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 Zuiga, 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 culpaaquiliana 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 extracontractual 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 apresumption 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 vinculumexists 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.
JAPAN AIRLINES,
Petitioner,

G.R. No. 170141

Present:

- versus -

YNARES-SANTIAGO, J.,
Chairperson,
MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:

JESUS SIMANGAN,
Respondent.
April 22, 2008
x--------------------------------------------------x
DECISION

REYES, R.T., J.:

WHEN an airline issues a ticket to a passenger confirmed on a particular flight on a certain date, a contract of carriage arises, and the passenger has every
right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage.[1]

The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by Japan Airlines (JAL).[2]
In this petition for review on certiorari,[3] petitioner JAL appeals the: (1) Decision[4] dated May 31, 2005 of the Court of Appeals (CA) ordering it to pay
respondent Jesus Simangan moral and exemplary damages; and

(2) Resolution[5] of the same court dated September 28, 2005 denying JALs motion for

reconsideration.

The Facts

In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto Simangan, in UCLA School of Medicine in Los Angeles,
California, U.S.A. Upon request of UCLA, respondent undertook a series of laboratory tests at the National Kidney Institute in Quezon City to verify whether his blood
and tissue type are compatible with Loretos.[6] Fortunately, said tests proved that respondents blood and tissue type were well-matched with Loretos.[7]

Respondent needed to go to the United States to complete his preliminary work-up and donation surgery. Hence, to facilitate respondents travel to the
United States, UCLA wrote a letter to the American Consulate in Manila to arrange for his visa. In due time, respondent was issued an emergency U.S. visa by the
American Embassy in Manila.[8]

Having obtained an emergency U.S. visa, respondent purchased a round trip plane ticket from petitioner JAL for US$1,485.00 and was issued the
corresponding boarding pass.[9] He was scheduled to a particular flight bound for Los Angeles, California, U.S.A. via Narita, Japan.[10]

On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino International Airport in the company of several relatives and friends.[11] He was
allowed to check-in at JALs counter.[12] His plane ticket, boarding pass, travel authority and personal articles were subjected to rigid immigration and security
routines.[13] After passing through said immigration and security procedures, respondent was allowed by JAL to enter its airplane.[14]

While inside the airplane, JALs airline crew suspected respondent of carrying a falsified travel document and imputed that he would only use the trip to the
United States as a pretext to stay and work in Japan.[15] The stewardess asked respondent to show his travel documents. Shortly after, the stewardess along with a
Japanese and a Filipino haughtily ordered him to stand up and leave the plane.[16] Respondent protested, explaining that he was issued a U.S. visa. Just to allow him to
board the plane, he pleaded with JAL to closely monitor his movements when the aircraft stops over in Narita.[17] His pleas were ignored. He was then constrained to
go out of the plane.[18] In a nutshell, respondent was bumped off the flight.

Respondent went to JALs ground office and waited there for three hours. Meanwhile, the plane took off and he was left behind.[19] Afterwards, he was
informed that his travel documents were, indeed, in order.[20] Respondent was refunded the cost of his plane ticket less the sum of US$500.00 which was deducted by
JAL.[21] Subsequently, respondents U.S. visa was cancelled.[22]

Displeased by the turn of events, respondent filed an action for damages against JAL with the Regional Trial Court (RTC) in Valenzuela City, docketed as
Civil Case No. 4195-V-93. He claimed he was not able to donate his kidney to Loreto; and that he suffered terrible embarrassment and mental anguish.[23] He prayed
that he be awarded P3 million as moral damages, P1.5 million as exemplary damages and P500,000.00 as attorneys fees.[24]

JAL denied the material allegations of the complaint. It argued, among others, that its failure to allow respondent to fly on his scheduled departure was due
to a need for his travel documents to be authenticated by the United States Embassy[25] because no one from JALs airport staff had encountered a parole visa
before.[26] It posited that the authentication required additional time; that respondent was advised to take the flight the following day, July 30, 1992. JAL alleged that
respondent agreed to be rebooked on July 30, 1992.[27]

JAL also lodged a counterclaim anchored on respondents alleged wrongful institution of the complaint. It prayed for litigation expenses, exemplary
damages and attorneys fees.[28]

On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its decision in favor of respondent (plaintiff), disposing as follows:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the amount of P1,000,000.00 as moral
damages, the amount of P500,000.00 as exemplary damages and the amount ofP250,000.00 as attorneys fees, plus the cost of suit.[29]

The RTC explained:

In summarily and insolently ordering the plaintiff to disembark while the latter was already settled in his assigned seat, the defendant
violated the contract of carriage; that when the plaintiff was ordered out of the plane under the pretext that the genuineness of his travel
documents would be verified it had caused him embarrassment and besmirched reputation; and that when the plaintiff was finally not allowed to
take the flight, he suffered more wounded feelings and social humiliation for which the plaintiff was asking to be awarded moral and exemplary
damages as well as attorneys fees.
The reason given by the defendant that what prompted them to investigate the genuineness of the travel documents of the plaintiff was
that the plaintiff was not then carrying a regular visa but just a letter does not appear satisfactory. The defendant is engaged in transporting
passengers by plane from country to country and is therefore conversant with the travel documents. The defendant should not be allowed to
pretend, to the prejudice of the plaintiff not to know that the travel documents of the plaintiff are valid documents to allow him entry in the
United States.
The foregoing act of the defendant in ordering the plaintiff to deplane while already settled in his assigned seat clearly demonstrated
that the defendant breached its contract of carriage with the plaintiff as passenger in bad faith and as such the plaintiff is entitled to moral and
exemplary damages as well as to an award of attorneys fees.[30]

Disagreeing with the RTC judgment, JAL appealed to the CA contending that it is not guilty of breach of contract of carriage, hence, not liable for
damages.

[31]

It posited that it is the one entitled to recover on its counterclaim.[32]

CA Ruling

In a Decision[33] dated May 31, 2005, the CA affirmed the decision of the RTC with modification in that it lowered the amount of moral and exemplary
damages and deleted the award of attorneys fees. The fallo of the CA decision reads:

WHEREFORE, the appealed Decision is AFFIRMED with MODIFICATION. Appellant JAPAN AIR LINES is ordered to pay
appellee JESUS SIMANGAN the reduced sums, as follows: Five Hundred Thousand Pesos (P500,000.00) as moral damages, and Two Hundred
Fifty Thousand Pesos (P250,000.00) as exemplary damages. The award of attorneys fees is hereby DELETED.[34]

The CA elucidated that since JAL issued to respondent a round trip plane ticket for a lawful consideration, there arose a perfected contract between
them.[35] It found that respondent was haughtily ejected[36] by JAL and that he was certainly embarrassed and humiliated[37] when, in the presence of other
passengers, JALs airline staff shouted at him to stand up and arrogantly asked him to produce his travel papers, without the least courtesy every human being is
entitled to;[38] and that he was compelled to deplane on the grounds that his papers were fake.[39]

The CA ratiocinated:
While the protection of passengers must take precedence over convenience, the implementation of security measures must be attended
by basic courtesies.
In fact, breach of the contract of carriage creates against the carrier a presumption of liability, by a simple proof of injury, relieving the
injured passenger of the duty to establish the fault of the carrier or of his employees; and placing on the carrier the burden to prove that it was due
to an unforeseen event or to force majeure.
That appellee possessed bogus travel documents and that he might stay illegally in Japan are allegations without substantiation. Also,
appellants attempt to rebook appellee the following day was too late and did not relieve it from liability. The damage had been done. Besides,
its belated theory of novation, i.e., that appellants original obligation to carry appellee to Narita and Los Angeles on July 29, 1992 was
extinguished by novation when appellant and appellant agreed that appellee will instead take appellants flight to Narita on the following day,
July 30, 1992, deserves little attention. It is inappropriate at bar. Questions not taken up during the trial cannot be raised for the first time on
appeal.[40] (Underscoring ours and citations were omitted)

Citing Ortigas, Jr. v. Lufthansa German Airlines,[41] the CA declared that (i)n contracts of common carriage, inattention and lack of care on the part of the
carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passengers to the award
of moral damages in accordance with Article 2220 of the Civil Code.[42]

Nevertheless, the CA modified the damages awarded by the RTC. It explained:

Fundamental in the law on damages is that one injured by a breach of a contract, or by a wrongful or negligent act or omission shall
have a fair and just compensation commensurate to the loss sustained as consequence of the defendants act. Being discretionary on the court, the
amount, however, should not be palpably and scandalously excessive.
Here, the trial courts award of P1,000,000.00 as moral damages appears to be overblown. No other proof of appellees social
standing, profession, financial capabilities was presented except that he was single and a businessman. To Us, the sum of 500,000.00 is just and
fair. For, moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. They are awarded only to enable
the injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone, by reason of the
defendants culpable action.
Moreover, the grant of P500,000.00 as exemplary damages needs to be reduced to a reasonable level. The award of exemplary
damages is designed to permit the courts to mould behavior that has socially deleterious consequences and its imposition is required by public
policy to suppress the wanton acts of the offender. Hence, the sum of P250,000.00 is adequate under the circumstances.

The award of P250,000.00 as attorneys fees lacks factual basis. Appellee was definitely compelled to litigate in protecting his rights
and in seeking relief from appellants misdeeds. Yet, the record is devoid of evidence to show the cost of the services of his counsel and/or the
actual expenses incurred in prosecuting his action.[43] (Citations were omitted)

When JALs motion for reconsideration was denied, it resorted to the petition at bar.

Issues

JAL poses the following issues

I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT WAS ENTITLED TO MORAL DAMAGES,
CONSIDERING THAT:
A. JAL WAS NOT GUILTY OF BREACH OF CONTRACT.
B. MORAL DAMAGES MAY BE AWARDED IN BREACH OF CONTRACT CASES ONLY WHEN THE BREACH
IS ATTENDED BY FRAUD OR BAD FAITH. ASSUMINGARGUENDO THAT JAL WAS GUILTY OF BREACH,
JAL DID NOT ACT FRAUDULENTLY OR IN BAD FAITH AS TO ENTITLE RESPONDENT TO MORAL
DAMAGES.
C. THE LAW DISTINGUISHES A CONTRACTUAL BREACH EFFECTED IN GOOD FAITH FROM ONE
ATTENDED BY BAD FAITH.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT WAS ENTITLED TO EXEMPLARY
DAMAGESCONSIDERING THAT:
A. EXEMPLARY DAMAGES ARE NOT RECOVERABLE IN BREACH OF CONTRACT OF CARRIAGE UNLESS
THE CARRIER IS GUILTY OF WANTON, FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT
CONDUCT.
B.
ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT ACT IN A WANTON
FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT MANNER AS TO ENTITLE RESPONDENT TO
EXEMPLARY DAMAGES.
III.
ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO AN AWARD OF DAMAGES, WHETHER OR NOT THE COURT
OF APPEALS AWARD OF P750,000 IN DAMAGES WAS EXCESSIVE AND UNPRECEDENTED.
IV.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING FOR JAL ON ITS COUNTERCLAIM.[44] (Underscoring Ours)

Basically, there are three (3) issues to resolve here: (1) whether or not JAL is guilty of contract of carriage; (2) whether or not respondent is entitled to moral
and exemplary damages; and (3) whether or not JAL is entitled to its counterclaim for damages.

Our Ruling
This Court is not a trier of facts.

Chiefly, the issues are factual. The RTC findings of facts were affirmed by the CA. The CA also gave its nod to the reasoning of the RTC except as to the
awards of damages, which were reduced, and that of attorneys fees, which was deleted.

We are not a trier of facts. We generally rely upon, and are bound by, the conclusions on this matter of the lower courts, which are better equipped and have
better opportunity to assess the evidence first-hand, including the testimony of the witnesses.[45]

We have repeatedly held that the findings of fact of the CA are final and conclusive and cannot be reviewed on appeal to the Supreme Court provided they
are based on substantial evidence.[46] We have no jurisdiction, as a rule, to reverse their findings.[47] Among the exceptions to this rule are: (a) when the conclusion is a
finding grounded entirely on speculations, surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd or impossible; (c) where there is grave
abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the findings of facts are conflicting; (f) 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.[48]

The said exceptions, which are being invoked by JAL, are not found here. There is no indication that the findings of the CA are contrary to the evidence on
record or that vital testimonies of JALs witnesses were disregarded. Neither did the CA commit misapprehension of facts nor did it fail to consider relevant
facts. Likewise, there was no grave abuse of discretion in the appreciation of facts or mistaken and absurd inferences.

We thus sustain the coherent facts as established by the courts below, there being no sufficient showing that the said courts committed reversible error in
reaching their conclusions.

JAL is guilty of breach of

contract of carriage.

That respondent purchased a round trip plane ticket from JAL and was issued the corresponding boarding pass is uncontroverted.[49] His plane ticket,
boarding pass, travel authority and personal articles were subjected to rigid immigration and security procedure.[50] After passing through said immigration and security
procedure, he was allowed by JAL to enter its airplane to fly to Los Angeles, California, U.S.A. via Narita, Japan.[51] Concisely, there was a contract of carriage between
JAL and respondent.

Nevertheless, JAL made respondent get off the plane on his scheduled departure on July 29, 1992. He was not allowed by JAL to fly. JAL thus failed to comply
with its obligation under the contract of carriage.

JAL justifies its action by arguing that there was a need to verify the authenticity of respondents travel document.[52] It alleged that no one from its airport
staff had encountered a parole visa before.[53] It further contended that respondent agreed to fly the next day so that it could first verify his travel document, hence, there
was novation.[54] It maintained that it was not guilty of breach of contract of carriage as respondent was not able to travel to the United States due to his own voluntary
desistance.[55]

We cannot agree. JAL did not allow respondent to fly. It informed respondent that there was a need to first check the authenticity of his travel documents
with the U.S. Embassy.[56] As admitted by JAL, the flight could not wait for Mr. Simangan because it was ready to depart.[57]

Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice but to be left behind. The latter was
unceremoniously bumped off despite his protestations and valid travel documents and notwithstanding his contract of carriage with JAL. Damage had already been
done when respondent was offered to fly the next day on July 30, 1992. Said offer did not cure JALs default.

Considering that respondent was forced to get out of the plane and left behind against his will, he could not have freely consented to be rebooked the next
day. In short, he did not agree to the alleged novation. Since novation implies a waiver of the right the creditor had before the novation, such waiver must be
express.[58] It cannot be supposed, without clear proof, that respondent had willingly done away with his right to fly on July 29, 1992.

Moreover, the reason behind the bumping off incident, as found by the RTC and CA, was that JAL personnel imputed that respondent would only use the
trip to the United States as a pretext to stay and work in Japan.[59]

Apart from the fact that respondents plane ticket, boarding pass, travel authority and personal articles already passed the rigid immigration and security
routines,[60] JAL, as a common carrier, ought to know the kind of valid travel documents respondent carried. As provided in Article 1755 of the New Civil Code: 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.[61] Thus, We find untenable JALs defense of verification of respondents documents in its breach of contract of carriage.

It bears repeating that the power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL.[62]

In an action for breach of contract of carriage, all that is required of plaintiff is to prove the existence of such contract and its non-performance by the carrier
through the latters failure to carry the passenger safely to his destination.[63] Respondent has complied with these twin requisites.

Respondent is entitled to moral and exemplary damages and attorneys fees plus legal interest.

With reference to moral damages, JAL alleged that they are not recoverable in actions ex contractu except only when the breach is attended by fraud or bad
faith. It is contended that it did not act fraudulently or in bad faith towards respondent, hence, it may not be held liable for moral damages.

As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items enumerated
under Article 2219 of the Civil Code.[64] As an exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as
provided in Article 1764, in relation to Article 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Article
2220.[65]

The acts committed by JAL against respondent amounts to bad faith. As found by the RTC, JAL breached its contract of carriage with respondent in bad
faith. JAL personnel summarily and insolently ordered respondent to disembark while the latter was already settled in his assigned seat. He was ordered out of the
plane under the alleged reason that the genuineness of his travel documents should be verified.

These findings of facts were upheld by the CA, to wit:

x x x he was haughtily ejected by appellant. He was certainly embarrassed and humiliated when, in the presence of other
passengers, the appellants airline staff shouted at him to stand up and arrogantly asked him to produce his travel papers, without the
least courtesy every human being is entitled to. Then, he was compelled to deplane on the grounds that his papers were fake. His
protestation of having been issued a U.S. visa coupled with his plea to appellant to closely monitor his movements when the aircraft
stops over in Narita, were ignored. Worse, he was made to wait for many hours at the office of appellant only to be told later that he
has valid travel documents.[66] (Underscoring ours)

Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits predicated on breach of a contract of carriage where
it is proved that the carrier was guilty of fraud or bad faith, as in this case. Inattention to and lack of care for the interests of its passengers who are entitled to its utmost
consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law considers as bad faith
which may furnish the ground for an award of moral damages would be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of
its terms, or any other kind of deceit.[67]

JAL is also liable for exemplary damages as its above-mentioned acts constitute wanton, oppressive and malevolent acts against respondent. Exemplary
damages, which are awarded by way of example or correction for the public good, may be recovered in contractual obligations, as in this case, if defendant acted in
wanton, fraudulent, reckless, oppressive, or malevolent manner.[68]

Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating
negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is, in fact, that of the
highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their
employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property.[69]

Neglect or malfeasance of the carriers employees could give ground for an action for damages. Passengers have a right to be treated by the carriers
employees with kindness, respect, courtesy and due consideration and are entitled to be protected against personal misconduct, injurious language, indignities and
abuses from such employees.[70]

The assessment of P500,000.00 as moral damages and P100,000.00 as exemplary damages in respondents favor is, in Our view, reasonable and realistic.
This award is reasonably sufficient to indemnify him for the humiliation and embarrassment he suffered. This also serves as an example to discourage the repetition of
similar oppressive acts.

With respect to attorney's fees, they may be awarded when defendants act or omission has compelled plaintiff to litigate with third persons or to incur expenses
to protect his interest.[71] The Court, in Construction Development Corporation of the Philippines v. Estrella,[72] citing Traders Royal BankEmployees UnionIndependent v. National Labor Relations Commission,[73]elucidated thus:
There are two commonly accepted concepts of attorneys fees, the so-called ordinary and extraordinary. In its ordinary concept, an
attorneys 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 attorneys 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, andis 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.[74]

It was therefore erroneous for the CA to delete the award of attorneys fees on the ground that the record is devoid of evidence to show the cost of the services of
respondents counsel. The amount is actually discretionary upon the Court so long as it passes the test of reasonableness. They may be recovered as actual or
compensatory damages when exemplary damages are awarded and whenever the court deems it just and equitable,[75] as in this case.

Considering the factual backdrop of this case, attorneys fees in the amount of P200,000.00 is reasonably modest.

The above liabilities of JAL in the total amount of P800,000.00 earn legal interest pursuant to the Courts ruling in Construction Development Corporation of the
Philippines v. Estrella,[76] citing Eastern Shipping Lines, Inc. v. Court of Appeals,[77] to wit:
Regarding the imposition of legal interest at the rate of 6% from the time of the filing of the complaint, we held in Eastern Shipping
Lines, Inc. v. Court of Appeals, that when an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for payment of interest in the concept of actual and compensatory damages, subject to the following
rules, to wit
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.[78] (Emphasis supplied and citations omitted)

Accordingly, in addition to the said total amount of P800,000.00, JAL is liable to pay respondent legal interest. Pursuant to the above ruling of the Court,
the legal interest is 6% and it shall be reckoned from September 21, 2000 when the RTC rendered its judgment. From the time this Decision becomes final and
executory, the interest rate shall be 12% until its satisfaction.

JAL is not entitled to its counterclaim for damages.

The counterclaim of JAL in its Answer[79] is a compulsory counterclaim for damages and attorneys fees arising from the filing of the complaint. There is no
mention of any other counter claims.

This compulsory counterclaim of JAL arising from the filing of the complaint may not be granted inasmuch as the complaint against it is obviously not
malicious or unfounded. It was filed by respondent precisely to claim his right to damages against JAL. Well-settled is the rule that the

commencement of an action does not per se make the action wrongful and subject the action to damages, for the law could not have meant to impose a penalty on the
right to litigate.[80]

We reiterate case law that if damages result from a partys exercise of a right, it is damnum absque injuria.[81] Lawful acts give rise to no injury. Walang
perhuwisyong maaring idulot ang paggamit sa sariling karapatan.

During the trial, however, JAL presented a witness who testified that JAL suffered further damages. Allegedly, respondent caused the publications of his
subject complaint against JAL in the newspaper for which JAL suffered damages.[82]

Although these additional damages allegedly suffered by JAL were not incorporated in its Answer as they arose subsequent to its filing, JALs witness was
able to testify on the same before the RTC.[83] Hence, although these issues were not raised by the pleadings, they shall be treated in all respects as if they had been
raised in the pleadings.

As provided in Section 5, Rule 10 of the Rules of Court, (w)hen issues not raised by the pleadings are tried with the express or implied consent of the
parties, they shall be treated in all respects as if they had been raised in the pleadings.

Nevertheless, JALs counterclaim cannot be granted.

JAL is a common carrier. JALs business is mainly with the traveling public. It invites people to avail themselves of the comforts and advantages it
offers.

[84]

Since JAL deals with the public, its bumping off of respondent without a valid reason naturally drew public attention and generated a public issue.

The publications involved matters about which the public has the right to be informed because they relate to a public issue. This public issue or concern is a
legitimate topic of a public comment that may be validly published.

Assuming that respondent, indeed, caused the publication of his complaint, he may not be held liable for damages for it. The constitutional guarantee of
freedom of the speech and of the press includes fair commentaries on matters of public interest. This is explained by the Court in Borjal v. Court of Appeals,[85] to wit:
To reiterate, fair commentaries on matters of public interest are privileged and constitute a valid defense in an action for libel or
slander. The doctrine of fair comment means that while in general every discreditable imputation publicly made is deemed false, because every
man is presumed innocent until his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless, when the
discreditable imputation is directed against a public person in his public capacity, it is not necessarily actionable. In order that such discreditable
imputation to a public official may be actionable, it must either be a false allegation of fact or a comment based on a false supposition. If the
comment is an expression of opinion, based on established facts, then it is immaterial that the opinion happens to be mistaken, as long as it might
reasonably be inferred from the facts.[86] (Citations omitted and underscoring ours)

Even though JAL is not a public official, the rule on privileged commentaries on matters of public interest applies to it. The privilege applies not only to
public officials but extends to a great variety of subjects, and includes matters of public concern, public men, and candidates for office.[87]

Hence, pursuant to the Borjal case, there must be an actual malice in order that a discreditable imputation to a public person in his public capacity or to a
public official may be actionable. To be considered malicious, the libelous statements must be shown to have been written or published with the knowledge that they
are false or in reckless disregard of whether they are false or not.[88]

Considering that the published articles involve matters of public interest and that its expressed opinion is not malicious but based on established facts, the
imputations against JAL are not actionable. Therefore, JAL may not claim damages for them.

WHEREFORE, the petition is DENIED. The appealed Decision of the Court of Appeals is AFFIRMED WITH MODIFICATION. As modified, petitioner
Japan Airlines is ordered to pay respondent Jesus Simangan the following: (1) P500,000.00 as moral damages;

(2) P100,000.00 as exemplary damages; and

(3) P200,000.00 as attorneys fees.

The total amount adjudged shall earn legal interest at the rate of 6% per annum from the date of judgment of the Regional Trial Court on September 21, 2000
until the finality of this Decision. From the time this Decision becomes final and executory, the unpaid amount, if any, shall earn legal interest at the rate of 12% per
annum until its satisfaction.
SO ORDERED.

G.R. No. L-44748 August 29, 1986

RADIO COMMUNICATIONS OF THE PHILS., INC. (RCPI). petitioner,
vs.
COURT OF APPEALS and LORETO DIONELA, respondents.
O. Pythogoras Oliver for respondents.

PARAS, J.:
Before Us, is a Petition for Review by certiorari of the decision of the Court of Appeals, modifying the decision of the trial court in a civil case for recovery
of damages against petitioner corporation by reducing the award to private respondent Loreto Dionela of moral damages from P40,000 to Pl5,000, and
attorney's fees from P3,000 to P2,000.
The basis of the complaint against the defendant corporation is a telegram sent through its Manila Office to the offended party, Loreto Dionela, reading
as follows:
176 AS JR 1215PM 9 PAID MANDALUYONG JUL 22-66 LORETO DIONELA CABANGAN LEGASPI CITY
WIRE ARRIVAL OF CHECK FER
LORETO DIONELA-CABANGAN-WIRE ARRIVAL OF CHECK-PER
115 PM
SA IYO WALANG PAKINABANG DUMATING KA DIYAN-WALA-KANG PADALA DITO KAHIT BULBUL MO
(p. 19, Annex "A")
Plaintiff-respondent Loreto Dionela alleges that the defamatory words on the telegram sent to him not only wounded his feelings but also caused him
undue embarrassment and affected adversely his business as well because other people have come to know of said defamatory words. Defendant
corporation as a defense, alleges that the additional words in Tagalog was a private joke between the sending and receiving operators and that they
were not addressed to or intended for plaintiff and therefore did not form part of the telegram and that the Tagalog words are not defamatory. The
telegram sent through its facilities was received in its station at Legaspi City. Nobody other than the operator manned the teletype machine which
automatically receives telegrams being transmitted. The said telegram was detached from the machine and placed inside a sealed envelope and
delivered to plaintiff, obviously as is. The additional words in Tagalog were never noticed and were included in the telegram when delivered.
The trial court in finding for the plaintiff ruled as follows:
There is no question that the additional words in Tagalog are libelous. They clearly impute a vice or defect of the plaintiff. Whether
or not they were intended for the plaintiff, the effect on the plaintiff is the same. Any person reading the additional words in Tagalog

will naturally think that they refer to the addressee, the plaintiff. There is no indication from the face of the telegram that the
additional words in Tagalog were sent as a private joke between the operators of the defendant.
The defendant is sued directly not as an employer. The business of the defendant is to transmit telegrams. It will open the door to
frauds and allow the defendant to act with impunity if it can escape liability by the simple expedient of showing that its employees
acted beyond the scope of their assigned tasks.
The liability of the defendant is predicated not only on Article 33 of the Civil Code of the Philippines but on the following articles of
said Code:
ART. 19.- Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his
due, and observe honesty and good faith.
ART. 20.-Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the
same.
There is sufficient publication of the libelous Tagalog words. The office file of the defendant containing copies of telegrams received
are open and held together only by a metal fastener. Moreover, they are open to view and inspection by third parties.
It follows that the plaintiff is entitled to damages and attorney's fees. The plaintiff is a businessman. The libelous Tagalog words
must have affected his business and social standing in the community. The Court fixes the amount of P40,000.00 as the reasonable
amount of moral damages and the amount of P3,000.00 as attorney's fee which the defendant should pay the plaintiff. (pp. 15-16,
Record on Appeal)
The respondent appellate court in its assailed decision confirming the aforegoing findings of the lower court stated:
The proximate cause, therefore, resulting in injury to appellee, was the failure of the appellant to take the necessary or
precautionary steps to avoid the occurrence of the humiliating incident now complained of. The company had not imposed any
safeguard against such eventualities and this void in its operating procedure does not speak well of its concern for their clientele's
interests. Negligence here is very patent. This negligence is imputable to appellant and not to its employees.
The claim that there was no publication of the libelous words in Tagalog is also without merit. The fact that a carbon copy of the
telegram was filed among other telegrams and left to hang for the public to see, open for inspection by a third party is sufficient
publication. It would have been otherwise perhaps had the telegram been placed and kept in a secured place where no one may
have had a chance to read it without appellee's permission.
The additional Tagalog words at the bottom of the telegram are, as correctly found by the lower court, libelous per se, and from
which malice may be presumed in the absence of any showing of good intention and justifiable motive on the part of the appellant.
The law implies damages in this instance (Quemel vs. Court of Appeals, L-22794, January 16, 1968; 22 SCRA 44). The award of
P40,000.00 as moral damages is hereby reduced to P15,000.00 and for attorney's fees the amount of P2,000.00 is awarded. (pp.
22-23, record)
After a motion for reconsideration was denied by the appellate court, petitioner came to Us with the following:
ASSIGNMENT OF ERRORS
I
The Honorable Court of Appeals erred in holding that Petitioner-employer should answer directly and primarily for the civil liability
arising from the criminal act of its employee.
II
The Honorable Court of Appeals erred in holding that there was sufficient publication of the alleged libelous telegram in question, as
contemplated by law on libel.
III
The Honorable Court of Appeals erred in holding that the liability of petitioner-company-employer is predicated on Articles 19 and 20
of the Civil Code, Articles on Human Relations.
IV
The Honorable Court of Appeals erred in awarding Atty's. fees. (p. 4, Record)
Petitioner's contentions do not merit our consideration. The action for damages was filed in the lower court directly against respondent corporation not as
an employer subsidiarily liable under the provisions of Article 1161 of the New Civil Code in relation to Art. 103 of the Revised Penal Code. The cause of

action of the private respondent is based on Arts. 19 and 20 of the New Civil Code (supra). As well as on respondent's breach of contract thru the
negligence of its own employees. 1
Petitioner is a domestic corporation engaged in the business of receiving and transmitting messages. Everytime a person transmits a message through
the facilities of the petitioner, a contract is entered into. Upon receipt of the rate or fee fixed, the petitioner undertakes to transmit the message
accurately. There is no question that in the case at bar, libelous matters were included in the message transmitted, without the consent or knowledge of
the sender. There is a clear case of breach of contract by the petitioner in adding extraneous and libelous matters in the message sent to the private
respondent. As a corporation, the petitioner can act only through its employees. Hence the acts of its employees in receiving and transmitting messages
are the acts of the petitioner. To hold that the petitioner is not liable directly for the acts of its employees in the pursuit of petitioner's business is to
deprive the general public availing of the services of the petitioner of an effective and adequate remedy. In most cases, negligence must be proved in
order that plaintiff may recover. However, since negligence may be hard to substantiate in some cases, we may apply the doctrine of RES IPSA
LOQUITUR (the thing speaks for itself), by considering the presence of facts or circumstances surrounding the injury.
WHEREFORE, premises considered, the judgment of the appellate court is hereby AFFIRMED.
SO ORDERED.
G.R. No. 98695 January 27, 1993
JUAN J. SYQUIA, CORAZON C. SYQUIA, CARLOTA C. SYQUIA, CARLOS C. SYQUIA and ANTHONY C. SYQUIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, and THE MANILA MEMORIAL PARK CEMETERY, INC.,respondents.
Pacis & Reyes Law Offices for petitioners.
Augusto S. San Pedro & Ari-Ben C. Sebastian for private respondents.

CAMPOS, JR., J.:

Herein petitioners, Juan J. Syquia and Corazon C. Syquia, Carlota C. Syquia, Carlos C. Syquia, and Anthony Syquia, were the parents and siblings,
respectively, of the deceased Vicente Juan Syquia. On March 5, 1979, they filed a complaint 1 in the then Court of First Instance against herein private
respondent, Manila Memorial Park Cemetery, Inc. for recovery of damages arising from breach of contract and/or quasi-delict. The trial court dismissed
the complaint.
The antecedent facts, as gathered by the respondent Court, are as follows:
On March 5, 1979, Juan, Corazon, Carlota and Anthony all surnamed Syquia, plaintiff-appellants herein, filed a complaint for
damages against defendant-appellee, Manila Memorial Park Cemetery, Inc.
The complaint alleged among others, that pursuant to a Deed of Sale (Contract No. 6885) dated August 27, 1969 and Interment
Order No. 7106 dated July 21, 1978 executed between plaintiff-appellant Juan J. Syquia and defendant-appellee, the former, father
of deceased Vicente Juan J. Syquia authorized and instructed defendant-appellee to inter the remains of deceased in the Manila
Memorial Park Cemetery in the morning of July 25, 1978 conformably and in accordance with defendant-appellant's (sic) interment
procedures; that on September 4, 1978, preparatory to transferring the said remains to a newly purchased family plot also at the
Manila Memorial Park Cemetery, the concrete vault encasing the coffin of the deceased was removed from its niche underground
with the assistance of certain employees of defendant-appellant (sic); that as the concrete vault was being raised to the surface,
plaintiffs-appellants discovered that the concrete vault had a hole approximately three (3) inches in diameter near the bottom of one
of the walls closing out the width of the vault on one end and that for a certain length of time (one hour, more or less), water drained
out of the hole; that because of the aforesaid discovery, plaintiffs-appellants became agitated and upset with concern that the water
which had collected inside the vault might have risen as it in fact did rise, to the level of the coffin and flooded the same as well as
the remains of the deceased with ill effects thereto; that pursuant to an authority granted by the Municipal Court of Paraaque,
Metro Manila on September 14, 1978, plaintiffs-appellants with the assistance of licensed morticians and certain personnel of
defendant-appellant (sic) caused the opening of the concrete vault on September 15, 1978; that upon opening the vault, the
following became apparent to the plaintiffs-appellants: (a) the interior walls of the concrete vault showed evidence of total flooding;
(b) the coffin was entirely damaged by water, filth and silt causing the wooden parts to warp and separate and to crack the viewing
glass panel located directly above the head and torso of the deceased; (c) the entire lining of the coffin, the clothing of the
deceased, and the exposed parts of the deceased's remains were damaged and soiled by the action of the water and silt and were
also coated with filth.
Due to the alleged unlawful and malicious breach by the defendant-appellee of its obligation to deliver a defect-free concrete vault
designed to protect the remains of the deceased and the coffin against the elements which resulted in the desecration of deceased's
grave and in the alternative, because of defendant-appellee's gross negligence conformably to Article 2176 of the New Civil Code in
failing to seal the concrete vault, the complaint prayed that judgment be rendered ordering defendant-appellee to pay plaintiffsappellants P30,000.00 for actual damages, P500,000.00 for moral damages, exemplary damages in the amount determined by the
court, 20% of defendant-appellee's total liability as attorney's fees, and expenses of litigation and costs of suit. 2
In dismissing the complaint, the trial court held that the contract between the parties did not guarantee that the cement vault would be waterproof; that
there could be no quasi-delict because the defendant was not guilty of any fault or negligence, and because there was a pre-existing contractual relation

between the Syquias and defendant Manila Memorial Park Cemetery, Inc.. The trial court also noted that the father himself, Juan Syquia, chose the
gravesite despite knowing that said area had to be constantly sprinkled with water to keep the grass green and that water would eventually seep through
the vault. The trial court also accepted the explanation given by defendant for boring a hole at the bottom side of the vault: "The hole had to be bored
through the concrete vault because if it has no hole the vault will (sic) float and the grave would be filled with water and the digging would caved (sic) in
the earth, the earth would caved (sic) in the (sic) fill up the grave." 3
From this judgment, the Syquias appealed. They alleged that the trial court erred in holding that the contract allowed the flooding of the vault; that there
was no desecration; that the boring of the hole was justifiable; and in not awarding damages.
The Court of Appeals in the Decision 4 dated December 7, 1990 however, affirmed the judgment of dismissal. Petitioner's motion for reconsideration was
denied in a Resolution dated April 25, 1991. 5
Unsatisfied with the respondent Court's decision, the Syquias filed the instant petition. They allege herein that the Court of Appeals committed the
following errors when it:
1. held that the contract and the Rules and Resolutions of private respondent allowed the flooding of the vault and the entrance
thereto of filth and silt;
2. held that the act of boring a hole was justifiable and corollarily, when it held that no act of desecration was committed;
3. overlooked and refused to consider relevant, undisputed facts, such as those which have been stipulated upon by the parties,
testified to by private respondent's witnesses, and admitted in the answer, which could have justified a different conclusion;
4. held that there was no tort because of a pre-existing contract and the absence of fault/negligence; and
5. did not award the P25,000.00 actual damages which was agreed upon by the parties, moral and exemplary damages, and
attorney's fees.
At the bottom of the entire proceedings is the act of boring a hole by private respondent on the vault of the deceased kin of the bereaved petitioners. The
latter allege that such act was either a breach of private respondent's contractual obligation to provide a sealed vault, or, in the alternative, a negligent
act which constituted a quasi-delict. Nonetheless, petitioners claim that whatever kind of negligence private respondent has committed, the latter is liable
for desecrating the grave of petitioners' dead.
In the instant case, We are called upon to determine whether the Manila Memorial Park Cemetery, Inc., breached its contract with petitioners; or,
alternatively, whether private respondent was guilty of a tort.
We understand the feelings of petitioners and empathize with them. Unfortunately, however, We are more inclined to answer the foregoing questions in
the negative. There is not enough ground, both in fact and in law, to justify a reversal of the decision of the respondent Court and to uphold the pleas of
the petitioners.
With respect to herein petitioners' averment that private respondent has committed culpa aquiliana, the Court of Appeals found no negligent act on the
part of private respondent to justify an award of damages against it. Although a pre-existing contractual relation between the parties does not preclude
the existence of a culpa aquiliana, We find no reason to disregard the respondent's Court finding that there was no negligence.
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict . . . .
(Emphasis supplied).
In this case, it has been established that the Syquias and the Manila Memorial Park Cemetery, Inc., entered into a contract entitled "Deed of
Sale and Certificate of Perpetual Care" 6 on August 27, 1969. That agreement governed the relations of the parties and defined their
respective rights and obligations. Hence, had there been actual negligence on the part of the Manila Memorial Park Cemetery, Inc., it would be
held liable not for a quasi-delict or culpa aquiliana, but for culpa contractual as provided by Article 1170 of the Civil Code, to wit:
Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene
the tenor thereof, are liable for damages.
The Manila Memorial Park Cemetery, Inc. bound itself to provide the concrete box to be send in the interment. Rule 17 of the Rules and Regulations of
private respondent provides that:
Rule 17. Every earth interment shall be made enclosed in a concrete box, or in an outer wall of stone, brick or concrete, the actual
installment of which shall be made by the employees of the Association. 7
Pursuant to this above-mentioned Rule, a concrete vault was provided on July 27, 1978, the day before the interment, and was, on the same day,
installed by private respondent's employees in the grave which was dug earlier. After the burial, the vault was covered by a cement lid.
Petitioners however claim that private respondent breached its contract with them as the latter held out in the brochure it distributed that the . . . lot may
hold single or double internment (sic) underground in sealed concrete vault." 8 Petitioners claim that the vault provided by private respondent was not
sealed, that is, not waterproof. Consequently, water seeped through the cement enclosure and damaged everything inside it.

We do not agree. There was no stipulation in the Deed of Sale and Certificate of Perpetual Care and in the Rules and Regulations of the Manila
Memorial Park Cemetery, Inc. that the vault would be waterproof. Private respondent's witness, Mr. Dexter Heuschkel, explained that the term "sealed"
meant "closed." 9 On the other hand, the word "seal" is defined as . . . any of various closures or fastenings . . . that cannot be opened without rupture
and that serve as a check against tampering or unauthorized opening." 10 The meaning that has been given by private respondent to the word conforms
with the cited dictionary definition. Moreover, it is also quite clear that "sealed" cannot be equated with "waterproof". Well settled is the rule that when the
terms of the contract are clear and leave no doubt as to the intention of the contracting parties, then the literal meaning of the stipulation shall
control. 11 Contracts should be interpreted according to their literal meaning and should not be interpreted beyond their obvious intendment. 12 As ruled
by the respondent Court:
When plaintiff-appellant Juan J. Syquia affixed his signature to the Deed of Sale (Exhibit "A") and the attached Rules and
Regulations (Exhibit "1"), it can be assumed that he has accepted defendant-appellee's undertaking to merely provide a concrete
vault. He can not now claim that said concrete vault must in addition, also be waterproofed (sic). It is basic that the parties are
bound by the terms of their contract, which is the law between them (Rizal Commercial Banking Corporation vs. Court of Appeals, et
al. 178 SCRA 739). Where there is nothing in the contract which is contrary to law, morals, good customs, public order, or public
policy, the validity of the contract must be sustained (Phil. American Insurance Co. vs. Judge Pineda, 175 SCRA 416). Consonant
with this ruling, a contracting party cannot incur a liability more than what is expressly specified in his undertaking. It cannot be
extended by implication, beyond the terms of the contract (Rizal Commercial Banking Corporation vs. Court of Appeals, supra). And
as a rule of evidence, where the terms of an agreement are reduced to writing, the document itself, being constituted by the parties
as the expositor of their intentions, is the only instrument of evidence in respect of that agreement which the law will recognize, so
long as its (sic) exists for the purpose of evidence (Starkie, Ev., pp. 648, 655, Kasheenath vs. Chundy, 5 W.R. 68 cited in Francisco,
Revised Rules of Court in the Phil. p. 153, 1973 Ed.). And if the terms of the contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall control (Santos vs. CA, et al., G. R. No. 83664, Nov.
13, 1989; Prudential Bank & Trust Co. vs. Community Builders Co., Inc., 165 SCRA 285; Balatero vs. IAC, 154 SCRA 530). 13
We hold, therefore, that private respondent did not breach the tenor of its obligation to the Syquias. While this may be so, can private respondent be
liable for culpa aquiliana for boring the hole on the vault? It cannot be denied that the hole made possible the entry of more water and soil than was
natural had there been no hole.
The law defines negligence as the "omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of
the persons, of the time and of the place." 14 In the absence of stipulation or legal provision providing the contrary, the diligence to be observed in the
performance of the obligation is that which is expected of a good father of a family.
The circumstances surrounding the commission of the assailed act boring of the hole negate the allegation of negligence. The reason for the act
was explained by Henry Flores, Interment Foreman, who said that:
Q It has been established in this particular case that a certain Vicente Juan Syquia was interred on July 25,
1978 at the Paraaque Cemetery of the Manila Memorial Park Cemetery, Inc., will you please tell the Hon.
Court what or whether you have participation in connection with said internment (sic)?
A A day before Juan (sic) Syquia was buried our personnel dug a grave. After digging the next morning a vault
was taken and placed in the grave and when the vault was placed on the grave a hole was placed on the vault
so that water could come into the vault because it was raining heavily then because the vault has no hole the
vault will float and the grave would be filled with water and the digging would caved (sic) in and the earth, the
earth would (sic) caved in and fill up the grave. 15 (Emphasis ours)
Except for the foreman's opinion that the concrete vault may float should there be a heavy rainfall, from the above-mentioned explanation, private
respondent has exercised the diligence of a good father of a family in preventing the accumulation of water inside the vault which would have resulted in
the caving in of earth around the grave filling the same with earth.
Thus, finding no evidence of negligence on the part of private respondent, We find no reason to award damages in favor of petitioners.
In the light of the foregoing facts, and construed in the language of the applicable laws and jurisprudence, We are constrained to AFFIRM in toto the
decision of the respondent Court of Appeals dated December 7, 1990. No costs.
SO ORDERED.
G.R. No. 108164 February 23, 1995
FAR EAST BANK AND TRUST COMPANY, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, LUIS A. LUNA and CLARITA S. LUNA, respondents.

VITUG, J.:
Some time in October 1986, private respondent Luis A. Luna applied for, and was accorded, a FAREASTCARD issued by petitioner Far East Bank and
Trust Company ("FEBTC") at its Pasig Branch. Upon his request, the bank also issued a supplemental card to private respondent Clarita S. Luna.

In August 1988, Clarita lost her credit card. FEBTC was forthwith informed. In order to replace the lost card, Clarita submitted an affidavit of loss. In
cases of this nature, the bank's internal security procedures and policy would appear to be to meanwhile so record the lost card, along with the principal
card, as a "Hot Card" or "Cancelled Card" in its master file.
On 06 October 1988, Luis tendered a despedida lunch for a close friend, a Filipino-American, and another guest at the Bahia Rooftop Restaurant of the
Hotel Intercontinental Manila. To pay for the lunch, Luis presented his FAREASTCARD to the attending waiter who promptly had it verified through a
telephone call to the bank's Credit Card Department. Since the card was not honored, Luis was forced to pay in cash the bill amounting to P588.13.
Naturally, Luis felt embarrassed by this incident.
In a letter, dated 11 October 1988, private respondent Luis Luna, through counsel, demanded from FEBTC the payment of damages. Adrian V. Festejo,
a vice-president of the bank, expressed the bank's apologies to Luis. In his letter, dated 03 November 1988, Festejo, in part, said:
In cases when a card is reported to our office as lost, FAREASTCARD undertakes the necessary action to avert its unauthorized use (such as
tagging the card as hotlisted), as it is always our intention to protect our cardholders.
An investigation of your case however, revealed that FAREASTCARD failed to inform you about its security policy. Furthermore, an
overzealous employee of the Bank's Credit Card Department did not consider the possibility that it may have been you who was presenting
the card at that time (for which reason, the unfortunate incident occurred). 1
Festejo also sent a letter to the Manager of the Bahia Rooftop Restaurant to assure the latter that private respondents were "very valued clients" of
FEBTC. William Anthony King, Food and Beverage Manager of the Intercontinental Hotel, wrote back to say that the credibility of private respondent had
never been "in question." A copy of this reply was sent to Luis by Festejo.
Still evidently feeling aggrieved, private respondents, on 05 December 1988, filed a complaint for damages with the Regional Trial Court ("RTC") of
Pasig against FEBTC.
On 30 March 1990, the RTC of Pasig, given the foregoing factual settings, rendered a decision ordering FEBTC to pay private respondents (a)
P300,000.00 moral damages; (b) P50,000.00 exemplary damages; and (c) P20,000.00 attorney's fees.
On appeal to the Court of Appeals, the appellate court affirmed the decision of the trial court.
Its motion for reconsideration having been denied by the appellate court, FEBTC has come to this Court with this petition for review.
There is merit in this appeal.
In culpa contractual, moral damages may be recovered where the defendant is shown to have acted in bad faith or with malice in the breach of the
contract. 2 The Civil Code provides:
Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances,
such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. (Emphasis
supplied)
Bad faith, in this context, includes gross, but not simple, negligence. 3 Exceptionally, in a contract of carriage, moral damages are also allowed in case of
death of a passenger attributable to the fault (which is presumed 4) of the common carrier.5
Concededly, the bank was remiss in indeed neglecting to personally inform Luis of his own card's cancellation. Nothing in the findings of the trial court
and the appellate court, however, can sufficiently indicate any deliberate intent on the part of FEBTC to cause harm to private respondents. Neither
could FEBTC's negligence in failing to give personal notice to Luis be considered so gross as to amount to malice or bad faith.
Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; it is different from the
negative idea of negligence in that malice or bad faith contemplates a state of mind affirmatively operating with furtive design or ill will. 6
We are not unaware of the previous rulings of this Court, such as in American Express International, Inc., vs.Intermediate Appellate Court (167 SCRA
209) and Bank of Philippine Islands vs. Intermediate Appellate Court (206 SCRA 408), sanctioning the application of Article 21, in relation to Article 2217
and Article 2219 7 of the Civil Code to a contractual breach similar to the case at bench. Article 21 states:
Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
Article 21 of the Code, it should be observed, contemplates a conscious act to cause harm. Thus, even if we are to assume that the provision could
properly relate to a breach of contract, its application can be warranted only when the defendant's disregard of his contractual obligation is so deliberate
as to approximate a degree of misconduct certainly no less worse than fraud or bad faith. Most importantly, Article 21 is a mere declaration of a general
principle in human relations that clearly must, in any case, give way to the specific provision of Article 2220 of the Civil Code authorizing the grant of
moral damages in culpa contractual solely when the breach is due to fraud or bad faith.
Mr. Justice Jose B.L. Reyes, in his ponencia in Fores vs. Miranda 8 explained with great clarity the predominance that we should give to Article 2220 in
contractual relations; we quote:

Anent the moral damages ordered to be paid to the respondent, the same must be discarded. We have repeatedly ruled (Cachero vs. Manila
Yellow Taxicab Co. Inc., 101 Phil. 523; 54 Off. Gaz., [26], 6599; Necesito, et al. vs. Paras, 104 Phil., 75; 56 Off. Gaz., [23] 4023), that moral
damages are not recoverable in damage actions predicated on a breach of the contract of transportation, in view of Articles 2219 and 2220 of
the new Civil Code, which provide as follows:
Art. 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
xxx xxx xxx
Art. 2220. Wilful injury to property may be a legal ground for awarding moral damages if the court should find that, under
the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith.
By contrasting the provisions of these two articles it immediately becomes apparent that:
(a) In case of breach of contract (including one of transportation) proof of bad faith or fraud (dolus), i.e., wanton or deliberately injurious
conduct, is essential to justify an award of moral damages; and
(b) That a breach of contract can not be considered included in the descriptive term "analogous cases" used in Art. 2219; not only because
Art. 2220 specifically provides for the damages that are caused contractual breach, but because the definition of quasi-delict in Art. 2176 of the
Code expressly excludes the cases where there is a "preexisitng contractual relations between the parties."
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.
The exception to the basic rule of damages now under consideration is a mishap resulting in the death of a passenger, in which case Article
1764 makes the common carrier expressly subject to the rule of Art. 2206, that entitles the spouse, descendants and ascendants of the
deceased passenger to "demand moral damages for mental anguish by reason of the death of the deceased" (Necesito vs. Paras, 104 Phil.
84, Resolution on motion to reconsider, September 11, 1958). But the exceptional rule of Art. 1764 makes it all the more evident that where
the injured passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. We
think it is clear that the mere carelessness of the carrier's driver does not per se constitute or justify an inference of malice or bad faith on the
part of the carrier; and in the case at bar there is no other evidence of such malice to support the award of moral damages by the Court of
Appeals. To award moral damages for breach of contract, therefore, without proof of bad faith or malice on the part of the defendant, as
required by Art. 2220, would be to violate the clear provisions of the law, and constitute unwarranted judicial legislation.
xxx xxx xxx
The distinction between fraud, bad faith or malice in the sense of deliberate or wanton wrong doing and negligence (as mere carelessness) is
too fundamental in our law to be ignored (Arts. 1170-1172); their consequences being clearly differentiated by the Code.
Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be
those that are the natural and probable consequences of the breach of the obligation, and which the parties have
foreseen or could have reasonably foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation.
It is to be presumed, in the absence of statutory provision to the contrary, that this difference was in the mind of the lawmakers when in Art.
2220 they limited recovery of moral damages to breaches of contract in bad faith. It is true that negligence may be occasionally so gross as to
amount to malice; but the fact must be shown in evidence, and a carrier's bad faith is not to be lightly inferred from a mere finding that the
contract was breached through negligence of the carrier's employees.
The Court has not in the process overlooked another rule that a quasi-delict can be the cause for breaching a contract that might thereby permit the
application of applicable principles on tort 9 even where there is a pre-existing contract between the plaintiff and the defendant (Phil. Airlines vs. Court of
Appeals, 106 SCRA 143; Singson vs. Bank of Phil. Islands, 23 SCRA 1117; and Air France vs. Carrascoso, 18 SCRA 155). This doctrine, unfortunately,
cannot improve private respondents' case for it can aptly govern only where the act or omission complained of would constitute an actionable tort
independently of the contract. The test (whether a quasi-delict can be deemed to underlie the breach of a contract) can be stated thusly: Where, without
a pre-existing contract between two parties, an act or omission can nonetheless amount to an actionable tort by itself, the fact that the parties are
contractually bound is no bar to the application of quasi-delict provisions to the case. Here, private respondents' damage claim is predicated solely on
their contractual relationship; without such agreement, the act or omission complained of cannot by itself be held to stand as a separate cause of action
or as an independent actionable tort.
The Court finds, therefore, the award of moral damages made by the court a quo, affirmed by the appellate court, to be inordinate and substantially
devoid of legal basis.

Exemplary or corrective damages, in turn, are intended to serve as an example or as correction for the public good in addition to moral, temperate,
liquidated or compensatory damages (Art. 2229, Civil Code; see Prudenciado vs. Alliance Transport System, 148 SCRA 440; Lopez vs. Pan American
World Airways, 16 SCRA 431). In criminal offenses, exemplary damages are imposed when the crime is committed with one or more aggravating
circumstances (Art. 2230, Civil Code). In quasi-delicts, such damages are granted if the defendant is shown to have been so guilty of gross negligence
as to approximate malice (See Art. 2231, Civil Code; CLLC E.G. Gochangco Workers Union vs. NLRC, 161 SCRA 655; Globe Mackay Cable and Radio
Corp. vs. CA, 176 SCRA 778). Incontracts and quasi-contracts, the court may award exemplary damages if the defendant is found to have acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner (Art. 2232, Civil Code; PNB vs. Gen. Acceptance and Finance Corp., 161 SCRA 449).
Given the above premises and the factual circumstances here obtaining, it would also be just as arduous to sustain the exemplary damages granted by
the courts below (see De Leon vs. Court of Appeals, 165 SCRA 166).
Nevertheless, the bank's failure, even perhaps inadvertent, to honor its credit card issued to private respondent Luis should entitle him to recover a
measure of damages sanctioned under Article 2221 of the Civil Code providing thusly:
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.
Reasonable attorney's fees may be recovered where the court deems such recovery to be just and equitable (Art. 2208, Civil Code). We see no issue of
sound discretion on the part of the appellate court in allowing the award thereof by the trial court.
WHEREFORE, the petition for review is given due course. The appealed decision is MODIFIED by deleting the award of moral and exemplary damages
to private respondents; in its stead, petitioner is ordered to pay private respondent Luis A. Luna an amount of P5,000.00 by way of nominal damages. In
all other respects, the appealed decision is AFFIRMED. No costs.
SO ORDERED.

[G.R. No. 156109. November 18, 2004]

KHRISTINE REA M. REGINO, Assisted and Represented by ARMANDO REGINO, petitioner, vs. PANGASINAN COLLEGES OF SCIENCE AND
TECHNOLOGY, RACHELLE A. GAMUROT and ELISSA BALADAD, respondents.
DECISION
PANGANIBAN, J.:
Upon enrolment, students and their school enter upon a reciprocal contract. The students agree to abide by the standards of academic
performance and codes of conduct, issued usually in the form of manuals that are distributed to the enrollees at the start of the school term. Further, the
school informs them of the itemized fees they are expected to pay. Consequently, it cannot, after the enrolment of a student, vary the terms of the
contract. It cannot require fees other than those it specified upon enrolment.

The Case

Before the Court is a Petition for Review under Rule 45,[1] seeking to nullify the July 12, 2002[2] and the November 22, 2002[3] Orders of the
Regional Trial Court (RTC) of Urdaneta City, Pangasinan (Branch 48) in Civil Case No. U-7541. The decretal portion of the first assailed Order reads:
WHEREFORE, the Court GRANTS the instant motion to dismiss for lack of cause of action.[4]
The second challenged Order denied petitioners Motion for Reconsideration.

The Facts

Petitioner Khristine Rea M. Regino was a first year computer science student at Respondent Pangasinan Colleges of Science and Technology
(PCST). Reared in a poor family, Regino went to college mainly through the financial support of her relatives. During the second semester of school year
2001-2002, she enrolled in logic and statistics subjects under Respondents Rachelle A. Gamurot and Elissa Baladad, respectively, as teachers.
In February 2002, PCST held a fund raising campaign dubbed the Rave Party and Dance Revolution, the proceeds of which were to go to the
construction of the schools tennis and volleyball courts. Each student was required to pay for two tickets at the price of P100 each. The project was
allegedly implemented by recompensing students who purchased tickets with additional points in their test scores; those who refused to pay were denied
the opportunity to take the final examinations.
Financially strapped and prohibited by her religion from attending dance parties and celebrations, Regino refused to pay for the tickets. On March
14 and March 15, 2002, the scheduled dates of the final examinations in logic and statistics, her teachers -- Respondents Rachelle A. Gamurot and

Elissa Baladad -- allegedly disallowed her from taking the tests. According to petitioner, Gamurot made her sit out her logic class while her classmates
were taking their examinations. The next day, Baladad, after announcing to the entire class that she was not permitting petitioner and another student to
take their statistics examinations for failing to pay for their tickets, allegedly ejected them from the classroom. Petitioners pleas ostensibly went
unheeded by Gamurot and Baladad, who unrelentingly defended their positions as compliance with PCSTs policy.
On April 25, 2002, petitioner filed, as a pauper litigant, a Complaint[5] for damages against PCST, Gamurot and Baladad. In her Complaint, she
prayed forP500,000 as nominal damages; P500,000 as moral damages; at least P1,000,000 as exemplary damages; P250,000 as actual damages; plus
the costs of litigation and attorneys fees.
On May 30, 2002, respondents filed a Motion to Dismiss[6] on the ground of petitioners failure to exhaust administrative remedies. According to
respondents, the question raised involved the determination of the wisdom of an administrative policy of the PCST; hence, the case should have been
initiated before the proper administrative body, the Commission of Higher Education (CHED).
In her Comment to respondents Motion, petitioner argued that prior exhaustion of administrative remedies was unnecessary, because her action
was not administrative in nature, but one purely for damages arising from respondents breach of the laws on human relations. As such, jurisdiction lay
with the courts.
On July 12, 2002, the RTC dismissed the Complaint for lack of cause of action.

Ruling of the Regional Trial Court

In granting respondents Motion to Dismiss, the trial court noted that the instant controversy involved a higher institution of learning, two of its
faculty members and one of its students. It added that Section 54 of the Education Act of 1982 vested in the Commission on Higher Education (CHED)
the supervision and regulation of tertiary schools. Thus, it ruled that the CHED, not the courts, had jurisdiction over the controversy.[7]
In its dispositive portion, the assailed Order dismissed the Complaint for lack of cause of action without, however, explaining this ground.
Aggrieved, petitioner filed the present Petition on pure questions of law.[8]

Issues

In her Memorandum, petitioner raises the following issues for our consideration:
Whether or not the principle of exhaustion of administrative remedies applies in a civil action exclusively for damages based on violation of the human relation
provisions of the Civil Code, filed by a student against her former school.
Whether or not there is a need for prior declaration of invalidity of a certain school administrative policy by the Commission on Higher Education (CHED) before a
former student can successfully maintain an action exclusively for damages in regular courts.
Whether or not the Commission on Higher Education (CHED) has exclusive original jurisdiction over actions for damages based upon violation of the Civil Code
provisions on human relations filed by a student against the school.[9]
All of the foregoing point to one issue -- whether the doctrine of exhaustion of administrative remedies is applicable. The Court, however, sees a
second issue which, though not expressly raised by petitioner, was impliedly contained in her Petition: whether the Complaint stated sufficient cause(s)
of action.

The Courts Ruling

The Petition is meritorious.

First Issue:
Exhaustion of Administrative Remedies

Respondents anchored their Motion to Dismiss on petitioners alleged failure to exhaust administrative remedies before resorting to the RTC.
According to them, the determination of the controversy hinge on the validity, the wisdom and the propriety of PCSTs academic policy. Thus, the
Complaint should have been lodged in the CHED, the administrative body tasked under Republic Act No. 7722 to implement the state policy to protect,
foster and promote the right of all citizens to affordable quality education at all levels and to take appropriate steps to ensure that education is accessible
to all.[10]
Petitioner counters that the doctrine finds no relevance to the present case since she is praying for damages, a remedy beyond the domain of the
CHED and well within the jurisdiction of the courts.[11]

Petitioner is correct. First, the doctrine of exhaustion of administrative remedies has no bearing on the present case. In Factoran Jr. v. CA,[12] the
Court had occasion to elucidate on the rationale behind this doctrine:
The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of law, comity, and convenience, should not
entertain suits unless the available administrative remedies have first been resorted to and the proper authorities have been given the appropriate
opportunity to act and correct their alleged errors, if any, committed in the administrative forum. x x x.[13]
Petitioner is not asking for the reversal of the policies of PCST. Neither is she demanding it to allow her to take her final examinations; she was
already enrolled in another educational institution. A reversal of the acts complained of would not adequately redress her grievances; under the
circumstances, the consequences of respondents acts could no longer be undone or rectified.
Second, exhaustion of administrative remedies is applicable when there is competence on the part of the administrative body to act upon the
matter complained of.[14] Administrative agencies are not courts; they are neither part of the judicial system, nor are they deemed judicial
tribunals.[15] Specifically, the CHED does not have the power to award damages.[16] Hence, petitioner could not have commenced her case before the
Commission.
Third, the exhaustion doctrine admits of exceptions, one of which arises when the issue is purely legal and well within the jurisdiction of the trial
court.[17]Petitioners action for damages inevitably calls for the application and the interpretation of the Civil Code, a function that falls within the
jurisdiction of the courts.[18]

Second Issue:
Cause of Action

Sufficient Causes of Action Stated

in the Allegations in the Complaint

As a rule, every complaint must sufficiently allege a cause of action; failure to do so warrants its dismissal.[19] A complaint is said to assert a
sufficient cause of action if, admitting what appears solely on its face to be correct, the plaintiff would be entitled to the relief prayed for. Assuming the
facts that are alleged to be true, the court should be able to render a valid judgment in accordance with the prayer in the complaint.[20]
A motion to dismiss based on lack of cause of action hypothetically admits the truth of the alleged facts. In their Motion to Dismiss, respondents
did not dispute any of petitioners allegations, and they admitted that x x x the crux of plaintiffs cause of action is the determination of whether or not the
assessment of P100 per ticket is excessive or oppressive.[21] They thereby premised their prayer for dismissal on the Complaints alleged failure to state
a cause of action. Thus, a reexamination of the Complaint is in order.
The Complaint contains the following factual allegations:
10.

In the second week of February 2002, defendant Rachelle A. Gamurot, in connivance with PCST, forced plaintiff and her
classmates to buy or take two tickets each, x x x;

11.

Plaintiff and many of her classmates objected to the forced distribution and selling of tickets to them but the said defendant
warned them that if they refused [to] take or pay the price of the two tickets they would not be allowed at all to take the final
examinations;

12.

As if to add insult to injury, defendant Rachelle A. Gamurot bribed students with additional fifty points or so in their test score in
her subject just to unjustly influence and compel them into taking the tickets;

13.

Despite the students refusal, they were forced to take the tickets because [of] defendant Rachelle A. Gamurots coercion and act
of intimidation, but still many of them including the plaintiff did not attend the dance party imposed upon them by defendants
PCST and Rachelle A. Gamurot;

14.

Plaintiff was not able to pay the price of her own two tickets because aside form the fact that she could not afford to pay them it is
also against her religious practice as a member of a certain religious congregation to be attending dance parties and
celebrations;

15.

On March 14, 2002, before defendant Rachelle A. Gamurot gave her class its final examination in the subject Logic she warned
that students who had not paid the tickets would not be allowed to participate in the examination, for which threat and
intimidation many students were eventually forced to make payments:

16.

Because plaintiff could not afford to pay, defendant Rachelle A. Gamurot inhumanly made plaintiff sit out the class but the
defendant did not allow her to take her final examination in Logic;

17.

On March 15, 2002 just before the giving of the final examination in the subject Statistics, defendant Elissa Baladad, in
connivance with defendants Rachelle A. Gamurot and PCST, announced in the classroom that she was not allowing plaintiff
and another student to take the examination for their failure and refusal to pay the price of the tickets, and thenceforth she
ejected plaintiff and the other student from the classroom;

18.

Plaintiff pleaded for a chance to take the examination but all defendants could say was that the prohibition to give the
examinations to non-paying students was an administrative decision;

19.

Plaintiff has already paid her tuition fees and other obligations in the school;

20.

That the above-cited incident was not a first since PCST also did another forced distribution of tickets to its students in the first
semester of school year 2001-2002; x x x [22]

The foregoing allegations show two causes of action; first, breach of contract; and second, liability for tort.

Reciprocity of the
School-Student Contract

In Alcuaz v. PSBA,[23] the Court characterized the relationship between the school and the student as a contract, in which a student, once
admitted by the school is considered enrolled for one semester.[24] Two years later, in Non v. Dames II,[25] the Court modified the termination of contract
theory in Alcuaz by holding that the contractual relationship between the school and the student is not only semestral in duration, but for the entire
period the latter are expected to complete it.[26] Except for the variance in the period during which the contractual relationship is considered to
subsist, both Alcuaz and Non were unanimous in characterizing the school-student relationship as contractual in nature.
The school-student relationship is also reciprocal. Thus, it has consequences appurtenant to and inherent in all contracts of such kind -- it gives
rise to bilateral or reciprocal rights and obligations. The school undertakes to provide students with education sufficient to enable them to pursue higher
education or a profession. On the other hand, the students agree to abide by the academic requirements of the school and to observe its rules and
regulations.[27]
The terms of the school-student contract are defined at the moment of its inception -- upon enrolment of the student. Standards of academic
performance and the code of behavior and discipline are usually set forth in manuals distributed to new students at the start of every school year.
Further, schools inform prospective enrollees the amount of fees and the terms of payment.
In practice, students are normally required to make a down payment upon enrollment, with the balance to be paid before every preliminary,
midterm and final examination. Their failure to pay their financial obligation is regarded as a valid ground for the school to deny them the opportunity to
take these examinations.
The foregoing practice does not merely ensure compliance with financial obligations; it also underlines the importance of major examinations.
Failure to take a major examination is usually fatal to the students promotion to the next grade or to graduation. Examination results form a significant
basis for their final grades. These tests are usually a primary and an indispensable requisite to their elevation to the next educational level and,
ultimately, to their completion of a course.
Education is not a measurable commodity. It is not possible to determine who is better educated than another. Nevertheless, a students grades
are an accepted approximation of what would otherwise be an intangible product of countless hours of study. The importance of grades cannot be
discounted in a setting where education is generally the gate pass to employment opportunities and better life; such grades are often the means by
which a prospective employer measures whether a job applicant has acquired the necessary tools or skills for a particular profession or trade.
Thus, students expect that upon their payment of tuition fees, satisfaction of the set academic standards, completion of academic requirements
and observance of school rules and regulations, the school would reward them by recognizing their completion of the course enrolled in.
The obligation on the part of the school has been established in Magtibay v. Garcia,[28] Licup v. University of San Carlos[29] and Ateneo de Manila
University v. Garcia,[30] in which the Court held that, barring any violation of the rules on the part of the students, an institution of higher learning has
a contractual obligation to afford its students a fair opportunity to complete the course they seek to pursue.
We recognize the need of a school to fund its facilities and to meet astronomical operating costs; this is a reality in running it. Crystal v. Cebu
International School[31] upheld the imposition by respondent school of a land purchase deposit in the amount of P50,000 per student to be used for the
purchase of a piece of land and for the construction of new buildings and other facilities x x x which the school would transfer [to] and occupy after the
expiration of its lease contract over its present site.
The amount was refundable after the student graduated or left the school. After noting that the imposition of the fee was made only after prior
consultation and approval by the parents of the students, the Court held that the school committed no actionable wrong in refusing to admit the children
of the petitioners therein for their failure to pay the land purchase deposit and the 2.5 percent monthly surcharge thereon.
In the present case, PCST imposed the assailed revenue-raising measure belatedly, in the middle of the semester. It exacted the dance party fee
as a condition for the students taking the final examinations, and ultimately for its recognition of their ability to finish a course. The fee, however, was
not part of the school-student contract entered into at the start of the school year. Hence, it could not be unilaterally imposed to the prejudice of the
enrollees.
Such contract is by no means an ordinary one. In Non, we stressed that the school-student contract is imbued with public interest, considering
the high priority given by the Constitution to education and the grant to the State of supervisory and regulatory powers over all educational
institutions.[32] Sections 5 (1) and (3) of Article XIV of the 1987 Constitution provide:
The State shall protect and promote the right of all citizens to quality education at all levels and shall take appropriate steps to make
such declaration accessible to all.
Every student has a right to select a profession or course of study, subject to fair, reasonable and equitable admission and academic
requirements.
The same state policy resonates in Section 9(2) of BP 232, otherwise known as the Education Act of 1982:
Section 9. Rights of Students in School. In addition to other rights, and subject to the limitations prescribed by law and
regulations, students and pupils in all schools shall enjoy the following rights:
xxx

xxx

xxx

(2) The right to freely choose their field of study subject to existing curricula and to continue their course
therein up to graduation, except in cases of academic deficiency, or violation of disciplinary regulations.
Liability for Tort

In her Complaint, petitioner also charged that private respondents inhumanly punish students x x x by reason only of their poverty, religious
practice or lowly station in life, which inculcated upon [petitioner] the feelings of guilt, disgrace and unworthiness;[33] as a result of such punishment, she
was allegedly unable to finish any of her subjects for the second semester of that school year and had to lag behind in her studies by a full year. The
acts of respondents supposedly caused her extreme humiliation, mental agony and demoralization of unimaginable proportions in violation of Articles
19, 21 and 26 of the Civil Code. These provisions of the law state thus:
Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good
faith.
Article 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter
for the damage.
Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though
they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief:
(1)
(2)
(3)
(4)

Prying into the privacy of anothers residence;

Meddling with or disturbing the private life or family relations of another;
Intriguing to cause another to be alienated from his friends;
Vexing or humiliating another on account of his beliefs, lowly station in life, place of birth, physical defect, or other personal
condition.

Generally, liability for tort arises only between parties not otherwise bound by a contract. An academic institution, however, may be held liable for
tort even if it has an existing contract with its students, since the act that violated the contract may also be a tort. We ruled thus in PSBA vs. CA,[34] from
which we quote:
x x x A perusal of Article 2176 [of the Civil Code] shows that obligations arising from quasi-delicts or tort, also known as extra-contractual obligations,
arise only between parties not otherwise bound by contract, whether express or implied. However, this impression has not prevented this Court from
determining the existence of a tort even when there obtains a contract. In Air France v. Carrascoso(124 Phil. 722), the private respondent was awarded
damages for his unwarranted expulsion from a first-class seat aboard the petitioner airline. It is noted, however, that the Court referred to the petitionerairlines liability as one arising from tort, not one arising form a contract of carriage. In effect, Air France is authority for the view that liability from tort
may exist even if there is a contract, for the act that breaks the contract may be also a tort. x x x This view was not all that revolutionary, for even as early as
1918, this Court was already of a similar mind. In Cangco v. Manila Railroad (38 Phil. 780), Mr. Justice Fisher elucidated thus: x x x. When such a
contractual relation exists the obligor may break the contract under such conditions that the same act which constitutes a breach of the contract would have
constituted the source of an extra-contractual obligation had no contract existed between the parties.
Immediately what comes to mind is the chapter of the Civil Code on Human Relations, particularly Article 21 x x x.[35]
Academic Freedom

In their Memorandum, respondents harp on their right to academic freedom. We are not impressed. According to present jurisprudence,
academic freedom encompasses the independence of an academic institution to determine for itself (1) who may teach, (2) what may be taught, (3) how
it shall teach, and (4) who may be admitted to study.[36] In Garcia v. the Faculty Admission Committee, Loyola School of Theology,[37] the Court upheld
the respondent therein when it denied a female students admission to theological studies in a seminary for prospective priests. The Court defined the
freedom of an academic institution thus: to decide for itself aims and objectives and how best to attain them x x x free from outside coercion or
interference save possibly when overriding public welfare calls for some restraint.[38]
In Tangonan v. Pao,[39] the Court upheld, in the name of academic freedom, the right of the school to refuse readmission of a nursing student
who had been enrolled on probation, and who had failed her nursing subjects. These instances notwithstanding, the Court has emphasized that once a
school has, in the name of academic freedom, set its standards, these should be meticulously observed and should not be used to discriminate against
certain students.[40] After accepting them upon enrollment, the school cannot renege on its contractual obligation on grounds other than those made
known to, and accepted by, students at the start of the school year.
In sum, the Court holds that the Complaint alleges sufficient causes of action against respondents, and that it should not have been summarily
dismissed. Needless to say, the Court is not holding respondents liable for the acts complained of. That will have to be ruled upon in due course by the
court a quo.
WHEREFORE, the Petition is hereby GRANTED, and the assailed Orders REVERSED. The trial court is DIRECTED to reinstate the Complaint
and, with all deliberate speed, to continue the proceedings in Civil Case No. U-7541. No costs.
SO ORDERED.
G.R. No. 74041

July 29, 1987

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
ROGELIO LIGON y TRIAS and FERNANDO GABAT y ALMERA, accused,
FERNANDO GABAT y ALMERA, accused-appellant.
YAP, J.:

This is an appeal from the judgment of the Regional Trial Court of Manila, Branch XX, rendered on February 17, 1986, convicting the accused-appellant,
Fernando Gabat, of the crime of Robbery with Homicide and sentencing him to reclusion perpetua. The victim was Jose Rosales y Ortiz, a ,Seventeenyear old working student who was earning his keep as a cigarette vendor. He was allegedly robbed of Es cigarette box containing cigarettes worth
P300.00 more or less.1
Only Fernando Gabat was arrested and brought to trial and convicted. The other accused, Rogelio Ligon, was never apprehended and is still at large.
The fatal incident happened on a Sunday, October 23, 1983 at about 6:10 p.m. The accused, Fernando Gabat, was riding in a 1978 Volkswagen Kombi
owned by his father, Antonio Gabat, and driven by the other accused, Rogelio Ligon. The Kombi was coming from Espana Street going towards the
direction of Quiapo. Fernando Gabat was seated beside the driver, in the front seat by the window on the right side of the Kombi. At the intersection of
Quezon Boulevard and Lerma Street before turning left towards the underpass at C.M. Recto Avenue, the Kombi had to stop as the traffic light was red.
While waiting for the traffic light to change, Fernando Gabat beckoned a cigarette vendor, Jose Rosales y Ortiz (Rosales for short) to buy some
cigarettes from him. Rosales approached the Kombi and handed Gabat two sticks of cigarettes. While this transaction was occurring, the traffic light
changed to green, and the Kombi driven by Rogelio Ligon suddenly moved forward. As to what precisely happened between Gabat and Rosales at the
crucial moment, and immediately thereafter, is the subject of conflicting versions by the prosecution and the defense. It is not controverted, however, that
as the Kombi continued to speed towards Quiapo, Rosales clung to the window of the Kombi but apparently lost his grip and fell down on the pavement.
Rosales was rushed by some bystanders to the Philippine General Hospital, where he was treated for multiple physical injuries and was confined thereat
until his death on October 30, 1983.
Following close behind the Kombi at the time of the incident was a taxicab driven by Prudencio Castillo. He was behind the Kombi, at a distance of about
three meters, travelling on the same lane in a slightly oblique position ("a little bit to the right").2 As the Kombi did not stop after the victim fell down on
the pavement near the foot of the underpass, Castillo pursued it as it sped towards Roxas Boulevard, beeping his horn to make the driver stop. When
they reached the Luneta near the Rizal monument, Castillo saw an owner-type jeep with two persons in it. He sought their assistance in chasing the
Kombi, telling them "nakaaksidente ng tao."3 The two men in the jeep joined the chase and at the intersection of Vito Cruz and Roxas Boulevard, Castillo
was able to overtake the Kombi when the traffic light turned red. He immediately blocked the Kombi while the jeep pulled up right behind it. The two men
on board the jeep turned out to be police officers, Patrolmen Leonardo Pugao and Peter Ignacio. They drew their guns and told the driver, Rogelio Ligon,
and his companion, Fernando Gabat, to alight from the Kombi. It was found out that there was a third person inside the Kombi, a certain Rodolfo
Primicias who was sleeping at the rear seat.4 The three were all brought by the police officers to the Western Police District and turned over to Pfc.
Fernan Payuan. The taxicab driver, Prudencio Castillo, also went along with them. The written statements of Castillo and Rodolfo Primicias were taken
by the traffic investigator, Pfc. Fernan Payuan.5 Payuan also prepared a Traffic Accident Report, dated October 23, 1983.6 Fernando Gabat and Rodolfo
Primicias were released early morning the following day, but Rogelio Ligon was detained and turned over to the City Fiscal's Office for further
investigation.
Investigating Fiscal Alfredo Cantos, filed an information in court against Rogelio Ligon dated December 6, 1983 charging him with Homicide thru
Reckless Imprudence.7 Six months later, however, or on June 28, 1984, Assistant Fiscal Cantos filed another information against Rogelio Ligon and
Fernando Gabat for Robbery with Homicide.8 He filed the latter information on the basis of a Supplemental Affidavit of Prudencio Castillo9 and a joint
affidavit of Armando Espino and Romeo Castil, cigarette vendors, who allegedly witnessed the incident on October 23, 1983.10 These affidavits were
already prepared and merely sworn to before Fiscal Cantos on January 17, 1984.
On October 31, 1983, an autopsy was conducted by the medico-legal officer of the National Bureau of Investigation, Dr. Orlando V. Salvador, who stated
in his autopsy report that the cause of death of Rosales was "pneumonia hypostatic, bilateral, secondary to traumatic injuries of the head."11
The prosecution tried to establish, through the sole testimony of the taxicab driver, Prudencio Castillo, that Gabat grabbed the box of cigarettes from
Rosales and pried loose the latter's hand from the window of the Kombi, resulting in the latter falling down and hitting the pavement. In its decision, the
trial court summarized the testimony of Castillo as follows: At about 6:00 o'clock in the evening of October 23, 1983, Castillo was then driving his taxicab
along Lerma Street near Far Eastern University, and at the intersection of Lerma and Quezon Boulevard, the traffic light changed from green to red. The
vehicular traffic stopped and Prudencio Castillo's taxi was right behind a Volkswagen Kombi. While waiting for the traffic light to change to green, Castillo
Idly watched the Volkswagen Kombi and saw Gabat, the passenger sitting beside the driver, signal to a cigarette vendor. The cigarette vendor, Rosales,
approached the right side of the Kombi. While Rosales was handing the cigarettes to Gabat, the traffic light suddenly changed to green. When the Kombi
moved forward, Gabat suddenly grabbed the cigarette box held by Rosales. Taken aback, Jose Rosales ran beside the Kombi and was able to hold on
to the windowsill of the right front door with his right hand. While Rosales was clinging to the windowsill, with both feet off the ground, the Kombi
continued to speed towards the C.M. Recto underpass. Castillo, who was closely following the Kombi, then saw Gabat forcibly remove the hand of
Rosales from the windowsill and the latter fell face down on Quezon Boulevard near the Recto underpass.12
The version of the defense, on the other hand, was summarized by the court as follows: On the date and time in question, Fernando Gabat, 31 years
old, an underwriter, was on board the Volkswagen Kombi driven by Rogelio Ligon. The Kombi had to stop at the intersection of Lerma Street and
Quezon Boulevard when the traffic light turned red. Fernando Gabat, who wanted to buy cigarettes, called a cigarette vendor who approached the right
side of the Kombi. Gabat bought two sticks of cigarettes and handed to the cigarette vendor, Rosales, a P5.00 bill. In order to change the P5.00 big,
Rosales placed his cigarette box containing assorted cigarettes on the windowsill of the front door of the Kombi between the arm of Gabat and the
window frame. Suddenly, the traffic light changed from red to green and Rogelio Ligon moved the vehicle forward, heedless of the transaction between
Gabat and the cigarette vendor. As the vehicle sped onward, the cigarette box which was squeezed between the right arm of Gabat and the window
frame fell inside the Kombi. Rosales then ran beside the vehicle and clung to the windowsill of the moving vehicle. Gabat testified that when he saw the
cigarette vendor clinging on the side of the front door, he told Ligon to veer to the right in order that Rosales could get off at the sidewalk. However,
Gabat declared, that Ligon said that it could not be done because of the moving vehicular traffic. Then, while the vehicle slowed down and Ligon was
maneuvering to the right in an attempt to go toward the sidewalk, Rosales lost his grip on the window frame and fell to the pavement of Quezon
Boulevard. Gabat allegedly shouted at Ligon to stop but Ligon replied that they should go on to Las Pinas and report the incident to the parents of
Gabat, and later they would come back to the scene of the incident. However, while the Kombi was speeding along Dewey Boulevard, it was blocked by
the taxi of Prudencio Castillo and a jeep driven by policemen. Gabat and Ligon were brought to police headquarters, but neither of them executed any
written statement.13
The trial court gave full credence to the prosecution's version, stating that there can be no doubt that Gabat forcibly took or grabbed the cigarette box
from Rosales because, otherwise, there could be no reason for the latter to run after the Kombi and hang on to its window. The court also believed
Castillo's testimony that Gabat forcibly removed or pried off the right hand of Rosales from the windowsill of the Kombi, otherwise, the latter could not
have fallen down, having already been able to balance himself on the stepboard.

On the other hand, the trial court dismissed as incredible the testimony of Gabat that the cigarette vendor placed the cigarette box on the windowsill of
the Kombi, holding it with his left hand, while he was trying to get from his pocket the change for the 5-peso bill of Gabat. The court said that it is of
common knowledge that cigarette vendors plying their trade in the streets do not let go of their cigarette box; no vendor lets go of his precious box of
cigarettes in order to change a peso bin given by a customer.
As a rule, the findings of fact of the trial court are accorded great respect and are not disturbed on appeal, unless it is shows that the findings are not
supported by the evidence, or the court failed to consider certain material facts and circumstances in its evaluation of the evidence. In the case at bar, a
careful review of the record shows that certain material facts and circumstances had been overlooked by the trial court which, if taken into account,
would alter the result of the case in that they would introduce an element of reasonable doubt which would entitle the accused to acquittal.
While the prosecution witness, Castillo, may be a disinterested witness with no motive, according to the court a quo, "other than to see that justice be
done," his testimony, even if not tainted with bias, is not entirely free from doubt because his observation of the event could have been faulty or
mistaken. The taxicab which Castillo was driving was lower in height compared to the Kombi in which Gabat was riding-a fact admitted by Castillo at the
trial.14Judicial notice may also be taken of the fact that the rear windshield of the 1978 Volkswagen Kombi is on the upper portion, occupying
approximately one-third (1/3) of the rear end of the vehicle, thus making it visually difficult for Castillo to observe clearly what transpired inside the Kombi
at the front end where Gabat was seated. These are circumstances which must be taken into consideration in evaluating Castillo's testimony as to what
exactly happened between Gabat and the cigarette vendor during that crucial moment before the latter fell down. As the taxicab was right behind the
Kombi, following it at a distance of about three meters, Castillo's line of vision was partially obstructed by the back part of the Kombi. His testimony that
he saw Gabat grab the cigarette box from Rosales and forcibly pry loose the latter's hand from the windowsill of the Kombi is thus subject to a
reasonable doubt, specially considering that this occurrence happened in just a matter of seconds, and both vehicles during that time were moving fast
in the traffic.
We find it significant that in his statement given to the police that very evening,15 Castillo did not mention that he saw Gabat forcibly prying off the hand
of Rosales from the windowsill of the Kombi, although the police report prepared by the investigating officer, Pfc. Fermin M. Payuan, on the same date,
stated that when the traffic signal changed to green and the driver stepped on the gas, the cigarette box of the cigarette vendor (Rosales) was grabbed
by the passenger Gabat and "instantly the former clung to the door and was dragged at a distance while at the same time the latter punched the
vendor's arm until the same (sic) fell to the pavement," thus showing that during the police investigation Castillo must have given a statement to the
police which indicated that Gabat did something to cause Rosales to fall from the Kombi.16 It was by way of a supplementary affidavit prepared by the
lawyer of the complainant and sworn to by Castillo before the Assistant City Fiscal on January 17, 1984 that this vital detail was added. This
supplementary affidavit was made the basis for filing another information charging both Gabat and the driver with the crime of Robbery with Homicide.
Considering the above circumstances, the Court is not convinced with moral certainty that the guilt of the accused Fernando Gabat has been established
beyond reasonable doubt. In our view, the quantum of proof necessary to sustain Gabat's conviction of so serious a crime as robbery with homicide has
not been met in this case. He is therefore entitled to acquittal on reasonable doubt.
However, it does not follow that a person who is not criminally liable is also free from civil liability.1avvphi1 While the guilt of the accused in a criminal
prosecution must be established beyond reasonable doubt, only a preponderance of evidence is required in a civil action for damages.17 The judgment
of acquittal extinguishes the civil liability of the accused only when it includes a declaration that the facts from which the civil liability might arise did not
exist.18
The reason for the provisions of Article 29 of the Civil Code, which provides that the acquittal of the accused on the ground that his guilt has not been
proved beyond reasonable doubt does not necessarily exempt him from civil liability for the same act or omission, has been explained by the Code
Commission as follows:
The old rule that the acquittal of the accused in a criminal case also releases him from civil liability is one of the most serious flaws in the
Philippine legal system. It has given rise to numberless instances of miscarriage of justice, where the acquittal was due to a reasonable doubt
in the mind of the court as to the guilt of the accused. The reasoning followed is that inasmuch as the civil responsibility is derived from the
criminal offense, when the latter is not proved, civil liability cannot be demanded.
This is one of those cases where confused thinking leads to unfortunate and deplorable consequences. Such reasoning fails to draw a clear
line of demarcation between criminal liability and civil responsibility, and to determine the logical result of the distinction. The two liabilities are
separate and distinct from each other. One affects the social order and the other, private rights. One is for the punishment or correction of the
offender while the other is for reparation of damages suffered by the aggrieved party. The two responsibilities are so different from each other
that article 1813 of the present (Spanish) Civil Code reads thus: "There may be a compromise upon the civil action arising from a crime; but
the public action for the imposition of the legal penalty shall not thereby be extinguished." It is just and proper that, for the purposes of the
imprisonment of or fine upon the accused, the offense 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 a preponderance of evidence? Is the right of the aggrieved person any less private because the wrongful act is also punishable
by the criminal law?
For these reasons, the Commission recommends the adoption of the reform under discussion. It will correct a serious defect in our law. It will
close up an inexhaustible source of injustice a cause for disillusionment on the part of the innumerable persons injured or wronged. 19
In the instant case, we find that a preponderance of evidence exists sufficient to establish the facts from which the civil liability of Gabat arises. On the
basis of the trial court's evaluation of the testimonies of both prosecution and defense witnesses at the trial and applying the quantum of proof required
in civil cases, we find that a preponderance of evidence establishes that Gabat by his act and omission with fault and negligence caused damage to
Rosales and should answer civilly for the damage done. Gabat's wilfull act of calling Rosales, the cigarette vendor, to the middle of a busy street to buy
two sticks of cigarettes set the chain of events which led to the death of Rosales. Through fault and negligence, Gabat (1) failed to prevent the driver
from moving forward while the purchase was completed; (2) failed to help Rosales while the latter clung precariously to the moving vehicle, and (3) did
not enforce his order to the driver to stop. Finally, Gabat acquiesced in the driver's act of speeding away, instead of stopping and picking up the injured
victim. These proven facts taken together are firm bases for finding Gabat civilly liable under the Civil Code20 for the damage done to Rosales.

WHEREFORE, judgment is rendered acquitting the appellant Gabat for the crime of Robbery with Homicide. However, he is hereby held civilly liable for
his acts and omissions, there being fault or negligence, and sentenced to indemnify the heirs of Jose Rosales y Ortiz in the amount of P15.000.00 for the
latter's death, P1,733.35 for hospital and medical expenses, and P4,100.00 for funeral expenses. The alleged loss of income amounting to P20,000.00,
not being supported by sufficient evidence, is DENIED. Costs de officio.
SO ORDERED.
[G.R. No. L-75357. November 27, 1987.]
RUFO MAURICIO CONSTRUCTION and/or RUFO MAURICO, Petitioner, v. HON. INTERMEDIATE APPELLATE COURT, and
PEOPLE OF THE PHILIPPINES, Respondents.
SYLLABUS
1. CRIMINAL LAW; CRIMINAL LIABILITY; EXTINGUISHED BY DEATH OF ACCUSED DURING THE PENDENCY OF HIS APPEAL OR
BEFORE THE JUDGMENT OF CONVICTION BECAME FINAL AND EXECUTORY. The death of the accused during the pendency of his
appeal or before the judgment of conviction (rendered against him by the lower court) became final and executory extinguished his
criminal liability meaning his obligation to serve the imprisonment imposed and his pecuniary liability for fines, but not his civil
liability should the liability or obligation arise (not from a crime, for here, no crime was committed, the accused not having been
convicted by final judgment, and therefore still regarded as innocent) but from a quasi-delict (See Arts. 2176 and 2177, Civil Code).
2. ID.; QUASI-DELICT; ID.; EMPLOYER SOLIDARILY LIABLE. The liability of the employer here would not be subsidiary but solidary
with his driver (unless said employer can prove there was no negligence on his part at all, that is, if he can prove due diligence in the
selection and supervision of his driver). (See 8th par. of Art. 2180, Art. 2194, Civil Code; also People v. Navoa, 132 SCRA 412;
People v. Tirol, 102 SCRA 558; People v. Sandaydiego, 82 SCRA 120).
3. REMEDIAL LAW; CRIMINAL PROCEDURE; ONE NOT A PARTY IN A CRIMINAL CASE, ENTITLED TO HIS DAY IN COURT AND THE
REOPENING OF THE HEARING ON THE MOTION TO QUASH SUBSIDIARY, WRIT OF EXECUTION. Inasmuch as the employer
(petitioner herein) was not a party in the criminal case, and to grant him his day in court for the purpose of cross-examining the
prosecution witnesses on their testimonies on the drivers alleged negligence and the amount of damages to which the heirs of the
victim are entitled, as well as to introduce any evidence or witnesses he may care to present in his defense, the hearing on the
motion to quash the subsidiary writ of execution must be reopened.
DECISION
PARAS, J.:
Illustre Cabiliza was charged before the Regional Trial Court of the 5th Judicial Region, Branch II, Legaspi City with homicide and
damage to property through reckless imprudence, in an information which reads
"That on or about the 20th day of September, 1979, in the city of Legaspi, Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, being then the driver of an Izusu dump truck, bearing Plate No. WD-224 T Philippines "79,
belonging to and owned by RUFO MAURICIO CONSTRUCTIONS, did then and there willfully, unlawfully and feloniously drive, operate
and manage the said vehicle in a reckless and imprudent manner without taking the necessary precaution to prevent and/or avoid
accident to persons and/or damage to property, and without regard to traffic rules and regulations, causing as a result of his
carelessness and imprudence the said vehicle that he was driving to sideswipe and hit a Colt Gallant with Plate No. AC-206 S
Pilipinas "79, driven and owned by the late JUDGE ARSENIO SOLIDUM, thereby inflicting injuries upon the said Judge Arsenio
Solidum which directly caused his untimely death, and further causing damage to the said Colt Gallant in the amount of Thirty
Thousand (P30,000.00) PESOS, Philippine Currency to the damage and prejudice of the late Judge Arsenio Solidum and/or his family,
and likewise causing damage to the house owned by PABLO NAVARRA, to the damage and prejudice of the said Pablo Navarra.
"CONTRARY TO LAW." (Rollo, pp. 74-75)
After arraignment and trial on the merits, Cabiliza was convicted of the crime charged in a Decision dated October 12, 1983, the
dispositive portion of which reads
"WHEREFORE, this Court finds accused Illustre Cabiliza guilty beyond reasonable doubt of the crime of homicide and damage to
property thru reckless imprudence and hereby sentences him to suffer the indeterminate penalty of two (2) years and four (4)
months, as minimum to six (6) years, as maximum of prision correccional; to indemnify the heirs of the deceased Judge Arsenio G.
Solidum, the sum of P115,723.05, as actual and compensatory damages; P1,447,200.00 for the loss of earning capacity of the
deceased; P200,000.00 as moral damages; and P20,000.00 as exemplary damages, and to pay the costs." (Rollo, p. 75)
The aforesaid judgment was promulgated on November 9, 1983. On November 11, 1983, Cabiliza filed a Notice of Appeal. But he did
not live to pursue his appeal as he died on January 5, 1984. A notice of death dated February 4, 1984 was filed by his counsel Atty.
Eustaquio S. Beltran. In the same notice of death, Atty. Beltran manifested the intention of Rufo Mauricio, as employer of Cabiliza to
proceed with the case on appeal pursuant to his right as employer who is subsidiarily liable.
On March 5, 1984, the lower court issued an Order requiring the heirs of Cabiliza to appear and to substitute him as appellant with

respect to the civil aspect of the case.

On motion of the heirs of the victim, the lower court in its order dated August 23, 1984 ordered the issuance of a writ of execution
and accordingly on the same date, the Branch Clerk of Court issued a writ.
The writ of execution was however returned unsatisfied per Sheriffs return of service dated September 3, 1984, because Cabiliza
was found insolvent. A certificate of insolvency was issued by the Register of Deeds of the Province of Cagayan and by the Municipal
Assessor of Claveria, Cagayan where Cabiliza appears to be a permanent resident.
On September 3, 1984, the victims widow, Mrs. Aurora Solidum, filed a motion for the issuance of a subsidiary writ of execution to
be enforced against the employer of Cabiliza, Rufo Mauricio and/or Rufo Mauricio Construction Co., which was granted by the court in
its order dated September 6, 1984. A subsidiary writ of execution was issued by the Clerk of Court also on September 6, 1984.
On September 12, 1984, Rufo Mauricio thru his counsel Atty. Beltran filed a motion to quash the subsidiary writ of execution.
Resolution of this motion was held in abeyance.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
Meanwhile, Rufo Mauricio, as the employer of Cabiliza pursued the latters appeal before the Intermediate Appellate Court (AC-G.R.
No. 01829). He interposed the following assignment of errors
I
THE LOWER COURT ERRED IN CONCLUDING THAT THE ACCUSED WAS GROSSLY NEGLIGENT AND IMPRUDENT IN TRYING TO
OVERTAKE ANOTHER TRUCK WHEN THERE WAS AN ONCOMING CAR FROM THE OPPOSITE DIRECTION;
II
THE LOWER COURT ERRED IN NOT CONCLUDING THAT THE PROXIMATE CAUSE OF THE COLLISION RESULTING IN DEATH OF JUDGE
ARSENIO SOLIDUM AND DAMAGE TO HIS CAR, WAS DUE TO THE LATTERS GROSS NEGLIGENCE AND IMPRUDENCE IN INVADING
THE PROPER LANE OF THE ISUZU DUMP TRUCK OWNED BY RUFO MAURICIO CONSTRUCTION;
III
THE LOWER COURT ERRED IN AWARDING THE TOTAL OF P1,782,923.05 DAMAGES IN FAVOR OF THE COMPLAINANTS;
IV
THE LOWER COURT ERRED IN NOT DISMISSING THE INFORMATION AGAINST THE ACCUSED UPON PROOF OF HIS DEATH AND IN
NOT RELEASING THE EMPLOYER RUFO MAURICIO CONSTRUCTIONS AND/OR RUFO MAURICIO FROM LIABILITY;
V
THE LOWER COURT ERRED IN NOT GIVING APPELLANT RUFO MAURICIO AND/OR RUFO MAURICIO CONSTRUCTION A DAY IN COURT
TO RESIST THE DAMAGES BEING CLAIMED BY THE HEIRS OF THE VICTIM.
On April 8, 1986, the Intermediate Appellate Court promulgated its now assailed Decision, 1 the pertinent portion of which reads
"We find that the proper amount of damages for loss of earnings based on life expectancy of the deceased is P1,082 223.84. In this
respect, the trial courts findings is modified. The Judgment appealed from is affirmed in all other aspects.
"WHEREFORE, with the afore-mentioned modifications, the appealed Judgment is AFFIRMED." (Rollo, p. 86).
Rufo Mauricio filed a motion for reconsideration which was denied for lack of merit in the Resolution of the Intermediate Appellate
Court dated July 18, 1986.
The said Decision and Resolution are the subject of the present petition. Petitioner contends that
"1. The dismissal of the criminal case against the accused employee wipes out not only the employees primary civil liability, but also
his employers subsidiary liability for such criminal negligence, because:chanrob1es virtual 1aw library
a. The criminal case is based on Article 100 of the Revised Penal Code wherein criminal liability and the exemption of criminal
liability implies exemption from civil liability arising from crime.
b. The civil liability of the employer petitioner is based, if any, on quasi-delict, since the accused was exempted from criminal
liability.
"2. Exemplary damages cannot be imposed upon an employer who at the time of the alleged incident was not present nor inside the
vehicle involved in the accident.

"3. The petitioner employer cannot be condemned (to pay) an exhorbitant amount of damages to the tune of P1,417,946.89, without
giving him opportunity to cross examine the witness supporting such claim and affording him opportunity to adduce evidence to
resist the claim, because that would be deprivation of property without due process of law, repugnant to the Freedom Constitution.
"4. The Honorable Intermediate Appellate Court misapplied the facts contrary to the physical evidence and relied on conjectures and
surmises that depicted a different picture of the accident when the evidence shows that it was the victim who was negligent at the
time of the accident." (Rollo, pp. 18-19).
The first contention of petitioner that the death of the accused-employee wipes out not only the employees primary civil liability but
also his employers subsidiary liability is without merit. The death of the accused during the pendency of his appeal or before the
judgment of conviction (rendered against him by the lower court) became final and executory extinguished his criminal liability
meaning his obligation to serve the imprisonment imposed and his pecuniary liability for fines, but not his civil liability should the
liability or obligation arise (not from a crime, for here, no crime was committed, the accused not having been convicted by final
judgment, and therefore still regarded as innocent) but from a quasi-delict (See Arts. 2176 and 2177, Civil Code), as in this case.
The liability of the employer here would not be subsidiary but solidary with his driver (unless said employer can prove there was no
negligence on his part at all, that is, if he can prove due diligence in the selection and supervision of his driver). (See 8th par. of Art.
2180, Art. 2194, Civil Code; also People v. Navoa, 132 SCRA 412; People v. Tirol, 102 SCRA 558; People v. Sandaydiego, 82 SCRA
120).chanrobles virtual lawlibrary
Inasmuch as the employer (petitioner herein) was not a party in the criminal case, and to grant him his day in court for the purpose
of cross-examining the prosecution witnesses on their testimonies on the drivers alleged negligence and the amount of damages to
which the heirs of the victim are entitled, as well as to introduce any evidence or witnesses he may care to present in his defense,
the hearing on the motion to quash the subsidiary writ of execution must be reopened precisely for the purpose adverted to
hereinabove.
PREMISES CONSIDERED, the assailed decision of the appellate court is hereby SET ASIDE, and this case is REMANDED to the trial
court for the hearing adverted to in the next preceding paragraph.
SO ORDERED.

G.R. No. 108017 April 3, 1995

MARIA BENITA A. DULAY, in her own behalf and in behalf of the minor children KRIZTEEN ELIZABETH, BEVERLY MARIE and NAPOLEON II,
all surnamed DULAY, petitioners,
vs.
THE COURT OF APPEALS, Former Eighth Division, HON. TEODORO P. REGINO, in his capacity as Presiding Judge of the Regional Trial
Court National Capital Region, Quezon City, Br. 84, SAFEGUARD INVESTIGATION AND SECURITY CO., INC., and SUPERGUARD SECURITY
CORPORATION, respondents.

BIDIN, J.:
This petition for certiorari prays for the reversal of the decision of the Court of Appeals dated October 29, 1991 in CA-G.R. CV No. 24646 which affirmed
the order of the Regional Trial Court dismissing Civil Case No. Q-89-1751, and its resolution dated November 17, 1991 denying herein, petitioner's
motion for reconsideration.
The antecedent facts of the case are as follows:
On December 7, 1988, an altercation between Benigno Torzuela and Atty. Napoleon Dulay occurred at the "Big Bang Sa Alabang," Alabang Village,
Muntinlupa as a result of which Benigno Torzuela, the security guard on duty at the said carnival, shot and killed Atty. Napoleon Dulay.
Herein petitioner Maria Benita A. Dulay, widow of the deceased Napoleon Dulay, in her own behalf and in behalf of her minor children, filed on February
8, 1989 an action for damages against Benigno Torzuela and herein private respondents Safeguard Investigation and Security Co., Inc.,
("SAFEGUARD") and/or Superguard Security Corp. ("SUPERGUARD"), alleged employers of defendant Torzuela. The complaint, docketed as Civil
Case No. Q-89-1751 among others alleges the following:
1. . . .
Defendants SAFEGUARD INVESTIGATION AND SECURITY CO., INC., (Defendant Safeguard) and SUPERGUARD SECURITY
CORPORATION (Defendant Superguard) are corporations duly organized and existing in accordance with Philippine laws, with
offices at 10th Floor, Manufacturers Building, Inc., Plaza Santa Cruz, Manila. They are impleaded as alternative defendants for,
while the former appears to be the employer of defendant BENIGNO TORZUELA (defendant TORZUELA), the latter impliedly
acknowledged responsibility for the acts of defendant TORZUELA by extending its sympathies to plaintiffs.
Defendant BENIGNO TORZUELA is of legal age, an employee of defendant SAFEGUARD and/or defendant SUPERGUARD and,
at the time of the incident complained of, was under their control and supervision. . . .

3. On December 7, 1988 at around 8:00 a.m., defendant TORZUELA, while he was on duty as security guard at the "Big Bang sa
Alabang," Alabang Village, Muntinlupa, Metro Manila shot and killed NAPOLEON V. DULAY with a .38 caliber revolver belonging to
defendant SAFEGUARD, and/or SUPERGUARD (per Police Report dated January 7, 1989, copy attached as Annex A);
4. The incident resulting in the death of NAPOLEON V. DULAY was due to the concurring negligence of the defendants. Defendant
TORZUELA'S wanton and reckless discharge of the firearm issued to him by defendant SAFEGUARD and/or SUPERGUARD was
the immediate and proximate cause of the injury, while the negligence of defendant SAFEGUARD and/or SUPERGUARD consists
in its having failed to exercise the diligence of a good father of a family in the supervision and control of its employee to avoid the
injury.
xxx xxx xxx
(Rollo, pp. 117-118)
Petitioners prayed for actual, compensatory, moral and exemplary damages, and attorney's fees. The said Civil Case No. Q-89-1751 was raffled to
Branch 84 of the Regional Trial Court of Quezon City, presided by respondent Judge Teodoro Regino.
On March 2, 1989, private respondent SUPERGUARD filed a Motion to Dismiss on the ground that the complaint does not state a valid cause of action.
SUPERGUARD claimed that Torzuela's act of shooting Dulay was beyond the scope of his duties, and that since the alleged act of shooting was
committed with deliberate intent (dolo), the civil liability therefor is governed by Article 100 of the Revised Penal Code, which states:
Art. 100. Civil liability of a person guilty of a felony. Every person criminally liable for a felony is also civilly liable.
Respondent SUPERGUARD further alleged that a complaint for damages based on negligence under Article 2176 of the New Civil Code, such as the
one filed by petitioners, cannot lie, since the civil liability under Article 2176 applies only to quasi-offenses under Article 365 of the Revised Penal Code.
In addition, the private respondent argued that petitioners' filing of the complaint is premature considering that the conviction of Torzuela in a criminal
case is a condition sine qua non for the employer's subsidiary liability (Rollo, p. 55-59).
Respondent SAFEGUARD also filed a motion praying that it be excluded as defendant on the ground that defendant Torzuela is not one of its
employees (Rollo, p. 96).
Petitioners opposed both motions, stating that their cause of action against the private respondents is based on their liability under Article 2180 of the
New Civil Code, which provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of
persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business or an industry.
xxx xxx xxx
(Emphasis supplied)
Petitioners contended that a suit against alternative defendants is allowed under Rule 3, Section 13 of the Rules of Court. Therefore, the inclusion of
private respondents as alternative defendants in the complaint is justified by the following: the Initial Investigation Report prepared by Pat. Mario Tubon
showing that Torzuela is an employee of SAFEGUARD; and through overt acts, SUPERGUARD extended its sympathies to petitioners (Rollo, pp. 64
and 98).
Meanwhile, an Information dated March 21, 1989 charging Benigno Torzuela with homicide was filed before the Regional Trial Court of Makati and was
docketed as Criminal Case No. 89-1896.
On April 13, 1989, respondent Judge Regino issued an order granting SUPERGUARD'S motion to dismiss and SAFEGUARD'S motion for exclusion as
defendant. The respondent judge held that the complaint did not state facts necessary or sufficient to constitute a quasi-delict since it does not mention
any negligence on the part of Torzuela in shooting Napoleon Dulay or that the same was done in the performance of his duties. Respondent judge ruled
that mere allegations of the concurring negligence of the defendants (private respondents herein) without stating the facts showing such negligence are
mere conclusions of law (Rollo, p. 106). Respondent judge also declared that the complaint was one for damages founded on crimes punishable under
Articles 100 and 103 of the Revised Penal Code as distinguished from those arising from, quasi-delict. The dispositive portion of the order dated April
13, 1989 states:
WHEREFORE, this Court holds that in view of the material and ultimate facts alleged in the verified complaint and in accordance
with the applicable law on the matter as well as precedents laid down by the Supreme Court, the complaint against the alternative
defendants Superguard Security Corporation and Safeguard Investigation and Security Co., Inc., must be and (sic) it is hereby
dismissed. (Rollo, p. 110)
The above order was affirmed by the respondent court and petitioners' motion for reconsideration thereof was denied.

Petitioners take exception to the assailed decision and insist that 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 quasioffenses under Article 365 of the Revised Penal Code. Torzuela's act of shooting Atty. Dulay to death, aside from being purely personal, was done with
deliberate intent and could not have been part of his duties as security guard. And since Article 2180 of the New Civil Code covers only: acts done within
the scope of the employee's assigned tasks, the private respondents cannot be held liable for damages.
We find for petitioners.
It is undisputed that Benigno Torzuela is being prosecuted for homicide for the fatal shooting of Napoleon Dulay. Rule 111 of the Rules on Criminal
Procedure provides:
Sec. 1. Institution of criminal and civil actions. When a criminal action is instituted, the civil action for the recovery of civil liability is
impliedly instituted with the criminal action, unless the offended party waives the civil action , reserves his right to institute it
separately or institutes the civil action prior to the criminal action.
Such civil action includes recovery of indemnity under the Revised Penal Code, and damages under Articles 32, 33, 34, and 2176 of
the Civil Code of the Philippines arising from the same act or omission of the accused. (Emphasis supplied)
It is well-settled that the filing of an independent civil action before the prosecution in the criminal action presents evidence is even far better than a
compliance with the requirement of express reservation (Yakult Philippines v. Court of Appeals, 190 SCRA 357 [1990]). This is precisely what the
petitioners opted to do in this case. However, the private respondents opposed the civil action on the ground that the same is founded on a delict and not
on a quasi-delict as the shooting was not attended by negligence. What is in dispute therefore is the nature of the petitioner's cause of action.
The nature of a cause of action is determined by the facts alleged in the complaint as constituting the cause of action (Republic v. Estenzo, 158 SCRA
282 [1988]). The purpose of an action or suit and the law to govern it is to be determined not by the claim of the party filing the action, made in his
argument or brief, but rather by the complaint itself, its allegations and prayer for relief. (De Tavera v. Philippine Tuberculosis Society, 112 SCRA 243
[1982]). An examination of the complaint in the present case would show that the plaintiffs, petitioners herein, are invoking their right to recover damages
against the private respondents for their vicarious responsibility for the injury caused by Benigno Torzuela's act of shooting and killing Napoleon Dulay,
as stated in paragraphs 1 and 2 of the complaint.
Article 2176 of the New Civil Code provides:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual relation between the parties is called a quasi-delict and is
governed by the provisions of this Chapter.
Contrary to the theory of private respondents, there is no justification for limiting the scope of Article 2176 of the Civil Code to acts or omissions resulting
from negligence. Well-entrenched is the doctrine that article 2176 covers not only acts committed with negligence, but also acts which are voluntary and
intentional. As far back as the definitive case of Elcano v. Hill (77 SCRA 98 [1977]), this Court already held that:
. . . Article 2176, where it refers to "fault or negligence," covers not only acts "not punishable by law" but also acts criminal in
character; whether intentional and voluntary or negligent. Consequently, a separate civil action against the offender in a criminal act,
whether or not he is criminally prosecuted and found guilty or acquitted, provided that the offended party is not allowed, if he is

actually charged also criminally, to recover damages on both scores, and would be entitled in such eventuality only to the bigger
award of the two, assuming the awards made in the two cases vary. In other words, the extinction of civil liability referred to in Par.
(e) of Section 3, Rule 111, refers exclusively to civil liability founded on Article 100 of the Revised Penal Code, whereas the civil
liability for the same act considered as quasi-delict only and not as a crime is not extinguished even by a declaration in the criminal
case that the criminal act charged has not happened or has not been committed by the accused. Briefly stated, We here hold, in
reiteration of Garcia, that culpa aquiliana includes voluntary and negligent acts which may be punishable by law. (Emphasis
supplied)
The same doctrine was echoed in the case of Andamo v. Intermediate Appellate Court (191 SCRA 195 [1990]), wherein the Court held:
Article 2176, whenever it refers to "fault or negligence," covers not only acts criminal in character, whether intentional and voluntary
or negligent. Consequently, a civil action lies against the offender in a criminal act, whether or not he is prosecuted or found guilty or
acquitted, provided that the offended party is not allowed, (if the tortfeasor is actually also charged criminally), to recover damages
on both scores, and would be entitled in such eventuality only to the bigger award of the two, assuming the awards made in the two
cases vary. [citing Virata v. Ochoa, 81 SCRA 472] (Emphasis supplied)
Private respondents submit that the word "intentional" in the Andamo case is inaccurate obiter, and should be read as "voluntary" since intent cannot be
coupled with negligence as defined by Article 365 of the Revised Penal Code. In the absence of more substantial reasons, this Court will not disturb the
above doctrine on the coverage of Article 2176.
Private respondents further aver that Article 33 of the New Civil Code applies only to injuries intentionally committed pursuant to the ruling in Marcia v.
CA (120 SCRA 193 [1983]), and that the actions for damages allowed thereunder are ex-delicto. However, the term "physical injuries" in Article 33 has
already been construed to include bodily injuries causing death (Capuno v. Pepsi-Cola Bottling Co. of the Philippines, 121 Phil. 638 [1965); Carandang
v. Santiago, 97 Phil. 94 [1955]). It is not the crime of physical injuries defined in the Revised Penal Code. It includes not only physical injuries but also
consummated, frustrated, and attempted homicide (Madeja v. Caro, 126 SCRA 293 [1983]). Although in the Marcia case (supra), it was held that no
independent civil action may be filed under Article 33 where the crime is the result of criminal negligence, it must be noted however, that Torzuela, the
accused in the case at bar, is charged with homicide, not with reckless imprudence, whereas the defendant in Marcia was charged with reckless
imprudence. Therefore, in this case, a civil action based on Article 33 lies.
Private respondents also contend that their liability is subsidiary under the Revised Penal Code; and that they are not liable for Torzuela's act which is
beyond the scope of his duties as a security guard. It having been established that the instant action is not ex-delicto, petitioners may proceed directly
against Torzuela and the private respondents. Under Article 2180 of the New Civil Code as aforequoted, when an injury is caused by the negligence of
the employee, there instantly arises a presumption of law that there was negligence on the part of the master or employer either in the selection of the
servant or employee, or in supervision over him after selection or both (Layugan v. Intermediate Appellate Court, 167 SCRA 363 [1988]). The liability of
the employer under Article 2180 is direct and immediate; it is not conditioned upon prior recourse against the negligent employee and a prior showing of
the insolvency of such employee (Kapalaran Bus Lines v. Coronado, 176 SCRA 792 [1989]). Therefore, it is incumbent upon the private respondents to
prove that they exercised the diligence of a good father of a family in the selection and supervision of their employee.
Since Article 2176 covers not only acts of negligence but also acts which are intentional and voluntary, it was therefore erroneous on the part of the trial
court to dismiss petitioner's complaint simply because it failed to make allegations of attendant negligence attributable to private respondents.
With respect to the issue of whether the complaint at hand states a sufficient cause of action, the general rule is that the allegations in a complaint are
sufficient to constitute a cause of action against the defendants if, admitting the facts alleged, the court can render a valid judgment upon the same in
accordance with the prayer therein. A cause of action exist if the following elements are present, namely: (1) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3)
an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery of damages (Del Bros Hotel Corporation v. CA, 210 SCRA 33 [1992]); Development
Bank of the Philippines v. Pundogar, 218 SCRA 118 [1993])
This Court finds, under the foregoing premises, that the complaint sufficiently alleged an actionable breach on the part of the defendant Torzuela and
respondents SUPERGUARD and/or SAFEGUARD. It is enough that the complaint alleged that Benigno Torzuela shot Napoleon Dulay resulting in the
latter's death; that the shooting occurred while Torzuela was on duty; and that either SUPERGUARD and/or SAFEGUARD was Torzuela's employer and
responsible for his acts. This does not operate however, to establish that the defendants below are liable. Whether or not the shooting was actually
reckless and wanton or attended by negligence and whether it was actually done within the scope of Torzuela's duties; whether the private respondents
SUPERGUARD and/or SAFEGUARD failed to exercise the diligence of a good father of a family; and whether the defendants are actually liable, are
questions which can be better resolved after trial on the merits where each party can present evidence to prove their respective allegations and
defenses. In determining whether the allegations of a complaint are sufficient to support a cause of action, it must be borne in mind that the complaint
does not have to establish or allege the facts proving the existence of a cause of action at the outset; this will have to be done at the trial on the merits of
the case (Del Bros Hotel Corporation v. CA, supra). If the allegations in a complaint can furnish a sufficient basis by which the complaint can be
maintained, the same should not be dismissed regardless of the defenses that may be assessed by the defendants (Rava Dev't. Corp. v. CA, 211 SCRA
152 [1992] citing Consolidated Bank & Trust Corporation v. Court of Appeals, 197 SCRA 663 [1991]). To sustain a motion to dismiss for lack of cause of
action, the complaint must show that the claim for relief does not exist rather than that a claim has been defectively stated, is ambiguous, indefinite or
uncertain (Azur v. Provincial Board, 27 SCRA 50 [1969]). Since the petitioners clearly sustained an injury to their rights under the law, it would be more
just to allow them to present evidence of such injury.
WHEREFORE, premises considered, the petition for review is hereby GRANTED. The decision of the Court of Appeals as well as the Order of the
Regional Trial Court dated April 13, 1989 are hereby REVERSED and SET ASIDE. Civil Case No. Q-89-1751 is remanded to the Regional Trial Court
for trial on the merits. This decision is immediately executory.
SO ORDERED.

[G.R. No. 150793. November 19, 2004]

FRANCIS CHUA, petitioner, vs. HON. COURT OF APPEALS and LYDIA C. HAO, respondents.
DECISION
QUISUMBING, J.:
Petitioner assails the Decision,[1] dated June 14, 2001, of the Court of Appeals in CA-G.R. SP No. 57070, affirming the Order, dated October 5,
1999, of the Regional Trial Court (RTC) of Manila, Branch 19. The RTC reversed the Order, dated April 26, 1999, of the Metropolitan Trial Court (MeTC)
of Manila, Branch 22. Also challenged by herein petitioner is the CA Resolution,[2] dated November 20, 2001, denying his Motion for Reconsideration.
The facts, as culled from the records, are as follows:
On February 28, 1996, private respondent Lydia Hao, treasurer of Siena Realty Corporation, filed a complaint-affidavit with the City Prosecutor of
Manila charging Francis Chua and his wife, Elsa Chua, of four counts of falsification of public documents pursuant to Article 172[3] in relation to Article
171[4] of the Revised Penal Code. The charge reads:
That on or about May 13, 1994, in the City of Manila, Philippines, the said accused, being then a private individual, did then and there willfully, unlawfully and
feloniously commit acts of falsification upon a public document, to wit: the said accused prepared, certified, and falsified the Minutes of the Annual Stockholders
meeting of the Board of Directors of the Siena Realty Corporation, duly notarized before a Notary Public, Atty. Juanito G. Garcia and entered in his Notarial Registry as
Doc No. 109, Page 22, Book No. IV and Series of 1994, and therefore, a public document, by making or causing it to appear in said Minutes of the Annual Stockholders
Meeting that one LYDIA HAO CHUA was present and has participated in said proceedings, when in truth and in fact, as the said accused fully well knew that said
Lydia C. Hao was never present during the Annual Stockholders Meeting held on April 30, 1994 and neither has participated in the proceedings thereof to the prejudice
of public interest and in violation of public faith and destruction of truth as therein proclaimed.
CONTRARY TO LAW.[5]
Thereafter, the City Prosecutor filed the Information docketed as Criminal Case No. 285721[6] for falsification of public document, before the
Metropolitan Trial Court (MeTC) of Manila, Branch 22, against Francis Chua but dismissed the accusation against Elsa Chua.
Herein petitioner, Francis Chua, was arraigned and trial ensued thereafter.
During the trial in the MeTC, private prosecutors Atty. Evelyn Sua-Kho and Atty. Ariel Bruno Rivera appeared as private prosecutors and
presented Hao as their first witness.
After Haos testimony, Chua moved to exclude complainants counsels as private prosecutors in the case on the ground that Hao failed to allege
and prove any civil liability in the case.
In an Order, dated April 26, 1999, the MeTC granted Chuas motion and ordered the complainants counsels to be excluded from actively
prosecuting Criminal Case No. 285721. Hao moved for reconsideration but it was denied.
Hence, Hao filed a petition for certiorari docketed as SCA No. 99-94846,[7]entitled Lydia C. Hao, in her own behalf and for the benefit of Siena
Realty Corporation v. Francis Chua, and the Honorable Hipolito dela Vega, Presiding Judge, Branch 22, Metropolitan Trial Court of Manila, before the
Regional Trial Court (RTC) of Manila, Branch 19.
The RTC gave due course to the petition and on October 5, 1999, the RTC in an order reversed the MeTC Order. The dispositive portion reads:
WHEREFORE, the petition is GRANTED. The respondent Court is ordered to allow the intervention of the private prosecutors in behalf of petitioner Lydia C. Hao in
the prosecution of the civil aspect of Crim. Case No. 285721, before Br. 22 [MeTC], Manila, allowing Attys. Evelyn Sua-Kho and Ariel Bruno Rivera to actively
participate in the proceedings.
SO ORDERED.[8]
Chua moved for reconsideration which was denied.
Dissatisfied, Chua filed before the Court of Appeals a petition for certiorari. The petition alleged that the lower court acted with grave abuse of
discretion in: (1) refusing to consider material facts; (2) allowing Siena Realty Corporation to be impleaded as co-petitioner in SCA No. 99-94846
although it was not a party to the criminal complaint in Criminal Case No. 285721; and (3) effectively amending the information against the accused in
violation of his constitutional rights.
On June 14, 2001, the appellate court promulgated its assailed Decision denying the petition, thus:
WHEREFORE, premises considered, the petition is hereby DENIED DUE COURSE and DISMISSED. The Order, dated October 5, 1999 as well as the Order, dated
December 3, 1999, are hereby AFFIRMED in toto.
SO ORDERED.[9]
Petitioner had argued before the Court of Appeals that respondent had no authority whatsoever to bring a suit in behalf of the Corporation since
there was no Board Resolution authorizing her to file the suit.

For her part, respondent Hao claimed that the suit was brought under the concept of a derivative suit. Respondent maintained that when the
directors or trustees refused to file a suit even when there was a demand from stockholders, a derivative suit was allowed.
The Court of Appeals held that the action was indeed a derivative suit, for it alleged that petitioner falsified documents pertaining to projects of the
corporation and made it appear that the petitioner was a stockholder and a director of the corporation. According to the appellate court, the corporation
was a necessary party to the petition filed with the RTC and even if private respondent filed the criminal case, her act should not divest the Corporation
of its right to be a party and present its own claim for damages.
Petitioner moved for reconsideration but it was denied in a Resolution dated November 20, 2001.
Hence, this petition alleging that the Court of Appeals committed reversible errors:
I. IN RULING THAT LYDIA HAOS FILING OF CRIMINAL CASE NO. 285721 WAS IN THE NATURE OF A DERIVATIVE SUIT
II. IN UPHOLDING THE RULING OF JUDGE DAGUNA THAT SIENA REALTY WAS A PROPER PETITIONER IN SCA NO. [99-94846]
III. IN UPHOLDING JUDGE DAGUNAS DECISION ALLOWING LYDIA HAOS COUNSEL TO CONTINUE AS PRIVATE
PROSECUTORS IN CRIMINAL CASE NO. 285721
IV. IN [OMITTING] TO CONSIDER AND RULE UPON THE ISSUE THAT JUDGE DAGUNA ACTED IN GRAVE ABUSE OF
DISCRETION IN NOT DISMISSING THE PETITION IN SCA NO. [99-94846] FOR BEING A SHAM PLEADING.[10]
The pertinent issues in this petition are the following: (1) Is the criminal complaint in the nature of a derivative suit? (2) Is Siena Realty Corporation
a proper petitioner in SCA No. 99-94846? and (3) Should private prosecutors be allowed to actively participate in the trial of Criminal Case No. 285721.
On the first issue, petitioner claims that the Court of Appeals erred when (1) it sustained the lower court in giving due course to respondents
petition in SCA No. 99-94846 despite the fact that the Corporation was not the private complainant in Criminal Case No. 285721, and (2) when it ruled
that Criminal Case No. 285721 was in the nature of a derivative suit.
Petitioner avers that a derivative suit is by nature peculiar only to intra-corporate proceedings and cannot be made part of a criminal action. He
cites the case ofWestern Institute of Technology, Inc. v. Salas,[11] where the court said that an appeal on the civil aspect of a criminal case cannot be
treated as a derivative suit. Petitioner asserts that in this case, the civil aspect of a criminal case cannot be treated as a derivative suit, considering that
Siena Realty Corporation was not the private complainant.
Petitioner misapprehends our ruling in Western Institute. In that case, we said:
Here, however, the case is not a derivative suit but is merely an appeal on the civil aspect of Criminal Cases Nos. 37097 and 37098 filed with the RTC of Iloilo for
estafa and falsification of public document. Among the basic requirements for a derivative suit to prosper is that the minority shareholder who is suing for and on
behalf of the corporation must allege in his complaint before the proper forum that he is suing on a derivative cause of action on behalf of the corporation and all other
shareholders similarly situated who wish to join. . . .This was not complied with by the petitioners either in their complaint before the court a quo nor in the instant
petition which, in part, merely states that this is a petition for review on certiorari on pure questions of law to set aside a portion of the RTC decision in Criminal
Cases Nos. 37097 and 37098 since the trial courts judgment of acquittal failed to impose civil liability against the private respondents. By no amount of equity
considerations, if at all deserved, can a mere appeal on the civil aspect of a criminal case be treated as a derivative suit.[12]
Moreover, in Western Institute, we said that a mere appeal in the civil aspect cannot be treated as a derivative suit because the appeal lacked the
basic requirement that it must be alleged in the complaint that the shareholder is suing on a derivative cause of action for and in behalf of the corporation
and other shareholders who wish to join.
Under Section 36[13] of the Corporation Code, read in relation to Section 23,[14]where a corporation is an injured party, its power to sue is lodged
with its board of directors or trustees.[15] An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds
stocks in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued, or hold the
control of the corporation. In such actions, the suing stockholder is regarded as a nominal party, with the corporation as the real party in interest.[16]
A derivative action is a suit by a shareholder to enforce a corporate cause of action. The corporation is a necessary party to the suit. And the relief
which is granted is a judgment against a third person in favor of the corporation. Similarly, if a corporation has a defense to an action against it and is not
asserting it, a stockholder may intervene and defend on behalf of the corporation.[17]
Under the Revised Penal Code, every person criminally liable for a felony is also civilly liable.[18] 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.[19]
In Criminal Case No. 285721, the complaint was instituted by respondent against petitioner for falsifying corporate documents whose subject
concerns corporate projects of Siena Realty Corporation. Clearly, Siena Realty Corporation is an offended party. Hence, Siena Realty Corporation has a
cause of action. And the civil case for the corporate cause of action is deemed instituted in the criminal action.
However, the board of directors of the corporation in this case did not institute the action against petitioner. Private respondent was the one who
instituted the action. Private respondent asserts that she filed a derivative suit in behalf of the corporation. This assertion is inaccurate. Not every suit
filed in behalf of the corporation is a derivative suit. For a derivative suit to prosper, it is required that the minority stockholder suing for and on behalf of
the corporation must allege in his complaint that he is suing on a derivative cause of action on behalf of the corporation and all other stockholders
similarly situated who may wish to join him in the suit.[20] It is a condition sine qua non that the corporation be impleaded as a party because not only is
the corporation an indispensable party, but it is also the present rule that it must be served with process. The judgment must be made binding upon the
corporation in order that the corporation may get the benefit of the suit and may not bring subsequent suit against the same defendants for the same
cause of action. In other words, the corporation must be joined as party because it is its cause of action that is being litigated and because judgment
must be a res adjudicata against it.[21]
In the criminal complaint filed by herein respondent, nowhere is it stated that she is filing the same in behalf and for the benefit of the corporation.
Thus, the criminal complaint including the civil aspect thereof could not be deemed in the nature of a derivative suit.
We turn now to the second issue, is the corporation a proper party in the petition for certiorari under Rule 65 before the RTC? Note that the case
was titled Lydia C. Hao, in her own behalf and for the benefit of Siena Realty Corporation v. Francis Chua, and the Honorable Hipolito dela Vega,

Presiding Judge, Branch 22, Metropolitan Trial Court of Manila. Petitioner before us now claims that the corporation is not a private complainant in
Criminal Case No. 285721, and thus cannot be included as appellant in SCA No. 99-94846.
Petitioner invokes the case of Ciudad Real & Devt. Corporation v. Court of Appeals.[22] In Ciudad Real, it was ruled that the Court of Appeals
committed grave abuse of discretion when it upheld the standing of Magdiwang Realty Corporation as a party to the petition for certiorari, even though it
was not a party-in-interest in the civil case before the lower court.
In the present case, respondent claims that the complaint was filed by her not only in her personal capacity, but likewise for the benefit of the
corporation. Additionally, she avers that she has exhausted all remedies available to her before she instituted the case, not only to claim damages for
herself but also to recover the damages caused to the company.
Under Rule 65 of the Rules of Civil Procedure,[23] when a trial court commits a grave abuse of discretion amounting to lack or excess of jurisdiction,
the person aggrieved can file a special civil action for certiorari. The aggrieved parties in such a case are the State and the private offended party or
complainant.[24]
In a string of cases, we consistently ruled that only a party-in-interest or those aggrieved may file certiorari cases. It is settled that the offended
parties in criminal cases have sufficient interest and personality as person(s) aggrieved to file special civil action of prohibition and certiorari.[25]
In Ciudad Real, cited by petitioner, we held that the appellate court committed grave abuse of discretion when it sanctioned the standing of a
corporation to join said petition for certiorari, despite the finality of the trial courts denial of its Motion for Intervention and the subsequent Motion to
Substitute and/or Join as Party/Plaintiff.
Note, however, that in Pastor, Jr. v. Court of Appeals[26] we held that if aggrieved, even a non-party may institute a petition for certiorari. In that
case, petitioner was the holder in her own right of three mining claims and could file a petition for certiorari, the fastest and most feasible remedy since
she could not intervene in the probate of her father-in-laws estate.[27]
In the instant case, we find that the recourse of the complainant to the respondent Court of Appeals was proper. The petition was brought in her
own name and in behalf of the Corporation. Although, the corporation was not a complainant in the criminal action, the subject of the falsification was the
corporations project and the falsified documents were corporate documents. Therefore, the corporation is a proper party in the petition for certiorari
because the proceedings in the criminal case directly and adversely affected the corporation.
We turn now to the third issue. Did the Court of Appeals and the lower court err in allowing private prosecutors to actively participate in the trial of
Criminal Case No. 285721?
Petitioner cites the case of Tan, Jr. v. Gallardo,[28] holding that where from the nature of the offense or where the law defining and punishing the
offense charged does not provide for an indemnity, the offended party may not intervene in the prosecution of the offense.
Petitioners contention lacks merit. Generally, the basis of civil liability arising from crime is the fundamental postulate that every man criminally
liable is also civilly liable. 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 has violated; and (2) the individual member of the society whose person, right, honor, chastity or property has been actually or
directly injured or damaged by the same punishable act or omission. 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. Additionally, 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, whether done
intentionally or negligently. The indemnity which a person is sentenced to pay forms an integral part of the penalty imposed by law for the commission of
the crime.[29] The civil action involves the civil liability arising from the offense charged which includes restitution, reparation of the damage caused, and
indemnification for consequential damages.[30]
Under the Rules, where the civil action for recovery of civil liability is instituted in the criminal action pursuant to Rule 111, the offended party may
intervene by counsel in the prosecution of the offense.[31] Rule 111(a) of the Rules of Criminal Procedure provides that, [w]hen a criminal action is
instituted, the civil action 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.
Private respondent did not waive the civil action, nor did she reserve the right to institute it separately, nor institute the civil action for damages
arising from the offense charged. Thus, we find that the private prosecutors can intervene in the trial of the criminal action.
Petitioner avers, however, that respondents testimony in the inferior court did not establish nor prove any damages personally sustained by her as
a result of petitioners alleged acts of falsification. Petitioner adds that since no personal damages were proven therein, then the participation of her
counsel as private prosecutors, who were supposed to pursue the civil aspect of a criminal case, is not necessary and is without basis.
When the civil action is instituted with the criminal action, evidence should be taken of the damages claimed and the court should determine who
are the persons entitled to such indemnity. The civil liability arising from the crime may be determined in the criminal proceedings if the offended party
does not waive to have it adjudged or does not reserve the right to institute a separate civil action against the defendant. Accordingly, if there is no
waiver or reservation of civil liability, evidence should be allowed to establish the extent of injuries suffered.[32]
In the case before us, there was neither a waiver nor a reservation made; nor did the offended party institute a separate civil action. It follows that
evidence should be allowed in the criminal proceedings to establish the civil liability arising from the offense committed, and the private offended party
has the right to intervene through the private prosecutors.
WHEREFORE, the instant petition is DENIED. The Decision, dated June 14, 2001, and the Resolution, dated November 20, 2001, of the Court of
Appeals in CA-G.R. SP No. 57070, affirming the Order, dated October 5, 1999, of the Regional Trial Court (RTC) of Manila, Branch 19, are AFFIRMED.
Accordingly, the private prosecutors are hereby allowed to intervene in behalf of private respondent Lydia Hao in the prosecution of the civil aspect of
Criminal Case No. 285721 before Branch 22, of Metropolitan Trial Court (MeTC) of Manila. Costs against petitioner.
SO ORDERED.

[G.R. No. 151452. July 29, 2005]

SPS. ANTONIO C. SANTOS and ESPERANZA C. SANTOS, NORA BARNALO, BELINDA LUMACTAD, MARIENELA DY, NIKKA SANTOS and
LEONARDO FERRER, petitioners, vs. HON. NORMANDIE B. PIZARDO, as Presiding Judge, RTC of Quezon City, Branch 101,
DIONISIO M SIBAYAN, and VIRON TRANSPORTATION COMPANY, INC., represented by VIRGILIO Q. RONDARIS,
President/Chairman, respondents.
DECISION
TINGA, J.:
In this Petition for Review on Certiorari[1] dated March 1, 2002, petitioners assail the Resolutions of the Court of Appeals dated September 10,
2001 and January 9, 2002, respectively dismissing their petition for certiorari and denying their motion for reconsideration, arising from the dismissal of
their complaint to recover civil indemnity for the death and physical injuries of their kin.
The following facts are matters of record.
In an Information dated April 25, 1994, Dionisio M. Sibayan (Sibayan) was charged with Reckless Imprudence Resulting to Multiple Homicide and
Multiple Physical Injuries in connection with a vehicle collision between a southbound Viron Transit bus driven by Sibayan and a northbound Lite Ace
Van, which claimed the lives of the vans driver and three (3) of its passengers, including a two-month old baby, and caused physical injuries to five (5)
of the vans passengers. After trial, Sibayan was convicted and sentenced to suffer the penalty of imprisonment for two (2) years, four (4) months and
one (1) day to four (4) years and two (2) months. However, as there was a reservation to file a separate civil action, no pronouncement of civil liability
was made by the municipal circuit trial court in its decision promulgated on December 17, 1998.[2]
On October 20, 2000, petitioners filed a complaint for damages against Sibayan, Viron Transit and its President/Chairman, Virgilio Q. Rondaris,
with the Regional Trial Court of Quezon City, pursuant to their reservation to file a separate civil action.[3] They cited therein the judgment convicting
Sibayan.
Viron Transit moved to dismiss the complaint on the grounds of improper service of summons, prescription and laches, and defective certification
of non-forum shopping. It also sought the dropping of Virgilio Q. Rondaris as defendant in view of the separate personality of Viron Transit from its
officers.[4]
Petitioners opposed the motion to dismiss contending, among others, that the right to file a separate action in this case prescribes in ten (10) years
reckoned from the finality of the judgment in the criminal action. As there was no appeal of the decision convicting Sibayan, the complaint which was
filed barely two (2) years thence was clearly filed within the prescriptive period.
The trial court dismissed the complaint on the principal ground that the cause of action had already prescribed. According to the trial court, actions
based on quasi delict, as it construed petitioners cause of action to be, prescribe four (4) years from the accrual of the cause of action. Hence,
notwithstanding the fact that petitioners reserved the right to file a separate civil action, the complaint ought to be dismissed on the ground of
prescription.[5]
Improper service of summons was likewise cited as a ground for dismissal of the complaint as summons was served through a certain Jessica
Ubalde of the legal department without mentioning her designation or position.
Petitioners filed a motion for reconsideration pointing out yet again that the complaint is not based on quasi delict but on the final judgment of
conviction in the criminal case which prescribes ten (10) years from the finality of the judgment.[6] The trial court denied petitioners motion for
reconsideration reiterating that petitioners cause of action was based on quasi delict and had prescribed under Article 1146 of the Civil Code because
the complaint was filed more than four (4) years after the vehicular accident.[7] As regards the improper service of summons, the trial court reconsidered
its ruling that the complaint ought to be dismissed on this ground.
Petitioners filed a petition for certiorari with the Court of Appeals which dismissed the same for error in the choice or mode of appeal.[8] The
appellate court also denied petitioners motion for reconsideration reasoning that even if the respondent trial court judge committed grave abuse of
discretion in issuing the order of dismissal, certiorari is still not the permissible remedy as appeal was available to petitioners and they failed to allege
that the petition was brought within the recognized exceptions for the allowance of certiorari in lieu of appeal.[9]
In this petition, petitioners argue that a rigid application of the rule that certiorari cannot be a substitute for appeal will result in a judicial rejection of
an existing obligation arising from the criminal liability of private respondents. Petitioners insist that the liability sought to be enforced in the complaint
arose ex delicto and is not based on quasi delict. The trial court allegedly committed grave abuse of discretion when it insisted that the cause of action
invoked by petitioners is based on quasi delict and concluded that the action had prescribed. Since the action is based on the criminal liability of private
respondents, the cause of action accrued from the finality of the judgment of conviction.
Assuming that their petition with the appellate court was procedurally flawed, petitioners implore the Court to exempt this case from the rigid
operation of the rules as they allegedly have a legitimate grievance to vindicate, i.e., damages for the deaths and physical injuries caused by private
respondents for which no civil liability had been adjudged by reason of their reservation of the right to file a separate civil action.
In their Comment[10] dated June 13, 2002, private respondents insist that the dismissal of the complaint on the ground of prescription was in order.
They point out that the averments in the complaint make out a cause of action for quasi delictunder Articles 2176 and 2180 of the Civil Code. As such,
the prescriptive period of four (4) years should be reckoned from the time the accident took place.
Viron Transit also alleges that its subsidiary liability cannot be enforced since Sibayan was not ordered to pay damages in the criminal case. It is
Viron Transits contention that the subsidiary liability of the employer contemplated in Article 103 of the Revised Penal Code presupposes a situation
where the civil aspect of the case was instituted in the criminal case and no reservation to file a separate civil case was made.
Private respondents likewise allege that the recourse to the Court of Appeals viacertiorari was improper as petitioners should have appealed the
adverse order of the trial court. Moreover, they point out several other procedural lapses allegedly committed by petitioners, such as lack of certification
against forum-shopping; lack of duplicate original or certified true copy of the assailed order of the trial court; and non-indication of the full names and
addresses of petitioners in the petition.
Petitioners filed a Reply[11] dated September 14, 2002, while private respondents filed a Rejoinder[12] dated October 14, 2002, both in reiteration of
their arguments.
We grant the petition.

Our Revised Penal Code provides that every person criminally liable for a felony is also civilly liable.[13] Such civil liability may consist of restitution,
reparation of the damage caused and indemnification of consequential damages.[14] When a criminal action is instituted, the civil liability arising from the
offense is impliedly instituted with the criminal action, subject to three notable exceptions: first, when the injured party expressly waives the right to
recover damages from the accused; second,when the offended party reserves his right to have the civil damages determined in a separate action in
order to take full control and direction of the prosecution of his cause; and third, when the injured party actually exercises the right to maintain a private
suit against the offender by instituting a civil action prior to the filing of the criminal case.
Notably, it was the 1985 Rules on Criminal Procedure, as amended in 1988, which governed the institution of the criminal action, as well as the
reservation of the right to file a separate civil action. Section 1, Rule 111 thereof states:
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.
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 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 filing thereof in court for trial.
Petitioners expressly made a reservation of their right to file a separate civil action as a result of the crime committed by Sibayan. On account of
this reservation, the municipal circuit trial court, in its decision convicting Sibayan, did not make any pronouncement as to the latters civil liability.
Predicating their claim on the judgment of conviction and their reservation to file a separate civil action made in the criminal case, petitioners filed
a complaint for damages against Sibayan, Viron Transit and its President/Chairman. Petitioners assert that by the institution of the complaint, they seek
to recover private respondents civil liability arising from crime. Unfortunately, based on its misreading of the allegations in the complaint, the trial court
dismissed the same, declaring that petitioners cause of action was based on quasi delict and should have been brought within four (4) years from the
time the cause of action accrued, i.e., from the time of the accident.
A reading of the complaint reveals that the allegations therein are consistent with petitioners claim that the action was brought to recover civil
liability arising from crime. Although there are allegations of negligence on the part of Sibayan and Viron Transit, such does not necessarily mean that
petitioners were pursuing a cause of action based on quasi delict, considering that at the time of the filing of the complaint, the cause of action ex quasi
delicto had already prescribed. Besides, in cases of negligence, the offended party has the choice between an action to enforce civil liability arising from
crime under the Revised Penal Code and an action forquasi delict under the Civil Code.
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.[15] Either of these liabilities may be enforced against the offender subject to the caveat under
Article 2177 of the Civil Code that the plaintiff cannot recover damages twice for the same act or omission of the defendant and the similar proscription
against double recovery under the Rules above-quoted.
At the time of the filing of the complaint for damages in this case, the cause of action ex quasi delicto had already prescribed. Nonetheless,
petitioners can pursue the remaining avenue opened for them by their reservation, i.e., the surviving cause of action ex delicto. This is so because the
prescription of the action ex quasi delicto does not operate as a bar to an action to enforce the civil liability arising from crime especially as the latter
action had been expressly reserved.
The case of Mendoza v. La Mallorca Bus Company[16] was decided upon a similar set of facts. Therein, the driver of La Mallorca Bus Company
was charged with reckless imprudence resulting to damage to property. The plaintiff made an express reservation for the filing of a separate civil action.
The driver was convicted which conviction was affirmed by this Court. Later, plaintiff filed a separate civil action for damages based on quasi delict which
was ordered dismissed by the trial court upon finding that the action was instituted more than six (6) years from the date of the accident and thus, had
already prescribed. Subsequently, plaintiff instituted another action, this time based on the subsidiary liability of the bus company. The trial court
dismissed the action holding that the dismissal of the earlier civil case operated as a bar to the filing of the action to enforce the bus companys
subsidiary liability.
We held that the dismissal of the action based on culpa aquiliana is not a bar to the enforcement of the subsidiary liability of the employer. Once
there is a conviction for a felony, final in character, the employer becomes subsidiarily liable if the commission of the crime was in the discharge of the
duties of the employees. This is so because Article 103 of the Revised Penal Code operates with controlling force to obviate the possibility of the
aggrieved party being deprived of indemnity even after the rendition of a final judgment convicting the employee.
Seen in this light, the trial court should not have dismissed the complaint on the ground of prescription, but instead allowed the complaint for
damages ex delicto to be prosecuted on the merits, considering petitioners allegations in their complaint, opposition to the motion to dismiss[17] and
motion for reconsideration[18] of the order of dismissal, insisting that the action was to recover civil liability arising from crime.

This does not offend the policy that the reservation or institution of a separate civil action waives the other civil actions. 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.[19] However, since the stale
action for damages based onquasi delict should be considered waived, there is no more occasion for petitioners to file multiple suits against private
respondents as the only recourse available to them is to pursue damages ex delicto. This interpretation is also consistent with the bar against double
recovery for obvious reasons.
Now the procedural issue. Admittedly, petitioners should have appealed the order of dismissal of the trial court instead of filing a petition for
certiorari with the Court of Appeals. Such procedural misstep, however, should be exempted from the strict application of the rules in order to promote
their fundamental objective of securing substantial justice.[20] We are loathe to deprive petitioners of the indemnity to which they are entitled by law and
by a final judgment of conviction based solely on a technicality. It is our duty to prevent such an injustice.[21]
WHEREFORE, judgment is hereby rendered SETTING ASIDE the resolutions of the Court of Appeals dated September 10, 2001 and January 9,
2002, respectively dismissing the present action and denying petitioners motion for reconsideration, as well as the orders of the lower court dated
February 26, 2001 and July 16, 2001. Let the case be REMANDED to the trial court for further proceedings.
SO ORDERED.
G.R. No. 158995

September 26, 2006

L.G. FOODS CORPORATION and VICTORINO GABOR, Vice-President and General Manager, petitioners,
vs.
HON. PHILADELFA B. PAGAPONG-AGRAVIADOR, in her capacity as Presiding Judge of Regional Trial Court, Branch 43, Bacolod City, and
SPS. FLORENTINO and THERESA VALLEJERA, respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this petition for review on certiorari is the Decision1 dated April 25, 2003 of the Court of Appeals (CA), as
reiterated in its Resolution of July 10, 2003,2 in CA-G.R. SP No. 67600, affirming an earlier Order of the Regional Trial Court (RTC) of Bacolod City,
Branch 43, which denied the petitioners' motion to dismiss in Civil Case No. 99-10845, an action for damages arising from a vehicular accident thereat
instituted by the herein private respondents - the spouses Florentino Vallejera and Theresa Vallejera - against the petitioners.
The antecedent facts may be briefly stated as follows:
On February 26, 1996, Charles Vallereja, a 7-year old son of the spouses Florentino Vallejera and Theresa Vallejera, was hit by a Ford Fiera van owned
by the petitioners and driven at the time by their employee, Vincent Norman Yeneza y Ferrer. Charles died as a result of the accident.
In time, an Information for Reckless Imprudence Resulting to Homicide was filed against the driver before the Municipal Trial Court in Cities (MTCC),
Bacolod City, docketed as Criminal Case No. 67787, entitled People of the Philippines v. Vincent Norman Yeneza.
Unfortunately, before the trial could be concluded, the accused driver committed suicide, evidently bothered by conscience and remorse. On account
thereof, the MTCC, in its order of September 30, 1998, dismissed the criminal case.
On June 23, 1999, in the RTC of Bacolod City, the spouses Vallejera filed a complaint3 for damages against the petitioners as employers of the
deceased driver, basically alleging that as such employers, they failed to exercise due diligence in the selection and supervision of their employees.
Thereat docketed as Civil Case No. 99-10845, the complaint was raffled to Branch 43 of the court.
In their Answer with Compulsory Counterclaim,4 the petitioners as defendants denied liability for the death of the Vallejeras' 7-year old son, claiming that
they had exercised the required due diligence in the selection and supervision of their employees, including the deceased driver. They thus prayed in
their Answer for the dismissal of the complaint for lack of cause of action on the part of the Vallejera couple.
During pre-trial, the defendant petitioners insisted that their dismissal prayer be resolved. Hence, the trial court required them to file within ten days a
memorandum of authorities supportive of their position.
Instead, however, of the required memorandum of authorities, the defendant petitioners filed a Motion to Dismiss, principally arguing that the complaint
is basically a "claim for subsidiary liability against an employer" under the provision of Article 1035 of the Revised Penal Code. Prescinding therefrom,
they contend that there must first be a judgment of conviction against their driver as a condition sine qua non to hold them liable. Ergo, since the driver
died during the pendency of the criminal action, the sine qua non condition for their subsidiary liability was not fulfilled, hence the of lack of cause of
action on the part of the plaintiffs. They further argue that since the plaintiffs did not make a reservation to institute a separate action for damages when
the criminal case was filed, the damage suit in question is thereby deemed instituted with the criminal action. which was already dismissed.
In an Order dated September 4, 2001,6 the trial court denied the motion to dismiss for lack of merit and set the case for pre-trial. With their motion for
reconsideration having been denied by the same court in its subsequent order7 of September 26, 2001, the petitioners then went on certiorari to the CA
in CA-G.R. SP No. 67600, imputing grave abuse of discretion on the part of the trial judge in refusing to dismiss the basic complaint for damages in Civil
Case No. 99-10845.
In the herein assailed decision8 dated April 25, 2003, the CA denied the petition and upheld the trial court. Partly says the CA in its challenged issuance:
xxx

xxx

xxx

It is clear that the complaint neither represents nor implies that the responsibility charged was the petitioner's subsidiary liability under Art.
103, Revised Penal Code. As pointed out [by the trial court] in the Order of September 4, 2001, the complaint does not even allege the basic
elements for such a liability, like the conviction of the accused employee and his insolvency. Truly enough, a civil action to enforce subsidiary
liability separate and distinct from the criminal action is even unnecessary.
xxx

xxx

xxx

Specifically, Civil Case No. 99-10845 exacts responsibility for fault or negligence under Art. 2176, Civil Code, which is
entirely separate and distinct from the civil liability arising from negligence under the Revised Penal Code. Verily, therefore, the liability under
Art. 2180, Civil Code, is direct and immediate, and not conditioned upon prior recourse against the negligent employee or prior showing of the
latter's insolvency. (Underscoring in the original.)
In time, the petitioners moved for a reconsideration but their motion was denied by the CA in its resolution9 of July 10, 2003. Hence, the petitioners'
present recourse on their submission that the appellate court committed reversible error in upholding the trial court's denial of their motion to dismiss.
We DENY.
As the Court sees it, the sole issue for resolution is whether the spouses Vallejeras' cause of action in Civil Case No. 99-10845 is founded on Article 103
of the Revised Penal Code, as maintained by the petitioners, or derived from Article 218010 of the Civil Code, as ruled by the two courts below.
It thus behooves us to examine the allegations of the complaint for damages in Civil Case No. 99-10845. That complaint alleged, inter alia, as follows:
xxx

xxx

xxx

3. That defendant [LG Food Corporation] is the registered owner of a Ford Fiera Van with Plate No. NMS 881 and employer sometime
February of 1996 of one Vincent Norman Yeneza y Ferrer, a salesman of said corporation;
4. That sometime February 26, 1996 at around 2:00 P.M. at Rosario St., Bacolod City, the minor son of said plaintiffs [now respondents],
Charles Vallejera, 7 years old, was hit and bumped by above-described vehicle then driven by said employee, Vincent Norman Yeneza y
Ferrer;
5. That the mishap was due to the gross fault and negligence of defendant's employee, who drove said vehicle, recklessly, negligently and at
a high speed without regard to traffic condition and safety of other road users and likewise to the fault and negligence of the owner employer,
herein defendants LG Food Corporation who failed to exercise due diligence in the selection and supervision of his employee, Vincent Norman
Yeneza y Ferrer;
6. That as a result of said incident, plaintiffs' son suffered multiple body injuries which led to his untimely demise on that very day;
7. That a criminal case was filed against the defendant's employee, docketed as Criminal Case No. 67787, (earlier filed as Crim. Case No. 9617570 before RTC) before MTC-Branch III, entitled "People v. Yeneza" for "Reckless Imprudence resulting to Homicide," but the same was
dismissed because pending litigation, then remorse-stricken [accused] committed suicide;
xxx xxx xxx
8. That the injuries and complications as well as the resultant death suffered by the late minor Charles Vallejera were due to the negligence
and imprudence of defendant's employee;
9. That defendant LG Foods Corporation is civilly liable for the negligence/imprudence of its employee since it failed to exercise the
necessary diligence required of a good father of the family in the selection and supervision of his employee, Vincent Norman
Yeneza y Ferrer which diligence if exercised, would have prevented said incident. (Bracketed words and emphasis ours.)
Nothing in the foregoing allegations suggests, even remotely, that the herein petitioners are being made to account for their subsidiary liability under
Article 103 of the Revised Penal Code. As correctly pointed out by the trial court in its order of September 4, 2001 denying the petitioners' Motion to
Dismiss, the complaint did not even aver the basic elements for the subsidiary liability of an employer under Article 103 of the Revised Penal Code, such
as the prior conviction of the driver in the criminal case filed against him nor his insolvency.
Admittedly, the complaint did not explicitly state that plaintiff Vallejeras were suing the defendant petitioners for damages based on quasi-delict. Clear it
is, however, from the allegations of the complaint that quasi-delict was their choice of remedy against the petitioners. To stress, the plaintiff spouses
alleged in their complaint gross fault and negligence on the part of the driver and the failure of the petitioners, as employers, to exercise due diligence in
the selection and supervision of their employees. The spouses further alleged that the petitioners are civilly liable for the negligence/imprudence of their
driver since they failed to exercise the necessary diligence required of a good father of the family in the selection and supervision of their employees,
which diligence, if exercised, could have prevented the vehicular accident that resulted to the death of their 7-year old son.
Section 2, Rule 2, of the 1997 Rules of Civil Procedure defines cause of action as the "act or omission by which a party violates the right of another."
Such act or omission gives rise to an obligation which may come from law, contracts, quasi contracts, delicts or quasi-delicts.11
Corollarily, 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;12 and 2) independent civil liabilities, such as those (a) not arising from an act or omission complained of as felony (e.g., culpa contractual or

obligations arising from law;13 the intentional torts;14 and culpa aquiliana15); or (b) where the injured party is granted a right to file an action independent
and distinct from the criminal action.16 Either of these two possible liabilities may be enforced against the offender.17
Stated otherwise, victims of negligence or their heirs have a choice between an action to enforce the civil liability arising from culpa criminal under Article
100 of the Revised Penal Code, and an action for quasi-delict (culpa aquiliana) under Articles 2176 to 2194 of the Civil Code. If, as here, the action
chosen is for quasi-delict, the plaintiff may hold the employer liable for the negligent act of its employee, subject to the employer's defense of exercise of
the diligence of a good father of the family. On the other hand, if the action chosen is for culpa criminal, the plaintiff can hold the employer subsidiarily
liable only upon proof of prior conviction of its employee.18
Article 116119 of the Civil Code provides that civil obligation arising from criminal offenses shall be governed by penal laws subject to the provision of
Article 217720 and of the pertinent provision of Chapter 2, Preliminary Title on Human Relation, and of Title XVIII of this Book, regulating damages.
Plainly, Article 2177 provides for the alternative remedies the plaintiff may choose from in case the obligation has the possibility of arising indirectly from
the delict/crime or directly from quasi-delict/tort. The choice is with the plaintiff who makes known his cause of action in his initiatory pleading or
complaint,21 and not with the defendant who can not ask for the dismissal of the plaintiff's cause of action or lack of it based on the defendant's
perception that the plaintiff should have opted to file a claim under Article 103 of the Revised Penal Code.
Under Article 2180 of the Civil Code, the liability of the employer is direct or immediate. It is not conditioned upon prior recourse against the negligent
employee and a prior showing of insolvency of such employee.22
Here, the complaint sufficiently alleged that the death of the couple's minor son was caused by the negligent act of the petitioners' driver; and that the
petitioners themselves were civilly liable for the negligence of their driver for failing "to exercise the necessary diligence required of a good father of the
family in the selection and supervision of [their] employee, the driver, which diligence, if exercised, would have prevented said accident."
Had the respondent spouses elected to sue the petitioners based on Article 103 of the Revised Penal Code, they would have alleged that the guilt of the
driver had been proven beyond reasonable doubt; that such accused driver is insolvent; that it is the subsidiary liability of the defendant petitioners as
employers to pay for the damage done by their employee (driver) based on the principle that every person criminally liable is also civilly liable.23 Since
there was no conviction in the criminal case against the driver, precisely because death intervened prior to the termination of the criminal proceedings,
the spouses' recourse was, therefore, to sue the petitioners for their direct and primary liability based on quasi-delict.
Besides, it is worthy to note that the petitioners, in their Answer with Compulsory Counter-Claim,24 repeatedly made mention of Article 2180 of the Civil
Code and anchored their defense on their allegation that "they had exercised due diligence in the selection and supervision of [their] employees." The
Court views this defense as an admission that indeed the petitioners acknowledged the private respondents' cause of action as one for quasi-delict
under Article 2180 of the Civil Code.
All told, Civil Case No. 99-10845 is a negligence suit brought under Article 2176 - Civil Code to recover damages primarily from the petitioners as
employers responsible for their negligent driver pursuant to Article 2180 of the Civil Code. 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. Thus, the employer is liable for damages caused by his
employees and household helpers acting within the scope of their assigned tasks, even though the former is not engaged in any business or industry.
Citing Maniago v. CA,25 petitioner would argue that Civil Case No. 99-10845 should have been dismissed for failure of the respondent spouses to make
a reservation to institute a separate civil action for damages when the criminal case against the driver was filed.
The argument is specious.
To start with, the petitioners' reliance on Maniago is obviously misplaced. There, the civil case was filed while the criminal case against the employee
was still pending. Here, the criminal case against the employee driver was prematurely terminated due to his death. Precisely, Civil Case No. 99-10845
was filed by the respondent spouses because no remedy can be obtained by them against the petitioners with the dismissal of the criminal case against
their driver during the pendency thereof.
The circumstance that no reservation to institute a separate civil action for damages was made when the criminal case was filed is of no moment for the
simple reason that the criminal case was dismissed without any pronouncement having been made therein. In reality, therefor, it is as if there was no
criminal case to speak of in the first place. And for the petitioners to insist for the conviction of their driver as a condition sine qua non to hold them liable
for damages is to ask for the impossible.
IN VIEW WHEREOF, the instant petition is DENIED for lack of merit.
Costs against the petitioners.
SO ORDERED.
G.R. No. 161075

July 15, 2013

RAFAEL JOSE-CONSING, JR., Petitioner,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.
DECISION

BERSAMIN, J.:
An independent civil action based on fraud initiated by the defrauded party does not raise a prejudicial question to stop the proceedings in a pending
criminal prosecution of the defendant for estafa through falsification. This is because the result of the independent civil action is irrelevant to the issue of
guilt or innocence of the accused.
The Case
On appeal is the amended decision promulgated on August 18, 2003,1 whereby the Court of Appeals (CA) granted the writ of certiorari upon petition by
the State in C.A.-G.R. No. 71252 entitled People v. Han. Winlove M Dumayas, Presiding Judge, Branch 59, Regional Trial Court, Makati City and Rafael
Consing, Jr., and set aside the assailed order issued on November 26, 2001 by the Regional Trial Court (RTC), Branch 59, in Makati City deferring the
arraignment of petitioner in Criminal Case No. 00-120 entitled People v. Rafael Consing, Jr. upon his motion on the ground of the existence of a
prejudicial question in the civil cases pending between him and the complainant in the trial courts in Pasig City and Makati City.
Antecedents
Petitioner negotiated with and obtained for himself and his mother, Cecilia de la Cruz (de la Cruz) various loans totaling P18,000,000.00 from Unicapital
Inc. (Unicapital). The loans were secured by a real estate mortgage constituted on a parcel of land (property) covered by Transfer Certificate of Title
(TCT) No. T-687599 of the Registry of Deeds for the Province of Cavite registered under the name of de la Cruz.2 In accordance with its option to
purchase the mortgaged property, Unicapital agreed to purchase one-half of the property for a total consideration ofP21,221,500.00. Payment was
effected by off-setting the amounts due to
Unicapital under the promissory notes of de la Cruz and Consing in the amount of P18,000,000.00 and paying an additional amount of P3,145,946.50.
The other half of the property was purchased by Plus Builders, Inc. (Plus Builders), a joint venture partner of Unicapital.3
Before Unicapital and Plus Builders could develop the property, they learned that the title to the property was really TCT No. 114708 in the names of Po
Willie Yu and Juanito Tan Teng, the parties from whom the property had been allegedly acquired by de la Cruz. TCT No. 687599 held by De la Cruz
appeared to be spurious.4
On its part, Unicapital demanded the return of the total amount of P41,377,851.48 as of April 19, 1999 that had been paid to and received by de la Cruz
and Consing, but the latter ignored the demands.5
On July 22, 1999, Consing filed Civil Case No. 1759 in the Pasig City Regional Trial Court (RTC) (Pasig civil case) for injunctive relief, thereby seeking
to enjoin Unicapital from proceeding against him for the collection of theP41,377,851.48 on the ground that he had acted as a mere agent of his mother.
On the same date, Unicapital initiated a criminal complaint for estafa through falsification of public document against Consing and de la Cruz in the
Makati City Prosecutors Office.6
On August 6, 1999, Unicapital sued Consing in the RTC in Makati City (Civil Case No. 99-1418) for the recovery of a sum of money and damages, with
an application for a writ of preliminary attachment (Makati civil case).7
On January 27, 2000, the Office of the City Prosecutor of Makati City filed against Consing and De la Cruz an information for estafa through falsification
of public document in the RTC in Makati City (Criminal Case No. 00-120), which was assigned to Branch 60 (Makati criminal case).8
On February 15, 2001, Consing moved to defer his arraignment in the Makati criminal case on the ground of existence of a prejudicial question due to
the pendency of the Pasig and Makati civil cases. On September 25, 2001, Consing reiterated his motion for deferment of his arraignment, citing the
additional ground of pendency of CA-G.R. SP No. 63712 in the CA. On November 19, 2001, the Prosecution opposed the motion.9
On November 26, 2001, the RTC issued an order suspending the proceedings in the Makati criminal case on the ground of the existence of a prejudicial
question, and on March 18, 2001, the RTC denied the Prosecutions motion for reconsideration.10
The State thus assailed in the CA the last two orders of the RTC in the Makati criminal case via petition for certiorari (C.A.-G.R. SP No. 71252).
On May 20, 2003, the CA promulgated its decision in C.A.-G.R. SP No. 71252,11 dismissing the petition for certiorari and upholding the RTCs
questioned orders, explaining:
Is the resolution of the Pasig civil case prejudicial to the Cavite and Makati criminal cases?
We hold that it is. The resolution of the issue in the Pasig case, i.e. whether or not private respondent may be held liable in the questioned transaction,
will determine the guilt or innocence of private respondent Consing in both the Cavite and Makati criminal cases.
The analysis and comparison of the Pasig civil case, Makati criminal case, Makati civil case and Cavite criminal case show that: (1) the parties are
identical; (2) the transactions in controversy are identical; (3) the Transfer Certificate of Titles (TCT) involved are identical; (4) the questioned Deeds of
Sale/Mortgage are identical; (5) the dates in question are identical; and (6) the issue of private respondents culpability for the questioned transactions is
identical in all the proceedings.

As discussed earlier, not only was the issue raised in the Pasig civil case identical to or intimately related to the criminal cases in Cavite and Makati. The
similarities also extend to the parties in the cases and the TCT and Deed of Sale/ Mortgage involved in the questioned transactions.
The respondent Judge, in ordering the suspension of the arraignment of private respondent in the Makati case, in view of CA-G.R. SP No. 63712, where
Unicapital was not a party thereto, did so pursuant to its mandatory power to take judicial notice of an official act of another judicial authority. It was also
a better legal tack to prevent multiplicity of action, to which our legal system abhors.
Applying the Tuanda ruling, the pendency of CA-G.R. SP No. 63712 may be validly invoked to suspend private respondents arraignment in the Makati
City criminal case, notwithstanding the fact that CA-G.R. SP No. 63712 was an offshoot, merely, in the Cavite criminal case.12
In the meanwhile, on October 13, 1999, Plus Builders commenced its own suit for damages against Consing (Civil Case No. 99-95381) in the RTC in
Manila (Manila civil case).13
On January 21, 2000, an information for estafa through falsification of public document was filed against Consing and De la Cruz in the RTC in Imus,
Cavite, docketed as Criminal Case No. 7668-00 and assigned to Branch 21 (Cavite criminal case). Consing filed a motion to defer the arraignment on
the ground of the existence of a prejudicial question, i.e., the pendency of the Pasig and Manila civil cases. On January 27, 2000, however, the RTC
handling the Cavite criminal case denied Consings motion. Later on, it also denied his motion for reconsideration. Thereafter, Consing commenced in
the CA a special civil action for certiorari with prayer for the issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction (C.A.G.R. SP No. 63712), seeking to enjoin his arraignment and trial in the Cavite criminal case. The CA granted the TRO on March 19, 2001, and later
promulgated its decision on May 31, 2001, granting Consing petition for certiorari and setting aside the January 27, 2000 order of the RTC, and
permanently enjoining the RTC from proceeding with the arraignment and trial until the Pasig and Manila civil cases had been finally decided.
Not satisfied, the State assailed the decision of the CA in this Court (G.R. No. 148193), praying for the reversal of the May 31, 2001 decision of the CA.
On January 16, 2003, the Court granted the petition for review in G.R. No. 148193, and reversed and set aside the May 31, 2001 decision of the
CA,14 viz:
In the case at bar, we find no prejudicial question that would justify the suspension of the proceedings in the criminal case (the Cavite criminal case).
The issue in Civil Case No. SCA 1759 (the Pasig civil case) for Injunctive Relief is whether or not respondent (Consing) merely acted as an agent of his
mother, Cecilia de la Cruz; while in Civil Case No. 99-95381 (the Manila civil case), for Damages and Attachment, the question is whether respondent
and his mother are liable to pay damages and to return the amount paid by PBI for the purchase of the disputed lot. Even if respondent is declared
merely an agent of his mother in the transaction involving the sale of the questioned lot, he cannot be adjudged free from criminal liability. An agent or
any person may be held liable for conspiring to falsify public documents. Hence, the determination of the issue involved in Civil Case No. SCA 1759 for
Injunctive Relief is irrelevant to the guilt or innocence of the respondent in the criminal case for estafa through falsification of public document.
Likewise, the resolution of PBIs right to be paid damages and the purchase price of the lot in question will not be determinative of the culpability of the
respondent in the criminal case for even if PBI is held entitled to the return of the purchase price plus damages, it does not ipso facto follow that
respondent should be held guilty of estafa through falsification of public document. Stated differently, a ruling of the court in the civil case that PBI should
not be paid the purchase price plus damages will not necessarily absolve respondent of liability in the criminal case where his guilt may still be
established under penal laws as determined by other evidence.
Moreover, neither is there a prejudicial question if the civil and the criminal action can, according to law, proceed independently of each other. Under
Rule 111, Section 3 of the Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil Code, 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.
Thus, in Rojas v. People, the petitioner was accused in a criminal case for violation of Article 319 of the Revised Penal Code, for executing a new chattel
mortgage on personal property in favor of another party without consent of the previous mortgagee. Thereafter, the offended party filed a civil case for
termination of management contract, one of the causes of action of which consisted of petitioner having executed a chattel mortgage while the previous
chattel mortgage was still valid and subsisting. Petitioner moved that the arraignment and trial of the criminal case be held in abeyance on the ground
that the civil case was a prejudicial question, the resolution of which was necessary before the criminal proceedings could proceed. The trial court
denied the suspension of the criminal case on the ground that no prejudicial question exist. We affirmed the order of the trial court and ruled that:
the resolution of the liability of the defendant in the civil case on the eleventh cause of action based on the fraudulent misrepresentation that the
chattel mortgage the defendant executed in favor of the said CMS Estate, Inc. on February 20, 1957, that his D-6 "Caterpillar" Tractor with Serial No. 9U-6565 was "free from all liens and encumbrances" will not determine the criminal liability of the accused in the said Criminal Case No. 56042 for
violation of paragraph 2 of Article 319 of the Revised Penal Code. . . . (i) That, even granting for the sake of argument, a prejudicial question is involved
in this case, the fact remains that both the crime charged in the information in the criminal case and the eleventh cause of action in the civil case are
based upon fraud, hence both the civil and criminal cases could proceed independently of the other pursuant to Article 33 of the new Civil Code which
provides: "In cases of defamation, fraud and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action shall
proceed independently of the criminal prosecution, and shall require only a preponderance of evidence." (j) That, therefore, the act of respondent judge
in issuing the orders referred to in the instant petition was not made with "grave abuse of discretion."
In the instant case, Civil Case No. 99-95381, for Damages and Attachment on account of the alleged fraud committed by respondent and his mother in
selling the disputed lot to PBI is an independent civil action under Article 33 of the Civil Code. As such, it will not operate as a prejudicial question that
will justify the suspension of the criminal case at bar.15
Turning back to the Makati criminal case, the State moved for the reconsideration of the adverse decision of the CA, citing the ruling in G.R. No. 148193,
supra, to the effect that the Pasig and Manila civil cases did not present a prejudicial question that justified the suspension of the proceedings in the
Cavite criminal case, and claiming that under the ruling in G.R. No. 148193, the Pasig and Makati civil cases did not raise a prejudicial question that
would cause the suspension of the Makati criminal case.

In his opposition to the States motion for reconsideration, Consing contended that the ruling in G.R. No. 148193 was not binding because G.R. No.
148193 involved Plus Builders, which was different from Unicapital, the complainant in the Makati criminal case. He added that the decision in G.R. No.
148193 did not yet become final and executory, and could still be reversed at any time, and thus should not control as a precedent to be relied upon; and
that he had acted as an innocent attorney-in-fact for his mother, and should not be held personally liable under a contract that had involved property
belonging to his mother as his principal.
On August 18, 2003, the CA amended its decision, reversing itself. It relied upon the ruling in G.R. No. 148193, and held thusly:
CA-G.R. SP No. 63712 is similar with the case at bench. The transactions in controversy, the documents involved; the issue of the respondents
culpability for the questioned transactions are all identical in all the proceedings; and it deals with the same parties with the exception of private
complainant Unicapital.
However, the Supreme Court, upon review of CA-G.R. SP No. 63712, People of the Philippines vs. Rafael Jose Consing, Jr. (G.R. No. 148193, January
16, 2003) held that "Civil Case No. 99-95381, for Damages and attachment on account of alleged fraud committed by respondent and his mother in
selling the disputed lot to Plus Builders, Inc. is an independent civil action under Article 33 of the Civil Code. As such, it will not operate as a prejudicial
question that will justify the suspension of the criminal case at bar." In view of the aforementioned decision of the Supreme Court, We are thus amending
Our May 20, 2003 decision.
WHEREFORE, the petitioners motion for reconsideration is GRANTED. The Orders dated November 26, 2001 and March 18, 2002 issued by the
respondent Judge are hereby REVERSED and SET ASIDE. Respondent Judge is hereby ordered to proceed with the hearing of Criminal Case No. 00120 with dispatch.
SO ORDERED.16
Consing filed a motion for reconsideration,17 but the CA denied the motion through the second assailed resolution of December 11, 2003.18
Hence, this appeal by petition for review on certiorari.
Issue
Petitioner reiterates his contention that the decision in G.R. No. 148193 was not controlling in relation to C.A.-G.R. No. 71252, which involved Plus
Builders, not Unicapital, the complainant in Criminal Case No. 00-120. He posits that in arriving at its amended decision, the CA did not consider the
pendency of the Makati civil case (Civil Case No. 99-1418), which raised a prejudicial question, considering that the resolution of such civil action would
include the issue of whether he had falsified a certificate of title or had willfully defrauded Unicapital, the resolution of either of which would determine his
guilt or innocence in Criminal Case No. 00-120.
In its comment,19 the Office of the Solicitor General (OSG) counters that Unicapital brought the Makati civil case as an independent civil action intended
to exact civil liability separately from Criminal Case No. 00-120 in a manner fully authorized under Section 1(a) and Section 2, Rule 111 of the Rules of
Court.20 It argues that the CA correctly took cognizance of the ruling in G.R. No. 148193, holding in its challenged amended decision that the Makati civil
case, just like the Manila civil case, was an independent civil action instituted by virtue of Article 33 of the Civil Code; that the Makati civil case did not
raise a prejudicial question that justified the suspension of Criminal Case No. 00-120; and that as finally settled in G.R. No. 148193, the Pasig civil case
did not also raise any prejudicial question, because the sole issue thereat was whether Consing, as the mere agent of his mother, had any obligation or
liability toward Unicapital.
In his reply,21 Consing submits that the Pasig civil case that he filed and Unicapitals Makati civil case were not intended to delay the resolution of
Criminal Case No. 00-120, nor to pre-empt such resolution; and that such civil cases could be validly considered determinative of whether a prejudicial
question existed to warrant the suspension of Criminal Case No. 00-120.
Did the CA err in reversing itself on the issue of the existence of a prejudicial question that warranted the suspension of the proceedings in the Makati
criminal case?
Ruling
The petition for review on certiorari is absolutely meritless.
Consing has hereby deliberately chosen to ignore the firm holding in the ruling in G.R. No. 148193 to the effect that the proceedings in Criminal Case
No. 00-120 could not be suspended because the Makati civil case was an independent civil action, while the Pasig civil case raised no prejudicial
question. That was wrong for him to do considering that the ruling fully applied to him due to the similarity between his case with Plus Builders and his
case with Unicapital.
A perusal of Unicapitals complaint in the Makati civil case reveals that the action was predicated on fraud. This was apparent from the allegations of
Unicapital in its complaint to the effect that Consing and de la Cruz had acted in a "wanton, fraudulent, oppressive, or malevolent manner in offering as
security and later object of sale, a property which they do not own, and foisting to the public a spurious title."22 As such, the action was one that could
proceed independently of Criminal Case No. 00-120 pursuant to Article 33 of the Civil Code, which states as follows:
Article 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.

It is well settled that a civil action based on defamation, fraud and physical injuries may be independently instituted pursuant to Article 33 of the Civil
Code, and does not operate as a prejudicial question that will justify the suspension of a criminal case.23 This was precisely the Courts thrust in G.R. No.
148193, thus:
Moreover, neither is there a prejudicial question if the civil and the criminal action can, according to law, proceed independently of each other. Under
Rule 111, Section 3 of the Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil Code, 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.
xxxx
In the instant case, Civil Case No. 99-95381, for Damages and Attachment on account of the alleged fraud committed by respondent and his mother in
selling the disputed lot to PBI is an independent civil action under Article 33 of the Civil Code. As such, it will not operate as a prejudicial question that
will justify the suspension of the criminal case at bar.24
Contrary to Consings stance, it was not improper for the CA to apply the ruling in G.R. No. 148193 to his case with Unicapital, for, although the Manila
and Makati civil cases involved different complainants (i.e., Plus Builders and Unicapital), the civil actions Plus Builders and Unicapital had separately
instituted against him were undeniably of similar mold, i.e., they were both based on fraud, and were thus covered by Article 33 of the Civil Code.
Clearly, the Makati criminal case could not be suspended pending the resolution of the Makati civil case that Unicapital had filed.
As far as the Pasig civil case is concerned, the issue of Consings being a mere agent of his mother who should not be criminally liable for having so
acted due to the property involved having belonged to his mother as principal has also been settled in G.R. No. 148193, to wit:
In the case at bar, we find no prejudicial question that would justify the suspension of the proceedings in the criminal case (the Cavite criminal case).
The issue in Civil Case No. SCA 1759 (the Pasig civil case) for Injunctive Relief is whether or not respondent (Consing) merely acted as an agent of his
mother, Cecilia de la Cruz; while in Civil Case No. 99-95381 (the Manila civil case), for Damages and Attachment, the question is whether respondent
and his mother are liable to pay damages and to return the amount paid by PBI for the purchase of the disputed lot. Even if respondent is declared
merely an agent of his mother in the transaction involving the sale of the questioned lot, he cannot be adjudged free from criminal liability. An agent or
any person may be held liable for conspiring to falsify public documents. Hence, the determination of the issue involved in Civil Case No. SCA 1759 for
Injunctive Relief is irrelevant to the guilt or innocence of the respondent in the criminal case for estafa through falsification of public document.25 (Words
in parentheses supplied; bold underscoring supplied for emphasis)
WHEREFORE, the Court AFFIRMS the amended decision promulgated on August 18, 2003; and ORDERS petitioner to pay the costs of suit.
SO ORDERED.

[G.R. No. 122823. November 25, 1999]

SEA COMMERCIAL COMPANY, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, JAMANDRE INDUSTRIES, INC. and TIRSO
JAMANDRE, respondents.
DECISION
GONZAGA-REYES, J.:
In this petition for review by certiorari, SEA Commercial Company, Inc. (SEACOM) assails the decision of the Court of Appeals in CA-G.R. CV NO. 31263
affirming in toto the decision of the Regional Trial Court of Manila, Branch 5, in Civil Case No. 122391, in favor of Jamandre Industries, Inc. (JII) et al., the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the defendant and against the plaintiff, ordering the plaintiff:
1) To pay defendant the sum of P66,156.15 (minus 18,843.85) with legal interest thereon, from the date of the filing of the counterclaim until fully paid;
2) To pay defendant P2,000.00 as moral and exemplary damages;
3) To pay attorneys fees in the sum of P10,000.00; and
4) To pay the costs of this suit.
SO ORDERED.

SEACOM is a corporation engaged in the business of selling and distributing agricultural machinery, products and equipment. On September 20, 1966,
SEACOM and JII entered into a dealership agreement whereby SEACOM appointed JII as its exclusive dealer in the City and Province of Iloilo[1] Tirso Jamandre
executed a suretyship agreement binding himself jointly and severally with JII to pay for all obligations of JII to SEACOM[2]. The agreement was subsequently
amended to include Capiz in the territorial coverage and to make the dealership agreement on a non-exclusive basis[3]. In the course of the business relationship arising
from the dealership agreement, JII allegedly incurred a balance ofP18,843.85 for unpaid deliveries, and SEACOM brought action to recover said amount plus interest
and attorneys fees.
JII filed an Answer denying the obligation and interposing a counterclaim for damages representing unrealized profits when JII sold to the Farm System
Development Corporation (FSDC) twenty one (21) units of Mitsubishi power tillers. In the counterclaim, JII alleged that as a dealer in Capiz, JII contracted to sell in
1977 twenty-four (24) units of Mitsubishi power tillers to a group of farmers to be financed by said corporation, which fact JII allegedly made known to petitioner, but
the latter taking advantage of said information and in bad faith, went directly to FSDC and dealt with it and sold twenty one (21) units of said tractors, thereby depriving
JII of unrealized profit of eighty-five thousand four hundred fifteen and 61/100 pesos (P85,415.61).
The trial court rendered its decision on January 24, 1990 ordering JII to pay SEACOM the amount of Eighteen Thousand Eight Hundred Forty Three and 85/100
(P18,843.85) representing its outstanding obligation. The trial court likewise granted JIIs counterclaim for unrealized profits, and for moral and exemplary damages
and attorney fees as above quoted.
SEACOM appealed the decision on the counterclaim.
The Court of Appeals held that while there exists no agency relationship between SEACOM and JII, SEACOM is liable for damages and unrealized profits to JII.
This Court, however, is convinced that with or without the existence of an agency relationship between appellant SEACOM and appellee JII and notwithstanding the
error committed by the lower court in finding that an agency relationship existed between appellant and defendant corporation the former is liable for the unrealized
profits which the latter could have gained had not appellant unjustly stepped in and in bad faith unethically intervened.
It should be emphasized that the very purpose of the dealership agreement is for SEACOM to have JII as its dealer to sell its products in the provinces of Capiz and
Iloilo. In view of this agreement, the second assigned error that the lower court erred in holding that appellant learned of the FSDC transaction from defendant JII is
clearly immaterial and devoid of merit. The fact that the dealership is on a non-exclusive basis does not entitle appellant SEACOM to join the fray as against its
dealer. To do so, is to violate the norms of conduct enjoined by Art. 19 of the Civil Code. By virtue of such agreement, the competition in the market as regards the
sale of farm equipment shall be between JII, as the dealer of SEACOM and other companies, not as against SEACOM itself. However, SEACOM, not satisfied with
the presence of its dealer JII in the market, joined the competition even as the against the latter and, therefore, changed the scenario of the competition thereby rendering
inutile the dealership agreement which they entered into the manifest prejudice of JII. Hence, the trial court was correct when it applied Art. 19 of the Civil Code in the
case at bar in that appellant SEACOM acted in bad faith when it competed with its own dealer as regards the sale of farm machineries, thereby depriving appellee JII of
the opportunity to gain a clear profit of P85,000.00.
and affirmed the judgment appealed from in toto.
Hence this petition for review on certiorari, which submits the following reasons for the allowance thereof:
THE RESPONDENT COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND
JURISPRUDENCE, CONSIDERING THAT:
A
THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PETITIONER IS LIABLE TO PAY DAMAGES AND UNREALIZED
PROFITS TO THE PRIVATE RESPONDENTS DESPITE THE FACT THAT NO AGENCY RELATIONSHIP EXISTS BETWEEN THEM.
B
THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PETITIONER ACTED IN BAD FAITH AGAINST THE PRIVATE
RESPONDENT CORPORATION DESPITE THE FACT THAT SAID RULING IS CONTRARY TO THE EVIDENCE ON RECORD.
C
THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE NON-EXCLUSIVITY CLAUSE IN THE DEALERSHIP AGREEMENT
EXECUTED BETWEEN THE PETITIONER AND PRIVATE RESPONDENT CORPORATION PRECLUDES THE PETITIONER FROM COMPETING WITH
THE PRIVATE RESPONDENT CORPORATION.
D
THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO UNREALIZED PROFITS,
MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES.[4]
Petitioner SEACOM disputes the conclusion of the Court of Appeals that despite the fact that no agency relationship existed between the parties, the SEACOM is
still liable in damages and unrealized profits for the reason that it acted in bad faith. Petitioner SEACOM invokes the non-exclusivity clause in the dealership
agreement and claims that the transaction with FSDC was concluded pursuant to a public bidding and not on the basis of alleged information it received from private
respondent Tirso Jamandre. Moreover, petitioner SEACOM claims that it did not underprice its products during the public bidding wherein both SEACOM and JII
participated. Petitioner also disputes the award of moral damages to JII which is a corporation, in the absence of any evidence that the said corporation had a good
reputation which was debased.
Private respondents in their comment, contends that the four assigned errors raise mixed questions of fact and law and are therefore beyond the jurisdiction of the
Supreme Court which may take cognizance of only questions of law. The assigned errors were also refuted to secure affirmance of the appealed decision. JII maintains

that the bidding set by FSDC on March 24, 1997 was scheduled after the demonstration conducted by JII, and after JII informed SEACOM about the preference of the
farmers to buy Mitsubishi tillers. JII further rebuts the SEACOMs contention that the transaction with FSDC was pursuant to a public bidding with full disclosure to
the public and private respondent JII considering that JII had nothing to do with the list of 37 bidders and cannot be bound by the listing made by SEACOMs
employee; moreover, JII did not participate in the bidding not having been informed about it. Furthermore, the price at which SEACOM sold to FSDC was lower than
the price it gave to JII. Also, even if the dealership agreement was not exclusive, it was breached when petitioner in bad faith sold directly to FSDC with whom JII had
previously offered the subject farm equipment. With respect to the awards of moral and exemplary damages, JII seeks an affirmation of the ruling of the Court of
Appeals justifying the awards.
SEACOM filed Reply defending the jurisdiction of this Court over the instant petition since the decision of the Court of Appeals was based on a
misapprehension of facts. SEACOM insists that FSDCs purchase was made pursuant to a public bidding, and even if SEACOM did not participate thereon, JII would
not necessarily have closed the deal since thirty seven (37) bidders participated. SEACOM contends that no evidence was presented to prove that the bidding was a
fraudulent scheme of SEACOM and FSDC. SEACOM further controverts JIIs contention that JII did not take part in the bidding as Tirso Jamandre was one of the
bidders and that SEACOM underpriced its products to entice FSDC to buy directly from it. In fine, JII is not entitled to the award of unrealized profits and damages.
In its Rejoinder, private respondents insist that there is an agency relationship, citing the evidence showing that credit memos and not cash vouchers were issued
to JII by SEACOM for every delivery from November 26, 1976 to December 24, 1978. Private respondents maintain that SEACOM torpedoed the emerging deal
between JII and FSDC after being informed about it by JII by dealing directly with FSDC at a lower price and after betraying JII, SEACOM would cover up the deceit
by conniving with FSDC to post up a sham public bidding.
SEACOMs sur-rejoinder contains basically a reiteration of its contention in previous pleadings. Additionally, it is contended that private respondents are barred
from questioning in their Rejoinder, the finding of the Court of Appeals that there is no agency relationship between the parties since this matter was not raised as error
in their comment.
The core issue is whether SEACOM acted in bad faith when it competed with its own dealer as regards the sale of farm machineries to FSDC.
Both the trial court and the Court of Appeals held affirmatively; the trial court found that JII was an agent of SEACOM and the act of SEACOM in dealing
directly with FSDC was unfair and unjust to its agent, and that there was fraud in the transaction between FSDC and SEACOM to the prejudice of JII. On the other
hand, the Court of Appeals ruled that there was no agency relationship between the parties but SEACOM is nevertheless liable in damages for having acted in bad faith
when it competed with its own dealer in the sale of the farm machineries to FSDC. Both courts invoke as basis for the award Article 19 of the Civil Code which reads
as follows:
"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.
The principle of abuse of rights stated in the above article, departs from the classical theory that he who uses a right injures no one. The modern tendency is to
depart from the classical and traditional theory, and to grant indemnity for damages in cases where there is an abuse of rights, even when the act is not illicit.[5]
Article 19 was intended to expand the concept of torts by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human
foresight to provide specifically in statutory law.[6] If mere fault or negligence in ones acts can make him liable for damages for injury caused thereby, with more
reason should abuse or bad faith make him liable. The absence of good faith is essential to abuse of right. Good faith is an honest intention to abstain from taking any
unconscientious advantage of another, even through the forms or technicalities of the law, together with an absence of all information or belief of fact which would
render the transaction unconscientious. In business relations, it means good faith as understood by men of affairs.[7]
While Article 19 may have been intended as a mere declaration of principle[8], the cardinal law on human conduct expressed in said article has given rise to
certain rules, e.g. that where a person exercises his rights but does so arbitrarily or unjustly or performs his duties in a manner that is not in keeping with honesty and
good faith, he opens himself to liability.[9] The elements of an abuse of rights under Article 19 are: (1) there is a legal right or duty; (2) which is exercised in bad faith;
(3) for the sole intent of prejudicing or injuring another.[10]
The issue whether JII is entitled to recovery on its counterclaim for unrealized profit in the twenty one (21) units of Mitsubishi power tillers sold by SEACOM
to FSDC was resolved by the trial court in favor of JII on the basis of documentary evidence[11] showing that (1) JII has informed SEACOM as early as February 1977
of the promotions undertaken by JII for the sale of 24 contracted units to FSDC and in connection therewith, requested a 50% discount to make the price competitive,
and to increase the warranty period for eight months to one year. In said letter Jamandre clarified that they were not amenable to SEACOMs offering directly to
FSDC and to be only given the usual overriding commission as we have considerable investments on this transaction. (2) In response, the general sales manager of
SEACOM declined to give the requested 50% discount and offered a less 30% less 10% up to end March xxx on cash before delivery basis, granted the requested
extension of the warranty period and stated that we are glad to note that you have quite a number of units pending with the FSDC.
The trial court ruled that with said information, SEACOM dealt directly with FSDC and offered its units at a lower price, leaving FSDC no choice but to accept
the said offer of (SEACOM).
In affirming the judgment of the of the trial court, the Court of Appeals held that by virtue of the dealership agreement the competition in the market as regards
the sale of farm equipment shall be between JII, as the dealer of SEACOM, and other companies, not as against SEACOM itself, the Court stated:
However, SEACOM not satisfied with the presence of its dealer JII in the market, joined the competition even as against the latter, and thereby changed the scenario of
the competition thereby rendering inutile the dealership agreement which they entered into to the manifest prejudice of JII. Hence the trial court trial court was correct
when it applied Art. 19 of the Civil Code in the case at bar in that appellant SEACOM acted in bad faith when it competed with its own dealer as regards the sale of
farm machineries, thereby depriving appellee JII of the opportunity to gain a clear profit of P85,000.00.
We find no cogent reason to overturn the factual finding of the two courts that SEACOM joined the bidding for the sale of the farm equipment after it was
informed that JII was already promoting the sales of said equipment to the FSDC. Moreover, the conclusion of the trial court that the SEACOM offered FSDC a lower
price than the price offered by JII to FSDC is supported by the evidence: the price offered by JII to FSDC is P27,167 per unit[12] but the prices at which SEACOM sold
to FSDC were at P22,867.00 for Model CT 83-2, P21,093.50 for model CT 83-E, and P18,979.25 for model CT 534. The fact that SEACOM may have offered to JII,
in lieu of a requested 50% discount, a discount effectively translating to 37% of the list price and actually sold to FSDC at 35% less than the list price[13] does not detract
from the fact that by participating in the bidding of FSDC, it actually competed with its own dealer who had earlier conducted demonstrations and promoted its own
products for the sale of the very same equipment, Exh. N for the plaintiff confirms that both SEACOM and Jamandre participated in the bidding.[14]However, the
SEACOM was awarded the contract directly from Manila.[15] The testimony of Tirso Jamandre that JII was the sole representative of SEACOM in the local
demonstrations to convince the farmers and cooperative officers to accept the Mitsubishi brand of equipment in preference to other brands, was unrebutted by
SEACOM.

Clearly, the bad faith of SEACOM was established. By appointing as a dealer of its agricultural equipment, SEACOM recognized the role and undertaking of JII
to promote and sell said equipment. Under the dealership agreement, JII was to act as a middleman to sell SEACOMs products, in its area of operations, i.e. Iloilo and
Capiz provinces, to the exclusion of other places,[16] to send its men to Manila for training on repair, servicing and installation of the items to be handled by it, and to
comply with other personnel and vehicle requirements intended for the benefit of the dealership.[17] After being informed of the demonstrations JII had conducted to
promote the sales of SEACOM equipment, including the operations at JIIs expense conducted for five months, and the approval of its facilities (service and parts) by
FSDC,[18] SEACOM participated in the bidding for the said equipment at a lower price, placing itself in direct competition with its own dealer. The actuations of
SEACOM are tainted by bad faith.
Even if the dealership agreement was amended to make it on a non-exclusive basis,[19]SEACOM may not exercise its right unjustly or in a manner that is not in
keeping with honesty or good faith; otherwise it opens itself to liability under the abuse of right rule embodied in Article 19 of the Civil Code above-quoted. This
provision, together with the succeeding article on human relation, was intended to embody certain basic principles that are to be observed for the rightful relationship
between human beings and for the stability of the social order.[20] What is sought to be written into the law is the pervading principle of equity and justice above strict
legalism.[21]
We accordingly resolve to affirm the award for unrealized profits. The Court of Appeals noted that the trial court failed to specify to which the two appellees the
award for moral and exemplary damages is granted. However, in view of the fact that moral damages are not as a general rule granted to a corporation, and that Tirso
Jamandre was the one who testified on his feeling very aggrieved and on his mental anguish and sleepless nights thinking of how SEACOM dealt with us behind (our)
backs,[22] the award should go to defendant Jamandre, President of JII.
WHEREFORE, the judgment appealed from is AFFIRMED with the modification that the award of P2,000.00 in moral and exemplary damages shall be paid to
defendant Tirso Jamandre.
Costs against appellant.
SO ORDERED.
G.R. No. 81262 August 25, 1989
GLOBE MACKAY CABLE AND RADIO CORP., and HERBERT C. HENDRY, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and RESTITUTO M. TOBIAS, respondents.
Atencia & Arias Law Offices for petitioners.
Romulo C. Felizmena for private respondent.

CORTES, J.:
Private respondent Restituto M. Tobias was employed by petitioner Globe Mackay Cable and Radio Corporation (GLOBE MACKAY) in a dual capacity
as a purchasing agent and administrative assistant to the engineering operations manager. In 1972, GLOBE MACKAY discovered fictitious purchases
and other fraudulent transactions for which it lost several thousands of pesos.
According to private respondent it was he who actually discovered the anomalies and reported them on November 10, 1972 to his immediate superior
Eduardo T. Ferraren and to petitioner Herbert C. Hendry who was then the Executive Vice-President and General Manager of GLOBE MACKAY.
On November 11, 1972, one day after private respondent Tobias made the report, petitioner Hendry confronted him by stating that he was the number
one suspect, and ordered him to take a one week forced leave, not to communicate with the office, to leave his table drawers open, and to leave the
office keys.
On November 20, 1972, when private respondent Tobias returned to work after the forced leave, petitioner Hendry went up to him and called him a
"crook" and a "swindler." Tobias was then ordered to take a lie detector test. He was also instructed to submit specimen of his handwriting, signature,
and initials for examination by the police investigators to determine his complicity in the anomalies.
On December 6,1972, the Manila police investigators submitted a laboratory crime report (Exh. "A") clearing private respondent of participation in the
anomalies.
Not satisfied with the police report, petitioners hired a private investigator, retired Col. Jose G. Fernandez, who on December 10, 1972, submitted a
report (Exh. "2") finding Tobias guilty. This report however expressly stated that further investigation was still to be conducted.
Nevertheless, on December 12, 1972, petitioner Hendry issued a memorandum suspending Tobias from work preparatory to the filing of criminal
charges against him.
On December 19,1972, Lt. Dioscoro V. Tagle, Metro Manila Police Chief Document Examiner, after investigating other documents pertaining to the
alleged anomalous transactions, submitted a second laboratory crime report (Exh. "B") reiterating his previous finding that the handwritings, signatures,
and initials appearing in the checks and other documents involved in the fraudulent transactions were not those of Tobias. The lie detector tests
conducted on Tobias also yielded negative results.
Notwithstanding the two police reports exculpating Tobias from the anomalies and the fact that the report of the private investigator, was, by its own
terms, not yet complete, petitioners filed with the City Fiscal of Manila a complaint for estafa through falsification of commercial documents, later

amended to just estafa. Subsequently five other criminal complaints were filed against Tobias, four of which were for estafa through Falsification of
commercial document while the fifth was for of Article 290 of' the Revised Penal Code (Discovering Secrets Through Seizure of
Correspondence).lwph1.t Two of these complaints were refiled with the Judge Advocate General's Office, which however, remanded them to the
fiscal's office. All of the six criminal complaints were dismissed by the fiscal. Petitioners appealed four of the fiscal's resolutions dismissing the criminal
complaints with the Secretary of Justice, who, however, affirmed their dismissal.
In the meantime, on January 17, 1973, Tobias received a notice (Exh. "F") from petitioners that his employment has been terminated effective December
13, 1972. Whereupon, Tobias filed a complaint for illegal dismissal. The labor arbiter dismissed the complaint. On appeal, the National Labor Relations
Commission (NLRC) reversed the labor arbiter's decision. However, the Secretary of Labor, acting on petitioners' appeal from the NLRC ruling,
reinstated the labor arbiter's decision. Tobias appealed the Secretary of Labor's order with the Office of the President. During the pendency of the appeal
with said office, petitioners and private respondent Tobias entered into a compromise agreement regarding the latter's complaint for illegal dismissal.
Unemployed, Tobias sought employment with the Republic Telephone Company (RETELCO). However, petitioner Hendry, without being asked by
RETELCO, wrote a letter to the latter stating that Tobias was dismissed by GLOBE MACKAY due to dishonesty.
Private respondent Tobias filed a civil case for damages anchored on alleged unlawful, malicious, oppressive, and abusive acts of petitioners. Petitioner
Hendry, claiming illness, did not testify during the hearings. The Regional Trial Court (RTC) of Manila, Branch IX, through Judge Manuel T. Reyes
rendered judgment in favor of private respondent by ordering petitioners to pay him eighty thousand pesos (P80,000.00) as actual damages, two
hundred thousand pesos (P200,000.00) as moral damages, twenty thousand pesos (P20,000.00) as exemplary damages, thirty thousand pesos
(P30,000.00) as attorney's fees, and costs. Petitioners appealed the RTC decision to the Court of Appeals. On the other hand, Tobias appealed as to
the amount of damages. However, the Court of Appeals, an a decision dated August 31, 1987 affirmed the RTC decision in toto. Petitioners' motion for
reconsideration having been denied, the instant petition for review on certiorari was filed.
The main issue in this case is whether or not petitioners are liable for damages to private respondent.
Petitioners contend that they could not be made liable for damages in the lawful exercise of their right to dismiss private respondent.
On the other hand, private respondent contends that because of petitioners' abusive manner in dismissing him as well as for the inhuman treatment he
got from them, the Petitioners must indemnify him for the damage that he had suffered.
One of the more notable innovations of the New Civil Code is the codification of "some basic principles that are to be observed for the rightful
relationship between human beings and for the stability of the social order." [REPORT ON THE CODE COMMISSION ON THE PROPOSED CIVIL
CODE OF THE PHILIPPINES, p. 39]. The framers of the Code, seeking to remedy the defect of the old Code which merely stated the effects of the law,
but failed to draw out its spirit, incorporated certain fundamental precepts which were "designed to indicate certain norms that spring from the fountain of
good conscience" and which were also meant to serve as "guides for human conduct [that] should run as golden threads through society, to the end that
law may approach its supreme ideal, which is the sway and dominance of justice" (Id.) Foremost among these principles is that pronounced in Article 19
which provides:
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.
This article, 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.
Article 20, which pertains to damage arising from a violation of law, provides that:
Art. 20. Every person who contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.
However, in the case at bar, petitioners claim that they did not violate any provision of law since they were merely exercising their legal right to dismiss
private respondent. This does not, however, leave private respondent with no relief because Article 21 of the Civil Code provides that:
Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy
shall compensate the latter for the damage.
This article, adopted to remedy the "countless gaps in the statutes, which leave so many victims of moral wrongs helpless, even though they have
actually suffered material and moral injury" [Id.] should "vouchsafe adequate legal remedy for that untold number of moral wrongs which it is impossible
for human foresight to provide for specifically in the statutes" [Id. it p. 40; See also PNB v. CA, G.R. No. L-27155, May 18,1978, 83 SCRA 237, 247].
In determining whether or not the principle of abuse of rights may be invoked, there is no rigid test which can be applied. While the Court has not
hesitated to apply Article 19 whether the legal and factual circumstances called for its application [See for e.g., Velayo v. Shell Co. of the Phil., Ltd., 100
Phil. 186 (1956); PNB v. CA, supra; Grand Union Supermarket, Inc. v. Espino, Jr., G.R. No. L-48250, December 28, 1979, 94 SCRA 953; PAL v. CA,
G.R. No. L-46558, July 31,1981,106 SCRA 391; United General Industries, Inc, v. Paler G.R. No. L-30205, March 15,1982,112 SCRA 404; Rubio v. CA,
G.R. No. 50911, August 21, 1987, 153 SCRA 183] the question of whether or not the principle of abuse of rights has been violated resulting in damages
under Article 20 or Article 21 or other applicable provision of law, depends on the circumstances of each case. And in the instant case, the Court, after

examining the record and considering certain significant circumstances, finds that all petitioners have indeed abused the right that they invoke, causing
damage to private respondent and for which the latter must now be indemnified.
The trial court made a finding that notwithstanding the fact that it was private respondent Tobias who reported the possible existence of anomalous
transactions, petitioner Hendry "showed belligerence and told plaintiff (private respondent herein) that he was the number one suspect and to take a one
week vacation leave, not to communicate with the office, to leave his table drawers open, and to leave his keys to said defendant (petitioner Hendry)"
[RTC Decision, p. 2; Rollo, p. 232]. This, petitioners do not dispute. But regardless of whether or not it was private respondent Tobias who reported the
anomalies to petitioners, the latter's reaction towards the former upon uncovering the anomalies was less than civil. An employer who harbors
suspicions that an employee has committed dishonesty might be justified in taking the appropriate action such as ordering an investigation and directing
the employee to go on a leave. Firmness and the resolve to uncover the truth would also be expected from such employer. But the high-handed
treatment accorded Tobias by petitioners was certainly uncalled for. And this reprehensible attitude of petitioners was to continue when private
respondent returned to work on November 20, 1972 after his one week forced leave. Upon reporting for work, Tobias was confronted by Hendry who
said. "Tobby, you are the crook and swindler in this company." Considering that the first report made by the police investigators was submitted only on
December 10, 1972 [See Exh. A] the statement made by petitioner Hendry was baseless. The imputation of guilt without basis and the pattern of
harassment during the investigations of Tobias transgress the standards of human conduct set forth in Article 19 of the Civil Code. The Court has
already ruled that the right of the employer to dismiss an employee should not be confused with the manner in which the right is exercised and the
effects flowing therefrom. If the dismissal is done abusively, then the employer is liable for damages to the employee [Quisaba v. Sta. Ines-Melale
Veneer and Plywood Inc., G.R. No. L-38088, August 30, 1974, 58 SCRA 771; See also Philippine Refining Co., Inc. v. Garcia, G.R. No. L-21871,
September 27,1966, 18 SCRA 107] Under the circumstances of the instant case, the petitioners clearly failed to exercise in a legitimate manner their
right to dismiss Tobias, giving the latter the right to recover damages under Article 19 in relation to Article 21 of the Civil Code.
But petitioners were not content with just dismissing Tobias. Several other tortious acts were committed by petitioners against Tobias after the latter's
termination from work. Towards the latter part of January, 1973, after the filing of the first of six criminal complaints against Tobias, the latter talked to
Hendry to protest the actions taken against him. In response, Hendry cut short Tobias' protestations by telling him to just confess or else the company
would file a hundred more cases against him until he landed in jail. Hendry added that, "You Filipinos cannot be trusted." The threat unmasked
petitioner's bad faith in the various actions taken against Tobias. On the other hand, the scornful remark about Filipinos as well as Hendry's earlier
statements about Tobias being a "crook" and "swindler" are clear violations of 'Tobias' personal dignity [See Article 26, Civil Code].
The next tortious act committed by petitioners was the writing of a letter to RETELCO sometime in October 1974, stating that Tobias had been
dismissed by GLOBE MACKAY due to dishonesty. Because of the letter, Tobias failed to gain employment with RETELCO and as a result of which,
Tobias remained unemployed for a longer period of time. For this further damage suffered by Tobias, petitioners must likewise be held liable for
damages consistent with Article 2176 of the Civil Code. Petitioners, however, contend that they have a "moral, if not legal, duty to forewarn other
employers of the kind of employee the plaintiff (private respondent herein) was." [Petition, p. 14; Rollo, p. 15]. Petitioners further claim that "it is the
accepted moral and societal obligation of every man to advise or warn his fellowmen of any threat or danger to the latter's life, honor or property. And
this includes warning one's brethren of the possible dangers involved in dealing with, or accepting into confidence, a man whose honesty and integrity is
suspect" [Id.]. These arguments, rather than justify petitioners' act, reveal a seeming obsession to prevent Tobias from getting a job, even after almost
two years from the time Tobias was dismissed.
Finally, there is the matter of the filing by petitioners of six criminal complaints against Tobias. Petitioners contend that there is no case against them for
malicious prosecution and that they cannot be "penalized for exercising their right and prerogative of seeking justice by filing criminal complaints against
an employee who was their principal suspect in the commission of forgeries and in the perpetration of anomalous transactions which defrauded them of
substantial sums of money" [Petition, p. 10, Rollo, p. 11].
While sound principles of justice and public policy dictate that persons shall have free resort to the courts for redress of wrongs and vindication of their
rights [Buenaventura v. Sto. Domingo, 103 Phil. 239 (1958)], the right to institute criminal prosecutions can not be exercised maliciously and in bad faith
[Ventura v. Bernabe, G.R. No. L-26760, April 30, 1971, 38 SCRA 5871.] Hence, in Yutuk V. Manila Electric Co., G.R. No. L-13016, May 31, 1961, 2
SCRA 337, the Court held that the right to file criminal complaints should not be used as a weapon to force an alleged debtor to pay an indebtedness. To
do so would be a clear perversion of the function of the criminal processes and of the courts of justice. And in Hawpia CA, G.R. No. L-20047, June 30,
1967. 20 SCRA 536 the Court upheld the judgment against the petitioner for actual and moral damages and attorney's fees after making a finding that
petitioner, with persistence, filed at least six criminal complaints against respondent, all of which were dismissed.
To constitute malicious prosecution, there must be proof that the prosecution was prompted by a design to vex and humiliate a person and that it was
initiated deliberately by the defendant knowing that the charges were false and groundless [Manila Gas Corporation v. CA, G.R. No. L-44190, October
30,1980, 100 SCRA 602]. Concededly, the filing of a suit by itself, does not render a person liable for malicious prosecution [Inhelder Corporation v. CA,
G.R. No. 52358, May 301983122 SCRA 576]. The mere dismissal by the fiscal of the criminal complaint is not a ground for an award of damages for
malicious prosecution if there is no competent evidence to show that the complainant had acted in bad faith [Sison v. David, G.R. No. L-11268, January
28,1961, 1 SCRA 60].
In the instant case, however, the trial court made a finding that petitioners acted in bad faith in filing the criminal complaints against Tobias, observing
that:
xxx
Defendants (petitioners herein) filed with the Fiscal's Office of Manila a total of six (6) criminal cases, five (5) of which were for
estafa thru falsification of commercial document and one for violation of Art. 290 of the Revised Penal Code "discovering secrets
thru seizure of correspondence," and all were dismissed for insufficiency or lack of evidence." The dismissal of four (4) of the cases
was appealed to the Ministry of Justice, but said Ministry invariably sustained the dismissal of the cases. As above adverted to, two
of these cases were refiled with the Judge Advocate General's Office of the Armed Forces of the Philippines to railroad plaintiffs
arrest and detention in the military stockade, but this was frustrated by a presidential decree transferring criminal cases involving
civilians to the civil courts.
xxx

To be sure, when despite the two (2) police reports embodying the findings of Lt. Dioscoro Tagle, Chief Document Examiner of the
Manila Police Department, clearing plaintiff of participation or involvement in the fraudulent transactions complained of, despite the
negative results of the lie detector tests which defendants compelled plaintiff to undergo, and although the police investigation was
"still under follow-up and a supplementary report will be submitted after all the evidence has been gathered," defendants hastily filed
six (6) criminal cases with the city Fiscal's Office of Manila, five (5) for estafa thru falsification of commercial document and one (1)
for violation of Art. 290 of the Revised Penal Code, so much so that as was to be expected, all six (6) cases were dismissed, with
one of the investigating fiscals, Asst. Fiscal de Guia, commenting in one case that, "Indeed, the haphazard way this case was
investigated is evident. Evident likewise is the flurry and haste in the filing of this case against respondent Tobias," there can be no
mistaking that defendants would not but be motivated by malicious and unlawful intent to harass, oppress, and cause damage to
plaintiff.
xxx
[RTC Decision, pp. 5-6; Rollo, pp. 235-236].
In addition to the observations made by the trial court, the Court finds it significant that the criminal complaints were filed during the pendency of the
illegal dismissal case filed by Tobias against petitioners. This explains the haste in which the complaints were filed, which the trial court earlier noted. But
petitioners, to prove their good faith, point to the fact that only six complaints were filed against Tobias when they could have allegedly filed one hundred
cases, considering the number of anomalous transactions committed against GLOBE MACKAY. However, petitioners' good faith is belied by the threat
made by Hendry after the filing of the first complaint that one hundred more cases would be filed against Tobias. In effect, the possible filing of one
hundred more cases was made to hang like the sword of Damocles over the head of Tobias. In fine, considering the haste in which the criminal
complaints were filed, the fact that they were filed during the pendency of the illegal dismissal case against petitioners, the threat made by Hendry, the
fact that the cases were filed notwithstanding the two police reports exculpating Tobias from involvement in the anomalies committed against GLOBE
MACKAY, coupled by the eventual dismissal of all the cases, the Court is led into no other conclusion than that petitioners were motivated by malicious
intent in filing the six criminal complaints against Tobias.
Petitioners next contend that the award of damages was excessive. In the complaint filed against petitioners, Tobias prayed for the following: one
hundred thousand pesos (P100,000.00) as actual damages; fifty thousand pesos (P50,000.00) as exemplary damages; eight hundred thousand pesos
(P800,000.00) as moral damages; fifty thousand pesos (P50,000.00) as attorney's fees; and costs. The trial court, after making a computation of the
damages incurred by Tobias [See RTC Decision, pp. 7-8; Rollo, pp. 154-1551, awarded him the following: eighty thousand pesos (P80,000.00) as actual
damages; two hundred thousand pesos (P200,000.00) as moral damages; twenty thousand pesos (P20,000.00) as exemplary damages; thirty thousand
pesos (P30,000.00) as attorney's fees; and, costs. It must be underscored that petitioners have been guilty of committing several actionable tortious
acts, i.e., the abusive manner in which they dismissed Tobias from work including the baseless imputation of guilt and the harassment during the
investigations; the defamatory language heaped on Tobias as well as the scornful remark on Filipinos; the poison letter sent to RETELCO which resulted
in Tobias' loss of possible employment; and, the malicious filing of the criminal complaints. Considering the extent of the damage wrought on Tobias, the
Court finds that, contrary to petitioners' contention, the amount of damages awarded to Tobias was reasonable under the circumstances.
Yet, petitioners still insist that the award of damages was improper, invoking the principle of damnum absque injuria. It is argued that "[t]he only probable
actual damage that plaintiff (private respondent herein) could have suffered was a direct result of his having been dismissed from his employment, which
was a valid and legal act of the defendants-appellants (petitioners herein).lwph1.t " [Petition, p. 17; Rollo, p. 18].
According to the principle of damnum absque injuria, damage or loss which does not constitute a violation of a legal right or amount to a legal wrong is
not actionable [Escano v. CA, G.R. No. L-47207, September 25, 1980, 100 SCRA 197; See also Gilchrist v. Cuddy 29 Phil, 542 (1915); The Board of
Liquidators v. Kalaw, G.R. No. L-18805, August 14, 1967, 20 SCRA 987]. This principle finds no application in this case. It bears repeating that even
granting that petitioners might have had the right to dismiss Tobias from work, the abusive manner in which that right was exercised amounted to a legal
wrong for which petitioners must now be held liable. Moreover, the damage incurred by Tobias was not only in connection with the abusive manner in
which he was dismissed but was also the result of several other quasi-delictual acts committed by petitioners.
Petitioners next question the award of moral damages. However, the Court has already ruled in Wassmer v. Velez, G.R. No. L-20089, December 26,
1964, 12 SCRA 648, 653, that [p]er express provision of Article 2219 (10) of the New Civil Code, moral damages are recoverable in the cases
mentioned in Article 21 of said Code." Hence, the Court of Appeals committed no error in awarding moral damages to Tobias.
Lastly, the award of exemplary damages is impugned by petitioners. Although Article 2231 of the Civil Code provides that "[i]n quasi-delicts, exemplary
damages may be granted if the defendant acted with gross negligence," the Court, in Zulueta v. Pan American World Airways, Inc., G.R. No. L- 28589,
January 8, 1973, 49 SCRA 1, ruled that if gross negligence warrants the award of exemplary damages, with more reason is its imposition justified when
the act performed is deliberate, malicious and tainted with bad faith. As in the Zulueta case, the nature of the wrongful acts shown to have been
committed by petitioners against Tobias is sufficient basis for the award of exemplary damages to the latter.
WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals in CA-G.R. CV No. 09055 is AFFIRMED.
SO ORDERED.
G.R. No. 161188

June 13, 2008

Heirs of PURISIMA NALA, represented by their attorney-in-fact EFEGENIA DIGNA DUYAN, petitioners,
vs.
ARTEMIO CABANSAG, respondent.
DECISION

AUSTRIA-MARTINEZ, J.:
This is a petition for review under Rule 45 of the Rules of Court assailing the Court of Appeals (CA) Decision1 dated December 19, 2002 and
Resolution2 dated October 28, 2003, dismissing petitioners' appeal and affirming with modification the Regional Trial Court (RTC) Decision dated August
10, 1994 rendered in Civil Case No. Q-91-10541.
The facts of the case are as follows:
Artemio Cabansag (respondent) filed Civil Case No. Q-91-10541 for damages in October 1991. According to respondent, he bought a 50-square meter
property from spouses Eugenio Gomez, Jr. and Felisa Duyan Gomez on July 23, 1990. Said property is part of a 400-square meter lot registered in the
name of the Gomez spouses. In October 1991, he received a demand letter from Atty. Alexander del Prado (Atty. Del Prado), in behalf of Purisima Nala
(Nala), asking for the payment of rentals from 1987 to 1991 until he leaves the premises, as said property is owned by Nala, failing which criminal and
civil actions will be filed against him. Another demand letter was sent on May 14, 1991. Because of such demands, respondent suffered damages and
was constrained to file the case against Nala and Atty. Del Prado.3
Atty. Del Prado claimed that he sent the demand letters in good faith and that he was merely acting in behalf of his client, Nala, who disputed
respondent's claim of ownership. Nala alleged that said property is part of an 800-square meter property owned by her late husband, Eulogio Duyan,
which was subsequently divided into two parts. The 400-square meter property was conveyed to spouses Gomez in a fictitious deed of sale, with the
agreement that it will be merely held by them in trust for the Duyan's children. Said property is covered by Transfer Certificate of Title (TCT) No. 281115
in the name of spouses Gomez. Nala also claimed that respondent is only renting the property which he occupies.4
After trial, the RTC of Quezon City, Branch 93, rendered its Decision on August 10, 1994, in favor of respondent. The dispositive portion of the Decision
provides:
WHEREFORE, premises considered, by preponderance of evidence, the Court finds in favor of the plaintiff and hereby orders the defendants,
jointly and severally, to pay plaintiff the following:
1. P150,000.00 by way of moral damages;
2. P30,000.00 by way of exemplary damages;
3. P20,000.00 as and for reasonable attorney's fees and other litigation expenses; and
4. to pay the costs.
SO ORDERED.5
Nala and Atty. Del Prado appealed to the CA. The herein assailed CA Decision dated December 19, 2002 affirmed the RTC Decision with modification,
thus:
WHEREFORE, premises considered, the instant appeal is hereby DISMISSED. The assailed decision of the Regional Trial Court, Branch 93,
Quezon City, in Civil Case No. Q-91-10541 is heretofore AFFIRMED with MODIFICATION. Defendants-appellants are ordered to pay, jointly
and severally, plaintiff-appellee the amount of P30,000.00 by way of moral damages. It is further ordered to pay him exemplary damages in
the amount of P10,000.00 and P10,000.00, attorney's fees.
SO ORDERED.6
In affirming the RTC Decision, the CA took note of the Decision dated September 5, 1994 rendered by the RTC of Quezon City, Branch 80, dismissing
Civil Case No. 91-8821, an action for reconveyance of real property and cancellation of TCT No. 281115 with damages, filed by Nala against spouses
Gomez.7
Hence, herein petition by the heirs of Nala (petitioners)8 with the following assignment of errors:
a) Respondent Court of Appeals erred in not considering the right of Purisima Nala to assert her rights and interest over the property.
b) Respondent Court of Appeals erred in not considering the Decision rendered by the Court of Appeals in the case for reconveyance which
upheld the rights and interest of Purisima Nala and her children over a certain parcel of land, a portion of which is subject of the present case.
c) Respondent Court of Appeals erred in awarding damages and attorney's fees without any basis.9
Atty. Del Prado filed a motion for extension of time to file his separate petition but it was denied by the Court per its Resolution dated January 19, 2004
issued in G.R. No. 160829.
Petitioners argue that their predecessor-in-interest had every right to protect and assert her interests over the property. Nala had no knowledge that the
property was sold by spouses Gomez to respondent when the demand letters were sent. What she was aware of was the fact that spouses Gomez were
managing the rentals on the property by virtue of the implied trust created between them and Eulogio Duyan. When spouses Gomez failed to remit the

rentals and claimed ownership of the property, it was then that Nala decided to procure the services of legal counsel to protect their rights over the
property.
Petitioners also contend that it was error for the CA to take note of the RTC Decision in Civil Case No. 91-8821 without further noting that the CA had
already reversed and set aside said RTC Decision and ordered reconveyance of the property to Nala and her children in a Decision dated March 8, 2000
rendered in CA-G.R. CV No. 49163. Petitioners also argue that respondent did not substantiate his claim for damages.
Preliminarily, the Court notes that both the RTC and the CA failed to indicate the particular provision of law under which it held petitioners liable for
damages. Nevertheless, based on the allegations in respondent's complaint, it may be gathered that the basis for his claim for damages is Article 19 of
the Civil Code, which provides:
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.
The foregoing provision sets the standards which may be observed not only in the exercise of one's rights but also in the performance of one's duties.
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 a right, though by itself legal because recognized or granted by law as such,
may nevertheless become the source of some illegality. A person should be protected only when he acts in the legitimate exercise of his right; that is,
when he acts with prudence and in good faith, but not when he acts with negligence or abuse. There is an abuse of right when it is exercised only for the
purpose of prejudicing or injuring another. The exercise of a right must be in accordance with the purpose for which it was established, and must not be
excessive or unduly harsh; there must be no intention to injure another.[10]
In order to be liable for damages under the abuse of rights principle, the following requisites must concur: (a) the existence of a legal right or duty; (b)
which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another.11
It should be stressed that malice or bad faith is at the core of Article 19 of the Civil Code. Good faith is presumed, and he who alleges bad faith has the
duty to prove the same.12 Bad faith, on the other hand, does not simply connote bad judgment to simple negligence, dishonest purpose or some moral
obloquy and conscious doing of a wrong, or a breach of known duty due to some motives or interest or ill will that partakes of the nature of fraud. Malice
connotes ill will or spite and speaks not in response to duty. It implies an intention to do ulterior and unjustifiable harm.13
In the present case, there is nothing on record which will prove that Nala and her counsel, Atty. Del Prado, acted in bad faith or malice in sending the
demand letters to respondent. In the first place, there was ground for Nala's actions since she believed that the property was owned by her husband
Eulogio Duyan and that respondent was illegally occupying the same. She had no knowledge that spouses Gomez violated the trust imposed on them
by Eulogio and surreptitiously sold a portion of the property to respondent. It was only after respondent filed the case for damages against Nala that
she learned of such sale. The bare fact that respondent claims ownership over the property does not give rise to the conclusion that the sending of the
demand letters by Nala was done in bad faith. Absent any evidence presented by respondent, bad faith or malice could not be attributed to petitioner
since Nala was only trying to protect their interests over the property.
Moreover, respondent failed to show that Nala and Atty. Del Prado's acts were done with the sole intention of prejudicing and injuring him. It may be true
that respondent suffered mental anguish, serious anxiety and sleepless nights when he received the demand letters; however, there is a material
distinction between damages and injury. Injury is the legal invasion of a legal right while damage is the hurt, loss or harm which results from the
injury.14Thus, 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.15
Nala was acting well within her rights when she instructed Atty. Del Prado to send the demand letters. She had to take all the necessary legal steps to
enforce her legal/equitable rights over the property occupied by respondent. One who makes use of his own legal right does no injury.16 Thus, whatever
damages are suffered by respondent should be borne solely by him.
Nala's acts in protecting her rights over the property find further solid ground in the fact that the property has already been ordered reconveyed to her
and her heirs. In its Decision dated March 8, 2000 in CA-G.R. CV No. 49163, the CA reversed and set aside the RTC's Decision and ordered the
reconveyance of the property to petitioners, and TCT No. 281115 was declared canceled. Said CA Decision was affirmed by this Court in its Decision
dated March 18, 2005 in G.R. No. 144148, which became final and executory on July 27, 2005.
WHEREFORE, the petition is GRANTED. The Decision dated December 19, 2002 and Resolution dated October 28, 2003 rendered by the Court of
Appeals in CA-G.R. CV No. 48580 are NULLIFIED. Civil Case No. Q-91-10541 is DISMISSED for lack of merit.
Costs against respondent.
SO ORDERED.
G.R. No. L-50911 August 21, 1987
MIGUEL PEREZ RUBIO, petitioner,
vs.
COURT OF APPEALS, ROBERTO O. PHILLIPS & SONS, INC., MAGDALENA YSMAEL PHILLIPS, MANUFACTURERS BANK & TRUST CO., INC.,
HACIENDA BENITO, INC., ET AL., respondents.
Daniel M. Malabonga for petitioner.

Argel-Guevarra & Associates for respondent Hacienda Benito, Inc.

Meer, Meer & Meer Law Office for respondent Victoria Valley.
Magtanggol C. Gunigundo for respondents Robert O. Phillips & Sons, Inc., Magdalena Ysmael Phillips and Heirs of Robert Phillips.
Ambrosia Padilla, Mempin & Reyes Law Office for respondent Manufacturers Bank & Trust Co Inc.

GUTIERREZ, JR., J.:

Before us for reconsideration are the various motions for reconsideration of the March 12, 1986 decision, the dispositive portion of which reads:
WHEREFORE, the petition is GRANTED. The decision of the former Court of Appeals is hereby REVERSED and SET ASIDE. The
respondents Phillips and Sons and the Phillips spouses are declared to be jointly and severally liable to the petitioner for the
outstanding debt of Phillips and Sons in the amount of FOUR MILLION TWO HUNDRED FIFTY THOUSAND PESOS
(P4,250,000.00) with interest at the rate of eight (8%) percent per annum from April 30, 1964 until fully paid as provided for in the
parties' agreement dated August 13, 1963. Costs against the respondents. (p. 869, rollo)
The petitioner asks that the decision be reconsidered insofar as it makes no finding against respondent Phillips for moral and exemplary damages as
well as attorney's fees and to the extent that the same decision absolves from joint and solidary liability respondents Manufacturers Bank and Trust
Company (hereinafter called MBTC), Hacienda Benito (hereinafter called HB, and Victoria Valley Development Corporation (hereinafter called VVDC).
The petitioner restates his position that the respondents conspired amongst themselves to put the properties of Hacienda Benito beyond his reach and
thus make it impossible for him to collect the sum of P4,250,000.00 still unpaid on the purchase price of his shares of stock in Hacienda Benito.
It may be recalled that on June 5, 1965, respondent Hacienda Benito, Inc., represented by Robert O. Phillips, president and Victoria Valley Development
Corporation which was in the process of incorporation and represented by Alfonso Yuchengco with the conformity of Manufacturers Bank and Trust
Company represented by Galicano Calapatia executed a "MEMORANDUM AGREEMENT. (Exhibit "31" Miguel Perez Rubio).
The thrust of the agreement is that respondent VVDC will acquire under conditions stated therein 134.1668 hectares of land including account
receivables belonging to respondent HBI Moreover, it was specifically provided in the agreement that " ... HB warrants that the properties to be acquired
by VVDC are not subject to any other obligations, liens, encumbrances, charges or claims of whatever nature than those mentioned herein, including
real estate taxes up to the first semester of 1965." (Memorandum Agreement, supra, pp. 3-4).
Included in this 134.1668 hectares are the 78 hectares mortgaged to MBTC. These parcels of land were mortgaged to MBTC to secure obligation and
liabilities incurred by HBI and other affiliate companies owned by the Phillips. Of the P7,419,130.19 amount due from these companies, only
P1,456,276.48 was the liability of HBI.
Under this agreement, MBTC will institute judicial foreclosure of mortgage after which all the companies would confess judgment and enter into a
compromise agreement in full satisfaction of the claim of MBTC under the several deeds of mortgage. It was further provided that HBI will convey all the
78 hectares in favor of MBTC after which VVDC will purchase from MBTC the same parcels of land together with the receivables. A final proviso was to
the effect that VVDC and HBI will enter into a separate agreement whereby HBI will expressly assign in favor of VVDC its right to redeem the properties
foreclosed by MBTC.
The consideration of the agreement amounted to Pl1,621,889.11 which VVDC agreed to assume in order to settle the obligations of HBI and the other
Phillips companies.
The Memorandum Agreement was executed under the following factual background: (1) Respondent ROPSI had still to pay its outstanding
P4,250.000.00 debt to the petitioner as the result of the latter's sale of his shares of stock of HBI; (2) Negotiations had broken down between the Phillips
spouses, ROPSI and Alfonso Yuchengco as regards the sale of the shares of stock of Hacienda Benito, Inc.; and (3) Petitioner had threatened to
rescind the contract of sale of his shares of stock of Hacienda Benito.
Obviously, Hacienda Benito through Robert O. Phillips, and VVDC through Alfonso Yuchengco were fully aware of the petitioner's still being unpaid the
P4,250,000.00 balance on his shares of stocks of Hacienda Benito sold to ROPSI. MBTC, too, because of the unrebutted evidence that its top officers
are also the top officers of VVDC is conclusively presumed to know the petitioner's predicament. These same personalities figures prominently in the
negotiations involving the shares of stock of Hacienda Benito including the unpaid P4,250,000.00 collectibles of the petitioner from the ROPSI as full
payment for the sale of his shares of stock in Hacienda Benito.
Hence, the scheme provided for in the Memorandum Agreement wherein all the properties of Hacienda Benito will be ultimately transferred to VVDC
without any mention at all and completely ignoring the petitioner's interest in said Hacienda placed the petitioner's rightful claim to the payment of his
shares of stock in clear jeopardy.
The fact that the Memorandum Agreement was not fully implemented is immaterial. The intent to defraud the petitioner and the damage which led to the
filing of this case was present in the execution of the Memorandum Agreement.
Therefore, an award for damages in favor of the petitioner is in order against respondents Hacienda Benito, VVDC and MBTC.

Article 19 of the New Civil Code provides 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.
while Article 20 thereof provides that:
Every person who, contrary to law, wilfully or negligently causes damage to another shall indemnify the latter for the same.
Parenthetically, these respondents did not observe honesty and good faith in dealing with the rightful claim of the petitioner to the still unpaid
P4,250,000.00 collectibles from ROPSI. The respondents' acts are tortious pursuant to Articles 19 and 20 of the New Civil Code. Hence, these
respondents are obliged to pay for the damage done to the petitioner. (See Article 2176, New Civil Code).
In the case at bar, the tortious and fraudulent scheme of the private respondents made it impossible for the petitioner to collect the P4,250,000.00 still
unpaid purchase price of his shares of stock in Hacienda Benito. All the respondents are, therefore, solidarity liable for these actual damages suffered by
the petitioner. (See Article 2194 of the New Civil Code).
Consequently, we rule that Hacienda Benito, VVDC and MBTC together with ROPSI and the Phillips spouses are solidarity liable to the petitioner for the
outstanding debt of ROPSI in the amount of P14,250,000.00 with interest at the rate of eight (8 % per cent per annum from April 30, 1964 until fully paid
as provided for in the parties' agreement dated August 13,1963.
Also, an award for moral damages in favor of the petitioner is in order against respondents Hacienda Benito, VVDC and MBTC. The planned transfer of
all the assets of Hacienda Benito to VVDC which the respondents sought to accomplish through the Memorandum Agreement created further anguish
and anxiety on the part of the petitioner who at that time was still trying to collect the P4,250,000.00 full payment of his shares of stock in Hacienda
Benito.
Considering the circumstances under which the respondents executed the Memorandum Agreement and the social status of the parties herein, the
amount of P100,000.00 as moral damages in favor of the petitioner is awarded.
However, we find no reasonable ground to set aside our findings in the March 12, 1986 decision that respondents Phillips spouses are not liable for
moral and exemplary damages and attorney's fees.
Juan Miguel Phillips also filed a motion to intervene in the instant case stating therein that Robert O. Phillips had died leaving as heirs respondent
Magdalena Ysmael Phillips and four legitimate children; that he is one of the four (4) children; that as such legal heir, he has a legal interest in the
subject matter of the instant case and will be favored or prejudiced in his interest depending on the final outcome of the instant case. He cites Rule 12,
Section 2, Rules of Court.
The right of the movant-intervenor proceeds only from the fact of heirship. Hence his interest to specific portions of the property of the deceased is, if not
conjectural, stin contingent and expectant. At this point, he cannot specify any property nor segregate any as his own before the liquidation of the estate
is completed. This is in accordance with Article 657 of the Civil Code (Article 777, Civil Code) which provides that the rights to succession of a person
are transmitted from the moment of death.
Thus, the heir has the right to impugn the validity of the decedent's transaction only when he is made answerable or when his specific right or property
would be affected thereby. The instant case is a personal action against Robert O. Phillips, filed while he was still alive. It is Robert O. Phillips and his
estate which are sought to be made liable, not the movant-intervenor or any of his legal heirs.
WHEREFORE, the petitioners motion for reconsideration is GRANTED in that respondent's Hacienda Benito, Victoria Valley Development Corporation
and Manufacturers Bank and Trust Company (now Filipinas Bank) together with respondents Robert 0. Phillips & Sons and the Phillips spouses are
declared to be jointly and severally liable to the petitioner for the outstanding debt of Phillips and Sons in the amount of FOUR MILLION TWO
HUNDRED FIFTY THOUSAND PESOS (P4,250,000.00) with interest at the rate of eight (8%) per cent per annum from April 30, 1964 until fully paid as
provided for in the parties' agreement dated August 13, 1963; that respondents Hacienda Benito, Inc., Victoria Valley Development Corporation and
Manufacturers Bank and Trust Company (now Filipinas Bank) are jointly and severally liable to the petitioner in the amount of ONE HUNDRED
THOUSAND PESOS (P100,000.00) as moral damages. Juan Miguel Phillips' motion for reconsideration is DENIED for lack of merit. The motions for
reconsideration filed by Robert O. Phillips and Sons, Magdalena Ysmael Phillips and the heirs of Robert O. Phillips, Hacienda Benito, Inc., and
Manufacturers Bank and Trust Company are DENIED it appearing that no new substantial reasons have been invoked to warrant reconsideration of the
said decision as far as these parties' motions are concerned, and this DENIAL is FINAL.
SO ORDERED.
JOSE S. ROQUE, JR., substituted by his wife NORMA
ROQUE,
Petitioner,

- versus -

G.R. No. 157632

Present:
PANGANIBAN, C.J.
Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.

JAIME T. TORRES, substituted by his son JAMES KENLEY

M. TORRES, and the HONORABLE COURT OF APPEALS,
Respondents.

Promulgated:

December 6, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing the Decision[1] of the Court of Appeals in CA-G.R.
CV No. 55895, dated 21 March 2003, which reversed and set aside the Judgment[2] of the Regional Trial Court (RTC) of Quezon City, Branch 104, in Civil Case No. Q93-14408, dated 8 April 1997, ordering respondent to pay petitioner damages in the total amount of P1,600,000.00 and attorneys fees.

The instant case sprang from an action for damages filed by the original petitioner, the late Jose Roque, Jr., against respondent, the recently deceased Jaime
Torres, for injuries sustained by petitioner on 27 August 1989, allegedly inflicted by the security guards employed by respondent.

In this petition, the deceased petitioner Jose Roque, Jr. is substituted by his wife Norma Roque while respondent Jaime T. Torres, per agreement of all his
heirs, is herein represented by his son James Kenley M. Torres.

Petitioner was the administrator of certain parcels of land in Upper Boso-Boso, Antipolo, Rizal, particularly Lots No. 13259 and 13260 covered by Original
Certificates of Titles (OCTs) No. NP-419 and NP-422, both registered in the name of his son Rafael Roque. Sometime before the incident, respondent, claiming to be
the owner of said property, hired security guards from Anchor Security and Detective Agency, namely Cesar Aquino, Alfredo Negro, and Mariano Cabos, who
allegedly barred petitioner from entering the property and threatened him with physical harm should he attempt to tend the said land. As a result, petitioner filed a case
for grave threats against said security guards before the Municipal Trial Court (MTC) of Rizal.

Prior to the incident, or on 9 September 1988, respondent instituted an Action[3] for cancellation of OCTs No. NP-419 and NP-422 in the name of petitioners
son Rafael Roque before the RTC of Antipolo which was dismissed by the trial court in an Order[4] dated 26 June 1989. According to the court a quo, therein petitioner
Torres action was premature for failure to exhaust administrative remedies in the Bureau of Lands, consistent with the established doctrine that where a party seeks for
the cancellation of a Free Patent, he must pursue his action in the proper agency and a review by the court will not be permitted unless administrative remedies have
been exhausted. The trial court also declared that the said action was in effect an action for reversion under Section 101 of the Public Land Act, thus, the action should
be in the name of the government and not the private complainants. Respondent appealed the dismissal before the Court of Appeals, which later affirmed the decision
of the lower court in a Decision[5] dated 11 June 1990. Respondents appeal to this Court was also dismissed in a Resolution dated 11 February 1991.

Petitioner maintained that at around four oclock in the afternoon of 27 August 1989, he, together with his housemaid Leilyn Saplot Kandt, MagnoImperial,
Jose Imperial, and Eliseo Pesito, visited the said property and was surprised to see seven security guards, including the above-mentioned security guards, guarding the
property upon orders of respondent. Aquino, Negro, andCabos approached petitioner and asked: Bakit wala ka noong arraignment saAntipolo noong August 16,
1989?[6] to which he replied that his presence was not necessary since he was not the accused. Thereafter, the said security guards asked him to leave the property and
uttered: Bakit mo kami kinakalaban? Utos ni Torres na itoy bantayan pagkat itoy kanyang property raw!. Petitioner showed his sons titles to the property but the
security guards merely answered:Fake yan at hindi kayo maaaring pumasok dito. Kayo ay dapat paalisin. A security guard then cocked his shotgun and warned
petitioner to leave the place. Petitioner offered to settle the dispute in the office of Anchor Security Agency, through its manager, Mrs. Nassam, but the security guards
merely

replied: Wala kaming pakialam kay Nassam. Lahat ginagawa dito, lahat ayutos ni Torres. At

yan ay sinusunod naming dahil si Torres ang bumubuhay saamin.

When petitioner refused to leave the premises, Cabos threatened petitioner that should he stay inside, Cabos would shoot him, so petitioner immediately left
the place. However, Cabos still fired at him but missed. Petitioner ran fast to his makeshift hut where Cabos followed him. Petitioner ran to the back of his makeshift
hut and was shot again by Cabos, hitting petitioner on the back. When petitioner fell, he turned and saw Cabos and Negro shooting at him. At the same

time, Aquino was also firing at the makeshift hut. After a while, the other security guards, namely Sulla, Betasulo, and Romy Mendoza, came, and together
with Cabos and Negro, mauled and kicked petitioner all over his body until he lost consciousness.

As a result of the incident, petitioner was hospitalized and placed under continuous treatment and medication. Due to the multiple gunshot
wounds,hematoma, and contusions sustained by petitioner, his left eye became 90 to 95% blind and his body was paralyzed from the bustline down. Consequently,
petitioner filed a criminal case[7] for frustrated murder before the RTC ofAntipolo against the security guards. Eventually, after suffering for more than nine years,
petitioner died.

On his part, respondent admits the existence of the titles in the name of Rafael Roque but denies the latters ownership over the property. He further admits
the dismissal of his case for cancellation of Roques titles based on a technical ground. Respondent likewise admits to the posting of the security guards on the property
to guard the same from any intruder but denies that they were his personal security guards, and moreover claimed that they were security guards of
the Antipolo Landowners and Farmers Association, Inc. (ALFAI), of which he was president. Respondent further asserts that being the President of ALFAI, his
instruction to the security guards was to prevent squatters or intruders from entering the property and to make use of reasonable force to repel aggression in the event of
any untoward incident.

After trial, the lower court, on 8 April 1997, rendered judgment in favor of petitioner. According to the court a quo:
After a thorough examination of the evidence presented by both parties, the Court is faced with the issue of: Whether or not
defendant Torres can be held liable for damages to herein plaintiff as a result of the injuries inflicted by the security guards deployed in the
property in question onAugust 28, 1989 [sic].
There is no question that the security guards involved in the shooting incident on August 28, 1989 [sic] were employed of [sic]
Anchor Security and Detective Agency. There is also no question that the same security guards were hired by defendant Torres to man and guard
the property in question in Boso-Boso, Antipolo, Rizal. In this simple scenario and in the event that said security guards caused wrong to
others while in their tour of duty, the law provides that the liability falls on the employer being the principal. On the contrary, for illegal
or harmful acts committed by the security guards as [sic] per order of the client or the one who hired them, liability attaches to the
latter. In the instant case, the unlawful act committed by the security guards against the plaintiff is within the strict compliance of the
instruction of the defendant. This is because of the fact that defendant Torres exercised direct supervision of the said security guards. As a
matter of fact, he provided the guards with his school bus to perform their duties effectively. Hence, defendant Torres is liable for the unlawful
acts committed by the said security guards against herein plaintiff. Such unlawful acts would not have been accomplished had defendant Torres
being their employer at that time, not instructed them so. What resulted to the shooting of the plaintiff by the security guards cannot be given
justice except by indemnifying him. And considering that plaintiff suffered paralization of his body and blindness in his left eye, notwithstanding
the fact of incurring the amount of P300,000.00 as hospitalization and medical expenses plus the continuous medication up to the present, the
Court believes that the plaintiff should be compensated. (Emphasis ours.)
WHEREFORE, judgment is hereby rendered in favor of the plaintiff as against defendant Torres and the latter is ordered to pay the
plaintiff the following:
a)

the amount of P300,000.00 as actual damages;

b)

the amount of P1,000,000.00 as moral damages;

c)

the amount of P300,000.00 as exemplary damages; and

d)

the amount of P50,000.00 as attorneys fee.[8]

Aggrieved by the above judgment, respondent lodged an appeal before the Court of Appeals. According to respondent, he did not know that the security
guards would commit the alleged aggressive acts until the commission thereof, and that said security guards acted upon their own judgment. Respondent claimed that
petitioner was an intruder and squatter on the property who entered it without permission from members of the ALFAI, the real owners of the said property. Thus,
respondent argued that petitioner forcibly entered the property and that the security guards merely repelled the unlawful aggression.

Subsequently, the appellate court reversed the RTC judgment and rendered a Decision, the pertinent portions of which read:
It is appellees contention that appellant as employer of the said security guards is liable for the injuries inflicted by the latter who
acted under his instructions to guard the subject premises.
Verily, the obligation imposed under Article 2176 of the Civil Code is demandable not only for ones own acts or omissions but also
for those persons for whom, one is responsible. The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in exercise of their duties and/or functions.
Relevantly, Article 2180 of the Civil Code provides that:

Art. 2180. The obligation imposed by article 2176 is not demandable not only for ones own acts or omissions, but
also for those persons for whom one is responsible.
xxxx
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 occasion of their functions.
Under the facts obtaining, the above provision of law does not apply. The court a quo succinctly declared:
There is no question that the security guards involved in the shooting incident on August 28, 1989 were employed
(sic) of Anchor Security Detective Agency. There is also no question that the same security guards were hired by
defendant Torres to man and guard the property in question in Boso-Boso, Antipolo, Rizal.
xxxx
There is no question therefore that the said security guards who inflicted the injuries sustained by the appellee were not employees of
herein appellant. This being so, the ruling in the case of Soliman, Jr. vs. Tuazonapplies, viz:
It is settled that where the security agency, as here recruits, hires and assigns the work of its watchmen or security
guards, the agency is the employer of such security guards or watchmen. Liability for illegal or harmful acts committed by
the security guards attaches to the employer agency, and not to the clients or customers of such agency.
At any rate, the appellant cannot be held liable under Art. 33 of the Civil Code as no evidence whatsoever, was adduced to show his
participation in the commission of the acts complained of. Neither was appellee able to prove that appellant can be held liable in the alternative
under Article 2176 in relation to Article 2180 of the Civil Code.
xxxx
WHEREFORE, the assailed decision is hereby REVERSED and SET ASIDE and the complaint as well as the counterclaim filed
before the court a quo is DISMISSED.[9]

With the reversal of the trial court judgment, petitioner filed the instant appeal, raising the following issues:

I. Whether or not the Court of Appeals committed grave and reversible error in ruling that petitioner failed to prove by mere preponderance of
evidence that respondent Torres was involved in any malevolent designs on petitioner;
II. Whether or not the Court of Appeals committed grave and reversible error in ruling that Article 2180 in relation to Article 2176 of the Civil
Code is not applicable to the case at bar; and
III. Whether or not the Court of Appeals committed grave and reversible error in applying the case of Soliman, Jr. v. Tuazon to the case at bar.

We agree with the Court of Appeals finding that respondent cannot be held liable under Article 2180 of the Civil Code for the damages suffered by
petitioner because respondent is not the employer of the security guards who inflicted the injuries upon the person of the petitioner. As reiterated in the recent case
of Mercury Drug Corporation v. Libunao:[10]

In Soliman, Jr. v. Tuazon, we held that where the security agency recruits, hires and assigns the works of its watchmen or security
guards to a client, the employer of such guards or watchmen is such agency, and not the client, since the latter has no hand in selecting the
security guards. Thus, the duty to observe the diligence of a good father of a family cannot be demanded from the said client:
x x x [I]t is settled in our jurisdiction that where the security agency, as here, recruits, hires and assigns the work of its watchmen or
security guards, the agency is the employer of such guards or watchmen. Liability for illegal or harmful acts committed by the security guards
attaches to the employer agency, and not to the clients or customers of such agency. As a general rule, a client or customer of a security agency
has no hand in selecting who among the pool of security guards or watchmen employed by the agency shall be assigned to it; the duty to observe
the diligence of a good father of a family in the selection of the guards cannot, in the ordinary course of events, be demanded from the client
whose premises or property are protected by the security guards.
x x x [T]he fact that a client company may give instructions or directions to the security guards assigned to it, does not, by itself, render the client
responsible as an employer of the security guards concerned and liable for their wrongful acts or omissions.[11]

This conclusion, however, does not necessarily preclude this Court from holding respondent liable under the law for damages resulting from the injuries
inflicted on petitioner by the unlawful acts of the security guards. As stressed by petitioner in his Memorandum:
Assuming arguendo that the security guards are not respondents employees, the same does not constitute a valid defense at
all. Article 2176 of the Civil Code provides that a person who, by act or omission, causes damage to another through fault or negligence may be
held liable in damages. By making it appear that he owns the disputed properties, putting security guards thereat to inti[mi]date, harass

or cause the rightful owner and his representatives and by providing the escape vehicle,more than sufficient evidence was established on
the civil liability of private respondent under Article 2176 of the Civil Code of the Philippines.
It must be emphasized that private respondent committed all these overt acts despite an earlier Decision by the Regional Trial Court
of Antipolo, Branch 71, affirming Rafael Roques ownership of the properties and dismissing the case he (private respondent) filed for the
cancellation of NP-419 and NP-422 in Rafael Roques name. Had he not misrepresented to the security guards that he owns the properties
and had he not hired these security guards/common thugs to secure the premises which he does not own, then the untoward incident
would not have happened. To allow private respondent to escape liability, despite his misdeeds, will not only result in grave injustice to Jose
Roque, Jr. who eventually died after having been paralyzed for several years as a result of [the] incident but will likewise result in the implied
tolerance by this Honorable Court of private respondents disobedience or disrespect of a lawful order/decision of the trial court (RTC Branch
71, Antipolo) which he failed or refused to honor.[12](Emphasis ours.)

Article 2176 of the Civil Code states that whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. In the case at bar, respondent cannot feign ignorance of the fact that at the time of the shooting incident, the titles to the disputed property were already
registered in the name of petitioners son, the cancellation for title case filed by respondent having been dismissed. In fact, during trial, the offer for stipulation of
petitioners counsel that at the time of the shooting incident, there is a valid and existing title in the name of petitioners son which was never cancelled by
the court, was accepted by the respondent. Therefore, by hiring the security guards to prevent entry, possibly even by the registered owner, to the subject property, titles
to which he fully knew he did not possess, respondent blatantly acted in bad faith. Respondents unwarranted act of posting security guards within the property, which
he clearly knew is registered in the name of another, unduly placed petitioner at harm and deprived him of his right to fully exercise his privileges and duties as
administrator of said property. Respondent, by his grossly faulty acts, paved the way to the infliction of injuries by the security guards on petitioner.

Furthermore, respondents palpable display of bad faith in claiming a superior right to the property over petitioners son entitles petitioner to damages
resulting therefrom. In order that a plaintiff may maintain an action for the injuries which he sustained, 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.[13] In other words, in order that
the law will give redress for an act causing damage, the act must be not only hurtful, but wrongful.[14]

In the case at bar, it is clear that respondent violated the principle embodied in Article 19 of the Civil Code which mandates 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. When a right is exercised in a
manner which discards these norms resulting in damage to another, a legal wrong is committed for which the actor can be held accountable.[15] As we have stated in a
previous case, if mere fault or negligence in ones acts can make him liable for damages for injury caused thereby, with more reason should abuse or bad faith make
him liable.[16]

With respect to the award of damages, we sustain the ruling of the trial court. It is essential in the award of damages that the claimant must have
satisfactorily proven during the trial the existence of the factual basis of the damages and its causal connection to defendants acts.[17] During trial, petitioner, through
his own testimony and that of his wife, was able to establish that they have incurred actual damages in the amount of P300,000.00 for the hospitalization of petitioner as
a result of the shooting and the mauling incident, thus, the award of actual damages in said amount is proper.

As regards the award of moral damages, we have ruled that there is no hard and fast rule in the determination of what would be a fair amount of moral
damages, since each case must be governed by its own peculiar circumstances.[18] As reflected in the records of the instant case, there is no gainsaying the fact that
petitioner, together with his family, had suffered physical suffering, mental anguish, fright, serious anxiety and moral shock resulting from respondents acts which
caused petitioner grave physical injuries eventually leading to his death. The several years of torment and agonizing on the part of the deceased petitioner and his family
more than justifiy the award of moral damages. It must be emphasized that moral damages are not intended to enrich the complainant at the expense of a
defendant.[19] They are awarded only to enable the injured parties to obtain means, diversions or amusements that will serve to alleviate the moral sufferings the injured
parties have undergone by reason of defendants culpable action.[20] In other words, the award of moral damages is aimed at a restoration within the limits of the
possible, of the spiritual status quo ante; and therefore it must be proportionate to the suffering inflicted.[21] Therefore, in light of the sufferings sustained by petitioner
and his family, we are inclined to sustain the award of P1,000,000.00 as moral damages.

As to exemplary damages, Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good,
in addition to the moral, temperate, liquidated or compensatory damages. While exemplary damages cannot be recovered as a matter of right, they need not be proved,
although plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary
damages should be awarded.[22] In the case at bar, having determined that petitioner is entitled to the award of actual and moral damages as a result of the wanton act

of respondent in stationing security guards in the property, the title of which is under the name of petitioners son, said act ultimately resulting in the paralysis and
blindness of petitioner, we find the award of exemplary damages to be proper by way of correction for the public good of respondents flagrant display of bad faith.

WHEREFORE, premises considered, the Petition for Review is herebyGRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 55895 is
hereby REVERSED and SET ASIDE. The Judgment of the Regional Trial Court of Quezon City, Branch 104, in Civil Case No. Q-93-14408 ordering respondent
Torres to pay petitioner Roque the amount of P300,000.00 as actual damages; the amount of P1,000,000.00 as moral damages; the amount ofP300,000.00 as exemplary
damages; and the amount of P50,000.00 as attorneys fee is hereby REINSTATED.
SO ORDERED.
G.R. No. 132344

February 17, 2000

UNIVERSITY OF THE EAST, petitioner,

vs.
ROMEO A. JADER, respondent.
YNARES-SANTIAGO, J.:
May an educational institution be held liable for damages for misleading a student into believing that the latter had satisfied all the requirements for
graduation when such is not the case? This is the issue in the instant petition for review premised on the following undisputed facts as summarized by
the trial court and adopted by the Court of Appeals (CA),1 to wit:
Plaintiff was enrolled in the defendants' College of Law from 1984 up to 1988. In the first semester of his last year (School year 1987-1988),
he failed to take the regular final examination in Practice Court I for which he was given an incomplete grade (Exhibits "2", also Exhibit "H").
He enrolled for the second semester as fourth year law student (Exhibit "A") and on February 1, 1988 he filed an application for the removal of
the incomplete grade given him by Professor Carlos Ortega (Exhibits "H-2", also Exhibit "2") which was approved by Dean Celedonio
Tiongson after payment of the required fee. He took the examination on March 28, 1988. On May 30, 1988, Professor Carlos Ortega
submitted his grade. It was a grade of five (5). (Exhibits "H-4", also Exhibits "2-L", "2-N").1wphi1.nt
In the meantime, the Dean and the Faculty Members of the College of Law met to deliberate on who among the fourth year students should be
allowed to graduate. The plaintiff's name appeared in the Tentative List of Candidates for graduation for the Degree of Bachelor of Laws
(LL.B) as of Second Semester (1987-1988) with the following annotation:
JADER ROMEO A.
Def. Conflict of Laws x-1-87-88, Practice Court I Inc., 1-87-88 C-1 to submit transcript with S.O. (Exhibits "3", "3-C-1", "3-C-2").
The 35th Investitures & Commencement Ceremonies for the candidates of Bachelor of Laws was scheduled on the 16th of April 1988 at 3:00
o'clock in the afternoon, and in the invitation for that occasion the name of the plaintiff appeared as one of the candidates. (Exhibits "B", "B-6",
"B-6-A"). At the foot of the list of the names of the candidates there appeared however the following annotation:
This is a tentative list Degrees will be conferred upon these candidates who satisfactorily complete requirements as stated in the
University Bulletin and as approved of the Department of Education, Culture and Sports (Exhibit "B-7-A").
The plaintiff attended the investiture ceremonies at F. dela Cruz Quadrangle, U.E., Recto Campus, during the program of which he went up
the stage when his name was called, escorted by her (sic) mother and his eldest brother who assisted in placing the Hood, and his Tassel was
turned from left to right, and he was thereafter handed by Dean Celedonio a rolled white sheet of paper symbolical of the Law Diploma. His
relatives took pictures of the occasion (Exhibits "C" to "C-6", "D-3" to "D-11").
He tendered a blow-out that evening which was attended by neighbors, friends and relatives who wished him good luck in the forthcoming bar
examination. There were pictures taken too during the blow-out (Exhibits "D" to "D-1").
He thereafter prepared himself for the bar examination. He took a leave of absence without pay from his job from April 20, 1988 to September
30, 1988 (Exhibit "G") and enrolled at the pre-bar review class in Far Eastern University. (Exhibits "F" to "F-2"). Having learned of the
deficiency he dropped his review class and was not able to take the bar examination.2
Consequently, respondent sued petitioner for damages alleging that he suffered moral shock, mental anguish, serious anxiety, besmirched reputation,
wounded feelings and sleepless nights when he was not able to take the 1988 bar examinations arising from the latter's negligence. He prayed for an
award of moral and exemplary damages, unrealized income, attorney's fees, and costs of suit.
In its answer with counterclaim, petitioner denied liability arguing mainly that it never led respondent to believe that he completed the requirements for a
Bachelor of Laws degree when his name was included in the tentative list of graduating students. After trial, the lower court rendered judgment as
follows:

WHEREFORE, in view of the foregoing judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the latter to
pay plaintiff the sum of THIRTY FIVE THOUSAND FOUR HUNDRED SEVENTY PESOS (P35,470.00) with legal rate of interest from the filing
of the complaint until fully paid, the amount of FIVE THOUSAND PESOS (P5,000.00) as attorney's fees and the cost of suit.
Defendant's counterclaim is, for lack of merit, hereby dismissed.
SO ORDERED.3
which on appeal by both parties was affirmed by the Court of Appeals (CA) with modification. The dispositive portion of the CA decision reads:
WHEREFORE, in the light of the foregoing, the lower Court's Decision is hereby AFFIRMED with the MODIFICATION that defendantappellee, in addition to the sum adjudged by the lower court in favor of plaintiff-appellant, is also ORDERED to pay plaintiff-appellant the
amount of FIFTY THOUSAND (P50,000.00) PESOS for moral damages. Costs against defendant-appellee.
SO ORDERED.4
Upon the denial of its motion for reconsideration, petitioner UE elevated the case to this Court on a petition for review under Rule 45 of the Rules of
Court, arguing that it has no liability to respondent Romeo A. Jader, considering that the proximate and immediate cause of the alleged damages
incurred by the latter arose out of his own negligence in not verifying from the professor concerned the result of his removal exam.
The petition lacks merit.
When a student is enrolled in any educational or learning institution, a contract of education is entered into between said institution and the student. The
professors, teachers or instructors hired by the school are considered merely as agents and administrators tasked to perform the school's commitment
under the contract. Since the contracting parties are the school and the student, the latter is not duty-bound to deal with the former's agents, such as the
professors with respect to the status or result of his grades, although nothing prevents either professors or students from sharing with each other such
information. The Court takes judicial notice of the traditional practice in educational institutions wherein the professor directly furnishes his/her students
their grades. It is the contractual obligation of the school to timely inform and furnish sufficient notice and information to each and every student as to
whether he or she had already complied with all the requirements for the conferment of a degree or whether they would be included among those who
will graduate. Although commencement exercises are but a formal ceremony, it nonetheless is not an ordinary occasion, since such ceremony is the
educational institution's way of announcing to the whole world that the students included in the list of those who will be conferred a degree during the
baccalaureate ceremony have satisfied all the requirements for such degree. Prior or subsequent to the ceremony, the school has the obligation to
promptly inform the student of any problem involving the latter's grades and performance and also most importantly, of the procedures for remedying the
same.
Petitioner, in belatedly informing respondent of the result of the removal examination, particularly at a time when he had already commenced preparing
for the bar exams, cannot be said to have acted in good faith. Absence of good faith must be sufficiently established for a successful prosecution by the
aggrieved party in a suit for abuse of right under Article 19 of the Civil Code. Good faith connotes an honest intention to abstain from taking undue
advantage of another, even though the forms and technicalities of the law, together with the absence of all information or belief of facts, would render the
transaction unconscientious.5 It is the school that has access to those information and it is only the school that can compel its professors to act and
comply with its rules, regulations and policies with respect to the computation and the prompt submission of grades. Students do not exercise control,
much less influence, over the way an educational institution should run its affairs, particularly in disciplining its professors and teachers and ensuring
their compliance with the school's rules and orders. Being the party that hired them, it is the school that exercises general supervision and exclusive
control over the professors with respect to the submission of reports involving the students' standing. Exclusive control means that no other person or
entity had any control over the instrumentality which caused the damage or injury.6
The college dean is the senior officer responsible for the operation of an academic program, enforcement of rules and regulations, and the supervision of
faculty and student services.7 He must see to it that his own professors and teachers, regardless of their status or position outside of the university, must
comply with the rules set by the latter. The negligent act of a professor who fails to observe the rules of the school, for instance by not promptly
submitting a student's grade, is not only imputable to the professor but is an act of the school, being his employer.
Considering further, that the institution of learning involved herein is a university which is engaged in legal education, it should have practiced what it
inculcates in its students, more specifically the principle of good dealings enshrined in Articles 19 and 20 of the Civil Code which states:
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.
Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.
Art. 19 was intended to expand the concept of torts by granting adequate legal remedy for the untold number of moral wrongs which is impossible for
human foresight to provide specifically in statutory law.8 In civilized society, men must be able to assume that others will do them no intended injury
that others will commit no internal aggressions upon them; that their fellowmen, when they act affirmatively will do so with due care which the ordinary
understanding and moral sense of the community exacts and that those with whom they deal in the general course of society will act in good faith. The
ultimate thing in the theory of liability is justifiable reliance under conditions of civilized society.9 Schools and professors cannot just take students for
granted and be indifferent to them, for without the latter, the former are useless.
Educational institutions are duty-bound to inform the students of their academic status and not wait for the latter to inquire from the former. The
conscious indifference of a person to the rights or welfare of the person/persons who may be affected by his act or omission can support a claim for
damages.10 Want of care to the conscious disregard of civil obligations coupled with a conscious knowledge of the cause naturally calculated to produce
them would make the erring party liable.11 Petitioner ought to have known that time was of the essence in the performance of its obligation to inform

respondent of his grade. It cannot feign ignorance that respondent will not prepare himself for the bar exams since that is precisely the immediate
concern after graduation of an LL.B. graduate. It failed to act seasonably. Petitioner cannot just give out its student's grades at any time because a
student has to comply with certain deadlines set by the Supreme Court on the submission of requirements for taking the bar. Petitioner's liability arose
from its failure to promptly inform respondent of the result of an examination and in misleading the latter into believing that he had satisfied all
requirements for the course. Worth quoting is the following disquisition of the respondent court:
It is apparent from the testimony of Dean Tiongson that defendant-appellee University had been informed during the deliberation that the
professor in Practice Court I gave plaintiff-appellant a failing grade. Yet, defendant-appellee still did not inform plaintiff-appellant of his failure
to complete the requirements for the degree nor did they remove his name from the tentative list of candidates for graduation. Worse,
defendant-appellee university, despite the knowledge that plaintiff-appellant failed in Practice Court I, again included plaintiff-appellant's name
in the "tentative list of candidates for graduation which was prepared after the deliberation and which became the basis for the
commencement rites program. Dean Tiongson reasons out that plaintiff-appellant's name was allowed to remain in the tentative list of
candidates for graduation in the hope that the latter would still be able to remedy the situation in the remaining few days before graduation
day. Dean Tiongson, however, did not explain how plaintiff appellant Jader could have done something to complete his deficiency if
defendant-appellee university did not exert any effort to inform plaintiff-appellant of his failing grade in Practice Court I.12
Petitioner cannot pass on its blame to the professors to justify its own negligence that led to the delayed relay of information to respondent. When one of
two innocent parties must suffer, he through whose agency the loss occurred must bear it.13 The modern tendency is to grant indemnity for damages in
cases where there is abuse of right, even when the act is not illicit.14 If mere fault or negligence in one's acts can make him liable for damages for injury
caused thereby, with more reason should abuse or bad faith make him liable. A person should be protected only when he acts in the legitimate exercise
of his right, that is, when he acts with prudence and in good faith, but not when he acts with negligence or abuse.15
However, while petitioner was guilty of negligence and thus liable to respondent for the latter's actual damages, we hold that respondent should not have
been awarded moral damages. We do not agree with the Court of Appeals' findings that respondent suffered shock, trauma and pain when he was
informed that he could not graduate and will not be allowed to take the bar examinations. At the very least, it behooved on respondent to verify for
himself whether he has completed all necessary requirements to be eligible for the bar examinations. As a senior law student, respondent should have
been responsible enough to ensure that all his affairs, specifically those pertaining to his academic achievement, are in order. Given these
considerations, we fail to see how respondent could have suffered untold embarrassment in attending the graduation rites, enrolling in the bar review
classes and not being able to take the bar exams. If respondent was indeed humiliated by his failure to take the bar, he brought this upon himself by not
verifying if he has satisfied all the requirements including his school records, before preparing himself for the bar examination. Certainly, taking the bar
examinations does not only entail a mental preparation on the subjects thereof; there are also prerequisites of documentation and submission of
requirements which the prospective examinee must meet.
WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED with MODIFICATION. Petitioner is ORDERED to PAY respondent the sum
of Thirty-five Thousand Four Hundred Seventy Pesos (P35,470.00), with legal interest of 6% per annum computed from the date of filing of the complaint
until fully paid; the amount of Five Thousand Pesos (P5,000.00) as attorney's fees; and the costs of the suit. The award of moral damages is
DELEIED.1wphi1.nt
SO ORDERED.

TITUS B. VILLANUEVA,

G.R. No. 180764

Petitioner,
Present:
- versus -

Carpio, J., Chairperson,

Brion,
Del Castillo,
Abad, and
Perez, JJ.

EMMA M. ROSQUETA,
Respondent.

Promulgated:

January 19, 2010

x --------------------------------------------------------------------------------------- x

DECISION

ABAD, J.:

This case is about the right to recover damages for alleged abuse of right committed by a superior public officer in preventing a subordinate from doing her
assigned task and being officially recognized for it.

The Facts and the Case

Respondent Emma M. Rosqueta (Rosqueta), formerly Deputy Commissioner of the Revenue Collection and Monitoring Group of the Bureau of Customs
(the Bureau), tendered her courtesy resignation from that post on January 23, 2001, shortly after President Gloria Macapagal-Arroyo assumed office. But five months
later on June 5, 2001, she withdrew her resignation, claiming that she enjoyed security of tenure and that she had resigned against her will on orders of her
superior.[1]

Meantime, on July 13, 2001 President Arroyo appointed Gil Valera (Valera) to respondent Rosquetas position. Challenging such appointment, Rosqueta
filed a petition for prohibition, quo warranto, and injunction against petitioner Titus B. Villanueva (Villanueva), then Commissioner of Customs, the Secretary of
Finance, and Valera with the Regional Trial Court[2] (RTC) of Manila in Civil Case 01-101539. On August 27, 2001 the RTC issued a temporary restraining order (TRO),
enjoining Villanueva and the Finance Secretary[3] from implementing Valeras appointment. On August 28, 2001 the trial court superseded the TRO with a writ of
preliminary injunction.[4]

Petitioner Villanueva, Valera, and the Secretary of Finance challenged the injunction order before the Court of Appeals (CA) in CA-G.R. SP 66070. On
September 14, 2001 the CA issued its own TRO, enjoining the implementation of the RTCs injunction order. But the TRO lapsed after 60 days and the CA eventually
dismissed the petition before it.

On November 22, 2001 while the preliminary injunction in the quo warranto case was again in force, petitioner Villanueva issued Customs Memorandum
Order 40-2001, authorizing Valera to exercise the powers and functions of the Deputy Commissioner.

During the Bureaus celebration of its centennial anniversary in February 2002, its special Panorama magazine edition featured all the customs deputy
commissioners, except respondent Rosqueta. The souvenir program, authorized by the Bureaus Steering Committee headed by petitioner Villanueva to be issued on
the occasion, had a space where Rosquetas picture was supposed to be but it instead stated that her position was under litigation. Meanwhile, the
commemorative billboard displayed at the Bureaus main gate included Valeras picture but not Rosquetas.

On February 28, 2002 respondent Rosqueta filed a complaint[5] for damages before the RTC of Quezon City against petitioner Villanueva in Civil Case Q-0246256, alleging that the latter maliciously excluded her from the centennial anniversary memorabilia. Further, she claimed that he prevented her from performing
her duties as Deputy Commissioner, withheld her salaries, and refused to act on her leave applications. Thus, she asked the RTC to award herP1,000,000.00 in moral
damages, P500,000.00 in exemplary damages, andP300,000.00 in attorneys fees and costs of suit.

But the RTC dismissed[6] respondent Rosquetas complaint, stating that petitioner Villanueva committed no wrong and incurred no omission that entitled
her to damages. The RTC found that Villanueva had validly and legally replaced her as Deputy Commissioner seven months before the Bureaus centennial
anniversary.

But the CA reversed the RTCs decision,[7] holding instead that petitioner Villanuevas refusal to comply with the preliminary injunction order issued in
the quo warranto case earned for Rosqueta the right to recover moral damages from him.[8] Citing the abuse of right principle, the RTC said that Villanueva acted
maliciously when he prevented Rosqueta from performing her duties, deprived her of salaries and leaves, and denied her official recognition as Deputy Commissioner
by excluding her from the centennial anniversary memorabilia. Thus, the appellate court ordered Villanueva to pay P500,000.00 in moral damages, P200,000.00 in
exemplary damages and P100,000.00 in attorneys fees and litigation expenses. With the denial of his motion for reconsideration, Villanueva filed this petition for
review on certiorari under Rule 45.

The Issue Presented

The key issue presented in this case is whether or not the CA erred in holding petitioner Villanueva liable in damages to respondent Rosqueta for ignoring
the preliminary injunction order that the RTC issued in the quo warranto case (Civil Case 01-101539), thus denying her of the right to do her job as Deputy
Commissioner of the Bureau and to be officially recognized as such public officer.

The Courts Ruling

Under the abuse of right principle found in Article 19 of the Civil Code,[9] a person must, in the exercise of his legal right or duty, act in good faith. He
would be liable if he instead acts in bad faith, with intent to prejudice another. Complementing this principle are Articles 20[10] and 21[11] of the Civil Code which grant
the latter indemnity for the injury he suffers because of such abuse of right or duty.[12]

Petitioner Villanueva claims that he merely acted on advice of the Office of the Solicitor General (OSG) when he allowed Valera to assume the office as
Deputy Commissioner since respondent Rosqueta held the position merely in a temporary capacity and since she lacked the Career Executive Service eligibility
required for the job.

But petitioner Villanueva cannot seek shelter in the alleged advice that the OSG gave him. Surely, a government official of his rank must know that a
preliminary injunction order issued by a court of law had to be obeyed, especially since the question of Valeras right to replace respondent Rosqueta had not yet
been properly resolved.

That petitioner Villanueva ignored the injunction shows bad faith and intent to spite Rosqueta who remained in the eyes of the law the Deputy
Commissioner. His exclusion of her from the centennial anniversary memorabilia was not an honest mistake by any reckoning. Indeed, he withheld her salary and
prevented her from assuming the duties of the position. As the Court said in Amonoy v. Spouses Gutierrez,[13] a partys refusal to abide by a court order enjoining him
from doing an act, otherwise lawful, constitutes an abuse and an unlawful exercise of right.

That respondent Rosqueta was later appointed Deputy Commissioner for another division of the Bureau is immaterial. While such appointment, when
accepted, rendered the quo warranto case moot and academic, it did not have the effect of wiping out the injuries she suffered on account of petitioner Villanuevas
treatment of her. The damage suit is an independent action.

The CA correctly awarded moral damages to respondent Rosqueta. Such damages may be awarded when the defendants transgression is the immediate
cause of the plaintiffs anguish[14] in the cases specified in Article 2219[15] of the Civil Code.[16]

Here, respondent Rosquetas colleagues and friends testified that she suffered severe anxiety on account of the speculation over her employment
status.[17] She had to endure being referred to as a squatter in her workplace. She had to face inquiries from family and friends about her exclusion from the
Bureaus centennial anniversary memorabilia. She did not have to endure all these affronts and the angst and depression they produced had Villanueva abided in
good faith by the courts order in her favor. Clearly, she is entitled to moral damages.

The Court, however, finds the award of P500,000.00 excessive. As it held in Philippine Commercial International Bank v. Alejandro,[18] moral damages are
not a bonanza. They are given to ease the defendants grief and suffering. Moral damages should reasonably approximate the extent of hurt caused and the gravity
of the wrong done. Here, that would be P200,000.00.

The Court affirms the grant of exemplary damages by way of example or correction for the public good but, in line with the same reasoning, reduces it
toP50,000.00. Finally, the Court affirms the award of attorneys fees and litigation expenses but reduces it to P50,000.00.

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of Appeals dated April 30, 2007 in CA-G.R. CV 85931
with MODIFICATION in that petitioner Titus B. Villanueva is ORDEREDto pay respondent Emma M. Rosqueta the sum of P200,000.00 in moral damages, P50,000.00
in exemplary damages, and P50,000.00 in attorneys fees and litigation expenses.

SO ORDERED.

[G.R. No. 147076. June 17, 2004]

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM,petitioner, vs. ACT THEATER, INC., respondent.
DECISION
CALLEJO, SR., J.:
Before the Court is a petition for review on certiorari filed by the Metropolitan Waterworks and Sewerage System (MWSS), seeking to reverse and
set aside the Decision[1] dated January 31, 2001 of the Court of Appeals in CA-G.R. CV No. 58581, which affirmed the civil aspect of the
Decision[2] dated May 5, 1997 of the Regional Trial Court of Quezon City, Branch 77, directing the petitioner MWSS to pay the respondent Act Theater,
Inc. damages and attorneys fees.
The present case stemmed from the consolidated cases of Criminal Case No. Q-89-2412 entitled People of the Philippines v. Rodolfo Tabian, et
al., for violation of Presidential Decree (P.D.) No. 401, as amended by Batas Pambansa Blg. 876, and Civil Case No. Q-88-768 entitled Act Theater, Inc.
v. Metropolitan Waterworks and Sewerage System. The two cases were jointly tried in the court a quo as they arose from the same factual
circumstances, to wit:
On September 22, 1988, four employees of the respondent Act Theater, Inc., namely, Rodolfo Tabian, Armando Aguilar, Arnel Concha and
Modesto Ruales, were apprehended by members of the Quezon City police force for allegedly tampering a water meter in violation of P.D. No. 401, as
amended by B.P. Blg. 876. The respondents employees were subsequently criminally charged (Criminal Case No. Q-89-2412) before the court a
quo. On account of the incident, the respondents water service connection was cut off. Consequently, the respondent filed a complaint for injunction
with damages (Civil Case No. Q-88-768) against the petitioner MWSS.
In the civil case, the respondent alleged in its complaint filed with the court a quo that the petitioner acted arbitrarily, whimsically and capriciously,
in cutting off the respondents water service connection without prior notice. Due to lack of water, the health and sanitation, not only of the respondents
patrons but in the surrounding premises as well, were adversely affected. The respondent prayed that the petitioner be directed to pay damages.
After due trial, the court a quo rendered its decision, the dispositive portion of which reads:
In Criminal Case No. Q-89-2412
WHEREFORE, for failure of the prosecution to prove the guilt of the accused beyond reasonable doubt, the four (4) above-named Accused are hereby ACQUITTED of
the crime charged.[3]
In Civil Case No. Q-88-768
...
1.

Ordering defendant MWSS to pay plaintiff actual or compensatory damages in the amount of P25,000.00; and to return the sum of P200,000.00
deposited by the plaintiff for the restoration of its water services after its disconnection on September 23, 1988;

2.

Defendants counterclaim for undercollection of P530,759.96 is dismissed for lack of merit;

3.

Ordering defendant MWSS to pay costs of suit;

4.

Ordering defendant MWSS to pay plaintiff the amount of P5,000.00 as attorneys fees;

5.

Making the mandatory injunction earlier issued to plaintiff Act Theater, Inc. permanent.

SO ORDERED.[4]
Aggrieved, the petitioner appealed the civil aspect of the aforesaid decision to the CA. The appellate court, however, dismissed the appeal.
According to the CA, the court a quo correctly found that the petitioners act of cutting off the respondents water service connection without prior notice
was arbitrary, injurious and prejudicial to the latter justifying the award of damages under Article 19 of the Civil Code.
Undaunted, the petitioner now comes to this Court alleging as follows:
I

WHETHER OR NOT THE HONORABLE COURT OF APPEAL[S] VALIDLY AFFIRMED THE DECISION OF THE REGIONAL TRIAL COURT IN
RESOLVING THE PETITIONERS APPEAL;
II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS VALIDLY UPHELD THE AWARD OF ATTORNEYS FEES;
III
WHETHER OR NOT THE HONORABLE COURT OF APPEAL[S] CORRECTLY APPLIED THE PROVISION OF ARTICLE 19 OF THE NEW CIVIL CODE
WITHOUT CONSIDERING THE APPLICABLE PROVISION OF ARTICLE 429 OF THE SAME CODE.[5]
Preliminarily, the petitioner harps on the fact that, in quoting the decretal portion of the court a quos decision, the CA erroneously typed P500,000
as the attorneys fees awarded in favor of the respondent when the same should only be P5,000. In any case, according to the petitioner, whether the
amount is P500,000 or P5,000, the award of attorneys fees is improper considering that there was no discussion or statement in the body of the
assailed decision justifying such award. The petitioner insists that in cutting off the respondents water service connection, the petitioner merely
exercised its proprietary right under Article 429 of the Civil Code.
The petition is devoid of merit.
Article 429 of the Civil Code, relied upon by the petitioner in justifying its act of disconnecting the water supply of the respondent without prior
notice, reads:
Art. 429. The owner or lawful possessor of a thing has the right to exclude any person from the enjoyment and disposal thereof. For this purpose, he may use such
force as may be reasonable to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property.
A right is a power, privilege, or immunity guaranteed under a constitution, statute or decisional law, or recognized as a result of long
usage,[6] constitutive of a legally enforceable claim of one person against the other.[7]
Concededly, the petitioner, as the owner of the utility providing water supply to certain consumers including the respondent, had the right to
exclude any person from the enjoyment and disposal thereof. However, the exercise of rights is not without limitations. Having the right should not be
confused with the manner by which such right is to be exercised.[8]
Article 19 of the Civil Code precisely sets the norms for the exercise of ones rights:
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.
When a right is exercised in a manner which discards these norms resulting in damage to another, a legal wrong is committed for which actor can
be held accountable.[9] In this case, the petitioner failed to act with justice and give the respondent what is due to it when the petitioner unceremoniously
cut off the respondents water service connection. As correctly found by the appellate court:
While it is true that MWSS had sent a notice of investigation to plaintiff-appellee prior to the disconnection of the latters water services, this was done only a few hours
before the actual disconnection. Upon receipt of the notice and in order to ascertain the matter, Act sent its assistant manager Teodulo Gumalid, Jr. to the MWSS office
but he was treated badly on the flimsy excuse that he had no authority to represent Act. Acts water services were cut at midnight of the day following the apprehension
of the employees. Clearly, the plaintiff-appellee was denied due process when it was deprived of the water services. As a consequence thereof, Act had to contract
another source to provide water for a number of days. Plaintiff-appellee was also compelled to deposit with MWSS the sum of P200,000.00 for the restoration of their
water services.[10]
There is, thus, no reason to deviate from the uniform findings and conclusion of the court a quo and the appellate court that the petitioners act
was arbitrary, injurious and prejudicial to the respondent, justifying the award of damages under Article 19 of the Civil Code.
Finally, the amount of P500,000 as attorneys fees in that portion of the assailed decision which quoted the fallo of the court a quos decision was
obviously a typographical error. As attorneys fees, the court a quo awarded the amount ofP5,000 only. It was this amount, as well as actual and
compensatory damages ofP25,000 and the reimbursement of P200,000 deposited by the respondent for the restoration of its water supply, that the CA
affirmed, as it expressly stated in its dispositive portion that finding no cogent reason to reverse the appealed Decision which is in conformity with the
law and evidence, the same is hereby AFFIRMED.[11]
The award of P5,000 as attorneys fees is reasonable and warranted. Attorneys fees may be awarded when a party is compelled to litigate or
incur expenses to protect his interest by reason of an unjustified act of the other party.[12]
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated January 31, 2001 in CA-G.R. CV No. 58581 is AFFIRMED in
toto.
SO ORDERED.

[G.R. No. 147614. January 29, 2004]

H.L. CARLOS CONSTRUCTION, INC., petitioner, vs. MARINA PROPERTIES CORPORATION, JESUS K. TYPOCO SR. and TAN
YU, respondents.
DECISION
PANGANIBAN, J.:
There is unjust enrichment when a building contractor is denied payment for increased labor cost validly incurred and additional work validly
rendered with the owners express or implied agreement.

The Case

The Petition for Review[1] before the Court, filed under Rule 45, seeks the reversal of the Decision[2] dated March 29, 2001, issued by the Court of
Appeals[3] in CA-GR CV No. 60975. The assailed Decision disposed as follows:
WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE, and a new one entered DISMISSING the [petitioners] Complaint, AND
PARTIALLY GRANTING THE [RESPONDENT-CORPORATIONS] COUNTERCLAIM, IN THAT THE [PETITIONER] IS DIRECTED TO PAY UNTO THE
[RESPONDENT-CORPORATION] THE SUM OF P4,604,579.00 in ACTUAL DAMAGES PLUSP3,549,416.00 AS AND FOR LIQUIDATED DAMAGES.[4]

The Facts

The facts of the case, summarized by the Court of Appeals (CA), are as follows:
[Respondent] MARINA PROPERTIES CORPORATION (MPC for brevity) is engaged in the business of real estate development. On May 10, 1988, MPC entered
into a contract[5]with [Petitioner] H.[L.] CARLOS CONSTRUCTION, INC. (HLC) to construct Phase III of a condominium complex called MARINA BAYHOMES
CONDOMINIUM PROJECT, consisting of townhouses and villas, totaling 31 housing units, for a total consideration ofP38,580,609.00, within a period of 365 days
from receipt of Notice to Proceed. The original completion date of the project was May 16, 1989, but it was extended to October 31, 1989 with a grace period until
November 30, 1989.[6]
The contract was signed by Jovencio F. Cinco, president of MPC, and Honorio L. Carlos, president of HLC.
On December 15, 1989, HLC instituted this case for sum of money against not only MPC but also against the latters alleged president, [Respondent] Jesus K. Typoco,
Sr. (Typoco) and [Respondent] Tan Yu (Tan), seeking the payment of various sums with an aggregate amount of P14 million pesos, broken down as follows:
a)

P7,065,885.03 for costs of labor escalation, change orders and material price escalation;

b)

P2,000,000.00 as additional compensatory damages, exclusive of the cost of suit.

c)

P3,147,992.00 representing retention money allegedly withheld by MPC on HLCs Progress Billings as of January 1990, and

d)

P2,000,000.00 representing the value of construction materials allegedly withheld/detained by MPC.

Traversing the allegations of the complaint, [respondents] filed separate answers, whereby the two individual [respondents] alleged that they are not parties to the
Construction Contract and Amendatory Contract and are therefore not liable to HLC. [Respondent] MPC on the other hand alleged that the [petitioner] has no cause of
action against it and that it (HLC) is not entitled to its various claims. MPC interposed a counterclaim in the aggregate sum of P68,296,227.14 for actual and
compensatory damages, liquidated damages, unliquidated advances, and attorneys fees.[7]
On May 15, 1997, the trial court[8] ruled as follows:[9]
WHEREFORE, premises above considered, judgment is hereby rendered for [Petitioner] H.L. CARLOS CONSTRUCTION, INC. and as against [Respondents]
MARINA PROPERTIES CORPORATION, TAN YU, and JESUS K. TYPOCO, SR., who are hereby ordered to pay, jointly and severally, the [petitioner], as follows:
1. the amount of P7,065,885.03, representing unpaid labor escalation costs, change orders and material price escalations, plus 12% interest per annum from date of
filing of the complaint, until fully paid;
2. the amount of P3,147,992.39 representing the 10% retention money withheld by the [respondents] [from] [petitioners] progress billing as of January 1990, plus
12% interest per annum from the date of filing of the complaint, until fully paid;
3. the amount of P2,000,000.00 representing the value of construction materials and the like detained by the [respondents], plus 12% legal interest from the date of
filing of the complaint, until fully paid;
4.

the sum equivalent to 15% of the principal sum as and by way of attorneys fees; and to

5.

[p]ay the costs of this suit.

The counterclaim for liquidated damages, are hereby DISMISSED for lack of evidence. Liquidated damages can only be awarded under paragraph 2 of the amended
construction contract that extended the completion period and mainly on the finding of the 85% substantial completion of the project, and that the delay and stoppage of
the project was caused by [respondents] default in payment of [the] progress billings that would have allowed [petitioner] to have the capability to continue and
complete the project.

Ruling of the Court of Appeals

On appeal, the CA held that respondents were not liable for escalations in the cost of labor and construction materials, because of the following
reasons: (1) the contract between the parties was for a lump sum consideration, which did not allow for cost escalation; and (2) petitioner failed to show
any basis for the award sought.
Respondents were also absolved from paying for change orders and extra work, inasmuch as there was no supplemental agreement covering
them as required in the main Construction Contract. Although Progress Billing No. 24 apparently indicates that extra work was rendered by petitioner,
this claim is not supported by sufficient evidence.
The CA further failed to find any basis for the release of the 10 percent retention fee. The Construction Contract had provided that such release
would be made only under certain conditions, none of which was complied with, as petitioner failed to complete the work required. Furthermore, MPC
was not held liable for detained or withheld construction materials, since petitioner had eventually withdrawn them.
Nothing in the records indicated any personal liability on the part of Typoco and Tan. Moreover, they had nothing to assume, as MPC was not
held liable to petitioner.
Furthermore, the CA ruled that petitioner was liable for actual and liquidated damages. The latter had abandoned the project prior to its
completion; hence, MPC contracted out the work to another entity and incurred actual damages in excess of the remaining balance of the contract
price. In addition, the Construction Contract had stipulated payment of liquidated damages in an amount equivalent to 1/1000 of the contract price for
each calendar day of delay.
Hence, this Petition.[10]

Issues

In its Memorandum, petitioner raises the following issues:

a. Whether or not the respondents are liable to pay the petitioner its claim for price escalation of construction materials and labor cost
escalation.
b. Whether or not the respondents are liable to the petitioner for cost of change orders and extra works.
c. Whether or not the respondents are liable to the petitioner for the ten percent retention money.
d. Whether or not the respondents are liable to pay the petitioner attorneys fees.
e. Whether or not the respondents are liable to the petitioner for the cost of illegally detained materials.
f. Whether or not the respondents Jesus Typoco Sr., and Tan Yu are jointly and solidarily liable to the petitioner for the latters claims.
g. Whether or not the petitioner is liable to the respondents for actual and liquidated damages.[11]
In simpler terms, the issues to be resolved are as follows:
(1)
Whether petitioner is entitled to (a) a price escalation for labor and material cost, (b) the cost of change orders and extra work, (c) the
release of the 10 percent retention money, (d) the cost of illegally detained materials, and (e) attorneys fees
(2)

Whether Typoco and Tan are solidarily liable with MPC

(3)

Whether petitioner is liable for actual and liquidated damages

The Courts Ruling

The Petition is partly meritorious.

First Issue:
Liability for Additional Costs

Petitioner argues that it is entitled to price escalation for both labor and materials, because MPC was delayed in paying for its obligations. The
former admits that it is normally not entitled to any price increase for labor and materials, because a contractor is expected to build into its price a
contingency factor to protect it from cost increases that may occur during the contract period.[12] It justifies its claim, however, on the ground that a
contractor cannot be expected to anticipate price increases beyond the original contract period. Respondents, on the other hand, aver that it was
delayed in finishing the project; hence, it is not entitled to any price increase.
It must be pointed out that the reason for the CAs denial of petitioners claim was that the contract between the parties was for a lump sum
consideration, and petitioner was guilty of delay in completing the project.

Labor and Material

Cost Escalation

We agree with petitioner that it is entitled to price escalation, but only for the labor component of Progress Billing No. 24. The Construction
Contract contains the following provision on the considerations therefor:
6.1

For and in consideration of the true and faithful performance of the work by the CONTRACTOR, the OWNER shall pay the Lump
Sum Contract Price of PESOS: THIRTY EIGHT MILLION FIVE HUNDRED EIGHTY THOUSAND SIX HUNDRED NINE
(P38,580,609.00) broken down as shown in the Bid Form. No cost escalation shall be allowed except on the labor component
of the work x x x.[13]

Since the Contract allows escalation only of the labor component, the implication is that material cost escalations are barred. There appears to
be no provision, either in the original or in the amended contract, that would justify billing of increased cost of materials. Furthermore, no evidence -- like
official economic data showing an increase in the price index of construction materials -- was even adduced by petitioner to prove that there had indeed
been increases in material costs.[14]
Petitioner attempts to pass off these cost escalations as a form of damages suffered by it as a natural consequence of the delay in the payment of
billings and claims for additional work. It argues that the baseless and malicious refusal to pay for those claims renders respondents liable for damages
under Article 2201 of the Civil Code.
We disagree. Without tackling the issue of delay, we find that the contentious Progress Billing No. 24 contains no claim for material cost
escalation. The other unsettled bills claimed by petitioner are those for change orders or extra work, which have not been shown to be related to the
increase in cost of materials. Dealt with in separate contracts between the parties were such claims, the costs of which were to be determined and
agreed upon only when required by MPC. Materials used for those additional jobs were to be purchased only when the work was contracted, not prior
thereto. As admitted by petitioner, expenses for change orders/additional work were not included in the agreed contract price[15] and, hence, were not
subject to increases.
MPC admits that the labor cost escalation clause was adopted by the parties to safeguard the contractor against losses in the event that, during
the execution of the Contract, the government would order a minimum wage adjustment, which would then inflate the labor cost.[16] Respondents deny
liability for this added expense because, according to the Contract, the allowance for labor cost escalation is available only within the duration of the
original construction period.
We clarify. The claimed cost of labor escalation pertains to the period September 1 to December 15, 1989, in the amount of P170,722.10; and
December 16 to January 27, 1990, P45,983.91. During those periods, petitioner had not yet incurred any delay in the project, originally stipulated to be
finished by May 16, 1989. But by mutual agreement, the period was extended up to October 31, 1989, with a grace period until November 30, 1989.
Furthermore, a legislated wage increase became effective after the expiration of the original period.[17] Respondents are, therefore, liable for this
increase in labor cost, because they allowed petitioner to continue working on the project until April 20, 1990 (even beyond November 30, 1989).
MPC argues that to allow the claim for labor cost escalation would be to reward petitioner for incurring delay, thereby breaching a contractual
obligation.
This contention is untenable. Before the expiration of the extended period, petitioner was not yet in delay. It was granted by MPC an extension to
complete the project until November 30, 1989. Moreover, despite the expiration of the extended period, MPC allowed it to continue working on the
project until the former took over and awarded that project to another contractor. Hence, labor costs were actually incurred by petitioner until April 20,
1990. It was thus entitled to reimbursement for labor cost escalation until that date. MPC cannot now be allowed to question the true valuation of the
additional labor because, instead of submitting to an independent evaluator, it violated the Temporary Restraining Order (TRO) issued by the trial court
and hired another contractor to finish the project.
Noteworthy is the fact that MPC paid for the labor cost escalation during the period August 1-15, 1989,[18] which was past the expiration of the
original period. Apparently, it thereafter stopped paying for labor cost escalation in response to the suit filed against it by petitioner.
The CA denied the labor cost escalation claim because, despite having billed MPC therefor, petitioner accepted payments that did not include
such claim. The appellate court construed the acceptance by petitioner as a waiver of the latters right to be reimbursed for the increased labor cost.
We believe that this position is untenable. The CA mistook Exhibits C-7-B[19]and D-1[20] as bills coming from petitioner, when in truth they were
Accomplishment Evaluation Sheets issued by MPC. The notation labor escalation not included in the said Exhibits was an admission on the part of
MPC that it had not paid such amount, upon the advice of Atty. Jose C. Laureta, its resident counsel. According to him, petitioner should be faulted for
having incurred labor cost increases after the expiration of the original period (after May 16, 1989). Not having waived such increases, it should thus
bear them.[21]
To allow MPC to acquire the partially accomplished project without paying for labor cost escalation validly incurred would constitute unjust
enrichment at the expense of petitioner.[22] There is unjust enrichment under Article 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.[23] Since petitioner had rendered services that were accepted by MPC, then the
former should be compensated for them. Labor cost escalation, in this case, has already been earned by petitioner.

Change Orders and Extra Work

Petitioner claims entitlement to compensation for change orders and extra work that were covered by construction memoranda. MPC counters,
however, that the former never presented any cost estimate for additional work. The estimate would have formed the basis for a consensual agreement
and a computation of actual accomplishment, for which MPC could have been unilaterally billed. Worse, the extra work was allegedly assessed by its
engineer to be worth only P705.41.
We side with petitioner. The General Conditions to the Construction Contract provides:
13.

CLAIMS FOR EXTRA AND FORCE ACCOUNT WORK:

If the Contractor claims that any construction by drawings or otherwise involve extra cost under this Contract, he shall give the Owner and/or the Architect, written
notice thereof within a reasonable time after receipt of such instructions, and in any event before proceeding to execute the work, except in emergency endangering life
or property. No such claim shall be valid unless so made.
Extra work for which no price is provided in the proposal shall be covered by a supplementary agreement to be signed by both parties before such
work is commenced. [24]
The CA is correct in holding that there is no supplemental agreement covering the claimed extra work and change orders. Exhibits C-1, C-2,
C-2-A, C-3 and C-4 show billings for extra work sent by petitioner to MPC. But the former did not submit in evidence the alleged construction
memoranda covering them. Neither were they mentioned in the letter[25] of Roilo Golez dated November 24, 1989.
Progress Billing No. 24, which pertained to the project as covered by the Construction Contract, did not mention any claim for extra work or
change orders. These additional jobs were covered by separate bills other than the twenty-four Progress Billings sent by petitioner.
MPC, however, never denied having ordered additional work. In Item No. 12 of its Amended Answer,[26] it averred that petitioners claim for change
orders and extra work were premature. Limneo P. Miranda, respondents work engineer, manifested that additional work was indeed done, but that
claims therefor were not settled for the following reasons: (1) reconciliation between the parties was never completed due to the absence of petitioners
representative in scheduled meetings; (2) difference in opinion on the proper valuation of the additional work, as MPC wanted to use the net quantity
method, while petitioner preferred the gross method; and (3) some claims were rejected by MPC, because they had not been properly approved in
accordance with the Contract.[27]
Evidence on record further reveals that MPC approved some change order jobs despite the absence of any supplementary agreement. In its
Over-all Summary of Reconciled Quantities as of September 6, 1989 (Annex C),[28] it valued petitioners valid claim therefor at P79,340.52. After
noting that the claim had extremely been bloated, Atty. Laureta, in-house counsel for respondent corporation, affirmed as valid the amount stated in the
summary.[29]
Petitioner may have failed to show the construction memoranda covering its claim, but it inarguably performed extra work that was accepted by
MPC. Hence, we will consider Annex C as the proper valuation thereof.
Under the principle of quantum meruit, a contractor is allowed to recover the reasonable value of the thing or services rendered despite the lack of
a written contract, in order to avoid unjust enrichment.[30] Quantum meruit means that in an action for work and labor, payment shall be made in such
amount as the plaintiff reasonably deserves.[31] To deny payment for a building almost completed and already occupied would be to permit unjust
enrichment at the expense of the contractor.[32]
The CA held that since Billing No. 24 did not include any claim for additional work, such work had presumably been previously paid for. This
reasoning is not correct. It is beyond dispute that the change orders and extra work were billed separately from the usual progress billings petitioner
sent to MPC.

Retention Money

The CA denied the claim for the 10 percent retention money, because petitioner had failed to comply with the conditions under paragraph 6.3 of
the Construction Contract. On the other hand, the latter avers that these conditions were deemed fulfilled under Article 1186 of the Civil Code because,
when its contract was terminated, MPC prevented the fulfillment of those conditions. It would allegedly be unfair and unreasonable for petitioner to
guarantee a project finished by another contractor.
We disagree with petitioner. In the construction industry, the 10 percent retention money is a portion of the contract price automatically deducted
from the contractors billings, as security for the execution of corrective work -- if any -- becomes necessary. This amount is to be released one year
after the completion of the project, minus the cost of corrective work.[33] The conditions for its release are stated in the Construction Contract as follows:
6.3

In all cases, however, payment of the progress billings shall be subject to deduction of twenty percent (20%) recoupment of the
downpayment, ten percent (10%) retention and expanded withholding tax on CONTRACTORS income. Upon issuance of the
Certificate of Completion of the work by the OWNER and upon submission of Guaranty Bond, Ninety Percent (90%) of the
retained amount shall be released to the CONTRACTOR and the balance thereof shall be released by the OWNER within
thirty (30) days after the expiration of the guaranty period which is 365 days after issuance of the certificate of completion. [34]

None of the foregoing conditions were satisfied; hence, the CA was correct in forfeiting the retention fee. The completion of the work was
stipulated in the Contract to be within 365 days from the issuance of a Notice to Proceed or until May 16, 1989. Then the period was extended up to
November 30, 1989. Petitioner worked on the project till April 20, 1990. It was given by MPC ample time and two extensions to complete the
project. The simple truth is that in failing to finish the project, the former failed to fulfill a prerequisite for the release of the retention money.

Detained Materials

Petitioner claims cost reimbursement of illegally detained materials, as it was allowed to withdraw them from the site only after two years from the
unilateral termination of the Contract. By 1992, only 30 percent of the materials detained were salvageable, while the rest had depreciated.
This contention has no merit. According to the CAs ruling, the only proof that MPC detained materials belonging to petitioner was the denial of
the request, contained in the latters February 1990 letter,[35] for the release of used form lumber. Aside from that letter, however, no other attempt was
shown to have been made by petitioner to obtain its request. It should have tried again to do so before claiming that respondents unreasonably
prevented it from removing its construction materials from the premises. As to the other materials, there was absolutely no attempt to remove them from
the construction site. Hence, we cannot say that these were ever withheld from petitioner.
Detention is not proved by Atty. Lauretas letter[36] dated July 4, 1992, allowing petitioner to remove its materials from the site. The letter was
merely a directive for it to clear out its belongings therefrom, in view of the hiring of a second contractor to finish the project.
Moreover, in a specifically designated yard inside the construction site, petitioner maintained a warehouse that was guarded by its own security
complement and completely inaccessible to MPC personnel.[37] It therefore had control over those materials and should have made provisions to keep
them safe from the elements and from pilferage.

Attorneys Fees

Petitioner argues that it is entitled to attorneys fees based on Article 2208 of the Civil Code, because (1) respondents act or omission has
compelled it to litigate with third persons or to incur expenses to protect its interest; and (2) respondents acted in gross and evident bad faith in refusing
to satisfy its plainly valid, just and demandable claim.
The grant of some of the claims of petitioner does not change the fact that it did not finish the project. Attorneys fees are not granted every time a
party prevails in a suit, because no premium should be placed on the right to litigate.[38] Petitioner is not, after all, blameless in the present
controversy. Just because MPC withheld some payments from petitioner does not mean that the former was in gross or evident bad faith. MPC had
claims that it wanted to offset with those of the latter.

Second Issue:
Typoco and Tans Liabilities

Petitioner claims that Respondents Jesus Typoco and Tan Yu are solidarily liable with MPC.
We concur with the CA that these two respondents are not liable. Section 31 of the Corporation Code (Batas Pambansa Blg. 68) provides:
Section 31. Liability of directors, trustees or officers. Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation
or who are guilty of gross negligence or bad faith x x x shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders and other persons.
The personal liability of corporate officers validly attaches only when (a) they assent to a patently unlawful act of the corporation; or (b) they are
guilty of bad faith or gross negligence in directing its affairs; or (c) they incur conflict of interest, resulting in damages to the corporation, its stockholders
or other persons.[39]
The records are bereft of any evidence that Typoco acted in bad faith with gross or inexcusable negligence, or that he acted outside the scope of
his authority as company president. The unilateral termination of the Contract during the existence of the TRO was indeed contemptible -- for which
MPC should have merely been cited for contempt of court at the most -- and a preliminary injunction would have then stopped work by the second
contractor. Besides, there is no showing that the unilateral termination of the Contract was null and void.
Respondent Tan is not an officer or a director of MPC. His participation is limited to an alleged conversation between him and Engineer Mario
Cornista, petitioners project manager. Supposedly, the former verbally agreed therein to guarantee the payment of the latters progress billings. We
find no satisfactory evidence to show respondents alleged solidary liability to petitioner.

Third Issue:
Liability for Actual and Liquidated Damages

Petitioner avers that it should be exonerated from the counterclaims for actual and liquidated damages, because its failure to complete the project
was due to respondents acts.
Central to the resolution of this issue is the question of which party was in delay. Aside from the contentious Progress Billing No. 24, there are no
other unpaid claims. The bills for extra work and change orders, aside from those for the beams and columns, were premature and still subject to
reconciliation and adjustment. Hence, we cannot hold MPC liable for them.
In comparison, petitioner did not fulfill its contractual obligations. It could not totally pass the blame to MPC for hiring a second contractor,
because the latter was allowed to terminate the services of the contractor.

10.1

The OWNER shall have the right to terminate this Contract in the event that the CONTRACTOR incurs a fifteen percent (15%) or
greater slippage in the prosecution of the overall work evaluated against the Project schedule as indicated by the critical path
of the approved PERT/CPM network for the Project or as amended by Art. II herein.

Either party shall have the right to terminate this Contract for reason of violation or non-compliance by the other party of the terms and conditions herein agreed
upon.[40]
As of November 30, 1989, petitioner accomplished only approximately 80 percent of the project. In other words, it was already in delay at the
time. In addition, Engineer Miranda testified that it would lose money even if it finished the project;[41] thus, respondents already suspected that it had no
intention of finishing the project at all.
Petitioner was in delay and in breach of contract. Clearly, the obligor is liable for damages that are the natural and probable consequences of its
breach of obligation.[42] Petitioner was already paid by MPC in the amount of P31,435,187 out of the total contract price of P38,580,609; thus,
only P7,145,422 remained outstanding. In order to finish the project, the latter had to contract the services of a second construction firm
for P11,750,000. Hence, MPC suffered actual damages in the amount of P4,604,579 for the completion of the project.
Petitioner is also liable for liquidated damages as provided in the Contract,[43]the pertinent portion of which is quoted as follows:
4.1

Time is an essential feature of this Contract and in the event that the CONTRACTOR fails to complete the contracted work within
the stipulated time inclusive of any granted extension of time, the CONTRACTOR shall pay the OWNER, as liquidated
damages, the amount of one over one thousand (1/1000) of the value of the contract price for each and every calendar day of
delay (Sundays and Holidays included), not to exceed 15% of [the] Contract amount, in the completion of the work as
specified in Article II above. It is understood that the liquidated damages herein provided are fixed, agreed upon and not by
way of penalty, and as such, the OWNER shall not be further required to prove that he has incurred actual damages to be
entitled thereto. In the case of such delays, the OWNER is hereby authorized to deduct the amount of liquidated damages
from any money due or which may become due the CONTRACTOR in this or any other contract or to collect such amount
from the CONTRACTORs performance bond whichever is convenient and expeditious to the OWNER.

Liquidated damages are those that the parties agree to be paid in case of a breach.[44] As worded, the amount agreed upon answers for damages
suffered by the owner due to delays in the completion of the project. Under Philippine laws, these damages take the nature of penalties.[45] A penal
clause is an accessory undertaking to assume greater liability in case of a breach. It is attached to an obligation in order to ensure performance.
Thus, as held by the CA, petitioner is bound to pay liquidated damages for 92 days, or from the expiration of the grace period in the Amended
Contract until February 1, 1990, when it effectively abandoned the project.
WHEREFORE, the Petition is partly GRANTED and the assailed DecisionMODIFIED. Petitioner is AWARDED labor cost escalation in the sum
of P1,196,202 and cost of extra work in the sum of P79,340.52. In all other respects, the appealed Decision is AFFIRMED.
SO ORDERED.
VICENTE S. ALMARIO,

G.R. No. 170928

Petitioner,
Present:
QUISUMBING,* J., Chairperson,
SANDOVAL-GUTIERREZ,**
CARPIO,***
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

- versus -

PHILIPPINE AIRLINES, INC.,

Respondent.

Promulgated:
September 11, 2007

x-------------------------------------------------- x
DECISION

CARPIO MORALES, J.:

On October 21, 1988, petitioner, Vicente S. Almario (Almario), was hired by respondent, Philippine Airlines, Inc. (PAL), as a Boeing 747 Systems
Engineer.

On April 28, 1995, Almario, then about 39 years of age[1] and a Boeing 737 (B-737) First Officer at PAL, successfully bid for the higher position of Airbus
300 (A-300) First Officer.[2] Since said higher position required additional training, he underwent, at PALs expense, more than five months of training consisting of
ground schooling in Manila and flight simulation inMelbourne, Australia.[3]

After completing the training course, Almario served as A-300 First Officer of PAL, but after eight months of service as such or on September 16, 1996, he
tendered his resignation, for personal reasons, effective October 15, 1996.[4]

On September 27, 1996, PALs Vice President for Flight Operations sentAlmario a letter, the pertinent portions of which read:
xxxx
2.

Our records show that you have been trained by the Company as A300 First Officer starting on 04 September 1995 and have completed
said training on 08 February 1996. As you are aware the Company invested heavily on your professional training in the estimated
amount of PHP786,713.00 on the basis that you continue to serve the Company for a definite period of time which is
approximately three (3) years or thirty-six (36) months.

3.

In view of the foregoing, we urge you to reconsider your proposed resignation otherwise you will be required to reimburse the Company
an amount equivalent to the cost of your professional training and the damaged [sic] caused to the Company.[5] (Emphasis and
underscoring supplied)

Despite receipt of the letter, Almario pushed through with his resignation.

By letter of October 9, 1996, Almarios counsel sought PALsexplanation behind its September 27, 1996 letter considering that Almario did not sign
anything regarding any reimbursement.[6] PAL did not reply,prompting Almarios counsel to send two letters dated January 6, 1997 andFebruary 10, 1997 followingup PALs reply, as well as the release ofAlmarios clearances which he needed to avail of his benefits.[7]

On February 11, 1997, PAL filed a Complaint[8] against Almario before the Makati Regional Trial Court (RTC), for reimbursement of P851,107 worth of
training costs, attorneys fees equivalent to 20% of the said amount, and costs of litigation. PAL invoked the existence of an innominate contract of do ut facias (I give
that you may do) with Almario in that by spending for his training, he would render service to it until the costs of training were recovered in at least three (3)
years.[9] Almario having resigned before the 3-year period, PAL prayed that he should be ordered to reimburse the costs for his training.

In his Answer with Special and Affirmative Defenses and Compulsory Counterclaims,[10] Almario denied the existence of any agreement with PAL that he
would have to render service to it for three years after his training failing which he would reimburse the training costs. He pointed out that the 1991-1994 Collective
Bargaining Agreement (CBA) between PAL and the Airline Pilots Association of the Philippines (ALPAP), of which he was a member,[11] carried no such agreement.

Almario thus prayed for the award of actual damages on account ofPALs withholding of the necessary clearances which he needed in order to obtain his
lawful benefits, and moral and exemplary damages for malicious prosecution and unjust harassment.[12]

PAL, in its Reply to Defendants Answer and Answer to Counterclaim,[13] argued as follows:
The right of PAL to be reimbursed for training expenses is based onArticle XXIII, Section 1 of the 1991-1994 Collective
Bargaining Agreement (CBA, for brevity) and which was taken from the decision of the Secretary of Labor.
[The Secretary of Labor] ruled that a pilot should remain in the position where he is upon reaching the age of fifty-seven (57),
irrespective of whether or not he has previously qualified in the Companys turbo-jet operations. The rationale behind this is that a pilot who will
be compulsorily retired at age sixty (60) should no longer be burdened with training for a new position.
Thus, Article XXIII, Section 1 of the CBA provide[s]:
Pilots fifty-seven (57) years of age shall be frozen in their position. Pilots who are less than fifty-seven (57)
years of age provided they have previously qualified in any companys turbo-jet aircraft shall be permitted to occupy any
position in the companys turbo-jet fleet.
The reason why pilots who are 57 years of age are no longer qualified to bid for a higher position is because they have only three (3)
years left before the mandatory retirement age [of 60] and to send them to training at that age, PAL would no longer be able to recover
whatever training expenses it will have to incur.

Simply put, the foregoing provision clearly and unequivocally recognizes the prohibitive training cost principle such that it will take a
period of at least three (3) years before PAL could recover from the training expenses it incurred.[14] (Emphasis and underscoring supplied)

By Decision[15] of October 25, 2000, Branch 147 of the Makati RTC, finding no provision in the CBA between PAL and ALPAP stipulating that a pilot who
underwent a training course for the position of A-300 First Officer must serve PAL for at least three years failing which he should reimburse the training expenses,
rendered judgment in favor of Almario.

The trial court denied Almarios claim for moral damages, however.[16] It denied too Almarios claim for the monetary equivalent of his family trip pass
benefits (worth US$49,824), it holding that the same had been forfeited as he did not avail of them within one year from the date of his separation.

Thus the trial court disposed:

WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of defendant Vicente Almario and against the
plaintiff:
12-

Dismissing the plaintiffs complaint;

Ordering the plaintiff to pay the defendant:
abcd-

the amount of P312,425.00 as actual damages with legal interest from the filing of the counterclaim;
the amount of P500,000.00 as exemplary damages;
the amount of P150,000.00 as attorneys fees;
the costs of the suit.

SO ORDERED.[17]

On appeal by both parties,[18] the Court of Appeals, by Decision[19]dated March 31, 2005, reversed the trial courts decision. It found Almarioliable under the
CBA between PAL and ALPAP and, in any event, under Article 22 of the Civil Code. Thus it disposed:
WHEREFORE, the appealed Decision is REVERSED and SET ASIDE. In lieu thereof, a new judgment is hereby ENTERED, as
follows: (a) Appellee Vicente Almario is hereby ordered to pay appellant Philippine Airlines, Inc. the sum of Five Hundred Fifty Nine Thousand,
Seven Hundred [T]hirty Nine & 9/100 Pesos (P559, 739.90) with six percent (6%) interest as above-computed; and (b) the award of exemplary
damages and attorneys fees in favor of appellee is hereby DELETED.[20] (Emphasis in the original; underscoring supplied)

His Motion for Reconsideration[21] having been denied,[22] Almario filed the instant Petition for Certiorari [sic] (Under Rule 45),[23] raising the following
issues:
A.

Whether the Court of Appeals committed reversible error in interpreting the Collective Bargaining Agreement between Philippine
Airlines, Inc. (PAL) and the Airline Pilots Association of the Philippines (ALPAP) as an ordinary civil law contract applying ordinary
contract law principles which is contrary to the ruling of the Supreme Court in SamahangManggagawa sa Top Form ManufacturingUnited Workers of the Philippines (SMTFM-UWP) v. NLRC and, therefore, erroneously reading into the CBA a clause that was not
agreed to during the negotiation and not expressly stated in the CBA;

B.

Whether the Court of Appeals committed reversible error in holding that Article 22 of the Civil Code can be applied to recover training
costswhich were never agreed to nor included as reimbursable expenses under the CBA;

C.

Whether the availing by petitioner of a required training is a legal ground justifying the entitlement to a benefit and therefore, negating
claims of unjust enrichment;

D.

Whether the failure of private respondent to honor and provide the Family Trip Pass Benefit in the equivalent amount of US$ 49,824.00
which petitioner and his family were not able to avail of within the one (1) year from date of separation due to the actions of PAL
amounts to unjust enrichment;

E.

Whether or not respondent is liable for malicious prosecution[.][24] (Underscoring supplied)

Almario insists on the absence of any written contract or explicit provision in the CBA obliging him to reimburse the costs incurred by PAL for his
training. And he argues:
[T]here can be no unjust enrichment because petitioner was entitled to the benefit of training when his bid was accepted, and
x x x PAL did not suffer any injury because the failure to include a reimbursement provision in the CBA was freely entered into by the
negotiating parties;
xxxx
It is not disputed that the petitioner merely entered a bid for a higherposition, and that when he was accepted based on seniority and
qualification, the position was awarded to him. It is also not disputed that petitioner [had] not asked, requested, or demanded for the training. It
came when his bid was accepted by PAL;
Because the training was provided when the bid was accepted, the acceptance of the bid was the basis and legal ground for the
training;
Therefore, since there is a legal ground for the entitlement of the training, contrary to the ruling of the Court of Appeals, there can be
no unjust enrichment;[25] (Underscoring supplied)

The petition fails.

As reflected in the above-enumerated issues raised by Almario, he cites the case of Samahang Manggagawa sa Top Form Manufacturing-United Workers of
the Philippines (SMTFM-UWP) v. NLRC[26] (Manggagawa) in support of his claim that the appellate court erred in interpreting the CBA as an ordinary civil law
contract and in reading into it a clause that was not agreed to during the negotiation and not expressly stated in the CBA.

On the contrary, the ruling in Manggagawa supports PALs position. Thus this Court held:
The CBA is the law between the contracting parties the collective bargaining representative and the employercompany. Compliance with a CBA is mandated by the expressed policy to give protection to labor. In the same vein, CBA provisions
should be construed liberally rather than narrowly and technically, and the courts must place a practical and realistic construction
upon it, giving due consideration to the context in which it is negotiated and purpose which it is intended to serve. This is
founded on the dictum that a CBA is not an ordinary contract but one impressed with public interest. It goes without saying, however,
that only provisions embodied in the CBA should be so interpreted and complied with. Where a proposal raised by a contracting
party does not find print in the CBA, it is not a part thereof and the proponent has no claim whatsoever to its
implementation.[27] (Emphasis and underscoring supplied)

In N.S. Case No. 11-506-87, In re Labor Dispute at the Philippine Airlines, Inc., the Secretary of the Department of Labor and Employment (DOLE),
passing on the failure of PAL and ALPAP to agree on the terms and conditions for the renewal of their CBA which expired on December 31, 1987 and construing
Section 1 of Article XXIII of the 1985-1987 CBA, held:
xxxx
Section 1, Article XXIII of the 1985-1987 CBA provides:
Pilots fifty-five (55) years of age or over who have not previously qualified in any Company turbo-jet aircraft
shall not be permitted to bid into the Companys turbo-jet operations. Pilots fifty-five (55) years of age or over who have
previously qualified in the companys turbo-jet operations may be by-passed at Company option, however, any such pilot
shall be paid the by-pass pay effective upon the date a junior pilot starts to occupy the bidded position.
x x x PAL x x x proposed to amend the provision in this wise:
The compulsory retirement age for all pilots is sixty (60) years. Pilots who reach the age of fifty-five (55) years
and over without having previously qualified in any Company turbo-jet aircraft shall not be permitted to occupy any
position in the Companys turbo-jet fleet. Pilots fifty-four (54) years of age and over are ineligible for promotion to any
position in Group I. Pilots reaching the age of fifty-five (55) shall be frozen in the position they currently occupy at that
time and shall be ineligible for any further movement to any other positions.
PALs contention is basically premised on prohibitive training costs. The return on this investment in the form of the pilot
promoted is allegedly five (5) years. Considering the pilots age, the chances of full recovery [are] asserted to be quite slim.

ALPAP opposed the proposal and argued that the training cost is offset by the pilots maturity, expertise and experience.
By way of compromise, we rule that a pilot should remain in the position where he is upon reaching age fifty-seven (57), irrespective
of whether or not he has previously qualified in the Companys turbo-jet operations. The rationale behind this is that a pilot who will be
compulsorily retired at age sixty (60) should no longer be burdened with training for a new position. But if a pilot is only at age fifty-five (55),
and promotional positions are available, he should still be considered and promoted if qualified, provided he has previously qualified in any
company turbo-jet aircraft. In the latter case, the prohibitive training costs are more than offset by the maturity, expertise, and experience
of the pilot.
Thus, the provision on age limit should now read:
Pilots fifty-seven (57) years of age shall be frozen in their positions. Pilots fifty-five (55) [sic] years of age
provided they have previously qualified in any company turbo-jet aircraft shall be permitted to occupy any position in the
companys turbo-jet fleet.[28] (Emphasis and underscoring supplied)

The above-quoted provision of Section 1 of Article XXIII of the 1985-1987 CBA, as construed by the DOLE Secretary, was substantially incorporated in the
1991-1994 CBA between PAL and ALPAP[29] as follows:
Pilots fifty-seven (57) years of age shall be frozen in their position. Pilots who are less than fifty-seven (57) years of age provided they
have previously qualified in any companys turbo-jet aircraft shall be permitted to occupy any position in the companys turbo-jet fleet.[30]

The same section of Article XXIII of the 1991-1994 CBA was reproduced in the 1994-2000 CBA.[31]

Arturo Gabanton, PALs Senior Vice President for Flight Operations, testifying on PALs policy or practice on underwriting the training costs of its pilots
at the time Almario was trained, with the expectation of benefitingtherefrom in order to recover the cost of training, explained:

Atty. Parinas:
Q:
At the time the defendant was accepted for training as A300 First Officer, would you know what was the governing policy or practice of
Philippine Airlines that was being employed regarding the training cost[s] for the pilots?
Witness:
A:
The company has to spend for the training of the pilots and after that the company expecting that services will be rendered in order
to recover the cost[s] of training.
Atty. Parinas:
Q:
You stated that the pilot must serve the company after completing the training, for how long after completing the training?
Witness:
A:
At least for three (3) years.

Atty. Parinas:
Q:
What is your basis in saying that a pilot must serve the company after completing the training?
Witness:
A:
That is embodied in the Collective Bargaining Agreement between Philippine Airlines and the Airline Pilot Association of
thePhilippines.[32]
xxxx
Atty. Parinas:
Q:
Can you point to the provision in this agreement relating to the three (3) year period you stated a while ago?
NOTE: Witness going over the document shown to him by counsel.
Witness:
A:
It is on page 99 of the Collective Bargaining Agreement, Article 23, Miscellaneous.
Atty. Parinas: I would like to manifest that this provision pointed out by the witness is already marked as Exhibit B-1 by the plaintiff.
xxxx
[Atty. Parinas]

Q:

Mr. witness, Exhibit B-1 states in part that Pilots, 57 years of age shall be frozen in their position. Pilots who are less than 57 years of
age provided they have been previously qualified in any companys Turbo-Jet Aircraft shall be permitted to occupy any position in the
companys Turbo-jet Fleet, why do you say this is the basis for the three (3) year period within which a pilot must render service to
the company after completing the training?
[Witness]
A:
The reason why 57 years old is placed here in the Collective Bargaining Agreement [is that] it is expected that you serve the position
for three (3) years because the retirement age is at 60, therefore, if you are past 57 years old, it will fall short of the three (3) years
recovery period for the company. So it was established that [anyone] past 57 years old will not be allowed to train for another
position.[33] (Emphasis and underscoring supplied)

It bears noting that when Almario took the training course, he was about 39 years old, 21 years away from the retirement age of 60. Hence, with the
maturity, expertise, and experience he gained from the training course, he was expected to serve PAL for at least three years to offset the prohibitive costs thereof.

The pertinent provision of the CBA and its rationale aside, contrary toAlmarios claim, Article 22 of the 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,

applies.

This provision on unjust enrichment recognizes the principle that one may not enrich himself at the expense of another. An authority on Civil Law[34] writes on
the subject, viz:
Enrichment of the defendant consists in every patrimonial, physical, or moral advantage, so long as it is appreciable in money. It may
consist of some positive pecuniary value incorporated into the patrimony of the defendant, such as: (1) the enjoyment of a thing belonging to the
plaintiff; (2) the benefits from service rendered by the plaintiff to the defendant; (3) the acquisition of a right, whether real or personal; (4) the
increase of value of property of the defendant; (5) the improvement of a right of the defendant, such as the acquisition of a right of
preference; (6) the recognition of the existence of a right in the defendant; and (7) the improvement of the conditions of life of the defendant.
xxxx
The enrichment of the defendant must have a correlative prejudice, disadvantage, or injury to the plaintiff. This prejudice may consist,
not only of the loss of property or the deprivation of its enjoyment, but also of non-payment of compensation for a prestation or service rendered
to the defendant without intent to donate on the part of the plaintiff, or the failure to acquire something which the latter would have obtained. The
injury to the plaintiff, however, need not be the cause of the enrichment of the defendant. It is enough that there be some relation between them,
that the enrichment of the defendant would not have been produced had it not been for the fact from which the injury to the plaintiff is
derived. (Underscoring supplied)[35]

Admittedly, PAL invested for the training of Almario to enable him to acquire a higher level of skill, proficiency, or technical competence so that he could
efficiently discharge the position of A-300 First Officer. Given that, PAL expected to recover the training costs by availing of Almarios services for at least three
years. The expectation of PAL was not fully realized, however, due to Almarios resignation after only eight months of service following the completion of his training
course. He cannot, therefore, refuse to reimburse the costs of training without violating the principle of unjust enrichment.

Following the computation by the appellate court which was arrived at by offsetting the respective claims of the parties, viz:
Training Cost
Less: Appellees corresponding 8 months
Service after training [P850,107.00
divided by 36 months (3 years)
= P23,640.86 x 8 months]
Equals
Less: Accrued Benefits
Net Reimbursable Amount or
Appellees Outstanding Account

P851,107.00

189,126.88
P661,980.12
102,240.22
P559,739.90[36]
**********,

Almario must pay PAL the sum of P559,739.90, to bear the legal interest rate of 6% per annum from the filing of PALs complaint on February 11, 1997 until the
finality of this decision.

In light of the foregoing discussions on the main issue, the Court finds it unnecessary to dwell on the other issues raised by Almario. Suffice it to state that
the appellate courts disposition thereof is, as its decision reflects, well-taken.

WHEREFORE, the petition is DENIED and the decision appealed from is AFFIRMED.

Costs against petitioner.

SO ORDERED.
ADVANCED FOUNDATION CONSTRUCTION SYSTEMS
CORPORATION,
Petitioner,

G.R. No. 143154

- versus NEW WORLD PROPERTIES AND VENTURES, INC.,

Respondent.
x------------------------x
NEW WORLD PROPERTIES AND VENTURES, INC.,
Petitioner.
G.R. No. 143177

Present:
- versus -

ADVANCED FOUNDATION CONSTRUCTION SYSTEMS

CORPORATION,
Respondent.

PANGANIBAN, CJ
Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.

Promulgated:
June 21, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION

CHICO-NAZARIO, J.:

Before Us are two consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Civil Procedure assailing the Decision[1] of the Court of
Appeals which affirmed with modification the Decision[2] of the Construction Industry Arbitration Commission (CIAC) awarding Advanced Foundation Construction
Systems Corporations (AFCSC) claim against New World Properties and Ventures, Inc. (New World) in the total amount ofP10,700,384.00 with interest, as well as the
Resolution dated 3 May 2000 denying both parties Motion for Partial Reconsideration.

Sometime in November 1996, New World conducted a bidding for the construction of 69 bored piles which would form the foundation of the 36storey World Trade Exchange Building it planned to erect on a parcel of land it owned in Binondo, Manila.

After inspecting the site and conducting soil investigation, the bidding participants submitted their respective bids. On 18 November 1996, New
World notified AFCSC of the acceptance of its bid to construct the 69 bored piles for the lump sum of Thirty-six Million Pesos (P36,000,000.00).

On 20 November 1996, New World issued to AFCSC the Notice to Proceed Work wherein AFCSC was instructed to commence work on 27 November
1996 and complete the same by 24 February 1997. Under said notice, it was stated that in case of delay in the completion of the project, AFCSC would pay New
World liquidated damages in the amount ofP36,000.00 per calendar day of delay.

After the issuance of the Notice to Proceed, but before the signing of the contract, AFCSC, on 21 November 1996, proposed an amendment to the contract
conditions, to wit:

1.6 Excluded in the contractor scope of work shall be as follows:

1.6.2. Removal of Underground Obstruction: - The contractor shall execute probing of underground obstruction on each pile
position. Should the bored piling contractor encounter underground obstruction during drilling such as footings, tie beams, piles, and
any other incidental impenetrable obstruction, the contractor shall be paid on the actual daywork expenses for equipment and
manpower plus 25% overhead (sic).
1.6.3.

Should the underground obstruction cannot be recover the contractor shall notify the owner in writing which in turn refer to
the structural engineer for further instructions provided however that the contractor will not entail delay and stand by in the
faithful execution of the work. Idle time shall be charge as per actual operating expenses of manpower and equipment
subject to the evaluation of the owners engineer representative (sic).

New World did not respond to said proposal but instead directed AFCSC to proceed with the construction. On 29 November 1996, both parties signed the
contract for the construction of the 69 bored piles. AFCSCs proposal, however, was not incorporated in said contract.

During the subsistence of the contract, New World directed AFCSC to make the following changes and additional works: 1) the addition of one bored pile;
2) the increase in the pile depths from 55m. to 60m. with respect to 23 bored piles and from 55m. to 70m. with respect to 47 bored piles; 3) the increase in the diameter
of six bored piles from 1.5m. to 1.8m.; and 4) the change in the compressive strength of concrete from 3,000 psi to 4,000 psi for all piles. Due to said changes in the
scope of work, AFCSC informed New World in a letter dated 13 January 1997 that the original contract price ofP36,000,000.00 would increase to P48,400,000.00.

Thereafter, sometime in August 1997, AFCSC billed New World the costs of the change orders in addition to the original contract price. Included in said
billing is the cost of the removal of underground obstructions in the project site as well as the installation of sonic pipes to be used to conduct load tests on the bored
piling works. AFCSC claimed that these works were not part of the original contract and should be treated as extra work. In a letter dated 9 September 1997, New
World informed AFCSC of the formers rejection of the21 November 1996 proposal of AFCSC regarding the exclusion of the removal of underground obstructions
from the original scope of work and AFCSCsclaim for compensation for alleged extra work. New World maintained that the alleged additional works were all part of
the contract signed by both parties.

After removing the underground obstructions and incorporating the change in the scope of work, the construction of the bored piles were completed only
on 27 November 1997, or more than eight months after the original date of24 February 1997 contemplated in the contract.

Subsequently, during the early part of 1998, New World informed AFCSC of its intention to test the bored piles constructed on the project site to check their
structural integrity. The tests to be conducted consisted of sonic logging test, dynamic pile test, and pile integrity test. Results of the testing showed that five piles were
found defective, namely, Pile Nos. 9, 21, 25, 49, and 62. The high-strain dynamic test (PDA) done to Pile No. 21, which was the only pile subjected to said test in order
to determine its load capacity, revealed that it had a load capacity of only 800 metric tons, far less than the required 1,200 metric tons.

When it came time to settle the accounts, the parties found that their respective records of accounts were at variance with each other. Thus, on 29 May 1998,
AFCSC, represented by Engr. Joel S. Arceo, and New World, represented by Engr. Gaudencio Lambino, reconciled the amount due to AFCSC and arrived at the sum
of P6,326,318.72 as the unpaid balance of the original contract price and P2,133,658.46 as the cost of the change orders after deducting the liquidated damages due to
New World for the delay incurred by AFCSC.

New World, however, refused to pay its outstanding obligations to AFCSC due to the defective bored piles. On 2 June 1998, AFCSC made a final demand
upon New World to pay the consolidated billing in the amount ofP23,478,251.29 consisting of the reconciled amount of P8,515,396.63, and the cost of removing the
underground obstructions, sonic pipe installation, build up of pile test cap, soil investigation and crane rental.

Upon New Worlds continuous refusal to pay its obligation, AFCSC filed a Request for Adjudication before the CIAC[3] on 2 July 1998. Among the issues
submitted for resolution by the parties were whether or not the removal of underground obstructions, installation of sonic pipes, build up of pile test cap, soil
investigation, and crane rental constitute additional works which will entitle AFCSC to its claim of additional pay; and whether or not AFCSC was in delay, thus
making it liable for liquidated damages.

In the Decision dated 8 December 1998, the CIAC disposed of the controversy in this wise:
The bone of contention is whether or not the removal of underground obstruction is part of the scope of the work of the contractor as
claimed by the respondents or is extra work as claimed by the contractor.
xxxx
It is clear to us that this controversy could have been avoided if the owners designers had clearly stated the contractors scope of
work. The bid documents failed to give bidders of the lump-sum bids details of the underground obstruction or at least made provisions for the
treatment of the parties reciprocal obligations in the event such obstruction is encountered. Upon the other hand, the contractor, one which is
experienced in foundation work, had been remiss in its obligation to obtain as much information as possible on the contingency that the unknown
obstruction would impede its work and make it more costly, or at least provided a qualification in its bid so as to make clear its right to claim
contract price and time adjustment caused by such obstruction. Assuming, therefore, that these omissions of both parties may be treated as acts in
bad faith, we shall have to apply the rule that in such case, their rights and obligations shall be resolved as if both had acted in good faith up to the
time of the bid.
xxxx
x x x We also reviewed the bid of the claimant as well as the bids of the other bidders made on a form supplied by New World. The items
mentioned in the bid form indicated the general pay items of work of the contractor, but it does not mention anything about the removal of
obstruction. Mr. Chika G. Go, however, argued that the item on removal of obstruction fell under the item miscellaneous. [t.s.n., October
19,1998, pp. 56-57] We reject this argument as facetious. The removal of underground obstruction is a major item of work and cannot
be understood as being subsumed under the general heading miscellaneous.
The removal of underground obstruction, in our view, is covered by the General Conditions of Contract which provide as follows:
Should the Contractor encounter subsurface or latent physical conditions differing materially from those indicated,
or unknown physical conditions at the site of an unusual nature differing materially from those ordinarily encountered
the Owners Representative shall be promptly notified of such conditions before they are disturbed. The Owners
Representative shall thereupon promptly investigate the conditions at the site and if he finds that they do so materially
differ and cause an increase or decrease in the cost, or the time required for performance of the Contract, an equitable
adjustment will be made and the Contract modified in accordance with existing laws on the matter or as agreed upon the
provided for [sic] under the Contract.
xxxx
We have no hesitation, therefore, in holding that the removal of underground obstructions by the claimant falls under Clause
56.2 of the General Conditions which should therefore be treated as extra work.
On the additional sub-issues:
xxxx
In its Reply, claimant alleged in its paragraph 9 that:
9. Claimant did not cover up several bored piles before the same were tested [par.4.14, Answer]. This is yet another of many
reckless allegations that discredit the whole Answer. Claimant was not the contractor for the mat foundation (the flooring of the
basement which is constructed on top of the bored piles) and accordingly, had nothing to do with cover[ing] up the bored piles.
9.1. On the contrary, after completing the bored piles, claimant left their tops, sticking overground, together with
extra rebarsand extra lengths as allowance for dirty concrete, which were later cut off and discarded.
10. It was only after the bored piles were covered up by the mat foundation contractor that respondents informed claimant of
the results of the pile testing rendering it impossible for claimant to challenge definitively the results and, more importantly, to
undertake remedial work on the five [5] piles alleged found defective.
We accept the foregoing assertions in pars. 9 and 9.1 of the claimant as being in accord with industry practice, and as being consistent
with the facts.
The issue, therefore, boils down to whether or not the cost of testing shall be for the account of claimant or of New World.
At the outset, it must be stressed that Clause 38.4 of the General Conditions cover tests of contractor-supplied materials such as
concrete, cement, or rebars, not finished products. In accordance with accepted industry practice, this provision, which is also a standard
provision in construction contracts, is not interpreted to include tests on finished structural members. It does not cover, for example, tests on the
reinforced concrete column of a building to see if it can carry 35 floors above or test a girder to check if it carry the designed seismic load.
The claim of the claimant is for the installation of sonic pipes amounting to P320,000.00; for built-up of pile test cap, to
P104,002.33; for crane rental, P75,000.00 and for soil investigation, P60,000.00 should be for the account of New World. However,

claimant agreed that it will absorb the cost of the soil investigation if the contract is awarded to it. Further, since the installation of sonic pipes
was defective in 34 out of 69 piles, we reduce to a corresponding extent the claimants claim for sonic pipe installation. x x x
We also find that claimant should be liable for part of the cost of the sonic pipes defectively installed by it. x x x
Issue No. 2 concerns liquidated damages. As formulated, the issue submitted for resolution is this: Whether or not claimant was in
delay and, as such, whether it is liable to pay respondent liquidated damages. If it is found to be liable, how much liquidated damaged should be
awarded to the respondent?
xxxx
Article 7.1 of the contract provides that: 7.1 The OWNER may, at any time, by a written order, make changes in the schedule and
work required under this Agreement. If any such changes causes an increase or decrease in the work or the time required for performing the
work, an equitable adjustment shall be made of the contract price and completion date upon mutual agreement of the parties reflecting such
adjustments by way of a written variation order subject to the negotiation by both parties.[Underscoring supplied]
Clause 49.2.4 of the General Conditions provide that The Contractor shall be entitled to claim an adjustment of his Contract Time
where: [i] the amount of additional work under a Change Order, or [ii] special circumstances had occurred, so as to fairly entitle the Contractor to
an extension of Contract Time.
In light of the facts, and in our discussion above of the changes made, it is clear that we have found that indeed there were
circumstances fairly entitling the claimant to an extension of its contract period.
xxxx
We examined the numerous exhibits submitted by the claimant all mentioning directly or indirectly compensation to it for extra work
performed. x x x In none of these exhibits did claimant request an extension of the contract period. Engr. Joel S. Arceos comprehensive 12page affidavit failed to mention any letter or request for the adjustment of the completion time due to extra works.
Claimant, in its memorandum, dismisses the request for time extension as a mere formality. [See claimants Memorandum, p.12] We
do not agree. The contract provides that the contractor shall pay liquidated damages for delay unless the period for completion of the
work is extended by the owner. The procedure for requesting extension of time and for the approval of the request by the owner is laid
out. We have not been shown why these important provisions of the contract between the parties should be treated by us as a mere
formality. [See Clauses 49.3.1 and 49.3.2 of the General Conditions] We accordingly hold that claimant is not entitled to extension of time for
the extra works performed and is accordingly liable to the respondent for liquidated damages in accordance with the contract.
xxxx
We note, however, that the purpose of giving punctual notice of claim for time extension is to enable the owner immediately to
investigate the actual basis of the claim, decide whether or not to grant the request, and in case the request is granted, to fix the period of
extension of Contract Time. In this case, the claimant submitted Exhs. R to R-138 to show on a daily basis the removal of obstruction and
each report is acknowledged received by the owners representative. Thus, New World was not unaware of the difficulty attending the
removal of obstruction. There is no showing of material prejudice caused to New World by the failure of claimant to give formal notice
of its extension of time to request time extension. Incidentally, no evidence has been presented to show that the claimant lacked workers,
materials and/or equipment as a result of which there was a slippage in the work. Liquidated damages are imposed as a penalty for delay. [See
Article 1226, Civil Code] As such, a contract provision for the imposition of liquidated damages shall be strictly construed. According to Article
1229, Civil Code, The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the
debtor. Even if there has been no performance, the penalty may be reduced by the courts if it is iniquitous or unconscionable. [See also Article
2227, Civil Code.]
In view of the circumstances of the case, taking into account the fact that there was no material prejudice caused to New World by the
failure of claimant to request extension of the completion time, applying Articles 1229 and 2227 of the Civil Code, we have decided to reduce the
amount of liquidated damages to P1,000,000.00.
The most difficult issue submitted for resolution is a highly technical one, namely: Did the result of the test piles accurately
determine the capacity of the piles?
xxxx
The test results were evaluated by Dr. Benjamin R. Buencuseso, Jr. who submitted his own report on June 5, 1998 [Exh. K]
Dr. Buensucesotestified that he is a registered civil engineer from 1979; that he took his post-graduate studies in Bangkok where he earned a
doctorate degree in geo-technical engineering; that he was associate professor in a university in Japan where he taught foundations; that from
1993 he taught on a full-time basis at the University of the Philippines; that he is also a consultant to various companies with particular emphasis
on pile testing; and that he started dynamic pile testing since 1993 and he has been doing this type of consultancy since 1996 [t.s.n., October 19,
1998, p. 15] In his report [Exh. K], Dr. Buensuceso made the following conclusion: In closing, my evaluation of the results of the various pile
tests conducted at the World Trade Exchange Center Project shows that the defects found for all the test piles are not critical from
a geotechnical engineering standpoint. Inasmuch as these defects do not result to a significant reduction in the skin resistance provided by the
soils surrounding the predominantly frictional piles. However, the effects of the presence of a 2m layer of contaminated concrete cover in Pile
Nos. 9, 25, 46 and 62, the structural capacity and behavior of the subject piles should be evaluated by the Structural Engineer.
xxxx
We find that only one pile test was done to assess both integrity and capacity. The other tests simply evaluated qualitatively pile
integrity. [Exh.K] A pile capacity in this context is meant to carry vertical loads and is dependent on any of three factors, namely: integrity,
skin friction and end-bearing.
A total of 34 piles were tested. A total of 35 tests were conducted. Pile No. 25 was tested twice, one by sonic logging and the second, for
pile integrity. The pile integrity tests resulted in a finding that all piles, except Pile No. 9, were of acceptable integrity. Pile No. 9 was found to

have defects in the lower portion of the pile shift. Pile No. 25 which was subjected to sonic logging and pile integrity tests, passed the integrity
test but the result of the sonic test was inconclusive.
Engr. Rogelio Menguito gave his formula for computing the capacity of each pile. The formula he gave is the standard formula meant to
determine the capacity of a reinforced concrete column with loads and reaction at each end and is not generally applicable to piles which are
laterally supported throughout its length and with skin friction capabilities. The capacity of a pile, with length of 70 meters, and at the project
site, the soil quality of which is described in three soil investigation reports, is normally determined by skin friction and point bearing
which Engr. Menguito merely considered as factors of safety. As admitted by him during the hearing, he had no mathematical or technical basis
for his conclusion, and that the bored poles could actually carry a load much heavier than 800 tons.
xxxx
We found support for this view from two recognized authorities. The first is Peck, Hanson and Thorburns Foundation Engineering, in
which it was stated that a point bearing pile is sometimes erroneously regarded as a structural member that transfers its load like a column from
the top of the pile to the bottom where it is delivered to the underlying rock or soil. [At p. 182, a photocopy of this page is hereto attached as
Annex A] The second are H.G. Poulos and E.H. Davis, who in their book, Pile Foundation, Analysis and Design, set the general equation for
the ultimate capacity of a pile. A photocopy of the page where the equation appeared is hereto attached as Annex B] It is clear from this
equation that the ultimate capacity of a pile is dependent on skin friction and end-bearing and not a pile acting as a column. Other that a pile
driven in water or on very soft soil, a pile is laterally supported on its entire length. Hence, it does not act as a reinforced concrete column
subjects to buckling. Because of the above discussion, the Arbitral Panel is of the opinion that the test results were inconclusive and did not truly
measure the capacity of the piles. Engr. Menguitos use of the result and his admission that all the values for pile capacities were simply based on
assumptions without any or technical basis [t.s.n., pp. 113-116] seriously undermines the value of his recommendation to reduce the capacity of
the piles and tends to give the impression that this was an accommodation to a client.
xxxx
AWARD
We find that:
[a]
As admitted by New World, claimant is entitled to the balance of the contract price amounting to P6,326,318.72 and the cost of
approved change orders amounting to P2,133,658.46 or the total amount ofP8,459,977.17.
[b]
Since the foregoing is a liquidated amount as due from June 2, 1998, we order New World to pay claimant the foregoing amount
ofP8,459,977.17 plus interest at 6% per annum from June 2, 1998. The amount which has accrued as interest from that date to December 2,
1998 isP253,799.32.
[c]
Claimant is entitled to payment for and hereby order New World to pay claimant the cost of additional works consisting of the
removal of underground obstructions and the conduct of various tests ordered by the latter amounting to P8,366,336.55.
[d]

Claimant is entitled to payment for the installation of 34 sonic pipes in the amount of P157,681.16.

The foregoing amount to a total of P17,237,794.20.

On the counterclaims, we find for New World and order claimant to pay it the following amounts:
[a]

P190,141.30 representing the value of sonic pipes which were defectively installed by claimant;

[b]

P1,000,000 as liquidated damages for delay; and

[c]

P5,347,268.90 as the cost of the five [5] bored piles which were found defective, or the total amount of P6,537,410.20.

All other claims and counterclaims are dismissed.

After offsetting the amount due claimant from respondent and the amount due respondent from claimant, there is a balance
of P10,700,384. which New World is hereby ordered to pay claimant. This amount shall earn interest at 6% per annum from the date of this
award.
The arbitration fees and expenses have been paid initially on a pro rata basis. In light of the findings above, no change in the above
sharing of expenses is warranted.[4] [Emphases ours]

Aggrieved by the Decision of the CIAC, New World filed a Petition for Review of the said decision before the Court of Appeals. On 31 January 2000, the
appellate court rendered the assailed Decision. According to the Court of Appeals:
But for one point, the appeal lacks merit.
One. The pronouncements of CIAC on the question of whether the removal of underground obstructions was covered by the contract
between the parties are evidently conclusions of law. This is so because the conclusions drawn by an adjudicatory body from a set of facts is a
question of law. (Pilar Development Corporation v. IAC, 146 SCRA 215; Cunanan v. de Lazatin, 74 Phil. 719) Consequently, the window for
review is fully open for this Court to examine the correctness of said conclusions.
Try as it might, this Court cannot share the view of CIAC that respondents November 21, 1996 proposals (Exhibit 7) to exclude the
removal of underground obstructions from the scope of work in the contract (Exhibit A) and to treat them as extra work was impliedly admitted
by petitioner. CIACs conclusion contravenes No. 9 of the Terms of Reference (TOR) reproduced above which expressly states that such
proposals were refused by respondent.

Neither can this Court go along with CIAC in its determination that said proposals modified respondents bid offer so that when the
contract was signed without petitioner expressly rejecting the proposals, the same were deemed impliedly accepted. The reasoning is quite
strained. The proposals were made on November 21, 1996 while the contract was signed on November 29, 1996. The contract was the
documentation of the agreement between the parties arising from respondents bid and petitioners award (Exhibit 5). When the parties signed
the contract which did not contain the proposals, what was logically implied was not the acceptance of the proposals but their rejection. The
proposals were actually nothing more than counter offers which were not accepted and, therefore, did not ripen into a perfected agreement. (Art.
1319, Civil Code).
But this Court fully agrees with CIAC that the removal of the underground obstructions was covered by Clause 56.2 of the General
Conditions of the Contract.
xxxx
It is clear to this Court that petitioner did not agree with respondents proposals but in order to address the latters concern about
underground obstructions, the parties adopted Clause 56.2. Therefore, the contractual rule governing underground obstructions was the abovequoted Clause 56.2.
But alas, respondent did not comply with said stipulation. Respondent did not formally notify the petitioner about the underground
obstruction that it encountered, hence, the petitioner did not conduct its investigation to verify the existence and nature of the obstructions. The
mechanism for a modification of the contract and an equitable adjustment of the contract price was not set in motion through the fault of
respondent.
The vital question then is: For its fault in not complying with the steps provided for in the above-quoted stipulation, should respondent be
left alone to shoulder the heavy cost of he removal of the obstruction?
xxxx
It is not disputed that the removal of the underground obstructions was a major work entailing additional expense and extra working
time. The experts and CIAC agreed that such work was not covered by the scope of work in the contract. That determination is logical and
correct. Petitioners rejection of this holding and its insistence post factum that such major work was embraced in the scope of work in the
contract puts to doubt its good faith and fairness. This stance may be perceived as taking advantage of the imprudence of respondent in not
faithfully observing the requirements of Clause 56.2 above quoted.
To deny respondent any relief for the expenses it incurred and the extra time that it spent in removing the underground obstructions is to
allow the petitioner to unjustly enrich itself at the expense of the respondent. That is anathema to the great principle of equity. When itbecomes
clear as in this case that the application to the law in sensustrictione would result in patently unjust juridical situation, a court of justice which
is also a court of equity is called upon to exercise itsequitas juridictio in order to refine the rough edges of the rules and avoid injustice. The Code
Commission which drafted the Civil Code justifies a resort to equity stating beautifully that every good law draws its breath of life from morals,
from those principles written with the words of fire in the conscience of man. Appropriately, these guides for human conduct should run as
golden threads through society, to the end that law may approach its supreme ideal which is the sway and dominance of justice. (Report of the
Code Commission, pp. 4041).
Inspired by such profound pronouncements, this Court, invoking its equity jurisdiction and in order to prevent unjust enrichment and
manifest injustice, holds that respondent should be accorded a relief. But then respondent should not expect for a full recovery of its claim for it
should realize that it had been contractually negligent not just once but several times. The cost of the removal of the underground obstructions
was P8,025,836.37. This Court allows respondent a concessional award of one-half (1/2) of said amount which is P4,012,918.18.
xxxx
Petitioner protests CIACs lowering of the amount of liquidated damages due it from P7.2 million to P1 million on the justification
that petitioner did not suffer any material prejudice. This Court, rejects petitioners protest. The reasons not just CIACs finding that petitioner
did not suffer material damage given by the CIAC for reducing the claimed liquidated damages are clear, logical and correct. The law gives a
wide degree of discretion to trial courts and quasi-judicial bodies to determine the amount of damages recoverable as long as there is ample
evidence to support the same. In the absence of a clear case of abuse of discretion, as in the present case, there is no reason for this Court to
unsettle CIACs determination of the proper and conscionable liquidated damages due the petitioner.
WHEREFORE, premises considered, this Court renders judgment MODIFYING the appealed Decision in this wise:
I. FOR PETITIONER
The respondent Advanced Foundation Construction Systems Corporation is hereby ordered to pay the petitioner New World
Properties and Ventures, Inc. the following:
1.
2.
3.

Php190,141.30 representing the value of sonic pipes which were defectively installed by respondent;
Php1,000,000.00 as liquidated damages for delay; and
Php5,347,268.90 as cost of the five (5) bored piles which were found defective, or a total amount of P6,537,410.20.

II. FOR RESPONDENT:

The petitioner is hereby ordered to pay the respondent the following:
1.

2.
3.

Php8,459,977.17 as the sum of the balance on the contract price amounting to Php6,326,318.72 and cost of approved
change orders amounting to Php2,133,658.46 plus six (6) percent interest per annum on said total amount
(Php8,459,977.17) from June 2, 1998 until fully paid;
Php4,353,418.37 as cost of additional works consisting of the removal of the underground obstructions and the cost
of various tests; and
Php157,681.16 as payment for the installation of 34 sonic pipes.

After compensating the obligations of the parties to each other, the balance shall earn six (6%) percent interest per annum from the
date of this decision.[5]

The Motion for Partial Reconsideration of both parties having been denied, both New World and AFCSC filed their respective Petitions for Review before this
Court.

The resolution of the instant case lies in the determination of two pivotal issues, namely: (1) Which between New World and AFCSC should shoulder the
expenses incurred for the removal of the underground obstructions and the conduct of the pile tests; and (2) Whether or not AFCSC is liable for liquidated damages for
its failure to complete the construction work by 24 February 1997.

At this point, We find it necessary to reiterate that our jurisprudence is replete with the rule that findings of fact of quasi-judicial bodies which have acquired
expertise because their jurisdiction is confined to specific matters, are accorded not only with respect but even finality if they are supported by substantial
evidence.[6] This is because there are certain cases which require the expertise, specialized skills, and knowledge of the proper administrative bodies because technical
matters or intricate questions of facts are involved.[7]

In the case at bar, it would seem that the CIAC, in interpreting the contract covering the construction work in the light of the facts present in the case, was
guided by the prevailing practices in the construction industry. The members of the three-man panel, all equipped with considerable knowledge and training in the field
of engineering and significant experience in construction industry arbitration, reconciled the conflicting claims of both parties by applying industry accepted practice
with respect to the treatment of removal of underground obstructions and the conduct of pile tests. According to the panel, the removal of underground obstruction is a
major item of work and it cannot be understood as being subsumed under the general heading miscellaneous and should therefore be treated as extra work. With
respect to the pile tests, the CIAC stated that in accordance with accepted industry practice, the provisions in the contract only cover tests of contractor-supplied
materials and not tests on finished products to see whether it can carry a certain load.

In light of the ratiocination of the CIAC that the removal of underground obstruction is a major item of work and cannot merely be contemplated as a
miscellaneous item in a construction bid and must therefore be considered as extra work, We conclude that there was nothing in the bid nor in the contract explicitly
discussing the obligations of both parties in the event that the contractor will encounter underground obstructions in the project site and may be constrained to remove
the same.

However, there is a provision in the contract that can be made applicable in the case of underground obstructions, which the CIAC and the Court of Appeals
have correctly pointed out, to wit:
56.2. Should the Contractor encounter subsurface or latent physical conditions differing materially from those indicated, or unknown
physical conditions at the site of an unusual nature differing materially from those ordinarily encountered and generally recognized as inherent in
the work of character provided for in the Contract, the Owners Representative shall be promptly notified of such conditions before they are
disturbed. The Owners Representative shall thereupon promptly investigate the conditions at the site and if he finds that they do so materially
differ and cause an increase or decrease in the cost, or the time required for performance of the Contract, an equitable adjustment will be made
and the Contract modified in accordance with existing laws on the matter or as agreed upon the provided for [sic] under the Contract.

The appellate court laid stress the fact that AFCSC failed to comply with the stipulations of the abovequoted provision. According to the Court of Appeals,
in failing to formally notify New World regarding the underground obstructions that it has encountered, AFCSC failed to set in motion the mechanism for a
modification of the contract and the equitable adjustment of the contract price. Thus, for such negligence, the appellate court reduced the original award of the CIAC to
only one-half of the cost of the removal of the underground obstructions.

We do not agree. As explained by the appellate court itself, the experts and CIAC have agreed that the removal of the underground obstructions was not
covered by the scope of work in the contract. It is not disputed though that the same was a major work entailing additional expenses and extra working time. Neither
was it denied that such major work was indeed necessary for the successful completion of the project. Indeed, to deny AFCSC relief for the expenses it incurred in
removing said obstructions would result in allowingNew World to unjustly enrich itself at the expense of AFCSC. Equity necessarily dictates that New World be held
liable for the expenses incurred for the extra work conducted for its sole benefit. Further, it cannot be said thatNew World was not made aware of the existence of the
underground obstruction nor of the additional expense that would be necessary for its removal. As heretofore stated, AFCSC, on 21 November 1996, sent a proposal to
New World regarding the additional expenses that would be incurred in the instance that the contractor shall encounter underground obstructions; however, New World

never responded to said proposal until 9 September 1997, when it informed AFCSC of the rejection of said proposal or almost ten (10) months after said proposal was
first offered, and after all the necessary extra work had been accomplished.

Article 22 of the Civil Code which embodies the maxim, Nemo exalterius incommode debet lecupletari (no man ought to be made rich out of anothers
injury) states:
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.[8]
The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as basic principles to be observed for
the rightful relationship between human beings and for the stability of the social order, x x x designed to indicate certain norms that spring from the fountain of good
conscience, x x x guides human conduct [that] should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and
dominance of justice.[9] Hence, to allow New World to acquire the finished project at a price far below its actual construction cost would undoubtedly constitute unjust
enrichment for the bank to the prejudice of AFCSC. Such unjust enrichment, as previously discussed, is not allowed by law.[10]

AFCSC submitted proof before the CIAC of the additional cost of manpower and equipment usage for the removal of the underground obstructions and
other supporting documents, the veracity of which was never questioned by New World. In fact, New World did not question the necessity of removing the
underground obstructions nor the facts on the bases of which the claim for extra work due to underground obstructions were made. As found by the CIAC and affirmed
by the Court of Appeals, the cost of the removal of the underground obstructions was P8,025,836.37. Beyond cavil, AFCSC is entitled to full payment of the expenses
incurred for the removal of the underground obstructions.

As to the question of which between AFCSC and New World should shoulder the expenses for the pile tests, We uphold the ruling of the CIAC, affirmed by
the Court of Appeals, that the pile tests conducted should be for the account of New World in accordance with the accepted practice in the construction industry. We
see no reason to disregard the determination of the CIAC on this matter. This being in accordance with the established principle that determination of certain questions
of fact falling within the peculiar technical expertise of an administrative agency, must be accorded great respect, if not finality by this Court. A long line of cases
establish the basis rule that the courts will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of
activities coming under the special technical knowledge and training of such agencies.[11] Therefore, AFCSC is entitled to the payment of the total amount
of P336,683.48consisting of P157,681.15 for sonic pipe installation; P104,002.33 for build up of pile test cap; and P75,000.00 for crane rental.

Finally, with respect to the issue of whether or not AFCSC is liable for liquidated damages for its failure to complete the construction work by the contract
date of 24 February 1997, We agree with the findings of the CIAC that AFCSC never sent notice to New World regarding a request for extension of time to finish the
work despite the existence of circumstances fairly entitling it to an extension of the contract period. Thus, AFCSC, must bear some consequences for the delay in the
completion of the project and for disregarding the owners right to determine the length of extension to be given to the contractor and to consequently adjust the period
to finish the extra work.

WHEREFORE, premises considered, the Decision of the Court of Appeals dated 31 January 2000, which modified the Decision dated 8 December 1998 of
the Construction Industry Arbitration Commission, is hereby MODIFIED in that New World Properties and Ventures, Inc is hereby ordered to pay Advanced
Foundation Construction Systems Corporation the following amounts:

1.

P8,025,836.37 as cost of additional work consisting of the removal of the underground obstructions;

2.

P336,683.48 as costs for the various test conducted consisting of P157,681.15 for sonic pipe installation; P104,002.33 for build up of
pile test cap; and P75,000.00 for crane rental.

The remainder of the same Decision of the Court of Appeals are hereby AFFIRMED. No costs.

SO ORDERED.

G.R. No. 153674

December 20, 2006

AVON COSMETICS, INCORPORATED and JOSE MARIE FRANCO, petitioners,

vs.
LETICIA H. LUNA, respondent.

DECISION

CHICO-NAZARIO, J.:
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse and set aside the Decision1 dated 20 May 2002
of the Court of Appeals in CA-G.R. CV No. 52550, which affirmed in totothe Decision2 dated 26 January 1996 of the Regional Trial Court (RTC) of
Makati City, Branch 138, in Civil Case No. 88-2595, in favor of herein respondent Leticia H. Luna (Luna), rendered by the Honorable Ed Vicente S.
Albano, designated as the "assisting judge" pursuant to Supreme Court Administrative Order No. 70-94, dated 16 June 1994.
The Facts
The facts of the case are not in dispute. As culled from the records, they are as follows:
The present petition stemmed from a complaint3 dated 1 December 1988, filed by herein respondent Luna alleging,inter alia that she began working for
Beautifont, Inc. in 1972, first as a franchise dealer and then a year later, as a Supervisor.
Sometime in 1978, Avon Cosmetics, Inc. (Avon), herein petitioner, acquired and took over the management and operations of Beautifont, Inc.
Nonetheless, respondent Luna continued working for said successor company.
Aside from her work as a supervisor, respondent Luna also acted as a make-up artist of petitioner Avons Theatrical Promotions Group, for which she
received a per diem for each theatrical performance.
On 5 November 1985, petitioner Avon and respondent Luna entered into an agreement, entitled Supervisors Agreement, whereby said parties
contracted in the manner quoted below:
The Company agrees:
xxxx
1) To allow the Supervisor to purchase at wholesale the products of the Company.
xxxx
The Supervisor agrees:
1) To purchase products from the Company exclusively for resale and to be responsible for obtaining all permits and licenses required to sell
the products on retail.
xxxx
The Company and the Supervisor mutually agree:
xxxx
2) That this agreement in no way makes the Supervisor an employee or agent of the Company, therefore, the Supervisor has no authority to
bind the Company in any contracts with other parties.
3) That the Supervisor is an independent retailer/dealer insofar as the Company is concerned, and shall have the sole discretion to determine
where and how products purchased from the Company will be sold. However, the Supervisor shall not sell such products to stores,
supermarkets or to any entity or person who sells things at a fixed place of business.
4) That this agreement supersedes any agreement/s between the Company and the Supervisor.

5) That the Supervisor shall sell or offer to sell, display or promote only and exclusively products sold by the Company.
6) Either party may terminate this agreement at will, with or without cause, at any time upon notice to the other.
x x x x.4
By virtue of the execution of the aforequoted Supervisors Agreement, respondent Luna became part of the independent sales force of petitioner Avon.
Sometime in the latter part of 1988, respondent Luna was invited by a former Avon employee who was then currently a Sales Manager of Sandr
Philippines, Inc., a domestic corporation engaged in direct selling of vitamins and other food supplements, to sell said products. Respondent Luna
apparently accepted the invitation as she then became a Group Franchise Director of Sandr Philippines, Inc. concurrently with being a Group
Supervisor of petitioner Avon. As Group Franchise Director, respondent Luna began selling and/or promoting Sandr products to other Avon employees
and friends. On 23 September 1988, she requested a law firm to render a legal opinion as to the legal consequence of the Supervisors Agreement she
executed with petitioner Avon. In response to her query, a lawyer of the firm opined that the Supervisors Agreement was "contrary to law and public
policy."
Wanting to share the legal opinion she obtained from her legal counsel, respondent Luna wrote a letter to her colleagues and attached mimeographed
copies of the opinion and then circulated them. The full text of her letter reads:
We all love our work as independent dealers and we all love to continue in this livelihood. Because my livelihood is important to me, I have
asked the legal opinion of a leading Makati law office regarding my status as an independent dealer, I am sharing this opinion with you.
I have asked their advice on three specific things:
1) May the company legally change the conditions of the existing "Supervisors Agreement" without the Supervisors consent? If I should
refuse to sign the new Agreement, may the company terminate my dealership?
On the first issue, my lawyers said that the company cannot change the existing "Agreement" without my consent, and that it would be illegal if
the company will compel me to sign the new agreement.
2) Is Section 5 of the "Supervisors Agreement" which says that a dealer may only sell products sold by the company, legal?
My lawyers said that Section 5 of the Supervisors Agreement is NOT valid because it is contrary to public policy, being an unreasonable
restraint of trade.
3) Is Section 6 of the "Supervisors Agreement" which authorizes the company to terminate the contract at any time, with or without cause,
legal?
My lawyer said Section 6 is NOT valid because it is contrary to law and public policy. The company cannot terminate the "Supervisors
Agreement" without a valid cause.
Therefore, I can conclude that I dont violate Section 5 if I sell any product which is not in direct competition with the companys products, and
there is no valid reason for the company to terminate my dealership contract if I sell a non-competitive product.
Dear co-supervisor[s], let us all support the reasonable and legal policies of the company. However, we must all be conscious of our legal
rights and be ready to protect ourselves if they are trampled upon.
I hope we will all stay together selling Avon products for a long time and at the same time increase our earning opportunity by engaging in
other businesses without being afraid to do so.
In a letter5 dated 11 October 1988, petitioner Avon, through its President and General Manager, Jose Mari Franco, notified respondent Luna of the
termination or cancellation of her Supervisors Agreement with petitioner Avon. Said letter reads in part:
In September, (sic) 1988, you brought to our attention that you signed up as Group Franchise Director of another company, Sandr
Philippines, Inc. (SPI).
Not only that. You have also sold and promoted products of SPI (please refer for example to SPI Invoice No. 1695 dated Sept. 30, 1988).
Worse, you promoted/sold SPI products even to several employees of our company including Mary Arlene Nolasco, Regina Porter, Emelisa
Aguilar, Hermie Esteller and Emma Ticsay.
To compound your violation of the above-quoted provision, you have written letters to other members of the Avon salesforce inducing them to
violate their own contracts with our company. x x x.
For violating paragraph 5 x x x, the Company, pursuant to paragraph 6 of the same Agreement, is terminating and canceling its Supervisors
Agreement with you effective upon your receipt of this notice. We regret having to do this, but your repeated disregard of the Agreement,
despite warnings, leaves (sic) the Company no other choice.

xxxx
Aggrieved, respondent Luna filed a complaint for damages before the RTC of Makati City, Branch 138. The complaint was docketed as Civil Case No.
88-2595.
On 26 January 1996, after trial on the merits, the RTC rendered judgment in favor of respondent Luna stating that:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered in favor of the plaintiff, and against defendant, Avon, ordering
the latter:
1) to pay moral damages to the plaintiff in the amount of P100,000.00 with interest from the date of this judgment up to the time of complete
payment;
2) to pay attorneys fees in the amount of P20,000.00;
3) to pay the costs.6
On 8 February 1996, petitioner Avon filed a Notice of Appeal dated the same day. In an Order7 dated 15 February 1996, the RTC gave due course to the
appeal and directed its Branch Clerk of Court to transmit the entire records of the case to the Court of Appeals, which docketed the appeal as CA G.R.
CV No. 52550.
On 20 May 2002, the Court of Appeals promulgated the assailed Decision, the dispositive part of which states thus:
WHEREFORE, the foregoing premises considered, the decision appealed from is hereby AFFIRMED in toto.8
The Issues
In predictable displeasure with the conclusions reached by the appellate court, petitioner Avon now implores this Court to review, via a petition for review
on certiorari under Rule 45 of the Revised Rules of Court, the formers decision and to resolve the following assigned errors:9
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN DECLARING THAT THE SUPERVISORS AGREEMENT EXECUTED
BETWEEN AVON AND RESPONDENT LUNA AS NULL AND VOID FOR BEING AGAINST PUBLIC POLICY;
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT AVON HAD NO RIGHT TO TERMINATE OR CANCEL
THE SUPERVIOSRS AGREEMENT;
III.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN UPHOLDING THE AWARD OF MORAL DAMAGES AND ATTORNEYS
FEES IN FAVOR OF RESPONDENT LUNA; and
IV.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT AWARDING ATTORNEYS FEES AND LITIGATION EXPENSES IN
FAVOR OF PETITIONER.
The Courts Ruling
A priori, respondent Luna objects to the presentation, and eventual resolution, of the issues raised herein as they allegedly involve questions of facts.
To be sure, questions of law are those that involve doubts or controversies on what the law is on certain state of facts; and questions of fact, on the other
hand, are those in which there is doubt or difference as to the truth or falsehood of the alleged facts. One test, it has been held, is whether the appellate
court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it will be a question of
fact.10
In the present case, the threshold issues are a) whether or not paragraph 5 of the Supervisors Agreement is void for being violative of law and public
policy; and b) whether or not paragraph 6 of the Supervisors Agreement which authorizes petitioner Avon to terminate or cancel the agreement at will is
void for being contrary to law and public policy. Certainly, it is quite obvious that the foregoing issues are questions of law.
In affirming the decision of the RTC declaring the subject contract null and void for being against public policy, the Court of Appeals ruled that
the exclusivity clause, which states that:

The Company and the Supervisor mutually agree:

xxxx
5) That the Supervisor shall sell or offer to sell, display or promote only and exclusively products sold by the Company. [Emphasis supplied.]
should be interpreted to apply solely to those products directly in competition with those of petitioner Avons, i.e., cosmetics and/or beauty supplies and
lingerie products. Its declaration is anchored on the fact that Avon products, at that time, were not in any way similar to the products sold by Sandr
Philippines, Inc. At that time, the latter was merely selling vitamin products. Put simply, the products of the two companies do not compete with each
other. The appellate court ratiocinated that:
x x x If the agreement were interpreted otherwise, so as to include products that do not directly compete with the products of defendantappellant Avon, such would result in absurdity. x x x [A]greements which prohibit a person from engaging in any enterprise whether similar or
not to the enterprise of the employer constitute an unreasonable restraint of trade, thus, it is void as against public policy.11
Petitioner Avon disputes the abovestated conclusion reached by the Court of Appeals. It argues that the latter went beyond the literal and obvious intent
of the parties to the subject contract when it interpreted the abovequoted clause to apply only to those products that do not compete with that of
petitioner Avons; and that the words "only and exclusively" need no other interpretation other than the literal meaning that "THE SUPERVISORS
CANNOT SELL THE PRODUCTS OF OTHER COMPANIES WHETHER OR NOT THEY ARE COMPETING PRODUCTS."12
Moreover, petitioner Avon reasons that:
The exclusivity clause was directed against the supervisors selling other products utilizing their training and experience, and capitalizing on
Avons existing network for the promotion and sale of the said products. The exclusivity clause was meant to protect Avon from other
companies, whether competitors or not, who would exploit the sales and promotions network already established by Avon at great expense
and effort.
xxxx
Obviously, Sandre Phils., Inc. did not have the (sic) its own trained personnel and network to sell and promote its products. It was precisely
why Sandre simply invited, and then and there hired Luna and other Avon supervisors and dealers to sell and promote its products. They had
the training and experience, they also had a ready market for the other products the customers to whom they had been selling the Avon
products. It was easy to entice the supervisors to sign up. The supervisors could continue to sell Avon products, and at the same time earn
additional income by selling other products.
This is most unfair to Avon. The other companies cannot ride on and exploit the training and experience of the Avon sales force to sell and
promote their own products. [Emphasis supplied.]
On the other hand, in her Memorandum, respondent Luna counters that "there is no allegation nor any finding by the trial court or the Court of Appeals of
an existing nationwide sales and promotions network established by Avon or Avons existing sales promotions network or Avons tried and tested
sales and promotions network nor the alleged damage caused to such system caused by other companies." Further, well worth noting is the opinion of
respondent Lunas counsel which started the set off the series of events which culminated to the termination or cancellation of the Supervisors
Agreement. In response to the query-letter13 of respondent Luna, the latters legal counsel opined that, as allegedly held in the case of Ferrazzini v.
Gsell,14 paragraph 5 of the subject Supervisors Agreement "not only prohibits the supervisor from selling products which compete with the companys
product but restricts likewise the supervisor from engaging in any industry which involves sales in general."15 Said counsel thereafter concluded that the
subject provision in the Supervisors Agreement constitutes an unreasonable restraint of trade and, therefore, void for being contrary to public policy.
At the crux of the first issue is the validity of paragraph 5 of the Supervisors Agreement, viz:
The Company and the Supervisor mutually agree:
xxxx
5) That the Supervisor shall sell or offer to sell, display or promote only and exclusively products sold by the Company. [Emphasis supplied.]
In business parlance, this is commonly termed as the "exclusivity clause." This is defined as agreements which prohibit the obligor from engaging in
"business" in competition with the obligee.
This exclusivity clause is more often the subject of critical scrutiny when it is perceived to collide with the Constitutional proscription against "reasonable
restraint of trade or occupation." The pertinent provision of the Constitution is quoted hereunder. Section 19 of Article XII of the 1987 Constitution on the
National Economy and Patrimony states that:
SEC. 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair
competition shall be allowed.
First off, restraint of trade or occupation embraces acts, contracts, agreements or combinations which restrict competition or obstruct due course of
trade.16

Now to the basics. From the wordings of the Constitution, truly then, what is brought about to lay the test on whether a given agreement constitutes an
unlawful machination or combination in restraint of trade is whether under the particular circumstances of the case and the nature of the particular
contract involved, such contract is, or is not, against public interest.17
Thus, restrictions upon trade may be upheld when not contrary to public welfare and not greater than is necessary to afford a fair and reasonable
protection to the party in whose favor it is imposed.18 Even contracts which prohibit an employee from engaging in business in competition with the
employer are not necessarily void for being in restraint of trade.
In sum, contracts requiring exclusivity are not per se void. Each contract must be viewed vis--vis all the circumstances surrounding such agreement in
deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition.
The question that now crops up is this, when is a restraint in trade unreasonable? Authorities are one in declaring that a restraint in trade is
unreasonable when it is contrary to public policy or public welfare. As far back as 1916, in the case of Ferrazzini v. Gsell,19 this Court has had the
occasion to declare that:
There is no difference in principle between the public policy (orden pblico) in the in the two jurisdictions (United States and the Philippine
Islands) as determined by the Constitution, laws, and judicial decisions.
In the United States it is well settled that contracts in undue or unreasonable restraint of trade are unenforcible because they are repugnant to
the established public policy in that country. Such contracts are illegal in the sense that the law will not enforce them. The Supreme Court in
the United States, in Oregon Steam Navigation Co. vs. Winsor )20 Will., 64), quoted with approval in Gibbs v. Consolidated gas Co. of
Baltimore (130 U.S., 396), said:
Cases must be judged according to their circumstances, and can only be rightly judged when reason and grounds of the rule are
carefully considered. There are two principle grounds on which the doctrine is founded that a contract in restraint of trade is void as
against public policy. One is, the injury to the public by being deprived of the restricted partys industry; and the other is, the injury to
the party himself by being precluded from pursuing his occupation, and thus being prevented from supporting himself and his
family.
And what is public policy? In the words of the eminent Spanish jurist, Don Jose Maria Manresa, in his commentaries of the Codigo Civil, public policy
(orden pblico):
Represents in the law of persons the public, social and legal interest, that which is permanent and essential of the institutions, that which, even
if favoring an individual in whom the right lies, cannot be left to his own will. It is an idea which, in cases of the waiver of any right, is
manifested with clearness and force. 20
As applied to agreements, Quintus Mucius Scaevola, another distinguished civilist gives the term "public policy" a more defined meaning:
Agreements in violation of orden pblico must be considered as those which conflict with law, whether properly, strictly and wholly a public law
(derecho) or whether a law of the person, but law which in certain respects affects the interest of society. 21
Plainly put, public policy is that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the
public or against the public good.22 As applied to contracts, in the absence of express legislation or constitutional prohibition, a court, in order to declare
a contract void as against public policy, must find that the contract as to the consideration or thing to be done, has a tendency to injure the public, is
against the public good, or contravenes some established interests of society, or is inconsistent with sound policy and good morals, or tends clearly to
undermine the security of individual rights, whether of personal liability or of private property.23
From another perspective, the main objection to exclusive dealing is its tendency to foreclose existing competitors or new entrants from competition in
the covered portion of the relevant market during the term of the agreement.24Only those arrangements whose probable effect is to foreclose competition
in a substantial share of the line of commerce affected can be considered as void for being against public policy. The foreclosure effect, if any, depends
on the market share involved. The relevant market for this purpose includes the full range of selling opportunities reasonably open to rivals, namely, all
the product and geographic sales they may readily compete for, using easily convertible plants and marketing organizations.25
Applying the preceding principles to the case at bar, there is nothing invalid or contrary to public policy either in the objectives sought to be attained by
paragraph 5, i.e., the exclusivity clause, in prohibiting respondent Luna, and all other Avon supervisors, from selling products other than those
manufactured by petitioner Avon. We quote with approval the determination of the U.S. Supreme Court in the case of Board of Trade of Chicago v.
U.S.26 that "the question to be determined is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition, or
whether it is such as may suppress or even destroy competition."
Such prohibition is neither directed to eliminate the competition like Sandr Phils., Inc. nor foreclose new entrants to the market. In its Memorandum, it
admits that the reason for such exclusion is to safeguard the network that it has cultivated through the years. Admittedly, both companies employ the
direct selling method in order to peddle their products. By direct selling, petitioner Avon and Sandre, the manufacturer, forego the use of a middleman in
selling their products, thus, controlling the price by which they are to be sold. The limitation does not affect the public at all. It is only a means by which
petitioner Avon is able to protect its investment.
It was not by chance that Sandr Philippines, Inc. made respondent Luna one of its Group Franchise Directors. It doesnt take a genius to realize that by
making her an important part of its distribution arm, Sandr Philippines, Inc., a newly formed direct-selling business, would be saving time, effort and
money as it will no longer have to recruit, train and motivate supervisors and dealers. Respondent Luna, who learned the tricks of the trade from
petitioner Avon, will do it for them. This is tantamount to unjust enrichment. Worse, the goodwill established by petitioner Avon among its loyal customers
will be taken advantaged of by Sandre Philippines, Inc. It is not so hard to imagine the scenario wherein the sale of Sandr products by Avon dealers will

engender a belief in the minds of loyal Avon customers that the product that they are buying had been manufactured by Avon. In other words, they will
be misled into thinking that the Sandr products are in fact Avon products. From the foregoing, it cannot be said that the purpose of the
subject exclusivity clause is to foreclose the competition, that is, the entrance of Sandr products in to the market. Therefore, it cannot be considered
void for being against public policy. How can the protection of ones property be violative of public policy? Sandr Philippines, Inc. is still very much free
to distribute its products in the market but it must do so at its own expense. The exclusivity clause does not in any way limit its selling opportunities, just
the undue use of the resources of petitioner Avon.
It has been argued that the Supervisors Agreement is in the nature of a contract of adhesion; but just because it is does not necessarily mean that it is
void. A contract of adhesion is so-called because its terms are prepared by only one party while the other party merely affixes his signature signifying his
adhesion thereto.27 Such contract is just as binding as ordinary contracts. "It is true that we have, on occasion, struck down such contracts as void when
the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely
deprived of the opportunity to bargain on equal footing. Nevertheless, contracts of adhesion are not invalid per se and they are not entirely prohibited.
The one who adheres to the contract is in reality free to reject it entirely, if he adheres, he gives his consent."28 In the case at bar, there was no indication
that respondent Luna was forced to sign the subject agreement. Being of age, financially stable and with vast business experience, she is presumed to
have acted with due care and to have signed the assailed contract with full knowledge of its import. Under the premises, it would be difficult to assume
that she was morally abused. She was free to reject the agreement if she wanted to.
Accordingly, a contract duly executed is the law between the parties, and they are obliged to comply fully and not selectively with its terms. A contract of
adhesion is no exception.29
The foregoing premises noted, the Court of Appeals, therefore, committed reversible error in interpreting the subjectexclusivity clause to apply merely to
those products in direct competition to those manufactured and sold by petitioner Avon. When the terms of the agreement are clear and explicit, that
they do not justify an attempt to read into any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of
the contract.30 Thus, in order to judge the intention of the contracting parties, "the circumstances under which it was made, including the situation of the
subject thereof and of the parties to it, may be shown, so that the judge may be placed in the position of those whose language he is to interpret."31 It
has been held that once this intention of the parties has been ascertained, it becomes an integral part of the contract as though it has been originally
expressed therein in unequivocal terms.32
Having held that the "exclusivity clause" as embodied in paragraph 5 of the Supervisors Agreement is valid and not against public policy, we now pass
to a consideration of respondent Lunas objections to the validity of her termination as provided for under paragraph 6 of the Supervisors Agreement
giving petitioner Avon the right to terminate or cancel such contract. The paragraph 6 or the "termination clause" therein expressly provides that:
The Company and the Supervisor mutually agree:
xxxx
6) Either party may terminate this agreement at will, with or without cause, at any time upon notice to the other. [Emphasis supplied.]
In the case of Petrophil Corporation v. Court of Appeals,33 this Court already had the opportunity to opine that termination or cancellation clauses such
as that subject of the case at bar are legitimate if exercised in good faith. The facts of said case likewise involved a termination or cancellation clause
that clearly provided for two ways of terminating the contract, i.e., with or without cause. The utilization of one mode will not preclude the use of the
other. Therein, we stated that the finding that the termination of the contract was "for cause," is immaterial. When petitioner terminated the contract
"without cause," it was required only to give x x x a 30-day prior written notice, which it did.
In the case at bar, the termination clause of the Supervisors Agreement clearly provides for two ways of terminating and/or canceling the contract. One
mode does not exclude the other. The contract provided that it can be terminated or cancelled for cause, it also stated that it can be terminated without
cause, both at any time and after written notice. Thus, whether or not the termination or cancellation of the Supervisors Agreement was "for cause," is
immaterial. The only requirement is that of notice to the other party. When petitioner Avon chose to terminate the contract, for cause, respondent Luna
was duly notified thereof.
Worth stressing is that the right to unilaterally terminate or cancel the Supervisors Agreement with or without cause is equally available to respondent
Luna, subject to the same notice requirement. Obviously, no advantage is taken against each other by the contracting parties.
WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The Decision dated 20 May 2002 rendered by the Court of Appeals in CAG.R. CV No. 52550, affirming the judgment of the RTC of Makati City, Branch 138, in Civil Case No. 88-2595, are hereby REVERSED and SET ASIDE.
Accordingly, let a new one be entered dismissing the complaint for damages. Costs against respondent Leticia Luna.
SO ORDERED.
Ynares-Santiago, (Working Chairman) and Austria-Martinez,, JJ., concur.
Panganiban, CJ, retired as of 7 December 2006.
Callejo, Sr., J., no part.
G.R. No. L-8851 March 16, 1914
AGAPITO BONZON, Plaintiff-Appellant, vs. STANDARD OIL COMPANY OF NEW YORK and LEONARDO OSORIO, as
sheriff, Defendants-Appellees.

Escader & Salas for appellant.

Bruce, Laurence, Ross & Block for appellees.
CARSON, J. :
This is an appeal from a judgment sustaining a demurrer to the original complaint filed in this action. The complaint appellees, in
substance, that plaintiff purchased certain real estate at an execution sale, paying therefor the sum of P2,170 to the defendant
sheriff, who turned over the purchase price to the defendant company, the execution creditor, at whose instance the sale was had;
that thereafter, plaintiff having gone into possession of the land was evicted therefrom in judicial proceedings, wherein the court
found that the land in question was the property of certain third parties, and that neither the judgment debtor nor the purchaser at
the execution sale had any title thereto. The prayer of the complaint is for judgment against the judgment creditor and the sheriff for
the amount of the purchase price paid at the execution sale.
The principal contention of counsel for appellee is as follows:
The only question presented by plaintiff is the interpretation to be placed upon section 470 of the Code of Civil Procedure. Unless this
section gives him the remedy for which he contends, he has stated no cause of action, because the only other theory upon which he
could possibly require a reinbursement of the price paid by him at the sheriff's sale is that of an implied warranty by the judgment
creditor and the sheriff. The complaint shows no compliance, as to the Standard Oil Company, with article 1481 of the Civil Code.
We must admit that section 470 of the code of Civil Procedure leaves something to be desired in the way of clearness. Its English
text. which of course must govern in case of any discrepancy between the English and the Spanish versions, is as follows:
"SEC. 470. If the purchaser of real property sold on execution, or his successor in interest, be evicted therefrom in consequence of
irregularities in the proceedings concerning the sale, or of the reversal or discharge of the judgment, he may recover the price paid,
with interest, from the judgment creditor. If the purchaser of property at such official sale, or his successor in interest, fail to recover
possession in consequence of irregularity in the proceedings concerning the sale, or because the property sold was not subject to
execution and sale, the court having jurisdiction thereof shall, after notice and on motion of such party in interest, or his attorney,
revive the original judgment in the name of the petitioner, for the amount paid by such purchaser at the sale, with interest thereon
from the time of payment of the same rate that the original judgment bore; and the judgment so revived shall have the same force
and effect as would an original judgment of the date of the revival and no more."
It appears, as appellant says, that this section divides naturally into two parts; (1) Authorizing the recovery of the purchase price
under certain conditions, and (2) authorizing the revival of the judgment in behalf of the purchaser in other circumstances. Plaintiff
claims to be entitled to the remedy set out in the first part of the section. It is apparent, however, that plaintiff's eviction, as set up
in his complaint, is not due to any of the causes shown in this first part of section 470. So far as appears, 'the proceedings
concerning the sale were perfectly regular, and the complaint discloses no reversal or discharge of the judgment' upon whose
execution plaintiff became a purchaser.
The second part of section 470, applied by the judge of the trial court, seems, at first glance, not exactly applicable, because it
provides for the case where the purchaser may "fail to recover possession," while in the present case the purchaser entered into
possession and was subsequently dispossessed by others. We think, however, that the phrase "fail to recover possession" was
intended to meet such a case as this; otherwise section 470 would not meet a case like the present, although it was obviously
intended to.
We agree with counsel for the appellee that the section of the Code in question leaves something to be desired in the way of
clearness; and it may be admitted that it is only by a liberal construction of the language used in the statute that the sale of property
under execution in which the judgment debtor has no title, can be held to be an "irregularity in the proceedings concerning the
sale."
But we are of opinion, that the section of the Code of Civil Procedure under consideration, being remedial in its character, should be
construed liberally so as to give a remedy as broad as that to be obtained by the corresponding suit in equity, which we think, would
extend to a case where the sale of property under execution is held to be void on the ground that the judgment had no title.
The supreme court of California, discussing the provisions of section 708 of the California Code of Civil Procedure in the case of
Merguire vs. O'Donnell (139 Cal., 6), held as follows:
We think a sale made by a sheriff on an order of the court and void execution is "irregular" in the extreme degree, and that a sale
had on a void execution is void for the reason of "irregularity in the proceedings concerning the sale." Section 708 of the Code of
Civil Procedure being remedial in its character, should be liberally construed. (Hitchcock vs.Caruthers, 100 Cal., 100; Cross vs. Zane,
47 Cal., 602.) The section under consideration was intended to give a remedy by petition in the action which had culminated in the
judgment sough to be revived. There was and is a remedy by an independent suit in equity by which similar relief may be had as is
given by the statute (Scherr vs.Himmelman, 53 Cal., 312); an this remedy ad administered in equity extends to cases where the
execution and sale under it are both held to be void (Smith vs.Reed, 52 Cal., 345); and, giving the section the liberal construction
required, it is clear that the remedy intended to be given under it is as board as that to be obtained in the corresponding action in
equity. It is certainly necessary and consonant with the principles of equity that a party should have relief in cases where the
execution and sale are void as well as in those cases where there is an irregularity of such a character as to render the sale merely

voidable. Indeed, it would seem that the requirements of equity were the same in both the supposed cases, and there is no good
reason for applying the section to one of them and not to the other.
Upon like principles we think that where sheriff, by virtue of the authority conferred upon him by the issuance of an execution it sell
the property of the judgment debtor, undertakes to sell and does sell property o r an interest in property to which the judgment
debtor is n no wise entitled, there is certainly a gave irregularity in the procedure had under color of the authority conferred by the
execution, and it would seem that in the irregularity may fairly be held to be an "irregularity in the proceedings concerning the
sale."
No sound reason suggested itself for restricting the meaning of the language of the statute so as to exclude there from- cases such
as that under consideration. While the doctrine of caveat emptor, relied upon by counsel for appellee, has its legitimate force and
effect in precluding any idea of a warranty by plaintiff or defendant in execution or by the sheriff, it has no application in a case
where a purchaser acquires no title to the property sold, as distinguished from a case wherein there is only a partial failure of title;
and it has been universally held that in case of failure of title a bona fide purchaser s entitled to recover the purchase price from the
officer, if the funds are still in his hands, or from the judgment debtor. True it is that in some jurisdiction in the United States
purchasers at execution sales where the debtor had no title to the property sold have no cause of action against the judgment
creditors, but in others, "by judicial construction or express statutory enactment," bona fide purchaser s given a cause of action
against the execution creditors as well as the judgment debtor n case of failure of title. See text and cases cited under heading
"Right and remedies on failure of title." (17 Cyc., 1319.) And we think that such was the intention of the legislator in enacting the
section under consideration.
In this jurisdiction (even n the absence of the statute), under the general principles tat one person may not enrich himself at the
expense of another, a judgment creditor would not be permitted to retain the purchaser price of land sold as the property of the
judgment debtor after it has been made to appear that the judgment debtor had no title to the land and that the purchaser had
failed to secure title thereto, and we find no difficulty therefore in accepting a liberal construction of the statute which arrives at the
same equitable result.
The judgment in favor of the Standard Oil Company, and the execution issued thereon, gave to that company merely the right to
have the property of the judgment debtor sold in satisfaction of the judgment. It did not and could not give the company the right to
have the judgment satisfied out of the property of any other person. By the tortious act of the sheriff, certain property was sold to
which the judgment debtor had no title whatever; and the proceedings concerning the sale having been found to be and the
purchaser having been evicted from the property, it s clear that the company had right under its judgment to the proceeds of the
sale, and that the sale having been held to have been void, the purchaser at the sale is equitably entitled to the return of the
purchaser price. This is precisely the result which we hold the remedial provisions of the section under consideration were intended
to secure, and it is the result which naturally and properly follows from a liberal construction of its terms.
We think that it will help to clear up the uncertainly as to the meaning of the different provisions of the statute if it be kept in mind
that the remedy provided in cases where "the property sold was not subject to execution and sale" was evidently intended to include
cases wherein exempted property of the judgment debtor is sold under execution, and does not refer to cases wherein property of
third persons is tortiously seized and sold, the case of Hitchcock vs. Caruthers(100 Cal., 100), cited in appellee's brief, to the
contrary notwithstanding. We think that the reasoning on which that decision should have been based is that set froth in the later
case of Merguire vs. O'Donnell, above cited.
The plaintiff's right to recovery from the judgment creditor not being predicated on the theory of an express or implied warranty of
title, defendant's contentions based on the provisions of article 1481 of the code need not be considered at this time. If defendant
was not given an opportunity to be heard in the eviction proceedings, it would seem that the can avail himself in the pending action
of any defense which if set up in the former action would have relieved him from liability to reimburse the purchaser.
Let judgment be entered reversing the order of the court below sustaining the demurrer to the complaint, and directing that the
record be returned to the court below for further proceedings in accordance with law the principles herein set forth.