Case No.11 PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION (PSBA) ET AL vs.

COURT OF APPEALS

FACTS: Carlitos Bautista, a third year commerce student in the Philippine School of Business Administration (PSBA) was stabbed on the second-floor premises of the school by assailants who were not members of the schools academic community. His parents then filed a suit in the RTC of Manila for damages against PSBA and its corporate officers. The plaintiffs (now private respondents) sought to adjudge them liable for the victims 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. Defendants (now petitioners) sought to have the suit dismissed, alleging that since they are sued under Article 2180 of the Civil Code, the complaint states no cause of action and not within the scope of the said provision since it is an academic institution. The trial court, however, overruled the petitioners contention and its decision was later affirmed by the appellate court. ISSUE: Whether or not the decision of the appellate court anchored on the law of quasi-delicts is valid. HELD: The Supreme Court held that although they agreed on the decision of the Court of Appeals to deny the petition of motion to dismiss by the PSBA, they do not agree to the premises stated by the appellate courts ruling. Article 2180, in the conjunction with Article 2176 of the Civil Code establishes the rule of in loco parentis, they cannot be held liable to the acts of Carlitos assailants which were not students of the PSBA and because of the contractual relationship. When an academic institution accepts students for enrollment, there is a contract between them, resulting in bilateral obligations which both parties are bound to comply with. The institution must provide their students with an atmosphere that promotes or assists its primary undertaking of imparting knowledge and maintain peace and order within its premises. In the circumstances, there is no finding that the contract between the school and Bautista had been breached thru the formers negligence in providing proper security measures. Therefore, the Supreme Court dismissed the petition and the case was remanded to the Trial Court to determine if the school neglected its obligation to perform based on the contractual relation of them and the students.

Case No. 22 VICTORINO D. MAGAT VS. HON. LEO D. MEDIALDEA AND SANTIAGO A. GUERRERO FACTS: The Defendant (herein private respondent) entered into a contract with the U.S. Navy Exchange in Subic Bay for the operation of a fleet of taxicabs with a required taximeter and radio transceiver. An agent acting on the Defendant's behalf proposed to the Plaintiff (herein petitioner) to import such taximeters and radio transceivers from Japan through the latter's business connections to fulfill the former's contract. The Plaintiff, through various dealings, was a regular supplier of materials or goods for the U.S. Navy in the Philippines from either the local origin or imported from U.S. or Japan. As such, the Defendant and his agent were able to import the taximeters required in the contract with the help of the Plaintiff and his Japanese business associates. The Defendant's agent then made representations with the Plaintiff to procure radio transceivers, amounting to $77,620.59, to be delivery to the Defendant within 60-90 days after the receipt of the proper radio frequency. While awaiting for it, the Plaintiff had instructed his agent to secure the radio transceivers. Later upon receiving the said required frequency of 34.2 MHZ and the instruction of the Defendant to proceed with the order, the Plaintiff waited for the former to open the letter of credit before delivering such goods. As a common practice in foreign importation, the buyer opens a letter of credit in favor of the foreign supplier. Contrary to what was communicated to the Plaintiff, the Defendant advice his banker not to give due course to the letter of credit and therefore did not pay for the said goods ordered despite affirmations that the latter had financial capabilities to do so. Eventually, the Plaintiff learned that the Defendant had been operating without radio transceivers and when questioned by the U.S. Navy Authorities, the latter cited the former for reason of delay. The Plaintiff, through counsel, sent a letter to the Defendant questioning whether or not there was still an intention to fulfill the agreements or on the cancellation of such however there's was no reply. Subsequently, the Plaintiff filed for damages and loses which may be incurred by his business in the future. The Defendant's counsel however moved to dismiss the complaint for lack of cause of action on the grounds that the loss or damage suffered are nonexisting which is a mere anticipation in the future. The Court of First Instance of Rizal's presiding Judge Medialdea grants such Motion to Dismiss. ISSUE: Whether or not Plaintiff has cause of action? HELD: Yes. Elements of cause of action are: [1] the existence of a legal right to the plaintiff; [2] a correlative duty of the defendant and [3] an act or omission of the defendant in violation of the plaintiff's right, with consequent injury or damage to the latter for which he may maintain an action for recovery of damages or other appropriate relief.

In the complaint of the Plaintiff detailing the beginning of transaction up to the refusal of open the letter of credit by the Defendant, there is reasonable legal sufficiency for cause of action to be satisfied for the failure to fulfill an obligation by either of the contracting parties which would then cause loss of expected profit. It is recoverable under Article 1170 of the Civil Code whereby, 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. The damages which the obligor is liable for includes not only the value of the loss suffered by the obligee [dao emergente] but also the profits which the latter failed to obtain [lucro cesante]. If the obligor acted in good faith, he shall be liable for those damages that are the natural and probable consequences of the breach of the obligation and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted; and in case of fraud, bad faith, malice or wanton attitude, he shall be liable for all damages which may be reasonably attributed to the non-performance of the obligation. Case is remanded to the court of origin for further proceedings. No costs.

Case No. 33 FAR EAST BANK AND TRUST COMPANY, petitioner, vs. THE HONORABLE COURT OF APPEALS, LUIS A. LUNA and CLARITA S. LUNA, respondents. FACTS: Private respondent Luis Luna applied for, and was accorded, a FAREASTCARD issued by Petitioner (FEBTC). The bank also issued a supplemental card to private respondent Clarita Luna upon request of Luis. In August 1988, Clarita lost her credit card and immediately informed FEBTC. In cases of this nature, the banks internal security procedures and policy would appear to be to meanwhile so record the lost card, along with the principal card, as a "Hot Card" or "Cancelled Card" in its master file. This case arose when Luis felt embarrassed in the incident where he tendered a despedida lunch at the Bahia Rooftop Restaurant of the Hotel Intercontinental Manila. He then presented his card, but was not honored, so Luis was forced to pay in cash the bill amounting to P588.13. Still feeling aggrieved despite the apologies made by the vice president of the FEBTC, Luis filed a complaint for damages. RTC favored Luis and rendered a decision ordering FEBTC to pay private respondents (a) P300,000.00 moral damages; (b) P50,000.00 exemplary damages; and (c) P20,000.00 attorney's fees. On appeal, the appellate court, affirmed the decision of the lower court. Hence, this petition. ISSUE: Whether or not the damages awarded is valid? HELD: No. The Supreme Court held that in culpa contractual, moral damages may be recovered where the defendant is shown to have acted in bad faith or with malice in the breach of the contract. Bad faith, in this context, includes gross, but not simple, negligence. Concededly, the bank was remiss in indeed neglecting to personally inform Luis of his own cards cancellation but such negligence cannot be considered so gross as to amount to malice or bad faith. The Court finds, therefore, the award of moral damages made by the court a quo, affirmed by the appellate court, to be inordinate and substantially devoid of legal basis. Exemplary or corrective damages, in turn, are intended to serve as an example or as correction for the public good in addition to moral, temperate, liquidated or compensatory damages but it would also be just as arduous to sustain the exemplary damages granted by the courts below. Therefore, the appealed decision is MODIFIED by the Supreme Court by deleting the award of moral and exemplary damages to private respondents; in its stead, petitioner is ordered to pay private respondent Luis A. Luna an amount of P5,000.00 by way of nominal damages. In all other respects, the appealed decision is AFFIRMED.