SECOND DIVISION [G.R. No. 114791. May 29, 1997] NANCY GO AND ALEX GO, Petitioners, v.

THE HONORABLE COURT OF APPEALS, HERMOGENES ONG and JANE C. ONG, Respondents. DECISION ROMERO, J.: No less than the Constitution commands us to protect marriage as an inviolable social institution and the foundation of the family.1 In our society, the importance of a wedding ceremony cannot be underestimated as it is the matrix of the family and, therefore, an occasion worth reliving in the succeeding years. It is in this light that we narrate the following undisputed facts: Private respondents spouses Hermogenes and Jane Ong were married on June 7, 1981, in Dumaguete City. The video coverage of the wedding was provided by petitioners at a contract price of P1,650.00. Three times thereafter, the newlyweds tried to claim the video tape of their wedding, which they planned to show to their relatives in the United States where they were to spend their honeymoon, and thrice they failed because the tape was apparently not yet processed. The parties then agreed that the tape would be ready upon private respondents return. When private respondents came home from their honeymoon, however, they found out that the tape had been erased by petitioners and therefore, could no longer be delivered. Furious at the loss of the tape which was supposed to be the only record of their wedding, private respondents filed on September 23, 1981 a complaint for specific performance and damages against petitioners before the Regional Trial Court, 7th Judicial District, Branch 33, Dumaguete City. After a protracted trial, the court a quo rendered a decision, to wit: WHEREFORE, judgment is hereby granted: 1. Ordering the rescission of the agreement entered into between plaintiff Hermogenes Ong and defendant Nancy Go; 2. Declaring defendants Alex Go and Nancy Go jointly and severally liable to plaintiffs Hermogenes Ong and Jane C. Ong for the following sums: a) P450.00, the down payment made at contract time; b) P75,000.00, as moral damages; c) P20,000.00, as exemplary damages; d) P5,000.00, as attorneys fees; and e) P2,000.00, as litigation expenses; Defendants are also ordered to pay the costs.

SO ORDERED. Dissatisfied with the decision, petitioners elevated the case to the Court of Appeals which, on September 14, 1993, dismissed the appeal and affirmed the trial courts decision. Hence, this petition. Petitioners contend that the Court of Appeals erred in not appreciating the evidence they presented to prove that they acted only as agents of a certain Pablo Lim and, as such, should not have been held liable. In addition, they aver that there is no evidence to show that the erasure of the tape was done in bad faith so as to justify the award of damages.2chanroblesvirtuallawlibrary The petition is not meritorious. Petitioners claim that for the video coverage, the cameraman was employed by Pablo Lim who also owned the video equipment used. They further assert that they merely get a commission for all customers solicited for their principal.3chanroblesvirtuallawlibrary This contention is primarily premised on Article 1883 of the Civil Code which states thus: ART. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. xxx xxx xxx Petitioners argument that since the video equipment used belonged to Lim and thus the contract was actually entered into between private respondents and Lim is not deserving of any serious consideration. In the instant case, the contract entered into is one of service, that is, for the video coverage of the wedding. Consequently, it can hardly be said that the object of the contract was the video equipment used. The use by petitioners of the video equipment of another person is of no consequence. It must also be noted that in the course of the protracted trial below, petitioners did not even present Lim to corroborate their contention that they were mere agents of the latter. It would not be unwarranted to assume that their failure to present such a vital witness would have had an adverse result on the case.4chanroblesvirtuallawlibrary As regards the award of damages, petitioners would impress upon this Court their lack of malice or fraudulent intent in the erasure of the tape. They insist that since private respondents did not claim the tape after the lapse of thirty days, as agreed upon in their contract, the erasure was done in consonance with consistent business practice to minimize losses.5chanroblesvirtuallawlibrary We are not persuaded. As correctly observed by the Court of Appeals, it is contrary to human nature for any newlywed couple to neglect to claim the video coverage of their wedding; the fact that private respondents filed a case against petitioners belies such assertion. Clearly, petitioners are guilty of actionable delay for having failed to process the video tape.

Considering that private respondents were about to leave for the United States, they took care to inform petitioners that they would just claim the tape upon their return two months later. Thus, the erasure of the tape after the lapse of thirty days was unjustified. In this regard, Article 1170 of the Civil Code provides that those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who is any manner contravene the tenor thereof, are liable for damages. In the instant case, petitioners and private respondents entered into a contract whereby, for a fee, the former undertook to cover the latters wedding and deliver to them a video copy of said event. For whatever reason, petitioners failed to provide private respondents with their tape. Clearly, petitioners are guilty of contravening their obligation to said private respondents and are thus liable for damages. The grant of actual or compensatory damages in the amount of P450.00 is justified, as reimbursement of the downpayment paid by private respondents to petitioners.6chanroblesvirtuallawlibrary Generally, moral damages cannot be recovered in an action for breach of contract because this case is not among those enumerated in Article 2219 of the Civil Code. However, it is also accepted in this jurisdiction that liability for a quasi-delict may still exist despite the presence of contractual relations, that is, the act which violates the contract may also constitute a quasi-delict.7 Consequently, moral damages are recoverable for the breach of contract which was palpably wanton, reckless, malicious or in bad faith, oppresive or abusive.8chanroblesvirtuallawlibrary Petitioners act or omission in recklessly erasing the video coverage of private respondents wedding was precisely the cause of the suffering private respondents had to undergo. As the appellate court aptly observed: Considering the sentimental value of the tapes and the fact that the event therein recorded a wedding which in our culture is a significant milestone to be cherished and remembered could no longer be reenacted and was lost forever, the trial court was correct in awarding the appellees moral damages albeit in the amount ofP75,000.00, which was a great reduction from plaintiffs demand in the complaint, in compensation for the mental anguish, tortured feelings, sleepless nights and humiliation that the appellees suffered and which under the circumstances could be awarded as allowed under Articles 2217 and 2218 of the Civil Code.9chanroblesvirtuallawlibrary Considering the attendant wanton negligence committed by petitioners in the case at bar, the award of exemplary damages by the trial court is justified10 to serve as a warning to all entities engaged in the same business to observe due diligence in the conduct of their affairs. The award of attorneys fees and litigation expenses are likewise proper, consistent with Article 220811 of the Civil Code. Finally, petitioner Alex Go questions the finding of the trial and appellate courts holding him jointly and severally liable with his wife Nancy regarding the pecuniary liabilities imposed. He argues that when his wife entered into the contract with private respondent, she was acting alone for her sole interest.12chanroblesvirtuallawlibrary We find merit in this contention. Under Article 117 of the Civil Code (now Article 73 of the Family Code), the wife may exercise any profession, occupation or engage in business without the consent of the husband. In the instant case, we are convinced that it was only

petitioner Nancy Go who entered into the contract with private respondent. Consequently, we rule that she is solely liable to private respondents for the damages awarded below, pursuant to the principle that contracts produce effect only as between the parties who execute them.13chanroblesvirtuallawlibrary WHEREFORE, the assailed decision dated September 14, 1993 is hereby AFFIRMED with the MODIFICATION that petitioner Alex Go is absolved from any liability to private respondents and that petitioner Nancy Go is solely liable to said private respondents for the judgment award. Costs against petitioners. SO ORDERED. Regalado, (Chairman), Puno, Mendoza, and Torres, Jr., JJ., concur.

epublic of the Philippines SUPREME COURT Manila EN BANC DECISION October 14, 1918 G.R. No. L-12191 JOSE CANGCO, plaintiff-appellant, vs. MANILA RAILROAD CO., defendant-appellee. Ramon Sotelo for appellant. Kincaid & Hartigan for appellee. Fisher, J.: At the time of the occurrence which gave rise to this litigation the plaintiff, Jose Cangco, was in the employment of Manila Railroad Company in the capacity of clerk, with a monthly wage of P25. He lived in the pueblo of San Mateo, in the province of Rizal, which is located upon the line of the defendant railroad company; and in coming daily by train to the companys office in the city of Manila where he worked, he used a pass, supplied by the company, which entitled him to ride upon the companys trains free of charge. Upon the occasion in question, January 20, 1915, the plaintiff arose from his seat in the second class-car where he was riding and, making, his exit through the door, took his position upon the steps of the coach, seizing the upright guardrail with his right hand for support.

On the side of the train where passengers alight at the San Mateo station there is a cement platform which begins to rise with a moderate gradient some distance away from the companys office and extends along in front of said office for a distance sufficient to cover the length of several coaches. As the train slowed down another passenger, named Emilio Zuiga, also an employee of the railroad company, got off the same car, alighting safely at the point where the platform begins to rise from the level of the ground. When the train had proceeded a little farther the plaintiff Jose Cangco stepped off also, but one or both of his feet came in contact with a sack of watermelons with the result that his feet slipped from under him and he fell violently on the platform. His body at once rolled from the platform and was drawn under the moving car, where his right arm was badly crushed and lacerated. It appears that after the plaintiff alighted from the train the car moved forward possibly six meters before it came to a full stop. The accident occurred between 7 and 8 oclock on a dark night, and as the railroad station was lighted dimly by a single light located some distance away, objects on the platform where the accident occurred were difficult to discern especially to a person emerging from a lighted car. The explanation of the presence of a sack of melons on the platform where the plaintiff alighted is found in the fact that it was the customary season for harvesting these melons and a large lot had been brought to the station for the shipment to the market. They were contained in numerous sacks which has been piled on the platform in a row one upon another. The testimony shows that this row of sacks was so placed of melons and the edge of platform; and it is clear that the fall of the plaintiff was due to the fact that his foot alighted upon one of these melons at the moment he stepped upon the platform. His statement that he failed to see these objects in the darkness is readily to be credited. The plaintiff was drawn from under the car in an unconscious condition, and it appeared that the injuries which he had received were very serious. He was therefore brought at once to a certain hospital in the city of Manila where an examination was made and his arm was amputated. The result of this operation was unsatisfactory, and the plaintiff was then carried to another hospital where a second operation was performed and the member was again amputated higher up near the shoulder. It appears in evidence that the plaintiff expended the sum of P790.25 in the form of medical and surgical fees and for other expenses in connection with the process of his curation. Upon August 31, 1915, he instituted this proceeding in the Court of First Instance of the city of Manila to recover damages of the defendant company, founding his action upon the negligence of the servants and employees of the defendant in placing the sacks of melons upon the platform and leaving them so placed as to be a menace to the security of passenger alighting from the companys trains. At the hearing in the Court of First Instance, his Honor, the trial judge, found the facts substantially as above stated, and drew therefrom his conclusion to the effect that, although negligence was attributable to the defendant by reason of the fact that the sacks of melons were so placed as to obstruct passengers passing to and from the cars, nevertheless, the plaintiff himself had failed to use due caution in alighting from the coach and was therefore precluded form recovering. Judgment was accordingly entered in favor of the defendant company, and the plaintiff appealed.

It can not be doubted that the employees of the railroad company were guilty of negligence in piling these sacks on the platform in the manner above stated; that their presence caused the plaintiff to fall as he alighted from the train; and that they therefore constituted an effective legal cause of the injuries sustained by the plaintiff. It necessarily follows that the defendant company is liable for the damage thereby occasioned unless recovery is barred by the plaintiffs own contributory negligence. In resolving this problem it is necessary that each of these conceptions of liability, to-wit, the primary responsibility of the defendant company and the contributory negligence of the plaintiff should be separately examined. It is important to note that the foundation of the legal liability of the defendant is the contract of carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the failure of defendant to exercise due care in its performance. That is to say, its liability is direct and immediate, differing essentially, in legal viewpoint from that presumptive responsibility for the negligence of its servants, imposed by article 1903 of the Civil Code, which can be rebutted by proof of the exercise of due care in their selection and supervision. Article 1903 of the Civil Code is not applicable to obligations arising ex contractu, but only to extra-contractual obligations or to use the technical form of expression, that article relates only to culpa aquiliana and not to culpa contractual. Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly points out this distinction, which was also recognized by this Court in its decision in the case of Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa clearly points out the difference between culpa, substantive and independent, which of itself constitutes the source of an obligation between persons not formerly connected by any legal tie and culpa considered as an accident in the performance of an obligation already existing . . . . In the Rakes case (supra) the decision of this court was made to rest squarely upon the proposition that article 1903 of the Civil Code is not applicable to acts of negligence which constitute the breach of a contract. Upon this point the Court said: The acts to which these articles [1902 and 1903 of the Civil Code] are applicable are understood to be those not growing out of pre-existing duties of the parties to one another. But where relations already formed give rise to duties, whether springing from contract or quasi-contract, then breaches of those duties are subject to article 1101, 1103, and 1104 of the same code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.) This distinction is of the utmost importance. The liability, which, under the Spanish law, is, in certain cases imposed upon employers with respect to damages occasioned by the negligence of their employees to persons to whom they are not bound by contract, is not based, as in the English Common Law, upon the principle of respondeat superior if it were, the master would be liable in every case and unconditionally but upon the principle announced in article 1902 of the Civil Code,

which imposes upon all persons who by their fault or negligence, do injury to another, the obligation of making good the damage caused. One who places a powerful automobile in the hands of a servant whom he knows to be ignorant of the method of managing such a vehicle, is himself guilty of an act of negligence which makes him liable for all the consequences of his imprudence. The obligation to make good the damage arises at the very instant that the unskillful servant, while acting within the scope of his employment causes the injury. The liability of the master is personal and direct. But, if the master has not been guilty of any negligence whatever in the selection and direction of the servant, he is not liable for the acts of the latter, whatever done within the scope of his employment or not, if the damage done by the servant does not amount to a breach of the contract between the master and the person injured. It is not accurate to say that proof of diligence and care in the selection and control of the servant relieves the master from liability for the latters acts on the contrary, that proof shows that the responsibility has never existed. As Manresa says (vol. 8, p. 68) the liability arising from extracontractual culpa is always based upon a voluntary act or omission which, without willful intent, but by mere negligence or inattention, has caused damage to another. A master who exercises all possible care in the selection of his servant, taking into consideration the qualifications they should possess for the discharge of the duties which it is his purpose to confide to them, and directs them with equal diligence, thereby performs his duty to third persons to whom he is bound by no contractual ties, and he incurs no liability whatever if, by reason of the negligence of his servants, even within the scope of their employment, such third person suffer damage. True it is that under article 1903 of the Civil Code the law creates a presumption that he has been negligent in the selection or direction of his servant, but the presumption is rebuttable and yield to proof of due care and diligence in this respect. The supreme court of Porto Rico, in interpreting identical provisions, as found in the Porto Rico Code, has held that these articles are applicable to cases of extra-contractual culpa exclusively. (Carmona vs. Cuesta, 20 Porto Rico Reports, 215.) This distinction was again made patent by this Court in its decision in the case of Bahia vs. Litonjua and Leynes, (30 Phil. rep., 624), which was an action brought upon the theory of the extra-contractual liability of the defendant to respond for the damage caused by the carelessness of his employee while acting within the scope of his employment. The Court, after citing the last paragraph of article 1903 of the Civil Code, said: From this article two things are apparent: (1) That when an injury is caused by the negligence of a servant or employee there instantly arises a presumption of law that there was negligence on the part of the master or employer either in selection of the servant or employee, or in supervision over him after the selection, or both; and (2) that that presumption is juris tantum and not juris et de jure, and consequently, may be rebutted. It follows necessarily that if the employer shows to the satisfaction of the court that in selection and supervision he has exercised the care and diligence of a good father of a family, the presumption is overcome and he is relieved from liability.

This theory bases the responsibility of the master ultimately on his own negligence and not on that of his servant. This is the notable peculiarity of the Spanish law of negligence. It is, of course, in striking contrast to the American doctrine that, in relations with strangers, the negligence of the servant in conclusively the negligence of the master. The opinion there expressed by this Court, to the effect that in case of extra-contractual culpa based upon negligence, it is necessary that there shall have been some fault attributable to the defendant personally, and that the last paragraph of article 1903 merely establishes a rebuttable presumption, is in complete accord with the authoritative opinion of Manresa, who says (vol. 12, p. 611) that the liability created by article 1903 is imposed by reason of the breach of the duties inherent in the special relations of authority or superiority existing between the person called upon to repair the damage and the one who, by his act or omission, was the cause of it. On the other hand, the liability of masters and employers for the negligent acts or omissions of their servants or agents, when such acts or omissions cause damages which amount to the breach of a contact, is not based upon a mere presumption of the masters negligence in their selection or control, and proof of exercise of the utmost diligence and care in this regard does not relieve the master of his liability for the breach of his contract. Every legal obligation must of necessity be extra-contractual or contractual. Extra-contractual obligation has its source in the breach or omission of those mutual duties which civilized society imposes upon it members, or which arise from these relations, other than contractual, of certain members of society to others, generally embraced in the concept of status. The legal rights of each member of society constitute the measure of the corresponding legal duties, mainly negative in character, which the existence of those rights imposes upon all other members of society. The breach of these general duties whether due to willful intent or to mere inattention, if productive of injury, give rise to an obligation to indemnify the injured party. The fundamental distinction between obligations of this character and those which arise from contract, rests upon the fact that in cases of non-contractual obligation it is the wrongful or negligent act or omission itself which creates the vinculum juris, whereas in contractual relations the vinculum exists independently of the breach of the voluntary duty assumed by the parties when entering into the contractual relation. With respect to extra-contractual obligation arising from negligence, whether of act or omission, it is competent for the legislature to elect and our Legislature has so elected whom such an obligation is imposed is morally culpable, or, on the contrary, for reasons of public policy, to extend that liability, without regard to the lack of moral culpability, so as to include responsibility for the negligence of those person who acts or mission are imputable, by a legal fiction, to others who are in a position to exercise an absolute or limited control over them. The legislature which adopted our Civil Code has elected to limit extra-contractual liability with certain well-defined exceptions to cases in which moral culpability can be directly imputed to the persons to be charged. This moral responsibility may consist in having failed to exercise due care in the selection and control of ones agents or servants, or in the control of persons who, by reason of their status, occupy a position of dependency with respect to the person made liable for their conduct.

The position of a natural or juridical person who has undertaken by contract to render service to another, is wholly different from that to which article 1903 relates. When the sources of the obligation upon which plaintiffs cause of action depends is a negligent act or omission, the burden of proof rests upon plaintiff to prove the negligence if he does not his action fails. But when the facts averred show a contractual undertaking by defendant for the benefit of plaintiff, and it is alleged that plaintiff has failed or refused to perform the contract, it is not necessary for plaintiff to specify in his pleadings whether the breach of the contract is due to willful fault or to negligence on the part of the defendant, or of his servants or agents. Proof of the contract and of its nonperformance is sufficient prima facie to warrant a recovery. As a general rule . . . it is logical that in case of extra-contractual culpa, a suing creditor should assume the burden of proof of its existence, as the only fact upon which his action is based; while on the contrary, in a case of negligence which presupposes the existence of a contractual obligation, if the creditor shows that it exists and that it has been broken, it is not necessary for him to prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p. 76]). As it is not necessary for the plaintiff in an action for the breach of a contract to show that the breach was due to the negligent conduct of defendant or of his servants, even though such be in fact the actual cause of the breach, it is obvious that proof on the part of defendant that the negligence or omission of his servants or agents caused the breach of the contract would not constitute a defense to the action. If the negligence of servants or agents could be invoked as a means of discharging the liability arising from contract, the anomalous result would be that person acting through the medium of agents or servants in the performance of their contracts, would be in a better position than those acting in person. If one delivers a valuable watch to watchmaker who contract to repair it, and the bailee, by a personal negligent act causes its destruction, he is unquestionably liable. Would it be logical to free him from his liability for the breach of his contract, which involves the duty to exercise due care in the preservation of the watch, if he shows that it was his servant whose negligence caused the injury? If such a theory could be accepted, juridical persons would enjoy practically complete immunity from damages arising from the breach of their contracts if caused by negligent acts as such juridical persons can of necessity only act through agents or servants, and it would no doubt be true in most instances that reasonable care had been taken in selection and direction of such servants. If one delivers securities to a banking corporation as collateral, and they are lost by reason of the negligence of some clerk employed by the bank, would it be just and reasonable to permit the bank to relieve itself of liability for the breach of its contract to return the collateral upon the payment of the debt by proving that due care had been exercised in the selection and direction of the clerk? This distinction between culpa aquiliana, as the source of an obligation, and culpa contractual as a mere incident to the performance of a contract has frequently been recognized by the supreme court of Spain. (Sentencias of June 27, 1894; November 20, 1896; and December 13, 1896.) In the decisions of November 20, 1896, it appeared that plaintiffs action arose ex contractu, but that defendant sought to avail himself of the provisions of article 1902 of the Civil Code as a defense. The Spanish Supreme Court rejected defendants contention, saying:

These are not cases of injury caused, without any pre-existing obligation, by fault or negligence, such as those to which article 1902 of the Civil Code relates, but of damages caused by the defendants failure to carry out the undertakings imposed by the contracts . . . . A brief review of the earlier decision of this court involving the liability of employers for damage done by the negligent acts of their servants will show that in no case has the court ever decided that the negligence of the defendants servants has been held to constitute a defense to an action for damages for breach of contract. In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner of a carriage was not liable for the damages caused by the negligence of his driver. In that case the court commented on the fact that no evidence had been adduced in the trial court that the defendant had been negligent in the employment of the driver, or that he had any knowledge of his lack of skill or carefulness. In the case of Baer Senior & Cos Successors vs. Compania Maritima (6 Phil. Rep., 215), the plaintiff sued the defendant for damages caused by the loss of a barge belonging to plaintiff which was allowed to get adrift by the negligence of defendants servants in the course of the performance of a contract of towage. The court held, citing Manresa (vol. 8, pp. 29, 69) that if the obligation of the defendant grew out of a contract made between it and the plaintiff . . . we do not think that the provisions of articles 1902 and 1903 are applicable to the case. In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the defendant to recover damages for the personal injuries caused by the negligence of defendants chauffeur while driving defendants automobile in which defendant was riding at the time. The court found that the damages were caused by the negligence of the driver of the automobile, but held that the master was not liable, although he was present at the time, saying: . . . unless the negligent acts of the driver are continued for a length of time as to give the owner a reasonable opportunity to observe them and to direct the driver to desist therefrom. . . . The act complained of must be continued in the presence of the owner for such length of time that the owner by his acquiescence, makes the drivers acts his own. In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co. (33 Phil. Rep., 8), it is true that the court rested its conclusion as to the liability of the defendant upon article 1903, although the facts disclosed that the injury complaint of by plaintiff constituted a breach of the duty to him arising out of the contract of transportation. The express ground of the decision in this case was that article 1903, in dealing with the liability of a master for the negligent acts of his servants makes the distinction between private individuals and public enterprise; that as to the latter the law creates a rebuttable presumption of negligence in the selection or direction of servants; and that in the particular case the presumption of negligence had not been overcome. It is evident, therefore that in its decision Yamada case, the court treated plaintiffs action as though founded in tort rather than as based upon the breach of the contract of carriage, and an examination of the pleadings and of the briefs shows that the questions of law were in fact discussed upon this

theory. Viewed from the standpoint of the defendant the practical result must have been the same in any event. The proof disclosed beyond doubt that the defendants servant was grossly negligent and that his negligence was the proximate cause of plaintiffs injury. It also affirmatively appeared that defendant had been guilty of negligence in its failure to exercise proper discretion in the direction of the servant. Defendant was, therefore, liable for the injury suffered by plaintiff, whether the breach of the duty were to be regarded as constituting culpa aquiliana or culpa contractual. As Manresa points out (vol. 8, pp. 29 and 69) whether negligence occurs an incident in the course of the performance of a contractual undertaking or its itself the source of an extra-contractual undertaking obligation, its essential characteristics are identical. There is always an act or omission productive of damage due to carelessness or inattention on the part of the defendant. Consequently, when the court holds that a defendant is liable in damages for having failed to exercise due care, either directly, or in failing to exercise proper care in the selection and direction of his servants, the practical result is identical in either case. Therefore, it follows that it is not to be inferred, because the court held in the Yamada case that defendant was liable for the damages negligently caused by its servants to a person to whom it was bound by contract, and made reference to the fact that the defendant was negligent in the selection and control of its servants, that in such a case the court would have held that it would have been a good defense to the action, if presented squarely upon the theory of the breach of the contract, for defendant to have proved that it did in fact exercise care in the selection and control of the servant. The true explanation of such cases is to be found by directing the attention to the relative spheres of contractual and extra-contractual obligations. The field of non- contractual obligation is much more broader than that of contractual obligations, comprising, as it does, the whole extent of juridical human relations. These two fields, figuratively speaking, concentric; that is to say, the mere fact that a person is bound to another by contract does not relieve him from extra-contractual liability to such person. When such a contractual relation exists the obligor may break the contract under such conditions that the same act which constitutes the source of an extra-contractual obligation had no contract existed between the parties. The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry him in safety and to provide safe means of entering and leaving its trains (civil code, article 1258). That duty, being contractual, was direct and immediate, and its non-performance could not be excused by proof that the fault was morally imputable to defendants servants. The railroad companys defense involves the assumption that even granting that the negligent conduct of its servants in placing an obstruction upon the platform was a breach of its contractual obligation to maintain safe means of approaching and leaving its trains, the direct and proximate cause of the injury suffered by plaintiff was his own contributory negligence in failing to wait until the train had come to a complete stop before alighting. Under the doctrine of comparative negligence announced in the Rakes case (supra), if the accident was caused by plaintiffs own negligence, no liability is imposed upon defendants negligence and plaintiffs negligence merely contributed to his injury, the damages

should be apportioned. It is, therefore, important to ascertain if defendant was in fact guilty of negligence. It may be admitted that had plaintiff waited until the train had come to a full stop before alighting, the particular injury suffered by him could not have occurred. Defendant contends, and cites many authorities in support of the contention, that it is negligence per se for a passenger to alight from a moving train. We are not disposed to subscribe to this doctrine in its absolute form. We are of the opinion that this proposition is too badly stated and is at variance with the experience of every-day life. In this particular instance, that the train was barely moving when plaintiff alighted is shown conclusively by the fact that it came to stop within six meters from the place where he stepped from it. Thousands of person alight from trains under these conditions every day of the year, and sustain no injury where the company has kept its platform free from dangerous obstructions. There is no reason to believe that plaintiff would have suffered any injury whatever in alighting as he did had it not been for defendants negligent failure to perform its duty to provide a safe alighting place. We are of the opinion that the correct doctrine relating to this subject is that expressed in Thompsons work on Negligence (vol. 3, sec. 3010) as follows: The test by which to determine whether the passenger has been guilty of negligence in attempting to alight from a moving railway train, is that of ordinary or reasonable care. It is to be considered whether an ordinarily prudent person, of the age, sex and condition of the passenger, would have acted as the passenger acted under the circumstances disclosed by the evidence. This care has been defined to be, not the care which may or should be used by the prudent man generally, but the care which a man of ordinary prudence would use under similar circumstances, to avoid injury. (Thompson, Commentaries on Negligence, vol. 3, sec. 3010.) Or, it we prefer to adopt the mode of exposition used by this court in Picart vs. Smith (37 Phil. rep., 809), we may say that the test is this; Was there anything in the circumstances surrounding the plaintiff at the time he alighted from the train which would have admonished a person of average prudence that to get off the train under the conditions then existing was dangerous? If so, the plaintiff should have desisted from alighting; and his failure so to desist was contributory negligence. As the case now before us presents itself, the only fact from which a conclusion can be drawn to the effect that plaintiff was guilty of contributory negligence is that he stepped off the car without being able to discern clearly the condition of the platform and while the train was yet slowly moving. In considering the situation thus presented, it should not be overlooked that the plaintiff was, as we find, ignorant of the fact that the obstruction which was caused by the sacks of melons piled on the platform existed; and as the defendant was bound by reason of its duty as a public carrier to afford to its passengers facilities for safe egress from its trains, the plaintiff had a right to assume, in the absence of some circumstance to warn him to the contrary, that the platform was clear. The place, as we have already stated, was dark, or dimly lighted, and this also is proof of a failure upon the part of the defendant in the performance of a duty owing by it to the plaintiff; for if it were by any possibility

concede that it had right to pile these sacks in the path of alighting passengers, the placing of them adequately so that their presence would be revealed. As pertinent to the question of contributory negligence on the part of the plaintiff in this case the following circumstances are to be noted: The companys platform was constructed upon a level higher than that of the roadbed and the surrounding ground. The distance from the steps of the car to the spot where the alighting passenger would place his feet on the platform was thus reduced, thereby decreasing the risk incident to stepping off. The nature of the platform, constructed as it was of cement material, also assured to the passenger a stable and even surface on which to alight. Furthermore, the plaintiff was possessed of the vigor and agility of young manhood, and it was by no means so risky for him to get off while the train was yet moving as the same act would have been in an aged or feeble person. In determining the question of contributory negligence in performing such act that is to say, whether the passenger acted prudently or recklessly the age, sex, and physical condition of the passenger are circumstances necessarily affecting the safety of the passenger, and should be considered. Women, it has been observed, as a general rule are less capable than men of alighting with safety under such conditions, as the nature of their wearing apparel obstructs the free movement of the limbs. Again, it may be noted that the place was perfectly familiar to the plaintiff as it was his daily custom to get on and of the train at this station. There could, therefore, be no uncertainty in his mind with regard either to the length of the step which he was required to take or the character of the platform where he was alighting. Our conclusion is that the conduct of the plaintiff in undertaking to alight while the train was yet slightly under way was not characterized by imprudence and that therefore he was not guilty of contributory negligence. The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as a copyist clerk, and that the injuries he has suffered have permanently disabled him from continuing that employment. Defendant has not shown that any other gainful occupation is open to plaintiff. His expectancy of life, according to the standard mortality tables, is approximately thirty-three years. We are of the opinion that a fair compensation for the damage suffered by him for his permanent disability is the sum of P2,500, and that he is also entitled to recover of defendant the additional sum of P790.25 for medical attention, hospital services, and other incidental expenditures connected with the treatment of his injuries. The decision of lower court is reversed, and judgment is hereby rendered plaintiff for the sum of P3,290.25, and for the costs of both instances. So ordered. Arellano, C.J., Torres, Street and Avancea, JJ., concur. Separate Opinions MALCOLM, J., dissenting: With one sentence in the majority decision, we are of full accord, namely, It may be admitted that had plaintiff waited until the train had come to a full stop before alighting, the particular injury suffered by him could not have occurred. With the general rule relative to a passengers contributory

negligence, we are likewise in full accord, namely, An attempt to alight from a moving train is negligence per se. Adding these two points together, should be absolved from the complaint, and judgment affirmed. Johnson, J., concur.

JOSE CANGCO VS MANILA RAILROAD

38 PHIL. 768

FACTS:

Cangco, herein plaintiff, was an employee of the defendant in this case, Manila Railroad Company. Upon the occasion in question, plaintiff was returning home by train from his daily labors. As the train drew up to the station, plaintiff arose from his seat. As the train slowed down, plaintiff stepped off, but one or both of his feet came in contact with a sack of watermelons. As a result, his feet slipped from under him and he fell violently on the platform.

The accident occurred between 7-8 oclock on a dark night as the railroad station was lighted dimly, objects on the platform were difficult to discern especially to a person emerging from a lighted car.

Plaintiff sued the defendant company for damages. The latter interposed the defense that the direct and proximate cause of the injury suffered by the plaintiff was his own contributory negligence in failing to wait until the train had come to a complete stop before alighting.

ISSUE:

Should Manila Railroad be held liable?

RULING:

Yes. The Supreme Court reversed the decision of the lower court holding that it was important to note that the foundation of the legal liability of the defendant was the contract of carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the failure of defendant to exercise due care in its performance. That was to say, its liability was direct and immediate, differing essentially, in legal viewpoint from that presumptive responsibility for the negligence of its servants, imposed by article 1903 of the Civil Code, which can be rebutted by proof of the exercise of due care in their selection and supervision. Article 1903 of the Civil Code is not applicable to obligations arising ex contractu, but only to extra-contractual obligations, or to use the technical form of expression, that article relates only to culpa aquiliana and not to culpa contractual.

Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly points out this distinction, which was also recognized by this Court in its decision in the case of Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa clearly points out the difference between "culpa, substantive and independent, which of itself constitutes the source of an obligation between persons not formerly connected by any legal tie" and culpa considered as an accident in the performance of an obligation already existing . . . ."

On the railroad companys defense of contributory negligence on the part of Cangco, the Court held that the plaintiff was ignorant of the fact that the obstruction which was caused by the sacks of melds piled on the platform existed. Moreover, the place was dark or dimly lighted. Thus, there was failure on the part of the defendant to afford to its passengers facilities for safe egress from its trains.

IGNACIO BARZAGA, petitioner, vs. COURT ANGELITO ALVIAR, respondents. DECISION

BELLOSILLO, J.:

OF

APPEALS

and

The Fates ordained that Christmas 1990 be bleak for Ignacio Barzaga and his family. On the nineteenth of December Ignacio's wife succumbed to a debilitating ailment after prolonged pain and suffering. Forewarned by her attending physicians of her impending death, she expressed her wish to be laid to rest before Christmas day to spare her family from keeping lonely vigil over her remains while the whole of Christendom celebrate the Nativity of their Redeemer. Drained to the bone from the tragedy that befell his family yet preoccupied with overseeing the wake for his departed wife, Ignacio Barzaga set out to arrange for her interment on the twenty-fourth of December in obedience semper fidelis to her dying wish. But her final entreaty, unfortunately, could not be carried out. Dire events conspired to block his plans that forthwith gave him and his family their gloomiest Christmas ever. This is Barzaga's story. On 21 December 1990, at about three o`clock in the afternoon, he went to the hardware store of respondent Angelito Alviar to inquire about the availability of certain materials to be used in the construction of a niche for his wife. He also asked if the materials could be delivered at once. Marina Boncales, Alviar's storekeeper, replied that she had yet to verify if the store had pending deliveries that afternoon because if there were then all subsequent purchases would have to be delivered the following day. With that reply petitioner left. At seven o' clock the following morning, 22 December, Barzaga returned to Alviar's hardware store to follow up his purchase of construction materials. He told the store employees that the materials he was buying would have to be delivered at the Memorial Cemetery in Dasmarias, Cavite, by eight o'clock that morning since his hired workers were already at the burial site and time was of the essence. Marina Boncales agreed to deliver the items at the designated time, date and place. With this assurance, Barzaga purchased the materials and paid in full the amount of P2,110.00. Thereafter he joined his workers at the cemetery, which was only a kilometer away, to await the delivery. The construction materials did not arrive at eight o'clock as promised. At nine o' clock, the delivery was still nowhere in sight. Barzaga returned to the hardware store to inquire about the delay. Boncales assured him that although the delivery truck was not yet around it had already left the garage and that as soon as it arrived the materials would be brought over to the cemetery in no time at all. That left petitioner no choice but to rejoin his workers at the memorial park and wait for the materials. By ten o'clock, there was still no delivery. This prompted petitioner to return to the store to inquire about the materials. But he received the same answer from respondent's employees who even cajoled him to go back to the burial place as they would just follow with his construction materials.

After hours of waiting - which seemed interminable to him - Barzaga became extremely upset. He decided to dismiss his laborers for the day. He proceeded to the police station, which was just nearby, and lodged a complaint against Alviar. He had his complaint entered in the police blotter. When he returned again to the store he saw the delivery truck already there but the materials he purchased were not yet ready for loading. Distressed that Alviar's employees were not the least concerned, despite his impassioned pleas, Barzaga decided to cancel his transaction with the store and look for construction materials elsewhere. In the afternoon of that day, petitioner was able to buy from another store. But since darkness was already setting in and his workers had left, he made up his mind to start his project the following morning, 23 December. But he knew that the niche would not be finish in time for the scheduled burial the following day. His laborers had to take a break on Christmas Day and they could only resume in the morning of the twentysixth. The niche was completed in the afternoon and Barzaga's wife was finally laid to rest. However, it was two-and-a-half (2-1/2) days behind schedule. On 21 January 1991, tormented perhaps by his inability to fulfill his wife's dying wish, Barzaga wrote private respondent Alviar demanding recompense for the damage he suffered. Alviar did not respond. Consequently, petitioner sued him before the Regional Trial Court.[1] Resisting petitioner's claim, private respondent contended that legal delay could not be validly ascribed to him because no specific time of delivery was agreed upon between them. He pointed out that the invoices evidencing the sale did not contain any stipulation as to the exact time of delivery and that assuming that the materials were not delivered within the period desired by petitioner, the delivery truck suffered a flat tire on the way to the store to pick up the materials. Besides, his men were ready to make the delivery by ten-thirty in the morning of 22 December but petitioner refused to accept them. According to Alviar, it was this obstinate refusal of petitioner to accept delivery that caused the delay in the construction of the niche and the consequent failure of the family to inter their loved one on the twenty-fourth of December, and that, if at all, it was petitioner and no other who brought about all his personal woes. Upholding the proposition that respondent incurred in delay in the delivery of the construction materials resulting in undue prejudice to petitioner, the trial court ordered respondent Alviar to pay petitioner (a) P2,110.00 as refund for the purchase price of the materials with interest per annum computed at the legal rate from the date of the filing of the complaint, (b) P5,000.00 as temperate damages, (c) P20,000.00 as moral damages, (d) P5,000.00 as litigation expenses, and (e) P5,000.00 as attorney's fees. On appeal, respondent Court of Appeals reversed the lower court and ruled that there was no contractual commitment as to the exact time of delivery since this was not indicated in the invoice receipts covering the sale.[2] The arrangement to deliver the materials merely implied that delivery should be made within a reasonable time but that the conclusion that since petitioner's workers were already at the graveyard the delivery had to be made at that precise moment, is non-sequitur. The Court of Appeals also held that assuming that there was delay,

petitioner still had sufficient time to construct the tomb and hold his wife's burial as she wished. We sustain the trial court. An assiduous scrutiny of the record convinces us that respondent Angelito Alviar was negligent and incurred in delay in the performance of his contractual obligation. This sufficiently entitles petitioner Ignacio Barzaga to be indemnified for the damage he suffered as a consequence of delay or a contractual breach. The law expressly provides that those who in the performance of their obligation are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable for damages.[3] Contrary to the appellate court's factual determination, there was a specific time agreed upon for the delivery of the materials to the cemetery. Petitioner went to private respondent's store on 21 December precisely to inquire if the materials he intended to purchase could be delivered immediately. But he was told by the storekeeper that if there were still deliveries to be made that afternoon his order would be delivered the following day. With this in mind Barzaga decided to buy the construction materials the following morning after he was assured of immediate delivery according to his time frame. The argument that the invoices never indicated a specific delivery time must fall in the face of the positive verbal commitment of respondent's storekeeper. Consequently it was no longer necessary to indicate in the invoices the exact time the purchased items were to be brought to the cemetery. In fact, storekeeper Boncales admitted that it was her custom not to indicate the time of delivery whenever she prepared invoices.[4] Private respondent invokes fortuitous event as his handy excuse for that "bit of delay" in the delivery of petitioner's purchases. He maintains that Barzaga should have allowed his delivery men a little more time to bring the construction materials over to the cemetery since a few hours more would not really matter and considering that his truck had a flat tire. Besides, according to him, Barzaga still had sufficient time to build the tomb for his wife. This is a gratuitous assertion that borders on callousness. Private respondent had no right to manipulate petitioner's timetable and substitute it with his own. Petitioner had a deadline to meet. A few hours of delay was no piddling matter to him who in his bereavement had yet to attend to other pressing family concerns. Despite this, respondent's employees still made light of his earnest importunings for an immediate delivery. As petitioner bitterly declared in court " x x x they (respondent's employees) were making a fool out of me."[5] We also find unacceptable respondent's justification that his truck had a flat tire, for this event, if indeed it happened, was forseeable according to the trial court, and as such should have been reasonably guarded against. The nature of private respondent's business requires that he should be ready at all times to meet contingencies of this kind. One piece of testimony by respondent's witness Marina Boncales has caught our attention - that the delivery truck arrived a little late than usual because it came from a delivery of materials in Langcaan, Dasmarias, Cavite.[6] Significantly, this information was withheld by Boncales from petitioner when the latter was negotiating with her for the purchase of construction materials. Consequently, it is not unreasonable to

suppose that had she told petitioner of this fact and that the delivery of the materials would consequently be delayed, petitioner would not have bought the materials from respondent's hardware store but elsewhere which could meet his time requirement. The deliberate suppression of this information by itself manifests a certain degree of bad faith on the part of respondent's storekeeper. The appellate court appears to have belittled petitioner's submission that under the prevailing circumstances time was of the essence in the delivery of the materials to the grave site. However, we find petitioner's assertion to be anchored on solid ground. The niche had to be constructed at the very least on the twenty-second of December considering that it would take about two (2) days to finish the job if the interment was to take place on the twenty-fourth of the month. Respondent's delay in the delivery of the construction materials wasted so much time that construction of the tomb could start only on the twenty-third. It could not be ready for the scheduled burial of petitioner's wife. This undoubtedly prolonged the wake, in addition to the fact that work at the cemetery had to be put off on Christmas day. This case is clearly one of non-performance of a reciprocal obligation.[7] In their contract of purchase and sale, petitioner had already complied fully with what was required of him as purchaser, i.e., the payment of the purchase price of P2,110.00. It was incumbent upon respondent to immediately fulfill his obligation to deliver the goods otherwise delay would attach. We therefore sustain the award of moral damages. It cannot be denied that petitioner and his family suffered wounded feelings, mental anguish and serious anxiety while keeping watch on Christmas day over the remains of their loved one who could not be laid to rest on the date she herself had chosen. There is no gainsaying the inexpressible pain and sorrow Ignacio Barzaga and his family bore at that moment caused no less by the ineptitude, cavalier behavior and bad faith of respondent and his employees in the performance of an obligation voluntarily entered into. We also affirm the grant of exemplary damages. The lackadaisical and feckless attitude of the employees of respondent over which he exercised supervisory authority indicates gross negligence in the fulfillment of his business obligations. Respondent Alviar and his employees should have exercised fairness and good judgment in dealing with petitioner who was then grieving over the loss of his wife. Instead of commiserating with him, respondent and his employees contributed to petitioner's anguish by causing him to bear the agony resulting from his inability to fulfill his wife's dying wish. We delete however the award of temperate damages. Under Art. 2224 of the Civil Code, temperate damages are more than nominal but less than compensatory, and may be recovered when the court finds that some pecuniary loss has been suffered but the amount cannot, from the nature of the case, be proved with certainty. In this case, the trial court found that plaintiff suffered damages in the form of wages for the hired workers for 22 December 1990 and expenses incurred during the extra two (2) days of the wake. The record however does not show that petitioner presented proof of the actual amount of expenses he incurred which seems to be the reason the trial court awarded to him temperate damages instead. This is an erroneous application of the

concept of temperate damages. While petitioner may have indeed suffered pecuniary losses, these by their very nature could be established with certainty by means of payment receipts. As such, the claim falls unequivocally within the realm of actual or compensatory damages. Petitioner's failure to prove actual expenditure consequently conduces to a failure of his claim. For in determining actual damages, the court cannot rely on mere assertions, speculations, conjectures or guesswork but must depend on competent proof and on the best evidence obtainable regarding the actual amount of loss.[8] We affirm the award of attorney's fees and litigation expenses. Award of damages, attorney's fees and litigation costs is left to the sound discretion of the court, and if such discretion be well exercised, as in this case, it will not be disturbed on appeal.[9] WHEREFORE, the decision of the Court of Appeals is REVERSED and SET ASIDE except insofar as it GRANTED on a motion for reconsideration the refund by private respondent of the amount of P2,110.00 paid by petitioner for the construction materials. Consequently, except for the award of P5,000.00 as temperate damages which we delete, the decision of the Regional Trial Court granting petitioner (a)P2,110.00 as refund for the value of materials with interest computed at the legal rate per annum from the date of the filing of the case; (b)P20,000.00 as moral damages; (c) P10,000.00 as exemplary damages; (d) P5,000.00 as litigation expenses; and (4) P5,000.00 as attorney's fees, is AFFIRMED. No costs. SO ORDERED. Padilla, (Chairman), Vitug, Kapunan, and Hermosisima, Jr., JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-49353 June 11, 1981 THE OVERSEAS BANK OF MANILA, petitioners, vs. COURT OF APPEALS and TONY D. TAPIA, in his capacity as Attorney-in-Fact of ENRIQUETA MICHEL DE CHAMPOURCIN respondents.

BARREDO, J.:

Petition for review of the decision of the Court of Appeals in CA-G.R. No. 44766-R, Tony D. Tapia, etc. vs. The Overseas Bank of Manila and the denial of the motion for reconsideration thereof. That judgment affirmed in toto the decision of the Court of First Instance of Manila, Branch IV, in Civil Case No. 69876, for collection of money, reading thus: WHEREFORE, judgment is hereby rendered in favor of the plaintiff against the herein defendant ordering the latter (1) to pay plaintiff the sum of P100,000.00 representing the value of its time deposit together with interest thereon at 4-1/2 % per annum from November 9, 1964 until the whole amount shall have been fully paid; (2) to pay attomey's fees in the amount of P1,000.00 it appearing that defendant's unjust and malicious refusal to pay has compelled plaintiff to litigate and secure services of counsel; and to pay costs. (Page 22, Record.) Actually, this case is simple enough but of undoubtedly great interest and grave importance to the banking community. It was for this reason that after denying originally the herein petition, We found it proper to give the same due course after petitioner filed a forceful and well-reasoned second motion for reconsideration. In petitioner's counsel's "Statement of the Case and of Matters Involved", it is stated that: Private respondent TONY D. TAPIA, in his capacity as attorney-in-fact of ENRIQUETA MICHEL DE CHAMPOURCIN (TAPIA), instituted the present action in the Court of First Instance of Manila against petitioner, The Overseas Bank of Manila (TOBM), to enforce collection of the proceeds of a time deposit for which TOBM had issued a certificate for P100,000.00, with an interest rate of 4-1/2 % per annum (Exh. "A"). After trial, the trial court rendered judgment for TAPIA the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiff against the herein defendant ordering the latter (1) to pay plaintiff the sum of P100,000.00 representing the value of its time deposit together with interest thereon at 41/2% per annum from November 9, 1964 until the whole amount shall have been fully paid: Not satisfied, TOBM interposed an appeal. In the meantime, during the pendency of this case, certain developments took place with respect to TOBM which were taken note of by the Court of Appeals in its resolution dated November 3, 1978, thus: This Court took note of the fact that on July 31, 1968, TOBM was excluded by the Central Bank under Monetary Board Resolution No. 1263 from inter-bank clearing, that on August 1, 1968, its operations were suspended under Central Bank Resolution No. 1290; and that on August 13, 1968, it was completely forbidden by the Central Bank in its Resolution No. 1333 to do business preparatory to its forcible liquidation. These Resolutions were, however, annulled and set aside by the Supreme Court in its decision in Ramos vs. Central Bank, L29350, promulgated October 4, 1971. To assure maximum protection to its depositors, creditors and the public interest, the rehabilitation,

normalization and stabilization thereof was also ordered by the Supreme Court in its resolution dated February 24, 1972. Pursuant thereto, both TOBM and the Central Bank submitted a Program of Rehabilitation of TOBM which was approved by the Supreme Court in its Resolution in L-29353, October 23, 1974 (60 SCRA 278). (C.A. Resolution dated Nov. 3, 1978, Appendix 'B', p. XVII.) It must be noted that the said resolutions of the Central Bank were held by this Honorable Supreme Court to have been "adopted in abuse of discretion equivalent to excess of jurisdiction" (Ramos vs. Central Bank, 41 SCRA 565). Equally noteworthy, however, is that the CB resolution suspending TOBM's business operations had actually been implemented starting 2 August 1968, (id.) before it was annulled, and that as of this writing TOBM has yet to resume operations in accordance with the aforesaid program of rehabilitation approved by this Honorable Supreme Court. In the decision it rendered in the instant case, (C.A. Decision, Appendix "A", p. V) the Court of Appeals affirmed in toto the trial court's judgment, which, as aforeseen, orders TOBM, among other things, to pay plaintiff the sum of P100,000.00 representing the value of its time deposit together with interest thereon at 4-1/2% per annum until the whole amount shall have been fully paid. TOBM moved respondent Court of Appeals to reconsider its judgment on two grounds, namely, (a) the suspension of operations of TOBM by the Central Bank likewise suspends payment of accrued interest, and (b) respondent Court's judgment must conform to the program of rehabilitation of TOBM approved by this Supreme Court. The Court of Appeals, acting on the motion for reconsideration, issued its resolution (Appendix 'B' hereto dated November 3, 1978, declaring In as much as a Program of Rehabilitation of the TOBM has been approved by the Supreme Court as above-mentioned, the execution of the decision in question should be made in accordance with the provision thereof, especially paragraph 3, sub-paragraph 4, Phase 1Rehabilitation. WHEREFORE, the motion for reconsideration is granted, and the dispositive portion of the decision, dated September 19, 1978, is hereby amended, so as to read as follows: WHEREFORE, the judgment appealed from is hereby affirmed in toto but the execution thereof should be in accordance with the provision of the Program of Rehabilitation of TOBM as approved by the Supreme Court in its resolution in G.R. No. L-29352 dated October 23, 1974 (60 SCRA 278) especially paragraph 3, Subparagraph 4, Phase 1, Rehabilitation, to quote: 34 Petitioners shall effect an agreement with OBM's depositors and creditors, singly or collectively, for the conversion of their deposits and claims into bills payable under plans mutually acceptable to the parties concerned, with the end in view that payments

of all deposits and claims against OBM may be made after a period three (3) years from date of suspension of normal banking operations. However, in the event that said program of rehabilitation is revoked or failed to materialize, the execution of the judgment is further subject to any subsequent development or charge that will be taken and considered by the Supreme Court and/or Central Bank in the premises, regarding the payments of deposits and claims against the Overseas Bank of Manila. (pp. XX, Court of Appeals' Resolution dated Nov. 3, 1978, Appendix "B" hereof). Thus, while the resolution purports to grant TOBM's motion for reconsideration, actually it reiterates its affirmance of the trial court's judgment in toto and rejects TOBM's prayer to be declared exempt from liability for interest on the deposit during the suspension of its business operations by the Central Bank, declaring: Appellant TOBM has not been declared insolvent. The suspension of its operations in 1968 was merely temporary. Its assets and properties were intact including its various investments, the management of which was taken over by the Central Bank to protect its depositors and creditors. Hence, there could be no justifiable reason to suspend the payment of the accrued interests on the appellee's time deposit of P100,000.00 which has been long overdue. The payment of interest thereon at 4-1/2% per annum from November 9, 1964 ordered by the lower court as wen as this Court upon the appellant is in accordance with the agreement embodied in the certificate of deposit, Exhibit "A", issued by the bank in favor of the appellee. Such agreement is the law between the parties and it should be complied with (Art. 1159, NCC). The mere suspension of its operation which was temporary could not excuse the appellant from complying with its obligation. The effect of the suspension and declared insolvency of a bank is to make its deposits due and actionable and a depositor then is entitled to interest on his deposits from the date of such suspension (10 Am. Jr. 2d. p. 389). The cases cited by the appellant in its motion has no application in this case for these refer to instances where the bank has been declared insolvent. This is not the situation prevailing in the case at bar.' Moreover, while the resolution also purports to declare that the execution of the judgment of the trial court should be in accordance with the Program of Rehabilitation of TOBM as approved by the Supreme Court, this is negated by its aforesaid reaffirmance in toto of the trial court's judgment, which holds TOBM totally liable to TAPIA. On the other hand, private respondent's brief begins thus: Herein respondents respectfully beg leave of Court to adopt as their own the Statement of the Case and of Matters Involved in the petitioner's Brief, the same being in consonance with the records of the case.

To begin with, we wish to call the attention of this Honorable Tribunal that the only ground upon which the present petition is predicated reads as follows: The suspension of operations of the Overseas Bank of Manila on August 1, 1968 by the Monetary Board likewise suspends payment of accrued interest contrary to the decision of this Honorable Court affirming in toto the decision of the Court of First Instance ordering defendant-appellant to pay plaintiff-appellee the sum of P100,000.00 representing the value of its time deposit together with interest thereon at 4-1/2% per annum from November 9, 1964 until the whole amount shall have been fully paid despite the suspension of operations and closing of the Bank by the Monetary Board on August 1, 1968 and August 13, 1968, respectively (Petition, p. 10). Apparently, the only issue in this case is whether or not the Petitioner is exempt from the payment of interest on the private respondent's time deposit of P100,000.00 for the period that its business operations were suspended by the Central Bank. We respectfully submit that under the facts of the case, the petitioner should be required to pay the accrued interest. And since the payment of the principal time deposit of P100,000.00 by the petitioner to the private respondent is no longer at issue, we shall focus our discussion on the subject of accrued interests as raised by the petitioner in its Assignment of Errors. (Pages 1-2) Briefly then" the general and main issue submitted for Our resolution is: When a bank is excluded by the Central Bank from inter-bank clearing, and a day later further suspended from operation, and thirteen days afterwards completely forbidden by the same (Central Bank) to do business preparatory to its forcible liquidation, but subsequently, the Supreme Court temporarily restrains the mentioned Central Bank's orders and ultimately renders a decision nullifying the same, (41 SCRA 565) with subsequent directives for the rehabilitation, normalization and stabilization thereof, under a formula approved by the Court, (60 SCRA 276) and the process of such rehabilitation, normalization and stabilization is considerably delayed, thru no fault of the bank, but due to usually difficult and lengthy procedures and transactions directed towards such end, is a person who has deposited money in said bank before the Central Bank's orders were issued, entitled to the payment of interest on his deposit that accrues during all the period from the bank's factual closure to its actual reopening for normal business? To make this statement of the issue more complete, it may be added that although private respondent does not dispute that there was complete paralization of the bank from August 13, 1968, he insists that since technically the bank was not placed under liquidation because of the decision of the Supreme Court, its obligation, contractual in nature, to pay him interest may not be deemed excused and should be enforced. Private respondent admits though that in cases of actual liquidation of a bank, it is justifiable for it not to pay interest of the nature here in dispute. Thus, Our task is narrowed down to the resolution of the legal problem of whether or not, for purposes of the payment of the interest here in question, stoppage of the operations of a bank by a legal order of liquidation may be equated with actual cessation of the bank's operation, not different, factually speaking, in its effects, from legal liquidation, the factual cessation having been ordered by the Central Bank. In the case of Chinese Grocer's Association, et al, vs. American Apothecaries, 65 Phil. 395, this Court held:

As to the second assignment of error, this court, in G.R. No. 43682, In re Liquidation of the Mercantile Bank of China, Tan Tiong Tick, claimant and appellant, vs. American Apothecaries, C., et al, claimants and appellees, through Justice Imperial, held the following: 4. The court held that the appellant is not entitled to charge interest on the amounts of his claims, and this is the object of the second assignment of error. Upon this point a distinction must be made between the interest which the deposits should earn from their existence until the bank ceased to operate, and that which they may earn from the, time the bank's operations were stopped until the date, of payment of the deposits. As to the first class, we hold that it should be paid because such interest has been earned in the ordinary course of the bank's business and before the latter has been declared in a state of liquidation. Moreover, the bank being authorized by law to make use of the deposits, with the station stated, to invest the same in its business and other operations, it may be presumed that it bound itself to pay interest to the depositors as in fact it paid interest prior to the dates of the said claims. As to the interest which may be charged from the date the bank ceased to do business because it was declared in a state of liquidation, we hold that the said interest should not be paid. The Court of Appeals considered this ruling inapplicable to the instant case, precisely because, as contended by private respondent, the said Apothecaries case had in fact in contemplation a valid order of liquidation of the bank concerned, whereas here, the order of the Central Bank of August 13, 1968 completely forbidding herein petitioner to do business preparatory to its liquidation was first restrained and then nullified by this Supreme Court. In other words, as far as private respondent is concerned, it is the legal reason for cessation of operations, not the actual cessation thereof, that matters and is decisive insofar as his right to the continued payment of the interest on his deposit during the period of cessation is concerned. In the light of the peculiar circumstances of this particular case, We disagree. It is Our considered view, after mature deliberation, that it is utterly unfair to award private respondent his prayer for payment of interest on his deposit during the period that petitioner bank was not allowed by the Central Bank to operate. It is a matter of common knowledge, which We take judicial notice of, that what enables a bank to pay stipulated interest on money deposited with it is that thru the other aspects of its operation it is able to generate funds to cover the payment of such interest. Unless a bank can lend money, engage in international transactions, acquire foreclosed mortgaged properties or their proceeds and generally engage in other banking and financing activities from which it can derive income, it is inconceivable how it can carry on as a depository obligated to pay stipulated interest. Conventional wisdom dictates this inexorable fair and just conclusion. And it can be said that all who deposit money in banks are aware of such a simple economic proposition. Consequently, it should be deemed read into every contract of deposit with a bank that the obligation to pay interest on the deposit ceases the moment the operation of the bank is completely suspended by the duly constituted authority, the Central Bank. We consider it of trivial consequence that the stoppage of the bank's operation by the Central Bank has been subsequently declared illegal by the Supreme Court, for before the Court's order, the bank

had no alternative under the law than to obey the orders of the Central Bank. Whatever be the juridical significance of the subsequent action of the Supreme Court, the stubborn fact remained that the petitioner was totally crippled from then on from earning the income needed to meet its obligations to its depositors. If such a situation cannot, strictly speaking, be legally denominated as "force majeure", as maintained by private respondent, We hold it is a matter of simple equity that it be treated as such. What is more, private respondent overlooks the fact that as noted in the very resolution of the Court of Appeals of November 3, 1978 granting petitioner's motion for reconsideration, said Court could not but take into account that petitioner's manner or mode of rehabilitation, normalization and stabilization was placed by the resolution of the Supreme Court of February 24, 1972 in the hands of the Central Bank, for it "to seek practical solutions in all good faith for such rehabilitation." Pursuant to said resolution, a "Program of Rehabilitation of TOBM (herein petitioner)" was submitted to this Court and We approved said program only on October 23, 1974. But that approval did not yet put petitioner back on its feet. The Central Bank, evidently in accordance with law, continued to refuse to allow it to operate until the program approved by the Court could materialize. Thus, after October 23, 1976, steps were continuously taken along that direction, and, as it is now of public knowledge, it was only this year 1981, that petitioner, with another name and another management has been allowed to reopen. In the aforementioned resolution of the Court of Appeals of November 3, 1978, it revised the dispositive portion of its original decision in the following manner: WHEREFORE, the motion for reconsideration is granted, and the dispositive portion of the decision dated September 19, 1978, is hereby amended, so as to read as follows: WHEREFORE, the judgment appealed from is hereby affirmed in toto, but the execution thereof should be in accordance with the provision of the Program of Rehabilitation of TOBM as approved by the Supreme Court in its resolution in G. R. No. L-29352 dated October 23, 1974 (60 SCRA 278) especially paragraph 3, subparagraph 4, Phase 1, Rehabilitation to quote: 34 Petitioners shall effect an agreement with OBM's depositors and creditors, singly or collectively, for the conversion of their deposits and claims into bills payable under plans mutually acceptable to the parties concerned, with the end in view that payments of all deposits and claims against OBM may be made after a period of three (3) years from date of resumption of normal banking operations.' However, in the event that said program of rehabilitation is revoked or failed to materialize, the execution of the judgment is further subject to any subsequent development or change that will be taken and considered by the Supreme Court and/or Central Bank in the premises, regarding the payments of deposits and claims against the Ovarseas Bank of Manila. (Pp. 33-34, Record.) Peculiarly, however, while the Appellate Court resolved to "grant" petitioner's motion for reconsideration, it still maintained its judgment affirming in toto the decision of the trial court, albeit it made the execution thereof subject to the conditions aforequoted. Naturally, petitioner could not be

contented with such modification, hence the present petition before Us asking, in effect, for the reversal of the foregoing resolution of the Court of Appeals which left it with the obligation to pal the interest private respondent is demanding, as if it were legally possible for the Court of Appeals to ignore or modify the "Program of Rehabilitation" approved by this Court, which providesinter alia that:
3.4. Petitioners shall effect an agreement with OBM's depositors and creditors, singly or collectively, for the conversion of their deposits and claims into bills payable under plans mutually acceptable to the parties concerned, with the end in view that payments of all deposits and claims against OBM may be made after a period of three (3) years from date of resumption of normal banking operation. (1)

xxx xxx xxx PHASE II NORMALIZATION AND STABILIZATION This phase shall be undertaken only when all the conditions for rehabilitation of OBM as speciffied in Phase I have been fulfilled and/or complied with by petitioners. Banking operations and transactions which OBM may be allowed to perform shall be in accordance with such authority as the Monetary Board, upon recommendation of the Director, Department of Commercial & Savings Banks, may deem proper to extend OBM. OBM may be allowed to resume normal banking operations only when, in addition to standard conditions prevailing in normal banking institutions: 1. It has reduced its loans/accounts receivable by at least 75% of the aggregate amount outstanding as of the start of the rehabilitation phase; 2. A program of paying depositors and creditors has been accepted singly or collectively by all such depositors and creditors, including Government instrumentalities and the Philippine National Bank; 3. The issues relative to penalties and interests mentioned in paragraph 3.8 hereof have been resolved either judicially or extrajudicially. The Comptroller-designate and the committee-of-three mentioned in paragraph 2.7 herein shall continue to function for as long as OBM has not been allowed to resume normal banking operations. (Pp. 283-285, 60 SCRA.) Nowhere in the above program is there anything indicating that depositors are entitled to interest. Paragraph 3.4 of the same refers to deposits exclusively. If the Central Bank authorities or the Supreme Court had in mind the payment also of interest on such deposits, either of those authorities would have required clear language to such effect be included in the program. It is understandable why nothing of that sort was required. As We have explained earlier, the complete factual suspension of petitioner's operation as a bank disabled it to commit itself to the payment of such interest. Hopefully, petitioner may be able to resume operations and recover its standing as a normal bank. But it is almost vain to expect that within the forseeable future, it would be in a position to pay in full even at least the deposits themselves, not to mention the interest thereon. In justice and equity, having been subjected to what the Supreme Court has found to be an unfortunate express or

abuse by the Central Bank of the exercise of its authority under the law, it would be, to put it tritely "squeezing blood out of turnip" for Us to grant private respondent's demand. Parenthetically, We may add for the guidance of those who might be concerned, and so that unnecessary litigations may be avoided from further clogging the dockets of the courts, that in the light of the considerations expounded in the above opinion, the same formula that exempts petitioner from the payment of interest to its depositors during the whole period of factual stoppage of its operations by orders of the Central Bank, modified in effect by the decision as well as the approval of a formula of rehabilitation by this Court, should be, as a .Matter of consistency, applicable or followed in respect to all other obligations of petitioner which could not be paid during the period of its actual complete closure. PREMISES CONSIDERED, judgment is hereby rendered modifying the decision of the Court of Appeals under review in the sense that the judgment of the trial court requiring petitioner to pay interest on private respondent's deposit from August 13, 1968 up to the reopening for normal operations of petitioner is reversed, and petitioner is declared free from any liability therefor, and that with regard to his deposit of P100,000.00, it is Our judgment that he secure payment thereof by negotiating with petitioner in accordance with the terms of the Rehabilitation Program of TOBM approved by this Court on October 23, 1974. No costs. Fernandez, Guerrero, Abad Santos and De Castro, JJ., concur.

Footnotes (1) Notably, the Appellate Court did quote this paragraph in its amendatory resolution but evidently failed to grasp its full import.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-29640 June 10, 1971 GUILLERMO AUSTRIA, petitioner, vs.

THE COURT OF APPEALS (Second Division), PACIFICO ABAD and MARIA G. ABAD, respondents. Antonio Enrile Inton for petitioner. Jose A. Buendia for respondents.

REYES, J.B.L., J.: Guillermo Austria petitions for the review of the decision rendered by the Court of Appeal (in CAG.R. No. 33572-R), on the sole issue of whether in a contract of agency (consignment of goods for sale) it is necessary that there be prior conviction for robbery before the loss of the article shall exempt the consignee from liability for such loss. In a receipt dated 30 January 1961, Maria G. Abad acknowledged having received from Guillermo Austria one (1) pendant with diamonds valued at P4,500.00, to be sold on commission basis or to be returned on demand. On 1 February 1961, however, while walking home to her residence in Mandaluyong, Rizal, Abad was said to have been accosted by two men, one of whom hit her on the face, while the other snatched her purse containing jewelry and cash, and ran away. Among the pieces of jewelry allegedly taken by the robbers was the consigned pendant. The incident became the subject of a criminal case filed in the Court of First Instance of Rizal against certain persons (Criminal Case No. 10649, People vs. Rene Garcia, et al.). As Abad failed to return the jewelry or pay for its value notwithstanding demands, Austria brought in the Court of First Instance of Manila an action against her and her husband for recovery of the pendant or of its value, and damages. Answering the allegations of the complaint, defendants spouses set up the defense that the alleged robbery had extinguished their obligation. After due hearing, the trial court rendered judgment for the plaintiff, and ordered defendants spouses, jointly and severally, to pay to the former the sum of P4,500.00, with legal interest thereon, plus the amount of P450.00 as reasonable attorneys' fees, and the costs. It was held that defendants failed to prove the fact of robbery, or, if indeed it was committed, that defendant Maria Abad was guilty of negligence when she went home without any companion, although it was already getting dark and she was carrying a large amount of cash and valuables on the day in question, and such negligence did not free her from liability for damages for the loss of the jewelry. Not satisfied with his decision, the defendants went to the Court of Appeals, and there secured a reversal of the judgment. The appellate court overruling the finding of the trial court on the lack of credibility of the two defense witnesses who testified on the occurrence of the robbery, and holding that the facts of robbery and defendant Maria Abad's possesion of the pendant on that unfortunate day have been duly published, declared respondents not responsible for the loss of the jewelry on account of a fortuitous event, and relieved them from liability for damages to the owner. Plaintiff thereupon instituted the present proceeding. It is now contended by herein petitioner that the Court of Appeals erred in finding that there was robbery in the case, although nobody has been found guilty of the supposed crime. It is petitioner's theory that for robbery to fall under the category of a fortuitous event and relieve the obligor from his obligation under a contract, pursuant to Article 1174 of the new Civil Code, there ought to be prior finding on the guilt of the persons responsible therefor. In short, that the occurrence of the robbery should be proved by a final judgment of conviction in the criminal case. To adopt a different view,

petitioner argues, would be to encourage persons accountable for goods or properties received in trust or consignment to connive with others, who would be willing to be accused in court for the robbery, in order to be absolved from civil liability for the loss or disappearance of the entrusted articles. We find no merit in the contention of petitioner. It is recognized in this jurisdiction that to constitute a caso fortuito that would exempt a person from responsibility, it is necessary that (1) the event must be independent of the human will (or rather, of the debtor's or obligor's); (2) the occurrence must render it impossible for the debtor to fulfill the obligation in a normal manner; and that (3) the obligor must be free of participation in or aggravation of the injury to the creditor. 1 A fortuitous event, therefore, can be produced by nature, e.g., earthquakes, storms, floods, etc., or by the act of man, such as war, attack by bandits, robbery, 2 etc., provided that the event has all the characteristics enumerated above. It is not here disputed that if respondent Maria Abad were indeed the victim of robbery, and if it were really true that the pendant, which she was obliged either to sell on commission or to return to petitioner, were taken during the robbery, then the occurrence of that fortuitous event would have extinguished her liability. The point at issue in this proceeding is how the fact of robbery is to be established in order that a person may avail of the exempting provision of Article 1174 of the new Civil Code, which reads as follows: ART. 1174. Except in cases expressly specified by law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. It may be noted the reform that the emphasis of the provision is on the events, not on the agents or factors responsible for them. To avail of the exemption granted in the law, it is not necessary that the persons responsible for the occurrence should be found or punished; it would only be sufficient to established that the enforceable event, the robbery in this case did take place without any concurrent fault on the debtor's part, and this can be done by preponderant evidence. To require in the present action for recovery the prior conviction of the culprits in the criminal case, in order to establish the robbery as a fact, would be to demand proof beyond reasonable doubt to prove a fact in a civil case. It is undeniable that in order to completely exonerate the debtor for reason of a fortutious event, such debtor must, in addition to the cams itself, be free of any concurrent or contributory fault or negligence. 3 This is apparent from Article 1170 of the Civil Code of the Philippines, providing that: 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. It is clear that under the circumstances prevailing at present in the City of Manila and its suburbs, with their high incidence of crimes against persons and property that renders travel after nightfall a matter to be sedulously avoided without suitable precaution and protection, the conduct of respondent Maria G. Abad, in returning alone to her house in the evening, carrying jewelry of considerable value would be negligent per se and would not exempt her from responsibility in the case of a robbery. We are not persuaded, however, that the same rule should obtain ten years previously, in 1961, when the robbery in question did take place, for at that time criminality had not by far reached the levels attained in the present day.

There is likewise no merit in petitioner's argument that to allow the fact of robbery to be recognized in the civil case before conviction is secured in the criminal action, would prejudice the latter case, or would result in inconsistency should the accused obtain an acquittal or should the criminal case be dismissed. It must be realized that a court finding that a robbery has happened would not necessarily mean that those accused in the criminal action should be found guilty of the crime; nor would a ruling that those actually accused did not commit the robbery be inconsistent with a finding that a robbery did take place. The evidence to establish these facts would not necessarily be the same. WHEREFORE, finding no error in the decision of the Court of Appeals under review, the petition in this case is hereby dismissed with costs against the petitioner. Concepcion, C.J., Dizon, Makalintal, Zaldivar, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ., concur. Castro, J., took no part.