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STRICT LIABILITY

A.

FALLING OBJECTS

B.

EMPLOYERS

C.

ANIMALS

G.R. No. 74431 November 6, 1989


PURITA
MIRANDA
VESTIL
vs.
INTERMEDIATE APPELLATE COURT, DAVID UY and TERESITA UY CRUZ, J.:

and

AGUSTIN

VESTIL

FACTS:

On July 29, 1915, Theness was bitten by a dog while she was playing with a child of the Vestils in the house of the late Vicente Miranda, the
father of Purita Vestil, at F. Ramos Street in Cebu City.

She was rushed to the Cebu General Hospital, where she was treated for "multiple lacerated wounds on the forehead" 1 and administered an
anti-rabies vaccine by Dr. Antonio Tautjo.

She was discharged after nine days but was readmitted one week later due to "vomiting of saliva."

The following day, on August 15, 1975, the child died. The cause of death was certified as broncho-pneumonia.

Seven months later, the Uys sued for damages, alleging that the Vestils were liable to them as the possessors of "Andoy," the dog that bit and
eventually killed their daughter.

The Vestils rejected the charge, insisting that the dog belonged to Vicente Miranda, that it was a tame animal, and that in any case no one had
witnessed it bite Theness.

TC: Judge Jose R. Ramolete of the CFI of Cebu dismissed the complaint.

CA: Reversed. It found that the Vestils were in possession of the house and the dog and so should be responsible under Article 2183 of the
Civil Code for the injuries caused by the dog.

It also held that the child had died as a result of the dog bites and not for causes independent thereof as submitted by the appellees. Hence
this petition.

ISSUE: WON the Vestils are liable for damages for the death of the child.
HELD: YES
RATIO:

Purita Vestil insists that she is not the owner of the house or of the dog left by her father as his estate has not yet been partitioned and there
are other heirs to the property.

Pursuing the logic of the Uys, she claims, even her sister living in Canada would be held responsible for the acts of the dog simply because
she is one of Miranda's heirs.

SC: What must be determined is the possession of the dog that admittedly was staying in the house in question, regardless of the
ownership of the dog or of the house.

Article 2183 reads as follows:


The possessor of an animal or whoever may make use of the same is responsible for the damage which it may cause, although it
may escape or be lost. 'This responsibility shall cease only in case the damages should come from force majeure from the fault of
the person who has suffered damage.

Purita Vestil's testimony that she was not in possession of Miranda's house is hardly credible. She said that the occupants of the house left by
her father were related to him ("one way or the other") and maintained themselves out of a common fund or by some kind of arrangement.

She at least implied that they did not pay any rent, presumably because of their relation with Vicente Miranda notwithstanding that she herself
did not seem to know them very well.

There is contrary evidence that the occupants of the house, were boarders (or more of boarders than relatives) who paid the petitioners for
providing them with meals and accommodations.

While it is true that she is not really the owner of the house, which was still part of Vicente Miranda's estate, there is no doubt that she and her
husband were its possessors at the time of the incident in question.

She was the only heir residing in Cebu City and the most logical person to take care of the property, which was only six kilometers from her
own house. Moreover, there is evidence showing that she and her family regularly went to the house, once or twice weekly, according to at
least one witness, 14 and used it virtually as a second house.

It is also noteworthy that the petitioners offered to assist the Uys with their hospitalization expenses although Purita said she knew them only
casually. 1

The petitioners also argue that even assuming that they were the possessors of the dog that bit Theness there was no clear showing that she
died as a result thereof.

On the contrary, the death certificate 17 declared that she died of broncho-pneumonia, which had nothing to do with the dog bites for which she
had been previously hospitalized. The Court need not involve itself in an extended scientific discussion of the causal connection between the
dog bites and the certified cause of death except to note that, first, Theness developed hydrophobia, a symptom of rabies, as a result of the
dog bites, and second, that asphyxia broncho-pneumonia, which ultimately caused her death, was a complication of rabies. (refer to the
testimony of the doctor as to the causal connection of rabies and pneumonia)

On the strength of the foregoing testimony, the Court finds that the link between the dog bites and the certified cause of death has beep
satisfactorily established.

We also reiterate our ruling in Sison v. Sun Life Assurance Company of Canada,
cause of death but only of the fact of death.

Indeed, the evidence of the child's hydrophobia is sufficient to convince us that she died because she was bitten by the dog even if the death
certificate stated a different cause of death.

The petitioner's contention that they could not be expected to exercise remote control of the dog is not acceptable. In fact, Article
2183 of the Civil Code holds the possessor liable even if the animal should "escape or be lost" and so be removed from his control.
And it does not matter either that, as the petitioners also contend, the dog was tame and was merely provoked by the child into
biting her. The law does not speak only of vicious animals but covers even tame ones as long as they cause injury.

As for the alleged provocation, the petitioners forget that Theness was only three years old at the time she was attacked and can
hardly be faulted for whatever she might have done to the animal.

It is worth observing that the above defenses of the petitioners are an implied rejection of their original posture that there was no proof that it
was the dog in their father's house that bit Theness.

According to Manresa the obligation imposed by Article 2183 of the Civil Code is not based on the negligence or on the presumed lack of
vigilance of the possessor or user of the animal causing the damage. It is based on natural equity and on the principle of social interest that he
who possesses animals for his utility, pleasure or service must answer for the damage which such animal may cause.

AFFIRMED

20

that the death certificate is not conclusive proof of the

NUISANCE
G.R. No. L-18390 August 6, 1971
PEDROJ.
VELASCO,vs.
MANILA ELECTRIC CO., WILLIAM SNYDER, its President; JOHN COTTON and HERMENEGILDO B. REYES, its Vice-Presidents; and
ANASTACIO A. AGAN, City Engineer of Quezon City, defendants-appellees.
REYES, J.B.L., J.:
FACTS:

In 1948, Velasco bought from the People's Homesite and Housing Corporation three (3) adjoining lots situated at the corner of South D and
South 6 Streets, Diliman, Quezon City.

These lots are within an area zoned out as a "first residence" district by the City Council of Quezon City.

Subsequently, the appellant sold two (2) lots to the Meralco, but retained the third lot, which was farthest from the street-corner, whereon he
built his house.

In September, 1953, the appellee company started the construction of the sub-station in question and finished it the following November,
without prior building permit or authority from the Public Service Commission.

The facility reduces high voltage electricity to a current suitable for distribution to the company's consumers, numbering not less than 8,500
residential homes, over 300 commercial establishments and about 30.

It was constructed at a distance of 10 to 20 meters from the Velascos house.

The company built a stone and cement wall at the sides along the streets but along the side adjoining the appellant's property it put up a
sawale wall but later changed it to an interlink wire fence.

It is undisputed that a sound unceasingly emanates from the substation. Whether this sound constitutes an actionable nuisance or not is the
principal issue in this case.

Velasco contends that the sound constitutes an actionable nuisance under Article 694 of the Civil Code of the Philippines, reading as follows:
A nuisance is any act, omission, establishment, business condition of property or anything else which:
(1) Injuries or endangers the health or safety of others; or
(2) Annoys or offends the senses;

because subjection to the sound since 1954 had disturbed the concentration and sleep of said appellant, and impaired his health and lowered the value
of his property.

Wherefore, he sought a judicial decree for the abatement of the nuisance and asked that he be declared entitled to recover compensatory,
moral and other damages under Article 2202 of the Civil Code.
ART. 2202. In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural and probable
consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could have
reasonably been foreseen by the defendant.

TC dismissed the claim of the plaintiff, finding that the sound of substation was unavoidable and did not constitute nuisance; that it could not
have caused the diseases of anxiety neurosis, pyelonephritis, ureteritis, lumbago and anemia; and that the items of damage claimed by
plaintiff were not adequate proved.

ISSUE: WON the noise from the Electric Company constitutes nuisance and WON Velasco is entitled to recover damages.

HELD: YES TO BOTH ISSUES


RATIO:

The general rule is that everyone is bound to bear the habitual or customary inconveniences that result from the proximity of others, and so
long as this level is not surpassed, he may not complain against them. But if the prejudice exceeds the inconveniences that such proximity
habitually brings, the neighbor who causes such disturbance is held responsible for the resulting damage, 1 being guilty of causing nuisance.

The basic principles are laid down in Tortorella vs. Traiser & Co., Inc., 90 ALR 1206:
A noise may constitute an actionable nuisance, but it must be a noise which affects injuriously the health or comfort of
ordinary people in the vicinity to an unreasonable extent. Injury to a particular person in a peculiar position or of specially
sensitive characteristics will not render the noise an actionable nuisance.
In the conditions of present living noise seems inseparable from the conduct of many necessary occupations. Its presence is a
nuisance in the popular sense in which that word is used, but in the absence of statute noise becomes actionable only when it
passes the limits of reasonable adjustment to the conditions of the locality and of the needs of the maker to the needs of
the listener. What those limits are cannot be fixed by any definite measure of quantity or quality. They depend upon the
circumstances of the particular case. They may be affected, but are not controlled, by zoning ordinances.
The delimitation of designated areas to use for manufacturing, industry or general business is not a license to emit every noise
profitably attending the conduct of any one of them.
The test is whether rights of property of health or of comfort are so injuriously affected by the noise in question that the
sufferer is subjected to a loss which goes beyond the reasonable limit imposed upon him by the condition of living, or of
holding property, in a particular locality in fact devoted to uses which involve the emission of noise although ordinary care
is taken to confine it within reasonable bounds; or in the vicinity of property of another owner who though creating a noise
is acting with reasonable regard for the rights of those affected by it.

With particular reference to noise emanating from electrical machinery and appliances, the court, in Kentucky & West Virginia Power Co. v.
Anderson, 156 S. W. 2d 857, after a review of authorities, ruled as follows:
The determinating factor when noise alone is the cause of complaint is not its intensity or volume. It is that the noise is of
such character as to produce actual physical discomfort and annoyance to a person of ordinary sensibilities, rendering
adjacent property less comfortable and valuable. If the noise does that it can well be said to be substantial and
unreasonable in degree; and reasonableness is a question of fact dependent upon all the circumstances and conditions

That of plaintiff Velasco is too plainly biased and emotional to be of much value.

His exaggerations are readily apparent in paragraph V of his amended complaint

The estimate of the other witnesses on the point of inquiry are vague and imprecise, and fail to give a definite idea of the intensity of the sound
complained of.

We are thus constrained to rely on quantitative measurements shown by the record.

Under instructions from the Director of Health, samplings of the sound intensity were taken by Dr. Jesus Almonte using a sound level meter
and other instruments. (refer to the case for valuations)

Thus the impartial and objective evidence points to the sound emitted by the appellee's substation transformers being of much higher level
than the ambient sound of the locality.

The measurements taken by Dr. Almonte, who is not connected with either party, and is a physician to boot (unlike appellee's electrical
superintendent Buenafe), appear more reliable.

The conclusion must be that, contrary to the finding of the trial court, the noise continuously emitted, day and night, constitutes an
actionable nuisance for which the appellant is entitled to relief, by requiring the appellee company to adopt the necessary measures
to deaden or reduce the sound at the plaintiff's house, by replacing the interlink wire fence with a partition made of sound absorbent
material, since the relocation of the substation is manifestly impracticable and would be prejudicial to the customers of the Electric
Company who are being serviced from the substation.

In Kentucky and West Virginia Co., Inc. vs. Anderson, 156 SW. 857, the average of three readings along the plaintiff's fence was only 44
decibels but, because the sound from the sub-station was interminable and monotonous, the court authorized an injunction and damages. In
the present case, the three readings along the property line are 52, 54 and 55 decibels. Plaintiff's case is manifestly stronger.

Constancio Soria testified that "The way the transformers are built, the humming sound cannot be avoided". On this testimony, the company
emphasizes that the substation was constructed for public convenience. Admitting that the sound cannot be eliminated, there is no proof that it
cannot be reduced. That the sub-station is needed for the Meralco to be able to serve well its customers is no reason, however, why it should
be operated to the detriment and discomfort of others. 2

The fact that the Meralco had received no complaint although it had been operating hereabouts for the past 50 years with substations similar
to the one in controversy is not a valid argument. The absence of suit neither lessens the company's liability under the law nor weakens
the right of others against it to demand their just due.

As to the damages caused by the noise, appellant Velasco, himself a physician, claimed that the noise, as a precipitating factor, has caused
him anxiety neurosis, which, in turn, predisposed him to, or is concomitant with, the other ailments which he was suffering at the time of the
trial, namely, pyelonephritis, ureteritis and others; that these resulted in the loss of his professional income and reduced his life expectancy.
There are, moreover, several factors that mitigate defendant's liability in damages. The first is that the noise from the substation does not
appear to be an exclusive causative factor of plaintiff-appellant's illnesses. This is proved by the circumstance that no other person in
Velasco's own household nor in his immediate neighborhood was shown to have become sick despite the noise complained of. There is also
evidence that at the time the plaintiff-appellant appears to have been largely indebted to various credit institutions, as a result of his
unsuccessful gubernatorial campaign, and this court can take judicial cognizance of the fact that financial worries can affect unfavorably the
debtor's disposition and mentality.

The other factor militating against full recovery by the petitioner Velasco in his passivity in the face of the damage caused to him by the noise
of the substation. Realizing as a physician that the latter was disturbing or depriving him of sleep and affecting both his physical and mental
well being, he did not take any steps to bring action to abate the nuisance or remove himself from the affected area as soon as the deleterious
effects became noticeable. To evade them appellant did not even have to sell his house; he could have leased it and rented other premises for
sleeping and maintaining his office and thus preserve his health as ordinary prudence demanded. Instead he obstinately stayed until his health
became gravely affected, apparently hoping that he would thereby saddle appellee with large damages.

The law in this jurisdiction is clear. Article 2203 prescribes that "The party suffering loss or injury must exercise the diligence of a
good father of a family to minimize the damages resulting from the act or omission in question". This codal rule, which embodies
the previous jurisprudence on the point, 3 clearly obligates the injured party to undertake measures that will alleviate and not
aggravate his condition after the infliction of the injury, and places upon him the burden of explaining why he could not do so. This
was not done.

Appellant Velasco introduced evidence to the effect that he tried to sell his house to Jose Valencia, Jr., in September, 1953, and on a 60 day
option, for P95,000.00, but that the prospective buyer backed out on account of his wife objecting to the noise of the substation.

Since there is no evidence upon which to compute any loss or damage allegedly incurred by the plaintiff by the frustration of the sale on
account of the noise, his claim therefore was correctly disallowed by the trial court. It may be added that there is no showing of any further
attempts on the part of appellant to dispose of the house, and this fact suffices to raise doubts as to whether he truly intended to dispose of it.
He had no actual need to do so in order to escape deterioration of his health, as heretofore noted.

The last issue is whether the City Engineer of Quezon City, Anastacio A. Agan, a co-defendant, may be held solidarily liable with Meralco.

Agan was included as a party defendant because he allegedly (1) did not require the Meralco to secure a building permit for the construction
of the substation; (2) even defended its construction by not insisting on such building permit; and (3) did not initiate its removal or demolition
and the criminal prosecution of the officials of the Meralco. The record does not support these allegations. On the first plea, it was not Agan's
duty to require the Meralco to secure a permit before the construction but for Meralco to apply for it, as per Section 1. Ordinance No. 1530, of
Quezon City. The second allegation is not true, because Agan wrote the Meralco requiring it to submit the plan and to pay permit fees (T.s.n.,
14 January 1960, pages 2081-2082). On the third allegation, no law or ordinance has been cited specifying that it is the city engineer's duty to
initiate the removal or demolition of, or for the criminal prosecution of, those persons who are responsible for the nuisance. Republic Act 537,
Section 24 (d), relied upon by the plaintiff, requires an order by, or previous approval of, the mayor for the city engineer to cause or order the
removal of buildings or structures in violation of law or ordinances, but the mayor could not be expected to take action because he was of the
belief, as he testified, that the sound "did not have any effect on his body."

FOR THE FOREGOING REASONS, the appealed decision is hereby reversed in part and affirmed in part. The defendant-appellee Manila
Electric Company is hereby ordered to either transfer its substation at South D and South 6 Streets, Diliman, Quezon City, or take appropriate
measures to reduce its noise at the property line between the defendant company's compound and that of the plaintiff-appellant to an average
of forty (40) to fifty (50) decibels within 90 days from finality of this decision; and to pay the said plaintiff-appellant P20,000.00 in damages and
P5,000.00 for attorney's fees. In all other respects, the appealed decision is affirmed. No costs.

PRODUCT AND SERVICE LIABILITY


NAVIDA VS HON DIZON GR 125598, MAY 30, 2011 LEONARDO-DE CASTRO, J.:
Proceedings before the Texas Courts

Beginning 1993, a number of personal injury suits were filed in different Texas state courts by citizens of twelve foreign countries, including the
Philippines.

The thousands of plaintiffs sought damages for injuries they allegedly sustained from their exposure to dibromochloropropane (DBCP), a
chemical used to kill nematodes (worms), while working on farms in 23 foreign countries.

The cases were eventually transferred to, and consolidated in, the Federal District Court for the Southern District of Texas, Houston Division.

The cases therein that involved plaintiffs from the Philippines were "Jorge Colindres Carcamo, et al. v. Shell Oil Co., et al.," which was
docketed as Civil Action No. H-94-1359, and "Juan Ramon Valdez, et al. v. Shell Oil Co., et al.," which was docketed as Civil Action No. H-951356.

The defendants in the consolidated cases prayed for the dismissal of all the actions under the doctrine of forum non conveniens.

July 11, 1995, the Federal District Court conditionally granted the defendants motion to dismiss. Pertinently, the court ordered that:

Notwithstanding the dismissals that may result from this Memorandum and Order, in the event that the highest court of any foreign country
finally affirms the dismissal for lack of jurisdiction of an action commenced by a plaintiff in these actions in his home country or the country in
which he was injured, that plaintiff may return to this court and, upon proper motion, the court will resume jurisdiction over the action as if the
case had never been dismissed for [forum non conveniens].

Civil Case No. 5617 before the RTC of General Santos City and G.R. Nos. 125078 and 125598

In accordance with the above Memorandum and Order, a total of 336 plaintiffs from General Santos City (the petitioners in G.R. No. 125078,
hereinafter referred to as NAVIDA, et al.) filed a Joint Complaint in the RTC of General Santos City on August 10, 1995.

Defendants therein were: Shell Oil Co. (SHELL); Dow Chemical Co. (DOW); Occidental Chemical Corp. (OCCIDENTAL); Dole Food Co., Inc.,
Dole Fresh Fruit Co., Standard Fruit Co., Standard Fruit and Steamship Co. (hereinafter collectively referred to as DOLE); Chiquita Brands,
Inc. and Chiquita Brands International, Inc. (CHIQUITA); Del Monte Fresh Produce N.A. and Del Monte Tropical Fruit Co. (hereinafter
collectively referred to as DEL MONTE); Dead Sea Bromine Co., Ltd.; Ameribrom, Inc.; Bromine Compounds, Ltd.; and Amvac Chemical Corp.

Navida, et al., prayed for the payment of damages in view of the illnesses and injuries to the reproductive systems which they
allegedly suffered because of their exposure to DBCP.

They claimed, among others, that they were exposed to this chemical during the early 1970s up to the early 1980s when they used the same
in the banana plantations where they worked at; and/or when they resided within the agricultural area where such chemical was used.

Navida, et al., claimed that their illnesses and injuries were due to the fault or negligence of each of the defendant companies in that they
produced, sold and/or otherwise put into the stream of commerce DBCP-containing products.

According to NAVIDA, et al., they were allowed to be exposed to the said products, which the defendant companies knew, or ought to have
known, were highly injurious to the formers health and well-being.

RTC of General Santos City issued an Order dismissing the complaint. First, the trial court determined that it did not have jurisdiction to hear
the case. Second, the RTC of General Santos City declared that the tort alleged by Navida, et al., in their complaint is a tort category that is
not recognized in Philippine laws.

The specific tort asserted against defendant foreign companies in the present complaint is product liability tort.

When the averments in the present complaint are examined in terms of the particular categories of tort recognized in the Philippine Civil Code,
it becomes stark clear that such averments describe and identify the category of specific tort known as product liability tort.

This is necessarily so, because it is the product manufactured by defendant foreign companies, which is asserted to be the proximate cause of
the damages sustained by the plaintiff workers, and the liability of the defendant foreign companies, is premised on being the manufacturer of
the pesticides.

It is clear, therefore, that the Regional Trial Court has jurisdiction over the present case, if and only if the Civil Code of the Philippines, or a
suppletory special law prescribes a product liability tort, inclusive of and comprehending the specific tort described in the complaint of the
plaintiff workers.

Third, the RTC of General Santos City adjudged that Navida, et al., were coerced into submitting their case to the Philippine courts, but rather
were coerced to do so, merely to comply with the U.S. District Courts Order dated July 11, 1995, and in order to keep open to the plaintiffs the
opportunity to return to the U.S. District Court.

Fourth, THE DEFENDANTS SUBMISSION TO JURISDICTION IS CONDITIONAL AS IT IS ILLUSORY

THE JURISDICTION FROWNS UPON AND PROHIBITS FORUM SHOPPING

THE FILING OF THE CASE IN U.S. DIVESTED THIS COURT OF ITS OWN JURISDICTION

THIS CASE IS BARRED BY THE RULE OF "LITIS PENDENCIA"

Civil Case No. 24,251-96 before the RTC of Davao City and G.R. Nos. 126654, 127856, and 128398

Another joint complaint for damages against SHELL, DOW, OCCIDENTAL, DOLE, DEL MONTE, and CHIQUITA was filed before Branch 16 of
the RTC of Davao City by 155 plaintiffs from Davao City. These plaintiffs (the petitioners in G.R. No. 126654, hereinafter referred to as
ABELLA, et al.) amended their Joint-Complaint on May 21, 1996.

Similar to the complaint of NAVIDA, et al., ABELLA, et al., alleged that, as workers in the banana plantation and/or as residents near the
said plantation, they were made to use and/or were exposed to nematocides, which contained the chemical DBCP. According to
ABELLA, et al., such exposure resulted in "serious and permanent injuries to their health, including, but not limited to, sterility and
severe injuries to their reproductive capacities."

ABELLA, et al., claimed that the defendant companies manufactured, produced, sold, distributed, used, and/or made available in commerce,
DBCP without warning the users of its hazardous effects on health, and without providing instructions on its proper use and application, which
the defendant companies knew or ought to have known, had they exercised ordinary care and prudence.

The RTC of Davao City, however, junked Civil Case No. 24,251-96

Upon a thorough review of the Complaint and Amended Complaint For: Damages filed by the plaintiffs against the defendants, all foreign corporations
with Philippine Representatives, the Court, is convinced that plaintiffs "would have this Honorable Court dismiss the case to pave the way for their
getting an affirmance by the Supreme Court" Consider these:
1) In the original Joint Complaint, plaintiffs state that: defendants have no properties in the Philippines; they have no agents as well; plaintiffs are suing
the defendants for tortuous acts committed by these foreign corporations on their respective countries, as plaintiffs, after having elected to sue in the
place of defendants residence, are now compelled by a decision of a Texas District Court to file cases under torts in this jurisdiction for causes of actions
which occurred abroad; a petition was filed by same plaintiffs against same defendants in the Courts of Texas, USA, plaintiffs seeking for payment of
damages based on negligence, strict liability, conspiracy and international tort theories (par. 27); upon defendants Motion to Dismiss on Forum non
[conveniens], said petition was provisionally dismissed on condition that these cases be filed in the Philippines or before 11 August 1995 (Philippine
date; Should the Philippine Courts refuse or deny jurisdiction, the U. S. Courts will reassume jurisdiction.)
11. In the Amended Joint Complaint, plaintiffs aver that: on 11 July 1995, the Federal District Court issued a Memorandum and Order conditionally
dismissing several of the consolidated actions including those filed by the Filipino complainants. One of the conditions imposed was for the plaintiffs to
file actions in their home countries or the countries in which they were injured x x x. Notwithstanding, the Memorandum and [O]rder further provided that
should the highest court of any foreign country affirm the dismissal for lack of jurisdictions over these actions filed by the plaintiffs in their home countries
[or] the countries where they were injured, the said plaintiffs may return to that court and, upon proper motion, the Court will resume jurisdiction as if the
case had never been dismissed for forum non conveniens.
The Court however is constrained to dismiss the case at bar not solely on the basis of the above but because it shares the opinion of legal experts given
in the interview made by the Inquirer in its Special report "Pesticide Cause Mass Sterility," to wit:
1. Former Justice Secretary Demetrio Demetria in a May 1995 opinion said: The Philippines should be an inconvenient forum to file this kind of
damage suit against foreign companies since the causes of action alleged in the petition do not exist under Philippine laws. There has been no
decided case in Philippine Jurisprudence awarding to those adversely affected by DBCP. This means there is no available evidence which will
prove and disprove the relation between sterility and DBCP.
2. Retired Supreme Court Justice Abraham Sarmiento opined that while a class suit is allowed in the Philippines the device has been
employed strictly. Mass sterility will not qualify as a class suit injury within the contemplation of Philippine statute.
3. Retired High Court Justice Rodolfo Nocom stated that there is simply an absence of doctrine here that permits these causes to be heard.
No product liability ever filed or tried here.
HENCE THIS PETITION

ISSUE: WON the RP has jurisdiction over the case.


HELD: YES, REMANDED TO RTC
RATIO:

According to ABELLA, et al., the RTC of Davao City has jurisdiction over the subject matter of the case since Articles 2176 and 2187 of the
Civil Code are broad enough to cover the acts complained of and to support their claims for damages.

ABELLA, et al., further aver that the dismissal of the case, based on the opinions of legal luminaries reported in a newspaper, by the RTC of
Davao City is bereft of basis.

According to them, their cause of action is based on quasi-delict under Article 2176 of the Civil Code.

They also maintain that the absence of jurisprudence regarding the award of damages in favor of those adversely affected by the DBCP does
not preclude them from presenting evidence to prove their allegations that their exposure to DBCP caused their sterility and/or infertility.

In the Resolutions dated February 10, 1997, April 28, 1997, and March 10, 1999, this Court consolidated G.R. Nos. 125078, 125598, 126654,
127856, and 128398.

The Consolidated Motion to Drop DOW, OCCIDENTAL, and SHELL as Party-Respondents filed by NAVIDA, et al. and ABELLA, et al.

The plaintiff claimants alleged that they had amicably settled their cases with DOW, OCCIDENTAL, and SHELL sometime in July 1997. This
settlement agreement was evidenced by facsimiles of the "Compromise Settlement, Indemnity, and Hold Harmless Agreement," which were
attached to the said motion. Pursuant to said agreement, the plaintiff claimants sought to withdraw their petitions as against DOW,
OCCIDENTAL, and SHELL.

The Motion to Withdraw Petition for Review in G.R. No. 125598

On July 13, 2004, DOW and OCCIDENTAL filed a Motion to Withdraw Petition for Review in G.R. No. 125598, 53explaining that the said
petition "is already moot and academic and no longer presents a justiciable controversy" since they have already entered into an amicable
settlement with NAVIDA, et al. DOW and OCCIDENTAL added that they have fully complied with their obligations set forth in the 1997
Compromise Agreements.

NAVIDA, et al., also filed their Comment dated September 14, 2004, 55 stating that they agree with the view of DOW and OCCIDENTAL that the
petition in G.R. No. 125598 has become moot and academic because Civil Case No. 5617 had already been amicably settled by the parties in
1997.

On the issue of jurisdiction

Essentially, the crux of the controversy in the petitions at bar is whether the RTC of General Santos City and the RTC of Davao City erred in
dismissing Civil Case Nos. 5617 and 24,251-96, respectively, for lack of jurisdiction.

NAVIDA, et al., and ABELLA, et al., argue that the allegedly tortious acts and/or omissions of defendant companies occurred within Philippine
territory.

Specifically, the use of and exposure to DBCP that was manufactured, distributed or otherwise put into the stream of commerce by defendant
companies happened in the Philippines.

Said fact allegedly constitutes reasonable basis for our courts to assume jurisdiction over the case.

Furthermore, NAVIDA, et al., and ABELLA, et al., assert that the provisions of Chapter 2 of the Preliminary Title of the Civil Code, as well as
Article 2176 thereof, are broad enough to cover their claim for damages. Thus, NAVIDA, et al., and ABELLA, et al., pray that the respective
rulings of the RTC of General Santos City and the RTC of Davao City in Civil Case Nos. 5617 and 24,251-96 be reversed and that the said
cases be remanded to the courts a quo for further proceedings.

DOLE similarly maintains that the acts attributed to defendant companies constitute a quasi-delict, which falls under Article 2176 of the Civil
Code.

In addition, DOLE states that if there were no actionable wrongs committed under Philippine law, the courts a quo should have dismissed the
civil cases on the ground that the Amended Joint-Complaints of NAVIDA, et al., and ABELLA, et al., stated no cause of action against the
defendant companies.

The court may still resolve the case, applying the customs of the place and, in the absence thereof, the general principles of law. DOLE posits
that the Philippines is the situs of the tortious acts allegedly committed by defendant companies as NAVIDA, et al., and ABELLA, et al., point to

their alleged exposure to DBCP which occurred in the Philippines, as the cause of the sterility and other reproductive system problems that
they allegedly suffered.

Finally, DOLE adds that the RTC of Davao City gravely erred in relying upon newspaper reports in dismissing Civil Case No. 24,251-96 given
that newspaper articles are hearsay and without any evidentiary value.

In a similar vein, CHIQUITA argues that the courts a quo had jurisdiction over the subject matter of the cases filed before them. The Amended
Joint-Complaints sought approximately P2.7 million in damages for each plaintiff claimant, which amount falls within the jurisdiction of the
RTC.

CHIQUITA avers that the pertinent matter is the place of the alleged exposure to DBCP, not the place of manufacture, packaging, distribution,
sale, etc., of the said chemical.

This is in consonance with the lex loci delicti commisi theory in determining the situs of a tort, which states that the law of the place where the
alleged wrong was committed will govern the action.

CHIQUITA and the other defendant companies also submitted themselves to the jurisdiction of the RTC by making voluntary appearances and
seeking for affirmative reliefs during the course of the proceedings. None of the defendant companies ever objected to the exercise of
jurisdiction by the courts a quo over their persons. CHIQUITA, thus, prays for the remand of Civil Case Nos. 5617 and 24,251-96 to the RTC of
General Santos City and the RTC of Davao City, respectively.

The RTC of General Santos City and the RTC of Davao City have jurisdiction over Civil Case Nos. 5617 and 24,251-96, respectively

The rule is settled that jurisdiction over the subject matter of a case is conferred by law and is determined by the allegations in the complaint
and the character of the relief sought, irrespective of whether the plaintiffs are entitled to all or some of the claims asserted therein. 59 Once
vested by law, on a particular court or body, the jurisdiction over the subject matter or nature of the action cannot be dislodged by anybody
other than by the legislature through the enactment of a law.

At the time of the filing of the complaints, the jurisdiction of the RTC in civil cases under Batas Pambansa Blg. 129, as amended by Republic Act No.
7691, was:
SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction:
(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses, and costs or the value of
the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive
of the abovementioned items exceeds Two hundred thousand pesos (P200,000.00).60

From the foregoing, it is clear that the claim for damages is the main cause of action and that the total amount sought in the complaints is
approximately P2.7 million for each of the plaintiff claimants.

The RTCs unmistakably have jurisdiction over the cases filed in General Santos City and Davao City, as both claims by NAVIDA, et al., and
ABELLA, et al., fall within the purview of the definition of the jurisdiction of the RTC under Batas Pambansa Blg. 129.

THE CAUSES OF ACTION


4. The Defendants manufactured, sold, distributed, used, AND/OR MADE AVAILABLE IN COMMERCE nematocides containing the chemical
dibromochloropropane, commonly known as DBCP. THE CHEMICAL WAS USED AGAINST the parasite known as the nematode, which plagued
banana plantations, INCLUDING THOSE in the Philippines. AS IT TURNED OUT, DBCP not only destroyed nematodes. IT ALSO CAUSED ILLEFFECTS ON THE HEALTH OF PERSONS EXPOSED TO IT AFFECTING the human reproductive system as well.
5. The plaintiffs were exposed to DBCP in the 1970s up to the early 1980s WHILE (a) they used this product in the banana plantations WHERE they
were employed, and/or (b) they resided within the agricultural area WHERE IT WAS USED. As a result of such exposure, the plaintiffs suffered serious
and permanent injuries TO THEIR HEALTH, including, but not limited to, STERILITY and severe injuries to their reproductive capacities.
6. THE DEFENDANTS WERE AT FAULT OR WERE NEGLIGENT IN THAT THEY MANUFACTURED, produced, sold, and/or USED DBCP and/or
otherwise, PUT THE SAME into the stream of commerce, WITHOUT INFORMING THE USERS OF ITS HAZARDOUS EFFECTS ON HEALTH AND/OR
WITHOUT INSTRUCTIONS ON ITS PROPER USE AND APPLICATION. THEY allowed Plaintiffs to be exposed to, DBCP-containing materials which
THEY knew, or in the exercise of ordinary care and prudence ought to have known, were highly harmful and injurious to the Plaintiffs health and wellbeing.
7. The Defendants WHO MANUFACTURED, PRODUCED, SOLD, DISTRIBUTED, MADE AVAILABLE OR PUT DBCP INTO THE STREAM OF
COMMERCE were negligent OR AT FAULT in that they
a. Failed to adequately warn Plaintiffs of the dangerous characteristics of DBCP, or to cause their subsidiaries or affiliates to so warn plaintiffs;

b. Failed to provide plaintiffs with information as to what should be reasonably safe and sufficient clothing and proper protective equipment
and appliances, if any, to protect plaintiffs from the harmful effects of exposure to DBCP, or to cause their subsidiaries or affiliates to do so;
c. Failed to place adequate warnings, in a language understandable to the worker, on containers of DBCP-containing materials to warn of the
dangers to health of coming into contact with DBCP, or to cause their subsidiaries or affiliates to do so;
d. Failed to take reasonable precaution or to exercise reasonable care to publish, adopt and enforce a safety plan and a safe method of
handling and applying DBCP, or to cause their subsidiaries or affiliates to do so;
e. Failed to test DBCP prior to releasing these products for sale, or to cause their subsidiaries or affiliates to do so; and
f. Failed to reveal the results of tests conducted on DBCP to each plaintiff, governmental agencies and the public, or to cause their
subsidiaries or affiliate to do so.
8. The illnesses and injuries of each plaintiff are also due to the FAULT or negligence of defendants Standard Fruit Company, Dole Fresh Fruit Company,
Dole Food Company, Inc., Chiquita Brands, Inc. and Chiquita Brands International, Inc. in that they failed to exercise reasonable care to prevent each
plaintiffs harmful exposure to DBCP-containing products which defendants knew or should have known were hazardous to each plaintiff in that they,
AMONG OTHERS:
a. Failed to adequately supervise and instruct Plaintiffs in the safe and proper application of DBCP-containing products;
b. Failed to implement proper methods and techniques of application of said products, or to cause such to be implemented;
c. Failed to warn Plaintiffs of the hazards of exposure to said products or to cause them to be so warned;
d. Failed to test said products for adverse health effects, or to cause said products to be tested;
e. Concealed from Plaintiffs information concerning the observed effects of said products on Plaintiffs;
f. Failed to monitor the health of plaintiffs exposed to said products;
g. Failed to place adequate labels on containers of said products to warn them of the damages of said products; and
h. Failed to use substitute nematocides for said products or to cause such substitutes to [be] used. 62 (Emphasis supplied and words in
brackets ours.)

Thus, these allegations in the complaints constitute the cause of action of plaintiff claimants a quasi-delict, which under the Civil Code is
defined as an act, or omission which causes damage to another, there being fault or negligence. To be precise, Article 2176 of the Civil Code
provides:..

Clearly then, the acts and/or omissions attributed to the defendant companies constitute a quasi-delict which is the basis for the claim for
damages filed by NAVIDA, et al., and ABELLA, et al., with individual claims of approximately P2.7 million for each plaintiff claimant, which
obviously falls within the purview of the civil action jurisdiction of the RTCs.

Moreover, the injuries and illnesses, which NAVIDA, et al., and ABELLA, et al., allegedly suffered resulted from their exposure to DBCP while
they were employed in the banana plantations located in the Philippines or while they were residing within the agricultural areas also located in
the Philippines.

The factual allegations in the Amended Joint-Complaints all point to their cause of action, which undeniably occurred in the Philippines. The
RTC of General Santos City and the RTC of Davao City obviously have reasonable basis to assume jurisdiction over the cases.

In a very real sense, most of the evidence required to prove the claims of NAVIDA, et al., and ABELLA, et al., are available only in the
Philippines.

First, plaintiff claimants are all residents of the Philippines, either in General Santos City or in Davao City.

Second, the specific areas where they were allegedly exposed to the chemical DBCP are within the territorial jurisdiction of the courts a quo
wherein NAVIDA, et al., and ABELLA, et al., initially filed their claims for damages.

Third, the testimonial and documentary evidence from important witnesses, such as doctors, co-workers, family members and other members
of the community, would be easier to gather in the Philippines.

The RTC of General Santos City and the RTC of Davao City validly acquired jurisdiction over the persons of all the defendant companies

All parties voluntarily, unconditionally and knowingly appeared and submitted themselves to the jurisdiction of the courts a quo.

It may also be pertinently stressed that "jurisdiction" is different from the "exercise of jurisdiction." Jurisdiction refers to the authority to decide a
case, not the orders or the decision rendered therein. Accordingly, where a court has jurisdiction over the persons of the defendants and the
subject matter, as in the case of the courts a quo, the decision on all questions arising therefrom is but an exercise of such jurisdiction. Any
error that the court may commit in the exercise of its jurisdiction is merely an error of judgment, which does not affect its authority to decide the
case, much less divest the court of the jurisdiction over the case.70

Plaintiffs purported bad faith in filing the subject civil cases in Philippine courts

Court finds such argument much too speculative to deserve any merit.

Under Article 2028 of the Civil Code, "[a] compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an
end to one already commenced." Like any other contract, an extrajudicial compromise agreement is not excepted from rules and principles of a contract.
It is a consensual contract, perfected by mere consent, the latter being manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. 76 Judicial approval is not required for its perfection. 77 A compromise has upon the parties the effect and
authority of res judicata78 and this holds true even if the agreement has not been judicially approved. 79 In addition, as a binding contract, a compromise
agreement determines the rights and obligations of only the parties to it.80
In light of the foregoing legal precepts, the RTC of General Santos City and the RTC of Davao City should first receive in evidence and examine all of
the alleged compromise settlements involved in the cases at bar to determine the propriety of dropping any party as a defendant therefrom.
It is true that, under Article 2194 of the Civil Code, the responsibility of two or more persons who are liable for the same quasi-delict is solidary. A solidary
obligation is one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the
whole obligation from any or all of the debtors.81
In the cases at bar, there is no right of reimbursement to speak of as yet. A trial on the merits must necessarily be conducted first in order to establish
whether or not defendant companies are liable for the claims for damages filed by the plaintiff claimants, which would necessarily give rise to an
obligation to pay on the part of the defendants.
WHEREFORE, the Court hereby GRANTS the petitions for review on certiorari in G.R. Nos. 125078, 126654, and 128398. We REVERSE and SET
ASIDE the Order dated May 20, 1996 of the Regional Trial Court of General Santos City, Branch 37, in Civil Case No. 5617, and the Order dated
October 1, 1996 of the Regional Trial Court of Davao City, Branch 16, and its subsequent Order dated December 16, 1996 denying reconsideration in
Civil Case No. 24,251-96, and REMAND the records of this case to the respective Regional Trial Courts of origin for further and appropriate proceedings
in line with the ruling herein that said courts have jurisdiction over the subject matter of the amended complaints in Civil Case Nos. 5617 and 24,251-96.
SO ORDERED.
CONTINENTAL CEMENT
ERIKSON,** Respondents.

CORPORATION

VS

ASEA BROWN

BOVERI,

INC.,

BBC

BROWN

BOVERI,

CORP.,

AND

TORD

B.

DEL CASTILLO, J.:


"Except as provided by law or by stipulation, one is 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 or compensatory damages."1
FACTS:

Sometime in July 1990, petitioner Continental Cement Corporation (CCC),a corporation engaged in the business of producing
cement,5 obtained the services of respondents6 Asea Brown Boveri, Inc. (ABB) and BBC Brown Boveri, Corp. to repair its 160 KW Kiln DC
Drive Motor (Kiln Drive Motor).7

On October 23, 1991, due to the repeated failure of respondents to repair the Kiln Drive Motor, petitioner filed with Branch 101 of the RTC of
Quezon City a Complaint for sum of money and damages, against respondent corporations and respondent Tord B. Eriksson (Eriksson), VicePresident of the Service Division of the respondent ABB.9

Petitioner alleged that: On July 11, 1990, the plaintiff delivered the 160 KW Kiln DC Drive Motor to the defendants to be repaired.

The defendant, Tord B. Eriksson, was personally directing the repair of the said Kiln Drive Motor.

After the first repair by the defendants, the 160 KW Kiln Drive Motor was installed for testing on October 3, 1990.

On October 4, 1990 the test failed. The plaintiff removed the DC Drive Motor and replaced it with its old motor. It was only on October 9, 1990
that the plaintiff resumed operation. The plaintiff lost 1,040 MTD per day from October 5 to October 9, 1990.

On November 14, 1990, after the defendants had undertaken the second repair of the motor in question, it was installed in the kiln. The test
failed again.

The plaintiff resumed operation with its old motor on November 19, 1990. The plaintiff suffered production losses for five days at the rate of
1,040 MTD daily.

The defendants were given a third chance to repair the 160 KW Kiln DC Drive Motor.

On March 13, 1991, the motor was installed and tested. Again, the test failed. The plaintiff resumed operation on March 15, 1991. The plaintiff
sustained production losses at the rate of 1,040 MTD for two days.

As a consequence of the failure of the defendants to comply with their contractual obligation to repair the 160 KW Kiln DC Drive Motor, the
plaintiff sustained the Total Damages OF 10,983,017.42

The plaintiff has made several demands on the defendants for the payment of the above-enumerated damages, but the latter refused to do so
without valid justification.

Respondents claimed that under Clause 7 of the General Conditions,11 attached to the letter of offer12dated July 4, 1990 issued by respondent
ABB to petitioner, the liability of respondent ABB "does not extend to consequential damages either direct or indirect." 13

RTC: in favor of petitioner. The RTC rejected the defense of limited liability interposed by respondents since they failed to prove that petitioner
received a copy of the General Conditions.

CA: REVERSED The CA applied the exculpatory clause in the General Conditions and ruled that there is no implied warranty on repair work;
thus, the repairman cannot be made to pay for loss of production as a result of the unsuccessful repair.

Issues
1. Whether the [CA] gravely erred in applying the terms of the "General Conditions" of Purchase Orders Nos. 17136 and 17137 to exculpate
the respondents from liability in this case.
2. Whether the [CA] seriously erred in applying the concepts of implied warranty and warranty against hidden defects of the New Civil Code
in order to exculpate the respondents from its contractual obligation.24
HELD:YES TO BOTH
RATIO:
Petitioners Arguments

Petitioner reiterates that the General Conditions cannot exculpate respondents because petitioner never agreed to be bound by it nor did
petitioner receive a copy of it.25

Petitioner contends that these concepts are not applicable because the instant case does not involve a contract of sale. 27 What applies are
Articles 1170 and 2201 of the Civil Code.28

Respondents Arguments

Conversely, respondents insist that petitioner is bound by the General Conditions.29

By issuing Purchase Order Nos. 17136-37, petitioner in effect accepted the General Conditions appended to respondent ABBs letter of
offer.30

Respondents likewise defend the ruling of the CA that there could be no implied warranty on the repair made by respondent ABB as the
warranty of the fitness of the equipment should be enforced directly against the manufacturer of the Kiln Drive Motor.

SC: Petitioner and respondent ABB entered into a contract for the repair of petitioners Kiln Drive Motor with the following terms and conditions:
a) Total Price: P197,450.00

b) Delivery Date: August 29, 1990 or six (6) weeks from receipt of order and down payment34
c) Penalty: One half of one percent of the total cost or Nine Hundred Eighty Seven Pesos and Twenty five centavos (P987.25) per day of
delay.
Respondent ABB, however, not only incurred delay in performing its obligation but likewise failed to repair the Kiln Drive Motor; thus, prompting petitioner
to sue for damages.
Clause 7 of the General Conditions is not binding on petitioner

Respondents contend that under Clause 7 of the General Conditions their liability "does not extend to consequential damages either direct or
indirect."35 This IS unavailing because respondents failed to show that petitioner was duly furnished with a copy of said General Conditions.

Having breached the contract it entered with petitioner, respondent ABB is liable for damages pursuant to Articles 1167, 1170, and 2201 of the
Civil Code, which state:

Based on the foregoing, a repairman who fails to perform his obligation is liable to pay for the cost of the execution of the obligation plus
damages.

Petitioner is entitled to penalties under Purchase Order Nos. 17136-37

As per Purchase Order Nos. 17136-37, petitioner is entitled to penalties in the amount of P987.25 per day from the time of delay, August 30,
1990, up to the time the Kiln Drive Motor was finally returned to petitioner.

Records show that although the testing of Kiln Drive Motor was done on March 13, 1991, the said motor was actually delivered to petitioner as
early as January 7, 1991.37

The installation and testing was done only on March 13, 1991 upon the request of petitioner because the Kiln was under repair at the time the
motor was delivered; hence, the load testing had to be postponed.38

Under Article 122639 of the Civil Code, the penalty clause takes the place of indemnity for damages and the payment of interests in case of
non-compliance with the obligation, unless there is a stipulation to the contrary. In this case, since there is no stipulation to the contrary, the
penalty in the amount of P987.25 per day of delay covers all other damages (i.e. production loss, labor cost, and rental of the crane) claimed
by petitioner.

Petitioner is not entitled to recover production loss, labor cost and the rental of crane

Article 1226 of the Civil Code further provides that if the obligor refuses to pay the penalty, such as in the instant case,
interests may still be recovered on top of the penalty.

Damages claimed must be the natural and probable consequences of the breach, which the parties have foreseen or could have reasonably
foreseen at the time the obligation was constituted.41

Thus, in addition to the penalties, petitioner seeks to recover as damages production loss, labor cost and the rental of the crane.

Besides, consequential damages, such as loss of profits on account of delay or failure of delivery, may be recovered only if such damages
were reasonably foreseen or have been brought within the contemplation of the parties as the probable result of a breach at the time of or
prior to contracting.48

Considering the nature of the obligation in the instant case, respondent ABB, at the time it agreed to repair petitioners Kiln Drive Motor, could
not have reasonably foreseen that it would be made liable for production loss, labor cost and rental of the crane in case it fails to repair the
motor or incurs delay in delivering the same, especially since the motor under repair was a spare motor.49

For the foregoing reasons, petitioner is not entitled to recover production loss, labor cost and the rental of the crane.

BUSINESS TORTS
A.

CONTRACTUAL INTERFERENCE, ART. 1314, CC

40

damages and

ALLAN
C.
GO,
doing
business
under
the
vs. MORTIMER F. CORDERO, Respondent.VILLARAMA, JR., J.:

name

and

style

"ACG

Express

Liner," Petitioner,

For review is the Decision1 dated March 16, 2004 as modified by the Resolution 2 dated July 22, 2004 of the Court of Appeals (CA) in CA-G.R. CV No.
69113, which affirmed with modifications the Decision 3 dated May 31, 2000 of the Regional Trial Court (RTC) of Quezon City, Branch 85 in Civil Case
No. 98-35332.
The factual antecedents:
Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation (Pamana), ventured into the business of marketing interisland passenger vessels. After contacting various overseas fast ferry manufacturers from all over the world, he came to meet Tony Robinson, an
Australian national based in Brisbane, Australia, who is the Managing Director of Aluminium Fast Ferries Australia (AFFA).
Between June and August 1997, Robinson signed documents appointing Cordero as the exclusive distributor of AFFA catamaran and other fast ferry
vessels in the Philippines. As such exclusive distributor, Cordero offered for sale to prospective buyers the 25-meter Aluminium Passenger catamaran
known as the SEACAT 25.4
After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C. Go who is the owner/operator of ACG Express Liner of Cebu City, a
single proprietorship, Cordero was able to close a deal for the purchase of two (2) SEACAT 25 as evidenced by the Memorandum of Agreement dated
August 7, 1997.5 Accordingly, the parties executed Shipbuilding Contract No. 7825 for one (1) high-speed catamaran (SEACAT 25) for the price of
US$1,465,512.00.6 Per agreement between Robinson and Cordero, the latter shall receive commissions totalling US$328,742.00, or 22.43% of the
purchase price, from the sale of each vessel.7
Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia, and on one (1) occasion even accompanied Go and his family and Landicho, to
monitor the progress of the building of the vessel. He shouldered all the expenses for airfare, food, hotel accommodations, transportation and
entertainment during these trips. He also spent for long distance telephone calls to communicate regularly with Robinson, Go, Tecson and Landicho.
However, Cordero later discovered that Go was dealing directly with Robinson when he was informed by Dennis Padua of Wartsila Philippines that Go
was canvassing for a second catamaran engine from their company which provided the ship engine for the first SEACAT 25. Padua told Cordero that Go
instructed him to fax the requested quotation of the second engine to the Park Royal Hotel in Brisbane where Go was then staying. Cordero tried to
contact Go and Landicho to confirm the matter but they were nowhere to be found, while Robinson refused to answer his calls. Cordero immediately
flew to Brisbane to clarify matters with Robinson, only to find out that Go and Landicho were already there in Brisbane negotiating for the sale of the
second SEACAT 25. Despite repeated follow-up calls, no explanation was given by Robinson, Go, Landicho and Tecson who even made Cordero
believe there would be no further sale between AFFA and ACG Express Liner.
In a handwritten letter dated June 24, 1998, Cordero informed Go that such act of dealing directly with Robinson violated his exclusive distributorship
and demanded that they respect the same, without prejudice to legal action against him and Robinson should they fail to heed the same. 8 Corderos
lawyer, Atty. Ernesto A. Tabujara, Jr. of ACCRA law firm, also wrote ACG Express Liner assailing the fraudulent actuations and misrepresentations
committed by Go in connivance with his lawyers (Landicho and Tecson) in breach of Corderos exclusive distributorship appointment. 9
Having been apprised of Corderos demand letter, Thyne & Macartney, the lawyer of AFFA and Robinson, faxed a letter to ACCRA law firm asserting that
the appointment of Cordero as AFFAs distributor was for the purpose of one (1) transaction only, that is, the purchase of a high-speed catamaran vessel
by ACG Express Liner in August 1997. The letter further stated that Cordero was offered the exclusive distributorship, the terms of which were contained
in a draft agreement which Cordero allegedly failed to return to AFFA within a reasonable time, and which offer is already being revoked by AFFA. 10
As to the response of Go, Landicho and Tecson to his demand letter, Cordero testified before the trial court that on the same day, Landicho, acting on
behalf of Go, talked to him over the telephone and offered to amicably settle their dispute. Tecson and Landicho offered to convince Go to honor his
exclusive distributorship with AFFA and to purchase all vessels for ACG Express Liner through him for the next three (3) years. In an effort to amicably
settle the matter, Landicho, acting in behalf of Go, set up a meeting with Cordero on June 29, 1998 between 9:30 p.m. to 10:30 p.m. at the Mactan
Island Resort Hotel lobby. On said date, however, only Landicho and Tecson came and no reason was given for Gos absence. Tecson and Landicho
proposed that they will convince Go to pay him US$1,500,000.00 on the condition that they will get a cut of 20%. And so it was agreed between him,
Landicho and Tecson that the latter would give him a weekly status report and that the matter will be settled in three (3) to four (4) weeks and neither
party will file an action against each other until a final report on the proposed settlement. No such report was made by either Tecson or Landicho who, it
turned out, had no intention to do so and were just buying time as the catamaran vessel was due to arrive from Australia. Cordero then filed a complaint
with the Bureau of Customs (BOC) to prohibit the entry of SEACAT 25 from Australia based on misdeclaration and undervaluation. Consequently, an
Alert Order was issued by Acting BOC Commissioner Nelson Tan for the vessel which in fact arrived on July 17, 1998. Cordero claimed that Go and
Robinson had conspired to undervalue the vessel by around US$500,000.00.11
On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to hold Robinson, Go, Tecson and Landicho liable jointly and solidarily for
conniving and conspiring together in violating his exclusive distributorship in bad faith and wanton disregard of his rights, thus depriving him of his due
commissions (balance of unpaid commission from the sale of the first vessel in the amount of US$31,522.01 and unpaid commission for the sale of the
second vessel in the amount of US$328,742.00) and causing him actual, moral and exemplary damages, including P800,000.00 representing expenses
for airplane travel to Australia, telecommunications bills and entertainment, on account of AFFAs untimely cancellation of the exclusive distributorship
agreement. Cordero also prayed for the award of moral and exemplary damages, as well as attorneys fees and litigation expenses. 12
Robinson filed a motion to dismiss grounded on lack of jurisdiction over his person and failure to state a cause of action, asserting that there was no act
committed in violation of the distributorship agreement. Said motion was denied by the trial court on December 20, 1999. Robinson was likewise
declared in default for failure to file his answer within the period granted by the trial court. 13 As for Go and Tecson, their motion to dismiss based on
failure to state a cause of action was likewise denied by the trial court on February 26, 1999. 14 Subsequently, they filed their Answer denying that they
have anything to do with the termination by AFFA of Corderos authority as exclusive distributor in the Philippines. On the contrary, they averred it was
Cordero who stopped communicating with Go in connection with the purchase of the first vessel from AFFA and was not doing his part in making
progress status reports and airing the clients grievances to his principal, AFFA, such that Go engaged the services of Landicho to fly to Australia and

attend to the documents needed for shipment of the vessel to the Philippines. As to the inquiry for the Philippine price for a Wartsila ship engine for
AFFAs other on-going vessel construction, this was merely requested by Robinson but which Cordero misinterpreted as indication that Go was buying a
second vessel. Moreover, Landicho and Tecson had no transaction whatsoever with Cordero who had no document to show any such shipbuilding
contract. As to the supposed meeting to settle their dispute, this was due to the malicious demand of Cordero to be given US$3,000,000 as otherwise he
will expose in the media the alleged undervaluation of the vessel with the BOC. In any case, Cordero no longer had cause of action for his commission
for the sale of the second vessel under the memorandum of agreement dated August 7, 1997 considering the termination of his authority by AFFAs
lawyers on June 26, 1998.15
Pre-trial was reset twice to afford the parties opportunity to reach a settlement. However, on motion filed by Cordero through counsel, the trial court
reconsidered the resetting of the pre-trial to another date for the third time as requested by Go, Tecson and Landicho, in view of the latters failure to
appear at the pre-trial conference on January 7, 2000 despite due notice. The trial court further confirmed that said defendants misled the trial court in
moving for continuance during the pre-trial conference held on December 10, 1999, purportedly to go abroad for the holiday season when in truth a
Hold-Departure Order had been issued against them.16 Accordingly, plaintiff Cordero was allowed to present his evidence ex parte.
Corderos testimony regarding his transaction with defendants Go, Landicho and Tecson, and the latters offer of settlement, was corroborated by his
counsel who also took the witness stand. Further, documentary evidence including photographs taken of the June 29, 1998 meeting with Landicho,
Tecson and Atty. Tabujara at Shangri-las Mactan Island Resort, photographs taken in Brisbane showing Cordero, Go with his family, Robinson and
Landicho, and also various documents, communications, vouchers and bank transmittals were presented to prove that: (1) Cordero was properly
authorized and actually transacted in behalf of AFFA as exclusive distributor in the Philippines; (2) Cordero spent considerable sums of money in
pursuance of the contract with Go and ACG Express Liner; and (3) AFFA through Robinson paid Cordero his commissions from each scheduled
payment made by Go for the first SEACAT 25 purchased from AFFA pursuant to Shipbuilding Contract No. 7825. 17
On May 31, 2000, the trial court rendered its decision, the dispositive portion of which reads as follows:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of Plaintiff and against defendants Allan C. Go, Tony Robinson, Felipe
Landicho, and Vincent Tecson. As prayed for, defendants are hereby ordered to pay Plaintiff jointly and solidarily, the following:
1. On the First Cause of Action, the sum total of SIXTEEN MILLION TWO HUNDRED NINETY ONE THOUSAND THREE HUNDRED FIFTY
TWO AND FORTY THREE CENTAVOS (P16,291,352.43) as actual damages with legal interest from 25 June 1998 until fully paid;
2. On the Second Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as moral damages;
3. On the Third Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as exemplary damages; and
4. On the Fourth Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as attorneys fees;
Costs against the defendants.
SO ORDERED.18
Go, Robinson, Landicho and Tecson filed a motion for new trial, claiming that they have been unduly prejudiced by the negligence of their counsel who
was allegedly unaware that the pre-trial conference on January 28, 2000 did not push through for the reason that Cordero was then allowed to present
his evidence ex-parte, as he had assumed that the said ex-parte hearing was being conducted only against Robinson who was earlier declared in
default.19 In its Order dated July 28, 2000, the trial court denied the motion for new trial. 20 In the same order, Corderos motion for execution pending
appeal was granted. Defendants moved to reconsider the said order insofar as it granted the motion for execution pending appeal. 21 On August 8, 2000,
they filed a notice of appeal.22
On August 18, 2000, the trial court denied the motion for reconsideration and on August 21, 2000, the writ of execution pending appeal was
issued.23 Meanwhile, the notice of appeal was denied for failure to pay the appellate court docket fee within the prescribed period. 24 Defendants filed a
motion for reconsideration and to transmit the case records to the CA.25
On September 29, 2000, the CA issued a temporary restraining order at the instance of defendants in the certiorari case they filed with said court
docketed as CA-G.R. SP No. 60354 questioning the execution orders issued by the trial court. Consequently, as requested by the defendants, the trial
court recalled and set aside its November 6, 2000 Order granting the ex-parte motion for release of garnished funds, cancelled the scheduled public
auction sale of levied real properties, and denied the ex-parte Motion for Break-Open Order and Ex-Parte Motion for Encashment of Check filed by
Cordero.26 On November 29, 2000, the trial court reconsidered its Order dated August 21, 2000 denying due course to the notice of appeal and forthwith
directed the transmittal of the records to the CA.27
On January 29, 2001, the CA rendered judgment granting the petition for certiorari in CA-G.R. SP No. 60354 and setting aside the trial courts orders of
execution pending appeal. Cordero appealed the said judgment in a petition for review filed with this Court which was eventually denied under our
Decision dated September 17, 2002.28
On March 16, 2004, the CA in CA-G.R. CV No. 69113 affirmed the trial court (1) in allowing Cordero to present his evidence ex-parte after the unjustified
failure of appellants (Go, Tecson and Landicho) to appear at the pre-trial conference despite due notice; (2) in finding that it was Cordero and not
Pamana who was appointed by AFFA as the exclusive distributor in the Philippines of its SEACAT 25 and other fast ferry vessels, which is not limited to
the sale of one (1) such catamaran to Go on August 7, 1997; and (3) in finding that Cordero is entitled to a commission per vessel sold for AFFA through
his efforts in the amount equivalent to 22.43% of the price of each vessel or US$328,742.00, and with payments of US$297,219.91 having been made to
Cordero, there remained a balance of US$31,522.09 still due to him. The CA sustained the trial court in ruling that Cordero is entitled to damages for the
breach of his exclusive distributorship agreement with AFFA. However, it held that Cordero is entitled only to commission for the sale of the first
catamaran obtained through his efforts with the remaining unpaid sum of US$31,522.09 or P1,355,449.90 (on the basis of US$1.00=P43.00 rate) with

interest at 6% per annum from the time of the filing of the complaint until the same is fully paid. As to the P800,000.00 representing expenses incurred
by Cordero for transportation, phone bills, entertainment, food and lodging, the CA declared there was no basis for such award, the same being the
logical and necessary consequences of the exclusive distributorship agreement which are normal in the field of sales and distribution, and the
expenditures having redounded to the benefit of the distributor (Cordero).
On the amounts awarded by the trial court as moral and exemplary damages, as well as attorneys fees, the CA reduced the same
to P500,000.00, P300,000.00 and P50,000.00, respectively. Appellants were held solidarily liable pursuant to the provisions of Article 1207 in relation to
Articles 19, 20, 21 and 22 of the New Civil Code. The CA further ruled that no error was committed by the trial court in denying their motion for new trial,
which said court found to be pro forma and did not raise any substantial matter as to warrant the conduct of another trial.
By Resolution dated July 22, 2004, the CA denied the motions for reconsideration respectively filed by the appellants and appellee, and affirmed the
Decision dated March 16, 2004 with the sole modification that the legal interest of 6% per annum shall start to run from June 24, 1998 until the finality of
the decision, and the rate of 12% interest per annum shall apply once the decision becomes final and executory until the judgment has been satisfied.
The case before us is a consolidation of the petitions for review under Rule 45 separately filed by Go (G.R. No. 164703) and Cordero (G.R. No. 164747)
in which petitioners raised the following arguments:
G.R. No. 164703
(Petitioner Go)
I. THE HONORABLE COURT OF APPEALS DISREGARDED THE RULES OF COURT AND PERTINENT JURISPRUDENCE AND ACTED WITH
GRAVE ABUSE OF DISCRETION IN NOT RULING THAT THE RESPONDENT IS NOT THE REAL PARTY-IN-INTEREST AND IN NOT DISMISSING
THE INSTANT CASE ON THE GROUND OF LACK OF CAUSE OF ACTION;
II. THE HONORABLE COURT OF APPEALS IGNORED THE LAW AND JURISPRUDENCE AND ACTED WITH GRAVE ABUSE OF DISCRETION IN
HOLDING HEREIN PETITIONER RESPONSIBLE FOR THE BREACH IN THE ALLEGED EXCLUSIVE DISTRIBUTORSHIP AGREEMENT WITH
ALUMINIUM FAST FERRIES AUSTRALIA;
III. THE HONORABLE APPELLATE COURT MISAPPLIED THE LAW AND ACTED WITH GRAVE ABUSE OF DISCRETION IN FINDING PETITIONER
LIABLE IN SOLIDUM WITH THE CO-DEFENDANTS WITH RESPECT TO THE CLAIMS OF RESPONDENT;
IV. THE HONORABLE COURT OF APPEALS MISAPPLIED LAW AND JURISPRUDENCE AND GRAVELY ABUSED ITS DISCRETION WHEN IT
FOUND PETITIONER LIABLE FOR UNPAID COMMISSIONS, DAMAGES, ATTORNEYS FEES, AND LITIGATION EXPENSES; and
V. THE HONORABLE APPELLATE COURT ACTED CONTRARY TO LAW AND JURISPRUDENCE AND GRAVELY ABUSED ITS DISCRETION WHEN
IT EFFECTIVELY DEPRIVED HEREIN PETITIONER OF HIS RIGHT TO DUE PROCESS BY AFFIRMING THE LOWER COURTS DENIAL OF
PETITIONERS MOTION FOR NEW TRIAL.29
G.R. No. 164747
(Petitioner Cordero)
I.
THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE JUDGMENT OF THE TRIAL COURT AWARDING PETITIONER ACTUAL DAMAGES
FOR HIS COMMISSION FOR THE SALE OF THE SECOND VESSEL, SINCE THERE IS SUFFICIENT EVIDENCE ON RECORD WHICH PROVES
THAT THERE WAS A SECOND SALE OF A VESSEL.
A. THE MEMORANDUM OF AGREEMENT DATED 7 AUGUST 1997 PROVIDES THAT RESPONDENT GO WAS CONTRACTUALLY BOUND TO BUY
TWO (2) VESSELS FROM AFFA.
B. RESPONDENT GOS POSITION PAPER AND COUNTER-AFFIDAVIT/POSITION PAPER THAT WERE FILED BEFORE THE BUREAU OF
CUSTOMS, ADMITS UNDER OATH THAT HE HAD INDEED PURCHASED A SECOND VESSEL FROM AFFA.
C. RESPONDENTS ADMITTED IN THEIR PRE-TRIAL BRIEF THAT THEY HAD PURCHASED A SECOND VESSEL.
II.
THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER IS NOT ENTITLED TO HIS COMMISSIONS FOR THE PURCHASE OF A
SECOND VESSEL, SINCE IT WAS PETITIONERS EFFORTS WHICH ACTUALLY FACILITATED AND SET-UP THE TRANSACTION FOR
RESPONDENTS.
III.
THE COURT OF APPEALS ERRED IN NOT IMPOSING THE PROPER LEGAL INTEREST RATE ON RESPONDENTS UNPAID OBLIGATION WHICH
SHOULD BE TWELVE PERCENT (12%) FROM THE TIME OF THE BREACH OF THE OBLIGATION.

IV.
THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE ORIGINAL AMOUNT OF CONSEQUENTIAL DAMAGES AWARDED TO PETITIONER
BY THE TRIAL COURT CONSIDERING THE BAD FAITH AND FRAUDULENT CONDUCT OF RESPONDENTS IN MISAPPROPRIATING THE MONEY
OF PETITIONER.30
The controversy boils down to two (2) main issues: (1) whether petitioner Cordero has the legal personality to sue the respondents for breach of
contract; and (2) whether the respondents may be held liable for damages to Cordero for his unpaid commissions and termination of his exclusive
distributorship appointment by the principal, AFFA.
I. Real Party-in-Interest
First, on the issue of whether the case had been filed by the real party-in-interest as required by Section 2, Rule 3 of the Rules of Court, which defines
such party as the one (1) to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. The purposes of this
provision are: 1) to prevent the prosecution of actions by persons without any right, title or interest in the case; 2) to require that the actual party entitled
to legal relief be the one to prosecute the action; 3) to avoid a multiplicity of suits; and 4) to discourage litigation and keep it within certain bounds,
pursuant to sound public policy.31 A case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-in-interest, hence
grounded on failure to state a cause of action.32
On this issue, we agree with the CA in ruling that it was Cordero and not Pamana who is the exclusive distributor of AFFA in the Philippines as shown by
the Certification dated June 1, 1997 issued by Tony Robinson. 33Petitioner Go mentions the following documents also signed by respondent Robinson
which state that "Pamana Marketing Corporation represented by Mr. Mortimer F. Cordero" was actually the exclusive distributor: (1) letter dated 1 June
199734; (2) certification dated 5 August 199735; and (3) letter dated 5 August 1997 addressed to petitioner Cordero concerning "commissions to be paid to
Pamana Marketing Corporation."36 Such apparent inconsistency in naming AFFAs exclusive distributor in the Philippines is of no moment. For all intents
and purposes, Robinson and AFFA dealt only with Cordero who alone made decisions in the performance of the exclusive distributorship, as with other
clients to whom he had similarly offered AFFAs fast ferry vessels. Moreover, the stipulated commissions from each progress payments made by Go
were directly paid by Robinson to Cordero. 37 Respondents Landicho and Tecson were only too aware of Corderos authority as the person who was
appointed and acted as exclusive distributor of AFFA, which can be gleaned from their act of immediately furnishing him with copies of bank transmittals
everytime Go remits payment to Robinson, who in turn transfers a portion of funds received to the bank account of Cordero in the Philippines as his
commission. Out of these partial payments of his commission, Cordero would still give Landicho and Tecson their respective "commission," or "cuts"
from his own commission. Respondents Landicho and Tecson failed to refute the evidence submitted by Cordero consisting of receipts signed by them.
Said amounts were apart from the earlier expenses shouldered by Cordero for Landichos airline tickets, transportation, food and hotel accommodations
for the trip to Australia.38
Moreover, petitioner Go, Landicho and Tecson never raised petitioner Corderos lack of personality to sue on behalf of Pamana, 39 and did so only before
the CA when they contended that it is Pamana and not Cordero, who was appointed and acted as exclusive distributor for AFFA. 40 It was Robinson who
argued in support of his motion to dismiss that as far as said defendant is concerned, the real party plaintiff appears to be Pamana, against the real party
defendant which is AFFA.41 As already mentioned, the trial court denied the motion to dismiss filed by Robinson.
We find no error committed by the trial court in overruling Robinsons objection over the improper resort to summons by publication upon a foreign
national like him and in an action in personam, notwithstanding that he raised it in a special appearance specifically raising the issue of lack of
jurisdiction over his person. Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, while jurisdiction over the defendants in a civil
case is acquired either through the service of summons upon them in the manner required by law or through their voluntary appearance in court and
their submission to its authority.42 A party who makes a special appearance in court challenging the jurisdiction of said court based on the ground of
invalid service of summons is not deemed to have submitted himself to the jurisdiction of the court. 43
In this case, however, although the Motion to Dismiss filed by Robinson specifically stated as one (1) of the grounds the lack of "personal jurisdiction," it
must be noted that he had earlier filed a Motion for Time to file an appropriate responsive pleading even beyond the time provided in the summons by
publication.44 Such motion did not state that it was a conditional appearance entered to question the regularity of the service of summons, but an
appearance submitting to the jurisdiction of the court by acknowledging the summons by publication issued by the court and praying for additional time
to file a responsive pleading. Consequently, Robinson having acknowledged the summons by publication and also having invoked the jurisdiction of the
trial court to secure affirmative relief in his motion for additional time, he effectively submitted voluntarily to the trial courts jurisdiction. He is now
estopped from asserting otherwise, even before this Court.45
II. Breach of Exclusive Distributorship, Contractual Interference and Respondents Liability for Damages
In Yu v. Court of Appeals,46 this Court ruled that the right to perform an exclusive distributorship agreement and to reap the profits resulting from such
performance are proprietary rights which a party may protect. Thus, injunction is the appropriate remedy to prevent a wrongful interference with
contracts by strangers to such contracts where the legal remedy is insufficient and the resulting injury is irreparable. In that case, the former dealer of the
same goods purchased the merchandise from the manufacturer in England through a trading firm in West Germany and sold these in the Philippines.
We held that the rights granted to the petitioner under the exclusive distributorship agreement may not be diminished nor rendered illusory by the
expedient act of utilizing or interposing a person or firm to obtain goods for which the exclusive distributorship was conceptualized, at the expense of the
sole authorized distributor.47
In the case at bar, it was established that petitioner Cordero was not paid the balance of his commission by respondent Robinson. From the time
petitioner Go and respondent Landicho directly dealt with respondent Robinson in Brisbane, and ceased communicating through petitioner Cordero as
the exclusive distributor of AFFA in the Philippines, Cordero was no longer informed of payments remitted to AFFA in Brisbane. In other words, Cordero
had clearly been cut off from the transaction until the arrival of the first SEACAT 25 which was sold through his efforts. When Cordero complained to Go,
Robinson, Landicho and Tecson about their acts prejudicial to his rights and demanded that they respect his exclusive distributorship, Go simply let his
lawyers led by Landicho and Tecson handle the matter and tried to settle it by promising to pay a certain amount and to purchase high-speed
catamarans through Cordero. However, Cordero was not paid anything and worse, AFFA through its lawyer in Australia even terminated his exclusive
dealership insisting that his services were engaged for only one (1) transaction, that is, the purchase of the first SEACAT 25 in August 1997.

Petitioner Go argues that unlike in Yu v. Court of Appeals 48 there is no conclusive proof adduced by petitioner Cordero that they actually purchased a
second SEACAT 25 directly from AFFA and hence there was no violation of the exclusive distributorship agreement. Further, he contends that the CA
gravely abused its discretion in holding them solidarily liable to Cordero, relying on Articles 1207, 19 and 21 of the Civil Code despite absence of
evidence, documentary or testimonial, showing that they conspired to defeat the very purpose of the exclusive distributorship agreement. 49
We find that contrary to the claims of petitioner Cordero, there was indeed no sufficient evidence that respondents actually purchased a second SEACAT
25 directly from AFFA. But this circumstance will not absolve respondents from liability for invading Corderos rights under the exclusive distributorship.
Respondents clearly acted in bad faith in bypassing Cordero as they completed the remaining payments to AFFA without advising him and furnishing
him with copies of the bank transmittals as they previously did, and directly dealt with AFFA through Robinson regarding arrangements for the arrival of
the first SEACAT 25 in Manila and negotiations for the purchase of the second vessel pursuant to the Memorandum of Agreement which Cordero signed
in behalf of AFFA. As a result of respondents actuations, Cordero incurred losses as he was not paid the balance of his commission from the sale of the
first vessel and his exclusive distributorship revoked by AFFA.
Petitioner Go contends that the trial and appellate courts erred in holding them solidarily liable for Corderos unpaid commission, which is the sole
obligation of the principal AFFA. It was Robinson on behalf of AFFA who, in the letter dated August 5, 1997 addressed to Cordero, undertook to pay
commission payments to Pamana on a staggered progress payment plan in the form of percentage of the commission per payment. AFFA explicitly
committed that it will, "upon receipt of progress payments, pay to Pamana their full commission by telegraphic transfer to an account nominated by
Pamana within one to two days of [AFFA] receiving such payments." 50Petitioner Go further maintains that he had not in any way violated or caused the
termination of the exclusive distributorship agreement between Cordero and AFFA; he had also paid in full the first and only vessel he purchased from
AFFA.51
While it is true that a third person cannot possibly be sued for breach of contract because only parties can breach contractual provisions, a contracting
party may sue a third person not for breach but for inducing another to commit such breach.
Article 1314 of the Civil Code provides:
Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party.
The elements of tort interference are: (1) existence of a valid contract; (2) knowledge on the part of the third person of the existence of a contract; and
(3) interference of the third person is without legal justification. 52
The presence of the first and second elements is not disputed. Through the letters issued by Robinson attesting that Cordero is the exclusive distributor
of AFFA in the Philippines, respondents were clearly aware of the contract between Cordero and AFFA represented by Robinson. In fact, evidence on
record showed that respondents initially dealt with and recognized Cordero as such exclusive dealer of AFFA high-speed catamaran vessels in the
Philippines. In that capacity as exclusive distributor, petitioner Go entered into the Memorandum of Agreement and Shipbuilding Contract No. 7825 with
Cordero in behalf of AFFA.
As to the third element, our ruling in the case of So Ping Bun v. Court of Appeals53 is instructive, to wit:
A duty which the law of torts is concerned with is respect for the property of others, and a cause of action ex delicto may be predicated upon an unlawful
interference by one person of the enjoyment by the other of his private property. This may pertain to a situation where a third person induces a party to
renege on or violate his undertaking under a contract. In the case before us, petitioners Trendsetter Marketing asked DCCSI to execute lease contracts
in its favor, and as a result petitioner deprived respondent corporation of the latters property right. Clearly, and as correctly viewed by the appellate
court, the three elements of tort interference above-mentioned are present in the instant case.
Authorities debate on whether interference may be justified where the defendant acts for the sole purpose of furthering his own financial or economic
interest. One view is that, as a general rule, justification for interfering with the business relations of another exists where the actors motive is to benefit
himself. Such justification does not exist where his sole motive is to cause harm to the other. Added to this, some authorities believe that it is not
necessary that the interferers interest outweigh that of the party whose rights are invaded, and that an individual acts under an economic interest that is
substantial, not merely de minimis, such that wrongful and malicious motives are negatived, for he acts in self-protection. Moreover, justification for
protecting ones financial position should not be made to depend on a comparison of his economic interest in the subject matter with that of others. It is
sufficient if the impetus of his conduct lies in a proper business interest rather than in wrongful motives.
As early as Gilchrist vs. Cuddy, we held that where there was no malice in the interference of a contract, and the impulse behind ones conduct lies in a
proper business interest rather than in wrongful motives, a party cannot be a malicious interferer. Where the alleged interferer is financially interested,
and such interest motivates his conduct, it cannot be said that he is an officious or malicious intermeddler.
In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the warehouse to his enterprise at the expense of respondent
corporation. Though petitioner took interest in the property of respondent corporation and benefited from it, nothing on record imputes deliberate
wrongful motives or malice in him.
xxx
While we do not encourage tort interferers seeking their economic interest to intrude into existing contracts at the expense of others, however, we find
that the conduct herein complained of did not transcend the limits forbidding an obligatory award for damages in the absence of any malice. The
business desire is there to make some gain to the detriment of the contracting parties. Lack of malice, however, precludes damages. But it does not
relieve petitioner of the legal liability for entering into contracts and causing breach of existing ones. The respondent appellate court correctly confirmed
the permanent injunction and nullification of the lease contracts between DCCSI and Trendsetter Marketing, without awarding damages. The injunction
saved the respondents from further damage or injury caused by petitioners interference.54 [emphasis supplied.]

Malice connotes ill will or spite, and speaks not in response to duty. It implies an intention to do ulterior and unjustifiable harm. Malice is bad faith or bad
motive.55 In the case of Lagon v. Court of Appeals, 56 we held that to sustain a case for tortuous interference, the defendant must have acted with malice
or must have been driven by purely impure reasons to injure the plaintiff; in other words, his act of interference cannot be justified. We further explained
that the word "induce" refers to situations where a person causes another to choose one course of conduct by persuasion or intimidation. As to the
allegation of private respondent in said case that petitioner induced the heirs of the late Bai Tonina Sepi to sell the property to petitioner despite an
alleged renewal of the original lease contract with the deceased landowner, we ruled as follows:
Assuming ex gratia argumenti that petitioner knew of the contract, such knowledge alone was not sufficient to make him liable for tortuous interference. x
xx
Furthermore, the records do not support the allegation of private respondent that petitioner induced the heirs of Bai Tonina Sepi to sell the property to
him. The word "induce" refers to situations where a person causes another to choose one course of conduct by persuasion or intimidation. The records
show that the decision of the heirs of the late Bai Tonina Sepi to sell the property was completely of their own volition and that petitioner did absolutely
nothing to influence their judgment. Private respondent himself did not proffer any evidence to support his claim. In short, even assuming that private
respondent was able to prove the renewal of his lease contract with Bai Tonina Sepi, the fact was that he was unable to prove malice or bad faith on the
part of petitioner in purchasing the property. Therefore, the claim of tortuous interference was never established. 57
In their Answer, respondents denied having anything to do with the unpaid balance of the commission due to Cordero and the eventual termination of his
exclusive distributorship by AFFA. They gave a different version of the events that transpired following the signing of Shipbuilding Contract No. 7825.
According to them, several builder-competitors still entered the picture after the said contract for the purchase of one (1) SEACAT 25 was sent to
Brisbane in July 1997 for authentication, adding that the contract was to be effective on August 7, 1997, the time when their funds was to become
available. Go admitted he called the attention of AFFA if it can compete with the prices of other builders, and upon mutual agreement, AFFA agreed to
give them a discounted price under the following terms and conditions: (1) that the contract price be lowered; (2) that Go will obtain another vessel; (3)
that to secure compliance of such conditions, Go must make an advance payment for the building of the second vessel; and (4) that the payment
scheme formerly agreed upon as stipulated in the first contract shall still be the basis and used as the guiding factor in remitting money for the building of
the first vessel. This led to the signing of another contract superseding the first one (1), still to be dated 07 August 1997. Attached to the answer were
photocopies of the second contract stating a lower purchase price (US$1,150,000.00) and facsimile transmission of AFFA to Go confirming the
transaction.58
As to the cessation of communication with Cordero, Go averred it was Cordero who was nowhere to be contacted at the time the shipbuilding progress
did not turn good as promised, and it was always Landicho and Tecson who, after several attempts, were able to locate him only to obtain unsatisfactory
reports such that it was Go who would still call up Robinson regarding any progress status report, lacking documents for MARINA, etc., and go to
Australia for ocular inspection. Hence, in May 1998 on the scheduled launching of the ship in Australia, Go engaged the services of Landicho who went
to Australia to see to it that all documents needed for the shipment of the vessel to the Philippines would be in order. It was also during this time that
Robinsons request for inquiry on the Philippine price of a Wartsila engine for AFFAs then on-going vessel construction, was misinterpreted by Cordero
as indicating that Go was buying a second vessel.59
We find these allegations unconvincing and a mere afterthought as these were the very same averments contained in the Position Paper for the Importer
dated October 9, 1998, which was submitted by Go on behalf of ACG Express Liner in connection with the complaint-affidavit filed by Cordero before the
BOC-SGS Appeals Committee relative to the shipment valuation of the first SEACAT 25 purchased from AFFA. 60 It appears that the purported second
contract superseding the original Shipbuilding Contract No. 7825 and stating a lower price of US$1,150,000.00 (not US$1,465,512.00) was only
presented before the BOC to show that the vessel imported into the Philippines was not undervalued by almost US$500,000.00. Cordero vehemently
denied there was such modification of the contract and accused respondents of resorting to falsified documents, including the facsimile transmission of
AFFA supposedly confirming the said sale for only US$1,150,000.00. Incidentally, another document filed in said BOC case, the CounterAffidavit/Position Paper for the Importer dated November 16, 1998,61 states in paragraph 8 under the Antecedent facts thereof, that -8. As elsewhere stated, the total remittances made by herein Importer to AFFA does not alone represent the purchase price for Seacat 25. It includes
advance payment for the acquisition of another vessel as part of the deal due to the discounted price.62
which even gives credence to the claim of Cordero that respondents negotiated for the sale of the second vessel and that the nonpayment of the
remaining two (2) instalments of his commission for the sale of the first SEACAT 25 was a result of Go and Landichos directly dealing with Robinson,
obviously to obtain a lower price for the second vessel at the expense of Cordero.
The act of Go, Landicho and Tecson in inducing Robinson and AFFA to enter into another contract directly with ACG Express Liner to obtain a lower
price for the second vessel resulted in AFFAs breach of its contractual obligation to pay in full the commission due to Cordero and unceremonious
termination of Corderos appointment as exclusive distributor. Following our pronouncement in Gilchrist v. Cuddy (supra), such act may not be deemed
malicious if impelled by a proper business interest rather than in wrongful motives. The attendant circumstances, however, demonstrated that
respondents transgressed the bounds of permissible financial interest to benefit themselves at the expense of Cordero. Respondents furtively went
directly to Robinson after Cordero had worked hard to close the deal for them to purchase from AFFA two (2) SEACAT 25, closely monitored the
progress of building the first vessel sold, attended to their concerns and spent no measly sum for the trip to Australia with Go, Landicho and Gos family
members. But what is appalling is the fact that even as Go, Landicho and Tecson secretly negotiated with Robinson for the purchase of a second vessel,
Landicho and Tecson continued to demand and receive from Cordero their "commission" or "cut" from Corderos earned commission from the sale of the
first SEACAT 25.
Cordero was practically excluded from the transaction when Go, Robinson, Tecson and Landicho suddenly ceased communicating with him, without
giving him any explanation. While there was nothing objectionable in negotiating for a lower price in the second purchase of SEACAT 25, which is not
prohibited by the Memorandum of Agreement, Go, Robinson, Tecson and Landicho clearly connived not only in ensuring that Cordero would have no
participation in the contract for sale of the second SEACAT 25, but also that Cordero would not be paid the balance of his commission from the sale of
the first SEACAT 25. This, despite their knowledge that it was commission already earned by and due to Cordero. Thus, the trial and appellate courts
correctly ruled that the actuations of Go, Robinson, Tecson and Landicho were without legal justification and intended solely to prejudice Cordero.

The existence of malice, ill will or bad faith is a factual matter. As a rule, findings of fact of the trial court, when affirmed by the appellate court, are
conclusive on this Court.63 We see no compelling reason to reverse the findings of the RTC and the CA that respondents acted in bad faith and in utter
disregard of the rights of Cordero under the exclusive distributorship agreement.
The failure of Robinson, Go, Tecson and Landico to act with fairness, honesty and good faith in securing better terms for the purchase of high-speed
catamarans from AFFA, to the prejudice of Cordero as the duly appointed exclusive distributor, is further proscribed by Article 19 of the Civil Code:
Art. 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.
As we have expounded in another case:
Elsewhere, we explained that when "a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in
damage to another, a legal wrong is thereby committed for which the wrongdoer must be responsible." The object of this article, therefore, is to set
certain standards which must be observed not only in the exercise of ones rights but also in the performance of ones duties. These standards are the
following: act with justice, give everyone his due and observe honesty and good faith. Its antithesis, necessarily, is any act evincing bad faith or intent to
injure. Its elements are the following: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring
another. When Article 19 is violated, an action for damages is proper under Articles 20 or 21 of the Civil Code. Article 20 pertains to damages arising
from a violation of law x x x. Article 21, on the other hand, states:
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.
Article 21 refers to acts contra bonus mores and has the following elements: (1) There is an act which is legal; (2) but which is contrary to morals, good
custom, public order, or public policy; and (3) it is done with intent to injure.
A common theme runs through Articles 19 and 21, and that is, the act complained of must be intentional.64
Petitioner Gos argument that he, Landicho and Tecson cannot be held liable solidarily with Robinson for actual, moral and exemplary damages, as well
as attorneys fees awarded to Cordero since no law or contract provided for solidary obligation in these cases, is equally bereft of merit. Conformably
with Article 2194 of the Civil Code, the responsibility of two or more persons who are liable for the quasi-delict is solidary. 65 In Lafarge Cement
Philippines, Inc. v. Continental Cement Corporation,66 we held:
[O]bligations arising from tort are, by their nature, always solidary. We have assiduously maintained this legal principle as early as 1912 in Worcester v.
Ocampo, in which we held:
x x x The difficulty in the contention of the appellants is that they fail to recognize that the basis of the present action is tort. They fail to recognize the
universal doctrine that each joint tort feasor is not only individually liable for the tort in which he participates, but is also jointly liable with his tort feasors.
xxx
It may be stated as a general rule that joint tort feasors are all the persons who command, instigate, promote, encourage, advise, countenance,
cooperate in, aid or abet the commission of a tort, or who approve of it after it is done, if done for their benefit. They are each liable as principals, to the
same extent and in the same manner as if they had performed the wrongful act themselves. x x x
Joint tort feasors are jointly and severally liable for the tort which they commit.1avvphi1 The persons injured may sue all of them or any number less than
all. Each is liable for the whole damages caused by all, and all together are jointly liable for the whole damage. It is no defense for one sued alone, that
the others who participated in the wrongful act are not joined with him as defendants; nor is it any excuse for him that his participation in the tort was
insignificant as compared to that of the others. x x x
Joint tort feasors are not liable pro rata. The damages can not be apportioned among them, except among themselves. They cannot insist upon an
apportionment, for the purpose of each paying an aliquot part. They are jointly and severally liable for the whole amount. x x x
A payment in full for the damage done, by one of the joint tort feasors, of course satisfies any claim which might exist against the others. There can be
but satisfaction. The release of one of the joint tort feasors by agreement generally operates to discharge all. x x x
Of course, the court during trial may find that some of the alleged tort feasors are liable and that others are not liable. The courts may release some for
lack of evidence while condemning others of the alleged tort feasors. And this is true even though they are charged jointly and severally. 67 [emphasis
supplied.]
The rule is that the defendant found guilty of interference with contractual relations cannot be held liable for more than the amount for which the party
who was inducted to break the contract can be held liable. 68 Respondents Go, Landicho and Tecson were therefore correctly held liable for the balance
of petitioner Corderos commission from the sale of the first SEACAT 25, in the amount of US$31,522.09 or its peso equivalent, which AFFA/Robinson
did not pay in violation of the exclusive distributorship agreement, with interest at the rate of 6% per annum from June 24, 1998 until the same is fully
paid.
Respondents having acted in bad faith, moral damages may be recovered under Article 2219 of the Civil Code.69On the other hand, the requirements of
an award of exemplary damages are: (1) they may be imposed by way of example in addition to compensatory damages, and only after the claimants
right to them has been established; (2) that they cannot be recovered as a matter of right, their determination depending upon the amount of
compensatory damages that may be awarded to the claimant; and (3) the act must be accompanied by bad faith or done in a wanton, fraudulent,

oppressive or malevolent manner.70 The award of exemplary damages is thus in order. However, we find the sums awarded by the trial court as moral
and exemplary damages as reduced by the CA, still excessive under the circumstances.
Moral damages are meant to compensate and alleviate the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injuries unjustly caused. Although incapable of pecuniary estimation, the amount must somehow be
proportional to and in approximation of the suffering inflicted. Moral damages are not punitive in nature and were never intended to enrich the claimant at
the expense of the defendant. There is no hard-and-fast rule in determining what would be a fair and reasonable amount of moral damages, since each
case must be governed by its own peculiar facts. Trial courts are given discretion in determining the amount, with the limitation that it "should not be
palpably and scandalously excessive." Indeed, it must be commensurate to the loss or injury suffered.71
We believe that the amounts of P300,000.00 and P200,000.00 as moral and exemplary damages, respectively, would be sufficient and reasonable.
Because exemplary damages are awarded, attorneys fees may also be awarded in consonance with Article 2208 (1). 72 We affirm the appellate courts
award of attorneys fees in the amount of P50,000.00.
WHEREFORE, the petitions are DENIED. The Decision dated March 16, 2004 as modified by the Resolution dated July 22, 2004 of the Court of Appeals
in CA-G.R. CV No. 69113 are hereby AFFIRMED with MODIFICATION in that the awards of moral and exemplary damages are hereby reduced
to P300,000.00 andP200,000.00, respectively.
With costs against the petitioner in G.R. No. 164703.
SO ORDERED.

B.

INTERFERENCE WITH PROSPECTIVE ADVANTAGE

C.

SECURITIES-RELATED TORTS

D.

UNFAIR COMPETITION, ART. 28 CC

SHELL
COMPANY
OF
THE
PHILIPPINES,
vs. INSULAR PETROLEUM REFINING CO., LTD., and COURT OF APPEALS, respondents.

LTD.,

petitioner,

PAREDES, J.:

Petitioner, Shell Co. of the Phil., Ltd, is a corporation engaged in the sale of petroleum products, including lubricating oil.

The packages and containers of its goods bear its trademark, labeled or stenciled thereon.

Defendant Insular Petroleum Refining Co., Ltd., is a registered limited partnership, whose principal business is collecting used lubricating oil.

From the used oil, respondent produces two types of lubricating oil one, a straight mineral oil classified as second grade or low-grade oil; and
another, a first grade or high-grade oil.

The essential difference between the two types lies in the fact that the high-grade oil contains an additive element which is not found in the
other type.

In marketing these two types of oil, respondent, as a practice, utilizes for the high grade oil containers, painted black on the sides and yellow
on top and on the bottom with its tradename stenciled thereon, with a special sealing device at its opening which cannot be removed unless
the oil is used.

In selling its low-grade oil, respondent use miscellaneous containers. (used drums may be belonging to the U.S. Army or other drums may be
belonging to the Caltex, or the Stanvac we have some that belonged to the Union, miscellaneous drums of other companies, but they are used
drums. ... And some of those miscellaneous containers are the Shell containers. ... but before filling the empty drums we obliterate the
markings of the drums)

In one transaction, however, which was consummated with Conrado Uichangco a dealer of petitioner's gasoline and lubricating oil, the lowgrade oil that was sold to said operator was contained in a drum with the petitioner's mark or brand "Shell" still stenciled without having been
erased.

This single transaction between plaintiff and defendant was effected, according to Conrado Uichangco an operator of a Shell service station at
the corner of San Andres and Tuason Privado Streets, Manila, and who has been losing during the first eight and ten months of operation of
his station, although he had money to back up his losses, when a certain F. Pecson Lozano, in agent of the defendant, repaired at his station
and "tried to convince me that Insoil is a good oil". As a matter of fact, he tried to show me a chemical analysis of Insoil which he claimed was
very close to the analysis of Shell oil; and he also told me that he could sell this kind of oil (Insoil) to me at a much cheaper price so that I
could make a bigger margin of profits Q. What did you reply? A. I told Mr. F. Pecson Lozano that if his intention was to sell me Insoil for me to

pass as any of the Shell oils, I was not agreeable because I did not want to cheat my customers. ... . Q. You ordered a Shell drum from Mr.
Lozano on your own volition or on orders of the Shell management? A. Well, this is the story as to how I happened to order that one drum of
Insoil oil that was inside that Shell drum. When Mr. Lozano was insistent that I buy Insoil package in a Shell drum I called up Mr. Crespo and I
risked him in effect why we have to kill ourselves when there is a man here who came to my station and told me that he has oil that
approximates the analysis of Shell oil which he could sell to me at a very much cheaper price, and Mr. Crespo told me "that is not true", and
then he further added, "can you order one drum of that oil for me. Charge it against me." I told him "Yes I will." So I ordered that one drum of
Insoil from Mr. F. Pecson Lozano. Q. Do you know whether that one drum of oil was ever sold by you or by the Shell company to the public? A.
It was never re-sold to the public. I re-sold it to the Shell Company of the Philippines. Q. You mean you bought in your own name and you sold
it to the Shell company at a profit? A. I sold it to the Shell company because it was an order of Mr. Crespo. I did not profit anything from it, I just
charged them the invoice price. ... . Q. My question to you is: He never made any misrepresentation to you that he was selling you any oil
other than Insoil Motor oil, straight mineral SAE No. 30? A. That is what he told me. ... . Q. And it is also a fact that you stated in the Fiscal's
Office and in the Court of First Instance during the trial there that there was no seal whatsoever appearing in the opening of the drum; is that
correct? A. There was no seal by the Insoil or by the Shell Company.
The incident between petitioner's operator and respondent's agent, brought about the presentation with the Manila CFI, a case for damages on the
allegation of unfair competition and a Criminal Case No. 42020 under the Revised Penal Code (Art. 189) against Donald Mead, Manager, Pedro
Kayanan and F. Tecson Lozano. In the criminal case, the accused therein were acquitted, the Court having found that the element of deceit was absent.
In the civil case, petitioner herein invoked two causes of action: (1) that respondent in selling its low-grade oil in Shell containers, without erasing the
marks or brands labeled or stencilled thereon, intended to mislead the buying public to the prejudice of petitioner and the general public; and (2)
defendant had attempted to persuade Shell dealers to purchase its low-grade oil and to pass the same to the public as Shell oil, by reason of which
petitioner bad suffered damages in the form of decrease in sales, estimated at least P10,000.00. A prayer for double the actual damages was made,
pursuant to section 23 of Republic Act 166, P5,000.00 for attorneys fees, P1,000.00 for legal expenses and P25,000.00 for exemplary damages. A writ
of preliminary injunction was requested to enjoin respondent herein to cease and desist from using for the sale of any of its products and more
particularly for the sale of its low-grade lubricating oil. Shell containers with Shell markings still on them. The motion to dissolve the injunction granted,
was denied by the court a quo. 1wph1.t
Respondent Insular answering the complaint, after the usual admissions and denials, alleged that it "has never attempted to pass off its products as that
of another nor to persuade anyone to do the same", and that the action is barred by the decision in the criminal case No. 42020. A counterclaim for
P81,000.00 for actual, moral and exemplary damages, P4,000.00 for attorney's fees and P5,000.00 for legal expenses with interposed by respondent.
After trial, the CFI found for Shell and ordered respondent to pay P20,000.00 for actual damages, P5,000.00 for attorney's fees, P1,000.00 for legal
expenses and P10,000.00 by way of exemplary damages and the costs.
In reversing the above judgment, the Court of Appeals, disquisitioned:
On the question of whether or not, as a matter of fact, the defendant is guilty of unfair competition in the conduct of its trade or business in the
marketing of its low-grade oil, particularly in the single transaction between defendant's agent and plaintiff's dealer, as hereinabove narrated,
we deem it wise to preface the discussion by citing certain passages in the decision of the Supreme Court in the case of Alhambra Cigar, etc.
v. Mojica, 27 Phil. Rep. 266, thus:
"No inflexible rule can be laid down as to what will constitute unfair competition. Each case is, in a measure, a law unto itself. Unfair
competition is dumps a question of fact. The question to be determined in every case is whether or not, as a matter of fact, the
name or mark used by the defendant has previously come to indicate and designate plaintiffs goods, or, to state it in another way,
whether defendant, as a matter of fact, is, by his conduct, passing off defendant's goods as plaintiffs goods or his business as
plaintiff's business. The universal test question is whether the public is likely to be deceived. ... . Nothing less than conduct tending
to pass off one man's goods or business as that of another will constitute unfair competition. Actual or probable deception and
confusion on the part of the customers by reason of defendant's practices must always appear."
Encompassing the facts of the case to the foregoing ruling in the Alhambra case, it clearly appears that defendant's practices in marketing its
low-grade oil did not cause actual or probable deception and confusion on the part of the general public, because, as shown from the
established facts, with the exception of that single transaction regarding the one drum of oil sold by the defendant's agent to the plaintiff's
dealer, as aforesaid, before marketing to the public its low-grade oil in containers the brands or marks of the different companies stenciled on
the containers are totally obliterated and erased. The defendant did not pass off or attempt to pass off upon the public its goods as the goods
of another. There is neither express nor implied representation to that effect. The practices do not show a conduct to the end and probable
effect to which is to deceive the public, or pass off its goods as those of another. Proof of this may be clearly deduced from the fact that, with
the exception of the sale of one drum of low-grade oil by defendant's agent to Uichangco no other companies whose drums or containers have
been used by the defendant in its business have filed any complaint to protect against the practices of the defendant. ... .
Now we shall dwell on the transaction between defendant's agent and plaintiff's dealer, Uichangco to determine whether or not, as a matter of
fact, the defendant is guilty of unfair competition. There is evidence showing that the use of the defendant of the drum or container with the
Shell brand stenciled thereon was with the knowledge and consent of Uichangco. There is also the categorical testimony of Uichangco that
defendant's agent did not make any representation that said agent was selling any oil other than Insoil motor oil. The sales invoice states that
Insoil Oil was sold. True, that a drum with the brand Shell remaining unerased was used by the defendant. But, Uichangco was apprised
beforehand that a Shell drum would be used, and in fact the instruction of Crespo to Uichangco could mean to buy Insoil oil contained in a
Shell drum. The buyer could not have been deceived or confused that he was not buying Insoil Oil. There is reason to believe that the
transaction was consummated in pursuance of a plan of Mr. Crespo to obtain evidence for the filing of a case. The oil was never sold to the
public because the plaintiff never intended or contemplated doing so.
The other issue discussed by the Court of Appeals, that is, whether the acquittal of the officers and employees of the respondent in the criminal case
(supra), constituted a bar to the filing of the civil case or amounted to res judicata, is, to our mind, not necessary to resolve in the instant appeal.
However, We agree with the appellate court that there is no res judicata.

In the petition, Shell claims three (3) errors allegedly committed by the Court of Appeals, all of which pose the singular issue of whether respondent in
the isolated transaction, stated elsewhere in this opinion, committed an act of unfair competition and should be held liable.
The complaint was predicated on section 29 of Rep. Act No. 166, defining unfair competition, to wit:
Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him
or in which he deals, ... for those of the one having established such goodwill, or who shall commit any act calculated to produce said result,
shall be guilty of unfair competition, and shall be subject to an action therefor.
From the above definition and authorities interpretative of the same, it is seen that to hold a defendant guilty of unfair competition, no less than
satisfactory and convincing evidence is essential, showing that the defendant has passed of or attempted to pass off his own goods as those of another
and that the customer was deceived with respect to the origin of the goods. In other words, the inherent element of unfair competition is fraud or deceit.
(I Nim's The Law of Unfair Competition and Trademarks, 4th ed. pp. 52-53, and cases cited therein; U. S. v. Kyburz, 28 Phil. 475, citing Paul on
Trademarks, sec. 209; I Callman's, The Law of Unfair Competition and Trademarks, 329; Roger's New Directions in the Law of Unfair Competition,
(1940) N. Y. L. Rev. 317, 320; Alhambra Cigar, etc. v. Mojica, 29 Phil. 266, refer to passage quoted in the decision of C.A. supra).
As no inflexible rule can be laid down as to what will constitute unfair competition; as each case is, in a measure, a law unto itself and as unfair
competition is always a question of fact, the determination of whether unfair competition was committed in the case at bar, must have to depend upon
the fact as found by the Court of Appeals, to the definitiveness of which We are bound (I Moran's Rules of Court, 1957 Ed. p. 699 & cases cited therein).
"... The Supreme Court can not examine the question of whether or not the Court of Appeals was right when that tribunal concluded from the
uncontroverted evidence that there had been no deceit." (De Luna, et al. v. Linatoc, 74 Phil. 15). And the facts of the case at bar, are, as found and
exposed by the Court of Appeals in the portion of its decision above-quoted.
Not just because a manufacturer used a container still bearing a competitor's marking in the sale of one's products, irrespective of to whom and how the
sale is made, can there be a conclusion that the buying public has been misled or will be misled, and, therefore, unfair competition is born. The single
transaction at bar will not render defendant's act an unfair competition, much in the same way that the appearance of one swallow does not make a
season, summer.
It was found by the Court of Appeals that in all transactions of the low-grade Insoil, except the present one, all the marks and brands on the containers
used were erased or obliterated. The drum in question did not reach the buying public. It was merely a shell dealer or an operator of a Shell Station who
purchased the drum not to be resold to the public, but to be sold to the petitioner company, with a view of obtaining evidence against someone who
might have been committing unfair business practices, for the dealer had found that his income was dwindling in his gasoline station. Uichangco the
Shell dealer, testified that Lozano (respondent's agent) did not all make any representation that he (Lozano) was selling any oil other than Insoil motor
oil, a fact which finds corroboration in the receipt issued for the sale of the drum. Uichangco was apprised beforehand that Lozano would sell Insoil oil in
a Shell drum. There was no evidence that defendant or its agent attempted to persuade Uichangco or any Shell dealer, for that matter, to purchase its
low-grade oil and to pass the same to the public as Shell oil. It was shown that Shell and other oil companies, deliver oil to oil dealers or gasoline
stations in drums, these dealers transfer the contents of the drums to retailing dispensers known as "tall boys", from which the oil is retailed to the public
by liters.
This Court is not unaware of the decisions cited by petitioner to bolster its contention. We find those cases, however, not applicable to the one at bar.
Those cases were predicated on facts and circumstances different from those of the present. In one case, the trade name of plaintiff was stamped on
the goods of defendant and they were being passed as those of the plaintiff. This circumstance does not obtain here. From these cases, one feature
common to all comes out in bold relief and that is, the competing products involving the offending bottles, wrappers, packages or marks reached, the
hands of the ultimate consumer, so bottled, wrapped, package or marked. In other words, it is the form in which the wares or products come to the
ultimate consumer that was significant; for, as has been well said, the law of unfair competition does not protect purchasers against falsehood which the
tradesman may tell; the falsehood must be told by the article itself in order to make the law of unfair competition applicable.
Petitioner contends that there had been a marked decrease in the volume of sales of low-grade oil of the company, for which reason it argues that the
sale of respondent's low-grade oil in Shell containers was the cause. We are reluctant to share the logic of the argument. We are more inclined to
believe that several factors contributed to the decrease of such sales. But let us assume, for purposes of argument, that the presence of respondent's
low-grade oil in the market contributed to such decrease. May such eventuality make respondent liable for unfair competition? There is no prohibition for
respondent to sell its goods, even in places where the goods of petitioner had long been sold or extensively advertised. Respondent should not be
blamed if some petitioner's dealers by Insoil oil, as long as respondent does not deceive said dealers. If petitioner's dealers pass off Insoil oil as Shell oil,
that is their responsibility. If there was any such effort to deceive the public, the dealers to whom the defendant (respondent) sold its products and not
the latter, were. legally responsible for such deception. The passing of said oil, therefore, as product of Shell was not performed by the respondent or its
agent, but petitioner's dealers, which act respondent had no control whatever. And this could easily be done, for, as respondents' counsel put it
The point we would like to drive home is that if a SHELL dealer wants to fool the public by passing off INSOIL as SHELL oil he could do this by
the simple expedient of placing the INSOIL oil or any other oil for that matter in the "tall boys" and dispense it to the public as SHELL oil.
Whatever container INSOIL uses would be of no moment. ... absence of a clear showing, that INSOIL and the SHELL dealer connived or
conspired, we respectfully maintain that the responsibility of INSOIL ceases from the moment its oil, if ever it has ever been done, is
transferred by a SHELL dealer to a SHELL "tall boy".
And the existence of connivance or conspiracy, between dealer Uichangco and Agent Lozano has not in the least been insinuated.
Petitioner submits the adoption in the case at bar of the "service station is package theory" that the service stations of oil companies are packages in
themselves, such that all products emanating therefrom are expected to be those of the company whose marks the station bear, that when a motorist
drives to a Shell station, he does so with the intention of buying Shell products and that he is naturally guided by the marking of the station itself. Hence,
it constitutes a deceit on the buying public, to sell to said motorist any other kind of products without apprising them beforehand that they are not Shell
products. (Third assignment of error). In view, however, of the findings and conclusions reached, there seem to be no need of discussing the merits and
demerits of the theory, or whether the same is applicable or not, to the present case.

CONFORMABLY WITH ALL THE FOREGOING, We find that the decision of the Court of Appeals appealed from, is in accordance with the fact, the law
and jurisprudence on the matter. The same is affirmed, with costs against petitioner, in both instances.