SAN ILDEFONSO LINES, INC., and EDUARDO JAVIER vs.

COURT OF APPEALS altering substantive rights, the primary purpose of the reservation is, to borrow the
(Thirteenth Division) and PIONEER INSURANCE and SURETY CORPORATION
G.R. No.119771. 24 Apr 1998.
FACTS: At around 3:30 in the afternoon of June 24, 1991, a Toyota Lite Ace Van
being driven by its owner Annie U. Jao and a passenger bus of herein petitioner San
Ildefonso Lines, Inc. (hereafter, SILI) figured in a vehicular mishap at the intersection
of Julia Vargas Avenue and Rodriguez Lanuza Avenue in Pasig, Metro Manila, totally
wrecking the Toyota van and injuring Ms. Jao and her two (2) passengers in the
process.
words of the Court in "Caños v. Peralta"
Clearly then, private respondent PISC, as subrogee under Article 2207 of the Civil
Code, is not exempt from the reservation requirement with respect to its damages suit
based on quasi-delict arising from the same act or omission of petitioner Javier
complained of in the criminal case. As private respondent PISC merely stepped into
the shoes of Ms. Jao (as owner of the insured Toyota van), then it is bound to
observe the procedural requirements which Ms. Jao ought to follow had she herself
instituted the civil case.

A criminal case was thereafter filed with the Regional Trial Court of Pasig on RAFAEL REYES VS. PEOPLE, 329 SCRA 600
September 18, 1991 charging the driver of the bus, herein petitioner Eduardo Javier,
with reckless imprudence resulting in damage to property with multiple physical
Facts:
injuries.
In the early morning of June 20, 1989, the White Truck driven by Dunca left
Tuguegarao, Cagayan bound to San Fernando, Pampanga loaded with 2,000 cases
About four (4) months later, or on January 13, 1992, herein private respondent
of empty beer “Grande” bottles. Seated at the front right seat beside him was
Pioneer Insurance and Surety Corporation (PISC), as insurer of the van and
Ferdinand Domingo, his truck helper. At around 4:00 o’clock that same morning while
subrogee, filed a case for damages against petitioner SILI with the Regional Trial
the truck was descending at a slight downgrade along the national road at Tagaran,
Court of Manila, seeking to recover the sums it paid the assured under a motor
Cauayan, Isabela, it approached a damaged portion of the road covering the full width
vehicle insurance policy as well as other damages, totaling P564,500.00
of the truck’s right lane going south and about six meters in length. These made the
(P454,000.00 as actual/compensatory damages; P50,000.00 as exemplary damages;
surface of the road uneven because the potholes were about five to six inches deep.
P50,000.00 as attorney's fees; P10,000.00 as litigation expenses; and P500.00 as
The left lane parallel to this damaged portion is smooth. As narrated by Ferdinand
appearance fees.)
Domingo, before approaching the potholes, he and Dunca saw the Nissan with its
headlights on coming from the opposite direction. They used to evade this damaged
ISSUEs: 1) If a criminal case was filed, can an independent civil action based on
road by taking the left lance but at that particular moment, because of the incoming
quasi-delict under Article 2176 of the Civil Code be filed if no reservation was made in
vehicle, they had to run over it. This caused the truck to bounce wildly. Dunca lost
the said criminal case?
control of the wheels and the truck swerved to the left invading the lane of the Nissan.
As a result, Dunca’s vehicle rammed the incoming Nissan dragging it to the left
2) Can a subrogee of an offended party maintain an independent civil action during
shoulder of the road and climbed a ridge above said shoulder where it finally stopped.
the pendency of a criminal action when no reservation of the right to file an
The Nissan was severely damaged and its two passengers, namely, Feliciano Balcita
independent civil action was made in the criminal action and despite the fact that the
and Francisco Dy, Jr. died instantly. On October 10, 1989, Provincial Prosecutor
private complainant is actively participating through a private prosecutor in the
Durian filed with the RTC an amended information charging Dunca with reckless
aforementioned criminal case?
imprudence resulting in double homicide and damage to property. On November 29,
1989, the offended parties filed with the RTC a complaint against petitioner Rafael
RULING: WHEREFORE, premises considered, the assailed decision of the Court of
Reyes Trucking Corporation, as employer of driver Dunca, based on quasi delict.
Appeals dated February 24, 1995 and the Resolution dated April 3, 1995 denying the
Respondents opted to pursue the criminal action but did not withdraw the civil case
motion for reconsideration thereof are hereby REVERSED and SET ASIDE. The
quasi ex delicto they filed against petitioner. On December 15, 1989, respondents
"MANIFESTATION AND MOTION TO SUSPEND CIVIL PROCEEDINGS" filed by
withdrew the reservation to file a separate civil action against the accused and
petitioners is GRANTED.
manifested that they would prosecute the civil aspect ex delicto in the criminal action.
However, they did not withdraw the separate civil action based on quasi delict against
RATIO: Now that the necessity of a prior reservation is the standing rule that shall
petitioner as employer arising from the same act or omission of the accused driver.
govern the institution of the independent civil actions referred to in Rule 111 of the
The RTC held that the driver was guilty. Respondents moved for amendment of the
Rules of Court, past pronouncements that view the reservation requirement as an
dispositive portion of the joint decision so as to hold petitioner subsidiarily liable for
"unauthorized amendment" to substantive law - i.e., the Civil Code, should no longer
the damages awarded to the private respondents in the event of insolvency of the
be controlling. There must be a renewed adherence to the time-honored dictum that
accused, which the lower court granted.
procedural rules are designed, not to defeat, but to safeguard the ends of substantial
justice. And for this noble reason, no less than the Constitution itself has mandated
this Court to promulgate rules concerning the enforcement of rights with the end in Issues: (1) Whether or not petitioner as owner of the truck involved in the accident
view of providing a simplified and inexpensive procedure for the speedy disposition of may be held subsidiarily liable for the damages awarded to the offended parties in the
cases which should not diminish, increase or modify substantive rights. Far from criminal action against the truck driver despite the filing of a separate civil action by
the offended parties against the employer of the truck driver; and
(2) Whether or not the Court may award damages to the offended parties in the
criminal case despite the filing of a civil action against the employer of the truck driver.
Held:
(1) No. In negligence cases, the aggrieved party has the choice between (1) an action
to enforce civil liability arising from crime under Article 100 of the Revised Penal
Code; and (2) a separate action for quasi delict under Article 2176 of the Civil Code of
the Philippines. Once the choice is made, the injured party can not avail himself of
any other remedy because he may not recover damages twice for the same negligent
act or omission of the accused. This is the rule against double recovery.In other
words, “the same act or omission can create two kinds of liability on the part of the
offender, that is, civil liability ex delicto, and civil liability quasi delicto” either of which
“may be enforced against the culprit, subject to the caveat under Article 2177 of the
Civil Code that the offended party can not recover damages under both types of
liability.” In the instant case, the offended parties elected to file a separate civil action
for damages against petitioner as employer of the accused, based on quasi delict,
under Article 2176 of the Civil Code of the Philippines. Petitioner, as employer of the
accused who has been adjudged guilty in the criminal case for reckless imprudence,
cannot be held subsidiarily liable because of the filing of the separate civil action
based on quasi delict against it. In view of the reservation to file, and the subsequent
filing of the civil action for recovery of civil liability, the same was not instituted with the
criminal action. Such separate civil action was for recovery of damages under Article
2176 of the Civil Code, arising from the same act or omission of the accused.
(2) No. The award of damages in the criminal case was improper because the civil
action for the recovery of civil liability was waived in the criminal action by the filing of
a separate civil action against the employer. The only issue brought before the trial
court in the criminal action is whether accused Dunca is guilty of reckless imprudence
resulting in homicide and damage to property. The action for recovery of civil liability
is not included therein, but is covered by the separate civil action filed against the
petitioner as employer of the accused truck-driver. The policy against double recovery
requires that only one action be maintained for the same act or omission whether the
action is brought against the employee or against his employer. The injured party
must choose which of the available causes of action for damages he will bring.
RAFAEL REYES TRUCKING CORPORATION, Petitioner, vs. PEOPLE OF THE
PHILIPPINES and ROSARIO P. DY (for herself and on behalf of the minors Maria
Luisa, Francis Edward, Francis Mark and Francis Rafael, all surnamed
Dy), Respondents.
FACTS: The defendant Rafael Reyes Trucking Corporation is a domestic corporation
engaged in the business of transporting beer products for the San Miguel Corporation
(SMC for short) from the latters San Fernando, Pampanga plant to its various sales
outlets in Luzon. Among its fleets of vehicles for hire is the white truck trailer driven by
Romeo Dunca y Tumol, a duly licensed driver. Aside from the Corporations
memorandum to all its drivers and helpers to physically inspect their vehicles before
each trip, the SMCs Traffic Investigator-Inspector certified the roadworthiness of this
White Truck trailer. In addition to a professional drivers license, it also conducts a rigid
examination of all driver applicants before they are hired.
In the early morning of June 20, 1989, the White Truck driven by Dunca left
Tuguegarao, Cagayan bound to San Fernando, Pampanga loaded with 2,000 cases
of empty beer "Grande" bottles. Seated at the front right seat beside him was
Ferdinand Domingo, his truck helper ("pahinante" in Pilipino). At around 4:00 oclock
that same morning while the truck was descending at a slight downgrade along the
national road at Tagaran, Cauayan, Isabela, it approached a damaged portion of the
road covering the full width of the trucks right lane going south and about six meters
in length. These made the surface of the road uneven because the potholes were
about five to six inches deep. The left lane parallel to this damaged portion is smooth.
As narrated by Ferdinand Domingo, before approaching the potholes, he and Dunca
saw the Nissan with its headlights on coming from the opposite direction. They used
to evade this damaged road by taking the left lance but at that particular moment,
because of the incoming vehicle, they had to run over it. This caused the truck to
bounce wildly. Dunca lost control of the wheels and the truck swerved to the left
invading the lane of the Nissan. As a result, Duncas vehicle rammed the incoming
Nissan dragging it to the left shoulder of the road and climbed a ridge above said
shoulder where it finally stopped. The Nissan was severely damaged and its two
passengers, namely: Feliciano Balcita and Francisco Dy, Jr. died instantly from
external and internal hemorrhage and multiple fractures.
For the funeral expenses of Francisco Dy, Jr. her widow spent P651,360.00. At the
time of his death he was 45 years old. He was the President and Chairman of the
Board of the Dynamic Wood Products and Development Corporation (DWPC), a
wood processing establishment, from which he was receiving an income of
P10,000.00 a month. In the Articles of Incorporation of the DWPC, the spouses
Francisco Dy, Jr. and Rosario Perez Dy appear to be stockholders of 10,000 shares
each with par value of P100.00 per share out of its outstanding and subscribed capital
stock of 60,000 shares valued at P6,000,000.00. Under its 1988 Income Tax Returns
the DWPC had a taxable net income of P78,499.30. Francisco Dy, Jr. was a La Salle
University graduate in Business Administration, past president of the Pasay Jaycees,
National Treasurer and President of the Philippine Jaycees in 1971 and 1976,
respectively, and World Vice-President of Jaycees International in 1979. He was also
the recipient of numerous awards as a civic leader. His children were all studying in
prestigious schools and spent about P180,000.00 for their education in 1988 alone.
The trial court rendered a joint decision finding the accused Romeo Dunca y de
Tumol guilty beyond reasonable doubt of the crime of Double Homicide through
Reckless Imprudence with violation of the Motor Vehicle Law (Rep. Act No. 4136),
and appreciating in his favor the mitigating circumstance of voluntary surrender
without any aggravating circumstance to offset the same, the Court sentences him to
suffer two (2) indeterminate penalties of four months and one day of arresto mayor as
minimum to three years, six months and twenty days as maximum; to indemnify the
Heirs of Francisco Dy. Jr. in the amount of P3,000,000.00 as compensatory damages,
P1,000,000.00 as moral damages, and P1,030,000.00 as funeral expenses; Ordering
the plaintiff in Civil Case No. Br. 19-424 to pay the defendant therein actual damages
in the amount of P84,000.00; and Ordering the dismissal of the complaint in Civil
Case No. Br. 19-424.
Petitioner and the accused filed a notice of appeal from the joint decision.On the other
hand, private respondents moved for amendment of the dispositive portion of the joint
decision so as to hold petitioner subsidiarily liable for the damages awarded to the
private respondents in the event of insolvency of the accused.
The trial court rendered a supplemental decision ordering the defendant Reyes
Trucking Corporation subsidiarily liable for all the damages awarded to the heirs of
Francisco Dy, Jr., in the event of insolvency of the accused but deducting therefrom
the damages of P84,000.00 awarded to said defendant.
Petitioner filed with the trial court a supplemental notice of appeal from the
supplemental decision. During the pendency of the appeal, the accused jumped bail
and fled to a foreign country. The Court of Appeals dismissed the appeal of the
accused in the criminal case and rendered an amended decision affirming that of the
trial court. Petitioner filed a motion for reconsideration of the amended decision. The
Court of Appeals denied petitioners motion for reconsideration for lack of merit.
Hence, this petition for review.
ISSUES: 1. May petitioner as owner of the truck involved in the accident be held
subsidiarily liable for the damages awarded to the offended parties in the criminal
action against the truck driver despite the filing of a separate civil action by the
offended parties against the employer of the truck driver?
2. May the Court award damages to the offended parties in the criminal
case despite the filing of a civil action against the employer of the truck driver; and in
amounts exceeding that alleged in the information for reckless imprudence resulting
in homicide and damage to property?
RULING: 1. Rafael Reyes Trucking Corporation, as employer of the accused who has
been adjudged guilty in the criminal case for reckless imprudence, can not be held
subsidiarily liable because of the filing of the separate civil action based on quasi
delict against it. In view of the reservation to file, and the subsequent filing of the civil
action for recovery of civil liability, the same was not instituted with the criminal action.
Such separate civil action was for recovery of damages under Article 2176 of the Civil
Code, arising from the same act or omission of the accused. In negligence cases, the
aggrieved party has the choice between (1) an action to enforce civil liability arising
from crime under Article 100 of the Revised Penal Code; and (2) a separate action
for quasi delict under Article 2176 of the Civil Code of the Philippines. Once the
choice is made, the injured party can not avail himself of any other remedy because
he may not recover damages twice for the same negligent act or omission of the
accused. This is the rule against double recovery.In other words, "the same act or
omission can create two kinds of liability on the part of the offender, that is, civil
liability ex delicto, and civil liability quasi delicto" either of which "may be enforced
against the culprit, subject to the caveat under Article 2177 of the Civil Code that the
offended party can not recover damages under both types of liability." In the instant
case, the offended parties elected to file a separate civil action for damages against
petitioner as employer of the accused, based on quasi delict, under Article 2176 of the
Civil Code of the Philippines. Private respondents sued petitioner Rafael Reyes
Trucking Corporation, as the employer of the accused, to be vicariously liable for the
fault or negligence of the latter. Under the law, this vicarious liability of the employer is
founded on at least two specific provisions of law.The first is expressed in Article 2176
in relation to Article 2180 of the Civil Code, which would allow an action predicated
on quasi-delict to be instituted by the injured party against the employer for an act or
omission of the employee and would necessitate only a preponderance of evidence to
prevail. Here, the liability of the employer for the negligent conduct of the subordinate
is direct and primary, subject to the defense of due diligence in the selection and
supervision of the employee. The enforcement of the judgment against the employer
in an action based on Article 2176 does not require the employee to be insolvent
since the nature of the liability of the employer with that of the employee, the two
being statutorily considered joint tortfeasors, is solidary. The second, predicated on
Article 103 of the Revised Penal Code, provides that an employer may be held
subsidiarily civilly liable for a felony committed by his employee in the discharge of his
duty. This liability attaches when the employee is convicted of a crime done in the
performance of his work and is found to be insolvent that renders him unable to
properly respond to the civil liability adjudged. Pursuant to the provision of Rule 111,
Section 1, paragraph 3 of the 1985 Rules of Criminal Procedure, when private
respondents, as complainants in the criminal action, reserved the right to file the
separate civil action, they waived other available civil actions predicated on the same
act or omission of the accused-driver. Such civil action includes the recovery of
indemnity under the Revised Penal Code, and damages under Articles 32, 33, and 34
of the Civil Code of the Philippines arising from the same act or omission of the
accused. The intention of private respondents to proceed primarily and directly
against petitioner as employer of accused truck driver became clearer when they did
not ask for the dismissal of the civil action against the latter based on quasi
delict.Consequently, the Court of Appeals and the trial court erred in holding the
accused civilly liable, and petitioner-employer of the accused subsidiarily liable for
damages arising from crime (ex delicto) in the criminal action as the offended parties
in fact filed a separate civil action against the employer based on quasi delict resulting
in the waiver of the civil action ex delicto.It might be argued that private respondents
as complainants in the criminal case withdrew the reservation to file a civil action
against the driver (accused) and manifested that they would pursue the civil liability of
the driver in the criminal action. However, the withdrawal is ineffective to reverse the
effect of the reservation earlier made because private respondents did not withdraw
the civil action against petitioner based on quasi delict. In such a case, the provision
of Rule 111, Section 1, paragraph 3 of the 1985 Rules on Criminal Procedure is clear
that the reservation to file or the filing of a separate civil action results in a waiver of
other available civil actions arising from the same act or omission of the accused.
Rule 111, Section 1, paragraph 2 enumerated what are the civil actions deemed
waived upon such reservation or filing, and one of which is the civil indemnity under
the Revised Penal Code. Rule 111, Section 1, paragraph 3 of the 1985 Rules on
Criminal Procedure specifically provides: "A waiver of any of the civil actions
extinguishes the others. The institution of, or the reservation of the right to file, any of
said civil actions separately waives the others."The rationale behind this rule is the
avoidance of multiple suits between the same litigants arising out of the same act or
omission of the offender. The restrictive phraseology of the section under
consideration is meant to cover all kinds of civil actions, regardless of their source in
law, provided that the action has for its basis the same act or omission of the
offender. However, petitioner as defendant in the separate civil action for damages
filed against it, based on quasi delict, may be held liable thereon. Thus, the trial court
grievously erred in dismissing plaintiffs civil complaint. And the Court of Appeals erred
in affirming the trial courts decision. Unfortunately private respondents did not appeal
from such dismissal and could not be granted affirmative relief.The Court, however, in
exceptional cases has relaxed the rules "in order to promote their objectives and
assist the parties in obtaining just, speedy, and inexpensive determination of every
action or proceeding" or exempted "a particular case from the operation of the rules."
Invoking this principle, we rule that the trial court erred in awarding civil damages in
the criminal case and in dismissing the civil action. Apparently satisfied with such
award, private respondent did not appeal from the dismissal of the civil case.
However, petitioner did appeal. Hence, this case should be remanded to the trial court
so that it may render decision in the civil case awarding damages as may be
warranted by the evidence.
2. The award of damages in the criminal case was improper because the civil action
for the recovery of civil liability was waived in the criminal action by the filing of a
separate civil action against the employer. As enunciated in Ramos vs. Gonong, "civil
indemnity is not part of the penalty for the crime committed." The only issue brought
before the trial court in the criminal action is whether accused Romeo Dunca y de
Tumol is guilty of reckless imprudence resulting in homicide and damage to property.
The action for recovery of civil liability is not included therein, but is covered by the
separate civil action filed against the petitioner as employer of the accused truck-
driver. In this case, accused-driver jumped bail pending his appeal from his
conviction. Thus, the judgment convicting the accused became final and executory,
but only insofar as the penalty in the criminal action is concerned. The damages
awarded in the criminal action was invalid because of its effective waiver. The
pronouncement was void because the action for recovery of the civil liability arising
from the crime has been waived in said criminal action. With respect to the issue that
the award of damages in the criminal action exceeded the amount of damages
alleged in the amended information, the issue is de minimis. At any rate, the trial court
erred in awarding damages in the criminal case because by virtue of the reservation
of the right to bring a separate civil action or the filing thereof, "there would be no
possibility that the employer would be held liable because in such a case there would
be no pronouncement as to the civil liability of the accused. As a final note, the Court
reiterate that "the policy against double recovery requires that only one action be
maintained for the same act or omission whether the action is brought against the
employee or against his employer. The injured party must choose which of the
available causes of action for damages he will bring.
LRT vs. NAVIDAD
G.R. No. 145804. February 6, 2003
FACTS:
Navidad was drunk when he entered the boarding platform of the LRT. He got into an
altercation with the SG Escartin. They had a fistfight and Navidad fell onto the tracks
and was killed when a train came and ran over him.
The Heirs of Navidad filed a complaint for damages against Escartin, the train driver,
(Roman) the LRTA, the Metro Transit Organization and Prudent Security Agency
(Prudent). The trial court found Prudent and Escartin jointly and severally liable for
damages to the heirs. The CA exonerated Prudent and instead held the LRTA and
the train driver Romero jointly and severally liable as well as removing the award for
compensatory damages and replacing it with nominal damages.
The reasoning of the CA was that a contract of carriage already existed between
Navidad and LRTA (by virtue of his havA ing purchased train tickets and the liability
was caused by the mere fact of Navidad's death after being hit by the train being
managed by the LRTA and operated by Roman. The CA also blamed LRTA for not
having presented expert evidence showing that the emergency brakes could not have
stopped the train on time.
ISSUES:
(1) Whether or not LRTA and/or Roman is liable for the death.
(2) Whether or not Escartin and/or Prudent are liable.
(3) Whether or not nominal damages may coexist with compensatory damages.
HELD:
(1) Yes. The foundation of LRTA's liability is the contract of carriage and its obligation
to indemnify the victim arising from the breach of that contract by reason of its failure
to exercise the high diligence required of a common carrier.
(2) Fault was not established. Liability will be based on Tort under Art. 2176 of the
New Civil Code.
(3) No. It is an established rule that nominal damages cannot co-exist with
compensatory damages.
RATIO:
Liability of LRTA – Read Arts. 1755,1756, 1759 and 1763 of the New Civil Code
A common carrier is required by these above statutory provisions to use utmost
diligence in carrying passengers with due regard for all circumstances. This obligation
exists not only during the course of the trip but for so long as the passengers are
within its premises where they ought to be in pursuance to then contract of carriage.
Art. 1763 renders 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 willful acts
or negligence of other passengers or of strangers if the common carrier’s employees
through theexercise of due diligence could have prevented or stopped the act or
omission. In case of such death or injury, a carrier is presumed to have been at fault
or been negligent, and 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.
Liability of Security Agency – If Prudent is to be held liable, it would be for a tort
under Art. 2176 in conjunction with Art. 2180. Once the fault of the employee Escartin
is established, the employer, Prudent, would be held liable on the presumption that it
did not exercise the diligence of a good father of the family in the selection and
supervision of its employees.
Relationship between contractual and non-contractual breach – 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 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 ontract 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.
Nominal Damages - 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. It is an established rule that nominal damages cannot co-exist with
compensatory damages. The award was deleted/\.
LRT vs. NAVIDAD
G.R. No. 145804 February 6, 2003
Lessons Applicable: Actionable Document (transportation)
Laws Cited: Art. 1755,Art. 1756,Art. 1759,Art. 1763
FACTS:
 October 14, 1993, 7:30 p.m. : Drunk Nicanor Navidad (Nicanor) entered the
EDSA LRT station after purchasing a “token”.
 While Nicanor was standing at the platform near the LRT tracks, the guard
Junelito Escartin approached him.
 Due to misunderstanding, they had a fist fight
 Nicanor fell on the tracks and killed instantaneously upon being hit by a
moving train operated by Rodolfo Roman
 December 8, 1994: The widow of Nicanor, along with her children, filed a
complaint for damages against Escartin, Roman, LRTA, Metro Transit Org. Inc.
and Prudent (agency of security guards) for the death of her husband.
 LRTA and Roman filed a counter-claim against Nicanor and a cross-claim
against Escartin and Prudent
 Prudent: denied liability – averred that it had exercised due diligence in the
selection and surpervision of its security guards
 LRTA and Roman: presented evidence
 Prudent and Escartin: demurrer contending that Navidad had failed to prove that
Escartin was negligent in his assigned task
 RTC: In favour of widow and against Prudent and Escartin, complaint against
LRT and Roman were dismissed for lack of merit
 CA: reversed by exonerating Prudent and held LRTA and Roman liable
ISSUE: W/N LRTA and Roman should be liable according to the contract of carriage
HELD: NO. Affirmed with Modification: (a) nominal damages is DELETED (CANNOT
co-exist w/ compensatory damages) (b) Roman is absolved.
 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 off exercising
utmost diligence in ensuring the safety of passengers
 Civil Code:
 Art. 1755. A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very
cautious persons, with a due regard for all the circumstances
 Art. 1756. In case of death or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as prescribed in articles 1733 and
1755
 Art. 1759. Common carriers are liable for the death of or injuries to passengers
through the negligence or wilful 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
 Art. 1763. A common carrier is responsible for injuries suffered by a passenger
on account of the wilful acts or negligence of other passengers or of strangers, if
the common carrier’s employees through the exercise of the diligence of a good
father of a family could have prevented or stopped the act or omission.
 Carriers presumed to be at fault or been negligent and by simple proof of injury,
the passenger is relieaved 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
 Where it hires its own employees or avail itself of the services of an outsider or
an independent firm to undertake the task, the common carrier is NOT relieved of
its responsibilities under the contract of carriage
 GR: Prudent can be liable only for tort under Art. 2176 and related provisions in
conjunction with Art. 2180 of the Civil Code. (Tort may arise even under a
contract, where tort [quasi-delict liability] is that which breaches the contract)
 EX: if employer’s liability is negligence or fault on the part of the employee,
employer can 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.
 EX to the EX: Upon showing due diligence in the selection and supervision of the
employee
 Factual finding of the CA: NO link bet. Prudent and the death of Nicanor for the
reason that the negligence of Escartin was NOT proven
 NO showing that Roman himself is guilty of any culpable act or omission, he
must also be absolved from liability
 Contractual tie bet. LRT and Nicanor is NOT itself a juridical relation bet. Nicanor
and Roman
 Roman can be liable only for his own fault or negligence
LIGA vs. ALLEGRO RESOURCES
575 SCRA 310 (Art. 1159)
Facts:
· Ortigas & Company, Limited Partnership entered into a lease agreement with La
Paz Investment & Realty Corporation wherein the former leased to the latter its parcel
of land located in San Juan. La Paz constructed the Greenhills Shopping Arcade and
divided it into several stalls and subleased them to other people. One of the sub-
lessees was Edsel Liga (Liga), who obtained the leasehold right to Unit No. 26, Level
A of the GSA.
· As the lease expired, the stallholders made several attempts to have their leasehold
rights extended.
· Allegro Resources became the new lessee. As the new lessee, Allegro offered to
sublease Unit No. 26, Level A to Liga. They entered into a lease agreement dubbed
Rental Information in which Liga agreed to pay rental of P40K monthly. She also
agreed to pay the back rentals due Ortigas. Liga also gave P40K as one month
advance rental and another P40K as one month security deposit as provided in the
agreement.
· Liga failed to pay the subsequent due rent. Despite repeated demands from Allegro,
Liga had failed to pay her rentals for the subleased property, as well as the back
rentals from January to August 2001 due Ortigas.
Issues:
1. WON Liga should pay to Ortigas back rentals covering the period 1 January 2001
to 31 August 2001? NO
2. WON Liga should pay to Allegro back rentals in the amount of P40K a month
starting from 1 September 2001 until such time as she vacates the leased property?
YES
3. WON Liga should pay to Allegro the amount of P20K as attorney's fees and the
costs of suit? YES
Held:
1. (1) Ortigas is not a party to this case, whether as plaintiff or otherwise. It is basic
that no relief can be extended in a judgment to a stranger or one who is not a party to
a case. (2) Allegro cannot justify the award as a legal representative by virtue of a
provision in its lease agreement with Ortigas. Allegro did not aver in its complaint that
it was acting as Ortigas's legal representative and seeking the back rentals due
Ortigas. (3) There is no allegation or prayer in the complaint that Allegro was seeking
the collection of the back rentals due Ortigas.
2. The Court cannot countenance the obstinate refusal of Liga to pay P40K a month
to Allegro since she had already acquiesced to pay such rental rate when she signed
the Rental Information. It is fundamental that a contract is the law between the
parties. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
It is a general principle of law that no one may be permitted to change his mind or
disavow and go back upon his own acts, or to proceed contrary thereto, to the
prejudice of the other party.
Likewise, it is settled that if the terms of the contract clearly express the intention of
the contracting parties, the literal meaning of the stipulations would be controlling.
3. Law and jurisprudence support the award of attorney's fees and costs of suit in
favor of Allegro. Attorney's fees and costs of litigation are awarded in instances where
"the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's
plainly valid, just and demandable claim." Having delivered possession over the
leased property to Liga, Allegro had already performed its obligation under the lease
agreement. Liga should have exercised fairness and good judgment in dealing with
Allegro by religiously paying the agreed monthly rental of P40,000.00.
LIGA vs. ALLEGRO RESOURCES
575 SCRA 310 (Art. 1159)
Facts: Ortigas & Company, Limited Partnership entered into a lease agreement with
La Paz Investment & Realty Corporation wherein the former leased to the latter its
parcel of land located in San Juan. La Paz constructed the Greenhills Shopping
Arcade and divided it into several stalls and subleased them to other people. One of
the sub-lessees was Edsel Liga (Liga), who obtained the leasehold right to Unit No.
26, Level A of the GSA.
As the lease expired, the stallholders made several attempts to have their leasehold
rights extended.
Allegro Resources became the new lessee. As the new lessee, Allegro offered to
sublease Unit No. 26, Level A to Liga. They entered into a lease agreement dubbed
Rental Information in which Liga agreed to pay rental of P40K monthly. She also
agreed to pay the back rentals due Ortigas. Liga also gave P40K as one month
advance rental and another P40K as one month security deposit as provided in the
agreement.
Liga failed to pay the subsequent due rent. Despite repeated demands from Allegro,
Liga had failed to pay her rentals for the subleased property, as well as the back
rentals from January to August 2001 due Ortigas.
Issues:
WON Liga should pay to Ortigas back rentals covering the period 1 January 2001 to
31 August 2001? NO
WON Liga should pay to Allegro back rentals in the amount of P40K a month starting
from 1 September 2001 until such time as she vacates the leased property? YES
WON Liga should pay to Allegro the amount of P20K as attorney’s fees and the costs
of suit? YES
Held:
(1) Ortigas is not a party to this case, whether as plaintiff or otherwise. It is basic that
no relief can be extended in a judgment to a stranger or one who is not a party to a
case. (2) Allegro cannot justify the award as a legal representative by virtue of a
provision in its lease agreement with Ortigas. Allegro did not aver in its complaint that
it was acting as Ortigas’s legal representative and seeking the back rentals due
Ortigas. (3) There is no allegation or prayer in the complaint that Allegro was seeking
the collection of the back rentals due Ortigas.
The Court cannot countenance the obstinate refusal of Liga to pay P40K a month to
Allegro since she had already acquiesced to pay such rental rate when she signed
the Rental Information. It is fundamental that a contract is the law between the
parties. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
It is a general principle of law that no one may be permitted to change his mind or
disavow and go back upon his own acts, or to proceed contrary thereto, to the
prejudice of the other party.
Likewise, it is settled that if the terms of the contract clearly express the intention of
the contracting parties, the literal meaning of the stipulations would be controlling.
Law and jurisprudence support the award of attorney’s fees and costs of suit in favor
of Allegro. Attorney’s fees and costs of litigation are awarded in instances where “the
defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s
plainly valid, just and demandable claim.” Having delivered possession over the
leased property to Liga, Allegro had already performed its obligation under the lease
agreement. Liga should have exercised fairness and good judgment in dealing with
Allegro by religiously paying the agreed monthly rental of P40,000.00.
MAKATI STOCK EXCHANGE, INC., vs. MIGUEL V. CAMPOS
G.R. No. 138814 , April 16, 2009
FACTS:
Respondent Miguel V. Campos filed a petition with the Securities, Investigation and
Clearing Department (SICD) of the Securities and Exchange Commission (SEC)
against the petitioners Makati Stock Exchange, Inc. (MKSE) The petition sought: (1)
to nullify 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;.
SICD granted the issuance of a Temporary Restraining Order to enjoin petitioners
from implementing or enforcing the resolution of the MKSE. they also issued a writ of
preliminary injunction for the implementation or enforcement of the MKSE Board
Resolution in question.
On March 11,1994, petitioners filed a motion to dismiss on the following grounds: (1)
Petition became moot due to the cancellation of the license of the MKSE (2) The
SICD had no jurisdiction over the petition and (3) the petition failed to state a cause of
action. However, the SICD denied petitioner’s motion to dismiss.
ISSUE: Whether or not the petition failed to state a cause of action.
HELD: The petition filed by respondent Miguel Campos should be dismissed for
failure to state a cause of action.
A cause of action is the act or omission by which a party violates a right of
another.
It contains three essential elements: 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 will be
dismissed on the ground of failure to state a cause of action. Furthermore, the
petition filed by respondent failed to lay down the source or basis of respondent’s right
and/or petitioner’s obligation.
Article 1157 of the Civil Code, provides that Obligations arise from: law,
Contracts, Quasi Contracts, Acts or omissions punished by law and 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.
The 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.
CHAVEZ VS. GONZALES
I. Nature and effect of obligations - Article 1167
II. Where obligation does not fix a period - Article 1197 cannot be invoked
in this case
DIESEL CONSTRUCTION CO., INC V. UPSI PROPERTY HOLDINGS, INC.
G.R. No. 154885, March 24, 2008
UPSI PROPERTY HOLDINGS, INC., V. DIESEL CONSTRUCTION CO., INC. AND
FGU INSURANCE CORP., G.R. No. 154937, March 24, 2008
Facts: On August 26, 1995, Diesel, as contractor, and UPSI, as Owner, entered into
a Construction Agreement for the interior architectural construction works for the 14th
to the 16th floors of the UPSI Building 3 Meditel/Condotel Project located on Gen.
Luna St., Ermita, Manila. Under the Agreement, as amended, Diesel, for PHP
12,739,099, agreed to undertake the Project, payable by progress billing. As
stipulated, Diesel posted, through FGU Insurance corp. (FGU), a performance bond in
favor of UPSI.
 The Agreement contained provisions and contract provisions on contract
works and Project completing, extensions of contract period, change/extra work
orders, delays and damages for negative slippage. Under the Agreement, the Project
Prosecution proper was to run for a period of 90 days from August 2, 1999 to
November 8, 1999. They later agreed to move the commencement date to August 21,
1999 and the completion was moved to November 20, 1999. Also this includes the
section obliging the contractor, in case of unjustifiable delay, to pay the owner
liquidated damages in the amount equivalent to one-fifth (1/5) of one (1) percent of
the total Project cost for each calendar day of delay.
During the course of Project implantation, change orders were effective and
extensive sought. Diesel requested for extension owing to the following causes or
delaying factors: (1) manual hauling of materials from the 14 th to 16th floors; (2)
delayed supply of marble; (3) various change orders; and (4) delayed in the
installation of shower assembly. UPSI disapproved the desired extensions on the
basis of the foregoing causes, thus putting Diesel in default for a given contract of
work. Furthermore, for every default situation, UPSI assessed Diesel for liquidated
damages in the form of deductions from Diesel’s progress payments, as stipulated in
the Agreement. On March 16, 2000, Diesel sent a letter notice to UPSI stating that the
Project has been completed as of the date. UPSI, however, disregarded the notice,
and refused to accept delivery of the contracted premises, claiming that Diesel
abandoned the Project unfinished. Diesel then filed a complaint compelling to pay the
unpaid balance of UPSI of the contract price, plus damages and attorney’s fees. UPSI
denied liability.
ISSUE: Whether or not Diesel can be entitled to full payment of the contract amount.
HELD: As evidenced, by UPSI’s Progress Report No. 19 for the period ending March
22, 2000, Diesel’s scope of work , as of that date, was already 97.56% complete.
Such level of work accomplishment would, by any natural norm, be considered as
substantial to warrant full payment of the contract amount, less actual damages
suffered by UPSI. Article 1234 of the Civil Code says as much, “If the obligation had
substantially performed in good faith, the obligor may recover as though there had
been and complete fulfillment, less damages suffered by the obligee.
PANTALEON VS AMERICAN EXPRESS INTERNATIONAL
G.R. No. 174269, May 8 2009 [Credit Transaction]
FACTS:
After the Amsterdam incident that happened involving the delay of American Express
Card to approve his credit card purchases worth US$13,826.00 at the Coster store,
Pantaleon commenced a complaint for moral and exemplary damages before the
RTC against American Express. He said that he and his family experienced
inconvenience and humiliation due to the delays in credit authorization. RTC rendered
a decision in favor of Pantaleon. CA reversed the award of damages in favor of
Pantaleon, holding that AmEx had not breached its obligations to Pantaleon, as the
purchase at Coster deviated from Pantaleon's established charge purchase pattern.
ISSUE:
1. Whether or not AmEx had committed a breach of its obligations to Pantaleon.
2. Whether or not AmEx is liable for damages.
RULING:
1. Yes. The popular notion that credit card purchases are approved “within seconds,”
there really is no strict, legally determinative point of demarcation on how long must it
take for a credit card company to approve or disapprove a customer’s purchase,
much less one specifically contracted upon by the parties. One hour appears to be
patently unreasonable length of time to approve or disapprove a credit card purchase.
The culpable failure of AmEx herein is not the failure to timely approve petitioner’s
purchase, but the more elemental failure to timely act on the same, whether favorably
or unfavorably. Even assuming that AmEx’s credit authorizers did not have sufficient
basis on hand to make a judgment, we see no reason why it could not have promptly
informed Pantaleon the reason for the delay, and duly advised him that resolving the
same could take some time.
2. Yes. The reason why Pantaleon is entitled to damages is not simply because
AmEx incurred delay, but because the delay, for which culpability lies under Article
1170, led to the particular injuries under Article 2217 of the Civil Code for which moral
damages are remunerative. The somewhat unusual attending circumstances to the
purchase at Coster – that there was a deadline for the completion of that purchase by
petitioner before any delay would redound to the injury of his several traveling
companions – gave rise to the moral shock, mental anguish, serious anxiety,
wounded feelings and social humiliation sustained by Pantaleon, as concluded by the
RTC.
PANTALEON v AMERICAN EXPRESS INTERNATIONAL, INC
RATIO DECIDENDI: Moral damages avail in cases of breach of contract where the
defendant acted fraudulently or in bad faith.
QUICK FACTS: Petitioner purchased items when he was in the States using his
AmEx credit card. During three particular instances, clearance of his purchase took
too long and under those circumstances caused him moral shock, mental anguish,
serious anxiety, wounded feelings and social humiliation.
FACTS:
Name of Offended party (petitioner): Polo S. Pantaleon
Name of respondent: American Express International, Inc.
-The petitioner, lawyer Polo Pantaleon, his wife, daughter and son joined an escorted
tour of Western Europe organized by Trafalgar Tours of Europe, Ltd., in October of
1991.
-The tour group arrived in Amsterdam in the afternoon of 25 October 1991, the
second to the last day of the tour. As the group had arrived late in the city, they failed
to engage in any sight-seeing so they agreed that they would start early the next day
to see the entire city before ending the tour.
-The following day, the last day of the tour, the group arrived at the Coster Diamond
House. The group had agreed that the visit to Coster should end by 9:30 a.m. to allow
enough time to take in a guided city tour of Amsterdam.
- While in the diamond house, led to the store’s showroom to allow them to select
items for purchase. Mrs. Pantaleon decided to buy a 2.5 karat diamond brilliant cut,
and she found a diamond close enough in approximation. Mrs. Pantaleon also
selected for purchase a pendant and a chain, all of which totaled U.S. $13,826.00.
-Pantaleon presented his American Express credit card together with his passport to
the Coster sales clerk. This occurred at around 9:15 a.m., or 15 minutes before the
tour group was slated to depart from the store. The sales clerk took the card’s imprint,
and asked Pantaleon to sign the charge slip. The charge purchase was then referred
electronically to respondent’s Amsterdam office at 9:20 a.m.
-clearance took too long. At 9:40am, Pantaleon asked the store clerk to cancel the
sale to avoid further delaying and inconveniencing the tour group. At around 10:00
a.m, 30 minutes after the tour group was supposed to have left the store, Coster
decided to release the items even without respondent’s approval of the purchase.
-due to the delay, the city tour of Amsterdam was to be canceled due to lack of
remaining time. The spouses Pantaleon allegedly offered their apologies but were
met by their tourmates with stony silence and visible irritation. Mrs. Pantaleon ended
up weeping, while her husband had to take a tranquilizer to calm his nerves.
-two instances similar to the Castor incident happened.
 purchased golf equipment amounting to US $1,475.00 using his AmEx card,
but he cancelled his credit card purchase and borrowed money instead from
a friend, after more than 30 minutes had transpired without the purchase
having been approved.
 used the card to purchase children’s shoes worth $87.00 at a store in
Boston, and it took 20 minutes before this transaction was approved by
respondent.
Petitioners: after coming back to Manila, sent a letter demanding an apology for the
"inconvenience, humiliation and embarrassment he and his family thereby suffered"
for respondent’s refusal to provide credit authorization for the aforementioned
purchases.
Respondent: refused to give an apology, sent a letter stating among others that the
delay in authorizing the purchase from Coster was attributable to the circumstance
that the charged purchase of US $13,826.00 "was out of the usual charge purchase
pattern established."
RTC: petitioner instituted an action for damages. Petitioner won.
 Court awarded P500,000.00 as moral damages, P300,000.00 as exemplary
damages, P100,000.00 as attorney’s fees, and P85,233.01 as expenses of
litigation.
 normal approval time for purchases was "a matter of seconds." Based on
that standard, respondent had been in clear delay with respect to the three
subject transactions.
CA: reversed the award of damages in favor of Pantaleon, holding that respondent
had not breached its obligations to petitioner.
 delay was not attended by bad faith, malice, or gross negligence.
 respondent "had exercised diligent efforts to effect the approval" of the
purchases, which were "not in accordance with the charge pattern" petitioner
had established for himself
ISSUE:
1) WON has committed a breach of its obligations.
2) WON respondent is liable for damages.
DECISION: Petition granted. CA decision set aside.
HELD:
1) There was a breach.
-Notwithstanding the popular notion that credit card purchases are approved "within
seconds," there really is no strict, legally determinative point of demarcation on how
long must it take for a credit card company to approve or disapprove a customer’s
purchase, much less one specifically contracted upon by the parties. Yet this is one of
those instances when "you’d know it when you’d see it," and one hour appears to be
an awfully long, patently unreasonable length of time to approve or disapprove a
credit card purchase.
-the respondent has the right, if not the obligation, to verify whether the credit it is
extending upon on a particular purchase was indeed contracted by the cardholder,
and that the cardholder is within his means to make such transaction. The culpable
failure of respondent herein is not the failure to timely approve petitioner’s purchase,
but the more elemental failure to timely act on the same, whether favorably or
unfavorably.
 Respondent should have promptly informed petitioner the reason for the
delay, and duly advised him that resolving the same could take some time so
that petitioners will know WON to continue with the purchases
2) YES.
-Moral damages avail in cases of breach of contract where the defendant acted
fraudulently or in bad faith, and the court should find that under the circumstances,
such damages are due.
-in this case, there was bad faith and unjustified neglect of respondent, attributable in
particular to the "dilly-dallying" of respondent’s Manila credit authorizer, Edgardo
Jaurique. This, to the Court’s mind, amounts to a wanton and deliberate refusal to
comply with its contractual obligations, or at least abuse of its rights, under the
contract.
-The delay committed by defendant was clearly attended by unjustified neglect and
bad faith, since it alleges to have consumed more than one hour to simply go over
plaintiff’s past credit history with defendant, his payment record and his credit and
bank references, when all such data are already stored and readily available from its bank for advances and payments made by the bank and that the cardholders
computer and the fact that there were no delinquencies in the plaintiff’s account obligation to pay the bank shall not be affected or impaired by any dispute, claim, or
demand by the cardholder with respect to any merchandise or service purchased.
-It should be emphasized that the reason why petitioner is entitled to damages
is not simply because respondent incurred delay, but because the delay, for The merchants participating in the system agree to honor the banks credit cards. The
which culpability lies under Article 1170, led to the particular injuries under bank irrevocably agrees to honor and pay the sales slips presented by the merchant if
Article 2217 of the Civil Code for which moral damages are remunerative. In this the merchant performs his undertakings such as checking the list of revoked cards
case, it was sufficiently shown that the incident gave rise to the moral shock, mental before accepting the card. x x x.
anguish, serious anxiety, wounded feelings and social humiliation to the petitioner.
These slips are forwarded to the member bank which originally issued the card. The
cardholder receives a statement from the bank periodically and may then decide
 Amount should be commensurate to the loss or injury suffered. Petitioner’s whether to make payment to the bank in full within a specified period, free of interest,
original prayer for P5,000,000.00 for moral damages is excessive under the or to defer payment and ultimately incur an interest charge.
circumstances, and the amount awarded by the trial court of P500,000.00 in
moral damages more seemly.1avvphi1
We adopted a similar view in CIR v. American Express International, Inc. (Philippine
-Likewise, we deem exemplary damages available under the circumstances, and the branch),[15] where we also recognized that credit card issuers are not limited to
amount of P300,000.00 appropriate. There is similarly no cause though to disturb the banks. We said:
determined award of P100,000.00 as attorney’s fees, and P85,233.01 as expenses of
litigation. Under RA 8484, the credit card that is issued by banks in general, or by non-banks in
particular, refers to any card x x x or other credit device existing for the purpose of
obtaining x x x goods x x x or services x x x on credit; and is being used usually on a
OUR RULING
revolving basis. This means that the consumer-credit arrangement that exists
between the issuer and the holder of the credit card enables the latter to procure
We GRANT the motion for reconsideration.
goods or services on a continuing basis as long as the outstanding balance does not
exceed a specified limit. The card holder is, therefore, given the power to obtain
present control of goods or service on a promise to pay for them in the future.
Brief historical background
Business establishments may extend credit sales through the use of the credit card
A credit card is defined as any card, plate, coupon book, or other credit device
facilities of a non-bank credit card company to avoid the risk of uncollectible accounts
existing for the purpose of obtaining money, goods, property, labor or services or
from their customers. Under this system, the establishments do not deposit in their
anything of value on credit.[9] It traces its roots to the charge card first introduced by
bank accounts the credit card drafts that arise from the credit sales. Instead, they
the Diners Club in New York City in 1950.[10] American Express followed suit by
merely record their receivables from the credit card company and periodically send
introducing its own charge card to the American market in 1958.[11]
the drafts evidencing those receivables to the latter.
In the Philippines, the now defunct Pacific Bank was responsible for bringing the first
The credit card company, in turn, sends checks as payment to these business
credit card into the country in the 1970s.[12] However, it was only in the early 2000s
establishments, but it does not redeem the drafts at full price. The agreement
that credit card use gained wide acceptance in the country, as evidenced by the surge
between them usually provides for discounts to be taken by the company upon its
in the number of credit card holders then.[13]
redemption of the drafts. At the end of each month, it then bills its credit card holders
for their respective drafts redeemed during the previous month. If the holders fail to
Nature of Credit Card Transactions
pay the amounts owed, the company sustains the loss.
To better understand the dynamics involved in credit card transactions, we turn to
the United States case of Harris Trust & Savings Bank v. McCray[14] which explains:
Simply put, every credit card transaction involves three contracts, namely: (a)
the sales contract between the credit card holder and the merchant or the business
The bank credit card system involves a tripartite relationship between the issuer bank,
establishment which accepted the credit card; (b) the loan agreement between the
the cardholder, and merchants participating in the system. The issuer bank
credit card issuer and the credit card holder; and lastly, (c) the promise to
establishes an account on behalf of the person to whom the card is issued, and the
pay between the credit card issuer and the merchant or business establishment. [16]
two parties enter into an agreement which governs their relationship. This agreement
Credit card issuer cardholder relationship
provides that the bank will pay for cardholders account the amount of merchandise or
services purchased through the use of the credit card and will also make cash loans
available to the cardholder. It also states that the cardholder shall be liable to the
When a credit card company gives the holder the privilege of charging items at
establishments associated with the issuer,[17] a necessary question in a legal analysis
is when does this relationship begin? There are two diverging views on the
matter. In City Stores Co. v. Henderson,[18] another U.S. decision, held that:
The issuance of a credit card is but an offer to extend a line of open account credit. It
is unilateral and supported by no consideration. The offer may be withdrawn at any
time, without prior notice, for any reason or, indeed, for no reason at all, and its
withdrawal breaches no duty for there is no duty to continue it and violates no rights.
Thus, under this view, each credit card transaction is considered a separate offer and
acceptance.
Novack v. Cities Service Oil Co.[19] echoed this view, with the court ruling that the
mere issuance of a credit card did not create a contractual relationship with the
cardholder.
On the other end of the spectrum is Gray v. American Express Company[20] which
recognized the card membership agreement itself as a binding contract between the
credit card issuer and the card holder. Unlike in the Novack and the City
Stores cases, however, the cardholder in Gray paid an annual fee for the privilege of
being an American Express cardholder.
In our jurisdiction, we generally adhere to the Gray ruling, recognizing the relationship
between the credit card issuer and the credit card holder as a contractual one that is
governed by the terms and conditions found in the card membership
agreement.[21] This contract provides the rights and liabilities of a credit card company
to its cardholders and vice versa.
We note that a card membership agreement is a contract of adhesion as its terms are
prepared solely by the credit card issuer, with the cardholder merely affixing his
signature signifying his adhesion to these terms.[22] This circumstance, however, does
not render the agreement void; we have uniformly held that contracts of adhesion are
as binding as ordinary contracts, the reason being that the party who adheres to the
contract is free to reject it entirely.[23] The only effect is that the terms of the contract
are construed strictly against the party who drafted it. [24]
On AMEXs obligations to Pantaleon
We begin by identifying the two privileges that Pantaleon assumes he is entitled to
with the issuance of his AMEX credit card, and on which he anchors his claims. First,
Pantaleon presumes that since his credit card has no pre-set spending limit, AMEX
has the obligation to approve all his charge requests. Conversely, even if AMEX has
no such obligation, at the very least it is obliged to act on his charge requests within a
specific period of time.
i. Use of credit card a mere offer to enter into loan agreements
Although we recognize the existence of a relationship between the credit card issuer
and the credit card holder upon the acceptance by the cardholder of the terms of the
card membership agreement (customarily signified by the act of the cardholder in
signing the back of the credit card), we have to distinguish this contractual
relationship from the creditor-debtor relationship which only arises after the
credit card issuer has approved the cardholders purchase request. The first
relates merely to an agreement providing for credit facility to the cardholder. The latter
involves the actual credit on loan agreement involving three contracts, namely:
the sales contract between the credit card holder and the merchant or the business
establishment which accepted the credit card; the loan agreement between the credit
card issuer and the credit card holder; and the promise to pay between the credit
card issuer and the merchant or business establishment.
From the loan agreement perspective, the contractual relationship begins to exist only
upon the meeting of the offer[25] and acceptance of the parties involved. In more
concrete terms, when cardholders use their credit cards to pay for their purchases,
they merely offer to enter into loan agreements with the credit card company. Only
after the latter approves the purchase requests that the parties enter into binding loan
contracts, in keeping with Article 1319 of the Civil Code, which provides:
Article 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.
This view finds support in the reservation found in the card membership agreement
itself, particularly paragraph 10, which clearly states that AMEX reserve[s] the right
to deny authorization for any requested Charge. By so providing, AMEX made its
position clear that it has no obligation to approve any and all charge requests made
by its card holders.
ii. AMEX not guilty of culpable delay
Since AMEX has no obligation to approve the purchase requests of its credit
cardholders, Pantaleon cannot claim that AMEX defaulted in its obligation. Article
1169 of the Civil Code, which provides the requisites to hold a debtor guilty of
culpable delay, states:
Article 1169. Those obliged to deliver or to do something incur in delay from the time
the obligee judicially or extrajudicially demands from them the fulfillment of their
obligation. x xx.
The three requisites for a finding of default are: (a) that the obligation is demandable
and liquidated; (b) the debtor delays performance; and (c) the creditor judicially or
extrajudicially requires the debtors performance.[26]
Based on the above, the first requisite is no longer met because AMEX, by the
express terms of the credit card agreement, is not obligated to approve Pantaleons
purchase request. Without a demandable obligation, there can be no finding of
default.
Apart from the lack of any demandable obligation, we also find that Pantaleon failed
to make the demand required by Article 1169 of the Civil Code.

As previously established, the use of a credit card to pay for a purchase is only an
offer to the credit card company to enter a loan agreement with the credit card
holder. Before the credit card issuer accepts this offer, no obligation relating to
the loan agreement exists between them. On the other hand, a demand is defined
as the assertion of a legal right; xxx an asking with authority, claiming or challenging
as due.[27] A demand presupposes the existence of an obligation between the
parties.
Thus, every time that Pantaleon used his AMEX credit card to pay for his purchases,
what the stores transmitted to AMEX were his offers to execute loan contracts. These
obviously could not be classified as the demand required by law to make the debtor in
default, given that no obligation could arise on the part of AMEX until after AMEX
transmitted its acceptance of Pantaleons offers. Pantaleons act of insisting on and
waiting for the charge purchases to be approved by AMEX[28] is not the demand
contemplated by Article 1169 of the Civil Code.
For failing to comply with the requisites of Article 1169, Pantaleons charge that AMEX
is guilty of culpable delay in approving his purchase requests must fail.
iii. On AMEXs obligation to act on the offer within a specific period of time
Even assuming that AMEX had the right to review his credit card history before it
approved his purchase requests, Pantaleon insists that AMEX had an obligation to act
on his purchase requests, either to approve or deny, in a matter of seconds or in
timely dispatch. Pantaleon impresses upon us the existence of this obligation by
emphasizing two points: (a) his card has no pre-set spending limit; and (b) in his
twelve years of using his AMEX card, AMEX had always approved his charges in a
matter of seconds.
Pantaleons assertions fail to convince us.
We originally held that AMEX was in culpable delay when it acted on the Coster
transaction, as well as the two other transactions in the United States which took
AMEX approximately 15 to 20 minutes to approve. This conclusion appears valid and
reasonable at first glance, comparing the time it took to finally get the Coster
purchase approved (a total of 78 minutes), to AMEXs normal approval time of three to
four seconds (based on the testimony of Edgardo Jaurigue, as well as Pantaleons
previous experience). We come to a different result, however, after a closer look at
the factual and legal circumstances of the case.
AMEXs credit authorizer, Edgardo Jaurigue, explained that having no pre-set
spending limit in a credit card simply means that the charges made by the cardholder
are approved based on his ability to pay, as demonstrated by his past spending,
payment patterns, and personal resources.[29] Nevertheless, every time Pantaleon
charges a purchase on his credit card, the credit card company still has to
determine whether it will allow this charge, based on his past credit history.
This right to review a card holders credit history, although not specifically set out in
the card membership agreement, is a necessary implication of AMEXs right to deny
authorization for any requested charge.
As for Pantaleons previous experiences with AMEX (i.e., that in the past 12 years,
AMEX has always approved his charge requests in three or four seconds), this record
does not establish that Pantaleon had a legally enforceable obligation to expect
AMEX to act on his charge requests within a matter of seconds. For one, Pantaleon
failed to present any evidence to support his assertion that AMEX acted on purchase
requests in a matter of three or four seconds as an established practice. More
importantly, even if Pantaleon did prove that AMEX, as a matter of practice or custom,
acted on its customers purchase requests in a matter of seconds, this would still not
be enough to establish a legally demandable right; as a general rule, a practice or
custom is not a source of a legally demandable or enforceable right. [30]
We next examine the credit card membership agreement, the contract that primarily
governs the relationship between AMEX and Pantaleon. Significantly, there is no
provision in this agreement that obligates AMEX to act on all cardholder
purchase requests within a specifically defined period of time. Thus, regardless
of whether the obligation is worded was to act in a matter of seconds or to act in
timely dispatch, the fact remains that no obligation exists on the part of AMEX to act
within a specific period of time. Even Pantaleon admits in his testimony that he could
not recall any provision in the Agreement that guaranteed AMEXs approval of his
charge requests within a matter of minutes.[31]
Nor can Pantaleon look to the law or government issuances as the source of AMEXs
alleged obligation to act upon his credit card purchases within a matter of seconds. As
the following survey of Philippine law on credit card transactions demonstrates, the
State does not require credit card companies to act upon its cardholders purchase
requests within a specific period of time.
Republic Act No. 8484 (RA 8484), or the Access Devices Regulation Act of 1998,
approved on February 11, 1998, is the controlling legislation
that regulates the issuance and use of access devices,[32] including credit cards. The
more salient portions of this law include the imposition of the obligation on a credit
card company to disclose certain important financial information [33] to credit card
applicants, as well as a definition of the acts that constitute access device fraud.
As financial institutions engaged in the business of providing credit, credit card
companies fall under the supervisory powers of the Bangko Sentral ng Pilipinas
(BSP).[34]BSP Circular No. 398 dated August 21, 2003 embodies the BSPs policy
when it comes to credit cards
The Bangko Sentral ng Pilipinas (BSP) shall foster the development of consumer
credit through innovative products such as credit cards under conditions of fair and
sound consumer credit practices. The BSP likewise encourages competition and
transparency to ensure more efficient delivery of services and fair dealings with
customers. (Emphasis supplied)
Based on this Circular, x x x [b]efore issuing credit cards, banks and/or their
subsidiary credit card companies must exercise proper diligence by ascertaining that
applicants possess good credit standing and are financially capable of fulfilling their
credit commitments.[35] As the above-quoted policy expressly states, the general
intent is to foster fair and sound consumer credit practices.
Other than BSP Circular No. 398, a related circular is BSP Circular No. 454, issued
on September 24, 2004, but this circular merely enumerates the unfair collection
practices of credit card companies a matter not relevant to the issue at hand.
In light of the foregoing, we find and so hold that AMEX is neither contractually bound
nor legally obligated to act on its cardholders purchase requests within any specific
period of time, much less a period of a matter of seconds that Pantaleon uses as his
standard. The standard therefore is implicit and, as in all contracts, must be based on
fairness and reasonableness, read in relation to the Civil Code provisions on human
relations, as will be discussed below.
AMEX acted with good faith
Thus far, we have already established that: (a) AMEX had neither a contractual nor a
legal obligation to act upon Pantaleons purchases within a specific period of time; and
(b) AMEX has a right to review a cardholders credit card history. Our recognition of
these entitlements, however, does not give AMEX an unlimited right to put off
action on cardholders purchase requests for indefinite periods of time. In acting
on cardholders purchase requests, AMEX must take care not to abuse its rights and
cause injury to its clients and/or third persons. We cite in this regard Article 19, in
conjunction with Article 21, of the Civil Code, which provide:
Article 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due and observe honesty and good faith.
Article 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage.
Article 19 pervades the entire legal system and ensures that a person suffering
damage in the course of anothers exercise of right or performance of duty, should find
himself without relief.[36] It sets the standard for the conduct of all persons, whether
artificial or natural, and requires that everyone, in the exercise of rights and the
performance of obligations, must: (a) act with justice, (b) give everyone his due, and
(c) observe honesty and good faith. It is not because a person invokes his rights that
he can do anything, even to the prejudice and disadvantage of another.[37]
While Article 19 enumerates the standards of conduct, Article 21 provides the remedy
for the person injured by the willful act, an action for damages. We explained how
these two provisions correlate with each other in GF Equity, Inc. v. Valenzona:[38]
[Article 19], known to contain what is commonly referred to as the principle of abuse
of rights, sets certain standards which must be observed not only in the exercise of
one's rights but also in the performance of one's duties. These standards are the
following: to act with justice; to give everyone his due; and to observe honesty and
good faith. The law, therefore, recognizes a primordial limitation on all rights; that in
their exercise, the norms of human conduct set forth in Article 19 must be
observed. A right, though by itself legal because recognized or granted by law
as such, may nevertheless become the source of some illegality. When a right
is exercised in a manner which does not conform with the norms enshrined in
Article 19 and results in damage to another, a legal wrong is thereby committed
for which the wrongdoer must be held responsible. But while Article 19 lays down
a rule of conduct for the government of human relations and for the maintenance of
social order, it does not provide a remedy for its violation. Generally, an action for
damages under either Article 20 or Article 21 would be proper.
In the context of a credit card relationship, although there is neither a contractual
stipulation nor a specific law requiring the credit card issuer to act on the credit card
holders offer within a definite period of time, these principles provide the standard by
which to judge AMEXs actions.
According to Pantaleon, even if AMEX did have a right to review his charge
purchases, it abused this right when it unreasonably delayed the processing of the
Coster charge purchase, as well as his purchase requests at the Richard Metz Golf
Studio and Kids Unlimited Store; AMEX should have known that its failure to act
immediately on charge referrals would entail inconvenience and result in humiliation,
embarrassment, anxiety and distress to its cardholders who would be required to wait
before closing their transactions.[39]
It is an elementary rule in our jurisdiction that good faith is presumed and that the
burden of proving bad faith rests upon the party alleging it. [40] Although it took AMEX
some time before it approved Pantaleons three charge requests, we find no evidence
to suggest that it acted with deliberate intent to cause Pantaleon any loss or injury, or
acted in a manner that was contrary to morals, good customs or public policy. We
give credence to AMEXs claim that its review procedure was done to ensure
Pantaleons own protection as a cardholder and to prevent the possibility that the
credit card was being fraudulently used by a third person.
Pantaleon countered that this review procedure is primarily intended to protect
AMEXs interests, to make sure that the cardholder making the purchase has enough
means to pay for the credit extended. Even if this were the case, however, we do not
find any taint of bad faith in such motive. It is but natural for AMEX to want to ensure
that it will extend credit only to people who will have sufficient means to pay for their
purchases. AMEX, after all, is running a business, not a charity, and it would simply
be ludicrous to suggest that it would not want to earn profit for its services. Thus, so
long as AMEX exercises its rights, performs its obligations, and generally acts with
good faith, with no intent to cause harm, even if it may occasionally inconvenience
others, it cannot be held liable for damages.
We also cannot turn a blind eye to the circumstances surrounding the Coster
transaction which, in our opinion, justified the wait. In Edgardo Jaurigues own words:
Q 21: With reference to the transaction at the Coster Diamond House covered by
Exhibit H, also Exhibit 4 for the defendant, the approval came at 2:19 a.m. after the
request was relayed at 1:33 a.m., can you explain why the approval came after about
46 minutes, more or less?
A21: Because we have to make certain considerations and evaluations of
[Pantaleons] past spending pattern with [AMEX] at that time before approving
plaintiffs request because [Pantaleon] was at that time making his very first
single charge purchase of US$13,826 [this is below the US$16,112.58 actually
billed and paid for by the plaintiff because the difference was already automatically
approved by [AMEX] office in Netherland[s] and the record of [Pantaleons] past
spending with [AMEX] at that time does not favorably support his ability to pay
for such purchase. In fact, if the foregoing internal policy of [AMEX] had been strictly
followed, the transaction would not have been approved at all considering that the
past spending pattern of the plaintiff with [AMEX] at that time does not support his
ability to pay for such purchase.[41]
xxxx
Q: Why did it take so long?
A: It took time to review the account on credit, so, if there is any delinquencies [sic] of
the cardmember. There are factors on deciding the charge itself which are standard
measures in approving the authorization. Now in the case of Mr. Pantaleon although
his account is single charge purchase of US$13,826. [sic] this is below the
US$16,000. plus actually billed x x x we would have already declined the charge
outright and asked him his bank account to support his charge. But due to the length
of his membership as cardholder we had to make a decision on hand.[42]
As Edgardo Jaurigue clarified, the reason why Pantaleon had to wait for AMEXs
approval was because he had to go over Pantaleons credit card history for the past
twelve months.[43] It would certainly be unjust for us to penalize AMEX for merely
exercising its right to review Pantaleons credit history meticulously.
Finally, we said in Garciano v. Court of Appeals that the right to recover [moral
damages] under Article 21 is based on equity, and he who comes to court to demand
equity, must come with clean hands. Article 21 should be construed as granting the
right to recover damages to injured persons who are not themselves at fault.[44] As will
be discussed below, Pantaleon is not a blameless party in all this.
Pantaleons action was the proximate cause for his injury
Pantaleon mainly anchors his claim for moral and exemplary damages on the
embarrassment and humiliation that he felt when the European tour group had to wait
for him and his wife for approximately 35 minutes, and eventually had to cancel
the Amsterdam city tour. After thoroughly reviewing the records of this case, we have
come to the conclusion that Pantaleon is the proximate cause for this embarrassment
and humiliation.
As borne by the records, Pantaleon knew even before entering Coster that the tour
group would have to leave the store by 9:30 a.m. to have enough time to take the city
tour of Amsterdam before they left the country. After 9:30 a.m., Pantaleons son, who
had boarded the bus ahead of his family, returned to the store to inform his family that
they were the only ones not on the bus and that the entire tour group was waiting for
them. Significantly, Pantaleon tried to cancel the sale at 9:40 a.m. because he did
not want to cause any inconvenience to the tour group. However, when Costers
sale manager asked him to wait a few more minutes for the credit card approval, he
agreed, despite the knowledge that he had already caused a 10-minute delay and
that the city tour could not start without him.
In Nikko Hotel Manila Garden v. Reyes,[45] we ruled that a person who knowingly and
voluntarily exposes himself to danger cannot claim damages for the resulting injury:
The doctrine of volenti non fit injuria (to which a person assents is not esteemed in
law as injury) refers to self-inflicted injury or to the consent to injury which precludes
the recovery of damages by one who has knowingly and voluntarily exposed himself
to danger, even if he is not negligent in doing so.
This doctrine, in our view, is wholly applicable to this case. Pantaleon himself testified
that the most basic rule when travelling in a tour group is that you must never be a
cause of any delay because the schedule is very strict.[46] When Pantaleon made up
his mind to push through with his purchase, he must have known that the group would
become annoyed and irritated with him. This was the natural, foreseeable
consequence of his decision to make them all wait.
We do not discount the fact that Pantaleon and his family did feel humiliated and
embarrassed when they had to wait for AMEX to approve the Coster purchase
in Amsterdam. We have to acknowledge, however, that Pantaleon was not a helpless
victim in this scenario at any time, he could have cancelled the sale so that the group
could go on with the city tour. But he did not.
More importantly, AMEX did not violate any legal duty to Pantaleon under the
circumstances under the principle of damnum absque injuria, or damages without
legal wrong, loss without injury.[47] As we held in BPI Express Card v. CA:[48]
We do not dispute the findings of the lower court that private respondent suffered
damages as a result of the cancellation of his credit card. However, there is a material
distinction between damages and injury. Injury is the illegal invasion of a legal right;
damage is the loss, hurt, or harm which results from the injury; and damages are the
recompense or compensation awarded for the damage suffered. Thus, there can be
damage without injury in those instances in which the loss or harm was not the
result of a violation of a legal duty. In such cases, the consequences must be
borne by the injured person alone, the law affords no remedy for damages
resulting from an act which does not amount to a legal injury or wrong. These
situations are often called damnum absque injuria.
In other words, in order that a plaintiff may maintain an action for the injuries of which
he complains, he must establish that such injuries resulted from a breach of duty
which the defendant owed to the plaintiff - a concurrence of injury to the plaintiff and
legal responsibility by the person causing it. The underlying basis for the award of
tort damages is the premise that an individual was injured in contemplation of
law. Thus, there must first be a breach of some duty and the imposition of liability for
that breach before damages may be awarded; and the breach of such duty should be
the proximate cause of the injury.
Pantaleon is not entitled to damages