G.R. No.

118889 March 23, 1998

FGU INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS, FILCAR TRANSPORT, INC., and FORTUNE INSURANCE
CORPORATION,respondents.
BELLOSILLO, J.:
For damages suffered by a third party, may an action based on quasi-delict prosper against a rent-a-car
company and, consequently, its insurer for fault or negligence of the car lessee in driving the rented vehicle?
This was a two-car collision at dawn. At around 3 o'clock of 21 April 1987, two (2) vehicles, both Mitsubishi Colt
Lancers, cruising northward along Epifanio de los Santos Avenue, Mandaluyong City, figured in a traffic
accident. The car bearing Plate No. PDG 435 owned by Lydia F. Soriano was being driven at the outer lane of
the highway by Benjamin Jacildone, while the other car, with Plate No. PCT 792, owned by respondent
FILCAR Transport, Inc. (FILCAR), and driven by Peter Dahl-Jensen as lessee, was at the center lane, left of
the other vehicle. Upon approaching the corner of Pioneer Street, the car owned by FILCAR swerved to the
right hitting the left side of the car of Soriano. At that time Dahl-Jensen, a Danish tourist, did not possess a
Philippine driver's license. 1
As a consequence, petitioner FGU Insurance Corporation, in view of its insurance contract with Soriano, paid
the latter P25,382.20. By way of subrogation,2 it sued Dahl-Jensen and respondent FILCAR as well as
respondent Fortune Insurance Corporation (FORTUNE) as insurer of FILCAR for quasi-delict before the
Regional Trial Court of Makati City.
Unfortunately, summons was not served on Dahl-Jensen since he was no longer staying at his given address;
in fact, upon motion of petitioner, he was dropped from the complaint.
On 30 July 1991 the trial court dismissed the case for failure of petitioner to substantiate its claim of
subrogation.3
On 31 January 1995 respondent Court of Appeals affirmed the ruling of the trial court although based on
another ground, i.e., only the fault or negligence of Dahl-Jensen was sufficiently proved but not that of
respondent FILCAR.4 In other words, petitioner failed to establish its cause of action for sum of money based
on quasi-delict.
In this appeal, petitioner insists that respondents are liable on the strength of the ruling in MYC-Agro-Industrial
Corporation v. Vda. de Caldo5 that the registered owner of a vehicle is liable for damages suffered by third
persons although the vehicle is leased to another.
We find no reversible error committed by respondent court in upholding the dismissal of petitioner's complaint.
The pertinent provision is Art. 2176 of the Civil Code which states: "Whoever by act or omission causes
damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict . . . . "
To sustain a claim based thereon, the following requisites must concur: (a) damage suffered by the plaintiff; (b)
fault or negligence of the defendant; and, (c) connection of cause and effect between the fault or negligence of
the defendant and the damage incurred by the plaintiff.6
We agree with respondent court that petitioner failed to prove the existence of the second requisite, i.e., fault or
negligence of defendant FILCAR, because only the fault or negligence of Dahl-Jensen was sufficiently
established, not that of FILCAR. It should be noted that the damage caused on the vehicle of Soriano was
brought about by the circumstance that Dahl-Jensen swerved to the right while the vehicle that he was driving
was at the center lane. It is plain that the negligence was solely attributable to Dahl-Jensen thus making the
damage suffered by the other vehicle his personal liability. Respondent FILCAR did not have any participation
therein.
Article 2180 of the same Code which deals also with quasi-delict provides:
The obligation imposed by article 2176 is demandable not only for one's own acts or omissions,
but also for those of persons for whom one is responsible.

The father and, in case of his death or incapacity, the mother, are responsible for the damages
caused by the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons who are under
their authority and live in their company.
The owners and managers of an establishment or enterprise are likewise responsible for
damages caused by their employees in the service of the branches in which the latter are
employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.
The State is responsible in like manner when it acts through a special agent; but not when the
damage has been caused by the official to whom the task done properly pertains, in which case
what is provided in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages
caused by their pupils and students or apprentices, so long as they remain in their custody.
The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage.
The liability imposed by Art. 2180 arises by virtue of a presumption juris tantum of negligence on the part of the
persons made responsible thereunder, derived from their failure to exercise due care and vigilance over the
acts of subordinates to prevent them from causing damage.7 Yet, as correctly observed by respondent court,
Art. 2180 is hardly applicable because none of the circumstances mentioned therein obtains in the case under
consideration. Respondent FILCAR being engaged in a rent-a-car business was only the owner of the car
leased to Dahl-Jensen. As such, there was no vinculum juris between them as employer and employee.
Respondent FILCAR cannot in any way be responsible for the negligent act of Dahl-Jensen, the former not
being an employer of the latter.
We now correlate par. 5 of Art. 2180 with Art. 2184 of the same Code which provides: "In motor vehicle
mishap, the owner is solidarily liable with his driver, if the former, who was in the vehicle, could have by the use
of due diligence, prevented the misfortune . . . . If the owner was not in the motor vehicle, the provisions of
article 2180 are applicable." Obviously, this provision of Art. 2184 is neither applicable because of the absence
of master-driver relationship between respondent FILCAR and Dahl-Jensen. Clearly, petitioner has no cause of
action against respondent FILCAR on the basis of quasi-delict; logically, its claim against respondent
FORTUNE can neither prosper.
Petitioner's insistence on MYC-Agro-Industrial Corporation is rooted in a misapprehension of our ruling therein.
In that case, the negligent and reckless operation of the truck owned by petitioner corporation caused injuries
to several persons and damage to property. Intending to exculpate itself from liability, the corporation raised the
defense that at the time of the collision it had no more control over the vehicle as it was leased to another; and,
that the driver was not its employee but of the lessee. The trial court was not persuaded as it found that the
true nature of the alleged lease contract was nothing more than a disguise effected by the corporation to
relieve itself of the burdens and responsibilities of an employer. We upheld this finding and affirmed the
declaration of joint and several liability of the corporation with its driver.
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals dated 31 January 1995
sustaining the dismissal of petitioner's complaint by the trial court is AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 122445 November 18, 1997

DR. NINEVETCH CRUZ, petitioner,

vs.
COURT OF APPEALS and LYDIA UMALI, respondents.
FRANCISCO, J.:
Doctors are protected by a special rule of law. They are not guarantors of care. They do not even warrant a
good result. They are not insurers against mishaps or unusual consequences. Furthermore they are not liable
for honest mistakes of judgment . . . 1
The present case against petitioner is in the nature of a medical malpractice suit, which in simplest terms is the
type of claim which a victim has available to him or her to redress a wrong committed by a medical
professional which has caused bodily harm. 2 In this jurisdiction, however, such claims are most often brought
as a civil action for damages under Article 2176 of the Civil Code, 3 and in some instances, as a criminal case
under Article 365 of the Revised Penal Code 4 with which the civil action for damages is impliedly instituted. It
is via the latter type of action that the heirs of the deceased sought redress for the petitioner's alleged
imprudence and negligence in treating the deceased thereby causing her death. The petitioner and one Dr.
Lina Ercillo who was the attending anaesthesiologist during the operation of the deceased were charged with
"reckless imprudence and negligence resulting to (sic) homicide" in an information which reads:
That on or about March 23, 1991, in the City of San Pablo, Republic of the Philippines and
within the jurisdiction of this Honorable Court, the accused above named, being then the
attending anaesthesiologist and surgeon, respectively, did then and there, in a negligence (sic),
careless, imprudent, and incompetent manner, and failing to supply or store sufficient provisions
and facilities necessary to meet any and all exigencies apt to arise before, during and/or after a
surgical operation causing by such negligence, carelessness, imprudence, and incompetence,
and causing by such failure, including the lack of preparation and foresight needed to avert a
tragedy, the untimely death of said Lydia Umali on the day following said surgical operation. 5
Trial ensued after both the petitioner and Dr. Lina Ercillo pleaded not guilty to the above-mentioned charge. On
March 4, 1994, the Municipal Trial Court in Cities (MTCC) of San Pablo City rendered a decision, the
dispositive portion of which is hereunder quoted as follows:
WHEREFORE, the court finds the accused Dra. Lina Ercillo not guilty of the offense charged for
insufficiency of evidence while her co-accused Dra. Ninevetch Cruz is hereby held responsible
for the death of Lydia Umali on March 24, 1991, and therefore guilty under Art. 365 of the
Revised Penal Code, and she is hereby sentenced to suffer the penalty of 2 months and 1 day
imprisonment of arresto mayor with costs. 6
The petitioner appealed her conviction to the Regional Trial Court (RTC) which affirmed in toto the
decision of the MTCC 7 prompting the petitioner to file a petition for review with the Court of Appeals but
to no avail. Hence this petition for review on certiorari assailing the decision promulgated by the Court
of Appeals on October 24, 1995 affirming petitioner's conviction with modification that she is further
directed to pay the heirs of Lydia Umali P50,000.00 as indemnity for her death. 8
In substance, the petition brought before this Court raises the issue of whether or not petitioner's
conviction of the crime of reckless imprudence resulting in homicide, arising from an alleged medical
malpractice, is supported by the evidence on record.
First the antecedent facts.
On March 22, 1991, prosecution witness, Rowena Umali De Ocampo, accompanied her mother to the
Perpetual Help Clinic and General Hospital situated in Balagtas Street, San Pablo City, Laguna. They arrived
at the said hospital at around 4:30 in the afternoon of the same day. 9 Prior to
March 22, 1991, Lydia was examined by the petitioner who found a "myoma" 10 in her uterus, and scheduled
her for a hysterectomy operation on March 23,
1991. 11 Rowena and her mother slept in the clinic on the evening of March 22, 1991 as the latter was to be
operated on the next day at 1:00 o'clock in the afternoon. 12 According to Rowena, she noticed that the clinic

was untidy and the window and the floor were very dusty prompting her to ask the attendant for a rag to wipe
the window and the floor with. 13 Because of the untidy state of the clinic, Rowena tried to persuade her mother
not to proceed with the operation. 14 The following day, before her mother was wheeled into the operating
room, Rowena asked the petitioner if the operation could be postponed. The petitioner called Lydia into her
office and the two had a conversation. Lydia then informed Rowena that the petitioner told her that she must be
operated on as scheduled. 15
Rowena and her other relatives, namely her husband, her sister and two aunts waited outside the operating
room while Lydia underwent operation. While they were waiting, Dr. Ercillo went out of the operating room and
instructed them to buy tagamet ampules which Rowena's sister immediately bought. About one hour had
passed when Dr. Ercillo came out again this time to ask them to buy blood for Lydia. They bought type "A"
blood from the St. Gerald Blood Bank and the same was brought by the attendant into the operating room.
After the lapse of a few hours, the petitioner informed them that the operation was finished. The operating staff
then went inside the petitioner's clinic to take their snacks. Some thirty minutes after, Lydia was brought out of
the operating room in a stretcher and the petitioner asked Rowena and the other relatives to buy additional
blood for Lydia. Unfortunately, they were not able to comply with petitioner's order as there was no more type
"A" blood available in the blood bank. Thereafter, a person arrived to donate blood which was later transfused
to Lydia. Rowena then noticed her mother, who was attached to an oxygen tank, gasping for breath.
Apparently the oxygen supply had run out and Rowena's husband together with the driver of the accused had
to go to the San Pablo District Hospital to get oxygen. Lydia was given the fresh supply of oxygen as soon as it
arrived. 16 But at around 10:00 o'clock P.M. she went into shock and her blood pressure dropped to 60/50.
Lydia's unstable condition necessitated her transfer to the San Pablo District Hospital so she could be
connected to a respirator and further examined. 17 The transfer to the San Pablo District Hospital was without
the prior consent of Rowena nor of the other relatives present who found out about the intended transfer only
when an ambulance arrived to take Lydia to the San Pablo District Hospital. Rowena and her other relatives
then boarded a tricycle and followed the ambulance. 18
Upon Lydia's arrival at the San Pablo District Hospital, she was wheeled into the operating room and the
petitioner and Dr. Ercillo re-operated on her because there was blood oozing from the abdominal
incision. 19 The attending physicians summoned Dr. Bartolome Angeles, head of the Obstetrics and
Gynecology Department of the San Pablo District Hospital. However, when Dr. Angeles arrived, Lydia was
already in shock and possibly dead as her blood pressure was already 0/0. Dr. Angeles then informed
petitioner and Dr. Ercillo that there was nothing he could do to help save the patient.20 While the petitioner was
closing the abdominal wall, the patient died. 21 Thus, on March 24, 1991, at 3:00 o'clock in the morning, Lydia
Umali was pronounced dead. Her death certificate states "shock" as the immediate cause of death and
"Disseminated Intravascular Coagulation (DIC)" as the antecedent cause. 22
In convicting the petitioner, the MTCC found the following circumstances as sufficient basis to conclude that
she was indeed negligent in the performance of the operation:
. . . , the clinic was untidy, there was lack of provision like blood and oxygen to prepare for any
contingency that might happen during the operation. The manner and the fact that the patient
was brought to the San Pablo District Hospital for reoperation indicates that there was
something wrong in the manner in which Dra. Cruz conducted the operation. There was no
showing that before the operation, accused Dra. Cruz had conducted a cardio pulmonary
clearance or any typing of the blood of the patient. It was (sic) said in medical parlance that the
"the abdomen of the person is a temple of surprises" because you do not know the whole thing
the moment it was open (sic) and surgeon must be prepared for any eventuality thereof. The
patient (sic) chart which is a public document was not presented because it is only there that we
could determine the condition of the patient before the surgery. The court also noticed in Exh.
"F-1" that the sister of the deceased wished to postpone the operation but the patient was
prevailed upon by Dra. Cruz to proceed with the surgery. The court finds that Lydia Umali died
because of the negligence and carelessness of the surgeon Dra. Ninevetch Cruz because of

loss of blood during the operation of the deceased for evident unpreparedness and for lack of
skill, the reason why the patient was brought for operation at the San Pablo City District
Hospital. As such, the surgeon should answer for such negligence. With respect to Dra. Lina
Ercillo, the anaesthesiologist, there is no evidence to indicate that she should be held jointly
liable with Dra. Cruz who actually did the operation. 23
The RTC reiterated the abovementioned findings of the MTCC and upheld the latter's declaration of
"incompetency, negligence and lack of foresight and skill of appellant (herein petitioner) in handling the subject
patient before and after the operation." 24 And likewise affirming the petitioner's conviction, the Court of Appeals
echoed similar observations, thus:
. . . While we may grant that the untidiness and filthiness of the clinic may not by itself indicate
negligence, it nevertheless shows the absence of due care and supervision over her
subordinate employees. Did this unsanitary condition permeate the operating room? Were the
surgical instruments properly sterilized? Could the conditions in the OR have contributed to the
infection of the patient? Only the petitioner could answer these, but she opted not to testify. This
could only give rise to the presumption that she has nothing good to testify on her defense.
Anyway, the alleged "unverified statement of the prosecution witness" remains unchallenged
and unrebutted.
Likewise undisputed is the prosecution's version indicating the following facts: that the accused
asked the patient's relatives to buy Tagamet capsules while the operation was already in
progress; that after an hour, they were also asked to buy type "A" blood for the patient; that after
the surgery, they were again asked to procure more type "A" blood, but such was not anymore
available from the source; that the oxygen given to the patient was empty; and that the son-inlaw of the patient, together with a driver of the petitioner, had to rush to the San Pablo City
District Hospital to get the much-needed oxygen. All these conclusively show that the petitioner
had not prepared for any unforeseen circumstances before going into the first surgery, which
was not emergency in nature, but was elective or pre-scheduled; she had no ready antibiotics,
no prepared blood, properly typed and cross-matched, and no sufficient oxygen supply.
Moreover, there are a lot of questions that keep nagging Us. Was the patient given any cardiopulmonary clearance, or at least a clearance by an internist, which are standard requirements
before a patient is subjected to surgery. Did the petitioner determine as part of the pre-operative
evaluation, the bleeding parameters of the patient, such as bleeding time and clotting time?
There is no showing that these were done. The petitioner just appears to have been in a hurry
to perform the operation, even as the family wanted a postponement to April 6, 1991. Obviously,
she did not prepare the patient; neither did she get the family's consent to the operation.
Moreover, she did not prepare a medical chart with instructions for the patient's care. If she did
all these, proof thereof should have been offered. But there is none. Indeed, these are
overwhelming evidence of recklessness and imprudence. 25
This Court, however, holds differently and finds the foregoing circumstances insufficient to sustain a judgment
of conviction against the petitioner for the crime of reckless imprudence resulting in homicide. The elements of
reckless imprudence are: (1) that the offender does or fails to do an act; (2) that the doing or the failure to do
that act is voluntary; (3) that it be without malice; (4) that material damage results from the reckless
imprudence; and (5) that there is inexcusable lack of precaution on the part of the offender, taking into
consideration his employment or occupation, degree of intelligence, physical condition, and other
circumstances regarding persons, time and place.
Whether or not a physician has committed an "inexcusable lack of precaution" in the treatment of his patient is
to be determined according to the standard of care observed by other members of the profession in good
standing under similar circumstances bearing in mind the advanced state of the profession at the time of
treatment or the present state of medical science. 26 In the recent case of Leonila Garcia-Rueda v. Wilfred
L. Pascasio, et al., 27 this Court stated that in accepting a case, a doctor in effect represents that, having the

needed training and skill possessed by physicians and surgeons practicing in the same field, he will employ
such training, care and skill in the treatment of his patients. He therefore has a duty to use at least the same
level of care that any other reasonably competent doctor would use to treat a condition under the same
circumstances. It is in this aspect of medical malpractice that expert testimony is essential to establish not only
the standard of care of the profession but also that the physician's conduct in the treatment and care falls
below such standard. 28 Further, inasmuch as the causes of the injuries involved in malpractice actions are
determinable only in the light of scientific knowledge, it has been recognized that expert testimony is usually
necessary to support the conclusion as to causation. 29
Immediately apparent from a review of the records of this case is the absence of any expert testimony on the
matter of the standard of care employed by other physicians of good standing in the conduct of similar
operations. The prosecution's expert witnesses in the persons of Dr. Floresto Arizala and Dr. Nieto Salvador, Jr.
of the National Bureau of Investigation (NBI) only testified as to the possible cause of death but did not venture
to illuminate the court on the matter of the standard of care that petitioner should have exercised.
All three courts below bewail the inadequacy of the facilities of the clinic and its untidiness; the lack of
provisions such as blood, oxygen, and certain medicines; the failure to subject the patient to a cardiopulmonary test prior to the operation; the omission of any form of blood typing before transfusion; and even the
subsequent transfer of Lydia to the San Pablo Hospital and the reoperation performed on her by the petitioner.
But while it may be true that the circumstances pointed out by the courts below seemed beyond cavil to
constitute reckless imprudence on the part of the surgeon, this conclusion is still best arrived at not through the
educated surmises nor conjectures of laymen, including judges, but by the unquestionable knowledge of expert
witnesses. For whether a physician or surgeon has exercised the requisite degree of skill and care in the
treatment of his patient is, in the generality of cases, a matter of expert opinion. 30 The deference of courts to
the expert opinion of qualified physicians stems from its realization that the latter possess unusual technical
skills which laymen in most instances are incapable of intelligently evaluating. 31 Expert testimony should have
been offered to prove that the circumstances cited by the courts below are constitutive of conduct falling below
the standard of care employed by other physicians in good standing when performing the same operation. It
must be remembered that when the qualifications of a physician are admitted, as in the instant case, there is
an inevitable presumption that in proper cases he takes the necessary precaution and employs the best of his
knowledge and skill in attending to his clients, unless the contrary is sufficiently established. 32 This
presumption is rebuttable by expert opinion which is so sadly lacking in the case at bench.
Even granting arguendo that the inadequacy of the facilities and untidiness of the clinic; the lack of provisions;
the failure to conduct pre-operation tests on the patient; and the subsequent transfer of Lydia to the San Pablo
Hospital and the reoperation performed on her by the petitioner do indicate, even without expert testimony, that
petitioner was recklessly imprudent in the exercise of her duties as a surgeon, no cogent proof exists that any
of these circumstances caused petitioner's death. Thus, the absence of the fourth element of reckless
imprudence: that the injury to the person or property was a consequence of the reckless imprudence.
In litigations involving medical negligence, the plaintiff has the burden of establishing appellant's negligence
and for a reasonable conclusion of negligence, there must be proof of breach of duty on the part of the
surgeon as well as a causal connection of such breach and the resulting death of his patient. 33 In Chan Lugay
v. St. Luke's Hospital, Inc., 34 where the attending physician was absolved of liability for the death of the
complainant's wife and newborn baby, this Court held that:
In order that there may be a recovery for an injury, however, it must be shown that the "injury for
which recovery is sought must be the legitimate consequence of the wrong done; the
connection between the negligence and the injury must be a direct and natural sequence of
events, unbroken by intervening efficient causes." In other words, the negligence must be the
proximate cause of the injury. For, "negligence, no matter in what it consists, cannot create a
right of action unless it is the proximate cause of the injury complained of ." And "the proximate
cause of an injury is that cause, which, in natural and continuous sequence, unbroken by any

efficient intervening cause, produces the injury, and without which the result would not have
occurred." 35 (Emphasis supplied.)
Dr. Arizala who conducted an autopsy on the body of the deceased summarized his findings as follows:
Atty. Cachero:
Q. You mentioned about your Autopsy Report which has been marked as Exh.
"A-1-b". There appears here a signature above the typewritten name Floresto
Arizala, Jr., whose signature is that?
A. That is my signature, sir.
Q. Do you affirm the truth of all the contents of Exh. "A-1-b"?
A. Only as to the autopsy report no. 91-09, the time and place and everything
after the post mortem findings, sir.
Q. You mentioned on your "Post Mortem Findings" about surgical incision, 14:0
cm., infraumbilical area, anterior abdominal area, midline, will you please explain
that in your own language?
A. There was incision wound (sic) the area just below the navel, sir.
Q. And the last paragraph of the postmortem findings which I read: Uterus, pearshaped and pale measuring 7.5 x 5.5 x 5.0 cm. with some surface nodulation of
the fundic area posteriorly. Cut-section shows diffusely pale myometrium with
areas of streak induration. The ovaries and adnexal structures are missing with
the raw surfaces patched with clotted blood. Surgical sutures were noted on the
operative site.
Intestines and mesenteries are pale with blood clots noted between the
mesentric folds.
Hemoperitoneum: 300 s.s.,
right paracolic gutter,
50 c.c., left paracolic gutter
200 c.c., mesentric area,
100 c.c., right pelvic gutter
stomach empty.
Other visceral organs, pale.,
will you please explain that on (sic) your own language or in ordinary. . . . . . . . . . . .
A. There was a uterus which was not attached to the adnexal structures namely
ovaries which were not present and also sign of previous surgical operation and
there were (sic) clotted blood, sir.
Q. How about the ovaries and adnexal structures?
A. They are missing, sir.
Q. You mean to say there are no ovaries?
A. During that time there are no ovaries, sir.
Q. And there were likewise sign of surgical sutures?
A. Yes, sir.
Q. How about the intestines and mesenteries are place (sic) with blood clots
noted between the mesenteric folds, will you please explain on (sic) this?
A. In the peritoneal cavity, they are mostly perritonial blood . . . . . . . .
Q. And what could have caused this blood?
A. Well, ordinarily blood is found inside the blood vessel. Blood were (sic) outside
as a result of the injuries which destroyed the integrity of the vessel allowing
blood to sip (sic) out, sir.
Q. By the nature of the postmortem findings indicated in Exh. A-1-B, can you tell
the court the cause of death?

A. Yes, sir. The cause of death is: Gross findings are compatible with
hemorrhagic shock.
Q. Can you tell the us what could have caused this hemorrhagic shock?
A. Well hemorrhagic shock is the result of blood loss.
Q. What could have the effect of that loss of blood?
A. Unattended hemorrhage, sir. 36 (Emphasis supplied.)
The foregoing was corroborated by Dr. Nieto Salvador:
Q. And were you able to determine the cause of death by virtue of the
examination of the specimen submitted by Dr. Arizala?
A. Without knowledge of the autopsy findings it would be difficult for me to
determine the cause of death, sir.
Q. Have you also examined the post mortem of Dr. Arizala?
A. Yes, sir, and by virtue of the autopsy report in connection with your pathology
report.
Q. What could have caused the death of the victim?
A. This pathologic examination are (sic) compatible with the person who died, sir.
Q. Will you explain to us the meaning of hemorrhagic compatible?
A. It means that a person died of blood loss. Meaning a person died of nonreplacement of blood and so the victim before she died there was shock of
diminish of blood of the circulation. She died most probably before the actual
complete blood loss, sir.
Court: Is it possible doctor that the loss of the blood was due on (sic) operation?
A. Based on my pathologist finding, sir.
Q. What could have caused this loss of blood?
A. Many, sir. A patient who have undergone surgery. Another may be a blood
vessel may be cut while on operation and this cause (sic) bleeding, or may be
set in the course of operation, or may be (sic) he died after the operation. Of
course there are other cause (sic).
Atty. Cachero:
Q. Especially so doctor when there was no blood replacement?
A. Yes, sir. 37 (Emphasis supplied.)
The testimonies of both doctors establish hemorrhage or hemorrhagic shock as the cause of death. However,
as likewise testified to by the expert witnesses in open court, hemorrhage or hemorrhagic shock during surgery
may be caused by several different factors. Thus, Dr. Salvador's elaboration on the matter:
Atty. Pascual:
Q. Doctor, among the causes of hemorrhage that you mentioned you said that it
could be at the moment of operation when one losses (sic) control of the
presence, is that correct? During the operation there is lost (sic) of control of the
cut vessel?
A. Yes, sir.
Q. Or there is a failure to ligate a vessel of considerable size?
A. Yes, sir.
Q. Or even if the vessel were ligated the knot may have slipped later on?
A. Yes, sir.
Q. And you also mentioned that it may be possible also to some clotting defect,
is that correct?
A. May be (sic). 38 (Emphasis supplied).
Defense witness, Dr. Bu C. Castro also gave the following expert opinion:

Q. Doctor even a patient after an operations (sic) would suffer hemorrage what
would be the possible causes of such hemorrage (sic)?
A. Among those would be what we call Intravascular Coagulation and this is the
reason for the bleeding, sir, which cannot be prevented by anyone, it will happen
to anyone, anytime and to any persons (sic), sir.
COURT:
What do you think of the cause of the bleeding, the cutting or the operations
done in the body?
A. Not related to this one, the bleeding here is not related to any cutting or
operation that I (sic) have done.
Q. Aside from the DIC what could another causes (sic) that could be the cause
for the hemorrhage or bleeding in a patient by an operations (sic)?
A. In general sir, if there was an operations (sic) and it is possible that the ligature
in the suture was (sic) become (sic) loose, it is (sic) becomes loose if proven..
xxx xxx xxx
Q. If the person who performed an autopsy does not find any untight (sic) clot
(sic) blood vessel or any suture that become (sic) loose the cause of the bleeding
could not be attributed to the fault of the subject?
A. Definitely, sir. 39 (Emphasis supplied.)
According to both doctors, the possible causes of hemorrhage during an operation are: (1) the failure of the
surgeon to tie or suture a cut blood vessel; (2) allowing a cut blood vessel to get out of control; (3) the
subsequent loosening of the tie or suture applied to a cut blood vessel; and (4) and a clotting defect known as
DIC. It is significant to state at this juncture that the autopsy conducted by Dr. Arizala on the body of Lydia did
not reveal any untied or unsutured cut blood vessel nor was there any indication that the tie or suture of a cut
blood vessel had become loose thereby causing the hemorrhage. 40 Hence the following pertinent portion of Dr.
Arizala's testimony:
Q: Doctor, in examining these structures did you know whether these were
sutured ligature or plain ligature
A: Ligature, sir.
Q: We will explain that later on. Did you recall if the cut structures were tied by
first suturing it and then tying a knot or the tie was merely placed around the cut
structure and tied?
A: I cannot recall, sir.
Q: As a matter of fact, you cannot recall because you did not even bothered (sic)
to examine, is that correct?
A: Well, I bothered enough to know that they were sutured, sir.
Q: So, therefore, Doctor, you would not know whether any of the cut structures
were not sutured or tied neither were you able to determine whether any loose
suture was found in the peritoneal cavity?
A: I could not recall any loose sutured (sic), sir. 41
On the other hand, the findings of all three doctors do not preclude the probability that DIC caused the
hemorrhage and consequently, Lydia's death. DIC which is a clotting defect creates a serious bleeding
tendency and when massive DIC occurs as a complication of surgery leaving raw surface, major hemorrhage
occurs. 42And as testified to by defense witness, Dr. Bu C. Castro, hemorrhage due to DIC "cannot be
prevented, it will happen to anyone,
anytime." 43 He testified further:
Q. Now, under that circumstance one of the possibility as you mentioned in (sic)
DIC?
A. Yes, sir.

Q. And you mentioned that this cannot be prevented?

A. Yes, sir.
Q. Can you even predict if it really happen (sic)?
A. Possible, sir.
Q. Are there any specific findings of autopsy that will tell you whether this patient
suffered among such things as DIC?
A. Well, I did reserve because of the condition of the patient.
Q. Now, Doctor you said that you went through the record of the deceased Lydia
Umali looking for the chart, the operated (sic) records, the post mortem findings
on the histophanic (sic) examination based on your examination of record,
doctor, can you more or less says (sic) what part are (sic) concerned could have
been the caused (sic) of death of this Lydia Umali?
A. As far as the medical record is concern (sic) the caused (sic) of death is
dessimulated (sic) Intra Vascular Coagulation or the DIC which resulted to
hemorrhage or bleedings, sir.
Q. Doctor based on your findings then there is knowing (sic) the doctor would say
whether the doctor her (sic) has been (sic) fault?
ATTY. MALVEDA:
We will moved (sic) to strike out the (sic) based on finding they just read the chart
as well as the other record.
ATTY. PASCUAL:
Precisely based on this examination.
ATTY. MALVEDA:
Not finding, there was no finding made.
COURT:
He is only reading the record.
ATTY. PASCUAL:
Yes, sir.
A. No, sir, there is no fault on the part of the surgeon, sir. 44
This Court has no recourse but to rely on the expert testimonies rendered by both prosecution and defense
witnesses that substantiate rather than contradict petitioner's allegation that the cause of Lydia's death was
DIC which, as attested to by an expert witness, cannot be attributed to the petitioner's fault or negligence. The
probability that Lydia's death was caused by DIC was unrebutted during trial and has engendered in the mind
of this Court a reasonable doubt as to the petitioner's guilt. Thus, her acquittal of the crime of reckless
imprudence resulting in homicide. While we condole with the family of Lydia Umali, our hands are bound by the
dictates of justice and fair dealing which hold inviolable the right of an accused to be presumed innocent until
proven guilty beyond reasonable doubt. Nevertheless, this Court finds the petitioner civilly liable for the death
of Lydia Umali, for while a conviction of a crime requires proof beyond reasonable doubt, only a preponderance
of evidence is required to establish civil liability. 45
The petitioner is a doctor in whose hands a patient puts his life and limb. For insufficiency of evidence this
Court was not able to render a sentence of conviction but it is not blind to the reckless and imprudent manner
in which the petitioner carried out her duties. A precious life has been lost and the circumstances leading
thereto exacerbated the grief of those left behind. The heirs of the deceased continue to feel the loss of their
mother up to the present time 46 and this Court is aware that no amount of compassion and commiseration nor
words of bereavement can suffice to assuage the sorrow felt for the loss of a loved one. Certainly, the award of
moral and exemplary damages in favor of the heirs of Lydia Umali are proper in the instant case.
WHEREFORE, premises considered, petitioner DR. NINEVETCH CRUZ is hereby ACQUITTED of the crime of
reckless imprudence resulting in homicide but is ordered to pay the heirs of the deceased Lydia Umali the

amount of FIFTY THOUSAND PESOS (P50,000.00) as civil liability, ONE HUNDRED THOUSAND PESOS
(P100,000.00) as moral damages, and FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages.
Let a copy of this decision be furnished to the Professional Regulation Commission (PRC) for appropriate
action.
SO ORDERED.

G.R. No. 164601 September 27, 2006

SPOUSES ERLINDA BATAL AND FRANK BATAL,Petitioners, - versus SPOUSES LUZ SAN PEDRO AND
KENICHIRO TOMINAGA,Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court questioning the
Decision[1] dated September 29, 2003 promulgated by the Court of Appeals (CA) in CA-G.R. CV No. 71758,
which affirmed the Decision dated May 31, 2004 of the Regional Trial Court, Branch 7, Malolos, Bulacan
(RTC); and the CA Resolution[2] dated July 19, 2004.
This case originated from an action for damages filed with the RTC by Spouses Luz San Pedro and Kenichiro
Tominaga (respondents) against Spouses Erlinda Batal and Frank Batal (petitioners) for failure to exercise due
care and diligence by the latter in the preparation of a survey which formed the basis for the construction of a
perimeter fence that was later discovered to have encroached on a right of way.
The facts of the case, as found by the RTC and summarized by the CA, are as follows:
The spouses Luz San Pedro (Luz) and Kenichiro Tominaga (Kenichiro) are the owners of a parcel of land, on
which their house was erected, described as Lot 1509-C-3 with an area of 700 square meters situated in
Barangay Malis, Guiguinto, Bulacan. Said property was acquired by them from one Guillermo Narciso as
evidenced by a Bilihan ng Bahagi ng Lupa dated March 18, 1992.
The spouses Luz and Kenichiro then contracted the services of Frank Batal (Frank) who represented himself
as a surveyor to conduct a survey of their lot for the sum of P6,500.00. As Luz and Kenichiro wanted to
enclose their property, they again procured the services of Frank for an additional fee of P1,500.00 in order to
determine the exact boundaries of the same by which they will base the construction of their perimeter fence.
Consequently, Frank placed concrete monuments marked P.S. on all corners of the lot which were used as
guides by Luz and Kenichiro in erecting a concrete fence measuring about eight (8) feet in height and cost
them P250,000.00 to build.
Sometime in 1996, a complaint was lodged against Luz and Kenichiro before the barangay on the ground that
the northern portion of their fence allegedly encroached upon a designated right-of-way known as Lot 1509-D.
Upon verification with another surveyor, Luz and Kenichiro found that their wall indeed overlapped the

adjoining lot. They also discovered that it was not Frank but his wife Erlinda Batal (Erlinda), who is a licensed
geodetic engineer.
During their confrontations before the barangay, Frank admitted that he made a mistake and offered to share in
the expenses for the demolition and reconstruction of the questioned portion of Luz and Kenichiros fence. He
however failed to deliver on his word, thus the filing of the instant suit.
In their defense, the defendants-spouses Frank and Erlinda Batal submitted that Frank never represented
himself to be a licensed geodetic engineer. It was Erlinda who supervised her husbands work [and t]hat the
house and lot of plaintiffs, Luz and Kenichiro, were already fenced even before they were contracted to do a
resurvey of the same and the laying out of the concrete monuments. The spouses Frank and Erlinda also
refuted the spouses Luzs and Kenichiros allegation of negligence and averred that the subject complaint was
instituted to harass them.[3]

On May 31, 2001, the RTC rendered its Decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendants, as follows:
1. Ordering the defendants [petitioners] to pay to plaintiffs [respondents] the sum of P6,500.00 as refund for
their professional fees by reason of the erroneous relocation survey of the property in question;
2. Ordering the defendants to pay to plaintiffs the sum of Three Hundred Thousand Pesos (P300,000.00) as
actual damages;
3. Ordering the defendants to pay to plaintiffs the sum of P50,000.00 as attorneys fees; and
4. Ordering the defendants to pay to plaintiffs the costs of this suit.
SO ORDERED.[4]

Regarding the issue whether the petitioners failed to exercise due care and diligence in the conduct of the
resurvey which eventually caused damage to the respondents, the RTC held:
As against the bare and self-serving denials of the [petitioners], the testimony of [respondent] Luz San Pedro
that she constructed the encroaching perimeter fence in question using as guide the cyclone concrete
monuments marked P.S. that were installed by [petitioner] Frank Batal and his survey team, is more credible.
As testified to by [respondent] Luz San Pedro, she proceeded with the construction of the perimeter fence in
question upon assurance given by [petitioner] Frank Batal that she could already do so as there were already
concrete monuments placed on the boundaries of her property x x x.
xxxx
It does not matter that the location plan dated May 3, 1992 (Exhibit B) was later approved by the DENR, as it is
quite apparent that the mistake committed by [petitioner] Frank Batal pertains to the wrong locations of the
concrete monuments that he placed on the subject property and which were used or relied upon by the
[respondents] in putting up the fence in question. Such mistake or negligence happened because quite

obviously the installation of said concrete monuments was without the needed supervision of [respondent]
Erlinda Batal, the one truly qualified to supervise the same. x x x x
x x x x[5]
The RTC found that indeed the perimeter fence constructed by the respondents encroached on the right-ofway in question; that the preponderance of evidence supports the finding that the encroachment was caused
by the negligence of the petitioners; that, in particular, respondents constructed the fence based on the
concrete cyclone monuments that were installed by petitioner Frank Batal and after he gave his assurance that
they can proceed accordingly; that the negligence in the installation of the monuments was due to the fact that
petitioner Erlinda Batal, the one truly qualified, did not provide the needed supervision over the work; and,
lastly, that the testimonies of the petitioners on the whole were not credible.
The petitioners appealed to the CA. On September 29, 2003, the CA rendered its Decision affirming the RTC
decision in its entirety.[6]
In concurring with the findings of the RTC, the CA in addition held that the petitioners cannot claim that the
error of the construction of the fence was due to the unilateral act of respondents in building the same without
their consent, since the former gave their word that the arrangement of the monuments of title accurately
reflected the boundaries of the lot; and that, as a result, the northern portion of the fence had to be demolished
and rebuilt in order to correct the error.
Hence, the instant Petition assigning the following errors:
I.
The Court of Appeals erred in ruling for the Respondents and basing its decision [o]n the following
jurisprudence:
(a) [A] party, having performed affirmative acts upon which another person based his subsequent actions,
cannot thereafter refute his acts or renege on the effects of the same, to the prejudice of the latter. (Pureza vs.
Court of Appeals, 290 SCRA 110); and
(b) Findings of fact made by the trial court [are] entitled to great weight and respect. (Lopez vs. Court of
Appeals, 322 SCRA 686).
II.
The Court of Appeals erred in ruling in favor of Respondents by premising its Decision on [a] misapprehension
of facts amounting to grave abuse of discretion . . . which is also a ground for a Petition for Review.[7]

The petition must fail.

The petitioners insist that there had been no error in their resurvey, but rather, the error occurred in
respondents fencing; that the proximate cause of the damage had been respondents own negligence such that
the fencing was done unilaterally and solely by them without the prior approval and supervision of the
petitioners. And to justify their case, the petitioners argue that the courts a quo misapprehended the facts.
Accordingly, they ask this Court to review findings of fact.

A review of the factual findings of the CA and the RTC are matters not ordinarily reviewable in a petition for
review on certiorari.[8] Well-established is the rule that factual findings of the trial court and the CA are entitled
to great weight and respect[9] and will not be disturbed on appeal save in exceptional circumstances,[10] none
of which obtains in the present case. This Court must stress that the findings of fact of the CA are conclusive
on the parties and carry even more weight when these coincide with the factual findings of the trial court,[11] as
in this case.
The Court will not weigh the evidence all over again unless there is a showing that the findings of the lower
court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of discretion.[12]
The petitioners failed to demonstrate this point. On the contrary, the finding of the courts a quo that the
damage caused to the respondents was due to petitioners negligence is sufficiently supported by the evidence
on record. For these reasons, the petitioner's contentions bear no import.
Culpa, or negligence, may be understood in two different senses: either as culpa aquiliana, which is the
wrongful or negligent act or omission which creates a vinculum juris and gives rise to an obligation between
two persons not formally bound by any other obligation, or as culpa contractual, which is the fault or negligence
incident in the performance of an obligation which already existed, and which increases the liability from such
already existing obligation.[13] Culpa aquiliana is governed by Article 2176 of the Civil Code and the
immediately following Articles; while culpa contractual is governed by Articles 1170 to 1174 of the same Code.
[14]
Articles 1170 and 1173 provide:
ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by
the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the
place. When negligence shows bad faith, the provisions of articles 1171 and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the performance, that which is
expected of a good father of a family shall be required.
In the present case, it is clear that the petitioners, in carrying out their contractual obligations, failed to exercise
the requisite diligence in the placement of the markings for the concrete perimeter fence that was later
constructed. The placement of the markings had been done solely by petitioner Frank Batal who is not a
geodetic engineer. It was later discovered that it was not he but his wife, petitioner Erlinda Batal, who is the
licensed geodetic engineer and who is, therefore, the one qualified to do the work. Petitioner Frank Batals
installation of the concrete cyclone monuments had been done without the adequate supervision of his wife,
Erlinda. As a result, the placement of the monuments did not accurately reflect the dimensions of the lot. The
respondents, upon assurance given by petitioner Frank Batal that they could proceed with the construction of
the perimeter fence by relying on the purported accuracy of the placement of the monuments, erected their
fence which turned out to encroach on an adjacent easement. Because of the encroachment, the respondents
had to demolish and reconstruct the fence and, thus, suffered damages.
The Court affirms and adopts the findings of the CA, to wit:
Records show that the services of the [petitioners] Frank and Erlinda were initially contracted to segregate Luz
and Kenichiros property from its adjoining lots. When the [respondent] spouses Luz and Kenichiro planned to

fence the segregated lot, they again commissioned [petitioners] Frank and Erlinda to conduct a resurvey in
order to determine the precise boundaries of their property upon which they will base the construction of their
fence. It was also shown that in the course of the resurvey, Frank caused the installation of monuments of title
on the four (4) corners of Luz and Kenichiros property and that he instructed them to just follow the same in
building their fence.
[Petitioners] Frank and Erlinda cannot thus validly claim that the error in the construction of the northern portion
of the fence was due to the spouses Luz and Kenichiros act of building the same without their consent. This is
considering that the former led the latter to believe the purported accuracy of the resurvey and exactness of
the lots boundaries based on the monuments of title which they installed.
It has been ruled that [A] party, having performed affirmative acts upon which another person based his
subsequent actions, cannot thereafter refute his acts or renege on the effects of the same, to the prejudice of
the latter. (Pureza v. Court of Appeals, 290 SCRA 110)
The foregoing clearly supports the findings of the RTC that the spouses Batal committed a mistake in the
conduct of their business that led to the encroachment of plaintiffs-appellees fence on the adjoining alley-lot.
As a result, the northern portion ha[d] to be torn down and rebuilt in order to correct the error in its original
construction. The defendants-appellants cannot be excused from the effects of their actions in the survey of
plaintiffs-appellees lot.
We therefore concur with the findings of the RTC holding defendants-appellants liable for damages in the case
at bar. Findings of fact made by the trial court is entitled to great weight and respect. (Lopez v. Court of
Appeals, 322 SCRA 686)[15]

Being guilty of a breach of their contract, petitioners are liable for damages suffered by the respondents in
accordance with Articles 1170 and 2201 of the Civil Code,[16] which state:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those
who in any manner contravene the tenor thereof are liable for damages
Art. 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.
Thus, the Court agrees with the CAs affirmance of the findings of the RTC on the matter of damages, to wit:
Going now to the claims for damages, Engr. Arnold Martin testified on his computation and estimate (Exhibits
G and G-1) that the total cost for the demolition and reconstruction of the perimeter fence in question would be
in the total amount of P428,163.90, and this was not at all disputed by the defendants, whose counsel waived
cross-examination. This estimate is practically double the amount of the cost of constructing said fence as
testified to by plaintiff Luz San Pedro as she was told that it is much costlier to demolish and reconstruct a
fence than to simply erect one because of the added expense involved in tearing it down and hauling its debris.
On the other hand, said plaintiff stated that the iron decorative grills of the fence, which is re-usable, cost her
P50,000.00, and it is only proper to deduct said amount from the total cost of reconstructing the fence in
question. At the same time, some figures in the said estimate appear to be quite excessive, such as the

estimated cost for demolition which was quoted at P25,000.00 in addition to the amount of excavation priced at
P30,000.00 and the cost of hauling of scrap materials at P10,000.00. The court believes that the sum of
P300,000.00 for the demolition and reconstruction of the fence in question would be reasonable considering
that the original cost for its construction was only about P200,000.00, and considering further that its iron grills
are re-usable.
The plaintiffs are likewise entitled to recover attorneys fees considering that they were compelled by the
defendants to resort to court action in order to protect their rights and interest, as defendants, particularly
defendant Frank Batal, failed and refused repeatedly to even attend the confrontation of conciliation meetings
arranged between him and the plaintiffs by the barangay authorities concerned, and to honor his promise to
help in shouldering the cost of reconstructing the fence in question.
On the other hand, there is no legal or factual bases for the claim of the plaintiffs for moral or exemplary
damages as there was no showing at all that defendants acted with malice or in bad faith.
In a long line of cases, we have consistently ruled that in the absence of a wrongful act or omission or of fraud
or bad faith, moral damages cannot be awarded. (R & B Surety Insurance Co. v. Intermediate Court of
Appeals, 129 SCRA 736; Guita v. Court of Appeals, 139 SCRA 576).[17]
WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the Court of
Appeals are AFFIRMED.
Costs against petitioners.
SO ORDERED.

G.R. No. 179337

April 30, 2008
JOSEPH SALUDAGA, petitioner,
vs.
FAR EASTERN UNIVERSITY and EDILBERTO C. DE JESUS in his capacity as President of
FEU,respondents.
DECISION
YNARES-SANTIAGO, J.:
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the June 29, 2007
Decision2 of the Court of Appeals in CA-G.R. CV No. 87050, nullifying and setting aside the November 10,
2004 Decision3 of the Regional Trial Court of Manila, Branch 2, in Civil Case No. 98-89483 and dismissing the
complaint filed by petitioner; as well as its August 23, 2007 Resolution4 denying the Motion for
Reconsideration.5
The antecedent facts are as follows:
Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern University (FEU) when
he was shot by Alejandro Rosete (Rosete), one of the security guards on duty at the school premises on
August 18, 1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes Medical Foundation (FEU-NRMF) due to
the wound he sustained.6 Meanwhile, Rosete was brought to the police station where he explained that the

shooting was accidental. He was eventually released considering that no formal complaint was filed against
him.
Petitioner thereafter filed a complaint for damages against respondents on the ground that they breached their
obligation to provide students with a safe and secure environment and an atmosphere conducive to learning.
Respondents, in turn, filed a Third-Party Complaint 7 against Galaxy Development and Management
Corporation (Galaxy), the agency contracted by respondent FEU to provide security services within its
premises and Mariano D. Imperial (Imperial), Galaxy's President, to indemnify them for whatever would be
adjudged in favor of petitioner, if any; and to pay attorney's fees and cost of the suit. On the other hand, Galaxy
and Imperial filed a Fourth-Party Complaint against AFP General Insurance.8
On November 10, 2004, the trial court rendered a decision in favor of petitioner, the dispositive portion of which
reads:
WHEREFORE, from the foregoing, judgment is hereby rendered ordering:
1. FEU and Edilberto de Jesus, in his capacity as president of FEU to pay jointly and severally
Joseph Saludaga the amount of P35,298.25 for actual damages with 12% interest per annum
from the filing of the complaint until fully paid; moral damages of P300,000.00, exemplary
damages of P500,000.00, attorney's fees of P100,000.00 and cost of the suit;
2. Galaxy Management and Development Corp. and its president, Col. Mariano Imperial to
indemnify jointly and severally 3rd party plaintiffs (FEU and Edilberto de Jesus in his capacity as
President of FEU) for the above-mentioned amounts;
3. And the 4th party complaint is dismissed for lack of cause of action. No pronouncement as to
costs.
SO ORDERED.9
Respondents appealed to the Court of Appeals which rendered the assailed Decision, the decretal portion of
which provides, viz:
WHEREFORE, the appeal is hereby GRANTED. The Decision dated November 10, 2004 is hereby
REVERSED and SET ASIDE. The complaint filed by Joseph Saludaga against appellant Far Eastern
University and its President in Civil Case No. 98-89483 is DISMISSED.
SO ORDERED.10
Petitioner filed a Motion for Reconsideration which was denied; hence, the instant petition based on the
following grounds:
THE COURT OF APPEALS SERIOUSLY ERRED IN MANNER CONTRARY TO LAW AND
JURISPRUDENCE IN RULING THAT:
5.1. THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;
5.2. RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR THE INJURY RESULTING FROM A
GUNSHOT WOUND SUFFERED BY THE PETITIONER FROM THE HANDS OF NO LESS THAN
THEIR OWN SECURITY GUARD IN VIOLATION OF THEIR BUILT-IN CONTRACTUAL OBLIGATION
TO PETITIONER, BEING THEIR LAW STUDENT AT THAT TIME, TO PROVIDE HIM WITH A SAFE
AND SECURE EDUCATIONAL ENVIRONMENT;
5.3. SECURITY GAURD, ALEJANDRO ROSETE, WHO SHOT PETITIONER WHILE HE WAS
WALKING ON HIS WAY TO THE LAW LIBRARY OF RESPONDENT FEU IS NOT THEIR EMPLOYEE
BY VIRTUE OF THE CONTRACT FOR SECURITY SERVICES BETWEEN GALAXY AND FEU
NOTWITHSTANDING THE FACT THAT PETITIONER, NOT BEING A PARTY TO IT, IS NOT BOUND
BY THE SAME UNDER THE PRINCIPLE OF RELATIVITY OF CONTRACTS; and
5.4. RESPONDENT EXERCISED DUE DILIGENCE IN SELECTING GALAXY AS THE AGENCY
WHICH WOULD PROVIDE SECURITY SERVICES WITHIN THE PREMISES OF RESPONDENT
FEU.11
Petitioner is suing respondents for damages based on the alleged breach of student-school contract for a safe
learning environment. The pertinent portions of petitioner's Complaint read:

6.0. At the time of plaintiff's confinement, the defendants or any of their representative did not bother to
visit and inquire about his condition. This abject indifference on the part of the defendants continued
even after plaintiff was discharged from the hospital when not even a word of consolation was heard
from them. Plaintiff waited for more than one (1) year for the defendants to perform their moral
obligation but the wait was fruitless. This indifference and total lack of concern of defendants served to
exacerbate plaintiff's miserable condition.
xxxx
11.0. Defendants are responsible for ensuring the safety of its students while the latter are within the
University premises. And that should anything untoward happens to any of its students while they are
within the University's premises shall be the responsibility of the defendants. In this case, defendants,
despite being legally and morally bound, miserably failed to protect plaintiff from injury and thereafter, to
mitigate and compensate plaintiff for said injury;
12.0. When plaintiff enrolled with defendant FEU, a contract was entered into between them. Under this
contract, defendants are supposed to ensure that adequate steps are taken to provide an atmosphere
conducive to study and ensure the safety of the plaintiff while inside defendant FEU's premises. In the
instant case, the latter breached this contract when defendant allowed harm to befall upon the plaintiff
when he was shot at by, of all people, their security guard who was tasked to maintain peace inside the
campus.12
In Philippine School of Business Administration v. Court of Appeals,13 we held that:
When an academic institution accepts students for enrollment, there is established a contract between
them, resulting in bilateral obligations which both parties are bound to comply with. For its part, the
school undertakes to provide the student with an education that would presumably suffice to equip him
with the necessary tools and skills to pursue higher education or a profession. On the other hand, the
student covenants to abide by the school's academic requirements and observe its rules and
regulations.
Institutions of learning must also meet the implicit or "built-in" obligation of providing their students with
an atmosphere that promotes or assists in attaining its primary undertaking of imparting knowledge.
Certainly, no student can absorb the intricacies of physics or higher mathematics or explore the realm
of the arts and other sciences when bullets are flying or grenades exploding in the air or where there
looms around the school premises a constant threat to life and limb. Necessarily, the school must
ensure that adequate steps are taken to maintain peace and order within the campus premises and to
prevent the breakdown thereof.14
It is undisputed that petitioner was enrolled as a sophomore law student in respondent FEU. As such, there
was created a contractual obligation between the two parties. On petitioner's part, he was obliged to comply
with the rules and regulations of the school. On the other hand, respondent FEU, as a learning institution is
mandated to impart knowledge and equip its students with the necessary skills to pursue higher education or a
profession. At the same time, it is obliged to ensure and take adequate steps to maintain peace and order
within the campus.
It is settled that in culpa contractual, the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.15 In the instant case, we find that, when
petitioner was shot inside the campus by no less the security guard who was hired to maintain peace and
secure the premises, there is a prima facie showing that respondents failed to comply with its obligation to
provide a safe and secure environment to its students.
In order to avoid liability, however, respondents aver that the shooting incident was a fortuitous event because
they could not have reasonably foreseen nor avoided the accident caused by Rosete as he was not their
employee;16 and that they complied with their obligation to ensure a safe learning environment for their
students by having exercised due diligence in selecting the security services of Galaxy.
After a thorough review of the records, we find that respondents failed to discharge the burden of proving that
they exercised due diligence in providing a safe learning environment for their students. They failed to prove

that they ensured that the guards assigned in the campus met the requirements stipulated in the Security
Service Agreement. Indeed, certain documents about Galaxy were presented during trial; however, no
evidence as to the qualifications of Rosete as a security guard for the university was offered.
Respondents also failed to show that they undertook steps to ascertain and confirm that the security guards
assigned to them actually possess the qualifications required in the Security Service Agreement. It was not
proven that they examined the clearances, psychiatric test results, 201 files, and other vital documents
enumerated in its contract with Galaxy. Total reliance on the security agency about these matters or failure to
check the papers stating the qualifications of the guards is negligence on the part of respondents. A learning
institution should not be allowed to completely relinquish or abdicate security matters in its premises to the
security agency it hired. To do so would result to contracting away its inherent obligation to ensure a safe
learning environment for its students.
Consequently, respondents' defense of force majeure must fail. In order for force majeure to be considered,
respondents must show that no negligence or misconduct was committed that may have occasioned the loss.
An act of God cannot be invoked to protect a person who has failed to take steps to forestall the possible
adverse consequences of such a loss. One's negligence may have concurred with an act of God in producing
damage and injury to another; nonetheless, showing that the immediate or proximate cause of the damage or
injury was a fortuitous event would not exempt one from liability. When the effect is found to be partly the result
of a person's participation - whether by active intervention, neglect or failure to act - the whole occurrence is
humanized and removed from the rules applicable to acts of God.17
Article 1170 of the Civil Code provides that those who are negligent in the performance of their obligations are
liable for damages. Accordingly, for breach of contract due to negligence in providing a safe learning
environment, respondent FEU is liable to petitioner for damages. 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 defendant's acts.18
In the instant case, it was established that petitioner spent P35,298.25 for his hospitalization and other medical
expenses.19 While the trial court correctly imposed interest on said amount, however, the case at bar involves
an obligation arising from a contract and not a loan or forbearance of money. As such, the proper rate of legal
interest is six percent (6%) per annum of the amount demanded. Such interest shall continue to run from the
filing of the complaint until the finality of this Decision.20 After this Decision becomes final and executory, the
applicable rate shall be twelve percent (12%) per annum until its satisfaction.
The other expenses being claimed by petitioner, such as transportation expenses and those incurred in hiring a
personal assistant while recuperating were however not duly supported by receipts.21 In the absence thereof,
no actual damages may be awarded. Nonetheless, temperate damages under Art. 2224 of the Civil Code may
be recovered where it has been shown that the claimant suffered some pecuniary loss but the amount thereof
cannot be proved with certainty. Hence, the amount of P20,000.00 as temperate damages is awarded to
petitioner.
As regards the award of moral damages, 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.22 The
testimony of petitioner about his physical suffering, mental anguish, fright, serious anxiety, and moral shock
resulting from the shooting incident23 justify the award of moral damages. However, moral damages are in the
category of an award designed to compensate the claimant for actual injury suffered and not to impose a
penalty on the wrongdoer. The award is not meant to enrich the complainant at the expense of the defendant,
but to enable the injured party to obtain means, diversion, or amusements that will serve to obviate the moral
suffering he has undergone. It is aimed at the restoration, within the limits of the possible, of the spiritual status
quo ante, and should be proportionate to the suffering inflicted. Trial courts must then guard against the award
of exorbitant damages; they should exercise balanced restrained and measured objectivity to avoid suspicion
that it was due to passion, prejudice, or corruption on the part of the trial court.24 We deem it just and
reasonable under the circumstances to award petitioner moral damages in the amount of P100,000.00.

Likewise, attorney's fees and litigation expenses in the amount of P50,000.00 as part of damages is
reasonable in view of Article 2208 of the Civil Code.25 However, the award of exemplary damages is deleted
considering the absence of proof that respondents acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.
We note that the trial court held respondent De Jesus solidarily liable with respondent FEU. In Powton
Conglomerate, Inc. v. Agcolicol,26 we held that:
[A] corporation is invested by law with a personality separate and distinct from those of the persons
composing it, such that, save for certain exceptions, corporate officers who entered into contracts in
behalf of the corporation cannot be held personally liable for the liabilities of the latter. Personal liability
of a corporate director, trustee or officer along (although not necessarily) with the corporation may so
validly attach, as a rule, only when - (1) he assents to a patently unlawful act of the corporation, or
when he is guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of
interest resulting in damages to the corporation, its stockholders or other persons; (2) he consents to
the issuance of watered down stocks or who, having knowledge thereof, does not forthwith file with the
corporate secretary his written objection thereto; (3) he agrees to hold himself personally and solidarily
liable with the corporation; or (4) he is made by a specific provision of law personally answerable for his
corporate action.27
None of the foregoing exceptions was established in the instant case; hence, respondent De Jesus should not
be held solidarily liable with respondent FEU.
Incidentally, although the main cause of action in the instant case is the breach of the school-student contract,
petitioner, in the alternative, also holds respondents vicariously liable under Article 2180 of the 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.
xxxx
Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.
xxxx
The responsibility treated of in this article shall cease when the persons herein mentioned prove that
they observed all the diligence of a good father of a family to prevent damage.
We agree with the findings of the Court of Appeals that respondents cannot be held liable for damages under
Art. 2180 of the Civil Code because respondents are not the employers of Rosete. The latter was employed by
Galaxy. The instructions issued by respondents' Security Consultant to Galaxy and its security guards are
ordinarily no more than requests commonly envisaged in the contract for services entered into by a principal
and a security agency. They cannot be construed as the element of control as to treat respondents as the
employers of Rosete.28
As held in Mercury Drug Corporation v. Libunao:29
In Soliman, Jr. v. Tuazon,30 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:
[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.
xxxx
The 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.31
We now come to respondents' Third Party Claim against Galaxy. In Firestone Tire and Rubber Company of the
Philippines v. Tempengko,32 we held that:
The third-party complaint is, therefore, a procedural device whereby a 'third party' who is neither a party
nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of
court, by the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a
right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiff's claim. The
third-party complaint is actually independent of and separate and distinct from the plaintiff's complaint.
Were it not for this provision of the Rules of Court, it would have to be filed independently and
separately from the original complaint by the defendant against the third-party. But the Rules permit
defendant to bring in a third-party defendant or so to speak, to litigate his separate cause of action in
respect of plaintiff's claim against a third-party in the original and principal case with the object of
avoiding circuitry of action and unnecessary proliferation of law suits and of disposing expeditiously in
one litigation the entire subject matter arising from one particular set of facts.33
Respondents and Galaxy were able to litigate their respective claims and defenses in the course of the trial of
petitioner's complaint. Evidence duly supports the findings of the trial court that Galaxy is negligent not only in
the selection of its employees but also in their supervision. Indeed, no administrative sanction was imposed
against Rosete despite the shooting incident; moreover, he was even allowed to go on leave of absence which
led eventually to his disappearance.34 Galaxy also failed to monitor petitioner's condition or extend the
necessary assistance, other than the P5,000.00 initially given to petitioner. Galaxy and Imperial failed to make
good their pledge to reimburse petitioner's medical expenses.
For these acts of negligence and for having supplied respondent FEU with an unqualified security guard, which
resulted to the latter's breach of obligation to petitioner, it is proper to hold Galaxy liable to respondent FEU for
such damages equivalent to the above-mentioned amounts awarded to petitioner.
Unlike respondent De Jesus, we deem Imperial to be solidarily liable with Galaxy for being grossly negligent in
directing the affairs of the security agency. It was Imperial who assured petitioner that his medical expenses
will be shouldered by Galaxy but said representations were not fulfilled because they presumed that petitioner
and his family were no longer interested in filing a formal complaint against them.35
WHEREFORE, the petition is GRANTED. The June 29, 2007 Decision of the Court of Appeals in CA-G.R. CV
No. 87050 nullifying the Decision of the trial court and dismissing the complaint as well as the August 23, 2007
Resolution denying the Motion for Reconsideration are REVERSED and SET ASIDE. The Decision of the
Regional Trial Court of Manila, Branch 2, in Civil Case No. 98-89483 finding respondent FEU liable for
damages for breach of its obligation to provide students with a safe and secure learning atmosphere,
is AFFIRMED with the following MODIFICATIONS:
a. respondent Far Eastern University (FEU) is ORDERED to pay petitioner actual damages in the amount of
P35,298.25, plus 6% interest per annum from the filing of the complaint until the finality of this Decision. After
this decision becomes final and executory, the applicable rate shall be twelve percent (12%) per annum until its
satisfaction;
b. respondent FEU is also ORDERED to pay petitioner temperate damages in the amount of P20,000.00;
moral damages in the amount of P100,000.00; and attorney's fees and litigation expenses in the amount of
P50,000.00;
c. the award of exemplary damages is DELETED.
The Complaint against respondent Edilberto C. De Jesus is DISMISSED. The counterclaims of respondents
are likewise DISMISSED.

Galaxy Development and Management Corporation (Galaxy) and its president, Mariano D. Imperial
areORDERED to jointly and severally pay respondent FEU damages equivalent to the above-mentioned
amounts awarded to petitioner.
SO ORDERED.

G.R. No. 188288 January 16, 2012

SPOUSES FERNANDO and LOURDES VILORIA, Petitioners, VS CONTINENTAL AIRLINES, INC.,
Respondent
DECISION
REYES, J.:
This is a petition for review under Rule 45 of the Rules of Court from the January 30, 2009 Decision 1 of
the Special Thirteenth Division of the Court of Appeals (CA) in CA-G.R. CV No. 88586 entitled Spouses
Fernando and Lourdes Viloria v. Continental Airlines, Inc., the dispositive portion of which states:
WHEREFORE, the Decision of the Regional Trial Court, Branch 74, dated 03 April 2006,
awarding US$800.00 or its peso equivalent at the time of payment, plus legal rate of interest
from 21 July 1997 until fully paid, [P]100,000.00 as moral damages, [P]50,000.00 as exemplary
damages, [P]40,000.00 as attorneys fees and costs of suit to plaintiffs-appellees is
herebyREVERSED and SET ASIDE.
Defendant-appellants counterclaim is DENIED.
Costs against plaintiffs-appellees.
SO ORDERED.2
On April 3, 2006, the Regional Trial Court of Antipolo City, Branch 74 (RTC) rendered a Decision, giving
due course to the complaint for sum of money and damages filed by petitioners Fernando Viloria (Fernando)
and Lourdes Viloria (Lourdes), collectively called Spouses Viloria, against respondent Continental Airlines, Inc.
(CAI). As culled from the records, below are the facts giving rise to such complaint.
On or about July 21, 1997 and while in the United States, Fernando purchased for himself and his wife,
Lourdes, two (2) round trip airline tickets from San Diego, California to Newark, New Jersey on board
Continental Airlines. Fernando purchased the tickets at US$400.00 each from a travel agency called Holiday
Travel and was attended to by a certain Margaret Mager (Mager). According to Spouses Viloria, Fernando
agreed to buy the said tickets after Mager informed them that there were no available seats at Amtrak, an
intercity passenger train service provider in the United States. Per the tickets, Spouses Viloria were scheduled
to leave for Newark on August 13, 1997 and return to San Diego on August 21, 1997.
Subsequently, Fernando requested Mager to reschedule their flight to Newark to an earlier date or
August 6, 1997. Mager informed him that flights to Newark via Continental Airlines were already fully booked
and offered the alternative of a round trip flight via Frontier Air. Since flying with Frontier Air called for a higher
fare of US$526.00 per passenger and would mean traveling by night, Fernando opted to request for a refund.
Mager, however, denied his request as the subject tickets are non-refundable and the only option that
Continental Airlines can offer is the re-issuance of new tickets within one (1) year from the date the subject
tickets were issued. Fernando decided to reserve two (2) seats with Frontier Air.

As he was having second thoughts on traveling via Frontier Air, Fernando went to the Greyhound
Station where he saw an Amtrak station nearby. Fernando made inquiries and was told that there are seats
available and he can travel on Amtrak anytime and any day he pleased. Fernando then purchased two (2)
tickets for Washington, D.C.
From Amtrak, Fernando went to Holiday Travel and confronted Mager with the Amtrak tickets, telling
her that she had misled them into buying the Continental Airlines tickets by misrepresenting that Amtrak was
already fully booked. Fernando reiterated his demand for a refund but Mager was firm in her position that the
subject tickets are non-refundable.
Upon returning to the Philippines, Fernando sent a letter to CAI on February 11, 1998, demanding a
refund and alleging that Mager had deluded them into purchasing the subject tickets.3
In a letter dated February 24, 1998, Continental Micronesia informed Fernando that his complaint had
been referred to the Customer Refund Services of Continental Airlines at Houston, Texas.4
In a letter dated March 24, 1998, Continental Micronesia denied Fernandos request for a refund and
advised him that he may take the subject tickets to any Continental ticketing location for the re-issuance of new
tickets within two (2) years from the date they were issued. Continental Micronesia informed Fernando that the
subject tickets may be used as a form of payment for the purchase of another Continental ticket, albeit with a
re-issuance fee.5
On June 17, 1999, Fernando went to Continentals ticketing office at Ayala Avenue, Makati City to have
the subject tickets replaced by a single round trip ticket to Los Angeles, California under his name. Therein,
Fernando was informed that Lourdes ticket was non-transferable, thus, cannot be used for the purchase of a
ticket in his favor. He was also informed that a round trip ticket to Los Angeles was US$1,867.40 so he would
have to pay what will not be covered by the value of his San Diego to Newark round trip ticket.
In a letter dated June 21, 1999, Fernando demanded for the refund of the subject tickets as he no
longer wished to have them replaced. In addition to the dubious circumstances under which the subject tickets
were issued, Fernando claimed that CAIs act of charging him with US$1,867.40 for a round trip ticket to Los
Angeles, which other airlines priced at US$856.00, and refusal to allow him to use Lourdes ticket, breached its
undertaking under its March 24, 1998 letter.6
On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying that CAI be ordered to
refund the money they used in the purchase of the subject tickets with legal interest from July 21, 1997 and to
pay P1,000,000.00 as moral damages, P500,000.00 as exemplary damages and P250,000.00 as attorneys
fees.7
CAI interposed the following defenses: (a) Spouses Viloria have no right to ask for a refund as the
subject tickets are non-refundable; (b) Fernando cannot insist on using the ticket in Lourdes name for the
purchase of a round trip ticket to Los Angeles since the same is non-transferable; (c) as Mager is not a CAI
employee, CAI is not liable for any of her acts; (d) CAI, its employees and agents did not act in bad faith as to
entitle Spouses Viloria to moral and exemplary damages and attorneys fees. CAI also invoked the following
clause printed on the subject tickets:
3. To the extent not in conflict with the foregoing carriage and other services performed by each
carrier are subject to: (i) provisions contained in this ticket, (ii) applicable tariffs, (iii) carriers
conditions of carriage and related regulations which are made part hereof (and are available on

application at the offices of carrier), except in transportation between a place in the United
States or Canada and any place outside thereof to which tariffs in force in those countries
apply.8
According to CAI, one of the conditions attached to their contract of carriage is the non-transferability
and non-refundability of the subject tickets.
The RTCs Ruling
Following a full-blown trial, the RTC rendered its April 3, 2006 Decision, holding that Spouses Viloria
are entitled to a refund in view of Magers misrepresentation in obtaining their consent in the purchase of the
subject tickets.9 The relevant portion of the April 3, 2006 Decision states:
Continental Airlines agent Ms. Mager was in bad faith when she was less candid and
diligent in presenting to plaintiffs spouses their booking options. Plaintiff Fernando clearly
wanted to travel via AMTRAK, but defendants agent misled him into purchasing Continental
Airlines tickets instead on the fraudulent misrepresentation that Amtrak was fully booked. In fact,
defendant Airline did not specifically denied (sic) this allegation.
Plainly, plaintiffs spouses, particularly plaintiff Fernando, were tricked into buying
Continental Airline tickets on Ms. Magers misleading misrepresentations. Continental Airlines
agent Ms. Mager further relied on and exploited plaintiff Fernandos need and told him that they
must book a flight immediately or risk not being able to travel at all on the couples preferred
date. Unfortunately, plaintiffs spouses fell prey to the airlines and its agents unethical tactics for
baiting trusting customers.10

Citing Articles 1868 and 1869 of the Civil Code, the RTC ruled that Mager is CAIs agent, hence, bound
by her bad faith and misrepresentation. As far as the RTC is concerned, there is no issue as to whether Mager
was CAIs agent in view of CAIs implied recognition of her status as such in its March 24, 1998 letter.
The act of a travel agent or agency being involved here, the following are the pertinent
New Civil Code provisions on agency:
Art. 1868. By the contract of agency a person binds himself to render
some service or to do something in representation or on behalf of another, with
the consent or authority of the latter.
Art. 1869. Agency may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific form.
As its very name implies, a travel agency binds itself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.
This court takes judicial notice of the common services rendered by travel agencies that
represent themselves as such, specifically the reservation and booking of local and foreign tours
as well as the issuance of airline tickets for a commission or fee.

The services rendered by Ms. Mager of Holiday Travel agency to the plaintiff spouses on
July 21, 1997 were no different from those offered in any other travel agency. Defendant airline
impliedly if not expressly acknowledged its principal-agent relationship with Ms. Mager by its
offer in the letter dated March 24, 1998 an obvious attempt to assuage plaintiffs spouses hurt
feelings.11

Furthermore, the RTC ruled that CAI acted in bad faith in reneging on its undertaking to replace the
subject tickets within two (2) years from their date of issue when it charged Fernando with the amount of
US$1,867.40 for a round trip ticket to Los Angeles and when it refused to allow Fernando to use Lourdes
ticket. Specifically:
Tickets may be reissued for up to two years from the original date of issue. When defendant
airline still charged plaintiffs spouses US$1,867.40 or more than double the then going rate of
US$856.00 for the unused tickets when the same were presented within two (2) years from date
of issue, defendant airline exhibited callous treatment of passengers.12
The Appellate Courts Ruling
On appeal, the CA reversed the RTCs April 3, 2006 Decision, holding that CAI cannot be held liable for
Magers act in the absence of any proof that a principal-agent relationship existed between CAI and Holiday
Travel. According to the CA, Spouses Viloria, who have the burden of proof to establish the fact of agency,
failed to present evidence demonstrating that Holiday Travel is CAIs agent. Furthermore, contrary to Spouses
Vilorias claim, the contractual relationship between Holiday Travel and CAI is not an agency but that of a sale.
Plaintiffs-appellees assert that Mager was a sub-agent of Holiday Travel who was in turn
a ticketing agent of Holiday Travel who was in turn a ticketing agent of Continental Airlines.
Proceeding from this premise, they contend that Continental Airlines should be held liable for
the acts of Mager. The trial court held the same view.
We do not agree. By the contract of agency, a person binds him/herself to render some
service or to do something in representation or on behalf of another, with the consent or
authority of the latter. The elements of agency are: (1) consent, express or implied, of the
parties to establish the relationship; (2) the object is the execution of a juridical act in relation to
a third person; (3) the agent acts as a representative and not for him/herself; and (4) the agent
acts within the scope of his/her authority. As the basis of agency is representation, there must
be, on the part of the principal, an actual intention to appoint, an intention naturally inferable
from the principals words or actions. In the same manner, there must be an intention on the part
of the agent to accept the appointment and act upon it. Absent such mutual intent, there is
generally no agency. It is likewise a settled rule that persons dealing with an assumed agent are
bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency
but also the nature and extent of authority, and in case either is controverted, the burden of
proof is upon them to establish it. Agency is never presumed, neither is it created by the mere
use of the word in a trade or business name. We have perused the evidence and documents so
far presented. We find nothing except bare allegations of plaintiffs-appellees that Mager/Holiday
Travel was acting in behalf of Continental Airlines. From all sides of legal prism, the transaction
in issue was simply a contract of sale, wherein Holiday Travel buys airline tickets from
Continental Airlines and then, through its employees, Mager included, sells it at a premium to
clients.13

The CA also ruled that refund is not available to Spouses Viloria as the word non-refundable was
clearly printed on the face of the subject tickets, which constitute their contract with CAI. Therefore, the grant of
their prayer for a refund would violate the proscription against impairment of contracts.
Finally, the CA held that CAI did not act in bad faith when they charged Spouses Viloria with the higher
amount of US$1,867.40 for a round trip ticket to Los Angeles. According to the CA, there is no compulsion for
CAI to charge the lower amount of US$856.00, which Spouses Viloria claim to be the fee charged by other
airlines. The matter of fixing the prices for its services is CAIs prerogative, which Spouses Viloria cannot
intervene. In particular:
It is within the respective rights of persons owning and/or operating business entities to peg the
premium of the services and items which they provide at a price which they deem fit, no matter
how expensive or exhorbitant said price may seem vis--vis those of the competing companies.
The Spouses Viloria may not intervene with the business judgment of Continental Airlines.14
The Petitioners Case
In this Petition, this Court is being asked to review the findings and conclusions of the CA, as the
latters reversal of the RTCs April 3, 2006 Decision allegedly lacks factual and legal bases. Spouses Viloria
claim that CAI acted in bad faith when it required them to pay a higher amount for a round trip ticket to Los
Angeles considering CAIs undertaking to re-issue new tickets to them within the period stated in their March
24, 1998 letter. CAI likewise acted in bad faith when it disallowed Fernando to use Lourdes ticket to purchase
a round trip to Los Angeles given that there is nothing in Lourdes ticket indicating that it is non-transferable. As
a common carrier, it is CAIs duty to inform its passengers of the terms and conditions of their contract and
passengers cannot be bound by such terms and conditions which they are not made aware of. Also, the
subject contract of carriage is a contract of adhesion; therefore, any ambiguities should be construed against
CAI. Notably, the petitioners are no longer questioning the validity of the subject contracts and limited its claim
for a refund on CAIs alleged breach of its undertaking in its March 24, 1998 letter.
The Respondents Case
In its Comment, CAI claimed that Spouses Vilorias allegation of bad faith is negated by its willingness
to issue new tickets to them and to credit the value of the subject tickets against the value of the new ticket
Fernando requested. CAI argued that Spouses Vilorias sole basis to claim that the price at which CAI was
willing to issue the new tickets is unconscionable is a piece of hearsay evidence an advertisement appearing
on a newspaper stating that airfares from Manila to Los Angeles or San Francisco cost US$818.00.15 Also, the
advertisement pertains to airfares in September 2000 and not to airfares prevailing in June 1999, the time
when Fernando asked CAI to apply the value of the subject tickets for the purchase of a new one.16 CAI
likewise argued that it did not undertake to protect Spouses Viloria from any changes or fluctuations in the
prices of airline tickets and its only obligation was to apply the value of the subject tickets to the purchase of
the newly issued tickets.
With respect to Spouses Vilorias claim that they are not aware of CAIs restrictions on the subject
tickets and that the terms and conditions that are printed on them are ambiguous, CAI denies any ambiguity
and alleged that its representative informed Fernando that the subject tickets are non-transferable when he
applied for the issuance of a new ticket. On the other hand, the word non-refundable clearly appears on the
face of the subject tickets.

CAI also denies that it is bound by the acts of Holiday Travel and Mager and that no principal-agency
relationship exists between them. As an independent contractor, Holiday Travel was without capacity to bind
CAI.
Issues
To determine the propriety of disturbing the CAs January 30, 2009 Decision and whether Spouses
Viloria have the right to the reliefs they prayed for, this Court deems it necessary to resolve the following
issues:
a. Does a principal-agent relationship exist between CAI and Holiday Travel?
b. Assuming that an agency relationship exists between CAI and Holiday Travel, is CAI bound
by the acts of Holiday Travels agents and employees such as Mager?
c. Assuming that CAI is bound by the acts of Holiday Travels agents and employees, can the
representation of Mager as to unavailability of seats at Amtrak be considered fraudulent
as to vitiate the consent of Spouse Viloria in the purchase of the subject tickets?
d. Is CAI justified in insisting that the subject tickets are non-transferable and non-refundable?
e. Is CAI justified in pegging a different price for the round trip ticket to Los Angeles requested
by Fernando?
f. Alternatively, did CAI act in bad faith or renege its obligation to Spouses Viloria to apply the
value of the subject tickets in the purchase of new ones when it refused to allow
Fernando to use Lourdes ticket and in charging a higher price for a round trip ticket to
Los Angeles?
This Courts Ruling
I. A principal-agent relationship exists between CAI and Holiday
Travel.
With respect to the first issue, which is a question of fact that would require this Court to review and reexamine the evidence presented by the parties below, this Court takes exception to the general rule that the
CAs findings of fact are conclusive upon Us and our jurisdiction is limited to the review of questions of law. It is
well-settled to the point of being axiomatic that this Court is authorized to resolve questions of fact if confronted
with contrasting factual findings of the trial court and appellate court and if the findings of the CA are
contradicted by the evidence on record.17
According to the CA, agency is never presumed and that he who alleges that it exists has the burden of
proof. Spouses Viloria, on whose shoulders such burden rests, presented evidence that fell short of indubitably
demonstrating the existence of such agency.
We disagree. The CA failed to consider undisputed facts, discrediting CAIs denial that Holiday Travel is
one of its agents. Furthermore, in erroneously characterizing the contractual relationship between CAI and
Holiday Travel as a contract of sale, the CA failed to apply the fundamental civil law principles governing
agency and differentiating it from sale.
In Rallos v. Felix Go Chan & Sons Realty Corporation,18 this Court explained the nature of an agency
and spelled out the essential elements thereof:

Out of the above given principles, sprung the creation and acceptance of
the relationship of agency whereby one party, called the principal (mandante), authorizes
another, called the agent (mandatario), to act for and in his behalf in transactions with third
persons. The essential elements of agency are: (1) there is consent, express or implied of the
parties to establish the relationship; (2) the object is the execution of a juridical act in relation to
a third person; (3) the agent acts as a representative and not for himself, and (4) the agent acts
within the scope of his authority.
Agency is basically personal, representative, and derivative in nature. The authority of
the agent to act emanates from the powers granted to him by his principal; his act is the act of
the principal if done within the scope of the authority. Qui facit per alium facit se. "He who acts
through another acts himself."19

Contrary to the findings of the CA, all the elements of an agency exist in this case. The first and second
elements are present as CAI does not deny that it concluded an agreement with Holiday Travel, whereby
Holiday Travel would enter into contracts of carriage with third persons on CAIs behalf. The third element is
also present as it is undisputed that Holiday Travel merely acted in a representative capacity and it is CAI and
not Holiday Travel who is bound by the contracts of carriage entered into by Holiday Travel on its behalf. The
fourth element is also present considering that CAI has not made any allegation that Holiday Travel exceeded
the authority that was granted to it. In fact, CAI consistently maintains the validity of the contracts of carriage
that Holiday Travel executed with Spouses Viloria and that Mager was not guilty of any fraudulent
misrepresentation. That CAI admits the authority of Holiday Travel to enter into contracts of carriage on its
behalf is easily discernible from its February 24, 1998 and March 24, 1998 letters, where it impliedly
recognized the validity of the contracts entered into by Holiday Travel with Spouses Viloria. When Fernando
informed CAI that it was Holiday Travel who issued to them the subject tickets, CAI did not deny that Holiday
Travel is its authorized agent.
Prior to Spouses Vilorias filing of a complaint against it, CAI never refuted that it gave Holiday Travel
the power and authority to conclude contracts of carriage on its behalf. As clearly extant from the records, CAI
recognized the validity of the contracts of carriage that Holiday Travel entered into with Spouses Viloria and
considered itself bound with Spouses Viloria by the terms and conditions thereof; and this constitutes an
unequivocal testament to Holiday Travels authority to act as its agent. This Court cannot therefore allow CAI to
take an altogether different position and deny that Holiday Travel is its agent without condoning or giving
imprimatur to whatever damage or prejudice that may result from such denial or retraction to Spouses Viloria,
who relied on good faith on CAIs acts in recognition of Holiday Travels authority. Estoppel is primarily based
on the doctrine of good faith and the avoidance of harm that will befall an innocent party due to its injurious
reliance, the failure to apply it in this case would result in gross travesty of justice.20 Estoppel bars CAI from
making such denial.
As categorically provided under Article 1869 of the Civil Code, [a]gency may be express, or implied
from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing
that another person is acting on his behalf without authority.
Considering that the fundamental hallmarks of an agency are present, this Court finds it rather peculiar
that the CA had branded the contractual relationship between CAI and Holiday Travel as one of sale. The
distinctions between a sale and an agency are not difficult to discern and this Court, as early as 1970, had
already formulated the guidelines that would aid in differentiating the two (2) contracts. In Commissioner of
Internal Revenue v. Constantino,21 this Court extrapolated that the primordial differentiating consideration

between the two (2) contracts is the transfer of ownership or title over the property subject of the contract. In an
agency, the principal retains ownership and control over the property and the agent merely acts on the
principals behalf and under his instructions in furtherance of the objectives for which the agency was
established. On the other hand, the contract is clearly a sale if the parties intended that the delivery of the
property will effect a relinquishment of title, control and ownership in such a way that the recipient may do with
the property as he pleases.
Since the company retained ownership of the goods, even as it delivered possession
unto the dealer for resale to customers, the price and terms of which were subject to the
company's control, the relationship between the company and the dealer is one of agency,
tested under the following criterion:
The difficulty in distinguishing between contracts of sale and the creation of an
agency to sell has led to the establishment of rules by the application of which this
difficulty may be solved. The decisions say the transfer of title or agreement to transfer it
for a price paid or promised is the essence of sale. If such transfer puts the transferee in
the attitude or position of an owner and makes him liable to the transferor as a debtor for
the agreed price, and not merely as an agent who must account for the proceeds of a
resale, the transaction is a sale; while the essence of an agency to sell is the delivery to
an agent, not as his property, but as the property of the principal, who remains the owner
and has the right to control sales, fix the price, and terms, demand and receive the
proceeds less the agent's commission upon sales made. 1 Mechem on Sales, Sec. 43; 1
Mechem on Agency, Sec. 48; Williston on Sales, 1; Tiedeman on Sales, 1. (Salisbury v.
Brooks, 94 SE 117, 118-119)22

As to how the CA have arrived at the conclusion that the contract between CAI and Holiday Travel is a
sale is certainly confounding, considering that CAI is the one bound by the contracts of carriage embodied by
the tickets being sold by Holiday Travel on its behalf. It is undisputed that CAI and not Holiday Travel who is
the party to the contracts of carriage executed by Holiday Travel with third persons who desire to travel via
Continental Airlines, and this conclusively indicates the existence of a principal-agent relationship. That the
principal is bound by all the obligations contracted by the agent within the scope of the authority granted to him
is clearly provided under Article 1910 of the Civil Code and this constitutes the very notion of agency.
II. In actions based on quasi-delict, a principal can only be held liable for the tort committed by its
agents employees if it has been established by preponderance of evidence that the principal was also
at fault or negligent or that the principal exercise control and supervision over them.

Considering that Holiday Travel is CAIs agent, does it necessarily follow that CAI is liable for the fault
or negligence of Holiday Travels employees? Citing China Air Lines, Ltd. v. Court of Appeals, et al.,23 CAI
argues that it cannot be held liable for the actions of the employee of its ticketing agent in the absence of an
employer-employee relationship.
An examination of this Courts pronouncements in China Air Lines will reveal that an airline company is
not completely exonerated from any liability for the tort committed by its agents employees. A prior
determination of the nature of the passengers cause of action is necessary. If the passengers cause of action
against the airline company is premised onculpa aquiliana or quasi-delict for a tort committed by the employee
of the airline companys agent, there must be an independent showing that the airline company was at fault or

negligent or has contributed to the negligence or tortuous conduct committed by the employee of its agent. The
mere fact that the employee of the airline companys agent has committed a tort is not sufficient to hold the
airline company liable. There is no vinculum juris between the airline company and its agents employees and
the contractual relationship between the airline company and its agent does not operate to create a juridical tie
between the airline company and its agents employees. Article 2180 of the Civil Code does not make the
principal vicariously liable for the tort committed by its agents employees and the principal-agency
relationship per se does not make the principal a party to such tort; hence, the need to prove the principals
own fault or negligence.
On the other hand, if the passengers cause of action for damages against the airline company is based
on contractual breach or culpa contractual, it is not necessary that there be evidence of the airline companys
fault or negligence. As this Court previously stated in China Air Lines and reiterated in Air France vs.
Gillego,24 in an action based on a breach of contract of carriage, the aggrieved party does not have to prove
that the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract
and the fact of its non-performance by the carrier.
Spouses Vilorias cause of action on the basis of Magers alleged fraudulent misrepresentation is
clearly one of tort or quasi-delict, there being no pre-existing contractual relationship between them. Therefore,
it was incumbent upon Spouses Viloria to prove that CAI was equally at fault.
However, the records are devoid of any evidence by which CAIs alleged liability can be substantiated.
Apart from their claim that CAI must be held liable for Magers supposed fraud because Holiday Travel is CAIs
agent, Spouses Viloria did not present evidence that CAI was a party or had contributed to Magers
complained act either by instructing or authorizing Holiday Travel and Mager to issue the said
misrepresentation.
It may seem unjust at first glance that CAI would consider Spouses Viloria bound by the terms and
conditions of the subject contracts, which Mager entered into with them on CAIs behalf, in order to deny
Spouses Vilorias request for a refund or Fernandos use of Lourdes ticket for the re-issuance of a new one,
and simultaneously claim that they are not bound by Magers supposed misrepresentation for purposes of
avoiding Spouses Vilorias claim for damages and maintaining the validity of the subject contracts. It may
likewise be argued that CAI cannot deny liability as it benefited from Magers acts, which were performed in
compliance with Holiday Travels obligations as CAIs agent.
However, a persons vicarious liability is anchored on his possession of control, whether absolute or
limited, on the tortfeasor. Without such control, there is nothing which could justify extending the liability to a
person other than the one who committed the tort. As this Court explained in Cangco v. Manila Railroad Co.:25
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 to
limit such liability to cases in which the person upon 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 persons whose acts or omissions 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 one's own acts, or in having failed to exercise due care in the selection and control of

one's agent or servants, or in the control of persons who, by reasons of their status, occupy a
position of dependency with respect to the person made liable for their conduct.26 (emphasis
supplied)

It is incumbent upon Spouses Viloria to prove that CAI exercised control or supervision over Mager by
preponderant evidence. The existence of control or supervision cannot be presumed and CAI is under no
obligation to prove its denial or nugatory assertion. Citing Belen v. Belen,27 this Court ruled in Jayme v.
Apostol,28 that:
In Belen v. Belen, this Court ruled that it was enough for defendant to deny an alleged
employment relationship. The defendant is under no obligation to prove the negative averment.
This Court said:
It is an old and well-settled rule of the courts that the burden of proving
the action is upon the plaintiff, and that if he fails satisfactorily to show the facts
upon which he bases his claim, the defendant is under no obligation to prove his
exceptions. This [rule] is in harmony with the provisions of Section 297 of the
Code of Civil Procedure holding that each party must prove his own affirmative
allegations, etc.29 (citations omitted)

Therefore, without a modicum of evidence that CAI exercised control over Holiday Travels employees or that
CAI was equally at fault, no liability can be imposed on CAI for Magers supposed misrepresentation.
III.

Even on the assumption that CAI may be held liable for the acts of Mager, still, Spouses Viloria
are not entitled to a refund. Magers statement cannot be considered a causal fraud that would
justify the annulment of the subject contracts that would oblige CAI to indemnify Spouses
Viloria and return the money they paid for the subject tickets.

Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the contracting
parties was obtained through fraud, the contract is considered voidable and may be annulled within four (4)
years from the time of the discovery of the fraud. Once a contract is annulled, the parties are obliged under
Article 1398 of the same Code to restore to each other the things subject matter of the contract, including their
fruits and interest.
On the basis of the foregoing and given the allegation of Spouses Viloria that Fernandos consent to the
subject contracts was supposedly secured by Mager through fraudulent means, it is plainly apparent that their
demand for a refund is tantamount to seeking for an annulment of the subject contracts on the ground of
vitiated consent.
Whether the subject contracts are annullable, this Court is required to determine whether Magers
alleged misrepresentation constitutes causal fraud. Similar to the dispute on the existence of an agency,
whether fraud attended the execution of a contract is factual in nature and this Court, as discussed above, may
scrutinize the records if the findings of the CA are contrary to those of the RTC.
Under Article 1338 of the Civil Code, there is fraud when, through insidious words or machinations of
one of the contracting parties, the other is induced to enter into a contract which, without them, he would not

have agreed to. In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the
incidental (dolo incidente), inducement to the making of the contract.30 In Samson v. Court of Appeals,31 causal
fraud was defined as a deception employed by one party prior to or simultaneous to the contract in order to
secure the consent of the other.32
Also, fraud must be serious and its existence must be established by clear and convincing evidence. As
ruled by this Court in Sierra v. Hon. Court of Appeals, et al.,33 mere preponderance of evidence is not
adequate:
Fraud must also be discounted, for according to the Civil Code:
Art. 1338. There is fraud when, through insidious words or machinations
of one of the contracting parties, the other is induced to enter into a contract
which without them, he would not have agreed to.
Art. 1344. In order that fraud may make a contract voidable, it should be
serious and should not have been employed by both contracting parties.
To quote Tolentino again, the misrepresentation constituting the fraud must be
established by full, clear, and convincing evidence, and not merely by a preponderance thereof.
The deceit must be serious. The fraud is serious when it is sufficient to impress, or to lead an
ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a
ground for nullity. The circumstances of each case should be considered, taking into account the
personal conditions of the victim.34
After meticulously poring over the records, this Court finds that the fraud alleged by Spouses Viloria has
not been satisfactorily established as causal in nature to warrant the annulment of the subject contracts. In
fact, Spouses Viloria failed to prove by clear and convincing evidence that Magers statement was fraudulent.
Specifically, Spouses Viloria failed to prove that (a) there were indeed available seats at Amtrak for a trip to
New Jersey on August 13, 1997 at the time they spoke with Mager on July 21, 1997; (b) Mager knew about
this; and (c) that she purposely informed them otherwise.
This Court finds the only proof of Magers alleged fraud, which is Fernandos testimony that an Amtrak
had assured him of the perennial availability of seats at Amtrak, to be wanting. As CAI correctly pointed out and
as Fernando admitted, it was possible that during the intervening period of three (3) weeks from the time
Fernando purchased the subject tickets to the time he talked to said Amtrak employee, other passengers may
have cancelled their bookings and reservations with Amtrak, making it possible for Amtrak to accommodate
them. Indeed, the existence of fraud cannot be proved by mere speculations and conjectures. Fraud is never
lightly inferred; it is good faith that is. Under the Rules of Court, it is presumed that "a person is innocent of
crime or wrong" and that "private transactions have been fair and regular."35 Spouses Viloria failed to overcome
this presumption.
IV. Assuming the contrary, Spouses Viloria are nevertheless deemed to have ratified the subject
contracts.
Even assuming that Magers representation is causal fraud, the subject contracts have been impliedly
ratified when Spouses Viloria decided to exercise their right to use the subject tickets for the purchase of new
ones. Under Article 1392 of the Civil Code, ratification extinguishes the action to annul a voidable contract.

Ratification of a voidable contract is defined under Article 1393 of the Civil Code as follows:
Art. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit
ratification if, with knowledge of the reason which renders the contract voidable and such reason
having ceased, the person who has a right to invoke it should execute an act which necessarily
implies an intention to waive his right.
Implied ratification may take diverse forms, such as by silence or acquiescence; by acts showing
approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom.36
Simultaneous with their demand for a refund on the ground of Fernandos vitiated consent, Spouses
Viloria likewise asked for a refund based on CAIs supposed bad faith in reneging on its undertaking to replace
the subject tickets with a round trip ticket from Manila to Los Angeles.
In doing so, Spouses Viloria are actually asking for a rescission of the subject contracts based on
contractual breach. Resolution, the action referred to in Article 1191, is based on the defendants breach of
faith, a violation of the reciprocity between the parties37 and in Solar Harvest, Inc. v. Davao Corrugated Carton
Corporation,38 this Court ruled that a claim for a reimbursement in view of the other partys failure to comply
with his obligations under the contract is one for rescission or resolution.
However, annulment under Article 1390 of the Civil Code and rescission under Article 1191 are two (2)
inconsistent remedies. In resolution, all the elements to make the contract valid are present; in annulment, one
of the essential elements to a formation of a contract, which is consent, is absent. In resolution, the defect is in
the consummation stage of the contract when the parties are in the process of performing their respective
obligations; in annulment, the defect is already present at the time of the negotiation and perfection stages of
the contract. Accordingly, by pursuing the remedy of rescission under Article 1191, the Vilorias had impliedly
admitted the validity of the subject contracts, forfeiting their right to demand their annulment. A party cannot
rely on the contract and claim rights or obligations under it and at the same time impugn its existence or
validity. Indeed, litigants are enjoined from taking inconsistent positions.39
V. Contracts cannot be rescinded for a slight or casual
breach.
CAI cannot insist on the non-transferability of the subject tickets.
Considering that the subject contracts are not annullable on the ground of vitiated consent, the next
question is: Do Spouses Viloria have the right to rescind the contract on the ground of CAIs supposed breach
of its undertaking to issue new tickets upon surrender of the subject tickets?
Article 1191, as presently worded, states:
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him.
The injured party may choose between the fulfilment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing
of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the
thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

According to Spouses Viloria, CAI acted in bad faith and breached the subject contracts when it refused
to apply the value of Lourdes ticket for Fernandos purchase of a round trip ticket to Los Angeles and in
requiring him to pay an amount higher than the price fixed by other airline companies.
In its March 24, 1998 letter, CAI stated that non-refundable tickets may be used as a form of payment
toward the purchase of another Continental ticket for $75.00, per ticket, reissue fee ($50.00, per ticket, for
tickets purchased prior to October 30, 1997).
Clearly, there is nothing in the above-quoted section of CAIs letter from which the restriction on the
non-transferability of the subject tickets can be inferred. In fact, the words used by CAI in its letter supports the
position of Spouses Viloria, that each of them can use the ticket under their name for the purchase of new
tickets whether for themselves or for some other person.
Moreover, as CAI admitted, it was only when Fernando had expressed his interest to use the subject
tickets for the purchase of a round trip ticket between Manila and Los Angeles that he was informed that he
cannot use the ticket in Lourdes name as payment.
Contrary to CAIs claim, that the subject tickets are non-transferable cannot be implied from a plain
reading of the provision printed on the subject tickets stating that [t]o the extent not in conflict with the
foregoing carriage and other services performed by each carrier are subject to: (a) provisions contained in this
ticket, x x x (iii) carriers conditions of carriage and related regulations which are made part hereof (and are
available on application at the offices of carrier) x x x. As a common carrier whose business is imbued with
public interest, the exercise of extraordinary diligence requires CAI to inform Spouses Viloria, or all of its
passengers for that matter, of all the terms and conditions governing their contract of carriage. CAI is
proscribed from taking advantage of any ambiguity in the contract of carriage to impute knowledge on its
passengers of and demand compliance with a certain condition or undertaking that is not clearly stipulated.
Since the prohibition on transferability is not written on the face of the subject tickets and CAI failed to inform
Spouses Viloria thereof, CAI cannot refuse to apply the value of Lourdes ticket as payment for Fernandos
purchase of a new ticket.
CAIs refusal to accept Lourdes ticket for the purchase of a new ticket for Fernando is only a casual
breach.
Nonetheless, the right to rescind a contract for non-performance of its stipulations is not absolute. The
general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such
substantial and fundamental violations as would defeat the very object of the parties in making the
agreement.40 Whether a breach is substantial is largely determined by the attendant circumstances.41
While CAIs refusal to allow Fernando to use the value of Lourdes ticket as payment for the purchase
of a new ticket is unjustified as the non-transferability of the subject tickets was not clearly stipulated, it cannot,
however be considered substantial. The endorsability of the subject tickets is not an essential part of the
underlying contracts and CAIs failure to comply is not essential to its fulfillment of its undertaking to issue new

tickets upon Spouses Vilorias surrender of the subject tickets. This Court takes note of CAIs willingness to
perform its principal obligation and this is to apply the price of the ticket in Fernandos name to the price of the
round trip ticket between Manila and Los Angeles. CAI was likewise willing to accept the ticket in Lourdes
name as full or partial payment as the case may be for the purchase of any ticket, albeit under her name and
for her exclusive use. In other words, CAIs willingness to comply with its undertaking under its March 24, 1998
cannot be doubted, albeit tainted with its erroneous insistence that Lourdes ticket is non-transferable.
Moreover, Spouses Vilorias demand for rescission cannot prosper as CAI cannot be solely faulted for
the fact that their agreement failed to consummate and no new ticket was issued to Fernando. Spouses Viloria
have no right to insist that a single round trip ticket between Manila and Los Angeles should be priced at
around $856.00 and refuse to pay the difference between the price of the subject tickets and the amount fixed
by CAI. The petitioners failed to allege, much less prove, that CAI had obliged itself to issue to them tickets for
any flight anywhere in the world upon their surrender of the subject tickets. In its March 24, 1998 letter, it was
clearly stated that [n]on-refundable tickets may be used as a form of payment toward the purchase of another
Continental ticket42 and there is nothing in it suggesting that CAI had obliged itself to protect Spouses Viloria
from any fluctuation in the prices of tickets or that the surrender of the subject tickets will be considered as full
payment for any ticket that the petitioners intend to buy regardless of actual price and destination. The CA was
correct in holding that it is CAIs right and exclusive prerogative to fix the prices for its services and it may not
be compelled to observe and maintain the prices of other airline companies.43
The conflict as to the endorsability of the subject tickets is an altogether different matter, which does not
preclude CAI from fixing the price of a round trip ticket between Manila and Los Angeles in an amount it deems
proper and which does not provide Spouses Viloria an excuse not to pay such price, albeit subject to a
reduction coming from the value of the subject tickets. It cannot be denied that Spouses Viloria had the
concomitant obligation to pay whatever is not covered by the value of the subject tickets whether or not the
subject tickets are transferable or not.
There is also no showing that Spouses Viloria were discriminated against in bad faith by being charged
with a higher rate. The only evidence the petitioners presented to prove that the price of a round trip ticket
between Manila and Los Angeles at that time was only $856.00 is a newspaper advertisement for another
airline company, which is inadmissible for being hearsay evidence, twice removed. Newspaper clippings are
hearsay if they were offered for the purpose of proving the truth of the matter alleged. As ruled in Feria v. Court
of Appeals,:44
[N]ewspaper articles amount to hearsay evidence, twice removed and are therefore not only
inadmissible but without any probative value at all whether objected to or not, unless offered for
a purpose other than proving the truth of the matter asserted. In this case, the news article is
admissible only as evidence that such publication does exist with the tenor of the news therein
stated.45(citations omitted)

The records of this case demonstrate that both parties were equally in default; hence, none of them can
seek judicial redress for the cancellation or resolution of the subject contracts and they are therefore bound to
their respective obligations thereunder. As the 1st sentence of Article 1192 provides:
Art. 1192. In case both parties have committed a breach of the obligation, the
liability of the first infractor shall be equitably tempered by the courts. If it cannot be
determined which of the parties first violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages. (emphasis supplied)

Therefore, CAIs liability for damages for its refusal to accept Lourdes ticket for the purchase of
Fernandos round trip ticket is offset by Spouses Vilorias liability for their refusal to pay the amount, which is
not covered by the subject tickets. Moreover, the contract between them remains, hence, CAI is duty bound to
issue new tickets for a destination chosen by Spouses Viloria upon their surrender of the subject tickets and
Spouses Viloria are obliged to pay whatever amount is not covered by the value of the subject tickets.
This Court made a similar ruling in Central Bank of the Philippines v. Court of Appeals.46 Thus:
Since both parties were in default in the performance of their respective reciprocal
obligations, that is, Island Savings Bank failed to comply with its obligation to furnish the entire
loan and Sulpicio M. Tolentino failed to comply with his obligation to pay his P17,000.00 debt
within 3 years as stipulated, they are both liable for damages.
Article 1192 of the Civil Code provides that in case both parties have committed a
breach of their reciprocal obligations, the liability of the first infractor shall be equitably tempered
by the courts. WE rule that the liability of Island Savings Bank for damages in not furnishing the
entire loan is offset by the liability of Sulpicio M. Tolentino for damages, in the form of penalties
and surcharges, for not paying his overdue P17,000.00 debt. x x x.47
Another consideration that militates against the propriety of holding CAI liable for moral damages is the
absence of a showing that the latter acted fraudulently and in bad faith. Article 2220 of the Civil Code requires
evidence of bad faith and fraud and moral damages are generally not recoverable in culpa contractual except
when bad faith had been proven.48The award of exemplary damages is likewise not warranted. Apart from the
requirement that the defendant acted in a wanton, oppressive and malevolent manner, the claimant must prove
his entitlement to moral damages.49
WHEREFORE, premises considered, the instant Petition is DENIED.
SO ORDERED.