to
the case. An indispensable party is one whose interest is affected by the
courts action in the litigation, and without whom no final resolution of the
case is possible.39 However, Mrs. Cerezos liability as an employer in an
action for a quasi-delict is not only solidary, it is also primary and direct.
Foronda is not an indispensable party to the final resolution of Tuazons
action for damages against Mrs. Cerezo.

The responsibility of two or more persons who are liable for a quasi-delict is
solidary.40 Where there is a solidary obligation on the part of debtors, as in
this case, each debtor is liable for the entire obligation. Hence, each debtor
is liable to pay for the entire obligation in full. There is no merger or
renunciation of rights, but only mutual representation.41 Where the obligation
of the parties is solidary, either of the parties is indispensable, and the other
is not even a necessary party because complete relief is available from
either.42 Therefore, jurisdiction over Foronda is not even necessary as Tuazon
may collect damages from Mrs. Cerezo alone.
Moreover, an employers liability based on a quasi-delict is primary and
direct, while the employers liability based on a delict is merely
subsidiary.43 The words "primary and direct," as contrasted with "subsidiary,"
refer to the remedy provided by law for enforcing the obligation rather than
to the character and limits of the obligation.44Although liability under Article
2180 originates from the negligent act of the employee, the aggrieved party
may sue the employer directly. When an employee causes damage, the law
presumes that the employer has himself committed an act of negligence in
not preventing or avoiding the damage. This is the fault that the law
condemns. While the employer is civilly liable in a subsidiary capacity for the
employees criminal negligence, the employer is also civilly liable directly
and separately for his own civil negligence in failing to exercise due diligence
in selecting and supervising his employee. The idea that the employers
liability is solely subsidiary is wrong.45
The action can be brought directly against the person responsible (for
another), without including the author of the act. The action against
the principal is accessory in the sense that it implies the existence of a
prejudicial act committed by the employee, but it is not subsidiary in
the sense that it can not be instituted till after the judgment against
the author of the act or at least, that it is subsidiary to the principal
action; the action for responsibility (of the employer) is in itself a
principal action.46
Thus, there is no need in this case for the trial court to acquire jurisdiction
over Foronda. The trial courts acquisition of jurisdiction over Mrs. Cerezo is
sufficient to dispose of the present case on the merits.
In contrast, an action based on a delict seeks to enforce the subsidiary
liability of the employer for the criminal negligence of the employee as
provided in Article 103 of the Revised Penal Code. To hold the employer liable
in a subsidiary capacity under a delict, the aggrieved party must initiate a
criminal action where the employees delict and corresponding primary
liability are established.47 If the present action proceeds from a delict, then
the trial courts jurisdiction over Foronda is necessary. However, the present
action is clearly for the quasi-delict of Mrs. Cerezo and not for the delict of
Foronda.
The Cerezo spouses contention that summons be served anew on them is
untenable in light of their participation in the trial court proceedings. To

uphold the Cerezo spouses contention would make a fetish of a

technicality.48Moreover, any irregularity in the service of summons that might
have vitiated the trial courts jurisdiction over the persons of the Cerezo
spouses was deemed waived when the Cerezo spouses filed a petition for
relief from judgment.49
We hold that the trial court had jurisdiction and was competent to decide the
case in favor of Tuazon and against Mrs. Cerezo even in the absence of
Foronda. Contrary to Mrs. Cerezos contention, Foronda is not an
indispensable party to the present case. It is not even necessary for Tuazon
to reserve the filing of a separate civil action because he opted to file a civil
action for damages against Mrs. Cerezo who is primarily and directly liable
for her own civil negligence. The words of Justice Jorge Bocobo in Barredo v.
Garcia still hold true today as much as it did in 1942:
x x x [T]o hold that there is only one way to make defendants liability
effective, and that is, to sue the driver and exhaust his (the latters)
property first, would be tantamount to compelling the plaintiff to follow
a devious and cumbersome method of obtaining relief. True, there is
such a remedy under our laws, but there is also a more expeditious
way, which is based on the primary and direct responsibility of the
defendant under article [2180] of the Civil Code. Our view of the law is
more likely to facilitate remedy for civil wrongs, because the procedure
indicated by the defendant is wasteful and productive of delay, it being
a matter of common knowledge that professional drivers of taxis and
other similar public conveyances do not have sufficient means with
which to pay damages. Why, then, should the plaintiff be required in all
cases to go through this roundabout, unnecessary, and probably
useless procedure? In construing the laws, courts have endeavored to
shorten and facilitate the pathways of right and justice.50
Interest at the rate of 6% per annum is due on the amount of damages
adjudged by the trial court.51 The 6% per annum interest shall commence
from 30 May 1995, the date of the decision of the trial court. Upon finality of
this decision, interest at 12% per annum, in lieu of 6% per annum, is due on
the amount of damages adjudged by the trial court until full payment.
WHEREFORE, we DENY the instant petition for review. The Resolution dated
21 October 1999 of the Court of Appeals in CA-G.R. SP No. 53572, as well as
its Resolution dated 20 January 2000 denying the motion for reconsideration,
is AFFIRMED with the MODIFICATION that the amount due shall earn legal
interest at 6% per annum computed from 30 May 1995, the date of the trial
courts decision. Upon finality of this decision, the amount due shall earn
interest at 12% per annum, in lieu of 6% per annum, until full payment.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, and Azcuna, JJ., concur.
Panganiban, J., on official leave.

G.R. No. L-83524 October 13, 1989

ERNESTO KRAMER, JR. and MARIA KRAMER, petitioners,
vs.
HON. COURT OF APPEALS and TRANS-ASIA SHIPPING LINES,
INC., respondents.
Rodolfo D. Mapile for petitioners.
Jose Al. Perez for private respondent.
GANCAYCO, J.:
The principal issue in this Petition for Review is whether or not a Complaint
for damages instituted by the petitioners against the private respondent
arising from a marine collision is barred by the statute of limitations.
The record of the case discloses that in the early morning of April 8, 1976,
the F/B Marjolea, a fishing boat owned by the petitioners Ernesto Kramer, Jr.
and Marta Kramer, was navigating its way from Marinduque to Manila.
Somewhere near Maricabon Island and Cape Santiago, the boat figured in a
collision with an inter-island vessel, the M/V Asia Philippines owned by the
private respondent Trans-Asia Shipping Lines, Inc. As a consequence of the
collision, the F/B Marjolea sank, taking with it its fish catch.
After the mishap, the captains of both vessels filed their respective marine
protests with the Board of Marine Inquiry of the Philippine Coast Guard. The
Board conducted an investigation for the purpose of determining the
proximate cause of the maritime collision.
On October 19, 1981, the Board concluded that the loss of the F/B Marjolea
and its fish catch was attributable to the negligence of the employees of the
private respondent who were on board the M/V Asia Philippines during the
collision. The findings made by the Board served as the basis of a
subsequent Decision of the Commandant of the Philippine Coast Guard dated
April 29, 1982 wherein the second mate of the M/V Asia Philippines was
suspended from pursuing his profession as a marine officer. 1
On May 30, 1985, the petitioners instituted a Complaint for damages against
the private respondent before Branch 117 of the Regional Trial Court in Pasay
City. 2 The suit was docketed as Civil Case No. 2907-P.
The private respondent filed a Motion seeking the dismissal of the Complaint
on the ground of prescription. He argued that under Article 1146 of the Civil
Code, 3 the prescriptive period for instituting a Complaint for damages
arising from a quasi-delict like a maritime collision is four years. He

maintained that the petitioners should have filed their Complaint within four
years from the date when their cause of action accrued, i.e., from April 8,
1976 when the maritime collision took place, and that accordingly, the
Complaint filed on May 30, 1985 was instituted beyond the four-year
prescriptive period.
For their part, the petitioners contended that maritime collisions have
peculiarities and characteristics which only persons with special skill, training
and experience like the members of the Board of Marine Inquiry can properly
analyze and resolve. The petitioners argued that the running of the
prescriptive period was tolled by the filing of the marine protest and that
their cause of action accrued only on April 29, 1982, the date when the
Decision ascertaining the negligence of the crew of the M/V Asia Philippines
had become final, and that the four-year prescriptive period under Article
1146 of the Civil Code should be computed from the said date. The
petitioners concluded that inasmuch as the Complaint was filed on May 30,
1985, the same was seasonably filed.
In an Order dated September 25, 1986, 4 the trial court denied the Motion
filed by the private respondent. The trial court observed that in ascertaining
negligence relating to a maritime collision, there is a need to rely on highly
technical aspects attendant to such collision, and that the Board of Marine
Inquiry was constituted pursuant to the Philippine Merchant Marine Rules and
Regulations, which took effect on January 1, 1975 by virtue of Letter of
Instruction No. 208 issued on August 12, 1974 by then President Ferdinand E.
Marcos, precisely to answer the need. The trial court went on to say that the
four-year prescriptive period provided in Article 1146 of the Civil Code should
begin to run only from April 29, 1982, the date when the negligence of the
crew of the M/V Asia Philippines had been finally ascertained. The pertinent
portions of the Order of the trial court are as follows
Considering that the action concerns an incident involving a
collision at sea of two vehicles and to determine negligence for
that incident there is an absolute need to rely on highly technical
aspects attendant to such collisions. It is obviously to answer
such a need that the Marine Board of Inquiry (Sic) was
constituted pursuant to the Philippine Merchant Marine Rules and
Regulations which became effective January 1, 1975 under Letter
of Instruction(s) No. 208 dated August 12, 1974. The relevant
section of that law (Art. XVI/b/ provided as follow(s):
1. Board of Marine Inquiry (BMI) Shall
have the jurisdiction to investigate

marine accidents or casualties relative to

the liability of shipowners and officers,
exclusive jurisdiction to investigate
cases/complaints against the marine
officers; and to review all proceedings or
investigation conducted by the Special
Boards of Marine Inquiry.
2. Special Board of Marine Inquiry.
Shall have original jurisdiction to
investigate marine casualties and
disasters which occur or are committed
within the limits of the Coast Guard
District concerned or those referred by
the Commandant.
The Court finds reason in the argument of the plaintiff that
marine incidents have those 'peculiarities which only persons of
special skill, training and exposure can rightfully decipher and
resolve on the matter of the negligence and liabilities of parties
involved and inasmuch as the report of the Board of Inquiry (sic)
admittedly came out only on April 29, 1982, the prescriptive
period provided x x x under Art. 1146 of the Civil Code should
begin to run only from that date. The complaint was filed with
this Court on May 10, 1985, hence the statute of limitations can
not constitute a bar to the filing of this case. 5
The private respondent elevated the case to the Court of Appeals by way of a
special civil action for certiorari and prohibition, alleging therein that the trial
court committed a grave abuse of discretion in refusing to dismiss the
Complaint filed by the petitioners. The case was assigned to the Second
Division of the appellate court and was docketed as Case No. CA-G.R. SP No.
12032. 6
In a Decision dated November 27, 1987, 7 and clarified in a Resolution dated
January 12, 1988, 8 the Court of Appeals granted the Petition filed by the
private respondent and ordered the trial court to dismiss the Complaint. The
pertinent portions of the Decision of the appellate court are as follows
It is clear that the cause of action of private respondent (the
herein petitioners Ernesto Kramer, Jr. and Marta Kramer) accrued
from the occurrence of the mishap because that is the precise
time when damages were inflicted upon and sustained by the
aggrieved party and from which relief from the court is presently

sought. Private respondents should have immediately instituted

a complaint for damages based on a quasi-delict within four
years from the said marine incident because its cause of action
had already definitely ripened at the onset of the collision. For
this reason, he (sic) could cite the negligence on the part of the
personnel of the petitioner to exercise due care and lack of (sic)
diligence to prevent the collision that resulted in the total loss of
their x x x boat.
We can only extend scant consideration to respondent judge's
reasoning that in view of the nature of the marine collision that
allegedly involves highly technical aspects, the running of the
prescriptive period should only commence from the finality of the
investigation conducted by the Marine Board of Inquiry (sic) and
the decision of the Commandant, Philippine Coast Guard, who
has original jurisdiction over the mishap. For one, while it is true
that the findings and recommendation of the Board and the
decision of the Commandant may be helpful to the court in
ascertaining which of the parties are at fault, still the former
(court) is not bound by said findings and decision. Indeed, the
same findings and decision could be entirely or partially
admitted, modified, amended, or disregarded by the court
according to its lights and judicial discretion. For another, if the
accrual of a cause of action will be made to depend on the action
to be taken by certain government agencies, then necessarily,
the tolling of the prescriptive period would hinge upon the
discretion of such agencies. Said alternative it is easy to foresee
would be fraught with hazards. Their investigations might be
delayed and lag and then witnesses in the meantime might not
be available or disappear, or certain documents may no longer
be available or might be mislaid. ... 9
The petitioners filed a Motion for the reconsideration of the said Decision but
the same was denied by the Court of Appeals in a Resolution dated May 27,
1988. 10
Hence, the instant Petition wherein the arguments raised by the petitioner
before the trial court are reiterated. 11In addition thereto, the petitioner
contends that the Decision of the Court of Appeals 12 The private respondent
filed its Comment on the Petition seeking therein the dismissal of the
same. 13 It is also contended by the private respondent that the ruling of the
Court in Vasquez is not applicable to the case at bar because the said case

involves a maritime collision attributable to a fortuitous event. In a

subsequent pleading, the private respondent argues that the Philippine
Merchant Marine Rules and Regulations cannot have the effect of repealing
the provisions of the Civil Code on prescription of actions.14
On September 19,1988, the Court resolved to give due course to the
petition. 15 After the parties filed their respective memoranda, the case was
deemed submitted for decision.
The petition is devoid of merit. Under Article 1146 of the Civil Code, an action
based upon a quasi-delict must be instituted within four (4) years. The
prescriptive period begins from the day the quasi-delict is committed.
InPaulan vs. Sarabia, 16 this Court ruled that in an action for damages arising
from the collision of two (2) trucks, the action being based on a quasi-delict,
the four (4) year prescriptive period must be counted from the day of the
collision.
In Espanol vs. Chairman, Philippine Veterans Administration,
held as follows-

17

this Court

The right of action accrues when there exists a cause of action,

which consists of 3 elements, namely: a) a right in favor of the
plaintiff by whatever means and under whatever law it arises or
is created; b) an obligation on the part of defendant to respect
such right; and c) an act or omission on the part of such
defendant violative of the right of the plaintiff ... It is only when
the last element occurs or takes place that it can be said in law
that a cause of action has arisen ... .
From the foregoing ruling, it is clear that the prescriptive period must be
counted when the last element occurs or takes place, that is, the time of the
commission of an act or omission violative of the right of the plaintiff, which
is the time when the cause of action arises.
It is therefore clear that in this action for damages arising from the collision
of two (2) vessels the four (4) year prescriptive period must be counted from
the day of the collision. The aggrieved party need not wait for a
determination by an administrative body like a Board of Marine Inquiry, that
the collision was caused by the fault or negligence of the other party before
he can file an action for damages. The ruling in Vasquez does not apply in
this case. Immediately after the collision the aggrieved party can seek relief
from the courts by alleging such negligence or fault of the owners, agents or
personnel of the other vessel.
Thus, the respondent court correctly found that the action of petitioner has
prescribed. The collision occurred on April 8, 1976. The complaint for

damages was filed iii court only on May 30, 1 985, was beyond the four (4)
year prescriptive period.
WHEREFORE, the petition is dismissed. No costs.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

G.R. No. 90365 March 18, 1991

VICENTE T. TAN, VICTAN & COMPANY, INC., TRANSWORLD
INVESTMENT CORPORATION, FIRST INTERNATIONAL INVESTMENT
COMPANY, INC., FAR EAST PETROLEUM & MINERALS CORPORATION,
and PHILCONTRUST INTERNATIONAL CORPORATION, petitioners,
vs.
THE HONORABLE COURT OF APPEALS (FORMER SPECIAL FIRST
DIVISION), CENTRAL BANK OF THE PHILIPPINES, respondents.
Ruperto G. Martin & Associates for petitioners.
Agapito S. Fajardo, Jerry P. Rebutoc & Restituto P. Ventura for private
respondent.
SARMIENTO, J.:p
The petitioners ask the Court to set aside the Decision of the Court of
Appeals 1 dismissing their complaint for reconveyance of shares of stock
against the Central Bank. The fact as stated by the respondent court are
accurate and we adopt the same. They are as follows:
xxx xxx xxx
Civil Case No. 15707, entitled "Vicente T. Tan, et al. vs. Central
Bank of the Philippines, et al.," is an action for "Reconveyance of
Shares of Stock with Damages and Restraining Order" wherein
private respondent Vicente T. Tan sought to recover shares of
stocks owned by him and his associates in Continental Bank
which he had assigned to three corporations, namely: Executive
Consultants, Inc., Orobel Property Management, Inc., and
Antolum International Trading Corporation, as well as damages
for the illegal closure of Continental Bank.
It appears from the record that on June 15, 1974, private
respondent Tan was arrested by the military authorities pursuant
to an Arrest, Search and Seizure Order (ASSO) issued by the then

Secretary of National Defense on the basis of criminal charges

filed against him before the PC Criminal Investigation Service for
alleged irregular transactions at Continental Bank. At the time of
his arrest, respondent Tan was neither a director nor an officer of
said bank. Subsequently, three (3) other officers of Continental
Bank, all with the rank of vice-presidents, were arrested.
However, the bank's chairman of the board, Cornelio Balmaceda,
and its President, Jose Moran, were not arrested, and in fact
continued to run the operations of the bank.
Because of a possible bank run as a result of the arrests, the
officers of Continental Bank requested an emergency loan to
meet pending withdrawals of depositors. The Monetary Board
approved the request on June 21, 1974 subject, however, to a
verification of the bank's assets.
On June 24, 1974, the Director of petitioner's department of
Commercial and Savings Banks, after conducting said
verification, reported that Continental Bank's assets cannot meet
its liabilities, since the latter exceeded the former by P 67.260
million. The report also indicated that Continental Bank was
insolvent and that its continuance in business would involve
probable loss to its depositors and creditors, which are the two
grounds mandated under Section 29 of Republic Act No. 265,
otherwise known as the Central Bank Act, justifying the closure
and placing under receivership of a bank.
On the basis of the report, petitioner ordered the closure of
Continental Bank effective June 24, 1974 and designated the
Director of its Department of Commercial and Savings Banks as
receiver with instructions to take charge of the bank's assets
pursuant to Sec. 29 of R.A. No. 265.
As also required by Section 29 of R.A. No. 265, a final report was
submitted to the Monetary Board on August 12, 1974 by
Feliciano A. Balajadia, the Supervising Bank Examiner, affirming
the earlier report that Continental Bank was in an insolvent
position and that its continuance in business may be detrimental
to its, creditors and depositors. The same report indicated,
however, that the bank may be allowed to reorganize under an
entirely new management subject to certain conditions foremost
of which was the infusion of fresh funds into the bank.

While still under detention by the military, respondent Tan

executed certain agreements on February 2, 1977, May 12, 1977
and July 5, 1977 transferring and assigning 359,615 shares of
stock in Continental Bank, as well as other properties belonging
to him and his affiliate firms, to Executive Consultants, Inc.,
Orobel Property Management, Inc. and Antolum International
Trading Corporation in consideration of the assumption by these
assignees of the liabilities and obligations of respondents Tan and
his companies.
The assignees of respondents Tan and his companies
rehabilitated Continental Bank and, in support thereof,
respondent Tan wrote the petitioner on July 5, 1977 certifying on
his own behalf and in behalf of the corporations owned and
controlled by him, that they have no objection to the reopening
and rehabilitation of Continental Bank under its new name,
International Corporate Bank or Interbank.
Interbank reopened in 1977 and since then operated as a
banking institution with controlling ownership thereof changing
hands during the past decade.
On January 13, 1987, after the lapse of more than twelve (12)
years, private respondents filed the present case of
reconveyance of shares of stock with damages and restraining
order before the respondent court. On March 3, 1987, petitioner
filed a Motion to Dismiss dated February 27, 1987 on the grounds
that the action is barred by the statute of limitations or
prescription and that plaintiffs therein (private respondents
herein) have no cause of action against the defendant (herein
petitioner), as well as laches on the part of plaintiffs. On April 1,
1987, private respondents filed their Opposition to the Motion to
Dismiss to which petitioner filed its Reply dated April 10, 1987.
The respondent court (trial court) resolved the motion to dismiss
in favor of private respondent(s) in an Order dated May 15, 1987,
which stated among other things:
As to the prescription of an action based on implied
or constructive trust, the Supreme Court held that it
prescribes in ten years. . . .
As alleged in the complaint, plaintiffs were
fraudulently divested of their Continental Bank

shares in 1977. Consequently, the ten-year

prescription period has not yet lapsed.
Plaintiffs likewise are not guilty of laches. . . .
With regards (sic) to the second ground, this Court
finds that the allegations in the complaint, passed
the test laid down in Ruiz vs. Court of Appeals, G.R.
No. 29213, Oct. 21, 1977, 79 SCRA 525, 534,
regarding sufficiency of ultimate facts. A valid
judgment can be rendered upon the facts alleged in
the complaint (which are deemed admitted for
purposes of the Motion to Dismiss) in accordance
with the prayer of this complaint. (p. 4, Petition)
Not satisfied with the Order petitioner filed a Motion for
Reconsideration of the same, alleging that the grounds of
prescription and laches were raised principally in connection with
private respondents' claim for damages, while the ground of no
cause of action was raised in connection with private
respondents' claim for reconveyance. In spite of petitioner's
arguments, the Motion for Reconsideration was denied by the
respondent court in its Order of August 12, 1987. Hence, the (sic)
petition for certiorari. 2
The issues, as the petitioners point out, are as follows:
1. Whether or not petitioners' action for damages against
respondent is barred by prescription under Section 29 of Republic
Act No. 265.
2. Assuming, arguendo, that the action is not barred by
prescription under Section 29 of Republic Act No. 265, whether or
not the action for damages is barred by prescription under Article
1146 of the Civil Code.
3. Whether or not the complaint states a cause of action against
respondent for the reconveyance of petitioners' shareholdings in
the former Continental Bank under the doctrine of constructive
trust. 3
On the issue of prescription, the holding of the Court of Appeals is that
prescription is a bar, under Section 29 of Republic Act No. 265, the Central
Bank Act, as follows:
Sec. 29. Proceedings upon insolvency. Whenever, upon
examination by the head of the appropriate supervising and
examining department or his examiners or agents into the

condition of any banking institution, it shall be disclosed that the

condition of the same is one of insolvency, or that its
continuance in business would involve probable loss to its
depositors or creditors, it shall be the duty of the department
head concerned therewith, in writing, to inform the Monetary
Board of the facts, and the Board, upon finding the statements of
the department head to be true, shall forthwith forbid the
institution to do business in the Philippines and shall designate
an official of the Central Bank as receiver to immediately take
charge of its assets and liabilities, as expeditiously as possible
collect and gather all the assets and administer the same for the
benefit of its creditors, and exercising all the power necessary for
these purposes including, but not limited to bringing suits and
foreclosing mortgages in the name of the banking institution.
xxx xxx xxx
At any time within ten days after the Monetary Board has taken
charge of the assets of any banking institution, such institution
may apply to the court of First Instance for an order requiring the
Monetary Board to show cause why its designated official should
not be enjoined from continuing such charge of its assets, and
the court may direct the Board to refrain from further
proceedings and to surrender charge of its assets. 4
The respondent court also held that assuming, as the petitioners maintained
(and still maintain in this petition), that the complaint is for tort, Article 1146
of the Civil Code, providing as follows:
Art. 1146. The following actions must be instituted within four
years:
(1) Upon an inquiry to the rights of the plaintiff;
(2) Upon a quasi-delict. 5
is in any case, a bar.
Its ruling is that since the petitioners' action was commenced on January 13,
1987, or more than twelve years from June 24, 1974, the date the Central
Bank ordered the closure of Continental Bank, the same had prescribed,
whether under Section 29 of the Central Bank Act or under Article 1146 of
the Civil Code.
On the issue of cause of action, the Court of Appeals is of the opinion that
the complaint states no cause of action, since the Central Bank is not one of
the assignees of the shares the petitioners are seeking to recover, and
hence, no reconveyance is possible against it.

The petitioners now argue that prescription has not set in; that the ten-day
period prescribed by Section 29 of Republic Act No. 265 refers to acts of the
Monetary Board in taking over a bank's assets; that their complaint is in the
nature of an action for tort against the Central Bank arising from its alleged
forcible divestment of their shares in the Continental Bank-; that the period
during which they were detained under a martial law government
constitutes fuerza mayor which interrupted prescription under Article 1146 of
the Civil Code; and that their action for reconveyance is to enforce a
constructive trust with the Central Bank as "indirect owner" (of the shares of
stock), which must allegedly account therefor.
The first question refers to prescription. In this connection, we are not
disposed to accept the ruling of the Court of Appeals that under Republic Act
No. 265, the action has prescribed, and that in any event, assuming that
Republic Act No. 265 is inapplicable, Article 1146 of the Civil Code is
nonetheless a bar. With respect to Republic Act No. 265, the Court notes that
the statute talks of enjoining the Monetary Board from taking charge of a
bank's assets. The Court also notes, however, that the Monetary Board has
since relinquished possession of Continental Bank's assets, and the
controlling ownership of the bank has passed from hand to hand in the
course of the decade. It has likewise since reopened under a new name,
International Corporate Bank, and a new management. Clearly, and as a
perusal of the petitioners' complaint confirms, the petitioners are not asking
for an injunction against the Monetary Board and the Board has since in fact
ceased from performing any act in connection with Continental Bank or its
successor bank.
From a reading of the complaint, we can not either say that Article 1146 is a
deterrent, because although the same, coincidentally, avers intimidation
employed by the martial law administration in taking over Continental Bank,
an act that suggests "quasi-delict," the same is preeminently one for
reconveyance of the shares of stock subject of that takeover, and not on
account of any injury to the petitioners' rights. We quote:
WHEREFORE, plaintiffs respectfully pray that judgment be
rendered:
A. Upon the filing of this Complaint, this Honorable Court issue a
restraining order directing defendant National Development
Company, its agents, representatives or such other persons
acting under its authority and direction to desist and refrain from
disposing or otherwise transferring the shares of stock in
question.

B. After due hearing:

1. Ordering the defendants to reconvey, restore and/or re-assign
to plaintiffs all the latter's controlling shareholdings in the former
Continental Bank (now renamed INTERBANK) in the same
proportion as it was at the time of its fraudulent acquisition
including such incremental shares of stock that should have been
acquired by the plaintiffs had they been granted the opportunity
to exercise their right to pre-emption to the new issues of shares
of stock as a consequence of the subsequent increases in the
authorized capital stock of said bank and all stocks dividends
declared since the reopening of Continental Bank under the
name INTERBANK.
2. Ordering the defendant Central Bank of the Philippines to pay
the plaintiffs moral damages including attorney's fees and
litigation expenses in an amount that may be proved during the
trial.
Plaintiffs likewise pray for such other reliefs and remedies as this
Honorable Court may deem just and equitable in the premises. 6
As the petitioners in fact very vehemently maintain in the present petition,
the cause of action is predicated on "reconveyance of petitioners'
shareholdings in the former Continental Bank under the doctrine of
constructive trust." 7
At any rate, actions on tortassuming that the complaint is one for tortprescribe in four years under, as aforesaid, Article 1146 of the Code. That
Article 1149 which refers to "periods not fixed in this Code or other laws
"is the applicable provision becomes therefore untenable because, please
note, Article 1146 speaks of "injury to the rights of the plaintiff " and "quasidelict" specific legal nomenclatures for tortassuming, again, that the
action is for tort. The Court does not see how Article 1149 can therefore
enter into the picture.
Please note also that in the case of Allied Banking Corporation vs. Court of
Appeals 8 we specifically held that an action against the Central Bank for
"tortious interference," that is, in closing and liquidating a bank, prescribes in
four years from the date of closure. In that case which is one for tort we
held that Article 1146 is the applicable law.
Be that as it may, and assuming ex gratia argumenti that Article 1149 were
applicable, it still would not have rescued the petitioners since that meant
that they had until 1982 at most, within which to institute a claim.
Prescription would still have been a bar.

The next question is whether or not any action for reconveyance has
nevertheless prescribed, on the bases of provisions governing reconveyance.
The rule anent prescription on recovery of movables (shares of stock in this
case) is expressed in Article 1140 of the Civil Code, which we quote:
Art. 1140. Actions to recover movables shall prescribe eight
years from the time the possession thereof is lost, unless the
possessor had acquired the ownership by prescription for a less
period, according to article 1132, and without prejudice to the
provisions of articles 559, 1505, and 1133.
As it provides, Article 1140 is subject to the provisions of Articles 1132 and
1133 of the Code, governing acquisitive presciption, in relation to Articles
559 and 1505 thereof. Under Article 1132:
Art. 1132. The ownership of movables prescribes through
uninterruped possession for four years in good faith.
The ownership of personal property also prescribes through
uninterrupted possession for eight years, without need of any
other condition.
With regard to the right of the owner to recover personal
property lost or of which he has been illegally deprived, as well
as with respect to movables acquired in a public sale, fair, or
market, or from a merchant's store the provisions of articles 559
and 1505 of this Code shall be observed.
acquisitive prescription sets in after uninterrupted possession of four years,
provided there is good faith, and upon the lapse of eight years, if bad faith is
present. Where, however, the thing was acquired through a crime, the
offender can not acquire ownership by prescription under Article 1133, which
we quote:
Art. 1133. Movables possessed through a crime can never be
acquired through prescription by the offender.
Please note that under the above Article, the benefits of prescription are
denied to the offender; nonetheless, if the thing has meanwhile passed to a
subsequent holder, prescription begins to run (four or eight years, depending
on the existence of good faith). 9
For purposes of existence prescription vis-a-vis movables, we therefore
understand the periods to be:
1. Four years, if the possessor is in good faith;
2. Eight years in all other cases, except where the loss was due
to a crime in which case, the offender can not acquire the

movable by prescription, and an action to recover it from him is

imprescriptible.
It is evident, for purposes of the complaint in question, that the petitioners
had at most eight years within which to pursue a reconveyance, reckoned
from the loss of the shares in 1977, when the petitioner Vicente Tan executed
the various agreements in which he conveyed the same in favor of the
Executive Consultants, Inc., Orobel Property Management, Inc., and Antolum
Trading Corporation.
We are hard put to say, in this regard, that the petitioners' action is after all,
imprescriptible pursuant to the provisions of Article 1133 of the Civil Code,
governing actions to recover loss by means of a crime. For one thing, the
complaint was not brought upon this theory. For another, there is nothing
there that suggests that the loss of the shares was indeed made possible by
a criminal act, other than simple bad faith and probably abuse of right:
18. By reason of the fraudulent acquisition by the Disini
corporations (Executive Consultants, Inc., Orobel Property
Management, Inc. and Antolum International Trading
Corporation) of the 359, 615 shares mentioned in Paragraph 5
hereof, a constructive trust has been constituted on said shares
in favor of plaintiffs, a "remedy to whatever knavery human
ingenuity can invent";
19. The execution of the aforementioned Agreement and
Supplemental Agreements paved the way for the re-opening of
the Continental Bank on September 19, 1977 under a new name,
INTERNATIONAL CORPORATE BANK (INTERBANK, for short) and
under the new management of the Herdis Group, which became
the owner of the controlling stocks by virtue of their fraudulent
acquisition of the 359,615 shares mentioned in Paragraph 5
hereof; and it also paved the way for the release of Plaintiff
Vicente T. Tan, his spouse and other officers of the Continental
Bank from military custody on December 27, 1977 and the
subsequent dismissal of the complaint for estafa thru falsification
and violation of the Central Bank Act against said Plaintiff Tan
and other officers of the Bank in compliance with the instructions
of deposed President Ferdinand E. Marcos;
20. Without the infusion of fresh capital and after barely three (3)
months of operation, INTERBANK's consolidated statement of
financial condition as of December 29, 1977, which was
published inBulletin Today on January 31, 1978, showed a P22.42

million undivided profit and surplus which represented about

50% of the paid-up capital. Said financial statement is hereto
attached as Annex "D".
21. In the special meeting of the shareholders of INTERBANK on
April 24, 1978, the recommendation/declaration by the Board of
Directors during its special meeting on April 14, 1978 of a 25.5%
stock dividend on all fully paid shares as of April 12, 1978 was
approved, subject to the approval of the Central Bank of the
Philippines; however, the Central Bank allowed INTERBANK to
declare only 23.71% stock dividend;
22. The new management then of INTERBANK totally ignored the
existing rules and regulations of the Central Bank of the
Philippines by milking dry the deposits with said INTERBANK
through huge borrowings of the Disini Group of companies
thereby pushing said Bank to the brink of total collapse had it not
been for the huge infusion of funds by the Central Bank of the
Philippines in the form of emergency loans and advances;
23. Since the Central Bank of the Philippines is prohibited to
acquire shares of any kind and to participate in the ownership or
management of any enterprise, either directly or indirectly, it
assigned the emergency loans and advances extended to the
INTERBANK to the National Development Company of (sic) which
the latter executed the corresponding promissory note payable in
25 years, without interest, in favor of said Central Bank, and
which loans and advances were converted into equity thereby
enabling the National Development Corporation to acquire 99%
of INTERBANK's outstanding shares of stock from the Disini
Group, including the 359,615 shares mentioned in Paragraph 5
hereof, and the corresponding stock/cash dividends earned;
24. The defendant American Express Bank, Ltd. (AMEX) acquired
from defendant National Development Company 40% of the
outstanding shares of stock of INTERBANK but before AMEX (sic)
acquisition of said interest, it was placed on notice of the
infirmities of the transfer of the shares of plaintiffs in Continental
Bank to the former owners of INTERBANK;
25. That despite said notice, AMEX proceeded to convert, with
the approval of Central Bank of the Philippines, its exposures to
the Philippine government into equity in INTERBANK;

26. Defendant Central Bank of the Philippines, which may be

considered indirect owner of INTERBANK under the foregoing
arrangement, and defendants National Development Company
and AMEX having actual or constructive notice of the fraudulent
acquisition by the aforementioned three corporations acting as
fronts of Herminio Disini of the 359,615 shares of stock of
plaintiffs, are obligated under the principle of constructive trust
to reconvey to plaintiffs their original controlling shareholdings in
the then Continental Bank including the corresponding
stock/cash dividends earned;
27. Were it not for the acts complained of in this case, plaintiffs
would have retained the right to said shareholdings and they
could have exercised their pre-emption rights to new issues of
stock as a consequence of the increases of capitalization of
INTERBANK;
28. In view of the evident arbitrariness and bad faith of the
Central Bank as adverted to above, which caused Plaintiffs
Vicente T. Tan being divested of his huge investment and
virtually all his assets, said Plaintiff Tan has been subjected to
physical suffering, mental anguish, besmirched reputation and
social humiliation; hence, defendant Central Bank is liable for
moral damages. 10
xxx xxx xxx
Since the complaint was filed on January 13, 1987, ten years more or less
after the petitioners transferred the shares in question, it is clear that the
petitioners have come to court too late.
We can not accept the petitioners' contention that the period during which
authoritarian rule was in force had interrupted prescription and that the
same began to run only on February 25, 1986, when the Aquino government
took power. It is true that under Article 1154:
Art. 1154. The period during which the obligee was prevented by
a fortuitous event from enforcing s right is not reckoned against
him. 11
fortuitous events have the effect of tolling the period of prescription.
However, we can not say, as a universal rule, that the period from
September 21, 1972 through February 25, 1986 involves a force
majeure. Plainly, we can not box in the "dictatorial" period within the
term without distinction, and without, by necessity, suspending all
liabilities, however demandable, incurred during that period, including

perhaps those ordered by this Court to be paid. While this Court is

cognizant of acts of the last regime, especially political acts, that might
have indeed precluded the enforcement of liability against that regime
and/or it's minions the Court is not inclined to make quite a sweeping
pronouncement, considering especially the unsettling effects such a
pronouncement is likely to bring about. It is our opinion that claims
should be taken on a case-to-case basis. This selective rule is
compelled, among others, by the fact that not all those imprisoned or
detained by the past dictatorship were true political oppositionists, or,
for that matter, innocent of any crime or wrongdoing. Indeed, not a few
of them were manipulators and scoundrels.
The petitioner Vicente Tan claims that from June, 1974 through December,
1977, he was under detention; that sometime in August, 1977, the Central
Bank lodged six criminal cases against him, along with several others, with
Military Commission No. 5 in connection with alleged violation of the Central
Bank Act, falsification of documents, and estafa, that while in detention, he
was made to execute various agreements in which he conveyed the shares
of stock in question; and that "[u]nder the foregoing factual setting . . . it
would be foolhardy on the part of petitioners to institute . . . [any] action for
reconveyance . . ." 12
The records show, however, that although under detention, Vicente Tan:
1. Commenced, in July, 1976, Civil Case No. 103359 of the
defunct Court of First Instance of Manila, "to mandatorily enjoin
the Central Bank as receiver of Continental Bank, to takeover
from 'NISA' the control and management and assets of Vicente
Tan and his affiliate corporations;" 13
2. Was ably represented by competent counsel, Atty. Norberto
Quisumbing, throughout; 14
3. Filed with this Court a petition to stop the trial of the criminal
cases pending against him with the Military Commission No. 5
and succeeded in obtaining a temporary restraining order.
On top of those facts abovementioned, he:
1. Asked the Court of First Instance to order the Central Bank "to
proceed to rehabilitate Continental Bank by extending to it such
emergency loans and advances as may be needed for its
rehabilitation. . ." 15
2. Wrote, on July 15, 1977, the Central Bank expressing his
approval in the reopening and rehabilitation of Continental
Bank. 16

We are, therefore, convinced, from Vicente Tan's very behavior, that

detention was not an impediment to a judicial challenge, and the fact of the
matter was that he was successful in obtaining judicial assistance. Under
these circumstances, we can not declare detention, or authoritarian rule for
that matter, as a fortuitous event insofar as he was concerned, that
interrupted prescription.
To be sure, there is nothing in the petition which would remotely suggest,
assuming that Vicente Tan could not have freely and intelligently acted
during the period of martial rule, that his co-petitioners Victan & Company,
Inc., Transworld Investment Corporation, First International Investment
Company, Inc., Far East Petroleum & Minerals Corporation, and Philcontrust
International Corporation, could not have similarly acted during the martial
law regime and shortly thereafter. As far as they are therefore concerned, the
Court has even better reason to invoke prescription because none of them
acted and none now claims that it could not have acted.
On the question of cause of action, the Court notes that as the complaint
itself avers, the petitioners' shares in the Continental Bank were assigned to
the firms already above specified (which Herminio Disini allegedly
controlled), and not to the Central Bank. It is therefore fairly obvious that if
any claim for reconveyance may be prosecuted, it should be prosecuted
against the Disini companies.
It is true that the Central Bank is alleged to be the "indirect owner," 17 arising
from certain loans supposedly facilitated by the Bank that enabled yet two
other companies, the National Development Company and the American
Express Bank, to acquire about ninety-nine percent of International
Corporate Bank, subject to the conditionality that any transfer of shares shall
be approved by the Central Bank. Clearly, however, if the Central Bank were
"owner" which as we shall see, it is notit is "owner" only because it is
preserving its money exposure to the National Development Corporation and
the American Express Bank. It is not "owner" for reconveyance purposes,
that is, as the trustee holding shares acquired by fraud or mistake. To say
now that it is holding those shares as such a trustee, that is, as a result of
the takeover of Continental Bank by the Disini companies, in spite of the fact
that based on the records the bank now pertains to the NDC and American
Express, is a mere conclusion of fact of the petitioners, the plaintiffs in the
trial court.
We have held that:
xxx xxx xxx

The subject Amended and Supplemental Complaint fail to meet

the test. It should be noted that it charges PNB and NIDC with
having assisted in the illegal creation and operation of defendant
sugar mill. Granting, for the sake of argument, that, indeed,
assistance in the "illegal" act was rendered, the same, however,
is not supported by well-pleaded averments of facts. Nowhere is
it alleged that defendants-appellees had notice, information or
knowledge of any flaw, much less any illegality, in their codefendants' actuations, assuming that there was such a flaw or
illegality. This absence is fatal and buoys up instead the PNB
NIDC's position of lack of cause of action.
Although it is averred that the defendants' acts were done in bad
faith, the Complaint does not contain any averment of facts
showing that the acts were done in the manner alleged. Such a
bare statement neither establishes any right or cause of action
on the part of the plaintiff-appellant. It is a mere conclusion of
law not sustained by declarations of facts, much less admitted by
defendants-appellees. It does not, therefore, aid in any wise the
complaint in setting forth a cause of action. Defendantsappellees are not fairly apprised of the act or acts complained
of. 18
xxx xxx xxx
As we indicated, the fact that the parties had stipulated that any transfer of
the Interbank shares by the National Development Company shall be
"subject to prior CB approval" does not make the Central Bank the owner. We
said, it is a simple conditionality prescribed by the Central Bank in order to
protect its money, a conditionality that is prescribed in many loans. It is not
as if the arrangement had allowed the Central Bank to hold the Interbank
shares in question and had left the National Development Company to act as
a front.
In fine, the respondent court did not commit any reversible error.
WHEREFORE, the petition is DENIED. The Complaint in Civil Case No. 15707
of the Regional Trial Court, Branch 134, Makati, Metro Manila, is hereby
DISMISSED.
Costs against the petitioners.
IT IS SO ORDERED.
Melencio-Herrera and Regalado, JJ., concur.
Padilla, J., took no part.

G.R. No. 104408 June 21, 1993

METRO MANILA TRANSIT CORPORATION, petitioner,
vs.
THE COURT OF APPEALS AND NENITA CUSTODIA, respondents.
Office of the Government Corporate Counsel for petitioner.
Renato P. Decena and Restituto Abjero for private respondent.
REGALADO, J.:
This appeal calls for a review of the legal validity and sufficiency of
petitioner's invocation of due diligence in the selection and supervision of
employees as its defense against liability resulting from a vehicular collision.
With the facility by which such a defense can be contrived and our country
having reputedly the highest traffic accident rate in its geographical region,
it is indeed high time for us to once again address this matter which poses
not only a litigation issue for the courts but affects the very safety of our
streets.
The facts of the case at bar are recounted for us by respondent court, thus
At about six o'clock in the morning of August 28, 1979, plaintiffappellant Nenita Custodio boarded as a paying passenger a
public utility jeepney with plate No. D7 305 PUJ Pilipinas 1979,
then driven by defendant Agudo Calebag and owned by his codefendant Victorino Lamayo, bound for her work at Dynetics
Incorporated located in Bicutan, Taguig, Metro Manila, where she
then worked as a machine operator earning P16.25 a day. While
the passenger jeepney was travelling at (a) fast clip along DBP
Avenue, Bicutan, Taguig, Metro Manila another fast moving
vehicle, a Metro Manila Transit Corp. (MMTC, for short) bus
bearing plate no. 3Z 307 PUB (Philippines) "79 driven by
defendant Godofredo C. Leonardo was negotiating Honeydew
Road, Bicutan, Taguig, Metro Manila bound for its terminal at
Bicutan. As both vehicles approached the intersection of DBP
Avenue and Honeydew Road they failed to slow down and
slacken their speed; neither did they blow their horns to warn
approaching vehicles. As a consequence, a collision between
them occurred, the passenger jeepney ramming the left side

portion of the MMTC bus. The collision impact caused plaintiffappellant Nenita Custodio to hit the front windshield of the
passenger jeepney and (she) was thrown out therefrom, falling
onto the pavement unconscious with serious physical injuries.
She was brought to the Medical City Hospital where she regained
consciousness only after one (1) week. Thereat, she was confined
for twenty-four (24) days, and as a consequence, she was unable
to work for three and one half months (31/2). 1
A complaint for damages 2 was filed by herein private respondent, who being
then a minor was assisted by her parents, against all of therein named
defendants following their refusal to pay the expenses incurred by the former
as a result of the collision.
Said defendants denied all the material allegations in the complaint and
pointed an accusing finger at each other as being the party at fault. Further,
herein petitioner Metro Manila Transit Corporation (MMTC), a governmentowned corporation and one of the defendants in the court a quo, along with
its driver, Godofredo Leonardo, contrarily averred in its answer with crossclaim and counterclaim 3 that the MMTC bus was driven in a prudent and
careful manner by driver Leonardo and that it was the passenger jeepney
which was driven recklessly considering that it hit the left middle portion of
the MMTC bus, and that it was defendant Lamayo, the owner of the jeepney
and employer of driver Calebag, who failed to exercise due diligence in the
selection and supervision of employees and should thus be held solidarily
liable for damages caused to the MMTC bus through the fault and negligence
of its employees.
Defendant Victorino Lamayo, for his part, alleged in his answer with crossclaim and counterclaim 4 that the damages suffered by therein plaintiff
should be borne by defendants MMTC and its driver, Godofredo Leonardo,
because the latter's negligence was the sole and proximate cause of the
accident and that MMTC failed to exercise due diligence in the selection and
supervision of its employees.
By order of the trial court, defendant Calebag was declared in default for
failure to file an answer. 5 Thereafter, as no amicable settlement was reached
during the pre-trial conference, 6 trial on the merits ensued with the opposing
parties presenting their respective witnesses and documentary evidence.
Herein private respondent Nenita Custodia, along with her parents, were
presented as witnesses for the prosecution. In addition, Dr. Edgardo del
Mundo, the attending physician, testified on the cause, nature and extent of
the injuries she sustained as a result of the vehicular mishap. 7 On the other

hand, defendant MMTC presented as witnesses Godofredo Leonardo,

Christian Bautista and Milagros Garbo. Defendant Lamayo, however, failed to
present any witness.
Milagros Garbo testified that, as a training officer of MMTC, she was in charge
of the selection of the company's bus drivers, conducting for this purpose a
series of training programs and examinations. According to her, new
applicants for job openings at MMTC are preliminarily required to submit
certain documents such as National Bureau of Investigation (NBI) clearance,
birth or residence certificate, ID pictures, certificate or diploma of highest
educational attainment, professional driver's license, and work experience
certification. Re-entry applicants, aside from the foregoing requirements, are
additionally supposed to submit company clearance for shortages and
damages and revenue performance for the preceding year. Upon satisfactory
compliance with said requisites, applicants are recommended for and
subjected to a Preliminary interview, followed by a record check to find out
whether they are included in the list of undesirable employees given by
other companies.
Thereafter, she continued, if an applicant is found to be acceptable, a final
interview by the Chief Supervisor is scheduled and followed by a training
program which consists of seminars and actual driving and Psycho-physical
tests and X-ray examinations. The seminars, which last for a total of eighteen
(18) days, include familiarization with assigned routes, existing traffic rules
and regulations, Constabulary Highway Patrol Group (CHPG) seminar on
defensive driving, preventive maintenance, proper vehicle handling,
interpersonal relationship ,and administrative rules on discipline and on-thejob training. Upon completion of all the seminars and tests, a final clearance
is issued, an employment contract is executed and the driver is ready to
report for duty. 8
MMTC's Transport Supervisor, Christian Bautista, testified that it was his duty
to monitor the daily operation of buses in the field, to countercheck the
dispatcher on duty prior to the operation of the buses in the morning and to
see to it that the bus crew follow written guidelines of the company, which
include seeing to it that its employees are in proper uniform, briefed in traffic
rules and regulations before the start of duty, fit to drive and, in general,
follow other rules and regulations of the Bureau of Land Transportation as
well as of the company. 9
The reorganized trial court, in its decision of August 1, 1989, 10 found both
drivers of the colliding vehicles concurrently negligent for non-observance of
appropriate traffic rules and regulations and for failure to take the usual

precautions when approaching an intersection. As joint tortfeasors, both

drivers, as well as defendant Lamayo, were held solidarily liable for damages
sustained by plaintiff Custodio. Defendant MMTC, on the bases of the
evidence presented was, however, absolved from liability for the accident on
the ground that it was not only careful and diligent in choosing and screening
applicants for job openings but was also strict and diligent in supervising its
employees by seeing to it that its employees were in proper uniforms,
briefed in traffic rules and regulations before the start of duty, and that it
checked its employees to determine whether or not they were positive for
alcohol and followed other rules and regulations and guidelines of the Bureau
of Land Transportation and of the company.
The trial court accordingly ruled:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby
rendered dismissing the complaint against the Metro Manila
Transit Corporation and ordering defendants Agudo P. Calebag,
Victorino Lamayo and Godofredo C. Leonardo to pay plaintiffs,
jointly and severally, the following:
a) the sum of P10,000.00 by way of medical expenses;
b) the sum of P5,000.00 by way of expenses of litigation;
c) the sum of P15,000.00 by way of moral damages;
d) the sum of P2,672.00 by way of loss of earnings;
e) the sum of P5,000.00 by way of exemplary damages;
f) the sum of P6,000.00 by way of attorney's fees; and
g) costs of suit.
SO ORDERED.

11

Plaintiff's motion to have that portion of the trial court's decision absolving
MMTC from liability reconsidered 12having been denied for lack of merit, 13 an
appeal was filed by her with respondent appellate court. After consideration
of the appropriate pleadings on appeal and finding the appeal meritorious,
the Court of Appeals modified the trial court's decision by holding MMTC
solidarily liable with the other defendants for the damages awarded by the
trial court because of their concurrent negligence, concluding that while
there is no hard and fast rule as to what constitutes sufficient evidence to
prove that an employer has exercised the due diligence required of it in the
selection and supervision of its employees, based on the quantum of
evidence adduced the said appellate court was not disposed to say that
MMTC had exercised the diligence required of a good father of a family in the
selection and supervision of its driver, Godofredo Leonardo. 14

The Court of Appeals was resolute in its conclusion and denied the motions
for reconsideration of appellee Custodio and appellant MMTC in a resolution
dated February 17, 1982, 15 thus prompting MMTC to file the instant petition
invoking the review powers of this Court over the decision of the Court of
Appeals, raising as issues for resolution whether or not (1) the documentary
evidence to support the positive testimonies of witnesses Garbo and Bautista
are still necessary; (2) the testimonies of witnesses Garbo and Bautista may
still be disturbed on appeal; and (3) the evidence presented during the trial
with respect to the proof of due diligence of petitioner MMTC in the selection
and supervision of its employees, particularly driver Leonardo, is sufficient.
Prefatorily, private respondent questions the timeliness of the filing of the
petition at bar in view of the procedural stricture that the timely perfection of
an appeal is both a mandatory and jurisdictional requirement. This is a
legitimate concern on the part of private respondent and presents an
opportune occasion to once again clarify this point as there appears to be
some confusion in the application of the rules and interpretative rulings
regarding the computation of reglementary periods at this stage of the
proceedings.
The records of this case reveal that the decision of respondent Court of
Appeals, dated October 31, 1991, was received by MMTC on November 18,
1991 16 and it seasonably filed a motion for the reconsideration thereof on
November 28, 1991. 17 Said motion for reconsideration was denied by
respondent court in its resolution dated February 17, 1992, which in turn was
received by MMTC on March 9, 1992. 18 Therefore, it had, pursuant to Section
1, Rule 45 of the Rules of Court, fifteen (15) days therefrom or up to March
24, 1992 within which to file its petition, for review on certiorari. Anticipating,
however, that it may not be able to file said petition before the lapse of the
reglementary period therefor, MMTC filed a motion on March 19, 1992 for an
extension of thirty (30) days to file the present petition, with proof of service
of copies thereof to respondent court and the adverse parties. The Court
granted said motion, with the extended period to be counted from the
expiration of the reglementary period. 19 Consequently, private respondent
had thirty (30) days from March 24, 1992 within which to file its petition, or
up to April 23, 1992, and the eventual filing of said petition on April 14, 1992
was well within the period granted by the Court.
We digress to reiterate, in view of erroneous submissions that we continue to
receive, that in the case of a petition for review on certiorari from a decision
rendered by the Court of Appeals, Section 1, Rule 45 of the Rules of Court,
which has long since been clarified in Lacsamana vs. The Hon. Second

Special Cases Division of the Intermediate Appellate Court, et al., 20 allows

the same to be filed "within fifteen (15) days from notice of judgment or of
the denial of the motion for reconsideration filed in due time, and paying at
the same time to the corresponding docket fee." In other words, in the event
a motion for reconsideration is filed and denied, the period of fifteen (15)
days begins to run all over again from notice of the denial resolution.
Otherwise put, if a motion for reconsideration is filed, the reglementary
period within which to appeal the decision of the Court of Appeals to the
Supreme Court is reckoned from the date the party who intends to appeal
received the order denying the motion for reconsideration. 21 Furthermore, a
motion for extension of time to file a petition for review may be filed with this
Court within said reglementary period, paying at the same time the
corresponding docket fee.
1. The first two issues raised by petitioner shall be correlatively discussed in
view of their interrelation.
In its present petition, MMTC insists that the oral testimonies of its
employees were presented as witnesses in its behalf sufficiently prove, even
without the presentation documentary evidence, that driver Leonardo had
complied with all the hiring and clearance requirements and had undergone
all trainings, tests and examinations preparatory to actual employment, and
that said positive testimonies spell out the rigid procedure for screening of
job applicants and the supervision of its employees in the field. It
underscored the fact that it had indeed complied with the measure of
diligence in the selection and supervision of its employees as enunciated
in Campo, et al. vs. Camarote, et al. 22 requiring an employer, in the exercise
of the diligence of a good father of a family, to carefully examine the
applicant for employment as to his qualifications, experience and record
service, and not merely be satisfied with the possession of a professional
driver's license.
It goes on to say since the testimonies of these witnesses were allegedly
neither discredited nor impeached by the adverse party, they should be
believed and not arbitrarily disregarded or rejected nor disturbed on appeal.
It assiduously argues that inasmuch as there is no law requiring that facts
alleged by petitioner be established by documentary evidence, the probative
force and weight of their testimonies should not be discredited, with the
further note that the lower court having passed upon the relevancy of the
oral testimonies and considered the same as unrebutted, its consideration
should no longer be disturbed on appeal. 23

Private respondent, on the other hand, retorts that the factual findings of
respondent court are conclusive upon the High Court which cannot be
burdened with the task of analyzing and weighing the evidence all over
again. 24
At this juncture, it suffices to note that factual findings of the trial court may
be reversed by the Court of Appeals, which is vested by law with the power
to review both legal and factual issues, if on the evidence of record, it
appears that the trial court may have been mistaken 25 particularly in the
appreciation of evidence, which is within the domain of the Court of
Appeals. 26 The general rule laid down in a plethora of cases is that such
findings of fact by the Court of Appeals are conclusive upon and beyond the
power of review of the Supreme Court. 27 However, it is now well-settled that
while the findings of fact of the Court of Appeals are entitled to great respect,
and even finality at times, that rule is not inflexible and is subject to well
established exceptions, to wit: (1) when the conclusion is a finding grounded
entirely on speculation, surmises and conjectures; (2) when the inference
made is manifestly mistaken, absurd or impossible; (3) where there is grave
abuse of discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6) when the Court of
Appeals, in making its findings, went beyond the issues of the case and the
same are contrary to the admissions of both appellant and appellee; (7)
when the findings of the Court of Appeals are contrary to those of the trial
court; (8) when the findings of fact are conclusions without citation of
specific evidence on which they are based; (9) when the facts set forth in the
petition, as well as in the petitioner's main and reply briefs are not disputed
by the respondents and (10) when the findings of fact of the Court of Appeals
are premised on the supposed absence of evidence and are contradicted by
the evidence on record. 28
When as in this case, the findings of the Court of Appeals and the trial court
are contrary to each other, this court may scrutinize the evidence on
record, 29 in order to arrive at a correct finding based thereon. 30
A perusal of the same shows that since there is no dispute as to the finding
of concurrent negligence on the part of the defendant Calebag, the driver of
the passenger jeepney, and co-defendant Leonardo, the bus driver of
petitioner MMTC, both of whom were solidarily held liable with defendant
Lamayo, the owner of the jeepney, we are spared the necessity of
determining the sufficiency of evidence establishing the fact of
negligence. 31 The contrariety is in the findings of the two lower courts, and

which is the subject of this present controversy, with regard to the liability of
MMTC as employer of one the erring drivers.
The trial court, in absolving MMTC from liability ruled that
On the question as to whether defendant MMTC was successful in
proving its defense that indeed it had exercised the due diligence
of a good father of a family in the selection and supervision of
defendant Leonardo, this Court finds that based on the evidence
presented during the trial, defendant MMTC was able to prove
that it was not only careful and diligent in choosing and
screening applicants for job openings but also strict (and) diligent
in supervising its employees by seeing to it that its employees
were in proper uniforms, briefed in traffic rules and regulations
before the start of duty, checked employees to determine
whether they were positive for alcohol and followed other rules
and regulations and guidelines of the Bureau of Land
Transportation as well as its company. Having successfully
proven such defense, defendant MMTC therefore, cannot be held
liable for the accident.
Having reached this conclusion, the Court now, holds that
defendant MMTC be totally absolved from liability and that the
complaint against it be dismissed. . . . 32
whereas respondent court was of the opinion that
It is surprising though that witness Milagros Garbo did not testify
nor present any evidence that defendant-appellee's driver,
defendant Godofredo Leonardo has complied with or has
undergone all clearances and trainings she referred to. The
clearances, result of seminars and tests which Godofredo
Leonardo submitted and complied with, if any, were not
presented in court despite the fact that they are obviously in the
possession and control of defendant-appellee. Instead, it resorted
to generalities. The Court has ruled that due diligence in (the)
selection and supervision of employee(s) are not proved by mere
testimonies to the effect that its applicant has complied with all
the company requirements before one is admitted as an
employee but without proof thereof. . . .
On the part of Christian Bautista, the transport supervisor of
defendant-appellee, he testified that it is his duty to monitor the
operation of buses in the field; to countercheck the dispatchers'
duty prior to the operation of the buses in the morning; to see to

it that bus crew follows written guidelines of the company (t.s.n.,

April 29, 1988, pp. 4-5), but when asked to present in court the
alleged written guidelines of the company he merely stated that
he brought with him a "wrong document" and defendantappellee's counsel asked for reservation to present such written
guidelines in the next hearing but the same was (sic) never
presented in court. 33
A thorough and scrupulous review of the records of this case reveals that the
conclusion of respondent Court of Appeals is more firmly grounded on
jurisprudence and amply supported by the evidence of record than that of
the court below.
It is procedurally required for each party in a case to prove his own
affirmative assertion by the degree of evidence required by law. 34 In civil
cases, the degree of evidence required of a party in order to support his
claim is preponderance of evidence, or that evidence adduced by one party
which is more conclusive and credible than that of the other party. It is,
therefore, incumbent on the plaintiff who is claiming a right to prove his
case. Corollarily, defendant must likewise prove own allegation to buttress its
claim that it is not liable. 35
In fine, the party, whether plaintiff or defendant, who asserts the affirmative
of the issue has the burden of presenting at the trial such amount of
evidence required by law to obtain a favorable judgment. 36 It is entirely
within each of the parties discretion, consonant with the theory of the case it
or he seeks to advance and subject to such procedural strategy followed
thereby, to present all available evidence at its or his disposal in the manner
which may be deemed necessary and beneficial to prove its or his position,
provided only that the same shall measure up to the quantum of evidence
required by law. In making proof in its or his case, it is paramount that the
best and most complete evidence be formally entered. 37
Coming now to the case at bar, while there is no rule which requires that
testimonial evidence, to hold sway, must be corroborated by documentary
evidence, or even subject evidence for that matter, inasmuch as the
witnesses' testimonies dwelt on mere generalities, we cannot consider the
same as sufficiently persuasive proof that there was observance of due
diligence in the selection and supervision of employees. 38 Petitioner's
attempt to prove itsdiligentissimi patris familias in the selection and
supervision of employees through oral evidence must fail as it was unable to
buttress the same with any other evidence, object or documentary, which
might obviate the apparent biased nature of the testimony. 39

Our view that the evidence for petitioner MMTC falls short of the required
evidentiary quantum as would convincingly and undoubtedly prove its
observance of the diligence of a good father of a family has its precursor in
the underlying rationale pronounced in the earlier case of Central Taxicab
Corp. vs. Ex-Meralco Employees Transportation Co., et al., 40 set amidst an
almost identical factual setting, where we held that:
. . . . This witness spoke of an "affidavit of experience" which a
driver-applicant must accomplish before he is employed by the
company, a written "time schedule" for each bus, and a record of
the inspections and thorough checks pertaining to each bus
before it leaves the car barn; yet no attempt was ever made to
present in evidence any of these documents, despite the fact
that they were obviously in the possession and control of the
defendant company.
xxx xxx xxx
Albert also testified that he kept records of the preliminary and
final tests given him as well as a record of the qualifications and
experience of each of the drivers of the company. It is rather
strange, therefore, that he failed to produce in court the all
important record of Roberto, the driver involved in this case.
The failure of the defendant company to produce in court any
"record" or other documentary proof tending to establish that it
had exercised all the diligence of a good father of a family in the
selection and supervision of its drivers and buses,
notwithstanding the calls therefor by both the trial court and the
opposing counsel, argues strongly against its pretensions.
We are fully aware that there is no hard-and-fast rule on the
quantum of evidence needed to prove due observance of all the
diligence of a good father of a family as would constitute a valid
defense to the legal presumption of negligence on the part of an
employer or master whose employee has by his negligence,
caused damage to another. . . . (R)educing the testimony of
Albert to its proper proportions, we do not have enough
trustworthy evidence left to go by. We are of the considered
opinion, therefore, that the believable evidence on the degree of
care and diligence that has been exercised in the selection and
supervision of Roberto Leon y Salazar, is not legally sufficient to
overcome the presumption of negligence against the defendant
company.

Whether or not the diligence of a good father of a family has been observed
by petitioner is a matter of proof which under the circumstances in the case
at bar has not been clearly established. It is not felt by the Court that there is
enough evidence on record as would overturn the presumption of
negligence, and for failure to submit all evidence within its control, assuming
the putative existence thereof, petitioner MMTC must suffer the
consequences of its own inaction and indifference.
2. In any event, we do not find the evidence presented by petitioner
sufficiently convincing to prove the diligence of a good father of a family,
which for an employer doctrinally translates into its observance of due
diligence in the selection and supervision of its employees but which
mandate, to use an oft-quoted phrase, is more often honored in the breach
than in the observance.
Petitioner attempted to essay in detail the company's procedure for
screening job applicants and supervising its employees in the field, through
the testimonies of Milagros Garbo, as its training officer, and Christian
Bautista, as its transport supervisor, both of whom naturally and expectedly
testified for MMTC. It then concluded with its sweeping pontifications that
"thus, there is no doubt that considering the nature of the business of
petitioner, it would not let any applicant-drivers to be (sic) admitted without
undergoing the rigid selection and training process with the end (in) view of
protecting the public in general and its passengers in particular; . . . thus,
there is no doubt that applicant had fully complied with the said
requirements otherwise Garbo should not have allowed him to undertake the
next set of requirements . . . and the training conducted consisting of
seminars and actual driving tests were satisfactory otherwise he should have
not been allowed to drive the subject vehicle. 41
These statements strike us as both presumptuous and in the nature of petitio
principii, couched in generalities and shorn of any supporting evidence to
boost their verity. As earlier observed, respondent court could not but
express surprise, and thereby its incredulity, that witness Garbo neither
testified nor presented any evidence that driver Leonardo had complied with
or had undergone all the clearances and trainings she took pains to recite
and enumerate. The supposed clearances, results of seminars and tests
which Leonardo allegedly submitted and complied with were never presented
in court despite the fact that, if true, then they were obviously in the
possession and control of petitioner. 42
The case at bar is clearly within the coverage of Article 2176 and 2177, in
relation to Article 2180, of the Civil Code provisions on quasi-delicts as all the

elements thereof are present, to wit: (1) damages suffered by the plaintiff,
(2) fault or negligence of the defendant or some other person for whose act
he must respond, and (3) the connection of cause and effect between fault or
negligence of the defendant and the damages incurred by plaintiff. 43 It is to
be noted that petitioner was originally sued as employer of driver Leonardo
under Article 2180, the pertinent parts of which provides that:
The obligation imposed by article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for
whom one is responsible.
xxx xxx xxx
Employers shall be liable for damages caused by their employees
and household helpers acting within the scope of their assigned
tasks, even though the former are not engaged in any business
or industry.
xxx xxx xxx
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
The basis of the employer's vicarious liability has been explained under this
ratiocination:
The responsibility imposed by this article arises by virtue of a
presumption juris tantum of negligence on the part of the
persons made responsible under the article, derived from their
failure to exercise due care and vigilance over the acts of
subordinates to prevent them from causing damage. Negligence
is imputed to them by law, unless they prove the contrary. Thus,
the last paragraph of the article says that such responsibility
ceases if is proved that the persons who might be held
responsible under it exercised the diligence of a good father of a
family (diligentissimi patris familias) to prevent damage. It is
clear, therefore, that it is not representation, nor interest, nor
even the necessity of having somebody else answer for the
damages caused by the persons devoid of personality, but it is
the non-performance of certain duties of precaution and
prudence imposed upon the persons who become responsible by
civil bond uniting the actor to them, which forms the foundation
of such responsibility. 44
The above rule is, of course, applicable only where there is an employeremployee relationship, although it is not necessary that the employer be

engaged in business or industry. Whether or not engaged in any business or

industry, the employer under Article 2180 is liable for torts committed by his
employees within the scope of their assigned tasks. But, it is necessary first
to establish the employment relationship. Once this is done, the plaintiff
must show, to hold the employer liable, that the employee was acting within
the scope of his assigned task when the tort complained of was committed. It
is only then that the defendant, as employer, may find it necessary to
interpose the defense of due diligence in the selection and supervision of
employees. 45 The diligence of a good father of a family required to be
observed by employers to prevent damages under Article 2180 refers to due
diligence in the selection and supervision of employees in order to protect
the public. 46
With the allegation and subsequent proof of negligence against the
defendant driver and of an employer-employee relation between him and his
co-defendant MMTC in this instance, the case in undoubtedly based on
aquasi-delict under Article 2180 47 When the employee causes damage due
to his own negligence while performing his own duties, there arises the juris
tantum presumption that the employer is negligent, 48 rebuttable only by
proof of observance of the diligence of a good father of a family. For failure to
rebut such legal presumption of negligence in the selection and supervision
of employees, the employer is likewise responsible for damages, 49 the basis
of the liability being the relationship of pater familias or on the employer's
own negligence. 50
As early as the case of Gutierrez vs. Gutierrez, 51 and thereafter, we have
consistently held that where the injury is due to the concurrent negligence of
the drivers of the colliding vehicles, the drivers and owners of the said
vehicles shall be primarily, directly and solidarily liable for damages and it is
immaterial that one action is based on quasi-delict and the other on culpa
contractual, as the solidarily of the obligation is justified by the very nature
thereof. 52
It should be borne in mind that the legal obligation of employers to observe
due diligence in the selection and supervision of employees is not to be
considered as an empty play of words or a mere formalism, as appears to be
the fashion of the times, since the non-observance thereof actually becomes
the basis of their vicarious liability under Article 2180.
On the matter of selection of employees, Campo vs. Camarote, supra, lays
down this admonition:
. . . . In order tat the owner of a vehicle may be considered as
having exercised all diligence of a good father of a family, he

should not have been satisfied with the mere possession of a

professional driver's license; he should have carefully examined
the applicant for employment as to his qualifications, his
experience and record of service. These steps appellant failed to
observe; he has therefore, failed to exercise all due diligence
required of a good father of a family in the choice or selection of
driver.
Due diligence in the supervision of employees, on the other hand, includes
the formulation of suitable rules and regulations for the guidance of
employees and the issuance of proper instructions intended for the
protection of the public and persons with whom the employer has relations
through his or its employees and the imposition of necessary disciplinary
measures upon employees in case of breach or as may be warranted to
ensure the performance of acts indispensable to the business of and
beneficial to their employer. 53 To this, we add that actual implementation
and monitoring of consistent compliance with said rules should be the
constant concern of the employer, acting through dependable supervisors
who should regularly report on their supervisory functions.
In order that the defense of due diligence in the selection and supervision of
employees may be deemed sufficient and plausible, it is not enough to
emptily invoke the existence of said company guidelines and policies on
hiring and supervision. As the negligence of the employee gives rise to the
presumption of negligence on the part of the employer, the latter has the
burden of proving that it has been diligent not only in the selection of
employees but also in the actual supervision of their work. The mere
allegation of the existence of hiring procedures and supervisory policies,
without anything more, is decidedly not sufficient to overcome presumption.
We emphatically reiterate our holding, as a warning to all employers, that
"(t)he mere formulation of various company policies on safety without
showing that they were being complied with is not sufficient to exempt
petitioner from liability arising from negligence of its employees. It is
incumbent upon petitioner to show that in recruiting and employing the
erring driver the recruitment procedures and company policies on efficiency
and safety were followed." 54 Paying lip-service to these injunctions or merely
going through the motions of compliance therewith will warrant stern
sanctions from the Court.
These obligations, imposed by the law and public policy in the interests and
for the safety of the commuting public, herein petitioner failed to perform.
Respondent court was definitely correct in ruling that ". . . due diligence in

the selection and supervision of employee (is) not proved by mere

testimonies to the effect that its applicant has complied with all the company
requirements before one is admitted as an employee but without proof
thereof." 55 It is further a distressing commentary on petitioner that it is a
government-owned public utility, maintained by public funds, and organized
for the public welfare.
The Court it is necessary to once again stress the following rationale behind
these all-important statutory and jurisprudential mandates, for it has been
observed that despite its pronouncement in Kapalaran Bus Line vs.
Coronado, et al., supra, there has been little improvement in the transport
situation in the country:
In requiring the highest possible degree of diligence from
common carriers and creating a presumption of negligence
against them, the law compels them to curb the recklessness of
their drivers. While the immediate beneficiaries of the standard
of extraordinary diligence are, of course, the passengers and
owners of the cargo carried by a common carrier, they are not
the only persons that the law seeks to benefit. For if common
carriers carefully observe the statutory standard of extraordinary
diligence in respect of their own passengers, they cannot help
but simultaneously benefit pedestrians and the owners and
passengers of other vehicles who are equally entitled to the safe
and convenient use of our roads and highways. The law seeks to
stop and prevent the slaughter and maiming of people (whether
passengers or not) and the destruction of property (whether
freight or not) on our highways by buses, the very size and
power of which seem often to inflame the minds of their drivers. .
..
Finally, we believe that respondent court acted in the exercise of sound
discretion when it affirmed the trial court's award, without requiring the
payment of interest thereon as an item of damages just because of delay in
the determination thereof, especially since private respondent did not
specifically pray therefor in her complaint. Article 2211 of the Civil Code
provides that in quasi-delicts, interest as a part of the damages may be
awarded in the discretion of the court, and not as a matter of right. We do
not perceive that there have been international dilatory maneuvers or any
special circumstances which would justify that additional award and,
consequently, we find no reason to disturb said ruling.

WHEREFORE, the impugned decision of respondent Court of Appeals is

hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J. and Nocon, JJ., concur.
Padilla, J., is on leave.

G.R. No. 97626 March 14, 1997

PHILIPPINE BANK OF COMMERCE, now absorbed by PHILIPPINE
COMMERCIAL INTERNATIONAL BANK, ROGELIO LACSON, DIGNA DE
LEON, MARIA ANGELITA PASCUAL, et al., petitioners,
vs.
THE COURT OF APPEALS, ROMMEL'S MARKETING CORP., represented
by ROMEO LIPANA, its President & General Manager, respondents.
HERMOSISIMA, JR., J.:
Challenged in this petition for review is the Decision dated February 28,
1991 1 rendered by public respondent Court of Appeals which affirmed the
Decision dated November 15, 1985 of the Regional Trial Court, National
Capital Judicial Region, Branch CLX (160), Pasig City, in Civil Case No. 27288
entitled "Rommel's Marketing Corporation, etc. v. Philippine Bank of
Commerce, now absorbed by Philippine Commercial and Industrial Bank."
The case stemmed from a complaint filed by the private respondent
Rommel's Marketing Corporation (RMC for brevity), represented by its
President and General Manager Romeo Lipana, to recover from the former
Philippine Bank of Commerce (PBC for brevity), now absorbed by the
Philippine Commercial International Bank, the sum of P304,979.74
representing various deposits it had made in its current account with said
bank but which were not credited to its account, and were instead deposited
to the account of one Bienvenido Cotas, allegedly due to the gross and
inexcusable negligence of the petitioner bank.
RMC maintained two (2) separate current accounts, Current Account Nos. 5301980-3 and 53-01748-7, with the Pasig Branch of PBC in connection with its
business of selling appliances.
In the ordinary and usual course of banking operations, current account
deposits are accepted by the bank on the basis of deposit slips prepared and
signed by the depositor, or the latter's agent or representative, who indicates

therein the current account number to which the deposit is to be credited,

the name of the depositor or current account holder, the date of the deposit,
and the amount of the deposit either in cash or checks. The deposit slip has
an upper portion or stub, which is detached and given to the depositor or his
agent; the lower portion is retained by the bank. In some instances, however,
the deposit slips are prepared in duplicate by the depositor. The original of
the deposit slip is retained by the bank, while the duplicate copy is returned
or given to the depositor.
From May 5, 1975 to July 16, 1976, petitioner Romeo Lipana claims to have
entrusted RMC funds in the form of cash totalling P304,979.74 to his
secretary, Irene Yabut, for the purpose of depositing said funds in the current
accounts of RMC with PBC. It turned out, however, that these deposits, on all
occasions, were not credited to RMC's account but were instead deposited to
Account No. 53-01734-7 of Yabut's husband, Bienvenido Cotas who likewise
maintains an account with the same bank. During this period, petitioner bank
had, however, been regularly furnishing private respondent with monthly
statements showing its current accounts balances. Unfortunately, it had
never been the practice of Romeo Lipana to check these monthly statements
of account reposing complete trust and confidence on petitioner bank.
Irene Yabut's modus operandi is far from complicated. She would accomplish
two (2) copies of the deposit slip, an original and a duplicate. The original
showed the name of her husband as depositor and his current account
number. On the duplicate copy was written the account number of her
husband but the name of the account holder was left blank. PBC's teller,
Azucena Mabayad, would, however, validate and stamp both the original and
the duplicate of these deposit slips retaining only the original copy despite
the lack of information on the duplicate slip. The second copy was kept by
Irene Yabut allegedly for record purposes. After validation, Yabut would then
fill up the name of RMC in the space left blank in the duplicate copy and
change the account number written thereon, which is that of her husband's,
and make it appear to be RMC's account number, i.e., C.A. No. 53-01980-3.
With the daily remittance records also prepared by Ms. Yabut and submitted
to private respondent RMC together with the validated duplicate slips with
the latter's name and account number, she made her company believe that
all the while the amounts she deposited were being credited to its account
when, in truth and in fact, they were being deposited by her and credited by
the petitioner bank in the account of Cotas. This went on in a span of more
than one (1) year without private respondent's knowledge.

Upon discovery of the loss of its funds, RMC demanded from petitioner bank
the return of its money, but as its demand went unheeded, it filed a
collection suit before the Regional Trial Court of Pasig, Branch 160. The trial
court found petitioner bank negligent and ruled as follows:
WHEREFORE, judgment is hereby rendered sentencing defendant
Philippine Bank of Commerce, now absorbed by defendant
Philippine Commercial & Industrial Bank, and defendant Azucena
Mabayad to pay the plaintiff, jointly and severally, and without
prejudice to any criminal action which may be instituted if found
warranted:
1. The sum of P304,979.72, representing plaintiffs lost deposit,
plus interest thereon at the legal rate from the filing of the
complaint;
2. A sum equivalent to 14% thereof, as exemplary damages;
3. A sum equivalent to 25% of the total amount due, as and for
attorney's fees; and
4. Costs.
Defendants' counterclaim is hereby dismissed for lack of merit. 2
On appeal, the appellate court affirmed the foregoing decision with
modifications, viz:
WHEREFORE, the decision appealed from herein is MODIFIED in
the sense that the awards of exemplary damages and attorney's
fees specified therein are eliminated and instead, appellants are
ordered to pay plaintiff, in addition to the principal sum of
P304,979.74 representing plaintiff's lost deposit plus legal
interest thereon from the filing of the complaint, P25,000.00
attorney's fees and costs in the lower court as well as in this
Court. 3
Hence, this petition anchored on the following grounds:
1) The proximate cause of the loss is the negligence of
respondent Rommel Marketing Corporation and Romeo Lipana in
entrusting cash to a dishonest employee.
2) The failure of respondent Rommel Marketing Corporation to
cross-check the bank's statements of account with its own
records during the entire period of more than one (1) year is the
proximate cause of the commission of subsequent frauds and
misappropriation committed by Ms. Irene Yabut.

3) The duplicate copies of the deposit slips presented by

respondent Rommel Marketing Corporation are falsified and are
not proof that the amounts appearing thereon were deposited to
respondent Rommel Marketing Corporation's account with the
bank,
4) The duplicate copies of the deposit slips were used by Ms.
Irene Yabut to cover up her fraudulent acts against respondent
Rommel Marketing Corporation, and not as records of deposits
she made with the bank. 4
The petition has no merit.
Simply put, the main issue posited before us is: What is the proximate cause
of the loss, to the tune of P304,979.74, suffered by the private respondent
RMC petitioner bank's negligence or that of private respondent's?
Petitioners submit that the proximate cause of the loss is the negligence of
respondent RMC and Romeo Lipana in entrusting cash to a dishonest
employee in the person of Ms. Irene Yabut. 5 According to them, it was
impossible for the bank to know that the money deposited by Ms. Irene Yabut
belong to RMC; neither was the bank forewarned by RMC that Yabut will be
depositing cash to its account. Thus, it was impossible for the bank to know
the fraudulent design of Yabut considering that her husband, Bienvenido
Cotas, also maintained an account with the bank. For the bank to inquire into
the ownership of the cash deposited by Ms. Irene Yabut would be irregular.
Otherwise stated, it was RMC's negligence in entrusting cash to a dishonest
employee which provided Ms. Irene Yabut the opportunity to defraud RMC. 6
Private respondent, on the other hand, maintains that the proximate cause of
the loss was the negligent act of the bank, thru its teller Ms. Azucena
Mabayad, in validating the deposit slips, both original and duplicate,
presented by Ms. Yabut to Ms. Mabayad, notwithstanding the fact that one of
the deposit slips was not completely accomplished.
We sustain the private respondent.
Our law on quasi-delicts states:
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasidelict and is governed by the provisions of this Chapter.
There are three elements of a quasi-delict: (a) damages suffered by the
plaintiff; (b) fault or negligence of the defendant, or some other person for
whose acts he must respond; and (c) the connection of cause and effect

between the fault or negligence of the defendant and the damages incurred
by the plaintiff. 7
In the case at bench, there is no dispute as to the damage suffered by the
private respondent (plaintiff in the trial court) RMC in the amount of
P304,979.74. It is in ascribing fault or negligence which caused the damage
where the parties point to each other as the culprit.
Negligence is the omission to do something which a reasonable man, guided
by those considerations which ordinarily regulate the conduct of human
affairs, would do, or the doing of something which a prudent and reasonable
man would do. The seventy-eight (78)-year-old, yet still relevant, case
of Picart v. Smith, 8 provides the test by which to determine the existence of
negligence in a particular case which may be stated as follows: Did the
defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence. The law here in effect adopts
the standard supposed to be supplied by the imaginary conduct of the
discreet paterfamilias of the Roman law. The existence of negligence in a
given case is not determined by reference to the personal judgment of the
actor in the situation before him. The law considers what would be reckless,
blameworthy, or negligent in the man of ordinary intelligence and prudence
and determines liability by that.
Applying the above test, it appears that the bank's teller, Ms. Azucena
Mabayad, was negligent in validating, officially stamping and signing all the
deposit slips prepared and presented by Ms. Yabut, despite the glaring fact
that the duplicate copy was not completely accomplished contrary to the
self-imposed procedure of the bank with respect to the proper validation of
deposit slips, original or duplicate, as testified to by Ms. Mabayad herself,
thus:
Q: Now, as teller of PCIB, Pasig Branch, will you
please tell us Mrs. Mabayad your important duties
and functions?
A: I accept current and savings deposits from
depositors and encashments.
Q: Now in the handling of current account deposits of
bank clients, could you tell us the procedure you
follow?
A: The client or depositor or the authorized
representative prepares a deposit slip by filling up
the deposit slip with the name, the account number,

the date, the cash breakdown, if it is deposited for

cash, and the check number, the amount and then
he signs the deposit slip.
Q: Now, how many deposit slips do you normally
require in accomplishing current account deposit,
Mrs. Mabayad?
A: The bank requires only one copy of the deposit
although some of our clients prepare the deposit slip
in duplicate.
Q: Now in accomplishing current account deposits
from your clients, what do you issue to the depositor
to evidence the deposit made?
A: We issue or we give to the clients the depositor's
stub as a receipt of the deposit.
Q: And who prepares the deposit slip?
A: The depositor or the authorized representative sir?
Q: Where does the depositor's stub comes (sic) from
Mrs. Mabayad, is it with the deposit slip?
A: The depositor's stub is connected with the deposit
slip or the bank's copy. In a deposit slip, the upper
portion is the depositor's stub and the lower portion
is the bank's copy, and you can detach the bank's
copy from the depositor's stub by tearing it sir.
Q: Now what do you do upon presentment of the
deposit slip by the depositor or the depositor's
authorized representative?
A: We see to it that the deposit slip 9 is properly
accomplished and then we count the money and
then we tally it with the deposit slip sir.
Q: Now is the depositor's stub which you issued to
your clients validated?
A: Yes, sir.

10

[Emphasis ours]

Clearly, Ms. Mabayad failed to observe this very important procedure.

The fact that the duplicate slip was not compulsorily required by the
bank in accepting deposits should not relieve the petitioner bank of
responsibility. The odd circumstance alone that such duplicate copy
lacked one vital information that of the name of the account holder
should have already put Ms. Mabayad on guard. Rather than readily

validating the incomplete duplicate copy, she should have proceeded

more cautiously by being more probing as to the true reason why the
name of the account holder in the duplicate slip was left blank while
that in the original was filled up. She should not have been so naive in
accepting hook, line and sinker the too shallow excuse of Ms. Irene
Yabut to the effect that since the duplicate copy was only for her
personal record, she would simply fill up the blank space later on. 11 A
"reasonable man of ordinary prudence" 12 would not have given
credence to such explanation and would have insisted that the space
left blank be filled up as a condition for validation. Unfortunately, this
was not how bank teller Mabayad proceeded thus resulting in huge
losses to the private respondent.
Negligence here lies not only on the part of Ms. Mabayad but also on the part
of the bank itself in its lackadaisical selection and supervision of Ms.
Mabayad. This was exemplified in the testimony of Mr. Romeo Bonifacio, then
Manager of the Pasig Branch of the petitioner bank and now its VicePresident, to the effect that, while he ordered the investigation of the
incident, he never came to know that blank deposit slips were validated in
total disregard of the bank's validation procedures, viz:
Q: Did he ever tell you that one of your cashiers
affixed the stamp mark of the bank on the deposit
slips and they validated the same with the machine,
the fact that those deposit slips were unfilled up, is
there any report similar to that?
A: No, it was not the cashier but the teller.
Q: The teller validated the blank deposit slip?
A: No it was not reported.
Q: You did not know that any one in the bank tellers
or cashiers validated the blank deposit slip?
A: I am not aware of that.
Q: It is only now that you are aware of that?
A: Yes, sir.

13

Prescinding from the above, public respondent Court of Appeals aptly

observed:
xxx xxx xxx
It was in fact only when he testified in this case in February,
1983, or after the lapse of more than seven (7) years counted
from the period when the funds in question were deposited in

plaintiff's accounts (May, 1975 to July, 1976) that bank manager

Bonifacio admittedly became aware of the practice of his teller
Mabayad of validating blank deposit slips. Undoubtedly, this is
gross, wanton, and inexcusable negligence in the appellant
bank's supervision of its employees. 14
It was this negligence of Ms. Azucena Mabayad, coupled by the negligence of
the petitioner bank in the selection and supervision of its bank teller, which
was the proximate cause of the loss suffered by the private respondent, and
not the latter's act of entrusting cash to a dishonest employee, as insisted by
the petitioners.
Proximate cause is determined on the facts of each case upon mixed
considerations of logic, common sense, policy and precedent. 15 Vda. de
Bataclan v. Medina, 16 reiterated in the case of Bank of the Phil. Islands
v. Court of Appeals, 17 defines proximate cause as "that cause, which, in
natural and continuous sequence, unbroken by any efficient intervening
cause, produces the injury, and without which the result would not have
occurred. . . ." In this case, absent the act of Ms. Mabayad in negligently
validating the incomplete duplicate copy of the deposit slip, Ms. Irene Yabut
would not have the facility with which to perpetrate her fraudulent scheme
with impunity. Apropos, once again, is the pronouncement made by the
respondent appellate court, to wit:
. . . . Even if Yabut had the fraudulent intention to misappropriate
the funds entrusted to her by plaintiff, she would not have been
able to deposit those funds in her husband's current account,
and then make plaintiff believe that it was in the latter's
accounts wherein she had deposited them, had it not been for
bank teller Mabayad's aforesaid gross and reckless negligence.
The latter's negligence was thus the proximate, immediate and
efficient cause that brought about the loss claimed by plaintiff in
this case, and the failure of plaintiff to discover the same soon
enough by failing to scrutinize the monthly statements of
account being sent to it by appellant bank could not have
prevented the fraud and misappropriation which Irene Yabut had
already completed when she deposited plaintiff's money to the
account of her husband instead of to the latter's accounts. 18
Furthermore, under the doctrine of "last clear chance" (also referred to, at
times as "supervening negligence" or as "discovered peril"), petitioner bank
was indeed the culpable party. This doctrine, in essence, states that where
both parties are negligent, but the negligent act of one is appreciably later in

time than that of the other, or when it is impossible to determine whose fault
or negligence should be attributed to the incident, the one who had the last
clear opportunity to avoid the impending harm and failed to do so is
chargeable with the consequences thereof.19 Stated differently, the rule
would also mean that an antecedent negligence of a person does not
preclude the recovery of damages for the supervening negligence of, or bar
a defense against liability sought by another, if the latter, who had thelast
fair chance, could have avoided the impending harm by the exercise of due
diligence. 20 Here, assuming that private respondent RMC was negligent in
entrusting cash to a dishonest employee, thus providing the latter with the
opportunity to defraud the company, as advanced by the petitioner, yet it
cannot be denied that the petitioner bank, thru its teller, had the last clear
opportunity to avert the injury incurred by its client, simply by faithfully
observing their self-imposed validation procedure.
At this juncture, it is worth to discuss the degree of diligence ought to be
exercised by banks in dealing with their clients.
The New Civil Code provides:
Art. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the
persons, of the time and of the place. When negligence shows
bad faith, the provisions of articles 1171 and 2201, paragraph 2,
shall apply.
If the law or contract does not state the diligence which is to be
observed in the performance, that which is expected of a good
father of a family shall be required. (1104a)
In the case of banks, however, the degree of diligence required is more than
that of a good father of a family. Considering the fiduciary nature of their
relationship with their depositors, banks are duty bound to treat the accounts
of their clients with the highest degree of care. 21
As elucidated in Simex International (Manila), Inc. v. Court of Appeals, 22 in
every case, the depositor expects the bank to treat his account with the
utmost fidelity, whether such account consists only of a few hundred pesos
or of millions. The bank must record every single transaction accurately,
down to the last centavo, and as promptly as possible. This has to be done if
the account is to reflect at any given time the amount of money the
depositor can dispose as he sees fit, confident that the bank will deliver it as
and to whomever he directs. A blunder on the part of the bank, such as the
failure to duly credit him his deposits as soon as they are made, can cause

the depositor not a little embarrassment if not financial loss and perhaps
even civil and criminal litigation.
The point is that as a business affected with public interest and because of
the nature of its functions, the bank is under obligation to treat the accounts
of its depositors with meticulous care, always having in mind the fiduciary
nature of their relationship. In the case before us, it is apparent that the
petitioner bank was remiss in that duty and violated that relationship.
Petitioners nevertheless aver that the failure of respondent RMC to crosscheck the bank's statements of account with its own records during the
entire period of more than one (1) year is the proximate cause of the
commission of subsequent frauds and misappropriation committed by Ms.
Irene Yabut.
We do not agree.
While it is true that had private respondent checked the monthly statements
of account sent by the petitioner bank to RMC, the latter would have
discovered the loss early on, such cannot be used by the petitioners to
escape liability. This omission on the part of the private respondent does not
change the fact that were it not for the wanton and reckless negligence of
the petitioners' employee in validating the incomplete duplicate deposit slips
presented by Ms. Irene Yabut, the loss would not have occurred. Considering,
however, that the fraud was committed in a span of more than one (1) year
covering various deposits, common human experience dictates that the
same would not have been possible without any form of collusion between
Ms. Yabut and bank teller Mabayad. Ms. Mabayad was negligent in the
performance of her duties as bank teller nonetheless. Thus, the petitioners
are entitled to claim reimbursement from her for whatever they shall be
ordered to pay in this case.
The foregoing notwithstanding, it cannot be denied that, indeed, private
respondent was likewise negligent in not checking its monthly statements of
account. Had it done so, the company would have been alerted to the series
of frauds being committed against RMC by its secretary. The damage would
definitely not have ballooned to such an amount if only RMC, particularly
Romeo Lipana, had exercised even a little vigilance in their financial affairs.
This omission by RMC amounts to contributory negligence which shall
mitigate the damages that may be awarded to the private
respondent 23 under Article 2179 of the New Civil Code, to wit:
. . . When the plaintiff's own negligence was the immediate and
proximate cause of his injury, he cannot recover damages. But if
his negligence was only contributory, the immediate and

proximate cause of the injury being the defendant's lack of due

care, the plaintiff may recover damages, but the courts shall
mitigate the damages to be awarded.
In view of this, we believe that the demands of substantial justice are
satisfied by allocating the damage on a 60-40 ratio. Thus, 40% of the
damage awarded by the respondent appellate court, except the award
of P25,000.00 attorney's fees, shall be borne by private respondent
RMC; only the balance of 60% needs to be paid by the petitioners. The
award of attorney's fees shall be borne exclusively by the petitioners.
WHEREFORE, the decision of the respondent Court of Appeals is modified by
reducing the amount of actual damages private respondent is entitled to by
40%. Petitioners may recover from Ms. Azucena Mabayad the amount they
would pay the private respondent. Private respondent shall have recourse
against Ms. Irene Yabut. In all other respects, the appellate court's decision is
AFFIRMED.
Proportionate costs.
SO ORDERED.
Bellosillo, Vitug and Kapunan, JJ., concur.
G.R. No. L-51806 November 8, 1988
CIVIL AERONAUTICS ADMINISTRATION, petitioner,
vs.
COURT OF APPEALS and ERNEST E. SIMKE, respondents.
The Solicitor General for petitioner.
Ledesma, Guytingco, Veleasco & Associates for respondent Ernest E. Simke.
CORTES, J.:
Assailed in this petition for review on certiorari is the decision of the Court of
Appeals affirming the trial court decision which reads as follows:
WHEREFORE, judgment is hereby rendered ordering defendant to
pay plaintiff the amount of P15,589.55 as full reimbursement of
his actual medical and hospital expenses, with interest at the
legal rate from the commencement of the suit; the amount of
P20,200.00 as consequential damages; the amount of
P30,000.00 as moral damages; the amount of P40,000.00 as
exemplary damages; the further amount of P20,000.00 as
attorney's fees and the costs [Rollo, p. 24].
The facts of the case are as follows:

Private respondent is a naturalized Filipino citizen and at the time of the

incident was the Honorary Consul Geileral of Israel in the Philippines.
In the afternoon of December 13, 1968, private respondent with several
other persons went to the Manila International Airport to meet his future sonin-law. In order to get a better view of the incoming passengers, he and his
group proceeded to the viewing deck or terrace of the airport.
While walking on the terrace, then filled with other people, private
respondent slipped over an elevation about four (4) inches high at the far
end of the terrace. As a result, private respondent fell on his back and broke
his thigh bone.
The next day, December 14, 1968, private respondent was operated on for
about three hours.
Private respondent then filed an action for damages based on quasi-delict
with the Court of First Instance of Rizal, Branch VII against petitioner Civil
Aeronautics Administration or CAA as the entity empowered "to administer,
operate, manage, control, maintain and develop the Manila International
Airport ... ." [Sec. 32 (24), R.A. 776].
Said claim for damages included, aside from the medical and hospital bills,
consequential damages for the expenses of two lawyers who had to go
abroad in private respondent's stead to finalize certain business transactions
and for the publication of notices announcing the postponement of private
respondent's daughter's wedding which had to be cancelled because of his
accident [Record on Appeal, p. 5].
Judgment was rendered in private respondent's favor prompting petitioner to
appeal to the Court of Appeals. The latter affirmed the trial court's decision.
Petitioner then filed with the same court a Motion for, Reconsideration but
this was denied.
Petitioner now comes before this Court raising the following assignment of
errors:
1. The Court of Appeals gravely erred in not holding that the
present the CAA is really a suit against the Republic of the
Philippines which cannot be sued without its consent, which was
not given in this case.
2. The Court of Appeals gravely erred in finding that the injuries
of respondent Ernest E. Simke were due to petitioner's
negligence although there was no substantial evidence to
support such finding; and that the inference that the hump or
elevation the surface of the floor area of the terrace of the fold)
MIA building is dangerous just because said respondent tripped

over it is manifestly mistaken circumstances that justify a

review by this Honorable Court of the said finding of fact of
respondent appellate court (Garcia v. Court of Appeals, 33 SCRA
622; Ramos v. CA, 63 SCRA 331.)
3. The Court of Appeals gravely erred in ordering petitioner to
pay actual, consequential, moral and exemplary damages, as
well as attorney's fees to respondent Simke although there
was no substantial and competent proof to support said awards I
Rollo, pp. 93-94 1.
I
Invoking the rule that the State cannot be sued without its consent,
petitioner contends that being an agency of the government, it cannot be
made a party-defendant in this case.
This Court has already held otherwise in the case of National Airports
Corporation v. Teodoro, Sr. [91 Phil. 203 (1952)]. Petitioner contends that the
said ruling does not apply in this case because: First, in the Teodoro case, the
CAA was sued only in a substituted capacity, the National Airports
Corporation being the original party. Second, in the Teodoro case, the cause
of action was contractual in nature while here, the cause of action is based
on a quasi-delict. Third, there is no specific provision in Republic Act No. 776,
the law governing the CAA, which would justify the conclusion that petitioner
was organized for business and not for governmental purposes. [Rollo, pp.
94-97].
Such arguments are untenable.
First, the Teodoro case, far from stressing the point that the CAA was only
substituted for the National Airports Corporation, in fact treated the CAA as
the real party in interest when it stated that:
xxx xxx xxx
... To all legal intents and practical purposes, the National
Airports Corporation is dead and the Civil Aeronautics
Administration is its heir or legal representative, acting by the
law of its creation upon its own rights and in its own name. The
better practice there should have been to make the Civil
Aeronautics Administration the third party defendant instead of
the National Airports Corporation. [National Airports Corp. v.
Teodoro, supra, p. 208.]
xxx xxx xxx

Second, the Teodoro case did not make any qualification or limitation as to
whether or not the CAA's power to sue and be sued applies only to
contractual obligations. The Court in the Teodoro case ruled that Sections 3
and 4 of Executive Order 365 confer upon the CAA, without any qualification,
the power to sue and be sued, albeit only by implication. Accordingly, this
Court's pronouncement that where such power to sue and be sued has been
granted without any qualification, it can include a claim based on tort or
quasi-delict [Rayo v. Court of First Instance of Bulacan, G.R. Nos. 55273-83,
December 19,1981, 1 1 0 SCRA 4561 finds relevance and applicability to the
present case.
Third, it has already been settled in the Teodoro case that the CAA as an
agency is not immune from suit, it being engaged in functions pertaining to a
private entity.
xxx xxx xxx
The Civil Aeronautics Administration comes under the category of
a private entity. Although not a body corporate it was created,
like the National Airports Corporation, not to maintain a
necessary function of government, but to run what is essentially
a business, even if revenues be not its prime objective but rather
the promotion of travel and the convenience of the travelling
public. It is engaged in an enterprise which, far from being the
exclusive prerogative of state, may, more than the construction
of public roads, be undertaken by private concerns. [National
Airports Corp. v. Teodoro, supra, p. 207.]
xxx xxx xxx
True, the law prevailing in 1952 when the Teodoro case was promulgated was
Exec. Order 365 (Reorganizing the Civil Aeronautics Administration and
Abolishing the National Airports Corporation). Republic Act No. 776 (Civil
Aeronautics Act of the Philippines), subsequently enacted on June 20, 1952,
did not alter the character of the CAA's objectives under Exec, Order 365.
The pertinent provisions cited in the Teodoro case, particularly Secs. 3 and 4
of Exec. Order 365, which led the Court to consider the CAA in the category
of a private entity were retained substantially in Republic Act 776, Sec. 32
(24) and (25).<re||an1w> Said Act provides:
Sec. 32. Powers and Duties of the Administrator. Subject to the
general control and supervision of the Department Head, the
Administrator shall have among others, the following powers and
duties:
xxx xxx xxx

(24) To administer, operate, manage, control, maintain and

develop the Manila International Airport and all governmentowned aerodromes except those controlled or operated by the
Armed Forces of the Philippines including such powers and duties
as: (a) to plan, design, construct, equip, expand, improve, repair
or alter aerodromes or such structures, improvement or air
navigation facilities; (b) to enter into, make and execute
contracts of any kind with any person, firm, or public or private
corporation or entity; ... .
(25) To determine, fix, impose, collect and receive landing fees,
parking space fees, royalties on sales or deliveries, direct or
indirect, to any aircraft for its use of aviation gasoline, oil and
lubricants, spare parts, accessories and supplies, tools, other
royalties, fees or rentals for the use of any of the property under
its management and control.
xxx xxx xxx
From the foregoing, it can be seen that the CAA is tasked with private or nongovernmental functions which operate to remove it from the purview of the
rule on State immunity from suit. For the correct rule as set forth in the
Tedoro case states:
xxx xxx xxx
Not all government entities, whether corporate or non-corporate,
are immune from suits. Immunity functions suits is determined
by the character of the objects for which the entity was
organized. The rule is thus stated in Corpus Juris:
Suits against State agencies with relation to matters
in which they have assumed to act in private or nongovernmental capacity, and various suits against
certain corporations created by the state for public
purposes, but to engage in matters partaking more
of the nature of ordinary business rather than
functions of a governmental or political character,
are not regarded as suits against the state. The latter
is true, although the state may own stock or property
of such a corporation for by engaging in business
operations through a corporation, the state divests
itself so far of its sovereign character, and by
implication consents to suits against the corporation.

(59 C.J., 313) [National Airport Corporation v.

Teodoro, supra, pp. 206-207; Emphasis supplied.]
This doctrine has been reaffirmed in the recent case of Malong v. Philippine
National Railways [G.R. No. L-49930, August 7, 1985, 138 SCRA 631, where it
was held that the Philippine National Railways, although owned and operated
by the government, was not immune from suit as it does not exercise
sovereign but purely proprietary and business functions. Accordingly, as the
CAA was created to undertake the management of airport operations which
primarily involve proprietary functions, it cannot avail of the immunity from
suit accorded to government agencies performing strictly governmental
functions.
II
Petitioner tries to escape liability on the ground that there was no basis for a
finding of negligence. There can be no negligence on its part, it alleged,
because the elevation in question "had a legitimate purpose for being on the
terrace and was never intended to trip down people and injure them. It was
there for no other purpose but to drain water on the floor area of the terrace"
[Rollo, P. 99].
To determine whether or not the construction of the elevation was done in a
negligent manner, the trial court conducted an ocular inspection of the
premises.
xxx xxx xxx
... This Court after its ocular inspection found the elevation
shown in Exhs. A or 6-A where plaintiff slipped to be a step, a
dangerous sliding step, and the proximate cause of plaintiffs
injury...
xxx xxx xxx
This Court during its ocular inspection also observed the
dangerous and defective condition of the open terrace which has
remained unrepaired through the years. It has observed the lack
of maintenance and upkeep of the MIA terrace, typical of many
government buildings and offices. Aside from the litter allowed to
accumulate in the terrace, pot holes cause by missing tiles
remained unrepaired and unattented. The several elevations
shown in the exhibits presented were verified by this Court
during the ocular inspection it undertook. Among these
elevations is the one (Exh. A) where plaintiff slipped. This Court
also observed the other hazard, the slanting or sliding step (Exh.

B) as one passes the entrance door leading to the terrace

[Record on Appeal, U.S., pp. 56 and 59; Emphasis supplied.]
The Court of Appeals further noted that:
The inclination itself is an architectural anomaly for as stated by
the said witness, it is neither a ramp because a ramp is an
inclined surface in such a way that it will prevent people or
pedestrians from sliding. But if, it is a step then it will not serve
its purpose, for pedestrian purposes. (tsn, p. 35, Id.) [rollo, p. 29.]
These factual findings are binding and conclusive upon this Court. Hence, the
CAA cannot disclaim its liability for the negligent construction of the
elevation since under Republic Act No. 776, it was charged with the duty of
planning, designing, constructing, equipping, expanding, improving,
repairing or altering aerodromes or such structures, improvements or air
navigation facilities [Section 32, supra, R.A. 776]. In the discharge of this
obligation, the CAA is duty-bound to exercise due diligence in overseeing the
construction and maintenance of the viewing deck or terrace of the airport.
It must be borne in mind that pursuant to Article 1173 of the Civil Code,
"(t)he fault or negligence of the obligor consists in the omission of that
diligence which is required by the nature of the obligation and corresponds
with the circumstances of the person, of the time and of the place." Here, the
obligation of the CAA in maintaining the viewing deck, a facility open to the
public, requires that CAA insure the safety of the viewers using it. As these
people come to the viewing deck to watch the planes and passengers, their
tendency would be to look to where the planes and the incoming passengers
are and not to look down on the floor or pavement of the viewing deck. The
CAA should have thus made sure that no dangerous obstructions or
elevations exist on the floor of the deck to prevent any undue harm to the
public.
The legal foundation of CAA's liability for quasi-delict can be found in Article
2176 of the Civil Code which provides that "(w)hoever by act or omission
causes damage to another, there being fault or negligence, is obliged to pay
for the damage done... As the CAA knew of the existence of the dangerous
elevation which it claims though, was made precisely in accordance with the
plans and specifications of the building for proper drainage of the open
terrace [See Record on Appeal, pp. 13 and 57; Rollo, p. 391, its failure to
have it repaired or altered in order to eliminate the existing hazard
constitutes such negligence as to warrant a finding of liability based on
quasi-delict upon CAA.

The Court finds the contention that private respondent was, at the very least,
guilty of contributory negligence, thus reducing the damages that plaintiff
may recover, unmeritorious. Contributory negligence under Article 2179 of
the Civil Code contemplates a negligent act or omission on the part of the
plaintiff, which although not the proximate cause of his injury, contributed to
his own damage, the proximate cause of the plaintiffs own injury being the
defendant's lack of due care. In the instant case, no contributory negligence
can be imputed to the private respondent, considering the following test
formulated in the early case of Picart v. Smith, 37 Phil. 809 (1918):
The test by which to determine the existence of negligence in a
particular case may be stated as follows: Did the defendant in
doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent man would have used in the
same situation? If not, then he is guilty of negligence. The law
here in effect adopts the standard supposed to be supplied by
the imaginary conduct of the discreet paterfamilias of the Roman
law. The existence of the negligence in a given case is not
determined by reference to the personal judgment of the actor in
the situation before him. The law considers what would be
reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a
prudent man in a given situation must of course be always
determined in the light of human experience and in view of the
facts involved in the particular case. Abstract speculations
cannot be here of much value but this much can be profitably
said: Reasonable men-overn their conduct by the circumstances
which are before them or known to them. They are not, and are
not supposed to be omniscient of the future. Hence they can be
expected to take care only when there is something before them
to suggest or warn of danger. Could a prudent man, in the case
under consideration, foresee harm as a result of the course
actually pursued' If so, it was the duty of the actor to take
precautions to guard against that harm. Reasonable foresight of
harm, followed by the ignoring of the suggestion born of this
prevision, is always necessary before negligence can be held to
exist.... [Picart v. Smith, supra, p. 813; Emphasis supplied.]
The private respondent, who was the plaintiff in the case before the lower
court, could not have reasonably foreseen the harm that would befall him,

considering the attendant factual circumstances. Even if the private

respondent had been looking where he was going, the step in question could
not easily be noticed because of its construction. As the trial court found:
In connection with the incident testified to, a sketch, Exhibit O,
shows a section of the floorings oil which plaintiff had tripped,
This sketch reveals two pavements adjoining each other, one
being elevated by four and one-fourth inches than the other.
From the architectural standpoint the higher, pavement is a step.
However, unlike a step commonly seen around, the edge of the
elevated pavement slanted outward as one walks to one interior
of the terrace. The length of the inclination between the edges of
the two pavements is three inches. Obviously, plaintiff had
stepped on the inclination because had his foot landed on the
lower pavement he would not have lost his balance. The same
sketch shows that both pavements including the inclined portion
are tiled in red cement, and as shown by the photograph Exhibit
A, the lines of the tilings are continuous. It would therefore be
difficult for a pedestrian to see the inclination especially where
there are plenty of persons in the terrace as was the situation
when plaintiff fell down. There was no warning sign to direct
one's attention to the change in the elevation of the floorings.
[Rollo, pp. 2829.]
III
Finally, petitioner appeals to this Court the award of damages to private
respondent. The liability of CAA to answer for damages, whether actual,
moral or exemplary, cannot be seriously doubted in view of one conferment
of the power to sue and be sued upon it, which, as held in the case of Rayo
v. Court of First Instance, supra, includes liability on a claim for quasi-dilict. In
the aforestated case, the liability of the National Power Corporation to
answer for damages resulting from its act of sudden, precipitate and
simultaneous opening of the Angat Dam, which caused the death of several
residents of the area and the destruction of properties, was upheld since the
o,rant of the power to sue and be sued upon it necessarily implies that it can
be held answerable for its tortious acts or any wrongful act for that matter.
With respect to actual or compensatory damages, the law mandates that the
same be proven.
Art. 2199. Except as provided by law or by stipulation, one are
entitled to an adequate compensation only for such pecuniary
loss suffered by him as he has duly proved. Such compensation

is referred to as actual on compensatory damages [New Civil

Code].
Private respondent claims P15,589.55 representing medical and
hospitalization bills. This Court finds the same to have been duly proven
through the testimony of Dr. Ambrosio Tangco, the physician who attended to
private respondent (Rollo, p. 26) and who Identified Exh. "H" which was his
bill for professional services [Rollo, p. 31].
Concerning the P20,200.00 alleged to have been spent for other expenses
such as the transportation of the two lawyers who had to represent private
respondent abroad and the publication of the postponement notices of the
wedding, the Court holds that the same had also been duly proven. Private
respondent had adequately shown the existence of such losses and the
amount thereof in the testimonies before the trial court [CA decision, p. 81.
At any rate, the findings of the Court of Appeals with respect to this are
findings of facts [One Heart Sporting Club, Inc. v. Court of Appeals, G.R. Nos.
5379053972, Oct. 23, 1981, 108 SCRA 4161 which, as had been held time
and again, are, as a general rule, conclusive before this Court [Sese v.
Intermediate Appellate Court, G.R. No. 66186, July 31, 1987,152 SCRA 585].
With respect to the P30,000.00 awarded as moral damages, the Court holds
private respondent entitled thereto because of the physical suffering and
physical injuries caused by the negligence of the CAA [Arts. 2217 and 2219
(2), New Civil Code].
With respect to the award of exemplary damages, the Civil Code explicitly,
states:
Art. 2229. Exemplary or corrective damages, are imposed, by
way of example or correction for the public good, in addition to
the moral, liquidated or compensatory
Art. 2231. In quasi-delicts, exemplary damages may be granted if
the defendant acted with gross negligence.
Gross negligence which, according to the Court, is equivalent to the term
"notorious negligence" and consists in the failure to exercise even slight care
[Caunan v. Compania General de Tabacos, 56 Phil. 542 (1932)] can be
attributed to the CAA for its failure to remedy the dangerous condition of the
questioned elevation or to even post a warning sign directing the attention of
the viewers to the change in the elevation of the floorings notwithstanding
its knowledge of the hazard posed by such elevation [Rollo, pp. 28-29;
Record oil Appeal, p. 57]. The wanton disregard by the CAA of the safety of
the people using the viewing deck, who are charged an admission fee,
including the petitioner who paid the entrance fees to get inside the vantage

place [CA decision, p. 2; Rollo, p. 25] and are, therefore, entitled to expect a
facility that is properly and safely maintained justifies the award of
exemplary damages against the CAA, as a deterrent and by way of example
or correction for the public good. The award of P40,000.00 by the trial court
as exemplary damages appropriately underscores the point that as an entity
changed with providing service to the public, the CAA. like all other entities
serving the public. has the obligation to provide the public with reasonably
safe service.
Finally, the award of attorney's fees is also upheld considering that under Art.
2208 (1) of the Civil Code, the same may be awarded whenever exemplary
damages are awarded, as in this case, and,at any rate, under Art. 2208 (11),
the Court has the discretion to grant the same when it is just and equitable.
However, since the Manila International Airport Authority (MIAA) has taken
over the management and operations of the Manila International Airport
[renamed Ninoy Aquino International Airport under Republic Act No. 6639]
pursuant to Executive Order No. 778 as amended by executive Orders Nos.
903 (1983), 909 (1983) and 298 (1987) and under Section 24 of the said
Exec. Order 778, the MIAA has assumed all the debts, liabilities and
obligations of the now defunct Civil Aeronautics Administration (CAA), the
liabilities of the CAA have now been transferred to the MIAA.
WHEREFORE, finding no reversible error, the Petition for review on certiorari
is DENIED and the decision of the Court of Appeals in CA-G.R. No. 51172-R is
AFFIRMED.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

G.R. No. 73998 November 14, 1988

PEDRO T. LAYUGAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, GODOFREDO ISIDRO, and
TRAVELLERS MULTI-INDEMNITY CORPORATION, respondents.
Edralin S. Mateo for petitioner.
Orlando L. Espinas for respondent Travellers Multi-Indemnity Corp.
Roberto T. Vallarta for respondent Godofredo Isidro.
SARMIENTO, J.:

Assailed in this petition for review on certiorari are 1) the decision 1 of the
then Intermediate Appellate Court 2 in AC-G.R. CV No. 01055, entitled "Pedro
T. Layugan, Plaintiff-Appellee, versus Godofredo Isidro, Defendant-Appellant
and Third-Party Plaintiff-Appellee, versus Travellers Multi-Indemnity
Corporation, Third Party Defendant- Appellant, "which reversed and set aside
the decision 3 of the Regional Trial Court, Third Judicial Region, Branch XXVI,
Cabanatuan City, and also dismissed the complaint, third party complaint,
and the counter claims of the parties and 2) the resolution 4 denying the
plaintiff-appellee's (herein petitioner) motion for reconsideration, for lack of
merit.
The findings of fact by the trial court which were adopted by the appellate
court are as follows: 5
xxx xxx xxx
Pedro T. Layugan filed an action for damages against Godofredo
Isidro, alleging that on May 15, 1979 while at Baretbet, Bagabag,
Nueva Vizcaya, the Plaintiff and a companion were repairing the
tire of their cargo truck with Plate No. SU-730 which was parked
along the right side of the National Highway; that defendant's
truck bearing Plate No. PW-583, driven recklessly by Daniel
Serrano bumped the plaintiff, that as a result, plaintiff was
injured and hospitalized at Dr. Paulino J. Garcia Research and
Medical Center and the Our Lady of Lourdes Hospital; that he
spent TEN THOUSAND PESOS (Pl0,000.00) and will incur more
expenses as he recuperates from said injuries; that because of
said injuries he would be deprived of a lifetime income in the
sum of SEVENTY THOUSAND PESOS (P70,000.00); and that he
agreed to pay his lawyer the sum of TEN THOUSAND PESOS
(Pl0,000.00).
As prayed for by the plaintiffs counsel, the Court declared the
defendant in default on October 12, 1979, and plaintiff's
evidence was received ex-parte on January 11, 1978 and
February 19, 1980. The decision on behalf of the plaintiff was set
aside to give a chance to the defendant to file his answer and
later on, a third-party complaint.
Defendant admitted his ownership of the vehicle involved in the
accident driven by Daniel Serrano. Defendant countered that the
plaintiff was merely a bystander, not a truck helper being a
brother-in-law law of the driver of said truck; that the truck
allegedly being repaired was parked, occupying almost half of

the right lane towards Solano, Nueva Vizcaya, right after the
curve; that the proximate cause of the incident was the failure of
the driver of the parked truck in installing the early warning
device, hence the driver of the parked car should be liable for
damages sustained by the truck of the herein defendant in the
amount of more than P20,000.00; that plaintiff being a mere
bystander and hitchhiker must suffer all the damages he
incurred. By way of counterclaim defendant alleged that due to
plaintiffs baseless complaint he was constrained to engage the
services of counsel for P5,000.00 and P200.00 per court
appearance; that he suffered sleepless nights, humiliation,
wounded feelings which may be estimated at P30.000.00.
On May 29, 1981, a third-party complaint was filed by the
defendant against his insurer, the Travellers Multi Indemnity
Corporation; that the third-party plaintiff, without admitting his
liability to the plaintiff, claimed that the third-party defendant is
liable to the former for contribution, indemnity and subrogation
by virtue of their contract under Insurance Policy No. 11723
which covers the insurer's liability for damages arising from
death, bodily injuries and damage to property.
Third-party defendant answered that, even assuming that the
subject matter of the complaint is covered by a valid and existing
insurance policy, its liability shall in no case exceed the limit
defined under the terms and conditions stated therein; that the
complaint is premature as no claim has been submitted to the
third party defendant as prescribed under the Insurance Code;
that the accident in question was approximately caused by the
carelessness and gross negligence of the plaintiff-, that by
reason of the third-party complaint, third-party defendant was
constrained to engage the services of counsel for a fee of
P3,000.00.
Pedro Layugan declared that he is a married man with one (1)
child. He was employed as security guard in Mandaluyong, Metro
Manila, with a salary of SIX HUNDRED PESOS (600.00) a month.
When he is off-duty, he worked as a truck helper and while
working as such, he sustained injuries as a result of the bumping
of the cargo truck they were repairing at Baretbet, Bagabag,
Nueva Vizcaya by the driver of the defendant. He used to earn
TWO HUNDRED PESOS (P200.00) to THREE HUNDRED PESOS

(P300.00) monthly, at the rate of ONE HUNDRED PESOS (Pl00.00)

per trip. Due to said injuries, his left leg was amputated so he
had to use crutches to walk. Prior to the incident, he supported
his family sufficiently, but after getting injured, his family is now
being supported by his parents and brother.
GODOFREDO ISIDRO, defendant/third-party plaintiff, testified that
his truck involved in this vehicular accident is insured with the
Travellers Multi Indemnity Corporation covering own damage and
third-party liability, under vehicle policy No. 11723 (Exh. "1")
dated May 30, 1978; that after he filed the insurance claim the
insurance company paid him the sum of P18,000.00 for the
damages sustained by this truck but not the third party liability.
DANIEL SERRANO, defendant driver, declared that he gave a
statement before the municipal police of Bagabag, Nueva
Vizcaya on May 16, 1979; that he knew the responsibilities of a
driver; that before leaving, he checked the truck. The truck
owner used to instruct him to be careful in driving. He bumped
the truck being repaired by Pedro Layugan, plaintiff, while the
same was at a stop position. From the evidence presented, it has
been established clearly that the injuries sustained by the
plaintiff was caused by defendant's driver, Daniel Serrano. The
police report confirmed the allegation of the plaintiff and
admitted by Daniel Serrano on cross-examination. The collision
dislodged the jack from the parked truck and pinned the plaintiff
to the ground. As a result thereof, plaintiff sustained injuries on
his left forearm and left foot. The left leg of the plaintiff from
below the knee was later on amputated (Exh. "C") when
gangrene had set in, thereby rendering him incapacitated for
work depriving him of his income. (pp. 118 to 120, Record on
Appeal.)
xxx xxx xxx
Upon such findings, amply supported by the evidence on record, the trial
court rendered its decision, the dispositive part of which reads as follows:

WHEREFORE, premises considered, the defendant is hereby

ordered:
a) To pay the plaintiff SEVENTY THOUSAND (P70,000.00) PESOS
actual and compensatory damages;
b) TWO THOUSAND (P2,000.00) PESOS for attorney's fees;
c) FIVE THOUSAND (P5,000.00) PESOS for moral damages; and

d) To pay the costs of this suit. On the third-party complaint, the

third-party defendant is ordered to indemnify the defendant/third
party plaintiff-.
a) The sum of FIFTY THOUSAND (P50,000.00) PESOS for actual
and compensatory damages; and
b) The costs of this suit.
The Intermediate Appellate Court as earlier stated reversed the decision of
the trial court and dismissed the complaint, the third-party complaint, and
the counter- claims of both appellants. 7
Hence, this petition.
The petitioner alleges the following errors.

1. WHETHER UPON THE GIVEN FACTS, THE INTERMEDIATE

APPELLATE COURT ACTED CORRECTLY IN REVERSING AND
SETTING ASIDE AND DISMISSING THE PLAINTIFF-APPELLEE'S
COMPLAINT.
2. WHETHER THE INTERMEDIATE APPELLATE COURT ACTED
CORRECTLY IN APPLYING THE DOCTRINE OF "RES IPSA
LOQUITUR" WITH PROPER JURIS- PRUDENTIAL (sic) BASIS.
The crux of the controversy lies in the correctness or error of the decision of
the respondent court finding the petitioner negligent under the doctrine
of Res ipsa loquitur (The thing speaks for itself).<re||an1w> Corollary
thereto, is the question as to who is negligent, if the doctrine is inapplicable.
The respondent corporation stresses that the issues raised in the petition
being factual, the same is not reviewable by this Court in a petition for
review by certiorari. 9
Indeed, it is an elementary rule in the review of decisions of the Court of
Appeals that its findings of fact are entitled to great respect and will not
ordinarily be disturbed by this Court. 10 For if we have to review every
question of fact elevated to us, we would hardly have any more time left for
the weightier issues compelling and deserving our preferential
attention. 11 Be that as it may, this rule is not inflexible. Surely there are
established exceptions 12 when the Court should review and rectify the
findings of fact of the lower court, such as:
1) when the conclusion is a finding grounded entirely on speculation,
surmise, or conjecture; 2) the inference made is manifestly mistaken; 3)
there is grave abuse of discretion; 4) the judgment is based on
misapprehension of facts; 5) the Court of Appeals went beyond the issues of
the case if the findings are contrary to the admission of both the appellant

and the appellee; 6) the findings of the Court of Appeals are contrary to
those of the trial court; 7) the said findings of fact are conclusions without
citation of specific evidence on which they are based; 8) the facts set forth in
the petition as well as in the petitioner's main and reply briefs are not
disputed by the respondents; and 9) when the findings of fact of the Court of
Appeals are premised on the absence of evidence and are contradicted on
record.
Exceptions 1, 2, 4, 6, 7, and 9 obtain in the instant case to warrant a
deviation from the general rule.
From its finding that the parked truck was loaded with ten (10) big round
logs 13 the Court of Appeals inferred that because of its weight the truck
could not have been driven to the shoulder of the road and concluded that
the same was parked on a portion of the road 14 at the time of the accident.
Consequently, the respondent court inferred that the mishap was due to the
negligence of the driver of the parked truck. 15 The inference or conclusion is
manifestly erroneous. In a large measure, it is grounded on speculation,
surmise, or conjecture. How the respondent court could have reversed the
finding of the trial court that a warning device was installed 16 escapes us
because it is evident from the record that really such a device, in the form of
a lighted kerosene lamp, was installed by the driver of the parked truck three
to four meters from the rear of his parked truck. 17 We see this negative
finding of the respondent appellate court as a misreading of the facts and
the evidence on record and directly contravening the positive finding of the
trial court that an early warning device was in proper place when the
accident happened and that the driver of the private respondent was the one
negligent. On the other hand, the respondent court, in refusing to give its
"imprimatur to the trial court's finding and conclusion that Daniel Serrano
(private respondent Isidro's driver) was negligent in driving the truck that
bumped the parked truck", did not cite specific evidence to support its
conclusion. In cavalier fashion, it simply and nebulously adverted to
unspecified "scanty evidence on record." 18
On the technical aspect of the case, the respondent corporation would want
us to dismiss this petition on the ground that it was filed out of time. It must
be noted that there was a motion for extension, 19 albeit filed erroneously
with the respondent court, dated March 19, 1986, requesting for 30 days
from March 20, 1986, to file the necessary petition or pleading before the
Supreme Court". Also, on April 1, 1986, an appearance of a new lawyer for
the petitioner before the Supreme Court" with motion 20 was filed, again
erroneously, with the Court of Appeals, requesting for 20 days extension "to

file the Petition for Review on Certiorari." Likewise a similar motion 21 was
filed with this Court also on April 1, 1986. On the other hand, the instant
petition for review was filed on April 17, 1986 22 but it was only after three
months, on August 1, 1986, in its comment 23 that the respondent
corporation raised the issue of tardiness. The respondent corporation should
not have waited in ambush before the comment was required and before due
course was given. In any event, to exact its "a pound of flesh", so to speak,
at this very late stage, would cause a grave miscarriage of justice.
Parenthetically, it must be noted that private respondent Isidro did not raise
this issue of late filing.
We now come to the merits of this petition.
The question before us is who was negligent? Negligence is the omission to
do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do 24 or as Judge
Cooley defines it, "(T)he failure to observe for the protection of the interests
of another person, that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury. 25
In Picart vs. Smith,
rule, we held:

26

decided more than seventy years ago but still a sound

The test by which to determine the existence of negligence in a particular

case may be stated as follows: Did the defendant in doing the alleged
negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is
guilty of negligence. The law here in effect adopts the standard supposed to
be supplied by the imaginary conduct of the discreet paterfamilias of the
Roman law. The existence of negligence in a given case is not determined by
reference to the personal judgment of the actor in the situation before him.
The Law considers what would be reckless, blameworthy, or negligent in the
man of ordinary intelligence and prudence and determines liability by that.
Respondent Isidro posits that any immobile object along the highway, like a
parked truck, poses serious danger to a moving vehicle which has the right
to be on the highway. He argues that since the parked cargo truck in this
case was a threat to life and limb and property, it was incumbent upon the
driver as well as the petitioner, who claims to be a helper of the truck driver,
to exercise extreme care so that the motorist negotiating the road would be
properly forewarned of the peril of a parked vehicle. Isidro submits that the
burden of proving that care and diligence were observed is shifted to the
petitioner, for, as previously claimed, his (Isidro's) Isuzu truck had a right to

be on the road, while the immobile cargo truck had no business, so to speak,
to be there. Likewise, Isidro proffers that the petitioner must show to the
satisfaction of a reasonable mind that the driver and he (petitioner) himself,
provided an early warning device, like that required by law, or, by some
other adequate means that would properly forewarn vehicles of the
impending danger that the parked vehicle posed considering the time, place,
and other peculiar circumstances of the occasion. Absent such proof of care,
as in the case at bar, Isidro concludes, would, under the doctrine of Res ipsa
loquitur, evoke the presumption of negligence on the part of the driver of the
parked cargo truck as well as his helper, the petitioner herein, who was fixing
the flat tire of the said truck. 27
Respondent Isidro's contention is untenable.
The evidence on record discloses that three or four meters from the rear of
the parked truck, a lighted kerosene lamp was placed. 28 Moreover, there is
the admission of respondent Isidro's driver, Daniel Serrano, to Wit: 29
Question No. 8 (by Patrolman Josefino Velasco)Will you narrate
to me in brief how the accident happens (sic) if you can still
remember?
Answer: (by Daniel Serrano)
That on or about 10:40 p.m., 15 May 1979 while
driving Isuzu truck at Baretbet, Bagabag, Nueva
Vizcaya and at KM 285, I met another vehicle who
(sic) did not dim his (sic) lights which cause (sic) me
to be blinded with intense glare of the light that's
why I did not notice a parked truck who (sic) was
repairing a front flat tire. When I was a few meters
away, I saw the truck which was loaded with round
logs. I step (sic) on my foot brakes but it did not
function with my many attempts. I have (sic) found
out later that the fluid pipe on the rear right was cut
that's why the breaks did not function. (Emphasis
supplied).
Whether the cargo truck was parked along the road or on half the shoulder of
the right side of the road would be of no moment taking into account the
warning device consisting of the lighted kerosene lamp placed three or four
meters from the back of the truck. 30 But despite this warning which we rule
as sufficient, the Isuzu truck driven by Daniel Serrano, an employee of the
private respondent, still bumped the rear of the parked cargo truck. As a
direct consequence of such accident the petitioner sustained injuries on his

left forearm and left foot. His left leg was later amputated from below the
knee when gangrene had set in. 31
It is clear from the foregoing disquisition that the absence or want of care of
Daniel Serrano has been established by clear and convincing evidence. It
follows that in stamping its imprimatur upon the invocation by respondent
Isidro of the doctrine of Res ipsa loquitur to escape liability for the negligence
of his employee, the respondent court committed reversible error.
The respondent court ruled:

32

xxx xxx xxx

In addition to this, we agree with the following arguments of
appellant Godofredo Isidro which would show that the accident
was caused due to the negligence of the driver of the cargo
truck:
xxx xxx xxx
... In the case at bar the burden of proving that care
and diligence was (sic) observed is shifted evidently
to the plaintiff, for, as adverted to, the motorists
have the right to be on the road, while the immobile
truck has no business, so to speak, to be there. It is
thus for the plaintiff to show to the satisfaction of a
reasonable mind that the driver and he himself did
employ early warning device such as that required by
law or by some other adequate means or device that
would properly forewarn vehicles of the impending
danger that the parked vehicle posed considering
the time, place and other peculiar circumstances of
the occasion. Absent such proof of care, as in the
case at bar, will evoke the presumption of negligence
under the doctrine of res ipsa loquitur, on the part of
the driver of the parked cargo truck as well as
plaintiff who was fixing the flat tire of said truck. (pp.
14-17, Appellant's Brief). (Emphasis supplied).
At this juncture, it may be enlightening and helpful in the proper resolution of
the issue of negligence to examine the doctrine of Res ipsa loquitur.
This doctrine is stated thus: "Where the thing which causes injury is shown to
be under the management of the defendant, and the accident is such as in
the ordinary course of things does not happen if those who have the
management use proper care, it affords reasonable evidence, in the absence

of an explanation by the defendant, that the accident arose from want of

care. 33 Or as Black's Law Dictionary 34 puts it:
Res ipsa loquitur. The thing speaks for itself Rebuttable
presumption or inference that defendant was negligent, which
arises upon proof that instrumentality causing injury was in
defendant's exclusive control, and that the accident was one
which ordinarily does not happen in absence of negligence. Res
ipsa loquitur is rule of evidence whereby negligence of alleged
wrongdoer may be inferred from mere fact that accident
happened provided character of accident and circumstances
attending it lead reasonably to belief that in absence of
negligence it would not have occurred and that thing which
caused injury is shown to have been under management and
control of alleged wrongdoer. Hillen v. Hooker Const. Co., Tex. Civ.
App., 484 S.W. 2d 133, 155. Under doctrine of "res ipsa
loquitur" the happening of an injury permits an inference of
negligence where plaintiff produces substantial evidence that
injury was caused by an agency or instrumentality under
exclusive control and management of defendant, and that the
occurrence was such that in the ordinary course of things would
not happen if reasonable care had been used.
In this jurisdiction we have applied this doctrine in quite a number of cases,
notably in Africa et al. vs. Caltex, Inc., et al., 35 and the latest is in the case
of F.F. Cruz and Co., Inc. vs. CA. 36
The doctrine of Res ipsa loquitur as a rule of evidence is peculiar to the law
of negligence which recognizes that prima facie negligence may be
established without direct proof and furnishes a substitute for specific proof
of negligence. 37 The doctrine is not a rule of substantive law 38 but merely a
mode of proof or a mere procedural convenience. 39 The rule, when
applicable to the facts and circumstances of a particular case, is not
intended to and does not dispense with the requirement of proof of culpable
negligence on the part of the party charged. 40 It merely determines and
regulates what shall be prima facie evidence thereof and facilitates the
burden of plaintiff of proving a breach of the duty of due care. 41 The doctrine
can be invoked when and only when, under the circumstances involved,
direct evidence is absent and not readily available. 42 Hence, it has generally
been held that the presumption of inference arising from the doctrine cannot
be availed of, or is overcome, where plaintiff has knowledge and testifies or
presents evidence as to the specific act of negligence which is the cause of

the injury complained of or where there is direct evidence as to the precise

cause of the accident and all the facts and circumstances attendant on the
occurrence clearly appear. 43 Finally, once the actual cause of injury is
established beyond controversy, whether by the plaintiff or by the defendant,
no presumptions will be involved and the doctrine becomes inapplicable
when the circumstances have been so completely eludicated that no
inference of defendant's liability can reasonably be made, whatever the
source of the evidence, 44 as in this case.
The private respondent is sued under Art. 2176 in relation to Art. 2180,
paragraph 5, of the Civil Code. In the latter, when an injury is caused by the
negligence of a servant or employee there instantly arises a presumption of
law that there was negligence on the part of the master or employer either in
the selection of the servant or employee, or in supervision over him after
selection, or both. Such presumption is juris tantum and not juris et de
jure and consequently, may be rebutted. If follows necessarily that if the
employer shows to the satisfaction of the court that in the selection and in
the supervision he has exercised the care and diligence of a good father of a
family, the presumption is overcome and he is relieved from liability. 45 In
disclaiming liability for the incident, the private respondent stresses that the
negligence of his employee has already been adequately overcome by his
driver's statement that he knew his responsibilities as a driver and that the
truck owner used to instruct him to be careful in driving.46
We do not agree with the private respondent in his submission. In the first
place, it is clear that the driver did not know his responsibilities because he
apparently did not check his vehicle before he took it on the road. If he did
he could have discovered earlier that the brake fluid pipe on the right was
cut, and could have repaired it and thus the accident could have been
avoided. Moveover, to our mind, the fact that the private respondent used to
intruct his driver to be careful in his driving, that the driver was licensed, and
the fact that he had no record of any accident, as found by the respondent
court, are not sufficient to destroy the finding of negligence of the Regional
Trial Court given the facts established at the trial 47 The private respondent
or his mechanic, who must be competent, should have conducted a thorough
inspection of his vehicle before allowing his driver to drive it. In the light of
the circumstances obtaining in the case, we hold that Isidro failed to prove
that the diligence of a good father of a family in the supervision of his
employees which would exculpate him from solidary liability with his driver
to the petitioner. But even if we concede that the diligence of a good father
of a family was observed by Isidro in the supervision of his driver, there is not
an iota of evidence on record of the observance by Isidro of the same

quantum of diligence in the supervision of his mechanic, if any, who would

be directly in charge in maintaining the road worthiness of his (Isidro's) truck.
But that is not all. There is paucity of proof that Isidro exercised the diligence
of a good father of a family in the selection of his driver, Daniel Serrano, as
well as in the selection of his mechanic, if any, in order to insure the safe
operation of his truck and thus prevent damage to others. Accordingly, the
responsibility of Isidro as employer treated in Article 2180, paragraph 5, of
the Civil Code has not ceased.
WHEREFORE, the petition is hereby GRANTED. The Decision of the
respondent court as well as its Resolution denying the petitioner's motion for
reconsideration are hereby SET ASIDE and the decision of the trial court,
dated January 20, 1983, is hereby REINSTATED in toto. With costs against the
private respondents.
SO ORDERED.
Melencio-Herrera, (Chairman), Paras and Padilla, JJ., concur.
G.R. No. 115024

February 7, 1996

MA. LOURDES VALENZUELA, petitioner,

vs.
COURT OF APPEALS, RICHARD LI and ALEXANDER COMMERCIAL,
INC., respondents.
x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
G.R. No. 117944

February 7, 1996

RICHARD LI, petitioner,

vs.
COURT OF APPEALS and LOURDES VALENZUELA, respondents.
DECISION
KAPUNAN, J.:
These two petitions for review on certiorari under Rule 45 of the Revised
Rules of Court stem from an action to recover damages by petitioner Lourdes
Valenzuela in the Regional Trial Court of Quezon City for injuries sustained by
her in a vehicular accident in the early morning of June 24, 1990. The facts
found by the trial court are succinctly summarized by the Court of Appeals
below:
This is an action to recover damages based on quasi-delict, for serious
physical injuries sustained in a vehicular accident.
Plaintiff's version of the accident is as follows: At around 2:00 in the
morning of June 24, 1990, plaintiff Ma. Lourdes Valenzuela was driving

a blue Mitsubishi lancer with Plate No. FFU 542 from her restaurant at
Marcos highway to her home at Palanza Street, Araneta Avenue. She
was travelling along Aurora Blvd. with a companion, Cecilia Ramon,
heading towards the direction of Manila. Before reaching A. Lake
Street, she noticed something wrong with her tires; she stopped at a
lighted place where there were people, to verify whether she had a flat
tire and to solicit help if needed. Having been told by the people
present that her rear right tire was flat and that she cannot reach her
home in that car's condition, she parked along the sidewalk, about 11/2 feet away, put on her emergency lights, alighted from the car, and
went to the rear to open the trunk. She was standing at the left side of
the rear of her car pointing to the tools to a man who will help her fix
the tire when she was suddenly bumped by a 1987 Mitsubishi Lancer
driven by defendant Richard Li and registered in the name of
defendant Alexander Commercial, Inc. Because of the impact plaintiff
was thrown against the windshield of the car of the defendant, which
was destroyed, and then fell to the ground. She was pulled out from
under defendant's car. Plaintiff's left leg was severed up to the middle
of her thigh, with only some skin and sucle connected to the rest of the
body. She was brought to the UERM Medical Memorial Center where
she was found to have a "traumatic amputation, leg, left up to distal
thigh (above knee)". She was confined in the hospital for twenty (20)
days and was eventually fitted with an artificial leg. The expenses for
the hospital confinement (P120,000.00) and the cost of the artificial leg
(P27,000.00) were paid by defendants from the car insurance.
In her complaint, plaintiff prayed for moral damages in the amount of
P1 million, exemplary damages in the amount of P100,000.00 and
other medical and related expenses amounting to a total of
P180,000.00, including loss of expected earnings.
Defendant Richard Li denied that he was negligent. He was on his way
home, travelling at 55 kph; considering that it was raining, visibility
was affected and the road was wet. Traffic was light. He testified that
he was driving along the inner portion of the right lane of Aurora Blvd.
towards the direction of Araneta Avenue, when he was suddenly
confronted, in the vicinity of A. Lake Street, San Juan, with a car
coming from the opposite direction, travelling at 80 kph, with "full
bright lights". Temporarily blinded, he instinctively swerved to the right
to avoid colliding with the oncoming vehicle, and bumped plaintiff's
car, which he did not see because it was midnight blue in color, with no
parking lights or early warning device, and the area was poorly lighted.

He alleged in his defense that the left rear portion of plaintiff's car was
protruding as it was then "at a standstill diagonally" on the outer
portion of the right lane towards Araneta Avenue (par. 18, Answer). He
confirmed the testimony of plaintiff's witness that after being bumped
the car of the plaintiff swerved to the right and hit another car parked
on the sidewalk. Defendants counterclaimed for damages, alleging that
plaintiff was reckless or negligent, as she was not a licensed driver.
The police investigator, Pfc. Felic Ramos, who prepared the vehicular
accident report and the sketch of the three cars involved in the
accident, testified that the plaintiff's car was "near the sidewalk"; this
witness did not remember whether the hazard lights of plaintiff's car
were on, and did not notice if there was an early warning device; there
was a street light at the corner of Aurora Blvd. and F. Roman, about
100 meters away. It was not mostly dark, i.e. "things can be seen" (p.
16, tsn, Oct. 28, 1991).
A witness for the plaintiff, Rogelio Rodriguez, testified that after
plaintiff alighted from her car and opened the trunk compartment,
defendant's car came approaching very fast ten meters from the
scene; the car was "zigzagging". The rear left side of plaintiff's car was
bumped by the front right portion of defendant's car; as a
consequence, the plaintiff's car swerved to the right and hit the parked
car on the sidewalk. Plaintiff was thrown to the windshield of
defendant's car, which was destroyed, and landed under the car. He
stated that defendant was under the influence of liquor as he could
"smell it very well" (pp. 43, 79, tsn, June 17, 1991).
After trial, the lower court sustained the plaintiff's submissions and found
defendant Richard Li guilty of gross negligence and liable for damages under
Article 2176 of the Civil Code. The trial court likewise held Alexander
Commercial, Inc., Li's employer, jointly and severally liable for damages
pursuant to Article 2180. It ordered the defendants to jointly and severally
pay the following amounts:
1. P41,840.00, as actual damages, representing the miscellaneous
expenses of the plaintiff as a result of her severed left leg;
2. The sums of (a) P37,500.00, for the unrealized profits because of the
stoppage of plaintiff's Bistro La Conga restaurant three (3) weeks after
the accident on June 24, 1990; (b) P20,000.00, a month, as unrealized
profits of the plaintiff in her Bistro La Conga restaurant, from August,
1990 until the date of this judgment and (c) P30,000.00, a month for

unrealized profits in plaintiff's two (2) beauty salons from July, 1990
until the date of this decision;
3. P1,000,000.00, in moral damages;
4. P50,000.00, as exemplary damages;
5. P60,000.00, as reasonable attorney's fees; and
6. Costs.
As a result of the trial court's decision, defendants filed an Omnibus Motion
for New Trial and for Reconsideration, citing testimony in Criminal Case O.C.
No. 804367 (People vs. Richard Li), tending to show that the point of impact,
as depicted by the pieces of glass/debris from the parties' cars, appeared to
be at the center of the right lane of Aurora Blvd. The trial court denied the
motion. Defendants forthwith filed an appeal with the respondent Court of
Appeals. In a Decision rendered March 30, 1994, the Court of Appeals found
that there was "ample basis from the evidence of record for the trial court's
finding that the plaintiff's car was properly parked at the right, beside the
sidewalk when it was bumped by defendant's car."1 Dismissing the
defendants' argument that the plaintiff's car was improperly parked, almost
at the center of the road, the respondent court noted that evidence which
was supposed to prove that the car was at or near center of the right lane
was never presented during the trial of the case.2 The respondent court
furthermore observed that:
Defendant Li's testimony that he was driving at a safe speed of 55
km./hour is self serving; it was not corroborated. It was in fact
contradicted by eyewitness Rodriguez who stated that he was outside
his beerhouse located at Aurora Boulevard after A. Lake Street, at or
about 2:00 a.m. of June 24, 1990 when his attention was caught by a
beautiful lady (referring to the plaintiff) alighting from her car and
opening the trunk compartment; he noticed the car of Richard Li
"approaching very fast ten (10) meters away from the scene";
defendant's car was zigzagging", although there were no holes and
hazards on the street, and "bumped the leg of the plaintiff" who was
thrown against the windshield of defendant's care, causing its
destruction. He came to the rescue of the plaintiff, who was pulled out
from under defendant's car and was able to say "hurting words" to
Richard Li because he noticed that the latter was under the influence
of liquor, because he "could smell it very well" (p. 36, et. seq., tsn, June
17, 1991). He knew that plaintiff owned a beerhouse in Sta. Mesa in
the 1970's, but did not know either plaintiff or defendant Li before the
accident.

In agreeing with the trial court that the defendant Li was liable for the
injuries sustained by the plaintiff, the Court of Appeals, in its decision,
however, absolved the Li's employer, Alexander Commercial, Inc. from any
liability towards petitioner Lourdes Valenzuela and reduced the amount of
moral damages to P500,000.00. Finding justification for exemplary damages,
the respondent court allowed an award of P50,000.00 for the same, in
addition to costs, attorney's fees and the other damages. The Court of
Appeals, likewise, dismissed the defendants' counterclaims.3
Consequently, both parties assail the respondent court's decision by filing
two separate petitions before this Court. Richard Li, in G.R. No. 117944,
contends that he should not be held liable for damages because the
proximate cause of the accident was Ma. Lourdes Valenzuela's own
negligence. Alternatively, he argues that in the event that this Court finds
him negligent, such negligence ought to be mitigated by the contributory
negligence of Valenzuela.
On the other hand, in G.R. No. 115024, Ma. Lourdes Valenzuela assails the
respondent court's decision insofar as it absolves Alexander Commercial, Inc.
from liability as the owner of the car driven by Richard Li and insofar as it
reduces the amount of the actual and moral damages awarded by the trial
court.4
As the issues are intimately related, both petitions are hereby consolidated.
It is plainly evident that the petition for review in G.R. No. 117944 raises no
substantial questions of law. What it, in effect, attempts to have this Court
review are factual findings of the trial court, as sustained by the Court of
Appeals finding Richard Li grossly negligent in driving the Mitsubishi Lancer
provided by his company in the early morning hours of June 24, 1990. This
we will not do. As a general rule, findings of fact of the Court of Appeals are
binding and conclusive upon us, and this Court will not normally disturb such
factual findings unless the findings of fact of the said court are palpably
unsupported by the evidence on record or unless the judgment itself is based
on a misapprehension of facts.5
In the first place, Valenzuela's version of the incident was fully corroborated
by an uninterested witness, Rogelio Rodriguez, the owner-operator of an
establishment located just across the scene of the accident. On trial, he
testified that he observed a car being driven at a "very fast" speed, racing
towards the general direction of Araneta Avenue.6 Rodriguez further added
that he was standing in front of his establishment, just ten to twenty feet
away from the scene of the accident, when he saw the car hit Valenzuela,
hurtling her against the windshield of the defendant's Mitsubishi Lancer, from

where she eventually fell under the defendant's car. Spontaneously reacting
to the incident, he crossed the street, noting that a man reeking with the
smell of liquor had alighted from the offending vehicle in order to survey the
incident.7 Equally important, Rodriguez declared that he observed
Valenzuela's car parked parallel and very near the sidewalk,8 contrary to Li's
allegation that Valenzuela's car was close to the center of the right lane. We
agree that as between Li's "self-serving" asseverations and the observations
of a witness who did not even know the accident victim personally and who
immediately gave a statement of the incident similar to his testimony to the
investigator immediately after the incident, the latter's testimony deserves
greater weight. As the court emphasized:
The issue is one of credibility and from Our own examination of the
transcript, We are not prepared to set aside the trial court's reliance on
the testimony of Rodriguez negating defendant's assertion that he was
driving at a safe speed. While Rodriguez drives only a motorcycle, his
perception of speed is not necessarily impaired. He was subjected to
cross-examination and no attempt was made to question .his
competence or the accuracy of his statement that defendant was
driving "very fast". This was the same statement he gave to the police
investigator after the incident, as told to a newspaper report (Exh. "P").
We see no compelling basis for disregarding his testimony.
The alleged inconsistencies in Rodriguez' testimony are not borne out
by an examination of the testimony. Rodriguez testified that the scene
of the accident was across the street where his beerhouse is located
about ten to twenty feet away (pp. 35-36, tsn, June 17, 1991). He did
not state that the accident transpired immediately in front of his
establishment. The ownership of the Lambingan se Kambingan is not
material; the business is registered in the name of his mother, but he
explained that he owns the establishment (p. 5, tsn, June 20, 1991).
Moreover, the testimony that the streetlights on his side of Aurora
Boulevard were on the night the accident transpired (p. 8) is not
necessarily contradictory to the testimony of Pfc. Ramos that there was
a streetlight at the corner of Aurora Boulevard and F. Roman Street (p.
45, tsn, Oct. 20, 1991).
With respect to the weather condition, Rodriguez testified that there
was only a drizzle, not a heavy rain and the rain has stopped and he
was outside his establishment at the time the accident transpired (pp.
64-65, tsn, June 17, 1991). This was consistent with plaintiff's
testimony that it was no longer raining when she left Bistro La Conga

(pp. 10-11, tsn, April 29, 1991). It was defendant Li who stated that it
was raining all the way in an attempt to explain why he was travelling
at only 50-55 kph. (p. 11, tsn, Oct. 14, 1991). As to the testimony of
Pfc. Ramos that it was raining, he arrived at the scene only in response
to a telephone call after the accident had transpired (pp. 9-10, tsn, Oct.
28, 1991). We find no substantial inconsistencies in Rodriguez's
testimony that would impair the essential integrity of his testimony or
reflect on his honesty. We are compelled to affirm the trial court's
acceptance of the testimony of said eyewitness.
Against the unassailable testimony of witness Rodriguez we note that Li's
testimony was peppered with so many inconsistencies leading us to conclude
that his version of the accident was merely adroitly crafted to provide a
version, obviously self-serving, which would exculpate him from any and all
liability in the incident. Against Valenzuela's corroborated claims, his
allegations were neither backed up by other witnesses nor by the
circumstances proven in the course of trial. He claimed that he was driving
merely at a speed of 55 kph. when "out of nowhere he saw a dark maroon
lancer right in front of him, which was (the) plaintiff's car". He alleged that
upon seeing this sudden "apparition" he put on his brakes to no avail as the
road was slippery.9
One will have to suspend disbelief in order to give credence to Li's
disingenuous and patently self-serving asseverations. The average
motorist alert to road conditions will have no difficulty applying the brakes to
a car traveling at the speed claimed by Li. Given a light rainfall, the visibility
of the street, and the road conditions on a principal metropolitan
thoroughfare like Aurora Boulevard, Li would have had ample time to react to
the changing conditions of the road if he were alert - as every driver should
be - to those conditions. Driving exacts a more than usual toll on the senses.
Physiological "fight or flight" 10 mechanisms are at work, provided such
mechanisms were not dulled by drugs, alcohol, exhaustion, drowsiness,
etc.11 Li's failure to react in a manner which would have avoided the accident
could therefore have been only due to either or both of the two factors: 1)
that he was driving at a "very fast" speed as testified by Rodriguez; and 2)
that he was under the influence of alcohol.12 Either factor working
independently would have diminished his responsiveness to road conditions,
since normally he would have slowed down prior to reaching Valenzuela's
car, rather than be in a situation forcing him to suddenly apply his brakes. As
the trial court noted (quoted with approval by respondent court):

Secondly, as narrated by defendant Richard Li to the San Juan Police

immediately after the incident, he said that while driving along Aurora
Blvd., out of nowhere he saw a dark maroon lancer right in front of him
which was plaintiff's car, indicating, again, thereby that, indeed, he
was driving very fast, oblivious of his surroundings and the road ahead
of him, because if he was not, then he could not have missed noticing
at a still far distance the parked car of the plaintiff at the right side
near the sidewalk which had its emergency lights on, thereby avoiding
forcefully bumping at the plaintiff who was then standing at the left
rear edge of her car.
Since, according to him, in his narration to the San Juan Police, he put
on his brakes when he saw the plaintiff's car in front of him, but that it
failed as the road was wet and slippery, this goes to show again, that,
contrary to his claim, he was, indeed, running very fast. For, were it
otherwise, he could have easily completely stopped his car, thereby
avoiding the bumping of the plaintiff, notwithstanding that the road
was wet and slippery. Verily, since, if, indeed, he was running slow, as
he claimed, at only about 55 kilometers per hour, then, inspite of the
wet and slippery road, he could have avoided hitting the plaintiff by the
mere expedient or applying his brakes at the proper time and distance.
It could not be true, therefore, as he now claims during his testimony,
which is contrary to what he told the police immediately after the
accident and is, therefore, more believable, that he did not actually
step on his brakes but simply swerved a little to the right when he saw
the on-coming car with glaring headlights, from the opposite direction,
in order to avoid it.
For, had this been what he did, he would not have bumped the car of
the plaintiff which was properly parked at the right beside the
sidewalk. And, it was not even necessary for him to swerve a little to
the right in order to safely avoid a collision with the on-coming car,
considering that Aurora Blvd. is a double lane avenue separated at the
center by a dotted white paint, and there is plenty of space for both
cars, since her car was running at the right lane going towards Manila
on the on-coming car was also on its right lane going to Cubao.13
Having come to the conclusion that Li was negligent in driving his companyissued Mitsubishi Lancer, the next question for us to determine is whether or
not Valenzuela was likewise guilty of contributory negligence in parking her
car alongside Aurora Boulevard, which entire area Li points out, is a no
parking zone.

We agree with the respondent court that Valenzuela was not guilty of
contributory negligence.
Contributory negligence is conduct on the part of the injured party,
contributing as a legal cause to the harm he has suffered, which falls below
the standard to which he is required to conform for his own
protection.14 Based on the foregoing definition, the standard or act to which,
according to petitioner Li, Valenzuela ought to have conformed for her own
protection was not to park at all at any point of Aurora Boulevard, a no
parking zone. We cannot agree.
Courts have traditionally been compelled to recognize that an actor who is
confronted with an emergency is not to be held up to the standard of
conduct normally applied to an individual who is in no such situation. The law
takes stock of impulses of humanity when placed in threatening or
dangerous situations and does not require the same standard of thoughtful
and reflective care from persons confronted by unusual and oftentimes
threatening conditions.15
Under the "emergency rule" adopted by this Court in Gan vs. Court of
Appeals,16 an individual who suddenly finds himself in a situation of danger
and is required to act without much time to consider the best means that
may be adopted to avoid the impending danger, is not guilty of negligence if
he fails to undertake what subsequently and upon reflection may appear to
be a better solution, unless the emergency was brought by his own
negligence.17
Applying this principle to a case in which the victims in a vehicular accident
swerved to the wrong lane to avoid hitting two children suddenly darting into
the street, we held, in Mc Kee vs. Intermediate Appellate Court,18 that the
driver therein, Jose Koh, "adopted the best means possible in the given
situation" to avoid hitting the children. Using the "emergency rule" the Court
concluded that Koh, in spite of the fact that he was in the wrong lane when
the collision with an oncoming truck occurred, was not guilty of negligence.19
While the emergency rule applies to those cases in which reflective thought,
or the opportunity to adequately weigh a threatening situation is absent, the
conduct which is required of an individual in such cases is dictated not
exclusively by the suddenness of the event which absolutely negates
thoroughful care, but by the over-all nature of the circumstances. A woman
driving a vehicle suddenly crippled by a flat tire on a rainy night will not be
faulted for stopping at a point which is both convenient for her to do so and
which is not a hazard to other motorists. She is not expected to run the
entire boulevard in search for a parking zone or turn on a dark street or alley

where she would likely find no one to help her. It would be hazardous for her
not to stop and assess the emergency (simply because the entire length of
Aurora Boulevard is a no-parking zone) because the hobbling vehicle would
be both a threat to her safety and to other motorists. In the instant case,
Valenzuela, upon reaching that portion of Aurora Boulevard close to A. Lake
St., noticed that she had a flat tire. To avoid putting herself and other
motorists in danger, she did what was best under the situation. As narrated
by respondent court: "She stopped at a lighted place where there were
people, to verify whether she had a flat tire and to solicit help if needed.
Having been told by the people present that her rear right tire was flat and
that she cannot reach her home she parked along the sidewalk, about 1 1/2
feet away, behind a Toyota Corona Car."20 In fact, respondent court noted,
Pfc. Felix Ramos, the investigator on the scene of the accident confirmed
that Valenzuela's car was parked very close to the sidewalk.21 The sketch
which he prepared after the incident showed Valenzuela's car partly
straddling the sidewalk, clear and at a convenient distance from motorists
passing the right lane of Aurora Boulevard. This fact was itself corroborated
by the testimony of witness Rodriguez.22
Under the circumstances described, Valenzuela did exercise the standard
reasonably dictated by the emergency and could not be considered to have
contributed to the unfortunate circumstances which eventually led to the
amputation of one of her lower extremities. The emergency which led her to
park her car on a sidewalk in Aurora Boulevard was not of her own making,
and it was evident that she had taken all reasonable precautions.
Obviously in the case at bench, the only negligence ascribable was the
negligence of Li on the night of the accident. "Negligence, as it is commonly
understood is conduct which creates an undue risk of harm to others."23It is
the failure to observe that degree of care, precaution, and vigilance which
the circumstances justly demand, whereby such other person suffers
injury.24 We stressed, in Corliss vs. Manila Railroad Company,25 that
negligence is the want of care required by the circumstances.
The circumstances established by the evidence adduced in the court below
plainly demonstrate that Li was grossly negligent in driving his Mitsubishi
Lancer. It bears emphasis that he was driving at a fast speed at about 2:00
A.M. after a heavy downpour had settled into a drizzle rendering the street
slippery. There is ample testimonial evidence on record to show that he was
under the influence of liquor. Under these conditions, his chances of
effectively dealing with changing conditions on the road were significantly
lessened. As Presser and Keaton emphasize:

[U]nder present day traffic conditions, any driver of an automobile

must be prepared for the sudden appearance of obstacles and persons
on the highway, and of other vehicles at intersections, such as one who
sees a child on the curb may be required to anticipate its sudden dash
into the street, and his failure to act properly when they appear may
be found to amount to negligence.26
Li's obvious unpreparedness to cope with the situation confronting him on
the night of the accident was clearly of his own making.
We now come to the question of the liability of Alexander Commercial, Inc.
Li's employer. In denying liability on the part of Alexander Commercial, the
respondent court held that:
There is no evidence, not even defendant Li's testimony, that the visit
was in connection with official matters. His functions as assistant
manager sometimes required him to perform work outside the office as
he has to visit buyers and company clients, but he admitted that on
the night of the accident he came from BF Homes Paranaque he did
not have "business from the company" (pp. 25-26, ten, Sept. 23,
1991). The use of the company car was partly required by the nature of
his work, but the privilege of using it for non-official business is a
"benefit", apparently referring to the fringe benefits attaching to his
position.
Under the civil law, an employer is liable for the negligence of his
employees in the discharge of their respective duties, the basis of
which liability is not respondeat superior, but the relationship of pater
familias, which theory bases the liability of the master ultimately on his
own negligence and not on that of his servant (Cuison v. Norton and
Harrison Co., 55 Phil. 18). Before an employer may be held liable for
the negligence of his employee, the act or omission which caused
damage must have occurred while an employee was in the actual
performance of his assigned tasks or duties (Francis High School vs.
Court of Appeals, 194 SCRA 341). In defining an employer's liability for
the acts done within the scope of the employee's assigned tasks, the
Supreme Court has held that this includes any act done by an
employee, in furtherance of the interests of the employer or for the
account of the employer at the time of the infliction of the injury or
damage (Filamer Christian Institute vs. Intermediate Appellate Court,
212 SCRA 637). An employer is expected to impose upon its employees
the necessary discipline called for in the performance of any act

"indispensable to the business and beneficial to their employer" (at p.

645).
In light of the foregoing, We are unable to sustain the trial court's
finding that since defendant Li was authorized by the company to use
the company car "either officially or socially or even bring it home", he
can be considered as using the company car in the service of his
employer or on the occasion of his functions. Driving the company car
was not among his functions as assistant manager; using it for nonofficial purposes would appear to be a fringe benefit, one of the perks
attached to his position. But to impose liability upon the employer
under Article 2180 of the Civil Code, earlier quoted, there must be a
showing that the damage was caused by their employees in the
service of the employer or on the occasion of their functions. There is
no evidence that Richard Li was at the time of the accident performing
any act in furtherance of the company's business or its interests, or at
least for its benefit. The imposition of solidary liability against
defendant Alexander Commercial Corporation must therefore fail. 27
We agree with the respondent court that the relationship in question is not
based on the principle of respondeat superior, which holds the master liable
for acts of the servant, but that of pater familias, in which the liability
ultimately falls upon the employer, for his failure to exercise the diligence of
a good father of the family in the selection and supervision of his employees.
It is up to this point, however, that our agreement with the respondent court
ends. Utilizing the bonus pater familias standard expressed in Article 2180 of
the Civil Code, 28 we are of the opinion that Li's employer, Alexander
Commercial, Inc. is jointly and solidarily liable for the damage caused by the
accident of June 24, 1990.
First, the case of St. Francis High School vs. Court of Appeals29 upon which
respondent court has placed undue reliance, dealt with the subject of a
school and its teacher's supervision of students during an extracurricular
activity. These cases now fall under the provision on special parental
authority found in Art. 218 of the Family Code which generally encompasses
all authorized school activities, whether inside or outside school premises.
Second, the employer's primary liability under the concept of pater
familias embodied by Art 2180 (in relation to Art. 2176) of the Civil Code is
quasi-delictual or tortious in character. His liability is relieved on a showing
that he exercised the diligence of a good father of the family in the selection
and supervision of its employees. Once evidence is introduced showing that
the employer exercised the required amount of care in selecting its

employees, half of the employer's burden is overcome. The question of

diligent supervision, however, depends on the circumstances of employment.
Ordinarily, evidence demonstrating that the employer has exercised diligent
supervision of its employee during the performance of the latter's assigned
tasks would be enough to relieve him of the liability imposed by Article 2180
in relation to Article 2176 of the Civil Code. The employer is not expected to
exercise supervision over either the employee's private activities or during
the performance of tasks either unsanctioned by the former or unrelated to
the employee's tasks. The case at bench presents a situation of a different
character, involving a practice utilized by large companies with either their
employees of managerial rank or their representatives.
It is customary for large companies to provide certain classes of their
employees with courtesy vehicles. These company cars are either wholly
owned and maintained by the company itself or are subject to various plans
through which employees eventually acquire their vehicles after a given
period of service, or after paying a token amount. Many companies provide
liberal "car plans" to enable their managerial or other employees of rank to
purchase cars, which, given the cost of vehicles these days, they would not
otherwise be able to purchase on their own.
Under the first example, the company actually owns and maintains the car
up to the point of turnover of ownership to the employee; in the second
example, the car is really owned and maintained by the employee himself. In
furnishing vehicles to such employees, are companies totally absolved of
responsibility when an accident involving a company-issued car occurs
during private use after normal office hours?
Most pharmaceutical companies, for instance, which provide cars under the
first plan, require rigorous tests of road worthiness from their agents prior to
turning over the car (subject of company maintenance) to their
representatives. In other words, like a good father of a family, they entrust
the company vehicle only after they are satisfied that the employee to whom
the car has been given full use of the said company car for company or
private purposes will not be a threat or menace to himself, the company or
to others. When a company gives full use and enjoyment of a company car to
its employee, it in effect guarantees that it is, like every good father,
satisfied that its employee will use the privilege reasonably and responsively.
In the ordinary course of business, not all company employees are given the
privilege of using a company-issued car. For large companies other than
those cited in the example of the preceding paragraph, the privilege serves
important business purposes either related to the image of success an entity

intends to present to its clients and to the public in general, or - for practical
and utilitarian reasons - to enable its managerial and other employees of
rank or its sales agents to reach clients conveniently. In most cases,
providing a company car serves both purposes. Since important business
transactions and decisions may occur at all hours in all sorts of situations
and under all kinds of guises, the provision for the unlimited use of a
company car therefore principally serves the business and goodwill of a
company and only incidentally the private purposes of the individual who
actually uses the car, the managerial employee or company sales agent. As
such, in providing for a company car for business use and/or for the purpose
of furthering the company's image, a company owes a responsibility to the
public to see to it that the managerial or other employees to whom it
entrusts virtually unlimited use of a company issued car are able to use the
company issue capably and responsibly.
In the instant case, Li was an Assistant Manager of Alexander Commercial,
Inc. In his testimony before the trial court, he admitted that his functions as
Assistant Manager did not require him to scrupulously keep normal office
hours as he was required quite often to perform work outside the office,
visiting prospective buyers and contacting and meeting with company
clients. 30 These meetings, clearly, were not strictly confined to routine hours
because, as a managerial employee tasked with the job of representing his
company with its clients, meetings with clients were both social as well as
work-related functions. The service car assigned to Li by Alexander
Commercial, Inc. therefore enabled both Li - as well as the corporation - to
put up the front of a highly successful entity, increasing the latter's goodwill
before its clientele. It also facilitated meeting between Li and its clients by
providing the former with a convenient mode of travel.
Moreover, Li's claim that he happened to be on the road on the night of the
accident because he was coming from a social visit with an officemate in
Paranaque was a bare allegation which was never corroborated in the court
below. It was obviously self-serving. Assuming he really came from his
officemate's place, the same could give rise to speculation that he and his
officemate had just been from a work-related function, or they were together
to discuss sales and other work related strategies.
In fine, Alexander Commercial, inc. has not demonstrated, to our satisfaction,
that it exercised the care and diligence of a good father of the family in
entrusting its company car to Li. No allegations were made as to whether or
not the company took the steps necessary to determine or ascertain the
driving proficiency and history of Li, to whom it gave full and unlimited use of

a company car.31 Not having been able to overcome the burden of

demonstrating that it should be absolved of liability for entrusting its
company car to Li, said company, based on the principle of bonus pater
familias, ought to be jointly and severally liable with the former for the
injuries sustained by Ma. Lourdes Valenzuela during the accident.
Finally, we find no reason to overturn the amount of damages awarded by
the respondent court, except as to the amount of moral damages. In the
case of moral damages, while the said damages are not intended to enrich
the plaintiff at the expense of a defendant, the award should nonetheless be
commensurate to the suffering inflicted. In the instant case we are of the
opinion that the reduction in moral damages from an amount of
P1,000,000.00 to P800,000,00 by the Court of Appeals was not justified
considering the nature of the resulting damage and the
predictable sequelae of the injury.
As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic
amputation of her left lower extremity at the distal left thigh just above the
knee. Because of this, Valenzuela will forever be deprived of the full
ambulatory functions of her left extremity, even with the use of state of the
art prosthetic technology. Well beyond the period of hospitalization (which
was paid for by Li), she will be required to undergo adjustments in her
prosthetic devise due to the shrinkage of the stump from the process of
healing.
These adjustments entail costs, prosthetic replacements and months of
physical and occupational rehabilitation and therapy. During her lifetime, the
prosthetic devise will have to be replaced and re-adjusted to changes in the
size of her lower limb effected by the biological changes of middle-age,
menopause and aging. Assuming she reaches menopause, for example, the
prosthetic will have to be adjusted to respond to the changes in bone
resulting from a precipitate decrease in calcium levels observed in the bones
of all post-menopausal women. In other words, the damage done to her
would not only be permanent and lasting, it would also be permanently
changing and adjusting to the physiologic changes which her body
would normally undergo through the years. The replacements, changes, and
adjustments will require corresponding adjustive physical and occupational
therapy. All of these adjustments, it has been documented, are painful.
The foregoing discussion does not even scratch the surface of the nature of
the resulting damage because it would be highly speculative to estimate the
amount of psychological pain, damage and injury which goes with the
sudden severing of a vital portion of the human body. A prosthetic device,

however technologically advanced, will only allow a reasonable amount of

functional restoration of the motor functions of the lower limb. The sensory
functions are forever lost. The resultant anxiety, sleeplessness, psychological
injury, mental and physical pain are inestimable.
As the amount of moral damages are subject to this Court's discretion, we
are of the opinion that the amount of P1,000,000.00 granted by the trial
court is in greater accord with the extent and nature of the injury - physical
and psychological - suffered by Valenzuela as a result of Li's grossly
negligent driving of his Mitsubishi Lancer in the early morning hours of the
accident.
WHEREFORE, PREMISES CONSIDERED, the decision of the Court of Appeals is
modified with the effect of REINSTATING the judgment of the Regional Trial
Court.
SO ORDERED.
Padilla, Bellosillo and Hermosisima, Jr., JJ., concur.

G.R. No. L-12219

March 15, 1918

AMADO PICART, plaintiff-appellant,

vs.
FRANK SMITH, JR., defendant-appellee.
Alejo Mabanag for appellant.
G. E. Campbell for appellee.
STREET, J.:
In this action the plaintiff, Amado Picart, seeks to recover of the defendant,
Frank Smith, jr., the sum of P31,000, as damages alleged to have been
caused by an automobile driven by the defendant. From a judgment of the
Court of First Instance of the Province of La Union absolving the defendant
from liability the plaintiff has appealed.
The occurrence which gave rise to the institution of this action took place on
December 12, 1912, on the Carlatan Bridge, at San Fernando, La Union. It
appears that upon the occasion in question the plaintiff was riding on his
pony over said bridge. Before he had gotten half way across, the defendant
approached from the opposite direction in an automobile, going at the rate of
about ten or twelve miles per hour. As the defendant neared the bridge he
saw a horseman on it and blew his horn to give warning of his approach. He
continued his course and after he had taken the bridge he gave two more

successive blasts, as it appeared to him that the man on horseback before

him was not observing the rule of the road.
The plaintiff, it appears, saw the automobile coming and heard the warning
signals. However, being perturbed by the novelty of the apparition or the
rapidity of the approach, he pulled the pony closely up against the railing on
the right side of the bridge instead of going to the left. He says that the
reason he did this was that he thought he did not have sufficient time to get
over to the other side. The bridge is shown to have a length of about 75
meters and a width of 4.80 meters. As the automobile approached, the
defendant guided it toward his left, that being the proper side of the road for
the machine. In so doing the defendant assumed that the horseman would
move to the other side. The pony had not as yet exhibited fright, and the
rider had made no sign for the automobile to stop. Seeing that the pony was
apparently quiet, the defendant, instead of veering to the right while yet
some distance away or slowing down, continued to approach directly toward
the horse without diminution of speed. When he had gotten quite near, there
being then no possibility of the horse getting across to the other side, the
defendant quickly turned his car sufficiently to the right to escape hitting the
horse alongside of the railing where it as then standing; but in so doing the
automobile passed in such close proximity to the animal that it became
frightened and turned its body across the bridge with its head toward the
railing. In so doing, it as struck on the hock of the left hind leg by the flange
of the car and the limb was broken. The horse fell and its rider was thrown off
with some violence. From the evidence adduced in the case we believe that
when the accident occurred the free space where the pony stood between
the automobile and the railing of the bridge was probably less than one and
one half meters. As a result of its injuries the horse died. The plaintiff
received contusions which caused temporary unconsciousness and required
medical attention for several days.
The question presented for decision is whether or not the defendant in
maneuvering his car in the manner above described was guilty of negligence
such as gives rise to a civil obligation to repair the damage done; and we are
of the opinion that he is so liable. As the defendant started across the bridge,
he had the right to assume that the horse and the rider would pass over to
the proper side; but as he moved toward the center of the bridge it was
demonstrated to his eyes that this would not be done; and he must in a
moment have perceived that it was too late for the horse to cross with safety
in front of the moving vehicle. In the nature of things this change of situation
occurred while the automobile was yet some distance away; and from this
moment it was not longer within the power of the plaintiff to escape being

run down by going to a place of greater safety. The control of the situation
had then passed entirely to the defendant; and it was his duty either to bring
his car to an immediate stop or, seeing that there were no other persons on
the bridge, to take the other side and pass sufficiently far away from the
horse to avoid the danger of collision. Instead of doing this, the defendant
ran straight on until he was almost upon the horse. He was, we think,
deceived into doing this by the fact that the horse had not yet exhibited
fright. But in view of the known nature of horses, there was an appreciable
risk that, if the animal in question was unacquainted with automobiles, he
might get exited and jump under the conditions which here confronted him.
When the defendant exposed the horse and rider to this danger he was, in
our opinion, negligent in the eye of the law.
The test by which to determine the existence of negligence in a particular
case may be stated as follows: Did the defendant in doing the alleged
negligent act use that person would have used in the same situation? If not,
then he is guilty of negligence. The law here in effect adopts the standard
supposed to be supplied by the imaginary conduct of the discreet
paterfamilias of the Roman law. The existence of negligence in a given case
is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless,
blameworthy, or negligent in the man of ordinary intelligence and prudence
and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a
given situation must of course be always determined in the light of human
experience and in view of the facts involved in the particular case. Abstract
speculations cannot here be of much value but this much can be profitably
said: Reasonable men govern their conduct by the circumstances which are
before them or known to them. They are not, and are not supposed to be,
omniscient of the future. Hence they can be expected to take care only when
there is something before them to suggest or warn of danger. Could a
prudent man, in the case under consideration, foresee harm as a result of
the course actually pursued? If so, it was the duty of the actor to take
precautions to guard against that harm. Reasonable foresight of harm,
followed by ignoring of the suggestion born of this prevision, is always
necessary before negligence can be held to exist. Stated in these terms, the
proper criterion for determining the existence of negligence in a given case
is this: Conduct is said to be negligent when a prudent man in the position of
the tortfeasor would have foreseen that an effect harmful to another was
sufficiently probable to warrant his foregoing conduct or guarding against its
consequences.

Applying this test to the conduct of the defendant in the present case we
think that negligence is clearly established. A prudent man, placed in the
position of the defendant, would in our opinion, have recognized that the
course which he was pursuing was fraught with risk, and would therefore
have foreseen harm to the horse and the rider as reasonable consequence of
that course. Under these circumstances the law imposed on the defendant
the duty to guard against the threatened harm.
It goes without saying that the plaintiff himself was not free from fault, for he
was guilty of antecedent negligence in planting himself on the wrong side of
the road. But as we have already stated, the defendant was also negligent;
and in such case the problem always is to discover which agent is
immediately and directly responsible. It will be noted that the negligent acts
of the two parties were not contemporaneous, since the negligence of the
defendant succeeded the negligence of the plaintiff by an appreciable
interval. Under these circumstances the law is that the person who has the
last fair chance to avoid the impending harm and fails to do so is chargeable
with the consequences, without reference to the prior negligence of the
other party.
The decision in the case of Rkes vs. Atlantic, Gulf and Pacific Co. (7 Phil. Rep.,
359) should perhaps be mentioned in this connection. This Court there held
that while contributory negligence on the part of the person injured did not
constitute a bar to recovery, it could be received in evidence to reduce the
damages which would otherwise have been assessed wholly against the
other party. The defendant company had there employed the plaintiff, as a
laborer, to assist in transporting iron rails from a barge in Manila harbor to
the company's yards located not far away. The rails were conveyed upon cars
which were hauled along a narrow track. At certain spot near the water's
edge the track gave way by reason of the combined effect of the weight of
the car and the insecurity of the road bed. The car was in consequence
upset; the rails slid off; and the plaintiff's leg was caught and broken. It
appeared in evidence that the accident was due to the effects of the typhoon
which had dislodged one of the supports of the track. The court found that
the defendant company was negligent in having failed to repair the bed of
the track and also that the plaintiff was, at the moment of the accident,
guilty of contributory negligence in walking at the side of the car instead of
being in front or behind. It was held that while the defendant was liable to
the plaintiff by reason of its negligence in having failed to keep the track in
proper repair nevertheless the amount of the damages should be reduced on
account of the contributory negligence in the plaintiff. As will be seen the
defendant's negligence in that case consisted in an omission only. The

liability of the company arose from its responsibility for the dangerous
condition of its track. In a case like the one now before us, where the
defendant was actually present and operating the automobile which caused
the damage, we do not feel constrained to attempt to weigh the negligence
of the respective parties in order to apportion the damage according to the
degree of their relative fault. It is enough to say that the negligence of the
defendant was in this case the immediate and determining cause of the
accident and that the antecedent negligence of the plaintiff was a more
remote factor in the case.
A point of minor importance in the case is indicated in the special defense
pleaded in the defendant's answer, to the effect that the subject matter of
the action had been previously adjudicated in the court of a justice of the
peace. In this connection it appears that soon after the accident in question
occurred, the plaintiff caused criminal proceedings to be instituted before a
justice of the peace charging the defendant with the infliction of serious
injuries (lesiones graves). At the preliminary investigation the defendant was
discharged by the magistrate and the proceedings were dismissed.
Conceding that the acquittal of the defendant at the trial upon the merits in
a criminal prosecution for the offense mentioned would be res adjudicata
upon the question of his civil liability arising from negligence -- a point upon
which it is unnecessary to express an opinion -- the action of the justice of
the peace in dismissing the criminal proceeding upon the preliminary hearing
can have no effect. (See U. S. vs. Banzuela and Banzuela, 31 Phil. Rep., 564.)
From what has been said it results that the judgment of the lower court must
be reversed, and judgment is her rendered that the plaintiff recover of the
defendant the sum of two hundred pesos (P200), with costs of other
instances. The sum here awarded is estimated to include the value of the
horse, medical expenses of the plaintiff, the loss or damage occasioned to
articles of his apparel, and lawful interest on the whole to the date of this
recovery. The other damages claimed by the plaintiff are remote or otherwise
of such character as not to be recoverable. So ordered.
Arellano, C.J., Torres, Carson, Araullo, Avancea, and Fisher, JJ., concur.
Johnson, J., reserves his vote.

G.R. No. 92087 May 8, 1992

SOFIA FERNANDO, in her behalf and as the legal guardian of her
minor children, namely: ALBERTO & ROBERTO, all surnamed
FERNANDO, ANITA GARCIA, NICOLAS LIAGOSO, ROSALIA

BERTULANO, in her behalf and as the legal guardian of her minor

children, namely: EDUARDO, ROLANDO, DANIEL, AND JOCELYN, all
surnamed BERTULANO, PRIMITIVA FAJARDO in her behalf and as
legal guardian of her minor children, namely: GILBERT, GLEN,
JOCELYN AND JOSELITO, all surnamed FAJARDO, and EMETERIA
LIAGOSO, in her behalf and as guardian ad litem, of her minor
grandchildren, namely: NOEL, WILLIAM, GENEVIEVE and GERRY, all
surnamed LIAGOSO, petitioners,
vs.
THE HONORABLE COURT OF APPEALS AND CITY OF
DAVAO, respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari praying that the amended decision
of the Court of Appeals dated January 11, 1990 in CA-G.R. No. C.V. 04846,
entitled "Sofia Fernando, etc., et al. v. The City of Davao," be reversed and
that its original decision dated January 31, 1986 be reinstated subject to the
modification sought by the petitioners in their motion for partial
reconsideration dated March 6, 1986.
The antecedent facts are briefly narrated by the trial court, as follows:
From the evidence presented we see the following facts: On
November 7, 1975, Bibiano Morta, market master of the Agdao
Public Market filed a requisition request with the Chief of Property
of the City Treasurer's Office for the re-emptying of the septic
tank in Agdao. An invitation to bid was issued to Aurelio
Bertulano, Lito Catarsa, Feliciano Bascon, Federico Bolo and
Antonio Suer, Jr. Bascon won the bid. On November 26, 1975
Bascon was notified and he signed the purchase order. However,
before such date, specifically on November 22, 1975, bidder
Bertulano with four other companions namely Joselito Garcia,
William Liagoso, Alberto Fernando and Jose Fajardo, Jr. were
found dead inside the septic tank. The bodies were removed by a
fireman. One body, that of Joselito Garcia, was taken out by his
uncle, Danilo Garcia and taken to the Regional Hospital but he
expired there. The City Engineer's office investigated the case
and learned that the five victims entered the septic tank without
clearance from it nor with the knowledge and consent of the
market master. In fact, the septic tank was found to be almost
empty and the victims were presumed to be the ones who did

the re-emptying. Dr. Juan Abear of the City Health Office

autopsied the bodies and in his reports, put the cause of death of
all five victims as "asphyxia" caused by the diminution of oxygen
supply in the body working below normal conditions. The lungs of
the five victims burst, swelled in hemmorrhagic areas and this
was due to their intake of toxic gas, which, in this case, was
sulfide gas produced from the waste matter inside the septic
tank. (p. 177, Records)
On August 28, 1984, the trial court rendered a decision, the dispositive
portion of which reads:
IN VIEW OF THE FOREGOING, this case is hereby DISMISSED
without pronouncement as to costs.
SO ORDERED. (Records, p. 181)
From the said decision, the petitioners appealed to the then Intermediate
Appellate Court (now Court of Appeals). On January 3, 1986, the appellate
court issued a decision, the dispositive portion of which reads:
WHEREFORE, in view of the facts fully established and in the
liberal interpretation of what the Constitution and the law
intended to protect the plight of the poor and the needy, the
ignorant and the
indigent more entitled to social justice for having, in the
unforgettable words of Magsaysay, "less in life," We hereby
reverse and set aside the appealed judgment and render another
one:
1. Ordering the defendant to pay to the plaintiffs Dionisio
Fernando, Sofia Fernando and her minor children the following
sums of money:
a) Compensatory damages for his death P30,000.00
b) Moral damages P20,000.00
2. Ordering the defendant to pay to the plaintiffs David Garcia
and Anita Garcia the following sums of money:
a) Compensatory damages for his death P30,000.00
b) Moral damages P20,000.00
3. Ordering the defendant to pay to the plaintiff Rosalia
Bertulano (sic) and her minor children the following sums of
money
a) Compensatory damages for his death P30,000.00
b) Moral damages P20,000.00

4. Ordering the defendant to pay to the plaintiff Primitiva Fajardo

and her minor children the following sums of money:
a) Compensatory damages for his death P30,000.00
b) Moral damages P20,000.00
5. Ordering the defendant to pay to the plaintiffs Norma Liagoso,
Nicolas Liagoso and Emeteria Liagoso and her minor
grandchildren the following sums of money:
a) Compensatory damages for his death P30,000.00
b) Moral damages P20,000.00
The death compensation is fixed at P30,000.00 in accordance
with the rulings of the Supreme Court starting with People vs. De
la Fuente, Nos. L-63251-52, December 29, 1983, 126 SCRA 518
reiterated in the recent case of People vs. Nepomuceno, No. L41412, May 27, 1985. Attorney's fees in the amount of
P10,000.00 for the handling of the case for the 5 victims is also
awarded.
No pronouncement as to costs.
SO ORDERED. (Rollo, pp. 33-34)
Both parties filed their separate motions for reconsideration. On January 11,
1990, the Court of Appeals rendered an Amended Decision, the dispositive
portion of which reads:
WHEREFORE, finding merit in the motion for reconsideration of
the defendant-appellee Davao City, the same is hereby
GRANTED. The decision of this Court dated January 31, 1986 is
reversed and set aside and another one is hereby rendered
dismissing the case. No pronouncement as to costs.
SO ORDERED. (Rollo, p. 25)
Hence, this petition raising the following issues for resolution:
1. Is the respondent Davao City guilty of negligence in the case
at bar?
2. If so, is such negligence the immediate and proximate cause
of deaths of the victims hereof? (p. 72, Rollo)
Negligence has been defined as the failure to observe for the protection of
the interests of another person that degree of care, precaution, and vigilance
which the circumstances justly demand, whereby such other person suffers
injury (Corliss v. Manila Railroad Company, L-21291, March 28, 1969, 27
SCRA 674, 680). Under the law, a person who by his omission causes
damage to another, there being negligence, is obliged to pay for the damage

done (Article 2176, New Civil Code). As to what would constitute a negligent
act in a given situation, the case of Picart v. Smith (37 Phil. 809, 813)
provides Us the answer, to wit:
The test by which to determine the existence of negligence in a
particular case may be stated as follows: Did the defendant in
doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence. The
law here in effect adopts the standard supposed to be supplied
by the imaginary conduct of the discreet pater familias of the
Roman law. The existence of negligence in a given case is not
determined by reference to the personal judgment of the actor in
the situation before him. The law considers what would be
reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a
prudent man in a given situation must of course be always
determined in the light of human experience and in view of the
facts involved in the particular case. Abstract speculation cannot
here be of much value but this much can be profitably said:
Reasonable men govern their conduct by the circumstances
which are before them or known to them. They are not, and are
not supposed to be, omniscient of the future. Hence they can be
expected to take care only when there is something before them
to suggest or warn of danger. Could a prudent man, in the case
under consideration, foresee harm as a result of the course
actually pursued? If so, it was the duty of the actor to take
precautions to guard against that harm.Reasonable foresight of
harm, followed by the ignoring of the suggestion born of this
provision, is always necessary before negligence can be held to
exist. Stated in these terms, the proper criterion for determining
the existence of negligence in a given case is this: Conduct is
said to be negligent when a prudent man in the position of the
tortfeasor would have foreseen that an effect harmful to another
was sufficiently probable warrant his foregoing the conduct or
guarding against its consequences. (emphasis supplied)
To be entitled to damages for an injury resulting from the negligence of
another, a claimant must establish the relation between the omission and
the damage. He must prove under Article 2179 of the New Civil Code that

the defendant's negligence was the immediate and proximate cause of his
injury. Proximate cause has been defined as that cause, which, in natural and
continuous sequence unbroken by any efficient intervening cause, produces
the injury, and without which the result would not have occurred (Vda. de
Bataclan, et al. v. Medina, 102 Phil. 181, 186). Proof of such relation of cause
and effect is not an arduous one if the claimant did not in any way contribute
to the negligence of the defendant. However, where the resulting injury was
the product of the negligence of both parties, there exists a difficulty to
discern which acts shall be considered the proximate cause of the accident.
InTaylor v. Manila Electric Railroad and Light Co. (16 Phil. 8, 29-30), this
Court set a guideline for a judicious assessment of the situation:
Difficulty seems to be apprehended in deciding which acts of the
injured party shall be considered immediate causes of the
accident. The test is simple. Distinction must be made between
the accident and the injury, between the event itself, without
which there could have been no accident, and those acts of the
victim not entering into it, independent of it, but contributing to
his own proper hurt. For instance, the cause of the accident
under review was the displacement of the crosspiece or the
failure to replace it. This produced the event giving occasion for
damages that is, the sinking of the track and the sliding of the
iron rails. To this event, the act of the plaintiff in walking by the
side of the car did not contribute, although it was an element of
the damage which came to himself. Had the crosspiece been out
of place wholly or partly through his act or omission of duty, that
would have been one of the determining causes of the event or
accident, for which he would have been responsible. Where he
contributes to the principal occurrence, as one of its determining
factors, he can not recover. Where, in conjunction with the
occurrence, he contributes only to his own injury, he may recover
the amount that the defendant responsible for the event should
pay for such injury, less a sum deemed a suitable equivalent for
his own imprudence. (emphasis Ours)
Applying all these established doctrines in the case at bar and after a careful
scrutiny of the records, We find no compelling reason to grant the petition.
We affirm.
Petitioners fault the city government of Davao for failing to clean a septic
tank for the period of 19 years resulting in an accumulation of hydrogen
sulfide gas which killed the laborers. They contend that such failure was

compounded by the fact that there was no warning sign of the existing
danger and no efforts exerted by the public respondent to neutralize or
render harmless the effects of the toxic gas. They submit that the public
respondent's gross negligence was the proximate cause of the fatal incident.
We do not subscribe to this view. While it may be true that the public
respondent has been remiss in its duty to re-empty the septic tank annually,
such negligence was not a continuing one. Upon learning from the report of
the market master about the need to clean the septic tank of the public toilet
in Agdao Public Market, the public respondent immediately responded by
issuing invitations to bid for such service. Thereafter, it awarded the bid to
the lowest bidder, Mr. Feliciano Bascon (TSN, May 24, 1983, pp. 22-25). The
public respondent, therefore, lost no time in taking up remedial measures to
meet the situation. It is likewise an undisputed fact that despite the public
respondent's failure to re-empty the septic tank since 1956, people in the
market have been using the public toilet for their personal necessities but
have remained unscathed. The testimonies of Messrs. Danilo Garcia and
David Secoja (plaintiffs'-petitioners' witnesses) on this point are relevant, to
wit:
Atty. Mojica, counsel for defendant Davao City:
xxx xxx xxx
The place where you live is right along the Agdao
creek, is that correct?
DANILO GARCIA:
A Yes, sir.
Q And to be able to go to the market place, where
you claim you have a stall,, you have to pass on the
septic tank?
A Yes, sir.
Q Day in and day out, you pass on top of the septic
tank?
A Yes, sir.
Q Is it not a fact that everybody living along the
creek passes on top of this septic tank as they go out
from the place and return to their place of residence,
is that correct?
And this septic tank, rather the whole of the septic
tank, is covered by lead . . .?
A Yes, sir. there is cover.

Q And there were three (3) of these lead covering

the septic tank?
A Yes, sir.
Q And this has always been closed?
A Yes, sir. (TSN, November 26, 1979, pp. 21-23,
emphasis supplied)
ATTY. JOVER, counsel for the plaintiffs:
Q You said you are residing at Davao City, is it not?
DAVID SEJOYA:
A Yes, sir.
Q How long have you been a resident of Agdao?
A Since 1953.
Q Where specifically in Agdao are you residing?
A At the Public Market.
Q Which part of the Agdao Public Market is your
house located?
A Inside the market in front of the fish section.
Q Do you know where the Agdao septic tank is
located?
A Yes, sir.
Q How far is that septic tank located from your
house?
A Around thirty (30) meters.
Q Have you ever had a chance to use that septic
tank (public toilet)?
A Yes, sir.
Q How many times, if you could remember?
A Many times, maybe more than 1,000 times.
Q Prior to November 22, 1975, have you ever used
that septic tank (public toilet)?
A Yes, sir.
Q How many times have you gone to that septic tank
(public toilet) prior to that date, November 22, 1975?
A Almost 1,000 times. (TSN, February 9, 1983, pp. 12)

The absence of any accident was due to the public respondent's

compliance with the sanitary and plumbing specifications in
constructing the toilet and the septic tank (TSN, November 4, 1983, p.
51). Hence, the toxic gas from the waste matter could not have leaked
out because the septic tank was air-tight (TSN, ibid, p. 49). The only
indication that the septic tank in the case at bar was full and needed
emptying was when water came out from it (TSN, September 13, 1983,
p. 41). Yet, even when the septic tank was full, there was no report of
any casualty of gas poisoning despite the presence of people living
near it or passing on top of it or using the public toilet for their
personal necessities.
Petitioners made a lot of fuss over the lack of any ventilation pipe in the
toilet to emphasize the negligence of the city government and presented
witnesses to attest on this lack. However, this strategy backfired on their
faces. Their witnesses were not expert witnesses. On the other hand,
Engineer Demetrio Alindada of the city government testified and
demonstrated by drawings how the safety requirements like emission of
gases in the construction of both toilet and septic tank have been complied
with. He stated that the ventilation pipe need not be constructed outside the
building as it could also be embodied in the hollow blocks as is usually done
in residential buildings (TSN, November 4, 1983, pp. 50-51). The petitioners
submitted no competent evidence to corroborate their oral testimonies or
rebut the testimony given by Engr. Alindada.
We also do not agree with the petitioner's submission that warning signs of
noxious gas should have been put up in the toilet in addition to the signs of
"MEN" and "WOMEN" already in place in that area. Toilets and septic tanks
are not nuisances per se as defined in Article 694 of the New Civil Code
which would necessitate warning signs for the protection of the public. While
the construction of these public facilities demands utmost compliance with
safety and sanitary requirements, the putting up of warning signs is not one
of those requirements. The testimony of Engr. Alindada on this matter is
elucidative:
ATTY. ALBAY:
Q Mr. Witness, you mentioned the several aspects of
the approval of the building permit which include the
plans of an architect, senitary engineer and electrical
plans. All of these still pass your approval as building
official, is that correct?
DEMETRIO ALINDADA:

A Yes.
Q So there is the sanitary plan submitted to and will
not be approved by you unless the same is in
conformance with the provisions of the building code
or sanitary requirements?
A Yes, for private building constructions.
Q How about public buildings?
A For public buildings, they are exempted for
payment of building permits but still they have to
have a building permit.
Q But just the same, including the sanitary plans, it
require your approval?
A Yes, it requires also.
Q Therefore, under the National Building Code, you
are empowered not to approve sanitary plans if they
are not in conformity with the sanitary requirements?
A Yes.
Q Now, in private or public buildings, do you see any
warning signs in the vicinity of septic tanks?
A There is no warning sign.
Q In residential buildings do you see any warning
sign?
A There is none.
ATTY. AMPIG:
We submit that the matter is irrelevant and
immaterial, Your Honor.
ATTY. ALBAY:
But that is in consonance with their crossexamination, your Honor.
COURT:
Anyway it is already answered.
ATTY. ALBAY:
Q These warning signs, are these required under the
preparation of the plans?
A It is not required.
Q I will just reiterate, Mr. Witness. In residences, for
example like the residence of Atty. Ampig or the

residence of the honorable Judge, would you say that

the same principle of the septic tank, from the water
closet to the vault, is being followed?
A Yes.
ATTY. ALBAY:
That will be all, Your Honor. (TSN, December 6, 1983,
pp. 62-63)
In view of this factual milieu, it would appear that an accident such as toxic
gas leakage from the septic tank is unlikely to happen unless one removes
its covers. The accident in the case at bar occurred because the victims on
their own and without authority from the public respondent opened the
septic tank. Considering the nature of the task of emptying a septic tank
especially one which has not been cleaned for years, an ordinarily prudent
person should undoubtedly be aware of the attendant risks. The victims are
no exception; more so with Mr. Bertulano, an old hand in this kind of service,
who is presumed to know the hazards of the job. His failure, therefore, and
that of his men to take precautionary measures for their safety was the
proximate cause of the accident. In Culion Ice, Fish and Elect. Co.,
v. Phil. Motors Corporation (55 Phil. 129, 133), We held that when a person
holds himself out as being competent to do things requiring professional
skill, he will be held liable for negligence if he fails to exhibit the care and
skill of one ordinarily skilled in the particular work which he attempts to
do (emphasis Ours). The fatal accident in this case would not have happened
but for the victims' negligence. Thus, the appellate court was correct to
observe that:
. . . Could the victims have died if they did not open the septic
tank which they were not in the first place authorized to open?
Who between the passive object (septic tank) and the active
subject (the victims herein) who, having no authority therefore,
arrogated unto themselves, the task of opening the septic tank
which caused their own deaths should be responsible for such
deaths. How could the septic tank which has been in existence
since the 1950's be the proximate cause of an accident that
occurred only on November 22, 1975? The stubborn fact remains
that since 1956 up to occurrence of the accident in 1975 no
injury nor death was caused by the septic tank. The only
reasonable conclusion that could be drawn from the above is that
the victims' death was caused by their own negligence in
opening the septic tank. . . . (Rollo, p. 23)

Petitioners further contend that the failure of the market master to supervise
the area where the septic tank is located is a reflection of the negligence of
the public respondent.
We do not think so. The market master knew that work on the septic tank
was still forthcoming. It must be remembered that the bidding had just been
conducted. Although the winning bidder was already known, the award to
him was still to be made by the Committee on Awards. Upon the other hand,
the accident which befell the victims who are not in any way connected with
the winning bidder happened before the award could be given. Considering
that the case was yet no award to commence work on the septic tank, the
duty of the market master or his security guards to supervise the work could
not have started (TSN, September 13, 1983, p. 40). Also, the victims could
not have been seen working in the area because the septic tank was hidden
by a garbage storage which is more or less ten (10) meters away from the
comfort room itself (TSN, ibid, pp. 38-39). The surreptitious way in which the
victims did their job without clearance from the market master or any of the
security guards goes against their good faith. Even their relatives or family
members did not know of their plan to clean the septic tank.
Finally, petitioners' insistence on the applicability of Article 24 of the New
Civil Code cannot be sustained. Said law states:
Art. 24. In all contractual, property or other relations, when one
of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age
or other handicap, the courts must be vigilant for his protection.
We approve of the appellate court's ruling that "(w)hile one of the
victims was invited to bid for said project, he did not win the bid,
therefore, there is a total absence of contractual relations between the
victims and the City Government of Davao City that could give rise to
any contractual obligation, much less, any liability on the part of Davao
City." (Rollo, p. 24) The accident was indeed tragic and We empathize
with the petitioners. However, the herein circumstances lead Us to no
other conclusion than that the proximate and immediate cause of the
death of the victims was due to their own negligence. Consequently,
the petitioners cannot demand damages from the public respondent.
ACCORDINGLY, the amended decision of the Court of Appeals dated January
11, 1990 is AFFIRMED. No costs.
SO ORDERED.
Narvasa, C.J., Cruz, Grio-Aquino and Bellosillo, JJ., concur.

G.R. No. 98695 January 27, 1993

JUAN J. SYQUIA, CORAZON C. SYQUIA, CARLOTA C. SYQUIA, CARLOS
C. SYQUIA and ANTHONY C. SYQUIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, and THE MANILA MEMORIAL
PARK CEMETERY, INC.,respondents.
Pacis & Reyes Law Offices for petitioners.
Augusto S. San Pedro & Ari-Ben C. Sebastian for private respondents.
CAMPOS, JR., J.:
Herein petitioners, Juan J. Syquia and Corazon C. Syquia, Carlota C. Syquia,
Carlos C. Syquia, and Anthony Syquia, were the parents and siblings,
respectively, of the deceased Vicente Juan Syquia. On March 5, 1979, they
filed a complaint 1 in the then Court of First Instance against herein private
respondent, Manila Memorial Park Cemetery, Inc. for recovery of damages
arising from breach of contract and/or quasi-delict. The trial court dismissed
the complaint.
The antecedent facts, as gathered by the respondent Court, are as follows:
On March 5, 1979, Juan, Corazon, Carlota and Anthony all
surnamed Syquia, plaintiff-appellants herein, filed a complaint for
damages against defendant-appellee, Manila Memorial Park
Cemetery, Inc.
The complaint alleged among others, that pursuant to a Deed of
Sale (Contract No. 6885) dated August 27, 1969 and Interment
Order No. 7106 dated July 21, 1978 executed between plaintiffappellant Juan J. Syquia and defendant-appellee, the former,
father of deceased Vicente Juan J. Syquia authorized and
instructed defendant-appellee to inter the remains of deceased
in the Manila Memorial Park Cemetery in the morning of July 25,
1978 conformably and in accordance with defendant-appellant's
(sic) interment procedures; that on September 4, 1978,
preparatory to transferring the said remains to a newly
purchased family plot also at the Manila Memorial Park
Cemetery, the concrete vault encasing the coffin of the deceased
was removed from its niche underground with the assistance of
certain employees of defendant-appellant (sic); that as the
concrete vault was being raised to the surface, plaintiffs-

appellants discovered that the concrete vault had a hole

approximately three (3) inches in diameter near the bottom of
one of the walls closing out the width of the vault on one end and
that for a certain length of time (one hour, more or less), water
drained out of the hole; that because of the aforesaid discovery,
plaintiffs-appellants became agitated and upset with concern
that the water which had collected inside the vault might have
risen as it in fact did rise, to the level of the coffin and flooded
the same as well as the remains of the deceased with ill effects
thereto; that pursuant to an authority granted by the Municipal
Court of Paraaque, Metro Manila on September 14, 1978,
plaintiffs-appellants with the assistance of licensed morticians
and certain personnel of defendant-appellant (sic) caused the
opening of the concrete vault on September 15, 1978; that upon
opening the vault, the following became apparent to the
plaintiffs-appellants: (a) the interior walls of the concrete vault
showed evidence of total flooding; (b) the coffin was entirely
damaged by water, filth and silt causing the wooden parts to
warp and separate and to crack the viewing glass panel located
directly above the head and torso of the deceased; (c) the entire
lining of the coffin, the clothing of the deceased, and the
exposed parts of the deceased's remains were damaged and
soiled by the action of the water and silt and were also coated
with filth.
Due to the alleged unlawful and malicious breach by the
defendant-appellee of its obligation to deliver a defect-free
concrete vault designed to protect the remains of the deceased
and the coffin against the elements which resulted in the
desecration of deceased's grave and in the alternative, because
of defendant-appellee's gross negligence conformably to Article
2176 of the New Civil Code in failing to seal the concrete vault,
the complaint prayed that judgment be rendered ordering
defendant-appellee to pay plaintiffs-appellants P30,000.00 for
actual damages, P500,000.00 for moral damages, exemplary
damages in the amount determined by the court, 20% of
defendant-appellee's total liability as attorney's fees, and
expenses of litigation and costs of suit. 2
In dismissing the complaint, the trial court held that the contract between
the parties did not guarantee that the cement vault would be waterproof;
that there could be no quasi-delict because the defendant was not guilty of

any fault or negligence, and because there was a pre-existing contractual

relation between the Syquias and defendant Manila Memorial Park Cemetery,
Inc.. The trial court also noted that the father himself, Juan Syquia, chose the
gravesite despite knowing that said area had to be constantly sprinkled with
water to keep the grass green and that water would eventually seep through
the vault. The trial court also accepted the explanation given by defendant
for boring a hole at the bottom side of the vault: "The hole had to be bored
through the concrete vault because if it has no hole the vault will (sic) float
and the grave would be filled with water and the digging would caved (sic) in
the earth, the earth would caved (sic) in the (sic) fill up the grave." 3
From this judgment, the Syquias appealed. They alleged that the trial court
erred in holding that the contract allowed the flooding of the vault; that there
was no desecration; that the boring of the hole was justifiable; and in not
awarding damages.
The Court of Appeals in the Decision 4 dated December 7, 1990 however,
affirmed the judgment of dismissal. Petitioner's motion for reconsideration
was denied in a Resolution dated April 25, 1991. 5
Unsatisfied with the respondent Court's decision, the Syquias filed the instant
petition. They allege herein that the Court of Appeals committed the
following errors when it:
1. held that the contract and the Rules and Resolutions of private
respondent allowed the flooding of the vault and the entrance
thereto of filth and silt;
2. held that the act of boring a hole was justifiable and corollarily,
when it held that no act of desecration was committed;
3. overlooked and refused to consider relevant, undisputed facts,
such as those which have been stipulated upon by the parties,
testified to by private respondent's witnesses, and admitted in
the answer, which could have justified a different conclusion;
4. held that there was no tort because of a pre-existing contract
and the absence of fault/negligence; and
5. did not award the P25,000.00 actual damages which was
agreed upon by the parties, moral and exemplary damages, and
attorney's fees.
At the bottom of the entire proceedings is the act of boring a hole by private
respondent on the vault of the deceased kin of the bereaved petitioners. The
latter allege that such act was either a breach of private respondent's
contractual obligation to provide a sealed vault, or, in the alternative, a
negligent act which constituted a quasi-delict. Nonetheless, petitioners claim

that whatever kind of negligence private respondent has committed, the

latter is liable for desecrating the grave of petitioners' dead.
In the instant case, We are called upon to determine whether the Manila
Memorial Park Cemetery, Inc., breached its contract with petitioners; or,
alternatively, whether private respondent was guilty of a tort.
We understand the feelings of petitioners and empathize with them.
Unfortunately, however, We are more inclined to answer the foregoing
questions in the negative. There is not enough ground, both in fact and in
law, to justify a reversal of the decision of the respondent Court and to
uphold the pleas of the petitioners.
With respect to herein petitioners' averment that private respondent has
committed culpa aquiliana, the Court of Appeals found no negligent act on
the part of private respondent to justify an award of damages against it.
Although a pre-existing contractual relation between the parties does not
preclude the existence of a culpa aquiliana, We find no reason to disregard
the respondent's Court finding that there was no negligence.
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a
quasi-delict . . . . (Emphasis supplied).
In this case, it has been established that the Syquias and the Manila
Memorial Park Cemetery, Inc., entered into a contract entitled "Deed of
Sale and Certificate of Perpetual Care" 6 on August 27, 1969. That
agreement governed the relations of the parties and defined their
respective rights and obligations. Hence, had there been actual
negligence on the part of the Manila Memorial Park Cemetery, Inc., it
would be held liable not for a quasi-delict orculpa aquiliana, but
for culpa contractual as provided by Article 1170 of the Civil Code, to
wit:
Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.
The Manila Memorial Park Cemetery, Inc. bound itself to provide the concrete
box to be send in the interment. Rule 17 of the Rules and Regulations of
private respondent provides that:
Rule 17. Every earth interment shall be made enclosed in a
concrete box, or in an outer wall of stone, brick or concrete, the

actual installment of which shall be made by the employees of

the Association. 7
Pursuant to this above-mentioned Rule, a concrete vault was provided on July
27, 1978, the day before the interment, and was, on the same day, installed
by private respondent's employees in the grave which was dug earlier. After
the burial, the vault was covered by a cement lid.
Petitioners however claim that private respondent breached its contract with
them as the latter held out in the brochure it distributed that the . . . lot may
hold single or double internment (sic) underground in sealed concrete
vault." 8 Petitioners claim that the vault provided by private respondent was
not sealed, that is, not waterproof. Consequently, water seeped through the
cement enclosure and damaged everything inside it.
We do not agree. There was no stipulation in the Deed of Sale and Certificate
of Perpetual Care and in the Rules and Regulations of the Manila Memorial
Park Cemetery, Inc. that the vault would be waterproof. Private respondent's
witness, Mr. Dexter Heuschkel, explained that the term "sealed" meant
"closed." 9 On the other hand, the word "seal" is defined as . . . any of various
closures or fastenings . . . that cannot be opened without rupture and that
serve as a check against tampering or unauthorized opening." 10 The
meaning that has been given by private respondent to the word conforms
with the cited dictionary definition. Moreover, it is also quite clear that
"sealed" cannot be equated with "waterproof". Well settled is the rule that
when the terms of the contract are clear and leave no doubt as to the
intention of the contracting parties, then the literal meaning of the
stipulation shall control. 11 Contracts should be interpreted according to their
literal meaning and should not be interpreted beyond their obvious
intendment. 12 As ruled by the respondent Court:
When plaintiff-appellant Juan J. Syquia affixed his signature to the
Deed of Sale (Exhibit "A") and the attached Rules and
Regulations (Exhibit "1"), it can be assumed that he has
accepted defendant-appellee's undertaking to merely provide a
concrete vault. He can not now claim that said concrete vault
must in addition, also be waterproofed (sic). It is basic that the
parties are bound by the terms of their contract, which is the law
between them (Rizal Commercial Banking Corporation vs. Court
of Appeals, et al. 178 SCRA 739). Where there is nothing in the
contract which is contrary to law, morals, good customs, public
order, or public policy, the validity of the contract must be
sustained (Phil. American Insurance Co. vs. Judge Pineda, 175

SCRA 416). Consonant with this ruling, a contracting party

cannot incur a liability more than what is expressly specified in
his undertaking. It cannot be extended by implication, beyond
the terms of the contract (Rizal Commercial Banking Corporation
vs. Court of Appeals, supra). And as a rule of evidence, where the
terms of an agreement are reduced to writing, the document
itself, being constituted by the parties as the expositor of their
intentions, is the only instrument of evidence in respect of that
agreement which the law will recognize, so long as its (sic) exists
for the purpose of evidence (Starkie, Ev., pp. 648, 655,
Kasheenath vs. Chundy, 5 W.R. 68 cited in Francisco, Revised
Rules of Court in the Phil. p. 153, 1973 Ed.). And if the terms of
the contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of its stipulations
shall control (Santos vs. CA, et al., G. R. No. 83664, Nov. 13,
1989; Prudential Bank & Trust Co. vs. Community Builders Co.,
Inc., 165 SCRA 285; Balatero vs. IAC, 154 SCRA 530). 13
We hold, therefore, that private respondent did not breach the tenor of its
obligation to the Syquias. While this may be so, can private respondent be
liable for culpa aquiliana for boring the hole on the vault? It cannot be denied
that the hole made possible the entry of more water and soil than was
natural had there been no hole.
The law defines negligence as the "omission of that diligence which is
required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place." 14 In the absence
of stipulation or legal provision providing the contrary, the diligence to be
observed in the performance of the obligation is that which is expected of a
good father of a family.
The circumstances surrounding the commission of the assailed act boring
of the hole negate the allegation of negligence. The reason for the act was
explained by Henry Flores, Interment Foreman, who said that:
Q It has been established in this particular case that
a certain Vicente Juan Syquia was interred on July 25,
1978 at the Paraaque Cemetery of the Manila
Memorial Park Cemetery, Inc., will you please tell the
Hon. Court what or whether you have participation in
connection with said internment (sic)?
A A day before Juan (sic) Syquia was buried our
personnel dug a grave. After digging the next

morning a vault was taken and placed in the grave

and when the vault was placed on the grave a hole
was placed on the vault so that water could come
into the vault because it was raining heavily then
because the vault has no hole the vault will float and
the grave would be filled with water and the digging
would caved (sic) in and the earth, the earth would
(sic) caved in and fill up the grave. 15 (Emphasis ours)
Except for the foreman's opinion that the concrete vault may float should
there be a heavy rainfall, from the above-mentioned explanation, private
respondent has exercised the diligence of a good father of a family in
preventing the accumulation of water inside the vault which would have
resulted in the caving in of earth around the grave filling the same with
earth.
Thus, finding no evidence of negligence on the part of private respondent,
We find no reason to award damages in favor of petitioners.
In the light of the foregoing facts, and construed in the language of the
applicable laws and jurisprudence, We are constrained to AFFIRM in toto the
decision of the respondent Court of Appeals dated December 7, 1990. No
costs.
SO ORDERED.
Narvasa, C.J., Feliciano, Regalado and Nocon, JJ., concur.

G.R. No. 130057 December 22, 1998

HERMOGINA U. BULILAN, petitioner,
vs.
COMMISSION ON AUDIT, respondent.
PURISIMA, J.:
At bar is a petition for review on certiorari under Rule 45 of the Revised Rules
of Court seeking to set aside the Decision of the Commission on Audit 1 dated
June 20, 1995 in COA Decision No. 95-384.
From the records on hand, the facts that matter can be culled, as follows:
Petitioner Hermogina U. Bulilan was the Cashier of Visaya State College of
Agriculture (VISCA, for brevity) in Baybay, Leyte, whose responsibility, as
such Cashier, was to prepare the payroll of employees of said State College.

As the first quincina of the March payroll was due on March 12, 1990, on
March 9, 1990, a Friday, petitioner withdrew from the Land Bank Branch in
Tacloban City, the needed amount. Since she was scheduled to leave for
Baguio City on the day the said payroll was to be released, according to
petitioner, she and her staff rendered overtime service without pay on March
10, a Saturday, and on March 11, a Sunday, to make sure that payment of
salaries of the employees would be on time.
The methodology adopted by petitioner in preparing the salaries of
employees was simple. It was based on the standard practice of government
offices, by placing the net pay of every employee in individual pay
envelopes. When the corresponding amounts were put in the pay envelopes,
the same became too bulky for the Mosler safeof petitioner to accomodate.
Confronted with the problem, she placed such pay envelopes in a steel
cabinet without a lock. According to petitioner, when she left her office, she
saw to it that its main door was double-locked.
On the night of March 11, 1990, a robbery took place at the Cashier's Office
of VISCA resulting to the loss of government funds amounting to Five
Hundred Sixty-Six Thousand Four Hundred Sixty-Eight and 91/100 NinetyOne (P566,468.91) Pesos.
With respect to the robbery under inquiry, Mr. Dominador Ugsang, Chief
Security Officer of VISCA, submitted the following report, to wit:
At around 8:30 a.m. on March 12, 1990, personnel of the Cash
Division discovered that the Cashier's Office had been robbed . . .
.
. . ., the undersigned (Mr. Ugsang, supplied) assisted the NBI
personnel in pin pointing traces of fingerprints on window glasses
left by the culprit. We also traced the route of the culprit in going
to the Cashier's Office. We noted that the route taken could only
be done by one who is very familiar with the building. The culprit
gained entrance to the building using the fire exit. From there, he
was able to enter the Personnel Office by pushing the sliding
frame. From the Personnel Office, he passed through the Office of
Business Affairs and to the Budget Office. From the Budget Office
he again pushed the sliding frame inorder to reach the window
(Northern Side) of the Cashier's Office. To gain entrance to the
Cashier's Office, the culprit lifter up the iron grills of the sliding
frame. The culprit was able to get the envelopes containing the
salaries of VISCA staff placed inside a steel cabinet . . . 2

Because of what happened, petitioner cancelled her trip to Baguio City and
reported the incident to the authorities concerned.
On March 27, 1990, petitioner wrote the Commission on Audit begging to be
relieved of accountability for the loss of subject government funds allegedly
taken by robbers, invoking Section 73 of P.D. 1445. But on June 20, 1995, the
Commission on Audit denied petitioner's plea for relief from responsibility;
ruling, thus:
Premises considered, and in view of the definite proof of
negligence on the part of Mrs. Hermogina Bulilan in the
safekeeping of subject government funds and considering further
the adverse recommendation of the resident auditor of VISCA
and the Director, COA Regional Office No. VIII, this Commission
hereby denies the instant request for relief from accountability. 3
With the denial of her motion for reconsideration, petitioner found her way to
this Court via the petition under scrutiny, faulting the Commission on Audit
for not absolving her of responsibility, and for adjudging her negligent and
answerable for the loss of the government funds involved.
Petitioner theorizes that what she did was what any reasonable person would
have done under the attendant facts and circumstances and therefore, she
should not be held liable for the effects of what she calls a fortuitous event
over which she had no control.
Did the Commission on Audit err in not absolving petitioner of any liability
and in holding her guilty of negligence, under the premises? On this crucial
issue, we rule against the petitioner. The action of respondent Commission
on the matter accords with law and the evidence.
To begin with, the petition for review under Rule 45 availed of by petitioner is
not an appropriate remedy for the problem at hand. Under her present
petition, only question of law may be raised. 4 Questions of fact, such as the
presence or absence of negligence on the part of petitioner in the handling
or custody of subject public funds, cannot be looked into and determined
under Rule 45. Succinct is the provision of Article IX-A, Section 7 of the
Constitution of the Republic of the Philippines that decisions, orders or
rulings of the Commission on Audit may be brought to the Supreme Court
on certiorari by the aggrieved party within thirty (30) days from receipt of a
copy thereof. Rule 65 of the Revised Rules of Court prescribes such a remedy.
The denial by respondent Commission of petitioner's prayer for exoneration
is premised on the November 24, 1992 Report 5 of Director Santos M.
Alquizalas of the Commission on Audit, Regional Office VIII, finding petitioner
negligent, and ratiocinating, thus:

xxx xxx xxx

As noted during the ocular inspection, the Cash Division of
VISCA, the scene of the robbery incident, had a concrete vault
with double steel doors both secured by big Yale padlocks. This
concrete vault is the one referred to by Mrs. Bulilan in her letter
dated July 11, 1991 as the "locked room" utilized as storage for
accountable forms and office supplies.
It is the opinion of this Office that the concrete vault is more
secured for safekeeping purposes compared to the "unlocked
storage cabinet" where the subject payroll money was placed.
While it is true that the concrete vault could not be seen directly
by the guard on duty at the lobby, the same is true also insofar
as the storage cabinet is concerned . . . The contention (of Mrs.
Bulilan) therefore that "the storage cabinet is strategically placed
in an area which can be seen directly by the guard on duty" is
misleading.
xxx xxx xxx
Another factor to be considered is the failure of Mrs. Bulilan to
turn over the payroll money to Ms. Anecia Fernandez, the
Disbursing Officer. As established/confirmed by the Resident
Auditor, the accountable officer concerned did not travel to
Tacloban City on March 9, 1990, a Friday, but only to Ormoc City.
On the following day, Saturday, and Sunday, March 10-11, 1990,
Mrs. Bulilan, with the help of two (2) casual clerk, did the placing
of the payroll money in the pay envelopes (sacking). It was only
on March 12, 1990, a Monday, that she went to Tacloban City
where she was overtaken by the news of the robbery. . . .
To buttress her plea for reversal of the finding adverse to her, petitioner
argues, that:
The contention by COA that it would have been safe had
petitioner placed the bulky envelopes in the concrete vault is
unsustaining. Calling that concrete room a concrete vault is a
misnomer, it appearing that indeed the original plan was to
construct a concrete vault in said area, but because of financial
constraint, said plan was never fully implemented. Only a
concrete room was made minus the vault . . . The ocular
inspection conducted by the C[O]A Regional Director indicated
the safe manner to place the money in said room, and this was
so because right after the robbery incident, former President

(Marianito R.) Villanueva (of VISCA), in order to cover up his

negligence as the responsible official of VISCA funds, hurriedly
improved the safety of government money by the first, buying
for a bigger safe and improving the lock mechanism of the
concrete room instead of only an ordinary lock during petitioner's
time . . .
. . ., the allegation of the Auditor that petitioner did not travel to
Tacloban City on March 9, 1990 but only to Ormoc City is utterly
misplaced. It is true that petitioner was scheduled on March 9,
1990 to Ormoc [C]ity to withdraw and deposit funds. However, at
around 9:45 a.m., she was called by Prof. Camilo D. Villanueva,
her immediate boss at that time, together with Anecia C.
Fernandez, Disbursing Officer, in the office and was informed
about a radio message Prof. Camilo Villanueva received from Dr.
Leonardo Manalo, Liason Officer based in Manila that VISCA
money was transmitted to Land Bank Tacloban [C]ity. Hence, Prof
[.] Villanueva directed petitioner to immediately proceed to
Tacloban City and verify if the money was already received by
said bank before proceeding to Ormoc City. Because of that order
and since the preparation of the remittance advice was not yet
through when petitioner left, hence, petitioner failed to bring it
with her to Tacloban City then to Ormoc. Stress is laid here that
petitioner and companion left VISCA at around 10:00 in the
morning and arrived past 5:00 o'clock (in the afternoon). If
petitioner was only in Ormoc City, she could be back during lunch
time because Ormoc is just few 38 kilometers away, more or less
from VISCA.
The petition under consideration is premised on alleged misappreciation of
facts by the respondent Commission. However, well settled is the rule that
"the findings or conclusions of administrative bodies are generally respected
and even given finality." 6 In Vicente Villaflor vs. Court of Appeals, 280 SCRA
297 [1997], the Court elucidated:
By reason of the special knowledge and expertise of said
administrative agencies over matters falling under their
jurisdiction, they are in a better position to pass judgment
thereon; thus, their findings of fact in that regard are generally
accorded reat respect, if not finality, by the courts. The findings
of fact of an administrative agency must be respected as long as
they are supported by substantial evidence, even if such

evidence might not be overhelming or even preponderant. It is

not the task of an appellate court to weigh once more the
evidence submitted before the administrative body and to
substitute its own judgment for that of the administrative agency
in respect of sufficiency of evidence.
After a careful examination of the records on hand, it can be gleaned
therefrom that the findings of fact by the respondent Commission are duly
supported by substantial evidence. Subject COA Decision was based on the
November 24, 1992 Report of Mr. Santos M. Alquizalas, COA Director for
Regional Office VIII, April 8, 1992 Report of Salvador L. Paril, resident Auditor
of VISCA, and the Ad Hoc Committee Report 7, as shown by Memorandum No.
166, series of 1990. 8
On the merits of the case, the Court is of the opinion, and so holds, that the
respondent Commission did not err in finding the herein petitioner guilty of
negligence.
Negligence is defined as "the omission to do something which a reasonable
man, guided upon those considerations which ordinarily regulate the conduct
of human affairs, would do, or the doing of something which a prudent man
and reasonable man could not do." 9 Stated otherwise, negligence is want of
care required by the circumstances. 10
Negligence is therefore a relative or comparative concept. Its application
depends upon the situation the parties are in, and the degree of care and
vigilance which the prevailing circumstances reasonably require.
Conformably, the diligence which the law requires an individual to observe
and exercise varies according to the nature of the situation in which happens
to be, and the importance of the act which he has to perform. 11
Applying the above contemplation of negligence to the case at bar, the
irresistible finding and conclusion is that the herein petitioner was negligent
in the performance of her duties as Cashier. She did not do her best, as
dictated by the attendant circumstances, to safeguard the public funds
entrusted to her, as such Cashier.
Upon verification and ocular inspection conducted by the Resident Auditor,
and as confirmed by the COA Director for Regional Office VIII, it was found
out that VISCA had a concrete vault/room with a steel door secured by a big
Yale padlock, which was very much safer than the unlocked storage cabinet
in which petitioner placed the government funds in question. It is irrefutable
that a locked vault/room is safer than an unlocked storage cabinet.
What is more, the storage cabinet where subject payroll money and
collections were kept could not be readily seen by the guard on duty who

was usually posted near the main entrance of the building. The said storage
cabinet could only be seen by the guard whenever he would go to the teller's
window and peep sideways to the left through the window glass.
Furthermore, it is worthy to consider against the petitioner her failure to
follow the frequency of deposit prescribed by Joint COA-MOF Circular No. 181. It was firmly established that she did not make a single deposit during
the month of March, 1990. Had she complied with the said circular, the illfated government funds would not have been exposed to the danger of
robbery. Not only that, the failure of petitioner to turn over to Ms. Anicia C.
Fernandez, VISCA Disbursing Officer, the payroll money and collections to be
needed by the school while she was out on travel was another indication of
her non-compliance with the internal rules of VISCA.
All things studiedly considered, we are of the ineluctable conclusion that the
respondent Commission on Audit correctly denied petitioner's request for
relief from responsibility. Section 73 of P.D. 1445, provides:
Credit for loss occuring in transit or due to casualty or force
majeure (1) When a loss of government funds or property
occurs while they are in transit or the loss is caused by fire, theft,
or other casualty or force majuere, the office accountable
therefor or having custody thereof shall immediately notify the
Commission or the Auditor concerned and, within thirty days or
such longer period as the Commission or Auditor may in the
particular case allow, shall present his application for relief, with
the available supporting evidence. Whenever warranted by the
evidence credit for the loss shall be allowed. An officer who fails
to comply with this requirement shall not be relieved of liability
or allowed credit for any loss in the settlement of his accounts.
WHEREFORE, the petition is hereby DENIED for being an improper remedy,
and for lack of merit, and COA Decision No. 95-384 AFFIRMED in its entirely.
No pronouncement as to costs.
SO ORDERED.
Davide, Jr., C.J., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza,
Panganiban, Martinez, Quisumbing and Pardo, JJ., concur.

G.R. No. 85331 August 25, 1989

KAPALARAN BUS LINE, petitioner,
vs.

ANGEL CORONADO, LOPE GRAJERA, DIONISIO SHINYO, and THE

COURT OF APPEALS, respondents,
Leopoldo M. Consunto for petitioner.
Danilo S. Cruz for intervenor-appellee.
Conrado Manicad for private respondents.
FELICIANO, J.:
Petitioner Kapalaran Bus Line ("Kapalaran") seeks the reversal or
modification of the Court of Appeals' decision in CA G.R. CV No. 12476 and
the absolution of petitioner from all liability arising from the collision between
one of petitioner's buses and a jeepney owned by respondent Coronado,
driven by respondent Grajera and in which jeepney respondent Shinyo was a
passenger.
The facts of this case as found by the trial court and adopted by the Court of
Appeals, are summarized in the trial court's decision and quoted in the Court
of Appeals' own judgment in the following terms:
The accident happened on the National Highway at 10:30 A.M. on
August 2, 1982. The jeepney driven by Lope Grajera was then
corning from Pila, Laguna on its way towards the direction of Sta.
Cruz, traversing the old highway. As it reached the intersection
where there is a traffic sign 'yield,' it stopped and cautiously
treated the intersection as a "Thru Stop' street, which it is not.
The KBL bus was on its way from Sta. Cruz, Laguna, driven by its
regular driver Virgilio Llamoso, on its way towards Manila. The
regular itinerary of the KBL bus is through the town proper of
Pila, Laguna, but at times it avoids this if a bus is already fully
loaded with passengers and can no longer accommodate
additional passengers. As the KBL bus neared the intersection,
Virgilio Llamoso inquired from his conductor if they could still
accommodate passengers and learning that they were already
full, he decided to bypass Pila and instead, to proceed along the
national highway. Virgilio Llamoso admitted that there was
another motor vehicle ahead of him.
The general rule is that the vehicle on the national highway has
the right-of-way as against a feeder road. Another general rule is
that the vehicle coming from the right has the right-of-way over
the vehicle coming from the left. The general rules on right-ofway may be invoked only if both vehicles approach the
intersection at almost the same time. In the case at bar, both

roads are national roads. Also, the KBL bus was still far from the
intersection when the jeepney reached the same. As testified to
by Atty. Conrado L. Manicad who was driving a Mustang car
coming from the direction of Sta. Cruz and proceeding towards
the direction of Manila, he stopped at the intersection to give
way to the jeepney driven by Grajera. Behind Manicad were two
vehicles, a car of his client and another car. A Laguna Transit bus
had just entered the town of Pila ahead of Atty. Manicad.
The sketch marked Exhibit 'E' indicates very clearly that the
jeepney had already traversed the intersection when it met the
KBL bus head-on. It is also obvious that the point of impact was
on the right lane of the highway which is the lane properly
belonging to the jeepney. As testified to by Lope Grajera, the KBL
bus ignored the stopped vehicles of Atty. Manicad and the other
vehicles behind Atty. Manicad and overtook both vehicles at the
intersection, therefore, causing the accident.
Judging from the testimony of Atty. Conrado L. Manicad and the
sketch (Exhibit 'E'), the sequence of events shows that the first
vehicle to arrive at the intersection was the jeepney. Seeing that
the road was clear, the jeepney which had stopped at the
intersection began to move forward, and for his part, Atty.
Manicad stopped his car at the intersection to give way to the
jeepney. At about this time, the KBL bus was approaching the
intersection and its driver was engaged in determining from his
conductor if they would still pass through the town proper of Pila.
Upon learning that they were already full, he turned his attention
to the road and found the stopped vehicles at the intersection
with the jeepney trying to cross the intersection. The KBL bus
had no more room within which to stop without slamming into
the rear of the vehicle behind the car of Atty. Manicad. The KBL
driver chose to gamble on proceeding on its way, unfortunately,
the jeepney driven by Grajera, which had the right-of-way, was
about to cross the center of the highway and was directly on the
path of the KBL bus. The gamble made by Llamoso did not pay
off. The impact indicates that the KBL bus was travelling at a fast
rate of speed because, after the collision, it did not stop; it
travelled for another 50 meters and stopped only when it hit an
electric post (pp. 3-4, Decision; pp. 166167, Record). 1

On 14 September 1982, Kapalaran, apparently believing that the best

defense was offense, filed a complaint for damage to property and physical
injuries through reckless imprudence against respondents Angel Coronado
and Lope Grajera in the Regional Trial Court, Branch 27, Sta. Cruz, Laguna.
Respondents answered with their own claims (counter-claims) for damages.
A third-party complaint and/or a complaint for intervention was also filed in
the same case against Kapalaran by jeepney passenger Dionisio Shinyo.
On 15 October 1986, after trial, the trial court rendered a judgment in favor
of private respondents and ordering Kapalaran
(a) to pay Angel Coronado the sum of P40,000.00 as
compensation for the totally wrecked jeepney, plus the sum of
P5,000.00 as attorney's fees and litigation expenses, and
(b) to Dionisio Shinyo the sum of P35,000.00 representing the
expenses incurred by said intervenor for his treatment including
his car-hire, the further sum of P30,000.00 representing the
expenses said defendant will incur for his second operation to
remove the intramedulary nail from his femur, the additional sum
of P50,000.00 to serve as moral damages for the pain and
suffering inflicted on said defendant, plus the sum of P10,000.00
in the concept of exemplary damages to serve as a deterrent to
others who, like the plaintiff, may be minded to induce accident
victims to perjure themselves in a sworn statement, and the sum
of P15,000.00 as attorney's fees and litigation expenses.
From the above judgment, Kapalaran appealed to the Court of Appeals
assailing the trial court's findings on the issue of fault and the award of
damages. The Court of Appeals, on 28 June 1988, affirmed the decision of
the trial court but modified the award of damages by setting aside the grant
of exemplary damages as well as the award of attomey's fee and litigation
expenses made to Dionisio Shinyo. 2
This decision of the Court of Appeals is now before us on a Petition for
Review, a motion for reconsideration by Kapalaran having been denied by
that court on 13 October 1988.
Kapalaran assails the findings of fact of the Regional Trial Court and of the
Court of Appeals, and insists before this Court that respondent Grajera,
driver of the jeepney, was at fault and not the driver of Kapalaran's bus. It
must be remembered that it is not the function of this Court to analyze and
weigh evidence presented by the parties all over again and that our
jurisdiction is in principle limited to reviewing errors of law that might have
been committed by the Court of Appeals. Kapalaran has made no compelling

showing of any misapprehension of facts on the part of the Court of Appeals

that would require us to review and overturn the factual findings of that
court. On the contrary, examination of the record shows that not only are the
conclusions of fact of the Court of Appeals and the trial court on who the
bus driver or the jeepney driver had acted negligently and was at fault in
the collision of their vehicles, amply supported by the evidence of record, but
also that Kapalaran's bus driver was grossly negligent and had acted
wantonly and in obvious disregard of the applicable rules on safety on the
highway.
Kapalaran's driver had become aware that some vehicles ahead of the bus
and travelling in the same direction had already stopped at the intersection
obviously to give way either to pedestrians or to another vehicle about to
enter the intersection. The bus driver, who was driving at a speed too high to
be safe and proper at or near an intersection on the highway, and in any
case too high to be able to slow down and stop behind the cars which had
preceded it and which had stopped at the intersection, chose to swerve to
the left lane and overtake such preceding vehicles, entered the intersection
and directly smashed into the jeepney within the intersection. Immediately
before the collision, the bus driver was actually violating the following traffic
rules and regulations, among others, in the Land Transportation and Traffic
Code, Republic Act No. 4136, as amended:
Sec. 35. Restriction as to speed. (a) Any person driving a
motor vehicle on a highway shall drive the same at a careful and
prudent speed, not greater nor less than is reasonable and
proper, having due regard for the traffic, the width of the
highway, and or any other condition then and there existing;
and no person shall drive any motor vehicle upon a highway at
such a speed as to endanger the life, limb and property of any
person, nor at a speed greater than will permit him to bring the
vehicle to a stop within the assured clear distance ahead.
xxx xxx xxx
Sec. 41. Restrictions on overtaking and passing. _1 (a) The driver
of a vehicle shall not drive to the left side of the center line of a
highway in overtaking or passing another vehicle, proceeding in
the same direction, unless such left side is clearly visible, and is
free of oncoming traffic for a sufficient distance ahead to permit
such overtaking or passing to be made in safety.
xxx xxx xxx

(c) The driver of a vehicle shall not overtake or pass any other
vehicle proceeding in the same direction, at any railway grade
crossing, or at any intersection of highways, unless such
intersection or crossing is controlled by traffic signal, or unless
permitted to do so by a watchman or a peace officer, except on a
highway having two or more lanes for movement of traffic in one
direction where the driver of a vehicle may overtake or pass
another vehicle on the right. Nothing in this section shall be
construed to prohibit a driver overtaking or passing, upon the
right, another vehicle which is making or about to make a left
turn.
xxx xxx xxx
(Emphasis supplied)
Thus, a legal presumption arose that the bus driver was negligent
presumption Kapalaran was unable to overthrow.

Petitioner's contention that the jeepney should have stopped before entering
the "Y-intersection" because of the possibility that another vehicle behind the
cars which had stopped might not similarly stop and might swerve to the left
to proceed to the highway en route to Manila, is more ingenious than
substantial. It also offers illustration of the familiar litigation tactic of shifting
blame from one's own shoulders to those of the other party. But the jeepney
driver, seeing the cars closest to the intersection on the opposite side of the
highway come to a stop to give way to him, had the right to assume that
other vehicles further away and behind the stopped cars would similarly
come to a stop and not seek illegally to overtake the stopped vehicles and
come careening into the intersection at an unsafe speed. 4 Petitioner's bus
was still relatively far away from the intersection when the jeepney entered
the same; the bus collided head on into the jeepney because the bus had
been going at an excessively high velocity immediately before and at the
time of overtaking the stopped cars, and so caught the jeepney within the
intersection. It was also the responsibility of the bus driver to see to it, when
it overtook the two (2) cars ahead which had stopped at the intersection,
that the left lane of the road within the intersection and beyond was clear.
The point of impact was on the left side of the intersection (the light lane so
far as concerns the jeepney coming from the opposite side), which was
precisely the lane or side on which the jeepney had a right to be.
Petitioner Kapalaran also assails the award of moral damages against itself,
upon the ground that its own bus driver, third-party defendant, was
apparently not held liable by the trial court . 5 Hence, Kapalaran argues that

there was no justification for holding it, the employer, liable for damages,
considering that such liability was premised upon the bus driver's negligence
and that petitioner "as mere employer" was not guilty of such negligence or
imprudence. 6 This contention in thoroughly unpersuasive. The patent and
gross negligence on the part of the petitioner Kapalaran's driver raised the
legal presumption that Kapalaran as employer was guilty of negligence
either in the selection or in the supervision of its bus driver, 7 Where the
employer is held liable for damages, it has of course a right of recourse
against its own negligent employee. If petitioner Kapalaran was interested in
maintaining its right of recourse against or reimbursement from its own
driver, 8 it should have appealled from that portion of the trial court's
decision which had failed to hold the bus driver is not "merely subsidiary,"
and is not limited to cases where the employee "cannot pay his liability" nor
are private respondents compelled frist to proceed against the bus driver.
The liability of the employer under Article 2180 of the Civil Code is direct and
immediate; it is not conditioned upon prior recourse against the negligent
employee and a prior showing of the insolvency of such employee. 9 So far as
the record shows, petitioner Kapalaran was unable to rebut the presumption
of negligence on its own part. The award of moral damages against
petitioner Kapalaran is not only entirely in order; it is also quite modest
consideirng Dionisio Shinyo's death during the pendency of this petition, a
death hastened by, if not directly due to, the grievous injuries sustained by
him in the violent collision.
The Court of Appeals deleted the award of exemplary damages which the
trial court had granted in order "to serve as a deterrent to others who, like
the plaintiff [Kapalaran], may be minded to induce accident victims to
perjure themselves in a sworn statement." The Court of Appeals held that
htere was no basis for this award of exemplary damages, stating that it was
not "such a reprehensible act to try to gather witnesses for one's cause" and
that there was no evidence of use of "presure or influence" to induce the
accident victims to perjure themselves While that might have been so, both
the trial court and the Court of Appeals overlook another and far more
compelling basis for the award of exemplary damages against petitioner
Kapalaran in this case. There is no question that petitioner's bus driver was
grossly and very probably criminally negligent in his reckless disregard of the
rights of other vehicles and their pasangers and of pedestrian as well The
Court is entitled to take judicial notice of the gross negligence and the
appalling disregard of the physical safety and property of others so
commonly exhibited today by the drivers of passanger bussses and similar
vehicles on our highways. The law requires petitioner as common carrier to

exercise extraordinary diligence incarrying and transporting their passanger

safely "as far as human care and foresight can proved, using the utmost
diligence of very cautious persons, with due regard for all
circumstances." 10 In requiring the highest possible degree of diligence from
common carriers and creating a presumption of negligence against them, the
law compels them to curb the recklessness of their drivers. 11 While the
immediate beneficiaries of the standard of extraordinary diligence are, of
course, the passengers and owners of cargo carried by a common carrier,
they are not only persons that the law seeks to benefit. For if common
carriers carefully observed the statutory standard of extraordinary diligence
in respect of of their own passengers, they cannot help but simultaneously
benefit pedestrians and the owners and passengers of other vehicles who
are equally entitled to the safe and convenient use of our roads and
highways. 12 The law seeks to stop and prevent the slaughter and maiming of
people (whether passengers or not) and the destruction of property (whether
freight or not) on our highways by buses, the very size and power of which
seem often to inflame the minds of their drivers. Article 2231 of the Civil
Code explicitly authorizes the imposition of exemplary damages in cases of
quasi-delicts "if the defendant acted with gross negligence." Thus we believe
that the award of exemplary damages by the trial court was quite proper,
although granted for the wrong reason, and should not only be restored but
augmented in the present case. The Court is aware that respondent Shinyo
did not file a separate petition for review to set aside that portion of the
Court of Appeals'decision which deleted the grant by the trial court of
exemplary damages. It is settled, however, that issues which must be
resolved if substantial justice is to be rendered to the parties, may and
should be considered and decided by this Court even if those issues had not
been explicitly raised by the party affected. 13 In the instant case, it is not
only the demands of substantial justice but also the compelling
considerations of public policy noted above, which impel us to the conclusion
that the trial court's award of exemplary damages was erroneously deleted
and must be restored and brought more nearly to the level which public
policy and substantial justice require.
In much the same vein, we believe that the award by the trial court of
P15,000.00 as attorney's fees and litigation expenses, deleted by the Court
of Appeals, should similarly be restored, being both authorized by law 14 and
demanded by substantial justice in the instant case.
WHEREFORE, the Petition for Review on certiorari is DENIED for lack of merit
and the Decision of the Court of Appeals is hereby AFFIRMED, except (1) that
the award of exemplary damages to Dionisio Shinyo shall be restored and

increased from P10,000.00 to P25,000.00, and (2) that the grant of

attorney's fees and litigation expenses in the sum of P15,000.00 to Dionisio
Shinyo shall similarly be restored. Costs against petitioner.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.
G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON
CARRIER. Article 1732 of the Civil Code defines a common carrier as "(a)
person, corporation or firm, or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water or air,
for compensation, offering their services to the public." The test to determine
a common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business
transacted." . . . The holding of the Court in De Guzman vs. Court of Appeals
is instructive. In referring to Article 1732 of the Civil Code, it held thus: "The
above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as a "sideline"). Article
1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguished between a carrier offering its
services to the "general public," i.e., the general community or population,
and one who offers services or solicits business only from a narrow segment
of the general population. We think that Article 1732 deliberately refrained
from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED;
WHEN PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION
OVERCAME; WHEN PRESUMPTION MADE ABSOLUTE. Common carriers are
obliged to observe extraordinary diligence in the vigilance over the goods
transported by them. Accordingly, they are presumed to have been at fault
or to have acted negligently if the goods are lost, destroyed or deteriorated.

There are very few instances when the presumption of negligence does not
attach and these instances are enumerated in Article 1734. In those cases
where the presumption is applied, the common carrier must prove that it
exercised extraordinary diligence in order to overcome the presumption . . .
The presumption of negligence was raised against petitioner. It was
petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW
CARRIER ABSOLVED FROM LIABILITY. In De Guzman vs. Court of Appeals,
the Court held that hijacking, not being included in the provisions of Article
1734, must be dealt with under the provisions of Article 1735 and thus, the
common carrier is presumed to have been at fault or negligent. To exculpate
the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or
force. This is in accordance with Article 1745 of the Civil Code which
provides: "Art. 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy . . . (6) That
the common carrier's liability for acts committed by thieves, or of robbers
who do not act with grave or irresistible threat, violences or force, is
dispensed with or diminished"; In the same case, the Supreme Court also
held that: "Under Article 1745 (6) above, a common carrier is held
responsible and will not be allowed to divest or to diminish such
responsibility even for acts of strangers like thieves or robbers, except
where such thieves or robbers in fact acted "with grave of irresistible threat,
violence of force," We believe and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the goods carried are reached
where the goods are lost as a result of a robbery which is attended by "grave
or irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this
case, petitioner herself has made the admission that she was in the trucking
business, offering her trucks to those with cargo to move. Judicial admissions
are conclusive and no evidence is required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT.
Petitioner presented no other proof of the existence of the contract of lease.
He who alleges a fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS
AVAILABLE AS WITNESSES. While the affidavit of Juanito Morden, the truck

helper in the hijacked truck, was presented as evidence in court, he himself

was a witness as could be gleaned from the contents of the petition.
Affidavits are not considered the best evidence if the affiants are available as
witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW
DEFINES IT TO BE. Granting that the said evidence were not self-serving,
the same were not sufficient to prove that the contract was one of lease. It
must be understood that a contract is what the law defines it to be and not
what it is called by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of
Appeals in "RODOLFO A. CIPRIANO, doing business under the name CIPRIANO
TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing
business under the name of BASCOS TRUCKING, defendant-appellant," C.A.G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed
from, which is hereby affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for
short) entered into a hauling contract 2 with Jibfair Shipping Agency
Corporation whereby the former bound itself to haul the latter's 2,000 m/tons
of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse
of Purefoods Corporation in Calamba, Laguna. To carry out its obligation,
CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos
(petitioner) to transport and to deliver 400 sacks of soya bean meal worth
P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of
P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a
consequence of that failure, Cipriano paid Jibfair Shipping Agency the
amount of the lost goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to
theft, hijacking and non-delivery or damages to the cargo during transport at
market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to
pay. Eventually, Cipriano filed a complaint for a sum of money and damages
with writ of preliminary attachment 4 for breach of a contract of carriage.
The prayer for a Writ of Preliminary Attachment was supported by an
affidavit 5 which contained the following allegations:

"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57
the Rules of Court, whereby a writ of preliminary attachment may lawfully
issue, namely:
"(e) in an action against a party who has removed or disposed of his
property, or is about to do so, with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by
the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all
legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17,
1987.
In her answer, petitioner interposed the following defenses: that there was
no contract of carriage since CIPTRADE leased her cargo truck to load the
cargo from Manila Port Area to Laguna; that CIPTRADE was liable to
petitioner in the amount of P11,000.00 for loading the cargo; that the truck
carrying the cargo was hijacked along Canonigo St., Paco, Manila on the night
of October 21, 1988; that the hijacking was immediately reported to
CIPTRADE and that petitioner and the police exerted all efforts to locate the
hijacked properties; that after preliminary investigation, an information for
robbery and carnapping were filed against Jose Opriano, et al.; and that
hijacking, being a force majeure, exculpated petitioner from any liability to
CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of
which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendant ordering the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED
FOUR PESOS (P156,404.00) as an (sic) for actual damages with legal interest
of 12% per cent per annum to be counted from December 4, 1986 until fully
paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's
fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10,
1987 filed by defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed
the trial court's judgment.

Consequently, petitioner filed this petition where she makes the following
assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS
CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE
RESPONDENT COURT THAT THE CONTRACTUAL RELATIONSHIP BETWEEN
PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS
CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE
THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE
MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE
TRIAL COURT THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF
PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY
THE DECISION OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a
common carrier?; and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found
that she admitted in her answer that she did business under the name A.M.
Bascos Trucking and that said admission dispensed with the presentation by
private respondent, Rodolfo Cipriano, of proofs that petitioner was a common
carrier. The respondent Court also adopted in toto the trial court's decision
that petitioner was a common carrier, Moreover, both courts appreciated the
following pieces of evidence as indicators that petitioner was a common
carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received
the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo
receipt signed by Maximo Sanglay; the fact that the truck helper, Juanito
Morden, was also an employee of petitioner; and the fact that control of the
cargo was placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner
was a common carrier, she alleged in this petition that the contract between
her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck.
She cited as evidence certain affidavits which referred to the contract as
"lease". These affidavits were made by Jesus Bascos 8 and by petitioner
herself. 9 She further averred that Jesus Bascos confirmed in his testimony
his statement that the contract was a lease contract. 10 She also stated that:
she was not catering to the general public. Thus, in her answer to the
amended complaint, she said that she does business under the same style of
A.M. Bascos Trucking, offering her trucks for lease to those who have cargo

to move, not to the general public but to a few customers only in view of the
fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common
carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to determine a
common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." 12
In this case, petitioner herself has made the admission that she was in the
trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they
offer their services only to a select group of people and because the private
respondents, plaintiffs in the lower court, did not object to the presentation
of affidavits by petitioner where the transaction was referred to as a lease
contract.
Regarding the first contention, the holding of the Court in De Guzman vs.
Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil
Code, it held thus:
"The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 also carefully avoids making any distinction between
a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial
and appellate courts have dismissed them as self-serving and petitioner
contests the conclusion. We are bound by the appellate court's factual
conclusions. Yet, granting that the said evidence were not self-serving, the
same were not sufficient to prove that the contract was one of lease. It must
be understood that a contract is what the law defines it to be and not what it

is called by the contracting parties. 15 Furthermore, petitioner presented no

other proof of the existence of the contract of lease. He who alleges a fact
has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the
goods was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the
vigilance over the goods transported by them. 17 Accordingly, they are
presumed to have been at fault or to have acted negligently if the goods are
lost, destroyed or deteriorated. 18 There are very few instances when the
presumption of negligence does not attach and these instances are
enumerated in Article 1734. 19 In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which
exculpated her from liability for the loss of the cargo. In De Guzman vs. Court
of Appeals, 20 the Court held that hijacking, not being included in the
provisions of Article 1734, must be dealt with under the provisions of Article
1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he
must prove that the robbers or the hijackers acted with grave or irresistible
threat, violence, or force. This is in accordance with Article 1745 of the Civil
Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violences or force, is
dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible and
will not be allowed to divest or to diminish such responsibility even for
acts of strangers like thieves or robbers except where such thieves or
robbers in fact acted with grave or irresistible threat, violence or force. We
believe and so hold that the limits of the duty of extraordinary diligence in
the vigilance over the goods carried are reached where the goods are lost as
a result of a robbery which is attended by "grave or irresistible threat,
violence or force."
To establish grave and irresistible force, petitioner presented her accusatory
affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay".

However, both the trial court and the Court of Appeals have concluded that
these affidavits were not enough to overcome the presumption. Petitioner's
affidavit about the hijacking was based on what had been told her by Juanito
Morden. It was not a first-hand account. While it had been admitted in court
for lack of objection on the part of private respondent, the respondent Court
had discretion in assigning weight to such evidence. We are bound by the
conclusion of the appellate court. In a petition for review on certiorari, We are
not to determine the probative value of evidence but to resolve questions of
law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking
took place. Thirdly, while the affidavit of Juanito Morden, the truck helper in
the hijacked truck, was presented as evidence in court, he himself was a
witness as could be gleaned from the contents of the petition. Affidavits are
not considered the best evidence if the affiants are available as witnesses.
25 The subsequent filing of the information for carnapping and robbery
against the accused named in said affidavits did not necessarily mean that
the contents of the affidavits were true because they were yet to be
determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was
petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial
issues involved, We find no reason to disturb the conclusion that the motion
to lift/dissolve the writ of preliminary attachment has been rendered moot
and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's
claim cannot be sustained. The petition is DISMISSED and the decision of the
Court of Appeals is hereby AFFIRMED.
SO ORDERED.
Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.

G.R. No. 143133

June 5, 2002

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE

DAVIES TRANSPORT SERVICES, INC., petitioners,
vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondents.

PANGANIBAN, J.:
Proof of the delivery of goods in good order to a common carrier and of their
arrival in bad order at their destination constitutes prima facie fault or
negligence on the part of the carrier. If no adequate explanation is given as
to how the loss, the destruction or the deterioration of the goods happened,
the carrier shall be held liable therefor.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court,
assailing the July 15, 1998 Decision1 and the May 2, 2000 Resolution2 of the
Court of Appeals3 (CA) in CA-GR CV No. 53571. The decretal portion of the
Decision reads as follows:
"WHEREFORE, in the light of the foregoing disquisition, the decision
appealed from is hereby REVERSED and SET ASIDE. Defendantsappellees are ORDERED to jointly and severally pay plaintiffsappellants the following:
'1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and
32/100 (P451,027.32) as actual damages, representing the value
of the damaged cargo, plus interest at the legal rate from the
time of filing of the complaint on July 25, 1991, until fully paid;
'2) Attorney's fees amounting to 20% of the claim; and
'3) Costs of suit.'"4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City
(Branch 134), which had disposed as follows:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered,
dismissing the complaint, as well as defendant's counterclaim."5
The Facts
The factual antecedents of the case are summarized by the Court of Appeals
in this wise:
"On June 13, 1990, CMC Trading A.G. shipped on board the M/V
'Anangel Sky' at Hamburg, Germany 242 coils of various Prime Cold
Rolled Steel sheets for transportation to Manila consigned to the
Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky
arrived at the port of Manila and, within the subsequent days,
discharged the subject cargo. Four (4) coils were found to be in bad
order B.O. Tally sheet No. 154974. Finding the four (4) coils in their
damaged state to be unfit for the intended purpose, the consignee

Philippine Steel Trading Corporation declared the same as total

loss.1wphi1.nt
"Despite receipt of a formal demand, defendants-appellees refused to
submit to the consignee's claim. Consequently, plaintiff-appellant paid
the consignee five hundred six thousand eighty six & 50/100 pesos
(P506,086.50), and was subrogated to the latter's rights and causes of
action against defendants-appellees. Subsequently, plaintiff-appellant
instituted this complaint for recovery of the amount paid by them, to
the consignee as insured.
"Impugning the propriety of the suit against them, defendantsappellees imputed that the damage and/or loss was due to preshipment damage, to the inherent nature, vice or defect of the goods,
or to perils, danger and accidents of the sea, or to insufficiency of
packing thereof, or to the act or omission of the shipper of the goods or
their representatives. In addition thereto, defendants-appellees argued
that their liability, if there be any, should not exceed the limitations of
liability provided for in the bill of lading and other pertinent laws.
Finally, defendants-appellees averred that, in any event, they exercised
due diligence and foresight required by law to prevent any
damage/loss to said shipment."6
Ruling of the Trial Court
The RTC dismissed the Complaint because respondent had failed to prove its
claims with the quantum of proof required by law.7
It likewise debunked petitioners' counterclaim, because respondent's suit
was not manifestly frivolous or primarily intended to harass them.8
Ruling of the Court of Appeals
In reversing the trial court, the CA ruled that petitioners were liable for the
loss or the damage of the goods shipped, because they had failed to
overcome the presumption of negligence imposed on common carriers.
The CA further held as inadequately proven petitioners' claim that the loss or
the deterioration of the goods was due to pre-shipment damage.9 It likewise
opined that the notation "metal envelopes rust stained and slightly dented"
placed on the Bill of Lading had not been the proximate cause of the damage
to the four (4) coils.10
As to the extent of petitioners' liability, the CA held that the package
limitation under COGSA was not applicable, because the words "L/C No.
90/02447" indicated that a higher valuation of the cargo had been declared
by the shipper. The CA, however, affirmed the award of attorney's fees.

Hence, this Petition.11

Issues
In their Memorandum, petitioners raise the following issues for the Court's
consideration:
I
"Whether or not plaintiff by presenting only one witness who has
never seen the subject shipment and whose testimony is purely
hearsay is sufficient to pave the way for the applicability of Article
1735 of the Civil Code;
II
"Whether or not the consignee/plaintiff filed the required notice of loss
within the time required by law;
III
"Whether or not a notation in the bill of lading at the time of loading is
sufficient to show pre-shipment damage and to exempt herein
defendants from liability;
IV
"Whether or not the "PACKAGE LIMITATION" of liability under Section 4
(5) of COGSA is applicable to the case at bar."12
In sum, the issues boil down to three:
1. Whether petitioners have overcome the presumption of negligence
of a common carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is applicable
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence
Petitioners contend that the presumption of fault imposed on common
carriers should not be applied on the basis of the lone testimony offered by
private respondent. The contention is untenable.
Well-settled is the rule that common carriers, from the nature of their
business and for reasons of public policy, are bound to observe extraordinary
diligence and vigilance with respect to the safety of the goods and the
passengers they transport.13 Thus, common carriers are required to render
service with the greatest skill and foresight and "to use all reason[a]ble
means to ascertain the nature and characteristics of the goods tendered for

shipment, and to exercise due care in the handling and stowage, including
such methods as their nature requires."14 The extraordinary responsibility
lasts from the time the goods are unconditionally placed in the possession of
and received for transportation by the carrier until they are delivered,
actually or constructively, to the consignee or to the person who has a right
to receive them.15
This strict requirement is justified by the fact that, without a hand or a voice
in the preparation of such contract, the riding public enters into a contract of
transportation with common carriers.16 Even if it wants to, it cannot submit
its own stipulations for their approval.17 Hence, it merely adheres to the
agreement prepared by them.
Owing to this high degree of diligence required of them, common carriers, as
a general rule, are presumed to have been at fault or negligent if the goods
they transported deteriorated or got lost or destroyed.18 That is, unless they
prove that they exercised extraordinary diligence in transporting the
goods.19 In order to avoid responsibility for any loss or damage, therefore,
they have the burden of proving that they observed such diligence.20
However, the presumption of fault or negligence will not arise21 if the loss is
due to any of the following causes: (1) flood, storm, earthquake, lightning, or
other natural disaster or calamity; (2) an act of the public enemy in war,
whether international or civil; (3) an act or omission of the shipper or owner
of the goods; (4) the character of the goods or defects in the packing or the
container; or (5) an order or act of competent public authority. 22 This is a
closed list. If the cause of destruction, loss or deterioration is other than the
enumerated circumstances, then the carrier is liable therefor.23
Corollary to the foregoing, mere proof of delivery of the goods in good order
to a common carrier and of their arrival in bad order at their destination
constitutes a prima facie case of fault or negligence against the carrier. If no
adequate explanation is given as to how the deterioration, the loss or the
destruction of the goods happened, the transporter shall be held
responsible.24
That petitioners failed to rebut the prima facie presumption of negligence is
revealed in the case at bar by a review of the records and more so by the
evidence adduced by respondent.25
First, as stated in the Bill of Lading, petitioners received the subject shipment
in good order and condition in Hamburg, Germany.26
Second, prior to the unloading of the cargo, an Inspection Report27 prepared
and signed by representatives of both parties showed the steel bands

broken, the metal envelopes rust-stained and heavily buckled, and the
contents thereof exposed and rusty.
Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport
Services, Inc., stated that the four coils were in bad order and condition.
Normally, a request for a bad order survey is made in case there is an
apparent or a presumed loss or damage.29
Fourth, the Certificate of Analysis30 stated that, based on the sample
submitted and tested, the steel sheets found in bad order were wet with
fresh water.
Fifth, petitioners -- in a letter31 addressed to the Philippine Steel Coating
Corporation and dated October 12, 1990 -- admitted that they were aware of
the condition of the four coils found in bad order and condition.
These facts were confirmed by Ruperto Esmerio, head checker of BM Santos
Checkers Agency. Pertinent portions of his testimony are reproduce
hereunder:
"Q.
Mr. Esmerio, you mentioned that you are a Head Checker. Will
you inform the Honorable Court with what company you are
connected?
A.

BM Santos Checkers Agency, sir.

Q.
How is BM Santos checkers Agency related or connected with
defendant Jardine Davies Transport Services?
A.

It is the company who contracts the checkers, sir.

Q.
You mentioned that you are a Head Checker, will you inform this
Honorable Court your duties and responsibilities?
A.
I am the representative of BM Santos on board the vessel, sir, to
supervise the discharge of cargoes.
xxx

xxx

xxx

Q.
On or about August 1, 1990, were you still connected or
employed with BM Santos as a Head Checker?
A.

Yes, sir.

Q.
And, on or about that date, do you recall having attended the
discharging and inspection of cold steel sheets in coil on board the
MV/AN ANGEL SKY?
A.

Yes, sir, I was there.

xxx

xxx

xxx

Q.
Based on your inspection since you were also present at that
time, will you inform this Honorable Court the condition or the

appearance of the bad order cargoes that were unloaded from the
MV/ANANGEL SKY?
ATTY. MACAMAY:
Objection, Your Honor, I think the document itself reflects the
condition of the cold steel sheets and the best evidence is the
document itself, Your Honor that shows the condition of the steel
sheets.
COURT:
Let the witness answer.
A.
The scrap of the cargoes is broken already and the rope is loosen
and the cargoes are dent on the sides."32
All these conclusively prove the fact of shipment in good order and condition
and the consequent damage to the four coils while in the possession of
petitioner,33 who notably failed to explain why.34
Further, petitioners failed to prove that they observed the extraordinary
diligence and precaution which the law requires a common carrier to know
and to follow to avoid damage to or destruction of the goods entrusted to it
for safe carriage and delivery.35
True, the words "metal envelopes rust stained and slightly dented" were
noted on the Bill of Lading; however, there is no showing that petitioners
exercised due diligence to forestall or lessen the loss.36 Having been in the
service for several years, the master of the vessel should have known at the
outset that metal envelopes in the said state would eventually deteriorate
when not properly stored while in transit.37 Equipped with the proper
knowledge of the nature of steel sheets in coils and of the proper way of
transporting them, the master of the vessel and his crew should have
undertaken precautionary measures to avoid possible deterioration of the
cargo. But none of these measures was taken.38 Having failed to discharge
the burden of proving that they have exercised the extraordinary diligence
required by law, petitioners cannot escape liability for the damage to the
four coils.39
In their attempt to escape liability, petitioners further contend that they are
exempted from liability under Article 1734(4) of the Civil Code. They cite the
notation "metal envelopes rust stained and slightly dented" printed on the
Bill of Lading as evidence that the character of the goods or defect in the
packing or the containers was the proximate cause of the damage. We are
not convinced.

From the evidence on record, it cannot be reasonably concluded that the

damage to the four coils was due to the condition noted on the Bill of
Lading.40 The aforecited exception refers to cases when goods are lost or
damaged while in transit as a result of the natural decay of perishable goods
or the fermentation or evaporation of substances liable therefor, the
necessary and natural wear of goods in transport, defects in packages in
which they are shipped, or the natural propensities of animals.41 None of
these is present in the instant case.
Further, even if the fact of improper packing was known to the carrier or its
crew or was apparent upon ordinary observation, it is not relieved of liability
for loss or injury resulting therefrom, once it accepts the goods
notwithstanding such condition.42 Thus, petitioners have not successfully
proven the application of any of the aforecited exceptions in the present
case.43
Second Issue:
Notice of Loss
Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of
Goods by Sea Act44 (COGSA), respondent should have filed its Notice of Loss
within three days from delivery. They assert that the cargo was discharged
on July 31, 1990, but that respondent filed its Notice of Claim only on
September 18, 1990.45
We are not persuaded. First, the above-cited provision of COGSA provides
that the notice of claim need not be given if the state of the goods, at the
time of their receipt, has been the subject of a joint inspection or survey. As
stated earlier, prior to unloading the cargo, an Inspection Report46 as to the
condition of the goods was prepared and signed by representatives of both
parties.47
Second, as stated in the same provision, a failure to file a notice of claim
within three days will not bar recovery if it is nonetheless filed within one
year.48 This one-year prescriptive period also applies to the shipper, the
consignee, the insurer of the goods or any legal holder of the bill of lading.49
In Loadstar Shipping Co., Inc, v. Court of Appeals,50 we ruled that a claim is
not barred by prescription as long as the one-year period has not lapsed.
Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.:
"Inasmuch as the neither the Civil Code nor the Code of Commerce
states a specific prescriptive period on the matter, the Carriage of
Goods by Sea Act (COGSA)--which provides for a one-year period of
limitation on claims for loss of, or damage to, cargoes sustained during
transit--may be applied suppletorily to the case at bar."

In the present case, the cargo was discharged on July 31, 1990, while the
Complaint51 was filed by respondent on July 25, 1991, within the one-year
prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for respondent's claims, petitioners
contend that their liability should be limited to US$500 per package as
provided in the Bill of Lading and by Section 4(5)52 of COGSA.53
On the other hand, respondent argues that Section 4(5) of COGSA is
inapplicable, because the value of the subject shipment was declared by
petitioners beforehand, as evidenced by the reference to and the insertion of
the Letter of Credit or "L/C No. 90/02447" in the said Bill of Lading.54
A bill of lading serves two functions. First, it is a receipt for the goods
shipped.53 Second, it is a contract by which three parties -- namely, the
shipper, the carrier, and the consignee -- undertake specific responsibilities
and assume stipulated obligations.56 In a nutshell, the acceptance of the bill
of lading by the shipper and the consignee, with full knowledge of its
contents, gives rise to the presumption that it constituted a perfected and
binding contract.57
Further, a stipulation in the bill of lading limiting to a certain sum the
common carrier's liability for loss or destruction of a cargo -- unless the
shipper or owner declares a greater value58 -- is sanctioned by law.59 There
are, however, two conditions to be satisfied: (1) the contract is reasonable
and just under the circumstances, and (2) it has been fairly and freely agreed
upon by the parties.60 The rationale for this rule is to bind the shippers by
their agreement to the value (maximum valuation) of their goods.61
It is to be noted, however, that the Civil Code does not limit the liability of
the common carrier to a fixed amount per package.62 In all matters not
regulated by the Civil Code, the right and the obligations of common carriers
shall be governed by the Code of Commerce and special laws.63 Thus, the
COGSA, which is suppletory to the provisions of the Civil Code, supplements
the latter by establishing a statutory provision limiting the carrier's liability in
the absence of a shipper's declaration of a higher value in the bill of
lading.64 The provisions on limited liability are as much a part of the bill of
lading as though physically in it and as though placed there by agreement of
the parties.65
In the case before us, there was no stipulation in the Bill of Lading66 limiting
the carrier's liability. Neither did the shipper declare a higher valuation of the

goods to be shipped. This fact notwithstanding, the insertion of the words

"L/C No. 90/02447 cannot be the basis for petitioners' liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter
of Credit obtained by the shipper for the importation of steel sheets did not
effect a declaration of the value of the goods as required by the bill. 67 That
notation was made only for the convenience of the shipper and the bank
processing the Letter of Credit.68
Second, in Keng Hua Paper Products v. Court of Appeals,69 we held that a bill
of lading was separate from the Other Letter of Credit arrangements. We
ruled thus:
"(T)he contract of carriage, as stipulated in the bill of lading in the
present case, must be treated independently of the contract of sale
between the seller and the buyer, and the contract of issuance of a
letter of credit between the amount of goods described in the
commercial invoice in the contract of sale and the amount allowed in
the letter of credit will not affect the validity and enforceability of the
contract of carriage as embodied in the bill of lading. As the bank
cannot be expected to look beyond the documents presented to it by
the seller pursuant to the letter of credit, neither can the carrier be
expected to go beyond the representations of the shipper in the bill of
lading and to verify their accuracy vis--vis the commercial invoice and
the letter of credit. Thus, the discrepancy between the amount of
goods indicated in the invoice and the amount in the bill of lading
cannot negate petitioner's obligation to private respondent arising
from the contract of transportation."70
In the light of the foregoing, petitioners' liability should be computed based
on US$500 per package and not on the per metric ton price declared in the
Letter of Credit.71 In Eastern Shipping Lines, Inc. v. Intermediate Appellate
Court,72 we explained the meaning of packages:
"When what would ordinarily be considered packages are shipped in a
container supplied by the carrier and the number of such units is
disclosed in the shipping documents, each of those units and not the
container constitutes the 'package' referred to in the liability limitation
provision of Carriage of Goods by Sea Act."
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that
the Bill of Lading clearly disclosed the contents of the containers, the number
of units, as well as the nature of the steel sheets, the four damaged coils
should be considered as the shipping unit subject to the US$500
limitation.1wphi1.nt

WHEREFORE, the Petition is partly granted and the assailed

Decision MODIFIED. Petitioners' liability is reduced to US$2,000 plus interest
at the legal rate of six percent from the time of the filing of the Complaint on
July 25, 1991 until the finality of this Decision, and 12 percent thereafter until
fully paid. No pronouncement as to costs.
SO ORDERED.
Sandoval-Gutierrez, and Carpio, JJ., concur.
Puno, J., abroad, on official leave.

G.R. No. 52159 December 22, 1989

JOSE PILAPIL, petitioner,
vs.
HON. COURT OF APPEALS and ALATCO TRANSPORTATION COMPANY,
INC., respondents.
Martin Badong, Jr. for petitioner.
Eufronio K. Maristela for private respondent.
PADILLA, J.:
This is a petition to review on certiorari the decision* rendered by the Court
of Appeals dated 19 October 1979 in CA-G.R. No. 57354-R entitled "Jose
Pilapil, plaintiff-appellee versus Alatco Transportation Co., Inc., defendantappellant," which reversed and set aside the judgment of the Court of First
Instance of Camarines Sur in Civil Case No. 7230 ordering respondent
transportation company to pay to petitioner damages in the total sum of
sixteen thousand three hundred pesos (P 16,300.00).
The record discloses the following facts:
Petitioner-plaintiff Jose Pilapil, a paying passenger, boarded respondentdefendant's bus bearing No. 409 at San Nicolas, Iriga City on 16 September
1971 at about 6:00 P.M. While said bus No. 409 was in due course
negotiating the distance between Iriga City and Naga City, upon reaching the
vicinity of the cemetery of the Municipality of Baao, Camarines Sur, on the
way to Naga City, an unidentified man, a bystander along said national
highway, hurled a stone at the left side of the bus, which hit petitioner above
his left eye. Private respondent's personnel lost no time in bringing the
petitioner to the provincial hospital in Naga City where he was confined and
treated.

Considering that the sight of his left eye was impaired, petitioner was taken
to Dr. Malabanan of Iriga City where he was treated for another week. Since
there was no improvement in his left eye's vision, petitioner went to V. Luna
Hospital, Quezon City where he was treated by Dr. Capulong. Despite the
treatment accorded to him by Dr. Capulong, petitioner lost partially his left
eye's vision and sustained a permanent scar above the left eye.
Thereupon, petitioner instituted before the Court of First Instance of
Camarines Sur, Branch I an action for recovery of damages sustained as a
result of the stone-throwing incident. After trial, the court a quo rendered
judgment with the following dispositive part:
Wherefore, judgment is hereby entered:
1. Ordering defendant transportation company to pay
plaintiff Jose Pilapil the sum of P 10,000.00, Philippine
Currency, representing actual and material damages
for causing a permanent scar on the face and injuring
the eye-sight of the plaintiff;
2. Ordering further defendant transportation
company to pay the sum of P 5,000.00, Philippine
Currency, to the plaintiff as moral and exemplary
damages;
3. Ordering furthermore, defendant transportation
company to reimburse plaintiff the sum of P 300.00
for his medical expenses and attorney's fees in the
sum of P 1,000.00, Philippine Currency; and
4. To pay the costs.
SO ORDERED

From the judgment, private respondent appealed to the Court of Appeals

where the appeal was docketed as CA-G.R. No. 57354R. On 19 October 1979,
the Court of Appeals, in a Special Division of Five, rendered judgment
reversing and setting aside the judgment of the court a quo.
Hence the present petition.
In seeking a reversal of the decision of the Court of Appeals, petitioner
contends that said court has decided the issue not in accord with law.
Specifically, petitioner argues that the nature of the business of a
transportation company requires the assumption of certain risks, and the
stoning of the bus by a stranger resulting in injury to petitioner-passenger is
one such risk from which the common carrier may not exempt itself from
liability.

We do not agree.
In consideration of the right granted to it by the public to engage in the
business of transporting passengers and goods, a common carrier does not
give its consent to become an insurer of any and all risks to passengers and
goods. It merely undertakes to perform certain duties to the public as the law
imposes, and holds itself liable for any breach thereof.
Under Article 1733 of the Civil Code, common carriers are required to
observe extraordinary diligence for the safety of the passenger transported
by them, according to all the circumstances of each case. The requirement of
extraordinary diligence imposed upon common carriers is restated in Article
1755: "A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances." Further, in case
of death of or injuries to passengers, the law presumes said common carriers
to be at fault or to have acted negligently. 2
While the law requires the highest degree of diligence from common carriers
in the safe transport of their passengers and creates a presumption of
negligence against them, it does not, however, make the carrier an insurer of
the absolute safety of its passengers. 3
Article 1755 of the Civil Code qualifies the duty of extraordinary care,
vigilance and precaution in the carriage of passengers by common carriers to
only such as human care and foresight can provide. what constitutes
compliance with said duty is adjudged with due regard to all the
circumstances.
Article 1756 of the Civil Code, in creating a presumption of fault or
negligence on the part of the common carrier when its passenger is injured,
merely relieves the latter, for the time being, from introducing evidence to
fasten the negligence on the former, because the presumption stands in the
place of evidence. Being a mere presumption, however, the same is
rebuttable by proof that the common carrier had exercised extraordinary
diligence as required by law in the performance of its contractual obligation,
or that the injury suffered by the passenger was solely due to a fortuitous
event. 4
In fine, we can only infer from the law the intention of the Code Commission
and Congress to curb the recklessness of drivers and operators of common
carriers in the conduct of their business.
Thus, it is clear that neither the law nor the nature of the business of a
transportation company makes it an insurer of the passenger's safety, but
that its liability for personal injuries sustained by its passenger rests upon its

negligence, its failure to exercise the degree of diligence that the law
requires. 5
Petitioner contends that respondent common carrier failed to rebut the
presumption of negligence against it by proof on its part that it exercised
extraordinary diligence for the safety of its passengers.
We do not agree.
First, as stated earlier, the presumption of fault or negligence against the
carrier is only a disputable presumption. It gives in where contrary facts are
established proving either that the carrier had exercised the degree of
diligence required by law or the injury suffered by the passenger was due to
a fortuitous event. Where, as in the instant case, the injury sustained by the
petitioner was in no way due to any defect in the means of transport or in
the method of transporting or to the negligent or willful acts of private
respondent's employees, and therefore involving no issue of negligence in its
duty to provide safe and suitable cars as well as competent employees, with
the injury arising wholly from causes created by strangers over which the
carrier had no control or even knowledge or could not have prevented, the
presumption is rebutted and the carrier is not and ought not to be held liable.
To rule otherwise would make the common carrier the insurer of the absolute
safety of its passengers which is not the intention of the lawmakers.
Second, while as a general rule, common carriers are bound to exercise
extraordinary diligence in the safe transport of their passengers, it would
seem that this is not the standard by which its liability is to be determined
when intervening acts of strangers is to be determined directly cause the
injury, while the contract of carriage Article 1763 governs:
Article 1763. A common carrier is responsible for injuries suffered
by a passenger on account of the wilful acts or negligence of
other passengers or of strangers, if the common carrier's
employees through the exercise of the diligence of a good father
of a family could have prevented or stopped the act or omission.
Clearly under the above provision, a tort committed by a stranger which
causes injury to a passenger does not accord the latter a cause of action
against the carrier. The negligence for which a common carrier is held
responsible is the negligent omission by the carrier's employees to prevent
the tort from being committed when the same could have been foreseen and
prevented by them. Further, under the same provision, it is to be noted that
when the violation of the contract is due to the willful acts of strangers, as in
the instant case, the degree of care essential to be exercised by the common

carrier for the protection of its passenger is only that of a good father of a
family.
Petitioner has charged respondent carrier of negligence on the ground that
the injury complained of could have been prevented by the common carrier if
something like mesh-work grills had covered the windows of its bus.
We do not agree.
Although the suggested precaution could have prevented the injury
complained of, the rule of ordinary care and prudence is not so exacting as
to require one charged with its exercise to take doubtful or unreasonable
precautions to guard against unlawful acts of strangers. The carrier is not
charged with the duty of providing or maintaining vehicles as to absolutely
prevent any and all injuries to passengers. Where the carrier uses cars of the
most approved type, in general use by others engaged in the same
occupation, and exercises a high degree of care in maintaining them in
suitable condition, the carrier cannot be charged with negligence in this
respect. 6
Finally, petitioner contends that it is to the greater interest of the State if a
carrier were made liable for such stone-throwing incidents rather than have
the bus riding public lose confidence in the transportation system.
Sad to say, we are not in a position to so hold; such a policy would be better
left to the consideration of Congress which is empowered to enact laws to
protect the public from the increasing risks and dangers of lawlessness in
society.
WHEREFORE, the judgment appealed from is hereby AFFIRMED.
SO ORDERED.
Melencio-Herrera (Chairperson), Sarmiento and Regalado, concur.
Paras, J., took no part.

G.R. No. 146635 December 14, 2005

MARCELO MACALINAO, Substituted by ESPERANZA MACALINAO and
ANTONIO MACALINAO, Petitioners,
vs.
EDDIE MEDECIELO ONG and GENOVEVO SEBASTIAN, Respondents.
DECISION
Tinga, J.:

Before this Court is a Petition for Review on Certiorari assailing

the Decision1 and Resolution2 of the Court of Appeals dated 31 May 2000 and
7 September 2000, respectively, in CA-G.R. CV No. 52963. The Court of
Appeals reversed the judgment of the trial court and dismissed the complaint
for damages filed by Marcelo Macalinao (Macalinao) against Eddie Medecielo
Ong (Ong) and Genovevo Sebastian (Sebastian) for insufficiency of evidence.
The antecedent facts follow.
Macalinao and Ong were employed as utility man and driver, respectively, at
the Genetron International Marketing (Genetron), a single proprietorship
owned and operated by Sebastian. On 25 April 1992, Sebastian instructed
Macalinao, Ong and two truck helpers to deliver a heavy piece of machinery
a reactor/motor for mixing chemicals, to Sebastians manufacturing plant in
Angat, Bulacan. While in the process of complying with the order, the vehicle
driven by Ong, Genetrons Isuzu Elf truck with plate no. PMP-106 hit and
bumped the front portion of a private jeepney with plate no. DAF-922 along
Caypombo, Sta. Maria, Bulacan at around 11:20 in the morning.3
Both vehicles incurred severe damages while the passengers sustained
physical injuries as a consequence of the collision.4 Macalinao incurred the
most serious injuries
among the passengers of the truck. He was initially brought to the Sta. Maria
District Hospital for first aid treatment but in view of the severity of his
condition, he was transferred to the Philippine Orthopedic Center at the
instance of Sebastian. He was again moved to the Capitol Medical Center by
his parents, petitioners herein, for medical reasons and later to the Philippine
General Hospital for financial considerations.5
Macalinaos body was paralyzed and immobilized from the neck down as a
result of the accident and per doctors advice, his foot was amputated. He
also suffered from bed sores and infection. His immedicable condition,
coupled with the doctors recommendation, led his family to bring him home
where he died on 7 November 1992.6
Before he died, Macalinao was able to file an action for damages against
both Ong and Sebastian before the Regional Trial Court (RTC) of Quezon City,
Branch 81.7 After his death, Macalinao was substituted by his parents in the
action.8 A criminal case for reckless imprudence
resulting to serious physical injuries9 had also been instituted earlier against
Ong but for reasons which do not appear in the records of this case, trial
thereon did not ensue.10
After trial in the civil action, the RTC held that based on the evidence, Ong
drove the Isuzu truck in a reckless and imprudent manner thereby causing

the same to hit the private jeepney. It observed that while respondents
claimed that Ong was driving cautiously and prudently at the time of the
mishap, no evidence was presented to substantiate the claim.11 It declared
Ong negligent and at the same time, it held that Sebastian failed to exercise
the diligence of a good father of a family in the selection and supervision of
Ong. Consequently, the trial court pronounced the two of them jointly liable
to pay actual, moral, and exemplary damages as well as civil indemnity for
Macalinaos death. The trial court subsequently increased the monetary
award12 upon petitioners motion for reconsideration thereof.
On appeal, the appellate court reversed the findings of the trial court. It held
that the evidence presented by petitioners was woefully scant to support a
verdict of negligence against Ong. And since respondents liability hinged
squarely on proof of Ongs negligence, neither of them could be held liable
for damages to petitioners.13
Aggrieved at the ruling, petitioners elevated the case to this Court. They
herein contend that contrary to the conclusion reached by the Court of
Appeals, the evidence conclusively establish fault or negligence on the part
of Ong and justify the award of damages in their favor.
The petition is meritorious.
The issue of negligence is factual and, in quasi-delicts, crucial in the award of
damages.14 In the case at bar, the crux of the controversy is the sufficiency
of the evidence presented to support a finding of negligence against Ong.
Given the contradictory conclusions of the trial court and the appellate court
on this issue, this Court is impelled to ascertain for itself which court made
the correct determination.
While as a rule factual findings of the Court of Appeals are deemed
conclusive in cases brought to us on appeal, we have also consistently
pronounced that we may review its findings of fact in the following instances,
among others:
(i) when the judgment of the Court of Appeals was based on a
misapprehension of facts; (ii) when the factual findings are conflicting; (iii)
when the Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties and which, if properly considered, would justify a
different conclusion; and (iv) where the findings of fact of the Court of
Appeals are contrary to those of the trial court, or are mere conclusions
without citation of specific evidence, or where the facts set forth by the
petitioner are not disputed by the respondent, or where the findings of fact
of the Court of Appeals are premised on the absence of evidence and are
contradicted by the evidence on record.15

Said exceptions obtain in this case thus, a departure from the application of
the general rule is warranted.
In reversing the trial court and absolving respondents from liability, the
appellate court made the following pronouncement:
The evidence presented is woefully scant. The pictures of the collision afford
no basis for concluding that it was the fault of the defendant driver, or that
he was driving recklessly. The police report contains no findings as to the
road conditions, estimates of the relative speed of the vehicles, or their exact
position at the time of the accident. And even so, entries in the police blotter
should not be given significance or probative value as they do not constitute
conclusive proof of the truth thereof. Nor were eyewitnesses presented, not
even affidavits or statements to give any indication as to what actually
happened. The police investigators findings are sketchy at best, with only
the phrase "Isuzu lost control" as his opinion, with no explanation how he
reached it. Civil cases require evidence of a lesser degree than criminal
cases, but one sentence by one who did not even witness an event, is not
conclusive proof.
...
There was only the fact of the collision before the trial court. The attendant
circumstances were not established, and no fault could be determined using
the evidence, both testimonial and documentary presented.16
Contrary to the above conclusion of the appellate court, the evidence on
record coupled with the doctrine of res ipsa loquitur sufficiently establishes
Ongs negligence.
We focus first on the evidence presented before the trial court.
The photographs of the accident which the appellate court cavalierly brushed
aside as insignificant deserve substantial cogitation. In Jose v. Court of
Appeals,17 we upheld the trial courts reliance on photographs of the accident
as opposed to a partys obviously biased testimony. In so doing, we stated:
In criminal cases such as murder or rape where the accused stands to lose
his liberty if found guilty, this Court has, in many occasions, relied principally
upon physical evidence in ascertaining the truth. In People v.
Vasquez,18 where the physical evidence on record ran counter to the
testimonial evidence of the prosecution witnesses, we ruled that the physical
evidence should prevail.19
Physical evidence is a mute but an eloquent manifestation of truth which
ranks high in our hierarchy of trustworthy evidence.20

In this case, while there is a dearth of testimonial evidence to enlighten us

about what actually happened, photographs21 depicting the relative positions
of the vehicles immediately after the accident took place do exist. It is well
established that photographs, when duly verified and shown by extrinsic
evidence to be faithful representations of the subject as of the time in
question, are, in the discretion of the trial court, admissible in evidence as
aids in arriving at an understanding of the evidence, the situation or
condition of objects or premises or the circumstances of an accident. 22
According to American courts, photographs are admissible in evidence in
motor vehicle accident cases when they appear to have been accurately
taken and are proved to be a faithful and clear representation of the subject,
which cannot itself be produced, and are of such nature as to throw light
upon a disputed point.23 Before a photograph may be admitted in evidence,
however, its accuracy or correctness must be proved, and it must be
authenticated or verified24 first. In the case at bar, the photographer testified
in open court and properly identified the pictures as the ones he took at the
scene of the accident.25
An examination of said photographs clearly shows that the road where the
mishap occurred is marked by a line at the center separating the right from
the left lane. Based on the motorists right of way rule, the Isuzu truck which
was headed towards Norzagaray, Bulacan26 should have been occupying the
left lane while the private jeepney which was traversing the road to the town
proper of Sta. Maria, Bulacan27 should have been in the right lane. Exhibits
"L" and "L-4" among the photographs, however, reveal that in the aftermath
of the collision, the Isuzu truck usurped the opposite lane to such an extent
that only its right rear wheel remained in the left lane, a few inches from the
demarcation line. Its two front wheels and left rear wheel were planted
squarely on the private jeepneys lane and the Isuzu truck had rotated such
that its front no longer pointed towards Norzagaray but partially faced the
town proper of Sta. Maria instead.
While ending up at the opposite lane is not conclusive proof of fault in
automobile collisions, the position of the two vehicles gives rise to the
conclusion that it was the Isuzu truck which hit the private jeepney rather
than the other way around. The smashed front of the Isuzu truck is pressed
against the private jeepneys left front portion near the drivers side. The
private jeepney is positioned diagonally in the right lane; its front at the
rightmost corner of the road while its rear remained a few feet from the
demarcation line. Based on the angle at which it stopped, the private
jeepney obviously swerved to the right in an unsuccessful effort to avoid the

Isuzu truck. This would support the statement of the police investigator that
the Isuzu truck lost control28 and hit the left front portion of the private
jeepney.29 It would also explain why the driver of the private jeepney died
immediately after being brought to the hospital,30 since in such a scenario,
the brunt of the collision logically bore down on him.
Moreover, the unequal size and weight of the two vehicles would make it
improbable for the relatively lighter private jeepney to have stricken the
heavier truck with such force as to push the latter to the formers side of the
road. Had that been the case, the two vehicles would have ended up crushed
together at the center of the road or at the Isuzu trucks lane instead of
rolling to a stop at the private jeepneys lane.
Another piece of evidence which supports a finding of negligence against
Ong is the police report of the incident denoted as Entry No. 04-229 of the
Sta. Maria Police Station. The report states that the Isuzu truck was the one
which hit the left front portion of the private jeepney.31 This piece of evidence
was disregarded by the Court of Appeals on the ground that entries in police
blotters should not be given significance or probative value as they do not
constitute conclusive proof of the truth thereof.
While true in most instances, it must still be remembered that although
police blotters are of little probative value, they are nevertheless admitted
and considered in the absence of competent evidence to refute the facts
stated therein.32 Entries in police records made by a police officer in the
performance of the duty especially enjoined by law are prima facie evidence
of the fact therein stated,33 and their probative value may be either
substantiated or nullified by other competent evidence.34
In this case, the police blotter was identified and formally offered as evidence
and the person who made the entries thereon was likewise presented in
court. On the other hand, aside from a blanket allegation that the driver of
the other vehicle was the one at fault, respondents did not present any
evidence to back up their charge and show that the conclusion of the police
investigator was false. Given the paucity of details in the report, the
investigators observation could have been easily refuted and overturned by
respondents through the simple expedient of supplying the missing facts and
showing to the satisfaction of the
court that the Isuzu truck was blameless in the incident. Ong was driving the
truck while the two other truck helpers also survived the accident. Any or all
of them could have given their testimony to shed light on what actually
transpired, yet not one of them was presented to substantiate the claim that
Ong was not negligent.

Since respondents failed to refute the contents of the police blotter, the
statement therein that the Isuzu truck hit the private jeepney and not the
other way around is deemed established. The prima facie nature of the police
report ensures that if it remains unexplained or uncontradicted, it will be
sufficient to establish the facts posited therein.35
While not constituting direct proof of Ongs negligence, the foregoing pieces
of evidence justify the application ofres ipsa loquitur, a Latin phrase which
literally means "the thing or the transaction speaks for itself."36
Res ipsa loquitur recognizes that parties may establish prima
facie negligence without direct proof, thus, it allows the principle to
substitute for specific proof of negligence.37 It permits the plaintiff to present
along with proof of the accident, enough of the attending circumstances to
invoke the doctrine, create an inference or presumption of negligence and
thereby place on the defendant the burden of proving that there was no
negligence on his part.38
The doctrine can be invoked only when under the circumstances, direct
evidence is absent and not readily available.39 This is based in part upon the
theory that the defendant in charge of the instrumentality which causes the
injury either knows the cause of the accident or has the best opportunity of
ascertaining it while the plaintiff has no such knowledge, and is therefore
compelled to allege negligence in general terms and rely upon the proof of
the happening of the accident in order to establish negligence.40 The
inference which the doctrine permits is grounded upon the fact that the chief
evidence of the true cause, whether culpable or innocent, is practically
accessible to the defendant but inaccessible to the injured person. 41
In this case, Macalinao could no longer testify as to the cause of the accident
since he is dead. Petitioners, while substituting their son as plaintiff, have no
actual knowledge
about the event since they were not present at the crucial moment. The
driver of the private jeepney who could have shed light on the circumstances
is likewise dead. The only ones left with knowledge about the cause of the
mishap are the two truck helpers who survived, both employees of
Sebastian, and Ong, who is not only Sebastians previous employee but his
co-respondent in this case as well. In the circumstances, evidence as to the
true cause of the accident is, for all intents and purposes, accessible to
respondents but not to petitioners. The witnesses left are unlikely to divulge
to petitioners what they knew about the cause of the accident if the same
militates against the interest of their employer. This justifies the invocation of
the doctrine.

Under local jurisprudence, the following are the requisites for the application
of res ipsa loquitur:
(1) The accident is of a kind which ordinarily does not occur in the absence of
someones negligence;
(2) It is caused by an instrumentality within the exclusive control of the
defendant or defendants; and
(3) The possibility of contributing conduct which would make the plaintiff
responsible is eliminated.42
We are convinced that all the above requisites are present in the case at bar.
No two motor vehicles traversing opposite lanes will collide as a matter of
course unless someone is negligent, thus, the first requisite for the
application of the doctrine is present. Ong was driving the Isuzu truck which,
from the evidence adduced, appears to have precipitated the collision with
the private jeepney. Driving the Isuzu truck gave Ong exclusive management
and control over it, a fact which shows that the second requisite is also
present. No contributory negligence could be attributed to Macalinao relative
to the happening of the accident since he was merely a passenger in the
Isuzu truck. Respondents allegation that Macalinao was guilty of
contributory negligence for failing to take the necessary precautions to
ensure his safety while onboard the truck43 is too specious for belief
particularly as respondents did not even present any evidence to prove such
allegation. The last requisite is, therefore, likewise present.
There exists a fourth requisite under American jurisprudence, that is, that the
defendant fails to offer any explanation tending to show that the injury was
caused by his or her want of due care.44 In this case, while respondents
claimed that Ong drove cautiously and prudently during the time in question,
no evidence was proffered to substantiate the same. In fact, Ong did not
bother to testify to explain his actuations and to show that he exercised due
care when the accident happened, so even this requisite is fulfilled.
All the requisites for the application of the rule of res ipsa loquitur are
present, thus a reasonable presumption or inference of Ongs negligence
arises. In consonance with the effect of the doctrine, the burden of proving
due care at the time in question shifts to respondents. Unfortunately, as
previously discussed, aside from blanket allegations that Ong exercised
prudence and due care while driving on the day of the accident, respondents
proffered no other proof. As a consequence, the prima facie finding of
negligence against Ong, remaining unexplained and/or uncontradicted, is
deemed established. This in turn warrants a finding that Ong is liable for
damages to petitioners.

Such liability of Ong is solidary with Sebastian pursuant to Art. 2176 in

relation to Art. 2180 of the Civil Code which provide:
Art. 2176. Whoever by act or omission causes damage to another, there
being fault or negligence is obliged to pay for the damage done . . . .
Art. 2180. The obligation imposed by Art. 2176 is demandable not only for
ones own acts or omissions but also for those of persons for whom one is
responsible.
...
Employers shall be liable for the damage caused by their employees and
household helpers acting within the scope of their assigned tasks even
though the former are not engaged in any business or industry.
...
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father
of a family to prevent damage.
Whenever an employees negligence causes damage or injury to another,
there instantly arises a presumptionjuris tantum that the employer failed to
exercise diligentissimi patris families in the selection (culpa in eligiendo) or
supervision (culpa in vigilando) of its employees.45 To avoid liability for a
quasi-delict committed by his employee, an employer must overcome the
presumption by presenting convincing proof that he exercised the care and
diligence of a good father of a family in the selection and supervision of his
employee.46
In an attempt to exculpate himself from liability, Sebastian claimed that he
exercised due care in selecting Ong as a driver. Before he hired Ong, he
allegedly required him to produce police and NBI clearances and he took into
account the recommendations of Ongs previous employer and
friends.47 Sebastian also stressed that he instructed Ong to drive slowly and
carefully and to take necessary precautions.48 He likewise admonished Ong
to be careful after the latter had some minor accidents in the parking area.49
However, Sebastians statements are not sufficient to prove that he
exercised the diligence of a good father of a family in the selection of Ong.
His testimony is self-serving and devoid of corroboration as he did not bother
to support the same with document evidence. Moreover, Sebastian could not
even remember whether the recommendation from Ongs previous employer
was made verbally or in writing.50
On the other hand, due diligence in supervision requires the formulation of
rules and regulations for the guidance of employees and the issuance of

proper instructions as well as actual implementation and monitoring of

consistent compliance with the rules.51 Admonitions to drive carefully without
the corresponding guidelines and monitoring of the employee do not satisfy
the due diligence required by law either.
In short, Sebastians claims fall short of what is required by law to overcome
the presumption of negligence in the selection and supervision of his
employee. The trial court therefore correctly held him solidarily liable with
Ong to petitioners.
In an obvious ploy to relieve himself from liability should the appellate
courts decision be reversed, Sebastian averred that Macalinao is not entitled
to damages. He anchored his claim on the novel argument that the
provisions of Art. 2180 apply only when the injured party is a third person but
it has no application to an employee like Macalinao.52 He likewise postulated
that recovery from the Social Security System, State Insurance Fund,
Employees Compensation Commission, and the Philippine Medical Care Act,
the government agencies with which petitioners filed a claim in view of
Macalinaos injury and subsequent death, preclude pursuing alternate
recourse or recovering from other sources until the former claims have been
rejected.53
Sebastian is grasping at straws. Art. 2180 makes no distinction whatsoever
whether the claimant is an employee or a third person relative to the
employer. Ubi lex non distinguit nec nos distinguere debemos. Where the law
does not distinguish, neither should we.54
Moreover, petitioners claim against Sebastian is not based upon the fact of
Macalinaos previous employment with him but on the solidary liability of the
latter for the negligent act of one of his employees. Such is not precluded by
prior claims with the government agencies enumerated. One is based on
compulsory coverage of government benefits while the other is based on a
cause of action provided by law.
Additionally, respondents postulated that since it was Macalinao who
sustained physical injuries and died, he was the one who suffered pain, not
petitioners so moral damages are not recoverable in this case.55
The relatives of the victim who incurred physical injuries in a quasi-delict are
not proscribed from recovering moral damages in meritorious cases. To hold
otherwise would give rise to the ridiculous scenario where a defendant may
be compelled to pay moral damages in a quasi-delict causing physical
injuries but will be relieved from doing so should those same injuries cause
the victims death.

In the case of Lambert v. Heirs of Ray Castillon,56 we held that in quasidelicts:

. . . . the award of moral damages is aimed at a restoration, within the limits
possible, of the spiritual status quo ante; and therefore, it must be
proportionate to the suffering inflicted. The intensity of the pain experienced
by therelatives of the victim is proportionate to the intensity of affection for
him and bears no relation whatsoever with the wealth or means of the
offender.57 (Emphasis Supplied.)
The trial court awarded moral damages in the amount of P30,000.00 but
since prevailing jurisprudence has fixed the same at P50,000.00,58 there is a
need to increase the award to reflect the recent rulings.
Lastly, respondents claim that exemplary damages is not warranted in this
case. Under the law, exemplary damages may be granted in quasi-delicts if
the defendant acted with gross negligence.59 Gross negligence has been
defined as negligence characterized by the want of even slight care, acting
or omitting to act in a situation where there is duty to act, not inadvertently
but willfully and intentionally, with a conscious indifference to consequences
insofar as other persons may be affected.60
Ongs gross negligence in driving the Isuzu truck precipitated the accident.
This is lucidly portrayed in the photographs on record and it justifies the
award of exemplary damages in petitioners favor. However, the trial courts
award of P10,000.00 is insufficient, thus the Court deems it proper to
increase the award to P25,000.00 under the circumstances.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals
dated 31 May 2000, as well as itsResolution dated 7 September 2000, are
hereby SET ASIDE. The Decision of the Regional Trial Court of Quezon City,
Branch 81 dated 12 April 1996 as amended by the Order dated 23 May 1996
is hereby REINSTATED with the modifications that the award for moral
damages is increased to P50,000.00 to conform with prevailing jurisprudence
and
the award for exemplary damages is increased to P25,000.00. Costs against
respondents.
SO ORDERED.

G.R. No. 107382/G.R. No. 107612

ASSOCIATED BANK, petitioner,
vs.

January 31, 1996

HON. COURT OF APPEALS, PROVINCE OF TARLAC and PHILIPPINE

NATIONAL BANK, respondents.
xxxxxxxxxxxxxxxxxxxxx
G.R. No. 107612

January 31, 1996

PHILIPPINE NATIONAL BANK, petitioner,

vs.
HONORABLE COURT OF APPEALS, PROVINCE OF TARLAC, and
ASSOCIATED BANK, respondents.
DECISION
ROMERO, J.:
Where thirty checks bearing forged endorsements are paid, who bears the
loss, the drawer, the drawee bank or the collecting bank?
This is the main issue in these consolidated petitions for review assailing the
decision of the Court of Appeals in "Province of Tarlac v. Philippine National
Bank v. Associated Bank v. Fausto Pangilinan, et. al." (CA-G.R. No. CV No.
17962). 1
The facts of the case are as follows:
The Province of Tarlac maintains a current account with the Philippine
National Bank (PNB) Tarlac Branch where the provincial funds are deposited.
Checks issued by the Province are signed by the Provincial Treasurer and
countersigned by the Provincial Auditor or the Secretary of the Sangguniang
Bayan.
A portion of the funds of the province is allocated to the Concepcion
Emergency Hospital. 2 The allotment checks for said government hospital are
drawn to the order of "Concepcion Emergency Hospital, Concepcion, Tarlac"
or "The Chief, Concepcion Emergency Hospital, Concepcion, Tarlac." The
checks are released by the Office of the Provincial Treasurer and received for
the hospital by its administrative officer and cashier.
In January 1981, the books of account of the Provincial Treasurer were postaudited by the Provincial Auditor. It was then discovered that the hospital did
not receive several allotment checks drawn by the Province.
On February 19, 1981, the Provincial Treasurer requested the manager of the
PNB to return all of its cleared checks which were issued from 1977 to 1980
in order to verify the regularity of their encashment. After the checks were
examined, the Provincial Treasurer learned that 30 checks amounting to
P203,300.00 were encashed by one Fausto Pangilinan, with the Associated
Bank acting as collecting bank.

It turned out that Fausto Pangilinan, who was the administrative officer and
cashier of payee hospital until his retirement on February 28, 1978, collected
the questioned checks from the office of the Provincial Treasurer. He claimed
to be assisting or helping the hospital follow up the release of the checks and
had official receipts. 3Pangilinan sought to encash the first check 4 with
Associated Bank. However, the manager of Associated Bank refused and
suggested that Pangilinan deposit the check in his personal savings account
with the same bank. Pangilinan was able to withdraw the money when the
check was cleared and paid by the drawee bank, PNB.
After forging the signature of Dr. Adena Canlas who was chief of the payee
hospital, Pangilinan followed the same procedure for the second check, in the
amount of P5,000.00 and dated April 20, 1978, 5 as well as for twenty-eight
other checks of various amounts and on various dates. The last check
negotiated by Pangilinan was for f8,000.00 and dated February 10,
1981. 6 All the checks bore the stamp of Associated Bank which reads "All
prior endorsements guaranteed ASSOCIATED BANK."
Jesus David, the manager of Associated Bank testified that Pangilinan made
it appear that the checks were paid to him for certain projects with the
hospital. 7 He did not find as irregular the fact that the checks were not
payable to Pangilinan but to the Concepcion Emergency Hospital. While he
admitted that his wife and Pangilinan's wife are first cousins, the manager
denied having given Pangilinan preferential treatment on this account. 8
On February 26, 1981, the Provincial Treasurer wrote the manager of the PNB
seeking the restoration of the various amounts debited from the current
account of the Province. 9
In turn, the PNB manager demanded reimbursement from the Associated
Bank on May 15, 1981. 10
As both banks resisted payment, the Province of Tarlac brought suit against
PNB which, in turn, impleaded Associated Bank as third-party defendant. The
latter then filed a fourth-party complaint against Adena Canlas and Fausto
Pangilinan. 11
After trial on the merits, the lower court rendered its decision on March 21,
1988, disposing as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1. On the basic complaint, in favor of plaintiff Province of Tarlac and
against defendant Philippine National Bank (PNB), ordering the latter to
pay to the former, the sum of Two Hundred Three Thousand Three
Hundred (P203,300.00) Pesos with legal interest thereon from March
20, 1981 until fully paid;

2. On the third-party complaint, in favor of defendant/third-party

plaintiff Philippine National Bank (PNB) and against third-party
defendant/fourth-party plaintiff Associated Bank ordering the latter to
reimburse to the former the amount of Two Hundred Three Thousand
Three Hundred (P203,300.00) Pesos with legal interests thereon from
March 20, 1981 until fully paid;.
3. On the fourth-party complaint, the same is hereby ordered
dismissed for lack of cause of action as against fourth-party defendant
Adena Canlas and lack of jurisdiction over the person of fourth-party
defendant Fausto Pangilinan as against the latter.
4. On the counterclaims on the complaint, third-party complaint and
fourth-party complaint, the same are hereby ordered dismissed for lack
of merit.
SO ORDERED.

12

PNB and Associated Bank appealed to the Court of Appeals. 13 Respondent

court affirmed the trial court's decision in toto on September 30, 1992.
Hence these consolidated petitions which seek a reversal of respondent
appellate court's decision.
PNB assigned two errors. First, the bank contends that respondent court
erred in exempting the Province of Tarlac from liability when, in fact, the
latter was negligent because it delivered and released the questioned checks
to Fausto Pangilinan who was then already retired as the hospital's cashier
and administrative officer. PNB also maintains its innocence and alleges that
as between two innocent persons, the one whose act was the cause of the
loss, in this case the Province of Tarlac, bears the loss.
Next, PNB asserts that it was error for the court to order it to pay the
province and then seek reimbursement from Associated Bank. According to
petitioner bank, respondent appellate Court should have directed Associated
Bank to pay the adjudged liability directly to the Province of Tarlac to avoid
circuity. 14
Associated Bank, on the other hand, argues that the order of liability should
be totally reversed, with the drawee bank (PNB) solely and ultimately
bearing the loss.
Respondent court allegedly erred in applying Section 23 of the Philippine
Clearing House Rules instead of Central Bank Circular No. 580, which, being
an administrative regulation issued pursuant to law, has the force and effect
of law. 15 The PCHC Rules are merely contractual stipulations among and
between member-banks. As such, they cannot prevail over the aforesaid CB
Circular.

It likewise contends that PNB, the drawee bank, is estopped from asserting
the defense of guarantee of prior indorsements against Associated Bank, the
collecting bank. In stamping the guarantee (for all prior indorsements), it
merely followed a mandatory requirement for clearing and had no choice but
to place the stamp of guarantee; otherwise, there would be no clearing. The
bank will be in a "no-win" situation and will always bear the loss as against
the drawee bank. 16
Associated Bank also claims that since PNB already cleared and paid the
value of the forged checks in question, it is now estopped from asserting the
defense that Associated Bank guaranteed prior indorsements. The drawee
bank allegedly has the primary duty to verify the genuineness of payee's
indorsement before paying the check. 17
While both banks are innocent of the forgery, Associated Bank claims that
PNB was at fault and should solely bear the loss because it cleared and paid
the forged checks.
xxx

xxx

xxx

The case at bench concerns checks payable to the order of Concepcion

Emergency Hospital or its Chief. They were properly issued and bear the
genuine signatures of the drawer, the Province of Tarlac. The infirmity in the
questioned checks lies in the payee's (Concepcion Emergency Hospital)
indorsements which are forgeries. At the time of their indorsement, the
checks were order instruments.
Checks having forged indorsements should be differentiated from forged
checks or checks bearing the forged signature of the drawer.
Section 23 of the Negotiable Instruments Law (NIL) provides:
Sec. 23. FORGED SIGNATURE, EFFECT OF. When a signature is forged
or made without authority of the person whose signature it purports to
be, it is wholly inoperative, and no right to retain the instrument, or to
give a discharge therefor, or to enforce payment thereof against any
party thereto, can be acquired through or under such signature unless
the party against whom it is sought to enforce such right is precluded
from setting up the forgery or want of authority.
A forged signature, whether it be that of the drawer or the payee, is wholly
inoperative and no one can gain title to the instrument through it. A person
whose signature to an instrument was forged was never a party and never
consented to the contract which allegedly gave rise to such
instrument. 18 Section 23 does not avoid the instrument but only the forged
signature. 19 Thus, a forged indorsement does not operate as the payee's
indorsement.

The exception to the general rule in Section 23 is where "a party against
whom it is sought to enforce a right is precluded from setting up the forgery
or want of authority." Parties who warrant or admit the genuineness of the
signature in question and those who, by their acts, silence or negligence are
estopped from setting up the defense of forgery, are precluded from using
this defense. Indorsers, persons negotiating by delivery and acceptors are
warrantors of the genuineness of the signatures on the instrument. 20
In bearer instruments, the signature of the payee or holder is unnecessary to
pass title to the instrument. Hence, when the indorsement is a forgery, only
the person whose signature is forged can raise the defense of forgery against
a holder in due course. 21
The checks involved in this case are order instruments, hence, the following
discussion is made with reference to the effects of a forged indorsement on
an instrument payable to order.
Where the instrument is payable to order at the time of the forgery, such as
the checks in this case, the signature of its rightful holder (here, the payee
hospital) is essential to transfer title to the same instrument. When the
holder's indorsement is forged, all parties prior to the forgery may raise the
real defense of forgery against all parties subsequent thereto. 22
An indorser of an order instrument warrants "that the instrument is genuine
and in all respects what it purports to be; that he has a good title to it; that
all prior parties had capacity to contract; and that the instrument is at the
time of his indorsement valid and subsisting." 23 He cannot interpose the
defense that signatures prior to him are forged.
A collecting bank where a check is deposited and which indorses the check
upon presentment with the drawee bank, is such an indorser. So even if the
indorsement on the check deposited by the banks's client is forged, the
collecting bank is bound by his warranties as an indorser and cannot set up
the defense of forgery as against the drawee bank.
The bank on which a check is drawn, known as the drawee bank, is under
strict liability to pay the check to the order of the payee. The drawer's
instructions are reflected on the face and by the terms of the check. Payment
under a forged indorsement is not to the drawer's order. When the drawee
bank pays a person other than the payee, it does not comply with the terms
of the check and violates its duty to charge its customer's (the drawer)
account only for properly payable items. Since the drawee bank did not pay
a holder or other person entitled to receive payment, it has no right to
reimbursement from the drawer. 24 The general rule then is that the drawee
bank may not debit the drawer's account and is not entitled to

indemnification from the drawer.

drawee bank.

25

The risk of loss must perforce fall on the

However, if the drawee bank can prove a failure by the customer/drawer to

exercise ordinary care that substantially contributed to the making of the
forged signature, the drawer is precluded from asserting the forgery.
If at the same time the drawee bank was also negligent to the point of
substantially contributing to the loss, then such loss from the forgery can be
apportioned between the negligent drawer and the negligent bank. 26
In cases involving a forged check, where the drawer's signature is forged, the
drawer can recover from the drawee bank. No drawee bank has a right to
pay a forged check. If it does, it shall have to recredit the amount of the
check to the account of the drawer. The liability chain ends with the drawee
bank whose responsibility it is to know the drawer's signature since the latter
is its customer. 27
In cases involving checks with forged indorsements, such as the present
petition, the chain of liability does not end with the drawee bank. The drawee
bank may not debit the account of the drawer but may generally pass
liability back through the collection chain to the party who took from the
forger and, of course, to the forger himself, if available. 28 In other words, the
drawee bank canseek reimbursement or a return of the amount it paid from
the presentor bank or person. 29 Theoretically, the latter can demand
reimbursement from the person who indorsed the check to it and so on. The
loss falls on the party who took the check from the forger, or on the forger
himself.
In this case, the checks were indorsed by the collecting bank (Associated
Bank) to the drawee bank (PNB). The former will necessarily be liable to the
latter for the checks bearing forged indorsements. If the forgery is that of the
payee's or holder's indorsement, the collecting bank is held liable, without
prejudice to the latter proceeding against the forger.
Since a forged indorsement is inoperative, the collecting bank had no right to
be paid by the drawee bank. The former must necessarily return the money
paid by the latter because it was paid wrongfully. 30
More importantly, by reason of the statutory warranty of a general indorser
in section 66 of the Negotiable Instruments Law, a collecting bank which
indorses a check bearing a forged indorsement and presents it to the drawee
bank guarantees all prior indorsements, including the forged indorsement. It
warrants that the instrument is genuine, and that it is valid and subsisting at
the time of his indorsement. Because the indorsement is a forgery, the
collecting bank commits a breach of this warranty and will be accountable to

the drawee bank. This liability scheme operates without regard to fault on
the part of the collecting/presenting bank. Even if the latter bank was not
negligent, it would still be liable to the drawee bank because of its
indorsement.
The Court has consistently ruled that "the collecting bank or last endorser
generally suffers the loss because it has the duty to ascertain the
genuineness of all prior endorsements considering that the act of presenting
the check for payment to the drawee is an assertion that the party making
the presentment has done its duty to ascertain the genuineness of the
endorsements." 31
The drawee bank is not similarly situated as the collecting bank because the
former makes no warranty as to the genuineness. of any indorsement. 32 The
drawee bank's duty is but to verify the genuineness of the drawer's signature
and not of the indorsement because the drawer is its client.
Moreover, the collecting bank is made liable because it is privy to the
depositor who negotiated the check. The bank knows him, his address and
history because he is a client. It has taken a risk on his deposit. The bank is
also in a better position to detect forgery, fraud or irregularity in the
indorsement.
Hence, the drawee bank can recover the amount paid on the check bearing a
forged indorsement from the collecting bank. However, a drawee bank has
the duty to promptly inform the presentor of the forgery upon discovery. If
the drawee bank delays in informing the presentor of the forgery, thereby
depriving said presentor of the right to recover from the forger, the former is
deemed negligent and can no longer recover from the presentor. 33
Applying these rules to the case at bench, PNB, the drawee bank, cannot
debit the current account of the Province of Tarlac because it paid checks
which bore forged indorsements. However, if the Province of Tarlac as drawer
was negligent to the point of substantially contributing to the loss, then the
drawee bank PNB can charge its account. If both drawee bank-PNB and
drawer-Province of Tarlac were negligent, the loss should be properly
apportioned between them.
The loss incurred by drawee bank-PNB can be passed on to the collecting
bank-Associated Bank which presented and indorsed the checks to it.
Associated Bank can, in turn, hold the forger, Fausto Pangilinan, liable.
If PNB negligently delayed in informing Associated Bank of the forgery, thus
depriving the latter of the opportunity to recover from the forger, it forfeits
its right to reimbursement and will be made to bear the loss.

After careful examination of the records, the Court finds that the Province of
Tarlac was equally negligent and should, therefore, share the burden of loss
from the checks bearing a forged indorsement.
The Province of Tarlac permitted Fausto Pangilinan to collect the checks when
the latter, having already retired from government service, was no longer
connected with the hospital. With the exception of the first check (dated
January 17, 1978), all the checks were issued and released after Pangilinan's
retirement on February 28, 1978. After nearly three years, the Treasurer's
office was still releasing the checks to the retired cashier. In addition, some
of the aid allotment checks were released to Pangilinan and the others to
Elizabeth Juco, the new cashier. The fact that there were now two persons
collecting the checks for the hospital is an unmistakable sign of an
irregularity which should have alerted employees in the Treasurer's office of
the fraud being committed. There is also evidence indicating that the
provincial employees were aware of Pangilinan's retirement and consequent
dissociation from the hospital. Jose Meru, the Provincial Treasurer, testified:.
ATTY. MORGA:
Q Now, is it true that for a given month there were two releases of
checks, one went to Mr. Pangilinan and one went to Miss Juco?
JOSE MERU:
A Yes, sir.
Q Will you please tell us how at the time (sic) when the authorized
representative of Concepcion Emergency Hospital is and was supposed
to be Miss Juco?
A Well, as far as my investigation show (sic) the assistant cashier told
me that Pangilinan represented himself as also authorized to help in
the release of these checks and we were apparently misled because
they accepted the representation of Pangilinan that he was helping
them in the release of the checks and besides according to them they
were, Pangilinan, like the rest, was able to present an official receipt to
acknowledge these receipts and according to them since this is a
government check and believed that it will eventually go to the
hospital following the standard procedure of negotiating government
checks, they released the checks to Pangilinan aside from Miss Juco. 34
The failure of the Province of Tarlac to exercise due care contributed to a
significant degree to the loss tantamount to negligence. Hence, the Province
of Tarlac should be liable for part of the total amount paid on the questioned
checks.

The drawee bank PNB also breached its duty to pay only according to the
terms of the check. Hence, it cannot escape liability and should also bear
part of the loss.
As earlier stated, PNB can recover from the collecting bank.
In the case of Associated Bank v. CA, 35 six crossed checks with forged
indorsements were deposited in the forger's account with the collecting bank
and were later paid by four different drawee banks. The Court found the
collecting bank (Associated) to be negligent and held:
The Bank should have first verified his right to endorse the crossed
checks, of which he was not the payee, and to deposit the proceeds of
the checks to his own account. The Bank was by reason of the nature
of the checks put upon notice that they were issued for deposit only to
the private respondent's account. . . .
The situation in the case at bench is analogous to the above case, for it was
not the payee who deposited the checks with the collecting bank. Here, the
checks were all payable to Concepcion Emergency Hospital but it was Fausto
Pangilinan who deposited the checks in his personal savings account.
Although Associated Bank claims that the guarantee stamped on the checks
(All prior and/or lack of endorsements guaranteed) is merely a requirement
forced upon it by clearing house rules, it cannot but remain liable. The stamp
guaranteeing prior indorsements is not an empty rubric which a bank must
fulfill for the sake of convenience. A bank is not required to accept all the
checks negotiated to it. It is within the bank's discretion to receive a check
for no banking institution would consciously or deliberately accept a check
bearing a forged indorsement. When a check is deposited with the collecting
bank, it takes a risk on its depositor. It is only logical that this bank be held
accountable for checks deposited by its customers.
A delay in informing the collecting bank (Associated Bank) of the forgery,
which deprives it of the opportunity to go after the forger, signifies
negligence on the part of the drawee bank (PNB) and will preclude it from
claiming reimbursement.
It is here that Associated Bank's assignment of error concerning C.B. Circular
No. 580 and Section 23 of the Philippine Clearing House Corporation Rules
comes to fore. Under Section 4(c) of CB Circular No. 580, items bearing a
forged endorsement shall be returned within twenty-Sour (24) hours after
discovery of the forgery but in no event beyond the period fixed or provided
by law for filing of a legal action by the returning bank. Section 23 of the
PCHC Rules deleted the requirement that items bearing a forged
endorsement should be returned within twenty-four hours. Associated Bank

now argues that the aforementioned Central Bank Circular is applicable.

Since PNB did not return the questioned checks within twenty-four hours, but
several days later, Associated Bank alleges that PNB should be considered
negligent and not entitled to reimbursement of the amount it paid on the
checks.
The Court deems it unnecessary to discuss Associated Bank's assertions that
CB Circular No. 580 is an administrative regulation issued pursuant to law
and as such, must prevail over the PCHC rule. The Central Bank circular was
in force for all banks until June 1980 when the Philippine Clearing House
Corporation (PCHC) was set up and commenced operations. Banks in Metro
Manila were covered by the PCHC while banks located elsewhere still had to
go through Central Bank Clearing. In any event, the twenty-four-hour return
rule was adopted by the PCHC until it was changed in 1982. The contending
banks herein, which are both branches in Tarlac province, are therefore not
covered by PCHC Rules but by CB Circular No. 580. Clearly then, the CB
circular was applicable when the forgery of the checks was discovered in
1981.
The rule mandates that the checks be returned within twenty-four hours after
discovery of the forgery but in no event beyond the period fixed by law for
filing a legal action. The rationale of the rule is to give the collecting bank
(which indorsed the check) adequate opportunity to proceed against the
forger. If prompt notice is not given, the collecting bank maybe prejudiced
and lose the opportunity to go after its depositor.
The Court finds that even if PNB did not return the questioned checks to
Associated Bank within twenty-four hours, as mandated by the rule, PNB did
not commit negligent delay. Under the circumstances, PNB gave prompt
notice to Associated Bank and the latter bank was not prejudiced in going
after Fausto Pangilinan. After the Province of Tarlac informed PNB of the
forgeries, PNB necessarily had to inspect the checks and conduct its own
investigation. Thereafter, it requested the Provincial Treasurer's office on
March 31, 1981 to return the checks for verification. The Province of Tarlac
returned the checks only on April 22, 1981. Two days later, Associated Bank
received the checks from PNB. 36
Associated Bank was also furnished a copy of the Province's letter of demand
to PNB dated March 20, 1981, thus giving it notice of the forgeries. At this
time, however, Pangilinan's account with Associated had only P24.63 in
it.37 Had Associated Bank decided to debit Pangilinan's account, it could not
have recovered the amounts paid on the questioned checks. In addition,
while Associated Bank filed a fourth-party complaint against Fausto

Pangilinan, it did not present evidence against Pangilinan and even

presented him as its rebuttal witness. 38Hence, Associated Bank was not
prejudiced by PNB's failure to comply with the twenty-four-hour return rule.
Next, Associated Bank contends that PNB is estopped from requiring
reimbursement because the latter paid and cleared the checks. The Court
finds this contention unmeritorious. Even if PNB cleared and paid the checks,
it can still recover from Associated Bank. This is true even if the payee's
Chief Officer who was supposed to have indorsed the checks is also a
customer of the drawee bank. 39 PNB's duty was to verify the genuineness of
the drawer's signature and not the genuineness of payee's indorsement.
Associated Bank, as the collecting bank, is the entity with the duty to verify
the genuineness of the payee's indorsement.
PNB also avers that respondent court erred in adjudging circuitous liability by
directing PNB to return to the Province of Tarlac the amount of the checks
and then directing Associated Bank to reimburse PNB. The Court finds
nothing wrong with the mode of the award. The drawer, Province of Tarlac, is
a clientor customer of the PNB, not of Associated Bank. There is no privity of
contract between the drawer and the collecting bank.
The trial court made PNB and Associated Bank liable with legal interest from
March 20, 1981, the date of extrajudicial demand made by the Province of
Tarlac on PNB. The payments to be made in this case stem from the deposits
of the Province of Tarlac in its current account with the PNB. Bank deposits
are considered under the law as loans. 40 Central Bank Circular No. 416
prescribes a twelve percent (12%) interest per annum for loans,
forebearance of money, goods or credits in the absence of express
stipulation. Normally, current accounts are likewise interest-bearing, by
express contract, thus excluding them from the coverage of CB Circular No.
416. In this case, however, the actual interest rate, if any, for the current
account opened by the Province of Tarlac with PNB was not given in
evidence. Hence, the Court deems it wise to affirm the trial court's use of the
legal interest rate, or six percent (6%) per annum. The interest rate shall be
computed from the date of default, or the date of judicial or extrajudicial
demand. 41 The trial court did not err in granting legal interest from March
20, 1981, the date of extrajudicial demand.
The Court finds as reasonable, the proportionate sharing of fifty percent fifty percent (50%-50%). Due to the negligence of the Province of Tarlac in
releasing the checks to an unauthorized person (Fausto Pangilinan), in
allowing the retired hospital cashier to receive the checks for the payee
hospital for a period close to three years and in not properly ascertaining

why the retired hospital cashier was collecting checks for the payee hospital
in addition to the hospital's real cashier, respondent Province contributed to
the loss amounting to P203,300.00 and shall be liable to the PNB for fifty
(50%) percent thereof. In effect, the Province of Tarlac can only recover fifty
percent (50%) of P203,300.00 from PNB.
The collecting bank, Associated Bank, shall be liable to PNB for fifty (50%)
percent of P203,300.00. It is liable on its warranties as indorser of the checks
which were deposited by Fausto Pangilinan, having guaranteed the
genuineness of all prior indorsements, including that of the chief of the
payee hospital, Dr. Adena Canlas. Associated Bank was also remiss in its duty
to ascertain the genuineness of the payee's indorsement.
IN VIEW OF THE FOREGOING, the petition for review filed by the Philippine
National Bank (G.R. No. 107612) is hereby PARTIALLY GRANTED. The petition
for review filed by the Associated Bank (G.R. No. 107382) is hereby DENIED.
The decision of the trial court is MODIFIED. The Philippine National Bank shall
pay fifty percent (50%) of P203,300.00 to the Province of Tarlac, with legal
interest from March 20, 1981 until the payment thereof. Associated Bank
shall pay fifty percent (50%) of P203,300.00 to the Philippine National Bank,
likewise, with legal interest from March 20, 1981 until payment is made.
SO ORDERED.
Regalado, Puno and Mendoza, JJ., concur.

G.R. No. 150255. April 22, 2005

SCHMITZ TRANSPORT & BROKERAGE CORPORATION, Petitioners,
vs.
TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE COMPANY,
LTD., and BLACK SEA SHIPPING AND DODWELL now INCHCAPE
SHIPPING SERVICES, Respondents.
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision1 of the Court of Appeals,
as well as its Resolution2 dated September 28, 2001 denying the motion for
reconsideration, which affirmed that of Branch 21 of the Regional Trial Court
(RTC) of Manila in Civil Case No. 92-631323 holding petitioner Schmitz
Transport Brokerage Corporation (Schmitz Transport), together with Black
Sea Shipping Corporation (Black Sea), represented by its ship agent Inchcape

Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily liable for the
loss of 37 hot rolled steel sheets in coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of
Ilyichevsk, Russia on board M/V "Alexander Saveliev" (a vessel of Russian
registry and owned by Black Sea) 545 hot rolled steel sheets in coil weighing
6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of
the consignee, Little Giant Steel Pipe Corporation (Little Giant),4 were insured
against all risks with Industrial Insurance Company Ltd. (Industrial Insurance)
under Marine Policy No. M-91-3747-TIS.5
The vessel arrived at the port of Manila on October 24, 1991 and the
Philippine Ports Authority (PPA) assigned it a place of berth at the outside
breakwater at the Manila South Harbor.6
Schmitz Transport, whose services the consignee engaged to secure the
requisite clearances, to receive the cargoes from the shipside, and to deliver
them to its (the consignees) warehouse at Cainta, Rizal,7 in turn engaged
the services of TVI to send a barge and tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVIs tugboat "Lailani" towed the
barge "Erika V" to shipside.8
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the
barge alongside the vessel, left and returned to the port terminal.9 At 9:00
p.m., arrastre operator Ocean Terminal Services Inc. commenced to unload
37 of the 545 coils from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had
become inclement due to an approaching storm, the unloading unto the
barge of the 37 coils was accomplished.10 No tugboat pulled the barge back
to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves,11 the crew of
the barge abandoned it and transferred to the vessel. The barge pitched and
rolled with the waves and eventually capsized, washing the 37 coils into the
sea.12 At 7:00 a.m., a tugboat finally arrived to pull the already empty and
damaged barge back to the pier.13
Earnest efforts on the part of both the consignee Little Giant and Industrial
Insurance to recover the lost cargoes proved futile.14
Little Giant thus filed a formal claim against Industrial Insurance which paid it
the amount of P5,246,113.11. Little Giant thereupon executed a subrogation
receipt15 in favor of Industrial Insurance.

Industrial Insurance later filed a complaint against Schmitz Transport, TVI,

and Black Sea through its representative Inchcape (the defendants) before
the RTC of Manila, for the recovery of the amount it paid to Little Giant plus
adjustment fees, attorneys fees, and litigation expenses.16
Industrial Insurance faulted the defendants for undertaking the unloading of
the cargoes while typhoon signal No. 1 was raised in Metro Manila.17
By Decision of November 24, 1997, Branch 21 of the RTC held all the
defendants negligent for unloading the cargoes outside of the breakwater
notwithstanding the storm signal.18 The dispositive portion of the decision
reads:
WHEREFORE, premises considered, the Court renders judgment in favor of
the plaintiff, ordering the defendants to pay plaintiff jointly and severally the
sum of P5,246,113.11 with interest from the date the complaint was filed
until fully satisfied, as well as the sum of P5,000.00 representing the
adjustment fee plus the sum of 20% of the amount recoverable from the
defendants as attorneys fees plus the costs of suit. The counterclaims and
cross claims of defendants are hereby DISMISSED for lack of [m]erit.19
To the trial courts decision, the defendants Schmitz Transport and TVI filed a
joint motion for reconsideration assailing the finding that they are common
carriers and the award of excessive attorneys fees of more thanP1,000,000.
And they argued that they were not motivated by gross or evident bad faith
and that the incident was caused by a fortuitous event. 20
By resolution of February 4, 1998, the trial court denied the motion for
reconsideration. 21
All the defendants appealed to the Court of Appeals which, by decision of
June 27, 2001, affirmed in toto the decision of the trial court, 22 it finding that
all the defendants were common carriers Black Sea and TVI for engaging
in the transport of goods and cargoes over the seas as a regular business
and not as an isolated transaction,23 and Schmitz Transport for entering into
a contract with Little Giant to transport the cargoes from ship to port for a
fee.24
In holding all the defendants solidarily liable, the appellate court ruled that
"each one was essential such that without each others contributory
negligence the incident would not have happened and so much so that the
person principally liable cannot be distinguished with sufficient accuracy."25
In discrediting the defense of fortuitous event, the appellate court held that
"although defendants obviously had nothing to do with the force of nature,
they however had control of where to anchor the vessel, where discharge will
take place and even when the discharging will commence."26

The defendants respective motions for reconsideration having been denied

by Resolution27 of September 28, 2001, Schmitz Transport (hereinafter
referred to as petitioner) filed the present petition against TVI, Industrial
Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it was
acting for its principal, consignee Little Giant, hence, the transportation
contract was by and between Little Giant and TVI.28
By Resolution of January 23, 2002, herein respondents Industrial Insurance,
Black Sea, and TVI were required to file their respective Comments.29
By its Comment, Black Sea argued that the cargoes were received by the
consignee through petitioner in good order, hence, it cannot be faulted, it
having had no control and supervision thereover.30
For its part, TVI maintained that it acted as a passive party as it merely
received the cargoes and transferred them unto the barge upon the
instruction of petitioner.31
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event,
independent of any act of negligence on the part of petitioner Black Sea and
TVI, and
(2) If there was negligence, whether liability for the loss may attach to Black
Sea, petitioner and TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any
party from any and all liability arising therefrom:
ART. 1174. Except in cases expressly specified by the law, or when it is
otherwise declared by stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be responsible for those
events which could not be foreseen, or which though foreseen, were
inevitable.
In order, to be considered a fortuitous event, however, (1) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to
comply with his obligation, must be independent of human will; (2) it must
be impossible to foresee the event which constitute the caso fortuito, or if it
can be foreseen it must be impossible to avoid; (3) the occurrence must be
such as to render it impossible for the debtor to fulfill his obligation in any
manner; and (4) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.32
[T]he principle embodied in the act of God doctrine strictly requires that the
act must be occasioned solely by the violence of nature. Human intervention

is to be excluded from creating or entering into the cause of the mischief.

When the effect is found to be in part the result of the participation of man,
whether due to his active intervention or neglect or failure to act, the whole
occurrence is then humanized and removed from the rules applicable to the
acts of God.33
The appellate court, in affirming the finding of the trial court that human
intervention in the form of contributory negligence by all the defendants
resulted to the loss of the cargoes,34 held that unloading outside the
breakwater, instead of inside the breakwater, while a storm signal was up
constitutes negligence.35 It thus concluded that the proximate cause of the
loss was Black Seas negligence in deciding to unload the cargoes at an
unsafe place and while a typhoon was approaching.36
From a review of the records of the case, there is no indication that there was
greater risk in loading the cargoes outside the breakwater. As the defendants
proffered, the weather on October 26, 1991 remained normal with moderate
sea condition such that port operations continued and proceeded normally.37
The weather data report,38 furnished and verified by the Chief of the Climate
Data Section of PAG-ASA and marked as a common exhibit of the parties,
states that while typhoon signal No. 1 was hoisted over Metro Manila on
October 23-31, 1991, the sea condition at the port of Manila at 5:00 p.m. 11:00 p.m. of October 26, 1991 was moderate. It cannot, therefore, be said
that the defendants were negligent in not unloading the cargoes upon the
barge on October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes were
completely loaded by 12:30 in the morning39 is, however, a material fact
which the appellate court failed to properly consider and appreciate40 the
proximate cause of the loss of the cargoes. Had the barge been towed back
promptly to the pier, the deteriorating sea conditions notwithstanding, the
loss could have been avoided. But the barge was left floating in open sea
until big waves set in at 5:30 a.m., causing it to sink along with the
cargoes.41 The loss thus falls outside the "act of God doctrine."
The proximate cause of the loss having been determined, who among the
parties is/are responsible therefor?
Contrary to petitioners insistence, this Court, as did the appellate court,
finds that petitioner is a common carrier. For it undertook to transport the
cargoes from the shipside of "M/V Alexander Saveliev" to the consignees
warehouse at Cainta, Rizal. As the appellate court put it, "as long as a person
or corporation holds [itself] to the public for the purpose of transporting
goods as [a] business, [it] is already considered a common carrier regardless

if [it] owns the vehicle to be used or has to hire one."42 That petitioner is a
common carrier, the testimony of its own Vice-President and General
Manager Noel Aro that part of the services it offers to its clients as a
brokerage firm includes the transportation of cargoes reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive
Vice-President and General Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and transport
business of the company. I also handle the various division heads of the
company for operation matters, and all other related functions that the
President may assign to me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as you mentioned, will
you please tell the Honorable Court if you came to know the company by the
name Little Giant Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that company, if you
can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company. What work
or duty did you perform in behalf of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of
Customs. We [are] also in-charged of the delivery of the goods to their
warehouses. We also handled the clearances of their shipment at the Bureau
of Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe
Corporation with regards to this shipment? What work did you do with this
shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter and then
the delivery of [the] cargo[es] from lighter to BASECO then to the truck and
to the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr. Witness, you
are supposed to perform, what equipment do (sic) you require or did you use
in order to effect this unloading, transfer and delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this unloading
[from] vessel to lighter, and on this we hired or we sub-contracted with
[T]ransport Ventures, Inc. which [was] in-charged (sic) of the barges. Also, in
BASECO compound we are leasing cranes to have the cargo unloaded from

the barge to trucks, [and] then we used trucks to deliver [the cargoes] to the
consignees warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the consignees
warehouse?
A: We utilized of (sic) our own trucks and we have some other contracted
trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it
you have to contract for the barges of Transport Ventures Incorporated in this
particular operation?
A: Firstly, we dont own any barges. That is why we hired the services of
another firm whom we know [al]ready for quite sometime, which is Transport
Ventures, Inc. (Emphasis supplied)43
It is settled that under a given set of facts, a customs broker may be
regarded as a common carrier. Thus, this Court, in A.F. Sanchez Brokerage,
Inc. v. The Honorable Court of Appeals,44 held:
The appellate court did not err in finding petitioner, a customs broker, to be
also a common carrier, as defined under Article 1732 of the Civil Code, to
wit,
Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the
public.
xxx
Article 1732 does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as an
ancillary activity. The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required
by law is bereft of merit. It suffices that petitioner undertakes to deliver the
goods for pecuniary consideration.45
And in Calvo v. UCPB General Insurance Co. Inc.,46 this Court held that as the
transportation of goods is an integral part of a customs broker, the customs
broker is also a common carrier. For to declare otherwise "would be to
deprive those with whom [it] contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for [its]
customers, is part and parcel of petitioners business."47

As for petitioners argument that being the agent of Little Giant, any
negligence it committed was deemed the negligence of its principal, it does
not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release of
the cargoes. In effecting the transportation of the cargoes from the shipside
and into Little Giants warehouse, however, petitioner was discharging its
own personal obligation under a contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the services of
TVI as handler48 to provide the barge and the tugboat. In their Service
Contract,49 while Little Giant was named as the consignee, petitioner did not
disclose that it was acting on commission and was chartering the vessel for
Little Giant.50 Little Giant did not thus automatically become a party to the
Service Contract and was not, therefore, bound by the terms and conditions
therein.
Not being a party to the service contract, Little Giant cannot directly sue TVI
based thereon but it can maintain a cause of action for negligence.51
In the case of TVI, while it acted as a private carrier for which it was under no
duty to observe extraordinary diligence, it was still required to observe
ordinary diligence to ensure the proper and careful handling, care and
discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of
that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the
place. When negligence shows bad faith, the provisions of articles 1171 and
2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in
the performance, that which is expected of a good father of a family shall be
required.
Was the reasonable care and caution which an ordinarily prudent person
would have used in the same situation exercised by TVI?52
This Court holds not.
TVIs failure to promptly provide a tugboat did not only increase the risk that
might have been reasonably anticipated during the shipside operation, but
was the proximate cause of the loss. A man of ordinary prudence would

not leave a heavily loaded barge floating for a considerable number of hours,
at such a precarious time, and in the open sea, knowing that the barge does
not have any power of its own and is totally defenseless from the ravages of
the sea. That it was nighttime and, therefore, the members of the crew of a
tugboat would be charging overtime pay did not excuse TVI from calling for
one such tugboat.
As for petitioner, for it to be relieved of liability, it should, following Article
173953 of the Civil Code, prove that it exercised due diligence to prevent or
minimize the loss, before, during and after the occurrence of the storm in
order that it may be exempted from liability for the loss of the goods.
While petitioner sent checkers54 and a supervisor55 on board the vessel to
counter-check the operations of TVI, itfailed to take all available and
reasonable precautions to avoid the loss. After noting that TVI failed to
arrange for the prompt towage of the barge despite the deteriorating sea
conditions, it should have summoned the same or another tugboat to extend
help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable56 for the loss
of the cargoes. The following pronouncement of the Supreme Court is
instructive:
The foundation of LRTAs liability is the contract of carriage and its obligation
to indemnify the victim arises from the breach of that contract by reason of
its failure to exercise the high diligence required of the common carrier. In
the discharge of its commitment to ensure the safety of passengers, a carrier
may choose to hire its own employees or avail itself of the services of an
outsider or an independent firm to undertake the task. In either case, the
common carrier is not relieved of its responsibilities under the contract of
carriage.
Should Prudent be made likewise liable? If at all, that liability could only be
for tort under the provisions of Article 2176 and related provisions, in
conjunction with Article 2180 of the Civil Code. x x x [O]ne might ask further,
how then must the liability of the common carrier, on one hand, and an
independent contractor, on the other hand, be described? It would be
solidary. A contractual obligation can be breached by tort and when the same
act or omission causes the injury, one resulting in culpa contractual and the
other in culpa aquiliana, Article 2194 of the Civil Code can well apply. In fine,
a liability for tort may arise even under a contract, where tort is that which
breaches the contract. Stated differently, when an act which constitutes a
breach of contract would have itself constituted the source of a quasidelictual liability had no contract existed between the parties, the contract

can be said to have been breached by tort, thereby allowing the rules on tort
to apply.57
As for Black Sea, its duty as a common carrier extended only from the time
the goods were surrendered or unconditionally placed in its possession and
received for transportation until they were delivered actually or
constructively to consignee Little Giant.58
Parties to a contract of carriage may, however, agree upon a definition of
delivery that extends the services rendered by the carrier. In the case at bar,
Bill of Lading No. 2 covering the shipment provides that delivery be made "to
the port of discharge or so near thereto as she may safely get, always
afloat."59 The delivery of the goods to the consignee was not from "pier to
pier" but from the shipside of "M/V Alexander Saveliev" and into barges, for
which reason the consignee contracted the services of petitioner. Since Black
Sea had constructively delivered the cargoes to Little Giant, through
petitioner, it had discharged its duty.60
In fine, no liability may thus attach to Black Sea.
Respecting the award of attorneys fees in an amount over P1,000,000.00 to
Industrial Insurance, for lack of factual and legal basis, this Court sets it
aside. While Industrial Insurance was compelled to litigate its rights, such
fact by itself does not justify the award of attorneys fees under Article 2208
of the Civil Code. For no sufficient showing of bad faith would be reflected in
a partys persistence in a case other than an erroneous conviction of the
righteousness of his cause.61 To award attorneys fees to a party just because
the judgment is rendered in its favor would be tantamount to imposing a
premium on ones right to litigate or seek judicial redress of legitimate
grievances.62
On the award of adjustment fees: The adjustment fees and expense of divers
were incurred by Industrial Insurance in its voluntary but unsuccessful efforts
to locate and retrieve the lost cargo. They do not constitute actual
damages.63
As for the court a quos award of interest on the amount claimed, the same
calls for modification following the ruling in Eastern Shipping Lines, Inc. v.
Court of Appeals64 that when the demand cannot be reasonably established
at the time the demand is made, the interest shall begin to run not from the
time the claim is made judicially or extrajudicially but from the date the
judgment of the court is made (at which the time the quantification of
damages may be deemed to have been reasonably ascertained).65
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz
Transport & Brokerage Corporation, and Transport Venture Incorporation

jointly and severally liable for the amount of P5,246,113.11 with the
MODIFICATION that interest at SIX PERCENT per annum of the amount due
should be computed from the promulgation on November 24, 1997 of the
decision of the trial court.
Costs against petitioner.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.

G.R. No. 159617

August 8, 2007

ROBERTO C. SICAM and AGENCIA de R.C. SICAM, INC., petitioners,

vs.
LULU V. JORGE and CESAR JORGE, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a Petition for Review on Certiorari filed by Roberto C. Sicam, Jr.
(petitioner Sicam) and Agencia deR.C. Sicam, Inc. (petitioner corporation)
seeking to annul the Decision1 of the Court of Appeals dated March 31, 2003,
and its Resolution2 dated August 8, 2003, in CA G.R. CV No. 56633.
It appears that on different dates from September to October 1987, Lulu V.
Jorge (respondent Lulu) pawned several pieces of jewelry with Agencia de R.
C. Sicam located at No. 17 Aguirre Ave., BF Homes Paraaque, Metro Manila,
to secure a loan in the total amount of P59,500.00.
On October 19, 1987, two armed men entered the pawnshop and took away
whatever cash and jewelry were found inside the pawnshop vault. The
incident was entered in the police blotter of the Southern Police District,
Paraaque Police Station as follows:
Investigation shows that at above TDPO, while victims were inside the
office, two (2) male unidentified persons entered into the said office
with guns drawn. Suspects(sic) (1) went straight inside and poked his
gun toward Romeo Sicam and thereby tied him with an electric wire
while suspects (sic) (2) poked his gun toward Divina Mata and Isabelita
Rodriguez and ordered them to lay (sic) face flat on the floor. Suspects
asked forcibly the case and assorted pawned jewelries items
mentioned above.
Suspects after taking the money and jewelries fled on board a Marson
Toyota unidentified plate number.3

Petitioner Sicam sent respondent Lulu a letter dated October 19, 1987
informing her of the loss of her jewelry due to the robbery incident in the
pawnshop. On November 2, 1987, respondent Lulu then wrote a letter4 to
petitioner Sicam expressing disbelief stating that when the robbery
happened, all jewelry pawned were deposited with Far East Bank near the
pawnshop since it had been the practice that before they could withdraw,
advance notice must be given to the pawnshop so it could withdraw the
jewelry from the bank. Respondent Lulu then requested petitioner Sicam to
prepare the pawned jewelry for withdrawal on November 6, 1987 but
petitioner Sicam failed to return the jewelry.
On September 28, 1988, respondent Lulu joined by her husband, Cesar Jorge,
filed a complaint against petitioner Sicam with the Regional Trial Court of
Makati seeking indemnification for the loss of pawned jewelry and payment
of actual, moral and exemplary damages as well as attorney's fees. The case
was docketed as Civil Case No. 88-2035.
Petitioner Sicam filed his Answer contending that he is not the real party-ininterest as the pawnshop was incorporated on April 20, 1987 and known
as Agencia de R.C. Sicam, Inc; that petitioner corporation had exercised due
care and diligence in the safekeeping of the articles pledged with it and
could not be made liable for an event that is fortuitous.
Respondents subsequently filed an Amended Complaint to include petitioner
corporation.
Thereafter, petitioner Sicam filed a Motion to Dismiss as far as he is
concerned considering that he is not the real party-in-interest. Respondents
opposed the same. The RTC denied the motion in an Order dated November
8, 1989.5
After trial on the merits, the RTC rendered its Decision6 dated January 12,
1993, dismissing respondents complaint as well as petitioners counterclaim.
The RTC held that petitioner Sicam could not be made personally liable for a
claim arising out of a corporate transaction; that in the Amended Complaint
of respondents, they asserted that "plaintiff pawned assorted jewelries in
defendants' pawnshop"; and that as a consequence of the separate juridical
personality of a corporation, the corporate debt or credit is not the debt or
credit of a stockholder.
The RTC further ruled that petitioner corporation could not be held liable for
the loss of the pawned jewelry since it had not been rebutted by respondents
that the loss of the pledged pieces of jewelry in the possession of the
corporation was occasioned by armed robbery; that robbery is a fortuitous
event which exempts the victim from liability for the loss, citing the case

of Austria v. Court of Appeals;7 and that the parties transaction was that of a
pledgor and pledgee and under Art. 1174 of the Civil Code, the pawnshop as
a pledgee is not responsible for those events which could not be foreseen.
Respondents appealed the RTC Decision to the CA. In a Decision dated March
31, 2003, the CA reversed the RTC, the dispositive portion of which reads as
follows:
WHEREFORE, premises considered, the instant Appeal is GRANTED,
and the Decision dated January 12, 1993,of the Regional Trial Court of
Makati, Branch 62, is hereby REVERSED and SET ASIDE, ordering the
appellees to pay appellants the actual value of the lost jewelry
amounting to P272,000.00, and attorney' fees of P27,200.00.8
In finding petitioner Sicam liable together with petitioner corporation, the CA
applied the doctrine of piercing the veil of corporate entity reasoning that
respondents were misled into thinking that they were dealing with the
pawnshop owned by petitioner Sicam as all the pawnshop tickets issued to
them bear the words "Agencia de R.C. Sicam"; and that there was no
indication on the pawnshop tickets that it was the petitioner corporation that
owned the pawnshop which explained why respondents had to amend their
complaint impleading petitioner corporation.
The CA further held that the corresponding diligence required of a pawnshop
is that it should take steps to secure and protect the pledged items and
should take steps to insure itself against the loss of articles which are
entrusted to its custody as it derives earnings from the pawnshop trade
which petitioners failed to do; that Austriais not applicable to this case since
the robbery incident happened in 1961 when the criminality had not as yet
reached the levels attained in the present day; that they are at least guilty of
contributory negligence and should be held liable for the loss of jewelries;
and that robberies and hold-ups are foreseeable risks in that those engaged
in the pawnshop business are expected to foresee.
The CA concluded that both petitioners should be jointly and severally held
liable to respondents for the loss of the pawned jewelry.
Petitioners motion for reconsideration was denied in a Resolution dated
August 8, 2003.
Hence, the instant petition for review with the following assignment of errors:
THE COURT OF APPEALS ERRED AND WHEN IT DID, IT OPENED ITSELF
TO REVERSAL, WHEN IT ADOPTED UNCRITICALLY (IN FACT IT
REPRODUCED AS ITS OWN WITHOUT IN THE MEANTIME
ACKNOWLEDGING IT) WHAT THE RESPONDENTS ARGUED IN THEIR
BRIEF, WHICH ARGUMENT WAS PALPABLY UNSUSTAINABLE.

THE COURT OF APPEALS ERRED, AND WHEN IT DID, IT OPENED ITSELF

TO REVERSAL BY THIS HONORABLE COURT, WHEN IT AGAIN ADOPTED
UNCRITICALLY (BUT WITHOUT ACKNOWLEDGING IT) THE SUBMISSIONS
OF THE RESPONDENTS IN THEIR BRIEF WITHOUT ADDING ANYTHING
MORE THERETO DESPITE THE FACT THAT THE SAID ARGUMENT OF THE
RESPONDENTS COULD NOT HAVE BEEN SUSTAINED IN VIEW OF
UNREBUTTED EVIDENCE ON RECORD.9
Anent the first assigned error, petitioners point out that the CAs finding that
petitioner Sicam is personally liable for the loss of the pawned jewelries is "a
virtual and uncritical reproduction of the arguments set out on pp. 5-6 of the
Appellants brief."10
Petitioners argue that the reproduced arguments of respondents in their
Appellants Brief suffer from infirmities, as follows:
(1) Respondents conclusively asserted in paragraph 2 of their
Amended Complaint that Agencia de R.C. Sicam, Inc. is the present
owner of Agencia de R.C. Sicam Pawnshop, and therefore, the CA
cannot rule against said conclusive assertion of respondents;
(2) The issue resolved against petitioner Sicam was not among those
raised and litigated in the trial court; and
(3) By reason of the above infirmities, it was error for the CA to have
pierced the corporate veil since a corporation has a personality distinct
and separate from its individual stockholders or members.
Anent the second error, petitioners point out that the CA finding on their
negligence is likewise an unedited reproduction of respondents brief which
had the following defects:
(1) There were unrebutted evidence on record that petitioners had
observed the diligence required of them, i.e, they wanted to open a
vault with a nearby bank for purposes of safekeeping the pawned
articles but was discouraged by the Central Bank (CB) since CB rules
provide that they can only store the pawned articles in a vault inside
the pawnshop premises and no other place;
(2) Petitioners were adjudged negligent as they did not take insurance
against the loss of the pledged jelweries, but it is judicial notice that
due to high incidence of crimes, insurance companies refused to cover
pawnshops and banks because of high probability of losses due to
robberies;
(3) In Hernandez v. Chairman, Commission on Audit (179 SCRA 39, 4546), the victim of robbery was exonerated from liability for the sum of
money belonging to others and lost by him to robbers.

Respondents filed their Comment and petitioners filed their Reply thereto.
The parties subsequently submitted their respective Memoranda.
We find no merit in the petition.
To begin with, although it is true that indeed the CA findings were exact
reproductions of the arguments raised in respondents (appellants) brief
filed with the CA, we find the same to be not fatally infirmed. Upon
examination of the Decision, we find that it expressed clearly and distinctly
the facts and the law on which it is based as required by Section 8, Article
VIII of the Constitution. The discretion to decide a case one way or another is
broad enough to justify the adoption of the arguments put forth by one of the
parties, as long as these are legally tenable and supported by law and the
facts on records.11
Our jurisdiction under Rule 45 of the Rules of Court is limited to the review of
errors of law committed by the appellate court. Generally, the findings of fact
of the appellate court are deemed conclusive and we are not duty-bound to
analyze and calibrate all over again the evidence adduced by the parties in
the court a quo.12 This rule, however, is not without exceptions, such as
where the factual findings of the Court of Appeals and the trial court are
conflicting or contradictory13 as is obtaining in the instant case.
However, after a careful examination of the records, we find no justification
to absolve petitioner Sicam from liability.
The CA correctly pierced the veil of the corporate fiction and adjudged
petitioner Sicam liable together with petitioner corporation. The rule is that
the veil of corporate fiction may be pierced when made as a shield to
perpetrate fraud and/or confuse legitimate issues. 14 The theory of corporate
entity was not meant to promote unfair objectives or otherwise to shield
them.15
Notably, the evidence on record shows that at the time respondent Lulu
pawned her jewelry, the pawnshop was owned by petitioner Sicam himself.
As correctly observed by the CA, in all the pawnshop receipts issued to
respondent Lulu in September 1987, all bear the words "Agencia de R. C.
Sicam," notwithstanding that the pawnshop was allegedly incorporated in
April 1987. The receipts issued after such alleged incorporation were still in
the name of "Agencia de R. C. Sicam," thus inevitably misleading, or at the
very least, creating the wrong impression to respondents and the public as
well, that the pawnshop was owned solely by petitioner Sicam and not by a
corporation.
Even petitioners counsel, Atty. Marcial T. Balgos, in his letter16 dated October
15, 1987 addressed to the Central Bank, expressly referred to petitioner

Sicam as the proprietor of the pawnshop notwithstanding the alleged

incorporation in April 1987.
We also find no merit in petitioners' argument that since respondents had
alleged in their Amended Complaint that petitioner corporation is the present
owner of the pawnshop, the CA is bound to decide the case on that basis.
Section 4 Rule 129 of the Rules of Court provides that an admission, verbal
or written, made by a party in the course of the proceedings in the same
case, does not require proof. The admission may be contradicted only by
showing that it was made through palpable mistake or that no such
admission was made.
Thus, the general rule that a judicial admission is conclusive upon the party
making it and does not require proof, admits of two exceptions, to wit: (1)
when it is shown that such admission was made through palpable mistake,
and (2) when it is shown that no such admission was in fact made. The
latter exception allows one to contradict an admission by denying
that he made such an admission.17
The Committee on the Revision of the Rules of Court explained the second
exception in this wise:
x x x if a party invokes an "admission" by an adverse party, but cites
the admission "out of context," then the one making the "admission"
may show that he made no "such" admission, or that his admission
was taken out of context.
x x x that the party can also show that he made no "such
admission", i.e., not in the sense in which the admission is
made to appear.
That is the reason for the modifier "such" because if the rule simply
states that the admission may be contradicted by showing that "no
admission was made," the rule would not really be providing for a
contradiction of the admission but just a denial.18 (Emphasis supplied).
While it is true that respondents alleged in their Amended Complaint that
petitioner corporation is the present owner of the pawnshop, they did so only
because petitioner Sicam alleged in his Answer to the original complaint filed
against him that he was not the real party-in-interest as the pawnshop was
incorporated in April 1987. Moreover, a reading of the Amended Complaint in
its entirety shows that respondents referred to both petitioner Sicam and
petitioner corporation where they (respondents) pawned their assorted
pieces of jewelry and ascribed to both the failure to observe due diligence
commensurate with the business which resulted in the loss of their pawned
jewelry.

Markedly, respondents, in their Opposition to petitioners Motion to Dismiss

Amended Complaint, insofar as petitioner Sicam is concerned, averred as
follows:
Roberto C. Sicam was named the defendant in the original complaint
because the pawnshop tickets involved in this case did not show that
the R.C. Sicam Pawnshop was a corporation. In paragraph 1 of his
Answer, he admitted the allegations in paragraph 1 and 2 of the
Complaint. He merely added "that defendant is not now the real party
in interest in this case."
It was defendant Sicam's omission to correct the pawnshop tickets
used in the subject transactions in this case which was the cause of the
instant action. He cannot now ask for the dismissal of the complaint
against him simply on the mere allegation that his pawnshop business
is now incorporated. It is a matter of defense, the merit of which can
only be reached after consideration of the evidence to be presented in
due course.19
Unmistakably, the alleged admission made in respondents' Amended
Complaint was taken "out of context" by petitioner Sicam to suit his own
purpose. Ineluctably, the fact that petitioner Sicam continued to issue
pawnshop receipts under his name and not under the corporation's name
militates for the piercing of the corporate veil.
We likewise find no merit in petitioners' contention that the CA erred in
piercing the veil of corporate fiction of petitioner corporation, as it was not
an issue raised and litigated before the RTC.
Petitioner Sicam had alleged in his Answer filed with the trial court that he
was not the real party-in-interest because since April 20, 1987, the pawnshop
business initiated by him was incorporated and known as Agencia deR.C.
Sicam. In the pre-trial brief filed by petitioner Sicam, he submitted that as far
as he was concerned, the basic issue was whether he is the real party in
interest against whom the complaint should be directed.20 In fact, he
subsequently moved for the dismissal of the complaint as to him but was not
favorably acted upon by the trial court. Moreover, the issue was squarely
passed upon, although erroneously, by the trial court in its Decision in this
manner:
x x x The defendant Roberto Sicam, Jr likewise denies liability as far as
he is concerned for the reason that he cannot be made personally
liable for a claim arising from a corporate transaction.
This Court sustains the contention of the defendant Roberto C. Sicam,
Jr. The amended complaint itself asserts that "plaintiff pawned assorted

jewelries in defendant's pawnshop." It has been held that " as a

consequence of the separate juridical personality of a corporation, the
corporate debt or credit is not the debt or credit of the stockholder, nor
is the stockholder's debt or credit that of a corporation.21
Clearly, in view of the alleged incorporation of the pawnshop, the issue of
whether petitioner Sicam is personally liable is inextricably connected with
the determination of the question whether the doctrine of piercing the
corporate veil should or should not apply to the case.
The next question is whether petitioners are liable for the loss of the pawned
articles in their possession.
Petitioners insist that they are not liable since robbery is a fortuitous event
and they are not negligent at all.
We are not persuaded.
Article 1174 of the Civil Code provides:
Art. 1174. Except in cases expressly specified by the law, or when it is
otherwise declared by stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be responsible for
those events which could not be foreseen or which, though foreseen,
were inevitable.
Fortuitous events by definition are extraordinary events not foreseeable or
avoidable. It is therefore, not enough that the event should not have been
foreseen or anticipated, as is commonly believed but it must be one
impossible to foresee or to avoid. The mere difficulty to foresee the
happening is not impossibility to foresee the same. 22
To constitute a fortuitous event, the following elements must concur: (a) the
cause of the unforeseen and unexpected occurrence or of the failure of the
debtor to comply with obligations must be independent of human will; (b) it
must be impossible to foresee the event that constitutes the caso fortuito or,
if it can be foreseen, it must be impossible to avoid; (c) the occurrence must
be such as to render it impossible for the debtor to fulfill obligations in a
normal manner; and, (d) the obligor must be free from any participation in
the aggravation of the injury or loss. 23
The burden of proving that the loss was due to a fortuitous event rests on
him who invokes it.24 And, in order for a fortuitous event to exempt one from
liability, it is necessary that one has committed no negligence or misconduct
that may have occasioned the loss. 25
It has been held that an act of God cannot be invoked to protect a person
who has failed to take steps to forestall the possible adverse consequences

of such a loss. One's negligence may have concurred with an act of God in
producing damage and injury to another; nonetheless, showing that the
immediate or proximate cause of the damage or injury was a fortuitous
event would not exempt one from liability. When the effect is found to be
partly the result of a person's participation -- whether by active intervention,
neglect or failure to act -- the whole occurrence is humanized and removed
from the rules applicable to acts of God. 26
Petitioner Sicam had testified that there was a security guard in their
pawnshop at the time of the robbery. He likewise testified that when he
started the pawnshop business in 1983, he thought of opening a vault with
the nearby bank for the purpose of safekeeping the valuables but was
discouraged by the Central Bank since pawned articles should only be stored
in a vault inside the pawnshop. The very measures which petitioners had
allegedly adopted show that to them the possibility of robbery was not only
foreseeable, but actually foreseen and anticipated. Petitioner Sicams
testimony, in effect, contradicts petitioners defense of fortuitous event.
Moreover, petitioners failed to show that they were free from any negligence
by which the loss of the pawned jewelry may have been occasioned.
Robbery per se, just like carnapping, is not a fortuitous event. It does not
foreclose the possibility of negligence on the part of herein petitioners. In Co
v. Court of Appeals,27 the Court held:
It is not a defense for a repair shop of motor vehicles to escape liability
simply because the damage or loss of a thing lawfully placed in its
possession was due to carnapping. Carnapping per se cannot be
considered as a fortuitous event. The fact that a thing was
unlawfully and forcefully taken from another's rightful
possession, as in cases of carnapping, does not automatically
give rise to a fortuitous event. To be considered as such,
carnapping entails more than the mere forceful taking of
another's property. It must be proved and established that the
event was an act of God or was done solely by third parties
and that neither the claimant nor the person alleged to be
negligent has any participation. In accordance with the Rules
of Evidence, the burden of proving that the loss was due to a
fortuitous event rests on him who invokes it which in this
case is the private respondent. However, other than the police
report of the alleged carnapping incident, no other evidence was
presented by private respondent to the effect that the incident was not
due to its fault. A police report of an alleged crime, to which only

private respondent is privy, does not suffice to establish the

carnapping. Neither does it prove that there was no fault on the part of
private respondent notwithstanding the parties' agreement at the pretrial that the car was carnapped. Carnapping does not foreclose the
possibility of fault or negligence on the part of private respondent. 28
Just like in Co, petitioners merely presented the police report of the
Paraaque Police Station on the robbery committed based on the report of
petitioners' employees which is not sufficient to establish robbery. Such
report also does not prove that petitioners were not at fault.
On the contrary, by the very evidence of petitioners, the CA did not err in
finding that petitioners are guilty of concurrent or contributory negligence as
provided in Article 1170 of the Civil Code, to wit:
Art. 1170. Those who in the performance of their obligations are guilty
of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.29
Article 2123 of the Civil Code provides that with regard to pawnshops and
other establishments which are engaged in making loans secured by
pledges, the special laws and regulations concerning them shall be observed,
and subsidiarily, the provisions on pledge, mortgage and antichresis.
The provision on pledge, particularly Article 2099 of the Civil Code, provides
that the creditor shall take care of the thing pledged with the diligence of a
good father of a family. This means that petitioners must take care of the
pawns the way a prudent person would as to his own property.
In this connection, Article 1173 of the Civil Code further provides:
Art. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of
time and of the place. When negligence shows bad faith, the provisions
of Articles 1171 and 2201, paragraph 2 shall apply.
If the law or contract does not state the diligence which is to be
observed in the performance, that which is expected of a good father
of a family shall be required.
We expounded in Cruz v. Gangan30 that negligence is the omission to do
something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do; or the doing of
something which a prudent and reasonable man would not do.31 It is want of
care required by the circumstances.

A review of the records clearly shows that petitioners failed to exercise

reasonable care and caution that an ordinarily prudent person would have
used in the same situation. Petitioners were guilty of negligence in the
operation of their pawnshop business. Petitioner Sicam testified, thus:
Court:
Q. Do you have security guards in your pawnshop?
A. Yes, your honor.
Q. Then how come that the robbers were able to enter the premises
when according to you there was a security guard?
A. Sir, if these robbers can rob a bank, how much more a pawnshop.
Q. I am asking you how were the robbers able to enter despite the fact
that there was a security guard?
A. At the time of the incident which happened about 1:00 and 2:00
o'clock in the afternoon and it happened on a Saturday and everything
was quiet in the area BF Homes Paraaque they pretended to pawn an
article in the pawnshop, so one of my employees allowed him to come
in and it was only when it was announced that it was a hold up.
Q. Did you come to know how the vault was opened?
A. When the pawnshop is official (sic) open your honor the pawnshop is
partly open. The combination is off.
Q. No one open (sic) the vault for the robbers?
A. No one your honor it was open at the time of the robbery.
Q. It is clear now that at the time of the robbery the vault was open the
reason why the robbers were able to get all the items pawned to you
inside the vault.
A. Yes sir.32
revealing that there were no security measures adopted by petitioners in the
operation of the pawnshop. Evidently, no sufficient precaution and vigilance
were adopted by petitioners to protect the pawnshop from unlawful intrusion.
There was no clear showing that there was any security guard at all. Or if
there was one, that he had sufficient training in securing a pawnshop.
Further, there is no showing that the alleged security guard exercised all that
was necessary to prevent any untoward incident or to ensure that no
suspicious individuals were allowed to enter the premises. In fact, it is even
doubtful that there was a security guard, since it is quite impossible that he
would not have noticed that the robbers were armed with caliber .45 pistols
each, which were allegedly poked at the employees.33 Significantly, the
alleged security guard was not presented at all to corroborate petitioner

Sicam's claim; not one of petitioners' employees who were present during
the robbery incident testified in court.
Furthermore, petitioner Sicam's admission that the vault was open at the
time of robbery is clearly a proof of petitioners' failure to observe the care,
precaution and vigilance that the circumstances justly demanded. Petitioner
Sicam testified that once the pawnshop was open, the combination was
already off. Considering petitioner Sicam's testimony that the robbery took
place on a Saturday afternoon and the area in BF Homes Paraaque at that
time was quiet, there was more reason for petitioners to have exercised
reasonable foresight and diligence in protecting the pawned jewelries.
Instead of taking the precaution to protect them, they let open the vault,
providing no difficulty for the robbers to cart away the pawned articles.
We, however, do not agree with the CA when it found petitioners negligent
for not taking steps to insure themselves against loss of the pawned
jewelries.
Under Section 17 of Central Bank Circular No. 374, Rules and Regulations for
Pawnshops, which took effect on July 13, 1973, and which was issued
pursuant to Presidential Decree No. 114, Pawnshop Regulation Act, it is
provided that pawns pledged must be insured, to wit:
Sec. 17. Insurance of Office Building and Pawns- The place of business
of a pawnshop and the pawns pledged to it must be insured against
fire and against burglary as well as for the latter(sic), by an
insurance company accredited by the Insurance Commissioner.
However, this Section was subsequently amended by CB Circular No. 764
which took effect on October 1, 1980, to wit:
Sec. 17 Insurance of Office Building and Pawns The office
building/premises and pawns of a pawnshop must be insured against
fire. (emphasis supplied).
where the requirement that insurance against burglary was deleted.
Obviously, the Central Bank considered it not feasible to require insurance of
pawned articles against burglary.
The robbery in the pawnshop happened in 1987, and considering the abovequoted amendment, there is no statutory duty imposed on petitioners to
insure the pawned jewelry in which case it was error for the CA to consider it
as a factor in concluding that petitioners were negligent.
Nevertheless, the preponderance of evidence shows that petitioners failed to
exercise the diligence required of them under the Civil Code.

The diligence with which the law requires the individual at all times to govern
his conduct varies with the nature of the situation in which he is placed and
the importance of the act which he is to perform.34 Thus, the cases ofAustria
v. Court of Appeals,35 Hernandez v. Chairman, Commission on
Audit36 and Cruz v. Gangan37 cited by petitioners in their pleadings, where the
victims of robbery were exonerated from liability, find no application to the
present case.
In Austria, Maria Abad received from Guillermo Austria a pendant with
diamonds to be sold on commission basis, but which Abad failed to
subsequently return because of a robbery committed upon her in 1961. The
incident became the subject of a criminal case filed against several persons.
Austria filed an action against Abad and her husband (Abads) for recovery of
the pendant or its value, but the Abads set up the defense that the robbery
extinguished their obligation. The RTC ruled in favor of Austria, as the Abads
failed to prove robbery; or, if committed, that Maria Abad was guilty of
negligence. The CA, however, reversed the RTC decision holding that the fact
of robbery was duly established and declared the Abads not responsible for
the loss of the jewelry on account of a fortuitous event. We held that for the
Abads to be relieved from the civil liability of returning the pendant under
Art. 1174 of the Civil Code, it would only be sufficient that the unforeseen
event, the robbery, took place without any concurrent fault on the debtors
part, and this can be done by preponderance of evidence; that to be free
from liability for reason of fortuitous event, the debtor must, in addition to
the casus itself, be free of any concurrent or contributory fault or
negligence.38
We found in Austria that under the circumstances prevailing at the time the
Decision was promulgated in 1971, the City of Manila and its suburbs had a
high incidence of crimes against persons and property that rendered travel
after nightfall a matter to be sedulously avoided without suitable precaution
and protection; that the conduct of Maria Abad in returning alone to her
house in the evening carrying jewelry of considerable value would have been
negligence per se and would not exempt her from responsibility in the case
of robbery. However we did not hold Abad liable for negligence since, the
robbery happened ten years previously; i.e., 1961, when criminality had not
reached the level of incidence obtaining in 1971.
In contrast, the robbery in this case took place in 1987 when robbery was
already prevalent and petitioners in fact had already foreseen it as they
wanted to deposit the pawn with a nearby bank for safekeeping. Moreover,

unlike in Austria, where no negligence was committed, we found petitioners

negligent in securing their pawnshop as earlier discussed.
In Hernandez, Teodoro Hernandez was the OIC and special disbursing officer
of the Ternate Beach Project of the Philippine Tourism in Cavite. In the
morning of July 1, 1983, a Friday, he went to Manila to encash two checks
covering the wages of the employees and the operating expenses of the
project. However for some reason, the processing of the check was delayed
and was completed at about 3 p.m. Nevertheless, he decided to encash the
check because the project employees would be waiting for their pay the
following day; otherwise, the workers would have to wait until July 5, the
earliest time, when the main office would open. At that time, he had two
choices: (1) return to Ternate, Cavite that same afternoon and arrive early
evening; or (2) take the money with him to his house in Marilao, Bulacan,
spend the night there, and leave for Ternate the following day. He chose the
second option, thinking it was the safer one. Thus, a little past 3 p.m., he
took a passenger jeep bound for Bulacan. While the jeep was on Epifanio de
los Santos Avenue, the jeep was held up and the money kept by Hernandez
was taken, and the robbers jumped out of the jeep and ran. Hernandez
chased the robbers and caught up with one robber who was subsequently
charged with robbery and pleaded guilty. The other robber who held the
stolen money escaped. The Commission on Audit found Hernandez negligent
because he had not brought the cash proceeds of the checks to his office in
Ternate, Cavite for safekeeping, which is the normal procedure in the
handling of funds. We held that Hernandez was not negligent in deciding to
encash the check and bringing it home to Marilao, Bulacan instead of
Ternate, Cavite due to the lateness of the hour for the following reasons: (1)
he was moved by unselfish motive for his co-employees to collect their
wages and salaries the following day, a Saturday, a non-working, because to
encash the check on July 5, the next working day after July 1, would have
caused discomfort to laborers who were dependent on their wages for
sustenance; and (2) that choosing Marilao as a safer destination, being
nearer, and in view of the comparative hazards in the trips to the two places,
said decision seemed logical at that time. We further held that the fact that
two robbers attacked him in broad daylight in the jeep while it was on a busy
highway and in the presence of other passengers could not be said to be a
result of his imprudence and negligence.
Unlike in Hernandez where the robbery happened in a public utility, the
robbery in this case took place in the pawnshop which is under the control of
petitioners. Petitioners had the means to screen the persons who were
allowed entrance to the premises and to protect itself from unlawful

intrusion. Petitioners had failed to exercise precautionary measures in

ensuring that the robbers were prevented from entering the pawnshop and
for keeping the vault open for the day, which paved the way for the robbers
to easily cart away the pawned articles.
In Cruz, Dr. Filonila O. Cruz, Camanava District Director of Technological
Education and Skills Development Authority (TESDA), boarded the Light Rail
Transit (LRT) from Sen. Puyat Avenue to Monumento when her handbag was
slashed and the contents were stolen by an unidentified person. Among
those stolen were her wallet and the government-issued cellular phone. She
then reported the incident to the police authorities; however, the thief was
not located, and the cellphone was not recovered. She also reported the loss
to the Regional Director of TESDA, and she requested that she be freed from
accountability for the cellphone. The Resident Auditor denied her request on
the ground that she lacked the diligence required in the custody of
government property and was ordered to pay the purchase value in the total
amount of P4,238.00. The COA found no sufficient justification to grant the
request for relief from accountability. We reversed the ruling and found that
riding the LRT cannot per se be denounced as a negligent act more so
because Cruzs mode of transit was influenced by time and money
considerations; that she boarded the LRT to be able to arrive in Caloocan in
time for her 3 pm meeting; that any prudent and rational person under
similar circumstance can reasonably be expected to do the same; that
possession of a cellphone should not hinder one from boarding the LRT coach
as Cruz did considering that whether she rode a jeep or bus, the risk of theft
would have also been present; that because of her relatively low position and
pay, she was not expected to have her own vehicle or to ride a taxicab; she
did not have a government assigned vehicle; that placing the cellphone in a
bag away from covetous eyes and holding on to that bag as she did is
ordinarily sufficient care of a cellphone while traveling on board the LRT; that
the records did not show any specific act of negligence on her part and
negligence can never be presumed.
Unlike in the Cruz case, the robbery in this case happened in petitioners'
pawnshop and they were negligent in not exercising the precautions justly
demanded of a pawnshop.
WHEREFORE, except for the insurance aspect, the Decision of the Court of
Appeals dated March 31, 2003 and its Resolution dated August 8, 2003,
are AFFIRMED.
Costs against petitioners.
SO ORDERED.

G.R. No. 69162 February 21, 1992

BANK OF THE PHILIPPINE ISLANDS, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT and the SPOUSES ARTHUR
CANLAS and VIVIENE CANLAS,respondents.
Leonen, Ramirez & Associates for petitioner.
L. Emmanuel B. Canilao for private respondents.
GRIO-AQUINO, J.:
In a decision dated September 3, 1984, the Intermediate Appellate Court
(now Court of Appeals) in AC-G.R. CV No. 69178 entitled, "Arthur A. Canlas,
et al., Plaintiff-Appellees vs. Commercial Bank and Trust Company of the
Philippines, Defendant-Appellant," reduced to P105,000 the P465,000
damage-award of the trial court to the private respondents for an error of a
bank teller which resulted in the dishonor of two small checks which the
private respondents had issued against their joint current account. This
petition for review of that decision was filed by the Bank.
The respondent spouses, Arthur and Vivienne Canlas, opened a joint current
account No. 210-520-73 on April 25, 1977 in the Quezon City branch of the
Commercial Bank and Trust Company of the Philippines (CBTC) with an initial
deposit of P2,250. Prior thereto, Arthur Canlas had an existing separate
personal checking account No. 210-442-41 in the same branch.
When the respondent spouses opened their joint current account, the "new
accounts" teller of the bank pulled out from the bank's files the old and
existing signature card of respondent Arthur Canlas for Current Account No.
210-442-41 for use as I D and reference. By mistake, she placed the old
personal account number of Arthur Canlas on the deposit slip for the new
joint checking account of the spouses so that the initial deposit of P2,250 for
the joint checking account was miscredited to Arthur's personal account (p.
9, Rollo). The spouses subsequently deposited other amounts in their joint
account.
However, when respondent Vivienne Canlas issued a check for Pl,639.89 in
April 1977 and another check for P1,160.00 on June 1, 1977, one of the
checks was dishonored by the bank for insufficient funds and a penalty of
P20 was deducted from the account in both instances. In view of the
overdrawings, the bank tried to call up the spouses at the telephone number

which they had given in their application form, but the bank could not
contact them because they actually reside in Porac, Pampanga. The city
address and telephone number which they gave to the bank belonged to
Mrs. Canlas' parents.
On December 15, 1977, the private respondents filed a complaint for
damages against CBTC in the Court of First Instance of Pampanga (p.
113, Rollo).
On February 27, 1978, the bank filed a motion to dismiss the complaint for
improper venue. The motion was denied.
During the pendency of the case, the Bank of the Philippine Islands (BPI) and
CBTC were merged. As the surviving corporation under the merger
agreement and under Section 80 (5) of the Corporation Code of the
Philippines, BPI took over the prosecution and defense of any pending claims,
actions or proceedings by and against CBTC.
On May 5, 1981, the Regional Trial Court of Pampanga rendered a decision
against BPI, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered sentencing defendant
to pay the plaintiff the following:
1. P 5,000.00 as actual damages;
2. P 150,000.00 for plaintiff Arthur Canlas and P150,000.00 for
plaintiff Vivienne S. Canlas representing moral damages;
3. P 150.000.00 as exemplary damages;
4. P 10,000.00 as attorney's fees; and
5. Costs. (p. 36, Rollo).
On appeal, the Intermediate Appellate Court deleted the actual damages and
reduced the other awards. The dispositive portion of its decision reads:
WHEREFORE, the judgment appealed from is hereby modified as
follows:
1. The award of P50,000.00 in actual damages is herewith
deleted.
2. Moral damages of P50,000.00 is awarded to plaintiffsappellees Arthur Canlas and Vivienne S. Canlas, not P50,000.00
each.
3. Exemplary damages is likewise reduced to the sum of
P50,000.00 and attorney's fees to P5,000.00.
Costs against the defendants appellant. (p. 40, Rollo.)

Petitioner filed this petition for review alleging that the appellate court erred
in holding that:
1. The venue of the case had been properly laid at Pampanga in
the light of private respondents' earlier declaration that Quezon
City is their true residence.
2. The petitioner was guilty of gross negligence in the handling of
private respondents' bank account.
3. Private respondents are entitled to the moral and exemplary
damages and attorney's fees adjudged by the respondent
appellate court.
On the question of venue raised by petitioner, it is evident that personal
actions may be instituted in the Court of First Instance (now Regional Trial
Court) of the province where the defendant or any of the defendants resides
or may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff (Section 2[b], Rule 4 of the Rules of Court). In this
case, there was ample proof that the residence of the plaintiffs is B. Sacan,
Porac, Pampanga (p. 117, Rollo). The city address of Mrs. Canlas' parents was
placed by the private respondents in their application for a joint checking
account, at the suggestion of the new accounts teller, presumably to
facilitate mailing of the bank statements and communicating with the private
respondents in case any problems should arise involving the account. No
waiver of their provincial residence for purposes of determining the venue of
an action against the bank may be inferred from the so-called
"misrepresentation" of their true residence.
The appellate court based its award of moral and exemplary damages, and
attorney's fees on its finding that the mistake committed by the new
accounts teller of the petitioner constituted "serious" negligence (p.
38, Rollo). Said court further stressed that it cannot absolve the petitioner
from liability for damages to the private respondents, even on the
assumption of an honest mistake on its part, because of the embarrassment
that even an honest mistake can cause its depositors (p. 31, Rollo).
There is no merit in petitioner's argument that it should not be considered
negligent, much less held liable for damages on account of the inadvertence
of its bank employee for Article 1173 of the Civil Code only requires it to
exercise the diligence of a good father of family.
In Simex International (Manila), Inc. vs. Court of Appeals (183 SCRA 360,
367), this Court stressed the fiduciary nature of the relationship between a
bank and its depositors and the extent of diligence expected of it in handling
the accounts entrusted to its care.

In every case, the depositor expects the bank to treat his

account with the utmost fidelity, whether such account consists
only of a few hundred pesos or of millions. The bank must record
every single transaction accurately, down to the last centavo,
and as promptly as possible. This has to be done if the account is
to reflect at any given time the amount of money the depositor
can dispose of as he sees fit, confident that the bank will deliver
it as and to whomever he directs. A blunder on the part of the
bank, such as the dishonor of a check without good reason, can
cause the depositor not a little embarrassment if not also
financial loss and perhaps even civil and criminal litigation.
The point is that as a business affected with public interest and
because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with meticulous
care, always having in mind the fiduciary nature of their
relationship. . . .
The bank is not expected to be infallible but, as correctly observed by
respondent Appellate Court, in this instance, it must bear the blame for not
discovering the mistake of its teller despite the established procedure
requiring the papers and bank books to pass through a battery of bank
personnel whose duty it is to check and countercheck them for possible
errors. Apparently, the officials and employees tasked to do that did not
perform their duties with due care, as may be gathered from the testimony
of the bank's lone witness, Antonio Enciso, who casually declared that "the
approving officer does not have to see the account numbers and all those
things.Those are very petty things for the approving manager to look into"
(p. 78, Record on Appeal). Unfortunately, it was a "petty thing," like the
incorrect account number that the bank teller wrote on the initial deposit slip
for the newly-opened joint current account of the Canlas spouses, that
sparked this half-a-million-peso damage suit against the bank.
While the bank's negligence may not have been attended with malice and
bad faith, nevertheless, it caused serious anxiety, embarrassment and
humiliation to the private respondents for which they are entitled to recover
reasonable moral damages (American Express International, Inc. vs. IAC, 167
SCRA 209). The award of reasonable attorney's fees is proper for the private
respondents were compelled to litigate to protect their interest (Art. 2208,
Civil Code). However, the absence of malice and bad faith renders the award
of exemplary damages improper (Globe Mackay Cable and Radio Corp. vs.
Court of Appeals, 176 SCRA 778).

WHEREFORE, the petition for review is granted. The appealed decision is

MODIFIED by deleting the award of exemplary damages to the private
respondents. In all other respects, the decision of the Intermediate Appellate
Court, now Court of Appeals, is AFFIRMED. No costs.
SO ORDERED.
Narvasa, C.J., Cruz and Medialdea, JJ., concur.

G.R. No. 100867. April 7, 1993.

LIM SIO BIO, also known as CORA LIM and CESAR ONG, petitioners,
vs.
THE COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES,
respondents.
De Castro & Cagampang Law Offices for petitioners
Franklin V. Tamargo for private respondent.
SYLLABUS
1. COMMERCIAL LAWS; SECURITIES; CONFIRMATION OF PURCHASE; FROM
THE POINT OF VIEW OF INVENTORS, BOTH A RECEIPT FOR THE FUND
RECEIVED AND A PROMISE BY THE BANK TO PAY BACK THE SAME WITH
INTEREST; RATIONALE IN CASE AT BAR. We cannot agree with respondent
bank's stand that the Confirmation of Purchase is a mere preliminary
document. It may be considered as such by the bank, but an ordinary
investor who is not familiar with banking practices, may easily conclude
otherwise. The Confirmation of Purchase is in printed form under the heading
"Producers Bank of the Philippines". It confirms having purchased specified
securities from the investor and provides blanks for the date of issue,
maturity date and par value of the securities which represent the amount
invested (these securities were not delivered to petitioner Lim but were kept
by respondent bank), as well as blanks for the amount of interest in pesos,
and the total amount to be paid by respondent bank. It is clear from the
Confirmations of Purchase that respondent bank admits having purchased
the securities therein with stated par value, and that it would issue
Manager's checks for the amounts of the total purchase price stated therein,
which included the interest. Any ordinary investor, as petitioner Lim was,
cannot but interpret this document to mean that respondent bank admits
having received her money and that she would get it back with interest on
the due date. With respect to the first Confirmation of Purchase, this means
that respondent bank would pay her P2,194,705.86 on February 6, 1984 for

the P2,093,935.23, the par value of the securities which represent the
amount she invested. The difference between the two amounts represents
the interest which respondent bank agreed to pay on her investment. From
petitioner Lim's point of view then, the Confirmation of Purchase was both a
receipt for the funds she invested with respondent bank and a promise by
the latter to pay her back the same with interest. There was thus no need for
an Official Receipt as alleged by respondent bank. Furthermore, since the
Confirmations of Purchase in question represent "roll overs" and not new
funds invested, the funds they cover remained with respondent bank, and
therefore, no other receipt was expected by the investor. Since under the two
(2) Confirmations of Purchase, respondent bank obligated itself to pay the
stated amount on the date of maturity, it cannot now refuse to pay on the
ground that it has no record of such Confirmations of Purchase on file or that
petitioner Lim had no official receipts for the two "roll overs". The investor
has no access to the bank records and would normally never think of even
inquiring about it.
2. ID.; ID.; ID.; WHEN SIGNED BY AUTHORIZED OFFICERS, ESTOPPED THE
BANK FROM ASSAILING ERRONEOUS AMOUNTS OF INTEREST STATED
THEREIN. Regarding respondent bank's contention that the Confirmations
of Purchase reflect erroneous amounts of interest, We hold that it is now
estopped from assailing such error for it became bound to pay the same
when these were signed by authorized officer. The petitioners herein had
nothing to do with the computation of said interest and it would be unjust to
make them suffer for such error, if any.
3. ID.; ID.; BANK SHOULD EXERCISE A HIGHER DEGREE DILIGENCE IN
HANDLING ITS AFFAIRS THAN EXPECTED OF AN ORDINARY BUSINESS FIRM.
Respondent bank has the legal responsibility to exercise due diligence not
only in the selection but also in the supervision of its employees. A bank,
being greatly affected with public interest, should exercise even a higher
degree of diligence in the handling of its affairs than that expected of an
ordinary business firm. Depositors, and the investing public in general,
entrust with it their funds, giving rise to the obligation of the bank to live up
to this trust and take all reasonable measures to prevent the dissipation of
such funds due to the fault or negligence of its employees. We believe that
respondent bank has failed in this duty and it cannot pass on this
responsibility to petitioner Lim, who acted in good faith in her dealings with
its duly authorized officer. The fact that there were several complaints
regarding the placements made with Deborah Dee Santos as respondent
bank's representative shows that respondent bank failed to diligently monitor

the activities of its money market traders who accept big amounts of money
on its behalf.
DECISION
CAMPOS, JR., J p:
This is a petition for review of the Decision ** of the Court of Appeals dated
January 22, 1991, and of its Resolution *** dated July 8, 1991 which denied
the Motion for Reconsideration of the aforesaid Decision in CA G.R. No. 20880
entitled "Lim Sio Bio, et al. vs. Producers Bank of the Philippines". The
respondent Court of Appeals affirmed the decision **** of the lower court
which dismissed the complaint for failure of the petitioners to prove their
claims by a preponderance of evidence.
In the case 1 which petitioners filed with the Regional Trial Court of Manila,
Branch 45, they sought to recover the sums of P2,194,705.86 2 and
P74,634.80, 3 constituting the principal and interest of money market
placements which petitioner Lim Sio Bio made with the respondent bank. To
support their claim, petitioners presented several documents consisting of
respondent bank's official receipts, as well as Investment Advices,
Confirmation of Purchases and Confirmation Letters.
It appears from the record that sometime in 1981, petitioner Lim Sio Bio,
otherwise known as Cora Lim, started making money market placements
with respondent bank. 4 Her initial placement is evidenced by respondent
bank's Official Receipt No. 237825 5 dated September 3, 1981 and by
respondent bank's Investment Advice No. 17852, 6 both in the amount of
P120,000.00, the latter bearing the due date of January 31, 1982.
Subsequently, said petitioner Lim made several other placements on
different dates, for various amounts and due dates. All of these placements
were supported by Official Receipts issued specifically to Lim Sio Bio or to
Cora Lim, signed by Deborah Dee Santos, a duly authorized officer of
respondent bank. These receipts were followed by an Investment Advice 7
specifying the amount of placement, the date of maturity and the rate of
interest to be earned. Whenever a placement matured, petitioner Lim would
"roll over" the funds; 8 i.e., it was renewed for a specific period and the
interest earned on the placement would be added to the principal. At times,
petitioner Lim would accumulate two or three maturing placements and "roll
them over" as one. At such "roll over", an Investment Advice would also be
given to her specifying the date of maturity, the amount "rolled over" and
the rate of interest. No Official Receipt was issued for the "rolled over"
amounts apparently because the funds never left the possession of
respondent bank.

Sometime in August, 1982, the Investment Advice usually issued by

respondent hank was replaced by a Confirmation of Repurchase, which in
turn was later substituted by a Confirmation of Purchase. Despite the
difference in nomenclature, all three have substantially the same effect.
They all confirm the receipt of the amount from the investor in the form of
specified securities, and under all of them, respondent bank obligated itself
to pay the investor the principal plus a specified rate of interest.
The last two "roll overs" were made by petitioner Lim on November 8, 1983.
9 One was for the amount of P2,093,124.00 and the other for P71,207.92.
Each was supported by a Confirmation of Purchase, the first for
P2,194,705.86, 10 and the second for P74,634.80, 11 and both were due on
February 6, 1984. These two "roll overs" together combined all of petitioner
Lim's placements since she made her first one on September 3, 1981,
together with the accumulated interests on all such placements. The
difference between the rolled over amounts and those in the Confirmations
of Purchase represented the interest which respondent bank was to pay on
the principal.
When these two "roll overs" matured, respondent bank refused to pay
despite repeated demands by petitioner Lim. It's refusal was based on the
fact that petitioner Lim's alleged two "rolled over" placements did not appear
in its records and that petitioner Lim did not present sufficient evidence
thereof. It alleged that the two Confirmations of Purchase presented by
petitioner Lim were merely "preliminary documents" which may not
necessarily lead to the perfection of the contract. According to respondent
bank, the basic document is its Official Receipt, and since petitioner Lim
could not present any such receipt for the "rolled over" placements, she had
no legal basis for her claim. 12 It further claimed that since there were
apparent alterations on the Investment Advices presented by petitioner Lim
to prove her prior placements, they were not binding on respondent bank.
We cannot agree with respondent bank's stand that the Confirmation of
Purchase is a mere preliminary document. It may be considered as such by
the bank, but an ordinary investor who is not familiar with banking practices,
may easily conclude otherwise. The Confirmation of Purchase is in printed
form under the heading "Producers Bank of the Philippines". It confirms
having purchased specified securities from the investor and provides blanks
for the date of issue, maturity date and par value of the securities which
represent the amount invested (these securities were not delivered to
petitioner Lim but were kept by respondent bank), as well as blanks for the
amount of interest in pesos, and the total amount to be paid by respondent

bank. Below these blanks are four alternative instructions to be followed by

respondent bank, number 4 of which says: "4. Other instructions ______". On
the first Confirmation of Purchase, the following is typewritten on this last
blank: "We will issue you a Manager's check amounting to P2,194,705.86 on
February 6, 1984". 13 On the second Confirmation of Purchase, this last
blank is filled in thus, also typewritten: "We will issue you a Manager's check
amounting to P74,634.80 on February 6, 1984". 14 Both Confirmations of
Purchase are signed by Deborah Dee Santos, who was admitted by
respondent bank's own witness to have been an officer of respondent bank
during all the time that petitioner Lim dealt with her. Another signature
appears beside that of Dee Santos, but is illegible. According to petitioner
Lim's undisputed testimony, when she first went to respondent bank's office
to inquire about money market placements, she was referred to Deborah Dee
Santos, who identified herself as the head of the Money Market Department.
Conrado Maebo, respondent's bank Internal Auditor at that time, testified
that Dee Santos was Assistant Manager of the Money Market Department 15
and that she was a highly respected trader of respondent bank, being one of
its biggest money market traders.
It is clear from the Confirmations of Purchase that respondent bank admits
having purchased the securities therein with stated par value, and that it
would issue Manager's checks for the amounts of the total purchase price
stated therein, which included the interest. Any ordinary investor, as
petitioner Lim was, cannot but interpret this document to mean that
respondent bank admits having received her money and that she would get
it back with interest on the due date. With respect to the first Confirmation of
Purchase, this means that respondent bank would pay her P2,194,705.86 on
February 6, 1984 for the P2,093,935.23, 16 the par value of the securities
which represent the amount she invested. The difference between the two
amounts represents the interest which respondent bank agreed to pay on her
investment. From petitioner Lim's point of view then, the Confirmation of
Purchase was both a receipt for the funds she invested with respondent bank
and a promise by the latter to pay her back the same with interest. There
was thus no need for an Official Receipt as alleged by respondent bank.
Furthermore, since the Confirmations of Purchase in question represent "roll
overs" and not new funds invested, the funds they cover remained with
respondent bank, and therefore, no other receipt was expected by the
investor. Since under the two (2) Confirmations of Purchase, respondent bank
obligated itself to pay the stated amount on the date of maturity, it cannot
now refuse to pay on the ground that it has no record of such Confirmations
of Purchase on file or that petitioner Lim had no official receipts for the two

"roll overs". The investor has no access to the bank records and would
normally never think of even inquiring about it. He has the right to assume
that the bank keeps its records faithfully. In this case, petitioner Lim had also
the right to assume, as in fact was the case, that Deborah Dee Santos was
authorized to issue such Confirmations of Purchase as she knew she was an
officer of respondent bank, with whom she had been dealing with since 1981.
All the Official Receipts she presented as evidence of her original and
subsequent placements were duly signed by Deborah Dee Santos and their
authenticity is not questioned. In fact, Carlos Maebo, respondent bank's
Internal Auditor, admitted in his testimony that the signatures of Dee Santos
on petitioners' exhibits were genuine. These receipts prove that petitioner
Lim did indeed make seventeen (17) placements with respondent bank.
It is true that there were apparent alterations on the various Investment
Advices which petitioners presented as evidence, but it is just as clear from a
perusal of such evidence that they all have respondent bank's checkwriter
imprinted on them stating the exact amount involved in each of such
Investment Advice. Although alterations could be made with respect to the
typed entries, an alteration of the checkwriter imprint is next to impossible.
In fact, respondent bank did not question the authenticity of said imprint. It
admitted also that the Investment Advices were actual bank forms, but
claimed that since the alterations were apparent, they could not have been
missed by petitioner Lim and that she was thus grossly negligent in not
questioning the same when she received the Investment Advices. Petitioner
Lim, on the other hand, testified that she was more concerned about whether
the amount imprinted on such Investment Advices tallied with the amount of
her, investment/placement, 17 and thus failed to notice the erasures. In all
the Investment Advices, the amount stated in place of the erased
typewritten amount tallied with the amount imprinted by respondent bank's
checkwriter. Neither respondent bank nor petitioner Lim could prove who
made the alterations, but petitioner Lim testified, and this was not disputed,
that she received the Investment Advices "as is", 18 meaning that she
received each Investment Advice as it appeared at the time of her testimony,
with the alterations. We believe that it is possible under the circumstances of
the case that petitioner Lim gave no importance to the erasures because she
felt secure enough with the fact that the amounts imprinted on the
Investment Advices tallied with her placements. Although she was a
businesswoman, it does not necessarily follow that she has the same
perception of the significance of erasures which a lawyer may have. And
even assuming that she was indeed negligent in failing to question the
erasures, petitioner Lim's claim is not based merely on the Investment

Advices, but mainly on the two (2) Confirmations of Purchase, the binding
effect of which We have already discussed earlier. The Investment Advices
were presented in evidence to strengthen petitioner Lim's claim and to show
that she had repeatedly rolled over her previous placements. Even without
the altered Investment Advices, she has a valid cause of action on the two
(2) Confirmations of Purchase alone. As We noted earlier, these two (2)
Confirmations of Purchase consolidated all her previous placements, and
standing alone, prove that she made the placements in the amounts therein
stated and that respondent bank had obligated itself to pay her on February
8, 1984 by Manager's check, the full amount stated in said Confirmations of
Purchase. The fact that said Confirmations of Purchase were unnumbered is
immaterial as far as petitioner Lim is concerned. Perhaps, it was material
from the viewpoint of respondent bank but there is no evidence at all to
show that petitioner Lim was aware of its materiality. The possibility exists
that she did not even notice that they were unnumbered. In any case, the
lack of such number cannot prevail over the express promise of respondent
bank to pay and cannot affect her right to demand repayment of her
placements, plus interest.
On the other hand, the Official Receipts which petitioner Lim presented in
evidence were admittedly authentic forms properly signed by Deborah Dee
Santos who as Assistant Manager of the Money Market Department had
authority to issue and sign them. These receipts prove petitioner Lim's claim
that she made not only the original placement but made several more during
the period from 1981 to 1983. Based on these Official Receipts, she made
seventeen (17) placements the sum total of which amounted to
P1,920,766.70. Interest rates agreed upon ranged from 15% to 19.25%, or
an average of 17%. Earnings on the placements computed at 17% would be
roughly about P330,000.00. Added to the principal, the sum comes up to
P2,247,297.00, very close to the amounts of the last two "roll overs" totalling
P2,269,340.66, which petitioner Lim claimed to be the accumulation of her
placements and "roll overs", with interest.
Respondent bank also showed that the Investment Advices in their file which
are supposed to correspond to the numbers of the Investment Advices
presented as evidence by petitioner Lim, contain different amounts and
maturity dates, and that the placements indicated in these Investment
Advices in their file have all been paid by respondent bank. Cancelled
Manager's checks were introduced in evidence to prove these payments.
However, there was no proof at all that petitioner Lim ever received any of
these payments. In fact, the testimony of respondent bank's Internal Auditor,
Conrado Maebo, was to the effect that respondent bank's records do not

show who received the checks in payment nor do these records identify
which hank employee delivered such checks in payment. 19
The probability that all the irregularities in this case were committed by a
bank "insider" is certainly strong. According to Maebo, Deborah Dee Santos
went on leave without pay sometime in early 1983 and has never come
back. He also testified that soon after she left, respondent bank received
complaints from several of its investors about newly discovered irregularities
in their placements. These admissions give rise to a strong suspicion that
Dee Santos was the person responsible for the irregularities in these
transactions, including petitioner Lim's. As an officer of the bank, she had
access to its records. She received the funds of petitioner Lim on behalf of
respondent bank. The latter had no control over Dee Santos and could not
possibly know what Deborah Dee Santos did with her funds and with
respondent bank's records. Petitioner Lim had her authentic Confirmations of
Purchase and to her mind, that was enough protection for her. On the other
hand, respondent bank has the legal responsibility to exercise due diligence
not only in the selection but also in the supervision of its employees. A bank,
being greatly affected with public interest, should exercise even a higher
degree of diligence in the handling of its affairs than that expected of an
ordinary business firm. Depositors, and the investing public in general,
entrust with it their funds, giving rise to the obligation of the bank to live up
to this trust and take all reasonable measures to prevent the dissipation of
such funds due to the fault or negligence of its employees. We believe that
respondent bank has failed in this duty and it cannot pass on this
responsibility to petitioner Lim, who acted in good faith in her dealings with
its duly authorized officer. The fact that there were several complaints
regarding the placements made with Deborah Dee Santos as respondent
bank's representative shows that respondent bank failed to diligently monitor
the activities of its money market traders who accept big amounts of money
on its behalf. Apparently, the anomalies had been going on for almost two (2)
years, since even the first of petitioner Lim's placements was found to have
been tainted with irregularity. It was only when Deborah Dee Santos left
without notice that the anomalies were discovered. Under these
circumstances, the blame can only be laid on respondent bank.
Regarding respondent bank's contention that the Confirmations of Purchase
reflect erroneous amounts of interest, We hold that it is now estopped from
assailing such error for it became bound to pay the same when these were
signed by authorized officer. The petitioners herein had nothing to do with
the computation of said interest and it would be unjust to make them suffer
for such error, if any.

In resume: The Official Receipts presented by petitioner Lim prove that she
has made seventeen (17) placements in the sum total of P1,920,766.70. The
two (2) Confirmations of Purchase held by Lim prove that the bank promised
to pay her P2,269,340.66 on February 6, 1984. The difference between these
two amounts corresponds roughly to the estimated interest on these
earnings. The consideration for respondent bank's promise is furnished by
the placements made by petitioner Lim and its use of such funds for
legitimate purposes. Although respondent bank claimed payment of these
placements, there was no proof at all as to who received the payments or
that petitioner Lim received any part of the same. In Our opinion, the
preponderance of evidence supports the claim of petitioner Lim.
WHEREFORE, in view of the foregoing, the assailed decision and resolution of
the respondent Court of Appeals are hereby REVERSED and a new one is
entered ordering respondent Producers Bank of the Philippines to pay
petitioners the amount of what was due to them upon the date of maturity of
the last renewal of the money market placements, that is, P2,194,705.86 and
P74,634.80 as of February 6, 1984, plus twelve per cent (12%) per annum
from February 6, 1984, compounded yearly until full payment. As there is no
showing that respondent bank acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner, no other damages may be awarded. No
pronouncement as to costs.
SO ORDERED.

G.R. No. 71049 May 29, 1987

BERNARDINO JIMENEZ, petitioner,
vs.
CITY OF MANILA and INTERMEDIATE APPELLATE COURT, respondents.
PARAS, J.:
This is a petition for review on certiorari of: (1) the decision * of the
Intermediate Appellate Court in AC-G.R. No. 013887-CVBernardino Jimenez v.
Asiatic Integrated Corporation and City of Manila, reversing the decision ** of
the Court of First Instance of Manila, Branch XXII in Civil Case No. 96390
between the same parties, but only insofar as holding Asiatic Integrated
Corporation solely liable for damages and attorney's fees instead of making
the City of Manila jointly and solidarily liable with it as prayed for by the
petitioner and (2) the resolution of the same Appellate Court denying his
Partial Motion for Reconsideration (Rollo, p. 2).

The dispositive portion of the Intermediate Appellate Court's decision is as

follows:
WHEREFORE, the decision appealed from is hereby REVERSED. A
new one is hereby entered ordering the defendant Asiatic
Integrated Corporation to pay the plaintiff P221.90 actual
medical expenses, P900.00 for the amount paid for the operation
and management of a school bus, P20,000.00 as moral damages
due to pains, sufferings and sleepless nights and P l0,000.00 as
attorney's fees.
SO ORDERED. (p. 20, Rollo)
The findings of respondent Appellate Court are as follows:
The evidence of the plaintiff (petitioner herein) shows that in the morning of
August 15, 1974 he, together with his neighbors, went to Sta. Ana public
market to buy "bagoong" at the time when the public market was flooded
with ankle deep rainwater. After purchasing the "bagoong" he turned around
to return home but he stepped on an uncovered opening which could not be
seen because of the dirty rainwater, causing a dirty and rusty four- inch nail,
stuck inside the uncovered opening, to pierce the left leg of plaintiffpetitioner penetrating to a depth of about one and a half inches. After
administering first aid treatment at a nearby drugstore, his companions
helped him hobble home. He felt ill and developed fever and he had to be
carried to Dr. Juanita Mascardo. Despite the medicine administered to him by
the latter, his left leg swelled with great pain. He was then rushed to the
Veterans Memorial Hospital where he had to be confined for twenty (20) days
due to high fever and severe pain.
Upon his discharge from the hospital, he had to walk around with crutches
for fifteen (15) days. His injury prevented him from attending to the school
buses he is operating. As a result, he had to engage the services of one
Bienvenido Valdez to supervise his business for an aggregate compensation
of nine hundred pesos (P900.00). (Decision, AC-G.R. CV No. 01387, Rollo, pp.
13-20).
Petitioner sued for damages the City of Manila and the Asiatic Integrated
Corporation under whose administration the Sta. Ana Public Market had been
placed by virtue of a Management and Operating Contract (Rollo, p. 47).
The lower court decided in favor of respondents, the dispositive portion of
the decision reading:
WHEREFORE, judgment is hereby rendered in favor of the
defendants and against the plaintiff dismissing the complaint
with costs against the plaintiff. For lack of sufficient evidence, the

counterclaims of the defendants are likewise dismissed.

(Decision, Civil Case No. 96390, Rollo, p. 42).
As above stated, on appeal, the Intermediate Appellate Court held the Asiatic
Integrated Corporation liable for damages but absolved respondent City of
Manila.
Hence this petition.
The lone assignment of error raised in this petition is on whether or not the
Intermediate Appellate Court erred in not ruling that respondent City of
Manila should be jointly and severally liable with Asiatic Integrated
Corporation for the injuries petitioner suffered.
In compliance with the resolution of July 1, 1985 of the First Division of this
Court (Rollo, p. 29) respondent City of Manila filed its comment on August 13,
1985 (Rollo, p. 34) while petitioner filed its reply on August 21, 1985 (Reno,
p. 51).
Thereafter, the Court in the resolution of September 11, 1985 (Rollo, p. 62)
gave due course to the petition and required both parties to submit
simultaneous memoranda
Petitioner filed his memorandum on October 1, 1985 (Rollo, p. 65) while
respondent filed its memorandum on October 24, 1985 (Rollo, p. 82).
In the resolution of October 13, 1986, this case was transferred to the
Second Division of this Court, the same having been assigned to a member
of said Division (Rollo, p. 92).
The petition is impressed with merit.
As correctly found by the Intermediate Appellate Court, there is no doubt
that the plaintiff suffered injuries when he fell into a drainage opening
without any cover in the Sta. Ana Public Market. Defendants do not deny that
plaintiff was in fact injured although the Asiatic Integrated Corporation tries
to minimize the extent of the injuries, claiming that it was only a small
puncture and that as a war veteran, plaintiff's hospitalization at the War
Veteran's Hospital was free. (Decision, AC-G.R. CV No. 01387, Rollo, p. 6).
Respondent City of Manila maintains that it cannot be held liable for the
injuries sustained by the petitioner because under the Management and
Operating Contract, Asiatic Integrated Corporation assumed all responsibility
for damages which may be suffered by third persons for any cause
attributable to it.
It has also been argued that the City of Manila cannot be held liable under
Article 1, Section 4 of Republic Act No. 409 as amended (Revised Charter of
Manila) which provides:

The City shall not be liable or held for damages or injuries to

persons or property arising from the failure of the Mayor, the
Municipal Board, or any other City Officer, to enforce the
provisions of this chapter, or any other law or ordinance, or from
negligence of said Mayor, Municipal Board, or any other officers
while enforcing or attempting to enforce said provisions.
This issue has been laid to rest in the case of City of Manila v. Teotico (22
SCRA 269-272 [1968]) where the Supreme Court squarely ruled that Republic
Act No. 409 establishes a general rule regulating the liability of the City of
Manila for "damages or injury to persons or property arising from the failure
of city officers" to enforce the provisions of said Act, "or any other law or
ordinance or from negligence" of the City "Mayor, Municipal Board, or other
officers while enforcing or attempting to enforce said provisions."
Upon the other hand, Article 2189 of the Civil Code of the Philippines which
provides that:
Provinces, cities and municipalities shall be liable for damages
for the death of, or injuries suffered by any person by reason of
defective conditions of roads, streets, bridges, public buildings
and other public works under their control or supervision.
constitutes a particular prescription making "provinces, cities and
municipalities ... liable for damages for the death of, or injury suffered by any
person by reason" specifically "of the defective condition of roads,
streets, bridges, public buildings, and other public works under their control
or supervision." In other words, Art. 1, sec. 4, R.A. No. 409 refers to liability
arising from negligence, in general, regardless of the object, thereof, while
Article 2189 of the Civil Code governs liability due to "defective streets,
public buildings and other public works" in particular and is therefore
decisive on this specific case.
In the same suit, the Supreme Court clarified further that under Article 2189
of the Civil Code, it is not necessary for the liability therein established to
attach, that the defective public works belong to the province, city or
municipality from which responsibility is exacted. What said article requires
is that the province, city or municipality has either "control or supervision"
over the public building in question.
In the case at bar, there is no question that the Sta. Ana Public Market,
despite the Management and Operating Contract between respondent City
and Asiatic Integrated Corporation remained under the control of the former.
For one thing, said contract is explicit in this regard, when it provides:
II

That immediately after the execution of this contract, the

SECOND PARTY shall start the painting, cleaning, sanitizing and
repair of the public markets and talipapas and within ninety (90)
days thereof, the SECOND PARTY shall submit a program of
improvement, development, rehabilitation and reconstruction of
the city public markets and talipapas subject to prior approval of
the FIRST PARTY. (Rollo, p. 44)
xxx xxx xxx
VI
That all present personnel of the City public markets and
talipapas shall be retained by the SECOND PARTY as long as their
services remain satisfactory and they shall be extended the
same rights and privileges as heretofore enjoyed by them.
Provided, however, that the SECOND PARTY shall have the right,
subject to prior approval of the FIRST PARTY to discharge any of
the present employees for cause. (Rollo, p. 45).
VII
That the SECOND PARTY may from time to time be required by
the FIRST PARTY, or his duly authorized representative or
representatives, to report, on the activities and operation of the
City public markets and talipapas and the facilities and
conveniences installed therein, particularly as to their cost of
construction, operation and maintenance in connection with the
stipulations contained in this Contract. (lbid)
The fact of supervision and control of the City over subject public market was
admitted by Mayor Ramon Bagatsing in his letter to Secretary of Finance
Cesar Virata which reads:
These cases arose from the controversy over the Management
and Operating Contract entered into on December 28, 1972 by
and between the City of Manila and the Asiatic Integrated
Corporation, whereby in consideration of a fixed service fee, the
City hired the services of the said corporation to undertake the
physical management, maintenance, rehabilitation and
development of the City's public markets and' Talipapas' subject
to the control and supervision of the City.
xxx xxx xxx
It is believed that there is nothing incongruous in the exercise of
these powers vis-a-vis the existence of the contract, inasmuch
as the City retains the power of supervision and control over its

public markets and talipapas under the terms of the contract.

(Exhibit "7-A") (Emphasis supplied.) (Rollo, p. 75).
In fact, the City of Manila employed a market master for the Sta. Ana Public
Market whose primary duty is to take direct supervision and control of that
particular market, more specifically, to check the safety of the place for the
public.
Thus the Asst. Chief of the Market Division and Deputy Market Administrator
of the City of Manila testified as follows:
Court This market master is an employee of the City
of Manila?
Mr. Ymson Yes, Your Honor.
Q What are his functions?
A Direct supervision and control over the market area
assigned to him."(T.s.n.,pp. 41-42, Hearing of May
20, 1977.)
xxx xxx xxx
Court As far as you know there is or is there any
specific employee assigned with the task of seeing to
it that the Sta. Ana Market is safe for the public?
Mr. Ymson Actually, as I stated, Your Honor, that the
Sta. Ana has its own market master. The primary
duty of that market master is to make the direct
supervision and control of that particular market, the
check or verifying whether the place is safe for public
safety is vested in the market master. (T.s.n., pp.
2425, Hearing of July 27, 1977.) (Emphasis supplied.)
(Rollo, p. 76).
Finally, Section 30 (g) of the Local Tax Code as amended, provides:
The treasurer shall exercise direct and immediate supervision
administration and control over public markets and the
personnel thereof, including those whose duties concern the
maintenance and upkeep of the market and ordinances and
other pertinent rules and regulations. (Emphasis supplied.)
(Rollo, p. 76)
The contention of respondent City of Manila that petitioner should not have
ventured to go to Sta. Ana Public Market during a stormy weather is indeed
untenable. As observed by respondent Court of Appeals, it is an error for the

trial court to attribute the negligence to herein petitioner. More specifically

stated, the findings of appellate court are as follows:
... The trial court even chastised the plaintiff for going to market
on a rainy day just to buy bagoong. A customer in a store has the
right to assume that the owner will comply with his duty to keep
the premises safe for customers. If he ventures to the store on
the basis of such assumption and is injured because the owner
did not comply with his duty, no negligence can be imputed to
the customer. (Decision, AC-G. R. CV No. 01387, Rollo, p. 19).
As a defense against liability on the basis of a quasi-delict, one must have
exercised the diligence of a good father of a family. (Art. 1173 of the Civil
Code).
There is no argument that it is the duty of the City of Manila to exercise
reasonable care to keep the public market reasonably safe for people
frequenting the place for their marketing needs.
While it may be conceded that the fulfillment of such duties is extremely
difficult during storms and floods, it must however, be admitted that ordinary
precautions could have been taken during good weather to minimize the
dangers to life and limb under those difficult circumstances.
For instance, the drainage hole could have been placed under the stalls
instead of on the passage ways. Even more important is the fact, that the
City should have seen to it that the openings were covered. Sadly, the
evidence indicates that long before petitioner fell into the opening, it was
already uncovered, and five (5) months after the incident happened, the
opening was still uncovered. (Rollo, pp. 57; 59). Moreover, while there are
findings that during floods the vendors remove the iron grills to hasten the
flow of water (Decision, AC-G.R. CV No. 0 1387; Rollo, p. 17), there is no
showing that such practice has ever been prohibited, much less penalized by
the City of Manila. Neither was it shown that any sign had been placed
thereabouts to warn passersby of the impending danger.
To recapitulate, it appears evident that the City of Manila is likewise liable for
damages under Article 2189 of the Civil Code, respondent City having
retained control and supervision over the Sta. Ana Public Market and as tortfeasor under Article 2176 of the Civil Code on quasi-delicts
Petitioner had the right to assume that there were no openings in the middle
of the passageways and if any, that they were adequately covered. Had the
opening been covered, petitioner could not have fallen into it. Thus the
negligence of the City of Manila is the proximate cause of the injury suffered,
the City is therefore liable for the injury suffered by the peti- 4 petitioner.

Respondent City of Manila and Asiatic Integrated Corporation being joint tortfeasors are solidarily liable under Article 2194 of the Civil Code.
PREMISES CONSIDERED, the decision of the Court of Appeals is hereby
MODIFIED, making the City of Manila and the Asiatic Integrated Corporation
solidarily liable to pay the plaintiff P221.90 actual medical expenses, P900.00
for the amount paid for the operation and management of the school bus,
P20,000.00 as moral damages due to pain, sufferings and sleepless nights
and P10,000.00 as attorney's fees.
SO ORDERED.
Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin and Cortes JJ., concur.

G.R. No. 161745 September 30, 2005

LEA MER INDUSTRIES, INC., Petitioners,
vs.
MALAYAN INSURANCE CO., INC.,* Respondent.
DECISION
PANGANIBAN, J.:
ommon carriers are bound to observe extraordinary diligence in their
vigilance over the goods entrusted to them, as required by the nature of
their business and for reasons of public policy. Consequently, the law
presumes that common carriers are at fault or negligent for any loss or
damage to the goods that they transport. In the present case, the evidence
submitted by petitioner to overcome this presumption was sorely insufficient.
The Case
1
Before us is a Petition for Review under Rule 45 of the Rules of Court,
assailing the October 9, 2002 Decision2and the December 29, 2003
Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 66028. The
challenged Decision disposed as follows:
"WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of
the Regional Trial Court of Manila, Branch 42 in Civil Case No. 92-63159 is
hereby REVERSED and SET ASIDE. [Petitioner] is ordered to pay the [herein
respondent] the value of the lost cargo in the amount of P565,000.00. Costs
against the [herein petitioner]."4
The assailed Resolution denied reconsideration.
The Facts
Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries,
Inc., for the shipment of 900 metric tons of silica sand valued
at P565,000.5 Consigned to Vulcan Industrial and Mining Corporation, the
cargo was to be transported from Palawan to Manila. On October 25, 1991,

the silica sand was placed on board Judy VII, a barge leased by Lea
Mer.6 During the voyage, the vessel sank, resulting in the loss of the cargo.7
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost
cargo.8 To recover the amount paid and in the exercise of its right of
subrogation, Malayan demanded reimbursement from Lea Mer, which
refused to comply. Consequently, Malayan instituted a Complaint with the
Regional Trial Court (RTC) of Manila on September 4, 1992, for the collection
of P565,000 representing the amount that respondent had paid Vulcan.9
On October 7, 1999, the trial court dismissed the Complaint, upon finding
that the cause of the loss was a fortuitous event.10 The RTC noted that the
vessel had sunk because of the bad weather condition brought about by
Typhoon Trining. The court ruled that petitioner had no advance knowledge
of the incoming typhoon, and that the vessel had been cleared by the
Philippine Coast Guard to travel from Palawan to Manila.11
Ruling of the Court of Appeals
Reversing the trial court, the CA held that the vessel was not seaworthy
when it sailed for Manila. Thus, the loss of the cargo was occasioned by
petitioners fault, not by a fortuitous event.12
Hence, this recourse.13
The Issues
Petitioner states the issues in this wise:
"A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who
had not been presented as a witness of the said report during the trial of this
case before the lower court can be admitted in evidence to prove the alleged
facts cited in the said report.
"B. Whether or not the respondent, Court of Appeals, had validly or legally
reversed the finding of fact of the Regional Trial Court which clearly and
unequivocally held that the loss of the cargo subject of this case was caused
by fortuitous event for which herein petitioner could not be held liable.
"C. Whether or not the respondent, Court of Appeals, had committed serious
error and grave abuse of discretion in disregarding the testimony of the
witness from the MARINA, Engr. Jacinto Lazo y Villegal, to the effect that the
vessel Judy VII was seaworthy at the time of incident and further in
disregarding the testimony of the PAG-ASA weather specialist, Ms. Rosa
Barba y Saliente, to the effect that typhoon Trining did not hit Metro Manila
or Palawan."14
In the main, the issues are as follows: (1) whether petitioner is liable for the
loss of the cargo, and (2) whether the survey report of Jesus Cortez is
admissible in evidence.
The Courts Ruling
The Petition has no merit.
First Issue:
Liability for Loss of Cargo

Question of Fact
The resolution of the present case hinges on whether the loss of the cargo
was due to a fortuitous event. This issue involves primarily a question of fact,
notwithstanding petitioners claim that it pertains only to a question of law.
As a general rule, questions of fact may not be raised in a petition for
review.15 The present case serves as an exception to this rule, because the
factual findings of the appellate and the trial courts vary.16 This Court
meticulously reviewed the records, but found no reason to reverse the CA.
Rule on Common Carriers
Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods, or both -- by
land, water, or air -- when this service is offered to the public for
compensation.17 Petitioner is clearly a common carrier, because it offers to
the public its business of transporting goods through its vessels.18
Thus, the Court corrects the trial courts finding that petitioner became a
private carrier when Vulcan chartered it.19 Charter parties are classified as
contracts of demise (or bareboat) and affreightment, which are distinguished
as follows:
"Under the demise or bareboat charter of the vessel, the charterer will
generally be considered as owner for the voyage or service stipulated. The
charterer mans the vessel with his own people and becomes, in effect, the
owner pro hac vice, subject to liability to others for damages caused by
negligence. To create a demise, the owner of a vessel must completely and
exclusively relinquish possession, command and navigation thereof to the
charterer; anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party at all."20
The distinction is significant, because a demise or bareboat charter indicates
a business undertaking that isprivate in character. 21 Consequently, the rights
and obligations of the parties to a contract of private carriage are governed
principally by their stipulations, not by the law on common carriers.22
The Contract in the present case was one of affreightment, as shown by the
fact that it was petitioners crew that manned the tugboat M/V Ayalit and
controlled the barge Judy VII.23 Necessarily, petitioner was a common carrier,
and the pertinent law governs the present factual circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence in their
vigilance over the goods and the safety of the passengers they transport, as
required by the nature of their business and for reasons of public
policy.24Extraordinary diligence requires rendering service with the greatest
skill and foresight to avoid damage and destruction to the goods entrusted
for carriage and delivery.25
Common carriers are presumed to have been at fault or to have acted
negligently for loss or damage to the goods that they have
transported.26 This presumption can be rebutted only by proof that they

observed extraordinary diligence, or that the loss or damage was occasioned

by any of the following causes:27
"(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
"(2) Act of the public enemy in war, whether international or civil;
"(3) Act or omission of the shipper or owner of the goods;
"(4) The character of the goods or defects in the packing or in the containers;
"(5) Order or act of competent public authority."28
Rule on Fortuitous Events
Article 1174 of the Civil Code provides that "no person shall be responsible
for a fortuitous event which could not be foreseen, or which, though
foreseen, was inevitable." Thus, if the loss or damage was due to such an
event, a common carrier is exempted from liability.
Jurisprudence defines the elements of a "fortuitous event" as follows: (a) the
cause of the unforeseen and unexpected occurrence, or the failure of the
debtors to comply with their obligations, must have been independent of
human will; (b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the
occurrence must have been such as to render it impossible for the debtors to
fulfill their obligation in a normal manner; and (d) the obligor must have been
free from any participation in the aggravation of the resulting injury to the
creditor.29
To excuse the common carrier fully of any liability, the fortuitous event must
have been the proximate and only cause of the loss.30 Moreover, it should
have exercised due diligence to prevent or minimize the loss before, during
and after the occurrence of the fortuitous event.31
Loss in the Instant Case
There is no controversy regarding the loss of the cargo in the present case.
As the common carrier, petitioner bore the burden of proving that it had
exercised extraordinary diligence to avoid the loss, or that the loss had been
occasioned by a fortuitous event -- an exempting circumstance.
It was precisely this circumstance that petitioner cited to escape liability. Lea
Mer claimed that the loss of the cargo was due to the bad weather condition
brought about by Typhoon Trining.32 Evidence was presented to show that
petitioner had not been informed of the incoming typhoon, and that the
Philippine Coast Guard had given it clearance to begin the voyage.33 On
October 25, 1991, the date on which the voyage commenced and the barge
sank, Typhoon Trining was allegedly far from Palawan, where the storm
warning was only "Signal No. 1."34
The evidence presented by petitioner in support of its defense of fortuitous
event was sorely insufficient. As required by the pertinent law, it was not
enough for the common carrier to show that there was an unforeseen or
unexpected occurrence. It had to show that it was free from any fault -- a fact
it miserably failed to prove.

First, petitioner presented no evidence that it had attempted to minimize or

prevent the loss before, during or after the alleged fortuitous event.35 Its
witness, Joey A. Draper, testified that he could no longer remember whether
anything had been done to minimize loss when water started entering the
barge.36 This fact was confirmed during his cross-examination, as shown by
the following brief exchange:
"Atty. Baldovino, Jr.:
Other than be[a]ching the barge Judy VII, were there other precautionary
measure[s] exercised by you and the crew of Judy VII so as to prevent the
los[s] or sinking of barge Judy VII?
xxxxxxxxx
Atty. Baldovino, Jr.:
Your Honor, what I am asking [relates to the] action taken by the officers and
crew of tugboat Ayalit and barge Judy VII x x x to prevent the sinking of
barge Judy VII?
xxxxxxxxx
Court:
Mr. witness, did the captain of that tugboat give any instruction on how to
save the barge Judy VII?
Joey Draper:
I can no longer remember sir, because that happened [a] long time ago." 37
Second, the alleged fortuitous event was not the sole and proximate cause of
the loss. There is a preponderance of evidence that the barge was not
seaworthy when it sailed for Manila.38 Respondent was able to prove that, in
the hull of the barge, there were holes that might have caused or aggravated
the sinking.39 Because the presumption of negligence or fault applied to
petitioner, it was incumbent upon it to show that there were no holes; or, if
there were, that they did not aggravate the sinking.
Petitioner offered no evidence to rebut the existence of the holes. Its witness,
Domingo A. Luna, testified that the barge was in "tip-top" or excellent
condition,40 but that he had not personally inspected it when it left Palawan.41
The submission of the Philippine Coast Guards Certificate of Inspection
of Judy VII, dated July 31, 1991, did not conclusively prove that the barge was
seaworthy.42 The regularity of the issuance of the Certificate is disputably
presumed.43 It could be contradicted by competent evidence, which
respondent offered. Moreover, this evidence did not necessarily take into
account the actual condition of
the vessel at the time of the commencement of the voyage.44
Second Issue:
Admissibility of the Survey Report
Petitioner claims that the Survey Report45 prepared by Jesus Cortez, the
cargo surveyor, should not have been admitted in evidence. The Court partly
agrees. Because he did not testify during the trial,46 then the Report that he

had prepared was hearsay and therefore inadmissible for the purpose of
proving the truth of its contents.
The Survey Report Not the Sole Evidence
The facts reveal that Cortezs Survey Report was used in the testimonies of
respondents witnesses -- Charlie M. Soriano; and Federico S. Manlapig, a
cargo marine surveyor and the vice-president of Toplis and Harding
Company.47 Soriano testified that the Survey Report had been used in
preparing the final Adjustment Report conducted by their company.48 The
final Report showed that the barge was not seaworthy because of the
existence of the holes. Manlapig testified that he had prepared that Report
after taking into account the findings of the surveyor, as well as the pictures
and the sketches of the place where the sinking occurred.49 Evidently, the
existence of the holes was proved by the testimonies of the witnesses, not
merely by Cortez Survey Report.
Rule on Independently
Relevant Statement
That witnesses must be examined and presented during the trial,50 and that
their testimonies must be confined to personal knowledge is required by the
rules on evidence, from which we quote:
"Section 36. Testimony generally confined to personal knowledge; hearsay
excluded. A witness can testify only to those facts which he knows of his
personal knowledge; that is, which are derived from his own perception,
except as otherwise provided in these rules."51
On this basis, the trial court correctly refused to admit Jesus Cortezs
Affidavit, which respondent had offered as evidence.52 Well-settled is the rule
that, unless the affiant is presented as a witness, an affidavit is considered
hearsay.53
An exception to the foregoing rule is that on "independently relevant
statements." A report made by a person is admissible if it is intended to
prove the tenor, not the truth, of the statements.54 Independent of the truth
or the falsity of the statement given in the report, the fact that it has been
made is relevant. Here, the hearsay rule does not apply.55
In the instant case, the challenged Survey Report prepared by Cortez was
admitted only as part of the testimonies of respondents witnesses. The
referral to Cortezs Report was in relation to Manlapigs final Adjustment
Report. Evidently, it was the existence of the Survey Report that was testified
to. The admissibility of that Report as part of the testimonies of the
witnesses was correctly ruled upon by the trial court.
At any rate, even without the Survey Report, petitioner has already failed to
overcome the presumption of fault that applies to common carriers.
WHEREFORE, the Petition is DENIED and the assailed Decision and
Resolution are AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. Nos. 103442-45 May 21, 1993

NATIONAL POWER CORPORATION, ET AL., petitioners,
vs.
THE COURT OF APPEALS, GAUDENCIO C. RAYO, ET AL., respondents.
The Solicitor General for plaintiff-appellee.
Ponciano G. Hernandez for private respondents.
DAVIDE, JR., J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules
of Court urging this Court to set aside the 19 August 1991 consolidated
Decision of the Court of Appeals in CA.-G.R. CV Nos. 27290-93 1 which
reversed the Decision of Branch 5 of the then Court of First Instance (now
Regional Trial Court) of Bulacan, and held petitioners National Power
Corporation (NPC) and Benjamin Chavez jointly and severally liable to the
private respondents for actual and moral damages, litigation expenses and
attorney's fees.
This present controversy traces its beginnings to four (4) separate
complaints 2 for damages filed against the NPC and Benjamin Chavez before
the trial court. The plaintiffs therein, now private respondents, sought to
recover actual and other damages for the loss of lives and the destruction to
property caused by the inundation of the town of Norzagaray, Bulacan on 2627 October 1978. The flooding was purportedly caused by the negligent
release by the defendants of water through the spillways of the Angat Dam
(Hydroelectric Plant). In said complaints, the plaintiffs alleged, inter alia, that:
1) defendant NPC operated and maintained a multi-purpose hydroelectric
plant in the Angat River at Hilltop, Norzagaray, Bulacan; 2) defendant
Benjamin Chavez was the plant supervisor at the time of the incident in
question; 3) despite the defendants' knowledge, as early as 24 October
1978, of the impending entry of typhoon "Kading," they failed to exercise
due diligence in monitoring the water level at the dam; 4) when the said
water level went beyond the maximum allowable limit at the height of the
typhoon, the defendants suddenly, negligently and recklessly opened three
(3) of the dam's spillways, thereby releasing a large amount of water which
inundated the banks of the Angat River; and 5) as a consequence, members
of the household of the plaintiffs, together with their animals, drowned, and
their properties were washed away in the evening of 26 October and the
early hours of 27 October 1978. 3
In their Answers, the defendants, now petitioners, alleged that: 1) the NPC
exercised due care, diligence and prudence in the operation and

maintenance of the hydroelectric plant; 2) the NPC exercised the diligence of

a good father in the selection of its employees; 3) written notices were sent
to the different municipalities of Bulacan warning the residents therein about
the impending release of a large volume of water with the onset of typhoon
"Kading" and advise them to take the necessary precautions; 4) the water
released during the typhoon was needed to prevent the collapse of the dam
and avoid greater damage to people and property; 5) in spite of the
precautions undertaken and the diligence exercised, they could still not
contain or control the flood that resulted and; 6) the damages incurred by
the private respondents were caused by a fortuitous event or force
majeure and are in the nature and character of damnum absque injuria. By
way of special affirmative defense, the defendants averred that the NPC
cannot be sued because it performs a purely governmental function. 4
Upon motion of the defendants, a preliminary hearing on the special defense
was conducted. As a result thereof, the trial court dismissed the complaints
as against the NPC on the ground that the provision of its charter allowing it
to sue and be sued does not contemplate actions based on tort. The parties
do not, however, dispute the fact that this Court overruled the trial court and
ordered the reinstatement of the complaints as against the NPC. 5
Being closely interrelated, the cases were consolidated and trial thereafter
ensued.
The lower court rendered its decision on 30 April 1990 dismissing the
complaints "for lack of sufficient and credible evidence." 6 Consequently, the
private respondents seasonably appealed therefrom to the respondent Court
which then docketed the cases as CA-G.R. CV Nos. 27290-93.
In its joint decision promulgated on 19 August 1991, the Court of Appeals
reversed the appealed decision and awarded damages in favor of the private
respondents. The dispositive portion of the decision reads:
CONFORMABLY TO THE FOREGOING, the joint decision appealed
from is hereby REVERSED and SET ASIDE, and a new one is
hereby rendered:
1. In Civil Case No. SM-950, ordering defendants-appellees to
pay, jointly and severally, plaintiffs-appellants, with legal interest
from the date when this decision shall become final and
executory, the following:
A. Actual damages, to wit:
1) Gaudencio C. Rayo, Two Hundred Thirty One
Thousand Two Hundred Sixty Pesos (P231,260.00);

2) Bienvenido P. Pascual, Two Hundred Four Thousand

Five Hundred Pesos (P204.500.00);
3) Tomas Manuel, One Hundred Fifty Five Thousand
Pesos (P155,000.00);
4) Pedro C. Bartolome, One Hundred Forty Seven
Thousand Pesos (P147,000.00);.
5) Bernardino Cruz, One Hundred Forty Three
Thousand Five Hundred Fifty Two Pesos and Fifty
Centavos (P143,552.50);
6) Jose Palad, Fifty Seven Thousand Five Hundred
Pesos (P57,500.00);
7) Mariano S. Cruz, Forty Thousand Pesos
(P40,000.00);
8) Lucio Fajardo, Twenty nine Thousand Eighty Pesos
(P29,080.00); and
B. Litigation expenses of Ten Thousand Pesos (P10,000.00);
2. In Civil case No. SM-951, ordering defendants-appellees to pay
jointly and severally, plaintiff-appellant, with legal interest from
the date when this decision shall have become final and
executory, the following :
A. Actual damages of Five Hundred Twenty Thousand
Pesos (P520,000.00);.
B. Moral damages of five hundred Thousand Pesos
(P500,000.00); and.
C. Litigation expenses of Ten Thousand Pesos
(P10,000.00);.
3. In Civil Case No. SM-953, ordering defendants-appellees to
pay, jointly and severally, with legal interest from the date when
this decision shall have become final and executory;
A. Plaintiff-appellant Angel C. Torres:
1) Actual damages of One Hundred Ninety Nine Thousand One
Hundred Twenty Pesos (P199,120.00);
2) Moral Damages of One Hundred Fifty Thousand Pesos
(P150,000.00);
B. Plaintiff-appellant Norberto Torres:
1) Actual damages of Fifty Thousand Pesos (P50,000.00);
2) Moral damages of Fifty Thousand Pesos (P50,000.00);

C. Plaintiff-appellant Rodelio Joaquin:

1) Actual damages of One Hundred Thousand Pesos
(P100,000.00);
2) Moral damages of One Hundred Thousand Pesos
(P100,000.00); and
D. Plaintifsf-appellants litigation expenses of Ten Thousand Pesos
(P10,000.00);
4. In Civil case No. SM-1247, ordering defendants-appellees to
pay, jointly and severally, with legal interest from the date when
this decision shall have become final and executory :
A. Plaintiffs-appellants Presentacion Lorenzo and Clodualdo
Lorenzo:
1) Actual damages of Two Hundred Fifty Six Thousand
Six Hundred Pesos (P256,600.00);
2) Moral damages of Fifty Thousand Pesos
(P50,000.00);
B. Plaintiff-appellant Consolacion Guzman :
1) Actual damages of One Hundred forty Thousand
Pesos (P140,000.00);
2) Moral damages of Fifty Thousand Pesos
(P50,000.00);
C. Plaintiff-appellant Virginia Guzman :
1) Actual damages of Two Hundred Five Hundred
Twenty Pesos (205,520.00); and
D. Plaintiffs-appellants litigation expenses of Ten Thousand Pesos
(10,000.00).
In addition, in all the four (4) instant cases, ordering defendantsappellees to pay, jointly and severally, plaintiffs-appellants
attorney fees in an amount equivalent to 15% of the total
amount awarded.
No pronouncement as to costs. 7
The foregoing judgment is based on the public respondent's conclusion that
the petitioners were guilty of:
. . . a patent gross and evident lack of foresight, imprudence and
negligence . . . in the management and operation of Angat Dam.
The unholiness of the hour, the extent of the opening of the
spillways, And the magnitude of the water released, are all but

products of defendants-appellees' headlessness, slovenliness,

and carelessness. The resulting flash flood and inundation of
even areas (sic) one (1) kilometer away from the Angat River
bank would have been avoided had defendants-appellees
prepared the Angat Dam by maintaining in the first place, a
water elevation which would allow room for the expected
torrential rains. 8
This conclusion, in turn, is anchored on its findings of fact, to wit:
As early as October 21, 1978, defendants-appellees knew of the
impending onslaught of and imminent danger posed by typhoon
"Kading". For as alleged by defendants-appellees themselves,
the coming of said super typhoon was bannered by Bulletin
Today, a newspaper of national circulation, on October 25, 1978,
as "Super Howler to hit R.P." The next day, October 26, 1978,
said typhoon once again merited a headline in said newspaper as
"Kading's Big Blow expected this afternoon" (Appellee's Brief, p.
6). Apart from the newspapers, defendants-appellees learned of
typhoon "Kading' through radio announcements (Civil Case No.
SM-950, TSN, Benjamin Chavez, December 4, 1984, pp. 7-9).
Defendants-appellees doubly knew that the Angat Dam
can safely hold a normal maximum headwater elevation of 217
meters (Appellee's brief, p. 12; Civil Case No. SM-951, Exhibit "I6"; Civil Case No. SM-953, Exhibit "J-6"; Civil Case No. SM-1247,
Exhibit "G-6").
Yet, despite such knowledge, defendants-appellees maintained a
reservoir water elevation even beyond its maximum and safe
level, thereby giving no sufficient allowance for the reservoir to
contain the rain water that will inevitably be brought by the
coming typhoon.
On October 24, 1978, before typhoon "Kading" entered the
Philippine area of responsibility, water elevation ranged from
217.61 to 217.53, with very little opening of the spillways,
ranging from 1/2 to 1 meter. On October 25, 1978, when typhoon
"Kading" entered the Philippine area of responsibility, and public
storm signal number one was hoisted over Bulacan at 10:45
a.m., later raised to number two at 4:45 p.m., and then to
number three at 10:45 p.m., water elevation ranged from 217.47
to 217.57, with very little opening of the spillways, ranging from
1/2 to 1 meter. On October 26, 1978, when public storm signal

number three remained hoisted over Bulacan, the water

elevation still remained at its maximum level of 217.00 to 218.00
with very little opening of the spillways ranging from 1/2 to 2
meters, until at or about midnight, the spillways were suddenly
opened at 5 meters, then increasing swiftly to 8, 10, 12, 12.5, 13,
13.5, 14, 14.5 in the early morning hours of October 27, 1978,
releasing water at the rate of 4,500 cubic meters per second,
more or less. On October 27, 1978, water elevation remained at
a range of 218.30 to 217.05 (Civil Case No. SM-950, Exhibits "D"
and series, "L", "M", "N", and "O" and Exhibits "3" and "4"; Civil
Case No. SM-951, Exhibits "H" and "H-1"; Civil Case No. SM-953,
Exhibits "I" and "I-1"; Civil Case No. SM 1247, Exhibits "F" and "F1").
xxx xxx xxx
From the mass of evidence extant in the record, We are
convinced, and so hold that the flash flood on October 27, 1978,
was caused not by rain waters (sic), but by stored waters (sic)
suddenly and simultaneously released from the Angat Dam by
defendants-appellees, particularly from midnight of October 26,
1978 up to the morning hours of October 27,
1978. 9
The appellate court rejected the petitioners' defense that they had sent
"early warning written notices" to the towns of Norzagaray, Angat, Bustos,
Plaridel, Baliwag and Calumpit dated 24 October 1978 which read:
TO ALL CONCERN (sic):
Please be informed that at present our reservoir (dam) is full and
that we have been releasing water intermittently for the past
several days.
With the coming of typhoon "Rita" (Kading) we expect to release
greater (sic) volume of water, if it pass (sic) over our place.
In view of this kindly advise people residing along Angat River to
keep alert and stay in safe places.
BENJA
MIN L.
CHAV
EZ
Power
Plant
Super

intend
ent 10
because:
Said notice was delivered to the "towns of Bulacan" on October
26, 1978 by defendants-appellees driver, Leonardo Nepomuceno
(Civil Case No. SM-950, TSN, Benjamin Chavez, December 4,
1984, pp. 7-11 and TSN, Leonardo Nepomuceno, March 7, 1985,
pp. 10-12).
Said notice is ineffectual, insufficient and inadequate for
purposes of the opening of the spillway gates at midnight of
October 26, 1978 and on October 27, 1978. It did not prepare or
warn the persons so served, for the volume of water to be
released, which turned out to be of such magnitude, that
residents near or along the Angat River, even those one (1)
kilometer away, should have been advised to evacuate. Said
notice, addressed "TO ALL CONCERN (sic)," was delivered to a
policeman (Civil Case No. SM-950, pp. 10-12 and Exhibit "2-A")
for the municipality of Norzagaray. Said notice was not thus
addressed and delivered to the proper and responsible officials
who could have disseminated the warning to the residents
directly affected. As for the municipality of Sta. Maria, where
plaintiffs-appellants in Civil Case No. SM-1246 reside, said notice
does not appear to have been served. 11
Relying on Juan F. Nakpil & Sons vs. Court of Appeals, 12 public respondent
rejected the petitioners' plea that the incident in question was caused
by force majeure and that they are, therefore, not liable to the private
respondents for any kind of damage such damage being in the nature
of damnum absque injuria.
The motion for reconsideration filed by the petitioners, as well as the motion
to modify judgment filed by the public respondents, 13 were denied by the
public respondent in its Resolution of 27 December 1991. 14
Petitioners thus filed the instant petition on 21 February 1992.
After the Comment to the petition was filed by the private respondents and
the Reply thereto was filed by the petitioners, We gave due course to the
petition on 17 June 1992 and directed the parties to submit their respective
Memoranda, 15 which they subsequently complied with.
The petitioners raised the following errors allegedly committed by the
respondent Court :

I. THE COURT OF APPEALS ERRED IN APPLYING THE RULING

OF NAKPIL & SONS V. COURT OF APPEALS AND HOLDING THAT
PETITIONERS WERE GUILTY OF NEGLIGENCE.
II. THE COURT OF APPEALS ERRED IN HOLDING THAT THE
WRITTEN NOTICES OF WARNING ISSUED BY PETITIONERS WERE
INSUFFICIENT.
III. THE COURT OF APPEALS ERRED IN HOLDING THAT THE
DAMAGE SUFFERED BY PRIVATE RESPONDENTS WAS
NOT DAMNUM ABSQUE INJURIA.
IV. THE COURT OF APPEALS ERRED IN NOT AWARDING THE
COUNTERCLAIM OF PETITIONERS FOR ATTORNEY'S FEES AND
EXPENSES OF LITIGATION. 16
These same errors were raised by herein petitioners in G.R. No. 96410,
entitled National Power Corporation, et al., vs. Court of Appeals, et
al., 17 which this Court decided on 3 July 1992. The said case involved the
very same incident subject of the instant petition. In no uncertain terms, We
declared therein that the proximate cause of the loss and damage sustained
by the plaintiffs therein who were similarly situated as the private
respondents herein was the negligence of the petitioners, and that the 24
October 1978 "early warning notice" supposedly sent to the affected
municipalities, the same notice involved in the case at bar, was insufficient.
We thus cannot now rule otherwise not only because such a decision binds
this Court with respect to the cause of the inundation of the town of
Norzagaray, Bulacan on 26-27 October 1978 which resulted in the loss of
lives and the destruction to property in both cases, but also because of the
fact that on the basis of its meticulous analysis and evaluation of the
evidence adduced by the parties in the cases subject of CA-G.R. CV Nos.
27290-93, public respondent found as conclusively established that indeed,
the petitioners were guilty of "patent gross and evident lack of foresight,
imprudence and negligence in the management and operation of Angat
Dam," and that "the extent of the opening of the spillways, and the
magnitude of the water released, are all but products of defendantsappellees' headlessness, slovenliness, and carelessness." 18 Its findings and
conclusions are biding upon Us, there being no showing of the existence of
any of the exceptions to the general rule that findings of fact of the Court of
Appeals are conclusive upon this Court. 19 Elsewise stated, the challenged
decision can stand on its own merits independently of Our decision in G.R.
No. 96410. In any event, We reiterate here in Our pronouncement in the
latter case that Juan F. Nakpil & Sons vs. Court of Appeals 20 is still good law

as far as the concurrent liability of an obligor in the case of force majeure is

concerned. In the Nakpil case, We held:
To exempt the obligor from liability under Article 1174 of the Civil
Code, for a breach of an obligation due to an "act of God," the
following must concur: (a) the cause of the breach of the
obligation must be independent of the will of the debtor; (b) the
event must be either unforseeable or unavoidable; (c) the event
must be such as to render it impossible for the debtor to fulfill his
obligation in a moral manner; and (d) the debtor must be free
from any participation in, or aggravation of the injury to the
creditor. (Vasquez v. Court of Appeals, 138 SCRA 553; Estrada v.
Consolacion, 71 SCRA 423; Austria v. Court of Appeals, 39 SCRA
527; Republic of the Phil. v. Luzon Stevedoring Corp., 21 SCRA
279; Lasam v. Smith, 45 Phil. 657).
Thus, if upon the happening of a fortuitous event or an act of
God, there concurs a corresponding fraud, negligence, delay or
violation or contravention in any manner of the tenor of the
obligation as provided for in Article 1170 of the Civil Code, which
results in loss or damage, the obligor cannot escape liability.
The principle embodied in the act of God doctrine strictly
requires that the act must be one occasioned exclusively by the
violence of nature and all human agencies are to be excluded
from creating or entering into the cause of the mischief. When
the effect, the cause of which is to be considered, is found to be
in part the result of the participation of man, whether it be from
active intervention or neglect, or failure to act, the whole
occurrence is thereby humanized, as it were, and removed from
the rules applicable to the acts of God. (1 Corpus Juris, pp. 11741175).
Thus it has been held that when the negligence of a person
concurs with an act of God in producing a loss, such person is not
exempt from liability by showing that the immediate cause of the
damage was the act of God. To be exempt from liability for loss
because of an act of God, he must be free from any previous
negligence or misconduct by which that loss or damage may
have been occasioned. (Fish & Elective Co. v. Phil. Motors, 55
Phil. 129; Tucker v. Milan, 49 O.G. 4379; Limpangco & Sons v.
Yangco Steamship Co., 34 Phil. 594, 604; Lasam v. Smith, 45 Phil.
657). 21

Accordingly, petitioners cannot be heard to invoke the act of God or force

majeure to escape liability for the loss or damage sustained by private
respondents since they, the petitioners, were guilty of negligence. The event
then was not occasioned exclusively by an act of God or force majeure; a
human factor negligence or imprudence had intervened. The effect
then of the force majeure in question may be deemed to have, even if only
partly, resulted from the participation of man. Thus, the whole occurrence
was thereby humanized, as it were, and removed from the laws applicable to
acts of God.
WHEREFORE, for want of merit, the instant petition is hereby DISMISSED and
the Consolidated Decision of the Court of Appeals in CA-G.R. CV Nos. 2729093 is AFFIRMED, with costs against the petitioners.
SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.

PROXIMATE CAUSE
G.R. No. L-10126

October 22, 1957

SALUD VILLANUEVA VDA. DE BATACLAN and the minors NORMA,

LUZVIMINDA, ELENITA, OSCAR and ALFREDO BATACLAN, represented by their
Natural guardian, SALUD VILLANUEVA VDA. DE BATACLAN, plaintiffsappellants,
vs.
MARIANO MEDINA, defendant-appellant.
Lope E. Adriano, Emmanuel Andamo and Jose R. Francisco for plaintiffsappellants.
Fortunato Jose for defendant and appellant.
MONTEMAYOR, J.:
Shortly after midnight, on September 13, 1952 bus no. 30 of the Medina
Transportation, operated by its owner defendant Mariano Medina under a
certificate of public convenience, left the town of Amadeo, Cavite, on its way
to Pasay City, driven by its regular chauffeur, Conrado Saylon. There were
about eighteen passengers, including the driver and conductor. Among the
passengers were Juan Bataclan, seated beside and to the right of the driver,
Felipe Lara, sated to the right of Bataclan, another passenger apparently
from the Visayan Islands whom the witnesses just called Visaya, apparently
not knowing his name, seated in the left side of the driver, and a woman

named Natalia Villanueva, seated just behind the four last mentioned. At
about 2:00 o'clock that same morning, while the bus was running within the
jurisdiction of Imus, Cavite, one of the front tires burst and the vehicle began
to zig-zag until it fell into a canal or ditch on the right side of the road and
turned turtle. Some of the passengers managed to leave the bus the best
way they could, others had to be helped or pulled out, while the three
passengers seated beside the driver, named Bataclan, Lara and the Visayan
and the woman behind them named Natalia Villanueva, could not get out of
the overturned bus. Some of the passengers, after they had clambered up to
the road, heard groans and moans from inside the bus, particularly, shouts
for help from Bataclan and Lara, who said they could not get out of the bus.
There is nothing in the evidence to show whether or not the passengers
already free from the wreck, including the driver and the conductor, made
any attempt to pull out or extricate and rescue the four passengers trapped
inside the vehicle, but calls or shouts for help were made to the houses in
the neighborhood. After half an hour, came about ten men, one of them
carrying a lighted torch made of bamboo with a wick on one end, evidently
fueled with petroleum. These men presumably approach the overturned bus,
and almost immediately, a fierce fire started, burning and all but consuming
the bus, including the four passengers trapped inside it. It would appear that
as the bus overturned, gasoline began to leak and escape from the gasoline
tank on the side of the chassis, spreading over and permeating the body of
the bus and the ground under and around it, and that the lighted torch
brought by one of the men who answered the call for help set it on fire.
That same day, the charred bodies of the four deemed passengers inside the
bus were removed and duly identified that of Juan Bataclan. By reason of his
death, his widow, Salud Villanueva, in her name and in behalf of her five
minor children, brought the present suit to recover from Mariano Medina
compensatory, moral, and exemplary damages and attorney's fees in the
total amount of P87,150. After trial, the Court of First Instance of Cavite
awarded P1,000 to the plaintiffs plus P600 as attorney's fee, plus P100, the
value of the merchandise being carried by Bataclan to Pasay City for sale and
which was lost in the fire. The plaintiffs and the defendants appealed the
decision to the Court of Appeals, but the latter endorsed the appeal to us
because of the value involved in the claim in the complaint.
Our new Civil Code amply provides for the responsibility of common carrier
to its passengers and their goods. For purposes of reference, we are
reproducing the pertinent codal provisions:

ART. 1733. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence
in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further
expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
extra ordinary diligence for the safety of the passengers is further set
forth in articles 1755 and 1756.
ART. 1755. A common carrier is bound to carry the passengers safely
as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the
circumstances.
ART. 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755
ART. 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the former's
employees, although such employees may have acted beyond the
scope of their authority or in violation of the order of the common
carriers.
This liability of the common carriers does not cease upon proof that
they exercised all the diligence of a good father of a family in the
selection and supervision of their employees.
ART. 1763. A common carrier responsible for injuries suffered by a
passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carrier's employees through
the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission.
We agree with the trial court that the case involves a breach of contract of
transportation for hire, the Medina Transportation having undertaken to carry
Bataclan safely to his destination, Pasay City. We also agree with the trial
court that there was negligence on the part of the defendant, through his
agent, the driver Saylon. There is evidence to show that at the time of the
blow out, the bus was speeding, as testified to by one of the passengers, and
as shown by the fact that according to the testimony of the witnesses,
including that of the defense, from the point where one of the front tires
burst up to the canal where the bus overturned after zig-zaging, there was a
distance of about 150 meters. The chauffeur, after the blow-out, must have

applied the brakes in order to stop the bus, but because of the velocity at
which the bus must have been running, its momentum carried it over a
distance of 150 meters before it fell into the canal and turned turtle.
There is no question that under the circumstances, the defendant carrier is
liable. The only question is to what degree. The trial court was of the opinion
that the proximate cause of the death of Bataclan was not the overturning of
the bus, but rather, the fire that burned the bus, including himself and his copassengers who were unable to leave it; that at the time the fire started,
Bataclan, though he must have suffered physical injuries, perhaps serious,
was still alive, and so damages were awarded, not for his death, but for the
physical injuries suffered by him. We disagree. A satisfactory definition of
proximate cause is found in Volume 38, pages 695-696 of American
jurisprudence, cited by plaintiffs-appellants in their brief. It is as follows:
. . . 'that cause, which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury, and without
which the result would not have occurred.' And more comprehensively,
'the proximate legal cause is that acting first and producing the injury,
either immediately or by setting other events in motion, all constituting
a natural and continuous chain of events, each having a close causal
connection with its immediate predecessor, the final event in the chain
immediately effecting the injury as a natural and probable result of the
cause which first acted, under such circumstances that the person
responsible for the first event should, as an ordinary prudent and
intelligent person, have reasonable ground to expect at the moment of
his act or default that an injury to some person might probably result
therefrom.
It may be that ordinarily, when a passenger bus overturns, and pins down a
passenger, merely causing him physical injuries, if through some event,
unexpected and extraordinary, the overturned bus is set on fire, say, by
lightning, or if some highwaymen after looting the vehicle sets it on fire, and
the passenger is burned to death, one might still contend that the proximate
cause of his death was the fire and not the overturning of the vehicle. But in
the present case under the circumstances obtaining in the same, we do not
hesitate to hold that the proximate cause was the overturning of the bus, this
for the reason that when the vehicle turned not only on its side but
completely on its back, the leaking of the gasoline from the tank was not
unnatural or unexpected; that the coming of the men with a lighted torch
was in response to the call for help, made not only by the passengers, but
most probably, by the driver and the conductor themselves, and that

because it was dark (about 2:30 in the morning), the rescuers had to carry a
light with them, and coming as they did from a rural area where lanterns and
flashlights were not available; and what was more natural than that said
rescuers should innocently approach the vehicle to extend the aid and effect
the rescue requested from them. In other words, the coming of the men with
a torch was to be expected and was a natural sequence of the overturning of
the bus, the trapping of some of its passengers and the call for outside help.
What is more, the burning of the bus can also in part be attributed to the
negligence of the carrier, through is driver and its conductor. According to
the witness, the driver and the conductor were on the road walking back and
forth. They, or at least, the driver should and must have known that in the
position in which the overturned bus was, gasoline could and must have
leaked from the gasoline tank and soaked the area in and around the bus,
this aside from the fact that gasoline when spilled, specially over a large
area, can be smelt and directed even from a distance, and yet neither the
driver nor the conductor would appear to have cautioned or taken steps to
warn the rescuers not to bring the lighted torch too near the bus. Said
negligence on the part of the agents of the carrier come under the codal
provisions above-reproduced, particularly, Articles 1733, 1759 and 1763.
As regard the damages to which plaintiffs are entitled, considering the
earning capacity of the deceased, as well as the other elements entering into
a damage award, we are satisfied that the amount of SIX THOUSAND
(P6,000) PESOS would constitute satisfactory compensation, this to include
compensatory, moral, and other damages. We also believe that plaintiffs are
entitled to attorney's fees, and assessing the legal services rendered by
plaintiffs' attorneys not only in the trial court, but also in the course of the
appeal, and not losing sight of the able briefs prepared by them, the
attorney's fees may well be fixed at EIGHT HUNDRED (P800) PESOS for the
loss of merchandise carried by the deceased in the bus, is adequate and will
not be disturbed.
There is one phase of this case which disturbs if it does not shock us.
According to the evidence, one of the passengers who, because of the
injuries suffered by her, was hospitalized, and while in the hospital, she was
visited by the defendant Mariano Medina, and in the course of his visit, she
overheard him speaking to one of his bus inspectors, telling said inspector to
have the tires of the bus changed immediately because they were already
old, and that as a matter of fact, he had been telling the driver to change the
said tires, but that the driver did not follow his instructions. If this be true, it
goes to prove that the driver had not been diligent and had not taken the
necessary precautions to insure the safety of his passengers. Had he

changed the tires, specially those in front, with new ones, as he had been
instructed to do, probably, despite his speeding, as we have already stated,
the blow out would not have occurred. All in all, there is reason to believe
that the driver operated and drove his vehicle negligently, resulting in the
death of four of his passengers, physical injuries to others, and the complete
loss and destruction of their goods, and yet the criminal case against him, on
motion of the fiscal and with his consent, was provisionally dismissed,
because according to the fiscal, the witnesses on whose testimony he was
banking to support the complaint, either failed or appear or were reluctant to
testify. But the record of the case before us shows the several witnesses,
passengers, in that bus, willingly and unhesitatingly testified in court to the
effect of the said driver was negligent. In the public interest the prosecution
of said erring driver should be pursued, this, not only as a matter of justice,
but for the promotion of the safety of passengers on public utility buses. Let
a copy of this decision be furnished the Department of Justice and the
Provincial Fiscal of Cavite.
In view of the foregoing, with the modification that the damages awarded by
the trial court are increased from ONE THOUSAND (P1,000) PESOS TO SIX
THOUSAND (P6,000) PESOS, and from SIX HUNDRED PESOS TO EIGHT
HUNDRED (P800) PESOS, for the death of Bataclan and for the attorney's
fees, respectively, the decision appealed is from hereby affirmed, with costs.
Paras, C. J., Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador,
Concepcion, Reyes, J. B. L., Endencia, and Felix, JJ., concur.
G.R. No. L-8328. May 18, 1956.]
MANILA ELECTRIC COMPANY, Petitioner, vs. SOTERO REMOQUILLO, in
his own behalf and as guardian of the minors MANUEL, BENJAMIN,
NESTOR, MILAGROS, CORAZON, CLEMENTE and AURORA, all
surnamed MAGNO, SALUD MAGNO, and the COURT OF APPEALS
(Second Division), Respondents.
DECISION
MONTEMAYOR, J.:
On August 22, 1950, Efren Magno went to the 3-story house of Antonio
Pealoza, his stepbrother, located on Rodriguez Lanuza Street, Manila, to
repair a media agua said to be in a leaking condition. The media agua
was just below the window of the third story. Standing on said media agua,
Magno received from his son thru that window a 3 X 6 galvanized iron sheet
to cover the leaking portion, turned around and in doing so the lower end of
the iron sheet came into contact with the electric wire of the Manila Electric

Company (later referred to as the Company) strung parallel to the edge of

the media agua and 2 1/2 feet from it, causing his death by electrocution.
His widow and children fled suit to recover damages from the company. After
hearing, the trial court rendered judgment in their favor P10,000 as
compensatory
damages; chan
roblesvirtualawlibraryP784
as
actual
damages; chan roblesvirtualawlibraryP2,000 as moral and exemplary
damages; chan roblesvirtualawlibraryand P3,000 as attorneys fees, with
costs. On appeal to the Court of Appeals, the latter affirmed the judgment
with slight modification by reducing the attorneys fees from P3,000 to
P1,000 with costs. The electric company has appealed said decision to us.
The findings of fact made by the Court of Appeals which are conclusive are
stated in the following portions of its decision which we reproduce
below:chanroblesvirtuallawlibrary
The electric wire in question was an exposed, uninsulated primary wire
stretched between poles on the street and carrying a charge of 3,600 volts. It
was installed there some two years before Pealozas house was
constructed. The record shows that during the construction of said house a
similar incident took place, although fortunate]y with much less tragic
consequences. A piece of wood which a carpenter was holding happened to
come in contact with the same wire, producing some sparks. The owner of
the house forthwith complained to Defendant about the danger which the
wire presented, and as a result Defendant moved one end of the wire farther
from the house by means of a brace, but left the other end where it was.
At any rate, as revealed by the ocular inspection of the premises ordered by
the trial court, the distance from the electric wire to the edge of the media
agua on which the deceased was making repairs was only 30 inches or 2 1/2
feet. Regulations of the City of Manila required that all wires be kept three
feet from the building. Appellant contends that in applying said regulations
to the case at bar the reckoning should not be from the edge of the media
agua but from the side of the house and that, thus measured, the distance
was almost 7 feet, or more then the minimum prescribed. This contention is
manifestly groundless, for not only is a media agua an integral part of the
building to which it is attached but to exclude it in measuring the distance
would defeat the purpose of the regulation. Appellant points out,
nevertheless, that even assuming that the distance, within the meaning of
the city regulations, should be measured from the edge of the media agua,
the fact that in the case of the house involved herein such distance was
actually less than 3 feet was due to the fault of the owner of said house,
because the city authorities gave him a permit to construct a media agua
only one meter or 39 1/2 inches wide, but instead he built one having a width
of 65 3/4 inches, 17 3/8 inches more than the width permitted by the
authorities, thereby reducing the distance to the electric wire to less than the
prescribed minimum of 3 feet.

It is a fact that the owner of the house exceeded the limit fixed in the permit
given to him by the city authorities for the construction of the media agua,
and that if he had not done so Appellantswire would have been 11 3/8
(inches) more than the required distance of three feet from the edge of the
media agua. It is also a fact, however, that after the media agua was
constructed the owner was given a final permit of occupancy of the
house cralaw .
cralaw The wire was an exposed, high tension wire carrying a load of 3,600
volts. There was, according to Appellant, no insulation that could have
rendered it safe, first, because there is no insulation material in commercial
use for such kind of wire; chan roblesvirtualawlibraryand secondly, because
the only insulation material that may be effective is still in the experimental
stage of development and, anyway, its costs would be prohibitive
The theory followed by the appellate court in finding for the Plaintiff is that
although the owner of the house in constructing the media agua in
question exceeded the limits fixed in the permit, still, after making that
media agua, its construction though illegal, was finally approved because
he
was
given
a
final
permit
to
occupy
the
house; chan
roblesvirtualawlibrarythat it was the company that was at fault and was
guilty of negligence because although the electric wire in question had been
installed long before the construction of the house and in accordance with
the ordinance fixing a minimum of 3 feet, mere compliance with the
regulations does not satisfy the requirement of due diligence nor avoid the
need for adopting such other precautionary measures as may be
warranted; chan roblesvirtualawlibrarythat negligence cannot be determined
by a simple matter of inches; chan roblesvirtualawlibrarythat all that the city
did was to prescribe certain minimum conditions and that just because the
ordinance required that primary electric wires should be not less than 3 feet
from any house, the obligation of due diligence is not fulfilled by placing such
wires at a distance of 3 feet and one inch, regardless of other factors. The
appellate court, however, refrained from stating or suggesting what other
precautionary measures could and should have been adopted.
After a careful study and discussion of the case and the circumstances
surrounding the same, we are inclined to agree to the contention
of Petitioner Company that the death of Magno was primarily caused by his
own negligence and in some measure by the too close proximity of the
media agua or rather its edge to the electric wire of the company by
reason of the violation of the original permit given by the city and the
subsequent approval of said illegal construction of the media agua. We fail
to see how the Company could be held guilty of negligence or as lacking in
due diligence. Although the city ordinance called for a distance of 3 feet of
its wires from any building, there was actually a distance of 7 feet and 2 3/4
inches of the wires from the side of the house of Pealoza. Even considering
said regulation distance of 3 feet as referring not to the side of a building,
but to any projecting part thereof, such as a media agua, had the house

owner followed the terms of the permit given him by the city for the
construction of his media agua, namely, one meter or 39 3/8 inches wide,
the distance from the wires to the edge of said media agua would have
been 3 feet and 11 3/8 inches. In fixing said one meter width for the media
agua the city authorities must have wanted to preserve the distance of at
least 3 feet between the wires and any portion of a building. Unfortunately,
however, the house owner disregarding the permit, exceeded the one meter
fixed by the same by 17 3/8 inches and leaving only a distance of 2 1/2 feet
between the Media agua as illegally constructed and the electric wires.
And added to this violation of the permit by the house owner, was its
approval by the city through its agent, possibly an inspector. Surely we
cannot lay these serious violations of a city ordinance and permit at the door
of the Company, guiltless of breach of any ordinance or regulation. The
Company cannot be expected to be always on the lookout for any illegal
construction which reduces the distance between its wires and said
construction, and after finding that said distance of 3 feet had been reduced,
to change the stringing or installation of its wires so as to preserve said
distance. It would be much easier for the City, or rather it is its duty, to be
ever on the alert and to see to it that its ordinances are strictly followed by
house owners and to condemn or disapprove all illegal constructions. Of
course, in the present case, the violation of the permit for the construction of
the media agua was not the direct cause of the accident. It merely
contributed to it. Had said media agua been only one meter wide as
allowed by the permit, Magno standing on it, would instinctively have stayed
closer to or hugged the side of the house in order to keep a safe margin
between the edge of the media agua and the yawning 2-story distance or
height from the ground, and possibly if not probably avoided the fatal
contact between the lower end of the iron sheet and the wires.
We realize that the presence of the wires in question quite close to the house
or its media agua was always a source of danger considering their high
voltage and uninsulated as they were, but the claim of the company and the
reasons given by it for not insulating said wires were unrefuted as we gather
from the findings of the Court of Appeals, and so we have to accept them as
satisfactory. Consequently, we may not hold said company as guilty of
negligence or wanting in due diligence in failing to insulate said wires. As to
their proximity to the house it is to be supposed that distance of 3 feet was
considered sufficiently safe by the technical men of the city such as its
electrician or engineer. Of course, a greater distance of say 6 feet or 12 feet
would have increased the margin of safety but other factors had to be
considered such as that the wires could not be strung or the posts supporting
them could not be located too far toward the middle of the street. Thus, the
real cause of the accident or death was the reckless or negligent act of
Magno himself. When he was called by his stepbrother to repair the media
agua just below the third story window, it is to be presumed that due to his
age and experience he was qualified to do so. Perhaps he was a tinsmith or

carpenter and had training and experience for the job. So, he could not have
been entirely a stranger to electric wires and the danger lurking in them. But
unfortunately, in the instant care, his training and experience failed him, and
forgetting where he was standing, holding the 6-feet iron sheet with both
hands and at arms length, evidently without looking, and throwing all
prudence and discretion to the winds, he turned around swinging his arms
with the motion of his body, thereby causing his own electrocution.
In support of its theory and holding that Defendant-Appellant was liable for
damages the Court of Appeals cites the case of Astudillo vs. Manila Electric
Co., 55 Phil., 427. We do not think the case is exactly applicable. There, the
premises involved was that elevated portion or top of the walls of
Intramuros, Manila, just above the Sta. Lucia Gate. In the words of the Court,
it was a public place where persons come to stroll, to rest and to enjoy
themselves. The electric company was clearly negligent in placing its wires
so near the place that without much difficulty or exertion, a person by
stretching his hand out could touch them. A boy named Astudillo, placing
one foot on a projection, reached out and actually grasped the electric wire
and was electrocuted. The person electrocuted in said case was a boy who
was in no position to realize the danger. In the present case, however, the
wires were well high over the street where there was no possible danger to
pedestrians. The only possible danger was to persons standing on the
media agua, but a media agua can hardly be considered a public place
where persons usually gather. Moreover, a person standing on the media
agua could not have reached the wires with his hands alone. It was
necessary as was done by Magno to hold something long enough to reach
the wire. Furthermore, Magno was not a boy or a person immature but the
father of a family, supposedly a tinsmith trained and experienced in the
repair of galvanized iron roofs and media agua. Moreover, in that very case
of Astudillo vs. Manila Electric Co., supra, the court said that although it is a
well- established rule that the liability of electric companies for damages or
personal injuries is governed by the rules of negligence, nevertheless such
companies are not insurers of the safety of the public.
But even assuming for a moment that under the facts of the present case
the Defendant electric company could be considered negligent in installing
its electric wires so close to the house and media agua in question, and in
failing to properly insulate those wires (although according to the unrefuted
claim of said company it was impossible to make the insulation of that kind
of wire), nevertheless to hold the Defendant liable in damages for the death
of Magno, such supposed negligence of the company must have been the
proximate and principal cause of the accident, because if the act of Magno in
turning around and swinging the galvanized iron sheet with his hands was
the proximate and principal cause of the electrocution, then his heirs may
not recover. Such was the holding of this Court in the case of Taylor vs.
Manila Electric Railroad and Light Company, 16 Phil., 8. In that case, the
electric company was found negligent in leaving scattered on its premises

fulminating caps which Taylor, a 15- year old boy found and carried home. In
the course of experimenting with said fulminating caps, he opened one of
them, held it out with his hands while another boy applied a lighted match to
it, causing it to explode and injure one of his eyes eventually causing
blindness in said eye. Said this Tribunal in denying recovery for the
injury:chanroblesvirtuallawlibrary
cralaw, so that while it may be true that these injuries would not have been
incurred but for the negligent act of the Defendant in leaving the caps
exposed on its premises, neverthelessPlaintiffs own act was the proximate
and principal cause of the accident which inflicted the injury.
To us it is clear that the principal and proximate cause of the electrocution
was not the electric wire, evidently a remote cause, but rather the reckless
and negligent act of Magno in turning around and swinging the galvanized
iron sheet without taking any precaution, such as looking back toward the
street and at the wire to avoid its contacting said iron sheet, considering the
latters length of 6 feet. For a better understanding of the rule on remote and
proximate cause with respect to injuries, we find the following citation
helpful:chanroblesvirtuallawlibrary
A prior and remote cause cannot be made the basis of an action if such
remote cause did nothing more than furnish the condition or give rise to the
occasion by which the injury was made possible, if there intervened between
such prior or remote cause and the injury a distinct, successive, unrelated,
and efficient cause of the injury, even though such injury would not have
happened but for such condition or occasion. If no danger existed in the
condition except because of the independent cause, such condition was not
the proximate cause. And if an independent negligent act or defective
condition sets into operation the circumstances which result in injury
because of the prior defective condition, such subsequent act or condition is
the proximate cause. (45 C.J. pp. 931-332.).
We realize that the stringing of wires of such high voltage (3,600 volts),
uninsulated and so close to houses is a constant source of danger, even
death, especially to persons who having occasion to be near said wires, do
not adopt the necessary precautions. But may be, the City of Manila
authorities and the electric company could get together and devise means of
minimizing this danger to the public. Just as the establishment of pedestrian
lanes in city thoroughfares may greatly minimize danger to pedestrians
because drivers of motor vehicles may expect danger and slow down or even
stop and take other necessary precaution upon approaching said lanes, so, a
similar way may possibly be found. Since these high voltage wires cannot be
properly insulated and at reasonable cost, they might perhaps be strung only
up to the outskirts of the city where there are few houses and few
pedestrians and there step-down to a voltage where the wires carrying the
same to the city could be properly insulated for the better protection of the
public.

In view of all the foregoing, the appealed decision of the Court of Appeals is
hereby reversed and the complaint filed against the Company is hereby
dismissed. No costs.
Paras, C.J., Bengzon, Padilla, Reyes, A., Jugo, Bautista Angelo,
Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ., concur.

G.R. No. 122039 May 31, 2000

VICENTE CALALAS, petitioner,
vs.
COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and FRANCISCO
SALVA, respondents.

MENDOZA, J.:
This is a petition for review on certiorari of the decision1 of the Court of
Appeals, dated March 31, 1991, reversing the contrary decision of the
Regional Trial Court, Branch 36, Dumaguete City, and awarding damages
instead to private respondent Eliza Jujeurche Sunga as plaintiff in an action
for breach of contract of carriage.
The facts, as found by the Court of Appeals, are as follows:
At 10 o'clock in the morning of August 23, 1989, private respondent Eliza
Jujeurche G. Sunga, then a college freshman majoring in Physical Education
at the Siliman University, took a passenger jeepney owned and operated by
petitioner Vicente Calalas. As the jeepney was filled to capacity of about 24
passengers, Sunga was given by the conductor an "extension seat," a
wooden stool at the back of the door at the rear end of the vehicle.
On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to
let a passenger off. As she was seated at the rear of the vehicle, Sunga gave
way to the outgoing passenger. Just as she was doing so, an Isuzu truck
driven by Iglecerio Verena and owned by Francisco Salva bumped the left
rear portion of the jeepney. As a result, Sunga was injured. She sustained a
fracture of the "distal third of the left tibia-fibula with severe necrosis of the
underlying skin." Closed reduction of the fracture, long leg circular casting,
and case wedging were done under sedation. Her confinement in the hospital
lasted from August 23 to September 7, 1989. Her attending physician, Dr.
Danilo V. Oligario, an orthopedic surgeon, certified she would remain on a
cast for a period of three months and would have to ambulate in crutches
during said period.
On October 9, 1989, Sunga filed a complaint for damages against Calalas,
alleging violation of the contract of carriage by the former in failing to
exercise the diligence required of him as a common carrier. Calalas, on the

other hand, filed a third-party complaint against Francisco Salva, the owner
of the Isuzu truck.
The lower court rendered judgment against Salva as third-party defendant
and absolved Calalas of liability, holding that it was the driver of the Isuzu
truck who was responsible for the accident. It took cognizance of another
case (Civil Case No. 3490), filed by Calalas against Salva and Verena, for
quasi-delict, in which Branch 37 of the same court held Salva and his driver
Verena jointly liable to Calalas for the damage to his jeepney.
On appeal to the Court of Appeals, the ruling of the lower court was reversed
on the ground that Sunga's cause of action was based on a contract of
carriage, not quasi-delict, and that the common carrier failed to exercise the
diligence required under the Civil Code. The appellate court dismissed the
third-party complaint against Salva and adjudged Calalas liable for damages
to Sunga. The dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby REVERSED
and SET ASIDE, and another one is entered ordering defendantappellee Vicente Calalas to pay plaintiff-appellant:
(1) P50,000.00 as actual and compensatory damages;
(2) P50,000.00 as moral damages;
(3) P10,000.00 as attorney's fees; and
(4) P1,000.00 as expenses of litigation; and
(5) to pay the costs.
SO ORDERED.
Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490
that the negligence of Verena was the proximate cause of the accident
negates his liability and that to rule otherwise would be to make the common
carrier an insurer of the safety of its passengers. He contends that the
bumping of the jeepney by the truck owned by Salva was a caso fortuito.
Petitioner further assails the award of moral damages to Sunga on the
ground that it is not supported by evidence.
The petition has no merit.
The argument that Sunga is bound by the ruling in Civil Case No. 3490
finding the driver and the owner of the truck liable for quasi-delict ignores
the fact that she was never a party to that case and, therefore, the principle
ofres judicata does not apply.
Nor are the issues in Civil Case No. 3490 and in the present case the same.
The issue in Civil Case No. 3490 was whether Salva and his driver Verena
were liable for quasi-delict for the damage caused to petitioner's jeepney. On
the other hand, the issue in this case is whether petitioner is liable on his
contract of carriage. The first, quasi-delict, also known as culpa aquiliana or
culpa extra contractual, has as its source the negligence of the tortfeasor.
The second, breach of contract or culpa contractual, is premised upon the
negligence in the performance of a contractual obligation.

Consequently, in quasi-delict, the negligence or fault should be clearly

established because it is the basis of the action, whereas in breach of
contract, the action can be prosecuted merely by proving the existence of
the contract and the fact that the obligor, in this case the common carrier,
failed to transport his passenger safely to his destination.2 In case of death or
injuries to passengers, Art. 1756 of the Civil Code provides that common
carriers are presumed to have been at fault or to have acted negligently
unless they prove that they observed extraordinary diligence as defined in
Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the
common carrier the burden of proof.
There is, thus, no basis for the contention that the ruling in Civil Case No.
3490, finding Salva and his driver Verena liable for the damage to
petitioner's jeepney, should be binding on Sunga. It is immaterial that the
proximate cause of the collision between the jeepney and the truck was the
negligence of the truck driver. The doctrine of proximate cause is applicable
only in actions for quasi-delict, not in actions involving breach of contract.
The doctrine is a device for imputing liability to a person where there is no
relation between him and another party. In such a case, the obligation is
created by law itself. But, where there is a pre-existing contractual relation
between the parties, it is the parties themselves who create the obligation,
and the function of the law is merely to regulate the relation thus created.
Insofar as contracts of carriage are concerned, some aspects regulated by
the Civil Code are those respecting the diligence required of common carriers
with regard to the safety of passengers as well as the presumption of
negligence in cases of death or injury to passengers. It provides:
Art. 1733. Common carriers, from the nature of their business
and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to
all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is
further expressed in articles 1734, 1735, and 1746, Nos. 5, 6,
and 7, while the extraordinary diligence for the safety of the
passengers is further set forth in articles 1755 and 1756.
Art. 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with due regard for all
the circumstances.
Art. 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed by articles 1733 and 1755.
In the case at bar, upon the happening of the accident, the presumption of
negligence at once arose, and it became the duty of petitioner to prove that
he had to observe extraordinary diligence in the care of his passengers.

Now, did the driver of jeepney carry Sunga "safely as far as human care and
foresight could provide, using the utmost diligence of very cautious persons,
with due regard for all the circumstances" as required by Art. 1755? We do
not think so. Several factors militate against petitioner's contention.
First, as found by the Court of Appeals, the jeepney was not properly parked,
its rear portion being exposed about two meters from the broad shoulders of
the highway, and facing the middle of the highway in a diagonal angle. This
is a violation of the R.A. No. 4136, as amended, or the Land Transportation
and Traffic Code, which provides:
Sec. 54. Obstruction of Traffic. No person shall drive his motor
vehicle in such a manner as to obstruct or impede the passage of
any vehicle, nor, while discharging or taking on passengers or
loading or unloading freight, obstruct the free passage of other
vehicles on the highway.
Second, it is undisputed that petitioner's driver took in more passengers than
the allowed seating capacity of the jeepney, a violation of 32(a) of the same
law. It provides:
Exceeding registered capacity. No person operating any motor
vehicle shall allow more passengers or more freight or cargo in
his vehicle than its registered capacity.
The fact that Sunga was seated in an "extension seat" placed her in a peril
greater than that to which the other passengers were exposed. Therefore,
not only was petitioner unable to overcome the presumption of negligence
imposed on him for the injury sustained by Sunga, but also, the evidence
shows he was actually negligent in transporting passengers.
We find it hard to give serious thought to petitioner's contention that Sunga's
taking an "extension seat" amounted to an implied assumption of risk. It is
akin to arguing that the injuries to the many victims of the tragedies in our
seas should not be compensated merely because those passengers assumed
a greater risk of drowning by boarding an overloaded ferry. This is also true
of petitioner's contention that the jeepney being bumped while it was
improperly parked constitutes caso fortuito. A caso fortuito is an event which
could not be foreseen, or which, though foreseen, was inevitable.3 This
requires that the following requirements be present: (a) the cause of the
breach is independent of the debtor's will; (b) the event is unforeseeable or
unavoidable; (c) the event is such as to render it impossible for the debtor to
fulfill his obligation in a normal manner, and (d) the debtor did not take part
in causing the injury to the
creditor.4 Petitioner should have foreseen the danger of parking his jeepney
with its body protruding two meters into the highway.
Finally, petitioner challenges the award of moral damages alleging that it is
excessive and without basis in law. We find this contention well taken.
In awarding moral damages, the Court of Appeals stated:

Plaintiff-appellant at the time of the accident was a first-year

college student in that school year 1989-1990 at the Silliman
University, majoring in Physical Education. Because of the injury,
she was not able to enroll in the second semester of that school
year. She testified that she had no more intention of continuing
with her schooling, because she could not walk and decided not
to pursue her degree, major in Physical Education "because of
my leg which has a defect already."
Plaintiff-appellant likewise testified that even while she was
under confinement, she cried in pain because of her injured left
foot. As a result of her injury, the Orthopedic Surgeon also
certified that she has "residual bowing of the fracture side." She
likewise decided not to further pursue Physical Education as her
major subject, because "my left leg . . . has a defect already."
Those are her physical pains and moral sufferings, the inevitable
bedfellows of the injuries that she suffered. Under Article 2219 of
the Civil Code, she is entitled to recover moral damages in the
sum of P50,000.00, which is fair, just and reasonable.
As a general rule, moral damages are not recoverable in actions for damages
predicated on a breach of contract for it is not one of the items enumerated
under Art. 2219 of the Civil Code.5 As an exception, such damages are
recoverable: (1) in cases in which the mishap results in the death of a
passenger, as provided in Art. 1764, in relation to Art. 2206(3) of the Civil
Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith,
as provided in Art. 2220.6
In this case, there is no legal basis for awarding moral damages since there
was no factual finding by the appellate court that petitioner acted in bad
faith in the performance of the contract of carriage. Sunga's contention that
petitioner's admission in open court that the driver of the jeepney failed to
assist her in going to a nearby hospital cannot be construed as an admission
of bad faith. The fact that it was the driver of the Isuzu truck who took her to
the hospital does not imply that petitioner was utterly indifferent to the
plight of his injured passenger. If at all, it is merely implied recognition by
Verena that he was the one at fault for the accident.
WHEREFORE, the decision of the Court of Appeals, dated March 31, 1995,
and its resolution, dated September 11, 1995, are AFFIRMED, with the
MODIFICATION that the award of moral damages is DELETED.
SO ORDERED.

EMERGENCY RULE

G.R. No. 115024

February 7, 1996

MA. LOURDES VALENZUELA, petitioner,

vs.
COURT OF APPEALS, RICHARD LI and ALEXANDER COMMERCIAL,
INC., respondents.
x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
G.R. No. 117944

February 7, 1996

RICHARD LI, petitioner,

vs.
COURT OF APPEALS and LOURDES VALENZUELA, respondents.
DECISION
KAPUNAN, J.:
These two petitions for review on certiorari under Rule 45 of the Revised
Rules of Court stem from an action to recover damages by petitioner Lourdes
Valenzuela in the Regional Trial Court of Quezon City for injuries sustained by
her in a vehicular accident in the early morning of June 24, 1990. The facts
found by the trial court are succinctly summarized by the Court of Appeals
below:
This is an action to recover damages based on quasi-delict, for serious
physical injuries sustained in a vehicular accident.
Plaintiff's version of the accident is as follows: At around 2:00 in the
morning of June 24, 1990, plaintiff Ma. Lourdes Valenzuela was driving
a blue Mitsubishi lancer with Plate No. FFU 542 from her restaurant at
Marcos highway to her home at Palanza Street, Araneta Avenue. She
was travelling along Aurora Blvd. with a companion, Cecilia Ramon,
heading towards the direction of Manila. Before reaching A. Lake
Street, she noticed something wrong with her tires; she stopped at a
lighted place where there were people, to verify whether she had a flat
tire and to solicit help if needed. Having been told by the people
present that her rear right tire was flat and that she cannot reach her
home in that car's condition, she parked along the sidewalk, about 11/2 feet away, put on her emergency lights, alighted from the car, and
went to the rear to open the trunk. She was standing at the left side of
the rear of her car pointing to the tools to a man who will help her fix
the tire when she was suddenly bumped by a 1987 Mitsubishi Lancer
driven by defendant Richard Li and registered in the name of
defendant Alexander Commercial, Inc. Because of the impact plaintiff

was thrown against the windshield of the car of the defendant, which
was destroyed, and then fell to the ground. She was pulled out from
under defendant's car. Plaintiff's left leg was severed up to the middle
of her thigh, with only some skin and sucle connected to the rest of the
body. She was brought to the UERM Medical Memorial Center where
she was found to have a "traumatic amputation, leg, left up to distal
thigh (above knee)". She was confined in the hospital for twenty (20)
days and was eventually fitted with an artificial leg. The expenses for
the hospital confinement (P120,000.00) and the cost of the artificial leg
(P27,000.00) were paid by defendants from the car insurance.
In her complaint, plaintiff prayed for moral damages in the amount of
P1 million, exemplary damages in the amount of P100,000.00 and
other medical and related expenses amounting to a total of
P180,000.00, including loss of expected earnings.
Defendant Richard Li denied that he was negligent. He was on his way
home, travelling at 55 kph; considering that it was raining, visibility
was affected and the road was wet. Traffic was light. He testified that
he was driving along the inner portion of the right lane of Aurora Blvd.
towards the direction of Araneta Avenue, when he was suddenly
confronted, in the vicinity of A. Lake Street, San Juan, with a car
coming from the opposite direction, travelling at 80 kph, with "full
bright lights". Temporarily blinded, he instinctively swerved to the right
to avoid colliding with the oncoming vehicle, and bumped plaintiff's
car, which he did not see because it was midnight blue in color, with no
parking lights or early warning device, and the area was poorly lighted.
He alleged in his defense that the left rear portion of plaintiff's car was
protruding as it was then "at a standstill diagonally" on the outer
portion of the right lane towards Araneta Avenue (par. 18, Answer). He
confirmed the testimony of plaintiff's witness that after being bumped
the car of the plaintiff swerved to the right and hit another car parked
on the sidewalk. Defendants counterclaimed for damages, alleging that
plaintiff was reckless or negligent, as she was not a licensed driver.
The police investigator, Pfc. Felic Ramos, who prepared the vehicular
accident report and the sketch of the three cars involved in the
accident, testified that the plaintiff's car was "near the sidewalk"; this
witness did not remember whether the hazard lights of plaintiff's car
were on, and did not notice if there was an early warning device; there
was a street light at the corner of Aurora Blvd. and F. Roman, about

100 meters away. It was not mostly dark, i.e. "things can be seen" (p.
16, tsn, Oct. 28, 1991).
A witness for the plaintiff, Rogelio Rodriguez, testified that after
plaintiff alighted from her car and opened the trunk compartment,
defendant's car came approaching very fast ten meters from the
scene; the car was "zigzagging". The rear left side of plaintiff's car was
bumped by the front right portion of defendant's car; as a
consequence, the plaintiff's car swerved to the right and hit the parked
car on the sidewalk. Plaintiff was thrown to the windshield of
defendant's car, which was destroyed, and landed under the car. He
stated that defendant was under the influence of liquor as he could
"smell it very well" (pp. 43, 79, tsn, June 17, 1991).
After trial, the lower court sustained the plaintiff's submissions and found
defendant Richard Li guilty of gross negligence and liable for damages under
Article 2176 of the Civil Code. The trial court likewise held Alexander
Commercial, Inc., Li's employer, jointly and severally liable for damages
pursuant to Article 2180. It ordered the defendants to jointly and severally
pay the following amounts:
1. P41,840.00, as actual damages, representing the miscellaneous
expenses of the plaintiff as a result of her severed left leg;
2. The sums of (a) P37,500.00, for the unrealized profits because of the
stoppage of plaintiff's Bistro La Conga restaurant three (3) weeks after
the accident on June 24, 1990; (b) P20,000.00, a month, as unrealized
profits of the plaintiff in her Bistro La Conga restaurant, from August,
1990 until the date of this judgment and (c) P30,000.00, a month for
unrealized profits in plaintiff's two (2) beauty salons from July, 1990
until the date of this decision;
3. P1,000,000.00, in moral damages;
4. P50,000.00, as exemplary damages;
5. P60,000.00, as reasonable attorney's fees; and
6. Costs.
As a result of the trial court's decision, defendants filed an Omnibus Motion
for New Trial and for Reconsideration, citing testimony in Criminal Case O.C.
No. 804367 (People vs. Richard Li), tending to show that the point of impact,
as depicted by the pieces of glass/debris from the parties' cars, appeared to
be at the center of the right lane of Aurora Blvd. The trial court denied the
motion. Defendants forthwith filed an appeal with the respondent Court of
Appeals. In a Decision rendered March 30, 1994, the Court of Appeals found
that there was "ample basis from the evidence of record for the trial court's

finding that the plaintiff's car was properly parked at the right, beside the
sidewalk when it was bumped by defendant's car."1 Dismissing the
defendants' argument that the plaintiff's car was improperly parked, almost
at the center of the road, the respondent court noted that evidence which
was supposed to prove that the car was at or near center of the right lane
was never presented during the trial of the case.2 The respondent court
furthermore observed that:
Defendant Li's testimony that he was driving at a safe speed of 55
km./hour is self serving; it was not corroborated. It was in fact
contradicted by eyewitness Rodriguez who stated that he was outside
his beerhouse located at Aurora Boulevard after A. Lake Street, at or
about 2:00 a.m. of June 24, 1990 when his attention was caught by a
beautiful lady (referring to the plaintiff) alighting from her car and
opening the trunk compartment; he noticed the car of Richard Li
"approaching very fast ten (10) meters away from the scene";
defendant's car was zigzagging", although there were no holes and
hazards on the street, and "bumped the leg of the plaintiff" who was
thrown against the windshield of defendant's care, causing its
destruction. He came to the rescue of the plaintiff, who was pulled out
from under defendant's car and was able to say "hurting words" to
Richard Li because he noticed that the latter was under the influence
of liquor, because he "could smell it very well" (p. 36, et. seq., tsn, June
17, 1991). He knew that plaintiff owned a beerhouse in Sta. Mesa in
the 1970's, but did not know either plaintiff or defendant Li before the
accident.
In agreeing with the trial court that the defendant Li was liable for the
injuries sustained by the plaintiff, the Court of Appeals, in its decision,
however, absolved the Li's employer, Alexander Commercial, Inc. from any
liability towards petitioner Lourdes Valenzuela and reduced the amount of
moral damages to P500,000.00. Finding justification for exemplary damages,
the respondent court allowed an award of P50,000.00 for the same, in
addition to costs, attorney's fees and the other damages. The Court of
Appeals, likewise, dismissed the defendants' counterclaims.3
Consequently, both parties assail the respondent court's decision by filing
two separate petitions before this Court. Richard Li, in G.R. No. 117944,
contends that he should not be held liable for damages because the
proximate cause of the accident was Ma. Lourdes Valenzuela's own
negligence. Alternatively, he argues that in the event that this Court finds

him negligent, such negligence ought to be mitigated by the contributory

negligence of Valenzuela.
On the other hand, in G.R. No. 115024, Ma. Lourdes Valenzuela assails the
respondent court's decision insofar as it absolves Alexander Commercial, Inc.
from liability as the owner of the car driven by Richard Li and insofar as it
reduces the amount of the actual and moral damages awarded by the trial
court.4
As the issues are intimately related, both petitions are hereby consolidated.
It is plainly evident that the petition for review in G.R. No. 117944 raises no
substantial questions of law. What it, in effect, attempts to have this Court
review are factual findings of the trial court, as sustained by the Court of
Appeals finding Richard Li grossly negligent in driving the Mitsubishi Lancer
provided by his company in the early morning hours of June 24, 1990. This
we will not do. As a general rule, findings of fact of the Court of Appeals are
binding and conclusive upon us, and this Court will not normally disturb such
factual findings unless the findings of fact of the said court are palpably
unsupported by the evidence on record or unless the judgment itself is based
on a misapprehension of facts.5
In the first place, Valenzuela's version of the incident was fully corroborated
by an uninterested witness, Rogelio Rodriguez, the owner-operator of an
establishment located just across the scene of the accident. On trial, he
testified that he observed a car being driven at a "very fast" speed, racing
towards the general direction of Araneta Avenue.6 Rodriguez further added
that he was standing in front of his establishment, just ten to twenty feet
away from the scene of the accident, when he saw the car hit Valenzuela,
hurtling her against the windshield of the defendant's Mitsubishi Lancer, from
where she eventually fell under the defendant's car. Spontaneously reacting
to the incident, he crossed the street, noting that a man reeking with the
smell of liquor had alighted from the offending vehicle in order to survey the
incident.7 Equally important, Rodriguez declared that he observed
Valenzuela's car parked parallel and very near the sidewalk,8 contrary to Li's
allegation that Valenzuela's car was close to the center of the right lane. We
agree that as between Li's "self-serving" asseverations and the observations
of a witness who did not even know the accident victim personally and who
immediately gave a statement of the incident similar to his testimony to the
investigator immediately after the incident, the latter's testimony deserves
greater weight. As the court emphasized:
The issue is one of credibility and from Our own examination of the
transcript, We are not prepared to set aside the trial court's reliance on

the testimony of Rodriguez negating defendant's assertion that he was

driving at a safe speed. While Rodriguez drives only a motorcycle, his
perception of speed is not necessarily impaired. He was subjected to
cross-examination and no attempt was made to question .his
competence or the accuracy of his statement that defendant was
driving "very fast". This was the same statement he gave to the police
investigator after the incident, as told to a newspaper report (Exh. "P").
We see no compelling basis for disregarding his testimony.
The alleged inconsistencies in Rodriguez' testimony are not borne out
by an examination of the testimony. Rodriguez testified that the scene
of the accident was across the street where his beerhouse is located
about ten to twenty feet away (pp. 35-36, tsn, June 17, 1991). He did
not state that the accident transpired immediately in front of his
establishment. The ownership of the Lambingan se Kambingan is not
material; the business is registered in the name of his mother, but he
explained that he owns the establishment (p. 5, tsn, June 20, 1991).
Moreover, the testimony that the streetlights on his side of Aurora
Boulevard were on the night the accident transpired (p. 8) is not
necessarily contradictory to the testimony of Pfc. Ramos that there was
a streetlight at the corner of Aurora Boulevard and F. Roman Street (p.
45, tsn, Oct. 20, 1991).
With respect to the weather condition, Rodriguez testified that there
was only a drizzle, not a heavy rain and the rain has stopped and he
was outside his establishment at the time the accident transpired (pp.
64-65, tsn, June 17, 1991). This was consistent with plaintiff's
testimony that it was no longer raining when she left Bistro La Conga
(pp. 10-11, tsn, April 29, 1991). It was defendant Li who stated that it
was raining all the way in an attempt to explain why he was travelling
at only 50-55 kph. (p. 11, tsn, Oct. 14, 1991). As to the testimony of
Pfc. Ramos that it was raining, he arrived at the scene only in response
to a telephone call after the accident had transpired (pp. 9-10, tsn, Oct.
28, 1991). We find no substantial inconsistencies in Rodriguez's
testimony that would impair the essential integrity of his testimony or
reflect on his honesty. We are compelled to affirm the trial court's
acceptance of the testimony of said eyewitness.
Against the unassailable testimony of witness Rodriguez we note that Li's
testimony was peppered with so many inconsistencies leading us to conclude
that his version of the accident was merely adroitly crafted to provide a
version, obviously self-serving, which would exculpate him from any and all

liability in the incident. Against Valenzuela's corroborated claims, his

allegations were neither backed up by other witnesses nor by the
circumstances proven in the course of trial. He claimed that he was driving
merely at a speed of 55 kph. when "out of nowhere he saw a dark maroon
lancer right in front of him, which was (the) plaintiff's car". He alleged that
upon seeing this sudden "apparition" he put on his brakes to no avail as the
road was slippery.9
One will have to suspend disbelief in order to give credence to Li's
disingenuous and patently self-serving asseverations. The average
motorist alert to road conditions will have no difficulty applying the brakes to
a car traveling at the speed claimed by Li. Given a light rainfall, the visibility
of the street, and the road conditions on a principal metropolitan
thoroughfare like Aurora Boulevard, Li would have had ample time to react to
the changing conditions of the road if he were alert - as every driver should
be - to those conditions. Driving exacts a more than usual toll on the senses.
Physiological "fight or flight" 10 mechanisms are at work, provided such
mechanisms were not dulled by drugs, alcohol, exhaustion, drowsiness,
etc.11 Li's failure to react in a manner which would have avoided the accident
could therefore have been only due to either or both of the two factors: 1)
that he was driving at a "very fast" speed as testified by Rodriguez; and 2)
that he was under the influence of alcohol.12 Either factor working
independently would have diminished his responsiveness to road conditions,
since normally he would have slowed down prior to reaching Valenzuela's
car, rather than be in a situation forcing him to suddenly apply his brakes. As
the trial court noted (quoted with approval by respondent court):
Secondly, as narrated by defendant Richard Li to the San Juan Police
immediately after the incident, he said that while driving along Aurora
Blvd., out of nowhere he saw a dark maroon lancer right in front of him
which was plaintiff's car, indicating, again, thereby that, indeed, he
was driving very fast, oblivious of his surroundings and the road ahead
of him, because if he was not, then he could not have missed noticing
at a still far distance the parked car of the plaintiff at the right side
near the sidewalk which had its emergency lights on, thereby avoiding
forcefully bumping at the plaintiff who was then standing at the left
rear edge of her car.
Since, according to him, in his narration to the San Juan Police, he put
on his brakes when he saw the plaintiff's car in front of him, but that it
failed as the road was wet and slippery, this goes to show again, that,
contrary to his claim, he was, indeed, running very fast. For, were it

otherwise, he could have easily completely stopped his car, thereby

avoiding the bumping of the plaintiff, notwithstanding that the road
was wet and slippery. Verily, since, if, indeed, he was running slow, as
he claimed, at only about 55 kilometers per hour, then, inspite of the
wet and slippery road, he could have avoided hitting the plaintiff by the
mere expedient or applying his brakes at the proper time and distance.
It could not be true, therefore, as he now claims during his testimony,
which is contrary to what he told the police immediately after the
accident and is, therefore, more believable, that he did not actually
step on his brakes but simply swerved a little to the right when he saw
the on-coming car with glaring headlights, from the opposite direction,
in order to avoid it.
For, had this been what he did, he would not have bumped the car of
the plaintiff which was properly parked at the right beside the
sidewalk. And, it was not even necessary for him to swerve a little to
the right in order to safely avoid a collision with the on-coming car,
considering that Aurora Blvd. is a double lane avenue separated at the
center by a dotted white paint, and there is plenty of space for both
cars, since her car was running at the right lane going towards Manila
on the on-coming car was also on its right lane going to Cubao.13
Having come to the conclusion that Li was negligent in driving his companyissued Mitsubishi Lancer, the next question for us to determine is whether or
not Valenzuela was likewise guilty of contributory negligence in parking her
car alongside Aurora Boulevard, which entire area Li points out, is a no
parking zone.
We agree with the respondent court that Valenzuela was not guilty of
contributory negligence.
Contributory negligence is conduct on the part of the injured party,
contributing as a legal cause to the harm he has suffered, which falls below
the standard to which he is required to conform for his own
protection.14 Based on the foregoing definition, the standard or act to which,
according to petitioner Li, Valenzuela ought to have conformed for her own
protection was not to park at all at any point of Aurora Boulevard, a no
parking zone. We cannot agree.
Courts have traditionally been compelled to recognize that an actor who is
confronted with an emergency is not to be held up to the standard of
conduct normally applied to an individual who is in no such situation. The law
takes stock of impulses of humanity when placed in threatening or
dangerous situations and does not require the same standard of thoughtful

and reflective care from persons confronted by unusual and oftentimes

threatening conditions.15
Under the "emergency rule" adopted by this Court in Gan vs. Court of
Appeals,16 an individual who suddenly finds himself in a situation of danger
and is required to act without much time to consider the best means that
may be adopted to avoid the impending danger, is not guilty of negligence if
he fails to undertake what subsequently and upon reflection may appear to
be a better solution, unless the emergency was brought by his own
negligence.17
Applying this principle to a case in which the victims in a vehicular accident
swerved to the wrong lane to avoid hitting two children suddenly darting into
the street, we held, in Mc Kee vs. Intermediate Appellate Court,18 that the
driver therein, Jose Koh, "adopted the best means possible in the given
situation" to avoid hitting the children. Using the "emergency rule" the Court
concluded that Koh, in spite of the fact that he was in the wrong lane when
the collision with an oncoming truck occurred, was not guilty of negligence.19
While the emergency rule applies to those cases in which reflective thought,
or the opportunity to adequately weigh a threatening situation is absent, the
conduct which is required of an individual in such cases is dictated not
exclusively by the suddenness of the event which absolutely negates
thoroughful care, but by the over-all nature of the circumstances. A woman
driving a vehicle suddenly crippled by a flat tire on a rainy night will not be
faulted for stopping at a point which is both convenient for her to do so and
which is not a hazard to other motorists. She is not expected to run the
entire boulevard in search for a parking zone or turn on a dark street or alley
where she would likely find no one to help her. It would be hazardous for her
not to stop and assess the emergency (simply because the entire length of
Aurora Boulevard is a no-parking zone) because the hobbling vehicle would
be both a threat to her safety and to other motorists. In the instant case,
Valenzuela, upon reaching that portion of Aurora Boulevard close to A. Lake
St., noticed that she had a flat tire. To avoid putting herself and other
motorists in danger, she did what was best under the situation. As narrated
by respondent court: "She stopped at a lighted place where there were
people, to verify whether she had a flat tire and to solicit help if needed.
Having been told by the people present that her rear right tire was flat and
that she cannot reach her home she parked along the sidewalk, about 1 1/2
feet away, behind a Toyota Corona Car."20 In fact, respondent court noted,
Pfc. Felix Ramos, the investigator on the scene of the accident confirmed
that Valenzuela's car was parked very close to the sidewalk.21 The sketch

which he prepared after the incident showed Valenzuela's car partly

straddling the sidewalk, clear and at a convenient distance from motorists
passing the right lane of Aurora Boulevard. This fact was itself corroborated
by the testimony of witness Rodriguez.22
Under the circumstances described, Valenzuela did exercise the standard
reasonably dictated by the emergency and could not be considered to have
contributed to the unfortunate circumstances which eventually led to the
amputation of one of her lower extremities. The emergency which led her to
park her car on a sidewalk in Aurora Boulevard was not of her own making,
and it was evident that she had taken all reasonable precautions.
Obviously in the case at bench, the only negligence ascribable was the
negligence of Li on the night of the accident. "Negligence, as it is commonly
understood is conduct which creates an undue risk of harm to others."23It is
the failure to observe that degree of care, precaution, and vigilance which
the circumstances justly demand, whereby such other person suffers
injury.24 We stressed, in Corliss vs. Manila Railroad Company,25 that
negligence is the want of care required by the circumstances.
The circumstances established by the evidence adduced in the court below
plainly demonstrate that Li was grossly negligent in driving his Mitsubishi
Lancer. It bears emphasis that he was driving at a fast speed at about 2:00
A.M. after a heavy downpour had settled into a drizzle rendering the street
slippery. There is ample testimonial evidence on record to show that he was
under the influence of liquor. Under these conditions, his chances of
effectively dealing with changing conditions on the road were significantly
lessened. As Presser and Keaton emphasize:
[U]nder present day traffic conditions, any driver of an automobile
must be prepared for the sudden appearance of obstacles and persons
on the highway, and of other vehicles at intersections, such as one who
sees a child on the curb may be required to anticipate its sudden dash
into the street, and his failure to act properly when they appear may
be found to amount to negligence.26
Li's obvious unpreparedness to cope with the situation confronting him on
the night of the accident was clearly of his own making.
We now come to the question of the liability of Alexander Commercial, Inc.
Li's employer. In denying liability on the part of Alexander Commercial, the
respondent court held that:
There is no evidence, not even defendant Li's testimony, that the visit
was in connection with official matters. His functions as assistant
manager sometimes required him to perform work outside the office as

he has to visit buyers and company clients, but he admitted that on

the night of the accident he came from BF Homes Paranaque he did
not have "business from the company" (pp. 25-26, ten, Sept. 23,
1991). The use of the company car was partly required by the nature of
his work, but the privilege of using it for non-official business is a
"benefit", apparently referring to the fringe benefits attaching to his
position.
Under the civil law, an employer is liable for the negligence of his
employees in the discharge of their respective duties, the basis of
which liability is not respondeat superior, but the relationship of pater
familias, which theory bases the liability of the master ultimately on his
own negligence and not on that of his servant (Cuison v. Norton and
Harrison Co., 55 Phil. 18). Before an employer may be held liable for
the negligence of his employee, the act or omission which caused
damage must have occurred while an employee was in the actual
performance of his assigned tasks or duties (Francis High School vs.
Court of Appeals, 194 SCRA 341). In defining an employer's liability for
the acts done within the scope of the employee's assigned tasks, the
Supreme Court has held that this includes any act done by an
employee, in furtherance of the interests of the employer or for the
account of the employer at the time of the infliction of the injury or
damage (Filamer Christian Institute vs. Intermediate Appellate Court,
212 SCRA 637). An employer is expected to impose upon its employees
the necessary discipline called for in the performance of any act
"indispensable to the business and beneficial to their employer" (at p.
645).
In light of the foregoing, We are unable to sustain the trial court's
finding that since defendant Li was authorized by the company to use
the company car "either officially or socially or even bring it home", he
can be considered as using the company car in the service of his
employer or on the occasion of his functions. Driving the company car
was not among his functions as assistant manager; using it for nonofficial purposes would appear to be a fringe benefit, one of the perks
attached to his position. But to impose liability upon the employer
under Article 2180 of the Civil Code, earlier quoted, there must be a
showing that the damage was caused by their employees in the
service of the employer or on the occasion of their functions. There is
no evidence that Richard Li was at the time of the accident performing
any act in furtherance of the company's business or its interests, or at

least for its benefit. The imposition of solidary liability against

defendant Alexander Commercial Corporation must therefore fail. 27
We agree with the respondent court that the relationship in question is not
based on the principle of respondeat superior, which holds the master liable
for acts of the servant, but that of pater familias, in which the liability
ultimately falls upon the employer, for his failure to exercise the diligence of
a good father of the family in the selection and supervision of his employees.
It is up to this point, however, that our agreement with the respondent court
ends. Utilizing the bonus pater familias standard expressed in Article 2180 of
the Civil Code, 28 we are of the opinion that Li's employer, Alexander
Commercial, Inc. is jointly and solidarily liable for the damage caused by the
accident of June 24, 1990.
First, the case of St. Francis High School vs. Court of Appeals29 upon which
respondent court has placed undue reliance, dealt with the subject of a
school and its teacher's supervision of students during an extracurricular
activity. These cases now fall under the provision on special parental
authority found in Art. 218 of the Family Code which generally encompasses
all authorized school activities, whether inside or outside school premises.
Second, the employer's primary liability under the concept of pater
familias embodied by Art 2180 (in relation to Art. 2176) of the Civil Code is
quasi-delictual or tortious in character. His liability is relieved on a showing
that he exercised the diligence of a good father of the family in the selection
and supervision of its employees. Once evidence is introduced showing that
the employer exercised the required amount of care in selecting its
employees, half of the employer's burden is overcome. The question of
diligent supervision, however, depends on the circumstances of employment.
Ordinarily, evidence demonstrating that the employer has exercised diligent
supervision of its employee during the performance of the latter's assigned
tasks would be enough to relieve him of the liability imposed by Article 2180
in relation to Article 2176 of the Civil Code. The employer is not expected to
exercise supervision over either the employee's private activities or during
the performance of tasks either unsanctioned by the former or unrelated to
the employee's tasks. The case at bench presents a situation of a different
character, involving a practice utilized by large companies with either their
employees of managerial rank or their representatives.
It is customary for large companies to provide certain classes of their
employees with courtesy vehicles. These company cars are either wholly
owned and maintained by the company itself or are subject to various plans
through which employees eventually acquire their vehicles after a given

period of service, or after paying a token amount. Many companies provide

liberal "car plans" to enable their managerial or other employees of rank to
purchase cars, which, given the cost of vehicles these days, they would not
otherwise be able to purchase on their own.
Under the first example, the company actually owns and maintains the car
up to the point of turnover of ownership to the employee; in the second
example, the car is really owned and maintained by the employee himself. In
furnishing vehicles to such employees, are companies totally absolved of
responsibility when an accident involving a company-issued car occurs
during private use after normal office hours?
Most pharmaceutical companies, for instance, which provide cars under the
first plan, require rigorous tests of road worthiness from their agents prior to
turning over the car (subject of company maintenance) to their
representatives. In other words, like a good father of a family, they entrust
the company vehicle only after they are satisfied that the employee to whom
the car has been given full use of the said company car for company or
private purposes will not be a threat or menace to himself, the company or
to others. When a company gives full use and enjoyment of a company car to
its employee, it in effect guarantees that it is, like every good father,
satisfied that its employee will use the privilege reasonably and responsively.
In the ordinary course of business, not all company employees are given the
privilege of using a company-issued car. For large companies other than
those cited in the example of the preceding paragraph, the privilege serves
important business purposes either related to the image of success an entity
intends to present to its clients and to the public in general, or - for practical
and utilitarian reasons - to enable its managerial and other employees of
rank or its sales agents to reach clients conveniently. In most cases,
providing a company car serves both purposes. Since important business
transactions and decisions may occur at all hours in all sorts of situations
and under all kinds of guises, the provision for the unlimited use of a
company car therefore principally serves the business and goodwill of a
company and only incidentally the private purposes of the individual who
actually uses the car, the managerial employee or company sales agent. As
such, in providing for a company car for business use and/or for the purpose
of furthering the company's image, a company owes a responsibility to the
public to see to it that the managerial or other employees to whom it
entrusts virtually unlimited use of a company issued car are able to use the
company issue capably and responsibly.

In the instant case, Li was an Assistant Manager of Alexander Commercial,

Inc. In his testimony before the trial court, he admitted that his functions as
Assistant Manager did not require him to scrupulously keep normal office
hours as he was required quite often to perform work outside the office,
visiting prospective buyers and contacting and meeting with company
clients. 30 These meetings, clearly, were not strictly confined to routine hours
because, as a managerial employee tasked with the job of representing his
company with its clients, meetings with clients were both social as well as
work-related functions. The service car assigned to Li by Alexander
Commercial, Inc. therefore enabled both Li - as well as the corporation - to
put up the front of a highly successful entity, increasing the latter's goodwill
before its clientele. It also facilitated meeting between Li and its clients by
providing the former with a convenient mode of travel.
Moreover, Li's claim that he happened to be on the road on the night of the
accident because he was coming from a social visit with an officemate in
Paranaque was a bare allegation which was never corroborated in the court
below. It was obviously self-serving. Assuming he really came from his
officemate's place, the same could give rise to speculation that he and his
officemate had just been from a work-related function, or they were together
to discuss sales and other work related strategies.
In fine, Alexander Commercial, inc. has not demonstrated, to our satisfaction,
that it exercised the care and diligence of a good father of the family in
entrusting its company car to Li. No allegations were made as to whether or
not the company took the steps necessary to determine or ascertain the
driving proficiency and history of Li, to whom it gave full and unlimited use of
a company car.31 Not having been able to overcome the burden of
demonstrating that it should be absolved of liability for entrusting its
company car to Li, said company, based on the principle of bonus pater
familias, ought to be jointly and severally liable with the former for the
injuries sustained by Ma. Lourdes Valenzuela during the accident.
Finally, we find no reason to overturn the amount of damages awarded by
the respondent court, except as to the amount of moral damages. In the
case of moral damages, while the said damages are not intended to enrich
the plaintiff at the expense of a defendant, the award should nonetheless be
commensurate to the suffering inflicted. In the instant case we are of the
opinion that the reduction in moral damages from an amount of
P1,000,000.00 to P800,000,00 by the Court of Appeals was not justified
considering the nature of the resulting damage and the
predictable sequelae of the injury.

As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic

amputation of her left lower extremity at the distal left thigh just above the
knee. Because of this, Valenzuela will forever be deprived of the full
ambulatory functions of her left extremity, even with the use of state of the
art prosthetic technology. Well beyond the period of hospitalization (which
was paid for by Li), she will be required to undergo adjustments in her
prosthetic devise due to the shrinkage of the stump from the process of
healing.
These adjustments entail costs, prosthetic replacements and months of
physical and occupational rehabilitation and therapy. During her lifetime, the
prosthetic devise will have to be replaced and re-adjusted to changes in the
size of her lower limb effected by the biological changes of middle-age,
menopause and aging. Assuming she reaches menopause, for example, the
prosthetic will have to be adjusted to respond to the changes in bone
resulting from a precipitate decrease in calcium levels observed in the bones
of all post-menopausal women. In other words, the damage done to her
would not only be permanent and lasting, it would also be permanently
changing and adjusting to the physiologic changes which her body
would normally undergo through the years. The replacements, changes, and
adjustments will require corresponding adjustive physical and occupational
therapy. All of these adjustments, it has been documented, are painful.
The foregoing discussion does not even scratch the surface of the nature of
the resulting damage because it would be highly speculative to estimate the
amount of psychological pain, damage and injury which goes with the
sudden severing of a vital portion of the human body. A prosthetic device,
however technologically advanced, will only allow a reasonable amount of
functional restoration of the motor functions of the lower limb. The sensory
functions are forever lost. The resultant anxiety, sleeplessness, psychological
injury, mental and physical pain are inestimable.
As the amount of moral damages are subject to this Court's discretion, we
are of the opinion that the amount of P1,000,000.00 granted by the trial
court is in greater accord with the extent and nature of the injury - physical
and psychological - suffered by Valenzuela as a result of Li's grossly
negligent driving of his Mitsubishi Lancer in the early morning hours of the
accident.
WHEREFORE, PREMISES CONSIDERED, the decision of the Court of Appeals is
modified with the effect of REINSTATING the judgment of the Regional Trial
Court.
SO ORDERED.

G.R. No. L-68102 July 16, 1992

GEORGE MCKEE and ARACELI KOH MCKEE, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, JAIME TAYAG and ROSALINDA
MANALO, respondents.
G.R. No. L-68103 July 16, 1992
CARMEN DAYRIT KOH, LETICIA KOH, JULIETA KOH TUQUERO, ARACELI
KOH MCKEE, ANTONIO KOH and ELIZABETH KOH TURLA, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, JAIME TAYAG and ROSALINDA
MANALO, respondents.
DAVIDE, JR., J.:
Petitioners urge this Court to review and reverse the Resolution of the Court
of Appeals in C.A.-G.R. CV Nos. 69040-41, promulgated on 3 April 1984,
which set aside its previous Decision dated 29 November 1983 reversing the
Decision of the trial court which dismissed petitioners' complaints in Civil
Case No. 4477 and Civil Case No. 4478 of the then Court of First Instance
(now Regional Trial Court) of Pampanga entitled "Carmen Dayrit Koh, Leticia
Koh, Julieta Koh Tuquero, Araceli Koh McKee and Elizabeth Koh Turla vs. Jaime
Tayag and Rosalinda Manalo," and "George McKee and Araceli Koh McKee vs.
Jaime Tayag and Rosalinda Manalo," respectively, and granted the private
respondents' counterclaim for moral damages, attorney's fees and litigation
expenses.
The said civil cases for damages based on quasi-delict were filed as a result
of a vehicular accident which led to the deaths of Jose Koh, Kim Koh McKee
and Loida Bondoc and caused physical injuries to George Koh McKee,
Christopher Koh McKee and petitioner Araceli Koh McKee.
Petitioners in G.R. No. 68102, parents of the minors George Koh McKee,
Christopher Koh McKee and the deceased Kim Koh McKee, were the plaintiffs
in Civil Case No. 4478, while petitioner Carmen Dayrit Koh and her copetitioners in G.R. No. 68103, who are the wife and children, respectively, of
the late Jose Koh, were the plaintiffs in Civil Case No. 4477. Upon the other
hand, private respondents are the owners of the cargo truck which figured in

the mishap; a certain Ruben Galang was the driver of the truck at the time of
the accident.
The antecedent facts are not disputed.
Between nine and ten o'clock in the morning of 8 January 1977, in Pulong
Pulo Bridge along MacArthur Highway, between Angeles City and San
Fernando, Pampanga, a head-on-collision took place between an
International cargo truck, Loadstar, with Plate No. RF912-T Philippines '76
owned by private respondents, and driven by Ruben Galang, and a Ford
Escort car bearing Plate No. S2-850 Pampanga '76 driven by Jose Koh. The
collision resulted in the deaths of Jose Koh, Kim Koh McKee and Loida
Bondoc, and physical injuries to George Koh McKee, Christopher Koh McKee
and Araceli Koh McKee, all passengers of the Ford Escort.
Jose Koh was the father of petitioner Araceli Koh McKee, the mother of minors
George, Christopher and Kim Koh McKee. Loida Bondoc, on the other hand,
was the baby sitter of one and a half year old Kim. At the time of the
collision, Kim was seated on the lap of Loida Bondoc who was at the front
passenger's seat of the car while Araceli and her two (2) sons were seated at
the car's back seat.
Immediately before the collision, the cargo truck, which was loaded with two
hundred (200) cavans of rice weighing about 10,000 kilos, was traveling
southward from Angeles City to San Fernando Pampanga, and was bound for
Manila. The Ford Escort, on the other hand, was on its way to Angeles City
from San Fernando. When the northbound car was about (10) meters away
from the southern approach of the bridge, two (2) boys suddenly darted from
the right side of the road and into the lane of the car. The boys were moving
back and forth, unsure of whether to cross all the way to the other side or
turn back. Jose Koh blew the horn of the car, swerved to the left and entered
the lane of the truck; he then switched on the headlights of the car, applied
the brakes and thereafter attempted to return to his lane. Before he could do
so, his car collided with the truck. The collision occurred in the lane of the
truck, which was the opposite lane, on the said bridge.
The incident was immediately reported to the police station in Angeles City;
consequently, a team of police officers was forthwith dispatched to conduct
an on the spot investigation. In the sketch 1 prepared by the investigating
officers, the bridge is described to be sixty (60) "footsteps" long and fourteen
(14) "footsteps" wide seven (7) "footsteps" from the center line to the
inner edge of the side walk on both sides. 2 Pulong Pulo Bridge, which spans
a dry brook, is made of concrete with soft shoulders and concrete railings on
both sides about three (3) feet high.

The sketch of the investigating officer discloses that the right rear portion of
the cargo truck was two (2) "footsteps" from the edge of the right sidewalk,
while its left front portion was touching the center line of the bridge, with the
smashed front side of the car resting on its front bumper. The truck was
about sixteen (16) "footsteps" away from the northern end of the bridge
while the car was about thirty-six (36) "footsteps" from the opposite end.
Skid marks produced by the right front tire of the truck measured nine (9)
"footsteps", while skid marks produced by the left front tire measured five (5)
"footsteps." The two (2) rear tires of the truck, however, produced no skid
marks.
In his statement to the investigating police officers immediately after the
accident, Galang admitted that he was traveling at thirty (30) miles (48
kilometers) per hour.
As a consequence of the collision, two (2) cases, Civil Case No. 4477 and No.
4478, were filed on 31 January 1977 before the then Court of First Instance of
Pampanga and were raffled to Branch III and Branch V of the said court,
respectively. In the first, herein petitioners in G.R. No. 68103 prayed for the
award of P12,000.00 as indemnity for the death of Jose Koh, P150,000.00 as
moral damages, P60,000.00 as exemplary damages, P10,000.00 for litigation
expenses, P6,000.00 for burial expenses, P3,650.00 for the burial lot and
P9,500.00 for the tomb, plus attorney's fees. 3 In the second case, petitioners
in G.R. No. 68102 prayed for the following: (a) in connection with the death
of Kim McKee, the sum of P12,000.00 as death benefit, P3,150.00 for funeral
services, P3,650.00 for the cemetery lot, P3,000.00 for the tomb, P50,000.00
as moral damages, P10,000.00 as exemplary damages and P2,000.00 as
miscellaneous damages; (b) in the case of Araceli Koh McKee, in connection
with the serious physical injuries suffered, the sum of P100,000.00 as moral
damages, P20,000.00 as exemplary damages, P12,000.00 for loss of
earnings, P5,000.00 for the hospitalization expenses up to the date of the
filing of the complaint; and (c) with respect to George McKee, Jr., in
connection with the serious physical injuries suffered, the sum of P50,000.00
as moral damages, P20,000.00 as exemplary damages and the following
medical expenses: P3,400 payable to the Medical Center, P3,500.00 payable
to the St. Francis Medical Center, P5,175.00 payable to the Clark Air Base
Hospital, and miscellaneous expenses amounting to P5,000.00. They also
sought an award of attorney's fees amounting to 25% of the total award plus
traveling and hotel expenses, with costs. 4
On 1 March 1977, an Information charging Ruben Galang with the crime of
"Reckless Imprudence Resulting to (sic) Multiple Homicide and Physical

Injuries and Damage to Property" was filed with the trial court. It was
docketed as Criminal Case No. 3751 and was raffled to Branch V of the court,
the same Branch where Civil Case No. 4478 was assigned. 5
In their Answer with Counterclaim in Civil Case No. 4477, private respondents
asserted that it was the Ford Escort car which "invaded and bumped (sic) the
lane of the truck driven by Ruben Galang and, as counterclaim, prayed for
the award of P15,000.00 as attorney's fees, P20,000.00 as actual and
liquidated damages, P100,000.00 as moral damages and P30,000.00 as
business losses. 6 In Civil Case No. 4478, private respondents first filed a
motion to dismiss on grounds of pendency of another action (Civil Case No.
4477) and failure to implead an indispensable party, Ruben Galang, the truck
driver; they also filed a motion to consolidate the case with Civil Case No.
4477 pending before Branch III of the same court, which was opposed by the
plaintiffs. 7 Both motions were denied by Branch V, then presided over by
Judge Ignacio Capulong. Thereupon, private respondents filed their Answer
with Counter-claim 8 wherein they alleged that Jose Koh was the person "at
fault having approached the lane of the truck driven by Ruben Galang, . . .
which was on the right lane going towards Manila and at a moderate speed
observing all traffic rules and regulations applicable under the circumstances
then prevailing;" in their counterclaim, they prayed for an award of damages
as may be determined by the court after due hearing, and the sums of
P10,000.00 as attorney's fees and P5,000.00 as expenses of litigation.
Petitioners filed their Answers to the Counterclaims in both cases.
To expedite the proceedings, the plaintiffs in Civil Case No. 4478 filed on 27
March 1978 a motion to adopt the testimonies of witnesses taken during the
hearing of Criminal Case No. 3751, which private respondents opposed and
which the court denied. 9 Petitioners subsequently moved to reconsider the
order denying the motion for consolidation, 10 which Judge Capulong granted
in the Order of 5 September 1978; he then directed that Civil Case No. 4478
be consolidated with Civil Case No. 4477 in Branch III of the court then
presided over by Judge Mario Castaeda, Jr.
Left then with Branch V of the trial court was Criminal Case No. 3751.
In the civil cases, the plaintiffs presented as witnesses Araceli Koh McKee,
Fernando Nuag, Col. Robert Fitzgerald, Primitivo Parel, Eugenio Tanhueco,
Carmen Koh and Antonio Koh, 11 and offered several documentary exhibits.
Upon the other hand, private respondents presented as witnesses Ruben
Galang, Zenaida Soliman, Jaime Tayag and Roman Dayrit. 12
In the criminal case, the prosecution presented as witnesses Mrs. Araceli
McKee, Salud Samia, Pfc. Fernando Nuag, Dr. Ramon Panlilio, Dr. Robert

Fitzgerald, Dr. Roberto Yuson, Dr. Hector, Ulanday, Pfc. Benigno de Leon,
Marina Bolos, Primitivo Parel, Rogelio Pineda, Benito Caraan and Eugenio
Tanhueco, and offered several documentary exhibits. 13 Upon the other hand,
the defense presented the accused Ruben Galang, Luciano Punzalan,
Zenaida Soliman and Roman Dayrit, and offered documentary exhibits. 14
On 1 October 1980, Judge Capulong rendered a decision against the accused
Ruben Galang in the aforesaid criminal case. The dispositive portion of the
decision reads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered finding the accused Ruben Galang guilty beyond
reasonable doubt of the crime charged in the information and
after applying the provisions of Article 365 of the Revised Penal
Code and indeterminate sentence law, this Court, imposes upon
said accused Ruben Galang the penalty of six (6) months
of arresto mayor as minimum to two (2) years, four (4) months
and one (1) day of prision correccional as maximum; the accused
is further sentenced to pay and indemnify the heirs of Loida
Bondoc the amount of P12,000.00 as indemnity for her death; to
reimburse the heirs of Loida Bondoc the amount of P2,000.00
representing the funeral expenses; to pay the heirs of Loida
Bondoc the amount of P20,000.00 representing her loss of
income; to indemnify and pay the heirs of the deceased Jose Koh
the value of the car in the amount of P53,910.95, and to pay the
costs. 15
The aforecited decision was promulgated only on 17 November 1980; on the
same day, counsel for petitioners filed with Branch III of the court where
the two (2) civil cases were pending a manifestation to that effect and
attached thereto a copy of the decision. 16
Upon the other hand, Judge Mario Castaeda, Jr. dismissed the two (2) civil
cases on 12 November 1980 and awarded the private respondents moral
damages, exemplary damages and attorney's fees. 17 The dispositive portion
of the said decision reads as follows:
WHEREFORE, finding the preponderance of evidence to be in
favor of the defendants and against the plaintiffs, these cases
are hereby ordered DISMISSED with costs against the plaintiffs.
The defendants had proven their counter-claim, thru evidences
(sic) presented and unrebutted. Hence, they are hereby awarded
moral and exemplary damages in the amount of P100,000.00
plus attorney's fee of P15,000.00 and litigation expenses for (sic)

P2,000.00. The actual damages claimed for (sic) by the

defendants is (sic) hereby dismissing for lack of proof to that
effect (sic). 18
A copy of the decision was sent by registered mail to the petitioners on 28
November 1980 and was received on 2 December 1980. 19
Accused Ruben Galang appealed the judgment of conviction to the Court of
Appeals. The appeal was docketed as C.A.-G.R. Blg. 24764-CR and was
assigned to the court's Third Division. Plaintiffs in Civil Cases Nos. 4477 and
4478 likewise separately appealed the 12 November 1980 decision to the
appellate court. The appeals were docketed as C.A.-G.R. No. 69041-R and
C.A.-G.R. No. 69040-R, respectively, and were assigned to the Fourth Civil
Cases Division.
On 4 October 1982, the respondent Court promulgated its decision 20 in C.A.G.R. Blg. 24764-CR affirming the conviction of Galang. 21 The dispositive
portion of the decision reads:
DAHIL DITO, ang hatol na paksa ng naritong paghahabol ay
Aming pinagtitibay sa kanyang kabuuan. Ang naghahabol pa rin
ang pinagbabayad ng gugol ng paghahabol.
A motion for reconsideration of the decision was denied by the respondent
Court in its Kapasiyahan promulgated on 25 November 1982. 22 A petition for
its review 23 was filed with this Court; said petition was subsequently denied.
A motion for its reconsideration was denied with finality in the Resolution of
20 April 1983. 24
On 29 November 1983, respondent Court, by then known as the
Intermediate Appellate Court, promulgated its consolidated decision in A.C.G.R. CV Nos. 69040 and 69041, 25 the dispositive portion of which reads:
WHEREFORE, the decision appealed from it hereby reversed and
set aside and another one is rendered, ordering defendantsappellees to pay plaintiffs-appellants as follows:
For the death of Jose Koh:
P 50,000.00 as moral damages
P 12,000.00 as death indemnity
P 16,000.00 for the lot and tomb (Exhs. U and U-1)
P 4,000.00 expenses for holding a wake (p. 9, tsn
April 19, 1979)
P 950.00 for the casket (Exh. M)
P 375.00 for the vault services (Exhs. V and V-1)
For the death of Kim Koh McKee:

P
P
P
P
P

50,000.00 as moral damages

12,000.00 as death indemnity
1,000.00 for the purchase of the burial lot (Exh. M)
950.00 for funeral services (Exh. M-1)
375.00 for vault services (Exhs. V and V-1)

For the physical injuries suffered by George Koh McKee:

P 25,000.00 as moral damages
P 672.00 for Clark Field Hospital (Exh. E)
P 4,384.00 paid to Angeles Medical Clinic (Exhs. D, D1 and
D-2)
P 1,555.00 paid to St. Francis Medical Center (Exhs. B
and B-1)
For the physical injuries suffered by Araceli Koh McKee:
P 25,000.00 as moral damages
P 1,055.00 paid to St. Francis Medical Center (Exhs. G
and
G-1)
P 75.00 paid to St. Francis Medical Center (Exhs. G-2
and G-3)
P 428.00 to Carmelite General Hospital (Exh. F)
P 114.20 to Muoz Clinic (Exh. MM)
For the physical injuries suffered by Christopher Koh McKee:
P 10,000.00 as moral damages
P 1,231.10 to St. Francis Medical Center (Exhs. L and
L-1)
P 321.95 to F.C.E.A. Hospital (Exhs. G and D-1)
In addition, We award P10,000.00 as counsel (sic) fees in Civil
Case No. 4477 and another P10,000.00; as counsel (sic) fees in
Civil Case No. 4478.
No pronouncement as to costs.
SO ORDERED.

26

The decision is anchored principally on the respondent Court's findings that it

was Ruben Galang's inattentiveness or reckless imprudence which caused
the accident. The appellate court further said that the law presumes
negligence on the part of the defendants (private respondents), as
employers of Galang, in the selection and supervision of the latter; it was
further asserted that these defendants did not allege in their Answers the

defense of having exercised the diligence of a good father of a family in

selecting and supervising the said employee. 27 This conclusion of reckless
imprudence is based on the following findings of fact:
In the face of these diametrically opposed judicial positions, the
determinative issue in this appeal is posited in the fourth
assigned error as follows:
IV
THE TRIAL COURT ERRED WHEN IT HELD THE (sic) DRIVER OF
THE TRUCK STOPPED HIS TRUCK BLEW HIS HORN SWITCHED ON
HIS HEADLIGHTS AND COULD NOT SWERVE TO THE RIGHT.
Supportive of plaintiffs' version, principal witness Araceli Koh McKee testified
thus:
Q What happened after that, as you approached the
bridge?
A When we were approaching the bridge, two (2)
boys tried to cross the right lane on the right side of
the highway going to San Fernando. My father, who is
(sic) the driver of the car tried to avoid the two (2)
boys who were crossing, he blew his horn and
swerved to the left to avoid hitting the two (2) boys.
We noticed the truck, he switched on the headlights
to warn the truck driver, to slow down to give us the
right of way to come back to our right lane.
Q Did the truck slow down?
A No, sir, it did not, just (sic) continued on its way.
Q What happened after that?
A After avoiding the two (2) boys, the car tried to go
back to the right lane since the truck is (sic) coming,
my father stepped on the brakes and all what (sic) I
heard is the sound of impact (sic), sir. (tsn, pp. 5-6,
July 22, 1977); or (Exhibit "O" in these Civil Cases).
xxx xxx xxx
Q Mrs. how did you know that the truck driven by the
herein accused, Ruben Galang did not reduce its
speed before the actual impact of collision (sic) as
you narrated in this Exhibit "1," how did you know
(sic)?

A It just kept on coming, sir. If only he reduced his

speed, we could have got (sic) back to our right lane
on side (sic) of the highway, sir. (tsn. pp. 33-34 July
22, 1977) or (Exhibit "O" in these Civil Cases) (pp.
30-31, Appellants' Brief).
Plaintiffs' version was successfully corroborated to Our satisfaction by the
following facts and circumstances:
1. An impartial eye-witness to the mishap, Eugenio Tanhueco,
declared that the truck stopped only when it had already collided
with the car:
xxx xxx xxx
Tanhueco repeated the same testimony during the hearing in the
criminal case:
xxx xxx xxx
Tanhueco could (sic) not be tagged as an accommodation
witness because he was one of the first to arrive at the scene of
the accident. As a matter of fact, he brought one of the injured
passengers to the hospital.
We are not prepared to accord faith and credit to defendants'
witnesses, Zenaida Soliman, a passenger of the truck, and
Roman Dayrit, who supposedly lived across the street.
Regarding Soliman, experience has shown that in the ordinary
course of events people usually take the side of the person with
whom they are associated at the time of the accident, because,
as a general rule, they do not wish to be identified with the
person who was at fault. Thus an imaginary bond is
unconsciously created among the several persons within the
same group (People vs. Vivencio, CA-G.R. No. 00310-CR, Jan. 31,
1962).
With respect to Dayrit, We can not help suspecting (sic) that he is
an accommodation witness. He did not go to the succor of the
injured persons. He said he wanted to call the police authorities
about the mishap, but his phone had no dial tone. Be this (sic) as
it may, the trial court in the criminal case acted correctly in
refusing to believe Dayrit.
2. Exhibit 2, the statement of Galang, does not include the claim
that Galang stopped his truck at a safe distance from the car,
according to plaintiffs (p. 25, Appellants' Brief). This contention of

appellants was completely passed sub-silencio or was not refuted

by appellees in their brief. Exhibit 2 is one of the exhibits not
included in the record. According to the Table of Contents
submitted by the court below, said Exhibit 2 was not submitted
by defendants-appellees. In this light, it is not far-fetched to
surmise that Galang's claim that he stopped was an eleventhhour desperate attempt to exculpate himself from imprisonment
and damages.
3. Galang divulged that he stopped after seeing the car about 10
meters away:
ATTY. SOTTO:
Q Do I understand from your testimony that inspite of
the fact that you admitted that the road is straight
and you may be able to (sic) see 500-1000 meters
away from you any vehicle, you first saw that car
only about ten (10) meters away from you for the
first time?
xxx xxx xxx
A I noticed it, sir, that it was about ten (10) meters
away.
ATTY. SOTTO:
Q So, for clarification, you clarify and state under
your oath that you have (sic) not noticed it before
that ten (10) meters? (Tsn. 3 to 5, Sept. 18, 1979). (p.
16, Appellants' Brief)
Galang's testimony substantiate (sic) Tanhueco's statement that
Galang stopped only because of the impact. At ten (10) meters
away, with the truck running at 30 miles per hour, as revealed in
Galang's affidavit (Exh. 2; p. 25, Appellants' brief), it is well-nigh
impossible to avoid a collision on a bridge.
5. Galang's truck stopped because of the collision, and not
because he waited for Jose Koh to return to his proper lane. The
police investigator, Pfc. Fernando L. Nuag, stated that he found
skid marks under the truck but there were not (sic) skid marks
behind the truck (pp. 19-20, t.s.n., Nov. 3, 1978). The presence of
skid marks show (sic) that the truck was speeding. Since the skid
marks were found under the truck and none were found at the
rear of the truck, the reasonable conclusion is that the skid
marks under the truck were caused by the truck's front wheels

when the trucks (sic) suddenly stopped seconds before the

mishap in an endeavor to avoid the same. But, as aforesaid,
Galang saw the car at barely 10 meters away, a very short
distance to avoid a collision, and in his futile endeavor to avoid
the collision he abruptly stepped on his brakes but the smashup
happened just the same.
For the inattentiveness or reckless imprudence of Galang, the
law presumes negligence on the part of the defendants in the
selection of their driver or in the supervision over him. Appellees
did not allege such defense of having exercised the duties of a
good father of a family in the selection and supervision of their
employees in their answers. They did not even adduce evidence
that they did in fact have methods of selection and programs of
supervision. The inattentiveness or negligence of Galang was the
proximate cause of the mishap. If Galang's attention was on the
highway, he would have sighted the car earlier or at a very safe
distance than (sic) 10 meters. He proceeded to cross the bridge,
and tried to stop when a collision was already inevitable,
because at the time that he entered the bridge his attention was
not riveted to the road in front of him.
On the question of damages, the claims of appellants were
amply proven, but the items must be reduced. 28
A motion for reconsideration alleging improper appreciation of the facts was
subsequently filed by private respondents on the basis of which the
respondent Court, in its Resolution of 3 April 1984, 29 reconsidered and set
aside its 29 November 1983 decision and affirmed in toto the trial court's
judgment of 12 November 1980. A motion to reconsider this Resolution was
denied by the respondent Court on 4 July 1984. 30
Hence, this petition.
Petitioners allege that respondent Court:
I
. . . COMMITTED A VERY SERIOUS AND GRAVE ERROR WHEN IT
TOTALLY REVERSED ITS DECISION BY MERELY BASING IT FROM
(sic) A MERE "PRESUMPTION," TOTALLY DISREGARDING THE
PRIVATE RESPONDENTS' DRIVER'S ADMISSIONS AND
CONFESSIONS, WHO EXCLUSIVELY COMMITTED THE PROXIMATE
CAUSE OF THE ACCIDENT (sic), FURTHER, IT ALSO DISREGARDED
THE EVIDENCE ADDUCED AND FOUND IN THE RECORDS;
THEREFORE, RESPONDENT COURT'S RESOLUTIONS (ANNEXES A

and B, PETITION) ARE CLEARLY ERRONEOUS, PURELY BASED ON

SPECULATIONS, CONJECTURES AND WITHOUT SURE FOUNDATION
IN THE EVIDENCE.
II
. . . GRAVELY ABUSED ITS DISCRETION AND ERRED WHEN IN
EFFECT IT DISREGARDED A DOCTRINE LAID DOWN BY THIS
HONORABLE COURT BY STATING AMONG OTHERS, "IT CANNOT
CATEGORICALLY ADOPT THE FINDINGS OF GUILT IN THE CRIMINAL
CASE WHERE THE DRIVER OF THE TRUCK INVOLVED IN THE
ACCIDENT WAS INDICTED.
III
. . . PATENTLY COMMITTED GRAVE ABUSE OF DISCRETION AND
MADE A MISLEADING PRONOUNCEMENT, WHEN IT HELD: "IT IS
THUS INCUMBENT UPON THE PLAINTIFFS-APPELLANTS
(APPELLEES WRONGLY MENTIONED IN THE RESOLUTION) TO
PROVE THEIR ALLEGATIONS THAT THE PROXIMATE CAUSE OF THE
ACCIDENT WAS THE NEGLIGENCE OF PRIVATE RESPONDENTS'
DRIVER.
IV
. . . COMMITTED ANOTHER GRIEVIOUS (sic) ERROR; COMMITTED
GRAVE ABUSE OF DISCRETION AND CITED ANOTHER CASE
WHICH IS CLEARLY INAPPLICABLE TO THESE CASES.
V
. . . COMMITTED A PATENT ERROR AND GRAVELY ABUSED ITS
DISCRETION IN ADOPTING THE FINDINGS OF THE TRIAL COURT
WHICH ARE CLEARLY ERRONEOUS AND CONTRARY TO THE
EVIDENCE FOUND IN THE RECORDS, SPECIALLY THEY (sic) ARE
CONTRARY TO THE ADMITTED FACTS AND JUDICIAL ADMISSIONS
MADE BY THE PRIVATE RESPONDENTS' DRIVER.
VI
. . . EXCEEDED ITS JURISDICTION, COMMITTED GRAVE ABUSE OF
DISCRETION AND GRAVELY ERRED WHEN IT AWARDED DAMAGES
TO THE PRIVATE RESPONDENTS WHEN SAID AWARD IS NOT
SUPPORTED BY EVIDENCE, IN THE RECORDS, AND SAID AWARD
IS NOT ALLOWED BY LAW AND THE CONSISTENT DECISIONS OF
THIS HONORABLE COURT.
VII

. . . EXCEEDED ITS JURISDICTION, COMMITTED GRAVE ABUSE OF

DISCRETION AND GRAVELY ERRED WHEN IT ERRONEOUSLY SET
ASIDE ITS DECISION AWARDING DAMAGES TO PETITIONERS
WHICH IS CLEARLY IN ACCORDANCE WITH THE EVIDENCE, THE
LAW AND JURISPRUDENCE RELATIVE TO THE AWARD OF
DAMAGES. 31
In the Resolution of 12 September 1984, We required private respondents to
Comment on the petition. 32 After the said Comment 33 was filed, petitioners
submitted a Reply 34 thereto; this Court then gave due course to the instant
petitions and required petitioners to file their Brief, 35 which they accordingly
complied with.
There is merit in the petition. Before We take on the main task of dissecting
the arguments and counter-arguments, some observations on the procedural
vicissitudes of these cases are in order.
Civil Cases Nos. 4477 and 4478, which were for the recovery of civil liability
arising from a quasi-delict under Article 2176 in relation to Article 2180 of the
Civil Code, were filed ahead of Criminal Case No. 3751. Civil Case No. 4478
was eventually consolidated with Civil Case No. 4477 for joint trial in Branch
III of the trial court. The records do not indicate any attempt on the part of
the parties, and it may therefore be reasonably concluded that none was
made, to consolidate Criminal Case No. 3751 with the civil cases, or viceversa. The parties may have then believed, and understandably so, since by
then no specific provision of law or ruling of this Court expressly allowed
such a consolidation, that an independent civil action, authorized under
Article 33 in relation to Article 2177 of the Civil Code, such as the civil cases
in this case, cannot be consolidated with the criminal case. Indeed, such
consolidation could have been farthest from their minds as Article 33 itself
expressly provides that the "civil action shall proceed independently of the
criminal prosecution, and shall require only a preponderance of evidence."
Be that as it may, there was then no legal impediment against such
consolidation. Section 1, Rule 31 of the Rules of Court, which seeks to avoid a
multiplicity of suits, guard against oppression and abuse, prevent delays,
clear congested dockets to simplify the work of the trial court, or in short,
attain justice with the least expense to the parties litigants, 36 would have
easily sustained a consolidation, thereby preventing the unseeming, if no
ludicrous, spectacle of two (2) judges appreciating, according to their
respective orientation, perception and perhaps even prejudice, the same
facts differently, and thereafter rendering conflicting decisions. Such was
what happened in this case. It should not, hopefully, happen anymore. In the

recent case of Cojuangco vs. Court or Appeals, 37 this Court held that the
present provisions of Rule 111 of the Revised Rules of Court allow a
consolidation of an independent civil action for the recovery of civil liability
authorized under Articles 32, 33, 34 or 2176 of the Civil Code with the
criminal action subject, however, to the condition that no final judgment has
been rendered in that criminal case.
Let it be stressed, however, that the judgment in Criminal Case No. 3751
finding Galang guilty of reckless imprudence, although already final by virtue
of the denial by no less than this Court of his last attempt to set aside the
respondent Court's affirmance of the verdict of conviction, has no relevance
or importance to this case.
As We held in Dionisio vs. Alvendia, 38 the responsibility arising from fault or
negligence in a quasi-delict is entirely separate and distinct from the civil
liability arising from negligence under the Penal Code. And, as more
concretely stated in the concurring opinion of Justice J.B.L. Reyes, "in the
case of independent civil actions under the new Civil Code, the result of the
criminal case, whether acquittal or conviction, would be entirely irrelevant to
the civil action." 39 In Salta vs. De Veyra and PNB vs. Purisima, 40 this Court
stated:
. . . It seems perfectly reasonable to conclude that the civil
actions mentioned in Article 33, permitted in the same manner to
be filed separately from the criminal case, may proceed
similarly regardless of the result of the criminal case.
Indeed, when the law has allowed a civil case related to a
criminal case, to be filed separately and to proceed
independently even during the pendency of the latter case, the
intention is patent to make the court's disposition of the criminal
case of no effect whatsoever on the separate civil case. This
must be so because the offenses specified in Article 33 are of
such a nature, unlike other offenses not mentioned, that they
may be made the subject of a separate civil action because of
the distinct separability of their respective juridical cause or
basis of action . . . .
What remains to be the most important consideration as to why the decision
in the criminal case should not be considered in this appeal is the fact that
private respondents were not parties therein. It would have been entirely
different if the petitioners' cause of action was for damages arising from
a delict, in which case private respondents' liability could only be subsidiary
pursuant to Article 103 of the Revised Penal Code. In the absence of any

collusion, the judgment of conviction in the criminal case against Galang

would have been conclusive in the civil cases for the subsidiary liability of
the private respondents. 41
And now to the merits of the petition.
It is readily apparent from the pleadings that the principal issue raised in this
petition is whether or not respondent Court's findings in its challenged
resolution are supported by evidence or are based on mere speculations,
conjectures and presumptions.
The principle is well-established that this Court is not a trier of facts.
Therefore, in an appeal by certiorari under Rule 45 of the Revised Rules of
Court, only questions of law may be raised. The resolution of factual issues is
the function of the lower courts whose findings on these matters are
received with respect and are, as a rule, binding on this Court. 42
The foregoing rule, however, is not without exceptions. Findings of facts of
the trial courts and the Court of Appeals may be set aside when such
findings are not supported by the evidence or when the trial court failed to
consider the material facts which would have led to a conclusion different
from what was stated in its judgment. 43The same is true where the appellate
court's conclusions are grounded entirely on conjectures, speculations and
surmises44 or where the conclusions of the lower courts are based on a
misapprehension of facts. 45
It is at once obvious to this Court that the instant case qualifies as one of the
aforementioned exceptions as the findings and conclusions of the trial court
and the respondent Court in its challenged resolution are not supported by
the evidence, are based on an misapprehension of facts and the inferences
made therefrom are manifestly mistaken. The respondent Court's decision of
29 November 1983 makes the correct findings of fact.
In the assailed resolution, the respondent Court held that the fact that the
car improperly invaded the lane of the truck and that the collision occurred in
said lane gave rise to the presumption that the driver of the car, Jose Koh,
was negligent. On the basis of this presumed negligence, the appellate court
immediately concluded that it was Jose Koh's negligence that was the
immediate and proximate cause of the collision. This is an unwarranted
deduction as the evidence for the petitioners convincingly shows that the car
swerved into the truck's lane because as it approached the southern end of
the bridge, two (2) boys darted across the road from the right sidewalk into
the lane of the car. As testified to by petitioner Araceli Koh McKee:
Q What happened after that, as you approached the
bridge?

A When we were approaching the bridge, two (2)

boys tried to cross the right lane on the right side of
the highway going to San Fernando. My father, who is
(sic) the driver of the car tried to avoid the two (2)
boys who were crossing, he blew his horn and
swerved to the left to avoid hitting the two (2) boys.
We noticed the truck, he switched on the headlights
to warn the truck driver, to slow down to give us the
right of way to come back to our right lane.
Q Did the truck slow down?
A No sir, it did not, just (sic) continued on its way.
Q What happened after that?
A After avoiding the two (2) boys, the car tried to go
back to the right lane since the truck is (sic) coming,
my father stepped on the brakes and all what (sic) I
heard is the sound of impact (sic), sir. 46
Her credibility and testimony remained intact even during cross examination.
Jose Koh's entry into the lane of the truck was necessary in order to avoid
what was, in his mind at that time, a greater peril death or injury to the
two (2) boys. Such act can hardly be classified as negligent.
Negligence was defined and described by this Court in Layugan vs.
Intermediate Appellate Court, 47 thus:
. . . Negligence is the omission to do something which a
reasonable man, guided by those considerations which ordinarily
regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do
(Black's Law Dictionary, Fifth Edition, 930), or as Judge Cooley
defines it, "(T)he failure to observe for the protection of the
interests of another person, that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such
other person suffers injury." (Cooley on Torts, Fourth Edition, vol.
3, 265)
In Picart vs. Smith (37 Phil 809, 813), decided more than seventy
years ago but still a sound rule, (W)e held:
The test by which to determine the existence of
negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged
negligent act use that(reasonable care and caution
which an ordinarily prudent person would have used

in the same situation?) If not, then he is guilty of

negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary
conduct of the discreet paterfamiliasof the Roman
law. . . .
In Corliss vs. Manila Railroad Company,

48

We held:

. . . Negligence is want of the care required by the circumstances.

It is a relative or comparative, not an absolute, term and its
application depends upon the situation of the parties and the
degree of care and vigilance which the circumstances reasonably
require. Where the danger is great, a high degree of care is
necessary, and the failure to observe it is a want of ordinary care
under the circumstances. (citing Ahern v. Oregon Telephone Co.,
35 Pac. 549 (1894).
On the basis of the foregoing definition, the test of negligence and the facts
obtaining in this case, it is manifest that no negligence could be imputed to
Jose Koh. Any reasonable and ordinary prudent man would have tried to
avoid running over the two boys by swerving the car away from where they
were even if this would mean entering the opposite lane. Avoiding such
immediate peril would be the natural course to take particularly where the
vehicle in the opposite lane would be several meters away and could very
well slow down, move to the side of the road and give way to the oncoming
car. Moreover, under what is known as the emergency rule, "one who
suddenly finds himself in a place of danger, and is required to act without
time to consider the best means that may be adopted to avoid the
impending danger, is not guilty of negligence, if he fails to adopt what
subsequently and upon reflection may appear to have been a better method,
unless the emergency in which he finds himself is brought about by his own
negligence." 49
Considering the sudden intrusion of the two (2) boys into the lane of the car,
We find that Jose Koh adopted the best means possible in the given situation
to avoid hitting them. Applying the above test, therefore, it is clear that he
was not guilty of negligence.
In any case, assuming, arguendo that Jose Koh is negligent, it cannot be said
that his negligence was the proximate cause of the collision. Proximate cause
has been defined as:
. . . that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury,
and without which the result would not have occurred. And more

comprehensively, the proximate legal cause is that acting first

and producing the injury, either immediately or by setting other
events in motion, all constituting a natural and continuous chain
of events, each having a close causal connection with its
immediate predecessor, the final event in the chain immediately
effecting the injury as a natural and probable result of the cause
which first acted, under such circumstances that the person
responsible for the first event should, as an ordinary prudent and
intelligent person, have reasonable ground to expect at the
moment of his act or default that an injury to some person might
probably result therefrom. 50
Applying the above definition, although it may be said that the act of Jose
Koh, if at all negligent, was the initial act in the chain of events, it cannot be
said that the same caused the eventual injuries and deaths because of the
occurrence of a sufficient intervening event, the negligent act of the truck
driver, which was the actual cause of the tragedy. The entry of the car into
the lane of the truck would not have resulted in the collision had the latter
heeded the emergency signals given by the former to slow down and give
the car an opportunity to go back into its proper lane. Instead of slowing
down and swerving to the far right of the road, which was the proper
precautionary measure under the given circumstances, the truck driver
continued at full speed towards the car. The truck driver's negligence
becomes more apparent in view of the fact that the road is 7.50 meters wide
while the car measures 1.598 meters and the truck, 2.286 meters, in width.
This would mean that both car and truck could pass side by side with a
clearance of 3.661 meters to spare. 51 Furthermore, the bridge has a level
sidewalk which could have partially accommodated the truck. Any
reasonable man finding himself in the given situation would have tried to
avoid the car instead of meeting it head-on.
The truck driver's negligence is apparent in the records. He himself said that
his truck was running at 30 miles (48 kilometers) per hour along the bridge
while the maximum speed allowed by law on a bridge 52 is only 30 kilometers
per hour. Under Article 2185 of the Civil Code, a person driving a vehicle is
presumed negligent if at the time of the mishap, he was violating any traffic
regulation. We cannot give credence to private respondents' claim that there
was an error in the translation by the investigating officer of the truck
driver's response in Pampango as to whether the speed cited was in
kilometers per hour or miles per hour. The law presumes that official duty
has been regularly performed; 53 unless there is proof to the contrary, this

presumption holds. In the instant case, private respondents' claim is based

on mere conjecture.
The truck driver's negligence was likewise duly established through the
earlier quoted testimony of petitioner Araceli Koh McKee which was duly
corroborated by the testimony of Eugenio Tanhueco, an impartial eyewitness
to the mishap.
Araceli Koh McKee testified further, thus:
xxx xxx xxx
Q Mrs. how did you know that the truck driven by the
herein accused, Ruben Galang did not reduce its
speed before the actual impact of collision as you
narrated in this Exhibit "1," how did you know?
A It just kept on coming, sir. If only he reduced his
speed, we could have got (sic) back to our right lane
on side (sic) of the highway, sir. (tsn, pp. 33-34, July
22, 1977) or (Exhibit; "O" in these Civil Cases) (pp.
30-31, Appellants' Brief) 54
while Eugenio Tanhueco testified thus:
Q When you saw the truck, how was it moving?
A It was moving 50 to 60 kilometers per hour, sir.
Q Immediately after you saw this truck, do you know
what happened?
A I saw the truck and a car collided (sic), sir, and I
went to the place to help the victims. (tsn. 28, April
19, 1979)
xxx xxx xxx
Q From the time you saw the truck to the time of the
impact, will you tell us if the said truck ever stopped?
A I saw it stopped (sic) when it has (sic) already
collided with the car and it was already motionless.
(tsn. 31, April 19, 1979; Emphasis Supplied). (p. 27,
Appellants' Brief). 55
Clearly, therefore, it was the truck driver's subsequent negligence in failing
to take the proper measures and degree of care necessary to avoid the
collision which was the proximate cause of the resulting accident.
Even if Jose Koh was indeed negligent, the doctrine of last clear chance finds
application here. Last clear chance is a doctrine in the law of torts which
states that the contributory negligence of the party injured will not defeat

the claim for damages if it is shown that the defendant might, by the
exercise of reasonable care and prudence, have avoided the consequences
of the negligence of the injured party. In such cases, the person who had the
last clear chance to avoid the mishap is considered in law solely responsible
for the consequences thereof. 56
In Bustamante vs. Court of Appeals,

57

We held:

The respondent court adopted the doctrine of "last clear chance."

The doctrine, stated broadly, is that the negligence of the
plaintiff does not preclude a recovery for the negligence of the
defendant where it appears that the defendant, by exercising
reasonable care and prudence, might have avoided injurious
consequences to the plaintiff notwithstanding the plaintiff's
negligence. In other words, the doctrine of last clear chance
means that even though a person's own acts may have placed
him in a position of peril, and an injury results, the injured person
is entitled to recovery (sic). As the doctrine is usually stated, a
person who has the last clear chance or opportunity of avoiding
an accident, notwithstanding the negligent acts of his opponent
or that of a third person imputed to the opponent is considered in
law solely responsible for the consequences of the accident.
(Sangco, Torts and Damages, 4th Ed., 1986, p. 165).
The practical import of the doctrine is that a negligent defendant
is held liable to a negligent plaintiff, or even to a plaintiff who has
been grossly negligent in placing himself in peril, if he, aware of
the plaintiff's peril, or according to some authorities, should have
been aware of it in the reasonable exercise of due care, had in
fact an opportunity later than that of the plaintiff to avoid an
accident (57 Am. Jur., 2d, pp. 798-799).
In Pantranco North Express, Inc., vs. Baesa,

58

We ruled:

The doctrine of last clear chance was defined by this Court in the
case of Ong v. Metropolitan Water District, 104 Phil. 397 (1958),
in this wise:
The doctrine of the last clear chance simply, means
that the negligence of a claimant does not preclude a
recovery for the negligence of defendant where it
appears that the latter, by exercising reasonable care
and prudence, might have avoided injurious
consequences to claimant notwithstanding his
negligence.

The doctrine applies only in a situation where the plaintiff was

guilty of prior or antecedent negligence but the defendant, who
had the last fair chance to avoid the impending harm and failed
to do so, is made liable for all the consequences of the accident
notwithstanding the prior negligence of the plaintiff [Picart v.
Smith, 37 Phil. 809 (1918); Glan People's Lumber and Hardware,
et al. vs. Intermediate Appellate Court, Cecilia Alferez Vda. de
Calibo, et al., G.R. No. 70493, May, 18, 1989]. The subsequent
negligence of the defendant in failing to exercise ordinary care to
avoid injury to plaintiff becomes the immediate or proximate
cause of the accident which intervenes between the accident
and the more remote negligence of the plaintiff, thus making the
defendant liable to the plaintiff [Picart v. Smith, supra].
Generally, the last clear chance doctrine is invoked for the
purpose of making a defendant liable to a plaintiff who was guilty
of prior or antecedent negligence, although it may also be raised
as a defense to defeat claim (sic) for damages.
Applying the foregoing doctrine, it is not difficult to rule, as We now rule, that
it was the truck driver's negligence in failing to exert ordinary care to avoid
the collision which was, in law, the proximate cause of the collision. As
employers of the truck driver, the private respondents are, under Article
2180 of the Civil Code, directly and primarily liable for the resulting
damages. The presumption that they are negligent flows from the negligence
of their employee. That presumption, however, is only juris tantum, not juris
et de jure. 59 Their only possible defense is that they exercised all the
diligence of a good father of a family to prevent the damage. Article 2180
reads as follows:
The obligation imposed by Article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for
whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in
any business or industry.
xxx xxx xxx
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.

The diligence of a good father referred to means the diligence in the

selection and supervision of employees. 60The answers of the private
respondents in Civil Cases Nos. 4477 and 4478 did not interpose this
defense. Neither did they attempt to prove it.
The respondent Court was then correct in its Decision of 29 November 1983
in reversing the decision of the trial court which dismissed Civil Cases Nos.
4477 and 4478. Its assailed Resolution of 3 April 1984 finds no sufficient
legal and factual moorings.
In the light of recent decisions of this Court, 61 the indemnity for death must,
however, be increased from P12,000.00 to P50,000.00.
WHEREFORE, the instant petition is GRANTED. The assailed Resolution of the
respondent Court of 3 April 1984 is SET ASIDE while its Decision of 29
November 1983 in C.A.-G.R. CV Nos. 69040-41 is REINSTATED, subject to the
modification that the indemnity for death is increased from P12,000.00 to
P50,000.00 each for the death of Jose Koh and Kim Koh McKee.
Costs against private respondents.
SO ORDERED.

G.R. No. L-44264 September 19, 1988

HEDY GAN y YU, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and the PEOPLE OF THE
PHILIPPINES, respondents.
Pacis, Baluyot, Reyes & De Leon for petitioner.
The Solicitor General for respondents.
FERNAN, C.J.:
Petitioner Hedy Gan was convicted of the crime of Homicide thru Reckless
Imprudence in Criminal Case No. 10201 of the then Court of First Instance of
Manila, Branch XXII presided by Judge Federico C. Alikpala. She was
sentenced to an indeterminate penalty of four (4) months and one (1) day
of arresto mayor as minimum and two (2) years, four (4) months and one (1)
day of prision correccional as maximum and was made to indemnify the
heirs of the victim the sum of P12,000.00 without any subsidiary
imprisonment in case of insolvency and to pay the costs. On appeal, the trial
court's decision was modified and petitioner was convicted only of Homicide

thru Simple Imprudence. Still unsatisfied with the decision of the Court of
Appeals, 1 petitioner has come to this Court for a complete reversal of the
judgment below.
The facts of the case as found by the appellate court are as follows:
In the morning of July 4, 1972 at about 8:00 o'clock, the accused
Hedy Gan was driving a Toyota car along North Bay Boulevard,
Tondo, Manila. While in front of house no. 694 of North Bay
Boulevard, there were two vehicles, a truck and a jeepney parked
on one side of the road, one following the other about two to
three meters from each other. As the car driven by the accused
approached the place where the two vehicles were parked, there
was a vehicle coming from the opposite direction, followed by
another which tried to overtake and bypass the one in front of it
and thereby encroached the lane of the car driven by the
accused. To avoid a head-on collision with the oncoming vehicle,
the defendant swerved to the right and as a consequence, the
front bumper of the Toyota Crown Sedan hit an old man who was
about to cross the boulevard from south to north, pinning him
against the rear of the parked jeepney. The force of the impact
caused the parked jeepney to move forward hitting the rear of
the parts truck ahead of it. The pedestrian was injured, the
Toyota Sedan was damaged on its front, the jeep suffered
damages on its rear and front paints, and the truck sustained
scratches at the wooden portion of its rear. The body of the old
man who was later Identified as Isidoro Casino was immediately
brought to the Jose Reyes Memorial Hospital but was
(pronounced) dead on arrival. 2
An information for Homicide thru Reckless Imprudence was filed against
petitioner in view of the above incident. She entered a plea of not guilty upon
arraignment and the case was set for trial.
Meanwhile, petitioner sought and was granted a re-investigation by the City
Fiscal, as a result of which the trial fiscal moved for the dismissal of the case
against petitioner during the resumption of hearing on September 7, 1972.
The grounds cited therefor were lack of interest on the part of the
complaining witness to prosecute the case as evidenced by an affidavit of
desistance submitted to the trial court and lack of eyewitness to sustain the
charge.
The motion to dismiss filed by the fiscal was never resolved. The Court
instead ordered the prosecution to present its evidence. After the

prosecution rested its case, the petitioner filed a motion to dismiss the case
on the ground of insufficiency of evidence.
On December 22, 1972, the trial court rendered judgment finding petitioner
guilty beyond reasonable doubt of the of- offense charged.
Petitioner appealed to the Court of Appeals in CA-G.R. No. 14472-CR. On May
3, 1976, the Court of Appeals rendered a decision, the dispositive portion of
which reads as follows:
Wherefore, as modified, the accused Hedy Gan is guilty beyond
reasonable doubt of the crime of homicide thru simple
imprudence and, pursuant to paragraph 2, Article 365 of the
Revised Penal Code, she is hereby sentenced to the
indeterminate penalty of three (3) months and eleven (11) days
of arresto mayor and to indemnify the heirs of Isidoro Casino in
the sum of Twelve Thousand Pesos (Pl2,000.00) without,
however, any subsidiary imprisonment in case of insolvency, and
to pay the costs. 3
Petitioner now appeals to this Court on the following assignments of errors:
I
The Court of Appeals erred in holding that when the petitioner
saw a car travelling directly towards her, she should have
stepped on the brakes immediately or in swerving her vehicle to
the right should have also stepped on the brakes or lessened her
speed, to avoid the death of a pedestrian.
II
The Court of Appeals erred in convicting the petitioner of the
crime of Homicide thru Simple Imprudence.
III
The Court of Appeals erred in adjudging the petitioner liable to
indemnify the deceased in the sum of P12,000.00. 4
We reverse.
The test for determining whether or not a person is negligent in doing an act
whereby injury or damage results to the person or property of another is this:
Would a prudent man in the position of the person to whom negligence is
attributed foresee harm to the person injured as a reasonable consequence
of the course about to be pursued? If so, the law imposes the duty oil the
doer to take precaution against its mischievous results and the failure to do
so constitutes negligence. 5

A corollary rule is what is known in the law as the emergency rule. "Under
that rule, one who suddenly finds himself in a place of danger, and is
required to act without time to consider the best means that may be adopted
to avoid the impending danger, is not guilty of negligence, if he fails to adopt
what subsequently and upon reflection may appear to have been a better
method, unless the emergency in which he finds himself is brought about by
his own negligence." 6
Applying the above test to the case at bar, we find the petitioner not guilty of
the crime of Simple Imprudence resulting in Homicide.
The appellate court in finding the petitioner guilty said:
The accused should have stepped on the brakes when she saw
the car going in the opposite direction followed by another which
overtook the first by passing towards its left. She should not only
have swerved the car she was driving to the right but should
have also tried to stop or lessen her speed so that she would not
bump into the pedestrian who was crossing at the time but also
the jeepney which was then parked along the street. 7
The course of action suggested by the appellate court would seem
reasonable were it not for the fact that such suggestion did not take into
account the amount of time afforded petitioner to react to the situation she
was in. For it is undeniable that the suggested course of action presupposes
sufficient time for appellant to analyze the situation confronting her and to
ponder on which of the different courses of action would result in the least
possible harm to herself and to others.
Due to the lack of eyewitnesses, no evidence was presented by the
prosecution with respect to the relative distances of petitioner to the parked
jeepney and the oncoming overtaking vehicle that would tend to prove that
petitioner did have sufficient time to reflect on the consequences of her
instant decision to swerve her car to the light without stepping on her
brakes. In fact, the evidence presented by the prosecution on this point is the
petitioner's statement to the police 8 stating::
And masasabi ko lang ho umiwas ho ako sa isang sasakyan
na biglang nagovertake sa sasakyan na aking kasalubong kung
kaya ay aking kinabig sa kanan ang akin kotse subalit siya
naman biglangpagtawid ng tao o victim at hindi ko na ho
naiwasan at ako ay wala ng magawa . Iyan ho ang buong
pangyayari nang nasabing aksidente. 9 (Emphasis supplied)
The prosecution having presented this exhibit as its own evidence, we
cannot but deem its veracity to have been admitted by it. Thus, under the

circumstances narrated by petitioner, we find that the appellate court is

asking too much from a mere mortal like the petitioner who in the blink of an
eye had to exercise her best judgment to extricate herself from a difficult
and dangerous situation caused by the driver of the overtaking vehicle.
Petitioner certainly could not be expected to act with all the coolness of a
person under normal conditions. 10 The danger confronting petitioner was
real and imminent, threatening her very existence. She had no opportunity
for rational thinking but only enough time to heed the very powerfull instinct
of self-preservation.
Also, the respondent court itself pronounced that the petitioner was driving
her car within the legal limits. We therefore rule that the "emergency rule"
enunciated above applies with full force to the case at bar and consequently
absolve petitioner from any criminal negligence in connection with the
incident under consideration.
We further set aside the award of damages to the heirs of the victim, who by
executing a release of the claim due them, had effectively and clearly waived
their right thereto.
WHEREFORE, judgment is hereby rendered acquitting petitioner HEDY GAN y
YU of the crime of Homicide thru Simple Imprudence. She is no longer liable
for the P12,000.00 civil indemnity awarded by the appellate court to the
heirs of the victim.
SO ORDERED.

G.R. No. 156034

October 1, 2003

DELSAN TRANSPORT LINES, INC., petitioner,

vs.
C & A construction, inc., respondent.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review under Rule 45 of the Revised Rules of
Court are the June 14, 2002 decision1 of the Court of Appeals in CA-G.R. CV
No. 59034, which reversed the decision2 of the Regional Trial Court of Manila,
Branch 46, in Civil Case No. 95-75565, and its November 7, 2002
resolution3 denying petitioners motion for reconsideration.

The undisputed facts reveal that respondent C & A Construction, Inc. was
engaged by the National Housing Authority (NHA) to construct a deflector
wall at the Vitas Reclamation Area in Vitas, Tondo, Manila.4 The project was
completed in 1994 but it was not formally turned over to NHA.
On October 9, 1994, M/V Delsan Express, a ship owned and operated by
petitioner Delsan Transport Lines, Inc., anchored at the Navotas Fish Port for
the purpose of installing a cargo pump and clearing the cargo oil tank. At
around 12:00 midnight of October 20, 1994, Captain Demetrio T. Jusep of M/V
Delsan Express received a report from his radio head operator in Japan5 that
a typhoon was going to hit Manila6 in about eight (8) hours.7 At
approximately 8:35 in the morning of October 21, 1994, Capt. Jusep tried to
seek shelter at the North Harbor but could not enter the area because it was
already congested.8 At 10:00 a.m., Capt. Jusep decided to drop anchor at the
vicinity of Vitas mouth, 4 miles away from a Napocor power barge. At that
time, the waves were already reaching 8 to 10 feet high. Capt. Jusep ordered
his crew to go full ahead to counter the wind which was dragging the ship
towards the Napocor power barge. To avoid collision, Capt. Jusep ordered a
full stop of the vessel.9 He succeeded in avoiding the power barge, but when
the engine was re-started and the ship was maneuvered full astern, it hit the
deflector wall constructed by respondent.10 The damage caused by the
incident amounted to P456,198.24.11
Respondent demanded payment of the damage from petitioner but the latter
refused to pay. Consequently, respondent filed a complaint for damages with
the Regional Trial Court of Manila, Branch 46, which was docketed as Civil
Case No. 95-75565. In its answer, petitioner claimed that the damage was
caused by a fortuitous event.12
On February 13, 1998, the complaint filed by respondent was dismissed. The
trial court ruled that petitioner was not guilty of negligence because it had
taken all the necessary precautions to avoid the accident. Applying the
"emergency rule", it absolved petitioner of liability because the latter had no
opportunity to adequately weigh the best solution to a threatening situation.
It further held that even if the maneuver chosen by petitioner was a wrong
move, it cannot be held liable as the cause of the damage sustained by
respondent was typhoon "Katring", which is an act of God.13
On appeal to the Court of Appeals, the decision of the trial court was
reversed and set aside.14 It found Capt. Jusep guilty of negligence in deciding
to transfer the vessel to the North Harbor only at 8:35 a.m. of October 21,
1994 and thus held petitioner liable for damages.

Hence, petitioner filed the instant petition contending that Capt. Jusep was
not negligent in waiting until 8:35 in the morning of October 21, 1994 before
transferring the vessel to the North Harbor inasmuch as it was not shown
that had the transfer been made earlier, the vessel could have sought
shelter.15 It further claimed that it cannot be held vicariously liable under
Article 2180 of the Civil Code because respondent failed to allege in the
complaint that petitioner was negligent in the selection and supervision of its
employees.16 Granting that Capt. Jusep was indeed guilty of negligence,
petitioner is not liable because it exercised due diligence in the selection of
Capt. Jusep who is a duly licensed and competent Master Mariner.17
The issues to be resolved in this petition are as follows (1) Whether or not
Capt. Jusep was negligent; (2) If yes, whether or not petitioner is solidarily
liable under Article 2180 of the Civil Code for the quasi-delict committed by
Capt. Jusep?
Article 2176 of the Civil Code provides that whoever by act or omission
causes damage to another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict. The test for
determining the existence of negligence in a particular case may be stated
as follows: Did the defendant in doing the alleged negligent act use the
reasonable care and caution which an ordinary prudent person would have
used in the same situation? If not, then he is guilty of negligence.18
In the case at bar, the Court of Appeals was correct in holding that Capt.
Jusep was negligent in deciding to transfer the vessel only at 8:35 in the
morning of October 21, 1994. As early as 12:00 midnight of October 20,
1994, he received a report from his radio head operator in Japan19 that a
typhoon was going to hit Manila20 after 8 hours.21 This, notwithstanding, he
did nothing, until 8:35 in the morning of October 21, 1994, when he decided
to seek shelter at the North Harbor, which unfortunately was already
congested. The finding of negligence cannot be rebutted upon proof that the
ship could not have sought refuge at the North Harbor even if the transfer
was done earlier. It is not the speculative success or failure of a decision that
determines the existence of negligence in the present case, but the failure to
take immediate and appropriate action under the circumstances. Capt. Jusep,
despite knowledge that the typhoon was to hit Manila in 8 hours,
complacently waited for the lapse of more than 8 hours thinking that the
typhoon might change direction.22 He cannot claim that he waited for the sun
to rise instead of moving the vessel at midnight immediately after receiving
the report because of the difficulty of traveling at night. The hour of 8:35

a.m. is way past sunrise. Furthermore, he did not transfer as soon as the sun
rose because, according to him, it was not very cloudy23 and there was no
weather disturbance yet.24
When he ignored the weather report notwithstanding reasonable foresight of
harm, Capt. Jusep showed an inexcusable lack of care and caution which an
ordinary prudent person would have observed in the same situation.25 Had
he moved the vessel earlier, he could have had greater chances of finding a
space at the North Harbor considering that the Navotas Port where they
docked was very near North Harbor.26 Even if the latter was already
congested, he would still have time to seek refuge in other ports.
The trial court erred in applying the emergency rule. Under this rule, one who
suddenly finds himself in a place of danger, and is required to act without
time to consider the best means that may be adopted to avoid the
impending danger, is not guilty of negligence, if he fails to adopt what
subsequently and upon reflection may appear to have been a better method,
unless the danger in which he finds himself is brought about by his own
negligence.27 Clearly, the emergency rule is not applicable to the instant
case because the danger where Capt. Jusep found himself was caused by his
own negligence.
Anent the second issue, we find petitioner vicariously liable for the negligent
act of Capt. Jusep.1awphi1.nt Under Article 2180 of the Civil Code an
employer may be held solidarily liable for the negligent act of his employee.
Thus
Art. 2180. The obligation imposed in Article 2176 is demandable not only for
ones own acts or omissions, but also for those of persons for whom one is
responsible.
xxxxxxxxx
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or industry.
xxxxxxxxx
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father
of a family to prevent damage.
Whenever an employees negligence causes damage or injury to another,
there instantly arises a presumptionjuris tantum that the employer failed to
exercise diligentissimi patris families in the selection (culpa in eligiendo) or
supervision (culpa in vigilando) of its employees. To avoid liability for a quasidelict committed by his employee, an employer must overcome the

presumption by presenting convincing proof that he exercised the care and

diligence of a good father of a family in the selection and supervision of his
employee. 28
There is no question that petitioner, who is the owner/operator of M/V Delsan
Express, is also the employer of Capt. Jusep who at the time of the incident
acted within the scope of his duty. The defense raised by petitioner was that
it exercised due diligence in the selection of Capt. Jusep because the latter is
a licensed and competent Master Mariner. It should be stressed, however,
that the required diligence of a good father of a family pertains not only to
the selection, but also to the supervision of employees. It is not enough that
the employees chosen be competent and qualified, inasmuch as the
employer is still required to exercise due diligence in supervising its
employees.
In Fabre, Jr. v. Court of Appeals,29 it was held that due diligence in supervision
requires the formulation of rules and regulations for the guidance of
employees and the issuance of proper instructions as well as actual
implementation and monitoring of consistent compliance with the rules.
Corollarily, in Ramos v. Court of Appeals,30 the Court stressed that once
negligence on the part of the employees is shown, the burden of proving that
he observed the diligence in the selection and supervision of its employees
shifts to the employer.
In the case at bar, however, petitioner presented no evidence that it
formulated rules/guidelines for the proper performance of functions of its
employees and that it strictly implemented and monitored compliance
therewith. Failing to discharge the burden, petitioner should therefore be
held liable for the negligent act of Capt. Jusep.
So also, petitioner cannot disclaim liability on the basis of respondents
failure to allege in its complaint that the former did not exercise due
diligence in the selection and supervision of its employees. In Viron
Transportation Co., Inc. v. Delos Santos,31 it was held that it is not necessary
to state that petitioner was negligent in the supervision or selection of its
employees, inasmuch as its negligence is presumed by operation of law.
Allegations of negligence against the employee and that of an employeremployee relation in the complaint are enough to make out a case of quasidelict under Article 2180 of the Civil Code.32
Considering that petitioner did not assail the damages awarded by the trial
court, we find no reason to alter the same. The interest imposed should,
however, be modified. In Eastern Shipping Lines, Inc. v. Court of Appeals,33it
was held that the rate of interest on obligations not constituting a loan or

forbearance of money is six percent (6%) per annum. If the purchase price
can be established with certainty at the time of the filing of the complaint,
the six percent (6%) interest should be computed from the date the
complaint was filed until finality of the decision. After the judgment becomes
final and executory until the obligation is satisfied, the amount due shall earn
interest at 12% per year, the interim period being deemed equivalent to a
forbearance of credit.34
Accordingly, the amount of P456,198.27 due the respondent shall earn 6%
interest per annum from October 3, 1995 until the finality of this decision. If
the adjudged principal and the interest (or any part thereof) remain unpaid
thereafter, the interest rate shall be twelve percent (12%) per annum
computed from the time the judgment becomes final and executory until it is
fully satisfied.
WHEREFORE, in view of all the foregoing, the instant petition is
DENIED.1awphi1.nt The June 14, 2002 decision of the Court of Appeals in
CA-G.R. CV No. 59034 ordering petitioner Delsan Transport Lines, Inc., to pay
respondent C & A Construction, Inc., damages in the amount of P456,198.27,
plus P30,000.00 as attorneys fees, is AFFIRMED with the MODIFICATION that
the award of P456,198.27 shall earn interest at the rate of 6% per annum
from October 3, 1995, until finality of this decision, and 12% per annum
thereafter on the principal and interest (or any part thereof) until full
payment.
SO ORDERED.

RES IPSA LOQUITOR

G.R. No. L-12986

March 31, 1966

THE SPOUSES BERNABE AFRICA and SOLEDAD C. AFRICA, and the

HEIRS OF DOMINGA ONG,petitioners-appellants,
vs.
CALTEX (PHIL.), INC., MATEO BOQUIREN and THE COURT OF
APPEALS, respondents-appellees.
Ross, Selph, Carrascoso and Janda for the respondents.
Bernabe Africa, etc. for the petitioners.

MAKALINTAL., J.:
This case is before us on a petition for review of the decision of the Court of
Appeals, which affirmed that of the Court of First Instance of Manila
dismissing petitioners' second amended complaint against respondents.
The action is for damages under Articles 1902 and 1903 of the old Civil Code.
It appears that in the afternoon of March 18, 1948 a fire broke out at the
Caltex service station at the corner of Antipolo street and Rizal Avenue,
Manila. It started while gasoline was being hosed from a tank truck into the
underground storage, right at the opening of the receiving tank where the
nozzle of the hose was inserted. The fire spread to and burned several
neighboring houses, including the personal properties and effects inside
them. Their owners, among them petitioners here, sued respondents Caltex
(Phil.), Inc. and Mateo Boquiren, the first as alleged owner of the station and
the second as its agent in charge of operation. Negligence on the part of
both of them was attributed as the cause of the fire.
The trial court and the Court of Appeals found that petitioners failed to prove
negligence and that respondents had exercised due care in the premises and
with respect to the supervision of their employees.
The first question before Us refers to the admissibility of certain reports on
the fire prepared by the Manila Police and Fire Departments and by a certain
Captain Tinio of the Armed Forces of the Philippines. Portions of the first two
reports are as follows:
1. Police Department report:
Investigation disclosed that at about 4:00 P.M. March 18, 1948,
while Leandro Flores was transferring gasoline from a tank truck,
plate No. T-5292 into the underground tank of the Caltex
Gasoline Station located at the corner of Rizal Avenue and
Antipolo Street, this City, an unknown Filipino lighted a cigarette
and threw the burning match stick near the main valve of the
said underground tank. Due to the gasoline fumes, fire suddenly
blazed. Quick action of Leandro Flores in pulling off the gasoline
hose connecting the truck with the underground tank prevented
a terrific explosion. However, the flames scattered due to the
hose from which the gasoline was spouting. It burned the truck
and the following accessorias and residences.
2. The Fire Department report:
In connection with their allegation that the premises was (sic)
subleased for the installation of a coca-cola and cigarette stand, the
complainants furnished this Office a copy of a photograph taken during

the fire and which is submitted herewith. it appears in this picture that
there are in the premises a coca-cola cooler and a rack which
according to information gathered in the neighborhood contained
cigarettes and matches, installed between the gasoline pumps and the
underground tanks.
The report of Captain Tinio reproduced information given by a certain Benito
Morales regarding the history of the gasoline station and what the chief of
the fire department had told him on the same subject.
The foregoing reports were ruled out as "double hearsay" by the Court of
Appeals and hence inadmissible. This ruling is now assigned as error. It is
contended: first, that said reports were admitted by the trial court without
objection on the part of respondents; secondly, that with respect to the
police report (Exhibit V-Africa) which appears signed by a Detective Zapanta
allegedly "for Salvador Capacillo," the latter was presented as witness but
respondents waived their right to cross-examine him although they had the
opportunity to do so; and thirdly, that in any event the said reports are
admissible as an exception to the hearsay rule under section 35 of Rule 123,
now Rule 130.
The first contention is not borne out by the record. The transcript of the
hearing of September 17, 1953 (pp. 167-170) shows that the reports in
question, when offered as evidence, were objected to by counsel for each of
respondents on the ground that they were hearsay and that they were
"irrelevant, immaterial and impertinent." Indeed, in the court's resolution
only Exhibits J, K, K-5 and X-6 were admitted without objection; the admission
of the others, including the disputed ones, carried no such explanation.
On the second point, although Detective Capacillo did take the witness
stand, he was not examined and he did not testify as to the facts mentioned
in his alleged report (signed by Detective Zapanta). All he said was that he
was one of those who investigated "the location of the fire and, if possible,
gather witnesses as to the occurrence, and that he brought the report with
him. There was nothing, therefore, on which he need be cross-examined; and
the contents of the report, as to which he did not testify, did not thereby
become competent evidence. And even if he had testified, his testimony
would still have been objectionable as far as information gathered by him
from third persons was concerned.
Petitioners maintain, however, that the reports in themselves, that is, without
further testimonial evidence on their contents, fall within the scope of
section 35, Rule 123, which provides that "entries in official records made in
the performance of his duty by a public officer of the Philippines, or by a

person in the performance of a duty specially enjoined by law, are prima

facie evidence of the facts therein stated."
There are three requisites for admissibility under the rule just mentioned: (a)
that the entry was made by a public officer, or by another person specially
enjoined by law to do so; (b) that it was made by the public officer in the
performance of his duties, or by such other person in the performance of a
duty specially enjoined by law; and (c) that the public officer or other person
had sufficient knowledge of the facts by him stated, which must have been
acquired by him personally or through official information (Moran, Comments
on the Rules of Court, Vol. 3 [1957] p. 398).
Of the three requisites just stated, only the last need be considered here.
Obviously the material facts recited in the reports as to the cause and
circumstances of the fire were not within the personal knowledge of the
officers who conducted the investigation. Was knowledge of such facts,
however, acquired by them through official information? As to some facts the
sources thereof are not even identified. Others are attributed to Leopoldo
Medina, referred to as an employee at the gas station were the fire occurred;
to Leandro Flores, driver of the tank truck from which gasoline was being
transferred at the time to the underground tank of the station; and to
respondent Mateo Boquiren, who could not, according to Exhibit V-Africa,
give any reason as to the origin of the fire. To qualify their statements as
"official information" acquired by the officers who prepared the reports, the
persons who made the statements not only must have personal knowledge
of the facts stated but must have the duty to give such statements for
record.1
The reports in question do not constitute an exception to the hearsay rule;
the facts stated therein were not acquired by the reporting officers through
official information, not having been given by the informants pursuant to any
duty to do so.
The next question is whether or not, without proof as to the cause and origin
of the fire, the doctrine of res ipsa loquitur should apply so as to presume
negligence on the part of appellees. Both the trial court and the appellate
court refused to apply the doctrine in the instant case on the grounds that
"as to (its) applicability ... in the Philippines, there seems to he nothing
definite," and that while the rules do not prohibit its adoption in appropriate
cases, "in the case at bar, however, we find no practical use for such
doctrine." The question deserves more than such summary dismissal. The
doctrine has actually been applied in this jurisdiction, in the case of Espiritu
vs. Philippine Power and Development Co. (CA-G.R. No. 3240-R, September

20, 1949), wherein the decision of the Court of Appeals was penned by Mr.
Justice J.B.L. Reyes now a member of the Supreme Court.
The facts of that case are stated in the decision as follows:
In the afternoon of May 5, 1946, while the plaintiff-appellee and other
companions were loading grass between the municipalities of Bay and
Calauan, in the province of Laguna, with clear weather and without any
wind blowing, an electric transmission wire, installed and maintained
by the defendant Philippine Power and Development Co., Inc. alongside
the road, suddenly parted, and one of the broken ends hit the head of
the plaintiff as he was about to board the truck. As a result, plaintiff
received the full shock of 4,400 volts carried by the wire and was
knocked unconscious to the ground. The electric charge coursed
through his body and caused extensive and serious multiple burns
from skull to legs, leaving the bone exposed in some parts and causing
intense pain and wounds that were not completely healed when the
case was tried on June 18, 1947, over one year after the mishap.
The defendant therein disclaimed liability on the ground that the plaintiff had
failed to show any specific act of negligence, but the appellate court
overruled the defense under the doctrine of res ipsa loquitur. The court said:
The first point is directed against the sufficiency of plaintiff's evidence
to place appellant on its defense. While it is the rule, as contended by
the appellant, that in case of noncontractual negligence, or culpa
aquiliana, the burden of proof is on the plaintiff to establish that the
proximate cause of his injury was the negligence of the defendant, it is
also a recognized principal that "where the thing which caused injury,
without fault of the injured person, is under the exclusive control of the
defendant and the injury is such as in the ordinary course of things
does not occur if he having such control use proper care, it affords
reasonable evidence, in the absence of the explanation, that the injury
arose from defendant's want of care."
And the burden of evidence is shifted to him to establish that he has
observed due care and diligence. (San Juan Light & Transit Co. v.
Requena, 244, U.S. 89, 56 L. ed. 680.) This rule is known by the name
of res ipsa loquitur (the transaction speaks for itself), and is peculiarly
applicable to the case at bar, where it is unquestioned that the plaintiff
had every right to be on the highway, and the electric wire was under
the sole control of defendant company. In the ordinary course of
events, electric wires do not part suddenly in fair weather and injure
people, unless they are subjected to unusual strain and stress or there

are defects in their installation, maintenance and supervision; just as

barrels do not ordinarily roll out of the warehouse windows to injure
passersby, unless some one was negligent. (Byrne v. Boadle, 2 H & Co.
722; 159 Eng. Reprint 299, the leading case that established that rule).
Consequently, in the absence of contributory negligence (which is
admittedly not present), the fact that the wire snapped suffices to raise
a reasonable presumption of negligence in its installation, care and
maintenance. Thereafter, as observed by Chief Baron Pollock, "if there
are any facts inconsistent with negligence, it is for the defendant to
prove."
It is true of course that decisions of the Court of Appeals do not lay down
doctrines binding on the Supreme Court, but we do not consider this a
reason for not applying the particular doctrine of res ipsa loquitur in the case
at bar. Gasoline is a highly combustible material, in the storage and sale of
which extreme care must be taken. On the other hand, fire is not considered
a fortuitous event, as it arises almost invariably from some act of man. A
case strikingly similar to the one before Us is Jones vs. Shell Petroleum
Corporation, et al., 171 So. 447:
Arthur O. Jones is the owner of a building in the city of Hammon which
in the year 1934 was leased to the Shell Petroleum Corporation for a
gasoline filling station. On October 8, 1934, during the term of the
lease, while gasoline was being transferred from the tank wagon, also
operated by the Shell Petroleum Corporation, to the underground tank
of the station, a fire started with resulting damages to the building
owned by Jones. Alleging that the damages to his building amounted to
$516.95, Jones sued the Shell Petroleum Corporation for the recovery
of that amount. The judge of the district court, after hearing the
testimony, concluded that plaintiff was entitled to a recovery and
rendered judgment in his favor for $427.82. The Court of Appeals for
the First Circuit reversed this judgment, on the ground the testimony
failed to show with reasonable certainty any negligence on the part of
the Shell Petroleum Corporation or any of its agents or employees.
Plaintiff applied to this Court for a Writ of Review which was granted,
and the case is now before us for decision.1wph1.t
In resolving the issue of negligence, the Supreme Court of Louisiana held:
Plaintiff's petition contains two distinct charges of negligence one
relating to the cause of the fire and the other relating to the spreading
of the gasoline about the filling station.

Other than an expert to assess the damages caused plaintiff's building

by the fire, no witnesses were placed on the stand by the defendant.
Taking up plaintiff's charge of negligence relating to the cause of the
fire, we find it established by the record that the filling station and the
tank truck were under the control of the defendant and operated by its
agents or employees. We further find from the uncontradicted
testimony of plaintiff's witnesses that fire started in the underground
tank attached to the filling station while it was being filled from the
tank truck and while both the tank and the truck were in charge of and
being operated by the agents or employees of the defendant,
extended to the hose and tank truck, and was communicated from the
burning hose, tank truck, and escaping gasoline to the building owned
by the plaintiff.
Predicated on these circumstances and the further circumstance of
defendant's failure to explain the cause of the fire or to show its lack of
knowledge of the cause, plaintiff has evoked the doctrine of res ipsa
loquitur. There are many cases in which the doctrine may be
successfully invoked and this, we think, is one of them.
Where the thing which caused the injury complained of is shown to be
under the management of defendant or his servants and the accident
is such as in the ordinary course of things does not happen if those
who have its management or control use proper care, it affords
reasonable evidence, in absence of explanation by defendant, that the
accident arose from want of care. (45 C.J. #768, p. 1193).
This statement of the rule of res ipsa loquitur has been widely
approved and adopted by the courts of last resort. Some of the cases
in this jurisdiction in which the doctrine has been applied are the
following, viz.: Maus v. Broderick, 51 La. Ann. 1153, 25 So. 977; Hebert
v. Lake Charles Ice, etc., Co., 111 La. 522, 35 So. 731, 64 L.R.A. 101,
100 Am. St. Rep. 505; Willis v. Vicksburg, etc., R. Co., 115 La. 63, 38
So. 892; Bents v. Page, 115 La. 560, 39 So. 599.
The principle enunciated in the aforequoted case applies with equal force
here. The gasoline station, with all its appliances, equipment and employees,
was under the control of appellees. A fire occurred therein and spread to and
burned the neighboring houses. The persons who knew or could have known
how the fire started were appellees and their employees, but they gave no
explanation thereof whatsoever. It is a fair and reasonable inference that the
incident happened because of want of care.

In the report submitted by Captain Leoncio Mariano of the Manila Police

Department (Exh. X-1 Africa) the following appears:
Investigation of the basic complaint disclosed that the Caltex Gasoline
Station complained of occupies a lot approximately 10 m x 10 m at the
southwest corner of Rizal Avenue and Antipolo. The location is within a
very busy business district near the Obrero Market, a railroad crossing
and very thickly populated neighborhood where a great number of
people mill around t
until
gasoline
tever be theWactjvities of these peopleor lighting a cigarette cannot be
excluded and this constitute a secondary hazard to its operation which
in turn endangers the entire neighborhood to conflagration.
Furthermore, aside from precautions already taken by its operator the
concrete walls south and west adjoining the neighborhood are only 21/2 meters high at most and cannot avoid the flames from leaping over
it in case of fire.
Records show that there have been two cases of fire which caused not
only material damages but desperation and also panic in the
neighborhood.
Although the soft drinks stand had been eliminated, this gasoline
service station is also used by its operator as a garage and repair shop
for his fleet of taxicabs numbering ten or more, adding another risk to
the possible outbreak of fire at this already small but crowded gasoline
station.
The foregoing report, having been submitted by a police officer in the
performance of his duties on the basis of his own personal observation of the
facts reported, may properly be considered as an exception to the hearsay
rule. These facts, descriptive of the location and objective circumstances
surrounding the operation of the gasoline station in question, strengthen the
presumption of negligence under the doctrine of res ipsa loquitur, since on
their face they called for more stringent measures of caution than those
which would satisfy the standard of due diligence under ordinary
circumstances. There is no more eloquent demonstration of this than the
statement of Leandro Flores before the police investigator. Flores was the
driver of the gasoline tank wagon who, alone and without assistance, was
transferring the contents thereof into the underground storage when the fire
broke out. He said: "Before loading the underground tank there were no
people, but while the loading was going on, there were people who went to

drink coca-cola (at the coca-cola stand) which is about a meter from the hole
leading to the underground tank." He added that when the tank was almost
filled he went to the tank truck to close the valve, and while he had his back
turned to the "manhole" he, heard someone shout "fire."
Even then the fire possibly would not have spread to the neighboring houses
were it not for another negligent omission on the part of defendants, namely,
their failure to provide a concrete wall high enough to prevent the flames
from leaping over it. As it was the concrete wall was only 2-1/2 meters high,
and beyond that height it consisted merely of galvanized iron sheets, which
would predictably crumple and melt when subjected to intense heat.
Defendants' negligence, therefore, was not only with respect to the cause of
the fire but also with respect to the spread thereof to the neighboring
houses.
There is an admission on the part of Boquiren in his amended answer to the
second amended complaint that "the fire was caused through the acts of a
stranger who, without authority, or permission of answering defendant,
passed through the gasoline station and negligently threw a lighted match in
the premises." No evidence on this point was adduced, but assuming the
allegation to be true certainly any unfavorable inference from the
admission may be taken against Boquiren it does not extenuate his
negligence. A decision of the Supreme Court of Texas, upon facts analogous
to those of the present case, states the rule which we find acceptable here.
"It is the rule that those who distribute a dangerous article or agent, owe a
degree of protection to the public proportionate to and commensurate with a
danger involved ... we think it is the generally accepted rule as applied to
torts that 'if the effects of the actor's negligent conduct actively and
continuously operate to bring about harm to another, the fact that the active
and substantially simultaneous operation of the effects of a third person's
innocent, tortious or criminal act is also a substantial factor in bringing about
the harm, does not protect the actor from liability.' (Restatement of the Law
of Torts, vol. 2, p. 1184, #439). Stated in another way, "The intention of an
unforeseen and unexpected cause, is not sufficient to relieve a wrongdoer
from consequences of negligence, if such negligence directly and
proximately cooperates with the independent cause in the resulting injury."
(MacAfee, et al. vs. Traver's Gas Corporation, 153 S.W. 2nd 442.)
The next issue is whether Caltex should be held liable for the damages
caused to appellants. This issue depends on whether Boquiren was an
independent contractor, as held by the Court of Appeals, or an agent of
Caltex. This question, in the light of the facts not controverted, is one of law

and hence may be passed upon by this Court. These facts are: (1) Boquiren
made an admission that he was an agent of Caltex; (2) at the time of the fire
Caltex owned the gasoline station and all the equipment therein; (3) Caltex
exercised control over Boquiren in the management of the state; (4) the
delivery truck used in delivering gasoline to the station had the name of
CALTEX painted on it; and (5) the license to store gasoline at the station was
in the name of Caltex, which paid the license fees. (Exhibit T-Africa; Exhibit UAfrica; Exhibit X-5 Africa; Exhibit X-6 Africa; Exhibit Y-Africa).
In Boquiren's amended answer to the second amended complaint, he denied
that he directed one of his drivers to remove gasoline from the truck into the
tank and alleged that the "alleged driver, if one there was, was not in his
employ, the driver being an employee of the Caltex (Phil.) Inc. and/or the
owners of the gasoline station." It is true that Boquiren later on amended his
answer, and that among the changes was one to the effect that he was not
acting as agent of Caltex. But then again, in his motion to dismiss appellants'
second amended complaint the ground alleged was that it stated no cause of
action since under the allegations thereof he was merely acting as agent of
Caltex, such that he could not have incurred personal liability. A motion to
dismiss on this ground is deemed to be an admission of the facts alleged in
the complaint.
Caltex admits that it owned the gasoline station as well as the equipment
therein, but claims that the business conducted at the service station in
question was owned and operated by Boquiren. But Caltex did not present
any contract with Boquiren that would reveal the nature of their relationship
at the time of the fire. There must have been one in existence at that time.
Instead, what was presented was a license agreement manifestly tailored for
purposes of this case, since it was entered into shortly before the expiration
of the one-year period it was intended to operate. This so-called license
agreement (Exhibit 5-Caltex) was executed on November 29, 1948, but made
effective as of January 1, 1948 so as to cover the date of the fire, namely,
March 18, 1948. This retroactivity provision is quite significant, and gives rise
to the conclusion that it was designed precisely to free Caltex from any
responsibility with respect to the fire, as shown by the clause that Caltex
"shall not be liable for any injury to person or property while in the property
herein licensed, it being understood and agreed that LICENSEE (Boquiren) is
not an employee, representative or agent of LICENSOR (Caltex)."
But even if the license agreement were to govern, Boquiren can hardly be
considered an independent contractor. Under that agreement Boquiren would
pay Caltex the purely nominal sum of P1.00 for the use of the premises and

all the equipment therein. He could sell only Caltex Products. Maintenance of
the station and its equipment was subject to the approval, in other words
control, of Caltex. Boquiren could not assign or transfer his rights as licensee
without the consent of Caltex. The license agreement was supposed to be
from January 1, 1948 to December 31, 1948, and thereafter until terminated
by Caltex upon two days prior written notice. Caltex could at any time cancel
and terminate the agreement in case Boquiren ceased to sell Caltex
products, or did not conduct the business with due diligence, in the judgment
of Caltex. Termination of the contract was therefore a right granted only to
Caltex but not to Boquiren. These provisions of the contract show the extent
of the control of Caltex over Boquiren. The control was such that the latter
was virtually an employee of the former.
Taking into consideration the fact that the operator owed his position to
the company and the latter could remove him or terminate his services
at will; that the service station belonged to the company and bore its
tradename and the operator sold only the products of the company;
that the equipment used by the operator belonged to the company and
were just loaned to the operator and the company took charge of their
repair and maintenance; that an employee of the company supervised
the operator and conducted periodic inspection of the company's
gasoline and service station; that the price of the products sold by the
operator was fixed by the company and not by the operator; and that
the receipts signed by the operator indicated that he was a mere
agent, the finding of the Court of Appeals that the operator was an
agent of the company and not an independent contractor should not
be disturbed.
To determine the nature of a contract courts do not have or are not
bound to rely upon the name or title given it by the contracting parties,
should thereby a controversy as to what they really had intended to
enter into, but the way the contracting parties do or perform their
respective obligations stipulated or agreed upon may be shown and
inquired into, and should such performance conflict with the name or
title given the contract by the parties, the former must prevail over the
latter. (Shell Company of the Philippines, Ltd. vs. Firemens' Insurance
Company of Newark, New Jersey, 100 Phil. 757).
The written contract was apparently drawn for the purpose of creating
the apparent relationship of employer and independent contractor, and
of avoiding liability for the negligence of the employees about the
station; but the company was not satisfied to allow such relationship to

exist. The evidence shows that it immediately assumed control, and

proceeded to direct the method by which the work contracted for
should be performed. By reserving the right to terminate the contract
at will, it retained the means of compelling submission to its orders.
Having elected to assume control and to direct the means and
methods by which the work has to be performed, it must be held liable
for the negligence of those performing service under its direction. We
think the evidence was sufficient to sustain the verdict of the jury. (Gulf
Refining Company v. Rogers, 57 S.W. 2d, 183).
Caltex further argues that the gasoline stored in the station belonged to
Boquiren. But no cash invoices were presented to show that Boquiren had
bought said gasoline from Caltex. Neither was there a sales contract to prove
the same.
As found by the trial court the Africas sustained a loss of P9,005.80, after
deducting the amount of P2,000.00 collected by them on the insurance of
the house. The deduction is now challenged as erroneous on the ground that
Article 2207 of the New Civil Code, which provides for the subrogation of the
insurer to the rights of the insured, was not yet in effect when the loss took
place. However, regardless of the silence of the law on this point at that
time, the amount that should be recovered be measured by the damages
actually suffered, otherwise the principle prohibiting unjust enrichment would
be violated. With respect to the claim of the heirs of Ong P7,500.00 was
adjudged by the lower court on the basis of the assessed value of the
property destroyed, namely, P1,500.00, disregarding the testimony of one of
the Ong children that said property was worth P4,000.00. We agree that the
court erred, since it is of common knowledge that the assessment for
taxation purposes is not an accurate gauge of fair market value, and in this
case should not prevail over positive evidence of such value. The heirs of
Ong are therefore entitled to P10,000.00.
Wherefore, the decision appealed from is reversed and respondentsappellees are held liable solidarily to appellants, and ordered to pay them the
aforesaid sum of P9,005.80 and P10,000.00, respectively, with interest from
the filing of the complaint, and costs.

G.R. No. L-52732 August 29, 1988

F.F. CRUZ and CO., INC., petitioner,

vs.
THE COURT OF APPEALS, GREGORIO MABLE as substituted by his
wife LUZ ALMONTE MABLE and children DOMING, LEONIDAS, LIGAYA,
ELENA, GREGORIO, JR., SALOME, ANTONIO, and BERNARDO all
surnamed MABLE, respondents.
Luis S. Topacio for petitioner.
Mauricio M. Monta for respondents.
CORTES, J.:
This petition to review the decision of the Court of Appeals puts in issue the
application of the common law doctrine of res ipsa loquitur.
The essential facts of the case are not disputed.
The furniture manufacturing shop of petitioner in Caloocan City was situated
adjacent to the residence of private respondents. Sometime in August 1971,
private respondent Gregorio Mable first approached Eric Cruz, petitioner's
plant manager, to request that a firewall be constructed between the shop
and private respondents' residence. The request was repeated several times
but they fell on deaf ears. In the early morning of September 6, 1974, fire
broke out in petitioner's shop. Petitioner's employees, who slept in the shop
premises, tried to put out the fire, but their efforts proved futile. The fire
spread to private respondents' house. Both the shop and the house were
razed to the ground. The cause of the conflagration was never discovered.
The National Bureau of Investigation found specimens from the burned
structures negative for the presence of inflammable substances.
Subsequently, private respondents collected P35,000.00 on the insurance on
their house and the contents thereof.
On January 23, 1975, private respondents filed an action for damages
against petitioner, praying for a judgment in their favor awarding
P150,000.00 as actual damages, P50,000.00 as moral damages, P25,000.00
as exemplary damages, P20,000.00 as attorney's fees and costs. The Court
of First Instance held for private respondents:
WHEREFORE, the Court hereby renders judgment, in favor of
plaintiffs, and against the defendant:
1. Ordering the defendant to pay to the plaintiffs the amount of
P80,000.00 for damages suffered by said plaintiffs for the loss of
their house, with interest of 6% from the date of the filing of the
Complaint on January 23, 1975, until fully paid;

2. Ordering the defendant to pay to the plaintiffs the sum of

P50,000.00 for the loss of plaintiffs' furnitures, religious images,
silverwares, chinawares, jewelries, books, kitchen utensils,
clothing and other valuables, with interest of 6% from date of the
filing of the Complaint on January 23, 1975, until fully paid;
3. Ordering the defendant to pay to the plaintiffs the sum of
P5,000.00 as moral damages, P2,000.00 as exemplary damages,
and P5,000.00 as and by way of attorney's fees;
4. With costs against the defendant;
5. Counterclaim is ordered dismissed, for lack of merit. [CA
Decision, pp. 1-2; Rollo, pp. 29-30.]
On appeal, the Court of Appeals, in a decision promulgated on November 19,
1979, affirmed the decision of the trial court but reduced the award of
damages:
WHEREFORE, the decision declaring the defendants liable is
affirmed. The damages to be awarded to plaintiff should be
reduced to P70,000.00 for the house and P50,000.00 for the
furniture and other fixtures with legal interest from the date of
the filing of the complaint until full payment thereof. [CA
Decision, p. 7; Rollo, p. 35.]
A motion for reconsideration was filed on December 3, 1979 but was denied
in a resolution dated February 18, 1980. Hence, petitioner filed the instant
petition for review on February 22, 1980. After the comment and reply were
filed, the Court resolved to deny the petition for lack of merit on June 11,
1980.
However, petitioner filed a motion for reconsideration, which was granted,
and the petition was given due course on September 12, 1980. After the
parties filed their memoranda, the case was submitted for decision on
January 21, 1981.
Petitioner contends that the Court of Appeals erred:
1. In not deducting the sum of P35,000.00, which private respondents
recovered on the insurance on their house, from the award of damages.
2. In awarding excessive and/or unproved damages.
3. In applying the doctrine of res ipsa loquitur to the facts of the instant case.
The pivotal issue in this case is the applicability of the common law doctrine
of res ipsa loquitur, the issue of damages being merely consequential. In
view thereof, the errors assigned by petitioner shall be discussed in the
reverse order.

1. The doctrine of res ipsa loquitur, whose application to the instant case
petitioner objects to, may be stated as follows:
Where the thing which caused the injury complained of is shown
to be under the management of the defendant or his servants
and the accident is such as in the ordinary course of things does
not happen if those who have its management or control use
proper care, it affords reasonable evidence, in the absence of
explanation by the defendant, that the accident arose from want
of care. [Africa v. Caltex (Phil.), Inc., G.R. No. L-12986, March 31,
1966, 16 SCRA 448.]
Thus, in Africa, supra, where fire broke out in a Caltex service station while
gasoline from a tank truck was being unloaded into an underground storage
tank through a hose and the fire spread to and burned neighboring houses,
this Court, applying the doctrine of res ipsa loquitur, adjudged Caltex liable
for the loss.
The facts of the case likewise call for the application of the doctrine,
considering that in the normal course of operations of a furniture
manufacturing shop, combustible material such as wood chips, sawdust,
paint, varnish and fuel and lubricants for machinery may be found thereon.
It must also be noted that negligence or want of care on the part of
petitioner or its employees was not merely presumed. The Court of Appeals
found that petitioner failed to construct a firewall between its shop and the
residence of private respondents as required by a city ordinance; that the fire
could have been caused by a heated motor or a lit cigarette; that gasoline
and alcohol were used and stored in the shop; and that workers sometimes
smoked inside the shop [CA Decision, p. 5; Rollo, p. 33.]
Even without applying the doctrine of res ipsa loquitur, petitioner's failure to
construct a firewall in accordance with city ordinances would suffice to
support a finding of negligence.
Even then the fire possibly would not have spread to the
neighboring houses were it not for another negligent omission on
the part of defendants, namely, their failure to provide a
concrete wall high enough to prevent the flames from leaping
over it. As it was the concrete wall was only 2-1/2 meters high,
and beyond that height it consisted merely of galvanized iron
sheets, which would predictably crumble and melt when
subjected to intense heat. Defendant's negligence, therefore,
was not only with respect to the cause of the fire but also with

respect to the spread thereof to the neighboring houses. [Africa

v. Caltex (Phil.), Inc., supra; Emphasis supplied.]
In the instant case, with more reason should petitioner be found guilty of
negligence since it had failed to construct a firewall between its property and
private respondents' residence which sufficiently complies with the pertinent
city ordinances. The failure to comply with an ordinance providing for safety
regulations had been ruled by the Court as an act of negligence [Teague v.
Fernandez, G.R. No. L-29745, June 4, 1973, 51 SCRA 181.]
The Court of Appeals, therefore, had more than adequate basis to find
petitioner liable for the loss sustained by private respondents.
2. Since the amount of the loss sustained by private respondents constitutes
a finding of fact, such finding by the Court of Appeals should not be disturbed
by this Court [M.D. Transit & Taxi Co., Inc. v. Court of Appeals, G.R. No. L23882, February 17, 1968, 22 SCRA 559], more so when there is no showing
of arbitrariness.
In the instant case, both the CFI and the Court of Appeals were in agreement
as to the value of private respondents' furniture and fixtures and personal
effects lost in the fire (i.e. P50,000.00). With regard to the house, the Court
of Appeals reduced the award to P70,000.00 from P80,000.00. Such cannot
be categorized as arbitrary considering that the evidence shows that the
house was built in 1951 for P40,000.00 and, according to private
respondents, its reconstruction would cost P246,000.00. Considering the
appreciation in value of real estate and the diminution of the real value of
the peso, the valuation of the house at P70,000.00 at the time it was razed
cannot be said to be excessive.
3. While this Court finds that petitioner is liable for damages to private
respondents as found by the Court of Appeals, the fact that private
respondents have been indemnified by their insurer in the amount of
P35,000.00 for the damage caused to their house and its contents has not
escaped the attention of the Court. Hence, the Court holds that in
accordance with Article 2207 of the Civil Code the amount of P35,000.00
should be deducted from the amount awarded as damages. Said article
provides:
Art. 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained of,
the insurance company is subrogated to the rights of the insured
against the wrongdoer or the person who violated the contract. If
the amount paid by the insurance company does not fully cover

the injury or loss, the aggrieved party shall be entitled to recover

the deficiency from the person causing the loss or injury.
(Emphasis supplied.]
The law is clear and needs no interpretation. Having been indemnified by
their insurer, private respondents are only entitled to recover the deficiency
from petitioner.
On the other hand, the insurer, if it is so minded, may seek reimbursement of
the amount it indemnified private respondents from petitioner. This is the
essence of its right to be subrogated to the rights of the insured, as expressly
provided in Article 2207. Upon payment of the loss incurred by the insured,
the insurer is entitled to be subrogated pro tanto to any right of action which
the insured may have against the third person whose negligence or wrongful
act caused the loss [Fireman's Fund Insurance Co. v. Jamila & Co., Inc., G.R.
No. L-27427, April 7, 1976, 70 SCRA 323.]
Under Article 2207, the real party in interest with regard to the indemnity
received by the insured is the insurer [Phil. Air Lines, Inc. v. Heald Lumber
Co., 101 Phil. 1031, (1957).] Whether or not the insurer should exercise the
rights of the insured to which it had been subrogated lies solely within the
former's sound discretion. Since the insurer is not a party to the case, its
identity is not of record and no claim is made on its behalf, the private
respondent's insurer has to claim his right to reimbursement of the
P35,000.00 paid to the insured.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is
hereby AFFIRMED with the following modifications as to the damages
awarded for the loss of private respondents' house, considering their receipt
of P35,000.00 from their insurer: (1) the damages awarded for the loss of the
house is reduced to P35,000.00; and (2) the right of the insurer to
subrogation and thus seek reimbursement from petitioner for the P35,000.00
it had paid private respondents is recognized.
SO ORDERED.

G.R. No. 73998 November 14, 1988

PEDRO T. LAYUGAN, petitioner,
vs.

INTERMEDIATE APPELLATE COURT, GODOFREDO ISIDRO, and

TRAVELLERS MULTI-INDEMNITY CORPORATION, respondents.
Edralin S. Mateo for petitioner.
Orlando L. Espinas for respondent Travellers Multi-Indemnity Corp.
Roberto T. Vallarta for respondent Godofredo Isidro.
SARMIENTO, J.:
Assailed in this petition for review on certiorari are 1) the decision 1 of the
then Intermediate Appellate Court 2 in AC-G.R. CV No. 01055, entitled "Pedro
T. Layugan, Plaintiff-Appellee, versus Godofredo Isidro, Defendant-Appellant
and Third-Party Plaintiff-Appellee, versus Travellers Multi-Indemnity
Corporation, Third Party Defendant- Appellant, "which reversed and set aside
the decision 3 of the Regional Trial Court, Third Judicial Region, Branch XXVI,
Cabanatuan City, and also dismissed the complaint, third party complaint,
and the counter claims of the parties and 2) the resolution 4 denying the
plaintiff-appellee's (herein petitioner) motion for reconsideration, for lack of
merit.
The findings of fact by the trial court which were adopted by the appellate
court are as follows: 5
xxx xxx xxx
Pedro T. Layugan filed an action for damages against Godofredo
Isidro, alleging that on May 15, 1979 while at Baretbet, Bagabag,
Nueva Vizcaya, the Plaintiff and a companion were repairing the
tire of their cargo truck with Plate No. SU-730 which was parked
along the right side of the National Highway; that defendant's
truck bearing Plate No. PW-583, driven recklessly by Daniel
Serrano bumped the plaintiff, that as a result, plaintiff was
injured and hospitalized at Dr. Paulino J. Garcia Research and
Medical Center and the Our Lady of Lourdes Hospital; that he
spent TEN THOUSAND PESOS (Pl0,000.00) and will incur more
expenses as he recuperates from said injuries; that because of
said injuries he would be deprived of a lifetime income in the
sum of SEVENTY THOUSAND PESOS (P70,000.00); and that he
agreed to pay his lawyer the sum of TEN THOUSAND PESOS
(Pl0,000.00).
As prayed for by the plaintiffs counsel, the Court declared the
defendant in default on October 12, 1979, and plaintiff's
evidence was received ex-parte on January 11, 1978 and

February 19, 1980. The decision on behalf of the plaintiff was set
aside to give a chance to the defendant to file his answer and
later on, a third-party complaint.
Defendant admitted his ownership of the vehicle involved in the
accident driven by Daniel Serrano. Defendant countered that the
plaintiff was merely a bystander, not a truck helper being a
brother-in-law law of the driver of said truck; that the truck
allegedly being repaired was parked, occupying almost half of
the right lane towards Solano, Nueva Vizcaya, right after the
curve; that the proximate cause of the incident was the failure of
the driver of the parked truck in installing the early warning
device, hence the driver of the parked car should be liable for
damages sustained by the truck of the herein defendant in the
amount of more than P20,000.00; that plaintiff being a mere
bystander and hitchhiker must suffer all the damages he
incurred. By way of counterclaim defendant alleged that due to
plaintiffs baseless complaint he was constrained to engage the
services of counsel for P5,000.00 and P200.00 per court
appearance; that he suffered sleepless nights, humiliation,
wounded feelings which may be estimated at P30.000.00.
On May 29, 1981, a third-party complaint was filed by the
defendant against his insurer, the Travellers Multi Indemnity
Corporation; that the third-party plaintiff, without admitting his
liability to the plaintiff, claimed that the third-party defendant is
liable to the former for contribution, indemnity and subrogation
by virtue of their contract under Insurance Policy No. 11723
which covers the insurer's liability for damages arising from
death, bodily injuries and damage to property.
Third-party defendant answered that, even assuming that the
subject matter of the complaint is covered by a valid and existing
insurance policy, its liability shall in no case exceed the limit
defined under the terms and conditions stated therein; that the
complaint is premature as no claim has been submitted to the
third party defendant as prescribed under the Insurance Code;
that the accident in question was approximately caused by the
carelessness and gross negligence of the plaintiff-, that by
reason of the third-party complaint, third-party defendant was
constrained to engage the services of counsel for a fee of
P3,000.00.

Pedro Layugan declared that he is a married man with one (1)

child. He was employed as security guard in Mandaluyong, Metro
Manila, with a salary of SIX HUNDRED PESOS (600.00) a month.
When he is off-duty, he worked as a truck helper and while
working as such, he sustained injuries as a result of the bumping
of the cargo truck they were repairing at Baretbet, Bagabag,
Nueva Vizcaya by the driver of the defendant. He used to earn
TWO HUNDRED PESOS (P200.00) to THREE HUNDRED PESOS
(P300.00) monthly, at the rate of ONE HUNDRED PESOS (Pl00.00)
per trip. Due to said injuries, his left leg was amputated so he
had to use crutches to walk. Prior to the incident, he supported
his family sufficiently, but after getting injured, his family is now
being supported by his parents and brother.
GODOFREDO ISIDRO, defendant/third-party plaintiff, testified that
his truck involved in this vehicular accident is insured with the
Travellers Multi Indemnity Corporation covering own damage and
third-party liability, under vehicle policy No. 11723 (Exh. "1")
dated May 30, 1978; that after he filed the insurance claim the
insurance company paid him the sum of P18,000.00 for the
damages sustained by this truck but not the third party liability.
DANIEL SERRANO, defendant driver, declared that he gave a
statement before the municipal police of Bagabag, Nueva
Vizcaya on May 16, 1979; that he knew the responsibilities of a
driver; that before leaving, he checked the truck. The truck
owner used to instruct him to be careful in driving. He bumped
the truck being repaired by Pedro Layugan, plaintiff, while the
same was at a stop position. From the evidence presented, it has
been established clearly that the injuries sustained by the
plaintiff was caused by defendant's driver, Daniel Serrano. The
police report confirmed the allegation of the plaintiff and
admitted by Daniel Serrano on cross-examination. The collision
dislodged the jack from the parked truck and pinned the plaintiff
to the ground. As a result thereof, plaintiff sustained injuries on
his left forearm and left foot. The left leg of the plaintiff from
below the knee was later on amputated (Exh. "C") when
gangrene had set in, thereby rendering him incapacitated for
work depriving him of his income. (pp. 118 to 120, Record on
Appeal.)
xxx xxx xxx

Upon such findings, amply supported by the evidence on record, the trial
court rendered its decision, the dispositive part of which reads as follows:

WHEREFORE, premises considered, the defendant is hereby

ordered:
a) To pay the plaintiff SEVENTY THOUSAND (P70,000.00) PESOS
actual and compensatory damages;
b) TWO THOUSAND (P2,000.00) PESOS for attorney's fees;
c) FIVE THOUSAND (P5,000.00) PESOS for moral damages; and
d) To pay the costs of this suit. On the third-party complaint, the
third-party defendant is ordered to indemnify the defendant/third
party plaintiff-.
a) The sum of FIFTY THOUSAND (P50,000.00) PESOS for actual
and compensatory damages; and
b) The costs of this suit.
The Intermediate Appellate Court as earlier stated reversed the decision of
the trial court and dismissed the complaint, the third-party complaint, and
the counter- claims of both appellants. 7
Hence, this petition.
The petitioner alleges the following errors.

1. WHETHER UPON THE GIVEN FACTS, THE INTERMEDIATE

APPELLATE COURT ACTED CORRECTLY IN REVERSING AND
SETTING ASIDE AND DISMISSING THE PLAINTIFF-APPELLEE'S
COMPLAINT.
2. WHETHER THE INTERMEDIATE APPELLATE COURT ACTED
CORRECTLY IN APPLYING THE DOCTRINE OF "RES IPSA
LOQUITUR" WITH PROPER JURIS- PRUDENTIAL (sic) BASIS.
The crux of the controversy lies in the correctness or error of the decision of
the respondent court finding the petitioner negligent under the doctrine
of Res ipsa loquitur (The thing speaks for itself).<re||an1w> Corollary
thereto, is the question as to who is negligent, if the doctrine is inapplicable.
The respondent corporation stresses that the issues raised in the petition
being factual, the same is not reviewable by this Court in a petition for
review by certiorari. 9
Indeed, it is an elementary rule in the review of decisions of the Court of
Appeals that its findings of fact are entitled to great respect and will not
ordinarily be disturbed by this Court. 10 For if we have to review every
question of fact elevated to us, we would hardly have any more time left for
the weightier issues compelling and deserving our preferential

attention. 11 Be that as it may, this rule is not inflexible. Surely there are
established exceptions 12 when the Court should review and rectify the
findings of fact of the lower court, such as:
1) when the conclusion is a finding grounded entirely on speculation,
surmise, or conjecture; 2) the inference made is manifestly mistaken; 3)
there is grave abuse of discretion; 4) the judgment is based on
misapprehension of facts; 5) the Court of Appeals went beyond the issues of
the case if the findings are contrary to the admission of both the appellant
and the appellee; 6) the findings of the Court of Appeals are contrary to
those of the trial court; 7) the said findings of fact are conclusions without
citation of specific evidence on which they are based; 8) the facts set forth in
the petition as well as in the petitioner's main and reply briefs are not
disputed by the respondents; and 9) when the findings of fact of the Court of
Appeals are premised on the absence of evidence and are contradicted on
record.
Exceptions 1, 2, 4, 6, 7, and 9 obtain in the instant case to warrant a
deviation from the general rule.
From its finding that the parked truck was loaded with ten (10) big round
logs 13 the Court of Appeals inferred that because of its weight the truck
could not have been driven to the shoulder of the road and concluded that
the same was parked on a portion of the road 14 at the time of the accident.
Consequently, the respondent court inferred that the mishap was due to the
negligence of the driver of the parked truck. 15 The inference or conclusion is
manifestly erroneous. In a large measure, it is grounded on speculation,
surmise, or conjecture. How the respondent court could have reversed the
finding of the trial court that a warning device was installed 16 escapes us
because it is evident from the record that really such a device, in the form of
a lighted kerosene lamp, was installed by the driver of the parked truck three
to four meters from the rear of his parked truck. 17 We see this negative
finding of the respondent appellate court as a misreading of the facts and
the evidence on record and directly contravening the positive finding of the
trial court that an early warning device was in proper place when the
accident happened and that the driver of the private respondent was the one
negligent. On the other hand, the respondent court, in refusing to give its
"imprimatur to the trial court's finding and conclusion that Daniel Serrano
(private respondent Isidro's driver) was negligent in driving the truck that
bumped the parked truck", did not cite specific evidence to support its
conclusion. In cavalier fashion, it simply and nebulously adverted to
unspecified "scanty evidence on record." 18

On the technical aspect of the case, the respondent corporation would want
us to dismiss this petition on the ground that it was filed out of time. It must
be noted that there was a motion for extension, 19 albeit filed erroneously
with the respondent court, dated March 19, 1986, requesting for 30 days
from March 20, 1986, to file the necessary petition or pleading before the
Supreme Court". Also, on April 1, 1986, an appearance of a new lawyer for
the petitioner before the Supreme Court" with motion 20 was filed, again
erroneously, with the Court of Appeals, requesting for 20 days extension "to
file the Petition for Review on Certiorari." Likewise a similar motion 21 was
filed with this Court also on April 1, 1986. On the other hand, the instant
petition for review was filed on April 17, 1986 22 but it was only after three
months, on August 1, 1986, in its comment 23 that the respondent
corporation raised the issue of tardiness. The respondent corporation should
not have waited in ambush before the comment was required and before due
course was given. In any event, to exact its "a pound of flesh", so to speak,
at this very late stage, would cause a grave miscarriage of justice.
Parenthetically, it must be noted that private respondent Isidro did not raise
this issue of late filing.
We now come to the merits of this petition.
The question before us is who was negligent? Negligence is the omission to
do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do 24 or as Judge
Cooley defines it, "(T)he failure to observe for the protection of the interests
of another person, that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury. 25
In Picart vs. Smith,
rule, we held:

26

decided more than seventy years ago but still a sound

The test by which to determine the existence of negligence in a particular

case may be stated as follows: Did the defendant in doing the alleged
negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is
guilty of negligence. The law here in effect adopts the standard supposed to
be supplied by the imaginary conduct of the discreet paterfamilias of the
Roman law. The existence of negligence in a given case is not determined by
reference to the personal judgment of the actor in the situation before him.
The Law considers what would be reckless, blameworthy, or negligent in the
man of ordinary intelligence and prudence and determines liability by that.

Respondent Isidro posits that any immobile object along the highway, like a
parked truck, poses serious danger to a moving vehicle which has the right
to be on the highway. He argues that since the parked cargo truck in this
case was a threat to life and limb and property, it was incumbent upon the
driver as well as the petitioner, who claims to be a helper of the truck driver,
to exercise extreme care so that the motorist negotiating the road would be
properly forewarned of the peril of a parked vehicle. Isidro submits that the
burden of proving that care and diligence were observed is shifted to the
petitioner, for, as previously claimed, his (Isidro's) Isuzu truck had a right to
be on the road, while the immobile cargo truck had no business, so to speak,
to be there. Likewise, Isidro proffers that the petitioner must show to the
satisfaction of a reasonable mind that the driver and he (petitioner) himself,
provided an early warning device, like that required by law, or, by some
other adequate means that would properly forewarn vehicles of the
impending danger that the parked vehicle posed considering the time, place,
and other peculiar circumstances of the occasion. Absent such proof of care,
as in the case at bar, Isidro concludes, would, under the doctrine of Res ipsa
loquitur, evoke the presumption of negligence on the part of the driver of the
parked cargo truck as well as his helper, the petitioner herein, who was fixing
the flat tire of the said truck. 27
Respondent Isidro's contention is untenable.
The evidence on record discloses that three or four meters from the rear of
the parked truck, a lighted kerosene lamp was placed. 28 Moreover, there is
the admission of respondent Isidro's driver, Daniel Serrano, to Wit: 29
Question No. 8 (by Patrolman Josefino Velasco)Will you narrate
to me in brief how the accident happens (sic) if you can still
remember?
Answer: (by Daniel Serrano)
That on or about 10:40 p.m., 15 May 1979 while
driving Isuzu truck at Baretbet, Bagabag, Nueva
Vizcaya and at KM 285, I met another vehicle who
(sic) did not dim his (sic) lights which cause (sic) me
to be blinded with intense glare of the light that's
why I did not notice a parked truck who (sic) was
repairing a front flat tire. When I was a few meters
away, I saw the truck which was loaded with round
logs. I step (sic) on my foot brakes but it did not
function with my many attempts. I have (sic) found
out later that the fluid pipe on the rear right was cut

that's why the breaks did not function. (Emphasis

supplied).
Whether the cargo truck was parked along the road or on half the shoulder of
the right side of the road would be of no moment taking into account the
warning device consisting of the lighted kerosene lamp placed three or four
meters from the back of the truck. 30 But despite this warning which we rule
as sufficient, the Isuzu truck driven by Daniel Serrano, an employee of the
private respondent, still bumped the rear of the parked cargo truck. As a
direct consequence of such accident the petitioner sustained injuries on his
left forearm and left foot. His left leg was later amputated from below the
knee when gangrene had set in. 31
It is clear from the foregoing disquisition that the absence or want of care of
Daniel Serrano has been established by clear and convincing evidence. It
follows that in stamping its imprimatur upon the invocation by respondent
Isidro of the doctrine of Res ipsa loquitur to escape liability for the negligence
of his employee, the respondent court committed reversible error.
The respondent court ruled:

32

xxx xxx xxx

In addition to this, we agree with the following arguments of
appellant Godofredo Isidro which would show that the accident
was caused due to the negligence of the driver of the cargo
truck:
xxx xxx xxx
... In the case at bar the burden of proving that care
and diligence was (sic) observed is shifted evidently
to the plaintiff, for, as adverted to, the motorists
have the right to be on the road, while the immobile
truck has no business, so to speak, to be there. It is
thus for the plaintiff to show to the satisfaction of a
reasonable mind that the driver and he himself did
employ early warning device such as that required by
law or by some other adequate means or device that
would properly forewarn vehicles of the impending
danger that the parked vehicle posed considering
the time, place and other peculiar circumstances of
the occasion. Absent such proof of care, as in the
case at bar, will evoke the presumption of negligence
under the doctrine of res ipsa loquitur, on the part of
the driver of the parked cargo truck as well as

plaintiff who was fixing the flat tire of said truck. (pp.
14-17, Appellant's Brief). (Emphasis supplied).
At this juncture, it may be enlightening and helpful in the proper resolution of
the issue of negligence to examine the doctrine of Res ipsa loquitur.
This doctrine is stated thus: "Where the thing which causes injury is shown to
be under the management of the defendant, and the accident is such as in
the ordinary course of things does not happen if those who have the
management use proper care, it affords reasonable evidence, in the absence
of an explanation by the defendant, that the accident arose from want of
care. 33 Or as Black's Law Dictionary 34 puts it:
Res ipsa loquitur. The thing speaks for itself Rebuttable
presumption or inference that defendant was negligent, which
arises upon proof that instrumentality causing injury was in
defendant's exclusive control, and that the accident was one
which ordinarily does not happen in absence of negligence. Res
ipsa loquitur is rule of evidence whereby negligence of alleged
wrongdoer may be inferred from mere fact that accident
happened provided character of accident and circumstances
attending it lead reasonably to belief that in absence of
negligence it would not have occurred and that thing which
caused injury is shown to have been under management and
control of alleged wrongdoer. Hillen v. Hooker Const. Co., Tex. Civ.
App., 484 S.W. 2d 133, 155. Under doctrine of "res ipsa
loquitur" the happening of an injury permits an inference of
negligence where plaintiff produces substantial evidence that
injury was caused by an agency or instrumentality under
exclusive control and management of defendant, and that the
occurrence was such that in the ordinary course of things would
not happen if reasonable care had been used.
In this jurisdiction we have applied this doctrine in quite a number of cases,
notably in Africa et al. vs. Caltex, Inc., et al., 35 and the latest is in the case
of F.F. Cruz and Co., Inc. vs. CA. 36
The doctrine of Res ipsa loquitur as a rule of evidence is peculiar to the law
of negligence which recognizes that prima facie negligence may be
established without direct proof and furnishes a substitute for specific proof
of negligence. 37 The doctrine is not a rule of substantive law 38 but merely a
mode of proof or a mere procedural convenience. 39 The rule, when
applicable to the facts and circumstances of a particular case, is not
intended to and does not dispense with the requirement of proof of culpable

negligence on the part of the party charged. 40 It merely determines and

regulates what shall be prima facie evidence thereof and facilitates the
burden of plaintiff of proving a breach of the duty of due care. 41 The doctrine
can be invoked when and only when, under the circumstances involved,
direct evidence is absent and not readily available. 42 Hence, it has generally
been held that the presumption of inference arising from the doctrine cannot
be availed of, or is overcome, where plaintiff has knowledge and testifies or
presents evidence as to the specific act of negligence which is the cause of
the injury complained of or where there is direct evidence as to the precise
cause of the accident and all the facts and circumstances attendant on the
occurrence clearly appear. 43 Finally, once the actual cause of injury is
established beyond controversy, whether by the plaintiff or by the defendant,
no presumptions will be involved and the doctrine becomes inapplicable
when the circumstances have been so completely eludicated that no
inference of defendant's liability can reasonably be made, whatever the
source of the evidence, 44 as in this case.
The private respondent is sued under Art. 2176 in relation to Art. 2180,
paragraph 5, of the Civil Code. In the latter, when an injury is caused by the
negligence of a servant or employee there instantly arises a presumption of
law that there was negligence on the part of the master or employer either in
the selection of the servant or employee, or in supervision over him after
selection, or both. Such presumption is juris tantum and not juris et de
jure and consequently, may be rebutted. If follows necessarily that if the
employer shows to the satisfaction of the court that in the selection and in
the supervision he has exercised the care and diligence of a good father of a
family, the presumption is overcome and he is relieved from liability. 45 In
disclaiming liability for the incident, the private respondent stresses that the
negligence of his employee has already been adequately overcome by his
driver's statement that he knew his responsibilities as a driver and that the
truck owner used to instruct him to be careful in driving.46
We do not agree with the private respondent in his submission. In the first
place, it is clear that the driver did not know his responsibilities because he
apparently did not check his vehicle before he took it on the road. If he did
he could have discovered earlier that the brake fluid pipe on the right was
cut, and could have repaired it and thus the accident could have been
avoided. Moveover, to our mind, the fact that the private respondent used to
intruct his driver to be careful in his driving, that the driver was licensed, and
the fact that he had no record of any accident, as found by the respondent
court, are not sufficient to destroy the finding of negligence of the Regional
Trial Court given the facts established at the trial 47 The private respondent

or his mechanic, who must be competent, should have conducted a thorough

inspection of his vehicle before allowing his driver to drive it. In the light of
the circumstances obtaining in the case, we hold that Isidro failed to prove
that the diligence of a good father of a family in the supervision of his
employees which would exculpate him from solidary liability with his driver
to the petitioner. But even if we concede that the diligence of a good father
of a family was observed by Isidro in the supervision of his driver, there is not
an iota of evidence on record of the observance by Isidro of the same
quantum of diligence in the supervision of his mechanic, if any, who would
be directly in charge in maintaining the road worthiness of his (Isidro's) truck.
But that is not all. There is paucity of proof that Isidro exercised the diligence
of a good father of a family in the selection of his driver, Daniel Serrano, as
well as in the selection of his mechanic, if any, in order to insure the safe
operation of his truck and thus prevent damage to others. Accordingly, the
responsibility of Isidro as employer treated in Article 2180, paragraph 5, of
the Civil Code has not ceased.
WHEREFORE, the petition is hereby GRANTED. The Decision of the
respondent court as well as its Resolution denying the petitioner's motion for
reconsideration are hereby SET ASIDE and the decision of the trial court,
dated January 20, 1983, is hereby REINSTATED in toto. With costs against the
private respondents.
SO ORDERED.

G.R. No. 132607 May 5, 1999

CEBU SHIPYARD AND ENGINEERING WORKS, INC., petitioner,
vs.
WILLIAM LINES, INC. and PRUDENTIAL GUARANTEE and ASSURANCE
COMPANY, INC., respondents.
PURISIMA, J.:
At bar is a Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court seeking a reversal of the decision of the Court of
Appeal 1 which affirmed the decision of the trial court of origin finding the
petitioner herein, Cebu Shipyard and Engineering Works, Inc. (CSEW)

negligent and liable for damages to the private respondent, William Lines,
Inc., and to the insurer, Prudential Guarantee Assurance Company, Inc.
The antecedent facts that matter are as follows:
Cebu Shipyard and Engineering Works, Inc. (CSEW) is a domestic corporation
engaged in the business of dry-docking and repairing of marine vessels while
the private respondent, Prudential Guarantee and Assurance, Inc.
(Prudential), also a domestic corporation is in the non-life insurance
business.
William Lines, Inc. (plaintiff below) is in the shipping business. It the owner of
M/V Manila City, a luxury passenger-cargo vessel, which caught fire and sank
on February 16, 1991. At the time of the unfortunate occurrence sued upon,
subject vessel was insured with Prudential for P45,000,000.00 pesos for hull
and machinery. The Hull Policy included an "Additional Perils (INCHMAREE)"
Clause covering loss of or damage to the vessel through the negligence of,
among others, ship repairmen. The Policy provided as follows:
Subject to the conditions of this Policy, this insurance also covers
loss of or damage to Vessel directly caused by the following:
xxx xxx xxx
Negligence of Charterers and/or Repairers, provided such
Charterers and/or Repairers are not an Assured hereunder.
xxx xxx xxx
provided such loss or damage has not resulted from want of due
diligence by the Assured, the Owners or Managers of the Vessel,
of any of them Masters, Officers, Crew or Pilots are not to be
considered Owners within the meaning of this Clause should they
hold shares in the Vessel. 2
Petitioner CSEW was also insured by Prudential for third party liability under
a Shiprepairer's Legal Liability Insurance Policy. The policy was for P10 million
only, under the limited liability clause, to wit:
7. Limit of Liability
The limit of liability under this insurance, in respect of any one
accident or series of accidents, arising out of one occurrence,
shall be [P10 million], including liability for costs and expense
which are either:
(a) incurred with the written consent of the underwriters hereon,
or
(b) awarded against the Assured. 3

On February 5, 1991, William Lines, Inc. brought its vessel, M/V Manila City,
to the Cebu Shipyard in Lapulapu City for annual dry-docking and repair.
On February 6, 1991, an arrival conference was held between
representatives of William Lines, Inc. and CSEW to discuss the work to be
undertaken on the M/V Manila City.
The contracts, denominated as Work Orders, were signed thereafter, with the
following stipulations:
10. The Contractor shall replace at its own work and at its own
cost any work or material which can be shown to be defective
and which is communicated in writing within one (1) month of
redelivery of the vessel or if the vessel was not in the
Contractor's Possession, the withdrawal of the Contractor's
workmen, or at its option to pay a sum equal to the cost of such
replacement at its own works. These conditions shall apply to
any such replacements.
11. Save as provided in Clause 10, the Contractor shall not be
under any liability to the Customer either in contract or for delict
or quasi-delict or otherwise except for negligence and such
liability shall itself be subject to the following overriding
limitations and exceptions, namely:
(a) The total liability of the Contractor to the
Customer (over and above the liability to replace
under Clause 10) or of any sub-contractor shall be
limited in respect of any defect or event (and a series
of accidents arising out of the same defect or event
shall constitute one defect or event) to the sum of
Pesos Philippine Currency One Million only.
(b) In no circumstance whatsoever shall the liability
of the Contractor or any Sub-Contractor include any
sum in respect of loss of profit or loss of use of the
vessel or damages consequential on such loss of use
xxx xxx xxx
20. The insurance on the vessel should be maintained by the
customer and/or owner of the vessel during the period the
contract is in effect. 4
While the M/V Manila City was undergoing dry-docking and repairs within the
premises of CSEW, the master, officers and crew of M/V Manila City stayed in
the vessel using their cabins as living quarters. Other employees hired by

William Lines to do repairs and maintenance work on the vessel were also
present during the dry-docking.
On February 16, 1991, after subject vessel was transferred to the docking
quay, it caught fire and sank, resulting to its eventual total loss.
On February 21, 1991, William Lines, Inc. filed a complaint for damages
against CSEW, alleging that the fire which broke out in M/V Manila City was
caused by CSEW's negligence and lack of care.
On July 15, 1991 was filed an Amended Complaint impleading Prudential as
co-plaintiff, after the latter had paid William Lines, Inc. the value of the hull
and machinery insurance on the M/V Manila City. As a result of such payment
Prudential was subrogated to the claim of P45 million, representing the value
of the said insurance it paid.
On June 10, 1994, the trial court a quo came out with a judgment against
CSEW, disposing as follows:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendant, ordering the latter.
1. To pay unto plaintiff Prudential Guarantee and Assurance Inc.,
the subrogee, the amount of Forty-five Million (P45 million)
Pesos, with interest at the legal rate until full payment is made.
2. To pay unto plaintiff, William Lines, Inc., the amount of Fifty-six
Million Seven Hundred Fifteen Thousand (P56,715,000.00) Pesos
representing loss of income of M/V MANILA CITY, with interest at
the legal rate until full payment is made.
3. To pay unto plaintiff, William Lines, Inc. the amount of Eleven
Million (P11 million) as payment, in addition to what it received
from the insurance company to fully cover the injury or loss, in
order to replace the M/V MANILA CITY, with interest at the legal
rate until full payment is made;
4. To pay unto plaintiff, William Lines, Inc. the sum of Nine
Hundred Twenty-Seven Thousand Thirty-nine (P927,039.00)
Pesos for the loss of fuel and lub (sic) oil on board the vessel
when she was completely gutted by fire at defendant, Cebu
Shipyard's quay, with interest at the legal rate until full payment
is made;
5. To pay unto plaintiff, William Lines, Inc. the sum of Three
Million Fifty-four Thousand Six Hundred Seventy-seven Pesos and
Ninety-five centavos (P3,054.677.95) as payment for the spare

parts and materials used in the M/V MANILA CITY during drydocking with interest at the legal rate until full payment is made;
6. To pay unto plaintiff William Lines, Inc., the sum of Five
Hundred Thousand (P500,000 00) Pesos in moral damages;
7. To pay unto plaintiff, William Lines, Inc. the amount of Ten
Million (P10,000.000.00) Pesos in attorney's fees; and to pay the
costs of this suit.
CSEW (defendant below) appealed the aforesaid decision to the Court of
Appeals. During the pendency of the appeal, CSEW and William Lines
presented a "Joint Motion for Partial Dismissal" with prejudice, on the basis of
the amicable settlement inked between Cebu Shipyard and William Lines
only.
On July 31, 1996, the Court of Appeals ordered the partial dismissal of the
case insofar as CSEW and William Lines were concerned.
On September 3, 1997, the Court of Appeals affirmed the appealed decision
of the trial court, ruling thus:
WHEREFORE, the judgment of the lower court ordering the
defendant, Cebu Shipyard and Engineering Works, Inc. to pay the
plaintiff Prudential Guarantee and Assurance, Inc., the subrogee,
the sum of P45 Million, with interest at the legal rate until full
payment is made, as contained in the decision of Civil Case No.
CEB-9935 is hereby AFFIRMED.
With the denial of its motion for reconsideration by the Court of Appeal's
Resolution dated February 13, 1998, CSEW found its way to this court via the
present petition, contending that:
I. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
HOLDING THAT CSEW HAD "MANAGEMENT AND SUPERVISORY
CONTROL" OF THE M/V MANILA CITY AT THE TIME THE FIRE
BROKE OUT.
II THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
APPLYING THE DOCTRINE OF RES IPSA LOQUITUR AGAINST CSEW.
III THE COURT OF APPEALS RULING HOLDING CSEW NEGLIGENT
AND THEREBY LIABLE FOR THE LOSS OF THE M/V MANILA CITY IS
BASED FINDINGS OF FACT NOT SUPPORTED BY EVIDENCE.
IV THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
RULING CSEW'S EXPERT EVIDENCE AS INADMISSIBLE OR OF NO
PROBATIVE VALUE.

V THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN

RULING THAT PRUDENTIAL HAS THE RIGHT OF SUBROGATION
AGAINST ITS OWN INSURED.
VI ASSUMING ARGUENDO THAT PRUDENTIAL HAS THE RIGHT OF
SUBROGATION AND THAT CSEW WAS NEGLIGENT IN THE
PERFORMANCE OF ITS OBLIGATIONS UNDER THE SHIPREPAIR
CONTRACTS. THE CONTRACTUAL PROVISIONS LIMITING CSEW'S
LIABILITY FOR NEGLIGENCE TO A MAXIMUM OF P 1 MILLION IS
NOT VALID, CONTRARY TO THE APPLICABLE RULINGS OF THIS
HONORABLE COURT.
Petitioner's version of the events that led to the fire runs as follows:
On February 13, 1991, the CSEW completed the drydocking of
M/V Manila City at its grave dock. It was then transferred to the
docking quay of CSEW where the remaining repair to be done
was the replating of the top of Water Ballast Tank No. 12 (Tank
Top No. 12) which was subcontracted by CSEW to JNB General
Services. Tank Top No. 12 was at the rear section of the vessel,
on level with the flooring of the crew cabins located on the
vessel's second deck.
At around seven o'clock in the morning of February 16, 1991, the
JNB workers trimmed and cleaned the tank framing which
involved minor hotworks (welding/cutting works). The said work
was completed at about 10:00 a.m. The JNB workers then
proceeded to rig the steel plates, after which they had their
lunch break. The rigging was resumed at 1:00 p.m.
While in the process of rigging the second steel plate, the JNB
workers noticed smoke coming from the passageway along the
crew cabins. When one of the workers, Mr. Casas, proceeded to
the passageway to ascertain the origin of the smoke, he noticed
that smoke was gathering on the ceiling of the passageway but
did not see any fire as the crew cabins on either side of the
passageway were locked. He immediately sought out the
proprietor of JNB, Mr. Buenavista, and the Safety officer CSEW,
Mr. Aves, who sounded the fire alarm. CSEW's fire brigade
immediately responded as well as the other fire fighting units in
Metro Cebu. However, there were no WLI representative, officer
or crew to guide the firemen inside the vessel.
Despite the combined efforts of the firemen of the Lapulapu City
Fire Department, Mandaue Fire Cordova Fire Department,

Emergency Rescue Unit Foundation, and fire brigade of CSEW,

the fire was not controlled until 2:00 a.m., of the following day,
February 17, 1991.
On the early morning of February 17, 1991, gusty winds
rekindled the flames on the vessel and fire again broke out. Then
the huge amounts of water pumped into the vessel, coupled with
the strong current, caused the vessel to tilt until it capsized and
sank.
When M/V Manila City capsized, steel and angle bars were
noticed to have been newly welded along the port side of the hull
of the vessel, at the level of the crew cabins. William Lines did
not previously apply for a permit to do hotworks on the said
portion of the ship as it should have done pursuant to its work
order with CSEW. 5
Respondent Prudential, on the other hand, theorized that the fire broke out in
the following manner:
At around eleven o'clock in the morning of February 16, 1991,
the Chief Mate of M/V Manila City was inspecting the various
works being done by CSEW on the vessel, when he saw that
some workers of CSEW were cropping out steel plates Tank Top
No. 12 using acetylene, oxygen and welding torch. He also
observed that the rubber insulation wire coming out of the airconditioning unit was already burning, prompting him to scold
the workers.
At 2:45 in the afternoon of the same day, witnesses saw smoke
coming from Tank No. 12. The vessel's reeferman reported such
occurence to the Chief Mate who immediately assembled the
crew members to put out the fire. When it was too hot for them
to stay on board and seeing that the fire cannot be controlled,
the vessel's crew were forced to withdraw from CSEW's docking
quay.
In the morning of February 17, 1991, M/V Manila City sank. As
the vessel was insured with Prudential Guarantee, William Lines
filed a claim for constructive loss, and after a thorough
investigation of the surrounding circumstances of the tragedy,
Prudential Guaranteed found the said insurance claim to be
meritorious and issued a check in favor of William Lines in the
amount of P 45 million pesos representing the total value of M/V
Manila City's hull and machinery insurance. 6

The petition is unmeritorious.

Petitioner CSEW faults the Court of Appeals for adjudging it negligent and
liable for damages for the respondents, William Lines, Inc., and Prudential for
the loss of M/V Manila City. It is petitioner's submission that the finding of
negligence by the Court of Appeals is not supported by the evidence on
record, and contrary to what the Court of Appeals found, petitioner did not
have management and control over M/V Manila City. Although it was brought
to the premises of CSEW for annual repair, William Lines, Inc. retained control
over the vessel as the ship captain remained in command and the ship's
crew were still present. While it imposed certain rules and regulations on
William Lines, it was in the exercise of due diligence and not an indication of
CSEW's exclusive control over subject vessel. Thus, CSEW maintains that it
did not have exclusive control over the M/V Manila City and the trial court
and the Court of Appeals erred in applying the doctrine of res ipsa loquitur.
Time and again, this Court had occasion to reiterate the well-established rule
that factual findings by the Court of Appeals are conclusive on the parties
and are not reviewable by this Court. They are entitled to great weight and
respect, even finality, especially when, as in this case, the Court of Appeals
affirmed the factual findings arrived at by the trial court. 7 When supported
by sufficient evidence, findings of fact by the Court of Appeals affirming
those of the trial court, are not to be disturbed on appeal. The rationale
behind this doctrine is that review of the findings of fact of the Court of
Appeals is not a function that the Supreme Court normally undertakes. 8
Here, the Court of Appeals and the Cebu Regional Trial Court of origin are
agreed that the fire which caused the total loss of subject M/V Manila City
was due to the negligence of the employees and workers of CSEW. Both
courts found that the M/V Manila City was under the custody and control of
petitioner CSEW, when the ill-fated vessel caught fire. The decisions of both
the lower court and the Court of Appeals set forth clearly the evidence
sustaining their finding of actionable negligence on the part of CSEW. This
factual finding is conclusive on the parties. The court discerns no basis for
disturbing such finding firmly anchored on enough evidence. As held in the
case of Roblett Industrial Construction Corporation vs. Court of Appeals, "in
the absence of any showing that the trial court failed to appreciate facts and
circumstances of weight and substance that would have altered its
conclusion, no compelling reason exists for the Court to impinge upon
matters more appropriately within its province. 9
Furthermore, in petitions for review on certiorari, only questions of law may
be put into issue. Questions of fact cannot be entertained. The finding of

negligence by the Court of Appeals is a question which this Court cannot look
into as it would entail going into factual matters on which the finding of
negligence was based. Such an approach cannot be allowed by this Court in
the absence of clear showing that the case falls under any of the
exceptions 10 to the well-established principle.
The finding by the trial court and the Court of Appeals that M/V Manila City
caught fire and sank by reason of the negligence of the workers of CSEW,
when the said vessel was under the exclusive custody and control of CSEW is
accordingly upheld. Under the circumstances of the case, the doctrine of res
ipsa loquitur applies. For the doctrine of res ipsa loquitur to apply to a given
situation, the following conditions must concur (1) the accident was of a kind
which does not ordinarily occur unless someone is negligent; and (2) that the
instrumentality or agency which caused the injury was under the exclusive
control of the person charged with negligence.
The facts and evidence on record reveal the concurrence of said conditions in
the case under scrutiny. First, the fire that occurred and consumed M/V
Manila City would not have happened in the ordinary course of things if
reasonable care and diligence had been exercised. In other words, some
negligence must have occurred.Second, the agency charged with negligence,
as found by the trial court and the Court of Appeals and as shown by the
records, is the herein petitioner, Cebu Shipyard and Engineering Works, Inc.,
which had control over subject vessel when it was docketed for annual
repairs. So also, as found by the regional trial court, "other responsible
causes, including the conduct of the plaintiff, and third persons, are
sufficiently eliminated by the evidence. 11
What is more, in the present case the trial court found direct evidence to
prove that the workers and/or employees of CSEW were remiss in their duty
of exercising due diligence in the care of subject vessel. The direct evidence
substantiates the conclusion that CSEW was really negligent. Thus, even
without applying the doctrine of res ipsa loquitur, in light of the direct
evidence on record, the ineluctable conclusion is that the petitioner, Cebu
Shipyard and Engineering Works, Inc., was negligent and consequently liable
for damages to the respondent, William Lines, Inc.
Neither is there tenability in the contention of petitioner that the Court of
Appeals erroneously ruled on the inadmissibility of the expert testimonies it
(petitioner) introduced on the probable cause and origin of the fire. Petitioner
maintains that the Court of Appeals erred in disregarding the testimonies of
the fire experts, Messrs. David Grey and Gregory Michael Southeard, who
testified on the probable origin of the fire in M/V Manila City. Petitioner avers

that since the said fire experts were one in their opinion that the fire did not
originate in the area of Tank Top No. 12 where the JNB workers were doing
hotworks but on the crew accommodation cabins on the portside No. 2 deck,
the trial court and the Court of Appeals should have given weight to such
finding based on the testimonies of fire experts; petitioner argues.
But courts are not bound by the testimonies of expert witnesses. Although
they may have probative value, reception in evidence of expert testimonies
is within the discretion of the court. Section 49, Rule 130 of the Revised Rules
of Court, provides:
Sec. 49. Opinion of expert witness. The opinion of a witness on
a matter requiring special knowledge, skill, experience or training
which he is shown to possess, may be received in evidence.
The word "may" signifies that the use of opinion of an expert witness
as evidence is a prerogative of the courts. It is never mandatory for
judges to give substantial weight to expert testimonies. If from the
facts and evidence on record, a conclusion is readily ascertainable,
there is no need for the judge to resort to expert opinion evidence. In
the case under consideration, the testimonies of the fire experts were
not the only available evidence on the probable cause and origin of the
fire. There were witnesses who were actually on board the vessel when
the fire occurred. Between the testimonies of the fire experts who
merely based their findings and opinions on interviews and the
testimonies of those present during the fire, the latter are of more
probative value. Verily, the trial court and the Court of Appeals did not
err in giving more weight to said testimonies.
On the issue of subrogation, petitioner contends that Prudential is not
entitled to be subrogated to the rights of William Lines, Inc., theorizing that
(1) the fire which gutted M/V Manila City was an excluded risk and (2) it is a
co-assured under the Marine Hull Insurance Policy.
It is petitioner's submission that the loss of M/V Manila City or damage
thereto is expressly excluded from the coverage of the insurance because
the same resulted from "want of due diligence by the Assured, Owners or
Managers" which is not included in the risks insured against. Again, this
theory of petitioner is bereft of any factual or legal basis. It proceeds from a
wrong premise that the fire which gutted subject vessel was caused by the
negligence of the employees of William Lines, Inc. To repeat, the issue of who
between the parties was negligent has already been resolved against Cebu
Shipyard and Engineering Works, Inc. Upon proof of payment by Prudential to
William Lines, Inc. the former was subrogated to the right of the latter to

indemnification from CSEW. As aptly ruled by the Court of Appeals, the law
on the manner is succinct and clear, to wit:
Art. 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained of
the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated
the contract. If the amount paid by the insurance company does
not fully cover the injury or loss the aggrieved party shall be
entitled to recover the deficiency from the person causing the
loss or injury. 12
Thus, when Prudential, after due verification of the merit and validity of the
insurance claim of William Lines, Inc., paid the latter the total amount
covered by its insurance policy, it was subrogated to the right of the latter to
recover the insured loss from the liable party, CSEW.
Petitioner theorizes further that there can be no right of subrogation as it is
deemed a co-assured under the subject insurance policy. To buttress its
stance that it is a co-assured, petitioner placed reliance on Clause 20 of the
Work Order which states:
20 The insurance on the vessel should be maintained by the
customer and/or owner of the vessel during the period the
contract is in effect. 13
According to petitioner, under the aforecited clause, William Lines, Inc.,
agreed to assume the risk of loss of the vessel while under dry-dock or
repair and to such extent, it is benefited and effectively constituted as
a co-assured under the policy.
This theory of petitioner is devoid of sustainable merit. Clause 20 of the Work
Order in question is clear in the sense that it requires William Lines to
maintain insurance on the vessel during the period of dry-docking or repair.
Concededly, such a stipulation works to the benefit of CSEW as the ship
repairer. However, the fact that CSEW benefits from the said stipulation does
not automatically make it as a co-assured of William Lines. The intention of
the parties to make each other a co-assured under an insurance policy is to
be gleaned principally from the insurance contract or policy itself and not
from any other contract or agreement because the insurance policy
denominates the assured and the beneficiaries of the insurance. The hull and
machinery insurance procured by William Lines, Inc. from Prudential named
only "William Lines, Inc." as the assured. There was no manifestation of any
intention of William Lines, Inc. to constitute CSEW as a co-assured under

subject policy. It is axiomatic that when the terms of a contract are clear its
stipulations control. 14 Thus, when the insurance policy involved named only
William Lines, Inc. as the assured thereunder, the claim of CSEW that it is a
co-assured is unfounded.
Then too, in the Additional Perils Clause of the same Marine Insurance Policy,
it is provided that:
Subject to the conditions of this Policy, this insurance also covers
loss of or damage to vessel directly caused by the following:
xxx xxx xxx
Negligence of Charterers and/or Repairers, provided such
Charterers and/or Repairers are not an Assured
hereunder 15 (emphasis supplied).
As correctly pointed out by respondent Prudential, if CSEW were deemed a
co-assured under the policy, it would nullify any claim of William Lines, Inc.
from Prudential for any loss or damage caused by the negligence of CSEW.
Certainly, no shipowner would agree to make a shiprepairer a co-assured
under such insurance policy; otherwise, any claim for loss or damage under
the policy would be invalidated. Such result could not have been intended by
William Lines, Inc.
Finally, CSEW argues that even assuming that it was negligent and therefore
liable to William Lines Inc., by stipulation in the Contract or Work Order its
liability is limited to One Million (P1,000,000.00) Pesos only, and Prudential a
mere subrogee of William Lines, Inc., should only be entitled to collect the
sum stipulated in the said contract.
Although in this jurisdiction, contracts of adhesion have been consistently
upheld as valid per se; as binding as an ordinary contract, the Court
recognizes instances when reliance on such contracts cannot be favored
especially where the facts and circumstances warrant that subject
stipulations be disregarded. 16 Thus, in ruling on the validity and applicability
of the stipulation limiting the liability of CSEW for negligence to One Million
(P1,000,000.00) Pesos only, the facts and circumstances vis-a-vis the nature
of the provision sought to be enforced should be considered, bearing in mind
the principles of equity and fair play.
It is worthy to note that M/V Manila City was insured with Prudential for Forty
Five Million (P45,000,000.00) Pesos. To determine the validity and
sustainability of the claim of William Lines, Inc., for a total loss, Prudential
conducted its own inquiry. Upon thorough investigation by its hull surveyor,
M/V Manila City was found to be beyond economical salvage and
repair. 17 The evaluation of the average adjuster also reported a constructive

total loss. 18 The said claim of William Lines, Inc., was then found to be valid
and compensable such that Prudential paid the latter the total value of its
insurance claim. Furthermore, it was ascertained that the replacement cost
of the vessel (the price of a vessel similar to M/V Manila City), amounts to
Fifty Million (P 50,000,000.00) Pesos. 19
Considering the aforestated circumstances, let alone the fact that negligence
on the part of petitioner has been sufficiently proven, it would indeed be
unfair and inequitable to limit the liability of petitioner to One Million Pesos
only. As aptly held by the trial court, "it is rather unconscionable if not
overstrained." To allow CSEW to limit its liability to One Million Pesos
notwithstanding the fact that the total loss suffered by the assured and paid
for by Prudential amounted to Forty Five Million (P45,000,000.00) Pesos
would sanction the exercise of a degree of diligence short of what is
ordinarily required because, then, it would not be difficult for petitioner to
escape liability by the simple expedient of paying an amount very much
lower than the actual damage or loss suffered by William Lines, Inc.
WHEREFORE, for want of merit, the petition is hereby DENIED and the
decision, dated September 3, 1997, and Resolution, dated February 13,
1998, of the Court of Appeals AFFIRMED. No pronouncement as to
costs.1wphi1.nt
SO ORDERED.

ATTRACTIVE NUISANCE

G.R. No. L-3422

June 13, 1952

HIDALGO ENTERPRISES, INC., petitioner,

vs.
GUILLERMO BALANDAN, ANSELMA ANILA and THE COURT OF
APPEALS, respondents.
Quisumbing, Sycip, Quisumbing and Salazar for petitioner.
Antonio M. Moncado for respondents.
BENGZON, J.:

This is an appeal by certiorari, from a decision of the Court of Appeals

requiring Hidalgo Enterprises, Inc. to pay Guillermo Balandan and his wife,
damages in the sum of P2,000 for the death of their son Mario.
It appears that the petitioner Hidalgo Enterprises, Inc. "was the owner of an
ice-plant factory in the City of San Pablo, Laguna, in whose premises were
installed two tanks full of water, nine feet deep, for cooling purposes of its
engine. While the factory compound was surrounded with fence, the tanks
themselves were not provided with any kind of fence or top covers. The
edges of the tanks were barely a foot high from the surface of the ground.
Through the wide gate entrance, which is continually open, motor vehicles
hauling ice and persons buying said commodity passed, and any one could
easily enter the said factory, as he pleased. There was no guard assigned on
the gate. At about noon of April 16, 1948, plaintiff's son, Mario Balandan, a
boy barely 8 years old, while playing with and in company of other boys of
his age entered the factory premises through the gate, to take a bath in one
of said tanks; and while thus bathing, Mario sank to the bottom of the tank,
only to be fished out later, already a cadaver, having been died of "asphyxia
secondary to drowning."
The Court of Appeals, and the Court of First Instance of Laguna, took the
view that the petitioner maintained an attractive nuisance (the tanks), and
neglected to adopt the necessary precautions to avoid accidents to persons
entering its premises. It applied the doctrine of attractive nuisance, of
American origin, recognized in this Jurisdiction in Taylor vs. Manila Electric 16
Phil., 8.
The doctrine may be stated, in short, as follows: One who maintains on his
premises dangerous instrumentalities or appliances of a character likely to
attract children in play, and who fails to exercise ordinary care to prevent
children from playing therewith or resorting thereto, is liable to a child of
tender years who is injured thereby, even if the child is technically a
trespasser in the premises. (See 65 C.J.S., p. 455.)
The principle reason for the doctrine is that the condition or appliance in
question although its danger is apparent to those of age, is so enticing or
alluring to children of tender years as to induce them to approach, get on or
use it, and this attractiveness is an implied invitation to such children (65
C.J.S., p. 458).
Now, is a swimming pool or water tank an instrumentality or appliance likely
to attract the little children in play? In other words is the body of water an
attractive nuisance?
The great majority of American decisions say no.

The attractive nuisance doctrine generally is not applicable to bodies of

water, artificial as well as natural, in the absence of some unusual
condition or artificial feature other than the mere water and its
location.
There are numerous cases in which the attractive nuisance doctrine
has not been held not to be applicable to ponds or reservoirs, pools of
water, streams, canals, dams, ditches, culverts, drains, cesspools or
sewer pools, . . . (65 C.J.S., p. 476 et seg. citing decisions of California,
Georgia, Idaho, Illinois, Kansas, Iowa, Louisiana, Miss., Missouri,
Montana, Oklahoma, Pennsylvania, Tennessee, Texas, Nebraska,
Wisconsin.)
In fairness to the Court of Appeals it should be stated that the above volume
of Corpus Juris Secundum was published in 1950, whereas its decision was
promulgated on September 30, 1949.
The reason why a swimming pool or pond or reservoir of water is not
considered an attractive nuisance was lucidly explained by the Indiana
Appellate Court as follows:
Nature has created streams, lakes and pools which attract children.
Lurking in their waters is always the danger of drowning. Against this
danger children are early instructed so that they are sufficiently
presumed to know the danger; and if the owner of private property
creates an artificial pool on his own property, merely duplicating the
work of nature without adding any new danger, . . . (he) is not liable
because of having created an "attractive nuisance." Anderson vs.
Reith-Riley Const. Co., N. E., 2nd, 184, 185; 112 Ind. App., 170.
Therefore, as petitioner's tanks are not classified as attractive nuisance, the
question whether the petitioner had taken reasonable precautions becomes
immaterial. And the other issue submitted by petitioner that the parents of
the boy were guilty of contributory negligence precluding recovery, because
they left for Manila on that unlucky day leaving their son under the care of no
responsible individual needs no further discussion.
The appealed decision is reversed and the Hidalgo Enterprises, Inc. is
absolved from liability. No costs.
Feria, Padilla, Tuason, Montemayor, and Bautista Angelo, JJ., concur.

G.R. No. L-33722 July 29, 1988

FEDERICO YLARDE and ADELAIDA DORONIO petitioners,

vs.
EDGARDO AQUINO, MAURO SORIANO and COURT OF
APPEALS, respondents.
Buenaventura C. Evangelista for petitioners.
Modesto V. Cabanela for respondent Edgardo Aquino.
Manuel P. Pastor for respondent Mauro Soriano.
GANCAYCO, J.:
In this petition for review on certiorari seeking the reversal of the decision of
the Court of Appeals in CA-G.R. No. 36390-R entitled "Federico Ylarde, et al.
vs. Edgardo Aquino, et al.," a case which originated from the Court of First
Instance of Pangasinan, We are again caned upon determine the
responsibility of the principals and teachers towards their students or pupils.
In 1963, private respondent Mariano Soriano was the principal of the
Gabaldon Primary School, a public educational institution located in Tayug,
Pangasinan-Private respondent Edgardo Aquino was a teacher therein. At
that time, the school was fittered with several concrete blocks which were
remnants of the old school shop that was destroyed in World War II. Realizing
that the huge stones were serious hazards to the schoolchildren, another
teacher by the name of Sergio Banez started burying them one by one as
early as 1962. In fact, he was able to bury ten of these blocks all by himself.
Deciding to help his colleague, private respondent Edgardo Aquino gathered
eighteen of his male pupils, aged ten to eleven, after class dismissal on
October 7, 1963. Being their teacher-in-charge, he ordered them to dig
beside a one-ton concrete block in order to make a hole wherein the stone
can be buried. The work was left unfinished. The following day, also after
classes, private respondent Aquino called four of the original eighteen pupils
to continue the digging. These four pupils Reynaldo Alonso, Francisco
Alcantara, Ismael Abaga and Novelito Ylarde, dug until the excavation was
one meter and forty centimeters deep. At this point, private respondent
Aquino alone continued digging while the pupils remained inside the pit
throwing out the loose soil that was brought about by the digging.
When the depth was right enough to accommodate the concrete block,
private respondent Aquino and his four pupils got out of the hole. Then, said
private respondent left the children to level the loose soil around the open
hole while he went to see Banez who was about thirty meters away. Private
respondent wanted to borrow from Banez the key to the school workroom

where he could get some rope. Before leaving. , private respondent Aquino
allegedly told the children "not to touch the stone."
A few minutes after private respondent Aquino left, three of the four kids,
Alonso, Alcantara and Ylarde, playfully jumped into the pit. Then, without any
warning at all, the remaining Abaga jumped on top of the concrete block
causing it to slide down towards the opening. Alonso and Alcantara were able
to scramble out of the excavation on time but unfortunately fo Ylarde, the
concrete block caught him before he could get out, pinning him to the wall in
a standing position. As a result thereof, Ylarde sustained the following
injuries:
1. Contusion with hematoma, left inguinal region and suprapubic
region.
2. Contusion with ecchymosis entire scrotal region.
3. Lacerated wound, left lateral aspect of penile skin with
phimosis
4. Abrasion, gluteal region, bilateral.
5. Intraperitoneal and extrapertitoneal extravasation of blood
and urine about 2 liters.
6. Fracture, simple, symphesis pubis
7. Ruptured (macerated) urinary bladder with body of bladder
almost entirely separated from its neck.
REMARKS:
1. Above were incurred by crushing injury.
2. Prognosis very poor.
(Sgd.)
MELQUIADES A.
BRAVO
Physi
cian
on
Duty.
1

Three days later, Novelito Ylarde died.

Ylarde's parents, petitioners in this case, filed a suit for damages against
both private respondents Aquino and Soriano. The lower court dismissed the
complaint on the following grounds: (1) that the digging done by the pupils is
in line with their course called Work Education; (2) that Aquino exercised the

utmost diligence of a very cautious person; and (3) that the demise of Ylarde
was due to his own reckless imprudence. 2
On appeal, the Court of Appeals affirmed the Decision of the lower court.
Petitioners base their action against private respondent Aquino on Article
2176 of the Civil Code for his alleged negligence that caused their son's
death while the complaint against respondent Soriano as the head of school
is founded on Article 2180 of the same Code.
Article 2176 of the Civil Code provides:
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
On the other hand, the applicable provision of Article 2180 states:
Art. 2180. x x x
xxx xxx xxx
Lastly, teachers or heads of establishments of arts and trades
shall be liable for damages caused by their pupils and students
or apprentices, so long as they remain in their custody. 3
The issue to be resolved is whether or not under the cited provisions, both
private respondents can be held liable for damages.
As regards the principal, We hold that he cannot be made responsible for the
death of the child Ylarde, he being the head of an academic school and not a
school of arts and trades. This is in line with Our ruling in Amadora vs. Court
of Appeals, 4 wherein this Court thoroughly discussed the doctrine that under
Article 2180 of the Civil Code, it is only the teacher and not the head of an
academic school who should be answerable for torts committed by their
students. This Court went on to say that in a school of arts and trades, it is
only the head of the school who can be held liable. In the same case, We
explained:
After an exhaustive examination of the problem, the Court has
come to the conclusion that the provision in question should
apply to all schools, academic as well as non-academic. Where
the school is academic rather than technical or vocational in
nature, responsibility for the tort committed by the student will
attach to the teacher in charge of such student, following the
first part of the provision. This is the general rule. In the case of
establishments of arts and trades, it is the head thereof, and only

he, who shall be held liable as an exception to the general rule.

In other words, teachers in general shall be liable for the acts of
their students except where the school is technical in nature, in
which case it is the head thereof who shall be answerable.
Following the canon ofreddendo singula sinquilis 'teachers'
should apply to the words "pupils and students' and 'heads of
establishments of arts and trades to the word "apprentices."
Hence, applying the said doctrine to this case, We rule that private
respondent Soriano, as principal, cannot be held liable for the reason that the
school he heads is an academic school and not a school of arts and trades.
Besides, as clearly admitted by private respondent Aquino, private
respondent Soriano did not give any instruction regarding the digging.
From the foregoing, it can be easily seen that private respondent Aquino can
be held liable under Article 2180 of the Civil Code as the teacher-in-charge of
the children for being negligent in his supervision over them and his failure
to take the necessary precautions to prevent any injury on their persons.
However, as earlier pointed out, petitioners base the alleged liability of
private respondent Aquino on Article 2176 which is separate and distinct
from that provided for in Article 2180.
With this in mind, the question We need to answer is this: Were there acts
and omissions on the part of private respondent Aquino amounting to fault or
negligence which have direct causal relation to the death of his pupil Ylarde?
Our answer is in the affirmative. He is liable for damages.
From a review of the record of this case, it is very clear that private
respondent Aquino acted with fault and gross negligence when he: (1) failed
to avail himself of services of adult manual laborers and instead utilized his
pupils aged ten to eleven to make an excavation near the one-ton concrete
stone which he knew to be a very hazardous task; (2) required the children to
remain inside the pit even after they had finished digging, knowing that the
huge block was lying nearby and could be easily pushed or kicked aside by
any pupil who by chance may go to the perilous area; (3) ordered them to
level the soil around the excavation when it was so apparent that the huge
stone was at the brink of falling; (4) went to a place where he would not be
able to check on the children's safety; and (5) left the children close to the
excavation, an obviously attractive nuisance.
The negligent act of private respondent Aquino in leaving his pupils in such a
dangerous site has a direct causal connection to the death of the child
Ylarde. Left by themselves, it was but natural for the children to play around.
Tired from the strenuous digging, they just had to amuse themselves with

whatever they found. Driven by their playful and adventurous instincts and
not knowing the risk they were facing three of them jumped into the hole
while the other one jumped on the stone. Since the stone was so heavy and
the soil was loose from the digging, it was also a natural consequence that
the stone would fall into the hole beside it, causing injury on the unfortunate
child caught by its heavy weight. Everything that occurred was the natural
and probable effect of the negligent acts of private respondent Aquino.
Needless to say, the child Ylarde would not have died were it not for the
unsafe situation created by private respondent Aquino which exposed the
lives of all the pupils concerned to real danger.
We cannot agree with the finding of the lower court that the injuries which
resulted in the death of the child Ylarde were caused by his own reckless
imprudence, It should be remembered that he was only ten years old at the
time of the incident, As such, he is expected to be playful and daring. His
actuations were natural to a boy his age. Going back to the facts, it was not
only him but the three of them who jumped into the hole while the remaining
boy jumped on the block. From this, it is clear that he only did what any
other ten-year old child would do in the same situation.
In ruling that the child Ylarde was imprudent, it is evident that the lower
court did not consider his age and maturity. This should not be the case. The
degree of care required to be exercised must vary with the capacity of the
person endangered to care for himself. A minor should not be held to the
same degree of care as an adult, but his conduct should be judged according
to the average conduct of persons of his age and experience. 5 The standard
of conduct to which a child must conform for his own protection is that
degree of care ordinarily exercised by children of the same age, capacity,
discretion, knowledge and experience under the same or similar
circumstances. 6Bearing this in mind, We cannot charge the child Ylarde with
reckless imprudence.
The court is not persuaded that the digging done by the pupils can pass as
part of their Work Education. A single glance at the picture showing the
excavation and the huge concrete block 7 would reveal a dangerous site
requiring the attendance of strong, mature laborers and not ten-year old
grade-four pupils. We cannot comprehend why the lower court saw it
otherwise when private respondent Aquino himself admitted that there were
no instructions from the principal requiring what the pupils were told to do.
Nor was there any showing that it was included in the lesson plan for their
Work Education. Even the Court of Appeals made mention of the fact that
respondent Aquino decided all by himself to help his co-teacher Banez bury

the concrete remnants of the old school shop. 8 Furthermore, the excavation
should not be placed in the category of school gardening, planting trees, and
the like as these undertakings do not expose the children to any risk that
could result in death or physical injuries.
The contention that private respondent Aquino exercised the utmost
diligence of a very cautious person is certainly without cogent basis. A
reasonably prudent person would have foreseen that bringing children to an
excavation site, and more so, leaving them there all by themselves, may
result in an accident. An ordinarily careful human being would not assume
that a simple warning "not to touch the stone" is sufficient to cast away all
the serious danger that a huge concrete block adjacent to an excavation
would present to the children. Moreover, a teacher who stands in loco
parentis to his pupils would have made sure that the children are protected
from all harm in his company.
We close by categorically stating that a truly careful and cautious person
would have acted in all contrast to the way private respondent Aquino did.
Were it not for his gross negligence, the unfortunate incident would not have
occurred and the child Ylarde would probably be alive today, a grown- man of
thirty-five. Due to his failure to take the necessary precautions to avoid the
hazard, Ylarde's parents suffered great anguish all these years.
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and
the questioned judgment of the respondent court is REVERSED and SET
ASIDE and another judgment is hereby rendered ordering private respondent
Edagardo Aquino to pay petitioners the following:
(1) Indemnity for the death of Child Ylarde P30,000.00
(2) Exemplary damages 10,000.00
(3) Moral damages 20,000.00
SO ORDERED.

LAST CLEAR CHANCE

G.R. No. L-68102 July 16, 1992

GEORGE MCKEE and ARACELI KOH MCKEE, petitioners,

vs.
INTERMEDIATE APPELLATE COURT, JAIME TAYAG and ROSALINDA
MANALO, respondents.
G.R. No. L-68103 July 16, 1992
CARMEN DAYRIT KOH, LETICIA KOH, JULIETA KOH TUQUERO, ARACELI
KOH MCKEE, ANTONIO KOH and ELIZABETH KOH TURLA, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, JAIME TAYAG and ROSALINDA
MANALO, respondents.
DAVIDE, JR., J.:
Petitioners urge this Court to review and reverse the Resolution of the Court
of Appeals in C.A.-G.R. CV Nos. 69040-41, promulgated on 3 April 1984,
which set aside its previous Decision dated 29 November 1983 reversing the
Decision of the trial court which dismissed petitioners' complaints in Civil
Case No. 4477 and Civil Case No. 4478 of the then Court of First Instance
(now Regional Trial Court) of Pampanga entitled "Carmen Dayrit Koh, Leticia
Koh, Julieta Koh Tuquero, Araceli Koh McKee and Elizabeth Koh Turla vs. Jaime
Tayag and Rosalinda Manalo," and "George McKee and Araceli Koh McKee vs.
Jaime Tayag and Rosalinda Manalo," respectively, and granted the private
respondents' counterclaim for moral damages, attorney's fees and litigation
expenses.
The said civil cases for damages based on quasi-delict were filed as a result
of a vehicular accident which led to the deaths of Jose Koh, Kim Koh McKee
and Loida Bondoc and caused physical injuries to George Koh McKee,
Christopher Koh McKee and petitioner Araceli Koh McKee.
Petitioners in G.R. No. 68102, parents of the minors George Koh McKee,
Christopher Koh McKee and the deceased Kim Koh McKee, were the plaintiffs
in Civil Case No. 4478, while petitioner Carmen Dayrit Koh and her copetitioners in G.R. No. 68103, who are the wife and children, respectively, of
the late Jose Koh, were the plaintiffs in Civil Case No. 4477. Upon the other
hand, private respondents are the owners of the cargo truck which figured in
the mishap; a certain Ruben Galang was the driver of the truck at the time of
the accident.
The antecedent facts are not disputed.
Between nine and ten o'clock in the morning of 8 January 1977, in Pulong
Pulo Bridge along MacArthur Highway, between Angeles City and San
Fernando, Pampanga, a head-on-collision took place between an

International cargo truck, Loadstar, with Plate No. RF912-T Philippines '76
owned by private respondents, and driven by Ruben Galang, and a Ford
Escort car bearing Plate No. S2-850 Pampanga '76 driven by Jose Koh. The
collision resulted in the deaths of Jose Koh, Kim Koh McKee and Loida
Bondoc, and physical injuries to George Koh McKee, Christopher Koh McKee
and Araceli Koh McKee, all passengers of the Ford Escort.
Jose Koh was the father of petitioner Araceli Koh McKee, the mother of minors
George, Christopher and Kim Koh McKee. Loida Bondoc, on the other hand,
was the baby sitter of one and a half year old Kim. At the time of the
collision, Kim was seated on the lap of Loida Bondoc who was at the front
passenger's seat of the car while Araceli and her two (2) sons were seated at
the car's back seat.
Immediately before the collision, the cargo truck, which was loaded with two
hundred (200) cavans of rice weighing about 10,000 kilos, was traveling
southward from Angeles City to San Fernando Pampanga, and was bound for
Manila. The Ford Escort, on the other hand, was on its way to Angeles City
from San Fernando. When the northbound car was about (10) meters away
from the southern approach of the bridge, two (2) boys suddenly darted from
the right side of the road and into the lane of the car. The boys were moving
back and forth, unsure of whether to cross all the way to the other side or
turn back. Jose Koh blew the horn of the car, swerved to the left and entered
the lane of the truck; he then switched on the headlights of the car, applied
the brakes and thereafter attempted to return to his lane. Before he could do
so, his car collided with the truck. The collision occurred in the lane of the
truck, which was the opposite lane, on the said bridge.
The incident was immediately reported to the police station in Angeles City;
consequently, a team of police officers was forthwith dispatched to conduct
an on the spot investigation. In the sketch 1 prepared by the investigating
officers, the bridge is described to be sixty (60) "footsteps" long and fourteen
(14) "footsteps" wide seven (7) "footsteps" from the center line to the
inner edge of the side walk on both sides. 2 Pulong Pulo Bridge, which spans
a dry brook, is made of concrete with soft shoulders and concrete railings on
both sides about three (3) feet high.
The sketch of the investigating officer discloses that the right rear portion of
the cargo truck was two (2) "footsteps" from the edge of the right sidewalk,
while its left front portion was touching the center line of the bridge, with the
smashed front side of the car resting on its front bumper. The truck was
about sixteen (16) "footsteps" away from the northern end of the bridge
while the car was about thirty-six (36) "footsteps" from the opposite end.

Skid marks produced by the right front tire of the truck measured nine (9)
"footsteps", while skid marks produced by the left front tire measured five (5)
"footsteps." The two (2) rear tires of the truck, however, produced no skid
marks.
In his statement to the investigating police officers immediately after the
accident, Galang admitted that he was traveling at thirty (30) miles (48
kilometers) per hour.
As a consequence of the collision, two (2) cases, Civil Case No. 4477 and No.
4478, were filed on 31 January 1977 before the then Court of First Instance of
Pampanga and were raffled to Branch III and Branch V of the said court,
respectively. In the first, herein petitioners in G.R. No. 68103 prayed for the
award of P12,000.00 as indemnity for the death of Jose Koh, P150,000.00 as
moral damages, P60,000.00 as exemplary damages, P10,000.00 for litigation
expenses, P6,000.00 for burial expenses, P3,650.00 for the burial lot and
P9,500.00 for the tomb, plus attorney's fees. 3 In the second case, petitioners
in G.R. No. 68102 prayed for the following: (a) in connection with the death
of Kim McKee, the sum of P12,000.00 as death benefit, P3,150.00 for funeral
services, P3,650.00 for the cemetery lot, P3,000.00 for the tomb, P50,000.00
as moral damages, P10,000.00 as exemplary damages and P2,000.00 as
miscellaneous damages; (b) in the case of Araceli Koh McKee, in connection
with the serious physical injuries suffered, the sum of P100,000.00 as moral
damages, P20,000.00 as exemplary damages, P12,000.00 for loss of
earnings, P5,000.00 for the hospitalization expenses up to the date of the
filing of the complaint; and (c) with respect to George McKee, Jr., in
connection with the serious physical injuries suffered, the sum of P50,000.00
as moral damages, P20,000.00 as exemplary damages and the following
medical expenses: P3,400 payable to the Medical Center, P3,500.00 payable
to the St. Francis Medical Center, P5,175.00 payable to the Clark Air Base
Hospital, and miscellaneous expenses amounting to P5,000.00. They also
sought an award of attorney's fees amounting to 25% of the total award plus
traveling and hotel expenses, with costs. 4
On 1 March 1977, an Information charging Ruben Galang with the crime of
"Reckless Imprudence Resulting to (sic) Multiple Homicide and Physical
Injuries and Damage to Property" was filed with the trial court. It was
docketed as Criminal Case No. 3751 and was raffled to Branch V of the court,
the same Branch where Civil Case No. 4478 was assigned. 5
In their Answer with Counterclaim in Civil Case No. 4477, private respondents
asserted that it was the Ford Escort car which "invaded and bumped (sic) the
lane of the truck driven by Ruben Galang and, as counterclaim, prayed for

the award of P15,000.00 as attorney's fees, P20,000.00 as actual and

liquidated damages, P100,000.00 as moral damages and P30,000.00 as
business losses. 6 In Civil Case No. 4478, private respondents first filed a
motion to dismiss on grounds of pendency of another action (Civil Case No.
4477) and failure to implead an indispensable party, Ruben Galang, the truck
driver; they also filed a motion to consolidate the case with Civil Case No.
4477 pending before Branch III of the same court, which was opposed by the
plaintiffs. 7 Both motions were denied by Branch V, then presided over by
Judge Ignacio Capulong. Thereupon, private respondents filed their Answer
with Counter-claim 8 wherein they alleged that Jose Koh was the person "at
fault having approached the lane of the truck driven by Ruben Galang, . . .
which was on the right lane going towards Manila and at a moderate speed
observing all traffic rules and regulations applicable under the circumstances
then prevailing;" in their counterclaim, they prayed for an award of damages
as may be determined by the court after due hearing, and the sums of
P10,000.00 as attorney's fees and P5,000.00 as expenses of litigation.
Petitioners filed their Answers to the Counterclaims in both cases.
To expedite the proceedings, the plaintiffs in Civil Case No. 4478 filed on 27
March 1978 a motion to adopt the testimonies of witnesses taken during the
hearing of Criminal Case No. 3751, which private respondents opposed and
which the court denied. 9 Petitioners subsequently moved to reconsider the
order denying the motion for consolidation, 10 which Judge Capulong granted
in the Order of 5 September 1978; he then directed that Civil Case No. 4478
be consolidated with Civil Case No. 4477 in Branch III of the court then
presided over by Judge Mario Castaeda, Jr.
Left then with Branch V of the trial court was Criminal Case No. 3751.
In the civil cases, the plaintiffs presented as witnesses Araceli Koh McKee,
Fernando Nuag, Col. Robert Fitzgerald, Primitivo Parel, Eugenio Tanhueco,
Carmen Koh and Antonio Koh, 11 and offered several documentary exhibits.
Upon the other hand, private respondents presented as witnesses Ruben
Galang, Zenaida Soliman, Jaime Tayag and Roman Dayrit. 12
In the criminal case, the prosecution presented as witnesses Mrs. Araceli
McKee, Salud Samia, Pfc. Fernando Nuag, Dr. Ramon Panlilio, Dr. Robert
Fitzgerald, Dr. Roberto Yuson, Dr. Hector, Ulanday, Pfc. Benigno de Leon,
Marina Bolos, Primitivo Parel, Rogelio Pineda, Benito Caraan and Eugenio
Tanhueco, and offered several documentary exhibits. 13 Upon the other hand,
the defense presented the accused Ruben Galang, Luciano Punzalan,
Zenaida Soliman and Roman Dayrit, and offered documentary exhibits. 14

On 1 October 1980, Judge Capulong rendered a decision against the accused

Ruben Galang in the aforesaid criminal case. The dispositive portion of the
decision reads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered finding the accused Ruben Galang guilty beyond
reasonable doubt of the crime charged in the information and
after applying the provisions of Article 365 of the Revised Penal
Code and indeterminate sentence law, this Court, imposes upon
said accused Ruben Galang the penalty of six (6) months
of arresto mayor as minimum to two (2) years, four (4) months
and one (1) day of prision correccional as maximum; the accused
is further sentenced to pay and indemnify the heirs of Loida
Bondoc the amount of P12,000.00 as indemnity for her death; to
reimburse the heirs of Loida Bondoc the amount of P2,000.00
representing the funeral expenses; to pay the heirs of Loida
Bondoc the amount of P20,000.00 representing her loss of
income; to indemnify and pay the heirs of the deceased Jose Koh
the value of the car in the amount of P53,910.95, and to pay the
costs. 15
The aforecited decision was promulgated only on 17 November 1980; on the
same day, counsel for petitioners filed with Branch III of the court where
the two (2) civil cases were pending a manifestation to that effect and
attached thereto a copy of the decision. 16
Upon the other hand, Judge Mario Castaeda, Jr. dismissed the two (2) civil
cases on 12 November 1980 and awarded the private respondents moral
damages, exemplary damages and attorney's fees. 17 The dispositive portion
of the said decision reads as follows:
WHEREFORE, finding the preponderance of evidence to be in
favor of the defendants and against the plaintiffs, these cases
are hereby ordered DISMISSED with costs against the plaintiffs.
The defendants had proven their counter-claim, thru evidences
(sic) presented and unrebutted. Hence, they are hereby awarded
moral and exemplary damages in the amount of P100,000.00
plus attorney's fee of P15,000.00 and litigation expenses for (sic)
P2,000.00. The actual damages claimed for (sic) by the
defendants is (sic) hereby dismissing for lack of proof to that
effect (sic). 18
A copy of the decision was sent by registered mail to the petitioners on 28
November 1980 and was received on 2 December 1980. 19

Accused Ruben Galang appealed the judgment of conviction to the Court of

Appeals. The appeal was docketed as C.A.-G.R. Blg. 24764-CR and was
assigned to the court's Third Division. Plaintiffs in Civil Cases Nos. 4477 and
4478 likewise separately appealed the 12 November 1980 decision to the
appellate court. The appeals were docketed as C.A.-G.R. No. 69041-R and
C.A.-G.R. No. 69040-R, respectively, and were assigned to the Fourth Civil
Cases Division.
On 4 October 1982, the respondent Court promulgated its decision 20 in C.A.G.R. Blg. 24764-CR affirming the conviction of Galang. 21 The dispositive
portion of the decision reads:
DAHIL DITO, ang hatol na paksa ng naritong paghahabol ay
Aming pinagtitibay sa kanyang kabuuan. Ang naghahabol pa rin
ang pinagbabayad ng gugol ng paghahabol.
A motion for reconsideration of the decision was denied by the respondent
Court in its Kapasiyahan promulgated on 25 November 1982. 22 A petition for
its review 23 was filed with this Court; said petition was subsequently denied.
A motion for its reconsideration was denied with finality in the Resolution of
20 April 1983. 24
On 29 November 1983, respondent Court, by then known as the
Intermediate Appellate Court, promulgated its consolidated decision in A.C.G.R. CV Nos. 69040 and 69041, 25 the dispositive portion of which reads:
WHEREFORE, the decision appealed from it hereby reversed and
set aside and another one is rendered, ordering defendantsappellees to pay plaintiffs-appellants as follows:
For the death of Jose Koh:
P 50,000.00 as moral damages
P 12,000.00 as death indemnity
P 16,000.00 for the lot and tomb (Exhs. U and U-1)
P 4,000.00 expenses for holding a wake (p. 9, tsn
April 19, 1979)
P 950.00 for the casket (Exh. M)
P 375.00 for the vault services (Exhs. V and V-1)
For the death of Kim Koh McKee:
P
P
P
P
P

50,000.00 as moral damages

12,000.00 as death indemnity
1,000.00 for the purchase of the burial lot (Exh. M)
950.00 for funeral services (Exh. M-1)
375.00 for vault services (Exhs. V and V-1)

For the physical injuries suffered by George Koh McKee:

P 25,000.00 as moral damages
P 672.00 for Clark Field Hospital (Exh. E)
P 4,384.00 paid to Angeles Medical Clinic (Exhs. D, D1 and
D-2)
P 1,555.00 paid to St. Francis Medical Center (Exhs. B
and B-1)
For the physical injuries suffered by Araceli Koh McKee:
P 25,000.00 as moral damages
P 1,055.00 paid to St. Francis Medical Center (Exhs. G
and
G-1)
P 75.00 paid to St. Francis Medical Center (Exhs. G-2
and G-3)
P 428.00 to Carmelite General Hospital (Exh. F)
P 114.20 to Muoz Clinic (Exh. MM)
For the physical injuries suffered by Christopher Koh McKee:
P 10,000.00 as moral damages
P 1,231.10 to St. Francis Medical Center (Exhs. L and
L-1)
P 321.95 to F.C.E.A. Hospital (Exhs. G and D-1)
In addition, We award P10,000.00 as counsel (sic) fees in Civil
Case No. 4477 and another P10,000.00; as counsel (sic) fees in
Civil Case No. 4478.
No pronouncement as to costs.
SO ORDERED.

26

The decision is anchored principally on the respondent Court's findings that it

was Ruben Galang's inattentiveness or reckless imprudence which caused
the accident. The appellate court further said that the law presumes
negligence on the part of the defendants (private respondents), as
employers of Galang, in the selection and supervision of the latter; it was
further asserted that these defendants did not allege in their Answers the
defense of having exercised the diligence of a good father of a family in
selecting and supervising the said employee. 27 This conclusion of reckless
imprudence is based on the following findings of fact:

In the face of these diametrically opposed judicial positions, the

determinative issue in this appeal is posited in the fourth
assigned error as follows:
IV
THE TRIAL COURT ERRED WHEN IT HELD THE (sic) DRIVER OF
THE TRUCK STOPPED HIS TRUCK BLEW HIS HORN SWITCHED ON
HIS HEADLIGHTS AND COULD NOT SWERVE TO THE RIGHT.
Supportive of plaintiffs' version, principal witness Araceli Koh McKee testified
thus:
Q What happened after that, as you approached the
bridge?
A When we were approaching the bridge, two (2)
boys tried to cross the right lane on the right side of
the highway going to San Fernando. My father, who is
(sic) the driver of the car tried to avoid the two (2)
boys who were crossing, he blew his horn and
swerved to the left to avoid hitting the two (2) boys.
We noticed the truck, he switched on the headlights
to warn the truck driver, to slow down to give us the
right of way to come back to our right lane.
Q Did the truck slow down?
A No, sir, it did not, just (sic) continued on its way.
Q What happened after that?
A After avoiding the two (2) boys, the car tried to go
back to the right lane since the truck is (sic) coming,
my father stepped on the brakes and all what (sic) I
heard is the sound of impact (sic), sir. (tsn, pp. 5-6,
July 22, 1977); or (Exhibit "O" in these Civil Cases).
xxx xxx xxx
Q Mrs. how did you know that the truck driven by the
herein accused, Ruben Galang did not reduce its
speed before the actual impact of collision (sic) as
you narrated in this Exhibit "1," how did you know
(sic)?
A It just kept on coming, sir. If only he reduced his
speed, we could have got (sic) back to our right lane
on side (sic) of the highway, sir. (tsn. pp. 33-34 July

22, 1977) or (Exhibit "O" in these Civil Cases) (pp.

30-31, Appellants' Brief).
Plaintiffs' version was successfully corroborated to Our satisfaction by the
following facts and circumstances:
1. An impartial eye-witness to the mishap, Eugenio Tanhueco,
declared that the truck stopped only when it had already collided
with the car:
xxx xxx xxx
Tanhueco repeated the same testimony during the hearing in the
criminal case:
xxx xxx xxx
Tanhueco could (sic) not be tagged as an accommodation
witness because he was one of the first to arrive at the scene of
the accident. As a matter of fact, he brought one of the injured
passengers to the hospital.
We are not prepared to accord faith and credit to defendants'
witnesses, Zenaida Soliman, a passenger of the truck, and
Roman Dayrit, who supposedly lived across the street.
Regarding Soliman, experience has shown that in the ordinary
course of events people usually take the side of the person with
whom they are associated at the time of the accident, because,
as a general rule, they do not wish to be identified with the
person who was at fault. Thus an imaginary bond is
unconsciously created among the several persons within the
same group (People vs. Vivencio, CA-G.R. No. 00310-CR, Jan. 31,
1962).
With respect to Dayrit, We can not help suspecting (sic) that he is
an accommodation witness. He did not go to the succor of the
injured persons. He said he wanted to call the police authorities
about the mishap, but his phone had no dial tone. Be this (sic) as
it may, the trial court in the criminal case acted correctly in
refusing to believe Dayrit.
2. Exhibit 2, the statement of Galang, does not include the claim
that Galang stopped his truck at a safe distance from the car,
according to plaintiffs (p. 25, Appellants' Brief). This contention of
appellants was completely passed sub-silencio or was not refuted
by appellees in their brief. Exhibit 2 is one of the exhibits not
included in the record. According to the Table of Contents

submitted by the court below, said Exhibit 2 was not submitted

by defendants-appellees. In this light, it is not far-fetched to
surmise that Galang's claim that he stopped was an eleventhhour desperate attempt to exculpate himself from imprisonment
and damages.
3. Galang divulged that he stopped after seeing the car about 10
meters away:
ATTY. SOTTO:
Q Do I understand from your testimony that inspite of
the fact that you admitted that the road is straight
and you may be able to (sic) see 500-1000 meters
away from you any vehicle, you first saw that car
only about ten (10) meters away from you for the
first time?
xxx xxx xxx
A I noticed it, sir, that it was about ten (10) meters
away.
ATTY. SOTTO:
Q So, for clarification, you clarify and state under
your oath that you have (sic) not noticed it before
that ten (10) meters? (Tsn. 3 to 5, Sept. 18, 1979). (p.
16, Appellants' Brief)
Galang's testimony substantiate (sic) Tanhueco's statement that
Galang stopped only because of the impact. At ten (10) meters
away, with the truck running at 30 miles per hour, as revealed in
Galang's affidavit (Exh. 2; p. 25, Appellants' brief), it is well-nigh
impossible to avoid a collision on a bridge.
5. Galang's truck stopped because of the collision, and not
because he waited for Jose Koh to return to his proper lane. The
police investigator, Pfc. Fernando L. Nuag, stated that he found
skid marks under the truck but there were not (sic) skid marks
behind the truck (pp. 19-20, t.s.n., Nov. 3, 1978). The presence of
skid marks show (sic) that the truck was speeding. Since the skid
marks were found under the truck and none were found at the
rear of the truck, the reasonable conclusion is that the skid
marks under the truck were caused by the truck's front wheels
when the trucks (sic) suddenly stopped seconds before the
mishap in an endeavor to avoid the same. But, as aforesaid,
Galang saw the car at barely 10 meters away, a very short

distance to avoid a collision, and in his futile endeavor to avoid

the collision he abruptly stepped on his brakes but the smashup
happened just the same.
For the inattentiveness or reckless imprudence of Galang, the
law presumes negligence on the part of the defendants in the
selection of their driver or in the supervision over him. Appellees
did not allege such defense of having exercised the duties of a
good father of a family in the selection and supervision of their
employees in their answers. They did not even adduce evidence
that they did in fact have methods of selection and programs of
supervision. The inattentiveness or negligence of Galang was the
proximate cause of the mishap. If Galang's attention was on the
highway, he would have sighted the car earlier or at a very safe
distance than (sic) 10 meters. He proceeded to cross the bridge,
and tried to stop when a collision was already inevitable,
because at the time that he entered the bridge his attention was
not riveted to the road in front of him.
On the question of damages, the claims of appellants were
amply proven, but the items must be reduced. 28
A motion for reconsideration alleging improper appreciation of the facts was
subsequently filed by private respondents on the basis of which the
respondent Court, in its Resolution of 3 April 1984, 29 reconsidered and set
aside its 29 November 1983 decision and affirmed in toto the trial court's
judgment of 12 November 1980. A motion to reconsider this Resolution was
denied by the respondent Court on 4 July 1984. 30
Hence, this petition.
Petitioners allege that respondent Court:
I
. . . COMMITTED A VERY SERIOUS AND GRAVE ERROR WHEN IT
TOTALLY REVERSED ITS DECISION BY MERELY BASING IT FROM
(sic) A MERE "PRESUMPTION," TOTALLY DISREGARDING THE
PRIVATE RESPONDENTS' DRIVER'S ADMISSIONS AND
CONFESSIONS, WHO EXCLUSIVELY COMMITTED THE PROXIMATE
CAUSE OF THE ACCIDENT (sic), FURTHER, IT ALSO DISREGARDED
THE EVIDENCE ADDUCED AND FOUND IN THE RECORDS;
THEREFORE, RESPONDENT COURT'S RESOLUTIONS (ANNEXES A
and B, PETITION) ARE CLEARLY ERRONEOUS, PURELY BASED ON
SPECULATIONS, CONJECTURES AND WITHOUT SURE FOUNDATION
IN THE EVIDENCE.

II
. . . GRAVELY ABUSED ITS DISCRETION AND ERRED WHEN IN
EFFECT IT DISREGARDED A DOCTRINE LAID DOWN BY THIS
HONORABLE COURT BY STATING AMONG OTHERS, "IT CANNOT
CATEGORICALLY ADOPT THE FINDINGS OF GUILT IN THE CRIMINAL
CASE WHERE THE DRIVER OF THE TRUCK INVOLVED IN THE
ACCIDENT WAS INDICTED.
III
. . . PATENTLY COMMITTED GRAVE ABUSE OF DISCRETION AND
MADE A MISLEADING PRONOUNCEMENT, WHEN IT HELD: "IT IS
THUS INCUMBENT UPON THE PLAINTIFFS-APPELLANTS
(APPELLEES WRONGLY MENTIONED IN THE RESOLUTION) TO
PROVE THEIR ALLEGATIONS THAT THE PROXIMATE CAUSE OF THE
ACCIDENT WAS THE NEGLIGENCE OF PRIVATE RESPONDENTS'
DRIVER.
IV
. . . COMMITTED ANOTHER GRIEVIOUS (sic) ERROR; COMMITTED
GRAVE ABUSE OF DISCRETION AND CITED ANOTHER CASE
WHICH IS CLEARLY INAPPLICABLE TO THESE CASES.
V
. . . COMMITTED A PATENT ERROR AND GRAVELY ABUSED ITS
DISCRETION IN ADOPTING THE FINDINGS OF THE TRIAL COURT
WHICH ARE CLEARLY ERRONEOUS AND CONTRARY TO THE
EVIDENCE FOUND IN THE RECORDS, SPECIALLY THEY (sic) ARE
CONTRARY TO THE ADMITTED FACTS AND JUDICIAL ADMISSIONS
MADE BY THE PRIVATE RESPONDENTS' DRIVER.
VI
. . . EXCEEDED ITS JURISDICTION, COMMITTED GRAVE ABUSE OF
DISCRETION AND GRAVELY ERRED WHEN IT AWARDED DAMAGES
TO THE PRIVATE RESPONDENTS WHEN SAID AWARD IS NOT
SUPPORTED BY EVIDENCE, IN THE RECORDS, AND SAID AWARD
IS NOT ALLOWED BY LAW AND THE CONSISTENT DECISIONS OF
THIS HONORABLE COURT.
VII
. . . EXCEEDED ITS JURISDICTION, COMMITTED GRAVE ABUSE OF
DISCRETION AND GRAVELY ERRED WHEN IT ERRONEOUSLY SET
ASIDE ITS DECISION AWARDING DAMAGES TO PETITIONERS
WHICH IS CLEARLY IN ACCORDANCE WITH THE EVIDENCE, THE

LAW AND JURISPRUDENCE RELATIVE TO THE AWARD OF

DAMAGES. 31
In the Resolution of 12 September 1984, We required private respondents to
Comment on the petition. 32 After the said Comment 33 was filed, petitioners
submitted a Reply 34 thereto; this Court then gave due course to the instant
petitions and required petitioners to file their Brief, 35 which they accordingly
complied with.
There is merit in the petition. Before We take on the main task of dissecting
the arguments and counter-arguments, some observations on the procedural
vicissitudes of these cases are in order.
Civil Cases Nos. 4477 and 4478, which were for the recovery of civil liability
arising from a quasi-delict under Article 2176 in relation to Article 2180 of the
Civil Code, were filed ahead of Criminal Case No. 3751. Civil Case No. 4478
was eventually consolidated with Civil Case No. 4477 for joint trial in Branch
III of the trial court. The records do not indicate any attempt on the part of
the parties, and it may therefore be reasonably concluded that none was
made, to consolidate Criminal Case No. 3751 with the civil cases, or viceversa. The parties may have then believed, and understandably so, since by
then no specific provision of law or ruling of this Court expressly allowed
such a consolidation, that an independent civil action, authorized under
Article 33 in relation to Article 2177 of the Civil Code, such as the civil cases
in this case, cannot be consolidated with the criminal case. Indeed, such
consolidation could have been farthest from their minds as Article 33 itself
expressly provides that the "civil action shall proceed independently of the
criminal prosecution, and shall require only a preponderance of evidence."
Be that as it may, there was then no legal impediment against such
consolidation. Section 1, Rule 31 of the Rules of Court, which seeks to avoid a
multiplicity of suits, guard against oppression and abuse, prevent delays,
clear congested dockets to simplify the work of the trial court, or in short,
attain justice with the least expense to the parties litigants, 36 would have
easily sustained a consolidation, thereby preventing the unseeming, if no
ludicrous, spectacle of two (2) judges appreciating, according to their
respective orientation, perception and perhaps even prejudice, the same
facts differently, and thereafter rendering conflicting decisions. Such was
what happened in this case. It should not, hopefully, happen anymore. In the
recent case of Cojuangco vs. Court or Appeals, 37 this Court held that the
present provisions of Rule 111 of the Revised Rules of Court allow a
consolidation of an independent civil action for the recovery of civil liability
authorized under Articles 32, 33, 34 or 2176 of the Civil Code with the

criminal action subject, however, to the condition that no final judgment has
been rendered in that criminal case.
Let it be stressed, however, that the judgment in Criminal Case No. 3751
finding Galang guilty of reckless imprudence, although already final by virtue
of the denial by no less than this Court of his last attempt to set aside the
respondent Court's affirmance of the verdict of conviction, has no relevance
or importance to this case.
As We held in Dionisio vs. Alvendia, 38 the responsibility arising from fault or
negligence in a quasi-delict is entirely separate and distinct from the civil
liability arising from negligence under the Penal Code. And, as more
concretely stated in the concurring opinion of Justice J.B.L. Reyes, "in the
case of independent civil actions under the new Civil Code, the result of the
criminal case, whether acquittal or conviction, would be entirely irrelevant to
the civil action." 39 In Salta vs. De Veyra and PNB vs. Purisima, 40 this Court
stated:
. . . It seems perfectly reasonable to conclude that the civil
actions mentioned in Article 33, permitted in the same manner to
be filed separately from the criminal case, may proceed
similarly regardless of the result of the criminal case.
Indeed, when the law has allowed a civil case related to a
criminal case, to be filed separately and to proceed
independently even during the pendency of the latter case, the
intention is patent to make the court's disposition of the criminal
case of no effect whatsoever on the separate civil case. This
must be so because the offenses specified in Article 33 are of
such a nature, unlike other offenses not mentioned, that they
may be made the subject of a separate civil action because of
the distinct separability of their respective juridical cause or
basis of action . . . .
What remains to be the most important consideration as to why the decision
in the criminal case should not be considered in this appeal is the fact that
private respondents were not parties therein. It would have been entirely
different if the petitioners' cause of action was for damages arising from
a delict, in which case private respondents' liability could only be subsidiary
pursuant to Article 103 of the Revised Penal Code. In the absence of any
collusion, the judgment of conviction in the criminal case against Galang
would have been conclusive in the civil cases for the subsidiary liability of
the private respondents. 41
And now to the merits of the petition.

It is readily apparent from the pleadings that the principal issue raised in this
petition is whether or not respondent Court's findings in its challenged
resolution are supported by evidence or are based on mere speculations,
conjectures and presumptions.
The principle is well-established that this Court is not a trier of facts.
Therefore, in an appeal by certiorari under Rule 45 of the Revised Rules of
Court, only questions of law may be raised. The resolution of factual issues is
the function of the lower courts whose findings on these matters are
received with respect and are, as a rule, binding on this Court. 42
The foregoing rule, however, is not without exceptions. Findings of facts of
the trial courts and the Court of Appeals may be set aside when such
findings are not supported by the evidence or when the trial court failed to
consider the material facts which would have led to a conclusion different
from what was stated in its judgment. 43The same is true where the appellate
court's conclusions are grounded entirely on conjectures, speculations and
surmises44 or where the conclusions of the lower courts are based on a
misapprehension of facts. 45
It is at once obvious to this Court that the instant case qualifies as one of the
aforementioned exceptions as the findings and conclusions of the trial court
and the respondent Court in its challenged resolution are not supported by
the evidence, are based on an misapprehension of facts and the inferences
made therefrom are manifestly mistaken. The respondent Court's decision of
29 November 1983 makes the correct findings of fact.
In the assailed resolution, the respondent Court held that the fact that the
car improperly invaded the lane of the truck and that the collision occurred in
said lane gave rise to the presumption that the driver of the car, Jose Koh,
was negligent. On the basis of this presumed negligence, the appellate court
immediately concluded that it was Jose Koh's negligence that was the
immediate and proximate cause of the collision. This is an unwarranted
deduction as the evidence for the petitioners convincingly shows that the car
swerved into the truck's lane because as it approached the southern end of
the bridge, two (2) boys darted across the road from the right sidewalk into
the lane of the car. As testified to by petitioner Araceli Koh McKee:
Q What happened after that, as you approached the
bridge?
A When we were approaching the bridge, two (2)
boys tried to cross the right lane on the right side of
the highway going to San Fernando. My father, who is
(sic) the driver of the car tried to avoid the two (2)

boys who were crossing, he blew his horn and

swerved to the left to avoid hitting the two (2) boys.
We noticed the truck, he switched on the headlights
to warn the truck driver, to slow down to give us the
right of way to come back to our right lane.
Q Did the truck slow down?
A No sir, it did not, just (sic) continued on its way.
Q What happened after that?
A After avoiding the two (2) boys, the car tried to go
back to the right lane since the truck is (sic) coming,
my father stepped on the brakes and all what (sic) I
heard is the sound of impact (sic), sir. 46
Her credibility and testimony remained intact even during cross examination.
Jose Koh's entry into the lane of the truck was necessary in order to avoid
what was, in his mind at that time, a greater peril death or injury to the
two (2) boys. Such act can hardly be classified as negligent.
Negligence was defined and described by this Court in Layugan vs.
Intermediate Appellate Court, 47 thus:
. . . Negligence is the omission to do something which a
reasonable man, guided by those considerations which ordinarily
regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do
(Black's Law Dictionary, Fifth Edition, 930), or as Judge Cooley
defines it, "(T)he failure to observe for the protection of the
interests of another person, that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such
other person suffers injury." (Cooley on Torts, Fourth Edition, vol.
3, 265)
In Picart vs. Smith (37 Phil 809, 813), decided more than seventy
years ago but still a sound rule, (W)e held:
The test by which to determine the existence of
negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged
negligent act use that(reasonable care and caution
which an ordinarily prudent person would have used
in the same situation?) If not, then he is guilty of
negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary

conduct of the discreet paterfamiliasof the Roman

law. . . .
In Corliss vs. Manila Railroad Company,

48

We held:

. . . Negligence is want of the care required by the circumstances.

It is a relative or comparative, not an absolute, term and its
application depends upon the situation of the parties and the
degree of care and vigilance which the circumstances reasonably
require. Where the danger is great, a high degree of care is
necessary, and the failure to observe it is a want of ordinary care
under the circumstances. (citing Ahern v. Oregon Telephone Co.,
35 Pac. 549 (1894).
On the basis of the foregoing definition, the test of negligence and the facts
obtaining in this case, it is manifest that no negligence could be imputed to
Jose Koh. Any reasonable and ordinary prudent man would have tried to
avoid running over the two boys by swerving the car away from where they
were even if this would mean entering the opposite lane. Avoiding such
immediate peril would be the natural course to take particularly where the
vehicle in the opposite lane would be several meters away and could very
well slow down, move to the side of the road and give way to the oncoming
car. Moreover, under what is known as the emergency rule, "one who
suddenly finds himself in a place of danger, and is required to act without
time to consider the best means that may be adopted to avoid the
impending danger, is not guilty of negligence, if he fails to adopt what
subsequently and upon reflection may appear to have been a better method,
unless the emergency in which he finds himself is brought about by his own
negligence." 49
Considering the sudden intrusion of the two (2) boys into the lane of the car,
We find that Jose Koh adopted the best means possible in the given situation
to avoid hitting them. Applying the above test, therefore, it is clear that he
was not guilty of negligence.
In any case, assuming, arguendo that Jose Koh is negligent, it cannot be said
that his negligence was the proximate cause of the collision. Proximate cause
has been defined as:
. . . that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury,
and without which the result would not have occurred. And more
comprehensively, the proximate legal cause is that acting first
and producing the injury, either immediately or by setting other
events in motion, all constituting a natural and continuous chain

of events, each having a close causal connection with its

immediate predecessor, the final event in the chain immediately
effecting the injury as a natural and probable result of the cause
which first acted, under such circumstances that the person
responsible for the first event should, as an ordinary prudent and
intelligent person, have reasonable ground to expect at the
moment of his act or default that an injury to some person might
probably result therefrom. 50
Applying the above definition, although it may be said that the act of Jose
Koh, if at all negligent, was the initial act in the chain of events, it cannot be
said that the same caused the eventual injuries and deaths because of the
occurrence of a sufficient intervening event, the negligent act of the truck
driver, which was the actual cause of the tragedy. The entry of the car into
the lane of the truck would not have resulted in the collision had the latter
heeded the emergency signals given by the former to slow down and give
the car an opportunity to go back into its proper lane. Instead of slowing
down and swerving to the far right of the road, which was the proper
precautionary measure under the given circumstances, the truck driver
continued at full speed towards the car. The truck driver's negligence
becomes more apparent in view of the fact that the road is 7.50 meters wide
while the car measures 1.598 meters and the truck, 2.286 meters, in width.
This would mean that both car and truck could pass side by side with a
clearance of 3.661 meters to spare. 51 Furthermore, the bridge has a level
sidewalk which could have partially accommodated the truck. Any
reasonable man finding himself in the given situation would have tried to
avoid the car instead of meeting it head-on.
The truck driver's negligence is apparent in the records. He himself said that
his truck was running at 30 miles (48 kilometers) per hour along the bridge
while the maximum speed allowed by law on a bridge 52 is only 30 kilometers
per hour. Under Article 2185 of the Civil Code, a person driving a vehicle is
presumed negligent if at the time of the mishap, he was violating any traffic
regulation. We cannot give credence to private respondents' claim that there
was an error in the translation by the investigating officer of the truck
driver's response in Pampango as to whether the speed cited was in
kilometers per hour or miles per hour. The law presumes that official duty
has been regularly performed; 53 unless there is proof to the contrary, this
presumption holds. In the instant case, private respondents' claim is based
on mere conjecture.

The truck driver's negligence was likewise duly established through the
earlier quoted testimony of petitioner Araceli Koh McKee which was duly
corroborated by the testimony of Eugenio Tanhueco, an impartial eyewitness
to the mishap.
Araceli Koh McKee testified further, thus:
xxx xxx xxx
Q Mrs. how did you know that the truck driven by the
herein accused, Ruben Galang did not reduce its
speed before the actual impact of collision as you
narrated in this Exhibit "1," how did you know?
A It just kept on coming, sir. If only he reduced his
speed, we could have got (sic) back to our right lane
on side (sic) of the highway, sir. (tsn, pp. 33-34, July
22, 1977) or (Exhibit; "O" in these Civil Cases) (pp.
30-31, Appellants' Brief) 54
while Eugenio Tanhueco testified thus:
Q When you saw the truck, how was it moving?
A It was moving 50 to 60 kilometers per hour, sir.
Q Immediately after you saw this truck, do you know
what happened?
A I saw the truck and a car collided (sic), sir, and I
went to the place to help the victims. (tsn. 28, April
19, 1979)
xxx xxx xxx
Q From the time you saw the truck to the time of the
impact, will you tell us if the said truck ever stopped?
A I saw it stopped (sic) when it has (sic) already
collided with the car and it was already motionless.
(tsn. 31, April 19, 1979; Emphasis Supplied). (p. 27,
Appellants' Brief). 55
Clearly, therefore, it was the truck driver's subsequent negligence in failing
to take the proper measures and degree of care necessary to avoid the
collision which was the proximate cause of the resulting accident.
Even if Jose Koh was indeed negligent, the doctrine of last clear chance finds
application here. Last clear chance is a doctrine in the law of torts which
states that the contributory negligence of the party injured will not defeat
the claim for damages if it is shown that the defendant might, by the
exercise of reasonable care and prudence, have avoided the consequences

of the negligence of the injured party. In such cases, the person who had the
last clear chance to avoid the mishap is considered in law solely responsible
for the consequences thereof. 56
In Bustamante vs. Court of Appeals,

57

We held:

The respondent court adopted the doctrine of "last clear chance."

The doctrine, stated broadly, is that the negligence of the
plaintiff does not preclude a recovery for the negligence of the
defendant where it appears that the defendant, by exercising
reasonable care and prudence, might have avoided injurious
consequences to the plaintiff notwithstanding the plaintiff's
negligence. In other words, the doctrine of last clear chance
means that even though a person's own acts may have placed
him in a position of peril, and an injury results, the injured person
is entitled to recovery (sic). As the doctrine is usually stated, a
person who has the last clear chance or opportunity of avoiding
an accident, notwithstanding the negligent acts of his opponent
or that of a third person imputed to the opponent is considered in
law solely responsible for the consequences of the accident.
(Sangco, Torts and Damages, 4th Ed., 1986, p. 165).
The practical import of the doctrine is that a negligent defendant
is held liable to a negligent plaintiff, or even to a plaintiff who has
been grossly negligent in placing himself in peril, if he, aware of
the plaintiff's peril, or according to some authorities, should have
been aware of it in the reasonable exercise of due care, had in
fact an opportunity later than that of the plaintiff to avoid an
accident (57 Am. Jur., 2d, pp. 798-799).
In Pantranco North Express, Inc., vs. Baesa,

58

We ruled:

The doctrine of last clear chance was defined by this Court in the
case of Ong v. Metropolitan Water District, 104 Phil. 397 (1958),
in this wise:
The doctrine of the last clear chance simply, means
that the negligence of a claimant does not preclude a
recovery for the negligence of defendant where it
appears that the latter, by exercising reasonable care
and prudence, might have avoided injurious
consequences to claimant notwithstanding his
negligence.
The doctrine applies only in a situation where the plaintiff was
guilty of prior or antecedent negligence but the defendant, who

had the last fair chance to avoid the impending harm and failed
to do so, is made liable for all the consequences of the accident
notwithstanding the prior negligence of the plaintiff [Picart v.
Smith, 37 Phil. 809 (1918); Glan People's Lumber and Hardware,
et al. vs. Intermediate Appellate Court, Cecilia Alferez Vda. de
Calibo, et al., G.R. No. 70493, May, 18, 1989]. The subsequent
negligence of the defendant in failing to exercise ordinary care to
avoid injury to plaintiff becomes the immediate or proximate
cause of the accident which intervenes between the accident
and the more remote negligence of the plaintiff, thus making the
defendant liable to the plaintiff [Picart v. Smith, supra].
Generally, the last clear chance doctrine is invoked for the
purpose of making a defendant liable to a plaintiff who was guilty
of prior or antecedent negligence, although it may also be raised
as a defense to defeat claim (sic) for damages.
Applying the foregoing doctrine, it is not difficult to rule, as We now rule, that
it was the truck driver's negligence in failing to exert ordinary care to avoid
the collision which was, in law, the proximate cause of the collision. As
employers of the truck driver, the private respondents are, under Article
2180 of the Civil Code, directly and primarily liable for the resulting
damages. The presumption that they are negligent flows from the negligence
of their employee. That presumption, however, is only juris tantum, not juris
et de jure. 59 Their only possible defense is that they exercised all the
diligence of a good father of a family to prevent the damage. Article 2180
reads as follows:
The obligation imposed by Article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for
whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in
any business or industry.
xxx xxx xxx
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
The diligence of a good father referred to means the diligence in the
selection and supervision of employees. 60The answers of the private

respondents in Civil Cases Nos. 4477 and 4478 did not interpose this
defense. Neither did they attempt to prove it.
The respondent Court was then correct in its Decision of 29 November 1983
in reversing the decision of the trial court which dismissed Civil Cases Nos.
4477 and 4478. Its assailed Resolution of 3 April 1984 finds no sufficient
legal and factual moorings.
In the light of recent decisions of this Court, 61 the indemnity for death must,
however, be increased from P12,000.00 to P50,000.00.
WHEREFORE, the instant petition is GRANTED. The assailed Resolution of the
respondent Court of 3 April 1984 is SET ASIDE while its Decision of 29
November 1983 in C.A.-G.R. CV Nos. 69040-41 is REINSTATED, subject to the
modification that the indemnity for death is increased from P12,000.00 to
P50,000.00 each for the death of Jose Koh and Kim Koh McKee.
Costs against private respondents.
SO ORDERED.

G.R. No. 153076

June 21, 2007

LAPANDAY AGRICULTURAL and DEVELOPMENT CORPORATION

(LADECO), HENRY BERENGUEL, and APOLONIO R.
DEOCAMPO, petitioners,
vs.
MICHAEL RAYMOND ANGALA, respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 assailing the 25 July 2001
Decision2 and 11 March 2002 Resolution3 of the Court of Appeals in CA-G.R.
CV No. 51134.
The Antecedent Facts
On 4 May 1993, at about 2:45 p.m., a Datsun crewcab with plate no. PEC-903
driven by Apolonio Deocampo (Deocampo) bumped into a 1958 Chevy pickup with plate no. MAM-475 owned by Michael Raymond Angala (respondent)
and driven by Bernulfo Borres (Borres). Lapanday Agricultural and
Development Corporation (LADECO) owned the crewcab which was assigned

to its manager Manuel Mendez (Mendez). Deocampo was the driver and
bodyguard of Mendez. Both vehicles were running along Rafael Castillo St.,
Agdao, Davao City heading north towards Lanang, Davao City. The left door,
front left fender, and part of the front bumper of the pick-up were damaged.
Respondent filed an action for Quasi-Delict, Damages, and Attorneys Fees
against LADECO, its administrative officer Henry Berenguel4 (Berenguel) and
Deocampo. Respondent alleged that his pick-up was slowing down to about
five to ten kilometers per hour (kph) and was making a left turn preparatory
to turning south when it was bumped from behind by the crewcab which was
running at around 60 to 70 kph. The crewcab stopped 21 meters from the
point of impact. Respondent alleged that he heard a screeching sound before
the impact. Respondent was seated beside the driver and was looking at the
speedometer when the accident took place. Respondent testified that Borres
made a signal because he noticed a blinking light while looking at the
speedometer.5
Respondent sent a demand letter to LADECO for the payment of the
damages he incurred because of the accident but he did not receive any
reply. Thus, respondent filed the case against LADECO, Berenguel, and
Deocampo.
Deocampo alleged that the pick-up and the crewcab he was driving were
both running at about 40 kph. The pick-up was running along the outer lane.
The pick-up was about 10 meters away when it made a U-turn towards the
left. Deocampo testified that he did not see any signal from the pickup.6 Deocampo alleged that he tried to avoid the pick-up but he was unable
to avoid the collision. Deocampo stated that he did not apply the brakes
because he knew the collision was unavoidable. Deocampo admitted that he
stepped on the brakes only after the collision.
The Ruling of the Trial Court
In its 3 March 1995 Decision,7 the Regional Trial Court of Davao City, Branch
15 (trial court) ruled:
WHEREFORE, judgment is hereby rendered ordering the defendants
LADECO and Apolonio Deocampo to solidarily pay the plaintiffs the
following sums:
1. Twenty three thousand two hundred (P23,200.00) pesos as
actual damages.
2. Ten thousand (P10,000.00) pesos as moral damages.
3. Ten thousand (P10,000.00) pesos as attorneys fees.
4. Costs of suit.

SO ORDERED.8
The trial court found that the crewcab was running very fast while following
the pick-up and that the crewcabs speed was the proximate cause of the
accident. The trial court observed that the crewcab stopped 21 meters away
from the point of impact despite Deocampos claim that he stepped on the
brakes moments after the collision. The trial court ruled that Deocampo had
the last opportunity to avoid the accident.
The trial court found that Berenguel was not liable because he was not the
owner of the crewcab.
LADECO and Deocampo (petitioners)9 filed a motion for reconsideration. The
trial court denied petitioners motion in its 13 June 1995 Order.10
Petitioners filed an appeal before the Court of Appeals.
The Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the trial courts decision.
The Court of Appeals sustained the finding of the trial court that Deocampo
was negligent. The Court of Appeals applied the doctrine of last clear chance
and ruled that Deocampo had the responsibility of avoiding the pick-up.
The Court of Appeals also sustained the solidary liability of LADECO and
Deocampo. The Court of Appeals ruled that under Article 2180 of the Civil
Code, the negligence of the driver is presumed to be the negligence of the
owner of the vehicle.
The dispositive portion of the Court of Appeals Decision reads:
WHEREFORE, premises considered, the appeal is DISMISSED for lack of
merit, and the assailed Decision of the Court a quo in Civil Case No.
22067-93 is AFFIRMED in toto. Costs against defendants-appellants.
SO ORDERED.11
Petitioners filed a motion for reconsideration. In its 11 March 2002
Resolution, the Court of Appeals denied the motion for lack of merit.
Hence, the petition before this Court.
The Issues
The issues before the Court are the following:
1. Whether the provisions of Section 45(b) of Republic Act No.
413612 (RA 4136) and Article 2185 of the Civil Code apply to this case;
and
2. Whether respondent is entitled to the damages awarded.
The Ruling of this Court
The petition is partly meritorious.

Both Drivers are Negligent

Both the trial court and the Court of Appeals found that Deocampo was at
fault because he was driving very fast prior to the collision. The Court of
Appeals sustained the trial courts finding that Deocampo was running more
than the normal cruising speed. Both the trial court and the Court of Appeals
noted that the crewcab stopped 21 meters away from the point of impact.
Deocampo admitted that he stepped on the brakes only after the collision.
Petitioners allege that Borres did not take the proper lane before executing
the U-turn. Petitioners allege that Borres violated Section 45(b) of RA 4136
and it was his recklessness that was the proximate cause of the accident.
Section 45(b) of RA 4136 states:
Sec. 45. Turning at intersections. x x x
(b) The driver of a vehicle intending to turn to the left shall approach
such intersection in the lane for traffic to the right of and nearest to the
center line of the highway, and, in turning, shall pass to the left of the
center of the intersection, except that, upon highways laned for traffic
and upon one-way highways, a left turn shall be made from the left
lane of traffic in the direction in which the vehicle is proceeding.
Petitioners further allege that since Borres was violating a traffic rule at the
time of the accident, respondent and Borres were the parties at fault.
Petitioners cite Article 2185 of the Civil Code, thus:
Art. 2185. Unless there is proof to the contrary, it is presumed that a
person driving a motor vehicle has been negligent if at the time of the
mishap, he was violating any traffic regulation.
We rule that both parties were negligent in this case. Borres was at the outer
lane when he executed a U-turn. Following Section 45(b) of RA 4136, Borres
should have stayed at the inner lane which is the lane nearest to the center
of the highway. However, Deocampo was equally negligent. Borres slowed
down the pick-up preparatory to executing the U-turn. Deocampo should
have also slowed down when the pick-up slowed down. Deocampo admitted
that he noticed the pick-up when it was still about 20 meters away from
him.13 Vehicular traffic was light at the time of the incident. The pick-up and
the crewcab were the only vehicles on the road.14 Deocampo could have
avoided the crewcab if he was not driving very fast before the collision, as
found by both the trial court and the Court of Appeals. We sustain this finding
since factual findings of the Court of Appeals affirming those of the trial court
are conclusive and binding on this Court.15 Further, the crewcab stopped 21
meters from the point of impact. It would not have happened if Deocampo
was not driving very fast.

Doctrine of Last Clear Chance Applies

Since both parties are at fault in this case, the doctrine of last clear chance
applies.
The doctrine of last clear chance states that where both parties are negligent
but the negligent act of one is appreciably later than that of the other, or
where it is impossible to determine whose fault or negligence caused the
loss, the one who had the last clear opportunity to avoid the loss but failed to
do so is chargeable with the loss.16 In this case, Deocampo had the last clear
chance to avoid the collision. Since Deocampo was driving the rear vehicle,
he had full control of the situation since he was in a position to observe the
vehicle in front of him.17Deocampo had the responsibility of avoiding
bumping the vehicle in front of him.18 A U-turn is done at a much slower
speed to avoid skidding and overturning, compared to running straight
ahead.19 Deocampo could have avoided the vehicle if he was not driving very
fast while following the pick-up. Deocampo was not only driving fast, he also
admitted that he did not step on the brakes even upon seeing the pick-up.
He only stepped on the brakes after the collision.
Petitioners are Solidarily Liable
LADECO alleges that it should not be held jointly and severally liable with
Deocampo because it exercised due diligence in the supervision and
selection of its employees. Aside from this statement, LADECO did not proffer
any proof to show how it exercised due diligence in the supervision and
selection of its employees. LADECO did not show its policy in hiring its
drivers, or the manner in which it supervised its drivers. LADECO failed to
substantiate its allegation that it exercised due diligence in the supervision
and selection of its employees.
Hence, we hold LADECO solidarily liable with Deocampo.
Respondent is Entitled to Moral Damages
We sustain the award of moral damages. Moral damages are awarded to
allow a plaintiff to obtain means, diversion, or amusement that will serve to
alleviate the moral suffering he has undergone due to the defendants
culpable action.20 The trial court found that respondent, who was on board
the pick-up when the collision took place, suffered shock, serious anxiety,
and fright when the crewcab bumped his pick-up. We sustain the trial court
and the Court of Appeals in ruling that respondent sufficiently showed that
he suffered shock, serious anxiety, and fright which entitle him to moral
damages.
Both the trial court and the Court of Appeals failed to give any justification
for the award of attorneys fees. Awards of attorneys fees must be based on

findings of fact and of law and stated in the decision of the trial
court.21Further, no premium should be placed on the right to litigate.22 Hence,
we delete the award of attorneys fees.
WHEREFORE, we AFFIRM the 25 July 2001 Decision and 11 March 2002
Resolution of the Court of Appeals in CA-G.R. CV No. 51134
with MODIFICATION by deleting the award of attorneys fees.
SO ORDERED.

[G.R. Nos. 79050-51. November 14, 1989.]

PANTRANCO NORTH EXPRESS, INC., Petitioner, v. MARICAR BASCOS
BAESA, thru her personal guardian FRANCISCA O. BASCOS, FE O.
ICO, in her behalf and in behalf of her minor children, namely
ERWIN, OLIVE, EDMUNDO and SHARON ICO, Respondents.
Efren N. Ambrosio & Associates for petitioner PNEI.
Emiliano S. Micu for Respondents.
SYLLABUS
1. CIVIL LAW; DAMAGES; LAST CLEAR CHANCE DOCTRINE; WHEN
APPLICABLE. The doctrine of last clear chance applies only in a situation
where the defendant, having the last fair chance to avoid the impending
harm and failed to do so, becomes liable for all the consequences of the
accident notwithstanding the prior negligence of the plaintiff.
2. ID.; ID.; ID.; CONDITION TO MAKE DOCTRINE APPLICABLE. In order that
the doctrine of last clear chance may be applied, it must be shown that the
person who allegedly had the last opportunity to avert the accident was
aware of the existence of the peril or with exercise of due care should have
been aware of it.
3. ID.; ID.; ID.; NOT APPLICABLE TO PERSON ACTING INSTANTANEOUSLY OR
BY AVAILABLE MEANS. This doctrine of last chance has no application to a
case where a person is to act instantaneously, and if the injury cannot be
avoided by using all means available after the peril is or should have been

discovered.
4. ID.; ID.; PROVISION OF R.A. NO. 4136 RE VEHICLE ENTERING A THROUGH
HIGHWAY OR A STOP INTERSECTION. Section 43 (c), Article III, Chapter IV
of Republic Act No. 1436 cannot apply to case a bar where at the time of the
accident, the jeepney had already crossed the intersection.
5. ID.; ID.; NEGLIGENCE; BURDEN OF PROOF LIES ON THE EMPLOYER. A
finding of negligence on the part of the driver establishes a presumption that
the employer has been negligent and the latter has the burden of proof that
it has exercised due negligence not only in the selection of its employees but
also in adequately supervising their work.
6. ID.; ID.; FAILURE TO PRESENT EVIDENCE TO SUPPORT CLAIM FOR
DAMAGES. Plaintiffs failure to present documentary evidence to support
their claim for damages for loss of earning capacity of the deceased victim
does not bar recovery of the damages, if such loss may be based sufficiently
on their testimonies.
7. ID.; ID.; INDEMNITY FIXED AT P30,000. The indemnity for the death of a
person was fixed by this Court at (P30,000.00).
DECISION
CORTES, J.:
In this Petition, Pantranco North Express Inc. (PANTRANCO), asks the Court to
review the decision of the Court of Appeals in CA-G.R. No. 05494-95 which
affirmed the decisions of the Court of First Instance of Rosales, Pangasinan in
Civil Case No. 561-R and Civil Case No. 589-R wherein PANTRANCO was
ordered to pay damages and attorneys fees to herein private
respondents.chanrobles virtual lawlibrary
The pertinent fact are as follows:chanrob1es virtual 1aw library
At about 7:00 oclock in the morning of June 12, 1981, the spouses Ceasar
and Marilyn Baesa and their children Harold Jim, Marcelino and Maricar,
together with spouses David Ico and Fe O. Ico with their son Erwin Ico and
seven other persons, were aboard a passenger jeepney on their way to a
picnic at Malalam River, Ilagan, Isabela, to celebrate the fifth wedding
anniversary of Ceasar and Marilyn Baesa.
The group, numbering fifteen (15) persons, rode in the passenger jeepney

driven by David Ico, who was also the registered owner thereof. From Ilagan,
Isabela, they proceeded to Barrio Capayacan to deliver some viands to one
Mrs. Bascos and thenceforth to San Felipe, taking the highway going to
Malalam River. Upon reaching the highway, the jeepney turned right and
proceeded to Malalam River at a speed of about 20 kph. While they were
proceeding towards Malalam River, a speeding PANTRANCO bus from Aparri,
on its regular route to Manila, encroached on the jeepneys lane while
negotiating a curve, and collided with it.
As a result of the accident David Ico, spouses Ceasar Baesa and Marilyn
Baesa and their children, Harold Jim and Marcelino Baesa, died while the rest
of the passengers suffered injuries. The jeepney was extensively damaged.
After the accident the driver of the PANTRANCO Bus, Ambrosio Ramirez,
boarded a car and proceeded to Santiago, Isabela. From that time on up to
the present, Ramirez has never been seen and has apparently remained in
hiding.
All the victims and/or their surviving heirs except herein private respondents
settled the case amicably under the "No Fault" insurance coverage of
PANTRANCO.
Maricar Baesa through her guardian Francisca O. Bascos and Fe O. Ico for
herself and for her minor children, filed separate actions for damages arising
from quasi-delict against PANTRANCO, respectively docketed as Civil Case
No. 561-R and 589-R of the Court of First Instance of Pangasinan.
In its answer, PANTRANCO, aside from pointing to the late David Icos alleged
negligence as the proximate cause of the accident, invoked the defense of
due diligence in the selection and supervision of its driver, Ambrosio
Ramirez.chanroblesvirtualawlibrary
On July 3, 1984, the CFI of Pangasinan rendered a decision against
PANTRANCO awarding the total amount of Two Million Three Hundred Four
Thousand Six Hundred Forty-Seven (P2,304,647.00) as damages, plus 10%
thereof as attorneys fees and costs to Maricar Baesa in Civil Case No. 561-R,
and the total amount of Six Hundred Fifty Two Thousand Six Hundred
Seventy-Two Pesos (P652,672.00) as damages, plus 10% thereof as
attorneys fees and costs to Fe Ico and her children in Civil Case No. 589-R.
On appeal, the cases were consolidated and the Court of Appeals modified
the decision of the trial court by ordering PANTRANCO to pay the total
amount of One Million One Hundred Eighty-Nine Thousand Nine Hundred
Twenty Seven Pesos (P1,189,927.00) as damages, plus Twenty Thousand
Pesos (P20,000.00) as attorneys fees to Maricar Baesa, and the total amount
of Three Hundred Forty-Four Thousand Pesos (P344,000.00) plus Ten
Thousand Pesos (P10,000.00) as attorneys fees to Fe Ico and her children,
and to pay the costs in both cases. The dispositive portion of the assailed

decision reads as follows:chanrob1es virtual 1aw library

WHEREFORE, the decision appealed from is hereby modified by ordering the
defendant PANTRANCO North Express, Inc. to pay:chanrob1es virtual 1aw
library
I. The plaintiff in Civil Case No. 561-R, Maricar Bascos Baesa, the following
damages:chanrob1es virtual 1aw library
A) As compensatory damages for the death of Ceasar Baesa P30,000.00;
B) As compensatory damages for the death of Marilyn Baesa P30,000.00;
C) As compensatory damages for the death of Harold Jim Baesa and
Marcelino Baesa P30,000.00;
D) For the loss of earnings of Ceasar Baesa P630,000.00;
E) For the loss of earnings of Marilyn Bascos Baesa P375,000.00;
F) For the burial expenses of the deceased Ceasar and Marilyn Baesa
P41,200.00;
G) For hospitalization expenses of Maricar Baesa P3,727.00;
H) As moral damages P50,000.00;
I) As attorneys fees P20,000.00;
II. The plaintiffs in Civil Case No. 589-R, the following damages:chanrob1es
virtual 1aw library
A) As compensatory damages for the death of David Ico P30,000.00;
B) For loss of earning capacity of David Ico P252,000.00;
C) As moral damages for the death of David Ico and the injury of Fe Ico
P30,000.00
D) As payment for the jeepney P20,000.00;
E) For the hospitalization of Fe Ico P12,000.000;
F) And for attorneys fees P10,000.00;
and to pay the costs in both cases.

The amount of P25,000 paid to Maricar Bascos Baesa, plaintiff in Civil Case
No. 561-R, and the medical expenses in the sum of P3,273.55, should be
deducted from the award in her favor.chanrobles virtual lawlibrary
All the foregoing amounts herein awarded except the costs shall earn
interest at the legal rate from date of this decision until fully paid. [CA
Decision, pp. 14-15; Rollo, pp. 57-58.]
PANTRANCO filed a motion for reconsideration of the Court of Appeals
decision, but on June 26, 1987, it denied the same for lack of merit.
PANTRANCO then filed the instant petition for review.
I
Petitioner faults the Court of Appeals for not applying the doctrine of the "last
clear chance" against the jeepney driver. Petitioner claims that under the
circumstances of the case, it was the driver of the passenger jeepney who
had the last clear chance to avoid the collision and was therefore negligent
in failing to utilize with reasonable care and competence his then existing
opportunity to avoid the harm.
The doctrine of the last clear chance was defined by this Court in the case of
Ong v. Metropolitan Water District, 104 Phil. 397 (1958), in this
wise:chanrob1es virtual 1aw library
The doctrine of the last clear chance simply, means that the negligence of a
claimant does not preclude a recovery for the negligence of defendant where
it appears that the latter, by exercising reasonable care and prudence, might
have avoided injurious consequences to claimant notwithstanding his
negligence.
The doctrine applies only in a situation where the plaintiff was guilty of prior
or antecedent negligence but the defendant, who had the last fair chance to
avoid the impending harm and failed to do so, is made liable for all the
consequences of the accident notwithstanding the prior negligence of the
plaintiff [Picart v. Smith, 37 Phil. 809 (1918); Glan Peoples Lumber and
Hardware, Et. Al. v. Intermediate Appellate Court, Cecilia Alferez Vda. de
Calibo, Et Al., G.R. No. 70493, May 18, 1989]. The subsequent negligence of
the defendant in failing to exercise ordinary care to avoid injury to plaintiff
becomes the immediate or proximate cause of the accident which intervenes
between the accident and the more remote negligence of the plaintiff, thus
making the defendant liable to the plaintiff [Picart v. Smith, supra].
Generally, the last clear chance doctrine is invoked for the purpose of

making a defendant liable to a plaintiff who was guilty of prior or antecedent

negligence, although it may also be raised as a defense to defeat claim for
damages.chanrobles lawlibrary : rednad
To avoid liability for the negligence of its driver, petitioner claims that the
original negligence of its driver was not the proximate cause of the accident
and that the sole proximate cause was the supervening negligence of the
jeepney driver David Ico in failing to avoid the accident. It is petitioners
position that even assuming arguendo, that the bus encroached into the lane
of the jeepney, the driver of the latter could have swerved the jeepney
towards the spacious dirt shoulder on his right without danger to himself or
his passengers.
The above contention of petitioner is manifestly devoid of merit.
Contrary to the petitioners contention, the doctrine of "last clear chance"
finds no application in this case. For the doctrine to be applicable, it is
necessary to show that the person who allegedly had the last opportunity to
avert the accident was aware of the existence of the peril or should, with
exercise of due care, have been aware of it. One cannot be expected to avoid
an accident or injury if he does not know or could not have known the
existence of the peril. In this case, there is nothing to show that the jeepney
driver David Ico knew of the impending danger. When he saw at a distance
that the approaching bus was encroaching on his lane, he did not
immediately swerve the jeepney to the dirt shoulder on his right since he
must have assumed that the bus driver will return the bus to its own lane
upon seeing the jeepney approaching from the opposite direction. As held by
this Court in the case of Vda. De Bonifacio v. BLTB, G.R. No. L-26810, August
31, 1970, 34 SCRA 618, a motorist who is properly proceeding on his own
side of the highway is generally entitled to assume that an approaching
vehicle coming towards him on the wrong side, will return to his proper lane
of traffic. There was nothing to indicate to David Ico that the bus could not
return to its own lane or was prevented from returning to the proper lane by
anything beyond the control of its driver. Leo Marantan, an alternate driver of
the Pantranco bus who was seated beside the driver Ramirez at the time of
the accident, testified that Ramirez had no choice but to swerve the steering
wheel to the left and encroach on the jeepneys lane because there was a
steep precipice on the right [CA Decision, p. 2; Rollo, p. 45]. However, this is
belied by the evidence on record which clearly shows that there was enough
space to swerve the bus back to its own lane without any danger [CA
Decision, p. 7; Rollo, p. 50].
Moreover, both the trial court and the Court of Appeals found that at the time
of the accident the Pantranco bus was speeding towards Manila [CA Decision,
p. 2; Rollo, p. 45]. By the time David Ico must have realized that the bus was
not returning to its own lane, it was already too late to swerve the jeepney to

his right to prevent an accident. The speed at which the approaching bus
was running prevented David Ico from swerving the jeepney to the right
shoulder of the road in time to avoid the collision. Thus, even assuming that
the jeepney driver perceived the danger a few seconds before the actual
collision, he had no opportunity to avoid it. This Court has held that the last
clear chance doctrine "can never apply where the party charged is required
to act instantaneously, and if the injury cannot be avoided by the application
of all means at hand after the peril is or should have been discovered" [Ong
v. Metropolitan Water District, supra].chanrobles.com : virtual law library
Petitioner likewise insists that David Ico was negligent in failing to observe
Section 43 (c), Article III Chapter IV of Republic Act No. 4136 * which provides
that the driver of a vehicle entering a through highway or a stop intersection
shall yield the right of way to all vehicles approaching in either direction on
such through highway.
Petitioners misplaced reliance on the aforesaid law is readily apparent in this
case. The cited law itself provides that it applies only to vehicles entering a
through highway or a stop intersection. At the time of the accident, the
jeepney had already crossed the intersection and was on its way to Malalam
River. Petitioner itself cited Fe Icos testimony that the accident occurred
after the jeepney had travelled a distance of about two (2) meters from the
point of intersection [Petition p. 10; Rollo, p. 27]. In fact, even the witness for
the petitioner, Leo Marantan, testified that both vehicles were coming from
opposite directions [CA Decision, p. 7; Rollo, p. 50], clearly indicating that the
jeepney had already crossed the intersection.
Considering the foregoing, the Court finds that the negligence of petitioners
driver in encroaching into the lane of the incoming jeepney and in failing to
return the bus to its own lane immediately upon seeing the jeepney coming
from the opposite direction was the sole and proximate cause of the accident
without which the collision would not have occurred. There was no
supervening or intervening negligence on the part of the jeepney driver
which would have made the prior negligence of petitioners driver a mere
remote cause of the accident.
II
On the issue of its liability as an employer, petitioner claims that it had
observed the diligence of a good father of a family to prevent damage,
conformably to the last paragraph of Article 2180 of the Civil Code. Petitioner
adduced evidence to show that in hiring its drivers, the latter are required to
have professional drivers license and police clearance. The drivers must also
pass written examinations, interviews and practical driving tests, and are
required to undergo a six-month training period. Rodrigo San Pedro,

petitioners Training Coordinator, testified on petitioners policy of conducting

regular and continuing training programs and safety seminars for its drivers,
conductors, inspectors and supervisors at a frequency rate of at least two (2)
seminars a month.
On this point, the Court quotes with approval the following findings of the
trial court which was adopted by the Court of Appeals in its challenged
decision:chanrob1es virtual 1aw library
When an injury is caused by the negligence of an employee, there instantly
arises a presumption that the employer has been negligent either in the
selection of his employees or in the supervision over their acts. Although this
presumption is only a disputable presumption which could be overcome by
proof of diligence of a good father of a family, this Court believes that the
evidence submitted by the defendant to show that it exercised the diligence
of a good father of a family in the case of Ramirez, as a company driver is far
from sufficient. No support evidence has been adduced. The professional
drivers license of Ramirez has not been produced. There is no proof that he
is between 25 to 38 years old. There is also no proof as to his educational
attainment, his age, his weight and the fact that he is married or not. Neither
are the result of the written test, psychological and physical test, among
other tests, have been submitted in evidence [sic]. His NBI or police
clearances and clearances from previous employment were not marked in
evidence. No evidence was presented that Ramirez actually and really
attended the seminars. Vital evidence should have been the certificate of
attendance or certificate of participation or evidence of such participation
like a logbook signed by the trainees when they attended the seminars. If
such records are not available, the testimony of the classmates that Ramirez
was their classmate in said seminar (should have been presented) [CA
Decision, pp. 8-9; Rollo, pp. 51-52].chanrobles law library
Petitioner contends that the fact that Ambrosio Ramirez was employed and
remained as its driver only means that he underwent the same rigid
selection process and was subjected to the same strict supervision imposed
by petitioner on all applicants and employees. It is argued by the petitioner
that unless proven otherwise, it is presumed that petitioner observed its
usual recruitment procedure and company polices on safety and efficiency
[Petition, p. 20; Rollo, p. 37].
The Court finds the above contention unmeritorious.
The finding of negligence on the part of its driver Ambrosio Ramirez gave rise
to the presumption of negligence on the part of petitioner and the burden of
proving that it exercised due diligence not only in the selection of its
employees but also in adequately supervising their work rests with the
petitioner [Lilius v. Manila Railroad Company, 59 Phil. 758 (1934); Umali v.

Bacani, G.R. No. L-40570, June 30, 1976, 69 SCRA 623]. Contrary to
petitioners claim, there is no presumption that the usual recruitment
procedures and safety standards were observed. The mere issuance of rules
and regulations and the formulation of various company policies on safety,
without showing that they are being complied with, are not sufficient to
exempt petitioner from liability arising from the negligence of its employee.
It is incumbent upon petitioner to show that in recruiting and employing the
erring driver, the recruitment procedures and company policies on efficiency
and safety were followed. Petitioner failed to do this. Hence, the Court finds
no cogent reason to disturb the finding of both the trial court and the Court
of Appeals that the evidence presented by the petitioner, which consists
mainly of the uncorroborated testimony of its Training Coordinator, is
insufficient to overcome the presumption of negligence against
petitioner.cralawnad
III
On the question of damages, petitioner claims that the Court of Appeals
erred in fixing the damages for the loss of earning capacity of the deceased
victims. Petitioner assails respondent courts findings because no
documentary evidence in support thereof, such as income tax returns, payrolls, pay slips or invoices obtained in the usual course of business, were
presented [Petition, p. 22; Rollo, p. 39]. Petitioner argues that the "bare and
self-serving testimonies of the wife of the deceased David Ico and the mother
of the deceased Marilyn Baesa . . . have no probative value to sustain in law
the Court of Appeals conclusion on the respective earnings of the deceased
victims." [Petition, pp. 21-22; Rollo, pp. 38-39.] It is petitioners contention
that the evidence presented by the private respondent does not meet the
requirements of clear and satisfactory evidence to prove actual and
compensatory damages.
The Court finds that the Court of Appeals committed no reversible error in
fixing the amount of damages for the loss of earning capacity of the
deceased victims. While it is true that private respondents should have
presented documentary evidence to support their claim for damages for loss
of earning capacity of the deceased victims, the absence thereof does not
necessarily bar the recovery of the damages in question. The testimony of Fe
Ico and Francisca Bascos as to the earning capacity of David Ico, and the
spouses Baesa, respectively, are sufficient to establish a basis from which
the court can make a fair and reasonable estimate of the damages for the
loss of earning capacity of the three deceased victims. Moreover, in fixing
the damages for loss of earning capacity of a deceased victim, the court can
consider the nature of his occupation, his educational attainment and the
state of his health at the time of death.

In the instant case, David Ico was thirty eight (38) years old at the time of his
death in 1981 and was driving his own passenger jeepney. The spouses
Ceasar and Marilyn Baesa were both thirty (30) years old at the time of their
death. Ceasar Baesa was a commerce degree holder and the proprietor of
the Cauayan Press, printer of the Cauayan Valley Newspaper and the Valley
Times at Cauayan, Isabela. Marilyn Baesa graduated as a nurse in 1976 and
at the time of her death, was the company nurse, personnel manager,
treasurer and cashier of the Ilagan Press at Ilagan, Isabela. Respondent court
duly considered these factors, together with the uncontradicted testimonies
of Fe Ico and Francisca Bascos, in fixing the amount of damages for the loss
of earning capacity of David Ico and the spouses
Baesa.chanrobles.com:cralaw:red
However, it should be pointed out that the Court of Appeals committed error
in fixing the compensatory damages for the death of Harold Jim Baesa and
Marcelino Baesa. Respondent court awarded to plaintiff (private respondent)
Maricar Baesa Thirty Thousand Pesos (P30,000.00) as "compensatory
damages for the death of Harold Jim Baesa and Marcelino Baesa." [CA
Decision, p. 14; Rollo, 57]. In other words, the Court of Appeals awarded only
Fifteen Thousand Pesos (P15,000.00) as indemnity for the death of Harold Jim
Baesa and another Fifteen Thousand Pesos (P15,000.00) for the death of
Marcelino Baesa. This is clearly erroneous. In the case of People v. de la
Fuente, G.R. Nos. 63251-52, December 29, 1983, 126 SCRA 518, the
indemnity for the death of a person was fixed by this Court at Thirty
Thousand Pesos (P30,000.00). Plaintiff Maricar Baesa should therefore be
awarded Sixty Thousand Pesos (P60,000.00) as indemnity for the death of
her brothers, Harold Jim Baesa and Marcelino Baesa or Thirty Thousand Pesos
(P30,000.00) for the death of each brother.
The other items of damages awarded by respondent court which were not
challenged by the petitioner are hereby affirmed.
WHEREFORE, premises considered, the petition is DENIED, and the decision
of respondent Court of Appeals is hereby AFFIRMED with the modification
that the amount of compensatory damages for the death of Harold Jim Baesa
and Marcelino Baesa are increased to Thirty Thousand Pesos (P30,000.00)
each.chanrobles law library
SO ORDERED.

[G.R. No. 138569. September 11, 2003]

THE CONSOLIDATED BANK and TRUST CORPORATION,petitioner, vs.

COURT
OF
APPEALS
and
L.C.
DIAZ
and
COMPANY,
CPAs, respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review of the Decision [1] of the Court of Appeals
dated 27 October 1998 and its Resolution dated 11 May 1999. The assailed
decision reversed the Decision[2] of the Regional Trial Court of Manila, Branch
8, absolving petitioner Consolidated Bank and Trust Corporation, now known
as Solidbank Corporation (Solidbank), of any liability. The questioned
resolution of the appellate court denied the motion for reconsideration of
Solidbank but modified the decision by deleting the award of exemplary
damages, attorneys fees, expenses of litigation and cost of suit.
The Facts
Solidbank is a domestic banking corporation organized and existing under
Philippine laws. Private respondent L.C. Diaz and Company, CPAs (L.C.
Diaz), is a professional partnership engaged in the practice of accounting.
Sometime in March 1976, L.C. Diaz opened a savings account with
Solidbank, designated as Savings Account No. S/A 200-16872-6.
On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya
(Macaraya), filled up a savings (cash) deposit slip for P990 and a savings
(checks) deposit slip for P50. Macaraya instructed the messenger of L.C.
Diaz, Ismael Calapre (Calapre), to deposit the money with Solidbank.
Macaraya also gave Calapre the Solidbank passbook.
Calapre went to Solidbank and presented to Teller No. 6 the two deposit
slips and the passbook. The teller acknowledged receipt of the deposit by
returning to Calapre the duplicate copies of the two deposit slips. Teller No. 6
stamped the deposit slips with the words DUPLICATE and SAVING TELLER
6 SOLIDBANK HEAD OFFICE. Since the transaction took time and Calapre
had to make another deposit for L.C. Diaz with Allied Bank, he left the
passbook with Solidbank. Calapre then went to Allied Bank. When Calapre
returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that
somebody got the passbook.[3]Calapre went back to L.C. Diaz and reported
the incident to Macaraya.
Macaraya immediately prepared a deposit slip in duplicate copies with a
check of P200,000. Macaraya, together with Calapre, went to Solidbank and
presented to Teller No. 6 the deposit slip and check. The teller stamped the

words DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE on the

duplicate copy of the deposit slip. When Macaraya asked for the passbook,
Teller No. 6 told Macaraya that someone got the passbook but she could not
remember to whom she gave the passbook. When Macaraya asked Teller No.
6 if Calapre got the passbook, Teller No. 6 answered that someone shorter
than Calapre got the passbook. Calapre was then standing beside Macaraya.
Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for
the deposit of a check for P90,000 drawn on Philippine Banking Corporation
(PBC). This PBC check of L.C. Diaz was a check that it had long
closed.[4] PBC subsequently dishonored the check because of insufficient
funds and because the signature in the check differed from PBCs specimen
signature. Failing to get back the passbook, Macaraya went back to her
office and reported the matter to the Personnel Manager of L.C. Diaz,
Emmanuel Alvarez.
The following day, 15 August 1991, L.C. Diaz through its Chief Executive
Officer, Luis C. Diaz (Diaz), called up Solidbank to stop any transaction
using the same passbook until L.C. Diaz could open a new account. [5] On the
same day, Diaz formally wrote Solidbank to make the same request. It was
also on the same day that L.C. Diaz learned of the unauthorized withdrawal
the day before, 14 August 1991, of P300,000 from its savings account. The
withdrawal slip for the P300,000 bore the signatures of the authorized
signatories of L.C. Diaz, namely Diaz and Rustico L. Murillo. The signatories,
however, denied signing the withdrawal slip. A certain Noel Tamayo received
the P300,000.
In an Information[6] dated 5 September 1991, L.C. Diaz charged its
messenger, Emerano Ilagan (Ilagan) and one Roscon Verdazola with Estafa
through Falsification of Commercial Document. The Regional Trial Court of
Manila dismissed the criminal case after the City Prosecutor filed a Motion to
Dismiss on 4 August 1992.
On 24 August 1992, L.C. Diaz through its counsel demanded from
Solidbank the return of its money. Solidbank refused.
On 25 August 1992, L.C. Diaz filed a Complaint [7] for Recovery of a Sum of
Money against Solidbank with the Regional Trial Court of Manila, Branch
8. After trial, the trial court rendered on 28 December 1994 a decision
absolving Solidbank and dismissing the complaint.
L.C. Diaz then appealed[8] to the Court of Appeals. On 27 October 1998,
the Court of Appeals issued its Decision reversing the decision of the trial
court.

On 11 May 1999, the Court of Appeals issued its Resolution denying the
motion for reconsideration of Solidbank. The appellate court, however,
modified its decision by deleting the award of exemplary damages and
attorneys fees.
The Ruling of the Trial Court
In absolving Solidbank, the trial court applied the rules on savings
account written on the passbook. The rules state that possession of this
book shall raise the presumption of ownership and any payment or payments
made by the bank upon the production of the said book and entry therein of
the withdrawal shall have the same effect as if made to the depositor
personally.[9]
At the time of the withdrawal, a certain Noel Tamayo was not only in
possession of the passbook, he also presented a withdrawal slip with the
signatures of the authorized signatories of L.C. Diaz. The specimen
signatures of these persons were in the signature cards. The teller stamped
the withdrawal slip with the words Saving Teller No. 5. The teller then
passed on the withdrawal slip to Genere Manuel (Manuel) for
authentication. Manuel verified the signatures on the withdrawal slip. The
withdrawal slip was then given to another officer who compared the
signatures on the withdrawal slip with the specimen on the signature cards.
The trial court concluded that Solidbank acted with care and observed the
rules on savings account when it allowed the withdrawal of P300,000 from
the savings account of L.C. Diaz.
The trial court pointed out that the burden of proof now shifted to L.C.
Diaz to prove that the signatures on the withdrawal slip were forged. The
trial court admonished L.C. Diaz for not offering in evidence the National
Bureau of Investigation (NBI) report on the authenticity of the signatures
on the withdrawal slip for P300,000. The trial court believed that L.C. Diaz
did not offer this evidence because it is derogatory to its action.
Another provision of the rules on savings account states that the
depositor must keep the passbook under lock and key. [10] When another
person presents the passbook for withdrawal prior to Solidbanks receipt of
the notice of loss of the passbook, that person is considered as the owner of
the passbook. The trial court ruled that the passbook presented during the
questioned transaction was now out of the lock and key and presumptively
ready for a business transaction.[11]
Solidbank did not have any participation in the custody and care of the
passbook. The trial court believed that Solidbanks act of allowing the
withdrawal ofP300,000 was not the direct and proximate cause of the loss.

The trial court held that L.C. Diazs negligence caused the unauthorized
withdrawal. Three facts establish L.C. Diazs negligence: (1) the possession
of the passbook by a person other than the depositor L.C. Diaz; (2) the
presentation of a signed withdrawal receipt by an unauthorized person; and
(3) the possession by an unauthorized person of a PBC check long closed
by L.C. Diaz, which check was deposited on the day of the fraudulent
withdrawal.
The trial court debunked L.C. Diazs contention that Solidbank did not
follow the precautionary procedures observed by the two parties whenever
L.C. Diaz withdrew significant amounts from its account. L.C. Diaz claimed
that a letter must accompany withdrawals of more than P20,000. The letter
must request Solidbank to allow the withdrawal and convert the amount to a
managers check. The bearer must also have a letter authorizing him to
withdraw the same amount. Another person driving a car must accompany
the bearer so that he would not walk from Solidbank to the office in making
the withdrawal. The trial court pointed out that L.C. Diaz disregarded these
precautions in its past withdrawal. On 16 July 1991, L.C. Diaz
withdrew P82,554 without any separate letter of authorization or any
communication with Solidbank that the money be converted into a
managers check.
The trial court further justified the dismissal of the complaint by holding
that the case was a last ditch effort of L.C. Diaz to recover P300,000 after the
dismissal of the criminal case against Ilagan.
The dispositive portion of the decision of the trial court reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered DISMISSING the
complaint.
The Court further renders judgment in favor of defendant bank pursuant to
its counterclaim the amount of Thirty Thousand Pesos (P30,000.00) as
attorneys fees.
With costs against plaintiff.
SO ORDERED.[12]
The Ruling of the Court of Appeals
The Court of Appeals ruled that Solidbanks negligence was the
proximate cause of the unauthorized withdrawal of P300,000 from the
savings account of L.C. Diaz. The appellate court reached this conclusion
after applying the provision of the Civil Code on quasi-delict, to wit:
Article 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault

or negligence, if there is no pre-existing contractual relation between the

parties, is called a quasi-delict and is governed by the provisions of this
chapter.
The appellate court held that the three elements of a quasi-delict are present
in this case, namely: (a) damages suffered by the plaintiff; (b) fault or
negligence of the defendant, or some other person for whose acts he must
respond; and (c) the connection of cause and effect between the fault or
negligence of the defendant and the damage incurred by the plaintiff.
The Court of Appeals pointed out that the teller of Solidbank who
received the withdrawal slip for P300,000 allowed the withdrawal without
making the necessary inquiry. The appellate court stated that the teller, who
was not presented by Solidbank during trial, should have called up the
depositor because the money to be withdrawn was a significant
amount. Had the teller called up L.C. Diaz, Solidbank would have known that
the withdrawal was unauthorized. The teller did not even verify the identity
of the impostor who made the withdrawal. Thus, the appellate court found
Solidbank liable for its negligence in the selection and supervision of its
employees.
The appellate court ruled that while L.C. Diaz was also negligent in
entrusting its deposits to its messenger and its messenger in leaving the
passbook with the teller, Solidbank could not escape liability because of the
doctrine of last clear chance. Solidbank could have averted the injury
suffered by L.C. Diaz had it called up L.C. Diaz to verify the withdrawal.
The appellate court ruled that the degree of diligence required from
Solidbank is more than that of a good father of a family. The business and
functions of banks are affected with public interest. Banks are obligated to
treat the accounts of their depositors with meticulous care, always having in
mind the fiduciary nature of their relationship with their clients. The Court of
Appeals found Solidbank remiss in its duty, violating its fiduciary relationship
with L.C. Diaz.
The dispositive portion of the decision of the Court of Appeals reads:
WHEREFORE, premises considered, the decision appealed from is hereby
REVERSED and a new one entered.
1.

Ordering defendant-appellee Consolidated Bank and Trust

Corporation to pay plaintiff-appellant the sum of Three Hundred
Thousand Pesos (P300,000.00), with interest thereon at the rate
of 12% per annum from the date of filing of the complaint until
paid, the sum of P20,000.00 as exemplary damages,

and P20,000.00 as attorneys fees and expenses of litigation as

well as the cost of suit; and
2.

Ordering the dismissal of defendant-appellees counterclaim in

the amount of P30,000.00 as attorneys fees.

SO ORDERED.[13]
Acting on the motion for reconsideration of Solidbank, the appellate court
affirmed its decision but modified the award of damages. The appellate
court deleted the award of exemplary damages and attorneys fees. Invoking
Article 2231[14] of the Civil Code, the appellate court ruled that exemplary
damages could be granted if the defendant acted with gross negligence.
Since Solidbank was guilty of simple negligence only, the award of
exemplary damages was not justified. Consequently, the award of attorneys
fees was also disallowed pursuant to Article 2208 of the Civil Code. The
expenses of litigation and cost of suit were also not imposed on Solidbank.
The dispositive portion of the Resolution reads as follows:
WHEREFORE, foregoing considered, our decision dated October 27, 1998 is
affirmed with modification by deleting the award of exemplary damages and
attorneys fees, expenses of litigation and cost of suit.
SO ORDERED.[15]
Hence, this petition.
The Issues
Solidbank seeks the review of the decision and resolution of the Court of
Appeals on these grounds:
I.

THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER

BANK SHOULD SUFFER THE LOSS BECAUSE ITS TELLER SHOULD
HAVE FIRST CALLED PRIVATE RESPONDENT BY TELEPHONE
BEFORE IT ALLOWED THE WITHDRAWAL OF P300,000.00 TO
RESPONDENTS MESSENGER EMERANO ILAGAN, SINCE THERE IS
NO AGREEMENT BETWEEN THE PARTIES IN THE OPERATION OF
THE SAVINGS ACCOUNT, NOR IS THERE ANY BANKING LAW,
WHICH MANDATES THAT A BANK TELLER SHOULD FIRST CALL UP
THE DEPOSITOR BEFORE ALLOWING A WITHDRAWAL OF A BIG
AMOUNT IN A SAVINGS ACCOUNT.

II.

THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF

LAST CLEAR CHANCE AND IN HOLDING THAT PETITIONER BANKS
TELLER HAD THE LAST OPPORTUNITY TO WITHHOLD THE
WITHDRAWAL WHEN IT IS UNDISPUTED THAT THE TWO
SIGNATURES OF RESPONDENT ON THE WITHDRAWAL SLIP ARE

GENUINE AND PRIVATE RESPONDENTS PASSBOOK WAS DULY

PRESENTED, AND CONTRARIWISE RESPONDENT WAS NEGLIGENT
IN THE SELECTION AND SUPERVISION OF ITS MESSENGER
EMERANO ILAGAN, AND IN THE SAFEKEEPING OF ITS CHECKS
AND OTHER FINANCIAL DOCUMENTS.
III.

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE

INSTANT CASE IS A LAST DITCH EFFORT OF PRIVATE
RESPONDENT TO RECOVER ITS P300,000.00 AFTER FAILING IN
ITS EFFORTS TO RECOVER THE SAME FROM ITS EMPLOYEE
EMERANO ILAGAN.

IV.

THE COURT OF APPEALS ERRED IN NOT MITIGATING THE

DAMAGES AWARDED AGAINST PETITIONER UNDER ARTICLE 2197
OF THE CIVIL CODE, NOTWITHSTANDING ITS FINDING THAT
PETITIONER BANKS NEGLIGENCE WAS ONLY CONTRIBUTORY. [16]
The Ruling of the Court

The petition is partly meritorious.

Solidbanks Fiduciary Duty under the Law
The rulings of the trial court and the Court of Appeals conflict on the
application of the law. The trial court pinned the liability on L.C. Diaz based
on the provisions of the rules on savings account, a recognition of the
contractual relationship between Solidbank and L.C. Diaz, the latter being a
depositor of the former. On the other hand, the Court of Appeals applied the
law on quasi-delict to determine who between the two parties was ultimately
negligent. The law on quasi-delict orculpa aquiliana is generally applicable
when there is no pre-existing contractual relationship between the parties.
We hold that Solidbank is liable for breach of contract due to negligence,
orculpa contractual.
The contract between the bank and its depositor is governed by the
provisions of the Civil Code on simple loan. [17] Article 1980 of the Civil Code
expressly provides that x x x savings x x x deposits of money in banks and
similar institutions shall be governed by the provisions concerning simple
loan. There is a debtor-creditor relationship between the bank and its
depositor. The bank is the debtor and the depositor is the creditor. The
depositor lends the bank money and the bank agrees to pay the depositor on
demand. The savings deposit agreement between the bank and the
depositor is the contract that determines the rights and obligations of the
parties.
The law imposes on banks high standards in view of the fiduciary nature
of banking. Section 2 of Republic Act No. 8791 (RA 8791), [18] which took

effect on 13 June 2000, declares that the State recognizes the fiduciary
nature of banking that requires high standards of integrity and
performance.[19] This new provision in the general banking law, introduced in
2000, is a statutory affirmation of Supreme Court decisions, starting with the
1990 case of Simex International v. Court of Appeals,[20] holding that
the bank is under obligation to treat the accounts of its depositors
with meticulous care, always having in mind the fiduciary nature of their
relationship.[21]
This fiduciary relationship means that the banks obligation to observe
high standards of integrity and performance is deemed written into every
deposit agreement between a bank and its depositor. The fiduciary nature of
banking requires banks to assume a degree of diligence higher than that of a
good father of a family. Article 1172 of the Civil Code states that the degree
of diligence required of an obligor is that prescribed by law or contract, and
absent such stipulation then the diligence of a good father of a family.
[22]
Section 2 of RA 8791 prescribes the statutory diligence required from
banks that banks must observe high standards of integrity and
performance in servicing their depositors. Although RA 8791 took effect
almost nine years after the unauthorized withdrawal of the P300,000 from
L.C. Diazs savings account, jurisprudence[23] at the time of the withdrawal
already imposed on banks the same high standard of diligence required
under RA No. 8791.
However, the fiduciary nature of a bank-depositor relationship does not
convert the contract between the bank and its depositors from a simple loan
to a trust agreement, whether express or implied. Failure by the bank to pay
the depositor is failure to pay a simple loan, and not a breach of trust. [24] The
law simply imposes on the bank a higher standard of integrity and
performance in complying with its obligations under the contract of simple
loan, beyond those required of non-bank debtors under a similar contract of
simple loan.
The fiduciary nature of banking does not convert a simple loan into a
trust agreement because banks do not accept deposits to enrich depositors
but to earn money for themselves. The law allows banks to offer the lowest
possible interest rate to depositors while charging the highest possible
interest rate on their own borrowers. The interest spread or differential
belongs to the bank and not to the depositors who are not cestui que trust of
banks. If depositors are cestui que trustof banks, then the interest spread or
income belongs to the depositors, a situation that Congress certainly did not
intend in enacting Section 2 of RA 8791.

Solidbanks Breach of its Contractual Obligation

Article 1172 of the Civil Code provides that responsibility arising from
negligence in the performance of every kind of obligation is demandable.
For breach of the savings deposit agreement due to negligence, or culpa
contractual, the bank is liable to its depositor.
Calapre left the passbook with Solidbank because the transaction took
time and he had to go to Allied Bank for another transaction. The passbook
was still in the hands of the employees of Solidbank for the processing of the
deposit when Calapre left Solidbank. Solidbanks rules on savings account
require that the deposit book should be carefully guarded by the depositor
and kept under lock and key, if possible. When the passbook is in the
possession of Solidbanks tellers during withdrawals, the law imposes on
Solidbank and its tellers an even higher degree of diligence in safeguarding
the passbook.
Likewise, Solidbanks tellers must exercise a high degree of diligence in
insuring that they return the passbook only to the depositor or his authorized
representative. The tellers know, or should know, that the rules on savings
account provide that any person in possession of the passbook is
presumptively its owner. If the tellers give the passbook to the wrong person,
they would be clothing that person presumptive ownership of the passbook,
facilitating unauthorized withdrawals by that person. For failing to return the
passbook to Calapre, the authorized representative of L.C. Diaz, Solidbank
and Teller No. 6 presumptively failed to observe such high degree of
diligence in safeguarding the passbook, and in insuring its return to the party
authorized to receive the same.
In culpa contractual, once the plaintiff proves a breach of contract, there
is a presumption that the defendant was at fault or negligent. The burden is
on the defendant to prove that he was not at fault or negligent. In contrast,
in culpa aquiliana the plaintiff has the burden of proving that the defendant
was negligent. In the present case, L.C. Diaz has established that Solidbank
breached its contractual obligation to return the passbook only to the
authorized representative of L.C. Diaz. There is thus a presumption that
Solidbank was at fault and its teller was negligent in not returning the
passbook to Calapre. The burden was on Solidbank to prove that there was
no negligence on its part or its employees.
Solidbank failed to discharge its burden. Solidbank did not present to the
trial court Teller No. 6, the teller with whom Calapre left the passbook and
who was supposed to return the passbook to him. The record does not
indicate that Teller No. 6 verified the identity of the person who retrieved the

passbook. Solidbank also failed to adduce in evidence its standard

procedure in verifying the identity of the person retrieving the passbook, if
there is such a procedure, and that Teller No. 6 implemented this procedure
in the present case.
Solidbank is bound by the negligence of its employees under the principle
ofrespondeat superior or command responsibility. The defense of exercising
the required diligence in the selection and supervision of employees is not a
complete defense in culpa contractual, unlike in culpa aquiliana.[25]
The bank must not only exercise high standards of integrity and
performance, it must also insure that its employees do likewise because this
is the only way to insure that the bank will comply with its fiduciary
duty. Solidbank failed to present the teller who had the duty to return to
Calapre the passbook, and thus failed to prove that this teller exercised the
high standards of integrity and performance required of Solidbanks
employees.
Proximate Cause of the Unauthorized Withdrawal
Another point of disagreement between the trial and appellate courts is
the proximate cause of the unauthorized withdrawal. The trial court believed
that L.C. Diazs negligence in not securing its passbook under lock and key
was the proximate cause that allowed the impostor to withdraw
the P300,000. For the appellate court, the proximate cause was the tellers
negligence in processing the withdrawal without first verifying with L.C.
Diaz. We do not agree with either court.
Proximate cause is that cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury and without
which the result would not have occurred.[26] Proximate cause is determined
by the facts of each case upon mixed considerations of logic, common sense,
policy and precedent.[27]
L.C. Diaz was not at fault that the passbook landed in the hands of the
impostor. Solidbank was in possession of the passbook while it was
processing the deposit. After completion of the transaction, Solidbank had
the contractual obligation to return the passbook only to Calapre, the
authorized representative of L.C. Diaz. Solidbank failed to fulfill its
contractual obligation because it gave the passbook to another person.
Solidbanks failure to return the passbook to Calapre made possible the
withdrawal of the P300,000 by the impostor who took possession of the
passbook. Under Solidbanks rules on savings account, mere possession of
the passbook raises the presumption of ownership. It was the negligent act
of Solidbanks Teller No. 6 that gave the impostor presumptive ownership of

the passbook. Had the passbook not fallen into the hands of the impostor,
the loss of P300,000 would not have happened. Thus, the proximate cause of
the unauthorized withdrawal was Solidbanks negligence in not returning the
passbook to Calapre.
We do not subscribe to the appellate courts theory that the proximate
cause of the unauthorized withdrawal was the tellers failure to call up L.C.
Diaz to verify the withdrawal. Solidbank did not have the duty to call up L.C.
Diaz to confirm the withdrawal. There is no arrangement between Solidbank
and L.C. Diaz to this effect. Even the agreement between Solidbank and L.C.
Diaz pertaining to measures that the parties must observe whenever
withdrawals of large amounts are made does not direct Solidbank to call up
L.C. Diaz.
There is no law mandating banks to call up their clients whenever their
representatives withdraw significant amounts from their accounts. L.C. Diaz
therefore had the burden to prove that it is the usual practice of Solidbank to
call up its clients to verify a withdrawal of a large amount of money. L.C.
Diaz failed to do so.
Teller No. 5 who processed the withdrawal could not have been put on
guard to verify the withdrawal. Prior to the withdrawal of P300,000, the
impostor deposited with Teller No. 6 the P90,000 PBC check, which later
bounced. The impostor apparently deposited a large amount of money to
deflect suspicion from the withdrawal of a much bigger amount of money.
The appellate court thus erred when it imposed on Solidbank the duty to call
up L.C. Diaz to confirm the withdrawal when no law requires this from banks
and when the teller had no reason to be suspicious of the transaction.
Solidbank continues to foist the defense that Ilagan made the
withdrawal. Solidbank claims that since Ilagan was also a messenger of L.C.
Diaz, he was familiar with its teller so that there was no more need for the
teller to verify the withdrawal. Solidbank relies on the following statements in
the Booking and Information Sheet of Emerano Ilagan:
xxx Ilagan also had with him (before the withdrawal) a forged check of PBC
and indicated the amount of P90,000 which he deposited in favor of L.C. Diaz
and Company. After successfully withdrawing this large sum of money,
accused Ilagan gave alias Rey (Noel Tamayo) his share of the loot. Ilagan
then hired a taxicab in the amount of P1,000 to transport him (Ilagan) to his
home province at Bauan, Batangas. Ilagan extravagantly and lavishly spent
his money but a big part of his loot was wasted in cockfight and horse
racing. Ilagan was apprehended and meekly admitted his guilt.[28] (Emphasis
supplied.)

L.C. Diaz refutes Solidbanks contention by pointing out that the person
who withdrew the P300,000 was a certain Noel Tamayo. Both the trial and
appellate courts stated that this Noel Tamayo presented the passbook with
the withdrawal slip.
We uphold the finding of the trial and appellate courts that a certain Noel
Tamayo withdrew the P300,000. The Court is not a trier of facts. We find no
justifiable reason to reverse the factual finding of the trial court and the
Court of Appeals. The tellers who processed the deposit of the P90,000
check and the withdrawal of the P300,000 were not presented during trial to
substantiate Solidbanks claim that Ilagan deposited the check and made the
questioned withdrawal. Moreover, the entry quoted by Solidbank does not
categorically state that Ilagan presented the withdrawal slip and the
passbook.
Doctrine of Last Clear Chance
The doctrine of last clear chance states that where both parties are
negligent but the negligent act of one is appreciably later than that of the
other, or where it is impossible to determine whose fault or negligence
caused the loss, the one who had the last clear opportunity to avoid the loss
but failed to do so, is chargeable with the loss.[29] Stated differently, the
antecedent negligence of the plaintiff does not preclude him from recovering
damages caused by the supervening negligence of the defendant, who had
the last fair chance to prevent the impending harm by the exercise of due
diligence.[30]
We do not apply the doctrine of last clear chance to the present
case. Solidbank is liable for breach of contract due to negligence in the
performance of its contractual obligation to L.C. Diaz. This is a case of culpa
contractual, where neither the contributory negligence of the plaintiff nor his
last clear chance to avoid the loss, would exonerate the defendant from
liability.[31] Such contributory negligence or last clear chance by the plaintiff
merely serves to reduce the recovery of damages by the plaintiff but does
not exculpate the defendant from his breach of contract.[32]
Mitigated Damages
Under Article 1172, liability (for culpa contractual) may be regulated by
the courts, according to the circumstances. This means that if the
defendant exercised the proper diligence in the selection and supervision of
its employee, or if the plaintiff was guilty of contributory negligence, then the
courts may reduce the award of damages. In this case, L.C. Diaz was guilty
of contributory negligence in allowing a withdrawal slip signed by its

authorized signatories to fall into the hands of an impostor. Thus, the liability
of Solidbank should be reduced.
In Philippine Bank of Commerce v. Court of Appeals,[33] where the
Court held the depositor guilty of contributory negligence, we allocated the
damages between the depositor and the bank on a 40-60 ratio. Applying
the same ruling to this case, we hold that L.C. Diaz must shoulder 40% of the
actual damages awarded by the appellate court. Solidbank must pay the
other 60% of the actual damages.
WHEREFORE,
the
decision
of
the
Court
of
Appeals
is AFFIRMED withMODIFICATION. Petitioner Solidbank Corporation shall pay
private respondent L.C. Diaz and Company, CPAs only 60% of the actual
damages awarded by the Court of Appeals. The remaining 40% of the actual
damages shall be borne by private respondent L.C. Diaz and Company,
CPAs. Proportionate costs.
SO ORDERED.

CONTRIBUTORY NEGLIGENCE

G.R. No. 115024

February 7, 1996

MA. LOURDES VALENZUELA, petitioner,

vs.
COURT OF APPEALS, RICHARD LI and ALEXANDER COMMERCIAL,
INC., respondents.
x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
G.R. No. 117944

February 7, 1996

RICHARD LI, petitioner,

vs.
COURT OF APPEALS and LOURDES VALENZUELA, respondents.
DECISION
KAPUNAN, J.:

These two petitions for review on certiorari under Rule 45 of the Revised
Rules of Court stem from an action to recover damages by petitioner Lourdes
Valenzuela in the Regional Trial Court of Quezon City for injuries sustained by
her in a vehicular accident in the early morning of June 24, 1990. The facts
found by the trial court are succinctly summarized by the Court of Appeals
below:
This is an action to recover damages based on quasi-delict, for serious
physical injuries sustained in a vehicular accident.
Plaintiff's version of the accident is as follows: At around 2:00 in the
morning of June 24, 1990, plaintiff Ma. Lourdes Valenzuela was driving
a blue Mitsubishi lancer with Plate No. FFU 542 from her restaurant at
Marcos highway to her home at Palanza Street, Araneta Avenue. She
was travelling along Aurora Blvd. with a companion, Cecilia Ramon,
heading towards the direction of Manila. Before reaching A. Lake
Street, she noticed something wrong with her tires; she stopped at a
lighted place where there were people, to verify whether she had a flat
tire and to solicit help if needed. Having been told by the people
present that her rear right tire was flat and that she cannot reach her
home in that car's condition, she parked along the sidewalk, about 11/2 feet away, put on her emergency lights, alighted from the car, and
went to the rear to open the trunk. She was standing at the left side of
the rear of her car pointing to the tools to a man who will help her fix
the tire when she was suddenly bumped by a 1987 Mitsubishi Lancer
driven by defendant Richard Li and registered in the name of
defendant Alexander Commercial, Inc. Because of the impact plaintiff
was thrown against the windshield of the car of the defendant, which
was destroyed, and then fell to the ground. She was pulled out from
under defendant's car. Plaintiff's left leg was severed up to the middle
of her thigh, with only some skin and sucle connected to the rest of the
body. She was brought to the UERM Medical Memorial Center where
she was found to have a "traumatic amputation, leg, left up to distal
thigh (above knee)". She was confined in the hospital for twenty (20)
days and was eventually fitted with an artificial leg. The expenses for
the hospital confinement (P120,000.00) and the cost of the artificial leg
(P27,000.00) were paid by defendants from the car insurance.
In her complaint, plaintiff prayed for moral damages in the amount of
P1 million, exemplary damages in the amount of P100,000.00 and
other medical and related expenses amounting to a total of
P180,000.00, including loss of expected earnings.

Defendant Richard Li denied that he was negligent. He was on his way

home, travelling at 55 kph; considering that it was raining, visibility
was affected and the road was wet. Traffic was light. He testified that
he was driving along the inner portion of the right lane of Aurora Blvd.
towards the direction of Araneta Avenue, when he was suddenly
confronted, in the vicinity of A. Lake Street, San Juan, with a car
coming from the opposite direction, travelling at 80 kph, with "full
bright lights". Temporarily blinded, he instinctively swerved to the right
to avoid colliding with the oncoming vehicle, and bumped plaintiff's
car, which he did not see because it was midnight blue in color, with no
parking lights or early warning device, and the area was poorly lighted.
He alleged in his defense that the left rear portion of plaintiff's car was
protruding as it was then "at a standstill diagonally" on the outer
portion of the right lane towards Araneta Avenue (par. 18, Answer). He
confirmed the testimony of plaintiff's witness that after being bumped
the car of the plaintiff swerved to the right and hit another car parked
on the sidewalk. Defendants counterclaimed for damages, alleging that
plaintiff was reckless or negligent, as she was not a licensed driver.
The police investigator, Pfc. Felic Ramos, who prepared the vehicular
accident report and the sketch of the three cars involved in the
accident, testified that the plaintiff's car was "near the sidewalk"; this
witness did not remember whether the hazard lights of plaintiff's car
were on, and did not notice if there was an early warning device; there
was a street light at the corner of Aurora Blvd. and F. Roman, about
100 meters away. It was not mostly dark, i.e. "things can be seen" (p.
16, tsn, Oct. 28, 1991).
A witness for the plaintiff, Rogelio Rodriguez, testified that after
plaintiff alighted from her car and opened the trunk compartment,
defendant's car came approaching very fast ten meters from the
scene; the car was "zigzagging". The rear left side of plaintiff's car was
bumped by the front right portion of defendant's car; as a
consequence, the plaintiff's car swerved to the right and hit the parked
car on the sidewalk. Plaintiff was thrown to the windshield of
defendant's car, which was destroyed, and landed under the car. He
stated that defendant was under the influence of liquor as he could
"smell it very well" (pp. 43, 79, tsn, June 17, 1991).
After trial, the lower court sustained the plaintiff's submissions and found
defendant Richard Li guilty of gross negligence and liable for damages under
Article 2176 of the Civil Code. The trial court likewise held Alexander

Commercial, Inc., Li's employer, jointly and severally liable for damages
pursuant to Article 2180. It ordered the defendants to jointly and severally
pay the following amounts:
1. P41,840.00, as actual damages, representing the miscellaneous
expenses of the plaintiff as a result of her severed left leg;
2. The sums of (a) P37,500.00, for the unrealized profits because of the
stoppage of plaintiff's Bistro La Conga restaurant three (3) weeks after
the accident on June 24, 1990; (b) P20,000.00, a month, as unrealized
profits of the plaintiff in her Bistro La Conga restaurant, from August,
1990 until the date of this judgment and (c) P30,000.00, a month for
unrealized profits in plaintiff's two (2) beauty salons from July, 1990
until the date of this decision;
3. P1,000,000.00, in moral damages;
4. P50,000.00, as exemplary damages;
5. P60,000.00, as reasonable attorney's fees; and
6. Costs.
As a result of the trial court's decision, defendants filed an Omnibus Motion
for New Trial and for Reconsideration, citing testimony in Criminal Case O.C.
No. 804367 (People vs. Richard Li), tending to show that the point of impact,
as depicted by the pieces of glass/debris from the parties' cars, appeared to
be at the center of the right lane of Aurora Blvd. The trial court denied the
motion. Defendants forthwith filed an appeal with the respondent Court of
Appeals. In a Decision rendered March 30, 1994, the Court of Appeals found
that there was "ample basis from the evidence of record for the trial court's
finding that the plaintiff's car was properly parked at the right, beside the
sidewalk when it was bumped by defendant's car."1 Dismissing the
defendants' argument that the plaintiff's car was improperly parked, almost
at the center of the road, the respondent court noted that evidence which
was supposed to prove that the car was at or near center of the right lane
was never presented during the trial of the case.2 The respondent court
furthermore observed that:
Defendant Li's testimony that he was driving at a safe speed of 55
km./hour is self serving; it was not corroborated. It was in fact
contradicted by eyewitness Rodriguez who stated that he was outside
his beerhouse located at Aurora Boulevard after A. Lake Street, at or
about 2:00 a.m. of June 24, 1990 when his attention was caught by a
beautiful lady (referring to the plaintiff) alighting from her car and
opening the trunk compartment; he noticed the car of Richard Li
"approaching very fast ten (10) meters away from the scene";

defendant's car was zigzagging", although there were no holes and

hazards on the street, and "bumped the leg of the plaintiff" who was
thrown against the windshield of defendant's care, causing its
destruction. He came to the rescue of the plaintiff, who was pulled out
from under defendant's car and was able to say "hurting words" to
Richard Li because he noticed that the latter was under the influence
of liquor, because he "could smell it very well" (p. 36, et. seq., tsn, June
17, 1991). He knew that plaintiff owned a beerhouse in Sta. Mesa in
the 1970's, but did not know either plaintiff or defendant Li before the
accident.
In agreeing with the trial court that the defendant Li was liable for the
injuries sustained by the plaintiff, the Court of Appeals, in its decision,
however, absolved the Li's employer, Alexander Commercial, Inc. from any
liability towards petitioner Lourdes Valenzuela and reduced the amount of
moral damages to P500,000.00. Finding justification for exemplary damages,
the respondent court allowed an award of P50,000.00 for the same, in
addition to costs, attorney's fees and the other damages. The Court of
Appeals, likewise, dismissed the defendants' counterclaims.3
Consequently, both parties assail the respondent court's decision by filing
two separate petitions before this Court. Richard Li, in G.R. No. 117944,
contends that he should not be held liable for damages because the
proximate cause of the accident was Ma. Lourdes Valenzuela's own
negligence. Alternatively, he argues that in the event that this Court finds
him negligent, such negligence ought to be mitigated by the contributory
negligence of Valenzuela.
On the other hand, in G.R. No. 115024, Ma. Lourdes Valenzuela assails the
respondent court's decision insofar as it absolves Alexander Commercial, Inc.
from liability as the owner of the car driven by Richard Li and insofar as it
reduces the amount of the actual and moral damages awarded by the trial
court.4
As the issues are intimately related, both petitions are hereby consolidated.
It is plainly evident that the petition for review in G.R. No. 117944 raises no
substantial questions of law. What it, in effect, attempts to have this Court
review are factual findings of the trial court, as sustained by the Court of
Appeals finding Richard Li grossly negligent in driving the Mitsubishi Lancer
provided by his company in the early morning hours of June 24, 1990. This
we will not do. As a general rule, findings of fact of the Court of Appeals are
binding and conclusive upon us, and this Court will not normally disturb such
factual findings unless the findings of fact of the said court are palpably

unsupported by the evidence on record or unless the judgment itself is based

on a misapprehension of facts.5
In the first place, Valenzuela's version of the incident was fully corroborated
by an uninterested witness, Rogelio Rodriguez, the owner-operator of an
establishment located just across the scene of the accident. On trial, he
testified that he observed a car being driven at a "very fast" speed, racing
towards the general direction of Araneta Avenue.6 Rodriguez further added
that he was standing in front of his establishment, just ten to twenty feet
away from the scene of the accident, when he saw the car hit Valenzuela,
hurtling her against the windshield of the defendant's Mitsubishi Lancer, from
where she eventually fell under the defendant's car. Spontaneously reacting
to the incident, he crossed the street, noting that a man reeking with the
smell of liquor had alighted from the offending vehicle in order to survey the
incident.7 Equally important, Rodriguez declared that he observed
Valenzuela's car parked parallel and very near the sidewalk,8 contrary to Li's
allegation that Valenzuela's car was close to the center of the right lane. We
agree that as between Li's "self-serving" asseverations and the observations
of a witness who did not even know the accident victim personally and who
immediately gave a statement of the incident similar to his testimony to the
investigator immediately after the incident, the latter's testimony deserves
greater weight. As the court emphasized:
The issue is one of credibility and from Our own examination of the
transcript, We are not prepared to set aside the trial court's reliance on
the testimony of Rodriguez negating defendant's assertion that he was
driving at a safe speed. While Rodriguez drives only a motorcycle, his
perception of speed is not necessarily impaired. He was subjected to
cross-examination and no attempt was made to question .his
competence or the accuracy of his statement that defendant was
driving "very fast". This was the same statement he gave to the police
investigator after the incident, as told to a newspaper report (Exh. "P").
We see no compelling basis for disregarding his testimony.
The alleged inconsistencies in Rodriguez' testimony are not borne out
by an examination of the testimony. Rodriguez testified that the scene
of the accident was across the street where his beerhouse is located
about ten to twenty feet away (pp. 35-36, tsn, June 17, 1991). He did
not state that the accident transpired immediately in front of his
establishment. The ownership of the Lambingan se Kambingan is not
material; the business is registered in the name of his mother, but he
explained that he owns the establishment (p. 5, tsn, June 20, 1991).

Moreover, the testimony that the streetlights on his side of Aurora

Boulevard were on the night the accident transpired (p. 8) is not
necessarily contradictory to the testimony of Pfc. Ramos that there was
a streetlight at the corner of Aurora Boulevard and F. Roman Street (p.
45, tsn, Oct. 20, 1991).
With respect to the weather condition, Rodriguez testified that there
was only a drizzle, not a heavy rain and the rain has stopped and he
was outside his establishment at the time the accident transpired (pp.
64-65, tsn, June 17, 1991). This was consistent with plaintiff's
testimony that it was no longer raining when she left Bistro La Conga
(pp. 10-11, tsn, April 29, 1991). It was defendant Li who stated that it
was raining all the way in an attempt to explain why he was travelling
at only 50-55 kph. (p. 11, tsn, Oct. 14, 1991). As to the testimony of
Pfc. Ramos that it was raining, he arrived at the scene only in response
to a telephone call after the accident had transpired (pp. 9-10, tsn, Oct.
28, 1991). We find no substantial inconsistencies in Rodriguez's
testimony that would impair the essential integrity of his testimony or
reflect on his honesty. We are compelled to affirm the trial court's
acceptance of the testimony of said eyewitness.
Against the unassailable testimony of witness Rodriguez we note that Li's
testimony was peppered with so many inconsistencies leading us to conclude
that his version of the accident was merely adroitly crafted to provide a
version, obviously self-serving, which would exculpate him from any and all
liability in the incident. Against Valenzuela's corroborated claims, his
allegations were neither backed up by other witnesses nor by the
circumstances proven in the course of trial. He claimed that he was driving
merely at a speed of 55 kph. when "out of nowhere he saw a dark maroon
lancer right in front of him, which was (the) plaintiff's car". He alleged that
upon seeing this sudden "apparition" he put on his brakes to no avail as the
road was slippery.9
One will have to suspend disbelief in order to give credence to Li's
disingenuous and patently self-serving asseverations. The average
motorist alert to road conditions will have no difficulty applying the brakes to
a car traveling at the speed claimed by Li. Given a light rainfall, the visibility
of the street, and the road conditions on a principal metropolitan
thoroughfare like Aurora Boulevard, Li would have had ample time to react to
the changing conditions of the road if he were alert - as every driver should
be - to those conditions. Driving exacts a more than usual toll on the senses.
Physiological "fight or flight" 10 mechanisms are at work, provided such

mechanisms were not dulled by drugs, alcohol, exhaustion, drowsiness,

etc.11 Li's failure to react in a manner which would have avoided the accident
could therefore have been only due to either or both of the two factors: 1)
that he was driving at a "very fast" speed as testified by Rodriguez; and 2)
that he was under the influence of alcohol.12 Either factor working
independently would have diminished his responsiveness to road conditions,
since normally he would have slowed down prior to reaching Valenzuela's
car, rather than be in a situation forcing him to suddenly apply his brakes. As
the trial court noted (quoted with approval by respondent court):
Secondly, as narrated by defendant Richard Li to the San Juan Police
immediately after the incident, he said that while driving along Aurora
Blvd., out of nowhere he saw a dark maroon lancer right in front of him
which was plaintiff's car, indicating, again, thereby that, indeed, he
was driving very fast, oblivious of his surroundings and the road ahead
of him, because if he was not, then he could not have missed noticing
at a still far distance the parked car of the plaintiff at the right side
near the sidewalk which had its emergency lights on, thereby avoiding
forcefully bumping at the plaintiff who was then standing at the left
rear edge of her car.
Since, according to him, in his narration to the San Juan Police, he put
on his brakes when he saw the plaintiff's car in front of him, but that it
failed as the road was wet and slippery, this goes to show again, that,
contrary to his claim, he was, indeed, running very fast. For, were it
otherwise, he could have easily completely stopped his car, thereby
avoiding the bumping of the plaintiff, notwithstanding that the road
was wet and slippery. Verily, since, if, indeed, he was running slow, as
he claimed, at only about 55 kilometers per hour, then, inspite of the
wet and slippery road, he could have avoided hitting the plaintiff by the
mere expedient or applying his brakes at the proper time and distance.
It could not be true, therefore, as he now claims during his testimony,
which is contrary to what he told the police immediately after the
accident and is, therefore, more believable, that he did not actually
step on his brakes but simply swerved a little to the right when he saw
the on-coming car with glaring headlights, from the opposite direction,
in order to avoid it.
For, had this been what he did, he would not have bumped the car of
the plaintiff which was properly parked at the right beside the
sidewalk. And, it was not even necessary for him to swerve a little to
the right in order to safely avoid a collision with the on-coming car,

considering that Aurora Blvd. is a double lane avenue separated at the

center by a dotted white paint, and there is plenty of space for both
cars, since her car was running at the right lane going towards Manila
on the on-coming car was also on its right lane going to Cubao.13
Having come to the conclusion that Li was negligent in driving his companyissued Mitsubishi Lancer, the next question for us to determine is whether or
not Valenzuela was likewise guilty of contributory negligence in parking her
car alongside Aurora Boulevard, which entire area Li points out, is a no
parking zone.
We agree with the respondent court that Valenzuela was not guilty of
contributory negligence.
Contributory negligence is conduct on the part of the injured party,
contributing as a legal cause to the harm he has suffered, which falls below
the standard to which he is required to conform for his own
protection.14 Based on the foregoing definition, the standard or act to which,
according to petitioner Li, Valenzuela ought to have conformed for her own
protection was not to park at all at any point of Aurora Boulevard, a no
parking zone. We cannot agree.
Courts have traditionally been compelled to recognize that an actor who is
confronted with an emergency is not to be held up to the standard of
conduct normally applied to an individual who is in no such situation. The law
takes stock of impulses of humanity when placed in threatening or
dangerous situations and does not require the same standard of thoughtful
and reflective care from persons confronted by unusual and oftentimes
threatening conditions.15
Under the "emergency rule" adopted by this Court in Gan vs. Court of
Appeals,16 an individual who suddenly finds himself in a situation of danger
and is required to act without much time to consider the best means that
may be adopted to avoid the impending danger, is not guilty of negligence if
he fails to undertake what subsequently and upon reflection may appear to
be a better solution, unless the emergency was brought by his own
negligence.17
Applying this principle to a case in which the victims in a vehicular accident
swerved to the wrong lane to avoid hitting two children suddenly darting into
the street, we held, in Mc Kee vs. Intermediate Appellate Court,18 that the
driver therein, Jose Koh, "adopted the best means possible in the given
situation" to avoid hitting the children. Using the "emergency rule" the Court
concluded that Koh, in spite of the fact that he was in the wrong lane when
the collision with an oncoming truck occurred, was not guilty of negligence.19

While the emergency rule applies to those cases in which reflective thought,
or the opportunity to adequately weigh a threatening situation is absent, the
conduct which is required of an individual in such cases is dictated not
exclusively by the suddenness of the event which absolutely negates
thoroughful care, but by the over-all nature of the circumstances. A woman
driving a vehicle suddenly crippled by a flat tire on a rainy night will not be
faulted for stopping at a point which is both convenient for her to do so and
which is not a hazard to other motorists. She is not expected to run the
entire boulevard in search for a parking zone or turn on a dark street or alley
where she would likely find no one to help her. It would be hazardous for her
not to stop and assess the emergency (simply because the entire length of
Aurora Boulevard is a no-parking zone) because the hobbling vehicle would
be both a threat to her safety and to other motorists. In the instant case,
Valenzuela, upon reaching that portion of Aurora Boulevard close to A. Lake
St., noticed that she had a flat tire. To avoid putting herself and other
motorists in danger, she did what was best under the situation. As narrated
by respondent court: "She stopped at a lighted place where there were
people, to verify whether she had a flat tire and to solicit help if needed.
Having been told by the people present that her rear right tire was flat and
that she cannot reach her home she parked along the sidewalk, about 1 1/2
feet away, behind a Toyota Corona Car."20 In fact, respondent court noted,
Pfc. Felix Ramos, the investigator on the scene of the accident confirmed
that Valenzuela's car was parked very close to the sidewalk.21 The sketch
which he prepared after the incident showed Valenzuela's car partly
straddling the sidewalk, clear and at a convenient distance from motorists
passing the right lane of Aurora Boulevard. This fact was itself corroborated
by the testimony of witness Rodriguez.22
Under the circumstances described, Valenzuela did exercise the standard
reasonably dictated by the emergency and could not be considered to have
contributed to the unfortunate circumstances which eventually led to the
amputation of one of her lower extremities. The emergency which led her to
park her car on a sidewalk in Aurora Boulevard was not of her own making,
and it was evident that she had taken all reasonable precautions.
Obviously in the case at bench, the only negligence ascribable was the
negligence of Li on the night of the accident. "Negligence, as it is commonly
understood is conduct which creates an undue risk of harm to others."23It is
the failure to observe that degree of care, precaution, and vigilance which
the circumstances justly demand, whereby such other person suffers
injury.24 We stressed, in Corliss vs. Manila Railroad Company,25 that
negligence is the want of care required by the circumstances.

The circumstances established by the evidence adduced in the court below

plainly demonstrate that Li was grossly negligent in driving his Mitsubishi
Lancer. It bears emphasis that he was driving at a fast speed at about 2:00
A.M. after a heavy downpour had settled into a drizzle rendering the street
slippery. There is ample testimonial evidence on record to show that he was
under the influence of liquor. Under these conditions, his chances of
effectively dealing with changing conditions on the road were significantly
lessened. As Presser and Keaton emphasize:
[U]nder present day traffic conditions, any driver of an automobile
must be prepared for the sudden appearance of obstacles and persons
on the highway, and of other vehicles at intersections, such as one who
sees a child on the curb may be required to anticipate its sudden dash
into the street, and his failure to act properly when they appear may
be found to amount to negligence.26
Li's obvious unpreparedness to cope with the situation confronting him on
the night of the accident was clearly of his own making.
We now come to the question of the liability of Alexander Commercial, Inc.
Li's employer. In denying liability on the part of Alexander Commercial, the
respondent court held that:
There is no evidence, not even defendant Li's testimony, that the visit
was in connection with official matters. His functions as assistant
manager sometimes required him to perform work outside the office as
he has to visit buyers and company clients, but he admitted that on
the night of the accident he came from BF Homes Paranaque he did
not have "business from the company" (pp. 25-26, ten, Sept. 23,
1991). The use of the company car was partly required by the nature of
his work, but the privilege of using it for non-official business is a
"benefit", apparently referring to the fringe benefits attaching to his
position.
Under the civil law, an employer is liable for the negligence of his
employees in the discharge of their respective duties, the basis of
which liability is not respondeat superior, but the relationship of pater
familias, which theory bases the liability of the master ultimately on his
own negligence and not on that of his servant (Cuison v. Norton and
Harrison Co., 55 Phil. 18). Before an employer may be held liable for
the negligence of his employee, the act or omission which caused
damage must have occurred while an employee was in the actual
performance of his assigned tasks or duties (Francis High School vs.
Court of Appeals, 194 SCRA 341). In defining an employer's liability for

the acts done within the scope of the employee's assigned tasks, the
Supreme Court has held that this includes any act done by an
employee, in furtherance of the interests of the employer or for the
account of the employer at the time of the infliction of the injury or
damage (Filamer Christian Institute vs. Intermediate Appellate Court,
212 SCRA 637). An employer is expected to impose upon its employees
the necessary discipline called for in the performance of any act
"indispensable to the business and beneficial to their employer" (at p.
645).
In light of the foregoing, We are unable to sustain the trial court's
finding that since defendant Li was authorized by the company to use
the company car "either officially or socially or even bring it home", he
can be considered as using the company car in the service of his
employer or on the occasion of his functions. Driving the company car
was not among his functions as assistant manager; using it for nonofficial purposes would appear to be a fringe benefit, one of the perks
attached to his position. But to impose liability upon the employer
under Article 2180 of the Civil Code, earlier quoted, there must be a
showing that the damage was caused by their employees in the
service of the employer or on the occasion of their functions. There is
no evidence that Richard Li was at the time of the accident performing
any act in furtherance of the company's business or its interests, or at
least for its benefit. The imposition of solidary liability against
defendant Alexander Commercial Corporation must therefore fail. 27
We agree with the respondent court that the relationship in question is not
based on the principle of respondeat superior, which holds the master liable
for acts of the servant, but that of pater familias, in which the liability
ultimately falls upon the employer, for his failure to exercise the diligence of
a good father of the family in the selection and supervision of his employees.
It is up to this point, however, that our agreement with the respondent court
ends. Utilizing the bonus pater familias standard expressed in Article 2180 of
the Civil Code, 28 we are of the opinion that Li's employer, Alexander
Commercial, Inc. is jointly and solidarily liable for the damage caused by the
accident of June 24, 1990.
First, the case of St. Francis High School vs. Court of Appeals29 upon which
respondent court has placed undue reliance, dealt with the subject of a
school and its teacher's supervision of students during an extracurricular
activity. These cases now fall under the provision on special parental

authority found in Art. 218 of the Family Code which generally encompasses
all authorized school activities, whether inside or outside school premises.
Second, the employer's primary liability under the concept of pater
familias embodied by Art 2180 (in relation to Art. 2176) of the Civil Code is
quasi-delictual or tortious in character. His liability is relieved on a showing
that he exercised the diligence of a good father of the family in the selection
and supervision of its employees. Once evidence is introduced showing that
the employer exercised the required amount of care in selecting its
employees, half of the employer's burden is overcome. The question of
diligent supervision, however, depends on the circumstances of employment.
Ordinarily, evidence demonstrating that the employer has exercised diligent
supervision of its employee during the performance of the latter's assigned
tasks would be enough to relieve him of the liability imposed by Article 2180
in relation to Article 2176 of the Civil Code. The employer is not expected to
exercise supervision over either the employee's private activities or during
the performance of tasks either unsanctioned by the former or unrelated to
the employee's tasks. The case at bench presents a situation of a different
character, involving a practice utilized by large companies with either their
employees of managerial rank or their representatives.
It is customary for large companies to provide certain classes of their
employees with courtesy vehicles. These company cars are either wholly
owned and maintained by the company itself or are subject to various plans
through which employees eventually acquire their vehicles after a given
period of service, or after paying a token amount. Many companies provide
liberal "car plans" to enable their managerial or other employees of rank to
purchase cars, which, given the cost of vehicles these days, they would not
otherwise be able to purchase on their own.
Under the first example, the company actually owns and maintains the car
up to the point of turnover of ownership to the employee; in the second
example, the car is really owned and maintained by the employee himself. In
furnishing vehicles to such employees, are companies totally absolved of
responsibility when an accident involving a company-issued car occurs
during private use after normal office hours?
Most pharmaceutical companies, for instance, which provide cars under the
first plan, require rigorous tests of road worthiness from their agents prior to
turning over the car (subject of company maintenance) to their
representatives. In other words, like a good father of a family, they entrust
the company vehicle only after they are satisfied that the employee to whom
the car has been given full use of the said company car for company or

private purposes will not be a threat or menace to himself, the company or

to others. When a company gives full use and enjoyment of a company car to
its employee, it in effect guarantees that it is, like every good father,
satisfied that its employee will use the privilege reasonably and responsively.
In the ordinary course of business, not all company employees are given the
privilege of using a company-issued car. For large companies other than
those cited in the example of the preceding paragraph, the privilege serves
important business purposes either related to the image of success an entity
intends to present to its clients and to the public in general, or - for practical
and utilitarian reasons - to enable its managerial and other employees of
rank or its sales agents to reach clients conveniently. In most cases,
providing a company car serves both purposes. Since important business
transactions and decisions may occur at all hours in all sorts of situations
and under all kinds of guises, the provision for the unlimited use of a
company car therefore principally serves the business and goodwill of a
company and only incidentally the private purposes of the individual who
actually uses the car, the managerial employee or company sales agent. As
such, in providing for a company car for business use and/or for the purpose
of furthering the company's image, a company owes a responsibility to the
public to see to it that the managerial or other employees to whom it
entrusts virtually unlimited use of a company issued car are able to use the
company issue capably and responsibly.
In the instant case, Li was an Assistant Manager of Alexander Commercial,
Inc. In his testimony before the trial court, he admitted that his functions as
Assistant Manager did not require him to scrupulously keep normal office
hours as he was required quite often to perform work outside the office,
visiting prospective buyers and contacting and meeting with company
clients. 30 These meetings, clearly, were not strictly confined to routine hours
because, as a managerial employee tasked with the job of representing his
company with its clients, meetings with clients were both social as well as
work-related functions. The service car assigned to Li by Alexander
Commercial, Inc. therefore enabled both Li - as well as the corporation - to
put up the front of a highly successful entity, increasing the latter's goodwill
before its clientele. It also facilitated meeting between Li and its clients by
providing the former with a convenient mode of travel.
Moreover, Li's claim that he happened to be on the road on the night of the
accident because he was coming from a social visit with an officemate in
Paranaque was a bare allegation which was never corroborated in the court
below. It was obviously self-serving. Assuming he really came from his

officemate's place, the same could give rise to speculation that he and his
officemate had just been from a work-related function, or they were together
to discuss sales and other work related strategies.
In fine, Alexander Commercial, inc. has not demonstrated, to our satisfaction,
that it exercised the care and diligence of a good father of the family in
entrusting its company car to Li. No allegations were made as to whether or
not the company took the steps necessary to determine or ascertain the
driving proficiency and history of Li, to whom it gave full and unlimited use of
a company car.31 Not having been able to overcome the burden of
demonstrating that it should be absolved of liability for entrusting its
company car to Li, said company, based on the principle of bonus pater
familias, ought to be jointly and severally liable with the former for the
injuries sustained by Ma. Lourdes Valenzuela during the accident.
Finally, we find no reason to overturn the amount of damages awarded by
the respondent court, except as to the amount of moral damages. In the
case of moral damages, while the said damages are not intended to enrich
the plaintiff at the expense of a defendant, the award should nonetheless be
commensurate to the suffering inflicted. In the instant case we are of the
opinion that the reduction in moral damages from an amount of
P1,000,000.00 to P800,000,00 by the Court of Appeals was not justified
considering the nature of the resulting damage and the
predictable sequelae of the injury.
As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic
amputation of her left lower extremity at the distal left thigh just above the
knee. Because of this, Valenzuela will forever be deprived of the full
ambulatory functions of her left extremity, even with the use of state of the
art prosthetic technology. Well beyond the period of hospitalization (which
was paid for by Li), she will be required to undergo adjustments in her
prosthetic devise due to the shrinkage of the stump from the process of
healing.
These adjustments entail costs, prosthetic replacements and months of
physical and occupational rehabilitation and therapy. During her lifetime, the
prosthetic devise will have to be replaced and re-adjusted to changes in the
size of her lower limb effected by the biological changes of middle-age,
menopause and aging. Assuming she reaches menopause, for example, the
prosthetic will have to be adjusted to respond to the changes in bone
resulting from a precipitate decrease in calcium levels observed in the bones
of all post-menopausal women. In other words, the damage done to her
would not only be permanent and lasting, it would also be permanently

changing and adjusting to the physiologic changes which her body

would normally undergo through the years. The replacements, changes, and
adjustments will require corresponding adjustive physical and occupational
therapy. All of these adjustments, it has been documented, are painful.
The foregoing discussion does not even scratch the surface of the nature of
the resulting damage because it would be highly speculative to estimate the
amount of psychological pain, damage and injury which goes with the
sudden severing of a vital portion of the human body. A prosthetic device,
however technologically advanced, will only allow a reasonable amount of
functional restoration of the motor functions of the lower limb. The sensory
functions are forever lost. The resultant anxiety, sleeplessness, psychological
injury, mental and physical pain are inestimable.
As the amount of moral damages are subject to this Court's discretion, we
are of the opinion that the amount of P1,000,000.00 granted by the trial
court is in greater accord with the extent and nature of the injury - physical
and psychological - suffered by Valenzuela as a result of Li's grossly
negligent driving of his Mitsubishi Lancer in the early morning hours of the
accident.
WHEREFORE, PREMISES CONSIDERED, the decision of the Court of Appeals is
modified with the effect of REINSTATING the judgment of the Regional Trial
Court.
SO ORDERED.
Padilla, Bellosillo and Hermosisima, Jr., JJ., concur.

G.R. No. L-9671

August 23, 1957

CESAR L. ISAAC, plaintiff-appellant,

vs.
A. L. AMMEN TRANSPORTATION CO., INC., defendant-appellee.
Angel S. Gamboa for appellant.
Manuel O. Chan for appellee.
BAUTISTA ANGELO, J.:
A. L. Ammen Transportation Co., Inc., hereinafter referred to as defendant, is
a corporation engaged in the business of transporting passengers by land for
compensation in the Bicol provinces and one of the lines it operates is the

one connecting Legaspi City, Albay with Naga City, Camarines Sur. One of
the buses which defendant was operating is Bus No. 31. On May 31, 1951,
plaintiff boarded said bus as a passenger paying the required fare from
Ligao, Albay bound for Pili, Camarines Sur, but before reaching his
destination, the bus collided with a motor vehicle of the pick-up type coming
from the opposite direction, as a result of which plaintiff's left arm was
completely severed and the severed portion fell inside the bus. Plaintiff was
rushed to a hospital in Iriga, Camarines Sur where he was given blood
transfusion to save his life. After four days, he was transferred to another
hospital in Tabaco, Albay, where he under went treatment for three months.
He was moved later to the Orthopedic Hospital where he was operated on
and stayed there for another two months. For these services, he incurred
expenses amounting to P623.40, excluding medical fees which were paid by
defendant.
As an aftermath, plaintiff brought this action against defendants for damages
alleging that the collision which resulted in the loss of his left arm was mainly
due to the gross incompetence and recklessness of the driver of the bus
operated by defendant and that defendant incurred in culpa
contractual arising from its non-compliance with its obligation to transport
plaintiff safely to his, destination. Plaintiff prays for judgment against
defendant as follows: (1) P5,000 as expenses for his medical treatment, and
P3,000 as the cost of an artificial arm, or a total of P8,000; (2) P6,000
representing loss of earning; (3) P75,000 for diminution of his earning
capacity; (4) P50,000 as moral damages; and (5) P10,000 as attorneys' fees
and costs of suit.
Defendant set up as special defense that the injury suffered by plaintiff was
due entirely to the fault or negligence of the driver of the pick-up car which
collided with the bus driven by its driver and to the contributory negligence
of plaintiff himself. Defendant further claims that the accident which resulted
in the injury of plaintiff is one which defendant could not foresee or, though
foreseen, was inevitable.
The after trial found that the collision occurred due to the negligence of the
driver of the pick-up car and not to that of the driver of the bus it appearing
that the latter did everything he could to avoid the same but that
notwithstanding his efforts, he was not able to avoid it. As a consequence,
the court dismissed complaint, with costs against plaintiff. This is an appeal
from said decision.
It appears that plaintiff boarded a bus of defendant as paying passenger
from Ligao, Albay, bound for Pili, Camarines Sur, but before reaching his

destination, the bus collided with a pick-up car which was coming from the
opposite direction and, as a, result, his left arm was completely severed and
fell inside the back part of the bus. Having this background in view, and
considering that plaintiff chose to hold defendant liable on its contractual
obligation to carry him safely to his place of destination, it becomes
important to determine the nature and extent of the liability of a common
carrier to a passenger in the light of the law applicable in this jurisdiction.
In this connection, appellant invokes the rule that, "when an action is based
on a contract of carriage, as in this case, all that is necessary to sustain
recovery is proof of the existence of the contract of the breach thereof by act
or omission", and in support thereof, he cites several Philippine cases.1 With
the ruling in mind, appellant seems to imply that once the contract of
carriage is established and there is proof that the same was broken by failure
of the carrier to transport the passenger safely to his destination, the liability
of the former attaches. On the other hand, appellee claims that is a wrong
presentation of the rule. It claims that the decisions of this Court in the cases
cited do not warrant the construction sought to be placed upon, them by
appellant for a mere perusal thereof would show that the liability of the
carrier was predicated not upon mere breach of its contract of carriage but
upon the finding that its negligence was found to be the direct or proximate
cause of the injury complained of. Thus, appellee contends that "if there is no
negligence on the part of the common carrier but that the accident resulting
in injuries is due to causes which are inevitable and which could not have
been avoided or anticipated notwithstanding the exercise of that high degree
of care and skill which the carrier is bound to exercise for the safety of his
passengers", neither the common carrier nor the driver is liable therefor.
We believe that the law concerning the liability of a common carrier has now
suffered a substantial modification in view of the innovations introduced by
the new Civil Code. These innovations are the ones embodied in Articles
1733, 1755 and 1756 in so far as the relation between a common carrier and
its passengers is concerned, which, for ready reference, we quote hereunder:
ART. 1733. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extra ordinary diligence
in the vigilance over the goods and for the safety of the passengers
transported by them according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further
expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set
forth in articles 1755 and 1756.

ART. 1755. A common carrier is bound to carry the passengers safely

as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the
circumstances.
ART. 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
The Code Commission, in justifying this extraordinary diligence required of a
common carrier, says the following:
A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost deligence of
very cautions persons, with due regard for all circumstances. This
extraordinary diligence required of common carriers is calculated to
protect the passengers from the tragic mishaps that frequently occur in
connection with rapid modern transportation. This high standard of
care is imperatively demanded by the precariousness of human life
and by the consideration that every person must in every way be
safeguarded against all injury. (Report of the Code Commission, pp. 3536)" (Padilla, Civil Code of the Philippines, Vol. IV, 1956 ed., p. 197).
From the above legal provisions, we can make the following restatement of
the principles governing the liability of a common carrier: (1) the liability of a
carrier is contractual and arises upon breach of its obligation. There is breach
if it fails to exert extraordinary diligence according to all circumstances of
each case; (2) a carrier is obliged to carry its passenger with the utmost
diligence of a very cautious person, having due regard for all the
circumstances; (3) a carrier is presumed to be at fault or to have acted
negligently in case of death of, or injury to, passengers, it being its duty to
prove that it exercised extraordinary diligence; and (4) the carrier is not an
insurer against all risks of travel.
The question that now arises is: Has defendant observed extraordinary
diligence or the utmost diligence of every cautious person, having due
regard for all circumstances, in avoiding the collision which resulted in the
injury caused to the plaintiff?
After examining the evidence in connection with how the collision occurred,
the lower court made the following finding:
Hemos examinado muy detenidamente las pruebas presentadas en la
vista, principalmente, las declaraciones que hemos acotado arriba, y
hernos Ilegado a la conclusion de que el demandado ha hecho, todo

cuanto estuviere de su parte para evitar el accidente, pero sin

embargo, no ha podido evitarlo.
EI hecho de que el demandado, antes del choque, tuvo que hacer
pasar su truck encima de los montones de grava que estaban
depositados en la orilla del camino, sin que haya ido mas alla, por el
grave riesgo que corrian las vidas de sus pasajeros, es prueba
concluyente de lo que tenemos dicho, a saber: que el cuanto esuba
de su parte, para evitar el accidente, sin que haya podidoevitardo, por
estar fuera de su control.
The evidence would appear to support the above finding. Thus, it appears
that Bus No. 31, immediately prior to the collision, was running at a
moderate speed because it had just stopped at the school zone of Matacong,
Polangui, Albay. The pick-up car was at full speed and was running outside of
its proper lane. The driver of the bus, upon seeing the manner in which the
pick-up was then running, swerved the bus to the very extreme right of the
road until its front and rear wheels have gone over the pile of stones or
gravel situated on the rampart of the road. Said driver could not move the
bus farther right and run over a greater portion of the pile, the peak of which
was about 3 feet high, without endangering the safety of his passengers. And
notwithstanding all these efforts, the rear left side of the bus was hit by the
pick-up car.
Of course, this finding is disputed by appellant who cannot see eye to eye
with the evidence for the appellee and insists that the collision took place
because the driver of the bus was going at a fast speed. He contends that,
having seen that a car was coming from the opposite direction at a distance
which allows the use of moderate care and prudence to avoid an accident,
and knowing that on the side of the road along which he was going there was
a pile of gravel, the driver of the bus should have stopped and waited for the
vehicle from the opposite direction to pass, and should have proceeded only
after the other vehicle had passed. In other words, according to appellant,
the act of the driver of the bus in squeezing his way through of the bus in
squeezing his way through between the oncoming pick-up and the pile of
gravel under the circumstances was considered negligent.
But this matter is one of credibility and evaluation of the evidence. This is
evidence. This is the function of the trial court. The trial court has already
spoken on this matter as we have pointed out above. This is also a matter of
appreciation of the situation on the part of the driver. While the position
taken by appellant appeals more to the sense of caution that one should
observe in a given situation to avoid an accident or mishap, such however

can not always be expected from one who is placed suddenly in a

predicament where he is not given enough time to take the course of action
as he should under ordinary circumstances. One who is placed in such a
predicament cannot exercise such coolness or accuracy of judgment as is
required of him under ordinary circumstances and he cannot therefore be
expected to observe the same judgment, care and precaution as in the latter.
For this reason, authorities abound where failure to observe the same degree
of care that as ordinary prudent man would exercise under ordinary
circumstances when confronted with a sadden emergency was held to be
warranted and a justification to exempt the carrier from liability. Thus, it was
held that "where a carrier's employee is confronted with a sudden
emergency, the fact that he is obliged to act quickly and without a chance
for deliberation must be taken into account, and he is held to the some
degree of care that he would otherwise be required to exercise in the
absence of such emergency but must exercise only such care as any ordinary
prudent person would exercise under like circumstances and conditions, and
the failure on his part to exercise the best judgement the case renders
possible does not establish lack of care and skill on his part which renders
the company, liable. . . . (13 C. J. S., 1412; 10 C. J.,970). Considering all the
circumstances, we are persuaded to conclude that the driver of the bus has
done what a prudent man could have done to avoid the collision and in our
opinion this relieves appellee from legibility under our law.
A circumstances which miliates against the stand of appellant is the fact
borne out by the evidence that when he boarded the bus in question, he
seated himself on the left side thereof resting his left arm on the window sill
but with his left elbow outside the window, this being his position in the bus
when the collision took place. It is for this reason that the collision resulted in
the severance of said left arm from the body of appellant thus doing him a
great damage. It is therefore apparent that appellant is guilty of contributory
negligence. Had he not placed his left arm on the window sill with a portion
thereof protruding outside, perhaps the injury would have been avoided as is
the case with the other passenger. It is to be noted that appellant was the
only victim of the collision.
It is true that such contributory negligence cannot relieve appellee of its
liability but will only entitle it to a reduction of the amount of damage caused
(Article 1762, new Civil Code), but this is a circumstance which further
militates against the position taken by appellant in this case.
It is the prevailing rule that it is negligence per se for a passenger on a
railroad voluntarily or inadvertently to protrude his arm, hand, elbow,

or any other part of his body through the window of a moving car
beyond the outer edge of the window or outer surface of the car, so as
to come in contact with objects or obstacles near the track, and that no
recovery can be had for an injury which but for such negligence would
not have been sustained. (10 C. J. 1139)
Plaintiff, (passenger) while riding on an interurban car, to flick the
ashes, from his cigar, thrust his hand over the guard rail a sufficient
distance beyond the side line of the car to bring it in contact with the
trunk of a tree standing beside the track; the force of the blow
breaking his wrist. Held, that he was guilty of contributory negligence
as a matter of law. (Malakia vs. Rhode Island Co., 89 A., 337.)
Wherefore, the decision appealed from is affirmed, with cost against
appellant.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion,
Endencia and Felix, JJ., concur.

G.R. No. L-29889 May 31, 1979

VICTORINO CUSI and PILAR POBRE, plaintiffs-appellees,
vs.
PHILIPPINE NATIONAL RAILWAYS, defendant-appellant.
Leopoldo M. Abellera for appellant.
Francisco V. Marasigan for appellees.
GUERRERO, J.:
Direct appeal from the decision of the Court of First Instance of Rizal ordering
defendant-appellant to indemnify the plaintiffs- appellees in the total amount
of Two Hundred Thirty-Nine Thousand and Six Hundred Forty-Eight Pesos, and
Seventy-Two Centavos (P239,648.72) for injuries received in a collision
caused by the gross negligence of defendant-appellant, plus Ten Thousand
Pesos (P10,000.00) as attorney's fees and expenses of litigation.
Upon the amended and supplemental complaints for damages filed by
plaintiffs-appellees, the spouses Victorino Cusi and Pilar Pobre before the
Court of First Instance of Rizal against the Manila Railroad Company, now the
Philippine National Railways and duly answered by the latter and after due

hearing. the following facts appear as undisputed: On the night of October 5,

1963, plaintiffs-appellees attended a birthday party inside the United
Housing Subdivision in Paranaque, Rizal. After the party which broke up at
about 11 o'clock that evening, the plaintiffs-appellees proceeded home in
their Vauxhall car with Victorino Cusi at the wheel. Upon reaching the
railroad tracks, finding that the level crossing bar was raised and seeing that
there was no flashing red light, and hearing no whistle from any coming
train, Cusi merely slack ened his speed and proceeded to cross the tracks. At
the same time, a train bound for Lucena traversed the crossing, resulting in a
collision between the two. The impact threw the plaintiffs-appellees out of
their car which was smashed. One Benjamin Franco, who came from the
same party and was driving a vehicle right behind them, rushed to their aid
and brought them. to San Juan de Dios Hospital for emergency treatment.
Later, the plaintiffs-appellees were transferred to the Philippine General
Hospital. A week later, Mrs. Cusi transferred to the Manila Doctors Hospital
where Dr. Manuel Rivera, head of the Orthopedic and Fracture Service of the
Philippine General Hospital performed on her a second operation and
continued to treat her until her discharge from the hospital on November 2,
1963. Thereafter, Dr. Rivera treated her as an out-patient until the end of
February, 1964 although by that time the fractured bones had not yet
healed. Mrs. Cusi was also operated on by Dr. Francisco Aguilar, Director of
the National Orthopedic Hospital, in May, 1964 and in August, 1965, after
another operation in her upper body from the chest to the abdomen, she was
placed in cast for some three (3) months and her right arm immobilized by
reason of the past
As enumerated in the Medical Certificate (Exh. "J"), Mrs. Cusi suffered the
following:
(1) Fracture open middle third humerus right
(2) Fracture mandible right paramedian
(3) Fracture fibula left distal
(4) Concussion, cerebral
(5) Abrasions, multiple (face, head, lumbosacral and extremities)
(6) Lacerations (2) right temporal
(7) Contusions with hematoma left forehead and parieto occipital
right.
For these injuries, she underwent a total of four surgical opera. petitions in a
period of two years. As a result of the fracture on her right arm, there was a
shortening of about 1 cm. of that arm. She lost the flexibility of her wrist,
elbow and shoulder. Up to the time she took the witness stand in August,

1966, she still had an intermedullary nail in the bone of her right arm
Likewise, Victorino Cusi suffered brain injuries which affected his speech,
memory, sense of hearing and neck movement. For a long period, he also
felt pain all over his body.
Victorino Cusi claimed that prior to the accident he was a successful
businessman the Special Assistant to the Dolor Lopez Enterprises, the
managing partner of Cusi and Rivera Partnership, the manager of his ricemill,
and with substantial investments in other business enterprises. As a result of
his injuries, he was unable to properly attend to his various business
undertakings. On the other hand, his wife, Pilar, was a skilled music and
piano teacher. After the accident, she lost the dexterity of her fingers forcing
her to quit her profession. She also bore ugly scars on several parts of her
body, and she suffered anxiety of a possible miscarriage being then five (5)
months pregnant at the time of the accident.
The defense is centered on the proposition that the gross negligence of
Victorino Cusi was the proximate cause of the collision; that had he made a
full stop before traversing the crossing as required by section 56(a) of Act
3992 (Motor Vehicle Law), he could have seen and heard the approach of the
train, and thus, there would have been no collision.
After a protracted trial, the lower court rendered the decision now subject of
the appeal. Defendant-appellant seeks the reversal of said decision; but
should we affirm the same, that the award be reduced to a reasonable
amount.
As the action is predicated on negligence, the New Civil Code 1 making clear
that "whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done the crucial
question posed in the petition at bar is the existence of negligence on the
part of defendant-appellant as found by the lower court.
1. The question of negligence being one of fact, the lower court's finding of
negligence on the part of the defendant-appellant deserves serious
consideration by the Court. It commands great respect and weight, the
reason being that the trial judge, having the advantage of hearing the
parties testify and of observing their demeanor on the witness stand, is
better situated to make conclusions of facts. Thus, it has been the standing
practice of appellate courts to accord lower court's judgments the
presumption of correctness. And unless it can be shown that error or errors,
substantial in character, be shown in the conclusion arrived at, or that there
was abuse in judicial scrutiny, We are bound by their judgments. On this
ground alone We can rest the affirmance of the judgment appealed from. 2

2. Nor is the result different even if no such presumption were indulged in,
that is, even if We were to resolve whether or not there exist compelling
reasons for an ultimate reversal.
The judicial pronouncement below that the gross negligence of defendantappellant was the proximate cause of the collision has been thoroughly
reviewed by this Court and we fully affirm the same.
Negligence has been defined by Judge Cooley in his work on Torts 3d ed sec.
1324 3 as "the failure to observe for the protection of the interests of another
person that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury." By
such a test, it can readily be seen that there is no hard and fast rule whereby
such degree of care and vigilance is measured, it is dependent upon the
circumstances in which a person finds himself so situated. All that the law
requires is that it is always incumbent upon a person to use that care and
diligence expected of reasonable men under similar circumstances.
These are the circumstances attendant to the collision. Undisputably, the
warning devices installed at the railroad crossing were manually operated;
there were only 2 shifts of guards provided for the operation thereof one,
the 7:00 A.M. to 3:00 P. M. shift, and the other, the 3:00 P.M. to 11:00 P.M.
shift. On the night of the accident, the train for Lucena was on an
unscheduled trip after 11:00 P.M. During that precise hour, the warning
devices were not operating for no one attended to them. Also, as observed
by the lower court, the locomotive driver did not blow his whistle, thus: "...
he simply sped on without taking an extra precaution of blowing his whistle
from a distance of 50 to 10 meters from the crossing. That the train was
running at full speed is attested to by the fact that notwithstanding the
application of the emergency brakes, the train did not stop until it reached a
distance of around 100 meters."
These facts assessed together show the inadequacy, nay, the absence, of
precautions taken by the defendant-appellant to warn the travelling public of
the impending danger. It is clear to Us that as the signal devices were wholly
manually-operated, there was an urgent need for a flagman or guard to man
the crossing at all times. As it was, the crossing was left unattended to after
eleven o'clock every night and on the night of the accident. We cannot in all
reason justify or condone the act of the defendant-appellant allowing the
subject locomotive to travel through the unattended crossing with
inoperative signal devices, but without sending any of its employees to
operate said signal devices so as to warn oncoming motorists of the
approach of one of its locomotives. It is not surprising therefore that the in

operation of the warning devices created a situation which was

misunderstood by the riding public to mean safe passage. Jurisprudence
recognizes that if warning devices are installed in railroad crossings, the
travelling public has the right to rely on such warning devices to put them on
their guard and take the necessary precautions before crossing the tracks. A
need, therefore, exists for the railroad company to use reasonable care to
keep such devices in good condition and in working order, or to give notice
that they are not operating, since if such a signal is misunderstood it is a
menace. 4 Thus, it has been held that if a railroad company maintains a
signalling device at a crossing to give warning of the approach of a train, the
failure of the device to operate is generally held to be evidence of
negligence, which maybe considered with all the circumstances of the case
in determining whether the railroad company was negligent as a matter of
fact. 5
The set of circumstances surrounding the collision subject of this case is very
much similar to that of Lilius v. Manila Railroad Company, 59 Phil. 758 (1934),
where this Court upheld the lower court's finding of negligence on the part of
defendant locomotive company upon the following facts
... on the part of the defendant company, for not having had on
that occasion any semaphore at the crossing at Dayap to serve
as a warning to passersby of its existence in order that they
might take the necessary precautions before crossing the
railroad; and, on the part of its employees the flagman and
switchman, for not having remained at his post at the crossing in
question to warn passersby of the approaching train; the station
master, for failure to send the said flagman and switchman to his
post on time; and the engineer, for not having taken the
necessary precautions to avoid an accident, in view of the
absence of said flagman and switchman, by slackening his speed
and continuously ringing the bell and blowing the whistle before
arriving at the crossing.
Defendant-appellant rests its defense mainly on Section 56(a) of the Motor
Vehicle Law. Thus:
Section 56(a) Traversing through streets and railroad crossing,
etc, All vehicles moving on the public highways shall be
brought to a full stop before traversing any 'through street' or
railroad crossing. Whenever any such 'through street' or crossing
is so designated and signposted, it shall be unlawful for the
driver of any vehicle to fail to stop within twenty meters but not

less than two and one-half meters from such through street or
railroad crossing.
The defense presupposes that the failure of plaintiffs-appellees to stop
before proceeding to traverse the crossing constitutes contributory
negligence, thereby precluding them from recovering indemnity for their
injuries and damages.
The candor of defendant-appellant in interposing such a defense is doubtful.
As seemingly observed by the lower court, the defense, through
inadvertence or deliberateness, did not pursue further the excepting clause
of the same section thus to go on:
Provided, however, that the driver of a passenger automobile or
motorcycle may instead of coming to a full stop, slow down to
not more than ten kilometers per hour whenever it is apparent
that no hazard exists.
After a thorough perusal of the facts attendant to the case, this Court is in
fun accord with the lower court. Plaintiff-appellee Victorino Cusi had
exercised all the necessary precautions required of him as to avoid injury to
-himself and to others. We find no need for him to have made a full stop;
relying on his faculties of sight and hearing, Victorino Cusi had no reason to
anticipate the impending danger. The record shows that the spouses Cusi
previously knew of the existence of the railroad crossing, having stopped at
the guardhouse to ask for directions before proceeding to the party. At the
crossing, they found the level bar raised, no warning lights flashing nor
warning bells ringing, nor whistle from an oncoming train. They safely
traversed the crossing. On their return home, the situation at the crossing
did not in the least change, except for the absence of the guard or flagman.
Hence, on the same impression that the crossing was safe for passage as
before, plaintiff-appellee Victorino Cusi merely slackened his speed and
proceeded to cross the tracks, driving at the proper rate of speed for going
over railroad crossings. Had defendant-appellant been successful in
establishing that its locomotive driver blew his whistle to warn motorists of
his approach to compensate for the absence of the warning signals, and that
Victorino Cusi, instead of stopping or slackening his speed, proceeded with
reckless speed and regardless of possible or threatened danger, then We
would have been put in doubt as to the degree of prudence exercised by him
and would have, in all probability, declared him negligent. 6 But as the
contrary was established, we remain convinced that Victorino Cusi had not,
through his own negligence, contributed to the accident so as to deny him
damages from the defendant-appellant.

The only question that now remains to be resolved is the reasonableness of

the amount awarded as damages to the plaintiffs- appellees.
The following actual expenses and losses are fully substantiated:
(a) Hospital bills of Mrs. Cusi from October, 1963 to May, 1964 in
the amount of Thirteen Thousand Five Hundred Fifty Pesos and
Five Centavos (P13,550.05);
(b) Another hospital bill of Mrs. Cusi in 1965 in the amount of
Three Thousand and One Pesos and Ninety Centavos
(P3,001.90);
(c) Doctor's fees for two surgical operations performed on Mrs.
Cusi by one Dr. Manuel Rivera in the amount of One Thousand
and Five Hundred Pesos (Pl,500.00);
(d) Loss of Victorino's wrist watch valued at Two Hundred and
Fifty Pesos (P250.00);
(e) Loss of Pilar's half of her pair of demand earrings(l-carrats)
valued at Two Thousand Seven Hundred and Fifty Pesos
(P2,750,00);
(f) Repair of the damaged Vauxhall car in the amount of Two
Thousand Eight Hundred and Ninety Four Pesos and SeventySeven Centavos (P2,894.77).
The total award of actual damages in the amount of Twenty Three Thousand
Nine Hundred Forty-Six Pesos and Seventy-Two Centavos (P23,946.72) is,
therefore, correct.
The lower court awarded Twenty-One Thousand Six Hundred Pesos
(P21,600.00) to Mrs. Cusi for loss of income for the three years that she was
under constant medical treatment, and Fourteen Thousand Pesos
(P14,000.00) for impairment of her earning capacity; and Forty Thousand
Pesos (P 40,000.00) to Mr. Cusi for loss of income for the eight months that
he was disabled and impairment of his earning capacity. We find the award
reasonable. The records show that Mrs. Cusi, previously a skilled piano
teacher averaging a monthly income of Six Hundred Pesos (P600.00), cannot
now teach nor play the piano since the accident which resulted in the loss of
the dexterity of her fingers; likewise, Mr. Cusi cannot now vigorously attend
to his businesses which previously netted him a monthly average income of
Five Thousand Pesos (P5,000.00).
As regards the award of Twenty Thousand Pesos (P20,000.00) for profits
which Victorino Cusi failed to realize from a certain real estate transaction
with the Dolor Lopez Enterprises, we affirm the same as the defendant-

appellant has failed to present an iota of evidence to overcome plaintiffsappellees' evidence credited by the lower court as to the certainty of the
materialization of the stated transaction.
The award of Seventy Thousand Pesos (P70,000.00) to Mrs. Cusi and Fifty
Thousand Pesos (P50,000.00) to Victorino Cusi as moral damages is not
excessive. In their own respective fields of endeavor, both were successful.
Now they have to bear throughout their whole lifetime the humiliation
wrought by their physical deformities which no doubt affected, and will
continue to do so, their social lives, their financial undertakings, and even
their mental attitudes.
Likewise, the amount of Ten Thousand Pesos (P10,000.00) given as
attorney's fees and expenses of litigation is not unreasonable. The total
amount of damages awarded by the trial court should bear legal interest at
6% from the rendition of the j judgment, which was on March 26, 1968.
WHEREFORE, the judgment of the lower court is hereby AFFIRMED with the
modification that the total amount of damages shall bear legal interest at six
per cent (6%) from the rendition of the decision dated March 26, 1968.
SO ORDERED.

G.R. No. 119197 May 16, 1997

TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE &
ASSURANCE, INC., and NEW ZEALAND INSURANCE CO.,
LTD., petitioners,
vs.
NORTH FRONT SHIPPING SERVICES, INC., and COURT OF
APPEALS, respondents.
BELLOSILLO, J.:
TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and
New Zealand Insurance Co., Ltd., in this petition for review on certiorari,
assail the 22 December 1994 decision of the Court of Appeals and its
Resolution of 16 February 1995 which affirmed the 1 June 1993 decision of
the Regional Trial Court dismissing their complaint for damages against North
Front Shipping Services, Inc.

On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00 were

shipped on board North Front 777, a vessel owned by North Front Shipping
Services, Inc. The cargo was consigned to Republic Flour Mills Corporation in
Manila under Bill of Lading No. 001 1 and insured with the herein mentioned
insurance companies. The vessel was inspected prior to actual loading by
representatives of the shipper and was found fit to carry the merchandise.
The cargo was covered with tarpaulins and wooden boards. The hatches
were sealed and could only be opened by representatives of Republic Flour
Mills Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on
16 August 1990. Republic Flour Mills Corporation was advised of its arrival
but it did not immediately commence the unloading operations. There were
days when unloading had to be stopped due to variable weather conditions
and sometimes for no apparent reason at all. When the cargo was eventually
unloaded there was a shortage of 26.333 metric tons. The remaining
merchandise was already moldy, rancid and deteriorating. The unloading
operations were completed on 5 September 1990 or twenty (20) days after
the arrival of the barge at the wharf of Republic Flour Mills Corporation in
Pasig City.
Precision Analytical Services, Inc., was hired to examine the corn grains and
determine the cause of deterioration. A Certificate of Analysis was issued
indicating that the corn grains had 18.56% moisture content and the wetting
was due to contact with salt water. The mold growth was only incipient and
not sufficient to make the corn grains toxic and unfit for consumption. In fact
the mold growth could still be arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo and formally
demanded from North Front Shipping Services, Inc., payment for the
damages suffered by it. The demands however were unheeded. The
insurance companies were perforce obliged to pay Republic Flour Mills
Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies they were
subrogated to the rights of Republic Flour Mills Corporation. Thusly, they
lodged a complaint for damages against North Front Shipping Services, Inc.,
claiming that the loss was exclusively attributable to the fault and negligence
of the carrier. The Marine Cargo Adjusters hired by the insurance companies
conducted a survey and found cracks in the bodega of the barge and heavy
concentration of molds on the tarpaulins and wooden boards. They did not
notice any seals in the hatches. The tarpaulins were not brand new as there
were patches on them, contrary to the claim of North Front Shipping

Services, Inc., thus making it possible for water to seep in. They also
discovered that the bulkhead of the barge was rusty.
North Front Shipping Services, Inc., averred in refutation that it could not be
made culpable for the loss and deterioration of the cargo as it was never
negligent. Captain Solomon Villanueva, master of the vessel, reiterated that
the barge was inspected prior to the actual loading and was found adequate
and seaworthy. In addition, they were issued a permit to sail by the Coast
Guard. The tarpaulins were doubled and brand new and the hatches were
properly sealed. They did not encounter big waves hence it was not possible
for water to seep in. He further averred that the corn grains were farm wet
and not properly dried when loaded.
The court below dismissed the complaint and ruled that the contract entered
into between North Front Shipping Services, Inc., and Republic Flour Mills
Corporation was a charter-party agreement. As such, only ordinary
diligence in the care of goods was required of North Front Shipping Services,
Inc. The inspection of the barge by the shipper and the representatives of the
shipping company before actual loading, coupled with the Permit to
Sailissued by the Coast Guard, sufficed to meet the degree of diligence
required of the carrier.
On the other hand, the Court of Appeals ruled that as a common carrier
required to observe a higher degree of diligence North Front 777
satisfactorily complied with all the requirements hence was issued a Permit
to Sail after proper inspection. Consequently, the complaint was dismissed
and the motion for reconsideration rejected.
The charter-party agreement between North Front Shipping Services, Inc.,
and Republic Flour Mills Corporation did not in any way convert the common
carrier into a private carrier. We have already resolved this issue with finality
in Planters Products, Inc. v. Court of Appeals 2 thus
A "charter-party" is defined as a contract by which an entire ship,
or some principal part thereof, is let by the owner to another
person for a specified time or use; a contract of affreightment by
which the owner of a ship or other vessel lets the whole or a part
of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of
freight . . . Contract of affreightment may either be time charter,
wherein the vessel is leased to the charterer for a fixed period of
time, or voyage charter, wherein the ship is leased for a single
voyage. In both cases, the charter-party provides for the hire of
the vessel only, either for a determinate period of time or for a

single or consecutive voyage, the ship owner to supply the ship's

store, pay for the wages of the master of the crew, and defray
the expenses for the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is
defined in Art. 1732 of the Civil Code. The definition extends to
carriers either by land, air or water which hold themselves out as
ready to engage in carrying goods or transporting passengers or
both for compensation as a public employment and not as a
casual occupation . . .
It is therefore imperative that a public carrier shall remain as
such, notwithstanding the charter of the whole or portion of a
vessel by one or more persons, provided the charter is limited to
the shin only, as in the case of a time-charter or voyagecharter (emphasis supplied).
North Front Shipping Services, Inc., is a corporation engaged in the business
of transporting cargo and offers its services indiscriminately to the public. It
is without doubt a common carrier. As such it is required to
observeextraordinary diligence in its vigilance over the goods it
transports. 3 When goods placed in its care are lost or damaged, the carrier is
presumed to have been at fault or to have acted negligently. 4 North Front
Shipping Services, Inc., therefore has the burden of proving that it
observed extraordinary diligence in order to avoid responsibility for the lost
cargo.
North Front Shipping Services, Inc., proved that the vessel was inspected
prior to actual loading by representatives of the shipper and was found fit to
take a load of corn grains. They were also issued Permit to Sailby the Coast
Guard. The master of the vessel testified that the corn grains were farm wet
when loaded. However, this testimony was disproved by the clean bill of
lading issued by North Front Shipping Services, Inc., which did not contain a
notation that the corn grains were wet and improperly dried. Having been in
the service since 1968, the master of the vessel would have known at the
outset that corn grains that were farm wet and not properly dried would
eventually deteriorate when stored in sealed and hot compartments as in
hatches of a ship. Equipped with this knowledge, the master of the vessel
and his crew should have undertaken precautionary measures to avoid or
lessen the cargo's possible deterioration as they were presumed
knowledgeable about the nature of such cargo. But none of such measures
was taken.
In Compania Maritima v. Court of Appeals

we ruled

. . . Mere proof of delivery of the goods in good order to a

common carrier, and of their arrival at the place of destination in
bad order, makes out prima facie case against the common
carrier, so that if no explanation is given as to how the loss,
deterioration or destruction of the goods occurred, the common
carrier must be held responsible. Otherwise stated, it is
incumbent upon the common carrier to prove that the loss,
deterioration or destruction was due to accident or some other
circumstances inconsistent with its liability . . .
The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and
to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for safe carriage and
delivery. It requires common carriers to render service with the
greatest skill and foresight and "to use all reasonable means to
ascertain the nature and characteristics of goods tendered for
shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires" (emphasis
supplied).
In fine, we find that the carrier failed to observe the required extraordinary
diligence in the vigilance over the goods placed in its care. The proofs
presented by North Front Shipping Services, Inc., were insufficient to rebut
the prima facie presumption of private respondent's negligence, more so if
we consider the evidence adduced by petitioners.
It is not denied by the insurance companies that the vessel was indeed
inspected before actual loading and thatNorth Front 777 was issued a Permit
to Sail. They proved the fact of shipment and its consequent loss or damage
while in the actual possession of the carrier. Notably, the carrier failed to
volunteer any explanation why there was spoilage and how it occurred. On
the other hand, it was shown during the trial that the vessel had rusty
bulkheads and the wooden boards and tarpaulins bore heavy concentration
of molds. The tarpaulins used were not new, contrary to the claim of North
Front Shipping Services, Inc., as there were already several patches on them,
hence, making it highly probable for water to enter.
Laboratory analysis revealed that the corn grains were contaminated with
salt water. North Front Shipping Services, Inc., failed to rebut all these
arguments. It did not even endeavor to establish that the loss, destruction or
deterioration of the goods was due to the following: (a) flood, storm,
earthquake, lightning, or other natural disaster or calamity; (b) act of the

public enemy in war, whether international or civil; (c) act or omission of the
shipper or owner of the goods; (d) the character of the goods or defects in
the packing or in the containers; (e) order or act of competent public
authority. 6 This is a closed list. If the cause of destruction, loss or
deterioration is other than the enumerated circumstances, then the carrier is
rightly liable therefor.
However, we cannot attribute the destruction, loss or deterioration of the
cargo solely to the carrier. We find the consignee Republic Flour Mills
Corporation guilty of contributory negligence. It was seasonably notified of
the arrival of the barge but did not immediately start the unloading
operations. No explanation was proffered by the consignee as to why there
was a delay of six (6) days. Had the unloading been commenced
immediately the loss could have been completely avoided or at least
minimized. As testified to by the chemist who analyzed the corn samples, the
mold growth was only at its incipient stage and could still be arrested by
drying. The corn grains were not yet toxic or unfit for consumption. For its
contributory negligence, Republic Flour Mills Corporation should share at
least 40% of the loss. 7
WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and
its Resolution of 16 February 1995 are REVERSED and SET ASIDE.
Respondent North Front Shipping Services, Inc., is ordered to pay petitioners
Tabacalera Insurance Co., Prudential Guarantee & Assurance, Inc., and New
Zealand Insurance Co. Ltd., P1,313,660.00 which is 60% of the amount paid
by the insurance companies to Republic Flour Mills Corporation, plus interest
at the rate of 12% per annum from the time this judgment becomes final
until full payment.
SO ORDERED.
Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

G.R. No. 83491 August 27, 1990

MA-AO SUGAR CENTRAL CO., INC. and GUILLERMO
ARANETA, petitioners,
vs.
HON. COURT OF APPEALS and HERMINIA FAMOSO, respondents.
Jalandoni, Herrera, Del Castillo & Associates for petitioners.

Napoleon Corral for private respondent.

CRUZ, J.:
To say the least, the Court views with regret the adamant refusal of
petitioner Ma-ao Sugar Central to recompense the private respondent for the
death of Julio Famoso, their main source of support, who was killed in line of
duty while in its employ. It is not only a matter of law but also of compassion
on which we are called upon to rule today. We shall state at the outset that
on both counts the petition must fail.
On March 22, 1980, Famoso was riding with a co-employee in the caboose or
"carbonera" of Plymouth No. 12, a cargo train of the petitioner, when the
locomotive was suddenly derailed. He and his companion jumped off to
escape injury, but the train fell on its side, caught his legs by its wheels and
pinned him down. He was declared dead on the spot. 1
The claims for death and other benefits having been denied by the
petitioner, the herein private respondent filed suit in the Regional Trial Court
of Bago City. Judge Marietta Hobilla-Alinio ruled in her favor but deducted
from the total damages awarded 25% thereof for the decedent's contributory
negligence and the total pension of P41,367.60 private respondent and her
children would be receiving from the SSS for the next five years. The
dispositive portion of the decision read:
WHEREFORE, in view of the foregoing facts and circumstances
present in this case, the Court order, as it does hereby order the
defendant Ma-ao Sugar Central thru its Manager Mr. Guillermo Y.
Araneta to pay plaintiff the following amount:
P30,000.00 for the death of plaintiff's husband, the late
Julio Famoso
P30,000.00 for actual, exemplary and moral damages
P10,000.00 loss of earnings for twenty (20) years
P3,000.00 funeral expenses

P73,000.00 Total Damages

Less: P18,250.00 25% for the deceased's contributory
negligence
Less: P41,367.60 pension plaintiff and her minor children
would

be receiving for five (5) years from the SSS

Pl3,382.40
Plus: P3,000.00 Attorney's fees and cost of this suit

Pl6,382.40 Total amount payable to the plaintiff.

SO ORDERED.
The widow appealed, claiming that the deductions were illegal. So did the
petitioner, but on the ground that it was not negligent and therefore not
liable at all.
In its own decision, the Court of Appeals 2 sustained the rulings of the trial
court except as to the contributory negligence of the deceased and
disallowed the deductions protested by the private respondent. Thus, the
respondent court declared:
WHEREFORE, the decision appealed from is MODIFIED by
ordering the defendant-appellant to pay the plaintiff-appellee the
following amounts:
P30,000.00, for the death of Julio Famoso
P30,000.00, for actual, exemplary and moral damages
P10,000.00, for loss of earnings for twenty (20) years
P3,000.00, for funeral expenses
P3,000.00, for attorney's fees

P76,000.00 Total Amount

========
In this petition, the respondent court is faulted for finding the petitioner
guilty of negligence notwithstanding its defense of due diligence under
Article 2176 of the Civil Code and for disallowing the deductions made by the
trial court.
Investigation of the accident revealed that the derailment of the locomotive
was caused by protruding rails which had come loose because they were not
connected and fixed in place by fish plates. Fish plates are described as
strips of iron 8" to 12" long and 3 1/2" thick which are attached to the rails by
4 bolts, two on each side, to keep the rails aligned. Although they could be
removed only with special equipment, the fish plates that should have kept
the rails aligned could not be found at the scene of the accident.
There is no question that the maintenance of the rails, for the purpose inter
alia of preventing derailments, was the responsibility of the petitioner, and

that this responsibility was not discharged. According to Jose Treyes, its own
witness, who was in charge of the control and supervision of its train
operations, cases of derailment in the milling district were frequent and there
were even times when such derailments were reported every hour. 3 The
petitioner should therefore have taken more prudent steps to prevent such
accidents instead of waiting until a life was finally lost because of its
negligence.
The argument that no one had been hurt before because of such derailments
is of course not acceptable. And neither are we impressed by the claim that
the brakemen and the conductors were required to report any defect in the
condition of the railways and to fill out prescribed forms for the purpose. For
what is important is that the petitioner should act on these reports and not
merely receive and file them. The fact that it is not easy to detect if the fish
plates are missing is no excuse either. Indeed, it should stress all the more
the need for the responsible employees of the petitioner to make periodic
checks and actually go down to the railroad tracks and see if the fish plates
were in place.
It is argued that the locomotive that was derailed was on its way back and
that it had passed the same rails earlier without accident. The suggestion is
that the rails were properly aligned then, but that does not necessarily mean
they were still aligned afterwards. It is possible that the fish plates were
loosened and detached during its first trip and the rails were as a result
already mis-aligned during the return trip. But the Court feels that even this
was unlikely, for, as earlier noted, the fish plates were supposed to have
been bolted to the rails and could be removed only with special tools. The
fact that the fish plates were not found later at the scene of the mishap may
show they were never there at all to begin with or had been removed long
before.
At any rate, the absence of the fish plates whatever the cause or reason
is by itself alone proof of the negligence of the petitioner. Res ipsa loquitur.
The doctrine was described recently in Layugan v. Intermediate
Appellate Court, 4 thus:
Where the thing which causes injury is shown to be under the
management of the defendant, and the accident is such as in the
ordinary course of things does not happen if those who have the
management use proper care, it affords reasonable evidence, in
the absence of an explanation by the defendant, that the
accident arose from want of care.

The petitioner also disclaims liability on the ground of Article 2176 of the
Civil Code, contending it has exercised due diligence in the selection and
supervision of its employees. The Court cannot agree. The record shows it
was in fact lax in requiring them to exercise the necessary vigilance in
maintaining the rails in good condition to prevent the derailments that
sometimes happened "every hour." Obviously, merely ordering the brakemen
and conductors to fill out prescribed forms reporting derailments-which
reports have not been acted upon as shown by the hourly derailments is-not
the kind of supervision envisioned by the Civil Code.
We also do not see how the decedent can be held guilty of contributory
negligence from the mere fact that he was not at his assigned station when
the train was derailed. That might have been a violation of company rules
but could not have directly contributed to his injury, as the petitioner
suggests. It is pure speculation to suppose that he would not have been
injured if he had stayed in the front car rather than at the back and that he
had been killed because he chose to ride in the caboose.
Contributory negligence has been defined as "the act or omission amounting
to want of ordinary care on the part of the person injured which, concurring
with the defendant's negligence, is the proximate cause of the
injury." 5 It has been held that "to hold a person as having contributed to his
injuries, it must be shown that he performed an act that brought about his
injuries in disregard of warnings or signs of an impending danger to health
and body." 6 There is no showing that the caboose where Famoso was riding
was a dangerous place and that he recklessly dared to stay there despite
warnings or signs of impending danger.
The last point raised by the petitioner is easily resolved. Citing the case of
Floresca v. Philex Mining Corporation,7 it argues that the respondent court
erred in disauthorizing the deduction from the total damages awarded the
private respondent of the amount of P41,367.60, representing the pension to
be received by the private respondent from the Social Security System for a
period of five years. The argument is that such deduction was quite proper
because of Art. 173 of the Labor Code, as amended. This article provides that
any amount received by the heirs of a deceased employee from the
Employees Compensation Commission, whose funds are administered by the
SSS, shall be exclusive of all other amounts that may otherwise be claimed
under the Civil Code and other pertinent laws.
The amount to be paid by the SSS represents the usual pension received by
the heirs of a deceased employee who was a member of the SSS at the time
of his death and had regularly contributed his premiums as required by the

System. The pension is the benefit derivable from such contributions. It does
not represent the death benefits payable under the Workmen's
Compensation Act to an employee who dies as a result of a work-connected
injury. Indeed, the certification from the SSS 8 submitted by the petitioner is
simply to the effect that:
TO WHOM IT MAY CONCERN:
This is to certify that Mrs. Herminia Vda. de Famoso is a recipient
of a monthly pension from the Social Security System arising
from the death of her late husband, Julio Famoso, an SSS
member with SSS No. 07-018173-1.
This certification is issued to Ma-ao Sugar Central for whatever
legal purpose it may serve best.
Issued this 8th day of April 1983 in Bacolod City, Philippines.
GODOFRED
O S. SISON
Regional
Manager
By: (SGD.)
COSME Q.
BERMEO,
JR.
Chief,
Benefits
Branch
It does not indicate that the pension is to be taken from the funds of the ECC.
The certification would have said so if the pension represented the death
benefits accruing to the heirs under the Workmen's Compensation Act.
This conclusion is supported by the express provision of Art. 173 as
amended, which categorically states that:
Art. 173. Exclusiveness of liability. Unless otherwise provided,
the liability of the State Insurance Fund under this Title shall be
exclusive and in place of all other liabilities of the employer to
the employee, his dependents or anyone otherwise entitled to
receive damages on behalf of the employee or his dependents.
The payment of compensation under this Title shall not bar the
recovery of benefits as provided for in Section 699 of the Revised
Administrative Code, Republic Act Numbered Eleven hundred
sixty-one, as amended, Commonwealth Act Numbered One

hundred eighty-six, as amended, Republic Act Numbered Six

hundred ten, as amended, Republic Act Numbered Forty-eight
hundred sixty-four, as amended and other laws whose benefits
are administered by the System or by other agencies of the
government. (Emphasis supplied).
Rep. Act No. 1161, as amended, is the Social Security Law.
As observed by Justice J.B.L. Reyes in the case of Valencia v. Manila Yacht
Club, 9 which is still controlling:
. . . By their nature and purpose, the sickness or disability
benefits to which a member of the System may be entitled under
the Social Security law (Rep. Act No. 1161, as amended by Rep.
Acts Nos. 1792 and 2658) are not the same as the compensation
that may be claimed against the employer under the Workmen's
Compensation Act or the Civil Code, so that payment to the
member employee of social security benefits would not wipe out
or extinguish the employer's liability for the injury or illness
contracted by his employee in the course of or during the
employment. It must be realized that, under the Workmen's
Compensation Act (or the Civil Code, in a proper case), the
employer is required to compensate the employee for the
sickness or injury arising in the course of the employment
because the industry is supposed to be responsible therefore;
whereas, under the Social Security Act, payment is being made
because the hazard specifically covered by the membership, and
for which the employee had put up his own money, had taken
place. As this Court had said:
. . . To deny payment of social security benefits
because the death or injury or confinement is
compensable under the Workmen's Compensation
Act would be to deprive the employees members of
the System of the statutory benefits bought and paid
for by them, since they contributed their money to
the general common fund out of which benefits are
paid. In other words, the benefits provided for in the
Workmen's Compensation Act accrues to the
employees concerned due to the hazards involved in
their employment and is made a burden on the
employment itself However, social security benefits
are paid to the System's members, by reason of their

membership therein for which they contribute their

money to a general common fund . . . .
It may be added that whereas social security benefits
are intended to provide insurance or protection
against the hazards or risks for which they are
established, e.g., disability, sickness, old age or
death, irrespective of whether they arose from or in
the course of the employment or not, the
compensation receivable under the Workmen's
Compensation law is in the nature of indemnity for
the injury or damage suffered by the employee or his
dependents on account of the employment. (Rural
Transit Employees Asso. vs. Bachrach Trans. Co., 21
SCRA 1263 [19671])
And according to Justice Jesus G. Barrera in Benguet Consolidated, Inc. v.
Social Security System:" 10
The philosophy underlying the Workmen's Compensation Act is
to make the payment of the benefits provided for therein as a
responsibility of the industry, on the ground that it is industry
which should bear the resulting death or injury to employees
engaged in the said industry. On the other hand, social security
sickness benefits are not paid as a burden on the industry, but
are paid to the members of the System as a matter of right,
whenever the hazards provided for in the law occurs. To deny
payment of social security benefits because the death or injury
or confinement is compensable under the Workmen's
Compensation Act would be to deprive the employees-members
of the System of the statutory benefits bought and paid for by
them, since they contribute their money to the general common
fund out of which benefits are paid. In other words, the benefits
provided for in the Workmen's Compensation Act accrues to the
employees concerned, due to the hazards involved in their
employment and is made a burden on the employment itself
However, social security benefits are paid to the System's
members, by reason of their membership therein for which they
contributed their money to a general common fund.
Famoso's widow and nine minor children have since his death sought to
recover the just recompense they need for their support. Instead of lending a
sympathetic hand, the petitioner has sought to frustrate their efforts and has

even come to this Court to seek our assistance in defeating their claim. That
relief-and we are happy to say this must be withheld.
WHEREFORE, the appealed decision is AFFIRMED in toto. The petition is
DENIED, with costs against the petitioner.
SO ORDERED.

G.R. No. 75955 October 28, 1988

MARIA LINDA FUENTES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), PHILIPPINE
BANKING CORPORATION and JOSE LAUREL IV, as its
President, respondents.
Pedro S. Ravelo for petitioner.
The Solicitor General for public respondent.
Laurel Law Offices for private respondents.
FERNAN, C.J.:
Petitioner Maria Linda Fuentes seeks to set aside the resolution dated
November 28, 1985 of the National Labor Relations Commission (NLRC for
brevity) affirming the Labor Arbiter's dismissal of her complaint for illegal
dismissal against private respondent Philippine Banking Corporation
(Philbanking for brevity).
Petitioner was employed as a teller at the Philbanking's office at Ayala
Avenue, Makati, Metro Manila. On May 28, 1982, at about 10:30 a.m.,
petitioner, who was acting as an overnight teller, received a cash deposit of
P200,000.00. She counted the money with the assistance of a co-teller,
finishing the task at 10:40 a.m. or ten (10) minutes after her closing time.
Before she could start balancing her transactions, the Chief Teller handed her
several payroll checks for validation. Finding the checks to be incomplete,
petitioner left her cage to get other checks, without, however, bothering to
put the P200,000.00 cash on her counter inside her drawer. When she
returned to her cubicle after three (3) to five (5) minutes, she found that the
checks for validation were still lacking, so she went out of her cubicle again
to get the rest of the checks. On her way to a co-teller's cubicle, she noticed
that the P200,000.00 pile on her counter had been re-arranged. She thus
returned to her cage, counted the money and discovered that one (1) big

bundle worth P50,000.00 was missing therefrom. She immediately asked her
co-teller about it and getting a negative reply, she reported the matter to the
Chief Teller. A search for the P50,000.00 having proved unavailing, petitioner
was asked to explain why she should not be held liable for the loss. She
submitted her explanation on June 24, 1982.
Subsequently, on June 3, 1983, petitioner was dismissed for gross
negligence. On June 21, 1983, she filed a complaint for illegal dismissal with
reinstatement and backwages.
Private respondent bank seasonably filed an answer with counterclaim that
petitioner be ordered to restitute the amount of P50,000.
On January 31, 1984, Labor Arbiter Bienvenido Hermogenes rendered a
decision dismissing the complaint as well as the counterclaim but without
prejudice as to the latter. 1 Petitioner's appeal to the NLRC was dismissed for
lack of merit 2 and her motion for reconsideration was denied. 3 Hence, this
petition.
The issue in this case is whether petitioner's dismissal on the ground of gross
negligence was justified under Art. 282 of the Labor Code.
Upon a thorough consideration of the facts of this case, the Court finds no
cogent reason for reversing the conclusion of the Labor Arbiter and the NLRC
that petitioner was grossly negligent in the performance of her duties as a
teller, which negligence resulted in the loss of P50,000.00.
Applying the test of negligence, we ask: did the petitioner in doing the
alleged negligent act use reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, she is guilty of
negligence.
The circumstances surrounding the loss in question lend us no sympathy for
the petitioner. It was established that petitioner simply left the pile of money
within the easy reach of the crowd milling in front of her cage, instead of
putting it in her drawer as required under the private respondent bank's
General Memorandum No. 211 (Teller's Manual of Operations) which she was
expected to know by heart. 4 Moreover, she left the P200,000.00 on two
occasions. 5
Her irresponsibility is nowhere made apparent than in her response to the
following question:
Q Noong lumabas ka sa iyong cage para pumunta sa
iyong Chief Teller, hindi ba ipinagbilin itong pera sa
iyong kasamahan?

A Hindi ko na ho ipinagbilin kasi masyadong

maraming tao noon, at iyong aking teller's counter
ay nilagyan ko ng sign na nakasulat ng 'next teller
please' na ang ibig sabihin ay kung meron mang mga
cliente doon sa akin ay doon muna sila makipagtransact ng negosyo sa kabilang teller o kung
sino man ang bakante kasi busy ako. 6
As a teller, petitioner must realize that the amount of care demanded by
reasonable conduct is that proportionate to the apparent risk. Since it was
payday and depositors were milling around, petitioner should have been
extra cautious. At no time than the occasion under consideration was the
need to be extra careful more obvious. It was certainly not the time to
breach the standard operating procedure of keeping one's cash in the drawer
as a precautionary and security measure.
"A teller's relationship with the bank is necessarily one of trust and
confidence. The teller as a trustee is expected to possess a high degree of
fidelity to trust and must exercise utmost diligence and care in handling
cash. A teller cannot afford to relax vigilance in the performance of his
duties." 7
Petitioner argues that there was contributor negligence on the part of private
respondent bank consisting in its failure to conduct an investigation minutes
after the loss. We do not agree with petitioner. The failure of private
respondent bank to conduct an investigation minutes after the loss was
totally distinct and independent of, as well as remotely related to the fact of
loss itself.
Petitioner Fuentes cannot invoke private respondent's alleged contributory
negligence as there was no direct causal connection between the negligence
of the bank in not conducting the investigation and the loss complained of. In
a legal sense, negligence is contributory only when it contributes proximately
to the injury, and not simply a condition for its occurrence.
In the case at bar, the bank's inaction merely created a condition under
which the loss was sustained. Regardless of whether there was a failure to
investigate, the fact is that the money was lost in the first place due to
petitioner's gross negligence. Such gross negligence was the immediate and
determining factor in the loss.
Besides, the petitioner's position is anathema to banking operations. By
conducting an instant search on its depositors for every loss that occurs,
management holds suspect each depositor within its premises. Considering
that currency in the form of money bills bears no distinct earmarks which

would distinguish it from other similar bills of similar denominations except

as to its serial numbers, any innocent depositor with P50,000 in his
possession would be a likely suspect. Such act would do violence to the
fiduciary relationship between a bank and its depositors. Ultimately it will
result in the loss of valued depositors.
Petitioner argues further that the NLRC failed to consider that petitioner left
her cage at the instance of the Chief Teller. Again we are not persuaded. The
findings of the NLRC are clear. Petitioner left at her own volition to approach
her Chief Teller to ask for the remaining checks to ascertain their authenticity
and completeness. Besides, irrespective of who summoned her, her
responsibility over the cash entrusted to her remained.
Although petitioner's infraction was not habitual, we took into account the
substantial amount lost. Since the deposit slip for P200,000.00 had already
been validated prior to the loss, the act of depositing had already been
complete and from thereon, the bank had already assumed the deposit as a
liability to its depositors. Cash deposits are not assets to banks but are
recognized as current liabilities in its balance sheet.
It would be most unfair to compel the bank to continue employing petitioner.
In Galsim v. PNB, 8 we upheld the dismissal of a bank teller who was found to
have given money to a co-employee in violation of bank rules and
regulations. Said act, which caused prejudice to the bank, was a justifiable
basis for the bank to lose confidence in the employee.
Similarly, in the case at bar, petitioner, as aforesaid, violated private
respondent bank's General Memorandum, No. 211 (Teller's Manual of
Operations) which strictly says:
Cash should never be left exposed. The coins and currencies
should be kept in drawers where they are not accessible to
someone through the windows with the aid of a stick or other
devices. 9
An employer cannot legally be compelled to continue with the employment
of a person admittedly guilty of gross negligence in the performance of his
duties and whose continuance in his office is patently inimical to the
employer's interest. "For the law in protecting the rights of the
employee/laborer authorizes neither oppression nor self-destruction of the
employer. 10
WHEREFORE, the instant petition is hereby DISMISSED. The assailed decision
dated November 28,1985 of the National Labor Relations Commission is
affirmed in toto.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

ACCIDENTS/ CASO FORTUITO

G.R. No. L-8561 December 4, 1913

THE UNITED STATES, plaintiff-appellee,
vs.
E. M. KNIGHT, defendant-appellant.
Beverly A. Read, Major, Judge-Advocate, U. S. Army, for appellant.
Office of the Solicitor-General Harvey, for appellee.
CARSON, J.:
This is an appeal from a judgment of the Court of First Instance of Manila
convicting the defendant and appellant of reckless negligence resulting in
homicide.
The information alleges: "That on or about the 13th day of September, 1912,
in the city of Manila, Philippine Islands, the said E. M. Knight, being then and
there a chauffeur driving automobile truck No. 774, as registered by the
Bureau of Public Works, and No. 4 of the quartermaster department, through
Calle Isaac Peral of this city, willfully, unlawfully, with reckless imprudence,
and in violation of regulations, conducted and drove aid automobile truck a
greater speed than was reasonable and proper, without regard to the state of
traffic and other conditions of the said street and of the atmosphere and
weather, and without sounding a horn or ringing a bell, or attracting in any
other way the attention of the passers-by, or keeping to the lefthand side of
the road, according to the direction he was going, thereby permitting the
said and auto truck, through his inexcusable recklessness and carelessness,
as aforesaid, to run over one Joe Prestuosa, fracturing his skull and thereby
causing his instantaneous death; that if the acts committed by the defendant
had been done with malice, he would have been guilty of the grave crime of
homicide: contrary to law."
The trial court found the defendant guilty of reckless negligence resulting in
homicide as defined and penalized in article 568 of the Penal Code, and
sentenced him to one year and one day of prision correccional, to pay an

indemnity in the sum of P500 to the heirs of the deceased, and to the
payment of the costs.
The undisputed facts as developed by the evidence of record may be briefly
summarized as follows: About 3.30 in the afternoon of the 13th of
September, 1912, the defendant, a chauffeur in the employ of the
quartermaster's department of the United States Army, was proceeding in
charge of a heavily loaded automobile truck along Calle Isaac Peral toward
the bay. Except for a steam road roller, which was slowly making its way in
the same direction, in advance of the truck, the street was wholly
unoccupied at that time. Just as the truck was passing the slow-moving road
roller, a boy about 10 or 12 years of age jumped from the step or sideboard
of the road roller directly in front of the truck, was knocked down, run over,
and instantly killed.
Giving the accused the benefit of any doubt which might arise upon a review
of all the testimony, it further appears that while the truck was still a
considerable way behind the road roller, the boy, who had been running
alongside the road roller, jumped on the step or sideboard to take a ride; that
the truck was running at the rate of about 8 miles an hour as it came up with
the road roller; that at a distance of about 45 or 50 feet from the road roller,
and while on or approaching a small bridge near the Columbia Club, the
defendant sounded his horn twice and then began to turn to the right in
order to pass the road roller, which was on the left side of the street; that at
that point the street was about 14 meters wide, and that except for the road
roller and those riding upon it the street was wholly unoccupied and clear of
all obstruction.
Basing our conclusions on these facts we agree with the Solicitor-General
that the prosecution failed to establish its charge of reckless negligence.
In reviewing the conduct of the defendant, in order to determine whether or
not he was recklessly negligent on the occasion when the accident occurred,
it will be well to have in mind the following sections of Act No. 2159, which
quite clearly prescribe the course which it was his duty to pursue under all
the circumstances.
SEC. 24. No person shall operate a motor vehicle on any highway in
these Islands recklessly or at a rate of speed greater than is reasonable
and proper, having regard to the width, traffic, grades, crossing,
curvatures, and other conditions of the atmosphere and weather, or so
as to endanger the property of the safety or rights of any person or so
as to cause excessive or unreasonable damage to the highway.

No person shall unreasonably obstruct or impede the passage or right

of travel of any motor vehicle or operator thereof and no operator shall
unreasonably obstruct the passage of any other vehicle or person on
any highway. Every person found guilty of violating the provisions of
this section shall be punished by a fine of not less than five nor more
than fifty pesos or by imprisonment of not more than six months or by
both such fine and imprisonment.
SEC. 25. Every person operating a motor vehicle on a highway shall
turn to the left when meeting persons or vehicles coming toward him,
and to the right when overtaking persons or vehicles going in the same
direction, unless a different course of action is required in the interests
of the safety and security of the safety and security of life, person, or
property.
xxx

xxx

xxx

SEC. 31. When meeting or overtaking persons or vehicles every

operator of a motor vehicle shall give timely notice and warning of his
proximity by sounding his horn. Such warning should be sounded when
the operator, having regard to the speed at which he is traveling, is
still a safe distance from the person or vehicle about to be met or
overtaken and before the motor vehicle has drawn opposite to or
abreast of such person or vehicle, the intent of this provision being the
requirement of a warning within such a distance that the same will be
clearly heard and not within such short distance that, owing to its
nearness and suddenness, it is likely to cause fright or startle the
person, horse or other animal which is being met or overtaken.
As pointed out by counsel for the appellant, in his very interesting brief, the
charge of reckless negligence in this case cannot be sustained unless the
evidence be deemed sufficient to establish either that the accident was due
to the fact that, when it occurred defendant was on the wrong side of the
street; or that he was running at an excessive speed; or that he had failed to
give timely notice of his approach to those who were riding on the road roller
by sounding his horn.
As to the contention that the defendant was on the wrong side of the street
when the accident occurred, it is sufficient to say that on the broad
unobstructed street, wholly unoccupied except for the slow-moving road
roller, he was clearly within his rights in attempting to pass to the right, as
the evidence shows that he did; and indeed, it will be seen that in doing so
he was proceeding strictly in conformity with the provisions of section 25 of
Act No. 2159, above cited.

One person is not compelled to travel behind another on the highway,

and one has not the exclusive right to precede another. The traveler
may pass to the front when he can do so in safety. (Clifford vs. Tyman,
61 N. H., 508, 510; Law of Automobiles, Berry, 113.)
The contention as to alleged excessive speed at which the accused was
running and his failure to give timely warning of his intention to pass would
seem to be sufficiently disposed of by our findings that, at the time of the
accident, he was running at the rate of about 8 miles an hour, and that he
blew his horn twice at a distance of between 45 and 50 feet from the road
roller. There is some conflict in the record upon these points, but we think
that the clear weight of the evidence sustains our findings in this regard, and
the Solicitor-General practically concedes both these contentions to the
defendant. Certain it is that the evidence does not sustain findings to the
contrary beyond a reasonable doubt, and this being a criminal prosecution,
the benefit of any doubts which may arise from an examination of the
testimony should be given to the accused.
In the absence of some exceptional circumstance, a speed of 8 miles an hour
maintained by an automobile or automobile truck on a wide, obstructed, and
unoccupied street, in broad daylight, cannot be said to be excessive; and the
accused having sounded his horn twice before he came up with the road
roller, and before he turned out in the road in the attempt to pass, must be
held to have complied with the regulations in that regard. (See section 31 of
Act No. 2159, above cited.)
The Solicitor-General in concluding his brief recommends that the judgment
of the lower court be reversed, but that the appellant be convicted of the
offense defined and penalized in the second paragraph of article 568 of the
Penal Code. In support of this contention he says:
The first paragraph of article 568 under which the defendant was
sentenced reads thus: "Any person who by reckless imprudence . . . ."
From the evidence it is plain that the defendant was not guilty of
'reckless imprudence,' and should not have been sentenced under that
paragraph. It seems certain, however, that the defendant has violated
section 24 of Act No. 2159, in that he operated his motor vehicle in
such a way as to endanger life and cause the death of Jose Prestuosa,
and should have been punished according to the second paragraph of
article 568 of the Penal Code, which reads:
"Any person who, while violating any regulation, shall, by any act
of imprudence or negligence not amounting to reckless

imprudence, commit an offense, shall suffer the penalty

of arresto mayor in its medium and maximum degrees."
The Solicitor-General's argument would seem to be that proof that a fatal
automobile accident occurred is conclusive proof of a violation of the above
cited section 24 of Act No. 2159, and that while the defendant was not
shown to be guilty of reckless negligence he was guilty of negligence not
amounting to reckless negligence in two respects:
First, in passing a playing boy at a speed, which, however slow it may
have been, was still too fast to avoid the accident; and, second,
granting that the horn was blown at a distance of 40 or 50 feet from
the boy, the defendant was negligent in not continuing to sound the
horn until he had passed the child.
We cannot agree with the Solicitor-General in these contentions. They would
seem, in their last analysis, to rest on the theory that when one is injured or
killed by an automobile it may always be presumed that there was some
negligence on the part of the chauffeur and a violation of the above cited
section 24 of Act No. 2159, prohibiting the operation of a motor vehicle on
any highway recklessly or so as to endanger the property or the safety or
rights of any person. Stated in this form the contention is manifestly
untenable. Automobile accidents may happen and do happen for which the
persons operating the machines are in no wise responsible. In the case of
United States vs. Tayongtong (21 Phil. Rep., 476), wherein we reversed a
judgment of conviction of a chauffeur charged with reckless negligence in
running down and killing a foot passenger, we said that:
. . . Where death is due to the negligence of the decedent himself and
not to the negligence of the driver of automobile, the latter cannot be
held for homicide. In this case the death of the deceased was due
entirely to his own negligence. There is not sufficient reliable proof in
the record to establish negligence on the part of the accused. There
being no negligence, he is not responsible, no matter what the result of
the accident may have been.
So, in the case of United States vs. Bacho (10 Phil. Rep., 574), we said: ". . .
In the general experience of mankind, accidents apparently unavoidable and
often inexplicable are unfortunately too frequent to permit us to conclude
that some one must be criminally liable for negligence in every case where
an accident occurs. It is the duty of the prosecution in each case to prove by
competent evidence not only the existence of criminal negligence, but that
the accused was guilty thereof."

In support of his claim that there was some negligence on the part of the
defendant and that his conduct amounted to a violation of Act No. 2159, the
Solicitor-General contends that while "a prudent man under the same
conditions might not have taken any greater precaution" then did the
defendant, nevertheless the defendant was negligent in that he did not take
extraordinary precautions when he saw the boy riding on the road roller. The
Solicitor-General insists that he should have reduced his speed lower than
the comparatively slow rate of 8 miles an hour at which he was running, and
that he should have continued to sound his horn from the moment he saw
the boy until he passed him.
We think, however, that we would not be justified in holding the drivers of
motor vehicles to such extraordinary precautions.
The employment of an automobile on the highway as a means of
transportation is a lawful use of the road, and if it results in an injury to
one traveling by another mode the driver of the automobile cannot be
held liable for injury, unless it is made to appear that he used the
machine at a time, or in manner, or under circumstances inconsistent
with a proper regard for the rights of others. (McIntyre vs. Ames (Ind.),
8-1087.)
So long as motor vehicles are not used at a time or in a manner or under
circumstances inconsistent with the rights of others, or in violation of the
regulations, their owners are entitled to all the advantages afforded by a
commodious and speedy means or transportation. While those who
undertake to drive high-power motor vehicles over the public highways may
be, and should be required to exercise great care and skill in the
management and control of their machines so as to avoid inflicting injury
upon others, still, they should not be required to exercise such extraordinary
precautions as would be necessary to avoid all possibility that others may be
injured in person or property as a result of their own negligence or of
unforseen contingencies which a prudent and skillful driver could not be
expected to anticipate and provide against.
It is true that the statute penalizes the operation of a motor vehicle
recklessly or an excessive rate of speed, "or so as to endanger the property
or safety or rights of any person;" but this does not mean that in any case
where an accident occurs it can be presumed that there was a violation of
the provisions of the statute. If it appears that the machine was being
operated carefully, prudently, and skillfully at the time when the accident
occurred, having regard to all the surrounding circumstances, it cannot fairly
be said to have been operated "so as to endanger the property, safety, or

rights of any person." Whatever may have been the cause of the accident, if
it cannot be attributed to the misconduct or the negligence of the operator in
the management of the machine, he cannot be held liable either civilly or
criminally.1awphi1.net To hold otherwise would be to place an intolerable
burden on the use and enjoyment of a class of vehicles of known and
admitted utility, and would be a violation of the sound legal principles on
which the doctrine of criminal liability as well as that of civil liability for
personal injuries have their basis.
Had the lad who was run over and killed been a little child below "the age of
understanding," or as it is sometimes expressed "below the thinking age,"
there would be much ground for the contention of the Solicitor-General that
the accused was guilty of a violation of the ordinance; indeed, under the
doctrine laid down in United States vs. Clemente (24 Phil. Rep., 178), there
can be little doubt that had the lad been a child under the age of
understanding, the failure of the accused to have the truck under such
perfect control that the accident could have been avoided would have
rendered him subject to conviction of the crime of homicide by reckless
negligence with which he was charged. In that case we said, in the language
of the syllabus prepared by the writer of the opinion:lawphil.net
Duty of all drivers of vehicles and street cars; children in the streets.
It is the duty of any person driving a vehicle, and especially a street
car, in the public thoroughfares to reduce the same to control ready to
be stopped at any moment if he sees a child below the age of
understanding in such a place that it can, by any reasonable chance,
place itself in a dangerous position with respect to the vehicle. In such
case the vehicle must be under such control that, if the child, by some
sudden or unusual movement, places itself in the way of the vehicle, it
can stopped in time to avert injury.
Vehicles are not permitted to be driven in the public streets in such a
way as to endanger the life of child below the thinking age who may
have strayed upon the streets in search of its mother or who may be
there for any other purpose; the child having no judgment of its own,
the drivers of vehicles must substitute theirs; not having the
intelligence to direct itself, men who drive cars of vehicles must
exercise their intelligence on its behalf. Seeing such child in the street
in front of his vehicle, the driver thereof must reduce the vehicle to
such control that, if the child by a sudden dart places itself in front of
the vehicle, the driver may save it from injury by stopping his vehicle.

In the case at bar, however, the evidence clearly discloses that the boy who
was killed was a lad 10 or 12 years of age. Boys 10 or 12 years of age,
unattended by their parents or guardians, are always to be found on the
streets and bypaths of our cities and villages, and no one questions their
right to be there. A driver of a vehicle seeing a boy of that age on the street
or side path may fairly assume that he has sufficient "intelligence to direct"
himself under ordinary conditions. Indeed boys of that age are often more
wide awake and alert in avoiding danger than are their elders, as anyone
who has ever watched a crowd of lively newsboys playing their trade will
readily agree. Manifestly, it would place an intolerable burden on all wheeled
traffic on our streets and highways, to rule that the drivers of all vehicles,
when they see boys 10 or 12 years of age on the street or side path or riding
on other vehicles, unattended by their parents or guardians, must reduced
their vehicles to such control that, if one of these boys "by a sudden dart"
places himself in front of vehicle, "the driver may save him from injury by
stopping his vehicle." Boys 10 or 12 years of age, who are permitted to go
about unattended, may fairly be presumed to have sense enough to take
care of themselves from the ordinary and usual dangers of street traffic.
The accused in the case at bar cannot be said to have been negligent in the
management of his machine, merely because he did not anticipate that the
boy, 10 or 12 years of age, who was riding on the slow-moving road roller,
would jump down directly in front of him at the moment when he turned his
machine out into the open street in an effort to pass by. And it appearing that
in all other respects he operated his machine carefully, prudently, and
skillfully at the time when the accident occurred, having regard to all the
surrounding circumstances, he must be acquitted of all criminal liability
arising out of the unfortunate accident which resulted in the death of the boy.
The judgment of the lower court convicting and sentencing the appellant
should be and is hereby reversed, and he should be and is hereby acquitted
of the offense with which he is charged, with the costs of both instances de
oficio.
Arellano, C.J., Torres, Moreland and Trent, JJ., concur.

G.R. No. 147746 October 25, 2005

PERLA COMPANIA DE SEGUROS, INC. and BIENVENIDO S.
PASCUAL, Petitioners,
vs.

SPS. GAUDENCIO SARANGAYA III and PRIMITIVA B.

SARANGAYA, Respondents.
DECISION
CORONA, J.:
This is an appeal by certiorari under Rule 45 of the 1997 Rules of Civil
Procedure seeking to annul the decisions of the Court of Appeals (CA) dated
June 29, 2000 and March 31, 2001, respectively, which affirmed the decision
of the Regional Trial Court (RTC), Branch 21 of Santiago, Isabela.
In 1986, respondent spouses Gaudencio Sarangaya III and Primitiva
Sarangaya erected a semi-concrete, semi-narra, one-storey commercial
building fronting the provincial road of Santiago, Isabela. The building was
known as "Super A Building" and was subdivided into three doors, each of
which was leased out. The two-storey residence of the Sarangayas was
behind the second and third doors of the building. On the left side of the
commercial building stood the office of the Matsushita Electric Philippine
Corporation (Matsushita).
In 1988, petitioner Perla Compania de Seguros, Inc. (petitioner-corporation),
through its branch manager and co-petitioner Bienvenido Pascual, entered
into a contract of lease of the first door of the "Super A Building," abutting
the office of Matsushita. Petitioner-corporation renovated its rented space
and divided it into two. The left side was converted into an office while the
right was used by Pascual as a garage for a 1981 model 4-door Ford Cortina,
a company-provided vehicle he used in covering the different towns within
his area of supervision.
On July 7, 1988, Pascual left for San Fernando, Pampanga but did not bring
the car with him. Three days later, he returned to Santiago and, after
checking his appointments the next day, decided to "warm up" the car. When
he pulled up the handbrake and switched on the ignition key, the engine
made an "odd" sound and did not start. Thinking it was just the gasoline
percolating into the engine, he again stepped on the accelerator and started
the car. This revved the engine but petitioner again heard an unusual sound.
He then saw a small flame coming out of the engine. Startled, he turned it
off, alighted from the vehicle and started to push it out of the garage when
suddenly, fire spewed out of its rear compartment and engulfed the whole
garage. Pascual was trapped inside and suffered burns on his face, legs and
arms.
Meanwhile, respondents were busy watching television when they heard two
loud explosions. The smell of gasoline permeated the air and, in no time, fire

spread inside their house, destroying all their belongings, furniture and
appliances.
The city fire marshall conducted an investigation and thereafter submitted a
report to the provincial fire marshall. He concluded that the fire was
"accidental." The report also disclosed that petitioner-corporation had no fire
permit as required by law.
Based on the same report, a criminal complaint for "Reckless Imprudence
Resulting to (sic) Damage in (sic) Property"1 was filed against petitioner
Pascual. On the other hand, petitioner-corporation was asked to pay the
amount of P7,992,350, inclusive of the value of the commercial building. At
the prosecutors office, petitioner Pascual moved for the withdrawal of the
complaint, which was granted.
Respondents later on filed a civil complaint based on quasi-delict against
petitioners for a "sum of money and damages," alleging that Pascual acted
with gross negligence while petitioner-corporation lacked the required
diligence in the selection and supervision of Pascual as its employee. They
prayed for payment of the following damages:
1. P2,070,000.00 - representing the value of the 2-storey residential building
and the 3-door apartment;
2. P5,922,350.00 - representing the value of the jewelries, appliances,
[furniture], fixtures and cash;
3. P8,300.00 a month for [lost rental] income from July 1995 until such time
that the premises is restored to its former condition or payment for its value,
whichever comes first;
4. P2,000,000.00 for moral damages;
5. P1,000,000.00 for exemplary damages, and
6. Attorneys fees equivalent to 15% of the total amount to be awarded to
the plaintiffs.2
During the trial, respondents presented witnesses who testified that a few
days before the incident, Pascual was seen buying gasoline in a container
from a nearby gas station. He then placed the container in the rear
compartment of the car.
In his answer, Pascual insisted that the fire was purely an accident, a caso
fortuito, hence, he was not liable for damages. He also denied putting a
container of gasoline in the cars rear compartment. For its part, petitionercorporation refused liability for the accident on the ground that it exercised
due diligence of a good father of a family in the selection and supervision of
Pascual as its branch manager.

After the trial, the court a quo ruled in favor of respondents. The decretal
portion of the decision read:
WHEREFORE, in the light of the foregoing considerations judgment is hereby
rendered ORDERING the defendants, Bienvenido Pascual and Perla Compania
de Seguros, Inc. to pay jointly and solidarily to the plaintiffs spouses
Gaudencio and Primitiva Sarangaya the total sum of Two Million Nine
Hundred Four Thousand Eight Hundred and Eighty Pesos ([P]2,904,880.00) as
actual damages with legal interest thereon from December 12, 1995 until
fully paid.3 (emphasis supplied)
The court a quo declared that, although the respondents failed to prove the
precise cause of the fire that engulfed the garage, Pascual was nevertheless
negligent based on the doctrine of res ipsa loquitur.4 It did not, however,
categorically rule that the gasoline container allegedly placed in the rear
compartment of the car caused the fire. The trial court instead declared that
both petitioners failed to adduce sufficient evidence to prove that they
employed the necessary care and diligence in the upkeep of the
car.5 Contrary to the claims of petitioner-corporation, the trial court also
found that it failed to employ the diligence of a good father of a family, as
required by law, in the selection and supervision of Pascual.
With respect to the amount of damages, the trial court awarded to
respondents no more than their claim for actual damages covering the cost
of the 2-storey residential building and the commercial building, including
their personal properties. It explained:
According to the plaintiff Gaudencio Sarangaya III, he made a list of what was
lost. His list includes the commercial building that was burned which he
valued at P2,070,000.00. The defendants take exception to the value given
by the plaintiff and for this purpose they submitted the tax declaration of the
building which states that the market value is P183,770.00. The Court takes
judicial notice that the valuation appearing on the tax declaration of property
is always lower [than] the correct value thereof. Considering that the building
that was burned was a two-storey residential house with a commercial
building annex with a total floor area of 241 square meters as stated in the
tax declaration, mostly concrete mixed with narra and other lumber
materials, the value given by the plaintiffs of P2,070,000.00 is reasonable
and credible and it shall be awarded to the plaintiffs.
The other items listed are assorted [furniture] and fixtures
totaling P307,000.00 assorted appliances worthP358,350.00; two filing
cabinets worth P7,000.00 and clothing and other personal effects
costing P350,000.00, household utensils costing P15,000.00. The Court finds

them reasonable and credible considering the social and financial stature of
the plaintiffs who are businessmen. There could be no question that they
were able to acquire and own quite a lot of home furnishings and personal
belongings. The costing however is high considering that these belongings
were already used for quite some time so a 20% depreciation should be
equitably deducted from the cost of acquisition submitted by plaintiffs. Thus,
the total amount recoverable would be P1,037,350.00 less 20% or a total
of P829,880.00. The P5,000.00 representing foodstock can also be ordered
paid to the plaintiffs. x x x.6
On appeal to the Court of Appeals, the appellate court again ruled in favor of
respondents but modified the amount of damages awarded by the trial court.
It held:
x x x the Decision of the Court a quo is AFFIRMED, with the modification that
the Appellants are hereby ordered to pay the Appellees, jointly and severally,
the total amount of P600,000.00 by way of nominal damages under Articles
2222 and 2223 of the New Civil Code, with interest thereon, at the rate of 6%
per annum from the date of the Decision of this Court.7
The appellate court was in accord with the trial courts findings that the
doctrine of res ipsa loquitur was correctly applied in determining the liability
of Pascual and that petitioner-corporation, as the employer, was vicariously
liable to respondents. Nonetheless, for respondents failure to substantiate
their actual loss, the appellate court granted nominal damages of P600,000
to them.
Petitioners and respondents filed their respective motions for
reconsideration.
In their MR, petitioners contested the findings of fact of the appellate court.
They denied any liability whatsoever to respondents but this was rejected by
the CA for lack of merit. Thus, the present appeal.
Respondents, on the other hand, argued in their MR that the award of
nominal damages was erroneous. They prayed that, in lieu of the award of
nominal damages, the case should instead be remanded to the trial court for
reception of additional evidence on their claim for actual damages. The CA
granted respondents MR. Hence they did not appeal the CAs decision to us.
According to the CA:
Anent Plaintiffs-Appellees plea that, in lieu of the Courts award of nominal
damages, the case be remanded to the Court a quo, in the interest of justice,
to enable them to adduce evidence to prove their claim for actual damages,
we find the same meritorious.
Accordingly, the Decision of the Court is hereby amended to read as follows:

IN THE LIGHT OF ALL THE FOREGOING, the Decision of the Court a quo
appealed from is AFFIRMED. The award of nominal damages is set
aside. Let the records be remanded to the Court a quo for the
reception of additional evidence by the Plaintiffs-Appellees and the
Defendants-Appellants anent Plaintiffs-Appellees claim for actual
damages.8 (emphasis supplied)
Via this petition, petitioners ascribe the following errors to the appellate
court:
(a) THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF ["RES
IPSA LOQUITUR"] IN THE PRESENT CASE;
(b) THE COURT OF APPEALS ERRED WHEN IT FOUND PERLA NEGLIGENT IN
THE SUPERVISION OF PASCUAL, AND CONSEQUENTLY, VICARIOUSLY LIABLE
FOR THE FIRE BECAUSE PERLA FAILED TO ADDUCE EVIDENCE OF
SUPERVISION OF EMPLOYEES CARE AND UPKEEP OF COMPANY VEHICLES
REQUIRED BY THE SUPREME COURT ON TRANSPORTATION COMPANIES; AND
(c) THE COURT OF APPEALS ERRED WHEN IT ORDERED THE REMAND OF THE
CASE TO RTC ISABELA FOR RECEPTION OF ADDITIONAL EVIDENCE BY THE
SARANGAYA SPOUSES ON THEIR CLAIM FOR ACTUAL DAMAGES.9
Res ipsa loquitur is a Latin phrase which literally means "the thing or the
transaction speaks for itself."10 It relates to the fact of an injury that sets out
an inference to the cause thereof or establishes the plaintiffs prima facie
case.11 The doctrine rests on inference and not on presumption.12 The facts of
the occurrence warrant the supposition of negligence and they furnish
circumstantial evidence of negligence when direct evidence is lacking. 13
The doctrine is based on the theory that the defendant either knows the
cause of the accident or has the best opportunity of ascertaining it and the
plaintiff, having no knowledge thereof, is compelled to allege negligence in
general terms.14 In such instance, the plaintiff relies on proof of the
happening of the accident alone to establish negligence.15
The doctrine provides a means by which a plaintiff can pin liability on a
defendant who, if innocent, should be able to explain the care he exercised
to prevent the incident complained of. Thus, it is the defendants
responsibility to show that there was no negligence on his part.16
To sustain the allegation of negligence based on the doctrine of res ipsa
loquitur, the following requisites must concur:
1) the accident is of a kind which does not ordinarily occur unless someone is
negligent;

2) the cause of the injury was under the exclusive control of the person in
charge and
3) the injury suffered must not have been due to any voluntary action or
contribution on the part of the person injured.17
Under the first requisite, the occurrence must be one that does not
ordinarily occur unless there is negligence. "Ordinary" refers to the usual
course of events.18 Flames spewing out of a car engine, when it is switched
on, is obviously not a normal event. Neither does an explosion usually occur
when a car engine is revved. Hence, in this case, without any direct evidence
as to the cause of the accident, the doctrine of res ipsa loquitur comes into
play and, from it, we draw the inference that based on the evidence at hand,
someone was in fact negligent and responsible for the accident.
The test to determine the existence of negligence in a particular case may
be stated as follows: did the defendant in committing the alleged negligent
act, use reasonable care and caution which an ordinarily prudent person in
the same situation would have employed?19 If not, then he is guilty of
negligence.
Here, the fact that Pascual, as the caretaker of the car, failed to submit any
proof that he had it periodically checked (as its year-model and condition
required) revealed his negligence. A prudent man should have known that a
14-year-old car, constantly used in provincial trips, was definitely prone to
damage and other defects. For failing to prove care and diligence in the
maintenance of the vehicle, the necessary inference was that Pascual had
been negligent in the upkeep of the car.
Pascual attempted to exculpate himself from liability by insisting that the
incident was a caso fortuito. We disagree.
The exempting circumstance of caso fortuito may be availed only when: (a)
the cause of the unforeseen and unexpected occurrence was independent of
the human will; (b) it was impossible to foresee the event which constituted
the caso fortuito or, if it could be foreseen, it was impossible to avoid; (c) the
occurrence must be such as to render it impossible to perform an obligation
in a normal manner and (d) the person tasked to perform the obligation must
not have participated in any course of conduct that aggravated the
accident.20
In fine, human agency must be entirely excluded as the proximate cause or
contributory cause of the injury or loss.21 In a vehicular accident, for
example, a mechanical defect will not release the defendant from liability if it
is shown that the accident could have been prevented had he properly
maintained and taken good care of the vehicle.22

The circumstances on record do not support the defense of Pascual. Clearly,

there was no caso fortuito because of his want of care and prudence in
maintaining the car.
Under the second requisite, the instrumentality or agency that triggered the
occurrence must be one that falls under the exclusive control of the person
in charge thereof. In this case, the car where the fire originated was under
the control of Pascual. Being its caretaker, he alone had the responsibility to
maintain it and ensure its proper functioning. No other person, not even the
respondents, was charged with that obligation except him.
Where the circumstances which caused the accident are shown to have been
under the management or control of a certain person and, in the normal
course of events, the incident would not have happened had that person
used proper care, the inference is that it occurred because of lack of such
care.23 The burden of evidence is thus shifted to defendant to establish that
he observed all that was necessary to prevent the accident from happening.
In this aspect, Pascual utterly failed.
Under the third requisite, there is nothing in the records to show that
respondents contributed to the incident. They had no access to the car and
had no responsibility regarding its maintenance even if it was parked in a
building they owned.
On the second assigned error, we find no reason to reverse the decision of
the Court of Appeals. The relationship between the two petitioners was
based on the principle of pater familias according to which the employer
becomes liable to the party aggrieved by its employee if he fails to prove due
diligence of a good father of a family in the selection and supervision of his
employees.24 The burden of proof that such diligence was observed devolves
on the employer who formulated the rules and procedures for the selection
and hiring of his employees.
In the selection of prospective employees, employers are required to
examine them as to their qualifications, experience and service
records.25 While the petitioner-corporation does not appear to have erred in
considering Pascual for his position, its lack of supervision over him made it
jointly and solidarily liable for the fire.
In the supervision of employees, the employer must formulate standard
operating procedures, monitor their implementation and impose disciplinary
measures for the breach thereof.26 To fend off vicarious liability, employers
must submit concrete proof, including documentary evidence, that they
complied with everything that was incumbent on them.27 Here, petitionercorporations evidence hardly included any rule or regulation that Pascual

should have observed in performing his functions. It also did not have any
guidelines for the maintenance and upkeep of company property like the
vehicle that caught fire. Petitioner-corporation did not require periodic
reports on or inventories of its properties either. Based on these
circumstances, petitioner-corporation clearly did not exert effort to be
apprised of the condition of Pascuals car or its serviceability.
Petitioner-corporations argument that the liability attached to employers
only applies in cases involving the supervision of employees in the
transportation business is incorrect. Article 2180 of the Civil Code states that
employers shall be liable for the damage caused by their employees. The
liability is imposed on all those who by their industry, profession or other
enterprise have other persons in their service or supervision.28 Nowhere does
it state that the liability is limited to employers in the transportation
business.
WHEREFORE, the petition is hereby DENIED and the
decision29 of the Court of Appeals affirmed in toto.
Costs against petitioners.
SO ORDERED.

G.R. No. 91115 December 29, 1992

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
PACALSO MAT-AN Y KUTBING/KATUBING, accused-appellant.
NOCON, J.:
This an appeal from a decision 1 dated March 7, 1989 of Regional Trial Court
of Baguio City, Branch 5 in Criminal Case No. 4230 wherein accusedappellant Pacalso Mat-an y Kutbing or Kutubing was found guilty beyond
reasonable doubt of the crime of PARRICIDE in an information filed on
January 19, 1987 which reads:
The undersigned accuses PACALSO MAT-AN y KUTBING or
KATUBING of the crime of the PARRICIDE, committed as follows:
That on or about the 24th day of December, 1986, in the City of
Baguio, Philippines and within the jurisdiction of this Honorable
Court , the above named accused, with intent to kill, did them
and there willfully, unlawfully and feloniously attack, assault and

strike his mother, Martha Mat-an, with a branch of pine tree,

hitting the latter on the head, thereby inflicting upon the victim
neurogenic shock secondary to contrecoup injuries of the brain,
subdural hemorrhage and basal skull fracture all due to
application of physical violence of the head, which injuries
directly caused the death of said Martha K. Mat-an. 2
Upon arraignment, accused-appellant pleaded "NOT GUILTY" to the offense
charged after due trial, the court a quo rendered a judgment against him, the
dispositive portion of which reads as follows:
WHEREFORE, the Court finds and declares the accused PACALSO
MAT-AN y "KATUBING" or "KUTBING" guilty beyond reasonable
doubt of the crime of parricide as charged, and hereby sentences
him to suffer reclusion perpetua; to indemnify the heirs of the
deceased Martha Katubing y Mat-an in the amounts of:
P30,000.00 for the latter's death and P30,869.75 as
consequential damages, representing the burial expenses; and to
pay the costs.
In the service of his sentence, the accused shall be credited with
his preventive imprisonment under the terms and conditions
prescribed in Article 29 of the Revised Penal Code, as amended. 3
It appears on record that at around 6 p.m. of December 24, 1986, David Matan, youngest brother of the accused-appellant, was walking towards a
nearby store with his four (4) friends when he met accused-appellant,
Pacalso Mat-an.
Accused-appellant told David that he was going to talk to their sister,
Brenda, and upon noticing that the former was holding a long piece of wood,
drunk and only in his briefs, the latter decided to follow accused-appellant
who is known to make trouble whenever he is drunk and had, in fact, killed
their brother, Witty, in 1968.
When accused-appellant reached the compound of the house of his sister,
the former confronted the latter about the spilled water at his residence and
told her to pay for one-half (1/2) of his water bill to which his sister readily
agreed. Inspite of his, accused-appellant hit his sister's right jaw and left arm
with the pine tree branch he was holding causing the latter to fall down on
the ground.
David, who followed accused-appellant and witnessed the incident tried to
pacify the latter and told him to go home but accused-appellant, instead, hit
his mother on the head with another piece of wood after arguing with her
about an indebtedness involving money.

To prevent the accused-appellant from inflicting further harm on their

mother, David got an axe and hit the chest of the accused-appellant with it
and the latter fled.
Thereafter, David called his friends to help him bring his mother to Baguio
Medical Center where the latter was pronounced dead on arrival.
On the following day or on December 25, 1986, accused-appellant was
arrested and a pine tree branch (Exhibit "A") used by the accused-appellant
in hitting his mother was recovered from the scene of the crime.
An autopsy conducted on the body of the victim by Dr. Emmanuel N.
Fernandez, the medico-legal officer of the Baguio Health Department on the
evening of December 25, 1986 reveal the following per his report, to wit:
AUTOPSY FINDINGS:
1. Body of a female; medium built; height of 4' 7" and weight of
about 90 lbs.
2. Rigor mortis beginning to disappear; postmortem lividity fully
developed on the neck, back and buttocks; cornea cloudy; pupils
dilated; pinkish conjunctive.
3. Presence of the following external injuries;
a) Contusion-hematoma on the left malar region of
the face.
b) Contusion-hematoma on the right forearm, lateral
aspect.
c) Contusion on the medial aspect of the left knee.
4. INTERNAL FINDINGS:
a) Presence of a subdural hemorrhage located over
the left cocipital lobe and the left cerebellar
hemisphere.
b) Presence of a basal skull fracture on the left
middle cranial vault.
c) The rest o the internal organs are within normal
limits.
CAUSE OF DEATH
Neurogenic shock secondary to contrecoup injuries of the brain,
subdural hemorrhage and basal skull fracture due to application
of physical violence on the head. 4
On the other hand, accused-appellant testified that at around 6 p.m. of
December 24, 1986, he went to the house of his sister to advice the latter

not to connect her water hose to his water hose as the connection was
causing water to spill since his water hose does not have a gate valve.
After informing his sister of said situation, his sister got mad and started
cursing him causing accused-appellant to get mad that he slapped his sister
causing the latter to fall down on the ground unconscious. Striken by a guilt
complex, accused-appellant was about to help his sister when his brother
David suddenly lunged at him and hit his left clavicle with an axe causing
him to fall on the ground. As he was struggling to get up from the ground, he
saw David about to hit him again with the axe and, in order to save himself
from further injury, he picked up a piece of wood and swang the same
towards David but instead hit his mother Martha who was about to embrace
David to prevent the latter from hitting accused-appellant. Thereafter,
accused-appellant ran away and proceeded to the Dr. Efrain Montemayor
Medical Center for the treatment of his wound.
Accused-appellant further denied that he was drunk when he went to his
sister's house, although he admitted to have previously drunk a bottle of
beer before proceeding to her house.
The appeal is devoid of merit.
It is well settled that appellate courts will generally not disturb the
conclusions and findings of fact of the trial court considering that it is in a
better position to decide the question, having heard the witnesses
themselves and observed their deportment and manner of testifying during
the trial, unless the court has plainly overlooked certain facts of substance
and value that, if considered, might affect the result of the case. 5
The conflicting testimonies of the accused-appellant and the prosecution
witnesses with regards to the chain of events that occurred on that fateful
day were properly assessed by the trial court in its decision which states
that:
The Court finds more credible the version of the prosecution that
Pacalso deliberately struck his mother Martha with a piece of
wood after picking up a quarrel with her over an indebtedness
which he was insisting to be still subsisting but which Martha
claimed to have already been paid. From all appearances, when
Pacalso went to confront Brenda, with whom Martha was living,
about Brenda's use of his water supply, he was ready for trouble.
He went there only in his briefs and was holding a piece of wood.
He even imbibed of liquor to embolden himself. In fact, he
admitted to slapping Brenda although the latter asserted that he
hit her with a piece of wood. His violent temper even towards his

next of kin is amply shown by his having already killed his own
brother, Witty, an attribution which he did not bother to deny.
xxx xxx xxx
Otherwise stated, it is more probable that David hit Pacalso with
the axe only after the latter had struck Martha with a piece of
wood in order to prevent Pacalso from inflicting further harm on
Martha. This explains why Pacalso has not seen it right to
complain against David up to the present time. 6
Furthermore, the testimonies of the prosecution witnesses were rendered in
a direct, simple and consistent manner and there is no showing of any
improper motive on their part to testify falsely against the accusedappellant. Besides, the injury sustained by the accused-appellant makes his
claim of self-defense highly improbable since the wound inflicted upon him
was such as to immobilize the latter's usage of his arms immediately after he
was hit by his brother David. Thus, defense witness Dr. Samuel Lachica,
resident physician of Dr. Efrain Montemayor Medical Center who treated
accused-appellant's wound, testified that:
Q. Now, what would happen to the person if hit by an
axe?
A. Due to this fracture and this wound, the first
problem of the patient would be, of course, the
limitation of range of motion over the left shoulder
due to pain and there will be massive bleeding. Not
only will it cause massive bleeding but it would also
affect the neuro-vascular structures in which the
patient cannot move the extremities, not even a
little range of motion. 7 (Emphasis supplied)
There is no doubt that accused-appellant killed his mother when he hit the
latter with a piece of wood. His contention that her death was accidental and
without any criminal intent as he was only defending himself from the
unlawful attack of his brother is unavailing since it was accused-appellant
himself who started the unlawful agrression when he slapped his sister which
led to the untimely death of their mother.
For the exempting circumstance of accident to be properly appreciated in
accused-appellant's favor, the following requisites must concur: (1) that the
accused person was performing a lawful act with due care; (2) that the injury
is caused by mere accident; and (3) that there was no fault or intent of
causing the injury (Paragraph 4, Article 12 of the Revised Penal Code). In the
case at bar, accused-appellant is liable for his unlawful act even if he never

intended to hit his mother since his act of hitting his mother was not done in
the performance of a lawful act as required by the aforementioned Article.
WHEREFORE, finding no error in the decision appealed from, the same is
hereby AFFIRMED but with MODIFICATION that the civil indemnity to be
awarded to the heirs of the victim be increased to P50,000.00 in accordance
with our present jurisprudence.
SO ORDERED.
Narvasa, C.J., (chairman), Feliciano, Regalado and Campos, JJ., concur.

LIABILITY OF JOINT TORT-FEASORS

G.R. No. L-21512

August 31, 1966

PROSPERO SABIDO and ASER LAGUNDA, petitioners,

vs.
CARLOS CUSTODIO, BELEN MAKABUHAY CUSTODIO and THE
HONORABLE COURT OF APPEALS,respondents.
Sabido, Sabido and Associates for petitioners.
Ernesto S. Tengco for respondents.
CONCEPCION, C.J.:
Prospero Sabido and Aser Lagunda seek the review by certiorari of a decision
of the Court of Appeals, affirming that of the Court of First Instance of
Laguna, sentencing the Laguna-Tayabas Bus Co., Nicasio Mudales, and herein
petitioners. Prospero Sabido and Aser Lagunda, to jointly and severally
indemnify Belen Makabuhay Custodio and her son, Agripino Custodio Jr., in
the sum of P6,000 and to pay the costs of the suit.
The facts are set forth in the decision of the Court of Appeals from which we
quote:
Upon a careful study and judicious examining of the evidence on
record, we are inclined to concur in the findings made by the trial
court. Here is how the Court a quo analyzed the facts of this case:

"In Barrio Halang, Municipality of Lumban, Province of Laguna,

two trucks, one driven by Nicasio Mudales and belonging to
Laguna-Tayabas Bus Company, and the other driven by Aser
Lagunda and owned by Prospero Sabido, going in opposite
directions met each other in a road curve. Agripino Custodia a
passenger of LTB bus, who was hanging on the left side as truck
was full of passengers was sideswiped by the track driven by
Aser Lagunda. As a result, Agripino Custodio was injured and
died (Exhibit A).
"It appears clear from the evidence that Agripino Custodio was
hanging on the left side of the LTB bus. Otherwise, were he
sitting inside the truck, he could not have been struck by the six
by six truck driven by Aser Lagunda. This fact alone, of allowing
Agripino Custodio to hang on the side of the truck, makes the
defendant Laguna Tayabas Bus Company liable for damages. For
certainly its employees, who are the driver and conductor were
negligent. They should not have allowed Agripino Custodio to
ride their truck in that manner.
"To avoid any liability, Aser Lagunda and Prospero Sabido throw
all the blame on Nicasio Mudales. From the testimony, however,
of Belen Makabuhay, Agripino Custodio's widow, we can deduce
that Aser Lagunda was equally negligent as Nicasio Mudales.
Belen testified that the 6 x 6 truck was running fast when it met
the LTB Bus. And Aser Lagunda had time and opportunity to
avoid the mishap if he had been sufficiently careful and cautious
because the two trucks never collided with each other. By simply
swerving to the right side of the road, the 6 x 6 truck could have
avoided hitting Agripino Custodio. It is incredible that the LTB was
running on the middle of the road when passing a curve. He
knows it is dangerous to do so. We are rather of the belief that
both trucks did not keep close to the right side of the road so
they sideswiped each other and thus Agripino Custodio was
injured and died. In other words, both drivers must have drive in
their trucks not in the proper lane and are, therefore, both
reckless and negligent.
"We might state by way of additional observations that the sideswiping
of the deceased and his two fellow passengers took place on broad
daylight at about 9:30 in the morning of June 9, 1955 when the LTB bus
with full load to passengers was negotiating a sharp curve of a bumpy

and sliding downward a slope, whereas the six by six truck was
climbing up with no cargoes or passengers on board but for three
helpers, owner Sabido and driver Lagunda (tsn. 308-309, Mendoza).
Under the above-stated condition, there exists strong persuasion to
accept what Belen Makabuhay and Sofia Mesina, LTB passengers, had
testified to the effect that the 6 x 6 cargo truck was running at a fast
rate of speed (tsn. 15, 74, 175 Mendoza). From the lips of no less than
driver Lagunda himself come the testimonial admission that the
presence of three hanging passengers located at the left side of the
bus was noted when his vehicle was still at a distance of 5 or 7 meters
from the bus, and yet despite the existence of a shallow canal on the
right side of the road which he could pass over with ease, Lagunda did
not care to exercise prudence to avert the accident simply because to
use his own language the canal "is not a passage of trucks."
Based upon these facts, the Court of First Instance of Laguna and the Court
of Appeals concluded that the Laguna-Tayabas Bus Co. hereinafter referred
to as the carrier and its driver Nicasio Mudales (none of whom has
appealed), had violated the contract of carriage with Agripino Custodio,
whereas petitioners Sabido and Lagunda were guilty of a quasi delict, by
reason of which all of them were held solidarity liable in the manner above
indicated.
Petitioners now maintain: (1) that the death of Agripino Custodio was due
exclusively to the negligence of the carrier and its driver; (2) that petitioners
were not guilty of negligence in connection with the matter under
consideration; (3) that petitioners cannot be held solidarily liable with the
carrier and its driver; and (4) that the complaint against petitioners herein
should be dismissed.
With respect to the first two (2) points, which are interrelated, it is urged that
the carrier and its driver were clearly guilty of negligence for having allowed
Agripino Custodio to ride on the running board of the bus, in violation of
Section 42 of Act No. 3992, and that this negligence was the proximate
cause of Agripino's death. It should be noted, however, that the lower court
had, likewise, found the petitioners guilty of contributory negligence, which
was as much a proximate cause of the accident as the carrier's negligence,
for petitioners' truck was running at a considerable speed, despite the fact
that it was negotiating a sharp curve, and, instead of being close to its right
side of the road, said truck was driven on its middle portion and so near the
passenger bus coming from the opposite direction as to sideswipe a
passenger riding on its running board.1wph1.t

The views of the Court of Appeals on the speed of the truck and its location
at the time of the accident are in the nature of findings of fact, which we
cannot disturb in a petition for review by certiorari, such as the one at bar. At
any rate, the correctness of said findings is borne out by the very testimony
of petitioner Lagunda to the effect that he saw the passengers riding on the
running board of the bus while the same was still five (5) or seven (7) meters
away from the truck driven by him. Indeed, the distance between the two (2)
vehicles was such that he could have avoided sideswiping said passengers if
his truck were not running at a great speed.
Although the negligence of the carrier and its driver is independent, in its
execution, of the negligence of the truck driver and its owner, both acts of
negligence are the proximate cause of the death of Agripino Custodio. In
fact, the negligence of the first two (2) would not have produced this result
without the negligence of petitioners' herein. What is more, petitioners'
negligence was the last, in point of time, for Custodio was on the running
board of the carrier's bus sometime before petitioners' truck came from the
opposite direction, so that, in this sense, petitioners' truck had the last clear
chance.
Petitioners contend that they should not be held solidarily liable with the
carrier and its driver, because the latter's liability arises from a breach of
contract, whereas that of the former springs from a quasi delict. The rule is,
however, that
According to the great weight of authority, where the concurrent or
successive negligent acts or omission of two or more persons, although
acting independently of each other, are, in combination, the direct and
proximate cause of a single injury to a third person, and it is impossible
to determine in what proportion each contributed to the injury, either is
responsible for the whole injury, even though his act alone might not
have caused the entire injury, or the same damage might have
resulted from the acts of the other tort-feasor ... . (38 Am. Jur. 946,
947.)
Wherefore, the decision appealed from is hereby affirmed, with costs against
the petitioners herein. It is so ordered.
Reyes, J.B.L., Barrera, Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and
Castro, JJ., concur.
Regala, J., is on leave.

G.R. No. 130068 October 1, 1998

FAR EASTERN SHIPPING COMPANY, petitioner,
vs.
COURT OF APPEALS and PHILIPPINE PORTS AUTHORITY, respondents.
G.R. No. 130150 October, 1998
MANILA PILOTS ASSOCIATION, petitioner,
vs.
PHILIPPINE PORTS AUTHORITY and FAR EASTERN SHIPPING
COMPANY, respondents.
REGALADO, J.:
These consolidated petitions for review on certiorari seek in unison to annul
and set aside the decision 1 of respondent Court of Appeals of November 15,
1996 and its resolution 2 dated July 31, 1997 in CA-G.R. CV No. 24072,
entitled "Philippine Ports Authority, Plaintiff-Appellee vs. Far Eastern Shipping
Company, Senen C. Gavino and Manila Pilots' Association, DefendantsAppellants," which affirmed with modification the judgment of the trial court
holding the defendants-appellants therein solidarily liable for damages in
favor of herein private respondent.
There is no dispute about the facts as found by the appellate court,
thus
. . . On June 20, 1980, the M/V PAVLODAR, flying under the
flagship of the USSR, owned and operated by the Far Eastern
Shipping Company (FESC for brevity's sake), arrived at the Port
of Manila from Vancouver, British Columbia at about 7:00 o'clock
in the morning. The vessel was assigned Berth 4 of the Manila
International Port, as its berthing space. Captain Roberto
Abellana was tasked by the Philippine Port Authority to supervise
the berthing of the vessel. Appellant Senen Gavino was assigned
by the Appellant Manila Pilots' Association (MPA for brevity's
sake) to conduct docking maneuvers for the safe berthing of the
vessel to Berth No. 4.
Gavino boarded the vessel at the quarantine anchorage and
stationed himself in the bridge, with the master of the vessel,
Victor Kavankov, beside him. After a briefing of Gavino by
Kavankov of the particulars of the vessel and its cargo, the vessel
lifted anchor from the quarantine anchorage and proceeded to

the Manila International Port. The sea was calm and the wind was
ideal for docking maneuvers.
When the vessel reached the landmark (the big church by the
Tondo North Harbor) one-half mile from the pier, Gavino ordered
the engine stopped. When the vessel was already about 2,000
feet from the pier, Gavino ordered the anchor dropped. Kavankov
relayed the orders to the crew of the vessel on the bow. The left
anchor, with two (2) shackles, were dropped. However, the
anchor did not take hold as expected. The speed of the vessel
did not slacken. A commotion ensued between the crew
members. A brief conference ensued between Kavankov and the
crew members. When Gavino inquired what was all the
commotion about, Kavankov assured Gavino that there was
nothing to it.
After Gavino noticed that the anchor did not take hold, he
ordered the engines half-astern. Abellana, who was then on the
pier apron, noticed that the vessel was approaching the pier fast.
Kavankov likewise noticed that the anchor did not take hold.
Gavino thereafter gave the "full-astern" code. Before the right
anchor and additional shackles could be dropped, the bow of the
vessel rammed into the apron of the pier causing considerable
damage to the pier. The vessel sustained damage too, (Exhibit
"7-Far Eastern Shipping). Kavankov filed his sea protest (Exhibit
"1-Vessel"). Gavino submitted his report to the Chief Pilot (Exhibit
"1-Pilot") who referred the report to the Philippine Ports Authority
(Exhibit 2-Pilot"). Abellana likewise submitted his report of the
incident (Exhibit "B").
Per contract and supplemental contract of the Philippine Ports
Authority and the contractor for the rehabilitation of the
damaged pier, the same cost the Philippine Ports Authority the
amount of P1,126,132.25 (Exhibits "D" and "E"). 3
On January 10, 1983, the Philippine Ports Authority (PPA, for brevity), through
the Solicitor General, filed before the Regional Trial Court of Manila, Branch
39, a complaint for a sum of money against Far Eastern Shipping Co., Capt.
Senen C. Gavino and the Manila Pilots' Association, docketed as Civil Case
No. 83-14958, 4 praying that the defendants therein be held jointly and
severally liable to pay the plaintiff actual and exemplary damages plus costs
of suit. In a decision dated August 1, 1985, the trial court ordered the

defendants therein jointly and severally to pay the PPA the amount of
P1,053,300.00 representing actual damages and the costs of suit. 5
The defendants appealed to the Court of Appeals and raised the following
issues: (1) Is the pilot of a commercial vessel, under compulsory pilotage,
solely liable for the damage caused by the vessel to the pier, at the port of
destination, for his negligence? and (2) Would the owner of the vessel be
liable likewise if the damage is caused by the concurrent negligence of the
master of the vessel and the pilot under a compulsory pilotage?
As stated at the outset, respondent appellate court affirmed the findings of
the court a quo except that if found no employer-employee relationship
existing between herein private respondents Manila Pilots' Association (MPA,
for short) and Capt. Gavino. 6 This being so, it ruled instead that the liability
of MPA is anchored, not on Article 2180 of the Civil Code, but on the
provisions of Customs Administrative Order No. 15-65, 7 and accordingly
modified said decision of the trial court by holding MPA, along with its codefendants therein, still solidarily liable to PPA but entitled MPA to
reimbursement from Capt. Gavino for such amount of the adjudged
pecuniary liability in excess of the amount equivalent to seventy-five percent
(75%) of its prescribed reserve
fund. 8
Neither Far Eastern Shipping Co. (briefly, FESC) nor MPA was happy with the
decision of the Court of Appeals and both of them elevated their respective
plaints to us via separate petitions for review on certiorari.
In G. R. No. 130068, which was assigned to the Second Division of this Court,
FESC imputed that the Court of Appeals seriously erred:
1. in not holding Senen C. Gavino and the Manila Pilots'
Association as the parties solely responsible for the resulting
damages sustained by the pier deliberately ignoring the
established jurisprudence on the matter;
2. in holding that the master had not exercised the required
diligence demanded from him by the circumstances at the time
the incident happened;
3. in affirming the amount of damages sustained by the
respondent Philippine Ports Authority despite a strong and
convincing evidence that the amount is clearly exorbitant and
unreasonable;
4. in not awarding any amount of counterclaim prayed for by the
petitioner in its answer; and

5. in not granting herein petitioner's claim against pilot Senen C.

Gavino and Manila Pilots' Association in the event that it be held
liable. 9
Petitioner asserts that since the MV PAVLODAR was under compulsory
pilotage at the time of the incident, it was the compulsory pilot, Capt.
Gavino, who was in command and had complete control in the navigation
and docking of the vessel. It is the pilot who supersedes the master for the
time being in the command and navigation of a ship and his orders must be
obeyed in all respects connected with her navigation. Consequently, he was
solely responsible for the damage caused upon the pier apron, and not the
owners of the vessel. It claims that the master of the boat did not commit
any act of negligence when he failed to countermand or overrule the orders
of the pilot because he did not see any justifiable reason to do so. In other
words, the master cannot be faulted for relying absolutely on the
competence of the compulsory pilot. If the master does not observe that a
compulsory pilot is incompetent or physically incapacitated, the master is
justified in relying on the pilot. 10
Respondent PPA, in its comment, predictably in full agreement with the ruling
of respondent court on the solidary liability of FESC, MPA and Capt. Gavino,
stresses the concurrent negligence of Capt. Gavino, the harbor pilot, and
Capt. Viktor Kabankov, * shipmaster of MV Pavlodar, as the basis of their
solidary liability for damages sustained by PPA. It posits that the vessel was
being piloted by Capt. Gavino with Capt. Kabankov beside him all the while
on the bridge of the vessel, as the former took over the helm of MV Pavlodar
when it rammed and damaged the apron of the pier of Berth No. 4 of the
Manila International Port. Their concurrent negligence was the immediate
and proximate cause of the collision between the vessel and the pier Capt.
Gavino, for his negligence in the conduct of docking maneuvers for the safe
berthing of the vessel; and Capt. Kabankov, for failing to countermand the
orders of the harbor pilot and to take over and steer the vessel himself in the
face of imminent danger, as well as for merely relying on Capt. Gavino
during the berthing procedure. 11
On the other hand, in G.R. No. 130150, originally assigned to the Court's First
Division and later transferred to the Third Division. MPA, now as petitioner in
this case, avers that respondent court's errors consisted in disregarding and
misinterpreting Customs Administrative Order No. 15-65 which limits the
liability of MPA. Said pilots' association asseverates that it should not be held
solidarily liable with Capt. Gavino who, as held by respondent court is only a
member, not an employee, thereof. There being no employer-employee

relationship, neither can MPA be held liable for any vicarious liability for the
respective exercise of profession by its members nor be considered a joint
tortfeasor as to be held jointly and severally liable. 12 It further argues that
there was erroneous reliance on Customs Administrative Order No. 15-65 and
the constitution and by-laws of MPA, instead of the provisions of the Civil
Code on damages which, being a substantive law, is higher in category than
the aforesaid constitution and by-laws of a professional organization or an
administrative order which bears no provision classifying the nature of the
liability of MPA for the negligence its member pilots. 13
As for Capt. Gavino, counsel for MPA states that the former had retired from
active pilotage services since July 28, 1994 and has ceased to be a member
of petitioner pilots' association. He is not joined as a petitioner in this case
since his whereabouts are unknown. 14
FESC's comment thereto relied on the competence of the Court of Appeals in
construing provisions of law or administrative orders as bases for
ascertaining the liability of MPA, and expressed full accord with the appellate
court's holding of solidary liability among itself, MPA and Capt. Gavino. It
further avers that the disputed provisions of Customs Administrative Order
No. 15-65 clearly established MPA's solidary liability. 15
On the other hand, public respondent PPA, likewise through representations
by the Solicitor General, assumes the same supportive stance it took in G.R.
No. 130068 in declaring its total accord with the ruling of the Court of
Appeals that MPA is solidarily liable with Capt. Gavino and FESC for damages,
and in its application to the fullest extent of the provisions of Customs
Administrative Order No. 15-65 in relation to MPA's constitution and by-laws
which spell out the conditions of and govern their respective liabilities. These
provisions are clear and unambiguous as regards MPA's liability without need
for interpretation or construction. Although Customs Administrative Order
No. 15-65 is a mere regulation issued by an administrative agency pursuant
to delegated legislative authority to fix details to implement the law, it is
legally binding and has the same statutory force as any valid statute. 16
Upon motion 17 by FESC dated April 24, 1998 in G.R. No. 130150, said case
was consolidated with G.R. No. 130068. 18
Prefatorily, on matters of compliance with procedural requirements, it must
be mentioned that the conduct of the respective counsel for FESC and PPA
leaves much to be desired, to the displeasure and disappointment of this
Court.
Sec. 2, Rule 42 of the 1997 Rules of Civil Procedure 19 incorporates the
former Circular No. 28-91 which provided for what has come to be known as

the certification against forum shopping as an additional requisite for

petitions filed with the Supreme Court and the Court of Appeals, aside from
the other requirements contained in pertinent provisions of the Rules of
Court therefor, with the end in view of preventing the filing of multiple
complaints involving the same issues in the Supreme Court, Court of Appeals
or different divisions thereof or any other tribunal or agency.
More particularly, the second paragraph of Section 2, Rule 42 provides:
xxx xxx xxx
The petitioner shall also submit together with the petition a
certification under oath that he has not theretofore commenced
any other action involving the same issues in the Supreme Court,
the Court of Appeals or different divisions thereof, or any other
tribunal or agency; if there is such other action or proceeding, he
must state the status of the same; and if he should thereafter
learn that a similar action or proceeding has been filed or is
pending before the Supreme Court, the Court of Appeals or
different divisions thereof, or any other tribunal or agency, he
undertakes to promptly inform the aforesaid courts and other
tribunal or agency thereof within five (5) days therefrom.
(Emphasis ours.)
For petitions for review filed before the Supreme Court, Section 4(e),
Rule 45 specifically requires that such petition shall contain a sworn
certification against forum shopping as provided in the last paragraph
of Section 2, Rule 42.
The records show that the law firm of Del Rosario and Del Rosario through its
associate, Atty. Herbert A. Tria, is the counsel of record for FESC in both G.R.
No. 130068 and G.R. No. 130150.
G.R. No. 130068, which is assigned to the Court's Second Division,
commenced with the filing by FESC through counsel on August 22, 1997 of a
verified motion for extension of time to file its petition for thirty (30) days
from August 28, 1997 or until September 27, 1997. 20 Said motion contained
the following certification against forum shopping 21 signed by Atty. Herbert
A. Tria as affiant:
CERTIFICATION
AGAINST FORUM SHOPPING
I/we hereby certify that I/we have not commenced any other
action or proceeding involving the same issues in the Supreme
Court, the Court of Appeals, or any other tribunal or agency; that
to the best of my own knowledge, no such action or proceeding

is pending in the Supreme Court, the Court of Appeals, or any

other tribunal or agency; that if I/we should thereafter learn that
a similar action or proceeding has been filed or is pending before
the Supreme Court, the Court of Appeals, or any other tribunal or
agency, I/we undertake to report that fact within five (5) days
therefrom to this Honorable Court.
This motion having been granted, FESC subsequently filed its petition
on September 26, 1997, this time bearing a "verification and
certification against forum-shopping" executed by one Teodoro P. Lopez
on September 24, 1997, 22 to wit:
VERIFICATION AND CERTIFICATION
AGAINST FORUM SHOPPING
in compliance with Section 4(e), Rule 45 in relation
to Section 2, Rule 42 of the Revised Rules of Civil Procedure
I, Teodoro P. Lopez, of legal age, after being duly sworn, depose
and state:
1. That I am the Manager, Claims Department of Filsov Shipping
Company, the local agent of petitioner in this case.
2. That I have caused the preparation of this Petition for Review
on Certiorari.
3. That I have read the same and the allegations therein
contained are true and correct based on the records of this case.
4. That I certify that petitioner has not commenced any other
action or proceeding involving the same issues in the Supreme
Court or Court of Appeals, or any other tribunal or agency, that
to the best of my own knowledge, no such action or proceeding
is pending in the Supreme Court, the Court of Appeals or any
other tribunal or agency, that if I should thereafter learn that a
similar action or proceeding has been filed or is pending before
the Supreme Court, the Court of Appeals, or any other tribunal or
agency, I undertake to report the fact within five (5) days
therefrom to this Honorable Court. (Italics supplied for
emphasis.)
Reviewing the records, we find that the petition filed by MPA in G.R. No.
130150 then pending with the Third Division was duly filed on August 29,
1997 with a copy thereof furnished on the same date by registered mail to
counsel for FESC. 23 Counsel of record for MPA. Atty. Jesus P. Amparo, in his
verification accompanying said petition dutifully revealed to the Court that

xxx xxx xxx

3. Petitioner has not commenced any other action or proceeding
involving the same issues in this Honorable Court, the Court of
Appeals or different Divisions thereof, or any other tribunal or
agency,but to the best of his knowledge, there is an action or
proceeding pending in this Honorable Court, entitled Far Eastern
Shipping Co., Petitioner, vs. Philippine Ports Authority and Court
of Appeals with a Motion for Extension of time to file Petition For
Review by Certiorari filed sometime on August 18, 1987. If
undersigned counsel will come to know of any other pending
action or claim filed or pending he undertakes to report such fact
within five (5) days to this Honorable Court. 24 (Emphasis
supplied.)
Inasmuch as MPA's petition in G.R. No. 130150 was posted by registered mail
on August 29, 1997 and taking judicial notice of the average period of time it
takes local mail to reach its destination, by reasonable estimation it would be
fair to conclude that when FESC filed its petition in G.R. No. 130068 on
September 26, 1997, it would already have received a copy of the former
and would then have knowledge of the pendency of the other petition
initially filed with the First Division. It was therefore incumbent upon FESC to
inform the Court of that fact through its certification against forum shopping.
For failure to make such disclosure, it would appear that the aforequoted
certification accompanying the petition in G.R. No. 130068 is defective and
could have been a ground for dismissal thereof.
Even assuming that FESC had not yet received its copy of MPA's petition at
the time it filed its own petition and executed said certification, its signatory
did state "that if I should thereafter learn that a similar action or proceeding
has been filed or is pending before the Supreme Court, the Court of Appeals
or any other tribunal or agency, I undertake to report the fact within five (5)
days therefrom to this Honorable Court." 25 Scouring the records page by
page in this case, we find that no manifestation concordant with such
undertaking was then or at any other time thereafter ever filed by FESC nor
was there any attempt to bring such matter to the attention of the Court.
Moreover, it cannot feign non-knowledge of the existence of such other
petition because FESC itself filed the motion for consolidation in G.R. No.
130150 of these two cases on April 24, 1998.
It is disturbing to note that counsel for FESC, the law firm of Del Rosario and
Del Rosario, displays an unprofessional tendency of taking the Rules for
granted, in this instance exemplified by its pro forma compliance therewith

but apparently without full comprehension of and with less than faithful
commitment to its undertakings to this Court in the interest of just, speedy
and orderly administration of court proceedings.
As between the lawyer and the courts, a lawyer owes candor, fairness and
good faith to the court. 26 He is an officer of the court exercising a privilege
which is indispensable in the administration of justice. 27 Candidness,
especially towards the courts, is essential for the expeditious administration
of justice. Courts are entitled to expect only complete honesty from lawyers
appearing and pleading before them. 28 Candor in all dealings is the very
essence of honorable membership in the legal profession. 29 More
specifically, a lawyer is obliged to observe the rules of procedure and not to
misuse them to defeat the ends of justice. 30 It behooves a lawyer, therefore,
to exert every effort and consider it his duty to assist in the speedy and
efficient administration of justice. 31 Being an officer of the court, a lawyer
has a responsibility in the proper administration of justice. Like the court
itself, he is an instrument to advance its ends the speedy, efficient,
impartial, correct and inexpensive adjudication of cases and the prompt
satisfaction of final judgments. A lawyer should not only help attain these
objectives but should likewise avoid any unethical or improper practices that
impede, obstruct or prevent their realization, charged as he is with the
primary task of assisting in the speedy and efficient administration of
justice. 32
Sad to say, the members of said law firm sorely failed to observe their duties
as responsible members of the Bar. Their actuations are indicative of their
predisposition to take lightly the avowed duties of officers of the Court to
promote respect for law and for legal processes. 33 We cannot allow this state
of things to pass judicial muster.
In view of the fact that at around the time these petitions were commenced,
the 1997 Rules of Civil Procedure had just taken effect, the Court treated
infractions of the new Rules then with relative liberality in evaluating full
compliance therewith. Nevertheless, it would do well to remind all concerned
that the penal provisions of Circular No. 28-91 which remain operative
provides, inter alia:
3. Penalties.
xxx xxx xxx
(c) The submission of a false certification under Par. 2 of the
Circular shall likewise constitute contempt of court, without
prejudice to the filing of criminal action against the guilty party.
The lawyer may also be subjected to disciplinary proceedings.

It must be stressed that the certification against forum shopping ordained

under the Rules is to be executed by the petitioner, and not by counsel.
Obviously it is the petitioner, and not always the counsel whose professional
services have been retained for a particular case, who is in the best position
to know whether he or it actually filed or caused the filing of a petition in that
case. Hence, a certification against forum shopping by counsel is a defective
certification. It is clearly equivalent to non-compliance with the requirement
under Section 2, Rule 42 in relation to Section 4, Rule 45, and constitutes a
valid cause for dismissal of the petition.
Hence, the initial certification appended to the motion for extension of time
to file petition in G.R. No. 130068 executed in behalf of FESC by Atty. Tria is
procedurally deficient. But considering that it was a superfluity at that stage
of the proceeding, it being unnecessary to file such a certification with a
mere motion for extension, we shall disregard such error. Besides, the
certification subsequently executed by Teodoro P. Lopez in behalf of FESC
cures that defect to a certain extent, despite the inaccuracies earlier pointed
out. In the same vein, we shall consider the verification signed in behalf of
MPA by its counsel, Atty. Amparo, in G.R. No. 130150 as substantial
compliance inasmuch as it served the purpose of the Rules of informing the
Court of the pendency of another action or proceeding involving the same
issues.
It bears stressing that procedural rules are instruments in the speedy and
efficient administration of justice. They should be used to achieve such end
and not to derail it. 34
Counsel for PPA did not make matters any better. Despite the fact that, save
for the Solicitor General at the time, the same legal team of the Office of the
Solicitor General (OSG, for short) composed of Assistant Solicitor General
Roman G. Del Rosario and Solicitor Luis F. Simon, with the addition of
Assistant Solicitor General Pio C. Guerrero very much later in the
proceedings, represented PPA throughout the appellate proceedings in both
G.R. No. 130068 and G.R. No. 130150 and was presumably fully acquainted
with the facts and issues of the case, it took the OSG an inordinately and
almost unreasonably long period of time to file its comment, thus unduly
delaying the resolution of these cases. It took several changes of leadership
in the OSG from Silvestre H. Bello III to Romeo C. dela Cruz and, finally,
Ricardo P. Galvez before the comment in behalf of PPA was finally filed.
In G.R. No. 130068, it took eight (8) motions for extension of time totaling
210 days, a warning that no further extensions shall be granted, and
personal service on the Solicitor General himself of the resolution requiring

the filing of such comment before the OSG indulged the Court with the long
required comment on July 10, 1998. 35This, despite the fact that said office
was required to file its comment way back on November 12, 1997. 36 A closer
scrutiny of the records likewise indicates that petitoner FESC was not even
furnished a copy of said comment as required by Section 5, Rule 42. Instead,
a copy thereof was inadvertently furnished to MPA which, from the point of
view of G.R. No. 130068, was a non-party. 37 The OSG fared slightly better in
G.R. No. 130150 in that it took only six (6) extensions, or a total of 180 days,
before the comment was finally filed. 38 And while it properly furnished
petitioner MPA with a copy of its comment, it would have been more
desirable and expedient in this case to have furnished its therein corespondent FESC with a copy thereof, if only as a matter of professional
courtesy. 39
This undeniably dilatory disinclination of the OSG to seasonably file required
pleadings constitutes deplorable disservice to the tax-paying public and can
only be categorized as censurable inefficiency on the part of the government
law office. This is most certainly professionally unbecoming of the OSG.
Another thing that baffles the Court is why the OSG did not take the inititive
of filing a motion for consolidation in either G.R. No. 130068 or G.R. No.
130150, considering its familiarity with the background of the case and if
only to make its job easier by having to prepare and file only one comment.
It could not have been unaware of the pendency of one or the other petition
because, being counsel for respondent in both cases, petitioner is required to
furnish it with a copy of the petition under pain of dismissal of the petition for
failure otherwise. 40
Besides, in G.R. 130068, it prefaces its discussions thus
Incidentally, the Manila Pilots' Association (MPA), one of the
defendants-appellants in the case before the respondent Court of
Appeals, has taken a separate appeal from the said decision to
this Honorable Court, which was docketed as G.R. No. 130150
and entitled "Manila Pilots' Association, Petitioner, versus
Philippine Ports Authority and Far Eastern Shipping Co.,
Respondents." 41
Similarly, in G.R. No. 130150, it states
Incidentally, respondent Far Eastern Shipping Co. (FESC) had also
taken an appeal from the said decision to this Honorable Court,
docketed as G.R. No. 130068, entitled "Far Eastern Shipping Co.
vs. Court of Appeals and Philippine Ports Authority." 42

We find here a lackadaisical attitude and complacency on the part of the OSG
in the handling of its cases and an almost reflexive propensity to move for
countless extensions, as if to test the patience of the Court, before favoring it
with the timely submission of required pleadings.
It must be emphasized that the Court can resolve cases only as fast as the
respective parties in a case file the necessary pleadings. The OSG, by
needlessly extending the pendency of these cases through its numerous
motions for extension, came very close to exhausting this Court's
forbearance and has regrettably fallen short of its duties as the People's
Tribune.
The OSG is reminded that just like other members of the Bar, the canons
under the Code of Professional Responsibility apply with equal force on
lawyers in government service in the discharge of their official tasks. 43These
ethical duties are rendered even more exacting as to them because, as
government counsel, they have the added duty to abide by the policy of the
State to promote a high standard of ethics in public service. 44 Furthermore, it
is incumbent upon the OSG, as part of the government bureaucracy, to
perform and discharge its duties with the highest degree of professionalism,
intelligence and skill 45 and to extend prompt, courteous and adequate
service to the public. 46
Now, on the merits of the case. After a judicious examination of the records
of this case, the pleadings filed, and the evidence presented by the parties in
the two petitions, we find no cogent reason to reverse and set aside the
questioned decision. While not entirely a case of first impression, we shall
discuss the issues seriatim and, correlatively by way of a judicial once-over,
inasmuch as the matters raised in both petitions beg for validation and
updating of well-worn maritime jurisprudence. Thereby, we shall write finis to
the endless finger-pointing in this shipping mishap which has been stretched
beyond the limits of judicial tolerance.
The Port of Manila is within the Manila Pilotage District which is under
compulsory pilotage pursuant to Section 8, Article III of Philippine Ports
Authority Administrative Order No. 03-85, 47 which provides that:
Sec. 8. Compulsor Pilotage Service. For entering a harbor and
anchoring thereat, or passing through rivers or straits within a
pilotage district, as well as docking and undocking at any
pier/wharf, or shifting from one berth or another, every vessel
engaged in coastwise and foreign trade shall be under
compulsory pilotage. . . .

In case of compulsory pilotage, the respective duties and responsibilities of

the compulsory pilot and the master have been specified by the same
regulation in this wise:
Sec. 11. Control of vessels and liability for damage. On
compulsory pilotage grounds, the Harbor Pilot providing the
service to a vessel shall be responsible for the damage caused to
a vessel or to life and property at ports due to his negligence or
fault. He can only be absolved from liability if the accident is
caused by force majeure or natural calamities provided he has
exercised prudence and extra diligence to prevent or minimize
damage.
The Master shall retain overall command of the vessel even on
pilotage grounds whereby he can countermand or overrule the
order or command of the Harbor Pilot on beard. In such event,
any damage caused to a vessel or to life and property at ports by
reason of the fault or negligence of the Master shall be the
responsibility and liability of the registered owner of the vessel
concerned without prejudice to recourse against said Master.
Such liability of the owner or Master of the vessel or its pilots
shall be determined by competent authority in appropriate
proceedings in the light of the facts and circumstances of each
particular case.
Sec. 32. Duties and responsibilities of the Pilot or Pilots'
Association. The duties and responsibilities of the Harbor Pilot
shall be as follows:
xxx xxx xxx
f) a pilot shall be held responsible for the direction of a vessel
from the time he assumes his work as a pilot thereof until he
leaves it anchored or berthed safely; Provided, however, that his
responsibility shall cease at the moment the Master neglects or
refuses to carry out hisorder.
Customs Administrative Order No. 15-65 issued twenty years earlier likewise
provided in Chapter I thereof for the responsibilities of pilots:
Par. XXXIX. A Pilot shall be held responsible for the direction of
a vessel from the time he assumes control thereof until he leaves
it anchored free from shoal: Provided, That his responsibility shall
cease at the moment the master neglects or refuses to carry out
his instructions.
xxx xxx xxx

Par. XLIV. Pilots shall properly and safely secure or anchor

vessels under their control when requested to do so by the
master of such vessels.
I. G.R. No. 130068
Petitioner FESC faults the respondent court with serious error in not holding
MPA and Capt. Gavino solely responsible for the damages cause to the pier. It
avers that since the vessel was under compulsory pilotage at the time with
Capt. Gavino in command and having exclusive control of the vessel during
the docking maneuvers, then the latter should be responsible for damages
caused to the pier. 48 It likewise holds the appellate court in error for holding
that the master of the ship, Capt. Kabankov, did not exercise the required
diligence demanded by the circumstances. 49
We start our discussion of the successive issues bearing in mind the
evidentiary rule in American jurisprudence that there is a presumption of
fault against a moving vessel that strikes a stationary object such as a dock
or navigational aid. In admiralty, this presumption does more than merely
require the ship to go forward and produce some evidence on the
presumptive matter. The moving vessel must show that it was without fault
or that the collision was occasioned by the fault of the stationary object or
was the result of inevitable accident. It has been held that such vessel must
exhaust every reasonable possibility which the circumstances admit and
show that in each, they did all that reasonable care required. 50 In the
absence of sufficient proof in rebuttal, the presumption of fault attaches to a
moving vessel which collides with a fixed object and makes a prima
facie case of fault against the vessel. 51 Logic and experience support this
presumption:
The common sense behind the rule makes the burden a heavy
one. Such accidents simply do not occur in the ordinary course of
things unless the vessel has been mismanaged in some way. It is
nor sufficient for the respondent to produce witnesses who testify
that as soon as the danger became apparent everything possible
was done to avoid an accident. The question remains, How then
did the collision occur? The answer must be either that, in spite
of the testimony of the witnesses, what was done was too little or
too late or, if not, then the vessel was at fault for being in a
position in which an unavoidable collision would occur. 52
The task, therefore, in these cases is to pinpoint who was negligent
the master of the ship, the harbor pilot or both.

A pilot, in maritime law, is a person duly qualified, and licensed, to conduct a

vessel into or out of ports, or in certain waters. In a broad sense, the term
"pilot" includes both (1) those whose duty it is to guide vessels into or out of
ports, or in particular waters and (2) those entrusted with the navigation of
vessels on the high seas. 53However, the term "pilot" is more generally
understood as a person taken on board at a particular place for the purpose
of conducting a ship through a river, road or channel, or from a port. 54
Under English and American authorities, generally speaking, the pilot
supersedes the master for the time being in the command and navigation of
the ship, and his orders must be obeyed in all matters connected with her
navigation. He becomes the master pro hac vice and should give all
directions as to speed, course, stopping and reversing anchoring, towing and
the like. And when a licensed pilot is employed in a place where pilotage is
compulsory, it is his duty to insist on having effective control of the vessel, or
to decline to act as pilot. Under certain systems of foreign law, the pilot does
not take entire charge of the vessel, but is deemed merely the adviser of the
master, who retains command and control of the navigation even in localities
where pilotage is compulsory. 55
It is quite common for states and localities to provide for compulsory
pilotage, and safety laws have been enacted requiring vessels approaching
their ports, with certain exceptions, to take on board pilots duly licensed
under local law. The purpose of these laws is to create a body of seamen
thoroughly acquainted with the harbor, to pilot vessels seeking to enter or
depart, and thus protect life and property from the dangers of navigation. 56
In line with such established doctrines, Chapter II of Customs Administrative
Order No. 15-65 prescribes the rules for compulsory pilotage in the covered
pilotage districts, among which is the Manila Pilotage District,
viz.
PARAGRAPH I. Pilotage for entering a harbor and anchoring
thereat, as well as docking and undocking in any pier or shifting
from one berth to another shall be compulsory, except
Government vessels and vessels of foreign governments entitled
to courtesy, and other vessels engaged solely in river or harbor
work, or in a daily ferry service between ports which shall be
exempt from compulsory pilotage provisions of these
regulations: provided, however, that compulsory pilotage shall
not apply in pilotage districts whose optional pilotage is allowed
under these regulations.

Pursuant thereto, Capt. Gavino was assigned to pilot MV Pavlodar into Berth
4 of the Manila International Port. Upon assuming such office as compulsory
pilot, Capt. Gavino is held to the universally accepted high standards of care
and diligence required of a pilot, whereby he assumes to have skill and
knowledge in respect to navigation in the particular waters over which his
license extends superior to and more to be trusted than that of the
master. 57A pilot 57 should have a thorough knowledge of general and local
regulations and physical conditions affecting the vessel in his charge and the
waters for which he is licensed, such as a particular harbor or river.
He is not held to the highest possible degree of skill and care, but must have
and exercise the ordinary skill and care demanded by the circumstances, and
usually shown by an expert in his profession. Under extraordinary
circumstancesm, a pilot must exercise extraordinary care. 58
In Atlee vs. The Northwesrern Union Packet Company.
spelled out in great detail the duties of a pilot:

59

Mr. Justice Miller

. . . (T)he pilot of a river steamer, like the harbor pilot, is selected

for his personal knowledge of the topography through which he
steers his vessel. In the long course of a thousand miles in one of
these rivers, he must be familiar with the appearance of the
shore on each side of the river as he goes along. Its banks,
towns, its landings, its houses and trees, are all landmarks by
which he steers his vessel. The compass is of little use to him. He
must know where the navigable channel is, in its relation to all
these external objects, especially in the night. He must also be
familiar with all dangers that are permanently located in the
course of the river, as sand-bars, snags, sunken rocks or trees or
abandoned vessels orbarges. All this he must know and
remember and avoid. To do this, he must be constantly informed
of the changes in the current of the river, of the sand-bars newly
made,of logs or snags, or other objects newly presented, against
which his vessel might be injured.
xxx xxx xxx
It may be said that this is exacting a very high order of ability in
a pilot. But when we consider the value of the lives and property
committed to their control, for in this they are absolute masters,
the high compensation they receive, the care which Congress
has taken to secure by rigid and frequent examinations and
renewal of licenses, this very class of skill, we do not think we fix
the standard too high.

Tested thereby, we affirm respondent court's finding that Capt. Gavino failed
to measure up to such strict standard of care and diligence required of pilots
in the performance of their duties. Witness this testimony of Capt. Gavino:
Court: You have testified before that the reason why
the vessel bumped the pier was because the anchor
was not released immediately or as soon as you have
given the order. Do you remember having srated
that?
A Yes, your Honor.
Q And you gave this order to the captain of the
vessel?
A Yes, your Honor.
Q By that testimony, you are leading the Court to
understand that if that anchor was released
immediately at the time you gave the order, the
incident would not have happened. Is that correct?
A Yes, sir, but actually it was only a presumption on
my part because there was a commotion between
the officers who are in charge of the dropping of the
anchor and the captain. I could not understand their
language, it was in Russian, so I presumed the
anchor was not dropped on time.
Q So, you are not sure whether it was really dropped
on time or not?
A I am not sure, your Honor.
xxx xxx xxx
Q You are not even sure what could have caused the
incident. What factor could have caused the
incident?
A Well, in this case now, because either the anchor
was not dropped on time or the anchor did not hold,
that was the cause of the incident, your Honor. 60
It is disconcertingly riddled with too much incertitude and manifests a
seeming indifference for the possibly injurious consequences his commands
as pilot may have. Prudence required that he, as pilot, should have made
sure that his directions were promptly and strictly followed. As correctly
noted by the trial court

Moreover, assuming that he did indeed give the command to

drop the anchor on time, as pilot he should have seen to it that
the order was carried out, and he could have done this in a
number of ways, one of which was to inspect the bow of the
vessel where the anchor mechanism was installed. Of course,
Captain Gavino makes reference to a commotion among the
crew members which supposedly caused the delay in the
execution of the command. This account was reflected in the
pilot's report prepared four hours later, but Capt. Kavankov, while
not admitting whether or not such a commotion occurred,
maintained that the command to drop anchor was followed
"immediately and precisely." Hence, the Court cannot give much
weight or consideration to this portion of Gavino's testimony." 61
An act may be negligent if it is done without the competence that a
reasonable person in the position of the actor would recognize as necessary
to prevent it from creating an unreasonable risk of harm to another. 62 Those
who undertake any work calling for special skills are required not only to
exercise reasonable care in what they do but also possess a standard
minimum of special knowledge and ability. 63
Every man who offers his services to another, and is employed, assumes to
exercise in the employment such skills he possesses, with a reasonable
degree of diligence. In all these employments where peculiar skill is
requisite, if one offers his services he is understood as holding himself out to
the public as possessing the degree of skill commonly possessed by others in
the same employment, and if his pretensions are unfounded he commits a
species of fraud on every man who employs him in reliance on his public
profession. 64
Furthermore, there is an obligation on all persons to take the care which,
under ordinary circumstances of the case, a reasonable and prudent man
would take, and the omission of that care constitutes
negligence. 65Generally, the degree of care required is graduated according
to the danger a person or property attendant upon the activity which the
actor pursues or the instrumentality which he uses. The greater the danger
the greater the degree of care required. What is ordinary under extraordinary
of conditions is dictated by those conditions; extraordinary risk demands
extraordinary care. Similarly, the more imminent the danger, the higher the
degree of care. 66

We give our imprimatur to the bases for the conclusion of the Court of
Appeals that Capt. Gavino was indeed negligent in the performance of his
duties:
xxx xxx xxx
. . . As can be gleaned from the logbook, Gavino ordered the left
anchor and two (2) shackles dropped at 8:30 o'clock in the
morning. He ordered the engines of the vessel stopped at 8:31
o'clock. By then,Gavino must have realized that the anchor did
not hit a hard object and was not clawed so as to reduce the
momentum of the vessel. In point of fact, the vessel continued
travelling towards the pier at the same speed. Gavino failed to
react, At 8:32 o'clock, the two (2) tugboats began to push the
stern part of the vessel from the port side bur the momentum of
the vessel was not contained. Still, Gavino did not react. He did
not even order the other anchor and two (2) more shackles
dropped to arrest the momentum of the vessel. Neither did he
order full-astern. It was only at 8:34 o'clock, or four (4) minutes,
after the anchor was dropped that Gavino reacted. But his
reaction was even (haphazard) because instead of arresting fully
the momentum of the vessel with the help of the tugboats,
Gavino ordered merely "half-astern". It took Gavino another
minute to order a "full-astern". By then, it was too late. The
vessel's momentum could no longer be arrested and, barely a
minute thereafter, the bow of the vessel hit the apron of the pier.
Patently, Gavino miscalculated. He failed to react and undertake
adequate measures to arrest fully the momentum of the vessel
after the anchor failed to claw to the seabed. When he reacted,
the same was even (haphazard). Gavino failed to reckon the bulk
of the vessel, its size and its cargo. He erroneously believed that
only one (1) anchor would suffice and even when the anchor
failed to claw into the seabed or against a hard object in the
seabed, Gavino failed to order the other anchor dropped
immediately. His claim that the anchor was dropped when the
vessel was only 1,000 feet from the pier is but a belated attempt
to extricate himself from the quagmire of his own insouciance
and negligence. In sum, then, Appellants' claim that the incident
was caused by "force majeure" is barren of factual basis.
xxx xxx xxx

The harbor pilots are especially trained for this job. In the
Philippines, one may not be a harbor pilot unless he passed the
required examination and training conducted then by the Bureau
of Custom, under Customs Administrative Order No. 15-65, now
under the Philippine Ports Authority under PPA Administrative
Order 63-85, Paragraph XXXIX of the Customs Administrative
Order No. 15-65 provides that "the pilot shall be held responsible
for the direction of the vessel from the time he assumes control
thereof, until he leaves it anchored free from shoal: Provided,
that his responsibility shall cease at the.moment the master
neglects or refuse(s) to carry out his instructions." The overall
direction regarding the procedure for docking and undocking the
vessel emanates from the harbor pilot. In the present recourse,
Gavino failed to live up to his responsibilities and exercise
reasonable care or that degree of care required by the exigencies
of the occasion. Failure on his part to exercise the degree of care
demanded by the circumstances is negligence (Reese versus
Philadelphia & RR Co. 239 US 363, 60 L ed. 384, 57 Am Jur, 2d
page 418). 67
This affirms the findings of the trial court regarding Capt. Gavino's
negligence:
This discussion should not however, divert the court from the
fact that negligence in manuevering the vessel must be
attributed to Capt. Senen Gavino. He was an experienced pilot
and by this time should have long familiarized himself with the
depth of the port and the distance he could keep between the
vessel and port in order to berth safely. 68
The negligence on the part of Capt. Gavino is evident; but Capt. Kabancov is
no less responsible for the allision. His unconcerned lethargy as master of
the ship in the face of troublous exigence constitutes negligence.
While it is indubitable that in exercising his functions a pilot is in sole
command of the ship 69 and supersedes the master for the time being in the
command and navigation of a ship and that he becomes master pro hac
vice of a vessel piloted by him, 70 there is overwhelming authority to the
effect that the master does not surrender his vessel to the pilot and the pilot
is not the master. The master is still in command of the vessel
notwithstanding the presence of a pilot. There are occasions when the
master may and should interfere and even displace the pilot, as when the
pilot is obviously incompetent or intoxicated and the circumstances may

require the master to displace a compulsory pilot because of incompetency

or physical incapacity. If, however, the master does nor observe that a
compulsory pilot is incompetent or physically incapacitated, the master is
justified in relying on the pilot, but not blindly. 71
The master is not wholly absolved from his duties while a pilot is on board his
vessel, and may advise with or offer suggestions to him. He is still in
command of the vessel, except so far as her navigation is concerned, and
must cause the ordinary work of the vessel to be properly carried on and the
usual precaution taken. Thus, in particular, he is bound to see that there is
sufficient watch on deck, and that the men are attentive to their duties, also
that engines are stopped, towlines cast off, and the anchors clear and ready
to go at the pilot's order. 72
A perusal of Capt. Kabankov's testimony makes it apparent that he was
remiss in the discharge of his duties as master of the ship, leaving the entire
docking procedure up to the pilot, instead of maintaining watchful vigilance
over this risky maneuver:
Q Will you please tell us whether you have the right
to intervene in docking of your ship in the harbor?
A No sir, I have no right to intervene in time of
docking, only in case there is imminent danger to the
vessel and to the pier.
Q Did you ever intervene during the time that your
ship was being docked by Capt. Gavino?
A No sir, I did not intervene at the time when the
pilot was docking my ship.
Q Up to the time it was actually docked at the pier, is
that correct?
A No sir, I did not intervene up to the very moment
when the vessel was docked.
xxx xxx xxx
Atty. Del Rosario (to the witness)
Q Mr. Witness, what happened, if any, or was there
anything unusual that happened during the docking?
A Yes sir, our ship touched ihe pier and the pier was
damaged.
Court (to the witness)

Q When you said touched the pier, are you leading

the court to understand that your ship bumped the
pier?
A I believe that my vessel only touched the pier but
the impact was very weak.
Q Do you know whether the pier was damaged as a
result of that slight or weak impact?
A Yes sir, after the pier was damaged.
xxx xxx xxx
Q Being most concerned with the safety of your
vessel, in the maneuvering of your vessel to the port,
did you observe anything irregular in the
maneuvering by Capt. Gavino at the time he was
trying to cause the vessel to be docked at the pier?
A You mean the action of Capt. Gavino or his
condition?
Court:
Q Not the actuation that conform to the safety
maneuver of the ship to the harbor?
A No sir, it was a usual docking.
Q By that statement of yours, you are leading the
court to understand that there was nothing irregular
in the docking of the ship?
A Yes sir, during the initial period of the docking,
there was nothing unusual that happened.
Q What about in the last portion of the docking of the
ship, was there anything unusual or abnormal that
happened?
A None Your Honor, I believe that Capt. Gavino
thought that the anchor could keep or hold the
vessel.
Q You want us to understand, Mr. Witness, that the
dropping of the anchor of the vessel was nor timely?
A I don't know the depth of this port but I think, if the
anchor was dropped earlier and with more shackles,
there could not have been an incident.

Q So you could not precisely tell the court that the

dropping of the anchor was timery because you are
not well aware of the seabed, is that correct?
A Yes sir, that is right.
xxx xxx xxx
Q Alright, Capt. Kavankov, did you come to know
later whether the anchor held its ground so much so
that the vessel could not travel?
A It is difficult for me to say definitely. I believe that
the anchor did not hold the ship.
Q You mean you don't know whether the anchor
blades stuck to the ground to stop the ship from
further moving?
A Yes sir, it is possible.
Q What is possible?
A I think, the 2 shackles were not enough to hold the
vessel.
Q Did you know that the 2 shackles were dropped?
A Yes sir, I knew that.
Q If you knew that the shackles were not enough to
hold the ship, did you not make any protest to the
pilot?
A No sir, after the incident, that was my assumption.
Q Did you come to know later whether that
presumption is correct?
A I still don't know the ground in the harbor or the
depths.
Q So from the beginning, you were not competent
whether the 2 shackles were also dropped to hold the
ship?
A No sir, at the beginning, I did not doubt it because I
believe Capt. Gavino to be an experienced pilot and
he should be more aware as to the depths of the
harbor and the ground and I was confident in his
actions.
xxx xxx xxx
Solicitor Abad (to the witness)

Q Now, you were standing with the pilot on the

bridge of the vessel before the inicident happened,
were you not?
A Yes sir, all the time, I was standing with the pilot.
Q And so whatever the pilot saw, you could also see
from that point of view?
A That is right.
Q Whatever the piler can read from the panel of the
bridge, you also could read, is that correct?
A What is the meaning of panel?
Q All indications necessary for men on the bridge to
be informed of the movements of the ship?
A That is right.
Q And whatever sound the captain . . . Capt. Gavino
would hear from the bridge, you could also hear?
A That is right.
Q Now, you said that when the command to lower
the anchor was given, it was obeyed, is that right?
A This command was executed by the third mate and
boatswain.
Court (to the witness)
Q Mr. Witness, earlier in today's hearing, you said
that you did not intervene with the duties of the pilot
and that, in your opinion, you can only intervene if
the ship is placed in imminent danger, is that
correct?
A That is right, I did say that.
Q In your observation before the incident actually
happened, did you observe whether or not the ship,
before the actual incident, the ship was placed in
imminent danger?
A No sir, I did not observe.
Q By that answer, are you leading the court to
understand that because you did not intervene and
because you believed that it was your duty to
intervene when the vessel is placed in imminent
danger to which you did not observe any imminent

danger thereof, you have not intervened in any

manner to the command of the pilot?
A That is right, sir.
xxx xxx xxx
Q Assuminp that you disagreed with the pilot
regarding the step being taken by the pilot in
maneuvering the vessel, whose command will
prevail, in case of imminent danger to the vessel?
A I did nor consider the situation as having an
imminent danger. I believed that the vessel will dock
alongside the pier.
Q You want us to understand that you did not see an
imminent danger to your ship, is that what you
mean?
A Yes sir, up to the very last moment, I believed that
there was no imminent danger.
Q Because of that, did you ever intervene in the
command of the pilot?
A Yes sir, I did not intervene because I believed that
the command of the pilot to be correct.
Solicitor Abad (to the witness)
Q As a captain of M/V Pavlodar, you consider docking
maneuvers a serious matter, is it not?
A Yes sir, that is right.
Q Since it affects not only the safety of the port or
pier, but also the safety of the vessel and the cargo,
is it not?
A That is right.
Q So that, I assume that you were watching Capt.
Gavino very closely at the time he was making his
commands?
A I was close to him, I was hearing his command and
being executed.
Q And that you were also alert for any possible
mistakes he might commit in the maneuvering of the
vessel?
A Yes sir, that is right.

Q But at no time during the maneuver did you issue

order contrary to the orders Capt. Gavino made?
A No sir.
Q So that you were in full accord with all of Capt.
Gavino's orders?
A Yes sir.
Q Because, otherwise, you would have issued order
that would supersede his own order?
A In that case, I should t,ke him away from his
command or remove the command from him.
Court (to the witness)
Q You were in full accord with the steps being taken
by Capt. Gavino because you relied on his
knowledge, on his familiarity of the seabed and
shoals and other surroundings or conditions under
the sea, is that correct?
A Yes sir, that is right.
xxx xxx xxx
Solicitor Abad (to the witness)
Q And so after the anchors were ordered dropped
and they did not take hold of the seabed, you were
alerted that there was danger already on hand?
A No sir, there was no imminent danger to the
vessel.
Q Do you mean to tell us that even if the anchor was
supposed to take hold of the bottom and it did not,
there was no danger to the ship?
A Yes sir, because the anchor dragged on the ground
later.
Q And after a few moments when the anchor should
have taken hold the seabed bur not done (sic), as
you expected, you already were alerted that there
was danger to the ship, is that correct?
A Yes sir, I was alerted but there was no danger.
Q And you were alerted that somebody was wrong?
A Yes sir, I was alerted.

Q And this alert vou assumed was the ordinary

alertness that you have for normal docking?
A Yes sir, I mean that it was usual condition of any
man in time of docking to be alert.
Q And that is the same alertness when the anchor
did not hold onto the ground, is that correct?
A Yes sir, me and Capt. Gavino (thought) that the
anchor will hold the ground.
Q Since, as you said that you agreed all the while
with the orders of Capt. Gavino, you also therefore
agreed with him in his failure to take necessary
precaution against the eventuality that the anchor
will not hold as expected?
Atty. Del Rosario:
May I ask that the question . . .
Solicitor Abad:
Never mind, I will reform the question.
xxx xxx xxx
Solicitor Abad (to the witness)
Q Is it not a fact that the vessel bumped the pier?
A That is right, it bumped the pier.
Q For the main reason that the anchor of the vessel
did not hold the ground as expected?
A Yes sir, that is my opinion.

73

Further, on redirect examination, Capt. Kabankov fortified his apathetic

assessment of the situation:
Q Now, after the anchor was dropped, was there any
point in time that you felt that the vessel was in
imminent danger.
A No, at that time, the vessel was not in imminent,
danger, sir. 74
This cavalier appraisal of the event by Capt. Kabankov is disturbingly
antipodal to Capt. Gavino's anxious assessment of the situation:
Q When a pilot is on board a vessel, it is the piler's
command which should be followed at that moment
until the vessel is, or goes to port or reaches port?

A Yes, your Honor, but it does not take away from the
Captain his prerogative to countermand the pilot.
Q In what way?
A In any case, which he thinks the pilot is not
maneuvering correctly, the Captain always has the
prerogative to countermand the pilot's order.
Q But insofar as competence, efficiency and
functional knowledee of the seabed which are vital or
decisive in the safety (sic) bringing of a vessel to the
port, he is not competent?
A Yes, your Honor. That is why they hire a pilot in an
advisory capacity, but still, the safety of the vessel
rest(s) upon the Captain, the Master of the vessel.
Q In this case, there was not a disagreement
between you and the Captain of the vessel in the
bringing of the vessel to port?
A No, your Honor.
Court:
May proceed.
Atty. Catris:
In fact, the Master of the vessel testified here that he
was all along in conformity with the orders you, gave
to him, and, as matter of fact, as he said, he obeyed
all your orders. Can you tell, if in the course of giving
such normal orders for the saf(e) docking of the MV
Pavlodar, do you remember of any instance that the
Master of the vessel did not obey your command for
the safety docking of the MV Pavlodar?
Atty. del Rosario:
Already answered, he already said yes sir.
Court:
Yes, he has just answered yes sir to the Court that
there was no disagreement insofar as the bringing of
the vessel safely to the port.
Atty. Catris:
But in this instance of docking of the MV Pavlodar, do
you remember of a time during the course of the

docking that the MV Pavlodar was in imminent

danger of bumping the pier?
A When we were about more than one thousand
meters from the pier, I think, the anchor was not
holding, so I immediately ordered to push the bow at
a fourth quarter, at the back of the vessel in order to
swing the bow away from the pier and at the same
time, I ordered for a full astern of the engine. 75
These conflicting reactions can only imply, at the very least, unmindful
disregard or, worse, neglectful relinquishment of duty by the
shipmaster, tantamount to negligence.
The findings of the trial court on this aspect is noteworthy:
For, while the pilot Gavino may indeed have been charged with
the task of docking the vessel in the berthing space, it is
undisputed that the master of the vessel had the corresponding
duty to countermand any of the orders made by the pilot, and
even maneuver the vessel himself, in case of imminent danger to
the vessel and the port.
In fact, in his testimony, Capt. Kavankov admitted that all
throughour the man(eu)vering procedures he did not notice
anything was going wrong, and even observed that the order
given to drop the anchor was done at the proper time. He even
ventured the opinion that the accident occurred because the
anchor failed to take hold but that this did not alarm him
because.there was still time to drop a second anchor.
Under normal circumstances, the abovementioned facts would
have caused the master of a vessel to take charge of the
situation and see to the man(eu)vering of the vessel himself.
Instead, Capt. Kavankov chose to rely blindly upon his pilot, who
by this time was proven ill-equipped to cope with the situation.
xxx xxx xxx
It is apparent that Gavino was negligent but Far Eastern's
employee Capt. Kavankov was no lesss responsible for as master
of the vessel he stood by the pilot during the man(eu)vering
procedures and was privy to every move the latter made, as well
as the vessel's response to each of the commands. His choice to
rely blindly upon the pilot's skills, to the point that despite being
appraised of a notice of alert he continued to relinquish control of
the vessel to Gavino, shows indubitably that he was not

performing his duties with the diligence required of him and

therefore may be charged with negligence along with defend;int
Gavino. 76
As correctly affirmed by the Court of Appeals
We are in full accord with the findings and disquisitions of the
Court a quo.
In the present recourse, Captain Viktor Kavankov had been a
mariner for thirty-two years before the incident. When Gavino
was (in) the command of the vessel, Kavankov was beside
Gavino, relaying the commands or orders of Gavino to the
crewmembers-officers of the vessel concerned. He was thus fully
aware of the docking maneuvers and procedure Gavino
undertook to dock the vessel. Irrefragably, Kavankov was fully
aware of the bulk and size of the vessel and its cargo as well as
the weight of the vessel. Kavankov categorically admitted that,
when the anchor and two (2) shackles were dropped to the sea
floor, the claws of the anchor did not hitch on to any hard object
in the seabed. The momentum of the vessel was not arrested.
The use of the two (2) tugboats was insufficient. The momentum
of the vessel, although a little bit arrested, continued (sic) the
vessel going straightforward with its bow towards the port
(Exhibit "A-1 ). There was thus a need for the vessel to move
"full-astern" and to drop the other anchor with another shackle or
two (2), for the vessel to avoid hitting the pier. Kavankov refused
to act even as Gavino failed to act. Even as Gavino gave mere
"half-astern" order, Kavankov supinely stood by. The vessel was
already about twenty (20) meters away from the pier when
Gavino gave the "full-astern" order. Even then, Kavankov did
nothing to prevent the vessel from hitting the pier simply
because he relied on the competence and plan of Gavino. While
the "full-astern'' maneuver momentarily arrested the momentum
of the vessel, it was, by then, too late. All along, Kavankov stood
supinely beside Gavino, doing nothing but relay the commands
of Gavino. Inscrutably, then, Kavankov was negligent.
xxx xxx xxx
The stark incompetence of Kavankov is competent evidence to
prove the unseaworthiness of the vessel. It has been held that
the incompetence of the navigator, the master of the vessel or
its crew makes the vessel unseaworthy (Tug Ocean Prince versus

United States of America, 584 F. 2nd, page 1151). Hence, the

Appellant FESC is likewise liable for the damage sustained by the
Appellee.77
We find strong and well-reasoned support in time-tested American maritime
jurisprudence, on which much of our laws and jurisprudence on the matter
are based, for the conclusions of the Court of Appeals adjudging both Capt.
Gavino and Capt. Kabankov negligent.
As early as 1869, the U.S. Supreme Court declared, through Mr. Justice
Swayne, in The Steamship China vs. Walsh, 78 that it is the duty of the master
to interfere in cases of the pilot's intoxication or manifest incapacity, in cases
of danger which he does not foresee, and in all cases of great necessity. The
master has the same power to displace the pilot that he has to remove any
subordinate officer of the vessel, at his discretion.
In 1895, the U.S. Supreme Court, this time through Mr. Justice Brown,
emphatically ruled that:
Nor are rye satisfied with the conduct of the master in leaving
the pilot in sole charge of the vessel. While the pilot doubtless
supersedes the master for the time being in the command and
navigation of the ship, and his orders must be obeyed in all
matters connected with her navigation, the master is not wholly
absolved from his duties while the pilot is on board, and may
advise with him, and even displace him in case he is intoxicated
or manifestly incompetent. He is still in command of the vessel,
except so far as her navigation is concerned, and bound to see
that there is a sufficient watch on deck, and that the men are
attentive to their duties.
. . . (N)orwithstanding the pilot has charge, it is the duty of the
master to prevent accident, and not to abandon the vessel
entirely to the pilot; but that there are certain duties he has to
discharge (notwithstanding there is a pilot on board) for the
benefit of the owners. . . . that in well conducted ships the
master does not regard the presence of a duly licensed pilot in
compulsory pilot waters as freeing him from every, obligation to
attend to the safety of the vessel; but that, while the master sees
that his officers and crew duly attend to the pilot's orders, he
himself is bound to keep a vigilant eye on the navigation of the
vessel, and, when exceptional circumstances exist, not only to
urge upon the pilot to use every precaution, but to insist upon
such being taken. 79 (Italics for emphasis.)

In Jure vs. United Fruit Co., 80 which, like the present petitions, involved
compulsory pilotage, with a similar scenario where at and prior to the time of
injury, the vessel was in the charge of a pilot with the master on the bridge
of the vessel beside said pilot, the court therein ruled:
The authority of the master of a vessel is not in complete
abeyance while a pilot, who is required by law to be accepted, is
in discharge of his functions. . . . It is the duty of the master to
interfere in cases of the pilot's intoxication or manifest
incapacity, in cases of danger which he does not foresee, and in
all cases of great necessity. The master has the same power to
displace the pilot that he has to remove any subordinate officer
of the vessel. He may exercise it, or not, according to his
discretion. There was evidence to support findings that piaintiff's
injury was due to the negligent operation of the Atenas, and that
the master of that vessel was negligent in failing to take action
to avoid endangering a vessel situated as the City of Canton was
and persons or property thereon.
A phase of the evidence furnished support for the inferences . . .
that he negligently failed to suggest to the pilot the danger
which was disclosed, and means of avoiding such danger; and
that the master's negligence in failing to give timelt admonition
to the pilot proximately contributed to the injury complained of.
We are of opinion that the evidence mentioned tended to prove
conduct of the pilot, known to the master, giving rise to a case of
danger or great necessity, calling for the intervention of the
master. A master of a vessel is not without fault in acquiescing in
canduct of a pilot which involves apparent and avoidable danger,
whether such danger is to the vessel upon which the pilot is, or
to another vessel, or persons or property thereon or on shore.
(Emphasis ours.)
Still in another case involving a nearly identical setting, the captain of a
vessel alongside the compulsory pilot was deemed to be negligent, since, in
the words of the court, "he was in a position to exercise his superior authority
if he had deemed the speed excessive on the occasion in question. I think it
was clearly negligent of him not to have recognized the danger to any craft
moored at Gravell Dock and that he should have directed the pilot to reduce
his speed as required by the local governmental regulations. His failure
amounted to negligence and renders the respondent liable." 81 (Emphasis
supplied.) Though a compulsory pilot might be regarded as an independent

contractor, he is at all times subject to the ultimate control of the ship's

master. 82
In sum, where a compulsory pilot is in charge of a ship, the master being
required to permit him to navigate it, if the master observes that the pilot is
incompetent or physically incapable, then it is the dury of the master to
refuse to permit the pilot to act. But if no such reasons are present, then the
master is justified in relying upon the pilot, but not blindly. Under the
circumstances of this case, if a situation arose where the master, exercising
that reasonable vigilance which the master of a ship should exercise,
observed, or should have observed, that the pilot was so navigating the
vessel that she was going, or was likely to go, into danger, and there was in
the exercise of reasonable care and vigilance an opportunity for the master
to intervene so as to save the ship from danger, the master should have
acted accordingly. 83 The master of a vessel must exercise a degree of
vigilance commensurate with the circumstances. 84
Inasmuch as the matter of negligence is a question of fact, 85 we defer to the
findings of the trial court, especially as this is affirmed by the Court of
Appeals. 86 But even beyond that, our own evaluation is that Capt.
Kabankov's shared liability is due mainly to the fact that he failed to act
when the perilous situation should have spurred him into quick and decisive
action as master of the ship. In the face of imminent or actual danger, he did
not have to wait for the happenstance to occur before countermanding or
overruling the pilot. By his own admission, Capt. Kabankov concurred with
Capt. Gavino's decisions, and this is precisely the reason why he decided not
to countermand any of the latter's orders. Inasmuch as both lower courts
found Capt. Gavino negligent, by expressing full agreement therewith Capt.
Kabankov was just as negligent as Capt. Gavino.
In general, a pilot is personally liable for damages caused by his own
negligence or default to the owners of the vessel, and to third parties for
damages sustained in a collision. Such negligence of the pilot in the
performance of duty constitutes a maritime tort. 87 At common law, a
shipowner is not liable for injuries inflicted exclusively by the negligence of a
pilot accepted by a vessel compulsorily. 88 The exemption from liability for
such negligence shall apply if the pilot is actually in charge and solely in
fault. Since, a pilot is responsible only for his own personal negligence, he
cannot be held accountable for damages proximately caused by the default
of others, 89 or, if there be anything which concurred with the fault of the
pilot in producing the accident, the vessel master and owners are liable.

Since the colliding vessel is prima facie responsible, the burden of proof is
upon the party claiming benefit of the exemption from liability. It must be
shown affirmatively that the pilot was at fault, and that there was no fault on
the part of the officers or crew, which might have been conducive to the
damage. The fact that the law compelled the master to take the pilot does
not exonerate the vessel from liability. The parties who suffer are entitled to
have their remedy against the vessel that occasioned the damage, and are
not under necessity to look to the pilot from whom redress is not always had
for compensation. The owners of the vessel are responsible to the injured
party for the acts of the pilot, and they must be left to recover the amount as
well as they can against him. It cannot be maintained that the circumstance
of having a pilot on board, and acting in conformity to his directions operate
as a discharge of responsibility of the owners. 90 Except insofar as their
liability is limited or exempted by statute, the vessel or her owner are liable
for all damages caused by the negligence or other wrongs of the owners or
those in charge of the vessel. Where the pilot of a vessel is not a compulsory
one in the sense that the owner or master of the vessel are bound to accept
him, but is employed voluntarily, the owners of the vessel are, all the more,
liable for his negligent act. 91
In the United States, the owners of a vessel are not personally liable for the
negligent acts of a compulsory pilot, but by admiralty law, the fault or
negligence of a compulsory pilot is imputable to the vessel and it may be
held liable therefor in rem. Where, however, by the provisions of the statute
the pilot is compulsory only in the sense that his fee must be paid, and is not
in compulsory charge of the vessel, there is no exemption from liability. Even
though the pilot is compulsory, if his negligence was not the sole cause of
the injury, but the negligence of the master or crew contributed thereto, the
owners are liable. 92 But the liability of the ship in rem does not release the
pilot from the consequences of his own negligence. 93 The rationale for this
rule is that the master is not entirely absolved of responsibility with respect
to navigation when a compulsory pilot is in charge. 94
By way of validation and in light of the aforecited guidepost rulings in
American maritime cases, we declare that our rulings during the early years
of this century in City of Manila vs. Gambe, 95 China Navigation Co., Ltd. vs.
Vidal,96 and Yap Tica & Co. vs. Anderson, et al. 97 have withstood the
proverbial test of time and remain good and relevant case law to this day.
City of Manila stands for the doctrine that the pilot who was in command and
complete control of a vessel, and not the owners, must be held responsible
for an accident which was solely the result of the mistake of the pilot in not

giving proper orders, and which did not result from the failure of the owners
to equip the vessel with the most modern and improved machinery. In China
Navigation Co., the pilot deviated from the ordinary and safe course, without
heeding the warnings of the ship captain. It was this careless deviation that
caused the vessel to collide with a pinnacle rock which, though uncharted,
was known to pilots and local navigators. Obviously, the captain was
blameless. It was the negligence of the pilot alone which was the proximate
cause of the collision. The Court could not but then rule that
The pilot in the case at bar having deviated from the usual and
ordinary course followed by navigators in passing through the
strait in question, without a substantial reason, was guilty of
negligence, and that negligence having been the proximate
cause of the damages, he is liable for such damages as usually
and naturally flow therefrom. . . .
. . . (T)he defendant should have known of the existence and
location of the rock upon which the vessel struck while under his
control and management. . . . .
Consistent with the pronouncements in these two earlier cases, but on a
slightly different tack, the Court in Yap Tico & Co. exonerated the pilot from
liability for the accident where the orders of the pilot in the handling of the
ship were disregarded by the officers and crew of the ship. According to the
Court, a pilot is ". . . responsible for a full knowledge of the channel and the
navigation only so far as he can accomplish it through the officers and crew
of the ship, and I don't see chat he can be held responsible for damage when
the evidence shows, as it does in this case, that the officers and crew of the
ship failed to obey his orders." Nonetheless, it is possible for a compulsory
pilot and the master of the vessel to be concurrently negligent and thus
share the blame for the resulting damage as joint tortfeasors, 98 but only
under the circumstances obtaining in and demonstrated by the instant
petitions.
It may be said, as a general rule, that negligence in order to render a person
liable need not be the sole cause of an injury. It is sufficient that his
negligence, concurring with one or more efficient causes other than
piaintiff's, is the proximate cause of the injury. Accordingly, where several
causes combine to produce injuries, a person is not relieved from liability
because he is responsible for only one of them, it being sufficient that the
negligence of the person charged with injury is an efficient cause without
which the injury would not have resulted to as great an extent, and that such
cause is not attributable to the person injured. It is no defense to one of the

concurrent tortfeasors that the injury would not have resulted from his
negligence alone, without the negligence or wrongful acts of the other
concurrent rortfeasor. 99 Where several causes producing an injury are
concurrent and each is an efficient cause without which the injury would not
have happened, the injury may be attributed to all or any of the causes and
recovery may be had against any or all of the responsible persons although
under the circumstances of the case, it may appear that one of them was
more culpable, and that the duty owed by them to the injured person was
not the same. No actor's negligence ceases to be a proximate cause merely
because it does not exceed the negligence of other actors. Each wrongdoer
is responsible for the entire result and is liable as though his acts were the
sole cause of the injury. 100
There is no contribution between joint tortfeasors whose liability is solidary
since both of them are liable for the total damage. Where the concurrent or
successive negligent acts or omissions of two or more persons, although
acting independently, are in combination the direct and proximate cause of a
single injury to a third person, it is impossible to determine in what
proportion each contributed to the injury and either of them is responsible
for the whole injury. Where their concurring negligence resulted in injury or
damage to a third party, they become joint tortfeasors and are solidarily
liable for the resulting damage under Article 2194 101 of the Civil Code. 102
As for the amount of damages awarded by the trial court, we find the same
to be reasonable. The testimony of Mr. Pascual Barral, witness for PPA, on
cross and redirect examination, appears to be grounded on practical
considerations:
Q So that the cost of the two additional piles as well
as the (two) square meters is already included in this
P1,300,999.77.
A Yes sir, everything. It is (the) final cost already.
Q For the eight piles.
A Including the reduced areas and other reductions.
Q (A)nd the two square meters.
A Yes sir.
Q In other words, this P1,300,999.77 does not
represent only for the six piles that was damaged as
well as the corresponding two piles.
A The area was corresponding, was increased by
almost two in the actual payment. That was why the

contract was decreased, the real amount was

P1,124,627.40 and the final one is P1,300,999.77.
Q Yes, but that P1,300,999.77 included the additional
two new posts.
A It was increased.
Q Why was it increased?
A The original was 48 and the actual was 46.
Q Now, the damage was somewhere in 1980. It took
place in 1980 and you started the repair and
reconstruction in 1982, that took almost two years?
A Yes sir.
Q May it not happen that by natural factors, the
existing damage in 1980 was aggravated for the 2
year period that the damage portion was not
repaired?
A I don't think so because that area was at once
marked and no vehicles can park, it was closed.
Q Even if or even natural elements cannot affect the
damage?
A Cannot, sir.
xxx xxx xxx
Q You said in the cross-examination that there were
six piles damaged by the accident, but that in the
reconstruction of the pier, PPA drove and constructed
8 piles. Will you explain to us why there was change
in the number of piles from the original number?
A In piers where the piles are withdrawn or pulled
out, you cannot re-drive or drive piles at the same
point. You have to redesign the driving of the piles.
We cannot drive the piles at the same point where
the piles are broken or damaged or pulled out. We
have to redesign, and you will note that in the
reconstruction, we redesigned such that it
necessitated 8 plies.
Q Why not, why could you not drive the same
number of piles and on the same spot?

A The original location was already disturbed. We

cannot get required bearing capacity. The area is
already disturbed.
Q Nonetheless, if you drove the original number of
piles, six, on different places, would not that have
sustained the same load?
A It will not suffice, sir.

103

We quote the findings of the lower court with approval.

With regards to the amount of damages that is to be awarded to
plaintiff, the Court finds that the amount of P1,053,300.00 is
justified. Firstly, the doctrine of res ipsa loquitur best expounded
upon in the landmark case of Republic vs. Luzon Stevedoring
Corp. (21 SCRA 279) establishes the presumption that in the
ordinary course of events the ramming of the dock would not
have occurred if proper care was used.
Secondly, the various estimates and plans justify the cost of the
port construction price. The new structure constructed not only
replaced the damaged one but was built of stronger materials to
forestall the possibility of any similar accidents in the future.
The Court inevitably finds that the plaintiff is entitled to an award
of P1,053,300.00 which represents actual damages caused by
the damage to Berth 4 of the Manila International Port. Codefendants Far Eastern Shipping, Capt. Senen Gavino and Manila
Pilots Association are solidariiy liable to pay this amount to
plaintiff. 104
The Solicitor General rightly commented that the adjudicated amount
of damages represents the proportional cost of repair and rehabilitation
of the damaged section of the pier. 105
Except insofar as their liability is limited or exempted by statute, the vessel
or her owners are liable for all damages caused by the negligence or other
wrongs of the owners or those in charge of the vessel. As a general rule, the
owners or those in possession and control of a vessel and the vessel are
liable for all natural and proximate damages caused to persons or property
by reason of her negligent management or navigation. 106
FESC's imputation of PPA's failure to provide a safe and reliable berthing
place is obtuse, not only because it appears to be a mere afterthought, being
tardily raised only in this petition, but also because there is no allegation or
evidence on record about Berth No. 4 being unsafe and unreliable, although
perhaps it is a modest pier by international standards. There was, therefore,

no error on the part of the Court of Appeals in dismissing FESC's

counterclaim.
II. G.R. No. 130150
This consolidated case treats on whether the Court of Appeals erred in
holding MPA jointly and solidarily liable with its member pilot. Capt. Gavino,
in the absence of employer-employee relationship and in applying Customs
Administrative Order No. 15-65, as basis for the adjudged solidary liability of
MPA and Capt. Gavino.
The pertinent provisions in Chapter I of Customs Administrative Order No. 1565 are:
PAR. XXVII. In all pilotage districts where pilotage is
compulsory, there shall be created and maintained by the pilots
or pilots' association, in the manner hereinafter prescribed, a
reserve fund equal to P1,000.00 for each pilot thereof for the
purpose of paying claims for damages to vessels or property
caused through acts or omissions of its members while rendered
in compulsory pilotage service. In Manila, the reserve fund shall
be P2,000.00 for each pilot.
PAR. XXVIII. A pilots' association shall not be liable under these
regulations for damage to any vessel, or other property, resulting
from acts of a member of an association in the actual
performance of his duty for a greater amount than seventy-five
per centum (75%) of its prescribed reserve fund; it being
understood that if the association is held liable for an amount
greater than the amount above-stated, the excess shall be paid
by the personal funds of the member concerned.
PAR. XXXI. If a payment is made from the reserve fund of an
association on account of damages caused by a member thereof,
and he shall have been found at fault, such member shall
reimburse the association in the amount so paid as soon as
practicable; and for this purpose, not less than twenty-five per
centum of his dividends shall be retained each month until the
full amount has been returned to the reserve fund.
PAR. XXXIV. Nothing in these regulations shall relieve any
pilots' association or members thereof, individually or
collectively, from civil responsibility for damages to life or
property resulting from the acts of members in the performance
of their duties.

Correlatively, the relevant provisions of PPA Administrative Order No. 03-85,

which timery amended this applicable maritime regulation, state:
Art. IV
Sec. 17. Pilots' Association The Pilots in a Pilotage District shall
organize themselves into a Pilots' Association or firm, the
members of which shall promulgate their own By-Laws not in
conflict with the rules and regulations promulgated by the
Authority. These By-Laws shall be submitted not later than one
(1) month after the organization of the Pilots' Association for
approval by the General Manager of the Authority. Subsequent
amendments thereto shall likewise be submitted for approval.
Sec. 25. Indemnity Insurance and Reserve Fund
a) Each Pilots' Association shall
collectively insure its membership at the
rate of P50,000.00 each member to
cover in whole or in part any liability
arising from any accident resulting in
damage to vessel(s), port facilities and
other properties and/or injury to persons
or death which any member may have
caused in the course of his performance
of pilotage duties. . . . .
b) The Pilotage Association shall likewise
set up and maintain a reserve fund which
shall answer for any part of the liability
referred to in the immediately preceding
paragraph which is left unsatisfied by the
insurance proceeds, in the following
manner:
1) Each pilot in the
Association shall contribute
from his own account an
amount of P4,000.00
(P6,000.00 in the Manila
Pilotage District) to the
reserve fund. This fund shall
not be considered part of the
capital of the Association nor

charged as an expense
thereof.
2) Seventy-five percent (75
%) of the reserve fund shall
be set aside for use in the
payment of damages referred
to above incurred in the
actual performance of pilots'
duties and the excess shall
be paid from the personal
funds of the member
concerned.
xxx xxx xxx
5) If payment is made from
the reserve fund of an
Association on account of
damage caused by a member
thereof who is found at fault,
he shall reimburse the
Association in the amount so
paid as soon as practicable;
and for this purpose, not less
than twenty-five percentum
(25 %) of his dividend shall
be retained each month until
the full amount has been
returned to the reserve fund.
Thereafter, the pilot involved
shall be entitled to his full
dividend.
6) When the reimbursement
has been completed as
prescribed in the preceding
paragraph, the ten
percentum (10%) and the
interest withheld from the
shares of the other pilots in
accordance with paragraph

(4) hereof shall be returned

to them.
c) Liability of Pilots' Association
Nothing in these regulations shall relieve
any Pilots' Association or members
thereof, individually or collectively, from
any civil, administrative and/or criminal
responsibility for damages to life or
property resulting from the individual
acts of its members as well as those of
the Association's employees and crew in
the performance of their duties.
The Court of Appeals, while affirming the trial court's finding of solidary
liability on the part of FESC, MPA and Capt. Gavino, correctly based MPA' s
liability not on the concept of employer-employee relationship between Capt.
Gavino and itself, but on the provisions of Customs Administrative Order No.
15-65:
The Appellant MPA avers that, contrary to the findings and
disquisitions of the Court a quo, the Appellant Gavino was not
and has never been an employee of the MPA but was only a
member thereof. The Court a quo, it is noteworthy, did not state
the factual basis on which it anchored its finding that Gavino was
the employee of MPA. We are in accord with MPA's pose. Case
law teaches Us that, for an employer-employee relationship to
exist, the confluence of the following elements must be
established: (1) selection and engagement of employees; (2) the
payment of wages; (3) the power of dismissal; (4) the employer's
power to control the employees with respect to the means and
method by which the work is to be performed (Ruga versus
NLRC, 181 SCRA 266).
xxx xxx xxx
The liability of MPA for damages is not anchored on Article 2180
of the New Civil Code as erroneously found and declared by the
Court a quo but under the provisions of Customs Administrative
Order No. 15-65, supra, in tandem with the by-laws of the
MPA. 107
There being no employer-employee relationship, clearly Article 2180 108 of
the Civil Code is inapplicable since there is no vicarious liability of an
employer to speak of. It is so stated in American law, as follows:

The well established rule is that pilot associations are immune to

vicarious liability for the tort of their members. They are not the
employer of their members and exercise no control over them
once they take the helm of the vessel. They are also not
partnerships because the members do not function as agents for
the association or for each other. Pilots' associations are also not
liable for negligently assuring the competence of their members
because as professional associations they made no guarantee of
the professional conduct of their members to the general
public. 109
Where under local statutes and regulations, pilot associations lack the
necessary legal incidents of responsibility, they have been held not liable for
damages caused by the default of a member pilot. 110 Whether or not the
members of a pilots' association are in legal effect a copartnership depends
wholly on the powers and duties of the members in relation to one another
under the provisions of the governing statutes and regulations. The relation
of a pilot to his association is not that of a servant to the master, but of an
associate assisting and participating in a common purpose. Ultimately, the
rights and liabilities between a pilots' association and an individual member
depend largely upon the constitution, articles or by-laws of the association,
subject to appropriate government regulations. 111
No reliance can be placed by MPA on the cited American rulings as to
immunity from liability of a pilots' association in ljght of existing positive
regulation under Philippine law. The Court of Appeals properly applied the
clear and unequivocal provisions of Customs Administrative Order No. 15-65.
In doing so, it was just being consistent with its finding of the non-existence
of employer-employee relationship between MPA and Capt. Gavino which
precludes the application of Article 2180 of the Civil Code.
True. Customs Administrative Order No. 15-65 does not categorically
characterize or label MPA's liability as solidary in nature. Nevertheless, a
careful reading and proper analysis of the correlated provisions lead to the
conclusion that MPA is solidarily liable for the negligence of its member
pilots, without prejudice to subsequent reimbursement from the pilot at fault.
Art. 1207 of the Civil Code provides that there is solidary liability only when
the obligation expressly so states, or when the law or the nature of the
obligation requires solidarity. Plainly, Customs Administrative Order No. 1565, which as an implementing rule has the force and effect of law, can validly
provide for solidary liability.We note the Solicitor General's comment hereon,
to wit:

. . . Customs Administrative Order No. 15-65 may be a mere rule

and regulation issued by an administrative agency pursuant to a
delegated authority to fix "the details" in the execution or
enforcement of a policy set out in the law itself. Nonetheless,
said administrative order, which adds to the procedural or
enforcing provisions of substantive law, is legally binding and
receives the same statutory force upon going into effect. In that
sense, it has equal, not lower, statutory force and effect as a
regular statute passed by the legislature. 112
MPA's prayer for modification of the appellate court's decision under review
by exculpating petitioner MPA "from liability beyond seventy-five percent (75
%) of Reserve Fund" is unnecessary because the liability of MPA under Par.
XXVIII of Customs Administrative Order No. 15-65 is in fact limited to
seventy-five percent (75 %) of its prescribed reserve fund, any amount of
liability beyond that being for the personal account of the erring pilot and
subject to reimbursement in case of a finding of fault by the member
concerned. This is clarified by the Solicitor General:
Moreover, contrary to petitioner's pretensions, the provisions of
Customs Administrative Order No. 15-65 do not limit the liability
of petitioner as a pilots' association to an absurdly small amount
of seventy-five per centum (75 %) of the member pilots'
contribution of P2,000.00 to the reserve fund. The law speaks of
the entire reserve fund required to be maintained by the pilots'
association to answer (for) whatever liability arising from the
tortious act of its members. And even if the association is held
liable for an amount greater than the reserve fund, the
association may not resist the liability by claiming to be liable
only up to seventy-five per centum (75 %) of the reserve fund
because in such instance it has the right to be reimbursed by the
offending member pilot for the excess. 113
WHEREFORE, in view of all of the foregoing, the consolidated petitions for
review are DENIED and the assailed decision of the Court of Appeals is
AFFIRMED in toto.
Counsel for FESC, the law firm of Del Rosario and Del Rosario, specifically its
associate, Atty. Herbert A. Tria, is REPRIMANDED and WARNED that a
repetition of the same or similar acts of heedless disregard of its
undertakings under the Rules shall be dealt with more severely.
The original members of the legal team of the Office of the Solicitor General
assigned to this case, namely, Assistant Solicitor General Roman G. Del

Rosario and Solicitor Luis F. Simon, are ADMONISHED and WARNED that a
repetition of the same or similar acts of unduly delaying proceedings due to
delayed filing of required pleadings shall also be dealt with more stringently.
The Solicitor Genral is DIRECTED to look into the circumstances of this case
and to adopt provident measures to avoid a repetition of this incident and
which would ensure prompt compliance with orders of this Court regarding
the timely filing of requisite pleadings, in the interest of just, speedy and
orderly administration of justice.
Let copies of this decision be spread upon the personal records of the
lawyers named herein in the Office of the Bar Confidant.
SO ORDERED.

VICARIOUS LIABILITY OF PARENTS AND GUARDIANS

[G.R. No. 70890. September 18, 1992.]

CRESENCIO LIBI * and AMELIA YAP LIBI, Petitioners, v. HON.
INTERMEDIATE APPELLATE COURT, FELIPE GOTIONG and SHIRLEY
GOTIONG, Respondents.
Alex Y. Tan, for Petitioners.
Mario D. Ortiz and Danilo V. Ortiz for Private Respondents.
SYLLABUS
1. CIVIL LAW; QUASI DELICT; LIABILITY OF PARENTS FOR CIVIL LIABILITY
ARISING FROM CRIMINAL OFFENSES COMMITTED BY THEIR MINOR CHILDREN;
RULE. The parents are and should be held primarily liable for the civil
liability arising from criminal offenses committed by their minor children
under their legal authority or control, or who live in their company, unless it
is proven that the former acted with the diligence of a good father of a family
to prevent such damages. That primary liability is premised on the provisions
of Article 101 of the Revised Penal Code with respect to damages ex delicto
caused by their children 9 years of age or under, or over 9 but under 15
years of age who acted without discernment; and, with regard to their
children over 9 but under 15 years of age who acted with discernment, or 15

years or over but under 21 years of age, such primary liability shall be
imposed pursuant to Article 2180 of the Civil Code. Under said Article 2180,
the enforcement of such liability shall be effected against the father and, in
case of his death or incapacity, the mother. This was amplified by the Child
and Youth Welfare Code which provides that the same shall devolve upon the
father and, in case of his death or incapacity, upon the mother or, in case of
her death or incapacity, upon the guardian, but the liability may also be
voluntarily assumed by a relative or family friend of the youthful offender.
However, under the Family Code, this civil liability is now, without such
alternative qualification, the responsibility of the parents and those who
exercise parental authority over the minor offender. For civil liability arising
from quasi-delicts committed by minors, the same rules shall apply in
accordance with Articles 2180 and 2182 of the Civil Code, as so modified.
DECISION
REGALADO, J.:
One of the ironic verities of life, it has been said, is that sorrow is sometimes
a touchstone of love. A tragic illustration is provided by the instant case,
wherein two lovers died while still in the prime of their years, a bitter episode
for those whose lives they have touched. While we cannot expect to award
complete assuagement to their families through seemingly prosaic legal
verbiage, this disposition should at least terminate the acrimony and rancor
of an extended judicial contest resulting from the unfortunate occurrence.
In this final denouement of the judicial recourse the stages whereof were
alternately initiated by the parties, petitioners are now before us seeking the
reversal of the judgment of respondent court promulgated on January 2,
1985 in AC-G.R. CV No. 69060 with the following decretal
portion:jgc:chanrobles.com.ph
"WHEREFORE, the decision of the lower court dismissing plaintiffs complaint
is hereby reversed; and instead, judgment is hereby rendered sentencing
defendants, jointly and solidarily, to pay to plaintiffs the following
amounts:chanrobles.com : virtual law library
1. Moral damages, P30,000.000;
2. Exemplary damages, P10,000.00;
3. Attorneys fees, P20,000.00, and costs.

However, denial of defendants-appellees counterclaims is affirmed." 1

Synthesized from the findings of the lower courts, it appears that respondent
spouses are the legitimate parents of Julie Ann Gotiong who, at the time of
the deplorable incident which took place and from which she died on January
14, 1979, was an 18-year old first year commerce student of the University
of San Carlos, Cebu City; while petitioners are the parents of Wendell Libi,
then a minor between 18 and 19 years of age living with his aforesaid
parents, and who also died in the same event on the same date.
For more than two (2) years before their deaths, Julie Ann Gotiong and
Wendell Libi were sweethearts until December, 1978 when Julie Ann broke up
her relationship with Wendell after she supposedly found him to be sadistic
and irresponsible. During the first and second weeks of January, 1979,
Wendell kept pestering Julie Ann with demands for reconciliation but the
latter persisted in her refusal, prompting the former to resort to threats
against her. In order to avoid him, Julie Ann stayed in the house of her best
friend, Malou Alfonso, at the corner of Maria Cristina and Juana Osmea
Streets, Cebu City, from January 7 to 13, 1978.
On January 14, 1979, Julie Ann and Wendell died, each from a single gunshot
wound inflicted with the same firearm, a Smith and Wesson revolver licensed
in the name of petitioner Cresencio Libi, which was recovered from the scene
of the crime inside the residence of private respondents at the corner of
General Maxilom and D. Jakosalem streets of the same city.
Due to the absence of an eyewitness account of the circumstances
surrounding the death of both minors, their parents, who are the contending
parties herein, posited their respective theories drawn from their
interpretation of circumstantial evidence, available reports, documents and
evidence of physical facts.
Private respondents, bereaved over the death of their daughter, submitted
that Wendell caused her death by shooting her with the aforesaid firearm
and, thereafter, turning the gun on himself to commit suicide. On the other
hand, Petitioners, puzzled and likewise distressed over the death of their son,
rejected the imputation and contended that an unknown third party, whom
Wendell may have displeased or antagonized by reason of his work as a
narcotics informer of the Constabulary Anti-Narcotics Unit (CANU), must have
caused Wendells death and then shot Julie Ann to eliminate any witness and
thereby avoid identification.chanrobles.com:cralaw:red
As a result of the tragedy, the parents of Julie Ann filed Civil Case No. R17774 in the then Court of First Instance of Cebu against the parents of
Wendell to recover damages arising from the latters vicarious liability under
Article 2180 of the Civil Code. After trial, the court below rendered judgment

on October 20, 1980 as follows:jgc:chanrobles.com.ph

"WHEREFORE, premises duly considered, judgment is hereby rendered
dismissing plaintiffs complaint for insufficiency of the evidence. Defendants
counterclaim is likewise denied for lack of sufficient merit." 2
On appeal to respondent court, said judgment of the lower court dismissing
the complaint of therein plaintiffs-appellants was set aside and another
judgment was rendered against defendants-appellees who, as petitioners in
the present appeal by certiorari, now submit for resolution the following
issues in this case:chanrob1es virtual 1aw library
1. Whether or not respondent court correctly reversed the trial court in
accordance with established decisional laws; and
2. Whether or not Article 2180 of the Civil Code was correctly interpreted by
respondent court to make petitioners liable for vicarious liability. 3
In the proceedings before the trial court, Dr. Jesus P. Cerna, Police MedicoLegal Officer of Cebu, submitted his findings and opinions on some
postulates for determining whether or not the gunshot wound was inflicted
on Wendell Libi by his own suicidal act. However, undue emphasis was
placed by the lower court on the absence of gunpowder or tattooing around
the wound at the point of entry of the bullet. It should be emphasized,
however, that this is not the only circumstance to be taken into account in
the determination of whether it was suicide or not.
It is true that said witness declared that he found no evidence of contact or
close-contact of an explosive discharge in the entrance wound. However, as
pointed out by private respondents, the body of deceased Wendell Libi must
have been washed at the funeral parlor, considering the hasty interment
thereof a little after eight (8) hours from the occurrence wherein he died. Dr.
Cerna himself could not categorically state that the body of Wendell Libi was
left untouched at the funeral parlor before he was able to conduct his
autopsy. It will also be noted that Dr. Cerna was negligent in not conducting a
paraffin test on Wendell Libi, hence possible evidence of gunpowder residue
on Wendells hands was forever lost when Wendell was hastily
buried.cralawnad
More specifically, Dr. Cerna testified that he conducted an autopsy on the
body of Wendell Libi about eight (8) hours after the incident or, to be exact,
eight (8) hours and twenty (20) minutes based on the record of death; that
when he arrived at the Cosmopolitan Funeral Homes, the body of the
deceased was already on the autopsy table and in the stage of rigor mortis;
and that said body was not washed, but it was dried. 4 However, on redirect
examination, he admitted that during the 8-hour interval, he never saw the

body nor did he see whether said body was wiped or washed in the area of
the wound on the head which he examined because the deceased was inside
the morgue. 5 In fact, on cross-examination, he had earlier admitted that as
far as the entrance of the wound, the trajectory of the bullet and the exit of
the wound are concerned, it is possible that Wendell Libi shot himself. 6
He further testified that the muzzle of the gun was not pressed on the head
of the victim and that he found no burning or singeing of the hair or
extensive laceration on the gunshot wound of entrance which are general
characteristics of contact or near-contact fire. On direct examination, Dr.
Cerna nonetheless made these clarification:jgc:chanrobles.com.ph
"Q Is it not a fact that there are certain guns which are so made that there
would be no black residue or tattooing that could result from these guns
because they are what we call clean?
A Yes, sir. I know that there are what we call smokeless powder.
ATTY. ORTIZ:chanrob1es virtual 1aw library
Q Yes. So, in cases, therefore, of guns where the powder is smokeless, those
indications that you said may not rule out the possibility that the gun was
closer than 24 inches, is that correct?
A If the . . . assuming that the gun used was .. the bullet used was a
smokeless powder.
Q At any rate, doctor, from . . . disregarding those other matters that you
have noticed, the singeing, etc., from the trajectory, based on the trajectory
of the bullet as shown in your own sketch, is it not a fact that the gun could
have been fired by the person himself, the victim himself, Wendell Libi,
because it shows a point of entry a little above the right ear and point of exit
a little above that, to be very fair and on your oath?
A As far as the point of entrance is concerned and as far as the trajectory of
the bullet is concerned and as far as the angle or the manner of fire is
concerned, it could have been fired by the victim." 7
As shown by the evidence, there were only two used bullets 8 found at the
scene of the crime, each of which were the bullets that hit Julie Ann Gotiong
and Wendell Libi, respectively. Also, the sketch prepared by the Medico-Legal
Division of the National Bureau of Investigation, 9 shows that there is only
one gunshot wound of entrance located at the right temple of Wendell Libi.
The necropsy report prepared by Dr. Cerna states:chanrob1es virtual 1aw
library

"Gunshot wound, ENTRANCE, ovaloid, 0.5 x 0.4 cm., with contusion collar
widest inferiorly by 0.2 cm., edges inverted, oriented upward, located at the
head, temporal region, right, 2.8 cms. behind and 5.5 cms. above right
external auditory meatus, directed slightly forward, upward and to the left,
involving skin and soft tissues, making a punch-in fracture on the temporal
bone, right, penetrating cranial cavity, lacerating extensively along its course
the brain tissues, fracturing parietal bone, left, and finally making an EXIT
wound, irregular, 2.0 x 1.8 cms., edges (e)verted, parietal region, left, 2.0
cms. behind and 12.9 cms. above left external auditory meatus.chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
x

"Evidence of contact or close-contact fire, such as burning around the

gunshot wound of entrance, gunpowder tatooing (sic), smudging, singeing of
hair, extensive laceration or bursting of the gunshot wound of entrance, or
separation of the skin from the underlying tissue, are absent." 10
On cross-examination, Dr. Cerna demonstrated his theory which was made of
record, thus:jgc:chanrobles.com.ph
"Q Now, will you please use yourself as Wendell Libi, and following the
entrance of the wound, the trajectory of the bullet and the exit of the wound,
and measuring yourself 24 inches, will you please indicate to the Honorable
Court how would it have been possible for Wendell Libi to kill himself? Will
you please indicate the 24 inches?
WITNESS:chanrob1es virtual 1aw library
A Actually, sir, the 24 inches is approximately one arms length.
ATTY. SENINING:chanrob1es virtual 1aw library
I would like to make of record that the witness has demonstrated by
extending his right arm almost straight towards his head." 11
Private respondents assail the fact that the trial court gave credence to the
testimonies of defendants witnesses Lydia Ang and James Enrique Tan, the
first being a resident of an apartment across the street from the Gotiongs
and the second, a resident of the house adjacent to the Gotiong residence,
who declared having seen a "shadow" of a person at the gate of the Gotiong
house after hearing shots therefrom.

On cross-examination, Lydia Ang testified that the apartment where she was
staying faces the gas station; that it is the second apartment; that from her
window she can see directly the gate of the Gotiongs and, that there is a
firewall between her apartment and the gas station. 12 After seeing a man
jump from the gate of the Gotiongs to the rooftop of the Tans, she called the
police station but the telephone lines were busy. Later on, she talked with
James Enrique Tan and told him that she saw a man leap from the gate
towards his rooftop. 13
However, James Enrique Tan testified that he saw a "shadow" on top of the
gate of the Gotiongs, but denied having talked with anyone regarding what
he saw. He explained that he lives in a duplex house with a garden in front of
it; that his house is next to Felipe Gotiongs house; and he further gave the
following answers to these questions:chanrobles.com : virtual law library
"ATTY. ORTIZ: (TO WITNESS).
Q What is the height of the wall of the Gotiongs in relation to your house?
WITNESS:chanrob1es virtual 1aw library
A It is about 8 feet.
ATTY. ORTIZ: (TO WITNESS)
Q And where were you looking from?
WITNESS:chanrob1es virtual 1aw library
A From upstairs in my living room.
ATTY. ORTIZ (TO WITNESS)
Q From Your living room window, is that correct?
WITNESS:chanrob1es virtual 1aw library
A Yes, but not very clear because the wall is high." 14
Analyzing the foregoing testimonies, we agree with respondent court that the
same do not inspire credence as to the reliability and accuracy of the
witnesses observations, since the visual perceptions of both were obstructed
by high walls in their respective houses in relation to the house of herein
private respondents. On the other hand, witness Manolo Alfonso, testifying
on rebuttal, attested without contradiction that he and his sister, Malou

Alfonso, were waiting for Julie Ann Gotiong when they heard her scream; that
when Manolo climbed the fence to see what was going on inside the Gotiong
house, he heard the first shot; and, not more than five (5) seconds later, he
heard another shot. Consequently, he went down from the fence and drove
to the police station to report the incident. 15 Manolos direct and candid
testimony establishes and explains the fact that it was he whom Lydia Ang
and James Enrique Tan saw as the "shadow" of a man at the gate of the
Gotiong house.
We have perforce to reject petitioners effete and unsubstantiated pretension
that it was another man who shot Wendell and Julie Ann. It is significant that
the Libi family did not even point to or present any suspect in the crime nor
did they file any case against any alleged "John Doe." Nor can we sustain the
trial courts dubious theory that Wendell Libi did not die by his own hand
because of the overwhelming evidence testimonial, documentary and
pictorial the confluence of which point to Wendell as the assailant of Julie
Ann, his motive being revenge for her rejection of his persistent pleas for a
reconciliation.chanrobles.com:cralaw:red
Petitioners defense that they had exercised the due diligence of a good
father of a family, hence they should not be civilly liable for the crime
committed by their minor son, is not borne out by the evidence on record
either.
Petitioner Amelita Yap Libi, mother of Wendell, testified that her husband,
Cresencio Libi, owns a gun which he kept in a safety deposit box inside a
drawer in their bedroom. Each of these petitioners holds a key to the safety
deposit box and Amelitas key is always in her bag, all of which facts were
known to Wendell. They have never seen their son Wendell taking or using
the gun. She admitted, however, that on that fateful night the gun was no
longer in the safety deposit box. 16 We, accordingly, cannot but entertain
serious doubts that petitioner spouses had really been exercising the
diligence of a good father of a family by safely locking the fatal gun away.
Wendell could not have gotten hold thereof unless one of the keys to the
safety deposit box was negligently left lying around or he had free access to
the bag of his mother where the other key was.
The diligence of a good father of a family required by law in a parent and
child relationship consists, to a large extent, of the instruction and
supervision of the child. Petitioners were gravely remiss in their duties as
parents in not diligently supervising the activities of their son, despite his
minority and immaturity, so much so that it was only at the time of Wendells
death that they allegedly discovered that he was a CANU agent and that
Cresencios gun was missing from the safety deposit box. Both parents were
sadly wanting in their duty and responsibility in monitoring and knowing the
activities of their children who, for all they know, may be engaged in

dangerous work such as being drug informers, 17 or even drug users. Neither
was a plausible explanation given for the photograph of Wendell, with a
handwritten dedication to Julie Ann at the back thereof, 18 holding upright
what clearly appears as a revolver and on how or why he was in possession
of that firearm.
In setting aside the judgment of the court a quo and holding petitioners
civilly liable, as explained at the start of this opinion, respondent court
waved aside the protestations of diligence on the part of petitioners and had
this to say:jgc:chanrobles.com.ph
". . . It is still the duty of parents to know the activity of their children who
may be engaged in this dangerous activity involving the menace of drugs.
Had the defendants-appellees been diligent in supervising the activities of
their son, Wendell, and in keeping said gun from his reach, they could have
prevented Wendell from killing Julie Ann Gotiong. Therefore, appellants are
liable under Article 2180 of the Civil Code which provides:chanrob1es virtual
1aw library
The father, and in case of his death or incapacity, the mother, are
responsible for the damages caused by their minor children who live in their
company.
"Having been grossly negligent in preventing Wendell Libi from having
access to said gun which was allegedly kept in a safety deposit box,
defendants-appellees are subsidiarily liable for the natural consequence of
the criminal act of said minor who was living in their company. This vicarious
liability of herein defendants-appellees has been reiterated by the Supreme
Court in many cases, prominent of which is the case of Fuellas v. Cadano, et.
al. (L-14409, Oct. 31, 1961, 3 SCRA 361-367), which held that:chanrob1es
virtual 1aw library
The subsidiary liability of parents for damages caused by their minor
children imposed by Article 2180 of the New Civil Code covers obligations
arising from both quasi-delicts and criminal offenses.
The subsidiary liability of parents arising from the criminal acts of their
minor children who acted with discernment is determined under the
provisions of Article 2180, N.C.C. and under Article 101 of the Revised Penal
Code, because to hold that the former only covers obligations which arise
from quasi-delicts and not obligations which arise from criminal offenses,
would result in the absurdity that while for an act where mere negligence
intervenes the father or mother may stand subsidiarily liable for the
damages caused by his or her son, no liability would attach if the damage is
caused with criminal intent. (3 SCRA 361-362).

". . . In the instant case, minor son of herein defendants-appellees, Wendell

Libi somehow got hold of the key to the drawer where said gun was kept
under lock without defendant-spouses ever knowing that said gun had been
missing from that safety box since 1978 when Wendell Libi had) a picture
taken wherein he proudly displayed said gun and dedicated this picture to his
sweetheart, Julie Ann Gotiong; also since then, Wendell Libi was said to have
kept said gun in his car, in keeping up with his supposed role of a CANU
agent . . ." chanrobles lawlibrary : rednad
x

"Based on the foregoing discussions of the assigned errors, this Court holds
that the lower court was not correct in dismissing herein plaintiffs-appellants
complaint because as preponderantly shown by evidence, defendantsappellees utterly failed to exercise all the diligence of a good father of the
family in preventing their minor son from committing this crime by means of
the gun of defendants-appellees which was freely accessible to Wendell Libi
for they have not regularly checked whether said gun was still under lock,
but learned that it was missing from the safety deposit box only after the
crime had been committed." (Emphases ours.) 19
We agree with the conclusion of respondent court that petitioners should be
held liable for the civil liability based on what appears from all indications
was a crime committed by their minor son. We take this opportunity,
however, to digress and discuss its ratiocination therefor on jurisprudential
dicta which we feel require clarification.
In imposing sanctions for the so-called vicarious liability of petitioners,
respondent court cites Fuellas v. Cadano, Et. Al. 20 which supposedly holds
that" (t)he subsidiary liability of parents for damages caused by their minor
children imposed by Article 2180 of the New Civil Code covers obligations
arising from both quasi-delicts and criminal offenses," followed by an
extended quotation ostensibly from the same case explaining why under
Article 2180 of the Civil Code and Article 101 of the Revised Penal Code
parents should assume subsidiary liability for damages caused by their minor
children. The quoted passages are set out two paragraphs back, with
pertinent underscoring for purposes of the discussion hereunder.chanrobles
law library
Now, we do not have any objection to the doctrinal rule holding, the parents
liable, but the categorization of their liability as being subsidiary, and not
primary, in nature requires a hard second look considering previous decisions
of this court on the matter which warrant comparative analyses. Our concern
stems from our readings that if the liability of the parents for crimes or quasidelicts of their minor children is subsidiary, then the parents can neither

invoke nor be absolved of civil liability on the defense that they acted with
the diligence of a good father of a family to prevent damages. On the other
hand, if such liability imputed to the parents is considered direct and
primary, that diligence would constitute a valid and substantial defense.
We believe that the civil liability of parents for quasi-delicts of their minor
children, as contemplated in Article 2180 of the Civil Code, is primary and
not subsidiary. In fact, if we apply Article 2194 of said code which provides
for solidary liability of joint tortfeasors, the persons responsible for the act or
omission, in this case the minor and the father and, in case of his death of
incapacity, the mother, are solidarily liable. Accordingly, such parental
liability is primary and not subsidiary, hence the last paragraph of Article
2180 provides that" (t)he responsibility treated of in this article shall cease
when the persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damages."cralaw virtua1aw
library
We are also persuaded that the liability of the parents for felonies committed
by their minor children is likewise primary, not subsidiary. Article 101 of the
Revised Penal Code provides:jgc:chanrobles.com.ph
"ARTICLE 101. Rules regarding civil liability in certain cases.
x

First. In cases of subdivisions . . . 2, and 3 of Article 12, the civil liability for
acts committed by . . . a person under nine years of age, or by one over nine
but under fifteen years of age, who has acted without discernment, shall
devolve upon those having such person under their legal authority or control,
unless it appears that there was no fault or negligence on their part."
(Emphasis supplied.) 21
Accordingly, just like the rule in Article 2180 of the Civil Code, under the
foregoing provision the civil liability of the parents for crimes committed by
their minor children is likewise direct and primary, and also subject to the
defense of lack of fault or negligence on their part, that is, the exercise of the
diligence of a good father of a family.
That in both quasi-delicts and crimes the parents primarily respond for such
damages is buttressed by the corresponding provisions in both codes that
the minor transgressor shall be answerable or shall respond with his own
property only in the absence or in case of insolvency of the former. Thus, for
civil liability ex quasi delicto of minors, Article 2182 of the Civil Code states
that" (i)f the minor causing damage has no parents or guardian, the
minor . . . shall be answerable with his own property in an action against him

where a guardian ad litem shall be appointed." For civil liability ex delicto of

minors, an equivalent provision is found in the third paragraph of Article 101
of the Revised Penal Code, to wit:jgc:chanrobles.com.ph
"Should there be no person having such . . . minor under his authority, legal
guardianship or control, or if such person be insolvent, said . . . minor shall
respond with (his) own property, excepting property exempt from execution,
in accordance with civil law."cralaw virtua1aw library
The civil liability of parents for felonies committed by their minor children
contemplated in the aforesaid rule in Article 101 of the Revised Penal Code in
relation to Article 2180 of the Civil Code has, aside from the aforecited case
of Fuellas, been the subject of a number of cases adjudicated by this Court,
viz.: Exconde v. Capuno, Et Al., 22 Araneta v. Arreglado, 23 Salen, Et. Al. v.
Balce, 24 Paleyan, etc., Et. Al. v. Bangkili, Et Al., 25 and Elcano, et al, v. Hill,
Et. Al. 26 Parenthetically, the aforesaid cases were basically on the issue of
the civil liability of parents for crimes committed by their minor children over
9 but under 15 years of age, who acted with discernment, and also of minors
15 years of aye or over, since these situations are not covered by Article
101, Revised Penal Code. In both instances, this Court held that the issue of
parental civil liability should be resolved in accordance with the provisions of
Article 2180 of the Civil Code for the reasons well expressed in Salen and
adopted in the cases hereinbefore enumerated that to hold that the civil
liability under Article 2180 would apply only to quasi-delicts and not to
criminal offenses would result in the absurdity that in an act involving mere
negligence the parents would be liable but not where the damage is caused
with criminal intent. In said cases, however, there are unfortunate variances
resulting in a regrettable inconsistency in the Courts determination of
whether the liability of the parents, in cases involving either crimes or quasidelicts of their minor children, is primary or subsidiary.
In Exconde, where the 15-year old minor was convicted of double homicide
through reckless imprudence, in a separate civil action arising from the crime
the minor and his father were held jointly and severally liable for failure of
the latter to prove the diligence of a good father of a family. The same
liability in solidum and, therefore, primary liability was imposed in a separate
civil action in Araneta on the parents and their 14-year old son who was
found guilty of frustrated homicide, but on the authority of Article 2194 of
the Civil Code providing for solidary responsibility of two or more persons
who are liable for a quasi-delict.
However, in Salen, the father was declared subsidiarily liable for damages
arising from the conviction of his son, who was over 15 but less than 18
years of age, by applying Article 2180 but, this time, disregarding Article
2194 of the Civil Code. In the present case, as already explained, the
petitioners herein were also held liable but supposedly in line with Fuellas

which purportedly declared the parents subsidiarily liable for the civil liability
for serious physical injuries committed by their 13-year old son. On the other
hand, in Paleyan, the mother and her 19-year old son were adjudged
solidarily liable for damages arising from his conviction for homicide by the
application of Article 2180 of the Civil Code since this is likewise not covered
by Article 101 of the Revised Penal Code. Finally, in Elcano, although the son
was acquitted in a homicide charge due to "lack of intent, coupled with
mistake," it was ruled that while under Article 2180 of the Civil Code there
should be solidary liability for damages, since the son, "although married,
was living with his father and getting subsistence from him at the time of the
occurrence," but "is now of age, as a matter of equity" the father was only
held subsidiarily liable.
It bears stressing, however, that the Revised Penal Code provides for
subsidiary liability only for persons causing damages under the compulsion
of irresistible force or under the impulse of an uncontrollable fear; 27
innkeepers, tavernkeepers and proprietors of establishments; 28 employers,
teachers, persons and corporations engaged in industry; 29 and principals,
accomplices and accessories for the unpaid civil liability of their co-accused
in the other classes. 30
Also, coming back to respondent courts reliance on Fuellas in its decision in
the present case, it is not exactly accurate to say that Fuellas provided for
subsidiary liability of the parents therein. A careful scrutiny shows that what
respondent court quoted verbatim in its decision now on appeal in the
present case, and which it attributed to Fuellas, was the syllabus on the law
report of said case which spoke of "subsidiary" liability. However, such
categorization does not specifically appear in the text of the decision in
Fuellas. In fact, after reviewing therein the cases of Exconde, Araneta and
Salen and the discussions in said cases of Article 101 of the Revised Penal
Code in relation to Article 2180 of the Civil Code, this Court concluded its
decision in this wise:jgc:chanrobles.com.ph
"Moreover, the case at bar was decided by the Court of Appeals on the basis
of evidence submitted therein by both parties, independent of the criminal
case. And responsibility for fault or negligence under Article 2176 upon which
the present action was instituted, is entirely separate and distinct from the
civil liability arising from fault or negligence under the Penal Code (Art.
2177), and having in mind the reasons behind the law as heretofore stated,
any discussion as to the minors criminal responsibility is of no
moment."cralaw virtua1aw library
Under the foregoing considerations, therefore, we hereby rule that the
parents are and should be held primarily liable for the civil liability arising
from criminal offenses committed by their minor children under their legal
authority or control, or who live in their company, unless it is proven that the

former acted with the diligence of a good father of a family to prevent such
damages. That primary liability is premised on the provisions of Article 101 of
the Revised Penal Code with respect to damages ex delicto caused by their
children 9 years of age or under, or over 9 but under 15 years of age who
acted without discernment; and, with regard to their children over 9 but
under 15 years of age who acted with discernment, or 15 years or over but
under 21 years of age, such primary liability shall be imposed pursuant to
Article 2180 of the Civil Code. 31
Under said Article 2180, the enforcement of such liability shall be effected
against the father and, in case of his death or incapacity, the mother. This
was amplified by the Child and Youth Welfare Code which provides that the
same shall devolve upon the father and, in case of his death or incapacity,
upon the mother or, in case of her death or incapacity, upon the guardian,
but the liability may also be voluntarily assumed by a relative or family friend
of the youthful offender. 32 However, under the Family Code, this civil
liability is now, without such alternative qualification, the responsibility of the
parents and those who exercise parental authority over the minor offender.
33 For civil liability arising from quasi-delicts committed by minors, the same
rules shall apply in accordance with Articles 2180 and 2182 of the Civil Code,
as so modified.
In the case at bar, whether the death of the hapless Julie Ann Gotiong was
caused by a felony or a quasi-delict committed by Wendell Libi, respondent
court did not err in holding petitioners liable for damages arising therefrom.
Subject to the preceding modifications of the premises relied upon by it
therefor and on the bases of the legal imperatives herein explained, we
conjoin in its findings that said petitioners failed to duly exercise the requisite
diligentissimi patris familias to prevent such damages.
ACCORDINGLY, the instant Petition is DENIED and the assailed judgment of
respondent Court of Appeals is hereby AFFIRMED, with costs against
petitioners.
SO ORDERED.

G.R. No. 85044 June 3, 1992

MACARIO TAMARGO, CELSO TAMARGO and AURELIA
TAMARGO, petitioners,
vs.
HON. COURT OF APPEALS, THE HON. ARISTON L. RUBIO, RTC Judge,

Branch 20, Vigan, Ilocos Sur; VICTOR BUNDOC; and CLARA

BUNDOC, respondents.
FELICIANO, J.:
On 20 October 1982, Adelberto Bundoc, then a minor of 10 years of age,
shot Jennifer Tamargo with an air rifle causing injuries which resulted in her
death. Accordingly, a civil complaint for damages was filed with the Regional
Trial Court, Branch 20, Vigan, Ilocos Sur, docketed as Civil Case No. 3457-V,
by petitioner Macario Tamargo, Jennifer's adopting parent, and petitioner
spouses Celso and Aurelia Tamargo, Jennifer's natural parents against
respondent spouses Victor and Clara Bundoc, Adelberto's natural parents
with whom he was living at the time of the tragic incident. In addition to this
case for damages, a criminal information or Homicide through Reckless
Imprudence was filed [Criminal Case No. 1722-V] against Adelberto Bundoc.
Adelberto, however, was acquitted and exempted from criminal liability on
the ground that he bad acted without discernment.
Prior to the incident, or on 10 December 1981, the spouses Sabas and Felisa
Rapisura had filed a petition to adopt the minor Adelberto Bundoc in Special
Proceedings No. 0373-T before the then Court of First Instance of Ilocos Sur.
This petition for adoption was grunted on, 18 November 1982, that
is, after Adelberto had shot and killed Jennifer.
In their Answer, respondent spouses Bundoc, Adelberto's natural parents,
reciting the result of the foregoing petition for adoption, claimed that not
they, but rather the adopting parents, namely the spouses Sabas and Felisa
Rapisura, were indispensable parties to the action since parental authority
had shifted to the adopting parents from the moment the successful petition
for adoption was filed.
Petitioners in their Reply contended that since Adelberto Bundoc was then
actually living with his natural parents, parental authority had not ceased nor
been relinquished by the mere filing and granting of a petition for adoption.
The trial court on 3 December 1987 dismissed petitioners' complaint, ruling
that respondent natural parents of Adelberto indeed were not indispensable
parties to the action.
Petitioners received a copy of the trial court's Decision on 7 December 1987.
Within the 15-day reglementary period, or on 14 December 1987, petitioners
filed a motion for reconsideration followed by a supplemental motion for
reconsideration on 15 January 1988. It appearing, however, that the motions
failed to comply with Sections 4 and 5 of Rule 15 of the Revised Rules of
Court that notice of the motion shall be given to all parties concerned at

least three (3) days before the hearing of said motion; and that said notice
shall state the time and place of hearing both motions were denied by the
trial court in an Order dated 18 April 1988. On 28 April 1988, petitioners filed
a notice of appeal. In its Order dated 6 June 1988, the trial court dismissed
the notice at appeal, this time ruling that the notice had been filed beyond
the 15-day reglementary period ending 22 December 1987.
Petitioners went to the Court of Appeals on a petition
for mandamus and certiorari questioning the trial court's Decision dated 3
December 1987 and the Orders dated 18 April 1988 and 6 June 1988, The
Court of Appeals dismissed the petition, ruling that petitioners had lost their
right to appeal.
In the present Petition for Review, petitioners once again contend that
respondent spouses Bundoc are the indispensable parties to the action for
damages caused by the acts of their minor child, Adelberto Bundoc.
Resolution of this Petition hinges on the following issues: (1) whether or not
petitioners, notwithstanding loss of their right to appeal, may still file the
instant Petition; conversely, whether the Court may still take cognizance of
the case even through petitioners' appeal had been filed out of time; and (2)
whether or not the effects of adoption, insofar as parental authority is
concerned may be given retroactive effect so as to make the adopting
parents the indispensable parties in a damage case filed against their
adopted child, for acts committed by the latter, when actual custody was yet
lodged with the biological parents.
1. It will be recalled that, petitioners' motion (and supplemental motion) for
reconsideration filed before the trial court, not having complied with the
requirements of Section 13, Rule 41, and Section 4, Rule 15, of the Revised
Rules of Court, were considered pro forma and hence did not interrupt and
suspend the reglementary period to appeal: the trial court held that the
motions, not having contained a notice of time and place of hearing, had
become useless pieces of paper which did not interrupt the reglementary
period. 1 As in fact repeatedly held by this Court, what is mandatory is the
service of the motion on the opposing counsel indicating the time and place
of hearing. 2
In view, however, of the nature of the issue raised in the instant. Petition,
and in order that substantial justice may be served, the Court, invoking its
right to suspend the application of technical rules to prevent manifest
injustice, elects to treat the notice of appeal as having been seasonably filed
before the trial court, and the motion (and supplemental motion) for
reconsideration filed by petitioner in the trial court as having interrupted the

reglementary period for appeal. As the Court held in Gregorio v. Court of

Appeals: 3
Dismissal of appeal; purely on technical grounds is frowned upon
where the policy of the courts is to encourage hearings of appeal
on their merits. The rules of procedure ought not be applied in a
very rigid technical sense, rules of procedure are used only to
help secure not override, substantial justice. if d technical and
rigid enforcement of the rules is made their aim would be
defeated. 4
2. It is not disputed that Adelberto Bundoc's voluntary act of shooting
Jennifer Tamargo with an air rifle gave rise to a cause of action on quasidelict against him. As Article 2176 of the Civil Code provides:
Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict . . .
Upon the other hand, the law imposes civil liability upon the father and, in
case of his death or incapacity, the mother, for any damages that may be
caused by a minor child who lives with them. Article 2180 of the Civil Code
reads:
The obligation imposed by article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for
whom one is responsible.
The father and, in case of his death or incapacity, the mother,
are responsible for the damages caused by the minor children
who live in their company.
xxx xxx xxx
The responsibility treated of in this Article shall cease when the
person herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
(Emphasis supplied)
This principle of parental liability is a species of what is frequently designated
as vicarious liability, or the doctrine of "imputed negligence" under AngloAmerican tort law, where a person is not only liable for torts committed by
himself, but also for torts committed by others with whom he has a certain
relationship and for whom he is responsible. Thus, parental liability is made a
natural or logical consequence of the duties and responsibilities of parents
their parental authority which includes the instructing, controlling and
disciplining of the child. 5 The basis for the doctrine of vicarious liability was

explained by the Court in Cangco v. Manila Railroad Co.

terms:

in the following

With respect to extra-contractual obligation arising from

negligence, whether of act or omission, it is competent for the
legislature to elect and our Legislature has so elected to
limit such liability to cases in which the person upon whom such
an obligation is imposed is morally culpable or, on the contrary,
for reasons of public policy. to extend that liability, without
regard to the lack of moral culpability, so as to
include responsibility for the negligence of those persons whose
acts or omissions are imputable, by a legal fiction, to others who
are in a position to exercise an absolute or limited control over
them. The legislature which adopted our Civil Code has elected
to limit extra-contractual liability with certain well-defined
exceptions to cases in which moral culpability can be directly
imputed to the persons to be charged. This moral responsibility
may consist in having failed to exercise due care in one's own
acts, or in having failed to exercise due care in the selection and
control of one's agent or servants, or in the control of persons
who, by reasons of their status, occupy a position of dependency
with respect to the person made liable for their
conduct. 7(Emphasis Supplied)
The civil liability imposed upon parents for the torts of their minor
children living with them, may be seen to be based upon the parental
authority vested by the Civil Code upon such parents. The civil law
assumes that when an unemancipated child living with its parents
commits a tortious acts, the parents were negligent in the performance
of their legal and natural duty closely to supervise the child who is in
their custody and control. Parental liability is, in other words, anchored
upon parental authority coupled with presumed parental dereliction in
the discharge of the duties accompanying such authority. The parental
dereliction is, of course, only presumed and the presumption can be
overtuned under Article 2180 of the Civil Code by proof that the
parents had exercised all the diligence of a good father of a family to
prevent the damage.
In the instant case, the shooting of Jennifer by Adelberto with an air rifle
occured when parental authority was still lodged in respondent Bundoc
spouses, the natural parents of the minor Adelberto. It would thus follow that

the natural parents who had then actual custody of the minor Adelberto, are
the indispensable parties to the suit for damages.
The natural parents of Adelberto, however, stoutly maintain that because a
decree of adoption was issued by the adoption court in favor of the Rapisura
spouses, parental authority was vested in the latter as adopting parents as
of the time of the filing of the petition for adoption that is, before Adelberto
had shot Jennifer which an air rifle. The Bundoc spouses contend that they
were therefore free of any parental responsibility for Adelberto's allegedly
tortious conduct.
Respondent Bundoc spouses rely on Article 36 of the Child and Youth Welfare
Code 8 which reads as follows:
Art. 36. Decree of Adoption. If, after considering the report of
the Department of Social Welfare or duly licensed child
placement agency and the evidence submitted before it, the
court is satisfied that the petitioner is qualified to maintain, care
for, and educate the child, that the trial custody period has been
completed, and that the best interests of the child will be
promoted by the adoption, a decree of adoption shall be entered,
which shall be effective he date the original petition was
filed. The decree shall state the name by which the child is
thenceforth to be known. (Emphasis supplied)
The Bundoc spouses further argue that the above Article 36 should be
read in relation to Article 39 of the same Code:
Art. 39. Effect of Adoption. The adoption shall:
xxx xxx xxx
(2) Dissolve the authority vested in the natural parents, except
where the adopter is the spouse of the surviving natural parent;
xxx xxx xxx
(Emphasis supplied)
and urge that their Parental authority must be deemed to have been
dissolved as of the time the Petition for adoption was filed.
The Court is not persuaded. As earlier noted, under the Civil Code, the basis
of parental liability for the torts of a minor child is the relationship existing
between the parents and the minor child living with them and over whom,
the law presumes, the parents exercise supervision and control. Article 58 of
the Child and Youth Welfare Code, re-enacted this rule:

Article 58 Torts Parents and guardians are responsible for the

damage caused by the child under their parental authority in
accordance with the civil Code. (Emphasis supplied)
Article 221 of the Family Code of the Philippines 9 has similarly insisted upon
the requisite that the child, doer of the tortious act, shall have beer in the
actual custody of the parents sought to be held liable for the ensuing
damage:
Art. 221. Parents and other persons exercising parental authority
shall be civilly liable for the injuries and damages caused by the
acts or omissions of their unemancipated children living in their
company and under their parental authority subject to the
appropriate defenses provided by law. (Emphasis supplied)
We do not believe that parental authority is properly regarded as having
been retroactively transferred to and vested in the adopting parents, the
Rapisura spouses, at the time the air rifle shooting happened. We do not
consider that retroactive effect may be giver to the decree of adoption so as
to impose a liability upon the adopting parents accruing at a time when
adopting parents had no actual or physically custody over the adopted child.
Retroactive affect may perhaps be given to the granting of the petition for
adoption where such is essential to permit the accrual of some benefit or
advantage in favor of the adopted child. In the instant case, however, to hold
that parental authority had been retroactively lodged in the Rapisura
spouses so as to burden them with liability for a tortious act that they could
not have foreseen and which they could not have prevented (since they were
at the time in the United States and had no physical custody over the child
Adelberto) would be unfair and unconscionable. Such a result, moreover,
would be inconsistent with the philosophical and policy basis underlying the
doctrine of vicarious liability. Put a little differently, no presumption of
parental dereliction on the part of the adopting parents, the Rapisura
spouses, could have arisen since Adelberto was not in fact subject to their
control at the time the tort was committed.
Article 35 of the Child and Youth Welfare Code fortifies the conclusion
reached above. Article 35 provides as follows:
Art. 35. Trial Custody. No petition for adoption shall be finally
granted unless and until the adopting parents are given by the
courts a supervised trial custody period of at least six months to
assess their adjustment and emotional readiness for the legal
union. During the period of trial custody, parental authority shall
be vested in the adopting parents. (Emphasis supplied)

Under the above Article 35, parental authority is provisionally vested in the
adopting parents during the period of trial custody, i.e., before the issuance
of a decree of adoption, precisely because the adopting parents are given
actual custody of the child during such trial period. In the instant case, the
trial custody period either had not yet begun or bad already been completed
at the time of the air rifle shooting; in any case, actual custody of Adelberto
was then with his natural parents, not the adopting parents.
Accordingly, we conclude that respondent Bundoc spouses, Adelberto's
natural parents, were indispensable parties to the suit for damages brought
by petitioners, and that the dismissal by the trial court of petitioners'
complaint, the indispensable parties being already before the court,
constituted grave abuse of discretion amounting to lack or excess of
jurisdiction.
WHEREFORE, premises considered, the Petition for Review is hereby
GRANTED DUE COURSE and the Decision of the Court of Appeals dated 6
September 1988, in C.A.-G.R. No. SP-15016 is hereby REVERSED and SET
ASIDE. Petitioners' complaint filed before the trial court is hereby
REINSTATED and this case is REMANDED to that court for further proceedings
consistent with this Decision. Costs against respondent Bundoc spouses. This
Decision is immediately executory.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, concur.

G.R. No. 30112

September 9, 1929
THE MABALACAT SUGAR COMPANY, plaintiff-appellant,
vs.
JOSE V. RAMIREZ, ET AL., defendants-appellants.
Alfonso Ponce Enrile for plaintiff-appellant.
Marcadia & Ocampo and Jose Ma. Cavanna for defendants-appellants.
STATEMENT
Plaintiff alleges that it is a domestic corporation and for more than seven
years has been in the quiet and peaceful possession of a strip of land 2,664
meters long and 5 meters wide across the land of the minor defendants in

the barrio of Dolores, municipality of Mabalacat, province of Pampanga,

which is specifically described in the complaint.
That it built a railway and made permanent improvements on the land in the
nature of embankments, bridges, sewers and telephone lines for the proper
transportation of sugar cane from the Hacienda Concepcion to its sugar
central in the municipality of Mabalacat, and that it has been in the peaceful
use, possession and enjoyment of the railway for about seven years. That on
the 4th and 5th of September, 1927, the defendants jointly and mutually,
with the aid of more than one hundred other persons acting for and with
them, raised and destroyed the rails of plaintiff's railway, a large portion of
which were twisted, and destroyed the bolts and ties, and left the railway a
wreck as a means of transportation for the plaintiff. That by reason of such
wrongful acts plaintiff was damaged in the sum of P32,000.
It is then alleged that the defendants by means of violence threatened to,
and will, dispossess plaintiff of the strip of the land in question, and it prays
that pending the action, the court issue a writ of preliminary injunction
against the defendants prohibiting them from in any manner disturbing
plaintiff's possession of a strip of land, and that upon final hearing, plaintiff
have judgment against the defendants jointly and severally for P32,000, and
that the injunction be made permanent.
For answer the defendants made a general and specific denial, and as a
counterclaim alleged that by reason of the injunction, which was granted by
the court on motion of the plaintiff, the defendants were damaged in the sum
of P2,000, for which they pray for a corresponding judgment against the
plaintiff.
Upon such issues the lower court rendered judgments against the
defendants Manuel Lazatin and Tomasa C. Viuda de Pamintuan, as guardian
of her sons, to jointly and severally pay the plaintiff P2,083.99 and costs, and
absolved Jose V. Ramirez from the complaint.
From this judgment both parties appealed, and the plaintiff assigns the
following errors:
I. The lower court erred in not adjudging to the plaintiff damages
caused by the necessary delay in its milling operations due to the
destruction of its railway by the defendants, in the sum of P20,760.
II. The lower court erred in not adjudging to the plaintiff the sum of
P6,739.53 as damages sustained by it due to the forcible removal and
destruction of its railway by the defendants.
The defendant as appellants, assign the following errors:
I. The trial court erred in not dismissing the complaint for damages
upon the dismissal of the principal action of injunction.
II. The trial court erred in condemning the defendants-appellants,
Manuel Lazatin and Tomasa Vda. de Pamintuan, as guardian of the
minor children Pamintuan to pay jointly and severally the plaintiff

company the sum of P2,083.99 as damages, and in not absolving the

same defendants-appellants to the payment thereof.
III. The trial court erred in not adjudicating to the defendantsappellants their counterclaim for P2,000 by way of damages and in not
condemning the plaintiff company to pay thereof.
IV. The trial court erred in admitting Exhibits C and C-1 against the
objection of defendants and without their proper identification by the
plaintiff.
V. The trial court erred in overruling defendant's demurrer to the
plaintiff's complaint and in not sustaining the same.

JOHNS, J.:
It must be conceded that any lease, right, title or interest which the
plaintiff ever had to the use or possession of the strip of land in
question had expired, and that the plaintiff was nothing more than a
tenant at will or sufferance. That is to say, at the time of the alleged
acts of which plaintiff complains, it had no legal right to the use or
possession of the land, and that any right which it ever did have had
expired with the contract for the lease of the land by the defendants to
Dizon and Tiglao. In this situation, the defendants had the legal right to
remove plaintiff's railway from their land, and plaintiff cannot recover
damages from the defendants for the doing of that which they had the
legal right to do. It is true that after the lease had expired by the terms
there were negotiations between the parties for a renewal or extension
of the lease. It is also true that such negotiations fell through, and that
the lease was never renewed or extended. Hence, it follows that the
defendants are not liable for any damages which the plaintiff may have
sustained from growing out of the failure to renew the lease, and for
such reasons the plaintiff's first assignment of error is not well taken.
Be that as it may, the railway track in question has lawfully been on the
defendants' land and in the use and possession of the plaintiff for about
seven years, and while it is true that after the expiration of the lease, the
defendant, upon notice to the plaintiff, had the legal right to terminate the
lease and remove the track, yet they had no right to do so in the manner in
which it was done. In its removal it was the duty of the defendant to remove
the track without any unnecessary damage to the plaintiff. That is to say, in
such removal the defendants had no legal right to bend or twist the rails or
to destroy the railway ties, fishplates, bolts and nuts and spikes, and that
such removal should have been made without any serious injury or damage
to the materials of which the railway was constructed. For such wrongful
acts, the lower court awarded damages to the plaintiff the sum of P2,083.99.
In the opinion of the writer the amount of such damages is about P4,000. Be
that as it may, my associates are all of the opinion that the amount awarded

by the lower court is reasonable, and that its judgment in that respect should
be affirmed.
From what has been said, it follows that there is no merit in the defendant's
appeal. If the defendants had torn up and removed the track in a peaceful
and orderly manner and without any unnecessary destruction to plaintiff's
property, they would not then be liable for any damages. But the proof is
conclusive that it was done with a large body of men and in a hasty manner,
and with force and violence, and that the whole track was torn up and
removed in about two days' time and without any regard to plaintiff's rights.
The evidence is conclusive that the track was removed at the instance and
request of Tomasa C. Vda. de Pamintuan, the guardian of minor defendants,
and the lower court rendered judgment against her as such guardian. That
was error. The judgment for the amount of damages awarded to plaintiff
should be against Tomasa C. Vda. de Pamintuan personally and in person,
and not as guardian, for the simple reason that the minor are not legally
liable for a tort committed by their guardian. That is to say, the judgment of
the lower court for damages against Tomasa C. Vda. de Pamintuan, as
guardian of the minors, is reversed, and in lieu thereof a corresponding
judgment will be entered against Tomasa C. Vda. de Pamintuan personally
and in person, and that in all other things and respects, the judgment of the
lower court is affirmed, with costs against the plaintiff. So ordered.
Avancea, C. J., Johnson, Street, Romualdez, and Villa-Real, JJ., concur.

VICARIOUS LIABILITY OF OWNERS AND MANAGERS OF ESTABLISHMENTS AND

ENTERPRISES

G.R. No. 126780

February 17, 2005

YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA

PAYAM, petitioners,
vs.
THE COURT OF APPEALS and MAURICE McLOUGHLIN, respondents.
DECISION
TINGA, J.:
The primary question of interest before this Court is the only legal issue in
the case: It is whether a hotel may evade liability for the loss of items left

with it for safekeeping by its guests, by having these guests execute written
waivers holding the establishment or its employees free from blame for such
loss in light of Article 2003 of the Civil Code which voids such waivers.
Before this Court is a Rule 45 petition for review of the Decision1 dated 19
October 1995 of the Court of Appeals which affirmed the Decision2 dated 16
December 1991 of the Regional Trial Court (RTC), Branch 13, of Manila,
finding YHT Realty Corporation, Brunhilda Mata-Tan (Tan), Erlinda Lainez
(Lainez) and Anicia Payam (Payam) jointly and solidarily liable for damages in
an action filed by Maurice McLoughlin (McLoughlin) for the loss of his
American and Australian dollars deposited in the safety deposit box of
Tropicana Copacabana Apartment Hotel, owned and operated by YHT Realty
Corporation.
The factual backdrop of the case follow.
Private respondent McLoughlin, an Australian businessman-philanthropist,
used to stay at Sheraton Hotel during his trips to the Philippines prior to
1984 when he met Tan. Tan befriended McLoughlin by showing him around,
introducing him to important people, accompanying him in visiting
impoverished street children and assisting him in buying gifts for the children
and in distributing the same to charitable institutions for poor children. Tan
convinced McLoughlin to transfer from Sheraton Hotel to Tropicana where
Lainez, Payam and Danilo Lopez were employed. Lopez served as manager of
the hotel while Lainez and Payam had custody of the keys for the safety
deposit boxes of Tropicana. Tan took care of McLoughlin's booking at the
Tropicana where he started staying during his trips to the Philippines from
December 1984 to September 1987.3
On 30 October 1987, McLoughlin arrived from Australia and registered with
Tropicana. He rented a safety deposit box as it was his practice to rent a
safety deposit box every time he registered at Tropicana in previous trips. As
a tourist, McLoughlin was aware of the procedure observed by Tropicana
relative to its safety deposit boxes. The safety deposit box could only be
opened through the use of two keys, one of which is given to the registered
guest, and the other remaining in the possession of the management of the
hotel. When a registered guest wished to open his safety deposit box, he
alone could personally request the management who then would assign one
of its employees to accompany the guest and assist him in opening the
safety deposit box with the two keys.4
McLoughlin allegedly placed the following in his safety deposit box: Fifteen
Thousand US Dollars (US$15,000.00) which he placed in two envelopes, one
envelope containing Ten Thousand US Dollars (US$10,000.00) and the other

envelope Five Thousand US Dollars (US$5,000.00); Ten Thousand Australian

Dollars (AUS$10,000.00) which he also placed in another envelope; two (2)
other envelopes containing letters and credit cards; two (2) bankbooks; and
a checkbook, arranged side by side inside the safety deposit box.5
On 12 December 1987, before leaving for a brief trip to Hongkong,
McLoughlin opened his safety deposit box with his key and with the key of
the management and took therefrom the envelope containing Five Thousand
US Dollars (US$5,000.00), the envelope containing Ten Thousand Australian
Dollars (AUS$10,000.00), his passports and his credit cards.6 McLoughlin left
the other items in the box as he did not check out of his room at the
Tropicana during his short visit to Hongkong. When he arrived in Hongkong,
he opened the envelope which contained Five Thousand US Dollars
(US$5,000.00) and discovered upon counting that only Three Thousand US
Dollars (US$3,000.00) were enclosed therein.7 Since he had no idea whether
somebody else had tampered with his safety deposit box, he thought that it
was just a result of bad accounting since he did not spend anything from that
envelope.8
After returning to Manila, he checked out of Tropicana on 18 December 1987
and left for Australia. When he arrived in Australia, he discovered that the
envelope with Ten Thousand US Dollars (US$10,000.00) was short of Five
Thousand US Dollars (US$5,000). He also noticed that the jewelry which he
bought in Hongkong and stored in the safety deposit box upon his return to
Tropicana was likewise missing, except for a diamond bracelet.9
When McLoughlin came back to the Philippines on 4 April 1988, he asked
Lainez if some money and/or jewelry which he had lost were found and
returned to her or to the management. However, Lainez told him that no one
in the hotel found such things and none were turned over to the
management. He again registered at Tropicana and rented a safety deposit
box. He placed therein one (1) envelope containing Fifteen Thousand US
Dollars (US$15,000.00), another envelope containing Ten Thousand
Australian Dollars (AUS$10,000.00) and other envelopes containing his
traveling papers/documents. On 16 April 1988, McLoughlin requested Lainez
and Payam to open his safety deposit box. He noticed that in the envelope
containing Fifteen Thousand US Dollars (US$15,000.00), Two Thousand US
Dollars (US$2,000.00) were missing and in the envelope previously
containing Ten Thousand Australian Dollars (AUS$10,000.00), Four Thousand
Five Hundred Australian Dollars (AUS$4,500.00) were missing.10
When McLoughlin discovered the loss, he immediately confronted Lainez and
Payam who admitted that Tan opened the safety deposit box with the key

assigned to him.11 McLoughlin went up to his room where Tan was staying
and confronted her. Tan admitted that she had stolen McLoughlin's key and
was able to open the safety deposit box with the assistance of Lopez, Payam
and Lainez.12 Lopez also told McLoughlin that Tan stole the key assigned to
McLoughlin while the latter was asleep.13
McLoughlin requested the management for an investigation of the incident.
Lopez got in touch with Tan and arranged for a meeting with the police and
McLoughlin. When the police did not arrive, Lopez and Tan went to the room
of McLoughlin at Tropicana and thereat, Lopez wrote on a piece of paper a
promissory note dated 21 April 1988. The promissory note reads as follows:
I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and
US$2,000.00 or its equivalent in Philippine currency on or before May 5,
1988.14
Lopez requested Tan to sign the promissory note which the latter did and
Lopez also signed as a witness. Despite the execution of promissory note by
Tan, McLoughlin insisted that it must be the hotel who must assume
responsibility for the loss he suffered. However, Lopez refused to accept the
responsibility relying on the conditions for renting the safety deposit box
entitled "Undertaking For the Use Of Safety Deposit Box,"15specifically
paragraphs (2) and (4) thereof, to wit:
2. To release and hold free and blameless TROPICANA APARTMENT HOTEL
from any liability arising from any loss in the contents and/or use of the said
deposit box for any cause whatsoever, including but not limited to the
presentation or use thereof by any other person should the key be lost;
...
4. To return the key and execute the RELEASE in favor of TROPICANA
APARTMENT HOTEL upon giving up the use of the box.16
On 17 May 1988, McLoughlin went back to Australia and he consulted his
lawyers as to the validity of the abovementioned stipulations. They opined
that the stipulations are void for being violative of universal hotel practices
and customs. His lawyers prepared a letter dated 30 May 1988 which was
signed by McLoughlin and sent to President Corazon Aquino.17 The Office of
the President referred the letter to the Department of Justice (DOJ) which
forwarded the same to the Western Police District (WPD).18
After receiving a copy of the indorsement in Australia, McLoughlin came to
the Philippines and registered again as a hotel guest of Tropicana.
McLoughlin went to Malacaang to follow up on his letter but he was
instructed to go to the DOJ. The DOJ directed him to proceed to the WPD for

documentation. But McLoughlin went back to Australia as he had an urgent

business matter to attend to.
For several times, McLoughlin left for Australia to attend to his business and
came back to the Philippines to follow up on his letter to the President but he
failed to obtain any concrete assistance.19
McLoughlin left again for Australia and upon his return to the Philippines on
25 August 1989 to pursue his claims against petitioners, the WPD conducted
an investigation which resulted in the preparation of an affidavit which was
forwarded to the Manila City Fiscal's Office. Said affidavit became the basis of
preliminary investigation. However, McLoughlin left again for Australia
without receiving the notice of the hearing on 24 November 1989. Thus, the
case at the Fiscal's Office was dismissed for failure to prosecute. Mcloughlin
requested the reinstatement of the criminal charge for theft. In the
meantime, McLoughlin and his lawyers wrote letters of demand to those
having responsibility to pay the damage. Then he left again for Australia.
Upon his return on 22 October 1990, he registered at the Echelon Towers at
Malate, Manila. Meetings were held between McLoughlin and his lawyer
which resulted to the filing of a complaint for damages on 3 December 1990
against YHT Realty Corporation, Lopez, Lainez, Payam and Tan (defendants)
for the loss of McLoughlin's money which was discovered on 16 April 1988.
After filing the complaint, McLoughlin left again for Australia to attend to an
urgent business matter. Tan and Lopez, however, were not served with
summons, and trial proceeded with only Lainez, Payam and YHT Realty
Corporation as defendants.
After defendants had filed their Pre-Trial Brief admitting that they had
previously allowed and assisted Tan to open the safety deposit box,
McLoughlin filed an Amended/Supplemental Complaint20 dated 10 June 1991
which included another incident of loss of money and jewelry in the safety
deposit box rented by McLoughlin in the same hotel which took place prior to
16 April 1988.21 The trial court admitted the Amended/Supplemental
Complaint.
During the trial of the case, McLoughlin had been in and out of the country to
attend to urgent business in Australia, and while staying in the Philippines to
attend the hearing, he incurred expenses for hotel bills, airfare and other
transportation expenses, long distance calls to Australia, Meralco power
expenses, and expenses for food and maintenance, among others.22
After trial, the RTC of Manila rendered judgment in favor of McLoughlin, the
dispositive portion of which reads:

WHEREFORE, above premises considered, judgment is hereby rendered by

this Court in favor of plaintiff and against the defendants, to wit:
1. Ordering defendants, jointly and severally, to pay plaintiff the sum of
US$11,400.00 or its equivalent in Philippine Currency of P342,000.00,
more or less, and the sum of AUS$4,500.00 or its equivalent in
Philippine Currency of P99,000.00, or a total of P441,000.00, more or
less, with 12% interest from April 16 1988 until said amount has been
paid to plaintiff (Item 1, Exhibit CC);
2. Ordering defendants, jointly and severally to pay plaintiff the sum
of P3,674,238.00 as actual and consequential damages arising from
the loss of his Australian and American dollars and jewelries
complained against and in prosecuting his claim and rights
administratively and judicially (Items II, III, IV, V, VI, VII, VIII, and IX,
Exh. "CC");
3. Ordering defendants, jointly and severally, to pay plaintiff the sum
of P500,000.00 as moral damages (Item X, Exh. "CC");
4. Ordering defendants, jointly and severally, to pay plaintiff the sum
of P350,000.00 as exemplary damages (Item XI, Exh. "CC");
5. And ordering defendants, jointly and severally, to pay litigation
expenses in the sum of P200,000.00 (Item XII, Exh. "CC");
6. Ordering defendants, jointly and severally, to pay plaintiff the sum
of P200,000.00 as attorney's fees, and a fee of P3,000.00 for every
appearance; and
7. Plus costs of suit.
SO ORDERED.23
The trial court found that McLoughlin's allegations as to the fact of loss and
as to the amount of money he lost were sufficiently shown by his direct and
straightforward manner of testifying in court and found him to be credible
and worthy of belief as it was established that McLoughlin's money, kept in
Tropicana's safety deposit box, was taken by Tan without McLoughlin's
consent. The taking was effected through the use of the master key which
was in the possession of the management. Payam and Lainez allowed Tan to
use the master key without authority from McLoughlin. The trial court added
that if McLoughlin had not lost his dollars, he would not have gone through
the trouble and personal inconvenience of seeking aid and assistance from
the Office of the President, DOJ, police authorities and the City Fiscal's Office
in his desire to recover his losses from the hotel management and Tan.24

As regards the loss of Seven Thousand US Dollars (US$7,000.00) and jewelry

worth approximately One Thousand Two Hundred US Dollars (US$1,200.00)
which allegedly occurred during his stay at Tropicana previous to 4 April
1988, no claim was made by McLoughlin for such losses in his complaint
dated 21 November 1990 because he was not sure how they were lost and
who the responsible persons were. But considering the admission of the
defendants in their pre-trial brief that on three previous occasions they
allowed Tan to open the box, the trial court opined that it was logical and
reasonable to presume that his personal assets consisting of Seven
Thousand US Dollars (US$7,000.00) and jewelry were taken by Tan from the
safety deposit box without McLoughlin's consent through the cooperation of
Payam and Lainez.25
The trial court also found that defendants acted with gross negligence in the
performance and exercise of their duties and obligations as innkeepers and
were therefore liable to answer for the losses incurred by McLoughlin.26
Moreover, the trial court ruled that paragraphs (2) and (4) of the
"Undertaking For The Use Of Safety Deposit Box" are not valid for being
contrary to the express mandate of Article 2003 of the New Civil Code and
against public policy.27 Thus, there being fraud or wanton conduct on the part
of defendants, they should be responsible for all damages which may be
attributed to the non-performance of their contractual obligations.28
The Court of Appeals affirmed the disquisitions made by the lower court
except as to the amount of damages awarded. The decretal text of the
appellate court's decision reads:
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED
but modified as follows:
The appellants are directed jointly and severally to pay the plaintiff/appellee
the following amounts:
1) P153,200.00 representing the peso equivalent of US$2,000.00 and
AUS$4,500.00;
2) P308,880.80, representing the peso value for the air fares from
Sidney [sic] to Manila and back for a total of eleven (11) trips;
3) One-half of P336,207.05 or P168,103.52 representing payment to
Tropicana Apartment Hotel;
4) One-half of P152,683.57 or P76,341.785 representing payment to
Echelon Tower;

5) One-half of P179,863.20 or P89,931.60 for the taxi xxx

transportation from the residence to Sidney [sic] Airport and from MIA
to the hotel here in Manila, for the eleven (11) trips;
6) One-half of P7,801.94 or P3,900.97 representing Meralco power
expenses;
7) One-half of P356,400.00 or P178,000.00 representing expenses for
food and maintenance;
8) P50,000.00 for moral damages;
9) P10,000.00 as exemplary damages; and
10) P200,000 representing attorney's fees.
With costs.
SO ORDERED.29
Unperturbed, YHT Realty Corporation, Lainez and Payam went to this Court in
this appeal by certiorari.
Petitioners submit for resolution by this Court the following issues: (a)
whether the appellate court's conclusion on the alleged prior existence and
subsequent loss of the subject money and jewelry is supported by the
evidence on record; (b) whether the finding of gross negligence on the part
of petitioners in the performance of their duties as innkeepers is supported
by the evidence on record; (c) whether the "Undertaking For The Use of
Safety Deposit Box" admittedly executed by private respondent is null and
void; and (d) whether the damages awarded to private respondent, as well
as the amounts thereof, are proper under the circumstances.30
The petition is devoid of merit.
It is worthy of note that the thrust of Rule 45 is the resolution only of
questions of law and any peripheral factual question addressed to this Court
is beyond the bounds of this mode of review.
Petitioners point out that the evidence on record is insufficient to prove the
fact of prior existence of the dollars and the jewelry which had been lost
while deposited in the safety deposit boxes of Tropicana, the basis of the trial
court and the appellate court being the sole testimony of McLoughlin as to
the contents thereof. Likewise, petitioners dispute the finding of gross
negligence on their part as not supported by the evidence on record.
We are not persuaded.l^vvphi1.net We adhere to the findings of the trial
court as affirmed by the appellate court that the fact of loss was established
by the credible testimony in open court by McLoughlin. Such findings are
factual and therefore beyond the ambit of the present petition.1awphi1.nt

The trial court had the occasion to observe the demeanor of McLoughlin
while testifying which reflected the veracity of the facts testified to by him.
On this score, we give full credence to the appreciation of testimonial
evidence by the trial court especially if what is at issue is the credibility of
the witness. The oft-repeated principle is that where the credibility of a
witness is an issue, the established rule is that great respect is accorded to
the evaluation of the credibility of witnesses by the trial court.31 The trial
court is in the best position to assess the credibility of witnesses and their
testimonies because of its unique opportunity to observe the witnesses
firsthand and note their demeanor, conduct and attitude under grilling
examination.32
We are also not impressed by petitioners' argument that the finding of gross
negligence by the lower court as affirmed by the appellate court is not
supported by evidence. The evidence reveals that two keys are required to
open the safety deposit boxes of Tropicana. One key is assigned to the guest
while the other remains in the possession of the management. If the guest
desires to open his safety deposit box, he must request the management for
the other key to open the same. In other words, the guest alone cannot open
the safety deposit box without the assistance of the management or its
employees. With more reason that access to the safety deposit box should
be denied if the one requesting for the opening of the safety deposit box is a
stranger. Thus, in case of loss of any item deposited in the safety deposit
box, it is inevitable to conclude that the management had at least a hand in
the consummation of the taking, unless the reason for the loss is force
majeure.
Noteworthy is the fact that Payam and Lainez, who were employees of
Tropicana, had custody of the master key of the management when the loss
took place. In fact, they even admitted that they assisted Tan on three
separate occasions in opening McLoughlin's safety deposit box.33 This only
proves that Tropicana had prior knowledge that a person aside from the
registered guest had access to the safety deposit box. Yet the management
failed to notify McLoughlin of the incident and waited for him to discover the
taking before it disclosed the matter to him. Therefore, Tropicana should be
held responsible for the damage suffered by McLoughlin by reason of the
negligence of its employees.
The management should have guarded against the occurrence of this
incident considering that Payam admitted in open court that she assisted Tan
three times in opening the safety deposit box of McLoughlin at around 6:30
A.M. to 7:30 A.M. while the latter was still asleep.34 In light of the

circumstances surrounding this case, it is undeniable that without the

acquiescence of the employees of Tropicana to the opening of the safety
deposit box, the loss of McLoughlin's money could and should have been
avoided.
The management contends, however, that McLoughlin, by his act, made its
employees believe that Tan was his spouse for she was always with him most
of the time. The evidence on record, however, is bereft of any showing that
McLoughlin introduced Tan to the management as his wife. Such an inference
from the act of McLoughlin will not exculpate the petitioners from liability in
the absence of any showing that he made the management believe that Tan
was his wife or was duly authorized to have access to the safety deposit box.
Mere close companionship and intimacy are not enough to warrant such
conclusion considering that what is involved in the instant case is the very
safety of McLoughlin's deposit. If only petitioners exercised due diligence in
taking care of McLoughlin's safety deposit box, they should have confronted
him as to his relationship with Tan considering that the latter had been
observed opening McLoughlin's safety deposit box a number of times at the
early hours of the morning. Tan's acts should have prompted the
management to investigate her relationship with McLoughlin. Then,
petitioners would have exercised due diligence required of them. Failure to
do so warrants the conclusion that the management had been remiss in
complying with the obligations imposed upon hotel-keepers under the law.
Under Article 1170 of the New Civil Code, those who, in the performance of
their obligations, are guilty of negligence, are liable for damages. As to who
shall bear the burden of paying damages, Article 2180, paragraph (4) of the
same Code provides that the owners and managers of an establishment or
enterprise are likewise responsible for damages caused by their employees
in the service of the branches in which the latter are employed or on the
occasion of their functions. Also, this Court has ruled that if an employee is
found negligent, it is presumed that the employer was negligent in selecting
and/or supervising him for it is hard for the victim to prove the negligence of
such employer.35 Thus, given the fact that the loss of McLoughlin's money
was consummated through the negligence of Tropicana's employees in
allowing Tan to open the safety deposit box without the guest's consent, both
the assisting employees and YHT Realty Corporation itself, as owner and
operator of Tropicana, should be held solidarily liable pursuant to Article
2193.36
The issue of whether the "Undertaking For The Use of Safety Deposit Box"
executed by McLoughlin is tainted with nullity presents a legal question

appropriate for resolution in this petition. Notably, both the trial court and
the appellate court found the same to be null and void. We find no reason to
reverse their common conclusion. Article 2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from responsibility by
posting notices to the effect that he is not liable for the articles brought by
the guest. Any stipulation between the hotel-keeper and the guest whereby
the responsibility of the former as set forth in Articles 1998 to 200137 is
suppressed or diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an expression of
public policy precisely to apply to situations such as that presented in this
case. The hotel business like the common carrier's business is imbued with
public interest. Catering to the public, hotelkeepers are bound to provide not
only lodging for hotel guests and security to their persons and belongings.
The twin duty constitutes the essence of the business. The law in turn does
not allow such duty to the public to be negated or diluted by any contrary
stipulation in so-called "undertakings" that ordinarily appear in prepared
forms imposed by hotel keepers on guests for their signature.
In an early case,38 the Court of Appeals through its then Presiding Justice
(later Associate Justice of the Court) Jose P. Bengzon, ruled that to hold
hotelkeepers or innkeeper liable for the effects of their guests, it is not
necessary that they be actually delivered to the innkeepers or their
employees. It is enough that such effects are within the hotel or inn.39 With
greater reason should the liability of the hotelkeeper be enforced when the
missing items are taken without the guest's knowledge and consent from a
safety deposit box provided by the hotel itself, as in this case.
Paragraphs (2) and (4) of the "undertaking" manifestly contravene Article
2003 of the New Civil Code for they allow Tropicana to be released from
liability arising from any loss in the contents and/or use of the safety deposit
box for any cause whatsoever.40 Evidently, the undertaking was intended to
bar any claim against Tropicana for any loss of the contents of the safety
deposit box whether or not negligence was incurred by Tropicana or its
employees. The New Civil Code is explicit that the responsibility of the hotelkeeper shall extend to loss of, or injury to, the personal property of the
guests even if caused by servants or employees of the keepers of hotels or
inns as well as by strangers, except as it may proceed from any force
majeure.41 It is the loss through force majeure that may spare the hotelkeeper from liability. In the case at bar, there is no showing that the act of
the thief or robber was done with the use of arms or through an irresistible
force to qualify the same as force majeure.42

Petitioners likewise anchor their defense on Article 200243 which exempts the
hotel-keeper from liability if the loss is due to the acts of his guest, his
family, or visitors. Even a cursory reading of the provision would lead us to
reject petitioners' contention. The justification they raise would render
nugatory the public interest sought to be protected by the provision. What if
the negligence of the employer or its employees facilitated the
consummation of a crime committed by the registered guest's relatives or
visitor? Should the law exculpate the hotel from liability since the loss was
due to the act of the visitor of the registered guest of the hotel? Hence, this
provision presupposes that the hotel-keeper is not guilty of concurrent
negligence or has not contributed in any degree to the occurrence of the
loss. A depositary is not responsible for the loss of goods by theft, unless his
actionable negligence contributes to the loss.44
In the case at bar, the responsibility of securing the safety deposit box was
shared not only by the guest himself but also by the management since two
keys are necessary to open the safety deposit box. Without the assistance of
hotel employees, the loss would not have occurred. Thus, Tropicana was
guilty of concurrent negligence in allowing Tan, who was not the registered
guest, to open the safety deposit box of McLoughlin, even assuming that the
latter was also guilty of negligence in allowing another person to use his key.
To rule otherwise would result in undermining the safety of the safety deposit
boxes in hotels for the management will be given imprimatur to allow any
person, under the pretense of being a family member or a visitor of the
guest, to have access to the safety deposit box without fear of any liability
that will attach thereafter in case such person turns out to be a complete
stranger. This will allow the hotel to evade responsibility for any liability
incurred by its employees in conspiracy with the guest's relatives and
visitors.
Petitioners contend that McLoughlin's case was mounted on the theory of
contract, but the trial court and the appellate court upheld the grant of the
claims of the latter on the basis of tort.45 There is nothing anomalous in how
the lower courts decided the controversy for this Court has pronounced a
jurisprudential rule that tort liability can exist even if there are already
contractual relations. The act that breaks the contract may also be tort. 46
As to damages awarded to McLoughlin, we see no reason to modify the
amounts awarded by the appellate court for the same were based on facts
and law. It is within the province of lower courts to settle factual issues such
as the proper amount of damages awarded and such finding is binding upon
this Court especially if sufficiently proven by evidence and not

unconscionable or excessive. Thus, the appellate court correctly awarded

McLoughlin Two Thousand US Dollars (US$2,000.00) and Four Thousand Five
Hundred Australian dollars (AUS$4,500.00) or their peso equivalent at the
time of payment,47 being the amounts duly proven by evidence.48The alleged
loss that took place prior to 16 April 1988 was not considered since the
amounts alleged to have been taken were not sufficiently established by
evidence. The appellate court also correctly awarded the sum ofP308,880.80,
representing the peso value for the air fares from Sydney to Manila and back
for a total of eleven (11) trips;49 one-half of P336,207.05 or P168,103.52
representing payment to Tropicana;50 one-half ofP152,683.57 or P76,341.785
representing payment to Echelon Tower;51 one-half of P179,863.20
or P89,931.60 for the taxi or transportation expenses from McLoughlin's
residence to Sydney Airport and from MIA to the hotel here in Manila, for the
eleven (11) trips;52 one-half of P7,801.94 or P3,900.97 representing Meralco
power expenses;53 one-half of P356,400.00 or P178,000.00 representing
expenses for food and maintenance.54
The amount of P50,000.00 for moral damages is reasonable. Although trial
courts are given discretion to determine the amount of moral damages, the
appellate court may modify or change the amount awarded when it is
palpably and scandalously excessive.l^vvphi1.net Moral damages are not
intended to enrich a complainant at the expense of a
defendant.l^vvphi1.net They are awarded only to enable the injured party to
obtain means, diversion or amusements that will serve to alleviate the moral
suffering he has undergone, by reason of defendants' culpable action.55
The awards of P10,000.00 as exemplary damages and P200,000.00
representing attorney's fees are likewise sustained.
WHEREFORE, foregoing premises considered, the Decision of the Court of
Appeals dated 19 October 1995 is hereby AFFIRMED. Petitioners are directed,
jointly and severally, to pay private respondent the following amounts:
(1) US$2,000.00 and AUS$4,500.00 or their peso equivalent at the
time of payment;
(2) P308,880.80, representing the peso value for the air fares from
Sydney to Manila and back for a total of eleven (11) trips;
(3) One-half of P336,207.05 or P168,103.52 representing payment to
Tropicana Copacabana Apartment Hotel;
(4) One-half of P152,683.57 or P76,341.785 representing payment to
Echelon Tower;

(5) One-half of P179,863.20 or P89,931.60 for the taxi or transportation

expense from McLoughlin's residence to Sydney Airport and from MIA
to the hotel here in Manila, for the eleven (11) trips;
(6) One-half of P7,801.94 or P3,900.97 representing Meralco power
expenses;
(7) One-half of P356,400.00 or P178,200.00 representing expenses for
food and maintenance;
(8) P50,000.00 for moral damages;
(9) P10,000.00 as exemplary damages; and
(10) P200,000 representing attorney's fees.
With costs.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., and Chico-Nazario, JJ., concur.
Austria-Martinez, J., no part.

VICARIOUS LIABILITY OF EMPLOYERS

G. R. No. 154278

December 27, 2002

VICTORY LINER, INC. petitioner,

vs.
HEIRS OF ANDRES MALECDAN, respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the decision1 of the Eighth Division of the Court
of Appeals, which affirmed the decision2 of the Regional Trial Court of Baguio
City, Branch 5, in Civil Case No. 3082-R, ordering petitioner and its driver,
Ricardo Joson, Jr., to pay damages to the heirs of Andres Malecdan, who had
been killed after being hit by a bus while attempting to cross the National
Highway in Barangay Nungnungan 2 in Cauayan, Isabela.
The facts of the case are as follows:

Petitioner is a common carrier. Private respondent Elena Malecdan is the

widow of the deceased, while private respondents Veronica, Virginia, Mary
Pauline, Arthur, Viola, Manuel and Valentin Malecdan are their children.
Andres Malecdan was a 75 year-old farmer residing in Barangay Nungnungan
2, Municipality of Cauayan, Province of Isabela.3 On July 15, 1994, at around
7:00 p.m., while Andres was crossing the National Highway on his way home
from the farm, a Dalin Liner bus on the southbound lane stopped to allow
him and his carabao to pass. However, as Andres was crossing the highway,
a bus of petitioner Victory Liner, driven by Ricardo C. Joson, Jr., bypassed the
Dalin bus. In so doing, respondent hit the old man and the carabao on which
he was riding. As a result, Andres Malecdan was thrown off the carabao,
while the beast toppled over.4 The Victory Liner bus sped past the old man,
while the Dalin bus proceeded to its destination without helping him.
The incident was witnessed by Andres Malecdan's neighbor, Virgilio Lorena,
who was resting in a nearby waiting shed after working on his farm.
Malecdan sustained a wound on his left shoulder, from which bone fragments
protruded. He was taken by Lorena and another person to the Cagayan
District Hospital where he died a few hours after arrival.5 The carabao also
died soon afterwards.6 Lorena executed a sworn statement before the police
authorities. Subsequently, a criminal complaint for reckless imprudence
resulting in homicide and damage to property was filed against the Victory
Liner bus driver Ricardo Joson, Jr.7
On October 5, 1994, private respondents brought this suit for damages in the
Regional Trial Court, Branch 5, Baguio City,8 which, in a decision rendered on
July 17, 2000, found the driver guilty of gross negligence in the operation of
his vehicle and Victory Liner, Inc. also guilty of gross negligence in the
selection and supervision of Joson, Jr. Petitioner and its driver were held liable
for damages. The dispositive portion of the trial court's decision reads:
WHEREFORE, judgment is hereby rendered ordering the defendants to pay,
jointly and severally to the plaintiffs the amounts of:
a. P50,000.00 as death indemnity;
b. P88,339.00 for actual damages;
c. P200,000.00 for moral damages;
d. P50,000.00 as exemplary damages;
e. Thirty percent (30%) as attorney's fees of whatever amount that can
be collected by the plaintiff; and
f. The costs of the suit.

The counterclaim of the defendant Victory Liner, Inc. against the plaintiffs
and the third-party complaint of the same defendant against the Zenith
Insurance Corporation are dismissed.
SO ORDERED.9
On appeal, the decision was affirmed by the Court of Appeals, with the
modification that the award of attorney's fees was fixed at P50,000.00.10
Hence, this appeal raising the following issues:
I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
AFFIRMING THE APPEALED DECISION OF THE REGIONAL TRIAL COURT
GRANTING P200,000.00 AS MORAL DAMAGES WHICH IS DOUBLE
THE P100,000.00 AS PRAYED FOR BY THE PRIVATE RESPONDENTS IN THEIR
COMPLAINT AND IN GRANTING ACTUAL DAMAGES NOT SUPPORTED BY
OFFICIAL RECEIPTS AND SPENT WAY BEYOND THE BURIAL OF THE DECEASED
VICTIM.
II. WHETHER OR NOT THE AFFIRMATION BY THE HONORABLE COURT OF
APPEALS OF THE APPEALED DECISION OF THE REGIONAL TRIAL COURT
GRANTING THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES WHICH WERE NOT PROVED AND CONSIDERING THAT
THERE IS NO FINDING OF BAD FAITH AND GROSS NEGLIGENCE ON THE PART
OF THE PETITIONER WAS NOT ESTABLISHED, IS IN ACCORD WITH LAW AND
JURISPRUDENCE.
III. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
AFFIRMING THE APPEALED DECISION OF THE REGIONAL TRIAL COURT WHICH
DISREGARDED THE APPELLANT'S TESTIMONIAL AND DOCUMENTARY
EVIDENCE THAT IT HAS EXERCISED EXTRAORDINARY DILIGENCE IN THE
SELECTION AND SUPERVISION OF ITS EMPLOYEES, OR STATED DIFFERENTLY,
WHETHER OR NOT THE AFFIRMATION BY THE COURT OF APPEALS OF THE
APPEALED DECISION OF THE TRIAL COURT THAT IS CONTRARY TO LAW AND
JURISPRUDENCE CONSTITUTES GRAVE ABUSE AND EXCESS OF
JURISDICTION.11
We find the appealed decision to be in order.
First. Victory Liner, Inc. no longer questions the findings of the Regional Trial
Court that Andres Malecdan was injured as a result of the gross negligence of
its driver, Ricardo Joson, Jr. What petitioner now questions is the finding that
it (petitioner) failed to exercise the diligence of a good father of the family in
the selection and supervision of its employee. Petitioner argues,
With all due respect, the assignment of three inspectors to check and remind
the drivers of petitioner Victory Liner of its policies in a two-and-a-half hour
driving distance, the installation of tachometers to monitor the speed of the

bus all throughout the trip, the periodic monitoring and checking of the trips
from one station to another through a trip ticket from station to station, the
regular periodic conducting of safety and defensive driving [training
sessions] for its drivers are concrete and physical proofs of the formulated
operating standards, the implementation and monitoring of the same,
designed for the exercise of due diligence of a good father of a family in the
supervision of its employees.12
It explained that it did not present bus driver Joson, Jr. on the witness stands
because he had been dismissed from the company after the incident, which
it found was a breach in the company regulations. Petitioner blames private
respondents for the death of their father, Andres Malecdan, who was already
75 years old, for allowing him to plough their field by himself.13
The contention has no merit.
Article 2176 provides:
Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence,
if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
Article 2180 provides for the solidary liability of an employer for the quasidelict committed by an employee. The responsibility of employers for the
negligence of their employees in the performance of their duties is primary
and, therefore, the injured party may recover from the employers directly,
regardless of the solvency of their employees.14 The rationale for the rule on
vicarious liability has been explained thus:
What has emerged as the modern justification for vicarious liability is a rule
of policy, a deliberate allocation of a risk. The losses caused by the torts of
employees, which as a practical matter are sure to occur in the conduct of
the employer's enterprise, are placed upon that enterprise itself, as a
required cost of doing business. They are placed upon the employer because,
having engaged in an enterprise, which will on the basis of all past
experience involve harm to others through the tort of employees, and sought
to profit by it, it is just that he, rather than the innocent injured plaintiff,
should bear them; and because he is better able to absorb them and to
distribute them, through prices, rates or liability insurance, to the public, and
so to shift them to society, to the community at large. Added to this is the
makeweight argument that an employer who is held strictly liable is under
the greatest incentive to be careful in the selection, instruction and
supervision of his servants, and to take every precaution to see that the
enterprise is conducted safely.15

Employers may be relieved of responsibility for the negligent acts of their

employees acting within the scope of their assigned task only if they can
show that "they observed all the diligence of a good father of a family to
prevent damage."16 For this purpose, they have the burden of proving that
they have indeed exercised such diligence, both in the selection of the
employee and in the supervision of the performance of his duties.17
In the selection of prospective employees, employers are required to
examine them as to their qualifications, experience and service
records.18 With respect to the supervision of employees, employers must
formulate standard operating procedures, monitor their implementation and
impose disciplinary measures for breaches thereof.19 These facts must be
shown by concrete proof, including documentary evidence.20
In the instant case, petitioner presented the results of Joson, Jr.'s written
examination,21 actual driving tests,22 x-ray examination,23 psychological
examination,24 NBI clearance,25 physical examination,26 hematology
examination,27 urinalysis,28 student driver training,29 shop training,30 birth
certificate,31 high school diploma32and reports from the General Maintenance
Manager and the Personnel Manager showing that he had passed all the
tests and training sessions and was ready to work as a professional
driver.33 However, as the trial court noted, petitioner did not present proof
that Joson, Jr. had nine years of driving experience.34
Petitioner also presented testimonial evidence that drivers of the company
were given seminars on driving safety at least twice a year.35 Again,
however, as the trial court noted there is no record of Joson, Jr. ever
attending such a seminar.36 Petitioner likewise failed to establish the speed of
its buses during its daily trips or to submit in evidence the trip tickets, speed
meters and reports of field inspectors. The finding of the trial court that
petitioner's bus was running at a very fast speed when it overtook the Dalin
bus and hit the deceased was not disputed by petitioner. For these reasons,
we hold that the trial court did not err in finding petitioner to be negligent in
the supervision of its driver Joson, Jr.
Second. To justify an award of actual damages, there should be proof of the
actual amount of loss incurred in connection with the death, wake or burial of
the victim.37 We cannot take into account receipts showing expenses incurred
some time after the burial of the victim, such as expenses relating to the 9th
day, 40th day and 1st year death anniversaries.38 In this case, the trial court
awarded P88,339.00 as actual damages. While these were duly supported by
receipts, these included the amount of P5,900.00, the cost of one pig which
had been butchered for the 9th day death anniversary of the deceased. This

item cannot be allowed. We, therefore, reduce the amount of actual damages
to P82,439.00.00. The award of P200,000.00 for moral damages should
likewise be reduced. The trial court found that the wife and children of the
deceased underwent "intense moral suffering" as a result of the latter's
death.39 Under Art. 2206 of the Civil Code, the spouse, legitimate children
and illegitimate descendants and ascendants of the deceased may demand
moral damages for mental anguish by reason of the death of the deceased.
Under the circumstances of this case an award of P100,000.00 would be in
keeping with the purpose of the law in allowing moral damages.40
On the other hand, the award of P50,000.00 for indemnity is in accordance
with current rulings of the Court.41
Art. 2231 provides that exemplary damages may be recovered in cases
involving quasi-delicts if the defendant acted with gross negligence.
Exemplary damages are imposed not to enrich one party or impoverish
another but to serve as a deterrent against or as a negative incentive to curb
socially deleterious actions.42 In this case, petitioner's driver Joson, Jr. was
grossly negligent in driving at such a high speed along the national highway
and overtaking another vehicle which had stopped to allow a pedestrian to
cross. Worse, after the accident, Joson, Jr. did not stop the bus to help the
victim. Under the circumstances, we believe that the trial court's award
ofP50,000.00 as exemplary damages is proper.
Finally, private respondents are entitled to attorney's fees. Under Art. 2008 of
the Civil Code, attorney's fees may be recovered when, as in the instant
case, exemplary damages are awarded. In the recent case of Metro Manila
Transit Corporation v. Court of Appeals,43 we held an award of P50,000.00 as
attorney's fees to be reasonable. Hence, private respondents are entitled to
attorney's fees in that amount.
WHEREFORE, the decision of the Court of Appeals, dated January 17, 2002,
is hereby AFFIRMED, with the MODIFICATION that petitioner Victory Liner, Inc.
is ordered to pay the following amounts to the respondent heirs of Andres
Malecdan:
1. Death indemnity in the amount of Fifty Thousand Pesos
(P50,000.00);
2. Actual damages in the amount of Eighty-Two Thousand Four Hundred
Thirty-Nine Pesos (P82,439.00);
3. Moral damages in the amount of One Hundred Thousand Pesos
(P100,000.00);
4. Exemplary damages in the amount of Fifty Thousand Pesos
(P50,000.00);

5. Attorney's fees in the amount of Fifty Thousand Pesos (P50,000.00);

and
6. Costs of suit.
SO ORDERED.

G.R. No. 129029

April 3, 2000

RAFAEL REYES TRUCKING CORPORATION, petitioner,

vs.
PEOPLE OF THE PHILIPPINES and ROSARIO P. DY (for herself and on
behalf of the minors Maria Luisa, Francis Edward, Francis Mark and
Francis Rafael, all surnamed Dy), respondents.
PARDO, J.:
The case is an appeal via certiorari from the amended decision 1 of the Court
of Appeals2 affirming the decision and supplemental decision of the trial
court,3 as follows:
IN VIEW OF THE FOREGOING, judgment is hereby rendered dismissing
the appeals interposed by both accused and Reyes Trucking
Corporation and affirming the Decision and Supplemental Decision
dated June 6, 1992 and October 26, 1992 respectively.
SO ORDERED.4
The facts are as follows:
On October 10, 1989, Provincial Prosecutor Patricio T. Durian of Isabela filed
with the Regional Trial Court, Isabela, Branch 19, Cauayan an amended
information charging Romeo Dunca y de Tumol with reckless imprudence
resulting in double homicide and damage to property, reading as follows:
That on or about the 20th day of June, 1989, in the Municipality of
Cauayan, Province of Isabela, Philippines, and within the jurisdiction of
this Honorable Court, the said accused being the driver and person-incharge of a Trailer Truck Tractor bearing Plate No. N2A-867 registered in
the name of Rafael Reyes Trucking Corporation, with a load of 2,000
cases of empty bottles of beer grande, willfully, unlawfully and
feloniously drove and operated the same while along the National
Highway of Barangay Tagaran, in said Municipality, in a negligent,
careless and imprudent manner, without due regard to traffic laws,
rules and ordinances and without taking the necessary precautions to
prevent injuries to persons and damage to property, causing by such

negligence, carelessness and imprudence the said trailer truck to hit

and bump a Nissan Pick-up bearing Plate No. BBG-957 driven by
Feliciano Balcita and Francisco Dy, Jr., @ Pacquing, due to irreversible
shock, internal and external hemorrhage and multiple injuries, open
wounds, abrasions, and further causing damages to the heirs of
Feliciano Balcita in the amount of P100,000.00 and to the death of
Francisco Dy, Jr.; @ Pacquing and damages to his Nissan Pick-Up
bearing Plate No. BBG-957 in the total amount of P2,000,000.00.
CONTRARY TO LAW.
Cauayan, Isabela, October 10, 1989.
(Sgd.) FAUSTO C. CABANTAC
Third Assistant Provincial Prosecutor
Upon arraignment on October 23, 1989, the accused entered a plea of not
guilty. On the same occasion, the offended parties (Rosario P. Dy and minor
children and Angelina M. Balcita and minor son Paolo) made a reservation to
file a separate civil action against the accused arising from the offense
charged.5 On November 29, 1989, the offended parties actually filed with the
Regional Trial Court, Isabela, Branch 19, Cauayan a complaint against
petitioner Rafael Reyes Trucking Corporation, as employer of driver Romeo
Dunca y de Tumol, based onquasi delict. The petitioner settled the claim of
the heirs of Feliciano Balcita (the driver of the other vehicle involved in the
accident). The private respondents opted to pursue the criminal action but
did not withdraw the civil case quasi ex delicto they filed against petitioner.
On December 15, 1989, private respondents withdrew the reservation to file
a separate civil action against the accused and manifested that they would
prosecute the civil aspect ex delicto in the criminal action.6 However, they
did not withdraw the separate civil action based on quasi delict against
petitioner as employer arising from the same act or omission of the accused
driver.7
Upon agreement of the parties, the trial court consolidated both criminal and
civil cases and conducted a joint trial of the same.
The facts, as found by the trial court, which appear to be undisputed, are as
follows:
The defendant Rafael Reyes Trucking Corporation is a domestic
corporation engaged in the business of transporting beer products for
the San Miguel Corporation (SMC for Short) from the latter's San
Fernando, Pampanga plant to its various sales outlets in Luzon. Among
its fleets of vehicles for hire is the white truck trailer described above
driven by Romeo Dunca y Tumol, a duly licensed driver. Aside from the

Corporation's memorandum to all its drivers and helpers to physically

inspect their vehicles before each trip (Exh. 15, pars. 4 & 5), the SMC's
Traffic Investigator-Inspector certified the roadworthiness of this White
Truck trailer prior to June 20, 1989 (Exh. 17). In addition to a
professional driver's license, it also conducts a rigid examination of all
driver applicants before they are hired.
In the early morning of June 20, 1989, the White Truck driven by Dunca
left Tuguegarao, Cagayan bound to San Fernando, Pampanga loaded
with 2,000 cases of empty beer "Grande" bottles. Seated at the front
right seat beside him was Ferdinand Domingo, his truck helper
("pahinante" in Pilipino). At around 4:00 o'clock that same morning
while the truck was descending at a slight downgrade along the
national road at Tagaran, Cauayan, Isabela, it approached a damaged
portion of the road covering the full width of the truck's right lane
going south and about six meters in length. These made the surface of
the road uneven because the potholes were about five to six inches
deep. The left lane parallel to this damaged portion is smooth. As
narrated by Ferdinand Domingo, before approaching the potholes, he
and Dunca saw the Nissan with its headlights on coming from the
opposite direction. They used to evade this damaged road by taking
the left lance but at that particular moment, because of the incoming
vehicle, they had to run over it. This caused the truck to bounce wildly.
Dunca lost control of the wheels and the truck swerved to the left
invading the lane of the Nissan. As a result, Dunca's vehicle rammed
the incoming Nissan dragging it to the left shoulder of the road and
climbed a ridge above said shoulder where it finally stopped. (see Exh.
A-5, p. 8, record). The Nissan was severely damaged (Exhs. A-7, A-8, A9 and A-14, pp. 9-11 record), and its two passengers, namely: Feliciano
Balcita and Francisco Dy, Jr. died instantly (Exh. A-19) from external
and internal hemorrhage and multiple fractures (pp. 15 and 16,
record).
For the funeral expenses of Francisco Dy, Jr. her widow spent
P651,360.00 (Exh. I-3). At the time of his death he was 45 years old.
He was the President and Chairman of the Board of the Dynamic Wood
Products and Development Corporation (DWPC), a wood processing
establishment, from which he was receiving an income of P10,000.00 a
month. (Exh. D). In the Articles of Incorporation of the DWPC, the
spouses Francisco Dy, Jr. and Rosario Perez Dy appear to be
stockholders of 10,000 shares each with par value of P100.00 per
share out of its outstanding and subscribed capital stock of 60,000

shares valued at P6,000,000.00 (Exhs. K-1 & 10-B). Under its 1988
Income Tax Returns (Exh. J) the DWPC had a taxable net income of
P78,499.30 (Exh. J). Francisco Dy, Jr. was a La Salle University graduate
in Business Administration, past president of the Pasay Jaycees,
National Treasurer and President of the Philippine Jaycees in 1971 and
1976, respectively, and World Vice-President of Jaycees International in
1979. He was also the recipient of numerous awards as a civic leader
(Exh. C). His children were all studying in prestigious schools and spent
about P180,000.00 for their education in 1988 alone (Exh. H-4).
As stated earlier, the plaintiffs' procurement of a writ of attachment of
the properties of the Corporation was declared illegal by the Court of
Appeals. It was shown that on December 26, 1989, Deputy Sheriff
Edgardo Zabat of the RTC at San Fernando, Pampanga, attached six
units of Truck Tractors and trailers of the Corporation at its garage at
San Fernando, Pampanga. These vehicles were kept under PC guard by
the plaintiffs in said garage thus preventing the Corporation to operate
them. However, on December 28, 1989, the Court of Appeals dissolved
the writ (p. 30, record) and on December 29, 1989, said Sheriff
reported to this Court that the attached vehicles were taken by the
defendant's representative, Melita Manapil (Exh. O, p. 31, record). The
defendant's general Manager declared that it lost P21,000.00 per day
for the non-operation of the six units during their attachment (p. 31,
t.s.n., Natividad C. Babaran, proceedings on December 10, 1990).8
On June 6, 1992, the trial court rendered a joint decision, the dispositive
portion of which reads as follows:
WHEREFORE, in view of the foregoing considerations judgment is
hereby rendered:
1. Finding the accused Romeo Dunca y de Tumol guilty beyond
reasonable doubt of the crime of Double Homicide through Reckless
Imprudence with violation of the Motor Vehicle Law (Rep. Act No.
4136), and appreciating in his favor the mitigating circumstance of
voluntary surrender without any aggravating circumstance to offset the
same, the Court hereby sentences him to suffer two (2) indeterminate
penalties of four months and one day of arresto mayor as minimum to
three years, six months and twenty days as maximum; to indemnify
the Heirs of Francisco Dy. Jr. in the amount of P3,000,000.00 as
compensatory damages, P1,000,000.00 as moral damages, and
P1,030,000.00 as funeral expenses;

2. Ordering the plaintiff in Civil Case No. Br. 19-424 to pay the
defendant therein actual damages in the amount of P84,000.00; and
3. Ordering the dismissal of the complaint in Civil Case No. Br. 19-424.
No pronouncement as to costs.
SO ORDERED.
Cauayan, Isabela, June 6, 1992.
(Sgd.) ARTEMIO R. ALIVIA
Regional Trial Judge9
On September 3, 1992, petitioner and the accused filed a notice of appeal
from the joint decision. 10
On the other hand, private respondents moved for amendment of the
dispositive portion of the joint decision so as to hold petitioner subsidiarily
liable for the damages awarded to the private respondents in the event of
insolvency of the accused. 11
On October 26, 1992, the trial court rendered a supplemental decision
amending the dispositive portion by inserting an additional paragraph
reading as follows:
2:A Ordering the defendant Reyes Trucking Corporation subsidiarily
liable for all the damages awarded to the heirs of Francisco Dy, Jr., in
the event of insolvency of the accused but deducting therefrom the
damages of P84,000.00 awarded to said defendant in the next
preceding paragraph; and . . . 12
On November 12, 1992, petitioner filed with the trial court a supplemental
notice of appeal from the supplemental decision. 13
During the pendency of the appeal, the accused jumped bail and fled to a
foreign country. By resolution dated December 29, 1994, the Court of
Appeals dismissed the appeal of the accused in the criminal case. 14
On January 6, 1997, the Court of Appeals rendered an amended decision
affirming that of the trial court, as set out in the opening paragraph of this
decision. 15
On January 31, 1997, petitioner filed a motion for reconsideration of the
amended decision. 16
On April 21, 1997, the Court of Appeals denied petitioner's motion for
reconsideration for lack of merit 17
Hence, this petition for review.

18

On July 21, 1997, the Court required respondents to comment on the petition
within ten (10) days from notice. 19

On January 27, 1998, the Solicitor General filed his comment. 20 On April 13,
1998, the Court granted leave to petitioner to file a reply and noted the reply
it filed on March 11, 1998. 21
We now resolve to give due course to the petition and decide the case.
Petitioner raises three (3) grounds for allowance of the petition, which,
however, boil down to two (2) basic issues, namely:
1. May petitioner as owner of the truck involved in the accident be held
subsidiarily liable for the damages awarded to the offended parties in
the criminal action against the truck driver despite the filing of a
separate civil action by the offended parties against the employer of
the truck driver?
2. May the Court award damages to the offended parties in the
criminal case despite the filing of a civil action against the employer of
the truck driver; and in amounts exceeding that alleged in the
information for reckless imprudence resulting in homicide and damage
to property? 22
We grant the petition, resolving under the circumstances pro hac vice to
remand the cases to the trial court for determination of the civil liability of
petitioner as employer of the accused driver in the civil action quasi ex
delictore-opened for the purpose.
In negligence cases, the aggrieved party has the choice between (1) an
action to enforce civil liability arising from crime under Article 100 of the
Revised Penal Code; and (2) a separate action for quasi delict under Article
2176 of the Civil Code of the Philippines. Once the choice is made, the
injured party can not avail himself of any other remedy because he may not
recover damages twice for the same negligent act or omission of the
accused. 23This is the rule against double recovery.1wphi1.nt
In other words, "the same act or omission can create two kinds of liability on
the part of the offender, that is, civil liability ex delicto, and civil
liability quasi delicto" either of which "may be enforced against the culprit,
subject to the caveat under Article 2177 of the Civil Code that the offended
party can not recover damages under both types of liability." 24
In the instant case, the offended parties elected to file a separate civil action
for damages against petitioner as employer of the accused, based on quasi
delict, under Article 2176 of the Civil Code of the Philippines. Private
respondents sued petitioner Rafael Reyes Trucking Corporation, as the
employer of the accused, to be vicariously liable for the fault or negligence of
the latter. Under the law, this vicarious liability of the employer is founded on
at least two specific provisions of law.

The first is expressed in Article 2176 in relation to Article 2180 of the Civil
Code, which would allow an action predicated on quasi-delict to be instituted
by the injured party against the employer for an act or omission of the
employee and would necessitate only a preponderance of evidence to
prevail. Here, the liability of the employer for the negligent conduct of the
subordinate is direct and primary, subject to the defense of due diligence in
the selection and supervision of the employee. The enforcement of the
judgment against the employer in an action based on Article 2176 does not
require the employee to be insolvent since the nature of the liability of the
employer with that of the employee, the two being statutorily considered
joint tortfeasors, is solidary. 25 The second, predicated on Article 103 of the
Revised Penal Code, provides that an employer may be held subsidiarily
civilly liable for a felony committed by his employee in the discharge of his
duty. This liability attaches when the employee is convicted of a crime done
in the performance of his work and is found to be insolvent that renders him
unable to properly respond to the civil liability adjudged. 26
As regards the first issue, the answer is in the negative. Rafael Reyes
Trucking Corporation, as employer of the accused who has been adjudged
guilty in the criminal case for reckless imprudence, can not be held
subsidiarily liable because of the filing of the separate civil action based
on quasi delict against it. In view of the reservation to file, and the
subsequent filing of the civil action for recovery of civil liability, the same
was not instituted with the criminal action. Such separate civil action was for
recovery of damages under Article 2176 of the Civil Code, arising from the
same act or omission of the accused. 27
Pursuant to the provision of Rule 111, Section 1, paragraph 3 of the 1985
Rules of Criminal Procedure, when private respondents, as complainants in
the criminal action, reserved the right to file the separate civil action, they
waived other available civil actions predicated on the same act or omission
of the accused-driver. Such civil action includes the recovery of indemnity
under the Revised Penal Code, and damages under Articles 32, 33, and 34 of
the Civil Code of the Philippines arising from the same act or omission of the
accused. 28
The intention of private respondents to proceed primarily and directly
against petitioner as employer of accused truck driver became clearer when
they did not ask for the dismissal of the civil action against the latter based
onquasi delict.
Consequently, the Court of Appeals and the trial court erred in holding the
accused civilly liable, and petitioner-employer of the accused subsidiarily

liable for damages arising from crime (ex delicto) in the criminal action as
the offended parties in fact filed a separate civil action against the employer
based on quasi delict resulting in the waiver of the civil action ex delicto.
It might be argued that private respondents as complainants in the criminal
case withdrew the reservation to file a civil action against the driver
(accused) and manifested that they would pursue the civil liability of the
driver in the criminal action. However, the withdrawal is ineffective to
reverse the effect of the reservation earlier made because private
respondents did not withdraw the civil action against petitioner based
on quasi delict. In such a case, the provision of Rule 111, Section 1,
paragraph 3 of the 1985 Rules on Criminal Procedure is clear that the
reservation to file or the filing of a separate civil action results in a waiver of
other available civil actions arising from the same act or omission of the
accused. Rule 111, Section 1, paragraph 2 enumerated what are the civil
actions deemed waived upon such reservation or filing, and one of which is
the civil indemnity under the Revised Penal Code. Rule 111, Section 1,
paragraph 3 of the 1985 Rules on Criminal Procedure specifically provides:
A waiver of any of the civil actions extinguishes the others. The
institution of, or the reservation of the right to file, any of said civil
actions separately waives the others.
The rationale behind this rule is the avoidance of multiple suits between the
same litigants arising out of the same act or omission of the offender. The
restrictive phraseology of the section under consideration is meant to cover
all kinds of civil actions, regardless of their source in law, provided that the
action has for its basis the same act or omission of the offender. 29
However, petitioner as defendant in the separate civil action for damages
filed against it, based on quasi delict, may be held liable thereon. Thus, the
trial court grievously erred in dismissing plaintiff's civil complaint. And the
Court of Appeals erred in affirming the trial court's decision. Unfortunately
private respondents did not appeal from such dismissal and could not be
granted affirmative relief. 30
The Court, however, in exceptional cases has relaxed the rules "in order to
promote their objectives and assist the parties in obtaining just, speedy, and
inexpensive determination of every action or proceeding" 31 or exempted "a
particular case from the operation of the rules." 32
Invoking this principle, we rule that the trial court erred in awarding civil
damages in the criminal case and in dismissing the civil action. Apparently
satisfied with such award, private respondent did not appeal from the
dismissal of the civil case. However, petitioner did appeal. Hence, this case

should be remanded to the trial court so that it may render decision in the
civil case awarding damages as may be warranted by the evidence. 33
With regard to the second issue, the award of damages in the criminal case
was improper because the civil action for the recovery of civil liability was
waived in the criminal action by the filing of a separate civil action against
the employer. As enunciated in Ramos vs. Gonong, 34 "civil indemnity is not
part of the penalty for the crime committed." The only issue brought before
the trial court in the criminal action is whether accused Romeo Dunca y de
Tumol is guilty of reckless imprudence resulting in homicide and damage to
property. The action for recovery of civil liability is not included therein, but is
covered by the separate civil action filed against the petitioner as employer
of the accused truck-driver.
In this case, accused-driver jumped bail pending his appeal from his
conviction. Thus, the judgment convicting the accused became final and
executory, but only insofar as the penalty in the criminal action is concerned.
The damages awarded in the criminal action was invalid because of its
effective waiver. The pronouncement was void because the action for
recovery of the civil liability arising from the crime has been waived in said
criminal action.
With respect to the issue that the award of damages in the criminal action
exceeded the amount of damages alleged in the amended information, the
issue is de minimis. At any rate, the trial court erred in awarding damages in
the criminal case because by virtue of the reservation of the right to bring a
separate civil action or the filing thereof, "there would be no possibility that
the employer would be held liable because in such a case there would be no
pronouncement as to the civil liability of the accused. 35
As a final note, we reiterate that "the policy against double recovery requires
that only one action be maintained for the same act or omission whether the
action is brought against the employee or against his employer. 36 The
injured party must choose which of the available causes of action for
damages he will bring. 37
Parenthetically, the trial court found the accused "guilty beyond reasonable
doubt of the crime of Double Homicide Through Reckless Imprudence with
violation of the Motor Vehicle Law (Rep. Act No. 4136)". There is no such
nomenclature of an offense under the Revised Penal Code. Thus, the trial
court was misled to sentence the accused "to suffer two (2) indeterminate
penalties of four (4) months and one (1) day of arresto mayor, as minimum,
to three (3) years, six (6) months and twenty (20) days of prision
correccional, as maximum." This is erroneous because in reckless

imprudence cases, the actual penalty for criminal negligence bears no

relation to the individual willfull crime or crimes committed, but is set in
relation to a whole class, or series of crimes. 38
Unfortunately, we can no longer correct this judgment even if erroneous, as
it is, because it has become final and executory.
Under Article 365 of the Revised Penal Code, criminal negligence "is treated
as a mere quasi offense, and dealt with separately from willful offenses. It is
not a question of classification or terminology. In intentional crimes, the act
itself is punished; in negligence or imprudence, what is principally penalized
is the mental attitude or condition behind the act, the dangerous
recklessness, lack of care or foresight, the imprudencia punible. Much of the
confusion has arisen from the common use of such descriptive phrase as
"homicide through reckless imprudence", and the like; when the strict
technical sense is, more accurately, "reckless imprudence resulting in
homicide"; or "simple imprudence causing damages to property"." 39
There is need, therefore, to rectify the designation of the offense without
disturbing the imposed penalty for the guidance of bench and bar in strict
adherence to precedent.
WHEREFORE, the Court GRANTS the petition and SETS ASIDE the amended
decision and resolution of the Court of Appeals in CA-G.R. CR No. 14448,
promulgated on January 6, 1997, and the joint decision of the Regional Trial
Court, Isabela, Branch 19, Cauayan, in Criminal Case No. Br. 19-311 and Civil
Case No. Br. 19-424, dated June 6, 1992.
IN LIEU THEREOF, the Court renders judgment as follows:
(1) In Criminal Case No. Br. 19-311, the Court declares the accused
Romeo Dunca y de Tumol guilty beyond reasonable doubt of reckless
imprudence resulting in homicide and damage to property, defined and
penalized under Article 365, paragraph 2 of the Revised Penal Code,
with violation of the automobile law (R.A. No. 4136, as amended), and
sentences him to suffer two (2) indeterminate penalties of four (4)
months and one (1) day of arresto mayor, as minimum, to three (3)
years, six (6) months and twenty (20) days of prision correccional, as
maximum, 40 without indemnity, and to pay the costs, and
(2) In Civil Case No. Br. 19-424, the Court orders the case re-opened to
determine the liability of the defendant Rafael Reyes Trucking
Corporation to plaintiffs and that of plaintiffs on defendant's
counterclaim.
No costs in this instance.
SO ORDERED.

[G.R. No. 143360. September 5, 2002]

EQUITABLE LEASING CORPORATION, petitioner, vs. LUCITA SUYOM,
MARISSA
ENANO,
MYRNA
TAMAYO
and
FELIX
OLEDAN, respondents.
DECISION
PANGANIBAN, J.:
In an action based on quasi delict, the registered owner of a motor
vehicle is solidarily liable for the injuries and damages caused by the
negligence of the driver, in spite of the fact that the vehicle may have
already been the subject of an unregistered Deed of Sale in favor of another
person. Unless registered with the Land Transportation Office, the sale -while valid and binding between the parties -- does not affect third parties,
especially the victims of accidents involving the said transport
equipment. Thus, in the present case, petitioner, which is the registered
owner, is liable for the acts of the driver employed by its former lessee who
has become the owner of that vehicle by virtue of an unregistered Deed of
Sale.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court,
assailing the May 12, 2000 Decision [1] of the Court of Appeals[2] (CA) in CA-GR
CV No. 55474. The decretal portion of the Decision reads as follows:
WHEREFORE, premises considered, the instant appeal is
hereby DISMISSED for lack of merit. The assailed decision, dated May 5,
1997, of the Regional Trial Court of Manila, Branch 14, in Civil Case No. 9573522, is hereby AFFIRMED with MODIFICATIONthat the award of
attorneys fees is DELETED.[3]
On the other hand, in Civil Case No. 95-73522, the Regional Trial Court
(RTC) of Manila (Branch 14) had earlier disposed in this wise:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendant Equitable Leasing Corporation ordering said defendant
to pay to the plaintiffs the following:
A. TO MYRNA TAMAYO
1. the sum of P50,000.00 for the death of Reniel Tamayo;
2. P50,000.00 as moral damages; and

3. P56,000.00 for the damage to the store and its contents, and funeral
expenses.
B. TO FELIX OLEDAN
1. the sum of P50,000.00 for the death of Felmarie Oledan;
2. P50,000.00 as moral damages; and
3. P30,000.00 for medical expenses, and funeral expenses.
C. TO MARISSA ENANO
1. P7,000.00 as actual damages
D. TO LUCITA SUYOM
1. The sum of P5,000.00 for the medical treatment of her two sons.
The sum of P120,000.00 as and for attorneys fees.[4]
The Facts
On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into
the house cum store of Myrna Tamayo located at Pier 18, Vitas, Tondo,
Manila. A portion of the house was destroyed. Pinned to death under the
engine of the tractor were Respondent Myrna Tamayos son, Reniel Tamayo,
and Respondent Felix Oledans daughter, Felmarie Oledan. Injured were
Respondent Oledan himself, Respondent Marissa Enano, and two sons of
Respondent Lucita Suyom.
Tutor was charged with and later convicted of reckless imprudence
resulting in multiple homicide and multiple physical injuries in Criminal Case
No. 296094-SA, Metropolitan Trial Court of Manila, Branch 12.[5]
Upon verification with the Land Transportation Office, respondents were
furnished a copy of Official Receipt No. 62204139 [6] and Certificate of
Registration No. 08262797,[7] showing that the registered owner of the
tractor was Equitable Leasing Corporation/leased to Edwin Lim. On April
15, 1995, respondents filed against Raul Tutor, Ecatine Corporation
(Ecatine) and Equitable Leasing Corporation (Equitable) a Complaint [8] for
damages docketed as Civil Case No. 95-73522 in the RTC of Manila, Branch
14.
The trial court, upon motion of plaintiffs counsel, issued an Order
dropping Raul Tutor, Ecatine and Edwin Lim from the Complaint, because
they could not be located and served with summonses. [9] On the other hand,
in its Answer with Counterclaim, [10] petitioner alleged that the vehicle had
already been sold to Ecatine and that the former was no longer in possession
and control thereof at the time of the incident. It also claimed that Tutor was
an employee, not of Equitable, but of Ecatine.

After trial on the merits, the RTC rendered its Decision ordering petitioner
to pay actual and moral damages and attorneys fees to respondents. It held
that since the Deed of Sale between petitioner and Ecatine had not been
registered with the Land Transportation Office (LTO), the legal owner was still
Equitable.[11]Thus, petitioner was liable to respondents.[12]
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner was still to be legally
deemed the owner/operator of the tractor, even if that vehicle had been the
subject of a Deed of Sale in favor of Ecatine on December 9, 1992. The
reason cited by the CA was that the Certificate of Registration on file with the
LTO still remained in petitioners name.[13] In order that a transfer of
ownership of a motor vehicle can bind third persons, it must be duly
recorded in the LTO.[14]
The CA likewise upheld respondents claim for moral damages against
petitioner because the appellate court considered Tutor, the driver of the
tractor, to be an agent of the registered owner/operator.[15]
Hence, this Petition.[16]
Issues
In its Memorandum, petitioner raises the following issues for the Courts
consideration:
I
Whether or not the Court of Appeals and the trial court gravely erred when
they decided and held that petitioner [was] liable for damages suffered by
private respondents in an action based on quasi delict for the negligent acts
of a driver who [was] not the employee of the petitioner.
II
Whether or not the Court of Appeals and the trial court gravely erred when
they awarded moral damages to private respondents despite their failure to
prove that the injuries they suffered were brought by petitioners wrongful
act.[17]
This Courts Ruling
The Petition has no merit.
First Issue:
Liability for Wrongful Acts
Petitioner contends that it should not be held liable for the damages
sustained by respondents and that arose from the negligence of the driver of
the Fuso Road Tractor, which it had already sold to Ecatine at the time of the

accident. Not having employed Raul Tutor, the driver of the vehicle, it could
not have controlled or supervised him.[18]
We are not persuaded. In negligence cases, the aggrieved party may sue
the negligent party under (1) Article 100[19] of the Revised Penal Code, for
civil liabilityex delicto; or (2) under Article 2176[20] of the Civil Code, for civil
liability ex quasi delicto.[21]
Furthermore, under Article 103 of the Revised Penal Code, employers
may be held subsidiarily liable for felonies committed by their employees in
the discharge of the latters duties.[22] This liability attaches when the
employees who are convicted of crimes committed in the performance of
their work are found to be insolvent and are thus unable to satisfy the civil
liability adjudged.[23]
On the other hand, under Article 2176 in relation to Article 2180 [24] of the
Civil Code, an action predicated on quasi delict may be instituted against the
employer for an employees act or omission. The liability for the negligent
conduct of the subordinate is direct and primary, but is subject to the
defense of due diligence in the selection and supervision of the employee.
[25]
The enforcement of the judgment against the employer for an action
based on Article 2176 does not require the employee to be insolvent, since
the liability of the former is solidary -- the latter being statutorily considered
a joint tortfeasor.[26] To sustain a claim based on quasi delict, the following
requisites must be proven: (a) damage suffered by the plaintiff, (b) fault or
negligence of the defendant, and (c) connection of cause and effect between
the fault or negligence of the defendant and the damage incurred by the
plaintiff.[27]
These two causes of action (ex delicto or ex quasi delicto) may be availed
of, subject to the caveat[28] that the offended party cannot recover damages
twice for the same act or omission or under both causes. [29] Since these two
civil liabilities are distinct and independent of each other, the failure to
recover in one will not necessarily preclude recovery in the other.[30]
In the instant case, respondents -- having failed to recover anything in
the criminal case -- elected to file a separate civil action for damages, based
on quasi delict under Article 2176 of the Civil Code. [31] The evidence is clear
that the deaths and the injuries suffered by respondents and their kins were
due to the fault of the driver of the Fuso tractor.
Dated June 4, 1991, the Lease Agreement [32] between petitioner and
Edwin Lim stipulated that it is the intention of the parties to enter into a
FINANCE LEASE AGREEMENT.[33] Under such scheme, ownership of the
subject tractor was to be registered in the name of petitioner, until the value

of the vehicle has been fully paid by Edwin Lim. [34] Further, in the Lease
Schedule,[35] the monthly rental for the tractor was stipulated, and the term
of the Lease was scheduled to expire on December 4, 1992. After a few
months, Lim completed the payments to cover the full price of the tractor.
[36]
Thus, on December 9, 1992, a Deed of Sale [37] over the tractor was
executed by petitioner in favor of Ecatine represented by Edwin
Lim. However, the Deed was not registered with the LTO.
We hold petitioner liable for the deaths and the injuries complained of,
because it was the registered owner of the tractor at the time of the accident
on July 17, 1994.[38] The Court has consistently ruled that, regardless of sales
made of a motor vehicle, the registered owner is the lawful operator insofar
as the public and third persons are concerned; consequently, it is directly
and primarily responsible for the consequences of its operation. [39] In
contemplation of law, the owner/operator of record is the employer of the
driver, the actual operator and employer being considered as merely
its agent.[40] The same principle applies even if the registered owner of any
vehicle does not use it for public service.[41]
Since Equitable remained the registered owner of the tractor, it could not
escape primary liability for the deaths and the injuries arising from the
negligence of the driver.[42]
The finance-lease agreement between Equitable on the one hand and Lim
or Ecatine on the other has already been superseded by the sale. In any
event, it does not bind third persons. The rationale for this rule has been
aptly explained inErezo v. Jepte,[43] which we quote hereunder:
x x x. The main aim of motor vehicle registration is to identify the owner so
that if any accident happens, or that any damage or injury is caused by the
vehicle on the public highways, responsibility therefor can be fixed on a
definite individual, the registered owner. Instances are numerous where
vehicles running on public highways caused accidents or injuries to
pedestrians or other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor
vehicle registration is primarily ordained, in the interest of the determination
of persons responsible for damages or injuries caused on public
highways.[44]
Further, petitioners insistence on FGU Insurance Corp. v. Court of
Appeals is misplaced.[45] First, in FGU Insurance, the registered vehicle owner,
which was engaged in a rent-a-car business, rented out the car. In this case,
the registered owner of the truck, which is engaged in the business of

financing motor vehicle acquisitions, has actually sold the truck to Ecatine,
which in turn employed Tutor. Second, in FGU Insurance, the registered
owner of the vehicle was not held responsible for the negligent acts of the
person who rented one of its cars, because Article 2180 of the Civil Code was
not applicable. We held that no vinculum juris as employer and employee
existed between the owner and the driver. [46] In this case, the registered
owner of the tractor is considered under the law to be the employer of the
driver, while the actual operator is deemed to be its agent.[47] Thus,
Equitable, the registered owner of the tractor, is -- for purposes of the law on
quasi delict -- the employer of Raul Tutor, the driver of the tractor. Ecatine,
Tutors actual employer, is deemed as merely an agent of Equitable. [48]
True, the LTO Certificate of Registration, dated 5/31/91, qualifies the
name of the registered owner as EQUITABLE LEASING CORPORATION/Leased
to Edwin Lim. But the lease agreement between Equitable and Lim has
been overtaken by the Deed of Sale on December 9, 1992, between
petitioner and Ecatine. While this Deed does not affect respondents in this
quasi delict suit, it definitely binds petitioner because, unlike them, it is a
party to it.
We must stress that the failure of Equitable and/or Ecatine to register the
sale with the LTO should not prejudice respondents, who have the legal right
to rely on the legal principle that the registered vehicle owner is liable for the
damages caused by the negligence of the driver. Petitioner cannot hide
behind its allegation that Tutor was the employee of Ecatine. This will
effectively prevent respondents from recovering their losses on the basis of
the inaction or fault of petitioner in failing to register the sale. The nonregistration is the fault of petitioner, which should thus face the legal
consequences thereof.
Second Issue:
Moral Damages
Petitioner further claims that it is not liable for moral damages, because
respondents failed to establish or show the causal connection or relation
between the factual basis of their claim and their wrongful act or omission, if
any. [49]
Moral damages are not punitive in nature, but are designed to
compensate[50]and alleviate in some way the physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury unjustly caused a person.
[51]
Although incapable of pecuniary computation, moral damages must
nevertheless be somehow proportional to and in approximation of the

suffering inflicted.[52] This is so because moral damages are in the category of

an award designed to compensate the claimant for actual injury suffered, not
to impose a penalty on the wrongdoer.[53]
Viewed as an action for quasi delict, the present case falls squarely within
the purview of Article 2219 (2), [54] which provides for the payment of moral
damages in cases of quasi delict.[55] Having established the liability of
petitioner as the registered owner of the vehicle,[56] respondents have
satisfactorily shown the existence of the factual basis for the award [57] and its
causal connection to the acts of Raul Tutor, who is deemed as petitioners
employee.[58] Indeed, the damages and injuries suffered by respondents were
the proximate result of petitioners tortious act or omission.[59]
Further, no proof of pecuniary loss is necessary in order that moral
damages may be awarded, the amount of indemnity being left to the
discretion of the court.[60] The evidence gives no ground for doubt that such
discretion was properly and judiciously exercised by the trial court. [61] The
award is in fact consistent with the rule that moral damages are not intended
to enrich the injured party, but to alleviate the moral suffering undergone by
that party by reason of the defendants culpable action.[62]
WHEREFORE, the
Petition
is DENIED and
Decision AFFIRMED. Costs against petitioner.

the

assailed

SO ORDERED.

G.R. No. 141538

March 23, 2004

HERMANA R. CEREZO, petitioner,

vs.
DAVID TUAZON, respondent.

DECISION

CARPIO, J.:
The Case
This is a petition for review on certiorari1 to annul the Resolution2 dated 21
October 1999 of the Court of Appeals in CA-G.R. SP No. 53572, as well as its

Resolution dated 20 January 2000 denying the motion for reconsideration.

The Court of Appeals denied the petition for annulment of the
Decision3 dated 30 May 1995 rendered by the Regional Trial Court of Angeles
City, Branch 56 ("trial court"), in Civil Case No. 7415. The trial court ordered
petitioner Hermana R. Cerezo ("Mrs. Cerezo") to pay respondent David
Tuazon ("Tuazon") actual damages, loss of earnings, moral damages, and
costs of suit.
Antecedent Facts
Around noontime of 26 June 1993, a Country Bus Lines passenger bus with
plate number NYA 241 collided with a tricycle bearing plate number TC RV
126 along Captain M. Palo Street, Sta. Ines, Mabalacat, Pampanga. On 1
October 1993, tricycle driver Tuazon filed a complaint for damages against
Mrs. Cerezo, as owner of the bus line, her husband Attorney Juan Cerezo
("Atty. Cerezo"), and bus driver Danilo A. Foronda ("Foronda"). The complaint
alleged that:
7. At the time of the incident, plaintiff [Tuazon] was in his proper lane
when the second-named defendant [Foronda], being then the driver
and person in charge of the Country Bus with plate number NYA 241,
did then and there willfully, unlawfully, and feloniously operate the said
motor vehicle in a negligent, careless, and imprudent manner without
due regard to traffic rules and regulations, there being a "Slow Down"
sign near the scene of the incident, and without taking the necessary
precaution to prevent loss of lives or injuries, his negligence,
carelessness and imprudence resulted to severe damage to the tricycle
and serious physical injuries to plaintiff thus making him unable to walk
and becoming disabled, with his thumb and middle finger on the left
hand being cut[.]4
On 1 October 1993, Tuazon filed a motion to litigate as a pauper.
Subsequently, the trial court issued summons against Atty. Cerezo and Mrs.
Cerezo ("the Cerezo spouses") at the Makati address stated in the complaint.
However, the summons was returned unserved on 10 November 1993 as the
Cerezo spouses no longer held office nor resided in Makati. On 18 April 1994,
the trial court issued alias summons against the Cerezo spouses at their
address in Barangay Sta. Maria, Camiling, Tarlac. The alias summons and a
copy of the complaint were finally served on 20 April 1994 at the office of
Atty. Cerezo, who was then working as Tarlac Provincial Prosecutor. Atty.
Cerezo reacted angrily on learning of the service of summons upon his
person. Atty. Cerezo allegedly told Sheriff William Canlas: "Punyeta, ano ang

gusto mong mangyari? Gusto mong hindi ka makalabas ng buhay dito?

Teritoryo ko ito. Wala ka sa teritoryo mo."5
The records show that the Cerezo spouses participated in the proceedings
before the trial court. The Cerezo spouses filed a comment with motion for
bill of particulars dated 29 April 1994 and a reply to opposition to comment
with motion dated 13 June 1994.6 On 1 August 1994, the trial court issued an
order directing the Cerezo spouses to file a comment to the opposition to the
bill of particulars. Atty. Elpidio B. Valera ("Atty. Valera") of Valera and Valera
Law Offices appeared on behalf of the Cerezo spouses. On 29 August 1994,
Atty. Valera filed an urgent ex-parte motion praying for the resolution of
Tuazons motion to litigate as a pauper and for the issuance of new summons
on the Cerezo spouses to satisfy proper service in accordance with the Rules
of Court.7
On 30 August 1994, the trial court issued an order resolving Tuazons motion
to litigate as a pauper and the Cerezo spouses urgent ex-parte motion. The
order reads:
At the hearing on August 30, 1994, the plaintiff [Tuazon] testified that
he is presently jobless; that at the time of the filing of this case, his son
who is working in Malaysia helps him and sends him once in a while
P300.00 a month, and that he does not have any real property.
Attached to the Motion to Litigate as Pauper are his Affidavit that he is
unemployed; a Certification by the Barangay Captain of his poblacion
that his income is not enough for his familys subsistence; and a
Certification by the Office of the Municipal Assessor that he has no
landholding in the Municipality of Mabalacat, Province of Pampanga.
The Court is satisfied from the unrebutted testimony of the plaintiff
that he is entitled to prosecute his complaint in this case as a pauper
under existing rules.
On the other hand, the Court denies the prayer in the Appearance and
Urgent Ex-Parte Motion requiring new summons to be served to the
defendants. The Court is of the opinion that any infirmity in the service
of the summons to the defendant before plaintiff was allowed to
prosecute his complaint in this case as a pauper has been cured by this
Order.
If within 15 days from receipt of this Order, the defendants do not
question on appeal this Order of this Court, the Court shall proceed to
resolve the Motion for Bill of Particulars.8
On 27 September 1994, the Cerezo spouses filed an urgent ex-parte motion
for reconsideration. The trial court denied the motion for reconsideration.

On 14 November 1994, the trial court issued an order directing the Cerezo
spouses to file their answer within fifteen days from receipt of the order. The
Cerezo spouses did not file an answer. On 27 January 1995, Tuazon filed a
motion to declare the Cerezo spouses in default. On 6 February 1995, the
trial court issued an order declaring the Cerezo spouses in default and
authorizing Tuazon to present his evidence. 9
On 30 May 1995, after considering Tuazons testimonial and documentary
evidence, the trial court ruled in Tuazons favor. The trial court made no
pronouncement on Forondas liability because there was no service of
summons on him. The trial court did not hold Atty. Cerezo liable as Tuazon
failed to show that Mrs. Cerezos business benefited the family, pursuant to
Article 121(3) of the Family Code. The trial court held Mrs. Cerezo solely
liable for the damages sustained by Tuazon arising from the negligence of
Mrs. Cerezos employee, pursuant to Article 2180 of the Civil Code. The
dispositive portion of the trial courts decision reads:
WHEREFORE, judgment is hereby rendered ordering the defendant
Hermana Cerezo to pay the plaintiff:
a) For Actual Damages

- P69,485.35

1) Expenses for operation and medical

Treatment
2) Cost of repair of the tricycle
b) For loss of earnings

- 39,921.00

c) For moral damages

- 43,300.00

d) And to pay the cost of the suit.

- 20,000.00

The docket fees and other expenses in the filing of this suit shall be
lien on whatever judgment may be rendered in favor of the plaintiff.
SO ORDERED.10
Mrs. Cerezo received a copy of the decision on 25 June 1995. On 10 July
1995, Mrs. Cerezo filed before the trial court a petition for relief from
judgment on the grounds of "fraud, mistake or excusable negligence."
Testifying before the trial court, both Mrs. Cerezo and Atty. Valera denied
receipt of notices of hearings and of orders of the court. Atty. Valera added
that he received no notice before or during the 8 May 1995 elections, "when
he was a senatorial candidate for the KBL Party, and very busy, using his
office and residence as Party National Headquarters." Atty. Valera claimed
that he was able to read the decision of the trial court only after Mrs. Cerezo
sent him a copy.11

Tuazon did not testify but presented documentary evidence to prove the
participation of the Cerezo spouses in the case. Tuazon presented the
following exhibits:
Exhibit 1

- Sheriffs return and summons;

Exhibit 1-A - Alias summons dated April 20, 1994;

Exhibit 2

- Comment with Motion;

Exhibit 3

- Minutes of the hearing held on August 1, 1994;

Exhibit 3-A - Signature of defendants counsel;

Exhibit 4

- Minutes of the hearing held on August 30, 1994;

Exhibit 4-A - Signature of the defendants counsel;

Exhibit 5

- Appearance and Urgent Ex-Parte Motion;

Exhibit 6

- Order dated November 14, 1994;

Exhibit 6-A - Postal certification dated January 13, 1995;

Exhibit 7

- Order dated February [illegible];

Exhibit 7-A - Courts return slip addressed to Atty. Elpidio Valera;

Exhibit 7-B - Courts return slip addressed to Spouses Juan and
Hermana Cerezo;
Exhibit 8

- Decision dated May [30], 1995

Exhibit 8-A - Courts return slip addressed to defendant Hermana

Cerezo;
Exhibit 8-B - Courts return slip addressed to defendants counsel,
Atty. Elpidio Valera;
Exhibit 9

- Order dated September 21, 1995;

Exhibit 9-A - Second Page of Exhibit 9;

Exhibit 9-B - Third page of Exhibit 9;
Exhibit 9-C - Fourth page of Exhibit 9;
Exhibit 9-D - Courts return slip addressed to Atty. Elpidio Valera;
and
Exhibit 9-E - Courts return slip addressed to plaintiffs counsel, Atty.
Norman Dick de Guzman.12
On 4 March 1998, the trial court issued an order13 denying the petition for
relief from judgment. The trial court stated that having received the decision
on 25 June 1995, the Cerezo spouses should have filed a notice of appeal
instead of resorting to a petition for relief from judgment. The trial court
refused to grant relief from judgment because the Cerezo spouses could

have availed of the remedy of appeal. Moreover, the Cerezo spouses not only
failed to prove fraud, accident, mistake or excusable negligence by
conclusive evidence, they also failed to prove that they had a good and
substantial defense. The trial court noted that the Cerezo spouses failed to
appeal because they relied on an expected settlement of the case.
The Cerezo spouses subsequently filed before the Court of Appeals a petition
for certiorari under Section 1 of Rule 65. The petition was docketed as CAG.R. SP No. 48132.14 The petition questioned whether the trial court acquired
jurisdiction over the case considering there was no service of summons on
Foronda, whom the Cerezo spouses claimed was an indispensable party. In a
resolution15 dated 21 January 1999, the Court of Appeals denied the petition
for certiorari and affirmed the trial courts order denying the petition for relief
from judgment. The Court of Appeals declared that the Cerezo spouses
failure to file an answer was due to their own negligence, considering that
they continued to participate in the proceedings without filing an answer.
There was also nothing in the records to show that the Cerezo spouses
actually offered a reasonable settlement to Tuazon. The Court of Appeals also
denied Cerezo spouses motion for reconsideration for lack of merit.
The Cerezo spouses filed before this Court a petition for review
on certiorari under Rule 45. Atty. Cerezo himself signed the petition,
docketed as G.R. No. 137593. On 13 April 1999, this Court rendered a
resolution denying the petition for review on certiorari for failure to attach an
affidavit of service of copies of the petition to the Court of Appeals and to the
adverse parties. Even if the petition complied with this requirement, the
Court would still have denied the petition as the Cerezo spouses failed to
show that the Court of Appeals committed a reversible error. The Courts
resolution was entered in the Book of Entries and Judgments when it became
final and executory on 28 June 1999.16
Undaunted, the Cerezo spouses filed before the Court of Appeals on 6 July
1999 a petition for annulment of judgment under Rule 47 with prayer for
restraining order. Atty. Valera and Atty. Dionisio S. Daga ("Atty. Daga")
represented Mrs. Cerezo in the petition, docketed as CA-G.R. SP No.
53572.17 The petition prayed for the annulment of the 30 May 1995 decision
of the trial court and for the issuance of a writ of preliminary injunction
enjoining execution of the trial courts decision pending resolution of the
petition.
The Court of Appeals denied the petition for annulment of judgment in a
resolution dated 21 October 1999. The resolution reads in part:

In this case, records show that the petitioner previously filed with the
lower court a Petition for Relief from Judgment on the ground that they
were wrongfully declared in default while waiting for an amicable
settlement of the complaint for damages. The court a quo correctly
ruled that such petition is without merit. The defendant spouses admit
that during the initial hearing they appeared before the court and even
mentioned the need for an amicable settlement. Thus, the lower court
acquired jurisdiction over the defendant spouses.
Therefore, petitioner having availed of a petition for relief, the remedy
of an annulment of judgment is no longer available. The proper action
for the petitioner is to appeal the order of the lower court denying the
petition for relief.
Wherefore, the instant petition could not be given due course and
should accordingly be dismissed.
SO ORDERED.18
On 20 January 2000, the Court of Appeals denied the Cerezo spouses motion
for reconsideration.19 The Court of Appeals stated:
A distinction should be made between a courts jurisdiction over a
person and its jurisdiction over the subject matter of a case. The
former is acquired by the proper service of summons or by the parties
voluntary appearance; while the latter is conferred by law.
Resolving the matter of jurisdiction over the subject matter, Section
19(1) of B[atas] P[ambansa] 129 provides that Regional Trial Courts
shall exercise exclusive original jurisdiction in all civil actions in which
the subject of the litigation is incapable of pecuniary estimation. Thus
it was proper for the lower court to decide the instant case for
damages.
Unlike jurisdiction over the subject matter of a case which is absolute
and conferred by law; any defects [sic] in the acquisition of jurisdiction
over a person (i.e., improper filing of civil complaint or improper
service of summons) may be waived by the voluntary appearance of
parties.
The lower court admits the fact that no summons was served on
defendant Foronda. Thus, jurisdiction over the person of defendant
Foronda was not acquired, for which reason he was not held liable in
this case. However, it has been proven that jurisdiction over the other
defendants was validly acquired by the court a quo.
The defendant spouses admit to having appeared in the initial hearings
and in the hearing for plaintiffs motion to litigate as a pauper. They

even mentioned conferences where attempts were made to reach an

amicable settlement with plaintiff. However, the possibility of amicable
settlement is not a good and substantial defense which will warrant the
granting of said petition.
xxx
Assuming arguendo that private respondent failed to reserve his right
to institute a separate action for damages in the criminal action, the
petitioner cannot now raise such issue and question the lower courts
jurisdiction because petitioner and her husband have waived such right
by voluntarily appearing in the civil case for damages. Therefore, the
findings and the decision of the lower court may bind them.
Records show that the petitioner previously filed with the lower court a
Petition for Relief from Judgment on the ground that they were
wrongfully declared in default while waiting for an amicable settlement
of the complaint for damages. The court a quo correctly ruled that such
petition is without merit, jurisdiction having been acquired by the
voluntary appearance of defendant spouses.
Once again, it bears stressing that having availed of a petition for
relief, the remedy of annulment of judgment is no longer available.
Based on the foregoing, the motion for reconsideration could not be
given due course and is hereby DENIED.
SO ORDERED.20
The Issues
On 7 February 2000, Mrs. Cerezo, this time with Atty. Daga alone
representing her, filed the present petition for review on certiorari before this
Court. Mrs. Cerezo claims that:
1. In dismissing the Petition for Annulment of Judgment, the Court of
Appeals assumes that the issues raised in the petition for annulment is
based on extrinsic fraud related to the denied petition for relief
notwithstanding that the grounds relied upon involves questions of lack
of jurisdiction.
2. In dismissing the Petition for Annulment, the Court of Appeals
disregarded the allegation that the lower court[s] findings of
negligence against defendant-driver Danilo Foronda [whom] the lower
court did not summon is null and void for want of due process and
consequently, such findings of negligence which is [sic] null and void
cannot become the basis of the lower court to adjudge petitioneremployer liable for civil damages.

3. In dismissing the Petition for Annulment, the Court of Appeals

ignored the allegation that defendant-driver Danilo A. Foronda whose
negligence is the main issue is an indispensable party whose presence
is compulsory but [whom] the lower court did not summon.
4. In dismissing the Petition for Annulment, the Court of Appeals ruled
that assuming arguendo that private respondent failed to reserve his
right to institute a separate action for damages in the criminal action,
the petitioner cannot now raise such issue and question the lower
courts jurisdiction because petitioner [has] waived such right by
voluntarily appearing in the civil case for damages notwithstanding
that lack of jurisdiction cannot be waived.21
The Courts Ruling
The petition has no merit. As the issues are interrelated, we shall discuss
them jointly.
Remedies Available to a Party Declared in Default
An examination of the records of the entire proceedings shows that three
lawyers filed and signed pleadings on behalf of Mrs. Cerezo, namely, Atty.
Daga, Atty. Valera, and Atty. Cerezo. Despite their number, Mrs. Cerezos
counsels failed to avail of the proper remedies. It is either by sheer ignorance
or by malicious manipulation of legal technicalities that they have managed
to delay the disposition of the present case, to the detriment of pauper
litigant Tuazon.
Mrs. Cerezo claims she did not receive any copy of the order declaring the
Cerezo spouses in default. Mrs. Cerezo asserts that she only came to know of
the default order on 25 June 1995, when she received a copy of the decision.
On 10 July 1995, Mrs. Cerezo filed before the trial court a petition for relief
from judgment under Rule 38, alleging "fraud, mistake, or excusable
negligence" as grounds. On 4 March 1998, the trial court denied Mrs.
Cerezos petition for relief from judgment. The trial court stated that Mrs.
Cerezo could have availed of appeal as a remedy and that she failed to prove
that the judgment was entered through fraud, accident, mistake, or
excusable negligence. Mrs. Cerezo then filed before the Court of Appeals a
petition for certiorari under Section 1 of Rule 65 assailing the denial of the
petition for relief from judgment. On 21 January 1999, the Court of Appeals
dismissed Mrs. Cerezos petition. On 24 February 1999, the appellate court
denied Mrs. Cerezos motion for reconsideration. On 11 March 1999, Mrs.
Cerezo filed before this Court a petition for review on certiorari under Rule
45, questioning the denial of the petition for relief from judgment. We denied
the petition and our resolution became final and executory on 28 June 1999.

On 6 July 1999, a mere eight days after our resolution became final and
executory, Mrs. Cerezo filed before the Court of Appeals a petition for
annulment of the judgment of the trial court under Rule 47. Meanwhile, on
25 August 1999, the trial court issued over the objection of Mrs. Cerezo an
order of execution of the judgment in Civil Case No. 7415. On 21 October
1999, the Court of Appeals dismissed the petition for annulment of
judgment. On 20 January 2000, the Court of Appeals denied Mrs. Cerezos
motion for reconsideration. On 7 February 2000, Mrs. Cerezo filed the present
petition for review on certiorari under Rule 45 challenging the dismissal of
her petition for annulment of judgment.
Lina v. Court of Appeals22 enumerates the remedies available to a party
declared in default:
a) The defendant in default may, at any time after discovery thereof
and before judgment, file a motion under oath to set aside the
order of default on the ground that his failure to answer was due to
fraud, accident, mistake or excusable negligence, and that he has a
meritorious defense (Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]);
b) If the judgment has already been rendered when the defendant
discovered the default, but before the same has become final and
executory, he may file a motion for new trial under Section 1 (a) of
Rule 37;
c) If the defendant discovered the default after the judgment has
become final and executory, he may file apetition for relief under
Section 2 [now Section 1] of Rule 38; and
d) He may also appeal from the judgment rendered against him as
contrary to the evidence or to the law, even if no petition to set aside
the order of default has been presented by him (Sec. 2, Rule 41).
(Emphasis added)
Moreover, a petition for certiorari to declare the nullity of a judgment by
default is also available if the trial court improperly declared a party in
default, or even if the trial court properly declared a party in default, if grave
abuse of discretion attended such declaration.23
Mrs. Cerezo admitted that she received a copy of the trial courts decision on
25 June 1995. Based on this admission, Mrs. Cerezo had at least three
remedies at her disposal: an appeal, a motion for new trial, or a petition
for certiorari.
Mrs. Cerezo could have appealed under Rule 4124 from the default judgment
within 15 days from notice of the judgment. She could have availed of the
power of the Court of Appeals to try cases and conduct hearings, receive

evidence, and perform all acts necessary to resolve factual issues raised in
cases falling within its appellate jurisdiction.25
Mrs. Cerezo also had the option to file under Rule 3726 a motion for new trial
within the period for taking an appeal. If the trial court grants a new trial, the
original judgment is vacated, and the action will stand for trial de novo. The
recorded evidence taken in the former trial, as far as the same is material
and competent to establish the issues, shall be used at the new trial without
retaking the same.27
Mrs. Cerezo also had the alternative of filing under Rule 6528 a petition
for certiorari assailing the order of default within 60 days from notice of the
judgment. An order of default is interlocutory, and an aggrieved party may
file an appropriate special civil action under Rule 65.29 In a petition
for certiorari, the appellate court may declare void both the order of default
and the judgment of default.
Clearly, Mrs. Cerezo had every opportunity to avail of these remedies within
the reglementary periods provided under the Rules of Court. However, Mrs.
Cerezo opted to file a petition for relief from judgment, which is
availableonly in exceptional cases. A petition for relief from judgment
should be filed within the reglementary period of 60 days from knowledge of
judgment and six months from entry of judgment, pursuant to
Rule 38 of the Rules of Civil Procedure.30 Tuason v. Court of
Appeals31 explained the nature of a petition for relief from judgment:
When a party has another remedy available to him, which may either
be a motion for new trial or appeal from an adverse decision of the trial
court, and he was not prevented by fraud, accident, mistake or
excusable negligence from filing such motion or taking such appeal, he
cannot avail himself of this petition. Indeed, relief will not be granted to
a party who seeks avoidance from the effects of the judgment when
the loss of the remedy at law was due to his own negligence; otherwise
the petition for relief can be used to revive the right to appeal which
has been lost thru inexcusable negligence.
Evidently, there was no fraud, accident, mistake, or excusable negligence
that prevented Mrs. Cerezo from filing an appeal, a motion for new trial or a
petition for certiorari. It was error for her to avail of a petition for relief from
judgment.
After our resolution denying Mrs. Cerezos petition for relief became final and
executory, Mrs. Cerezo, in her last ditch attempt to evade liability, filed
before the Court of Appeals a petition for annulment of the judgment of the
trial court. Annulment is available only on the grounds of extrinsic fraud and

lack of jurisdiction. If based on extrinsic fraud, a party must file the petition
within four years from its discovery, and if based on lack of jurisdiction,
before laches or estoppel bars the petition. Extrinsic fraud is not a valid
ground if such fraud was used as a ground, or could have been used as a
ground, in a motion for new trial or petition for relief from judgment.32
Mrs. Cerezo insists that lack of jurisdiction, not extrinsic fraud, was her
ground for filing the petition for annulment of judgment. However, a party
may avail of the remedy of annulment of judgment under Rule 47 only if the
ordinary remedies of new trial, appeal, petition for relief from judgment, or
other appropriate remedies are no longer available through no fault of the
party.33 Mrs. Cerezo could have availed of a new trial or appeal but through
her own fault she erroneously availed of the remedy of a petition for relief,
which was denied with finality. Thus, Mrs. Cerezo may no longer avail of the
remedy of annulment.
In any event, the trial court clearly acquired jurisdiction over Mrs. Cerezos
person. Mrs. Cerezo actively participated in the proceedings before the trial
court, submitting herself to the jurisdiction of the trial court. The defense of
lack of jurisdiction fails in light of her active participation in the trial court
proceedings. Estoppel or laches may also bar lack of jurisdiction as a ground
for nullity especially if raised for the first time on appeal by a party who
participated in the proceedings before the trial court, as what happened in
this case.34
For these reasons, the present petition should be dismissed for utter lack of
merit. The extraordinary action to annul a final judgment is restricted to the
grounds specified in the rules. The reason for the restriction is to prevent this
extraordinary action from being used by a losing party to make a complete
farce of a duly promulgated decision that has long become final and
executory. There would be no end to litigation if parties who have
unsuccessfully availed of any of the appropriate remedies or lost them
through their fault could still bring an action for annulment of
judgment.35 Nevertheless, we shall discuss the issues raised in the present
petition to clear any doubt about the correctness of the decision of the trial
court.
Mrs. Cerezos Liability and the Trial Courts Acquisition of
Jurisdiction
Mrs. Cerezo contends that the basis of the present petition for annulment is
lack of jurisdiction. Mrs. Cerezo asserts that the trial court could not validly
render judgment since it failed to acquire jurisdiction over Foronda. Mrs.
Cerezo points out that there was no service of summons on Foronda.

Moreover, Tuazon failed to reserve his right to institute a separate civil action
for damages in the criminal action. Such contention betrays a faulty
foundation. Mrs. Cerezos contention proceeds from the point of view of
criminal law and not of civil law, while the basis of the present action of
Tuazon is quasi-delict under the Civil Code, not delict under the Revised
Penal Code.
The same negligent act may produce civil liability arising from a delict under
Article 103 of the Revised Penal Code, or may give rise to an action for a
quasi-delict under Article 2180 of the Civil Code. An aggrieved party may
choose between the two remedies. An action based on a quasi-delict may
proceed independently from the criminal action.36 There is, however, a
distinction between civil liability arising from a delict and civil liability arising
from a quasi-delict. The choice of remedy, whether to sue for a delict or a
quasi-delict, affects the procedural and jurisdictional issues of the action.37
Tuazon chose to file an action for damages based on a quasi-delict. In his
complaint, Tuazon alleged that Mrs. Cerezo, "without exercising due care and
diligence in the supervision and management of her employees and buses,"
hired Foronda as her driver. Tuazon became disabled because of Forondas
"recklessness, gross negligence and imprudence," aggravated by Mrs.
Cerezos "lack of due care and diligence in the selection and supervision of
her employees, particularly Foronda."38
The trial court thus found Mrs. Cerezo liable under Article 2180 of the Civil
Code. Article 2180 states in part:
Employers shall be liable for the damages caused by their employees
and household helpers acting within the scope of their assigned tasks,
even though the former are not engaged in any business or industry.
Contrary to Mrs. Cerezos assertion, Foronda is not an indispensable party to
the case. An indispensable party is one whose interest is affected by the
courts action in the litigation, and without whom no final resolution of the
case is possible.39 However, Mrs. Cerezos liability as an employer in an
action for a quasi-delict is not only solidary, it is also primary and direct.
Foronda is not an indispensable party to the final resolution of Tuazons
action for damages against Mrs. Cerezo.
The responsibility of two or more persons who are liable for a quasi-delict is
solidary.40 Where there is a solidary obligation on the part of debtors, as in
this case, each debtor is liable for the entire obligation. Hence, each debtor
is liable to pay for the entire obligation in full. There is no merger or
renunciation of rights, but only mutual representation.41 Where the obligation
of the parties is solidary, either of the parties is indispensable, and the other

is not even a necessary party because complete relief is available from

either.42 Therefore, jurisdiction over Foronda is not even necessary as Tuazon
may collect damages from Mrs. Cerezo alone.
Moreover, an employers liability based on a quasi-delict is primary and
direct, while the employers liability based on a delict is merely
subsidiary.43 The words "primary and direct," as contrasted with "subsidiary,"
refer to the remedy provided by law for enforcing the obligation rather than
to the character and limits of the obligation.44Although liability under Article
2180 originates from the negligent act of the employee, the aggrieved party
may sue the employer directly. When an employee causes damage, the law
presumes that the employer has himself committed an act of negligence in
not preventing or avoiding the damage. This is the fault that the law
condemns. While the employer is civilly liable in a subsidiary capacity for the
employees criminal negligence, the employer is also civilly liable directly
and separately for his own civil negligence in failing to exercise due diligence
in selecting and supervising his employee. The idea that the employers
liability is solely subsidiary is wrong.45
The action can be brought directly against the person responsible (for
another), without including the author of the act. The action against
the principal is accessory in the sense that it implies the existence of a
prejudicial act committed by the employee, but it is not subsidiary in
the sense that it can not be instituted till after the judgment against
the author of the act or at least, that it is subsidiary to the principal
action; the action for responsibility (of the employer) is in itself a
principal action.46
Thus, there is no need in this case for the trial court to acquire jurisdiction
over Foronda. The trial courts acquisition of jurisdiction over Mrs. Cerezo is
sufficient to dispose of the present case on the merits.
In contrast, an action based on a delict seeks to enforce the subsidiary
liability of the employer for the criminal negligence of the employee as
provided in Article 103 of the Revised Penal Code. To hold the employer liable
in a subsidiary capacity under a delict, the aggrieved party must initiate a
criminal action where the employees delict and corresponding primary
liability are established.47 If the present action proceeds from a delict, then
the trial courts jurisdiction over Foronda is necessary. However, the present
action is clearly for the quasi-delict of Mrs. Cerezo and not for the delict of
Foronda.
The Cerezo spouses contention that summons be served anew on them is
untenable in light of their participation in the trial court proceedings. To

uphold the Cerezo spouses contention would make a fetish of a

technicality.48Moreover, any irregularity in the service of summons that might
have vitiated the trial courts jurisdiction over the persons of the Cerezo
spouses was deemed waived when the Cerezo spouses filed a petition for
relief from judgment.49
We hold that the trial court had jurisdiction and was competent to decide the
case in favor of Tuazon and against Mrs. Cerezo even in the absence of
Foronda. Contrary to Mrs. Cerezos contention, Foronda is not an
indispensable party to the present case. It is not even necessary for Tuazon
to reserve the filing of a separate civil action because he opted to file a civil
action for damages against Mrs. Cerezo who is primarily and directly liable
for her own civil negligence. The words of Justice Jorge Bocobo in Barredo v.
Garcia still hold true today as much as it did in 1942:
x x x [T]o hold that there is only one way to make defendants liability
effective, and that is, to sue the driver and exhaust his (the latters)
property first, would be tantamount to compelling the plaintiff to follow
a devious and cumbersome method of obtaining relief. True, there is
such a remedy under our laws, but there is also a more expeditious
way, which is based on the primary and direct responsibility of the
defendant under article [2180] of the Civil Code. Our view of the law is
more likely to facilitate remedy for civil wrongs, because the procedure
indicated by the defendant is wasteful and productive of delay, it being
a matter of common knowledge that professional drivers of taxis and
other similar public conveyances do not have sufficient means with
which to pay damages. Why, then, should the plaintiff be required in all
cases to go through this roundabout, unnecessary, and probably
useless procedure? In construing the laws, courts have endeavored to
shorten and facilitate the pathways of right and justice.50
Interest at the rate of 6% per annum is due on the amount of damages
adjudged by the trial court.51 The 6% per annum interest shall commence
from 30 May 1995, the date of the decision of the trial court. Upon finality of
this decision, interest at 12% per annum, in lieu of 6% per annum, is due on
the amount of damages adjudged by the trial court until full payment.
WHEREFORE, we DENY the instant petition for review. The Resolution dated
21 October 1999 of the Court of Appeals in CA-G.R. SP No. 53572, as well as
its Resolution dated 20 January 2000 denying the motion for reconsideration,
is AFFIRMED with the MODIFICATION that the amount due shall earn legal
interest at 6% per annum computed from 30 May 1995, the date of the trial

courts decision. Upon finality of this decision, the amount due shall earn
interest at 12% per annum, in lieu of 6% per annum, until full payment.
SO ORDERED.

G.R. No. 108017 April 3, 1995

MARIA BENITA A. DULAY, in her own behalf and in behalf of the
minor children KRIZTEEN ELIZABETH, BEVERLY MARIE and
NAPOLEON II, all surnamed DULAY, petitioners,
vs.
THE COURT OF APPEALS, Former Eighth Division, HON. TEODORO P.
REGINO, in his capacity as Presiding Judge of the Regional Trial
Court National Capital Region, Quezon City, Br. 84, SAFEGUARD
INVESTIGATION AND SECURITY CO., INC., and SUPERGUARD
SECURITY CORPORATION, respondents.
BIDIN, J.:
This petition for certiorari prays for the reversal of the decision of the Court
of Appeals dated October 29, 1991 in CA-G.R. CV No. 24646 which affirmed
the order of the Regional Trial Court dismissing Civil Case No. Q-89-1751, and
its resolution dated November 17, 1991 denying herein, petitioner's motion
for reconsideration.
The antecedent facts of the case are as follows:
On December 7, 1988, an altercation between Benigno Torzuela and Atty.
Napoleon Dulay occurred at the "Big Bang Sa Alabang," Alabang Village,
Muntinlupa as a result of which Benigno Torzuela, the security guard on duty
at the said carnival, shot and killed Atty. Napoleon Dulay.
Herein petitioner Maria Benita A. Dulay, widow of the deceased Napoleon
Dulay, in her own behalf and in behalf of her minor children, filed on
February 8, 1989 an action for damages against Benigno Torzuela and herein
private respondents Safeguard Investigation and Security Co., Inc.,
("SAFEGUARD") and/or Superguard Security Corp. ("SUPERGUARD"), alleged
employers of defendant Torzuela. The complaint, docketed as Civil Case No.
Q-89-1751 among others alleges the following:

1. . . .
Defendants SAFEGUARD INVESTIGATION AND SECURITY CO.,
INC., (Defendant Safeguard) and SUPERGUARD SECURITY
CORPORATION (Defendant Superguard) are corporations duly
organized and existing in accordance with Philippine laws, with
offices at 10th Floor, Manufacturers Building, Inc., Plaza Santa
Cruz, Manila. They are impleaded as alternative defendants for,
while the former appears to be the employer of defendant
BENIGNO TORZUELA (defendant TORZUELA), the latter impliedly
acknowledged responsibility for the acts of defendant TORZUELA
by extending its sympathies to plaintiffs.
Defendant BENIGNO TORZUELA is of legal age, an employee of
defendant SAFEGUARD and/or defendant SUPERGUARD and, at
the time of the incident complained of, was under their control
and supervision. . . .
3. On December 7, 1988 at around 8:00 a.m., defendant
TORZUELA, while he was on duty as security guard at the "Big
Bang sa Alabang," Alabang Village, Muntinlupa, Metro Manila
shot and killed NAPOLEON V. DULAY with a .38 caliber revolver
belonging to defendant SAFEGUARD, and/or SUPERGUARD (per
Police Report dated January 7, 1989, copy attached as Annex A);
4. The incident resulting in the death of NAPOLEON V. DULAY was
due to the concurring negligence of the defendants. Defendant
TORZUELA'S wanton and reckless discharge of the firearm issued
to him by defendant SAFEGUARD and/or SUPERGUARD was the
immediate and proximate cause of the injury, while the
negligence of defendant SAFEGUARD and/or SUPERGUARD
consists in its having failed to exercise the diligence of a good
father of a family in the supervision and control of its employee
to avoid the injury.
xxx xxx xxx
(Rollo, pp. 117-118)
Petitioners prayed for actual, compensatory, moral and exemplary damages,
and attorney's fees. The said Civil Case No. Q-89-1751 was raffled to Branch
84 of the Regional Trial Court of Quezon City, presided by respondent Judge
Teodoro Regino.
On March 2, 1989, private respondent SUPERGUARD filed a Motion to Dismiss
on the ground that the complaint does not state a valid cause of action.
SUPERGUARD claimed that Torzuela's act of shooting Dulay was beyond the

scope of his duties, and that since the alleged act of shooting was committed
with deliberate intent (dolo), the civil liability therefor is governed by Article
100 of the Revised Penal Code, which states:
Art. 100. Civil liability of a person guilty of a felony. Every
person criminally liable for a felony is also civilly liable.
Respondent SUPERGUARD further alleged that a complaint for damages
based on negligence under Article 2176 of the New Civil Code, such as the
one filed by petitioners, cannot lie, since the civil liability under Article 2176
applies only to quasi-offenses under Article 365 of the Revised Penal Code. In
addition, the private respondent argued that petitioners' filing of the
complaint is premature considering that the conviction of Torzuela in a
criminal case is a condition sine qua non for the employer's subsidiary
liability (Rollo, p. 55-59).
Respondent SAFEGUARD also filed a motion praying that it be excluded as
defendant on the ground that defendant Torzuela is not one of its employees
(Rollo, p. 96).
Petitioners opposed both motions, stating that their cause of action against
the private respondents is based on their liability under Article 2180 of the
New Civil Code, which provides:
Art. 2180. The obligation imposed by Article 2176 is demandable
not only for one's own acts or omissions, but also for those of
persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in
any business or an industry.
xxx xxx xxx
(Emphasis supplied)
Petitioners contended that a suit against alternative defendants is allowed
under Rule 3, Section 13 of the Rules of Court. Therefore, the inclusion of
private respondents as alternative defendants in the complaint is justified by
the following: the Initial Investigation Report prepared by Pat. Mario Tubon
showing that Torzuela is an employee of SAFEGUARD; and through overt
acts, SUPERGUARD extended its sympathies to petitioners (Rollo, pp. 64 and
98).

Meanwhile, an Information dated March 21, 1989 charging Benigno Torzuela

with homicide was filed before the Regional Trial Court of Makati and was
docketed as Criminal Case No. 89-1896.
On April 13, 1989, respondent Judge Regino issued an order granting
SUPERGUARD'S motion to dismiss and SAFEGUARD'S motion for exclusion as
defendant. The respondent judge held that the complaint did not state facts
necessary or sufficient to constitute a quasi-delict since it does not mention
any negligence on the part of Torzuela in shooting Napoleon Dulay or that
the same was done in the performance of his duties. Respondent judge ruled
that mere allegations of the concurring negligence of the defendants (private
respondents herein) without stating the facts showing such negligence are
mere conclusions of law (Rollo, p. 106). Respondent judge also declared that
the complaint was one for damages founded on crimes punishable under
Articles 100 and 103 of the Revised Penal Code as distinguished from those
arising from, quasi-delict. The dispositive portion of the order dated April 13,
1989 states:
WHEREFORE, this Court holds that in view of the material and
ultimate facts alleged in the verified complaint and in accordance
with the applicable law on the matter as well as precedents laid
down by the Supreme Court, the complaint against the
alternative defendants Superguard Security Corporation and
Safeguard Investigation and Security Co., Inc., must be and (sic)
it is hereby dismissed. (Rollo, p. 110)
The above order was affirmed by the respondent court and petitioners'
motion for reconsideration thereof was denied.
Petitioners take exception to the assailed decision and insist that quasidelicts are not limited to acts of negligence but also cover acts that are
intentional and voluntary, citing Andamo v. IAC (191 SCRA 195 [1990]). Thus,
petitioners insist that Torzuela' s act of shooting Napoleon Dulay constitutes
a quasi-delict actionable under Article 2176 of the New Civil Code.
Petitioners further contend that under Article 2180 of the New Civil Code,
private respondents are primarily liable for their negligence either in the
selection or supervision of their employees. This liability is independent of
the employee's own liability for fault or negligence and is distinct from the
subsidiary civil liability under Article 103 of the Revised Penal Code. The civil
action against the employer may therefore proceed independently of the
criminal action pursuant to Rule 111 Section 3 of the Rules of Court.
Petitioners submit that the question of whether Torzuela is an employee of
respondent SUPERGUARD or SAFEGUARD would be better resolved after trial.

Moreover, petitioners argue that Torzuela's act of shooting Dulay is also

actionable under Article 33 of the New Civil Code, to wit:
Art. 33. In cases of defamation, fraud, and physical injuries, a
civil action for damages, entirely separate and distinct from the
criminal action, may be brought by the injured party. Such civil
action shall proceed independently of the criminal prosecution,
and shall require only a preponderance of evidence. (Emphasis
supplied)
In the same vein, petitioners cite Section 3, Rule 111 of the Rules of Court
which provides:
Rule 111. . . . .
Sec. 3. When civil action may proceed independently In the
cases provided for in Articles 32, 33, 34 and 2176 of the Civil
Code of the Philippines, the independent civil action which has
been reserved may be brought by the offended party, shall
proceed independently of the criminal action, and shall require
only a preponderance of evidence. (Emphasis supplied)
The term "physical injuries" under Article 33 has been held to include
consummated, frustrated and attempted homicide. Thus, petitioners
maintain that Torzuela's prior conviction is unnecessary since the civil action
can proceed independently of the criminal action. On the other hand, it is the
private respondents' argument that since the act was not committed with
negligence, the petitioners have no cause of action under Articles 2116 and
2177 of the New Civil Code. The civil action contemplated in Article 2177 is
not applicable to acts committed with deliberate intent, but only applies to
quasi-offenses under Article 365 of the Revised Penal Code. Torzuela's act of
shooting Atty. Dulay to death, aside from being purely personal, was done
with deliberate intent and could not have been part of his duties as security
guard. And since Article 2180 of the New Civil Code covers only: acts done
within the scope of the employee's assigned tasks, the private respondents
cannot be held liable for damages.
We find for petitioners.
It is undisputed that Benigno Torzuela is being prosecuted for homicide for
the fatal shooting of Napoleon Dulay. Rule 111 of the Rules on Criminal
Procedure provides:
Sec. 1. Institution of criminal and civil actions. When a criminal
action is instituted, the civil action for the recovery of civil
liability is impliedly instituted with the criminal action, unless the
offended party waives the civil action , reserves his right to

institute it separately or institutes the civil action prior to the

criminal action.
Such civil action includes recovery of indemnity under the
Revised Penal Code, and damages under Articles 32, 33, 34, and
2176 of the Civil Code of the Philippines arising from the same
act or omission of the accused. (Emphasis supplied)
It is well-settled that the filing of an independent civil action before the
prosecution in the criminal action presents evidence is even far better than a
compliance with the requirement of express reservation (Yakult Philippines v.
Court of Appeals, 190 SCRA 357 [1990]). This is precisely what the
petitioners opted to do in this case. However, the private respondents
opposed the civil action on the ground that the same is founded on a delict
and not on a quasi-delict as the shooting was not attended by negligence.
What is in dispute therefore is the nature of the petitioner's cause of action.
The nature of a cause of action is determined by the facts alleged in the
complaint as constituting the cause of action (Republic v. Estenzo, 158 SCRA
282 [1988]). The purpose of an action or suit and the law to govern it is to be
determined not by the claim of the party filing the action, made in his
argument or brief, but rather by the complaint itself, its allegations and
prayer for relief. (De Tavera v. Philippine Tuberculosis Society, 112 SCRA 243
[1982]). An examination of the complaint in the present case would show
that the plaintiffs, petitioners herein, are invoking their right to recover
damages against the private respondents for their vicarious responsibility for
the injury caused by Benigno Torzuela's act of shooting and killing Napoleon
Dulay, as stated in paragraphs 1 and 2 of the complaint.
Article 2176 of the New Civil Code provides:
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties is called a quasi-delict
and is governed by the provisions of this Chapter.
Contrary to the theory of private respondents, there is no justification for
limiting the scope of Article 2176 of the Civil Code to acts or omissions
resulting from negligence. Well-entrenched is the doctrine that article 2176
covers not only acts committed with negligence, but also acts which are
voluntary and intentional. As far back as the definitive case of Elcano v. Hill
(77 SCRA 98 [1977]), this Court already held that:
. . . Article 2176, where it refers to "fault or negligence," covers
not only acts "not punishable by law" but also acts criminal in

character; whether intentional and voluntary or negligent.

Consequently, a separate civil action against the offender in a
criminal act, whether or not he is criminally prosecuted and
found guilty or acquitted, provided that the offended party is not
allowed, if he is actually charged also criminally, to recover
damages on both scores, and would be entitled in such
eventuality only to the bigger award of the two, assuming the
awards made in the two cases vary. In other words, the extinction
of civil liability referred to in Par. (e) of Section 3, Rule 111, refers
exclusively to civil liability founded on Article 100 of the Revised
Penal Code, whereas the civil liability for the same act considered
as quasi-delict only and not as a crime is not extinguished even
by a declaration in the criminal case that the criminal act
charged has not happened or has not been committed by the
accused. Briefly stated, We here hold, in reiteration of Garcia,
that culpa aquiliana includes voluntary and negligent acts which
may be punishable by law. (Emphasis supplied)
The same doctrine was echoed in the case of Andamo v. Intermediate
Appellate Court (191 SCRA 195 [1990]), wherein the Court held:
Article 2176, whenever it refers to "fault or negligence," covers
not only acts criminal in character, whether intentional and
voluntary or negligent. Consequently, a civil action lies against
the offender in a criminal act, whether or not he is prosecuted or
found guilty or acquitted, provided that the offended party is not
allowed, (if the tortfeasor is actually also charged criminally), to
recover damages on both scores, and would be entitled in such
eventuality only to the bigger award of the two, assuming the
awards made in the two cases vary. [citing Virata v. Ochoa, 81
SCRA 472] (Emphasis supplied)
Private respondents submit that the word "intentional" in the Andamo case is
inaccurate obiter, and should be read as "voluntary" since intent cannot be
coupled with negligence as defined by Article 365 of the Revised Penal Code.
In the absence of more substantial reasons, this Court will not disturb the
above doctrine on the coverage of Article 2176.
Private respondents further aver that Article 33 of the New Civil Code applies
only to injuries intentionally committed pursuant to the ruling in Marcia v. CA
(120 SCRA 193 [1983]), and that the actions for damages allowed thereunder
are ex-delicto. However, the term "physical injuries" in Article 33 has already
been construed to include bodily injuries causing death (Capuno v. Pepsi-Cola

Bottling Co. of the Philippines, 121 Phil. 638 [1965); Carandang v. Santiago,
97 Phil. 94 [1955]). It is not the crime of physical injuries defined in the
Revised Penal Code. It includes not only physical injuries but also
consummated, frustrated, and attempted homicide (Madeja v. Caro, 126
SCRA 293 [1983]). Although in the Marcia case (supra), it was held that no
independent civil action may be filed under Article 33 where the crime is the
result of criminal negligence, it must be noted however, that Torzuela, the
accused in the case at bar, is charged with homicide, not with reckless
imprudence, whereas the defendant in Marcia was charged with reckless
imprudence. Therefore, in this case, a civil action based on Article 33 lies.
Private respondents also contend that their liability is subsidiary under the
Revised Penal Code; and that they are not liable for Torzuela's act which is
beyond the scope of his duties as a security guard. It having been
established that the instant action is not ex-delicto, petitioners may proceed
directly against Torzuela and the private respondents. Under Article 2180 of
the New Civil Code as aforequoted, when an injury is caused by the
negligence of the employee, there instantly arises a presumption of law that
there was negligence on the part of the master or employer either in the
selection of the servant or employee, or in supervision over him after
selection or both (Layugan v. Intermediate Appellate Court, 167 SCRA 363
[1988]). The liability of the employer under Article 2180 is direct and
immediate; it is not conditioned upon prior recourse against the negligent
employee and a prior showing of the insolvency of such employee (Kapalaran
Bus Lines v. Coronado, 176 SCRA 792 [1989]). Therefore, it is incumbent
upon the private respondents to prove that they exercised the diligence of a
good father of a family in the selection and supervision of their employee.
Since Article 2176 covers not only acts of negligence but also acts which are
intentional and voluntary, it was therefore erroneous on the part of the trial
court to dismiss petitioner's complaint simply because it failed to make
allegations of attendant negligence attributable to private respondents.
With respect to the issue of whether the complaint at hand states a sufficient
cause of action, the general rule is that the allegations in a complaint are
sufficient to constitute a cause of action against the defendants if, admitting
the facts alleged, the court can render a valid judgment upon the same in
accordance with the prayer therein. A cause of action exist if the following
elements are present, namely: (1) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (2) an obligation on
the part of the named defendant to respect or not to violate such right; and
(3) an act or omission on the part of such defendant violative of the right of

the plaintiff or constituting a breach of the obligation of the defendant to the

plaintiff for which the latter may maintain an action for recovery of damages
(Del Bros Hotel Corporation v. CA, 210 SCRA 33 [1992]); Development Bank
of the Philippines v. Pundogar, 218 SCRA 118 [1993])
This Court finds, under the foregoing premises, that the complaint
sufficiently alleged an actionable breach on the part of the defendant
Torzuela and respondents SUPERGUARD and/or SAFEGUARD. It is enough
that the complaint alleged that Benigno Torzuela shot Napoleon Dulay
resulting in the latter's death; that the shooting occurred while Torzuela was
on duty; and that either SUPERGUARD and/or SAFEGUARD was Torzuela's
employer and responsible for his acts. This does not operate however, to
establish that the defendants below are liable. Whether or not the shooting
was actually reckless and wanton or attended by negligence and whether it
was actually done within the scope of Torzuela's duties; whether the private
respondents SUPERGUARD and/or SAFEGUARD failed to exercise the
diligence of a good father of a family; and whether the defendants are
actually liable, are questions which can be better resolved after trial on the
merits where each party can present evidence to prove their respective
allegations and defenses. In determining whether the allegations of a
complaint are sufficient to support a cause of action, it must be borne in
mind that the complaint does not have to establish or allege the facts
proving the existence of a cause of action at the outset; this will have to be
done at the trial on the merits of the case (Del Bros Hotel Corporation v.
CA, supra). If the allegations in a complaint can furnish a sufficient basis by
which the complaint can be maintained, the same should not be dismissed
regardless of the defenses that may be assessed by the defendants (Rava
Dev't. Corp. v. CA, 211 SCRA 152 [1992] citing Consolidated Bank & Trust
Corporation v. Court of Appeals, 197 SCRA 663 [1991]). To sustain a motion
to dismiss for lack of cause of action, the complaint must show that the claim
for relief does not exist rather than that a claim has been defectively stated,
is ambiguous, indefinite or uncertain (Azur v. Provincial Board, 27 SCRA 50
[1969]). Since the petitioners clearly sustained an injury to their rights under
the law, it would be more just to allow them to present evidence of such
injury.
WHEREFORE, premises considered, the petition for review is hereby
GRANTED. The decision of the Court of Appeals as well as the Order of the
Regional Trial Court dated April 13, 1989 are hereby REVERSED and SET
ASIDE. Civil Case No. Q-89-1751 is remanded to the Regional Trial Court for
trial on the merits. This decision is immediately executory.

SO ORDERED.
Narvasa, C.J., Regalado, Puno and Mendoza, JJ., concur.

G.R. Nos. 118441-42

January 18, 2000

ARMANDO JOSE y PAZ and MANILA CENTRAL BUS LINES (MCL),

represented by its General Manager MR. DANILO T. DE
DIOS, petitioners,
vs.
COURT OF APPEALS, ROMMEL ABRAHAM, represented by his father
FELIXBERTO ABRAHAM, JOSE MACARUBO and MERCEDES
MACARUBO, respondents.
MENDOZA, J.:
This is a petition for review on certiorari of the decision1 of the Court of
Appeals, reversing the decision of the Regional Trial Court, Branch 172,
Valenzuela, Metro Manila and ordering petitioners to pay damages for
injuries to persons and damage to property as a result of a vehicular
accident.
The facts are as follows:
Petitioner Manila Central Bus Lines Corporation (MCL) is the operatorlessee of a public utility bus (hereafter referred to as Bus 203) with
plate number NVR-III-TB-PIL and body number 203. Bus 203 is owned
by the Metro Manila Transit Corporation and is insured with the
Government Service Insurance System.1wphi1.nt
On February 22, 1985, at around six o'clock in the morning, Bus 203, then
driven by petitioner Armando Jose, collided with a red Ford Escort driven by
John Macarubo on MacArthur Highway, in Marulas, Valenzuela, Metro Manila.
Bus 203 was bound for Muntinlupa, Rizal, while the Ford Escort was headed
towards Malanday, Valenzuela on the opposite lane. As a result of the
collision, the left side of the Ford Escort's hood was severely damaged while
its driver, John Macarubo, and its lone passenger, private respondent
Rommel Abraham, were seriously injured. The driver and conductress of Bus
203 rushed Macarubo and Abraham to the nearby Fatima Hospital where
Macarubo lapsed into a coma. Despite surgery, Macarubo failed to recover
and died five days later. Abraham survived, but he became blind on the left
eye which had to be removed. In addition, he sustained a fracture on the

forehead and multiple lacerations on the face, which caused him to be

hospitalized for a week.
On March 26, 1985, Rommel Abraham, represented by his father, Felixberto,
instituted Civil Case No. 2206-V-85 for damages against petitioners MCL and
Armando Jose in the Regional Trial Court, Branch 172, Valenzuela.
On July 17, 1986, the spouses Jose and Mercedes Macarubo, parents of the
deceased John Macarubo, filed their own suit for damages in the same trial
court, where it was docketed as Civil Case No. 2428-V-86, against MCL alone.
On the other hand, MCL filed a third-party complaint against Juanita
Macarubo, registered owner of the Ford Escort on the theory that John
Macarubo was negligent and that he was the "authorized driver" of Juanita
Macarubo. The latter, in turn, filed a counterclaim for damages against MCL
for the damage to her car. Civil Case No. 2206-V-85 and Civil Case No. 2428V-86 were consolidated and later tried jointly. The facts, as found by the trial
court, are as follows:
In Civil Case No. 2206-V-85, the Court heard the testimonies that
during the night previous to the accident of February 22, 1985 at 6:15
a.m., Rommel Abraham and John Macarubo were at a party. There was
therefore, no sleep for them, notwithstanding testimony to the contrary
and the service of drinks cannot be totally discounted. After the party
at 11 p.m., while both Rommel and John were enroute home to
Valenzuela from La Loma, the car encountered mechanical trouble and
had to be repaired as its cross-joint was detached. The defect of a
cross-joint is not minor and repair thereof would as testified to by
Rommel lasted up to early dawn and the car started to run only after
five o'clock in the morning. With lack of sleep, the strains of a party still
on their bodies, and the attention to the repair coupled with the wait
until the car was ready to run, are potentials in a driver for possible
accident. The accident happened at 6:15 a.m. when the physical and
mental condition of the driver John Macarubo was as expected not too
fit for the driving as he could not anymore control the car. The desire to
be home quick for the much needed sleep could have prompted him to
overtake the preceding vehicle.
Indeed the pictures taken of the two vehicles (Exh. 1, 2 and 3) will
clearly show that the MCL bus was at its proper lane and not in an
overtaking position while the car driven by John Macarubo was
positioned in a diagonal manner and crossed the line of the MCL, which
is an indication of an overtaking act. If it were the bus that was

overtaking at the time, the car would have been thrown farther away
from the point of the impact.
The court is convinced of the close supervision and control of MCL over
their drivers, and its exercise of due diligence in seeing to it that no
recklessness is committed by its employees, drivers especially, from
the unrebutted testimonies of Cesar Cainglet.
The Court noted the respective damages of the two vehicles especially
the point of the impact. From these damages as shown by the picture,
it can be clearly deduced which vehicle did the bumping. It was the car
driven by John Macarubo that hit the MCL which was on its right and
correct lane.2
Based on the foregoing facts, the trial court rendered judgment on
September 28, 1989, dismissing both civil cases against MCL and ruling
favorably on its third-party complaint against Juanita Macarubo, ordering the
latter to pay MCL P54,232.12 as actual damages, P24,000.00 for lost income,
and P10,000.00 as attorney's fees.
Rommel Abraham, the Macarubo spouses, and third-party defendant Juanita
Macarubo then appealed to the Court of Appeals which, on December 21,
1994, rendered a decision reversing the decision of the trial court. It held (1)
that the trial court erred in disregarding Rommel Abraham's uncontroverted
testimony that the collision was due to the fault of the driver of Bus 203; (2)
that the trial court erred in relying on photographs (Exhs. 1-3) which had
been taken an hour after the collision as within that span of time, the
positions of the vehicles could have been changed; (3) that the photographs
do not show that the Ford Escort was overtaking another vehicle when the
accident happened and that John Macarubo, its driver, was negligent; and (4)
that MCL failed to make a satisfactory showing that it exercised due diligence
in the selection and supervision of its driver Armando Jose. The dispositive
portion of the decision reads:
WHEREFORE, the appealed decision is hereby REVERSED and the
defendants-appellees MCL and Armando Jose are adjudged to pay jointly and
severally:
1. Rommel Abraham, represented by his father Felixberto Abraham:
(a) P37,576.47 as actual damages;
(b) P50,000.00 as compensatory damages;
(c) P15,000.00 as moral damages;
(d) P5,000.00 as exemplary damages; and
(e) P10,000.00 as attorney's fees.

2. The heirs of John Macarubo:

(a) P50,000.00 as indemnity for his death;
(b) P50,000.00 as moral damages;
(c) P10,000.00 as exemplary damages; and
(d) P10,000.00 as attorney's fees.
Costs against the appellees.
SO ORDERED.
Hence, this petition for review on certiorari. Petitioners MCL and Armando
Jose raise four issues which boil down to the question whether it was the
driver of Bus 203 or that of the Ford Escort who was at fault for the collision
of the two vehicles.
It is well-settled that a question of fact is to be determined by the evidence
offered to support the particular contention.3 In the proceedings below,
petitioners relied mainly on photographs, identified in evidence as Exhibits 1
to 3, showing the position of the two vehicles after the collision. On the other
hand, private respondents offered the testimony of Rommel Abraham to the
effect that the collision took place because Bus 203 invaded their lane.4
The trial court was justified in relying on the photographs rather than on
Rommel Abraham's testimony which was obviously biased and unsupported
by any other evidence. Physical evidence is a mute but an eloquent
manifestation of truth, and it ranks high in our hierarchy of trustworthy
evidence.5 In criminal cases such as murder or rape where the accused
stands to lose his liberty if found guilty, this Court has, in many occasions,
relied principally upon physical evidence in ascertaining the truth. In People
v. Vasquez,6 where the physical evidence on record ran counter to the
testimonial evidence of the prosecution witnesses, we ruled that the physical
evidence should prevail.7
In this case, the positions of the two vehicles, as shown in the photographs
(Exhs. 1 to 3) taken by MCL line inspector Jesus Custodio about an hour and
fifteen minutes after the collision, disputes Abraham's self-serving testimony
that the two vehicles collided because Bus 203 invaded the lane of the Ford
Escort and clearly shows that the case is exactly the opposite of what he
claimed happened. Contrary to Abraham's testimony, the photographs show
quite clearly that Bus 203 was in its proper lane and that it was the Ford
Escort which usurped a portion of the opposite lane. The three photographs
show the Ford Escort positioned diagonally on the highway, with its two front
wheels occupying Bus 203's lane. As shown by the photograph marked
Exhibit 3, the portion of MacArthur Highway where the collision took place is

marked by a groove which serves as the center line separating the right from
the left lanes. The photograph shows that the left side of Bus 203 is about a
few feet from the center line and that the bus is positioned parallel thereto.
This negates the claim that Bus 203 was overtaking another vehicle and, in
so doing, encroached on the opposite lane occupied by the Ford Escort.
Indeed, Bus 203 could not have been overtaking another vehicle when the
collision happened. It was filled with passengers,8 and it was considerably
heavier and larger than the Ford Escort. If it was overtaking another vehicle,
it necessarily had to accelerate. The acceleration of its speed and its heavy
load would have greatly increased its momentum so that the impact of the
collision would have thrown the smaller and lighter Ford Escort to a
considerable distance from the point of impact. Exhibit 1, however, shows
that the Ford Escort's smashed hood was only about one or two meters from
Bus 203's damaged left front. If there had been a great impact, such as
would be the case if Bus 203 had been running at a high speed, the two
vehicles should have ended up far from each other.
In discrediting the physical evidence, the appellate court made following
observations:
We cannot believe that it the car which overtook another vehicle and
proceeded to the lane occupied by the bus. There was a traffic jam on
the "bus lane" while traffic was light on the "car lane." Indeed, we find
it inconceivable that the car, occupying the lane without any
traffic, would overtake and traverse a heavy traffic lane.9 (Emphasis
supplied.)
This is correct. However, the fact remains that when the Ford Escort finally
came to a stop, it encroached on the opposite lane occupied by Bus 203.
Significantly, Rommel Abraham testified that on February 21, 1985, the night
before the accident, he and John Macarubo went to a friend's house in La
Loma where they stayed until 11 p.m.10 Abraham's explanation as to why
they did not reach Valenzuela until six o'clock in the morning of the next day
when the accident happened indicates that the Ford Escort careened and
slammed against Bus 203 because of a mechanical defect. Abraham told the
court.11
ATTY. RESPICIO:
Q: I am sorry, Your honor. After leaving Arnel's place where did you go?
ROMMEL ABRAHAM
A: We proceeded in going home, sir.
Q: You were on your way home?

A: Yes, sir.
Q: What time did you . . . I will reform the question. You met the
accident at about 6:00 o'clock the next day, 6:00 o'clock in the
morning the next day, did it take you long to reach BBB?
A: Our car had a mechanical trouble somewhere at 2nd Avenue, sir.
Q: What kind of trouble?
A: The cross-joint were detached, sir.
Q: Are you familiar with cars?
A: A little, sir.
COURT:
Q: What time was that when you have this cross-joint problem?
A: About 12:00 o'clock perhaps, sir.
Q: What happened to the cross joint?
A: It was cut, ma'am.
Q: You were able to repair that cross-joint 12:00 o'clock and you were
able to run and reached this place of accident at 6:00 o'clock?
A: No, we we're not able to get spare parts, ma'am.
Q: Why were you able to reach this place at 6:00 o'clock?
A: We went home and look for the spare parts in their house, ma'am.
Q: House of Macarubo?
A: Yes, ma'am.
Q: So you were able to repair the car?
A: Yes, ma'am.
Q: What time were you able to repair the car?
A: Around 5:00 o'clock in the morning, sir.
Q: You were able to replace the cross-joint or what?
A: Ginawaan ng paraan, ma'am.
Q: How?
A: The cross-joint were welded in order to enable us to go
home, ma'am.
Q: No spare parts was replaced?
A: No, ma'am.
Thus, as Rommel Abraham himself admitted, the Ford Escort's rear crossjoint was cut/detached. This mechanism controls the movement of the rear
tires. Since trouble in the cross-joint affects a car's maneuverability, the
matter should have been treated as a serious mechanical problem. In this

case, when asked if they were able to repair the cross-joint, Abraham said
"Ginawaan ng paraan, ma'am," by simply welding them just so they could
reach home. His testimony indicates that the rear cross-joint was hastily
repaired and that, at most, the kind of repairs made thereon were merely
temporary; just enough to enable Abraham and Macarubo to reach home.
Given such fact, the likelihood is that while the Ford Escort might not have
been overtaking another vehicle, it actually strayed into the bus' lane
because of the defective cross-joint, causing its driver to lose control of the
vehicle.
The appellate court refused to give credence to the physical evidence on the
ground that the photographs were taken an hour after the collision and that
within such span of time the bus could have been moved because there was
no showing that the driver left the scene of the accident. This is not correct.
Constancia Gerolada, Bus 203's conductress, testified that, immediately after
the collision, she and bus driver, petitioner Armando Jose, took the injured
driver and passenger of the Ford Escort to the Fatima Hospital.12 This fact is
not disputed by private respondents.
Rommel Abraham mentioned in his appellant's brief in the appellate court a
sketch of the scene of the accident allegedly prepared by one Patrolman
Kalale, which shows Bus 203 to be occupying the Ford Escort's lane.
However, the records of this case do not show that such a sketch was ever
presented in evidence in the trial court or that Patrolman Kalale was ever
presented as a witness to testify on the sketch allegedly prepared by him.
Under Rule 132, 3 of the Rules on Evidence, courts cannot consider any
evidence unless formally offered by a party.
Finally, the appellate court also ruled that MCL failed to make a satisfactory
showing that it exercised the diligence of a good father of a family in the
selection and supervision of its bus driver, Armando Jose.13 Under the
circumstances of this case, we hold that proof of due diligence in the
selection and supervision of employees is not required.
The Civil Code provides in pertinent parts:
Art. 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict and is governed by the
provisions of this chapter.
Art. 2180 The obligation imposed in Art. 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for whom
one is responsible.

xxx

xxx

xxx

Employers shall be liable for the damages caused by their employees

and household helpers acting within the scope of their assigned tasks,
even though the former are not engaged in any business or industry.
xxx

xxx

xxx

The responsibility treated of in this article shall cease when the

persons herein mentioned prove that they observed all the diligence of
a good father of a family to prevent damage.
Thus, the responsibility of employers is premised upon the presumption of
negligence of their employees. As held in Poblete v. Fabros:14
[I]t is such a firmly established principle, as to have virtually formed
part of the law itself, that the negligence of the employee gives rise to
the presumption of negligence on the part of the employer. This is the
presumed negligence in the selection and supervision of the employee.
The theory of presumed negligence, in contrast with the American
doctrine of respondent superior, where the negligence of the employee
is conclusively presumed to be the negligence of the employer, is
clearly deducible from the last paragraph of Article 2180 of the Civil
Code which provides that the responsibility therein mentioned shall
cease if the employers prove that they observed all the diligence of a
good father of a family to prevent damages (12 Manresa, 657; Balica
vs. Litonjua and Leynes, 30 Phil. 624; Cangco vs. Manila Railroad Co.,
30 Phil. 768), as observed in the same cases just cited.
Therefore, before the presumption of the employer's negligence in the
selection and supervision of its employees can arise, the negligence of the
employee must first be established. While the allegations of negligence
against the employee and that of an employer-employee relation in the
complaint are enough to make out a case of quasi-delict under Art. 2180 of
the Civil Code, the failure to prove the employee's negligence during the trial
is fatal to proving the employer's vicarious liability. In this case, private
respondents failed to prove their allegation of negligence against driver
Armando Jose who, in fact, was acquitted in the case for criminal negligence
arising from the same incident.15
For the foregoing reasons, we hold that the appellate court erred in holding
petitioners liable to private respondents. The next question then is whether,
as the trial court held, private respondent Juanita Macarubo is liable to
petitioners.
Art. 2180 of the Civil Code makes the persons specified therein responsible
for the quasi-delicts of others. The burden is upon MCL to prove that Juanita

Macarubo is one of those specified persons who are vicariously liable for the
negligence of the deceased John Macarubo.
In its third-party complaint, MCL alleged that Juanita Macarubo was the
registered owner of the Ford Escort car and that John Macarubo was the
"authorized driver" of the car.16 Nowhere was it alleged that John Macarubo
was the son, ward, employee or pupil of private respondent Juanita Macarubo
so as to make the latter vicariously liable for the negligence of John
Macarubo. The allegation that John Macarubo was "the authorized driver" of
the Ford Escort is not equivalent to an allegation that he was an employee of
Juanita Macarubo. That John Macarubo was the "authorized driver" of the car
simply means that he drove the Ford Escort with the permission of Juanita
Macarubo.
Nor did MCL present any evidence to prove that Juanita Macarubo was the
employer of John Macarubo or that she is in any way liable for John
Macarubo's negligence under Art. 2180 of the Civil Code. For failure to
discharge its burden, MCL's third-party complaint should be dismissed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and the
complaints filed in Civil Cases Nos. 2206-V-85 and 24428-V-86 against Manila
Central Bus Lines and Armando Jose, as well as the third-party complaint
filed in Civil Case No. 2206-V-85 against Juanita Macarubo, are hereby
DISMISSED.
SO ORDERED.1wphi1.nt
Bellosillo, Quisumbing, Buena and De Leon, Jr., JJ., concur.

G.R. No. 66207 May 18, 1992

MAXIMINO SOLIMAN, JR., represented by his judicial guardian
VIRGINIA C. SOLIMAN, petitioner,
vs.
HON. JUDGE RAMON TUAZON, Presiding Judge of Branch LXI,
Regional Trial Court of Region III, Angeles City, and the REPUBLIC
CENTRAL COLLEGES, represented by its President, respondents.
Mariano Y. Navarro for Republic Central Colleges.
RESOLUTION

FELICIANO, J.:
On 22 March 1983, petitioner Soliman, Jr. filed a civil complaint for damages
against private respondent Republic Central Colleges ("Colleges"), the R.L.
Security Agency Inc. and one Jimmy B. Solomon, a security guard, as
defendants. The complaint alleged that:
. . . on 13 August 1982, in the morning thereof, while the plaintiff
was in the campus ground and premises of the defendant,
REPUBLIC CENTRAL COLLEGES, as he was and is still a regular
enrolled student of said school taking his morning classes, the
defendant, JIMMY B. SOLOMON, who was on said date and hour in
the premises of said school performing his duties and obligations
as a duly appointed security guard under the employment,
supervision and control of his employer-defendant R.L. SECURITY
AGENCY, INC., headed by Mr. Benjamin Serrano, without any
provocation, in a wanton, fraudulent, reckless, oppressive or
malevolent manner, with intent to kill, attack, assault, strike and
shoot the plaintiff on the abdomen with a .38 Caliber Revolver, a
deadly weapon, which ordinarily such wound sustained would
have caused plaintiff's death were it not for the timely medical
assistance given to him. The plaintiff was treated and confined at
Angeles Medical Center, Angeles City, and, as per doctor's
opinion, the plaintiff may not be able to attend to his regular
classes and will be incapacitated in the performance of his usual
work for a duration of from three to four months before his
wounds would be completely healed. 1
Private respondent Colleges filed a motion to dismiss, contending that the
complaint stated no cause of action against it. Private respondent argued
that it is free from any liability for the injuries sustained by petitioner student
for the reason that private respondent school was not the employer of the
security guard charged, Jimmy Solomon, and hence was not responsible for
any wrongful act of Solomon. Private respondent school further argued that
Article 2180, 7th paragraph, of the Civil Code did not apply, since said
paragraph holds teachers and heads of establishment of arts and trades
liable for damages caused by their pupils and students or apprentices, while
security guard Jimmy Solomon was not a pupil, student or apprentice of the
school.
In an order dated 29 November 1983, respondent Judge granted private
respondent school's motion to dismiss, holding that security guard Jimmy
Solomon was not an employee of the school which accordingly could not be

held liable for his acts or omissions. Petitioner moved for reconsideration,
without success.
In this Petition for Certiorari and Prohibition, it is contended that respondent
trial judge committed a grave abuse of discretion when he refused to apply
the provisions of Article 2180, as well as those of Articles 349, 350 and 352,
of the Civil Code and granted the school's motion to dismiss.
Under Article 2180 of the Civil Code, the obligation to respond for damage
inflicted by one against another by fault or negligence exists not only for
one's own act or omission, but also for acts or omissions of a person for
whom one is by law responsible. Among the persons held vicariously
responsible for acts or omissions of another person are the following:
xxx xxx xxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in
any business or industry.
xxx xxx xxx
Lastly, teachers or heads of establishments of arts and trades
shall be liable for damages caused by their pupils, their students
or apprentices, so long as they remain in their custody.
xxx xxx xxx
The first paragraph quoted above offers no basis for holding the Colleges
liable for the alleged wrongful acts of security guard Jimmy B. Solomon
inflicted upon petitioner Soliman, Jr. Private respondent school was not the
employer of Jimmy Solomon. The employer of Jimmy Solomon was the R.L.
Security Agency Inc., while the school was the client or customer of the R.L.
Security Agency Inc. It is settled that where the security agency, as here,
recruits, hires and assigns the work of its watchmen or security guards, the
agency is the employer of such guards or watchmen. 2 Liability for illegal or
harmful acts committed by the security guards attaches to the employer
agency, and not to the clients or customers of such agency. 3 As a general
rule, a client or customer of a security agency has no hand in selecting who
among the pool of security guards or watchmen employed by the agency
shall be assigned to it; the duty to observe the diligence of a good father of a
family in the selection of the guards cannot, in the ordinary course of events,
be demanded from the client whose premises or property are protected by
the security guards. The fact that a client company may give instructions or
directions to the security guards assigned to it, does not, by itself, render the
client responsible as an employer of the security guards concerned and liable

for their wrongful acts or omissions. Those instructions or directions are

ordinarily no more than requests commonly envisaged in the contract for
services entered into with the security agency. There being no employeremployee relationship between the Colleges and Jimmy Solomon, petitioner
student cannot impose vicarious liability upon the Colleges for the acts of
security guard Solomon.
Since there is no question that Jimmy Solomon was not a pupil or student or
an apprentice of the Colleges, he being in fact an employee of the R.L.
Security Agency Inc., the other above-quoted paragraph of Article 2180 of
the Civil Code is similarly not available for imposing liability upon the
Republic Central Colleges for the acts or omissions of Jimmy Solomon.
The relevant portions of the other Articles of the Civil Code invoked by
petitioner are as follows:
Art. 349. The following persons shall exercise substitute parental
authority:
xxx xxx xxx
(2) Teachers and professors;
xxx xxx xxx
(4) Directors of trade establishments with regard to apprentices;
xxx xxx xxx
Art. 350. The persons named in the preceding article shall
exercise reasonable supervision over the conduct of the child.
xxx xxx xxx
Art. 352. The relations between teacher and pupil, professor and
student are fixed by government regulations and those of each
school or institution. In no case shall corporal punishment be
countenanced. The teacher or professor shall cultivate the best
potentialities of the heart and mind of the pupil or student.
In Palisoc v. Brillantes, 4 invoked by petitioner, the Court held the owner and
president of a school of arts and trades known as the "Manila Technical
Institute," Quezon Blvd., Manila, responsible in damages for the death of
Dominador Palisoc, a student of Institute, which resulted from fist blows
delivered by Virgilio L. Daffon, another student of the Institute. It will be seen
that the facts of Palisoc v. Brillantes brought it expressly within the 7th
paragraph of Article 2180, quoted above; but those facts are entirely
different from the facts existing in the instant case.
Persons exercising substitute parental authority are made responsible for
damage inflicted upon a third person by the child or person subject to such

substitute parental authority. In the instant case, as already noted, Jimmy

Solomon who committed allegedly tortious acts resulting in injury to
petitioner, was not a pupil, student or apprentice of the Republic Central
Colleges; the school had no substitute parental authority over Solomon.
Clearly, within the confines of its limited logic, i.e., treating the petitioner's
claim as one based wholly and exclusively on Article 2180 of the Civil Code,
the order of the respondent trial judge was correct. Does it follow, however,
that respondent Colleges could not be held liable upon any other basis in
law, for or in respect of the injury sustained by petitioner, so as to entitle
respondent school to dismissal of petitioner's complaint in respect of itself?
The very recent case of the Philippine School of Business Administration
(PSBA) v. Court of Appeals, 5requires us to give a negative answer to that
question.
In PSBA, the Court held that Article 2180 of the Civil Code was not applicable
where a student had been injured by one who was an outsider or by one over
whom the school did not exercise any custody or control or supervision. At
the same time, however, the Court stressed that an implied contract may be
held to be established between a school which accepts students for
enrollment, on the one hand, and the students who are enrolled, on the other
hand, which contract results in obligations for both parties:
When an academic institution accepts students for enrollment,
there is established a contractbetween them, resulting in
bilateral obligations which parties are bound to comply with. For
its part, the school undertakes to provide the student with an
education that would presumably suffice to equip him with the
necessary tools and skills to pursue higher education or a
profession. On the other hand, the student covenants to abide by
the school's academic requirements and observe its rules and
regulations.
Institutions of learning must also meet the implicit or "built-in"
obligation of providing their students with an atmosphere that
promotes or assists in attaining its primary undertaking of
imparting knowledge. Certainly, no student can absorb the
intricacies of physics or higher mathematics or explore the realm
of the arts and other sciences when bullets are flying or grenades
exploding in the air or where there looms around the school
premises a constant threat to life and limb. Necessarily, the
school must ensure that adequate steps are taken to maintain

peace and order within the campus premises and to prevent the
breakdown thereof.6
In that case, the Court was careful to point out that:
In the circumstances obtaining in the case at bar, however, there
is, as yet, no finding that the contract between the school and
Bautista had been breached thru the former's negligence in
providing proper security measures. This would be for the trial
court to determine. And, even if there be a finding of negligence,
the same could give rise generally to a breach of contractual
obligation only. Using the test of Cangco, supra, the negligence
of the school would not be relevant absent a contract. In fact,
that negligence becomes material only because of the
contractual relation between PSBA and Bautista. In other words,
a contractual relation is a condition sine qua non to the school's
liability. The negligence of the school cannot exist independently
of the contract, unless the negligence occurs under the
circumstances set out in Article 21 of the Civil Code.
The Court is not unmindful of the attendant difficulties posed by
the obligation of schools, above-mentioned, for conceptually a
school, like a common carrier, cannot be an insurer of its
students against all risks. This is specially true in the populous
student communities of the so-called "university belt" in Manila
where there have been reported several incidents ranging from
gang wars to other forms of hooliganism. It would not be
equitable to expect of schools to anticipate all types of violent
trespass upon their premises, for notwithstanding the security
measures installed, the same may still fail against an individual
or group determined to carry out a nefarious deed inside school
premises and environs. Should this be the case, the school may
still avoid liability by proving that the breach of its contractual
obligation to the students was not due to its negligence, here
statutorily defined to be the omission of that degree of diligence
which is required by the nature of obligation and corresponding
to the circumstances of person, time and place. 7
In the PSBA case, the trial court had denied the school's motion to dismiss
the complaint against it, and both the Court of Appeals and this Court
affirmed the trial court's order. In the case at bar, the court a quo granted
the motion to dismiss filed by respondent Colleges, upon the assumption
that petitioner's cause of action was based, and could have been based, only

on Article 2180 of the Civil Code. As PSBA, however, states, acts which are
tortious or allegedly tortious in character may at the same time constitute
breach of a contractual, or other legal, obligation. Respondent trial judge was
in serious error when he supposed that petitioner could have no cause of
action other than one based on Article 2180 of the Civil Code. Respondent
trial judge should not have granted the motion to dismiss but rather should
have, in the interest of justice, allowed petitioner to prove acts constituting
breach of an obligation ex contractu or ex lege on the part of respondent
Colleges.
In line, therefore, with the most recent jurisprudence of this Court, and in
order to avoid a possible substantial miscarriage of justice, and putting aside
technical considerations, we consider that respondent trial judge committed
serious error correctible by this Court in the instant case.
ACCORDINGLY, the Court Resolved to GRANT DUE COURSE to the Petition, to
TREAT the comment of respondent Colleges as its answer, and to REVERSE
and SET ASIDE the Order dated 29 November 1983. This case is REMANDED
to the court a quo for further proceedings consistent with this Resolution.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

G.R. No. 126297

January 31, 2007

PROFESSIONAL SERVICES, INC., Petitioner,

vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.
x-----------------------x
G.R. No. 126467

January 31, 2007

NATIVIDAD (Substituted by her children MARCELINO AGANA III,

ENRIQUE AGANA, JR., EMMA AGANA ANDAYA, JESUS AGANA, and
RAYMUND AGANA) and ENRIQUE AGANA, Petitioners,
vs.
JUAN FUENTES, Respondent.
x- - - - - - - - - - - - - - - - - - - -- - - - x
G.R. No. 127590

January 31, 2007

MIGUEL AMPIL, Petitioner,

vs.
NATIVIDAD AGANA and ENRIQUE AGANA, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Hospitals, having undertaken one of mankinds most important and delicate
endeavors, must assume the grave responsibility of pursuing it with
appropriate care. The care and service dispensed through this high trust,
however technical, complex and esoteric its character may be, must meet
standards of responsibility commensurate with the undertaking to preserve
and protect the health, and indeed, the very lives of those placed in the
hospitals keeping.1
Assailed in these three consolidated petitions for review on certiorari is the
Court of Appeals Decision2 dated September 6, 1996 in CA-G.R. CV No.
42062 and CA-G.R. SP No. 32198 affirming with modification the
Decision3 dated March 17, 1993 of the Regional Trial Court (RTC), Branch 96,
Quezon City in Civil Case No. Q-43322 and nullifying its Order dated
September 21, 1993.
The facts, as culled from the records, are:
On April 4, 1984, Natividad Agana was rushed to the Medical City General
Hospital (Medical City Hospital) because of difficulty of bowel movement and
bloody anal discharge. After a series of medical examinations, Dr. Miguel
Ampil, petitioner in G.R. No. 127590, diagnosed her to be suffering from
"cancer of the sigmoid."
On April 11, 1984, Dr. Ampil, assisted by the medical staff4 of the Medical
City Hospital, performed an anterior resection surgery on Natividad. He found
that the malignancy in her sigmoid area had spread on her left ovary,
necessitating the removal of certain portions of it. Thus, Dr. Ampil obtained
the consent of Natividads husband, Enrique Agana, to permit Dr. Juan
Fuentes, respondent in G.R. No. 126467, to perform hysterectomy on her.
After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over,
completed the operation and closed the incision.
However, the operation appeared to be flawed. In the corresponding Record
of Operation dated April 11, 1984, the attending nurses entered these
remarks:
"sponge count lacking 2
"announced to surgeon searched (sic) done but to no avail continue for
closure."

On April 24, 1984, Natividad was released from the hospital. Her hospital and
medical bills, including the doctors fees, amounted to P60,000.00.
After a couple of days, Natividad complained of excruciating pain in her anal
region. She consulted both Dr. Ampil and Dr. Fuentes about it. They told her
that the pain was the natural consequence of the surgery. Dr. Ampil then
recommended that she consult an oncologist to examine the cancerous
nodes which were not removed during the operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the United
States to seek further treatment. After four months of consultations and
laboratory examinations, Natividad was told she was free of cancer. Hence,
she was advised to return to the Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still suffering
from pains. Two weeks thereafter, her daughter found a piece of gauze
protruding from her vagina. Upon being informed about it, Dr. Ampil
proceeded to her house where he managed to extract by hand a piece of
gauze measuring 1.5 inches in width. He then assured her that the pains
would soon vanish.
Dr. Ampils assurance did not come true. Instead, the pains intensified,
prompting Natividad to seek treatment at the Polymedic General Hospital.
While confined there, Dr. Ramon Gutierrez detected the presence of another
foreign object in her vagina -- a foul-smelling gauze measuring 1.5 inches in
width which badly infected her vaginal vault. A recto-vaginal fistula had
formed in her reproductive organs which forced stool to excrete through the
vagina. Another surgical operation was needed to remedy the damage. Thus,
in October 1984, Natividad underwent another surgery.
On November 12, 1984, Natividad and her husband filed with the RTC,
Branch 96, Quezon City a complaint for damages against the Professional
Services, Inc. (PSI), owner of the Medical City Hospital, Dr. Ampil, and Dr.
Fuentes, docketed as Civil Case No. Q-43322. They alleged that the latter are
liable for negligence for leaving two pieces of gauze inside Natividads body
and malpractice for concealing their acts of negligence.
Meanwhile, Enrique Agana also filed with the Professional Regulation
Commission (PRC) an administrative complaint for gross negligence and
malpractice against Dr. Ampil and Dr. Fuentes, docketed as Administrative
Case No. 1690. The PRC Board of Medicine heard the case only with respect
to Dr. Fuentes because it failed to acquire jurisdiction over Dr. Ampil who was
then in the United States.
On February 16, 1986, pending the outcome of the above cases, Natividad
died and was duly substituted by her above-named children (the Aganas).

On March 17, 1993, the RTC rendered its Decision in favor of the Aganas,
finding PSI, Dr. Ampil and Dr. Fuentes liable for negligence and malpractice,
the decretal part of which reads:
WHEREFORE, judgment is hereby rendered for the plaintiffs ordering the
defendants PROFESSIONAL SERVICES, INC., DR. MIGUEL AMPIL and DR. JUAN
FUENTES to pay to the plaintiffs, jointly and severally, except in respect of
the award for exemplary damages and the interest thereon which are the
liabilities of defendants Dr. Ampil and Dr. Fuentes only, as follows:
1. As actual damages, the following amounts:
a. The equivalent in Philippine Currency of the total of
US$19,900.00 at the rate of P21.60-US$1.00, as reimbursement
of actual expenses incurred in the United States of America;
b. The sum of P4,800.00 as travel taxes of plaintiffs and their
physician daughter;
c. The total sum of P45,802.50, representing the cost of
hospitalization at Polymedic Hospital, medical fees, and cost of
the saline solution;
2. As moral damages, the sum of P2,000,000.00;
3. As exemplary damages, the sum of P300,000.00;
4. As attorneys fees, the sum of P250,000.00;
5. Legal interest on items 1 (a), (b), and (c); 2; and 3 hereinabove, from
date of filing of the complaint until full payment; and
6. Costs of suit.
SO ORDERED.
Aggrieved, PSI, Dr. Fuentes and Dr. Ampil interposed an appeal to the Court
of Appeals, docketed as CA-G.R. CV No. 42062.
Incidentally, on April 3, 1993, the Aganas filed with the RTC a motion for a
partial execution of its Decision, which was granted in an Order dated May
11, 1993. Thereafter, the sheriff levied upon certain properties of Dr. Ampil
and sold them for P451,275.00 and delivered the amount to the Aganas.
Following their receipt of the money, the Aganas entered into an agreement
with PSI and Dr. Fuentes to indefinitely suspend any further execution of the
RTC Decision. However, not long thereafter, the Aganas again filed a motion
for an alias writ of execution against the properties of PSI and Dr. Fuentes. On
September 21, 1993, the RTC granted the motion and issued the
corresponding writ, prompting Dr. Fuentes to file with the Court of Appeals a
petition for certiorari and prohibition, with prayer for preliminary injunction,
docketed as CA-G.R. SP No. 32198. During its pendency, the Court of Appeals

issued a Resolution5 dated October 29, 1993 granting Dr. Fuentes prayer for
injunctive relief.
On January 24, 1994, CA-G.R. SP No. 32198 was consolidated with CA-G.R.
CV No. 42062.
Meanwhile, on January 23, 1995, the PRC Board of Medicine rendered its
Decision6 in Administrative Case No. 1690 dismissing the case against Dr.
Fuentes. The Board held that the prosecution failed to show that Dr. Fuentes
was the one who left the two pieces of gauze inside Natividads body; and
that he concealed such fact from Natividad.
On September 6, 1996, the Court of Appeals rendered its Decision jointly
disposing of CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198, thus:
WHEREFORE, except for the modification that the case against defendantappellant Dr. Juan Fuentes is hereby DISMISSED, and with the
pronouncement that defendant-appellant Dr. Miguel Ampil is liable to
reimburse defendant-appellant Professional Services, Inc., whatever amount
the latter will pay or had paid to the plaintiffs-appellees, the decision
appealed from is hereby AFFIRMED and the instant appeal DISMISSED.
Concomitant with the above, the petition for certiorari and prohibition filed
by herein defendant-appellant Dr. Juan Fuentes in CA-G.R. SP No. 32198 is
hereby GRANTED and the challenged order of the respondent judge dated
September 21, 1993, as well as the alias writ of execution issued pursuant
thereto are hereby NULLIFIED and SET ASIDE. The bond posted by the
petitioner in connection with the writ of preliminary injunction issued by this
Court on November 29, 1993 is hereby cancelled.
Costs against defendants-appellants Dr. Miguel Ampil and Professional
Services, Inc.
SO ORDERED.
Only Dr. Ampil filed a motion for reconsideration, but it was denied in a
Resolution7 dated December 19, 1996.
Hence, the instant consolidated petitions.
In G.R. No. 126297, PSI alleged in its petition that the Court of Appeals erred
in holding that: (1) it is estopped from raising the defense that Dr. Ampil is
not its employee; (2) it is solidarily liable with Dr. Ampil; and (3) it is not
entitled to its counterclaim against the Aganas. PSI contends that Dr. Ampil is
not its employee, but a mere consultant or independent contractor. As such,
he alone should answer for his negligence.
In G.R. No. 126467, the Aganas maintain that the Court of Appeals erred in
finding that Dr. Fuentes is not guilty of negligence or medical malpractice,

invoking the doctrine of res ipsa loquitur. They contend that the pieces of
gauze are prima facie proofs that the operating surgeons have been
negligent.
Finally, in G.R. No. 127590, Dr. Ampil asserts that the Court of Appeals erred
in finding him liable for negligence and malpractice sans evidence that he
left the two pieces of gauze in Natividads vagina. He pointed to other
probable causes, such as: (1) it was Dr. Fuentes who used gauzes in
performing the hysterectomy; (2) the attending nurses failure to properly
count the gauzes used during surgery; and (3) the medical intervention of
the American doctors who examined Natividad in the United States of
America.
For our resolution are these three vital issues: first, whether the Court of
Appeals erred in holding Dr. Ampil liable for negligence and malpractice;
second, whether the Court of Appeals erred in absolving Dr. Fuentes of any
liability; and third, whether PSI may be held solidarily liable for the
negligence of Dr. Ampil.
I - G.R. No. 127590
Whether the Court of Appeals Erred in Holding Dr. Ampil
Liable for Negligence and Malpractice.
Dr. Ampil, in an attempt to absolve himself, gears the Courts attention to
other possible causes of Natividads detriment. He argues that the Court
should not discount either of the following possibilities: first, Dr. Fuentes left
the gauzes in Natividads body after performing hysterectomy; second, the
attending nurses erred in counting the gauzes; and third, the American
doctors were the ones who placed the gauzes in Natividads body.
Dr. Ampils arguments are purely conjectural and without basis. Records
show that he did not present any evidence to prove that the American
doctors were the ones who put or left the gauzes in Natividads body. Neither
did he submit evidence to rebut the correctness of the record of operation,
particularly the number of gauzes used. As to the alleged negligence of Dr.
Fuentes, we are mindful that Dr. Ampil examined his (Dr. Fuentes) work and
found it in order.
The glaring truth is that all the major circumstances, taken together, as
specified by the Court of Appeals, directly point to Dr. Ampil as the negligent
party, thus:
First, it is not disputed that the surgeons used gauzes as sponges to
control the bleeding of the patient during the surgical operation.

Second, immediately after the operation, the nurses who assisted in

the surgery noted in their report that the sponge count (was) lacking
2; that such anomaly was announced to surgeon and that a search
was done but to no avail prompting Dr. Ampil to continue for closure
x x x.
Third, after the operation, two (2) gauzes were extracted from the
same spot of the body of Mrs. Agana where the surgery was
performed.
An operation requiring the placing of sponges in the incision is not complete
until the sponges are properly removed, and it is settled that the leaving of
sponges or other foreign substances in the wound after the incision has been
closed is at least prima facie negligence by the operating surgeon.8 To put it
simply, such act is considered so inconsistent with due care as to raise an
inference of negligence. There are even legions of authorities to the effect
that such act is negligence per se.9
Of course, the Court is not blind to the reality that there are times when
danger to a patients life precludes a surgeon from further searching missing
sponges or foreign objects left in the body. But this does not leave him free
from any obligation. Even if it has been shown that a surgeon was required
by the urgent necessities of the case to leave a sponge in his patients
abdomen, because of the dangers attendant upon delay, still, it is his legal
duty to so inform his patient within a reasonable time thereafter by advising
her of what he had been compelled to do. This is in order that she might
seek relief from the effects of the foreign object left in her body as her
condition might permit. The ruling in Smith v. Zeagler10 is explicit, thus:
The removal of all sponges used is part of a surgical operation, and when a
physician or surgeon fails to remove a sponge he has placed in his patients
body that should be removed as part of the operation, he thereby leaves his
operation uncompleted and creates a new condition which imposes upon him
the legal duty of calling the new condition to his patients attention, and
endeavoring with the means he has at hand to minimize and avoid untoward
results likely to ensue therefrom.
Here, Dr. Ampil did not inform Natividad about the missing two pieces of
gauze. Worse, he even misled her that the pain she was experiencing was
the ordinary consequence of her operation. Had he been more candid,
Natividad could have taken the immediate and appropriate medical remedy
to remove the gauzes from her body. To our mind, what was initially an act of
negligence by Dr. Ampil has ripened into a deliberate wrongful act of
deceiving his patient.

This is a clear case of medical malpractice or more appropriately, medical

negligence. To successfully pursue this kind of case, a patient must only
prove that a health care provider either failed to do something which a
reasonably prudent health care provider would have done, or that he did
something that a reasonably prudent provider would not have done; and that
failure or action caused injury to the patient.11 Simply put, the elements are
duty, breach, injury and proximate causation. Dr, Ampil, as the lead surgeon,
had the duty to remove all foreign objects, such as gauzes, from Natividads
body before closure of the incision. When he failed to do so, it was his duty to
inform Natividad about it. Dr. Ampil breached both duties. Such breach
caused injury to Natividad, necessitating her further examination by
American doctors and another surgery. That Dr. Ampils negligence is the
proximate cause12 of Natividads injury could be traced from his act of closing
the incision despite the information given by the attending nurses that two
pieces of gauze were still missing. That they were later on extracted from
Natividads vagina established the causal link between Dr. Ampils
negligence and the injury. And what further aggravated such injury was his
deliberate concealment of the missing gauzes from the knowledge of
Natividad and her family.
II - G.R. No. 126467
Whether the Court of Appeals Erred in Absolving
Dr. Fuentes of any Liability
The Aganas assailed the dismissal by the trial court of the case against Dr.
Fuentes on the ground that it is contrary to the doctrine of res ipsa loquitur.
According to them, the fact that the two pieces of gauze were left inside
Natividads body is a prima facie evidence of Dr. Fuentes negligence.
We are not convinced.
Literally, res ipsa loquitur means "the thing speaks for itself." It is the rule
that the fact of the occurrence of an injury, taken with the surrounding
circumstances, may permit an inference or raise a presumption of
negligence, or make out a plaintiffs prima facie case, and present a question
of fact for defendant to meet with an explanation.13 Stated differently, where
the thing which caused the injury, without the fault of the injured, is under
the exclusive control of the defendant and the injury is such that it should
not have occurred if he, having such control used proper care, it affords
reasonable evidence, in the absence of explanation that the injury arose
from the defendants want of care, and the burden of proof is shifted to him
to establish that he has observed due care and diligence.14

From the foregoing statements of the rule, the requisites for the applicability
of the doctrine of res ipsa loquitur are: (1) the occurrence of an injury; (2) the
thing which caused the injury was under the control and management of the
defendant; (3) the occurrence was such that in the ordinary course of things,
would not have happened if those who had control or management used
proper care; and (4) the absence of explanation by the defendant. Of the
foregoing requisites, the most instrumental is the "control and management
of the thing which caused the injury."15
We find the element of "control and management of the thing which caused
the injury" to be wanting. Hence, the doctrine of res ipsa loquitur will not lie.
It was duly established that Dr. Ampil was the lead surgeon during the
operation of Natividad. He requested the assistance of Dr. Fuentes only to
perform hysterectomy when he (Dr. Ampil) found that the malignancy in her
sigmoid area had spread to her left ovary. Dr. Fuentes performed the surgery
and thereafter reported and showed his work to Dr. Ampil. The latter
examined it and finding everything to be in order, allowed Dr. Fuentes to
leave the operating room. Dr. Ampil then resumed operating on Natividad.
He was about to finish the procedure when the attending nurses informed
him that two pieces of gauze were missing. A "diligent search" was
conducted, but the misplaced gauzes were not found. Dr. Ampil then directed
that the incision be closed. During this entire period, Dr. Fuentes was no
longer in the operating room and had, in fact, left the hospital.
Under the "Captain of the Ship" rule, the operating surgeon is the person in
complete charge of the surgery room and all personnel connected with the
operation. Their duty is to obey his orders.16 As stated before, Dr. Ampil was
the lead surgeon. In other words, he was the "Captain of the Ship." That he
discharged such role is evident from his following conduct: (1) calling Dr.
Fuentes to perform a hysterectomy; (2) examining the work of Dr. Fuentes
and finding it in order; (3) granting Dr. Fuentes permission to leave; and (4)
ordering the closure of the incision. To our mind, it was this act of ordering
the closure of the incision notwithstanding that two pieces of gauze
remained unaccounted for, that caused injury to Natividads body. Clearly,
the control and management of the thing which caused the injury was in the
hands of Dr. Ampil, not Dr. Fuentes.
In this jurisdiction, res ipsa loquitur is not a rule of substantive law, hence,
does not per se create or constitute an independent or separate ground of
liability, being a mere evidentiary rule.17 In other words, mere invocation and
application of the doctrine does not dispense with the requirement of proof

of negligence. Here, the negligence was proven to have been committed by

Dr. Ampil and not by Dr. Fuentes.
III - G.R. No. 126297
Whether PSI Is Liable for the Negligence of Dr. Ampil
The third issue necessitates a glimpse at the historical development of
hospitals and the resulting theories concerning their liability for the
negligence of physicians.
Until the mid-nineteenth century, hospitals were generally charitable
institutions, providing medical services to the lowest classes of society,
without regard for a patients ability to pay.18 Those who could afford medical
treatment were usually treated at home by their doctors.19 However, the
days of house calls and philanthropic health care are over. The modern
health care industry continues to distance itself from its charitable past and
has experienced a significant conversion from a not-for-profit health care to
for-profit hospital businesses. Consequently, significant changes in health law
have accompanied the business-related changes in the hospital industry. One
important legal change is an increase in hospital liability for medical
malpractice. Many courts now allow claims for hospital vicarious liability
under the theories of respondeat superior, apparent authority, ostensible
authority, or agency by estoppel. 20
In this jurisdiction, the statute governing liability for negligent acts is Article
2176 of the Civil Code, which reads:
Art. 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this
Chapter.
A derivative of this provision is Article 2180, the rule governing vicarious
liability under the doctrine of respondeat superior, thus:
ART. 2180. The obligation imposed by Article 2176 is demandable not only
for ones own acts or omissions, but also for those of persons for whom one
is responsible.
x x x
x x x
The owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the
branches in which the latter are employed or on the occasion of their
functions.

Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks even
though the former are not engaged in any business or industry.
x x x
x x x
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father
of a family to prevent damage.
A prominent civilist commented that professionals engaged by an employer,
such as physicians, dentists, and pharmacists, are not "employees" under
this article because the manner in which they perform their work is not
within the control of the latter (employer). In other words, professionals are
considered personally liable for the fault or negligence they commit in the
discharge of their duties, and their employer cannot be held liable for such
fault or negligence. In the context of the present case, "a hospital cannot be
held liable for the fault or negligence of a physician or surgeon in the
treatment or operation of patients."21
The foregoing view is grounded on the traditional notion that the professional
status and the very nature of the physicians calling preclude him from being
classed as an agent or employee of a hospital, whenever he acts in a
professional capacity.22 It has been said that medical practice strictly involves
highly developed and specialized knowledge,23 such that physicians are
generally free to exercise their own skill and judgment in rendering medical
services sans interference.24 Hence, when a doctor practices medicine in a
hospital setting, the hospital and its employees are deemed to subserve him
in his ministrations to the patient and his actions are of his own
responsibility.25
The case of Schloendorff v. Society of New York Hospital26 was then
considered an authority for this view. The "Schloendorff doctrine" regards a
physician, even if employed by a hospital, as an independent contractor
because of the skill he exercises and the lack of control exerted over his
work. Under this doctrine, hospitals are exempt from the application of the
respondeat superior principle for fault or negligence committed by
physicians in the discharge of their profession.
However, the efficacy of the foregoing doctrine has weakened with the
significant developments in medical care. Courts came to realize that
modern hospitals are increasingly taking active role in supplying and
regulating medical care to patients. No longer were a hospitals functions
limited to furnishing room, food, facilities for treatment and operation, and
attendants for its patients. Thus, in Bing v. Thunig,27 the New York Court of

Appeals deviated from the Schloendorff doctrine, noting that modern

hospitals actually do far more than provide facilities for treatment. Rather,
they regularly employ, on a salaried basis, a large staff of physicians, interns,
nurses, administrative and manual workers. They charge patients for medical
care and treatment, even collecting for such services through legal action, if
necessary. The court then concluded that there is no reason to exempt
hospitals from the universal rule of respondeat superior.
In our shores, the nature of the relationship between the hospital and the
physicians is rendered inconsequential in view of our categorical
pronouncement in Ramos v. Court of Appeals28 that for purposes of
apportioning responsibility in medical negligence cases, an employeremployee relationship in effect exists between hospitals and their attending
and visiting physicians. This Court held:
"We now discuss the responsibility of the hospital in this particular incident.
The unique practice (among private hospitals) of filling up specialist staff
with attending and visiting "consultants," who are allegedly not hospital
employees, presents problems in apportioning responsibility for negligence
in medical malpractice cases. However, the difficulty is more apparent than
real.
In the first place, hospitals exercise significant control in the hiring and firing
of consultants and in the conduct of their work within the hospital premises.
Doctors who apply for consultant slots, visiting or attending, are required to
submit proof of completion of residency, their educational qualifications,
generally, evidence of accreditation by the appropriate board (diplomate),
evidence of fellowship in most cases, and references. These requirements
are carefully scrutinized by members of the hospital administration or by a
review committee set up by the hospital who either accept or reject the
application. x x x.
After a physician is accepted, either as a visiting or attending consultant, he
is normally required to attend clinico-pathological conferences, conduct
bedside rounds for clerks, interns and residents, moderate grand rounds and
patient audits and perform other tasks and responsibilities, for the privilege
of being able to maintain a clinic in the hospital, and/or for the privilege of
admitting patients into the hospital. In addition to these, the physicians
performance as a specialist is generally evaluated by a peer review
committee on the basis of mortality and morbidity statistics, and feedback
from patients, nurses, interns and residents. A consultant remiss in his
duties, or a consultant who regularly falls short of the minimum standards

acceptable to the hospital or its peer review committee, is normally politely

terminated.
In other words, private hospitals, hire, fire and exercise real control over their
attending and visiting consultant staff. While consultants are not,
technically employees, x x x, the control exercised, the hiring, and the right
to terminate consultants all fulfill the important hallmarks of an employeremployee relationship, with the exception of the payment of wages. In
assessing whether such a relationship in fact exists, the control test is
determining. Accordingly, on the basis of the foregoing, we rule that for the
purpose of allocating responsibility in medical negligence cases, an
employer-employee relationship in effect exists between hospitals and their
attending and visiting physicians. "
But the Ramos pronouncement is not our only basis in sustaining PSIs
liability. Its liability is also anchored upon the agency principle of apparent
authority or agency by estoppel and the doctrine of corporate negligence
which have gained acceptance in the determination of a hospitals liability
for negligent acts of health professionals. The present case serves as a
perfect platform to test the applicability of these doctrines, thus, enriching
our jurisprudence.
Apparent authority, or what is sometimes referred to as the "holding
out" theory, or doctrine of ostensible agency or agency by estoppel, 29 has its
origin from the law of agency. It imposes liability, not as the result of the
reality of a contractual relationship, but rather because of the actions of a
principal or an employer in somehow misleading the public into believing
that the relationship or the authority exists.30 The concept is essentially one
of estoppel and has been explained in this manner:
"The principal is bound by the acts of his agent with the apparent authority
which he knowingly permits the agent to assume, or which he holds the
agent out to the public as possessing. The question in every case is whether
the principal has by his voluntary act placed the agent in such a situation
that a person of ordinary prudence, conversant with business usages and the
nature of the particular business, is justified in presuming that such agent
has authority to perform the particular act in question.31
The applicability of apparent authority in the field of hospital liability was
upheld long time ago in Irving v. Doctor Hospital of Lake Worth, Inc.32 There,
it was explicitly stated that "there does not appear to be any rational basis
for excluding the concept of apparent authority from the field of hospital
liability." Thus, in cases where it can be shown that a hospital, by its actions,
has held out a particular physician as its agent and/or employee and that a

patient has accepted treatment from that physician in the reasonable belief
that it is being rendered in behalf of the hospital, then the hospital will be
liable for the physicians negligence.
Our jurisdiction recognizes the concept of an agency by implication or
estoppel. Article 1869 of the Civil Code reads:
ART. 1869. Agency may be express, or implied from the acts of the principal,
from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority.
In this case, PSI publicly displays in the lobby of the Medical City Hospital the
names and specializations of the physicians associated or accredited by it,
including those of Dr. Ampil and Dr. Fuentes. We concur with the Court of
Appeals conclusion that it "is now estopped from passing all the blame to
the physicians whose names it proudly paraded in the public directory
leading the public to believe that it vouched for their skill and competence."
Indeed, PSIs act is tantamount to holding out to the public that Medical City
Hospital, through its accredited physicians, offers quality health care
services. By accrediting Dr. Ampil and Dr. Fuentes and publicly advertising
their qualifications, the hospital created the impression that they were its
agents, authorized to perform medical or surgical services for its patients. As
expected, these patients, Natividad being one of them, accepted the services
on the reasonable belief that such were being rendered by the hospital or its
employees, agents, or servants. The trial court correctly pointed out:
x x x regardless of the education and status in life of the patient, he ought
not be burdened with the defense of absence of employer-employee
relationship between the hospital and the independent physician whose
name and competence are certainly certified to the general public by the
hospitals act of listing him and his specialty in its lobby directory, as in the
case herein. The high costs of todays medical and health care should at
least exact on the hospital greater, if not broader, legal responsibility for the
conduct of treatment and surgery within its facility by its accredited
physician or surgeon, regardless of whether he is independent or
employed."33
The wisdom of the foregoing ratiocination is easy to discern. Corporate
entities, like PSI, are capable of acting only through other individuals, such as
physicians. If these accredited physicians do their job well, the hospital
succeeds in its mission of offering quality medical services and thus profits
financially. Logically, where negligence mars the quality of its services, the
hospital should not be allowed to escape liability for the acts of its ostensible
agents.

We now proceed to the doctrine of corporate negligence or corporate

responsibility.
One allegation in the complaint in Civil Case No. Q-43332 for negligence and
malpractice is that PSI as owner, operator and manager of Medical City
Hospital, "did not perform the necessary supervision nor exercise diligent
efforts in the supervision of Drs. Ampil and Fuentes and its nursing staff,
resident doctors, and medical interns who assisted Drs. Ampil and Fuentes in
the performance of their duties as surgeons."34 Premised on the doctrine of
corporate negligence, the trial court held that PSI is directly liable for such
breach of duty.
We agree with the trial court.
Recent years have seen the doctrine of corporate negligence as the judicial
answer to the problem of allocating hospitals liability for the negligent acts
of health practitioners, absent facts to support the application of respondeat
superior or apparent authority. Its formulation proceeds from the judiciarys
acknowledgment that in these modern times, the duty of providing quality
medical service is no longer the sole prerogative and responsibility of the
physician. The modern hospitals have changed structure. Hospitals now tend
to organize a highly professional medical staff whose competence and
performance need to be monitored by the hospitals commensurate with their
inherent responsibility to provide quality medical care.35
The doctrine has its genesis in Darling v. Charleston Community
Hospital.36 There, the Supreme Court of Illinois held that "the jury could have
found a hospital negligent, inter alia, in failing to have a sufficient number of
trained nurses attending the patient; failing to require a consultation with or
examination by members of the hospital staff; and failing to review the
treatment rendered to the patient." On the basis of Darling, other
jurisdictions held that a hospitals corporate negligence extends to
permitting a physician known to be incompetent to practice at the
hospital.37 With the passage of time, more duties were expected from
hospitals, among them: (1) the use of reasonable care in the maintenance of
safe and adequate facilities and equipment; (2) the selection and retention of
competent physicians; (3) the overseeing or supervision of all persons who
practice medicine within its walls; and (4) the formulation, adoption and
enforcement of adequate rules and policies that ensure quality care for its
patients.38 Thus, in Tucson Medical Center, Inc. v. Misevich,39 it was held that
a hospital, following the doctrine of corporate responsibility, has the duty to
see that it meets the standards of responsibilities for the care of patients.
Such duty includes the proper supervision of the members of its medical

staff. And in Bost v. Riley,40 the court concluded that a patient who enters a
hospital does so with the reasonable expectation that it will attempt to cure
him. The hospital accordingly has the duty to make a reasonable effort to
monitor and oversee the treatment prescribed and administered by the
physicians practicing in its premises.
In the present case, it was duly established that PSI operates the Medical
City Hospital for the purpose and under the concept of providing
comprehensive medical services to the public. Accordingly, it has the duty to
exercise reasonable care to protect from harm all patients admitted into its
facility for medical treatment. Unfortunately, PSI failed to perform such duty.
The findings of the trial court are convincing, thus:
x x x PSIs liability is traceable to its failure to conduct an investigation of the
matter reported in the nota bene of the count nurse. Such failure established
PSIs part in the dark conspiracy of silence and concealment about the
gauzes. Ethical considerations, if not also legal, dictated the holding of an
immediate inquiry into the events, if not for the benefit of the patient to
whom the duty is primarily owed, then in the interest of arriving at the truth.
The Court cannot accept that the medical and the healing professions,
through their members like defendant surgeons, and their institutions like
PSIs hospital facility, can callously turn their backs on and disregard even a
mere probability of mistake or negligence by refusing or failing to investigate
a report of such seriousness as the one in Natividads case.
It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with
the assistance of the Medical City Hospitals staff, composed of resident
doctors, nurses, and interns. As such, it is reasonable to conclude that PSI, as
the operator of the hospital, has actual or constructive knowledge of the
procedures carried out, particularly the report of the attending nurses that
the two pieces of gauze were missing. In Fridena v. Evans,41 it was held that a
corporation is bound by the knowledge acquired by or notice given to its
agents or officers within the scope of their authority and in reference to a
matter to which their authority extends. This means that the knowledge of
any of the staff of Medical City Hospital constitutes knowledge of PSI. Now,
the failure of PSI, despite the attending nurses report, to investigate and
inform Natividad regarding the missing gauzes amounts to callous
negligence. Not only did PSI breach its duties to oversee or supervise all
persons who practice medicine within its walls, it also failed to take an active
step in fixing the negligence committed. This renders PSI, not only
vicariously liable for the negligence of Dr. Ampil under Article 2180 of the

Civil Code, but also directly liable for its own negligence under Article 2176.
In Fridena, the Supreme Court of Arizona held:
x x x In recent years, however, the duty of care owed to the patient by the
hospital has expanded. The emerging trend is to hold the hospital
responsible where the hospital has failed to monitor and review medical
services being provided within its walls. See Kahn Hospital Malpractice
Prevention, 27 De Paul . Rev. 23 (1977).
Among the cases indicative of the emerging trend is Purcell v. Zimbelman,
18 Ariz. App. 75,500 P. 2d 335 (1972). In Purcell, the hospital argued that it
could not be held liable for the malpractice of a medical practitioner because
he was an independent contractor within the hospital. The Court of Appeals
pointed out that the hospital had created a professional staff whose
competence and performance was to be monitored and reviewed by the
governing body of the hospital, and the court held that a hospital would be
negligent where it had knowledge or reason to believe that a doctor using
the facilities was employing a method of treatment or care which fell below
the recognized standard of care.
Subsequent to the Purcell decision, the Arizona Court of Appeals held that a
hospital has certain inherent responsibilities regarding the quality of medical
care furnished to patients within its walls and it must meet the standards of
responsibility commensurate with this undertaking. Beeck v. Tucson General
Hospital, 18 Ariz. App. 165, 500 P. 2d 1153 (1972). This court has confirmed
the rulings of the Court of Appeals that a hospital has the duty of supervising
the competence of the doctors on its staff. x x x.
x
x
x
x
x x
In the amended complaint, the plaintiffs did plead that the operation was
performed at the hospital with its knowledge, aid, and assistance, and that
the negligence of the defendants was the proximate cause of the patients
injuries. We find that such general allegations of negligence, along with the
evidence produced at the trial of this case, are sufficient to support the
hospitals liability based on the theory of negligent supervision."
Anent the corollary issue of whether PSI is solidarily liable with Dr. Ampil for
damages, let it be emphasized that PSI, apart from a general denial of its
responsibility, failed to adduce evidence showing that it exercised the
diligence of a good father of a family in the accreditation and supervision of
the latter. In neglecting to offer such proof, PSI failed to discharge its burden
under the last paragraph of Article 2180 cited earlier, and, therefore, must
be adjudged solidarily liable with Dr. Ampil. Moreover, as we have discussed,
PSI is also directly liable to the Aganas.

One final word. Once a physician undertakes the treatment and care of a
patient, the law imposes on him certain obligations. In order to escape
liability, he must possess that reasonable degree of learning, skill and
experience required by his profession. At the same time, he must apply
reasonable care and diligence in the exercise of his skill and the application
of his knowledge, and exert his best judgment.
WHEREFORE, we DENY all the petitions and AFFIRM the challenged Decision
of the Court of Appeals in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198.
Costs against petitioners PSI and Dr. Miguel Ampil.
SO ORDERED.

G.R. No. 104408 June 21, 1993

METRO MANILA TRANSIT CORPORATION, petitioner,
vs.
THE COURT OF APPEALS AND NENITA CUSTODIA, respondents.
Office of the Government Corporate Counsel for petitioner.
Renato P. Decena and Restituto Abjero for private respondent.
REGALADO, J.:
This appeal calls for a review of the legal validity and sufficiency of
petitioner's invocation of due diligence in the selection and supervision of
employees as its defense against liability resulting from a vehicular collision.
With the facility by which such a defense can be contrived and our country
having reputedly the highest traffic accident rate in its geographical region,
it is indeed high time for us to once again address this matter which poses
not only a litigation issue for the courts but affects the very safety of our
streets.
The facts of the case at bar are recounted for us by respondent court, thus
At about six o'clock in the morning of August 28, 1979, plaintiffappellant Nenita Custodio boarded as a paying passenger a
public utility jeepney with plate No. D7 305 PUJ Pilipinas 1979,
then driven by defendant Agudo Calebag and owned by his codefendant Victorino Lamayo, bound for her work at Dynetics
Incorporated located in Bicutan, Taguig, Metro Manila, where she
then worked as a machine operator earning P16.25 a day. While
the passenger jeepney was travelling at (a) fast clip along DBP

Avenue, Bicutan, Taguig, Metro Manila another fast moving

vehicle, a Metro Manila Transit Corp. (MMTC, for short) bus
bearing plate no. 3Z 307 PUB (Philippines) "79 driven by
defendant Godofredo C. Leonardo was negotiating Honeydew
Road, Bicutan, Taguig, Metro Manila bound for its terminal at
Bicutan. As both vehicles approached the intersection of DBP
Avenue and Honeydew Road they failed to slow down and
slacken their speed; neither did they blow their horns to warn
approaching vehicles. As a consequence, a collision between
them occurred, the passenger jeepney ramming the left side
portion of the MMTC bus. The collision impact caused plaintiffappellant Nenita Custodio to hit the front windshield of the
passenger jeepney and (she) was thrown out therefrom, falling
onto the pavement unconscious with serious physical injuries.
She was brought to the Medical City Hospital where she regained
consciousness only after one (1) week. Thereat, she was confined
for twenty-four (24) days, and as a consequence, she was unable
to work for three and one half months (31/2). 1
A complaint for damages 2 was filed by herein private respondent, who being
then a minor was assisted by her parents, against all of therein named
defendants following their refusal to pay the expenses incurred by the former
as a result of the collision.
Said defendants denied all the material allegations in the complaint and
pointed an accusing finger at each other as being the party at fault. Further,
herein petitioner Metro Manila Transit Corporation (MMTC), a governmentowned corporation and one of the defendants in the court a quo, along with
its driver, Godofredo Leonardo, contrarily averred in its answer with crossclaim and counterclaim 3 that the MMTC bus was driven in a prudent and
careful manner by driver Leonardo and that it was the passenger jeepney
which was driven recklessly considering that it hit the left middle portion of
the MMTC bus, and that it was defendant Lamayo, the owner of the jeepney
and employer of driver Calebag, who failed to exercise due diligence in the
selection and supervision of employees and should thus be held solidarily
liable for damages caused to the MMTC bus through the fault and negligence
of its employees.
Defendant Victorino Lamayo, for his part, alleged in his answer with crossclaim and counterclaim 4 that the damages suffered by therein plaintiff
should be borne by defendants MMTC and its driver, Godofredo Leonardo,
because the latter's negligence was the sole and proximate cause of the

accident and that MMTC failed to exercise due diligence in the selection and
supervision of its employees.
By order of the trial court, defendant Calebag was declared in default for
failure to file an answer. 5 Thereafter, as no amicable settlement was reached
during the pre-trial conference, 6 trial on the merits ensued with the opposing
parties presenting their respective witnesses and documentary evidence.
Herein private respondent Nenita Custodia, along with her parents, were
presented as witnesses for the prosecution. In addition, Dr. Edgardo del
Mundo, the attending physician, testified on the cause, nature and extent of
the injuries she sustained as a result of the vehicular mishap. 7 On the other
hand, defendant MMTC presented as witnesses Godofredo Leonardo,
Christian Bautista and Milagros Garbo. Defendant Lamayo, however, failed to
present any witness.
Milagros Garbo testified that, as a training officer of MMTC, she was in charge
of the selection of the company's bus drivers, conducting for this purpose a
series of training programs and examinations. According to her, new
applicants for job openings at MMTC are preliminarily required to submit
certain documents such as National Bureau of Investigation (NBI) clearance,
birth or residence certificate, ID pictures, certificate or diploma of highest
educational attainment, professional driver's license, and work experience
certification. Re-entry applicants, aside from the foregoing requirements, are
additionally supposed to submit company clearance for shortages and
damages and revenue performance for the preceding year. Upon satisfactory
compliance with said requisites, applicants are recommended for and
subjected to a Preliminary interview, followed by a record check to find out
whether they are included in the list of undesirable employees given by
other companies.
Thereafter, she continued, if an applicant is found to be acceptable, a final
interview by the Chief Supervisor is scheduled and followed by a training
program which consists of seminars and actual driving and Psycho-physical
tests and X-ray examinations. The seminars, which last for a total of eighteen
(18) days, include familiarization with assigned routes, existing traffic rules
and regulations, Constabulary Highway Patrol Group (CHPG) seminar on
defensive driving, preventive maintenance, proper vehicle handling,
interpersonal relationship ,and administrative rules on discipline and on-thejob training. Upon completion of all the seminars and tests, a final clearance
is issued, an employment contract is executed and the driver is ready to
report for duty. 8

MMTC's Transport Supervisor, Christian Bautista, testified that it was his duty
to monitor the daily operation of buses in the field, to countercheck the
dispatcher on duty prior to the operation of the buses in the morning and to
see to it that the bus crew follow written guidelines of the company, which
include seeing to it that its employees are in proper uniform, briefed in traffic
rules and regulations before the start of duty, fit to drive and, in general,
follow other rules and regulations of the Bureau of Land Transportation as
well as of the company. 9
The reorganized trial court, in its decision of August 1, 1989, 10 found both
drivers of the colliding vehicles concurrently negligent for non-observance of
appropriate traffic rules and regulations and for failure to take the usual
precautions when approaching an intersection. As joint tortfeasors, both
drivers, as well as defendant Lamayo, were held solidarily liable for damages
sustained by plaintiff Custodio. Defendant MMTC, on the bases of the
evidence presented was, however, absolved from liability for the accident on
the ground that it was not only careful and diligent in choosing and screening
applicants for job openings but was also strict and diligent in supervising its
employees by seeing to it that its employees were in proper uniforms,
briefed in traffic rules and regulations before the start of duty, and that it
checked its employees to determine whether or not they were positive for
alcohol and followed other rules and regulations and guidelines of the Bureau
of Land Transportation and of the company.
The trial court accordingly ruled:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby
rendered dismissing the complaint against the Metro Manila
Transit Corporation and ordering defendants Agudo P. Calebag,
Victorino Lamayo and Godofredo C. Leonardo to pay plaintiffs,
jointly and severally, the following:
a) the sum of P10,000.00 by way of medical expenses;
b) the sum of P5,000.00 by way of expenses of litigation;
c) the sum of P15,000.00 by way of moral damages;
d) the sum of P2,672.00 by way of loss of earnings;
e) the sum of P5,000.00 by way of exemplary damages;
f) the sum of P6,000.00 by way of attorney's fees; and
g) costs of suit.
SO ORDERED.

11

Plaintiff's motion to have that portion of the trial court's decision absolving
MMTC from liability reconsidered 12having been denied for lack of merit, 13 an

appeal was filed by her with respondent appellate court. After consideration
of the appropriate pleadings on appeal and finding the appeal meritorious,
the Court of Appeals modified the trial court's decision by holding MMTC
solidarily liable with the other defendants for the damages awarded by the
trial court because of their concurrent negligence, concluding that while
there is no hard and fast rule as to what constitutes sufficient evidence to
prove that an employer has exercised the due diligence required of it in the
selection and supervision of its employees, based on the quantum of
evidence adduced the said appellate court was not disposed to say that
MMTC had exercised the diligence required of a good father of a family in the
selection and supervision of its driver, Godofredo Leonardo. 14
The Court of Appeals was resolute in its conclusion and denied the motions
for reconsideration of appellee Custodio and appellant MMTC in a resolution
dated February 17, 1982, 15 thus prompting MMTC to file the instant petition
invoking the review powers of this Court over the decision of the Court of
Appeals, raising as issues for resolution whether or not (1) the documentary
evidence to support the positive testimonies of witnesses Garbo and Bautista
are still necessary; (2) the testimonies of witnesses Garbo and Bautista may
still be disturbed on appeal; and (3) the evidence presented during the trial
with respect to the proof of due diligence of petitioner MMTC in the selection
and supervision of its employees, particularly driver Leonardo, is sufficient.
Prefatorily, private respondent questions the timeliness of the filing of the
petition at bar in view of the procedural stricture that the timely perfection of
an appeal is both a mandatory and jurisdictional requirement. This is a
legitimate concern on the part of private respondent and presents an
opportune occasion to once again clarify this point as there appears to be
some confusion in the application of the rules and interpretative rulings
regarding the computation of reglementary periods at this stage of the
proceedings.
The records of this case reveal that the decision of respondent Court of
Appeals, dated October 31, 1991, was received by MMTC on November 18,
1991 16 and it seasonably filed a motion for the reconsideration thereof on
November 28, 1991. 17 Said motion for reconsideration was denied by
respondent court in its resolution dated February 17, 1992, which in turn was
received by MMTC on March 9, 1992. 18 Therefore, it had, pursuant to Section
1, Rule 45 of the Rules of Court, fifteen (15) days therefrom or up to March
24, 1992 within which to file its petition, for review on certiorari. Anticipating,
however, that it may not be able to file said petition before the lapse of the
reglementary period therefor, MMTC filed a motion on March 19, 1992 for an

extension of thirty (30) days to file the present petition, with proof of service
of copies thereof to respondent court and the adverse parties. The Court
granted said motion, with the extended period to be counted from the
expiration of the reglementary period. 19 Consequently, private respondent
had thirty (30) days from March 24, 1992 within which to file its petition, or
up to April 23, 1992, and the eventual filing of said petition on April 14, 1992
was well within the period granted by the Court.
We digress to reiterate, in view of erroneous submissions that we continue to
receive, that in the case of a petition for review on certiorari from a decision
rendered by the Court of Appeals, Section 1, Rule 45 of the Rules of Court,
which has long since been clarified in Lacsamana vs. The Hon. Second
Special Cases Division of the Intermediate Appellate Court, et al., 20 allows
the same to be filed "within fifteen (15) days from notice of judgment or of
the denial of the motion for reconsideration filed in due time, and paying at
the same time to the corresponding docket fee." In other words, in the event
a motion for reconsideration is filed and denied, the period of fifteen (15)
days begins to run all over again from notice of the denial resolution.
Otherwise put, if a motion for reconsideration is filed, the reglementary
period within which to appeal the decision of the Court of Appeals to the
Supreme Court is reckoned from the date the party who intends to appeal
received the order denying the motion for reconsideration. 21 Furthermore, a
motion for extension of time to file a petition for review may be filed with this
Court within said reglementary period, paying at the same time the
corresponding docket fee.
1. The first two issues raised by petitioner shall be correlatively discussed in
view of their interrelation.
In its present petition, MMTC insists that the oral testimonies of its
employees were presented as witnesses in its behalf sufficiently prove, even
without the presentation documentary evidence, that driver Leonardo had
complied with all the hiring and clearance requirements and had undergone
all trainings, tests and examinations preparatory to actual employment, and
that said positive testimonies spell out the rigid procedure for screening of
job applicants and the supervision of its employees in the field. It
underscored the fact that it had indeed complied with the measure of
diligence in the selection and supervision of its employees as enunciated
in Campo, et al. vs. Camarote, et al. 22 requiring an employer, in the exercise
of the diligence of a good father of a family, to carefully examine the
applicant for employment as to his qualifications, experience and record

service, and not merely be satisfied with the possession of a professional

driver's license.
It goes on to say since the testimonies of these witnesses were allegedly
neither discredited nor impeached by the adverse party, they should be
believed and not arbitrarily disregarded or rejected nor disturbed on appeal.
It assiduously argues that inasmuch as there is no law requiring that facts
alleged by petitioner be established by documentary evidence, the probative
force and weight of their testimonies should not be discredited, with the
further note that the lower court having passed upon the relevancy of the
oral testimonies and considered the same as unrebutted, its consideration
should no longer be disturbed on appeal. 23
Private respondent, on the other hand, retorts that the factual findings of
respondent court are conclusive upon the High Court which cannot be
burdened with the task of analyzing and weighing the evidence all over
again. 24
At this juncture, it suffices to note that factual findings of the trial court may
be reversed by the Court of Appeals, which is vested by law with the power
to review both legal and factual issues, if on the evidence of record, it
appears that the trial court may have been mistaken 25 particularly in the
appreciation of evidence, which is within the domain of the Court of
Appeals. 26 The general rule laid down in a plethora of cases is that such
findings of fact by the Court of Appeals are conclusive upon and beyond the
power of review of the Supreme Court. 27 However, it is now well-settled that
while the findings of fact of the Court of Appeals are entitled to great respect,
and even finality at times, that rule is not inflexible and is subject to well
established exceptions, to wit: (1) when the conclusion is a finding grounded
entirely on speculation, surmises and conjectures; (2) when the inference
made is manifestly mistaken, absurd or impossible; (3) where there is grave
abuse of discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6) when the Court of
Appeals, in making its findings, went beyond the issues of the case and the
same are contrary to the admissions of both appellant and appellee; (7)
when the findings of the Court of Appeals are contrary to those of the trial
court; (8) when the findings of fact are conclusions without citation of
specific evidence on which they are based; (9) when the facts set forth in the
petition, as well as in the petitioner's main and reply briefs are not disputed
by the respondents and (10) when the findings of fact of the Court of Appeals
are premised on the supposed absence of evidence and are contradicted by
the evidence on record. 28

When as in this case, the findings of the Court of Appeals and the trial court
are contrary to each other, this court may scrutinize the evidence on
record, 29 in order to arrive at a correct finding based thereon. 30
A perusal of the same shows that since there is no dispute as to the finding
of concurrent negligence on the part of the defendant Calebag, the driver of
the passenger jeepney, and co-defendant Leonardo, the bus driver of
petitioner MMTC, both of whom were solidarily held liable with defendant
Lamayo, the owner of the jeepney, we are spared the necessity of
determining the sufficiency of evidence establishing the fact of
negligence. 31 The contrariety is in the findings of the two lower courts, and
which is the subject of this present controversy, with regard to the liability of
MMTC as employer of one the erring drivers.
The trial court, in absolving MMTC from liability ruled that
On the question as to whether defendant MMTC was successful in
proving its defense that indeed it had exercised the due diligence
of a good father of a family in the selection and supervision of
defendant Leonardo, this Court finds that based on the evidence
presented during the trial, defendant MMTC was able to prove
that it was not only careful and diligent in choosing and
screening applicants for job openings but also strict (and) diligent
in supervising its employees by seeing to it that its employees
were in proper uniforms, briefed in traffic rules and regulations
before the start of duty, checked employees to determine
whether they were positive for alcohol and followed other rules
and regulations and guidelines of the Bureau of Land
Transportation as well as its company. Having successfully
proven such defense, defendant MMTC therefore, cannot be held
liable for the accident.
Having reached this conclusion, the Court now, holds that
defendant MMTC be totally absolved from liability and that the
complaint against it be dismissed. . . . 32
whereas respondent court was of the opinion that
It is surprising though that witness Milagros Garbo did not testify
nor present any evidence that defendant-appellee's driver,
defendant Godofredo Leonardo has complied with or has
undergone all clearances and trainings she referred to. The
clearances, result of seminars and tests which Godofredo
Leonardo submitted and complied with, if any, were not
presented in court despite the fact that they are obviously in the

possession and control of defendant-appellee. Instead, it resorted

to generalities. The Court has ruled that due diligence in (the)
selection and supervision of employee(s) are not proved by mere
testimonies to the effect that its applicant has complied with all
the company requirements before one is admitted as an
employee but without proof thereof. . . .
On the part of Christian Bautista, the transport supervisor of
defendant-appellee, he testified that it is his duty to monitor the
operation of buses in the field; to countercheck the dispatchers'
duty prior to the operation of the buses in the morning; to see to
it that bus crew follows written guidelines of the company (t.s.n.,
April 29, 1988, pp. 4-5), but when asked to present in court the
alleged written guidelines of the company he merely stated that
he brought with him a "wrong document" and defendantappellee's counsel asked for reservation to present such written
guidelines in the next hearing but the same was (sic) never
presented in court. 33
A thorough and scrupulous review of the records of this case reveals that the
conclusion of respondent Court of Appeals is more firmly grounded on
jurisprudence and amply supported by the evidence of record than that of
the court below.
It is procedurally required for each party in a case to prove his own
affirmative assertion by the degree of evidence required by law. 34 In civil
cases, the degree of evidence required of a party in order to support his
claim is preponderance of evidence, or that evidence adduced by one party
which is more conclusive and credible than that of the other party. It is,
therefore, incumbent on the plaintiff who is claiming a right to prove his
case. Corollarily, defendant must likewise prove own allegation to buttress its
claim that it is not liable. 35
In fine, the party, whether plaintiff or defendant, who asserts the affirmative
of the issue has the burden of presenting at the trial such amount of
evidence required by law to obtain a favorable judgment. 36 It is entirely
within each of the parties discretion, consonant with the theory of the case it
or he seeks to advance and subject to such procedural strategy followed
thereby, to present all available evidence at its or his disposal in the manner
which may be deemed necessary and beneficial to prove its or his position,
provided only that the same shall measure up to the quantum of evidence
required by law. In making proof in its or his case, it is paramount that the
best and most complete evidence be formally entered. 37

Coming now to the case at bar, while there is no rule which requires that
testimonial evidence, to hold sway, must be corroborated by documentary
evidence, or even subject evidence for that matter, inasmuch as the
witnesses' testimonies dwelt on mere generalities, we cannot consider the
same as sufficiently persuasive proof that there was observance of due
diligence in the selection and supervision of employees. 38 Petitioner's
attempt to prove itsdiligentissimi patris familias in the selection and
supervision of employees through oral evidence must fail as it was unable to
buttress the same with any other evidence, object or documentary, which
might obviate the apparent biased nature of the testimony. 39
Our view that the evidence for petitioner MMTC falls short of the required
evidentiary quantum as would convincingly and undoubtedly prove its
observance of the diligence of a good father of a family has its precursor in
the underlying rationale pronounced in the earlier case of Central Taxicab
Corp. vs. Ex-Meralco Employees Transportation Co., et al., 40 set amidst an
almost identical factual setting, where we held that:
. . . . This witness spoke of an "affidavit of experience" which a
driver-applicant must accomplish before he is employed by the
company, a written "time schedule" for each bus, and a record of
the inspections and thorough checks pertaining to each bus
before it leaves the car barn; yet no attempt was ever made to
present in evidence any of these documents, despite the fact
that they were obviously in the possession and control of the
defendant company.
xxx xxx xxx
Albert also testified that he kept records of the preliminary and
final tests given him as well as a record of the qualifications and
experience of each of the drivers of the company. It is rather
strange, therefore, that he failed to produce in court the all
important record of Roberto, the driver involved in this case.
The failure of the defendant company to produce in court any
"record" or other documentary proof tending to establish that it
had exercised all the diligence of a good father of a family in the
selection and supervision of its drivers and buses,
notwithstanding the calls therefor by both the trial court and the
opposing counsel, argues strongly against its pretensions.
We are fully aware that there is no hard-and-fast rule on the
quantum of evidence needed to prove due observance of all the
diligence of a good father of a family as would constitute a valid

defense to the legal presumption of negligence on the part of an

employer or master whose employee has by his negligence,
caused damage to another. . . . (R)educing the testimony of
Albert to its proper proportions, we do not have enough
trustworthy evidence left to go by. We are of the considered
opinion, therefore, that the believable evidence on the degree of
care and diligence that has been exercised in the selection and
supervision of Roberto Leon y Salazar, is not legally sufficient to
overcome the presumption of negligence against the defendant
company.
Whether or not the diligence of a good father of a family has been observed
by petitioner is a matter of proof which under the circumstances in the case
at bar has not been clearly established. It is not felt by the Court that there is
enough evidence on record as would overturn the presumption of
negligence, and for failure to submit all evidence within its control, assuming
the putative existence thereof, petitioner MMTC must suffer the
consequences of its own inaction and indifference.
2. In any event, we do not find the evidence presented by petitioner
sufficiently convincing to prove the diligence of a good father of a family,
which for an employer doctrinally translates into its observance of due
diligence in the selection and supervision of its employees but which
mandate, to use an oft-quoted phrase, is more often honored in the breach
than in the observance.
Petitioner attempted to essay in detail the company's procedure for
screening job applicants and supervising its employees in the field, through
the testimonies of Milagros Garbo, as its training officer, and Christian
Bautista, as its transport supervisor, both of whom naturally and expectedly
testified for MMTC. It then concluded with its sweeping pontifications that
"thus, there is no doubt that considering the nature of the business of
petitioner, it would not let any applicant-drivers to be (sic) admitted without
undergoing the rigid selection and training process with the end (in) view of
protecting the public in general and its passengers in particular; . . . thus,
there is no doubt that applicant had fully complied with the said
requirements otherwise Garbo should not have allowed him to undertake the
next set of requirements . . . and the training conducted consisting of
seminars and actual driving tests were satisfactory otherwise he should have
not been allowed to drive the subject vehicle. 41
These statements strike us as both presumptuous and in the nature of petitio
principii, couched in generalities and shorn of any supporting evidence to

boost their verity. As earlier observed, respondent court could not but
express surprise, and thereby its incredulity, that witness Garbo neither
testified nor presented any evidence that driver Leonardo had complied with
or had undergone all the clearances and trainings she took pains to recite
and enumerate. The supposed clearances, results of seminars and tests
which Leonardo allegedly submitted and complied with were never presented
in court despite the fact that, if true, then they were obviously in the
possession and control of petitioner. 42
The case at bar is clearly within the coverage of Article 2176 and 2177, in
relation to Article 2180, of the Civil Code provisions on quasi-delicts as all the
elements thereof are present, to wit: (1) damages suffered by the plaintiff,
(2) fault or negligence of the defendant or some other person for whose act
he must respond, and (3) the connection of cause and effect between fault or
negligence of the defendant and the damages incurred by plaintiff. 43 It is to
be noted that petitioner was originally sued as employer of driver Leonardo
under Article 2180, the pertinent parts of which provides that:
The obligation imposed by article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for
whom one is responsible.
xxx xxx xxx
Employers shall be liable for damages caused by their employees
and household helpers acting within the scope of their assigned
tasks, even though the former are not engaged in any business
or industry.
xxx xxx xxx
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
The basis of the employer's vicarious liability has been explained under this
ratiocination:
The responsibility imposed by this article arises by virtue of a
presumption juris tantum of negligence on the part of the
persons made responsible under the article, derived from their
failure to exercise due care and vigilance over the acts of
subordinates to prevent them from causing damage. Negligence
is imputed to them by law, unless they prove the contrary. Thus,
the last paragraph of the article says that such responsibility
ceases if is proved that the persons who might be held
responsible under it exercised the diligence of a good father of a

family (diligentissimi patris familias) to prevent damage. It is

clear, therefore, that it is not representation, nor interest, nor
even the necessity of having somebody else answer for the
damages caused by the persons devoid of personality, but it is
the non-performance of certain duties of precaution and
prudence imposed upon the persons who become responsible by
civil bond uniting the actor to them, which forms the foundation
of such responsibility. 44
The above rule is, of course, applicable only where there is an employeremployee relationship, although it is not necessary that the employer be
engaged in business or industry. Whether or not engaged in any business or
industry, the employer under Article 2180 is liable for torts committed by his
employees within the scope of their assigned tasks. But, it is necessary first
to establish the employment relationship. Once this is done, the plaintiff
must show, to hold the employer liable, that the employee was acting within
the scope of his assigned task when the tort complained of was committed. It
is only then that the defendant, as employer, may find it necessary to
interpose the defense of due diligence in the selection and supervision of
employees. 45 The diligence of a good father of a family required to be
observed by employers to prevent damages under Article 2180 refers to due
diligence in the selection and supervision of employees in order to protect
the public. 46
With the allegation and subsequent proof of negligence against the
defendant driver and of an employer-employee relation between him and his
co-defendant MMTC in this instance, the case in undoubtedly based on
aquasi-delict under Article 2180 47 When the employee causes damage due
to his own negligence while performing his own duties, there arises the juris
tantum presumption that the employer is negligent, 48 rebuttable only by
proof of observance of the diligence of a good father of a family. For failure to
rebut such legal presumption of negligence in the selection and supervision
of employees, the employer is likewise responsible for damages, 49 the basis
of the liability being the relationship of pater familias or on the employer's
own negligence. 50
As early as the case of Gutierrez vs. Gutierrez, 51 and thereafter, we have
consistently held that where the injury is due to the concurrent negligence of
the drivers of the colliding vehicles, the drivers and owners of the said
vehicles shall be primarily, directly and solidarily liable for damages and it is
immaterial that one action is based on quasi-delict and the other on culpa

contractual, as the solidarily of the obligation is justified by the very nature

thereof. 52
It should be borne in mind that the legal obligation of employers to observe
due diligence in the selection and supervision of employees is not to be
considered as an empty play of words or a mere formalism, as appears to be
the fashion of the times, since the non-observance thereof actually becomes
the basis of their vicarious liability under Article 2180.
On the matter of selection of employees, Campo vs. Camarote, supra, lays
down this admonition:
. . . . In order tat the owner of a vehicle may be considered as
having exercised all diligence of a good father of a family, he
should not have been satisfied with the mere possession of a
professional driver's license; he should have carefully examined
the applicant for employment as to his qualifications, his
experience and record of service. These steps appellant failed to
observe; he has therefore, failed to exercise all due diligence
required of a good father of a family in the choice or selection of
driver.
Due diligence in the supervision of employees, on the other hand, includes
the formulation of suitable rules and regulations for the guidance of
employees and the issuance of proper instructions intended for the
protection of the public and persons with whom the employer has relations
through his or its employees and the imposition of necessary disciplinary
measures upon employees in case of breach or as may be warranted to
ensure the performance of acts indispensable to the business of and
beneficial to their employer. 53 To this, we add that actual implementation
and monitoring of consistent compliance with said rules should be the
constant concern of the employer, acting through dependable supervisors
who should regularly report on their supervisory functions.
In order that the defense of due diligence in the selection and supervision of
employees may be deemed sufficient and plausible, it is not enough to
emptily invoke the existence of said company guidelines and policies on
hiring and supervision. As the negligence of the employee gives rise to the
presumption of negligence on the part of the employer, the latter has the
burden of proving that it has been diligent not only in the selection of
employees but also in the actual supervision of their work. The mere
allegation of the existence of hiring procedures and supervisory policies,
without anything more, is decidedly not sufficient to overcome presumption.

We emphatically reiterate our holding, as a warning to all employers, that

"(t)he mere formulation of various company policies on safety without
showing that they were being complied with is not sufficient to exempt
petitioner from liability arising from negligence of its employees. It is
incumbent upon petitioner to show that in recruiting and employing the
erring driver the recruitment procedures and company policies on efficiency
and safety were followed." 54 Paying lip-service to these injunctions or merely
going through the motions of compliance therewith will warrant stern
sanctions from the Court.
These obligations, imposed by the law and public policy in the interests and
for the safety of the commuting public, herein petitioner failed to perform.
Respondent court was definitely correct in ruling that ". . . due diligence in
the selection and supervision of employee (is) not proved by mere
testimonies to the effect that its applicant has complied with all the company
requirements before one is admitted as an employee but without proof
thereof." 55 It is further a distressing commentary on petitioner that it is a
government-owned public utility, maintained by public funds, and organized
for the public welfare.
The Court it is necessary to once again stress the following rationale behind
these all-important statutory and jurisprudential mandates, for it has been
observed that despite its pronouncement in Kapalaran Bus Line vs.
Coronado, et al., supra, there has been little improvement in the transport
situation in the country:
In requiring the highest possible degree of diligence from
common carriers and creating a presumption of negligence
against them, the law compels them to curb the recklessness of
their drivers. While the immediate beneficiaries of the standard
of extraordinary diligence are, of course, the passengers and
owners of the cargo carried by a common carrier, they are not
the only persons that the law seeks to benefit. For if common
carriers carefully observe the statutory standard of extraordinary
diligence in respect of their own passengers, they cannot help
but simultaneously benefit pedestrians and the owners and
passengers of other vehicles who are equally entitled to the safe
and convenient use of our roads and highways. The law seeks to
stop and prevent the slaughter and maiming of people (whether
passengers or not) and the destruction of property (whether
freight or not) on our highways by buses, the very size and

power of which seem often to inflame the minds of their drivers. .

..
Finally, we believe that respondent court acted in the exercise of sound
discretion when it affirmed the trial court's award, without requiring the
payment of interest thereon as an item of damages just because of delay in
the determination thereof, especially since private respondent did not
specifically pray therefor in her complaint. Article 2211 of the Civil Code
provides that in quasi-delicts, interest as a part of the damages may be
awarded in the discretion of the court, and not as a matter of right. We do
not perceive that there have been international dilatory maneuvers or any
special circumstances which would justify that additional award and,
consequently, we find no reason to disturb said ruling.
WHEREFORE, the impugned decision of respondent Court of Appeals is
hereby AFFIRMED.
SO ORDERED.

G.R. No. 149149

October 23, 2003

ERNESTO SYKI, petitioner,

vs.
SALVADOR BEGASA, respondent.
DECISION
CORONA, J.:
Assailed in the instantthis petition for review under Rule 45 of the Rules of
Court is the decision1 dated January 31, 2001 of the Court of Appeals,
affirming the decision dated May 5, 1998 of the Regional Trial Court of
Negros Occidental, Branch 48, Bacolod City, in Civil Case No. 7458 for
damages. The trial court awarded actual and moral damages to herein
respondent Salvador Begasa who suffered injuries in an accident due to the
negligence of Elizalde Sablayan, the truck driver of petitioner Ernesto Syki.
The facts follow.
On June 22, 1992, around 11:20 a.m., near the corner of Araneta and
Magsaysay Streets, Bacolod City, respondent Salvador Begasa and his three
companions flagged down a passenger jeepney driven by Joaquin Espina and
owned by Aurora Pisuena. While respondent was boarding the passenger
jeepney (his right foot already inside while his left foot still on the boarding
step of the passenger jeepney), a truck driven by Elizalde Sablayan and

owned by petitioner Ernesto Syki bumped the rear end of the passenger
jeepney. Respondent fell and fractured his left thigh bone (femur). He also
suffered lacerations and abrasions in his left leg, thusas follows:
1. Fracture left femur, junction of middle and distal third, comminuted.
2. Lacerated wounds, left poplitial 10 cm. left leg anterior 2.5 cm.
3. Abrasion left knee.2
On October 29, 1992, respondent filed a complaint for damages for breach of
common carriers contractual obligations and quasi-delict against Aurora
Pisuena, the owner of the passenger jeepney;, herein petitioner Ernesto Syki,
the owner of the truck;, and Elizalde Sablayan, the driver of the truck.
After hearing, the trial court dismissed the complaint against Aurora Pisuena,
the owner and operator of the passenger jeepney, but ordered petitioner
Ernesto Syki and his truck driver, Elizalde Sablayan, to pay respondent
Salvador Begasa, jointly and severally, actual and moral damages plus
attorneys fees as follows:
1. Actual damages of P48,308.20 less the financial assistance given by
defendant Ernesto Syki to plaintiff Salvador Begasa in the amount
of P4,152.55 or a total amount of P44,155.65;
2. The amount of P30,000.00 as moral damages;
3. The amount of P20,000.00 as reasonable attorneys fees.3
Petitioner Syki and his driver appealed to the Court of Appeals. However, the
appellate court found no reversible error in the decision of the trial court and
affirmed the same in toto.4 The appellate court also denied their motion for
reconsideration.5
Aggrieved, petitioner Ernesto Syki filed the instant petition for review,
arguing that the Court of Appeals erred in not finding respondent Begasa
guilty of contributory negligence. Hence, the damages awarded to him
(respondent) should have been decreased or mitigated. Petitioner also
contends that the appellate court erred in ruling that he failed to observe the
diligence of a good father of a family in the selection and supervision of his
driver. He asserts that he presented sufficient evidence to prove that he
observed the diligence of a good father of a family in selecting and
supervising the said employee, thus he should not be held liable for the
injuries sustained by respondent.
The petition has no merit.
Article 2180 of the Civil Code provides:
. . . . . . . . .x x x x x x x x x

Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or industry.
xxxxxxxxx
.........
The responsibility treated in this article shall cease when the persons herein
mentioned prove they observed all the diligence of a good father of a family
to prevent damage.
From the above provision, when an injury is caused by the negligence of an
employee, a legal presumption instantly arises that the employer was
negligent, either or both, in the selection and/or supervision of his said
employeeduties. The said presumption may be rebutted only by a clear
showing on the part of the employer that he had exercised the diligence of a
good father of a family in the selection and supervision of his employee. If
the employer successfully overcomes the legal presumption of negligence,
he is relieved of liability.6 In other words, the burden of proof is on the
employer.
The question is: how does an employer prove that he had indeed exercised
the diligence of a good father of a family in the selection and supervision of
his employee? The case of Metro Manila Transit Corporation vs. Court of
Appeals7 is instructive:
In fine, the party, whether plaintiff or defendant, who asserts the affirmative
of the issue has the burden of presenting at the trial such amount of
evidence required by law to obtain a favorable judgment. . .In making proof
in its or his case, it is paramount that the best and most complete evidence
is formally entered.1vvphi1.nt
Coming now to the case at bar, while there is no rule which requires that
testimonial evidence, to hold sway, must be corroborated by documentary
evidence, inasmuch as the witnesses testimonies dwelt on mere
generalities, we cannot consider the same as sufficiently persuasive proof
that there was observance of due diligence in the selection and supervision
of employees. Petitioners attempt to prove its "deligentissimi patris
familias" in the selection and supervision of employees through oral
evidence must fail as it was unable to buttress the same with any other
evidence, object or documentary, which might obviate the apparent biased
nature of the testimony.
Our view that the evidence for petitioner MMTC falls short of the required
evidentiary quantum as would convincingly and undoubtedly prove its
observance of the diligence of a good father of a family has its precursor in

the underlying rationale pronounced in the earlier case of Central Taxicab

Corp. vs. Ex-Meralco Employees Transportation Co., et. al., set amidst an
almost identical factual setting, where we held that:
The failure of the defendant company to produce in court any record or
other documentary proof tending to establish that it had exercised all the
diligence of a good father of a family in the selection and supervision of its
drivers and buses, notwithstanding the calls therefore by both the trial court
and the opposing counsel, argues strongly against its pretensions.
We are fully aware that there is no hard-and-fast rule on the quantum of
evidence needed to prove due observance of all the diligence of a good
father of a family as would constitute a valid defense to the legal
presumption of negligence on the part of an employer or master whose
employee has by his negligence, caused damage to another. x x
x (R)educing the testimony of Albert to its proper proportion, we do not have
enough trustworthy evidence left to go by. We are of the considerable
opinion, therefore, that the believable evidence on the degree of care and
diligence that has been exercised in the selection and supervision of Roberto
Leon y Salazar, is not legally sufficient to overcome the presumption of
negligence against the defendant company. (emphasis ours)
The above 1993 ruling in Metro Manila Transit Corporation vs. Court of
Appeals was reiterated in a recent case again involving the Metro Manila
Transit Corporation,8 thus:
In the selection of prospective employees, employers are required to
examine them as to their qualifications, experience, and service records. On
the other hand, with respect to the supervision of employees, employers
should formulate standard operating procedures, monitor their
implementation, and impose disciplinary measures for breaches thereof. To
establish these factors in a trial involving the issue of vicarious liability,
employers must submit concrete proof, including documentary evidence.
In this case, MMTC sought to prove that it exercised the diligence of a good
father of a family with respect to the selection of employees by presenting
mainly testimonial evidence on its hiring procedure. According to MMTC,
applicants are required to submit professional driving licenses, certifications
of work experience, and clearances from the National Bureau of
Investigation; to undergo tests of their driving skills, concentration, reflexes,
and vision; and, to complete training programs on traffic rules, vehicle
maintenance, and standard operating procedures during emergency cases.
. . . . . . . . .x x x x x x x x x

Although testimonies were offered that in the case of Pedro Musa all these
precautions were followed, the records of his interview, of the results of his
examinations, and of his service were not presented. . . [T]here is no record
that Musa attended such training programs and passed the said
examinations before he was employed. No proof was presented that Musa
did not have any record of traffic violations. Nor were records of daily
inspections, allegedly conducted by supervisors, ever presented. . . The
failure of MMTC to present such documentary proof puts in doubt the
credibility of its witnesses.
x x x x x x x x x. . . . . . . . .
It is noteworthy that, in another case involving MMTC, testimonial evidence
of identical content, which MMTC presented to show that it exercised the
diligence of a good father of a family in the selection and supervision of
employees and thus avoid vicarious liability for the negligent acts of its
employees, was held to be insufficient to overcome the presumption of
negligence against it. (emphasis ours)
Based therefore on jurisprudential law, the employer must not merely
present testimonial evidence to prove that he had observed the diligence of
a good father of a family in the selection and supervision of his employee,
but he must also support such testimonial evidence with concrete or
documentary evidence.1awphi1.nt The reason for this is to obviate the
biased nature of the employers testimony or that of his witnesses.9
In this case, petitioners evidence consisted entirely of testimonial evidence.
He testified that before he hired Elizalde Sablayan, he required him to submit
a police clearance in order to determine if he was ever involved in any
vehicular accident. He also required Sablayan to undergo a driving test with
conducted by his mechanic, Esteban Jaca. Petitioner claimed that he, in fact,
accompanied Sablayan during the driving test and that during the test,
Sablayan was taught to read and understand traffic signs like "Do Not Enter,"
"One Way," "Left Turn," and "Right Turn."
Petitioners mechanic, Esteban Jaca, on the other hand, testified that
Sablayan passed the driving test and had never figured in any vehicular
accident except the one in question. He also testified that he maintained in
good condition all the trucks of petitioner by checking the brakes, horns and
tires thereof before leaving forproviding hauling services.10
Petitioner, however, never presented the alleged police clearance given to
him by Sablayan, nor the results of Sablayans driving test. Petitioner also did
not present records of the regular inspections that his mechanic allegedly
conducted. The unsubstantiated and self-serving testimonies of petitioner

and his mechanic arewere, without doubt, insufficient to overcome the legal
presumption that petitioner was negligent in the selection and supervision of
his driver. Accordingly, we affirm the ruling of the Court of Appeals that
petitioner is liable for the injuries suffered by respondent.
It should be emphasized that the legal obligation of employers to observe
due diligence in the selection and supervision of their employees provided
under in Article 2180 of the Civil Code is not an empty provision or a mere
formalism since the non-observance thereof actually becomes the basis of
the employers vicarious liability.11 Employers should thus seriously observe
such a degree of diligence (and must presentprove it in court by sufficient
and concrete evidence) in court showing such observance in order to be
freethat would exculpate them from liability.
Petitioner next contends that, even if he is liable, the award of damages
given to respondent should be decreased or mitigated because respondent
was guilty of contributory negligence. Petitioner claims that his driver was
allegedly caught unaware when the passenger jeepney hailed by respondent
suddenly stopped at the intersection of a national highway. Petitioner argues
that, had respondent flagged down the passenger jeepney at the proper
place, the accident could have been avoided.12
Petitioners contention has no merit.
Article 2179 provides:
When the plaintiffs own negligence was the immediate and proximate cause
of his injury, he cannot recover damages. But if his negligence was only
contributory, the immediate and proximate cause of the injury being the
defendants lack of due care, the plaintiff may recover damages, but the
courts shall mitigate the damages to be awarded.
The underlying precept of the above article on contributory negligence is
that a plaintiff who is partly responsible for his own injury should not be and
is not entitled to recover damages in full but must bear the consequences of
his own negligence. Inferrably, tThe defendant must thus be held liable only
for the damages actually caused by his negligence.13
In the present case, was respondent partly negligent and thus, should not
recover the full amount of the damages awarded by the trial court? We rule
in the negative.
There was no evidence that respondent Begasa and his three companions
flagged down the passenger jeepney at in a prohibited area. All Tthe facts
only showed was that the passenger jeepney was near the corner of Araneta
and Magsaysay Streets, Bacolod City when petitioners driver bumped it from
the rear. No city resolution, traffic regulation or DPWH memorandum were

was presented to show that the passenger jeepney picked up respondent

and his three companions at in a prohibited area. In fact, the trial court
dismissed the case against the driver and/or owner of the passenger jeepney
on the ground that they were not liable, which meansing, that no negligence
could be attributed to them. The trial court also found no negligence on the
part of respondent Begasa. This factual finding was affirmed in toto by the
Court of Appeals.14
It must be emphasized that petitions for review under Rule 45 of the Rules of
Court should deals only with questions of law. The factual conclusions of the
Court of Appeals are given great weight and even finality by the Supreme
Court, especially when, as in the present case, the appellate court upholds
the findings of fact of the trial court. The factual findings of the Court of
Appeals can only be overturned if it is shown that such findings are obviously
whimsical, capricious and arbitrary, or are contrary with to the factual
findings of the trial court.15 In this case, we find no reason to overturn the
factual findings of the Court of Appeals. Thus, we affirm the appellate courts
finding that there was no contributory negligence on the part of respondent.
In sum, the sole and proximate cause of the accident was the negligence of
petitioners driver who, as found by the lower courts, did not slow down even
when he was already approaching a busy intersection within the city
proper.16 The passenger jeepney had long stopped to pick up respondent and
his three companions and, in fact, respondent was already partly inside the
jeepney, when petitioners driver bumped the rear end ofrear-ended it. The
impact was so strong such that respondent fell and fractured his left thigh
bone (femur), and suffered severely woundeds in his left knee and leg. No
doubt that respondentpetitioners driver was reckless speeding.
Since the negligence of petitioners driver was the sole and proximate cause
of the accident, in the present case, petitioner is liable, under Article 2180 of
the Civil Code, to pay damages to respondent Begasa for the injuries
sustained by latterhim.
WHEREFORE, the petition is hereby DENIED. The decision of the Court of
Appeals is AFFIRMED.
SO ORDERED.

VICARIOUS LIABILITY OF THE STATE

G.R. No. L-11154

March 21, 1916

E. MERRITT, plaintiff-appellant,
vs.
GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.
Crossfield and O'Brien for plaintiff.
Attorney-General Avancea for defendant..
TRENT, J.:
This is an appeal by both parties from a judgment of the Court of First
Instance of the city of Manila in favor of the plaintiff for the sum of P14,741,
together with the costs of the cause.
Counsel for the plaintiff insist that the trial court erred (1) "in limiting the
general damages which the plaintiff suffered to P5,000, instead of P25,000
as claimed in the complaint," and (2) "in limiting the time when plaintiff was
entirely disabled to two months and twenty-one days and fixing the damage
accordingly in the sum of P2,666, instead of P6,000 as claimed by plaintiff in
his complaint."
The Attorney-General on behalf of the defendant urges that the trial court
erred: (a) in finding that the collision between the plaintiff's motorcycle and
the ambulance of the General Hospital was due to the negligence of the
chauffeur; (b) in holding that the Government of the Philippine Islands is
liable for the damages sustained by the plaintiff as a result of the collision,
even if it be true that the collision was due to the negligence of the
chauffeur; and (c) in rendering judgment against the defendant for the sum
of P14,741.
The trial court's findings of fact, which are fully supported by the record, are
as follows:
It is a fact not disputed by counsel for the defendant that when the
plaintiff, riding on a motorcycle, was going toward the western part of
Calle Padre Faura, passing along the west side thereof at a speed of ten
to twelve miles an hour, upon crossing Taft Avenue and when he was
ten feet from the southwestern intersection of said streets, the General
Hospital ambulance, upon reaching said avenue, instead of turning
toward the south, after passing the center thereof, so that it would be
on the left side of said avenue, as is prescribed by the ordinance and
the Motor Vehicle Act, turned suddenly and unexpectedly and long
before reaching the center of the street, into the right side of Taft
Avenue, without having sounded any whistle or horn, by which
movement it struck the plaintiff, who was already six feet from the
southwestern point or from the post place there.

By reason of the resulting collision, the plaintiff was so severely injured

that, according to Dr. Saleeby, who examined him on the very same
day that he was taken to the General Hospital, he was suffering from a
depression in the left parietal region, a would in the same place and in
the back part of his head, while blood issued from his nose and he was
entirely unconscious.
The marks revealed that he had one or more fractures of the skull and
that the grey matter and brain was had suffered material injury. At ten
o'clock of the night in question, which was the time set for performing
the operation, his pulse was so weak and so irregular that, in his
opinion, there was little hope that he would live. His right leg was
broken in such a way that the fracture extended to the outer skin in
such manner that it might be regarded as double and the would be
exposed to infection, for which reason it was of the most serious
nature.
At another examination six days before the day of the trial, Dr. Saleeby
noticed that the plaintiff's leg showed a contraction of an inch and a
half and a curvature that made his leg very weak and painful at the
point of the fracture. Examination of his head revealed a notable
readjustment of the functions of the brain and nerves. The patient
apparently was slightly deaf, had a light weakness in his eyes and in
his mental condition. This latter weakness was always noticed when
the plaintiff had to do any difficult mental labor, especially when he
attempted to use his money for mathematical calculations.
According to the various merchants who testified as witnesses, the
plaintiff's mental and physical condition prior to the accident was
excellent, and that after having received the injuries that have been
discussed, his physical condition had undergone a noticeable
depreciation, for he had lost the agility, energy, and ability that he had
constantly displayed before the accident as one of the best
constructors of wooden buildings and he could not now earn even a
half of the income that he had secured for his work because he had
lost 50 per cent of his efficiency. As a contractor, he could no longer, as
he had before done, climb up ladders and scaffoldings to reach the
highest parts of the building.
As a consequence of the loss the plaintiff suffered in the efficiency of
his work as a contractor, he had to dissolved the partnership he had
formed with the engineer. Wilson, because he was incapacitated from
making mathematical calculations on account of the condition of his

leg and of his mental faculties, and he had to give up a contract he had
for the construction of the Uy Chaco building."
We may say at the outset that we are in full accord with the trial court to the
effect that the collision between the plaintiff's motorcycle and the ambulance
of the General Hospital was due solely to the negligence of the chauffeur.
The two items which constitute a part of the P14,741 and which are drawn in
question by the plaintiff are (a) P5,000, the award awarded for permanent
injuries, and (b) the P2,666, the amount allowed for the loss of wages during
the time the plaintiff was incapacitated from pursuing his occupation. We find
nothing in the record which would justify us in increasing the amount of the
first. As to the second, the record shows, and the trial court so found, that
the plaintiff's services as a contractor were worth P1,000 per month. The
court, however, limited the time to two months and twenty-one days, which
the plaintiff was actually confined in the hospital. In this we think there was
error, because it was clearly established that the plaintiff was wholly
incapacitated for a period of six months. The mere fact that he remained in
the hospital only two months and twenty-one days while the remainder of
the six months was spent in his home, would not prevent recovery for the
whole time. We, therefore, find that the amount of damages sustained by the
plaintiff, without any fault on his part, is P18,075.
As the negligence which caused the collision is a tort committed by an agent
or employee of the Government, the inquiry at once arises whether the
Government is legally-liable for the damages resulting therefrom.
Act No. 2457, effective February 3, 1915, reads:
An Act authorizing E. Merritt to bring suit against the Government of
the Philippine Islands and authorizing the Attorney-General of said
Islands to appear in said suit.
Whereas a claim has been filed against the Government of the
Philippine Islands by Mr. E. Merritt, of Manila, for damages resulting
from a collision between his motorcycle and the ambulance of the
General Hospital on March twenty-fifth, nineteen hundred and thirteen;
Whereas it is not known who is responsible for the accident nor is it
possible to determine the amount of damages, if any, to which the
claimant is entitled; and
Whereas the Director of Public Works and the Attorney-General
recommended that an Act be passed by the Legislature authorizing Mr.
E. Merritt to bring suit in the courts against the Government, in order
that said questions may be decided: Now, therefore,

By authority of the United States, be it enacted by the Philippine

Legislature, that:
SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of
First Instance of the city of Manila against the Government of the
Philippine Islands in order to fix the responsibility for the collision
between his motorcycle and the ambulance of the General Hospital,
and to determine the amount of the damages, if any, to which Mr. E.
Merritt is entitled on account of said collision, and the Attorney-General
of the Philippine Islands is hereby authorized and directed to appear at
the trial on the behalf of the Government of said Islands, to defendant
said Government at the same.
SEC. 2. This Act shall take effect on its passage.
Enacted, February 3, 1915.
Did the defendant, in enacting the above quoted Act, simply waive its
immunity from suit or did it also concede its liability to the plaintiff? If only
the former, then it cannot be held that the Act created any new cause of
action in favor of the plaintiff or extended the defendant's liability to any
case not previously recognized.
All admit that the Insular Government (the defendant) cannot be sued by an
individual without its consent. It is also admitted that the instant case is one
against the Government. As the consent of the Government to be sued by
the plaintiff was entirely voluntary on its part, it is our duty to look carefully
into the terms of the consent, and render judgment accordingly.
The plaintiff was authorized to bring this action against the Government "in
order to fix the responsibility for the collision between his motorcycle and the
ambulance of the General Hospital and to determine the amount of the
damages, if any, to which Mr. E. Merritt is entitled on account of said
collision, . . . ." These were the two questions submitted to the court for
determination. The Act was passed "in order that said questions may be
decided." We have "decided" that the accident was due solely to the
negligence of the chauffeur, who was at the time an employee of the
defendant, and we have also fixed the amount of damages sustained by the
plaintiff as a result of the collision. Does the Act authorize us to hold that the
Government is legally liable for that amount? If not, we must look elsewhere
for such authority, if it exists.
The Government of the Philippine Islands having been "modeled after the
Federal and State Governments in the United States," we may look to the
decisions of the high courts of that country for aid in determining the
purpose and scope of Act No. 2457.

In the United States the rule that the state is not liable for the torts
committed by its officers or agents whom it employs, except when expressly
made so by legislative enactment, is well settled. "The Government," says
Justice Story, "does not undertake to guarantee to any person the fidelity of
the officers or agents whom it employs, since that would involve it in all its
operations in endless embarrassments, difficulties and losses, which would
be subversive of the public interest." (Claussen vs. City of Luverne, 103
Minn., 491, citing U. S. vs. Kirkpatrick, 9 Wheat, 720; 6 L. Ed., 199; and Beers
vs. States, 20 How., 527; 15 L. Ed., 991.)
In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to recover
damages from the state for personal injuries received on account of the
negligence of the state officers at the state fair, a state institution created by
the legislature for the purpose of improving agricultural and kindred
industries; to disseminate information calculated to educate and benefit the
industrial classes; and to advance by such means the material interests of
the state, being objects similar to those sought by the public school system.
In passing upon the question of the state's liability for the negligent acts of
its officers or agents, the court said:
No claim arises against any government is favor of an individual, by
reason of the misfeasance, laches, or unauthorized exercise of powers
by its officers or agents. (Citing Gibbons vs. U. S., 8 Wall., 269;
Clodfelter vs. State, 86 N. C., 51, 53; 41 Am. Rep., 440; Chapman vs.
State, 104 Cal., 690; 43 Am. St. Rep., 158; Green vs. State, 73 Cal., 29;
Bourn vs. Hart, 93 Cal., 321; 27 Am. St. Rep., 203; Story on Agency,
sec. 319.)
As to the scope of legislative enactments permitting individuals to sue the
state where the cause of action arises out of either fort or contract, the rule
is stated in 36 Cyc., 915, thus:
By consenting to be sued a state simply waives its immunity from suit.
It does not thereby concede its liability to plaintiff, or create any cause
of action in his favor, or extend its liability to any cause not previously
recognized. It merely gives a remedy to enforce a preexisting liability
and submits itself to the jurisdiction of the court, subject to its right to
interpose any lawful defense.
In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16,
1915, the Act of 1913, which authorized the bringing of this suit, read:
SECTION 1. Authority is hereby given to George Apfelbacher, of the
town of Summit, Waukesha County, Wisconsin, to bring suit in such
court or courts and in such form or forms as he may be advised for the

purpose of settling and determining all controversies which he may

now have with the State of Wisconsin, or its duly authorized officers
and agents, relative to the mill property of said George Apfelbacher,
the fish hatchery of the State of Wisconsin on the Bark River, and the
mill property of Evan Humphrey at the lower end of Nagawicka Lake,
and relative to the use of the waters of said Bark River and Nagawicka
Lake, all in the county of Waukesha, Wisconsin.
In determining the scope of this act, the court said:
Plaintiff claims that by the enactment of this law the legislature
admitted liability on the part of the state for the acts of its officers, and
that the suit now stands just as it would stand between private parties.
It is difficult to see how the act does, or was intended to do, more than
remove the state's immunity from suit. It simply gives authority to
commence suit for the purpose of settling plaintiff's controversies with
the estate. Nowhere in the act is there a whisper or suggestion that the
court or courts in the disposition of the suit shall depart from well
established principles of law, or that the amount of damages is the
only question to be settled. The act opened the door of the court to the
plaintiff. It did not pass upon the question of liability, but left the suit
just where it would be in the absence of the state's immunity from suit.
If the Legislature had intended to change the rule that obtained in this
state so long and to declare liability on the part of the state, it would
not have left so important a matter to mere inference, but would have
done so in express terms. (Murdock Grate Co. vs. Commonwealth, 152
Mass., 28; 24 N.E., 854; 8 L. R. A., 399.)
In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied
upon and considered, are as follows:
All persons who have, or shall hereafter have, claims on contract or for
negligence against the state not allowed by the state board of
examiners, are hereby authorized, on the terms and conditions herein
contained, to bring suit thereon against the state in any of the courts
of this state of competent jurisdiction, and prosecute the same to final
judgment. The rules of practice in civil cases shall apply to such suits,
except as herein otherwise provided.
And the court said:
This statute has been considered by this court in at least two cases,
arising under different facts, and in both it was held that said statute
did not create any liability or cause of action against the state where
none existed before, but merely gave an additional remedy to enforce

such liability as would have existed if the statute had not been
enacted. (Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158;
Melvin vs. State, 121 Cal., 16.)
A statute of Massachusetts enacted in 1887 gave to the superior court
"jurisdiction of all claims against the commonwealth, whether at law or in
equity," with an exception not necessary to be here mentioned. In construing
this statute the court, in Murdock Grate Co. vs. Commonwealth (152 Mass.,
28), said:
The statute we are discussing disclose no intention to create against
the state a new and heretofore unrecognized class of liabilities, but
only an intention to provide a judicial tribunal where well recognized
existing liabilities can be adjudicated.
In Sipple vs. State (99 N. Y., 284), where the board of the canal claims had,
by the terms of the statute of New York, jurisdiction of claims for damages for
injuries in the management of the canals such as the plaintiff had sustained,
Chief Justice Ruger remarks: "It must be conceded that the state can be
made liable for injuries arising from the negligence of its agents or servants,
only by force of some positive statute assuming such liability."
It being quite clear that Act No. 2457 does not operate to extend the
Government's liability to any cause not previously recognized, we will now
examine the substantive law touching the defendant's liability for the
negligent acts of its officers, agents, and employees. Paragraph 5 of article
1903 of the Civil Code reads:
The state is liable in this sense when it acts through a special agent,
but not when the damage should have been caused by the official to
whom properly it pertained to do the act performed, in which case the
provisions of the preceding article shall be applicable.
The supreme court of Spain in defining the scope of this paragraph said:
That the obligation to indemnify for damages which a third person
causes to another by his fault or negligence is based, as is evidenced
by the same Law 3, Title 15, Partida 7, on that the person obligated, by
his own fault or negligence, takes part in the act or omission of the
third party who caused the damage. It follows therefrom that the state,
by virtue of such provisions of law, is not responsible for the damages
suffered by private individuals in consequence of acts performed by its
employees in the discharge of the functions pertaining to their office,
because neither fault nor even negligence can be presumed on the
part of the state in the organization of branches of public service and
in the appointment of its agents; on the contrary, we must presuppose

all foresight humanly possible on its part in order that each branch of
service serves the general weal an that of private persons interested in
its operation. Between these latter and the state, therefore, no
relations of a private nature governed by the civil law can arise except
in a case where the state acts as a judicial person capable of acquiring
rights and contracting obligations. (Supreme Court of Spain, January 7,
1898; 83 Jur. Civ., 24.)
That the Civil Code in chapter 2, title 16, book 4, regulates the
obligations which arise out of fault or negligence; and whereas in the
first article thereof. No. 1902, where the general principle is laid down
that where a person who by an act or omission causes damage to
another through fault or negligence, shall be obliged to repair the
damage so done, reference is made to acts or omissions of the persons
who directly or indirectly cause the damage, the following articles
refers to this persons and imposes an identical obligation upon those
who maintain fixed relations of authority and superiority over the
authors of the damage, because the law presumes that in consequence
of such relations the evil caused by their own fault or negligence is
imputable to them. This legal presumption gives way to proof,
however, because, as held in the last paragraph of article 1903,
responsibility for acts of third persons ceases when the persons
mentioned in said article prove that they employed all the diligence of
a good father of a family to avoid the damage, and among these
persons, called upon to answer in a direct and not a subsidiary
manner, are found, in addition to the mother or the father in a proper
case, guardians and owners or directors of an establishment or
enterprise, the state, but not always, except when it acts through the
agency of a special agent, doubtless because and only in this case, the
fault or negligence, which is the original basis of this kind of objections,
must be presumed to lie with the state.
That although in some cases the state might by virtue of the general
principle set forth in article 1902 respond for all the damage that is
occasioned to private parties by orders or resolutions which by fault or
negligence are made by branches of the central administration acting
in the name and representation of the state itself and as an external
expression of its sovereignty in the exercise of its executive powers,
yet said article is not applicable in the case of damages said to have
been occasioned to the petitioners by an executive official, acting in
the exercise of his powers, in proceedings to enforce the collections of

certain property taxes owing by the owner of the property which they
hold in sublease.
That the responsibility of the state is limited by article 1903 to the case
wherein it acts through a special agent (and a special agent, in the
sense in which these words are employed, is one who receives a
definite and fixed order or commission, foreign to the exercise of the
duties of his office if he is a special official) so that in representation of
the state and being bound to act as an agent thereof, he executes the
trust confided to him. This concept does not apply to any executive
agent who is an employee of the acting administration and who on his
own responsibility performs the functions which are inherent in and
naturally pertain to his office and which are regulated by law and the
regulations." (Supreme Court of Spain, May 18, 1904; 98 Jur. Civ., 389,
390.)
That according to paragraph 5 of article 1903 of the Civil Code and the
principle laid down in a decision, among others, of the 18th of May,
1904, in a damage case, the responsibility of the state is limited to that
which it contracts through a special agent, duly empowered by
a definite order or commission to perform some act or charged with
some definite purpose which gives rise to the claim, and not where the
claim is based on acts or omissions imputable to a public official
charged with some administrative or technical office who can be held
to the proper responsibility in the manner laid down by the law of civil
responsibility. Consequently, the trial court in not so deciding and in
sentencing the said entity to the payment of damages, caused by an
official of the second class referred to, has by erroneous interpretation
infringed the provisions of articles 1902 and 1903 of the Civil Code.
(Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146.)
It is, therefore, evidence that the State (the Government of the Philippine
Islands) is only liable, according to the above quoted decisions of the
Supreme Court of Spain, for the acts of its agents, officers and employees
when they act as special agents within the meaning of paragraph 5 of article
1903, supra, and that the chauffeur of the ambulance of the General Hospital
was not such an agent.
For the foregoing reasons, the judgment appealed from must be reversed,
without costs in this instance. Whether the Government intends to make
itself legally liable for the amount of damages above set forth, which the
plaintiff has sustained by reason of the negligent acts of one of its
employees, by legislative enactment and by appropriating sufficient funds

therefor, we are not called upon to determine. This matter rests solely with
the Legislature and not with the courts.
Arellano, C. J., Torres, Johnson, and Moreland, JJ., concur.

G.R. No. L-1120

August 31, 1948

INOCENCIO ROSETE, petitioner,

vs.
THE AUDITOR GENERAL, respondent.
Quijano, Rosete and Tizon for petitioner.
First Assistant Solicitor General Jose B. L. Reyes and Solicitor Manuel
Tomacruz for respondent.
FERIA, J.:
This is an appeal from the decision of the Insular Auditor denying the claim of
Inocencio Rosete and others against the Government in the amount of
P35,376, for damages caused to buildings belonging to the claimant, which
according to the appellant's claim were destroyed by fire that came from the
contiguous warehouse of the Emergency Control Administration, ECA,
located at No. 2262 Azcarraga, due to the negligence of a certain Jose Frayno
y Panlilio in igniting recklessly his cigarette-lighter near a five gallon drum
into which gasoline was being drained, and of the officers of the said ECA,
which is an office or agency of the Government, in storing gasoline in said
warehouse contrary to the provisions of Ordinances of the City of Manila.
It is not necessary for us to pass upon the facts alleged by the appellant, but
only on the question whether, assuming them to be true, the Insular Auditor
erred in denying or dismissing the appellant's claim.
The claimant contends that the Auditor General erred in not finding that the
government agency or instrumentality known as the Emergency Control
Administration of the officers thereof, were guilty of negligence in storing a
highly combustible and inflammable substance in its warehouse on bodega
in Manila in violation of City Ordinances, and therefore the government is
liable for the damages sustained by the claimant under article 1903 of the
Civil Code, which in its pertinent part reads as follows:
ART. 1903. The obligation imposed by the preceding article is
enforceable not only for personal acts and omissions but also for those
persons for whom another is responsible.
xxx

xxx

xxx

The state is liable in the scene when it acts through a special agent,
but not when the damage should have been caused by the official to
whom it properly pertained to do the act performed, in which case the
provisions of the preceding article shall be applicable.
In the case of Merritt vs. Government of the Philippine Islands (34 Phil., 311),
this Court held the following:
. . . Paragraph 5 of article 1903 of the Civil Code reads:
"The state is liable in this sense when it acts through a special agent,
but not when the damage should have been caused by the official to
whom properly it pertained to do the act performed, in which cast the
provisions of the preceding article shall be applicable."
The supreme court of Spain in defining the scope of this paragraph
said:
"That the obligation to indemnify for damages which a third person
causes to another by his fault or negligence is based, as is evidenced
by the same Law 3, Title 15, Partida 7, on that the person obligated, by
his own fault or negligence, takes part in the act or omission of the
third party who caused the damage. It follows therefrom that the state,
by virtue of such provisions of law, is not responsible for the damage
suffered by private individuals in consequence of acts performed by its
employees in the discharge of the functions pertaining to their office,
because neither fault nor even negligence can be presumed on the
part of the state in the organization of branches of the public service
and the appointment of its agents; on the contrary, we must
presuppose all foresight humanly possible on its part in order that each
branch of service serves the general weal and that of private persons
interested in its operation. Between these latter and the state,
therefore, no relations of a private nature governed by the civil law can
arise except in a case where the state acts as a judicial person capable
of acquiring rights and contracting obligations." (Supreme Court of
Spain, January 7, 1898; 83 Jur. Civ., 24.).
xxx

xxx

xxx

"That the responsibility of the state is limited by article 1903 to the

case wherein it acts through a special agent (and a special agent, in
the sense in which these words are employed, is one who receives a
definite and fixed order or commission, foreign to the exercise of the
duties of his office if he is a special official) so that in representation of
the state and being bound to act as an agent thereof, he executes the
trust confided to him. This concept does not apply to any executive

agent who is an employee of the active administration and who on his

own responsibility performs the functions which are inherent in and
naturally pertain to his office and which are regulated by law and the
regulations." (Supreme Court of Spain, May 18, 1904; 98 Jur. Civ., 389,
390.).
"That according to paragraph 5 of article 1903 of the Civil Code and
the principle laid down in a decision, among others, of the 18th of May,
1904, in a damage case, the responsibility of the state is limited to that
which it contracts through a special agent, duly empowered by
a definite order or commission to perform some act or charged with
some definite purpose which gives rise to the claim, and not where the
claim is based on acts or omissions imputable to a public official
charged with some administrative or technical office who can be held
to the proper responsibility. Consequently, the trial court in not so
deciding and in sentencing the said entity to the payment of damages,
caused by an official of the second class referred to, has by erroneous
interpretation infringed the provisions of article 1902 and 1903 of the
Civil Code.' (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146.)"
There being no showing that whatever negligence may be imputed to the
Emergency Control Administration or its officers, was done by an special
agent, because the officers of the Emergency Control Administration did not
act as special agents of the government within the above defined meaning of
that word in article 1903 of the Civil Code in storing gasoline in warehouse of
the ECA, the government is not responsible for the damages caused through
such negligence.
The case of Marine Trading vs. Government, 39 Phil., 29, cited by the
appellant, is inapplicable, because the plaintiff in that case recovered under
the special provisions of articles 862, 827, 828 and 830 of the Code of
Commerce and the Philippine Marine Regulations of the Collector of Customs,
regarding collision of vessels, and not on the ground of tort in general
provided for in article 1903 of the Civil Code.
Act No. 327, in authorizing the filing of claims against the Government with
the Insular Auditor, and appeal by the private persons or entities from the
latter's decision to the Supreme Court, does not make any and all claims
against the Government allowable, and the latter responsible for all claims
which may be filed with the Insular Auditor under the provisions of said Act.
In view of the foregoing, the decision appealed from is affirmed.
Paras, Actg. C.J., Pablo Bengzon, Briones, Padilla, and Tuason, JJ., concur.

G.R. No. L-55963 December 1, 1989

SPOUSES JOSE FONTANILLA AND VIRGINIA FONTANILLA, petitioners,
vs.
HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION
ADMINISTRATION, respondents.
G.R. No. L-61045 December 1, 1989
NATIONAL IRRIGATION ADMINISTRATION, appellant,
vs.
SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees.
Cecilio V. Suarez, Jr. for Spouses Fontanilla.
Felicisimo C. Villaflor for NIA.
PARAS, J.:
In G.R. No. L-55963, the petition for review on certiorari seeks the affirmance
of the decision dated March 20, 1980 of the then Court of First Instance of
Nueva Ecija, Branch VIII, at San Jose City and its modification with respect to
the denial of petitioner's claim for moral and exemplary damages and
attorneys fees.
In G.R. No. 61045, respondent National Irrigation Administration seeks the
reversal of the aforesaid decision of the lower court. The original appeal of
this case before the Court of Appeals was certified to this Court and in the
resolution of July 7, 1982, it was docketed with the aforecited number. And in
the resolution of April 3, this case was consolidated with G.R. No. 55963.
It appears that on August 21, 1976 at about 6:30 P.M., a pickup owned and
operated by respondent National Irrigation Administration, a government
agency bearing Plate No. IN-651, then driven officially by Hugo Garcia, an
employee of said agency as its regular driver, bumped a bicycle ridden by
Francisco Fontanilla, son of herein petitioners, and Restituto Deligo, at
Maasin, San Jose City along the Maharlika Highway. As a result of the impact,
Francisco Fontanilla and Restituto Deligo were injured and brought to the San
Jose City Emergency Hospital for treatment. Fontanilla was later transferred
to the Cabanatuan Provincial Hospital where he died.
Garcia was then a regular driver of respondent National Irrigation
Administration who, at the time of the accident, was a licensed professional
driver and who qualified for employment as such regular driver of
respondent after having passed the written and oral examinations on traffic

rules and maintenance of vehicles given by National Irrigation Administration

authorities.
The within petition is thus an off-shot of the action (Civil Case No. SJC-56)
instituted by petitioners-spouses on April 17, 1978 against respondent NIA
before the then Court of First Instance of Nueva Ecija, Branch VIII at San Jose
City, for damages in connection with the death of their son resulting from the
aforestated accident.
After trial, the trial court rendered judgment on March 20, 1980 which
directed respondent National Irrigation Administration to pay damages
(death benefits) and actual expenses to petitioners. The dispositive portion
of the decision reads thus:
. . . . . Judgment is here rendered ordering the defendant National
Irrigation Administration to pay to the heirs of the deceased
P12,000.00 for the death of Francisco Fontanilla; P3,389.00 which
the parents of the deceased had spent for the hospitalization and
burial of the deceased Francisco Fontanilla; and to pay the costs.
(Brief for the petitioners spouses Fontanilla, p. 4; Rollo, p. 132)
Respondent National Irrigation Administration filed on April 21, 1980, its
motion for reconsideration of the aforesaid decision which respondent trial
court denied in its Order of June 13, 1980. Respondent National Irrigation
Administration thus appealed said decision to the Court of Appeals (C.A.-G.R.
No. 67237- R) where it filed its brief for appellant in support of its position.
Instead of filing the required brief in the aforecited Court of Appeals case,
petitioners filed the instant petition with this Court.
The sole issue for the resolution of the Court is: Whether or not the award of
moral damages, exemplary damages and attorney's fees is legally proper in
a complaint for damages based on quasi-delict which resulted in the death of
the son of herein petitioners.
Petitioners allege:
1. The award of moral damages is specifically allowable. under
paragraph 3 of Article 2206 of the New Civil Code which provides
that the spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for
mental anguish by reason of the death of the deceased. Should
moral damages be granted, the award should be made to each of
petitioners-spouses individually and in varying amounts
depending upon proof of mental and depth of intensity of the
same, which should not be less than P50,000.00 for each of
them.

2. The decision of the trial court had made an impression that

respondent National Irrigation Administration acted with gross
negligence because of the accident and the subsequent failure of
the National Irrigation Administration personnel including the
driver to stop in order to give assistance to the, victims. Thus, by
reason of the gross negligence of respondent, petitioners
become entitled to exemplary damages under Arts. 2231 and
2229 of the New Civil Code.
3. Petitioners are entitled to an award of attorney's fees, the
amount of which (20%) had been sufficiently established in the
hearing of May 23, 1979.
4. This petition has been filed only for the purpose of reviewing
the findings of the lower court upon which the disallowance of
moral damages, exemplary damages and attorney's fees was
based and not for the purpose of disturbing the other findings of
fact and conclusions of law.
The Solicitor General, taking up the cudgels for public respondent National
Irrigation Administration, contends thus:
1. The filing of the instant petition is rot proper in view of the
appeal taken by respondent National Irrigation Administration to
the Court of Appeals against the judgment sought to be
reviewed. The focal issue raised in respondent's appeal to the
Court of Appeals involves the question as to whether or not the
driver of the vehicle that bumped the victims was negligent in
his operation of said vehicle. It thus becomes necessary that
before petitioners' claim for moral and exemplary damages could
be resolved, there should first be a finding of negligence on the
part of respondent's employee-driver. In this regard, the Solicitor
General alleges that the trial court decision does not
categorically contain such finding.
2. The filing of the "Appearance and Urgent Motion For Leave to
File Plaintiff-Appellee's Brief" dated December 28, 1981 by
petitioners in the appeal (CA-G.R. No. 67237-R; and G. R.
No.61045) of the respondent National Irrigation Administration
before the Court of Appeals, is an explicit admission of said
petitioners that the herein petition, is not proper. Inconsistent
procedures are manifest because while petitioners question the
findings of fact in the Court of Appeals, they present only the

questions of law before this Court which posture confirms their

admission of the facts.
3. The fact that the parties failed to agree on whether or not
negligence caused the vehicular accident involves a question of
fact which petitioners should have brought to the Court of
Appeals within the reglementary period. Hence, the decision of
the trial court has become final as to the petitioners and for this
reason alone, the petition should be dismissed.
4. Respondent Judge acted within his jurisdiction, sound
discretion and in conformity with the law.
5. Respondents do not assail petitioners' claim to moral and
exemplary damages by reason of the shock and subsequent
illness they suffered because of the death of their son.
Respondent National Irrigation Administration, however, avers
that it cannot be held liable for the damages because it is an
agency of the State performing governmental functions and
driver Hugo Garcia was a regular driver of the vehicle, not a
special agent who was performing a job or act foreign to his
usual duties. Hence, the liability for the tortious act should. not
be borne by respondent government agency but by driver Garcia
who should answer for the consequences of his act.
6. Even as the trial court touched on the failure or laxity of
respondent National Irrigation Administration in exercising due
diligence in the selection and supervision of its employee, the
matter of due diligence is not an issue in this case since driver
Garcia was not its special agent but a regular driver of the
vehicle.
The sole legal question on whether or not petitioners may be entitled to an
award of moral and exemplary damages and attorney's fees can very well be
answered with the application of Arts. 2176 and 2180 of theNew Civil Code.
Art. 2176 thus provides:
Whoever by act omission causes damage to another, there being
fault or negligence, is obliged to pay for damage done. Such fault
or negligence, if there is no pre-existing cotractual relation
between the parties, is called a quasi-delict and is governed by
the provisions of this Chapter
Paragraphs 5 and 6 of Art. 21 80 read as follows:
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of

their assigned tasks, even the though the former are not
engaged in any business or industry.
The State is responsible in like manner when it acts through a
special agent.; but not when the damage has been caused by the
official to whom the task done properly pertains, in which case
what is provided in Art. 2176 shall be applicable.
The liability of the State has two aspects. namely:
1. Its public or governmental aspects where it is liable for the
tortious acts of special agents only.
2. Its private or business aspects (as when it engages in private
enterprises) where it becomes liable as an ordinary employer. (p.
961, Civil Code of the Philippines; Annotated, Paras; 1986 Ed. ).
In this jurisdiction, the State assumes a limited liability for the damage
caused by the tortious acts or conduct of its special agent.
Under the aforequoted paragrah 6 of Art. 2180, the State has voluntarily
assumed liability for acts done through special agents. The State's agent, if a
public official, must not only be specially commissioned to do a particular
task but that such task must be foreign to said official's usual governmental
functions. If the State's agent is not a public official, and is commissioned to
perform non-governmental functions, then the State assumes the role of an
ordinary employer and will be held liable as such for its agent's tort. Where
the government commissions a private individual for a special governmental
task, it is acting through a special agent within the meaning of the provision.
(Torts and Damages, Sangco, p. 347, 1984 Ed.)
Certain functions and activities, which can be performed only by the
government, are more or less generally agreed to be "governmental" in
character, and so the State is immune from tort liability. On the other hand, a
service which might as well be provided by a private corporation, and
particularly when it collects revenues from it, the function is considered a
"proprietary" one, as to which there may be liability for the torts of agents
within the scope of their employment.
The National Irrigation Administration is an agency of the government
exercising proprietary functions, by express provision of Rep. Act No. 3601.
Section 1 of said Act provides:
Section 1. Name and domicile.-A body corporate is hereby
created which shall be known as the National Irrigation
Administration, hereinafter called the NIA for short, which shall
be organized immediately after the approval of this Act. It shall
have its principal seat of business in the City of Manila and shall

have representatives in all provinces for the proper conduct of its

business.
Section 2 of said law spells out some of the NIA's proprietary functions. ThusSec. 2. Powers and objectives.-The NIA shall have the following
powers and objectives:
(a) x x x x x x x x x x x x x x x x x x
(b) x x x x x x x x x x x x x x x x x x
(c) To collect from the users of each irrigation system constructed
by it such fees as may be necessary to finance the continuous
operation of the system and reimburse within a certain period
not less than twenty-five years cost of construction thereof; and
(d) To do all such other tthings and to transact all such business
as are directly or indirectly necessary, incidental or conducive to
the attainment of the above objectives.
Indubitably, the NIA is a government corporation with juridical personality
and not a mere agency of the government. Since it is a corporate body
performing non-governmental functions, it now becomes liable for the
damage caused by the accident resulting from the tortious act of its driveremployee. In this particular case, the NIA assumes the responsibility of an
ordinary employer and as such, it becomes answerable for damages.
This assumption of liability, however, is predicated upon the existence of
negligence on the part of respondent NIA. The negligence referred to here is
the negligence of supervision.
At this juncture, the matter of due diligence on the part of respondent NIA
becomes a crucial issue in determining its liability since it has been
established that respondent is a government agency performing proprietary
functions and as such, it assumes the posture of an ordinary employer which,
under Par. 5 of Art. 2180, is responsible for the damages caused by its
employees provided that it has failed to observe or exercise due diligence in
the selection and supervision of the driver.
It will be noted from the assailed decision of the trial court that "as a result of
the impact, Francisco Fontanilla wasthrown to a distance 50 meters away
from the point of impact while Restituto Deligo was thrown a little bit further
away. The impact took place almost at the edge of the cemented portion of
the road." (Emphasis supplied,) [page 26, Rollo]
The lower court further declared that "a speeding vehicle coming in contact
with a person causes force and impact upon the vehicle that anyone in the
vehicle cannot fail to notice. As a matter of fact, the impact was so strong as

shown by the fact that the vehicle suffered dents on the right side of the
radiator guard, the hood, the fender and a crack on the radiator as shown by
the investigation report (Exhibit "E"). (Emphasis supplied) [page 29, Rollo]
It should be emphasized that the accident happened along the Maharlika
National Road within the city limits of San Jose City, an urban area.
Considering the fact that the victim was thrown 50 meters away from the
point of impact, there is a strong indication that driver Garcia was driving at
a high speed. This is confirmed by the fact that the pick-up suffered
substantial and heavy damage as above-described and the fact that the NIA
group was then "in a hurry to reach the campsite as early as possible", as
shown by their not stopping to find out what they bumped as would have
been their normal and initial reaction.
Evidently, there was negligence in the supervision of the driver for the
reason that they were travelling at a high speed within the city limits and yet
the supervisor of the group, Ely Salonga, failed to caution and make the
driver observe the proper and allowed speed limit within the city. Under the
situation, such negligence is further aggravated by their desire to reach their
destination without even checking whether or not the vehicle suffered
damage from the object it bumped, thus showing imprudence and
reckelessness on the part of both the driver and the supervisor in the group.
Significantly, this Court has ruled that even if the employer can prove the
diligence in the selection and supervision (the latter aspect has not been
established herein) of the employee, still if he ratifies the wrongful acts, or
take no step to avert further damage, the employer would still be liable.
(Maxion vs. Manila Railroad Co., 44 Phil. 597).
Thus, too, in the case of Vda. de Bonifacio vs. B.L.T. Bus Co. (L-26810, August
31, 1970, 34 SCRA 618), this Court held that a driver should be especially
watchful in anticipation of others who may be using the highway, and his
failure to keep a proper look out for reasons and objects in the line to be
traversed constitutes negligence.
Considering the foregoing, respondent NIA is hereby directed to pay herein
petitioners-spouses the amounts of P12,000.00 for the death of Francisco
Fontanilla; P3,389.00 for hospitalization and burial expenses of the
aforenamed deceased; P30,000.00 as moral damages; P8,000.00 as
exemplary damages and attorney's fees of 20% of the total award.
SO ORDERED.

VICARIOUS LIABILITY OF SCHOOL, TEACHERS, AND ADMINISTRATORS

G.R. No. L-29025 October 4, 1971

Spouses MOISES P. PALISOC and BRIGIDA P. PALISOC, plaintiffsappellants,
vs.
ANTONIO C. BRILLANTES and TEODOSIO V. VALENTON, owner and
President, respectively, of a school of arts and trades, known under
the name and style of "Manila Technical Institute" (M.I.T.), VIRGILIO
L. DAFFON and SANTIAGO M. QUIBULUE, defendants-appellees.
Leovillo C. Agustin for plaintiffs-appellants. .
Honorato S. Reyes for appellee Brillantes, et al. .
Villareal, Almacen Navarra & Amores for appellee Daffon. .
TEEHANKEE, J.:
An appeal in forma pauperis on pure questions of law from a decision of the
Court of First Instance of Manila. .
Plaintiffs-appellants as parents of their sixteen-year old son, Dominador
Palisoc, and a student in automotive mechanics at the Manila Technical
Institute, Quezon Boulevard, Manila, had filed on May 19, 1966, the action
below for damages arising from the death on March 10, 1966 of their son at
the hands of a fellow student, defendant Virgilio L. Daffon, at the laboratory
room of the said Institute. .
Defendants, per the trial court's decision, are: "(T)he defendant Antonio C.
Brillantes, at the time when the incident which gave rise to his action
occurred was a member of the Board of Directors of the institute; 1 the
defendant Teodosio Valenton, the president thereof; the defendant Santiago
M. Quibulue, instructor of the class to which the deceased belonged; and the
defendant Virgilio L. Daffon, a fellow student of the deceased. At the
beginning the Manila Technical Institute was a single proprietorship, but
lately on August 2, 1962, it was duly incorporated."
The facts that led to the tragic death of plaintiffs' son were thus narrated by
the trial court: "(T)he deceased Dominador Palisoc and the defendant Virgilio
L. Daffon were classmates, and on the afternoon of March 10, 1966, between
two and three o'clock, they, together with another classmate Desiderio Cruz
were in the laboratory room located on the ground floor. At that time the
classes were in recess. Desiderio Cruz and Virgilio L. Daffon were working on

a machine while Dominador Palisoc was merely looking on at them. Daffon

made a remark to the effect that Palisoc was acting like a foreman. Because
of this remark Palisoc slapped slightly Daffon on the face. Daffon, in
retaliation, gave Palisoc a strong flat blow on the face, which was followed by
other fist blows on the stomach. Palisoc retreated apparently to avoid the fist
blows, but Daffon followed him and both exchanged blows until Palisoc
stumbled on an engine block which caused him to fall face downward. Palisoc
became pale and fainted. First aid was administered to him but he was not
revived, so he was immediately taken to a hospital. He never regained
consciousness; finally he died. The foregoing is the substance of the
testimony of Desiderio Cruz, the lone witness to the incident."
The trial court expressly gave credence to this version of the incident, as
testified to by the lone eyewitness, Desiderio Cruz, a classmate of the
protagonists, as that of a disinterested witness who "has no motive or reason
to testify one way or another in favor of any party" and rejected the selfexculpatory version of defendant Daffon denying that he had inflicted any
fist blows on the deceased. .
With the postmortem findings of Dr. Angelo Singian of the Manila Police
Department who performed the autopsy re "Cause of death: shock due to
traumatic fracture of theribs (6th and 7th, left, contusion of the pancreas and
stomach with intra-gastric hemorrhage and slight subarachnoid hemorrhage
on the brain," and his testimony that these internal injuries of the deceased
were caused "probably by strong fist blows," the trial court found defendant
Daffon liable for the quasi delict under Article 2176 of the Civil Code. 3 It held
that "(T)he act, therefore, of the accused Daffon in giving the deceased
strong fistblows in the stomach which ruptured his internal organs and
caused his death falls within the purview of this article of the Code." 4
The trial court, however, absolved from liability the three other defendantsofficials of the Manila Technical Institute, in this wise:
... Their liabilities are based on the provisions of Article 2180 of
the New Civil Code which reads:
Art. 2180. ... .
Lastly, teachers or heads of establishments of arts
and trades shall be liable for damages caused by
their pupils and students and apprentices, so long as
they remain in their custody.
In the opinion of the Court, this article of the Code is not
applicable to the case at bar, since this contemplates the
situation where the control or influence of the teachers and

heads of school establishments over the conduct and actions by

the pupil supersedes those of the parents.
CIVIL LAW: DAMAGES ART 2180. NEW CIVIL CODE
CONSTRUED: The clause "so long as they remain
in their custody" contained in Article 2180 of the new
civil code contemplated a situation where the pupil
lives and boards with the teacher, such that the
control or influence on the pupil supersedes those of
the parents. In those circumstances the control or
influence over the conduct and actions of the pupil
as well as the responsibilities for their sort would
pass from the father and mother to the teachers.
(Ciriaco L. Mercado, Petitioner vs. the Court of
Appeals, Manuel Quisumbing, Jr., et al., respondents,
G.R. No. L-14862, May 30, 1960). 5
There is no evidence that the accused Daffon lived and boarded
with his teacher or the other defendant officials of the school.
These defendants cannot therefore be made responsible for the
tort of the defendant Daffon.
Judgment was therefore rendered by the trial court as follows:
1. Sentencing the defendant Virgilio L. Daffon to pay the plaintiffs
as heirs of the deceased Dominador Palisoc (a) P6,000.00 for the
death of Dominador Palisoc; (b) P3,375.00 for actual and
compensatory expenses; (c) P5,000.00 for moral damages; (d)
P10,000.00 for loss of earning power, considering that the
deceased was only between sixteen and seventeen years, and in
good health when he died, and (e) P2,000.00 for attorney's fee,
plus the costs of this action. .
2. Absolving the other defendants. .
3. Dismissing the defendants' counterclaim for lack of merit.
Plaintiffs' appeal raises the principal legal question that under the factual
findings of the trial court, which are now beyond review, the trial court erred
in absolving the defendants-school officials instead of holding them jointly
and severally liable as tortfeasors, with defendant Daffon, for the damages
awarded them as a result of their son's death. The Court finds the appeal, in
the main, to be meritorious. .
1. The lower court absolved defendants-school officials on the ground that
the provisions of Article 2180, Civil Code, which expressly hold "teachers or
heads of establishments of arts and trades ... liable for damages caused by

their pupils and students and apprentices, so long as they remain in their
custody," are not applicable to to the case at bar, since "there is no evidence
that the accused Daffon [who inflicted the fatal fistblows] 6 lived and boarded
with his teacher or the other defendants-officials of the school. These
defendants cannot therefore be made responsible for the tort of the
defendant Daffon."
The lower court based its legal conclusion expressly on the Court's dictum
in Mercado vs. Court of Appeals, 7 that "(I)t would seem that the clause "so
long as they remain in their custody," contemplates a situation where the
pupil lives and boards with the teacher, such that the control, direction and
influence on the pupil supersedes those of the parents. In these
circumstances the control or influence over the conduct and actions of the
pupil would pass from the father and mother to the teacher; and so would
the responsibility for the torts of the pupil. Such a situation does not appear
in the case at bar; the pupils appear to go to school during school hours and
go back to their homes with their parents after school is over." This dictum
had been made in rejecting therein petitioner father's contention that his
minor son's school, Lourdes Catholic School at Kanlaon, Quezon City [which
was not a party to the case] should be held responsible, rather than him as
father, for the moral damages of P2,000.00 adjudged against him for the
physical injury inflicted by his son on a classmate. [A cut on the right cheek
with a piece of razor which costs only P50.00 by way of medical expenses to
treat and cure, since the wound left no scar.] The moral damages award was
after all set aside by the Court on the ground that none of the specific cases
provided in Article 2219, Civil Code, for awarding moral damages had been
established, petitioner's son being only nine years old and not having been
shown to have "acted with discernment" in inflicting the injuries on his
classmate. .
The dictum in Mercado was based in turn on another dictum in the earlier
case of Exconde vs. Capuno, 8 where the only issue involved as expressly
stated in the decision, was whether the therein defendant-father could be
civilly liable for damages resulting from a death caused in a motor vehicle
accident driven unauthorizedly and negligently by his minor son, (which
issue was resolved adversely against the father). Nevertheless, the dictum in
such earlier case that "It is true that under the law abovequoted, teachers or
directors of arts and trades are liable for any damage caused by their pupils
or apprentices while they are under their custody, but this provision only
applies to an institution of arts and trades and not to any academic
educational institution" was expressly cited and quoted in Mercado. .

2. The case at bar was instituted directly against the school officials and
squarely raises the issue of liability of teachers and heads of schools under
Article 2180, Civil Code, for damages caused by their pupils and students
against fellow students on the school premises. Here, the parents of the
student at fault, defendant Daffon, are not involved, since Daffon was
already of age at the time of the tragic incident. There is no question, either,
that the school involved is a non-academic school, 9 the Manila Technical
Institute being admittedly a technical vocational and industrial school. .
The Court holds that under the cited codal article, defendants head and
teacher of the Manila Technical Institute (defendants Valenton and Quibulue,
respectively) are liable jointly and severally for damages to plaintiffsappellants for the death of the latter's minor son at the hands of defendant
Daffon at the school's laboratory room. No liability attaches to defendant
Brillantes as a mere member of the school's board of directors. The school
itself cannot be held similarly liable, since it has not been properly impleaded
as party defendant. While plaintiffs sought to so implead it, by impleading
improperly defendant Brillantes, its former single proprietor, the lower court
found that it had been incorporated since August 2, 1962, and therefore the
school itself, as thus incorporated, should have been brought in as party
defendant. Plaintiffs failed to do so, notwithstanding that Brillantes and his
co-defendants in their reply to plaintiffs' request for admission had expressly
manifested and made of record that "defendant Antonio C. Brillantes is not
the registered owner/head of the "Manila Technical Institute" which is now a
corporation and is not owned by any individual person." 10
3. The rationale of such liability of school heads and teachers for the tortious
acts of their pupils and students, so long as they remain in their custody, is
that they stand, to a certain extent, as to their pupils and students, in loco
parentis and are called upon to "exercise reasonable supervision over the
conduct of the child." 11 This is expressly provided for in Articles 349, 350 and
352 of the Civil Code. 12 In the law of torts, the governing principle is that the
protective custody of the school heads and teachers is mandatorily
substituted for that of the parents, and hence, it becomes their obligation as
well as that of the school itself to provide proper supervision of the students'
activities during the whole time that they are at attendance in the school,
including recess time, as well as to take the necessary precautions to protect
the students in their custody from dangers and hazards that would
reasonably be anticipated, including injuries that some student themselves
may inflict willfully or through negligence on their fellow students. .

4. As tersely summarized by Mr. Justice J.B.L. Reyes in his dissenting opinion

in Exconde, "the basis of the presumption of negligence of Art. 1903 [now
2180] is some culpa in vigilando that the parents, teachers, etc. are
supposed to have incurred in the exercise of their authority" 13 and "where
the parent places the child under the effective authority of the teacher, the
latter, and not the parent, should be the one answerable for the torts
committed while under his custody, for the very reason that the parent is not
supposed to interfere with the discipline of the school nor with the authority
and supervision of the teacher while the child is under instruction." The
school itself, likewise, has to respond for the fault or negligence of its school
head and teachers under the same cited article. 14
5. The lower court therefore erred in law in absolving defendants-school
officials on the ground that they could be held liable under Article 2180, Civil
Code, only if the student who inflicted the fatal fistblows on his classmate
and victim "lived and boarded with his teacher or the other defendants
officials of the school." As stated above, the phrase used in the cited article
"so long as (the students) remain in their custody" means the protective
and supervisory custody that the school and its heads and teachers exercise
over the pupils and students for as long as they are at attendance in the
school, including recess time. There is nothing in the law that requires that
for such liability to attach the pupil or student who commits the tortious act
must live and board in the school, as erroneously held by the lower court,
and the dicta in Mercado (as well as in Exconde) on which it relied, must now
be deemed to have been set aside by the present decision. .
6. Defendants Valenton and Quibulue as president and teacher-in-charge of
the school must therefore be held jointly and severally liable for the quasidelict of their co-defendant Daffon in the latter's having caused the death of
his classmate, the deceased Dominador Palisoc. The unfortunate death
resulting from the fight between the protagonists-students could have been
avoided, had said defendants but complied with their duty of providing
adequate supervision over the activities of the students in the school
premises to protect their students from harm, whether at the hands of fellow
students or other parties. At any rate, the law holds them liable unless they
relieve themselves of such liability, in compliance with the last paragraph of
Article 2180, Civil Code, by "(proving) that they observed all the diligence of
a good father of a family to prevent damage." In the light of the factual
findings of the lower court's decision, said defendants failed to prove such
exemption from liability. .

7. Plaintiffs-appellees' contention that the award of P6,000.00 as indemnity

for the death of their son should be increased to P12,000.00 as set by the
Court in People vs. Pantoja, 15 and observed in all death indemnity cases
thereafter is well taken. The Court, in Pantoja, after noting the decline in the
purchasing power of the Philippine peso, had expressed its "considered
opinion that the amount of award of compensatory damages for death
caused by a crime orquasi-delict should now be P12,000.00." The Court
thereby adjusted the minimum amount of "compensatory damages for death
caused by a crime or quasi-delict" as per Article 2206, Civil Code, from the
old stated minimum of P3,000.00 to P12,000.00, which amount is to be
awarded "even though there may have been mitigating circumstances"
pursuant to the express provisions of said codal article. .
8. Plaintiffs-appellees' other claims on appeal that the lower court should
have awarded exemplary damages and imposed legal interest on the total
damages awarded, besides increasing the award of attorney's fees all
concern matters that are left by law to the discretion of the trial court and
the Court has not been shown any error or abuse in the exercise of such
discretion on the part of the trial court. 16 Decisive here is the touchstone
provision of Article 2231, Civil Code, that "In quasi-delicts, exemplary
damages may be granted if the defendant acted with gross negligence." No
gross negligence on the part of defendants was found by the trial court to
warrant the imposition of exemplary damages, as well as of interest and
increased attorney's fees, and the Court has not been shown in this appeal
any compelling reason to disturb such finding. .
ACCORDINGLY, the judgment appealed from is modified so as to provide as
follows: .
1. Sentencing the defendants Virgilio L. Daffon, TeodosioV. Valenton and
Santiago M. Quibulue jointly and severally to pay plaintiffs as heirs of the
deceased Dominador Palisoc (a) P12,000.00 for the death of Dominador
Palisoc; (b) P3,375.00 for actual and compensatory expenses; (c) P5,000.00
for moral, damages; (d) P10,000.00 for loss of earning power and (e)
P2,000.00 for attorney's fee, plus the costs of this action in both instances; 2.
absolving defendant Antonio C. Brillantes from the complaint; and 3.
dismissing defendants' counterclaims. .
Concepcion, C.J., Villamor and Makasiar, JJ., concur. .
Dizon, J., took no part. .
REYES, J.B.L., J., concurring: .
I concur with the opinion of Mr. Justice Teehankee but would like to clarify
that the argument of the dissenting opinion of the effect that the

responsibility of teachers and school officers under Articles 2180 should be

limited to pupils who are minors (below the age of majority) is not in accord
with the plain text of the law. Article 2180 of the Civil Code of the Philippines
is to the following effect: .
The obligation imposed by article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for
whom one is responsible. .
The father and, in case of his death or incapacity, the mother,
are responsible for the damages caused by the minor children
who live in their company. .
Guardians are liable for damages caused by the minors or
incapacitated persons who are under their authority and live in
their company. .
The owners and managers of an establishment or enterprise are
likewise responsible for damages caused by their employees in
the service of the branches in which the latter are employed or
on the occasion of their functions. .
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in
any business or industry. .
The State is responsible in like manner when it acts through a
special agent; but not when the damage has been caused by the
official to whom the task done properly pertains, in which case
what is provided in article 2176 shall be applicable. .
Lastly, teachers or heads of establishments of arts and trades
shall be liable for damages caused by their pupils and students
or apprentices, so long as they remain in their custody.
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observe all the
diligence of a good father of a family to prevent damages.
Examination of the article shows that where the responsibility prescribed
therein is limited to illegal acts during minority, the article expressly so
provides, as in the case of the parents and of the guardians. It is natural to
expect that if the law had intended to similarly restrict the civil responsibility
of the other categories of persons enumerated in the article, it would have
expressly so stated. The fact that it has not done so indicates an intent that
the liability be not restricted to the case of persons under age. Further, it is
not without significance that the teachers and heads of scholarly

establishments are not grouped with parents and guardians but ranged with
owners and managers of enterprises, employers and the state, as to whom
no reason is discernible to imply that they should answer only for minors. .
Giorgi, in his well-known "Teoria de las Obligaciones en el Derecho Moderno",
Volume 5, page 404, No. 272 (Sp. Ed.), after noting the split among
commentators on the point it issue, observes with considerable cogency that

272. Ante esta variedad de opiniones, ninguna de las cuales se

funds en argumentos merecedores de seria ponderacion, no es
facil tomar un partido. Esto no obstante, debiendo manisfestar
nuestra opinion, nos acercamos a la de los que no estiman
necesaria la menor edad del discipulo o del aprendiz; porque si el
aforismo ubi voluit dixit, ubi noluit tacuit, no es siempre
argumento seguro para interpreter la ley, es infalible cuanto se
refiere a una misma disposicion relative a varios casos. Y tal es el
art. 1.153. Lo que haya establecido important poco si,
elevandones a los principios de razon, puede dudarse de la
oportunidad de semajante diferencia; porque la voluntad cierta
del legislador prevalece in iure condito a cualquier otra
consideracion. Por otra parte, si bien se considera, no puede
parecer extrano o absurdo el suponer que un discipulo y un
aprendiz, aunque mayores de edad, acepten voluntariamente la
entera vigilancia de su preceptor mientras dura la educacion. Ni
parece dudoso desde el momento que los artesanos y los
preceptores deben, al par de los padres, responder civilmente de
los daos comitidos por sus discipulos, aun cuando estos esten
faltos de discernimiento.
Similarly, Planiol-Ripert, in their "Droit Civil Pratique," Volume VI, No. 635
(Spanish version), say that
635. Personas de quien responde. Si bien la responsibilidad del
maestro es originalmente una estension de la de los padres (1),
el art. 1384 no especifica que los alumnos y aprendices han de
ser menores de edad, por lo que la presuncion de culpa
funcionara aun cuando sean mayores (2); pero, la vigilancia no
tendra que ser ejercida en iguales terminos. Aun respecto a los
menores variara segun la edad, extremo que tendra que ternese
en ceunta a los fines de apreciar si el maestro ha podido impedir
el acto nocivo o no. .

I submit, finally, that while in the case of parents and guardians, their
authority and supervision over the children and wards end by law upon the
latter reaching majority age, the authority and custodial supervision over
pupils exist regardless of the age of the latter. A student over twenty-one, by
enrolling and attending a school, places himself under the custodial
supervision and disciplinary authority of the school authorities, which is the
basis of the latter's correlative responsibility for his torts, committed while
under such authority. Of course, the teachers' control is not as plenary as
when the student is a minor; but that circumstance can only affect the
decree of the responsibility but cannot negate the existence thereof. It is only
a factor to be appreciated in determining whether or not the defendant has
exercised due diligence in endeavoring to prevent the injury, as prescribed in
the last paragraph of Article 2180. .
Barredo, J., concurs.

Separate Opinions
MAKALINTAL, J., dissenting:
I vote to affirm the decision appealed from. I see no reason to depart from
the doctrine laid down by this Court inMercado v. Court of Appeals, 108 Phil.
414, where the clause "so long as they remain in their custody" used in
Article 2180 of the Civil Code was construed as referring to a "situation
where the pupil lives and boards with the teacher, such that the (latter's)
control, direction and influence on the pupil supersedes those of the
parents." I think it is highly unrealistic and conducive to unjust results,
considering the size of the enrollment in many of our educational institutions,
academic and non-academic, as well as the temper, attitudes and often
destructive activism of the students, to hold their teachers and/or the
administrative heads of the schools directly liable for torts committed by
them. When even the school authorities find themselves besieged,
beleaguered and attacked, and unable to impose the traditional disciplinary
measures formerly recognized as available to them, such as suspension or
outright expulsion of the offending students, it flies in the face of logic and
reality to consider such students, merely from the fact of enrollment and
class attendance, as "in the custody" of the teachers or school heads within
the meaning of the statute, and to hold the latter liable unless they can
prove that they have exercised "all the diligence of a good father of the

family to prevent damage." Article 2180, if applied as appellants construe it,

would be bad law. It would demand responsibility without commensurate
authority, rendering teachers and school heads open to damage suits for
causes beyond their power to control. Present conditions being what they
are, I believe the restrictive interpretation of the aforesaid provision
enunciated in Mercado should be maintained. .
With particular reference to the case at bar, one other factor constrains me
to dissent. The opinion of the majority states: "Here, the parents of the
student at fault, defendant Daffon, are not involved, since Daffon was
already of age at the time of the tragic incident." This statement is of course
in accordance with Article 2180, which says that "the father and, in case of
his death or incapacity, the mother, are responsible for the damages caused
by the minor children who live in their company." Note that for parental
responsibility to arise the children must be minors who live in their company.
If, as stated also in the opinion of the majority, "the rationale of (the) liability
of school heads and teachers for the tortious acts of their pupils and
students, so long as they remain in their custody, is that they stand, to a
certain extent, as to their pupils and students, in loco parentis and are called
upon to exercise reasonable supervision over the conduct of the child," then
it stands to reason that (1) the clause "so long as they remain in their
custody" as used in reference to teachers and school heads should be
equated with the phrase "who live in their company" as used in reference to
parents; and (2) that just as parents are not responsible for damages caused
by their children who are no longer minors, so should teachers and school
heads be exempt from liability for the tortious acts of their students in the
same age category. I find no justification, either in the law itself or in justice
and equity, to make a substitute parent liable where the real parent would be
free from liability. .
Zaldivar, Castro and Fernando, JJ., concur.

Separate Opinions
MAKALINTAL, J., dissenting:
I vote to affirm the decision appealed from. I see no reason to depart from
the doctrine laid down by this Court inMercado v. Court of Appeals, 108 Phil.
414, where the clause "so long as they remain in their custody" used in
Article 2180 of the Civil Code was construed as referring to a "situation
where the pupil lives and boards with the teacher, such that the (latter's)

control, direction and influence on the pupil supersedes those of the

parents." I think it is highly unrealistic and conducive to unjust results,
considering the size of the enrollment in many of our educational institutions,
academic and non-academic, as well as the temper, attitudes and often
destructive activism of the students, to hold their teachers and/or the
administrative heads of the schools directly liable for torts committed by
them. When even the school authorities find themselves besieged,
beleaguered and attacked, and unable to impose the traditional disciplinary
measures formerly recognized as available to them, such as suspension or
outright expulsion of the offending students, it flies in the face of logic and
reality to consider such students, merely from the fact of enrollment and
class attendance, as "in the custody" of the teachers or school heads within
the meaning of the statute, and to hold the latter liable unless they can
prove that they have exercised "all the diligence of a good father of the
family to prevent damage." Article 2180, if applied as appellants construe it,
would be bad law. It would demand responsibility without commensurate
authority, rendering teachers and school heads open to damage suits for
causes beyond their power to control. Present conditions being what they
are, I believe the restrictive interpretation of the aforesaid provision
enunciated in Mercado should be maintained. .
With particular reference to the case at bar, one other factor constrains me
to dissent. The opinion of the majority states: "Here, the parents of the
student at fault, defendant Daffon, are not involved, since Daffon was
already of age at the time of the tragic incident." This statement is of course
in accordance with Article 2180, which says that "the father and, in case of
his death or incapacity, the mother, are responsible for the damages caused
by the minor children who live in their company." Note that for parental
responsibility to arise the children must be minors who live in their company.
If, as stated also in the opinion of the majority, "the rationale of (the) liability
of school heads and teachers for the tortious acts of their pupils and
students, so long as they remain in their custody, is that they stand, to a
certain extent, as to their pupils and students, in loco parentis and are called
upon to exercise reasonable supervision over the conduct of the child," then
it stands to reason that (1) the clause "so long as they remain in their
custody" as used in reference to teachers and school heads should be
equated with the phrase "who live in their company" as used in reference to
parents; and (2) that just as parents are not responsible for damages caused
by their children who are no longer minors, so should teachers and school
heads be exempt from liability for the tortious acts of their students in the
same age category. I find no justification, either in the law itself or in justice

and equity, to make a substitute parent liable where the real parent would be
free from liability. .
Zaldivar, Castro and Fernando, JJ., concur.

G.R. No. L-47745 April 15, 1988

JOSE S. AMADORA, LORETA A. AMADORA, JOSE A. AMADORA JR.,
NORMA A. YLAYA PANTALEON A. AMADORA, JOSE A. AMADORA III,
LUCY A. AMADORA, ROSALINDA A. AMADORA, PERFECTO A.
AMADORA, SERREC A. AMADORA, VICENTE A. AMADORA and MARIA
TISCALINA A. AMADORA,petitioners
vs.
HONORABLE COURT OF APPEALS, COLEGIO DE SAN JOSERECOLETOS, VICTOR LLUCH SERGIO P. DLMASO JR., CELESTINO
DICON, ANIANO ABELLANA, PABLITO DAFFON thru his parents and
natural guardians, MR. and MRS. NICANOR GUMBAN, and ROLANDO
VALENCIA, thru his guardian, A. FRANCISCO ALONSO, respondents.
Jose S. Amadora & Associates for petitioners.
Padilla Law Office for respondents.
CRUZ, J.:
Like any prospective graduate, Alfredo Amadora was looking forward to the
commencement exercises where he would ascend the stage and in the
presence of his relatives and friends receive his high school diploma. These
ceremonies were scheduled on April 16, 1972. As it turned out, though, fate
would intervene and deny him that awaited experience. On April 13, 1972,
while they were in the auditorium of their school, the Colegio de San JoseRecoletos, a classmate, Pablito Damon, fired a gun that mortally hit Alfredo,
ending all his expectations and his life as well. The victim was only
seventeen years old. 1
Daffon was convicted of homicide thru reckless imprudence . 2 Additionally,
the herein petitioners, as the victim's parents, filed a civil action for damages
under Article 2180 of the Civil Code against the Colegio de San JoseRecoletos, its rector the high school principal, the dean of boys, and the
physics teacher, together with Daffon and two other students, through their
respective parents. The complaint against the students was later dropped.

After trial, the Court of First Instance of Cebu held the remaining defendants
liable to the plaintiffs in the sum of P294,984.00, representing death
compensation, loss of earning capacity, costs of litigation, funeral expenses,
moral damages, exemplary damages, and attorney's fees . 3 On appeal to the
respondent court, however, the decision was reversed and all the defendants
were completely absolved . 4
In its decision, which is now the subject of this petition for certiorari under
Rule 45 of the Rules of Court, the respondent court found that Article 2180
was not applicable as the Colegio de San Jose-Recoletos was not a school of
arts and trades but an academic institution of learning. It also held that the
students were not in the custody of the school at the time of the incident as
the semester had already ended, that there was no clear identification of the
fatal gun and that in any event the defendant, had exercised the necessary
diligence in preventing the injury. 5
The basic undisputed facts are that Alfredo Amadora went to the San JoseRecoletos on April 13, 1972, and while in its auditorium was shot to death by
Pablito Daffon, a classmate. On the implications and consequences of these
facts, the parties sharply disagree.
The petitioners contend that their son was in the school to show his physics
experiment as a prerequisite to his graduation; hence, he was then under the
custody of the private respondents. The private respondents submit that
Alfredo Amadora had gone to the school only for the purpose of submitting
his physics report and that he was no longer in their custody because the
semester had already ended.
There is also the question of the identity of the gun used which the
petitioners consider important because of an earlier incident which they
claim underscores the negligence of the school and at least one of the
private respondents. It is not denied by the respondents that on April 7,
1972, Sergio Damaso, Jr., the dean of boys, confiscated from Jose Gumban an
unlicensed pistol but later returned it to him without making a report to the
principal or taking any further action . 6 As Gumban was one of the
companions of Daffon when the latter fired the gun that killed Alfredo, the
petitioners contend that this was the same pistol that had been confiscated
from Gumban and that their son would not have been killed if it had not been
returned by Damaso. The respondents say, however, that there is no proof
that the gun was the same firearm that killed Alfredo.
Resolution of all these disagreements will depend on the interpretation of
Article 2180 which, as it happens, is invoked by both parties in support of
their conflicting positions. The pertinent part of this article reads as follows:

Lastly, teachers or heads of establishments of arts and trades

shall be liable for damages caused by their pupils and students
or apprentices so long as they remain in their custody.
Three cases have so far been decided by the Court in connection with the
above-quoted provision, to wit: Exconde v. Capuno 7 Mercado v. Court of
Appeals, 8 and Palisoc v. Brillantes. 9 These will be briefly reviewed in this
opinion for a better resolution of the case at bar.
In the Exconde Case, Dante Capuno, a student of the Balintawak Elementary
School and a Boy Scout, attended a Rizal Day parade on instructions of the
city school supervisor. After the parade, the boy boarded a jeep, took over its
wheel and drove it so recklessly that it turned turtle, resulting in the death of
two of its passengers. Dante was found guilty of double homicide with
reckless imprudence. In the separate civil action flied against them, his
father was held solidarily liable with him in damages under Article 1903 (now
Article 2180) of the Civil Code for the tort committed by the 15-year old boy.
This decision, which was penned by Justice Bautista Angelo on June 29,1957,
exculpated the school in an obiter dictum (as it was not a party to the case)
on the ground that it was riot a school of arts and trades. Justice J.B.L. Reyes,
with whom Justices Sabino Padilla and Alex Reyes concurred, dissented,
arguing that it was the school authorities who should be held liable Liability
under this rule, he said, was imposed on (1) teachers in general; and (2)
heads of schools of arts and trades in particular. The modifying clause "of
establishments of arts and trades" should apply only to "heads" and not
"teachers."
Exconde was reiterated in the Mercado Case, and with an elaboration. A
student cut a classmate with a razor blade during recess time at the Lourdes
Catholic School in Quezon City, and the parents of the victim sued the
culprits parents for damages. Through Justice Labrador, the Court declared in
another obiter (as the school itself had also not been sued that the school
was not liable because it was not an establishment of arts and trades.
Moreover, the custody requirement had not been proved as this
"contemplates a situation where the student lives and boards with the
teacher, such that the control, direction and influences on the pupil
supersede those of the parents." Justice J.B.L. Reyes did not take part but the
other members of the court concurred in this decision promulgated on May
30, 1960.
In Palisoc vs. Brillantes, decided on October 4, 1971, a 16-year old student
was killed by a classmate with fist blows in the laboratory of the Manila
Technical Institute. Although the wrongdoer who was already of age was

not boarding in the school, the head thereof and the teacher in charge were
held solidarily liable with him. The Court declared through Justice Teehankee:
The phrase used in the cited article "so long as (the students)
remain in their custody" means the protective and supervisory
custody that the school and its heads and teachers exercise over
the pupils and students for as long as they are at attendance in
the school, including recess time. There is nothing in the law that
requires that for such liability to attach, the pupil or student who
commits the tortious act must live and board in the school, as
erroneously held by the lower court, and the dicta in Mercado (as
well as in Exconde) on which it relied, must now be deemed to
have been set aside by the present decision.
This decision was concurred in by five other members, 10 including Justice
J.B.L. Reyes, who stressed, in answer to the dissenting opinion, that even
students already of age were covered by the provision since they were
equally in the custody of the school and subject to its discipline. Dissenting
with three others, 11 Justice Makalintal was for retaining the custody
interpretation in Mercado and submitted that the rule should apply only to
torts committed by students not yet of age as the school would be acting
only in loco parentis.
In a footnote, Justice Teehankee said he agreed with Justice Reyes' dissent in
the Exconde Case but added that "since the school involved at bar is a nonacademic school, the question as to the applicability of the cited codal
provision to academic institutions will have to await another case wherein it
may properly be raised."
This is the case.
Unlike in Exconde and Mercado, the Colegio de San Jose-Recoletos has been
directly impleaded and is sought to be held liable under Article 2180; and
unlike in Palisoc, it is not a school of arts and trades but an academic
institution of learning. The parties herein have also directly raised the
question of whether or not Article 2180 covers even establishments which
are technically not schools of arts and trades, and, if so, when the offending
student is supposed to be "in its custody."
After an exhaustive examination of the problem, the Court has come to the
conclusion that the provision in question should apply to all schools,
academic as well as non-academic. Where the school is academic rather
than technical or vocational in nature, responsibility for the tort committed
by the student will attach to the teacher in charge of such student, following
the first part of the provision. This is the general rule. In the case of

establishments of arts and trades, it is the head thereof, and only he, who
shall be held liable as an exception to the general rule. In other words,
teachers in general shall be liable for the acts of their students except where
the school is technical in nature, in which case it is the head thereof who
shall be answerable. Following the canon ofreddendo singula
singulis "teachers" should apply to the words "pupils and students" and
"heads of establishments of arts and trades" to the word "apprentices."
The Court thus conforms to the dissenting opinion expressed by Justice J.B.L.
Reyes in Exconde where he said in part:
I can see no sound reason for limiting Art. 1903 of the Old Civil
Code to teachers of arts and trades and not to academic ones.
What substantial difference is there between them insofar as
concerns the proper supervision and vice over their pupils? It
cannot be seriously contended that an academic teacher is
exempt from the duty of watching that his pupils do not commit
a tort to the detriment of third Persons, so long as they are in a
position to exercise authority and Supervision over the pupil. In
my opinion, in the phrase "teachers or heads of establishments
of arts and trades" used in Art. 1903 of the old Civil Code, the
words "arts and trades" does not qualify "teachers" but only
"heads of establishments." The phrase is only an updated version
of the equivalent terms "preceptores y artesanos" used in the
Italian and French Civil Codes.
If, as conceded by all commentators, the basis of the
presumption of negligence of Art. 1903 in someculpa in
vigilando that the parents, teachers, etc. are supposed to have
incurred in the exercise of their authority, it would seem clear
that where the parent places the child under the effective
authority of the teacher, the latter, and not the parent, should be
the one answerable for the torts committed while under his
custody, for the very reason/that the parent is not supposed to
interfere with the discipline of the school nor with the authority
and supervision of the teacher while the child is under
instruction. And if there is no authority, there can be no
responsibility.
There is really no substantial distinction between the academic and the nonacademic schools insofar as torts committed by their students are
concerned. The same vigilance is expected from the teacher over the
students under his control and supervision, whatever the nature of the

school where he is teaching. The suggestion in the Exconde and Mercado

Cases is that the provision would make the teacher or even the head of the
school of arts and trades liable for an injury caused by any student in its
custody but if that same tort were committed in an academic school, no
liability would attach to the teacher or the school head. All other
circumstances being the same, the teacher or the head of the academic
school would be absolved whereas the teacher and the head of the nonacademic school would be held liable, and simply because the latter is a
school of arts and trades.
The Court cannot see why different degrees of vigilance should be exercised
by the school authorities on the basis only of the nature of their respective
schools. There does not seem to be any plausible reason for relaxing that
vigilance simply because the school is academic in nature and for increasing
such vigilance where the school is non-academic. Notably, the injury subject
of liability is caused by the student and not by the school itself nor is it a
result of the operations of the school or its equipment. The injury
contemplated may be caused by any student regardless of the school where
he is registered. The teacher certainly should not be able to excuse himself
by simply showing that he is teaching in an academic school where, on the
other hand, the head would be held liable if the school were non-academic.
These questions, though, may be asked: If the teacher of the academic
school is to be held answerable for the torts committed by his students, why
is it the head of the school only who is held liable where the injury is caused
in a school of arts and trades? And in the case of the academic or nontechnical school, why not apply the rule also to the head thereof instead of
imposing the liability only on the teacher?
The reason for the disparity can be traced to the fact that historically the
head of the school of arts and trades exercised a closer tutelage over his
pupils than the head of the academic school. The old schools of arts and
trades were engaged in the training of artisans apprenticed to their master
who personally and directly instructed them on the technique and secrets of
their craft. The head of the school of arts and trades was such a master and
so was personally involved in the task of teaching his students, who usually
even boarded with him and so came under his constant control, supervision
and influence. By contrast, the head of the academic school was not as
involved with his students and exercised only administrative duties over the
teachers who were the persons directly dealing with the students. The head
of the academic school had then (as now) only a vicarious relationship with
the students. Consequently, while he could not be directly faulted for the

acts of the students, the head of the school of arts and trades, because of his
closer ties with them, could be so blamed.
It is conceded that the distinction no longer obtains at present in view of the
expansion of the schools of arts and trades, the consequent increase in their
enrollment, and the corresponding diminution of the direct and personal
contract of their heads with the students. Article 2180, however, remains
unchanged. In its present state, the provision must be interpreted by the
Court according to its clear and original mandate until the legislature, taking
into account the charges in the situation subject to be regulated, sees fit to
enact the necessary amendment.
The other matter to be resolved is the duration of the responsibility of the
teacher or the head of the school of arts and trades over the students. Is
such responsibility co-extensive with the period when the student is actually
undergoing studies during the school term, as contended by the respondents
and impliedly admitted by the petitioners themselves?
From a reading of the provision under examination, it is clear that while the
custody requirement, to repeatPalisoc v. Brillantes, does not mean that the
student must be boarding with the school authorities, it does signify that the
student should be within the control and under the influence of the school
authorities at the time of the occurrence of the injury. This does not
necessarily mean that such, custody be co-terminous with the semester,
beginning with the start of classes and ending upon the close thereof, and
excluding the time before or after such period, such as the period of
registration, and in the case of graduating students, the period before the
commencement exercises. In the view of the Court, the student is in the
custody of the school authorities as long as he is under the control and
influence of the school and within its premises, whether the semester has
not yet begun or has already ended.
It is too tenuous to argue that the student comes under the discipline of the
school only upon the start of classes notwithstanding that before that day he
has already registered and thus placed himself under its rules. Neither
should such discipline be deemed ended upon the last day of classes
notwithstanding that there may still be certain requisites to be satisfied for
completion of the course, such as submission of reports, term papers,
clearances and the like. During such periods, the student is still subject to
the disciplinary authority of the school and cannot consider himself released
altogether from observance of its rules.
As long as it can be shown that the student is in the school premises in
pursuance of a legitimate student objective, in the exercise of a legitimate

student right, and even in the enjoyment of a legitimate student right, and
even in the enjoyment of a legitimate student privilege, the responsibility of
the school authorities over the student continues. Indeed, even if the student
should be doing nothing more than relaxing in the campus in the company of
his classmates and friends and enjoying the ambience and atmosphere of
the school, he is still within the custody and subject to the discipline of the
school authorities under the provisions of Article 2180.
During all these occasions, it is obviously the teacher-in-charge who must
answer for his students' torts, in practically the same way that the parents
are responsible for the child when he is in their custody. The teacher-incharge is the one designated by the dean, principal, or other administrative
superior to exercise supervision over the pupils in the specific classes or
sections to which they are assigned. It is not necessary that at the time of
the injury, the teacher be physically present and in a position to prevent it.
Custody does not connote immediate and actual physical control but refers
more to the influence exerted on the child and the discipline instilled in him
as a result of such influence. Thus, for the injuries caused by the student, the
teacher and not the parent shag be held responsible if the tort was
committed within the premises of the school at any time when its authority
could be validly exercised over him.
In any event, it should be noted that the liability imposed by this article is
supposed to fall directly on the teacher or the head of the school of arts and
trades and not on the school itself. If at all, the school, whatever its nature,
may be held to answer for the acts of its teachers or even of the head
thereof under the general principle ofrespondeat superior, but then it may
exculpate itself from liability by proof that it had exercised the diligence of
abonus paterfamilias.
Such defense is, of course, also available to the teacher or the head of the
school of arts and trades directly held to answer for the tort committed by
the student. As long as the defendant can show that he had taken the
necessary precautions to prevent the injury complained of, he can exonerate
himself from the liability imposed by Article 2180, which also states that:
The responsibility treated of in this article shall cease when the
Persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damages.
In this connection, it should be observed that the teacher will be held liable
not only when he is acting in loco parentis for the law does not require that
the offending student be of minority age. Unlike the parent, who wig be liable
only if his child is still a minor, the teacher is held answerable by the law for

the act of the student under him regardless of the student's age. Thus, in the
Palisoc Case, liability attached to the teacher and the head of the technical
school although the wrongdoer was already of age. In this sense, Article
2180 treats the parent more favorably than the teacher.
The Court is not unmindful of the apprehensions expressed by Justice
Makalintal in his dissenting opinion in Palisoc that the school may be unduly
exposed to liability under this article in view of the increasing activism
among the students that is likely to cause violence and resulting injuries in
the school premises. That is a valid fear, to be sure. Nevertheless, it should
be repeated that, under the present ruling, it is not the school that will be
held directly liable. Moreover, the defense of due diligence is available to it in
case it is sought to be held answerable as principal for the acts or omission
of its head or the teacher in its employ.
The school can show that it exercised proper measures in selecting the head
or its teachers and the appropriate supervision over them in the custody and
instruction of the pupils pursuant to its rules and regulations for the
maintenance of discipline among them. In almost all cases now, in fact,
these measures are effected through the assistance of an adequate security
force to help the teacher physically enforce those rules upon the students.
Ms should bolster the claim of the school that it has taken adequate steps to
prevent any injury that may be committed by its students.
A fortiori, the teacher himself may invoke this defense as it would otherwise
be unfair to hold him directly answerable for the damage caused by his
students as long as they are in the school premises and presumably under
his influence. In this respect, the Court is disposed not to expect from the
teacher the same measure of responsibility imposed on the parent for their
influence over the child is not equal in degree. Obviously, the parent can
expect more obedience from the child because the latter's dependence on
him is greater than on the teacher. It need not be stressed that such
dependence includes the child's support and sustenance whereas submission
to the teacher's influence, besides being coterminous with the period of
custody is usually enforced only because of the students' desire to pass the
course. The parent can instill more las discipline on the child than the
teacher and so should be held to a greater accountability than the teacher
for the tort committed by the child.
And if it is also considered that under the article in question, the teacher or
the head of the school of arts and trades is responsible for the damage
caused by the student or apprentice even if he is already of age and
therefore less tractable than the minor then there should all the more be

justification to require from the school authorities less accountability as long

as they can prove reasonable diligence in preventing the injury. After all, if
the parent himself is no longer liable for the student's acts because he has
reached majority age and so is no longer under the former's control, there is
then all the more reason for leniency in assessing the teacher's responsibility
for the acts of the student.
Applying the foregoing considerations, the Court has arrived at the following
conclusions:
1. At the time Alfredo Amadora was fatally shot, he was still in the custody of
the authorities of Colegio de San Jose-Recoletos notwithstanding that the
fourth year classes had formally ended. It was immaterial if he was in the
school auditorium to finish his physics experiment or merely to submit his
physics report for what is important is that he was there for a legitimate
purpose. As previously observed, even the mere savoring of the company of
his friends in the premises of the school is a legitimate purpose that would
have also brought him in the custody of the school authorities.
2. The rector, the high school principal and the dean of boys cannot be held
liable because none of them was the teacher-in-charge as previously defined.
Each of them was exercising only a general authority over the student body
and not the direct control and influence exerted by the teacher placed in
charge of particular classes or sections and thus immediately involved in its
discipline. The evidence of the parties does not disclose who the teacher-incharge of the offending student was. The mere fact that Alfredo Amadora
had gone to school that day in connection with his physics report did not
necessarily make the physics teacher, respondent Celestino Dicon, the
teacher-in-charge of Alfredo's killer.
3. At any rate, assuming that he was the teacher-in-charge, there is no
showing that Dicon was negligent in enforcing discipline upon Daffon or that
he had waived observance of the rules and regulations of the school or
condoned their non-observance. His absence when the tragedy happened
cannot be considered against him because he was not supposed or required
to report to school on that day. And while it is true that the offending student
was still in the custody of the teacher-in-charge even if the latter was
physically absent when the tort was committed, it has not been established
that it was caused by his laxness in enforcing discipline upon the student. On
the contrary, the private respondents have proved that they had exercised
due diligence, through the enforcement of the school regulations, in
maintaining that discipline.

4. In the absence of a teacher-in-charge, it is probably the dean of boys who

should be held liable especially in view of the unrefuted evidence that he had
earlier confiscated an unlicensed gun from one of the students and returned
the same later to him without taking disciplinary action or reporting the
matter to higher authorities. While this was clearly negligence on his part, for
which he deserves sanctions from the school, it does not necessarily link him
to the shooting of Amador as it has not been shown that he confiscated and
returned pistol was the gun that killed the petitioners' son.
5. Finally, as previously observed, the Colegio de San Jose-Recoletos cannot
be held directly liable under the article because only the teacher or the head
of the school of arts and trades is made responsible for the damage caused
by the student or apprentice. Neither can it be held to answer for the tort
committed by any of the other private respondents for none of them has
been found to have been charged with the custody of the offending student
or has been remiss in the discharge of his duties in connection with such
custody.
In sum, the Court finds under the facts as disclosed by the record and in the
light of the principles herein announced that none of the respondents is
liable for the injury inflicted by Pablito Damon on Alfredo Amadora that
resulted in the latter's death at the auditorium of the Colegio de San JoseRecoletos on April 13, 1972. While we deeply sympathize with the petitioners
over the loss of their son under the tragic circumstances here related, we
nevertheless are unable to extend them the material relief they seek, as a
balm to their grief, under the law they have invoked.
WHEREFORE, the petition is DENIED, without any pronouncement as to costs.
It is so ordered.
Yap, Narvasa, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes and
Grio-Aquino, JJ., concur.
Fernan, Padilla and Teehankee, C.J., JJ, took no part.

G.R. No. 70458 October 5, 1988

BENJAMIN SALVOSA and BAGUIO COLLEGES FOUNDATION, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT, EDUARDO B. CASTRO,
DIOMEDES B. CASTRO, VIRGINIA B. CASTRO and RODOLFO B.
CASTRO., respondents.

Edilberto B. Tenefrancia for petitioners.

Leonardo L. Cocjin Jr. for respondents.
PADILLA, J.:
In this petition for review on certiorari, petitioners seek the reversal of the
decision 1 of respondent Intermediate Appellate Court, dated 7 December
1984, in AC-G.R. No. CV 69876, in so far as it affirmed the decision 2 of the
Court of First Instance of Tarlac (hereinafter referred to as the Trial Court),
which held, among others, petitioners solidarily hable with Jimmy B. Abon,
under Art. 2180 of the Civil Code.
The relevant facts, as found by the Trial Court and adopted by reference by
the respondent Court, are:
... Baguio Colleges Foundation (BCF, hereafter) is an academic institution ...
[However], it is also an institution of arts and trade. It has so advertised
itself, as its own evidence shows. Its brochure (Exh. 2) shows that BCF has a
full-fledged technical-vocational department offer Communication, Broadcast
and Teletype Technician courses as well as Electronics Serviceman and
Automotive Mechanics courses... these courses divest BCF of the nature or
character of being purely or exclusively an academic institution. 3
Within the premises of the BCF is an ROTC Unit, the Baguio Colleges
Foundation Reserve Officers Training Corps (ROTC) Unit, which is under the
fifth control of the Armed Forces of the Philippines. 4 The ROTC Unit, by way
of accommodation to the Armed Forces of the Philippines (AFP), pursuant to
Department Order No. 14, Series of 1975 of the Department of Education
and Culture, 5 is provided by the BCF an office and an armory located at the
basement of its main building. 6
The Baguio Colleges Foundation ROTC Unit had Jimmy B. Abon as its duly
appointed armorer. 7 As armorer of the ROTC Unit, Jimmy B. Abon received
his appointment from the AFP. Not being an employee of the BCF, he also
received his salary from the AFP, 8 as well as orders from Captain Roberto C.
Ungos, the Commandant of the Baguio Colleges Foundation ROTC Unit,
concurrent Commandant of other ROTC units in Baguio and an employee
(officer) of the AFP. 9Jimmy B. Abon was also a commerce student of the
BCF. 10
On 3 March 1977, at around 8:00 p.m., in the parking space of BCF, Jimmy B.
Abon shot Napoleon Castro a student of the University of Baguio with an
unlicensed firearm which the former took from the armory of the ROTC Unit
of the BCF. 11 As a result, Napoleon Castro died and Jimmy B. Abon was

prosecuted for, and convicted of the crime of Homicide by Military

Commission No. 30, AFP. 12
Subsequently, the heirs of Napoleon Castro sued for damages, impleading
Jimmy B. Abon, Roberto C. Ungos (ROTC Commandant Benjamin Salvosa
(President and Chairman of the Board of BCF), Jesus Salvosa (Executive Vice
President of BCF), Libertad D. Quetolio (Dean of the College of Education and
Executive Trustee of BCF) and the Baguio Colleges Foundation Inc. as party
defendants. After hearing, the Trial Court rendered a decision, (1) sentencing
defendants Jimmy B. Abon, Benjamin Salvosa and Baguio Colleges
Foundation, Inc., jointly and severally, to pay private respondents, as heirs of
Napoleon Castro: a) P12,000.00 for the death of Napoleon Castro, (b)
P316,000.00 as indemnity for the loss of earning capacity of the deceased,
(c) P5,000.00 as moral damages, (d) P6,000.00 as actual damages, and (e)
P5,000.00 as attorney's fees, plus costs; (2) absolving the other defendants;
and (3) dismissing the defendants' counterclaim for lack of merit. 13 On
appeal by petitioners, the respondent Court affirmed with modification the
decision of the Trial Court. The modification consisted in reducing the award
for loss of earning capacity of the deceased from P316,000.00 to P30,000.00
by way of temperate damages, and increasing the indemnity for the death of
Napoleon Castro from P12,000.00 to P30,000.00.
Hence, this petition.
The central issue in this case is whether or not petitioners can be held
solidarity hable with Jimmy B. Abon for damages under Article 2180 of the
Civil Code, as a consequence of the tortious act of Jimmy B. Abon.
Under the penultimate paragraph of Art. 2180 of the Civil Code, teachers or
heads of establishments of arts and trades are hable for "damages caused
by their pupils and students or apprentices, so long as they remain in their
custody." The rationale of such liability is that so long as the student remains
in the custody of a teacher, the latter "stands, to a certain extent, in loco
parentis [as to the student] and [is] called upon to exercise reasonable
supervision over the conduct of the [student]." 14 Likewise, "the phrase used
in [Art. 2180 'so long as (the students) remain in their custody means the
protective and supervisory custody that the school and its heads and
teachers exercise over the pupils and students for as long as they are at
attendance in the school, including recess time." 15
In the case at bar, in holding that Jimmy B. Abon was stin in the protective
and supervisory custody of the Baguio Colleges Foundation when he shot
Napoleon Castro, the respondent Court ruled that:

it is true that Abon was not attending any class or school

function at the time of the shooting incident, which was at about
8 o'clock in the evening; but considering that Abon was
employed as an armorer and property custodian of the BCF ROTC
unit, he must have been attending night classes and therefore
that hour in the evening was just about dismissal time for him or
soon thereafter. The time interval is safely within the "recess
time" that the trial court spoke of and envisioned by the Palisoc
case, supra. 16 (Emphasis supplied)
In line with the case of Palisoc, 17 a student not "at attendance in the school"
cannot be in "recess" thereat. A "recess," as the concept is embraced in the
phrase "at attendance in the school," contemplates a situation of temporary
adjournment of school activities where the student still remains within call of
his mentor and is not permitted to leave the school premises, or the area
within which the school activity is conducted. Recess by its nature does not
include dismissal. 18Likewise, the mere fact of being enrolled or being in the
premises of a school without more does not constitute "attending school" or
being in the "protective and supervisory custody' of the school, as
contemplated in the law.
Upon the foregoing considerations, we hold that Jimmy B. Abon cannot be
considered to have been "at attendance in the school," or in the custody of
BCF, when he shot Napoleon Castro. Logically, therefore, petitioners cannot
under Art. 2180 of the Civil Code be held solidarity liable with Jimmy B. Abon
for damages resulting from his acts.
Besides, the record shows that before the shooting incident, Roberto B.
Ungos ROTC Unit Commandant, AFP, had instructed Jimmy B. Abon "not to
leave the office and [to keep the armory] well guarded." 19 Apart from
negating a finding that Jimmy B. Abon was under the custody of the school
when he committed the act for which the petitioners are sought to be held
liable, this circumstance shows that Jimmy B. Abon was supposed to
be working in the armory with definite instructions from his superior, the
ROTC Commandant, when he shot Napoleon Castro.
Petitioners also raise the issue that, under Art. 2180 of the Civil Code, a
school which offers both academic and technical/vocational courses cannot
be held liable for a tort committed by a student enrolled only in its academic
program; however, considering that Jimmy B. Abon was not in the custody of
BCF when he shot Napoleon Castro, the Court deems it unnecessary to pass
upon such other issue. 20

WHEREFORE, the decision appealed from is hereby REVERSED in so far as it

holds petitioners solidarily liable with Jimmy B. Abon for his tortious act in the
killing of Napoleon Castro. No costs.
SO ORDERED.
Melencio-Herrera (Chairperson), Paras, Sarmiento and Regalado, JJ., concur.

G.R. No. 84698 February 4, 1992

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, JUAN D. LIM,
BENJAMIN P. PAULINO, ANTONIO M. MAGTALAS, COL. PEDRO SACRO
and LT. M. SORIANO, petitioners,
vs.
COURT OF APPEALS, HON. REGINA ORDOEZ-BENITEZ, in her
capacity as Presiding Judge of Branch 47, Regional Trial Court,
Manila, SEGUNDA R. BAUTISTA and ARSENIA D.
BAUTISTA, respondents.
Balgos and Perez for petitioners.
Collantes, Ramirez & Associates for private respondents.
PADILLA, J.:
A stabbing incident on 30 August 1985 which caused the death of Carlitos
Bautista while on the second-floor premises of the Philippine School of
Business Administration (PSBA) prompted the parents of the deceased to file
suit in the Regional Trial Court of Manila (Branch 47) presided over by Judge
(now Court of Appeals justice) Regina Ordoez-Benitez, for damages against
the said PSBA and its corporate officers. At the time of his death, Carlitos was
enrolled in the third year commerce course at the PSBA. It was established
that his assailants were not members of the school's academic community
but were elements from outside the school.
Specifically, the suit impleaded the PSBA and the following school
authorities: Juan D. Lim (President), Benjamin P. Paulino (Vice-President),
Antonio M. Magtalas (Treasurer/Cashier), Col. Pedro Sacro (Chief of Security)
and a Lt. M. Soriano (Assistant Chief of Security). Substantially, the plaintiffs
(now private respondents) sought to adjudge them liable for the victim's
untimely demise due to their alleged negligence, recklessness and lack of
security precautions, means and methods before, during and after the attack
on the victim. During the proceedings a quo, Lt. M. Soriano terminated his
relationship with the other petitioners by resigning from his position in the
school.

Defendants a quo (now petitioners) sought to have the suit dismissed,

alleging that since they are presumably sued under Article 2180 of the Civil
Code, the complaint states no cause of action against them, as jurisprudence
on the subject is to the effect that academic institutions, such as the PSBA,
are beyond the ambit of the rule in the afore-stated article.
The respondent trial court, however, overruled petitioners' contention and
thru an order dated 8 December 1987, denied their motion to dismiss. A
subsequent motion for reconsideration was similarly dealt with by an order
dated 25 January 1988. Petitioners then assailed the trial court's disposition
before the respondent appellate court which, in a decision * promulgated on
10 June 1988, affirmed the trial court's orders. On 22 August 1988, the
respondent appellate court resolved to deny the petitioners' motion for
reconsideration. Hence, this petition.
At the outset, it is to be observed that the respondent appellate court
primarily anchored its decision on the law ofquasi-delicts, as enunciated in
Articles 2176 and 2180 of the Civil Code. 1 Pertinent portions of the appellate
court's now assailed ruling state:
Article 2180 (formerly Article 1903) of the Civil Code is an
adoption from the old Spanish Civil Code. The comments of
Manresa and learned authorities on its meaning should give way
to present day changes. The law is not fixed and flexible (sic); it
must be dynamic. In fact, the greatest value and significance of
law as a rule of conduct in (sic) its flexibility to adopt to changing
social conditions and its capacity to meet the new challenges of
progress.
Construed in the light of modern day educational system, Article
2180 cannot be construed in its narrow concept as held in the old
case of Exconde vs. Capuno 2 and Mercado vs. Court of
Appeals; 3hence, the ruling in the Palisoc 4 case that it should
apply to all kinds of educational institutions, academic or
vocational.
At any rate, the law holds the teachers and heads of the school
staff liable unless they relieve themselves of such liability
pursuant to the last paragraph of Article 2180 by "proving that
they observed all the diligence to prevent damage." This can
only be done at a trial on the merits of the case. 5
While we agree with the respondent appellate court that the motion to
dismiss the complaint was correctly denied and the complaint should be tried

on the merits, we do not however agree with the premises of the appellate
court's ruling.
Article 2180, in conjunction with Article 2176 of the Civil Code, establishes
the rule of in loco parentis. This Court discussed this doctrine in the aforecited cases of Exconde, Mendoza, Palisoc and, more recently, in Amadora
vs.Court of Appeals. 6 In all such cases, it had been stressed that the law
(Article 2180) plainly provides that the damage should have been caused or
inflicted by pupils or students of he educational institution sought to be held
liable for the acts of its pupils or students while in its custody. However, this
material situation does not exist in the present case for, as earlier indicated,
the assailants of Carlitos were not students of the PSBA, for whose acts the
school could be made liable.
However, does the appellate court's failure to consider such material facts
mean the exculpation of the petitioners from liability? It does not necessarily
follow.
When an academic institution accepts students for enrollment, there is
established a contract between them, resulting in bilateral obligations which
both parties are bound to comply with. 7 For its part, the school undertakes
to provide the student with an education that would presumably suffice to
equip him with the necessary tools and skills to pursue higher education or a
profession. On the other hand, the student covenants to abide by the
school's academic requirements and observe its rules and regulations.
Institutions of learning must also meet the implicit or "built-in" obligation of
providing their students with an atmosphere that promotes or assists in
attaining its primary undertaking of imparting knowledge. Certainly, no
student can absorb the intricacies of physics or higher mathematics or
explore the realm of the arts and other sciences when bullets are flying or
grenades exploding in the air or where there looms around the school
premises a constant threat to life and limb. Necessarily, the school must
ensure that adequate steps are taken to maintain peace and order within the
campus premises and to prevent the breakdown thereof.
Because the circumstances of the present case evince a contractual relation
between the PSBA and Carlitos Bautista, the rules on quasi-delict do not
really govern. 8 A perusal of Article 2176 shows that obligations arising from
quasi-delicts or tort, also known as extra-contractual obligations, arise only
between parties not otherwise bound by contract, whether express or
implied. However, this impression has not prevented this Court from
determining the existence of a tort even when there obtains a contract.
In Air France vs. Carrascoso (124 Phil. 722), the private respondent was

awarded damages for his unwarranted expulsion from a first-class seat

aboard the petitioner airline. It is noted, however, that the Court referred to
the petitioner-airline's liability as one arising from tort, not one arising from a
contract of carriage. In effect, Air France is authority for the view that liability
from tort may exist even if there is a contract, for the act that breaks the
contract may be also a tort. (Austro-America S.S. Co. vs. Thomas, 248 Fed.
231).
This view was not all that revolutionary, for even as early as 1918, this Court
was already of a similar mind. InCangco vs. Manila Railroad (38 Phil. 780), Mr.
Justice Fisher elucidated thus:
The field of non-contractual obligation is much broader than that
of contractual obligation, comprising, as it does, the whole extent
of juridical human relations. These two fields, figuratively
speaking, concentric; that is to say, the mere fact that a person
is bound to another by contract does not relieve him from extracontractual liability to such person. When such a contractual
relation exists the obligor may break the contract under such
conditions that the same act which constitutes a breach of the
contract would have constituted the source of an extracontractual obligation had no contract existed between the
parties.
Immediately what comes to mind is the chapter of the Civil Code on Human
Relations, particularly Article 21, which provides:
Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good custom or public
policy shall compensate the latter for the damage. (emphasis
supplied).
Air France penalized the racist policy of the airline which emboldened the
petitioner's employee to forcibly oust the private respondent to cater to the
comfort of a white man who allegedly "had a better right to the seat."
InAustro-American, supra, the public embarrassment caused to the
passenger was the justification for the Circuit Court of Appeals, (Second
Circuit), to award damages to the latter. From the foregoing, it can be
concluded that should the act which breaches a contract be done in bad faith
and be violative of Article 21, then there is a cause to view the act as
constituting a quasi-delict.
In the circumstances obtaining in the case at bar, however, there is, as yet,
no finding that the contract between the school and Bautista had been
breached thru the former's negligence in providing proper security measures.

This would be for the trial court to determine. And, even if there be a finding
of negligence, the same could give rise generally to a breach of contractual
obligation only. Using the test of Cangco, supra, the negligence of the school
would not be relevant absent a contract. In fact, that negligence becomes
material only because of the contractual relation between PSBA and
Bautista. In other words, a contractual relation is a condition sine qua nonto
the school's liability. The negligence of the school cannot exist independently
of the contract, unless the negligence occurs under the circumstances set
out in Article 21 of the Civil Code.
This Court is not unmindful of the attendant difficulties posed by the
obligation of schools, above-mentioned, for conceptually a school, like a
common carrier, cannot be an insurer of its students against all risks. This is
specially true in the populous student communities of the so-called
"university belt" in Manila where there have been reported several incidents
ranging from gang wars to other forms of hooliganism. It would not be
equitable to expect of schools to anticipate all types of violent trespass upon
their premises, for notwithstanding the security measures installed, the same
may still fail against an individual or group determined to carry out a
nefarious deed inside school premises and environs. Should this be the case,
the school may still avoid liability by proving that the breach of its
contractual obligation to the students was not due to its negligence, here
statutorily defined to be the omission of that degree of diligence which is
required by the nature of the obligation and corresponding to the
circumstances of persons, time and place. 9
As the proceedings a quo have yet to commence on the substance of the
private respondents' complaint, the record is bereft of all the material facts.
Obviously, at this stage, only the trial court can make such a determination
from the evidence still to unfold.
WHEREFORE, the foregoing premises considered, the petition is DENIED. The
court of origin (RTC, Manila, Br. 47) is hereby ordered to continue
proceedings consistent with this ruling of the Court. Costs against the
petitioners.
SO ORDERED.
Melencio-Herrera, Paras, Regalado and Nocon, JJ., concur.

G.R. No. 66207 May 18, 1992

MAXIMINO SOLIMAN, JR., represented by his judicial guardian

VIRGINIA C. SOLIMAN, petitioner,
vs.
HON. JUDGE RAMON TUAZON, Presiding Judge of Branch LXI,
Regional Trial Court of Region III, Angeles City, and the REPUBLIC
CENTRAL COLLEGES, represented by its President, respondents.
Mariano Y. Navarro for Republic Central Colleges.
RESOLUTION
FELICIANO, J.:
On 22 March 1983, petitioner Soliman, Jr. filed a civil complaint for damages
against private respondent Republic Central Colleges ("Colleges"), the R.L.
Security Agency Inc. and one Jimmy B. Solomon, a security guard, as
defendants. The complaint alleged that:
. . . on 13 August 1982, in the morning thereof, while the plaintiff
was in the campus ground and premises of the defendant,
REPUBLIC CENTRAL COLLEGES, as he was and is still a regular
enrolled student of said school taking his morning classes, the
defendant, JIMMY B. SOLOMON, who was on said date and hour in
the premises of said school performing his duties and obligations
as a duly appointed security guard under the employment,
supervision and control of his employer-defendant R.L. SECURITY
AGENCY, INC., headed by Mr. Benjamin Serrano, without any
provocation, in a wanton, fraudulent, reckless, oppressive or
malevolent manner, with intent to kill, attack, assault, strike and
shoot the plaintiff on the abdomen with a .38 Caliber Revolver, a
deadly weapon, which ordinarily such wound sustained would
have caused plaintiff's death were it not for the timely medical
assistance given to him. The plaintiff was treated and confined at
Angeles Medical Center, Angeles City, and, as per doctor's
opinion, the plaintiff may not be able to attend to his regular
classes and will be incapacitated in the performance of his usual
work for a duration of from three to four months before his
wounds would be completely healed. 1
Private respondent Colleges filed a motion to dismiss, contending that the
complaint stated no cause of action against it. Private respondent argued
that it is free from any liability for the injuries sustained by petitioner student
for the reason that private respondent school was not the employer of the
security guard charged, Jimmy Solomon, and hence was not responsible for

any wrongful act of Solomon. Private respondent school further argued that
Article 2180, 7th paragraph, of the Civil Code did not apply, since said
paragraph holds teachers and heads of establishment of arts and trades
liable for damages caused by their pupils and students or apprentices, while
security guard Jimmy Solomon was not a pupil, student or apprentice of the
school.
In an order dated 29 November 1983, respondent Judge granted private
respondent school's motion to dismiss, holding that security guard Jimmy
Solomon was not an employee of the school which accordingly could not be
held liable for his acts or omissions. Petitioner moved for reconsideration,
without success.
In this Petition for Certiorari and Prohibition, it is contended that respondent
trial judge committed a grave abuse of discretion when he refused to apply
the provisions of Article 2180, as well as those of Articles 349, 350 and 352,
of the Civil Code and granted the school's motion to dismiss.
Under Article 2180 of the Civil Code, the obligation to respond for damage
inflicted by one against another by fault or negligence exists not only for
one's own act or omission, but also for acts or omissions of a person for
whom one is by law responsible. Among the persons held vicariously
responsible for acts or omissions of another person are the following:
xxx xxx xxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in
any business or industry.
xxx xxx xxx
Lastly, teachers or heads of establishments of arts and trades
shall be liable for damages caused by their pupils, their students
or apprentices, so long as they remain in their custody.
xxx xxx xxx
The first paragraph quoted above offers no basis for holding the Colleges
liable for the alleged wrongful acts of security guard Jimmy B. Solomon
inflicted upon petitioner Soliman, Jr. Private respondent school was not the
employer of Jimmy Solomon. The employer of Jimmy Solomon was the R.L.
Security Agency Inc., while the school was the client or customer of the R.L.
Security Agency Inc. It is settled that where the security agency, as here,
recruits, hires and assigns the work of its watchmen or security guards, the
agency is the employer of such guards or watchmen. 2 Liability for illegal or
harmful acts committed by the security guards attaches to the employer

agency, and not to the clients or customers of such agency. 3 As a general

rule, a client or customer of a security agency has no hand in selecting who
among the pool of security guards or watchmen employed by the agency
shall be assigned to it; the duty to observe the diligence of a good father of a
family in the selection of the guards cannot, in the ordinary course of events,
be demanded from the client whose premises or property are protected by
the security guards. The fact that a client company may give instructions or
directions to the security guards assigned to it, does not, by itself, render the
client responsible as an employer of the security guards concerned and liable
for their wrongful acts or omissions. Those instructions or directions are
ordinarily no more than requests commonly envisaged in the contract for
services entered into with the security agency. There being no employeremployee relationship between the Colleges and Jimmy Solomon, petitioner
student cannot impose vicarious liability upon the Colleges for the acts of
security guard Solomon.
Since there is no question that Jimmy Solomon was not a pupil or student or
an apprentice of the Colleges, he being in fact an employee of the R.L.
Security Agency Inc., the other above-quoted paragraph of Article 2180 of
the Civil Code is similarly not available for imposing liability upon the
Republic Central Colleges for the acts or omissions of Jimmy Solomon.
The relevant portions of the other Articles of the Civil Code invoked by
petitioner are as follows:
Art. 349. The following persons shall exercise substitute parental
authority:
xxx xxx xxx
(2) Teachers and professors;
xxx xxx xxx
(4) Directors of trade establishments with regard to apprentices;
xxx xxx xxx
Art. 350. The persons named in the preceding article shall
exercise reasonable supervision over the conduct of the child.
xxx xxx xxx
Art. 352. The relations between teacher and pupil, professor and
student are fixed by government regulations and those of each
school or institution. In no case shall corporal punishment be
countenanced. The teacher or professor shall cultivate the best
potentialities of the heart and mind of the pupil or student.

In Palisoc v. Brillantes, 4 invoked by petitioner, the Court held the owner and
president of a school of arts and trades known as the "Manila Technical
Institute," Quezon Blvd., Manila, responsible in damages for the death of
Dominador Palisoc, a student of Institute, which resulted from fist blows
delivered by Virgilio L. Daffon, another student of the Institute. It will be seen
that the facts of Palisoc v. Brillantes brought it expressly within the 7th
paragraph of Article 2180, quoted above; but those facts are entirely
different from the facts existing in the instant case.
Persons exercising substitute parental authority are made responsible for
damage inflicted upon a third person by the child or person subject to such
substitute parental authority. In the instant case, as already noted, Jimmy
Solomon who committed allegedly tortious acts resulting in injury to
petitioner, was not a pupil, student or apprentice of the Republic Central
Colleges; the school had no substitute parental authority over Solomon.
Clearly, within the confines of its limited logic, i.e., treating the petitioner's
claim as one based wholly and exclusively on Article 2180 of the Civil Code,
the order of the respondent trial judge was correct. Does it follow, however,
that respondent Colleges could not be held liable upon any other basis in
law, for or in respect of the injury sustained by petitioner, so as to entitle
respondent school to dismissal of petitioner's complaint in respect of itself?
The very recent case of the Philippine School of Business Administration
(PSBA) v. Court of Appeals, 5requires us to give a negative answer to that
question.
In PSBA, the Court held that Article 2180 of the Civil Code was not applicable
where a student had been injured by one who was an outsider or by one over
whom the school did not exercise any custody or control or supervision. At
the same time, however, the Court stressed that an implied contract may be
held to be established between a school which accepts students for
enrollment, on the one hand, and the students who are enrolled, on the other
hand, which contract results in obligations for both parties:
When an academic institution accepts students for enrollment,
there is established a contractbetween them, resulting in
bilateral obligations which parties are bound to comply with. For
its part, the school undertakes to provide the student with an
education that would presumably suffice to equip him with the
necessary tools and skills to pursue higher education or a
profession. On the other hand, the student covenants to abide by
the school's academic requirements and observe its rules and
regulations.

Institutions of learning must also meet the implicit or "built-in"

obligation of providing their students with an atmosphere that
promotes or assists in attaining its primary undertaking of
imparting knowledge. Certainly, no student can absorb the
intricacies of physics or higher mathematics or explore the realm
of the arts and other sciences when bullets are flying or grenades
exploding in the air or where there looms around the school
premises a constant threat to life and limb. Necessarily, the
school must ensure that adequate steps are taken to maintain
peace and order within the campus premises and to prevent the
breakdown thereof.6
In that case, the Court was careful to point out that:
In the circumstances obtaining in the case at bar, however, there
is, as yet, no finding that the contract between the school and
Bautista had been breached thru the former's negligence in
providing proper security measures. This would be for the trial
court to determine. And, even if there be a finding of negligence,
the same could give rise generally to a breach of contractual
obligation only. Using the test of Cangco, supra, the negligence
of the school would not be relevant absent a contract. In fact,
that negligence becomes material only because of the
contractual relation between PSBA and Bautista. In other words,
a contractual relation is a condition sine qua non to the school's
liability. The negligence of the school cannot exist independently
of the contract, unless the negligence occurs under the
circumstances set out in Article 21 of the Civil Code.
The Court is not unmindful of the attendant difficulties posed by
the obligation of schools, above-mentioned, for conceptually a
school, like a common carrier, cannot be an insurer of its
students against all risks. This is specially true in the populous
student communities of the so-called "university belt" in Manila
where there have been reported several incidents ranging from
gang wars to other forms of hooliganism. It would not be
equitable to expect of schools to anticipate all types of violent
trespass upon their premises, for notwithstanding the security
measures installed, the same may still fail against an individual
or group determined to carry out a nefarious deed inside school
premises and environs. Should this be the case, the school may
still avoid liability by proving that the breach of its contractual

obligation to the students was not due to its negligence, here

statutorily defined to be the omission of that degree of diligence
which is required by the nature of obligation and corresponding
to the circumstances of person, time and place. 7
In the PSBA case, the trial court had denied the school's motion to dismiss
the complaint against it, and both the Court of Appeals and this Court
affirmed the trial court's order. In the case at bar, the court a quo granted
the motion to dismiss filed by respondent Colleges, upon the assumption
that petitioner's cause of action was based, and could have been based, only
on Article 2180 of the Civil Code. As PSBA, however, states, acts which are
tortious or allegedly tortious in character may at the same time constitute
breach of a contractual, or other legal, obligation. Respondent trial judge was
in serious error when he supposed that petitioner could have no cause of
action other than one based on Article 2180 of the Civil Code. Respondent
trial judge should not have granted the motion to dismiss but rather should
have, in the interest of justice, allowed petitioner to prove acts constituting
breach of an obligation ex contractu or ex lege on the part of respondent
Colleges.
In line, therefore, with the most recent jurisprudence of this Court, and in
order to avoid a possible substantial miscarriage of justice, and putting aside
technical considerations, we consider that respondent trial judge committed
serious error correctible by this Court in the instant case.
ACCORDINGLY, the Court Resolved to GRANT DUE COURSE to the Petition, to
TREAT the comment of respondent Colleges as its answer, and to REVERSE
and SET ASIDE the Order dated 29 November 1983. This case is REMANDED
to the court a quo for further proceedings consistent with this Resolution.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

LIABILITY OF PROVINCES, CITIES AND MUNICIPALITIES

G.R. No. 61516 March 21, 1989

FLORENTINA A. GUILATCO, petitioner,
vs.
CITY OF DAGUPAN, and the HONORABLE COURT OF
APPEALS, respondents.

Nolan R. Evangelista for petitioner.

The City Legal Officer for respondents.
SARMIENTO, J.:
In a civil action 1 for recovery of damages filed by the petitioner Florentina A.
Guilatco, the following judgment was rendered against the respondent City of
Dagupan:
xxx
(1) Ordering defendant City of Dagupan to pay plaintiff actual
damages in the amount of P 15,924 (namely P8,054.00 as
hospital, medical and other expenses [Exhs. H to H-60], P
7,420.00 as lost income for one (1) year [Exh. F] and P 450.00 as
bonus). P 150,000.00 as moral damages, P 50,000.00 as
exemplary damages, and P 3,000.00 as attorney's fees, and
litigation expenses, plus costs and to appropriate through its
Sangguniang Panglunsod (City Council) said amounts for said
purpose;
(2) Dismissing plaintiffs complaint as against defendant City
Engr. Alfredo G. Tangco; and
(3) Dismissing the counterclaims of defendant City of Dagupan
and defendant City Engr. Alfredo G. Tangco, for lack of merit. 2
The facts found by the trial court are as follows: 3
It would appear from the evidences that on July 25, 1978, herein
plaintiff, a Court Interpreter of Branch III, CFI--Dagupan City,
while she was about to board a motorized tricycle at a sidewalk
located at Perez Blvd. (a National Road, under the control and
supervision of the City of Dagupan) accidentally fell into a
manhole located on said sidewalk, thereby causing her right leg
to be fractured. As a result thereof, she had to be hospitalized,
operated on, confined, at first at the Pangasinan Provincial
Hospital, from July 25 to August 3, 1978 (or for a period of 16
days). She also incurred hospitalization, medication and other
expenses to the tune of P 8,053.65 (Exh. H to H-60) or a total of
P 10,000.00 in all, as other receipts were either lost or
misplaced; during the period of her confinement in said two
hospitals, plaintiff suffered severe or excruciating pain not only
on her right leg which was fractured but also on all parts of her
body; the pain has persisted even after her discharge from the

Medical City General Hospital on October 9, 1978, to the present.

Despite her discharge from the Hospital plaintiff is presently still
wearing crutches and the Court has actually observed that she
has difficulty in locomotion. From the time of the mishap on July
25, 1978 up to the present, plaintiff has not yet reported for duty
as court interpreter, as she has difficulty of locomotion in going
up the stairs of her office, located near the city hall in Dagupan
City. She earns at least P 720.00 a month consisting of her
monthly salary and other means of income, but since July 25,
1978 up to the present she has been deprived of said income as
she has already consumed her accrued leaves in the government
service. She has lost several pounds as a result of the accident
and she is no longer her former jovial self, she has been unable
to perform her religious, social, and other activities which she
used to do prior to the incident.
Dr. Norberto Felix and Dr. Dominado Manzano of the Provincial
Hospital, as well as Dr. Antonio Sison of the Medical City General
Hospital in Mandaluyong Rizal (Exh. I; see also Exhs. F, G, G-1 to
G-19) have confirmed beyond shadow of any doubt the extent of
the fracture and injuries sustained by the plaintiff as a result of
the mishap. On the other hand, Patrolman Claveria, De Asis and
Cerezo corroborated the testimony of the plaintiff regarding the
mishap and they have confirmed the existence of the manhole
(Exhs. A, B, C and sub-exhibits) on the sidewalk along Perez
Blvd., at the time of the incident on July 25, 1978 which was
partially covered by a concrete flower pot by leaving gaping hole
about 2 ft. long by 1 1/2 feet wide or 42 cms. wide by 75 cms.
long by 150 cms. deep (see Exhs. D and D-1).
Defendant Alfredo Tangco, City Engineer of Dagupan City and
admittedly ex-officio Highway Engineer, City Engineer of the
Public Works and Building Official for Dagupan City, admitted the
existence of said manhole along the sidewalk in Perez Blvd.,
admittedly a National Road in front of the Luzon Colleges. He also
admitted that said manhole (there are at least 11 in all in Perez
Blvd.) is owned by the National Government and the sidewalk on
which they are found along Perez Blvd. are also owned by the
National Government. But as City Engineer of Dagupan City, he
supervises the maintenance of said manholes or drainage
system and sees to it that they are properly covered, and the job
is specifically done by his subordinates, Mr. Santiago de Vera

(Maintenance Foreman) and Engr. Ernesto Solermo also a

maintenance Engineer. In his answer defendant Tangco expressly
admitted in par. 7-1 thereof, that in his capacity as ex-officio
Highway Engineer for Dagupan City he exercises supervision and
control over National roads, including the Perez Blvd. where the
incident happened.
On appeal by the respondent City of Dagupan, the appellate court 4 reversed
the lower court findings on the ground that no evidence was presented by
the plaintiff- appellee to prove that the City of Dagupan had "control or
supervision" over Perez Boulevard. 5
The city contends that Perez Boulevard, where the fatal drainage hole is
located, is a national road that is not under the control or supervision of the
City of Dagupan. Hence, no liability should attach to the city. It submits that
it is actually the Ministry of Public Highways that has control or supervision
through the Highway Engineer which, by mere coincidence, is held
concurrently by the same person who is also the City Engineer of Dagupan.
After examination of the findings and conclusions of the trial court and those
of the appellate court, as well as the arguments presented by the parties, we
agree with those of the trial court and of the petitioner. Hence, we grant the
petition.
In this review on certiorari, we have simplified the errors assigned by the
petitioner to a single issue: whether or not control or supervision over a
national road by the City of Dagupan exists, in effect binding the city to
answer for damages in accordance with article 2189 of the Civil Code.
The liability of public corporations for damages arising from injuries suffered
by pedestrians from the defective condition of roads is expressed in the Civil
Code as follows:
Article 2189. Provinces, cities and municipalities shall be liable
for damages for the death of, or injuries suffered by, any person
by reason of the defective condition of roads, streets, bridges,
public buildings, and other public works under their control or
supervision.
It is not even necessary for the defective road or street to belong to the
province, city or municipality for liability to attach. The article only requires
that either control or supervision is exercised over the defective road or
street. 6
In the case at bar, this control or supervision is provided for in the charter of
Dagupan and is exercised through the City Engineer who has the following
duties:

Sec. 22. The City Engineer--His powers, duties and compensationThere shall be a city engineer, who shall be in charge of the
department of Engineering and Public Works. He shall receive a
salary of not exceeding three thousand pesos per annum. He
shall have the following duties:
xxx
(j) He shall have the care and custody of the public system of
waterworks and sewers, and all sources of water supply, and
shall control, maintain and regulate the use of the same, in
accordance with the ordinance relating thereto; shall inspect and
regulate the use of all private systems for supplying water to the
city and its inhabitants, and all private sewers, and their
connection with the public sewer system.
xxx
The same charter of Dagupan also provides that the laying out, construction
and improvement of streets, avenues and alleys and sidewalks, and
regulation of the use thereof, may be legislated by the Municipal
Board . 7Thus the charter clearly indicates that the city indeed has
supervision and control over the sidewalk where the open drainage hole is
located.
The express provision in the charter holding the city not liable for damages
or injuries sustained by persons or property due to the failure of any city
officer to enforce the provisions of the charter, can not be used to exempt
the city, as in the case at bar.8
The charter only lays down general rules regulating the liability of the city.
On the other hand article 2189 appliesin particular to the liability arising
from "defective streets, public buildings and other public works." 9
The City Engineer, Mr. Alfredo G. Tangco, admits that he exercises control or
supervision over the said road. But the city can not be excused from liability
by the argument that the duty of the City Engineer to supervise or control
the said provincial road belongs more to his functions as an ex-officio
Highway Engineer of the Ministry of Public Highway than as a city officer. This
is because while he is entitled to an honorarium from the Ministry of Public
Highways, his salary from the city government substantially exceeds the
honorarium.
We do not agree.
Alfredo G. Tangco "(i)n his official capacity as City Engineer of Dagupan, as
Ex- Officio Highway Engineer, as Ex-Officio City Engineer of the Bureau of
Public Works, and, last but not the least, as Building Official for Dagupan City,

receives the following monthly compensation: P 1,810.66 from Dagupan City;

P 200.00 from the Ministry of Public Highways; P 100.00 from the Bureau of
Public Works and P 500.00 by virtue of P.D. 1096, respectively." 10This
function of supervision over streets, public buildings, and other public works
pertaining to the City Engineer is coursed through a Maintenance Foreman
and a Maintenance Engineer.11 Although these last two officials are
employees of the National Government, they are detailed with the City of
Dagupan and hence receive instruction and supervision from the city through
the City Engineer.
There is, therefore, no doubt that the City Engineer exercises control or
supervision over the public works in question. Hence, the liability of the city
to the petitioner under article 2198 of the Civil Code is clear.
Be all that as it may, the actual damages awarded to the petitioner in the
amount of P 10,000.00 should be reduced to the proven expenses of P
8,053.65 only. The trial court should not have rounded off the amount. In
determining actual damages, the court can not rely on "speculation,
conjecture or guess work" as to the amount. Without the actual proof of loss,
the award of actual damages becomes erroneous. 12
On the other hand, moral damages may be awarded even without proof of
pecuniary loss, inasmuch as the determination of the amount is discretionary
on the court.13 Though incapable of pecuniary estimation, moral damages
are in the nature of an award to compensate the claimant for actual injury
suffered but which for some reason can not be proven. However, in awarding
moral damages, the following should be taken into consideration:
(1) First, the proximate cause of the injury must be the claimee's
acts.14
(2) Second, there must be compensatory or actual damages as
satisfactory proof of the factual basis for damages.15
(3) Third, the award of moral damages must be predicated on
any of the cases enumerated in the Civil Code. 16
In the case at bar, the physical suffering and mental anguish suffered by the
petitioner were proven. Witnesses from the petitioner's place of work
testified to the degeneration in her disposition-from being jovial to
depressed. She refrained from attending social and civic activities.17
Nevertheless the award of moral damages at P 150,000.00 is excessive. Her
handicap was not permanent and disabled her only during her treatment
which lasted for one year. Though evidence of moral loss and anguish
existed to warrant the award of damages,18 the moderating hand of the law
is called for. The Court has time and again called attention to the

reprehensible propensity of trial judges to award damages without

basis,19 resulting in exhorbitant amounts.20
Although the assessment of the amount is better left to the discretion of the
trial court 21 under preceding jurisprudence, the amount of moral damages
should be reduced to P 20,000.00.
As for the award of exemplary damages, the trial court correctly pointed out
the basis:
To serve as an example for the public good, it is high time that
the Court, through this case, should serve warning to the city or
cities concerned to be more conscious of their duty and
responsibility to their constituents, especially when they are
engaged in construction work or when there are manholes on
their sidewalks or streets which are uncovered, to immediately
cover the same, in order to minimize or prevent accidents to the
poor pedestrians.22
Too often in the zeal to put up "public impact" projects such as beautification
drives, the end is more important than the manner in which the work is
carried out. Because of this obsession for showing off, such trivial details as
misplaced flower pots betray the careless execution of the projects, causing
public inconvenience and inviting accidents.
Pending appeal by the respondent City of Dagupan from the trial court to the
appellate court, the petitioner was able to secure an order for garnishment of
the funds of the City deposited with the Philippine National Bank, from the
then presiding judge, Hon. Willelmo Fortun. This order for garnishment was
revoked subsequently by the succeeding presiding judge, Hon. Romeo D.
Magat, and became the basis for the petitioner's motion for reconsideration
which was also denied. 23
We rule that the execution of the judgment of the trial court pending appeal
was premature. We do not find any good reason to justify the issuance of an
order of execution even before the expiration of the time to appeal .24
WHEREFORE, the petition is GRANTED. The assailed decision and resolution
of the respondent Court of Appeals are hereby REVERSED and SET ASIDE and
the decision of the trial court, dated March 12, 1979 and amended on March
13, 1979, is hereby REINSTATED with the indicated modifications as regards
the amounts awarded:
(1) Ordering the defendant City of Dagupan to pay the plaintiff
actual damages in the amount of P 15,924 (namely P 8,054.00 as
hospital, medical and other expenses; P 7,420.00 as lost income

for one (1) year and P 450.00 as bonus); P 20,000.00 as moral

damages and P 10,000.00 as exemplary damages.
The attorney's fees of P 3,000.00 remain the same.
SO ORDERED.

G.R. No. 71049 May 29, 1987

BERNARDINO JIMENEZ, petitioner,
vs.
CITY OF MANILA and INTERMEDIATE APPELLATE COURT, respondents.
PARAS, J.:
This is a petition for review on certiorari of: (1) the decision * of the
Intermediate Appellate Court in AC-G.R. No. 013887-CVBernardino Jimenez v.
Asiatic Integrated Corporation and City of Manila, reversing the decision ** of
the Court of First Instance of Manila, Branch XXII in Civil Case No. 96390
between the same parties, but only insofar as holding Asiatic Integrated
Corporation solely liable for damages and attorney's fees instead of making
the City of Manila jointly and solidarily liable with it as prayed for by the
petitioner and (2) the resolution of the same Appellate Court denying his
Partial Motion for Reconsideration (Rollo, p. 2).
The dispositive portion of the Intermediate Appellate Court's decision is as
follows:
WHEREFORE, the decision appealed from is hereby REVERSED. A
new one is hereby entered ordering the defendant Asiatic
Integrated Corporation to pay the plaintiff P221.90 actual
medical expenses, P900.00 for the amount paid for the operation
and management of a school bus, P20,000.00 as moral damages
due to pains, sufferings and sleepless nights and P l0,000.00 as
attorney's fees.
SO ORDERED. (p. 20, Rollo)
The findings of respondent Appellate Court are as follows:
The evidence of the plaintiff (petitioner herein) shows that in the morning of
August 15, 1974 he, together with his neighbors, went to Sta. Ana public
market to buy "bagoong" at the time when the public market was flooded
with ankle deep rainwater. After purchasing the "bagoong" he turned around
to return home but he stepped on an uncovered opening which could not be

seen because of the dirty rainwater, causing a dirty and rusty four- inch nail,
stuck inside the uncovered opening, to pierce the left leg of plaintiffpetitioner penetrating to a depth of about one and a half inches. After
administering first aid treatment at a nearby drugstore, his companions
helped him hobble home. He felt ill and developed fever and he had to be
carried to Dr. Juanita Mascardo. Despite the medicine administered to him by
the latter, his left leg swelled with great pain. He was then rushed to the
Veterans Memorial Hospital where he had to be confined for twenty (20) days
due to high fever and severe pain.
Upon his discharge from the hospital, he had to walk around with crutches
for fifteen (15) days. His injury prevented him from attending to the school
buses he is operating. As a result, he had to engage the services of one
Bienvenido Valdez to supervise his business for an aggregate compensation
of nine hundred pesos (P900.00). (Decision, AC-G.R. CV No. 01387, Rollo, pp.
13-20).
Petitioner sued for damages the City of Manila and the Asiatic Integrated
Corporation under whose administration the Sta. Ana Public Market had been
placed by virtue of a Management and Operating Contract (Rollo, p. 47).
The lower court decided in favor of respondents, the dispositive portion of
the decision reading:
WHEREFORE, judgment is hereby rendered in favor of the
defendants and against the plaintiff dismissing the complaint
with costs against the plaintiff. For lack of sufficient evidence, the
counterclaims of the defendants are likewise dismissed.
(Decision, Civil Case No. 96390, Rollo, p. 42).
As above stated, on appeal, the Intermediate Appellate Court held the Asiatic
Integrated Corporation liable for damages but absolved respondent City of
Manila.
Hence this petition.
The lone assignment of error raised in this petition is on whether or not the
Intermediate Appellate Court erred in not ruling that respondent City of
Manila should be jointly and severally liable with Asiatic Integrated
Corporation for the injuries petitioner suffered.
In compliance with the resolution of July 1, 1985 of the First Division of this
Court (Rollo, p. 29) respondent City of Manila filed its comment on August 13,
1985 (Rollo, p. 34) while petitioner filed its reply on August 21, 1985 (Reno,
p. 51).

Thereafter, the Court in the resolution of September 11, 1985 (Rollo, p. 62)
gave due course to the petition and required both parties to submit
simultaneous memoranda
Petitioner filed his memorandum on October 1, 1985 (Rollo, p. 65) while
respondent filed its memorandum on October 24, 1985 (Rollo, p. 82).
In the resolution of October 13, 1986, this case was transferred to the
Second Division of this Court, the same having been assigned to a member
of said Division (Rollo, p. 92).
The petition is impressed with merit.
As correctly found by the Intermediate Appellate Court, there is no doubt
that the plaintiff suffered injuries when he fell into a drainage opening
without any cover in the Sta. Ana Public Market. Defendants do not deny that
plaintiff was in fact injured although the Asiatic Integrated Corporation tries
to minimize the extent of the injuries, claiming that it was only a small
puncture and that as a war veteran, plaintiff's hospitalization at the War
Veteran's Hospital was free. (Decision, AC-G.R. CV No. 01387, Rollo, p. 6).
Respondent City of Manila maintains that it cannot be held liable for the
injuries sustained by the petitioner because under the Management and
Operating Contract, Asiatic Integrated Corporation assumed all responsibility
for damages which may be suffered by third persons for any cause
attributable to it.
It has also been argued that the City of Manila cannot be held liable under
Article 1, Section 4 of Republic Act No. 409 as amended (Revised Charter of
Manila) which provides:
The City shall not be liable or held for damages or injuries to
persons or property arising from the failure of the Mayor, the
Municipal Board, or any other City Officer, to enforce the
provisions of this chapter, or any other law or ordinance, or from
negligence of said Mayor, Municipal Board, or any other officers
while enforcing or attempting to enforce said provisions.
This issue has been laid to rest in the case of City of Manila v. Teotico (22
SCRA 269-272 [1968]) where the Supreme Court squarely ruled that Republic
Act No. 409 establishes a general rule regulating the liability of the City of
Manila for "damages or injury to persons or property arising from the failure
of city officers" to enforce the provisions of said Act, "or any other law or
ordinance or from negligence" of the City "Mayor, Municipal Board, or other
officers while enforcing or attempting to enforce said provisions."
Upon the other hand, Article 2189 of the Civil Code of the Philippines which
provides that:

Provinces, cities and municipalities shall be liable for damages

for the death of, or injuries suffered by any person by reason of
defective conditions of roads, streets, bridges, public buildings
and other public works under their control or supervision.
constitutes a particular prescription making "provinces, cities and
municipalities ... liable for damages for the death of, or injury suffered by any
person by reason" specifically "of the defective condition of roads,
streets, bridges, public buildings, and other public works under their control
or supervision." In other words, Art. 1, sec. 4, R.A. No. 409 refers to liability
arising from negligence, in general, regardless of the object, thereof, while
Article 2189 of the Civil Code governs liability due to "defective streets,
public buildings and other public works" in particular and is therefore
decisive on this specific case.
In the same suit, the Supreme Court clarified further that under Article 2189
of the Civil Code, it is not necessary for the liability therein established to
attach, that the defective public works belong to the province, city or
municipality from which responsibility is exacted. What said article requires
is that the province, city or municipality has either "control or supervision"
over the public building in question.
In the case at bar, there is no question that the Sta. Ana Public Market,
despite the Management and Operating Contract between respondent City
and Asiatic Integrated Corporation remained under the control of the former.
For one thing, said contract is explicit in this regard, when it provides:
II
That immediately after the execution of this contract, the
SECOND PARTY shall start the painting, cleaning, sanitizing and
repair of the public markets and talipapas and within ninety (90)
days thereof, the SECOND PARTY shall submit a program of
improvement, development, rehabilitation and reconstruction of
the city public markets and talipapas subject to prior approval of
the FIRST PARTY. (Rollo, p. 44)
xxx xxx xxx
VI
That all present personnel of the City public markets and
talipapas shall be retained by the SECOND PARTY as long as their
services remain satisfactory and they shall be extended the
same rights and privileges as heretofore enjoyed by them.
Provided, however, that the SECOND PARTY shall have the right,

subject to prior approval of the FIRST PARTY to discharge any of

the present employees for cause. (Rollo, p. 45).
VII
That the SECOND PARTY may from time to time be required by
the FIRST PARTY, or his duly authorized representative or
representatives, to report, on the activities and operation of the
City public markets and talipapas and the facilities and
conveniences installed therein, particularly as to their cost of
construction, operation and maintenance in connection with the
stipulations contained in this Contract. (lbid)
The fact of supervision and control of the City over subject public market was
admitted by Mayor Ramon Bagatsing in his letter to Secretary of Finance
Cesar Virata which reads:
These cases arose from the controversy over the Management
and Operating Contract entered into on December 28, 1972 by
and between the City of Manila and the Asiatic Integrated
Corporation, whereby in consideration of a fixed service fee, the
City hired the services of the said corporation to undertake the
physical management, maintenance, rehabilitation and
development of the City's public markets and' Talipapas' subject
to the control and supervision of the City.
xxx xxx xxx
It is believed that there is nothing incongruous in the exercise of
these powers vis-a-vis the existence of the contract, inasmuch
as the City retains the power of supervision and control over its
public markets and talipapas under the terms of the contract.
(Exhibit "7-A") (Emphasis supplied.) (Rollo, p. 75).
In fact, the City of Manila employed a market master for the Sta. Ana Public
Market whose primary duty is to take direct supervision and control of that
particular market, more specifically, to check the safety of the place for the
public.
Thus the Asst. Chief of the Market Division and Deputy Market Administrator
of the City of Manila testified as follows:
Court This market master is an employee of the City
of Manila?
Mr. Ymson Yes, Your Honor.
Q What are his functions?

A Direct supervision and control over the market area

assigned to him."(T.s.n.,pp. 41-42, Hearing of May
20, 1977.)
xxx xxx xxx
Court As far as you know there is or is there any
specific employee assigned with the task of seeing to
it that the Sta. Ana Market is safe for the public?
Mr. Ymson Actually, as I stated, Your Honor, that the
Sta. Ana has its own market master. The primary
duty of that market master is to make the direct
supervision and control of that particular market, the
check or verifying whether the place is safe for public
safety is vested in the market master. (T.s.n., pp.
2425, Hearing of July 27, 1977.) (Emphasis supplied.)
(Rollo, p. 76).
Finally, Section 30 (g) of the Local Tax Code as amended, provides:
The treasurer shall exercise direct and immediate supervision
administration and control over public markets and the
personnel thereof, including those whose duties concern the
maintenance and upkeep of the market and ordinances and
other pertinent rules and regulations. (Emphasis supplied.)
(Rollo, p. 76)
The contention of respondent City of Manila that petitioner should not have
ventured to go to Sta. Ana Public Market during a stormy weather is indeed
untenable. As observed by respondent Court of Appeals, it is an error for the
trial court to attribute the negligence to herein petitioner. More specifically
stated, the findings of appellate court are as follows:
... The trial court even chastised the plaintiff for going to market
on a rainy day just to buy bagoong. A customer in a store has the
right to assume that the owner will comply with his duty to keep
the premises safe for customers. If he ventures to the store on
the basis of such assumption and is injured because the owner
did not comply with his duty, no negligence can be imputed to
the customer. (Decision, AC-G. R. CV No. 01387, Rollo, p. 19).
As a defense against liability on the basis of a quasi-delict, one must have
exercised the diligence of a good father of a family. (Art. 1173 of the Civil
Code).

There is no argument that it is the duty of the City of Manila to exercise

reasonable care to keep the public market reasonably safe for people
frequenting the place for their marketing needs.
While it may be conceded that the fulfillment of such duties is extremely
difficult during storms and floods, it must however, be admitted that ordinary
precautions could have been taken during good weather to minimize the
dangers to life and limb under those difficult circumstances.
For instance, the drainage hole could have been placed under the stalls
instead of on the passage ways. Even more important is the fact, that the
City should have seen to it that the openings were covered. Sadly, the
evidence indicates that long before petitioner fell into the opening, it was
already uncovered, and five (5) months after the incident happened, the
opening was still uncovered. (Rollo, pp. 57; 59). Moreover, while there are
findings that during floods the vendors remove the iron grills to hasten the
flow of water (Decision, AC-G.R. CV No. 0 1387; Rollo, p. 17), there is no
showing that such practice has ever been prohibited, much less penalized by
the City of Manila. Neither was it shown that any sign had been placed
thereabouts to warn passersby of the impending danger.
To recapitulate, it appears evident that the City of Manila is likewise liable for
damages under Article 2189 of the Civil Code, respondent City having
retained control and supervision over the Sta. Ana Public Market and as tortfeasor under Article 2176 of the Civil Code on quasi-delicts
Petitioner had the right to assume that there were no openings in the middle
of the passageways and if any, that they were adequately covered. Had the
opening been covered, petitioner could not have fallen into it. Thus the
negligence of the City of Manila is the proximate cause of the injury suffered,
the City is therefore liable for the injury suffered by the peti- 4 petitioner.
Respondent City of Manila and Asiatic Integrated Corporation being joint tortfeasors are solidarily liable under Article 2194 of the Civil Code.
PREMISES CONSIDERED, the decision of the Court of Appeals is hereby
MODIFIED, making the City of Manila and the Asiatic Integrated Corporation
solidarily liable to pay the plaintiff P221.90 actual medical expenses, P900.00
for the amount paid for the operation and management of the school bus,
P20,000.00 as moral damages due to pain, sufferings and sleepless nights
and P10,000.00 as attorney's fees.
SO ORDERED.

LIABILITY OF PROPREITORS OF BUILDINGS OR STRUCTURES

G.R. No. 80718 January 29, 1988

FELIZA P. DE ROY and VIRGILIO RAMOS, petitioners,
vs.
COURT OF APPEALS and LUIS BERNAL, SR., GLENIA BERNAL, LUIS
BERNAL, JR., HEIRS OF MARISSA BERNAL, namely, GLICERIA DELA
CRUZ BERNAL and LUIS BERNAL, SR., respondents.
RESOLUTION
CORTES, J.:
This special civil action for certiorari seeks to declare null and void two (2)
resolutions of the Special First Division of the Court of Appeals in the case of
Luis Bernal, Sr., et al. v. Felisa Perdosa De Roy, et al., CA-G.R. CV No. 07286.
The first resolution promulgated on 30 September 1987 denied petitioners'
motion for extension of time to file a motion for reconsideration and directed
entry of judgment since the decision in said case had become final; and the
second Resolution dated 27 October 1987 denied petitioners' motion for
reconsideration for having been filed out of time.
At the outset, this Court could have denied the petition outright for not being
verified as required by Rule 65 section 1 of the Rules of Court. However, even
if the instant petition did not suffer from this defect, this Court, on procedural
and substantive grounds, would still resolve to deny it.
The facts of the case are undisputed. The firewall of a burned-out building
owned by petitioners collapsed and destroyed the tailoring shop occupied by
the family of private respondents, resulting in injuries to private respondents
and the death of Marissa Bernal, a daughter. Private respondents had been
warned by petitioners to vacate their shop in view of its proximity to the
weakened wall but the former failed to do so. On the basis of the foregoing
facts, the Regional Trial Court. First Judicial Region, Branch XXXVIII, presided
by the Hon. Antonio M. Belen, rendered judgment finding petitioners guilty of
gross negligence and awarding damages to private respondents. On appeal,
the decision of the trial court was affirmed in toto by the Court of Appeals in
a decision promulgated on August 17, 1987, a copy of which was received by
petitioners on August 25, 1987. On September 9, 1987, the last day of the
fifteen-day period to file an appeal, petitioners filed a motion for extension of
time to file a motion for reconsideration, which was eventually denied by the
appellate court in the Resolution of September 30, 1987. Petitioners filed

their motion for reconsideration on September 24, 1987 but this was denied
in the Resolution of October 27, 1987.
This Court finds that the Court of Appeals did not commit a grave abuse of
discretion when it denied petitioners' motion for extension of time to file a
motion for reconsideration, directed entry of judgment and denied their
motion for reconsideration. It correctly applied the rule laid down
in Habaluyas Enterprises, Inc. v. Japzon, [G.R. No. 70895, August 5, 1985,138
SCRA 461, that the fifteen-day period for appealing or for filing a motion for
reconsideration cannot be extended. In its Resolution denying the motion for
reconsideration, promulgated on July 30, 1986 (142 SCRA 208), this Court en
banc restated and clarified the rule, to wit:
Beginning one month after the promulgation of this Resolution, the rule shall
be strictly enforced that no motion for extension of time to file a motion for
reconsideration may be filed with the Metropolitan or Municipal Trial Courts,
the Regional Trial Courts, and the Intermediate Appellate Court. Such a
motion may be filed only in cases pending with the Supreme Court as the
court of last resort, which may in its sound discretion either grant or deny the
extension requested. (at p. 212)
Lacsamana v. Second Special Cases Division of the intermediate Appellate
Court, [G.R. No. 73146-53, August 26, 1986, 143 SCRA 643], reiterated the
rule and went further to restate and clarify the modes and periods of appeal.
Bacaya v. Intermediate Appellate Court, [G.R. No. 74824, Sept. 15, 1986,144
SCRA 161],stressed the prospective application of said rule, and explained
the operation of the grace period, to wit:
In other words, there is a one-month grace period from the
promulgation on May 30, 1986 of the Court's Resolution in the
clarificatory Habaluyas case, or up to June 30, 1986, within which
the rule barring extensions of time to file motions for new trial or
reconsideration is, as yet, not strictly enforceable.
Since petitioners herein filed their motion for extension on
February 27, 1986, it is still within the grace period, which
expired on June 30, 1986, and may still be allowed.
This grace period was also applied in Mission v. Intermediate Appellate
Court [G.R. No. 73669, October 28, 1986, 145 SCRA 306].]
In the instant case, however, petitioners' motion for extension of time was
filed on September 9, 1987, more than a year after the expiration of the
grace period on June 30, 1986. Hence, it is no longer within the coverage of
the grace period. Considering the length of time from the expiration of the
grace period to the promulgation of the decision of the Court of Appeals on

August 25, 1987, petitioners cannot seek refuge in the ignorance of their
counsel regarding said rule for their failure to file a motion for
reconsideration within the reglementary period.
Petitioners contend that the rule enunciated in the Habaluyas case should
not be made to apply to the case at bar owing to the non-publication of
the Habaluyas decision in the Official Gazette as of the time the subject
decision of the Court of Appeals was promulgated. Contrary to petitioners'
view, there is no law requiring the publication of Supreme Court decisions in
the Official Gazette before they can be binding and as a condition to their
becoming effective. It is the bounden duty of counsel as lawyer in active law
practice to keep abreast of decisions of the Supreme Court particularly where
issues have been clarified, consistently reiterated, and published in the
advance reports of Supreme Court decisions (G. R. s) and in such
publications as the Supreme Court Reports Annotated (SCRA) and law
journals.
This Court likewise finds that the Court of Appeals committed no grave abuse
of discretion in affirming the trial court's decision holding petitioner liable
under Article 2190 of the Civil Code, which provides that "the proprietor of a
building or structure is responsible for the damage resulting from its total or
partial collapse, if it should be due to the lack of necessary repairs.
Nor was there error in rejecting petitioners argument that private
respondents had the "last clear chance" to avoid the accident if only they
heeded the. warning to vacate the tailoring shop and , therefore, petitioners
prior negligence should be disregarded, since the doctrine of "last clear
chance," which has been applied to vehicular accidents, is inapplicable to
this case.
WHEREFORE, in view of the foregoing, the Court Resolved to DENY the
instant petition for lack of merit.
Fernan (Chairman), Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

ACTUAL DAMAGES

G.R. No. 104576 January 20, 1995

MARIANO L. DEL MUNDO, petitioner,
vs.
HON. COURT OF APPEALS, JOSE U. FRANCISCO and GENOVEVA V.
ROSALES, respondents.

VITUG, J.:
Mariano Del Mundo ("Del Mundo") impugns in this petition for review
on certiorari the 07th April 1989 decision 1 of the Court of appeals which has
affirmed, with modification, the 29th June 1984 decision 2 of the Regional
Trial Court of Quezon City ordering him, together with the Republic Planters
bank ("RPB"), inter alia, to pay jointly and severally herein private
respondents, the spouses Jose Francisco and Genoveva Francisco
("Franciscos"), the sum of P200,000.00 by way of actual and moral damages,
as well as P6,000.00 of attorney's fees, plus litigation expenses.
The Franciscos are the owners of a parcel of land, with an area of 38,010
square meters, situated in Barrio Anilao, Municipality of Mabini, Province of
Batangas, covered by and described in Original Certificate of title ("OCT") No.
0-3267 of the Registry of deeds of Batangas. Del Mundo, on the other hand,
is the operator of a dive camp resort adjacent to the property.
Sometime in June of 1980, Del Mundo, on the other hand, is the operator of a
dive camp resort adjacent to the property.
Sometime in June of 1980, Del Mundo proposed a corporate joint venture
with the Franciscos for the development of the latter's property. The
corporation (to be named the "Anilao Development Corporation") would have
a capital stock of One Million (P1,000,000.00) Pesos to be subscribed equally
between Del Mundo and the Franciscos. To cover the proposed subscription
of the Franciscos, Del Mundo assured the couple that he could get from them
a P125,000.00 loan secured by the realty. 3
The Franciscos executed a special power of attorney ("SPA"), dated 25 July
1980, 4 in favor of Del Mundo authorizing him to obtain a bank loan. The SPA,
in part, provided:
1. To negotiate for a loan with any bank or financial institution, in
such amount or amounts as our said attorney-in-fact may deem
proper and expedient and under such terms and conditions as he
may also deem proper and convenient;
2. To sign, execute and deliver by way of first mortgage in favor
of said bank or financial institution on our property situated in
Anilao, Mabini, Batangas, . . .
3. To receive and receipt for the proceeds of the loan, and to sign
such other papers and documents as may be necessary in
connection therewith;

GIVING AND GRANTING unto our said attorney-in-fact full power

and authority as we might or could do if personally present and
acting in person, and hereby CONFIRMING all that our said
attorney-in-fact may lawfully do under and by virtue of these
presents.
Only the duplicate copy of the SPA was given to Del Mundo by the Francisco.
The latter kept the original copy but agreed to have it delivered to Del Mundo
once he would have been able to firm up the P125,000.00 financing to cover
their (the Franciscos) proposed subscription. 5 Aside from the special power
of attorney, the Franciscos, who were then about to depart for
abroad, 6 turned over to Del Mundo the physical possession of the real
property along with its existing facilities and equipment.
Del Mundo proceeded to the Republic Planters Bank ("RPB") to apply for the
loan. After the loan application was approved, Del Mundo executed a deed of
real estate mortgage over the Franciscos' property to secure a P265,000.00
loan. The mortgage, however, could not be annotated on the owner's copy of
OCT NO. 0-3267, then in the possession of the Development Bank of the
Philippines ("DBP") which had a previous mortgage lien on it. To obtain said
owner's copy, the RPB agreed to assume, and thereafter paid, Franciscos'
outstanding indebtedness to the DBP. The latter, despite the payment,
refused to release the owner's copy of the certificate of title due to
Franciscos' objection. 7 In order to allow the release of the loan proceeds, Del
Mundo submitted additional collaterals. The RPB then withdrew its previous
payment to the DBP of P22,621.75, and the P265,000.00 loan was forthwith
released to Del Mundo. 8
The joint venture did not materialize. The Franciscos wrote a demand letter
addressed to Del Mundo for the payment of rentals for the use of their
property at the rate of P3,000.00 a month (totalling P42,000.00) and for the
return of the equipment taken by Del Mundo from the bodega of the
Franciscos valued at P15,000.00. 9
Since Del Mundo failed to settle with the Franciscos, the latter sued Del
Mundo, along with the RPB, for annulment of the mortgage, as well as for
damages, before the Regional Trial Court of Quezon City. The Franciscos
asserted that Del Mundo made use of their property for his sole benefit and
purpose, and that the use of the property could not have been availed by Del
Mundo himself had it not been for the latter's proposal to put up the joint
venture. After trial, the trial court rendered judgment, dated 29 June
1984, 10 in favor of the Franciscos thusly:

(1) Declaring the real estate mortgage (Exh. E) executed by

defendant Mariano Del Mundo in favor of defendant Republic
Planters Bank on January 10, 1981, null and void ab initio;
(2) Declaring the unauthorized payments made by defendant
Republic Planters Bank to the Development Bank of the
Philippines for the account of plaintiffs as null and void;
(3) Ordering defendant Mariano L. del Mundo to pay to plaintiffs
the sum of P42,000.00 as reasonable rental payment for the use
and occupancy of plaintiffs' property, plus P15,000.00
representing the value of equipment taken by said defendant
from plaintiffs;
(4) Ordering defendants jointly and severally, to pay to plaintiffs
the sum of P200,000.00 as actual and moral damages, plus
P6,000.00 as attorney's fees and litigation expenses, plus costs;
(5) Ordering plaintiffs to reimburse defendant Republic Planters
Bank the sum of P67,000.00;
(6) Dismissing defendants' counterclaims for lack of merit.

11

Both parties appealed the decision to the Court of Appeals. While the appeal
was pending, Jose Francisco died; he was substituted by his heirs. On 07 April
1989, the court of Appeals rendered its now assailed decision 12which
decreed:
WHEREFORE, the appealed decision is hereby AFFIRMED in all
respects subject to the modification that plaintiff-appellants be
absolved of any liability to appellant bank. 13
On its assumption that the decision had already become final and executory,
the Court of Appeals made an entry of judgment on 28 September
1989. 14 Thus, RPB, sometime in October 1990, paid Genoveva Francisco and
the substituted heirs the amount of P209,126.00, the extent to which RPB
was held to be jointly and solidarily liable with Del Mundo conformably with
the appellate court's decision (affirming that of the trial court). 15 The
Franciscos acknowledged the payment and manifested that "(t)he only
amount not satisfied . . . (was) the amount due solely from defendant
Mariano L. Del Mundo" pursuant to that portion of the judgment
3) Ordering defendant Mariano L. Del Mundo to pay plaintiffs the
sum of P42,000.00 as reasonable rental payment for the use and
occupancy of plaintiff's property, plus P15,000.00 representing
the value of equipment taken by said defendant from plaintiffs; 16

When Del Mundo learned, for the first time, that a writ of execution pursuant
to the appellate court's decision was sought to be implemented against his
property on 09 October 1990, he filed on the very next day, or on 10 October
1990, an urgent manifestation with motion to lift the entry of judgment
against him alleging non-service of the assailed decision. 17 The appellate
court acted favorably on Del Mundo's motion and, "in the interest of
justice," 18 he was also allowed to file his own for reconsideration. He did in
due time. 19
After Del Mundo's motion for reconsideration was denied on 18 March 1992,
the present petition was seasonably instituted assigning three alleged errors;
viz:
A.
RESPONDENT C.A. ERRED IN AFFIRMING THE TRIAL COURT'S
FINDING THAT PRIVATE RESPONDENTS HAVE A CAUSE OF ACTION
AGAINST PETITIONER DESPITE THE TOTAL ABSENCE OF DAMAGE
ON THE PART OF PRIVATE RESPONDENTS.
B.
RESPONDENT C.A. ERRED IN AFFIRMING THE TRIAL COURT'S
DECISION DESPITE THE FACT THAT SAID DECISION DOES NOT
STATE THE FACTS AND THE LAW ON WHICH IT IS BASED IN
GROSS VIOLATION OF SEC. 9, X OF THE 1973 CONSTITUTION
THEN IN FORCE AND EFFECT.
C.
RESPONDENT C.A. ERRED IN AFFIRMING THE TRIAL COURT'S
DECISION ORDERING PETITIONER AND CO-DEFENDANT REPUBLIC
PLANTERS BANK ("RPB") TO PAY PRIVATE RESPONDENTS, JOINTLY
AND SEVERALLY, THE SUM OF p200,000.00 AS ACTUAL AND
MORAL DAMAGES PLUS ATTORNEY'S FEES, AND
COSTS/EXPENSES OF LITIGATION.
We see partial merit in the petition.
In its 29th June 1984 decision, the trial court, after summarizing the
conflicting asseverations of the parties, went on to discuss, and forthwith to
conclude on, the kernel issue of the case in just two paragraphs, to wit:
The evidence disclose that defendant RPB executed said
mortgage with del Mundo, although the original of said special
power-of-attorney and the original of the owner's duplicate
certificate of title was not presented to it and without requiring
its registration. Under the circumstances, the mortgage to

defendant RPB was irregularity executed, justifying annulment of

said mortgage in its favor.
However, the evidence disclose that plaintiffs has received the
sum of P45,000.00 from del Mundo, and the sum of P22,300.00
was paid to DBP (Exh. F) and applied to plaintiffs' previous loan
with DBP, as part of an agreement between plaintiffs and del
Mundo, or a total of P67,300.00. Plaintiffs are, therefore, duty
bound to make reimbursement of said amount to RPB, as they
cannot be allowed to enrich themselves at RPB's expense and
prejudice. 20
After that brief disquisition, the trial court disposed of the case by ordering
Del Mundo and RPB, inter alia, jointly and severally to pay the Franciscos the
sum of P200,000.00 as actual and moral damages, P6,000.00 as attorney's
fees, and litigation expenses plus costs.
It is understandable that courts, with their heavy dockets and time
constraints, often find themselves with little to spare in the preparation of
decisions to the extent most desirable. We have thus pointed out that judges
might learn to synthesize and to simplify their
pronouncements. 21 Nevertheless, concisely written such as they may be,
decisions must still distinctly and clearly express, at least in minimum
essence, its factual and legal bases. 22
The two awards one for actual damages and the other for moral damages
cannot be dealt with in the aggregate; neither being kindred terms nor
governed by a coincident set of rules, each must be separately identified and
independently justified. A requirement common to both, of course, is that an
injury must have been sustained by the claimant. The nature of that injury,
nonetheless, differs for while it is pecuniary in actual or compensatory
damages, 23 it is, upon the other hand, non-pecuniary in the case of moral
damages. 24
A party is entitled to an adequate compensation for such pecuniary loss
actually suffered by him as he has duly proved. 25 Such damages, to be
recoverable, must not only be capable of proof, but must actually be proved
with a reasonable degree of certainty. 26 We have emphasized that these
damages cannot be presumed, 27 and courts, in making an award must point
out specific facts which could afford a basis for measuring whatever
compensatory or actual damages are borne. 28
Moral damages, upon the other hand, may be awarded to compensate one
for manifold injuries such as physical suffering, mental anguish, serious
anxiety, besmirched reputation, wounded feelings and social humiliation.

These damages must be understood to be in the concept of grants, not

punitive 29 or corrective 30 in nature, calculated to compensate the claimant
for the injury suffered. 31 Although incapable of exactness and no proof of
pecuniary loss is necessary in order that moral damages may be awarded,
the amount of indemnity being left to the discretion of the court, 32it is
imperative, nevertheless, that (1) injury must have been suffered by the
claimant, and (2) such injury must have sprung from any of the cases
expressed in Article 2219 33 and Article 2220 34 of the civil Code. A causal
relation, in fine, must exist between the act or omission referred to in the
Code which underlies, or gives rise to, the case or proceeding, on the one
hand, and the resulting injury, on the other hand; i.e., the first must be the
proximate cause and the latter the direct consequence thereof.
A judicious review of the records in the case at bench, indeed, fails to show
that substantial legal basis was shown to support the herein
questioned collective award for the questioned damages. We are, therefore,
constrained to disregard them.
As regards the other issues raised by petitioner, the findings of the appellate
court, involving such as they do mainly factual matters that are not entirely
bereft of substantial basis, must be respected and held binding on this Court.
In passing, we have taken note of the fact that the RPB, itself a judgment codebtor in solidum with Del Mundo, did not join the latter in this appeal. The
Court, accordingly, cannot here and now make any pronouncement on the
effects of said bank's payment to Del Mundo under and by virtue of the
appellate court's appealed decision.
WHEREFORE, the decision of the Court of Appeals is accordingly MODIFIED
by deleting the award of P200,000.00 for actual and moral damages. In all
other respects, the appealed decision is AFFIRMED. No costs.
SO ORDERED.

G.R. No. L-64398 November 6, 1990

JOSE CHING SUI YONG, petitioner,
vs.
INTERMEDIATE APPELLATE COURT (THIRD CIVIL CASES DIVISION)
AND INTERCONTINENTAL DISTRIBUTORS (P.I.) CORPORATION,

ROBERTO SUAREZ, and INTERCONTINENTAL FILM DISTRIBUTORS,

(H.K.) LTD., respondents.
P.M. Mortera & Associates Law Offices for petitioner.
Lauro G. Sandoval for private respondents.
PADILLA, J.:
This is a petition for review on certiorari of the decision of the respondent
Intermediate Appellate Court (now Court of Appeals) in AC-G.R. CV No.
58527, dated 14 June 1983 1 affirming in toto the decision of the lower court
rendered in favor of private respondents.
The antecedent facts that gave rise to this case are as follows:
Petitioner bought from a certain Norberto Concepcion for the total sum of
P75,000.00 seven (7) foreign cinematographic films, as evidenced by four (4)
receipts of payment duly signed by said Norberto Concepcion who was
allegedly the authorized agent and representative of private respondent
Intercontinental Film Distributors (P.I.) Corporation and its managing director,
respondent Roberto Suarez.
It was stated in the said receipts that private respondents Intercontinental
Film Distributors (P.I.) Corporation (Intercontinental (P.I.), for brevity) and
Roberto Suarez agreed that all the seven (7) films would be sent and
delivered directly to petitioner upon their arrival in the Philippines. However,
the films were not delivered to petitioner despite repeated demands, as a
result of which, the latter filed an action for replevin with damages before the
Court of First Instance of Rizal, Branch XXII, docketed as Civil Case No.
12578. 2
Upon petitioner's filing of the necessary bond in the amount of P150,000. 00,
the court a quo issued a writ of seizure ordering the Sheriff of Manila to take
immediate possession of the seven (7) films. Six (6) films were seized by the
Sheriff of Manila from the Board of Censors, while the seventh film was
seized by Special Sheriff Gregorio Guido. All the seven (7) cinematographic
films had been delivered by Intercontinental (P.I.) to the Board of Censors
prior to their seizure.
Informed of the seizure of the seven (7) films by the Sheriffs, Intercontinental
Film Distributors (H.K.) Ltd (Intercontinental (H.K.), for brevity) filed a thirdparty claim, alleging ownership and asserting the right to possess the said
seven (7) cinematographic films, and stating in its claim that the value of the
said films was P250,000.00. Notified by the Sheriff of the third-party claim,
petitioner filed an ex-parte motion to quash the third-party claim and for the

delivery of the said films to him (petitioner), instead of filing an indemnity

bond as required by the Sheriff. The ex-parte motion was granted and the
films were delivered to the petitioner. Subsequently, Intercontinental (H.K.)
filed a motion praying to the Court that it be allowed to intervene in the case
as party defendant, which motion was granted. It did intervene as defendantintervenor and filed its answer to the complaint.
After trial on the merits, the court a quo dismissed the complaint and set
aside the writ of seizure it had issued earlier. The dispositive part of the
lower court's decision, 3 which respondent appellate court later affirmed in
toto reads as follows:
WHEREFORE, judgment is rendered:
1. Dismissing plaintiff s complaint, and the writ of seizure issued
by this Court in favor of the plaintiff is hereby set aside;
2. Ordering plaintiff to return to defendants and intervenor the
seven (7) cinematographic films, namely, Venus in Furs; Girl with
Hungry Eyes; Free Love Confidential, Cool It Baby; Mondo Mod;
Secret Sex Lives of Romeo and Juliet; Mantis in Lace, in the same
condition as they were taken by and delivered to plaintiff on
December 22, 1969 and in the event that delivery cannot be
made, plaintiff shall pay defendants and intervenor the sum of
P250,000.00 representing the value of said seven (7)
cinematographic films; and
3. Sentencing plaintiff to pay defendants and defendant
intervenor the sum of P10,000.00 a day as damages
commencing from December 23, 1969 until the aforesaid seven
(7) cinematographic films are delivered or returned to
defendants and defendant-intervenor or the sum of P250,000.00
is fully paid to defendants and defendant-intervenor, and to pay
further the amount of P10,000.00 by way of attorney's fees.
With costs of suit against the plaintiff.
SO ORDERED.
As already stated, the Court of Appeals affirmed the above judgment in its
entirety. Not satisfied, petitioner interposed the present petition for review,
raising the following issues:
(a) whether or not the plaintiff has a valid cause of action against
the defendants and the defendant-intervenor;
(b) whether or not Norberto Concepcion is the authorized agent
and representative of the defendant Intercontinental Film

Distributors (P.I.) Corporation and its Managing Director,

defendant Roberto Suarez;
(c) whether or not the award of damages of P10,000.00 a day
commencing from December 23, 1969 until the aforesaid seven
(7) cinematographic films are delivered or returned to
defendants and defendant-intervenor or the sum of P250,000.00
is fully paid to defendants and defendant-intervenor and to pay
further the amount of P10,000.00 by way of attorney's fees, are
supported by evidence and the law on the matter. 4
At the outset, it would appear that the above-stated issues involve a review
mainly of factual findings of respondent appellate court. We have repeatedly
held that in a petition for review on certiorari only legal questions should be
raised before this Court and that findings of fact of the Court of Appeals are
conclusive on the parties and on this Court, absent any showing of grave
error or abuse of discretion. 5
We note further that the issues raised and the arguments adduced by
petitioner in the present petition for review are reiterations of those
submitted by him to the Court of Appeals. The first two (2) issues were
resolved by the appellate court to which we agree in this wise:
A study of the evidence viz a viz (sic) the arguments supporting
the errors imputed to the trial court in its decision appealed from
convinces Us that the trial court did not err in holding "the
plaintiff-appellant as plainly has no cause of action against
defendants and defendant-intervenor" as it found that Norberto
Concepcion was not the duly authorized agent or representative
of the Intercontinental Film Distributors (P.I.) Corporation and
Roberto Suarez, the Managing Director, (who) denied having
authorized Norberto Concepcion to enter into contract with the
plaintiff-appellant.
Let it be admitted that the cause of action of the plaintiffappellant in his complaint for replevin (to take possession of the
seven cinematographic films) is based on the alleged sales of the
films in question to plaintiff-appellant by defendants thru
Norberto Concepcion for the total sum of P75,000 as evidenced
by Exhibits "A", "B", "C" and "D" and the alleged agency
instituted by Roberto Suarez in favor of Norberto Concepcion as
shown by said Exhibits.
The trial court, however, found and We agree that plaintiffappellant failed to prove that Norberto Concepcion was the duly

authorized agent or representative of the Intercontinental Films

Distributors (P.I.) Corporation and Roberto Suarez. In fact, the
lower court went further stating that Exhibits "A", "B", "C" and
"D" are fictitious contracts, a forgery undertaken merely to
promote the scheme of the plaintiff-appellant to take possession
of the cinematographic films in question. On the other hand, the
Intercontinental Films Distributors (H.K.) Ltd., intervenors, has
established that it owns the said films. ... 6
We agree with the foregoing findings and conclusions. As private
respondents correctly observed, despite petitioner's claim that he paid
Norberto Concepcion, the alleged agent of Roberto Suarez, the sum of
P75,000.00 as evidenced by the four (4) receipts of payment, and despite
the trial court's suggestion that Norberto Concepcion be included as a
defendant, petitioner failed to implead said Norberto Concepcion. Neither
was Concepcion presented as a witness. Thus, the court a quo correctly
resolved that:
... The failure of Concepcion to testify and clear the doubt that
surrounded the alleged execution by Suarez of the receipt Exhibit
E, considerably weakened the claim of plaintiff that defendants
and defendant-intervenor sold to him the films in question for
which Concepcion was duly authorized by defendant and
intervenor, and the proceeds of the sale was later turned
allegedly over by Concepcion to Suarez. ... 7
In short, the failure of petitioner to produce the person to whom he allegedly
paid P75,000.00 for the seven (7) films, rendered his claim untenable. For,
when a party has it in his possession or power to produce the best evidence
of which the case in its nature is susceptible and withholds it, the fair
presumption is that the evidence is withheld for some sinister motive and
that its production would thwart his evil or fraudulent lent purpose. 8
However, we resolve the third issue raised by petitioner, in his favor.
The sole basis for the award of damages against the petitioner is the alleged
unrealized profits of private respondents for the non-screening of the seven
(7) films. We believe that respondent court committed grave abuse of
discretion in arriving at the amount of P10,000.00 a day as unrealized profits
suffered by private respondents due to the filing of the present action by the
petitioner. As correctly averred by petitioner, the films had yet to be passed
by the Board of Censors and being "bold" or so called "bomba" films, there
was the probability that some scenes therein would have been cut or
censored or the films totally banned, as in the case of one of the films.

Besides, no document or proof was presented to prove that private

respondents really lost such amount daily for non-exhibition of the films to
the public by reason of the action instituted by petitioner. The amount of
P10,000.00 a day as alleged unrealized profit was arrived at by mere
speculation and conjecture by respondent court. Hence, the award of
damages for the anticipated loss of profits is unwarranted.
It is a settled rule that in order for damages to be recovered, the best
evidence obtainable by the injured party must be presented. 9 Actual or
compensatory damages cannot be presumed, but must be duly proved, and
proved with a reasonable degree of certainty. A court cannot rely on
speculation, conjecture or guesswork as to the fact and amount of damages,
but must depend upon competent proof that they have been suffered and on
evidence of the actual amount thereof. If the proof is flimsy and
unsubstantial, no damages will be awarded. 10
WHEREFORE, the appealed decision is hereby AFFIRMED with the
modification that the award of damages in the amount of P10,000. 00 a day
for alleged unrealized profits is eliminated. Costs against petitioner.
SO ORDERED.

MORAL DAMAGES

G.R. No. L-33836 March 16, 1987

DRA. SOFIA L. PRUDENCIADO, petitioner,
vs.
ALLIANCE TRANSPORT SYSTEM, INC. and JOSE LEYSON, et
al., respondents.
PARAS, J.:
This is a petition for review on certiorari of the decision 1 of the Court of
Appeals dated May 4,1971 in CA-G.R. No. 34832R entitled Dra. Sofia L.
Prudenciado v. Alliance Transport System, Inc. and Jose Leyson, which
modified the decision 2 of the Court of First Instance of Rizal, Quezon City, in

Civil Case No. Q-5235 reducing the amount of moral damages from P25,000
to P2,000 and eliminating the award of exemplary damages and attorney's
fees but granting actual damages of P2,451.27.
The decretal portion of said decision reads:
WHEREFORE, the decision appealed from is hereby modified,
ordering appellants jointly and severally to pay plaintiff the sum
of P2,451.27 for actual damages representing the cost of the
repair of the car of Plaintiff; (2) the sum of P2,000.00 as moral
damages. No pronouncement as to costs.
The antecedent facts of this case as found by the trial court and by the Court
of Appeals are as follows:
At about 2:05 p.m. of May 11, 1960, Dra. Sofia L. Prudenciado was driving
her own Chevrolet Bel Air car along Arroceros Street with the intention of
crossing Taft Avenue in order to turn left, to go to the Philippine Normal
College Compound where she would hold classes. She claimed that she was
driving her car at the rate of 10 kmph; that before crossing Taft Ave. she
stopped her car and looked to the right and to the left and not noticing any
on-coming vehicle on either side she slowly proceeded on first gear to cross
the same, but when she was almost at the center, near the island thereof,
Jose Leyson who was driving People's Taxicab owned and operated by
Alliance Transport System, Inc., suddenly bumped and struck Dra.
Prudenciado's car, thereby causing physical injuries in different parts of her
body, suffering more particularly brain concussion which subjected her to
several physical examinations and to an encephalograph test while her car
was damaged to the extent of P2,451.27. The damage to the taxicab
amounted to P190.00 (Decision in Civil Case No. Q-5235, CFI, Rizal; Record
on Appeal, pp. 63-64; Decision, CA-G.R. No. 34832-R, Rollo, pp. 37-38).
Dra. Prudenciado filed a complaint for damages at the Court of First Instance
of Rizal, Quezon City against the Alliance Transport System and Jose Leyson
docketed as aforestated, Civil Case No. Q-5232 (Record on Appeal, pp. 2-11).
After due hearing, the Court of First Instance of Rizal, Quezon City, found Jose
Leyson guilty of negligence in the performance of his duties as taxicab driver
which is the proximate cause of the accident in question. On the other hand,
defendant Alliance Transport System, Inc. failed to prove to the satisfaction
of the court that it had exercised the required diligence of a good father of
the family in the selection, supervision and control of its employees including
defendant Leyson. Consequently, both defendants were held jointly and
severally liable for the physical injuries suffered by the plaintiff Dra. Sofia L.
Prudenciado as well as for the damage to her car, in addition to the other

consequential damages prayed for. The dispositive portion of said decision

reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS judgment is
rendered, one in favor of plaintiff and against the defendants, by
ordering the said defendants, jointly and severally, to pay the
plaintiff the sum of P2,451.27 for actual damages representing
the cost for the repair of the car of plaintiff; P25,000.00 as moral
damages; P5,000.00 as exemplary damages; and the further sum
of P3,000.00 as attorney's fees, with costs against the
defendants. (Record on Appeal, pp. 71-73).
On appeal, the Court of Appeals rendered the assailed decision on May 14,
1971 and denied petitioner's motion for reconsideration in its resolution
dated July 20, 1971.
Hence, this petition.
The petition was given due course in the resolution of this Court dated
September 6, 1971 and petitioner filed her brief on November 10, 1971
(Rollo, p. 69) while respondents filed their brief on January 24, 1972 (Rollo, p.
86). Petitioner filed her Reply Brief on March 1, 1972 (Rollo, p. 96); after
which the case was considered submitted for decision on the same date
(Rollo, p. 99).
In her brief, petitioner raised the following assignment of errors:
I
THE RESPONDENT COURT OF APPEALS ERRED IN REDUCING THE AWARD OF
MORAL DAMAGES TO THE PETITIONER FROM P25,000.00 AWARDED BY THE
COURT OF FIRST INSTANCE OF RIZAL, BRANCH V, QUEZON CITY, TO
P2,000.00 NOTWITHSTANDING THE FACT THAT THERE WAS NO FINDING THAT
THE AWARD WAS PALPABLY AND SCANDALOUSLY EXCESSIVE AS TO INDICATE
THAT IT WAS THE RESULT OF PASSION OR CORRUPTION ON THE PART OF THE
TRIAL COURT;
II
THE RESPONDENT COURT OF APPEALS ERRED IN ELIMINATING THE AWARD
OF EXEMPLARY DAMAGES OF P5,000.00 NOTWITHSTANDING THE FACT THAT
THE FINDING OF THE SAID COURT ON THE EVIDENCE AND THE LAW
APPLICABLE JUSTIFIED THE AWARD OF EXEMPLARY DAMAGES AS HELD BY
THE SAID TRIAL COURT;
III
THE COURT OF APPEALS ERRED IN FINDING THAT HER DEMOTION IN RANK AS
A PROFESSOR IN THE UNITED STATES WAS NOT SUBSTANTIATED AND IN

MAKING THIS FINDING A BASIS FOR THE REDUCTION OF THE AWARD OF

MORAL DAMAGES, NOTWITHSTANDING THAT IT IS ALREADY TOO FAR
FETCHED AND IT MERELY CONFIRMS THE TRUTH OF THE FACT THAT THE
ACCUSED SUFFERED LOSS OF HER USUAL LIVELINESS; VIVACITY ACTIVITY
SELF-CONFIDENCE AND THAT SHE FEELS UNCERTAIN AND INSECURE AND
THAT SHE WAS SUBJECTED TO EXTREME FRIGHT AND SERIOUS ANXIETY,
SERIOUS APPREHENSION OF LOSING HER LIFE OR HER SENSES OR REASON
AND OF HER PHYSICAL MOBILITY ANYTIME AND THAT SHE SUFFERED GREAT
SHOCK AND SEVERE PAINS ON HER BACK NEAR THE LEFT SIDE OF HER
SPINAL COLUMN OF THE LUMBAR REGION;
IV
THE RESPONDENT COURT OF APPEALS ALSO ERRED IN ELIMINATING THE
AWARD OF ATTORNEY'S FEES TO THE PETITIONERS NOTWITHSTANDING THE
FACT THAT SAID AWARD IS LEGAL AND PROPER;
V
THE RESPONDENT COURT OF APPEALS ERRED IN ELIMINATING THE COSTS
TAXED AGAINST THE RESPONDENTS NOTWITHSTANDING THE FACT THAT
SAID COSTS ARE LEGAL AND PROPER;
VI
THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE CLAIM
OF DR. SOFIA L. PRUDENCIADO OF HER LOSS OF HER USUAL LIVELINESS,
VIVACITY ACTIVITY AND HER USUAL SELF CONFIDENCE, SUCH THAT SHE NOW
FEELS UNCERTAIN AND INSECURE... EXTREME FRIGHT AND SERIOUS
ANXIETY, SERIOUS APPREHENSION OF LOSING HER LIFE OR HER SENSES OR
REASON; OF HER PHYSICAL MOBILITY ANYTIME ... GREAT SHOCK AND
SEVERE PAINS ON HER BACK NEAR THE LEFT SIDE OF HER SPINAL COLUMN
IN THE LUMBAR REGION IS UNCORROBORATED NOTWITHSTANDING THE FACT
OF THE CERTIFICATE, EXHIBIT "G" OF DR. DOMINADOR VERGARA, OF THE
VETERANS MEMORIAL HOSPITAL AND DR. CONRADO ARAMIL, BRAIN
SPECIALIST AND THE CORROBORATING TESTIMONY OF THE LATTER AFTER
EXAMINATION AND TREATMENT OF PETITIONER;
VII
THE RESPONDENT COURT OF APPEALS ERRED IN SO MODIFYING THE
DECISION OF THE TRIAL COURT NOTWITHSTANDING THE FACT THAT IT HAD
NO POWER TO DO SO UNDER THE FACTS AND CIRCUMSTANCES OF THIS
CASE AS FOUND BY THE COURT OF APPEALS;
VIII

THE RESPONDENT COURT OF APPEALS ERRED IN MODIFYING THE DECISION

OF THE TRIAL COURT NOTWITHSTANDING THE FACT THAT THE DECISION OF
SAID TRIAL COURT IS IN ACCORDANCE WITH LAW.
The Court of Appeals and the trial court are in accord in the finding that the
accident was caused by the negligence of the taxi driver. The bone of
contention is however in the award of damages, which crystalizes the errors
assigned into one issue, which is whether or not the Court of Appeals is
justified in modifying or changing the grant of damages by the trial court.
It is well settled that factual findings of the Court of Appeals are binding on
the Supreme Court, but said findings are subject to scrutiny if such are
diametrically opposed to those of the trial court (Samson v. CA, et al. G.R.
No. L-40071, January 29, 1986).
The Court of Appeals concedes that a concussion of the brain was suffered
by Dra. Prudenciado but as to how serious was the concussion or how it had
later become, and the disastrous extent of the injuries which she alleges to
have sustained as a result of the accident, are seriously doubted by said
Appellate Court.
Specifically, said Court finds that Dra. Prudenciado's claim (which was
sustained b the trial court) that because of aforesaid concussion, she
eventually lost her usual liveliness, vivacity activity and her usual selfconfidence, to the extent that now she feels uncertain and insecure, not to
mention a sense of extreme fright and serious anxiety, serious apprehension
of losing her life, or her senses or reason or her physical mobility
momentarily, plus experiences of great shock and severe pains on her back
near the left side of her spinal column in the lumbar region, was not
supported by the deposition of Dr. Conrado Aramil the list who attended to
the plaintiff from May 14 to May 26, 1960 (TSN, July 13, 1960, pp. 72-73).
From said deposition, it was gathered that Dra. Prudenciado suffered a mild
abnormality, compatible with mold concussion of the brain (TSN, July 13,
1960, pp. 47-48); that the symptoms of any brain concussion usually are
headache, dizziness, voting and lack of pep or alertness; and that the
possible after effects that may be produced are persistent or irregular
headaches, fluctuating dizziness. Accordingly, Dra. Prudenciado was advised
"Just to watch herself if she would develop any alarming symptoms such as
headache, dizziness or vomitings, to have her re-checked after several
months for her to be sure." (Ibid,pp. 51-52). It might also produce intellectual
deterioration or lessening of intelligence, and even insanity.
Dra. Prudenciado sought to establish that she had precisely suffered are
those after effects except insanity; but the Court of Appeals ruled that her

proof consisted merely in her own uncorroborated testimony. In support of

her allegation she could not show any medical certificate tending to prove
that she was indeed medically treated abroad for her brain ailment nor was
there any showing in the documents presented that she was demoted to the
rank of technical assistant because the San Francisco State College does not
believe in her mental capacity any more.
Finally, her statements that she is almost completely losing her voice, that
she has a terrible headache when her head is pressed, that she has lost her
sense of taste, that she is nervous and temperamental and that she has
lapses of memory, are belied by the deposition of Dr. Aramil that the
patient's EEG was already normal on May 26, 1960; and on crossexamination he declared that she was clinically symtomless when she was
discharged from the hospital (TSN, July 13, 1960, pp. 75-76; 78-79).
There is no argument that moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be recovered if they are the
proximate result of defendant's wrongful act or omission (People v. Baylon,
129 SCRA 62 [1984]).
In the same manner, it is undisputed that the trial courts are given discretion
to determine the amount of moral damages Alcantara v. Surro, 93 Phil. 472)
and that the Court of Appeals can only modify or change the amount
awarded when they are palpably and scandalously excessive "so as to
indicate that it was the result of passion, prejudice or corruption on the part
of the trial court (Gellada v. Warner Barnes & Co., Inc., 57 O.G. (4) 7347,
7358; Sadie v. Bachrach Motors Co., Inc., 57 O.G. (4) 636 and Adone v.
Bachrach Motor Co., Inc., 57 O.G. 656). But in more recent cases where the
awards of moral and exemplary damages are far too excessive compared to
the, actual losses sustained by the aggrieved party, this Court ruled that
they should be reduced to more reasonable amounts.
Thus, in the case of San Andres v. Court of Appeals (116 SCRA 85 [1982]) the
Supreme Court ruled that while the amount of moral damages is a matter left
largely to the sound discretion of a court, the same when found excessive
should be reduced to more reasonable amounts, considering the attendant
facts and circumstances. Moral damages, though incapable of pecuniary
estimation, are in the category of an award designed to compensate the
claimant for actual injury suffered and not to impose a penalty on the
wrongdoer.

In a much later case (Siguenza v. Court of Appeals, 137 SCRA 578-579

[1985]), the Supreme court, reiterating the above ruling, reduced the awards
of moral and exemplary damages which were far too excessive compared to
the actual losses sustained by the aggrieved parties and where the records
show that the injury suffered was not serious or gross and, therefore, out of
proportion to the amount of damages generously awarded by the trial court.
In any case the Court held that "moral damages are emphatically not
intended to enrich a complainant at the expense of a defendant. They are
awarded only to enable the injured party to obtain means, diversion or
amusements that will serve to alleviate the moral suffering he has
undergone, by reason of the defendants' culpable action." The award of
moral damages must be proportionate to the suffering inflicted & B Surety &
Insurance Co., Inc. v. Intermediate Appellate Court, 129 SCRA 745 [1984]
citing Grand Union Supermarket, Inc. v. Espino, Jr., 94 SCRA 966).
Coming back to the case at bar, a careful review of the records makes it
readily apparent that the injuries sustained by Dra. Prudenciado are not as
serious or extensive as they were claimed to be, to warrant the damages
awarded by the trial court. In fact, a closer scrutiny of the exhibits showing a
moderate damage to the car can by no stretch of the imagination produce a
logical conclusion that such disastrous effects of the accident sought to be
established, actually took place, not to mention the fact that such were not
supported by the medical findings presented. Unquestionably, therefore, the
damages imposed' by the lower court should be reduced to more reasonable
levels.
On the other hand, it will be observed that the reduction of the damages
made by the Court of Appeals is both too drastic and unrealistic, to pass the
test of reasonableness, which appears to be the underlying basis to justify
such reduction.
While the damages sought to be recovered were not satisfactorily
established to the extent desired by the petitioner, it was nonetheless not
disputed that an accident occurred due to the fault and negligence of the
respondents; that Dra. Prudenciado suffered a brain concussion which
although mild can admittedly produce the effects complained of by her and
that these symptoms can develop after several years and can lead to some,
serious handicaps or predispose the patient to other sickness (TSN, July 13,
1960, pp. 52-54). Being a doctor by profession, her fears can be more real
and intense than an ordinary person. Otherwise stated, she is undeniably a
proper recipient of moral damages which are proportionate to her suffering.
As to exemplary damages, Article 2231 of the Civil Code provides:

In quasi-delicts, exemplary damages may be granted if the

defendant acted with grave negligence.
The rationale behind exemplary or corrective damages is, as the name
implies, to provide an example or correction for the public good (Lopez, et al.
v. Pan American World Airways, 16 SCRA 431).
The findings of the trial court in the case at bar which became the basis of
the award of exemplary damages are to the effect that it is more apparent
from the facts, conditions and circumstances obtaining in the record of the
case that respondent driver was running at high speed after turning to the
right along Taft Ave. coming from Ayala Boulevard, considering that the
traffic was clear. Failing to notice petitioner's car, he failed to apply his
brakes and did not even swerve to the right to avoid the collision (Record on
Appeal, pp. 69-70).
The Court of Appeals conforms with aforesaid findings of the trial court but is
not prepared to accept that there was gross negligence on the part of the
driver to justify the imposition of exemplary damages.
However, a driver running at full speed on a rainy day, on a slippery road in
complete disregard of the hazards to life and limb of other people cannot be
said to be acting in anything less than gross negligence. The frequent
incidence of accidents of this nature caused by taxi drivers indeed demands
corrective measures.
PREMISES CONSIDERED, the assailed decision of the Court of Appeals is
hereby MODIFIED insofar as the award of damages is concerned; and
respondents are ordered to jointly and severally pay the petitioner; (1) the
sum of P2,451.27 for actual damages representing the cost of the repair of
her car; (2) the sum of P15,000.00 as moral damages; (3) the sum of
P5,000.00 as exemplary damages; and (4) the sum of P3,000.00 as
attorney's fees. No pronouncement as to costs.
SO ORDERED.

G.R. No. 120262 July 17, 1997

PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS and LEOVIGILDO A. PANTEJO, respondents.
REGALADO, J.:

In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) seeks to

set aside the decision of respondent Court of Appeals, 1 promulgated on
December 29, 1994, which affirmed the award for damages made by the trial
court in favor of herein private respondent Leovegildo A. Pantejo.
On October 23, 1988, private respondent Pantejo, then City Fiscal of Surigao
City, boarded a PAL plane in Manila and disembarked in Cebu City where he
was supposed to take his connecting flight to Surigao City However, due to
typhoon Osang, the connecting flight to Surigao City was cancelled.
To accommodate the needs of its stranded passengers, PAL initially gave out
cash assistance of P100.00 and, the next day, P200.00, for their expected
stay of two days in Cebu. Respondent Pantejo requested instead that he be
billeted in a hotel at PAL's expense because he did not have cash with him at
that time, but PAL refused. Thus, respondent Pantejo was forced to seek and
accept the generosity of a co-passenger, an engineer named Andoni Dumlao,
and he shared a room with the latter at Sky View Hotel with the promise to
pay his share of the expenses upon reaching Surigao.
On October 25, 1988 when the flight for Surigao was resumed, respondent
Pantejo came to know that the hotel expenses of his co-passengers, one
Superintendent Ernesto Gonzales and a certain Mrs. Gloria Rocha, an auditor
of the Philippine National Bank, were reimbursed by PAL. At this point,
respondent Pantejo informed Oscar Jereza, PAL's Manager for Departure
Services at Mactan Airport and who was in charge of cancelled flights, that
he was going to sue the airline for discriminating against him. It was only
then that Jereza offered to pay respondent Pantejo P300.00 which, due to the
ordeal and anguish he had undergone, the latter decline.
On March 18, 1991, the Regional Trial Court of Surigao City, Branch 30,
rendered judgment in the action for damages filed by respondent Pantejo
against herein petitioner, Philippine Airlines, Inc., ordering the latter to pay
Pantejo P300.00 for actual damages, P150,000.00 as moral damages,
P100,000.00 as exemplary damages, P15,000.00 as attorney's fees, and 6%
interest from the time of the filing of the complaint until said amounts shall
have been fully paid, plus costs of suit. 2 On appeal, respondent court
affirmed the decision of the court a quo, but with the exclusion of the award
of attorney's fees and litigation expenses.
The main issue posed for resolution is whether petitioner airlines acted in
bad faith when it failed and refused to provide hotel accommodations for
respondent Pantejo or to reimburse him for hotel expenses incurred by
reason of the cancellation of its connecting flight to Surigao City due to force
majeure.

To begin with, it must be emphasized that a contract to transport passengers

is quite different in kind and degree from any other contractual relation, and
this is because of the relation which an air carrier sustain with the public. Its
business is mainly with the travelling public. It invites people to avail of the
comforts and advantages it offers. The contract of air carriage, therefore,
generates a relation attended with a public duty. Neglect or malfeasance of
the carrier's employees naturally could give ground for an action for
damages. 3
In ruling for respondent Pantejo, both the trial court and the Court of Appeals
found that herein petitioner acted in bad faith in refusing to provide hotel
accommodations for respondent Pantejo or to reimburse him for hotel
expenses incurred despite and in contrast to the fact that other passengers
were so favored.
In declaring that bad faith existed, respondent court took into consideration
the following factual circumstances:
1. Contrary to petitioner's claim that cash assistance was given instead
because of non-availability of rooms in hotels where petitioner had existing
tie-ups, the evidence shows that Sky View Hotel, where respondent Pantejo
was billeted, had plenty of rooms available.
2. It is not true that the P300.00 Paid to Ernesto Gonzales, a co-passenger of
respondent, was a refund for his plane ticket, the truth being that it was a
reimbursement for hotel and meal expenses.
3. It is likewise not denied that said Gonzales and herein respondent came to
know about the reimbursements only because another passenger, Mrs.
Rocha, informed them that she was able to obtain the refund for her own
hotel expenses.
4. Petitioner offered to pay P300.00 to private respondent only after he had
confronted the airline's manager about the discrimination committed against
him, which the latter realized was an actionable wrong.
5. Service Voucher No. 199351, presented by petitioner to prove that it gave
cash assistance to its passengers, was based merely on the list of
passengers already given cash assistance and was purportedly prepared at
around 10:00 A.M. of October 23, 1988. This was two
hours before respondent came to know of the cancellation of his flight to
Surigao, hence private respondent could not have possibly refused the
same. 4
It must be stressed that these factual findings, which are supported by
substantial evidence, are binding, final and conclusive upon this Court absent

any reason, and we find none, why this settled evidential rule should not
apply.
Petitioner theorizes that the hotel accommodations or cash assistance given
in case a flight is cancelled is in the nature of an amenity and is merely a
privilege that may be extended at its own discretion, but never a right that
may be demanded by its passengers. Thus, when respondent Pantejo was
offered cash assistance and he refused it, petitioner cannot be held liable for
whatever befell respondent Pantejo on that fateful day, because it was
merely exercising its discretion when it opted to just give cash assistance to
its passengers.
Assuming arguendo that the airline passengers have no vested right to these
amenities in case a flight is cancelled due to force majeure, what makes
petitioner liable for damages in this particular case and under the facts
obtaining herein is its blatant refusal to accord the so-called amenities
equally to all its stranded passengers who were bound for Surigao City. No
compelling or justifying reason was advanced for such discriminatory and
prejudicial conduct.
More importantly, it has been sufficiently established that it is petitioner's
standard company policy, whenever a flight has been cancelled, to extend to
its hapless passengers cash assistance or to provide them accommodations
in hotels with which it has existing tie-ups. In fact, petitioner's Mactan Airport
Manager for departure services, Oscar Jereza, admitted that PAL has an
existing arrangement with hotels to accommodate stranded
passengers, 5 and that the hotel bills of Ernesto Gonzales were
reimbursed 6 obviously pursuant to that policy.
Also, two witnesses presented by respondent, Teresita Azarcon and Nerie Bol,
testified that sometime in November, 1988, when their flight from Cebu to
Surigao was cancelled, they were billeted at Rajah Hotel for two nights and
three days at the expense of PAL. 7 This was never denied by PAL.
Further, Ernesto Gonzales, the aforementioned co-passenger of respondent
on that fateful flight, testified that based on his previous experience hotel
accommodations were extended by PAL to its stranded passengers either in
Magellan or Rajah Hotels, or even in Cebu Plaza. Thus, we view as impressed
with dubiety PAL's present attempt to represent such emergency assistance
as being merely ex gratia and not ex debito.
While petitioner now insists that the passengers were duly informed that
they would be reimbursed for their hotel expenses, it miserably and
significantly failed to explain why the other passengers were given
reimbursement while private respondent was not. Although Gonzales was

subsequently given a refund, this was only so because he came to know

about it by accident through Mrs. Rocha, as earlier explained.
Petitioner could only offer the strained and flimsy pretext that possibly the
passengers were not listening when the announcement was made. This is
absurd because when respondent Pantejo came to know that his flight had
been cancelled, he immediately proceeded to petitioner's office and
requested for hotel accommodations. He was not only refused
accommodations, but he was not even informed that he may later on be
reimbursed for his hotel expenses. This explains why his co-passenger,
Andoni Dumlao, offered to answer for respondent's hotel bill and the latter
promised to pay him when they arrive in Surigao. Had both know that they
would be reimbursed by the airline, such arrangement would not have been
necessary.
Respondent Court of Appeals thus correctly concluded that the refund of
hotel expenses was surreptitiously and discriminatorily made by herein
petitioner since the same was not made known to everyone, except through
word of mouth to a handful of passengers. This is a sad commentary on the
quality of service and professionalism of an airline company, which is the
country's flag carrier at that.
On the bases of all the foregoing, the inescapable conclusion is that
petitioner acted in bad faith in disregarding its duties as a common carrier to
its passengers and in discriminating against herein respondent Pantejo. It
was even oblivious to the fact that this respondent was exposed to
humiliation and embarrassment especially because of his government
position and social prominence, which altogether necessarily subjected him
to ridicule, shame and anguish. It remains uncontroverted that at the time of
the incident, herein respondent was then the City Prosecutor of Surigao City,
and that he is a member of the Philippine Jaycee Senate, past Lt. Governor of
the Kiwanis Club of Surigao, a past Master of the Mount Diwata Lodge of Free
Masons of the Philippines, member of the Philippine National Red Cross,
Surigao Chapter,
and past Chairman of the Boy Scouts of the Philippines, Surigao del Norte
Chapter. 8
It is likewise claimed that the moral and exemplary damages awarded to
respondent Pantejo are excessive and unwarranted on the ground that
respondent is not totally blameless because of his refusal to accept the
P100.00 cash assistance which was inceptively offered to him. It bears
emphasis that respondent Pantejo had every right to make such refusal since

it evidently could not meet his needs and that was all that PAL claimed it
could offer.
His refusal to accept the P300.00 proffered as an afterthought when he
threatened suit was justified by his resentment when he belatedly found out
that his co-passengers were reimbursed for hotel expenses and he was not.
Worse, he would not even have known about it were it not for a co-passenger
who verbally told him that she was reimbursed by the airline for hotel and
meal expenses. It may even be said that the amounts, the time and the
circumstances under which those amounts were offered could not salve the
moral wounds inflicted by PAL on private respondent but even approximated
insult added to injury.
The discriminatory act of petitioner against respondent ineludibly makes the
former liable for moral damages under Article 21 in relation to Article 2219
(10) of the Civil Code. 9 As held in Alitalia Airways vs. CA, et al., 10 such
inattention to and lack of care by petitioner airline for the interest of its
passengers who are entitled to its utmost consideration, particularly as to
their convenience, amount to bad faith which entitles the passenger to the
award of moral damages.
Moral damages are emphatically not intended to enrich a plaintiff at the
expense of the defendant. They are awarded only to allow the former to
obtain means, diversion, or amusements that will serve to alleviate the moral
suffering he has undergone due to the defendant's culpable action and must,
perforce, be proportional to the suffering inflicted. 11 However, substantial
damages do not translate into excessive damages. 12 Except for attorney's
fees and costs of suit, it will be noted that the Court of Appeals affirmed
point by point the factual findings of the lower court upon which the award of
damages had been based. 13 We, therefore, see no reason to modify the
award of damages made by the trial court.
Under the peculiar circumstances of this case, we are convinced that the
awards for actual, moral and exemplary damages granted in the judgment of
respondent court, for the reasons meticulously analyzed and thoroughly
explained in its decision, are just and equitable. It is high time that the
travelling public is afforded protection and that the duties of common
carriers, long detailed in our previous laws and jurisprudence and thereafter
collated and specifically catalogued in our Civil Code in 1950, be enforced
through appropriate sanctions.
We agree, however, with the contention that the interest of 6% imposed by
respondent court should be computed from the date of rendition of judgment

and not from the filing of the complaint. The rule has been laid down
inEastern Shipping Lines, Inc. vs. Court of Appeals, et al. 14 that:
When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with
reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but
when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the date
the judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained). The
actual base for the computation of legal interest shall, in any case, be
on the amount finally adjudged.
This is because at the time of the filing of the complaint, the amount of
damages to which plaintiff may be entitled remains unliquidated and not
known, until it is definitely ascertained, assessed and determined by the
court, and only after the presentation of proof thereon. 15
WHEREFORE, the challenged judgment of respondent Court of Appeals is
hereby AFFIRMED, subject to the MODIFICATION regarding the computation
of the 6% legal rate of interest on the monetary awards granted therein to
private respondent
SO ORDERED.

G.R. No. 88013 March 19, 1990

SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and TRADERS ROYAL
BANK, respondents.
Don P. Porcuincula for petitioner.
San Juan, Gonzalez, San Agustin & Sinense for private respondent.
CRUZ, J.:

We are concerned in this case with the question of damages, specifically

moral and exemplary damages. The negligence of the private respondent
has already been established. All we have to ascertain is whether the
petitioner is entitled to the said damages and, if so, in what amounts.
The parties agree on the basic facts. The petitioner is a private corporation
engaged in the exportation of food products. It buys these products from
various local suppliers and then sells them abroad, particularly in the United
States, Canada and the Middle East. Most of its exports are purchased by the
petitioner on credit.
The petitioner was a depositor of the respondent bank and maintained a
checking account in its branch at Romulo Avenue, Cubao, Quezon City. On
May 25, 1981, the petitioner deposited to its account in the said bank the
amount of P100,000.00, thus increasing its balance as of that date to
P190,380.74. 1 Subsequently, the petitioner issued several checks against its
deposit but was suprised to learn later that they had been dishonored for
insufficient funds.
The dishonored checks are the following:
1. Check No. 215391 dated May 29, 1981, in favor of California
Manufacturing Company, Inc. for P16,480.00:
2. Check No. 215426 dated May 28, 1981, in favor of the Bureau
of Internal Revenue in the amount of P3,386.73:
3. Check No. 215451 dated June 4, 1981, in favor of Mr. Greg
Pedreo in the amount of P7,080.00;
4. Check No. 215441 dated June 5, 1981, in favor of Malabon
Longlife Trading Corporation in the amount of P42,906.00:
5. Check No. 215474 dated June 10, 1981, in favor of Malabon
Longlife Trading Corporation in the amount of P12,953.00:
6. Check No. 215477 dated June 9, 1981, in favor of Sea-Land
Services, Inc. in the amount of P27,024.45:
7. Check No. 215412 dated June 10, 1981, in favor of Baguio
Country Club Corporation in the amount of P4,385.02: and
8. Check No. 215480 dated June 9, 1981, in favor of Enriqueta
Bayla in the amount of P6,275.00. 2
As a consequence, the California Manufacturing Corporation sent on June 9,
1981, a letter of demand to the petitioner, threatening prosecution if the
dishonored check issued to it was not made good. It also withheld delivery of
the order made by the petitioner. Similar letters were sent to the petitioner
by the Malabon Long Life Trading, on June 15, 1981, and by the G. and U.

Enterprises, on June 10, 1981. Malabon also canceled the petitioner's credit
line and demanded that future payments be made by it in cash or certified
check. Meantime, action on the pending orders of the petitioner with the
other suppliers whose checks were dishonored was also deferred.
The petitioner complained to the respondent bank on June 10,
1981. 3 Investigation disclosed that the sum of P100,000.00 deposited by the
petitioner on May 25, 1981, had not been credited to it. The error was
rectified on June 17, 1981, and the dishonored checks were paid after they
were re-deposited. 4
In its letter dated June 20, 1981, the petitioner demanded reparation from
the respondent bank for its "gross and wanton negligence." This demand was
not met. The petitioner then filed a complaint in the then Court of First
Instance of Rizal claiming from the private respondent moral damages in the
sum of P1,000,000.00 and exemplary damages in the sum of P500,000.00,
plus 25% attorney's fees, and costs.
After trial, Judge Johnico G. Serquinia rendered judgment holding that moral
and exemplary damages were not called for under the circumstances.
However, observing that the plaintiff's right had been violated, he ordered
the defendant to pay nominal damages in the amount of P20,000.00 plus
P5,000.00 attorney's fees and costs. 5 This decision was affirmed in toto by
the respondent court. 6
The respondent court found with the trial court that the private respondent
was guilty of negligence but agreed that the petitioner was nevertheless not
entitled to moral damages. It said:
The essential ingredient of moral damages is proof of bad faith
(De Aparicio vs. Parogurga, 150 SCRA 280). Indeed, there was
the omission by the defendant-appellee bank to credit
appellant's deposit of P100,000.00 on May 25, 1981. But the
bank rectified its records. It credited the said amount in favor of
plaintiff-appellant in less than a month. The dishonored checks
were eventually paid. These circumstances negate any
imputation or insinuation of malicious, fraudulent, wanton and
gross bad faith and negligence on the part of the defendantappellant.
It is this ruling that is faulted in the petition now before us.
This Court has carefully examined the facts of this case and finds that it
cannot share some of the conclusions of the lower courts. It seems to us that
the negligence of the private respondent had been brushed off rather lightly
as if it were a minor infraction requiring no more than a slap on the wrist. We

feel it is not enough to say that the private respondent rectified its records
and credited the deposit in less than a month as if this were sufficient
repentance. The error should not have been committed in the first place. The
respondent bank has not even explained why it was committed at all. It is
true that the dishonored checks were, as the Court of Appeals put it,
"eventually" paid. However, this took almost a month when, properly, the
checks should have been paid immediately upon presentment.
As the Court sees it, the initial carelessness of the respondent bank,
aggravated by the lack of promptitude in repairing its error, justifies the
grant of moral damages. This rather lackadaisical attitude toward the
complaining depositor constituted the gross negligence, if not wanton bad
faith, that the respondent court said had not been established by the
petitioner.
We also note that while stressing the rectification made by the respondent
bank, the decision practically ignored the prejudice suffered by the
petitioner. This was simply glossed over if not, indeed, disbelieved. The fact
is that the petitioner's credit line was canceled and its orders were not acted
upon pending receipt of actual payment by the suppliers. Its business
declined. Its reputation was tarnished. Its standing was reduced in the
business community. All this was due to the fault of the respondent bank
which was undeniably remiss in its duty to the petitioner.
Article 2205 of the Civil Code provides that actual or compensatory damages
may be received "(2) for injury to the plaintiff s business standing or
commercial credit." There is no question that the petitioner did sustain actual
injury as a result of the dishonored checks and that the existence of the loss
having been established "absolute certainty as to its amount is not
required." 7 Such injury should bolster all the more the demand of the
petitioner for moral damages and justifies the examination by this Court of
the validity and reasonableness of the said claim.
We agree that moral damages are not awarded to penalize the defendant but
to compensate the plaintiff for the injuries he may have suffered. 8 In the
case at bar, the petitioner is seeking such damages for the prejudice
sustained by it as a result of the private respondent's fault. The respondent
court said that the claimed losses are purely speculative and are not
supported by substantial evidence, but if failed to consider that the amount
of such losses need not be established with exactitude precisely because of
their nature. Moral damages are not susceptible of pecuniary estimation.
Article 2216 of the Civil Code specifically provides that "no proof of pecuniary
loss is necessary in order that moral, nominal, temperate, liquidated or

exemplary damages may be adjudicated." That is why the determination of

the amount to be awarded (except liquidated damages) is left to the sound
discretion of the court, according to "the circumstances of each case."
From every viewpoint except that of the petitioner's, its claim of moral
damages in the amount of P1,000,000.00 is nothing short of preposterous.
Its business certainly is not that big, or its name that prestigious, to sustain
such an extravagant pretense. Moreover, a corporation is not as a rule
entitled to moral damages because, not being a natural person, it cannot
experience physical suffering or such sentiments as wounded feelings,
serious anxiety, mental anguish and moral shock. The only exception to this
rule is where the corporation has a good reputation that is debased, resulting
in its social humiliation. 9
We shall recognize that the petitioner did suffer injury because of the private
respondent's negligence that caused the dishonor of the checks issued by it.
The immediate consequence was that its prestige was impaired because of
the bouncing checks and confidence in it as a reliable debtor was diminished.
The private respondent makes much of the one instance when the petitioner
was sued in a collection case, but that did not prove that it did not have a
good reputation that could not be marred, more so since that case was
ultimately settled. 10 It does not appear that, as the private respondent would
portray it, the petitioner is an unsavory and disreputable entity that has no
good name to protect.
Considering all this, we feel that the award of nominal damages in the sum of
P20,000.00 was not the proper relief to which the petitioner was entitled.
Under Article 2221 of the Civil Code, "nominal damages are adjudicated in
order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him." As we have found
that the petitioner has indeed incurred loss through the fault of the private
respondent, the proper remedy is the award to it of moral damages, which
we impose, in our discretion, in the same amount of P20,000.00.
Now for the exemplary damages.
The pertinent provisions of the Civil Code are the following:
Art. 2229. Exemplary or corrective damages are imposed, by way
of example or correction for the public good, in addition to the
moral, temperate, liquidated or compensatory damages.
Art. 2232. In contracts and quasi-contracts, the court may award
exemplary damages if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.

The banking system is an indispensable institution in the modern world and

plays a vital role in the economic life of every civilized nation. Whether as
mere passive entities for the safekeeping and saving of money or as active
instruments of business and commerce, banks have become an ubiquitous
presence among the people, who have come to regard them with respect
and even gratitude and, most of all, confidence. Thus, even the humble
wage-earner has not hesitated to entrust his life's savings to the bank of his
choice, knowing that they will be safe in its custody and will even earn some
interest for him. The ordinary person, with equal faith, usually maintains a
modest checking account for security and convenience in the settling of his
monthly bills and the payment of ordinary expenses. As for business entities
like the petitioner, the bank is a trusted and active associate that can help in
the running of their affairs, not only in the form of loans when needed but
more often in the conduct of their day-to-day transactions like the issuance
or encashment of checks.
In every case, the depositor expects the bank to treat his account with the
utmost fidelity, whether such account consists only of a few hundred pesos
or of millions. The bank must record every single transaction accurately,
down to the last centavo, and as promptly as possible. This has to be done if
the account is to reflect at any given time the amount of money the
depositor can dispose of as he sees fit, confident that the bank will deliver it
as and to whomever he directs. A blunder on the part of the bank, such as
the dishonor of a check without good reason, can cause the depositor not a
little embarrassment if not also financial loss and perhaps even civil and
criminal litigation.
The point is that as a business affected with public interest and because of
the nature of its functions, the bank is under obligation to treat the accounts
of its depositors with meticulous care, always having in mind the fiduciary
nature of their relationship. In the case at bar, it is obvious that the
respondent bank was remiss in that duty and violated that relationship. What
is especially deplorable is that, having been informed of its error in not
crediting the deposit in question to the petitioner, the respondent bank did
not immediately correct it but did so only one week later or twenty-three
days after the deposit was made. It bears repeating that the record does not
contain any satisfactory explanation of why the error was made in the first
place and why it was not corrected immediately after its discovery. Such
ineptness comes under the concept of the wanton manner contemplated in
the Civil Code that calls for the imposition of exemplary damages.

After deliberating on this particular matter, the Court, in the exercise of its
discretion, hereby imposes upon the respondent bank exemplary damages in
the amount of P50,000.00, "by way of example or correction for the public
good," in the words of the law. It is expected that this ruling will serve as a
warning and deterrent against the repetition of the ineptness and
indefference that has been displayed here, lest the confidence of the public
in the banking system be further impaired.
ACCORDINGLY, the appealed judgment is hereby MODIFIED and the private
respondent is ordered to pay the petitioner, in lieu of nominal damages,
moral damages in the amount of P20,000.00, and exemplary damages in the
amount of P50,000.00 plus the original award of attorney's fees in the
amount of P5,000.00, and costs.
SO ORDERED.
Narvasa, Gancayco, Grino-Aquino and Medialdea, JJ., concur.

G.R. No. 148246

February 16, 2007

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
JUAN C. TUVERA, VICTOR P. TUVERA and TWIN PEAKS DEVELOPMENT
CORPORATION, Respondents.
DECISION
TINGA, J.:
The long-term campaign for the recovery of ill-gotten wealth of former
President Ferdinand E. Marcos, his wife Imelda, and their associates, has
been met with many impediments, some of which are featured in this case,
that have led to doubts whether there is still promise in that enterprise. Yet
even as the prosecution of those cases have drudged on and on, the era of
their final reckoning is just beginning before this Court. The heavy hammer of
the law is just starting to fall.
The instant action originated from a civil complaint for restitution and
damages filed by the Republic of the Philippines against Marcos and his
longtime aide Juan Tuvera, as well as Tuvera's son Victor and a corporation
the younger Tuvera had controlled. Trial on the case against the Tuveras
proceeded separately before the Sandiganbayan. After the Republic had
presented its evidence, the Tuveras successfully moved for the dismissal of
the case on demurrer to evidence. The demurrer was sustained, and it falls

upon this Court to ascertain the absence or existence of sufficient proof to

support the relief sought by the Republic against the Tuveras.
I.
We begin with the facts.
Twin Peaks Development Corporation (Twin Peaks) was organized on 5 March
1984 as a corporation with a principal purpose of engaging in the real estate
business. There were five incorporating stockholders, including respondent
Victor Tuvera (Victor)1 who owned 48% of the shares of the fledgling
corporation. Victor was the son of respondent Juan Tuvera, who was then
Presidential Executive Assistant of President Marcos.
Acting on a letter dated 31 May 1984 of Twin Peaks Vice-President and
Treasurer Evelyn Fontanilla in behalf of the corporation, President Marcos
granted the award of a Timber License Agreement (TLA), more specifically
TLA No. 356, in favor of Twin Peaks to operate on 26,000 hectares of forest
land with an annual allowable cut of 60,000 cubic meters of timber and to
export 10,000 cubic meters of mahogany of the narra species.2 As a result,
Twin Peaks was able to engage in logging operations.
On 25 February 1986, President Marcos was ousted, and Corazon C. Aquino
assumed the presidency. Among her first acts as President was to establish
the Philippine Commission on Good Government (PCGG), tasked with
tracking down the ill-gotten wealth procured by Marcos, his family, and
associates during his 20-year rule. Among the powers granted to the PCGG
was the power to issue writs of sequestration.3 On 13 June 1988, the PCGG
issued a Writ of Sequestration on all assets, properties, records, documents,
and shares of stock of Twin Peaks on the ground that all the assets of the
corporation are ill-gotten wealth for having been acquired directly or
indirectly through fraudulent and illegal means.4 This was followed
two days later by Mission Order No. MER-88 (Mission Order), also issued by
the PCGG, implementing the aforementioned Writ of Sequestration.5
On 9 December 1988, the PCGG, in behalf of the Republic, filed the
Complaint now subject of this Petition.6Impleaded as defendants in the
Complaint7 were Juan and Victor Tuvera, as well as the then-exiled President
Marcos. Through the Complaint, the Republic sought to recover funds
allegedly acquired by said parties in flagrant breach of trust and fiduciary
obligations with grave abuse of right and power in violation of the
Constitution and the laws of the Republic of the Philippines.8
In particular, the Complaint alleged that Juan Tuvera, as Presidential
Executive Assistant of President Marcos, took advantage of his relationship to
influence upon and connection with the President by engaging in a scheme

to unjustly enrich himself at the expense of the Republic and of the Filipino
people. This was allegedly accomplished on his part by securing TLA No. 356
on behalf of Twin Peaks despite existing laws expressly prohibiting the
exportation of mahogany of the narra species9 and Twin Peaks lack of
qualification to be a grantee thereof for lack of sufficient logging equipment
to engage in the logging business.10 The Complaint further alleged that Twin
Peaks exploited the countrys natural resources by engaging in large-scale
logging and the export of its produce through its Chinese operators whereby
respondents obtained a revenue of approximately P45 million.
The Complaint prayed that (1) TLA No. 356 be reverted to the State or
cancelled; (2) respondents be jointly and severally ordered to pay P48
million11 as actual damages; and (3) respondents pay moral, temperate and
exemplary damages, litigation expenses, and treble judicial costs.12 It cited
as grounds for relief, gross abuse of official position and authority, breach of
public trust and fiduciary obligations, brazen abuse of right and power,
unjust enrichment, and violation of the Constitution.13
In their Answer,14 respondents Victor Tuvera and Twin Peaks claimed that
Twin Peaks was awarded TLA No. 356 only after its articles of incorporation
had been amended enabling it to engage in logging operations,15 that the
Republics reference to Chinese operations and revenue of
approximately P45 million were merely
imagined,16 and that the PCGG has no statutory authority to institute the
action.17 By way of counterclaim, respondents asked that the Republic be
ordered to pay Victor Tuvera moral damages and to pay both Victor Tuvera
and Twin Peaks exemplary damages, and to reimburse their attorneys fees.18
Anent the allegation that Twin Peaks sold about P3 million worth of lumber
despite the Writ of Sequestration issued by the PCGG, respondents stressed
that the Director of Forest Development acted within the scope of his
authority and the courts have no supervising power over the actions of the
Director of Forest Development and the Secretary of the Department of
Environment and Natural Resources (DENR) in the performance of their
official duties.19
As an affirmative and special defense, respondents Victor Tuvera and Twin
Peaks alleged that after Twin Peaks was granted TLA No. 356 in 24 August
1984, Felipe Ysmael, Jr. and Co., Inc. had filed a motion for the cancellation of
the same with the DENR
Secretary. When respondents submitted their Answer, the denial by the
DENR of the Ysmael motion was under review before the Court.20

Juan Tuvera, who was abroad when the case was filed on 9 December 1988,
later submitted his own Answer on 6 December 1989.21 He also denied the
allegations of the Republic and alleged that as Presidential Executive
Assistant of then President Marcos, he acted within the confines of his duties
and had perpetrated no unlawful acts. He merely transmitted
communications of approval in the course of his duties and had nothing to do
with the decisions of then President Marcos.22 He denied having anything to
do with Twin Peaks.
Juan Tuvera filed a compulsory counterclaim on the ground that the instant
action had besmirched his reputation and caused serious anxiety and mental
anguish thus entitling him to moral and exemplary damages and litigation
expenses.23
On 3 May 1989, respondents filed an Omnibus Motion to Nullify Writ of
Sequestration and/or the Mission Order.24The Sandiganbayan issued a
Temporary Restraining Order against the PCGG requiring it to cease, refrain
and desist from further implementing the Writ of Sequestration and the
Mission Order.25 Subsequently, on motion of respondents, the Sandiganbayan
granted a Writ of Preliminary Injunction covering the Mission Order. The
Sandiganbayan deferred its resolution on the Motion to Lift the Writ of
Sequestration.26
From 1988 to 1993, the proceedings before the Sandiganbayan were delayed
owing to the difficulty of acquiring jurisdiction over the person of President
Marcos, who was by then already in exile. Thus, upon motion by
respondents, the Sandiganbayan granted them a separate pre-trial/trial from
President Marcos.27
Respondents submitted their documentary evidence in the Pre-Trial
Conference while the Republic reserved to present the same during trial.
After the pre-trial conference, the Sandiganbayan issued a Pre-Trial
Order28 dated 3 November 1993, which presented the issues for litigation as
follows:
Whether or not defendant Juan C. Tuvera who was a Presidential Executive
Assistant at the time material to this case, by himself and in concert with his
co-defendants Ferdinand E. Marcos and Victor Tuvera, took advantage of his
relation and connection with the late Marcos, secure (sic) a timber
concession for Twin Peaks Development Corporation and, engage (sic) in a
scheme to unjustly enrich himself at the expense of the Republic and the
Filipino People.29

The Pre-Trial Order also indicated that the Republic admitted the exhibits by
respondents, subject to the presentation of certified true copies thereof.
Respondents exhibits were as follows:30
Exhibit
Nos.

Description

Amended Articles of Incorporation dated 31 July 1984

TLA No. 356

Order, Minister Ernesto M. Maceda, 22 July 1986

3-A

Order, Minister Ernesto M. Maceda, 10 October 1986

3-B

Order, Minister Ernesto M. Maceda, 26 November 1986, O.P.

Case No. 3521

3-C

Resolution, Office of the President, 6 July 1987, O.P. Case No.

3521

3-D

Order, Office of the President, 14 August 1987, I.S. No. 66

3-E

Complaint, PCGG, dated 20 July 1988

3-E-1, 3- I.S. No. 66 Affidavit, PCGG, Almario F. Mendoza, Ltv. Ramon F.

E-2,
Mendoza and Affidavit, Isidro Santiago
3-E-3
3-F

Counter-Affidavit, Juan C. Tuvera, 17 August 1989

3-F-1

PCGG, Motion to Withdraw, Jose Restituto F. Mendoza, 10 May

1989

3-F-2

Decision, Supreme Court, 18 October 1990

3-G
4
4-A

Resolution, Supreme Court, 5 June 1991

Complaint, DENR, Almario F, Mendoza, 9 March 1990
Answer/Comment, DENR, Almario F. Mendoza, dated 20 April

1990
4-B
5

6, 6-A
6-B

Decision, DENR, dated 28 August 1990

Complaint, Ombudsman, etc., Case No. 0-90-0708, 9 March
1990
Answer/Counter-Affidavit, etc.
Decision, Ombudsman Case No. 0-90-0708, dated 8 August
1990

The Republic presented three (3) witnesses during the trial. The first witness
was Joveniana M. Galicia, Chief of the National Forest Management Division
of the Forest Management Bureau. She identified TLA No. 356 of Twin Peaks
dated 20 August 1984 and a Memorandum dated 18 July 1984. She testified
that TLA No. 356 covers 26,000 hectares of forest land located in the
Municipality of Isabela, Province of Quirino.31 The Memorandum dated 18 July
1984 addressed to Director Edmundo Cortez recited then President Marcos
grant of the timber concession to Twin Peaks. Identified and marked in the
same memorandum were the name and signature of Juan Tuvera.32 Upon
cross-examination, Galicia stated that she was not yet the chief of the
Division when the documents she identified were submitted to the Bureau.
She further stated it was her first time to see the aforementioned documents
when she was asked to bring the same before the trial court.33
The next witness was Fortunato S. Arcangel, Regional Technical Director III of
the DENR. He testified that he is a Technical Director under the Forest
Management Services of the DENR.34 He identified Forestry Administration
Order (FAO) No. 11 dated 1 September 1970. He said he was aware of TLA
No. 356 of Twin Peaks35 because at the time it was issued, he was the chief of
the Forestry Second Division and his duties included the evaluation and
processing of applications for licenses and permits for the disposition and
distribution of timber and other forest products.36 Consequently,
he was aware of the process by which TLA No. 356 was issued to Twin
Peaks.37 According to him, they processed the application insofar as they
evaluated the location of the area concerned and its present vegetative
state, examined the records, and determined the annual allowable land. After
the examination, the license agreement was prepared and submitted for
approval.38 He continued that under FAO No. 11, a public bidding is required
before any license agreement or permit for the utilization of timber within

the forestry land is issued39 but no public bidding was conducted for TLA No.
356.40 He explained that no such bidding was conducted because of a
Presidential Instruction not to accept any application for timber licensing as a
consequence of which bidding procedures were stopped.41 Upon crossexamination, Arcangel said that at the time TLA No. 356 was issued, the
Revised Forestry Code of the Philippines42 was already in effect but there
were still provisions in FAO No. 11 that remained applicable such as the
terms and conditions of granting a license. He also stated that the issuance
of the license to Twin Peaks emanated from the President of the Philippines.43
The Republics third and last witness was Teresita M. Zuiga, employee of the
Bureau of Internal Revenue. She identified the 1986 Income Tax Returns of
Victor P. Tuvera, Evelyn Fontanilla and Feliciano O. Salvana, stockholders of
Twin Peaks.44
On 24 June 1994, the Republic rested its case after its formal offer of
evidence, as follows:45
Exhibit
s

Documents

Purpose

Timber License
Agreement No. 356 of
Twin Peaks Realty
Development Corp.
dated 20 August 1984

To prove that the Timber License

Agreement was executed prior to the
amendment of the Articles of
Incorporation of Twin Peaks Realty
Development Corp.

Memorandum dated 18
July 1984 of Juan C.
Tuvera, Presidential
Executive Secretary

To prove the participation of Juan C.

Tuvera in the grant of the timber
concession of Twin Peaks Realty
Development Corp.

Forestry Administrative
Order No. 11 (Revised)

To prove that Twin Peaks Realty

Development Corp. was granted a
timber license agreement without
following the procedure outlined in
the forestry rules and regulation and
in violation of law.

Income Tax Return of

Victor Tuvera

To prove that Victor Tuvera was not a

legitimate stockholder of Twin Peaks
Realty Development Corp.

Income Tax Return of

Evelyn Fontanilla

To prove that Evelyn Fontanilla was

not a legitimate stockholder of Twin
Peaks Realty Development Corp.

Income Tax Return of

Feliciano Salvana

To prove that Feliciano Salvana was

not a legitimate stockholder of Twin
Peaks Realty Development Corp.

Articles of Incorporation
of Twin Peaks Realty
Development Corp.
(original)

To prove that Twin Peaks Realty

Development Corp. was organized to
engage in the real estate business
and not in the logging industry.

Timber Manifestation
Report of [Twin Peaks
Realty Development
Corp.] consigned to
Scala Sawmill46

To show that Twin Peaks Realty

Development Corp. lacks equipment
to process logs.

Timber Manifestation
Report of Twin Peaks
consigned to La Pea
Sawmill47

To show that Twin Peaks Realty

Development Corp. lacks equipment
to process logs.

Respondents subsequently submitted certified true copies of the exhibits

they had presented during the pre-trial conference.48
With leave of court, respondents filed a Demurrer to Evidence. Respondents
argued that the Republic failed to present sufficient legal affirmative
evidence to prove its claim. In particular, respondents demurrer contends
that the memorandum (Exh. B) and TLA No. 356 are not "legal evidence"
because "legal evidence" is not meant to raise a mere suspicion or doubt.
Respondents also claim that income tax returns are not sufficient to show
ones holding in a corporation. Respondents also cited the factual
antecedents culminating with the Courts decision in Felipe Ysmael, Jr. &
Corp., Inc. v. Sec. of Environment and Natural Resources.49
The Republic filed a Manifestation, contending that the demurrer is not based
on the insufficiency of its evidence but on the strength of the evidence of
respondents as shown by their own exhibits. The Republic claimed that the
Revised Forestry Code of the Philippines does not dispense with the
requirement of public bidding. The Republic added that Sec. 5 of said law

clearly provides that all applications for a timber license agreement must be
filed before the Bureau of Forest Development and that respondents still
have to prove compliance with the requirements for service contracts.50
Respondents opposed the Manifestation, maintaining that since the Republic
admitted the exhibits of respondents during the pre-trial, it is bound by its
own admission. Further, these same exhibits contain uncontroverted facts
and laws that only magnify the conclusion that the Republic has no right to
relief.51
In its Resolution dated 23 May 2001,52 the Sandiganbayan sustained the
demurrer to evidence and referred to the decision of this Court in Ysmael in
holding that res judicata applies. The Anti-Graft Court also did not give
credence to the Republics allegations concerning respondents abuse of
power and/or public trust and consequent liability for damages in view of its
failure to establish any violation of Arts. 19, 20 and 21 of the Civil Code.
In essence, the Sandiganbayan held that the validity of TLA No. 356 was
already fully adjudicated in a Resolution/Order issued by the Office of the
President on 14 August 1987, which had become final and executory with the
failure of the aggrieved party to seek a review thereof. The Sandiganbayan
continued that the above pronouncement is supported by this Court in
Ysmael. Consequently, the Sandiganbayan concluded, the Republic is barred
from questioning the validity of TLA No. 356 in consonance with the principle
of res judicata.
The Republic now questions the correctness of the Sandiganbayans decision
to grant the demurrer to evidence because it was not based solely on the
insufficiency of its evidence but also on the evidence of respondent
mentioned during the pre-trial conference. The Republic also challenges the
applicability of res judicata.
II.
Preliminarily, we observe that respondents had filed before the
Sandiganbayan a pleading captioned Motion to Dismiss or Demurrer to
Evidence, thus evincing that they were seeking the alternative reliefs of
either a motion to dismiss or a demurrer to evidence. However, the
Sandiganbayan, in resolving this motion, referred to it as Motion to
Dismiss on Demurrer to Evidence, a pleading of markedly different character
from a Motion to Dismiss orDemurrer to Evidence. Still, a close reading of the
Sandiganbayan Resolution reveals clearly that the Sandiganbayan was
treating the motion as a demurrer, following Rule 33, Section 1 of the Rules
of Court, rather than a motion to dismiss under Rule 16, Section 1.

This notwithstanding, the Sandiganbayan justified the grant of demurrer with

res judicata as rationale. Res judicata is an inappropriate ground for
sustaining a demurrer to evidence, even as it stands as a proper ground for a
motion to dismiss. A demurrer may be granted if, after the presentation of
plaintiffs evidence, it appears upon the facts and the law that the plaintiff
has shown no right to relief. In contrast, the grounds for res judicata present
themselves even before the presentation of evidence, and it should be at
that stage that the defense of res judicata should be invoked as a ground for
dismissal. Properly speaking, the movants for demurral who wish to rely on a
controlling value of a settled case as a ground for demurrer should invoke
the ground of stare decisis in lieu of res judicata.
In Domondon v. Lopez,53 we distinguished a motion to dismiss for failure of
the complainant to state a cause of action from a motion to dismiss based on
lack of cause of action. The first is governed by Rule 16, Section 1(g),54while
the second by Rule 3355 of the Rules of Court, to wit:
x x x The first [situation where the complaint does not alleged cause of
action] is raised in a motion to dismiss under Rule 16 before a responsive
pleading is filed and can be determined only from the allegations in the
initiatory pleading and not from evidentiary or other matter aliunde. The
second [situation where the evidence does not sustain the cause of
action alleged] is raised in a demurrer to evidence under Rule 33 after the
plaintiff has rested his case and can be resolved only on the basis of the
evidence he has presented in support of his claim. The first does not concern
itself with the truth and falsity of the allegations while the second arises
precisely because the judge has determined the truth and falsity of the
allegations and has found the evidence wanting.
Hence, a motion to dismiss based on lack of cause of action is filed by the
defendant after the plaintiff has presented his evidence on the ground that
the latter has shown no right to the relief sought. While a motion to dismiss
under Rule 16 is based on preliminary objections which can be ventilated
before the beginning of the trial, a motion to dismiss under Rule 33 is in the
nature of a demurrer to evidence on the ground of insufficiency of evidence
and is presented only after the plaintiff has rested his case.56 [Emphasis
supplied]
III.
We shall first discuss the question of whether or not a demurrer to evidence
may be granted based on the evidence presented by the opposing parties.
An examination of the Sandiganbayans Resolution shows that dismissal of
the case on demurrer to evidence was principally anchored on the Republics

failure to show its right to relief because of the existence of a prior judgment
which consequently barred the relitigation of the same issue. In other words,
the Sandiganbayan did
not dismiss the case on the insufficiency of the Republics evidence nor on
the strength of respondents evidence. Rather, it based its dismissal on the
existence of the Ysmael case which, according to it, would render the case
barred by res judicata.
Prescinding from this procedural miscue, was the Sandiganbayan correct in
applying res judicata to the case at bar? To determine whether or not res
judicata indeed applies in the instant case, a review of Ysmael is proper.
In brief, Felipe Ysmael, Jr. & Co., Inc. was a grantee of a timber license
agreement, TLA No. 87. Sometime in August 1983, the Bureau of Forest
Development cancelled TLA No. 87 despite the companys letter for the
reconsideration of the revocation. Barely one year thereafter, one-half (or
26,000 hectares) of the area formerly covered by TLA No. 87 was re-awarded
to Twin Peaks under TLA No. 356.
In 1986, Felipe Ysmael, Jr. & Co., Inc. sent separate letters to the Office of the
President and the Ministry of Natural Resources primarily seeking the
reinstatement of TLA No. 87 and the revocation of TLA No. 356. Both offices
denied the relief prayed for. Consequently, Felipe Ysmael, Jr. & Co., Inc. filed
a petition for review before this Court.
The Court, through the late Justice Irene Cortes, held that Ysmaels letters to
the Office of the President and to the Ministry of Natural Resources in 1986
sought the reconsideration of a memorandum order by the Bureau of Forest
Development canceling their timber license agreement in 1983 and the
revocation of TLA No. 356 subsequently issued by the Bureau in 1984.
Ysmael did not attack the administrative actions until after 1986. Since the
decision of the Bureau has become final, it has the force and effect of a final
judgment within the purview of the doctrine of res judicata. These decisions
and orders, therefore, are conclusive upon the rights of the affected parties
as though the same had been rendered by a court of general jurisdiction. The
Court also denied the petition of Ysmael because it failed to file the special
civil action for certiorari under Rule 65 within a reasonable time, as well as in
due regard for public policy considerations and the principle of noninterference by the courts in matters which are addressed to the sound
discretion of government agencies entrusted with the regulation of activities
coming under the special technical knowledge and training of such agencies.
In Sarabia and Leido v. Secretary of Agriculture and Natural Resources, et
al.,57 the Court discussed the underlying principle for res judicata, to wit:

The fundamental principle upon which the doctrine of res judicata rests is
that parties ought not to be permitted to litigate the same issue more than
once; that, when a right or fact has been judicially tried and determined by a
court of competent jurisdiction, or an opportunity for such trial has been
given, the judgment of the court, so long as it remains unreversed, should be
conclusive upon the parties and those in privity with them in law or estate.
For res judicata to serve as an absolute bar to a subsequent action, the
following requisites must concur: (1) the former judgment or order must be
final; (2) the judgment or order must be on the merits; (3) it must have been
rendered by a court having jurisdiction over the subject matter and parties;
and (4) there must be between the first and second actions, identity of
parties, of subject matter, and of causes of action.58 When there is only
identity of issues with no identity of causes of action, there exists res
judicata in the concept of conclusiveness of judgment.59
In Ysmael, the case was between Felipe Ysmael Jr. & Co., Inc. and the Deputy
Executive Secretary, the Secretary of Environment and Natural Resources,
the Director of the Bureau of Forest Development and Twin Peaks
Development and Realty Corporation. The present case, on the other hand,
was initiated by the Republic of
the Philippines represented by the Office of the Solicitor General. No amount
of imagination could let us believe that there was an identity of parties
between this case and the one formerly filed by Felipe Ysmael Jr. & Co., Inc.
The Sandiganbayan held that despite the difference of parties, res judicata
nevertheless applies on the basis of the supposed sufficiency of the
"substantial identity" between the Republic of the Philippines and Felipe
Ysmael, Jr. Co., Inc. We disagree. The Court in a number of cases considered
the substantial identity of parties in the application of res judicata in
instances where there is privity between the two parties, as between their
successors in interest by title60 or where an additional party was simply
included in the subsequent case61 or where one of the parties to a previous
case was not impleaded in the succeeding case.62
The Court finds no basis to declare the Republic as having substantial
interest as that of Felipe Ysmael, Jr. & Co., Inc. In the first place, the
Republics cause of action lies in the alleged abuse of
power on respondents part in violation of R.A. No. 301963 and breach of
public trust, which in turn warrants its claim for restitution and damages.
Ysmael, on the other hand, sought the revocation of TLA No. 356 and the
reinstatement of its own timber license agreement. Indeed, there is no
identity of parties and no identity of causes of action between the two

cases.
IV.
What now is the course of action to take since we cannot affirm the
Sandiganbayans grant of the demurrer to evidence? Rule 33, Sec. 1 reads:
Sec. 1. Effect of judgment on demurrer to evidence. After the plaintiff has
completed the presentation of his evidence, the defendant may move for
dismissal on the ground that upon the facts and the law the plaintiff has
shown no right to relief. If his motion is denied, he shall have the right to
present evidence. If the motion is granted but on appeal the order of
dismissal is reversed he shall have be deemed to have waived the right to
present evidence.
The general rule is that upon the dismissal of the demurrer in the appellate
court, the defendant loses the right to present his evidence and the
appellate court shall then proceed to render judgment on the
merits on the basis of plaintiffs evidence. As the Court explained in
Generoso Villanueva Transit Co., Inc. v. Javellana:64
The rationale behind the rule and doctrine is simple and logical. The
defendant is permitted, without waiving his right to offer evidence in the
event that his motion is not granted, to move for a dismissal (i.e., demur to
the plaintiffs evidence) on the ground that upon the facts as thus
established and the applicable law, the plaintiff has shown no right to relief. If
the trial court denies the dismissal motion, i.e., finds that plaintiffs evidence
is sufficient for an award of judgment in the absence of contrary evidence,
the case still remains before the trial court which should then proceed to
hear and receive the defendants evidence so that all the facts and evidence
of the contending parties may be properly placed before it for adjudication as
well as before the appellate courts, in case of appeal. Nothing is lost. The
doctrine is but in line with the established procedural precepts in the conduct
of trials that the trial court liberally receive all proffered evidence at the trial
to enable it to render its decision with all possibly relevant proofs in the
record, thus assuring that the appellate courts upon appeal have all the
material before them necessary to make a correct judgment, and avoiding
the need of remanding the case for retrial or reception of improperly
excluded evidence, with the possibility thereafter of still another appeal, with
all the concomitant delays. The rule, however, imposes the condition by the
same token that if his demurrer is granted by the trial court, and the order of
dismissal is reversed on appeal, the movant loses his right to present
evidence in his behalf and he shall have been deemed to have elected to
stand on the insufficiency of plaintiffs case and evidence. In such event, the

appellate court which reverses the order of dismissal shall proceed to render
judgment on the merits on the basis of plaintiffs evidence.65
It thus becomes the Court's duty to rule on the merits of the complaint, duly
taking into account the evidence presented by the Republic, and without
need to consider whatever evidence the Tuveras have, they having waived
their right to present evidence in their behalf.
V.
Executive Order No. 14-A66 establishes that the degree of proof required in
cases such as this instant case is preponderance of evidence. Section 3
thereof reads:
SEC. 3. The civil suits to recover unlawfully acquired property under Republic
Act No. 1379 or for restitution, reparation of damages, or indemnification for
consequential and other damages or any other civil actions under the Civil
Code or other existing laws filed with the Sandiganbayan against Ferdinand
E. Marcos, Imelda R. Marcos, members of their immediate family, close
relatives, subordinates, close and/or business associates, dummies, agents
and nominees, may proceed independently of any criminal proceedings and
may be proved by a preponderance of evidence. [Emphasis supplied.]
Thus, the Court recently held in Yuchengco v. Sandiganbayan,67 that in
establishing the quantum of evidence required for civil cases involving the
Marcos wealth held by their immediate family, close relatives, subordinates,
close and/or business associates, dummies,
agents and nominees filed before the Sandiganbayan, that "the
Sandiganbayan, x x x was not to look for proof beyond reasonable doubt, but
to determine, based on the evidence presented, in light of common human
experience, which of the theories proffered by the parties is more worthy of
credence."
In order that restitution may be proper in this case, it must be first
established that the grant of the TLA to Twin Peaks was illegal. With the
illegality of the grant established as fact, finding Victor Tuvera, the major
stockholder of Twin Peaks, liable in this case should be the ineluctable
course. In order that Juan Tuvera may be held answerable as well, his own
participation in the illegal grant should also be substantiated.
Regarding the first line of inquiry, the Complaint adverted to several
provisions of law which ostensibly were violated by the grant of the TLA in
favor of Twin Peaks. These include R.A. No. 3019, otherwise known as the
Anti-Graft and Corrupt Practices Act, and Articles 19, 20 and 21 of the Civil
Code.

Still, the most organic laws that determine the validity or invalidity of the TLA
are those that governed the issuance of timber license agreements in 1984.
In that regard, the Republic argues that the absence of a bidding process is
patent proof of the irregularity of the issuance of the TLA in favor of Twin
Peaks.
A timber license agreement authorizes a person to utilize forest resources
within any forest land with the right of possession and exclusion of
others.68 The Forestry Reform Code prohibits any person from utilizing,
exploiting, occupying, possessing or conducting any activity within any forest
land unless he had been authorized to do so under a license agreement,
lease, license or permit.69 The Code also mandates that no timber license
agreement shall be issued unless the applicant satisfactorily proves that he
has the financial resources and technical capability not only to minimize
utilization, but also to practice forest protection, conservation and
development measures to insure the perpetuation of said forest in productive
condition.70 However, the Code is silent as to the procedure in the acquisition
of such timber license agreement. Such procedure is more particularly
defined under FAO No. 11, dated 1 September 1970, which provides for the
"revised forestry license regulations."
FAO No. 11 establishes that it is the Director of Forestry who has the power
"to grant timber licenses and permits."71 It also provides as a general policy
that timber license agreements shall be
granted through no other mode than public bidding.72 However, Section 24 of
FAO No. 11 does admit that a timber license agreement may be granted
through "negotiation," as well as through "public bidding."
26. When license may be issued.A license under this Regulations may be
issued or granted only after an application and an award either
through bidding or by negotiation has been made and the Director of
Forestry is satisfied that the issuance of such license shall not be inconsistent
with existing laws and regulations or prejudicial to public interest, and that
the necessary license fee, bond deposit and other requirements of the
Bureau of Forestry have been paid and complied with.73 [Emphasis supplied.]
However, even a person who is granted a TLA through "negotiation" is still
required to submit the same requirements and supporting papers as required
for public bidding. The pertinent provisions of FAO No. 11 state:
18. Requirements and supporting papers to be submitted.The following
requirements with accompanying supporting papers or documents shall be
submitted in addition to the requirements of Section 12:
a. With bid application:

The applicant shall support his bid application with the required application
fee duly paid and proofs of the following:
(1) Capitalization.Cash deposits and established credit line by applicant in
domestic bank certified to by the bank President or any of its authorized
officials, duly attested by depositor as his own to be used exclusively in
logging and wood processing operations if awarded the area. The bank
certificate shall be accompanied by a written consent by the applicantdepositor for the Director of Forestry or his authorized representative to
verify such cash deposit with bank authorities.
Capitalization and financial statements. A minimum capitalization
of P20.00 per cubit meter in cash and an established credit line of P150.00
per cubic meter based on the allowable annual cut are required. Financial
statements certified by the independent and reputable certified public
accountants must accompany the application as proof of the necessary
capitalization.
Additional capitalization, Real Estate. In the event that the capitalization of
the applicant is less than the minimum or less than that set by the Director
of Forestry for the area, the applicant bidder may be asked to submit an
affidavit signifying his readiness, should the area be awarded to him, to
convert within a specified time any specified unencumbered and titled real
estate into cash for use in operating and developing the area. Presentation of
real estate should show location by municipality and province, hectarage,
title number, latest land tax declaration, assessed value of land and
improvements (stating kind of improvements), and encumbrances if any.
(2) Logging machinery and equipment.Evidence of ownership or capacity
to acquire the requisite machinery or equipment shall accompany the bid
application. The capacity or ability to acquire machineries and equipments
shall be determined by the committee on award. Leased equipment or
machineries may be considered in the determination by the Committee if
expressly authorized in writing by the Director of Forestry.
(3) Technical know-how.To assure efficient operation of the area or
concession, the applicant shall submit proof of technical competence and
know-how and/or his ability to provide hired services of competent
personnel.
(4) Operation or development plan. An appropriate plan of operation and
development of the forest area applied for shall be submitted, including
phasing plans and the fund requirements therefor, consistent with selective
logging methods and the sustained yield policy of the Bureau of Forestry.

This plan must be in general agreement with the working unit plan for the
area as contained in Chapter III, Section 6(a) hereinabove.
(5) Processing plant.The bidder or applicant shall show evidence of
ownership of, or negotiation to acquire, a wood processing plant. The kind
and type of plant, such as plywood, veneer, bandmill, etc. shall be specified.
The plant should be capable of processing at least 60% of the allowable
annual cut.
(6) Forestry Department.The applicant shall submit assurance under oath
that he shall put a forestry department composed of trained or experienced
foresters to carry out forest management activities such as selective logging,
planting of denuded or logged-over areas within the concessions as specified
by the Director of Forestry and establish a forest nursery for the purpose.
(7) Statement on sustained yield operations, reforestation, and protection
under management plans. The bidder or applicant shall submit a sworn
statement of his agreement and willingness to operate the area under
sustained yield to reforest cleared areas and protect the concession or
licensed area and under the approved management plan, and to abide with
all existing forestry laws, rules and regulations and those that may hereafter
be promulgated; and of his agreement that any violation of these conditions
shall be sufficient cause for the cancellation of the licenses.
(8) Organization plan.Other important statement connected with sound
management and operation of the area, such as the submission among
others, of the organizational plan and employment of concession guards,
shall be submitted. In this connection, the applicant shall submit a sworn
statement to the effect no alien shall be employed without prior approval of
proper authorities.
(9) Unauthorized use of heave equipment.The applicant shall give his
assurance that he shall not introduce into his area additional heave
equipment and machinery without approval of the Director of Forestry.
(10) Such other inducements or considerations to the award as will serve
public interest may also be required from time to time.
xxxx
d) With applications for areas to be negotiated.All the foregoing
requirements and supporting papers required for bidding under Section 18(a)
hereinabove and of Section 20(b) hereinbelow shall also apply to all areas
that may be granted through negotiation. In no case shall an area exceeding
100,000 hectares be granted thru negotiation.74
The rationale underlying the very elaborate procedure that entails prior to
the grant of a timber license agreement is to avert the haphazard

exploitation of the State's forest resources as it provides that only the most
qualified applicants will be allowed to engage in timber activities within the
strict limitations of the grant and that cleared forest areas will have to be
renewed through reforestation. Since timber is not a readily renewable
natural resource, it is essential and appropriate that the State serve and act
as a jealous and zealous guardian of our forest lands, with the layers of
bureaucracy that encumber the grant of timber license agreements
effectively serving as a defensive wall against the thoughtless ravage of our
forest resources.
There is no doubt that no public bidding occurred in this case. Certainly,
respondents did not raise the defense in their respective answers. The
absence of such bidding was testified on by prosecution witness Arcangel.
Yet even if we consider that Twin Peaks could have acquired the TLA through
"negotiation," the prescribed requirements for "negotiation" under the law
were still not complied with.
It is evident that Twin Peaks was of the frame of mind that it could simply
walk up to President Marcos and ask for a timber license agreement without
having to comply with the elaborate application procedure under the law.
This is indicated by the letter dated 31 May 198475 signed by Twin Peaks
Vice President and Treasurer Evelyn Fontanilla, addressed directly to then
President Marcos, wherein Twin Peaks expressed that "we would like to
request a permit to export 20,000 cubic meters of logs and to cut and
process 10,000 cubic meters of the narra species in the same area." 76 A
marginal note therein signed by Marcos indicates an approval thereof.
Neither the Forestry Reform Code nor FAO No. 11 provide for the submission
of
an application directly to the Office of the President as a proper mode for the
issuance of a TLA. Without discounting the breadth and scope of the
Presidents powers as Chief Executive, the authority of the President with
respect to timber licenses is, by the express terms of the Revised Forestry
Code, limited to the amendment, modification, replacement or rescission of
any contract, concession, permit, license or any other form of privilege
granted by said Code.77
There are several factors that taint this backdoor application for a timber
license agreement by Twin Peaks. The forest area covered by the TLA was
already the subject of a pre-existing TLA in favor of Ysmael. The Articles of
Incorporation of Twin Peaks does not even stipulate that logging was either a
principal or secondary purpose of the corporation. Respondents do allege
that the Articles was amended prior to the grant in order to accommodate

logging as a corporate purpose, yet since respondents have waived their

right to present evidence by reason of their resort to demurrer, we cannot
consider such allegation as proven.
Sec. 18(a)(1) of FAO No. 11 requires that an applicant must have a minimum
capitalization of P20.00 per cubic meter in cash and an established credit
line of P150.00 per cubic meter based on the allowable annual cut. TLA No.
356 allowed Twin Peaks to operate on 26,000 hectares of forest land with an
annual allowable cut of 60,000 cubic meters of timber. With such annual
allowable cut, Twin
Peaks, therefore, must have at least P1,200,000.00 in cash as its minimum
capitalization, following FAO No. 11. An examination of Twin Peaks Articles of
Incorporation shows that its paid-up capital was only P312,500.00.78Clearly,
Twin Peaks paid-up capital is way below the minimum capitalization
requirement.
Moreover, Sec. 18(5) provides that the bidder or applicant shall show
evidence of ownership of, or negotiation to acquire, a wood processing plant.
However, although TLA No. 356 was issued to Twin Peaks in 1984, it
continued to engage the services of at least two sawmills79 as late as 1988.
Four (4) years from the issuance of the license, Twin Peaks remained
incapable of processing logs.
What could have made Twin Peaks feel emboldened to directly request
President Marcos for the grant of Timber License Agreement despite the
obvious problems relating to its capacity to engage in timber activities? The
reasonable assumption is that the official and personal proximity of Juan
Tuvera to President Marcos was a key factor, considering that he was the
father of Twin Peaks' most substantial stockholder.
The causes of action against respondents allegedly arose from Juan Tuveras
abuse of his relationship, influence and connection as Presidential Executive
Assistant of then President Marcos. Through Juan Tuveras position, the
Republic claims that Twin Peaks was able to secure a Timber License
Agreement despite its lack of qualification and the absence of a public
bidding. On account of the unlawful issuance of a timber license agreement,
the natural resources of the country were unlawfully exploited at the
expense of the Filipino people. Victor Tuvera, as son of Juan Tuvera and a
major stockholder of Twin Peaks, was included as respondent for having
substantially benefited from this breach of trust. The circumstance of kinship
alone may not be enough to disqualify Victor Tuvera from seeking a timber
license agreement. Yet the basic ethical principle of delicadeza should have

dissuaded Juan Tuvera from any official or unofficial participation or

intervention in behalf of the "request" of Twin Peaks for a timber license.
Did Juan Tuvera do the honorable thing and keep his distance from Twin
Peaks' "request"? Apparently not. Instead, he penned a Memorandum dated
18 July 1984 in his capacity as Presidential Executive Assistant, directed at
the Director of Forestry, the official who, under the law, possessed the legal
authority to decide whether to grant the timber license agreements after
deliberating on the application and its supporting documents. The
Memorandum reads in full:
Office of the President of the Philippines
Malacanang
18 July 1984
74-84
MEMORANDUM to
Director Edmundo Cortes
Bureau of Forest Development
I wish to inform you that the President has granted the award to the Twin
Peaks Realty Development Corporation, of the concession to manage,
operate and develop in accordance with existing policies and regulations half
of the timber area in the Province of Quirino covered by TLA No. 87, formerly
belonging to the Felipe Ysmael, Jr. & Company and comprising 54,920
hectares, and to export half of the requested 20,000 cubic meters of logs to
be gathered from the area.
Herewith is a copy of the letter concering (sic) this matter of Ms. Evelyn F.
Fontanilla, Vice-President and Treasurer of the Twin Peaks Realty
Development Corporation, on which the President indicated such approval in
his own hand, which I am furnishing you for your information and appropriate
action.
(signed)
JUAN C. TUVERA
Presidential Executive Assistant80
The Memorandum establishes at the very least that Tuvera knew about the
Twin Peaks "request," and of President Marcos's favorable action on such
"request." The Memorandum also indicates that Tuvera was willing to convey
those facts to the Director of Forestry, the ostensible authority in deciding
whether the Twin Peaks "request" should have been granted. If Juan Tuvera
were truly interested in preventing any misconception that his own position
had nothing to do with the favorable action on the "request" lodged by the
company controlled by his son, he would not have prepared or signed the

Memorandum at all. Certainly, there were other officials in Malacaang who

could have performed that role had the intent of the Memorandum been
merely to inform the Director of Forestry of such Presidential action.
Delicadeza is not merely a stentorian term evincing a bygone ethic. It is a
legal principle as embodied by certain provisions of the Anti-Graft and
Corrupt Practices Act. Section 3 of R.A. No. 3019 states in part:
Sec. 3. Corrupt practices of public officers.In addition to acts or omissions
of public officers already penalized by existing law, the following shall
constitute corrupt practices of any public officer and are hereby declared to
be unlawful:
(a) Persuading, inducing or influencing another public officer to perform an
act constituting a violation of rules and regulations duly promulgated by
competent authority or an offense in connection with the official duties of the
latter, or allowing himself to be persuaded, induced or influenced to commit
such violation or offense.
xxxx
(h) Directly or indirectly having financial or pecuniary interest in any
business, contract or transaction in connection with which he intervenes or
takes part in his official capacity, or in which he is prohibited by the
Constitution or by any law from having any interest.
The Memorandum signed by Juan Tuvera can be taken as proof that he
"persuaded, induced or influenced" the Director of Forestry to accommodate
a timber license agreement in favor of Twin Peaks, despite the failure to
undergo public bidding, or to comply with the requisites for the grant of such
agreement by negotiation, and in favor of a corporation that did not appear
legally capacitated to be granted such agreement. The fact that the principal
stockholder of Twin Peaks was his own son establishes his indirect pecuniary
interest in the transaction he appears to have intervened in. It may have
been possible on the part of Juan Tuvera to prove that he did not persuade,
induce or influence the Director of Forestry or any other official in behalf of
the timber license agreement of Twin Peaks, but then again, he waived his
right to present evidence to acquit himself of such suspicion. Certainly, the
circumstances presented by the evidence of the prosecution are sufficient to
shift the burden of evidence to Tuvera in establishing that he did not violate
the provisions of the Anti-Graft and Corrupt Practices Act in relation to the
Twin Peaks "request." Unfortunately, having waived his right to present
evidence, Juan Tuvera failed to disprove that he failed to act in consonance
with his obligations under the Anti-Graft and Corrupt Practices Act.

In sum, the backdoor recourse for a hugely priced favor from the government
by itself, and more in tandem with other brazen relevant damning
circumstances, indicates the impudent abuse of power and the detestable
misuse of influence that homologously made the acquisition of ill-gotten
wealth a reality. Upon the facts borne out by the evidence for the Republic
and guideposts supplied by the governing laws, the Republic has a clear right
to the reliefs it seeks.
VI.
If only the Court's outrage were quantifiable in sums of money, respondents
are due for significant pecuniary hurt. Instead, the Court is forced to explain
in the next few paragraphs why respondents could not be forced to
recompensate the Filipino people in appropriate financial terms. The fault lies
with those engaged by the government to litigate this case in behalf of the
State.
It bears to the most primitive of reasons that an action for recovery of sum of
money must prove the amount sought to be recovered. In the case at bar,
the Republic rested its case without presenting any evidence, documentary
or testimonial, to establish the amount that should be restituted to the State
by reason of the illegal acts committed by the respondents. There is the bare
allegation in the complaint that the State is entitled to P48 million by way of
actual damages, but no single proof presented as to why the State is entitled
to such amount.
Actual damages must be proven, not presumed.81 The Republic failed to
prove damages. It is not enough for the Republic to have established, as it
did, the legal travesty that led to the wrongful obtention by Twin Peaks of the
TLA. It should have established the degree of injury sustained by the State
by reason of such wrongful act.
We fail to comprehend why the Republic failed to present any proof of actual
damages. Was it the inability to obtain the necessary financial documents
that would establish the income earned by Twin Peaks during the period it
utilized the TLA, despite the presence of the discovery processes? Was it
mere indolence or sheer incompetence? Whatever the reason, the lapse is
inexcusable, and the injury ultimately conduces to the pain of the Filipino
people. If the litigation of this case is indicative of the mindset in the
prosecution of ill-gotten wealth cases, it is guaranteed to ensure that those
who stole from the people will be laughing on their way to the bank.
The claim for moral damages deserves short shrift. The claimant in this case
is the Republic of the Philippines, a juridical person. We explained in Filipinas

Broadcasting v. Ago Medical & Educational Center-Bicol Christian College of

Medicine (AMEC-BCCM):82
A juridical person is generally not entitled to moral damages because, unlike
a natural person, it cannot experience physical suffering or such sentiments
as wounded feelings, serious anxiety, mental anguish or moral shock. The
Court of Appeals cites Mambulao Lumber Co. v. PNB, et al. to justify the
award of moral damages. However, the Court's statement in Mambulao that
"a corporation may have a good reputation which, if besmirched, may also
be a ground for the award of moral damages" is an obiter dictum.
Nevertheless, AMEC's claim for moral damages falls under item 7 of Article
2219 of the Civil Code. This provision expressly authorizes the recovery of
moral damages in cases of libel, slander or any other form of defamation.
Article 2219(7) does not qualify whether the plaintiff is a natural or juridical
person. Therefore, a juridical person such as a corporation can validly
complain for libel or any other form of defamation and claim for moral
damages.83
As explained, a juridical person is not entitled to moral damages under
Article 2217 of the Civil Code. It may avail of moral damages under the
analogous cases listed in Article 2219, such as for libel, slander or any other
form of defamation. Suffice it to say that the action at bar does not involve
any of the analogous cases under Article 2219, and indeed upon an
intelligent reading of Article 2219, it is difficult to see how the Republic could
sustain any of the injuries contemplated therein. Any lawyer for the Republic
who poses a claim for moral damages in behalf of the State stands in risk of
serious ridicule.
However, there is sufficient basis for an award of temperate damages, also
sought by the Republic notwithstanding the fact that a claim for both actual
and temperate damages is internally inconsistent. Temperate or moderate
damages avail when "the court finds that some pecuniary loss has been
suffered but its amount can not from the nature of the case, be proved with
certainty."84 The textual language might betray an intent that temperate
damages do not avail when the case, by its nature, is susceptible to proof of
pecuniary loss; and certainly the Republic could have proved pecuniary loss
herein.85 Still, jurisprudence applying Article 2224 is clear that temperate
damages may be awarded even in instances where pecuniary loss could
theoretically have been proved with certainty.1awphi1.net
In a host of criminal cases, the Court has awarded temperate damages to the
heirs of the victim in cases where the amount of actual damages was not
proven due to the inadequacy of the evidence presented by the prosecution.

These cases include People v. Oliano,86 People v. Suplito,87 People v. De la

Tongga,[88] People v. Briones,89 and People v. Plazo.90 In Viron Transportation
Co., Inc. v. Delos Santos,91 a civil action for damages involving a vehicular
collision, temperate damages were awarded for the resulting damage
sustained by a cargo truck, after the plaintiff had failed to submit competent
proof of actual damages.
We cannot discount the heavy influence of common law, and its reliance on
judicial precedents, in our law on tort and damages. Notwithstanding the
language of Article 2224, a line of jurisprudence has emerged authorizing the
award of temperate damages even in cases where the amount of pecuniary
loss could have been proven with certainty, if no such adequate proof was
presented. The allowance of temperate damages when actual damages were
not adequately proven is ultimately a rule drawn from equity, the principle
affording relief to those definitely injured who are unable to prove how
definite the injury. There is no impediment to apply this doctrine to the case
at bar, which involves one of the most daunting and noble undertakings of
our young democracythe recovery of ill-gotten wealth salted away during
the Marcos years. If the doctrine can be justified to answer for the unlawful
damage to a cargo truck, it is a
compounded wrath if it cannot answer for the unlawful exploitation of our
forests, to the injury of the Filipino people. The amount of P1,000,000.00 as
temperate damages is proper.
The allowance of temperate damages also paves the way for the award of
exemplary damages. Under Article 2234 of the Civil Code, a showing that the
plaintiff is entitled to temperate damages allows for the award of exemplary
damages. Even as exemplary damages cannot be recovered as a matter of
right, the courts are empowered to decide whether or not they should be
adjudicated. Ill-gotten wealth cases are hornbook demonstrations where
damages by way of example or correction for the public good should be
awarded. Fewer causes of action deserve the stigma left by exemplary
damages, which "serve as a deterrent against or as a negative incentive to
curb socially deleterious actions."92 The obtention of the timber license
agreement by Twin Peaks through fraudulent and illegal means was
highlighted by Juan Tuveras abuse of his position as Presidential Executive
Assistant. The consequent exploitation of 26 hectares of forest land
benefiting all respondents is a grave case of unjust enrichment at the
expense of the Filipino people and of the environment which should never be
countenanced. Considering the expanse of forest land exploited by
respondents, the volume of timber that was necessarily cut by virtue of their

abuse and the estimated wealth acquired by respondents through grave

abuse of trust and public office, it is only reasonable that petitioner be
granted the amount of P1,000,000.00 as exemplary damages.
The imposition of exemplary damages is a means by which the State,
through its judicial arm, can send the clear and unequivocal signal best
expressed in the pithy but immutable phrase, "never again." It is severely
unfortunate that the Republic did not exert its best efforts in the full recovery
of the actual damages caused by the illegal grant of the Twin Peaks TLA. To
the best of our ability, through the appropriate vehicle of exemplary
damages, the Court will try to fill in that deficiency. For if there is a lesson
that should be
learned from the national trauma of the rule of Marcos, it is that kleptocracy
cannot pay. As those dark years fade into the backburner of the collective
memory, and a new generation emerges without proximate knowledge of
how bad it was then, it is useful that the Court serves a reminder here and
now.
WHEREFORE, the petition is GRANTED. The Resolution of the Sandiganbayan
dated 23 May 2001 is REVERSED. Respondents Juan C. Tuvera, Victor P.
Tuvera and Twin Peaks Development Corporation are hereby ordered to
jointly and severally pay to the Republic of the Philippines One Million
(P1,000,000.00) Pesos, as and for temperate damages, and One Million
(P1,000,000.00) Pesos, as and for exemplary damages, plus costs of suit.
SO ORDERED.

NOMINAL DAMAGES

G.R. No. 100727 March 18, 1992

COGEO-CUBAO OPERATORS AND DRIVERS ASSOCIATION, petitioner,
vs.
THE COURT OF APPEALS, LUNGSOD SILANGAN TRANSPORT
SERVICES, CORP., INC., respondents.
MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Court of

Appeals which affirmed with modification the decision of the Regional Trial
Court awarding damages in favor of respondent Lungsod Silangan Transport
Services Corp., Inc. (Lungsod Corp. for brevity).
The antecedents facts of this case are as follows:
It appears that a certificate of public convenience to operate a
jeepney service was ordered to be issued in favor of Lungsod
Silangan to ply the Cogeo-Cubao route sometime in 1983 on the
justification that public necessity and convenience will best be
served, and in the absence of existing authorized operators on
the lined apply for . . . On the other hand, defendant-Association
was registered as a non-stock, non-profit organization with the
Securities and Exchange Commission on October 30, 1985 . . .
with the main purpose of representing plaintiff-appellee for
whatever contract and/or agreement it will have regarding the
ownership of units, and the like, of the members of the
Association . . .
Perturbed by plaintiffs' Board Resolution No. 9 . . . adopting a
Bandera' System under which a member of the cooperative is
permitted to queue for passenger at the disputed pathway in
exchange for the ticket worth twenty pesos, the proceeds of
which shall be utilized for Christmas programs of the drivers and
other benefits, and on the strength of defendants' registration as
a collective body with the Securities and Exchange Commission,
defendants-appellants, led by Romeo Oliva decided to form a
human barricade on November 11, 1985 and assumed the
dispatching of passenger jeepneys . . . This development as
initiated by defendants-appellants gave rise to the suit for
damages.
Defendant-Association's Answer contained vehement denials to
the insinuation of take over and at the same time raised as a
defense the circumstance that the organization was formed not
to compete with plaintiff-cooperative. It, however, admitted that
it is not authorized to transport passengers . . . (pp. 15-16, Rollo)
On July 31, 1989, the trial court rendered a decision in favor of respondent
Lungsod Corp., the dispositive portion of which states:
WHEREFORE FROM THE FOREGOING CONSIDERATION, the Court
hereby renders judgment in favor of the plaintiff and against the
defendants as follows:

1. Ordering defendants to pay plaintiff the amount of P50,000.00

as actual damages;
2. Ordering the defendants to pay the plaintiffs the amount of
P10,000.00 as attorney's fees.
SO ORDERED. (P. 39, Rollo)
Not satisfied with the decision, petitioner Association appealed with the
Court of Appeals. On May 27, 1991, respondent appellate court rendered its
decision affirming the findings of the trial court except with regard to the
award of actual damages in the amount of P50,000.00 and attorney's fees in
the amount of P10,000.00. The Court of Appeals however, awarded nominal
damages to petitioner in the amount of P10,000.00.
Hence, this petition was filed with the petitioner assigning the following
errors of the appellate court:
I. THE RESPONDENT COURT ERRED IN MERELY MODIFYING THE
JUDGMENT OF THE TRIAL COURT.
II. THE RESPONDENT COURT ERRED IN HOLDING THAT THE
PETITIONER USURPED THE PROPERTY RIGHT OF THE PRIVATE
RESPONDENT.
III. AND THE RESPONDENT COURT ERRED IN DENYING THE
MOTION FOR RECONSIDERATION.
Since the assigned errors are interrelated, this Court shall discuss them
jointly. The main issue raised by the petitioner is whether or not the
petitioner usurped the property right of the respondent which shall entitle
the latter to the award of nominal damages.
Petitioner contends that the association was formed not to complete with the
respondent corporation in the latter's operation as a common carrier; that
the same was organized for the common protection of drivers from abusive
traffic officers who extort money from them, and for the elimination of the
practice of respondent corporation of requiring jeepney owners to execute
deed of sale in favor of the corporation to show that the latter is the owner of
the jeeps under its certificate of public convenience. Petitioner also argues
that in organizing the association, the members thereof are merely
exercising their freedom or right to redress their grievances.
We find the petition devoid of merit.
Under the Public Service Law, a certificate of public convenience is an
authorization issued by the Public Service Commission for the operation of
public services for which no franchise is required by law. In the instant case,
a certificate of public convenience was issued to respondent corporation on

January 24, 1983 to operate a public utility jeepney service on the CogeoCubao route. As found by the trial court, the certificate was issued pursuant
to a decision passed by the Board of Transportation in BOT Case No. 82-565.
A certification of public convenience is included in the term "property" in the
broad sense of the term. Under the Public Service Law, a certificate of public
convenience can be sold by the holder thereof because it has considerable
material value and is considered as valuable asset (Raymundo v. Luneta
Motor Co., et al., 58 Phil. 889). Although there is no doubt that it is private
property, it is affected with a public interest and must be submitted to the
control of the government for the common good (Pangasinan Transportation
Co. v. PSC, 70 Phil 221). Hence, insofar as the interest of the State is
involved, a certificate of public convenience does not confer upon the holder
any proprietary right or interest or franchise in the route covered thereby
and in the public highways (Lugue v. Villegas, L-22545, Nov . 28, 1969, 30
SCRA 409). However, with respect to other persons and other public utilities,
a certificate of public convenience as property, which represents the right
and authority to operate its facilities for public service, cannot be taken or
interfered with without due process of law. Appropriate actions may be
maintained in courts by the holder of the certificate against those who have
not been authorized to operate in competition with the former and those who
invade the rights which the former has pursuant to the authority granted by
the Public Service Commission (A.L. Ammen Transportation Co. v. Golingco.
43 Phil. 280).
In the case at bar, the trial court found that petitioner association forcibly
took over the operation of the jeepney service in the Cogeo-Cubao route
without any authorization from the Public Service Commission and in
violation of the right of respondent corporation to operate its services in the
said route under its certificate of public convenience. These were its findings
which were affirmed by the appellate court:
The Court from the testimony of plaintiff's witnesses as well as
the documentary evidences presented is convinced that the
actions taken by defendant herein though it admit that it did not
have the authority to transport passenger did in fact assume the
role as a common carrier engaged in the transport of passengers
within that span of ten days beginning November 11, 1985 when
it unilaterally took upon itself the operation and dispatching of
jeepneys at St. Mary's St. The president of the defendant
corporation. Romeo Oliva himself in his testimony confirmed that

there was indeed a takeover of the operations at St. Mary's

St. . . . (p. 36, Rollo)
The findings of the trial court especially if affirmed by the appellate court
bear great weight and will not be disturbed on appeal before this Court.
Although there is no question that petitioner can exercise their constitutional
right to redress their grievances with respondent Lungsod Corp., the manner
by which this constitutional right is to be, exercised should not undermine
public peace and order nor should it violate the legal rights of other persons.
Article 21 of the Civil Code provides that any person who wilfully causes loss
or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage. The provision
covers a situation where a person has a legal right which was violated by
another in a manner contrary to morals, good customs or public policy. It
presupposes loss or injury, material or otherwise, which one may suffer as a
result of such violation. It is clear form the facts of this case that petitioner
formed a barricade and forcibly took over the motor units and personnel of
the respondent corporation. This paralyzed the usual activities and earnings
of the latter during the period of ten days and violated the right of
respondent Lungsod Corp. To conduct its operations thru its authorized
officers.
As to the propriety of damages in favor of respondent Lungsod Corp., the
respondent appellate court stated:
. . . it does not necessarily follow that plaintiff-appellee is entitled
to actual damages and attorney's fees. While there may have
been allegations from plaintiff-cooperative showing that it did in
fact suffer some from of injury . . . it is legally unprecise to order
the payment of P50,000.00 as actual damages for lack of
concrete proof therefor. There is, however, no denying of the act
of usurpation by defendants-appellants which constituted an
invasion of plaintiffs'-appellees' property right. For this, nominal
damages in the amount of P10,000.00 may be granted. (Article
2221, Civil Code). (p. 18, Rollo)
No compelling reason exists to justify the reversal of the ruling of the
respondent appellate court in the case at bar. Article 2222 of the Civil Code
states that the court may award nominal damages in every obligation arising
from any source enumerated in Article 1157, or in every case where any
property right has been invaded. Considering the circumstances of the case,
the respondent corporation is entitled to the award of nominal damages.

ACCORDINGLY, the petition is DENIED and the assailed decision of the

respondent appellate court dated May 27, 1991 is AFFIRMED.
SO ORDERED.

G.R. No. 84281 May 27, 1994

CITYTRUST BANKING CORPORATION, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT and EMME
HERRERO, respondents.
Agcaoili and Associates for petitioner.
David B. Agoncillo for private respondent.
Humberto B. Basco, collaborating counsel for private respondent.
VITUG, J.:
This case emanated from a complaint filed by private respondent Emme
Herrero for damages against petitioner Citytrust Banking Corporation. In her
complaint, private respondent averred that she, a businesswoman, made
regular deposits, starting September of 1979, with petitioner Citytrust
Banking Corporation at its Burgos branch in Calamba, Laguna. On 15 May
1980, she deposited with petitioner the amount of Thirty One Thousand Five
Hundred Pesos (P31,500.00), in cash, in order to amply cover six (6)
postdated checks she issued, viz:
Check No. Amount
007383
007384
007387
007387
007492
007400

P1,507.00
1,262.00
4,299.00
2,204.00
6,281.00
4,716.00

When presented for encashment upon maturity, all the checks were
dishonored due to "insufficient funds." The last check No. 007400,
however, was personally redeemed by private respondent in cash
before it could be redeposited.
Petitioner, in its answer, asserted that it was due to private respondent's
fault that her checks were dishonored. It averred that instead of stating her

correct account number, i.e., 29000823, in her deposit slip, she inaccurately
wrote 2900823.
The Regional Trial Court (Branch XXXIV) of Calamba, Laguna, on
27 February 1984, dismissed the complaint for lack of merit; thus:
WHEREFORE, judgment is hereby rendered in favor of the
defendant and against the plaintiff, DISMISSING the complaint for
lack of merit, plaintiff is hereby adjudged to pay the defendant
reasonable attorney's fee in the amount of FIVE THOUSAND
PESOS (P5,000.00) plus cost of suit.
Private respondent went to the Court of Appeals, which found the appeal
meritorious. Hence, it rendered judgment, on 15 July 1988, reversing the trial
court's decision. The appellate court ruled:
WHEREFORE, the judgment appealed from is REVERSED and a
new one entered thereby ordering defendant to pay plaintiff
nominal damages of P2,000.00, temperate and moderate
damages of P5,000.00, and attorney's fees of P4,000.00.
The counterclaim of defendant is dismissed for lack of merit, with
costs against him.
Petitioner Citytrust Banking Corporation is now before us in this petition for
review on certiorari.
Petitioner bank concedes that it is its obligation to honor checks issued by
private respondent which are sufficiently funded, but, it contends, private
respondent has also the duty to use her account in accordance with the rules
of petitioner bank to which she has contractually acceded. Among such rules,
contained in its "brochures" governing current account deposits, is the
following printed provision:
In making a deposit . . . kindly insure accuracy in filing said
deposit slip forms as we hold ourselves free of any liability for
loss due to an incorrect account number indicated in the deposit
slip although the name of the depositor is correctly written.
Exactly the same issue was addressed by the appellate court, which, after its
deliberations, made the following findings and conclusions: 1
We cannot uphold the position of defendant. For, even if it be
true that there was error on the part of the plaintiff in omitting a
"zero" in her account number, yet, it is a fact that her name,
"Emme E. Herrero", is clearly written on said deposit slip (Exh.
"B"). This is controlling in determining in whose account the
deposit is made or should be posted. This is so because it is not

likely to commit an error in one's name than merely relying on

numbers which are difficult to remember, especially a number
with eight (8) digits as the account numbers of defendant's
depositors. We view the use of numbers as simply for the
convenience of the bank but was never intended to disregard the
real name of its depositors. The bank is engaged in business
impressed with public interest, and it is its duty to protect in
return its many clients and depositors who transact business with
it. It should not be a matter of the bank alone receiving deposits,
lending out money and collecting interests. It is also its obligation
to see to it that all funds invested with it are properly accounted
for and duly posted in its ledgers.
In the case before Us, We are not persuaded that defendant bank
was not free from blame for the fiasco. In the first place, the
teller should not have accepted plaintiff's deposit without
correcting the account number on the deposit slip which,
obviously, was erroneous because, as pointed out by defendant,
it contained only seven (7) digits instead of eight (8). Second, the
complete name of plaintiff depositor appears in bold letters on
the deposit slip (Exh. "B"). There could be no mistaking in her
name, and that the deposit was made in her name, "Emma E.
Herrero." In fact, defendant's teller should not have fed her
deposit slip to the computer knowing that her account number
written thereon was wrong as it contained only seven (7) digits.
As it happened, according to defendant, plaintiff's deposit had to
be consigned to the suspense accounts pending verification.
This, indeed, could have been avoided at the first instance had
the teller of defendant bank performed her duties efficiently and
well. For then she could have readily detected that the account
number in the name of "Emma E. Herrero" was erroneous and
would be rejected by the computer. That is, or should be, part of
the training and standard operating procedure of the bank's
employees. On the other hand, the depositors are not concerned
with banking procedure. That is the responsibility of the bank and
its employees. Depositors are only concerned with the facility of
depositing their money, earning interest thereon, if any, and
withdrawing therefrom, particularly businessmen, like plaintiff,
who are supposed to be always "on-the-go". Plaintiff's account is
a "current account" which should immediately be posted. After

all, it does not earn interest. At least, the forbearance should be

commensurated with prompt, efficient and satisfactory service.
Bank clients are supposed to rely on the services extended by
the bank, including the assurance that their deposits will be duly
credited them as soon as they are made. For, any delay in
crediting their account can be embarrassing to them as in the
case of plaintiff.
We agree with plaintiff that
. . . even in computerized systems of accounts, ways
and means are available whereby deposits with
erroneous account numbers are properly credited
depositor's correct account numbers. They add that
failure on the part of the defendant to do so is
negligence for which they are liable. As proof thereof
plaintiff alludes to five particular incidents where
plaintiff admittedly wrongly indicated her account
number in her deposit slips
(Exhs. "J", "L", "N", "O" and "P"), but were
nevertheless properly credited her deposit (pp. 4-5,
Decision).
We have already ruled in Mundin v. Far East Bank & Trust Co.,
AC-G.R. CV No. 03639, prom. Nov. 2, 1985, quoting the court a
quo in an almost identical set of facts, that
Having accepted a deposit in the course of its
business transactions, it behooved upon defendant
bank to see to it and without recklessness that the
depositor was accurately credited therefor. To post a
deposit in somebody else's name despite the name
of the depositor clearly written on the deposit slip is
indeed sheer negligence which could have easily
been avoided if defendant bank exercised due
diligence and circumspection in the acceptance and
posting of plaintiff's deposit.
We subscribe to the above disquisitions of the appellate court. In Simex
International (Manila), Inc. vs. Court of Appeals, 183 SCRA 360, reiterated
in Bank of Philippine Islands vs. Intermediate Appellate Court, 206 SCRA 408,
we similarly said, in cautioning depository banks on their fiduciary
responsibility, that

In every case, the depositor expects the bank to treat his

account with utmost fidelity, whether such account consists only
of a few hundred pesos or of millions. The bank must record
every single transaction accurately, down to the last centavo,
and as promptly as possible. This has to be done if the account is
to reflect at any given time the amount of money the depositor
can dispose of as he sees fit, confident that the bank will deliver
it as and to whomever he directs. A blunder on the part of the
bank, such as the dishonor of a check without good reason, can
cause the depositor not a little embarrassment if not also
financial loss and perhaps even civil and criminal litigation.
The point is that as a business affected with public interest and
because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with meticulous
care, always having in mind the fiduciary nature of their
relationship.
We agree with petitioner, however, that it is wrong to award, along with
nominal damages, temperate or moderate damages. The two awards are
incompatible and cannot be granted concurrently. Nominal damages are
given in order that a right of the plaintiff, which has been violated or invaded
by the defendant, may be vindicated or recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by him (Art. 2221, New Civil
Code; Manila Banking Corp. vs. Intermediate Appellate Court, 131 SCRA 271).
Temperate or moderate damages, which are more than nominal but less than
compensatory damages, on the other hand, may be recovered when the
court finds that some pecuniary loss has been suffered but its amount
cannot, from the nature of the case, be proved with reasonable certainty
(Art. 2224, New Civil Code).
In the instant case, we also find need for vindicating the wrong done on
private respondent, and we accordingly agree with the Court of Appeals in
granting to her nominal damages but not in similarly awarding temperate or
moderate damages.
WHEREFORE, the appealed decision is MODIFIED by deleting the award of
temperate or moderate damages. In all other respects, the appellate court's
decision is AFFIRMED. No costs in this instance.
SO ORDERED.

TEMPERATE DAMAGES

G.R. No. 159352

April 14 ,2004

PREMIERE DEVELOPMENT BANK, petitioner,

vs.
COURT OF APPEALS, PANACOR MARKETING CORPORATION and
ARIZONA TRANSPORT CORPORATION, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the 1997 Rules on Civil
Procedure seeking the annulment of the Decision dated June 18, 2003 of the
Court of Appeals1 which affirmed the Decision of the Regional Trial Court2 in
Civil Case No. 65577.
The undisputed facts show that on or about October 1994, Panacor
Marketing Corporation (Panacor for brevity), a newly formed corporation,
acquired an exclusive distributorship of products manufactured by Colgate
Palmolive Philippines, Inc. (Colgate for short). To meet the capital
requirements of the exclusive distributorship, which required an initial
inventory level of P7.5 million, Panacor applied for a loan of P4.1 million with
Premiere Development Bank. After an extensive study of Panacors
creditworthiness, Premiere Bank rejected the loan application and suggested
that its affiliate company, Arizona Transport Corporation (Arizona for
short),3 should instead apply for the loan on condition that the proceeds
thereof shall be made available to Panacor. Eventually, Panacor was granted
a P4.1 million credit line as evidenced by a Credit Line Agreement. 4 As
suggested, Arizona, which was an existing loan client, applied for and was
granted a loan of P6.1 million, P3.4 million of which would be used to pay-off
its existing loan accounts and the remaining P2.7 million as credit line of
Panacor. As security for the P6.1 million loan, Arizona, represented by its
Chief Executive Officer Pedro Panaligan and spouses Pedro and Marietta
Panaligan in their personal capacities, executed a Real Estate Mortgage
against a parcel of land covered by TCT No. T-3475 as per Entry No. 49507
dated October 2, 1995.5
Since the P2.7 million released by Premiere Bank fell short of the P4.1 million
credit line which was previously approved, Panacor negotiated for a take-out
loan with Iba Finance Corporation (hereinafter referred to as Iba-Finance) in
the sum of P10 million, P7.5 million of which will be released outright in order
to take-out the loan from Premiere Bank and the balance of P2.5 million (to

complete the needed capital of P4.1 million with Colgate) to be released after
the cancellation by Premiere of the collateral mortgage on the property
covered by TCT No. T-3475. Pursuant to the said take-out agreement, IbaFinance was authorized to pay Premiere Bank the prior existing loan
obligations of Arizona in an amount not to exceed P6 million.
On October 5, 1995, Iba-Finance sent a letter to Ms. Arlene R. Martillano,
officer-in-charge of Premiere Banks San Juan Branch, informing her of the
approved loan in favor of Panacor and Arizona, and requesting for the release
of TCT No. T-3475. Martillano, after reading the letter, affixed her signature of
conformity thereto and sent the original copy to Premiere Banks legal office.
The full text of the letter reads:6
Please be informed that we have approved the loan application of
ARIZONA TRANSPORT CORP. and PANACOR MARKETING CORPORATION.
Both represented by MR. PEDRO P. PANALIGAN (hereinafter the
BORROWERS) in the principal amount of PESOS: SEVEN MILLION FIVE
HUNDRED THOUSAND ONLY (P7,500,000.00) Philippine Currency. The
loan shall be secured by a Real Estate Mortgage over a parcel of land
located at #777 Nueve de Pebrero St. Bo. Mauway, Mandaluyong City,
Metro Manila covered by TCT No. 3475 and registered under the name
of Arizona Haulers, Inc. which is presently mortgaged with your bank.
The borrowers have authorized IBA FINANCE CORP. to pay Premiere
Bank from the proceeds of their loan. The disbursement of the loan,
however is subject to the annotation of our mortgage lien on the said
property and final verification that said title is free from any other lien
or encumbrance other than that of your company and IBA Finance
Corporation.
In order to register the mortgage, please entrust to us the owners
duplicate copy of TCT No. 3475, current tax declaration, realty tax
receipts for the current year and other documents necessary to affect
annotation thereof.
Upon registration of our mortgage, we undertake to remit directly to
you or your authorized representative the amount equivalent to the
Borrowers outstanding indebtedness to Premiere Bank as duly
certified by your goodselves provided such an amount shall not exceed
PESOS: SIX MILLION ONLY (P6,000,000.00) and any amount in excess of
the aforestated shall be for the account of the borrowers. It is
understood that upon receipt of payment, you will release to us the
corresponding cancellation of your mortgage within five (5) banking
days therefrom.

If the foregoing terms and conditions are acceptable to you, please

affix your signature provided below and furnish us a copy of the
Statement of Account of said borrowers.
On October 12, 1995, Premiere Bank sent a letter-reply7 to Iba-Finance,
informing the latter of its refusal to turn over the requested documents on
the ground that Arizona had existing unpaid loan obligations and that it was
the banks policy to require full payment of all outstanding loan obligations
prior to the release of mortgage documents. Thereafter, Premiere Bank
issued to Iba-Finance a Final Statement of Account8 showing Arizonas total
loan indebtedness. On October 19, 1995, Panacor and Arizona executed in
favor of Iba-Finance a promissory note in the amount of 7.5 million.
Thereafter, Iba-Finance paid to Premiere Bank the amount of P6,235,754.79
representing the full outstanding loan account of Arizona. Despite such
payment, Premiere Bank still refused to release the requested mortgage
documents specifically, the owners duplicate copy of TCT No. T-3475.9
On November 2, 1995, Panacor requested Iba-Finance for the immediate
approval and release of the remaining P2.5 million loan to meet the required
monthly purchases from Colgate. Iba-Finance explained however, that the
processing of the P2.5 million loan application was conditioned, among
others, on the submission of the owners duplicate copy of TCT No. 3475 and
the cancellation by Premiere Bank of Arizonas mortgage. Occasioned by
Premiere Banks adamant refusal to release the mortgage cancellation
document, Panacor failed to generate the required capital to meet its
distribution and sales targets. On December 7, 1995, Colgate informed
Panacor of its decision to terminate their distribution agreement.
On March 13, 1996, Panacor and Arizona filed a complaint for specific
performance and damages against Premiere Bank before the Regional Trial
Court of Pasig City, docketed as Civil Case No. 65577.
On June 11, 1996, Iba-Finance filed a complaint-in-intervention praying that
judgment be rendered ordering Premiere Bank to pay damages in its favor.
On May 26, 1998, the trial court rendered a decision in favor of Panacor and
Iba-Finance, the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff
Panacor Marketing Corporation and against the defendant Premiere
Bank, ordering the latter to pay the former the following sums, namely:
1) P4,520,000.00 in addition to legal interest from the time of
filing of the complaint until full payment;
2) P1,000,000.00 as and for exemplary damages;
3) P100,000.00 as and for reasonable attorneys fees; and

4) Costs of suit.
Similarly, judgment is hereby rendered in favor of plaintiff-inintervention IBA-Finance Corporation as against defendant Premiere
bank, as follows, namely:
1) Ordering defendant Premiere Bank to release to plaintiffintervenor IBA-Finance Corporation the owners duplicate copy of
Transfer Certificate of Title No. 3475 registered in the name of
Arizona Haulers, Inc. including the deed of cancellation of the
mortgage constituted thereon;
2) Ordering the defendant Premiere Bank to pay to Intervenor
IBA-Finance, the following sums, to wit:
3) P1,000,000.00 as and by way of exemplary damages; and
4) P100,000.00 as and for reasonable attorneys fees; and
5) Costs of suit.
For lack of sufficient legal and factual basis, the counterclaim of
defendant Premiere Bank is DISMISSED.
SO ORDERED.
Premiere Bank appealed to the Court of Appeals contending that the trial
court erred in finding, inter alia, that it had maliciously downgraded the
credit-line of Panacor from P4.1 million to P2.7 million.
In the meantime, a compromise agreement was entered into between IbaFinance and Premiere Bank whereby the latter agreed to return without
interest the amount of P6,235,754.79 which Iba-Finance earlier remitted to
Premiere Bank to pay off the unpaid loans of Arizona. On March 11, 1999, the
compromise agreement was approved.
On June 18, 2003, a decision was rendered by the Court of Appeals which
affirmed with modification the decision of the trial court, the dispositive
portion of which reads:
WHEREFORE, premises considered, the present appeal is hereby
DISMISSED, and the decision appealed from in Civil Case No. 65577 is
hereby AFFIRMED with MODIFICATION in that the award of exemplary
damages in favor of the appellees is hereby reduced to P500,000.00.
Needless to add, in view of the Compromise Agreement plaintiffintervenor IBA-Finance and defendant-appellant PREMIERE between
plaintiff-intervenor IBA-Finance and defendant-appellant PREMIERE as
approved by this Court per Resolution dated March 11, 1999, Our
dispositive of the present appeal is only with respect to the liability of
appellant PREMIERE to the plaintiff-appellees.

With costs against the defendant-appellant.

SO ORDERED.10
Hence the present petition for review, which raises the following issues: 11
I
WHETHER OR NOT THE DECISION OF HONORABLE COURT OF APPEALS
EXCEEDED AND WENT BEYOND THE FACTS, THE ISSUES AND EVIDENCE
PRESENTED IN THE APPEAL TAKING INTO CONSIDERATION THE ARGUMENT
OF PETITIONER BANK AND ADVENT OF THE DULY APPROVED COMPROMISE
AGREEMENT BETWEEN THE PETITIONER BANK AND IBA FINANCE
CORPORATION.
II
WHETHER OR NOT THE ISSUES THAT SHOULD HAVE BEEN RESOLVED BY THE
HONORABLE COURT OF APPEALS, BY REASON OF THE EXISTENCE OF THE
COMPROMISE AGREEMENT, IS LIMITED TO THE ISSUE OF ALLEGED BAD FAITH
OF PETITIONER BANK IN THE DOWNGRADING OF THE LOAN AND SHOULD
NOT INCLUDE THE RENDITION OF AN ADVERSE PRONOUNCEMENT TO AN
ALREADY FAIT ACCOMPLI- ISSUE ON THE REFUSAL OF THE BANK TO
RECOGNIZE THE TAKE-OUT OF THE LOAN AND THE RELEASE OF TCT NO.
3475.
III
WHETHER OR NOT PETITIONER ACTED IN BAD FAITH IN THE DOWNGRADING
OF THE LOAN OF RESPONDENTS TO SUPPORT AN AWARD OF ACTUAL AND
EXEMPLARY DAMAGES NOW REDUCED TO P500,000.00.
IV
WHETHER OR NOT THERE IS BASIS OR COMPETENT PIECE OF EVIDENCE
PRESENTED DURING THE TRIAL TO SUPPORT AN AWARD OF ACTUAL
DAMAGES OF P4,520,000.00.
Firstly, Premiere Bank argues that considering the compromise agreement it
entered with Iba-Finance, the Court of Appeals should have ruled only on the
issue of its alleged bad faith in downgrading Panacors credit line. It further
contends that the Court of Appeals should have refrained from making any
adverse pronouncement on the refusal of Premiere Bank to recognize the
take-out and its subsequent failure to release the cancellation of the
mortgage because they were rendered fait accompli by the compromise
agreement.
We are not persuaded.
In a letter-agreement12 dated October 5, 1995, Iba-Finance informed
Premiere Bank of its approval of Panacors loan application in the amount of

P10 million to be secured by a real estate mortgage over a parcel of land

covered by TCT No. T-3475. It was agreed that Premiere Bank shall entrust to
Iba-Finance the owners duplicate copy of TCT No. T-3475 in order to register
its mortgage, after which Iba-Finance shall pay off Arizonas outstanding
indebtedness. Accordingly, Iba-Finance remitted P6,235,754.79 to Premiere
Bank on the understanding that said amount represented the full payment of
Arizonas loan obligations. Despite performance by Iba-Finance of its end of
the bargain, Premiere Bank refused to deliver the mortgage document. As a
consequence, Iba-Finance failed to release the remaining P2.5 million loan it
earlier pledged to Panacor, which finally led to the revocation of its
distributorship agreement with Colgate.
Undeniably, the not-so-forthright conduct of Premiere Bank in its dealings
with respondent corporations caused damage to Panacor and Iba-Finance. It
is error for Premiere Bank to assume that the compromise agreement it
entered with Iba-Finance extinguished all direct and collateral incidents to
the aborted take-out such that it also cancelled its obligations to Panacor.
The unjustified refusal by Premiere Bank to release the mortgage document
prompted Iba-Finance to withhold the release of the P2.5 million earmarked
for Panacor which eventually terminated the distributorship agreement. Both
Iba-Finance and Panacor, which are two separate and distinct juridical
entities, suffered damages due to the fault of Premiere Bank. Hence, it
should be held liable to each of them.
While the compromise agreement may have resulted in the satisfaction of
Iba-Finances legal claims, Premiere Banks liability to Panacor remains. We
agree with the Court of Appeals that the "present appeal is only with respect
to the liability of appellant Premiere Bank to the plaintiffs-appellees (Panacor
and Arizona)"13 taking into account the compromise agreement.
For the foregoing reasons, we find that the Court of Appeals did not err in
discussing in the assailed decision the abortive take-out and the refusal by
Premiere Bank to release the cancellation of the mortgage document.
Secondly, Premiere Bank asserts that it acted in good faith when it
downgraded the credit line of Panacor from P4.1 million to P2.7 million. It
cites the decision of the trial court which, albeit inconsistent with its final
disposition, expressly recognized that the downgrading of the loan was not
the proximate cause of the damages suffered by respondents.
Under the Credit Line Agreement14 dated September 1995, Premiere Bank
agreed to extend a loan of P4.1 million to Arizona to be used by its affiliate,
Panacor, in its operations. Eventually, Premiere approved in favor of Arizona
a loan equivalent to P6.1 million, P3.4 million of which was allotted for the

payment of Arizonas existing loan obligations and P2.7 million as credit line
of Panacor. Since only P2.7 million was made available to Panacor, instead of
P4.1 million as previously approved, Panacor applied for a P2.5 loan from IbaFinance, which, as earlier mentioned, was not released because of Premiere
Banks refusal to issue the mortgage cancellation.
It is clear that Premiere Bank deviated from the terms of the credit line
agreement when it unilaterally and arbitrarily downgraded the credit line of
Panacor from P4.1 million to P2.7 million. Having entered into a well-defined
contractual relationship, it is imperative that the parties should honor and
adhere to their respective rights and obligations thereunder. Law and
jurisprudence dictate that obligations arising from contracts have the force of
law between the contracting parties and should be complied with in good
faith.15 The appellate court correctly observed, and we agree, that:
Appellants actuations, considering the actual knowledge of its officers
of the tight financial situation of appellee PANACOR brought about
primarily by the appellant banks considerable reduction of the credit
line portion of the loan, in relation to the "bail-out" efforts of IBA
Finance, whose payment of the outstanding loan account of appellee
ARIZONA with appellant was readily accepted by the appellant, were
truly marked by bad faith and lack of due regard to the urgency of its
compliance by immediately releasing the mortgage cancellation
document and delivery of the title to IBA Finance. That time is of the
essence in the requested release of the mortgage cancellation and
delivery of the subject title was only too well-known to appellant,
having only belatedly invoked the cross-default provision in the Real
Estate Mortgage executed in its favor by appellee ARIZONA to resist
the plain valid and just demand of IBA Finance for such compliance by
appellant bank.16
Premiere Bank cannot justify its arbitrary act of downgrading the credit line
on the alleged finding by its project analyst that the distributorship was not
financially feasible. Notwithstanding the alleged forewarning, Premiere Bank
still extended Arizona the loan of P6.1 million, albeit in contravention of the
credit line agreement. This indubitably indicates that Premiere Bank had
deliberately and voluntarily granted the said loan despite its claim that the
distributorship contract was not viable.
Neither can Premiere Bank rely on the puerile excuse that it was the banks
policy not to release the mortgage cancellation prior to the settlement of
outstanding loan obligations. Needless to say, the Final Statement of Account
dated October 17, 1995 showing in no uncertain terms Arizonas outstanding

indebtedness, which was subsequently paid by Iba-Finance, was the full

payment of Arizonas loan obligations. Equity demands that a party cannot
disown it previous declaration to the prejudice of the other party who relied
reasonably and justifiably on such declaration.
Thirdly, Premiere Bank avers that the appellate courts reliance on the credit
line agreement as the basis of bad faith on its part was inadmissible or selfserving for not being duly notarized, being unsigned in all of its left margins,
and undated. According to Premiere Bank, the irregularities in the execution
of the credit line agreement bolsters the theory that the same was the
product of manipulation orchestrated by respondent corporations through
undue influence and pressure exerted by its officers on Martillano.
Premiere Banks posture deserves scant consideration. As found by the lower
court, there are sufficient indicia that demonstrate that the alleged unjust
pressure exerted on Martillano was more imagined than real. In her
testimony, Martillano claims that she was persuaded and coaxed by Caday of
Iba-Finance and Panaligan of Panacor to sign the letter. It was she who
provided Iba-Finance with the Final Statement of Account and accepted its
payment without objection or qualification. These acts show that she was
vested by Premiere Bank with sufficient authority to enter into the said
transactions.
If a private corporation intentionally or negligently clothes its officers or
agents with apparent power to perform acts for it, the corporation will be
estopped to deny that the apparent authority is real as to innocent third
persons dealing in good faith with such officers or agents.17 As testified to by
Martillano, after she received a copy of the credit line agreement and affixed
her signature in conformity thereto, she forwarded the same to the legal
department of the Bank at its Head Office. Despite its knowledge, Premiere
Bank failed to disaffirm the contract. When the officers or agents of a
corporation exceed their powers in entering into contracts or doing other
acts, the corporation, when it has knowledge thereof, must promptly
disaffirm the contract or act and allow the other party or third persons to act
in the belief that it was authorized or has been ratified. If it acquiesces, with
knowledge of the facts, or fails to disaffirm, ratification will be implied or else
it will be estopped to deny ratification.18
Finally, Premiere Bank argues that the finding by the appellate court that it
was liable for actual damages in the amount of P4,520,000.00 is without
basis. It contends that the evidence presented by Panacor in support of its
claim for actual damages are not official receipts but self-serving
declarations.

To justify an award for actual damages, there must be competent proof of the
actual amount of loss. Credence can be given only to claims, which are duly
supported by receipts.19 The burden of proof is on the party who will be
defeated if no evidence is presented on either side. He must establish his
case by a preponderance of evidence which means that the evidence, as a
whole, adduced by one side is superior to that of the other. In other words,
damages cannot be presumed and courts, in making an award, must point
out specific facts that can afford a basis for measuring whatever
compensatory or actual damages are borne.
Under Article 2199 of the Civil Code, actual or compensatory damages are
those awarded in satisfaction of, or in recompense for, loss or injury
sustained. They proceed from a sense of natural justice and are designed to
repair the wrong that has been done, to compensate for the injury inflicted
and not to impose a penalty.
In the instant case, the actual damages were proven through the sole
testimony of Themistocles Ruguero, the vice president for administration of
Panacor. In his testimony, the witness affirmed that Panacor incurred losses,
specifically, in terms of training and seminars, leasehold acquisition,
procurement of vehicles and office equipment without, however, adducing
receipts to substantiate the same. The documentary evidence marked as
exhibit "W", which was an ordinary private writing allegedly itemizing the
capital expenditures and losses from the failed operation of Panacor, was not
testified to by any witness to ascertain the veracity of its contents. Although
the lower court fixed the sum of P4,520,000.00 as the total expenditures
incurred by Panacor, it failed to show how and in what manner the same
were substantiated by the claimant with reasonable certainty. Hence, the
claim for actual damages should be admitted with extreme caution since it is
only based on bare assertion without support from independent evidence.
Premieres failure to prove actual expenditure consequently conduces to a
failure of its claim. In determining actual damages, the court cannot rely on
mere assertions, speculations, conjectures or guesswork but must depend on
competent proof and on the best evidence obtainable regarding the actual
amount of loss.20
Even if not recoverable as compensatory damages, Panacor may still be
awarded damages in the concept of temperate or moderate damages. When
the court finds that some pecuniary loss has been suffered but the amount
cannot, from the nature of the case, be proved with certainty, temperate
damages may be recovered. Temperate damages may be allowed in cases
where from the nature of the case, definite proof of pecuniary loss cannot be

adduced, although the court is convinced that the aggrieved party suffered
some pecuniary loss.
The Code Commission, in explaining the concept of temperate damages
under Article 2224, makes the following comment:21
In some States of the American Union, temperate damages are
allowed. There are cases where from the nature of the case, definite
proof of pecuniary loss cannot be offered, although the court is
convinced that there has been such loss. For instance, injury to ones
commercial credit or to the goodwill of a business firm is often hard to
show with certainty in terms of money. Should damages be denied for
that reason? The judge should be empowered to calculate moderate
damages in such cases, rather than that the plaintiff should suffer,
without redress from the defendant's wrongful act.
It is obvious that the wrongful acts of Premiere Bank adversely affected, in
one way or another, the commercial credit22 of Panacor, greatly contributed
to, if not, decisively caused the premature stoppage of its business
operations and the consequent loss of business opportunity. Since these
losses are not susceptible to pecuniary estimation, temperate damages may
be awarded. Article 2216 of the Civil Code:
No proof of pecuniary loss is necessary in order that moral, nominal,
temperate, liquidated or exemplary damages may be adjudicated. The
assessment of such damages, except liquidated ones, is left to the discretion
of the Court, according to the circumstances of each case.
Under the circumstances, the sum of P200,000.00 as temperate damages is
reasonable.
WHEREFORE, the petition is DENIED. The Decision dated June 18, 2003 of
the Court of Appeals in CA-G.R. CV No. 60750, ordering Premiere Bank to pay
Panacor Marketing Corporation P500,000.00 as exemplary damages,
P100,000.00 as attorneys fees, and costs, is AFFIRMED, with
the MODIFICATION that the award of P4,520,000.00 as actual damages
is DELETED for lack of factual basis. In lieu thereof, Premiere Bank is ordered
to pay Panacor P200,000.00 as temperate damages.
SO ORDERED.

G.R. No. 115129 February 12, 1997

IGNACIO BARZAGA, petitioner,

vs.
COURT OF APPEALS and ANGELITO ALVIAR, respondents.
BELLOSILLO, J.:
The Fates ordained that Christmas 1990 be bleak for Ignacio Barzaga and his
family. On the nineteenth of December Ignacio's wife succumbed to a
debilitating ailment after prolonged pain and suffering. Forewarned by her
attending physicians of her impending death, she expressed her wish to be
laid to rest before Christmas day to spare her family from keeping lonely vigil
over her remains while the whole of Christendom celebrate the Nativity of
their Redeemer.
Drained to the bone from the tragedy that befell his family yet preoccupied
with overseeing the wake for his departed wife, Ignacio Barzaga set out to
arrange for her interment on the twenty-fourth of December in
obedience semper fidelis to her dying wish. But her final entreaty,
unfortunately, could not be carried out. Dire events conspired to block his
plans that forthwith gave him and his family their gloomiest Christmas ever.
This is Barzaga's story. On 21 December 1990, at about three o'clock in the
afternoon, he went to the hardware store of respondent Angelito Alviar to
inquire about the availability of certain materials to be used in the
construction of a niche for his wife. He also asked if the materials could be
delivered at once. Marina Boncales, Alviar's storekeeper, replied that she had
yet to verify if the store had pending deliveries that afternoon because if
there were then all subsequent purchases would have to be delivered the
following day. With that reply petitioner left.
At seven o'clock the following morning, 22 December, Barzaga returned to
Alviar's hardware store to follow up his purchase of construction materials.
He told the store employees that the materials he was buying would have to
be delivered at the Memorial Cemetery in Dasmarinas, Cavite, by eight
o'clock that morning since his hired workers were already at the burial site
and time was of the essence. Marina Boncales agreed to deliver the items at
the designated time, date and place. With this assurance, Barzaga purchased
the materials and paid in full the amount of P2,110.00. Thereafter he joined
his workers at the cemetery, which was only a kilometer away, to await the
delivery.
The construction materials did not arrive at eight o'clock as promised. At
nine o'clock, the delivery was still nowhere in sight. Barzaga returned to the
hardware store to inquire about the delay. Boncales assured him that

although the delivery truck was not yet around it had already left the garage
and that as soon as it arrived the materials would be brought over to the
cemetery in no time at all. That left petitioner no choice but to rejoin his
workers at the memorial park and wait for the materials.
By ten o'clock, there was still no delivery. This prompted petitioner to return
to the store to inquire about the materials. But he received the same answer
from respondent's employees who even cajoled him to go back to the burial
place as they would just follow with his construction materials.
After hours of waiting which seemed interminable to him Barzaga
became extremely upset. He decided to dismiss his laborers for the day. He
proceeded to the police station, which was just nearby, and lodged a
complaint against Alviar. He had his complaint entered in the police blotter.
When he returned again to the store he saw the delivery truck already there
but the materials he purchased were not yet ready for loading. Distressed
that Alviar's employees were not the least concerned, despite his
impassioned pleas, Barzaga decided to cancel his transaction with the store
and look for construction materials elsewhere.
In the afternoon of that day, petitioner was able to buy from another store.
But since darkness was already setting in and his workers had left, he made
up his mind to start his project the following morning, 23 December. But he
knew that the niche would not be finish in time for the scheduled burial the
following day. His laborers had to take a break on Christmas Day and they
could only resume in the morning of the twenty-sixth. The niche was
completed in the afternoon and Barzaga's wife was finally laid to rest.
However, it was two-and-a-half (2-1/2) days behind schedule.
On 21 January 1991, tormented perhaps by his inability to fulfill his wife's
dying wish, Barzaga wrote private respondent Alviar demanding recompense
for the damage he suffered. Alviar did not respond. Consequently, petitioner
sued him before the Regional Trial Court. 1
Resisting petitioner's claim, private respondent contended that legal delay
could not be validly ascribed to him because no specific time of delivery was
agreed upon between them. He pointed out that the invoices evidencing the
sale did not contain any stipulation as to the exact time of delivery and that
assuming that the materials were not delivered within the period desired by
petitioner, the delivery truck suffered a flat tire on the way to the store to
pick up the materials. Besides, his men were ready to make the delivery by
ten-thirty in the morning of 22 December but petitioner refused to accept
them. According to Alviar, it was this obstinate refusal of petitioner to accept
delivery that caused the delay in the construction of the niche and the

consequent failure of the family to inter their loved one on the twenty-fourth
of December, and that, if at all, it was petitioner and no other who brought
about all his personal woes.
Upholding the proposition that respondent incurred in delay in the delivery of
the construction materials resulting in undue prejudice to petitioner, the trial
court ordered respondent Alviar to pay petitioner (a) P2,110.00 as refund for
the purchase price of the materials with interest per annum computed at the
legal rate from the date of the filing of the complaint, (b) P5,000.00 as
temperate damages, (c) P20,000.00 as moral damages, (d) P5,000.00 as
litigation expenses, and (e) P5,000.00 as attorney's fees.
On appeal, respondent Court of Appeals reversed the lower court and ruled
that there was no contractual commitment as to the exact time of delivery
since this was not indicated in the invoice receipts covering the sale. 2
The arrangement to deliver the materials merely implied that delivery should
be made within a reasonable time but that the conclusion that since
petitioner's workers were already at the graveyard the delivery had to be
made at that precise moment, is non-sequitur. The Court of Appeals also
held that assuming that there was delay, petitioner still had sufficient time to
construct the tomb and hold his wife's burial as she wished.
We sustain the trial court. An assiduous scrutiny of the record convinces us
that respondent Angelito Alviar was negligent and incurred in delay in the
performance of his contractual obligation. This sufficiently entitles petitioner
Ignacio Barzaga to be indemnified for the damage he suffered as a
consequence of delay or a contractual breach. The law expressly provides
that those who in the performance of their obligation are guilty of fraud,
negligence, or delay and those who in any manner contravene the tenor
thereof, are liable for damages. 3
Contrary to the appellate court's factual determination, there was a specific
time agreed upon for the delivery of the materials to the cemetery. Petitioner
went to private respondent's store on 21 December precisely to inquire if the
materials he intended to purchase could be delivered immediately. But he
was told by the storekeeper that if there were still deliveries to be made that
afternoon his order would be delivered the following day. With this in mind
Barzaga decided to buy the construction materials the following morning
after he was assured of immediate delivery according to his time frame. The
argument that the invoices never indicated a specific delivery time must fall
in the face of the positive verbal commitment of respondent's storekeeper.
Consequently it was no longer necessary to indicate in the invoices the exact
time the purchased items were to be brought to the cemetery. In fact,

storekeeper Boncales admitted that it was her custom not to indicate the
time of delivery whenever she prepared invoices. 4
Private respondent invokes fortuitous event as his handy excuse for that "bit
of delay" in the delivery of petitioner's purchases. He maintains that Barzaga
should have allowed his delivery men a little more time to bring the
construction materials over to the cemetery since a few hours more would
not really matter and considering that his truck had a flat tire. Besides,
according to him, Barzaga still had sufficient time to build the tomb for his
wife.
This is a gratuitous assertion that borders on callousness. Private respondent
had no right to manipulate petitioner's timetable and substitute it with his
own. Petitioner had a deadline to meet. A few hours of delay was no piddling
matter to him who in his bereavement had yet to attend to other pressing
family concerns. Despite this, respondent's employees still made light of his
earnest importunings for an immediate delivery. As petitioner bitterly
declared in court " . . . they (respondent's employees) were making a fool out
of me." 5
We also find unacceptable respondent's justification that his truck had a flat
tire, for this event, if indeed it happened, was forseeable according to the
trial court, and as such should have been reasonably guarded against. The
nature of private respondent's business requires that he should be ready at
all times to meet contingencies of this kind. One piece of testimony by
respondent's witness Marina Boncales has caught our attention - that the
delivery truck arrived a little late than usual because it came from a delivery
of materials in Langcaan, Dasmarinas, Cavite. 6 Significantly, this information
was withheld by Boncales from petitioner when the latter was negotiating
with her for the purchase of construction materials. Consequently, it is not
unreasonable to suppose that had she told petitioner of this fact and that the
delivery of the materials would consequently be delayed, petitioner would
not have bought the materials from respondent's hardware store but
elsewhere which could meet his time requirement. The deliberate
suppression of this information by itself manifests a certain degree of bad
faith on the part of respondent's storekeeper.
The appellate court appears to have belittled petitioner's submission that
under the prevailing circumstances time was of the essence in the delivery of
the materials to the grave site. However, we find petitioner's assertion to be
anchored on solid ground. The niche had to be constructed at the very least
on the twenty-second of December considering that it would take about two
(2) days to finish the job if the interment was to take place on the twenty-

fourth of the month. Respondent's delay in the delivery of the construction

materials wasted so much time that construction of the tomb could start only
on the twenty-third. It could not be ready for the scheduled burial of
petitioner's wife. This undoubtedly prolonged the wake, in addition to the
fact that work at the cemetery had to be put off on Christmas day.
This case is clearly one of non-performance of a reciprocal obligation. 7 In
their contract of purchase and sale, petitioner had already complied fully
with what was required of him as purchaser, i.e., the payment of the
purchase price of P2,110.00. It was incumbent upon respondent to
immediately fulfill his obligation to deliver the goods otherwise delay would
attach.
We therefore sustain the award of moral damages. It cannot be denied that
petitioner and his family suffered wounded feelings, mental anguish and
serious anxiety while keeping watch on Christmas day over the remains of
their loved one who could not be laid to rest on the date she herself had
chosen. There is no gainsaying the inexpressible pain and sorrow Ignacio
Barzaga and his family bore at that moment caused no less by the
ineptitude, cavalier behavior and bad faith of respondent and his employees
in the performance of an obligation voluntarily entered into.
We also affirm the grant of exemplary damages. The lackadaisical and
feckless attitude of the employees of respondent over which he exercised
supervisory authority indicates gross negligence in the fulfillment of his
business obligations. Respondent Alviar and his employees should have
exercised fairness and good judgment in dealing with petitioner who was
then grieving over the loss of his wife. Instead of commiserating with him,
respondent and his employees contributed to petitioner's anguish by causing
him to bear the agony resulting from his inability to fulfill his wife's dying
wish.
We delete however the award of temperate damages. Under Art. 2224 of the
Civil Code, temperate damages are more than nominal but less than
compensatory, and may be recovered when the court finds that some
pecuniary loss has been suffered but the amount cannot, from the nature of
the case, be proved with certainty. In this case, the trial court found that
plaintiff suffered damages in the form of wages for the hired workers for 22
December 1990 and expenses incurred during the extra two (2) days of the
wake. The record however does not show that petitioner presented proof of
the actual amount of expenses he incurred which seems to be the reason the
trial court awarded to him temperate damages instead. This is an erroneous
application of the concept of temperate damages. While petitioner may have

indeed suffered pecuniary losses, these by their very nature could be

established with certainty by means of payment receipts. As such, the claim
falls unequivocally within the realm of actual or compensatory damages.
Petitioner's failure to prove actual expenditure consequently conduces to a
failure of his claim. For in determining actual damages, the court cannot rely
on mere assertions, speculations, conjectures or guesswork but must depend
on competent proof and on the best evidence obtainable regarding the
actual amount of loss. 8
We affirm the award of attorney's fees and litigation expenses. Award of
damages, attorney's fees and litigation costs is left to the sound discretion of
the court, and if such discretion be well exercised, as in this case, it will not
be disturbed on appeal. 9
WHEREFORE, the decision of the Court of Appeals is REVERSED and SET
ASIDE except insofar as it GRANTED on a motion for reconsideration the
refund by private respondent of the amount of P2,110.00 paid by petitioner
for the construction materials. Consequently, except for the award of
P5,000.00 as temperate damages which we delete, the decision of the
Regional Trial Court granting petitioner (a) P2,110.00 as refund for the value
of materials with interest computed at the legal rate per annum from the
date of the filing of the case; (b) P20,000.00 as moral damages; (c)
P10,000.00 as exemplary damages; (d) P5,000.00 as litigation expenses; and
(4) P5,000.00 as attorney's fees, is AFFIRMED. No costs.
SO ORDERED.

LIQUIDATED DAMAGES
G.R. No. 153201

January 26, 2005

JOSE MENCHAVEZ, JUAN MENCHAVEZ JR., SIMEON MENCHAVEZ,

RODOLFO MENCHAVEZ, CESAR MENCHAVEZ, REYNALDO,
MENCHAVEZ, ALMA MENCHAVEZ, ELMA MENCHAVEZ, CHARITO M.
MAGA, FE M. POTOT, THELMA M. REROMA, MYRNA M. YBAEZ, and
SARAH M. VILLABER, petitioners,
vs.
FLORENTINO TEVES JR., respondent.
DECISION

PANGANIBAN, J.:
Avoid contract is deemed legally nonexistent. It produces no legal effect. As
a general rule, courts leave parties to such a contract as they are, because
they are in pari delicto or equally at fault. Neither party is entitled to legal
protection.
The Case
1

Before us is a Petition for Review under Rule 45 of the Rules of Court,

assailing the February 28, 2001 Decision2and the April 16, 2002
Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 51144. The
challenged Decision disposed as follows:
"WHEREFORE, the assailed decision is hereby MODIFIED, as follows:
"1. Ordering [petitioners] to jointly and severally pay the [respondent]
the amount of P128,074.40 as actual damages, and P50,000.00 as
liquidated damages;
"2. Dismissing the third party complaint against the third party
defendants;
"3. Upholding the counterclaims of the third party defendants against
the [petitioners. Petitioners] are hereby required to pay [the] third
party defendants the sum of P30,000.00 as moral damages for the
clearly unfounded suit;
"4. Requiring the [petitioners] to reimburse the third party defendants
the sum of P10,000.00 in the concept of attorneys fees and
appearance fees of P300.00 per appearance;
"5. Requiring the [petitioners] to reimburse the third party defendants
the sum of P10,000.00 as exemplary damages pro bono publico and
litigation expenses including costs, in the sum of P5,000.00."4
The assailed Resolution denied petitioners Motion for Reconsideration.
The Facts
On February 28, 1986, a "Contract of Lease" was executed by Jose S.
Menchavez, Juan S. Menchavez Sr., Juan S. Menchavez Jr., Rodolfo
Menchavez, Simeon Menchavez, Reynaldo Menchavez, Cesar Menchavez,
Charito M. Maga, Fe M. Potot, Thelma R. Reroma, Myrna Ybaez, Sonia S.
Menchavez, Sarah Villaver, Alma S. Menchavez, and Elma S. Menchavez, as
lessors; and Florentino Teves Jr. as lessee.l^vvphi1.net The pertinent portions
of the Contract are herein reproduced as follows:
"WHEREAS, the LESSORS are the absolute and lawful co-owners of that area
covered by FISHPOND APPLICATION No. VI-1076 of Juan Menchavez, Sr., filed

on September 20, 1972, at Fisheries Regional Office No. VII, Cebu City
covering an area of 10.0 hectares more or less located at Tabuelan, Cebu;
xxxxxxxxx
"NOW, THEREFORE, for and in consideration of the mutual covenant and
stipulations hereinafter set forth, the LESSORS and the LESSEE have agreed
and hereby agree as follows:
"1. The TERM of this LEASE is FIVE (5) YEARS, from and after the
execution of this Contract of Lease, renewable at the OPTION of the
LESSORS;
"2. The LESSEE agrees to pay the LESSORS at the residence of JUAN
MENCHAVEZ SR., one of the LESSORS herein, the sum of FORTY
THOUSAND PESOS (P40,000.00) Philippine Currency, annually x x x;
"3. The LESSORS hereby warrant that the above-described parcel of
land is fit and good for the intended use as FISHPOND;
"4. The LESSORS hereby warrant and assure to maintain the LESSEE in
the peaceful and adequate enjoyment of the lease for the entire
duration of the contract;
"5. The LESSORS hereby further warrant that the LESSEE can and shall
enjoy the intended use of the leased premises as FISHPOND FOR THE
ENTIRE DURATION OF THE CONTRACT;
"6. The LESSORS hereby warrant that the above-premises is free from
all liens and encumbrances, and shall protect the LESSEE of his right of
lease over the said premises from any and all claims whatsoever;
"7. Any violation of the terms and conditions herein provided, more
particularly the warranties above-mentioned, the parties of this
Contract responsible thereof shall pay liquidated damages in the
amount of not less than P50,000.00 to the offended party of this
Contract; in case the LESSORS violated therefor, they bound
themselves jointly and severally liable to the LESSEE;"
x x x x x x x x x.5
On June 2, 1988, Cebu RTC Sheriffs Gumersindo Gimenez and Arturo Cabigon
demolished the fishpond dikes constructed by respondent and delivered
possession of the subject property to other parties.6 As a result, he filed a
Complaint for damages with application for preliminary attachment against
petitioners. In his Complaint, he alleged that the lessors had violated their
Contract of Lease, specifically the peaceful and adequate enjoyment of the
property for the entire duration of the Contract. He claimed P157,184.40 as
consequential damages for the demolition of the fishpond dikes, P395,390.00

as unearned income, and an amount not less than P100,000.00 for rentals
paid.7
Respondent further asserted that the lessors had withheld from him the
findings of the trial court in Civil Case No. 510-T, entitled "Eufracia Colongan
and Paulino Pamplona v. Juan Menchavez Sr. and Sevillana S. Menchavez." In
that case involving the same property, subject of the lease, the Menchavez
spouses were ordered to remove the dikes illegally constructed and to pay
damages and attorneys fees.8
Petitioners filed a Third Party Complaint against Benny and Elizabeth Allego,
Albino Laput, Adrinico Che and Charlemagne Arendain Jr., as agents of
Eufracia Colongan and Paulino Pamplona. The third-party defendants
maintained that the Complaint filed against them was unfounded. As agents
of their elderly parents, they could not be sued in their personal capacity.
Thus, they asserted their own counterclaims.9
After trial on the merits, the RTC ruled thus:
"[The court must resolve the issues one by one.] As to the question of
whether the contract of lease between Teves and the [petitioners] is valid,
we must look into the present law on the matter of fishponds. And this is
Pres. Decree No. 704 which provides in Sec. 24:
Lease of fishponds-Public lands available for fishpond development including
those earmarked for family-size fishponds and not yet leased prior to
November 9, 1972 shall be leased only to qualified persons, associations,
cooperatives or corporations, subject to the following conditions.
1. The lease shall be for a period of twenty five years (25), renewable
for another twenty five years;
2. Fifty percent of the area leased shall be developed and be
producing in commercial scale within three years and the remaining
portion shall be developed and be producing in commercial scale
within five years; both periods begin from the execution of the lease
contract;
3. All areas not fully developed within five years from the date of the
execution of the lease contract shall automatically revert to the public
domain for disposition of the bureau; provided that a lessee who failed
to develop the area or any portion thereof shall not be permitted to
reapply for said area or any portion thereof or any public land under
this decree; and/or any portion thereof or any public land under this
decree;
4. No portion of the leased area shall be subleased.

The Constitution, (Sec. 2 & 3, Art. XII of the 1987 Constitution) states:
Sec. 2 - All lands of the public domain, waters, minerals, coal, petroleum and
other mineral oils, all forces of potential energy, fisheries, forests, or timber,
wild life, flora and fauna and other natural resources are owned by the state.
Sec. 3 - Lands of the public domain are classified into agricultural, forest or
timber, mineral lands and national parks. Agricultural lands of the public
domain may be further classified by law according to the uses to which they
may be devoted. Alienable lands of the public domain shall be limited to
agricultural lands x x x.
"As a consequence of these provisions, and the declared public policy of the
State under the Regalian Doctrine, the lease contract between Florentino
Teves, Jr. and Juan Menchavez Sr. and his family is a patent nullity. Being a
patent nullity, [petitioners] could not give any rights to Florentino Teves, Jr.
under the principle: NEMO DAT QUOD NON HABET - meaning ONE CANNOT
GIVE WHAT HE DOES NOT HAVE, considering that this property in litigation
belongs to the State and not to [petitioners]. Therefore, the first issue is
resolved in the negative, as the court declares the contract of lease as
invalid and void ab-initio.
"On the issue of whether [respondent] and [petitioners] are guilty of mutual
fraud, the court rules that the [respondent] and [petitioners] are in paridelicto. As a consequence of this, the court must leave them where they are
found. x x x.
xxxxxxxxx
"x x x. Why? Because the defendants ought to have known that they cannot
lease what does not belong to them for as a matter of fact, they themselves
are still applying for a lease of the same property under litigation from the
government.
"On the other hand, Florentino Teves, being fully aware that [petitioners
were] not yet the owner[s], had assumed the risks and under the principle
of VOLENTI NON FIT INJURIA NEQUES DOLUS - He who voluntarily assumes a
risk, does not suffer damage[s] thereby. As a consequence, when Teves
leased the fishpond area from [petitioners]- who were mere holders or
possessors thereof, he took the risk that it may turn out later that his
application for lease may not be approved.
"Unfortunately however, even granting that the lease of [petitioners] and
[their] application in 1972 were to be approved, still [they] could not
sublease the same. In view therefore of these, the parties must be left in the
same situation in which the court finds them, under the principle IN PARI

DELICTO NON ORITOR ACTIO, meaning[:] Where both are at fault, no one can
found a claim.
"On the third issue of whether the third party defendants are liable for
demolishing the dikes pursuant to a writ of execution issued by the lower
court[, t]his must be resolved in the negative, that the third party defendants
are not liable.l^vvphi1.net First, because the third party defendants are mere
agents of Eufracia Colongan and Eufenio Pamplona, who are the ones who
should be made liable if at all, and considering that the demolition was
pursuant to an order of the court to restore the prevailing party in that Civil
Case 510-T, entitled: Eufracia Colongan v. Menchavez.
"After the court has ruled that the contract of lease is null and void ab-initio,
there is no right of the [respondent] to protect and therefore[,] there is no
basis for questioning the Sheriffs authority to demolish the dikes in order to
restore the prevailing party, under the principle VIDETUR NEMO QUISQUAM
ID CAPERE QUOD EI NECESSE EST ALII RESTITUERE - He will not be
considered as using force who exercise his rights and proceeds by the force
of law.
"WHEREFORE, in view of all foregoing [evidence] and considerations, this
court hereby renders judgment as follows:
"1. Dismissing the x x x complaint by the [respondent] against the
[petitioners];
"2. Dismissing the third party complaint against the third party
defendants;
"3. Upholding the counterclaims of the third party defendants against
the [petitioners. The petitioners] are hereby required to pay third party
defendants the sum of P30,000.00 as moral damages for this clearly
unfounded suit;
"4. Requiring the [petitioners] to reimburse the third party defendants
the sum of P10,000.00 in the concept of attorneys fees and
appearance fees of P300.00 per appearance;
"5. Requiring the [petitioners] to pay to the third party defendants the
sum of P10,000.00 as exemplary damages probono publico and
litigation expenses including costs, in the sum
of P5,000.00."10(Underscoring in the original)
Respondent elevated the case to the Court of Appeals, where it was docketed
as CA-GR CV No. 51144.
Ruling of the Court of Appeals

The CA disagreed with the RTCs finding that petitioners and respondent
were in pari delicto. It contended that while there was negligence on the part
of respondent for failing to verify the ownership of the subject property,
there was no evidence that he had knowledge of petitioners lack of
ownership.11 It held as follows:
"x x x. Contrary to the findings of the lower court, it was not duly proven and
established that Teves had actual knowledge of the fact that [petitioners]
merely usurped the property they leased to him. What Teves admitted was
that he did not ask for any additional document other than those shown to
him, one of which was the fishpond application. In fact, [Teves] consistently
claimed that he did not bother to ask the latter for their title to the property
because he relied on their representation that they are the lawful owners of
the fishpond they are holding for lease. (TSN, July 11, 1991, pp. 811)"121awphi1.nt
The CA ruled that respondent could recover actual damages in the amount
of P128,074.40. Citing Article 135613of the Civil Code, it further awarded
liquidated damages in the amount of P50,000, notwithstanding the nullity of
the Contract.14
Hence, this Petition.15
The Issues
Petitioners raise the following issues for our consideration:
"1. The Court of Appeals disregarded the evidence, the law and
jurisprudence when it modified the trial courts decision when it ruled
in effect that the trial court erred in holding that the respondent and
petitioners are in pari delicto, and the courts must leave them where
they are found;
"2. The Court of Appeals disregarded the evidence, the law and
jurisprudence in modifying the decision of the trial court and ruled in
effect that the Regional Trial Court erred in dismissing the respondents
Complaint."16
The Courts Ruling
The Petition has merit.
Main Issue:
Were the Parties in Pari Delicto?
The Court shall discuss the two issues simultaneously.
In Pari Delicto Rule on Void Contracts
The parties do not dispute the finding of the trial and the appellate courts
that the Contract of Lease was void.17Indeed, the RTC correctly held that it

was the State, not petitioners, that owned the fishpond. The 1987
Constitution specifically declares that all lands of the public domain,
waters, fisheries and other natural resources belong to the State.18 Included
here are fishponds, which may not be alienated but only leased.19 Possession
thereof, no matter how long, cannot ripen into ownership.20
Being merely applicants for the lease of the fishponds, petitioners had no
transferable right over them. And even if the State were to grant their
application, the law expressly disallowed sublease of the fishponds to
respondent.21Void are all contracts in which the cause, object or purpose is
contrary to law, public order or public policy.22
A void contract is equivalent to nothing; it produces no civil effect.23 It does
not create, modify or extinguish a juridical relation.24 Parties to a void
agreement cannot expect the aid of the law; the courts leave them as they
are, because they are deemed in pari delicto or "in equal fault."25 To this rule,
however, there are exceptions that permit the return of that which may have
been given under a void contract.26 One of the exceptions is found in Article
1412 of the Civil Code, which states:
"Art. 1412. If the act in which the unlawful or forbidden cause consists does
not constitute a criminal offense, the following rules shall be observed:
"(1) When the fault is on the part of both contracting parties, neither
may recover what he has given by virtue of the contract, or demand
the performance of the others undertaking;
"(2) When only one of the contracting parties is at fault, he cannot
recover what he has given by reason of the contract, or ask for the
fulfillment of what has been promised him. The other, who is not at
fault, may demand the return of what he has given without any
obligation to comply with his promise."
On this premise, respondent contends that he can recover from petitioners,
because he is an innocent party to the Contract of Lease.27 Petitioners
allegedly induced him to enter into it through serious misrepresentation. 28
Finding of In Pari Delicto:
A Question of Fact
The issue of whether respondent was at fault or whether the parties were
in pari delicto is a question of fact not normally taken up in a petition for
review on certiorari under Rule 45 of the Rules of Court.29 The present case,
however, falls under two recognized exceptions to this rule.30 This Court is
compelled to review the facts, since the CAs factual findings are (1) contrary
to those of the trial court;31 and (2) premised on an absence of evidence, a
presumption that is contradicted by the evidence on record. 32

Unquestionably, petitioners leased out a property that did not belong to

them, one that they had no authority to sublease. The trial court correctly
observed that petitioners still had a pending lease application with the State
at the time they entered into the Contract with respondent.33
Respondent, on the other hand, claims that petitioners misled him into
executing the Contract.34 He insists that he relied on their assertions
regarding their ownership of the property. His own evidence, however, rebuts
his contention that he did not know that they lacked ownership. At the very
least, he had notice of their doubtful ownership of the fishpond.
Respondent himself admitted that he was aware that the petitioners lease
application for the fishpond had not yet been approved.35 Thus, he knowingly
entered into the Contract with the risk that the application might be
disapproved. Noteworthy is the fact that the existence of a fishpond lease
application necessarily contradicts a claim of ownership. That respondent did
not know of petitioners lack of ownership is therefore incredible.
The evidence of respondent himself shows that he negotiated the lease of
the fishpond with both Juan Menchavez Sr. and Juan Menchavez Jr. in the
office of his lawyer, Atty. Jorge Esparagoza.36 His counsels presence during
the negotiations, prior to the parties meeting of minds, further debunks his
claim of lack of knowledge. Lawyers are expected to know that fishponds
belong to the State and are inalienable. It was reasonably expected of the
counsel herein to advise his client regarding the matter of ownership.
Indeed, the evidence presented by respondent demonstrates the
contradictory claims of petitioners regarding their alleged ownership of the
fishpond. On the one hand, they claimed ownership and, on the other, they
assured him that their fishpond lease application would be approved.37 This
circumstance should have been sufficient to place him on notice. It should
have compelled him to determine their right over the fishpond, including
their right to lease it.
The Contract itself stated that the area was still covered by a fishpond
application.38 Nonetheless, although petitioners declared in the Contract that
they co-owned the property, their erroneous declaration should not be used
against them. A cursory examination of the Contract suggests that it was
drafted to favor the lessee. It can readily be presumed that it was he or his
counsel who prepared it -- a matter supported by petitioners evidence. 39 The
ambiguity should therefore be resolved against him, being the one who
primarily caused it.40
The CA erred in finding that petitioners had failed to prove actual knowledge
of respondent of the ownership status of the property that had been leased

to him. On the contrary, as the party alleging the fact, it was he who had the
burden of proving through a preponderance of evidence41 -- that they
misled him regarding the ownership of the fishpond. His evidence fails to
support this contention. Instead, it reveals his fault in entering into a void
Contract. As both parties are equally at fault, neither may recover against
the other.42
Liquidated Damages Not Proper
The CA erred in awarding liquidated damages, notwithstanding its finding
that the Contract of Lease was void. Even if it was assumed that respondent
was entitled to reimbursement as provided under paragraph 1 of Article 1412
of the Civil Code, the award of liquidated damages was contrary to
established legal principles.1a\^/phi1.net
Liquidated damages are those agreed upon by the parties to a contract, to
be paid in case of a breach thereof.43Liquidated damages are identical to
penalty insofar as legal results are concerned.44 Intended to ensure the
performance of the principal obligation, such damages are accessory and
subsidiary obligations.45 In the present case, it was stipulated that the party
responsible for the violation of the terms, conditions and warranties of the
Contract would pay not less than P50,000 as liquidated damages. Since the
principal obligation was void, there was no contract that could have been
breached by petitioners; thus, the stipulation on liquidated damages was
inexistent. The nullity of the principal obligation carried with it the nullity of
the accessory obligation of liquidated damages.46
As explained earlier, the applicable law in the present factual milieu is Article
1412 of the Civil Code. This law merely allows innocent parties to recover
what they have given without any obligation to comply with their prestation.
No damages may be recovered on the basis of a void contract; being
nonexistent, the agreement produces no juridical tie between the parties
involved. Since there is no contract, the injured party may only recover
through other sources of obligations such as a law or a quasi-contract.47 A
party recovering through these other sources of obligations may not claim
liquidated damages, which is an obligation arising from a contract.
WHEREFORE, the Petition is GRANTED and the assailed Decision and
Resolution SET ASIDE. The Decision of the trial court is hereby REINSTATED.
No pronouncement as to costs.
SO ORDERED.

G.R. Nos. 82282-83 November 24, 1988

ANTONIO M. GARCIA, DYNETICS, INC., and MATRIX MANAGEMENT
CORPORATION, petitioners,
vs.
COURT OF APPEALS and SECURITY BANK AND TRUST
COMPANY, respondents.
Sycip, Salazar, Hernandez & Gatmaitan for petitioners.
Bengson, Zarraga, Narciso, Cudala, Pecson & Bengson for private
respondent.
GUTIERREZ, JR., J.:
In a summary judgment rendered by the Regional Trial Court of Makati in
Civil Case No. 10398, the complaint was dismissed for lack of merit and the
petitioners were ordered to pay the private respondent the following: (a) the
unpaid principal sum of P15 million remaining unpaid out of Chemark's
availment of the P20 million credit line, plus 18% interest per annum and
36% as penalty per annum for Promissory Note No. DLS/74/540/83 from
March 23, 1984 until fully paid; and plus 24% interest per annum and 36% as
penalty per annum for Promissory Note No. DLS/74/1358/83 from August 9,
1983 until fully paid; (b) attorney's fees equivalent to 10% of the total
amount of plaintiffs' obligations and (c) costs of suit.
The summary judgment was affirmed by the Court of Appeals. The appellate
court's decision and the resolution denying a motion for reconsideration are
now challenged by the petitioners in the instant petition.
The antecedent facts relevant to the instant petition are as follows:
On April 23, 1985 petitioners Dynetics, Inc., Matrix Management and Trading
Corporation and Antonio M. Garcia filed a complaint for declaratory relief
and/or injunction with damages against respondent Security Bank and Trust
Company (SBTC). The plaintiffs sought a judicial declaration that they were
not liable to the defendant bank under certain Indemnity Agreements they
executed in favor of Chemark Electric Motors, Inc. which had been extended
a credit accommodation of about P20,000,000.00 by the defendant bank.
They also prayed for payment of attorney's fees and costs of suit. Thus, they
alleged in their complaint:
xxx xxx xxx
a) There is no valid consideration for the execution of the said
instruments;

b) The said instruments had become invalid and ineffective at

the time the defendant finally extended the loan accommodation
to Chemark and that the parties to the said instruments did not
intend the said instruments to cover Chemark's obligations to the
defendant which were subsequently granted under separate and
independent transactions;
c) Assuming, without conceding, that there is a valid
consideration for the execution of the aforesaid instruments and
that the said instruments continued to be valid and effective
when the defendant extended a credit accommodation to
Chemark, said instruments are null and void insofar as Dynetics
is concerned as it is ultra vires, being contrary to the purposes of
Dynetics, its powers, licenses and franchise;
d) Assuming, without conceding, that the Indemnity Agreement
instruments are valid and enforceable, the obligations of the
plaintiffs thereunder have been extinguished, either by novation
or by the acts and conduct of the defendant, who, under the
circumstances, in refusing the valid and legitimate plea of
Chemark for a reasonable restructuring plan of its obligations has
practically rendered it impossible for Chemark to pay its
obligations to its creditors and to the plaintiffs in the event
plaintiffs are legally obligated to pay Chemark's obligations to
the defendant;
e) In the light of present economic conditions, in general, and the
condition of Chemark in particular, as well as the financial
condition of the plaintiffs, the demand of the defendant for the
plaintiffs to pay the Chemark obligations would constitute an
abuse of right as defined in the New Civil Code;
f) Considering the present adverse economic conditions plaguing
the entire country, the terms and conditions of the credit
accommodation and the Indemnity Agreement instruments,
assuming that the latter are valid and enforceable, have become
so manifestly difficult as to be beyond the contemplation of the
parties. Under the provisions of Human Relations of the New Civil
Code, as well as the general principles of equity, especially the
doctrine of the "rebus sic stantibus" and "the frustration of the
commercial object or frustration of enterprise" and under Article
1267 of the New Civil Code, when the service has become so

difficult as to be manifestly beyond the contemplation of the

parties, the obligor may be released therefrom;
g) In addition to the reasons stated in paragraphs e and f hereof,
Chemark, the principal obligor, is not liable for its obligations
under the credit accommodations extended to it by the
defendant because it has been prohibited from complying
therewith by a lawful authority. Under the law on guaranty and
surety, the guarantor or the surety, not being a principal debtor,
is not liable for the obligations unless the principal obligor is
likewise liable. (Article 2054 of the New Civil Code; Hospicio de
San Jose v. Fidelity and Surety Co., 52 Phil. 926; Uy Isabelo v.
Yandoc, CA-G.R. No. 8801-R, June 20, 1956). The debtor in
obligations to do shall also be released when the prestation
becomes legally impossible without the fault of the obligor.
(Article 1266 of the New Civil Code);
h) Assuming, without conceding, that the plaintiffs are liable
under the Indemnity Agreement instruments, they are not liable
for the amounts being claimed by the defendant, considering
that the said amounts include the payment of exorbitant
interests, excessive penalties and amounts imputed to be due
which are not, in fact, due. (Rollo, pp. 106-107)
On June 11, 1985 the respondent bank filed its Answer and Counterclaim
with prayer for preliminary attachment. The defendant alleged in its counter
claim:
ALLEGATIONS COMMON TO ALL DEFENDANTS
21. Sometime in August, 1981, Chemark was granted by plaintiff
a credit line of P4.0 million consisting of an import LC-TR line of
P2.0 million and an export loan line of P2.0 million.
22. Said credit line was increased in February, 1982 from P4.0
million to P20.0 million, to wit:
Export loan linefrom P2.0 million to P15.0 million
Import LC-TRfrom P2.0 million to P5.0 million
The terms and conditions of this P20.0 million credit are reflected
in the Amended Credit Line Agreement dated February 8, 1982
attached as Annex "1" hereof,
23. Chemark availed of said credit line and as evidence of said
availments, Chemark executed several promissory notes

covering the following amounts drawn against this credit line,

viz;
a) The sum of P6,350,750.00 drawn on March 23,
1983 with interest and penalty at the rate indicated
in promissory Note No. DLS/74/540/83 to mature on
June 21, 1983, a copy is attached as Annex "3";
b) The sum of P8,649,250.00 drawn on August 9,
1983 with interest and penalty at the rate indicated
in Promissory Note No. DLS/74/1358/83 to mature on
September 8, 1983, a copy of which is hereto
attached as Annex "4".
24. Chemark defaulted in paying its obligations under the
aforesaid promissory notes when these became due. Despite
repeated demands, Chemark failed and refused to pay its valid
and just obligations to the defendant which, as of December 11,
1984, amounted to P13,130,596.93 under Promissory Note No.
DLS/74/540/83 and P17,357,117.51 under PN No.
DLS/74/1358/83.
CAUSE OF ACTION AGAINST ANTONIO M. GARCIA
25. Plaintiff Garcia personally bound himself jointly and severally
with Chemark, to pay defendant upon demand and without
benefit of excussion of whatever amount or amounts Chemark
may be indebted to defendant under and by virtue of the
aforesaid credit line accommodation, including the substitutions,
renewals, extensions, increases and other amendments of the
aforesaid credit accommodations, as well as all other obligations
that Chemark may owe the defendant.
26. Accordingly, plaintiff Garcia executed two (2) Indemnity
Agreements, one dated January 20, 1982, a copy of which is
attached hereto and made integral part hereof as Annex "E" and
the other, an Indemnity Agreement dated February 8, 1982, as
Annex "B" of the Complaint;
27. Under the terms of the foregoing Indemnity Agreements
executed by plaintiff Garcia, he further bound himself solidarily
with Chemark in favor of defendant for the faithful compliance of
all the terms and conditions contained in the Amended Credit
Line Agreement (Annex "l ").
28. Defendant demanded from plaintiff Garcia the payment of
the outstanding obligation of Chemark in a letter dated October

26, 1984, a copy of which is made Annex "5" to form part hereof.
Defendant reiterated said demand on April 15, 1985.
29. Notwithstanding said demands, plaintiff Garcia failed and
refused, as he still fails and refuses to pay his obligation pursuant
to the indemnity agreements he executed.
CAUSES OF ACTION AGAINST MATRIX MANAGEMENT & TRADING
CORPORATION
30. Plaintiff Matrix bound itself jointly and severally with
Chemark in favor of the defendant for the payment, upon
demand and without benefit of excussion, of whatever amount or
amounts Chemark may be indebted to defendant under and by
virtue of the aforesaid credit line accommodation including the
substitutions, renewals, extensions, increases and other
amendments of the aforesaid credit accommodations, as well as
of the amount of such other obligations that Chemark may owe
the defendant.
31. Accordingly, Matrix through its duly authorized officers,
executed an Indemnity Agreement dated February 8, 1982, a
copy of which is attached hereto as Annex "A" and incorporated
herein by reference.
32. Under the terms of the foregoing indemnity agreement
executed by Matrix, it further bound itself solidarily with Chemark
in favor of defendant for the faithful compliance of all the terms
and conditions contained in the Credit Line Agreement (Annex
"B").<re||an1w>
33. Defendant demanded from Matrix the payment of the
outstanding obligation of Chemark in a letter dated October 26,
1984, a copy of which is made Annex "5" to form part hereof.
Defendant reiterated said demand on April 25, 1985.
34. Notwithstanding said demands, Matrix failed and refused, as
it still fails and refuses, to pay its obligation pursuant to the
indemnity agreement it executed in plaintiffs favor.
CAUSE OF ACTION AGAINST DYNETICS, INC.
35. Plaintiff Dynetics bound itself jointly and severally with
Chemark in favor of the defendant for the payment, upon
demand and without benefit of excussion, of whatever amount or
amounts Chemark may be indebted to defendant under and by
virtue of the aforesaid credit line accommodation including the
substitutions, renewals, extensions, increases and other

amendments of the aforesaid credit accommodations, as well as

of the amount of such obligations that Chemark may owe the
defendant.
36. Dynetics executed an indemnity agreement dated February
8, 1982, copy of which is attached as annex "A" of the Complaint.
37. Under the terms of the foregoing Indemnity Agreement
executed by Dynetics, it further bound itself solidarily with
Chemark in favor of defendant for the faithful compliance of all
the terms and conditions contained in the Amended Credit Line
Agreement (Annex "I")
38. Defendant demanded from Dynetics the payment of the
outstanding obligation of Chemark in a letter dated October 26,
1984, a copy of which is made Annex "5", to form part hereof.
Defendant reiterated said demand on April 25, 1985.
39. Notwithstanding said demands, Dynetics failed and refused,
as it still fails and refuses to pay its obligation pursuant to the
indemnity agreement it executed in defendant's favor. (Rollo, pp.
108-111)
On August 21, 1985, the petitioners manifested that ... they are adopting all
allegations in their Complaint as their answer to the respective counterclaim
against each of them." (Original Records, p. 229)
On September 18, 1985, the respondent bank filed a motion for summary
judgment on the ground that the answer to the counterclaim "tenders no
genuine issue as to any material fact, and consists of mere conclusions of
law and fact, and in paragraph 4 thereof, plaintiffs expressly acknowledged
their obligation to defendant and indemnity agreements dated February 8,
1982 when they admitted "under said instruments, it was basically provided
that for and in consideration of the credit accommodation in the total
amount of Twenty Million (20,000,000.00) Pesos, granted by defendant in
favor of Chemark Electric Motors, Inc., a corporation duly organized and
existing under the laws of the Philippines, plaintiffs agreed to indemnify
defendant in the event Chemark should fail to comply with its obligations."'
(Original Records, p. 248) In support of the motion, the respondent bank
attached the affidavit dated September 17, 1985 of Ms. Charis Marquez,
Senior Assistant Manager, corporate banking group, SBTC including its
annexes.
The petitioners filed an opposition to the motion for summary judgment but
to no avail. The lower court rendered a decision granting the motion for

summary judgment. The petitioners' complaint was dismissed and they were
ordered to pay the respondent bank under the indemnity agreements.
The petitioners then filed with the Court of Appeals: 1) an appeal from the
summary judgment and 2) a special civil action for certiorari and prohibition
with a prayer for preliminary injunction to annul the orders of the lower,
court granting motion for summary judgment and granting motion for
execution pending appeal. The two cases were consolidated.
The appellate court sustained the summary judgment. Both petitions were
dismissed with costs against the petitioners. A motion for reconsideration
thereto was denied.
Hence, this petition.
On March 30, 1988, we issued a temporary restraining order to enjoin the
enforcement of the questioned decision of the appellate court. In a
Resolution dated June 6, 1988, we gave due course to the petition.
The issue raised in the petition is whether or not the appellate court
committed reversible error when it sustained the trial court's summary
judgment.
The petitioners submit that the appellate court committed such an error, to
wit:
a. The rendition of Judge Mendoza's Summary Judgment was
improper because petitioners' Complaint and SBTC's Answer with
Counterclaim raise triable issues of fact. The Court of Appeals,
therefore, erred when it sustained Judge Mendoza's Summary
Judgment.
b. Assuming (the untrue) that there were no "genuine issues as
to any material fact," the awards set out in Judge Mendoza's
Summary Judgment were rendered in violation of rules of
evidence and laws and jurisprudence on interest, penalties and
attorney's fees. The appellate court, therefore, committed the
same violation when it upheld Judge Mendoza's Summary
Judgment. (Rollo, p. 325).
A Summary Judgment may be rendered by a court upon motion of a party
before trial and after submission of pleadings, admissions, documents and/or
affidavits and counter affidavits when it is clear that "except as to the
amount of damages, there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law." (Rule 34,
Rules of Court). By genuine issue is meant an issue of fact which calls for the
presentation of evidence Cadirao v. Estenzo, 132 SCRA 93) as distinguished
from an issue which is sham, fictitious, contrived, set up in bad faith, or

patently unsubstantial as not to constitute a genuine issue for trial. (Vergara,

Sr. v. Suelto, et al., G.R. No. 74766 December 21, 1987, Cadirao v.
Estenzo supra; Mercado, et al. v. Court of Appeals, G.R. No. L-44001 June 10,
1988) This can be determined by the court on the basis of the pleadings,
admissions, documents, affidavits and/or counter-affidavits submitted by the
parties to the court. (Section 3, Rule 34, Revised Rules of Court; Vergara v.
Suelto supra; Cadirao v. Estenzo supra).
The pleadings, admissions and affidavits submitted in court in this case
reveal the following facts:
In August 1981, Chemark was granted by respondent bank a credit line of
P4.0 million which was increased in February 1982 to P20.0 million, to wit;
Export loan line from P2.0 million to P15.00 million; Import LC/TR-from P2.0
million to P5.0 million. The terms and conditions of this P20 million credit are
stated in the Credit Line Agreement dated February 8, 1982 (p. 254,
Records). On this same day, February 8, 1982 the petitioners executed
separate, but with similar terms, indemnity agreements whereby they bound
themselves jointly and severally with Chemark to pay respondent bank upon
demand and without excussion of whatever amount Chemark may be
indebted to said bank by virtue of said credit line accommodation including
the substitution, renewals, extensions, increases and other amendments
thereof; and that upon default of Chemark, proper demands to pay were
made on the petitioners to comply with their obligations. The three
indemnity agreements binding each of the petitioners contain the following
provisions:
INDEMNITY AGREEMENT
KNOW ALL MEN BY THESE PRESENTS: That
DYNETICS, INC., a corportion duly organized and existing under
and by virtue of the laws of the Philippines, with offices at the FTI
Complex, Taguig, Metro Manila for and in consideration of the
credit accommodation in the total amount of TWENTY MILLION
(P20,000,000.00) PESOS granted by the SECURITY BANK &
TRUST COMPANY, a commercial banking corporation duly
organized and existing under and by virtue of the laws of the
Philippines, with offices at 6778 Ayala Avenue, Makati, Metro
Manila, hereinafter referred to as the BANK, in favor of CHEMARK
ELECTRIC MOTORS, INC., ... a corporation duly organized and
existing under and by virtue of the laws of the Philippines, with
offices at the 2nd Floor, Princess Building, Esteban Street,
Legaspi Village, Makati, Metro Manila, hereinafter referred to as

the CLIENT, with the stipulated interests and charges thereon,

evidenced by that/those certain AMENDED CREDIT LINE
AGREEMENT made and executed by and between the CLIENT and
the BANK on even date hereby bind(s) himself/themselves jointly
and severally with the CLIENT in favor of the BANK for the
payment, upon demand and without benefit of excussion, of
whatever amount or amounts the CLIENT may be indebted to the
BANK under and by virtue of aforesaid credit accommodation(s)
including the substitutions, renewals, extensions, increases,
amendments, conversions and revivals of the aforesaid credit
accommodation(s), as well as of the amount or amounts of such
other obligations that the CLIENT may owe the BANK, whether
direct or indirect, principal or secondary, as appears in the
accounts, books and records of the BANK, plus interest and
expenses arising from any agreement or agreements that may
have heretofore been made, or may hereafter be executed by
and between the parties thereto, including the substitutions,
renewals, extensions, increases, amendments, conversions and
revivals of the aforesaid credit accommodation(s), and further
bind(s) himself/themselves with the CLIENT in favor of the BANK
for the faithful compliance of all the aforesaid credit
accommodation(s), all of which are incorporated herein and
made part hereof by reference.
IN WITNESS WHEREOF, these presents are signed at Makati,
Metro Manila on this 8th day of February, 1982. ... and/or its trust
accounts funding this loan
DYNETICS, INC.
(SGD.) ANTONIO M. GARCIA (SGD.) DOMINADOR GAMEZ
Signed in the Presence of.
(SGD.) JONA C. CAJUYONG (SGD.) TERESITA A. DE GUZMAN
(Original Records, pp. 306-307)
Both Dynetics and Matrix were authorized by their respective
board of directors to execute the indemnity agreements. In the
case of Dynetics, Corporate Secretary Antonio Pastelero certified
that during a meeting of the Board of Directors held on
December 29, 1981 at its office address, it was unanimously
adopted that the corporation "... undertake to jointly and
severally guarantee the credit line of CHEMARK ELECTRIC
MOTORS, INC. in favor of the SECURITY BANK & TRUST

COMPANY, in an amount not to exceed TWENTY MILLION

(20,000,000.00) PESOS" (p. 264, Original Records). In the case of
MATRIX, Corporate Secretary Rene J. Katigbak certified that at
the meeting of the Board of Directors held on December 28,
1981, a resolution was unanimously adopted to have the
corporation "... jointly and severally guarantee the credit line of
CHEMARK ELECTRIC MOTORS, INC. in favor of the SECURITY
BANK & TRUST COMPANY, in an amount not to exceed TWENTY
MILLION (P20,000,000.00) PESOS. (Original Records, p. 262)
Chemark then availed of the P20.0 million credit line and executed two (2)
promissory notes covering the following amounts drawn against the Export
Loan Line, to wit:
a) The sum of P6,350,750.00 drawn on March 23, 1983 with
interest and penalty at the rate indicated in Promissory Note No.
DLS/74/540/83 to mature on June 21, 1983 (p. 255, Original
Records)
b) The sum of P8,649,250.00 drawn on August 9, 1983 with
interest and penalty ac the rate indicated in Promissory Note No.
DLS/74/1358/83 to mature on September 8, 1983 (p. 256,
Original Records)
These obligations were not paid by Chemark when they became due. Hence,
the respondent bank demanded from the petitioners under the indemnity
agreements the payment of the outstanding obligations of Chemark.
Undoubtedly, the obligations of the petitioners to the respondents are clearly
defined in the pleadings, admissions and the unrebutted affidavit of Ms.
Marquez who handles the Chemark account.
Nevertheless, the petitioners insist that their complaint for declaratory relief
tenders genuine issues which should be threshed out in a full-blown trial, to
wit:
xxx xxx xxx
11.1 First Defense: that the principal obligation has not yet
matured because SBTC, agreed to allow Chemark a grace period
within which to recover its liquidity and pay the debt.
11.1A This defense is pleaded in the following allegations of the
Complaint:
6. In the aftermath of the assassination of Senator Benigno S.
Aquino, Jr., on August 21, 1983, the Philippine economy was
plunged into a deep crisis. There was a massive flight of capital;

the country's balance of payments deteriorated; business and

industry practically stood still; and the foreign debts of the
country could not be serviced; banks collapsed, the exchange
rate between the Philippine Peso and US Dollar tripled and there
was practically no foreign exchange available in the country. The
resultant extremely adverse economic conditions were not
foreseen or contemplated by persons or entities who became
parties to a contract. None of the parties to a contract expected
nor did they intend that the terms and conditions they agreed
upon would operate under extreme adverse economic
conditions.
7. Because of the recent economic developments here and
abroad, the failure of one of the stockholders of Chemark to
comply with its commitments and Chemark's inability to collect
substantial receivables from its marketing representatives in the
United States, Chemark started to suffer liquidity problems. As a
consequence, it was unable to pay its creditors, among whom is
the defendant. However, Chemark had more than sufficient
assets to pay all its obligations including its obligations to the
defendant, except that its liquidity problems prevented it from
paying its creditors.
8. Chemark started negotiating with the defendant for the
restructuring of its obligations to the latter. For this purpose, it
submitted several proposed courses of action to the defendant
whereby in time all of its obligations to the defendant would be
paid.
9. In the meantime, the defendant demanded payment from the
plaintiffs of the obligations of Chemark. Although plaintiffs are
not legally liable for the payment of such obligations, they
nonetheless, proposed to the defendant that the latter allow
Chemark to recover its liquidity until such time that it shall have
recovered its ability to pay its obligations. An agreement in
principle was reached on this proposal and the defendant
committed itself to allow Chemark to recover from its liquidity
problems and to refrain from demanding payment of the loans of
Chemark from the plaintiffs. (Emphasis supplied). (Rollo, pp. 328329).
xxx xxx xxx

11.2 Second Defense: that SBTC and the petitioners did not
intend to use petitioners' Indemnity Agreements as collateral
security for Chemark's loans and that SBTC extended the loan
solely on Chemark's viability as a business enterprise.
11.2A The Complaint pleads this defense in the following
paragraphs:
5. ... when the defendant finally extended the loan to Chemark, it
did so not because of the aforesaid instruments (referring to the
Indemnity Agreements) previously executed by the (petitioners)
which, in the meantime, were no longer valid and effective
and intended by the parties as collateral security for future
Chemark loans, but because of defendant's assessment of the
viability of Chemark's business operations and interest income
expected to be generated from the loans to Chemark. (Emphasis
supplied) (Rollo, pp. 329-330)
xxx xxx xxx
11.3 Third Defense: that Dynetic's execution of the Indemnity
Agreement is contrary to its purposes and is therefore ultra vires
and unenforceable against it.
11.3A This defense is pleaded in the Complaint as follows:
13. Plaintiffs are not liable to the defendant under the Indemnity
Agreement instruments xxx for the following reasons:
xxx xxx xxx
(c) Assuming, without, conceding, that there is a valid
consideration for the execution of the aforesaid instruments and
that said instruments continued to be valid and effective when
the defendant extended a credit accommodation to
Chemark, said instruments are null and void insofar as Dynetics
is concerned as it is ultra vires, being contrary to the purpose of
Dynetics, its powers, licenses and franchise: (Emphasis supplied)
(Rollo, pp. 332-333)
We find no material questions of facts tendered by these defenses as to the
main issue on whether or not the petitioners can be held liable to the
respondent bank under their indemnity agreements.
The issue tendered in the first defense is "sham and fictitious" in the light of
the terms of the indemnity agreements. Thus, under the indemnity
agreements, the petitioners bound themselves jointly and severally with
Chemark in favor of the respondent bank for the payment, upon demand and

without benefit of excussion, of whatever amount or amounts Chemark may

be indebted to the respondent bank under and by virtue of the credit
accommodations. (Emphasis supplied) The economic conditions of the
country are immaterial to the issue on the liability of the petitioners under
their indemnity agreements.
The issue raised in the second defense, on whether or not the indemnity
agreements were intended as collaterals for future Chemark loans is likewise
sham and fictitious. Under the indemnity agreements, the petitioners bound
themselves to pay whatever amount Chemark may be indebted to the
bank "under and by virtue of aforesaid credit accommodation(s) including
the substitutions, renewals, extensions, increases, amendments, conversions
and revivals of the aforesaid credit accommodation(s) ... (Emphasis supplied)
The argument as to whether or not Dynetics' execution of the indemnity
agreement is contrary to its purposes and therefore ultra vires and
unenforceable against it does not tender a genuine issue. The record shows
that Dynetics was authorized to execute the indemnity agreements
evidenced by the Corporate Secretary's certificate (p. 38, 264 Original
Records).
This was not rebutted.
Indeed, we find no genuine issues raised in the complaint which can not be
resolved by the pleadings, admissions and the affidavit of Charis Marquez
submitted to the court. As the appellate court said:
Dynetics, Garcia and Matrix attempted to avoid liability by trying
hard to create factual issues fit for trial. The attempt is but a
hodgepodge of legal arguments and conclusions which can be
resolved without the rituals of trial. Thus, Dynetics urges that
there is need for trial to determine whether it can be compelled
to pay considering that SEC by its Order of September 27, 1984
has prohibited Chemark from paying its creditors. The issue is
strictly legal and can be decided by determining the character of
liability of Dynetics as joint and solidary debtor. Dynetics also
argues that it raised the issue of lack of consideration which
must be tried on the merits. The issue deserves scant
consideration for the parties' Indemnity Agreement specifies the
consideration to be the grant of credit accommodation to
Chemark in the sum of P20 M. Also what is posed is a legal issue
resolvable in light of the character of Dynetics as a joint and
solidary debtor. Dynetics also asseverates that it did not intend
its Indemnity Agreement as collaterals for future Chemark loans.

This is a clear pretense considering that again under its

Indemnity Agreement, Dynetics clearly bound itself to pay
whatever amount Chemark may be indebted to Security Bank
"under and by virtue of the aforesaid credit accommodation(s)
including the substitutions, renewals, extensions, increases,
amendments, conversions and revivals of aforesaid credit
accommodation(s.)" There is nothing on record to substantiate
the pretense of mistake of Dynetics. (Rollo, p. 121)
xxx xxx xxx
Then Dynetics argues that it has raised the issue of novation in
light of the new loan contracts between Security Bank and
Chemark. Again, the alleged new contracts are established facts
and need not be the subject of trial. Upon their basis, the court
can conclude whether there is novation of contract. (Rollo, P.
125)
The petitioners also assail the awards of penalty charges at 36% per annum
and interest at 18% and 24% per annum respectively on the loans. They
contend that the interests are excessive and are not sustained by the
evidence because the rate of interest stipulated in the promissory notes is
only 11 % per annum.
The lower courts based the computation of interests and penalty charges on
the affidavit of Charis Marquez, Assistant Manager of the Corporate Banking
Group of Security Bank & Trust Co. Marquez was the account officer who
handled the account of Chemark. The pertinent portions of the affidavit read
as follows:
22. As per statements of Accounts dated June l5, 1985, under the
said promissory notes (Annexes "2" and "3" hereof) covered by
the subject Indemnity Agreements (Annexes "4", "7" and "8"
hereof), the total outstanding obligation of Dynetics, Inc., Matrix
Management & Trading Corporation and Antonio M. Garcia to
Security Bank & Trust Co. was P38,189,038.27, including interest
and charges. Attached hereto as Annexes "9" and "l0" are copies
of said Statements of Accounts dated June 15, 1985;
23. In the said Statements of Accounts dated June 15, 1985, we
charged 18% and 25% per annum, respectively, because the
subject loans (Annexes "2" and "3" hereof) were intended to be
rediscounted at the Central Bank at 11% per annum. However,
when Chemark Electric Motors, Inc. failed to give us the required
letter of credit which was a requirement of the Central Bank, we

charged them 18% and 24% instead of 11% interest per annum.
These higher interest charges were based on and authorized
under our Credit Proposal, copies of which are hereto attached as
Annexes "11" to "11-B". (Original Records, p. 252)
The increased interest rates are expressly provided for in the amended credit
line agreement and in the two promissory notes executed by Chemark in
favor of Security Bank & Trust Co. We find no reversible error in the award of
interests.
The penalty of 36% per annum is provided in the promissory notes (Annexes
"3", "4" Affidavit), as follows:
If this note is not fully paid when due, the undersigned shall pay,
in addition to the stipulated interest, a penalty of 3% per month
on the total outstanding principal and interest due and unpaid. ...
(Original Records, p. 256)
The affidavit and supporting documents were attached to the respondent
bank's motion for summary judgment. The petitioners failed to oppose
Marquez' affidavit in their "Oppositions" to the motion for summary
judgment. Neither did they submit counter- affidavits, as was their right, to
oppose these amounts due from them including the increased interests and
penalty charges. Under these circumstances, the respondent bank was
entitled to summary judgment (Philippine National Bank v. Phil. Leather Co.,
Inc., et al. 105 Phil. 400; See also Mercado, et al. v. Court of
Appeals supra).<re||an1w> As earlier stated, the lower court committed
no reversible error in awarding the questioned interests. We cannot,
however, agree with the appellate court as regards the award of penalty
charges at 36% per annum.
Penalty interests are in the nature of liquidated damages (Cumagun v.
Philippine American Insurance Co., Inc., et al. G.R. No. 81453 August 15,
1988; Lambert v. Fox, 26 Phil. 588) and may be equitably reduced by the
courts if they are iniquitous or unconscionable. (See Articles 1229, 2227,
New Civil Code).
The records show that on the first loan, the principal of which is
P6,350,750.00, the penalty charges as of June 15, 1986 are already
equivalent to P6,774,378.06 (p. 265, Original Records) and that on the
second loan, the principal of which is P8,649,250.00 the penalty charges as
of June 15, 1985 are equivalent to P8,662,008.53. (p. 266, Original Records)
The P6,774,378.06 penalty charges in the first loan would have been earned
by the private respondent after only 725 days (1 year and 360 days) of delay
in the payment of the loan while the P8,662,008.53 penalty charges would

have been earned by the private respondent after only 646 days (1 year and
281 days) of delay in the payment of the loan. The figures from 1985 to 1988
would amount to several times the principal loans.
We agree with the petitioner that the penalty charges are excessive and
unconscionable. The interest charges are enough punishment for the
petitioners' failure to comply with their obligations.
Finally, the petitioners question the amount for attorney's fees equivalent to
10% of their obligation.
Again, Chemark's promissory notes provide for the award of attorney's fees
in case of default to pay the loans, to wit:
xxx xxx xxx
If this note is not fully paid when due, the undersigned shall pay,
in addition to the stipulated interest, a penalty of 3% per month
on the total outstanding principal and interest due and unpaid.
The undersigned shall also pay, as and for attorney's fee, a sum
equivalent to 20% of the total amount due under this note plus
expenses and costs of collection, in case this note is placed in
the hands of an attorney for collection. (See Annexes "2", "3",
Affidavit of Charis Marquez) (Original Records, p. 255)
The award for attorney's fees is justified and, in fact, is even lower than that
agreed upon by the parties.
WHEREFORE, the instant petition is DISMISSED. The questioned decision and
resolution of the Court of Appeals are AFFIRMED except for the award of
penalty charges which is stricken from the judgment. The Temporary
Restraining Order issued on March 30, 1988 is LIFTED. Costs against the
petitioners.
SO ORDERED.

EXEMPLARY DAMAGES

G.R. No. 94761 May 17, 1993

MAERSK LINE, petitioner,

vs.
COURT OF APPEALS AND EFREN V. CASTILLO, doing business under
the name and style of Ethegal Laboratories, respondents.
Bito, Lozada, Ortega & Castillo for petitioner.
Humberto A. Jambora for private respondent.
BIDIN, J.:
Petitioner Maersk Line is engaged in the transportation of goods by sea,
doing business in the Philippines through its general agent Compania
General de Tabacos de Filipinas.
Private respondent Efren Castillo, on the other hand, is the proprietor of
Ethegal Laboratories, a firm engaged in the manutacture of pharmaceutical
products.
On November 12, 1976, private respondent ordered from Eli Lilly. Inc. of
Puerto Rico through its (Eli Lilly, Inc.'s) agent in the Philippines, Elanco
Products, 600,000 empty gelatin capsules for the manufacture of his
pharmaceutical products. The capsules were placed in six (6) drums of
100,000 capsules each valued at US $1,668.71.
Through a Memorandum of Shipment (Exh. "B"; AC GR CV No.10340, Folder
of Exhibits, pp. 5-6), the shipper Eli Lilly, Inc. of Puerto Rico advised private
respondent as consignee that the 600,000 empty gelatin capsules in six (6)
drums of 100,000 capsules each, were already shipped on board MV "Anders
Maerskline" under Voyage No. 7703 for shipment to the Philippines via
Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the
date of arrival to be April 3, 1977.
For reasons unknown, said cargo of capsules were mishipped and diverted to
Richmond, Virginia, USA and then transported back Oakland, Califorilia. The
goods finally arrived in the Philippines on June 10, 1977 or after two (2)
months from the date specified in the memorandum. As a consequence,
private respondent as consignee refused to take delivery of the goods on
account of its failure to arrive on time.
Private respondent alleging gross negligence and undue delay in the delivery
of the goods, filed an action before the court a quo for rescission of contract
with damages against petitioner and Eli Lilly, Inc. as defendants.
Denying that it committed breach of contract, petitioner alleged in its that
answer that the subject shipment was transported in accordance with the
provisions of the covering bill of lading and that its liability under the law on

transportation of good attaches only in case of loss, destruction or

deterioration of the goods as provided for in Article 1734 of Civil Code (Rollo,
p. 16).
Defendant Eli Lilly, Inc., on the other hand, filed its answer with compulsory
and cross-claim. In its cross-claim, it alleged that the delay in the arrival of
the the subject merchandise was due solely to the gross negligence of
petitioner Maersk Line.
The issues having been joined, private respondent moved for the dismissal of
the complaint against Eli Lilly, Inc.on the ground that the evidence on record
shows that the delay in the delivery of the shipment was attributable solely
to petitioner.
Acting on private respondent's motion, the trial court dismissed the
complaint against Eli Lilly, Inc. Correspondingly, the latter withdraw its crossclaim against petitioner in a joint motion dated December 3, 1979.
After trial held between respondent and petitioner, the court a quo rendered
judgment dated January 8, 1982 in favor of respondent Castillo, the
dispositive portion of which reads:
IN VIEW OF THE FOREGOING, this Court believe (sic) and so hold
(sic) that there was a breach in the performance of their
obligation by the defendant Maersk Line consisting of their
negligence to ship the 6 drums of empty Gelatin Capsules which
under their own memorandum shipment would arrive in the
Philippines on April 3, 1977 which under Art. 1170 of the New
Civil Code, they stood liable for damages.
Considering that the only evidence presented by the defendant
Maersk line thru its agent the Compania de Tabacos de Filipinas
is the testimony of Rolando Ramirez who testified on Exhs. "1" to
"5" which this Court believe (sic) did not change the findings of
this Court in its decision rendered on September 4, 1980, this
Court hereby renders judgment in favor of the plaintiff Efren
Castillo as against the defendant Maersk Line thru its agent, the
COMPANIA GENERAL DE TABACOS DE FILIPINAS and ordering:
(a) Defendant to pay the plaintiff Efren V. Castillo the amount of
THREE HUNDRED SIXTY NINE THOUSAND PESOS, (P369,000.00)
as unrealized profit;.
(b) Defendant to pay plaintiff the sum of TWO HUNDRED
THOUSAND PESOS (P200,000.00), as moral damages;
(c) Defendant to pay plaintiff the sum of TEN THOUSAND PESOS
(P10,000.00) as exemplary damages;

(d) Defendant to pay plaintiff the sum of ELEVEN THOUSAND SIX

HUNDRED EIGHTY PESOS AND NINETY SEVEN CENTAVOS
(P11,680.97) as cost of credit line; and
(e) Defendant to pay plaintiff the sum of FIFTY THOUSAND PESOS
(P50,000.00), as attorney's fees and to pay the costs of suit.
That the above sums due to the plaintiff will bear the legal rate
of interest until they are fully paid from the time the case was
filed.
SO ORDERED. (AC-GR CV No. 10340, Rollo, p. 15).
On appeal, respondent court rendered its decision dated August 1, 1990
affirming with modifications the lower court's decision as follows:
WHEREFORE, the decision appealed from is affirmed with a
modification, and, as modified, the judgment in this case should
read as follows:
Judgment is hereby rendered ordering defendant-appellant
Maersk Line to pay plaintiff-appellee (1) compensatory damages
of P11,680.97 at 6% annual interest from filing of the complaint
until fully paid, (2) moral damages of P50,000.00, (3) exemplary
damages of P20,000,00, (3) attorney's fees, per appearance
fees, and litigation expenses of P30,000.00, (4) 30% of the total
damages awarded except item (3) above, and the costs of suit.
SO ORDERED. (Rollo, p. 50)
In its Memorandum, petitioner submits the following "issues" for resolution of
the court :
I
Whether or not the respondent Court of Appeals committed an
error when it ruled that a defendant's cross-claim against a codefendant survives or subsists even after the dismissal of the
complaint against defendant-cross claimant.
II
Whether or not respondent Castillo is entitled to damages
resulting from delay in the delivery of the shipment in the
absence in the bill of lading of a stipulation on the period of
delivery.
III
Whether or not the respondent appellate court erred in awarding
actual, moral and exemplary damages and attorney's fees

despite the absence of factual findings and/or legal bases in the

text of the decision as support for such awards.
IV
Whether or not the respondent Court of Appeals committed an
error when it rendered an ambiguous and unexplained award in
the dispositive portion of the decision which is not supported by
the body or the text of the decision. (Rollo, pp.94-95).
With regard to the first issue raised by petitioner on whether or not a
defendant's cross-claim against co-defendant (petitioner herein) survives or
subsists even after the dismissal of the complaint against defendant-crossclaimant (petitioner herein), we rule in the negative.
Apparently this issue was raised by reason of the declaration made by
respondent court in its questioned decision, as follows:
Re the first assigned error: What should be rescinded in this case
is not the "Memorandum of Shipment" but the contract between
appellee and defendant Eli Lilly (embodied in three documents,
namely: Exhs. A, A-1 and A-2) whereby the former agreed to buy
and the latter to sell those six drums of gelatin capsules. It is by
virtue of the cross-claim by appellant Eli Lilly against defendant
Maersk Line for the latter's gross negligence in diverting the
shipment thus causing the delay and damage to appellee that
the trial court found appellant Maersk Line liable. . . .
xxx xxx xxx
Re the fourth assigned error: Appellant Maersk Line's insistence
that appellee has no cause of action against it and appellant Eli
Lilly because the shipment was delivered in good order and
condition, and the bill of lading in question contains "stipulations,
exceptions and conditions" Maersk Line's liability only to the
"loss, destruction or deterioration," indeed, this issue of lack of
cause of action has already been considered in our foregoing
discussion on the second assigned error, and our resolution here
is still that appellee has a cause of action against appellant Eli
Lilly. Since the latter had filed a cross-claim against appellant
Maersk Line, the trial court committed no error, therefore, in
holding the latter appellant ultimately liable to appellee. (Rollo,
pp. 47-50; Emphasis supplied)
Reacting to the foregoing declaration, petitioner submits that its liability is
predicated on the cross-claim filed its co-defendant Eli Lilly, Inc. which crossclaim has been dismissed, the original complaint against it should likewise be

dismissed. We disagree. It should be recalled that the complaint was filed

originally against Eli Lilly, Inc. as shipper-supplier and petitioner as carrier.
Petitioner being an original party defendant upon whom the delayed
shipment is imputed cannot claim that the dismissal of the complaint against
Eli Lilly, Inc. inured to its benefit.
Respondent court, erred in declaring that the trial court based petitioner's
liability on the cross-claim of Eli Lilly, Inc. As borne out by the record, the trial
court anchored its decision on petitioner's delay or negligence to deliver the
six (6) drums of gelatin capsules within a reasonable time on the basis of
which petitioner was held liable for damages under Article 1170 of the New
Civil Code which provides that those who in the performance of their
obligations are guilty of fraud, negligence, or delay and those who in any
manner contravene the tenor thereof, are liable for damages.
Nonetheless, petitioner maintains that it cannot be held for damages for the
alleged delay in the delivery of the 600,000 empty gelatin capsules since it
acted in good faith and there was no special contract under which the carrier
undertook to deliver the shipment on or before a specific date (Rollo, p. 103).
On the other hand, private respondent claims that during the period before
the specified date of arrival of the goods, he had made several commitments
and contract of adhesion. Therefore, petitioner can be held liable for the
damages suffered by private respondent for the cancellation of the contracts
he entered into.
We have carefully reviewed the decisions of respondent court and the trial
court and both of them show that, in finding petitioner liable for damages for
the delay in the delivery of goods, reliance was made on the rule that
contracts of adhesion are void. Added to this, the lower court stated that the
exemption against liability for delay is against public policy and is thus, void.
Besides, private respondent's action is anchored on Article 1170 of the New
Civil Code and not under the law on Admiralty (AC-GR CV No. 10340, Rollo, p.
14).
The bill of lading covering the subject shipment among others, reads:
6. GENERAL
(1) The Carrier does not undertake that the goods shall arive at
the port of discharge or the place of delivery at any particular
time or to meet any particular market or use and save as is
provided in clause 4 the Carrier shall in no circumstances be
liable for any direct, indirect or consequential loss or damage
caused by delay. If the Carrier should nevertheless be held
legally liable for any such direct or indirect or consequential loss

or damage caused by delay, such liability shall in no event

exceed the freight paid for the transport covered by this Bill of
Lading. (Exh. "1-A"; AC-G.R. CV No. 10340, Folder of Exhibits, p.
41)
It is not disputed that the aforequoted provision at the back of the bill of
lading, in fine print, is a contract of adhesion. Generally, contracts of
adhesion are considered void since almost all the provisions of these types of
contracts are prepared and drafted only by one party, usually the carrier
(Sweet Lines v. Teves, 83 SCRA 361 [1978]). The only participation left of the
other party in such a contract is the affixing of his signature thereto, hence
the term "Adhesion" (BPI Credit Corporation v. Court of Appeals, 204 SCRA
601 [1991]; Angeles v. Calasanz, 135 SCRA 323 [1985]).
Nonetheless, settled is the rule that bills of lading are contracts not entirely
prohibited (Ong Yiu v. Court of Appeals, et al., 91 SCRA 223 [1979];
Servando, et al. v. Philippine Steam Navigation Co., 117 SCRA 832 [1982]).
One who adheres to the contract is in reality free to reject it in its entirety; if
he adheres, he gives his consent (Magellan Manufacturing Marketing
Corporation v. Court of Appeals, et al., 201 SCRA 102 [1991]).
In Magellan, (supra), we ruled:
It is a long standing jurisprudential rule that a bill of lading
operates both as a receipt and as contract to transport and
deliver the same a therein stipulated. As a contract, it names the
parties, which includes the consignee, fixes the route,
destination, and freight rates or charges, and stipulates the
rights and obligations assumed by the parties. Being a contract,
it is the law between the parties who are bound by its terms and
conditions provided that these are not contrary to law, morals,
good customs, public order and public policy. A bill of lading
usually becomes effective upon its delivery to and acceptance by
the shipper. It is presumed that the stipulations of the bill were,
in the absence of fraud, concealment or improper conduct,
known to the shipper, and he is generally bound by his
acceptance whether he reads the bill or not. (Emphasis supplied)
However, the aforequoted ruling applies only if such contracts will not create
an absurd situation as in the case at bar. The questioned provision in the
subject bill of lading has the effect of practically leaving the date of arrival of
the subject shipment on the sole determination and will of the carrier.
While it is true that common carriers are not obligated by law to carry and to
deliver merchandise, and persons are not vested with the right to prompt

delivery, unless such common carriers previously assume the obligation to

deliver at a given date or time (Mendoza v. Philippine Air Lines, Inc., 90 Phil.
836 [1952]), delivery of shipment or cargo should at least be made within a
reasonable time.
In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court held:
The oft-repeated rule regarding a carrier's liability for delay is
that in the absence of a special contract, a carrier is not an
insurer against delay in transportation of goods. When a
common carrier undertakes to convey goods, the law implies a
contract that they shall be delivered at destination within a
reasonable time, in the absence, of any agreement as to the
time of delivery. But where a carrier has made an express
contract to transport and deliver properly within a specified time,
it is bound to fulfill its contract and is liable for any delay, no
matter from what cause it may have arisen. This result logically
follows from the well-settled rule that where the law creates a
duty or charge, and the default in himself, and has no remedy
over, then his own contract creates a duty or charge upon
himself, he is bound to make it good notwithstanding any
accident or delay by inevitable necessity because he might have
provided against it by contract. Whether or not there has been
such an undertaking on the part of the carrier is to be
determined from the circumstances surrounding the case and by
application of the ordinary rules for the interpretation of
contracts.
An examination of the subject bill of lading (Exh. "1"; AC GR CV No. 10340,
Folder of Exhibits, p. 41) shows that the subject shipment was estimated to
arrive in Manila on April 3, 1977. While there was no special contract entered
into by the parties indicating the date of arrival of the subject shipment,
petitioner nevertheless, was very well aware of the specific date when the
goods were expected to arrive as indicated in the bill of lading itself. In this
regard, there arises no need to execute another contract for the purpose as it
would be a mere superfluity.
In the case before us, we find that a delay in the delivery of the goods
spanning a period of two (2) months and seven (7) days falls was beyond the
realm of reasonableness. Described as gelatin capsules for use in
pharmaceutical products, subject shipment was delivered to, and left in, the
possession and custody of petitioner-carrier for transport to Manila via
Oakland, California. But through petitioner's negligence was mishipped to

Richmond, Virginia. Petitioner's insitence that it cannot be held liable for the
delay finds no merit.
Petition maintains that the award of actual, moral and exemplary dames and
attorney's fees are not valid since there are no factual findings or legal bases
stated in the text of the trial court's decision to support the award thereof.
Indeed, it is settled that actual and compensataory damages requires
substantial proof (Capco v. Macasaet. 189 SCRA 561 [1990]). In the case at
bar, private respondent was able to sufficiently prove through an invoice
(Exh. 'A-1'), certification from the issuer of the letter of credit (Exh.'A-2') and
the Memorandum of Shipment (Exh. "B"), the amount he paid as costs of the
credit line for the subject goods. Therefore, respondent court acted correctly
in affirming the award of eleven thousand six hundred eighty pesos and
ninety seven centavos (P11,680.97) as costs of said credit line.
As to the propriety of the award of moral damages, Article 2220 of the Civil
Code provides that moral damages may be awarded in "breaches of contract
where the defendant acted fraudulently or in bad faith" (Pan American World
Airways v. Intermediate Appellate Court, 186 SCRA 687 [1990]).
In the case before us, we that the only evidence presented by petitioner was
the testimony of Mr. Rolando Ramirez, a claims manager of its agent
Compania General de Tabacos de Filipinas, who merely testified on Exhs. '1'
to '5' (AC-GR CV No. 10340, p. 2) and nothing else. Petitioner never even
bothered to explain the course for the delay, i.e. more than two (2) months,
in the delivery of subject shipment. Under the circumstances of the case, we
hold that petitioner is liable for breach of contract of carriage through gross
negligence amounting to bad faith. Thus, the award of moral damages if
therefore proper in this case.
In line with this pronouncement, we hold that exemplary damages may be
awarded to the private respondent. In contracts, exemplary damages may be
awarded if the defendant acted in a wanton, fraudulent, reckless, oppresive
or malevolent manner. There was gross negligence on the part of the
petitioner in mishiping the subject goods destined for Manila but was
inexplicably shipped to Richmond, Virginia, U.S.A. Gross carelessness or
negligence contitutes wanton misconduct, hence, exemplary damages may
be awarded to the aggrieved party (Radio Communication of the Phils., Inc. v.
Court of Appeals, 195 SCRA 147 [1991]).
Although attorney's fees are generally not recoverable, a party can be held
lible for such if exemplary damages are awarded (Artice 2208, New Civil
Code). In the case at bar, we hold that private respondent is entitled to

reasonable attorney`s fees since petitioner acte with gross negligence

amounting to bad faith.
However, we find item 4 in the dispositive portion of respondent court`s
decision which awarded thirty (30) percent of the total damages awarded
except item 3 regarding attorney`s fees and litigation expenses in favor of
private respondent, to be unconsionable, the same should be deleted.
WHEREFORE, with the modification regarding the deletion of item 4 of
respondent court`s decision, the appealed decision is is hereby AFFIRMED in
all respects.
SO ORDERED.

G.R. No. 49470 April 8, 1991

DARIO N. LOZANO, in his capacity as administrator of the estate of
the deceased AGUSTO N. LOZANO, PATROCINIO DEL PRADO and
ANTONIO LOZANO, plaintiffs-appellants,
vs.
IGNACIO BALLESTEROS, defendant-appellee.
Tomas V. Tadeo, Jr. for plaintiffs-appellants.
Generoso T. Tarlit for defendant-appellee.
MEDIALDEA, J.:p
This is an appeal elevated to Us by the Court of Appeals on pure questions of
law seeking the reversal of the decision of the respondent Court of First
Instance of Pangasinan, Third Judicial District, Dagupan City in Civil Case No.
D-2107 dismissing the complaint for lack of merit, declaring defendant
Ignacio Ballesteros the absolute owner of the land in question, ordering the
cancellation of the plaintiffs' adverse claim and the payment to defendant of
damages, attorney's fees and cost of suit.
The antecedent facts of this case as recounted by the trial court and adopted
partially from the parties' stipulation of facts are as follows:
Maria Nieves Nunez Tuazon, deceased mother of the plaintiffs, was the
original registered exclusive owner of the land in question comprising Lots Q,
B and O as evidenced by Original Certificate of Title No. 46076. However only
Lot Q is the subject of this present action. On March 6, 1958, by virtue of a
deed of absolute sale, Tuazon sold the land in question to Marciana de Dios.
On June 2, 1958, Augusto, Dario, Jaime, Cresencia, Lourdes and Alicia, all
surnamed Lozano, together with Marciana de Dios filed a verified petition

before the Court of First Instance of Pangasinan seeking the approval of the
consolidation-subdivision plan and for the annotation of several documents
at the back of the Original Certificate of Title No. 46076. Acting on the
verified petition, the court approved the consolidation-subdivision plan and
directed the inscription, among others, of said deed of sale at the back of the
title.
Transfer Certificate of Title No. 26537 was issued in the name of Marciana de
Dios who later mortgaged the land to Kaluyagan Rural Bank in San Carlos
City, Pangasinan.
On January 22, 1963, plaintiffs caused the annotation of their adverse claim
at the back of the title of the said lot.
Thereafter, a petition for the settlement of the estate of Augusta Lozano was
filed by the plaintiffs in the Court of First Instance of Pangasinan. On
November 18, 1965, plaintiffs through the administrator filed an inventory
which included said lot Q.
On August 25, 1966, De Dios sold lot Q to defendant Ignacio Ballesteros and
Transfer Certificate of Title No. 63171 was later transferred in his name.
On September 21, 1966, plaintiffs filed an action for reconveyance against
De Dios in Civil Case No. D-1953, alleging that the estate of Augusto Lozano
is the absolute owner of Lots Q, O and B. On June 8, 1967, the court rendered
a default decision in favor of the plaintiffs. However, the judgment was not
satisfied on the ground that De Dios was insolvent and did not have any
registered property.
Having failed to effect the recovery and/or reconveyance of the lots, plaintiffs
filed several complaints in Civil Cases Nos. D-2107, D-2109 and D-2115
before the Court of First Instance of Pangasinan for reconveyance and
recovery of possession. The trial court in Civil Case No. D-2107 rendered a
decision on October 21, 1969, the dispositive portion is hereunder quoted as
follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the court hereby
renders judgment (1) dismissing the complaint for lack of merit;
(2) declaring defendant Ignacio Ballesteros the absolute owner of
the land in question; (3) ordering the cancellation of plaintiffs'
adverse claim at the back of Transfer Certificate of Title No.
63171 at the expense of the plaintiffs; and (4) ordering plaintiffs
to pay, jointly and severally, the herein defendant in the amount
of P1,000.00 damages, and P500.00 for attorney's fees and the
cost of suit.
SO ORDERED. (Record on Appeal, p. 35)

Hence, plaintiffs interposed an appeal to the Court of Appeals docketed as

CA-G.R. No. 46169-R. However, the Court of Appeals in its resolution dated
November 16, 1978 ruled that "the matter submitted for determination is
purely a question of law that is beyond the jurisdiction of this court." (Rollo,
p. 50). Thus, the records of the case were elevated to this Court, to wit:
WHEREFORE, let the records of this case be elevated to the
Honorable Supreme Court as a matter pertaining to its exclusive
appellate jurisdiction.
SO ORDERED. (Rollo, p. 50)
It should be noted that during the pendency of the appeal before the Court of
Appeals, the appellants manifested in the motion for extension to file brief
their intention of filing a joint brief for all cases pending before the same
court because of the relationship and similarity of issues of the aforementioned cases.
Thereupon, said appellants as well as appellees filed their respective joint
briefs.
The appellants raised the following seven (7) assignments of errors:
I
THE LOWER COURT ERRED IN NOT FINDING THAT THE ADVERSE
CLAIM OF HEREIN PLAINTIFFS-APPELLANTS FILED AND
ANNOTATED AT THE BACK OF THE PRIOR TITLES OF MARCIANA
DE DIOS AS ENTRY NO. 194992 AND ENTRY NO. 197335 ARE
BINDING AND VALID AS AGAINST DEFENDANTS-APPELLEES WHO
ARE SUBSEQUENT PURCHASERS FROM MARCIANA DE DIOS.
II
THE LOWER COURT ERRED IN NOT FINDING THAT BY VIRTUE OF
SAID ADVERSE CLAIM THE DEFENDANTS-APPELLEES
PURCHASERS ARE BOUND BY THE DECISION AGAINST MARCIANA
DE DIOS IN CIVIL CASE NO. D-1953 (EXHIBIT "I").
III
THE LOWER COURT ERRED IN DECLARING NULL AND VOID AS
AGAINST THE DEFENDANTS-APPELLEES THE DECISION IN CIVIL
CASE NO. D-1953.
IV
THE LOWER COURT ERRED IN NOT FINDING THAT AS LONG AS
THE ADVERSE CLAIM REMAINS AS AN ENCUMBRANCE ON THE
TITLES THE SAME IS DESIGNED TO PROTECT THE INTEREST OF

THE ADVERSE CLAIMANTS AGAINST CLAIMS OF SUBSEQUENT

PURCHASERS.
V
THE LOWER COURT ERRED IN NOT DECLARING THE
DEFENDANTS-APPELLEES AS PURCHASERS IN BAD FAITH AS THEY
HAVE KNOWLEDGE OF HEREIN PLAINTIFFS-APPELLANTS' CLAIMS
AGAINST MARCIANA DE DIOS.
VI
THE LOWER COURT ERRED IN AWARDING DAMAGES AND
ATTORNEY'S FEES TO THE DEFENDANTS-APPELLEES DESPITE THE
LACK OF EVIDENCE OF DAMAGES AND DESPITE THE FACT THAT
THERE IS NO EVIDENCE THAT HEREIN PLAINTIFFS' COMPLAINT
WERE FILED IN GROSS BAD FAITH OR WITH MALICE.
VII
THE LOWER COURT ERRED IN DECIDING THE CASES IN FAVOR OF
APPELLEES. (Rollo, pp. 49-50)
Appellants maintain that the first five assignments of errors should be
discussed jointly because these errors boil down to the issue of the validity
and effectivity of the adverse claim. The appellants insist that "the said
adverse claim has been carried along in the subsequent titles of the
defendants." (Joint Brief for Plaintiffs-Appellants, p. 7) Thus, they conclude
that the consequence of this cautionary notice is that whatever would be the
result of their claim against Marciana de Dios is binding on subsequent
purchasers or successors-in-interest. They contend that the "defendantsappellees should have waited for the decision of the court on the question of
the validity of the adverse claim or should have first moved for the removal
or cancellation of the adverse claim." (Ibid, p. 8) Hence, appellants conclude
that defendants-appellees are purchasers in bad faith as they have
knowledge of the claims against De Dios.
However, the appellee stresses that "a cursory examination of the adverse
claim filed by the plaintiffs-appellants . . . readily reveals that the same has
failed to comply with the formal requirements of Section 110 of Act 496 with
respect to adverse claims. And for which, and for all legal purposes, the
adverse claim under comment is not valid and effective." (Joint Brief for
Defendants-Appellees, pp. 15-16) Appellee argues that "there was a fatal
non-joinder of necessary or indispensable parties." (Ibid, p. 21) Thus, the
position of the appellants is untenable because "the non-joinder of necessary
and indispensable parties renders null and void as against them any decision
in a case in which they were not made parties-litigants." (Ibid, p. 23)

Furthermore, appellee "submits that the protection given by the law to

adverse claimants in regard to the property subject to an adverse claim is
available only to the party whose registered adverse claim meets all the
formal requisites of law, and not when the same is a nullity." (Ibid, p. 26)
Hence, appellee concludes that "an invalid and ineffective adverse
claim cannot validly serve as a notice or warning to third parties who may
deal with the properties subject thereto because such adverse claim by
reason of its nullity is deemed not existent and unregistered." (Ibid, p. 27)
The appellants claim that "there are several reasons why the decision of the
lower court in the matter of damages and attorney's fees should be reversed,
to wit:
First, defendants did not present evidence on damages and
attorney's fees.
Second, there is no proof of mental suffering, mental anguish,
fright, and the like to entitle defendants to moral damages.
Third, there is no showing by the defendants that herein
plaintiffs' complaints were filed in gross bad faith or malice.
Fourth, the decision itself did not make finding of facts which
would show that defendants are entitled to damages and
attorney's fees. The reason for this is that these cases were
submitted mainly on stipulation of facts and exhibits. In the
stipulation of facts, there is no stipulation as to damages and
attorney's fees.
Fifth, the herein plaintiffs-appellants in coming to court are just
pursuing a proprietary claim which has legal and factual basis."
(Joint Brief for Plaintiffs-Appellants, p. 11)
However, the appellee argues that when he was unfoundedly sued by the
appellants, the former was under pain of default. Whether he liked it or not,
he had to come to court and defend himself. Thus, he was compelled
tounnecessarily incur expenses for the services of their counsel. (Joint Brief
for Defendants-Appellees, p. 33)
In sum, the appellants insist that "the lower court erred in deciding the cases
in favor of appellees." (Joint Brief for Plaintiffs-Appellants, p. 1)
We find appellants' contentions devoid of merit except that pertaining to the
award of damages and attorney's fees and therefore uphold the ruling of the
lower court with modification.
The applicable law in the case at bar is still Section 110 of Act No. 496,
otherwise known as the Land Registration Act despite the modification

introduced by Section 70 of Presidential Decree No. 1529. The said section

particularly deals with adverse claim, to wit:
Whoever claims any part or interest in registered land adverse to
the registered owner, arising subsequent to date of the original
registration, may, if no other provision is made in this Act for
registering the same, make a statement in writing setting forth
fully his alleged right or interest, and how or under whom
acquired, and a reference to the volume and page of the
certificate of title of the registered owner, and a description of
the land in which the right or interest is claimed.
The statement shall be signed and sworn to, and shall state the
adverse claimant's residence, and designate a place at which all
notices may be served upon him. This statement shall be entitled
to registration as an adverse claim, and the court, upon a
petition of any party in interest, shall grant a speedy hearing
upon the question of the validity of such adverse claim and shall
enter such decree therein as justice and equity may require. If
the claim is adjudged to be invalid, the registration shall be
cancelled. If in any case the court after notice and hearing shall
find that a claim thus registered was frivolous or vexatious, it
may tax the adverse claimant double or treble costs in its
discretion.
Hence, for the purpose of registration and as required by the abovequoted
provision, as amended, the following are the formal requisites of an adverse
claim:
1. the adverse claimant must state the following in writing:
a. his alleged right or interest;
b. how and under whom such alleged right or interest
is acquired;
c. the description of the land in which the right or
interest is claimed, and
d. the certificate of title number
2. the statement must be signed and sworn to before a notary
public or other officer authorized to administer oath; and
3. the claimant should state his residence or the place to which
all notices may be served upon him.
The lower court quoted in part the adverse claim filed by the plaintiffs, to wit:

That this adverse claim is being filed prior to the filing of a court
action because all the properties above-described formerly
belong to my husband, the late Augusto Lozano. (Record on
Appeal, p. 32)
However, the lower court noted that "the adverse claim filed and annotated
on the back of the title of Marciana de Dios and later to the title of the herein
defendant, did not meet the requirements provided for in Section 110 of Act
496, that is setting forth fully how or under whom the heirs of Lozano
acquired the property. (Record on Appeal, p. 33)
We adhere to the lower court's findings and find appellee's position
meritorious. A cursory reading of the aforequoted adverse claim filed by the
plaintiffs shows that the same has failed to comply with the formal requisites
of Section 110 of Act 496, more specifically the appellants' failure to state
how and under whom their alleged right or interest is acquired. Thus, the
effect of such non-compliance renders the adverse claim non-registrable and
ineffective.
In a case where the adverse claim filed for registration did not fully comply
with the formal requisites of Section 110 of Act No. 496, or more specifically,
there being no description of the land in which right or interest is claimed nor
the place to which all notices may be served upon the adverse claimant
given, such adverse claim could not be registered. (LRC Consulta No. 144,
Register of Deeds of Quezon City, pet., February 18, 1957)
Despite the appellee's alleged knowledge of the appellants' claims against
De Dios, We still find the allegation of bad faith on the part of the appellee
devoid of merit. It should be stressed that bad faith is inconsequential
because of the ineffectiveness of the adverse claim.
Anent the appellant's contention that appellee is bound by the decision in
the former reconveyance case against De Dios, the lower court stressed that
it is convinced that the decision rendered in Civil Case No. D-1953 is a nullity,
because an indispensable party like the defendant herein was not brought as
party therein. The failure of the plaintiffs to implead the present defendant in
that case, constituted a legal obstacle to the exercise of judicial power in
said case, and rendered any judgment therein an absolute nullity. (Record on
Appeal, p. 30)
Rule 3, Section 7 of the Revised Rules of Court provides that:
Parties in interest without whom no final determination can be
had of an action shall be joined either as plaintiffs or defendants.
We rule that "owners of property over which reconveyance is asserted are
indispensable parties, without whom no relief is available and without whom

the court can render no valid judgment." (see Acting Registrars of Land Titles
and Deeds of Pasay City, Pasig and Makati v. Regional Trial Court of Makati,
Branch 57, G.R. No. 81564, 24 April 1990, 184 SCRA 622, 633.)
As defined, "an indispensable party is one without whom the action cannot
be finally determined, whose interests in the subject matter of the suit and in
the relief sought are so bound up with that of the other parties that his legal
presence as a party to the proceeding is an absolute necessity. (Co vs.
Intermediate Appellate Court, G. R. No. 65928, 21 June 1988, 162 SCRA 390,
399)
On the basis of the above-mentioned definition, We believe that the point of
the appellee was well taken by the court and We therefore conclude that the
defendant-appellee was correctly considered as an indispensable party, ergo,
the court cannot rule that said party is bound by the previous decision in
favor of the appellants.
Finally, the appellants' claim against the lower court's award of damages and
Attorney's fees is meritorious.
The lower court is admonished in ordering the payment of damages without
mentioning the specific type of damages being awarded. In view of the lower
court's inaccuracy as well as its failure to state any basis for the award of the
indemnity, the same must be deleted.
More specifically, We already emphasized that most of the items for which
moral damages can be awarded under Article 2219 of the new Civil Code are
such as affect the moral feelings and personal pride of the person seeking
recovery, and they should be weighed in determining the indemnity to be
awarded. (Layda vs. Court of Appeals, et al., 90 Phil 724) Thus, if the court
has no proof or evidence upon which the claim for moral damages could be
based, such indemnity could not be outrightly awarded.
In relation to appellee's prayer for exemplary damages, it has been held that
under Articles 2229, 2233 and 2234 of the New Civil Code, "exemplary
damages may be imposed by way of example or correction only in addition,
among others, to compensatory damages, but they cannot be recovered as a
matter of right, their determination depending upon the discretion of the
court. It further appears that the amount of exemplary damages need not be
proved, because its determination depends upon the amount of
compensatory damages that may be awarded to the claimant. If the amount
of exemplary damages need not be proved, it need not also be alleged and
the reason is obvious because it is merely incidental or dependent upon what
the court may award as compensatory damages. Unless and until this
premise is determined and established, what may be claimed as exemplary

damages would amount to a mere surmise or speculation." (Singson, et al. v.

Aragon and Lorza 92 Phil 515, 518.)
Hence, in the absence of any claim and proof of compensatory damages, the
award of exemplary damages has no leg to stand on.
Finally, the rule on the award of attorney's fees is that there must be a
justification for the same. In the absence of a statement why attorney's fees
were awarded, the same should be disallowed.
All premises considered, the Court is convinced that the lower court
committed no error in adjudicating in favor of the defendant-appellee except
as to the award of damages and attorney's fees which We find erroneous.
ACCORDINGLY, the appealed judgment of the lower court is hereby
AFFIRMED with modification insofar as it awarded damages amounting to
P1,000.00, and attorney's fees amounting to P500.00 which are hereby
deleted.
SO ORDERED.