G.R. No. 138814 April 16, 2009 On 14 February 1994, the SICD issued an Order granting SEC-EB No.
sued an Order granting SEC-EB No. 403, respectively. Respondent’s Petition
MAKATI STOCK EXCHANGE, INC., MA. VIVIAN
YUCHENGCO, ADOLFO M. DUARTE, MYRON C. PAPA,
NORBERTO C. NAZARENO, GEORGE UY-TIOCO,
ANTONIO A. LOPA, RAMON B. ARNAIZ, LUIS J.L.
VIRATA, and ANTONIO GARCIA, JR. Petitioners,
vs.
MIGUEL V. CAMPOS, substituted by JULIA ORTIGAS
VDA. DE CAMPOS,1 Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45
seeking the reversal of the Decision2 dated 11 February
1997 and Resolution dated 18 May 1999 of the Court of
Appeals in CA-G.R. SP No. 38455.
The facts of the case are as follows:
SEC Case No. 02-94-4678 was instituted on 10 February
1994 by respondent Miguel V. Campos, who filed with the
Securities, Investigation and Clearing Department (SICD)
of the Securities and Exchange Commission (SEC), a
Petition against herein petitioners Makati Stock Exchange,
Inc. (MKSE) and MKSE directors, Ma. Vivian Yuchengco,
Adolfo M. Duarte, Myron C. Papa, Norberto C. Nazareno,
George Uy-Tioco, Antonio A, Lopa, Ramon B. Arnaiz, Luis
J.L. Virata, and Antonio Garcia, Jr. Respondent, in said
Petition, sought: (1) the nullification of the Resolution
dated 3 June 1993 of the MKSE Board of Directors, which
allegedly deprived him of his right to participate equally in
the allocation of Initial Public Offerings (IPO) of
corporations registered with MKSE; (2) the delivery of the
IPO shares he was allegedly deprived of, for which he
would pay IPO prices; and (3) the payment of ₱2 million as
moral damages, ₱1 million as exemplary damages, and
₱500,000.00 as attorney’s fees and litigation expenses.
respondent’s prayer for the issuance of a Temporary
Restraining Order to enjoin petitioners from implementing
or enforcing the 3 June 1993 Resolution of the MKSE
Board of Directors.
The SICD subsequently issued another Order on 10 March
1994 granting respondent’s application for a Writ of
Preliminary Injunction, to continuously enjoin, during the
pendency of SEC Case No. 02-94-4678, the
implementation or enforcement of the MKSE Board
Resolution in question. Petitioners assailed this SICD
Order dated 10 March 1994 in a Petition for Certiorari filed
with the SEC en banc, docketed as SEC-EB No. 393.
On 11 March 1994, petitioners filed a Motion to Dismiss
respondent’s Petition in SEC Case No. 02-94-4678, based
on the following grounds: (1) the Petition became moot
due to the cancellation of the license of MKSE; (2) the
SICD had no jurisdiction over the Petition; and (3) the
Petition failed to state a cause of action.
The SICD denied petitioner’s Motion to Dismiss in an
Order dated 4 May 1994. Petitioners again challenged the
4 May 1994 Order of SICD before the SEC en banc
through another Petition for Certiorari, docketed as SEC-
EB No. 403.
In an Order dated 31 May 1995 in SEC-EB No. 393, the
SEC en banc nullified the 10 March 1994 Order of SICD in
SEC Case No. 02-94-4678 granting a Writ of Preliminary
Injunction in favor of respondent. Likewise, in an Order
dated 14 August 1995 in SEC-EB No. 403, the SEC en
banc annulled the 4 May 1994 Order of SICD in SEC Case
No. 02-94-4678 denying petitioners’ Motion to Dismiss,
and accordingly ordered the dismissal of respondent’s
Petition before the SICD.
Respondent filed a Petition for Certiorari with the Court of
Appeals assailing the Orders of the SEC en banc dated 31
May 1995 and 14 August 1995 in SEC-EB No. 393 and
before the appellate court was docketed as CA-G.R. SP
No. 38455.
On 11 February 1997, the Court of Appeals promulgated
its Decision in CA-G.R. SP No. 38455, granting
respondent’s Petition for Certiorari, thus:
WHEREFORE, the petition in so far as it prays for
annulment of the Orders dated May 31, 1995 and August
14, 1995 in SEC-EB Case Nos. 393 and 403 is
GRANTED. The said orders are hereby rendered null and
void and set aside.
Petitioners filed a Motion for Reconsideration of the
foregoing Decision but it was denied by the Court of
Appeals in a Resolution dated 18 May 1999.
Hence, the present Petition for Review raising the
following arguments:
I.
THE SEC EN BANC DID NOT COMMIT GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR EXCESS
OF JURISDICTION WHEN IT DISMISSED THE
PETITION FILED BY RESPONDENT BECAUSE ON ITS
FACE, IT FAILED TO STATE A CAUSE OF ACTION.
II.
THE GRANT OF THE IPO ALLOCATIONS IN FAVOR OF
RESPONDENT WAS A MERE ACCOMMODATION
GIVEN TO HIM BY THE BOARD OF [DIRECTORS] OF
THE MAKATI STOCK EXCHANGE, INC.
III.
THE COURT OF APPEALS ERRED IN HOLDING THAT
THE SEC EN BANC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT MADE AN EXTENDED
INQUIRY AND PROCEEDED TO MAKE A
DETERMINATION AS TO THE TRUTH OF
RESPONDENT’S ALLEGATIONS IN HIS PETITION AND
USED AS BASIS THE EVIDENCE ADDUCED DURING
THE HEARING ON THE APPLICATION FOR THE WRIT
OF PRELIMINARY INJUNCTION TO DETERMINE THE
EXISTENCE OR VALIDITY OF A STATED CAUSE OF
ACTION.
IV.
IPO ALLOCATIONS GRANTED TO BROKERS ARE NOT
TO BE BOUGHT BY THE BROKERS FOR THEMSELVES
BUT ARE TO BE DISTRIBUTED TO THE INVESTING
PUBLIC. HENCE, RESPONDENT’S CLAIM FOR
DAMAGES IS ILLUSORY AND HIS PETITION A
NUISANCE SUIT.3
On 18 September 2001, counsel for respondent
manifested to this Court that his client died on 7 May 2001.
In a Resolution dated 24 October 2001, the Court directed
the substitution of respondent by his surviving spouse,
Julia Ortigas vda. de Campos.
Petitioners want this Court to affirm the dismissal by the
SEC en banc of respondent’s Petition in SEC Case No.
02-94-4678 for failure to state a cause of action. On the
other hand, respondent insists on the sufficiency of his
Petition and seeks the continuation of the proceedings
before the SICD.
A cause of action is the act or omission by which a party
violates a right of another.4 A complaint states a cause of
action where it contains three essential elements of a
cause of action, namely: (1) the legal right of the plaintiff,
(2) the correlative obligation of the defendant, and (3) the
act or omission of the defendant in violation of said legal
right. If these elements are absent, the complaint becomes
vulnerable to dismissal on the ground of failure to state a
cause of action.
If a defendant moves to dismiss the complaint on the
ground of lack of cause of action, he is regarded as having
hypothetically admitted all the averments thereof. The test
of sufficiency of the facts found in a complaint as
constituting a cause of action is whether or not admitting
the facts alleged, the court can render a valid judgment
upon the same in accordance with the prayer thereof. The
hypothetical admission extends to the relevant and
material facts well pleaded in the complaint and inferences
fairly deducible therefrom. Hence, if the allegations in the
complaint furnish sufficient basis by which the complaint
can be maintained, the same should not be dismissed
regardless of the defense that may be assessed by the
defendant.5
Given the foregoing, the issue of whether respondent’s
Petition in SEC Case No. 02-94-4678 sufficiently states a
cause of action may be alternatively stated as whether,
hypothetically admitting to be true the allegations in
respondent’s Petition in SEC Case No. 02-94-4678, the
SICD may render a valid judgment in accordance with the
prayer of said Petition.
A reading of the exact text of respondent’s Petition in SEC
Case No. 02-94-4678 is, therefore, unavoidable. Pertinent
portions of the said Petition reads:
7. In recognition of petitioner’s invaluable services, the
general membership of respondent corporation [MKSE]
passed a resolution sometime in 1989 amending its
Articles of Incorporation, to include the following provision
therein:
"ELEVENTH – WHEREAS, Mr. Miguel Campos is the only
surviving incorporator of the Makati Stock Exchange, Inc.
who has maintained his membership;
"WHEREAS, he has unselfishly served the Exchange in
various capacities, as governor from 1977 to the present
and as President from 1972 to 1976 and again as
President from 1988 to the present;
"WHEREAS, such dedicated service and leadership which
has contributed to the advancement and well being not
only of the Exchange and its members but also to the
Securities industry, needs to be recognized and
appreciated;
"WHEREAS, as such, the Board of Governors in its
meeting held on February 09, 1989 has correspondingly
adopted a resolution recognizing his valuable service to
the Exchange, reward the same, and preserve for posterity
such recognition by proposing a resolution to the
membership body which would make him as Chairman
Emeritus for life and install in the Exchange premises a
commemorative bronze plaque in his honor;
"NOW, THEREFORE, for and in consideration of the
above premises, the position of the "Chairman Emeritus"
to be occupied by Mr. Miguel Campos during his lifetime
and irregardless of his continued membership in the
Exchange with the Privilege to attend all membership
meetings as well as the meetings of the Board of
Governors of the Exchange, is hereby created."
8. Hence, to this day, petitioner is not only an active
member of the respondent corporation, but its Chairman
Emeritus as well.
9. Correspondingly, at all times material to this petition, as
an active member and Chairman Emeritus of respondent
corporation, petitioner has always enjoyed the right given
to all the other members to participate equally in the Initial
Public Offerings (IPOs for brevity) of corporations.
10. IPOs are shares of corporations offered for sale to the
public, prior to the listing in the trading floor of the
country’s two stock exchanges. Normally, Twenty Five
Percent (25%) of these shares are divided equally
between the two stock exchanges which in turn divide
these equally among their members, who pay therefor at
the offering price.
11. However, on June 3, 1993, during a meeting of the
Board of Directors of respondent-corporation, individual
respondents passed a resolution to stop giving petitioner
the IPOs he is entitled to, based on the ground that these
shares were allegedly benefiting Gerardo O. Lanuza, Jr.,
who these individual respondents wanted to get even with,
for having filed cases before the Securities and Exchange
(SEC) for their disqualification as member of the Board of
Directors of respondent corporation.
12. Hence, from June 3, 1993 up to the present time,
petitioner has been deprived of his right to subscribe to the
IPOs of corporations listing in the stock market at their
offering prices.
13. The collective act of the individual respondents in
depriving petitioner of his right to a share in the IPOs for
the aforementioned reason, is unjust, dishonest and done
in bad faith, causing petitioner substantial financial
damage.6
There is no question that the Petition in SEC Case No. 02-
94-4678 asserts a right in favor of respondent, particularly,
respondent’s alleged right to subscribe to the IPOs of
corporations listed in the stock market at their offering
prices; and stipulates the correlative obligation of
petitioners to respect respondent’s right, specifically, by
continuing to allow respondent to subscribe to the IPOs of
corporations listed in the stock market at their offering
prices.
However, the terms right and obligation in respondent’s
Petition are not magic words that would automatically lead
to the conclusion that such Petition sufficiently states a
cause of action. Right and obligation are legal terms with
specific legal meaning. A right is a claim or title to an
interest in anything whatsoever that is enforceable by
law.7 An obligation is defined in the Civil Code as a
juridical necessity to give, to do or not to do.8 For every
right enjoyed by any person, there is a corresponding
obligation on the part of another person to respect such
right. Thus, Justice J.B.L. Reyes offers9 the definition
given by Arias Ramos as a more complete definition:
An obligation is a juridical relation whereby a person
(called the creditor) may demand from another (called the
debtor) the observance of a determinative conduct (the
giving, doing or not doing), and in case of breach, may
demand satisfaction from the assets of the latter.
The Civil Code enumerates the sources of obligations:
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.
Therefore, an obligation imposed on a person, and the
corresponding right granted to another, must be rooted in
at least one of these five sources. The mere assertion of a
right and claim of an obligation in an initiatory pleading,
whether a Complaint or Petition, without identifying the
basis or source thereof, is merely a conclusion of fact and
law. A pleading should state the ultimate facts essential to
the rights of action or defense asserted, as distinguished
from mere conclusions of fact or conclusions of
law.10 Thus, a Complaint or Petition filed by a person
claiming a right to the Office of the President of this
Republic, but without stating the source of his purported
right, cannot be said to have sufficiently stated a cause of
action. Also, a person claiming to be the owner of a parcel
of land cannot merely state that he has a right to the
ownership thereof, but must likewise assert in the
Complaint either a mode of acquisition of ownership or at
least a certificate of title in his name.
In the case at bar, although the Petition in SEC Case No.
02-94-4678 does allege respondent’s right to subscribe to
the IPOs of corporations listed in the stock market at their
offering prices, and petitioners’ obligation to continue
respecting and observing such right, the Petition utterly
failed to lay down the source or basis of respondent’s right
and/or petitioners’ obligation.
Respondent merely quoted in his Petition the MKSE Board
Resolution, passed sometime in 1989, granting him the
position of Chairman Emeritus of MKSE for life. However,
there is nothing in the said Petition from which the Court
can deduce that respondent, by virtue of his position as
Chairman Emeritus of MKSE, was granted by law,
contract, or any other legal source, the right to subscribe to
the IPOs of corporations listed in the stock market at their
offering prices.
A meticulous review of the Petition reveals that the
allocation of IPO shares was merely alleged to have been
done in accord with a practice normally observed by the
members of the stock exchange, to wit:
IPOs are shares of corporations offered for sale to the
public, prior to their listing in the trading floor of the
country’s two stock exchanges. Normally, Twenty-Five
Percent (25%) of these shares are divided equally
between the two stock exchanges which in turn divide
these equally among their members, who pay therefor at
the offering price.11(Emphasis supplied)
A practice or custom is, as a general rule, not a source of
a legally demandable or enforceable right.12 Indeed, in
labor cases, benefits which were voluntarily given by the
employer, and which have ripened into company practice,
are considered as rights that cannot be diminished by the
employer.13 Nevertheless, even in such cases, the source
of the employees’ right is not custom, but ultimately, the
law, since Article 100 of the Labor Code explicitly prohibits
elimination or diminution of benefits.
There is no such law in this case that converts the practice
of allocating IPO shares to MKSE members, for
subscription at their offering prices, into an enforceable or
demandable right. Thus, even if it is hypothetically
admitted that normally, twenty five percent (25%) of the
IPOs are divided equally between the two stock
exchanges -- which, in turn, divide their respective
allocation equally among their members, including the
Chairman Emeritus, who pay for IPO shares at the offering
price -- the Court cannot grant respondent’s prayer for
damages which allegedly resulted from the MKSE Board
Resolution dated 3 June 1993 deviating from said practice
by no longer allocating any shares to respondent.1avvphi1
11 of the amended articles of incorporation of the
Exchange in support of his position but a careful reading of
the said provision shows nothing therein that would bear
out his claim. The provision merely created the position of
chairman emeritus of the Exchange but it mentioned
nothing about conferring upon the occupant thereof the
right to receive IPO allocations.14
With the dismissal of respondent’s Petition in SEC Case
No. 02-94-4678, there is no more need for this Court to
resolve the propriety of the issuance by SCID of a writ of
preliminary injunction in said case.
WHEREFORE, the Petition is GRANTED. The Decision of
the Court of Appeals dated 11 February 1997 and its
Resolution dated 18 May 1999 in CA-G.R. SP No. 38455
are REVERSED and SET ASIDE. The Orders dated 31
May 1995 and 14 August 1995 of the Securities and
Exchange Commission en banc in SEC-EB Case No. 393
and No. 403, respectively, are hereby reinstated. No
pronouncement as to costs.
SO ORDERED.

Accordingly, the instant Petition should be granted. The

Petition in SEC Case No. 02-94-4678 should be dismissed
for failure to state a cause of action. It does not matter that
the SEC en banc, in its Order dated 14 August 1995 in
SEC-EB No. 403, overstepped its bounds by not limiting
itself to the issue of whether respondent’s Petition before
the SICD sufficiently stated a cause of action. The SEC en
banc may have been mistaken in considering extraneous
evidence in granting petitioners’ Motion to Dismiss, but its
discussion thereof are merely superfluous and obiter
dictum. In the main, the SEC en banc did correctly dismiss
the Petition in SEC Case No. 02-94-4678 for its failure to
state the basis for respondent’s alleged right, to wit:

Private respondent Campos has failed to establish the

basis or authority for his alleged right to participate equally
in the IPO allocations of the Exchange. He cited paragraph
EN BANC
G.R. No. 109125 December 2, 1994
ANG YU ASUNCION, ARTHUR GO AND KEH TIONG,
Petitioners, v. THE HON. COURT OF APPEALS and
BUEN REALTY DEVELOPMENT CORPORATION,
Respondents.
Antonio M. Albano for petitioners.chanrobles virtual law
library
Umali, Soriano & Associates for private respondent.
VITUG, J.:
Assailed, in this petition for review, is the decision of the
Court of Appeals, dated 04 December 1991, in CA-G.R.
SP No. 26345 setting aside and declaring without force
and effect the orders of execution of the trial court, dated
30 August 1991 and 27 September 1991, in Civil Case No.
87-41058.chanroblesvirtualawlibrarychanrobles virtual law
library
The antecedents are recited in good detail by the appellate
court thusly:
On July 29, 1987 a Second Amended Complaint for
Specific Performance was filed by Ang Yu Asuncion and
Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu
Unjieng and Jose Tan before the Regional Trial Court,
Branch 31, Manila in Civil Case No. 87-41058, alleging,
among others, that plaintiffs are tenants or lessees of
residential and commercial spaces owned by defendants
described as Nos. 630-638 Ongpin Street, Binondo,
Manila; that they have occupied said spaces since 1935
and have been religiously paying the rental and complying
with all the conditions of the lease contract; that on several
occasions before October 9, 1986, defendants informed
plaintiffs that they are offering to sell the premises and are
giving them priority to acquire the same; that during the
negotiations, Bobby Cu Unjieng offered a price of P6-
million while plaintiffs made a counter offer of P5-million;
that plaintiffs thereafter asked the defendants to put their
offer in writing to which request defendants acceded; that
in reply to defendant's letter, plaintiffs wrote them on
October 24, 1986 asking that they specify the terms and
conditions of the offer to sell; that when plaintiffs did not
receive any reply, they sent another letter dated January
28, 1987 with the same request; that since defendants
failed to specify the terms and conditions of the offer to sell
and because of information received that defendants were
about to sell the property, plaintiffs were compelled to file
the complaint to compel defendants to sell the property to
them.chanroblesvirtualawlibrarychanrobles virtual law
library
Defendants filed their answer denying the material
allegations of the complaint and interposing a special
defense of lack of cause of
action.chanroblesvirtualawlibrarychanrobles virtual law
library
After the issues were joined, defendants filed a motion for
summary judgment which was granted by the lower court.
The trial court found that defendants' offer to sell was
never accepted by the plaintiffs for the reason that the
parties did not agree upon the terms and conditions of the
proposed sale, hence, there was no contract of sale at all.
Nonetheless, the lower court ruled that should the
defendants subsequently offer their property for sale at a
price of P11-million or below, plaintiffs will have the right of
first refusal. Thus the dispositive portion of the decision
states:
WHEREFORE, judgment is hereby rendered in favor of
the defendants and against the plaintiffs summarily
dismissing the complaint subject to the aforementioned
condition that if the defendants subsequently decide to
offer their property for sale for a purchase price of Eleven
Million Pesos or lower, then the plaintiffs has the option to
purchase the property or of first refusal, otherwise,
defendants need not offer the property to the plaintiffs if
the purchase price is higher than Eleven Million
Pesos.chanroblesvirtualawlibrarychanrobles virtual law
library
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court
in
CA-G.R. CV No. 21123. In a decision promulgated on
September 21, 1990 (penned by Justice Segundino G.
Chua and concurred in by Justices Vicente V. Mendoza
and Fernando A. Santiago), this Court affirmed with
modification the lower court's judgment, holding:
In resume, there was no meeting of the minds between the
parties concerning the sale of the property. Absent such
requirement, the claim for specific performance will not lie.
Appellants' demand for actual, moral and exemplary
damages will likewise fail as there exists no justifiable
ground for its award. Summary judgment for defendants
was properly granted. Courts may render summary
judgment when there is no genuine issue as to any
material fact and the moving party is entitled to a judgment
as a matter of law (Garcia vs. Court of Appeals, 176 SCRA
815). All requisites obtaining, the decision of the court a
quo is legally
justifiable.chanroblesvirtualawlibrarychanrobles virtual law
library
WHEREFORE, finding the appeal unmeritorious, the
judgment appealed from is hereby AFFIRMED, but subject
to the following modification: The court a quo in the
aforestated decision gave the plaintiffs-appellants the right
of first refusal only if the property is sold for a purchase
price of Eleven Million pesos or lower; however,
considering the mercurial and uncertain forces in our
market economy today. We find no reason not to grant the
same right of first refusal to herein appellants in the event
that the subject property is sold for a price in excess of
Eleven Million pesos. No pronouncement as to
costs.chanroblesvirtualawlibrarychanrobles virtual law
library
SO ORDERED.
The decision of this Court was brought to the Supreme
Court by petition for review on certiorari. The Supreme
Court denied the appeal on May 6, 1991 "for insufficiency
in form and substances" (Annex H,
Petition).chanroblesvirtualawlibrarychanrobles virtual law
library
On November 15, 1990, while CA-G.R. CV No. 21123 was
pending consideration by this Court, the Cu Unjieng
spouses executed a Deed of Sale (Annex D, Petition)
transferring the property in question to herein petitioner
Buen Realty and Development Corporation, subject to the
following terms and conditions:
1. That for and in consideration of the sum of
FIFTEEN MILLION PESOS (P15,000,000.00), receipt of
which in full is hereby acknowledged, the VENDORS
hereby sells, transfers and conveys for and in favor of the
VENDEE, his heirs, executors, administrators or assigns,
the above-described property with all the improvements
found therein including all the rights and interest in the said
property free from all liens and encumbrances of whatever
nature, except the pending ejectment
proceeding;chanrobles virtual law library
2. That the VENDEE shall pay the Documentary
Stamp Tax, registration fees for the transfer of title in his
favor and other expenses incidental to the sale of above-
described property including capital gains tax and accrued
real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in
the name of the Cu Unjieng spouses was cancelled and, in
lieu thereof, TCT No. 195816 was issued in the name of
petitioner on December 3,
1990.chanroblesvirtualawlibrarychanrobles virtual law
library
On July 1, 1991, petitioner as the new owner of the subject
property wrote a letter to the lessees demanding that the
latter vacate the
premises.chanroblesvirtualawlibrarychanrobles virtual law
library
On July 16, 1991, the lessees wrote a reply to petitioner
stating that petitioner brought the property subject to the
notice of lis pendens regarding Civil Case No. 87-41058
annotated on TCT No. 105254/T-881 in the name of the
Cu Unjiengs.chanroblesvirtualawlibrarychanrobles virtual
law library
The lessees filed a Motion for Execution dated August 27,
1991 of the Decision in Civil Case No. 87-41058 as
modified by the Court of Appeals in CA-G.R. CV No.
21123.chanroblesvirtualawlibrarychanrobles virtual law
library
On August 30, 1991, respondent Judge issued an order
(Annex A, Petition) quoted as follows:
Presented before the Court is a Motion for Execution filed
by plaintiff represented by Atty. Antonio Albano. Both
defendants Bobby Cu Unjieng and Rose Cu Unjieng
represented by Atty. Vicente Sison and Atty. Anacleto
Magno respectively were duly notified in today's
consideration of the motion as evidenced by the rubber
stamp and signatures upon the copy of the Motion for
Execution.chanroblesvirtualawlibrarychanrobles virtual law
library
The gist of the motion is that the Decision of the Court
dated September 21, 1990 as modified by the Court of
Appeals in its decision in CA G.R. CV-21123, and elevated
to the Supreme Court upon the petition for review and that
the same was denied by the highest tribunal in its
resolution dated May 6, 1991 in G.R. No.
L-97276, had now become final and executory. As a
consequence, there was an Entry of Judgment by the
Supreme Court as of June 6, 1991, stating that the
aforesaid modified decision had already become final and
executory.chanroblesvirtualawlibrarychanrobles virtual law
library
It is the observation of the Court that this property in
dispute was the subject of the Notice of Lis Pendens and
that the modified decision of this Court promulgated by the
Court of Appeals which had become final to the effect that
should the defendants decide to offer the property for sale
for a price of P11 Million or lower, and considering the
mercurial and uncertain forces in our market economy
today, the same right of first refusal to herein
plaintiffs/appellants in the event that the subject property is
sold for a price in excess of Eleven Million pesos or
more.chanroblesvirtualawlibrarychanrobles virtual law
library
WHEREFORE, defendants are hereby ordered to execute
the necessary Deed of Sale of the property in litigation in
favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur
Go for the consideration of P15 Million pesos in
recognition of plaintiffs' right of first refusal and that a new
Transfer Certificate of Title be issued in favor of the
buyer.chanroblesvirtualawlibrarychanrobles virtual law
library
All previous transactions involving the same property
notwithstanding the issuance of another title to Buen
Realty Corporation, is hereby set aside as having been
executed in bad faith.chanroblesvirtualawlibrarychanrobles
virtual law library
SO ORDERED.
On September 22, 1991 respondent Judge issued another
order, the dispositive portion of which reads:
WHEREFORE, let there be Writ of Execution issue in the
above-entitled case directing the Deputy Sheriff Ramon
Enriquez of this Court to implement said Writ of Execution
ordering the defendants among others to comply with the
aforesaid Order of this Court within a period of one (1)
week from receipt of this Order and for defendants to
execute the necessary Deed of Sale of the property in
litigation in favor of the plaintiffs Ang Yu Asuncion, Keh
Tiong and Arthur Go for the consideration of
P15,000,000.00 and ordering the Register of Deeds of the
City of Manila, to cancel and set aside the title already
issued in favor of Buen Realty Corporation which was
previously executed between the latter and defendants
and to register the new title in favor of the aforesaid
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur
Go.chanroblesvirtualawlibrarychanrobles virtual law library
SO ORDERED.
On the same day, September 27, 1991 the corresponding
writ of execution (Annex C, Petition) was issued.
1chanrobles virtual law library
On 04 December 1991, the appellate court, on appeal to it
by private respondent, set aside and declared without
force and effect the above questioned orders of the court a
quo.chanroblesvirtualawlibrarychanrobles virtual law
library
In this petition for review on certiorari, petitioners contend
that Buen Realty can be held bound by the writ of
execution by virtue of the notice of lis pendens, carried
over on TCT No. 195816 issued in the name of Buen
Realty, at the time of the latter's purchase of the property
on 15 November 1991 from the Cu
Unjiengs.chanroblesvirtualawlibrarychanrobles virtual law
library
We affirm the decision of the appellate
court.chanroblesvirtualawlibrarychanrobles virtual law
library
A not too recent development in real estate transactions is
the adoption of such arrangements as the right of first
refusal, a purchase option and a contract to sell. For ready
reference, we might point out some fundamental precepts
that may find some relevance to this
discussion.chanroblesvirtualawlibrarychanrobles virtual
law library
An obligation is a juridical necessity to give, to do or not to
do (Art. 1156, Civil Code). The obligation is constituted
upon the concurrence of the essential elements thereof,
viz: (a) The vinculum juris or juridical tie which is the
efficient cause established by the various sources of
obligations (law, contracts, quasi-contracts, delicts and
quasi-delicts); (b) the object which is the prestation or
conduct; required to be observed (to give, to do or not to
do); and (c) the subject-persons who, viewed from the
demandability of the obligation, are the active (obligee)
and the passive (obligor)
subjects.chanroblesvirtualawlibrarychanrobles virtual law
library
Among the sources of an obligation is a contract (Art.
1157, Civil Code), which is a meeting of minds between
two persons whereby one binds himself, with respect to
the other, to give something or to render some service
(Art. 1305, Civil Code). A contract undergoes various
stages that include its negotiation or preparation, its
perfection and, finally, its consummation. Negotiation
covers the period from the time the prospective contracting
parties indicate interest in the contract to the time the
contract is concluded (perfected). The perfection of the
contract takes place upon the concurrence of the essential
elements thereof. A contract which is consensual as to
perfection is so established upon a mere meeting of
minds, i.e., the concurrence of offer and acceptance, on
the object and on the cause thereof. A contract which
requires, in addition to the above, the delivery of the object
of the agreement, as in a pledge or commodatum, is
commonly referred to as a real contract. In a solemn
contract, compliance with certain formalities prescribed by
law, such as in a donation of real property, is essential in
order to make the act valid, the prescribed form being
thereby an essential element thereof. The stage of
consummation begins when the parties perform their
respective undertakings under the contract culminating in
the extinguishment
thereof.chanroblesvirtualawlibrarychanrobles virtual law
library
Until the contract is perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation. In
sales, particularly, to which the topic for discussion about
the case at bench belongs, the contract is perfected when
a person, called the seller, obligates himself, for a price
certain, to deliver and to transfer ownership of a thing or
right to another, called the buyer, over which the latter
agrees. Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other to pay therefor
a price certain in money or its
equivalent.chanroblesvirtualawlibrarychanrobles virtual law
library
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a
"Contract to Sell" where invariably the ownership of the
thing sold is retained until the fulfillment of a positive
suspensive condition (normally, the full payment of the
purchase price), the breach of the condition will prevent
the obligation to convey title from acquiring an obligatory
force. 2In Dignos vs. Court of Appeals (158 SCRA 375),
we have said that, although denominated a "Deed of
Conditional Sale," a sale is still absolute where the
contract is devoid of any proviso that title is reserved or the
right to unilaterally rescind is stipulated, e.g., until or
unless the price is paid. Ownership will then be transferred
to the buyer upon actual or constructive delivery (e.g., by
the execution of a public document) of the property sold.
Where the condition is imposed upon the perfection of the
contract itself, the failure of the condition would prevent
such perfection. 3If the condition is imposed on the
obligation of a party which is not fulfilled, the other party
may either waive the condition or refuse to proceed with
the sale (Art. 1545, Civil Code). 4chanrobles virtual law
library
An unconditional mutual promise to buy and sell, as long
as the object is made determinate and the price is fixed,
can be obligatory on the parties, and compliance therewith
may accordingly be exacted. 5chanrobles virtual law
library
An accepted unilateral promise which specifies the thing to
be sold and the price to be paid, when coupled with a
valuable consideration distinct and separate from the
price, is what may properly be termed a perfected contract
of option. This contract is legally binding, and in sales, it
conforms with the second paragraph of Article 1479 of the
Civil Code, viz:
Art. 1479. . . .chanroblesvirtualawlibrarychanrobles virtual
law library
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price. (1451a) 6chanrobles virtual law
library
Observe, however, that the option is not the contract of
sale itself. 7 The optionee has the right, but not the
obligation, to buy. Once the option is exercised timely, i.e.,
the offer is accepted before a breach of the option, a
bilateral promise to sell and to buy ensues and both
parties are then reciprocally bound to comply with their
respective undertakings. 8chanrobles virtual law library
Let us elucidate a little. A negotiation is formally initiated
by an offer. An imperfect promise (policitacion) is merely
an offer. Public advertisements or solicitations and the like
are ordinarily construed as mere invitations to make offers
or only as proposals. These relations, until a contract is
perfected, are not considered binding commitments. Thus,
at any time prior to the perfection of the contract, either
negotiating party may stop the negotiation. The offer, at
this stage, may be withdrawn; the withdrawal is effective
immediately after its manifestation, such as by its mailing
and not necessarily when the offeree learns of the
withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a
period is given to the offeree within which to accept the
offer, the following rules generally govern:chanrobles
virtual law library
(1) If the period is not itself founded upon or
supported by a consideration, the offeror is still free and
has the right to withdraw the offer before its acceptance,
or, if an acceptance has been made, before the offeror's
coming to know of such fact, by communicating that
withdrawal to the offeree (see Art. 1324, Civil Code; see
also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that
this rule is applicable to a unilateral promise to sell under
Art. 1479, modifying the previous decision in South
Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art.
1319, Civil Code; Rural Bank of Parañaque, Inc., vs.
Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA
368). The right to withdraw, however, must not be
exercised whimsically or arbitrarily; otherwise, it could give
rise to a damage claim under Article 19 of the Civil Code
which ordains that "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."chanrobles virtual law library
(2) If the period has a separate consideration, a
contract of "option" is deemed perfected, and it would be a
breach of that contract to withdraw the offer during the
agreed period. The option, however, is an independent
contract by itself, and it is to be distinguished from the
projected main agreement (subject matter of the option)
which is obviously yet to be concluded. If, in fact, the
optioner-offeror withdraws the offer before its acceptance
(exercise of the option) by the optionee-offeree, the latter
may not sue for specific performance on the proposed
contract ("object" of the option) since it has failed to reach
its own stage of perfection. The optioner-offeror, however,
renders himself liable for damages for breach of the
option. In these cases, care should be taken of the real
nature of the consideration given, for if, in fact, it has been
intended to be part of the consideration for the main
contract with a right of withdrawal on the part of the
optionee, the main contract could be deemed perfected; a
similar instance would be an "earnest money" in a contract
of sale that can evidence its perfection (Art. 1482, Civil
Code).chanroblesvirtualawlibrarychanrobles virtual law
library
In the law on sales, the so-called "right of first refusal" is
an innovative juridical relation. Needless to point out, it
cannot be deemed a perfected contract of sale under
Article 1458 of the Civil Code. Neither can the right of first
refusal, understood in its normal concept, per se be
brought within the purview of an option under the second
paragraph of Article 1479, aforequoted, or possibly of an
offer under Article 1319 9of the same Code. An option or
an offer would require, among other things, 10a clear
certainty on both the object and the cause or consideration
of the envisioned contract. In a right of first refusal, while
the object might be made determinate, the exercise of the
right, however, would be dependent not only on the
grantor's eventual intention to enter into a binding juridical
relation with another but also on terms, including the price,
that obviously are yet to be later firmed up. Prior thereto, it
can at best be so described as merely belonging to a class
of preparatory juridical relations governed not by contracts
(since the essential elements to establish the vinculum
juris would still be indefinite and inconclusive) but by,
among other laws of general application, the pertinent
scattered provisions of the Civil Code on human
conduct.chanroblesvirtualawlibrarychanrobles virtual law
library
Even on the premise that such right of first refusal has
been decreed under a final judgment, like here, its breach
cannot justify correspondingly an issuance of a writ of
execution under a judgment that merely recognizes its
existence, nor would it sanction an action for specific
performance without thereby negating the indispensable
element of consensuality in the perfection of contracts. 11It
is not to say, however, that the right of first refusal would
be inconsequential for, such as already intimated above,
an unjustified disregard thereof, given, for instance, the
circumstances expressed in Article 19 12of the Civil Code,
can warrant a recovery for
damages.chanroblesvirtualawlibrarychanrobles virtual law
library
The final judgment in Civil Case No. 87-41058, it must be
stressed, has merely accorded a "right of first refusal" in
favor of petitioners. The consequence of such a
declaration entails no more than what has heretofore been
said. In fine, if, as it is here so conveyed to us, petitioners
are aggrieved by the failure of private respondents to
honor the right of first refusal, the remedy is not a writ of
execution on the judgment, since there is none to execute,
but an action for damages in a proper forum for the
purpose.chanroblesvirtualawlibrarychanrobles virtual law
library
Furthermore, whether private respondent Buen Realty
Development Corporation, the alleged purchaser of the
property, has acted in good faith or bad faith and whether
or not it should, in any case, be considered bound to
respect the registration of the lis pendens in Civil Case No.
87-41058 are matters that must be independently
addressed in appropriate proceedings. Buen Realty, not
having been impleaded in Civil Case No. 87-41058, cannot
be held subject to the writ of execution issued by
respondent Judge, let alone ousted from the ownership
and possession of the property, without first being duly
afforded its day in
court.chanroblesvirtualawlibrarychanrobles virtual law
library
We are also unable to agree with petitioners that the Court
of Appeals has erred in holding that the writ of execution
varies the terms of the judgment in Civil Case No. 87-
41058, later affirmed in CA-G.R. CV-21123. The Court of
Appeals, in this regard, has observed:
Finally, the questioned writ of execution is in variance with
the decision of the trial court as modified by this Court. As
already stated, there was nothing in said decision 13 that
decreed the execution of a deed of sale between the Cu
Unjiengs and respondent lessees, or the fixing of the price
of the sale, or the cancellation of title in the name of
petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng
Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman
vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).
It is likewise quite obvious to us that the decision in Civil
Case No. 87-41058 could not have decreed at the time the
execution of any deed of sale between the Cu Unjiengs
and petitioners.chanroblesvirtualawlibrarychanrobles
virtual law library
WHEREFORE, we UPHOLD the Court of Appeals in
ultimately setting aside the questioned Orders, dated 30
August 1991 and 27 September 1991, of the court a quo.
Costs against
petitioners.chanroblesvirtualawlibrarychanrobles virtual law
library
SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr.,
Romero, Bellosillo, Melo, Quiason, Puno and Mendoza,
JJ., concur.
Kapunan, J., took no part.
Feliciano, J., is on leave.
Endnotes:
1 Rollo, pp. 32-38.chanrobles virtual law library
2 Roque vs. Lapuz, 96 SCRA 741; Agustin vs. CA,
186 SCRA 375.chanrobles virtual law library
3 See People's Homesite and Housing Corp. vs.
Court of Appeals, 133 SCRA 777.chanrobles virtual law
library
4 Delta Motor Corporation vs. Genuino, 170 SCRA
29.chanrobles virtual law library
5 See Art. 1459; Atkins, Kroll and Co., Inc. vs. Cua
Hian Tek, 102 Phil. 948.chanrobles virtual law library
6 It is well to note that when the consideration
given, for what otherwise would have been an option,
partakes the nature in reality of a part payment of the
purchase price (termed as "earnest money" and
considered as an initial payment thereof), an actual
contract of sale is deemed entered into and enforceable as
such.chanrobles virtual law library
7 Enriquez de la Cavada vs. Diaz, 37 Phil.
982.chanrobles virtual law library
8 Atkins, Kroll & Co., Inc., vs. Cua Hian Tek, 102
Phil. 948.chanrobles virtual law library
9 Article 1319, Civil Code, provides:
Art. 1319. Consent is manifested by the meeting of the
offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer. (Emphasis
supplied.)
10 It is also essential for an option to be binding
that valuable consideration distinct from the price should
be given (see Montilla vs. Court of Appeals, 161 SCRA
167; Sps. Natino vs. IAC, 197 SCRA 323; Cronico vs. J.M.
Tuason & Co., Inc., 78 SCRA 331).chanrobles virtual law
library
11 See Article 1315 and 1318, Civil Code; Madrigal
& Co. vs. Stevenson & Co., 15 Phil. 38; Salonga vs.
Ferrales, 105 SCRA 359).chanrobles virtual law library
12 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.chanrobles virtual law library
13 The decision referred to reads:
In resume, there was no meeting of the minds between the
parties concerning the sale of the property. Absent such
requirement, the claim for specific performance will not lie.
Appellants' demand for actual, moral and exemplary
damages will likewise fail as there exists no justifiable
ground for its award. Summary judgment for defendants
was properly granted. Courts may render summary
judgment when there is no genuine issue as to any
material fact and the moving party is entitled to a judgment
as a matter of law (Garcia vs. Court of Appeals, 176 SCRA
815). All requisites obtaining, the decision of the court a
quo is legally justifiable.chanrobles virtual law library

WHEREFORE, finding the appeal unmeritorious, the

judgment appealed from is hereby AFFIRMED, but subject
to the following modification: The court a quo in the
aforestated decision, gave the plaintiffs - considering the
mercurial and uncertain forces in our market economy
today. We find no reason not to grant the same right of first
refusal to herein appellants in the event that the subject
property is sold for a price in excess of Eleven Million
pesos. No pronouncement as to costs.
G.R. No. 120592 March 14, 1997
TRADERS ROYAL BANK EMPLOYEES UNION-
INDEPENDENT, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
EMMANUEL NOEL A. CRUZ, respondents.
REGALADO, J.:
Petitioner Traders Royal Bank Employees Union and
private respondent Atty. Emmanuel Noel A. Cruz, head of
the E.N.A. Cruz and Associates law firm, entered into a
retainer agreement on February 26, 1987 whereby the
former obligated itself to pay the latter a monthly retainer
fee of P3,000.00 in consideration of the law firm's
undertaking to render the services enumerated in their
contract.1 Parenthetically, said retainer agreement was
terminated by the union on April 4, 1990.2
During the existence of that agreement, petitioner union
referred to private respondent the claims of its members
for holiday, mid-year and year-end bonuses against their
employer, Traders Royal Bank (TRB). After the
appropriate complaint was filed by private respondent, the
case was certified by the Secretary of Labor to the
National Labor Relations Commission (NLRC) on March
24, 1987 and docketed as NLRC-NCR Certified Case No.
0466.3
On September 2, 1988, the NLRC rendered a decision in
the foregoing case in favor of the employees, awarding
them holiday pay differential, mid-year bonus differential,
and year-end bonus differential.4 The NLRC, acting on a
motion for the issuance of a writ of execution filed by
private respondent as counsel for petitioner union, raffled
the case to Labor Arbiter Oswald Lorenzo.5
However, pending the hearing of the application for the
writ of execution, TRB challenged the decision of the
NLRC before the Supreme Court. The Court, in its
decision promulgated on August 30, 1990,6 modified the
decision of the NLRC by deleting the award of mid-year
and year-end bonus differentials while affirming the award
of holiday pay differential.7
The bank voluntarily complied with such final judgment
and determined the holiday pay differential to be in the
amount of P175,794.32. Petitioner never contested the
amount thus found by TRB.8 The latter duly paid its
concerned employees their respective entitlement in said
sum through their payroll.9
After private respondent received the above decision of
the Supreme Court on September 18, 1990, 10 he notified
the petitioner union, the TRB management and the NLRC
of his right to exercise and enforce his attorney's lien over
the award of holiday pay differential through a letter dated
October 8, 1990. 11
Thereafter, on July 2, 1991, private respondent filed a
motion before Labor Arbiter Lorenzo for the determination
of his attorney's fees, praying that ten percent (10%) of the
total award for holiday pay differential computed by TRB at
P175,794.32, or the amount of P17,579.43, be declared as
his attorney's fees, and that petitioner union be ordered to
pay and remit said amount to him. 12
The TRB management manifested before the labor arbiter
that they did not wish to oppose or comment on private
respondent's motion as the claim was directed against the
union, 13 while petitioner union filed a comment and
opposition to said motion on July 15, 1991. 14 After
considering the position of the parties, the labor arbiter
issued an order 15 on November 26, 1991 granting the
motion of private respondent, as follows:
WHEREFORE, premises considered, it is hereby ordered
that the TRADERS ROYAL BANK EMPLOYEES UNION
with offices at Kanlaon Towers, Roxas Boulevard is hereby
ordered (sic) to pay without delay the attorney's fees due
the movant law firm, E.N.A. CRUZ and ASSOCIATES the
amount of P17,574.43 or ten (10%) per cent of the
P175,794.32 awarded by the Supreme Court to the
members of the former.
This constrained petitioner to file an appeal with the NLRC
on December 27, 1991, seeking a reversal of that order.
16
On October 19, 1994, the First Division of the NLRC
promulgated a resolution affirming the order of the labor
arbiter. 17 The motion for reconsideration filed by
petitioner was denied by the NLRC in a resolution dated
May 23, 1995, 18 hence the petition at bar.
Petitioner maintains that the NLRC committed grave abuse
of discretion amounting to lack of jurisdiction in upholding
the award of attorney's fees in the amount of P17,574.43,
or ten percent (10%) of the P175,794.32 granted as
holiday pay differential to its members, in violation of the
retainer agreement; and that the challenged resolution of
the NLRC is null and void, 19 for the reasons hereunder
stated.
Although petitioner union concedes that the NLRC has
jurisdiction to decide claims for attorney's fees, it contends
that the award for attorney's fees should have been
incorporated in the main case and not after the Supreme
Court had already reviewed and passed upon the decision
of the NLRC. Since the claim for attorney's fees by private
respondent was neither taken up nor approved by the
Supreme Court, no attorney's fees should have been
allowed by the NLRC.
Thus, petitioner posits that the NLRC acted without
jurisdiction in making the award of attorney's fees, as said
act constituted a modification of a final and executory
judgment of the Supreme Court which did not award
attorney's fees. It then cited decisions of the Court
declaring that a decision which has become final and
executory can no longer be altered or modified even by the
court which rendered the same.
On the other hand, private respondent maintains that his
motion to determine attorney's fees was just an incident of
the main case where petitioner was awarded its money
claims. The grant of attorney's fees was the consequence
of his exercise of his attorney's lien. Such lien resulted
from and corresponds to the services he rendered in the
action wherein the favorable judgment was obtained. To
include the award of the attorney's fees in the main case
presupposes that the fees will be paid by TRB to the
adverse party. All that the non-inclusion of attorney's fees
in the award means is that the Supreme Court did not
order TRB to pay the opposing party attorney's fees in the
concept of damages. He is not therefore precluded from
filing his motion to have his own professional fees
adjudicated.
In view of the substance of the arguments submitted by
petitioner and private respondent on this score, it appears
necessary to explain and consequently clarify the nature of
the attorney's fees subject of this petition, in order to
dissipate the apparent confusion between and the
conflicting views of the parties.
There are two commonly accepted concepts of attorney's
fees, the so-called ordinary and extraordinary. 20 In its
ordinary concept, an attorney's fee is the reasonable
compensation paid to a lawyer by his client for the legal
services he has rendered to the latter. The basis of this
compensation is the fact of his employment by and his
agreement with the client.
In its extraordinary concept, an attorney's fee is an
indemnity for damages ordered by the court to be paid by
the losing party in a litigation. The basis of this is any of
the cases provided by law where such award can be
made, such as those authorized in Article 2208, Civil
Code, and is payable not to the lawyer but to the client,
unless they have agreed that the award shall pertain to the
lawyer as additional compensation or as part thereof.
It is the first type of attorney's fees which private
respondent demanded before the labor arbiter. Also, the
present controversy stems from petitioner's apparent
misperception that the NLRC has jurisdiction over claims
for attorney's fees only before its judgment is reviewed and
ruled upon by the Supreme Court, and that thereafter the
former may no longer entertain claims for attorney's fees.
It will be noted that no claim for attorney's fees was filed by
private respondent before the NLRC when it acted on the
money claims of petitioner, nor before the Supreme Court
when it reviewed the decision of the NLRC. It was only
after the High Tribunal modified the judgment of the NLRC
awarding the differentials that private respondent filed his
claim before the NLRC for a percentage thereof as
attorney's fees.
It would obviously have been impossible, if not improper,
for the NLRC in the first instance and for the Supreme
Court thereafter to make an award for attorney's fees
when no claim therefor was pending before them. Courts
generally rule only on issues and claims presented to them
for adjudication. Accordingly, when the labor arbiter
ordered the payment of attorney's fees, he did not in any
way modify the judgment of the Supreme Court.
As an adjunctive episode of the action for the recovery of
bonus differentials in NLRC-NCR Certified Case No. 0466,
private respondent's present claim for attorney's fees may
be filed before the NLRC even though or, better stated,
especially after its earlier decision had been reviewed and
partially affirmed. It is well settled that a claim for
attorney's fees may be asserted either in the very action in
which the services of a lawyer had been rendered or in a
separate action. 21
With respect to the first situation, the remedy for
recovering attorney's fees as an incident of the main action
may be availed of only when something is due to the
client. 22 Attorney's fees cannot be determined until after
the main litigation has been decided and the subject of the
recovery is at the disposition of the court. The issue over
attorney's fees only arises when something has been
recovered from which the fee is to be paid. 23
While a claim for attorney's fees may be filed before the
judgment is rendered, the determination as to the propriety
of the fees or as to the amount thereof will have to be held
in abeyance until the main case from which the lawyer's
claim for attorney's fees may arise has become final.
Otherwise, the determination to be made by the courts will
be premature. 24 Of course, a petition for attorney's fees
may be filed before the judgment in favor of the client is
satisfied or the proceeds thereof delivered to the client. 25
It is apparent from the foregoing discussion that a lawyer
has two options as to when to file his claim for professional
fees. Hence, private respondent was well within his rights
when he made his claim and waited for the finality of the
judgment for holiday pay differential, instead of filing it
ahead of the award's complete resolution. To declare that
a lawyer may file a claim for fees in the same action only
before the judgment is reviewed by a higher tribunal would
deprive him of his aforestated options and render
ineffective the foregoing pronouncements of this Court.
Assailing the rulings of the labor arbiter and the NLRC,
petitioner union insists that it is not guilty of unjust
enrichment because all attorney's fees due to private
respondent were covered by the retainer fee of P3,000.00
which it has been regularly paying to private respondent
under their retainer agreement. To be entitled to the
additional attorney's fees as provided in Part D (Special
Billings) of the agreement, it avers that there must be a
separate mutual agreement between the union and the law
firm prior to the performance of the additional services by
the latter. Since there was no agreement as to the
payment of the additional attorney's fees, then it is
considered waived.
En contra, private respondent contends that a retainer fee
is not the attorney's fees contemplated for and
commensurate to the services he rendered to petitioner.
He asserts that although there was no express agreement
as to the amount of his fees for services rendered in the
case for recovery of differential pay, Article 111 of the
Labor Code supplants this omission by providing for an
award of ten percent (10%) of a money judgment in a labor
case as attorney's fees.
It is elementary that an attorney is entitled to have and
receive a just and reasonable compensation for services
performed at the special instance and request of his client.
As long as the lawyer was in good faith and honestly trying
to represent and serve the interests of the client, he should
have a reasonable compensation for such services. 26 It
will thus be appropriate, at this juncture, to determine if
private respondent is entitled to an additional remuneration
under the retainer agreement 27 entered into by him and
petitioner.
The parties subscribed therein to the following stipulations:
xxx xxx xxx
The Law Firm shall handle cases and extend legal
services under the parameters of the following terms and
conditions:
A. GENERAL SERVICES
1. Assurance that an Associate of the Law Firm
shall be designated and be available on a day-to-day basis
depending on the Union's needs;
2. Legal consultation, advice and render opinion on
any actual and/or anticipatory situation confronting any
matter within the client's normal course of business;
3. Proper documentation and notarization of any or
all transactions entered into by the Union in its day-to-day
course of business;
4. Review all contracts, deeds, agreements or any
other legal document to which the union is a party
signatory thereto but prepared or caused to be prepared
by any other third party;
5. Represent the Union in any case wherein the
Union is a party litigant in any court of law or quasi-judicial
body subject to certain fees as qualified hereinafter;
6. Lia(i)se with and/or follow-up any pending
application or any papers with any government agency
and/or any private institution which is directly related to
any legal matter referred to the Law Firm.
B. SPECIAL LEGAL SERVICES
1. Documentation of any contract and other legal
instrument/documents arising and/or required by your
Union which do not fall under the category of its ordinary
course of business activity but requires a special,
exhaustive or detailed study and preparation;
2. Conduct or undertake researches and/or studies
on special projects of the Union;
3. Render active and actual participation or
assistance in conference table negotiations with TRB
management or any other third person(s), juridical or
natural, wherein the presence of counsel is not for mere
consultation except CBA negotiations which shall be
subject to a specific agreement (pursuant to PD 1391 and
in relation to BP 130 & 227);
4. Preparation of Position Paper(s), Memoranda or
any other pleading for and in behalf of the Union;
5. Prosecution or defense of any case instituted by
or against the Union; and,
6. Represent any member of the Union in any
proceeding provided that the particular member must give
his/her assent and that prior consent be granted by the
principal officers. Further, the member must conform to the
rules and policies of the Law Firm.
C. FEE STRUCTURE
In consideration of our commitment to render the services
enumerated above when required or necessary, your
Union shall pay a monthly retainer fee of THREE
THOUSAND PESOS (PHP 3,000.00), payable in advance
on or before the fifth day of every month.
An Appearance Fee which shall be negotiable on a case-
to-case basis.
Any and all Attorney's Fees collected from the adverse
party by virtue of a successful litigation shall belong
exclusively to the Law Firm.
It is further understood that the foregoing shall be without
prejudice to our claim for reimbursement of all out-of-
pocket expenses covering filing fees, transportation,
publication costs, expenses covering reproduction or
authentication of documents related to any matter referred
to the Law Firm or that which redound to the benefit of the
Union.
D. SPECIAL BILLINGS
In the event that the Union avails of the services duly
enumerated in Title B, the Union shall pay the Law Firm an
amount mutually agreed upon PRIOR to the performance
of such services. The sum agreed upon shall be based on
actual time and effort spent by the counsel in relation to
the importance and magnitude of the matter referred to by
the Union. However, charges may be WAIVED by the Law
Firm if it finds that time and efforts expended on the
particular services are inconsequential but such right of
waiver is duly reserved for the Law Firm.
xxx xxx xxx
The provisions of the above contract are clear and need
no further interpretation; all that is required to be done in
the instant controversy is its application. The P3,000.00
which petitioner pays monthly to private respondent does
not cover the services the latter actually rendered before
the labor arbiter and the NLRC in behalf of the former. As
stipulated in Part C of the agreement, the monthly fee is
intended merely as a consideration for the law firm's
commitment to render the services enumerated in Part A
(General Services) and Part B (Special Legal Services) of
the retainer agreement.
The difference between a compensation for a commitment
to render legal services and a remuneration for legal
services actually rendered can better be appreciated with
a discussion of the two kinds of retainer fees a client may
pay his lawyer. These are a general retainer, or a retaining
fee, and a special
retainer. 28
A general retainer, or retaining fee, is the fee paid to a
lawyer to secure his future services as general counsel for
any ordinary legal problem that may arise in the routinary
business of the client and referred to him for legal action.
The future services of the lawyer are secured and
committed to the retaining client. For this, the client pays
the lawyer a fixed retainer fee which could be monthly or
otherwise, depending upon their arrangement. The fees
are paid whether or not there are cases referred to the
lawyer. The reason for the remuneration is that the lawyer
is deprived of the opportunity of rendering services for a
fee to the opposing party or other parties. In fine, it is a
compensation for lost opportunities.
A special retainer is a fee for a specific case handled or
special service rendered by the lawyer for a client. A client
may have several cases demanding special or individual
attention. If for every case there is a separate and
independent contract for attorney's fees, each fee is
considered a special retainer.
As to the first kind of fee, the Court has had the occasion
to expound on its concept in Hilado vs. David 29 in this
wise:
There is in legal practice what is called a "retaining fee,"
the purpose of which stems from the realization that the
attorney is disabled from acting as counsel for the other
side after he has given professional advice to the opposite
party, even if he should decline to perform the
contemplated services on behalf of the latter. It is to
prevent undue hardship on the attorney resulting from the
rigid observance of the rule that a separate and
independent fee for consultation and advice was
conceived and authorized. "A retaining fee is a preliminary
fee given to an attorney or counsel to insure and secure
his future services, and induce him to act for the client. It is
intended to remunerate counsel for being deprived, by
being retained by one party, of the opportunity of rendering
services to the other and of receiving pay from him, and
the payment of such fee, in the absence of an express
understanding to the contrary, is neither made nor
received in payment of the services contemplated; its
payment has no relation to the obligation of the client to
pay his attorney for the services for which he has retained
him to perform." (Emphasis supplied).
Evidently, the P3,000.00 monthly fee provided in the
retainer agreement between the union and the law firm
refers to a general retainer, or a retaining fee, as said
monthly fee covers only the law firm's pledge, or as
expressly stated therein, its "commitment to render the
legal services enumerated." The fee is not payment for
private respondent's execution or performance of the
services listed in the contract, subject to some particular
qualifications or permutations stated there.
Generally speaking, where the employment of an attorney
is under an express valid contract fixing the compensation
for the attorney, such contract is conclusive as to the
amount of compensation. 30 We cannot, however, apply
the foregoing rule in the instant petition and treat the fixed
fee of P3,000.00 as full and sufficient consideration for
private respondent's services, as petitioner would have it.
We have already shown that the P3,000.00 is independent
and different from the compensation which private
respondent should receive in payment for his services.
While petitioner and private respondent were able to fix a
fee for the latter's promise to extend services, they were
not able to come into agreement as to the law firm's actual
performance of services in favor of the union. Hence, the
retainer agreement cannot control the measure of
remuneration for private respondent's services.
We, therefore, cannot favorably consider the suggestion of
petitioner that private respondent had already waived his
right to charge additional fees because of their failure to
come to an agreement as to its payment.
Firstly, there is no showing that private respondent
unequivocally opted to waive the additional charges in
consonance with Part D of the agreement. Secondly, the
prompt actions taken by private respondent, i.e., serving
notice of charging lien and filing of motion to determine
attorney's fees, belie any intention on his part to renounce
his right to compensation for prosecuting the labor case
instituted by the union. And, lastly, to adopt such theory of
petitioner may frustrate private respondent's right to
attorney's fees, as the former may simply and
unreasonably refuse to enter into any special agreement
with the latter and conveniently claim later that the law firm
had relinquished its right because of the absence of the
same.
The fact that petitioner and private respondent failed to
reach a meeting of the minds with regard to the payment
of professional fees for special services will not absolve
the former of civil liability for the corresponding
remuneration therefor in favor of the latter.
Obligations do not emanate only from contracts. 31 One of
the sources of extra-contractual obligations found in our
Civil Code is the quasi-contract premised on the Roman
maxim that nemo cum alterius detrimento locupletari
protest. As embodied in our law, 32 certain lawful,
voluntary and unilateral acts give rise to the juridical
relation of quasi-contract to the end that no one shall be
unjustly enriched or benefited at the expense of another.
A quasi-contract between the parties in the case at bar
arose from private respondent's lawful, voluntary and
unilateral prosecution of petitioner's cause without awaiting
the latter's consent and approval. Petitioner cannot deny
that it did benefit from private respondent's efforts as the
law firm was able to obtain an award of holiday pay
differential in favor of the union. It cannot even hide behind
the cloak of the monthly retainer of P3,000.00 paid to
private respondent because, as demonstrated earlier,
private respondent's actual rendition of legal services is
not compensable merely by said amount.
Private respondent is entitled to an additional
remuneration for pursuing legal action in the interest of
petitioner before the labor arbiter and the NLRC, on top of
the P3,000.00 retainer fee he received monthly from
petitioner. The law firm's services are decidedly worth
more than such basic fee in the retainer agreement. Thus,
in Part C thereof on "Fee Structure," it is even provided
that all attorney's fees collected from the adverse party by
virtue of a successful litigation shall belong exclusively to
private respondent, aside from petitioner's liability for
appearance fees and reimbursement of the items of costs
and expenses enumerated therein.
A quasi-contract is based on the presumed will or intent of
the obligor dictated by equity and by the principles of
absolute justice. Some of these principles are: (1) It is
presumed that a person agrees to that which will benefit
him; (2) Nobody wants to enrich himself unjustly at the
expense of another; and (3) We must do unto others what
we want them to do unto us under the same
circumstances. 33
As early as 1903, we allowed the payment of reasonable
professional fees to an interpreter, notwithstanding the
lack of understanding with his client as to his
remuneration, on the basis of quasi-contract. 34 Hence, it
is not necessary that the parties agree on a definite fee for
the special services rendered by private respondent in
order that petitioner may be obligated to pay compensation
to the former. Equity and fair play dictate that petitioner
should pay the same after it accepted, availed itself of, and
benefited from private respondent's services.
We are not unaware of the old ruling that a person who
had no knowledge of, nor consented to, or protested
against the lawyer's representation may not be held liable
for attorney's fees even though he benefited from the
lawyer's services. 35 But this doctrine may not be applied
in the present case as petitioner did not object to private
respondent's appearance before the NLRC in the case for
differentials.
Viewed from another aspect, since it is claimed that
petitioner obtained respondent's legal services and
assistance regarding its claims against the bank, only they
did not enter into a special contract regarding the
compensation therefor, there is at least the innominate
contract of facio ut des (I do that you may give). 36 This
rule of law, likewise founded on the principle against unjust
enrichment, would also warrant payment for the services
of private respondent which proved beneficial to
petitioner's members. In any case, whether there is an
agreement or not, the courts can fix a reasonable
compensation which lawyers should receive for their
professional services. 37 However, the value of private
respondent's legal services should not be established on
the basis of Article 111 of the Labor Code alone. Said
article provides:
Art. 111. Attorney's fees. — (a) In cases of unlawful
withholding of wages the culpable party may be assessed
attorney's fees equivalent to ten percent of the amount of
the wages recovered.
xxx xxx xxx
The implementing provision 38 of the foregoing article
further states:
Sec. 11. Attorney's fees. — Attorney's fees in any judicial
or administrative proceedings for the recovery of wages
shall not exceed 10% of the amount awarded. The fees
may be deducted from the total amount due the winning
party.
In the first place, the fees mentioned here are the
extraordinary attorney's fees recoverable as indemnity for
damages sustained by and payable to the prevailing part.
In the second place, the ten percent (10%) attorney's fees
provided for in Article 111 of the Labor Code and Section
11, Rule VIII, Book III of the Implementing Rules is the
maximum of the award that may thus be granted. 39
Article 111 thus fixes only the limit on the amount of
attorney's fees the victorious party may recover in any
judicial or administrative proceedings and it does not even
prevent the NLRC from fixing an amount lower than the
ten percent (10%) ceiling prescribed by the article when
circumstances warrant it. 40
The measure of compensation for private respondent's
services as against his client should properly be
addressed by the rule of quantum meruit long adopted in
this jurisdiction. Quantum meruit, meaning "as much as he
deserves," is used as the basis for determining the
lawyer's professional fees in the absence of a contract, 41
but recoverable by him from his client.
Where a lawyer is employed without a price for his
services being agreed upon, the courts shall fix the
amount on quantum meruit basis. In such a case, he
would be entitled to receive what he merits for his
services. 42
It is essential for the proper operation of the principle that
there is an acceptance of the benefits by one sought to be
charged for the services rendered under circumstances as
reasonably to notify him that the lawyer performing the
task was expecting to be paid compensation therefor. The
doctrine of quantum meruit is a device to prevent undue
enrichment based on the equitable postulate that it is
unjust for a person to retain benefit without paying for it. 43
Over the years and through numerous decisions, this
Court has laid down guidelines in ascertaining the real
worth of a lawyer's services. These factors are now
codified in Rule 20.01, Canon 20 of the Code of
Professional Responsibility and should be considered in
fixing a reasonable compensation for services rendered by
a lawyer on the basis of quantum meruit. These are: (a)
the time spent and the extent of services rendered or
required; (b) the novelty and difficulty of the questions
involved; (c) the importance of the subject matter; (d) the
skill demanded; (e) the probability of losing other
employment as a result of acceptance of the proffered
case; (f) the customary charges for similar services and
the schedule of fees of the IBP chapter to which the lawyer
belongs; (g) the amount involved in the controversy and
the benefits resulting to the client from the services; (h) the
contingency or certainty of compensation; (i) the character
of the employment, whether occasional or established; and
(j) the professional standing of the lawyer.
Here, then, is the flaw we find in the award for attorney's
fees in favor of private respondent. Instead of adopting the
above guidelines, the labor arbiter forthwith but
erroneously set the amount of attorney's fees on the basis
of Article 111 of the Labor Code. He completely relied on
the operation of Article 111 when he fixed the amount of
attorney's fees at P17,574.43. 44 Observe the conclusion
stated in his order. 45
xxx xxx xxx
FIRST. Art. 111 of the Labor Code, as amended, clearly
declares movant's right to a ten (10%) per cent of the
award due its client. In addition, this right to ten (10%) per
cent attorney's fees is supplemented by Sec. 111, Rule
VIII, Book III of the Omnibus Rules Implementing the
Labor Code, as amended.
xxx xxx xxx
As already stated, Article 111 of the Labor Code regulates
the amount recoverable as attorney's fees in the nature of
damages sustained by and awarded to the prevailing
party. It may not be used therefore, as the lone standard in
fixing the exact amount payable to the lawyer by his client
for the legal services he rendered. Also, while it limits the
maximum allowable amount of attorney's fees, it does not
direct the instantaneous and automatic award of attorney's SO ORDERED.
fees in such maximum limit.
Romero, Puno, Mendoza and Torres, Jr., JJ., concur.
It, therefore, behooves the adjudicator in questions and
circumstances similar to those in the case at bar, involving Footnotes
a conflict between lawyer and client, to observe the above
guidelines in cases calling for the operation of the 1 Rollo, 26-30.
principles of quasi-contract and quantum meruit, and to
conduct a hearing for the proper determination of 2 Ibid., 45, 105.
attorney's fees. The criteria found in the Code of
Professional Responsibility are to be considered, and not 3 Ibid., 4.
disregarded, in assessing the proper amount. Here, the
records do not reveal that the parties were duly heard by 4 Ibid., 5.
the labor arbiter on the matter and for the resolution of
private respondent's fees. 5 Ibid., 106.
It is axiomatic that the reasonableness of attorney's fees is 6 Traders Royal Bank vs. NLRC and Traders
a question of fact. 46 Ordinarily, therefore, we would have Royal Bank Employees Union, G.R. No. 88168.
remanded this case for further reception of evidence as to
the extent and value of the services rendered by private 7 Ibid., 31-38.
respondent to petitioner. However, so as not to needlessly
prolong the resolution of a comparatively simple 8 Ibid., 106.
controversy, we deem it just and equitable to fix in the
present recourse a reasonable amount of attorney's fees 9 Ibid., 17, 106.
in favor of private respondent. For that purpose, we have
duly taken into account the accepted guidelines therefor 10 Ibid., 106.
and so much of the pertinent data as are extant in the
records of this case which are assistive in that regard. On 11 Ibid., 112-113.
such premises and in the exercise of our sound discretion,
we hold that the amount of P10,000.00 is a reasonable 12 Ibid., 39-43.
and fair compensation for the legal services rendered by
private respondent to petitioner before the labor arbiter 13 Ibid., 107.
and the NLRC.
14 Ibid., 44-45.
WHEREFORE, the impugned resolution of respondent
National Labor Relations Commission affirming the order 15 Ibid., 46-49.
of the labor arbiter is MODIFIED, and petitioner is hereby
ORDERED to pay the amount of TEN THOUSAND 16 Ibid., 7.
PESOS (P10,000.00) as attorney's fees to private
respondent for the latter's legal services rendered to the 17 Ibid., 17-21.
former.
18 Ibid., 22-25. 35 Orosco vs. Heirs of Hernandez, 1 Phil. 77
(1901).
19 Ibid., 7-8.
36 Corpuz vs. Court of Appeals, et al., G.R. No. L-
20 Pineda E.L., Legal and Judicial Ethics, 1994 ed., 40424, June 30, 1980, 98 SCRA 424.
220.
37 Panis vs. Yangco, 52 Phil. 499 (1928).
21 Tolentino vs. Escalona, G.R. No. L-26556,
January 24, 1969, 26 SCRA 613. 38 Sec. 11, Rule VIII, Book III of the Omnibus
Rules Implementing the Labor Code.
22 Quirante, et al. vs. Intermediate Appellate Court,
et al., G.R. No. 73886, January 31, 1989, 169 SCRA 769. 39 Sebuguero, et al. vs. NLRC, et al., G.R. No.
115394, September 27, 1995, 248 SCRA 532.
23 Otto Gmur, Inc. vs. Revilla, et al., 55 Phil. 627
(1931). 40 Taganas vs. NLRC, et al., G.R. No. 118746,
September 7, 1995, 248 SCRA 133.
24 See Quirante, et al. vs. Intermediate Appellate
Court, et al., supra, Fn. 22. 41 Sesbreño vs. Court of Appeals, et al., G.R. No.
117438, June 8, 1995, 245 SCRA 30.
25 Palanca vs. Pecson, 94 Phil. 419 (1954).
42 Lorenzo vs. Court of Appeals, et al., G.R. No.
26 De Guzman vs. Visayan Rapid Transit Co., Inc., 85383, August 30, 1990, 189 SCRA 260.
et al., 68 Phil. 643 (1939).
43 Agpalo, R.E., The Code of Professional
27 Rollo, 26-30. Responsibility for Lawyers, 1991 ed., 257.

28 Pineda, op. cit., 224-225, Fn. 20. 44 The amount is short by P5.00 because 10% of
P175,794.32 is P17,579.43.
29 84 Phil. 579 (1949), citing 7 C.J.S. 1019.
45 Rollo, 48-49.
30 Francisco vs. Matias, G.R. No. L-16349,
January 31, 1965, 10 SCRA 89. 46 Gonzales vs. National Housing Corporation,
G.R. No. 50092, December 18, 1979, 94 SCRA 786.
31 Article 1157, Civil Code.

32 Article 2142, Civil Code.

33 Tolentino, A.M., Commentaries and

Jurisprudence on the Civil Code, Vol. V, 1992 ed., 575.

34 See Perez vs. Pomar, 2 Phil. 682 (1903).

G.R. No. 109125 December 2, 1994
ANG YU ASUNCION, ARTHUR GO AND KEH TIONG,
petitioners,
vs.
THE HON. COURT OF APPEALS and BUEN REALTY
DEVELOPMENT CORPORATION, respondents.
Antonio M. Albano for petitioners.
Umali, Soriano & Associates for private respondent.
VITUG, J.:
Assailed, in this petition for review, is the decision of the
Court of Appeals, dated 04 December 1991, in CA-G.R.
SP No. 26345 setting aside and declaring without force
and effect the orders of execution of the trial court, dated
30 August 1991 and 27 September 1991, in Civil Case No.
87-41058.
The antecedents are recited in good detail by the appellate
court thusly:
On July 29, 1987 a Second Amended Complaint for
Specific Performance was filed by Ang Yu Asuncion and
Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu
Unjieng and Jose Tan before the Regional Trial Court,
Branch 31, Manila in Civil Case No. 87-41058, alleging,
among others, that plaintiffs are tenants or lessees of
residential and commercial spaces owned by defendants
described as Nos. 630-638 Ongpin Street, Binondo,
Manila; that they have occupied said spaces since 1935
and have been religiously paying the rental and complying
with all the conditions of the lease contract; that on several
occasions before October 9, 1986, defendants informed
plaintiffs that they are offering to sell the premises and are
giving them priority to acquire the same; that during the
negotiations, Bobby Cu Unjieng offered a price of P6-
million while plaintiffs made a counter offer of P5-million;
that plaintiffs thereafter asked the defendants to put their
offer in writing to which request defendants acceded; that
in reply to defendant's letter, plaintiffs wrote them on
October 24, 1986 asking that they specify the terms and
conditions of the offer to sell; that when plaintiffs did not
receive any reply, they sent another letter dated January
28, 1987 with the same request; that since defendants
failed to specify the terms and conditions of the offer to sell
and because of information received that defendants were
about to sell the property, plaintiffs were compelled to file
the complaint to compel defendants to sell the property to
them.
Defendants filed their answer denying the material
allegations of the complaint and interposing a special
defense of lack of cause of action.
After the issues were joined, defendants filed a motion for
summary judgment which was granted by the lower court.
The trial court found that defendants' offer to sell was
never accepted by the plaintiffs for the reason that the
parties did not agree upon the terms and conditions of the
proposed sale, hence, there was no contract of sale at all.
Nonetheless, the lower court ruled that should the
defendants subsequently offer their property for sale at a
price of P11-million or below, plaintiffs will have the right of
first refusal. Thus the dispositive portion of the decision
states:
WHEREFORE, judgment is hereby rendered in favor of
the defendants and against the plaintiffs summarily
dismissing the complaint subject to the aforementioned
condition that if the defendants subsequently decide to
offer their property for sale for a purchase price of Eleven
Million Pesos or lower, then the plaintiffs has the option to
purchase the property or of first refusal, otherwise,
defendants need not offer the property to the plaintiffs if
the purchase price is higher than Eleven Million Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court
in
CA-G.R. CV No. 21123. In a decision promulgated on
September 21, 1990 (penned by Justice Segundino G.
Chua and concurred in by Justices Vicente V. Mendoza
and Fernando A. Santiago), this Court affirmed with
modification the lower court's judgment, holding:
In resume, there was no meeting of the minds between the
parties concerning the sale of the property. Absent such
requirement, the claim for specific performance will not lie.
Appellants' demand for actual, moral and exemplary
damages will likewise fail as there exists no justifiable
ground for its award. Summary judgment for defendants
was properly granted. Courts may render summary
judgment when there is no genuine issue as to any
material fact and the moving party is entitled to a judgment
as a matter of law (Garcia vs. Court of Appeals, 176 SCRA
815). All requisites obtaining, the decision of the court a
quo is legally justifiable.
WHEREFORE, finding the appeal unmeritorious, the
judgment appealed from is hereby AFFIRMED, but subject
to the following modification: The court a quo in the
aforestated decision gave the plaintiffs-appellants the right
of first refusal only if the property is sold for a purchase
price of Eleven Million pesos or lower; however,
considering the mercurial and uncertain forces in our
market economy today. We find no reason not to grant the
same right of first refusal to herein appellants in the event
that the subject property is sold for a price in excess of
Eleven Million pesos. No pronouncement as to costs.
SO ORDERED.
The decision of this Court was brought to the Supreme
Court by petition for review on certiorari. The Supreme
Court denied the appeal on May 6, 1991 "for insufficiency
in form and substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was
pending consideration by this Court, the Cu Unjieng
spouses executed a Deed of Sale (Annex D, Petition)
transferring the property in question to herein petitioner
Buen Realty and Development Corporation, subject to the
following terms and conditions:
1. That for and in consideration of the sum of
FIFTEEN MILLION PESOS (P15,000,000.00), receipt of
which in full is hereby acknowledged, the VENDORS
hereby sells, transfers and conveys for and in favor of the
VENDEE, his heirs, executors, administrators or assigns,
the above-described property with all the improvements
found therein including all the rights and interest in the said
property free from all liens and encumbrances of whatever
nature, except the pending ejectment proceeding;
2. That the VENDEE shall pay the Documentary
Stamp Tax, registration fees for the transfer of title in his
favor and other expenses incidental to the sale of above-
described property including capital gains tax and accrued
real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in
the name of the Cu Unjieng spouses was cancelled and, in
lieu thereof, TCT No. 195816 was issued in the name of
petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of the subject
property wrote a letter to the lessees demanding that the
latter vacate the premises.
On July 16, 1991, the lessees wrote a reply to petitioner
stating that petitioner brought the property subject to the
notice of lis pendens regarding Civil Case No. 87-41058
annotated on TCT No. 105254/T-881 in the name of the
Cu Unjiengs.
The lessees filed a Motion for Execution dated August 27,
1991 of the Decision in Civil Case No. 87-41058 as
modified by the Court of Appeals in CA-G.R. CV No.
21123.
On August 30, 1991, respondent Judge issued an order
(Annex A, Petition) quoted as follows:
Presented before the Court is a Motion for Execution filed
by plaintiff represented by Atty. Antonio Albano. Both
defendants Bobby Cu Unjieng and Rose Cu Unjieng
represented by Atty. Vicente Sison and Atty. Anacleto
Magno respectively were duly notified in today's
consideration of the motion as evidenced by the rubber
stamp and signatures upon the copy of the Motion for
Execution.
The gist of the motion is that the Decision of the Court
dated September 21, 1990 as modified by the Court of
Appeals in its decision in CA G.R. CV-21123, and elevated
to the Supreme Court upon the petition for review and that
the same was denied by the highest tribunal in its
resolution dated May 6, 1991 in G.R. No.
L-97276, had now become final and executory. As a
consequence, there was an Entry of Judgment by the
Supreme Court as of June 6, 1991, stating that the
aforesaid modified decision had already become final and
executory.
It is the observation of the Court that this property in
dispute was the subject of the Notice of Lis Pendens and
that the modified decision of this Court promulgated by the
Court of Appeals which had become final to the effect that
should the defendants decide to offer the property for sale
for a price of P11 Million or lower, and considering the
mercurial and uncertain forces in our market economy
today, the same right of first refusal to herein
plaintiffs/appellants in the event that the subject property is
sold for a price in excess of Eleven Million pesos or more.
WHEREFORE, defendants are hereby ordered to execute
the necessary Deed of Sale of the property in litigation in
favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur
Go for the consideration of P15 Million pesos in
recognition of plaintiffs' right of first refusal and that a new
Transfer Certificate of Title be issued in favor of the buyer.
All previous transactions involving the same property
notwithstanding the issuance of another title to Buen
Realty Corporation, is hereby set aside as having been
executed in bad faith.
SO ORDERED.
On September 22, 1991 respondent Judge issued another
order, the dispositive portion of which reads:
WHEREFORE, let there be Writ of Execution issue in the
above-entitled case directing the Deputy Sheriff Ramon
Enriquez of this Court to implement said Writ of Execution
ordering the defendants among others to comply with the
aforesaid Order of this Court within a period of one (1)
week from receipt of this Order and for defendants to
execute the necessary Deed of Sale of the property in
litigation in favor of the plaintiffs Ang Yu Asuncion, Keh
Tiong and Arthur Go for the consideration of
P15,000,000.00 and ordering the Register of Deeds of the
City of Manila, to cancel and set aside the title already
issued in favor of Buen Realty Corporation which was
previously executed between the latter and defendants
and to register the new title in favor of the aforesaid
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the corresponding
writ of execution (Annex C, Petition) was issued.1
On 04 December 1991, the appellate court, on appeal to it
by private respondent, set aside and declared without
force and effect the above questioned orders of the court a
quo.
In this petition for review on certiorari, petitioners contend
that Buen Realty can be held bound by the writ of
execution by virtue of the notice of lis pendens, carried
over on TCT No. 195816 issued in the name of Buen
Realty, at the time of the latter's purchase of the property
on 15 November 1991 from the Cu Unjiengs.
We affirm the decision of the appellate court.

A not too recent development in real estate transactions is
the adoption of such arrangements as the right of first
refusal, a purchase option and a contract to sell. For ready
reference, we might point out some fundamental precepts
that may find some relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to
do (Art. 1156, Civil Code). The obligation is constituted
upon the concurrence of the essential elements thereof,
viz: (a) The vinculum juris or juridical tie which is the
efficient cause established by the various sources of
obligations (law, contracts, quasi-contracts, delicts and
quasi-delicts); (b) the object which is the prestation or
conduct; required to be observed (to give, to do or not to
do); and (c) the subject-persons who, viewed from the
demandability of the obligation, are the active (obligee)
and the passive (obligor) subjects.
Among the sources of an obligation is a contract (Art.
1157, Civil Code), which is a meeting of minds between
two persons whereby one binds himself, with respect to
the other, to give something or to render some service
(Art. 1305, Civil Code). A contract undergoes various
stages that include its negotiation or preparation, its
perfection and, finally, its consummation. Negotiation
covers the period from the time the prospective contracting
parties indicate interest in the contract to the time the
contract is concluded (perfected). The perfection of the
contract takes place upon the concurrence of the essential
elements thereof. A contract which is consensual as to
perfection is so established upon a mere meeting of
minds, i.e., the concurrence of offer and acceptance, on
the object and on the cause thereof. A contract which
requires, in addition to the above, the delivery of the object
of the agreement, as in a pledge or commodatum, is
commonly referred to as a real contract. In a solemn
contract, compliance with certain formalities prescribed by
law, such as in a donation of real property, is essential in
order to make the act valid, the prescribed form being
thereby an essential element thereof. The stage of
consummation begins when the parties perform their
respective undertakings under the contract culminating in
the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation. In
sales, particularly, to which the topic for discussion about
the case at bench belongs, the contract is perfected when
a person, called the seller, obligates himself, for a price
certain, to deliver and to transfer ownership of a thing or
right to another, called the buyer, over which the latter
agrees. Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other to pay therefor
a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a
"Contract to Sell" where invariably the ownership of the
thing sold is retained until the fulfillment of a positive
suspensive condition (normally, the full payment of the
purchase price), the breach of the condition will prevent
the obligation to convey title from acquiring an obligatory
force.2 In Dignos vs. Court of Appeals (158 SCRA 375),
we have said that, although denominated a "Deed of
Conditional Sale," a sale is still absolute where the
contract is devoid of any proviso that title is reserved or the
right to unilaterally rescind is stipulated, e.g., until or
unless the price is paid. Ownership will then be transferred
to the buyer upon actual or constructive delivery (e.g., by
the execution of a public document) of the property sold.
Where the condition is imposed upon the perfection of the
contract itself, the failure of the condition would prevent
such perfection.3 If the condition is imposed on the
obligation of a party which is not fulfilled, the other party
may either waive the condition or refuse to proceed with
the sale (Art. 1545, Civil Code).4
An unconditional mutual promise to buy and sell, as long
as the object is made determinate and the price is fixed,
can be obligatory on the parties, and compliance therewith
may accordingly be exacted.5
An accepted unilateral promise which specifies the thing to
be sold and the price to be paid, when coupled with a
valuable consideration distinct and separate from the
price, is what may properly be termed a perfected contract
of option. This contract is legally binding, and in sales, it
conforms with the second paragraph of Article 1479 of the
Civil Code, viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price. (1451a)6
Observe, however, that the option is not the contract of
sale itself.7 The optionee has the right, but not the
obligation, to buy. Once the option is exercised timely, i.e.,
the offer is accepted before a breach of the option, a
bilateral promise to sell and to buy ensues and both
parties are then reciprocally bound to comply with their
respective undertakings.8
Let us elucidate a little. A negotiation is formally initiated
by an offer. An imperfect promise (policitacion) is merely
an offer. Public advertisements or solicitations and the like
are ordinarily construed as mere invitations to make offers
or only as proposals. These relations, until a contract is
perfected, are not considered binding commitments. Thus,
at any time prior to the perfection of the contract, either
negotiating party may stop the negotiation. The offer, at
this stage, may be withdrawn; the withdrawal is effective
immediately after its manifestation, such as by its mailing
and not necessarily when the offeree learns of the
withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a
period is given to the offeree within which to accept the
offer, the following rules generally govern:
(1) If the period is not itself founded upon or
supported by a consideration, the offeror is still free and
has the right to withdraw the offer before its acceptance,
or, if an acceptance has been made, before the offeror's
coming to know of such fact, by communicating that
withdrawal to the offeree (see Art. 1324, Civil Code; see
also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that
this rule is applicable to a unilateral promise to sell under
Art. 1479, modifying the previous decision in South
Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art.
1319, Civil Code; Rural Bank of Parañaque, Inc., vs.
Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA
368). The right to withdraw, however, must not be
exercised whimsically or arbitrarily; otherwise, it could give
rise to a damage claim under Article 19 of the Civil Code
which ordains that "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."
(2) If the period has a separate consideration, a
contract of "option" is deemed perfected, and it would be a
breach of that contract to withdraw the offer during the
agreed period. The option, however, is an independent
contract by itself, and it is to be distinguished from the
projected main agreement (subject matter of the option)
which is obviously yet to be concluded. If, in fact, the
optioner-offeror withdraws the offer before its acceptance
(exercise of the option) by the optionee-offeree, the latter
may not sue for specific performance on the proposed
contract ("object" of the option) since it has failed to reach
its own stage of perfection. The optioner-offeror, however,
renders himself liable for damages for breach of the
option. In these cases, care should be taken of the real
nature of the consideration given, for if, in fact, it has been
intended to be part of the consideration for the main
contract with a right of withdrawal on the part of the
optionee, the main contract could be deemed perfected; a
similar instance would be an "earnest money" in a contract
of sale that can evidence its perfection (Art. 1482, Civil
Code).
In the law on sales, the so-called "right of first refusal" is
an innovative juridical relation. Needless to point out, it
cannot be deemed a perfected contract of sale under
Article 1458 of the Civil Code. Neither can the right of first
refusal, understood in its normal concept, per se be
brought within the purview of an option under the second
paragraph of Article 1479, aforequoted, or possibly of an
offer under Article 13199 of the same Code. An option or
an offer would require, among other things,10 a clear
certainty on both the object and the cause or consideration
of the envisioned contract. In a right of first refusal, while
the object might be made determinate, the exercise of the
right, however, would be dependent not only on the
grantor's eventual intention to enter into a binding juridical
relation with another but also on terms, including the price,
that obviously are yet to be later firmed up. Prior thereto, it
can at best be so described as merely belonging to a class
of preparatory juridical relations governed not by contracts
(since the essential elements to establish the vinculum
juris would still be indefinite and inconclusive) but by,
among other laws of general application, the pertinent
scattered provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has
been decreed under a final judgment, like here, its breach
cannot justify correspondingly an issuance of a writ of
execution under a judgment that merely recognizes its
existence, nor would it sanction an action for specific
performance without thereby negating the indispensable
element of consensuality in the perfection of contracts.11 It
is not to say, however, that the right of first refusal would
be inconsequential for, such as already intimated above,
an unjustified disregard thereof, given, for instance, the
circumstances expressed in Article 1912 of the Civil Code,
can warrant a recovery for damages.
The final judgment in Civil Case No. 87-41058, it must be
stressed, has merely accorded a "right of first refusal" in
favor of petitioners. The consequence of such a
declaration entails no more than what has heretofore been
said. In fine, if, as it is here so conveyed to us, petitioners
are aggrieved by the failure of private respondents to
honor the right of first refusal, the remedy is not a writ of
execution on the judgment, since there is none to execute,
but an action for damages in a proper forum for the
purpose.
Furthermore, whether private respondent Buen Realty
Development Corporation, the alleged purchaser of the
property, has acted in good faith or bad faith and whether
or not it should, in any case, be considered bound to
respect the registration of the lis pendens in Civil Case No.
87-41058 are matters that must be independently
addressed in appropriate proceedings. Buen Realty, not
having been impleaded in Civil Case No. 87-41058, cannot
be held subject to the writ of execution issued by
respondent Judge, let alone ousted from the ownership
and possession of the property, without first being duly
afforded its day in court.
We are also unable to agree with petitioners that the Court
of Appeals has erred in holding that the writ of execution
varies the terms of the judgment in Civil Case No. 87-
41058, later affirmed in CA-G.R. CV-21123. The Court of
Appeals, in this regard, has observed:
Finally, the questioned writ of execution is in variance with
the decision of the trial court as modified by this Court. As
already stated, there was nothing in said decision 13 that
decreed the execution of a deed of sale between the Cu
Unjiengs and respondent lessees, or the fixing of the price
of the sale, or the cancellation of title in the name of
petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng
Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman
vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).
It is likewise quite obvious to us that the decision in Civil
Case No. 87-41058 could not have decreed at the time the
execution of any deed of sale between the Cu Unjiengs
and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in
ultimately setting aside the questioned Orders, dated 30
August 1991 and 27 September 1991, of the court a quo.
Costs against petitioners.
SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr.,
Romero, Bellosillo, Melo, Quiason, Puno and Mendoza,
JJ., concur.
Kapunan, J., took no part.
Feliciano, J., is on leave.
#Footnotes
1 Rollo, pp. 32-38.
2 Roque vs. Lapuz, 96 SCRA 741; Agustin vs. CA,
186 SCRA 375.
3 See People's Homesite and Housing Corp. vs.
Court of Appeals, 133 SCRA 777.
4 Delta Motor Corporation vs. Genuino, 170 SCRA
29.
5 See Art. 1459; Atkins, Kroll and Co., Inc. vs. Cua
Hian Tek, 102 Phil. 948.
6 It is well to note that when the consideration
given, for what otherwise would have been an option,
partakes the nature in reality of a part payment of the
purchase price (termed as "earnest money" and
considered as an initial payment thereof), an actual
contract of sale is deemed entered into and enforceable as
such.
7 Enriquez de la Cavada vs. Diaz, 37 Phil. 982.
8 Atkins, Kroll & Co., Inc., vs. Cua Hian Tek, 102 WHEREFORE, finding the appeal unmeritorious, the
Phil. 948. judgment appealed from is hereby AFFIRMED, but subject
to the following modification: The court a quo in the
9 Article 1319, Civil Code, provides: aforestated decision, gave the plaintiffs — considering the
mercurial and uncertain forces in our market economy
Art. 1319. Consent is manifested by the meeting of the today. We find no reason not to grant the same right of first
offer and the acceptance upon the thing and the cause refusal to herein appellants in the event that the subject
which are to constitute the contract. The offer must be property is sold for a price in excess of Eleven Million
certain and the acceptance absolute. A qualified pesos. No pronouncement as to costs.
acceptance constitutes a counter-offer. (Emphasis
supplied.)
10 It is also essential for an option to be binding
that valuable consideration distinct from the price should
be given (see Montilla vs. Court of Appeals, 161 SCRA
167; Sps. Natino vs. IAC, 197 SCRA 323; Cronico vs. J.M.
Tuason & Co., Inc., 78 SCRA 331).
11 See Article 1315 and 1318, Civil Code; Madrigal
& Co. vs. Stevenson & Co., 15 Phil. 38; Salonga vs.
Ferrales, 105 SCRA 359).
12 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.
13 The decision referred to reads:
In resume, there was no meeting of the minds between the
parties concerning the sale of the property. Absent such
requirement, the claim for specific performance will not lie.
Appellants' demand for actual, moral and exemplary
damages will likewise fail as there exists no justifiable
ground for its award. Summary judgment for defendants
was properly granted. Courts may render summary
judgment when there is no genuine issue as to any
material fact and the moving party is entitled to a judgment
as a matter of law (Garcia vs. Court of Appeals, 176 SCRA
815). All requisites obtaining, the decision of the court a
quo is legally justifiable.
G.R. No. 97995 January 21, 1993
PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF APPEALS AND B.P. MATA AND CO., INC.,
respondents.
Roland A. Niedo for petitioner.
Benjamin C. Santos Law Office for respondent.
ROMERO, J.:
Rarely is this Court confronted with a case calling for the
delineation in broad strokes of the distinctions between
such closely allied concepts as the quasi-contract called
"solutio indebiti" under the venerable Spanish Civil Code
and the species of implied trust denominated "constructive
trusts," commonly regarded as of Anglo-American origin.
Such a case is the one presented to us now which has
highlighted more of the affinity and less of the dissimilarity
between the two concepts as to lead the legal scholar into
the error of interchanging the two. Presented below are the
factual circumstances that brought into juxtaposition the
twin institutions of the Civil Law quasi-contract and the
Anglo-American trust.
Private Respondent B.P. Mata & Co. Inc. (Mata), is a
private corporation engaged in providing goods and
services to shipping companies. Since 1966, it has acted
as a manning or crewing agent for several foreign firms,
one of which is Star Kist Foods, Inc., USA (Star Kist). As
part of their agreement, Mata makes advances for the
crew's medical expenses, National Seaman's Board fees,
Seaman's Welfare fund, and standby fees and for the
crew's basic personal needs. Subsequently, Mata sends
monthly billings to its foreign principal Star Kist, which in
turn reimburses Mata by sending a telegraphic transfer
through banks for credit to the latter's account.
Against this background, on February 21, 1975, Security
Pacific National Bank (SEPAC) of Los Angeles which had
an agency arrangement with Philippine National Bank
(PNB), transmitted a cable message to the International
Department of PNB to pay the amount of US$14,000 to
Mata by crediting the latter's account with the Insular Bank
of Asia and America (IBAA), per order of Star Kist. Upon
receipt of this cabled message on February 24, 1975,
PNB's International Department noticed an error and sent
a service message to SEPAC Bank. The latter replied with
instructions that the amount of US$14,000 should only be
for US$1,400.
On the basis of the cable message dated February 24,
1975 Cashier's Check No. 269522 in the amount of
US$1,400 (P9,772.95) representing reimbursement from
Star Kist, was issued by the Star Kist for the account of
Mata on February 25, 1975 through the Insular Bank of
Asia and America (IBAA).
However, fourteen days after or on March 11, 1975, PNB
effected another payment through Cashier's Check No.
270271 in the amount of US$14,000 (P97,878.60)
purporting to be another transmittal of reimbursement from
Star Kist, private respondent's foreign principal.
Six years later, or more specifically, on May 13, 1981, PNB
requested Mata for refund of US$14,000 (P97,878.60)
after it discovered its error in effecting the second
payment.
On February 4, 1982, PNB filed a civil case for collection
and refund of US$14,000 against Mata arguing that based
on a constructive trust under Article 1456 of the Civil Code,
it has a right to recover the said amount it erroneously
credited to respondent Mata.1
After trial, the Regional Trial Court of Manila rendered
judgment dismissing the complaint ruling that the instant
case falls squarely under Article 2154 on solutio indebiti
and not under Article 1456 on constructive trust. The lower
court ruled out constructive trust, applying strictly the
technical definition of a trust as "a right of property, real or
personal, held by one party for the benefit of another; that
there is a fiduciary relation between a trustee and a cestui
que trust as regards certain property, real, personal,
money or choses in action."2
In affirming the lower court, the appellate court added in its
opinion that under Article 2154 on solutio indebiti, the
person who makes the payment is the one who commits
the mistake vis-a-vis the recipient who is unaware of such
a mistake.3 Consequently, recipient is duty bound to return
the amount paid by mistake. But the appellate court
concluded that petitioner's demand for the return of
US$14,000 cannot prosper because its cause of action
had already prescribed under Article 1145, paragraph 2 of
the Civil Code which states:
The following actions must be commenced within six
years:
xxx xxx xxx
(2) Upon a quasi-contract.
This is because petitioner's complaint was filed only on
February 4, 1982, almost seven years after March 11,
1975 when petitioner mistakenly made payment to private
respondent.
Hence, the instant petition for certiorari proceeding
seeking to annul the decision of the appellate court on the
basis that Mata's obligation to return US$14,000 is
governed, in the alternative, by either Article 1456 on
constructive trust or Article 2154 of the Civil Code on
quasi-contract.4
Article 1456 of the Civil Code provides:
If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the
property comes.

On the other hand, Article 2154 states:
If something is received when there is no right to demand
it, and it was unduly delivered through mistake, the
obligation to return it arises.
Petitioner naturally opts for an interpretation under
constructive trust as its action filed on February 4, 1982
can still prosper, as it is well within the prescriptive period
of ten (10) years as provided by Article 1144, paragraph 2
of the Civil Code.5
If it is to be construed as a case of payment by mistake or
solutio indebiti, then the prescriptive period for quasi-
contracts of six years applies, as provided by Article 1145.
As pointed out by the appellate court, petitioner's cause of
action thereunder shall have prescribed, having been
brought almost seven years after the cause of action
accrued. However, even assuming that the instant case
constitutes a constructive trust and prescription has not set
in, the present action has already been barred by laches.
To recall, trusts are either express or implied. While
express trusts are created by the intention of the trustor or
of the parties, implied trusts come into being by operation
of law.6 Implied trusts are those which, without being
expressed, are deducible from the nature of the
transaction as matters of intent or which are superinduced
on the transaction by operation of law as matters of equity,
independently of the particular intention of the parties.7
In turn, implied trusts are subdivided into resulting and
constructive trusts.8 A resulting trust is a trust raised by
implication of law and presumed always to have been
contemplated by the parties, the intention of which is found
in the nature of the transaction, but not expressed in the
deed or instrument of conveyance.9 Examples of resulting
trusts are found in Articles 1448 to 1455 of the Civil
Code.10 On the other hand, a constructive trust is one not
created by words either expressly or impliedly, but by
construction of equity in order to satisfy the demands of
justice. An example of a constructive trust is Article 1456
quoted above.11
A deeper analysis of Article 1456 reveals that it is not a
trust in the technical sense 12 for in a typical trust,
confidence is reposed in one person who is named a
trustee for the benefit of another who is called the cestui
que trust, respecting property which is held by the trustee
for the benefit of the cestui que trust.13 A constructive
trust, unlike an express trust, does not emanate from, or
generate a fiduciary relation. While in an express trust, a
beneficiary and a trustee are linked by confidential or
fiduciary relations, in a constructive trust, there is neither a
promise nor any fiduciary relation to speak of and the so-
called trustee neither accepts any trust nor intends holding
the property for the beneficiary.14
In the case at bar, Mata, in receiving the US$14,000 in its
account through IBAA, had no intent of holding the same
for a supposed beneficiary or cestui que trust, namely
PNB. But under Article 1456, the law construes a trust,
namely a constructive trust, for the benefit of the person
from whom the property comes, in this case PNB, for
reasons of justice and equity.
At this juncture, a historical note on the codal provisions on
trust and quasi-contracts is in order.
Originally, under the Spanish Civil Code, there were only
two kinds of quasi contracts: negotiorum gestio and solutio
indebiti. But the Code Commission, mindful of the position
of the eminent Spanish jurist, Manresa, that "the number
of quasi contracts may be indefinite," added Section 3
entitled "Other Quasi-Contracts."15
Moreover, even as Article 2142 of the Civil Code defines a
quasi-contract, the succeeding article provides that: "The
provisions for quasi-contracts in this Chapter do not
exclude other quasi-contracts which may come within the
purview of the preceding article."16
Indubitably, the Civil Code does not confine itself
exclusively to the quasi-contracts enumerated from
Articles 2144 to 2175 but is open to the possibility that,
absent a pre-existing relationship, there being neither
crime nor quasi-delict, a quasi-contractual relation may be
forced upon the parties to avoid a case of unjust
enrichment.17 There being no express consent, in the
sense of a meeting of minds between the parties, there is
no contract to speak of. However, in view of the peculiar
circumstances or factual environment, consent is
presumed to the end that a recipient of benefits or favors
resulting from lawful, voluntary and unilateral acts of
another may not be unjustly enriched at the expense of
another.
Undoubtedly, the instant case fulfills the indispensable
requisites of solutio indebiti as defined in Article 2154 that
something (in this case money) has been received when
there was no right to demand it and (2) the same was
unduly delivered through mistake. There is a presumption
that there was a mistake in the payment "if something
which had never been due or had already been paid was
delivered; but he from whom the return is claimed may
prove that the delivery was made out of liberality or for any
other just cause."18
In the case at bar, a payment in the corrected amount of
US$1,400 through Cashier's Check No. 269522 had
already been made by PNB for the account of Mata on
February 25, 1975. Strangely, however, fourteen days
later, PNB effected another payment through Cashier's
Check No. 270271 in the amount of US$14,000, this time
purporting to be another transmittal of reimbursement from
Star Kist, private respondent's foreign principal.
While the principle of undue enrichment or solutio indebiti,
is not new, having been incorporated in the subject on
quasi-contracts in Title XVI of Book IV of the Spanish Civil
Code entitled "Obligations incurred without contract,"19
the chapter on Trusts is fairly recent, having been
introduced by the Code Commission in 1949. Although the
concept of trusts is nowhere to be found in the Spanish
Civil Code, the framers of our present Civil Code
incorporated implied trusts, which includes constructive
trusts, on top of quasi-contracts, both of which embody the
principle of equity above strict legalism.20
In analyzing the law on trusts, it would be instructive to
refer to Anglo-American jurisprudence on the subject.
Under American Law, a court of equity does not consider a
constructive trustee for all purposes as though he were in
reality a trustee; although it will force him to return the
property, it will not impose upon him the numerous
fiduciary obligations ordinarily demanded from a trustee of
an express trust.21 It must be borne in mind that in an
express trust, the trustee has active duties of management
while in a constructive trust, the duty is merely to surrender
the property.
Still applying American case law, quasi-contractual
obligations give rise to a personal liability ordinarily
enforceable by an action at law, while constructive trusts
are enforceable by a proceeding in equity to compel the
defendant to surrender specific property. To be sure, the
distinction is more procedural than substantive.22
Further reflection on these concepts reveals that a
constructive "trust" is as much a misnomer as a "quasi-
contract," so far removed are they from trusts and
contracts proper, respectively. In the case of a constructive
trust, as in the case of quasi-contract, a relationship is
"forced" by operation of law upon the parties, not because
of any intention on their part but in order to prevent unjust
enrichment, thus giving rise to certain obligations not
within the contemplation of the parties.23
Although we are not quite in accord with the opinion that
"the trusts known to American and English equity
jurisprudence are derived from the fidei commissa of the
Roman Law,"24 it is safe to state that their roots are firmly
grounded on such Civil Law principles are expressed in
the Latin maxim, "Nemo cum alterius detrimento
locupletari potest," 25 particularly the concept of
constructive trust.
Returning to the instant case, while petitioner may indeed
opt to avail of an action to enforce a constructive trust or
the quasi-contract of solutio indebiti, it has been deprived
of a choice, for prescription has effectively blocked quasi-
contract as an alternative, leaving only constructive trust
as the feasible option.
Petitioner argues that the lower and appellate courts
cannot indulge in semantics by holding that in Article 1456
the recipient commits the mistake while in Article 2154, the
recipient commits no mistake. 26 On the other hand,
private respondent, invoking the appellate court's
reasoning, would impress upon us that under Article 1456,
there can be no mutual mistake. Consequently, private
respondent contends that the case at bar is one of solutio
indebiti and not a constructive trust.
We agree with petitioner's stand that under Article 1456,
the law does not make any distinction since mutual
mistake is a possibility on either side — on the side of
either the grantor or the grantee.27 Thus, it was error to
conclude that in a constructive trust, only the person
obtaining the property commits a mistake. This is because
it is also possible that a grantor, like PNB in the case at
hand, may commit the mistake.
Proceeding now to the issue of whether or not petitioner
may still claim the US$14,000 it erroneously paid private
respondent under a constructive trust, we rule in the
negative. Although we are aware that only seven (7) years
lapsed after petitioner erroneously credited private
respondent with the said amount and that under Article
1144, petitioner is well within the prescriptive period for the
enforcement of a constructive or implied trust, we rule that
petitioner's claim cannot prosper since it is already barred
by laches. It is a well-settled rule now that an action to
enforce an implied trust, whether resulting or constructive,
may be barred not only by prescription but also by
laches.28
While prescription is concerned with the fact of delay,
laches deals with the effect of unreasonable delay.29 It is
amazing that it took petitioner almost seven years before it
discovered that it had erroneously paid private respondent.
Petitioner would attribute its mistake to the heavy volume
of international transactions handled by the Cable and
Remittance Division of the International Department of
PNB. Such specious reasoning is not persuasive. It is
unbelievable for a bank, and a government bank at that,
which regularly publishes its balanced financial statements
annually or more frequently, by the quarter, to notice its
error only seven years later. As a universal bank with
worldwide operations, PNB cannot afford to commit such
costly mistakes. Moreover, as between parties where
negligence is imputable to one and not to the other, the
former must perforce bear the consequences of its
neglect. Hence, petitioner should bear the cost of its own
negligence.
WHEREFORE, the decision of the Court of Appeals
dismissing petitioner's claim against private respondent is
AFFIRMED.
Costs against petitioner.
SO ORDERED.
Bidin, Davide, Jr. and Melo, JJ., concur.
Gutierrez, Jr., J., concurs in the result.
# Footnotes
1 Records, p. 122.
2 Salao v. Salao, G.R. No. L-26699, March 16,
1976, 70 SCRA 65.
3 Rollo, p. 41.
4 Rollo, p. 27.
18 Article 2163, Civil Code.
5 Article 1144. The following actions must
be brought within ten years from the time the right of action 19 Lao Chit v. Security and Trust Co. and
accrues: Consolidated Investment, Inc., 105 Phil. 490.

xxx xxx xxx 20 Report of the Code Commission, p. 26.

(2) Upon an obligation created by law; 21 Scott on Trusts, Volume 3, p. 2315.

xxx xxx xxx 22 Ibid, p. 2312.

6 Article 1441, Civil Code. 23 Scott on Trusts, Volume 3, p. 2316.

7 89 CJS 724. 24 Government v. Abadilla, 46 Phil. 642 and Miguel

et al v. Court of Appeals,
8 89 CJS 722. L-20274, October 30, 1969, 29 SCRA 760.

9 89 CJS 725. 25 Translated as, "No one should be allowed to

enrich himself unjustly at the expense of another." (Jenk
10 Aquino, Civil Code, Vol. II. pp. 556-557; Ramos Cent. Cas. 4; 10 Barb. [N.Y.] 626, 633, "Cyclopedic Law
v. Ramos, G.R. No. L-19872, December 3, 1974, 61 Dictionary," 2nd Edition, p. 688).
SCRA 284.
26 Rollo, p. 32.
11 Salao v. Salao, G.R. No. L-26699, March 16,
1976, 70 SCRA 65. 27 Tolentino, Civil Code of the Philippines, Vol. IV,
p. 685.
12 Ramos v. Ramos, G.R. No. L-19872 December
3, 1974, 61 SCRA 284, citing Gayondato v. Treasurer of 28 Villagonzalo v. IAC, G.R. No. 711110,
the Philippine Islands, 49 Phil. 244. November 22, 1988, 167 SCRA 535; Perez v. Ong Chua,
No. L-36850, September 23, 1982, 116 SCRA 732, 90
13 State ex Wirt v. Superior Court for Spokane CJS 887-889 and 54 Am Jur., pp. 449-450.
Country, 10 Wash. 2d, 362, 116 P. 2d 752, 755, Article
1440 Civil Code. 29 Mapa III v. Guanzon, G.R. No. L-25605, June
20, 1977, 77 SCRA 387.
14 Diaz v. Goricho, 103 Phil. 261.

15 Report of the Code Commission, p. 60.

16 Article 2143, Civil Code.

17 Report of the Code Commission, pp. 159-160.

[G.R. No. 132076. July 22, 2003]
ROBERTO U. GENOVA, petitioner, vs. LEVITA DE
CASTRO, respondent.
[G.R. No. 140989. July 22, 2003]
ROBERTO U. GENOVA, petitioner, vs. LEVITA DE
CASTRO and THE HONORABLE COURT OF APPEALS,
respondents.
DECISION
YNARES-SANTIAGO, J.:
These are consolidated petitions for review of the
decisions of Court of Appeals in CA-G.R. SP Nos. 41521
and 48422.[1]
Petitioner was the owner of a parcel of land located in Sta.
Ana, Manila, containing an area of 399.6 square meters
and registered in his name under Transfer Certificate of
Title No. 172539 of the Register of Deeds of Manila.
Sometime in 1989, petitioner ventured into the business of
movie production. In order to finance his film project, he
obtained a loan from respondent Levita de Castro for
P1,000,000.00 with interest thereon at the rate of 5% per
annum. By way of security for the loan, and as required by
respondent, petitioner turned over his owners duplicate
certificate of title and signed blank sheets of paper with the
understanding that their Deed of Mortgage will be printed
thereon. Meanwhile, petitioner remained in possession of
the property.
It appears that previously, petitioner had obtained a loan
from the United Coconut Planters Bank secured by a real
estate mortgage over the subject property. He defaulted in
the payment of his obligations, whereupon the bank
caused the extrajudicial foreclosure of the mortgage and
purchased the property as the highest bidder at the sale at
public auction.
Subsequently, respondent redeemed the property from
UCPB and caused the cancellation of TCT No. 172539 on
the strength of a purported deed of sale from petitioner. It
turned out that instead of printing a Deed of Mortgage on
the blank sheets of paper which petitioner had earlier
signed, respondent caused to be printed thereon an
Absolute Deed of Sale of a Registered Land in her favor.
Thus, respondent obtained TCT No. 194123 in her
name.[2]
G.R. No. 140989
Petitioner filed against respondent an action for
Reformation of Contract, Reconveyance and Damages
with the Regional Trial Court of Manila, Branch 25, which
was docketed as Civil Case No. 90-54611. In the course of
the proceedings, the parties entered into a Compromise
Agreement whereby they stipulated as follows:
1. Plaintiff [petitioner herein] acknowledges defendants
[respondent herein] having redeemed the property in
question on November 12, 1991, subject of the Certificate
of Sale dated September 29, 1990, and inscribed on the
title thereof (TCT No. 194123 ind.) on November 12, 1990
under Entry No. 2422 in favor of UCPB Savings Bank.
2. Defendant has hereby acceded to the request of plaintiff
to re-sell to him the property in question within a period of
four (4) months from date of approval hereof at the agreed
repurchase price corresponding to the total original
purchase price of One Million and Sixty Thousand
(P1,060,000.00) pesos, plus five (5%) percent agreed
monthly interest to the tune of Fifty Three Thousand
(P53,000.00) pesos, commencing from December 23,
1989, up to the time when plaintiff has finally exercised his
right to buy back the property within the period stipulated
above.
3. Plaintiff likewise has agreed to reimburse the
defendants redemption payment of Three Hundred Ninety
Two Thousand and Eight Hundred (P392,800.00) pesos,
to UCPB Savings Bank plus legal bank rate of interest
accrued thereon and payments made corresponding to
insurance premium in the total sum of EIGHTY ONE
THOUSAND THREE HUNDRED NINETY SIX AND FIFTY
NINE CENTAVOS (P81,396.59) PESOS; subject however,
to presentation of supporting pertinent receipt.
4. As regards realty tax and transfer tax payments made
by the defendant necessary for the transfer of TCT No.
172539 in her name, plaintiff has further agreed to
reimburse defendant the fixed amount of One Hundred
Fifty Five Thousand (P155,000.00) pesos, to be added to
the repurchase price of the subject property.
5. Finally, defendant hereby recognized payment made by
plaintiff on May 11, 1990 in the amount of One Million Two
Hundred Thousand (Y1,200,000.00) yen, subject,
however, to the prevailing conversion in Philippine Pesos;
6. In the event plaintiff fails to repurchase back the subject
property within the period stipulated herein, he shall be
deemed therefor to have irrevocably waived any further
right, claim, or interest to the subject property in question
and, thereafter, defendant shall be entitled to a Writ of
Execution issued ex-parte to oust or eject plaintiff and all
persons claiming right under him from the house built on
the said property as well as from its premises.
7. By virtue of the agreement, the parties hereto
authorized the Register of Deeds for the City of Manila to
cancel or delete any and/or all annotations or liens and
encumbrances on TCT No. 194123 ind., including, but not
limited to the lis pendens caused to be inscribed by the
plaintiff which affect and/or involve the parties hereto.[3]
The Compromise Agreement was approved by the trial
court in a decision dated June 8, 1992.[4]
Under the Compromise Agreement, petitioner was
obligated to pay respondent the total amount of
P3,332,196.59. He was able to pay only the sum of
P2,287,000.00 within the four-month stipulated period.
Thereafter, he tendered payment of the remaining balance
of P1,045,196.59, but respondent refused to accept the
same. On March 13, 1996, petitioner consigned with the
trial court a check for the amount of the said remaining
balance.
Respondent filed a motion for the issuance of a writ of
execution of the compromise judgment dated June 8, 1992
on the ground that petitioner failed to pay the stipulated
amount in full within the period agreed upon in the
compromise agreement.[5] In an Order dated March 4,
1998, the trial court denied the motion, upon a finding that
the principal obligation had already been paid by petitioner
and the unpaid balance represented the interest on the
loan.[6] Respondent filed a motion for reconsideration,
which was denied in an Order dated May 15, 1998.[7]
Hence, respondent filed a petition for certiorari with the
Court of Appeals, which was docketed as CA-G.R. SP No.
48422. The petition was granted by the appellate court.
The trial court was directed to issue the writ of execution
prayed for by respondent.[8]
Petitioner thus filed the instant petition for review, which
was docketed as G.R. No. 140989, based on the following
assignment of errors:
I. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT PETITIONER FAILED TO
REPURCHASE THE SUBJECT PROPERTY FROM
RESPONDENT DE CASTRO IN ACCORDANCE WITH
THE COMPROMISE AGREEMENT BETWEEN THE
PARTIES.
II. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT THE CONSIGNATION MADE
BY PETITIONER WITH THE REGIONAL TRIAL COURT
OF THE REMAINING BALANCE OF THE AGREED
REPURCHASE PRICE WAS INVALID.
III. EVEN ASSUMING FOR THE SAKE OF ARGUMENT
THAT THE JUDICIALLY SANCTIONED COMPROMISE
AGREEMENT BETWEEN PETITIONER AND
RESPONDENT DE CASTRO WAS NOT COMPLIED
WITH TO THE LETTER, THE HONORABLE COURT OF
APPEALS GRAVELY ERRED IN HOLDING THAT THERE
WAS NO SUBSTANTIAL COMPLIANCE THEREOF BY
SAID PETITIONER OF HIS OBLIGATION UNDER THE
SAME.
IV. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN REVERSING THE COURT A QUOS ORDER
DENYING RESPONDENT DE CASTROS MOTION FOR
ISSUANCE OF WRIT OF EXECUTION AS WELL AS THE
ORDER DENYING SAID RESPONDENTS
SUBSEQUENT MOTION FOR RECONSIDERATION OF
THE ABOVE-MENTIONED COURT A QUOS ORDER.[9]
More specifically, petitioner contends that the compromise
agreement approved by the lower court partook of the
nature of a pacto de retro sale. He argues that he may still
pay even after the lapse of the four-month period agreed
upon as long as no demand for rescission of the contract
has been made upon him either judicially or by notarial act,
citing Article 1592 of the Civil Code which states:
In the sale of immovable property, even though it may
have been stipulated that upon failure to pay the price at
the time agreed upon the rescission of the contract shall of
right take place, the vendee may pay, even after the
expiration of the period, as long as no demand for
rescission of the contract has been made upon him either
judicially or by notarial act. After the demand, the court
may grant him a new term.
Petitioner also claims that the tender and consignation of
the remaining balance of the purchase price before any
demand for rescission was made constituted valid
payment. He points out that the amount he was not able to
pay within the stipulated period represented
unconscionable interests on the loan, the imposition of
which is contrary to public policy. Should reconveyance of
the property be no longer feasible, petitioner prayed that
the amount which he had paid to the respondent be
returned to him based on the principle of solutio indebiti.
G.R. No. 132076
On October 2, 1995, respondent filed a complaint for
unlawful detainer against petitioner before the Metropolitan
Trial Court of Manila, Branch 15, which was docketed as
Civil Case No. 149540-CV. On March 21, 1996, a
judgment was rendered in favor of respondent as follows:
WHEREFORE, judgment is hereby rendered in favor of
the plaintiff [respondent herein] as against defendant
[petitioner herein] ordering the latter and all persons
claiming right under him to vacate and turn over the
possession of the premises to the plaintiff; ordering the
defendant to pay the amount of P40,000.00 as reasonable
compensation of the premises from he time of demand to
vacate until such time that defendant shall have finally
vacated the premises; ordering defendant to pay plaintiff
the sum of P10,000.00 as and for attorneys fees, plus
costs of suit.
SO ORDERED.[10]
Petitioner appealed the decision to the Regional Trial
Court of Manila, Branch 31, where it was docketed as Civil
Case No. 96-78041. On July 12, 1996, the Regional Trial
Court rendered judgment reversing the decision of the
Metropolitan Trial Court and dismissed the ejectment case
pending the outcome of Civil Case No. 90-54611 (the
reformation case).[11]
Respondent filed a petition for review of the above
decision before the Court of Appeals, which reversed the
decision of the Regional Trial Court[12] on the ground that
inferior courts are not divested of jurisdiction over the
unlawful detainer case when the defendant sets up a claim
of ownership over the litigated property.[13]
Hence, the instant petition for review, raising the following
assignment of errors:
1. THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED WHEN IT OVERLOOKED THE FACT THAT
CIVIL CASE NO. 90-54611 FOR REFORMATION,
RECONVEYANCE AND DAMAGES FILED BY
PETITIONER HEREIN WAS ALREADY FINAL AND
EXECUTORY, THUS, BARRING THE INSTANT ACTION
OF PRIVATE RESPONDENT ON THE GROUND OF RES
JUDICATA AND FORUM SHOPPING;
2. THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED WHEN IT FAILED TO APPRECIATE THAT
PETITIONER IS THE REAL AND TRUE OWNER OF THE
PROPERTY SUBJECT MATTER.[14]
Petitioner argues that the judgment by compromise in the
reconveyance case was a final judgment which barred the
ejectment case filed by the respondent on the ground of
res judicata and forum shopping.
Both petitions lack merit.
A compromise is an agreement between two or more
persons who, for preventing or putting an end to a lawsuit,
adjust their respective positions by mutual consent in the
way they feel they can live with. Reciprocal concessions
are the very heart and life of every compromise
agreement, where each party approximates and concedes
in the hope of gaining balance by the danger of losing. It
is, in essence, a contract.[15]
A compromise is binding and has the force of law between
the parties, unless the consent of a party is vitiated such
as by mistake, fraud, violence, intimidation or undue
influence or when there is forgery, or if the terms of the
settlement are so palpably unconscionable.[16]
Under the compromise agreement executed between the
parties, petitioner bound himself to pay respondent the
aggregate amount of P3,332,196.59 as consideration for
the reconveyance to him of the property.[17] However, he
failed to pay the said amount in full within the four-month
period stipulated in the compromise agreement, counted
from the date of approval thereof by the trial court. Thus,
the provision contained in paragraph 6 of the compromise
agreement came into play, to wit:
6. In the event plaintiff fails to repurchase back the subject
property within the period stipulated herein, he shall be
deemed therefor to have irrevocably waived any further
right, claim, or interest to the subject property in question
and, thereafter, defendant shall be entitled to a Writ of
Execution issued ex-parte to oust or eject plaintiff and all
persons claiming right under him from the house built on
the said property as well as from its premises.[18]
Petitioner argues that he should be allowed to pay the
remaining balance even after the lapse of the four-month
stipulated period considering that pursuant to Article 1592
of the Civil Code, a judicial or notarial act was necessary
before the respondent may unilaterally rescind the contract
of sale.
The argument is misplaced.
In the case at bar, the judicial compromise specifically
provided for the relief that the parties may resort to in case
of breach. More particularly, it states that respondent shall
have the right to file a motion for the issuance of a writ of
execution to eject petitioner from the property in case he
fails to pay his obligations in full within the stipulated
period. On the other hand, petitioner agreed to waive any
further right, claim or interest to the subject property.
Indeed, it has been held in a number of cases that in the
event of breach or default by one party to a judicial
compromise in the performance of his obligations, the
remedy of the aggrieved party is to move for the execution
of the compromise judgment.[19] Thus:
Even more than a contract which may be enforced by
ordinary action for specific performance, the compromise
agreement is part and parcel of the judgment, and may
therefore be enforced as such by a writ of execution.
Finally, when the terms of an amicable settlement are
violated, as in the case at bar, the remedy of the aggrieved
party is to move for its execution. [20]
Therefore, respondent availed of the proper remedy when
she filed with the court that rendered the compromise
judgment a motion for the execution of the same.
Conversely, petitioner has no choice but to abide by the
consequences of his failure to perform his obligation under
the agreement.
Petitioner likewise contends that respondent was guilty of
forum shopping. The test to determine whether a party
violated the rule against forum shopping is whether the
elements of litis pendentia are present, or whether a final
judgment in one case will amount to res judicata in
another.[21] Accordingly, there is res judicata where the
following four essential conditions concur, viz: (1) there
must be a final judgment or order; (2) the court rendering it
must have jurisdiction over the subject matter and the
parties; (3) it must be a judgment or order on the merits;
and (4) there must be, between the two cases, identity of
parties, subject matter and causes of action.[22]
Here, while the first three conditions are present and there
was identity of parties, there is no identity of causes of
action in the reformation case, on the one hand, and the
ejectment case, on the other hand. In determining the
question of the identity of causes of action, the following
test is as a rule sufficient: Would the same evidence
support and establish both the present and the former
cause of action?[23] It is clear that the evidence petitioner
needed to sustain his complaint for reformation is different
from the proofs he must present in support of his defense
in the action for unlawful detainer. In the action for
reformation, the issue to be resolved is whether the
agreement was attended by fraud. Thus, he should
present evidence to prove the true intent of the parties in
entering into the mortgage agreement. He should also
prove that there was fraud in the transfer of title to the
property to respondent. On the other hand, the ejectment
suit involved the issue of possession only.

Moreover, petitioners violation of the terms of the
compromise judgment gave rise to a new cause of action
on the part of respondent, i.e., the right to enforce the
terms thereof. When she failed to obtain this by mere
motion filed with the trial court, she was constrained to
institute the proper suit for ejectment. The filing of a
separate case based on a cause of action that arises from
the application or violation of a compromise agreement is
not barred by res judicata in the first action.[24]
Petitioner also argues that the payments he has made to
respondent must be returned based on the principle of
solutio indebiti under Article 2154 of the Civil Code. There
is solutio indebiti where: (1) payment is made when there
exists no binding relation between the payor, who has no
duty to pay, and the person who received the payment;
and (2) the payment is made through mistake, and not
through liberality or some other cause.[25] The quasi-
contract of solutio indebiti is based on the ancient principle
that no one shall enrich himself unjustly at the expense of
another.[26]
Article 2154 of the Civil Code provides:
If something is received when there is no right to demand
it, and it was unduly delivered through mistake, the
obligation to return it arises.
The first element of solutio indebiti is lacking. There can be
no mistaken payment in this case because petitioner made
payments to respondent pursuant to an agreement to
repurchase the property. Hence, the principle of solutio
indebiti finds no application in this case.
This notwithstanding, petitioner is entitled to a refund of
what he had paid based on equitable grounds. We find it
iniquitous for the respondent to forfeit both petitioners land
and hard-earned money. In Trinidad v. Intermediate
Appellate Court,[27] this Court, in the exercise of equity
jurisdiction, refused to strictly enforce the stipulation of the
parties, thus:
xxx Given such circumstances, the Court feels and so
holds that the above-quoted stipulation should not be
strictly enforced, to justify the rescission of the contract. To
make her forfeit the payments already made by her and at
the same time return the property to the private
respondents for standing up to what she considered her
right would, in our view, be unfair and unconscionable.
Justice demands that we moderate the harsh effects of the
stipulation. Accordingly, in the exercise of our equity
jurisdiction, we hereby rule that the Contract of Conditional
Sale shall be maintained between the parties except that
the petitioner shall not return the house to the private
respondents. However, she will have to pay them the
balance of the purchase price in the sum of P52,500.00,
with 12% annual interest from July 1, 1972, until full
payment.
Also, in Ramos, et al. v. Court of Appeals, et al.,[28] it was
held that although the contract of sale between Herminio
Ramos and Lydia Celestino should be voided for being
contrary to public policy, we deemed it equitable to allow
private respondent therein to recover what she had paid
for the land with legal interest thereon commencing from
the date of the filing of the complaint.
In one case,[29] we even ordered the Government to
refund the overpayment of franchise taxes to a taxpayer
despite its non-compliance with the requisites before suit
could be maintained for the recovery thereof, based on
moral and equitable grounds. From a moral standpoint, it
was ruled that the Government would be enriching itself at
the expense of the taxpayer, viz:
xxx Legally speaking, the decision of the Tax Court is
therefore correct, being in accordance with law. However,
ones conscience does not and cannot rest easy on this
strict application of the law, considering the special
circumstances that surround this case. xxx
Hence, in the exercise of equity jurisdiction, the
compromise agreement between the parties should be
maintained but respondent should be made to return the
amount of P2,287,000.00 to petitioner. The Regional Trial
Court of Manila, Branch 25 is ordered to return the check
in the amount of P1,045,196.59 which was consigned by
the petitioner.
WHEREFORE, the consolidated petitions are PARTLY
GRANTED. The decision of the Court of Appeals in CA-
G.R. SP No. 41521, which reversed the decision of the
Regional Trial Court of Manila, Branch 31 in Civil Case No.
96-78041 dismissing the action for unlawful detainer
pending the outcome of the reformation case, is
AFFIRMED. The decision of the Court of Appeals in CA-
G.R. SP No. 48422, which directed the Regional Trial
Court of Manila, Branch 25, in Civil Case No. 90-54611, to
order the execution of the compromise judgment, is
AFFIRMED with the MODIFICATION that respondent is
ordered to REFUND to petitioner the sum of
P2,287,000.00. The Regional Trial Court of Manila, Branch
25, is also ordered to RETURN the check which was
consigned by the petitioner in the amount of
P1,045,196.59.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna,
JJ., concur.
[1] Resolution dated September 9, 2002.
[2] CA Rollo, CA-G.R. SP No. 48422, p. 36.
[3] Id., pp. 17-18.
[4] Id., p. 18.
[5] Id., p. 20.
[6] Id., pp. 13-15.
[7] Id., p. 16.

[8] Rollo, G.R. No. 140989, pp. 44-51; penned by
Associate Justice Fermin A. Martin, concurred in by
Associate Justices B.A. Adefuin-De la Cruz and Presbitero
J. Velasco, Jr.
[9] Id., p. 26.
[10] Id., pp. 31-34, at 33-34; penned by Judge Virgilio N.
Jiro.
[11] Id., pp. 26-29; penned by Judge Regino T. Veridiano
II.
[12] Rollo, pp. 46-50; penned by Associate Justice
Oswaldo D. Agcaoili, concurred in by Associate Justices
Jaime M. Lantin and Buenaventura J. Guerrero.
[13] Id., p. 50.
[14] Id., p. 33.
[15] Regal Films v. Concepcion, G.R. No. 139539, 9
August 2001.
[16] Chavez v. Presidential Commission on Good
Government, 360 Phil. 133 (1998).
[17] Rollo G.R. No. 140989, p. 37.
[18] Op. cit., note 3.
[19] Paredes v. Court of Appeals, 217 Phil. 471 (1984);
citing Zapanta v. De Rotaeche, 21 Phil. 154 (1912), World
Machine Enterprises v. Intermediate Appellate Court, G.R.
No. 72019, 20 December 1990 and Chemphil Export and
Import Corporation v. Court of Appeals, 321 Phil. 619
(1995).
[20] Dela Rama v. Mendiola, G.R. No. 135394, 29 April
2003.
[21] Bank of America NT & SA, et al. v. CA, et al., G.R. No. [29] Panay Electric Co., Inc. v. The Collector of Internal
120135, 31 March 2003; Young v. John Keng Seng, G.R. Revenue and the Court of Tax Appeals, 103 Phil. 819
No. 143464, 5 March 2003; Phil. Nails and Wires (1958).
Corporation v. Malayan Insurance Co., Inc., G.R. No.
143933, 12 February 2003; Spouses Tirona, et al. v. Alejo,
et al., G.R. No. 129313, 10 October 2001; Manalo v. CA,
et al., G.R. No. 141297, 8 October 2001; Roxas v. CA, et
al., G.R. No. 139337, 15 August 2001; Bangko Silangan
Development Bank v. CA, et al., 412 Phil. 755 (2001);
Osmea III, et al. v. Sandiganbayan, et al., G.R. No.
116941, 31 May 2001; The United Residents of Dominican
Hill, Inc. v. Commission on the Settlement of Land
Problems, G.R. No. 135945, 7 March 2001; Heirs of
Victorina Motus Penaverde v. Heirs of Mariano Penaverde,
G.R. No. 131141, 20 October 2000; Quinsay v. CA, et al.,
G.R. No. 127058, 31 August 2000.
[22] Gallardo-Corro v. Gallardo, et al., G.R. No. 136228,
30 January 2001; Republic v. CA, et al., 381 Phil. 558
(2000); Ayala Land, Inc. v. Valisno, 381 Phil. 518 (2000);
Bachrach Corporation v. CA, et al., 357 Phil. 483 (1998);
Alejandrino v. CA, et al., 356 Phil. 851 (1998).
[23] Pealosa v. Tuason, 22 Phil. 303 (1912).
[24] Greenfield Realty Corporation v. Cardama, G.R. No.
129246, 25 January 2000, 323 SCRA 280.
[25] National Commercial Bank of Saudi Arabia v. Court of
Appeals, et al., G.R. No. 124267, 31 January 2003;
Philippine National Bank v. Court of Appeals, et al., G.R.
No. 97995, 21 January 1993.
[26] Andres v. Manufacturers Hanover & Trust
Corporation, et al., G.R. No. 82670, 15 September 1989,
see also Ramie Textiles, Inc. v. Mathay, Sr., G.R. No. L-
32364, 30 April 1979.
[27] G. R. No. 659222, 3 December 1991, 204 SCRA 524.
[28] G.R. No. 108121, 10 May 1994.
SECOND DIVISION
[G.R. No. 10305. September 5, 1916. ]
TOMAS SISON and LEODEGARIO AZARRAGA,
Plaintiffs-Appellants, v. ALEJANDRO BALGOS,
Defendant-Appellee.
Leodegario Azarraga for Appellants.
The appellee in his own behalf.
SYLLABUS
1. ACTION’ STATUTE OF LIMITATIONS. — One of the
actions which does not lapse by death is that for the
recovery of title or possession of real estate. (Code of Civ.
Proc., sec. 703.)
2. REDEMPTION; HOW EFFECTED. — In order to effect
the redemption of land sold on execution the debtor has
but to pay the sum advanced by the purchaser and, in
addition thereto, interest thereon at the rate of 1 per cent
month until the day of the redemption. (Code of Civ. Proc.,
sec. 465.)
3. PAYMENT; WHO CAN MAKE THE PAYMENT. — Any
person, whether he has an interest or not in the fulfillment
of the obligation, and whether the debtor knows approves
it or is not aware thereof, can make the payment. (Civil
Code, art. 1158.)
DECISION
ARELLANO, C.J. :
Isidro Azarraga was guardian of certain minors named
Maria Felisa and Jesus Bellosillo. During his
administration, as the result of a writ of execution issued
by the Court of First Instance of Capiz, the sheriff of Capiz
sold at public auction, on May 17, 1910, a parcel of land
belonging to said minors, containing 11 hectares 32 ares
and 64 centares bounded as described in the complaint.
This land was knocked down to Alejandro Balgos for P126.
On May 17, 1911, the period for redemption was to expire.
But it happened that Isidro Azarraga died on May 2, 1911,
the minors thus being left without any guardian.
Notwithstanding this, on the every last day of the period for
redemption, May 17, 1911, Leodegario Azarraga, an uncle
of said minors, deposited with the sheriff the sum of
P141.12 in refund of the principal paid by the purchaser
and the interest thereon. The sheriff notified the latter of
the deposit in order that he might receive the money and
turn over the land. These facts are admitted.
But the purchaser refused and still refuses to allow the
redemption of Thailand, and hence the present suit in
which the new guardian for the persons, Leodegario
Azarraga, and Tomas Sison, guardian for the property of
the Bellosillo minors, request the court to order the
defendant Alejandro Balgos to return the land in question
to the plaintiffs by virtue of their having redeemed it within
the legal period, to indemnify them in the sum of P800, the
amount of the costs of the case. Among the allegations set
out in the complaint and denied by defendant in his answer
is the 5th, which sets forth that Leodegario Azarraga
deposited with the sheriff P141 for the purposes of the
redemption. But defendant stated on the witness stand
that he had received in Panay, where he resides, a notice
from the sheriff that Leodegario Azarraga had deposited
with this officer an amount sufficient to redeem the land,
and that on the same date in which the deposit was made,
May 17, 1911, the sheriff went to Leodegario Azarraga’s
house.
The defendant set up the following defenses: (1) That on
May 17, 1911, the plaintiff Leiodegario Azarraga was not
yet special administrator of the estate of the decedent
Isidro Azarraga, former guardian in the minors Maria
Felisa and Jesus Bellosillo, inasmuch as he did not take
oath of office in that capacity until the 18th of the said
month of May, 1911; (2) that as such special administrator
of the estate of Isidro Azarraga the said Leodegario
Azarraga had no right of redeem the land in question, that
he did not handle funds of the said minors and that he was
not their legal representative; (3) that with respect to the
allegation that Azarraga was, on May 17, 1911, privately in
charge of the said minors, even so, he could not legally
represent them without any order of court nor could said
minors contract and bind themselves with Azarraga; (4)
that the office of guardian of said minors, which in the
complaint Leodegario Azarraga claims he held, was not
obtained by him until after the expiration of the legal period
for the redemption of the land in question, that is, not until
May 24, 1911, the date on which he took oath of office; (5)
that the fact of being guardian of the persons of said
minors does not authorize Leodegario Azarraga to litigate
matters concerning their property; (6) that with respect to
the other plaintiff Tomas Sison, although he is guardian for
the property of said minors, he was not such on the 17th of
May, 1911, inasmuch as he was not appointed to this
position until May 24, 1911, and then only on condition that
he should give bond if there was property belonging to the
minors to be administered and that up to the present time
he had not furnished said bond; (7) that the provincial
sheriff of Capiz, to whom Leodegario Azarraga delivered
the amount mentioned in the complaint, was not
authorized by any order of court to receive the redemption
price, nor did he represent the defendant for the purpose
of receiving it; (8) that defendant’s refusal to accept the
redemption price was made subsequent to the termination
of the period fixed by law for the redemption of said land
and was made at the time when he received in Panay the
notice from the same sheriff, to which he replied on the
very day of its receipt; (9) that no legal representative
whatsoever of said minors has complied with the notice
required in the last clause of section 465 of the Code of
Civil Procedure, no has a duplicate of said notice been
filed the register of deeds of the province.
The trial court sustained some of the defenses and
absolved the defendant the compliant without findings as
to costs. The plaintiffs appealed.
With respect to the defendant’s first point, to wit, that
Leodegario Azarraga was a special administrator of the
estate of Isidro Azarraga, the deceased guardian of the
Bellosillo minors, defendant merely objected that the
decedent did not become such special administrator until
he took the oath of office on May 18, 1911, that is, one day
after having exercised the right of redemption. But in
regard to this point the court said that the office of special
administrator of the estate of Isidro Azarraga does not
necessarily include that of guardian of the wards of said
decedent.
The first assignment of error is based on that finding. "The
court erred," say the appellants, "in holding that
Leodegario Azarraga, appointed special administrator of
the estate of Isidro Azarraga, the former guardian of said
minors, cannot exercise the rights and fulfill the obligations
of Isidro Azarraga as such guardian in behalf of said
minors."cralaw virtua1aw library
The original cause of the execution which gave rise to the
sale of the land in question was prosecuted by Severino
Villaruz, as administrator of the estate of the deceased
Gregorio Villaruz, against Isidro Azarraga, guardian of the
minors Maria Felisa and Jesus Bellosillo y Azarraga. Had
Isidro Azarraga been living on the 17th of May, 1911, it is
certain that he would have taken steps to redeem a piece
of land containing more than 11 hectares, sold for only
P126; and as he died on the 2d of that month, is not the
administrator of his estate able to do that which the
decedent would have done and which he was unable to
do? Section 702 of Act No. 190 expressly authorizes him
to prosecute, in the exercise of the rights of the deceased,
all actions necessary to recover property or to protect the
rights of the deceased. One of these is that for redemption,
now before us. One of the actions that does not expire at
death is that to recover the title or possession of real
estate. (Sec. 703.) In this case, when Leodegario Azarraga
acted as special administrator of the estate of Isidro
Azarraga, he did not do so as guardian of the Bellosillo
minors, but as administrator de bones non to relieve the
estate of Isidro Azarraga from the great responsibility it
would have incurred with regard to the Bellosillo minors, if
that land, sold at such an unwarrantably low price, and
which appears to be the only parcel left to said minors, had
not been redeemed; wherefore no bond for its
administrator was required of the present guardians.
All that the Bellosillo minors, the debtors, had to do in
order to redeem the property was to pay the purchaser the
amount of his purchase with 1 per cent per month interest
thereon up to the time of redemption. (Act No. 190, sec.
165.) Any person, whether he has and interest or not in
fulfilling the obligation, and whether the debtor knows and
approves it or not, can make the payment. The person
paying on account of another may recover from the debtor
whatever he pays, unless he makes such payment against
the express will of the latter. (Civ. Code, art. 1158.) So that
although the Bellosillo minors did not know of the
circumstance, Leodegario Azarraga could pay the P141
that he deposited with the sheriff.
In the lamentable situation in which these poor children
were left from the 2d of May, when their guardian Isidro
Azarraga died, until the 17th of the same month, on which
date the period for redemption expired, the law was not
obliged to abandon them to their fate. Leodegario
Azarraga was reduced to the expedient of voluntarily
undertaking to carry out a business matter for another and
effected the redemption by depositing the price thereof.
"The following are circumstances under which one may
undertake to carry out a business matter for another
(gestion de negocios ajenos)" says Manresa, "and
complete the juridic conception which we have just given
of such undertaking: (1) That they relate to determined
things or affairs, and that there be no administrator or
representative of the owner who is charged with the
management thereof; (2) that it be foreign to all idea of
express or tacit mandate on the part of the owner, for it
very often may happen even without his knowledge; it is
authorized by Law 26, title 12, of the 5th Partida and
continues to be authorized by the Code, which latter, in
fulfillment of base 21, aforecited, of the law of May 18,
1888, maintained the doctrine sanctioned by the old law;
and, (3), that the actor be inspire by the beneficent idea of
averting losses and damages to the owner or to the
interested party through the abandonment of the things
that belong to him or of the business in which he may be
interested, that is, that the administrator shall not
undertake the matter in the hope of obtaining profit, or, as
stated in Law 29, of the title and Partida cited, with the
avaricious idea of gain. Without these circumstances,’
says Sanchez Roman, ’the quasi contract with which we
are now dealing does not exist; and, on the contrary,
reduced to its just and natural limits, it is of unquestionable
utility’ (12 Manresa, 547 and 548)."cralaw virtua1aw library
On the following page, 549, he
adds:jgc:chanrobles.com.ph
"And as the law cannot and should not presume that the
administrator undertakes the venture for unlawful and
immoral purposes, but simply for the good of the owner or
of the persons who are interested in the things or affairs
affected, it confers upon the administrator the capacity of
mandatory, and in such capacity requires of him that he
fulfill his trust under conditions similar to those under which
the mandatory would fulfill his own . . . ."cralaw virtua1aw
library
In effect, article 1888 of the Civil Code
provides:jgc:chanrobles.com.ph
"A person who voluntarily takes charge of the agency or
administration of the business of another, without
authorization, is obliged to continue to manage the same
until the business and its incidents are terminated, or to
notify the interested person in order that the latter may
come to substitute him in his management, should he be in
a condition to do so for himself."cralaw virtua1aw library
That is what Leodegario Azarraga did. He took steps to do Torres, Johnson, Trent and Araullo, JJ., concur.
what was most indispensable, namely, to deposit the
redemption price in order to prevent the action from Moreland, J., concurs in the result.
prescribing, and as the minors or owners of the land could
not themselves provide for its continuance, Azarraga
called upon the guardian ad bona, Tomas Sison, to
undertake the matter in addition to his own duties as
guardian for the persons of the minors in which capacity
Azarraga had also been appointed on the 24th of the same
month of May, 1911. And these two are the persons who
continued the action for redemption after the prescription
of the action had been prevented by means of the deposit
of the price of the redemption in conformity with section
465 of the Code of Civil Procedure.

The defendant’s third defense is without merit. It consists

in the assertion that the minors could not contract nor bind
themselves with Azarraga because article 1893 of the Civil
Code expressly provides that "The owner of property or a
business who avails himself of the advantages of the
administration of another, even when he has not expressly
ratified it, shall be liable for the obligation contracted for his
benefit, and he shall indemnify the administrator for the
necessary and useful expenses which he may have
incurred and for the losses he may have suffered in the
discharged of his duties. The same obligation shall pertain
to said owner when the object of said administration
should have been to avoid any imminent or manifest
damage, even when no profit results therefrom."
Furthermore, the minor, although usually incapable of
contracting or binding himself, cannot disavow the efficacy
of the contracted obligation when it redounds to his
benefit, because of the principle that no one may enrich
himself to the prejudice of another.

For the foregoing reasons, the judgment appealed from is

reversed. It is hereby held that the property described in
the complaint may be redeemed, and the defendant is
ordered to deliver the same to the plaintiffs on receipt of
the sum of P141 deposited with the sheriff. No special
finding is made as to costs. so ordered.
THIRD DIVISION Before Us is a Petition[1] for Review on Certiorari under
SEBASTIAN SIGA-AN, Rule 45 of the Rules of Court seeking to set aside the
Decision,[2] dated 16 December 2005, and Resolution,[3]
Petitioner, dated 19 June 2006 of the Court of Appeals in CA-G.R.
-versus CV No. 71814, which affirmed in toto the Decision,[4]
dated 26 January 2001, of the Las Pinas City Regional
ALICIA VILLANUEVA, Trial Court, Branch 255, in Civil Case No. LP-98-0068.
Respondent.
G.R. No. 173227 The facts gathered from the records are as follows:
Present:
YNARES-SANTIAGO,
On 30 March 1998, respondent Alicia Villanueva filed a
Chairperson, complaint[5] for sum of money against petitioner Sebastian
Siga-an before the Las Pinas City Regional Trial Court
AUSTRIA-MARTINEZ, (RTC), Branch 255, docketed as Civil Case No. LP-98-
0068. Respondent alleged that she was a businesswoman
CHICO-NAZARIO, engaged in supplying office materials and equipments to
the Philippine Navy Office (PNO) located at Fort Bonifacio,
NACHURA, and Taguig City, while petitioner was a military officer and
comptroller of the PNO from 1991 to 1996.
LEONARDO-DE CASTRO,* JJ.
Promulgated:
January 20, 2009 Respondent claimed that sometime in 1992, petitioner
approached her inside the PNO and offered to loan her the
x----------------------------------------- amount of P540,000.00. Since she needed capital for her
- - - - - - - - -x business transactions with the PNO, she accepted
petitioners proposal. The loan agreement was not reduced
in writing. Also, there was no stipulation as to the payment
of interest for the loan.[6]
DECISION
On 31 August 1993, respondent issued a check worth
P500,000.00 to petitioner as partial payment of the loan.
CHICO-NAZARIO, J.: On 31 October 1993, she issued another check in the
amount of P200,000.00 to petitioner as payment of the
remaining balance of the loan. Petitioner told her that since
she paid a total amount of P700,000.00 for the
P540,000.00 worth of loan, the excess amount of
P160,000.00 would be applied as interest for the loan. Not
satisfied with the amount applied as interest, petitioner
pestered her to pay additional interest. Petitioner
threatened to block or disapprove her transactions with the
PNO if she would not comply with his demand. As all her
transactions with the PNO were subject to the approval of
petitioner as comptroller of the PNO, and fearing that
petitioner might block or unduly influence the payment of
her vouchers in the PNO, she conceded. Thus, she paid
additional amounts in cash and checks as interests for the
loan. She asked petitioner for receipt for the payments but
petitioner told her that it was not necessary as there was
mutual trust and confidence between them. According to
her computation, the total amount she paid to petitioner for
the loan and interest accumulated to P1,200,000.00.[7]
Thereafter, respondent consulted a lawyer regarding the
propriety of paying interest on the loan despite absence of
agreement to that effect. Her lawyer told her that petitioner
could not validly collect interest on the loan because there
was no agreement between her and petitioner regarding
payment of interest. Since she paid petitioner a total
amount of P1,200,000.00 for the P540,000.00 worth of
loan, and upon being advised by her lawyer that she made
overpayment to petitioner, she sent a demand letter to
petitioner asking for the return of the excess amount of
P660,000.00. Petitioner, despite receipt of the demand
letter, ignored her claim for reimbursement.[8]
Respondent prayed that the RTC render judgment
ordering petitioner to pay respondent (1) P660,000.00 plus
legal interest from the time of demand; (2) P300,000.00 as
moral damages; (3) P50,000.00 as exemplary damages;
and (4) an amount equivalent to 25% of P660,000.00 as
attorneys fees.[9]
In his answer[10] to the complaint, petitioner denied that
he offered a loan to respondent. He averred that in 1992,
respondent approached and asked him if he could grant
her a loan, as she needed money to finance her business
venture with the PNO. At first, he was reluctant to deal with
respondent, because the latter had a spotty record as a
supplier of the PNO. However, since respondent was an
acquaintance of his officemate, he agreed to grant her a
loan. Respondent paid the loan in full.[11]
Subsequently, respondent again asked him to give her a
loan. As respondent had been able to pay the previous
loan in full, he agreed to grant her another loan. Later,
respondent requested him to restructure the payment of
the loan because she could not give full payment on the
due date. He acceded to her request. Thereafter,
respondent pleaded for another restructuring of the
payment of the loan. This time he rejected her plea. Thus,
respondent proposed to execute a promissory note
wherein she would acknowledge her obligation to him,
inclusive of interest, and that she would issue several
postdated checks to guarantee the payment of her
obligation. Upon his approval of respondents request for
restructuring of the loan, respondent executed a
promissory note dated 12 September 1994 wherein she
admitted having borrowed an amount of P1,240,000.00,
inclusive of interest, from petitioner and that she would pay
said amount in March 1995. Respondent also issued to
him six postdated checks amounting to P1,240,000.00 as
guarantee of compliance with her obligation.
Subsequently, he presented the six checks for
encashment but only one check was honored. He
demanded that respondent settle her obligation, but the
latter failed to do so. Hence, he filed criminal cases for
Violation of the Bouncing Checks Law (Batas Pambansa
Blg. 22) against respondent. The cases were assigned to
the Metropolitan Trial Court of Makati City, Branch 65
(MeTC).[12]
Petitioner insisted that there was no overpayment because WHEREFORE, in view of the foregoing evidence and in
respondent admitted in the latters promissory note that her the light of the provisions of law and jurisprudence on the
monetary obligation as of 12 September 1994 amounted to matter, judgment is hereby rendered in favor of the plaintiff
P1,240,000.00 inclusive of interests. He argued that and against the defendant as follows:
respondent was already estopped from complaining that
she should not have paid any interest, because she was
given several times to settle her obligation but failed to do
so. He maintained that to rule in favor of respondent is (1) Ordering defendant to pay plaintiff the amount
tantamount to concluding that the loan was given interest- of P660,000.00 plus legal interest of 12% per annum
free. Based on the foregoing averments, he asked the computed from 3 March 1998 until the amount is paid in
RTC to dismiss respondents complaint. full;
(2) Ordering defendant to pay plaintiff the amount of
After trial, the RTC rendered a Decision on 26 January P300,000.00 as moral damages;
2001 holding that respondent made an overpayment of her
loan obligation to petitioner and that the latter should
refund the excess amount to the former. It ratiocinated that
respondents obligation was only to pay the loaned amount (3) Ordering defendant to pay plaintiff the amount of
of P540,000.00, and that the alleged interests due should P50,000.00 as exemplary damages;
not be included in the computation of respondents total
monetary debt because there was no agreement between
them regarding payment of interest. It concluded that since
respondent made an excess payment to petitioner in the (4) Ordering defendant to pay plaintiff the amount
amount of P660,000.00 through mistake, petitioner should equivalent to 25% of P660,000.00 as attorneys fees; and
return the said amount to respondent pursuant to the
principle of solutio indebiti.[13]
(5) Ordering defendant to pay the costs of suit.[14]
The RTC also ruled that petitioner should pay moral
damages for the sleepless nights and wounded feelings
experienced by respondent. Further, petitioner should pay
exemplary damages by way of example or correction for
the public good, plus attorneys fees and costs of suit. Petitioner appealed to the Court of Appeals. On 16
December 2005, the appellate court promulgated its
Decision affirming in toto the RTC Decision, thus:
The dispositive portion of the RTC Decision reads:
WHEREFORE, the foregoing considered, the instant
appeal is hereby DENIED and the assailed decision [is]
AFFIRMED in toto.[15]
Petitioner filed a motion for reconsideration of the
appellate courts decision but this was denied.[16] Hence,
petitioner lodged the instant petition before us assigning
the following errors:
I.
THE RTC AND THE COURT OF APPEALS ERRED IN
RULING THAT NO INTEREST WAS DUE TO
PETITIONER;
II.
THE RTC AND THE COURT OF APPEALS ERRED IN
APPLYING THE PRINCIPLE OF SOLUTIO INDEBITI.[17]
Interest is a compensation fixed by the parties for the use
or forbearance of money. This is referred to as monetary
interest. Interest may also be imposed by law or by courts
as penalty or indemnity for damages. This is called
compensatory interest.[18] The right to interest arises only
by virtue of a contract or by virtue of damages for delay or
failure to pay the principal loan on which interest is
demanded.[19]
Article 1956 of the Civil Code, which refers to monetary
interest,[20] specifically mandates that no interest shall be
due unless it has been expressly stipulated in writing. As
can be gleaned from the foregoing provision, payment of
monetary interest is allowed only if: (1) there was an
express stipulation for the payment of interest; and (2) the
agreement for the payment of interest was reduced in
writing. The concurrence of the two conditions is required
for the payment of monetary interest. Thus, we have held
that collection of interest without any stipulation therefor in
writing is prohibited by law.[21]
It appears that petitioner and respondent did not agree on
the payment of interest for the loan. Neither was there
convincing proof of written agreement between the two
regarding the payment of interest. Respondent testified
that although she accepted petitioners offer of loan
amounting to P540,000.00, there was, nonetheless, no
verbal or written agreement for her to pay interest on the
loan.[22]
Petitioner presented a handwritten promissory note dated
12 September 1994[23] wherein respondent purportedly
admitted owing petitioner capital and interest. Respondent,
however, explained that it was petitioner who made a
promissory note and she was told to copy it in her own
handwriting; that all her transactions with the PNO were
subject to the approval of petitioner as comptroller of the
PNO; that petitioner threatened to disapprove her
transactions with the PNO if she would not pay interest;
that being unaware of the law on interest and fearing that
petitioner would make good of his threats if she would not
obey his instruction to copy the promissory note, she
copied the promissory note in her own handwriting; and
that such was the same promissory note presented by
petitioner as alleged proof of their written agreement on
interest.[24] Petitioner did not rebut the foregoing
testimony. It is evident that respondent did not really
consent to the payment of interest for the loan and that
she was merely tricked and coerced by petitioner to pay
interest. Hence, it cannot be gainfully said that such
promissory note pertains to an express stipulation of
interest or written agreement of interest on the loan
between petitioner and respondent.
Petitioner, nevertheless, claims that both the RTC and the
Court of Appeals found that he and respondent agreed on
the payment of 7% rate of interest on the loan; that the
agreed 7% rate of interest was duly admitted by
respondent in her testimony in the Batas Pambansa Blg.
22 cases he filed against respondent; that despite such
judicial admission by respondent, the RTC and the Court
of Appeals, citing Article 1956 of the Civil Code, still held
that no interest was due him since the agreement on
interest was not reduced in writing; that the application of
Article 1956 of the Civil Code should not be absolute, and
an exception to the application of such provision should be
made when the borrower admits that a specific rate of
interest was agreed upon as in the present case; and that
it would be unfair to allow respondent to pay only the loan
when the latter very well knew and even admitted in the
Batas Pambansa Blg. 22 cases that there was an agreed
7% rate of interest on the loan.[25]
We have carefully examined the RTC Decision and found
that the RTC did not make a ruling therein that petitioner
and respondent agreed on the payment of interest at the
rate of 7% for the loan. The RTC clearly stated that
although petitioner and respondent entered into a valid
oral contract of loan amounting to P540,000.00, they,
nonetheless, never intended the payment of interest
thereon.[26] While the Court of Appeals mentioned in its
Decision that it concurred in the RTCs ruling that petitioner
and respondent agreed on a certain rate of interest as
regards the loan, we consider this as merely an
inadvertence because, as earlier elucidated, both the RTC
and the Court of Appeals ruled that petitioner is not entitled
to the payment of interest on the loan. The rule is that
factual findings of the trial court deserve great weight and
respect especially when affirmed by the appellate
court.[27] We found no compelling reason to disturb the
ruling of both courts.
Petitioners reliance on respondents alleged admission in
the Batas Pambansa Blg. 22 cases that they had agreed
on the payment of interest at the rate of 7% deserves
scant consideration. In the said case, respondent merely
testified that after paying the total amount of loan,
petitioner ordered her to pay interest.[28] Respondent did
not categorically declare in the same case that she and
respondent made an express stipulation in writing as
regards payment of interest at the rate of 7%. As earlier
discussed, monetary interest is due only if there was an
express stipulation in writing for the payment of interest.
There are instances in which an interest may be imposed
even in the absence of express stipulation, verbal or
written, regarding payment of interest. Article 2209 of the
Civil Code states that if the obligation consists in the
payment of a sum of money, and the debtor incurs delay, a
legal interest of 12% per annum may be imposed as
indemnity for damages if no stipulation on the payment of
interest was agreed upon. Likewise, Article 2212 of the
Civil Code provides that interest due shall earn legal
interest from the time it is judicially demanded, although
the obligation may be silent on this point.
All the same, the interest under these two instances may
be imposed only as a penalty or damages for breach of
contractual obligations. It cannot be charged as a
compensation for the use or forbearance of money. In
other words, the two instances apply only to compensatory
interest and not to monetary interest.[29] The case at bar
involves petitioners claim for monetary interest.
Further, said compensatory interest is not chargeable in
the instant case because it was not duly proven that
respondent defaulted in paying the loan. Also, as earlier
found, no interest was due on the loan because there was
no written agreement as regards payment of interest.
Apropos the second assigned error, petitioner argues that
the principle of solutio indebiti does not apply to the instant
case. Thus, he cannot be compelled to return the alleged
excess amount paid by respondent as interest.[30]
Under Article 1960 of the Civil Code, if the borrower of
loan pays interest when there has been no stipulation
therefor, the provisions of the Civil Code concerning
solutio indebiti shall be applied. Article 2154 of the Civil
Code explains the principle of solutio indebiti. Said
provision provides that if something is received when there
is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises. In such a
case, a creditor-debtor relationship is created under a
quasi-contract whereby the payor becomes the creditor
who then has the right to demand the return of payment
made by mistake, and the person who has no right to
receive such payment becomes obligated to return the
same. The quasi-contract of solutio indebiti harks back to
the ancient principle that no one shall enrich himself
unjustly at the expense of another.[31] The principle of
solutio indebiti applies where (1) a payment is made when
there exists no binding relation between the payor, who
has no duty to pay, and the person who received the
payment; and (2) the payment is made through mistake,
and not through liberality or some other cause.[32] We
have held that the principle of solutio indebiti applies in
case of erroneous payment of undue interest.[33]
It was duly established that respondent paid interest to
petitioner. Respondent was under no duty to make such
payment because there was no express stipulation in
writing to that effect. There was no binding relation
between petitioner and respondent as regards the
payment of interest. The payment was clearly a mistake.
Since petitioner received something when there was no
right to demand it, he has an obligation to return it.
We shall now determine the propriety of the monetary
award and damages imposed by the RTC and the Court of
Appeals.
Records show that respondent received a loan amounting
to P540,000.00 from petitioner.[34] Respondent issued two
checks with a total worth of P700,000.00 in favor of
petitioner as payment of the loan.[35] These checks were
subsequently encashed by petitioner.[36] Obviously, there
was an excess of P160,000.00 in the payment for the loan.
Petitioner claims that the excess of P160,000.00 serves as
interest on the loan to which he was entitled. Aside from
issuing the said two checks, respondent also paid cash in
the total amount of P175,000.00 to petitioner as
interest.[37] Although no receipts reflecting the same were
presented because petitioner refused to issue such to
respondent, petitioner, nonetheless, admitted in his Reply-
Affidavit[38] in the Batas Pambansa Blg. 22 cases that
respondent paid him a total amount of P175,000.00 cash
in addition to the two checks. Section 26 Rule 130 of the
Rules of Evidence provides that the declaration of a party
as to a relevant fact may be given in evidence against him.
Aside from the amounts of P160,000.00 and P175,000.00
paid as interest, no other proof of additional payment as
interest was presented by respondent. Since we have
previously found that petitioner is not entitled to payment
of interest and that the principle of solutio indebiti applies
to the instant case, petitioner should return to respondent
the excess amount of P160,000.00 and P175,000.00 or
the total amount of P335,000.00. Accordingly, the
reimbursable amount to respondent fixed by the RTC and
the Court of Appeals should be reduced from P660,000.00
to P335,000.00.
As earlier stated, petitioner filed five (5) criminal cases for
violation of Batas Pambansa Blg. 22 against respondent.
In the said cases, the MeTC found respondent guilty of
violating Batas Pambansa Blg. 22 for issuing five
dishonored checks to petitioner. Nonetheless, respondents
conviction therein does not affect our ruling in the instant
case. The two checks, subject matter of this case, totaling
P700,000.00 which respondent claimed as payment of the
P540,000.00 worth of loan, were not among the five
checks found to be dishonored or bounced in the five
criminal cases. Further, the MeTC found that respondent
made an overpayment of the loan by reason of the interest
which the latter paid to petitioner.[39]
Article 2217 of the Civil Code provides that moral damages
may be recovered if the party underwent physical
suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock,
social humiliation and similar injury. Respondent testified
that she experienced sleepless nights and wounded
feelings when petitioner refused to return the amount paid
as interest despite her repeated demands. Hence, the
award of moral damages is justified. However, its
corresponding amount of P300,000.00, as fixed by the
RTC and the Court of Appeals, is exorbitant and should be
equitably reduced. Article 2216 of the Civil Code instructs
that assessment of damages is left to the discretion of the
court according to the circumstances of each case. This
discretion is limited by the principle that the amount
awarded should not be palpably excessive as to indicate
that it was the result of prejudice or corruption on the part
of the trial court.[40] To our mind, the amount of
P150,000.00 as moral damages is fair, reasonable, and
proportionate to the injury suffered by respondent.
Article 2232 of the Civil Code states that in a quasi-
contract, such as solutio indebiti, exemplary damages may
be imposed if the defendant acted in an oppressive
manner. Petitioner acted oppressively when he pestered
respondent to pay interest and threatened to block her
transactions with the PNO if she would not pay interest.
This forced respondent to pay interest despite lack of
agreement thereto. Thus, the award of exemplary
damages is appropriate. The amount of P50,000.00
imposed as exemplary damages by the RTC and the Court
is fitting so as to deter petitioner and other lenders from
committing similar and other serious wrongdoings.[41]
Jurisprudence instructs that in awarding attorneys fees,
the trial court must state the factual, legal or equitable
justification for awarding the same.[42] In the case under
consideration, the RTC stated in its Decision that the
award of attorneys fees equivalent to 25% of the amount
paid as interest by respondent to petitioner is reasonable
and moderate considering the extent of work rendered by
respondents lawyer in the instant case and the fact that it
dragged on for several years.[43] Further, respondent
testified that she agreed to compensate her lawyer
handling the instant case such amount.[44] The award,
therefore, of attorneys fees and its amount equivalent to
25% of the amount paid as interest by respondent to
petitioner is proper.
Finally, the RTC and the Court of Appeals imposed a 12%
rate of legal interest on the amount refundable to
respondent computed from 3 March 1998 until its full
payment. This is erroneous.
We held in Eastern Shipping Lines, Inc. v. Court of
Appeals,[45] that when an obligation, not constituting a
loan or forbearance of money is breached, an interest on
the amount of damages awarded may be imposed at the
rate of 6% per annum. We further declared that when the
judgment of the court awarding a sum of money becomes
final and executory, the rate of legal interest, whether it is
a loan/forbearance of money or not, shall be 12% per
annum from such finality until its satisfaction, this interim
period being deemed equivalent to a forbearance of credit.
In the present case, petitioners obligation arose from a
quasi-contract of solutio indebiti and not from a loan or
forbearance of money. Thus, an interest of 6% per annum
should be imposed on the amount to be refunded as well
as on the damages awarded and on the attorneys fees, to
be computed from the time of the extra-judicial demand on
3 March 1998,[46] up to the finality of this Decision. In
addition, the interest shall become 12% per annum from
the finality of this Decision up to its satisfaction.
WHEREFORE, the Decision of the Court of Appeals in
CA-G.R. CV No. 71814, dated 16 December 2005, is
hereby AFFIRMED with the following MODIFICATIONS:
(1) the amount of P660,000.00 as refundable amount of
interest is reduced to THREE HUNDRED THIRTY FIVE
THOUSAND PESOS (P335,000.00); (2) the amount of [30] Rollo, pp. 18-20.
P300,000.00 imposed as moral damages is reduced to [13] Id. at 514-515.
ONE HUNDRED FIFTY THOUSAND PESOS [31] Moreo-Lentfer v. Wolff, G.R. No. 152317, 10
(P150,000.00); (3) an interest of 6% per annum is imposed [14] Id. at 515-516. November 2004, 441 SCRA 584, 591.
on the P335,000.00, on the damages awarded and on the
attorneys fees to be computed from the time of the extra- [15] Rollo, p. 32. [32] Id.
judicial demand on 3 March 1998 up to the finality of this
Decision; and (4) an interest of 12% per annum is also [16] Id. at 34-35. [33] Velez v. Balzarza, 73 Phil. 630, 632 (1942).
imposed from the finality of this Decision up to its
satisfaction. Costs against petitioner. [17] Id. at 16. [34] TSN, 18 April 2000, p. 7.

[18] Paras, CIVIL CODE OF THE PHILIPPINES [35] Exhibits A & B; records, pp. 367, 371 and 372.
ANNOTATED (13th Edition, 1995, Volume V), p. 854;
SO ORDERED. Caguioa, COMMENTS AND CASES ON CIVIL LAW, (1st [36] CA rollo, pp. 58-63.
Edition, Volume VI), p. 260.
[1] Rollo, pp. 9-23. [37] TSN, 18 April 2000, p. 23.
[19] Baretto v. Santa Marina, 37 Phil. 568, 571 (1918).
[2] Penned by Associate Justice Josefina Guevara- [38] CA rollo, pp. 94-96.
Salonga with Associate Justices Eliezer R. de Los Santos [20] Supra note 18.
and Fernanda Lampas-Peralta, concurring; rollo, pp. 24- [39] Records, pp. 510-516.
32. [21] Ching v. Nicdao, G.R. No. 141181, 27 April 2007, 522
SCRA 316, 361; Tan v. Valdehueza, 160 Phil. 760, 767 [40] Philippine Airlines v. Court of Appeals, G.R. No.
[3] Rollo, pp. 34-35. (1975). 123238, 22 September 2008.

[4] Penned by Judge Florentino M. Alumbres; records, pp. [22] TSN, 18 April 2000, pp. 7-8. [41] Id.
510-516.
[23] Records, p. 321. [42] Serrano v. Gutierrez, G.R. No. 162366, 10 November
[5] Records, pp. 1-5. 2006, 506 SCRA 712, 724; Buing v. Santos, G.R. No.
[24] Rollo, pp. 70-71; TSN, 18 April 2000, pp. 17-18. 152544, 19 September 2006, 502 SCRA 315, 321-323;
[6] Id. at 2. Ballesteros v. Abion, G.R. No. 143361, 9 February 2006,
[25] Id. at 17-18. 482 SCRA 23, 39-40.
[7] Id. at 2-3.
[26] Records, p. 514. [43] Records, p. 515.
[8] Id. at 3-4.
[27] Pantranco North Express Inc. v. Standard Insurance [44] TSN, 18 April 2000, pp. 35-36.
[9] Id. at 4-5. Company Inc., G.R. No. 140746, 16 March 2005, 453
SCRA 482, 490. [45] G.R. No. 97412, 12 July 1994, 234 SCRA 78, 95-97.
[10] Id. at 150-160.
[28] CA rollo, p. 88. [46] Records, p. 7.
[11] Id. at 3-4.
[29] Supra note 18 at 856-857.
[12] Id. at 4-5.
GR NO. 146021 March 10, 2006
BANK OF THE PHILIPPINE ISLANDS, Petitioner,
vs.
ELIZABETH G. SARMIENTO, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari filed
by Bank of the Philippine Islands (petitioner) seeking to
annul the Decision dated September 15, 20001 and the
Resolution dated November 13, 20002 of the Court of
Appeals (CA) in CA G.R. CV No. 50135 affirming in toto
the decision of the Regional Trial Court of Quezon City
dismissing the complaint for sum of money filed by
petitioner against Elizabeth Sarmiento (respondent).
The factual backdrop as found by the CA is as follows:
Appellee Sarmiento was the assistant manager of
appellant bank's España Branch. Sometime in 1987, the
España Branch was investigated for several alleged
anomalous transactions involving time deposits (Exhibit A).
Among the suspects in the alleged scam was appellee
Sarmiento. From October 10, 1987 to June 30, 1988,
appellee Sarmiento did not regularly report for work but
went to her office in the bank only once in a while. She
however received her full salary for the said period totaling
P116,003.52. Subsequently, she received a demand from
the appellant bank to return said amount because it was
mistakenly paid to her. She refused to do so and so
appellant bank instituted an action for collection in the
court below.
Appellant bank asserted that since appellee Sarmiento did
not actually work during the period adverted to, she was
not therefore, entitled to receive any salary. The payment
to her of said salary was a mistake.
According to appellee Sarmiento however, when an
internal audit was being undertaken in connection with the
investigation of the alleged bank scam, Vice President
Arturo Kimseng of the Audit Department of appellant bank
verbally directed her to stop working while the investigation
was going on. This directive was obviously for the purpose
of preventing appellee Sarmiento from tampering with the
records or from influencing her subordinates to cover-up
for her. It was because of said oral instruction that
appellee Sarmiento went to office sparingly.3
On April 3, 1995, the Regional Trial Court of Quezon City,
Branch 98, dismissed 4 the complaint for failure of
petitioner to establish its case by preponderance of
evidence with costs against it. The trial court found that the
principle of solutio indebiti upon which petitioner based its
complaint for a sum of money is untenable. It ruled that
since respondent was petitioner's Assistant Manager at
the España Branch, she was a managerial employee who
was not under obligation to punch in her card in the bundy
clock; that she was allowed to visit the business
establishments of petitioner's several clients thus she
could not be seen reporting for work which was not a
conclusive proof that she was not rendering service to her
employer; that respondent was lawfully entitled for
payment of her salaries for the period from October 10,
1987 to June 30, 1988, amounting to P116,003.52; that
petitioner's averment that during the periods
aforementioned respondent had already ceased reporting
rest on a very shaky ground since respondent claimed that
she was instructed by petitioner's Assistant Vice-President
of the Auditing Department to refrain from reporting
regularly inasmuch as there was an on-going internal
audit; that petitioner failed to present countervailing
evidence on this point, hence such claim remained
unrebutted; and that petitioner did not even bother to
adduce clear and convincing evidence when the services
of respondent was terminated.
Petitioner filed its appeal with the CA which in a Decision
dated September 15, 2000 affirmed the Decision of the
trial court and dismissed the appeal. Petitioner's motion for
reconsideration was likewise denied in a Resolution dated
November 13, 2000.
In finding for the respondent, the CA made the following
disquisition:
These are admitted or fully established facts which
constitute the foundation of this Court's verdict, to wit:
1. Appellee Sarmiento was an assistant manager of
appellant bank's España Branch and therefore was a
managerial employee.
2. As a managerial employee, appellee Sarmiento was not
required to report for work in accordance with a definite
time schedule.
3. For the period, October 10, 1987 to June 30, 1988,
appellee Sarmiento went to her office only once in a while
but received her full salary for said period.
4. According to appellant bank, appellee Sarmiento's
services in said bank were terminated on August 26, 1988.
Consequently, for the period, October 10, 1987 to June 30,
1988, appellee was still an employee of the bank.
5. During the period in question, appellee Sarmiento was
not suspended from office.
6. No criminal, civil or administrative action has been
instituted by appellant bank against appellee Sarmiento.
In this suit, the basis of appellant's bank's claim for
reimbursement of the salary paid to appellee Sarmiento for
the period in question is the rule of "no work, no pay".
Since she did not work during the period in question, she
was not entitled to any salary. Appellee Sarmiento
counters this position with the argument that the reason
why she did not report for work regularly was because she
was verbally instructed by Vice-President Arturo Kimseng
not to report for work while the investigation in the bank
was going on. Consequently, it was not her desire, much
less her fault, that she went to office very rarely.
The only issue to resolve is whether or not appellee
Sarmiento was indeed verbally instructed by Vice
President Arturo Kimseng not to report for work while the
investigation was still going on.
It is true that Vice President Arturo Kimseng denied having
given said oral instruction to appellee Sarmiento. That
notwithstanding, this Court shares the view of the lower
court that indeed appellee Sarmiento was enjoined from
reporting for work during the period of investigation.
This is plausible because it jibes with the common practice
in the business world. When a managerial employee is
under investigation, the employer has three options. First:
to suspend the managerial employee during the period of
investigation - but this entails notice and hearing to comply
with the demands of administrative due process. Second:
to allow the managerial employee to continue working
during the period of investigation so that the employer can
derive benefit out of the salary being paid to the former.
Third: to let the managerial employee discontinue working
during the period of investigation but continue paying his
salary. Usually, the employers choose the third option
because they consider the salary paid without work a
reasonable price to pay for ensuring the integrity of the
records under the control and to avoid influence being
exerted upon subordinate employees who may be
potential witnesses against the former.
If there had been no such instruction to appellee
Sarmiento, why did not the branch manager or even higher
corporate officials call her attention for not reporting to
office regularly? If her attention was called but she
continued to be absent, why was she not suspended? Why
was her salary paid? These questions were not
satisfactorily answered by appellant bank.
Accordingly, this Court holds that the payment of the
salary to appellee Sarmiento during the period in question
was correct and the latter's receipt was legal. She has
therefore, no obligation to return it.5
Hence, the instant petition for review on the following
grounds:
I. The Honorable Court of Appeals erred in holding based
on a misapprehension of facts that the "only issue to
resolve is whether it is true or not that appellee Sarmiento
was indeed verbally instructed by Vice President Arturo
Kimseng not to report for work while the investigation was
still going on."
II. In connection with the foregoing, the Honorable Court of
Appeals also erred in holding without any basis at all, that
it "shares the view of the lower court that indeed appellee
Sarmiento was enjoined from reporting for work during the
period of investigation."
III. The Honorable Court of Appeals erred in holding based
entirely on speculations, surmises or conjectures that "the
payment of the salary to appellee Sarmiento during the
period in question was correct and the latter's receipt
(thereof) was legal" and accordingly, "she has therefore no
obligation to return it."
IV. The Honorable Court of Appeals erred in dismissing
the appeal of BPI and affirming the Decision under appeal.
6 surmises or conjectures; (2) when the inference made is
Respondent filed her Comment. Subsequently, upon
directive of the Court, the parties submitted their
respective memoranda.
Petitioner claims that: when the CA declared that the only
issue to resolve is whether it is true or not that appellee
Sarmiento was indeed verbally instructed by Assistant
Vice-President Arturo Kimseng (AVP Kimseng) not to
report for work while the investigation was still going on,
the CA impliedly acknowledged that it is convinced that
respondent did not report for work while the investigation
was going on; petitioner fully agrees with the CA in making
such an assumption as it was based on the evidence on
record; it was even respondent who admitted in her
Answer to the complaint as well as in her testimony in
cross-examination that she stopped reporting for work on
September 12, 1987; the CA erred in its assumption that
AVP Kimseng had the power or authority to order or direct
respondent not to report for work since no evidence was
presented by the defense to that effect; AVP Kimseng
rebutted such claim when he testified that he had no
authority to do so; if it was really petitioner's intention not
to allow respondent to report for work and yet pay her
salaries, there is no reason why it should now proceed to
recover from her; it is not uncommon for an employee who
is under investigation to cease from reporting for work on
her own because she does not want to cooperate or to
participate in the investigation being conducted.
The Court dismisses the petition.
It is a settled rule that in the exercise of the Supreme
Court's power of review, the Court is not a trier of facts and
does not normally undertake the re-examination of the
evidence presented by the contending parties during the
trial of the case considering that the findings of facts of the
CA are conclusive and binding on the Court.7
Jurisprudence has recognized several exceptions in which
factual issues may be resolved by this Court, such as: (1)
when the findings are grounded entirely on speculation,
manifestly mistaken, absurd or impossible; (3) when there
is grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the
findings of facts are conflicting; (6) when in making its
findings the Court of Appeals went beyond the issues of
the case, or its findings are contrary to the admissions of
both the appellant and the appellee; (7) when the findings
are contrary to the trial court; (8) when the findings are
conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition
as well as in the petitioner's main and reply briefs are not
disputed by the respondent; (10) when the findings of fact
are premised on the supposed absence of evidence and
contradicted by the evidence on record; or (11) when the
Court of Appeals manifestly overlooked certain relevant
facts not disputed by the parties, which, if properly
considered, would justify a different conclusion.8 None of
these exceptions find application in the present case.
After a thorough review of the instant case, the Court finds
that the petition raises no substantial question of law. The
questions raised as to whether or not respondent was
verbally instructed not to report for work by petitioner's
AVP Kimseng while the investigation was going on and
whether he possesses such authority considering that on
rebuttal, he denied having given such instruction claiming
that he had no authority to do so, are patently questions of
fact beyond the pale of Rule 45 of the Rules of Court
which mandates that only questions of law be raised in the
petition.
The Court finds no cogent reason to deviate from the
findings of the trial court and the CA that respondent is
entitled to the payment of her salary from October 10,
1987 to June 30, 1988. Petitioner's witness, Eduardo
Cascarro, Head of the Branches Division Investigation
Unit, testified that respondent was terminated only on
August 26, 1988,9 thus, there is no question that
respondent was still an employee of petitioner during the
period in question. There was no showing that respondent
was even suspended during the said period.
Although respondent testified that she stopped reporting
for work on September 12, 1987, she also testified on
cross-examination that she still went to her office from
September to December 1987 although admittedly she
was not doing anything but she still received her salary.
The Court likewise agrees with the CA that respondent
could not be faulted for not reporting for work because she
merely complied with the verbal instruction of AVP
Kimseng not to report for work when the latter was
conducting the investigation of the branch for anomalies.
While AVP Kimseng denied that he made such instruction
and declared that he had no authority to give such
instruction, the trial court gave more credence to the
testimony of respondent that indeed she was instructed
not to report for work.
We find no cogent reason to disturb the findings of the trial
court in light of the settled rule that the evaluation of the
testimonies of witnesses by the trial court is entitled to the
highest respect because such court has the direct
opportunity to observe the witnesses' demeanor and
manner of testifying and thus, is in a better position to
assess their credibility.10
The CA finding was supported by the evidence on record.
Petitioner contends that respondent was not reporting for
work from October 10, 1987 to June 30, 1988, however,
petitioner failed to show why its España Branch Manager
allowed respondent to be absent or not to do anything
during that period if indeed there was no such instruction
from AVP Kimseng for her not to report for work. It bears
stressing that as an Assistant Branch Manager,
respondent has some official duties to perform pertaining
to the internal operation of petitioner's branch and yet her
Branch Manager allowed her to be absent for such a long
period of time without calling her attention on such
absences. The only plausible explanation is that, as
declared by respondent, which remained unrebutted, she
had relayed to her Branch Manager the verbal instruction
of AVP Kimseng for her not to report for work while the
investigation was on-going. If indeed there was no such
instruction, the Branch Manager could have immediately
called respondent's attention regarding her absences and
that she should have been required to perform her official
duties inside the branch office. And if she continued to be
absent, she could have been sanctioned or given the
corresponding memorandum. Moreover, there is no
evidence to show that such absences, if unauthorized,
were reported by the Branch Manager to higher authorities
of petitioner. On the contrary, without qualification or
reservation, respondent's salary and other benefits were
given to her by petitioner during the said period.
Petitioner insists that its payment of respondent's salary
was by mistake since respondent who chose not to report
for work was not entitled to it under the principle of "no
work, no pay", thus she has the obligation to return the
same. Petitioner based such contention on the principle of
solutio indebiti under Article 215411 of the Civil Code.
There is solutio indebiti where: (1) payment is made when
there exists no binding relation between the payor, who
has no duty to pay, and the person who received the
payment; and (2) the payment is made through mistake,
and not through liberality or some other cause. x x x The
quasi-contract of solutio indebiti is based on the ancient
principle that no one shall enrich himself unjustly at the
expense of another.12
Both elements are lacking in the present case. Mr.
Cascarro, the Head of the Branches Division Investigation
Unit, had categorically stated that respondent was only
terminated from service on August 26, 1988. Respondent
was not suspended from office. Consequently, during the
period in question, there still existed an employer-
employee relationship between petitioner and respondent
which entitled respondent to the payment of her salary
during the said period. Thus, there can be no mistaken
payment in this case. Moreover, it has been shown that
the payment of respondent's salary was with the
knowledge and approval of respondent's immediate
superior officers. Hence, the principle of solutio indebiti
finds no application in this case.
WHEREFORE, the petition is DENIED and the Decision
dated September 15, 2000 and the Resolution dated
November 13, 2000 of the Court of Appeals are
AFFIRMED.
Costs against petitioner.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
WE CONCUR:
Footnotes

1 Rollo, pp. 8-12; Penned by Justice Hilarion L. Aquino

(now retired), concurred in by Justices Buenaventura J.
Guerrero (now retired) and Mercedes Gozo-Dadole (now
retired).

2 Id., p. 14.

3 Id., pp. 8-9.

4 Penned by Judge Justo M. Sultan, docketed as Civil

Case No. Q-91-9539, rollo, pp. 49-53.

5 Id., pp. 9-11.

6 Id., pp. 20-21.

7 Spouses Almendrala v. Spouses Ngo, G.R. No. 142408,

September 30, 2005, 471 SCRA 311, 322.

8 Id.

9 TSN, November 15, 1993, p. 4.

10 Aclon v. Court of Appeals, 436 Phil. 219, 232 (2002),

citing Concepcion v. Court of Appeals, 381 Phil. 91, 96
(2000); Bugatti v. Court of Appeals, 397 Phil. 377, 388
(2000); Viron Transportation Co., Inc. v. Delos Santos, 399
Phil. 243, 250 (2000).

11 Art. 2154. If something is received when there is no

right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises.

12 Power Commercial and Industrial Corporation v. Court

of Appeals, G.R. No. 119745, June 20, 1997, 274 SCRA
597, 612, 613.
[G.R. No. 152317. November 10, 2004]
VICTORIA MOREO-LENTFER,* GUNTER LENTFER and
JOHN CRAIGIE YOUNG CROSS, petitioners, vs. HANS
JURGEN WOLFF, respondent.
DECISION
QUISUMBING, J.:
For review on certiorari are the Decision[1] dated June 14,
2001, and Resolution[2] dated February 22, 2002, of the
Court of Appeals in CA-G.R. CV No. 48272. The decision
reversed the judgment[3] of the Regional Trial Court of
Calapan City, Oriental Mindoro, Branch 39, in Civil Case
No. R-4219.
The facts are as follows:
The petitioners are Gunter Lentfer, a German citizen; his
Filipina wife, Victoria Moreo-Lentfer; and John Craigie
Young Cross, an Australian citizen, all residing in Sabang,
Puerto Galera, Oriental Mindoro. Respondent Hans Jurgen
Wolff is a German citizen, residing in San Lorenzo Village,
Makati City.
Petitioners alleged that with respondent, on March 6,
1992, they engaged the notarial services of Atty. Rodrigo
C. Dimayacyac for: (1) the sale of a beach house owned
by petitioner Cross in Sabang, Puerto Galera, Oriental
Mindoro, and (2) the assignment of Cross contract of lease
on the land where the house stood. The sale of the beach
house and the assignment of the lease right would be in
the name of petitioner Victoria Moreo-Lentfer, but the total
consideration of 220,000 Deutschmarks (DM) would be
paid by respondent Hans Jurgen Wolff. A promissory note
was executed by said respondent in favor of petitioner
Cross.
According to respondent, however, the Lentfer spouses
were his confidants who held in trust for him, a time
deposit account in the amount of DM 200,000[4] at Solid
Bank Corporation. Apprised of his interest to own a house
along a beach, the Lentfer couple urged him to buy
petitioner Cross beach house and lease rights in Puerto
Galera. Respondent agreed and through a bank-to-bank
transaction, he paid Cross the amount of DM 221,700[5]
as total consideration for the sale and assignment of the
lease rights. However, Cross, Moreo-Lentfer and Atty.
Dimayacyac surreptitiously executed a deed of sale
whereby the beach house was made to appear as sold to
Moreo-Lentfer for only P100,000.[6] The assignment of the
lease right was likewise made in favor of Moreo-Lentfer.[7]
Upon learning of this, respondent filed a Complaint
docketed as Civil Case No. R-4219 with the lower court for
annulment of sale and reconveyance of property with
damages and prayer for a writ of attachment.
After trial, the court a quo dismissed the complaint for
failure to establish a cause of action, thus:
ACCORDINGLY, judgment is hereby rendered in favor of
the defendants and against the plaintiff, dismissing the
complaint for the reason that plaintiff has not established a
cause of action against the defendants with costs against
the plaintiff.
SO ORDERED.[8]
Aggrieved, respondent appealed to the Court of
Appeals.[9]
But in its Decision[10] dated June 14, 2001, the appellate
court reversed the decision of the trial court, thus:
WHEREFORE, the judgment appealed from is hereby
REVERSED and a new one is hereby rendered, as
follows:
1. Defendants-appellees spouses Genter[11] and Victoria
Moreno-Lentfer and John Craigie Young Cross are jointly
and severally held liable to pay plaintiff-appellant the
amount of 220,000.00 DM German Currency or its present
peso equivalent plus legal interest starting from March 8,
1993, the date of the last final demand letter;
2. The above defendants-appellees are jointly and
severally held liable to pay plaintiff-appellant the amount of
P200,000.00 Philippine Currency, representing the amount
of expenses incurred in the repairs and maintenance of the
property plus legal interest starting from October 28, 1992,
the date the amount was received by defendant-appellee
Victoria Moreno-Lentfer; and
3. The case against defendant-appellee Rodrigo
Dimayacyac is dismissed.
SO ORDERED.[12]
Hence, the instant petition raising the following issues:
1) DOES ARTICLE 1238 OF THE NEW CIVIL CODE
APPLY IN THE CASE AT BAR?[13]
2) DOES THE PRINCIPLE OF SOLUTIO INDEBITI
UNDER ARTICLE 2154 OF THE NEW CIVIL CODE, THE
PRINCIPLE OF JUSTICE AND EQUITY, APPLY IN THE
CASE AT BAR?[14]
Article 1238 of the New Civil Code provides:
ART. 1238. Payment made by a third person who does not
intend to be reimbursed by the debtor is deemed to be a
donation, which requires the debtors consent. But the
payment is in any case valid as to the creditor who has
accepted it.
Petitioners posit that in a contract of sale, the seller is the
creditor, who in this case is Cross, and the buyer is the
debtor, namely Moreo-Lentfer in this case. Respondent is
the third person who paid the consideration on behalf of
Moreo-Lentfer, the debtor. Petitioners insist that
respondent did not intend to be reimbursed for said
payment and debtor Moreo-Lentfer consented to it. Thus,
by virtue of Article 1238, payment by respondent is
considered a donation.
Respondent counters that Article 1238 bears no relevance
to the case since it applies only to contracts of loan where
payment is made by a third person to a creditor in favor of
a debtor of a previously incurred obligation. The instant
case, in contrast, involves a contract of sale where no real
creditor-debtor relationship exists between the parties.
Further, respondent argues his conduct never at any time
intimated any intention to donate in favor of petitioner
Moreo-Lentfer.
Moreover, respondent contends that the alleged donation
is void for non-compliance with the formal requirements
set by law. Citing Article 748[15] of the New Civil Code,
respondent avers that since the amount involved exceeds
P5,000, both the donation and its acceptance must be in
writing for the donation to be valid. Respondent further
says there was no simultaneous delivery of the money as
required by Art. 748 for instances of oral donation.
Respondent also calls our attention to the sudden change
in petitioners theory. Previously, before the Court of
Appeals, the petitioners claimed that what was donated
were the subject properties. But before this Court, they
insist that what was actually donated was the money used
in the purchase of subject properties.
On this point, we find petitioners stance without merit.
Article 1238 of the New Civil Code is not applicable in this
case.
Trying to apply Art. 1238 to the instant case is like forcing
a square peg into a round hole. The absence of intention
to be reimbursed, the qualifying circumstance in Art. 1238,
is negated by the facts of this case. Respondents acts
contradict any intention to donate the properties to
petitioner Moreo-Lentfer. When respondent learned that
the sale of the beach house and assignment of the lease
right were in favor of Victoria Moreo-Lentfer, he
immediately filed a complaint for annulment of the sale and
reconveyance of the property with damages and prayer for
a writ of attachment. Respondent Moreo-Lentfer at that
time claimed the beach house, together with the lease
right, was donated to her. Noteworthy, she had changed
her theory, to say that it was only the money used in the
purchase that was donated to her. But in any event,
respondent actually stayed in the beach house in the
concept of an owner and shouldered the expenses for its
maintenance and repair amounting to P200,000 for the
entire period of his stay for ten weeks. Moreover, the
appellate court found that respondent is not related or
even close to the Lentfer spouses. Obviously, respondent
had trusted the Lentfer spouses to keep a time deposit
account for him with Solid Bank for the purpose of making
the purchase of the cited properties.
Petitioner Moreo-Lentfers claim of either cash or property
donation rings hollow. A donation is a simple act of
liberality where a person gives freely of a thing or right in
favor of another, who accepts it.[16] But when a large
amount of money is involved, equivalent to P3,297,800,
based on the exchange rate in the year 1992, we are
constrained to take the petitioners claim of liberality of the
donor with more than a grain of salt.
Petitioners could not brush aside the fact that a donation
must comply with the mandatory formal requirements set
forth by law for its validity. Since the subject of donation is
the purchase money, Art. 748 of the New Civil Code is
applicable. Accordingly, the donation of money equivalent
to P3,297,800 as well as its acceptance should have been
in writing. It was not. Hence, the donation is invalid for
non-compliance with the formal requisites prescribed by
law.
Anent the second issue, petitioners insist that since the
deed of sale in favor of Moreo-Lentfer was neither
identified or marked nor formally offered in evidence, the
same cannot be given any evidentiary value. They add
that since it was not annulled, it remains valid and binding.
Hence, petitioners argue, the principle of solutio indebiti
under Article 2154[17] of the New Civil Code should be the
applicable provision in the resolution of this controversy. If
so, the parties unjustly enriched would be liable to the
other party who suffered thereby by being correspondingly
injured or damaged.
The quasi-contract of solutio indebiti harks back to the
ancient principle that no one shall enrich himself unjustly at
the expense of another.[18] It applies where (1) a payment
is made when there exists no binding relation between the
payor, who has no duty to pay, and the person who
received the payment, and (2) the payment is made
through mistake, and not through liberality or some other
cause.[19]
In the instant case, records show that a bank-to-bank
payment was made by respondent Wolff to petitioner
Cross in favor of co-petitioner Moreo-Lentfer. Respondent
was under no duty to make such payment for the benefit of
Moreo-Lentfer. There was no binding relation between
respondent and the beneficiary, Moreo-Lentfer. The
payment was clearly a mistake. Since Moreo-Lentfer
received something when there was no right to demand it,
she had an obligation to return it.[20]
Following Article 22[21] of the New Civil Code, two
conditions must concur to declare that a person has
unjustly enriched himself or herself, namely: (a) a person
is unjustly benefited, and (b) such benefit is derived at the
expense of or to the damage of another.[22]
We are convinced petitioner Moreo-Lentfer had been
unjustly enriched at the expense of respondent. She
acquired the properties through deceit, fraud and abuse of
confidence. The principle of justice and equity does not
work in her favor but in favor of respondent Wolff.
Whatever she may have received by mistake from and at
the expense of respondent should thus be returned to the
latter, if the demands of justice are to be served.
The Court of Appeals held that respondent was not entitled
to the reconveyance of the properties because, inter alia,
of the express prohibition under the Constitution[23] that
non-Filipino citizens cannot acquire land in the Philippines.
We note, however, that subject properties consist of a
beach house and the lease right over the land where the
beach house stands. The constitutional prohibition against
aliens from owning land in the Philippines has no actual
bearing in this case. A clear distinction exists between the
ownership of a piece of land and the mere lease of the
land where the foreigners house stands. Thus, we see no
legal reason why reconveyance could not be allowed.
Since reconveyance is the proper remedy, respondents
expenses for the maintenance and repair of the beach
house is for his own account as owner thereof. It need not
be an issue for now.
* Also Moreno-Lentfer in the Records.
[1] Rollo, pp. 21-28. Penned by Associate Justice Juan Q.
Enriquez, Jr., with Associate Justices Presbitero J.
Velasco, Jr., and Bienvenido L. Reyes concurring.
[2] Id. at 29-30.
[3] Id. at 31-37.
[4] Id. at 108-109.
If the value of the personal property donated exceeds five
thousand pesos, the donation and the acceptance shall be
made in writing. Otherwise, the donation shall be void.
[16] Civil Code, Article 725.
[17] ART. 2154. If something is received when there is no
right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises.
[18] Power Commercial and Industrial Corp. v. Court of
Appeals, G.R. No. 119745, 20 June 1997, 274 SCRA 597,
613.

However, we deem it just and equitable under the
circumstances to award respondent nominal damages in
the amount of P50,000,[24] pursuant to Articles 2221[25]
and 2222[26] of the New Civil Code, since respondents
property right has been invaded through defraudation and
abuse of confidence committed by petitioners.
WHEREFORE, the petition is hereby DENIED. The
assailed Decision, dated June 14, 2001 and Resolution
dated February 22, 2002, of the Court of Appeals in CA-
G.R. CV No. 48272 reversing the lower courts judgment
are AFFIRMED with MODIFICATION. Petitioners--
particularly the spouses Gunter Lentfer and Victoria
Moreo-Lentfer--are hereby ORDERED to:
1. RECONVEY to respondent Hans Jurgen Wolff the
beach house and the lease right over the land on which it
is situated; and
2. PAY respondent Wolff nominal damages in the amount
of P50,000.00.
Costs against petitioners.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio,
and Azcuna, JJ., concur.
[5] Id. at 114-115. [19] National Commercial Bank of Saudi Arabia v. Court of
Appeals, G.R. No. 124267, 31 January 2003, 396 SCRA
[6] Id. at 113. 541, 547.
[7] Id. at 110. [20] See Citibank, N.A. v. Court of Appeals, G.R. No.
107434, 10 October 1997, 280 SCRA 459, 475.
[8] Id. at 37.
[21] ART. 22. Every person who through an act of
[9] See Id. at 22-23, for assigned errors. performance by another, or any other means, acquires or
comes into possession of something at the expense of the
[10] Id. at 21-28. latter without just or legal ground, shall return the same to
him.
[11] Gunter in the Records.
[22] MC Engineering, Inc. v. Court of Appeals, G.R. No.
[12] Rollo, p. 27. 104047, 3 April 2002, 380 SCRA 116, 138.
[13] Id. at 12. [23] Sec. 7 in relation to Sec. 3 of Article XII.
[14] Id. at 15. Sec. 7. Save in cases of hereditary succession, no private
lands shall be transferred or conveyed except to
[15] ART. 748. The donation of a movable may be made individuals, corporations, or associations qualified to
orally or in writing. acquire or hold lands of the public domain.
An oral donation requires the simultaneous delivery of the Sec. 3. Lands of the public domain are classified into
thing or of the document representing the right donated. agricultural, forest or timber, mineral lands, and national
parks. Agricultural lands of the public domain may be
further classified by law according to the uses to which
they may be devoted. Alienable lands of the public domain
shall be limited to agricultural lands. Private corporations
or associations may not hold such alienable lands of the
public domain except by lease, for a period not exceeding
twenty-five years, renewable for not more than twenty-five
years, and not to exceed one thousand hectares in area.
Citizens of the Philippines may lease not more than five
hundred hectares, or acquire not more than twelve
hectares thereof by purchase, homestead or grant.

Taking into account the requirements of conservation,

ecology, and development, and subject to the
requirements of agrarian reform, the Congress shall
determine, by law, the size of lands of the public domain
which may be acquired, developed, held, or leased and
the conditions therefor.

[24] See Almeda v. Cario, G.R. No. 152143, 13 January

2003, 395 SCRA 144.

[25] ART. 2221. Nominal damages are adjudicated in

order that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.

[26] ART. 2222. The court may award nominal damages in

every obligation arising from any source enumerated in
Article 1157, or in every case where any property right has
been invaded.
G.R. No. 124267 January 31, 2003
NATIONAL COMMERCIAL BANK OF SAUDI ARABIA,
petitioner,
vs.
COURT OF APPEALS and PHILIPPINE BANKING
CORPORATION, respondents.
CARPIO MORALES, J.:
May the unrippled doctrine that a motion filed without the
requisite notice of hearing is a useless piece of paper with
no legal effect1 be, under the facts of the case, relaxed?
Petitioner National Commercial Bank of Saudi Arabia
(NCBSA) filed a case against respondent Philippine
Banking Corporation (PBC) in the Regional Trial Court
(RTC) of Makati on December 4, 1985 to recover "the
duplication in the payment of the proceeds of a letter of
credit [NCBSA] has issued . . . brought about by the fact
that both the head office and the Makati branch of [PBC,
the negotiating bank,] collected the proceeds of the letter
of credit."2
On August 24, 1993, the RTC of Makati rendered a
decision in favor of NCBSA.3 PBC received a copy of the
decision on September 3, 19934 and on the 12th day of
the period of appeal or on September 15, 1993, it filed a
Motion for Reconsideration.5 The motion, however, did not
contain a notice of hearing.6
On September 21, 1993, NCBSA filed a Manifestation
pointing out that PBC's Motion for Reconsideration did not
contain any notice of hearing.7
On September 27, 1993, NCBSA filed a Motion for Writ of
Execution of the decision of the trial court.8 On even date,
PBC filed a Motion to Set "Motion for Reconsideration" for
Hearing9 alleging as follows:
xxx xxx xxx
2. The Motion for Reconsideration raised both
questions of facts and law arising from the erroneous
findings made by the Honorable Court in the said Decision;
3. In order that defendant can fully amplify and
expound on the issues raised on the said motions, there is
a need to set the Motion for Hearing.
xxx xxx xxx10
NCBSA opposed this motion vigorously, it praying that it
be stricken off the records.11
By Order of February 1, 1994, the trial court struck from
the records of the case PBC's Motion for Reconsideration
of its decision and granted NCBSA's Motion for Writ of
Execution.12
PBC filed a Motion for Reconsideration of said Order of
February 1, 1994, this time alleging that PBC's failure to
comply with the 3-day notice rule "was essentially an
honest mistake or oversight of counsel."13 This motion
was just as vigorously opposed by NCBSA.14
By Order of March 2, 1994, the trial court denied PBC's
Motion for Reconsideration of its Order of February 1,
1994, finding that "[t]here are no compelling reasons to
warrant a liberal construction of the rules on Motions."15
PBC assailed before the Court of Appeals via Petition for
Certiorari the trial court's March 2, 1994 Order.16
By Decision of February 27, 1995, the Court of Appeals
dismissed PBC's Petition for Certiorari.17 On PBC's
Motion for Reconsideration, however, the Court of
Appeals, by Amended Decision of March 8, 1996, set
aside its February 27, 1995 Decision and granted PBC's
Petition for Certiorari and directed the trial court to resolve
PBC's Motion for Reconsideration (of the trial court's
August 24, 1993 Decision).18
Justifying its setting aside of its February 27, 1995
Decision, the Court of Appeals held in its Amended
Decision:
. . . [T]o deny petitioner's motion for reconsideration on the
ground of failure to contain a notice of hearing is too harsh
an application of procedural rules especially so when
petitioner has filed a motion to set the motion for
reconsideration for hearing and had furnished private
respondent a copy of the motion, a fact which is not denied
by the latter.19
NCBSA thus comes to this Court assailing the Court of
Appeals' Amended Decision.
The petition is impressed with merit.
The requirement of notice under Sections 4 and 5, Rule 15
in connection with Section 2, Rule 37 of the Revised Rules
of Court20 is mandatory. The absence of a notice of
hearing is fatal and, in cases of motions to reconsider a
decision, the running of the period to appeal is not tolled
by their filing or pendency.21 In the case at bar, it is not
disputed that PBC's Motion for Reconsideration of the
August 24, 1993 decision of the trial court did not contain
the requisite notice of hearing.
In an attempt to cure the defect, PBC filed on Motion to
Set the "Motion for Reconsideration" for Hearing on
September 27, 1993, or 9 days after the period for filing
the Notice of Appeal had expired.
The motion for reconsideration, however, being fatally
defective for lack of notice of hearing, cannot be cured by
a belated filing of a notice of hearing.22 More so in the
case at bar where the Motion to Set the "Motion for
Reconsideration" was filed after the expiration of the
period for filing an appeal.
NCBSA thus calls for the strict application of our rules of
procedure to avoid further delays in the disposition of the
case,23 which has remained pending for more than 17
years.
PBC, on the other hand, invokes a just and fair
determination of the case.24
PBC's appeal for justice and fairness does not lie,
however, there being nothing on record to show that it has
been a victim of injustice or unfairness. On the contrary, as
found by the Court of Appeals in its original decision, PBC
had the opportunity to participate in the trial and present its
defense and had actually made full use of the remedies
under our rules of procedure.25 More importantly, there
was no oppressive exercise of judicial authority that would
call for the annulment of the trial court's resolutions.26
The finality of the decision of the trial court cannot be set
aside purely on the basis of liberality for while it is true that
a litigation is not a game of technicalities, this does not
mean that the Rules of Court may be ignored at will and at
random. Only for the most persuasive of reasons should
the court allow a relaxation of its procedural rules.27
PBC, however, has not advanced any persuasive or
exceptional reason in failing to set its Motion for
Reconsideration of the trial court's decision for hearing. In
fact, in its Motion to Set "Motion for Reconsideration" for
Hearing, PBC was completely silent on why it did not set
the Motion for Reconsideration for hearing. It just alleged
that, as earlier quoted, "[i]n order that defendant can fully
amplify and expound on the issues raised on said motion,
there is a need to set the Motion [for Reconsideration] for
Hearing."28 This allegation conveys that, if there was no
need for PBC to "fully amplify and expound on the issues
raised" in the Motion for Reconsideration, no setting for
hearing of said motion was needed. But as earlier stated,
the requirement of notice in this kind of motion is
mandatory. The Motion for Reconsideration thus remained
a mere scrap of paper which deserved no consideration.
But assuming that PBC had presented exceptional reason
or excuse for its failure to comply with the notice
requirement, the Motion for Reconsideration would be
denied on the ground that it is pro forma.
In its Rejoinder29 to NCBSA's Reply to Comment to the
petition at bar, PBC alleged that it was, in its Motion for
Reconsideration of the trial court's decision, raising
"serious questions involving findings of fact and
conclusions of law by the trial court," thus "questioning the
decision as being contrary to law and the evidence on
record."30 A reading of the records will show, however,
that the same three issues raised by PBC during the trial
— prescription, laches and lack of double payment — are
what are being raised in its Motion for Reconsideration of
the decision of the trial court.
PBC's Motion for Reconsideration of the trial court's
decision was thus "in substance . . . a reiteration of
reasons and arguments"31 raised before the trial court for
the dismissal of NCBSA's complaint, which reasons and
arguments had already been considered and resolved
against it on the merits by the trial court. The Motion for
Reconsideration was thus merely pro forma.
Technicality aside, en passant, on the merits of PBC's
Motion for Reconsideration of the trial court's decision, the
trial court did not err in brushing aside its main defense of
prescription — that NCBSA's complaint is "based on the
quasi-contract of solutio indebiti,"32 hence, it prescribes in
six years and, therefore, when NCBSA filed its complaint
nine years after the cause of action arose, it had
prescribed.
Solutio indebiti applies where: (1) a payment is made
when there exists no binding relation between the payor,
who has no duty to pay, and the person who received the
payment, and (2) the payment is made through mistake,
and not through liberality or some other cause33 In the
case at bar, PBC and NCBSA were bound by their
contract, the letter of credit, under which NCBSA obliged
itself to pay PBC, subject to compliance by the latter with
certain conditions provided therein. As such, the cause of
action was based on a contract, and the prescriptive
period is ten,34 not six years.
Even PBC's defense of laches is bereft of merit, the cause
of action not having yet prescribed at the time NCBSA's
complaint was filed.
Courts should never apply the doctrine of laches earlier
than the expiration of time limited for the commencement
of actions at law.35
And as to PBC's allegation that the trial court erred in
finding the existence of double payment, suffice it to state
that PBC, while denying that there was double payment,
itself admitted having received a second set of payment for
the same amount covered by the letter of credit. Thus, in
its petition for certiorari36 filed with the Court of Appeals, it
alleged, quoted verbatim:
The second set for the same amount, although it was
received and credited to [PBC's] account with Chemical
Bank New York, were to be and subsequently transmitted
to the account of Labroco (International, Philippines) . . .37
(Emphasis supplied.)
WHEREFORE, the instant petition for review on certiorari
is GRANTED. The Amended Decision of the Court of
Appeals dated March 8, 1996 is SET ASIDE and the
Resolutions of the Regional Trial Court declaring the
Motion for Reconsideration filed by the Philippine Banking
Corporation as pro forma is REINSTATED.
SO ORDERED.
Puno, Panganiban, Sandoval-Gutierrez, and Corona JJ.,
concur.
Footnotes
1 See Vlason Enterprises Corp. v. Court of Appeals, 310
SCRA 26 (1999); Tan v. Court of Appeals, 295 SCRA 755
(1998); De la Peña v. De la Peña, 258 SCRA 298 (1996);
MERALCO v. La Campana Food Products, Inc., 247
SCRA 77 (1995); Goldloop Properties, Inc. v. Court of
Appeals, 212 SCRA 498 (1992); Tamargo v. Court of
Appeals, 209 SCRA 519 (1992); Pojas v. Gozo-Da[d]ole,
192 SCRA 575 (1990); New Japan Motors, Inc. v.
Perucho, 74, SCRA 14 (1976); Manila Surety and Fidelity
Co., Inc. v. Bath Construction and Co., 14 SCRA 435
(1965).
18 Id. at 14, 256–260.
37 Id. at 149, penultimate paragraph.
19 Id. at 14, 256–257.
20 Restated in the same Rule and Section numbers in the
1997 Rules of Civil Procedure.
21 Bank of the Philippine Islands v. Far East Molasses,
198 SCRA 689, 698–699 (1991).

2 Rollo, p. 11. 22 People v. Court of Appeals, 296 SCRA 418, 426–427

(1998).
3 Id. at 11, 303–316.
23 Rollo at 23.
4 Id. at 11.
24 Id. at 323.
5 Id. at 11, 28–38.
25 Id. at 217.
6 Id. at 11, 99, 213.
26 Id. at 218.
7 Id. at 39–40.
27 Limpot v. Court of Appeals, 170 SCRA 367, 377 (1989).
8 Id. at 12, 41–44.
28 Rollo at 45.
9 Id. at 12, 45–46.
29 Id. at 323–330.
10 Id. at 45.
30 Rollo at 326.
11 Id. at 12, 47–49.
31 Ibid.
12 Id. at 12–13, 98–99.
32 CA Rollo at 85.
13 Id. at 13, 51, 104.
33 Power Commercial and Industrial Corp. v. Court of
14 Id. at 13, 112–116. Appeals, 274 SCRA 597, 612 (1997).

15 Id. at 125. 34 Article 1144, Civil Code.

16 Id. at 13, 126–166. 35 Imperial Valley Shipping Agency v. NLRC, 200 SCRA
178,184 (1991).
17 Id. at 14, 211–219.
36 Rollo at 126–166.
G.R. No. 119745 June 20, 1997
POWER COMMERCIAL AND INDUSTRIAL
CORPORATION, petitioner,
vs.
COURT OF APPEALS, SPOUSES REYNALDO and
ANGELITA R. QUIAMBAO and PHILIPPINE NATIONAL
BANK, respondents.
PANGANIBAN, J.:
Is the seller's failure to eject the lessees from a lot that is
the subject of a contract of sale with assumption of
mortgage a ground (1) for rescission of such contract and
(2) for a return by the mortgagee of the amortization
payments made by the buyer who assumed such
mortgage?
Petitioner posits an affirmative answer to such question in
this petition for review on certiorari of the March 27, 1995
Decision1 of the Court of Appeals, Eighth Division, in CA-
G.R. CV Case No. 32298 upholding the validity of the
contract of sale with assumption of mortgage and
absolving the mortgagee from the liability of returning the
mortgage payments already made.2
The Facts
Petitioner Power Commercial & Industrial Development
Corporation, an industrial asbestos manufacturer, needed
a bigger office space and warehouse for its products. For
this purpose, on January 31, 1979, it entered into a
contract of sale with the spouses Reynaldo and Angelita
R. Quiambao, herein private respondents. The contract
involved a 612-sq. m. parcel of land covered by Transfer
Certificate of Title No. S-6686 located at the corner of
Bagtican and St. Paul Streets, San Antonio Village, Makati
City. The parties agreed that petitioner would pay private
respondents P108,000.00 as down payment, and the
balance of P295,000.00 upon the execution of the deed of
transfer of the title over the property. Further, petitioner
assumed, as part of the purchase price, the existing
mortgage on the land. In full satisfaction thereof, he paid
P79,145.77 to Respondent Philippine National Bank
("PNB" for brevity).
On June 1, 1979, respondent spouses mortgaged again
said land to PNB to guarantee a loan of P145,000.00,
P80,000.00 of which was paid to respondent spouses.
Petitioner agreed to assume payment of the loan.
On June 26, 1979, the parties executed a Deed of
Absolute Sale With Assumption of Mortgage which
contained the following terms and conditions:3
That for and in consideration of the sum of Two Hundred
Ninety-Five Thousand Pesos (P295,000.00) Philippine
Currency, to us in hand paid in cash, and which we hereby
acknowledge to be payment in full and received to our
entire satisfaction, by POWER COMMERCIAL AND
INDUSTRIAL DEVELOPMENT CORPORATION, a 100%
Filipino Corporation, organized and existing under and by
virtue of Philippine Laws with offices located at 252-C Vito
Cruz Extension, we hereby by these presents SELL,
TRANSFER and CONVEY by way of absolute sale the
above described property with all the improvements
existing thereon unto the said Power Commercial and
Industrial Development Corporation, its successors and
assigns, free from all liens and encumbrances.
We hereby certify that the aforesaid property is not subject
to nor covered by the provisions of the Land Reform Code
— the same having no agricultural lessee and/or tenant.
We hereby also warrant that we are the lawful and
absolute owners of the above described property, free
from any lien and/or encumbrance, and we hereby agree
and warrant to defend its title and peaceful possession
thereof in favor of the said Power Commercial and
Industrial Development Corporation, its successors and
assigns, against any claims whatsoever of any and all third
persons; subject, however, to the provisions hereunder
provided to wit:
That the above described property is mortgaged to the
Philippine National Bank, Cubao, Branch, Quezon City for
the amount of one hundred forty-five thousand pesos,
Philippine, evidenced by document No. 163, found on
page No. 34 of Book No. XV, Series of 1979 of Notary
Public Herita
L. Altamirano registered with the Register of Deeds of
Pasig (Makati), Rizal . . . ;
That the said Power Commercial and Industrial
Development Corporation assumes to pay in full the entire
amount of the said mortgage above described plus interest
and bank charges, to the said mortgagee bank, thus
holding the herein vendor free from all claims by the said
bank;
That both parties herein agree to seek and secure the
agreement and approval of the said Philippine National
Bank to the herein sale of this property, hereby agreeing to
abide by any and all requirements of the said bank,
agreeing that failure to do so shall give to the bank first lieu
(sic) over the herein described property.
On the same date, Mrs. C.D. Constantino, then General
Manager of petitioner-corporation, submitted to PNB said
deed with a formal application for assumption of
mortgage.4
On February 15, 1980, PNB informed respondent spouses
that, for petitioner's failure to submit the papers necessary
for approval pursuant to the former's letter dated January
15, 1980, the application for assumption of mortgage was
considered withdrawn; that the outstanding balance of
P145,000.00 was deemed fully due and demandable; and
that said loan was to be paid in full within fifteen (15) days
from notice.5
Petitioner paid PNB P41,880.45 on June 24, 1980 and
P20,283.14 on December 23, 1980, payments which were
to be applied to the outstanding loan. On December 23,
1980, PNB received a letter from petitioner which reads:6

With regard to the presence of the people who are
currently in physical occupancy of the (l)ot . . . it is our
desire as buyers and new owners of this lot to make use of
this lot for our own purpose, which is why it is our desire
and intention that all the people who are currently
physically present and in occupation of said lot should be
removed immediately.
For this purpose we respectfully request that . . . our
assumption of mortgage be given favorable consideration,
and that the mortgage and title be transferred to our name
so that we may undertake the necessary procedures to
make use of this lot ourselves.
It was our understanding that this lot was free and clear of
problems of this nature, and that the previous owner would
be responsible for the removal of the people who were
there. Inasmuch as the previous owner has not been able
to keep his commitment, it will be necessary for us to take
legal possession of this lot inorder (sic) to take physical
possession.
On February 19, 1982, PNB sent petitioner a letter as
follows:7
(T)his refers to the loan granted to Mr. Reynaldo
Quiambao which was assumed by you on June 4, 1979 for
P101,500.00. It was last renewed on December 24, 1980
to mature on June 4, 1981.
A review of our records show that it has been past due
from last maturity with interest arrearages amounting to
P25,826.08 as of February 19, 1982. The last payment
received by us was on December 24, 1980 for P20,283.
14. In order to place your account in current form, we
request you to remit payments to cover interest, charges,
and at least part of the principal.
On March 17, 1982, petitioner filed Civil Case No. 45217
against respondent spouses for rescission and damages
before the Regional Trial Court of Pasig, Branch 159.
Then, in its reply to PNB's letter of February 19, 1982,
petitioner demanded the return of the payments it made on
the ground that its assumption of mortgage was never
approved. On May 31, 1983,8 while this case was
pending, the mortgage was foreclosed. The property was
subsequently bought by PNB during the public auction.
Thus, an amended complaint was filed impleading PNB as
party defendant.
On July 12, 1990, the trial court9 ruled that the failure of
respondent spouses to deliver actual possession to
petitioner entitled the latter to rescind the sale, and in view
of such failure and of the denial of the latter's assumption
of mortgage, PNB was obliged to return the payments
made by the latter. The dispositive portion of said decision
states: 10
IN VIEW OF ALL THE FOREGOING, the Court hereby
renders judgment in favor of plaintiff and against
defendants:
(1) Declaring the rescission of the Deed of Sale with
Assumption of Mortgage executed between plaintiff and
defendants Spouses Quiambao, dated June 26, 1979;
(2) Ordering defendants Spouses Quiambao to
return to plaintiff the amount of P187,144.77 (P108,000.00
plus P79,145.77) with legal interest of 12% per annum
from date of filing of herein complaint, that is, March 17,
1982 until the same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the
amount of P62,163.59 (P41,880.45 and P20,283.14) with
12% interest thereon from date of herein judgment until the
same is fully paid.
No award of other damages and attorney's fees, the same
not being warranted under the facts and circumstances of
the case.
The counterclaim of both defendants spouses Quiambao
and PNB are dismissed for lack of merit.
No pronouncement as to costs.
SO ORDERED.
On appeal by respondent-spouses and PNB, Respondent
Court of Appeals reversed the trial court. In the assailed
Decision, it held that the deed of sale between respondent
spouses and petitioner did not obligate the former to eject
the lessees from the land in question as a condition of the
sale, nor was the occupation thereof by said lessees a
violation of the warranty against eviction. Hence, there was
no substantial breach to justify the rescission of said
contract or the return of the payments made. The
dispositive portion of said Decision reads: 11
WHEREFORE, the Decision appealed from is hereby
REVERSED and the complaint filed by Power Commercial
and Industrial Development Corporation against the
spouses Reynaldo and Angelita Quiambao and the
Philippine National Bank is DISMISSED. No costs.
Hence, the recourse to this Court.
Issues
Petitioner contends that: (1) there was a substantial
breach of the contract between the parties warranting
rescission; and (2) there was a "mistake in payment" made
by petitioner, obligating PNB to return such payments. In
its Memorandum, it specifically assigns the following errors
of law on the part of Respondent Court: 12
A. Respondent Court of Appeals gravely erred in
failing to consider in its decision that a breach of implied
warranty under Article 1547 in relation to Article 1545 of
the Civil Code applies in the case-at-bar.
B. Respondent Court of Appeals gravely erred in
failing to consider in its decision that a mistake in payment
giving rise to a situation where the principle of solutio
indebiti applies is obtaining in the case-at-bar.

The Court's Ruling
The petition is devoid of merit. It fails to appreciate the
difference between a condition and a warranty and the
consequences of such distinction.
Conspicuous Absence of an Imposed Condition
The alleged "failure" of respondent spouses to eject the
lessees from the lot in question and to deliver actual and
physical possession thereof cannot be considered a
substantial breach of a condition for two reasons: first,
such "failure" was not stipulated as a condition — whether
resolutory or suspensive — in the contract; and second, its
effects and consequences were not specified either. 13
The provision adverted to by petitioner does not impose a
condition or an obligation to eject the lessees from the lot.
The deed of sale provides in part: 14
We hereby also warrant that we are the lawful and
absolute owners of the above described property, free
from any lien and/or encumbrance, and we hereby agree
and warrant to defend its title and peaceful possession
thereof in favor of the said Power Commercial and
Industrial Development Corporation, its successors and
assigns, against any claims whatsoever of any and all third
persons; subject, however, to the provisions hereunder
provided to wit:
By his own admission, Anthony Powers, General Manager
of petitioner-corporation, did not ask the corporation's
lawyers to stipulate in the contract that Respondent
Reynaldo was guaranteeing the ejectment of the
occupants, because there was already a proviso in said
deed of sale that the sellers were guaranteeing the
peaceful possession by the buyer of the land in question.
15 Any obscurity in a contract, if the above-quoted
provision can be so described, must be construed against
the party who caused it. 16 Petitioner itself caused the
obscurity because it omitted this alleged condition when its
lawyer drafted said contract.
If the parties intended to impose on respondent spouses
the obligation to eject the tenants from the lot sold, it
should have included in the contract a provision similar to
that referred to in Romero vs. Court of Appeals, 17 where
the ejectment of the occupants of the lot sold by private
respondent was the operative act which set into motion the
period of petitioner's compliance with his own obligation,
i.e., to pay the balance of the purchase price. Failure to
remove the squatters within the stipulated period gave the
other party the right to either refuse to proceed with the
agreement or to waive that condition of ejectment in
consonance with Article 1545 of the Civil Code. In the case
cited, the contract specifically stipulated that the ejectment
was a condition to be fulfilled; otherwise, the obligation to
pay the balance would not arise. This is not so in the case
at bar.
Absent a stipulation therefor, we cannot say that the
parties intended to make its nonfulfillment a ground for
rescission. If they did intend this, their contract should
have expressly stipulated so. In Ang vs. C.A.,18 rescission
was sought on the ground that the petitioners had failed to
fulfill their obligation "to remove and clear" the lot sold, the
performance of which would have given rise to the
payment of the consideration by private respondent.
Rescission was not allowed, however, because the breach
was not substantial and fundamental to the fulfillment by
the petitioners of the obligation to sell.
As stated, the provision adverted to in the contract pertains
to the usual warranty against eviction, and not to a
condition that was not met.
The terms of the contract are so clear as to leave no room
for any other interpretation. 19
Furthermore, petitioner was well aware of the presence of
the tenants at the time it entered into the sales transaction.
As testified to by Reynaldo, 20 petitioner's counsel during
the sales negotiation even undertook the job of ejecting
the squatters. In fact, petitioner actually filed suit to eject
the occupants. Finally, petitioner in its letter to PNB of
December 23, 1980 admitted that it was the "buyer(s) and
new owner(s) of this lot."
Effective Symbolic Delivery
The Court disagrees with petitioner's allegation that the
respondent spouses failed to deliver the lot sold. Petitioner
asserts that the legal fiction of symbolic delivery yielded to
the truth that, at the execution of the deed of sale, transfer
of possession of said lot was impossible due to the
presence of occupants on the lot sold. We find this
misleading.
Although most authorities consider transfer of ownership
as the primary purpose of sale, delivery remains an
indispensable requisite as our law does not admit the
doctrine of transfer of property by mere consent. 21 The
Civil Code provides that delivery can either be (1) actual
(Article 1497) or (2) constructive (Articles 1498-1501).
Symbolic delivery (Article 1498), as a species of
constructive delivery, effects the transfer of ownership
through the execution of a public document. Its efficacy
can, however, be prevented if the vendor does not
possess control over the thing sold, 22 in which case this
legal fiction must yield to reality.
The key word is control, not possession, of the land as
petitioner would like us to believe. The Court has
consistently held that: 23
. . . (I)n order that this symbolic delivery may produce the
effect of tradition, it is necessary that the vendor shall have
had such control over the thing sold that . . . its material
delivery could have been made. It is not enough to confer
upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control.
When there is no impediment whatever to prevent the
thing sold passing into the tenancy of the purchaser by the
sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the
purchaser cannot have the enjoyment and material
tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will,
then fiction yields to reality — the delivery has not been
effected.
Considering that the deed of sale between the parties did
not stipulate or infer otherwise, delivery was effected
through the execution of said deed. The lot sold had been
placed under the control of petitioner; thus, the filing of the
ejectment suit was subsequently done. It signified that its
new owner intended to obtain for itself and to terminate
said occupants' actual possession thereof. Prior physical
delivery or possession is not legally required and the
execution of the deed of sale is deemed equivalent to
delivery. 24 This deed operates as a formal or symbolic
delivery of the property sold and authorizes the buyer to
use the document as proof of ownership. Nothing more is
required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is its
failure to establish any breach of the warranty against
eviction. Despite its protestation that its acquisition of the
lot was to enable it to set up a warehouse for its asbestos
products and that failure to deliver actual possession
thereof defeated this purpose, still no breach of warranty
against eviction can be appreciated because the facts of
the case do not show that the requisites for such breach
have been satisfied. A breach of this warranty requires the
concurrence of the following circumstances:
(1) The purchaser has been deprived of the whole
or part of the thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to
the sale made by the vendor; and
(4) The vendor has been summoned and made co-
defendant in the suit for eviction at the instance of the
vendee. 25
In the absence of these requisites, a breach of the
warranty against eviction under Article 1547 cannot be
declared.
Petitioner argues in its memorandum that it has not yet
ejected the occupants of said lot, and not that it has been
evicted therefrom. As correctly pointed out by Respondent
Court, the presence of lessees does not constitute an
encumbrance of the land, 26 nor does it deprive petitioner
of its control thereof.
We note, however, that petitioner's deprivation of
ownership and control finally occurred when it failed and/or
discontinued paying the amortizations on the mortgage,
causing the lot to be foreclosed and sold at public auction.
But this deprivation is due to petitioner's fault, and not to
any act attributable to the vendor-spouses.
Because petitioner failed to impugn its integrity, the
contract is presumed, under the law, to be valid and
subsisting.
Absence of Mistake In Payment
Contrary to the contention of petitioner that a return of the
payments it made to PNB is warranted under Article 2154
of the Code, solutio indebiti does not apply in this case.
This doctrine applies where: (1) a payment is made when
there exists no binding relation between the payor, who
has no duty to pay, and the person who received the
payment, and (2) the payment is made through mistake,
and not through liberality or some other cause. 27
In this case, petitioner was under obligation to pay the
amortizations on the mortgage under the contract of sale
and the deed of real estate mortgage. Under the deed of
sale (Exh. "2"), 28 both parties agreed to abide by any and
all the requirements of PNB in connection with the real
estate mortgage. Petitioner was aware that the deed of
mortgage (Exh. "C") made it solidarily and, therefore,
primarily 29 liable for the mortgage obligation: 30
(e) The Mortgagor shall neither lease the
mortgaged property. . . nor sell or dispose of the same in
any manner, without the written consent of the Mortgagee.
However, if not withstanding this stipulation and during the
existence of this mortgage, the property herein mortgaged,
or any portion thereof, is . . . sold, it shall be the obligation
of the Mortgagor to impose as a condition of the sale,
alienation or encumbrance that the vendee, or the party in
whose favor the alienation or encumbrance is to be made,
should take the property subject to the obligation of this
mortgage in the same terms and condition under which it
is constituted, it being understood that the Mortgagor is not
in any manner relieved of his obligation to the Mortgagee
under this mortgage by such sale, alienation or
encumbrance; on the contrary both the vendor and the
vendee, or the party in whose favor the alienation or
encumbrance is made shall be jointly and severally liable
for said mortgage obligations. . . .
Therefore, it cannot be said that it did not have a duty to
pay to PNB the amortization on the mortgage.
Also, petitioner insists that its payment of the amortization
was a mistake because PNB disapproved its assumption
of mortgage after it failed to submit the necessary papers
for the approval of such assumption.
But even if petitioner was a third party in regard to the
mortgage of the land purchased, the payment of the loan
by petitioner was a condition clearly imposed by the
contract of sale. This fact alone disproves petitioner's
insistence that there was a "mistake" in payment. On the
contrary, such payments were necessary to protect its
interest as a "the buyer(s) and new owner(s) of the lot."
The quasi-contract of solutio indebiti is one of the concrete 9 The decision was penned by then Judge (now and Danguilan vs. Intermediate Appellate Court, 168
manifestations of the ancient principle that no one shall Justice of the Court of Appeals) Maria Alicia M. Austria. SCRA 22, 32, November 28, 1988.
enrich himself unjustly at the expense of another. 31 But
as shown earlier, the payment of the mortgage was an 10 Rollo, p. 44. 23 Ibid.
obligation petitioner assumed under the contract of sale.
There is no unjust enrichment where the transaction, as in 11 Rollo, p. 34. 24 Manuel R. Dulay Enterprises, Inc. vs. Court of
this case, is quid pro quo, value for value. Appeals, 225 SCRA 678, 687, August 27, 1993.
12 Rollo, p. 148.
All told, respondent Court did not commit any reversible 25 Escaler v. Court of Appeals, 138 SCRA 1, 7,
error which would warrant the reversal of the assailed 13 Article 1458, 2nd paragraph, Civil Code; and August 1, 1985; Canizares Tiana v. Torrejos, 21 Phil. 127,
Decision. Romero vs. Court of Appeals, 250 SCRA 223, 232, 130 (1911); Bautista vs. Laserna, 72 Phil. 506, 510 (1941);
November 23, 1995. and Jovellano vs. Lualhati, 47 Phil. 371, 373 (1925).
WHEREFORE, the petition is hereby DENIED, and the
assailed Decision is AFFIRMED. 14 Records, p. 361. 26 Investment & Development Corp. vs. Court of
Appeals, 162 SCRA 636, 641-642, June 27, 1988.
SO ORDERED. 15 TSN, April 1, 1987, pp. 19-21; and rollo, p. 147.
27 Velez vs. Balzarza, 73 Phil. 630, 632 (1942);
Narvasa, C.J., Davide, Jr. and Melo, JJ., concur. 16 Article 1377, Civil Code; Ang vs. Court of City of Cebu vs. Judge Piccio, 110 Phil. 558, 563 (1960);
Appeals, 170 SCRA 286, 294, February 13, 1989; and Lim and Andres vs. Manufacturers Hanover & Trust
Francisco, J., is on leave. Lhi Luya vs. Court of Appeals, 99 SCRA 668, 682-683, Corporation, 177 SCRA 618, 622, September 15, 1989.
September 11, 1980.
Footnotes 28 Records, p. 362.
17 Supra, p. 234.
1 Penned by J. Jesus M. Elbinias and concurred 29 Article 1216, Civil Code.
in by JJ. Lourdes K. Tayao-Jaguros and B.A. Adefuin-De 18 Supra, p. 296.
la Cruz. 30 Records, p. 256.
19 Article 1370, Civil Code; Ang vs. CA., ibid, p.
2 Rollo, p. 34. 295; Sy vs. Court of Appeals, 131 SCRA 116, 124, July 31 Ibid.; and Ramie Textiles, Inc. vs. Mathay, Sr.,
31, 1984; Labasan vs. Lacuesta, 86 SCRA 16, 21, October 89 SCRA 586, 592, April 30, 1979.
3 Records, pp. 361-362. 30, 1978.

4 Records, pp. 261-264. 20 TSN, November 4, 1983, p. 23 and November

14, 1983, pp. 28-30.
5 Records, p. 306.
21 Article 1477 & 1495, Civil Code; Fidelity &
6 Records, p. 298. Deposit Co. vs. Wilson, 8 Phil. 51, 56-57 (1907); Tan
Leonco vs. Go Inqui, 8 Phil. 531, 534 (1907); and Kuenzle
7 Records, p. 299. & Streiff vs. Macke & Chandler, 14 Phil. 610, 611-612
(1909).
8 Notice of Extra-Judicial Sale, Records, p. 372.
22 Addison vs. Felix, 38 Phil. 404, 408 (1918); Vda.
de Sarmiento vs. Lesaca, 108 Phil. 900, 902-903 (1960);
G.R. Nos. 167274-75 July 21, 2008
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
FORTUNE TOBACCO CORPORATION, Respondent.
DECISION
TINGA, J.:
Simple and uncomplicated is the central issue involved,
yet whopping is the amount at stake in this case.
After much wrangling in the Court of Tax Appeals (CTA)
and the Court of Appeals, Fortune Tobacco Corporation
(Fortune Tobacco) was granted a tax refund or tax credit
representing specific taxes erroneously collected from its
tobacco products. The tax refund is being re-claimed by
the Commissioner of Internal Revenue (Commissioner) in
this petition.
The following undisputed facts, summarized by the Court
of Appeals, are quoted in the assailed Decision1 dated 28
September 2004:
CAG.R. SP No. 80675
xxxx
Petitioner2 is a domestic corporation duly organized and
existing under and by virtue of the laws of the Republic of
the Philippines, with principal address at Fortune Avenue,
Parang, Marikina City.
Petitioner is the manufacturer/producer of, among others,
the following cigarette brands, with tax rate classification
based on net retail price prescribed by Annex "D" to R.A.
No. 4280, to wit:
Brand Tax Rate
Champion M 100 ₱1.00
Salem M 100 ₱1.00
Salem M King ₱1.00
Camel F King ₱1.00
Camel Lights Box 20’s ₱1.00
Camel Filters Box 20’s ₱1.00
Winston F Kings ₱5.00
Winston Lights ₱5.00
Immediately prior to January 1, 1997, the above-
mentioned cigarette brands were subject to ad valorem tax
pursuant to then Section 142 of the Tax Code of 1977, as
amended. However, on January 1, 1997, R.A. No. 8240
took effect whereby a shift from the ad valorem tax (AVT)
system to the specific tax system was made and
subjecting the aforesaid cigarette brands to specific tax
under [S]ection 142 thereof, now renumbered as Sec. 145
of the Tax Code of 1997, pertinent provisions of which are
quoted thus:
Section 145. Cigars and Cigarettes-
(A) Cigars. – There shall be levied, assessed and collected
on cigars a tax of One peso (₱1.00) per cigar.
"(B) Cigarettes packed by hand. – There shall be levied,
assessesed and collected on cigarettes packed by hand a
tax of Forty centavos (P0.40) per pack.
(C) Cigarettes packed by machine. – There shall be levied,
assessed and collected on cigarettes packed by machine
a tax at the rates prescribed below:
(1) If the net retail price (excluding the excise tax and the
value-added tax) is above Ten pesos (₱10.00) per pack,
the tax shall be Twelve (₱12.00) per pack;
(2) If the net retail price (excluding the excise tax and the
value added tax) exceeds Six pesos and Fifty centavos
(₱6.50) but does not exceed Ten pesos (₱10.00) per pack,
the tax shall be Eight Pesos (₱8.00) per pack.
(3) If the net retail price (excluding the excise tax and the
value-added tax) is Five pesos (₱5.00) but does not
exceed Six Pesos and fifty centavos (₱6.50) per pack, the
tax shall be Five pesos (₱5.00) per pack;
(4) If the net retail price (excluding the excise tax and the
value-added tax) is below Five pesos (₱5.00) per pack, the
tax shall be One peso (₱1.00) per pack;
"Variants of existing brands of cigarettes which are
introduced in the domestic market after the effectivity of
R.A. No. 8240 shall be taxed under the highest
classification of any variant of that brand.
The excise tax from any brand of cigarettes within the next
three (3) years from the effectivity of R.A. No. 8240 shall
not be lower than the tax, which is due from each brand on
October 1, 1996. Provided, however, that in cases were
(sic) the excise tax rate imposed in paragraphs (1), (2), (3)
and (4) hereinabove will result in an increase in excise tax
of more than seventy percent (70%), for a brand of
cigarette, the increase shall take effect in two tranches:
fifty percent (50%) of the increase shall be effective in
1997 and one hundred percent (100%) of the increase
shall be effective in 1998.
Duly registered or existing brands of cigarettes or new
brands thereof packed by machine shall only be packed in
twenties.
The rates of excise tax on cigars and cigarettes under
paragraphs (1), (2) (3) and (4) hereof, shall be increased
by twelve percent (12%) on January 1, 2000. (Emphasis
supplied)
New brands shall be classified according to their current
net retail price.
For the above purpose, ‘net retail price’ shall mean the
price at which the cigarette is sold on retail in twenty (20)
major supermarkets in Metro Manila (for brands of
cigarettes marketed nationally), excluding the amount
intended to cover the applicable excise tax and value-
added tax. For brands which are marketed only outside
Metro [M]anila, the ‘net retail price’ shall mean the price at
which the cigarette is sold in five (5) major supermarkets in
the region excluding the amount intended to cover the
applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its
average retail price as of October 1, 1996, as set forth in
Annex "D," shall remain in force until revised by Congress.
Variant of a brand shall refer to a brand on which a
modifier is prefixed and/or suffixed to the root name of the
brand and/or a different brand which carries the same logo
or design of the existing brand.
To implement the provisions for a twelve percent (12%)
increase of excise tax on, among others, cigars and
cigarettes packed by machines by January 1, 2000, the
Secretary of Finance, upon recommendation of the
respondent Commissioner of Internal Revenue, issued
Revenue Regulations No. 17-99, dated December 16,
1999, which provides the increase on the applicable tax
rates on cigar and cigarettes as follows:
SECTION ARTICLES PRESENT SPECIFIC TAX
RATE PRIOR TO JAN. 1, 2000 NEW SPECIFIC
TAX RATE EFFECTIVE JAN. 1, 2000
145 (A) P1.00/cigar ₱1.12/cigar
(B)Cigarettes packed by machine
(1) Net retail price (excluding VAT and excise) exceeds
₱10.00 per pack ₱12.00/pack ₱13.44/ pack
(2) Exceeds ₱10.00 per pack ₱8.00/pack
₱8.96/pack
(3) Net retail price (excluding VAT and excise) is ₱5.00 to
₱6.50 per pack ₱5.00/pack ₱5.60/pack
(4) Net Retail Price (excluding VAT and excise) is below
₱5.00 per pack ₱1.00/pack ₱1.12/pack
Revenue Regulations No. 17-99 likewise provides in the
last paragraph of Section 1 thereof, "(t)hat the new specific
tax rate for any existing brand of cigars, cigarettes packed
by machine, distilled spirits, wines and fermented liquor
shall not be lower than the excise tax that is actually being
paid prior to January 1, 2000."
For the period covering January 1-31, 2000, petitioner
allegedly paid specific taxes on all brands manufactured
and removed in the total amounts of ₱585,705,250.00.
On February 7, 2000, petitioner filed with respondent’s
Appellate Division a claim for refund or tax credit of its
purportedly overpaid excise tax for the month of January
2000 in the amount of ₱35,651,410.00
On June 21, 2001, petitioner filed with respondent’s Legal
Service a letter dated June 20, 2001 reiterating all the
claims for refund/tax credit of its overpaid excise taxes
filed on various dates, including the present claim for the
month of January 2000 in the amount of ₱35,651,410.00.
As there was no action on the part of the respondent,
petitioner filed the instant petition for review with this Court
on December 11, 2001, in order to comply with the two-
year period for filing a claim for refund.
In his answer filed on January 16, 2002, respondent raised
the following Special and Affirmative Defenses;
4. Petitioner’s alleged claim for refund is subject to
administrative routinary investigation/examination by the
Bureau;
5. The amount of ₱35,651,410 being claimed by petitioner
as alleged overpaid excise tax for the month of January
2000 was not properly documented.
6. In an action for tax refund, the burden of proof is on the
taxpayer to establish its right to refund, and failure to
sustain the burden is fatal to its claim for refund/credit.
7. Petitioner must show that it has complied with the
provisions of Section 204(C) in relation [to] Section 229 of
the Tax Code on the prescriptive period for claiming tax
refund/credit;
8. Claims for refund are construed strictly against the
claimant for the same partake of tax exemption from
taxation; and
9. The last paragraph of Section 1 of Revenue
Regulation[s] [No.]17-99 is a valid implementing regulation
which has the force and effect of law."
CA G.R. SP No. 83165
The petition contains essentially similar facts, except that
the said case questions the CTA’s December 4, 2003
decision in CTA Case No. 6612 granting respondent’s3
claim for refund of the amount of ₱355,385,920.00
representing erroneously or illegally collected specific
taxes covering the period January 1, 2002 to December
31, 2002, as well as its March 17, 2004 Resolution
denying a reconsideration thereof.
xxxx
In both CTA Case Nos. 6365 & 6383 and CTA No. 6612,
the Court of Tax Appeals reduced the issues to be
resolved into two as stipulated by the parties, to wit: (1)
Whether or not the last paragraph of Section 1 of Revenue
Regulation[s] [No.] 17-99 is in accordance with the
pertinent provisions of Republic Act [No.] 8240, now
incorporated in Section 145 of the Tax Code of 1997; and
(2) Whether or not petitioner is entitled to a refund of
₱35,651,410.00 as alleged overpaid excise tax for the
month of January 2000.
xxxx
Hence, the respondent CTA in its assailed October 21,
2002 [twin] Decisions[s] disposed in CTA Case Nos. 6365
& 6383:
WHEREFORE, in view of the foregoing, the court finds the
instant petition meritorious and in accordance with law.
Accordingly, respondent is hereby ORDERED to REFUND
to petitioner the amount of ₱35,651.410.00 representing
erroneously paid excise taxes for the period January 1 to
January 31, 2000.
SO ORDERED.
Herein petitioner sought reconsideration of the above-
quoted decision. In [twin] resolution[s] [both] dated July 15,
2003, the Tax Court, in an apparent change of heart,
granted the petitioner’s consolidated motions for
reconsideration, thereby denying the respondent’s claim
for refund.
However, on consolidated motions for reconsideration filed
by the respondent in CTA Case Nos. 6363 and 6383, the
July 15, 2002 resolution was set aside, and the Tax Court
ruled, this time with a semblance of finality, that the
respondent is entitled to the refund claimed. Hence, in a
resolution dated November 4, 2003, the tax court
reinstated its December 21, 2002 Decision and disposed
as follows:
WHEREFORE, our Decisions in CTA Case Nos. 6365 and
6383 are hereby REINSTATED. Accordingly, respondent
is hereby ORDERED to REFUND petitioner the total
amount of ₱680,387,025.00 representing erroneously paid
excise taxes for the period January 1, 2000 to January 31,
2000 and February 1, 2000 to December 31, 2001.
SO ORDERED.
Meanwhile, on December 4, 2003, the Court of Tax
Appeals rendered decision in CTA Case No. 6612 granting
the prayer for the refund of the amount of
₱355,385,920.00 representing overpaid excise tax for the
period covering January 1, 2002 to December 31, 2002.
The tax court disposed of the case as follows:
IN VIEW OF THE FOREGOING, the Petition for Review is
GRANTED. Accordingly, respondent is hereby ORDERED
to REFUND to petitioner the amount of ₱355,385,920.00
representing overpaid excise tax for the period covering
January 1, 2002 to December 31, 2002.
SO ORDERED.
Petitioner sought reconsideration of the decision, but the
same was denied in a Resolution dated March 17, 2004.4
(Emphasis supplied) (Citations omitted)
The Commissioner appealed the aforesaid decisions of the
CTA. The petition questioning the grant of refund in the
amount of ₱680,387,025.00 was docketed as CA-G.R. SP
No. 80675, whereas that assailing the grant of refund in
the amount of ₱355,385,920.00 was docketed as CA-G.R.
SP No. 83165. The petitions were consolidated and
eventually denied by the Court of Appeals. The appellate
court also denied reconsideration in its Resolution5 dated
1 March 2005.
In its Memorandum6 22 dated November 2006, filed on
behalf of the Commissioner, the Office of the Solicitor
General (OSG) seeks to convince the Court that the literal
interpretation given by the CTA and the Court of Appeals
of Section 145 of the Tax Code of 1997 (Tax Code) would
lead to a lower tax imposable on 1 January 2000 than that
imposable during the transition period. Instead of an
increase of 12% in the tax rate effective on 1 January 2000
as allegedly mandated by the Tax Code, the appellate
court’s ruling would result in a significant decrease in the
tax rate by as much as 66%.
The OSG argues that Section 145 of the Tax Code admits
of several interpretations, such as:
1. That by January 1, 2000, the excise tax on cigarettes
should be the higher tax imposed under the specific tax
system and the tax imposed under the ad valorem tax
system plus the 12% increase imposed by par. 5, Sec. 145
of the Tax Code;
2. The increase of 12% starting on January 1, 2000 does
not apply to the brands of cigarettes listed under Annex
"D" referred to in par. 8, Sec. 145 of the Tax Code;
3. The 12% increment shall be computed based on the net
retail price as indicated in par. C, sub-par. (1)-(4), Sec. 145
of the Tax Code even if the resulting figure will be lower
than the amount already being paid at the end of the
transition period. This is the interpretation followed by both
the CTA and the Court of Appeals.7
This being so, the interpretation which will give life to the
legislative intent to raise revenue should govern, the OSG
stresses.
Finally, the OSG asserts that a tax refund is in the nature
of a tax exemption and must, therefore, be construed
strictly against the taxpayer, such as Fortune Tobacco.
In its Memorandum8 dated 10 November 2006, Fortune
Tobacco argues that the CTA and the Court of Appeals
merely followed the letter of the law when they ruled that
the basis for the 12% increase in the tax rate should be the
net retail price of the cigarettes in the market as outlined in
paragraph C, sub paragraphs (1)-(4), Section 145 of the
Tax Code. The Commissioner allegedly has gone beyond
his delegated rule-making power when he promulgated,
enforced and implemented Revenue Regulation No. 17-
99, which effectively created a separate classification for
cigarettes based on the excise tax "actually being paid
prior to January 1, 2000."9
It should be mentioned at the outset that there is no
dispute between the fact of payment of the taxes sought to
be refunded and the receipt thereof by the Bureau of
Internal Revenue (BIR). There is also no question about
the mathematical accuracy of Fortune Tobacco’s claim
since the documentary evidence in support of the refund
has not been controverted by the revenue agency.
Likewise, the claims have been made and the actions
have been filed within the two (2)-year prescriptive period
provided under Section 229 of the Tax Code.

The power to tax is inherent in the State, such power being
inherently legislative, based on the principle that taxes are
a grant of the people who are taxed, and the grant must be
made by the immediate representatives of the people; and
where the people have laid the power, there it must remain
and be exercised.10
This entire controversy revolves around the interplay
between Section 145 of the Tax Code and Revenue
Regulation 17-99. The main issue is an inquiry into
whether the revenue regulation has exceeded the
allowable limits of legislative delegation.
For ease of reference, Section 145 of the Tax Code is
again reproduced in full as follows:
Section 145. Cigars and Cigarettes-
(A) Cigars.—There shall be levied, assessed and collected
on cigars a tax of One peso (₱1.00) per cigar.
(B). Cigarettes packed by hand.—There shall be levied,
assessed and collected on cigarettes packed by hand a
tax of Forty centavos (₱0.40) per pack.
(C) Cigarettes packed by machine.—There shall be levied,
assessed and collected on cigarettes packed by machine
a tax at the rates prescribed below:
(1) If the net retail price (excluding the excise tax and the
value-added tax) is above Ten pesos (₱10.00) per pack,
the tax shall be Twelve pesos (₱12.00) per pack;
(2) If the net retail price (excluding the excise tax and the
value added tax) exceeds Six pesos and Fifty centavos
(₱6.50) but does not exceed Ten pesos (₱10.00) per pack,
the tax shall be Eight Pesos (₱8.00) per pack.
(3) If the net retail price (excluding the excise tax and the
value-added tax) is Five pesos (₱5.00) but does not
exceed Six Pesos and fifty centavos (₱6.50) per pack, the
tax shall be Five pesos (₱5.00) per pack;
(4) If the net retail price (excluding the excise tax and the
value-added tax) is below Five pesos (₱5.00) per pack, the
tax shall be One peso (₱1.00) per pack;
Variants of existing brands of cigarettes which are
introduced in the domestic market after the effectivity of
R.A. No. 8240 shall be taxed under the highest
classification of any variant of that brand.
The excise tax from any brand of cigarettes within the next
three (3) years from the effectivity of R.A. No. 8240 shall
not be lower than the tax, which is due from each brand on
October 1, 1996. Provided, however, That in cases where
the excise tax rates imposed in paragraphs (1), (2), (3) and
(4) hereinabove will result in an increase in excise tax of
more than seventy percent (70%), for a brand of cigarette,
the increase shall take effect in two tranches: fifty percent
(50%) of the increase shall be effective in 1997 and one
hundred percent (100%) of the increase shall be effective
in 1998.
Duly registered or existing brands of cigarettes or new
brands thereof packed by machine shall only be packed in
twenties.
The rates of excise tax on cigars and cigarettes under
paragraphs (1), (2) (3) and (4) hereof, shall be increased
by twelve percent (12%) on January 1, 2000.
New brands shall be classified according to their current
net retail price.
For the above purpose, ‘net retail price’ shall mean the
price at which the cigarette is sold on retail in twenty (20)
major supermarkets in Metro Manila (for brands of
cigarettes marketed nationally), excluding the amount
intended to cover the applicable excise tax and value-
added tax. For brands which are marketed only outside
Metro Manila, the ‘net retail price’ shall mean the price at
which the cigarette is sold in five (5) major intended to
cover the applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its
average retail price as of October 1, 1996, as set forth in
Annex "D," shall remain in force until revised by Congress.
Variant of a brand’ shall refer to a brand on which a
modifier is prefixed and/or suffixed to the root name of the
brand and/or a different brand which carries the same logo
or design of the existing brand.11 (Emphasis supplied)
Revenue Regulation 17-99, which was issued pursuant to
the unquestioned authority of the Secretary of Finance to
promulgate rules and regulations for the effective
implementation of the Tax Code,12 interprets the above-
quoted provision and reflects the 12% increase in excise
taxes in the following manner:
SECTION DESCRIPTION OF ARTICLES
PRESENT SPECIFIC TAX RATES PRIOR TO
JAN. 1, 2000 NEW SPECIFIC TAX RATE Effective
Jan.. 1, 2000
145 (A) P1.00/cigar ₱1.12/cigar
(B)Cigarettes packed by Machine
(1) Net Retail Price (excluding VAT and Excise) exceeds
₱10.00 per pack ₱12.00/pack ₱13.44/pack
(2) Net Retail Price (excluding VAT and Excise) is ₱6.51
up to ₱10.00 per pack ₱8.00/pack
₱8.96/pack
(3) Net Retail Price (excluding VAT and excise) is ₱5.00 to
₱6.50 per pack ₱5.00/pack ₱5.60/pack
(4) Net Retail Price (excluding VAT and excise) is below
₱5.00 per pack) ₱1.00/pack ₱1.12/pack
This table reflects Section 145 of the Tax Code insofar as
it mandates a 12% increase effective on 1 January 2000
based on the taxes indicated under paragraph C, sub-
paragraph (1)-(4). However, Revenue Regulation No. 17-
99 went further and added that "[T]he new specific tax rate
for any existing brand of cigars, cigarettes packed by
machine, distilled spirits, wines and fermented liquor shall
not be lower than the excise tax that is actually being paid
prior to January 1, 2000."13
Parenthetically, Section 145 states that during the
transition period, i.e., within the next three (3) years from
the effectivity of the Tax Code, the excise tax from any
brand of cigarettes shall not be lower than the tax due from
each brand on 1 October 1996. This qualification,
however, is conspicuously absent as regards the 12%
increase which is to be applied on cigars and cigarettes
packed by machine, among others, effective on 1 January
2000. Clearly and unmistakably, Section 145 mandates a
new rate of excise tax for cigarettes packed by machine
due to the 12% increase effective on 1 January 2000
without regard to whether the revenue collection starting
from this period may turn out to be lower than that
collected prior to this date.
By adding the qualification that the tax due after the 12%
increase becomes effective shall not be lower than the tax
actually paid prior to 1 January 2000, Revenue Regulation
No. 17-99 effectively imposes a tax which is the higher
amount between the ad valorem tax being paid at the end
of the three (3)-year transition period and the specific tax
under paragraph C, sub-paragraph (1)-(4), as increased by
12%—a situation not supported by the plain wording of
Section 145 of the Tax Code.
This is not the first time that national revenue officials had
ventured in the area of unauthorized administrative
legislation.
In Commissioner of Internal Revenue v. Reyes,14
respondent was not informed in writing of the law and the
facts on which the assessment of estate taxes was made
pursuant to Section 228 of the 1997 Tax Code, as
amended by Republic Act (R.A.) No. 8424. She was
merely notified of the findings by the Commissioner, who
had simply relied upon the old provisions of the law and
Revenue Regulation No. 12-85 which was based on the
old provision of the law. The Court held that in case of
discrepancy between the law as amended and the
implementing regulation based on the old law, the former
necessarily prevails. The law must still be followed, even
though the existing tax regulation at that time provided for
a different procedure.15
In Commissioner of Internal Revenue v. Central Luzon
Drug Corporation,16 the tax authorities gave the term "tax
credit" in Sections 2(i) and 4 of Revenue Regulation 2-94 a
meaning utterly disparate from what R.A. No. 7432
provides. Their interpretation muddled up the intent of
Congress to grant a mere discount privilege and not a
sales discount. The Court, striking down the revenue
regulation, held that an administrative agency issuing
regulations may not enlarge, alter or restrict the provisions
of the law it administers, and it cannot engraft additional
requirements not contemplated by the legislature. The
Court emphasized that tax administrators are not allowed
to expand or contract the legislative mandate and that the
"plain meaning rule" or verba legis in statutory construction
should be applied such that where the words of a statute
are clear, plain and free from ambiguity, it must be given
its literal meaning and applied without attempted
interpretation.
As we have previously declared, rule-making power must
be confined to details for regulating the mode or
proceedings in order to carry into effect the law as it has
been enacted, and it cannot be extended to amend or
expand the statutory requirements or to embrace matters
not covered by the statute. Administrative regulations must
always be in harmony with the provisions of the law
because any resulting discrepancy between the two will
always be resolved in favor of the basic law.17
In Commissioner of Internal Revenue v. Michel J. Lhuillier
Pawnshop, Inc.,18 Commissioner Jose Ong issued
Revenue Memorandum Order (RMO) No. 15-91, as well
as the clarificatory Revenue Memorandum Circular (RMC)
43-91, imposing a 5% lending investor’s tax under the
1977 Tax Code, as amended by Executive Order (E.O.)
No. 273, on pawnshops. The Commissioner anchored the
imposition on the definition of lending investors provided in
the 1977 Tax Code which, according to him, was broad
enough to include pawnshop operators. However, the
Court noted that pawnshops and lending investors were
subjected to different tax treatments under the Tax Code
prior to its amendment by the executive order; that
Congress never intended to treat pawnshops in the same
way as lending investors; and that the particularly involved
section of the Tax Code explicitly subjected lending
investors and dealers in securities only to percentage tax.
And so the Court affirmed the invalidity of the challenged
circulars, stressing that "administrative issuances must not
override, supplant or modify the law, but must remain
consistent with the law they intend to carry out."19
In Philippine Bank of Communications v. Commissioner of
Internal Revenue,20 the then acting Commissioner issued
RMC 7-85, changing the prescriptive period of two years to
ten years for claims of excess quarterly income tax
payments, thereby creating a clear inconsistency with the
provision of Section 230 of the 1977 Tax Code. The Court
nullified the circular, ruling that the BIR did not simply
interpret the law; rather it legislated guidelines contrary to
the statute passed by Congress. The Court held:
It bears repeating that Revenue memorandum-circulars
are considered administrative rulings (in the sense of more
specific and less general interpretations of tax laws) which
are issued from time to time by the Commissioner of
Internal Revenue. It is widely accepted that the
interpretation placed upon a statute by the executive
officers, whose duty is to enforce it, is entitled to great
respect by the courts. Nevertheless, such interpretation is
not conclusive and will be ignored if judicially found to be
erroneous. Thus, courts will not countenance
administrative issuances that override, instead of
remaining consistent and in harmony with, the law they
seek to apply and implement.21
In Commissioner of Internal Revenue v. CA, et al.,22 the
central issue was the validity of RMO 4-87 which had
construed the amnesty coverage under E.O. No. 41 (1986)
to include only assessments issued by the BIR after the
promulgation of the executive order on 22 August 1986
and not assessments made to that date. Resolving the
issue in the negative, the Court held:
x x x all such issuances must not override, but must
remain consistent and in harmony with, the law they seek
to apply and implement. Administrative rules and
regulations are intended to carry out, neither to supplant
nor to modify, the law.23
xxx
If, as the Commissioner argues, Executive Order No. 41
had not been intended to include 1981-1985 tax liabilities
already assessed (administratively) prior to 22 August
1986, the law could have simply so provided in its
exclusionary clauses. It did not. The conclusion is
unavoidable, and it is that the executive order has been
designed to be in the nature of a general grant of tax
amnesty subject only to the cases specifically excepted by
it.24
In the case at bar, the OSG’s argument that by 1 January
2000, the excise tax on cigarettes should be the higher tax
imposed under the specific tax system and the tax
imposed under the ad valorem tax system plus the 12%
increase imposed by paragraph 5, Section 145 of the Tax
Code, is an unsuccessful attempt to justify what is clearly
an impermissible incursion into the limits of administrative
legislation. Such an interpretation is not supported by the
clear language of the law and is obviously only meant to
validate the OSG’s thesis that Section 145 of the Tax
Code is ambiguous and admits of several interpretations.
The contention that the increase of 12% starting on 1
January 2000 does not apply to the brands of cigarettes
listed under Annex "D" is likewise unmeritorious, absurd
even. Paragraph 8, Section 145 of the Tax Code simply
states that, "[T]he classification of each brand of cigarettes
based on its average net retail price as of October 1, 1996,
as set forth in Annex ‘D’, shall remain in force until revised
by Congress." This declaration certainly does not lend
itself to the interpretation given to it by the OSG. As plainly
worded, the average net retail prices of the listed brands
under Annex "D," which classify cigarettes according to
their net retail price into low, medium or high, obviously
remain the bases for the application of the increase in
excise tax rates effective on 1 January 2000.
The foregoing leads us to conclude that Revenue
Regulation No. 17-99 is indeed indefensibly flawed. The
Commissioner cannot seek refuge in his claim that the
purpose behind the passage of the Tax Code is to
generate additional revenues for the government.
Revenue generation has undoubtedly been a major
consideration in the passage of the Tax Code. However,
as borne by the legislative record,25 the shift from the ad
valorem system to the specific tax system is likewise
meant to promote fair competition among the players in
the industries concerned, to ensure an equitable
distribution of the tax burden and to simplify tax
administration by classifying cigarettes, among others, into
high, medium and low-priced based on their net retail price
and accordingly graduating tax rates.
At any rate, this advertence to the legislative record is
merely gratuitous because, as we have held, the meaning
of the law is clear on its face and free from the ambiguities
that the Commissioner imputes. We simply cannot
disregard the letter of the law on the pretext of pursuing its
spirit.26
Finally, the Commissioner’s contention that a tax refund
partakes the nature of a tax exemption does not apply to
the tax refund to which Fortune Tobacco is entitled. There
is parity between tax refund and tax exemption only when
the former is based either on a tax exemption statute or a
tax refund statute. Obviously, that is not the situation here.
Quite the contrary, Fortune Tobaccos claim for refund is
premised on its erroneous payment of the tax, or better still
the government’s exaction in the absence of a law.
Tax exemption is a result of legislative grace. And he who
claims an exemption from the burden of taxation must
justify his claim by showing that the legislature intended to
exempt him by words too plain to be mistaken.27 The rule
is that tax exemptions must be strictly construed such that
the exemption will not be held to be conferred unless the
terms under which it is granted clearly and distinctly show
that such was the intention.28
A claim for tax refund may be based on statutes granting
tax exemption or tax refund. In such case, the rule of strict
interpretation against the taxpayer is applicable as the
claim for refund partakes of the nature of an exemption, a
legislative grace, which cannot be allowed unless granted
in the most explicit and categorical language. The taxpayer
must show that the legislature intended to exempt him
from the tax by words too plain to be mistaken.29
Tax refunds (or tax credits), on the other hand, are not
founded principally on legislative grace but on the legal
principle which underlies all quasi-contracts abhorring a
person’s unjust enrichment at the expense of another.30
The dynamic of erroneous payment of tax fits to a tee the
prototypic quasi-contract, solutio indebiti, which covers not
only mistake in fact but also mistake in law.31
The Government is not exempt from the application of
solutio indebiti.32 Indeed, the taxpayer expects fair dealing
from the Government, and the latter has the duty to refund
without any unreasonable delay what it has erroneously
collected.33 If the State expects its taxpayers to observe
fairness and honesty in paying their taxes, it must hold
itself against the same standard in refunding excess (or
erroneous) payments of such taxes. It should not unjustly
enrich itself at the expense of taxpayers.34 And so, given
its essence, a claim for tax refund necessitates only
preponderance of evidence for its approbation like in any
other ordinary civil case.
Under the Tax Code itself, apparently in recognition of the
pervasive quasi-contract principle, a claim for tax refund
may be based on the following: (a) erroneously or illegally
assessed or collected internal revenue taxes; (b) penalties
imposed without authority; and (c) any sum alleged to
have been excessive or in any manner wrongfully
collected.35
What is controlling in this case is the well-settled doctrine
of strict interpretation in the imposition of taxes, not the
similar doctrine as applied to tax exemptions. The rule in
the interpretation of tax laws is that a statute will not be
construed as imposing a tax unless it does so clearly,
expressly, and unambiguously. A tax cannot be imposed
without clear and express words for that purpose.
Accordingly, the general rule of requiring adherence to the
letter in construing statutes applies with peculiar strictness
to tax laws and the provisions of a taxing act are not to be
extended by implication. In answering the question of who
is subject to tax statutes, it is basic that in case of doubt,
such statutes are to be construed most strongly against
the government and in favor of the subjects or citizens
because burdens are not to be imposed nor presumed to
be imposed beyond what statutes expressly and clearly
import.36 As burdens, taxes should not be unduly exacted
nor assumed beyond the plain meaning of the tax laws.37
WHEREFORE, the petition is DENIED. The Decision of
the Court of Appeals in CA G.R. SP No. 80675, dated 28
September 2004, and its Resolution, dated 1 March 2005,
are AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Footnotes
1 Rollo, pp. 59-93; penned by Associate Justice Jose L.
Sabio, Jr. and concurred in by Associate Justices Eubulo
G. Verzola and Monina Arevalo-Zenarosa.
2 Herein respondent, Fortune Tobacco Corporation.
3 Herein respondent, Fortune Tobacco Corporation.
4 Rollo, pp. 60-73.
5 Id. at 95-101.
6 Id. at 456-495.
7 Rollo,, pp. 484, 486 and 487.
8 Id. at 407-455.
9 Id. at 409.
10 1 Cooley Taxation, 3rd Ed., p. 43 cited in Dimaampao,
Tax Principle and Remedies, p. 13.
11 Tax Code, Sec. 145.
12 Tax Code, Sec. 244, provides:
Sec. 244. Authority of Secretary of Finance to Promulgate
Rules and Regulations.—The Secretary of Finance, upon
recommendation of the Commissioner, shall promulgate all
needful rules and regulations for the effective enforcement
of the provisions of this Code.
See ABAKADA Guro Party List Officers v. Ermita, G.R.
No. 168056, 1 September 2005, 469 SCRA 1.
13 Rollo, p. 104.
14 G.R. No. 159694, 27 January 2006, 480 SCRA 382.
15 Id. at 396. Citing Philippine Petroleum Corp. v.
Municipality of Pililla, Rizal, 198 SCRA 82, 88, 3 June
1991, citing Shell Philippines, Inc. v. Central Bank of the
Philippines, 162 SCRA 628, 634, 27 June 1988.
16 G.R. No. 159647, 15 April 2005, 456 SCRA 414.
17 Landbank of the Philippines v. Court of Appeals, 327
Phil. 1047, 1052 (1996).
18 453 Phil. 1043 (2003).
19 Id. at 1052. Citing Commissioner of Internal Revenue v.
Court of Appeals, G.R. No. 108358, 20 January 1995, 240
SCRA 368, 372; Romulo, Mabanta, Buenaventura, Sayoc
& De los Angeles v. Home Development Mutual Fund,
G.R. No. 131082, 19 June 2000; 333 SCRA 777, 786.
20 361 Phil. 916 (1999).
21 Id. at 928-929.
22 310 Phil. 392 (1995).
23 Id. at 399. This ruling was reiterated in Republic v.
Court of Appeals, 381 Phil. 248 (2000).
24 Id. at 397.
25 Record of the Senate, pp. 224-225.
26 Tañada and Macapagal v. Cuenco, et al., 103 Phil.
1051, 1086 (1957), citing 82 C.J.S., 613.
27 Surigao Consolidated Mining Co. Inc. v. Commissioner
of Internal Revenue and Court of Tax Appeals, 119 Phil.
33, 37 (1963).
28 Phil. Acetylene Co. v. Commission of Internal Revenue,
et al., 127 Phil. 461, 472 (1967); Manila Electric Company
v. Vera, G.R. No. L-29987, 22 October 1975, 67 SCRA
351, 357-358; Surigao Consolidated Mining Co. Inc. v.
Commissioner of Internal Revenue, supra.
29 See Surigao Consolidated Mining Co. Inc. v. CIR, supra
at 732-733; Philex Mining Corp. v. . Commissioner of
Internal Revenue, 365 Phil. 572, 579 (1999); Davao Gulf
Lumber Corp. v. . Commissioner of Internal Revenue, 354
Phil. 891-892 (1998); . Commissioner of Internal Revenue
v. Tokyo Shipping Co., Ltd., 314 Phil. 220, 228 (1995).
30 Ramie Textiles, Inc. v. Hon. Mathay, Sr., 178 Phil. 482
(1979); Puyat & Sons v. City of Manila, et al., 117 Phil. 985
(1963).

31 Civil Code, Arts. 2142, 2154 and 2155.

32 Commissioner of Internal Revenue v. Fireman’s Fund

Insurance Co., G.R. No. L-30644, 9 March 1987, 148
SCRA 315, 324-325; Ramie Textiles, Inc. v. Mathay,
supra; Gonzales Puyat & Sons v. City of Manila, supra.

33 Commissioner of Internal Revenue v. Tokyo Shipping

Co., supra at 338.

34 AB Leasing and Finance Corporation v. . Commissioner

of Internal Revenue, 453 Phil. 297.. Citing BPI-Family
Savings Bank, Inc. v. Court of Appeals, 330 SCRA 507,
510, 518 (200).

35 Tax Code (1997), Secs. 204(c) and 229.

36 CIR v. Court of Appeals, 338 Phil. 322, 330-331 (1997).

37 CIR v. Philippine American Accident Insurance

Company, Inc., G.R. No. 141658, March 18, 2005, 453
SCRA 668, 680.
G.R. No. 143958 July 11, 2003
ALFRED FRITZ FRENZEL, petitioner,
vs.
EDERLINA P. CATITO, respondent.
CALLEJO, SR., J.:
Before us is a petition for review of the Decision1 of the
Court of Appeals in CA-G.R. CV No. 53485 which affirmed
the Decision2 of the Regional Trial Court of Davao City,
Branch 14, in Civil Case No. 17,817 dismissing the
petitioner's complaint, and the resolution of the Court of
Appeals denying his motion for reconsideration of the said
decision.
The Antecedents3
As gleaned from the evidence of the petitioner, the case at
bar stemmed from the following factual backdrop:
Petitioner Alfred Fritz Frenzel is an Australian citizen of
German descent. He is an electrical engineer by
profession, but worked as a pilot with the New Guinea
Airlines. He arrived in the Philippines in 1974, started
engaging in business in the country two years thereafter,
and married Teresita Santos, a Filipino citizen. In 1981,
Alfred and Teresita separated from bed and board without
obtaining a divorce.
Sometime in February 1983, Alfred arrived in Sydney,
Australia for a vacation. He went to King's Cross, a night
spot in Sydney, for a massage where he met Ederlina
Catito, a Filipina and a native of Bajada, Davao City.
Unknown to Alfred, she resided for a time in Germany and
was married to Klaus Muller, a German national. She left
Germany and tried her luck in Sydney, Australia, where
she found employment as a masseuse in the King's Cross
nightclub. She was fluent in German, and Alfred enjoyed
talking with her. The two saw each other again; this time
Ederlina ended up staying in Alfred's hotel for three days.
Alfred gave Ederlina sums of money for her services.4
Alfred was so enamored with Ederlina that he persuaded
her to stop working at King's Cross, return to the
Philippines, and engage in a wholesome business of her
own. He also proposed that they meet in Manila, to which
she assented. Alfred gave her money for her plane fare to
the Philippines. Within two weeks of Ederlina's arrival in
Manila, Alfred joined her. Alfred reiterated his proposal for
Ederlina to stay in the Philippines and engage in business,
even offering to finance her business venture. Ederlina
was delighted at the idea and proposed to put up a beauty
parlor. Alfred happily agreed.
Alfred told Ederlina that he was married but that he was
eager to divorce his wife in Australia. Alfred proposed
marriage to Ederlina, but she replied that they should wait
a little bit longer.
Ederlina found a building at No. 444 M.H. del Pilar corner
Arquiza Street, Ermita, Manila, owned by one Atty. Jose
Hidalgo who offered to convey his rights over the property
for P18,000.00. Alfred and Ederlina accepted the offer.
Ederlina put up a beauty parlor on the property under the
business name Edorial Beauty Salon, and had it registered
with the Department of Trade and Industry under her
name. Alfred paid Atty. Hidalgo P20,000.00 for his right
over the property and gave P300,000.00 to Ederlina for the
purchase of equipment and furniture for the parlor. As
Ederlina was going to Germany, she executed a special
power of attorney on December 13, 19835 appointing her
brother, Aser Catito, as her attorney-in-fact in managing
the beauty parlor business. She stated in the said deed
that she was married to Klaus Muller. Alfred went back to
Papua New Guinea to resume his work as a pilot.
When Alfred returned to the Philippines, he visited
Ederlina in her Manila residence and found it unsuitable for
her. He decided to purchase a house and lot owned by
Victoria Binuya Steckel in San Francisco del Monte,
Quezon City, covered by Transfer Certificate of Title No.
218429 for US$20,000.00. Since Alfred knew that as an
alien he was disqualified from owning lands in the
Philippines, he agreed that only Ederlina's name would
appear in the deed of sale as the buyer of the property, as
well as in the title covering the same. After all, he was
planning to marry Ederlina and he believed that after their
marriage, the two of them would jointly own the property.
On January 23, 1984, a Contract to Sell was entered into
between Victoria Binuya Steckel as the vendor and
Ederlina as the sole vendee. Alfred signed therein as a
witness.6 Victoria received from Alfred, for and in behalf of
Ederlina, the amount of US$10,000.00 as partial payment,
for which Victoria issued a receipt.7 When Victoria
executed the deed of absolute sale over the property on
March 6, 1984,8 she received from Alfred, for and in behalf
of Ederlina, the amount of US$10,000.00 as final and full
payment. Victoria likewise issued a receipt for the said
amount.9 After Victoria had vacated the property, Ederlina
moved into her new house. When she left for Germany to
visit Klaus, she had her father Narciso Catito and her two
sisters occupy the property.
Alfred decided to stay in the Philippines for good and live
with Ederlina. He returned to Australia and sold his fiber
glass pleasure boat to John Reid for $7,500.00 on May 4,
1984.10 He also sold his television and video business in
Papua New Guinea for K135,000.00 to Tekeraoi Pty.
Ltd.11 He had his personal properties shipped to the
Philippines and stored at No. 14 Fernandez Street, San
Francisco del Monte, Quezon City. The proceeds of the
sale were deposited in Alfred's account with the Hong
Kong Shanghai Banking Corporation (HSBC), Kowloon
Branch under Bank Account No. 018-2-807016.12 When
Alfred was in Papua New Guinea selling his other
properties, the bank sent telegraphic letters updating him
of his account.13 Several checks were credited to his
HSBC bank account from Papua New Guinea Banking
Corporation, Westpac Bank of Australia and New Zealand
Banking Group Limited and Westpac Bank-PNG-Limited.
Alfred also had a peso savings account with HSBC,
Manila, under Savings Account No. 01-725-183-01.14
Once, when Alfred and Ederlina were in Hong Kong, they
opened another account with HSBC, Kowloon, this time in
the name of Ederlina, under Savings Account No. 018-0-
807950.15 Alfred transferred his deposits in Savings
Account No. 018-2-807016 with the said bank to this new
account. Ederlina also opened a savings account with the
Bank of America Kowloon Main Office under Account No.
30069016.16
On July 28, 1984, while Alfred was in Papua New Guinea,
he received a Letter dated December 7, 1983 from Klaus
Muller who was then residing in Berlin, Germany. Klaus
informed Alfred that he and Ederlina had been married on
October 16, 1978 and had a blissful married life until Alfred
intruded therein. Klaus stated that he knew of Alfred and
Ederlina's amorous relationship, and discovered the same
sometime in November 1983 when he arrived in Manila.
He also begged Alfred to leave Ederlina alone and to
return her to him, saying that Alfred could not possibly
build his future on his (Klaus') misfortune.17
Alfred had occasion to talk to Sally MacCarron, a close
friend of Ederlina. He inquired if there was any truth to
Klaus' statements and Sally confirmed that Klaus was
married to Ederlina. When Alfred confronted Ederlina, she
admitted that she and Klaus were, indeed, married. But
she assured Alfred that she would divorce Klaus. Alfred
was appeased. He agreed to continue the amorous
relationship and wait for the outcome of Ederlina's petition
for divorce. After all, he intended to marry her. He retained
the services of Rechtsanwaltin Banzhaf with offices in
Berlin, as her counsel who informed her of the progress of
the proceedings.18 Alfred paid for the services of the
lawyer.
In the meantime, Alfred decided to purchase another
house and lot, owned by Rodolfo Morelos covered by TCT
No. 92456 located in Peña Street, Bajada, Davao City.19
Alfred again agreed to have the deed of sale made out in
the name of Ederlina. On September 7, 1984, Rodolfo
Morelos executed a deed of absolute sale over the said
property in favor of Ederlina as the sole vendee for the
amount of P80,000.00.20 Alfred paid US$12,500.00 for the
property.
Alfred purchased another parcel of land from one Atty.
Mardoecheo Camporedondo, located in Moncado, Babak,
Davao, covered by TCT No. 35251. Alfred once more
agreed for the name of Ederlina to appear as the sole
vendee in the deed of sale. On December 31, 1984, Atty.
Camporedondo executed a deed of sale over the property
for P65,000.00 in favor of Ederlina as the sole vendee.21
Alfred, through Ederlina, paid the lot at the cost of
P33,682.00 and US$7,000.00, respectively, for which the
vendor signed receipts.22 On August 14, 1985, TCT No.
47246 was issued to Ederlina as the sole owner of the said
property.23
Meanwhile, Ederlina deposited on December 27, 1985, the
total amount of US$250,000 with the HSBC Kowloon
under Joint Deposit Account No. 018-462341-145.24
The couple decided to put up a beach resort on a four-
hectare land in Camudmud, Babak, Davao, owned by
spouses Enrique and Rosela Serrano. Alfred purchased
the property from the spouses for P90,000.00, and the
latter issued a receipt therefor.25 A draftsman
commissioned by the couple submitted a sketch of the
beach resort.26 Beach houses were forthwith constructed
on a portion of the property and were eventually rented out
by Ederlina's father, Narciso Catito. The rentals were
collected by Narciso, while Ederlina kept the proceeds of
the sale of copra from the coconut trees in the property. By
this time, Alfred had already spent P200,000.00 for the
purchase, construction and upkeep of the property.
Ederlina often wrote letters to her family informing them of
her life with Alfred. In a Letter dated January 21, 1985, she
wrote about how Alfred had financed the purchases of
some real properties, the establishment of her beauty
parlor business, and her petition to divorce Klaus.27
Because Ederlina was preoccupied with her business in
Manila, she executed on July 8, 1985, two special powers
of attorney28 appointing Alfred as attorney-in-fact to
receive in her behalf the title and the deed of sale over the
property sold by the spouses Enrique Serrano.
In the meantime, Ederlina's petition for divorce was denied
because Klaus opposed the same. A second petition filed
by her met the same fate. Klaus wanted half of all the
properties owned by Ederlina in the Philippines before he
would agree to a divorce. Worse, Klaus threatened to file a
bigamy case against Ederlina.29
Alfred proposed the creation of a partnership to Ederlina,
or as an alternative, the establishment of a corporation,
with Ederlina owning 30% of the equity thereof. She
initially agreed to put up a corporation and contacted Atty.
Armando Dominguez to prepare the necessary
documents. Ederlina changed her mind at the last minute
when she was advised to insist on claiming ownership
over the properties acquired by them during their
coverture.
Alfred and Ederlina's relationship started deteriorating.
Ederlina had not been able to secure a divorce from Klaus.
The latter could charge her for bigamy and could even
involve Alfred, who himself was still married. To avoid
complications, Alfred decided to live separately from
Ederlina and cut off all contacts with her. In one of her
letters to Alfred, Ederlina complained that he had ruined
her life. She admitted that the money used for the
purchase of the properties in Davao were his. She offered
to convey the properties deeded to her by Atty.
Mardoecheo Camporedondo and Rodolfo Morelos, asking
Alfred to prepare her affidavit for the said purpose and
send it to her for her signature.30 The last straw for Alfred
came on September 2, 1985, when someone smashed the
front and rear windshields of Alfred's car and damaged the
windows. Alfred thereafter executed an affidavit-complaint
charging Ederlina and Sally MacCarron with malicious
mischief.31
On October 15, 1985, Alfred wrote to Ederlina's father,
complaining that Ederlina had taken all his life savings and
because of this, he was virtually penniless. He further
accused the Catito family of acquiring for themselves the
properties he had purchased with his own money. He
demanded the return of all the amounts that Ederlina and
her family had "stolen" and turn over all the properties
acquired by him and Ederlina during their coverture.32
Shortly thereafter, Alfred filed a Complaint33 dated
October 28, 1985, against Ederlina, with the Regional Trial
Court of Quezon City, for recovery of real and personal
properties located in Quezon City and Manila. In his
complaint, Alfred alleged, inter alia, that Ederlina, without
his knowledge and consent, managed to transfer funds
from their joint account in HSBC Hong Kong, to her own
account with the same bank. Using the said funds,
Ederlina was able to purchase the properties subject of the
complaints. He also alleged that the beauty parlor in
Ermita was established with his own funds, and that the
Quezon City property was likewise acquired by him with
his personal funds.34
Ederlina failed to file her answer and was declared in
default. Alfred adduced his evidence ex parte.
In the meantime, on November 7, 1985, Alfred also filed a
complaint35 against Ederlina with the Regional Trial Court,
Davao City, for specific performance, declaration of
ownership of real and personal properties, sum of money,
and damages. He alleged, inter alia, in his complaint:
4. That during the period of their common-law
relationship, plaintiff solely through his own efforts and
resources acquired in the Philippines real and personal
properties valued more or less at P724,000.00; The
defendant's common-law wife or live-in partner did not
contribute anything financially to the acquisition of the said
real and personal properties. These properties are as
follows:
I. Real Properties
a. TCT No. T-92456 located at Bajada, Davao City,
consisting of 286 square meters, (with residential house)
registered in the name of the original title owner Rodolfo
M. Morelos but already fully paid by plaintiff. Valued at
P342,000.00;
b. TCT No. T-47246 (with residential house)
located at Babak, Samal, Davao, consisting of 600 square
meters, registered in the name of Ederlina Catito, with the
Register of Deeds of Tagum, Davao del Norte valued at
P144,000.00;
c. A parcel of agricultural land located at
Camudmud, Babak, Samal, Davao del Norte, consisting of
4.2936 hectares purchased from Enrique Serrano and
Rosela B. Serrano. Already paid in full by plaintiff. Valued
at P228,608.32;
II. Personal Properties:
a. Furniture valued at P10,000.00.
...
5. That defendant made no contribution at all to the
acquisition, of the above-mentioned properties as all the
monies (sic) used in acquiring said properties belonged
solely to plaintiff;36
Alfred prayed that after hearing, judgment be rendered in
his favor:
WHEREFORE, in view of the foregoing premises, it is
respectfully prayed that judgment be rendered in favor of
plaintiff and against defendant:
a) Ordering the defendant to execute the
corresponding deeds of transfer and/or conveyances in
favor of plaintiff over those real and personal properties
enumerated in Paragraph 4 of this complaint;
b) Ordering the defendant to deliver to the plaintiff
all the above real and personal properties or their money
value, which are in defendant's name and custody
because these were acquired solely with plaintiffs money
and resources during the duration of the common-law
relationship between plaintiff and defendant, the
description of which are as follows:
(1) TCT No. T-92456 (with residential house)
located at Bajada, Davao City, consisting of 286 square
meters, registered in the name of the original title owner
Rodolfo Morelos but already fully paid by plaintiff. Valued
at P342,000.00;
(2) TCT No. T-47246 (with residential house)
located at Babak, Samal, Davao, consisting of 600 square
meters, registered in the name of Ederlina Catito, with the
Register of Deeds of Tagum, Davao del Norte, valued at
P144,000.00;
(3) A parcel of agricultural land located at
Camudmud, Babak, Samal, Davao del Norte, consisting of
4.2936 hectares purchased from Enrique Serrano and
Rosela B. Serrano. Already fully paid by plaintiff. Valued at
P228,608.32;
c) Declaring the plaintiff to be the sole and
absolute owner of the above-mentioned real and personal
properties;
d) Awarding moral damages to plaintiff in an
amount deemed reasonable by the trial court;
e) To reimburse plaintiff the sum of P12,000.00 as
attorney's fees for having compelled the plaintiff to litigate;
f) To reimburse plaintiff the sum of P5,000.00
incurred as litigation expenses also for having compelled
the plaintiff to litigate; and
g) To pay the costs of this suit;
Plaintiff prays other reliefs just and equitable in the
premises.37
In her answer, Ederlina denied all the material allegations
in the complaint, insisting that she acquired the said
properties with her personal funds, and as such, Alfred
had no right to the same. She alleged that the deeds of
sale, the receipts, and certificates of titles of the subject
properties were all made out in her name.38 By way of
special and affirmative defense, she alleged that Alfred
had no cause of action against her. She interposed
counterclaims against the petitioner.39
In the meantime, the petitioner filed a Complaint dated
August 25, 1987, against the HSBC in the Regional Trial
Court of Davao City40 for recovery of bank deposits and
damages.41 He prayed that after due proceedings,
judgment be rendered in his favor, thus:
WHEREFORE, plaintiff respectfully prays that the
Honorable Court adjudge defendant bank, upon hearing
the evidence that the parties might present, to pay plaintiff:
1. ONE HUNDRED TWENTY SIX THOUSAND
TWO HUNDRED AND THIRTY U.S. DOLLARS AND
NINETY EIGHT CENTS (US$126,230.98) plus legal
interests, either of Hong Kong or of the Philippines, from
20 December 1984 up to the date of execution or
satisfaction of judgment, as actual damages or in
restoration of plaintiffs lost dollar savings;
2. The same amount in (1) above as moral
damages;
3. Attorney's fees in the amount equivalent to
TWENTY FIVE PER CENT (25%) of (1) and (2) above;
4. Litigation expenses in the amount equivalent to
TEN PER CENT (10%) of the amount in (1) above; and
5. For such other reliefs as are just and equitable
under the circumstances.42
On April 28, 1986, the RTC of Quezon City rendered its
decision in Civil Case No. Q-46350, in favor of Alfred, the (1) Office desk and chair
decretal portion of which reads as follows:
(1) Double bed suits
WHEREFORE, premises considered, judgment is hereby
rendered ordering the defendant to perform the following: (1) Mirror/dresser
(1) To execute a document waiving her claim to the (1) Heavy duty voice/working mechanic
house and lot in No. 14 Fernandez St., San Francisco Del
Monte, Quezon City in favor of plaintiff or to return to the (1) "Sony" Beta-Movie camera
plaintiff the acquisition cost of the same in the amount of
$20,000.00, or to sell the said property and turn over the (1) Suitcase with personal belongings
proceeds thereof to the plaintiff;
(1) Cardboard box with belongings
(2) To deliver to the plaintiff the rights of ownership
and management of the beauty parlor located at 444 (1) Guitar Amplifier
Arquiza St., Ermita, Manila, including the equipment and
fixtures therein; (1) Hanger with men's suit (white)."
(3) To account for the earnings of rental of the To return to the plaintiff, (1) Hi-Fi Stereo equipment left at
house and lot in No. 14 Fernandez St., San Francisco Del 444 Arquiza Street, Ermita, Manila, as well as the Fronte
Monte, Quezon City, as well as the earnings in the beauty Suzuki car.
parlor at 444 Arquiza St., Ermita, Manila and turn over
one-half of the net earnings of both properties to the (4) To account for the monies (sic) deposited with
plaintiff; the joint account of the plaintiff and defendant (Account
No. 018-0-807950); and to restore to the plaintiff all the
(4) To surrender or return to the plaintiff the monies (sic) spent by the defendant without proper
personal properties of the latter left in the house at San authority;
Francisco Del Monte, to wit:
(5) To pay the amount of P5,000.00 by way of
"(1) Mamya automatic camera attorney's fees, and the costs of suit.
(1) 12 inch "Sonny" T.V. set, colored with remote SO ORDERED.43
control.
However, after due proceedings in the RTC of Davao City,
(1) Micro oven in Civil Case No. 17,817, the trial court rendered judgment
on September 28, 1995 in favor of Ederlina, the dispositive
(1) Electric fan (tall, adjustable stand) portion of which reads:
(1) Office safe with (2) drawers and safe WHEREFORE, the Court cannot give due course to the
complaint and hereby orders its dismissal. The
(1) Electric Washing Machine counterclaims of the defendant are likewise dismissed.

SO ORDERED.44
The trial court ruled that based on documentary evidence,
the purchaser of the three parcels of land subject of the
complaint was Ederlina. The court further stated that even
if Alfred was the buyer of the properties; he had no cause
of action against Ederlina for the recovery of the same
because as an alien, he was disqualified from acquiring
and owning lands in the Philippines. The sale of the three
parcels of land to the petitioner was null and void ab initio.
Applying the pari delicto doctrine, the petitioner was
precluded from recovering the properties from the
respondent.
Alfred appealed the decision to the Court of Appeals45 in
which the petitioner posited the view that although he
prayed in his complaint in the court a quo that he be
declared the owner of the three parcels of land, he had no
intention of owning the same permanently. His principal
intention therein was to be declared the transient owner for
the purpose of selling the properties at public auction,
ultimately enabling him to recover the money he had spent
for the purchase thereof.
On March 8, 2000, the CA rendered a decision affirming in
toto the decision of the RTC. The appellate court ruled that
the petitioner knowingly violated the Constitution; hence,
was barred from recovering the money used in the
purchase of the three parcels of land. It held that to allow
the petitioner to recover the money used for the purchase
of the properties would embolden aliens to violate the
Constitution, and defeat, rather than enhance, the public
policy.46
Hence, the petition at bar.
The petitioner assails the decision of the court contending
that:
THE HONORABLE COURT OF APPEALS ERRED IN
APPLYING THE RULE OF IN PARI DELICTO IN THE
INSTANT CASE BECAUSE BY THE FACTS AS
NARRATED IN THE DECISION IT IS APPARENT THAT
THE PARTIES ARE NOT EQUALLY GUILTY BUT
RATHER IT WAS THE RESPONDENT WHO EMPLOYED
FRAUD AS WHEN SHE DID NOT INFORM PETITIONER
THAT SHE WAS ALREADY MARRIED TO ANOTHER
GERMAN NATIONAL AND WITHOUT SUCH
FRAUDULENT DESIGN PETITIONER COULD NOT
HAVE PARTED WITH HIS MONEY FOR THE
PURCHASE OF THE PROPERTIES.47
and
THE HONORABLE COURT OF APPEALS ERRED IN
NOT HOLDING THAT THE INTENTION OF THE
PETITIONER IS NOT TO OWN REAL PROPERTIES IN
THE PHILIPPINES BUT TO SELL THEM AT PUBLIC
AUCTION TO BE ABLE TO RECOVER HIS MONEY
USED IN PURCHASING THEM.48
Since the assignment of errors are intertwined with each
other, the Court shall resolve the same simultaneously.
The petitioner contends that he purchased the three
parcels of land subject of his complaint because of his
desire to marry the respondent, and not to violate the
Philippine Constitution. He was, however, deceived by the
respondent when the latter failed to disclose her previous
marriage to Klaus Muller. It cannot, thus, be said that he
and the respondent are "equally guilty;" as such, the pari
delicto doctrine is not applicable to him. He acted in good
faith, on the advice of the respondent's uncle, Atty.
Mardoecheo Camporedondo. There is no evidence on
record that he was aware of the constitutional prohibition
against aliens acquiring real property in the Philippines
when he purchased the real properties subject of his
complaint with his own funds. The transactions were not
illegal per se but merely prohibited, and under Article 1416
of the New Civil Code, he is entitled to recover the money
used for the purchase of the properties. At any rate, the
petitioner avers, he filed his complaint in the court a quo
merely for the purpose of having him declared as the
owner of the properties, to enable him to sell the same at
public auction. Applying by analogy Republic Act No.
13349 as amended by Rep. Act No. 4381 and Rep. Act
No. 4882, the proceeds of the sale would be remitted to
him, by way of refund for the money he used to purchase
the said properties. To bar the petitioner from recovering
the subject properties, or at the very least, the money used
for the purchase thereof, is to allow the respondent to
enrich herself at the expense of the petitioner in violation
of Article 22 of the New Civil Code.
The petition is bereft of merit.
Section 14, Article XIV of the 1973 Constitution provides,
as follows:
Save in cases of hereditary succession, no private land
shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire or hold
lands in the public domain.50
Lands of the public domain, which include private lands,
may be transferred or conveyed only to individuals or
entities qualified to acquire or hold private lands or lands of
the public domain. Aliens, whether individuals or
corporations, have been disqualified from acquiring lands
of the public domain. Hence, they have also been
disqualified from acquiring private lands.51
Even if, as claimed by the petitioner, the sales in question
were entered into by him as the real vendee, the said
transactions are in violation of the Constitution; hence, are
null and void ab initio.52 A contract that violates the
Constitution and the law, is null and void and vests no
rights and creates no obligations. It produces no legal
effect at all.53 The petitioner, being a party to an illegal
contract, cannot come into a court of law and ask to have
his illegal objective carried out. One who loses his money
or property by knowingly engaging in a contract or
transaction which involves his own moral turpitude may not
maintain an action for his losses. To him who moves in
deliberation and premeditation, the law is unyielding.54
The law will not aid either party to an illegal contract or out of my own exclusive funds." (paragraph IV, Exhibit
agreement; it leaves the parties where it finds them.55 "W.")
Under Article 1412 of the New Civil Code, the petitioner
cannot have the subject properties deeded to him or allow and his testimony before this Court which is hereby
him to recover the money he had spent for the purchase quoted:
thereof.56 Equity as a rule will follow the law and will not
permit that to be done indirectly which, because of public ATTY. ABARQUEZ:
policy, cannot be done directly.57 Where the wrong of one
party equals that of the other, the defendant is in the Q. In whose name the said house and lot placed, by
stronger position . . . it signifies that in such a situation, the way, where is his house and lot located?
neither a court of equity nor a court of law will administer a
remedy.58 The rule is expressed. in the maxims: EX A. In 14 Fernandez St., San Francisco, del Monte,
DOLO ORITUR ACTIO and IN PARI DELICTO POTIOR Manila.
EST CONDITIO DEFENDENTIS.59
Q. In whose name was the house placed?
The petitioner cannot feign ignorance of the constitutional
proscription, nor claim that he acted in good faith, let alone A. Ederlina Catito because I was informed being not a
assert that he is less guilty than the respondent. The Filipino, I cannot own the property. (tsn, p. 11, August 27,
petitioner is charged with knowledge of the constitutional 1986).
prohibition.60 As can be gleaned from the decision of the
trial court, the petitioner was fully aware that he was xxx xxx xxx
disqualified from acquiring and owning lands under
Philippine law even before he purchased the properties in COURT:
question; and, to skirt the constitutional prohibition, the
petitioner had the deed of sale placed under the Q. So you understand that you are a foreigner that
respondent's name as the sole vendee thereof: you cannot buy land in the Philippines?
Such being the case, the plaintiff is subject to the A. That is correct but as she would eventually be my
constitutional restrictions governing the acquisition of real wife that would be owned by us later on. (tsn, p. 5,
properties in the Philippines by aliens. September 3, 1986)
From the plaintiff's complaint before the Regional Trial xxx xxx xxx
Court, National Capital Judicial Region, Branch 84,
Quezon City in Civil Case No. Q-46350 he alleged: Q. What happened after that?
x x x "That on account that foreigners are not allowed by A. She said you foreigner you are using Filipinos to
the Philippine laws to acquire real properties in their name buy property.
as in the case of my vendor Miss Victoria Vinuya (sic)
although married to a foreigner, we agreed and I Q. And what did you answer?
consented in having the title to subject property placed in
defendant's name alone although I paid for the whole price
A: I said thank you very much for the property I
bought because I gave you a lot of money (tsn., p. 14,
ibid).
It is evident that the plaintiff was fully aware that as a non-
citizen of the Philippines, he was disqualified from validly
purchasing any land within the country.61
The petitioner's claim that he acquired the subject
properties because of his desire to marry the respondent,
believing that both of them would thereafter jointly own the
said properties, is belied by his own evidence. It is merely
an afterthought to salvage a lost cause. The petitioner
admitted on cross-examination that he was all along
legally married to Teresita Santos Frenzel, while he was
having an amorous relationship with the respondent:
ATTY. YAP:
Q When you were asked to identify yourself on direct
examination you claimed before this Honorable Court that
your status is that of being married, do you confirm that?
A Yes, sir.
Q To whom are you married?
A To a Filipina, since 1976.
Q Would you tell us who is that particular person you
are married since 1976?
A Teresita Santos Frenzel.
Q Where is she now?
A In Australia.
Q Is this not the person of Teresita Frenzel who
became an Australian citizen?
A I am not sure, since 1981 we were separated.

Q You were only separated, in fact, but not legally
separated?
A Thru my counsel in Australia I filed a separation
case.
Q As of the present you are not legally divorce[d]?
A I am still legally married.62
The respondent was herself married to Klaus Muller, a
German citizen. Thus, the petitioner and the respondent
could not lawfully join in wedlock. The evidence on record
shows that the petitioner in fact knew of the respondent's
marriage to another man, but nonetheless purchased the
subject properties under the name of the respondent and
paid the purchase prices therefor. Even if it is assumed
gratia arguendi that the respondent and the petitioner were
capacitated to marry, the petitioner is still disqualified to
own the properties in tandem with the respondent.63
The petitioner cannot find solace in Article 1416 of the
New Civil Code which reads:
Art. 1416. When the agreement is not illegal per se but is
merely prohibited, and the prohibition by the law is
designed for the protection of the plaintiff, he may, if public
policy is thereby enhanced, recover what he has paid or
delivered.64
The provision applies only to those contracts which are
merely prohibited, in order to benefit private interests. It
does not apply to contracts void ab initio. The sales of
three parcels of land in favor of the petitioner who is a
foreigner is illegal per se. The transactions are void ab
initio because they were entered into in violation of the
Constitution. Thus, to allow the petitioner to recover the
properties or the money used in the purchase of the
parcels of land would be subversive of public policy.
Neither may the petitioner find solace in Rep. Act No. 133,
as amended by Rep. Act No. 4882, which reads:
SEC. 1. Any provision of law to the contrary
notwithstanding, private real property may be mortgaged in
favor of any individual, corporation, or association, but the
mortgagee or his successor-in-interest, if disqualified to
acquire or hold lands of the public domain in the
Philippines, shall not take possession of the mortgaged
property during the existence of the mortgage and shall
not take possession of mortgaged property except after
default and for the sole purpose of foreclosure,
receivership, enforcement or other proceedings and in no
case for a period of more than five years from actual
possession and shall not bid or take part in any sale of
such real property in case of foreclosure: Provided, That
said mortgagee or successor-in-interest may take
possession of said property after default in accordance
with the prescribed judicial procedures for foreclosure and
receivership and in no case exceeding five years from
actual possession.65
From the evidence on record, the three parcels of land
subject of the complaint were not mortgaged to the
petitioner by the owners thereof but were sold to the
respondent as the vendee, albeit with the use of the
petitioner's personal funds.
Futile, too, is petitioner's reliance on Article 22 of the New
Civil Code which reads:
Art. 22. Every person who through an act of
performance by another, or any other means, acquires or
comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to
him.66
The provision is expressed in the maxim: "MEMO CUM
ALTERIUS DETER DETREMENTO PROTEST" (No
person should unjustly enrich himself at the expense of
another). An action for recovery of what has been paid
without just cause has been designated as an accion in
rem verso.67 This provision does not apply if, as in this
case, the action is proscribed by the Constitution or by the
application of the pari delicto doctrine. 68 It may be unfair
and unjust to bar the petitioner from filing an accion in rem
verso over the subject properties, or from recovering the
money he paid for the said properties, but, as Lord
Mansfield stated in the early case of Holman vs.
Johnson:69 "The objection that a contract is immoral or
illegal as between the plaintiff and the defendant, sounds
at all times very ill in the mouth of the defendant. It is not
for his sake, however, that the objection is ever allowed;
but it is founded in general principles of policy, which the
defendant has the advantage of, contrary to the real
justice, as between him and the plaintiff."
IN LIGHT OF ALL THE FOREGOING, the petition is
DISMISSED. The decision of the Court of Appeals is
AFFIRMED in toto.
Costs against the petitioner.
SO ORDERED.
Bellosillo, Austria-Martinez and Tinga, JJ ., concur.
Quisumbing, J ., is on leave.
Footnotes
1 Penned by Justice Martin Villarama, Jr., with Presiding
Justice Cancio C. Garcia and Justice Andres B. Reyes, Jr.
concurring.
2 Penned by Judge William M. Layague.
3 The petitioner adduced testimonial and documentary
evidence. The respondent did not adduce any testimonial
evidence, but adduced as Exhibit "5," the petitioner's
complaint in Civil Case No. 18,750-87 filed with the RTC of
Davao City.
4 Exhibits "A" to "D-4."

5 Exhibits "B" and "B-1."
6 Exhibit "C."
7 Exhibit "E."
8 Exhibit "D."
9 Exhibit "F."
10 Exhibit "G."
11 Exhibits "H" to "H-12."
12 Exhibit "J."
13 Exhibits "K" to "K-5."
14 Exhibit "L."
15 Exhibit "M."
16 Exhibit "V."
17 Exhibit "N."
18 Exhibits "O" to "O-4."
19 Exhibit "P-4."
20 Exhibit "P" & "P-1."
21 Exhibit "Q" & "Q-1."
22 Exhibits "Q-4" to "Q-6."
23 Exhibit "Q-20."
24 Exhibits "V-4"–"V-10."
25 Exhibit "R-5."
45 Docketed as CA-G.R. CV. No. 53485.
26 Exhibit "R-13."
46 Rollo, p. 30.
27 Exhibit "BB."
47 Id., at 16.
28 Exhibits "S" and "T."
48 Id., at 19.
29 Exhibit "BB."
49 An act to authorize the mortgage of private real
30 Exhibits "CC" to "CC-4." property in favor of any individual, corporation or
association subject to certain conditions.
31 Exhibit "U;" Entitled and docketed as Alfred Fritz
Frenzel vs. Ederlina P. Catito, Civil Case No. 46350. 50 Supra. The conveyances subject of the case were
executed when the 1973 Constitution was in effect.
32 Exhibit "GG."
51 Ong Ching Po vs. Court of Appeals, 239 SCRA 341
33 Entitled and docketed as Alfred Fritz Frenzel vs. [1994].
Ederlina P. Catito, Civil Case No. Q-46350.
52 Alexander Krivenko, vs. Register of Deeds, et al., 79
34 Exhibit "W." Phil. 461 [1947]; Rellosa vs. Hun, 93 Phil. 827 [1953];
Caoile vs. Peng, 93 Phil. 861 [1953]; Ong Ching Po vs.
35 Entitled and docketed as Alfred Frenzel vs. Ederlina P. Court of Appeals, supra.
Catito, Civil Case No. 17,817.
53 Francisco Chavez vs. Presidential Commission on
36 Records, p. 2. Good Government, et al., 307 SCRA 394 [1999].
37 Records, pp. 4–5. 54 Aikman vs. City of Wheeling, Southeastern Reporter,
667 [1938].
38 Exhibit "5."
55 Rellosa vs. Hun, supra.
39 Records, pp. 13–16.
56 ART. 1412. If the act in which the unlawful or forbidden
40 Docketed as Civil Case No. 18,750-87. cause consists does not constitute a criminal offense, the
following rules shall be observed:
41 Exhibit "5;" Records, pp. 194–198.
(1) When the fault is on the part of both contracting
42 Exhibit "5-D;" Records, pp. 197–198. parties, neither may recover what he has given by virtue of
the contract, or demand the performance of the other's
43 Exhibit "X-2"–"X-3." undertaking. . .
44 Records, p. 232.
57 Corkins vs. Ritter, 40 N.W., Reporter, 2d 726 [1950],
Daley vs. City of Melvindale, 260 N.W. Reporter, 898
[1935].

58 19 Am. Jur., Equity, Section 478.

59 Bough & Bough vs. Cantiveros and Hanopol, 40 Phil.

209 [1919], Reporter.

60 Cheesman vs. Intermediate Appellate Court, et al., 193

SCRA 93 [1991].

61 Records, pp. 230–231.

62 TSN, 7 April 1987, pp. 2–3 (Frenzel).

63 See note 57.

64 Supra.

65 Supra.

66 Supra.

67 Id., at 85.

68 Tolentino, Civil Code of the Philippines, 1990 ed., Vol. I,

p. 85.

69 Cited in Marissey vs. Bologna, 123 So. 2d 537 [1960].

G.R. No. 190755 November 24, 2010
LAND BANK OF THE PHILIPPINES, Petitioner,
vs.
ALFREDO ONG, Respondent.
DECISION
VELASCO, JR., J.:
This is an appeal from the October 20, 2009 Decision of
the Court of Appeals (CA) in CA-G.R. CR-CV No. 84445
entitled Alfredo Ong v. Land Bank of the Philippines, which
affirmed the Decision of the Regional Trial Court (RTC),
Branch 17 in Tabaco City.
The Facts
On March 18, 1996, spouses Johnson and Evangeline Sy
secured a loan from Land Bank Legazpi City in the amount
of PhP 16 million. The loan was secured by three (3)
residential lots, five (5) cargo trucks, and a warehouse.
Under the loan agreement, PhP 6 million of the loan would
be short-term and would mature on February 28, 1997,
while the balance of PhP 10 million would be payable in
seven (7) years. The Notice of Loan Approval dated
February 22, 1996 contained an acceleration clause
wherein any default in payment of amortizations or other
charges would accelerate the maturity of the loan.1
Subsequently, however, the Spouses Sy found they could
no longer pay their loan. On December 9, 1996, they sold
three (3) of their mortgaged parcels of land for PhP
150,000 to Angelina Gloria Ong, Evangeline’s mother,
under a Deed of Sale with Assumption of Mortgage. The
relevant portion of the document2 is quoted as follows:
WHEREAS, we are no longer in a position to settle our
obligation with the bank;
NOW THEREFORE, for and in consideration of the sum of
ONE HUNDRED FIFTY THOUSAND PESOS
(P150,000.00) Philippine Currency, we hereby these
presents SELL, CEDE, TRANSFER and CONVEY, by way
of sale unto ANGELINA GLORIA ONG, also of legal age,
Filipino citizen, married to Alfredo Ong, and also a resident
of Tabaco, Albay, Philippines, their heirs and assigns, the
above-mentioned debt with the said LAND BANK OF THE
PHILIPPINES, and by reason hereof they can make the
necessary representation with the bank for the proper
restructuring of the loan with the said bank in their favor;
That as soon as our obligation has been duly settled, the
bank is authorized to release the mortgage in favor of the
vendees and for this purpose VENDEES can register this
instrument with the Register of Deeds for the issuance of
the titles already in their names.
IN WITNESS WHEREOF, we have hereunto affixed our
signatures this 9th day of December 1996 at Tabaco,
Albay, Philippines.
(signed)
EVANGELINE O. SY
Vendor (signed)
JOHNSON B. SY
Vendor
Evangeline’s father, petitioner Alfredo Ong, later went to
Land Bank to inform it about the sale and assumption of
mortgage.3 Atty. Edna Hingco, the Legazpi City Land
Bank Branch Head, told Alfredo and his counsel Atty.
Ireneo de Lumen that there was nothing wrong with the
agreement with the Spouses Sy but provided them with
requirements for the assumption of mortgage. They were
also told that Alfredo should pay part of the principal which
was computed at PhP 750,000 and to update due or
accrued interests on the promissory notes so that Atty.
Hingco could easily approve the assumption of mortgage.
Two weeks later, Alfredo issued a check for PhP 750,000
and personally gave it to Atty. Hingco. A receipt was
issued for his payment. He also submitted the other
documents required by Land Bank, such as financial
statements for 1994 and 1995. Atty. Hingco then informed
Alfredo that the certificate of title of the Spouses Sy would
be transferred in his name but this never materialized. No
notice of transfer was sent to him.4
Alfredo later found out that his application for assumption
of mortgage was not approved by Land Bank. The bank
learned from its credit investigation report that the Ongs
had a real estate mortgage in the amount of PhP
18,300,000 with another bank that was past due. Alfredo
claimed that this was fully paid later on. Nonetheless, Land
Bank foreclosed the mortgage of the Spouses Sy after
several months. Alfredo only learned of the foreclosure
when he saw the subject mortgage properties included in a
Notice of Foreclosure of Mortgage and Auction Sale at the
RTC in Tabaco, Albay. Alfredo’s other counsel, Atty.
Madrilejos, subsequently talked to Land Bank’s lawyer and
was told that the PhP 750,000 he paid would be returned
to him.5
On December 12, 1997, Alfredo initiated an action for
recovery of sum of money with damages against Land
Bank in Civil Case No. T-1941, as Alfredo’s payment was
not returned by Land Bank. Alfredo maintained that Land
Bank’s foreclosure without informing him of the denial of
his assumption of the mortgage was done in bad faith. He
argued that he was lured into believing that his payment of
PhP 750,000 would cause Land Bank to approve his
assumption of the loan of the Spouses Sy and the transfer
of the mortgaged properties in his and his wife’s name.6
He also claimed incurring expenses for attorney’s fees of
PhP 150,000, filing fee of PhP 15,000, and PhP 250,000 in
moral damages.7
Testifying for Land Bank, Atty. Hingco claimed during trial
that as branch manager she had no authority to approve
loans and could not assure anybody that their assumption
of mortgage would be approved. She testified that the
breakdown of Alfredo’s payment was as follows:
PhP 101,409.59 applied to principal
216,246.56 accrued interests receivable
396,571.77 interests
18,766.10 penalties
16,805.98 accounts receivable
Total: ----------------
750,000.00
According to Atty. Hingco, the bank processes an
assumption of mortgage as a new loan, since the new
borrower is considered a new client. They used character,
capacity, capital, collateral, and conditions in determining
who can qualify to assume a loan. Alfredo’s proposal to
assume the loan, she explained, was referred to a
separate office, the Lending Center. 8
During cross-examination, Atty. Hingco testified that
several months after Alfredo made the tender of payment,
she received word that the Lending Center rejected
Alfredo’s loan application. She stated that it was the
Lending Center and not her that should have informed
Alfredo about the denial of his and his wife’s assumption of
mortgage. She added that although she told Alfredo that
the agreement between the spouses Sy and Alfredo was
valid between them and that the bank would accept
payments from him, Alfredo did not pay any further amount
so the foreclosure of the loan collaterals ensued. She
admitted that Alfredo demanded the return of the PhP
750,000 but said that there was no written demand before
the case against the bank was filed in court. She said that
Alfredo had made the payment of PhP 750,000 even
before he applied for the assumption of mortgage and that
the bank received the said amount because the subject
account was past due and demandable; and the Deed of
Assumption of Mortgage was not used as the basis for the
payment. 9
The Ruling of the Trial Court
The RTC held that the contract approving the assumption
of mortgage was not perfected as a result of the credit
investigation conducted on Alfredo. It noted that Alfredo
was not even informed of the disapproval of the
assumption of mortgage but was just told that the accounts
of the spouses Sy had matured and gone unpaid. It ruled
that under the principle of equity and justice, the bank
should return the amount Alfredo had paid with interest at
12% per annum computed from the filing of the complaint.
The RTC further held that Alfredo was entitled to attorney’s
fees and litigation expenses for being compelled to
litigate.10
The dispositive portion of the RTC Decision reads:
WHEREFORE, premises considered, a decision is
rendered, ordering defendant bank to pay plaintiff, Alfredo
Ong the amount of P750,000.00 with interest at 12% per
annum computed from Dec. 12, 1997 and attorney’s fees
and litigation expenses of P50,000.00.
Costs against defendant bank.
SO ORDERED.11
The Ruling of the Appellate Court
On appeal, Land Bank faulted the trial court for (1) holding
that the payment of PhP 750,000 made by Ong was one of
the requirements for the approval of his proposal to
assume the mortgage of the Sy spouses; (2) erroneously
ordering Land Bank to return the amount of PhP 750,000
to Ong on the ground of its failure to effect novation; and
(3) erroneously affirming the award of PhP 50,000 to Ong
as attorney’s fees and litigation expenses.
The CA affirmed the RTC Decision.12 It held that Alfredo’s
recourse is not against the Sy spouses. According to the
appellate court, the payment of PhP 750,000 was for the
approval of his assumption of mortgage and not for
payment of arrears incurred by the Sy spouses. As such, it
ruled that it would be incorrect to consider Alfredo a third
person with no interest in the fulfillment of the obligation
under Article 1236 of the Civil Code. Although Land Bank
was not bound by the Deed between Alfredo and the
Spouses Sy, the appellate court found that Alfredo and
Land Bank’s active preparations for Alfredo’s assumption
of mortgage essentially novated the agreement.
On January 5, 2010, the CA denied Land Bank’s motion
for reconsideration for lack of merit. Hence, Land Bank
appealed to us.
The Issues
I
Whether the Court of Appeals erred in holding that Art.
1236 of the Civil Code does not apply and in finding that
there is no novation.
II
Whether the Court of Appeals misconstrued the evidence
and the law when it affirmed the trial court decision’s
ordering Land Bank to pay Ong the amount of
Php750,000.00 with interest at 12% annum.
III
Whether the Court of Appeals committed reversible error
when it affirmed the award of Php50,000.00 to Ong as
attorney’s fees and expenses of litigation.
The Ruling of this Court
We affirm with modification the appealed decision.
Recourse is against Land Bank
Land Bank contends that Art. 1236 of the Civil Code backs
their claim that Alfredo should have sought recourse
against the Spouses Sy instead of Land Bank. Art. 1236
provides:
The creditor is not bound to accept payment or
performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to
the contrary.
Whoever pays for another may demand from the debtor
what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover
only insofar as the payment has been beneficial to the
debtor.1avvphi1
We agree with Land Bank on this point as to the first part
of paragraph 1 of Art. 1236. Land Bank was not bound to
accept Alfredo’s payment, since as far as the former was
concerned, he did not have an interest in the payment of
the loan of the Spouses Sy. However, in the context of the
second part of said paragraph, Alfredo was not making
payment to fulfill the obligation of the Spouses Sy. Alfredo
made a conditional payment so that the properties subject
of the Deed of Sale with Assumption of Mortgage would be
titled in his name. It is clear from the records that Land
Bank required Alfredo to make payment before his
assumption of mortgage would be approved. He was
informed that the certificate of title would be transferred
accordingly. He, thus, made payment not as a debtor but
as a prospective mortgagor. But the trial court stated:
[T]he contract was not perfected or consummated because
of the adverse finding in the credit investigation which led
to the disapproval of the proposed assumption. There was
no evidence presented that plaintiff was informed of the
disapproval. What he received was a letter dated May 22,
1997 informing him that the account of spouses Sy had
matured but there [were] no payments. This was sent even
before the conduct of the credit investigation on June 20,
1997 which led to the disapproval of the proposed
assumption of the loans of spouses Sy.13
Alfredo, as a third person, did not, therefore, have an
interest in the fulfillment of the obligation of the Spouses
Sy, since his interest hinged on Land Bank’s approval of
his application, which was denied. The circumstances of
the instant case show that the second paragraph of Art.
1236 does not apply. As Alfredo made the payment for his
own interest and not on behalf of the Spouses Sy,
recourse is not against the latter. And as Alfredo was not
paying for another, he cannot demand from the debtors,
the Spouses Sy, what he has paid.
Novation of the loan agreement
Land Bank also faults the CA for finding that novation
applies to the instant case. It reasons that a substitution of
debtors was made without its consent; thus, it was not
bound to recognize the substitution under the rules on
novation.
On the matter of novation, Spouses Benjamin and Agrifina
Lim v. M.B. Finance Corporation14 provides the following
discussion:
Novation, in its broad concept, may either be extinctive or
modificatory. It is extinctive when an old obligation is
terminated by the creation of a new obligation that takes
the place of the former; it is merely modificatory when the
old obligation subsists to the extent it remains compatible
with the amendatory agreement. An extinctive novation
results either by changing the object or principal conditions
(objective or real), or by substituting the person of the
debtor or subrogating a third person in the rights of the
creditor (subjective or personal). Under this mode,
novation would have dual functions ─ one to extinguish an
existing obligation, the other to substitute a new one in its
place ─ requiring a conflux of four essential requisites: (1)
a previous valid obligation; (2) an agreement of all parties
concerned to a new contract; (3) the extinguishment of the
old obligation; and (4) the birth of a valid new obligation. x
xx
In order that an obligation may be extinguished by another
which substitutes the same, it is imperative that it be so
declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other.
The test of incompatibility is whether or not the two
obligations can stand together, each one having its
independent existence. x x x (Emphasis supplied.)
Furthermore, Art. 1293 of the Civil Code states:
Novation which consists in substituting a new debtor in the
place of the original one, may be made even without the
knowledge or against the will of the latter, but not without
the consent of the creditor. Payment by the new debtor
gives him rights mentioned in articles 1236 and 1237.
We do not agree, then, with the CA in holding that there
was a novation in the contract between the parties. Not all
the elements of novation were present. Novation must be
expressly consented to. Moreover, the conflicting intention
and acts of the parties underscore the absence of any
express disclosure or circumstances with which to deduce
a clear and unequivocal intent by the parties to novate the
old agreement.15 Land Bank is thus correct when it
argues that there was no novation in the following:
[W]hether or not Alfredo Ong has an interest in the
obligation and payment was made with the knowledge or
consent of Spouses Sy, he may still pay the obligation for
the reason that even before he paid the amount of
P750,000.00 on January 31, 1997, the substitution of
debtors was already perfected by and between Spouses
Sy and Spouses Ong as evidenced by a Deed of Sale with
Assumption of Mortgage executed by them on December
9, 1996. And since the substitution of debtors was made
without the consent of Land Bank – a requirement which is
indispensable in order to effect a novation of the
obligation, it is therefore not bound to recognize the
substitution of debtors. Land Bank did not intervene in the
contract between Spouses Sy and Spouses Ong and did
not expressly give its consent to this substitution.16
Unjust enrichment
Land Bank maintains that the trial court erroneously
applied the principle of equity and justice in ordering it to
return the PhP 750,000 paid by Alfredo. Alfredo was
allegedly in bad faith and in estoppel. Land Bank contends
that it enjoyed the presumption of regularity and was in
good faith when it accepted Alfredo’s tender of PhP
750,000. It reasons that it did not unduly enrich itself at
Alfredo’s expense during the foreclosure of the mortgaged
properties, since it tendered its bid by subtracting PhP
750,000 from the Spouses Sy’s outstanding loan
obligation. Alfredo’s recourse then, according to Land
Bank, is to have his payment reimbursed by the Spouses
Sy.
We rule that Land Bank is still liable for the return of the
PhP 750,000 based on the principle of unjust enrichment.
Land Bank is correct in arguing that it has no obligation as
creditor to recognize Alfredo as a person with interest in
the fulfillment of the obligation. But while Land Bank is not
bound to accept the substitution of debtors in the subject
real estate mortgage, it is estopped by its action of
accepting Alfredo’s payment from arguing that it does not
have to recognize Alfredo as the new debtor. The
elements of estoppel are:
First, the actor who usually must have knowledge, notice
or suspicion of the true facts, communicates something to
another in a misleading way, either by words, conduct or
silence; second, the other in fact relies, and relies
reasonably or justifiably, upon that communication; third,
the other would be harmed materially if the actor is later
permitted to assert any claim inconsistent with his earlier
conduct; and fourth, the actor knows, expects or foresees
that the other would act upon the information given or that
a reasonable person in the actor’s position would expect or
foresee such action.17
By accepting Alfredo’s payment and keeping silent on the
status of Alfredo’s application, Land Bank misled Alfredo to
believe that he had for all intents and purposes stepped
into the shoes of the Spouses Sy.
The defense of Land Bank Legazpi City Branch Manager
Atty. Hingco that it was the bank’s Lending Center that
should have notified Alfredo of his assumption of mortgage
disapproval is unavailing. The Lending Center’s lack of
notice of disapproval, the Tabaco Branch’s silence on the
disapproval, and the bank’s subsequent actions show a
failure of the bank as a whole, first, to notify Alfredo that he
is not a recognized debtor in the eyes of the bank; and
second, to apprise him of how and when he could collect
on the payment that the bank no longer had a right to
keep.
We turn then on the principle upon which Land Bank must
return Alfredo’s payment. Unjust enrichment exists "when
a person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another
against the fundamental principles of justice, equity and
good conscience."18 There is unjust enrichment under Art.
22 of the Civil Code when (1) a person is unjustly
benefited, and (2) such benefit is derived at the expense of
or with damages to another.19
Additionally, unjust enrichment has been applied to actions
called accion in rem verso. In order that the accion in rem
verso may prosper, the following conditions must concur:
(1) that the defendant has been enriched; (2) that the
plaintiff has suffered a loss; (3) that the enrichment of the
defendant is without just or legal ground; and (4) that the
plaintiff has no other action based on contract, quasi-
contract, crime, or quasi-delict.20 The principle of unjust
enrichment essentially contemplates payment when there
is no duty to pay, and the person who receives the
payment has no right to receive it.21
The principle applies to the parties in the instant case, as,
Alfredo, having been deemed disqualified from assuming
the loan, had no duty to pay petitioner bank and the latter
had no right to receive it.
Moreover, the Civil Code likewise requires under Art. 19
that "[e]very 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."
Land Bank, however, did not even bother to inform Alfredo
that it was no longer approving his assumption of the
Spouses Sy’s mortgage. Yet it acknowledged his interest
in the loan when the branch head of the bank wrote to tell
him that his daughter’s loan had not been paid.22 Land
Bank made Alfredo believe that with the payment of PhP
750,000, he would be able to assume the mortgage of the
Spouses Sy. The act of receiving payment without
returning it when demanded is contrary to the adage of
giving someone what is due to him. The outcome of the
application would have been different had Land Bank first
conducted the credit investigation before accepting
Alfredo’s payment. He would have been notified that his
assumption of mortgage had been disapproved; and he
would not have taken the futile action of paying PhP
750,000. The procedure Land Bank took in acting on
Alfredo’s application cannot be said to have been fair and
proper.
As to the claim that the trial court erred in applying equity
to Alfredo’s case, we hold that Alfredo had no other
remedy to recover from Land Bank and the lower court
properly exercised its equity jurisdiction in resolving the
collection suit. As we have held in one case:
Equity, as the complement of legal jurisdiction, seeks to
reach and complete justice where courts of law, through
the inflexibility of their rules and want of power to adapt
their judgments to the special circumstances of cases, are
incompetent to do so. Equity regards the spirit and not the
letter, the intent and not the form, the substance rather
than the circumstance, as it is variously expressed by
different courts.23
Another claim made by Land Bank is the presumption of
regularity it enjoys and that it was in good faith when it
accepted Alfredo’s tender of PhP 750,000.
The defense of good faith fails to convince given Land
Bank’s actions. Alfredo was not treated as a mere
prospective borrower. After he had paid PhP 750,000, he
was made to sign bank documents including a promissory
note and real estate mortgage. He was assured by Atty.
Hingco that the titles to the properties covered by the
Spouses Sy’s real estate mortgage would be transferred in
his name, and upon payment of the PhP 750,000, the
account would be considered current and renewed in his
name.24

Land Bank posits as a defense that it did not unduly enrich
itself at Alfredo’s expense during the foreclosure of the
mortgaged properties, since it tendered its bid by
subtracting PhP 750,000 from the Spouses Sy’s
outstanding loan obligation. It is observed that this is the
first time Land Bank is revealing this defense. However,
issues, arguments, theories, and causes not raised below
may no longer be posed on appeal.25 Land Bank’s
contention, thus, cannot be entertained at this
point.1avvphi1
Land Bank further questions the lower court’s decision on
the basis of the inconsistencies made by Alfredo on the
witness stand. It argues that Alfredo was not a credible
witness and his testimony failed to overcome the
presumption of regularity in the performance of regular
duties on the part of Land Bank.
This claim, however, touches on factual findings by the
trial court, and we defer to these findings of the trial court
as sustained by the appellate court. These are generally
binding on us. While there are exceptions to this rule, Land
Bank has not satisfactorily shown that any of them is
applicable to this issue.26 Hence, the rule that the trial
court is in a unique position to observe the demeanor of
witnesses should be applied and respected27 in the
instant case.
In sum, we hold that Land Bank may not keep the PhP
750,000 paid by Alfredo as it had already foreclosed on
the mortgaged lands.
Interest and attorney’s fees
As to the applicable interest rate, we reiterate the
guidelines found in Eastern Shipping Lines, Inc. v. Court of
Appeals:28
II. With regard particularly to an award of interest in the
concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as
follows:
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can
be established with reasonable certainty. Accordingly,
where the demand is established with reasonable
certainty, the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall,
in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of
credit.
No evidence was presented by Alfredo that he had sent a
written demand to Land Bank before he filed the collection
suit. Only the verbal agreement between the lawyers of the
parties on the return of the payment was mentioned.29
Consequently, the obligation of Land Bank to return the
payment made by Alfredo upon the former’s denial of the
latter’s application for assumption of mortgage must be
reckoned from the date of judicial demand on December
12, 1997, as correctly determined by the trial court and
affirmed by the appellate court.
The next question is the propriety of the imposition of
interest and the proper imposable rate of applicable
interest. The RTC granted the rate of 12% per annum
which was affirmed by the CA. From the above-quoted
guidelines, however, the proper imposable interest rate is
6% per annum pursuant to Art. 2209 of the Civil Code.
Sunga-Chan v. Court of Appeals is illuminating in this
regard:
In Reformina v. Tomol, Jr., the Court held that the legal
interest at 12% per annum under Central Bank (CB)
Circular No. 416 shall be adjudged only in cases involving
the loan or forbearance of money. And for transactions
involving payment of indemnities in the concept of
damages arising from default in the performance of
obligations in general and/or for money judgment not
involving a loan or forbearance of money, goods, or credit,
the governing provision is Art. 2209 of the Civil Code
prescribing a yearly 6% interest. Art. 2209 pertinently
provides:
Art. 2209. If the obligation consists in the payment of a
sum of money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation to the
contrary, shall be the payment of the interest agreed upon,
and in the absence of stipulation, the legal interest, which
is six per cent per annum.
The term "forbearance," within the context of usury law,
has been described as a contractual obligation of a lender
or creditor to refrain, during a given period of time, from
requiring the borrower or debtor to repay the loan or debt
then due and payable.

Eastern Shipping Lines, Inc. synthesized the rules on the
imposition of interest, if proper, and the applicable rate, as
follows: The 12% per annum rate under CB Circular No.
416 shall apply only to loans or forbearance of money,
goods, or credits, as well as to judgments involving such
loan or forbearance of money, goods, or credit, while the
6% per annum under Art. 2209 of the Civil Code applies
"when the transaction involves the payment of indemnities
in the concept of damage arising from the breach or a
delay in the performance of obligations in general," with
the application of both rates reckoned "from the time the
complaint was filed until the [adjudged] amount is fully
paid." In either instance, the reckoning period for the
commencement of the running of the legal interest shall be
subject to the condition "that the courts are vested with
discretion, depending on the equities of each case, on the
award of interest."30 (Emphasis supplied.)
Based on our ruling above, forbearance of money refers to
the contractual obligation of the lender or creditor to desist
for a fixed period from requiring the borrower or debtor to
repay the loan or debt then due and for which 12% per
annum is imposed as interest in the absence of a
stipulated rate. In the instant case, Alfredo’s conditional
payment to Land Bank does not constitute forbearance of
money, since there was no agreement or obligation for
Alfredo to pay Land Bank the amount of PhP 750,000, and
the obligation of Land Bank to return what Alfredo has
conditionally paid is still in dispute and has not yet been
determined. Thus, it cannot be said that Land Bank’s
alleged obligation has become a forbearance of money.
On the award of attorney’s fees, attorney’s fees and
expenses of litigation were awarded because Alfredo was
compelled to litigate due to the unjust refusal of Land Bank
to refund the amount he paid. There are instances when it
is just and equitable to award attorney’s fees and
expenses of litigation.31 Art. 2208 of the Civil Code
pertinently states:
In the absence of stipulation, attorney’s fees and expenses 1 Rollo, p. 44.
of litigation, other than judicial costs, cannot be recovered,
except: 2 Records, pp. 63-64.
xxxx 3 Rollo, p. 45.
(2) When the defendant’s act or omission has compelled 4 Id. at 45-46.
the plaintiff to litigate with third persons or to incur
expenses to protect his interest. 5 Id. at 46.
Given that Alfredo was indeed compelled to litigate against 6 Id.
Land Bank and incur expenses to protect his interest, we
find that the award falls under the exception above and is, 7 Id. at 92.
thus, proper given the circumstances.
8 Records, pp. 162-163.
On a final note. The instant case would not have been
litigated had Land Bank been more circumspect in dealing 9 Id. at 160.
with Alfredo. The bank chose to accept payment from
Alfredo even before a credit investigation was underway, a 10 Id. at 168.
procedure worsened by the failure to even inform him of
his credit standing’s impact on his assumption of 11 CA rollo, p. 87. Penned by Judge Virginia G. Almonte.
mortgage. It was, therefore, negligent to a certain degree
in handling the transaction with Alfredo. It should be 12 Rollo, p. 53. The CA Decision was penned by
remembered that the business of a bank is affected with Associate Justice Jose C. Reyes, Jr. and concurred in by
public interest and it should observe a higher standard of Presiding Justice Conrado M. Vasquez, Jr. and Associate
diligence when dealing with the public.32 Justice Apolinario D. Bruselas, Jr.
WHEREFORE, the appeal is DENIED. The CA Decision in 13 CA rollo, p. 87.
CA-G.R. CR-CV No. 84445 is AFFIRMED with
MODIFICATION in that the amount of PhP 750,000 will 14 G.R. No. 164300, November 29, 2006, 508 SCRA 556,
earn interest at 6% per annum reckoned from December 560-561; citing Fabrigas v. San Francisco del Monte, Inc.,
12, 1997, and the total aggregate monetary awards will in G.R. No. 152346, November 25, 2005, 476 SCRA 247,
turn earn 12% per annum from the finality of this Decision 258-259.
until fully paid.
15 Philippine Savings Bank v. Spouses Mañalac, G.R. No.
SO ORDERED. 145441, April 26, 2005, 457 SCRA 203, 218.
Footnotes 16 Rollo, p. 23.
* Additional member per Special Order No. 913 dated 17 Philippine Bank of Communications v. Court of
November 2, 2010. Appeals, G.R. No. 109803, April 20, 1998, 289 SCRA 185,
186.
18 Car Cool Philippines v. Ushio Realty and Development 31 Trade & Investment Development Corporation v.
Corporation, G.R. No. 138088, January 23, 2006, 479 Roblett Industrial Construction Corp., G.R. No. 139290,
SCRA 404, 412. November 11, 2005, 474 SCRA 510, 540-541.

19 H.L. Carlos Corporation, Inc. v. Marina Properties 32 Philippine Bank of Communications v. Court of
Corporation, G.R. No. 147614, January 29, 2004, 421 Appeals, supra note 17.
SCRA 428, 437; citing MC Engineering, Inc. v. Court of
Appeals, G.R. No. 104047, April 3, 2002, 380 SCRA 116,
138.

20 1 Tolentino, Civil Code of the Philippines

Commentaries and Jurisprudence 77 (1990).

21 Gil Miguel T. Puyat v. Ron Zabarte, G.R. No. 141536.

February 26, 2001, 352 SCRA 738, 750.

22 CA rollo, p. 86.

23 LCK Industries Inc. v. Planters Development Bank,

G.R. No. 170606, November 23, 2007, 538 SCRA 634,
652; citing Tamio v. Ticson, G.R. No. 154895, November
18, 2004, 443 SCRA 44, 55.

24 CA rollo, p.86.

25 Agra v. Philippine National Bank, G.R. No. 133317,

June 29, 1999, 514 SCRA 509, 528.

26 See Royal Cargo Corporation v. DFS Sports Unlimited

Inc., G.R. No. 158621, December 10, 2008, 573 SCRA
414, 421-422.

27 See Tugade v. Court of Appeals, G.R. No. 120874, July

31, 2003, 407 SCRA 497, 508.

28 G.R. No. 97412, July 12, 1994, 234 SCRA 78, 95-97.

29 Records, p. 255.

30 G.R. No. 164401, June 25, 2008, 555 SCRA 275, 287-
288 [citations omitted].

[G.R. No. 152411. September 29, 2004]
UNIVERSITY OF THE PHILIPPINES, petitioner, vs.
PHILAB INDUSTRIES, INC., respondent.
DECISION
CALLEJO, SR., J.:
Before the Court is a petition for review on certiorari of the
Decision[1] of the Court of Appeals in CA-G.R. CV No.
44209, as well as its Resolution[2] denying the petitioners
motion for the reconsideration thereof. The Court of
Appeals set aside the Decision[3] of Branch 150 of the
Regional Trial Court (RTC) of Makati City, which dismissed
the complaint of the respondent against the petitioner for
sum of money and damages.
The Facts of the Case
Sometime in 1979, the University of the Philippines (UP)
decided to construct an integrated system of research
organization known as the Research Complex. As part of
the project, laboratory equipment and furniture were
purchased for the National Institute of Biotechnology and
Applied Microbiology (BIOTECH) at the UP Los Baos.
Providentially, the Ferdinand E. Marcos Foundation
(FEMF) came forward and agreed to fund the acquisition
of the laboratory furniture, including the fabrication thereof.
Renato E. Lirio, the Executive Assistant of the FEMF, gave
the go-signal to BIOTECH to contact a corporation to
accomplish the project. On July 23, 1982, Dr. William
Padolina, the Executive Deputy Director of BIOTECH,
arranged for Philippine Laboratory Industries, Inc.
(PHILAB), to fabricate the laboratory furniture and deliver
the same to BIOTECH for the BIOTECH Building Project,
for the account of the FEMF. Lirio directed Padolina to give
the go-signal to PHILAB to proceed with the fabrication of
the laboratory furniture, and requested Padolina to forward
the contract of the project to FEMF for its approval.
On July 13, 1982, Padolina wrote Lirio and requested for
the issuance of the purchase order and downpayment for
the office and laboratory furniture for the project, thus:
1. Supply and Installation of Laboratory furniture for the
BIOTECH Building Project
Amount : P2,934,068.90
Supplier : Philippine Laboratory Furniture Co.,
College, Laguna
Attention: Mr. Hector C. Navasero
President
Downpayment : 40% or P1,173,627.56
2. Fabrication and Supply of office furniture for the
BIOTECH Building Project
Amount : P573,375.00
Supplier : Trans-Oriental Woodworks, Inc.
1st Avenue, Bagumbayan
Tanyag, Taguig, Metro Manila
Downpayment : 50% or P286,687.50[4]
Padolina assured Lirio that the contract would be prepared
as soon as possible before the issuance of the purchase
orders and the downpayment for the goods, and would be
transmitted to the FEMF as soon as possible.
In a Letter dated July 23, 1982, Padolina informed Hector
Navasero, the President of PHILAB, to proceed with the
fabrication of the laboratory furniture, per the directive of
FEMF Executive Assistant Lirio. Padolina also requested
for copies of the shop drawings and a sample contract[5]
for the project, and that such contract and drawings had to
be finalized before the down payment could be remitted to
the PHILAB the following week. However, PHILAB failed to
forward any sample contract.
Subsequently, PHILAB made partial deliveries of office
and laboratory furniture to BIOTECH after having been
duly inspected by their representatives and FEMF
Executive Assistant Lirio.
On August 24, 1982, FEMF remitted P600,000 to PHILAB
as downpayment for the laboratory furniture for the
BIOTECH project, for which PHILAB issued Official
Receipt No. 253 to FEMF. On October 22, 1982, FEMF
made another partial payment of P800,000 to PHILAB, for
which the latter issued Official Receipt No. 256 to FEMF.
The remittances were in the form of checks drawn by
FEMF and delivered to PHILAB, through Padolina.
On October 16, 1982, UP, through Emil Q. Javier, the
Chancellor of UP Los Baos and FEMF, represented by its
Executive Officer, Rolando Gapud, executed a
Memorandum of Agreement (MOA) in which FEMF agreed
to grant financial support and donate sums of money to UP
for the construction of buildings, installation of laboratory
and other capitalization for the project, not to exceed
P29,000,000.00. The obligations of FEMF under the MOA
are the following:
ARTICLE II
OBLIGATIONS OF THE FOUNDATION
2.1. The FOUNDATION, in carrying out its principal
objectives of promoting philantrophic and scientific projects
through financial support to such projects that will
contribute to the countrys economic development, shall
grant such financial support and donate such sums of
money to the RESEARCH COMPLEX as may be
necessary for the construction of buildings, installation of
laboratories, setting up of offices and physical plants and
facilities and other capital investment of the RESEARCH
COMPLEX and/or any of its component Research
Institutes not to exceed P29 Million. For this purpose, the
FOUNDATION shall:
(a) Acquire and donate to the UNIVERSITY the site for the
RESEARCH COMPLEX; and
(b) Donate or cause to be donated to the UNIVERSITY the
sum of TWENTY-NINE MILLION PESOS
(P29,000,000.00) for the construction of the buildings of
the National Institutes of Biotechnology and Applied
Microbiology (BIOTECH) and the installation of their
laboratories and their physical plants and other facilities to
enable them to commence operations.
2.2. In addition, the FOUNDATION shall, subject to the
approval of the Board of Trustees of the FOUNDATION,
continue to support the activities of the RESEARCH
COMPLEX by way of recurrent additional grants and
donations for specific research and development projects
which may be mutually agreed upon and, from time to
time, additional grants and donations of such amounts as
may be necessary to provide the RESEARCH COMPLEX
and/or any of its Research Institutes with operational
flexibility especially with regard to incentives to staff
purchase of equipment/facilities, travel abroad, recruitment
of local and expatriate staff and such other activities and
inputs which are difficult to obtain under usual government
rules and regulations.[6]
The Board of Regents of the UP approved the MOA on
November 25, 1982.[7]
In the meantime, Navasero promised to submit the
contract for the installation of laboratory furniture to
BIOTECH, by January 12, 1983. However, Navasero failed
to do so. In a Letter dated February 1, 1983, BIOTECH
reminded Navasero of the need to submit the contract so
that it could be submitted to FEMF for its evaluation and
approval.[8] Instead of submitting the said contract,
PHILAB submitted to BIOTECH an accomplishment report
on the project as of February 28, 1983, and requested
payment thereon.[9] By May 1983, PHILAB had completed
78% of the project, amounting to P2,288,573.74 out of the
total cost of P2,934,068.90. The FEMF had already paid
forty percent (40%) of the total cost of the project. On May
12, 1983, Padolina wrote Lirio and furnished him the
progress billing from PHILAB.[10] On August 11, 1983, the
FEMF made another partial payment of P836,119.52
representing the already delivered laboratory and office
furniture after the requisite inspection and verification
thereof by representatives from the BIOTECH, FEMF, and
PHILAB. The payment was made in the form of a check,
for which PHILAB issued Official Receipt No. 202 to FEMF
through Padolina.[11]
On July 1, 1984, PHILAB submitted to BIOTECH Invoice
No. 01643 in the amount of P702,939.40 for the final
payment of laboratory furniture. Representatives from
BIOTECH, PHILAB, and Lirio for the FEMF, conducted a
verification of the accomplishment of the work and
confirmed the same. BIOTECH forwarded the invoice to
Lirio on December 18, 1984 for its payment.[12] Lirio, in
turn, forwarded the invoice to Gapud, presumably
sometime in the early part of 1985. However, the FEMF
failed to pay the bill. PHILAB reiterated its request for
payment through a letter on May 9, 1985.[13] BIOTECH
again wrote Lirio on March 21, 1985, requesting the
payment of PHILABs bill.[14] It sent another letter to
Gapud, on November 22, 1985, again appealing for the
payment of PHILABs bill.[15] In a Letter to BIOTECH
dated December 5, 1985, PHILAB requested payment of
P702,939.40 plus interest thereon of P224,940.61.[16]
There was, however, no response from the FEMF. On
February 24, 1986, PHILAB wrote BIOTECH, appealing for
the payment of its bill even on installment basis.[17]
President Marcos was ousted from office during the
February 1986 EDSA Revolution. On March 26, 1986,
Navasero wrote BIOTECH requesting for its much-needed
assistance for the payment of the balance already due
plus interest of P295,234.55 for its fabrication and supply
of laboratory furniture.[18]
On April 22, 1986, PHILAB wrote President Corazon C.
Aquino asking her help to secure the payment of the
amount due from the FEMF.[19] The letter was referred to
then Budget Minister Alberto Romulo, who referred the
letter to then UP President Edgardo Angara on June 9,
1986. On September 30, 1986, Raul P. de Guzman, the
Chancellor of UP Los Baos, wrote then Chairman of the
Presidential Commission on Good Government (PCGG)
Jovito Salonga, submitting PHILABs claim to be officially
entered as accounts payable as soon as the assets of
FEMF were liquidated by the PCGG.[20]
In the meantime, the PCGG wrote UP requesting for a
copy of the relevant contract and the MOA for its
perusal.[21]
Chancellor De Guzman wrote Navasero requesting for a
copy of the contract executed between PHILAB and
FEMF. In a Letter dated October 20, 1987, Navasero
informed De Guzman that PHILAB and FEMF did not
execute any contract regarding the fabrication and delivery
of laboratory furniture to BIOTECH.
Exasperated, PHILAB filed a complaint for sum of money
and damages against UP. In the complaint, PHILAB
prayed that it be paid the following:
(1) PESOS: SEVEN HUNDRED TWO THOUSAND NINE
HUNDRED THIRTY NINE & 40/100 (P702,939.40) plus an
additional amount (as shall be determined during the
hearing) to cover the actual cost of money which at the
time of transaction the value of the peso was eleven to a
dollar (P11.00:$1) and twenty seven (27%) percent
interest on the total amount from August 1982 until fully
paid;
(2) PESOS: ONE HUNDRED THOUSAND (P100,000.00)
exemplary damages;
(3) FIFTY THOUSAND [PESOS] (P50,000.00) as and for
attorneys fees; and

(4) Cost of suit.[22]
PHILAB alleged, inter alia, that:
3. Sometime in August 1982, defendant, through its
officials, particularly MR. WILLIAM PADOLINA, Director,
asked plaintiff to supply and install several laboratory
furnitures and equipment at BIOTECH, a research
laboratory of herein defendant located at its campus in
College, Laguna, for a total contract price of PESOS: TWO
MILLION NINE HUNDRED THIRTY-NINE THOUSAND
FIFTY-EIGHT & 90/100 (P2,939,058.90);
4. After the completion of the delivery and installation of
said laboratory furnitures and equipment at defendants
BIOTECH Laboratory, defendant paid three (3) times on
installment basis:
a) P600,000.00 as per Official Receipt No. 253 dated
August 24, 1982;
b) P800,000.00 as per Official Receipt No. 256 dated
October 22, 1982;
c) P836,119.52 as per Official Receipt No. 202 dated
August 11, 1983;
thus leaving a balance of PESOS: SEVEN HUNDRED
TWO THOUSAND NINE HUNDRED THIRTY-NINE &
40/100 (P702,939.40).
5. That notwithstanding repeated demands for the past
eight years, defendant arrogantly and maliciously made
plaintiff believe that it was going to pay the balance
aforestated, that was why plaintiffs President and General
Manager himself, HECTOR C. NAVASERO, personally
went to and from UP Los Baos to talk with defendants
responsible officers in the hope of expecting payment,
when, in truth and in fact, defendant had no intention to
pay whatsoever right from the start on a misplaced ground
of technicalities. Some of plaintiffs demand letters since
year 1983 up to the present are hereto attached as
Annexes A, B, C, D, E, F, G, and H hereof;
6. That by reason of defendants malicious, evil and
unnecessary misrepresentations that it was going to pay
its obligation and asking plaintiff so many red tapes and
requirements to submit, compliance of all of which took
plaintiff almost eight (8) years to finish, when, in truth and
in fact, defendant had no intention to pay, defendant
should be ordered to pay plaintiff no less than PESOS:
ONE HUNDRED THOUSAND (P100,000.00) exemplary
damages, so that other government institutions may be
warned that they must not unjustly enrich themselves at
the expense of the people they serve.[23]
In its answer, UP denied liability and alleged that PHILAB
had no cause of action against it because it was merely
the donee/beneficiary of the laboratory furniture in the
BIOTECH; and that the FEMF, which funded the project,
was liable to the PHILAB for the purchase price of the
laboratory furniture. UP specifically denied obliging itself to
pay for the laboratory furniture supplied by PHILAB.
After due proceedings, the trial court rendered judgment
dismissing the complaint without prejudice to PHILABs
recourse against the FEMF. The fallo of the decision
reads:
WHEREFORE, this case is hereby DISMISSED for lack of
merit without prejudice to plaintiff's recourse to the assets
of the Marcos Foundation for the unpaid balance of
P792,939.49.
SO ORDERED.[24]
Undaunted, PHILAB appealed to the Court of Appeals
(CA) alleging that the trial court erred in finding that:
1. the contract for the supply and installation of subject
laboratory furniture and equipment was between PHILAB
and the Marcos Foundation; and,
2. the Marcos Foundation, not the University of the
Philippines, is liable to pay the respondent the balance of
the purchase price.[25]
The CA reversed and set aside the decision of the RTC
and held that there was never a contract between FEMF
and PHILAB. Consequently, PHILAB could not be bound
by the MOA between the FEMF and UP since it was never
a party thereto. The appellate court ruled that, although UP
did not bind itself to pay for the laboratory furniture;
nevertheless, it is liable to PHILAB under the maxim: No
one should unjustly enrich himself at the expense of
another.
The Present Petition
Upon the denial of its motion for reconsideration of the
appellate courts decision, UP, now the petitioner, filed its
petition for review contending that:
I. THE COURT OF APPEALS ERRED WHEN IT FAILED
TO APPLY THE LAW ON CONTRACTS BETWEEN
PHILAB AND THE MARCOS FOUNDATION.
II. THE COURT OF APPEALS ERRED IN APPLYING THE
LEGAL PRINCIPLE OF UNJUST ENRICHMENT WHEN
IT HELD THAT THE UNIVERSITY, AND NOT THE
MARCOS FOUNDATION, IS LIABLE TO PHILAB.[26]
Prefatorily, the doctrinal rule is that pure questions of facts
may not be the subject of appeal by certiorari under Rule
45 of the 1997 Rules of Civil Procedure, as this mode of
appeal is generally restricted to questions of law.[27]
However, this rule is not absolute. The Court may review
the factual findings of the CA should they be contrary to
those of the trial court.[28] Correspondingly, this Court
may review findings of facts when the judgment of the CA
is premised on a misapprehension of facts.[29]
On the first assigned error, the petitioner argues that the
CA overlooked the evidentiary effect and substance of the
corresponding letters and communications which support
the statements of the witnesses showing affirmatively that
an implied contract of sale existed between PHILAB and
the FEMF. The petitioner furthermore asserts that no
contract existed between it and the respondent as it could
not have entered into any agreement without the requisite
public bidding and a formal written contract.
The respondent, on the other hand, submits that the CA
did not err in not applying the law on contracts between
the respondent and the FEMF. It, likewise, attests that it
was never privy to the MOA entered into between the
petitioner and the FEMF. The respondent adds that what
the FEMF donated was a sum of money equivalent to
P29,000,000, and not the laboratory equipment supplied
by it to the petitioner. The respondent submits that the
petitioner, being the recipient of the laboratory furniture,
should not enrich itself at the expense of the respondent.
The petition is meritorious.
It bears stressing that the respondents cause of action is
one for sum of money predicated on the alleged promise
of the petitioner to pay for the purchase price of the
furniture, which, despite demands, the petitioner failed to
do. However, the respondent failed to prove that the
petitioner ever obliged itself to pay for the laboratory
furniture supplied by it. Hence, the respondent is not
entitled to its claim against the petitioner.
There is no dispute that the respondent is not privy to the
MOA executed by the petitioner and FEMF; hence, it is not
bound by the said agreement. Contracts take effect only
between the parties and their assigns.[30] A contract
cannot be binding upon and cannot be enforced against
one who is not a party to it, even if he is aware of such
contract and has acted with knowledge thereof.[31]
Likewise admitted by the parties, is the fact that there was
no written contract executed by the petitioner, the
respondent and FEMF relating to the fabrication and
delivery of office and laboratory furniture to the BIOTECH.
Even the CA failed to specifically declare that the petitioner
and the respondent entered into a contract of sale over the
said laboratory furniture. The parties are in accord that the
FEMF had remitted to the respondent partial payments via
checks drawn and issued by the FEMF to the respondent,
through Padolina, in the total amount of P2,288,573.74 out
of the total cost of the project of P2,934,068.90 and that
the respondent received the said checks and issued
receipts therefor to the FEMF. There is also no
controversy that the petitioner did not pay a single centavo
for the said furniture delivered by the respondent that the
petitioner had been using ever since.
We agree with the petitioner that, based on the records, an
implied-in-fact contract of sale was entered into between
the respondent and FEMF. A contract implied in fact is one
implied from facts and circumstances showing a mutual
intention to contract. It arises where the intention of the
parties is not expressed, but an agreement in fact creating
an obligation. It is a contract, the existence and terms of
which are manifested by conduct and not by direct or
explicit words between parties but is to be deduced from
conduct of the parties, language used, or things done by
them, or other pertinent circumstances attending the
transaction. To create contracts implied in fact,
circumstances must warrant inference that one expected
compensation and the other to pay.[32] An implied-in-fact
contract requires the parties intent to enter into a contract;
it is a true contract.[33] The conduct of the parties is to be
viewed as a reasonable man would view it, to determine
the existence or not of an implied-in-fact contract.[34] The
totality of the acts/conducts of the parties must be
considered to determine their intention. An implied-in-fact
contract will not arise unless the meeting of minds is
indicated by some intelligent conduct, act or sign.[35]
In this case, the respondent was aware, from the time
Padolina contacted it for the fabrication and supply of the
laboratory furniture until the go-signal was given to it to
fabricate and deliver the furniture to BIOTECH as
beneficiary, that the FEMF was to pay for the same.
Indeed, Padolina asked the respondent to prepare the
draft of the contract to be received by the FEMF prior to
the execution of the parties (the respondent and FEMF),
but somehow, the respondent failed to prepare one. The
respondent knew that the petitioner was merely the donee-
beneficiary of the laboratory furniture and not the buyer;
nor was it liable for the payment of the purchase price
thereof. From the inception, the FEMF paid for the bills
and statement of accounts of the respondent, for which the
latter unconditionally issued receipts to and under the
name of the FEMF. Indeed, witness Lirio testified:
Q: Now, did you know, Mr. Witness, if PHILAB Industries
was aware that it was the Marcos Foundation who would
be paying for this particular transaction for the completion
of this particular transaction?
A: I think they are fully aware.
Q: What is your basis for saying so?
A: First, I think they were appraised by Dr. Padolina.
Secondly, there were occasions during our inspection in
Los Baos, at the installation site, there were occasions,
two or three occasions, when we met with Mr. Navasero
who is the President, I think, or manager of PHILAB, and
we appraised him that it was really between the foundation
and him to which includes (sic) the construction company
constructing the building. He is fully aware that it is the
foundation who (sic) engaged them and issued the
payments.[36]
The respondent, in its Letter dated March 26, 1986,
informed the petitioner and sought its assistance for the
collection of the amount due from the FEMF:
Dear Dr. Padolina:
May we request for your much-needed assistance in the
payment of the balance still due us on the laboratory
furniture we supplied and installed two years ago?
Business is still slow and we will appreciate having these
funds as soon as possible to keep up our operations.
We look forward to hearing from you regarding this matter.
Very truly yours,
PHILAB INDUSTRIES, INC.[37]
The respondent even wrote former President Aquino
seeking her assistance for the payment of the amount due,
in which the respondent admitted it tried to collect from her
predecessor, namely, the former President Ferdinand E.
Marcos:
YOUR EXCELLENCY:
At the instance of the national government, subject
laboratory furnitures were supplied by our company to the
National Institute of Biotechnology & Applied Microbiology
(BIOTECH), University of the Philippines, Los Baos,
Laguna, in 1984.
Out of the total contract price of PESOS: TWO MILLION
NINE HUNDRED THIRTY-NINE THOUSAND FIFTY-
EIGHT & 90/100 (P2,939,058.90), the previous
administration had so far paid us the sum of
P2,236,119.52 thus leaving a balance of PESOS: ONE
MILLION FOUR HUNDRED TWELVE THOUSAND
SEVEN HUNDRED FORTY-EIGHT & 61/100
(P1,412.748.61) inclusive of interest of 24% per annum
and 30% exchange rate adjustment.
On several occasions, we have tried to collect this amount
from your predecessor, the latest of which was subject
invoice (01643) we submitted to DR. W. PADOLINA,
deputy director of BIOTECH. But this, notwithstanding, our
claim has remained unacted upon up to now. Copy of said
invoice is hereto attached for easy reference.
Now that your excellency is the head of our government,
we sincerely hope that payment of this obligation will soon
be made as this is one project the Republic of the
Philippines has use of and derives benefit from.[38]
Admittedly, the respondent sent to the petitioner its bills
and statements of accounts for the payments of the
laboratory furniture it delivered to the petitioner which the
petitioner, through Padolina, transmitted to the FEMF for
its payment. However, the FEMF failed to pay the last
statement of account of the respondent because of the
onset of the EDSA upheaval. It was only when the
respondent lost all hope of collecting its claim from the
government and/or the PCGG did it file the complaint
against the petitioner for the collection of the payment of
its last delivery of laboratory furniture.
We reject the ruling of the CA holding the petitioner liable
for the claim of the respondent based on the maxim that
no one should enrich itself at the expense of another.
Unjust enrichment claims do not lie simply because one
party benefits from the efforts or obligations of others, but
instead it must be shown that a party was unjustly
enriched in the sense that the term unjustly could mean
illegally or unlawfully.[39]
Moreover, to substantiate a claim for unjust enrichment,
the claimant must unequivocally prove that another party
knowingly received something of value to which he was
not entitled and that the state of affairs are such that it
would be unjust for the person to keep the benefit.[40]
Unjust enrichment is a term used to depict result or effect
of failure to make remuneration of or for property or
benefits received under circumstances that give rise to
legal or equitable obligation to account for them; to be
entitled to remuneration, one must confer benefit by
mistake, fraud, coercion, or request.[41] Unjust enrichment
is not itself a theory of reconvey. Rather, it is a prerequisite
for the enforcement of the doctrine of restitution.[42]
Article 22 of the New Civil Code reads:
Every person who, through an act of performance by
another, or any other means, acquires or comes into
possession of something at the expense of the latter
without just or legal ground, shall return the same to him.
(Boldface supplied)
In order that accion in rem verso may prosper, the
essential elements must be present: (1) that the defendant
has been enriched, (2) that the plaintiff has suffered a loss,
(3) that the enrichment of the defendant is without just or
legal ground, and (4) that the plaintiff has no other action
based on contract, quasi-contract, crime or quasi-
delict.[43]
An accion in rem verso is considered merely an auxiliary
action, available only when there is no other remedy on
contract, quasi-contract, crime, and quasi-delict. If there is
an obtainable action under any other institution of positive
law, that action must be resorted to, and the principle of
accion in rem verso will not lie.[44]
The essential requisites for the application of Article 22 of
the New Civil Code do not obtain in this case. The
respondent had a remedy against the FEMF via an action
based on an implied-in-fact contract with the FEMF for the
payment of its claim. The petitioner legally acquired the
laboratory furniture under the MOA with FEMF; hence, it is
entitled to keep the laboratory furniture.
IN LIGHT OF ALL THE FOREGOING, the petition is
GRANTED. The assailed Decision of the Court of Appeals
is REVERSED AND SET ASIDE. The Decision of the
Regional Trial Court, Makati City, Branch 150, is
REINSTATED. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, and Tinga, JJ.,
concur.
Chico-Nazario, J., on leave.
[1] Penned by Associate Justice Demetrio G. Demetria [20] Exhibit 15. [38] Exhibit 14.
(retired), with Associate Justices Ramon Mabutas, Jr.
(retired) and Jose L. Sabio, Jr., concurring. [21] Exhibit 16. [39] Mon-Ray, Inc. v. Granite Re, Inc., 677 N.W.2d 434
(2004) citing First National Bank of St. Paul v. Ramier, 311
[2] Penned by Associate Justice Jose L. Sabio, Jr., with [22] Rollo, p. 45. N.W. 2d 502, 504 (1981).
Associate Justices Oswaldo Agcaoili (retired) and Sergio
L. Pestao, concurring. [23] Id. at 43-44. [40] ServiceMaster of St. Cloud v. GAB Bus. Services.,
Inc., 544 N.W.2d 302, 306 (1996).
[3] Penned by Judge Zeus C. Abrogar. [24] Id. at 58.
[41] Callaway Golf Company v. Dunlop Slazenger Group
[4] Rollo, p. 104. [25] Records, p. 52. Americas, Inc., 318 F.Supp.2d 216 (2004); Dinosaur Dev.,
Inc. v. White, 216 Cal.App.3d 1310, 265 Cal.Rptr. 525
[5] Exhibit I. [26] Rollo, p. 11. (1989).

[6] Rollo, p. 65. [27] Metropolitan Bank and Trust Company v. Wong, 359 [42] Reeves v. Alyeska Pipeline Service Company, 926
SCRA 608 (2001). P.2d 1130 (1996).
[7] Exhibit 24.
[28] Tando v. Court of Appeals, 372 SCRA 321 (2001). [43] Tolentino, Arturo M., Commentaries and
[8] Exhibit 2. Jurisprudence on the Civil Code of the Philippines, Vol. I,
[29] Spouses Constante Firme and Azucena E. Firme v. pp. 77; In Albrecht v. Walter, 572 N.W.2d 809 (1997), it
[9] Exhibit 3. Bukal Enterprises and Development Corporation, G.R. No. was held that:
146608, October 23, 2003.
[10] Exhibit 4. (1) an enrichment; (2) an impoverishment; (3) some
[30] Article 1311, New Civil Code. connection between enrichment and impoverishment; (4)
[11] Rollo, p. 109. the absence of justification for enrichment and
[31] Manila Port Services, Inc. v. Court of Appeals, 20 impoverishment; and (5) the absence of a remedy
[12] Ibid. SCRA 1214 (1967). provided by law.

[13] Exhibit 8. [32] 17 Corpus Juris Secundum, Contract, pp. 559-560. [44] Id. at 82.

[14] Exhibit 7. [33] G. T. Fogle & Co. v. United States, 135 F.2d 117
(1943).
[15] Exhibit 9.
[34] Roebling v. Dillon, 288 F.2d 386 (1961).
[16] Exhibit 10.
[35] Baltimore & O. R. Co. v. United States, 261 U.S. 592
[17] Exhibit 11. (1923).

[18] Exhibit 12. [36] TSN, 17 August 1992, p. 14.

[19] Exhibit 14. [37] Exhibit 12.

G.R. No. 172525 October 20, 2010
SHINRYO (PHILIPPINES) COMPANY, INC., Petitioner,
vs.
RRN INCORPORATED,* Respondent.
DECISION
PERALTA, J.:
This resolves the Petition for Review on Certiorari under
Rule 45 of the Rules of Court, praying that the Decision1
of the Court of Appeals (CA) dated February 22, 2006,
affirming the Decision of the Construction Industry
Arbitration Commission (CIAC), and the CA Resolution2
dated April 26, 2006, denying herein petitioner's motion for
reconsideration, be reversed and set aside.
The facts, as accurately narrated in the CA Decision, are
as follows.
Petitioner Shinryo (Philippines) Company, Inc. (hereinafter
petitioner) is a domestic corporation organized under
Philippine laws. Private respondent RRN Incorporated
(hereinafter respondent) is likewise a domestic corporation
organized under Philippine laws.
Respondent filed a claim for arbitration against petitioner
before CIAC for recovery of unpaid account which consists
of unpaid portions of the sub-contract, variations and
unused materials in the total sum of ₱5,275,184.17 and
legal interest in the amount of ₱442,014.73. Petitioner filed
a counterclaim for overpayment in the amount of
₱2,512,997.96.
The parties admitted several facts before the CIAC. It was
shown that petitioner and respondent executed an
Agreement and Conditions of Sub-contract (hereafter
Agreement signed on June 11, 1996 and June 14, 1996,
respectively. Respondent signified its willingness to accept
and perform for petitioner in any of its projects, a part or
the whole of the works more particularly described in
Conditions of Sub-Contract and other Sub-contract
documents.
On June 11, 2002, the parties executed a "Supply of
Manpower, Tools/Equipment, Consumables for the
Electrical Works-Power and Equipment Supply, Bus Duct
Installation" for the Phillip Morris Greenfield Project
(hereafter Project) covered by Purchase Order Nos.
4501200300-000274 and 4501200300-000275 amounting
to ₱15,724,000.00 and ₱9,276,000.00 respectively, or a
total amount of ₱25,000,000.00. The parties also agreed
that respondent will perform variation orders in the Project.
In connection with the Project, petitioner supplied
manpower chargeable against respondent.
Respondent was not able to finish the entire works with
petitioner due to financial difficulties. Petitioner paid
respondent a total amount of ₱26,547,624.76. On June 25,
2005 [should read 2003], respondent, through its former
counsel sent a letter to petitioner demanding for the
payment of its unpaid balance amounting to
₱5,275,184.17. Petitioner claimed material back charges
in the amount of ₱4,063,633.43. On September 26, 2003,
respondent only acknowledged ₱2,371,895.33 as material
back charges. Thereafter, on October 16, 2003,
respondent sent another letter to petitioner for them to
meet and settle their dispute.
On January 8, 2004, respondent sent another letter to
petitioner regarding the cost of equipment rental and the
use of scaffolding. Thereafter, on August 12, 2004,
petitioner sent a letter to respondent denying any unpaid
account and the failure in their negotiations for amicable
settlement.
On September 3, 2004, respondent, through its new
counsel, advised petitioner of their intention to submit the
matter to arbitration. Thereafter, their dispute was
submitted to arbitration. During the preliminary conference,
the parties agreed in their Terms of Reference to resolve
eight issues, to wit:
1. What should be the basis in evaluating the variation
cost?
1.1 How much is the variation cost?
2. Is the Respondent (petitioner in the instant case)
justified in charging claimant (herein respondent) the
equipment rental fee and for the use of the scaffoldings? If
so, how much should be charged to Claimant?
3. What should be the basis in evaluating the total cost of
materials supplied by Respondent to the Project which is
chargeable to Claimant?
3.1 How much is the total cost of materials supply
chargeable to Claimant?
4. How much is the value of the remaining works left
undone by the Claimant in the project?
5. Is the Claimant's claim for inventory of excess materials
valid? If so, how much is the value thereof?
6. Is the Respondent entitled to its claim for an
overpayment in the amount of ₱2,512,997.96?
7. Is Claimant entitled to its claim for interest? If so, how
much?
8. Who between the parties shall bear the cost of
Arbitration?
The CIAC rendered the assailed decision after the
presentation of the parties' evidence. [The dispositive
portion of said decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of
the claimant and respondent is ordered to pay claimant its
unpaid account in the sum of ₱3,728,960.54 plus legal
interest of 6% reckoned from June 25, 2003 up to the filing
of the case on October 11, 2004 and 12% of
₱3,728,960.54 from the finality of the judgment until fully
paid and arbitration cost of ₱104,333.82 representing
claimant's share of the arbitration cost which respondent
should reimburse.
SO ORDERED.]
Petitioner accepts the ruling of the CIAC only in Issue No.
1 and Sub-Issue No. 1.1 and in Issue No. 2 in so far as the
amount of ₱440,000.00 awarded as back charges for the
use of scaffoldings. x x x3
On February 22, 2006, the CA promulgated the assailed
Decision affirming the decision of the CIAC. The CA
upheld the CIAC ruling that petitioner failed to adduce
sufficient proof that the parties had an agreement
regarding charges for respondent's use of the manlift. As
to the other charges for materials, the CA held that the
evidence on record amply supports the CIAC findings.
Petitioner moved for reconsideration of said ruling, but the
same was denied per Resolution dated April 26, 2006.
Hence, this petition where it is alleged that:
I. THE HONORABLE COURT OF APPEALS COMMITTED
GRAVE REVERSIBLE ERROR WHEN IT DENIED
PETITIONER'S CLAIM FOR MANLIFT EQUIPMENT
RENTAL IN THE AMOUNT OF ₱511,000.00 DESPITE
EVIDENCE ON RECORD THAT RESPONDENT RRN
ACTUALLY USED AND BENEFITED FROM THE
MANLIFT EQUIPMENT.
II. IN RENDERING THE QUESTIONED DECISION AND
QUESTIONED RESOLUTION, THE HONORABLE
COURT OF APPEALS HAS DECIDED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND/OR
WITH THE APPLICABLE DECISIONS OF THE
HONORABLE SUPREME COURT.
III. THE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR IN AFFIRMING THE CIAC
AWARD FOR THE VALUE OF INVENTORIED
MATERIALS CONSIDERING THAT:
A. RESPONDENT RRN ADMITTED THE VALIDITY OF
THE DEDUCTIONS ON ACCOUNT OF MATERIAL
SUPPLY, WHICH INCLUDED THE INVENTORIED
MATERIALS.
B. RESPONDENT RRN HAS NO BASIS TO CLAIM
BECAUSE ENGR. BONIFACIO ADMITTED THAT
RESPONDENT RRN FAILED TO ESTABLISH WHETHER
THE MATERIALS CAME FROM RESPONDENT RRN OR
FROM PETITIONER AND THAT IT WAS PETITIONER
THAT ACTUALLY INSTALLED THE SAID MATERIALS
AS PART OF REMAINING WORKS THAT PETITIONER
TOOK OVER FROM RESPONDENT RRN.
C. THE CLAIM FOR THE VALUE OF INVENTORIED
MATERIALS IS A DOUBLE CLAIM OR DOUBLE ENTRY
BECAUSE IN THE COMPUTATION OF THE FINAL
ACCOUNT, RESPONDENT RRN WAS CREDITED THE
FULL CONTRACT PRICE AND THE COST OF
VARIATIONS, WHICH INCLUDED THE INVENTORIED
MATERIALS.
IV. IN RENDERING THE QUESTIONED DECISION AND
QUESTIONED RESOLUTION, THE COURT OF
APPEALS COMMITTED A GRAVE REVERSIBLE ERROR
IN THAT IT COMPLETELY DISREGARDED THE
PROVISION OF THE SUBCONTRACT, WHICH
ALLOWED PAYMENT OF ACTUAL COST INCURRED
BY PETITIONER IN COMPLETING THE REMAINING
WORKS THAT PRIVATE RESPONDENT ADMITTEDLY
FAILED TO COMPLETE.
V. THE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR WHEN IT COMPLETELY
DISREGARDED THE EVIDENCE ON ACTUAL COST
INCURRED BY PETITIONER IN COMPLETING THE
REMAINING WORKS.
VI. THE COURT OF APPEALS COMMITTED GRAVE
REVERSIBLE ERROR WHEN IT AFFIRMED THE CIAC
AWARD FOR INTERESTS AND ARBITRATION COSTS
IN FAVOR OF RESPONDENT RRN.4
The petition is bereft of merit.
Despite petitioner's attempts to make it appear that it is
advancing questions of law, it is quite clear that what
petitioner seeks is for this Court to recalibrate the evidence
it has presented before the CIAC. It insists that its
evidence sufficiently proves that it is entitled to payment
for respondent's use of its manlift equipment, and even
absent proof of the supposed agreement on the charges
petitioner may impose on respondent for the use of said
equipment, respondent should be made to pay based on
the principle of unjust enrichment. Petitioner also
questions the amounts awarded by the CIAC for
inventoried materials, and costs incurred by petitioner for
completing the work left unfinished by respondent.
As reiterated by the Court in IBEX International, Inc. v.
Government Service Insurance System,5 to wit:
It is settled that findings of fact of quasi-judicial bodies,
which have acquired expertise because their jurisdiction is
confined to specific matters, are generally accorded not
only respect, but also finality, especially when affirmed by
the Court of Appeals. In particular, factual findings of
construction arbitrators are final and conclusive and not
reviewable by this Court on appeal.
This rule, however, admits of certain exceptions. In
Uniwide Sales Realty and Resources Corporation v. Titan-
Ikeda Construction and Development Corporation, we
said:
In David v. Construction Industry and Arbitration
Commission, we ruled that, as exceptions, factual findings
of construction arbitrators may be reviewed by this Court
when the petitioner proves affirmatively that: (1) the award
was procured by corruption, fraud or other undue means;
(2) there was evident partiality or corruption of the
arbitrators or any of them; (3) the arbitrators were guilty of
misconduct in refusing to hear evidence pertinent and
material to the controversy; (4) one or more of the
arbitrators were disqualified to act as such under Section
nine of Republic Act No. 876 and willfully refrained from
disclosing such disqualifications or of any other
misbehavior by which the rights of any party have been
materially prejudiced; or (5) the arbitrators exceeded their
powers, or so imperfectly executed them, that a mutual,
final and definite award upon the subject matter submitted
to them was not made.1avvp++i1
Other recognized exceptions are as follows: (1) when
there is a very clear showing of grave abuse of discretion
resulting in lack or loss of jurisdiction as when a party was
deprived of a fair opportunity to present its position before
the Arbitral Tribunal or when an award is obtained through
fraud or the corruption of arbitrators, (2) when the findings
of the Court of Appeals are contrary to those of the CIAC,
and (3) when a party is deprived of administrative due
process.6
A perusal of the records would reveal that none of the
aforementioned circumstances, which would justify
exemption of this case from the general rule, are present
here. Such being the case, the Court, not being a trier of
facts, is not duty-bound to examine, appraise and analyze
anew the evidence presented before the arbitration body.7
Petitioner's reliance on the principle of unjust enrichment is
likewise misplaced. The ruling of the Court in University of
the Philippines v. Philab Industries, Inc.8 is highly
instructive, thus:
Unjust enrichment claims do not lie simply because one
party benefits from the efforts or obligations of others, but
instead it must be shown that a party was unjustly
enriched in the sense that the term unjustly could mean
illegally or unlawfully.
Moreover, to substantiate a claim for unjust enrichment,
the claimant must unequivocally prove that another party
knowingly received something of value to which he was
not entitled and that the state of affairs are such that it
would be unjust for the person to keep the benefit. Unjust
enrichment is a term used to depict result or effect of
failure to make remuneration of or for property or benefits
received under circumstances that give rise to legal or
equitable obligation to account for them; to be entitled to
remuneration, one must confer benefit by mistake, fraud,
coercion, or request. Unjust enrichment is not itself a
theory of reconvey. Rather, it is a prerequisite for the
enforcement of the doctrine of restitution.
Article 22 of the New Civil Code reads:
Every person who, through an act of performance by
another, or any other means, acquires or comes into
possession of something at the expense of the latter
without just or legal ground, shall return the same to him.
In order that accion in rem verso may prosper, the
essential elements must be present: (1) that the defendant
has been enriched, (2) that the plaintiff has suffered a loss,
(3) that the enrichment of the defendant is without just or
legal ground, and (4) that the plaintiff has no other action
based on contract, quasi-contract, crime or quasi-delict.
An accion in rem verso is considered merely an auxiliary
action, available only when there is no other remedy on
contract, quasi-contract, crime, and quasi-delict. If there is
an obtainable action under any other institution of positive
law, that action must be resorted to, and the principle of
accion in rem verso will not lie.9
As found by both the CIAC and affirmed by the CA,
petitioner failed to prove that respondent's free use of the
manlift was without legal ground based on the provisions
of their contract. Thus, the third requisite, i.e., that the
enrichment of respondent is without just or legal ground, is
missing. In addition, petitioner's claim is based on contract,
hence, the fourth requisite − that the plaintiff has no other
action based on contract, quasi-contract, crime or quasi-
delict − is also absent. Clearly, the principle of unjust
enrichment is not applicable in this case.
The other issues raised by petitioner all boil down to
whether the CIAC or the CA erred in rejecting its claims for
costs of some materials.
Again, these issues are purely factual and cannot be
properly addressed in this petition for review on certiorari.
In Hanjin Heavy Industries and Construction Co., Ltd. v.
Dynamic Planners and Construction Corp.,10 it was
emphasized that mathematical computations, the propriety
of arbitral awards, claims for "other costs" and
"abandonment" are factual questions. Since the
discussions of the CIAC and the CA in their respective
Decisions show that its factual findings are supported by
substantial evidence, there is no reason why this Court
should not accord finality to said findings. Verily, to accede
to petitioner's request for a recalibration of its evidence,
which had been thoroughly studied by both the CIAC and
the CA would result in negating the objective of Executive
Order No. 1008, which created an arbitration body to
ensure the prompt and efficient settlement of disputes in
the construction industry. Thus, the Court held in Uniwide
Sales Realty and Resources Corporation v. Titan-Ikeda
Construction and Development Corporation,11 that:
x x x The Court will not review the factual findings of an
arbitral tribunal upon the artful allegation that such body
had "misapprehended facts" and will not pass upon issues
which are, at bottom, issues of fact, no matter how cleverly
disguised they might be as "legal questions." The parties
here had recourse to arbitration and chose the arbitrators
themselves; they must have had confidence in such
arbitrators. The Court will not, therefore, permit the parties
to relitigate before it the issues of facts previously
presented and argued before the Arbitral Tribunal, save
only where a clear showing is made that, in reaching its
factual conclusions, the Arbitral Tribunal committed an
error so egregious and hurtful to one party as to constitute
a grave abuse of discretion resulting in lack or loss of
jurisdiction.12
As discussed above, there is nothing in the records that
point to any grave abuse of discretion committed by the 5 G.R. No. 162095, October 12, 2009, 603 SCRA 306.
CIAC.
6 Id. at 314-315. (Emphasis supplied.)
The awards for interests and arbitration costs are, likewise,
correct as they are in keeping with prevailing 7 Diesel Construction v. UPSI Property Holdings, Inc. G.R.
jurisprudence.13 No. 154885, March 24, 2008, 549 SCRA 12, ---30.

IN VIEW OF THE FOREGOING, the Petition is DENIED.
The Decision of the Court of Appeals dated February 22,
2006 and its Resolution dated April 26, 2006 are
AFFIRMED.
SO ORDERED.
8 482 Phil. 693 (2004)
9 Id. at 709-711. (Emphasis and underscoring supplied.)
10 G.R. Nos. 169408 & 170144, April 30, 2008, 553 SCRA
541, 558, 565, 568.

Footnotes 11 G.R. No. 126619, December 20, 2006 (quoting David v.

* The Court of Appeals, Construction Industry Arbitration
Commission, the Honorable Beda G. Fajardo, Joel J.
Marciano and Guillermo Claridad, in their capacities as
Chairman and Member of the Arbitral Tribunal, who were
initially included as respondents in the petition should not
be included as such pursuant to Section 4, Rule 45 of the
Rules of Court.
Construction Industry Arbitration Commission, 479 Phil.
578 [2004]), 511 SCRA 335.
12 Id. at 362.
13 See Hanjin Heavy Industries and Construction Co., Ltd.
v. Dynamic Planners and Construction Corp., supra note
10, at 576.

** Designated as an additional member in lieu of Associate

Justice Antonio Eduardo B. Nachura, per raffle dated
October 20, 2010.

*** Designated as an additional member in lieu of

Associate Justice Roberto A. Abad, per Special Order No.
905, dated October 5, 2010.

1 Penned by Associate Justice Juan Q. Enriquez, Jr., with

Associate Justices Godardo A. Jacinto and Vicente Q.
Roxas, concurring; rollo, pp. 66-76..

2 Id. at 78-79.

3 Id. at 66-69.

4 Id. at 17-19.
G.R. No. 82146 January 22, 1990
EULOGIO OCCENA, petitioner,
vs.
HON. PEDRO M. ICAMINA, Presiding Judge, Branch X of
the Regional Trial Court Sixth Judicial Region, San Jose,
Antique; THE PEOPLE OF THE PHILIPPINES,
represented by the Honorable Provincial Fiscal of Antique;
and CRISTINA VEGAFRIA, respondents.
Comelec Legal Assistance Office for petitioner.
Comelec Legal Assistance Officer for private respondent.
FERNAN, C.J.:
On May 31, 1979, herein petitioner Eulogio Occena
instituted before the Second Municipal Circuit Trial Court
of Sibalom, San Remigio — Belison, Province of Antique,
Criminal Case No. 1717, a criminal complaint for Grave
Oral Defamation against herein private respondent Cristina
Vegafria for allegedly openly, publicly and maliciously
uttering the following insulting words and statements:
"Gago ikaw nga Barangay Captain, montisco, traidor,
malugus, Hudas," which, freely translated, mean: "You are
a foolish Barangay Captain, ignoramus, traitor, tyrant,
Judas" and other words and statements of similar import
which caused great and irreparable damage and injury to
his person and honor.
Private respondent as accused therein entered a plea of
not guilty. Trial thereafter ensued, at which petitioner,
without reserving his right to file a separate civil action for
damages actively intervened thru a private prosecutor.
After trial, private respondent was convicted of the offense
of Slight Oral Defamation and was sentenced to pay a fine
of Fifty Pesos (P50.00) with subsidiary imprisonment in
case of insolvency and to pay the costs. No damages were
awarded to petitioner in view of the trial court's opinion that
"the facts and circumstances of the case as adduced by
the evidence do not warrant the awarding of moral
damages." 1
Disagreeing, petitioner sought relief from the Regional
Trial Court, which in a decision dated March 16, 1987
disposed of petitioner's appeal as follows:
IN VIEW OF ALL THE FOREGOING, the civil aspect of
the lower court's decision of April 20, 1981 subject of this
appeal, for lack of merit, is hereby DENIED.
After the decision shall have become final, remand the
records of this case to the court of origin, Second
Municipal Circuit Trial Court of Sibalom, San Remigio-
Belison, Antique, for the execution of its decision on the
criminal aspect.
SO ORDERED. 2
Petitioner is now before us by way of a petition for review
on certiorari seeking to annul the RTC decision for being
contrary to Article 100 of the Revised Penal Code
providing that every person criminally liable for a felony is
also civilly liable, and Article 2219 of the New Civil Code
providing that moral damages may be recovered in libel,
slander or any other form of defamation. He submits that
public respondent RTC erred in relying on the cases of
Roa vs. de la Cruz, 107 Phil. 10 and Tan vs. Standard
Vacuum Oil Co., et al., 91 Phil. 672 cited therein. He
differentiates said cases from the case at bar by saying
that in the case of Roa, the decision of the trial court had
become final before Maria C. Roa instituted a civil action
for damages; whereas in the instant case, the decision of
the trial court has not yet become final by reason of the
timely appeal interposed by him and no civil action for
damages has been instituted by petitioner against private
respondent for the same cause. Tan, on the other hand,
contemplates of two actions, one criminal and one civil,
and the prosecution of the criminal case had resulted in
the acquittal of the accused, which is not the situation here
where the civil aspect was impliedly instituted with the
criminal action in accordance with Section 1, Rule 111, of
the Rules of Court.
Private respondent for her part argues that the decision of
the trial court carries with it the final adjudication of her civil
liability. Since petitioner chose to actively intervene in the
criminal action without reserving his right to file a separate
civil action for damages, he assumed the risk that in the
event he failed to recover damages he cannot appeal from
the decision of the lower court.
We find merit in the petition.
The issues confronting us in the instant petition is whether
or not the decision of the Second Municipal Trial Court of
Sibalom, San-Remigio-Belison, Province of Antique
constitutes the final adjudication on the merits of private
respondent's civil liability; and whether or not petitioner is
entitled to an award of damages arising from the remarks
uttered by private respondent and found by the trial court
to be defamatory.
The decision of the Municipal Circuit Trial Court as
affirmed by the Regional Trial Court in Criminal Case No.
1709 cannot be considered as a final adjudication on the
civil liability of private respondent simply because said
decision has not yet become final due to the timely appeal
filed by petitioner with respect to the civil liability of the
accused in said case. It was only the unappealed criminal
aspect of the case which has become final.
In the case of People vs. Coloma, 105 Phil. 1287, we
categorically stated that from a judgment convicting the
accused, two (2) appeals may, accordingly, be taken. The
accused may seek a review of said judgment, as regards
both civil and criminal actions; while the complainant may
appeal with respect only to the civil action, either because
the lower court has refused to award damages or because
the award made is unsatisfactory to him. The right of either
to appeal or not to appeal in the event of conviction of the
accused is not dependent upon the other. Thus, private
respondent's theory that in actively intervening in the
criminal action, petitioner waived his right to appeal from
the decision that may be rendered therein, is incorrect and
inaccurate. Petitioner may, as he did, appeal from the
decision on the civil aspect which is deemed instituted with
the criminal action and such appeal, timely taken, prevents
the decision on the civil liability from attaining finality.
We tackle the second issue by determining the basis of
civil liability arising from crime. Civil obligations arising
from criminal offenses are governed by Article 100 of the
Revised Penal Code which provides that "(E)very person
criminally liable for a felony is also civilly liable," in relation
to Article 2177 of the Civil Code on quasi-delict, the
provisions for independent civil actions in the Chapter on
Human Relations and the provisions regulating damages,
also found in the Civil Code.
Underlying the legal principle that a person who is
criminally liable is also civilly liable is the view that from the
standpoint of its effects, a crime has dual character: (1) as
an offense against the state because of the disturbance of
the social order; and (2) as an offense against the private
person injured by the crime unless it involves the crime of
treason, rebellion, espionage, contempt and others
wherein no civil liability arises on the part of the offender
either because there are no damages to be compensated
or there is no private person injured by the crime. 3
In the ultimate analysis, what gives rise to the civil liability
is really the obligation of everyone to repair or to make
whole the damage caused to another by reason of his act
or omission, whether done intentional or negligently and
whether or not punishable by law. 4
In the case at bar, private respondent was found guilty of
slight oral defamation and sentenced to a fine of P50.00
with subsidiary imprisonment in case of insolvency, but no
civil liability arising from the felonious act of the accused
was adjudged. This is erroneous. As a general rule, a
person who is found to be criminally liable offends two (2)
entities: the state or society in which he lives and the
individual member of the society or private person who
was injured or damaged by the punishable act or omission. petitioner is entitled to moral damages in the sum of
The offense of which private respondent was found guilty P5,000.00 and a further sum of P5,000.00 as exemplary
is not one of those felonies where no civil liability results damages.
because either there is no offended party or no damage
was caused to a private person. There is here an offended WHEREFORE, the petition is hereby GRANTED. The
party, whose main contention precisely is that he suffered decision of the Regional Trial Court is hereby MODIFIED
damages in view of the defamatory words and statements and private respondent is ordered to pay petitioner the
uttered by private respondent, in the amount of Ten amount of P5,000.00 as moral damages and another
Thousand Pesos (P10,000.00) as moral damages and the P5,000.00 as exemplary damages. Costs against private
further sum of Ten Thousand Pesos (P10,000) as respondent.
exemplary damages.
SO ORDERED.
Article 2219, par. (7) of the Civil Code allows the recovery
of moral damages in case of libel, slander or any other Gutierrez, Jr., Feliciano, Bidin and Cortés JJ., concur
form of defamation This provision of law establishes the
right of an offended party in a case for oral defamation to
recover from the guilty party damages for injury to his Footnotes
feelings and reputation. The offended party is likewise
allowed to recover punitive or exemplary damages. 1 p. 12, Rollo.
It must be remembered that every defamatory imputation 2 p. 15. Rollo.
is presumed to be malicious, even if it be true, if no good
intention and justifiable motive for making it is shown. And 3 H. Jarencio, Torts and Damages, 1983, ed., p.
malice may be inferred from the style and tone of 237.
publication 5 subject to certain exceptions which are not
present in the case at bar. 4 C. Sangco, Philippine Law on Torts and
Damages, Revised Edition pp. 246-257.
Calling petitioner who was a barangay captain an
ignoramus, traitor, tyrant and Judas is clearly an 5 U.S. vs. Sedano, 14 Phil. 328.
imputation of defects in petitioner's character sufficient to
cause him embarrassment and social humiliation. 6 tsn, March 10, 1980, pp. 5-6, p. 59, Rollo.
Petitioner testified to the feelings of shame and anguish he
suffered as a result of the incident complained of. 6 It is
patently error for the trial court to overlook this vital piece
of evidence and to conclude that the "facts and
circumstances of the case as adduced by the evidence do
not warrant the awarding of moral damages." Having
misapprehended the facts, the trial court's findings with
respect thereto is not conclusive upon us.
From the evidence presented, we rule that for the injury to
his feelings and reputation, being a barangay captain,
G.R. No. 78911-25 December 11, 1987
CHARMINA B. BANAL, petitioner,
vs.
THE HON. TOMAS V. TADEO, JR., Presiding Judge,
RTC-Quezon City, Branch 105 and Rosario Claudia
respondents.
GUTIERREZ, JR., J.:
This is a petition for certiorari to review and set aside the
orders of the respondent Regional Trial Court, Branch 105,
Quezon City dated (1) 8 January 1987 which rejected the
appearance of Atty. Nicolito L. Bustos as private
prosecutor in Criminal Cases Nos. Q-40909 to Q-40913
where respondent Rosario Claudio is the accused for
violation of Batas Pambansa Blg. 22; and (2) 31 March
1987 which denied the petitioner's motion for
reconsideration of the order dated 8 January 1987; and for
mandamus to allow Atty. Bustos to enter his appearance
as private prosecutor in the aforestated criminal cases.
It appears that fifteen (15) separate informations for
violation of Batas Pambansa Blg. 22 or the Bouncing
Checks Law, docketed as Criminal Cases Nos. 40909-
40913, were filed against respondent Claudio before the
Regional Trial Court of Quezon City and originally
assigned to Branch 84.
The presiding judge of Branch 84 inhibited himself when
respondent Claudio, through counsel, filed a petition for
recuse dated May 19,1986.
The cases were re-raffled and consequently assigned on
June 25, 1986 to Branch 105 which was then presided
over by Judge Johnico G. Serquina
During these proceedings, respondent Claudio was finally
arraigned on November 20, 1986 where she pleaded not
guilty to the charges. Pre-trial was then set on January 8,
1987.
In the meantime Judge Tomas V. Tadeo, Jr. replaced
Judge Serquina as presiding judge of Branch 105.
On January 8, 1987, the respondent court issued an order
rejecting the appearance of Atty. Nicolito L. Bustos as
private prosecutor on the ground that the charge is for the
violation of Batas Pambansa Blg. 22 which does not
provide for any civil liability or indemnity and hence, "it is
not a crime against property but public order."
The petitioner, through counsel filed a motion for
reconsideration of the order dated 8 January 1987 on
March 10, 1987.
Respondent Claudio filed her opposition to the motion for
reconsideration on March 25, 1987.
In an order dated 31 March 1987, the respondent court
denied petitioner's motion for reconsideration.
Hence, this petition questioning the orders of the
respondent Court.
The issue to be resolved is whether or not the respondent
Court acted with grave abuse of discretion or in excess of
its jurisdiction in rejecting the appearance of a private
prosecutor.
The respondents make capital of the fact that Batas
Pambansa Blg. 22 punishes the act of knowingly issuing
worthless checks as an offense against public order. As
such, it is argued that it is the State and the public that are
the principal complainants and, therefore, no civil
indemnity is provided for by Batas Pambansa Blg. 22 for
which a private party or prosecutor may intervene.
On the other hand, the petitioner, relying on the legal
axiom that "Every man criminally liable is also civilly
liable," contends that indemnity may be recovered from the
offender regardless of whether or not Batas Pambansa
Blg. 22 so provides.
A careful study of the concept of civil liability allows a
solution to the issue in the case at bar.
Generally, the basis of civil liability arising from crime is the
fundamental postulate of our law that "Every man
criminally liable is also civilly liable" (Art. 100, The Revised
Penal Code). Underlying this legal principle is the
traditional theory that when a person commits a crime he
offends two entities namely ( 1) the society in which he
lives in or the political entity called the State whose law he
had violated; and (2) the individual member of that society
whose person, right, honor, chastity or property was
actually or directly injured or damaged by the same
punishable act or omission. However, this rather broad
and general provision is among the most complex and
controversial topics in criminal procedure. It can be
misleading in its implications especially where the same
act or omission may be treated as a crime in one instance
and as a tort in another or where the law allows a separate
civil action to proceed independently of the course of the
criminal prosecution with which it is intimately intertwined.
Many legal scholars treat as a misconception or fallacy the
generally accepted notion that, the civil liability actually
arises from the crime when, in the ultimate analysis, it
does not. While an act or omission is felonious because it
is punishable by law, it gives rise to civil liability not so
much because it is a crime but because it caused damage
to another. Viewing things pragmatically, we can readily
see that what gives rise to the civil liability is really the
obligation and the moral duty of everyone to repair or
make whole the damage caused to another by reason of
his own act or omission, done intentionally or negligently,
whether or not the same be punishable by law. In other
words, criminal liability will give rise to civil liability only if
the same felonious act or omission results in damage or
injury to another and is the direct and proximate cause
thereof. Damage or injury to another is evidently the
foundation of the civil action. Such is not the case in
criminal actions for, to be criminally liable, it is enough that
the act or omission complained of is punishable,
regardless of whether or not it also causes material
damage to another. (See Sangco, Philippine Law on Torts
and Damages, 1978, Revised Edition, pp. 246-247).
Article 20 of the New Civil Code provides:
Every person who, contrary to law, wilfully or negligently
causes damage to another, shall indemnify the latter for
the same.
Regardless, therefore, of whether or not a special law so
provides, indemnification of the offended party may be had
on account of the damage, loss or injury directly suffered
as a consequence of the wrongful act of another. The
indemnity which a person is sentenced to pay forms an
integral part of the penalty imposed by law for the
commission of a crime (Quemel v. Court of Appeals, 22
SCRA 44, citing Bagtas v. Director of Prisons, 84 Phil.
692). Every crime gives rise to a penal or criminal action
for the punishment of the guilty party, and also to civil
action for the restitution of the thing, repair of the damage,
and indemnification for the losses. (United States v.
Bernardo, 19 Phil. 265).
Indeed one cannot disregard the private party in the case
at bar who suffered the offenses committed against her.
Not only the State but the petitioner too is entitled to relief
as a member of the public which the law seeks to protect.
She was assured that the checks were good when she
parted with money, property or services. She suffered with
the State when the checks bounced.
In Lozano v. Hon. Martinez (G.R. No. 63419, December
18, 1986) and the cases consolidated therewith, we held
that "The effects of a worthless check transcend the
private interests of the parties directly involved in the
transaction and touch the interests of the community at
large." Yet, we too recognized the wrong done to the
private party defrauded when we stated therein that "The
mischief it creates is not only a wrong to the payee or the
holder, but also an injury to the public."
Civil liability to the offended private party cannot thus be Fernan (Chairman), Feliciano, Bidin and Cortes, JJ.,
denied, The payee of the check is entitled to receive the concur.
payment of money for which the worthless check was
issued. Having been caused the damage, she is entitled to
recompense.
Surely, it could not have been the intendment of the
framers of Batas Pambansa Big. 22 to leave the offended
private party defrauded and empty- handed by excluding
the civil liability of the offender, giving her only the remedy,
which in many cases results in a Pyrrhic victory, of having
to file a separate civil suit. To do so, may leave the
offended party unable to recover even the face value of
the check due her, thereby unjustly enriching the errant
drawer at the expense of the payee. The protection which
the law seeks to provide would, therefore, be brought to
naught.
The petitioner's intervention in the prosecution of Criminal
Cases 40909 to 40913 is justified not only for the
protection of her interests but also in the interest of the
speedy and inexpensive administration of justice
mandated by the Constitution (Section 16, Article III, Bill of
Rights, Constitution of 1987). A separate civil action for the
purpose would only prove to be costly, burdensome, and
time-consuming for both parties and further delay the final
disposition of the case. This multiplicity of suits must be
avoided. Where petitioner's rights may be fulIy adjudicated
in the proceedings before the trial court, resort t o a
separate action to recover civil liability is clearly
unwarranted.
WHEREFORE the petition is hereby GRANTED. The
respondent court is ordered to permit the intervention of a
private prosecutor in behalf of petitioner Charmina B.
Banal, in the prosecution of the civil aspect of Criminasl
Cases Nos. 40909 to 40913. The temporary restraining
order issued by this court a quo for further proceedings.
This decision is immediately executory.
SO ORDERED.
GEORGE MANANTAN, petitioner, vs. THE COURT OF
APPEALS, SPOUSES MARCELINO NICOLAS and
MARIA NICOLAS, respondents.
DECISION
QUISUMBING, J.:
This is a petition for review of the decision dated January
31, 1992 of the Court of Appeals in CA-G.R. CV No.
19240, modifying the judgment of the Regional Trial Court
of Santiago, Isabela, Branch 21, in Criminal Case No. 066.
Petitioner George Manantan was acquitted by the trial
court of homicide through reckless imprudence without a
ruling on his civil liability. On appeal from the civil aspect of
the judgment in Criminal Case No. 066, the appellate court
found petitioner Manantan civilly liable and ordered him to
indemnify private respondents Marcelino Nicolas and
Maria Nicolas P104,400.00 representing loss of support,
P50,000.00 as death indemnity, and moral damages of
P20,000.00 or a total of P174,400.00 for the death of their
son, Ruben Nicolas.
The facts of this case are as follows:
On June 1, 1983, the Provincial Fiscal of Isabela filed an
information charging petitioner Manantan with reckless
imprudence resulting in homicide, allegedly committed as
follows:
That on or about the 25th day of September 1982, in the
municipality of Santiago, province of Isabela, Philippines,
and within the jurisdiction of this Honorable Court, the said
accused, being then the driver and person-in-charge of an
automobile bearing Plate No. NGA-816, willfully and
unlawfully drove and operated the same while along the
Daang Maharlika at Barangay Malvar, in said municipality,
in a negligent, careless and imprudent manner, without
due regard to traffic laws, regulations and ordinances and
without taking the necessary precaution to prevent
accident to person and damage to property, causing by
such negligence, carelessness and imprudence said
automobile driven and operated by him to sideswipe a
passenger jeep bearing plate No. 918-7F driven by
Charles Codamon, thereby causing the said automobile to
turn down (sic) resulting to the death of Ruben Nicolas a
passenger of said automobile.
CONTRARY TO LAW.[1]
On arraignment, petitioner pleaded not guilty to the
charge. Trial on the merits ensued.
The prosecutions evidence, as summarized by the trial
court and adopted by the appellate court, showed that:
[I]n the morning of September 25, 1982, Fiscal Wilfredo
Ambrocio decided to catch shrimps at the irrigation canal
at his farm. He invited the deceased who told him that they
(should) borrow the Ford Fiera of the accused George
Manantan who is also from Cordon. The deceased went to
borrow the Ford Fiera butsaid that the accused also
wanted to (come) along. So Fiscal Ambrocio and the
deceased dropped by the accused at the Manantan
Technical School. They drank beer there before they
proceeded to the farm using the Toyota Starlet of the
accused. At the farm they consumed one (more) case of
beer. At about 12:00 oclock noon they went home. Then at
about 2:00 or 3:00 oclock that afternoon, (defense witness
Miguel) Tabangin and (Ruben) Nicolas and the accused
returned to the house of Fiscal Ambrocio with a duck. They
cooked the duck and ate the same with one more case of
beer. They ate and drank until about 8:30 in the evening
when the accused invited them to go bowling. They went
to Santiago, Isabela on board the Toyota Starlet of the
accused who drove the same. They went to the Vicap
Bowling Lanes at Mabini, Santiago, Isabela but
unfortunately there was no vacant alley. While waiting for a
vacant alley they drank one beer each. After waiting for
about 40 minutes and still no alley became vacant the
accused invited his companions to go to the LBC Night
Club. They had drinks and took some lady partners at the
LBC. After one hour, they left the LBC and proceeded to a
nearby store where they ate arroz caldoand then they
decided to go home. Again the accused drove the car.
Miguel Tabangin sat with the accused in the front seat
while the deceased and Fiscal Ambrocio sat at the back
seat with the deceased immediately behind the accused.
The accused was driving at a speed of about 40 kilometers
per hour along the Maharlika Highway at Malvar, Santiago,
Isabela, at the middle portion of the highway (although
according to Charles Cudamon, the car was running at a
speed of 80 to 90 kilometers per hours on [the] wrong lane
of the highway because the car was overtaking a tricycle)
when they met a passenger jeepney with bright lights on.
The accused immediately tried to swerve the car to the
right and move his body away from the steering wheel but
he was not able to avoid the oncoming vehicle and the two
vehicles collided with each other at the center of the road.
xxx
As a result of the collision the car turned turtle twice and
landed on its top at the side of the highway immediately at
the approach of the street going to the Flores Clinic while
the jeep swerved across the road so that one half front
portion landed on the lane of the car while the back half
portion was at its right lane five meters away from the point
of impact as shown by a sketch (Exhibit A) prepared by
Cudamon the following morning at the Police
Headquarters at the instance of his lawyer. Fiscal
Ambrocio lost consciousness. When he regained
consciousness he was still inside the car (lying) on his
belly with the deceased on top of him. Ambrocio pushed
(away) the deceased and then he was pulled out of the car
by Tabangin. Afterwards, the deceased who was still
unconscious was pulled out from the car. Both Fiscal
Ambrocio and the deceased were brought to the Flores
Clinic. The deceased died that night (Exhibit B) while
Ambrocio suffered only minor injuries to his head and
legs.[2]
The defense version as to the events prior to the incident
was essentially the same as that of the prosecution,
except that defense witness Miguel Tabangin declared that
Manantan did not drink beer that night. As to the accident,
the defense claimed that:
The accused was driving slowly at the right lane [at] about
20 inches from the center of the road at about 30
kilometers per hour at the National Highway at Malvar,
Santiago, Isabela, when suddenly a passenger jeepney
with bright lights which was coming from the opposite
direction and running very fast suddenly swerve(d) to the
cars lane and bumped the car which turned turtle twice
and rested on its top at the right edge of the road while the
jeep stopped across the center of the road as shown by a
picture taken after the incident (Exhibit 1) and a sketch
(Exhibit 3) drawn by the accused during his rebuttal
testimony. The car was hit on the drivers side. As a result
of the collision, the accused and Miguel Tabangin and
Fiscal Ambrocio were injured while Ruben Nicolas died at
the Flores Clinic where they were all brought for
treatment.[3]
In its decision dated June 30, 1988, promulgated on
August 4, 1988, the trial court decided Criminal Case No.
066 in petitioners favor, thus:
WHEREFORE, in the light of the foregoing considerations,
the Court finds the accused NOT GUILTY of the crime
charged and hereby acquits him.
SO ORDERED.[4]
On August 8, 1988, private respondents filed their notice of
appeal on the civil aspect of the trial courts judgment. In
their appeal, docketed as CA-G.R. CV No. 19240, the
Nicolas spouses prayed that the decision appealed from
be modified and that appellee be ordered to pay indemnity
and damages.
On January 31, 1992, the appellate court decided CA-G.R.
CV No. 19240 in favor of the Nicolas spouses, thus:
WHEREFORE, the decision appealed from is MODIFIED
in that defendant-appellee is hereby held civilly liable for
his negligent and reckless act of driving his car which was
the proximate cause of the vehicular accident, and
sentenced to indemnify plaintiffs-appellants in the amount
of P174,400.00 for the death of Ruben Nicolas,
SO ORDERED.[5]
In finding petitioner civilly liable, the court a quo noted that
at the time the accident occurred, Manantan was in a state
of intoxication, due to his having consumed all in all, a total
of at least twelve (12) bottles of beerbetween 9 a.m. and
11 p.m.[6] It found that petitioners act of driving while
intoxicated was a clear violation of Section 53 of the Land
Transportation and Traffic Code (R.A. No. 4136)[7] and
pursuant to Article 2185 of the Civil Code,[8] a statutory
presumption of negligence existed. It held that petitioners
act of violating the Traffic Code is negligence in itself
because the mishap, which occurred, was the precise
injury sought to be prevented by the regulation.[9]
Petitioner moved for reconsideration, but the appellate
court in its resolution of August 24, 1992 denied the
motion.
Hence, the present case. Petitioner, in his memorandum,
submits the following issues for our consideration:
FIRST THE DECISION OF THE TRIAL COURT
ACQUITTING THE PETITIONER OF THE CRIME OF
RECKLESS IMPRUDENCE RESULTING TO HOMICIDE
FORECLOSED ANY FURTHER INQUIRY ON THE
ACCUSEDS (PETITIONERS) NEGLIGENCE OR
RECKLESS IMPRUDENCE BECAUSE BY THEN HE
WILL BE PLACED IN DOUBLE JEOPARDY AND
THEREFORE THE COURT OF APPEALS ERRED IN
PASSING UPON THE SAME ISSUE AGAIN.
SECOND THE COURT OF APPEALS DID NOT HAVE
JURISDICTION TO AWARD DAMAGES AND
INDEMNITY TO THE PRIVATE RESPONDENTS
CONSIDERING THAT THE NON-DECLARATION OF
ANY INDEMNITY OR AWARD OF DAMAGES BY THE
REGIONAL TRIAL COURT OF ISABELA, BRANCH XXI,
WAS ITSELF CONSISTENT WITH THE PETITIONERS
ACQUITTAL FOR THE REASON THAT THE CIVIL
ACTION WAS IMPLIEDLY INSTITUTED WITH THE
CRIMINAL ACTION AND THERE WAS NO EXPRESS
WAIVER OF THE CIVIL ACTION OR RESERVATION TO
INSTITUTE IT SEPARATELY BY THE PRIVATE
RESPONDENTS IN THE TRIAL COURT.
THIRD THE COURT OF APPEALS DID NOT HAVE
JURISDICTION TO TAKE COGNIZANCE OF THE CASE
CA-G.R. CV No. 19240 ENTITLED: SPOUSES
MARCELINO NICOLAS AND MARIA NICOLAS v.
GEORGE MANANTAN, AND RENDER THE DECISION
SOUGHT TO BE REVIEWED WHEN THE SAME WAS
PROSECUTED BY THE PRIVATE RESPONDENTS IN
THEIR PERSONAL CAPACITIES AND THE FILING FEES
NOT HAVING BEEN PAID, THUS VIOLATING THE
MANCHESTER DOCTRINE.
In brief, the issues for our resolution are:
(1) Did the acquittal of petitioner foreclose any further
inquiry by the Court of Appeals as to his negligence or
reckless imprudence?
(2) Did the court a quo err in finding that petitioners
acquittal did not extinguish his civil liability?
(3) Did the appellate court commit a reversible error in
failing to apply the Manchester doctrine to CA-G.R. CV No.
19240?
On the first issue, petitioner opines that the Court of
Appeals should not have disturbed the findings of the trial
court on the lack of negligence or reckless imprudence
under the guise of determining his civil liability. He argues
that the trial courts finding that he was neither imprudent
nor negligent was the basis for his acquittal, and not
reasonable doubt. He submits that in finding him liable for
indemnity and damages, the appellate court not only
placed his acquittal in suspicion, but also put him in double
jeopardy.
Private respondents contend that while the trial court found
that petitioners guilt had not been proven beyond
reasonable doubt, it did not state in clear and unequivocal
terms that petitioner was not recklessly imprudent or
negligent. Hence, impliedly the trial court acquitted him on
reasonable doubt. Since civil liability is not extinguished in
criminal cases, if the acquittal is based on reasonable
doubt, the Court of Appeals had to review the findings of
the trial court to determine if there was a basis for
awarding indemnity and damages.
Preliminarily, petitioners claim that the decision of the
appellate court awarding indemnity placed him in double
jeopardy is misplaced. The constitution provides that no
person shall be twice put in jeopardy for the same offense.
If an act is punished by a law and an ordinance, conviction
or acquittal under either shall constitute a bar to another
prosecution for the same act.[10] When a person is
charged with an offense and the case is terminated either
by acquittal or conviction or in any other manner without
the consent of the accused, the latter cannot again be
charged with the same or identical offense.[11] This is
double jeopardy. For double jeopardy to exist, the
following elements must be established: (a) a first jeopardy
must have attached prior to the second; (2) the first
jeopardy must have terminated; and (3) the second
jeopardy must be for the same offense as the first.[12] In
the instant case, petitioner had once been placed in
jeopardy by the filing of Criminal Case No. 066 and the
jeopardy was terminated by his discharge. The judgment
of acquittal became immediately final. Note, however, that
what was elevated to the Court of Appeals by private
respondents was the civil aspect of Criminal Case No.
066. Petitioner was not charged anew in CA-G.R. CV No.
19240 with a second criminal offense identical to the first
offense. The records clearly show that no second criminal
offense was being imputed to petitioner on appeal. In
modifying the lower courts judgment, the appellate court
did not modify the judgment of acquittal. Nor did it order
the filing of a second criminal case against petitioner for
the same offense. Obviously, therefore, there was no
second jeopardy to speak of. Petitioners claim of having
been placed in double jeopardy is incorrect.
Our law recognizes two kinds of acquittal, with different
effects on the civil liability of the accused. First is an
acquittal on the ground that the accused is not the author
of the act or omission complained of. This instance closes
the door to civil liability, for a person who has been found
to be not the perpetrator of any act or omission cannot and
can never be held liable for such act or omission.[13]
There being no delict, civil liability ex delicto is out of the
question, and the civil action, if any, which may be
instituted must be based on grounds other than the delict
complained of. This is the situation contemplated in Rule
111 of the Rules of Court.[14] The second instance is an
acquittal based on reasonable doubt on the guilt of the
accused. In this case, even if the guilt of the accused has
not been satisfactorily established, he is not exempt from
civil liability which may be proved by preponderance of
evidence only.[15] This is the situation contemplated in
Article 29 of the Civil Code,[16] where the civil action for
damages is for the same act or omission. Although the two
actions have different purposes, the matters discussed in
the civil case are similar to those discussed in the criminal
case. However, the judgment in the criminal proceeding
cannot be read in evidence in the civil action to establish
any fact there determined, even though both actions
involve the same act or omission.[17] The reason for this
rule is that the parties are not the same and secondarily,
different rules of evidence are applicable. Hence,
notwithstanding herein petitioners acquittal, the Court of
Appeals in determining whether Article 29 applied, was not
precluded from looking into the question of petitioners
negligence or reckless imprudence.
On the second issue, petitioner insists that he was
acquitted on a finding that he was neither criminally
negligent nor recklessly imprudent. Inasmuch as his civil
liability is predicated on the criminal offense, he argues
that when the latter is not proved, civil liability cannot be
demanded. He concludes that his acquittal bars any civil
action.
Private respondents counter that a closer look at the trial
courts judgment shows that the judgment of acquittal did
not clearly and categorically declare the non-existence of
petitioners negligence or imprudence. Hence, they argue
that his acquittal must be deemed based on reasonable
doubt, allowing Article 29 of the Civil Code to come into
play.
Our scrutiny of the lower courts decision in Criminal Case
No. 066 supports the conclusion of the appellate court that
the acquittal was based on reasonable doubt; hence,
petitioners civil liability was not extinguished by his
discharge. We note the trial courts declaration that did not
discount the possibility that the accused was really
negligent. However, it found that a hypothesis inconsistent
with the negligence of the accused presented itself before
the Court and since said hypothesis is consistent with the
recordthe Courts mind cannot rest on a verdict of
conviction.[18] The foregoing clearly shows that petitioners
acquittal was predicated on the conclusion that his guilt
had not been established with moral certainty. Stated
differently, it is an acquittal based on reasonable doubt
and a suit to enforce civil liability for the same act or
omission lies.
On the third issue, petitioner argues that the Court of
Appeals erred in awarding damages and indemnity, since
private respondents did not pay the corresponding filing
fees for their claims for damages when the civil case was
impliedly instituted with the criminal action. Petitioner
submits that the non-payment of filing fees on the amount
of the claim for damages violated the doctrine in
Manchester Development Corporation v. Court of Appeals,
149 SCRA 562 (1987) and Supreme Court Circular No. 7
dated March 24, 1988.[19] He avers that since Manchester
held that The Court acquires jurisdiction over any case
only upon payment of the prescribed docket fees, the
appellate court was without jurisdiction to hear and try CA-
G.R. CV No. 19240, much less award indemnity and
damages.
Private respondents argue that the Manchester doctrine is
inapplicable to the instant case. They ask us to note that
the criminal case, with which the civil case was impliedly
instituted, was filed on July 1, 1983, while the Manchester
requirements as to docket and filing fees took effect only
with the promulgation of Supreme Court Circular No. 7 on
March 24, 1988. Moreover, the information filed by the
Provincial Prosecutor of Isabela did not allege the amount
of indemnity to be paid. Since it was not then customarily
or legally required that the civil damages sought be stated
in the information, the trial court had no basis in assessing
the filing fees and demanding payment thereof. Moreover,
assuming that the Manchester ruling is applied
retroactively, under the Rules of Court, the filing fees for
the damages awarded are a first lien on the judgment.
Hence, there is no violation of the Manchester doctrine to
speak of.
At the time of the filing of the information in 1983, the
implied institution of civil actions with criminal actions was
governed by Rule 111, Section 1 of the 1964 Rules of
Court.[20] As correctly pointed out by private respondents,
under said rule, it was not required that the damages
sought by the offended party be stated in the complaint or
information. With the adoption of the 1985 Rules of
Criminal Procedure, and the amendment of Rule 111,
Section 1 of the 1985 Rules of Criminal Procedure by a
resolution of this Court dated July 7, 1988, it is now
required that:
When the offended party seeks to enforce civil liability
against the accused by way of moral, nominal, temperate
or exemplary damages, the filing fees for such civil action
as provided in these Rules shall constitute a first lien on
the judgment except in an award for actual damages.
In cases wherein the amount of damages, other than
actual, is alleged in the complaint or information, the
corresponding filing fees shall be paid by the offended
party upon the filing thereof in court for trial.
The foregoing were the applicable provisions of the Rules
of Criminal Procedure at the time private respondents
appealed the civil aspect of Criminal Case No. 066 to the
court a quo in 1989. Being in the nature of a curative
statute, the amendment applies retroactively and affects
pending actions as in this case.
Thus, where the civil action is impliedly instituted together
with the criminal action, the actual damages claimed by
the offended parties, as in this case, are not included in
the computation of the filing fees. Filing fees are to be paid
only if other items of damages such as moral, nominal,
temperate, or exemplary damages are alleged in the
complaint or information, or if they are not so alleged, shall
constitute a first lien on the judgment.[21] Recall that the
information in Criminal Case No. 066 contained no specific
allegations of damages. Considering that the Rules of
Criminal Procedure effectively guarantee that the filing
fees for the award of damages are a first lien on the
judgment, the effect of the enforcement of said lien must
retroact to the institution of the criminal action. The filing
fees are deemed paid from the filing of the criminal
complaint or information. We therefore find no basis for
petitioners allegations that the filing fees were not paid or
improperly paid and that the appellate court acquired no
jurisdiction.
WHEREFORE, the instant petition is DISMISSED for lack
of merit. The assailed decision of the Court of Appeals in
CA-G.R. CV No. 19240 promulgated on January 31, 1992,
as well as its resolution dated August 24, 1992, denying
herein petitioners motion for reconsideration, are
AFFIRMED. Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr.,
JJ., concur.
[1] Records, p. 1.
[2] CA Rollo, pp. 53-55.
[3] Id. at 56-57.
[4] Records, p. 429.
[5] CA Rollo, p. 60.
[6] Id. at 57.
[7] SEC. 53. Driving while under the influence of liquor or
narcotic drug. No person shall drive a motor vehicle while
under the influence of liquor or narcotic drug.
[8] CIVIL CODE, ART. 2185. Unless there is proof to the
contrary, it is presumed that a person driving a motor
vehicle has been negligent if at the time of the mishap, he
was violating any traffic regulation.
[9] Supra note 6, at 58.
[10] CONST., Art. III, Sec. 21.
[11] Melo v. People, 85 Phil. 766, 768 (1950).
[12] People v. Bocar, 138 SCRA 166, 171 (1985).
[13] Almeida, et al. v. Abaroa, 8 Phil, 178, 181 (1907). See
also Almeida Chantangco and Lete v. Abaroa, 40 Phil.
1056 (1910), 218 US 476, 54 L. Ed. 1116 (1910); Wise &
Co. v. Larion, 45 Phil. 314 (1923), Francisco v. Onrubia,
46 Phil. 327 (1924). Article 29 of the Civil Code serves
only to limit and qualify the application of the Almeida
doctrine.
[14] Rules of Court, Rule 111, Sec. 2. Institution of
separate civil action.
xxx
 civil liability arising from the offense charged is impliedly
(b) Extinction of the penal action does not carry with it instituted with the criminal action, unless the offended
extinction of the civil, unless the extinction proceeds from a party expressly waives the civil action or reserves his right
declaration in a final judgment that the fact from which the to institute it separately.
civil might arise did not exist. (stress supplied)
[21] People v. Escano, Jr., 193 SCRA 662, 665 (1991).
[15] Manahan, Jr. v. Court of Appeals, 255 SCRA 202, 214
(1996), citing Padilla v. Court of Appeals, 129 SCRA 558
(1984).

[16] CIVIL CODE, Art. 29. When the accused in a criminal

prosecution is acquitted on the ground that his guilt has
not been proved beyond reasonable doubt, a civil action
for damages for the same act or omission may be
instituted (stress supplied). Such action requires only a
preponderance of evidence. Upon motion of the
defendant, the court may require the plaintiff to file a bond
to answer for damages in case the complaint should be
found to be malicious.

If in a criminal case, the judgment of acquittal is based

upon reasonable doubt, the court shall so declare. In the
absence of any declaration to that effect, it may be inferred
from the text of the decision whether or not the acquittal is
due to that ground.

[17] Almeida Chantangco and Lete v. Abaroa, supra note

13, at 1061.

[18] Supra note 4.

[19] The subject of which reads: ALL COMPLAINTS MUST

SPECIFY THE AMOUNT OF DAMAGES SOUGHT NOT
ONLY IN THE BODY OF THE PLEADINGS, BUT ALSO
IN THE PRAYER IN ORDER TO BE ACCEPTED AND
ADMITTED FOR FILING. THE AMOUNT OF DAMAGES
SO SPECIFIED IN THE COMPLAINT SHALL BE THE
BASIS FOR ASSESSING THE AMOUNT OF THE FILING
FEES.

[20] Sec. 1. Institution of criminal and civil actions. When a

criminal action is instituted, the civil action for recovery of
[G.R. NO. 150157 : January 25, 2007]
MAURICIO MANLICLIC and PHILIPPINE RABBIT BUS
LINES, INC., Petitioners, v. MODESTO CALAUNAN,
Respondent.
DECISION
CHICO-NAZARIO, J.:
Assailed before Us is the decision1 of the Court of Appeals
in CA-G.R. CV No. 55909 which affirmed in toto the
decision2 of the Regional Trial Court (RTC) of Dagupan
City, Branch 42, in Civil Case No. D-10086, finding
petitioners Mauricio Manliclic and Philippine Rabbit Bus
Lines, Inc. (PRBLI) solidarily liable to pay damages and
attorney's fees to respondent Modesto Calaunan.
The factual antecedents are as follows:
The vehicles involved in this case are: (1) Philippine
Rabbit Bus No. 353 with plate number CVD-478, owned by
petitioner PRBLI and driven by petitioner Mauricio
Manliclic; and (2) owner-type jeep with plate number PER-
290, owned by respondent Modesto Calaunan and driven
by Marcelo Mendoza.
At around 6:00 to 7:00 o'clock in the morning of 12 July
1988, respondent Calaunan, together with Marcelo
Mendoza, was on his way to Manila from Pangasinan on
board his owner-type jeep. The Philippine Rabbit Bus was
likewise bound for Manila from Concepcion, Tarlac. At
approximately Kilometer 40 of the North Luzon
Expressway in Barangay Lalangan, Plaridel, Bulacan, the
two vehicles collided. The front right side of the Philippine
Rabbit Bus hit the rear left side of the jeep causing the
latter to move to the shoulder on the right and then fall on
a ditch with water resulting to further extensive damage.
The bus veered to the left and stopped 7 to 8 meters from
point of collision.
Respondent suffered minor injuries while his driver was
unhurt. He was first brought for treatment to the Manila
Central University Hospital in Kalookan City by Oscar
Buan, the conductor of the Philippine Rabbit Bus, and was
later transferred to the Veterans Memorial Medical Center.
By reason of such collision, a criminal case was filed
before the RTC of Malolos, Bulacan, charging petitioner
Manliclic with Reckless Imprudence Resulting in Damage
to Property with Physical Injuries, docketed as Crim. Case
No. 684-M-89. Subsequently on 2 December 1991,
respondent filed a complaint for damages against
petitioners Manliclic and PRBLI before the RTC of
Dagupan City, docketed as Civil Case No. D-10086. The
criminal case was tried ahead of the civil case. Among
those who testified in the criminal case were respondent
Calaunan, Marcelo Mendoza and Fernando Ramos.
In the civil case (now before this Court), the parties
admitted the following:
1. The parties agreed on the capacity of the parties to sue
and be sued as well as the venue and the identities of the
vehicles involved;
2. The identity of the drivers and the fact that they are duly
licensed;
3. The date and place of the vehicular collision;
4. The extent of the injuries suffered by plaintiff Modesto
Calaunan and the existence of the medical certificate;
5. That both vehicles were going towards the south; the
private jeep being ahead of the bus;
6. That the weather was fair and the road was well paved
and straight, although there was a ditch on the right side
where the jeep fell into.3
When the civil case was heard, counsel for respondent
prayed that the transcripts of stenographic notes (TSNs)4
of the testimonies of respondent Calaunan, Marcelo
Mendoza and Fernando Ramos in the criminal case be
received in evidence in the civil case in as much as these
witnesses are not available to testify in the civil case.
Francisco Tuliao testified that his brother-in-law,
respondent Calaunan, left for abroad sometime in
November, 1989 and has not returned since then. Rogelio
Ramos took the stand and said that his brother, Fernando
Ramos, left for Amman, Jordan, to work. Rosalia Mendoza
testified that her husband, Marcelo Mendoza, left their
residence to look for a job. She narrated that she thought
her husband went to his hometown in Panique, Tarlac,
when he did not return after one month. She went to her
husband's hometown to look for him but she was informed
that he did not go there.ςηαñrοblεš νιr†υαl
lαω lιbrαrÿ
The trial court subpoenaed the Clerk of Court of Branch 8,
RTC, Malolos, Bulacan, the court where Criminal Case No.
684-M-89 was tried, to bring the TSNs of the testimonies
of respondent Calaunan,5 Marcelo Mendoza6 and
Fernando Ramos7 in said case, together with other
documentary evidence marked therein. Instead of the
Branch Clerk of Court, it was Enrique Santos Guevara,
Court Interpreter, who appeared before the court and
identified the TSNs of the three afore-named witnesses
and other pertinent documents he had brought.8 Counsel
for respondent wanted to mark other TSNs and documents
from the said criminal case to be adopted in the instant
case, but since the same were not brought to the trial
court, counsel for petitioners compromised that said TSNs
and documents could be offered by counsel for respondent
as rebuttal evidence.
For the defendants, petitioner Manliclic and bus conductor
Oscar Buan testified. The TSN9 of the testimony of Donato
Ganiban, investigator of the PRBLI, in Criminal Case No.
684-M-89 was marked and allowed to be adopted in the
civil case on the ground that he was already dead.
Respondent further marked, among other documents, as
rebuttal evidence, the TSNs10 of the testimonies of
Donato Ganiban, Oscar Buan and petitioner Manliclic in
Criminal Case No. 684-M-89.
The disagreement arises from the question: Who is to be
held liable for the collision?cralaw library
Respondent insists it was petitioner Manliclic who should
be liable while the latter is resolute in saying it was the
former who caused the smash up.
The versions of the parties are summarized by the trial
court as follows:
The parties differed only on the manner the collision
between the two (2) vehicles took place. According to the
plaintiff and his driver, the jeep was cruising at the speed
of 60 to 70 kilometers per hour on the slow lane of the
expressway when the Philippine Rabbit Bus overtook the
jeep and in the process of overtaking the jeep, the
Philippine Rabbit Bus hit the rear of the jeep on the left
side. At the time the Philippine Rabbit Bus hit the jeep, it
was about to overtake the jeep. In other words, the
Philippine Rabbit Bus was still at the back of the jeep when
the jeep was hit. Fernando Ramos corroborated the
testimony of the plaintiff and Marcelo Mendoza. He said
that he was on another jeep following the Philippine Rabbit
Bus and the jeep of plaintiff when the incident took place.
He said, the jeep of the plaintiff overtook them and the said
jeep of the plaintiff was followed by the Philippine Rabbit
Bus which was running very fast. The bus also overtook
the jeep in which he was riding. After that, he heard a loud
sound. He saw the jeep of the plaintiff swerved to the right
on a grassy portion of the road. The Philippine Rabbit Bus
stopped and they overtook the Philippine Rabbit Bus so
that it could not moved (sic), meaning they stopped in front
of the Philippine Rabbit Bus. He testified that the jeep of
plaintiff swerved to the right because it was bumped by the
Philippine Rabbit bus from behind.
Both Mauricio Manliclic and his driver, Oscar Buan
admitted that the Philippine Rabbit Bus bumped the jeep in
question. However, they explained that when the
Philippine Rabbit bus was about to go to the left lane to
overtake the jeep, the latter jeep swerved to the left
because it was to overtake another jeep in front of it. Such
was their testimony before the RTC in Malolos in the
criminal case and before this Court in the instant case.
[Thus, which of the two versions of the manner how the
collision took place was correct, would be determinative of
who between the two drivers was negligent in the
operation of their respective vehicles.]11
Petitioner PRBLI maintained that it observed and
exercised the diligence of a good father of a family in the
selection and supervision of its employee, specifically
petitioner Manliclic.
On 22 July 1996, the trial court rendered its decision in
favor of respondent Calaunan and against petitioners
Manliclic and PRBLI. The dispositive portion of its decision
reads:
WHEREFORE, judgment is rendered in favor of the
plaintiff and against the defendants ordering the said
defendants to pay plaintiff jointly and solidarily the amount
of P40,838.00 as actual damages for the towing as well as
the repair and the materials used for the repair of the jeep
in question; P100,000.00 as moral damages and another
P100,000.00 as exemplary damages and P15,000.00 as
attorney's fees, including appearance fees of the lawyer. In
addition, the defendants are also to pay costs.12
Petitioners appealed the decision via Notice of Appeal to
the Court of Appeals.13
In a decision dated 28 September 2001, the Court of
Appeals, finding no reversible error in the decision of the
trial court, affirmed it in all respects.14
Petitioners are now before us by way of Petition for
Review assailing the decision of the Court of Appeals.
They assign as errors the following:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF
LAW IN AFFIRMING THE TRIAL COURT'S
QUESTIONABLE ADMISSION IN EVIDENCE OF THE
TSN's AND OTHER DOCUMENTS PRESENTED IN THE
CRIMINAL CASE.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF
LAW IN AFFIRMING THE TRIAL COURT'S RELIANCE
ON THE VERSION OF THE RESPONDENT ON HOW
THE ACCIDENT SUPPOSEDLY OCCURRED.
III
THE COURT OF APPEALS ERRED ON A QUESTION OF
LAW IN AFFIRMING THE TRIAL COURT'S UNFAIR
DISREGARD OF HEREIN PETITIONER PRBL's
DEFENSE OF EXERCISE OF DUE DILIGENCE IN THE
SELECTION AND SUPERVISION OF ITS EMPLOYEES.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF
LAW IN AFFIRMING THE TRIAL COURT'S
QUESTIONABLE AWARD OF DAMAGES AND
ATTORNEY'S FEE.
With the passing away of respondent Calaunan during the
pendency of this appeal with this Court, we granted the
Motion for the Substitution of Respondent filed by his wife,
Mrs. Precila Zarate Vda. De Calaunan, and children,
Virgilio Calaunan, Carmelita Honeycomb, Evelyn
Calaunan, Marko Calaunan and Liwayway Calaunan.15
In their Reply to respondent's Comment, petitioners
informed this Court of a Decision16 of the Court of
Appeals acquitting petitioner Manliclic of the charge17 of
Reckless Imprudence Resulting in Damage to Property
with Physical Injuries attaching thereto a photocopy
thereof.
On the first assigned error, petitioners argue that the TSNs
containing the testimonies of respondent Calaunan,18
Marcelo Mendoza19 and Fernando Ramos20 should not
be admitted in evidence for failure of respondent to comply
with the requisites of Section 47, Rule 130 of the Rules of
Court.
For Section 47, Rule 13021 to apply, the following
requisites must be satisfied: (a) the witness is dead or
unable to testify; (b) his testimony or deposition was given
in a former case or proceeding, judicial or administrative,
between the same parties or those representing the same
interests; (c) the former case involved the same subject as
that in the present case, although on different causes of
action; (d) the issue testified to by the witness in the former
trial is the same issue involved in the present case; and (e)
the adverse party had an opportunity to cross-examine the
witness in the former case.22
Admittedly, respondent failed to show the concurrence of
all the requisites set forth by the Rules for a testimony
given in a former case or proceeding to be admissible as
an exception to the hearsay rule. Petitioner PRBLI, not
being a party in Criminal Case No. 684-M-89, had no
opportunity to cross-examine the three witnesses in said
case. The criminal case was filed exclusively against
petitioner Manliclic, petitioner PRBLI's employee. The
cases dealing with the subsidiary liability of employers
uniformly declare that, strictly speaking, they are not
parties to the criminal cases instituted against their
employees.23
Notwithstanding the fact that petitioner PRBLI was not a
party in said criminal case, the testimonies of the three
witnesses are still admissible on the ground that petitioner
PRBLI failed to object on their admissibility.
It is elementary that an objection shall be made at the time
when an alleged inadmissible document is offered in
evidence; otherwise, the objection shall be treated as
waived, since the right to object is merely a privilege which
the party may waive. Thus, a failure to except to the
evidence because it does not conform to the statute is a
waiver of the provisions of the law. Even assuming ex
gratia argumenti that these documents are inadmissible for
being hearsay, but on account of failure to object thereto,
the same may be admitted and considered as sufficient to
prove the facts therein asserted.24 Hearsay evidence
alone may be insufficient to establish a fact in a suit but,
when no objection is made thereto, it is, like any other
evidence, to be considered and given the importance it
deserves.25
In the case at bar, petitioner PRBLI did not object to the
TSNs containing the testimonies of respondent Calaunan,
Marcelo Mendoza and Fernando Ramos in the criminal
case when the same were offered in evidence in the trial
court. In fact, the TSNs of the testimonies of Calaunan and
Mendoza were admitted by both petitioners.26 Moreover,
petitioner PRBLI even offered in evidence the TSN
containing the testimony of Donato Ganiban in the criminal
case. If petitioner PRBLI argues that the TSNs of the
testimonies of plaintiff's witnesses in the criminal case
should not be admitted in the instant case, why then did it
offer the TSN of the testimony of Ganiban which was given
in the criminal case? It appears that petitioner PRBLI
wants to have its cake and eat it too. It cannot argue that
the TSNs of the testimonies of the witnesses of the
adverse party in the criminal case should not be admitted
and at the same time insist that the TSN of the testimony
of the witness for the accused be admitted in its favor. To
disallow admission in evidence of the TSNs of the
testimonies of Calaunan, Marcelo Mendoza and Fernando
Ramos in the criminal case and to admit the TSN of the
testimony of Ganiban would be unfair.
We do not subscribe to petitioner PRBLI's argument that it
will be denied due process when the TSNs of the
testimonies of Calaunan, Marcelo Mendoza and Fernando
Ramos in the criminal case are to be admitted in the civil
case. It is too late for petitioner PRBLI to raise denial of
due process in relation to Section 47, Rule 130 of the
Rules of Court, as a ground for objecting to the
admissibility of the TSNs. For failure to object at the proper
time, it waived its right to object that the TSNs did not
comply with Section 47.
In Mangio v. Court of Appeals,27 this Court, through
Associate Justice Reynato S. Puno,28 admitted in
evidence a TSN of the testimony of a witness in another
case despite therein petitioner's assertion that he would be
denied due process. In admitting the TSN, the Court ruled
that the raising of denial of due process in relation to
Section 47, Rule 130 of the Rules of Court, as a ground for
objecting to the admissibility of the TSN was belatedly
done. In so doing, therein petitioner waived his right to
object based on said ground.
Petitioners contend that the documents in the criminal
case should not have been admitted in the instant civil
case because Section 47 of Rule 130 refers only to
"testimony or deposition." We find such contention to be
untenable. Though said section speaks only of testimony
and deposition, it does not mean that documents from a
former case or proceeding cannot be admitted. Said
documents can be admitted they being part of the
testimonies of witnesses that have been admitted.
Accordingly, they shall be given the same weight as that to
which the testimony may be entitled.29
On the second assigned error, petitioners contend that the
version of petitioner Manliclic as to how the accident
occurred is more credible than respondent's version. They
anchor their contention on the fact that petitioner Manliclic
was acquitted by the Court of Appeals of the charge of
Reckless Imprudence Resulting in Damage to Property
with Physical Injuries.
To be resolved by the Court is the effect of petitioner
Manliclic's acquittal in the civil case.
From the complaint, it can be gathered that the civil case
for damages was one arising from, or based on, quasi-
delict.30 Petitioner Manliclic was sued for his negligence
or reckless imprudence in causing the collision, while
petitioner PRBLI was sued for its failure to exercise the
diligence of a good father in the selection and supervision
of its employees, particularly petitioner Manliclic. The
allegations read:
"4. That sometime on July 12, 1988 at around 6:20 A.M.
plaintiff was on board the above-described motor vehicle
travelling at a moderate speed along the North Luzon
Expressway heading South towards Manila together with
MARCELO MENDOZA, who was then driving the same;
"5. That approximately at kilometer 40 of the North Luzon
Express Way, the above-described motor vehicle was
suddenly bumped from behind by a Philippine Rabbit Bus
with Body No. 353 and with plate No. CVD 478 then being
driven by one Mauricio Manliclic of San Jose, Concepcion,
Tarlac, who was then travelling recklessly at a very fast
speed and had apparently lost control of his vehicle;
"6. That as a result of the impact of the collision the above-
described motor vehicle was forced off the North Luzon
Express Way towards the rightside where it fell on its
driver's side on a ditch, and that as a consequence, the
above-described motor vehicle which maybe valued at
EIGHTY THOUSAND PESOS (P80,000) was rendered a
total wreck as shown by pictures to be presented during
the pre-trial and trial of this case;
"7. That also as a result of said incident, plaintiff sustained
bodily injuries which compounded plaintiff's frail physical
condition and required his hospitalization from July 12,
1988 up to and until July 22, 1988, copy of the medical
certificate is hereto attached as Annex "A" and made an
integral part hereof;
"8. That the vehicular collision resulting in the total
wreckage of the above-described motor vehicle as well as
bodily (sic) sustained by plaintiff, was solely due to the
reckless imprudence of the defendant driver Mauricio
Manliclic who drove his Philippine Rabbit Bus No. 353 at a
fast speed without due regard or observance of existing
traffic rules and regulations;
"9. That defendant Philippine Rabbit Bus Line Corporation
failed to exercise the diligence of a good father of (sic)
family in the selection and supervision of its drivers; x x
x"31
Can Manliclic still be held liable for the collision and be
found negligent notwithstanding the declaration of the
Court of Appeals that there was an absence of negligence
on his part?cralaw library
In exonerating petitioner Manliclic in the criminal case, the
Court of Appeals said:
To the following findings of the court a quo, to wit: that
accused-appellant was negligent "when the bus he was
driving bumped the jeep from behind"; that "the proximate
cause of the accident was his having driven the bus at a
great speed while closely following the jeep"; x x x
We do not agree.
The swerving of Calaunan's jeep when it tried to overtake
the vehicle in front of it was beyond the control of accused-
appellant.
x x x the accused, even if based on a finding that he is not
Absent evidence of negligence, therefore, accused-
appellant cannot be held liable for Reckless Imprudence
Resulting in Damage to Property with Physical Injuries as
defined in Article 365 of the Revised Penal Code.32
From the foregoing declaration of the Court of Appeals, it
appears that petitioner Manliclic was acquitted not on
reasonable doubt, but on the ground that he is not the
author of the act complained of which is based on Section
2(b) of Rule 111 of the Rules of Criminal Procedure which
reads:
(b) Extinction of the penal action does not carry with it
extinction of the civil, unless the extinction proceeds from a
declaration in a final judgment that the fact from which the
civil might arise did not exist.
In spite of said ruling, petitioner Manliclic can still be held
liable for the mishap. The afore-quoted section applies
only to a civil action arising from crime or ex delicto and
not to a civil action arising from quasi-delict or culpa
aquiliana. The extinction of civil liability referred to in Par.
(e) of Section 3, Rule 111 [now Section 2 (b) of Rule 111],
refers exclusively to civil liability founded on Article 100 of
the Revised Penal Code, whereas the civil liability for the
same act considered as a quasi-delict only and not as a
crime is not extinguished even by a declaration in the
criminal case that the criminal act charged has not
happened or has not been committed by the accused.33
A quasi-delict or culpa aquiliana is a separate legal
institution under the Civil Code with a substantivity all its
own, and individuality that is entirely apart and
independent from a delict or crime - a distinction exists
between the civil liability arising from a crime and the
responsibility for quasi-delicts or culpa extra-contractual.
The same negligence causing damages may produce civil
liability arising from a crime under the Penal Code, or
create an action for quasi-delicts or culpa extra-contractual
under the Civil Code.34 It is now settled that acquittal of
guilty, does not carry with it the extinction of the civil
liability based on quasi delict.35
In other words, if an accused is acquitted based on
reasonable doubt on his guilt, his civil liability arising from
the crime may be proved by preponderance of evidence
only. However, if an accused is acquitted on the basis that
he was not the author of the act or omission complained of
(or that there is declaration in a final judgment that the fact
from which the civil might arise did not exist), said acquittal
closes the door to civil liability based on the crime or ex
delicto. In this second instance, there being no crime or
delict to speak of, civil liability based thereon or ex delicto
is not possible. In this case, a civil action, if any, may be
instituted on grounds other than the delict complained of.
As regards civil liability arising from quasi-delict or culpa
aquiliana, same will not be extinguished by an acquittal,
whether it be on ground of reasonable doubt or that
accused was not the author of the act or omission
complained of (or that there is declaration in a final
judgment that the fact from which the civil liability might
arise did not exist). The responsibility arising from fault or
negligence in a quasi-delict is entirely separate and distinct
from the civil liability arising from negligence under the
Penal Code.36 An acquittal or conviction in the criminal
case is entirely irrelevant in the civil case37 based on
quasi-delict or culpa aquiliana.
Petitioners ask us to give credence to their version of how
the collision occurred and to disregard that of
respondent's. Petitioners insist that while the PRBLI bus
was in the process of overtaking respondent's jeep, the
latter, without warning, suddenly swerved to the left (fast)
lane in order to overtake another jeep ahead of it, thus
causing the collision.
As a general rule, questions of fact may not be raised in a
Petition for Review . The factual findings of the trial court,
especially when affirmed by the appellate court, are
binding and conclusive on the Supreme Court.38 Not
being a trier of facts, this Court will not allow a review
thereof unless:
(1) the conclusion is a finding grounded entirely on
speculation, surmise and conjecture; (2) the inference
made is manifestly mistaken; (3) there is grave abuse of
discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are
conflicting; (6) the Court of Appeals went beyond the
issues of the case and its findings are contrary to the
admissions of both appellant and appellees; (7) the
findings of fact of the Court of Appeals are contrary to
those of the trial court; (8) said findings of fact are
conclusions without citation of specific evidence on which
they are based; (9) the facts set forth in the petition as well
as in the petitioner's main and reply briefs are not disputed
by the respondents; and (10) the findings of fact of the
Court of Appeals are premised on the supposed absence
of evidence and contradicted by the evidence on record.39
After going over the evidence on record, we do not find
any of the exceptions that would warrant our departure
from the general rule. We fully agree in the finding of the
trial court, as affirmed by the Court of Appeals, that it was
petitioner Manliclic who was negligent in driving the PRBLI
bus which was the cause of the collision. In giving
credence to the version of the respondent, the trial court
has this say:
x x x Thus, which of the two versions of the manner how
the collision took place was correct, would be
determinative of who between the two drivers was
negligent in the operation of their respective vehicle.
In this regard, it should be noted that in the statement of
Mauricio Manliclic (Exh. 15) given to the Philippine Rabbit
Investigator CV Cabading no mention was made by him
about the fact that the driver of the jeep was overtaking
another jeep when the collision took place. The allegation
that another jeep was being overtaken by the jeep of
Calaunan was testified to by him only in Crim. Case No.
684-M-89 before the Regional Trial Court in Malolos,
Bulacan and before this Court. Evidently, it was a product
of an afterthought on the part of Mauricio Manliclic so that
he could explain why he should not be held responsible for
the incident. His attempt to veer away from the truth was
also apparent when it would be considered that in his
statement given to the Philippine Rabbit Investigator CV
Cabading (Exh. 15), he alleged that the Philippine Rabbit
Bus bumped the jeep of Calaunan while the Philippine
Rabbit Bus was behind the said jeep. In his testimony
before the Regional Trial Court in Malolos, Bulacan as well
as in this Court, he alleged that the Philippine Rabbit Bus
was already on the left side of the jeep when the collision
took place. For this inconsistency between his statement
and testimony, his explanation regarding the manner of
how the collision between the jeep and the bus took place
should be taken with caution. It might be true that in the
statement of Oscar Buan given to the Philippine Rabbit
Investigator CV Cabading, it was mentioned by the former
that the jeep of plaintiff was in the act of overtaking
another jeep when the collision between the latter jeep and
the Philippine Rabbit Bus took place. But the fact,
however, that his statement was given on July 15, 1988,
one day after Mauricio Manliclic gave his statement should
not escape attention. The one-day difference between the
giving of the two statements would be significant enough
to entertain the possibility of Oscar Buan having received
legal advise before giving his statement. Apart from that,
as between his statement and the statement of Manliclic
himself, the statement of the latter should prevail. Besides,
in his Affidavit of March 10, 1989, (Exh. 14), the
unreliability of the statement of Oscar Buan (Exh. 13)
given to CV Cabading rear its "ugly head" when he did not
mention in said affidavit that the jeep of Calaunan was
trying to overtake another jeep when the collision between
the jeep in question and the Philippine Rabbit bus took
place.
x x x
If one would believe the testimony of the defendant,
Mauricio Manliclic, and his conductor, Oscar Buan, that the
Philippine Rabbit Bus was already somewhat parallel to
the jeep when the collision took place, the point of collision
on the jeep should have been somewhat on the left side
thereof rather than on its rear. Furthermore, the jeep
should have fallen on the road itself rather than having
been forced off the road. Useless, likewise to emphasize
that the Philippine Rabbit was running very fast as testified
to by Ramos which was not controverted by the
defendants.40
Having ruled that it was petitioner Manliclic's negligence
that caused the smash up, there arises the juris tantum
presumption that the employer is negligent, rebuttable only
by proof of observance of the diligence of a good father of
a family.41 Under Article 218042 of the New Civil Code,
when an injury is caused by the negligence of the
employee, there instantly arises a presumption of law that
there was negligence on the part of the master or
employer either in the selection of the servant or
employee, or in supervision over him after selection or
both. The liability of the employer under Article 2180 is
direct and immediate; it is not conditioned upon prior
recourse against the negligent employee and a prior
showing of the insolvency of such employee. Therefore, it
is incumbent upon the private respondents to prove that
they exercised the diligence of a good father of a family in
the selection and supervision of their employee.43
In the case at bar, petitioner PRBLI maintains that it had
shown that it exercised the required diligence in the
selection and supervision of its employees, particularly
petitioner Manliclic. In the matter of selection, it showed
the screening process that petitioner Manliclic underwent
before he became a regular driver. As to the exercise of
due diligence in the supervision of its employees, it argues
that presence of ready investigators (Ganiban and
Cabading) is sufficient proof that it exercised the required
due diligence in the supervision of its employees.
In the selection of prospective employees, employers are
required to examine them as to their qualifications,
experience and service records. In the supervision of
employees, the employer must formulate standard
operating procedures, monitor their implementation and
impose disciplinary measures for the breach thereof. To
fend off vicarious liability, employers must submit concrete
proof, including documentary evidence, that they complied
with everything that was incumbent on them.44
In Metro Manila Transit Corporation v. Court of Appeals,45
it was explained that:
Due diligence in the supervision of employees on the other
hand, includes the formulation of suitable rules and
regulations for the guidance of employees and the
issuance of proper instructions intended for the protection
of the public and persons with whom the employer has
relations through his or its employees and the imposition of
necessary disciplinary measures upon employees in case
of breach or as may be warranted to ensure the
performance of acts indispensable to the business of and
beneficial to their employer. To this, we add that actual
implementation and monitoring of consistent compliance
with said rules should be the constant concern of the
employer, acting through dependable supervisors who
should regularly report on their supervisory functions.
In order that the defense of due diligence in the selection
and supervision of employees may be deemed sufficient
and plausible, it is not enough to emptily invoke the
existence of said company guidelines and policies on
hiring and supervision. As the negligence of the employee
gives rise to the presumption of negligence on the part of
the employer, the latter has the burden of proving that it
has been diligent not only in the selection of employees
but also in the actual supervision of their work. The mere
allegation of the existence of hiring procedures and
supervisory policies, without anything more, is decidedly
not sufficient to overcome such presumption.
We emphatically reiterate our holding, as a warning to all
employers, that "the formulation of various company
policies on safety without showing that they were being
complied with is not sufficient to exempt petitioner from
liability arising from negligence of its employees. It is
incumbent upon petitioner to show that in recruiting and
employing the erring driver the recruitment procedures and
company policies on efficiency and safety were followed."
x x x.
The trial court found that petitioner PRBLI exercised the
diligence of a good father of a family in the selection but
not in the supervision of its employees. It expounded as
follows:
From the evidence of the defendants, it seems that the
Philippine Rabbit Bus Lines has a very good procedure of
recruiting its driver as well as in the maintenance of its
vehicles. There is no evidence though that it is as good in
the supervision of its personnel. There has been no iota of
evidence introduced by it that there are rules promulgated
by the bus company regarding the safe operation of its
vehicle and in the way its driver should manage and
operate the vehicles assigned to them. There is no
showing that somebody in the bus company has been
employed to oversee how its driver should behave while
operating their vehicles without courting incidents similar to
the herein case. In regard to supervision, it is not difficult to
observe that the Philippine Rabbit Bus Lines, Inc. has
been negligent as an employer and it should be made
responsible for the acts of its employees, particularly the
driver involved in this case.
We agree. The presence of ready investigators after the
occurrence of the accident is not enough to exempt
petitioner PRBLI from liability arising from the negligence
of petitioner Manliclic. Same does not comply with the
guidelines set forth in the cases above-mentioned. The
presence of the investigators after the accident is not
enough supervision. Regular supervision of employees,
that is, prior to any accident, should have been shown and
established. This, petitioner failed to do. The lack of
supervision can further be seen by the fact that there is
only one set of manual containing the rules and
regulations for all the drivers of PRBLI.46 How then can all
the drivers of petitioner PRBLI know and be continually
informed of the rules and regulations when only one
manual is being lent to all the drivers?cralaw library
For failure to adduce proof that it exercised the diligence of
a good father of a family in the selection and supervision of
its employees, petitioner PRBLI is held solidarily
responsible for the damages caused by petitioner
Manliclic's negligence.
We now go to the award of damages. The trial court
correctly awarded the amount of P40,838.00 as actual
damages representing the amount paid by respondent for
the towing and repair of his jeep.47 As regards the awards
for moral and exemplary damages, same, under the
circumstances, must be modified. The P100,000.00
awarded by the trial court as moral damages must be
reduced to P50,000.00.48 Exemplary damages are
imposed by way of example or correction for the public
good.49 The amount awarded by the trial court must,
likewise, be lowered to P50,000.00.50 The award of
P15,000.00 for attorney's fees and expenses of litigation is
in order and authorized by law.51
WHEREFORE, premises considered, the instant Petition
for Review is DENIED. The decision of the Court of
Appeals in CA-G.R. CV No. 55909 is AFFIRMED with the
MODIFICATION that (1) the award of moral damages shall
be reduced to P50,000.00; and (2) the award of exemplary
damages shall be lowered to P50,000.00. Costs against
petitioners.
SO ORDERED.
Endnotes:
1 CA rollo, pp. 191-193.
2 Records, pp. 437-456.
3 Pre-Trial Order; Records, p. 143.
4 TSNs were admitted per Order dated 13 September
1994; Records, p. 341.
5 Exhs. G-3 to G-10 (19 April 1991) and G-11 to G-36 (1
July 1991).
6 Exh. D-4 (5 February 1993).
7 Exh. E-4.
8 Exhs. A to H, with submarkings. 24 Tison v. Court of Appeals, G.R. No. 121027, 31 July
1997, 276 SCRA 582.
9 Exh. 19.
25 Top-Weld Manufacturing, Inc. v. ECED, S.A., G.R. No.
10 Exhs. M to P. 44944, 9 August 1985, 138 SCRA 118.
11 Rollo, pp. 45-47. 26 Records, pp. 336-337.
12 Records, p. 456. 27 G.R. No. 139849, 5 December 2001, 371 SCRA 466,
474-476.
13 Id. at 459.
28 Now Chief Justice.
14 CA rollo, p. 193.
29 People v. Martinez, G.R. No. 116918, 19 June 1997,
15 Rollo, pp. 59-62, 88. 274 SCRA 259, 272.
16 CA-G.R. CR No. 19749. 30 Art. 2176. Whoever by act or omission causes damage
to another, there being fault or negligence, is obliged to
17 Crim. Case No. 684-M-89. pay for the damage done. Such fault or negligence, if there
is no pre-existing contractual relation between the parties,
18 Exhs. G-3 to G-10 (19 April 1991) and G-11 to G-36 (1 is called a quasi-delict and is governed by the provision of
July 1991). this Chapter.
19 Exh. D-4 (5 February 1993). 31 Records, pp. 1-3.
20 Exh. E-4. 32 Rollo, pp. 112-114.
21 Sec. 47. Testimony or deposition at a former 33 Elcano v. Hill, G.R. No. L-24803, 26 May 1977, 77
proceeding. - The testimony or deposition of a witness SCRA 98, 106.
deceased or unable to testify, given in a former case or
proceeding, judicial or administrative, involving the same 34 Andamo v. Intermediate Appellate Court, G.R. No.
parties and subject matter, may be given in evidence 74761, 6 November 1990, 191 SCRA 195, 203-204.
against the adverse party who had the opportunity to
cross-examine him. 35 Heirs of the Late Guaring, Jr. v. Court of Appeals, 336
Phil. 274, 279 (1997).
22 Samalio v. Court of Appeals, G.R. No. 140079, 31
March 2005, 454 SCRA 462, 470. 36 McKee v. Intermediate Appellate Court, G.R. No. 68102
and No. 68103, 16 July 1992, 211 SCRA 517, 536.
23 Philippine Rabbit Bus Lines, Inc. v. People, G.R. No.
147703, 14 April 2004, 427 SCRA 456, 471. 37 Castillo v. Court of Appeals, G.R. No. 48541, 21 August
1989, 176 SCRA 591, 598.
38 Pilipinas Shell Petroleum Corporation v. John Bordman
Ltd. Of Iloilo, Inc., G.R. No. 159831, 14 October 2005, 473
SCRA 151, 162.
39 Sigaya v. Mayuga, G.R. No. 143254, 18 August 2005,
467 SCRA 341, 352-353.
40 Rollo, pp. 47-50.
41 Metro Manila Transit Corporation v. Court of Appeals,
G.R. No. 104408, 21 June 1993, 223 SCRA 521, 539.
48 Kapalaran Bus Line v. Coronado, G.R. No. 85331, 25
August 1989, 176 SCRA 792, 803.
49 Article 2229, Civil Code.
50 Tiu v. Arriesgado, G.R. No. 138060, 1 September 2004,
437 SCRA 426, 451; Philtranco Service Enterprises, Inc. v.
Court of Appeals, G.R. No. 120553, 17 June 1997, 273
SCRA 562, 574-575.
51 Article 2208 (1), (2) and (5), Civil Code.

42 Art. 2180. The obligation imposed by article 2176 is

demandable not only for one's own acts or omissions, but
also for those of persons for whom one is responsible.

x x x

Employers shall be liable for the damages caused by their

employees and household helpers acting within the scope
of their assigned tasks, even though the former are not
engaged in any business or industry.

x x x

The responsibility treated of in this article shall cease when

the persons herein mentioned prove that they observed all
the diligence of a good father of a family to prevent
damage.

43 Dulay v. Court of Appeals, 313 Phil. 8, 23 (1995).

44 Perla Compania de Seguros, Inc. v. Sarangaya III, G.R.

No. 147746, 25 October 2005, 474 SCRA 191, 202.

45 Supra note 41 at 540-541.

46 TSN, 16 February 1995, pp. 23-24.

47 Exhs. C to C-4 and F. Records, pp. 232-236, 288.

Article 2219 (2), Civil Code.
G.R. No. 150785 September 15, 2006 [petitioner], the latter lent the former her money. Thus,
every month, she was persuaded to release P100,000.00 8128
EMMA P. NUGUID, petitioner, to the accused until the total amount reached
vs. P1,150,000.00. 100,000.00 (Exhibit "A")
CLARITA S. NICDAO,1 respondent.
As security for the P1,150,000.00, [respondent] gave 7254
DECISION [petitioner] the following open dated Hermosa Savings
Bank (HSLB) (sic) with the assurance that if the entire 50,000.00 (Exhibit "A")
CORONA, J.: amount is not paid within one (1) year, [petitioner] can
deposit the check: 7278
In this petition for review on certiorari under Rule 45 of the
Rules of Court, Emma P. Nuguid assails the decision of Check No. 100,000.00 (Exhibit "A")
the Court of Appeals (CA) dated October 30, 2001 in CA-
G.R. No. 23054: Amount 4540

WHEREFORE, the Petition for Review is hereby 7277 50,000.00 (Exhibit "A")
GRANTED and the Assailed Decision dated May 10, 1999
of the Regional Trial Court [RTC], Branch 5, Bataan, P100,000.00 (Exhibit "A") 4523
affirming the Decision dated January 11, 1999 of the First
Municipal Circuit Trial Court of Dinalupihan-Hermosa, 7348 50,000.00 (Exhibit "A")
Bataan is REVERSED and SET ASIDE.
150,000.00 (Exhibit "A") 12103
The petitioner CLARITA S. NICDAO is hereby
ACQUITTED of the offense charged. NO COSTS. 12118 50,000.00 (Exhibit "A")

SO ORDERED.2 100,000.00 (Exhibit "A") 7294

Petitioner seeks a review of the decision with respect to 8812 100,000.00 (Exhibit "A")
the alleged lack of civil liability of respondent Clarita S.
Nicdao. Stemming from two cases of violation of BP 22,3 50,000.00 (Exhibit "A")
this petition involves the following facts: P1,150,000.00
12102
xxx xxx xxx In June 1997, [petitioner] together with Samson Ching
100,000.00 (Exhibit "A") demanded payment of the sums [above-mentioned], but
Accused Clarita S. Nicdao is charged with having [respondent] refused to acknowledge the indebtedness.
committed the crime of Violation of BP 22 in fourteen (14) 7255 Thus, on October 6, 1977, [petitioner] deposited all
counts. The criminal complaints allege that sometime in aforementioned checks in the bank of Samson Ching
1996, from April to August thereof, [respondent] and her 100,000.00 (Exhibit "A") totaling P1,150,000.00 since all the money given by her to
husband [,] of Vignette Superstore [,] approached [respondent] came from Samson Ching. The checks were
[petitioner] and asked her if they [could] borrow money to 2286 all returned for having been drawn against insufficient
settle some obligations. Having been convinced by them funds (DAIF).
and because of the close relationship of [respondent] to 50,000.00 (Exhibit "A")
A verbal and written demand was made upon [respondent]
to pay the amount represented by the bounced checks, but
[to] no avail. Hence, a complaint for violation of BP 22 was
filed against the [respondent]. 4(Citation omitted)
After petitioner instituted 14 criminal cases5 (docketed as
Criminal Case Nos. 9458-9471) for violation of BP 22
involving the sum of P1,150,000, corresponding warrants
of arrest were issued against respondent. On November
12, 1997, respondent was arraigned. She pleaded not
guilty and trial ensued.
In a decision dated January 11, 1999, Judge Manuel M.
Tan of the Municipal Circuit Trial Court of Dinalupihan,
Bataan found respondent guilty of the charges against her.
Respondent was sentenced to pay P1,150,000, plus
interest, and to suffer imprisonment equivalent to one year
for each violation of BP 22, or a total of 14 years of
imprisonment.
On appeal, the decision was affirmed in toto by the
Regional Trial Court of Dinalupihan, Bataan. Respondent
elevated the case to the CA. On October 30, 2001, the CA
reversed the decision of the lower courts and acquitted
respondent. According to the CA, certain substantial facts
were overlooked by the trial court. These circumstances, if
properly considered, justified a different conclusion on the
case.6
Petitioner now comes to us, raising this main issue:
whether respondent remains civilly liable to her for the sum
of P1,150,000. In this connection, she asserts that
respondent obtained loans from her in the aggregate
amount of P1,150,000 and that these loans have not been
paid.
From the standpoint of its effects, a crime has a dual
character: (1) as an offense against the State because of
the disturbance of the social order and (2) as an offense
against the private person injured by the crime unless it
involves the crime of treason, rebellion, espionage,
contempt and others (wherein no civil liability arises on the
part of the offender either because there are no damages
to be compensated or there is no private person injured by
the crime7). What gives rise to the civil liability is really the
obligation of everyone to repair or to make whole the
damage caused to another by reason of his act or
omission, whether done intentionally or negligently and
whether or not punishable by law.8
Extinction of penal action does not carry with it the
eradication of civil liability, unless the extinction proceeds
from a declaration in the final judgment that the fact from
which the civil liability might arise did not exist.9
On one hand, as regards the criminal aspect of a violation
of BP 22, suffice it to say that:
[t]he gravamen of BP 22 is the act of making and issuing a
worthless check or one that is dishonored upon its
presentment for payment [and] the accused failed to
satisfy the amount of the check or make arrangement for
its payment within 5 banking days from notice of dishonor.
The act is
malum prohibitum, pernicious and inimical to public
welfare. Laws are created to achieve a goal intended to
guide and prevent against an evil or mischief. Why and to
whom the check was issued is irrelevant in determining
culpability. The terms and conditions surrounding the
issuance of the checks are also irrelevant.10
On the other hand, the basic principle in civil liability ex
delicto is that every person criminally liable is also civilly
liable, crime being one of the five sources of obligations
under the Civil Code.11 A person acquitted of a criminal
charge, however, is not necessarily civilly free because the
quantum of proof required in criminal prosecution (proof
beyond reasonable doubt) is greater than that required for
civil liability (mere preponderance of evidence12). In order
to be completely free from civil liability, a person's acquittal
must be based on the fact that he did not commit the
offense.13 If the acquittal is based merely on reasonable
doubt, the accused may still be held civilly liable since this
does not mean he did not commit the act complained of.14
It may only be that the facts proved did not constitute the
offense charged.15
Acquittal will not bar a civil action in the following cases:
(1) where the acquittal is based on reasonable doubt as
only preponderance of evidence is required in civil cases;
(2) where the court declared the accused's liability is not
criminal but only civil in nature and (3) where the civil
liability does not arise from or is not based upon the
criminal act of which the accused was acquitted.16
In this petition, we find no reason to ascribe any civil
liability to respondent. As found by the CA, her supposed
civil liability had already been fully satisfied and
extinguished by payment. The statements of the appellate
court leave no doubt that respondent, who was acquitted
from the charges against her, had already been completely
relieved of civil liability:
[Petitioner] does not dispute the fact that payments have
already been made by petitioner in [the stated] amounts
but argues that the Demand Draft represented payment of
a previous obligation. However, no evidence of whatever
nature was presented by the prosecution to substantiate
their claim that there was indeed a previous obligation
involving the same amount for which the demand draft was
given. Except for this bare allegation, which is self-serving,
no documentary evidence was ever adduced that there
were previous transactions involving the subject amount.
Likewise, [petitioner] admitted having received the cash
payments from petitioner on a daily basis but argues that
the same were applied to interest payments only. It
however appears that [petitioner] was charging
[respondent] with an exorbitant rate of interest…on a daily
basis. xxx In any event, the cash payments [made] were
recorded at the back of the cigarette cartons by [petitioner]
in her own handwriting as testified to by [respondent] and
her employees, Melanie Tolentino and Jocelyn Nicdao.
Indeed, the daily cash payments marked in evidence as
Exhibits 7 to 15 reveal that [respondent] had already paid
her obligation to [petitioner] in the amount of
P5,780,000.00 as of July 21, 1997 and that she stopped
making further payments when she realized that she had
already paid such amount.
From the foregoing, it would appear that [respondent]
made a total payment of P6,980,000.00, inclusive of the
P1,200,000.00 Demand Draft, which is definitely much
more than P1,150,000.00, the amount she actually
borrowed from [petitioner]. These facts were never
rebutted by [petitioner].
Moreover, we find no evidence was presented by the
prosecution to prove that there was a stipulation in writing
that interest will be paid by [respondent] on her loan
obligations [as required under Article 1956 of the Civil
Code].
xxx xxx xxx
By and large, the obligation of [respondent] has already
been extinguished long before the encashment of the
subject checks. A check is said to apply for account only
when there is still a pre-existing obligation. In the case at
bench, the pre-existing obligation was extinguished after
full payment was made by [respondent]. We therefore find
the clear and convincing documentary evidence of
payment presented by [respondent] worthy of credence.17
(emphasis supplied)
WHEREFORE, the petition is hereby DENIED. The
October 30, 2001 decision of the Court of Appeals in CA-
G.R. No. 23054 is AFFIRMED.
Costs against petitioner.
SO ORDERED.
Puno, Chairperson, Sandoval-Gutierrez, Azcuna, Garcia,
J.J., concur.
Footnotes
1 The Court of Appeals was impleaded as a respondent
but we have excluded it pursuant to Section 4 of Rule 45
of the Rules of Court.
2 Penned by Associate Justice Josefina Guevara-Salonga
and concurred in by Associate Justices Godardo A.
Jacinto (retired) and Eloy R. Bello, Jr., of the Sixth Division
of the Court of Appeals; rollo, p. 53.
3 Anti-Bouncing Checks Law.
4 CA Decision, rollo, pp. 39-40; MCTC Decision in
Criminal Case Nos. 9458-9471, id., pp. 68-69. See also
Petition, id., pp. 21-22.
5 Samson Ching, petitioner's partner, had earlier instituted
a criminal case for eleven counts of violation of BP 22
against Nicdao, this time involving the sum of
P20,950,000. It was docketed as Criminal Case Nos.
9433-9443.
In Criminal Case Nos. 9433-9443, Hon. Manuel M. Tan of
the Municipal Circuit Trial Court found Nicdao guilty of the
charges.
Nicdao filed two separate petitions for review with the CA.
The petition for review of the RTC decision on Criminal
Case Nos. DH-848-99 to DH-858-99 was docketed as CA-
G.R. No. 23055. Meanwhile, the petition involving Criminal
Case Nos. DH-859-99 to DH-872-99, docketed as CA-
G.R. No. 23054, is the subject matter of this petition.
The Office of the Solicitor General filed a motion for
consolidation of the two petitions on October 13, 1999
pursuant to Section 7 (b) (1) of the 1988 Revised Rules of
the CA.
Without resolving and acting on the motion for
consolidation, the CA, through Associate Justice Artemio
G. Tuquero, decided CA-G.R. No. 23055 on November 22,
1999. The CA reversed and set aside the RTC decision
and acquitted Nicdao.
Samson Ching questioned the civil aspect of the CA
decision by way of petition for review on certiorari before
this Court. The case was docketed as G.R. No. 141181. At
the time of the filing of the present petition, G.R. No.
141181 was allegedly still pending with the Court's First
Division.
6 Rollo, p. 52.
7 Reyes, The Revised Penal Code: Criminal Law 1 (2001),
p. 876. Citation omitted.
8 See also Occena v. Icamina, G.R. No. 82146, 22
January 1990, 181 SCRA 328, 333.
9 Reyes supra note 7, at 878, citing Sec. 2, par. 4, Rule III,
Revised Rules of Criminal Procedure.
10 Boado, Notes and Cases on the Revised Penal Code
and Special Penal Laws (2002), p. 692. Citations omitted.
See also Ngo v. People, G.R. No. 155815, 14 July 2004,
434 SCRA 522, 530-533; King v. People, 377 Phil. 692
(1999); Navarro v. Court of Appeals, G.R. Nos. 112389-90,
1 August 1994, 234 SCRA 639.
11 Id., p. 298. Civil Code, Art. 1156.
12 Id.
13 Id.
14 Id.
15 Id.
16 Id., p. 302. See also Reyes, supra note 7, at 879.
Civil liability may exist, although the accused is not held
criminally liable, in the following cases:
1. Acquittal on reasonable doubt (Civil Code, Art. 29)

2. Acquittal from a cause of nonimputability (Revised

Penal Code, Art. 101)

3. Acquittal in the criminal action for negligence (Civil

Code, Art. 2177)

4. When there is only civil responsibility (De Guzman v.

Alva, 51 O.G. 1311)

5. In cases of independent civil actions (Civil Code, Arts.

31-34).

17 CA Decision, rollo, pp. 48-52. Citations omitted.

G.R. No. L-39999 May 31, 1984
ROY PADILLA, FILOMENO GALDONES, ISMAEL
GONZALGO and JOSE FARLEY BEDENIA, petitioners,
vs.
COURT OF APPEALS, respondent.
Sisenando Villaluz, Sr. for petitioners.
The Solicitor General for respondent.
GUTIERREZ, JR., J.:
This is a petition for review on certiorari of a Court of
Appeals' decision which reversed the trial court's judgment
of conviction and acquitted the petitioners of the crime of
grave coercion on the ground of reasonable doubt but
inspite of the acquittal ordered them to pay jointly and
severally the amount of P9,000.00 to the complainants as
actual damages.
The petitioners were charged under the following
information:
The undersigned Fiscal accused ROY PADILLA,
FILOMENO GALDONES, PEPITO BEDENIA, YOLLY
RICO, DAVID BERMUNDO, VILLANOAC, ROBERTO
ROSALES, VILLANIA, ROMEO GARRIDO, JOSE
ORTEGA, JR., RICARDO CELESTINO, REALINGO alias
"KAMLON", JOHN DOE alias TATO, and FOURTEEN (14)
RICARDO DOES of the crime of GRAVE COERCION,
committed as follows:
That on or about February 8, 1964 at around 9:00 o'clock
in the morning, in the municipality of Jose Panganiban,
province of Camarines Norte, Philippines, and within the
jurisdiction of this Honorable Court, the above- named
accused, Roy Padilla, Filomeno Galdones, Pepito
Bedenia, Yolly Rico, David Bermundo, Villanoac, Roberto
Rosales, Villania, Romeo Garrido, Jose Ortega, Jr.,
Ricardo Celestino, Realingo alias Kamlon, John Doe alias
Tato, and Fourteen Richard Does, by confederating and
mutually helping one another, and acting without any
authority of law, did then and there wilfully, unlawfully, and
feloniously, by means of threats, force and violence
prevent Antonio Vergara and his family to close their stall
located at the Public Market, Building No. 3, Jose
Panganiban, Camarines Norte, and by subsequently
forcibly opening the door of said stall and thereafter
brutally demolishing and destroying said stall and the
furnitures therein by axes and other massive instruments,
and carrying away the goods, wares and merchandise, to
the damage and prejudice of the said Antonio Vergara and
his family in the amount of P30,000.00 in concept of actual
or compensatory and moral damages, and further the sum
of P20,000.00 as exemplary damages.
That in committing the offense, the accused took
advantage of their public positions: Roy Padilla, being the
incumbent municipal mayor, and the rest of the accused
being policemen, except Ricardo Celestino who is a
civilian, all of Jose Panganiban, Camarines Norte, and that
it was committed with evident premeditation.
The Court of First Instance of Camarines Norte, Tenth
Judicial District rendered a decision, the dispositive portion
of which states that:
IN VIEW OF THE FOREGOING, the Court finds the
accused Roy Padilla, Filomeno Galdonez, Ismael
Gonzalgo and Jose Parley Bedenia guilty beyond
reasonable doubt of the crime of grave coercion, and
hereby imposes upon them to suffer an imprisonment of
FIVE (5) months and One (1) day; to pay a fine of P500.00
each; to pay actual and compensatory damages in the
amount of P10,000.00; moral damages in the amount of
P30,000.00; and another P10,000.00 for exemplary
damages, jointly and severally, and all the accessory
penalties provided for by law; and to pay the proportionate
costs of this proceedings.
The accused Federico Realingo alias 'Kamlon', David
Bermundo, Christopher Villanoac, Godofredo Villania,
Romeo Garrido, Roberto Rosales, Ricardo Celestino and
Jose Ortega, are hereby ordered acquitted on grounds of
reasonable doubt for their criminal participation in the
crime charged.
The petitioners appealed the judgment of conviction to the
Court of Appeals. They contended that the trial court's
finding of grave coercion was not supported by the
evidence. According to the petitioners, the town mayor had
the power to order the clearance of market premises and
the removal of the complainants' stall because the
municipality had enacted municipal ordinances pursuant to
which the market stall was a nuisance per se. The
petitioners stated that the lower court erred in finding that
the demolition of the complainants' stall was a violation of
the very directive of the petitioner Mayor which gave the
stall owners seventy two (72) hours to vacate the market
premises. The petitioners questioned the imposition of
prison terms of five months and one day and of accessory
penalties provided by law. They also challenged the order
to pay fines of P500.00 each, P10,000.00 actual and
compensatory damages, P30,000.00 moral damages,
P10,000.00 exemplary damages, and the costs of the suit.
The dispositive portion of the decision of the respondent
Court of Appeals states:
WHEREFORE, we hereby modify the judgment appealed
from in the sense that the appellants are acquitted on
ground of reasonable doubt. but they are ordered to pay
jointly and severally to complainants the amount of
P9,600.00, as actual damages.
The petitioners filed a motion for reconsideration
contending that the acquittal of the defendants-appellants
as to criminal liability results in the extinction of their civil
liability. The Court of Appeals denied the motion holding
that:
xxx xxx xxx
... appellants' acquittal was based on reasonable doubt
whether the crime of coercion was committed, not on facts
that no unlawful act was committed; as their taking the law
into their hands, destructing (sic) complainants' properties
is unlawful, and, as evidence on record established that
complainants suffered actual damages, the imposition of
actual damages is correct.
Consequently, the petitioners filed this special civil action,
contending that:
I requiring the petitioners to pay civil indemnity to the
THE COURT OF APPEALS COMMITTED A GRAVE
ERROR OF LAW OR GRAVELY ABUSED ITS
DISCRETION IN IMPOSING UPON PETITIONERS
PAYMENT OF DAMAGES TO COMPLAINANTS AFTER
ACQUITTING PETITIONERS OF THE CRIME CHARGED
FROM WHICH SAID LIABILITY AROSE.
II
THE COURT OF APPEALS ERRED IN HOLDING IN ITS
RESOLUTION DATED DECEMBER 26, 1974 THAT
SINCE APPELLANTS' ACQUITTAL WAS BASED ON
REASONABLE DOUBT, NOT ON FACTS THAT NO
UNLAWFUL ACT WAS COMMITTED, THE IMPOSITION
OF ACTUAL DAMAGES IS CORRECT.
III
THE COURT OF APPEALS COMMITTED A LEGAL
INCONSISTENCY, IF NOT PLAIN JUDICIAL ERROR, IN
HOLDING IN ITS APPEALED RESOLUTION THAT
PETITIONERS COMMITTED AN UNLAWFUL ACT, THAT
IS TAKING THE LAW INTO THEIR HANDS,
DESTRUCTING (sic) 'COMPLAINANTS' PROPERTIES',
AFTER HOLDING IN ITS MAIN DECISION OF
NOVEMBER 6,1974 THAT THE ACTS FOR WHICH
THEY WERE CHARGED DID NOT CONSTITUTE GRAVE
COERCION AND THEY WERE NOT CHARGED OF ANY
OTHER CRIME.
IV
THE COURT OF APPEALS ERRED IN ORDERING THE
PETITIONERS HEREIN, APPELLANTS IN CA-G.R. NO.
13456CR, JOINTLY AND SEVERALLY, TO PAY
COMPLAINANTS P9,600.00 IN SUPPOSED ACTUAL
DAMAGES.
The issue posed in the instant proceeding is whether or
not the respondent court committed a reversible error in
complainants after acquitting them from the criminal
charge.
Petitioners maintain the view that where the civil liability
which is included in the criminal action is that arising from
and as a consequence of the criminal act, and the
defendant was acquitted in the criminal case, (no civil
liability arising from the criminal case), no civil liability
arising from the criminal charge could be imposed upon
him. They cite precedents to the effect that the liability of
the defendant for the return of the amount received by him
may not be enforced in the criminal case but must be
raised in a separate civil action for the recovery of the said
amount (People v. Pantig, 97 Phil. 748; following the
doctrine laid down in Manila Railroad Co. v. Honorable
Rodolfo Baltazar, 49 O.G. 3874; Pueblo contra Abellera,
69 Phil. 623; People v. Maniago 69 Phil. 496; People v.
Miranda, 5 SCRA 1067; Aldaba v. Elepafio 116 Phil. 457).
In the case before us, the petitioners were acquitted not
because they did not commit the acts stated in the charge
against them. There is no dispute over the forcible opening
of the market stall, its demolition with axes and other
instruments, and the carting away of the merchandize. The
petitioners were acquitted because these acts were
denominated coercion when they properly constituted
some other offense such as threat or malicious mischief.
The respondent Court of Appeals stated in its decision:
For a complaint to prosper under the foregoing provision,
the violence must be employed against the person, not
against property as what happened in the case at bar. ...
xxx xxx xxx
The next problem is: May the accused be convicted of an
offense other than coercion?
From all appearances, they should have been prosecuted
either for threats or malicious mischief. But the law does
not allow us to render judgment of conviction for either of
these offenses for the reason that they were not indicted
for, these offenses. The information under which they were
prosecuted does not allege the elements of either threats
or malicious mischief. Although the information mentions
that the act was by means of threats', it does not allege the
particular threat made. An accused person is entitled to be
informed of the nature of the acts imputed to him before he
can be made to enter into trial upon a valid information.
We rule that the crime of grave coercion has not been
proved in accordance with law.
While appellants are entitled to acquittal they nevertheless
are liable for the actual damages suffered by the
complainants by reason of the demolition of the stall and
loss of some of their properties. The extinction of the penal
action does not carry with it that of the civil, unless the
extinction proceeds from a declaration in a final judgment
that the fact from which the civil might arise did not exist.
(Rule 111, Sec. 3 (c), Rev. Rules of Court; Laperal v.
Aliza, 51 OG.R. 1311, People v. Velez, 44 OG. 1811). In
the instant case, the fact from which the civil might arise,
namely, the demolition of the stall and loss of the
properties contained therein; exists, and this is not denied
by the accused. And since there is no showing that the
complainants have reserved or waived their right to
institute a separate civil action, the civil aspect therein is
deemed instituted with the criminal action. (Rule 111, Sec.
1, Rev. Rules of Court).
xxx xxx xxx
Section 1 of Rule 111 of the Rules of Court states the
fundamental proposition that when a criminal action is
instituted, the civil action for recovery of civil liability arising
from the offense charged is impliedly instituted with it.
There is no implied institution when the offended party
expressly waives the civil action or reserves his right to
institute it separately. (Morte Sr. v. Alvizo, Jr., 101 SCRA
221).
The extinction of the civil action by reason of acquittal in
the criminal case refers exclusively to civil liability ex
delicto founded on Article 100 of the Revised Penal Code.
(Elcano v. Hill, 77 SCRA 98; Virata v. Ochoa, 81 SCRA
472). In other words, the civil liability which is also
extinguished upon acquittal of the accused is the civil
liability arising from the act as a crime.
As easily as 1942, the Supreme Court speaking through
Justice Jorge Bocobo in Barredo v. Garcia, et at. 73 Phil.
607 laid down the rule that the same punishable act or
omission can create two kinds of civil liabilities against the
accused and, where provided by law, his employer. 'There
is the civil liability arising from the act as a crime and the
liability arising from the same act as a quasi-delict. Either
one of these two types of civil liability may be enforced
against the accused, However, the offended party cannot
recover damages under both types of liability. For
instance, in cases of criminal negligence or crimes due to
reckless imprudence, Article 2177 of the Civil Code
provides:
Responsibility for fault or negligence under the preceding
article is entirely separate and distinct from the civil liability
arising from negligence under the Penal Code. But the
plaintiff cannot recover damages twice for the same act or
omission of the defendant.
Section 3 (c) of Rule 111 specifically provides that:
Sec. 3. Other civil actions arising from offenses. — In all
cases not included in the preceding section the following
rules shall be observed:
xxx xxx xxx
xxx xxx xxx
(c) Extinction of the penal action does not carry with
it extinction of the civil, unless the extinction proceeds from
a declaration in a final judgment that the fact from which
the civil might arise did not exist. In other cases, the
person entitled to the civil action may institute it in the
Jurisdiction and in the manner provided by law against the
person who may be liable for restitution of the thing and
reparation or indemnity for the damage suffered.
The judgment of acquittal extinguishes the liability of the
accused for damages only when it includes a declaration
that the facts from which the civil might arise did not exist.
Thus, the civil liability is not extinguished by acquittal
where the acquittal is based on reasonable doubt (PNB v.
Catipon, 98 Phil. 286) as only preponderance of evidence
is required in civil cases; where the court expressly
declares that the liability of the accused is not criminal but
only civil in nature (De Guzman v. Alvia, 96 Phil. 558;
People v. Pantig, supra) as, for instance, in the felonies of
estafa, theft, and malicious mischief committed by certain
relatives who thereby incur only civil liability (See Art. 332,
Revised Penal Code); and, where the civil liability does not
arise from or is not based upon the criminal act of which
the accused was acquitted (Castro v. Collector of Internal
Revenue, 4 SCRA 1093; See Regalado, Remedial Law
Compendium, 1983 ed., p. 623). Article 29 of the Civil
Code also provides that:
When the accused in a criminal prosecution is acquitted on
the ground that his guilt has not been proved beyond
reasonable doubt, a civil action for damages for the same
act or omission may be instituted. Such action requires
only a preponderance of evidence. Upon motion of the
defendant, the court may require the plaintiff to file a bond
to answer for damages in case the complaint should be
found to be malicious.
If in a criminal case the judgment of acquittal is based
upon reasonable doubt, the court shall so declare. In the
absence of any declaration to that effect, it may be inferred
from the text of the decision whether or not the acquittal is
due to that ground.
More recently, we held that the acquittal of the defendant
in the criminal case would not constitute an obstacle to the
filing of a civil case based on the same acts which led to
the criminal prosecution:
... The finding by the respondent court that he spent said
sum for and in the interest of the Capiz Agricultural and
Fishery School and for his personal benefit is not a
declaration that the fact upon which Civil Case No. V-3339
is based does not exist. The civil action barred by such a
declaration is the civil liability arising from the offense
charged, which is the one impliedly instituted with the
criminal action. (Section 1, Rule III, Rules of Court.) Such
a declaration would not bar a civil action filed against an
accused who had been acquitted in the criminal case if the
criminal action is predicated on factual or legal
considerations other than the commission of the offense
charged. A person may be acquitted of malversation
where, as in the case at bar, he could show that he did not
misappropriate the public funds in his possession, but he
could be rendered liable to restore said funds or at least to
make a proper accounting thereof if he shall spend the
same for purposes which are not authorized nor intended,
and in a manner not permitted by applicable rules and
regulations. (Republic v. Bello, 120 SCRA 203)
There appear to be no sound reasons to require a
separate civil action to still be filed considering that the
facts to be proved in the civil case have already been
established in the criminal proceedings where the accused
was acquitted. Due process has been accorded the
accused. He was, in fact, exonerated of the criminal
charged. The constitutional presumption of innocence
called for more vigilant efforts on the part of prosecuting
attorneys and defense counsel, a keener awareness by all
witnesses of the serious implications of perjury, and a
more studied consideration by the judge of the entire
records and of applicable statutes and precedents. To
require a separate civil action simply because the accused
was acquitted would mean needless clogging of court
dockets and unnecessary duplication of litigation with all its
attendant loss of time, effort, and money on the part of all
concerned.
The trial court found the following facts clearly established
by the evidence adduced by both the prosecution and the
defense:
xxx xxx xxx
(9) In the morning of February 8, 1964, then Chief
Galdones, complying with the instructions contained in
said Memorandum No. 32 of the Mayor, and upon seeing
that Antonio Vergara had not vacated the premises in
question, with the aid of his policemen, forced upon the
store or stall and ordered the removal of the goods inside
the store of Vergara, at the same time taking inventory of
the goods taken out, piled them outside in front of the store
and had it cordoned with a rope, and after all the goods
were taken out from the store, ordered the demolition of
said stall of Antonio Vergara. Since then up to the trial of
this case, the whereabouts of the goods taken out from the
store nor the materials of the demolished stall have not
been made known.
The respondent Court of Appeals made a similar finding
that:
On the morning of February 8th, because the said
Vergaras had not up to that time complied with the order to
vacate, the co-accused Chief of Police Galdones and
some members of his police force, went to the market and,
using ax, crowbars and hammers, demolished the stall of
the Vergaras who were not present or around, and after
having first inventoried the goods and merchandise found
therein, they had them brought to the municipal building for
safekeeping. Inspite of notice served upon the Vergaras to
take possession of the goods and merchandise thus taken
away, the latter refused to do so.
The loss and damage to the Vergaras as they evaluated
them were:
Cost of stall construction P1,300.00
Value of furniture and equipment
judgment destroyed 300.00
Value of goods and equipment taken 8,000.00
P9,600.00
It is not disputed that the accused demolished the grocery
stall of the complainants Vergaras and carted away its
contents. The defense that they did so in order to abate
what they considered a nuisance per se is untenable, This
finds no support in law and in fact. The couple has been
paying rentals for the premises to the government which
allowed them to lease the stall. It is, therefore, farfetched
to say that the stall was a nuisance per se which could be
summarily abated.
The petitioners, themselves, do not deny the fact that they
caused the destruction of the complainant's market stall
and had its contents carted away. They state:
On February 8, 1964, despite personal pleas on Vergaras
by the Mayor to vacate the passageways of Market
Building No. 3, the Vergaras were still in the premises, so
the petitioners Chief of Police and members of the Police
Force of Jose Panganiban, pursuant to the Mayor' 6
directives, demolished the store of the Vergaras, made an
inventory of the goods found in said store, and brought
these goods to the municipal building under the custody of
the Municipal Treasurer, ...
The only supposed obstacle is the provision of Article 29 of
the Civil Code, earlier cited, that "when the accused in a
criminal prosecution is acquitted on the ground that his
guilt has not been proved beyond reasonable doubt, a civil
action for damages for the same act or omission may be
instituted." According to some scholars, this provision of
substantive law calls for a separate civil action and cannot
be modified by a rule of remedial law even in the interests
of economy and simplicity and following the dictates of
logic and common sense.
As stated by retired Judge J. Cezar Sangco:
... if the Court finds the evidence sufficient to sustain the
civil action but inadequate to justify a conviction in the
criminal action, may it render judgment acquitting the
accused on reasonable doubt, but hold him civilly liable
nonetheless? An affirmative answer to this question would
be consistent with the doctrine that the two are distinct and
separate actions, and win (a) dispense with the
reinstituting of the same civil action, or one based on
quasi-delict or other independent civil action, and of
presenting the same evidence: (b) save the injured party
unnecessary expenses in the prosecution of the civil action
or enable him to take advantage of the free services of the
fiscal; and (c) otherwise resolve the unsettling implications
of permitting the reinstitution of a separate civil action
whether based on delict, or quasi-delict, or other
independent civil actions.
... But for the court to be able to adjudicate in the manner
here suggested, Art. 29 of the Civil Code should be
amended because it clearly and expressly provides that
the civil action based on the same act or omission may
only be instituted in a separate action, and therefore, may
not inferentially be resolved in the same criminal action. To
dismiss the civil action upon acquittal of the accused and
disallow the reinstitution of any other civil action, would
likewise render, unjustifiably, the acquittal on reasonable
doubt without any significance, and would violate the
doctrine that the two actions are distinct and separate.
In the light of the foregoing exposition, it seems evident
that there is much sophistry and no pragmatism in the
doctrine that it is inconsistent to award in the same
proceedings damages against the accused after acquitting
him on reasonable doubt. Such doctrine must recognize
the distinct and separate character of the two actions, the
nature of an acquittal on reasonable doubt, the vexatious
and oppressive effects of a reservation or institution of a
separate civil action, and that the injured party is entitled to
damages not because the act or omission is punishable
but because he was damaged or injured thereby (Sangco,
Philippine Law on Torts and Damages, pp. 288-289).
We see no need to amend Article 29 of the Civil Code in
order to allow a court to grant damages despite a
judgment of acquittal based on reasonable doubt. What
Article 29 clearly and expressly provides is a remedy for
the plaintiff in case the defendant has been acquitted in a
criminal prosecution on the ground that his guilt has not
been proved beyond reasonable doubt. It merely
emphasizes that a civil action for damages is not
precluded by an acquittal for the same criminal act or
omission. The Civil Code provision does not state that the
remedy can be availed of only in a separate civil action. A
separate civil case may be filed but there is no statement
that such separate filing is the only and exclusive
permissible mode of recovering damages.
There is nothing contrary to the Civil Code provision in the
rendition of a judgment of acquittal and a judgment
awarding damages in the same criminal action. The two
can stand side by side. A judgment of acquittal operates to
extinguish the criminal liability. It does not, however,
extinguish the civil liability unless there is clear showing
that the act from which civil liability might arise did not
exist.
A different conclusion would be attributing to the Civil
Code a trivial requirement, a provision which imposes an
uncalled for burden before one who has already been the
victim of a condemnable, yet non-criminal, act may be
accorded the justice which he seeks.
efficacious or even more expedient than a timely remand
We further note the rationale behind Art. 29 of the Civil to the trial court where the criminal action was decided for
Code in arriving at the intent of the legislator that they further hearings on the civil aspects of the case. The
could not possibly have intended to make it more difficult offended party may, of course, choose to file a separate
for the aggrieved party to recover just compensation by action. These do not exist in this case. Considering
making a separate civil action mandatory and exclusive: moreover the delays suffered by the case in the trial,
appellate, and review stages, it would be unjust to the
The old rule that the acquittal of the accused in a criminal complainants in this case to require at this time a separate
case also releases him from civil liability is one of the most civil action to be filed.
serious flaws in the Philippine legal system. It has given
rise to numberless instances of miscarriage of justice, With this in mind, we therefore hold that the respondent
where the acquittal was due to a reasonable doubt in the Court of Appeals did not err in awarding damages despite
mind of the court as to the guilt of the accused. The a judgment of acquittal.
reasoning followed is that inasmuch as the civil
responsibility is derived from the the criminal offense, WHEREFORE, we hereby AFFIRM the decision of the
when the latter is not proved, civil liability cannot be respondent Court of Appeals and dismiss the petition for
demanded. lack of merit.
This is one of those cases where confused thinking leads SO ORDERED.
to unfortunate and deplorable consequences. Such
reasoning fails to draw a clear line of demarcation between Fernando, C.J., Teehankee, Makasiar, Guerrero, Abad
criminal liability and civil responsibility, and to determine Santos, Melencio- Herrera, Plana, Escolin, Relova and De
the logical result of the distinction. The two liabilities are la Fuente, JJ., concur.
separate and distinct from each other. One affects the
social order and the other, private rights. One is for the Aquino, J., concur in the result.
punishment or correction of the offender while the other is
for reparation of damages suffered by the aggrieved De Castro, J., took no part.
party... it is just and proper that, for the purposes of the
imprisonment of or fine upon the accused, the offense Concepcion, Jr. J., is on leave.
should be proved beyond reasonable doubt. But for the
purpose of indemnifying the complaining party, why should
the offense also be proved beyond reasonable doubt? Is
not the invasion or violation of every private right to be
proved only by preponderance of evidence? Is the right of
the aggrieved person any less private because the
wrongful act is also punishable by the criminal law? (Code
Commission, pp. 45-46).
A separate civil action may be warranted where additional
facts have to be established or more evidence must be
adduced or where the criminal case has been fully
terminated and a separate complaint would be just as
THIRD DIVISION
[G.R. No. 145391. August 26, 2002.]
AVELINO CASUPANAN and ROBERTO CAPITULO,
Petitioners, v. MARIO LLAVORE LAROYA, Respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari to set aside the
Resolution 1 dated December 28, 1999 dismissing the
petition for certiorari and the Resolution 2 dated August
24, 2000 denying the motion for reconsideration, both
issued by the Regional Trial Court of Capas, Tarlac,
Branch 66, in Special Civil Action No. 17-C (99).
The Facts
Two vehicles, one driven by respondent Mario Llavore
Laroya ("Laroya" for brevity) and the other owned by
petitioner Roberto Capitulo ("Capitulo" for brevity) and
driven by petitioner Avelino Casupanan ("Casupanan" for
brevity), figured in an accident. As a result, two cases were
filed with the Municipal Circuit Trial Court ("MCTC" for
brevity) of Capas, Tarlac. Laroya filed a criminal case
against Casupanan for reckless imprudence resulting in
damage to property, docketed as Criminal Case No. 002-
99. On the other hand, Casupanan and Capitulo filed a
civil case against Laroya for quasi-delict, docketed as Civil
Case No. 2089.chanrob1es virtua1 1aw 1ibrary
When the civil case was filed, the criminal case was then
at its preliminary investigation stage. Laroya, defendant in
the civil case, filed a motion to dismiss the civil case on the
ground of forum-shopping considering the pendency of the
criminal case. The MCTC granted the motion in the Order
of March 26, 1999 and dismissed the civil case.
On Motion for Reconsideration, Casupanan and Capitulo
insisted that the civil case is a separate civil action which
can proceed independently of the criminal case. The
MCTC denied the motion for reconsideration in the Order
of May 7, 1999. Casupanan and Capitulo filed a petition for
certiorari under Rule 65 before the Regional Trial Court
("Capas RTC" for brevity) of Capas, Tarlac, Branch 66, 3
assailing the MCTC’s Order of dismissal.
The Trial Court’s Ruling
The Capas RTC rendered judgment on December 28,
1999 dismissing the petition for certiorari for lack of merit.
The Capas RTC ruled that the order of dismissal issued by
the MCTC is a final order which disposes of the case and
therefore the proper remedy should have been an appeal.
The Capas RTC further held that a special civil action for
certiorari is not a substitute for a lost appeal. Finally, the
Capas RTC declared that even on the premise that the
MCTC erred in dismissing the civil case, such error is a
pure error of judgment and not an abuse of
discretion.chanrob1es virtua1 1aw 1ibrary
Casupanan and Capitulo filed a Motion for
Reconsideration but the Capas RTC denied the same in
the Resolution of August 24, 2000.
Hence, this petition.
The Issue
The petition premises the legal issue in this
wise:jgc:chanrobles.com.ph
"In a certain vehicular accident involving two parties, each
one of them may think and believe that the accident was
caused by the fault of the other. . . . [T]he first party,
believing himself to be the aggrieved party, opted to file a
criminal case for reckless imprudence against the second
party. On the other hand, the second party, together with
his operator, believing themselves to be the real aggrieved
parties, opted in turn to file a civil case for quasi-delict
against the first party who is the very private complainant
in the criminal case." 4
Thus, the issue raised is whether an accused in a pending
criminal case for reckless imprudence can validly file,
simultaneously and independently, a separate civil action
for quasi-delict against the private complainant in the
criminal case.
The Court’s Ruling
Casupanan and Capitulo assert that Civil Case No. 2089,
which the MCTC dismissed on the ground of forum-
shopping, constitutes a counterclaim in the criminal case.
Casupanan and Capitulo argue that if the accused in a
criminal case has a counterclaim against the private
complainant, he may file the counterclaim in a separate
civil action at the proper time. They contend that an action
on quasi-delict is different from an action resulting from the
crime of reckless imprudence, and an accused in a
criminal case can be an aggrieved party in a civil case
arising from the same incident. They maintain that under
Articles 31 and 2176 of the Civil Code, the civil case can
proceed independently of the criminal action. Finally, they
point out that Casupanan was not the only one who filed
the independent civil action based on quasi-delict but also
Capitulo, the owner-operator of the vehicle, who was not a
party in the criminal case.
In his Comment, Laroya claims that the petition is fatally
defective as it does not state the real antecedents. Laroya
further alleges that Casupanan and Capitulo forfeited their
right to question the order of dismissal when they failed to
avail of the proper remedy of appeal. Laroya argues that
there is no question of law to be resolved as the order of
dismissal is already final and a petition for certiorari is not
a substitute for a lapsed appeal.
In their Reply, Casupanan and Capitulo contend that the
petition raises the legal question of whether there is forum-
shopping since they filed only one action — the
independent civil action for quasi-delict against Laroya.
Nature of the Order of Dismissal
The MCTC dismissed the civil action for quasi-delict on the
ground of forum-shopping under Supreme Court
Administrative Circular No. 04-94. The MCTC did not state
in its order of dismissal 5 that the dismissal was with
prejudice. Under the Administrative Circular, the order of
dismissal is without prejudice to refiling the complaint,
unless the order of dismissal expressly states it is with
prejudice. 6 Absent a declaration that the dismissal is with
prejudice, the same is deemed without prejudice. Thus,
the MCTC’s dismissal, being silent on the matter, is a
dismissal without prejudice.
Section 1 of Rule 41 7 provides that an order dismissing
an action without prejudice is not appealable. The remedy
of the aggrieved party is to file a special civil action under
Rule 65. Section 1 of Rule 41 expressly states that "where
the judgment or final order is not appealable, the
aggrieved party may file an appropriate special civil action
under Rule 65." Clearly, the Capas RTC’s order dismissing
the petition for certiorari, on the ground that the proper
remedy is an ordinary appeal, is erroneous.
Forum-Shopping
The essence of forum-shopping is the filing of multiple
suits involving the same parties for the same cause of
action, either simultaneously or successively, to secure a
favorable judgment. 8 Forum-shopping is present when in
the two or more cases pending, there is identity of parties,
rights of action and reliefs sought. 9 However, there is no
forum-shopping in the instant case because the law and
the rules expressly allow the filing of a separate civil action
which can proceed independently of the criminal
action.chanrobles virtual lawlibrary
Laroya filed the criminal case for reckless imprudence
resulting in damage to property based on the Revised
Penal Code while Casupanan and Capitulo filed the civil
action for damages based on Article 2176 of the Civil
Code. Although these two actions arose from the same act
or omission, they have different causes of action. The
criminal case is based on culpa criminal punishable under
the Revised Penal Code while the civil case is based on
culpa aquiliana actionable under Articles 2176 and 2177 of
the Civil Code. These articles on culpa aquiliana
read:jgc:chanrobles.com.ph
"Art. 2176. Whoever by act or omission causes
damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
Art. 2177. Responsibility for fault or negligence under the
preceding article is entirely separate and distinct from the
civil liability arising from negligence under the Penal Code.
But the plaintiff cannot recover damages twice for the
same act or omission of the defendant."cralaw virtua1aw
library
Any aggrieved person can invoke these articles provided
he proves, by preponderance of evidence, that he has
suffered damage because of the fault or negligence of
another. Either the private complainant or the accused can
file a separate civil action under these articles. There is
nothing in the law or rules that state only the private
complainant in a criminal case may invoke these articles.
Moreover, paragraph 6, Section 1, Rule 111 of the 2000
Rules on Criminal Procedure ("2000 Rules" for brevity)
expressly requires the accused to litigate his counterclaim
in a separate civil action, to wit:jgc:chanrobles.com.ph
"SECTION 1. Institution of criminal and civil actions.
— (a) . . ..
No counterclaim, cross-claim or third-party complaint may
be filed by the accused in the criminal case, but any cause
of action which could have been the subject thereof may
be litigated in a separate civil action." (Emphasis supplied)
Since the present Rules require the accused in a criminal
action to file his counterclaim in a separate civil action,
there can be no forum-shopping if the accused files such
separate civil action.chanrob1es virtua1 1aw 1ibrary
Filing of a separate civil action
Section 1, Rule 111 of the 1985 Rules on Criminal
Procedure ("1985 Rules" for brevity), as amended in 1988,
allowed the filing of a separate civil action independently of
the criminal action provided the offended party reserved
the right to file such civil action. Unless the offended party
reserved the civil action before the presentation of the
evidence for the prosecution, all civil actions arising from
the same act or omission were deemed "impliedly
instituted" in the criminal case. These civil actions referred
to the recovery of civil liability ex-delicto, the recovery of
damages for quasi-delict, and the recovery of damages for
violation of Articles 32, 33 and 34 of the Civil Code on
Human Relations.
Thus, to file a separate and independent civil action for
quasi-delict under the 1985 Rules, the offended party had
to reserve in the criminal action the right to bring such
action. Otherwise, such civil action was deemed "impliedly
instituted" in the criminal action. Section 1, Rule 111 of the
1985 Rules provided as follows:jgc:chanrobles.com.ph
"Section 1. Institution of criminal and civil actions.
— When a criminal action is instituted, the civil action for
the recovery of civil liability is impliedly instituted with the
criminal action, unless the offended party waives the
action, reserves his right to institute it separately, or
institutes the civil action prior to the criminal action.
Such civil action includes recovery of indemnity under the
Revised Penal Code, and damages under Articles 32, 33,
34 and 2176 of the Civil Code of the Philippines arising
from the same act or omission of the accused.

A waiver of any of the civil actions extinguishes the others.
The institution of, or the reservation of the right to file, any
of said civil actions separately waives the others.
The reservation of the right to institute the separate civil
actions shall be made before the prosecution starts to
present its evidence and under circumstances affording
the offended party a reasonable opportunity to make such
reservation.
In no case may the offended party recover damages twice
for the same act or omission of the accused.
x x x" (Emphasis supplied)
Section 1, Rule 111 of the 1985 Rules was amended on
December 1, 2000 and now provides as
follows:jgc:chanrobles.com.ph
"SECTION 1. Institution of criminal and civil actions.
— (a) When a criminal action is instituted, the civil action
for the recovery of civil liability arising from the offense
charged shall be deemed instituted with the criminal action
unless the offended party waives the civil action, reserves
the right to institute it separately or institutes the civil action
prior to the criminal action.chanrob1es virtua1 1aw 1ibrary
The reservation of the right to institute separately the civil
action shall be made before the prosecution starts
presenting its evidence and under circumstances affording
the offended party a reasonable opportunity to make such
reservation.
x x x Civil Code. 11
(b) ...
Where the civil action has been filed separately and trial
thereof has not yet commenced, it may be consolidated
with the criminal action upon application with the court
trying the latter case. If the application is granted, the trial
of both actions shall proceed in accordance with section 2
of this rule governing consolidation of the civil and criminal
actions." (Emphasis supplied)
Under Section 1 of the present Rule 111, what is "deemed
instituted" with the criminal action is only the action to
recover civil liability arising from the crime or ex-delicto. All
the other civil actions under Articles 32, 33, 34 and 2176 of
the Civil Code are no longer "deemed instituted," and may
be filed separately and prosecuted independently even
without any reservation in the criminal action. The failure to
make a reservation in the criminal action is not a waiver of
the right to file a separate and independent civil action
based on these articles of the Civil Code. The prescriptive
period on the civil actions based on these articles of the
Civil Code continues to run even with the filing of the
criminal action. Verily, the civil actions based on these
articles of the Civil Code are separate, distinct and
independent of the civil action "deemed instituted" in the
criminal action. 10
Under the present Rule 111, the offended party is still
given the option to file a separate civil action to recover
civil liability ex-delicto by reserving such right in the
criminal action before the prosecution presents its
evidence. Also, the offended party is deemed to make
such reservation if he files a separate civil action before
filing the criminal action. If the civil action to recover civil
liability ex-delicto is filed separately but its trial has not yet
commenced, the civil action may be consolidated with the
criminal action. The consolidation under this Rule does not
apply to separate civil actions arising from the same act or
omission filed under Articles 32, 33, 34 and 2176 of the
Suspension of the Separate Civil Action
Under Section 2, Rule 111 of the amended 1985 Rules, a
separate civil action, if reserved in the criminal action,
could not be filed until after final judgment was rendered in
the criminal action. If the separate civil action was filed
before the commencement of the criminal action, the civil
action, if still pending, was suspended upon the filing of the
criminal action until final judgment was rendered in the
criminal action. This rule applied only to the separate civil
action filed to recover liability ex-delicto. The rule did not
apply to independent civil actions based on Articles 32, 33,
34 and 2176 of the Civil Code, which could proceed
independently regardless of the filing of the criminal action.
The amended provision of Section 2, Rule 111 of the 2000
Rules continues this procedure, to
wit:jgc:chanrobles.com.ph
"SEC. 2. When separate civil action is suspended. —
After the criminal action has been commenced, the
separate civil action arising therefrom cannot be instituted
until final judgment has been entered in the criminal action.
If the criminal action is filed after the said civil action has
already been instituted, the latter shall be suspended in
whatever stage it may be found before judgment on the
merits. The suspension shall last until final judgment is
rendered in the criminal action. Nevertheless, before
judgment on the merits is rendered in the civil action, the
same may, upon motion of the offended party, be
consolidated with the criminal action in the court trying the
criminal action. In case of consolidation, the evidence
already adduced in the civil action shall be deemed
automatically reproduced in the criminal action without
prejudice to the right of the prosecution to cross-examine
the witnesses presented by the offended party in the
criminal case and of the parties to present additional
evidence. The consolidated criminal and civil actions shall
be tried and decided jointly.
During the pendency of the criminal action, the running of
the period of prescription of the civil action which cannot
be instituted separately or whose proceeding has been
suspended shall be tolled.chanrob1es virtua1 1aw library
x x x." (Emphasis supplied)
Thus, Section 2, Rule 111 of the present Rules did not
change the rule that the separate civil action, filed to
recover damages ex-delicto, is suspended upon the filing
of the criminal action. Section 2 of the present Rule 111
also prohibits the filing, after commencement of the
criminal action, of a separate civil action to recover
damages ex-delicto.
When civil action may proceed independently
The crucial question now is whether Casupanan and
Capitulo, who are not the offended parties in the criminal
case, can file a separate civil action against the offended
party in the criminal case. Section 3, Rule 111 of the 2000
Rules provides as follows:jgc:chanrobles.com.ph
"SEC. 3. When civil action may proceed independently.
— In the cases provided in Articles 32, 33, 34 and 2176 of
the Civil Code of the Philippines, the independent civil
action may be brought by the offended party. It shall
proceed independently of the criminal action and shall
require only a preponderance of evidence. In no case,
however, may the offended party recover damages twice
for the same act or omission charged in the criminal
action." (Emphasis supplied)
Section 3 of the present Rule 111, like its counterpart in
the amended 1985 Rules, expressly allows the "offended
party" to bring an independent civil action under Articles
32, 33, 34 and 2176 of the Civil Code. As stated in Section
3 of the present Rule 111, this civil action shall proceed
independently of the criminal action and shall require only
a preponderance of evidence. In no case, however, may
the "offended party recover damages twice for the same
act or omission charged in the criminal action."cralaw
virtua1aw library
There is no question that the offended party in the criminal
action can file an independent civil action for quasi-delict
against the accused. Section 3 of the present Rule 111
expressly states that the "offended party" may bring such
an action but the "offended party" may not recover
damages twice for the same act or omission charged in
the criminal action. Clearly, Section 3 of Rule 111 refers to
the offended party in the criminal action, not to the
accused.
Casupanan and Capitulo, however, invoke the ruling in
Cabaero v. Cantos 12 where the Court held that the
accused therein could validly institute a separate civil
action for quasi-delict against the private complainant in
the criminal case. In Cabaero, the accused in the criminal
case filed his Answer with Counterclaim for malicious
prosecution. At that time the Court noted the "absence of
clear-cut rules governing the prosecution on impliedly
instituted civil actions and the necessary consequences
and implications thereof." Thus, the Court ruled that the
trial court should confine itself to the criminal aspect of the
case and disregard any counterclaim for civil liability. The
Court further ruled that the accused may file a separate
civil case against the offended party "after the criminal
case is terminated and/or in accordance with the new
Rules which may be promulgated." The Court explained
that a cross-claim, counterclaim or third-party complaint on
the civil aspect will only unnecessarily complicate the
proceedings and delay the resolution of the criminal case.
Paragraph 6, Section 1 of the present Rule 111 was
incorporated in the 2000 Rules precisely to address the
lacuna mentioned in Cabaero. Under this provision, the
accused is barred from filing a counterclaim, cross-claim or
third-party complaint in the criminal case. However, the
same provision states that "any cause of action which
could have been the subject (of the counterclaim, cross-
claim or third-party complaint) may be litigated in a
separate civil action." The present Rule 111 mandates the
accused to file his counterclaim in a separate civil action
which shall proceed independently of the criminal action,
even as the civil action of the offended party is litigated in
the criminal action.
Conclusion
Under Section 1 of the present Rule 111, the independent
civil action in Articles 32, 33, 34 and 2176 of the Civil Code
is not deemed instituted with the criminal action but may
be filed separately by the offended party even without
reservation. The commencement of the criminal action
does not suspend the prosecution of the independent civil
action under these articles of the Civil Code. The
suspension in Section 2 of the present Rule 111 refers
only to the civil action arising from the crime, if such civil
action is reserved or filed before the commencement of the
criminal action.chanrob1es virtual law library
Thus, the offended party can file two separate suits for the
same act or omission. The first a criminal case where the
civil action to recover civil liability ex-delicto is deemed
instituted, and the other a civil case for quasi-delict —
without violating the rule on non-forum shopping. The two
cases can proceed simultaneously and independently of
each other. The commencement or prosecution of the
criminal action will not suspend the civil action for quasi-
delict. The only limitation is that the offended party cannot
recover damages twice for the same act or omission of the
defendant. In most cases, the offended party will have no
reason to file a second civil action since he cannot recover
damages twice for the same act or omission of the
accused. In some instances, the accused may be
insolvent, necessitating the filing of another case against
his employer or guardians.
Similarly, the accused can file a civil action for quasi-delict
for the same act or omission he is accused of in the
criminal case. This is expressly allowed in paragraph 6,
Section 1 of the present Rule 111 which states that the
counterclaim of the accused "may be litigated in a
separate civil action." This is only fair for two reasons.
First, the accused is prohibited from setting up any
counterclaim in the civil aspect that is deemed instituted in
the criminal case. The accused is therefore forced to
litigate separately his counterclaim against the offended
party. If the accused does not file a separate civil action for
quasi-delict, the prescriptive period may set in since the
period continues to run until the civil action for quasi-delict
is filed.
Second, the accused, who is presumed innocent, has a
right to invoke Article 2177 of the Civil Code, in the same
way that the offended party can avail of this remedy which
is independent of the criminal action. To disallow the
accused from filing a separate civil action for quasi-delict,
while refusing to recognize his counterclaim in the criminal
case, is to deny him due process of law, access to the
courts, and equal protection of the law.
Thus, the civil action based on quasi-delict filed separately
by Casupanan and Capitulo is proper. The order of
dismissal by the MCTC of Civil Case No. 2089 on the
ground of forum-shopping is erroneous.
We make this ruling aware of the possibility that the
decision of the trial court in the criminal case may vary with
the decision of the trial court in the independent civil
action. This possibility has always been recognized ever
since the Civil Code introduced in 1950 the concept of an
independent civil action under Articles 32, 33, 34 and 2176
of the Code. But the law itself, in Article 31 of the Code,
expressly provides that the independent civil action "may
proceed independently of the criminal proceedings and
regardless of the result of the latter." In Azucena v.
Potenciano, 13 the Court declared:jgc:chanrobles.com.ph
". . . There can indeed be no other logical conclusion than
this, for to subordinate the civil action contemplated in the
said articles to the result of the criminal prosecution —
whether it be conviction or acquittal — would render
meaningless the independent character of the civil action
and the clear injunction in Article 31 that this action ‘may
proceed independently of the criminal proceedings and
regardless of the result of the latter.’"
More than half a century has passed since the Civil Code
introduced the concept of a civil action separate and
independent from the criminal action although arising from
the same act or omission. The Court, however, has yet to
encounter a case of conflicting and irreconcilable decisions
of trial courts, one hearing the criminal case and the other
the civil action for quasi-delict. The fear of conflicting and
irreconcilable decisions may be more apparent than real.
In any event, there are sufficient remedies under the Rules
of Court to deal with such remote possibilities.
One final point. The Revised Rules on Criminal Procedure
took effect on December 1, 2000 while the MCTC issued
the order of dismissal on December 28, 1999 or before the
amendment of the rules. The Revised Rules on Criminal
Procedure must be given retroactive effect considering the
well-settled rule that —
". . . statutes regulating the procedure of the court will be
construed as applicable to actions pending and
undetermined at the time of their passage. Procedural
laws are retroactive in that sense and to that extent." 14
WHEREFORE, the petition for review on certiorari is
hereby GRANTED. The Resolutions dated December 28,
1999 and August 24, 2000 in Special Civil Action No. 17-C
(99) are ANNULLED and Civil Case No. 2089 is
REINSTATED.chanrob1es virtua1 1aw 1ibrary
SO ORDERED.
Puno and Panganiban, JJ., concur.
Sandoval-Gutierrez, J., is on leave.
Endnotes:
1. Penned by Judge Josefina D. Ceballos.
2. Penned by Judge Cesar M. Sotero.
3. Docketed as Special Civil Action No. 17-C (99).
4. Petition for Review on Certiorari dated October
27, 2000, pp. 1 & 2; Rollo, pp. 9 &10.
5. Records of Special Civil Action No. 17 C- ‘99,
Order of March 26, 1999, pp. 12-14.
6. Sto. Domingo-David v. Guerrero, 296 SCRA 277
(1998).
7. Section 9, Rule 40 (Appeal from Municipal Trial
Courts to the Regional Trial Courts)
provides:jgc:chanrobles.com.ph
"SEC. 9. Applicability of Rule 41. — The other provisions
of Rule 41 shall apply to appeals provided for herein
insofar as they are not inconsistent with or may serve to
supplement the provisions of this Rule."cralaw virtua1aw
library
8. Melo v. Court of Appeals, 318 SCRA 94 (1999).
9. International School, Inc. (Manila) v. Court of
Appeals, 309 SCRA 474 (1999).
10. Neplum, Inc. v. Evelyn V. Orbeso, G.R. No.
141986, prom. July 11, 2002, at pp. 11-12.
11. Section 1 of Rule 31, however, allows
consolidation, in the discretion of the trial court, of actions
involving common questions of law or fact pending before
the same court (Cojuangco, Jr. v. Court of Appeals (203
SCRA 619 [1991]), or pending even in different branches
of the same regional trial court if one of the cases has not
been partially tried (Raymundo v. Felipe, 42 SCRA 615
[1971]).
12. 271 SCRA 391 (1997).
13. 5 SCRA 468 (1962).
14. People v. Arrojado, 350 SCRA 679 (2001) citing
Ocampo v. Court of Appeals, 180 SCRA 27 (1989), Alday
v. Camilon, 120 SCRA 521 (1983) & People v. Sumilang,
77 Phil 764 (1946).
G.R. No. 102007 September 2, 1994
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
ROGELIO BAYOTAS y CORDOVA, accused-appellant.
The Solicitor General for plaintiff-appellee.
Public Attorney's Office for accused-appellant.
ROMERO, J.:
In Criminal Case No. C-3217 filed before Branch 16, RTC
Roxas City, Rogelio Bayotas y Cordova was charged with
Rape and eventually convicted thereof on June 19, 1991 in
a decision penned by Judge Manuel E. Autajay. Pending
appeal of his conviction, Bayotas died on February 4, 1992
at
the National Bilibid Hospital due to cardio respiratory arrest
secondary to hepatic encephalopathy secondary to hipato
carcinoma gastric malingering. Consequently, the
Supreme Court in its Resolution of May 20, 1992
dismissed the criminal aspect of the appeal. However, it
required the Solicitor General to file its comment with
regard to Bayotas' civil liability arising from his commission
of the offense charged.
In his comment, the Solicitor General expressed his view
that the death of accused-appellant did not extinguish his
civil liability as a result of his commission of the offense
charged. The Solicitor General, relying on the case of
People v. Sendaydiego 1 insists that the appeal should still
be resolved for the purpose of reviewing his conviction by
the lower court on which the civil liability is based.
Counsel for the accused-appellant, on the other hand,
opposed the view of the Solicitor General arguing that the
death of the accused while judgment of conviction is
pending appeal extinguishes both his criminal and civil
penalties. In support of his position, said counsel invoked
the ruling of the Court of Appeals in People v. Castillo and
Ocfemia 2 which held that the civil obligation in a criminal
case takes root in the criminal liability and, therefore, civil
liability is extinguished if accused should die before final
judgment is rendered.
We are thus confronted with a single issue: Does death of
the accused pending appeal of his conviction extinguish
his civil liability?
In the aforementioned case of People v. Castillo, this issue
was settled in the affirmative. This same issue posed
therein was phrased thus: Does the death of Alfredo
Castillo affect both his criminal responsibility and his civil
liability as a consequence of the alleged crime?
It resolved this issue thru the following disquisition:
Article 89 of the Revised Penal Code is the controlling
statute. It reads, in part:
Art. 89. How criminal liability is totally extinguished. —
Criminal liability is totally extinguished:
1. By the death of the convict, as to the personal
penalties; and as to the pecuniary penalties liability
therefor is extinguished only when the death of the
offender occurs before final judgment;
With reference to Castillo's criminal liability, there is no
question. The law is plain. Statutory construction is
unnecessary. Said liability is extinguished.
The civil liability, however, poses a problem. Such liability
is extinguished only when the death of the offender occurs
before final judgment. Saddled upon us is the task of
ascertaining the legal import of the term "final judgment."
Is it final judgment as contradistinguished from an
interlocutory order? Or, is it a judgment which is final and
executory?
We go to the genesis of the law. The legal precept
contained in Article 89 of the Revised Penal Code
heretofore transcribed is lifted from Article 132 of the
Spanish El Codigo Penal de 1870 which, in part, recites:
La responsabilidad penal se extingue.
1. Por la muerte del reo en cuanto a las penas
personales siempre, y respecto a las pecuniarias, solo
cuando a su fallecimiento no hubiere recaido sentencia
firme.
xxx xxx xxx
The code of 1870 . . . it will be observed employs the term
"sentencia firme." What is "sentencia firme" under the old
statute?

XXVIII Enciclopedia Juridica Española, p. 473, furnishes
the ready answer: It says:
SENTENCIA FIRME. La sentencia que adquiere la fuerza
de las definitivas por no haberse utilizado por las partes
litigantes recurso alguno contra ella dentro de los terminos
y plazos legales concedidos al efecto.
"Sentencia firme" really should be understood as one
which is definite. Because, it is only when judgment is
such that, as Medina y Maranon puts it, the crime is
confirmed — "en condena determinada;" or, in the words
of Groizard, the guilt of the accused becomes — "una
verdad legal." Prior thereto, should the accused die,
according to Viada, "no hay legalmente, en tal caso, ni
reo, ni delito, ni responsabilidad criminal de ninguna
clase." And, as Judge Kapunan well explained, when a
defendant dies before judgment becomes executory,
"there cannot be any determination by final judgment
whether or not the felony upon which the civil action might
arise exists," for the simple reason that "there is no party
defendant." (I Kapunan, Revised Penal Code, Annotated,
p. 421. Senator Francisco holds the same view. Francisco,
Revised Penal Code, Book One, 2nd ed., pp. 859-860)
The legal import of the term "final judgment" is similarly
reflected in the Revised Penal Code. Articles 72 and 78 of
that legal body mention the term "final judgment" in the
sense that it is already enforceable. This also brings to
mind Section 7, Rule 116 of the Rules of Court which
states that a judgment in a criminal case becomes final
"after the lapse of the period for perfecting an appeal or
when the sentence has been partially or totally satisfied or
served, or the defendant has expressly waived in writing
his right to appeal."
By fair intendment, the legal precepts and opinions here
collected funnel down to one positive conclusion: The term
final judgment employed in the Revised Penal Code
means judgment beyond recall. Really, as long as a
judgment has not become executory, it cannot be truthfully
said that defendant is definitely guilty of the felony charged
against him.
Not that the meaning thus given to final judgment is
without reason. For where, as in this case, the right to
institute a separate civil action is not reserved, the decision
to be rendered must, of necessity, cover "both the criminal
and the civil aspects of the case." People vs. Yusico
(November 9, 1942), 2 O.G., No. 100, p. 964. See also:
People vs. Moll, 68 Phil., 626, 634; Francisco, Criminal
Procedure, 1958 ed., Vol. I, pp. 234, 236. Correctly, Judge
Kapunan observed that as "the civil action is based solely
on the felony committed and of which the offender might
be found guilty, the death of the offender extinguishes the
civil liability." I Kapunan, Revised Penal Code, Annotated,
supra.
Here is the situation obtaining in the present case:
Castillo's criminal liability is out. His civil liability is sought
to be enforced by reason of that criminal liability. But then,
if we dismiss, as we must, the criminal action and let the
civil aspect remain, we will be faced with the anomalous
situation whereby we will be called upon to clamp civil
liability in a case where the source thereof — criminal
liability — does not exist. And, as was well stated in
Bautista, et al. vs. Estrella, et al., CA-G.R.
No. 19226-R, September 1, 1958, "no party can be found
and held criminally liable in a civil suit," which solely would
remain if we are to divorce it from the criminal proceeding."
This ruling of the Court of Appeals in the Castillo case 3
was adopted by the Supreme Court in the cases of People
of the Philippines v. Bonifacio Alison, et al., 4 People of the
Philippines v. Jaime Jose, et al. 5 and People of the
Philippines v. Satorre 6 by dismissing the appeal in view of
the death of the accused pending appeal of said cases.
As held by then Supreme Court Justice Fernando in the
Alison case:
The death of accused-appellant Bonifacio Alison having
been established, and considering that there is as yet no
final judgment in view of the pendency of the appeal, the
criminal and civil liability of the said accused-appellant
Alison was extinguished by his death (Art. 89, Revised
Penal Code; Reyes' Criminal Law, 1971 Rev. Ed., p. 717,
citing People v. Castillo and Ofemia C.A., 56 O.G. 4045);
consequently, the case against him should be dismissed.
On the other hand, this Court in the subsequent cases of
Buenaventura Belamala v. Marcelino Polinar 7 and
Lamberto Torrijos v. The Honorable Court of Appeals 8
ruled differently. In the former, the issue decided by this
court was: Whether the civil liability of one accused of
physical injuries who died before final judgment is
extinguished by his demise to the extent of barring any
claim therefore against his estate. It was the contention of
the administrator-appellant therein that the death of the
accused prior to final judgment extinguished all criminal
and civil liabilities resulting from the offense, in view of
Article 89, paragraph 1 of the Revised Penal Code.
However, this court ruled therein:
We see no merit in the plea that the civil liability has been
extinguished, in view of the provisions of the Civil Code of
the Philippines of 1950 (Rep. Act No. 386) that became
operative eighteen years after the revised Penal Code. As
pointed out by the Court below, Article 33 of the Civil Code
establishes a civil action for damages on account of
physical injuries, entirely separate and distinct from the
criminal action.
Art. 33. In cases of defamation, fraud, and physical
injuries, a civil action for damages, entirely separate and
distinct from the criminal action, may be brought by the
injured party. Such civil action shall proceed independently
of the criminal prosecution, and shall require only a
preponderance of evidence.
Assuming that for lack of express reservation, Belamala's
civil action for damages was to be considered instituted
together with the criminal action still, since both
proceedings were terminated without final adjudication, the
civil action of the offended party under Article 33 may yet
be enforced separately.
In Torrijos, the Supreme Court held that:
xxx xxx xxx
It should be stressed that the extinction of civil liability
follows the extinction of the criminal liability under Article
89, only when the civil liability arises from the criminal act
as its only basis. Stated differently, where the civil liability
does not exist independently of the criminal responsibility,
the extinction of the latter by death, ipso facto extinguishes
the former, provided, of course, that death supervenes
before final judgment. The said principle does not apply in
instant case wherein the civil liability springs neither solely
nor originally from the crime itself but from a civil contract
of purchase and sale. (Emphasis ours)
xxx xxx xxx
In the above case, the court was convinced that the civil
liability of the accused who was charged with estafa could
likewise trace its genesis to Articles 19, 20 and 21 of the
Civil Code since said accused had swindled the first and
second vendees of the property subject matter of the
contract of sale. It therefore concluded: "Consequently,
while the death of the accused herein extinguished his
criminal liability including fine, his civil liability based on the
laws of human relations remains."
Thus it allowed the appeal to proceed with respect to the
civil liability of the accused, notwithstanding the extinction
of his criminal liability due to his death pending appeal of
his conviction.
To further justify its decision to allow the civil liability to
survive, the court relied on the following ratiocination:
Since Section 21, Rule 3 of the Rules of Court 9 requires
the dismissal of all money claims against the defendant
whose death occurred prior to the final judgment of the
Court of First Instance (CFI), then it can be inferred that
actions for recovery of money may continue to be heard on
appeal, when the death of the defendant supervenes after
the CFI had rendered its judgment. In such case,
explained this tribunal, "the name of the offended party
shall be included in the title of the case as plaintiff-appellee
and the legal representative or the heirs of the deceased-
accused should be substituted as defendants-appellants."
It is, thus, evident that as jurisprudence evolved from
Castillo to Torrijos, the rule established was that the
survival of the civil liability depends on whether the same
can be predicated on sources of obligations other than
delict. Stated differently, the claim for civil liability is also
extinguished together with the criminal action if it were
solely based thereon, i.e., civil liability ex delicto.
However, the Supreme Court in People v. Sendaydiego, et
al. 10 departed from this long-established principle of law.
In this case, accused Sendaydiego was charged with and
convicted by the lower court of malversation thru
falsification of public documents. Sendaydiego's death
supervened during the pendency of the appeal of his
conviction.
This court in an unprecedented move resolved to dismiss
Sendaydiego's appeal but only to the extent of his criminal
liability. His civil liability was allowed to survive although it
was clear that such claim thereon was exclusively
dependent on the criminal action already extinguished.
The legal import of such decision was for the court to
continue exercising appellate jurisdiction over the entire
appeal, passing upon the correctness of Sendaydiego's
conviction despite dismissal of the criminal action, for the
purpose of determining if he is civilly liable. In doing so,
this Court issued a Resolution of July 8, 1977 stating thus:
The claim of complainant Province of Pangasinan for the
civil liability survived Sendaydiego because his death
occurred after final judgment was rendered by the Court of
First Instance of Pangasinan, which convicted him of three
complex crimes of malversation through falsification and
ordered him to indemnify the Province in the total sum of
P61,048.23 (should be P57,048.23).
The civil action for the civil liability is deemed impliedly
instituted with the criminal action in the absence of express
waiver or its reservation in a separate action (Sec. 1, Rule
111 of the Rules of Court). The civil action for the civil
liability is separate and distinct from the criminal action
(People and Manuel vs. Coloma, 105 Phil. 1287; Roa vs.
De la Cruz, 107 Phil. 8).
When the action is for the recovery of money and the
defendant dies before final judgment in the Court of First
Instance, it shall be dismissed to be prosecuted in the
manner especially provided in Rule 87 of the Rules of
Court (Sec. 21, Rule 3 of the Rules of Court).
The implication is that, if the defendant dies after a money
judgment had been rendered against him by the Court of
First Instance, the action survives him. It may be continued
on appeal (Torrijos vs. Court of Appeals, L-40336, October
24, 1975; 67 SCRA 394).
The accountable public officer may still be civilly liable for
the funds improperly disbursed although he has no
criminal liability (U.S. vs. Elvina, 24 Phil. 230; Philippine
National Bank vs. Tugab, 66 Phil. 583).
In view of the foregoing, notwithstanding the dismissal of
the appeal of the deceased Sendaydiego insofar as his
criminal liability is concerned, the Court Resolved to
continue exercising appellate jurisdiction over his possible
civil liability for the money claims of the Province of
Pangasinan arising from the alleged criminal acts
complained of, as if no criminal case had been instituted
against him, thus making applicable, in determining his
civil liability, Article 30 of the Civil Code . . . and, for that
purpose, his counsel is directed to inform this Court within
ten (10) days of the names and addresses of the
decedent's heirs or whether or not his estate is under
administration and has a duly appointed judicial
administrator. Said heirs or administrator will be
substituted for the deceased insofar as the civil action for
the civil liability is concerned (Secs. 16 and 17, Rule 3,
Rules of Court).
Succeeding cases 11 raising the identical issue have
maintained adherence to our ruling in Sendaydiego; in
other words, they were a reaffirmance of our abandonment
of the settled rule that a civil liability solely anchored on the
criminal (civil liability ex delicto) is extinguished upon
dismissal of the entire appeal due to the demise of the
accused.
But was it judicious to have abandoned this old ruling? A
re-examination of our decision in Sendaydiego impels us
to revert to the old ruling.
To restate our resolution of July 8, 1977 in Sendaydiego:
The resolution of the civil action impliedly instituted in the
criminal action can proceed irrespective of the latter's
extinction due to death of the accused pending appeal of
his conviction, pursuant to Article 30 of the Civil Code and
Section 21, Rule 3 of the Revised Rules of Court.
Article 30 of the Civil Code provides:
When a separate civil action is brought to demand civil
liability arising from a criminal offense, and no criminal
proceedings are instituted during the pendency of the civil
case, a preponderance of evidence shall likewise be
sufficient to prove the act complained of.
Clearly, the text of Article 30 could not possibly lend
support to the ruling in Sendaydiego. Nowhere in its text is
there a grant of authority to continue exercising appellate
jurisdiction over the accused's civil liability ex delicto when
his death supervenes during appeal. What Article 30
recognizes is an alternative and separate civil action which
may be brought to demand civil liability arising from a
criminal offense independently of any criminal action. In
the event that no criminal proceedings are instituted during
the pendency of said civil case, the quantum of evidence
needed to prove the criminal act will have to be that which
is compatible with civil liability and that is, preponderance
of evidence and not proof of guilt beyond reasonable
doubt. Citing or invoking Article 30 to justify the survival of
the civil action despite extinction of the criminal would in
effect merely beg the question of whether civil liability ex
delicto survives upon extinction of the criminal action due
to death of the accused during appeal of his conviction.
This is because whether asserted in
the criminal action or in a separate civil action, civil liability
ex delicto is extinguished by the death of the accused
while his conviction is on appeal. Article 89 of the Revised
Penal Code is clear on this matter:
Art. 89. How criminal liability is totally extinguished. —
Criminal liability is totally extinguished:
1. By the death of the convict, as to the personal
penalties; and as to pecuniary penalties, liability therefor is
extinguished only when the death of the offender occurs
before final judgment;
xxx xxx xxx
However, the ruling in Sendaydiego deviated from the
expressed intent of Article 89. It allowed claims for civil
liability ex delicto to survive by ipso facto treating the civil
action impliedly instituted with the criminal, as one filed
under Article 30, as though no criminal proceedings had
been filed but merely a separate civil action. This had the
effect of converting such claims from one which is
dependent on the outcome of the criminal action to an
entirely new and separate one, the prosecution of which
does not even necessitate the filing of criminal
proceedings. 12 One would be hard put to pinpoint the
statutory authority for such a transformation. It is to be
borne in mind that in recovering civil liability ex delicto, the
same has perforce to be determined in the criminal action,
rooted as it is in the court's pronouncement of the guilt or
innocence of the accused. This is but to render fealty to
the intendment of Article 100 of the Revised Penal Code
which provides that "every person criminally liable for a
felony is also civilly liable." In such cases, extinction of the
criminal action due to death of the accused pending
appeal inevitably signifies the concomitant extinction of the
civil liability. Mors Omnia Solvi. Death dissolves all things.
In sum, in pursuing recovery of civil liability arising from
crime, the final determination of the criminal liability is a
condition precedent to the prosecution of the civil action,
such that when the criminal action is extinguished by the
demise of accused-appellant pending appeal thereof, said
civil action cannot survive. The claim for civil liability
springs out of and is dependent upon facts which, if true,
would constitute a crime. Such civil liability is an inevitable
consequence of the criminal liability and is to be declared
and enforced in the criminal proceeding. This is to be
distinguished from that which is contemplated under Article
30 of the Civil Code which refers to the institution of a
separate civil action that does not draw its life from a
criminal proceeding. The Sendaydiego resolution of July 8,
1977, however, failed to take note of this fundamental
distinction when it allowed the survival of the civil action for
the recovery of civil liability ex delicto by treating the same
as a separate civil action referred to under Article 30.
Surely, it will take more than just a summary judicial
pronouncement to authorize the conversion of said civil
action to an independent one such as that contemplated
under Article 30.
Ironically however, the main decision in Sendaydiego did
not apply Article 30, the resolution of July 8, 1977
notwithstanding. Thus, it was held in the main decision:
Sendaydiego's appeal will be resolved only for the purpose
of showing his criminal liability which is the basis of the
civil liability for which his estate would be liable. 13
In other words, the Court, in resolving the issue of his civil
liability, concomitantly made a determination on whether
Sendaydiego, on the basis of evidenced adduced, was
indeed guilty beyond reasonable doubt of committing the
offense charged. Thus, it upheld Sendaydiego's conviction
and pronounced the same as the source of his civil liability.
Consequently, although Article 30 was not applied in the
final determination of Sendaydiego's civil liability, there
was a reopening of the criminal action already
extinguished which served as basis for Sendaydiego's civil
liability. We reiterate: Upon death of the accused pending
appeal of his conviction, the criminal action is extinguished
inasmuch as there is no longer a defendant to stand as the
accused; the civil action instituted therein for recovery of
civil liability ex delicto is ipso facto extinguished, grounded
as it is on the criminal.
Section 21, Rule 3 of the Rules of Court was also invoked
to serve as another basis for the Sendaydiego resolution
of July 8, 1977. In citing Sec. 21, Rule 3 of the Rules of
Court, the Court made the inference that civil actions of the
type involved in Sendaydiego consist of money claims, the
recovery of which may be continued on appeal if
defendant dies pending appeal of his conviction by holding
his estate liable therefor. Hence, the Court's conclusion:
"When the action is for the recovery of money" "and the
defendant dies before final judgment in the court of First
Instance, it shall be dismissed to be prosecuted in the
manner especially provided" in Rule 87 of the Rules of
Court (Sec. 21, Rule 3 of the Rules of Court).
The implication is that, if the defendant dies after a money
judgment had been rendered against him by the Court of
First Instance, the action survives him. It may be continued
on appeal.
Sadly, reliance on this provision of law is misplaced. From
the standpoint of procedural law, this course taken in
Sendaydiego cannot be sanctioned. As correctly observed
by Justice Regalado:
xxx xxx xxx
I do not, however, agree with the justification advanced in
both Torrijos and Sendaydiego which, relying on the
provisions of Section 21, Rule 3 of the Rules of Court,
drew the strained implication therefrom that where the civil
liability instituted together with the criminal liabilities had
already passed beyond the judgment of the then Court of
First Instance (now the Regional Trial Court), the Court of
Appeals can continue to exercise appellate jurisdiction
thereover despite the extinguishment of the component
criminal liability of the deceased. This pronouncement,
which has been followed in the Court's judgments
subsequent and consonant to Torrijos and Sendaydiego,
should be set aside and abandoned as being clearly
erroneous and unjustifiable.
Said Section 21 of Rule 3 is a rule of civil procedure in
ordinary civil actions. There is neither authority nor
justification for its application in criminal procedure to civil
actions instituted together with and as part of criminal
actions. Nor is there any authority in law for the summary
conversion from the latter category of an ordinary civil
action upon the death of the offender. . . .
Moreover, the civil action impliedly instituted in a criminal
proceeding for recovery of civil liability ex delicto can
hardly be categorized as an ordinary money claim such as
that referred to in Sec. 21, Rule 3 enforceable before the
estate of the deceased accused.
Ordinary money claims referred to in Section 21, Rule 3
must be viewed in light of the provisions of Section 5, Rule
86 involving claims against the estate, which in
Sendaydiego was held liable for Sendaydiego's civil
liability. "What are contemplated in Section 21 of Rule 3, in
relation to Section 5 of Rule 86, 14 are contractual money
claims while the claims involved in civil liability ex delicto
may include even the restitution of personal or real
property." 15 Section 5, Rule 86 provides an exclusive
enumeration of what claims may be filed against the
estate. These are: funeral expenses, expenses for the last
illness, judgments for money and claim arising from
contracts, expressed or implied. It is clear that money
claims arising from delict do not form part of this exclusive
enumeration. Hence, there could be no legal basis in (1)
treating a civil action ex delicto as an ordinary contractual
money claim referred to in Section 21, Rule 3 of the Rules
of Court and (2) allowing it to survive by filing a claim
therefor before the estate of the deceased accused.
Rather, it should be extinguished upon extinction of the
criminal action engendered by the death of the accused
pending finality of his conviction.
Accordingly, we rule: if the private offended party, upon
extinction of the civil liability ex delicto desires to recover
damages from the same act or omission complained of, he
must subject to Section 1, Rule 111 16 (1985 Rules on
Criminal Procedure as amended) file a separate civil
action, this time predicated not on the felony previously
charged but on other sources of obligation. The source of
obligation upon which the separate civil action is premised
determines against whom the same shall be enforced.
If the same act or omission complained of also arises from
quasi-delict or may, by provision of law, result in an injury
to person or property (real or personal), the separate civil
action must be filed against the executor or administrator
17 of the estate of the accused pursuant to Sec. 1, Rule 87
of the Rules of Court:
Sec. 1. Actions which may and which may not be
brought against executor or administrator. — No action
upon a claim for the recovery of money or debt or interest
thereon shall be commenced against the executor or
administrator; but actions to recover real or personal
property, or an interest therein, from the estate, or to
enforce a lien thereon, and actions to recover damages for
an injury to person or property, real or personal, may be
commenced against him.
This is in consonance with our ruling in Belamala 18 where
we held that, in recovering damages for injury to persons
thru an independent civil action based on Article 33 of the
Civil Code, the same must be filed against the executor or
administrator of the estate of deceased accused and not
against the estate under Sec. 5, Rule 86 because this rule
explicitly limits the claim to those for funeral expenses,
expenses for the last sickness of the decedent, judgment
for money and claims arising from contract, express or
implied. Contractual money claims, we stressed, refers
only to purely personal obligations other than those which
have their source in delict or tort.
Conversely, if the same act or omission complained of also
arises from contract, the separate civil action must be filed
against the estate of the accused, pursuant to Sec. 5, Rule
86 of the Rules of Court.
From this lengthy disquisition, we summarize our ruling
herein:
1. Death of the accused pending appeal of his
conviction extinguishes his criminal liability as well as the
civil liability based solely thereon. As opined by Justice
Regalado, in this regard, "the death of the accused prior to
final judgment terminates his criminal liability and only the
civil liability directly arising from and based solely on the
offense committed, i.e., civil liability ex delicto in senso
strictiore."
2. Corollarily, the claim for civil liability survives
notwithstanding the death of accused, if the same may
also be predicated on a source of obligation other than
delict. 19 Article 1157 of the Civil Code enumerates these
other sources of obligation from which the civil liability may
arise as a result of the same act or omission:
a) Law 20
b) Contracts
c) Quasi-contracts
d) ...
e) Quasi-delicts
3. Where the civil liability survives, as explained in
Number 2 above, an action for recovery therefor may be
pursued but only by way of filing a separate civil action and
subject to Section 1, Rule 111 of the 1985 Rules on
Criminal Procedure as amended. This separate civil action
may be enforced either against the executor/administrator
or the estate of the accused, depending on the source of
obligation upon which the same is based as explained
above.
4. Finally, the private offended party need not fear
a forfeiture of his right to file this separate civil action by
prescription, in cases where during the prosecution of the
criminal action and prior to its extinction, the private-
offended party instituted together therewith the civil action.
In such case, the statute of limitations on the civil liability is
deemed interrupted during the pendency of the criminal
case, conformably with provisions of Article 1155 21 of the
Civil Code, that should thereby avoid any apprehension on
a possible privation of right by prescription. 22
Applying this set of rules to the case at bench, we hold that
the death of appellant Bayotas extinguished his criminal
liability and the civil liability based solely on the act
complained of, i.e., rape. Consequently, the appeal is
hereby dismissed without qualification.
WHEREFORE, the appeal of the late Rogelio Bayotas is
DISMISSED with costs de oficio.
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide,
Jr., Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and
Mendoza, JJ., concur.
Cruz, J., is on leave.
#Footnotes
1 Nos. L-33252, L-33253 and L-33254, 81 SCRA
120.
2 No. 22211-R, November 4, 1959, 56 O.G. No.
23, p. 4045.
3 supra.
4 L-30612, April 27, 1972, 44 SCRA 523.
5 No. L-28397, June 17, 1976, 71 SCRA 273.
6 No. L-26282, August 27, 1976, 72 SCRA 439.
7 No. L-24098, November 18, 1967, 21 SCRA
970.
8 No. L-40336, October 24, 1975, 67 SCRA 394.
9 Sec. 21. Where claim does not survive. —
When the action is for recovery of money, debt or interest
thereon, and the defendant dies before final judgment in
the Court of First Instance, it shall be dismissed to be
prosecuted in the manner especially provided in these
rules.
10 Supra.
11 People v. Badeo, G.R. No. 72990, November
21, 1991, 204 SCRA 122; Petralba v. Sandiganbayan,
G.R. No. 81337, August 16, 1991, 200 SCRA 644; Dumlao
v. Court of Appeals, No. L-51625, October 5, 1988, 166
SCRA 269; Rufo Mauricio Construction v. Intermediate
Appellate Court, No. L-75357, November 27, 1987, 155
SCRA 712; People v. Salcedo, No. L-48642, June 22,
1987, 151 SCRA 220; People v. Pancho, No. L-32507,
November 4, 1986, 145 SCRA 323; People v. Navoa, No.
L-67966, September 28, 1984, 132 SCRA 410; People v.
Asibar,
No. L-37255, October 23, 1982, 117 SCRA 856; People v.
Tirol, No. L-30538, January 31, 1981, 102 SCRA 558; and
People v. Llamoso, No. L-24866, July 13, 1979, 91 SCRA
364.
12 Justice Barredo in his concurring opinion
observed that:
. . . this provision contemplates prosecution of the civil
liability arising from a criminal offense without the need of
any criminal proceeding to prove the commission of the
crime as such, that is without having to prove the criminal
liability of the defendant so long as his act causing
damage or prejudice to the offended party is proven by
preponderance of evidence.
13 Supra, p. 134.
14 Sec. 5. Claims which must be filed under the
notice. If not filed, barred; exceptions. — All claims for
money against the decedent, arising from contract,
express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses and expenses
for the last sickness of the decedent, and judgment for
money against the decedent, must be filed within the time
limited in the notice; otherwise they are barred forever,
except that they may be set forth as counterclaims in any
action that the executor or administrator may bring against
the claimants. Where an executor or administrator
commences an action, or prosecutes an action already
commenced by the deceased in his lifetime, the debtor
may set forth by answer the claims he has against the
decedent, instead of presenting them independently to the
court as herein provided, and mutual claims may be set off
against each other in such action; and if final judgment is
rendered in favor of the defendant, the amount so
determined shall be considered the true balance against
the estate, as though the claim had been presented
directly before the court in the administration proceedings.
Claims not yet due, or contingent, may be approved at
their present value.
15 As explained by J. Regalado in the deliberation
of this case.

16 Sec. 1. Institute of criminal and civil actions.
— When a criminal action is instituted, the civil action for
the recovery of civil liability is impliedly instituted with the
criminal action, unless the offended party waives the civil
action, reserves his right to institute it separately, or
institutes the civil action prior to the criminal action.
Such civil action includes recovery of indemnity under the
Revised Penal Code, and damages under Article 32, 33,
34 and 2176 of the Civil Code of the Philippines arising
from the same act or omission of the accused.
corresponding filing fees shall be paid by the offended
party upon the filing thereof in court for trial.
17 Justice Regalado cited the Court's ruling in
Belamala that since the damages sought, as a result of the
felony committed amounts to injury to person or property,
real or personal, the civil liability to be recovered must be
claimed against the executor/administrator and not against
the estate.
18 Ibid.
Criminal Procedure, as amended, particularly Sec. 1, Rule
111.
21 Art. 1155. The prescription of actions is
interrupted when they are filed before the court, when
there is a written extrajudicial demand by the creditors,
and when there is any written acknowledgment of the debt
by the debtor.
22 As explained by J. Vitug in the deliberation of
this case.

A waiver of any of the civil actions extinguishes the others.
The institution of, or the reservation of the right to file, any
of said civil actions separately waives the others.
The reservation of the right to institute the separate civil
actions shall be made before the prosecution starts to
present its evidence and under circumstances affording
the offended party a reasonable opportunity to make such
reservation.
In no case may the offended party recover damages twice
for the same act or omission of the accused.
When the offended party seeks to enforce civil liability
against the accused by way of moral, nominal, temperate
or exemplary damages, the filing fees for such civil action
as provided in these Rules shall constitute a first lien on
the judgment except in an award for actual damages.
19 Justice Vitug who holds a similar view stated:
"The civil liability may still be pursued in a separate civil
action but it must be predicated on a source of obligation
other than delict, except when by statutory provision an
independent civil action is authorized such as, to
exemplify, in the instance enumerated in Article 33 of the
Civil Code." Justice Regalado stressed that:
Conversely, such civil liability is not extinguished and
survives the deceased offender where it also arises
simultaneously from or exists as a consequence or by
reason of a contract, as in Torrijos; or from law, as stated
in Torrijos and in the concurring opinion in Sendaydiego,
such as in reference to the Civil Code; or from a quasi-
contract; or is authorized by law to be pursued in an
independent civil action, as in Belamala. Indeed, without
these exceptions, it would be unfair and inequitable to
deprive the victim of his property or recovery of damages
therefor, as would have been the fate of the second
vendee in Torrijos or the provincial government in
Sendaydiego."

20 See Articles 19, 20, 21, 31, 32, 33, 34, 2176 of
In cases wherein the amount of damages, other than
the Civil Code; see related provisions of the Rules on
actual, is alleged in the complaint or information, the
G.R. No. 82562 April 11, 1997
LYDIA VILLEGAS, MA TERESITA VILLEGAS, ANTONIO
VILLEGAS, JR., and ANTONIETTE VILLEGAS,
petitioners,
vs.
THE COURT OF APPEALS, PEOPLE OF THE
PHILIPPINES and ANTONIO V. RAQUIZA, respondents.
G.R. No. 82592 April 11, 1997
ANTONIO V. RAQUIZA, petitioner,
vs.
COURT OF APPEALS, LYDIA A. VILLEGAS, ANTONIO
VILLEGAS, JR., MA. ANTONETTE VILLEGAS, MA.
LYDIA VILLEGAS and ESTATE OF ANTONIO J.
VILLEGAS, respondents.
ROMERO, J.:
This case originated from a libel suit filed by then
Assemblyman Antonio V. Raquiza against then Manila
Mayor Antonio J. Villegas, who allegedly publicly imputed
to him acts constituting violations of the Anti-Graft and
Corrupt Practices Act. He did this on several occasions in
August 1968 through (a) a speech before the Lion's Club
of Malasiqui, Pangasinan on August 10; (b) public
statements in Manila on August 13 and in Davao on
August 17, which was coupled with a radio-TV interview;
and (c) a public statement shortly prior to his appearance
before the Senate Committee on Public Works (the
Committee) on August 20 to formally submit a letter-
complaint implicating Raquiza, among other government
officials.
2. Ordenng the estate of Antonio J. Villegas,
represented herein by his legal heirs, namely: Lydia A
Villegas, Ma. Teresita Villegas, Antonio Villegas, Jr., Ma.
The Committee, however, observed that all the allegations Anton(i)ette Villegas, and Ma. Lydia Villegas (sic), to pay
in the complaint were based mainly on the uncorroborated plaintiff Antonio V. Raquiza Two Hundred Million Pesos
testimony of a certain Pedro U. Fernandez, whose (P200,000,000.00), itemized as follows:
credibility turned out to be highly questionable. Villegas
also failed to submit the original copies of his documentary
evidence. Thus, after thorough investigation, Raquiza was
cleared of all charges by the Committee. 1 All these acts of a) One Hundred Fifty Million Pesos
political grandstanding received extensive media (P150.000.000.00) as moral damages:
coverage.
b) Two Hundred Thousand Pesos (P200.000.00)
On July 25, 1969, an information for libel was filed by the as actual damages:
Office of the City Fiscal of Manila with the then Court of
First Instance of Manila against Villegas who denied the
charge. After losing in the 1971 elections, Villegas left for
c) Forty-nine Million Eight Hundred Thousand
the United States where he stayed until his death on
Pesos (P49,800,000.00) as exemplary damages; and
November 16, 1984. Nevertheless, trial proceeded on
absentia by the time of his death the in 1984, the
prosecution had already rested its case Two months after
notice of his death, the court issued an order dismissing d) The cost of suit.
the crimal aspect of the case but reserving the right to
resolve its civil aspect. No memorandum was ever filed in
his behalf.
SO ORDERED. 3 (Amendments underscored)
Judge Marcelo R. Obien 2 rendered judgment on March 7,
1985, the dispositive portion of which was amended on The heirs of Villegas (the Heirs), through their father's
March 26 to read as follows: counsel, Atty. Norberto, Quisumbing appealed the decision
on these three main grounds:
WHEREFORE, and in view of the foregoing
considerations, judgment is hereby rendered as follows: 1. Whether the trial court, three months after notice
of the death of the accused and before his counsel could
file a memorandum in his behalf, could velidly render
judgment in the case?
1. The dismissal of the criminal case against
Antonio J. Vlllegas, on account of his death on November
16, 1984. is hereby reiterated.
2. Whether in the absence of formal substitution of
parties, the trial court could validly render judgment
against the heirs and estate of a deceased accused?
3 Whether, under the facts of the instant case,
deceased Villegas was liable for libel, and assuming he
was, whether the damages awarded by the trial court were
just and reasonable?
On March 15, 1988, the Court of Appeals rendered a
decision affirming the trial court's judgment modified only
with respect to the award of damages which was reduced
to P2 million representing P1.5 million, P300,000.00, and
P200,000.00 in moral exemplary and actual damages,
respectively. Both parties elevated said decision to this
Court for review
In their petition (G.R. No. 82562), the Heirs once again
raise the very same issues brought before the Court of
Appeals, albeit reworded. On the other hand, petitioner
Requiza (G.R. No. 82592) questions the extensions of
time to file appellant's brief granted by the appellate court
to the Heirs, as well as the drastic reduction in the award
of damages.
It is immediately apparent that the focal issue in these
petitions is the effect of the death of Villegas before the
case was decided by the trial court. Stated otherwise, did
the death of the accused before final judgment extinguish
his civil liability?
Fortunately, this Court has already settled this issue with
the promulgation of the case of People v. Bayotas (G.R.
No. 102007) on September 2, 1994, 4 viz.:
It is thus evident that as jurisprudence evolved from
Castillo 5 to Torrijos, 6 the rule established was that the
survival of the civil liability depends on whether the same
can be predicated on sources of obligations other than
delict. Stated differently, the claim for civil liability is also
extinguished together with the criminal action if it were
solely based thereon, i.e., civil liability ex delicto.
xxx xxx xxx
(I)n recovering damages for injury to persons thru an
independent civil action based on Article 33 of the Civil
Code, the same must be filed against the executor or
administrator of the estate of deceased accused (undet
Sec. 1, Rule 87, infra.) and not against the estate under
Sec. 5, Rule 86 because this rule explicitly limits the claim
to those for funeral expenses, expenses for the last
sickness of the decedent, judgment for money and claims
arising from contract, express or implied. 7
xxx xxx xxx
From this lengthy dlsquisition, we summarize our ruling
herein:
1 Death of the accused pending appeal of his
conviction extinguishes his criminal liability as well as the
civil liability based solely thereon As opined by Justice
Regalado, in this regard, "the death of the accused prior to
final judgment terminates his criminal liability and only the
civil liability directly arising from and based solely on the
offense committed, i.e., civil liability ex delicto in senso
strictiore."
2 Corollarily the claim for civil liability survives
notwithstanding the death of (the) accused, if the same
may also be predicated on a source of obligation other
than delict. Article 1157 of the Civil Code enumerates
these other sources of obligation from which the civil
liability may arise as a result of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
d) xxx xxx xxx
e) Quasi-delicts
3. Where the civil liability survives, as explained in
Number 2 above, an action for recovery therefor may be
pursued but only by way of filing a separate civil action and
subject to Section 1, Rule 111 of the 1985 Rules on
Criminal Procedure as amended. 8 This separate civil
action may be enforced either against the
executor/administrator o(f) the estate of the accused,
depending on the source of obligation upon which the
same is based as explained above.
4. Finally, the private offended party need not fear
a forfeiture of his right to file this separate civil action by
prescription, in cases where during the prosecution of the
criminal action and prior to its extinction, the private
offended party instituted together therewith the civil action.
In such case, the statute of limitations on the civil liability is
deemed interrupted during the pendency of the criminal
case, conformably with (the) provisions of Article 1155 of
the Civil Code, that should thereby avoid any
apprehension on a possible privation of right by
prescription. (Emphasis supplied).
The source of Villegas' civil liability in the present case is
the felonious act of libel he allegedly committed. Yet, this
act could also be deemed a quasi-delict within the purview
of Article 33 9 in relation to Article 1157 of the Civil Code.
If the Court ruled in Bayotas that the death of an accused
during the pendency of his appeal extinguishes not only
his criminal but also his civil liability unless the latter can
be predicated on a source of obligation other than the act
or omission complained of, with more reason should it
apply to the case at bar where the accused died shortly
after the prosecution had rested its case and before he
was able to submit his memorandum and all this before
any decision could even be reached by the trial court.
The Bayotas ruling, however, makes the enforcement of a
deceased accused's civil liability dependent on two factors,
namely, that it be pursued by filing a separate civil action
and that it be made subject to Section 1, Rule 111 of the
1985 Rules on Criminal Procedure, as amended.
Obviously, in the case at bar, the civil action was deemed
instituted with the criminal. There was no waiver of the civil
action and no reservation of the right to institute the same,
nor was it instituted prior to the criminal action. What then
is the recourse of the private offended party in a criminal
case such as this which must be dismissed in accordance
with the Bayotas doctrine, where the civil action was
impliedly instituted with it?
The answer is likewise provided in Bayatas, thus:
Assuming that for lack of express reservation, Belamala's
civil civil for damages was to be considered instituted
together with the crinimal action still, since both
proceedings were terminated without finals adjudication
the civil action of the offended party under Article 33 may
yet be enforced separately 10 (Emphasis supplied)
Hence, logically, the court a quo should have dismissed
both actions against Vilegas which dismissal will not,
however, bar Raquiza as the private offended party from
pursuing his claim for damages against the executor or
administrator of the former's estate, notwitnstanding the
fact that he did not reserve the right to institute a civil
separate civil action based on Article 33 of the Civil Code.
It cannot be argued either that to follow Bayotas would
result in further delay in this protracted litigation. This is
because the resolution of the civil aspect of the case after
the dismissal of the main criminal action by the trial court
was technically defective There was no proper substitution
of parties, as correctly pointed out by the Heirs and
repeatedly put in issue by Atty. Quisumbing. What should
have been followed by the court a quo was the procedure
laid down in the Rules of Court, specifically, Section 17,
Rule 3, in connection with Section 1, Rule 87. The
pertinent provisions state as follws:
Rule 3
Sec.17. Death of party. — After a party dies and the
claim is not there extinguished, the court shall order upon
proper notice the legal representative of the deceased to
appear and to be substituted for the deceased, within a
period of thirty (30) days, or within such time as may
be·granted. . . . The heirs of the deceased may be allowed
to be for the deceased, without requiring the appointment
of an executor or administrator and the court may appoint
guardian ad litem for the minor heirs.
Rule 87
Sec. 1. Actions which may and which may not be
brought against or executor or administrator. — No action
upon a claim for the recovery of money or debt or interest
thereon shall be commenced against the executor or
administrator; but actions to recover real or personal
property, or an interest therein, from the estate, or to
enforce a lien thereon, and actions to recover damages for
an injury to person or property, real or personal may be
commenced against him.
Accordingly, the Court sees no more necessity in resolving
the other issues used by both parties in these petitions.
WHEREFORE, the petition in G.R. No. 82562 is
GRANTED and the petition in G.R. No. 82592 is DENIED.
The decisions of the Court of Appeals in CA-G.R. CR No.
82186 dated March 15, 1988, and of the Manila Regional
Trial Court, Branch 44, dated March 7, 1985, as amended,
are hereby REVERSED and SET ASIDE, without prejudice
to the right of the private offended party Antonio V.
Raquiza, to file the appropriate civil action for damages
against the executor or administrator of the estate or the
heirs of the late Antonto J. Villegas in accordance with the
foregoing procedure.
SO ORDERED.
Regalado, Puno, Mendoza and Torres, Jr., JJ., concur.
Footnotes
1 Exhibit "WW." pp. 255-279 of original exhibits.
2 Presiding Judge, Manila Regional Trial Court, The reservation of the right to institute the separate civil
Branch 44. action shall be made before the prosecution starts to
present its evidence and under circumstances affording
the offended party a reasonable opportunity to make such
reservation.
3 Records. p. 621.

xxx xxx xxx

4 236 SCRA 239 (1994).

9 Art. 33. In cases of defamation, fraud, and

5 People v. Castillo and Ocfemia, 81 SCRA 120 physical injuries a civil action for damages, entirely
(1978). separate and distinct from the criminal action may be
brought by the injured party. Such civil action shall
proceed independently of the criminal prosecution and
6 Torrijos v. Court of Appeals, 67 SCRA 394 shall require only a preponderance of evidence.
(1975).

10 Belamala, supra.
7 Citing Belamala v. Polinar, 21 SCRA 970 (1967).

8 In states inter alia

"Rule III

Prosecution of Civil Action

Sec. 1 Institution of criminal and civil actions — When a

criminal action is instituted, the civil action for the recovery
of civil liability is impliedly instituted with the criminal
action, unless the offended party waives the civil action,
reserves his right to institute it the civil action prior to the
criminal action.

xxx xxx xxx

G.R. No. 136843 September 28, 2000
PEOPLE OF THE PHILIPPINES, appellee,
vs.
PEDRO ABUNGAN alias "Pedring," RANDY PASCUA and
ERNESTO RAGONTON Jr., accused,
PEDRO ABUNGAN alias "Pedring," appellant.
RESOLUTION
PANGANIBAN, J.:
The death of the appellant pending appeal and prior to the
finality of conviction extinguished his criminal and civil
liabilities arising from the delict or crime. Hence, the
criminal case against him, not the appeal, should be
dismissed.
The Case and the Facts
Before us is an appeal filed by Pedro Abungan assailing
the Decision1 of the Regional Trial Court of Villasis,
Pangasinan, Branch 50,2 in Criminal Case No. V-0447, in
which he was convicted of murder, sentenced to reclusion
perpetua, and ordered to pay P50,000 as indemnity to the
heirs of the deceased.
In an Information3 dated March 9, 1993, Prosecutor I
Benjamin R. Bautista charged appellant, together with
Randy Pascua and Ernesto Ragonton Jr. (both at large),
with murder committed as follows:
this Court. The Office of the Solicitor General, on the other
hand, submitted the Appellee's Brief8 on February 4,
"That on or about the 4th day of August 1992, at Barangay 2000. The case was deemed submitted for resolution on
Capulaan, Municipality of Villasis, Province of Pangasinan, June 5, 2000, when the Court received the Manifestation
Philippines, and within the jurisdiction of this Honorable of appellant stating that he would not file a reply brief.
Court, the above-named accused conspiring,
confederating and mutually helping one another, armed
with long firearms, with intent to kill, with treachery, evident
In a letter dated August 7, 2000,9 however, Joselito A.
premeditation and superior strength, did then and there
Fajardo, assistant director of the Bureau of Corrections,
wilfully, unlawfully and feloniously attack, assault and
shoot Camilo Dirilo, [Sr.] y Pajarito, inflicting upon him informed the Court that Appellant Abungan had died on
wounds on the different parts of his body x x x injuries July 19, 2000 at the NBP Hospital. Attached to the letter
[which] directly caused his death, to the damage and was Abungan's Death Certificate.
prejudice of his heirs.
Issue
"Contrary to Art. 248 of the Revised Penal Code."4
The only issue before us is the effect of Appellant
With the assistance of Atty. Simplicio Sevilleja, appellant Abungan's death on the case and on the appeal.
pleaded not guilty upon his arraignment on April 30,
1993.5 After trial on the merits, the trial court rendered the
assailed August 24, 1998 Decision, the dispositive portion
This Court's Ruling
of which reads as follows:
The death of appellant on July 19, 2000 during the
"WHEREFORE, his guilt having been established beyond
pendency of his appeal extinguished his criminal as well
reasonable doubt, the [Appellant] Pedro Abungan is
as his civil liability, based solely on delict (civil liability ex
hereby sentenced to suffer the penalty of RECLUSION
delicto).
PERPETUA and such penalties accessory thereto as may
be provided for by law.
Main Issue: Effect of Appellant's Death During Appeal
The x x x [appellant] is hereby further ordered to indemnify
the heirs of Camilo Dirilo Sr. in the amount of FIFTY
THOUSAND PESOS (P50,000.00) and to pay the costs."6 The consequences of appellant's death are provided for in
Article 89 (1) of the Revised Penal Code, which reads as
follows:
Appellant, through counsel, filed the Notice of Appeal on
September 14, 1998. On January 9, 1999, he was
committed to the New Bilibid Prison (NBP) in Muntinlupa. "Art. 89. How criminal liability is totally extinguished. -
On October 26, 1999, he filed the Appellant's Brief7 before Criminal liability is totally extinguished:
1. By the death of the convict, as to the personal penalties;
and as to pecuniary penalties, liability therefor is
extinguished only when the death of the offender occurs
before final judgment;
xxx xxx x x x"
Applying this provision, the Court in People v. Bayotas10
made the following pronouncements:
"1. Death of the accused pending appeal of his conviction
extinguishes his criminal liability as well as the civil liability
based solely thereon. As opined by Justice Regalado, in
this regard, 'the death of the accused prior to final
judgment terminates his criminal liability and only the civil
liability directly arising from and based solely on the
offense committed, i.e., civil liability ex delicto in senso
strictiore.'"
"2. Corollarily, the claim for civil liability survives
notwithstanding the death of (the) accused, if the same
may also be predicated on a source of obligation other
than delict. Article 1157 of the Civil Code enumerates
these other sources of obligation from which the civil
liability may arise as a result of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
d) x x x x x x x x x Moreover, we hold that the death of Appellant Abungan
would result in the dismissal of the criminal case against
him.11 Necessarily, the lower court's Decision -- finding
him guilty and sentencing him to suffer reclusion perpetua
e) Quasi-delicts and to indemnify the heirs of the deceased -- becomes
ineffectual.
"3. Where the civil liability survives, as explained in
Number 2 above, an action for recovery therefor may be WHEREFORE, the criminal case (No. V-0447, RTC of
pursued but only by way of filing a separate civil action and Villasis, Pangasinan) against Pedro Abungan is hereby
subject to Section 1, Rule 111 of the 1985 Rules on DISMISSED and the appealed Decision SET ASIDE.
Criminal Procedure as amended. This separate civil action Costs de oficio.
may be enforced either against the executor/administrator
or the estate of the accused, depending on the source of
obligation upon which the same is based as explained
above. SO ORDERED.
"4. Finally, the private offended party need not fear a Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes,
forfeiture of his right to file this separate civil action by JJ., concur.
prescription, in cases where during the prosecution of the
criminal action and prior to its extinction, the private
offended party instituted together therewith the civil action.
In such case, the statute of limitations on the civil liability is
deemed interrupted during the pendency of the criminal
Footnotes
case, conformably with the provisions of Article 1155 of the
Civil Code, that should thereby avoid any apprehension on
a possible privation of right by prescription."
1 Rollo, pp. 15-36.
In the present case, it is clear that, following the above
disquisition in Bayotas, the death of appellant extinguished 2 Penned by Judge Rosario C. Cruz.
his criminal liability. Moreover, because he died during the
pendency of the appeal and before the finality of the
judgment against him, his civil liability arising from the
crime or delict (civil liability ex delicto) was also 3 Rollo, p. 9.
extinguished. It must be added, though, that his civil
liability may be based on sources of obligation other than
delict. For this reason, the victims may file a separate civil 4 Ibid.
action against his estate, as may be warranted by law and
procedural rules.
5 RTC Records, p. 304.

6 Rollo, p. 36.

7 The Appellant's Brief was signed by Atty. Simplicio M.

Sevilleja.

8 This was signed by Asst. Sol. Gen. Mariano M. Martinez,

Asst. Sol. Ben Magdangal M. De Leon and Sol. Nyriam
Susan O. Sedillo-Hernandez.

9 Received by the Court on August 8, 2000.

10 236 SCRA 239, September 2, 1994, per Romero, J.

See also Villegas v. CA, 271 SCRA 148, April 11, 1997;
People v. Sambulan, 289 SCRA 500, April 24, 1998;
People v. Romero, 306 SCRA 90, April 21, 1999; People
v. Enoja, GR No. 102596, December 17, 1999.

11 While we agree with the doctrinal ruling in Bayotas, we

believe that the disposition therein dismissing the appeal
might have resulted from an oversight. In doing so, the
Court was effectively affirming the trial court's Decision,
which had found Bayotas criminally and civilly liable. Such
disposition is clearly contrary to the discussion in the body
of the Bayotas Decision quoted earlier in this Resolution
that his death extinguished his criminal as well as civil
liabilities based on delict. Indeed, the only logical
consequence of the extinguishment of his criminal and civil
liabilities was the dismissal of the case itself, not of the
appeal.
JIMMY T. GO, Petitioner, versus ALBERTO T. LOOYUKO,
Respondent., G.R. No. 147923, 2007 October 26, 2nd
Division
DECISION
VELASCO, JR., J.:
The Case
Before us are three (3) petitions. The first,[1] G.R. No.
147962, is for certiorari under Rule 65. It assails the
February 12, 2001 Resolution[2] of the Court of Appeals
(CA) in CA-G.R. SP No. 62438, which granted a Writ of
Preliminary Injunction in favor of respondent Looyuko
restraining the Orders of the Pasig City Regional Trial
Court (RTC), Branch 69, from enforcing the Orders dated
September 25, 2000,[3] December 19, 2000,[4] and
December 29, 2000[5] in Civil Case No. 67921 entitled
Jimmy T. Go v. Alberto T. Looyuko for Specific
Performance, Accounting, Inventory of Assets and
Damages; also questioned is the April 24, 2001 CA
Resolution[6] which rejected petitioners plea for
reconsideration.
G.R. No. 147923[7] assails the September 11, 2000 CA
Decision[8] in CA-G.R. SP No. 58639, which upheld the
December 16, 1999[9] Makati City RTC Order denying the
requested inhibition of RTC Judge Nemesio Felix (now
retired) and the March 8, 2000 Order[10] which denied the
recall of the December 16, 1999 Order and which likewise
required the prosecution to make a formal offer of
evidence. Also challenged is the March 27, 2001 CA
Resolution[11] denying petitioners Motion for
Reconsideration.
The third, G.R. No. 154035,[12] assails the January 31,
2002 CA Decision[13] in CA-G.R. SP No. 62296, which
affirmed the Makati City RTC May 9, 2000 Order[14] in
Criminal Case No. 98-1643, denying petitioners prayer to
defer submission of the formal offer of evidence and at the
same time granting leave to respondent to file demurrer to
evidence, and the September 22, 2000 Order[15] denying
reconsideration of the May 9, 2000 Order. Likewise
challenged is the June 3, 2002 CA Resolution[16] of the
CA disallowing petitioners Motion for Reconsideration.
The second, G.R. No. 147923, and third, G.R. No. 154035,
petitions under Rule 45 of the Rules of Court arose from
Criminal Case No. 98-1643 entitled People of the
Philippines v. Alberto T. Looyuko for Estafa under Article
315, paragraph 1 (b) of the Revised Penal Code before the
Makati City RTC, Branch 56.
In G.R. No. 154035, we consolidated the three petitions
having originated from the same criminal case involving
the same parties with interrelated issues. Although the
latter petition raises the issue of the existence of a
business partnership and propriety of the conduct of the
inventory of assets and properties of Noahs Ark Sugar
Refinery in Civil Case No. 67921, all the foregoing actions
trace their beginnings from the same factual milieu.[17]
The Facts
Petitioner Go and respondent Looyuko were business
associates. Respondent is the registered owner of Noahs
Ark Merchandising, a sole proprietorship, which includes
Noahs Ark International, Noahs Ark Sugar Carriers, Noahs
Ark Sugar Truckers, Noahs Ark Sugar Repacker, Noahs
Ark Sugar Insurers, Noahs Ark Sugar Terminal, Noahs Ark
Sugar Building and the land on which the building stood,
and Noahs Ark Sugar Refinery, and the
plant/building/machinery in the compound and the land on
which the refinery is situated. These businesses are
collectively known as the Noahs Ark Group of Companies.
Go was the business manager or chief operating officer of
the group of companies.
Sometime in 1997, the business associates had a falling
out that spawned numerous civil lawsuits. Among these
actions are Civil Case No. 67921 and Criminal Case No.
98-1643 from which arose several incidents which
eventually became subject of these consolidated petitions.
Criminal Case No. 98-1643
On May 21, 1998, petitioner filed People of the Philippines
v. Alberto T. Looyuko, an Affidavit Complaint[18] before
the Makati City RTC, Branch 56, charging respondent with
Estafa under Article 315, paragraph 1 (b) of the Revised
Penal Code. The case was docketed as Criminal Case No.
98-1643. Petitioner alleged that respondent
misappropriated and converted in his name petitioners
41,376 China Banking Corporation (CBC) shares of stock.
Petitioner averred that he entrusted the stock certificates
to respondent for the latter to sell. The Information reads:
That sometime during the month of May, 1997 or prior
thereto, in the City of Makati, Philippines and within the
jurisdiction of this Honorable Court, the above-named
accused, received in trust from complainant Jimmy T. Go
China Banking Corporation stock certificates numbers
25447, 25449, 25450, 26481, 28418, 30916, 32501,
34697 and 36713 representing the 41,376 shares of
stocks of the complainant with China Banking Corporation,
with a market value of P1,400.00 per share, more or less,
with the obligation on the part of the accused to sell the
same and remit the proceeds thereof to the complainant,
but the accused, once in possession of said stock
certificates, far from complying with his aforesaid
obligation, with intent to gain and abuse of confidence, did
then and there willfully, unlawfully and feloniously
misappropriated, misapply and convert the said shares of
stocks to his own personal benefit by causing the transfer
of said stock certificates to his name considering that the
same were endorsed in blank by the complainant out of
the latters trust to the accused, and the accused never
paid the market value of said shares of stocks, which is
P1,400.00 per share, more or less, or a total market value
of P57,926,400.00 for the 41,376 shares of stocks, to the
damage and prejudice of the complainant in the amount of
P7,926,400.00.
CONTRARY TO LAW.[19]
After respondent pleaded Not Guilty, and after the
testimonies of the prosecution witnesses among them, Go
and Amalia de Leon, an employee of CBC, who testified
that certificates of stocks in Gos name were cancelled and
new certificates were issued in Looyukos name. Earlier,
subpoena ad testificandum and subpoena duces tecum
were issued to Peter Dee, President of CBC, Atty. Arsenio
Lim, Corporate Secretary of CBC, and Gloria Padecio. The
trial court also felt no need for the testimonies of Dee, Lim,
and Padecio and ordered the prosecution to offer its
evidence.
Petitioner filed a Motion for Reconsideration and asked
that the prosecution be allowed to present its last witness
from Amsteel Securities, Inc., Bohn Bernard J. Briones.
The RTC granted the motion. However, at the conclusion
of Briones testimony, the prosecution moved to subpoena
Alvin Padecio which was vehemently objected to by the
defense. The trial court denied the motion. The
prosecution thereafter opted to ask for ten (10) days to
formally offer its documentary evidence. The trial court
granted the request.
Instead of filing its formal offer of evidence, the
prosecution filed an Urgent Motion for
Reconsideration,[20] then a Supplemental Motion with
Manifestation, and a Second Supplemental Motion with
Manifestation,[21] all praying that the testimony of Alvin
Padecio be allowed.
For his part, respondent filed a Motion to Declare the
Prosecution as Having Waived its Right to Make a Formal
Offer of Evidence.[22] Hence, petitioner filed an Omnibus
Motion to Withdraw the Urgent Motion for Reconsideration
with Motion for Inhibition.[23]
On December 16, 1999, the trial court denied petitioners
motion for inhibition;[24] petitioners motion to declare the
prosecution to have waived its right to file formal offer of
evidence; and gave the prosecution a last chance to
submit its formal offer of documentary evidence within ten
(10) days from notice.[25]
Petitioner moved to defer compliance with the submission
of its formal offer of documentary evidence pending
petitioners motion for reconsideration of the trial courts
December 16, 1999 Order denying petitioners motion for
inhibition.[26] The RTC denied petitioners motion and
granted the prosecution a last opportunity to submit its
formal offer of documentary evidence within five (5) days
from notice.[27]
Frustrated, petitioner adamantly reiterated his motion for
inhibition in a Manifestation/Motion[28] praying that the trial
court reconsider its Order directing the prosecution to
formally offer its documentary evidence in deference to the
petition for certiorari it intends to file with the CA, where it
would assail the December 16, 1999 and March 8, 2000
Orders denying the inhibition of the judge.
Subsequently, petitioner filed a Petition for Certiorari[29]
under Rule 65 before the CA. It again sought the reversal
of the orders denying his motion for inhibition. The petition
was docketed as CA-G.R. SP No. 58639.
Meanwhile, before the RTC hearing the criminal case,
respondent filed an Omnibus Motion[30] dated March 20,
2000 to declare petitioner to have rested his case on the
basis of the prosecutions testimonial evidence and to grant
respondent leave to file his demurrer to evidence. The
RTC denied the Omnibus Motion. Petitioner timely filed a
Motion for Reconsideration/Manifestation, which was
denied. Respondent filed his demurrer to evidence
incorporating in it his offer of evidence.
Petitioner filed another petition for certiorari before the CA,
docketed as CA-G.R. SP No. 62296. It sought to reverse
the orders of the trial court declaring petitioner to have
waived his right to formally offer his documentary evidence
and allowing respondent to file a demurrer to evidence.
While these motions were being considered by the trial
court, petitioner filed an administrative case docketed as
OCA I.P.I. No. 00-971-RTJ against the trial court Presiding
Judge Nemesio S. Felix. It charged Judge Felix with
Partiality, relative to Criminal Case No. 98-1643.
Citing the administrative case he filed against Judge Felix,
petitioner filed a Second Motion for Voluntary Inhibition[31]
before the trial court. The trial court denied the second
motion.[32] His Motion for Reconsideration was
opposed[33] by respondent.
Civil Case No. 67921
Meanwhile, during the pendency of Crim. Case No. 98-
1643, on May 23, 2000, petitioner filed a Complaint[34]
docketed as Civil Case No. 67921 entitled Jimmy T. Go v.
Alberto T. Looyuko for Specific Performance, Accounting,
Inventory of Assets and Damages against respondent
before the Pasig City RTC. Petitioner claimed that in two
(2) Agreements executed on February 9, 1982[35] and
October 10, 1986,[36] respondent and petitioner agreed to
have their venture registered with the Department of Trade
and Industry (DTI) in the name of Looyuko as sole
proprietor, and both agreed to be equally entitled to 50% of
the business, goodwill, profits, and real and personal
properties owned by the group of companies. Petitioner
alleged that respondent had committed and continued to
commit insidious acts to oust him from the ownership of
half of the assets of the firms under Noahs Ark Group of
Companies in breach of their agreements. Thus,
petitioners action for specific performance, accounting,
and inventory of assets and damages was instituted
against respondent.
Respondent filed a motion to dismiss on the grounds of
forum shopping, litis pendentia, and abandonment or
laches. The motion to dismiss was denied.[37] The trial
court likewise denied respondents Motion for
Reconsideration.[38] The trial court nevertheless granted
petitioners motion to conduct an inventory of the assets of
the group of companies but under the direct supervision
and control of the Branch Clerk of Court.[39]
On January 2, 2001, respondent filed before the CA a
Petition for Certiorari[40] with application for a temporary
restraining order (TRO) and preliminary injunction
assailing the trial courts orders denying respondents
motion to dismiss and grant of the motion of petitioner to
conduct an inventory.
Respondent also filed a Manifestation and Motion for
Reconsideration of the grant of the motion to inventory
before the trial court. Therein, respondent informed the
trial court of his intention to elevate the denial of his motion
to dismiss before the CA, praying that no further
proceedings be conducted in view thereof. Apparently,
respondents petition for certiorari before the CA did not
mention the fact of the Manifestation and Motion for
Reconsideration filed and pending before the trial court.
After filing the petition for certiorari, respondent filed an
Urgent Ex-Parte Motion to Admit Additional Annexes to
Petition.[41] In the meantime, on January 5, 2001, the
inventory of assets in the Noahs Ark Sugar Refinery was
completed.
Three days after the CA issued a Resolution[42] enjoining
the trial court from enforcing its orders denying the motion
to dismiss and grant of motion to inventory, it set the
hearing for the application of the injunctive writ on January
29, 2001.
On February 9, 2001, petitioner filed his opposition[43] to
respondents urgent motion to admit additional annexes to
petition which was replied[44] by respondent with
additional annexes appended thereto.
The Ruling of the Court of Appeals in
CA-G.R. SP No. 58639 (Criminal Case No. 98-1643)
On September 11, 2000, the CA rendered the assailed
Decision dismissing the petition.
The CA explained that the petition was initiated solely by
petitioner and was dismissible for it did not implead nor
have the participation of the Office of the Solicitor General.
And, on the merits, the appellate court ruled that the
voluntary inhibition prayed by petitioner had no legal and
factual basis. The appellate court found that three (3)
alleged grounds of partiality raised by petitioner were not
badges of partiality.
The appellate court ruled that the denial of the testimony of
three (3) witnesses and that of Alvin Padecio was an
exercise of sound discretion by the judge. Besides, the CA
added, Alvin Padecio, son of respondent, was entitled to
the testimonial privilege set forth in Section 25,[45] Rule
130 of the Rules of Court. Moreover, the appellate court
found baseless the other two (2) grounds of partiality. In
fine, the CA held that mere allegation of partiality and bias
will not suffice for a judge to voluntarily inhibit himself and
shirk from responsibility of hearing the case.
On March 27, 2001, the appellate court likewise denied
petitioners Motion for Reconsideration. Thus, petitioner
assails the above Decision and Resolution of the appellate
court in CA-G.R. SP No. 58639 through a Petition for
Review on Certiorari before us docketed as G.R. No.
147923.
The Ruling of the Court of Appeals in
CA-G.R. SP No. 62296 (Criminal Case No. 98-1643)
On January 31, 2002, the appellate court in CA-G.R. SP
No. 62296 rendered the assailed Decision. The CA in
dismissing the petition ruled that the trial court did not
commit grave abuse of discretion in finding that the
petitioner had waived his right to file a formal offer of
documentary evidence and in allowing respondent to file a
demurrer to evidence. It ratiocinated that the pendency of
the issue of inhibition before the appellate court absent a
TRO did not suspend the proceedings in the trial court.
The CA pointed out that petitioner should have pursued his
plea for injunctive relief before it or to file with the trial court
his Formal Offer of Evidence Ex Abundantia Cautelam.
Since petitioner pursued neither, he cannot fault the trial
court from issuing the assailed orders.
Finally, on the issue of the demurrer to evidence, the CA
held that such was seasonably filed by respondent. It ruled
in this wise:
In the case before the Respondent Court, the Petitioner
had presented its witnesses but had no documentary
evidence to formally offer as it was considered to have
waived the same by his intractable refusal to file its Formal
Offer of Evidence. Hence, the Demurrer to Evidence, filed
by the Private Respondent, was seasonably filed with the
Respondent Court.[46]
Petitioners Motion for Reconsideration was also denied.
Hence, petitioner assails the above Decision and
Resolution of the appellate court in CA-G.R. SP No. 62296
through a Petition for Review on Certiorari before us
docketed as G.R. No. 154035.
The Ruling of the Court of Appeals in
CA-G.R. SP No. 62438 (Civil Case No. 67921)
On February 12, 2001, the CA issued the assailed
Resolution, granting a writ of preliminary injunction
conditioned on the filing of a PhP 50,000 bond. The CA
ruled that the requisites for an injunctive writ were present
and that the status quo at the inception of the case on May
23, 2000 must be observed. Thus, the appellate court
enjoined the trial court from enforcing its Orders dated
September 25, 2000, December 19, 2000, and December
29, 2000, and from conducting further proceedings in the
case pending resolution of the certiorari case.
Petitioners Motion for Reconsideration was denied through
the appellate courts April 24, 2001 Resolution. Thus,
petitioner assails the above Resolutions of the appellate
court in CA-G.R. SP No. 62438 through a petition for
certiorari under Rule 65 before us docketed as G.R. No.
147962.
The Issues
In G.R. No. 147923, petitioner Go raises the sole issue:
Whether the Honorable Court of Appeals committed
reversible errors when it failed to apply the law and
established jurisprudence on the matter by issuing the
questioned Resolutions (sic) thereby affirming the
questioned Orders of the Court a quo which were issued
with grave abuse of discretion.
In G.R. No. 154035, petitioner Go raises the sole issue:
Whether the Honorable Court of Appeals committed
reversible errors when it failed to apply the law and
established jurisprudence on the matter by issuing the
questioned Resolutions thereby affirming the questioned
Orders of the Court a quo which were issued with grave
abuse of discretion.
In G.R. No. 147962, petitioner Go alleges that the
respondent CA acted with grave abuse of discretion and in
excess of its jurisdiction in rendering the questioned
Resolutions when:
1) It failed to dismiss the questioned Petition
notwithstanding the fatal error committed by Looyuko in
intentionally failing to await the resolution of his Motion for
Reconsideration filed in the Court a quo before filing his
Petition with the Court of Appeals.
2) It failed to dismiss the questioned Petition on the ground
of Looyukos failure to attach all relevant and pertinent
documents to his Petition.
3) It failed to dismiss the questioned Petition
notwithstanding the fact that Looyuko violated the rule
against forum-shopping.
4) It failed to apply the rule that consummated acts could
no longer be restrained by injunction.
5) It granted Looyukos prayer for injunction. Injunction
should have been denied. Looyuko has unclean hands
and he seeks equity without doing equity. No irreparable
damage exists and a plain and adequate legal remedy is
available to him.
6) It fixed the amount of the injunction bond in the measly
amount of P50,000.00.
Meanwhile, during the pendency of these petitions,
respondent Looyuko died on October 29, 2004.[47]
The Courts Ruling
The petitions are partly meritorious.
G.R. Nos. 147923 and 154035
We will tackle G.R. Nos. 147923 and 154035 jointly since
the issues raised are closely interwoven as the pending
incidents arose from the same Crim. Case No. 98-1643.
Voluntary Inhibition: Not a remedy absent valid grounds
In G.R. No. 147923, petitioner strongly asserts that
Presiding Judge Nemesio Felix has displayed manifest
bias and partiality in favor of respondent by disallowing the
presentation of the testimonies of the prosecutions vital
witnesses, namely, Dee, Lim, Gloria Padecio, and Alvin
Padecio, without any valid reason and in utter bad faith.
Petitioner also foists the alleged badges of partiality in the
conduct and attitude of the trial court judge during the
proceedings; and that it is revealing that the respondent
and his counsel knew the judge beforehand. Finally,
petitioner points to the apparent animosity and enmity of
Judge Felix in his Comment to the administrative case
(OCA I.P.I. No. 00-971-RTJ) filed by petitioner against him.
We have ploughed through the records and we are
constrained to agree with the findings of the appellate
court. First, we find no manifest partiality. Indeed, the
adverse rulings on the denial of the proposed testimonies
of the prosecutions witnesses are judicial in nature. Absent
proof that the trial court judge had acted in a wanton,
whimsical or oppressive manner or for an illegal
consideration, and similar reasons, in giving undue
advantage to respondent, inhibition is not a remedy to oust
the judge from sitting on the case.
Second, the other two (2) grounds raised by petitioner are
also baseless. We reiterate the age-old rule in civil cases
that one who alleges a fact has the burden of proving it
and a mere allegation is not evidence.[48] Verily, petitioner
has not shown substantial proof to bolster these
allegations. It is quite revealing what was pointed out by
Judge Felix in his December 16, 1999 Order, as quoted by
the appellate court, that the allegation of respondents
counsel saying to petitioner that Amin na si Judge first
came out only in petitioners second supplemental motion
with manifestation dated September 7, 1999. If it was
indeed uttered by respondents counsel, such would have
been immediately stated in the prior pleadings of
petitioner: the urgent motion for reconsideration dated
August 26, 1999 and supplemental motion with
manifestation dated August 31, 1999. Besides, in a string
of cases, this Court has said that bias and prejudice, to be
considered valid reasons for the voluntary inhibition of
judges, must be proved with clear and convincing
evidence. Bare allegations of partiality and prejudgment
will not suffice.[49]
Third, on June 26, 2002, we dismissed the administrative
case filed by petitioner against Judge Felix in OCA I.P.I.
No. 00-971-RTJ. Therein, we found no basis to
administratively discipline respondent judge for manifest
partiality. Verily, the assailed orders were issued with
judicial discretion and no administrative liability attaches
absent showing of illegal consideration or giving undue
advantage to a party, and much less can we compel the
trial court judge to inhibit himself absent valid grounds
therefor.
Fourth, since the grounds raised by petitioner in his motion
to inhibit are not among those expressly mentioned in
Section 1, Rule 137 of the Revised Rules of Court, the
decision to inhibit himself lies within the sound discretion of
Judge Felix. Grounds raised outside the five (5) mandatory
disqualification of judges enumerated in the first paragraph
of Sec. 1 of Rule 137 are properly addressed to the sound
discretion of the trial court judge hearing a case as
pertinently provided for in the second paragraph of Sec. 1,
Rule 137, thus:
SECTION 1. Disqualification of judges. x x x
A judge may, in the exercise of his sound discretion,
disqualify himself from sitting in a case, for just or valid
reasons other than those mentioned above.
Thus, it is clearly within the discretion of the judge to
voluntarily inhibit himself from sitting in a case or not.
Fifth, we fail to appreciate petitioners contention that the
harsh language in the comment of Judge Felix shows his
apparent animosity and enmity against petitioner. We have
gone over the 2nd Indorsement (Comment) of Judge Felix
and we failed to find such animosity against petitioner. Be
that as it may, the tenor of the comment is usual given the
indignation and the bother that judges, and other court
employees for that matter, have to go through when faced
with an administrative case.
Finally, this issue has been mooted as Judge Nemesio
Felix had compulsorily retired on December 19, 2004.
Grave abuse of discretion in the denial of additional
witnesses
At this juncture, we come to the issue of denial of
additional witnesses. Petitioner contends that the
prosecution should have been given the opportunity to
present four witnesses, namely, Dee, the President of
CBC; Lim, Corporate Secretary of CBC; Gloria Padecio
and Alvin Padecio, whom petitioner strongly avers are vital
witnesses to prove the allegations in the Information as set
out in the issues embodied in the Pre-Trial Order.
The contention of petitioner is well-taken.
It is basic that the case of the prosecution in a criminal
case depends on the strength of its evidence and not on
the weakness of the defense. This is so as proof beyond
reasonable doubt is required in criminal cases. Thus, the
prosecution must be afforded ample opportunity to present
testimonial and documentary evidence to prove its case. A
close perusal of the antecedent facts in the instant case
shows that the prosecution had not been given this
opportunity.
The Pre-Trial Order[50] of January 19, 1999 shows that
the prosecution will present seven (7) witnesses and to
resolve the issues on whether petitioner is only a mere
employee of or a 50-50 partner of respondent. The
prosecution was allowed to present only three (3)
witnesses, namely, petitioner Jimmy T. Go, Amalia de
Leon, representative of CBC, Bohn Briones, representative
of and Credit Comptroller of Amsteel Securities, Inc.
It must be noted that after petitioner and de Leon
presented their testimonies, the trial court ruled that the
testimonies of Dee and Lim of the CBC, who were ready to
testify, and that of Gloria Padecio, the common-law wife of
respondent, were superfluous. Moreover, after much
wrangling with the prosecution conceding the non-
presentation of the three (3) witnesses, the testimony of
Briones was allowed as final witness for the prosecution.
But Briones testimony left much to be desired as he was
not able to testify on some points the prosecution
considered vital to its case. Thus, the prosecution
requested for the presentation of Alvin Padecio, the son of
respondent and Gloria Padecio, the alleged stock agent of
Amsteel Securities, Inc. who handled the transaction
involving the subject shares of stock of CBC. This was
likewise denied by the trial court, which led to the motion
for inhibition and administrative case against Judge Felix,
and the adamant stand of petitioner not to rest his case by
filing his formal offer of evidence until the testimony of
Padecio is had.
It must be emphasized that in a catena of cases we have
reiterated the principle that the matter of deciding who to
present as a witness for the prosecution is not for the
defendant or the trial court to decide, as it is the
prerogative of the prosecutor.[51] It cannot be
overemphasized that the trial court must accord full
opportunity for the prosecution, more so in criminal cases,
to adduce evidence to prove its case and to properly
ventilate the issues absent patent showing of dilatory or
delaying tactics. The reason is obvious: it is tasked to
produce and adduce evidence beyond a reasonable doubt.
Sans such evidence, a dismissal of the criminal case on a
demurrer to the evidence is proper. In the case at bar,
there was no showing that the presentation of the three (3)
witnesses previously approved by the trial court would be
dilatory and manifestly for delay.
The trial court anchored its ruling on the denial of the three
(3) witnesses on the fact that the Pre-Trial Order already
stipulated the fact that the certificates were issued in the
name of petitioner Go, were indorsed in blank and
delivered to respondent, and the certificates were
subsequently transferred to respondents name. The trial
court ruled that these facts were already testified to by
petitioner and de Leon. Moreover, the trial court also ruled
that the testimony of Gloria Padecio was a superfluity as
petitioner already testified to the alleged partnership
between petitioner and respondent.
We cannot agree with the trial court and neither can we
give imprimatur on the appellate courts affirmance thereof.
We find that the trial court gravely abused its discretion in
denying petitioner and the prosecution to present their
witnesses.
Grave abuse of discretion implies such capricious and
whimsical exercise of judgment as is equivalent to lack of
jurisdiction. It is well-settled that an act of a court or
tribunal may only be considered to have been done in
grave abuse of discretion when the act was performed in a
capricious or whimsical exercise of judgment which is
equivalent to lack of jurisdiction. The abuse of discretion
must be so patent and gross as to amount to an evasion of
positive duty or to a virtual refusal to perform a duty
enjoined or to act at all in contemplation of law, as where
the power is exercised in an arbitrary and despotic manner
by reason of passion or personal hostility.[52] An error of
judgment committed in the exercise of its legitimate
jurisdiction is not the same as grave abuse of discretion.
An abuse of discretion is not sufficient by itself to justify the
issuance of a writ of certiorari.
We find that the trial court gravely abused its discretion in
patently and arbitrarily denying the prosecution the
opportunity to present four (4) witnesses in the instant
criminal case. First, the testimonies of Dee and Lim from
CBC would bolster and tend to prove whatever fact the
prosecution is trying to establish. Truth to tell, only the
testimony of de Leon corroborates petitioners testimony on
the alleged transfer from petitioners name to that of
respondent of the certificates of stock. More light can be
shed on the transaction with the additional testimony of
Dee and Lim.
Second, the superfluity of a testimony vis--vis what has
already been proven can be determined with certainty only
after it has been adduced. Verily, the testimonies of
petitioner Go and de Leon on the issue of the transfer
cannot be said to have truly proven and been corroborated
with certainty as they are.
Third, the trial court cannot invoke its discretion under Sec.
6 of Rule 134, Rules of Court given that only two (2)
witnesses were presented when it denied the testimony of
the three (3) witnesses. Sec. 6 of Rule 134 pertinently
provides:
SEC. 6. Power of the court to stop further evidence. The
court may stop the introduction of further testimony upon
any particular point when the evidence upon it is already
so full that more witnesses to the same point cannot be
reasonably expected to be additionally persuasive. But this
power should be exercised with caution.
The above proviso clearly grants the trial court the
authority and discretion to stop further testimonial
evidence on the ground that additional corroborative
testimony has no more persuasive value as the evidence
on that particular point is already so full. Indeed, it was
only petitioner Go, whose testimony may be considered
self-serving who testified on the issue of the transfer.
Certainly, the additional testimony of de Leon on the issue
of the transfer cannot be considered as so adequate that
additional corroborative testimony has no more persuasive
value. Besides, the discretion granted by the above
proviso has the clear caveat that this power should be
exercised with caution, more so in criminal cases where
proof beyond reasonable doubt is required for the
conviction of the accused.
Fourth, in consonance with the immediate preceding
discussion, petitioner Gos testimony on the alleged
partnership is not confirmed and supported by any other
proof with the exclusion of the testimony of Gloria Padecio.
Certainly, it is imperative for the prosecution to prove by
clear and strong evidence that the alleged partnership
exists; otherwise, respondent Looyuko is entitled to
exoneration as the element of trust is important in estafa
by abuse of confidence. Corroborative testimony is a
necessity given the nature of the criminal case.
Likewise, the trial court gravely abused its discretion in
denying the prosecution to present the testimony of Alvin
Padecio considering that Briones of Amsteel Securities,
Inc. did not provide some details on the transfer. Alvin
Padecio, petitioner claims, is the person who can shed
light on these matters, more particularly if one considers
the fact that he is the son of respondent Looyuko.
Based on the foregoing findings, we hold that the trial court
whimsically, arbitrarily, and gravely abused its discretion
amounting to a denial of the prosecution of its day in court.
Death of respondent extinguished criminal liability
Respondent Looyuko died on October 29, 2004. It is an
established principle that the death of the accused pending
final adjudication of the criminal case extinguishes the
accuseds criminal liability. If the civil liability directly arose
from and is based solely on the offense committed, then
the civil liability is also extinguished.[53]
In the case at bar, the civil liability for the recovery of the
CBC stock certificates covering 41,376 shares of stock or
their value does not directly result from or based solely on
the crime of estafa but on an agreement or arrangement
between the parties that petitioner Go would endorse in
blank said stock certificates and give said certificates to
respondent Looyuko in trust for petitioner for said
respondent to sell the stocks covered by the certificates. In
such a case, the civil liability survives and an action for
recovery therefor in a separate civil action can be instituted
either against the executor or administrator or the estate of
the accused.
The case law on the matter reads:
1. Corollarily, the claim for civil liability survives
notwithstanding the death of the accused, if the same may
also be predicated on a source of obligation other than
delict. Article 1157of the Civil Code enumerates these
other sources of obligation from which the civil liability may
arise as a result of the same act or omission:
a.) Law
b.) Contracts
c.) Quasi-contracts
d.) xxx
e.) Quasi-delicts
2. Where the civil liability survives, as explained
in Number 2 above, an action for recover therefore may be
pursued but only by way of filing a separate civil action and
subject to Section 1, Rule 111 of the 1985 Rules on
Criminal Procedure as amended. This separate civil action
may be enforced either against the executor/administrator
or the estate of the accused, depending on the source of
obligation upon which the same is based as explained
above.[54] (Emphasis supplied.)
On the other hand, Sec. 4, Rule 111 of the Rules on
Criminal Procedure provides:
SEC. 4. Effect of death on civil actions. The death of the
accused after arraignment and during the pendency of the
criminal action shall extinguish the civil liability arising from
the delict.
However, the independent civil action instituted under
section 3 of this Rule or which thereafter is instituted to
enforce liability arising from other sources of obligation
may be continued against the estate or legal
representative of the accused after proper substitution or
against said estate, as the case may be. The heirs of the
accused may be substituted for the deceased without
requiring the appointment of an executor or administrator
and the court may appoint a guardian ad litem for the
minor heirs. (Emphasis supplied.)
In the light of the foregoing provision, Crim. Case No. 98-
1643 has to be dismissed by reason of the death of
respondent Looyuko without prejudice to the filing of a
separate civil action.
One last point. Petitioner Go filed the two petitions before
the CA docketed as CA-G.R. SP No. 58639 and CA-G.R.
SP No. 62296 involving incidents arising from the
proceedings in Crim. Case No. 98-1643. It can be
observed from the two petitions that they do not reflect the
conformity of the trial prosecutor assigned to said criminal
case. This is in breach of Sec. 5, Rule 110 of the Rules of
Court that requires that all criminal actions shall be
prosecuted under the direction and control of a public
prosecutor. Although in rare occasions, the offended party
as a person aggrieved was allowed to file a petition under
Rule 65 before the CA without the intervention of the
Solicitor General,[55] the instant petitions before the CA,
as a general rule, should be filed by the Solicitor General
on behalf of the State and not solely by the offended
party.[56]
For non-compliance with the rules, the twin petitions could
have been rejected outright. However, in view of the death
of respondent Looyuko, these procedural matters are now
mooted and rendered insignificant.
G.R. No. 147962
Appellate courts discretion to give due course to petition
Petitioner strongly asserts that the CA gravely abused its
discretion in failing to dismiss the petition in CA-G.R. SP
No. 62438 on the ground of respondents failure to attach
all relevant and pertinent documents to his petition, and it
erroneously ruled that such procedural defect was cured
by admitting respondents motion to admit additional
annexes. Petitioner relies on Manila Midtown Hotels and
Land Corp., et al. v. NLRC[57] and contends that Director
of Lands v. Court of Appeals[58] cited by the CA is
inapplicable.
We cannot agree with petitioner.
Sec. 1 of Rule 65 pertinently provides:
SECTION 1. Petition for certiorari. When any tribunal,
board or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to
lack or excess of jurisdiction, and there is no appeal, nor
any plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered annulling
or modifying the proceedings of such tribunal, board or
officer, and granting such incidental reliefs as law and
justice may require.
The petition shall be accompanied by a certified true copy
of the judgment, order or resolution subject thereof, copies
of all pleadings and documents relevant and pertinent
thereto, and a sworn certification of non-forum shopping as
provided in the third paragraph of Section 3, Rule 46.
The above proviso clearly vests the appellate court the
authority and discretion to give due course to the petitions
before it or to dismiss the same when it is not sufficient in
form and substance, the required pleadings and
documents are not attached thereto, and no sworn
certificate on non-forum shopping is submitted. And such
must be exercised, not arbitrarily or oppressively, but in a
reasonable manner in consonance with the spirit of the
law. The appellate court should always see to it that justice
is served in exercising such discretion.
In the case at bar, the appellate court exercised its
discretion in giving due course to respondent Looyukos
petition in view of the policy of liberality in the application
of the rules. Verily, petitioner has not shown that the
appellate court abused its discretion in an arbitrary or
oppressive manner in not dismissing the petition due to the
non-attachment of some relevant pleadings to the petition.
The miscue was cured when respondent submitted
additional annexes to the petition. Neither has petitioner
shown any manifest bias, fraud, or illegal consideration on
the part of the appellate court to merit reconsideration for
the grant of due course.
Respondent guilty of forum shopping
There was still a pending Motion for Reconsideration (to
the Order of denial of Looyukos Motion to Dismiss) filed by
Looyuko in the court a quo when he instituted the petition
before the CA on January 2, 2001. It is aggravated by the
fact that the Motion for Reconsideration to the denial Order
was filed on the same day or simultaneously with the filing
of the Petition for Certiorari; hence, the petition is in the
nature of forum shopping. The issues brought before the
CA are similar to the issues raised in Looyukos Motion for
Reconsideration involving similar cause of action and
reliefs sought, that is, to dismiss the basic complaint of
petitioner Go. This Court in a catena of cases resolved that
a Motion for Reconsideration is an adequate remedy in
itself, and is a condition sine qua non to the prosecution of
the independent, original, and extra ordinary special civil
action of certiorari.[59] We must not lose sight of the fact
that a Motion for Reconsideration (subsequently denied) is
a pre-requisite before a Petition for Certiorari may properly
be filed.[60]
Considering, that the Motion for Reconsideration has not
been resolved by the court a quo, the petition (CA-G.R. SP
No. 62438) was prematurely filed; hence, it should have
been outrightly denied due course. Looyuko was remiss of
his duty to inform the appellate court in his petition that
there was a pending Motion for Reconsideration in the
court a quo.
Consummated acts not restrained by injunctive writ
A close review of the antecedent facts bears out that,
indeed, petitioner did not know of the petition for certiorari
before the CA until he received a copy of the CAs January
8, 2001 Resolution on January 12, 2001. It is undisputed
that petitioner received a copy of respondents December
29, 2000 petition only on January 19, 2001.
Clearly, petitioner did not yet know of the pendency of the
petition for certiorari before the CA when the inventory of
the assets in Noahs Ark Sugar Refinery was completed on
January 5, 2001. Thus, the appellate court committed
reversible error when it held that petitioner proceeded at
his own peril the conduct of the inventory in view of the
pendency of the certiorari case in which the appellate court
enjoined the trial court from proceeding with its January 8,
2001 Resolution. Verily, even before the CA granted the
TRO and issued its January 8, 2001 Resolution, the
proceeding to be enjoined, that is, the conduct of the
inventory, had already been done. Thus, we agree with
petitioner that Verzosa v. Court of Appeals[61] relied upon
by the appellate court is not applicable.
The established principle is that when the events sought to
be prevented by injunction or prohibition have already
happened, nothing more could be enjoined or
prohibited.[62] Indeed, it is a universal principle of law that
an injunction will not issue to restrain the performance of
an act already done. This is so, for the simple reason that
nothing more can be done in reference thereto.[63] A writ
of injunction becomes moot and academic after the act
sought to be enjoined has already been consummated.[64]
In the case at bar, it is manifest that the inventory has
already been conducted when the January 8, 2001 TRO
and February 12, 2001 Writ of Injunction were issued.
Thus, the issue of injunction has been mooted, and the
injunctive writ must be nullified and lifted.
Inventory of assets does not prejudice the parties
Moreover, it must be noted that the inventory of assets
granted by the trial court on December 29, 2000, which
was completed on January 5, 2001, does not prejudice
respondent Looyukos right. Certainly, the rights of
respondent over the inventoried assets in Noahs Ark
Sugar Refinery have not been transgressed, set aside,
diminished, or militated upon by the conduct of the
inventory.
An inventory does not confer any rights. Thus, by
conducting the inventory, petitioner had not been
conferred any rights over the assets absent a final
determination by the court on the main action for specific
performance, accounting, and damages, as the inventory
is only an ancillary remedy preparatory for the party to an
action to institute other legal remedies for the protection of
whatever right the party may have over the subject of the
inventory.
Injunction, therefore, against the inventory of the assets
covered by the December 29, 2000 Order should be lifted
since the inventory has been completed and there is
nothing to enjoin or restrain. Consequently, the February
12, 2001 CA Resolution on this matter will have to be
modified.
Lower court to proceed absent any TRO or injunctive writ
from this Court
With regard to the injunction on the September 25, 2000
and December 19, 2000 Orders which denied respondents
motion to dismiss and motion for reconsideration,
respectively, which effectively prohibited the Pasig City
RTC from conducting further proceedings in Civil Case No.
67921 until CA-G.R. SP No. 62438 is resolved, it is clear
that more than six (6) years had elapsed since the April
24, 2001 CA Resolution was issued and still the CA
petition of petitioner has not yet been resolved on the
merits. It is observed that this Court did not issue a TRO or
a writ of preliminary injunction against the CA from
proceeding in CA-G.R. SP No. 62438. The CA should
have proceeded to resolve the petition notwithstanding the
pendency of G.R. No. 147962 before this Court. This is
unequivocal from Sec. 7 of Rule 65 which provides that the
petition shall not interrupt the course of the principal case
unless a TRO or a writ of preliminary injunction has been
issued against the public respondent from further
proceeding in the case. This rule must be strictly adhered
to by the lower court notwithstanding the possibility that
the proceedings undertaken by the lower court tend to or
would render nugatory the pending petition before this
Court. As long as there is no directive from this Court for
the lower court to defer action in the case, the latter would
not be faulted if it continues with the proceedings in said
case.
Given the more than six (6) years that CA-G.R. SP No.
62438 has been pending with the CA, we deem it better to
resolve the issue of the propriety of the denial by the trial
court of respondents motion to dismiss than remanding it
to the CA.
Issue of denial of motion to dismiss
Respondent Looyuko anchored his motion to dismiss on
the ground of forum shopping, litis pendentia, and
abandonment or laches. Respondent anchors his grounds
of litis pendentia and forum shopping on the fact of the
pendency of Civil Case No. 98-91153 entitled Alberto T.
Looyuko v. Jimmy T. Go a.k.a. Jaime Gaisano and the
Register of Deeds of Manila before the Manila RTC,
Branch 36, and in Civil Case No. MC 98-038 entitled
Alberto T. Looyuko v. Jimmy T. Go a.k.a. Jaime Gaisano
and the Register of Deeds of Mandaluyong City before
Mandaluyong City RTC, Branch 213.
Civil Case No. 98-91153 involves an action to amend
Transfer Certificate of Title (TCT) Nos. 160277 and
160284 by deleting the name of petitioner Jimmy T. Go as
co-owner. While Civil Case No. MC 98-038 is a petition to
cancel the adverse claims annotated by petitioner in TCT
No. 64070 in the name of respondent Alberto T. Looyuko
and in TCT No. 3325 in the name of Noahs Ark Sugar
Refinery. In both civil cases, petitioner has anchored his
defense and adverse claims on the Agreements executed
on February 9, 1982 and October 10, 1986, wherein the
parties allegedly entered into and embodied in said
agreements their true intent and relationship with respect
to their business ventures in Noahs Ark Group of
Companies, that is, for convenience and expediency, the
parties agreed to have their ventures registered with the
DTI in the name of respondent Looyuko only as sole
proprietor while they are both equally entitled to 50% of the
business, goodwill, profits, real and personal properties
owned by the group of companies.
Respondent pointed out that that petitioner has prayed in
Civil Case No. 98-91153 that the parties agreement dated
February 9, 1982 and October 10, 1986 be declared valid
and binding, and in Civil Case No. MC 98-038 to order the
Register of Deeds of Mandaluyong City to register
petitioner Gos name as co-owner of the properties covered
by TCT Nos. 64070 and 3325 by virtue of the February 9,
1982 and October 10, 1986 agreements.
Thus, respondent strongly argues that the issue regarding
the validity and binding effect of the alleged partnership
agreements dated February 9, 1982 and October 10, 1986
on which petitioner anchors his claim of co-ownership in
the Noahs Ark Group of Companies has been squarely
raised not only as a defense but also as basis of his prayer
for positive relief. Respondent now contends that petitioner
is barred by litis pendentia in filing Civil Case No. 67921
for Specific Performance, Accounting, Inventory of Assets
and Damages anchored on the same issue of the disputed
partnership agreements. Moreover, such filing duly
recognized by the trial court constitutes forum shopping.
We cannot agree with respondent.
Litis pendentia and forum shopping not present
There is no basis for respondents claim based on litis
pendentia and forum shopping. For litis pendentia to be a
ground for the dismissal of an action there must be: (1)
identity of the parties or at least such as to represent the
same interest in both actions; (2) identity of rights asserted
and relief prayed for, the relief being founded on the same
acts; and (3) the identity in the two cases should be such
that the judgment which may be rendered in one would,
regardless of which party is successful, amount to res
judicata in the other.[65] On the other hand, forum
shopping exists where the elements of litis pendentia are
present, and where a final judgment in one case will
amount to res judicata in the other.[66]
A brief perusal of the cause of action in Civil Case No.
67921 vis--vis those of Civil Case Nos. 98-91153 and MC
98-038 reveals that there is neither identity of rights
asserted and reliefs prayed for, nor are the reliefs founded
on the same acts. In this case, Civil Case No. 67921, the
relief sought before the Pasig City RTC where the
complaint for specific performance was filed by petitioner,
was the enforcement of the disputed partnership
agreements, whereas, in the Makati City and Mandaluyong
City RTCs, the reliefs sought by petitioner who is a
defendant and respondent, respectively, were merely as
defense for his co-ownership over subject parcels of land
and as defense for the adverse claims he had annotated in
the titles of subject properties. Such defenses cannot be
equated with seeking relief for the enforcement of the
disputed partnership agreements. Indeed, the complaint
and petition filed by respondent in the Makati City and
Mandaluyong City RTCs had different causes of action
and sought different reliefs which did not stem from nor are
founded from the same acts complained of. There is no
basis, therefore, for petitioners contention that respondent
is guilty of forum shopping nor the instant complaint barred
by litis pendentia.
Anent abandonment or laches, we fully agree with the trial
court that there is no basis to dismiss the complaint in Civil
Case No. 67921 on the grounds of laches and
abandonment. Laches, being controlled by equitable
considerations and addressed to the sound discretion of
the trial court, is evidentiary in nature and thus can not be
resolved in a motion to dismiss, as we have held in the
fairly recent case of Felix Gochan and Sons Realty
Corporation v. Heirs of Raymundo Baba.[67]
WHEREFORE, the petition in G.R. No. 147962 is
GRANTED. The February 12, 2001 and April 24, 2001
Resolutions of the CA in CA-G.R. SP No. 62438 are
REVERSED and SET ASIDE, and the Writ of Preliminary
Injunction is LIFTED. The Petition for Certiorari of
respondent Looyuko in CA-G.R. SP No. 62438 is
DISMISSED for lack of merit, and the Orders dated
September 25, 2000, December 19, 2000, and December
29, 2000 of the Pasig City RTC, Branch 69 are
AFFIRMED. The Pasig City RTC, Branch 69 is hereby
ordered to proceed with the case with dispatch.
The petition in G.R. No. 147923 is DENIED and the
September 11, 2000 Decision and March 27, 2001
Resolution of the CA in CA-G.R. SP No. 58639 are
AFFIRMED.
The petition in G.R. No. 154035 is GRANTED. The
January 31, 2002 Decision and June 3, 2002 Resolution of
the CA in CA-G.R. SP No. 62296 are REVERSED and
SET ASIDE. Likewise, the Orders dated May 9, 2000 and
September 22, 2000 of the Makati City RTC in Crim. Case
No. 98-1643 are REVERSED and SET ASIDE.
However, in view of the demise of respondent Looyuko on
October 29, 2004, the Makati City RTC is ordered to
dismiss Crim. Case No. 98-1643 without prejudice to the
filing of a separate civil action by petitioner Go.
No pronouncement as to costs.
SO ORDERED.
[1] Rollo (G.R. No. 147962), pp. 3-37.
[2] Id. at 40-44. The Resolution was penned by Associate
Justice Marina L. Buzon (Chairperson) and concurred in
by Associate Justices Wenceslao I. Agnir, Jr. and
Bienvenido L. Reyes.
[3] Id. at 97-100, per Presiding Judge Lorifel Lacap
Pahimna.
[4] Id. at 101-102.
[5] Id. at 103-104.
[6] Id. at 46-47.
[7] Rollo (G.R. No. 147923), pp. 12-56, Petition dated June
18, 2001.
[8] Id. at 59-69. The Decision was penned by Associate
Justice Conrado M. Vasquez (Chairperson) and concurred
in by Associate Justices Mariano M. Umali and Rebecca
de Guia-Salvador.
[9] Id. at 72-80, per Presiding Judge Nemesio S. Felix.
[10] Id. at 82.
[11] Id. at 71. The Resolution was penned by Associate
Justice Conrado M. Vasquez (Chairperson) and concurred
in by Associate Justices Rebecca de Guia-Salvador and
Presiding Justice Cancio C. Garcia (now Associate Justice
of this Court).
[12] Rollo (G.R. No. 154035), pp. 12-54, Petition dated
August 7, 2002.
[13] Id. at 55-75. The Decision was penned by Associate
Justice Romeo J. Callejo, Sr. (Chairperson, now a retired
member this Court) and concurred in by Associate
Justices Remedios Salazar-Fernando and Perlita J. Tria
Tirona of the Eleventh Division.
[14] Id. at 77-78.
[15] Id. at 80.
[16] Id. at 76.
[17] Id. at 461-463. Memorandum dated July 14, 2004
submitted by Atty. Enriqueta Esguerra-Vidal, Clerk of
Court, First Division, recommending the consolidation of
the three cases.
[18] Id. at 83-84, dated April 24, 1998.
[19] Id. at 85.
[20] Id. at 235-243.
[21] Id. at 252-256.
[22] Id. at 147-149.
[23] Id. at 150-163.
[24] Rollo (G.R. No. 147923), pp. 72-80. (This is subject of
CA-G.R. SP No. 58639 and later G.R. No. 147923.)
[25] Rollo (G.R. No. 154035), pp. 176-179.
[26] Id. at 180-183.
[27] Rollo (G.R. No. 147923), p. 82. (This is subject of CA-
G.R. SP No. 58639 and later G.R. No. 147923.)
[28] Rollo (G.R. No. 154035), pp. 185-189.
[29] Rollo (G.R. No. 147923), pp. 101-121.
[30] Rollo (G.R. No. 154035), pp. 190-194.
[31] Id. at 335-343.
[32] Id. at 345-346.
[33] Id. at 355-358, Opposition to the Motion for
Reconsideration dated February 12, 2001.
[34] Rollo (G.R. No. 147962), pp. 49-71.
[35] Id. at 195-197.
[36] Id. at 198-200.
[37] Id. at 97-100. (This is subject of CA-G.R. SP No.
62438 and later G.R. No. 147962.)
[38] Id. at 101-102. (This is subject of CA-G.R. SP No.
62438 and later G.R. No. 147962.)
[39] Id. at 103-104. (This is likewise subject of CA-G.R. SP
No. 62438 and later G.R. No. 147962.)
[40] Id. at 72-96, dated December 29, 2000.
[41] Id. at 318-322.
[42] Id. at 150-151.
[43] Id. at 323-329.
[44] Id. at 330-335.
[45] SEC. 25. Parental and filial privilege. No person may
be compelled to testify against his parents, other direct
ascendants, children or other direct descendants.
[46] Rollo (G.R. No. 154035), p. 74.
[47] Rollo (G.R. No. 147962), p. 552. Death Certificate of
respondent Alberto T. Looyuko.
[48] Luxuria Homes, Inc. v. Court of Appeals, G.R. No.
125986, January 28, 1999, 302 SCRA 315, 325.
[49] Joseph Estrada v. Gloria Macapagal-Arroyo, G.R. No.
146738, March 2, 2001, 353 SCRA 452, 583.
[50] Rollo (G.R. No. 147923), pp. 257-261.
[51] People v. Dagami, G.R. No. 136397, November 11,
2003, 415 SCRA 482, 500; citing People v. Tuvilla, G.R.
No. 88822, July 15, 1996, 259 SCRA 1. See also People
v. Morico, G.R. No. 92660, July 14, 1995, 246 SCRA 214.
[52] Intestate Estate of Carmen de Luna v. Intermediate
Appellate Court, G.R. No. 72424, February 13, 1989, 170
SCRA 246; Litton Mills v. Galleon Traders, G.R. No. L-
40867, July 26, 1988, 163 SCRA 489; Butuan Bay Export
Co. v. Court of Appeals, G.R. No. L-45473, April 28, 1980,
97 SCRA 297.
[53] People v. Bayotas, G.R. No. 102007, September 2,
1994, 236 SCRA 239, 255.
[54] Id. at 255-256. Though laches applies even to imprescriptible actions, its
elements must be proved positively. Laches is evidentiary
[55] People v. Calo, Jr., G.R. No. 88531, June 18, 1990, in nature which could not be established by mere
186 SCRA 620, 624; and People v. Santiago, G.R. No. allegations in the pleadings and can not be resolved in a
80778, June 20, 1989, 174 SCRA 143, 153. motion to dismiss. (Emphasis supplied.)
[56] Republic v. Partisala, No. L-61997, November 15,
1982, 118 SCRA 370, 373.
[57] G.R. No.118397, March 27, 1998, 288 SCRA 259.
[58] G.R. No. L-47380, February 23, 1999, 303 SCRA 495.
[59] Manila Post Publishing Co. v. Sanchez, 81 Phil. 614
(1948); Uy Chu v. Imperial and Uy Du, 44 Phil. 27 (1922).
[60] Ricafort v. Fernan, et al., 101 Phil. 575 (1957).
[61] G.R. Nos. 119511-13, November 24, 1998, 299 SCRA
100
[62] Ramos, Sr. v. Court of Appeals, G.R. No. 80908, May
24, 1989, 173 SCRA 550.
[63] Manila Railroad Company v. Yatco, G.R. No. L-23056,
May 27, 1968, 23 SCRA 735.
[64] PCIB v. NAMAWU-MIF, G.R. No. L-50402, August 19,
1982, 115 SCRA 873; Romulo v. Yiguez, G.R. No. L-
71908, February 4, 1986, 141 SCRA 263; Rivera v.
Florendo, G.R. No. L-60066, July 31, 1986, 144 SCRA
647; Zabat v. Court of Appeals, G.R. No. 122089, August
23, 2000, 338 SCRA 551.
[65] Cebu International Finance Corp. v. Court of Appeals,
G.R. No. 123031, October 12, 1999, 316 SCRA 488.
[66] Prubankers Association v. Prudential Bank & Trust
Company, G.R. No. 131247, January 25, 1999, 302 SCRA
74.
[67] G.R. No. 138945, August 19, 2003, 409 SCRA 306,
315, citing Santos v. Santos, G.R. No. 133895, 2 October
2, 2001, 366 SCRA 395, 405406, where we held, thus:
EN BANC
G.R. No. 171268 September 14, 2010
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,
vs.
BRINGAS BUNAY y DAM-AT, Accused-Appellant.
RESOLUTION
BERSAMIN, J.:
The Regional Trial Court (RTC), Branch 26, in Luna,
Apayao tried and found the accused guilty of qualified rape
in its decision dated December 11, 2001, the decretal
portion of which reads:
WHEREFORE, finding the accused, BRINGAS BUNAY y
DAM-AT guilty beyond reasonable doubt of the crime of
Rape as charged against him, this court hereby sentences
said accused to suffer the Supreme Penalty of DEATH.
The accused is further ordered to pay the victim, "AAA",
the amount of Seventy Five Thousand (₱75,000.00) by
way of civil indemnity plus exemplary and moral damages
of Sixty Thousand Pesos (₱60,000.00).
The accused is ordered to be immediately shipped to New
Bilibid Prisons, Muntinlupa City, for imprisonment thereat
while awaiting the review of this decision by the Supreme
Court.
IT IS SO ORDERED.1
On December 13, 2001, the accused was committed to the
New Bilibid Prison in Muntinlupa City, per the certification
issued on August 14, 2002 by the Director of the Bureau of
Corrections.2
The conviction was brought for automatic review, but the
Court transferred the case to the CA for intermediate
review on November 9, 2004,3 conformably with People v.
Mateo.4
On August 10, 2005, the Court of Appeals (CA) affirmed
the conviction of the accused for qualified rape in C.A.-
G.R. No. CR HC No. 00758,5 viz:
IN LIGHT OF THE FOREGOING, the assailed Decision of
the Regional Trial Court of Luna, Apayao, Branch 26 in
Criminal Case No. 5-2001 is hereby AFFIRMED.
SO ORDERED.
Following the CA’s denial of his motion for reconsideration,
the accused now appeals to the Court.
On April 20, 2010, the Court received the letter dated April
15, 2010 from Bureau of Corrections Assistant Director for
Operations Rodrigo A. Mercado, advising that the accused
had died on March 25, 2010 at the New Bilibid Prison
Hospital in Muntinlupa City. The report of Dr. Marylou V.
Arbatin, Medical Officer III, revealed that the immediate
cause of death had been cardio-respiratory arrest, with
pneumonia as the antecedent cause.
On June 22, 2010, the Court required the Bureau of
Corrections to submit a certified true copy of the death
certificate of the accused.1avvphi1
By letter dated August 16, 2010, Armando T. Miranda,
Chief Superintendent of the New Bilibid Prison, submitted
the death certificate of the accused.
Under the foregoing circumstances, the death of the
accused during the pendency of his appeal in this Court
totally extinguished his criminal liability. Such extinction is
based on Article 89 of the Revised Penal Code, which
pertinently provides:
Article 89. How criminal liability is totally extinguished. —
Criminal liability is totally extinguished:
1. By the death of the convict, as to the personal penalties;
and as to pecuniary penalties, liability therefor is
extinguished only when the death of the offender occurs
before final judgment.
xxx
The death of the accused likewise extinguished the civil
liability that was based exclusively on the crime for which
the accused was convicted (i.e., ex delicto), because no
final judgment of conviction was yet rendered by the time
of his death. Only civil liability predicated on a source of
obligation other than the delict survived the death of the
accused, which the offended party can recover by means
of a separate civil action.6
UPON THE FOREGOING CONSIDERATIONS, the appeal
of the accused is dismissed, and this criminal case is
considered closed and terminated.
SO ORDERED.
Footnotes
1 Original Records, p. 116.
2 CA Rollo, p. 30.
3 Id., p. 113.
4 G.R. Nos. 147678-87, 7 July 2004, 433 SCRA 640.
5 CA Rollo, pp. 115-123; penned by Associate Justice
Jose. L. Sabio, Jr. (retired) and concurred in by Associate
Justice Hakim Abdulwahid and Associate Justice
Magdangal De Leon.
6 People v. Bayotas, G.R. No. 102007, September 2,
1994, 236 SCRA 239.
G.R. No. 175784 August 25, 2010
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, vs.
JAIME AYOCHOK y TAULI, Accused-Appellant.
DECISION
LEONARDO-DE CASTRO, J.:
Before Us is an appeal filed by Jaime Ayochok y Tauli
(Ayochok) assailing the Decision1 dated June 28, 2005 of
the Court of Appeals in CA-G.R. CR No. 00949, entitled
People of the Philippines v. Jaime Ayochok y Tauli," which
affirmed with modifications the Decision dated August 13,
2003 of the Regional Trial Court (RTC) of Baguio City,
Branch 6, in Criminal Case No. 18658-R.2 The RTC found
Ayochok guilty beyond reasonable doubt of the crime of
Murder.
In an Amended Information3 dated September 21, 2001,
Prosecutor Benedicto T. Carantes charged Ayochok with
Murder, committed as follows:
That on or about the 15th day of July, 2001, in the City of
Baguio, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, being then
armed with a gun, with intent to kill and with evident
premeditation and by means of treachery and with cruelty
by deliberately and inhumanly outraging at the victim, did
then and there willfully, unlawfully and feloniously attack,
assault and shoot SPO1 CLAUDIO CALIGTAN y NGODO
in the following manner, to wit: that while the victim was
relieving himself with his back turned to the accused, the
latter coming from the blind side of the victim, shoot him
several times hitting him on the different parts of his body
and there was no opportunity or means to defend himself
from the treacherous act of the assailant, thereby inflicting
upon the latter: hypovolemic shock due to massive
hemorrhage; multiple gunshot wounds on the head, neck,
and upper extremities which directly caused his death.
When arraigned, Ayochok pleaded not guilty.
After trial on the merits of Criminal Case No. 18658-R, the
RTC rendered a Decision on August 13, 2003, the
dispositive portion of which reads:
WHEREFORE, the Court finds the accused Jaime
Ayochok guilty beyond reasonable doubt of the offense of
Murder, defined and penalized under Article 248 of the
Revised Penal Code as amended, qualified by treachery
as charged in the Information and hereby sentences him to
reclusion perpetua; to indemnify the heirs of the deceased
SPO1 Claudio Caligtan the sum of ₱75,000.00 as civil
indemnity for his death; ₱200,000.00 as moral damages;
₱378,956.50 as actual damages in connection with his
death; ₱2,573,096.40 as unearned income, all
indemnifications being without subsidiary imprisonment in
case of insolvency; and to pay the costs.
The accused Jaime Ayochok being a detention prisoner is
entitled to be credited 4/5 of his preventive imprisonment
in the service of his sentence in accordance with Article 29
of the Revised Penal Code.4
Ayochok was committed at the New Bilibid Prison in
Muntinlupa City on October 31, 2003.
The case was directly elevated to us for automatic review
and was docketed as G.R. No. 161469. However,
pursuant to our decision in People v. Mateo5 – which
modified the pertinent provisions of the Revised Rules on
Criminal Procedure on direct appeals from the RTC to the
Supreme Court in cases where the penalty imposed is
death, reclusion perpetua or life imprisonment – G.R. No.
161469 was transferred to the Court of Appeals,6 where it
was docketed as CA-G.R. CR No. 00949.
In its Decision dated June 28, 2005, the Court of Appeals
affirmed with modifications the RTC judgment, to wit:
WHEREFORE, in view of the foregoing premises, the
Decision subject of this review is hereby AFFIRMED, save
for several modifications in the civil aspect. Accordingly,
the civil indemnity is reduced to ₱50,000.00; moral
damages reduced to ₱50,000.00; actual damages reduced
to ₱144,375.75 and unearned income reduced to
₱2,571,696.10.7
Initially, Ayochok filed a Motion for Reconsideration8 of the
foregoing Decision of the Court of Appeals. Subsequently,
however, Ayochok filed a Motion to Withdraw Motion for
Reconsideration with Notice of Appeal9 since he believed
there was no chance that the appellate court would
reverse itself, and prayed that the case already be
forwarded to us instead. In a Resolution dated June 14,
2006, the Court of Appeals denied Ayochok’s Motion to
Withdraw Motion for Reconsideration with Notice of
Appeal. In another Resolution dated August 11, 2006, the
appellate court denied Ayochok’s Motion for
Reconsideration of the Decision dated June 28, 2005.
Ayochok, through counsel, filed a Notice of Appeal with the
Court of Appeals conveying his intention to appeal to us
the Decision dated June 28, 2005 of said court. On
December 29, 2006, the Judicial Records Division of the
Court of Appeals elevated to us the original records of CA-
G.R. CR No. 00949,10 and Ayochok’s appeal was
docketed as G.R. No. 175784.
On February 12, 2007, we required the parties in G.R. No.
175784 to file their supplemental briefs. 11
Ayochok filed his Supplemental Appellant’s Brief12 on May
31, 2007, while the Office of the Solicitor General filed a
Manifestation13 on March 29, 2007, stating that it would
no longer file a supplemental brief given that its Appellee’s
Brief, originally filed in G.R. No. 161469, is adequate to
ventilate the People’s cause. On August 6, 2007, we
submitted G.R. No. 175784 for resolution.14
However, in a letter dated February 16, 2010, Julio A.
Arciaga, the Assistant Director for Prisons and Security of
the Bureau of Corrections, informed us that Ayochok had
died on January 15, 2010 at the Philippine General
Hospital, Manila. A copy of the death report signed by a
medical officer of the New Bilibid Prison Hospital was
attached to said letter.
In a Resolution dated April 28, 2010, we noted the letter
and required the Director of the Bureau of Corrections to
submit a certified true copy of Ayochok’s death certificate
from the local civil registrar within five days from notice of
the said resolution.
On June 22, 2010, Melind M. Alipe, Head of the Medical
and Dental Division of the New Bilibid Prison, Muntinlupa
City, submitted a certified true copy of the death certificate
of Ayochok.
Given Ayochok’s death, we are now faced with the
question of the effect of such death on the present appeal.
Ayochok’s death on January 15, 2010, during the
pendency of his appeal, extinguished not only his criminal
liability for the crime of murder committed against Senior
Police Officer 1 Claudio N. Caligtan, but also his civil
liability solely arising from or based on said crime.
According to Article 89(1) of the Revised Penal Code,
criminal liability is totally extinguished:
1. By the death of the convict, as to the personal penalties;
and as to pecuniary penalties, liability therefor is
extinguished only when the death of the offender occurs
before final judgment.
Applying the foregoing provision, we laid down the
following guidelines in People v. Bayotas15:
1. Death of the accused pending appeal of his conviction
extinguishes his criminal liability as well as the civil liability
based solely thereon. As opined by Justice Regalado, in
this regard, "the death of the accused prior to final
judgment terminates his criminal liability and only the civil
liability directly arising from and based solely on the
offense committed, i.e., civil liability ex delicto in senso
strictiore."
2. Corollarily, the claim for civil liability survives
notwithstanding the death of (the) accused, if the same
may also be predicated on a source of obligation other
than delict. Article 1157 of the Civil Code enumerates
these other sources of obligation from which the civil
liability may arise as a result of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
xxxx
e) Quasi-delicts
3. Where the civil liability survives, as explained in Number
2 above, an action for recovery therefor may be pursued
but only by way of filing a separate civil action and subject
to Section 1, Rule 111 of the 1985 Rules on Criminal
Procedure as amended. This separate civil action may be
enforced either against the executor/administrator or the
estate of the accused, depending on the source of
obligation upon which the same is based as explained
above.
4. Finally, the private offended party need not fear a
forfeiture of his right to file this separate civil action by
prescription, in cases where during the prosecution of the
criminal action and prior to its extinction, the private-
offended party instituted together therewith the civil action.
In such case, the statute of limitations on the civil liability is
deemed interrupted during the pendency of the criminal
case, conformably with the provisions of Article 1155 of the
Civil Code that should thereby avoid any apprehension on
a possible privation of right by prescription.16
Clearly, in view of a supervening event, it is unnecessary
for the Court to rule on Ayochok’s appeal.1âwphi1
Whether or not he was guilty of the crime charged has
become irrelevant since, following Article 89(1) of the
Revised Penal Code and our disquisition in Bayotas, even
assuming Ayochok had incurred any criminal liability, it
was totally extinguished by his death. Moreover, because
Ayochok’s appeal was still pending and no final judgment
of conviction had been rendered against him when he
died, his civil liability arising from the crime, being civil
liability ex delicto, was likewise extinguished by his death.
Consequently, the appealed Decision dated June 28, 2005
of the Court of Appeals in CA-G.R. CR No. 00949 – finding
Ayochok guilty of Murder, sentencing him to imprisonment,
and ordering him to indemnify his victim – had become
ineffectual.17
WHEREFORE, in view of the death of accused-appellant
Jaime Ayochok y Tauli, the Decision dated June 28, 2005
of the Court of Appeals in CA-G.R. CR No. 00949 is SET
ASIDE and Criminal Case No. 18658-R before the
Regional Trial Court of Baguio City is DISMISSED. Costs
de oficio.
SO ORDERED.
Footnotes
1 Penned by Associate Justice Bienvenido L. Reyes with
Associate Justices Godardo A. Jacinto and Rosalinda
Asuncion-Vicente concurring; rollo, pp. 3-13.
2 CA rollo, pp. 123-147.
3 Id. at 20.
4 Id. at 146-147.
5 G.R. Nos. 147678-87, July 7, 2004, 433 SCRA 640.
6 CA rollo, p. 211.
7 Rollo, p. 13.
8 CA rollo, pp. 236-243.
9 Id. at 252-254.
10 Rollo, p. 1.
11 Id. at 14.
12 Id. at 24-41.
13 Id. at 15-18.
14 Id. at 44.
15 G.R. No. 102007, September 2, 1994, 236 SCRA 239.
16 Id. at 255-256.
17 De Guzman v. People, 459 Phil. 576, 580 (2003).
THIRD DIVISION
[G.R. NO. 161803 : February 4, 2008]
DY TEBAN TRADING, INC., Petitioner, v. JOSE CHING
AND/OR LIBERTY FOREST, INC. and CRESILITO M.
LIMBAGA, Respondents.
DECISION
REYES, R.T., J.:
THE vehicular collision resulting in damages and injuries in
this case could have been avoided if the stalled prime
mover with trailer were parked properly and equipped with
an early warning device. It is high time We sounded the
call for strict enforcement of the law and regulation on
traffic and vehicle registration. Panahon na para mahigpit
na ipatupad ang batas at regulasyon sa trapiko at
pagpapatala ng sasakyan.
Before Us is a Petition for Review on Certiorari of the
Decision1 of the Court of Appeals (CA) modifying that2 of
the Regional Trial Court (RTC) in Butuan City finding
private respondents Liberty Forest, Inc. and Cresilito
Limbaga liable to petitioner Dy Teban Trading, Inc. for
damages.
Facts
On July 4, 1995, at around 4:45 a.m., Rogelio Ortiz, with
helper Romeo Catamora, was driving a Nissan van owned
by petitioner Dy Teban Trading, Inc. along the National
Highway in Barangay Sumilihon, Butuan City, going to
Surigao City. They were delivering commercial ice to
nearby barangays and municipalities. A Joana Paula
passenger bus was cruising on the opposite lane towards
the van. In between the two vehicles was a parked prime
mover with a trailer, owned by private respondent Liberty
Forest, Inc.3
The night before, at around 10:00 p.m., the prime mover
with trailer suffered a tire blowout. The driver, private
respondent Cresilito Limbaga, parked the prime mover
askew occupying a substantial portion of the national
highway, on the lane of the passenger bus. He parked the
prime mover with trailer at the shoulder of the road with the
left wheels still on the cemented highway and the right
wheels on the sand and gravel shoulder of the highway.4
The prime mover was not equipped with triangular,
collapsible reflectorized plates, the early warning device
required under Letter of Instruction No. 229. As substitute,
Limbaga placed a banana trunk with leaves on the front
and the rear portion of the prime mover to warn incoming
motorists. It is alleged that Limbaga likewise placed
kerosene lighted tin cans on the front and rear of the
trailer.5
To avoid hitting the parked prime mover occupying its
lane, the incoming passenger bus swerved to the right,
onto the lane of the approaching Nissan van. Ortiz saw
two bright and glaring headlights and the approaching
passenger bus. He pumped his break slowly, swerved to
the left to avoid the oncoming bus but the van hit the front
of the stationary prime mover. The passenger bus hit the
rear of the prime mover.6
Ortiz and Catamora only suffered minor injuries. The
Nissan van, however, became inoperable as a result of the
incident. After the collision, SPO4 Teofilo Pame conducted
an investigation and submitted a police traffic incident
investigation report.7
On October 31, 1995, petitioner Nissan van owner filed a
complaint for damages8 against private respondents prime
mover owner and driver with the RTC in Butuan City. The
Joana Paula passenger bus was not impleaded as
defendant in the complaint.
RTC Disposition
On August 7, 2001, the RTC rendered a decision in favor
of petitioner Dy Teban Trading, Inc. with a fallo reading:
WHEREFORE, judgment is hereby rendered directing,
ordaining and ordering:
a) That defendants Liberty Forest, Inc. and Cresilito M.
Limbaga pay, jointly and solidarily, plaintiff Dy Teban
Trading, Inc. the amounts of P279,832.00 as actual and
compensatory damages, P30,000.00 as attorney's fees
and P5,000.00 as expenses of litigation;
b) That all money claims of plaintiff Rogelio C. Ortiz are
dismissed;
c) That defendant Jose Ching is absolved from any civil
liability or the case against him dismissed;
d) That the counterclaim of all the defendants is dismissed;
andcralawlibrary
e) That defendants Liberty Forest, Inc. and Cresilito M.
Limbaga to pay, jointly and solidarily, the costs.
SO ORDERED.9
The RTC held that the proximate cause of the three-way
vehicular collision was improper parking of the prime
mover on the national highway and the absence of an
early warning device on the vehicle, thus:
The court finds that the proximate cause of the incidents is
the negligence and carelessness attributable to the
defendants. When the trailer being pulled by the prime
mover suffered two (2) flat tires at Sumilihon, the prime
mover and trailer were parked haphazardly, as the right
tires of the prime mover were the only ones on the sand
and gravel shoulder of the highway while the left tires and
all the tires of the trailer were on the cemented pavement
of the highway, occupying almost the whole of the right
lane on the direction the prime mover and trailer were
traveling. The statement of Limbaga that he could not park
the prime mover and trailer deeper into the sand and
gravel shoulder of the highway to his right because there
were banana plants is contradicted by the picture marked
Exhibit "F." The picture shows that there was ample space
on the shoulder. If defendant Limbaga was careful and
prudent enough, he should have the prime mover and
trailer traveled more distance forward so that the bodies of
the prime mover and trailer would be far more on the
shoulder rather than on the cemented highway when they
were parked. x x x The court has some doubts on the
statement of witness-driver Limbaga that there were
banana trunks with leaves and lighted tin cans with crude
oil placed 3 strides in front of the prime mover and behind
the trailer because the testimonies of witnesses Rogelio C.
Ortiz, driver of the ice van, Romeo D. Catamora, helper of
the ice van, and Police Traffic Investigator SPO3 Teofilo
M. Pame show that there were no banana trunks with
leaves and lighted tin cans at the scene of the incident. But
even assuming that there were banana trunks with leaves
but they were placed close to the prime mover and trailer
as they were placed 3 strides away which to the mind of
the court is equivalent approximately to 3 meters and with
this distance, approaching vehicles would have no
sufficient time and space to make a complete stop,
especially if the vehicles are heavy and loaded. If there
were lighted tin cans, it was not explained by the
defendants why the driver, especially driver witness Ortiz,
did not see them.
x x x
Defendant Liberty Forest, Inc. did not exercise the
diligence of a good father of a family in managing and
running its business. The evidence on record shows that it
failed to provide its prime mover and trailer with the
required "early warning devices" with reflectors and it did
not keep proper maintenance and condition of the prime
mover and the trailer. The circumstances show that the
trailer were provided with wornout tires and with only one
(1) piece of spare tire. The pictures marked Exhibit "3" and
"4" show that two (2) flat tires suffered by the trailer and
these two (2) tires were attached to one of the two (2) I-
beams or axles attached to the rear of the trailer which
axle is very near but behind the other axle and with the
location of the 2 I-beams, it would have the other I-beam
that would have suffered the flat tires as it has to bear the
brunt of weight of the D-8 bulldozer. The bulldozer was not
loaded directly above the two (2) I-beams as 2 I-beams, as
a pair, were attached at the far rear end of the trailer.
x x x
However, defendant Jose Ching should be absolved of
any liability as there is no showing that he is the manager
or CEO of defendant Liberty Forest, Inc. Although in the
answer, it is admitted that he is an officer of the defendant
corporation, but it is not clarified what kind of position he is
holding, as he could be an officer as one of the members
of the Board of Directors or a cashier and treasurer of the
corporation. Witness Limbaga in his testimony mentioned
a certain Boy Ching as the Manager but it was never
clarified whether or not Boy Ching and defendant Jose
Ching is one and the same person.10
Private respondents appealed to the CA.
CA Disposition
On August 28, 2003, the CA reversed the RTC decision,
disposing as follows:
WHEREFORE, premises considered, the decision dated
August 7, 2001 of the Regional Trial Court, Branch 2,
Butuan City in Civil Case No. 4360 is hereby PARTLY
MODIFIED by absolving the defendants-
appellants/appellees of any liability to plaintiffs-
appellants/appellees by reason of the incident on July 4,
1995.
The dismissal of the case against Jose Ching, the
counterclaim of defendants-appellants/appellees and the
money claim of Rogelio Ortiz STANDS.
SO ORDERED.11
In partly reversing or partly modifying the RTC decision,
the CA held that the proximate cause of the vehicular
collision was the failure of the Nissan van to give way or
yield to the right of way of the passenger bus, thus:
It was stated that the Joana Paula bus in trying to avoid a
head-on collision with the truck, sideswept the parked
trailer loaded with bulldozer.
Evidently, the driver of the Joana Paula bus was aware of
the presence on its lane of the parked trailer with
bulldozer. For this reason, it proceeded to occupy what
was left of its lane and part of the opposite lane. The truck
occupying the opposite lane failed to give way or yield the
right of way to the oncoming bus by proceeding with the
same speed. The two vehicles were, in effect, trying to
beat each other in occupying a single lane. The bus was
the first to occupy the said lane but upon realizing that the
truck refused to give way or yield the right of way, the bus,
as a precaution, geared to its right where the trailer was
parked. Unfortunately, the bus miscalculated its distance
from the parked trailer and its rear right side hit the
protruding blade of the bulldozer then on the top of the
parked trailer. The impact of the collision on its right rear
side with the blade of the bulldozer threw the bus further to
the opposite lane, landing its rear portion on the shoulder
of the opposite lane.
x x x
Facts of the case reveal that when Ortiz, the driver of the
truck, failed to give the Joana Paula bus the space on the
road it needed, the latter vehicle scraped its rear right side
on the protruded bulldozer blade and the impact threw the
bus directly on the path of the oncoming truck. This made
plaintiffs-appellants/appellees conclude that the Joana
Paula bus occupied its lane which forced Ortiz, the driver
of the truck, to swerve to its left and ram the front of the
parked trailer.
x x x
The trailer was parked because its two (2) rear-left tires
were blown out. With a bulldozer on top of the trailer and
two (2) busted tires, it would be dangerous and quite
impossible for the trailer to further park on the graveled
shoulder of the road. To do so will cause the flat car to tilt
and may cause the bulldozer to fall from where it was
mounted. In fact, it appeared that the driver of the trailer
tried its best to park on the graveled shoulder since the
right-front tires were on the graveled shoulder of the road.
The lower court erred in stating that the Joana Paula bus
swerved to the left of the truck because it did not see the
parked trailer due to lack of warning sign of danger of any
kind that can be seen from a distance. The damage
suffered by the Joana Paula bus belied this assessment.
As stated before, the Joana Paula bus, with the intention
of passing first which it did, first approached the space
beside the parked trailer, veered too close to the parked
trailer thereby hitting its rear right side on the protruding
bulldozer blade. Since the damage was on the rear right
most of the bus, it was clearly on the space which was
wide enough for a single passing vehicle but not sufficient
for two (2) passing vehicles. The bus was thrown right to
the path of the truck by the impact of the collision of its
rear right side with the bulldozer blade.12
The CA disagreed with the RTC that the prime mover did
not have an early warning device. The appellate court
accepted the claim of private respondent that Limbaga
placed kerosene lighted tin cans on the front and rear of
the trailer which, in Baliwag Transit, Inc. v. Court of
Appeals,13 may act as substitute early warning device.
The CA stated:
Likewise, it was incorrect for the lower court to state that
there was no warning sign of danger of any kind, most
probably referring to the absence of the triangular
reflectorized plates. The police sketch clearly indicated the
stack of banana leaves placed at the rear of the parked
trailer. The trailer's driver testified that they placed
kerosene lighted tin can at the back of the parked trailer.
A pair of triangular reflectorized plates is not the only early
warning device allowed by law. The Supreme Court (in
Baliwag Transit, Inc. v. Court of Appeals) held that:
"x x x Col. Dela Cruz and Romano testified that they did
not see any early warning device at the scene of the
accident. They were referring to the triangular reflectorized
plates in red and yellow issued by the Land Transportation
Office. However, the evidence shows that Recontique and
Ecala placed a kerosene lamp or torch at the edge of the
road, near the rear portion of the truck to serve as an early
warning device. This substantially complies with Section
34(g) of the Land Transportation and Traffic Code x x x
Baliwag's argument that the kerosene lamp or torch does
not substantially comply with the law is untenable. The
aforequoted law clearly allows the use not only of an early
warning device of the triangular reflectorized plates' variety
but also parking lights or flares visible one hundred meters
away. x x x."
This Court holds that the defendants-appellants/appellees
were not negligent in parking the trailer on the scene of the
accident. It would have been different if there was only one
flat tire and defendant-appellant/appellee Limbaga failed to
change the same and left immediately.
As such, defendants-appellants/appellees are not liable for
the damages suffered by plaintiffs-appellants/appellees.
Whatever damage plaintiffs-appellants/appellees suffered,
they alone must bear them.14
Issues
Petitioner raises two issues15 for Our consideration, to wit:
I.
THE HONORABLE COURT OF APPEALS, WITHOUT
ANY AVAILABLE CONCRETE EVIDENCE,
ERRONEOUSLY DETERMINED THAT THERE WERE
EARLY WARNING DEVICES PLACED IN FRONT OF
THE DEFENDANT-APPELLANTS/APPELLEES' TRUCK
AND FLAT CAR TO WARN PLAINTIFF-
APPELLANT/APPELLEE ROGELIO ORTIZ OF THEIR
PRESENCE.
II.
WITH DUE RESPECT, IT IS HIGH TIME TO ENFORCE
THE LAW ON EARLY WARNING DEVICES IN THE
PUBLIC INTEREST.
Our Ruling
The petition is meritorious.
The meat of the petition is whether or not the prime mover
is liable for the damages suffered by the Nissan van. The
RTC ruled in the affirmative holding that the proximate
cause of the vehicular collision was the negligence of
Limbaga in parking the prime mover on the national
highway without an early warning device on the vehicle.
The CA reversed the RTC decision, holding that the
proximate cause of the collision was the negligence of
Ortiz in not yielding to the right of way of the passenger
bus.
Article 2176 of the Civil Code provides that whoever by act
or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-
delict. To sustain a claim based on quasi-delict, the
following requisites must concur: (a) damage suffered by
plaintiff; (b) fault or negligence of defendant; and (c)
connection of cause and effect between the fault or
negligence of defendant and the damage incurred by
plaintiff.16
There is no dispute that the Nissan van suffered damage.
That is borne by the records and conceded by the parties.
The outstanding issues are negligence and proximate
cause. Tersely put, the twin issues are: (a) whether or not
prime mover driver Limbaga was negligent in parking the
vehicle; and (b) whether or not his negligence was the
proximate cause of the damage to the Nissan van.
Limbaga was negligent in parking the prime mover on the
national highway; he failed to prevent or minimize the risk
to oncoming motorists.
Negligence is defined as the failure to observe for the
protection of the interests of another person that degree of
care, precaution, and vigilance which the circumstances
justly demand, whereby such other person suffers
injury.17 The Supreme Court stated the test of negligence
in the landmark case Picart v. Smith18 as follows:
The test by which to determine the existence or negligence
in a particular case may be stated as follows: Did the
defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinary person
would have used in the same situation? If not, then he is
guilty of negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary
conduct of the discreet paterfamilias of the Roman law.
The existence of negligence in a given case is not
determined by reference to the personal judgment of the
actor in the situation before him. The law considers what
would be reckless, blameworthy, or negligent in the man of
ordinary intelligence and prudence and determines liability
by that. (Underscoring supplied)cralawlibrary
The test of negligence is objective. We measure the act or
omission of the tortfeasor with that of an ordinary
reasonable person in the same situation. The test, as
applied to this case, is whether Limbaga, in parking the
prime mover, used that reasonable care and caution which
an ordinary reasonable person would have used in the
same situation.
We find that Limbaga was utterly negligent in parking the
prime mover askew on the right side of the national
highway. The vehicle occupied a substantial portion of the
national road on the lane of the passenger bus. It was
parked at the shoulder of the road with its left wheels still
on the cemented highway and the right wheels on the
sand and gravel shoulder of the highway. It is common
sense that the skewed parking of the prime mover on the
national road posed a serious risk to oncoming motorists.
It was incumbent upon Limbaga to take some measures to
prevent that risk, or at least minimize it.
We are unable to agree with the CA conclusion "it would
have been dangerous and quite impossible to further park
the prime mover on the graveled shoulder of the road
because the prime mover may tilt and the bulldozer may
fall off." The photographs taken after the incident show
that it could have been possible for Limbaga to park the
prime mover completely on the shoulder of the national
road without risk to oncoming motorists. We agree with the
RTC observation on this point, thus:
x x x The statement of Limbaga that he could not park the
prime mover and trailer deeper into the sand and gravel
shoulder of the highway to his right because there were
banana plants is contradicted by the picture marked
Exhibit "F." The picture shows that there was ample space
on the shoulder. If defendant Limbaga was careful and
prudent enough, he should have the prime mover and
trailer traveled more distance forward so that the bodies of
the prime mover and trailer would be far more on the
shoulder rather than on the cemented highway when they
were parked. Although at the time of the incident, it was
about 4:45 in the morning and it was drizzling but there is
showing that it was pitch dark that whoever travels along
the highway must be extra careful. If the Joana Paula bus
swerved to the lane on which the "Nissan" ice van was
properly traveling, as prescribed by Traffic Rules and
Regulations, it is because the driver of the bus did not see
at a distance the parked prime mover and trailer on the
bus' proper lane because there was no warning signs of
danger of any kind that can be seen from a distance.19
Limbaga also failed to take proper steps to minimize the
risk posed by the improperly parked prime mover. He did
not immediately inform his employer, private respondent
Liberty Forest, Inc., that the prime mover suffered two tire
blowouts and that he could not have them fixed because
he had only one spare tire. Instead of calling for help,
Limbaga took it upon himself to simply place banana
leaves on the front and rear of the prime mover to serve as
warning to oncoming motorists. Worse, Limbaga slept on
the prime mover instead of standing guard beside the
vehicle. By his own account, Limbaga was sleeping on the
prime mover at the time of the collision and that he was
only awakened by the impact of the Nissan van and the
passenger bus on the prime mover.20
Limbaga also admitted on cross-examination that it was
his first time to drive the prime mover with trailer loaded
with a D-8 caterpillar bulldozer.21 We find that private
respondent Liberty Forest, Inc. was utterly negligent in
allowing a novice driver, like Limbaga, to operate a
vehicle, such as a truck loaded with a bulldozer, which
required highly specialized driving skills. Respondent
employer clearly failed to properly supervise Limbaga in
driving the prime mover.
The RTC noted that private respondent Liberty Forest, Inc.
also failed to keep the prime mover in proper condition at
the time of the collision. The prime mover had worn out
tires. It was only equipped with one spare tire. It was for
this reason that Limbaga was unable to change the two
blown out tires because he had only one spare. The
bulldozer was not even loaded properly on the prime
mover, which caused the tire blowouts.
All told, We agree with the RTC that private respondent
Limbaga was negligent in parking the prime mover on the
national highway. Private respondent Liberty Forest, Inc.
was also negligent in failing to supervise Limbaga and in
ensuring that the prime mover was in proper condition.
The case of Baliwag Transit, Inc. v. Court of Appeals is
inapplicable; Limbaga did not put lighted kerosene tin cans
on the front and rear of the prime mover.
Anent the absence of an early warning device on the prime
mover, the CA erred in accepting the bare testimony of
Limbaga that he placed kerosene lighted tin cans on the
front and rear of the prime mover. The evidence on
records belies such claim. The CA reliance on Baliwag
Transit, Inc. v. Court of Appeals22 as authority for the
proposition that kerosene lighted tin cans may act as
substitute early warning device is misplaced.
First, the traffic incident report did not mention any lighted
tin cans on the prime mover or within the immediate
vicinity of the accident. Only banana leaves were placed
on the prime mover. The report reads:
VIII - RESULT OF INVESTIGATION: A Joana Pa_ula Bus,
with Body No. 7788, with Plate No. LVA-137, driven by
one Temestocles Relova v. Antero, of legal age, married
and a resident of San Roque, Kitcharao, Agusan del Norte,
while traveling along the National Highway, coming from
the east going to the west direction, as it moves along the
way and upon reaching Brgy. Sumilihon, Butuan City to
evade bumping to the approaching Nissan Ice Van with
Plate No. PNT-247, driven by one Rogelio Cortez y
Ceneza. As the result, the Joana Paula Bus accidentally
busideswept (sic) to the parked Prime Mover with Trailer
loaded with Bulldozer without early warning device,
instead placing only dry banana leaves three (3) meters at
the rear portion of the Trailer, while failure to place at the
front portion, and the said vehicle occupied the whole lane.
As the result, the Joana Paula Bus hit to the left edge
blade of the Bulldozer. Thus, causing the said bus swept
to the narrow shouldering, removing the rear four (4)
wheels including the differential and injuring the above-
stated twelve (12) passengers and damaged to the right
side fender above the rear wheel. Thus, causing damage
on it. While the Nissan Ice Van in evading, accidentally
swerved to the left lane and accidentally bumped to the
front bumper of the parked Prime Mover with Trailer
loaded with Bulldozer. Thus, causing heavy damage to
said Nissan Ice Van including the cargoes of the said
van.23
Second, SPO4 Pame, who investigated the collision,
testified24 that only banana leaves were placed on the
front and rear of the prime mover. He did not see any
lighted tin cans in the immediate vicinity of the collision.
Third, the claim of Limbaga that he placed lighted tin cans
on the front and rear of the prime mover belatedly surfaced
only during his direct examination. No allegation to this
effect was made by private respondents in their Answer to
the complaint for damages. Petitioner's counsel promptly
objected to the testimony of Limbaga, thus:
ATTY. ROSALES:
Q. Now you mentioned about placing some word signs in
front and at the rear of the prime mover with trailer, will you
please describe to us what this word signs are?cralawred
A. We placed a piece of cloth on tin cans and filled them
with crude oil. And these tin cans were lighted and they
are like torches. These two lights or torches were placed in
front and at the rear side of the prime mover with trailer.
After each torch, we placed banana trunk. The banana
trunk is placed between the two (2) torches and the prime
mover, both on the rear and on the front portion of the
prime mover.
Q. How far was the lighted tin cans with wick placed in
front of the prime mover.
ATTY. ASIS:
At this point, we will be objecting to questions particularly
referring to the alleged tin cans as some of the warning-
sign devices, considering that there is no allegation to that
effect in the answer of the defendants. The answer was
just limited to the numbers 4 & 5 of the answer. And,
therefore, if we follow the rule of the binding effect of an
allegation in the complaint, then the party will not be
allowed to introduce evidence to attack jointly or rather the
same, paragraph 5 states, warning device consisting of 3
banana trunks, banana items and leaves were filed. He
can be cross-examined in the point, Your Honor.
COURT:
Q. Put that on record that as far as this tin cans are
concerned, the plaintiffs are interposing continuing
objections. But the Court will allow the question.25
We thus agree with the RTC that Limbaga did not place
lighted tin cans on the front and rear of the prime mover.
We give more credence to the traffic incident report and
the testimony of SPO4 Pame that only banana leaves
were placed on the vehicle. Baliwag Transit, Inc. v. Court
of Appeals26 thus finds no application to the case at bar.
The skewed parking of the prime mover was the proximate
cause of the collision.
Proximate cause is defined as that cause, which, in natural
and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which
the result would not have occurred. More
comprehensively, proximate cause is that cause acting
first and producing the injury, either immediately or by
setting other events in motion, all constituting a natural and
continuous chain of events, each having a close causal
connection with its immediate predecessor, the final event
in the chain immediately effecting the injury as natural and
probable result of the cause which first acted, under such
circumstances that the person responsible for the first
event should, as an ordinarily prudent and intelligent
person, have reasonable ground to expect at the moment
of his act or default that an injury to some person might
probably result therefrom.27
There is no exact mathematical formula to determine
proximate cause. It is based upon mixed considerations of
logic, common sense, policy and precedent.28 Plaintiff
must, however, establish a sufficient link between the act
or omission and the damage or injury. That link must not
be remote or far-fetched; otherwise, no liability will attach.
The damage or injury must be a natural and probable
result of the act or omission. In the precedent-setting Vda.
de Bataclan v. Medina,29 this Court discussed the
necessary link that must be established between the act or
omission and the damage or injury, viz.:
It may be that ordinarily, when a passenger bus overturns,
and pins down a passenger, merely causing him physical
injuries, if through some event, unexpected and
extraordinary, the overturned bus is set on fire, say, by
lightning, or if some highwaymen after looting the vehicle
sets it on fire, and the passenger is burned to death, one
might still contend that the proximate cause of his death
was the fire and not the overturning of the vehicle. But in
the present case and under the circumstances obtaining in
the same, we do not hesitate to hold that the proximate
cause of the death of Bataclan was the overturning of the
bus, this for the reason that when the vehicle turned not
only on its side but completely on its back, the leaking of
the gasoline from the tank was not unnatural or
unexpected; that the coming of the men with a lighted
torch was in response to the call for help, made not only by
the passengers, but most probably, by the driver and the
conductor themselves, and that because it was very dark
(about 2:30 in the morning), the rescuers had to carry a
light with them; and coming as they did from a rural area
where lanterns and flashlights were not available, they had
to use a torch, the most handy and available; and what
was more natural than that said rescuers should innocently
approach the overturned vehicle to extend the aid and
effect the rescue requested from them. In other words, the
coming of the men with the torch was to be expected and
was natural sequence of the overturning of the bus, the
trapping of some of its passengers' bus, the trapping of
some of its passengers and the call for outside help.
The ruling in Bataclan has been repeatedly cited in
subsequent cases as authority for the proposition that the
damage or injury must be a natural or probable result of
the act or omission. Here, We agree with the RTC that the
damage caused to the Nissan van was a natural and
probable result of the improper parking of the prime mover
with trailer. As discussed, the skewed parking of the prime
mover posed a serious risk to oncoming motorists.
Limbaga failed to prevent or minimize that risk. The
skewed parking of the prime mover triggered the series of
events that led to the collision, particularly the swerving of
the passenger bus and the Nissan van.
Private respondents Liberty Forest, Inc. and Limbaga are
liable for all damages that resulted from the skewed
parking of the prime mover. Their liability includes those
damages resulting from precautionary measures taken by
other motorist in trying to avoid collision with the parked
prime mover. As We see it, the passenger bus swerved to
the right, onto the lane of the Nissan van, to avoid colliding
with the improperly parked prime mover. The driver of the
Nissan van, Ortiz, reacted swiftly by swerving to the left,
onto the lane of the passenger bus, hitting the parked
prime mover. Ortiz obviously would not have swerved if
not for the passenger bus abruptly occupying his van's
lane. The passenger bus, in turn, would not have swerved
to the lane of the Nissan van if not for the prime mover
improperly parked on its lane. The skewed parking is the
proximate cause of the damage to the Nissan van.
In Phoenix Construction, Inc. v. Intermediate Appellate
Court,30 this Court held that a similar vehicular collision
was caused by the skewed parking of a dump truck on the
national road, thus:
The conclusion we draw from the factual circumstances
outlined above is that private respondent Dionisio was
negligent the night of the accident. He was hurrying home
that night and driving faster than he should have been.
Worse, he extinguished his headlights at or near the
intersection of General Lacuna and General Santos
Streets and thus did not see the dump truck that was
parked askew and sticking out onto the road lane.
Nonetheless, we agree with the Court of First Instance and
the Intermediate Appellate Court that the legal and
proximate cause of the accident and of Dionisio's injuries
was the wrongful or negligent manner in which the dump
truck was parked - in other words, the negligence of
petitioner Carbonel. That there was a reasonable
relationship between petitioner Carbonel's negligence on
the one hand and the accident and respondent's injuries
on the other hand, is quite clear. Put in a slightly different
manner, the collision of Dionisio's car with the dump truck
was a natural and foreseeable consequence of the truck
driver's negligence.
x x x
We believe, secondly, that the truck driver's negligence far
from being a "passive and static condition" was rather an
indispensable and efficient cause. The collision between
the dump truck and the private respondent's car would in
all probability not have occurred had the dump truck not
been parked askew without any warning lights or reflector
devices. The improper parking of the dump truck created
an unreasonable risk of injury for anyone driving down
General Lacuna Street and for having so created this risk,
the truck driver must be held responsible. In our view,
Dionisio's negligence, although later in point of time than
the truck driver's negligence and, therefore, closer to the
accident, was not an efficient intervening or independent
cause. What the Petitioner describes as an "intervening
cause" was no more than a foreseeable consequence of
the risk created by the negligent manner in which the truck
driver had parked the dump truck. In other words, the
petitioner truck driver owed a duty to private respondent
Dionisio and others similarly situated not to impose upon
them the very risk the truck driver had created. Dionisio's
negligence was not of an independent and overpowering
nature as to cut, as it were, the chain of causation in fact
between the improper parking of the dump truck and the
accident, nor to sever the juris vinculum of liability. x x x
(Underscoring supplied)cralawlibrary
We cannot rule on the proportionate or contributory liability
of the passenger bus, if any, because it was not a party to
the case; joint tortfeasors are solidarily liable.
The CA also faults the passenger bus for the vehicular
collision. The appellate court noted that the passenger bus
was "aware" of the presence of the prime mover on its
lane, but it still proceeded to occupy the lane of the Nissan
van. The passenger bus also miscalculated its distance
from the prime mover when it hit the vehicle.
We cannot definitively rule on the proportionate or
contributory liability of the Joana Paula passenger bus vis -
à-vis the prime mover because it was not a party to the
complaint for damages. Due process dictates that the
passenger bus must be given an opportunity to present its
own version of events before it can be held liable. Any
contributory or proportionate liability of the passenger bus
must be litigated in a separate action, barring any defense
of prescription or laches. Insofar as petitioner is
concerned, the proximate cause of the collision was the
improper parking of the prime mover. It was the improper
parking of the prime mover which set in motion the series
of events that led to the vehicular collision.
Even granting that the passenger bus was at fault, it's fault
will not necessarily absolve private respondents from
liability. If at fault, the passenger bus will be a joint
tortfeasor along with private respondents. The liability of
joint tortfeasors is joint and solidary. This means that
petitioner may hold either of them liable for damages from
the collision. In Philippine National Construction
Corporation v. Court of Appeals,31 this Court held:
According to the great weight of authority, where the
concurrent or successive negligent acts or omission of two
or more persons, although acting independently of each
other, are, in combination, the direct and proximate cause
of a single injury to a third person and it is impossible to
determine in what proportion each contributed to the injury,
either is responsible for the whole injury, even though his
act alone might not have caused the entire injury, or the
same damage might have resulted from the acts of the
other tort-feasor x x x.
In Far Eastern Shipping Company v. Court of Appeals, the
Court declared that the liability of joint tortfeasors is joint
and solidary, to wit:
It may be said, as a general rule, that negligence in order
to render a person liable need not be the sole cause of an
injury. It is sufficient that his negligence, concurring with
one or more efficient causes other than plaintiff's, is the
proximate cause of the injury. Accordingly, where several
causes combine to produce injuries, a person is not
relieved from liability because he is responsible for only
one of them, it being sufficient that the negligence of the
person charged with injury is an efficient cause without
which the injury would not have resulted to as great an
extent, and that such cause is not attributable to the
person injured. It is no defense to one of the concurrent
tortfeasors that the injury would not have resulted from his
negligence alone, without the negligence or wrongful acts
of the other concurrent tortfeasors. Where several causes
producing an injury are concurrent and each is an efficient
cause without which the injury would not have happened,
the injury may be attributed to all or any of the causes and
recovery may be had against any or all of the responsible
persons although under the circumstances of the case, it
may appear that one of them was more culpable, and that
the duty owed by them to the injured person was not the
same. No actor's negligence ceases to be a proximate
cause merely because it does not exceed the negligence
of other actors. Each wrongdoer is responsible for the
entire result and is liable as though his acts were the sole
cause of the injury.
There is no contribution between joint tortfeasors whose
liability is solidary since both of them are liable for the total
damage. Where the concurrent or successive negligent
acts or omissions of two or more persons, although acting
independently, are in combination with the direct and
proximate cause of a single injury to a third person, it is
impossible to determine in what proportion each
contributed to the injury and either of them is responsible
for the whole injury. Where their concurring negligence
resulted in injury or damage to a third party, they become
joint tortfeasors and are solidarily liable for the resulting
damage under Article 2194 of the Civil Code.
(Underscoring supplied)cralawlibrary
All told, all the elements of quasi delict have been proven
by clear and convincing evidence. The CA erred in
absolving private respondents from liability for the
vehicular collision.
Final Note
It is lamentable that the vehicular collision in this case
could have been easily avoided by following basic traffic
rules and regulations and road safety standards. In
hindsight, private respondent Limbaga could have
prevented the three-way vehicular collision if he had
properly parked the prime mover on the shoulder of the
national road. The improper parking of vehicles, most
especially along the national highways, poses a serious
and unnecessary risk to the lives and limbs of other
motorists and passengers. Drivers owe a duty of care to
follow basic traffic rules and regulations and to observe
road safety standards. They owe that duty not only for their
own safety, but also for that of other motorists. We can
prevent most vehicular accidents by simply following basic
traffic rules and regulations.
We also note a failure of implementation of basic safety
standards, particularly the law on early warning devices.
This applies even more to trucks and big vehicles, which
are prone to mechanical breakdown on the national
highway. The law, as crafted, requires vehicles to be
equipped with triangular reflectorized plates.32 Vehicles
without the required early warning devices are ineligible for
registration.33 Vehicle owners may also be arrested and
fined for non-compliance with the law.34
The Land Transportation Office (LTO) owes a duty to the
public to ensure that all vehicles on the road meet basic
and minimum safety features, including that of early
warning devices. It is most unfortunate that We still see
dilapidated and rundown vehicles on the road with
substandard safety features. These vehicles not only pose 28 Mercury Drug v. Baking, G.R. No. 156037, May 25,
a hazard to the safety of their occupants but that of other 9 Id. at 107-108. 2007.
motorists. The prime mover truck in this case should not
have been granted registration because it failed to comply 10 Id. at 101-107. 29 Supra.
with the minimum safety features required for vehicles on
the road. 11 Id. at 50. 30 G.R. No. L-65295, March 10, 1987, 148 SCRA 353,
365-367.
It is, indeed, time for traffic enforcement agencies and the 12 Id. at 46-48.
LTO to strictly enforce all pertinent laws and regulations 31 G.R. No. 159270, August 22, 2005, 467 SCRA 569,
within their mandate. 13 G.R. No. 116110, May 15, 1996, 256 SCRA 746. 582-583.

WHEREFORE, the petition is GRANTED. The Court of
Appeals decision dated August 28, 2003 is hereby SET
ASIDE. The RTC decision dated August 7, 2001 is
REINSTATED IN FULL.
SO ORDERED.
14 Rollo, pp. 48-50. 32 Rollo, pp. 29-30. Letter of Instruction No. 229.
15 Id. at 26, 29. 33 Id. at 32-34. Memorandum Circular Nos. 92-146.
16 Philippine Bank of Commerce v. Court of Appeals, G.R. 34 Id. at 31-32. LTO Memorandum dated October 16,
No. 97626, March 14, 1997, 269 SCRA 695, 702-703. 1995.

Ynares-Santiago, J., Chairperson, Austria-Martinez, 17 Corliss v. Manila Railroad Company, G.R. No. L-21291,
Corona *, Nachura, JJ., concur. March 28, 1969, 27 SCRA 674, 680.

Endnotes: 18 37 Phil. 809, 813 (1918).

* Vice Associate Justice Minita V. Chico-Nazario. Justice 19 Rollo, p. 102.

Nazario is on official leave per Special Order No. 484
dated January 11, 2008. 20 Id. at 90-91.

1 Rollo, pp. 39-50-A. 21 Id. at 93.

2 Id. at 68-108. 22 Supra note 13.

3 Id. at 72-73. 23 Id. at 275.

4 Id. at 89-90. 24 Id. at 83.

5 Id. at 90. 25 Id. at 262-263.

6 Id. at 72-74. 26 Supra note 13.

7 Id. at 45-46. 27 Vda. de Bataclan v. Medina, 102 Phil. 181 (1957), citing
38 Am. Jur. 695-696.
8 Id. at 52-57.
G.R. No. 176434 June 25, 2008
BANK OF THE PHILIPPINE ISLANDS, petitioner,
vs.
LIFETIME MARKETING CORPORATION, respondent.
DECISION
TINGA, J.:
The Bank of the Philippine Islands (BPI) seeks the reversal
of the Decision1 of the Court of Appeals dated 31 July
2006 in CA-G.R. CV No. 62769 which ordered it to pay
Lifetime Marketing Corporation (LMC) actual damages in
the amount of P2,075,695.50 on account of its gross
negligence in handling LMC's account.
The following facts, quoted from the decision of the Court
of Appeals, are undisputed:
On October 22, 1981, Lifetime Marketing Corporation
(LMC, for brevity), opened a current account with the Bank
of the Philippine Islands (BPI, for brevity), Greenhills-Edsa
branch, denominated as Account No. 3101-0680-63. In
this account, the "sales agents" of LMC would have to
deposit their collections or payments to the latter. As a
result, LMC and BPI, made a special arrangement that the
former's agents will accomplish three (3) copies of the
deposit slips, the third copy to be retained and held by the
teller until LMC's authorized representatives, Mrs. Virginia
Mongon and Mrs. Violeta Ancajas, shall retrieve them on
the following banking day.
Sometime in 1986, LMC availed of the BPI's inter-branch
banking network services in Metro Manila, whereby the
former's agents could make [a] deposit to any BPI branch
in Metro Manila under the same account. Under this
system, BPI's bank tellers were no longer obliged to retain
the extra copy of the deposit slips instead, they will rely on
the machine-validated deposit slip, to be submitted by
LMC's agents. For its part, BPI would send to LMC a
monthly bank statement relating to the subject account.
This practice was observed and complied with by the
parties.
As a business practice, the registered sales agents or the
Lifetime Educational Consultants of LMC, can get the
books from the latter on consignment basis, then they
would go directly to their clients to sell. These agents or
Lifetime Educational Consultants would then pay to LMC,
seven (7) days after they pick up all the books to be sold.
Since LMC have several agents around the Philippines, it
required to remit their payments through BPI, where LMC
maintained its current account. It has been LMC's practice
to require its agents to present a validated deposit slip
and, on that basis, LMC would issue to the latter an
acknowledgement receipt.
Alice Laurel, is one of LMC's "Educational Consultants" or
agents. On various dates covering the period from May,
[sic] 1991 up to August, 1992, Alice Laurel deposited
checks to LMC's subject account at different branches of
BPI, specifically: at the Harrison/Buendia branch-8 checks;
at Arrangue branch-4 checks; at Araneta branch-1 check;
at Binondo branch-3 checks; at Ermita branch-5 checks; at
Cubao Shopping branch-1 check; at Escolta branch-4
checks; at the Malate branch-2 checks; at Taft Avenue
branch-2 checks; at Paseo de Roxas branch-1 check; at J.
Ruiz, San Juan branch, at West Avenue and
Commonwealth Quezon City branch- 2 checks; and at Vito
Cruz branch-2 checks.
Each check thus deposited were retrieved by Alice Laurel
after the deposit slips were machine-validated, except the
following thirteen (13) checks, which bore no machine
validation, to wit: CBC Check No. 484004, RCBC Check
No. 419818, CBC Check No. 484042, FEBTC Check No.
171857, RCBC Check No. 419847, CBC Check No.
484053, MBTC Check No. 080726, CBC Check No.
484062, PBC Check No. 158076, CBC Check No. 484027,
CBC Check No. 484017, CBC Check No. 484023 and
CBC Check No. 218190.
A verification with BPI by LMC showed that Alice Laurel
made check deposits with the named BPI branches and,
after the check deposit slips were machine-validated,
requested the teller to reverse the transactions. Based on
general banking practices, however, the cancellation of
deposit or payment transactions upon request by any
depositor or payor, requires that all copies of the deposit
slips must be retrieved or surrendered to the bank. This
practice, in effect, cancels the deposit or payment
transaction, thus, it leaves no evidence for any subsequent
claim or misrepresentation made by any innocent third
person. Notwithstanding this, the verbal requests of Alice
Laurel and her husband to reverse the deposits even after
the deposit slips were already received and consummated
were accommodated by BPI tellers.
Alice Laurel presented the machine-validated deposit slips
to LMC which, on the strength thereof, considered her
account paid. LMC even granted her certain privileges or
prizes based on the deposits she made.
The total aggregate amount covered by Alice Laurel's
deposit slips was Two Million Seven Hundred Sixty Seven
Thousand, Five Hundred Ninety Four Pesos
(P2,767,594.00) and, for which, LMC paid Laurel the total
sum of Five Hundred Sixty Thousand Seven Hundred
Twenty Six Pesos (P560,726.00) by way of "sales discount
and promo prizes."
The above fraudulent transactions of Alice Laurel and her
husband was made possible through BPI teller's failure to
retrieve the duplicate original copies of the deposit slips
from the former, every time they ask for cancellation or
reversal of the deposit or payment transaction.
Upon discovery of this fraud in early August 1992, LMC
made queries from the BPI branches involved. In reply to
said queries, BPI branch managers formally admitted that
they cancelled, without the permission of or due notice to
LMC, the deposit transactions made by Alice and her
husband, and based only upon the latter's verbal request
or representation.

Thereafter, LMC immediately instituted a criminal action
for Estafa against Alice Laurel and her husband Thomas
Limoanco, before the Regional Trial Court of Makati,
Branch 65, docketed as Criminal Case No. 93-7970 to 71,
entitled People of the Philippines v. Thomas Limoanco and
Alice Laurel. This case for estafa, however, was archived
because summons could not be served upon the spouses
as they have absconded. Thus, the BPI's apparent
reluctance to admit liability and settle LMC's claim for
damages, and a hopeless case of recovery from Alice
Laurel and her husband, has left LMC, with no option but
to recover damages from BPI.
On July 24, 1995, LMC, through its representative, Miss
Consolacion C. Rogacion, the President of the company,
filed a Complaint for Damages against BPI, docketed as
Civil Case No. 95-1106, and was raffled to Regional Trial
Court of Makati City, Branch 141.
After trial on the merits, the court a quo rendered a
Decision in favor of LMC. The dispositive portion of which
reads, as follows:
WHEREFORE, decision is hereby rendered ordering
defendant bank to pay plaintiff actual damages equitably
reduced to one (1) million pesos plus attorney's fees of
P100,000.00.
No pronouncement as to costs.
SO ORDERED.2
Only BPI filed an appeal. The Court of Appeals affirmed
the decision of the trial court but increased the award of
actual damages to P2,075,695.50 and deleted the award
of P100,000.00 as attorney's fees.3 Citing public interest,
the appellate court denied reconsideration in a Resolution4
dated 30 January 2007.
In this Petition for Review5 dated 19 March 2007, BPI
insists that LMC should have presented evidence to prove
not only the amount of the checks that were deposited and
subsequently reversed, but also the actual delivery of the
books and the payment of "sales and promo prizes" to
Alice Laurel. Failing this, there was allegedly no basis for
the award of actual damages. Moreover, the actual
damages should not have been increased because the
decision of the trial court became conclusive as regards
LMC when it did not appeal the said decision.
BPI further avers that LMC's negligence in considering the
machine-validated check deposit slips as evidence of Alice
Laurel's payment was the proximate cause of its own loss.
Allegedly, by allowing its agents to make deposits with
other BPI branches, LMC violated its own special
arrangement with BPI's Greenhills-EDSA branch for the
latter to hold on to an extra copy of the deposit slip for pick
up by LMC's authorized representatives. BPI points out
that the deposits were in check and not in cash. As such,
LMC should have borne in mind that the machine
validation in the deposit slips is still subject to the
sufficiency of the funds in the drawers' account.
Furthermore, LMC allegedly ignored the express notice
indicated in its monthly bank statements and consequently
failed to check the accuracy of the transactions reflected
therein.
In its Manifestation of Compliance by Respondent on the
Order Dated 20 June 2007 Received on 29 July 2007 to
Submit Comment,6 dated 9 August 2007, LMC insists that
it is indeed entitled to the actual damages awarded to it by
the appellate court.
BPI filed a Reply7 dated 15 January 2008, in reiteration of
its submissions.
We have repeatedly emphasized that the banking industry
is impressed with public interest. Of paramount importance
thereto is the trust and confidence of the public in general.
Accordingly, the highest degree of diligence is expected,
and high standards of integrity and performance are
required of it. By the nature of its functions, a bank is
under obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary
nature of its relationship with them.8 The fiduciary nature
of banking, previously imposed by case law, is now
enshrined in Republic Act No. 8791 or the General
Banking Law of 2000. Section 2 thereof specifically says
that the state recognizes the fiduciary nature of banking
that requires high standards of integrity and performance.9
Whether BPI observed the highest degree of care in
handling LMC's account is the subject of the inquiry in this
case.
LMC sought recovery from BPI on a cause of action based
on tort. Article 2176 of the Civil Code provides, "Whoever
by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done.
Such fault or negligence if there is no pre-existing
contractual relation between the parties, is called a quasi-
delict and is governed by the provisions of this Chapter."
There are three elements of quasi-delict: (a) fault or
negligence of the defendant, or some other person for
whose acts he must respond; (b) damages suffered by the
plaintiff; and (c) the connection of cause and effect
between the fault or negligence of the defendant and the
damages incurred by the plaintiff.10
In this case, both the trial court and the Court of Appeals
found that the reversal of the transactions in question was
unilaterally undertaken by BPI's tellers without following
normal banking procedure which requires them to ensure
that all copies of the deposit slips are surrendered by the
depositor. The machine-validated deposit slips do not
show that the transactions have been cancelled, leading
LMC to rely on these slips and to consider Alice Laurel's
account as already paid.
Negligence is the omission to do something which a
reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do,
or the doing of something which a prudent and reasonable
man would not do.11 Negligence in this case lies in the
tellers' disregard of the validation procedures in place and
BPI's utter failure to supervise its employees. Notably,
BPI's managers admitted in several correspondences with
LMC that the deposit transactions were cancelled without
LMC's knowledge and consent and based only upon the
request of Alice Laurel and her husband.12
It is well to reiterate that the degree of diligence required of
banks is more than that of a reasonable man or a good
father of a family. In view of the fiduciary nature of their
relationship with their depositors, banks are duty-bound to
treat the accounts of their clients with the highest degree
of care.13
BPI cannot escape liability because of LMC's failure to
scrutinize the monthly statements sent to it by the bank.
This omission does not change the fact that were it not for
the wanton and reckless negligence of BPI's tellers in
failing to require the surrender of the machine-validated
deposit slips before reversing the deposit transactions, the
loss would not have occurred. BPI's negligence is
undoubtedly the proximate cause of the loss. Proximate
cause is that cause which, in a natural and continuous
sequence, unbroken by any efficient intervening cause,
produces the injury, and without which the result would not
have occurred.14
It is also true, however, that LMC should have been more
vigilant in managing and overseeing its own financial
affairs. The damages awarded to it were correctly reduced
on account of its own contributory negligence in
accordance with Article 1172 of the Civil Code.15
Parenthetically, we find no merit in BPI's allegation that
LMC should have presented evidence of delivery of the
books and payment of sales and promo prizes to Alice
Laurel. The evidence presented by LMC in the form of
BPI's own admission that the deposit transactions were
reversed at the instance of Alice Laurel and her husband,
coupled with the machine-validated deposit slips16 which
were supposed to have been deposited to LMC's account
but were cancelled without its knowledge and consent,
sufficiently form the bases for the actual damages claimed
because they are the very same documents relied upon by
LMC in considering Alice Laurel's account paid and in
granting her monetary privileges and prizes.
Be that as it may, we find the appellate court's decision
increasing the award of actual damages in favor of LMC
improper since the latter did not appeal from the decision
of the trial court. It is well-settled that a party who does not
appeal from the decision may not obtain any affirmative
relief from the appellate court other than what he has
obtained from the lower court whose decision is brought
up on appeal. The exceptions to this rule, such as where
there are (1) errors affecting the lower court's jurisdiction
over the subject matter, (2) plain errors not specified, and
(3) clerical errors, do not apply in this case.17
WHEREFORE, the Decision of the Court of Appeals in
CA-G.R. CV No. 62769 dated 31 July 2006 and its
Resolution dated January 30, 2007 are AFFIRMED with
the MODIFICATION that the Bank of the Philippine Islands
is ordered to pay actual damages to Lifetime
Marketing Corporation in the amount of One Million Pesos
(P1,000,000.00). No pronouncement as to costs.
SO ORDERED.
Footnotes
1 Rollo, pp. 7-21; penned by Associate Justice Normandie
B. Pizarro and concurred in by Associate Justices Josefina
Guevara-Salonga and Aurora Santiago-Lagman.
2 Id. at 8-13.
3 Id. at 20-21.
4 Id. at 22-23.
5 Id. at 28-49.
6 Id. at 84-88.
7 Temporary Rollo.
8 Citibank, N.A. v. Cabamongan, G.R. No. 146918, 2 May
2006, 488 SCRA 517, 531; Prudential Bank v. Lim, G.R.
No. 136371, 11 November 2005, 474 SCRA 485, 495.
9 Associated Bank v. Tan, G.R. No. 156940, 14 December
2004, 446 SCRA 282, 292.
10 Philippine Bank of Commerce v. CA, 336 Phil. 667, 675
(1997).
11 Philippine Bank of Commerce v. CA, 336 Phil. 667, 676
(1997).
12 Records, pp. 28-36.
13 Supra, note 10.
14 Bank of the Philippine Islands v. Casa Montessori
Internationale, G.R. No. 149507, 28 May 2004, 430 SCRA
261, 287.
15 The Consolidated Bank & Trust Corporation v. Court of
Appeals, 457 Phil. 688, 713 (2003).
16 Records, pp. 15-27.
17 Real v. Belo, G.R. No. 146224, 26 January 2007, 513
SCRA 111, 126-127; Santos v. Court of Appeals, G.R. No.
100963, 6 April 1993, 221 SCRA 42, 46.
G.R. No. 160795 June 27, 2008
CORINTHIAN GARDENS ASSOCIATION, INC., petitioner,
vs.
SPOUSES REYNALDO and MARIA LUISA TANJANGCO,
and SPOUSES FRANK and TERESITA CUASO,
respondent.
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari1
under Rule 45 of the Rules of Civil Procedure seeking the
reversal of the Court of Appeals (CA) Decision2 dated
January 31, 2003 in CA-G.R. CV No. 43217, which
reversed and set aside the Decision3 of the Regional Trial
Court (RTC) of Quezon City, dated March 30, 1993.
The Antecedents:
Respondents-spouses Reynaldo and Maria Luisa
Tanjangco (the Tanjangcos) own Lots 68 and 69 covered
by Transfer Certificates of Title (TCT) No. 2422454 and
2829615 respectively, located at Corinthian Gardens
Subdivision, Quezon City, which is managed by petitioner
Corinthian Gardens Association, Inc. (Corinthian). On the
other hand, respondents-spouses Frank and Teresita
Cuaso (the Cuasos) own Lot 65 which is adjacent to the
Tanjangcos’ lots.
Before the Cuasos constructed their house on Lot 65, a
relocation survey was necessary. As Geodetic Engineer
Democrito De Dios (Engr. De Dios), operating under the
business name D.M. De Dios Realty and Surveying,
conducted all the previous surveys for the subdivision's
developer, Corinthian referred Engr. De Dios to the
Cuasos. Before, during and after the construction of the
said house, Corinthian conducted periodic ocular
inspections in order to determine compliance with the
approved plans pursuant to the Manual of Rules and
Regulations of Corinthian.6 Unfortunately, after the
Cuasos constructed their house employing the services of
C.B. Paraz & Construction Co., Inc. (C.B. Paraz) as
builder, their perimeter fence encroached on the
Tanjangcos’ Lot 69 by 87 square meters.
No amicable settlement was reached between the parties.
Thus, the Tanjangcos demanded that the Cuasos
demolish the perimeter fence but the latter failed and
refused, prompting the Tanjangcos to file with the RTC a
suit against the Cuasos for Recovery of Possession with
Damages.7
Eventually, the Cuasos filed a Third-Party Complaint8
against Corinthian, C.B. Paraz and Engr. De Dios. The
Cuasos ascribed negligence to C.B. Paraz for its failure to
ascertain the proper specifications of their house, and to
Engr. De Dios for his failure to undertake an accurate
relocation survey, thereby, exposing them to litigation. The
Cuasos also faulted Corinthian for approving their
relocation survey and building plans without verifying their
accuracy and in making representations as to Engr. De
Dios' integrity and competence. The Cuasos alleged that
had Corinthian exercised diligence in performing its duty,
they would not have been involved in a boundary dispute
with the Tanjangcos. Thus, the Cuasos opined that
Corinthian should also be held answerable for any
damages that they might incur as a result of such
construction.
On March 30, 1993, the RTC rendered a Decision in favor
of the Tanjangcos. It ruled that the Cuasos’ perimeter wall
encroached on the land of the Tanjangos by 87 square
meters. It, however, ruled that the Cuasos were builders in
good faith, and gave the Tanjangcos the option to sell and
the Cuasos the option to buy the encroaching portion of
the land, at a price to be agreed upon by the parties within
sixty (60) days from receipt of the said Decision. In the
event that the Cuasos were unable and unwilling to
purchase the said portion, the perimeter wall should be
demolished at the latter’s expense. The RTC also ordered
the Cuasos to pay monthly rentals of P2,000.00
commencing from the time of the filing of the complaint.
The RTC likewise held that C.B. Paraz was grossly
negligent in not taking into account the correct boundaries
of Cuasos’ lot when it constructed the house. It, thus,
ordered C.B. Paraz to pay moral and exemplary damages
as well as attorney’s fees to the Tanjangcos and the
Cuasos. The third-party complaint against Corinthian and
Engr. De Dios, on the other hand, was dismissed for lack
of cause of action.
The Tanjangcos filed a Motion for Reconsideration9 of the
said RTC Decision which the RTC, however, denied in its
Order10 dated June 28, 1993.
Dissatisfied with the RTC ruling, the Tanjangcos, the
Cuasos, and C.B. Paraz all appealed to the CA.
On appeal, the CA reversed and set aside the RTC
Decision. It held that the Cuasos acted in bad faith in land-
grabbing the 87 square meter-portion of Lot 69 as of April
5, 1989. Correlatively, the CA allowed the Tanjangcos to
exercise the rights granted under Articles 449, 450, 451
and 549 of the New Civil Code, which include the right to
demand the demolition of the offending perimeter wall after
reimbursing the Cuasos the necessary expenses for the
preservation of the encroached area. The Cuasos were
ordered to pay monthly rentals of P10,000.00 for the use,
enjoyment and occupancy of the lot from 1989 up to the
time they vacate the property considering the location and
category of the same. They were, likewise, ordered to pay
the Tanjangcos P100,000.00, as moral damages,
P50,000.00 as exemplary damages, and P150,000.00 as
attorney’s fees. The CA also imposed six percent (6%)
interest per annum on all the awards. The Cuasos’ appeal
against the Tanjangcos, on the other hand, was dismissed
for lack of merit. On the third-party complaints, Corinthian,
C.B. Paraz and Engr. De Dios were all found negligent in
performing their respective duties and so they were
ordered to contribute five percent (5%) each, or a total of
fifteen percent (15%) to all judgment sums and amounts
that the Cuasos shall eventually pay under the decision,
also with interest of six percent (6%) per annum.
Only Corinthian filed a Motion for Reconsideration11 of the
CA Decision within the 15-day reglementary period. No
motion for reconsideration was filed by the Cuasos, C.B.
Paraz and/or Engr. De Dios.
About six (6) months later, or on August 12, 2003, the
Cuasos filed a Comment/Manifestation12 praying that they
be allowed to adopt Corinthian’s Motion for
Reconsideration.
In its Resolution13 dated November 14, 2003, the CA
denied Corinthian’s Motion for Reconsideration.
Hence, Corinthian filed the instant Petition for Review on
Certiorari assailing the CA Decision and Resolution, and
impleading the Cuasos as one of the respondents being
the third-party plaintiffs in the RTC.
This Court gave due course to Corinthian’s petition and
required the parties to submit their respective
memorandum.14 In compliance, the Cuasos submitted
their Memorandum15 and Supplement to Memorandum,16
which were both noted by this Court in its Resolutions
dated January 10, 200517 and February 2, 2005, 18
respectively.
In the meantime, the Tanjangcos moved for partial entry of
judgment of the CA Decision which was granted by the CA
in its Resolution19 dated May 26, 2006, directing the
issuance of an Entry of Judgment and a Certification that
its Decision dated January 31 2003 has become final and
executory with respect to the Cuasos, C.B. Paraz and
Engr. De Dios for their failure to file an appeal assailing the
said Decision before this Court.
The Tanjangcos then moved for the execution of the
judgment against the Cuasos, specifically the demolition of
the perimeter fence,20 which was also granted by the RTC
in its Order21 dated December 18, 2006.
Other than the filing of an Opposition22 and a Motion for
Reconsideration23 before the RTC, the Cuasos prayed for
the issuance of a temporary restraining order (TRO) and/or
preliminary injunction before this Court to enjoin the
demolition of the perimeter fence. They averred that the
premature demolition of the alleged encroaching perimeter
wall and other improvements will cause grave and
irreparable damage to them, because what is sought to be
demolished is part of their residence. They claimed that no
amount of money will compensate for the damage they
stand to suffer should any demolition subsequently prove
to be wrongful. They argued that before any execution can
be carried out, it is necessary to first determine whether or
not Corinthian was negligent in approving the building plan
and whether or not it acted in good faith in doing so. Such
determination, according to the Cuasos, will in turn
determine whether or not they were in good faith in
constructing the house.24
The Tanjangcos opposed the Cuasos' application for TRO.
They countered that the only pending matter with this
Court is the appeal by Corinthian; hence, the
implementation of the January 31, 2003 Decision of the
CA against the Cuasos will not preempt the outcome of the
said pending incidents. Also, any action taken by this
Court on Corinthian’s petition would not benefit the Cuasos
for they did not appeal the adverse decision against them.
Accordingly, they cannot obtain affirmative relief from this
Court by reason or on account of the appeal taken by
Corinthian. The appeal, they added, is personal to
Corinthian. Finally, they argued that the Cuasos are now
estopped from questioning the enforcement of the CA
Decision since they issued a manager’s check to pay the
money judgment.25
In this Court's Resolution dated July 18, 2007, we denied
the Cuasos' application for TRO and/or writ of preliminary
injunction for lack of merit.
The denial was based on sound legal principles. It is
axiomatic that to be entitled to the injunctive writ, one must
show that there exists a right to be protected which is
directly threatened by the act sought to be enjoined.
Furthermore, there must be a showing that the invasion of
the right is material and substantial, that the right of
complainant is clear and unmistakable, and that there is an
urgent and paramount necessity for the writ to issue in
order to prevent serious damage.26
In the Cuasos’ case, their right to injunctive relief had not
been clearly and unmistakably demonstrated. They failed
to show proof that there is material and substantial
invasion of their right to warrant the issuance of an
injunctive writ. Indeed, the enforcement of the writ of
execution, which would demolish the Cuasos’ perimeter
fence, is manifestly prejudicial to their interest. However,
they possess no clear and unmistakable legal right that
merits protection through the writ of preliminary
injunction.27 Their right to maintain the said fence had
been declared inferior to the Tanjangcos’ right to the
demolition of the fence, after the CA judgment had
become final and executory as to the Cuasos.
It bears stressing that the Cuasos failed to appeal the
ruling of the CA. This failure to contest the CA decision
before this Court was fatal to their cause. It had the effect
of an admission that they indeed acted in bad faith, as they
accepted the CA ruling. The decision of the CA, therefore,
became binding and final as to them.28 As a matter of
fact, the CA already issued a partial entry of judgment
against the Cuasos.
An injunction to stay a final and executory decision is
unavailing except only after a showing that facts and
circumstances exist which would render execution unjust
or inequitable, or that a change in the situation of the
parties occurred. Here, no such exception exists as shown
by the facts earlier narrated.29
While it is true that this Court noted the Memorandum and
Supplemental Memorandum filed by the Cuasos, such
notation was made only insofar as Corinthian made them
respondents in this petition. This Court cannot grant to the
Cuasos any affirmative relief as they did not file a petition
questioning the CA ruling. Consequently, the Decision of
the CA holding that the Cuasos acted in bad faith and that
the perimeter fence may now be demolished cannot be put
in issue by the Cuasos. It is a fundamental principle that a
party who does not appeal, or file a petition for certiorari, is
not entitled to any affirmative relief.30 An appellee who is
not an appellant may assign errors in his brief where his
purpose is to maintain the judgment, but he cannot seek
modification or reversal of the judgment or claim
affirmative relief unless he has also appealed.31 This
applies to C.B. Paraz and Engr. De Dios who likewise
failed to assail the aforementioned CA Decision.
With this matter put to rest, we now go to the main issues
raised by Corinthian, the sole petitioner in this case, to wit:
a) Whether or not there is legal basis for the Court of
Appeals to hold petitioner Corinthian Gardens Association,
Inc. liable to pay 5% of the judgment money to Sps.
Tanjangco on account of the encroachment made by Sps.
Cuaso[; and]
b) Whether or not the Court of Appeals has legal basis to
increase unilaterally and without proof the amount prayed
for in the Complaint, i.e., P2,000.00, as reasonable
compensation for the use and enjoyment of the portion of
the lot encroached upon, to P10,000.00.32
Corinthian claims that the approval of the building plan of
the Cuasos was not tainted with negligence as it did not
approve the survey relocation plan but merely the
architectural, structural and sanitary plans for Cuasos'
house; that the purpose of the said approval is not to
ensure that the house to be erected on a particular lot is
constructed within its boundaries but only to ensure
compliance with the Manual of Rules and Regulations; that
while Corinthian conducts actual site inspections, the
inspection and approval of the building plans are limited to
"table inspection" only; that the survey relocation plan was
never submitted for Corinthian's approval; that the
acceptance of the builder's bond did not make Corinthian
automatically liable for the encroachment and for
damages; and that Corinthian approved the building plan
with the good faith and due diligence required under the
circumstances. It, thus, concludes that it cannot be held
liable to pay five
percent (5%) of the money judgment to the Tanjangcos on
account of the encroachment made by the Cuasos.
Likewise, it finds no legal basis for the CA to unilaterally
increase the amount of the adjudged rent from P2,000.00
to P10,000.00 which was not prayed for by the Tanjangcos
in their complaint and in the absence of evidence adduced
by the parties.33
On the other hand, the Tanjangcos stand by the ruling of
the CA and opine that Corinthian was negligent in
approving the building plan of the Cuasos. They submit
that Corinthian's claim that it merely conducts "table
inspections" of buildings further bolsters their argument
that Corinthian was negligent in conveniently and
unilaterally restricting and limiting the coverage of its
approval, contrary to its own Manual of Rules and
Regulations; that the acceptance of a builder's bond does
not automatically make Corinthian liable but the same
affirms the fact that a homeowner can hold it liable for the
consequences of the approval of a building plan; and that
Corinthian, by regularly demanding and accepting
membership dues, must be wary of its responsibility to
protect the rights and interests of its members. Lastly, the
Tanjangcos contend that a court can take judicial notice of
the general increase in the rentals of real estate, as in this
case, where the CA considered the value of their lot in the
"posh-and-swank" Corinthian Gardens Subdivision and the
fact that they were deprived of it for almost two decades.
The Tanjangcos pray that this Court sustain the ruling of
the CA.34
The instant case is obviously one for tort, as governed by
Article 2176 of the Civil Code, which provides:
ART. 2176. Whoever by act or omission causes damage
to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if there
is no pre-existing contractual relation between the parties,
is called a quasi-delict and is governed by the provisions of
this Chapter.
In every tort case filed under this provision, plaintiff has to
prove by a preponderance of evidence: (1) the damages
suffered by the plaintiff; (2) the fault or negligence of the
defendant or some other person for whose act he must
respond; and (3) the connection of cause and effect
between the fault or negligence and the damages
incurred.35
Undeniably, the perimeter fence of the Cuasos
encroached on Lot 69 owned by the Tanjangcos by 87
square meters as duly found by both the RTC and the CA
in accordance with the evidence on record. As a result, the
Tanjangcos suffered damage in having been deprived of
the use of that portion of their lot encroached upon. Thus,
the primordial issue to be resolved in this case is whether
Corinthian was negligent under the circumstances and, if
so, whether such negligence contributed to the injury
suffered by the Tanjangcos.
A negligent act is an inadvertent act; it may be merely
carelessly done from a lack of ordinary prudence and may
be one which creates a situation involving an
unreasonable risk to another because of the expectable
action of the other, a third person, an animal, or a force of
nature. A negligent act is one from which an ordinary
prudent person in the actor's position, in the same or
similar circumstances, would foresee such an appreciable
risk of harm to others as to cause him not to do the act or
to do it in a more careful manner.36
The test to determine the existence of negligence in a
particular case may be stated as follows: Did the
defendant in committing the alleged negligent act use that
reasonable care and caution which an ordinary person
would have used in the same situation? If not, then he is
guilty of negligence. The law, in effect, adopts the standard
supplied by the imaginary conduct of the discreet
paterfamilias in Roman law. The existence of negligence in
a given case is not determined by reference to the
personal judgment of the actor in the situation before him.
The law considers what would be reckless, blameworthy,
or negligent in a man of ordinary intelligence and
prudence, and determines liability according to that
standard.37
By this test, we find Corinthian negligent.
While the issue of Corinthian's alleged negligence is
factual in character,38 a review by this Court is proper
because the CA's factual findings differ from those of the
RTC's.39 Thus, after a meticulous review of the evidence
on record, we hold that the CA committed no reversible
error when it deviated from the findings of fact of the RTC.
The CA's findings and conclusions are substantiated by
the evidence on record and are more in accord with law
and reason. Indeed, it is clear that Corinthian failed to
exercise the requisite diligence in insuring that the Cuasos
abide by its Manual of Rules and Regulations, thereby
resulting in the encroachment on the Tanjangcos’ property.
We agree with the CA when it aptly held:
Corinthian cannot and should not be allowed to justify or
excuse its negligence by claiming that its approval of the
Cuasos’ building plans was only limited to a so-called
"table inspection;" and not actual site measurement. To
accept some such postulate is to put a premium on
negligence. Corinthian was not organized solely for the
defendants Cuasos. It is also the subdivision of the
plaintiffs-spouses Tanjangcos - and of all others who have
their dwelling units or abodes therein. Pertinently, its
Manual of Rules and Regulations stipulates in Section 3
thereof (under the heading Construction), thus:
A. Rules and Regulations
No new construction can be started unless the building
plans are approved by the Association and the appropriate
Builder’s cash bond and pre-construction fees are paid.
The Association will not allow the entry of construction
materials and process identification cards for workers if the
above conditions are not complied with. Likewise, all
renovations, repairs, additions and improvements to a
finished house except electrical wiring, will have to be
approved by the Association. Water service connection of
a homeowner who undertakes construction work without
prior approval of the Association will be cut-off in addition
to the sanctions previously mentioned.
It goes without saying that this Manual of Rules and
Regulations applies to all - or it does not apply at all. To
borrow a popular expression, what is sauce for the gander
is sauce for the goose - or ought to be. To put it matter-of-
factly and bluntly, thus, its so-called "table inspection"
approval of the Cuasos’ building plans is no less of an
approval, as approvals come and go. And since it is an
approval tainted with negligence, the necessary and
inevitable consequences which law and justice attach to
such negligence must, as a matter of law and justice, also
necessarily attach to Corinthian.
And then again third party defendant-appellee Corinthian
Garden required the posting of a builder’s cash bond (Exh.
5-Corinthian) from the defendants-appellants Cuasos and
the third-party defendant C.B. Paraz Construction to
secure the performance of their undertaking. Surely,
Corinthian does not imply that while it may take the
benefits from the Builder’s cash bond, it may, Pilate-like,
wash its hands of any responsibility or liability that would
or might arise from the construction or building of the
structure for which the cash bond was in the first place
posted. That is not only unjust and immoral, but downright
unchristian and iniquitous.
Under the same parity of reasoning, the payment by the
appellants-Cuasos to the appellee Corinthian of pre-
construction and membership fees in the Association must
necessarily entail the creation of certain obligations on the
part of Corinthian. For duties and responsibilities always
go hand in hand with rights and privileges. That is the law
of life - and that is the law of every civilized society. It is an
axiom of equity that he who receives the benefits must
share the burdens.40
By its Manual of Rules and Regulations, it is reasonable to
assume that Corinthian, through its representative, in the
approval of building plans, and in the conduct of periodic
inspections of on-going construction projects within the
subdivision, is responsible in insuring compliance with the
approved plans, inclusive of the construction of perimeter
walls, which in this case is the subject of dispute between
the Tanjangcos and the Cuasos.41 It is not just or
equitable to relieve Corinthian of any liability when, by its
very own rules, it imposes its authority over all its
members to the end that "no new construction can be
started unless the plans are approved by the Association
and the appropriate cash bond and pre-construction fees
are paid." Moreover, Corinthian can impose sanctions for
violating these rules. Thus, the proposition that the
inspection is merely a "table inspection" and, therefore,
should exempt Corinthian from liability, is unacceptable.
After all, if the supposed inspection is merely a "table
inspection" and the approval granted to every member is a
mere formality, then the purpose of the rules would be
defeated. Compliance therewith would not be mandatory,
and sanctions imposed for violations could be disregarded.
Corinthian's imprimatur on the construction of the Cuasos'
perimeter wall over the property of the Tanjangcos
assured the Cuasos that everything was in order.
In sum, Corinthian’s failure to prevent the encroachment of
the Cuasos’ perimeter wall into Tanjangcos’ property –
despite the inspection conducted – constitutes negligence
and, at the very least, contributed to the injury suffered by
the Tanjangcos.
On the second issue, our ruling in Spouses Badillo v.
Tayag42 is instructive:
Citing Sia v. Court of Appeals [272 SCRA 141, May 5,
1997], petitioners argue that the MTC may take judicial
notice of the reasonable rental or the general price
increase of land in order to determine the amount of rent
that may be awarded to them. In that case, however, this
Court relied on the CA's factual findings, which were
based on the evidence presented before the trial court. In Hao,43 we considered the increase in the award of rentals I attest that the conclusions in the above Decision had
determining reasonable rent, as reasonable given the particular circumstances of each been reached in consultation before the case was
case. We noted therein that the respondent denied the assigned to the writer of the opinion of the Court’s Division.
the RTC therein took account of the following factors: 1) petitioners the benefits, including rightful possession, of
the realty assessment of the land, 2) the increase in realty their property for almost a decade. CONSUELO YNARES-SANTIAGO
taxes, and 3) the prevailing rate of rentals in the vicinity. Associate Justice
Clearly, the trial court relied, not on mere judicial notice, Similarly, in the instant case, the Tanjangcos were Chairperson, Third Division
but on the evidence presented before it. deprived of possession and use of their property for more
than two decades through no fault of their own. Thus, we
Indeed, courts may fix the reasonable amount of rent for find no cogent reason to disturb the monthly rental fixed by CERTIFICATION
the use and occupation of a disputed property. However, the CA.
petitioners herein erred in assuming that courts, in Pursuant to Section 13, Article VIII of the Constitution and
determining the amount of rent, could simply rely on their All told, the CA committed no reversible error. the Division Chairperson’s Attestation, I certify that the
own appreciation of land values without considering any conclusions in the above Decision had been reached in
evidence. As we have said earlier, a court may fix the WHEREFORE, the petition is DENIED. The Decision of consultation before the case was assigned to the writer of
reasonable amount of rent, but it must still base its action the Court of Appeals is AFFIRMED. Costs against the opinion of the Court’s Division.
on the evidence adduced by the parties. petitioner.
REYNATO S. PUNO
In Herrera v. Bollos [G.R. No. 138258, January 18, 2002], SO ORDERED. Chief Justice
the trial court awarded rent to the defendants in a forcible
entry case. Reversing the RTC, this Court declared that ANTONIO EDUARDO B. NACHURA
the reasonable amount of rent could be determined not by Associate Justice Footnotes
mere judicial notice, but by supporting evidence:
1 Rollo, pp. 8-53.
x x x A court cannot take judicial notice of a factual matter WE CONCUR:
in controversy. The court may take judicial notice of 2 Penned by Associate Justice Renato C. Dacudao (now
matters of public knowledge, or which are capable of CONSUELO YNARES-SANTIAGO retired), with Associate Justices Eugenio S. Labitoria (now
unquestionable demonstration, or ought to be known to Associate Justice retired) and Danilo B. Pine (now retired), concurring; id. at
judges because of their judicial functions. Before taking Chairperson 56-108.
such judicial notice, the court must "allow the parties to be
heard thereon." Hence, there can be no judicial notice on MA. ALICIA AUSTRIA-MARTINEZ 3 Particularly docketed as Civil Case No. Q-89-2706; id. at
the rental value of the premises in question without Associate Justice 172-199.
supporting evidence.
MINITA V. CHICO-NAZARIO 4 Rollo, pp. 148-149.
Truly, mere judicial notice is inadequate, because Associate Justice
evidence is required for a court to determine the proper 5 Id. at 150.
rental value. But contrary to Corinthian's arguments, both RUBEN T. REYES
the RTC and the CA found that indeed rent was due the Associate Justice 6 Id. at 119-139.
Tanjangcos because they were deprived of possession
and use of their property. This uniform factual finding of 7 Id. at 143-147.
the RTC and the CA was based on the evidence ATTESTATION
presented below. Moreover, in Spouses Catungal v. 8 Id. at 153-164.
9 Id. at 200-207. 27 Philippine School of Business Administration-Quezon
City v. Tolentino-Genilo, G.R. No. 159277, December 21,
10 Id. at 208. 2004, 447 SCRA 442, 448.
11 Id. at 209-216. 28 In GSIS v. Court of Appeals, 368 Phil. 36, 50 (1999),
citing Firestone Tire and Rubber Company of the
12 Id. at 225-227. Philippines v. Tempongko, 27 SCRA 418, 424 (1969) and
Singapore Airlines Limited v. Court of Appeals, 243 SCRA
13 Id. at 110-115. 143, 148 (1995), this Court held: The decision of the trial
court as affirmed by the Court of Appeals not having been
14 Resolution dated September 15, 2004; id. at 308. appealed by the insurer (MIGC) of the Toyota Tamaraw,
the same is now final as far as that entity is concerned,
15 Rollo, pp. 310-325. and may not be modified by this Court. Failure of any
parties to appeal the judgment as against him makes such
16 Id. at 419-433. judgment final and executory. By the same token, an
appeal by one party from such judgment does not inure to
17 Id. at 450. the benefit of the other party who had not appealed nor
can it be deemed to be an appeal of such other party from
18 Id. at 452. the judgment against him.
19 Penned by Associate Justice Renato C. Dacudao (now 29 Philippine Sinter Corporation v. Cagayan Electric
retired), with Associate Justices Celia C. Librea-Leagogo Power and Light Co., Inc., 431 Phil. 324, 333 (2002).
and Mariflor Punzalan-Castillo, concurring; id. at 457-460.
30 Alauya, Jr. v. COMELEC, 443 Phil. 893, 907 (2003).
20 Motion for Execution dated July 10, 2006; id. at 493-
501. 31 Acebedo Optical Company, Inc. v. Court of Appeals,
385 Phil. 956, 976 (2000).
21 Rollo, pp. 509-511.
32 Corinthian's Memorandum dated December 6, 2004,
22 Id. at 502-508. rollo, pp. 384-385.
23 Id. at 517-529. 33 Id. at 363-407.
24 Application for a Temporary Restraining Order and/or 34 Tanjangcos' Memorandum dated November 29, 2004;
Writ of Preliminary Injunction dated May 4, 2007; id. at id. at 331-361.
465-491.
35 Child Learning Center, Inc. v. Tagorio, G.R. No.
25 Opposition dated May 17, 2007; id. at 556-574. 150920, November 25, 2005, 476 SCRA 236, 242.
26 Almeida v. Court of Appeals, G.R. No. 159124, January 36 Capili v. Cardaña, G.R. No. 157906, November 2,
17, 2005, 448 SCRA 681, 694. 2006, 506 SCRA 569, 575, citing 65 C.J.S. §1(14), p. 462.
37 Fernando v. Court of Appeals, G.R. No. 92087, May 8,
1992, 208 SCRA 714, 718, citing Picart v. Smith, 37 Phil.
809, 813 (1992).
38 Pestaño v. Sumayang, 400 Phil. 740, 749 (2000).
39 Manila Electric Company v. Court of Appeals, 413 Phil.
338, 354 (2001).
40 Rollo, pp. 104-105 (Citations omitted).
41 Art. IV, Section 3(d) of Corinthian's Manual of Rules
and Regulations provides:
All on-going construction shall be subject to inspection of
the Association's representative for the purpose of
determining compliance to the approved plans. It shall be
considered a violation if the contractor/lot owner does not
permit entry of the Association representative doing
inspection works. Such violation will be subject to the
sanctions available to the Association such as (a) denial of
entry of construction materials (b) renovation of ID's of
construction workers and (c) cutting-off of water service.
The schedule of inspection shall be as follows:
A. For original construction
xxx
2. When the perimeter walls are being constructed.
xxx
42 448 Phil. 606, 623 (2003).
43 407 Phil. 309, 323 (2001).
G.R. No. 170596 November 28, 2008
NGO SIN SING and TICIA DY NGO,petitioners,
vs.
LI SENG GIAP & SONS, INC., and CONTECH
CONSTRUCTION TECHNOLOGY DEVELOPMENT
CORPORATION, respondents.
DECISION
NACHURA, J.:
This is a petition for review on certiorari of the Decision1 of
the Court of Appeals (CA) dated May 11, 2005 and the
resolution denying the motion for reconsideration thereof in
CA-G.R. CV No. 65553.
The facts are as follows:
Petitioner spouses Ngo Sin Sing and Ticia Dy Ngo owned
a lot at 745 Caballero St., Binondo. In 1978, they decided
to construct a 5-storey concrete building thereon, the NSS
Building, and for this project, they contracted the services
of Contech Construction Technology Development
Corporation (Contech) as their General Contractor.
Adjacent to their lot is a semi-concrete building known as
the Li Seng Giap Building (LSG Building), owned by Li
Seng Giap & Sons, Inc. (respondent). During the
construction of the NSS Building, the respondent, through
its general manager, John T. Lee, received complaints
from their tenants about defects in the building. There
were cracks appearing on the floors, the steel door was
bent, and concrete slabs of the walls were falling apart.2
An inspection of the premises revealed that the excavation
made by Contech on petitioners' land was close to the
common boundary, exposing the foundation of the LSG
Building. As a gesture of goodwill to their neighbors, the
petitioners assured the respondent that repairs would be
undertaken by their contractor. In December 1979,
Contech announced that it had completed repairs on the
LSG Building. Notwithstanding this assurance, more
defects in the LSG Building appeared, i.e., tilted floors,
cracks in the columns and beams, distorted window
frames. Apparently, the LSG Building was continuously
sagging and the respondent felt that it was no longer safe
to occupy the building.
In 1981, the respondent was constrained to consult
engineers, E.S. de Castro Ph.D. and Associates, through
Control Builders Corporation, to investigate the cause of
the damages in the LSG Building and to determine its
present structural integrity. It was immediately noticed that
the LSG Building underwent differential settlement.3
Based on their ocular inspection on the building
measurement of the actual differential settlement,
structural analysis of the building and determination of the
sub-surface soil conditions, the consultants concluded that
the structural failure of the LSG Building resulted from the
differential settlement caused by the excavation during the
construction of the NSS Building. Since the building had
undergone large differential settlements beyond safe
tolerable limits, the consultants recommended the
complete demolition of the LSG Building. The demolition
and reconstruction of the building was estimated to cost
the respondents about P8,021,687.00.4 The respondents
demanded that the petitioners rebuild the LSG Building or
pay the cost of the same, which the petitioners refused.
Thus, a complaint for sum of money was filed against Ngo
Sin Sing, Ticia Dy Ngo and Contech Construction
Technology Development Corporation with the Regional
Trial Court of Manila, docketed as Civil Case No. 83-
19367, praying that the petitioners and Contech be
ordered to, jointly and severally, pay the following sums:
1) P8,021,687.00, representing the actual cost of
demolition and reconstruction of the LSG Building;
2) P154,800.00 which plaintiff contracted to pay the E.S.
de Castro, Ph.D. and Associates, and Control Builders
Corporation to determine the extent of the damages and
the structural integrity of the LSG Building;
3) P543,672.00, representing the income that the plaintiff
will lose from the rentals during the reconstruction of the
building;
4) P10,000.00 as attorney's fees.5
In their Answer,6 spouses Ngo Sin Sing and Ticia Dy Ngo
moved to dismiss the complaint alleging that: (1) the
respondent's building had been structurally unstable and
deficient since incipiency, having been constructed in 1966
without the appropriate provision to vouchsafe its structural
integrity including differential settlements during its
economic life; and (2) the structural defects and failure
were traceable not necessarily due to soil erosion but to a
number of external forces constantly working upon the
building including earthquakes and improper maintenance.
Petitioners filed a cross-claim against Contech averring
that pursuant to their construction contract, all claims of
third parties should be answered by said corporation.7
For its part, Contech alleged that the excavation did not
reach the common boundary and was eight (8) inches,
more or less, away from the common boundary. Adequate
and necessary precautions were undertaken which
included the putting of wood sheet piles along the
boundaries to prevent soil erosion and all phases of work
were done according to the approved plan. Assuming it
was liable on the cross-claim, such liability was deemed
waived or abandoned for failure of Ngo Sin Sing to notify
Contech of such claim.8
After due hearing, the trial court ruled that the defendants
were negligent. It found that the excavation made on
defendant's lot was near the common boundary, and that
soil erosion would not have taken place if wood sheet piles
were properly put in place along the common boundary.
However, the trial court also stated that the plaintiff was
likewise not without fault. The trial court noted that the
LSG Building was originally a 2-storey building and the
plaintiff added two more floors without providing the
necessary foundation and reinforcement causing the
building to sag. The trial court held that it was but fair for
the plaintiff to assume its share of the faults and defects of
its property in this case.
Thus, the trial court rendered judgment as follows:
WHEREFORE, premises considered, judgment is hereby
rendered ordering defendants Ngo Sin Sing, Ticia Dy Ngo
and [Contech] Construction Technology Development
Corp. jointly and severally, liable to pay plaintiff Li Seng
Giap & Sons, Inc. the sum of P4,010,843.50. The claim for
other damages cannot be awarded for lack of sufficient
basis. Defendant Contech Technology & Development
Corp. shall reimburse defendants Spouses Ngo Sin Sing &
Ticia Dy Ngo for whatever amount the latter will pay to
plaintiff. The counterclaims of defendants are
DISMISSED.9
Dissatisfied with the trial court's ruling, Li Seng Giap &
Sons, Inc. and the spouses Ngo Sin Sing and Ticia Dy
Ngo filed their respective appeals. Contech no longer
appealed.
The respondent disagreed with the trial court's finding that
it was guilty of contributory negligence and that it must
share in the cost of the reconstruction of the LSG Building.
It claimed that the LSG Building never exhibited any sign
of structural distress from the time it was completely
constructed in 1968, despite the fact that Manila was
rocked by several earthquakes, the most violent of which
was in 1969. The defects were experienced only when
excavation and construction of the NSS Building started.
Respondent reiterated its prayer in the complaint.
The petitioners, on the other hand, averred that there was
no basis for holding them jointly and severally liable with
Contech for the payment of the amount of damages to the
respondent. The trial court correctly pointed out that as
owner of the property, it was their right to construct on their
land and have it excavated. More importantly, they had a
contract with Contech wherein it was provided that all
claims of third persons would be answered by the
company.
On May 11, 2005, the CA affirmed the trial court's decision
with modification. The appellate court ruled that the
respondent had a proven cause of action against the
petitioners; that respondent's right to property was invaded
or disturbed when excavation was done without sufficient
lateral or subjacent support. As such, the petitioners'
liability as project owner should be shared with the
contractor, applying the provisions of Article 2194 of the
Civil Code which states that "the responsibility of two or
more persons for a quasi-delict is solidary."10 The CA
refuted the findings of the trial court imputing contributory
negligence to the respondents Li Seng Giap & Sons, Inc.,
and ruled that the spouses Ngo Sin Sing and Ticia Dy Ngo
together with Contech, were solidarily liable for the whole
amount. Thus:
IN VIEW OF THE FOREGOING, the decision appealed
from is MODIFIED in that the defendants shall jointly and
severally pay the plaintiff the sum of P8,021,687.[00] with
interest at 6 percent per annum from the date of the filing
of the complaint until paid, plus ten percent of the principal
award as attorney's fees and costs. The rest of the
decision is AFFIRMED.
Aggrieved, the spouses Ngo Sin Sing and Ticia Dy Ngo
now come to this Court raising the following assignment of
errors:
I.
RESPONDENT COURT OF APPEALS COMMITTED
GRAVE REVERSIBLE ERROR IN RENDERING THE
ASSAILED DECISION AND RESOLUTION WHICH
IGNORED AND DISREGARDED CLEAR EVIDENCE ON
RECORD THAT RESPONDENT LSG'S OWN
NEGLIGENCE WAS THE PROXIMATE CAUSE OF THE
DAMAGE TO ITS BUILDING, OR AT LEAST,
AMOUNTED TO CONTRIBUTORY NEGLIGENCE
WARRANTING REDUCTION OF THE AWARD.
II.
RESPONDENT COURT OF APPEALS COMMITTED
GRAVE REVERSIBLE ERROR IN RENDERING THE
ASSAILED DECISION AND RESOLUTION WHEN
DESPITE THE FACT THAT NO ACT OR OMISSION
CONSTITUTING NEGLIGENCE HAD BEEN
SUCCESSFULLY IMPUTED AGAINST PETITIONERS, IT
HELD PETITIONERS JOINTLY AND SEVERALLY
LIABLE WITH RESPONDENT CONTECH FOR
RECONSTRUCTION COSTS.
III.
RESPONDENT COURT OF APPEALS COMMITTED
GRAVE REVERSIBLE ERROR IN RENDERING THE
ASSAILED DECISION AND RESOLUTION WHEN,
WITHOUT ANY LEGAL AND FACTUAL BASIS, IT
ORDERED PETITIONER TO PAY RESPONDENT LSG
ATTORNEY'S FEES IN THE AMOUNT OF TEN (10%)
[PERCENT] OF THE PRINCIPAL AMOUNT.11
We resolve to grant the petition.
In petitions for review, the Court does not normally review
the factual findings of the courts below, but when the
findings of the CA differ from those of the trial court, the
Court will not hesitate to scrutinize the evidence on record.
As between these two courts, it cannot be denied that the
trial court is in a better position to ascertain the facts of the
case considering its peculiar opportunity to be in direct
contact with the witnesses and the evidence presented. As
such, this Court is inclined to uphold the findings of the trial
court in this case which we find to be more conformable to
the evidence on record.
The records reveal that the LSG Building was constructed
as early as 1956. Originally, the building permit dated June
27, 195612 was for the construction of a 3-storey building.
Apparently, this was amended when another building
permit was issued on August 20, 1956,13 for the
construction of a 2-storey building only. The City Engineer
testified that the Certificate of Occupancy was issued for
the August 20, 1956 permit which was for the 2-storey
building.14 In 1966, the building was burned. Thereafter, it
was rebuilt with two floors added to the original 2-storey
building. The CA stressed that, according to John T. Lee,
Manager of LSG Building, the present building was an
entirely new edifice and not one built on the ashes of the
old.15 However, on cross-examination, John T. Lee
admitted that:
WITNESS:
May I recall sometime in 1940, the property was
purchased with an existing building apartment wooden in
1940. Sometime in 1956, the wooden apartment was
destroyed by fire. So in 1956, a permit was requested and
granted to construct a three storey reinforce concrete
building. Now on the later part of 1956 it was amended.
The permit was amended. It was changed to a two storey
concrete building. It is called semi-concrete. So the
building was finished in 1957. Then in 1966 that semi-
concrete building was burned. So we requested for a
building permit to reconstruct and include a 3rd and 4th
storey building.
COURT:
Q So the 3rd and 4th storey will be built on the
skeleton?
A According to my brother that is exactly the …
Q Skeleton on the ground floor and second floor and
what was added was the 3rd and 4th floor? Storey?
A Yes, sir.
Q And it was finished when?
A It was finished in 1968.
Q And it was semi-concrete?
A No reinforce concrete in 1968.
Q So the 3rd and 4th storey was added to the shell of
the ground and 2nd floor which was burned?
A Yes, your honor.16
Whether or not the building is a new edifice or built on the
old ashes is really of no moment. Verily, the foundation of
the LSG Building which was good to support only two
floors remained the same and could not support the weight
of the present 4-storey building. Edgardo Soriano, Civil
Engineer from the Office of the City Engineers Manila,
testified that there was a great possibility that the
settlement may be progressive,17 and that the damages
may be due to the defect in the foundation and not due to
the excavation.18 More intriguing is the statement in the
report of E.S de Castro which reads:
In terms of purely engineering considerations, it would be
best to demolish the existing building and then rebuild
using present data as design guides. Economic feasibility
is, of course, beyond the scope of this study.
If the owners wish to salvage whatever they can of the
present building, it is suggested that the 3rd and 4th floors
be removed and retain use of the ground and second
floors only. To leave the building in its present condition
would be unsafe.19
This only goes to show that the additional two floors put up
on the LSG Building could have overburdened the
foundation's load-bearing capacity and contributed to the
sagging of the building. The possibility of settlement due to
weak foundation cannot, therefore, be discounted. As the
trial court correctly ruled: "adding more floors without
touching or reinforcing the building's bottom line or
foundation are already manifestive of some negligence or
ignorance on the part of said building owner. x x x Had
plaintiff stuck to his original building 2-storey with its kind
of foundation, the excavation by its adjacent neighbor
would not matter much or affect the building in question at
the outset."20
Contributory negligence is conduct on the part of the
injured party, contributing as a legal cause to the harm he
has suffered, which falls below the standard to which he is
required to conform for his own protection.21 In this case,
considering that respondent's negligence must have
necessarily contributed to the sagging of the LSG Building,
a reduction of the award is warranted. We, therefore,
agree with the trial court that respondent should likewise
share in the cost of the restructuring of its building. This is
more in keeping with justice and equity. As the trial court
ratiocinated:
After going over the records of the case, the Court
believes and so holds that plaintiff is equally negligent in
not providing the necessary foundation and reinforcement
to accommodate/support the additional floors and this
finding is supported by plaintiff's evidence more
particularly the declaration of John Lee that the 3rd and
4th floors were built on the skeleton of the ground and 2nd
floor which was burned (tsn pp. 8-9, July 9, 1985). To be
adding additional floors to the original 2-storey of plaintiff's
building and depending merely on the skeleton of the
ground and second floors for its third and fourth floors
without touching or reinforcing that building's bottom line or
foundation are already manifestive of some negligence or
ignorance on the part of said building owner (plaintiff). To
put all the blame and responsibility for the defects, cracks
and tilting or sagging of the building in question on the
shoulders of the defendants is not proper. Plaintiff must
realize his share of the faults and defects of his property in
the situation.22
xxxx
In view of this and considering that the plaintiff's building is
still occupied by tenants and has not been condemned nor
condemnation proceedings accordingly instituted, the
Court believes that demands of substantial justice are
satisfied by allocating the damages on 50-50 ratio. Thus,
50% of the damages sustained by the building is to be
borne by the plaintiff and the other 50% by the defendants
jointly and severally upon reconstruction of the former's
building. The amount of P154,000.00 for the services
rendered by Contech (sic) Builders should be shouldered
by the plaintiff alone. Defendant Contech shall reimburse
defendants Spouses Ngo Sin Sing and Ticia Dy Ngo for
whatever amount the latter will pay to the plaintiff.23
The lower courts also found that there was insufficient
lateral or subjacent support provided on the adjoining lot
when excavation was done on petitioners' land. While
there were wood sheet piles placed along the sides of the
excavation, they were not properly braced to prevent a
failure wedge.24 Such failure can only be accounted to the
contractor, which is no other than Contech. In the
Proposal25 submitted to the petitioners, Contech
committed to undertake the construction of the NSS
Building, providing labor and equipment for the project.
Work included excavation for foundation, formworks, steel
works, etc. Construction would be completed after 365
days. It was also provided that the petitioners were
"released and relieved of any and all liabilities and
responsibilities for any injury to the workers and laborers
employed in the work contracted for, as well as for third-
party liabilities."26 As it turned out in the course of the
construction of the NSS Building, Contech failed to
observe the proper procedure prior to excavation. We
quote the trial court:
Clearly, defendant Contech failed to observe his procedure
of providing lateral and subjacent support prior to
excavation. Under the doctrine of "supervening
negligence" which states that where both parties are
negligent but the negligence of one is appreciably later in
time than of the other, or when it is impossible to
determine whose fault or negligence should be attributed
to the incident, the one who had the last clear opportunity
to avoid the impending harm and failed to do so is
chargeable with the consequences thereof. Stated
differently, the rule would also mean that an antecedent
negligence of a person does not preclude the recovery of
damages for the supervening negligence of or bar a
defense against the liability sought by another, if the latter,
who had the last fair chance, could have avoided the
impending harm by the exercise of due diligence.
In the case at bench, the negligence of Contech caused
the damages sustained by the building, which did not
discharge its duty of excavating eight (8) inches away from
the boundary line from the lot of plaintiff with insufficient
lateral and subjacent support.27
Article 2176 of the New Civil Code provides:
Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called
a quasi-delict and is governed by the provisions of this
Chapter.
The requisites of quasi-delict are the following:
(a) There must be an act or omission;
(b) Such act or omission causes damage to another;
(c) Such act or omission is caused by fault or negligence;
and
(d) There is no pre-existing contractual relation between
the parties.28
These requisites are attendant in the instant case. The
tortious act was the excavation done without observing the
proper safeguards. Although the trial court stated that
petitioner as land owner had every right to excavate on his
own land, such right is not absolute as to deprive the
adjacent owner sufficient lateral support pursuant to Article
684, New Civil Code, which states that:
No proprietor shall make such excavation upon his land as
to deprive any adjacent land or building of sufficient lateral
or subjacent support.
For the damage caused to the respondent, petitioners and
Contech are jointly liable as they are joint tort-feasors.
Conformably with Article 2194, the responsibility of two or
more persons who are liable for the quasi-delict is
solidary.29 In Lafarge Cement Philippines, Inc. v.
Continental Cement Corporation,30 the Court had the
occasion to explain:
[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. x x x
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. 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.31
Prescinding from the above, there is basis to re-examine
the court's disposition in this case as to the liability of the
petitioner in the light of the judgment rendered (1) holding
the petitioner and Contech jointly and severally liable, and
(2) giving the right to the petitioner to be reimbursed for
whatever amount it shall pay the respondent.32
In Citytrust Banking Corporation v. Court of Appeals,33 the
Court stated that a judgment may determine the ultimate
rights of the parties on the same side as between
themselves, such that questions of primary and secondary
liability between joint tort-feasors may be determined.
Such judgment does not make the "co-defendants"
adversaries. It permits only the determination of questions
of primary and secondary liability between joint tort-
feasors.34
In Weiner v. Mager & Throne, Inc., et al.,35 it was held that
- the decision holding it liable has become final and
In order to avoid a multiplicity of suits, and to place it in the
power of the defendant to get a determination of an entire
controversy in a single action, statutory provision is made
whereby, if the rights of the defendants as between
themselves are determinable in an action, the whole
matter may be disposed of in the judgment of such action,
instead of leaving the defendants to litigate independently
after the judgment has been entered in the main action.
From the foregoing, it is clear that this Court is not
precluded from rendering a judgment that determines the
liabilities of the "co-defendants" (petitioners and Contech)
in this case. Rather than invite the definite prospect of the
petitioners filing or instituting an action later on seeking
reimbursement from the party primarily liable, which in this
case is Contech, it would be more in keeping with the
principles of expediency and the policy against multiplicity
of suits to make a direct adjudication in this regard.
Considering that there was no proffered evidence of
negligence on the part of the petitioners, the inescapable
conclusion is that Contech is ultimately liable and should
answer for the cost of the damage.
Indeed, the facts show that Contech's negligence was the
proximate cause of the damage. Construction is a field
requiring technical expertise. The petitioners, as ordinary
laymen, would understandably have no knowledge at all
about the technical aspect of constructing a building. This
was precisely the reason why they contracted the services
of a reputable construction firm to undertake the project.
Petitioners had every right to rely on the warranties and
representations of their contractor.
We note that Contech has remained silent, as if accepting
its fate of liability in this case. The trial court observed that
Contech did not present evidence to controvert the parties'
assertions or prove their allegations in the answer, despite
an order to do so.36 From the trial court's decision, both
the petitioner and respondent filed their respective appeals
while Contech no longer challenged said decision. Thus,
executory.
Moreover, the trial court pointed out that Contech fell short
of its responsibility as contractor in this valuable project. It
failed to insure its work against possible risks. We quote:
Defendant Contech as the contractor should have been
prudent enough as to have sought and acquired a
Contractor All Risk (CAR) insurance policy and/or Erection
All Risk (EAR) insurance policy in the course of such a
construction that it had contracted with co-defendant
Spouses. Had CAR & EAR insurance policies been
availed of before any excavation was undertaken the
plaintiff could have run after the insurance companies that
could have covered those risks. Contractors of building
should have taken the roles of the wise and prudent father
to their customers or clients as they are specialists in
themselves as their field of know-how in technology would
always be demanded and extracted of them by all their
patrons.37
As to the award for attorney's fees in the CA decision, the
same should be deleted, as the appellate court did not
provide any basis whatsoever to justify the award.
WHEREFORE, the petition is GRANTED. The Decision of
the Court of Appeals is SET ASIDE. The decision of the
Regional Trial Court is REINSTATED with the modification
that Contech Construction Technology Development
Corporation, alone, is ORDERED to pay respondent Li
Seng Giap & Sons, Inc., the sum of P4,010,843.50.
SO ORDERED.
ANTONIO EDUARDO B.
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
MINITA V. CHICO-NAZARIO 26 Id. at 672.
Associate Justice 6 Records, pp. 10-13.
27 Rollo, pp. 107-108.
RUBEN T. REYES 7 Rollo, pp. 101-102.
Associate Justice 28 Chan, Jr. v. Iglesia ni Cristo, Inc., G.R. No. 160283,
8 Records, pp. 14-16. October 14, 2005, 473 SCRA 177, 186-187.
ATTESTATION
9 Rollo, p. 110. 29 Id. at 186.
I attest that the conclusions in the above Decision had
been reached in consultation before the case was 10 Id. at 42. 30 G.R. No. 155173, November 23, 2004, 443 SCRA 522.
assigned to the writer of the opinion of the Court's Division.
11 Id. at 18-19. 31 Id. at 544-545. (Underlining ours.)
CONSUELO YNARES-SANTIAGO
Associate Justice 12 Exhibit "2," records, p. 577. 32 Citytrust Banking Corporation v. Court of Appeals, G.R.
Chairperson, Third Division No. 92592, April 30, 1991, 196 SCRA 553.
13 Exhibit "1," id. at 576, with notation "Amendment."
33 Id. at 561.
CERTIFICATION 14 Rollo, p. 105.
34 49 C.J.S. Judgments §42.
Pursuant to Section 13, Article VIII of the Constitution and 15 CA Decision, p. 6; id. at 40.
the Division Chairperson's Attestation, I certify that the 35 167 Misc. 338, 3 N.Y.S.2d 918.
conclusions in the above Decision had been reached in 16 TSN, July 9, 1985, pp. 8-9.
consultation before the case was assigned to the writer of 36 Rollo, p. 106.
the opinion of the Court's Division. 17 TSN, August 25, 1991, p. 35.
37 Id. at 109.
REYNATO S. PUNO 18 TSN, August 10, 1995, p. 46.
Chief Justice
19 Exhibit "P," p. 9. (Underlining ours.)

Footnotes 20 Rollo, p. 108.

1 Penned by Associate Justice Mario L. Guariña III, with 21 Valenzuela v. Court of Appeals, 323 Phil. 374, 388
Associate Justices Rebecca de Guia-Salvador and (1996).
Santiago Javier Ranada, concurring; rollo, pp. 35-43.
22 Rollo, p. 108.
2 TSN, February 8, 1985, p. 6.
23 Id. at 110.
3 CA Decision, p. 2, rollo, p. 36.
24 TSN, August 9, 1991.
4 Complaint, p. 5; records, p. 5.
25 Records, pp. 671-672.
5 Rollo, pp. 52-53.
G.R. No. L-48006 July 8, 1942
FAUSTO BARREDO, petitioner,
vs.
SEVERINO GARCIA and TIMOTEA ALMARIO,
respondents.
Celedonio P. Gloria and Antonio Barredo for petitioner.
Jose G. Advincula for respondents.
BOCOBO, J.:
This case comes up from the Court of Appeals which held
the petitioner herein, Fausto Barredo, liable in damages for
the death of Faustino Garcia caused by the negligence of
Pedro Fontanilla, a taxi driver employed by said Fausto
Barredo.
At about half past one in the morning of May 3, 1936, on
the road between Malabon and Navotas, Province of Rizal,
there was a head-on collision between a taxi of the Malate
Taxicab driven by Pedro Fontanilla and a carretela guided
by Pedro Dimapalis. The carretela was overturned, and
one of its passengers, 16-year-old boy Faustino Garcia,
suffered injuries from which he died two days later. A
criminal action was filed against Fontanilla in the Court of
First Instance of Rizal, and he was convicted and
sentenced to an indeterminate sentence of one year and
one day to two years of prision correccional. The court in
the criminal case granted the petition that the right to bring
a separate civil action be reserved. The Court of Appeals
affirmed the sentence of the lower court in the criminal
case. Severino Garcia and Timotea Almario, parents of the
deceased on March 7, 1939, brought an action in the
Court of First Instance of Manila against Fausto Barredo
as the sole proprietor of the Malate Taxicab and employer
of Pedro Fontanilla. On July 8, 1939, the Court of First
Instance of Manila awarded damages in favor of the
plaintiffs for P2,000 plus legal interest from the date of the
complaint. This decision was modified by the Court of
Appeals by reducing the damages to P1,000 with legal
interest from the time the action was instituted. It is
undisputed that Fontanilla 's negligence was the cause of
the mishap, as he was driving on the wrong side of the
road, and at high speed. As to Barredo's responsibility, the
Court of Appeals found:
... It is admitted that defendant is Fontanilla's employer.
There is proof that he exercised the diligence of a good
father of a family to prevent damage. (See p. 22,
appellant's brief.) In fact it is shown he was careless in
employing Fontanilla who had been caught several times
for violation of the Automobile Law and speeding (Exhibit
A) — violation which appeared in the records of the
Bureau of Public Works available to be public and to
himself. Therefore, he must indemnify plaintiffs under the
provisions of article 1903 of the Civil Code.
The main theory of the defense is that the liability of
Fausto Barredo is governed by the Revised Penal Code;
hence, his liability is only subsidiary, and as there has
been no civil action against Pedro Fontanilla, the person
criminally liable, Barredo cannot be held responsible in the
case. The petitioner's brief states on page 10:
... The Court of Appeals holds that the petitioner is being
sued for his failure to exercise all the diligence of a good
father of a family in the selection and supervision of Pedro
Fontanilla to prevent damages suffered by the
respondents. In other words, The Court of Appeals insists
on applying in the case article 1903 of the Civil Code.
Article 1903 of the Civil Code is found in Chapter II, Title
16, Book IV of the Civil Code. This fact makes said article
to a civil liability arising from a crime as in the case at bar
simply because Chapter II of Title 16 of Book IV of the Civil
Code, in the precise words of article 1903 of the Civil Code
itself, is applicable only to "those (obligations) arising from
wrongful or negligent acts or commission not punishable
by law.
The gist of the decision of the Court of Appeals is
expressed thus:
... We cannot agree to the defendant's contention. The
liability sought to be imposed upon him in this action is not
a civil obligation arising from a felony or a misdemeanor
(the crime of Pedro Fontanilla,), but an obligation imposed
in article 1903 of the Civil Code by reason of his
negligence in the selection or supervision of his servant or
employee.
The pivotal question in this case is whether the plaintiffs
may bring this separate civil action against Fausto
Barredo, thus making him primarily and directly,
responsible under article 1903 of the Civil Code as an
employer of Pedro Fontanilla. The defendant maintains
that Fontanilla's negligence being punishable by the Penal
Code, his (defendant's) liability as an employer is only
subsidiary, according to said Penal code, but Fontanilla
has not been sued in a civil action and his property has not
been exhausted. To decide the main issue, we must cut
through the tangle that has, in the minds of many confused
and jumbled together delitos and cuasi delitos, or crimes
under the Penal Code and fault or negligence under
articles 1902-1910 of the Civil Code. This should be done,
because justice may be lost in a labyrinth, unless
principles and remedies are distinctly envisaged.
Fortunately, we are aided in our inquiry by the luminous
presentation of the perplexing subject by renown jurists
and we are likewise guided by the decisions of this Court
in previous cases as well as by the solemn clarity of the
consideration in several sentences of the Supreme
Tribunal of Spain.
Authorities support the proposition that a quasi-delict or
"culpa aquiliana " is a separate legal institution under the
Civil Code with a substantivity all its own, and individuality
that is entirely apart and independent from delict or crime.
Upon this principle and on the wording and spirit article
1903 of the Civil Code, the primary and direct
responsibility of employers may be safely anchored.
The pertinent provisions of the Civil Code and Revised
Penal Code are as follows:
CIVIL CODE
ART. 1089 Obligations arise from law, from
contracts and quasi-contracts, and from acts and
omissions which are unlawful or in which any kind of fault
or negligence intervenes.
xxx xxx xxx
ART. 1092. Civil obligations arising from felonies or
misdemeanors shall be governed by the provisions of the
Penal Code.
ART. 1093. Those which are derived from acts or
omissions in which fault or negligence, not punishable by
law, intervenes shall be subject to the provisions of
Chapter II, Title XVI of this book.
xxx xxx xxx
ART 1902. Any person who by an act or omission causes
damage to another by his fault or negligence shall be liable
for the damage so done.
ART. 1903. The obligation imposed by the next preceding
article is enforcible, not only for personal acts and
omissions, but also for those of persons for whom another
is responsible.
The father and in, case of his death or incapacity, the
mother, are liable for any damages caused by the minor
children who live with them.
Guardians are liable for damages done by minors or
incapacitated persons subject to their authority and living
with them.
Owners or directors of an establishment or business are
equally liable for any damages caused by their employees
while engaged in the branch of the service in which
employed, or on occasion of the performance of their
duties.
The State is subject to the same liability when it acts
through a special agent, but not if the damage shall have
been caused by the official upon whom properly devolved
the duty of doing the act performed, in which case the
provisions of the next preceding article shall be applicable.
Finally, teachers or directors of arts trades are liable for
any damages caused by their pupils or apprentices while
they are under their custody.
The liability imposed by this article shall cease in case the
persons mentioned therein prove that they are exercised
all the diligence of a good father of a family to prevent the
damage.
ART. 1904. Any person who pays for damage caused by
his employees may recover from the latter what he may
have paid.
REVISED PENAL CODE
ART. 100. Civil liability of a person guilty of felony. —
Every person criminally liable for a felony is also civilly
liable.
ART. 101. Rules regarding civil liability in certain cases. —
The exemption from criminal liability established in
subdivisions 1, 2, 3, 5, and 6 of article 12 and in
subdivision 4 of article 11 of this Code does not include
exemption from civil liability, which shall be enforced to the
following rules:
First. In cases of subdivision, 1, 2 and 3 of article 12 the
civil liability for acts committed by any imbecile or insane
person, and by a person under nine years of age, or by
one over nine but under fifteen years of age, who has
acted without discernment shall devolve upon those
having such person under their legal authority or control,
unless it appears that there was no fault or negligence on
their part.
Should there be no person having such insane, imbecile or
minor under his authority, legal guardianship, or control, or
if such person be insolvent, said insane, imbecile, or minor
shall respond with their own property, excepting property
exempt from execution, in accordance with the civil law.
Second. In cases falling within subdivision 4 of article 11,
the person for whose benefit the harm has been prevented
shall be civilly liable in proportion to the benefit which they
may have received.
The courts shall determine, in their sound discretion, the
proportionate amount for which each one shall be liable.
When the respective shares can not be equitably
determined, even approximately, or when the liability also
attaches to the Government, or to the majority of the
inhabitants of the town, and, in all events, whenever the
damage has been caused with the consent of the
authorities or their agents, indemnification shall be made in
the manner prescribed by special laws or regulations.
Third. In cases falling within subdivisions 5 and 6 of article
12, the persons using violence or causing the fear shall be
primarily liable and secondarily, or, if there be no such
persons, those doing the act shall be liable, saving always
to the latter that part of their property exempt from
execution.
ART. 102. Subsidiary civil liability of innkeepers, tavern
keepers and proprietors of establishment. — In default of
persons criminally liable, innkeepers, tavern keepers, and
any other persons or corporation shall be civilly liable for
crimes committed in their establishments, in all cases
where a violation of municipal ordinances or some general
or special police regulation shall have been committed by
them or their employees.
Innkeepers are also subsidiarily liable for the restitution of
goods taken by robbery or theft within their houses lodging
therein, or the person, or for the payment of the value
thereof, provided that such guests shall have notified in
advance the innkeeper himself, or the person representing
him, of the deposit of such goods within the inn; and shall
furthermore have followed the directions which such
innkeeper or his representative may have given them with
respect to the care of and vigilance over such goods. No
liability shall attach in case of robbery with violence against
or intimidation against or intimidation of persons unless
committed by the innkeeper's employees.
ART. 103. Subsidiary civil liability of other persons. — The
subsidiary liability established in the next preceding article
shall also apply to employers, teachers, persons, and
corporations engaged in any kind of industry for felonies
committed by their servants, pupils, workmen, apprentices,
or employees in the discharge of their duties.
xxx xxx xxx
ART. 365. Imprudence and negligence. — Any person
who, by reckless imprudence, shall commit any act which,
had it been intentional, would constitute a grave felony,
shall suffer the penalty of arresto mayor in its maximum
period to prision correccional in its minimum period; if it
would have constituted a less grave felony, the penalty of
arresto mayor in its minimum and medium periods shall be
imposed.
Any person who, by simple imprudence or negligence,
shall commit an act which would otherwise constitute a
grave felony, shall suffer the penalty of arresto mayor in its
medium and maximum periods; if it would have constituted
a less serious felony, the penalty of arresto mayor in its
minimum period shall be imposed."
It will thus be seen that while the terms of articles 1902 of
the Civil Code seem to be broad enough to cover the
driver's negligence in the instant case, nevertheless article
1093 limits cuasi-delitos to acts or omissions "not
punishable by law." But inasmuch as article 365 of the
Revised Penal Code punishes not only reckless but even
simple imprudence or negligence, the fault or negligence
under article 1902 of the Civil Code has apparently been
crowded out. It is this overlapping that makes the
"confusion worse confounded." However, a closer study
shows that such a concurrence of scope in regard to
negligent acts does not destroy the distinction between the
civil liability arising from a crime and the responsibility for
cuasi-delitos or culpa extra-contractual. The same
negligent act causing damages may produce civil liability
arising from a crime under article 100 of the Revised Penal
Code, or create an action for cuasi-delito or culpa extra-
contractual under articles 1902-1910 of the Civil Code.
The individuality of cuasi-delito or culpa extra-contractual
looms clear and unmistakable. This legal institution is of
ancient lineage, one of its early ancestors being the Lex
Aquilia in the Roman Law. In fact, in Spanish legal
terminology, this responsibility is often referred to as culpa
aquiliana. The Partidas also contributed to the genealogy
of the present fault or negligence under the Civil Code; for
instance, Law 6, Title 15, of Partida 7, says: "Tenudo es
de fazer emienda, porque, como quier que el non fizo a
sabiendas en daño al otro, pero acaescio por su culpa."
The distinctive nature of cuasi-delitos survives in the Civil
Code. According to article 1089, one of the five sources of
obligations is this legal institution of cuasi-delito or culpa
extra-contractual: "los actos . . . en que intervenga
cualquier genero de culpa o negligencia." Then article
1093 provides that this kind of obligation shall be governed
by Chapter II of Title XVI of Book IV, meaning articles
1902-0910. This portion of the Civil Code is exclusively
devoted to the legal institution of culpa aquiliana.
Some of the differences between crimes under the Penal
Code and the culpa aquiliana or cuasi-delito under the
Civil Code are:
1. That crimes affect the public interest, while cuasi-delitos
are only of private concern.
2. That, consequently, the Penal Code punishes or
corrects the criminal act, while the Civil Code, by means of
indemnification, merely repairs the damage.
3. That delicts are not as broad as quasi-delicts, because
the former are punished only if there is a penal law clearly
covering them, while the latter, cuasi-delitos, include all
acts in which "any king of fault or negligence intervenes."
However, it should be noted that not all violations of the
penal law produce civil responsibility, such as begging in
contravention of ordinances, violation of the game laws,
infraction of the rules of traffic when nobody is hurt. (See
Colin and Capitant, "Curso Elemental de Derecho Civil,"
Vol. 3, p. 728.)
Let us now ascertain what some jurists say on the
separate existence of quasi-delicts and the employer's
primary and direct liability under article 1903 of the Civil
Code.
Dorado Montero in his essay on "Responsibilidad" in the
"Enciclopedia Juridica Española" (Vol. XXVII, p. 414) says:
El concepto juridico de la responsabilidad civil abarca
diversos aspectos y comprende a diferentes personas.
Asi, existe una responsabilidad civil propiamente dicha,
que en ningun casl lleva aparejada responsabilidad
criminal alguna, y otra que es consecuencia indeclinable
de la penal que nace de todo delito o falta."
The juridical concept of civil responsibility has various
aspects and comprises different persons. Thus, there is a
civil responsibility, properly speaking, which in no case
carries with it any criminal responsibility, and another
which is a necessary consequence of the penal liability as
a result of every felony or misdemeanor."
Maura, an outstanding authority, was consulted on the
following case: There had been a collision between two
trains belonging respectively to the Ferrocarril Cantabrico
and the Ferrocarril del Norte. An employee of the latter
had been prosecuted in a criminal case, in which the
company had been made a party as subsidiarily
responsible in civil damages. The employee had been
acquitted in the criminal case, and the employer, the
Ferrocarril del Norte, had also been exonerated. The
question asked was whether the Ferrocarril Cantabrico
could still bring a civil action for damages against the
Ferrocarril del Norte. Maura's opinion was in the
affirmative, stating in part (Maura, Dictamenes, Vol. 6, pp.
511-513):
Quedando las cosas asi, a proposito de la realidad pura y
neta de los hechos, todavia menos parece sostenible que
exista cosa juzgada acerca de la obligacion civil de
indemnizar los quebrantos y menoscabos inferidos por el
choque de los trenes. El titulo en que se funda la accion
para demandar el resarcimiento, no puede confundirse
con las responsabilidades civiles nacidas de delito,
siquiera exista en este, sea el cual sea, una culpa rodeada
de notas agravatorias que motivan sanciones penales,
mas o menos severas. La lesion causada por delito o falta
en los derechos civiles, requiere restituciones,
reparaciones o indemnizaciones, que cual la pena misma
atañen al orden publico; por tal motivo vienen
encomendadas, de ordinario, al Ministerio Fiscal; y claro
es que si por esta via se enmiendan los quebrantos y
menoscabos, el agraviado excusa procurar el ya
conseguido desagravio; pero esta eventual coincidencia
de los efectos, no borra la diversidad originaria de las
acciones civiles para pedir indemnizacion.
Estas, para el caso actual (prescindiendo de culpas
contractuales, que no vendrian a cuento y que tiene otro
regimen), dimanan, segun el articulo 1902 del Codigo
Civil, de toda accion u omision, causante de daños o
perjuicios, en que intervenga culpa o negligencia. Es trivial
que acciones semejantes son ejercitadas ante los
Tribunales de lo civil cotidianamente, sin que la Justicia
punitiva tenga que mezclarse en los asuntos. Los articulos
18 al 21 y 121 al 128 del Codigo Penal, atentos al espiritu
y a los fines sociales y politicos del mismo, desenvuelven
y ordenan la materia de responsabilidades civiles nacidas
de delito, en terminos separados del regimen por ley
comun de la culpa que se denomina aquiliana, por alusion
a precedentes legislativos del Corpus Juris. Seria
intempestivo un paralelo entre aquellas ordenaciones, y la
de la obligacion de indemnizar a titulo de culpa civil; pero
viene al caso y es necesaria una de las diferenciaciones
que en el tal paralelo se notarian.
Los articulos 20 y 21 del Codigo Penal, despues de
distribuir a su modo las responsabilidades civiles, entre los
que sean por diversos conceptos culpables del delito o
falta, las hacen extensivas a las empresas y los
establecimientos al servicio de los cuales estan los
delincuentes; pero con caracter subsidiario, o sea, segun
el texto literal, en defecto de los que sean responsables
criminalmente. No coincide en ello el Codigo Civil, cuyo
articulo 1903, dice; La obligacion que impone el articulo
anterior es exigible, no solo por los actos y omisiones
propios, sino por los de aquellas personas de quienes se
debe responder; personas en la enumeracion de las
cuales figuran los dependientes y empleados de los
establecimientos o empresas, sea por actos del servicio,
sea con ocasion de sus funciones. Por esto acontece, y se
observa en la jurisprudencia, que las empresas, despues
de intervenir en las causas criminales con el caracter
subsidiario de su responsabilidad civil por razon del delito,
son demandadas y condenadas directa y aisladamente,
cuando se trata de la obligacion, ante los tribunales civiles.
Siendo como se ve, diverso el titulo de esta obligacion, y
formando verdadero postulado de nuestro regimen judicial
la separacion entre justicia punitiva y tribunales de lo civil,
de suerte que tienen unos y otros normas de fondo en
distintos cuerpos legales, y diferentes modos de proceder,
habiendose, por añadidura, abstenido de asistir al juicio
criminal la Compañia del Ferrocarril Cantabrico, que se
reservo ejercitar sus acciones, parece innegable que la de
indemnizacion por los daños y perjuicios que le irrogo el
choque, no estuvo sub judice ante el Tribunal del Jurado,
ni fue sentenciada, sino que permanecio intacta, al
pronunciarse el fallo de 21 de marzo. Aun cuando el
veredicto no hubiese sido de inculpabilidad, mostrose mas
arriba, que tal accion quedaba legitimamente reservada
para despues del proceso; pero al declararse que no
existio delito, ni responsabilidad dimanada de delito,
materia unica sobre que tenian jurisdiccion aquellos
juzgadores, se redobla el motivo para la obligacion civil ex
lege, y se patentiza mas y mas que la accion para pedir su
cumplimiento permanece incolume, extraña a la cosa
juzgada.
As things are, apropos of the reality pure and simple of the
facts, it seems less tenable that there should be res
judicata with regard to the civil obligation for damages on
account of the losses caused by the collision of the trains.
The title upon which the action for reparation is based
cannot be confused with the civil responsibilities born of a
crime, because there exists in the latter, whatever each
nature, a culpa surrounded with aggravating aspects which
give rise to penal measures that are more or less severe.
The injury caused by a felony or misdemeanor upon civil
rights requires restitutions, reparations, or indemnifications
which, like the penalty itself, affect public order; for this
reason, they are ordinarily entrusted to the office of the
prosecuting attorney; and it is clear that if by this means
the losses and damages are repaired, the injured party no
longer desires to seek another relief; but this coincidence
of effects does not eliminate the peculiar nature of civil
actions to ask for indemnity.
Such civil actions in the present case (without referring to
contractual faults which are not pertinent and belong to
another scope) are derived, according to article 1902 of
the Civil Code, from every act or omission causing losses
and damages in which culpa or negligence intervenes. It is
unimportant that such actions are every day filed before
the civil courts without the criminal courts interfering
therewith. Articles 18 to 21 and 121 to 128 of the Penal
Code, bearing in mind the spirit and the social and political
purposes of that Code, develop and regulate the matter of
civil responsibilities arising from a crime, separately from
the regime under common law, of culpa which is known as
aquiliana, in accordance with legislative precedent of the
Corpus Juris. It would be unwarranted to make a detailed
comparison between the former provisions and that
regarding the obligation to indemnify on account of civil
culpa; but it is pertinent and necessary to point out to one
of such differences.

Articles 20 and 21 of the Penal Code, after distriburing in
their own way the civil responsibilities among those who,
for different reasons, are guilty of felony or misdemeanor,
make such civil responsibilities applicable to enterprises
and establishments for which the guilty parties render
service, but with subsidiary character, that is to say,
according to the wording of the Penal Code, in default of
those who are criminally responsible. In this regard, the
Civil Code does not coincide because article 1903 says:
"The obligation imposed by the next preceding article is
demandable, not only for personal acts and omissions, but
also for those of persons for whom another is responsible."
Among the persons enumerated are the subordinates and
employees of establishments or enterprises, either for acts
during their service or on the occasion of their functions. It
is for this reason that it happens, and it is so observed in
judicial decisions, that the companies or enterprises, after
taking part in the criminal cases because of their
subsidiary civil responsibility by reason of the crime, are
sued and sentenced directly and separately with regard to
the obligation, before the civil courts.
Seeing that the title of this obligation is different, and the
separation between punitive justice and the civil courts
being a true postulate of our judicial system, so that they
have different fundamental norms in different codes, as
well as different modes of procedure, and inasmuch as the
Compaña del Ferrocarril Cantabrico has abstained from
taking part in the criminal case and has reserved the right
to exercise its actions, it seems undeniable that the action
for indemnification for the losses and damages caused to it
by the collision was not sub judice before the Tribunal del
Jurado, nor was it the subject of a sentence, but it
remained intact when the decision of March 21 was
rendered. Even if the verdict had not been that of acquittal,
it has already been shown that such action had been
legitimately reserved till after the criminal prosecution; but
because of the declaration of the non-existence of the
felony and the non-existence of the responsibility arising
from the crime, which was the sole subject matter upon
which the Tribunal del Jurado had jurisdiction, there is
greater reason for the civil obligation ex lege, and it
becomes clearer that the action for its enforcement remain
intact and is not res judicata.
Laurent, a jurist who has written a monumental work on
the French Civil Code, on which the Spanish Civil Code is
largely based and whose provisions on cuasi-delito or
culpa extra-contractual are similar to those of the Spanish
Civil Code, says, referring to article 1384 of the French
Civil Code which corresponds to article 1903, Spanish Civil
Code:
The action can be brought directly against the person
responsible (for another), without including the author of
the act. The action against the principal is accessory in the
sense that it implies the existence of a prejudicial act
committed by the employee, but it is not subsidiary in the
sense that it can not be instituted till after the judgment
against the author of the act or at least, that it is subsidiary
to the principal action; the action for responsibility (of the
employer) is in itself a principal action. (Laurent, Principles
of French Civil Law, Spanish translation, Vol. 20, pp. 734-
735.)
Amandi, in his "Cuestionario del Codigo Civil Reformado"
(Vol. 4, pp. 429, 430), declares that the responsibility of
the employer is principal and not subsidiary. He writes:
Cuestion 1. La responsabilidad declarada en el articulo
1903 por las acciones u omisiones de aquellas personas
por las que se debe responder, es subsidiaria? es
principal? Para contestar a esta pregunta es necesario
saber, en primer lugar, en que se funda el precepto legal.
Es que realmente se impone una responsabilidad por una
falta ajena? Asi parece a primera vista; pero semejante
afirmacion seria contraria a la justicia y a la maxima
universal, segun la que las faltas son personales, y cada
uno responde de aquellas que le son imputables. La
responsabilidad de que tratamos se impone con ocasion
de un delito o culpa, pero no por causa de ellos, sino por
causa del causi delito, esto es, de la imprudencia o de la
negligencia del padre, del tutor, del dueño o director del
establecimiento, del maestro, etc. Cuando cualquiera de
las personas que enumera el articulo citado (menores de
edad, incapacitados, dependientes, aprendices) causan
un daño, la ley presume que el padre, el tutor, el maestro,
etc., han cometido una falta de negligencia para prevenir o
evitar el daño. Esta falta es la que la ley castiga. No hay,
pues, responsabilidad por un hecho ajeno, sino en la
apariencia; en realidad la responsabilidad se exige por un
hecho propio. La idea de que esa responsabilidad sea
subsidiaria es, por lo tanto, completamente inadmisible.
Question No. 1. Is the responsibility declared in article
1903 for the acts or omissions of those persons for who
one is responsible, subsidiary or principal? In order to
answer this question it is necessary to know, in the first
place, on what the legal provision is based. Is it true that
there is a responsibility for the fault of another person? It
seems so at first sight; but such assertion would be
contrary to justice and to the universal maxim that all faults
are personal, and that everyone is liable for those faults
that can be imputed to him. The responsibility in question
is imposed on the occasion of a crime or fault, but not
because of the same, but because of the cuasi-delito, that
is to say, the imprudence or negligence of the father,
guardian, proprietor or manager of the establishment, of
the teacher, etc. Whenever anyone of the persons
enumerated in the article referred to (minors, incapacitated
persons, employees, apprentices) causes any damage,
the law presumes that the father, guardian, teacher, etc.
have committed an act of negligence in not preventing or
avoiding the damage. It is this fault that is condemned by
the law. It is, therefore, only apparent that there is a
responsibility for the act of another; in reality the
responsibility exacted is for one's own act. The idea that
such responsibility is subsidiary is, therefore, completely
inadmissible.
Oyuelos, in his "Digesto: Principios, Doctrina y
Jurisprudencia, Referentes al Codigo Civil Español," says
in Vol. VII, p. 743:
Es decir, no responde de hechos ajenos, porque se
responde solo de su propia culpa, doctrina del articulo
1902; mas por excepcion, se responde de la ajena
respecto de aquellas personas con las que media algun
nexo o vinculo, que motiva o razona la responsabilidad.
Esta responsabilidad, es directa o es subsidiaria? En el
orden penal, el Codigo de esta clase distingue entre
menores e incapacitados y los demas, declarando directa
la primera (articulo 19) y subsidiaria la segunda (articulos
20 y 21); pero en el orden civil, en el caso del articulo
1903, ha de entenderse directa, por el tenor del articulo
que impone la responsabilidad precisamente "por los
actos de aquellas personas de quienes se deba
responder."
That is to say, one is not responsible for the acts of others,
because one is liable only for his own faults, this being the
doctrine of article 1902; but, by exception, one is liable for
the acts of those persons with whom there is a bond or tie
which gives rise to the responsibility. Is this responsibility
direct or subsidiary? In the order of the penal law, the
Penal Code distinguishes between minors and
incapacitated persons on the one hand, and other persons
on the other, declaring that the responsibility for the former
is direct (article 19), and for the latter, subsidiary (articles
20 and 21); but in the scheme of the civil law, in the case
of article 1903, the responsibility should be understood as
direct, according to the tenor of that articles, for precisely it
imposes responsibility "for the acts of those persons for
whom one should be responsible."
Coming now to the sentences of the Supreme Tribunal of
Spain, that court has upheld the principles above set forth:
that a quasi-delict or culpa extra-contractual is a separate
and distinct legal institution, independent from the civil
responsibility arising from criminal liability, and that an
employer is, under article 1903 of the Civil Code, primarily
and directly responsible for the negligent acts of his
employee.
One of the most important of those Spanish decisions is
that of October 21, 1910. In that case, Ramon Lafuente
died as the result of having been run over by a street car
owned by the "compañia Electric Madrileña de Traccion."
The conductor was prosecuted in a criminal case but he
was acquitted. Thereupon, the widow filed a civil action
against the street car company, paying for damages in the
amount of 15,000 pesetas. The lower court awarded
damages; so the company appealed to the Supreme
Tribunal, alleging violation of articles 1902 and 1903 of the
Civil Code because by final judgment the non-existence of
fault or negligence had been declared. The Supreme Court
of Spain dismissed the appeal, saying:
Considerando que el primer motivo del recurso se funda
en el equivocado supuesto de que el Tribunal a quo, al
condonar a la compañia Electrica Madrileña al pago del
daño causado con la muerte de Ramon La fuente
Izquierdo, desconoce el valor y efectos juridicos de la
sentencia absolutoria deictada en la causa criminal que se
siguio por el mismo hecho, cuando es lo cierto que de este
han conocido las dos jurisdicciones bajo diferentes as
pectos, y como la de lo criminal declrao dentro de los
limites de su competencia que el hecho de que se trata no
era constitutivo de delito por no haber mediado descuido o
negligencia graves, lo que no excluye, siendo este el unico
fundamento del fallo absolutorio, el concurso de la culpa o
negligencia no califacadas, fuente de obligaciones civiles
segun el articulo 1902 del Codigo, y que alcanzan, segun
el 1903, netre otras perosnas, a los Directores de
establecimientos o empresas por los daños causados por
sus dependientes en determinadas condiciones, es
manifesto que la de lo civil, al conocer del mismo hehco
baho este ultimo aspecto y al condenar a la compañia
recurrente a la indemnizacion del daño causado por uno
de sus empleados, lejos de infringer los mencionados
textos, en relacion con el articulo 116 de la Ley de
Enjuciamiento Criminal, se ha atenido estrictamente a
ellos, sin invadir atribuciones ajenas a su jurisdiccion
propia, ni contrariar en lo mas minimo el fallo recaido en la
causa.
Considering that the first ground of the appeal is based on
the mistaken supposition that the trial court, in sentencing
the Compañia Madrileña to the payment of the damage
caused by the death of Ramon Lafuente Izquierdo,
disregards the value and juridical effects of the sentence of
acquittal rendered in the criminal case instituted on
account of the same act, when it is a fact that the two
jurisdictions had taken cognizance of the same act in its
different aspects, and as the criminal jurisdiction declared
within the limits of its authority that the act in question did
not constitute a felony because there was no grave
carelessness or negligence, and this being the only basis
of acquittal, it does no exclude the co-existence of fault or
negligence which is not qualified, and is a source of civil
obligations according to article 1902 of the Civil Code,
affecting, in accordance with article 1903, among other
persons, the managers of establishments or enterprises by
reason of the damages caused by employees under
certain conditions, it is manifest that the civil jurisdiccion in
taking cognizance of the same act in this latter aspect and
in ordering the company, appellant herein, to pay an
indemnity for the damage caused by one of its employees,
far from violating said legal provisions, in relation with
article 116 of the Law of Criminal Procedure, strictly
followed the same, without invading attributes which are
beyond its own jurisdiction, and without in any way
contradicting the decision in that cause. (Emphasis
supplied.)
It will be noted, as to the case just cited:
First. That the conductor was not sued in a civil case,
either separately or with the street car company. This is
precisely what happens in the present case: the driver,
Fontanilla, has not been sued in a civil action, either alone
or with his employer.
Second. That the conductor had been acquitted of grave
criminal negligence, but the Supreme Tribunal of Spain
said that this did not exclude the co-existence of fault or
negligence, which is not qualified, on the part of the
conductor, under article 1902 of the Civil Code. In the
present case, the taxi driver was found guilty of criminal
negligence, so that if he had even sued for his civil
responsibility arising from the crime, he would have been
held primarily liable for civil damages, and Barredo would
have been held subsidiarily liable for the same. But the
plaintiffs are directly suing Barredo, on his primary
responsibility because of his own presumed negligence —
which he did not overcome — under article 1903. Thus,
there were two liabilities of Barredo: first, the subsidiary
one because of the civil liability of the taxi driver arising
from the latter's criminal negligence; and, second,
Barredo's primary liability as an employer under article
1903. The plaintiffs were free to choose which course to
take, and they preferred the second remedy. In so doing,
they were acting within their rights. It might be observed in
passing, that the plaintiff choose the more expeditious and
effective method of relief, because Fontanilla was either in
prison, or had just been released, and besides, he was
probably without property which might be seized in
enforcing any judgment against him for damages.
Third. That inasmuch as in the above sentence of October
21, 1910, the employer was held liable civilly,
notwithstanding the acquittal of the employee (the
conductor) in a previous criminal case, with greater reason
should Barredo, the employer in the case at bar, be held
liable for damages in a civil suit filed against him because
his taxi driver had been convicted. The degree of
negligence of the conductor in the Spanish case cited was
less than that of the taxi driver, Fontanilla, because the
former was acquitted in the previous criminal case while
the latter was found guilty of criminal negligence and was
sentenced to an indeterminate sentence of one year and
one day to two years of prision correccional.
(See also Sentence of February 19, 1902, which is similar
to the one above quoted.)
In the Sentence of the Supreme Court of Spain, dated
February 14, 1919, an action was brought against a
railroad company for damages because the station agent,
employed by the company, had unjustly and fraudulently,
refused to deliver certain articles consigned to the plaintiff.
The Supreme Court of Spain held that this action was
properly under article 1902 of the Civil Code, the court
saying:
Considerando que la sentencia discutida reconoce, en
virtud de los hechos que consigna con relacion a las
pruebas del pleito: 1.º, que las expediciones facturadas
por la compañia ferroviaria a la consignacion del actor de
las vasijas vacias que en su demanda relacionan tenian
como fin el que este las devolviera a sus remitentes con
vinos y alcoholes; 2.º, que llegadas a su destino tales
mercanias no se quisieron entregar a dicho consignatario
por el jefe de la estacion sin motivo justificado y con
intencion dolosa, y 3.º, que la falta de entrega de estas
expediciones al tiempo de reclamarlas el demandante le
originaron daños y perjuicios en cantidad de bastante
importancia como expendedor al por mayor que era de
vinos y alcoholes por las ganancias que dejo de obtener al
verse privado de servir los pedidos que se le habian hecho
por los remitentes en los envases:
Considerando que sobre esta base hay necesidad de
estimar los cuatro motivos que integran este recurso,
porque la demanda inicial del pleito a que se contrae no
contiene accion que nazca del incumplimiento del contrato
de transporte, toda vez que no se funda en el retraso de la
llegada de las mercancias ni de ningun otro vinculo
contractual entre las partes contendientes, careciendo, por
tanto, de aplicacion el articulo 371 del Codigo de
Comercio, en que principalmente descansa el fallo
recurrido, sino que se limita a pedir la reparaction de los
daños y perjuicios producidos en el patrimonio del actor
por la injustificada y dolosa negativa del porteador a la
entrega de las mercancias a su nombre consignadas,
segun lo reconoce la sentencia, y cuya responsabilidad
esta claramente sancionada en el articulo 1902 del Codigo
Civil, que obliga por el siguiente a la Compañia
demandada como ligada con el causante de aquellos por
relaciones de caracter economico y de jurarquia
administrativa.
Considering that the sentence, in question recognizes, in
virtue of the facts which it declares, in relation to the
evidence in the case: (1) that the invoice issued by the
railroad company in favor of the plaintiff contemplated that
the empty receptacles referred to in the complaint should
be returned to the consignors with wines and liquors; (2)
that when the said merchandise reached their destination,
their delivery to the consignee was refused by the station
agent without justification and with fraudulent intent, and
(3) that the lack of delivery of these goods when they were
demanded by the plaintiff caused him losses and damages
of considerable importance, as he was a wholesale vendor
of wines and liquors and he failed to realize the profits
when he was unable to fill the orders sent to him by the
consignors of the receptacles:
Considering that upon this basis there is need of upholding
the four assignments of error, as the original complaint did
not contain any cause of action arising from non-fulfillment
of a contract of transportation, because the action was not
based on the delay of the goods nor on any contractual
relation between the parties litigant and, therefore, article
371 of the Code of Commerce, on which the decision
appealed from is based, is not applicable; but it limits to
asking for reparation for losses and damages produced on
the patrimony of the plaintiff on account of the unjustified
and fraudulent refusal of the carrier to deliver the goods
consigned to the plaintiff as stated by the sentence, and
the carrier's responsibility is clearly laid down in article
1902 of the Civil Code which binds, in virtue of the next
article, the defendant company, because the latter is
connected with the person who caused the damage by
relations of economic character and by administrative
hierarchy. (Emphasis supplied.)
The above case is pertinent because it shows that the
same act may come under both the Penal Code and the
Civil Code. In that case, the action of the agent was
unjustified and fraudulent and therefore could have been
the subject of a criminal action. And yet, it was held to be
also a proper subject of a civil action under article 1902 of
the Civil Code. It is also to be noted that it was the
employer and not the employee who was being sued.
Let us now examine the cases previously decided by this
Court.
In the leading case of Rakes vs. Atlantic Gulf and Pacific
Co. (7 Phil., 359, 362-365 [year 1907]), the trial court
awarded damages to the plaintiff, a laborer of the
defendant, because the latter had negligently failed to
repair a tramway in consequence of which the rails slid off
while iron was being transported, and caught the plaintiff
whose leg was broken. This Court held:
It is contended by the defendant, as its first defense to the
action that the necessary conclusion from these collated
laws is that the remedy for injuries through negligence lies
only in a criminal action in which the official criminally
responsible must be made primarily liable and his
employer held only subsidiarily to him. According to this
theory the plaintiff should have procured the arrest of the
representative of the company accountable for not
repairing the track, and on his prosecution a suitable fine
should have been imposed, payable primarily by him and
secondarily by his employer.
This reasoning misconceived the plan of the Spanish
codes upon this subject. Article 1093 of the Civil Code
makes obligations arising from faults or negligence not
punished by the law, subject to the provisions of Chapter II
of Title XVI. Section 1902 of that chapter reads:
"A person who by an act or omission causes damage to
another when there is fault or negligence shall be obliged
to repair the damage so done.
"SEC. 1903. The obligation imposed by the preceeding
article is demandable, not only for personal acts and
omissions, but also for those of the persons for whom they
should be responsible.
"The father, and on his death or incapacity, the mother, is
liable for the damages caused by the minors who live with
them.
xxx xxx xxx
"Owners or directors of an establishment or enterprise are
equally liable for the damages caused by their employees
in the service of the branches in which the latter may be
employed or in the performance of their duties.
xxx xxx xxx
"The liability referred to in this article shall cease when the
persons mentioned therein prove that they employed all
the diligence of a good father of a family to avoid the
damage."
As an answer to the argument urged in this particular
action it may be sufficient to point out that nowhere in our
general statutes is the employer penalized for failure to
provide or maintain safe appliances for his workmen. His
obligation therefore is one 'not punished by the laws' and
falls under civil rather than criminal jurisprudence. But the
answer may be a broader one. We should be reluctant,
under any conditions, to adopt a forced construction of
these scientific codes, such as is proposed by the
defendant, that would rob some of these articles of effect,
would shut out litigants against their will from the civil
courts, would make the assertion of their rights dependent
upon the selection for prosecution of the proper criminal
offender, and render recovery doubtful by reason of the
strict rules of proof prevailing in criminal actions. Even if
these articles had always stood alone, such a construction
would be unnecessary, but clear light is thrown upon their
meaning by the provisions of the Law of Criminal
Procedure of Spain (Ley de Enjuiciamiento Criminal),
which, though never in actual force in these Islands, was
formerly given a suppletory or explanatory effect. Under
article 111 of this law, both classes of action, civil and
criminal, might be prosecuted jointly or separately, but
while the penal action was pending the civil was
suspended. According to article 112, the penal action once
started, the civil remedy should be sought therewith,
unless it had been waived by the party injured or been
expressly reserved by him for civil proceedings for the
future. If the civil action alone was prosecuted, arising out
of a crime that could be enforced only on private
complaint, the penal action thereunder should be
extinguished. These provisions are in harmony with those
of articles 23 and 133 of our Penal Code on the same
subject.
An examination of this topic might be carried much further,
but the citation of these articles suffices to show that the
civil liability was not intended to be merged in the criminal
nor even to be suspended thereby, except as expressly
provided in the law. Where an individual is civilly liable for
a negligent act or omission, it is not required that the
injured party should seek out a third person criminally
liable whose prosecution must be a condition precedent to
the enforcement of the civil right.
Under article 20 of the Penal Code the responsibility of an
employer may be regarded as subsidiary in respect of
criminal actions against his employees only while they are
in process of prosecution, or in so far as they determine
the existence of the criminal act from which liability arises,
and his obligation under the civil law and its enforcement
in the civil courts is not barred thereby unless by the
election of the injured person. Inasmuch as no criminal
proceeding had been instituted, growing our of the
accident in question, the provisions of the Penal Code can
not affect this action. This construction renders it
unnecessary to finally determine here whether this
subsidiary civil liability in penal actions has survived the
laws that fully regulated it or has been abrogated by the
American civil and criminal procedure now in force in the
Philippines.
The difficulty in construing the articles of the code above
cited in this case appears from the briefs before us to have
arisen from the interpretation of the words of article 1093,
"fault or negligence not punished by law," as applied to the
comprehensive definition of offenses in articles 568 and
590 of the Penal Code. It has been shown that the liability
of an employer arising out of his relation to his employee
who is the offender is not to be regarded as derived from
negligence punished by the law, within the meaning of
articles 1902 and 1093. More than this, however, it cannot
be said to fall within the class of acts unpunished by the
law, the consequence of which are regulated by articles
1902 and 1903 of the Civil Code. The acts to which these
articles are applicable are understood to be those not
growing out of pre-existing duties of the parties to one
another. But where relations already formed give rise to
duties, whether springing from contract or quasi contract,
then breaches of those duties are subject to articles 1101,
1103, and 1104 of the same code. A typical application of
this distinction may be found in the consequences of a
railway accident due to defective machinery supplied by
the employer. His liability to his employee would arise out
of the contract of employment, that to the passengers out
of the contract for passage, while that to the injured
bystander would originate in the negligent act itself.
In Manzanares vs. Moreta, 38 Phil., 821 (year 1918), the
mother of the 8 of 9-year-old child Salvador Bona brought
a civil action against Moreta to recover damages resulting
from the death of the child, who had been run over by an
automobile driven and managed by the defendant. The
trial court rendered judgment requiring the defendant to
pay the plaintiff the sum of P1,000 as indemnity: This
Court in affirming the judgment, said in part:
If it were true that the defendant, in coming from the
southern part of Solana Street, had to stop his auto before
crossing Real Street, because he had met vehicles which
were going along the latter street or were coming from the
opposite direction along Solana Street, it is to be believed
that, when he again started to run his auto across said
Real Street and to continue its way along Solana Street
northward, he should have adjusted the speed of the auto
which he was operating until he had fully crossed Real
Street and had completely reached a clear way on Solana
Street. But, as the child was run over by the auto precisely
at the entrance of Solana Street, this accident could not
have occurred if the auto had been running at a slow
speed, aside from the fact that the defendant, at the
moment of crossing Real Street and entering Solana
Street, in a northward direction, could have seen the child
in the act of crossing the latter street from the sidewalk on
the right to that on the left, and if the accident had
occurred in such a way that after the automobile had run
over the body of the child, and the child's body had already
been stretched out on the ground, the automobile still
moved along a distance of about 2 meters, this
circumstance shows the fact that the automobile entered
Solana Street from Real Street, at a high speed without
the defendant having blown the horn. If these precautions
had been taken by the defendant, the deplorable accident
which caused the death of the child would not have
occurred.
It will be noticed that the defendant in the above case
could have been prosecuted in a criminal case because
his negligence causing the death of the child was
punishable by the Penal Code. Here is therefore a clear
instance of the same act of negligence being a proper
subject-matter either of a criminal action with its
consequent civil liability arising from a crime or of an
entirely separate and independent civil action for fault or
negligence under article 1902 of the Civil Code. Thus, in
this jurisdiction, the separate individually of a cuasi-delito
or culpa aquiliana under the Civil Code has been fully and
clearly recognized, even with regard to a negligent act for
which the wrongdoer could have been prosecuted and
convicted in a criminal case and for which, after such a
conviction, he could have been sued for this civil liability
arising from his crime.
Years later (in 1930) this Court had another occasion to
apply the same doctrine. In Bernal and Enverso vs. House
and Tacloban Electric & Ice Plant, Ltd., 54 Phil., 327, the
parents of the five-year-old child, Purificacion Bernal,
brought a civil action to recover damages for the child's
death as a result of burns caused by the fault and
negligence of the defendants. On the evening of April 10,
1925, the Good Friday procession was held in Tacloban,
Leyte. Fortunata Enverso with her daughter Purificacion
Bernal had come from another municipality to attend the
same. After the procession the mother and the daughter
with two others were passing along Gran Capitan Street in
front of the offices of the Tacloban Electric & Ice Plant,
Ltd., owned by defendants J. V. House, when an
automobile appeared from the opposite direction. The little
girl, who was slightly ahead of the rest, was so frightened
by the automobile that she turned to run, but unfortunately
she fell into the street gutter where hot water from the
electric plant was flowing. The child died that same night
from the burns. The trial courts dismissed the action
because of the contributory negligence of the plaintiffs. But
this Court held, on appeal, that there was no contributory
negligence, and allowed the parents P1,000 in damages
from J. V. House who at the time of the tragic occurrence
was the holder of the franchise for the electric plant. This
Court said in part:
Although the trial judge made the findings of fact
hereinbefore outlined, he nevertheless was led to order the
dismissal of the action because of the contributory
negligence of the plaintiffs. It is from this point that a
majority of the court depart from the stand taken by the
trial judge. The mother and her child had a perfect right to
be on the principal street of Tacloban, Leyte, on the
evening when the religious procession was held. There
was nothing abnormal in allowing the child to run along a
few paces in advance of the mother. No one could foresee
the coincidence of an automobile appearing and of a
frightened child running and falling into a ditch filled with
hot water. The doctrine announced in the much debated
case of Rakes vs. Atlantic Gulf and Pacific Co. ([1907]), 7
Phil., 359), still rule. Article 1902 of the Civil Code must
again be enforced. The contributory negligence of the child
and her mother, if any, does not operate as a bar to
recovery, but in its strictest sense could only result in
reduction of the damages.
It is most significant that in the case just cited, this Court
specifically applied article 1902 of the Civil Code. It is thus
that although J. V. House could have been criminally
prosecuted for reckless or simple negligence and not only
punished but also made civilly liable because of his
criminal negligence, nevertheless this Court awarded
damages in an independent civil action for fault or
negligence under article 1902 of the Civil Code.
In Bahia vs. Litonjua and Leynes (30 Phil., 624 [year
1915), the action was for damages for the death of the
plaintiff's daughter alleged to have been caused by the
negligence of the servant in driving an automobile over the
child. It appeared that the cause of the mishap was a
defect in the steering gear. The defendant Leynes had
rented the automobile from the International Garage of
Manila, to be used by him in carrying passengers during
the fiesta of Tuy, Batangas. Leynes was ordered by the
lower court to pay P1,000 as damages to the plaintiff. On
appeal this Court reversed the judgment as to Leynes on
the ground that he had shown that the exercised the care
of a good father of a family, thus overcoming the
presumption of negligence under article 1903. This Court
said:
As to selection, the defendant has clearly shown that he
exercised the care and diligence of a good father of a
family. He obtained the machine from a reputable garage
and it was, so far as appeared, in good condition. The
workmen were likewise selected from a standard garage,
were duly licensed by the Government in their particular
calling, and apparently thoroughly competent. The
machine had been used but a few hours when the
accident occurred and it is clear from the evidence that the
defendant had no notice, either actual or constructive, of
the defective condition of the steering gear.
The legal aspect of the case was discussed by this Court
thus:
Article 1903 of the Civil Code not only establishes liability
in cases of negligence, but also provides when the liability
shall cease. It says:
"The liability referred to in this article shall cease when the
persons mentioned therein prove that they employed all
the diligence of a good father of a family to avoid the
damage."
From this article two things are apparent: (1) That when an
injury is caused by the negligence of a servant or
employee there instantly arises a presumption of law that
there was negligence on the part of the matter or employer
either in the selection of the servant or employee, or in
supervision over him after the selection, or both; and (2)
that presumption is juris tantum and not juris et de jure,
and consequently, may be rebutted. It follows necessarily
that if the employer shows to the satisfaction of the court
that in selection and supervision he has exercised the care
and diligence of a good father of a family, the presumption
is overcome and he is relieve from liability.
This theory bases the responsibility of the master
ultimately on his own negligence and not on that of his
servant.
The doctrine of the case just cited was followed by this
Court in Cerf vs. Medel (33 Phil., 37 [year 1915]). In the
latter case, the complaint alleged that the defendant's
servant had so negligently driven an automobile, which
was operated by defendant as a public vehicle, that said
automobile struck and damaged the plaintiff's motorcycle.
This Court, applying article 1903 and following the rule in
Bahia vs. Litonjua and Leynes, said in part (p. 41) that:
The master is liable for the negligent acts of his servant
where he is the owner or director of a business or
enterprise and the negligent acts are committed while the
servant is engaged in his master's employment as such
owner.
Another case which followed the decision in Bahia vs.
Litonjua and Leynes was Cuison vs. Norton & Harrison
Co., 55 Phil., 18 (year 1930). The latter case was an action
for damages brought by Cuison for the death of his seven-
year-old son Moises. The little boy was on his way to
school with his sister Marciana. Some large pieces of
lumber fell from a truck and pinned the boy underneath,
instantly killing him. Two youths, Telesforo Binoya and
Francisco Bautista, who were working for Ora, an
employee of defendant Norton & Harrison Co., pleaded
guilty to the crime of homicide through reckless negligence
and were sentenced accordingly. This Court, applying
articles 1902 and 1903, held:
The basis of civil law liability is not respondent superior but
the relationship of pater familias. This theory bases the
liability of the master ultimately on his own negligence and
not on that of his servant. (Bahia vs. Litonjua and Leynes
[1915], 30 Phil., 624; Cangco vs. Manila Railroad Co.
[1918], 38 Phil., 768.)
In Walter A. Smith & Co. vs. Cadwallader Gibson Lumber
Co., 55 Phil., 517 (year 1930) the plaintiff brought an
action for damages for the demolition of its wharf, which
had been struck by the steamer Helen C belonging to the
defendant. This Court held (p. 526):
The evidence shows that Captain Lasa at the time the
plaintiff's wharf collapsed was a duly licensed captain,
authorized to navigate and direct a vessel of any tonnage,
and that the appellee contracted his services because of
his reputation as a captain, according to F. C.
Cadwallader. This being so, we are of the opinion that the
presumption of liability against the defendant has been
overcome by the exercise of the care and diligence of a
good father of a family in selecting Captain Lasa, in
accordance with the doctrines laid down by this court in
the cases cited above, and the defendant is therefore
absolved from all liability.
It is, therefore, seen that the defendant's theory about his
secondary liability is negatived by the six cases above set
forth. He is, on the authority of these cases, primarily and
directly responsible in damages under article 1903, in
relation to article 1902, of the Civil Code.
Let us now take up the Philippine decisions relied upon by
the defendant. We study first, City of Manila vs. Manila
Electric Co., 52 Phil., 586 (year 1928). A collision between
a truck of the City of Manila and a street car of the Manila
Electric Co. took place on June 8, 1925. The truck was
damaged in the amount of P1,788.27. Sixto Eustaquio, the
motorman, was prosecuted for the crime of damage to
property and slight injuries through reckless imprudence.
He was found guilty and sentenced to pay a fine of P900,
to indemnify the City of Manila for P1,788.27, with
subsidiary imprisonment in case of insolvency. Unable to
collect the indemnity from Eustaquio, the City of Manila
filed an action against the Manila Electric Company to
obtain payment, claiming that the defendant was
subsidiarily liable. The main defense was that the
defendant had exercised the diligence of a good father of a
family to prevent the damage. The lower court rendered
judgment in favor of the plaintiff. This Court held, in part,
that this case was governed by the Penal Code, saying:
With this preliminary point out of the way, there is no
escaping the conclusion that the provisions of the Penal
Code govern. The Penal Code in easily understandable
language authorizes the determination of subsidiary
liability. The Civil Code negatives its application by
providing that civil obligations arising from crimes or
misdemeanors shall be governed by the provisions of the
Penal Code. The conviction of the motorman was a
misdemeanor falling under article 604 of the Penal Code.
The act of the motorman was not a wrongful or negligent
act or omission not punishable by law. Accordingly, the
civil obligation connected up with the Penal Code and not
with article 1903 of the Civil Code. In other words, the
Penal Code affirms its jurisdiction while the Civil Code
negatives its jurisdiction. This is a case of criminal
negligence out of which civil liability arises and not a case
of civil negligence.
xxx xxx xxx
Our deduction, therefore, is that the case relates to the
Penal Code and not to the Civil Code. Indeed, as pointed
out by the trial judge, any different ruling would permit the
master to escape scot-free by simply alleging and proving
that the master had exercised all diligence in the selection
and training of its servants to prevent the damage. That
would be a good defense to a strictly civil action, but might
or might not be to a civil action either as a part of or
predicated on conviction for a crime or misdemeanor. (By
way of parenthesis, it may be said further that the
statements here made are offered to meet the argument
advanced during our deliberations to the effect that article
0902 of the Civil Code should be disregarded and codal
articles 1093 and 1903 applied.)
It is not clear how the above case could support the
defendant's proposition, because the Court of Appeals
based its decision in the present case on the defendant's
primary responsibility under article 1903 of the Civil Code
and not on his subsidiary liability arising from Fontanilla's
criminal negligence. In other words, the case of City of
Manila vs. Manila Electric Co., supra, is predicated on an
entirely different theory, which is the subsidiary liability of
an employer arising from a criminal act of his employee,
whereas the foundation of the decision of the Court of
Appeals in the present case is the employer's primary
liability under article 1903 of the Civil Code. We have
already seen that this is a proper and independent
remedy.
Arambulo vs. Manila Electric Co. (55 Phil., 75), is another
case invoked by the defendant. A motorman in the employ
of the Manila Electric Company had been convicted o
homicide by simple negligence and sentenced, among
other things, to pay the heirs of the deceased the sum of
P1,000. An action was then brought to enforce the
subsidiary liability of the defendant as employer under the
Penal Code. The defendant attempted to show that it had
exercised the diligence of a good father of a family in
selecting the motorman, and therefore claimed exemption
from civil liability. But this Court held:
In view of the foregoing considerations, we are of opinion
and so hold, (1) that the exemption from civil liability
established in article 1903 of the Civil Code for all who
have acted with the diligence of a good father of a family,
is not applicable to the subsidiary civil liability provided in
article 20 of the Penal Code.
The above case is also extraneous to the theory of the
defendant in the instant case, because the action there
had for its purpose the enforcement of the defendant's
subsidiary liability under the Penal Code, while in the case
at bar, the plaintiff's cause of action is based on the
defendant's primary and direct responsibility under article
1903 of the Civil Code. In fact, the above case destroys
the defendant's contention because that decision
illustrates the principle that the employer's primary
responsibility under article 1903 of the Civil Code is
different in character from his subsidiary liability under the
Penal Code.
In trying to apply the two cases just referred to, counsel for
the defendant has failed to recognize the distinction
between civil liability arising from a crime, which is
governed by the Penal Code, and the responsibility for
cuasi-delito or culpa aquiliana under the Civil Code, and
has likewise failed to give the importance to the latter type
of civil action.
The defendant-petitioner also cites Francisco vs. Onrubia
(46 Phil., 327). That case need not be set forth. Suffice it
to say that the question involved was also civil liability
arising from a crime. Hence, it is as inapplicable as the two
cases above discussed.
The foregoing authorities clearly demonstrate the separate
individuality of cuasi-delitos or culpa aquiliana under the
Civil Code. Specifically they show that there is a distinction
between civil liability arising from criminal negligence
(governed by the Penal Code) and responsibility for fault
or negligence under articles 1902 to 1910 of the Civil
Code, and that the same negligent act may produce either
a civil liability arising from a crime under the Penal Code,
or a separate responsibility for fault or negligence under
articles 1902 to 1910 of the Civil Code. Still more
concretely, the authorities above cited render it
inescapable to conclude that the employer — in this case
the defendant-petitioner — is primarily and directly liable
under article 1903 of the Civil Code.
The legal provisions, authors, and cases already invoked
should ordinarily be sufficient to dispose of this case. But
inasmuch as we are announcing doctrines that have been
little understood in the past, it might not be inappropriate to
indicate their foundations.
Firstly, the Revised Penal Code in article 365 punishes not
only reckless but also simple negligence. If we were to
hold that articles 1902 to 1910 of the Civil Code refer only
to fault or negligence not punished by law, according to the
literal import of article 1093 of the Civil Code, the legal
institution of culpa aquiliana would have very little scope
and application in actual life. Death or injury to persons
and damage to property through any degree of negligence
— even the slightest — would have to be indemnified only
through the principle of civil liability arising from a crime. In
such a state of affairs, what sphere would remain for
cuasi-delito or culpa aquiliana? We are loath to impute to
the lawmaker any intention to bring about a situation so
absurd and anomalous. Nor are we, in the interpretation of
the laws, disposed to uphold the letter that killeth rather
than the spirit that giveth life. We will not use the literal
meaning of the law to smother and render almost lifeless a
principle of such ancient origin and such full-grown
development as culpa aquiliana or cuasi-delito, which is
conserved and made enduring in articles 1902 to 1910 of
the Spanish Civil Code.
Secondly, to find the accused guilty in a criminal case,
proof of guilt beyond reasonable doubt is required, while in
a civil case, preponderance of evidence is sufficient to
make the defendant pay in damages. There are numerous
cases of criminal negligence which can not be shown
beyond reasonable doubt, but can be proved by a
preponderance of evidence. In such cases, the defendant
can and should be made responsible in a civil action under
articles 1902 to 1910 of the Civil Code. Otherwise, there
would be many instances of unvindicated civil wrongs. Ubi
jus ibi remedium.
Thirdly, to hold that there is only one way to make
defendant's liability effective, and that is, to sue the driver
and exhaust his (the latter's) property first, would be
tantamount to compelling the plaintiff to follow a devious
and cumbersome method of obtaining relief. True, there is
such a remedy under our laws, but there is also a more
expeditious way, which is based on the primary and direct
responsibility of the defendant under article 1903 of the
Civil Code. Our view of the law is more likely to facilitate
remedy for civil wrongs, because the procedure indicated
by the defendant is wasteful and productive of delay, it
being a matter of common knowledge that professional
drivers of taxis and similar public conveyance usually do
not have sufficient means with which to pay damages.
Why, then, should the plaintiff be required in all cases to
go through this roundabout, unnecessary, and probably
useless procedure? In construing the laws, courts have
endeavored to shorten and facilitate the pathways of right
and justice.
At this juncture, it should be said that the primary and
direct responsibility of employers and their presumed
negligence are principles calculated to protect society.
Workmen and employees should be carefully chosen and
supervised in order to avoid injury to the public. It is the
masters or employers who principally reap the profits
resulting from the services of these servants and
employees. It is but right that they should guarantee the
latter's careful conduct for the personnel and patrimonial
safety of others. As Theilhard has said, "they should
reproach themselves, at least, some for their weakness,
others for their poor selection and all for their negligence."
And according to Manresa, "It is much more equitable and
just that such responsibility should fall upon the principal or
director who could have chosen a careful and prudent
employee, and not upon the injured person who could not
exercise such selection and who used such employee
because of his confidence in the principal or director." (Vol.
12, p. 622, 2nd Ed.) Many jurists also base this primary
responsibility of the employer on the principle of
representation of the principal by the agent. Thus, Oyuelos
says in the work already cited (Vol. 7, p. 747) that before
third persons the employer and employee "vienen a ser
como una sola personalidad, por refundicion de la del
dependiente en la de quien le emplea y utiliza." ("become
as one personality by the merging of the person of the
employee in that of him who employs and utilizes him.") All
these observations acquire a peculiar force and
significance when it comes to motor accidents, and there
is need of stressing and accentuating the responsibility of
owners of motor vehicles.
Fourthly, because of the broad sweep of the provisions of
both the Penal Code and the Civil Code on this subject,
which has given rise to the overlapping or concurrence of
spheres already discussed, and for lack of understanding
of the character and efficacy of the action for culpa
aquiliana, there has grown up a common practice to seek
damages only by virtue of the civil responsibility arising
from a crime, forgetting that there is another remedy,
which is by invoking articles 1902-1910 of the Civil Code.
Although this habitual method is allowed by our laws, it
has nevertheless rendered practically useless and
nugatory the more expeditious and effective remedy based
on culpa aquiliana or culpa extra-contractual. In the
present case, we are asked to help perpetuate this usual
course. But we believe it is high time we pointed out to the
harm done by such practice and to restore the principle of
responsibility for fault or negligence under articles 1902 et
seq. of the Civil Code to its full rigor. It is high time we
caused the stream of quasi-delict or culpa aquiliana to flow
on its own natural channel, so that its waters may no
longer be diverted into that of a crime under the Penal
Code. This will, it is believed, make for the better
safeguarding of private rights because it re-establishes an
ancient and additional remedy, and for the further reason
that an independent civil action, not depending on the
issues, limitations and results of a criminal prosecution,
and entirely directed by the party wronged or his counsel,
is more likely to secure adequate and efficacious redress.
In view of the foregoing, the judgment of the Court of
Appeals should be and is hereby affirmed, with costs
against the defendant-petitioner.
Yulo, C.J., Moran, Ozaeta and Paras, JJ., concur.
G.R. No. L-22686 January 30, 1968
BERNARDO JOCSON and MARIA D. JOCSON, plaintiffs-
appellees,
vs.
REDENCION GLORIOSO, defendant-appellant.
Ernesto C. Hidalgo for plaintiffs-appellees.
Farol Law Office for defendant-appellant.
FERNANDO, J.:
For the death of a three-year-old boy who was run over by
a passenger jeepney, two actions were filed by the
parents, the first, against its owner and the driver for culpa
aquiliana, and the other, against the driver for homicide
thru reckless imprudence, the criminal action having been
instituted while the civil case was pending trial. The civil
case was dismissed, the lower court being of the opinion
that "in conscience" it could not "hold the . . . defendant
driver guilty of negligence or lack of care resulting in or
contributory to, the said accident." 1 There was an appeal,
but it did not prosper, the Court of Appeals dismissing it for
failure of appellants to pay the docketing fees.
The criminal case against the driver had a different
outcome. He was convicted by the trial court of homicide
thru reckless imprudence "and aside from the prison
sentence imposed upon him, was ordered to indemnify,
the heirs of the deceased in the sum of P6,000.00 with
subsidiary imprisonment in case of insolvency." 2
The accused driver appealed raising as one of the issues
"the propriety of sentencing the driver to pay indemnity to
the parents of the deceased child, considering the fact that
the civil action for damages brought by the parents of the
child against the driver and the owner of the vehicle was
dismissed." 3 The matter being taken to the Court of
Appeals, the decision was modified as to the duration of
the prison sentence, but insofar as the civil indemnity was
concerned, was affirmed. After the judgment became final,
a writ for the execution of the civil liability was returned
unsatisfied due to the insolvency of the accused.
The parents, now plaintiffs-appellees, in an action with the
Court of First Instance of Manila against defendant, now
appellant, sought to enforce such civil liability against her
as owner of the jeepney, pursuant to Article 103 of the
Revised Penal Code. At the trial, the principal defense
pressed was barred by a prior judgment, the attention of
the Court having been called to the civil case for damages
based on culpa aquiliana, filed against defendant and her
driver, a case, which as noted, was dismissed. The
defense was not considered meritorious, and judgment
was rendered by the Hon. Carmelino Alvendia, finding
defendant liable for subsidiary liability in accordance with
Article 103 of the Revised Penal Code in the sum of
P6,030.00, with costs.
Hence, this appeal. Since the principal legal question was
that pressed before the trial judge and his determination of
such question was in accordance with the settled law, the
decision must be affirmed.
Article 103 4 is quite explicit. For a felony committed by
servants, pupils, workmen, apprentices, or employees in
the discharge of their duties, the employers, teachers,
persons, and corporations are made subsidiarily liable. As
authoritatively interpreted by this Court in Martinez v.
Barredo, 5 "judgment of conviction, the absence of any
collusion between the defendant and the offended party,
should bind the person subsidiarily liable." Such a decision
is of a "conclusive nature . . .;" 6 it is "binding and
conclusive upon defendant not only with regard to its civil
liability but also with regard to its amount because the
liability of an employer cannot be separated but follows
that of his employee." 7 The latest manifestation of
approval of the Martinez doctrine appears in Bantoto v.
Bobis, 8 recently promulgated.
Thus the novel question presented is whether the previous
dismissal of an action based on culpa aquiliana precludes
the application of the plain and explicit command of Article
103 of the Revised Penal Code. We do not think so. Diana
v. Batangas Transportation Co., 9 while not decisive,
furnishes some light.
The opinion by Justice Bautista Angelo noted that such
appeal arose "from a case originally instituted in the Court
of First Instance of Laguna wherein plaintiffs seek to
recover from defendant as a party subsidiarily liable for the
crime committed by an employee in the discharge of his
duty the sum of P2,500 as damages, plus legal interest,
and the costs of action." 10 The pertinent facts follow:
"Plaintiffs are the heirs of one Florenio Diana, a former
employee of the defendant. On June 21, 1945, while
Florenio Diana was riding in Truck No. 14, belonging to the
defendant, driven by Vivencio Bristol, the truck ran into a
ditch at Bay, Laguna resulting in the death of Florenio
Diana and other passengers. Subsequently, Vivencio
Bristol was charged and convicted of multiple homicide
through reckless imprudence wherein among other things,
he was ordered to indemnify the heirs of the deceased in
the amount of P2,000. When the decision became final, a
writ of execution was issued in order that the indemnity
may be satisfied, but the sheriff filed a return stating that
the accused had no visible leviable property. The present
case was started when defendant failed to pay the
indemnity under its subsidiary liability under article 103 of
the Revised Penal Code. The complaint was filed on
October 19, 1948 (civil case No. 9221)." 11
On December 13 of the same year, defendant Batangas
Transportation Co. filed a motion to dismiss on the ground
of the pendency of the other action between the same
parties for the same cause, the plaintiffs seeking to
recover from the aforesaid defendant the amount of
P4,500 as damages resulting from the death of Florenio
Diana while on board a truck of defendant allegedly due to
the negligent act of its driver Bristol. Clearly then, the basis
of the action was culpa aquiliana. On December 16, 1948,
there was a written opposition to such motion to dismiss.
Then on February 3, 1949, came an order of dismissal
from the lower court which found the motion well-founded.
The reconsideration sought having been denied, the
appeal, as set forth in the opening paragraph of the
opinion, was taken.
In reversing the action of the lower court, this Court stated
that there could be no doubt "with regard to the identity of
parties." 12 It is not so concerning the identity of reliefs
prayed for, . . . ." 13 As was stated in the opinion: "It
should be noted that the present case (civil case No. 9221)
stems from a criminal case in which the driver of the
defendant was found guilty of multiple homicide through
reckless imprudence and was ordered to pay an indemnity
of P2,000 for which the defendant is made subsidiarily
liable under article 103 of the Revised Penal Code, while
the other case (civil case No. 8023) is an action for
damages based on culpa aquiliana which underlies the
civil liability predicated on articles 1902 to 1910 of the old
Civil Code. These two cases involve two different
remedies." 14
It was the conclusion of this Court then: "Considering the
distinguishing characteristics of the two cases, which
involve two different remedies, it can hardly be said that
there is identity of reliefs in both actions as to make the
present case fall under the operation of Rule 8, section 1
(d) of the Rules of Court. In other words, it is a mistake to
say that the present action should be dismissed because
of the pendency of another action between the same
parties involving the same cause. Evidently, both cases
involve different causes of action. In fact, when the Court
of Appeals dismissed the action based on culpa aquiliana
(civil case No. 8022), this distinction was stressed. It was
there said that the negligent act committed by defendant's
employee is not a quasi crime, for such negligence is
punished by law. What plaintiffs should have done was to
institute an action under Article 103 of the Revised Penal
Code (CA-G.R. No. 3632-R). And this is what plaintiffs
have done. To deprive them now of this remedy, after the
conviction of defendant's employee, would be to deprive
them altogether of the indemnity to which they are entitled
by law and by a court decision, which injustice it is our duty
to prevent." 15 On the same principle then, the previous
dismissal of the action based on culpa aquiliana could not
be a bar to the enforcement of the subsidiary liability
required by Article 103 of the Revised Penal Code.
What clearly emerges then is the controlling force of the
principle that once there is a conviction for a felony, final in
character, the employer, according to the plain and explicit
command of Article 103 of the Revised Penal Code, is
subsidiarily liable, if it be shown that the commission
thereof was in the discharge of the duties of such
employee.
Another consideration is equally decisive in the affirmance
of the appealed judgment. A decision of conviction of the
driver was affirmed by the Court of Appeals, which
rejected the defense of a bar by a prior judgment arising
from the dismissal of the action based on culpa aquiliana.
"To take up this issue anew, [according to the lower]
Court, would be equivalent for this Court to review the
decision of the Court of Appeals. That would be
preposterous and against the law. While it is true that the
defendant in this case was not a party to the Criminal
Case, since the liability sought to be enforced against her
in this case is merely subsidiary and is a necessary
consequence of the judgment of conviction rendered in the
criminal case, the decision of the Court of Appeals denying
the defense of prior judgment set up by Mendoza is
equally applicable against defendant in this case." 16
No error could be imputed the lower court for viewing the
matter thus. From Shioji vs. Harvey, 17 the principle is
undisputed that a lower court judge "cannot enforce
different decrees than those rendered by the superior
court. If each and every Court of First Instance could enjoy
the privilege of overruling decisions of [a higher court],
there would be no end to litigation, and judicial chaos
would result." As noted by this Court, the emphatic
language employed was "intentionally framed . . . to keep
lower courts from assuming supervisory jurisdiction to
interpret or to reverse the judgment of the higher court." 18
To the same effect is the view that there is compelling
reason for denying a lower court the power to refuse "to
issue such writ [of execution] or quash it or order its stay,
when the judgment had been reviewed and affirmed by an
appellate court, for it cannot review or interfere with any
matter decided on appeal, or give other or further relief, or
assume supervisory jurisdiction to interpret or reverse the
judgment of the higher court." 19 The latest opinion of this
Court on the matter, speaking through Justice Dizon
follows: "It is elementary — so elementary, indeed, that
even freshmen law students know it — that an inferior
court has no legal authority to set aside a final and
executory decision. . . ." 20
The lower court, therefore, acted strictly in compliance with
a principle, authoritative and binding in character, in
holding defendant-appellant subsidiarily liable.
WHEREFORE, the appealed decision is affirmed. With
costs against defendant-appellant.1äwphï1.ñët
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal,
Bengzon, J.P., Zaldivar and Castro, JJ., concur.
Sanchez and Angeles, JJ., took no part.
Footnotes
1Decision, Record on Appeal, p. 17.
2Decision, Record on Appeal, p. 71.
3Id., p. 71.
4Art. 103. "Subsidiary civil liability of other persons. — The
subsidiary liability established in the next preceding article
shall also apply to employers, teachers, persons, and
corporations engaged in any kind of industry for felonies
committed by their servants, pupils, workmen, apprentices,
or employees in the discharge of their duties." Article 102
speaks of subsidiary civil liability of innkeepers,
tavernkeepers, and proprietors of establishments.
581 Phil. 1, 3 (1948).
6Nagrampa v. Mulvaney McMillan & Co., Inc. 97 Phil. 724
(1955).
7Miranda v. Malate Garage & Taxicab, Inc., 99 Phil. 670,
673 (1956). See also Manalo and Salvador v. Robles
Trans Co., Inc., 99 Phil. 729 (1956).
8L-18966, Nov. 22, 1966.
993 Phil. 391 (1953).
10Diana v. Batangas Trans. Co., 93 Phil. 391, 392 (1953).
11Id., at p. 392.
12Id., at p. 393.
13Id., at p. 393.
14Id., at pp. 393-394.
15Id., at pp. 394-395.
16Decision of the lower court, Record on Appeal, pp. 73-
74.
1743 Phil. 333, 337 (1922). According to Cabigao and
Izquierdo v. Del Rosario and Lim, 44 Phil. 182, 185 (1922)
citing Shioji v. Harvey, "Inferior courts cannot vary the
mandate of the superior court, or examine it, for any other
purpose than execution; nor give any other further relief;
nor review it, upon any matter decided on appeal for error
apparent; nor intermeddle with it further than to settle so
much as has been remanded.
18Chua A. H. Lee v. Mapa, 51 Phil. 624, 628 (1928). See
also Philippine Trust Co. v. Santamaria, 53 Phil. 463
(1929).
19Armor v. Jugo, 77 Phil. 703, 707 (1946).
20Usaffe Veterans Asso., Inc. v. Treasurer of the Phil., L-
18393, December 17, 1966.
EN BANC
G.R. No. L-4920 June 29, 1953
FRANCISCO DIANA and SOLEDAD DIANA, plaintiffs-
appellants,
vs.
BATANGAS TRANSPORTATION CO., defendant-
appellee.
Zosimo D. Tanalega for appellants.
Gibbs, Gibbs, Chuidian and Quasha for appellee.
BAUTISTA ANGELO, J.:
The present appeal stems from a case originally instituted
in the Court of First Instance of Laguna wherein plaintiffs
seek to recover from defendant as a party subsidiarily
liable for the crime committed by an employee in the
discharge of his duty the sum of P2,500 as damages, plus
legal interest, and the costs of action.
The appeal was originally taken to the Court of Appeals
but the case was certified to this court on the ground that it
poses merely a question of law.
Plaintiffs are the heirs of one Florenio Diana, a former
employee of the defendant. On June 21, 1945, while
Florenio Diana was riding in Truck No. 14, belonging to the
defendant, driven by Vivencio Bristol, the truck ran into a
ditch at Bay, Laguna, resulting in the death of Florenio
Diana and other passengers. Subsequently, Vivencio
Bristol was charged and convicted of multiple homicide
through reckless imprudence wherein, among other things,
he was ordered to indemnify the heirs of the deceased in
the amount of P2,000. When the decision became final, a
writ of execution was issued in order that the indemnity
may be satisfied but the sheriff filed a return stating that
the accused had no visible leviable property. The present
case was started when defendant failed to pay the
indemnity under its subsidiary liability under article 103 of
the Revised Penal Code. The complaint was filed on
October 19, 1948 (civil case No. 9221).
On December 13, 1948, defendant filed a motion to dis-
miss on the ground that there was another action pending
between the same parties for the same cause (civil case
No. 8023 of the Court of First Instance of Laguna) in which
the same plaintiffs herein sought to recover from the same
defendant the amount of P4,500 as damages resulting
from the death of Florenio Diana who died while on board
a truck of defendant due to the negligent act of the driver
Vivencio Bristol. This first action was predicated on culpa
aquiliana.
On December 16, 1948, plaintiffs filed a written opposition
to the motion to dismiss. On February 3, 1949, the lower
court, having found the motion well founded, dismissed the
complaint, without special pronouncement as to costs; and
their motion for reconsideration having been denied,
plaintiffs took the present appeal.
The only question to be determined is whether the lower
court correctly dismissed the complaint on the sole ground
that there was another action pending between the same
parties for the same cause under Rule 8, section 1(d) of
the Rules of Court.
The determination of this issue hinges on the proper
interpretation of Rule 8, section 1 (d) which allows the
dismissal of a case on the ground that "there is another
action pending between the same parties for the same
cause." Former Justice Moran, commenting on this
ground, says: "In order that this ground may be invoked,
there must be between the action under consideration and
the other action, (1) identity of parties, or at least such as
representing the same interest in both actions; (2) identity
of rights asserted and relief prayed for, the relief being
found on the same facts; and (3) the identity on the two
preceding particulars should be such that any judgment
which may be rendered on the other action will, regardless
of which party is successful, amount to res adjudicata in
the action under consideration." [I Moran, Comments on
the Rules of Court, (1952), p. 168.].
There is no doubt with regard to the identity of parties. In
both cases, the plaintiffs and the defendant are the same.
With regard to the identity of reliefs prayed for, a different
consideration should be made. It should be noted that the
present case (civil case No. 9221) stems from a criminal
case in which the driver of the defendant was found guilty
of multiple homicide through reckless imprudence and was
ordered to pay an indemnity of P2,000 for which the
defendant is made subsidiarily liable under article 103 of
the Revised Penal Code, while the other case (civil case
No. 8023) is an action for damages based on culpa
aquiliana which underlies the civil liability predicated on
articles 1902 to 1910 of the old Civil Code. These two
cases involve two different remedies. As this court aptly
said: "A quasi-delict or culpa aquiliana is a separate legal
institution under the Civil Code, with a substantivity all its
own, and individuality that is entirely apart and
independent from a delict or crime. * * *. A distinction
exists between the civil liability arising from a crime and
the responsibility for cuasi-delictos or culpa extra-
contractual. The same negligent act causing dam- ages
may produce civil liability arising from a crime under article
100 of the Revised Penal Code, or create an action for
cuasi-delito or culpa extra-contractual under articles 1902-
1910 of the Civil Code (Barredo vs. Garcia and Al- mario,
73 Phil., 607). The other differences pointed out between
crimes and culpa aquiliana are:.
1. That crimes affect the public interest, while cuasi-delitos
are only of private concern.
2. That, consequently, the Penal Code punishes or
corrects the criminal act, while the Civil Code, by means of
indemnification, merely repairs the damage.
3. That delicts are not as broad as quasi-delicts, because
the former are punished only if there is a penal law clearly
covering them, while the latter, cuasi-delitos, include all
acts in which 'any kind of fault or negligence intervenes.
(P. 611, supra.).

Considering the distinguishing characteristics of the two

cases, which involve two different remedies, it can hardly
be said that there is identity of reliefs in both actions as to
make the present case fall under the operation of Rule 8,
section 1(d) of the Rules of Court. In other words, it is a
mistake to say that the present action should be dismissed
because of the pendency of another action between the
same parties involving the same cause. Evidently, both
cases involve different causes of action. In fact, when the
Court of Appeals dismissed the action based on culpa
aquiliana (civil case No. 8023), this distinction was
stressed. It was there said that the negligent act committed
by defendant's employee is not a quasi crime, for such
negligence is punishable by law. What plaintiffs should
have done was to institute an action under article 103 of
the Revised Penal Code (CA-G.R. No. 3632-R). And this is
what plaintiffs have done. To deprive them now of this
remedy, after the conviction of defendant's employee,
would be to deprive them altogether of the indemnity to
which they are entitled by law and by a court decision,
which injustice it is our duty to prevent.

Wherefore, the order appealed from is reversed and the

case is hereby remanded to the lower court for further
proceedings. No pronouncement as to costs.

Paras, C.J., Pablo, Bengzon, Padilla, Tuason,

Montemayor, Jugo, and Labrador, JJ., concur.
G.R. No. L-24803 May 26, 1977
PEDRO ELCANO and PATRICIA ELCANO, in their
capacity as Ascendants of Agapito Elcano, deceased,
plaintiffs-appellants,
vs.
REGINALD HILL, minor, and MARVIN HILL, as father and
Natural Guardian of said minor, defendants-appellees.
Cruz & Avecilla for appellants.
Marvin R. Hill & Associates for appellees.
BARREDO, J.:
Appeal from the order of the Court of First Instance of
Quezon City dated January 29, 1965 in Civil Case No. Q-
8102, Pedro Elcano et al. vs. Reginald Hill et al.
dismissing, upon motion to dismiss of defendants, the
complaint of plaintiffs for recovery of damages from
defendant Reginald Hill, a minor, married at the time of the
occurrence, and his father, the defendant Marvin Hill, with
whom he was living and getting subsistence, for the killing
by Reginald of the son of the plaintiffs, named Agapito
Elcano, of which, when criminally prosecuted, the said
accused was acquitted on the ground that his act was not
criminal, because of "lack of intent to kill, coupled with
mistake."
Actually, the motion to dismiss based on the following
grounds:
1. The present action is not only against but a
violation of section 1, Rule 107, which is now Rule III, of
the Revised Rules of Court;
2. The action is barred by a prior judgment which is
now final and or in res-adjudicata;
3. The complaint had no cause of action against
defendant Marvin Hill, because he was relieved as
guardian of the other defendant through emancipation by
marriage.
(P. 23, Record [p. 4, Record on Appeal.])
was first denied by the trial court. It was only upon motion
for reconsideration of the defendants of such denial,
reiterating the above grounds that the following order was
issued:
Considering the motion for reconsideration filed by the
defendants on January 14, 1965 and after thoroughly
examining the arguments therein contained, the Court
finds the same to be meritorious and well-founded.
WHEREFORE, the Order of this Court on December 8,
1964 is hereby reconsidered by ordering the dismissal of
the above entitled case.
SO ORDERED.
Quezon City, Philippines, January 29, 1965. (p. 40, Record
[p. 21, Record on Appeal.)
Hence, this appeal where plaintiffs-appellants, the spouses
Elcano, are presenting for Our resolution the following
assignment of errors:
THE LOWER COURT ERRED IN DISMISSING THE
CASE BY UPHOLDING THE CLAIM OF DEFENDANTS
THAT -
I As We view the foregoing background of this case, the two
THE PRESENT ACTION IS NOT ONLY AGAINST BUT
ALSO A VIOLATION OF SECTION 1, RULE 107, NOW
RULE 111, OF THE REVISED RULES OF COURT, AND
THAT SECTION 3(c) OF RULE 111, RULES OF COURT
IS APPLICABLE;
II
THE ACTION IS BARRED BY A PRIOR JUDGMENT
WHICH IS NOW FINAL OR RES-ADJUDICTA;
III
THE PRINCIPLES OF QUASI-DELICTS, ARTICLES 2176
TO 2194 OF THE CIVIL CODE, ARE INAPPLICABLE IN
THE INSTANT CASE; and
IV
THAT THE COMPLAINT STATES NO CAUSE OF
ACTION AGAINST DEFENDANT MARVIN HILL
BECAUSE HE WAS RELIEVED AS GUARDIAN OF THE
OTHER DEFENDANT THROUGH EMANCIPATION BY
MARRIAGE. (page 4, Record.)
It appears that for the killing of the son, Agapito, of
plaintiffs-appellants, defendant- appellee Reginald Hill was
prosecuted criminally in Criminal Case No. 5102 of the
Court of First Instance of Quezon City. After due trial, he
was acquitted on the ground that his act was not criminal
because of "lack of intent to kill, coupled with mistake."
Parenthetically, none of the parties has favored Us with a
copy of the decision of acquittal, presumably because
appellants do not dispute that such indeed was the basis
stated in the court's decision. And so, when appellants
filed their complaint against appellees Reginald and his
father, Atty. Marvin Hill, on account of the death of their
son, the appellees filed the motion to dismiss above-
referred to.
decisive issues presented for Our resolution are:
1. Is the present civil action for damages barred by
the acquittal of Reginald in the criminal case wherein the
action for civil liability, was not reversed?
2. May Article 2180 (2nd and last paragraphs) of
the Civil Code he applied against Atty. Hill, notwithstanding
the undisputed fact that at the time of the occurrence
complained of. Reginald, though a minor, living with and
getting subsistenee from his father, was already legally
married?
The first issue presents no more problem than the need for
a reiteration and further clarification of the dual character,
criminal and civil, of fault or negligence as a source of
obligation which was firmly established in this jurisdiction
in Barredo vs. Garcia, 73 Phil. 607. In that case, this Court
postulated, on the basis of a scholarly dissertation by
Justice Bocobo on the nature of culpa aquiliana in relation
to culpa criminal or delito and mere culpa or fault, with
pertinent citation of decisions of the Supreme Court of
Spain, the works of recognized civilians, and earlier
jurisprudence of our own, that the same given act can
result in civil liability not only under the Penal Code but
also under the Civil Code. Thus, the opinion holds:
The, above case is pertinent because it shows that the
same act machinist. come under both the Penal Code and
the Civil Code. In that case, the action of the agent killeth
unjustified and fraudulent and therefore could have been
the subject of a criminal action. And yet, it was held to be
also a proper subject of a civil action under article 1902 of
the Civil Code. It is also to be noted that it was the
employer and not the employee who was being sued. (pp.
615-616, 73 Phil.). 1
It will be noticed that the defendant in the above case
could have been prosecuted in a criminal case because
his negligence causing the death of the child was
punishable by the Penal Code. Here is therefore a clear
instance of the same act of negligence being a proper
subject matter either of a criminal action with its
consequent civil liability arising from a crime or of an
entirely separate and independent civil action for fault or
negligence under article 1902 of the Civil Code. Thus, in
this jurisdiction, the separate individuality of a cuasi-delito
or culpa aquiliana, under the Civil Code has been fully and
clearly recognized, even with regard to a negligent act for
which the wrongdoer could have been prosecuted and
convicted in a criminal case and for which, after such a
conviction, he could have been sued for this civil liability
arising from his crime. (p. 617, 73 Phil.) 2
It is most significant that in the case just cited, this Court
specifically applied article 1902 of the Civil Code. It is thus
that although J. V. House could have been criminally
prosecuted for reckless or simple negligence and not only
punished but also made civilly liable because of his
criminal negligence, nevertheless this Court awarded
damages in an independent civil action for fault or
negligence under article 1902 of the Civil Code. (p. 618, 73
Phil.) 3
The legal provisions, authors, and cases already invoked
should ordinarily be sufficient to dispose of this case. But
inasmuch as we are announcing doctrines that have been
little understood, in the past, it might not he inappropriate
to indicate their foundations.
Firstly, the Revised Penal Code in articles 365 punishes
not only reckless but also simple negligence. If we were to
hold that articles 1902 to 1910 of the Civil Code refer only
to fault or negligence not punished by law, accordingly to
the literal import of article 1093 of the Civil Code, the legal
institution of culpa aquiliana would have very little scope
and application in actual life. Death or injury to persons
and damage to property- through any degree of
negligence - even the slightest - would have to be
Idemnified only through the principle of civil liability arising
from a crime. In such a state of affairs, what sphere would
remain for cuasi-delito or culpa aquiliana? We are loath to
impute to the lawmaker any intention to bring about a
situation so absurd and anomalous. Nor are we, in the
interpretation of the laws, disposed to uphold the letter that
killeth rather than the spirit that giveth life. We will not use
the literal meaning of the law to smother and render almost
lifeless a principle of such ancient origin and such full-
grown development as culpa aquiliana or cuasi-delito,
which is conserved and made enduring in articles 1902 to
1910 of the Spanish Civil Code.
Secondary, to find the accused guilty in a criminal case,
proof of guilt beyond reasonable doubt is required, while in
a civil case, preponderance of evidence is sufficient to
make the defendant pay in damages. There are numerous
cases of criminal negligence which can not be shown
beyond reasonable doubt, but can be proved by a
preponderance of evidence. In such cases, the defendant
can and should be made responsible in a civil action under
articles 1902 to 1910 of the Civil Code. Otherwise. there
would be many instances of unvindicated civil wrongs.
"Ubi jus Idemnified remedium." (p. 620,73 Phil.)
Fourthly, because of the broad sweep of the provisions of
both the Penal Code and the Civil Code on this subject,
which has given rise to the overlapping or concurrence of
spheres already discussed, and for lack of understanding
of the character and efficacy of the action for culpa
aquiliana, there has grown up a common practice to seek
damages only by virtue of the civil responsibility arising
from a crime, forgetting that there is another remedy,
which is by invoking articles 1902-1910 of the Civil Code.
Although this habitual method is allowed by, our laws, it
has nevertheless rendered practically useless and
nugatory the more expeditious and effective remedy based
on culpa aquiliana or culpa extra-contractual. In the
present case, we are asked to help perpetuate this usual
course. But we believe it is high time we pointed out to the
harms done by such practice and to restore the principle of
responsibility for fault or negligence under articles 1902 et
seq. of the Civil Code to its full rigor. It is high time we
caused the stream of quasi-delict or culpa aquiliana to flow
on its own natural channel, so that its waters may no
longer be diverted into that of a crime under the Penal
Code. This will, it is believed, make for the better
safeguarding or private rights because it realtor, an ancient
and additional remedy, and for the further reason that an
independent civil action, not depending on the issues,
limitations and results of a criminal prosecution, and
entirely directed by the party wronged or his counsel, is
more likely to secure adequate and efficacious redress. (p.
621, 73 Phil.)
Contrary to an immediate impression one might get upon a
reading of the foregoing excerpts from the opinion in
Garcia that the concurrence of the Penal Code and the
Civil Code therein referred to contemplate only acts of
negligence and not intentional voluntary acts - deeper
reflection would reveal that the thrust of the
pronouncements therein is not so limited, but that in fact it
actually extends to fault or culpa. This can be seen in the
reference made therein to the Sentence of the Supreme
Court of Spain of February 14, 1919, supra, which involved
a case of fraud or estafa, not a negligent act. Indeed,
Article 1093 of the Civil Code of Spain, in force here at the
time of Garcia, provided textually that obligations "which
are derived from acts or omissions in which fault or
negligence, not punishable by law, intervene shall be the
subject of Chapter II, Title XV of this book (which refers to
quasi-delicts.)" And it is precisely the underline
qualification, "not punishable by law", that Justice Bocobo
emphasized could lead to an ultimo construction or
interpretation of the letter of the law that "killeth, rather
than the spirit that giveth lift- hence, the ruling that "(W)e
will not use the literal meaning of the law to smother and
render almost lifeless a principle of such ancient origin and
such full-grown development as culpa aquiliana or quasi-
delito, which is conserved and made enduring in articles
1902 to 1910 of the Spanish Civil Code." And so, because
Justice Bacobo was Chairman of the Code Commission
that drafted the original text of the new Civil Code, it is to
be noted that the said Code, which was enacted after the
Garcia doctrine, no longer uses the term, 11 not
punishable by law," thereby making it clear that the
concept of culpa aquiliana includes acts which are criminal
in character or in violation of the penal law, whether
voluntary or matter. Thus, the corresponding provisions to
said Article 1093 in the new code, which is Article 1162,
simply says, "Obligations derived from quasi-delicto shall
be governed by the provisions of Chapter 2, Title XVII of
this Book, (on quasi-delicts) and by special laws." More
precisely, a new provision, Article 2177 of the new code
provides:
ART. 2177. Responsibility for fault or negligence
under the preceding article is entirely separate and distinct
from the civil liability arising from negligence under the
Penal Code. But the plaintiff cannot recover damages
twice for the same act or omission of the defendant.
According to the Code Commission: "The foregoing
provision (Article 2177) through at first sight startling, is not
so novel or extraordinary when we consider the exact
nature of criminal and civil negligence. The former is a
violation of the criminal law, while the latter is a "culpa
aquiliana" or quasi-delict, of ancient origin, having always
had its own foundation and individuality, separate from
criminal negligence. Such distinction between criminal
negligence and "culpa extracontractual" or "cuasi-delito"
has been sustained by decision of the Supreme Court of
Spain and maintained as clear, sound and perfectly
tenable by Maura, an outstanding Spanish jurist.
Therefore, under the proposed Article 2177, acquittal from
an accusation of criminal negligence, whether on
reasonable doubt or not, shall not be a bar to a
subsequent civil action, not for civil liability arising from
criminal negligence, but for damages due to a quasi-delict
or 'culpa aquiliana'. But said article forestalls a double
recovery.", (Report of the Code) Commission, p. 162.)
Although, again, this Article 2177 does seem to literally
refer to only acts of negligence, the same argument of
Justice Bacobo about construction that upholds "the spirit
that giveth lift- rather than that which is literal that killeth
the intent of the lawmaker should be observed in applying
the same. And considering that the preliminary chapter on
human relations of the new Civil Code definitely
establishes the separability and independence of liability in
a civil action for acts criminal in character (under Articles
29 to 32) from the civil responsibility arising from crime
fixed by Article 100 of the Revised Penal Code, and, in a
sense, the Rules of Court, under Sections 2 and 3 (c),
Rule 111, contemplate also the same separability, it is
"more congruent with the spirit of law, equity and justice,
and more in harmony with modern progress"- to borrow
the felicitous relevant language in Rakes vs. Atlantic. Gulf
and Pacific Co., 7 Phil. 359, to hold, as We do hold, that
Article 2176, where it refers to "fault or negligencia covers
not only acts "not punishable by law" but also acts criminal
in character, whether intentional and voluntary or
negligent. Consequently, a separate civil action lies
against the offender in a criminal act, whether or not he is
criminally prosecuted and found guilty or acquitted,
provided that the offended party is not allowed, if he is
actually charged also criminally, to recover damages on
both scores, and would be entitled in such eventuality only
to the bigger award of the two, assuming the awards made
in the two cases vary. In other words, the extinction of civil
liability referred to in Par. (e) of Section 3, Rule 111, refers
exclusively to civil liability founded on Article 100 of the
Revised Penal Code, whereas the civil liability for the
same act considered as a quasi-delict only and not as a
crime is not estinguished even by a declaration in the
criminal case that the criminal act charged has not
happened or has not been committed by the accused.
Briefly stated, We here hold, in reiteration of Garcia, that
culpa aquiliana includes voluntary and negligent acts
which may be punishable by law.4
It results, therefore, that the acquittal of Reginal Hill in the
criminal case has not extinguished his liability for quasi-
delict, hence that acquittal is not a bar to the instant action
against him.
Coming now to the second issue about the effect of
Reginald's emancipation by marriage on the possible civil
liability of Atty. Hill, his father, it is also Our considered
opinion that the conclusion of appellees that Atty. Hill is
already free from responsibility cannot be upheld.
While it is true that parental authority is terminated upon
emancipation of the child (Article 327, Civil Code), and
under Article 397, emancipation takes place "by the
marriage of the minor (child)", it is, however, also clear that
pursuant to Article 399, emancipation by marriage of the
minor is not really full or absolute. Thus "(E)mancipation
by marriage or by voluntary concession shall terminate
parental authority over the child's person. It shall enable
the minor to administer his property as though he were of
age, but he cannot borrow money or alienate or encumber
real property without the consent of his father or mother, or
guardian. He can sue and be sued in court only with the
assistance of his father, mother or guardian."
Now under Article 2180, "(T)he obligation imposed by
article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is
responsible. The father and, in case of his death or
incapacity, the mother, are responsible. The father and, in
case of his death or incapacity, the mother, are
responsible for the damages caused by the minor children
who live in their company." In the instant case, it is not
controverted that Reginald, although married, was living
with his father and getting subsistence from him at the time
of the occurrence in question. Factually, therefore,
Reginald was still subservient to and dependent on his
father, a situation which is not unusual.
It must be borne in mind that, according to Manresa, the
reason behind the joint and solidary liability of presuncion
with their offending child under Article 2180 is that is the
obligation of the parent to supervise their minor children in
order to prevent them from causing damage to third
persons. 5 On the other hand, the clear implication of
Article 399, in providing that a minor emancipated by
marriage may not, nevertheless, sue or be sued without
the assistance of the parents, is that such emancipation
does not carry with it freedom to enter into transactions or
do any act that can give rise to judicial litigation. (See
Manresa, Id., Vol. II, pp. 766-767, 776.) And surely, killing
someone else invites judicial action. Otherwise stated, the
marriage of a minor child does not relieve the parents of
the duty to see to it that the child, while still a minor, does
not give answerable for the borrowings of money and
alienation or encumbering of real property which cannot be
done by their minor married child without their consent.
(Art. 399; Manresa, supra.)
Accordingly, in Our considered view, Article 2180 applies
to Atty. Hill notwithstanding the emancipation by marriage
of Reginald. However, inasmuch as it is evident that
Reginald is now of age, as a matter of equity, the liability of
Atty. Hill has become milling, subsidiary to that of his son.
WHEREFORE, the order appealed from is reversed and
the trial court is ordered to proceed in accordance with the
foregoing opinion. Costs against appellees.
Fernando (Chairman), Antonio, and Martin, JJ., concur.
Concepcion Jr., J, is on leave.
Martin, J, was designated to sit in the Second Division.
Separate Opinions
AQUINO, J, concurring:
Article 2176 of the Civil Code comprehends any culpable
act, which is blameworthy, when judged by accepted legal
standards. "The Idea thus expressed is undoubtedly board
enough to include any rational conception of liability for the
tortious acts likely to be developed in any society." (Street,
J. in Daywalt vs. Corporacion de PP. Agustinos Recoletos,
39 Phil. 587, 600). See article 38, Civil Code and the ruling
that "the infant tortfeasor is liable in a civil action to the
injured person in the same manner and to the same extent
as an adult" (27 Am. Jur. 812 cited by Bocobo, J., in
Magtibay vs. Tiangco, 74 Phil. 576, 579).
Separate Opinions
AQUINO, J, concurring:
Article 2176 of the Civil Code comprehends any culpable
act, which is blameworthy, when judged by accepted legal
standards. "The Idea thus expressed is undoubtedly board
enough to include any rational conception of liability for the
tortious acts likely to be developed in any society." (Street,
J. in Daywalt vs. Corporacion de PP. Agustinos Recoletos,
39 Phil. 587, 600). See article 38, Civil Code and the ruling
that "the infant tortfeasor is liable in a civil action to the
injured person in the same manner and to the same extent
as an adult" (27 Am. Jur. 812 cited by Bocobo, J., in
Magtibay vs. Tiangco, 74 Phil. 576, 579).
Footnotes
1 Referring to Sentence of the Supreme Court of
Spain of February 14, 1919.
2 Referring to Manzanares vs. Moreta, 38 Phil.
821.
3 Referring to Bernal et al, vs. House et al., 54
Phil. 327.
4 Parenthetically, Manresa seemingly holds. the
contrary view thus:
"Sin embargo, para no ineurrir en error hay que tener en
cuenta que los lineage. del precepts contenido en el
presente articulo son bastante mas reducidos, pues no se
hallan comprendidos en el todos los datios que pues tener
por causa la culpa o la negligencia.
"En efecto, examinando detenidamente la terminos
general de la culpa y de la negligencia. se observe que,
tanto en una como en otra de dichas causas, hay tres
generoso o tres especies distintas, a saber:
1. La que represents una accion u omision
voluntaria por la que results incumplida una obligacion
anteriormente constituida.

2. La que sin existencia de una obligacion anterior
produce un dano o perjuicio que, teniendo su origen en un
hecho ilicito, no reviste los caracteres de delito o falta; y
3. La que teniendo por origen un hecho que
constituya delito o falta produce una responsabilidad civil
como accesoria de la responsabilidad criminal.
"La primera de estas tres especies de culpa o negligencia
es siempre accesoria de una obligacion principal, cuyo
incumplimiento da origen a la terminos especial de la
culpa en materia de contratos, y el eatudio de esta debe
harms al examinar cada contrato, en especial, como lo
hicimos asi, analizando entoces los peculiares efectos de
dicha culpa en cada uno de ellos.
"La tercera de las especies citadas es accesoria tambien,
pues no puede concebirse su existencia sin la de un
delicto o falts que la produzca. Es decir, que solo al lado
de la responsabilidad criminal puede supuesto esa
responsabilidad civil y la obligacion proveniente de la
culpa, ineurrir como una consecuencia de la
responsabilidad criminal, y, por consiguente, su examen y
regulacion perusal. al Derecho penal.
5 "Nuestro Codigo no ha seguido la escuela
italiana, sino que mas bien se ha instantaneous, en el
criterio de la doctrina full-grown puesto que impone la
obligacion de reparar, el dano causado en virtud de una
presuncion juris tecum de culpa por parte del que tiene
bajo su autoridad o dependecia al causante del daho,
derivada del hicimos de no haber puesto el cuidado y la
vinculos debida en los actos de sus subordinados para
evitar dicho resultado. Asi es que, segun el parrafo ultimo
del art. 1,903, cesa dicha responsabilidad cuando se
prueba que los obligados por los actos ajenos emplearon
toda la diligencia de un buen padre de familia. Luego no
es la causa de la obligacion impuesta la representacion, ni
el interes, ni la necesidad de que haya quienes responda
del dano causado por el que no tiene personalidad in
garantias de specialist. para responsabilidad por siendo
sino el incumplimiento implicito o supuesto de los deberes
de precaucion y de prudencia que impuesta los vinculos
civiles que unicamente al obligado con las persons., por
quienes debe representacion, el mal causado, Por ese
motivo coloca dicha obligacion entre las que prudencia de
la culpa of negligentj (pp. 670671, Manresa, Codigo Civil
Espanol, Vol. XII.)

"Como consecuencia de ello, results que la unica especie

de culpa y omisiones o negligencia que puede ser y es
meanwhile.' del presente capitulo, es la separability, o sea
la que sin la existencia de una obligacion anterior, y sin
ningun antecedents contractual, produce un dano o
perjuico que tiene su origen en una accion u omision
culpable solo civilmente; as decir, que siendo ilicita, no
reviste sin embargo, los caracteres de un delito o falta por
no estar penada por la ley. Y aun dentro de estos lineage
hay que restringir aun mas los terminos o la materia
propria de este articulo, el cual se refiere unicamente a la
culpa o negligencia personates del obligado, pero no a las
que prudencia de actos o de omisiones de persons.,
distintas de este." (pp. 642-643, Vol. XII, Manresa, Codigo
Civil Espanol.)
G.R. No. 108017 April 3, 1995
MARIA BENITA A. DULAY, in her own behalf and in behalf
of the minor children KRIZTEEN ELIZABETH, BEVERLY
MARIE and NAPOLEON II, all surnamed DULAY,
petitioners,
vs.
THE COURT OF APPEALS, Former Eighth Division, HON.
TEODORO P. REGINO, in his capacity as Presiding
Judge of the Regional Trial Court National Capital Region,
Quezon City, Br. 84, SAFEGUARD INVESTIGATION AND
SECURITY CO., INC., and SUPERGUARD SECURITY
CORPORATION, respondents.
BIDIN, J.:
This petition for certiorari prays for the reversal of the
decision of the Court of Appeals dated October 29, 1991 in
CA-G.R. CV No. 24646 which affirmed the order of the
Regional Trial Court dismissing Civil Case No. Q-89-1751,
and its resolution dated November 17, 1991 denying
herein, petitioner's motion for reconsideration.
The antecedent facts of the case are as follows:
On December 7, 1988, an altercation between Benigno
Torzuela and Atty. Napoleon Dulay occurred at the "Big
Bang Sa Alabang," Alabang Village, Muntinlupa as a result
of which Benigno Torzuela, the security guard on duty at
the said carnival, shot and killed Atty. Napoleon Dulay.
Herein petitioner Maria Benita A. Dulay, widow of the
deceased Napoleon Dulay, in her own behalf and in behalf
of her minor children, filed on February 8, 1989 an action
for damages against Benigno Torzuela and herein private
respondents Safeguard Investigation and Security Co.,
Inc., ("SAFEGUARD") and/or Superguard Security Corp.
("SUPERGUARD"), alleged employers of defendant
Torzuela. The complaint, docketed as Civil Case No. Q-
89-1751 among others alleges the following:
1. ...
Defendants SAFEGUARD INVESTIGATION AND
SECURITY CO., INC., (Defendant Safeguard) and
SUPERGUARD SECURITY CORPORATION (Defendant
Superguard) are corporations duly organized and existing
in accordance with Philippine laws, with offices at 10th
Floor, Manufacturers Building, Inc., Plaza Santa Cruz,
Manila. They are impleaded as alternative defendants for,
while the former appears to be the employer of defendant
BENIGNO TORZUELA (defendant TORZUELA), the latter
impliedly acknowledged responsibility for the acts of
defendant TORZUELA by extending its sympathies to
plaintiffs.
Defendant BENIGNO TORZUELA is of legal age, an
employee of defendant SAFEGUARD and/or defendant
SUPERGUARD and, at the time of the incident
complained of, was under their control and supervision. . .
. liable.
3. On December 7, 1988 at around 8:00 a.m.,
defendant TORZUELA, while he was on duty as security
guard at the "Big Bang sa Alabang," Alabang Village,
Muntinlupa, Metro Manila shot and killed NAPOLEON V.
DULAY with a .38 caliber revolver belonging to defendant
SAFEGUARD, and/or SUPERGUARD (per Police Report
dated January 7, 1989, copy attached as Annex A);
4. The incident resulting in the death of
NAPOLEON V. DULAY was due to the concurring
negligence of the defendants. Defendant TORZUELA'S
wanton and reckless discharge of the firearm issued to him
by defendant SAFEGUARD and/or SUPERGUARD was
the immediate and proximate cause of the injury, while the
negligence of defendant SAFEGUARD and/or
SUPERGUARD consists in its having failed to exercise the
diligence of a good father of a family in the supervision and
control of its employee to avoid the injury.
xxx xxx xxx
(Rollo, pp. 117-118)
Petitioners prayed for actual, compensatory, moral and
exemplary damages, and attorney's fees. The said Civil
Case No. Q-89-1751 was raffled to Branch 84 of the
Regional Trial Court of Quezon City, presided by
respondent Judge Teodoro Regino.
On March 2, 1989, private respondent SUPERGUARD
filed a Motion to Dismiss on the ground that the complaint
does not state a valid cause of action. SUPERGUARD
claimed that Torzuela's act of shooting Dulay was beyond
the scope of his duties, and that since the alleged act of
shooting was committed with deliberate intent (dolo), the
civil liability therefor is governed by Article 100 of the
Revised Penal Code, which states:
Art. 100. Civil liability of a person guilty of a felony. —
Every person criminally liable for a felony is also civilly
Respondent SUPERGUARD further alleged that a
complaint for damages based on negligence under Article
2176 of the New Civil Code, such as the one filed by
petitioners, cannot lie, since the civil liability under Article
2176 applies only to quasi-offenses under Article 365 of
the Revised Penal Code. In addition, the private
respondent argued that petitioners' filing of the complaint
is premature considering that the conviction of Torzuela in
a criminal case is a condition sine qua non for the
employer's subsidiary liability (Rollo, p. 55-59).
Respondent SAFEGUARD also filed a motion praying that
it be excluded as defendant on the ground that defendant
Torzuela is not one of its employees (Rollo, p. 96).
Petitioners opposed both motions, stating that their cause
of action against the private respondents is based on their
liability under Article 2180 of the New Civil Code, which
provides:
Art. 2180. The obligation imposed by Article 2176 is
demandable not only for one's own acts or omissions, but
also for those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope
of their assigned tasks, even though the former are not
engaged in any business or an industry.
xxx xxx xxx
(Emphasis supplied)
Petitioners contended that a suit against alternative
defendants is allowed under Rule 3, Section 13 of the
Rules of Court. Therefore, the inclusion of private
respondents as alternative defendants in the complaint is
justified by the following: the Initial Investigation Report
prepared by Pat. Mario Tubon showing that Torzuela is an
employee of SAFEGUARD; and through overt acts,
SUPERGUARD extended its sympathies to petitioners
(Rollo, pp. 64 and 98).
Meanwhile, an Information dated March 21, 1989 charging
Benigno Torzuela with homicide was filed before the
Regional Trial Court of Makati and was docketed as
Criminal Case No. 89-1896.
On April 13, 1989, respondent Judge Regino issued an
order granting SUPERGUARD'S motion to dismiss and
SAFEGUARD'S motion for exclusion as defendant. The
respondent judge held that the complaint did not state
facts necessary or sufficient to constitute a quasi-delict
since it does not mention any negligence on the part of
Torzuela in shooting Napoleon Dulay or that the same was
done in the performance of his duties. Respondent judge
ruled that mere allegations of the concurring negligence of
the defendants (private respondents herein) without stating
the facts showing such negligence are mere conclusions
of law (Rollo, p. 106). Respondent judge also declared that
the complaint was one for damages founded on crimes
punishable under Articles 100 and 103 of the Revised
Penal Code as distinguished from those arising from,
quasi-delict. The dispositive portion of the order dated April
13, 1989 states:
WHEREFORE, this Court holds that in view of the material
and ultimate facts alleged in the verified complaint and in
accordance with the applicable law on the matter as well
as precedents laid down by the Supreme Court, the
complaint against the alternative defendants Superguard
Security Corporation and Safeguard Investigation and
Security Co., Inc., must be and (sic) it is hereby dismissed.
(Rollo, p. 110)
The above order was affirmed by the respondent court and
petitioners' motion for reconsideration thereof was denied.
Petitioners take exception to the assailed decision and
insist that quasi-delicts are not limited to acts of negligence
but also cover acts that are intentional and voluntary, citing
Andamo v. IAC (191 SCRA 195 [1990]). Thus, petitioners
insist that Torzuela' s act of shooting Napoleon Dulay
constitutes a quasi-delict actionable under Article 2176 of
the New Civil Code.
Petitioners further contend that under Article 2180 of the
New Civil Code, private respondents are primarily liable for
their negligence either in the selection or supervision of
their employees. This liability is independent of the
employee's own liability for fault or negligence and is
distinct from the subsidiary civil liability under Article 103 of
the Revised Penal Code. The civil action against the
employer may therefore proceed independently of the
criminal action pursuant to Rule 111 Section 3 of the Rules
of Court. Petitioners submit that the question of whether
Torzuela is an employee of respondent SUPERGUARD or
SAFEGUARD would be better resolved after trial.
Moreover, petitioners argue that Torzuela's act of shooting
Dulay is also actionable under Article 33 of the New Civil
Code, to wit:
Art. 33. In cases of defamation, fraud, and physical
injuries, a civil action for damages, entirely separate and
distinct from the criminal action, may be brought by the
injured party. Such civil action shall proceed independently
of the criminal prosecution, and shall require only a
preponderance of evidence. (Emphasis supplied)
In the same vein, petitioners cite Section 3, Rule 111 of
the Rules of Court which provides:
Rule 111. . . . .
Sec. 3. When civil action may proceed independently —
In the cases provided for in Articles 32, 33, 34 and 2176 of
the Civil Code of the Philippines, the independent civil
action which has been reserved may be brought by the
offended party, shall proceed independently of the criminal
action, and shall require only a preponderance of
evidence. (Emphasis supplied)
The term "physical injuries" under Article 33 has been held
to include consummated, frustrated and attempted
homicide. Thus, petitioners maintain that Torzuela's prior
conviction is unnecessary since the civil action can
proceed independently of the criminal action. On the other
hand, it is the private respondents' argument that since the
act was not committed with negligence, the petitioners
have no cause of action under Articles 2116 and 2177 of
the New Civil Code. The civil action contemplated in Article
2177 is not applicable to acts committed with deliberate
intent, but only applies to quasi-offenses under Article 365
of the Revised Penal Code. Torzuela's act of shooting
Atty. Dulay to death, aside from being purely personal,
was done with deliberate intent and could not have been
part of his duties as security guard. And since Article 2180
of the New Civil Code covers only: acts done within the
scope of the employee's assigned tasks, the private
respondents cannot be held liable for damages.
We find for petitioners.
It is undisputed that Benigno Torzuela is being prosecuted
for homicide for the fatal shooting of Napoleon Dulay. Rule
111 of the Rules on Criminal Procedure provides:
Sec. 1. Institution of criminal and civil actions. When a
criminal action is instituted, the civil action for the recovery
of civil liability is impliedly instituted with the criminal
action, unless the offended party waives the civil action ,
reserves his right to institute it separately or institutes the
civil action prior to the criminal action.
Such civil action includes recovery of indemnity under the
Revised Penal Code, and damages under Articles 32, 33,
34, and 2176 of the Civil Code of the Philippines arising
from the same act or omission of the accused. (Emphasis
supplied)
It is well-settled that the filing of an independent civil action
before the prosecution in the criminal action presents
evidence is even far better than a compliance with the
requirement of express reservation (Yakult Philippines v.
Court of Appeals, 190 SCRA 357 [1990]). This is precisely
what the petitioners opted to do in this case. However, the
private respondents opposed the civil action on the ground
that the same is founded on a delict and not on a quasi-
delict as the shooting was not attended by negligence.
What is in dispute therefore is the nature of the petitioner's
cause of action.
The nature of a cause of action is determined by the facts
alleged in the complaint as constituting the cause of action
(Republic v. Estenzo, 158 SCRA 282 [1988]). The purpose
of an action or suit and the law to govern it is to be
determined not by the claim of the party filing the action,
made in his argument or brief, but rather by the complaint
itself, its allegations and prayer for relief. (De Tavera v.
Philippine Tuberculosis Society, 112 SCRA 243 [1982]).
An examination of the complaint in the present case would
show that the plaintiffs, petitioners herein, are invoking
their right to recover damages against the private
respondents for their vicarious responsibility for the injury
caused by Benigno Torzuela's act of shooting and killing
Napoleon Dulay, as stated in paragraphs 1 and 2 of the
complaint.
Article 2176 of the New Civil Code provides:
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is
no pre-existing contractual relation between the parties is
called a quasi-delict and is governed by the provisions of
this Chapter.
Contrary to the theory of private respondents, there is no
justification for limiting the scope of Article 2176 of the Civil
Code to acts or omissions resulting from negligence. Well-
entrenched is the doctrine that article 2176 covers not only
acts committed with negligence, but also acts which are
voluntary and intentional. As far back as the definitive case
of Elcano v. Hill (77 SCRA 98 [1977]), this Court already
held that:
. . . Article 2176, where it refers to "fault or negligence,"
covers not only acts "not punishable by law" but also acts
criminal in character; whether intentional and voluntary or
negligent. Consequently, a separate civil action against the
offender in a criminal act, whether or not he is criminally
prosecuted and found guilty or acquitted, provided that the
offended party is not allowed, if he is actually charged also
criminally, to recover damages on both scores, and would
be entitled in such eventuality only to the bigger award of
the two, assuming the awards made in the two cases vary.
In other words, the extinction of civil liability referred to in
Par. (e) of Section 3, Rule 111, refers exclusively to civil
liability founded on Article 100 of the Revised Penal Code,
whereas the civil liability for the same act considered as
quasi-delict only and not as a crime is not extinguished
even by a declaration in the criminal case that the criminal
act charged has not happened or has not been committed
by the accused. Briefly stated, We here hold, in reiteration
of Garcia, that culpa aquiliana includes voluntary and
negligent acts which may be punishable by law. (Emphasis
supplied)
The same doctrine was echoed in the case of Andamo v.
Intermediate Appellate Court (191 SCRA 195 [1990]),
wherein the Court held:
Article 2176, whenever it refers to "fault or negligence,"
covers not only acts criminal in character, whether
intentional and voluntary or negligent. Consequently, a civil
action lies against the offender in a criminal act, whether or
not he is prosecuted or found guilty or acquitted, provided
that the offended party is not allowed, (if the tortfeasor is
actually also charged criminally), to recover damages on
both scores, and would be entitled in such eventuality only
to the bigger award of the two, assuming the awards made
in the two cases vary. [citing Virata v. Ochoa, 81 SCRA
472] (Emphasis supplied)
Private respondents submit that the word "intentional" in
the Andamo case is inaccurate obiter, and should be read
as "voluntary" since intent cannot be coupled with
negligence as defined by Article 365 of the Revised Penal
Code. In the absence of more substantial reasons, this
Court will not disturb the above doctrine on the coverage
of Article 2176.
Private respondents further aver that Article 33 of the New
Civil Code applies only to injuries intentionally committed
pursuant to the ruling in Marcia v. CA (120 SCRA 193
[1983]), and that the actions for damages allowed
thereunder are ex-delicto. However, the term "physical
injuries" in Article 33 has already been construed to
include bodily injuries causing death (Capuno v. Pepsi-
Cola Bottling Co. of the Philippines, 121 Phil. 638 [1965);
Carandang v. Santiago, 97 Phil. 94 [1955]). It is not the
crime of physical injuries defined in the Revised Penal
Code. It includes not only physical injuries but also
consummated, frustrated, and attempted homicide
(Madeja v. Caro, 126 SCRA 293 [1983]). Although in the
Marcia case (supra), it was held that no independent civil
action may be filed under Article 33 where the crime is the
result of criminal negligence, it must be noted however,
that Torzuela, the accused in the case at bar, is charged
with homicide, not with reckless imprudence, whereas the
defendant in Marcia was charged with reckless
imprudence. Therefore, in this case, a civil action based on
Article 33 lies.
Private respondents also contend that their liability is
subsidiary under the Revised Penal Code; and that they
are not liable for Torzuela's act which is beyond the scope
of his duties as a security guard. It having been
established that the instant action is not ex-delicto,
petitioners may proceed directly against Torzuela and the
private respondents. Under Article 2180 of the New Civil
Code as aforequoted, when an injury is caused by the
negligence of the employee, there instantly arises a
presumption of law that there was negligence on the part
of the master or employer either in the selection of the
servant or employee, or in supervision over him after
selection or both (Layugan v. Intermediate Appellate
Court, 167 SCRA 363 [1988]). The liability of the employer
under Article 2180 is direct and immediate; it is not
conditioned upon prior recourse against the negligent
employee and a prior showing of the insolvency of such
employee (Kapalaran Bus Lines v. Coronado, 176 SCRA
792 [1989]). Therefore, it is incumbent upon the private
respondents to prove that they exercised the diligence of a
good father of a family in the selection and supervision of
their employee.
Since Article 2176 covers not only acts of negligence but
also acts which are intentional and voluntary, it was
therefore erroneous on the part of the trial court to dismiss
petitioner's complaint simply because it failed to make
allegations of attendant negligence attributable to private
respondents.
With respect to the issue of whether the complaint at hand
states a sufficient cause of action, the general rule is that
the allegations in a complaint are sufficient to constitute a
cause of action against the defendants if, admitting the
facts alleged, the court can render a valid judgment upon
the same in accordance with the prayer therein. A cause of
action exist if the following elements are present, namely:
(1) a right in favor of the plaintiff by whatever means and Court of Appeals, 197 SCRA 663 [1991]). To sustain a
under whatever law it arises or is created; (2) an obligation motion to dismiss for lack of cause of action, the complaint
on the part of the named defendant to respect or not to must show that the claim for relief does not exist rather
violate such right; and (3) an act or omission on the part of than that a claim has been defectively stated, is
such defendant violative of the right of the plaintiff or ambiguous, indefinite or uncertain (Azur v. Provincial
constituting a breach of the obligation of the defendant to Board, 27 SCRA 50 [1969]). Since the petitioners clearly
the plaintiff for which the latter may maintain an action for sustained an injury to their rights under the law, it would be
recovery of damages (Del Bros Hotel Corporation v. CA, more just to allow them to present evidence of such injury.
210 SCRA 33 [1992]); Development Bank of the
Philippines v. Pundogar, 218 SCRA 118 [1993]) WHEREFORE, premises considered, the petition for
review is hereby GRANTED. The decision of the Court of
This Court finds, under the foregoing premises, that the Appeals as well as the Order of the Regional Trial Court
complaint sufficiently alleged an actionable breach on the dated April 13, 1989 are hereby REVERSED and SET
part of the defendant Torzuela and respondents ASIDE. Civil Case No. Q-89-1751 is remanded to the
SUPERGUARD and/or SAFEGUARD. It is enough that the Regional Trial Court for trial on the merits. This decision is
complaint alleged that Benigno Torzuela shot Napoleon immediately executory.
Dulay resulting in the latter's death; that the shooting
occurred while Torzuela was on duty; and that either SO ORDERED.
SUPERGUARD and/or SAFEGUARD was Torzuela's
employer and responsible for his acts. This does not Narvasa, C.J., Regalado, Puno and Mendoza, JJ., concur.
operate however, to establish that the defendants below
are liable. Whether or not the shooting was actually
reckless and wanton or attended by negligence and
whether it was actually done within the scope of Torzuela's
duties; whether the private respondents SUPERGUARD
and/or SAFEGUARD failed to exercise the diligence of a
good father of a family; and whether the defendants are
actually liable, are questions which can be better resolved
after trial on the merits where each party can present
evidence to prove their respective allegations and
defenses. In determining whether the allegations of a
complaint are sufficient to support a cause of action, it
must be borne in mind that the complaint does not have to
establish or allege the facts proving the existence of a
cause of action at the outset; this will have to be done at
the trial on the merits of the case (Del Bros Hotel
Corporation v. CA, supra). If the allegations in a complaint
can furnish a sufficient basis by which the complaint can
be maintained, the same should not be dismissed
regardless of the defenses that may be assessed by the
defendants (Rava Dev't. Corp. v. CA, 211 SCRA 152
[1992] citing Consolidated Bank & Trust Corporation v.
[G.R. NO. 165732 : December 14, 2006]
SAFEGUARD SECURITY AGENCY, INC., and ADMER
PAJARILLO, Petitioners, v. LAURO TANGCO, VAL
TANGCO, VERN LARRY TANGCO, VAN LAURO
TANGCO, VON LARRIE TANGCO, VIEN LARI TANGCO
and VIVIEN LAURIZ TANGCO, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a Petition for Review on Certiorari filed by
Safeguard Security Agency, Inc. (Safeguard) and Admer
Pajarillo (Pajarillo) assailing the Decision1 dated July 16,
2004 and the Resolution2 dated October 20, 2004 issued
by the Court of Appeals (CA) in CA-G.R. CV No. 77462.
On November 3, 1997, at about 2:50 p.m., Evangeline
Tangco (Evangeline) went to Ecology Bank, Katipunan
Branch, Quezon City, to renew her time deposit per advise
of the bank's cashier as she would sign a specimen card.
Evangeline, a duly licensed firearm holder with
corresponding permit to carry the same outside her
residence, approached security guard Pajarillo, who was
stationed outside the bank, and pulled out her firearm from
her bag to deposit the same for safekeeping. Suddenly,
Pajarillo shot Evangeline with his service shotgun hitting
her in the abdomen instantly causing her death.
Lauro Tangco, Evangeline's husband, together with his six
minor children (respondents) filed with the Regional Trial
Court (RTC) of Quezon City, a criminal case of Homicide
against Pajarillo, docketed as Criminal Case No. 0-97-
73806 and assigned to Branch 78. Respondents reserved
their right to file a separate civil action in the said criminal
case. The RTC of Quezon City subsequently convicted
Pajarillo of Homicide in its Decision dated January 19,
2000.3 On appeal to the CA, the RTC decision was
affirmed with modification as to the penalty in a Decision4
dated July 31, 2000. Entry of Judgment was made on
August 25, 2001.
Meanwhile, on January 14, 1998, respondents filed with
RTC, Branch 273, Marikina City, a complaint5 for
damages against Pajarillo for negligently shooting
Evangeline and against Safeguard for failing to observe
the diligence of a good father of a family to prevent the
damage committed by its security guard. Respondents
prayed for actual, moral and exemplary damages and
attorney's fees.
In their Answer,6 petitioners denied the material
allegations in the complaint and alleged that Safeguard
exercised the diligence of a good father of a family in the
selection and supervision of Pajarillo; that Evangeline's
death was not due to Pajarillo's negligence as the latter
acted only in self-defense. Petitioners set up a compulsory
counterclaim for moral damages and attorney's fees.
Trial thereafter ensued. On January 10, 2003, the RTC
rendered its Decision,7 the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered in favor of
the plaintiffs, the heirs of Evangeline Tangco, and against
defendants Admer Pajarillo and Safeguard Security
Agency, Inc. ordering said defendants to pay the plaintiffs,
jointly and severally, the following:
1. ONE HUNDRED FIFTY SEVEN THOUSAND FOUR
HUNDRED THIRTY PESOS (P157,430.00), as actual
damages
2. FIFTY THOUSAND PESOS (P50,000.00) as death
indemnity;
3. ONE MILLION PESOS (P1,000,000.00), as moral
damages;
4. THREE HUNDRED THOUSAND PESOS
(P300,000.00), as exemplary damages;
5. THIRTY THOUSAND PESOS (P30,000.00), as
attorney's fees; andcralawlibrary
6. costs of suit.
For lack of merit, defendants' counterclaim is hereby
DISMISSED.
SO ORDERED.8
The RTC found respondents to be entitled to damages. It
rejected Pajarillo's claim that he merely acted in self-
defense. It gave no credence to Pajarillo's bare claim that
Evangeline was seen roaming around the area prior to the
shooting incident since Pajarillo had not made such report
to the head office and the police authorities. The RTC
further ruled that being the guard on duty, the situation
demanded that he should have exercised proper prudence
and necessary care by asking Evangeline for him to
ascertain the matter instead of shooting her instantly; that
Pajarillo had already been convicted of Homicide in
Criminal Case No. 0-97-73806; and that he also failed to
proffer proof negating liability in the instant case.
The RTC also found Safeguard as employer of Pajarillo to
be jointly and severally liable with Pajarillo. It ruled that
while it may be conceded that Safeguard had perhaps
exercised care in the selection of its employees,
particularly of Pajarillo, there was no sufficient evidence to
show that Safeguard exercised the diligence of a good
father of a family in the supervision of its employee; that
Safeguard's evidence simply showed that it required its
guards to attend trainings and seminars which is not the
supervision contemplated under the law; that supervision
includes not only the issuance of regulations and
instructions designed for the protection of persons and
property, for the guidance of their servants and
employees, but also the duty to see to it that such
regulations and instructions are faithfully complied with.
Petitioners appealed the RTC decision to the CA. On July
16, 2004, the CA issued its assailed Decision, the
dispositive portion of which reads:
IN VIEW OF ALL THE FOREGOING, the appealed
decision is hereby AFFIRMED, with the modification that
Safeguard Security Agency, Inc.'s civil liability in this case
is only subsidiary under Art. 103 of the Revised Penal
Code. No pronouncement as to costs.9
In finding that Safeguard is only subsidiarily liable, the CA
held that the applicable provisions are not Article 2180 in
relation to Article 2176 of the Civil Code, on quasi - delicts,
but the provisions on civil liability arising from felonies
under the Revised Penal Code; that since Pajarillo had
been found guilty of Homicide in a final and executory
judgment and is said to be serving sentence in Muntinlupa,
he must be adjudged civilly liable under the provisions of
Article 100 of the Revised Penal Code since the civil
liability recoverable in the criminal action is one solely
dependent upon conviction, because said liability arises
from the offense charged and no other; that this is also the
civil liability that is deemed extinguished with the extinction
of the penal liability with a pronouncement that the fact
from which the civil action might proceed does not exist;
that unlike in civil liability arising from quasi-delict, the
defense of diligence of a good father of a family in the
employment and supervision of employees is inapplicable
and irrelevant in civil liabilities based on crimes or ex-
delicto; that Article 103 of the Revised Penal Code
provides that the liability of an employer for the civil liability
of their employees is only subsidiary, not joint or solidary.
Petitioners filed their Motion for Reconsideration which the
CA denied in a Resolution dated October 20, 2004.
Hence, the instant Petition for Review on Certiorari with
the following assignment of errors, to wit:
The Honorable Court of Appeals gravely erred in finding
petitioner Pajarillo liable to respondents for the payment of
damages and other money claims.
The Honorable Court of Appeals gravely erred when it
applied Article 103 of the Revised Penal Code in holding
petitioner Safeguard solidarily [sic] liable with petitioner
Pajarillo for the payment of damages and other money
claims.
The Honorable Court of Appeals gravely erred in failing to
find that petitioner Safeguard Security Agency, Inc.
exercised due diligence in the selection and supervision of
its employees, hence, should be excused from any
liability.10
The issues for resolution are whether (1) Pajarillo is guilty
of negligence in shooting Evangeline; and (2) Safeguard
should be held solidarily liable for the damages awarded to
respondents.
Safeguard insists that the claim for damages by
respondents is based on culpa aquiliana under Article
217611 of the Civil Code, in which case, its liability is
jointly and severally with Pajarillo. However, since it has
established that it had exercised due diligence in the
selection and supervision of Pajarillo, it should be
exonerated from civil liability.
We will first resolve whether the CA correctly held that
respondents, in filing a separate civil action against
petitioners are limited to the recovery of damages arising
from a crime or delict, in which case the liability of
Safeguard as employer under Articles 102 and 103 of the
Revised Penal Code12 is subsidiary and the defense of
due diligence in the selection and supervision of employee
is not available to it.
The CA erred in ruling that the liability of Safeguard is only
subsidiary.
The law at the time the complaint for damages was filed is
Rule 111 of the 1985 Rules on Criminal Procedure, as
amended, to wit:
SECTION 1. Institution of criminal and civil actions. - When
a criminal action is instituted, the civil action for the
recovery of civil liability is impliedly instituted with the
criminal action, unless the offended party waives the civil
action, reserves his right to institute it separately, or
institutes the civil action prior to the criminal action.
Such civil action includes recovery of indemnity under the
Revised Penal Code, and damages under Articles 32, 33,
34, and 2176 of the Civil Code of the Philippines arising
from the same act or omission of the accused.
Respondents reserved the right to file a separate civil
action and in fact filed the same on January 14, 1998.
The CA found that the source of damages in the instant
case must be the crime of homicide, for which he had
already been found guilty of and serving sentence thereof,
thus must be governed by the Revised Penal Code.
We do not agree.
An act or omission causing damage to another may give
rise to two separate civil liabilities on the part of the
offender, i.e., (1) civil liability ex delicto, under Article 100
of the Revised Penal Code; and (2) independent civil
liabilities, such as those (a) not arising from an act or
omission complained of as a felony, e.g., culpa contractual
or obligations arising from law under Article 31 of the Civil
Code, intentional torts under Articles 32 and 34, and culpa
aquiliana under Article 2176 of the Civil Code; or (b) where
the injured party is granted a right to file an action
independent and distinct from the criminal action under
Article 33 of the Civil Code. Either of these liabilities may
be enforced against the offender subject to the caveat
under Article 2177 of the Civil Code that the offended party
cannot recover damages twice for the same act or
omission or under both causes.13
It is important to determine the nature of respondents'
cause of action. The nature of a cause of action is
determined by the facts alleged in the complaint as
constituting the cause of action.14 The purpose of an
action or suit and the law to govern it is to be determined
not by the claim of the party filing the action, made in his
argument or brief, but rather by the complaint itself, its
allegations and prayer for relief.15
The pertinent portions of the complaint read:
7. That Defendant Admer A. Pajarillo was the guard
assigned and posted in the Ecology Bank - Katipunan
Branch, Quezon City, who was employed and under
employment of Safeguard Security Agency, Inc. hence
there is employer-employee relationship between co-
defendants.
The Safeguard Security Agency, Inc. failed to observe the
diligence of a good father of a family to prevent damage to
herein plaintiffs.
8. That defendant Admer Pajarillo upon seeing Evangeline
Tangco, who brought her firearm out of her bag, suddenly
without exercising necessary caution/care, and in idiotic
manner, with the use of his shotgun, fired and burst bullets
upon Evangeline M. Tangco, killing her instantly. x x x
xxxx
16. That defendants, being employer and the employee
are jointly and severally liable for the death of Evangeline
M. Tangco.16
Thus, a reading of respondents' complaint shows that the
latter are invoking their right to recover damages against
Safeguard for their vicarious responsibility for the injury
caused by Pajarillo's act of shooting and killing Evangeline
under Article 2176, Civil Code which provides:
ARTICLE 2176. Whoever by act or omission causes
damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation
between the parties is called a quasi-delict and is
governed by the provisions of this Chapter.
The scope of Article 2176 is not limited to acts or
omissions resulting from negligence. In Dulay v. Court of
Appeals,17 we held:
x x x Well-entrenched is the doctrine that Article 2176
covers not only acts committed with negligence, but also
acts which are voluntary and intentional. As far back as the
definitive case of Elcano v. Hill (77 SCRA 98 [1977]), this
Court already held that:
"x x x Article 2176, where it refers to "fault or negligence,"
covers not only acts "not punishable by law" but also acts
criminal in character, whether intentional and voluntary or
negligent. Consequently, a separate civil action lies
against the offender in a criminal act, whether or not he is
criminally prosecuted and found guilty or acquitted,
provided that the offended party is not allowed, if he is
actually charged also criminally, to recover damages on
both scores, and would be entitled in such eventuality only
to the bigger award of the two, assuming the awards made
in the two cases vary. In other words, the extinction of civil
liability referred to in Par. (e) of Section 3, Rule 111, refers
exclusively to civil liability founded on Article 100 of the
Revised Penal Code, whereas the civil liability for the
same act considered as quasi-delict only and not as a
crime is not extinguished even by a declaration in the
criminal case that the criminal act charged has not
happened or has not been committed by the accused.
Briefly stated, We here hold, in reiteration of Garcia, that
culpa aquiliana includes voluntary and negligent acts
which may be punishable by law." (Emphasis
supplied)cralawlibrary
The civil action filed by respondents was not derived from
the criminal liability of Pajarillo in the criminal case but one
based on culpa aquiliana or quasi-delict which is separate
and distinct from the civil liability arising from crime.18 The
source of the obligation sought to be enforced in the civil
case is a quasi-delict not an act or omission punishable by
law.
In Bermudez v. Melencio-Herrera,19 where the issue
involved was whether the civil action filed by plaintiff-
appellants is founded on crime or on quasi-delict, we held:
x x x The trial court treated the case as an action based on
a crime in view of the reservation made by the offended
party in the criminal case (Criminal Case No. 92944), also
pending before the court, to file a separate civil action.
Said the trial court:
It would appear that plaintiffs instituted this action on the
assumption that defendant Pontino's negligence in the
accident of May 10, 1969 constituted a quasi - delict. The
Court cannot accept the validity of that assumption. In
Criminal Case No. 92944 of this Court, plaintiffs had
already appeared as complainants. While that case was
pending, the offended parties reserved the right to institute
a separate civil action. If, in a criminal case, the right to file
a separate civil action for damages is reserved, such civil
action is to be based on crime and not on tort. That was
the ruling in Joaquin v. Aniceto, L-18719, Oct. 31, 1964.
We do not agree. The doctrine in the case cited by the trial
court is inapplicable to the instant case x x x.
xxxx
In cases of negligence, the injured party or his heirs has
the choice between an action to enforce the civil liability
arising from crime under Article 100 of the Revised Penal
Code and an action for quasi - delict under Article 2176-
2194 of the Civil Code. If a party chooses the latter, he
may hold the employer solidarily liable for the negligent act
of his employee, subject to the employer's defense of
exercise of the diligence of a good father of the family.
In the case at bar, the action filed by appellant was an
action for damages based on quasi - delict. The fact that
appellants reserved their right in the criminal case to file an
independent civil action did not preclude them from
choosing to file a civil action for quasi - delict.20
(Emphasis supplied)cralawlibrary
Although the judgment in the criminal case finding Pajarillo
guilty of Homicide is already final and executory, such
judgment has no relevance or importance to this case.21 It
would have been entirely different if respondents' cause of
action was for damages arising from a delict, in which case
the CA is correct in finding Safeguard to be only subsidiary
liable pursuant to Article 103 of the Revised Penal
Code.22
As clearly shown by the allegations in the complaint,
respondents' cause of action is based on quasi - delict.
Under Article 2180 of the Civil Code, when the injury is
caused by the negligence of the employee, there instantly
arises a presumption of law that there was negligence on
the part of the master or the employer either in the
selection of the servant or employee, or in the supervision
over him after selection or both. The liability of the
employer under Article 2180 is direct and immediate.
Therefore, it is incumbent upon petitioners to prove that
they exercised the diligence of a good father of a family in
the selection and supervision of their employee.
We must first resolve the issue of whether Pajarillo was
negligent in shooting Evangeline.
The issue of negligence is factual in nature. Whether a
person is negligent or not is a question of fact, which, as a
general rule, we cannot pass upon in a Petition for Review
on Certiorari, as our jurisdiction is limited to reviewing
errors of law.23 Generally, factual findings of the trial
court, affirmed by the CA, are final and conclusive and
may not be reviewed on appeal. The established
exceptions are: (1) when the inference made is manifestly
mistaken, absurd or impossible; (2) when there is grave
abuse of discretion; (3) when the findings are grounded
entirely on speculations, surmises or conjectures; (4) when
the judgment of the CA is based on misapprehension of
facts; (5) when the findings of fact are conflicting; (6) when
the CA, in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of
both appellant and appellee; (7) when the findings of fact
are conclusions without citation of specific evidence on
which they are based; (8) when the CA manifestly
overlooked certain relevant facts not disputed by the
parties and which, if properly considered, would justify a
different conclusion; and (9) when the findings of fact of
the CA are premised on the absence of evidence and are
contradicted by the evidence on record.24
A thorough review of the records of the case fails to show
any cogent reason for us to deviate from the factual finding
of the trial court and affirmed by the CA that petitioner
Pajarillo was guilty of negligence in shooting Evangeline.
Respondents' evidence established that Evangeline's
purpose in going to the bank was to renew her time
deposit.25 On the other hand, Pajarillo claims that
Evangeline drew a gun from her bag and aimed the same
at him, thus, acting instinctively, he shot her in self-
defense.
Pajarillo testified that when Evangeline aimed the gun at
him at a distance of about one meter or one arm's
length26 he stepped backward, loaded the chamber of his
gun and shot her.27 It is however unimaginable that
petitioner Pajarillo could still make such movements if
indeed the gun was already pointed at him. Any movement
could have prompted Evangeline to pull the trigger to
shoot him.
Petitioner Pajarillo would like to justify his action in
shooting Evangeline on his mere apprehension that
Evangeline will stage a bank robbery. However, such claim
is befuddled by his own testimony. Pajarillo testified that
prior to the incident, he saw Evangeline roaming under the
fly over which was about 10 meters away from the bank28
and saw her talking to a man thereat;29 that she left the
man under the fly-over, crossed the street and approached
the bank. However, except for the bare testimony of
Pajarillo, the records do not show that indeed Evangeline
was seen roaming near the vicinity of the bank and acting
suspiciously prior to the shooting incident. In fact, there is
no evidence that Pajarillo called the attention of his head
guard or the bank's branch manager regarding his
concerns or that he reported the same to the police
authorities whose outpost is just about 15 meters from the
bank.
Moreover, if Evangeline was already roaming the vicinity of
the bank, she could have already apprised herself that
Pajarillo, who was posted outside the bank, was armed
with a shotgun; that there were two guards inside the
bank30 manning the entrance door. Thus, it is quite
incredible that if she really had a companion, she would
leave him under the fly-over which is 10 meters far from
the bank and stage a bank robbery all by herself without a
back-up. In fact, she would have known, after surveying
the area, that aiming her gun at Pajarillo would not ensure
entrance to the bank as there were guards manning the
entrance door.
Evidence, to be believed, must not only proceed from the
mouth of a credible witness, but it must be credible in itself
- such as the common experience and observation of
mankind can approve as probable under the
circumstances. We have no test of the truth of human
testimony, except its conformity to our knowledge,
observation and experience. Whatever is repugnant to
these belongs to the miraculous and is outside judicial
cognizance.31
That Evangeline just wanted to deposit her gun before
entering the bank and was actually in the act of pulling her
gun from her bag when petitioner Pajarillo recklessly shot
her, finds support from the contentions raised in
petitioners' Petition for Review where they argued that
when Evangeline approached the bank, she was seen
pulling a gun from inside her bag and petitioner Pajarillo
who was suddenly beset by fear and perceived the act as
a dangerous threat, shot and killed the deceased out of
pure instinct;32 that the act of drawing a gun is a
threatening act, regardless of whether or not the gun was
intended to be used against petitioner Pajarillo;33 that the
fear that was created in the mind of petitioner Pajarillo as
he saw Evangeline Tangco drawing a gun from her purse
was suddenly very real and the former merely reacted out
of pure self-preservation.34
Considering that unlawful aggression on the part of
Evangeline is absent, Pajarillo's claim of self-defense
cannot be accepted specially when such claim was
uncorroborated by any separate competent evidence other
than his testimony which was even doubtful. Pajarillo's
apprehension that Evangeline will shoot him to stage a
bank robbery has no basis at all. It is therefore clear that
the alleged threat of bank robbery was just a figment of
Pajarillo's imagination which caused such unfounded
unlawful aggression on his part.
Petitioners argue that Evangeline was guilty of contributory
negligence. Although she was a licensed firearm holder,
she had no business bringing the gun in such
establishment where people would react instinctively upon
seeing the gun; that had Evangeline been prudent, she
could have warned Pajarillo before drawing the gun and
did not conduct herself with suspicion by roaming outside
the vicinity of the bank; that she should not have held the
gun with the nozzle pointed at Pajarillo who mistook the
act as hold up or robbery.
We are not persuaded.
As we have earlier held, Pajarillo failed to substantiate his
claim that Evangeline was seen roaming outside the
vicinity of the bank and acting suspiciously prior to the
shooting incident. Evangeline's death was merely due to
Pajarillo's negligence in shooting her on his imagined
threat that Evangeline will rob the bank.
Safeguard contends that it cannot be jointly held liable
since it had adequately shown that it had exercised the
diligence required in the selection and supervision of its
employees. It claims that it had required the guards to
undergo the necessary training and to submit the requisite
qualifications and credentials which even the RTC found to
have been complied with; that the RTC erroneously found
that it did not exercise the diligence required in the
supervision of its employee. Safeguard further claims that
it conducts monitoring of the activities of its personnel,
wherein supervisors are assigned to routinely check the
activities of the security guards which include among
others, whether or not they are in their proper post and
with proper equipment, as well as regular evaluations of
the employees' performances; that the fact that Pajarillo
loaded his firearm contrary to Safeguard's operating
procedure is not sufficient basis to say that Safeguard had
failed its duty of proper supervision; that it was likewise
error to say that Safeguard was negligent in seeing to it
that the procedures and policies were not properly
implemented by reason of one unfortunate event.
We are not convinced.
Article 2180 of the Civil Code provides:
Art. 2180. The obligation imposed by Article 2176 is
demandable not only for one's own acts or omissions, but
also for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope
of their assigned tasks, even though the former are not
engaged in any business or industry.
xxxx
The responsibility treated of in this article shall cease when
the persons herein mentioned prove that they observed all
the diligence of a good father of a family to prevent
damage.
As the employer of Pajarillo, Safeguard is primarily and
solidarily liable for the quasi-delict committed by the
former. Safeguard is presumed to be negligent in the
selection and supervision of his employee by operation of
law. This presumption may be overcome only by
satisfactorily showing that the employer exercised the care
and the diligence of a good father of a family in the
selection and the supervision of its employee.
In the selection of prospective employees, employers are
required to examine them as to their qualifications,
experience, and service records.35 On the other hand,
due diligence in the supervision of employees includes the
formulation of suitable rules and regulations for the
guidance of employees and the issuance of proper
instructions intended for the protection of the public and
persons with whom the employer has relations through his
or its employees and the imposition of necessary
disciplinary measures upon employees in case of breach
or as may be warranted to ensure the performance of acts
indispensable to the business of and beneficial to their
employer. To this, we add that actual implementation and
monitoring of consistent compliance with said rules should
be the constant concern of the employer, acting through
dependable supervisors who should regularly report on
their supervisory functions.36 To establish these factors in
a trial involving the issue of vicarious liability, employers
must submit concrete proof, including documentary
evidence.
We agree with the RTC's finding that Safeguard had
exercised the diligence in the selection of Pajarillo since
the record shows that Pajarillo underwent a psychological
and neuro-psychiatric evaluation conducted by the St.
Martin de Porres Center where no psychoses ideations
were noted, submitted a certification on the Pre-licensing
training course for security guards, as well as police and
NBI clearances.
The RTC did not err in ruling that Safeguard fell short of
the diligence required in the supervision of its employee,
particularly Pajarillo. In this case, while Safeguard
presented Capt. James Camero, its Director for
Operations, who testified on the issuance of company
rules and regulations, such as the Guidelines of Guards
Who Will Be Assigned To Banks,37 Weapons Training,38
Safeguard Training Center Marksmanship Training Lesson
Plan,39 Disciplinary/Corrective Sanctions,40 it had also
been established during Camero's cross-examination that
Pajarillo was not aware of such rules and regulations.41
Notwithstanding Camero's clarification on his re-direct
examination that these company rules and regulations are
lesson plans as a basis of guidelines of the instructors
during classroom instructions and not necessary to give
students copy of the same,42 the records do not show that
Pajarillo had attended such classroom instructions.
The records also failed to show that there was adequate
training and continuous evaluation of the security guard's
performance. Pajarillo had only attended an in-service
training on March 1, 1997 conducted by Toyota Sta. Rosa,
his first assignment as security guard of Safeguard, which
was in collaboration with Safeguard. It was established
that the concept of such training was purely on security of
equipments to be guarded and protection of the life of the
employees.43
It had not been established that after Pajarillo's training in
Toyota, Safeguard had ever conducted further training of
Pajarillo when he was later assigned to guard a bank
which has a different nature of business with that of
Toyota. In fact, Pajarillo testified that being on duty in a
bank is different from being on duty in a factory since a
bank is a very sensitive area.44
Moreover, considering his reactions to Evangeline's act of
just depositing her firearm for safekeeping, i.e., of
immediately shooting her, confirms that there was no
training or seminar given on how to handle bank clients
and on human psychology.
Furthermore, while Safeguard would like to show that
there were inspectors who go around the bank two times a
day to see the daily performance of the security guards
assigned therein, there was no record ever presented of
such daily inspections. In fact, if there was really such
inspection made, the alleged suspicious act of Evangeline
could have been taken noticed and reported.
Turning now to the award of damages, we find that the
award of actual damages in the amount P157,430.00
which were the expenses incurred by respondents in
connection with the burial of Evangeline were supported
by receipts. The award of P50,000.00 as civil indemnity for
the death of Evangeline is likewise in order.
As to the award of moral damages, Article 2206 of the Civil
Code provides that the spouse, legitimate children and
illegitimate descendants and ascendants of the deceased
may demand moral damages for mental anguish by
reason of the death of the deceased. Moral damages are
awarded to enable the injured party to obtain means,
diversions or amusements that will serve to alleviate the
moral suffering he/she has undergone, by reason of the
defendant's culpable action. Its award is aimed at
restoration, as much as possible, of the spiritual status quo
ante; thus it must be proportionate to the suffering
inflicted.45 The intensity of the pain experienced by the
relatives of the victim is proportionate to the intensity of
affection for him and bears no relation whatsoever with the
wealth or means of the offender.46
In this case, respondents testified as to their moral
suffering caused by Evangeline's death was so sudden
causing respondent Lauro to lose a wife and a mother to
six children who were all minors at the time of her death. In
People v. Teehankee, Jr.,47 we awarded one million
pesos as moral damages to the heirs of a seventeen-year-
old girl who was murdered. In Metro Manila Transit
Corporation v. Court of Appeals,48 we likewise awarded
the amount of one million pesos as moral damages to the
parents of a third year high school student and who was
also their youngest child who died in a vehicular accident
since the girl's death left a void in their lives. Hence, we
hold that the respondents are also entitled to the amount
of one million pesos as Evangeline's death left a void in
the lives of her husband and minor children as they were
deprived of her love and care by her untimely demise.
We likewise uphold the award of exemplary damages in
the amount of P300,000.00. Under Article 2229 of the Civil
Code, exemplary damages are imposed by way of
example or correction for the public good, in addition to
moral, temperate, liquidated or compensatory damages.49
It is awarded as a deterrent to socially deleterious actions.
In quasi-delict, exemplary damages may be granted if the
defendant acted with gross negligence.50
Pursuant to Article 2208 of the Civil Code, attorney's fees
may be recovered when, as in the instant case, exemplary
damages are awarded. Hence, we affirm the award of
attorney's fees in the amount of P30,000.00.
WHEREFORE, the Petition for Review is DENIED. The
Decision dated July 16, 2004 of the Court of Appeals is
AFFIRMED with MODIFICATION that the civil liability of
petitioner Safeguard Security Agency, Inc. is SOLIDARY
and PRIMARY under Article 2180 of the Civil Code.
SO ORDERED.
Endnotes:
1 CA rollo, pp. 127-135; Penned by Justice Conrado M.
Vasquez, Jr. and concurred in by Justices Josefina
Guevara-Salonga and Fernanda Lampas Peralta.
2 Id. at 158.
3 Penned by Judge Percival Mandap Lopez.
4 Docketed as G.R. CR No. 23947; Penned by Justice
Bernardo P. Abesamis and concurred in by Justices
Godardo A. Jacinto (retired) and Eliezer R. delos Santos.
5 Records, pp. 1-5; Docketed as Case No. 98-417-MK.
6 Id. at 21-30.
7 Id. at 320-336.
8 Id. at 336.
9 CA rollo, p.134.
10 Rollo, p. 16.
11 Civil Code, Art. 2176. Whoever by act or omission
causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such
fault or negligence, if there is no pre-existing contractual 34 Id. at 19.
relation between the parties, is called a quasi-delict and is 16 Records, pp. 3-4.
governed by the provisions of this Chapter. 35 Metro Manila Transit Corporation v. Court of Appeals,
17 Supra note 14, at 20-21. 359 Phil. 18, 32 (1998).
12 Revised Penal Code, Art. 102. Subsidiary civil liability
of innkeepers, tavern-keepers and proprietors of 18 Bordas v. Canadalla, G.R. No. L-30036, April 15, 1988, 36 Metro Manila Transit Corporation v. Court of Appeals,
establishments. - In default of the persons criminally liable, 160 SCRA 37, 39. G.R. No. 104408, June 21, 1993, 223 SCRA 521, 540-
innkeepers, tavern-keepers, and any other persons or 541.
corporations shall be civilly liable for crimes committed in 19 G.R. No. L-32055, February 26, 1988, 158 SCRA 168.
their establishments, in all cases where a violation of 37 Records, pp. 263-267, Exhibit "10".
municipal ordinances or some general or special police 20 Id. at 170-171.
regulations shall have been committed by them or their 38 Id. at 268-270, Exhibit "11".
employees. 21 McKee v. Intermediate Appellate Court, G.R. No.
68102, July 16, 1992, 211 SCRA 517, 536. 39 Id. at 271-274, Exhibit "12".
Innkeepers are also subsidiarily liable for the restitution of
goods taken by robbery or theft within their houses from 22 Id. 40 Id. at 275-279, Exhibit "13.
guests lodging therein, or for the payment of the value
thereof, provided that such guests shall have notified in 23 Yambao v. Zuñiga, 463 Phil. 650, 657 (2003). 41 TSN, April 11, 2000, p. 26.
advance the innkeeper himself, or the person representing
him, of the deposits of such goods within the inn; and shall 24 Child Learning Center Inc. v. Tagorio, G.R. No. 150920, 42 Id. at 30-31.
furthermore have followed the directions which such November 25, 2005, 476 SCRA 236, 241-242.
innkeeper or his representative may have given them with 43 TSN, May 19, 1999, pp. 15-16.
respect to the care of and vigilance over such goods. No 25 TSN, October 1, 1998, p. 33; TSN, November 12, 1998,
liability shall attach in case of robbery with violence against p. 6. 44 TSN, April 4, 2002, p. 83.
or intimidation of persons unless committed by the
innkeeper's employees. 26 TSN, April 4, 2002, p. 36. 45 Pleyto v. Lomboy, G.R. No. 148737, June 16, 2004,
432 SCRA 329, 342.
Art. 103. Subsidiary civil liability of other persons. - The 27 Id. at 79.
subsidiary liability established in the next preceding article 46 Secosa v. Heirs of Erwin Suarez Francisco, G.R. No.
shall also apply to employers, teachers, persons, and 28 Id. at 42. 160039, June 29, 2004, 433 SCRA 273, 282.
corporations engaged in any kind of industry for felonies
committed by their servants, pupils, workmen, apprentices, 29 Id. at 40-41. 47 319 Phil. 128, 216 (1995).
or employees in the discharge of their duties.
30 Id. at 99. 48 Supra note 35, at 44.
13 Cancio, Jr. v. Isip, 440 Phil. 29, 34-36 (2002).
31 Castañares v. Court of Appeals, G.R. NOS. L-41269- 49 Civil Code, Art. 2229.
14 Dulay v. Court of Appeals, 313 Phil. 8, 20 (1995), citing 70, August 6, 1979, 92 SCRA 568, 580.
Republic v. Estenzo, G.R. No. L-35512, February 29, 50 Civil Code, Art. 2231.
1988, 158 SCRA 282, 285. 32 Rollo, p.17.

15 Id. citing De Tavera v. Philippine Tuberculosis Society, 33 Id. at 18.

Inc., 197 Phil. 919, 926 (1982).
THIRD DIVISION
[G.R. NO. 138550. October 14, 2005]
AMERICAN EXPRESS INTERNATIONAL, INC.,
Petitioner, v. NOEL CORDERO, Defendant.
DECISION
SANDOVAL-GUTIERREZ, J.:
This is a Petition for Review on Certiorari of the Decision1
of the Court of Appeals dated April 30, 1999 in CA-G.R.
CV No. 51671, entitled, "Noel Cordero, Plaintiff-Appellee v.
American Express International, Inc., Defendant-
Appellant."
Petitioner is a foreign corporation that issues charge cards
to its customers, which the latter then use to purchase
goods and services at accredited merchants worldwide.
Sometime in 1988, Nilda Cordero, wife of respondent Noel
Cordero, applied for and was issued an American Express
charge card with No. 3769-895901-010020. The issuance
of the charge card was covered by an Amex Cardmember
Agreement. As cardholder, Nilda, upon signing the back
portion of the card, manifested her acceptance of the
terms of the Agreement.
An extension charge card, with No. 3769-895901-01010,
was likewise issued to respondent Noel Cordero which he
also signed.2
On November 29, 1991, respondent, together with his
wife, Nilda, daughter, sisters-in-law and uncle-in-law, went
on a three-day holiday trip to Hong Kong. In the early
evening of November 30, 1991, at about 7:00 o'clock, the
group went to the Watson's Chemist Shop located at 277C
Ocean Gallery, Kowloon, Hong Kong. Noel picked up
some chocolate candies and handed to the sales clerk his
American Express extension charge card to pay for his
purchases. The sales clerk verified the card by making a
telephone call to the American Express Office in Hong
Kong. Moments later, Susan Chong, the store manager,
emerged from behind the counter and informed
respondent that she had to confiscate the card.
Thereupon, she cut respondent's American Express card
in half with a pair of scissors. This, according to
respondent, caused him embarrassment and humiliation
considering that it was done in front of his family and the
other customers lined up at the check-out counter. Hence,
Nilda had to pay for the purchases using her own
American Express charge card.3
When they returned to the Excelsior Hotel, Nilda called up
petitioner's Office in Hong Kong. She was able to talk to
Senior Authorizer Johnny Chen, who informed her that on
November 1, 1991, a person in Hong Kong attempted to
use a charge card with the same number as respondent's
card. The Hong Kong American Express Office called up
respondent and after determining that he was in Manila
and not in Hong Kong, placed his card in the "Inspect
Airwarn Support System." This is the system utilized by
petitioner as a protection both for the company and the
cardholders against the fraudulent use of their charge
cards. Once a card suspected of unauthorized use is
placed in the system, the person to whom the card is
tendered must verify the identity of the holder. If the true
identity of the card owner is established, the card is
honored and the charges are approved. Otherwise, the
card is revoked or confiscated.4
When the Watson's sales clerk called up petitioner's Hong
Kong Office, its representative said he wants to talk to
respondent in order to verify the latter's identity, pursuant
to the procedure observed under the "Inspect Airwarn
Support System." However, respondent refused.
Consequently, petitioner's representative was unable to
establish the identity of the cardholder.5 This led to the
confiscation of respondent's card.
On March 31, 1992, respondent filed with the Regional
Trial Court, Branch V, Manila, a complaint for damages
against petitioner, docketed as Civil Case No. 92-60807.
He prayed for the award of moral damages and exemplary
damages, as well as attorney's fees as a result of the
humiliation he suffered.
The trial court found that "the inexcusable failure of
defendant (petitioner herein) to inform plaintiff (respondent
herein) of the November 1, 1991 incident despite sufficient
time was the proximate cause of the confiscation and
cutting of plaintiff's extension card which exposed the latter
to public humiliation for which defendant should be held
liable."6 On February 20, 1995, the trial court promulgated
its Decision, the dispositive portion of which reads:
"WHEREFORE, judgment is hereby rendered in favor of
the plaintiff and against the defendant, ordering the latter
to pay the former the following amounts, namely:
a) The sum of P300,000.00 as and by way of moral
damages;
b) The sum of P200,000.00 as exemplary damages;
c) The sum of P100,000.00 as and for reasonable
attorney's fees; andcralawlibrary
d) The costs of the suit.
SO ORDERED."7
Upon appeal, the Court of Appeals rendered the assailed
Decision affirming the trial court's Decision with
modification in the sense that the amounts of damages
awarded were reduced, thus:
"WHEREFORE, in view of the foregoing, the appealed
decision dated February 20, 1995 of the Regional Trial
Court of Manila, Branch V, in Civil Case No. 92-60807 is
hereby AFFIRMED, subject to modifications with respect
to the amount of damages awarded, which are reduced as
follows:
(a) Moral damages from P300,000.00 to P150,000.00;
andcralawlibrary
(b) Exemplary damages from P200,000.00 to
P100,000.00.
No pronouncement as to costs.
SO ORDERED."
Hence, the instant petition raising the following issues:
"A. Whether the lower courts gravely erred in attributing
the 'public humiliation' allegedly suffered by Cordero to
Amex.
B. Whether the lower courts gravely erred in holding Amex
liable to Cordero for moral damages, exemplary damages
and attorney's fees."8
Respondent filed his comment contending in the main that
the petition raises questions of fact beyond this Court's
domain.
While it is true that under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, this Court may review only
errors of law, however, this rule admits of well-known
recognized exceptions, thus:
". . . (1) the conclusion is a finding grounded entirely on
speculation, surmise and conjecture; (2) the inference
made is manifestly mistaken; (3) there is grave abuse of
discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are
conflicting; (6) the Court of Appeals went beyond the
issues of the case and its findings are contrary to the
admissions of both parties; (7) the findings of fact of the
Court of Appeals are contrary to those of the trial court; (8)
said findings of fact are conclusions without citation of
specific evidence on which they are based; (9) the facts
set forth in the petition are not disputed by the
respondents; and (10) the findings of fact of the Court of
Appeals are premised on the supposed absence of
evidence and contradicted by the evidence on record."9
In this case, the inference made by the courts below is
manifestly mistaken. Therefore, we are justified in
reviewing the records of this case and rendering judgment
based on our own findings.
In his complaint, respondent claimed that he suffered
embarrassment and humiliation because his card was
unceremoniously confiscated and cut in half by Susan
Chong of Watson's Chemist Shop.
Respondent anchors his cause of action on the following
provision of the Civil Code:
"Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is
no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of
this Chapter."10
In order that an obligation based on quasi-delict may arise,
there must be no pre-existing contractual relation between
the parties. But there are exceptions. There may be an
action for quasi-delict notwithstanding that there is a
subsisting contract between the parties. A liability for tort
may arise even under a contract, where tort is that which
breaches the contract. Stated differently, when an act
which constitutes a breach of contract would have itself
constituted the source of a quasi-delictual liability, the
contract can be said to have been breached by tort,
thereby allowing the rules on tort to apply.11
Furthermore, to constitute quasi-delict, the fault or
negligence must be the proximate cause of the damage or
injury suffered by the plaintiff. Proximate cause is that
cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the
injury and without which the result would not have
occurred. Proximate cause is determined by the facts of
each case upon mixed considerations of logic, common
sense, policy and precedent.12
According to the trial court, petitioner should have
informed respondent that on November 1, 1991, a person
in Hong Kong attempted to use a charge card bearing
similar number to that of respondent's card; and that
petitioner's inexcusable failure to do so is the proximate
cause of the "confiscation and cutting of [respondent's]
extension card which exposed the latter to public
humiliation for which [petitioner] should be held liable."13
We cannot sustain the trial court's conclusion.
As explained by respondent himself, he could have used
his card upon verification by the sales clerk of Watson that
indeed he is the authorized cardholder. This could have
been accomplished had respondent talked to petitioner's
representative, enabling the latter to determine that
respondent is indeed the true holder of the card. Clearly,
no negligence which breaches the contract can be
attributed to petitioner. If at all, the cause of respondent's
humiliation and embarrassment was his refusal to talk to
petitioner's representative.
That respondent refused to talk to petitioner's
representative can be gleaned from the testimony of Mr.
Chen Heng Kun a.k.a. Johnny Chen during the deposition
in Hong Kong,14 thus:
"Question No 9 : Was AEII required under its existing
policies and/or membership agreement with its
cardholders to advise said cardholders of their card have
been put under the support INSPECT - Strictly Question
(for identification) cardmembers before approving any
charge?cralawlibrary
Mr. Johnny Chen : Under the existing policies of AEII, we
don't have to inform the cardholders if they have to pass
the INSPECT 'Strictly Questions (for identification).
Question No 10 : If the answer to Q9 is in the negative,
please explain why not?cralawlibrary
Mr. Johnny Chen : The reason why we don't have to are
because, first, we are not terminating the service to the
cardholder. Second, it doesn't mean that we are going to
limit the service to the cardholder. Third, as long as the
cardholder can present an identification card of his
membership, we allow him to use the card. He can show
this by telephoning the company or by presenting us his
passport or travel document. When Watson Company
called AEII for authorization, AEII representative requested
that he talk to Mr. Cordero but he refused to talk to any
representative of AEII. AEII could not prove then that he is
really the real card holder."
Mr. Chen Heng Kun was briefly cross-examined by
respondent's counsel, thus:
"Question No 10 : Question 9 is objected to since the best
evidence would be the membership agreement between
plaintiffs and AEII."
Significantly, paragraph 16 of the Cardmember Agreement
signed by respondent provides:
"16. THE CARD REMAINS OUR PROPERTY
"The revocation, repossession or request for the return of
the Card is not, and shall not constitute any reflection of
your character or credit-worthiness and we shall not be
liable in any way for any statement made by any person
requesting the return or surrender of the Card."15
To be sure, pursuant to the above stipulation, petitioner
can revoke respondent's card without notice, as was done
here. It bears reiterating that the subject card would not
have been confiscated and cut had respondent talked to
petitioner's representative and identified himself as the
genuine cardholder. It is thus safe to conclude that there
was no negligence on the part of petitioner and that,
therefore, it cannot be held liable to respondent for
damages.
WHEREFORE, the petition is GRANTED. The assailed
Decision of the Court of Appeals in CA-G.R. CV No. 51671
is REVERSED.
SO ORDERED.
Panganiban, J., (Chairman), Corona, Carpio Morales, and
Garcia, JJ., concur.
7 Id., at 159; penned by Presiding Judge Zeus O. Abrogar.
8 Petition at 8; Rollo at 60.
9 Baricuatro v. Court of Appeals, G.R. No. 105902,
February 9, 2000, 325 SCRA 137.
10 Civil Code, Article 2176.
11 Light Rail Transit Authority, et al. v. Navidad, et al.,
G.R. No. 145804, February 6, 2003, 397 SCRA 75.
12 The Consolidated Bank & Trust Co. v. Court of
Appeals, G.R. No. 138569, September 11, 2003, 410
SCRA 562.
13 Rollo at 158.
14 Deposition upon Written Interrogatories and Cross-
Examination Re Case of Mr. Johnny Chen before Vice
Consul Marlene Brigida B. Agmata at the Philippine
Consultate General, 21-22/F Regent Centre, 88 Queen's
Road, Central, Hong Kong, 28 Fenruary 1994 at 5-6.

"The Card remains our property and we can revoke your Endnotes: 15 Exh. "3-A".
right and the right of ay Additional Cardmember to use it at
any time, we can do this with or without giving you notice. 1 Rollo at 9-25, at 25; penned by Associate Justice B.A.
If we have revoked the Card without cause, we will refund Adefuin-Dela Cruz (retired), concurred in by Associate
a proportion of your annual Card Account fee. We may list Justices Eugenio S. Labitoria and Presbitero J. Velasco,
revoked Cards in our "Cancellation Bulletin", or otherwise Jr. (now Court Administrator).
inform Establishments that the Card issued to you and, if
you are the basic Cardmember, any Additional Cards have 2 Exh. "3-C".
been revoked or cancelled.
3 TSN, March 25, 1993 at 6-11.
"If we revoke the card or it expires, you must return it to us
if we request. Also, if any Establishment asks you to 4 TSN, May 4, 1993 at 13.
surrender an expired or revoked Card, you must do so.
You may not use the Card after it has expired or after it 5 TSN of Deposition of Johnny Chen, February 28, 1994,
has been revoked. at 6.

6 Rollo at 154-159, 158.

G.R. No. 159831 October 14, 2005
PILIPINAS SHELL PETROLEUM CORPORATION,
Petitioner,
vs.
JOHN BORDMAN LTD. OF ILOILO, INC., Respondent.
DECISION
eeply imbedded in our jurisprudence is the doctrine that
the factual findings of the Court of Appeals (CA) affirming
those of the trial court are, subject to some exceptions,
binding upon this Court. Otherwise stated, only questions
of law, not of facts, may be raised before this Court in
petitions for review under Rule 45 of the Rules of Court.
Nonetheless, in the interest of substantial justice, the Court
delved into both the factual and the legal issues raised in
the present case and found no reason to overturn the CA’s
main Decision. Furthermore, under the peculiar factual
circumstances of the instant appeal, this Court holds that
the period for reckoning the prescription of the present
cause of action began only when respondent discovered
with certainty the short deliveries made by petitioner.
The Case
Before us is a Petition for Review1 under Rule 45 of the
Rules of Court, assailing the August 20, 2002 Decision2
and August 29, 2003 Resolution3 of the Court of Appeals
(CA) in CA-GR CV No. 46974. The challenged Decision
disposed as follows:
"WHEREFORE, premises considered, the assailed
decision dated August 30, 1991 of the RTC, Branch 26,
Manila in Civil Case No. 13419 is hereby AFFIRMED with
the MODIFICATION that the award of exemplary damages
and attorney’s fees be both reduced to ₱100,000.00.
"The order dated December 9, 1991 is likewise
AFFIRMED."4
The assailed Resolution denied reconsideration.
The Facts
Petitioner Pilipinas Shell Petroleum Corporation ("Pilipinas
Shell") is a corporation engaged in the business of refining
and processing petroleum products.5 The invoicing of the
products was made by Pilipinas Shell, but delivery was
effected through Arabay, Inc., its sole distributor at the
time material to the present case.6 From 1955 to 1975,
Respondent John Bordman Ltd. of Iloilo, Inc. ("John
Bordman") purchased bunker oil in drums from Arabay.7
When Arabay ceased its operations in 1975, Pilipinas
Shell took over and directly marketed its products to John
Bordman.8
On August 20, 1980, John Bordman filed against Pilipinas
Shell a civil case for specific performance. The former
demanded the latter’s short deliveries of fuel oil since
1955; as well as the payment of exemplary damages,
attorney’s fees and costs of suit.9 John Bordman alleged
that Pilipinas Shell and Arabay had billed it at 210 liters per
drum, while other oil companies operating in Bacolod had
billed their customers at 200 liters per drum. On July 24,
1974, when representatives from John Bordman and
Arabay conducted a volumetric test to determine the
quantity of fuel oil actually delivered, the drum used could
only fill up to 190 liters, instead of 210 liters, or a short
delivery rate of 9.5%.10 After this volumetric test, Arabay
reduced its billing rate to 200 (instead of 210) liters per
drum, except for 4 deliveries between August 1 and
September 9, 1974, when the billing was at 190 liters per
drum.11
On January 23, 1975, another volumetric test allegedly
showed that the drum could contain only 187.5 liters.12 On
February 1, 1975, John Bordman requested from Pilipinas
Shell that 640,000 liters of fuel oil, representing the latter’s
alleged deficient deliveries, be credited to the former’s
account.13 The volume demanded was adjusted to
780,000 liters, upon a realization that the billing rate of 210
liters per drum had been effective since 1966.
On October 24, 1977 and November 9, 1977,
representatives from John Bordman, the auditor of the
Iloilo City Commission on Audit, pump boat carriers, and
truck drivers conducted actual measurements of fuel
loaded on tanker trucks as transferred to dented drums at
mouth full. They found that the drums could contain 180
liters only.14 In its Complaint, John Bordman prayed for
the appointment of commissioners to ascertain the volume
of short deliveries.15
On October 21, 1980, Pilipinas Shell and Arabay filed their
Answer with Counterclaim.16 They specifically denied that
fuel oil deliveries had been less than those billed.17
Moreover, the drums used in the volumetric tests were
allegedly not representative of the ones used in the actual
deliveries.18
By way of affirmative defense, Pilipinas Shell and Arabay
countered that John Bordman had no cause of action
against them.19 If any existed, it had been waived or
extinguished; or otherwise barred by prescription, laches,
and estoppel.20
During the pretrial, the parties agreed to limit the issues to
the following: (1) whether the action had prescribed, and
(2) whether there had been short deliveries in the
quantities of fuel oil.21 John Bordman’s Motion for Trial by
Commissioner was granted by the RTC,22 and the court-
appointed commissioner submitted her Report on April 20,
1988.23
On April 3, 1989, Pilipinas Shell and Arabay filed a Motion
for Resolution of their affirmative defense of
prescription.24 Because prescription had not been
established with certainty, the RTC ordered them on
November 6, 1989, to present evidence in support of their
defense.25
On August 30, 1991, the RTC issued a Decision in favor of
respondent.26 Pilipinas Shell and Arabay were required to
deliver to John Bordman 916,487.62 liters of bunker fuel
oil, to pay actual damages of ₱1,000,000; exemplary
damages of ₱500,000; attorney’s fees of ₱500,000; and
the costs of suit.27 The basis of the trial court’s decision
was predicated on the following pronouncement:
"Since [respondent] had fully paid their contract price at
210 liters per drum, then the [petitioner] should deliver to
the [respondent] the undelivered volume of fuel oil from
1955 to 1974, which is 20 liters per drum; and 10 liters per
drum from 1974 to 1977. Per the invoice receipts
submitted, the total volume of fuel oil which [petitioner]
have failed to deliver to [respondent] is 916,487.62
liters."28
Pilipinas Shell appealed to the CA, alleging that John
Bordman had failed to prove the short deliveries; and that
the suit had been barred by estoppel, laches, and
prescription.29
Ruling of the Court of Appeals
Upholding the trial court, the CA overruled petitioner’s
objections to the evidence of respondent in relation to the
testimonies of the latter’s witnesses and the results of the
volumetric tests.30 The CA noted that deliveries from 1955
to 1977 had been admitted by petitioner; and the fact of
deficiency, established by respondent.31
The appellate court also debunked petitioner’s claims of
estoppel and laches. It held that the stipulation in the
product invoices stating that respondent had received the
products in good order was not controlling.32 On the issue
of prescription, the CA ruled that the action had been filed
within the period required by law.33
Hence, this Petition.34
The Issues
Petitioner states the issues in this wise:
"I.
Respondent’s allegation that the Petition must be
summarily dismissed for containing a false, defective and
unauthorized verification and certification against forum
shopping is patently unmeritorious, as the requisites for a
valid verification and certification against forum shopping
have been complied with.
"II.
The Decisions of the court a quo and of the Honorable
Court of Appeals were clearly issued with grave abuse of
discretion, based as they are on an unmistakable
misappreciation of facts clearly appearing in the records of
the case.
A.
The Honorable Court of Appeals erred giving full faith and
credence to the testimony of respondent’s sole witness,
who was neither an ‘expert witness’ nor one with personal
knowledge of the material facts.
B.
The Honorable Court of Appeals erred in ruling that the
testimony of respondent’s sole witness was not
controverted and that the results of his volumetric tests
were not disproved by petitioner as the records of the court
a quo indubitably show that petitioner disputed the
testimony of said witness in every material respect.
C.
The court a quo and the Honorable Court of Appeals erred
when it failed to hold that the results of the volumetric tests
conducted by respondent’s sole witness are not worthy of
full faith and credence, considering that drums subjected
to said tests in 1974 and 1975 were not the same with, or
otherwise similar to those used by petitioner in the
deliveries made to respondent since 1955.
D.
The Honorable Court of Appeals erred in holding that
petitioner’s unilateral reduction of billing rates constitutes
an implied admission of the fact of short deliveries. The
reduction was made for no other purpose than as a
business accommodation of a valued client.
"III.
The court a quo, as well as the Honorable Court of
Appeals, gravely erred in not ruling that respondent’s
claims of alleged short deliveries for the period 1955 to
1976 were already barred by prescription.
"IV.
The Honorable Court of Appeals and the court a quo erred
in not ruling that respondent’s claims are barred by
estoppel and laches considering that respondent failed to
assert its claim for about twenty-five (25) years.
"V.
The Honorable Court of Appeals erred in awarding to
respondent compensatory damages, exemplary damages,
attorney’s fees and cost of suit, when petitioner has not
otherwise acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner."35
The Court’s Ruling
In the main, the Petition has no merit, except in regard to
the CA’s grant of exemplary damages.
First Issue:
Validity of Verification and Certification
Preliminarily, the Court shall tackle respondent’s allegation
that petitioner’s verification and certification against forum
shopping had not complied with, and were in fact made in
contravention of, Section 4 of Rule 45 of the Rules of
Court.36 Respondent alleges that Romeo B. Garcia, vice-
president of Pilipinas Shell, had no authority to execute
them.37
The records, however, show that petitioner’s president
conferred upon its vice-president the power to institute
actions. As certified by the assistant board secretary, the
delegation was authorized by petitioner’s board of
directors.38 The power to institute actions necessarily
included the power to execute the verification and
certification against forum shopping, as required in a
petition for review before this Court.
In any event, the policy of liberal interpretation of
procedural rules compels us to give due course to the
Petition.39 There appears to be no intention to circumvent
the need for proper verification and certification, which are
intended to assure the truthfulness and correctness of the
allegations in the Petition and to discourage forum
shopping.40
Second Issue:
Appreciation of Facts
As a general rule, questions of fact may not be raised in a
petition for review.41 The factual findings of the trial court,
especially when affirmed by the appellate court, are
binding and conclusive on the Supreme Court.42
Nevertheless, this rule has certain exceptions,43 which
petitioner asserts are present in this case.44 The Court
reviewed the evidence presented and revisited the
applicable pertinent rules. Being intertwined, the issues
raised by petitioner relating to the evidence will be
discussed together.
Objection to Respondent’s Witness
Petitioner claims that the trial court erred in giving
credence to the testimony of respondent’s witness,
Engineer Jose A. Macarubbo. The testimony had allegedly
consisted of his personal opinion. Under the Rules of
Evidence, the opinion of a witness is not admissible,
unless it is given by an expert.45 Macarubbo was allegedly
not an expert witness; neither did he have personal
knowledge of material facts.46
We clarify. Macarubbo testified that sometime in May
1974, respondent had contacted him to review the
reception of fuel at its lime plant. He discovered that
Arabay had been billing respondent at 210 liters per drum,
while other oil companies billed their customers at 200
liters per drum.47 On July 24, 1974, he and Jerome
Juarez, branch manager of Pilipinas Shell, conducted a
volumetric test to determine the amount of fuel that was
actually being delivered to respondent.48 On January 25,
1975, the test was again conducted in the presence of
Macarubbo, Juarez and Manuel Ravina (Arabay’s sales
supervisor).49
From the foregoing facts, it is evident that Macarubbo did
not testify as an expert witness. The CA correctly noted
that he had testified based on his personal knowledge and
involvement in discovering the short deliveries.50 His
testimony as an ordinary witness was aptly allowed by the
appellate court under the following rule on admissibility:
"Sec. 36. Testimony generally confined to personal
knowledge; hearsay excluded. – A witness can testify only
to those facts which he knows of his personal knowledge;
that is, which are derived from his own perception, except
as otherwise provided in these rules."51
Challenge to Volumetric Tests
Petitioner disputes the CA’s finding that it had failed to
disprove the results of the volumetric tests conducted by
respondent. The former claims that it was able to
controvert the latter’s evidence.52
During the July 24, 1974 volumetric test, representatives of
both petitioner and respondent allegedly agreed to conduct
two tests using drums independently chosen by each.53
Respondent allegedly chose the worst-dented drum that
could fill only up to 190 liters. The second drum, which was
chosen by petitioner, was not tested in the presence of
Macarubbo because of heavy rain.54 It supposedly filled
up to 210 liters, however.55
The issue, therefore, relates not to the submission of
evidence, but to its weight and credibility. While petitioner
may have submitted evidence, it failed to disprove the
short deliveries. The lower courts obviously gave credence
to the volumetric tests witnessed by both parties as
opposed to those done solely by petitioner.
Petitioner also challenges the reliability of the volumetric
tests on the grounds of failure to simulate the position of
the drums during filling56 and the fact that those tested
were not representative of the ones used from 1955 to
1974.57 These contentions fail to overturn the short
deliveries established by respondent.
The evidence of petitioner challenging the volumetric tests
was wanting. It did not present any as regards the correct
position of the drums during loading. Notably, its
representative had witnessed the two tests showing the
short deliveries.58 He therefore had the opportunity to
correct the position of the drums, if indeed they had been
incorrectly positioned. Further, there was no proof that
those used in previous years were all good drums with no
defects. Neither was there evidence that its deliveries from
1955 had been properly measured.
From the foregoing observations, it is apparent that the
evidence presented by both parties preponderates in favor
of respondent. The Court agrees with the following
observations of the CA:
"[Petitioner] posits that its fuel deliveries were properly
measured and/or calibrated. To the mind of this Court,
regardless of what method or manner the deliveries were
made, whether pre-packed drums, by the dip stick method
or through ex-jetty, the fact remains that [petitioner] failed
to overcome the burden of proving that indeed the drums
used during the deliveries contain 210 liters. The
[petitioner], to support its claim, adduced no evidence.
Moreover, it failed to disprove the results of the volumetric
tests."59
Having sustained the finding of short deliveries, the Court
finds it no longer necessary to address the contention of
petitioner that its subsequent reduction of billings
constituted merely a business accommodation.60
Third Issue:
Prescription
Action Based on Contract
Petitioner avers that respondent’s action -- a claim for
damages as a result of over-billing -- has already
prescribed. Respondent’s claim supposedly constitutes a
quasi-delict, which prescribes in four years.61
We do not agree. It is elementary that a quasi-delict, as a
source of an obligation, occurs only when there is no
preexisting contractual relation between the parties.62 The
action of respondent
for specific performance was founded on short deliveries,
which had arisen from its Contract of Sale with petitioner,
and from which resulted the former’s obligation in the
present case. Any action to enforce a breach of that
Contract prescribes in ten years.63
Prescriptive Period Counted from
the Accrual of the Cause of Action
Petitioner avers that the action of respondent, even if
based on a Contract, has nevertheless already prescribed,
because more than ten years had lapsed since 1955 to
August 20, 1970 -- the period of short deliveries that the
latter seeks to recover.64 Respondent’s request for fuel
adjustments on October 24, 1974, February 1, 1975, April
3, 1975, and September 22, 1975, were not formal
demands that would interrupt the prescriptive period, says
petitioner.
The Court shall first address the contention that formal
demands were not alleged in the Complaint. This
argument was not raised in the courts a quo; thus, it
cannot be brought before this tribunal.65 Well settled is the
rule that issues not argued in the lower courts cannot be
raised for the first time on appeal.66 At any rate, it appears
from the records that respondent’s letters to petitioner
dated October 24, 1974 and February 1, 1975 were formal
and written extrajudicial demands that interrupted the
prescriptive period.67 Nevertheless, the interruption has
no bearing on the prescriptive period, as will be shown
presently.
Cause of Action Defined
Actions based upon a written contract should be brought
within ten years from the time the right of action
accrues.68 This accrual refers to the cause of action,
which is defined as the act or the omission by which a
party violates the right of another.69
Jurisprudence is replete with the elements of a cause of
action: (1) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (2)
an obligation on the part of the named defendant to
respect or not to violate the right; and (3) an act or
omission on the part of the defendant violative of the right
of the plaintiff or constituting a breach of an obligation to
the latter.70 It is only when the last element occurs that a
cause of action arises.71
Applying the foregoing elements, it can readily be
determined that a cause of action in a contract arises upon
its breach or violation.72 Therefore, the period of
prescription commences, not from the date of the
execution of the contract, but from the occurrence of the
breach.
The cause of action resulting from a breach of contract is
dependent on the facts of each particular case. The
following cases involving prescription illustrate this
statement.
Nabus v. Court of Appeals73 dealt with an action to
rescind a Contract of Sale. The cause of action arose at
the time when the last installment was not paid. Since the
case was filed ten years after that date, the action was
deemed to have prescribed.74
In Elido v. Court of Appeals,75 the overdraft Agreement
stipulated that the obligation was payable on demand.
Thus, the breach started only when that judicial demand
was made. This rule was applied recently to China
Banking Corporation v. Court of Appeals,76 which held
that the prescriptive period commenced on the date of the
demand, not on the maturity of the certificate of
indebtedness. In that case, the certificate had stipulated
that payment should be made upon presentation.
Banco Filipino Savings & Mortgage Bank v. Court of
Appeals77 involved a Contract of Loan with real estate
mortgages, whereby the creditor could unilaterally
increase the interest rate. When the debtor failed to pay
the loan, the creditor foreclosed on the mortgage. The
Court ruled that the cause of action for the annulment of
the foreclosure sale should be counted from the date the
debtor discovered the increased interest rate.78
In Cole v. Gregorio,79 the agreement to buy and sell was
conditioned upon the conduct of a preliminary survey of
the land to verify whether it contained the area stated in
the Tax Declaration. Both the agreement and the survey
were made in 1963. The Court ruled that the right of action
for specific performance arose only in 1966, when the
plaintiff discovered the completion of the survey.80
Serrano v. Court of Appeals81dealt with money claims
arising from a Contract of Employment, which would
prescribe in three years from the time the cause of action
accrued.82 The Court noted that the cause of action had
arisen when the employer made a definite denial of the
employee’s claim. It was deemed that the issues had not
yet been joined prior to the definite denial of the claim,
because the employee could have still been reinstated.83
Naga Telephone Co. v. Court of Appeals84 involved the
reformation of a Contract. Among others, the grounds for
the action filed by the plaintiff included allegations that the
contract was too one-sided in favor of the defendant, and
that certain events had made the arrangement
inequitable.85 The Court ruled that the cause of action for
a reformation would arise only when the contract appeared
disadvantageous.86
Cause of Action in
the Present Case
The Court of Appeals noted that, in the case before us,
respondent had been negotiating with petitioner since
1974. Accordingly, the CA ruled that the cause of action
had arisen only in 1979, after a manifestation of
petitioner’s denial of the claims.87
The nature of the product in the present factual milieu is a
major factor in determining when the cause of action has
accrued. The delivery of fuel oil requires the buyer’s
dependence upon the seller
for the correctness of the volume. When fuel is delivered in
drums, a buyer readily assumes that the agreed volume
can be, and actually is, contained in those drums.
Buyer dependence is common in many ordinary sale
transactions, as when gasoline is loaded in the gas tanks
of motor vehicles, and when beverage is purchased in
bottles and ice cream in bulk containers. In these cases,
the buyers rely, to a considerable degree, on the sellers’
representation that the agreed volumes are being
delivered. They are no longer expected to make a
meticulous measurement of each and every delivery.
To the mind of this Court, the cause of action in the
present case arose on July 24, 1974, when respondent
discovered the short deliveries with certainty. Prior to the
discovery, the latter had no indication that it was not
getting what it was paying for. There was yet no issue to
speak of; thus, it could not have brought an action against
petitioner. It was only after the discovery of the short
deliveries that respondent got into a position to bring an
action for specific performance. Evidently then, that action
was brought within the prescriptive period when it was filed
on August 20, 1980.
Fourth Issue:
Estoppel
Petitioner alleges, in addition to prescription, that
respondent is estopped from claiming short deliveries.88 It
is argued that, since the initial deliveries had been made
way back in 1955, the latter belatedly asserted its right
only in 1980, or after twenty-five years. Moreover,
respondent should allegedly be bound by the Certification
in the delivery Receipts and Invoices that state as follows:
"RECEIVED ABOVE PRODUCT(S) IN GOOD
CONDITION. I HAVE INSPECTED THE
COMPARTMENTS OF THE BULK LORRY, WHEN FULL
AND EMPTY, AND FOUND THEM IN ORDER."89
Estoppel by Laches
Estoppel by laches is the failure or neglect for an
unreasonable length of time to do that which, by the
exercise of due diligence, could or should have been done
earlier.90 Otherwise stated, negligence or omission to
assert a right within a reasonable time warrants a
presumption that the party has abandoned or declined the
right.91 This principle is based on grounds of public policy,
which discourages stale claims for the peace of society.92
Respondent cannot be held guilty of delay in asserting its
right during the time it did not yet know of the short
deliveries. The facts in the present case show that after
the discovery of the short deliveries, it immediately sought
to recover the undelivered fuel from petitioner.93 Laches
refers, inter alia, to the length of time in asserting a claim.
The Court, therefore, agrees with the lower courts that
respondent’s claim was not lost by laches.
Alleged Certification Not a Bar
It is not disputed that the alleged Certification stating that
respondent received the fuel oil in good condition is in the
nature of a contract of adhesion.94 The statement was in
fine print at the lower right of petitioner’s invoices.95 It was
made in the form and language prepared by petitioner.
The latter’s customers, including respondent, were
required to sign the statement upon every delivery. The
primary purpose of an invoice, however, is merely to
evidence delivery and receipt of the goods stated in it.
While the Court has sustained the validity of similar
stipulations in other contracts, it has also recognized that
reliance on them cannot be favored when the facts and
circumstances warrant the contrary.96 Noting the nature of
the product in the present factual milieu, as discussed
earlier in the claim of prescription, the dependence of the
buyer upon the seller makes the stipulation inapplicable.
Indeed, it would be too cumbersome and impractical for
respondent to measure the fuel oil in each and every drum
delivered. Nonetheless, upon delivery by petitioner, the
former was obliged to sign the Certification in the invoice.
In signing it, respondent could not have waived the right to
a legitimate claim for hidden defects. Thus, it is not
estopped from recovering short deliveries.
Doubts in the interpretation of stipulations in contracts of
adhesion should be resolved against the party that
prepared them. This principle especially holds true with
regard to waivers, which are not presumed, but which
must be clearly and convincingly shown.97
Fourth Issue:

Exemplary Damages and Attorney’s Fees
In the last error assigned, petitioner challenges the Order
for specific performance and the awards of exemplary
damages and attorney’s fees in favor of respondent.98
The directive for the delivery of 916,487.62 liters of bunker
oil will no longer be taken up because, as discussed
earlier, this fact is borne out by the evidence.
The CA sustained the award of exemplary damages
because of petitioner’s wanton refusal to deliver the
shortages of fuel oil after the demand was made.99
Similarly, attorney’s fees were imposed, because
respondent had been compelled to litigate to protect its
interests.100 Both awards, however, were each reduced
from ₱500,000 to ₱100,000.101
Exemplary Damages Not Proper
Exemplary damages are imposed as a corrective
measure102 when the guilty party has acted in a wanton,
fraudulent, reckless, oppressive, or malevolent
manner.103 These damages are awarded in accordance
with the sound discretion of the court.104
Petitioner argues that its refusal to deliver the shortages of
fuel was premised on good faith.105 Indeed, records
reveal that it had reviewed respondent’s requests for the
delivery of shortages before declining them.106 It likewise
readily granted respondent’s requests to conduct
volumetric tests. It simply had the mistaken belief that it
was not liable for any shortages. Unfortunately, the
evidence showed the contrary.
Absent any showing of bad faith on the part of petitioner,
exemplary damages cannot be imposed upon it.
Attorney’s Fees Allowed
Petitioner claims that the award of attorney’s fees was tied
up with the award for exemplary damages.107 Since those
damages were not recoverable, then the attorney’s fees Associate Justice
allegedly had no legal basis.
Associate Justice
While attorney’s fees are recoverable when exemplary
damages are awarded, the former may also be granted
when the court deems it just and equitable.108 The grant
of attorney’s fees depends on the circumstances of each
case and lies within the discretion of the court. They may CONCHITA CARPIO MORALES
be awarded when a party is compelled to litigate or to incur
expenses to protect its interest by reason of an unjustified CANCIO C. GARCIA
act by the other.109
Associate Justice
The Court agrees that the award of ₱100,000 as attorney’s
fees is very reasonable;110 in fact, it is almost symbolic, Associate Justice
as it will not totally recompense respondent for the actual
fees spent to prosecute its cause. The case has dragged
on unnecessarily despite petitioner’s failure to present ATTESTATION
countervailing evidence during the trial. Moreover,
respondent was compelled to litigate, notwithstanding its I attest that the conclusions in the above Decision had
attempt at an amicable settlement from the time it been reached in consultation before the case was
discovered the shortages in 1974 until the actual filing of assigned to the writer of the opinion of the Court’s Division.
the case in 1980.111
ARTEMIO V. PANGANIBAN
WHEREFORE, the Petition is hereby DENIED. The
assailed Decision and Resolution are AFFIRMED with the Associate Justice
slight MODIFICATION that the award of exemplary
damages is deleted. Costs against petitioner. Chairman, Third Division
SO ORDERED. CERTIFICATION
ARTEMIO V. PANGANIBAN Pursuant to Section 13, Article VIII of the Constitution, and
the Division Chairman’s Attestation, it is hereby certified
Associate Justice that the conclusions in the above Decision had been
reached in consultation before the case was assigned to
Chairman, Third Division the writer of the opinion of the Court’s Division.
WECONCUR: HILARIO G. DAVIDE, JR.
ANGELINA SANDOVAL-GUTIERREZ Chief Justice
RENATO C. CORONA
Footnotes

1 Rollo, pp. 83-122.
2 Id., pp. 130-149. Tenth Division. Penned by Justice
Remedios A. Salazar-Fernando, with the concurrence of
Justices Romeo J. Callejo Sr. (Division chair and now a
member of this Court) and Danilo B. Pine (member).
3 Id., p. 151.
4 CA Decision, p. 19; rollo, p. 148.
5 Petitioner’s Memorandum, p. 7; rollo, p. 501.
6 RTC Decision dated August 30, 1991, p. 5; CA rollo, p.
86.
7 Ibid; Petitioner’s Memorandum, p. 7; rollo, p. 501.
8 Ibid.; Petitioner’s Exhibit "4" (records, p. 1179).
9 Complaint, p. 7; records, p. 9.
10 Id., pp. 2-3 & 4-5.
11 Id., pp. 3 & 5.
12 Ibid.
13 Id., pp. 4 & 6.
14 Id., pp. 6 & 8.
15 Id., pp. 7 & 9.
16 Assailed Decision, p. 8; rollo, p. 137.
17 Answer with Counterclaim, p. 4; records, p. 13.
18 Ibid.
19 Id., pp. 10-11 & 19-20.
20 Id., pp. 11-12 & 20-21.
21 RTC Order dated August 5, 1982; records, p. 72.
22 There were three commissioners: Mr. Victoriano T.
Macarubo (representing John Bordman), Atty. Luis A. Vera
Cruz Jr. (representing Pilipinas Shell and Arabay), and
Rebecca R. Mariano (as appointed by the trial court).
23 Report by Commissioner Rebecca R. Mariano; records,
pp. 283-284.
24 Assailed Decision, p. 8; rollo, p. 137.
25 RTC Order dated November 6, 1989, pp. 2-3; records,
pp. 1043-1044.
26 RTC Decision; CA rollo, pp. 82-91.
27 Id., pp. 9-10; CA rollo, pp. 90-91.
28 RTC Decision, pp. 8-9; CA rollo, pp. 89-90.
29 Appellant’s Brief, pp. 9-10; CA rollo, pp. 53-54.
30 Assailed Decision, pp. 12-13; rollo, pp. 140-141.
31 Ibid.
32 Id., pp. 14 & 142.
33 Id., pp. 17 & 145.
34 The case was deemed submitted for decision on
November 18, 2004, upon this Court’s receipt of
petitioner’s Memorandum, signed by Attys. Ana Teresa
Arnaldo-Oracion and Ria Corazon A. Golez. Respondent’s
Memorandum, signed by Atty. Miguel Antonio H. Galvez,
was received by this Court on November 3, 2004.
35 Petitioner’s Memorandum, pp. 12-13; rollo, pp. 506-
507. Original in uppercase.
36 The rule requires a certification against forum shopping
and verification that the allegations in the Petition are true
and correct based on personal knowledge and authentic
records.
37 Respondent’s Memorandum, pp. 1-2; rollo, pp. 425-
426.
38 Certification of Efren L. Legaspi; rollo, p. 127.
39 §6 of Rule 1 of the Rules of Court.
40 See BA Savings Bank v. Sia, 336 SCRA 484, July 27,
2000.
41 §1 of Rule 45 of the Rules of Court.
42 Sps. Lagandaon v. Court of Appeals, 352 Phil. 928,
May 21, 1998; Yu Bun Guan v. Ong, 419 Phil. 845,
October 18, 2001; Cuenco v. Cuenco vda. de Manguerra,
440 SCRA 252, October 13, 2004.
43 CIR v. Embroidery and Garments Industries (Phil.),
Inc., 364 Phil. 541, 546, March 22, 1999; Medina v.
Asistio, 191 SCRA 218, 223, November 8, 1990.
44 Petitioner claims that (1) the factual findings are
grounded entirely on speculations, surmises or
conjectures; (2) the lower court’s inference from its factual
findings were manifestly mistaken, absurd or impossible;
(3) there was grave abuse of discretion in the appreciation
of facts; (4) there was a misappreciation of facts, as those
averred by petitioner were not disputed by the respondent;
and (5) the factual findings of the Court of Appeals, which
were premised on absence of evidence, are contradicted
by the evidence on record. (Petitioner’s Memorandum, pp.
2-3; rollo, pp. 496-497)
45 §48 of Rule 130 of the Rules of Court.

46 Petitioner’s Memorandum, p. 18; rollo, p. 512.
The Court, however, observes that in its Memorandum,
petitioner failed to explain how Macarubbo lacked any
personal knowledge on the material facts.
47 RTC Decision, p. 1; CA rollo, p. 82.
48 Id., pp. 2 & 83. See also Answer, p. 2; records, p. 11;
TSN dated September 13, 1983, pp. 11-16; TSN dated
May 29, 1990, p. 17.
49 Ibid. See also Answer, p. 2; records, p. 11; TSN dated
September 13, 1983, p. 21; TSN dated May 29, 1990, p.
19; Answer, p. 2; records, p. 11.
50 Assailed Decision, p. 11; rollo, p. 140.
51 Rule 130 of the Rules of Court.
52 Petitioner’s Memorandum, p. 23; rollo, p. 517.
53 Petitioner’s Memorandum, pp. 23-24; rollo, pp. 517-
518.
54 Petitioner’s Memorandum, p. 24; rollo, p. 518.
55 Id., p. 25; rollo, p. 519.
56 Petitioner claims that a drum will contain more fuel oil
when loaded in an inclined position than when it is filled up
in an upright position, because of less ullage or allowance
for gas expansion. (Petitioner’s Memorandum, p. 26; rollo,
p. 520)
57 Petitioner’s Memorandum, p. 29; rollo, p. 523.
58 TSN dated May 29, 1990, pp. 17 & 20.
59 Assailed Decision, p. 13; rollo, p. 141.
60 The CA found that the accuracy of the volumetric tests Court of Appeals, 193 SCRA 732, 747, February 7, 1991;
had been bolstered by Shell’s voluntary reduction of its Cole v. Gregorio, 202 Phil. 226, 236, September 21, 1982.
billing rate. (Assailed Decision, p. 11; rollo, p. 140).
71 Ibid.
Petitioner voluntarily reduced its billing rate effective July
24, 1974, the date on which the first volumetric test was 72 Ibid.
conducted. (Answer, p. 2; records, p. 11; TSN dated May
29, 1990, p. 19. 73 193 SCRA 732, February 7, 1991.
61 Petitioner’s Memorandum, p. 34; rollo, p. 528 (citing 74 Id., p. 747.
Art. 1146 of the Civil Code).
75 216 SCRA 637, 644, December 16, 1992.
62 Art. 2126 of the Civil Code.
76 Supra.
63 Art. 1144 of the Civil Code.
77 388 Phil. 27, May 30, 2000.
64 Petitioner’s Memorandum. pp. 34-35; rollo, pp. 528-
529. 78 Id., p. 40.
65 See Petitioner’s Appellant Brief, pp. 30-32; CA rollo, pp. 79 Supra.
74-76.
80 Id., p. 238.
66 Elido v. Court of Appeals, 216 SCRA 637, 646,
December 16, 1992; BA Finance Corporation v. Court of 81 415 Phil. 447, August 15, 2001.
Appeals, 201 SCRA 17, 164, August 28, 1991.
82 Art. 291 of the Labor Code.
67 Petitioner’s Exhibits "D" and "E;" records, pp. 318-337.
83 Supra, p. 458.
The interruption of the prescriptive period by a written
extrajudicial demand means that the period to file would 84 230 SCRA 351, February 24, 1994.
commence anew from the receipt of the demand.
(Permanent Savings and Loan Bank v. Velarde, 439 85 Id., p. 355.
SCRA 1, 11, September 23, 2004)
86 Id., p. 369.
68 Art. 1144 of the Civil Code.
87 Assailed Decision, p. 17; rollo, p. 145.
69 §2 of Rule 2 of the Rules of Court.
88 Petitioner’s Memorandum, p. 37; rollo, p. 531.
70 China Banking Corporation v. Court of Appeals, GR No.
153267, June 23, 2005; Swagman Hotels & Travel, Inc. v. 89 Ibid.
Court of Appeals, GR No. 161135, April 8, 2005; Nabus v.
90 Alfredo v. Borras, 404 SCRA 145, 167, June 17, 2003; 100 Ibid.
Felizardo v. Fernandez, 363 SCRA 182, 191, August 15,
2001; Tijam v. Sibonghanoy, 131 Phil. 556, 563, April 15, 101 Id., p. 19; rollo, p. 148.
1968.
102 Art. 2229 of the Civil Code.
91 Ibid.
103 Art. 2232 of the Civil Code.
92 Felizardo v. Fernandez, supra, Catholic Bishop of
Balanga v. Court of Appeals, 332 Phil. 206, 219, 104 Art. 2233 of the Civil Code.
November 14, 1996.
105 Petitioner’s Memorandum, p. 43; rollo, p. 537.
93 Exhibits "C" and "D"; records, pp. 317-318.
106 Petitioner’s Exhibit "1," "3" and "4;" records, pp. 1171,
94 A contract of adhesion is one wherein a party prepares 1177 and 1179.
the stipulations in the contract, while the other party merely
affixes the latter’s signature to it. (Gulf Resorts v. Phil. 107 Petitioner’s Memorandum, p. 44; rollo, p. 538.
Charter Insurance Corp., GR No. 156167, May 16, 2005)
108 Art. 2208 of the Civil Code.
95 Respondent’s Exhibits "O," "O-1" to "O-136," "P," "P-1"
to "P-105," "Q," "Q-1" to "Q-147," "R," "R-1" to "R-135," 109 Chavez v. Court of Appeals, 453 SCRA 843, 854,
"S," and "S-1" to "S-86"; records, pp. 353-971. March 18, 2005; Tugade v. Court of Appeals, 407 SCRA
497, 515, July 31, 2003.
96 Cebu Shipyard & Engineering Works v. William Lines,
366 Phil. 439, 457, May 5, 1999; Sweet Lines, Inc. v. 110 Art. 2208 of the Civil Code.
Teves, 83 SCRA 361, 369, May 19, 1978. See also
Philippine National Bank v. Court of Appeals, 196 SCRA 111 Petitioner’s Exhibits "C," "D," "E," "M," and "N";
536, 545, April 30, 1991. records, pp. 317, 318, 327, and 348-352.

97 See Ramirez v. Court of Appeals, 98 Phil. 225, 228,

January 25, 1956; Arrieta v. National Rice and Corn Corp.,
119 Phil. 339, 347, January 31, 1964.

98 Petitioner’s Memorandum, pp. 43-44; rollo, pp. 537-

538.

The Court observes that petitioner is no longer challenging

the actual or compensatory damages in the amount of
₱1,000,000 that was awarded by the trial court. (RTC
Decision, p. 9; CA rollo, p. 90).

99 Assailed Decision, p. 18; rollo, p. 147.

G.R. No. L-21438 September 28, 1966
AIR FRANCE, petitioner,
vs.
RAFAEL CARRASCOSO and the HONORABLE COURT
OF APPEALS, respondents.
Lichauco, Picazo and Agcaoili for petitioner.
Bengzon Villegas and Zarraga for respondent R.
Carrascoso.
SANCHEZ, J.:
The Court of First Instance of Manila 1 sentenced
petitioner to pay respondent Rafael Carrascoso
P25,000.00 by way of moral damages; P10,000.00 as
exemplary damages; P393.20 representing the difference
in fare between first class and tourist class for the portion
of the trip Bangkok-Rome, these various amounts with
interest at the legal rate, from the date of the filing of the
complaint until paid; plus P3,000.00 for attorneys' fees;
and the costs of suit.
On appeal,2 the Court of Appeals slightly reduced the
amount of refund on Carrascoso's plane ticket from
P393.20 to P383.10, and voted to affirm the appealed
decision "in all other respects", with costs against
petitioner.
The case is now before us for review on certiorari.
The facts declared by the Court of Appeals as " fully
supported by the evidence of record", are:
Plaintiff, a civil engineer, was a member of a group of 48
Filipino pilgrims that left Manila for Lourdes on March 30,
1958.
On March 28, 1958, the defendant, Air France, through its
authorized agent, Philippine Air Lines, Inc., issued to
plaintiff a "first class" round trip airplane ticket from Manila
to Rome. From Manila to Bangkok, plaintiff travelled in
"first class", but at Bangkok, the Manager of the defendant
airline forced plaintiff to vacate the "first class" seat that he
was occupying because, in the words of the witness
Ernesto G. Cuento, there was a "white man", who, the
Manager alleged, had a "better right" to the seat. When
asked to vacate his "first class" seat, the plaintiff, as was to
be expected, refused, and told defendant's Manager that
his seat would be taken over his dead body; a commotion
ensued, and, according to said Ernesto G. Cuento, "many
of the Filipino passengers got nervous in the tourist class;
when they found out that Mr. Carrascoso was having a hot
discussion with the white man [manager], they came all
across to Mr. Carrascoso and pacified Mr. Carrascoso to
give his seat to the white man" (Transcript, p. 12, Hearing
of May 26, 1959); and plaintiff reluctantly gave his "first
class" seat in the plane.3
1. The trust of the relief petitioner now seeks is that we
review "all the findings" 4 of respondent Court of Appeals.
Petitioner charges that respondent court failed to make
complete findings of fact on all the issues properly laid
before it. We are asked to consider facts favorable to
petitioner, and then, to overturn the appellate court's
decision.
Coming into focus is the constitutional mandate that "No
decision shall be rendered by any court of record without
expressing therein clearly and distinctly the facts and the
law on which it is based". 5 This is echoed in the statutory
demand that a judgment determining the merits of the
case shall state "clearly and distinctly the facts and the law
on which it is based"; 6 and that "Every decision of the
Court of Appeals shall contain complete findings of fact on
all issues properly raised before it". 7
A decision with absolutely nothing to support it is a nullity.
It is open to direct attack. 8 The law, however, solely
insists that a decision state the "essential ultimate facts"
upon which the court's conclusion is drawn. 9 A court of
justice is not hidebound to write in its decision every bit
and piece of evidence 10 presented by one party and the
other upon the issues raised. Neither is it to be burdened
with the obligation "to specify in the sentence the facts"
which a party "considered as proved". 11 This is but a part
of the mental process from which the Court draws the
essential ultimate facts. A decision is not to be so clogged
with details such that prolixity, if not confusion, may result.
So long as the decision of the Court of Appeals contains
the necessary facts to warrant its conclusions, it is no error
for said court to withhold therefrom "any specific finding of
facts with respect to the evidence for the defense".
Because as this Court well observed, "There is no law that
so requires". 12 Indeed, "the mere failure to specify (in the
decision) the contentions of the appellant and the reasons
for refusing to believe them is not sufficient to hold the
same contrary to the requirements of the provisions of law
and the Constitution". It is in this setting that in Manigque,
it was held that the mere fact that the findings "were based
entirely on the evidence for the prosecution without taking
into consideration or even mentioning the appellant's side
in the controversy as shown by his own testimony", would
not vitiate the judgment. 13 If the court did not recite in the
decision the testimony of each witness for, or each item of
evidence presented by, the defeated party, it does not
mean that the court has overlooked such testimony or
such item of evidence. 14 At any rate, the legal
presumptions are that official duty has been regularly
performed, and that all the matters within an issue in a
case were laid before the court and passed upon by it. 15
Findings of fact, which the Court of Appeals is required to
make, maybe defined as "the written statement of the
ultimate facts as found by the court ... and essential to
support the decision and judgment rendered thereon". 16
They consist of the court's "conclusions" with respect to
the determinative facts in issue". 17 A question of law,
upon the other hand, has been declared as "one which
does not call for an examination of the probative value of
the evidence presented by the parties." 18
2. By statute, "only questions of law may be raised" in an
appeal by certiorari from a judgment of the Court of
Appeals. 19 That judgment is conclusive as to the facts. It
is not appropriately the business of this Court to alter the
facts or to review the questions of fact. 20
With these guideposts, we now face the problem of
whether the findings of fact of the Court of Appeals support
its judgment.
3. Was Carrascoso entitled to the first class seat he
claims?
It is conceded in all quarters that on March 28, 1958 he
paid to and received from petitioner a first class ticket. But
petitioner asserts that said ticket did not represent the true
and complete intent and agreement of the parties; that
said respondent knew that he did not have confirmed
reservations for first class on any specific flight, although
he had tourist class protection; that, accordingly, the
issuance of a first class ticket was no guarantee that he
would have a first class ride, but that such would depend
upon the availability of first class seats.
These are matters which petitioner has thoroughly
presented and discussed in its brief before the Court of
Appeals under its third assignment of error, which reads:
"The trial court erred in finding that plaintiff had confirmed
reservations for, and a right to, first class seats on the
"definite" segments of his journey, particularly that from
Saigon to Beirut". 21
And, the Court of Appeals disposed of this contention thus:
Defendant seems to capitalize on the argument that the
issuance of a first-class ticket was no guarantee that the
passenger to whom the same had been issued, would be
accommodated in the first-class compartment, for as in the
case of plaintiff he had yet to make arrangements upon
arrival at every station for the necessary first-class
reservation. We are not impressed by such a reasoning.
We cannot understand how a reputable firm like defendant
airplane company could have the indiscretion to give out
tickets it never meant to honor at all. It received the
corresponding amount in payment of first-class tickets and
yet it allowed the passenger to be at the mercy of its
employees. It is more in keeping with the ordinary course
of business that the company should know whether or riot
the tickets it issues are to be honored or not.22
Not that the Court of Appeals is alone. The trial court
similarly disposed of petitioner's contention, thus:
On the fact that plaintiff paid for, and was issued a "First
class" ticket, there can be no question. Apart from his
testimony, see plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-
2", "C" and "C-1", and defendant's own witness, Rafael
Altonaga, confirmed plaintiff's testimony and testified as
follows:
Q. In these tickets there are marks "O.K." From what you
know, what does this OK mean?
A. That the space is confirmed.
Q. Confirmed for first class?
A. Yes, "first class". (Transcript, p. 169)
xxx xxx xxx
Defendant tried to prove by the testimony of its witnesses
Luis Zaldariaga and Rafael Altonaga that although plaintiff
paid for, and was issued a "first class" airplane ticket, the
ticket was subject to confirmation in Hongkong. The court
cannot give credit to the testimony of said witnesses. Oral
evidence cannot prevail over written evidence, and
plaintiff's Exhibits "A", "A-l", "B", "B-l", "C" and "C-1" belie
the testimony of said witnesses, and clearly show that the
plaintiff was issued, and paid for, a first class ticket without
any reservation whatever.
Furthermore, as hereinabove shown, defendant's own
witness Rafael Altonaga testified that the reservation for a
"first class" accommodation for the plaintiff was confirmed.
The court cannot believe that after such confirmation
defendant had a verbal understanding with plaintiff that the
"first class" ticket issued to him by defendant would be
subject to confirmation in Hongkong. 23
We have heretofore adverted to the fact that except for a
slight difference of a few pesos in the amount refunded on
Carrascoso's ticket, the decision of the Court of First
Instance was affirmed by the Court of Appeals in all other
respects. We hold the view that such a judgment of
affirmance has merged the judgment of the lower court. 24
Implicit in that affirmance is a determination by the Court of
Appeals that the proceeding in the Court of First Instance
was free from prejudicial error and "all questions raised by
the assignments of error and all questions that might have
been raised are to be regarded as finally adjudicated
against the appellant". So also, the judgment affirmed
"must be regarded as free from all error". 25 We reached
this policy construction because nothing in the decision of
the Court of Appeals on this point would suggest that its
findings of fact are in any way at war with those of the trial
court. Nor was said affirmance by the Court of Appeals
upon a ground or grounds different from those which were
made the basis of the conclusions of the trial court. 26
If, as petitioner underscores, a first-class-ticket holder is
not entitled to a first class seat, notwithstanding the fact
that seat availability in specific flights is therein confirmed,
then an air passenger is placed in the hollow of the hands
of an airline. What security then can a passenger have? It
will always be an easy matter for an airline aided by its
employees, to strike out the very stipulations in the ticket,
and say that there was a verbal agreement to the contrary.
What if the passenger had a schedule to fulfill? We have
long learned that, as a rule, a written document speaks a
uniform language; that spoken word could be notoriously
unreliable. If only to achieve stability in the relations
between passenger and air carrier, adherence to the ticket
so issued is desirable. Such is the case here. The lower
courts refused to believe the oral evidence intended to
defeat the covenants in the ticket.
The foregoing are the considerations which point to the
conclusion that there are facts upon which the Court of
Appeals predicated the finding that respondent Carrascoso
had a first class ticket and was entitled to a first class seat
at Bangkok, which is a stopover in the Saigon to Beirut leg
of the flight. 27 We perceive no "welter of distortions by the
Court of Appeals of petitioner's statement of its position",
as charged by petitioner. 28 Nor do we subscribe to
petitioner's accusation that respondent Carrascoso
"surreptitiously took a first class seat to provoke an issue".
29 And this because, as petitioner states, Carrascoso went
to see the Manager at his office in Bangkok "to confirm my
seat and because from Saigon I was told again to see the
Manager". 30 Why, then, was he allowed to take a first
class seat in the plane at Bangkok, if he had no seat? Or,
if another had a better right to the seat?
4. Petitioner assails respondent court's award of moral
damages. Petitioner's trenchant claim is that Carrascoso's
action is planted upon breach of contract; that to authorize
an award for moral damages there must be an averment of
fraud or bad faith;31 and that the decision of the Court of
Appeals fails to make a finding of bad faith. The pivotal
allegations in the complaint bearing on this issue are:
3. That ... plaintiff entered into a contract of air carriage
with the Philippine Air Lines for a valuable consideration,
the latter acting as general agents for and in behalf of the
defendant, under which said contract, plaintiff was entitled
to, as defendant agreed to furnish plaintiff, First Class
passage on defendant's plane during the entire duration of
plaintiff's tour of Europe with Hongkong as starting point
up to and until plaintiff's return trip to Manila, ... .
4. That, during the first two legs of the trip from Hongkong
to Saigon and from Saigon to Bangkok, defendant
furnished to the plaintiff First Class accommodation but
only after protestations, arguments and/or insistence were
made by the plaintiff with defendant's employees.
5. That finally, defendant failed to provide First Class
passage, but instead furnished plaintiff only Tourist Class
accommodations from Bangkok to Teheran and/or
Casablanca, ... the plaintiff has been compelled by
defendant's employees to leave the First Class
accommodation berths at Bangkok after he was already
seated.
6. That consequently, the plaintiff, desiring no repetition of
the inconvenience and embarrassments brought by
defendant's breach of contract was forced to take a Pan
American World Airways plane on his return trip from
Madrid to Manila.32
xxx xxx xxx
2. That likewise, as a result of defendant's failure to furnish
First Class accommodations aforesaid, plaintiff suffered
inconveniences, embarrassments, and humiliations,
thereby causing plaintiff mental anguish, serious anxiety,
wounded feelings, social humiliation, and the like injury,
resulting in moral damages in the amount of P30,000.00.
33
xxx xxx xxx
The foregoing, in our opinion, substantially aver: First, That
there was a contract to furnish plaintiff a first class
passage covering, amongst others, the Bangkok-Teheran
leg; Second, That said contract was breached when
petitioner failed to furnish first class transportation at
Bangkok; and Third, that there was bad faith when
petitioner's employee compelled Carrascoso to leave his
first class accommodation berth "after he was already,
seated" and to take a seat in the tourist class, by reason of
which he suffered inconvenience, embarrassments and
humiliations, thereby causing him mental anguish, serious
anxiety, wounded feelings and social humiliation, resulting
in moral damages. It is true that there is no specific
mention of the term bad faith in the complaint. But, the
inference of bad faith is there, it may be drawn from the
facts and circumstances set forth therein. 34 The contract
was averred to establish the relation between the parties.
But the stress of the action is put on wrongful expulsion.
Quite apart from the foregoing is that (a) right the start of
the trial, respondent's counsel placed petitioner on guard
on what Carrascoso intended to prove: That while sitting in
the plane in Bangkok, Carrascoso was ousted by
petitioner's manager who gave his seat to a white man; 35
and (b) evidence of bad faith in the fulfillment of the
contract was presented without objection on the part of the
petitioner. It is, therefore, unnecessary to inquire as to
whether or not there is sufficient averment in the complaint
to justify an award for moral damages. Deficiency in the
complaint, if any, was cured by the evidence. An
amendment thereof to conform to the evidence is not even
required. 36 On the question of bad faith, the Court of
Appeals declared:
That the plaintiff was forced out of his seat in the first class
compartment of the plane belonging to the defendant Air
France while at Bangkok, and was transferred to the
tourist class not only without his consent but against his
will, has been sufficiently established by plaintiff in his
testimony before the court, corroborated by the
corresponding entry made by the purser of the plane in his
notebook which notation reads as follows:
"First-class passenger was forced to go to the tourist class
against his will, and that the captain refused to intervene",
and by the testimony of an eye-witness, Ernesto G.
Cuento, who was a co-passenger. The captain of the
plane who was asked by the manager of defendant
company at Bangkok to intervene even refused to do so. It
is noteworthy that no one on behalf of defendant ever
contradicted or denied this evidence for the plaintiff. It
could have been easy for defendant to present its
manager at Bangkok to testify at the trial of the case, or
yet to secure his disposition; but defendant did neither. 37
The Court of appeals further stated —
Neither is there evidence as to whether or not a prior
reservation was made by the white man. Hence, if the
employees of the defendant at Bangkok sold a first-class
ticket to him when all the seats had already been taken,
surely the plaintiff should not have been picked out as the
one to suffer the consequences and to be subjected to the
humiliation and indignity of being ejected from his seat in
the presence of others. Instead of explaining to the white
man the improvidence committed by defendant's
employees, the manager adopted the more drastic step of
ousting the plaintiff who was then safely ensconsced in his
rightful seat. We are strengthened in our belief that this
probably was what happened there, by the testimony of
defendant's witness Rafael Altonaga who, when asked to
explain the meaning of the letters "O.K." appearing on the
tickets of plaintiff, said "that the space is confirmed for first
class. Likewise, Zenaida Faustino, another witness for
defendant, who was the chief of the Reservation Office of
defendant, testified as follows:
"Q How does the person in the ticket-issuing office know
what reservation the passenger has arranged with you?
A They call us up by phone and ask for the confirmation."
(t.s.n., p. 247, June 19, 1959)
In this connection, we quote with approval what the trial
Judge has said on this point:
Why did the, using the words of witness Ernesto G.
Cuento, "white man" have a "better right" to the seat
occupied by Mr. Carrascoso? The record is silent. The
defendant airline did not prove "any better", nay, any right
on the part of the "white man" to the "First class" seat that
the plaintiff was occupying and for which he paid and was
issued a corresponding "first class" ticket.
If there was a justified reason for the action of the
defendant's Manager in Bangkok, the defendant could
have easily proven it by having taken the testimony of the
said Manager by deposition, but defendant did not do so;
the presumption is that evidence willfully suppressed
would be adverse if produced [Sec. 69, par (e), Rules of
Court]; and, under the circumstances, the Court is
constrained to find, as it does find, that the Manager of the
defendant airline in Bangkok not merely asked but
threatened the plaintiff to throw him out of the plane if he
did not give up his "first class" seat because the said
Manager wanted to accommodate, using the words of the
witness Ernesto G. Cuento, the "white man".38
It is really correct to say that the Court of Appeals in the
quoted portion first transcribed did not use the term "bad
faith". But can it be doubted that the recital of facts therein
points to bad faith? The manager not only prevented
Carrascoso from enjoying his right to a first class seat;
worse, he imposed his arbitrary will; he forcibly ejected him
from his seat, made him suffer the humiliation of having to
go to the tourist class compartment - just to give way to
another passenger whose right thereto has not been
established. Certainly, this is bad faith. Unless, of course,
bad faith has assumed a meaning different from what is
understood in law. For, "bad faith" contemplates a "state of
mind affirmatively operating with furtive design or with
some motive of self-interest or will or for ulterior purpose."
39
And if the foregoing were not yet sufficient, there is the
express finding of bad faith in the judgment of the Court of
First Instance, thus:
The evidence shows that the defendant violated its
contract of transportation with plaintiff in bad faith, with the
aggravating circumstances that defendant's Manager in
Bangkok went to the extent of threatening the plaintiff in
the presence of many passengers to have him thrown out
of the airplane to give the "first class" seat that he was
occupying to, again using the words of the witness Ernesto
G. Cuento, a "white man" whom he (defendant's Manager)
wished to accommodate, and the defendant has not
proven that this "white man" had any "better right" to
occupy the "first class" seat that the plaintiff was
occupying, duly paid for, and for which the corresponding
"first class" ticket was issued by the defendant to him.40
5. The responsibility of an employer for the tortious act of
its employees need not be essayed. It is well settled in
law. 41 For the willful malevolent act of petitioner's
manager, petitioner, his employer, must answer. Article 21
of the Civil Code says:
ART. 21. Any person who willfully causes loss or injury to
another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the
damage.
In parallel circumstances, we applied the foregoing legal
precept; and, we held that upon the provisions of Article
2219 (10), Civil Code, moral damages are recoverable. 42
6. A contract to transport passengers is quite different in
kind and degree from any other contractual relation. 43
And this, because of the relation which an air-carrier
sustains with the public. Its business is mainly with the
travelling public. It invites people to avail of the comforts
and advantages it offers. The contract of air carriage,
therefore, generates a relation attended with a public duty.
Neglect or malfeasance of the carrier's employees,
naturally, could give ground for an action for damages.
Passengers do not contract merely for transportation. They
have a right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They
are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such
employees. So it is, that any rule or discourteous conduct
on the part of employees towards a passenger gives the
latter an action for damages against the carrier. 44
Thus, "Where a steamship company 45 had accepted a
passenger's check, it was a breach of contract and a tort,
giving a right of action for its agent in the presence of third
persons to falsely notify her that the check was worthless
and demand payment under threat of ejection, though the
language used was not insulting and she was not ejected."
46 And this, because, although the relation of passenger
and carrier is "contractual both in origin and nature"
nevertheless "the act that breaks the contract may be also
a tort". 47 And in another case, "Where a passenger on a
railroad train, when the conductor came to collect his fare
tendered him the cash fare to a point where the train was
scheduled not to stop, and told him that as soon as the
train reached such point he would pay the cash fare from
that point to destination, there was nothing in the conduct
of the passenger which justified the conductor in using
insulting language to him, as by calling him a lunatic," 48
and the Supreme Court of South Carolina there held the
carrier liable for the mental suffering of said
passenger.1awphîl.nèt
Petitioner's contract with Carrascoso is one attended with
public duty. The stress of Carrascoso's action as we have
said, is placed upon his wrongful expulsion. This is a
violation of public duty by the petitioner air carrier — a
case of quasi-delict. Damages are proper.
7. Petitioner draws our attention to respondent
Carrascoso's testimony, thus —
Q You mentioned about an attendant. Who is that
attendant and purser?
A When we left already — that was already in the trip — I
could not help it. So one of the flight attendants
approached me and requested from me my ticket and I
said, What for? and she said, "We will note that you
transferred to the tourist class". I said, "Nothing of that
kind. That is tantamount to accepting my transfer." And I
also said, "You are not going to note anything there
because I am protesting to this transfer".
Q Was she able to note it?
A No, because I did not give my ticket.
Q About that purser?
A Well, the seats there are so close that you feel
uncomfortable and you don't have enough leg room, I
stood up and I went to the pantry that was next to me and
the purser was there. He told me, "I have recorded the
incident in my notebook." He read it and translated it to me
— because it was recorded in French — "First class
passenger was forced to go to the tourist class against his
will, and that the captain refused to intervene."
Mr. VALTE —
I move to strike out the last part of the testimony of the
witness because the best evidence would be the notes.
Your Honor.
COURT —
I will allow that as part of his testimony. 49
Petitioner charges that the finding of the Court of Appeals
that the purser made an entry in his notebook reading
"First class passenger was forced to go to the tourist class
against his will, and that the captain refused to intervene"
is predicated upon evidence [Carrascoso's testimony
above] which is incompetent. We do not think so. The
subject of inquiry is not the entry, but the ouster incident.
Testimony on the entry does not come within the
proscription of the best evidence rule. Such testimony is
admissible. 49a
Besides, from a reading of the transcript just quoted, when
the dialogue happened, the impact of the startling
occurrence was still fresh and continued to be felt. The
excitement had not as yet died down. Statements then, in
this environment, are admissible as part of the res gestae.
50 For, they grow "out of the nervous excitement and
mental and physical condition of the declarant". 51 The
utterance of the purser regarding his entry in the notebook
was spontaneous, and related to the circumstances of the
ouster incident. Its trustworthiness has been guaranteed.
52 It thus escapes the operation of the hearsay rule. It
forms part of the res gestae.
At all events, the entry was made outside the Philippines.
And, by an employee of petitioner. It would have been an
easy matter for petitioner to have contradicted
Carrascoso's testimony. If it were really true that no such
entry was made, the deposition of the purser could have
cleared up the matter.
We, therefore, hold that the transcribed testimony of
Carrascoso is admissible in evidence.
8. Exemplary damages are well awarded. The Civil Code
gives the court ample power to grant exemplary damages
— in contracts and quasi- contracts. The only condition is
that defendant should have "acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner." 53 The
manner of ejectment of respondent Carrascoso from his
first class seat fits into this legal precept. And this, in
addition to moral damages.54
9. The right to attorney's fees is fully established. The
grant of exemplary damages justifies a similar judgment
for attorneys' fees. The least that can be said is that the
courts below felt that it is but just and equitable that
attorneys' fees be given. 55 We do not intend to break
faith with the tradition that discretion well exercised — as it
was here — should not be disturbed.
10. Questioned as excessive are the amounts decreed by
both the trial court and the Court of Appeals, thus:
P25,000.00 as moral damages; P10,000.00, by way of
exemplary damages, and P3,000.00 as attorneys' fees.
The task of fixing these amounts is primarily with the trial
court. 56 The Court of Appeals did not interfere with the
same. The dictates of good sense suggest that we give
our imprimatur thereto. Because, the facts and
circumstances point to the reasonableness thereof.57
On balance, we say that the judgment of the Court of
Appeals does not suffer from reversible error. We
accordingly vote to affirm the same. Costs against
petitioner. So ordered.
Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala,
Makalintal, Zaldivar and Castro, JJ., concur.
Bengzon, J.P., J., took no part.
Footnotes
1Civil Case No. 38810, "Rafael Carrascoso, plaintiff, vs.
Air France, defendant," R.A., pp. 79-80.
2C.A.-G.R. No. 26522-R, "Rafael Carrascoso, plaintiff-
appellee, vs. Air France, defendant-appellant."
3Appendix A, petitioner's brief, pp 146-147. See also R.A.,
pp. 66-67.
4Petitioner's brief, p. 142.
5Section 12, Article VIII, Constitution.
6Section 1, Rule 36, Rules of Court. See also Section 2,
Rule 120, in reference to judgments in criminal cases.
7Sec. 4. Rule 51; Sec. 33(2), Judiciary Act of 1948, as
amended.
8Edwards vs. McCoy, 22 Phil. 598, 601; Yangco vs. Court
of First Instance of Manila, et al., 29 Phil. 183, 191.
9Braga vs. Millora, 3 Phil. 458, 465.
10Id.
11Aringo vs. Arena 14 Phil. 263, 266; emphasis supplied.
12Reyes vs. People. 71 Phil. 598, 600.
13People vs. Manigque 35 O.G., No. 94, pp. 1682, 1683,
citing Section 133 of the Code of Civil Procedure and
Section 12, Art. VIII, Constitution, supra.
14Badger et al. vs. Boyd, 65 S.W. (2d), pp. 601, 610.
15Section 5, (m) and (o), Rule 131, Rules of Court.
16In re Good's Estate, 266 P. (2d), pp. 719, 729.
17Badger et al. vs. Boyd, supra. 31Article 2220, Civil Code reads: "Willful injury to property
may be a legal ground for awarding moral damages if the
18Goduco vs. Court of Appeals, et al., L-17647, February court should find that, under the circumstances, such
28, 1964. damages are justly due. The same rule applies to
breaches of contract where the defendant acted
19Section 2, Rule 45, Rules of Court, formerly Section 2, fraudulently or in bad faith."
Rule 46 of the Rules of Court.
32R.A., p. 2-4; emphasis supplied.
20Medel, et al. vs. Calasanz, et al. L-14835, August 31,
1960; Astraquillo, et al. vs. Javier, et al., L-20034, January 33R.A., P. 5; second cause of action.
30, 1965.
34Copeland vs. Dunehoo et al., 138 S.E., 267, 270. See
21Petitioner's brief in the Court of Appeals, pp. 82-98. also 25 C.J.S., pp. 758-759; 15 Am. Jur., pp. 766-767.
22Decision of the Court of Appeals, Appendix A, 35Statement of Attorney Villegas for respondent
petitioner's brief, pp. 148-149. Carrascoso in open court. Respondent's brief, p. 33.
23R.A., pp. 67, 73. 36Section 5, Rule 10, Rules of Court, in part reads: "SEC.
5. Amendment to conform to or authorize presentation of
245 B C.J.S., p. 295; 3 Am. Jur. p. 678. evidence.—When issues not raised by the pleadings are
tried by express or implied consent of the parties, they
253 Am. Jur., pp. 677-678. shall be treated in all respects, as if they had been raised
in the pleadings. Such amendment of the pleadings as
26See Garcia Valdez vs. Seterana Tuason, 40 Phil, 943, may be necessary to cause them to conform to the
951. evidence and to raise these issues may be made upon
motion of any party at any time, even after judgment; but
27Carrascoso's ticket, according to petitioner (brief, pp. 7- failure so to amend does not affect the result of the trial of
8), shows: these issues ..."; Co Tiamco vs. Diaz, etc., et al., 75 Phil.
672, 679; J.M. Tuason & Co., Inc., etc. vs. Bolanos, 95
Segment or leg Carrier Flight No. Date of Departure Phil. 106, 110.
1. Manila to Hongkong PAL 300A March
30 37Decision, Court of Appeals, Appendix A of petitioner's
2. Hongkong to Saigon VN(Air Vietnam) 693 brief, pp. 147-148.
March 31
3. Saigon to Beirut AF(Air France) 245 March 38Decision of the Court of Appeals, Appendix A of
31 petitioner's brief, pp. 147-151.
28Petitioner's brief, p. 50; see also id., pp. 37 and 46.
39Words & Phrases, Perm. Ed., Vol. 5, p. 13, citing
29Id., p. 103. Warfield Natural Gas Co. vs. Allen, 59 S.W. (2d) 534, 538.
30Ibid., p. 102. 40R.A., p.74; emphasis supplied.
 57Cf. Yutuk vs. Manila Electric Company, L-13016, May
41Article 2180, Civil Code. 31, 1961; Lopez et al. vs. Pan American World Airways, L-
22415, March 30, 1966.
42Philippine Refining Co. vs. Garcia, et al., L-21871 and L-
21962, September 27, 1966.

43See Section 4, Chapter 3, Title VIII, Civil Code.

444 R.C.L., pp. 1174-1175.

45An air carrier is a common carrier; and air transportation

is similar or analogous to land and water transportation.
Mendoza vs. Philippine Air Lines, Inc., 90 Phil. 836, 841-
842.

46Austro-American S.S. Co. vs. Thomas, 248 F. 231.

47Id., p. 233.

48Lipman vs. Atlantic Coast Line R. Co., 93 S.E. 714, 716.

49Petitioner's brief, pp, 104-105.

49aV Moran, Comments on the Rules of Court, 1963 ed.,

p. 76.

50Section 36, Rule 130, Rules of Court.

51IV Martin, Rules of Court in the Philippines, 1963 ed., p.

324.

52Ibid.

53Article 2232, Civil Code.

54Article 2229, Civil Code.

55Article 2208, (1) and (11), Civil Code.

56Coleongco vs. Claparols, L-18616, March 31, 1964;

Corpus vs. Cuaderno, et al., L-23721, March 31, 1965.
G.R. No. L-24837 June 27, 1968
JULIAN C. SINGSON and RAMONA DEL CASTILLO,
plaintiffs,
vs.
BANK OF THE PHILIPPINE ISLANDS and SANTIAGO
FREIXAS, in his capacity as President of the said Bank,
defendants.
Gil B. Galang for plaintiffs.
Aviado and Aranda for defendants.
CONCEPCION, C.J.:
Appeal by plaintiffs, Julian Singson and his wife, Ramona
del Castillo, from a decision of the Court of First Instance
of Manila dismissing their complaint against defendants
herein, the Bank of the Philippine Islands and Santiago
Freixas.
It appears that Singson, was one of the defendants in civil
case No. 23906 of the Court of First Instance, Manila, in
which judgment had been rendered sentencing him and
his co-defendants therein, namely, Celso Lobregat and
Villa-Abrille & Co., to pay the sum of P105,539.56 to the
plaintiff therein, Philippine Milling Co. Singson and
Lobregat had seasonably appealed from said judgment,
but not Villa-Abrille & Co., as against which said judgment,
accordingly, became final and executory. In due course, a
writ of garnishment was subsequently served upon the
Bank of the Philippine Islands — in which the Singsons
had a current account — insofar as Villa-Abrille's credits
against the Bank were concerned. What happened
thereafter is set forth in the decision appealed from, from
which we quote:
Upon receipt of the said Writ of Garnishment, a clerk of the
bank in charge of all matters of execution and
garnishment, upon reading the name of the plaintiff herein
in the title of the Writ of Garnishment as a party
defendants, without further reading the body of the said
garnishment and informing himself that said garnishment
was merely intended for the deposits of defendant Villa-
Abrille & Co., Valentin Teus, Fernando F. de Villa-Abrille
and Joaquin Bona, prepared a letter for the signature of
the President of the Bank informing the plaintiff Julian C.
Singson of the garnishment of his deposits by the plaintiff
in that case. Another letter was also prepared and signed
by the said President of the Bank for the Special Sheriff
dated April 17, 1963.
Subsequently, two checks issued by the plaintiff Julian C.
Singson, one for the amount of P383 in favor of B. M.
Glass Service dated April 16, 1963 and bearing No. C-
424852, and check No. C-394996 for the amount of P100
in favor of the Lega Corporation, and drawn against the
said Bank, were deposited by the said drawers with the
said bank. Believing that the plaintiff Singson, the drawer
of the check, had no more control over the balance of his
deposits in the said bank, the checks were dishonored and
were refused payment by the said bank. After the first
check was returned by the bank to the B. M. Glass
Service, the latter wrote plaintiff Julian C. Singson a letter,
dated April 19, 1963, advising him that his check for
P383.00 bearing No. C-424852 was not honored by the
bank for the reason that his account therein had already
been garnished. The said B. M. Glass Service further
stated in the said letter that they were constrained to close
his credit account with them. In view thereof, plaintiff Julian
C. Singson wrote the defendant bank a letter on April 19,
1963, claiming that his name was not included in the Writ
of Execution and Notice of Garnishment, which was
served upon the bank. The defendant President Santiago
Freixas of the said bank took steps to verify this
information and after having confirmed the same,
apologized to the plaintiff Julian C. Singson and wrote him
a letter dated April 22, 1963, requesting him to disregard
their letter of April 17, 1963, and that the action of
garnishment from his account had already been removed.
A similar letter was written by the said official of the bank
on April 22, 1963 to the Special Sheriff informing him that
his letter dated April 17, 1963 to the said Special Sheriff
was considered cancelled and that they had already
removed the Notice of Garnishment from plaintiff
Singson's account. Thus, the defendants lost no time to
rectify the mistake that had been inadvertently committed,
resulting in the temporary freezing of the account of the
plaintiff with the said bank for a short time.
xxx xxx xxx
On May 8, 1963, the Singsong commenced the present
action against the Bank and its president, Santiago
Freixas, for damages1 in consequence of said illegal
freezing of plaintiffs' account.1äwphï1.ñët
After appropriate proceedings, the Court of First Instance
of Manila rendered judgment dismissing the complaint
upon the ground that plaintiffs cannot recover from the
defendants upon the basis of a quasi-delict, because the
relation between the parties is contractual in nature;
because this case does not fall under Article 2219 of our
Civil Code, upon which plaintiffs rely; and because
plaintiffs have not established the amount of damages
allegedly sustained by them.
The lower court held that plaintiffs' claim for damages
cannot be based upon a tort or quasi-delict, their relation
with the defendants being contractual in nature. We have
repeatedly held, however, that the existence of a contract
between the parties does not bar the commission of a tort
by the one against the order and the consequent recovery
of damages therefor.2 Indeed, this view has been, in
effect, reiterated in a comparatively recent case. Thus, in
Air France vs. Carrascoso,3 involving an airplane
passenger who, despite his first-class ticket, had been
illegally ousted from his first-class accommodation and
compelled to take a seat in the tourist compartment, was
held entitled to recover damages from the air-carrier, upon
the ground of tort on the latter's part, for, although the
relation between a passenger and a carrier is "contractual
both in origin and nature ... the act that breaks the contract
may also be a tort".
In view, however, of the facts obtaining in the case at bar,
and considering, particularly, the circumstance, that the
wrong done to the plaintiff was remedied as soon as the
President of the bank realized the mistake he and his
subordinate employee had committed, the Court finds that
an award of nominal damages — the amount of which
need not be proven4 — in the sum of P1,000, in addition
to attorney's fees in the sum of P500, would suffice to
vindicate plaintiff's rights.5

WHEREFORE, the judgment appealed from is hereby

reversed, and another one shall be entered sentencing the
defendant Bank of the Philippine Islands to pay to the
plaintiffs said sums of P1,000, as nominal damages, and
P500, as attorney's fees, apart from the costs. It is so
ordered.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez,

Castro and Angeles, JJ., concur.
Fernando, J., took no part.

Footnotes

1P100,000 as moral damages, P20,000 as exemplary

damages, P20,000 as nominal damages, and P10,000 for
attorney's fees and expenses of litigation, plus the costs.

2Cangco v. Manila Railroad, 38 Phil. 768; Yamada v.

Manila Railroad, 33 Phil. 8; Vazquez v. Borja, 74 Phil. 560.

3L-21438, Sept. 28, 1966.

4Ventanilla v. Centeno, L-14333, January 28, 1961.

5Articles 2208 and 2221 of the Civil Code of the

Philippines.
G.R. No. 145804 February 6, 2003
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO
ROMAN, petitioners,
vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR
NAVIDAD & PRUDENT SECURITY AGENCY,
respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from the decision
and resolution of the Court of Appeals, promulgated on 27
April 2000 and 10 October 2000, respectively, in CA-G.R.
CV No. 60720, entitled "Marjorie Navidad and Heirs of the
Late Nicanor Navidad vs. Rodolfo Roman, et. al.," which
has modified the decision of 11 August 1998 of the
Regional Trial Court, Branch 266, Pasig City, exonerating
Prudent Security Agency (Prudent) from liability and
finding Light Rail Transit Authority (LRTA) and Rodolfo
Roman liable for damages on account of the death of
Nicanor Navidad.
On 14 October 1993, about half an hour past seven
o’clock in the evening, Nicanor Navidad, then drunk,
entered the EDSA LRT station after purchasing a "token"
(representing payment of the fare). While Navidad was
standing on the platform near the LRT tracks, Junelito
Escartin, the security guard assigned to the area
approached Navidad. A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight.
No evidence, however, was adduced to indicate how the
fight started or who, between the two, delivered the first
blow or how Navidad later fell on the LRT tracks. At the
exact moment that Navidad fell, an LRT train, operated by
petitioner Rodolfo Roman, was coming in. Navidad was
struck by the moving train, and he was killed
instantaneously.
On 08 December 1994, the widow of Nicanor, herein
respondent Marjorie Navidad, along with her children, filed
a complaint for damages against Junelito Escartin, Rodolfo
Roman, the LRTA, the Metro Transit Organization, Inc.
(Metro Transit), and Prudent for the death of her husband.
LRTA and Roman filed a counterclaim against Navidad
and a cross-claim against Escartin and Prudent. Prudent,
in its answer, denied liability and averred that it had
exercised due diligence in the selection and supervision of
its security guards.
The LRTA and Roman presented their evidence while
Prudent and Escartin, instead of presenting evidence, filed
a demurrer contending that Navidad had failed to prove
that Escartin was negligent in his assigned task. On 11
August 1998, the trial court rendered its decision; it
adjudged:
"WHEREFORE, judgment is hereby rendered in favor of
the plaintiffs and against the defendants Prudent Security
and Junelito Escartin ordering the latter to pay jointly and
severally the plaintiffs the following:
"a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum
of P50,000.00;
"b) Moral damages of P50,000.00;
"c) Attorney’s fees of P20,000;
"d) Costs of suit.
"The complaint against defendants LRTA and Rodolfo
Roman are dismissed for lack of merit.
"The compulsory counterclaim of LRTA and Roman are
likewise dismissed."1
Prudent appealed to the Court of Appeals. On 27 August
2000, the appellate court promulgated its now assailed
decision exonerating Prudent from any liability for the
death of Nicanor Navidad and, instead, holding the LRTA
and Roman jointly and severally liable thusly:
"WHEREFORE, the assailed judgment is hereby
MODIFIED, by exonerating the appellants from any liability
for the death of Nicanor Navidad, Jr. Instead, appellees
Rodolfo Roman and the Light Rail Transit Authority (LRTA)
are held liable for his death and are hereby directed to pay
jointly and severally to the plaintiffs-appellees, the
following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased;
and
e) P20,000.00 as and for attorney’s fees."2
The appellate court ratiocinated that while the deceased
might not have then as yet boarded the train, a contract of
carriage theretofore had already existed when the victim
entered the place where passengers were supposed to be
after paying the fare and getting the corresponding token
therefor. In exempting Prudent from liability, the court
stressed that there was nothing to link the security agency
to the death of Navidad. It said that Navidad failed to show
that Escartin inflicted fist blows upon the victim and the
evidence merely established the fact of death of Navidad
by reason of his having been hit by the train owned and
managed by the LRTA and operated at the time by
Roman. The appellate court faulted petitioners for their
failure to present expert evidence to establish the fact that
the application of emergency brakes could not have
stopped the train.
The appellate court denied petitioners’ motion for
reconsideration in its resolution of 10 October 2000.
In their present recourse, petitioners recite alleged errors
on the part of the appellate court; viz:
"I.
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED BY DISREGARDING THE FINDINGS OF FACTS
BY THE TRIAL COURT
"II.
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT PETITIONERS ARE LIABLE
FOR THE DEATH OF NICANOR NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT RODOLFO ROMAN IS AN
EMPLOYEE OF LRTA."3
Petitioners would contend that the appellate court ignored
the evidence and the factual findings of the trial court by
holding them liable on the basis of a sweeping conclusion
that the presumption of negligence on the part of a
common carrier was not overcome. Petitioners would insist
that Escartin’s assault upon Navidad, which caused the
latter to fall on the tracks, was an act of a stranger that
could not have been foreseen or prevented. The LRTA
would add that the appellate court’s conclusion on the
existence of an employer-employee relationship between
Roman and LRTA lacked basis because Roman himself
had testified being an employee of Metro Transit and not
of the LRTA.
Respondents, supporting the decision of the appellate
court, contended that a contract of carriage was deemed
created from the moment Navidad paid the fare at the LRT
station and entered the premises of the latter, entitling
Navidad to all the rights and protection under a contractual
relation, and that the appellate court had correctly held
LRTA and Roman liable for the death of Navidad in failing
to exercise extraordinary diligence imposed upon a
common carrier.
Law and jurisprudence dictate that a common carrier, both
from the nature of its business and for reasons of public
policy, is burdened with the duty of exercising utmost
diligence in ensuring the safety of passengers.4 The Civil
Code, governing the liability of a common carrier for death
of or injury to its passengers, provides:
"Article 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances.
"Article 1756. In case of death of or injuries to passengers,
common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in articles
1733 and 1755."
"Article 1759. Common carriers are liable for the death of
or injuries to passengers through the negligence or willful
acts of the former’s employees, although such employees
may have acted beyond the scope of their authority or in
violation of the orders of the common carriers.
"This liability of the common carriers does not cease upon
proof that they exercised all the diligence of a good father
of a family in the selection and supervision of their
employees."
"Article 1763. A common carrier is responsible for injuries
suffered by a passenger on account of the willful acts or
negligence of other passengers or of strangers, if the
common carrier’s employees through the exercise of the
diligence of a good father of a family could have prevented
or stopped the act or omission."
The law requires common carriers to carry passengers
safely using the utmost diligence of very cautious persons
with due regard for all circumstances.5 Such duty of a
common carrier to provide safety to its passengers so
obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where
they ought to be in pursuance to the contract of carriage.6
The statutory provisions render a common carrier liable for
death of or injury to passengers (a) through the negligence
or wilful acts of its employees or b) on account of wilful
acts or negligence of other passengers or of strangers if
the common carrier’s employees through the exercise of
due diligence could have prevented or stopped the act or
omission.7 In case of such death or injury, a carrier is
presumed to have been at fault or been negligent, and8 by
simple proof of injury, the passenger is relieved of the duty
to still establish the fault or negligence of the carrier or of
its employees and the burden shifts upon the carrier to
prove that the injury is due to an unforeseen event or to
force majeure.9 In the absence of satisfactory explanation
by the carrier on how the accident occurred, which
petitioners, according to the appellate court, have failed to
show, the presumption would be that it has been at
fault,10 an exception from the general rule that negligence
must be proved.11
The foundation of LRTA’s liability is the contract of
carriage and its obligation to indemnify the victim arises
from the breach of that contract by reason of its failure to
exercise the high diligence required of the common carrier.
In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own
employees or avail itself of the services of an outsider or
an independent firm to undertake the task. In either case,
the common carrier is not relieved of its responsibilities
under the contract of carriage.
Should Prudent be made likewise liable? If at all, that
liability could only be for tort under the provisions of Article
217612 and related provisions, in conjunction with Article
2180,13 of the Civil Code. The premise, however, for the
employer’s liability is negligence or fault on the part of the
employee. Once such fault is established, the employer
can then be made liable on the basis of the presumption
juris tantum that the employer failed to exercise
diligentissimi patris families in the selection and
supervision of its employees. The liability is primary and
can only be negated by showing due diligence in the
selection and supervision of the employee, a factual matter
that has not been shown. Absent such a showing, one
might ask further, how then must the liability of the
common carrier, on the one hand, and an independent
contractor, on the other hand, be described? It would be
solidary. A contractual obligation can be breached by tort
and when the same act or omission causes the injury, one
resulting in culpa contractual and the other in culpa
aquiliana, Article 219414 of the Civil Code can well
apply.15 In fine, a liability for tort may arise even under a
contract, where tort is that which breaches the contract.16
Stated differently, when an act which constitutes a breach
of contract would have itself constituted the source of a
quasi-delictual liability had no contract existed between the
parties, the contract can be said to have been breached by
tort, thereby allowing the rules on tort to apply.17
Regrettably for LRT, as well as perhaps the surviving
spouse and heirs of the late Nicanor Navidad, this Court is
concluded by the factual finding of the Court of Appeals
that "there is nothing to link (Prudent) to the death of
Nicanor (Navidad), for the reason that the negligence of its
employee, Escartin, has not been duly proven x x x." This
finding of the appellate court is not without substantial
justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo
Roman himself is guilty of any culpable act or omission, he
must also be absolved from liability. Needless to say, the
contractual tie between the LRT and Navidad is not itself a
juridical relation between the latter and Roman; thus,
Roman can be made liable only for his own fault or
negligence.
The award of nominal damages in addition to actual
damages is untenable. Nominal damages are adjudicated
in order that a right of the plaintiff, which has been violated
or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.18 It is an established
rule that nominal damages cannot co-exist with
compensatory damages.19
WHEREFORE, the assailed decision of the appellate court
is AFFIRMED with MODIFICATION but only in that (a) the
award of nominal damages is DELETED and (b) petitioner
Rodolfo Roman is absolved from liability. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio
and Azcuna, JJ., concur.
Footnotes
1 Rollo, p. 16.
2 Rollo, pp. 46-47.
3 Rollo, pp. 18-19.
4 Arada vs. Court of Appeals, 210 SCRA 624.
5 Philippine Airlines, Inc. vs. Court of Appeals, 226 SCRA
423.
6 Dangwa Transportation Co., Inc. vs. Court of Appeals,
202 SCRA 575.
7 Article 1763, Civil Code.
8 Gatchalian vs. Delim, 203 SCRA 126; Yobido vs. Court
of Appeals, 281 SCRA 1; Landingin vs. Pangasinan
Transportation Co., 33 SCRA 284.
9 Mercado vs. Lira, 3 SCRA 124.
10 Article 1756, Civil Code.
11 Vda. De Abeto vs. Phil. Air Lines, Inc., 30 July 1982.
12 Art. 2176. Whoever by act or omission causes damage
to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if there
is no pre-existing contractual relation between the parties,
is called a quasi-delict and is governed by the provisions of
this Chapter.
13 Art. 2180. The obligation imposed by Article 2176 is
demandable not only for one’s own acts or omissions, but
also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the
mother, are responsible for the damages caused by the
minor children who live in their company.
Guardians are liable for damages caused by the minors or
incapacitated persons who are under their authority and
live in their company.
The owners and managers of an establishment or
enterprise are likewise responsible for damages caused by
their employees in the service of the branches in which the
latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope
of their assigned tasks, even though the former are not
engaged in any business or industry.
The State is responsible in like manner when it acts
through a special agent, but not when the damage has
been caused by the official to whom the task done properly
pertains, in which case what is provided in article 2176
shall be applicable.
Lastly, teachers or heads of establishments of arts and
trades shall be liable for damages caused by their pupils
and students or apprentices, so long as they remain in
their custody.

The responsibility treated of in this article shall cease when

the persons herein mentioned prove that they observed all
the diligence of a good father of a family to prevent
damage.

14 Art. 2194. The responsibility of two or more persons

who are liable for a quasi-delict is solidary.

15 Air France vs. Carrascoso, 124 Phil. 722.

16 PSBA vs. CA, 205 SCRA 729.

17 Cangco vs. Manila Railroad, 38 Phil. 768; Manila

Railroad vs. Compania Transatlantica, 38 Phil. 875.

18 Article 2221, Civil Code.

19 Medina, et al. vs. Cresencia, 99 Phil. 506.

G.R. No. 126780 February 17, 2005
YHT REALTY CORPORATION, ERLINDA LAINEZ and
ANICIA PAYAM, petitioners,
vs.
THE COURT OF APPEALS and MAURICE
McLOUGHLIN, respondents.
DECISION
TINGA, J.:
The primary question of interest before this Court is the
only legal issue in the case: It is whether a hotel may
evade liability for the loss of items left with it for
safekeeping by its guests, by having these guests execute
written waivers holding the establishment or its employees
free from blame for such loss in light of Article 2003 of the
Civil Code which voids such waivers.
Before this Court is a Rule 45 petition for review of the
Decision1 dated 19 October 1995 of the Court of Appeals
which affirmed the Decision2 dated 16 December 1991 of
the Regional Trial Court (RTC), Branch 13, of Manila,
finding YHT Realty Corporation, Brunhilda Mata-Tan
(Tan), Erlinda Lainez (Lainez) and Anicia Payam (Payam)
jointly and solidarily liable for damages in an action filed by
Maurice McLoughlin (McLoughlin) for the loss of his
American and Australian dollars deposited in the safety
deposit box of Tropicana Copacabana Apartment Hotel,
owned and operated by YHT Realty Corporation.
The factual backdrop of the case follow.
Private respondent McLoughlin, an Australian
businessman-philanthropist, used to stay at Sheraton
Hotel during his trips to the Philippines prior to 1984 when
he met Tan. Tan befriended McLoughlin by showing him
around, introducing him to important people,
accompanying him in visiting impoverished street children
and assisting him in buying gifts for the children and in
distributing the same to charitable institutions for poor
children. Tan convinced McLoughlin to transfer from
Sheraton Hotel to Tropicana where Lainez, Payam and
Danilo Lopez were employed. Lopez served as manager
of the hotel while Lainez and Payam had custody of the
keys for the safety deposit boxes of Tropicana. Tan took
care of McLoughlin's booking at the Tropicana where he
started staying during his trips to the Philippines from
December 1984 to September 1987.3
On 30 October 1987, McLoughlin arrived from Australia
and registered with Tropicana. He rented a safety deposit
box as it was his practice to rent a safety deposit box
every time he registered at Tropicana in previous trips. As
a tourist, McLoughlin was aware of the procedure
observed by Tropicana relative to its safety deposit boxes.
The safety deposit box could only be opened through the
use of two keys, one of which is given to the registered
guest, and the other remaining in the possession of the
management of the hotel. When a registered guest wished
to open his safety deposit box, he alone could personally
request the management who then would assign one of its
employees to accompany the guest and assist him in
opening the safety deposit box with the two keys.4
McLoughlin allegedly placed the following in his safety
deposit box: Fifteen Thousand US Dollars (US$15,000.00)
which he placed in two envelopes, one envelope
containing Ten Thousand US Dollars (US$10,000.00) and
the other envelope Five Thousand US Dollars
(US$5,000.00); Ten Thousand Australian Dollars
(AUS$10,000.00) which he also placed in another
envelope; two (2) other envelopes containing letters and
credit cards; two (2) bankbooks; and a checkbook,
arranged side by side inside the safety deposit box.5
On 12 December 1987, before leaving for a brief trip to
Hongkong, McLoughlin opened his safety deposit box with
his key and with the key of the management and took
therefrom the envelope containing Five Thousand US
Dollars (US$5,000.00), the envelope containing Ten
Thousand Australian Dollars (AUS$10,000.00), his
passports and his credit cards.6 McLoughlin left the other
items in the box as he did not check out of his room at the
Tropicana during his short visit to Hongkong. When he
arrived in Hongkong, he opened the envelope which
contained Five Thousand US Dollars (US$5,000.00) and
discovered upon counting that only Three Thousand US
Dollars (US$3,000.00) were enclosed therein.7 Since he
had no idea whether somebody else had tampered with
his safety deposit box, he thought that it was just a result
of bad accounting since he did not spend anything from
that envelope.8
After returning to Manila, he checked out of Tropicana on
18 December 1987 and left for Australia. When he arrived
in Australia, he discovered that the envelope with Ten
Thousand US Dollars (US$10,000.00) was short of Five
Thousand US Dollars (US$5,000). He also noticed that the
jewelry which he bought in Hongkong and stored in the
safety deposit box upon his return to Tropicana was
likewise missing, except for a diamond bracelet.9
When McLoughlin came back to the Philippines on 4 April
1988, he asked Lainez if some money and/or jewelry
which he had lost were found and returned to her or to the
management. However, Lainez told him that no one in the
hotel found such things and none were turned over to the
management. He again registered at Tropicana and rented
a safety deposit box. He placed therein one (1) envelope
containing Fifteen Thousand US Dollars (US$15,000.00),
another envelope containing Ten Thousand Australian
Dollars (AUS$10,000.00) and other envelopes containing
his traveling papers/documents. On 16 April 1988,
McLoughlin requested Lainez and Payam to open his
safety deposit box. He noticed that in the envelope
containing Fifteen Thousand US Dollars (US$15,000.00),
Two Thousand US Dollars (US$2,000.00) were missing
and in the envelope previously containing Ten Thousand
Australian Dollars (AUS$10,000.00), Four Thousand Five
Hundred Australian Dollars (AUS$4,500.00) were
missing.10
When McLoughlin discovered the loss, he immediately
confronted Lainez and Payam who admitted that Tan
opened the safety deposit box with the key assigned to
him.11 McLoughlin went up to his room where Tan was
staying and confronted her. Tan admitted that she had
stolen McLoughlin's key and was able to open the safety
deposit box with the assistance of Lopez, Payam and
Lainez.12 Lopez also told McLoughlin that Tan stole the
key assigned to McLoughlin while the latter was asleep.13
McLoughlin requested the management for an
investigation of the incident. Lopez got in touch with Tan
and arranged for a meeting with the police and
McLoughlin. When the police did not arrive, Lopez and
Tan went to the room of McLoughlin at Tropicana and
thereat, Lopez wrote on a piece of paper a promissory
note dated 21 April 1988. The promissory note reads as
follows:
I promise to pay Mr. Maurice McLoughlin the amount of
AUS$4,000.00 and US$2,000.00 or its equivalent in
Philippine currency on or before May 5, 1988.14
Lopez requested Tan to sign the promissory note which
the latter did and Lopez also signed as a witness. Despite
the execution of promissory note by Tan, McLoughlin
insisted that it must be the hotel who must assume
responsibility for the loss he suffered. However, Lopez
refused to accept the responsibility relying on the
conditions for renting the safety deposit box entitled
"Undertaking For the Use Of Safety Deposit Box,"15
specifically paragraphs (2) and (4) thereof, to wit:
2. To release and hold free and blameless TROPICANA
APARTMENT HOTEL from any liability arising from any
loss in the contents and/or use of the said deposit box for
any cause whatsoever, including but not limited to the
presentation or use thereof by any other person should the
key be lost;
...
4. To return the key and execute the RELEASE in favor of
TROPICANA APARTMENT HOTEL upon giving up the
use of the box.16
On 17 May 1988, McLoughlin went back to Australia and
he consulted his lawyers as to the validity of the
abovementioned stipulations. They opined that the
stipulations are void for being violative of universal hotel
practices and customs. His lawyers prepared a letter dated
30 May 1988 which was signed by McLoughlin and sent to
President Corazon Aquino.17 The Office of the President
referred the letter to the Department of Justice (DOJ)
which forwarded the same to the Western Police District
(WPD).18
After receiving a copy of the indorsement in Australia,
McLoughlin came to the Philippines and registered again
as a hotel guest of Tropicana. McLoughlin went to
Malacaňang to follow up on his letter but he was instructed
to go to the DOJ. The DOJ directed him to proceed to the
WPD for documentation. But McLoughlin went back to
Australia as he had an urgent business matter to attend to.
For several times, McLoughlin left for Australia to attend to
his business and came back to the Philippines to follow up
on his letter to the President but he failed to obtain any
concrete assistance.19
McLoughlin left again for Australia and upon his return to
the Philippines on 25 August 1989 to pursue his claims
against petitioners, the WPD conducted an investigation
which resulted in the preparation of an affidavit which was
forwarded to the Manila City Fiscal's Office. Said affidavit
became the basis of preliminary investigation. However,
McLoughlin left again for Australia without receiving the
notice of the hearing on 24 November 1989. Thus, the
case at the Fiscal's Office was dismissed for failure to
prosecute. Mcloughlin requested the reinstatement of the
criminal charge for theft. In the meantime, McLoughlin and
his lawyers wrote letters of demand to those having
responsibility to pay the damage. Then he left again for
Australia.
Upon his return on 22 October 1990, he registered at the
Echelon Towers at Malate, Manila. Meetings were held
between McLoughlin and his lawyer which resulted to the
filing of a complaint for damages on 3 December 1990
against YHT Realty Corporation, Lopez, Lainez, Payam
and Tan (defendants) for the loss of McLoughlin's money
which was discovered on 16 April 1988. After filing the
complaint, McLoughlin left again for Australia to attend to
an urgent business matter. Tan and Lopez, however, were
not served with summons, and trial proceeded with only
Lainez, Payam and YHT Realty Corporation as
defendants.
After defendants had filed their Pre-Trial Brief admitting
that they had previously allowed and assisted Tan to open
the safety deposit box, McLoughlin filed an
Amended/Supplemental Complaint20 dated 10 June 1991
which included another incident of loss of money and
jewelry in the safety deposit box rented by McLoughlin in
the same hotel which took place prior to 16 April 1988.21
The trial court admitted the Amended/Supplemental
Complaint.
During the trial of the case, McLoughlin had been in and
out of the country to attend to urgent business in Australia,
and while staying in the Philippines to attend the hearing,
he incurred expenses for hotel bills, airfare and other
transportation expenses, long distance calls to Australia,
Meralco power expenses, and expenses for food and
maintenance, among others.22
After trial, the RTC of Manila rendered judgment in favor of
McLoughlin, the dispositive portion of which reads:
WHEREFORE, above premises considered, judgment is
hereby rendered by this Court in favor of plaintiff and
against the defendants, to wit:
1. Ordering defendants, jointly and severally, to pay
plaintiff the sum of US$11,400.00 or its equivalent in
Philippine Currency of ₱342,000.00, more or less, and the
sum of AUS$4,500.00 or its equivalent in Philippine
Currency of ₱99,000.00, or a total of ₱441,000.00, more or
less, with 12% interest from April 16 1988 until said
amount has been paid to plaintiff (Item 1, Exhibit CC);
2. Ordering defendants, jointly and severally to pay plaintiff
the sum of ₱3,674,238.00 as actual and consequential
damages arising from the loss of his Australian and
American dollars and jewelries complained against and in
prosecuting his claim and rights administratively and
judicially (Items II, III, IV, V, VI, VII, VIII, and IX, Exh.
"CC");
3. Ordering defendants, jointly and severally, to pay
plaintiff the sum of ₱500,000.00 as moral damages (Item
X, Exh. "CC");
4. Ordering defendants, jointly and severally, to pay
plaintiff the sum of ₱350,000.00 as exemplary damages
(Item XI, Exh. "CC");
5. And ordering defendants, jointly and severally, to pay
litigation expenses in the sum of ₱200,000.00 (Item XII,
Exh. "CC");
6. Ordering defendants, jointly and severally, to pay
plaintiff the sum of ₱200,000.00 as attorney's fees, and a
fee of ₱3,000.00 for every appearance; and
7. Plus costs of suit.
SO ORDERED.23
The trial court found that McLoughlin's allegations as to
the fact of loss and as to the amount of money he lost
were sufficiently shown by his direct and straightforward
manner of testifying in court and found him to be credible
and worthy of belief as it was established that
McLoughlin's money, kept in Tropicana's safety deposit
box, was taken by Tan without McLoughlin's consent. The
taking was effected through the use of the master key
which was in the possession of the management. Payam
and Lainez allowed Tan to use the master key without
authority from McLoughlin. The trial court added that if
McLoughlin had not lost his dollars, he would not have
gone through the trouble and personal inconvenience of
seeking aid and assistance from the Office of the
President, DOJ, police authorities and the City Fiscal's
Office in his desire to recover his losses from the hotel
management and Tan.24
As regards the loss of Seven Thousand US Dollars
(US$7,000.00) and jewelry worth approximately One
Thousand Two Hundred US Dollars (US$1,200.00) which
allegedly occurred during his stay at Tropicana previous to
4 April 1988, no claim was made by McLoughlin for such
losses in his complaint dated 21 November 1990 because
he was not sure how they were lost and who the
responsible persons were. But considering the admission
of the defendants in their pre-trial brief that on three
previous occasions they allowed Tan to open the box, the
trial court opined that it was logical and reasonable to
presume that his personal assets consisting of Seven
Thousand US Dollars (US$7,000.00) and jewelry were
taken by Tan from the safety deposit box without
McLoughlin's consent through the cooperation of Payam
and Lainez.25
The trial court also found that defendants acted with gross
negligence in the performance and exercise of their duties
and obligations as innkeepers and were therefore liable to
answer for the losses incurred by McLoughlin.26
Moreover, the trial court ruled that paragraphs (2) and (4)
of the "Undertaking For The Use Of Safety Deposit Box"
are not valid for being contrary to the express mandate of
Article 2003 of the New Civil Code and against public
policy.27 Thus, there being fraud or wanton conduct on the
part of defendants, they should be responsible for all
damages which may be attributed to the non-performance
of their contractual obligations.28
The Court of Appeals affirmed the disquisitions made by
the lower court except as to the amount of damages
awarded. The decretal text of the appellate court's
decision reads:
THE FOREGOING CONSIDERED, the appealed Decision
is hereby AFFIRMED but modified as follows:
The appellants are directed jointly and severally to pay the
plaintiff/appellee the following amounts:
1) ₱153,200.00 representing the peso equivalent of
US$2,000.00 and AUS$4,500.00;
2) ₱308,880.80, representing the peso value for the air
fares from Sidney [sic] to Manila and back for a total of
eleven (11) trips;
3) One-half of ₱336,207.05 or ₱168,103.52 representing
payment to Tropicana Apartment Hotel;
4) One-half of ₱152,683.57 or ₱76,341.785 representing
payment to Echelon Tower;
5) One-half of ₱179,863.20 or ₱89,931.60 for the taxi xxx
transportation from the residence to Sidney [sic] Airport
and from MIA to the hotel here in Manila, for the eleven
(11) trips;
6) One-half of ₱7,801.94 or ₱3,900.97 representing
Meralco power expenses;
7) One-half of ₱356,400.00 or ₱178,000.00 representing
expenses for food and maintenance;
8) ₱50,000.00 for moral damages;
9) ₱10,000.00 as exemplary damages; and
10) ₱200,000 representing attorney's fees.
With costs.
SO ORDERED.29

Unperturbed, YHT Realty Corporation, Lainez and Payam
went to this Court in this appeal by certiorari.
Petitioners submit for resolution by this Court the following
issues: (a) whether the appellate court's conclusion on the
alleged prior existence and subsequent loss of the subject
money and jewelry is supported by the evidence on
record; (b) whether the finding of gross negligence on the
part of petitioners in the performance of their duties as
innkeepers is supported by the evidence on record; (c)
whether the "Undertaking For The Use of Safety Deposit
Box" admittedly executed by private respondent is null and
void; and (d) whether the damages awarded to private
respondent, as well as the amounts thereof, are proper
under the circumstances.30
The petition is devoid of merit.
It is worthy of note that the thrust of Rule 45 is the
resolution only of questions of law and any peripheral
factual question addressed to this Court is beyond the
bounds of this mode of review.
Petitioners point out that the evidence on record is
insufficient to prove the fact of prior existence of the dollars
and the jewelry which had been lost while deposited in the
safety deposit boxes of Tropicana, the basis of the trial
court and the appellate court being the sole testimony of
McLoughlin as to the contents thereof. Likewise,
petitioners dispute the finding of gross negligence on their
part as not supported by the evidence on record.
We are not persuaded.l^vvphi1.net We adhere to the
findings of the trial court as affirmed by the appellate court
that the fact of loss was established by the credible
testimony in open court by McLoughlin. Such findings are
factual and therefore beyond the ambit of the present
petition.1awphi1.nét
The trial court had the occasion to observe the demeanor
of McLoughlin while testifying which reflected the veracity
of the facts testified to by him. On this score, we give full
credence to the appreciation of testimonial evidence by the
trial court especially if what is at issue is the credibility of
the witness. The oft-repeated principle is that where the
credibility of a witness is an issue, the established rule is
that great respect is accorded to the evaluation of the
credibility of witnesses by the trial court.31 The trial court
is in the best position to assess the credibility of witnesses
and their testimonies because of its unique opportunity to
observe the witnesses firsthand and note their demeanor,
conduct and attitude under grilling examination.32
We are also not impressed by petitioners' argument that
the finding of gross negligence by the lower court as
affirmed by the appellate court is not supported by
evidence. The evidence reveals that two keys are required
to open the safety deposit boxes of Tropicana. One key is
assigned to the guest while the other remains in the
possession of the management. If the guest desires to
open his safety deposit box, he must request the
management for the other key to open the same. In other
words, the guest alone cannot open the safety deposit box
without the assistance of the management or its
employees. With more reason that access to the safety
deposit box should be denied if the one requesting for the
opening of the safety deposit box is a stranger. Thus, in
case of loss of any item deposited in the safety deposit
box, it is inevitable to conclude that the management had
at least a hand in the consummation of the taking, unless
the reason for the loss is force majeure.
Noteworthy is the fact that Payam and Lainez, who were
employees of Tropicana, had custody of the master key of
the management when the loss took place. In fact, they
even admitted that they assisted Tan on three separate
occasions in opening McLoughlin's safety deposit box.33
This only proves that Tropicana had prior knowledge that a
person aside from the registered guest had access to the
safety deposit box. Yet the management failed to notify
McLoughlin of the incident and waited for him to discover
the taking before it disclosed the matter to him. Therefore,
Tropicana should be held responsible for the damage
suffered by McLoughlin by reason of the negligence of its
employees.
The management should have guarded against the
occurrence of this incident considering that Payam
admitted in open court that she assisted Tan three times in
opening the safety deposit box of McLoughlin at around
6:30 A.M. to 7:30 A.M. while the latter was still asleep.34
In light of the circumstances surrounding this case, it is
undeniable that without the acquiescence of the
employees of Tropicana to the opening of the safety
deposit box, the loss of McLoughlin's money could and
should have been avoided.
The management contends, however, that McLoughlin, by
his act, made its employees believe that Tan was his
spouse for she was always with him most of the time. The
evidence on record, however, is bereft of any showing that
McLoughlin introduced Tan to the management as his
wife. Such an inference from the act of McLoughlin will not
exculpate the petitioners from liability in the absence of
any showing that he made the management believe that
Tan was his wife or was duly authorized to have access to
the safety deposit box. Mere close companionship and
intimacy are not enough to warrant such conclusion
considering that what is involved in the instant case is the
very safety of McLoughlin's deposit. If only petitioners
exercised due diligence in taking care of McLoughlin's
safety deposit box, they should have confronted him as to
his relationship with Tan considering that the latter had
been observed opening McLoughlin's safety deposit box a
number of times at the early hours of the morning. Tan's
acts should have prompted the management to investigate
her relationship with McLoughlin. Then, petitioners would
have exercised due diligence required of them. Failure to
do so warrants the conclusion that the management had
been remiss in complying with the obligations imposed
upon hotel-keepers under the law.
Under Article 1170 of the New Civil Code, those who, in
the performance of their obligations, are guilty of
negligence, are liable for damages. As to who shall bear
the burden of paying damages, Article 2180, paragraph (4)
of the same Code provides that the owners and managers
of an establishment or enterprise are likewise responsible
for damages caused by their employees in the service of
the branches in which the latter are employed or on the
occasion of their functions. Also, this Court has ruled that if
an employee is found negligent, it is presumed that the
employer was negligent in selecting and/or supervising
him for it is hard for the victim to prove the negligence of
such employer.35 Thus, given the fact that the loss of
McLoughlin's money was consummated through the
negligence of Tropicana's employees in allowing Tan to
open the safety deposit box without the guest's consent,
both the assisting employees and YHT Realty Corporation
itself, as owner and operator of Tropicana, should be held
solidarily liable pursuant to Article 2193.36
The issue of whether the "Undertaking For The Use of
Safety Deposit Box" executed by McLoughlin is tainted
with nullity presents a legal question appropriate for
resolution in this petition. Notably, both the trial court and
the appellate court found the same to be null and void. We
find no reason to reverse their common conclusion. Article
2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from
responsibility by posting notices to the effect that he is not
liable for the articles brought by the guest. Any stipulation
between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in Articles 1998 to
200137 is suppressed or diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an
expression of public policy precisely to apply to situations
such as that presented in this case. The hotel business
like the common carrier's business is imbued with public
interest. Catering to the public, hotelkeepers are bound to
provide not only lodging for hotel guests and security to
their persons and belongings. The twin duty constitutes the
essence of the business. The law in turn does not allow
such duty to the public to be negated or diluted by any
contrary stipulation in so-called "undertakings" that
ordinarily appear in prepared forms imposed by hotel
keepers on guests for their signature.
In an early case,38 the Court of Appeals through its then
Presiding Justice (later Associate Justice of the Court)
Jose P. Bengzon, ruled that to hold hotelkeepers or
innkeeper liable for the effects of their guests, it is not
necessary that they be actually delivered to the innkeepers
or their employees. It is enough that such effects are within
the hotel or inn.39 With greater reason should the liability
of the hotelkeeper be enforced when the missing items are
taken without the guest's knowledge and consent from a
safety deposit box provided by the hotel itself, as in this
case.
Paragraphs (2) and (4) of the "undertaking" manifestly
contravene Article 2003 of the New Civil Code for they
allow Tropicana to be released from liability arising from
any loss in the contents and/or use of the safety deposit
box for any cause whatsoever.40 Evidently, the
undertaking was intended to bar any claim against
Tropicana for any loss of the contents of the safety deposit
box whether or not negligence was incurred by Tropicana
or its employees. The New Civil Code is explicit that the
responsibility of the hotel-keeper shall extend to loss of, or
injury to, the personal property of the guests even if
caused by servants or employees of the keepers of hotels
or inns as well as by strangers, except as it may proceed
from any force majeure.41 It is the loss through force
majeure that may spare the hotel-keeper from liability. In
the case at bar, there is no showing that the act of the thief
or robber was done with the use of arms or through an
irresistible force to qualify the same as force majeure.42
Petitioners likewise anchor their defense on Article 200243
which exempts the hotel-keeper from liability if the loss is
due to the acts of his guest, his family, or visitors. Even a
cursory reading of the provision would lead us to reject
petitioners' contention. The justification they raise would
render nugatory the public interest sought to be protected
by the provision. What if the negligence of the employer or
its employees facilitated the consummation of a crime
committed by the registered guest's relatives or visitor?
Should the law exculpate the hotel from liability since the
loss was due to the act of the visitor of the registered guest
of the hotel? Hence, this provision presupposes that the
hotel-keeper is not guilty of concurrent negligence or has
not contributed in any degree to the occurrence of the loss.
A depositary is not responsible for the loss of goods by
theft, unless his actionable negligence contributes to the
loss.44
In the case at bar, the responsibility of securing the safety
deposit box was shared not only by the guest himself but
also by the management since two keys are necessary to
open the safety deposit box. Without the assistance of
hotel employees, the loss would not have occurred. Thus,
Tropicana was guilty of concurrent negligence in allowing
Tan, who was not the registered guest, to open the safety
deposit box of McLoughlin, even assuming that the latter
was also guilty of negligence in allowing another person to
use his key. To rule otherwise would result in undermining
the safety of the safety deposit boxes in hotels for the
management will be given imprimatur to allow any person,
under the pretense of being a family member or a visitor of
the guest, to have access to the safety deposit box without
fear of any liability that will attach thereafter in case such
person turns out to be a complete stranger. This will allow
the hotel to evade responsibility for any liability incurred by
its employees in conspiracy with the guest's relatives and
visitors.
Petitioners contend that McLoughlin's case was mounted
on the theory of contract, but the trial court and the
appellate court upheld the grant of the claims of the latter
on the basis of tort.45 There is nothing anomalous in how
the lower courts decided the controversy for this Court has
pronounced a jurisprudential rule that tort liability can exist
even if there are already contractual relations. The act that
breaks the contract may also be tort.46
As to damages awarded to McLoughlin, we see no reason
to modify the amounts awarded by the appellate court for
the same were based on facts and law. It is within the
province of lower courts to settle factual issues such as the WHEREFORE, foregoing premises considered, the
proper amount of damages awarded and such finding is Decision of the Court of Appeals dated 19 October 1995 is
binding upon this Court especially if sufficiently proven by hereby AFFIRMED. Petitioners are directed, jointly and Footnotes
evidence and not unconscionable or excessive. Thus, the severally, to pay private respondent the following amounts:
appellate court correctly awarded McLoughlin Two 1 Rollo, p. 38. Decision penned by Justice Bernardo LL.
Thousand US Dollars (US$2,000.00) and Four Thousand (1) US$2,000.00 and AUS$4,500.00 or their peso Salas and concurred in by Justices Pedro A. Ramirez and
Five Hundred Australian dollars (AUS$4,500.00) or their equivalent at the time of payment; Ma. Alicia Austria-Martinez.
peso equivalent at the time of payment,47 being the
amounts duly proven by evidence.48 The alleged loss that (2) ₱308,880.80, representing the peso value for the air 2 Id. at 118. Decision penned by Judge Gerardo M.S.
took place prior to 16 April 1988 was not considered since fares from Sydney to Manila and back for a total of eleven Pepito.
the amounts alleged to have been taken were not (11) trips;
sufficiently established by evidence. The appellate court 3 Id. at 119.
also correctly awarded the sum of ₱308,880.80, (3) One-half of ₱336,207.05 or ₱168,103.52 representing
representing the peso value for the air fares from Sydney payment to Tropicana Copacabana Apartment Hotel; 4 Id. at 120.
to Manila and back for a total of eleven (11) trips;49 one-
half of ₱336,207.05 or ₱168,103.52 representing payment (4) One-half of ₱152,683.57 or ₱76,341.785 representing 5 Ibid.
to Tropicana;50 one-half of ₱152,683.57 or ₱76,341.785 payment to Echelon Tower;
representing payment to Echelon Tower;51 one-half of 6 Ibid.
₱179,863.20 or ₱89,931.60 for the taxi or transportation (5) One-half of ₱179,863.20 or ₱89,931.60 for the taxi or
expenses from McLoughlin's residence to Sydney Airport transportation expense from McLoughlin's residence to 7 Ibid.
and from MIA to the hotel here in Manila, for the eleven Sydney Airport and from MIA to the hotel here in Manila,
(11) trips;52 one-half of ₱7,801.94 or ₱3,900.97 for the eleven (11) trips; 8 Ibid.
representing Meralco power expenses;53 one-half of
₱356,400.00 or ₱178,000.00 representing expenses for (6) One-half of ₱7,801.94 or ₱3,900.97 representing 9 Ibid.
food and maintenance.54 Meralco power expenses;
10 Id. at 121 and 41. TSN, 9 September 1991, p. 10.
The amount of ₱50,000.00 for moral damages is (7) One-half of ₱356,400.00 or ₱178,200.00 representing
reasonable. Although trial courts are given discretion to expenses for food and maintenance; 11 Id. at 42.
determine the amount of moral damages, the appellate
court may modify or change the amount awarded when it (8) ₱50,000.00 for moral damages; 12 Ibid.
is palpably and scandalously excessive.l^vvphi1.net Moral
damages are not intended to enrich a complainant at the (9) ₱10,000.00 as exemplary damages; and 13 Id. at 121.
expense of a defendant.l^vvphi1.net They are awarded
only to enable the injured party to obtain means, diversion (10) ₱200,000 representing attorney's fees. 14 Exhibit V.
or amusements that will serve to alleviate the moral
suffering he has undergone, by reason of defendants' With costs. 15 Exh. W.
culpable action.55
SO ORDERED. 16 Rollo, p. 122.
The awards of ₱10,000.00 as exemplary damages and
₱200,000.00 representing attorney's fees are likewise Puno, (Chairman), Callejo, Sr., and Chico-Nazario, JJ., 17 Ibid.
sustained. concur.
Austria-Martinez, J., no part. 18 Ibid.
 X. MORAL DAMAGES 1997, 279 SCRA 532; People v. Cabel, G.R. No. 121508,
19 Id. at 123. ………………………………………… 500,000.00 282 SCRA 410.
XI. EXEMPLARY DAMAGES
20 Records, p. 52. …………………………………… 350,000.00 33 Id. at 125.
XII. LITIGATION EXPENSES
21 Rollo, p. 125. …………………………………… 200,000.00 34 Id. at 128.
TOTAL ………………………………………………………
22 Exh. CC. Records (Exhibit Folder), pp. 146-147. The ₱5,135,038.64 35 Campo, et al. v. Camarote and Gemilga, 100 Phil. 459
Itemized Claims for Damages allegedly incurred by ATTORNEY'S FEES………………………………………… (1956).
McLoughlin: 200,000.00
Plus, appearance fee of ₱3,000.00 for every court 36 Art. 2194. The responsibility of two or more persons
I. CLAIMS FOR STOLEN MONIES AND appearance. who are liable for a quasi-delict is solidary.
PERSONAL PROPERTY:
A. US$2,000.00 23 Rollo, pp. 141-142. 37 Art. 1998. The deposit of effects made by travelers in
US$4,500.00………………………………………………… hotels or inns shall also be regarded as necessary. The
₱153,200.00 24 Id. at 127. keepers of hotels or inns shall be responsible for them as
B. US$8,000.00 cash and US$1,200.00 with jewelry……… depositaries, provided that notice was given to them, or to
257,600.00 25 Ibid. their employees, of the effects brought by the guests and
II. AIR FARES from Sydney to Manila and that, on the part of the latter, they take the precautions
back (11trips up to date of testimony)……………………… 26 Id. at 134. which said hotel-keepers or their substitutes advised
308,880.00 relative to the care and vigilance of their effects.
III. PAYMENTS TO TROPICANA APARTMENT 27 Id. at 135.
HOTEL……… 336,207.05 Art. 1999. The hotel-keeper is liable for the vehicles,
IV. PAYMENTS TO ECHELON 28 Id. at 138. animals and articles which have been introduced or placed
TOWER………………………… 152,683.57 in the annexes of the hotel.
V. Taxes, fees, transportation from residence to 29 Id. at 63-64.
Sydney airport and from MIA to hotel in Manila Art. 2000. The responsibility referred to in the two
and vice versa………………………………………………… 30 Id. at 19-20. preceding articles shall include the loss of, or injury to the
179,863.20 personal property of the guests caused by the servants or
VI. MERALCO POWER EXPENSES 31 People v. Andales, G.R. Nos. 152624-25, February 5, employees of the keepers of hotels or inns as well as by
…………………………… 7,811.94 2004; People v. Fucio, G.R. No. 151186-95, February 13, strangers; but not that which may proceed from any force
VII. PLDT EXPENSES(overseas telephone calls) 2004; People v. Preciados, G.R. No. 122934, January 5, majeure. The fact that travellers are constrained to rely on
Paid in the Philippines……………………………………… 2001, 349 SCRA 1; People v. Toyco, Sr., G.R. No. the vigilance of the keeper of the hotel or inn shall be
5,597.68 138609, January 17, 2001, 349 SCRA 385; People v. considered in determining the degree of care required of
Paid in Australia……………………………………………… Cabareňo, G.R. No. 138645, January 16, 2001, 349 SCRA him.
166,795.20 297; People v. Valdez, G.R. No. 128105, January 24,
VIII. EXPENSES FOR FOOD AND 2001, 350 SCRA 189. Art. 2001. The act of a thief or robber, who has entered the
MAINTENANCE…………… 356,400.00 hotel is not deemed force majeure, unless it is done with
IX. BUSINESS/OPPORTUNITY LOSS IN SYDNEY 32 People v. Dimacuha, G.R. Nos. 152592-93, February the use of arms or through an irresistible force.
WHILE IN THE PHILIPPINES BECAUSE OF CASE 13, 2004; People v. Yang, G.R. No. 148077, February 16,
……… 2,160,000.00 2004; People v. Betonio, G.R. No. 119165, September 26, 38 De Los Santos v. Tan Khey, 58 O.G. No. 45-53, p.
7693.
39 Ibid at 7694-7695. 52 Ibid.

40 Exh. W. 53 Ibid. Expenses for power and air-conditioning were

separate from room payment.
41 Art. 2000, New Civil Code.
54 Ibid. Business losses were rejected because of lack of
42 Art. 2001, supra at note 39. proof.

43 Art. 2002. The hotel-keeper is not liable for 55 Prudenciado v. Alliance Transport System, Inc., G.R.
compensation if the loss is due to the acts of the guest, his No. 33836, March 16, 1987.
family, servants or visitors, or if the loss arises from the
character of the things brought into the hotel.

44 26 C.J.S. 731 citing Griffith v. Zipperwick, 28 Ohio St.

388.

45 Rollo, pp. 31-32.

46 Air France v. Carrascoso, et al., 124 Phil. 722 (1966).

47 Zagala v. Jimenez, G.R. No. 33050, July 23, 1987, 152

SCRA 147. "According to the case of Phoenix Assurance
Company v. Macondray & Co., Inc., (64 SCRA 15) a
judgment awarding an amount in U.S. dollars may be paid
with its equivalent amount in local currency based on the
conversion rate prevailing at the time of payment. If the
parties cannot agree on the same, the trial court should
determine such conversion rate. Needless to say, the
judgment debtor may simply satisfy said award by paying
in full the amount in U.S. dollars."

48 Exh. V.

49 Exh. CC, p. 146.

50 Id. The Court of Appeals noted that during his stay in

the Philippines, McLoughlin's time was not totally devoted
to following up his claim as he had business arrangements
to look into.

51 Ibid.
G.R. No. 150255. April 22, 2005
SCHMITZ TRANSPORT & BROKERAGE
CORPORATION, Petitioners,
vs.
TRANSPORT VENTURE, INC., INDUSTRIAL
INSURANCE COMPANY, LTD., and BLACK SEA
SHIPPING AND DODWELL now INCHCAPE SHIPPING
SERVICES, Respondents.
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision1 of
the Court of Appeals, as well as its Resolution2 dated
September 28, 2001 denying the motion for
reconsideration, which affirmed that of Branch 21 of the
Regional Trial Court (RTC) of Manila in Civil Case No. 92-
631323 holding petitioner Schmitz Transport Brokerage
Corporation (Schmitz Transport), together with Black Sea
Shipping Corporation (Black Sea), represented by its ship
agent Inchcape Shipping Inc. (Inchcape), and Transport
Venture (TVI), solidarily liable for the loss of 37 hot rolled
steel sheets in coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore
shipped from the port of Ilyichevsk, Russia on board M/V
"Alexander Saveliev" (a vessel of Russian registry and
owned by Black Sea) 545 hot rolled steel sheets in coil
weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of
Manila in favor of the consignee, Little Giant Steel Pipe
Corporation (Little Giant),4 were insured against all risks
with Industrial Insurance Company Ltd. (Industrial
Insurance) under Marine Policy No. M-91-3747-TIS.5
The vessel arrived at the port of Manila on October 24,
1991 and the Philippine Ports Authority (PPA) assigned it
a place of berth at the outside breakwater at the Manila
South Harbor.6
Schmitz Transport, whose services the consignee
engaged to secure the requisite clearances, to receive the
cargoes from the shipside, and to deliver them to its (the
consignee’s) warehouse at Cainta, Rizal,7 in turn engaged
the services of TVI to send a barge and tugboat at
shipside.
On October 26, 1991, around 4:30 p.m., TVI’s tugboat
"Lailani" towed the barge "Erika V" to shipside.8
By 7:00 p.m. also of October 26, 1991, the tugboat, after
positioning the barge alongside the vessel, left and
returned to the port terminal.9 At 9:00 p.m., arrastre
operator Ocean Terminal Services Inc. commenced to
unload 37 of the 545 coils from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the
weather condition had become inclement due to an
approaching storm, the unloading unto the barge of the 37
coils was accomplished.10 No tugboat pulled the barge
back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong
waves,11 the crew of the barge abandoned it and
transferred to the vessel. The barge pitched and rolled with
the waves and eventually capsized, washing the 37 coils
into the sea.12 At 7:00 a.m., a tugboat finally arrived to pull
the already empty and damaged barge back to the pier.13
Earnest efforts on the part of both the consignee Little
Giant and Industrial Insurance to recover the lost cargoes
proved futile.14
Little Giant thus filed a formal claim against Industrial
Insurance which paid it the amount of ₱5,246,113.11. Little
Giant thereupon executed a subrogation receipt15 in favor
of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz
Transport, TVI, and Black Sea through its representative
Inchcape (the defendants) before the RTC of Manila, for
the recovery of the amount it paid to Little Giant plus
adjustment fees, attorney’s fees, and litigation
expenses.16
Industrial Insurance faulted the defendants for undertaking
the unloading of the cargoes while typhoon signal No. 1
was raised in Metro Manila.17
By Decision of November 24, 1997, Branch 21 of the RTC
held all the defendants negligent for unloading the cargoes
outside of the breakwater notwithstanding the storm
signal.18 The dispositive portion of the decision reads:
WHEREFORE, premises considered, the Court renders
judgment in favor of the plaintiff, ordering the defendants
to pay plaintiff jointly and severally the sum of
₱5,246,113.11 with interest from the date the complaint
was filed until fully satisfied, as well as the sum of
₱5,000.00 representing the adjustment fee plus the sum of
20% of the amount recoverable from the defendants as
attorney’s fees plus the costs of suit. The counterclaims
and cross claims of defendants are hereby DISMISSED for
lack of [m]erit.19
To the trial court’s decision, the defendants Schmitz
Transport and TVI filed a joint motion for reconsideration
assailing the finding that they are common carriers and the
award of excessive attorney’s fees of more than
₱1,000,000. And they argued that they were not motivated
by gross or evident bad faith and that the incident was
caused by a fortuitous event. 20
By resolution of February 4, 1998, the trial court denied the
motion for reconsideration. 21
All the defendants appealed to the Court of Appeals which,
by decision of June 27, 2001, affirmed in toto the decision
of the trial court, 22 it finding that all the defendants were
common carriers — Black Sea and TVI for engaging in the
transport of goods and cargoes over the seas as a regular
business and not as an isolated transaction,23 and
Schmitz Transport for entering into a contract with Little
Giant to transport the cargoes from ship to port for a fee.24
In holding all the defendants solidarily liable, the appellate
court ruled that "each one was essential such that without
each other’s contributory negligence the incident would not
have happened and so much so that the person principally
liable cannot be distinguished with sufficient accuracy."25
In discrediting the defense of fortuitous event, the
appellate court held that "although defendants obviously
had nothing to do with the force of nature, they however
had control of where to anchor the vessel, where
discharge will take place and even when the discharging
will commence."26
The defendants’ respective motions for reconsideration
having been denied by Resolution27 of September 28,
2001, Schmitz Transport (hereinafter referred to as
petitioner) filed the present petition against TVI, Industrial
Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat
of TVI, it was acting for its principal, consignee Little Giant,
hence, the transportation contract was by and between
Little Giant and TVI.28
By Resolution of January 23, 2002, herein respondents
Industrial Insurance, Black Sea, and TVI were required to
file their respective Comments.29
By its Comment, Black Sea argued that the cargoes were
received by the consignee through petitioner in good
order, hence, it cannot be faulted, it having had no control
and supervision thereover.30
For its part, TVI maintained that it acted as a passive party
as it merely received the cargoes and transferred them
unto the barge upon the instruction of petitioner.31
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous
event, independent of any act of negligence on the part of
petitioner Black Sea and TVI, and
(2) If there was negligence, whether liability for the loss
may attach to Black Sea, petitioner and TVI.
When a fortuitous event occurs, Article 1174 of the Civil
Code absolves any party from any and all liability arising
therefrom:
ART. 1174. Except in cases expressly specified by the
law, or when it is otherwise declared by stipulation, or
when the nature of the obligation requires the assumption
of risk, no person shall be responsible for those events
which could not be foreseen, or which though foreseen,
were inevitable.
In order, to be considered a fortuitous event, however, (1)
the cause of the unforeseen and unexpected occurrence,
or the failure of the debtor to comply with his obligation,
must be independent of human will; (2) it must be
impossible to foresee the event which constitute the caso
fortuito, or if it can be foreseen it must be impossible to
avoid; (3) the occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in any
manner; and (4) the obligor must be free from any
participation in the aggravation of the injury resulting to the
creditor.32
[T]he principle embodied in the act of God doctrine strictly
requires that the act must be occasioned solely by the
violence of nature. Human intervention is to be excluded
from creating or entering into the cause of the mischief.
When the effect is found to be in part the result of the
participation of man, whether due to his active intervention
or neglect or failure to act, the whole occurrence is then
humanized and removed from the rules applicable to the
acts of God.33
The appellate court, in affirming the finding of the trial court
that human intervention in the form of contributory
negligence by all the defendants resulted to the loss of the
cargoes,34 held that unloading outside the breakwater,
instead of inside the breakwater, while a storm signal was
up constitutes negligence.35 It thus concluded that the
proximate cause of the loss was Black Sea’s negligence in
deciding to unload the cargoes at an unsafe place and
while a typhoon was approaching.36
From a review of the records of the case, there is no
indication that there was greater risk in loading the
cargoes outside the breakwater. As the defendants
proffered, the weather on October 26, 1991 remained
normal with moderate sea condition such that port
operations continued and proceeded normally.37
The weather data report,38 furnished and verified by the
Chief of the Climate Data Section of PAG-ASA and
marked as a common exhibit of the parties, states that
while typhoon signal No. 1 was hoisted over Metro Manila
on October 23-31, 1991, the sea condition at the port of
Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991 was
moderate. It cannot, therefore, be said that the defendants
were negligent in not unloading the cargoes upon the
barge on October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the
cargoes were completely loaded by 12:30 in the
morning39 is, however, a material fact which the appellate
court failed to properly consider and appreciate40 — the
proximate cause of the loss of the cargoes. Had the barge
been towed back promptly to the pier, the deteriorating sea
conditions notwithstanding, the loss could have been
avoided. But the barge was left floating in open sea until
big waves set in at 5:30 a.m., causing it to sink along with
the cargoes.41 The loss thus falls outside the "act of God
doctrine."
The proximate cause of the loss having been determined,
who among the parties is/are responsible therefor?
Contrary to petitioner’s insistence, this Court, as did the
appellate court, finds that petitioner is a common carrier.
For it undertook to transport the cargoes from the shipside
of "M/V Alexander Saveliev" to the consignee’s warehouse
at Cainta, Rizal. As the appellate court put it, "as long as a
person or corporation holds [itself] to the public for the
purpose of transporting goods as [a] business, [it] is
already considered a common carrier regardless if [it]
owns the vehicle to be used or has to hire one."42 That
petitioner is a common carrier, the testimony of its own
Vice-President and General Manager Noel Aro that part of
the services it offers to its clients as a brokerage firm
includes the transportation of cargoes reflects so.
Atty. Jubay: Will you please tell us what [are you] functions
x x x as Executive Vice-President and General Manager of
said Company?
Mr. Aro: Well, I oversee the entire operation of the
brokerage and transport business of the company. I also
handle the various division heads of the company for
operation matters, and all other related functions that the
President may assign to me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as
you mentioned, will you please tell the Honorable Court if
you came to know the company by the name Little Giant
Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that
Company.
Q: And since when have you been the brokerage firm of
that company, if you can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this
Company. What work or duty did you perform in behalf of
this company?
A: We handled the releases (sic) of their cargo[es] from
the Bureau of Customs. We [are] also in-charged of the
delivery of the goods to their warehouses. We also
handled the clearances of their shipment at the Bureau of
Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this
Little Giant Steel Pipe Corporation with regards to this
shipment? What work did you do with this shipment?
A: We handled the unloading of the cargo[es] from vessel
to lighter and then the delivery of [the] cargo[es] from
lighter to BASECO then to the truck and to the warehouse,
Sir.
Q: Now, in connection with this work which you are doing,
Mr. Witness, you are supposed to perform, what
equipment do (sic) you require or did you use in order to
effect this unloading, transfer and delivery to the
warehouse?
A: Actually, we used the barges for the ship side
operations, this unloading [from] vessel to lighter, and on
this we hired or we sub-contracted with [T]ransport
Ventures, Inc. which [was] in-charged (sic) of the barges.
Also, in BASECO compound we are leasing cranes to
have the cargo unloaded from the barge to trucks, [and]
then we used trucks to deliver [the cargoes] to the
consignee’s warehouse, Sir.
Q: And whose trucks do you use from BASECO compound
to the consignee’s warehouse?
A: We utilized of (sic) our own trucks and we have some
other contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the
Honorable Court why is it you have to contract for the
barges of Transport Ventures Incorporated in this
particular operation?
A: Firstly, we don’t own any barges. That is why we hired
the services of another firm whom we know [al]ready for
quite sometime, which is Transport Ventures, Inc.
(Emphasis supplied)43
It is settled that under a given set of facts, a customs
broker may be regarded as a common carrier. Thus, this
Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable
Court of Appeals,44 held:
The appellate court did not err in finding petitioner, a
customs broker, to be also a common carrier, as defined
under Article 1732 of the Civil Code, to wit,
Art. 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to
the public.
xxx
Article 1732 does not distinguish between one whose
principal business activity is the carrying of goods and one
who does such carrying only as an ancillary activity. The
contention, therefore, of petitioner that it is not a common
carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper
shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for
pecuniary consideration.45
And in Calvo v. UCPB General Insurance Co. Inc.,46 this
Court held that as the transportation of goods is an integral
part of a customs broker, the customs broker is also a
common carrier. For to declare otherwise "would be to
deprive those with whom [it] contracts the protection which
the law affords them notwithstanding the fact that the
obligation to carry goods for [its] customers, is part and
parcel of petitioner’s business."47
As for petitioner’s argument that being the agent of Little
Giant, any negligence it committed was deemed the
negligence of its principal, it does not persuade.
True, petitioner was the broker-agent of Little Giant in
securing the release of the cargoes. In effecting the
transportation of the cargoes from the shipside and into
Little Giant’s warehouse, however, petitioner was
discharging its own personal obligation under a contact of
carriage.
Petitioner, which did not have any barge or tugboat,
engaged the services of TVI as handler48 to provide the
barge and the tugboat. In their Service Contract,49 while
Little Giant was named as the consignee, petitioner did not
disclose that it was acting on commission and was
chartering the vessel for Little Giant.50 Little Giant did not
thus automatically become a party to the Service Contract
and was not, therefore, bound by the terms and conditions
therein.
Not being a party to the service contract, Little Giant
cannot directly sue TVI based thereon but it can maintain a
cause of action for negligence.51
In the case of TVI, while it acted as a private carrier for
which it was under no duty to observe extraordinary
diligence, it was still required to observe ordinary diligence
to ensure the proper and careful handling, care and
discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are
liable for damages.
ART. 1173. The fault or negligence of the obligor consists
in the omission of that diligence which is required by the
nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place.
When negligence shows bad faith, the provisions of
articles 1171 and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is
to be observed in the performance, that which is expected
of a good father of a family shall be required.
Was the reasonable care and caution which an ordinarily
prudent person would have used in the same situation
exercised by TVI?52
This Court holds not.
TVI’s failure to promptly provide a tugboat did not only
increase the risk that might have been reasonably
anticipated during the shipside operation, but was the
proximate cause of the loss. A man of ordinary prudence
would not leave a heavily loaded barge floating for a
considerable number of hours, at such a precarious time,
and in the open sea, knowing that the barge does not have
any power of its own and is totally defenseless from the
ravages of the sea. That it was nighttime and, therefore,
the members of the crew of a tugboat would be charging
overtime pay did not excuse TVI from calling for one such
tugboat.
As for petitioner, for it to be relieved of liability, it should,
following Article 173953 of the Civil Code, prove that it
exercised due diligence to prevent or minimize the loss,
before, during and after the occurrence of the storm in
order that it may be exempted from liability for the loss of
the goods.
While petitioner sent checkers54 and a supervisor55 on
board the vessel to counter-check the operations of TVI, it
failed to take all available and reasonable precautions to
avoid the loss. After noting that TVI failed to arrange for
the prompt towage of the barge despite the deteriorating
sea conditions, it should have summoned the same or
another tugboat to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily
liable56 for the loss of the cargoes. The following
pronouncement of the Supreme Court is instructive:
The foundation of LRTA’s liability is the contract of
carriage and its obligation to indemnify the victim arises
from the breach of that contract by reason of its failure to
exercise the high diligence required of the common carrier.
In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own
employees or avail itself of the services of an outsider or
an independent firm to undertake the task. In either case,
the common carrier is not relieved of its responsibilities
under the contract of carriage.
Should Prudent be made likewise liable? If at all, that
liability could only be for tort under the provisions of Article
2176 and related provisions, in conjunction with Article
2180 of the Civil Code. x x x [O]ne might ask further, how
then must the liability of the common carrier, on one hand,
and an independent contractor, on the other hand, be
described? It would be solidary. A contractual obligation
can be breached by tort and when the same act or
omission causes the injury, one resulting in culpa
contractual and the other in culpa aquiliana, Article 2194 of
the Civil Code can well apply. In fine, a liability for tort may
arise even under a contract, where tort is that which
breaches the contract. Stated differently, when an act
which constitutes a breach of contract would have itself
constituted the source of a quasi-delictual liability had no
contract existed between the parties, the contract can be
said to have been breached by tort, thereby allowing the
rules on tort to apply.57
As for Black Sea, its duty as a common carrier extended
only from the time the goods were surrendered or
unconditionally placed in its possession and received for
transportation until they were delivered actually or
constructively to consignee Little Giant.58
Parties to a contract of carriage may, however, agree upon
a definition of delivery that extends the services rendered
by the carrier. In the case at bar, Bill of Lading No. 2 WHEREFORE, judgment is hereby rendered ordering
covering the shipment provides that delivery be made "to petitioner Schmitz Transport & Brokerage Corporation, and 13 TSN, July 18, 1996 at 19.
the port of discharge or so near thereto as she may safely Transport Venture Incorporation jointly and severally liable
get, always afloat."59 The delivery of the goods to the for the amount of ₱5,246,113.11 with the MODIFICATION 14 Rollo at 125.
consignee was not from "pier to pier" but from the shipside that interest at SIX PERCENT per annum of the amount
of "M/V Alexander Saveliev" and into barges, for which due should be computed from the promulgation on 15 Records at 317.
reason the consignee contracted the services of petitioner. November 24, 1997 of the decision of the trial court.
Since Black Sea had constructively delivered the cargoes 16 Id. at 1-6.
to Little Giant, through petitioner, it had discharged its Costs against petitioner.
duty.60 17 Id. at 318-321.
SO ORDERED.
In fine, no liability may thus attach to Black Sea. 18 Rollo at 176.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona,
Respecting the award of attorney’s fees in an amount over and Garcia, JJ., concur. 19 Id. at 177.
₱1,000,000.00 to Industrial Insurance, for lack of factual
and legal basis, this Court sets it aside. While Industrial 20 Records at 520-528.
Insurance was compelled to litigate its rights, such fact by Footnotes
itself does not justify the award of attorney’s fees under 21 Id. at 538.
Article 2208 of the Civil Code. For no sufficient showing of 1 Rollo at 47-85.
bad faith would be reflected in a party’s persistence in a 22 Rollo at 69.
case other than an erroneous conviction of the 2 Id. at 7-20.
righteousness of his cause.61 To award attorney’s fees to 23 Id. at 53.
a party just because the judgment is rendered in its favor 3 Id. at 171-177.
would be tantamount to imposing a premium on one’s right 24 Id. at 63.
to litigate or seek judicial redress of legitimate 4 Records at 301-303,
grievances.62 25 Id. at 69.
5 Id. at 290.
On the award of adjustment fees: The adjustment fees and 26 Id. at 55.
expense of divers were incurred by Industrial Insurance in 6 Rollo at 195.
its voluntary but unsuccessful efforts to locate and retrieve 27 Id. at 7-20.
the lost cargo. They do not constitute actual damages.63 7 Id. at 32.
28 Id. at 119.
As for the court a quo’s award of interest on the amount 8 Records at 472.
claimed, the same calls for modification following the ruling 29 Id. at 181.
in Eastern Shipping Lines, Inc. v. Court of Appeals64 that 9 Transcript of Stenographic Notes (TSN), July 18, 1996 at
when the demand cannot be reasonably established at the 18. 30 Id. at 204.
time the demand is made, the interest shall begin to run
not from the time the claim is made judicially or 10 Records at 333. 31 Id. at 225-226.
extrajudicially but from the date the judgment of the court
is made (at which the time the quantification of damages 11 Id. at 332, 464. 32 Yobido v. Court of Appeals, 281 SCRA 1, 9 (1997).
may be deemed to have been reasonably ascertained).65
12 Rollo at 125.
33 National Power Corporation v. Court of Appeals, 211
SCRA 162, 167 (1992). 50 Article 652 (5) of the Code of Commerce provides that
the charter party shall contain the name, surname, and
34 Rollo at 69. domicile of the charterer; and if he states that he is acting
by commission, that of the person for whose account he
35 Id. at 59, 99. makes the contract.
59 Records at 7.
60 Vide A/S Dampskibsselskabet Torm v. McDermott, Inc.,
788 F.2d 1103, 1987 A.M.C. 353 (May 5, 1986). Vide
Proctor and Gamble, Limited v. M/T Stolt Llandaff, 664
F.2d 1285, 1982 A.M.C. 2517 (January 4, 1982).

36 Id. at 61.
37 Id. at 33, 225; CA Rollo at 33.
38 Records at 318-321.
39 TSN, July 18, 1996 at 19.
40 In Philippine American General Insurance Company v.
PKS Shipping Company, 401 SCRA 222, 230 (2003), this
Court has held that findings of fact of the Court of Appeals
are generally conclusive but one of the exceptions is when
the Court of Appeals failed to notice certain relevant facts
which, if properly considered, would justify a different
conclusion.
41 Records at 332, 464.
42 Rollo at 63.
43 TSN, February 4, 1997 at 5-10.
51 T. SCHOENBAUM, ADMIRALTY AND MARITIME LAW 61 National Steel Corporation v. Court of Appeals, 283
330 (1987). SCRA 45, 78-79 (1997).
52 D. JURADO, COMMENTS AND JURISPRUDENCE 62 Id. at 45, 79.
ON OBLIGATIONS AND CONTRACTS 66 (1993).
63 Iron Bulk Shipping Philippines, Cp. Ltd., v. Remington
53 Art. 1739. In order that the common carrier may be Industrial Sales Corporation, 417 SCRA 229, 240 (2003).
exempted from responsibility, the natural disaster must
have been the proximate and only cause of the loss. 64 234 SCRA 78 (1994).
However, the common carrier must exercise due diligence
to prevent or minimize loss before, during and after the 65 Eastern Shipping Lines, Inc. v. Court of Appeals, supra
occurrence of flood, storm or other natural disaster in order at 78, 96-97.
that the common carrier may be exempted from liability for
the loss, destruction, or deterioration of the good. x x x
54 TSN, February 4, 1997 at 14-15.
55 Id. at 22.
56 CIVIL CODE, Art. 2194. The responsibility of two or
more persons who are liable for a quasi-delict is solidary.

44 G.R. No. 147079, December 15, 2004. 57 Light Rail Transit Authority v. Navidad, 397 SCRA 75,
82-83 (2003).
45 A.F. Sanchez Brokerage Inc. v. The Honorable Court of
Appeals, G.R. No. 147079, December 15, 2004. 58 CIVIL CODE, Art. 1736. The extraordinary
responsibility of the common carriers lasts from the time
46 379 SCRA 510 (2002). the goods are unconditionally laced in the possession of,
and received by the carrier for transportation until the
47 Calvo v. UCPB General Insurance Co., Inc., 379 SCRA same are delivered actually or constructively, by the carrier
510, 517 (2002). to the consignee, or to the person who has a right to
receive them, without prejudice to the provisions of Article
48 Records at 521. 1738. Vide Eastern Shipping Lines Inc. v. Hon. Court of
Appeals, 234 SCRA 78 (1994).
49 Rollo at 90.
G.R. No. 122039 May 31, 2000
VICENTE CALALAS, petitioner,
vs.
COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and
FRANCISCO SALVA, respondents.
MENDOZA, J.:
This is a petition for review on certiorari of the decision1 of
the Court of Appeals, dated March 31, 1991, reversing the
contrary decision of the Regional Trial Court, Branch 36,
Dumaguete City, and awarding damages instead to private
respondent Eliza Jujeurche Sunga as plaintiff in an action
for breach of contract of carriage.
The facts, as found by the Court of Appeals, are as
follows:
At 10 o'clock in the morning of August 23, 1989, private
respondent Eliza Jujeurche G. Sunga, then a college
freshman majoring in Physical Education at the Siliman
University, took a passenger jeepney owned and operated
by petitioner Vicente Calalas. As the jeepney was filled to
capacity of about 24 passengers, Sunga was given by the
conductor an "extension seat," a wooden stool at the back
of the door at the rear end of the vehicle.
On the way to Poblacion Sibulan, Negros Occidental, the
jeepney stopped to let a passenger off. As she was seated
at the rear of the vehicle, Sunga gave way to the outgoing
passenger. Just as she was doing so, an Isuzu truck
driven by Iglecerio Verena and owned by Francisco Salva
bumped the left rear portion of the jeepney. As a result,
Sunga was injured. She sustained a fracture of the "distal
third of the left tibia-fibula with severe necrosis of the
underlying skin." Closed reduction of the fracture, long leg
circular casting, and case wedging were done under
sedation. Her confinement in the hospital lasted from
August 23 to September 7, 1989. Her attending physician,
Dr. Danilo V. Oligario, an orthopedic surgeon, certified she
would remain on a cast for a period of three months and
would have to ambulate in crutches during said period.
On October 9, 1989, Sunga filed a complaint for damages
against Calalas, alleging violation of the contract of
carriage by the former in failing to exercise the diligence
required of him as a common carrier. Calalas, on the other
hand, filed a third-party complaint against Francisco Salva,
the owner of the Isuzu truck.
The lower court rendered judgment against Salva as third-
party defendant and absolved Calalas of liability, holding
that it was the driver of the Isuzu truck who was
responsible for the accident. It took cognizance of another
case (Civil Case No. 3490), filed by Calalas against Salva
and Verena, for quasi-delict, in which Branch 37 of the
same court held Salva and his driver Verena jointly liable
to Calalas for the damage to his jeepney.
On appeal to the Court of Appeals, the ruling of the lower
court was reversed on the ground that Sunga's cause of
action was based on a contract of carriage, not quasi-
delict, and that the common carrier failed to exercise the
diligence required under the Civil Code. The appellate
court dismissed the third-party complaint against Salva
and adjudged Calalas liable for damages to Sunga. The
dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby
REVERSED and SET ASIDE, and another one is entered
ordering defendant-appellee Vicente Calalas to pay
plaintiff-appellant:
(1) P50,000.00 as actual and compensatory
damages;
(2) P50,000.00 as moral damages;
(3) P10,000.00 as attorney's fees; and
(4) P1,000.00 as expenses of litigation; and
(5) to pay the costs.
SO ORDERED.
Hence, this petition. Petitioner contends that the ruling in
Civil Case No. 3490 that the negligence of Verena was the
proximate cause of the accident negates his liability and
that to rule otherwise would be to make the common
carrier an insurer of the safety of its passengers. He
contends that the bumping of the jeepney by the truck
owned by Salva was a caso fortuito. Petitioner further
assails the award of moral damages to Sunga on the
ground that it is not supported by evidence.
The petition has no merit.
The argument that Sunga is bound by the ruling in Civil
Case No. 3490 finding the driver and the owner of the
truck liable for quasi-delict ignores the fact that she was
never a party to that case and, therefore, the principle of
res judicata does not apply.
Nor are the issues in Civil Case No. 3490 and in the
present case the same. The issue in Civil Case No. 3490
was whether Salva and his driver Verena were liable for
quasi-delict for the damage caused to petitioner's jeepney.
On the other hand, the issue in this case is whether
petitioner is liable on his contract of carriage. The first,
quasi-delict, also known as culpa aquiliana or culpa extra
contractual, has as its source the negligence of the
tortfeasor. The second, breach of contract or culpa
contractual, is premised upon the negligence in the
performance of a contractual obligation.
Consequently, in quasi-delict, the negligence or fault
should be clearly established because it is the basis of the
action, whereas in breach of contract, the action can be
prosecuted merely by proving the existence of the contract
and the fact that the obligor, in this case the common
carrier, failed to transport his passenger safely to his
destination.2 In case of death or injuries to passengers,
Art. 1756 of the Civil Code provides that common carriers
are presumed to have been at fault or to have acted
negligently unless they prove that they observed
extraordinary diligence as defined in Arts. 1733 and 1755
of the Code. This provision necessarily shifts to the
common carrier the burden of proof.
There is, thus, no basis for the contention that the ruling in
Civil Case No. 3490, finding Salva and his driver Verena
liable for the damage to petitioner's jeepney, should be
binding on Sunga. It is immaterial that the proximate cause
of the collision between the jeepney and the truck was the
negligence of the truck driver. The doctrine of proximate
cause is applicable only in actions for quasi-delict, not in
actions involving breach of contract. The doctrine is a
device for imputing liability to a person where there is no
relation between him and another party. In such a case,
the obligation is created by law itself. But, where there is a
pre-existing contractual relation between the parties, it is
the parties themselves who create the obligation, and the
function of the law is merely to regulate the relation thus
created. Insofar as contracts of carriage are concerned,
some aspects regulated by the Civil Code are those
respecting the diligence required of common carriers with
regard to the safety of passengers as well as the
presumption of negligence in cases of death or injury to
passengers. It provides:
Art. 1733. Common carriers, from the nature of their
business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by
them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the
goods is further expressed in articles 1734, 1735, and
1746, Nos. 5, 6, and 7, while the extraordinary diligence
for the safety of the passengers is further set forth in
articles 1755 and 1756.
Art. 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.
Art. 1756. In case of death of or injuries to passengers,
common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed by articles
1733 and 1755.
In the case at bar, upon the happening of the accident, the
presumption of negligence at once arose, and it became
the duty of petitioner to prove that he had to observe
extraordinary diligence in the care of his passengers.
Now, did the driver of jeepney carry Sunga "safely as far
as human care and foresight could provide, using the
utmost diligence of very cautious persons, with due regard
for all the circumstances" as required by Art. 1755? We do
not think so. Several factors militate against petitioner's
contention.
First, as found by the Court of Appeals, the jeepney was
not properly parked, its rear portion being exposed about
two meters from the broad shoulders of the highway, and
facing the middle of the highway in a diagonal angle. This
is a violation of the R.A. No. 4136, as amended, or the
Land Transportation and Traffic Code, which provides:
Sec. 54. Obstruction of Traffic. — No person shall drive
his motor vehicle in such a manner as to obstruct or
impede the passage of any vehicle, nor, while discharging
or taking on passengers or loading or unloading freight,
obstruct the free passage of other vehicles on the
highway.
Second, it is undisputed that petitioner's driver took in
more passengers than the allowed seating capacity of the
jeepney, a violation of §32(a) of the same law. It provides:
Exceeding registered capacity. — No person operating
any motor vehicle shall allow more passengers or more
freight or cargo in his vehicle than its registered capacity.
The fact that Sunga was seated in an "extension seat"
placed her in a peril greater than that to which the other
passengers were exposed. Therefore, not only was
petitioner unable to overcome the presumption of
negligence imposed on him for the injury sustained by
Sunga, but also, the evidence shows he was actually
negligent in transporting passengers.
We find it hard to give serious thought to petitioner's
contention that Sunga's taking an "extension seat"
amounted to an implied assumption of risk. It is akin to
arguing that the injuries to the many victims of the
tragedies in our seas should not be compensated merely
because those passengers assumed a greater risk of
drowning by boarding an overloaded ferry. This is also true
of petitioner's contention that the jeepney being bumped
while it was improperly parked constitutes caso fortuito. A
caso fortuito is an event which could not be foreseen, or
which, though foreseen, was inevitable.3 This requires that
the following requirements be present: (a) the cause of the
breach is independent of the debtor's will; (b) the event is
unforeseeable or unavoidable; (c) the event is such as to
render it impossible for the debtor to fulfill his obligation in
a normal manner, and (d) the debtor did not take part in
causing the injury to the
creditor.4 Petitioner should have foreseen the danger of
parking his jeepney with its body protruding two meters
into the highway.
Finally, petitioner challenges the award of moral damages
alleging that it is excessive and without basis in law. We
find this contention well taken.
In awarding moral damages, the Court of Appeals stated:
Plaintiff-appellant at the time of the accident was a first-
year college student in that school year 1989-1990 at the
Silliman University, majoring in Physical Education.
Because of the injury, she was not able to enroll in the
second semester of that school year. She testified that she
had no more intention of continuing with her schooling,
because she could not walk and decided not to pursue her WHEREFORE, the decision of the Court of Appeals, dated
degree, major in Physical Education "because of my leg March 31, 1995, and its resolution, dated September 11,
which has a defect already." 1995, are AFFIRMED, with the MODIFICATION that the
award of moral damages is DELETED.
Plaintiff-appellant likewise testified that even while she was
under confinement, she cried in pain because of her SO ORDERED.
injured left foot. As a result of her injury, the Orthopedic
Surgeon also certified that she has "residual bowing of the Bellosillo and Buena, JJ., concur.
fracture side." She likewise decided not to further pursue
Physical Education as her major subject, because "my left Quisumbing and De Leon, Jr., JJ., are on leave.
leg . . . has a defect already."
Footnotes
Those are her physical pains and moral sufferings, the
inevitable bedfellows of the injuries that she suffered. 1 Per Justice Artemon D. Luna and concurred in by
Under Article 2219 of the Civil Code, she is entitled to Justices Hector L. Hofilena and B.A. Adefuin-dela Cruz.
recover moral damages in the sum of P50,000.00, which is
fair, just and reasonable. 2 See B. BALDERRAMA, THE PHILIPPINE LAW ON
TROTS AND DAMAGES 20 (1953).
As a general rule, moral damages are not recoverable in
actions for damages predicated on a breach of contract for 3 CIVIL CODE, ART. 1174.
it is not one of the items enumerated under Art. 2219 of
the Civil Code.5 As an exception, such damages are 4 Juan F. Nakpil & Sons v. Court of Appeals, 144 SCRA
recoverable: (1) in cases in which the mishap results in the 596 (1986); Vasquez v. Court of Appeals, 138 SCRA 553
death of a passenger, as provided in Art. 1764, in relation (1985); Republic v. Luzon Stevedoring Corp., 128 Phil.
to Art. 2206(3) of the Civil Code; and (2) in the cases in 313 (1967).
which the carrier is guilty of fraud or bad faith, as provided
in Art. 2220.6 5 Fores v. Miranda, 67 105 Phil. 267 (1959); Mercado v.
Lira, 3 SCRA 124 (1961).
In this case, there is no legal basis for awarding moral
damages since there was no factual finding by the 6 Philippine Rabbit Bus Lines, Inc. v. Esguerra, 117 SCRA
appellate court that petitioner acted in bad faith in the 741 (1982); Sabena Belgian World Airlines v. Court of
performance of the contract of carriage. Sunga's Appeals, 171 SCRA 620 (1989); China Airlines, Ltd. v.
contention that petitioner's admission in open court that Intermediate Appellate Court, 169 SCRA 226 (1989).
the driver of the jeepney failed to assist her in going to a
nearby hospital cannot be construed as an admission of
bad faith. The fact that it was the driver of the Isuzu truck
who took her to the hospital does not imply that petitioner
was utterly indifferent to the plight of his injured passenger.
If at all, it is merely implied recognition by Verena that he
was the one at fault for the accident.
G.R. No. L-12191 October 14, 1918
JOSE CANGCO, plaintiff-appellant,
vs.
MANILA RAILROAD CO., defendant-appellee.
Ramon Sotelo for appellant.
Kincaid & Hartigan for appellee.
FISHER, J.:
At the time of the occurrence which gave rise to this
litigation the plaintiff, Jose Cangco, was in the employment
of Manila Railroad Company in the capacity of clerk, with a
monthly wage of P25. He lived in the pueblo of San Mateo,
in the province of Rizal, which is located upon the line of
the defendant railroad company; and in coming daily by
train to the company's office in the city of Manila where he
worked, he used a pass, supplied by the company, which
entitled him to ride upon the company's trains free of
charge. Upon the occasion in question, January 20, 1915,
the plaintiff arose from his seat in the second class-car
where he was riding and, making, his exit through the
door, took his position upon the steps of the coach, seizing
the upright guardrail with his right hand for support.
On the side of the train where passengers alight at the San
Mateo station there is a cement platform which begins to
rise with a moderate gradient some distance away from
the company's office and extends along in front of said
office for a distance sufficient to cover the length of several
coaches. As the train slowed down another passenger,
named Emilio Zuñiga, also an employee of the railroad
company, got off the same car, alighting safely at the point
where the platform begins to rise from the level of the
ground. When the train had proceeded a little farther the
plaintiff Jose Cangco stepped off also, but one or both of
his feet came in contact with a sack of watermelons with
the result that his feet slipped from under him and he fell
violently on the platform. His body at once rolled from the
platform and was drawn under the moving car, where his
right arm was badly crushed and lacerated. It appears that
after the plaintiff alighted from the train the car moved
forward possibly six meters before it came to a full stop.
The accident occurred between 7 and 8 o'clock on a dark
night, and as the railroad station was lighted dimly by a
single light located some distance away, objects on the
platform where the accident occurred were difficult to
discern especially to a person emerging from a lighted car.
The explanation of the presence of a sack of melons on
the platform where the plaintiff alighted is found in the fact
that it was the customary season for harvesting these
melons and a large lot had been brought to the station for
the shipment to the market. They were contained in
numerous sacks which has been piled on the platform in a
row one upon another. The testimony shows that this row
of sacks was so placed of melons and the edge of
platform; and it is clear that the fall of the plaintiff was due
to the fact that his foot alighted upon one of these melons
at the moment he stepped upon the platform. His
statement that he failed to see these objects in the
darkness is readily to be credited.
The plaintiff was drawn from under the car in an
unconscious condition, and it appeared that the injuries
which he had received were very serious. He was
therefore brought at once to a certain hospital in the city of
Manila where an examination was made and his arm was
amputated. The result of this operation was unsatisfactory,
and the plaintiff was then carried to another hospital where
a second operation was performed and the member was
again amputated higher up near the shoulder. It appears in
evidence that the plaintiff expended the sum of P790.25 in
the form of medical and surgical fees and for other
expenses in connection with the process of his curation.
Upon August 31, 1915, he instituted this proceeding in the
Court of First Instance of the city of Manila to recover
damages of the defendant company, founding his action
upon the negligence of the servants and employees of the
defendant in placing the sacks of melons upon the
platform and leaving them so placed as to be a menace to
the security of passenger alighting from the company's
trains. At the hearing in the Court of First Instance, his
Honor, the trial judge, found the facts substantially as
above stated, and drew therefrom his conclusion to the
effect that, although negligence was attributable to the
defendant by reason of the fact that the sacks of melons
were so placed as to obstruct passengers passing to and
from the cars, nevertheless, the plaintiff himself had failed
to use due caution in alighting from the coach and was
therefore precluded form recovering. Judgment was
accordingly entered in favor of the defendant company,
and the plaintiff appealed.
It can not be doubted that the employees of the railroad
company were guilty of negligence in piling these sacks on
the platform in the manner above stated; that their
presence caused the plaintiff to fall as he alighted from the
train; and that they therefore constituted an effective legal
cause of the injuries sustained by the plaintiff. It
necessarily follows that the defendant company is liable for
the damage thereby occasioned unless recovery is barred
by the plaintiff's own contributory negligence. In resolving
this problem it is necessary that each of these conceptions
of liability, to-wit, the primary responsibility of the
defendant company and the contributory negligence of the
plaintiff should be separately examined.
It is important to note that the foundation of the legal
liability of the defendant is the contract of carriage, and
that the obligation to respond for the damage which
plaintiff has suffered arises, if at all, from the breach of that
contract by reason of the failure of defendant to exercise
due care in its performance. That is to say, its liability is
direct and immediate, differing essentially, in legal
viewpoint from that presumptive responsibility for the
negligence of its servants, imposed by article 1903 of the
Civil Code, which can be rebutted by proof of the exercise
of due care in their selection and supervision. Article 1903
of the Civil Code is not applicable to obligations arising ex
contractu, but only to extra-contractual obligations — or to
use the technical form of expression, that article relates
only to culpa aquiliana and not to culpa contractual.
Manresa (vol. 8, p. 67) in his commentaries upon articles
1103 and 1104 of the Civil Code, clearly points out this
distinction, which was also recognized by this Court in its
decision in the case of Rakes vs. Atlantic, Gulf and Pacific
Co. (7 Phil. rep., 359). In commenting upon article 1093
Manresa clearly points out the difference between "culpa,
substantive and independent, which of itself constitutes the
source of an obligation between persons not formerly
connected by any legal tie" and culpa considered as an
accident in the performance of an obligation already
existing . . . ."
In the Rakes case (supra) the decision of this court was
made to rest squarely upon the proposition that article
1903 of the Civil Code is not applicable to acts of
negligence which constitute the breach of a contract.
Upon this point the Court said:
The acts to which these articles [1902 and 1903 of the
Civil Code] are applicable are understood to be those not
growing out of pre-existing duties of the parties to one
another. But where relations already formed give rise to
duties, whether springing from contract or quasi-contract,
then breaches of those duties are subject to article 1101,
1103, and 1104 of the same code. (Rakes vs. Atlantic,
Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.)
This distinction is of the utmost importance. The liability,
which, under the Spanish law, is, in certain cases imposed
upon employers with respect to damages occasioned by
the negligence of their employees to persons to whom
they are not bound by contract, is not based, as in the
English Common Law, upon the principle of respondeat
superior — if it were, the master would be liable in every
case and unconditionally — but upon the principle
announced in article 1902 of the Civil Code, which
imposes upon all persons who by their fault or negligence,
do injury to another, the obligation of making good the
damage caused. One who places a powerful automobile in
the hands of a servant whom he knows to be ignorant of
the method of managing such a vehicle, is himself guilty of
an act of negligence which makes him liable for all the
consequences of his imprudence. The obligation to make
good the damage arises at the very instant that the
unskillful servant, while acting within the scope of his
employment causes the injury. The liability of the master is
personal and direct. But, if the master has not been guilty
of any negligence whatever in the selection and direction
of the servant, he is not liable for the acts of the latter,
whatever done within the scope of his employment or not,
if the damage done by the servant does not amount to a
breach of the contract between the master and the person
injured.
It is not accurate to say that proof of diligence and care in
the selection and control of the servant relieves the master
from liability for the latter's acts — on the contrary, that
proof shows that the responsibility has never existed. As
Manresa says (vol. 8, p. 68) the liability arising from extra-
contractual culpa is always based upon a voluntary act or
omission which, without willful intent, but by mere
negligence or inattention, has caused damage to another.
A master who exercises all possible care in the selection
of his servant, taking into consideration the qualifications
they should possess for the discharge of the duties which
it is his purpose to confide to them, and directs them with
equal diligence, thereby performs his duty to third persons
to whom he is bound by no contractual ties, and he incurs
no liability whatever if, by reason of the negligence of his
servants, even within the scope of their employment, such
third person suffer damage. True it is that under article
1903 of the Civil Code the law creates a presumption that
he has been negligent in the selection or direction of his
servant, but the presumption is rebuttable and yield to
proof of due care and diligence in this respect.
The supreme court of Porto Rico, in interpreting identical
provisions, as found in the Porto Rico Code, has held that
these articles are applicable to cases of extra-contractual
culpa exclusively. (Carmona vs. Cuesta, 20 Porto Rico
Reports, 215.)
This distinction was again made patent by this Court in its
decision in the case of Bahia vs. Litonjua and Leynes, (30
Phil. rep., 624), which was an action brought upon the
theory of the extra-contractual liability of the defendant to
respond for the damage caused by the carelessness of his
employee while acting within the scope of his employment.
The Court, after citing the last paragraph of article 1903 of
the Civil Code, said:
From this article two things are apparent: (1) That when an
injury is caused by the negligence of a servant or
employee there instantly arises a presumption of law that
there was negligence on the part of the master or
employer either in selection of the servant or employee, or
in supervision over him after the selection, or both; and (2)
that that presumption is juris tantum and not juris et de
jure, and consequently, may be rebutted. It follows
necessarily that if the employer shows to the satisfaction of
the court that in selection and supervision he has
exercised the care and diligence of a good father of a
family, the presumption is overcome and he is relieved
from liability.
This theory bases the responsibility of the master
ultimately on his own negligence and not on that of his
servant. This is the notable peculiarity of the Spanish law
of negligence. It is, of course, in striking contrast to the
American doctrine that, in relations with strangers, the
negligence of the servant in conclusively the negligence of
the master.
The opinion there expressed by this Court, to the effect
that in case of extra-contractual culpa based upon
negligence, it is necessary that there shall have been
some fault attributable to the defendant personally, and
that the last paragraph of article 1903 merely establishes a
rebuttable presumption, is in complete accord with the
authoritative opinion of Manresa, who says (vol. 12, p.
611) that the liability created by article 1903 is imposed by
reason of the breach of the duties inherent in the special
relations of authority or superiority existing between the
person called upon to repair the damage and the one who,
by his act or omission, was the cause of it.
On the other hand, the liability of masters and employers
for the negligent acts or omissions of their servants or
agents, when such acts or omissions cause damages
which amount to the breach of a contact, is not based
upon a mere presumption of the master's negligence in
their selection or control, and proof of exercise of the
utmost diligence and care in this regard does not relieve
the master of his liability for the breach of his contract.
Every legal obligation must of necessity be extra-
contractual or contractual. Extra-contractual obligation has
its source in the breach or omission of those mutual duties
which civilized society imposes upon it members, or which
arise from these relations, other than contractual, of
certain members of society to others, generally embraced
in the concept of status. The legal rights of each member
of society constitute the measure of the corresponding
legal duties, mainly negative in character, which the
existence of those rights imposes upon all other members
of society. The breach of these general duties whether due
to willful intent or to mere inattention, if productive of injury,
give rise to an obligation to indemnify the injured party.
The fundamental distinction between obligations of this
character and those which arise from contract, rests upon
the fact that in cases of non-contractual obligation it is the
wrongful or negligent act or omission itself which creates
the vinculum juris, whereas in contractual relations the
vinculum exists independently of the breach of the
voluntary duty assumed by the parties when entering into
the contractual relation.
With respect to extra-contractual obligation arising from
negligence, whether of act or omission, it is competent for
the legislature to elect — and our Legislature has so
elected — whom such an obligation is imposed is morally
culpable, or, on the contrary, for reasons of public policy,
to extend that liability, without regard to the lack of moral
culpability, so as to include responsibility for the
negligence of those person who acts or mission are
imputable, by a legal fiction, to others who are in a position
to exercise an absolute or limited control over them. The
legislature which adopted our Civil Code has elected to
limit extra-contractual liability — with certain well-defined
exceptions — to cases in which moral culpability can be
directly imputed to the persons to be charged. This moral
responsibility may consist in having failed to exercise due
care in the selection and control of one's agents or
servants, or in the control of persons who, by reason of
their status, occupy a position of dependency with respect
to the person made liable for their conduct.
The position of a natural or juridical person who has
undertaken by contract to render service to another, is
wholly different from that to which article 1903 relates.
When the sources of the obligation upon which plaintiff's
cause of action depends is a negligent act or omission, the
burden of proof rests upon plaintiff to prove the negligence
— if he does not his action fails. But when the facts
averred show a contractual undertaking by defendant for
the benefit of plaintiff, and it is alleged that plaintiff has
failed or refused to perform the contract, it is not necessary
for plaintiff to specify in his pleadings whether the breach
of the contract is due to willful fault or to negligence on the
part of the defendant, or of his servants or agents. Proof of
the contract and of its nonperformance is sufficient prima
facie to warrant a recovery.
As a general rule . . . it is logical that in case of extra-
contractual culpa, a suing creditor should assume the
burden of proof of its existence, as the only fact upon
which his action is based; while on the contrary, in a case
of negligence which presupposes the existence of a
contractual obligation, if the creditor shows that it exists
and that it has been broken, it is not necessary for him to
prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p.
76]).
As it is not necessary for the plaintiff in an action for the
breach of a contract to show that the breach was due to
the negligent conduct of defendant or of his servants, even
though such be in fact the actual cause of the breach, it is
obvious that proof on the part of defendant that the
negligence or omission of his servants or agents caused
the breach of the contract would not constitute a defense
to the action. If the negligence of servants or agents could
be invoked as a means of discharging the liability arising
from contract, the anomalous result would be that person
acting through the medium of agents or servants in the
performance of their contracts, would be in a better
position than those acting in person. If one delivers a
valuable watch to watchmaker who contract to repair it,
and the bailee, by a personal negligent act causes its
destruction, he is unquestionably liable. Would it be logical
to free him from his liability for the breach of his contract,
which involves the duty to exercise due care in the
preservation of the watch, if he shows that it was his
servant whose negligence caused the injury? If such a
theory could be accepted, juridical persons would enjoy
practically complete immunity from damages arising from
the breach of their contracts if caused by negligent acts as
such juridical persons can of necessity only act through
agents or servants, and it would no doubt be true in most
instances that reasonable care had been taken in selection
and direction of such servants. If one delivers securities to
a banking corporation as collateral, and they are lost by
reason of the negligence of some clerk employed by the
bank, would it be just and reasonable to permit the bank to
relieve itself of liability for the breach of its contract to
return the collateral upon the payment of the debt by
proving that due care had been exercised in the selection
and direction of the clerk?
This distinction between culpa aquiliana, as the source of
an obligation, and culpa contractual as a mere incident to
the performance of a contract has frequently been
recognized by the supreme court of Spain. (Sentencias of
June 27, 1894; November 20, 1896; and December 13,
1896.) In the decisions of November 20, 1896, it appeared
that plaintiff's action arose ex contractu, but that defendant
sought to avail himself of the provisions of article 1902 of
the Civil Code as a defense. The Spanish Supreme Court
rejected defendant's contention, saying:
These are not cases of injury caused, without any pre-
existing obligation, by fault or negligence, such as those to
which article 1902 of the Civil Code relates, but of
damages caused by the defendant's failure to carry out the
undertakings imposed by the contracts . . . .
A brief review of the earlier decision of this court involving
the liability of employers for damage done by the negligent
acts of their servants will show that in no case has the
court ever decided that the negligence of the defendant's
servants has been held to constitute a defense to an
action for damages for breach of contract.
In the case of Johnson vs. David (5 Phil. Rep., 663), the
court held that the owner of a carriage was not liable for
the damages caused by the negligence of his driver. In
that case the court commented on the fact that no
evidence had been adduced in the trial court that the
defendant had been negligent in the employment of the
driver, or that he had any knowledge of his lack of skill or
carefulness.
In the case of Baer Senior & Co's Successors vs.
Compania Maritima (6 Phil. Rep., 215), the plaintiff sued
the defendant for damages caused by the loss of a barge
belonging to plaintiff which was allowed to get adrift by the
negligence of defendant's servants in the course of the
performance of a contract of towage. The court held, citing
Manresa (vol. 8, pp. 29, 69) that if the "obligation of the
defendant grew out of a contract made between it and the
plaintiff . . . we do not think that the provisions of articles
1902 and 1903 are applicable to the case."
In the case of Chapman vs. Underwood (27 Phil. Rep.,
374), plaintiff sued the defendant to recover damages for
the personal injuries caused by the negligence of
defendant's chauffeur while driving defendant's automobile
in which defendant was riding at the time. The court found
that the damages were caused by the negligence of the
driver of the automobile, but held that the master was not
liable, although he was present at the time, saying:
. . . unless the negligent acts of the driver are continued for
a length of time as to give the owner a reasonable
opportunity to observe them and to direct the driver to
desist therefrom. . . . The act complained of must be
continued in the presence of the owner for such length of
time that the owner by his acquiescence, makes the
driver's acts his own.
In the case of Yamada vs. Manila Railroad Co. and
Bachrach Garage & Taxicab Co. (33 Phil. Rep., 8), it is
true that the court rested its conclusion as to the liability of
the defendant upon article 1903, although the facts
disclosed that the injury complaint of by plaintiff constituted
a breach of the duty to him arising out of the contract of
transportation. The express ground of the decision in this
case was that article 1903, in dealing with the liability of a
master for the negligent acts of his servants "makes the
distinction between private individuals and public
enterprise;" that as to the latter the law creates a
rebuttable presumption of negligence in the selection or
direction of servants; and that in the particular case the
presumption of negligence had not been overcome.
It is evident, therefore that in its decision Yamada case,
the court treated plaintiff's action as though founded in tort
rather than as based upon the breach of the contract of
carriage, and an examination of the pleadings and of the
briefs shows that the questions of law were in fact
discussed upon this theory. Viewed from the standpoint of
the defendant the practical result must have been the
same in any event. The proof disclosed beyond doubt that
the defendant's servant was grossly negligent and that his
negligence was the proximate cause of plaintiff's injury. It
also affirmatively appeared that defendant had been guilty
of negligence in its failure to exercise proper discretion in
the direction of the servant. Defendant was, therefore,
liable for the injury suffered by plaintiff, whether the breach
of the duty were to be regarded as constituting culpa
aquiliana or culpa contractual. As Manresa points out (vol.
8, pp. 29 and 69) whether negligence occurs an incident in
the course of the performance of a contractual undertaking
or its itself the source of an extra-contractual undertaking
obligation, its essential characteristics are identical. There
is always an act or omission productive of damage due to
carelessness or inattention on the part of the defendant.
Consequently, when the court holds that a defendant is
liable in damages for having failed to exercise due care,
either directly, or in failing to exercise proper care in the
selection and direction of his servants, the practical result
is identical in either case. Therefore, it follows that it is not
to be inferred, because the court held in the Yamada case
that defendant was liable for the damages negligently
caused by its servants to a person to whom it was bound
by contract, and made reference to the fact that the
defendant was negligent in the selection and control of its
servants, that in such a case the court would have held
that it would have been a good defense to the action, if
presented squarely upon the theory of the breach of the
contract, for defendant to have proved that it did in fact
exercise care in the selection and control of the servant.
The true explanation of such cases is to be found by
directing the attention to the relative spheres of contractual
and extra-contractual obligations. The field of non-
contractual obligation is much more broader than that of
contractual obligations, comprising, as it does, the whole
extent of juridical human relations. These two fields,
figuratively speaking, concentric; that is to say, the mere
fact that a person is bound to another by contract does not
relieve him from extra-contractual liability to such person.
When such a contractual relation exists the obligor may
break the contract under such conditions that the same act
which constitutes the source of an extra-contractual
obligation had no contract existed between the parties.
The contract of defendant to transport plaintiff carried with
it, by implication, the duty to carry him in safety and to
provide safe means of entering and leaving its trains (civil
code, article 1258). That duty, being contractual, was
direct and immediate, and its non-performance could not
be excused by proof that the fault was morally imputable to
defendant's servants.
The railroad company's defense involves the assumption
that even granting that the negligent conduct of its
servants in placing an obstruction upon the platform was a
breach of its contractual obligation to maintain safe means
of approaching and leaving its trains, the direct and
proximate cause of the injury suffered by plaintiff was his
own contributory negligence in failing to wait until the train
had come to a complete stop before alighting. Under the
doctrine of comparative negligence announced in the
Rakes case (supra), if the accident was caused by
plaintiff's own negligence, no liability is imposed upon
defendant's negligence and plaintiff's negligence merely
contributed to his injury, the damages should be
apportioned. It is, therefore, important to ascertain if
defendant was in fact guilty of negligence.
It may be admitted that had plaintiff waited until the train
had come to a full stop before alighting, the particular
injury suffered by him could not have occurred. Defendant
contends, and cites many authorities in support of the
contention, that it is negligence per se for a passenger to
alight from a moving train. We are not disposed to
subscribe to this doctrine in its absolute form. We are of
the opinion that this proposition is too badly stated and is
at variance with the experience of every-day life. In this
particular instance, that the train was barely moving when
plaintiff alighted is shown conclusively by the fact that it
came to stop within six meters from the place where he
stepped from it. Thousands of person alight from trains
under these conditions every day of the year, and sustain
no injury where the company has kept its platform free
from dangerous obstructions. There is no reason to
believe that plaintiff would have suffered any injury
whatever in alighting as he did had it not been for
defendant's negligent failure to perform its duty to provide
a safe alighting place.
We are of the opinion that the correct doctrine relating to
this subject is that expressed in Thompson's work on
Negligence (vol. 3, sec. 3010) as follows:
The test by which to determine whether the passenger has
been guilty of negligence in attempting to alight from a
moving railway train, is that of ordinary or reasonable care.
It is to be considered whether an ordinarily prudent person,
of the age, sex and condition of the passenger, would
have acted as the passenger acted under the
circumstances disclosed by the evidence. This care has
been defined to be, not the care which may or should be
used by the prudent man generally, but the care which a
man of ordinary prudence would use under similar
circumstances, to avoid injury." (Thompson,
Commentaries on Negligence, vol. 3, sec. 3010.)
Or, it we prefer to adopt the mode of exposition used by
this court in Picart vs. Smith (37 Phil. rep., 809), we may
say that the test is this; Was there anything in the
circumstances surrounding the plaintiff at the time he
alighted from the train which would have admonished a
person of average prudence that to get off the train under
the conditions then existing was dangerous? If so, the
plaintiff should have desisted from alighting; and his failure
so to desist was contributory negligence.1awph!l.net
As the case now before us presents itself, the only fact
from which a conclusion can be drawn to the effect that
plaintiff was guilty of contributory negligence is that he
stepped off the car without being able to discern clearly the
condition of the platform and while the train was yet slowly
moving. In considering the situation thus presented, it
should not be overlooked that the plaintiff was, as we find,
ignorant of the fact that the obstruction which was caused
by the sacks of melons piled on the platform existed; and
as the defendant was bound by reason of its duty as a
public carrier to afford to its passengers facilities for safe
egress from its trains, the plaintiff had a right to assume, in
the absence of some circumstance to warn him to the
contrary, that the platform was clear. The place, as we
have already stated, was dark, or dimly lighted, and this
also is proof of a failure upon the part of the defendant in
the performance of a duty owing by it to the plaintiff; for if it
were by any possibility concede that it had right to pile
these sacks in the path of alighting passengers, the
placing of them adequately so that their presence would
be revealed.
As pertinent to the question of contributory negligence on
the part of the plaintiff in this case the following
circumstances are to be noted: The company's platform
was constructed upon a level higher than that of the
roadbed and the surrounding ground. The distance from
the steps of the car to the spot where the alighting
passenger would place his feet on the platform was thus
reduced, thereby decreasing the risk incident to stepping
off. The nature of the platform, constructed as it was of
cement material, also assured to the passenger a stable
and even surface on which to alight. Furthermore, the
plaintiff was possessed of the vigor and agility of young
manhood, and it was by no means so risky for him to get
off while the train was yet moving as the same act would
have been in an aged or feeble person. In determining the
question of contributory negligence in performing such act
— that is to say, whether the passenger acted prudently or
recklessly — the age, sex, and physical condition of the
passenger are circumstances necessarily affecting the
safety of the passenger, and should be considered.
Women, it has been observed, as a general rule are less
capable than men of alighting with safety under such
conditions, as the nature of their wearing apparel obstructs
the free movement of the limbs. Again, it may be noted
that the place was perfectly familiar to the plaintiff as it was
his daily custom to get on and of the train at this station.
There could, therefore, be no uncertainty in his mind with
regard either to the length of the step which he was
required to take or the character of the platform where he
was alighting. Our conclusion is that the conduct of the
plaintiff in undertaking to alight while the train was yet
slightly under way was not characterized by imprudence
and that therefore he was not guilty of contributory
negligence.
The evidence shows that the plaintiff, at the time of the
accident, was earning P25 a month as a copyist clerk, and
that the injuries he has suffered have permanently
disabled him from continuing that employment. Defendant
has not shown that any other gainful occupation is open to
plaintiff. His expectancy of life, according to the standard
mortality tables, is approximately thirty-three years. We are
of the opinion that a fair compensation for the damage
suffered by him for his permanent disability is the sum of
P2,500, and that he is also entitled to recover of defendant
the additional sum of P790.25 for medical attention,
hospital services, and other incidental expenditures
connected with the treatment of his injuries.

The decision of lower court is reversed, and judgment is

hereby rendered plaintiff for the sum of P3,290.25, and for
the costs of both instances. So ordered.

Arellano, C.J., Torres, Street and Avanceña, JJ., concur.

G.R. No. 141910 August 6, 2002
FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and
LAMBERT M. EROLES, respondents.
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to
deliver on 18 June 1994 thirty (30) units of Condura S.D.
white refrigerators aboard one of its Isuzu truck, driven by
Lambert Eroles, from the plant site of Concepcion
Industries, Inc., along South Superhighway in Alabang,
Metro Manila, to the Central Luzon Appliances in Dagupan
City. While the truck was traversing the north diversion
road along McArthur highway in Barangay Anupol,
Bamban, Tarlac, it collided with an unidentified truck,
causing it to fall into a deep canal, resulting in damage to
the cargoes.
FGU Insurance Corporation (FGU), an insurer of the
shipment, paid to Concepcion Industries, Inc., the value of
the covered cargoes in the sum of P204,450.00. FGU, in
turn, being the subrogee of the rights and interests of
Concepcion Industries, Inc., sought reimbursement of the
amount it had paid to the latter from GPS. Since the
trucking company failed to heed the claim, FGU filed a
complaint for damages and breach of contract of carriage
against GPS and its driver Lambert Eroles with the
Regional Trial Court, Branch 66, of Makati City. In its
answer, respondents asserted that GPS was the exclusive
hauler only of Concepcion Industries, Inc., since 1988, and
it was not so engaged in business as a common carrier.
Respondents further claimed that the cause of damage
was purely accidental.1âwphi1.nêt
The issues having thus been joined, FGU presented its
evidence, establishing the extent of damage to the
cargoes and the amount it had paid to the assured. GPS,
instead of submitting its evidence, filed with leave of court
a motion to dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed to prove
that it was a common carrier.
The trial court, in its order of 30 April 1996,1 granted the
motion to dismiss, explaining thusly:
"Under Section 1 of Rule 131 of the Rules of Court, it is
provided that ‘Each party must prove his own affirmative
allegation, xxx.’
"In the instant case, plaintiff did not present any single
evidence that would prove that defendant is a common
carrier.
"x x x xxx xxx
"Accordingly, the application of the law on common
carriers is not warranted and the presumption of fault or
negligence on the part of a common carrier in case of loss,
damage or deterioration of goods during transport under
1735 of the Civil Code is not availing.
"Thus, the laws governing the contract between the owner
of the cargo to whom the plaintiff was subrogated and the
owner of the vehicle which transports the cargo are the
laws on obligation and contract of the Civil Code as well as
the law on quasi delicts.
"Under the law on obligation and contract, negligence or
fault is not presumed. The law on quasi delict provides for
some presumption of negligence but only upon the
attendance of some circumstances. Thus, Article 2185
provides:
‘Art. 2185. Unless there is proof to the contrary, it is
presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any
traffic regulation.’
"Evidence for the plaintiff shows no proof that defendant
was violating any traffic regulation. Hence, the
presumption of negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that
defendant is a common carrier and defendant’s driver was
the one negligent, defendant cannot be made liable for the
damages of the subject cargoes."2
The subsequent motion for reconsideration having been
denied,3 plaintiff interposed an appeal to the Court of
Appeals, contending that the trial court had erred (a) in
holding that the appellee corporation was not a common
carrier defined under the law and existing jurisprudence;
and (b) in dismissing the complaint on a demurrer to
evidence.
The Court of Appeals rejected the appeal of petitioner and
ruled in favor of GPS. The appellate court, in its decision of
10 June 1999,4 discoursed, among other things, that -
"x x x in order for the presumption of negligence provided
for under the law governing common carrier (Article 1735,
Civil Code) to arise, the appellant must first prove that the
appellee is a common carrier. Should the appellant fail to
prove that the appellee is a common carrier, the
presumption would not arise; consequently, the appellant
would have to prove that the carrier was negligent.
"x x x xxx xxx
"Because it is the appellant who insists that the appellees
can still be considered as a common carrier, despite its
`limited clientele,’ (assuming it was really a common
carrier), it follows that it (appellant) has the burden of
proving the same. It (plaintiff-appellant) `must establish his
case by a preponderance of evidence, which means that
the evidence as a whole adduced by one side is superior
to that of the other.’ (Summa Insurance Corporation vs.
Court of Appeals, 243 SCRA 175). This, unfortunately, the
appellant failed to do -- hence, the dismissal of the
plaintiff’s complaint by the trial court is justified.
"x x x xxx xxx
"Based on the foregoing disquisitions and considering the
circumstances that the appellee trucking corporation has
been `its exclusive contractor, hauler since 1970,
defendant has no choice but to comply with the directive of
its principal,’ the inevitable conclusion is that the appellee
is a private carrier.
"x x x xxx xxx
"x x x the lower court correctly ruled that 'the application of
the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a
common carrier in case of loss, damage or deterioration of
good[s] during transport under [article] 1735 of the Civil
Code is not availing.' x x x.
"Finally, We advert to the long established rule that
conclusions and findings of fact of a trial court are entitled
to great weight on appeal and should not be disturbed
unless for strong and valid reasons."5
Petitioner's motion for reconsideration was likewise
denied;6 hence, the instant petition,7 raising the following
issues:
I the mere proof of the existence of the contract and the
WHETHER RESPONDENT GPS MAY BE CONSIDERED
AS A COMMON CARRIER AS DEFINED UNDER THE
LAW AND EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A
COMMON CARRIER OR A PRIVATE CARRIER, MAY BE
PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE
GOODS IT UNDERTOOK TO TRANSPORT SAFELY
WERE SUBSEQUENTLY DAMAGED WHILE IN ITS
PROTECTIVE CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS
APPLICABLE IN THE INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial
court and the Court of Appeals to be amply justified. GPS,
being an exclusive contractor and hauler of Concepcion
Industries, Inc., rendering or offering its services to no
other individual or entity, cannot be considered a common
carrier. Common carriers are persons, corporations, firms
or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water,
or air, for hire or compensation, offering their services to
the public,8 whether to the public in general or to a limited
clientele in particular, but never on an exclusive basis.9
The true test of a common carrier is the carriage of
passengers or goods, providing space for those who opt to
avail themselves of its transportation service for a fee.10
Given accepted standards, GPS scarcely falls within the
term "common carrier."
The above conclusion nothwithstanding, GPS cannot
escape from liability.
In culpa contractual, upon which the action of petitioner
rests as being the subrogee of Concepcion Industries, Inc.,
failure of its compliance justify, prima facie, a
corresponding right of relief.11 The law, recognizing the
obligatory force of contracts,12 will not permit a party to be
set free from liability for any kind of misperformance of the
contractual undertaking or a contravention of the tenor
thereof.13 A breach upon the contract confers upon the
injured party a valid cause for recovering that which may
have been lost or suffered. The remedy serves to preserve
the interests of the promisee that may include his
"expectation interest," which is his interest in having the
benefit of his bargain by being put in as good a position as
he would have been in had the contract been performed,
or his "reliance interest," which is his interest in being
reimbursed for loss caused by reliance on the contract by
being put in as good a position as he would have been in
had the contract not been made; or his "restitution
interest," which is his interest in having restored to him any
benefit that he has conferred on the other party.14 Indeed,
agreements can accomplish little, either for their makers or
for society, unless they are made the basis for action.15
The effect of every infraction is to create a new duty, that
is, to make recompense to the one who has been injured
by the failure of another to observe his contractual
obligation16 unless he can show extenuating
circumstances, like proof of his exercise of due diligence
(normally that of the diligence of a good father of a family
or, exceptionally by stipulation or by law such as in the
case of common carriers, that of extraordinary diligence)
or of the attendance of fortuitous event, to excuse him
from his ensuing liability.
Respondent trucking corporation recognizes the existence
of a contract of carriage between it and petitioner’s
assured, and admits that the cargoes it has assumed to
deliver have been lost or damaged while in its custody. In
such a situation, a default on, or failure of compliance with,
the obligation – in this case, the delivery of the goods in its
custody to the place of destination - gives rise to a
presumption of lack of care and corresponding liability on
the part of the contractual obligor the burden being on him
to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete
proof of his negligence or fault, may not himself be ordered
to pay petitioner. The driver, not being a party to the
contract of carriage between petitioner’s principal and
defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it
or their successors who have assumed their personality or
their juridical position.17 Consonantly with the axiom res
inter alios acta aliis neque nocet prodest, such contract
can neither favor nor prejudice a third person. Petitioner’s
civil action against the driver can only be based on culpa
aquiliana, which, unlike culpa contractual, would require
the claimant for damages to prove negligence or fault on
the part of the defendant.18
A word in passing. Res ipsa loquitur, a doctrine being
invoked by petitioner, holds a defendant liable where the
thing which caused the injury complained of is shown to be
under the latter’s management and the accident is such
that, in the ordinary course of things, cannot be expected
to happen if those who have its management or control
use proper care. It affords reasonable evidence, in the
absence of explanation by the defendant, that the accident
arose from want of care.19 It is not a rule of substantive
law and, as such, it does not create an independent
ground of liability. Instead, it is regarded as a mode of
proof, or a mere procedural convenience since it furnishes
a substitute for, and relieves the plaintiff of, the burden of
producing specific proof of negligence. The maxim simply
places on the defendant the burden of going forward with
the proof.20 Resort to the doctrine, however, may be
allowed only when (a) the event is of a kind which does not
ordinarily occur in the absence of negligence; (b) other
responsible causes, including the conduct of the plaintiff
and third persons, are sufficiently eliminated by the
evidence; and (c) the indicated negligence is within the
scope of the defendant's duty to the plaintiff.21 Thus, it is
not applicable when an unexplained accident may be
attributable to one of several causes, for some of which
the defendant could not be responsible.22
Res ipsa loquitur generally finds relevance whether or not
a contractual relationship exists between the plaintiff and
the defendant, for the inference of negligence arises from
the circumstances and nature of the occurrence and not
from the nature of the relation of the parties.23
Nevertheless, the requirement that responsible causes
other than those due to defendant’s conduct must first be
eliminated, for the doctrine to apply, should be understood
as being confined only to cases of pure (non-contractual)
tort since obviously the presumption of negligence in culpa
contractual, as previously so pointed out, immediately
attaches by a failure of the covenant or its tenor. In the
case of the truck driver, whose liability in a civil action is
predicated on culpa acquiliana, while he admittedly can be
said to have been in control and management of the
vehicle which figured in the accident, it is not equally
shown, however, that the accident could have been
exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the
order of dismissal is reversed, the movant shall be
deemed to have waived the right to present evidence.24
Thus, respondent corporation may no longer offer proof to
establish that it has exercised due care in transporting the
cargoes of the assured so as to still warrant a remand of
the case to the trial court.1âwphi1.nêt
WHEREFORE, the order, dated 30 April 1996, of the
Regional Trial Court, Branch 66, of Makati City, and the
decision, dated 10 June 1999, of the Court of Appeals, are
AFFIRMED only insofar as respondent Lambert M. Eroles
is concerned, but said assailed order of the trial court and
decision of the appellate court are REVERSED as regards
G.P. Sarmiento Trucking Corporation which, instead, is
hereby ordered to pay FGU Insurance Corporation the
value of the damaged and lost cargoes in the amount of
P204,450.00. No costs.
SO ORDERED.
Davide, Jr., C.J., Kapunan, Ynares-Santiago, and Austria-
Martinez, JJ., concur.
Footnotes
1 Rollo, p. 14.
2 Rollo, pp. 14-15.
3 Rollo, p. 17
4 Rollo, p. 20.
5 Rollo, pp. 24-28.
6 Rollo, p. 32.
7 Rollo, p. 3.
8 Article 1732, Civil Code.
9 Sec. 13[b], Public Service Act as amended; see also
Guzman vs. Court of Appeals, G.R. L-47822, 22
December 1988.
10 National Steel Corporation vs. Court of Appeals, 283
SCRA 45.
11 Calalas vs. Court of Appeals, 332 SCRA 356; Sabena
Belgian World Airlines vs. Court of Appeals, 255 SCRA 38.
12 See Articles 1159, 1308, 1315, 1356, Civil Code.
13 Anson on Contracts, 1939, p. 424; 17A Am Jur 2d, p.
728 citing Parks vs. Parks, 187 P2d 145.
14 Restatement, Second, Contracts, §344.
15 Fuller and Purdue, The Reliance Interest in Contract
Damages, 46 Yale L.J.61 (1936).
16 Richardson on Contracts, 1951, p. 309.
17 Article 1311, Civil Code.
18 Calalas vs. Court of Appeals, supra; See Article 2176,
Civil Code.
19 Africa vs. Caltex (Phils.) Inc., 16 SCRA 448; Layugan
vs. Intermediate Appellate Court, 167 SCRA 376.
20 Ramos vs. Court of Appeals, 321 SCRA 600.
21 Sangco, Torts and Damages V.1, 1993, p. 29, citing 58
Am Jur 2d, pp. 56-58. See Ramos vs. Court of Appeals,
supra.
22 Words and Phrases Vol. 37, p. 483.
23 57B Am Jur 2d, p. 496.
24 Section 1, Rule 35, Rules of Court; Section 1, Rule 33,
1997 Rules of Civil Procedure.