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SABINA EXCONDE, Plaintiff-Appellant, v.

DELFIN CAPUNO and DANTE


CAPUNO, Defendants-Appellees.
Magno T. Bueser for Appellant.
Alvero Law Offices & Edon B. Brion and Vencedor A. Alimario
for Appellees.

SYLLABUS

1. CIVIL LIABILITY OF PARENTS FOR DAMAGES CAUSED BY THEIR


MINOR CHILDREN; RELIEF FROM LIABILITY. The civil liability which the
law imposes upon the father, and, in case of his death or incapacity, the
mother, for any damages that may be caused by the minor children who live
with them is a necessary consequence of the parental authority they
exercise over them which imposes upon the parents the "duty of supporting
them, keeping them in their company, educating them and instructing them
in proportion to their means", while, on the other hand, gives them the "right
to correct and punish them in moderation" (Articles 154 and 155, Spanish
Civil Code). The only way by which they can relieve themselves of such
liability is if they prove that they exercised all the diligence of a good father of
a family to prevent the damage (Article 1903, last paragraph, Spanish Civil
Code).
2. ID.; LIABILITY OF TEACHERS OR DIRECTOR; INSTITUTIONS
AFFECTED. The civil liability imposed by Article 1903 of the old Civil
Code on teachers or directors of arts and trades for damages caused by
pupils or apprentices under their custody, only applies to an institution of arts
and trades and not to any academic educational institution.

DECISION

BAUTISTA ANGELO, J.:

Dante Capuno, son of Delfin Capuno, was accused of double homicide


through reckless imprudence for the death of Isidoro Caperia and Amado
Ticzon on March 31, 1949 in the Court of First Instance of Laguna (Criminal

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[G.R. No. L-10134. June 29, 1957.]

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Case No. 15001). During the trial, Sabina Exconde, as mother of the
deceased Isidoro Caperia, reserved her right to bring a separate civil action
for damages against the accused. After trial, Dante Capuno was found guilty
of the crime charged and, on appeal, the Court of Appeals affirmed the
decision. Dante Capuno was only fifteen (15) years old when he committed
the crime.
In line with her reservation, Sabina Exconde filed the present action against
Delfin Capuno and his son Dante Capuno asking for damages in the
aggregate amount of P2,959.00 for the death of her son Isidoro Caperia.
Defendants set up the defense that if any one should be held liable for the
death of Isidoro Caperia, he is Dante Capuno and not his father Delfin
because at the time of the accident, the former was not under the control,
supervision and custody of the latter. This defense was sustained by the
lower court and, as a consequence, it only convicted Dante Capuno to pay
the damages claimed in the complaint. From this decision, plaintiff appealed
to the Court of Appeals but the case was certified to us on the ground that
the appeal only involves questions of law.
It appears that Dante Capuno was a member of the Boy Scouts
Organization and a student of the Balintawak Elementary School situated in
a barrio in the City of San Pablo and on March 31, 1949 he attended a
parade in honor of Dr. Jose Rizal in said city upon instruction of the city
schools supervisor. From the school Dante, with other students, boarded a
jeep and when the same started to run, he took hold of the wheel and drove
it while the driver sat on his left side. They have not gone far when the jeep
turned turtle and two of its passengers, Amado Ticzon and Isidoro Caperia,
died as a consequence. It further appears that Delfin Capuno, father of
Dante, was not with his son at the time of the accident, nor did he know that
his son was going to attend a parade. He only came to know it when his son
told him after the accident that he attended the parade upon instruction of
his teacher.
The only issue involved in this appeal is whether defendant Delfin Capuno
can be held civilly liable, jointly and severally with his son Dante, for
damages resulting from the death of Isidoro Caperia caused by the
negligent act of minor Dante Capuno.
The case comes under Article 1903 of the Spanish Civil Code, paragraph 1
and 5, which provides:jgc:chanrobles.com.ph
"ART. 1903. The obligation imposed by the next preceding articles is
enforceable not only for personal acts and omissions, but also for those of
persons for whom another is responsible.

Finally, teachers or directors of arts and trades are liable for any damages
caused by their pupils or apprentices while they are under their
custody."cralaw virtua1aw library
Plaintiff contends that defendant Delfin Capuno is liable for the damages in
question jointly and severally with his son Dante because at the time the
latter committed the negligent act which resulted in the death of the victim,
he was a minor and was then living with his father, and inasmuch as these
facts are not disputed, the civil liability of the father is evident. And so,
plaintiff contends, the lower court erred in relieving the father from liability.
We find merit in this claim. It is true that under the law above quoted,
"teachers or directors of arts and trades are liable for any damages caused
by their pupils or apprentices while they are under their custody", but this
provision only applies to an institution of arts and trades and not to any
academic educational institution (Padilla, Civil Law, 1953, Ed., Vol. IV, p.
841; See 12 Manresa, 4th Ed., p. 557). Here Dante Capuno was then a
student of the Balintawak Elementary School and as part of his extracurricular activity, he attended the parade in honor of Dr. Jose Rizal upon
instruction of the city schools supervisor. And it was in connection with that
parade that Dante boarded a jeep with some companions and while driving
it, the accident occurred. In the circumstances, it is clear that neither the
head of that school, nor the city schools supervisor, could be held liable for
the negligent act of Dante because he was not then a student of an
institution of arts and trades as provided for by law.
The civil liability which the law impose upon the father, and, in case of his
death or incapacity, the mother, for any damages that may be caused by the
minor children who live with them, is obvious. This is a necessary
consequence of the parental authority they exercise over them which
imposes upon the parents the "duty of supporting them, keeping them in
their company, educating them and instructing them in proportion to their
means", while, on the other hand, gives them the "right to correct and punish
them in moderation" (Articles 154 and 155, Spanish Civil Code). The only
way by which they can relieve themselves of this liability is if they prove that
they exercised all the diligence of a good father of a family to prevent the
damage (Article 1903, last paragraph, Spanish Civil Code). This defendants
failed to prove.

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The father, and, in case of his death or incapacity, the mother, are liable for
any damages caused by the minor children who live with them.

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Wherefore, the decision appealed from is modified in the sense that
defendants Delfin Capuno and Dante Capuno shall pay to plaintiff, jointly
and severally, the sum of P2,959.00 as damages, and the costs of action.
Bengzon, Montemayor, Labrador and Endencia, JJ., concur.
Paras, C.J., concurs in the result.
Separate Opinions
REYES, J.B.L., J., dissenting:chanrob1es virtual 1aw library
After mature consideration I believe we should affirm the judgment relieving
the father of liability. I can see no sound reason for limiting Art. 1903 of the
old Civil Code to teachers of arts and trades and not to academic ones.
What substantial difference is there between them in so far as concerns the
proper supervision and vigilance over their pupils? It cannot be seriously
contended that an academic teacher is exempt from the duty of watching
that his pupils do not commit a tort to the detriment of third persons, so long
as they are in a position to exercise authority and supervision over the pupil.
In my opinion, in the phrase "teachers or heads of establishments of arts
and trades" used in Art. 1903 of the old Civil Code, the words "arts and
trades" does not qualify "teachers" but only "heads of establishments." The
phrase is only an updated version of the equivalent terms "preceptores y
artesanos" used in the Italian and French Civil Codes.
If, as conceded by all commentators, the basis of the presumption of
negligence of Art. 1903 in some culpa in vigilando that the parents, teachers,
etc. are supposed to have incurred in the exercise of their authority, it would
seem clear that where the parent places the child under the effective
authority of the teacher, the latter, and not the parent, should be the one
answerable for the torts committed while under his custody, for the very
reason that the parent is not supposed to interfere with the discipline of the
school nor with the authority and supervision of the teacher while the child is
under instruction. And if there is no authority, there can be no responsibility.
In the case before us, there is no question that the pupil, Dante Capuno, was
instructed by the City School Supervisor to attend the Rizal parade. His
father could not properly refuse to allow the child to attend, in defiance of the
school authorities. The father had every reason to assume that in ordering a
minor to attend a parade with other children, the school authorities would
provide adequate supervision over them. If a teacher or scout master was
present, then he should be the one responsible for allowing the minor to
drive the jeep without being qualified to do so. On the other hand, if no

At any rate, I submit that the father should not be held liable for a tort that he
was in no way able to prevent, and which he had every right to assume the
school authorities would avoid. Having proved that he entrusted his child to
the custody of school authorities that were competent to exercise vigilance
over him, the father has rebutted the presumption of Art. 1903 and the
burden of proof shifted to the claimant to show actual negligence on the part
of the parent in order to render him liable.
Padilla and Reyes, A., JJ., concur.

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teacher or master was at hand to watch over the pupils, the school
authorities are the ones answerable for that negligence, and not the father.

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[G.R. No. L-24101. September 30, 1970.]


MARIA TERESA Y. CUADRA, minor represented by her father ULISES P.
CUADRA, ET AL.,Plaintiffs-Appellees, v. ALFONSO
MONFORT, Defendant-Appellant.
Rodolfo J. Herman for Plaintiffs-Appellees.
Luis G. Torres & Abraham E. Tionko for defendant appellant.

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FIRST DIVISION

moral damages; and P2,000.00 as attorneys fees, plus the costs of the suit.
The legal issue posed in this appeal is the liability of a parent for an act of
his minor child which causes damage to another under the specific facts
related above and the applicable provisions of the Civil Code, particularly
Articles 2176 and 2180 thereof, which read:jgc:chanrobles.com.ph
"ART. 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this
Chapter."cralaw virtua1aw library
"ART. 2180. The obligation imposed by Article 2176 is demandable not only
for ones own acts or omissions, but also for those of persons for whom one
is responsible.

DECISION

MAKALINTAL, J.:

This is an action for damages based on quasi-delict, decided by the Court of


First Instance of Negros Occidental favorably to the plaintiffs and appealed
by the defendant to the Court of Appeals, which certified the same to us
since the facts are not in issue.
Maria Teresa Cuadra, 12, and Maria Teresa Monfort, 13, were classmates in
Grade Six at the Mabini Elementary School in Bacolod City. On July 9, 1962
their teacher assigned them, together with three other classmates, to weed
the grass in the school premises. While thus engaged Maria Teresa Monfort
found a plastic headband, an ornamental object commonly worn by young
girls over their hair. Jokingly she said aloud that she had found an
earthworm and, evidently to frighten the Cuadra girl, tossed the object at her.
At that precise moment the latter turned around to face her friend, and the
object hit her right eye. Smarting from the pain, she rubbed the injured part
and treated it with some powder. The next day, July 10, the eye became
swollen and it was then that the girl related the incident to her parents, who
thereupon took her to a doctor for treatment. She underwent surgical
operation twice, first on July 20 and again on August 4, 1962, and stayed in
the hospital for a total of twenty-three days, for all of which the parents spent
the sum of P1,703.75. Despite the medical efforts, however, Maria Teresa
Cuadra completely lost the sight of her right eye.
In the civil suit subsequently instituted by the parents in behalf of their minor
daughter against Alfonso Monfort, Maria Teresa Monforts father, the
defendant was ordered to pay P1,703.00 as actual damages; P20,000.00 as

The father and, in case of his death or incapacity, the mother, are
responsible for the damages caused by the minor children who live in their
company.
x

The responsibility treated of in this Article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father
of a family to prevent damage."cralaw virtua1aw library
The underlying basis of the liability imposed by Article 2176 is the fault or
negligence accompanying the act or the omission, there being no willfulness
or intent to cause damage thereby. When the act or omission is that of one
person for whom another is responsible, the latter then becomes himself
liable under Article 2180, in the different cases enumerated therein, such as
that of the father or the mother under the circumstances above quoted. The
basis of this vicarious, although primary, liability is, as in Article 2176, fault or
negligence, which is presumed from that which accompanied the causative
act or omission. The presumption is merely prima facie and may therefore
be rebutted. This is the clear and logical inference that may be drawn from
the last paragraph of Article 2180, which states "that the responsibility
treated of in this Article shall cease when the persons herein mentioned
prove that they observed all the diligence of a good father of a family to
prevent damage."cralaw virtua1aw library
Since the fact thus required to be proven is a matter of defense, the burden
of proof necessarily rests on the defendant. But what is the exact degree of

In the present case there is nothing from which it may be inferred that the
defendant could have prevented the damage by the observance of due care,
or that he was in any way remiss in the exercise of his parental authority in
failing to foresee such damage, or the act which caused it. On the contrary,
his child was at school, where it was his duty to send her and where she
was, as he had the right to expect her to be, under the care and supervision
of the teacher. And as far as the act which caused the injury was concerned,
it was an innocent prank not unusual among children at play and which no
parent, however careful, would have any special reason to anticipate much
less guard against. Nor did it reveal any mischievous propensity, or indeed
any trait in the childs character which would reflect unfavorably on her
upbringing and for which the blame could be attributed to her parents.
The victim, no doubt, deserves no little commiseration and sympathy for the
tragedy that befell her. But if the defendant is at all obligated to compensate
her suffering, the obligation has no legal sanction enforceable in court, but
only the moral compulsion of good conscience.
The decision appealed from is reversed, and the complaint is dismissed,
without pronouncement as to costs.
Reyes, J.B.L., Actg. C.J., Dizon, Zaldivar, Castro, Teehankee, Villamor and
Makasiar, JJ., concur.
Concepcion, C.J., is on leave.
Fernando, J., did not take part.
Barredo, J., dissents in a separate opinion.
Separate Opinions
BARREDO, J., dissenting:chanrob1es virtual 1aw library
I am afraid I cannot go along with my esteemed colleagues in holding that

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diligence contemplated, and how does a parent prove it in connection with a


particular act or omission of a minor child, especially when it takes place in
his absence or outside his immediate company? Obviously there can be no
meticulously calibrated measure applicable; and when the law simply refers
to "all the diligence of a good father of the family to prevent damage," it
implies a consideration of the attendant circumstances in every individual
case, to determine whether or not by the exercise of such diligence the
damage could have been prevented.

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the act of appellants daughter does not constitute fault within the
contemplation of our law on torts. She was 13 years and should have known
that by jokingly saying "aloud that she had found an earthworm and,
evidently to frighten the Cuadra girl, tossed the object at her," it was likely
that something would happen to her friend, as in fact, she was hurt.
As to the liability of appellant as father, I prefer to hold that there being no
evidence that he had properly advised his daughter to behave properly and
not to play dangerous jokes on her classmate and playmates, he can be
liable under Article 2180 of the Civil Code. There is nothing in the record to
show that he had done anything at all to even try to minimize the damage
caused upon plaintiff child

FILAMER CHRISTIAN INSTITUTE, Petitioner, v. HON. INTERMEDIATE


APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity as
Judge of the Court of Appeals, Branch XIV, Roxas City and
POTENCIANO KAPUNAN SR., Respondents.
Bedona & Bedona Law Office for Petitioner.
Rhodora G. Kapunan for Private Respondents.

SYLLABUS

1. CIVIL LAW; QUASI-DELICTS; ART. 2180 OF THE CIVIL CODE;


APPLICABLE IN CASE AT BAR; INJURED PARTY SHALL HAVE
RECOURSE AGAINST THE SERVANT AS WELL AS THE EMPLOYER FOR
WHOM SERVANT WAS ACTING IN FURTHERANCE OF THE INTEREST
OF THE LATTER. The private respondents assert that the circumstances
obtaining in the present case call for the application of Article 2180 of the
Civil Code since Funtecha is no doubt an employee of the petitioner. The
private respondents maintain that under Article 2180 an injured party shall
have recourse against the servant as well as the petitioner for whom, at the
time of the incident, the servant was performing an act in furtherance of the
interest and for the benefit of the petitioner. Funtecha allegedly did not steal
the school jeep nor use it for a joy ride without the knowledge of the school
authorities. In learning how to drive while taking the vehicle home in the
direction of Allans house, Funtecha definitely was not, having a joy ride
Funtecha was not driving for the purpose of his enjoyment or for a "frolic of
his own" but ultimately, for the service for which the jeep was intended by the
petitioner school. (See L. Battistoni v. Thomas, Can SC 144, 1 D.L.R. 577,
80 ALR 722 [1932]; See also Association of Baptists for World Evangelism,
Inc. v. Fieldmens Insurance Co., Inc. 124 SCRA 618 [1983]). Therefore, the
Court is constrained to conclude that the act of Funtecha in taking over the
steering wheel was one done for and in behalf of his employer for which act
the petitioner-school cannot deny any responsibility by arguing that it was
done beyond the scope of his janitorial duties. The clause "within the scope
of their assigned tasks" for purposes of raising the presumption of liability of
an employer, includes any act done by an employee, in furtherance of the
interests of the employer or for the account of the employer at the time of the
infliction of the injury or damage. (Manuel Casada, 190 Va 906, 59 SE 2d 47
[1950]) Even if somehow, the employee driving the vehicle derived some
benefit from the act, the existence of a presumptive liability of the employer

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[G.R. No. 75112. August 17, 1992.]

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is determined by answering the question of whether or not the servant was
at the time of the accident performing any act in furtherance of his masters
business. (Kohlman v. Hyland, 210 NW 643, 50 ALR 1437 [1926]; Jameson
v. Gavett, 71 P 2d 937 [1937])
2. LABOR LAW; SEC. 14, RULE X, BOOK III OF RULES IMPLEMENTING
THE LABOR CODE; NOT THE DECISIVE LAW IN A CIVIL SUIT FOR
DAMAGES UNDER THE CIVIL CODE. Section 14, Rule X, Book III of the
Rules implementing the Labor Code, on which the petitioner anchors its
defense, has promulgated by the Secretary of Labor and Employment only
for the purpose of administering and enforcing the provisions of the Labor
Code on conditions of employment. Particularly, Rule X of Book III provides
guidelines on the manner by which the powers of the Labor Secretary shall
be exercised; on what records should be kept, maintained and preserved; on
payroll; and on the exclusion of working scholars from, and inclusion of
resident physicians in the employment coverage as far as compliance with
the substantive labor provisions on working conditions, rest periods, and
wages, is concerned. In other words, Rule X is merely a guide to the
enforcement of the substantive law on labor. The Court, thus, makes the
distinction and so holds that Section 14, Rule X, Book III of the Rules is not
the decisive law in a civil suit for damages instituted by an injured person
during a vehicular accident against a working student of a school and
against the school itself. The present case does not deal with a labor dispute
on conditions of employment between an alleged employee and an alleged
employer. It invokes a claim brought by one for damages for injury caused
by the patently negligent acts of a person, against both doer-employee and
his employer. Hence, the reliance on the implementing rule on labor to
disregard the primary liability of an employer under Article 2180 of the Civil
Code is misplaced. An implementing rule on labor cannot be used by an
employer as a shield to void liability under the substantive provisions of the
Civil Code.
3. CIVIL LAW; QUASI-DELICTS, EXTRA-CONTRACTUAL OBLIGATION
ARISING FROM NEGLIGENCE OF AN EMPLOYEE; DILIGENCE OF A
GOOD FATHER OF A FAMILY; PETITIONER FAILED TO SHOW PROOF
OF HAVING EXERCISED IT. Funtecha is an employee of petitioner
Filamer. He need not have an official appointment for a drivers position in
order that the petitioner may be held responsible for his grossly negligent
act, it being sufficient that the act of driving at the time of the incident was for
the benefit of the petitioner. Hence, the fact that Funtecha was not the
school driver or was not acting with the scope of his janitorial duties does not
relieve the petitioner of the burden of rebutting the presumption juris tantum
that there was negligence on its part either in the selection of a servant or
employee, or in the supervision over him. The petitioner has failed to show
proof of its having exercised the required diligence of a good father of a

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4. ID.; ID.; SUPERVISION; WHAT IT INCLUDES; FAILURE OF


PETITIONER TO SET FORTH SUCH RULES AND GUIDELINES; CASE AT
BAR. The Court reiterates that supervision includes the formulation of
suitable rules and regulation for the guidance of its employees and the
issuance of proper instructions intended for the protection of the public and
persons with whom the employer has relations through his employees.
(Bahia v. Litonjua and Leynes, supra, at p. 628; Phoenix Construction, Inc. v.
Intermediate Appellate Court, 148 SCRA 353 [1987]) An employer is
expected to impose upon its employees the necessary discipline called for in
the performance of any act indispensable to the business and beneficial to
their employer. In the present case, the petitioner has not shown that it has
set forth such rules and guidelines as would prohibit any one of its
employees from taking control over its vehicles if one is not the official driver
or prohibiting the driver and son of the Filamer president from authorizing
another employee to drive the school vehicle. Furthermore, the petitioner
has failed to prove that it had imposed sanctions or warned its employees
against the use of its vehicles by persons other than the driver.
5. ID.; ID.; LIABILITY OF EMPLOYER UNDER ART. 2180 IS PRIMARY AND
SOLIDARY; RECOURSE AGAINST NEGLIGENT EMPLOYEE. The
liability of the employer is, under Article 2180, primary and solidary.
However, the employer shall have recourse against the negligent employee
for whatever damages are paid to the heirs of the plaintiff.

DECISION

GUTIERREZ, JR., J.:

The private respondents, heirs of the late Potenciano Kapunan, seek


reconsideration of the decision rendered by this Court on October 16, 1990
(Filamer Christian Institute v. Court Appeals, 190 SCRA 477) reviewing the
appellate courts conclusion that there exists an employer-employee
relationship between the petitioner and its co-defendant Funtecha. The
Court ruled that the petitioner is not liable for the injuries caused by
Funtecha on the grounds that the latter was not an authorized driver for
whose acts the petitioner shall be directly and primarily answerable, and that
Funtecha was merely a working scholar who, under Section 14, Rule X,
Book III of the Rules and Regulations Implementing the Labor Code is not
considered an employee of the petitioner.

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family over its employees Funtecha and Allan.

The private respondents assert that the circumstances obtaining in the


present case call for the application of Article 2180 of the Civil Code since
Funtecha is no doubt an employee of the petitioner. The private respondents
maintain that under Article 2180 an injured party shall have recourse against
the servant as well as the petitioner for whom, at the time of the incident, the
servant was performing an act in furtherance of the interest and for the
benefit of the petitioner. Funtecha allegedly did not steal the school jeep nor
use it for a joy ride without the knowledge of the school authorities.
After a re-examination of the laws relevant to the facts found by the trial
court and the appellate court, the Court reconsiders its decision. We
reinstate the Court of Appeals decision penned by the late Justice Desiderio
Jurado and concurred in by Justices Jose G. Campos, Jr. and Serafin E.
Camilon Applying Civil Code provisions, the appellate court affirmed the trial
court decision which ordered the payment of the P20,000.00 liability in the
Zenith Insurance Corporation policy, P10,000.00 moral damages, P4,000.00
litigation and actual expenses, and P3,000.00 attorneys fees.cralawnad
It is undisputed that Funtecha was a working student, being a part-time
Janitor and a scholar of petitioner Filamer. He was, in relation to the school,
an employee even if he was assigned to clean the school premises for only
two (2) hours in the morning of each school day.
Having a student drivers license, Funtecha requested the driver, Allan Masa,
and was allowed, to take over the vehicle while the latter was on his way
home one late afternoon. It is significant to note that the place where Allan
lives is also the house of his father, the school president, Agustin Masa.
Moreover, it is also the house where Funtecha was allowed free board while
he was a student of Filamer Christian Institute.
Allan Masa turned over the vehicle to Funtecha only after driving down a
road, negotiating a sharp dangerous curb, and viewing that the road was
clear. (TSN, April 4, 1983, pp. 78-79) According to Allans testimony, a fast
moving truck with glaring lights nearly hit them so that they had to swerve to
the right to avoid a collision. Upon swerving, they heard a sound as if
something had bumped against the vehicle, but they did not stop to check.
Actually, the Pinoy jeep swerved towards the pedestrian, Potenciano
Kapunan who was walking in his lane in the direction against vehicular
traffic, and hit him. Allan affirmed that Funtecha followed his advise to
swerve to the right. (Ibid., p. 79) At the time of the incident (6:30 P.M.) in
Roxas City, the jeep had only one functioning headlight.
Allan testified that he was the driver and at the same time a security guard of
the petitioner-school. He further said that there was no specific time for him

Driving the vehicle to and from the house of the school president where both
Allan and Funtecha reside is an act in furtherance of the interest of the
petitioner-school. Allans job demands that he drive home the school jeep so
he can use it to fetch students in the morning of the next school day.
It is indubitable under the circumstances that the school president had
knowledge that the jeep was routinely driven home for the said purpose.
Moreover, it is not improbable that the school president also had knowledge
of Funtechas possession of a student drivers license and his desire to
undergo driving lessons during the time that he was not in his classrooms.
In learning how to drive while taking the vehicle home in the direction of
Allans house, Funtecha definitely was not, having a joy ride Funtecha was
not driving for the purpose of his enjoyment or for a "frolic of his own" but
ultimately, for the service for which the jeep was intended by the petitioner
school. (See L. Battistoni v. Thomas, Can SC 144, 1 D.L.R. 577, 80 ALR 722
[1932]; See also Association of Baptists for World Evangelism, Inc. v.
Fieldmens Insurance Co., Inc. 124 SCRA 618 [1983]). Therefore, the Court
is constrained to conclude that the act of Funtecha in taking over the
steering wheel was one done for and in behalf of his employer for which act
the petitioner-school cannot deny any responsibility by arguing that it was
done beyond the scope of his janitorial duties. The clause "within the scope
of their assigned tasks" for purposes of raising the presumption of liability of
an employer, includes any act done by an employee, in furtherance of the
interests of the employer or for the account of the employer at the time of the
infliction of the injury or damage. (Manuel Casada, 190 Va 906, 59 SE 2d 47
[1950]) Even if somehow, the employee driving the vehicle derived some
benefit from the act, the existence of a presumptive liability of the employer
is determined by answering the question of whether or not the servant was
at the time of the accident performing any act in furtherance of his masters
business. (Kohlman v. Hyland, 210 NW 643, 50 ALR 1437 [1926]; Jameson
v. Gavett, 71 P 2d 937 [1937])cralawnad
Section 14, Rule X, Book III of the Rules implementing the Labor Code, on
which the petitioner anchors its defense, has promulgated by the Secretary
of Labor and Employment only for the purpose of administering and
enforcing the provisions of the Labor Code on conditions of employment.
Particularly, Rule X of Book III provides guidelines on the manner by which
the powers of the Labor Secretary shall be exercised; on what records
should be kept, maintained and preserved; on payroll; and on the exclusion
of working scholars from, and inclusion of resident physicians in the

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to be off-duty and that after driving the students home at 5:00 in the
afternoon, he still had to go back to school and then drive home using the
same vehicle.

TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
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employment coverage as far as compliance with the substantive labor
provisions on working conditions, rest periods, and wages, is concerned.
In other words, Rule X is merely a guide to the enforcement of the
substantive law on labor. The Court, thus, makes the distinction and so holds
that Section 14, Rule X, Book III of the Rules is not the decisive law in a civil
suit for damages instituted by an injured person during a vehicular accident
against a working student of a school and against the school itself.
The present case does not deal with a labor dispute on conditions of
employment between an alleged employee and an alleged employer. It
invokes a claim brought by one for damages for injury caused by the
patently negligent acts of a person, against both doer-employee and his
employer. Hence, the reliance on the implementing rule on labor to disregard
the primary liability of an employer under Article 2180 of the Civil Code is
misplaced. An implementing rule on labor cannot be used by an employer as
a shield to void liability under the substantive provisions of the Civil Code.
There is evidence to show that there exists in the present case an extracontractual obligation arising from the negligence or reckless imprudence of
a person "whose acts or omissions are imputable, by a legal fiction, to
other(s) who are in a position to exercise an absolute or limited control over
(him)." (Bahia v. Litonjua and Leynes, 30 Phil. 624 [1915])
Funtecha is an employee of petitioner Filamer. He need not have an official
appointment for a drivers position in order that the petitioner may be held
responsible for his grossly negligent act, it being sufficient that the act of
driving at the time of the incident was for the benefit of the petitioner. Hence,
the fact that Funtecha was not the school driver or was not acting with the
scope of his janitorial duties does not relieve the petitioner of the burden of
rebutting the presumption juris tantum that there was negligence on its part
either in the selection of a servant or employee, or in the supervision over
him. The petitioner has failed to show proof of its having exercised the
required diligence of a good father of a family over its employees Funtecha
and Allan.
The Court reiterates that supervision includes the formulation of suitable
rules and regulation for the guidance of its employees and the issuance of
proper instructions intended for the protection of the public and persons with
whom the employer has relations through his employees. (Bahia v. Litonjua
and Leynes, supra, at p. 628; Phoenix Construction, Inc. v. Intermediate
Appellate Court, 148 SCRA 353 [1987])
An employer is expected to impose upon its employees the necessary
discipline called for in the performance of any act indispensable to the

In the present case, the petitioner has not shown that it has set forth such
rules and guidelines as would prohibit any one of its employees from taking
control over its vehicles if one is not the official driver or prohibiting the driver
and son of the Filamer president from authorizing another employee to drive
the school vehicle. Furthermore, the petitioner has failed to prove that it had
imposed sanctions or warned its employees against the use of its vehicles
by persons other than the driver.
The petitioner, thus, has an obligation to pay damages for injury arising from
the unskilled manner by which Funtecha drove the vehicle. (Cangco v.
Manila Railroad Co. 38 Phil. 760, 772 [1918]) In the absence of evidence
that the petitioner had exercised the diligence of a good father of a family in
the supervision of its employees, the law imposes upon it the vicarious
liability for acts or omissions of its employees. (Umali v. Bacani, 69 SCRA
263 [1976l; Poblete v. Fabros, 93 SCRA 200 [1979]; Kapalaran Bus Liner v.
Coronado, 176 SCRA 792 [1989]; Franco v. Intermediate Appellate Court,
178 SCRA 331 [1989]; Pantranco North Express, Inc. v. Baesa, 179 SCRA
384 (1989]) The liability of the employer is, under Article 2180, primary and
solidary. However, the employer shall have recourse against the negligent
employee for whatever damages are paid to the heirs of the plaintiff.
It is an admitted fact that the actual driver of the school jeep, Allan Masa,
was not made a party defendant in the civil case for damages. This is quite
understandable considering that as far as the injured pedestrian, plaintiff
Potenciano Kapunan, was concerned, it was Funtecha who was the one
driving the vehicle and presumably was one authorized by the school to
drive. The plaintiff and his heirs should not now be left to suffer without
simultaneous recourse against the petitioner for the consequent injury
caused by a janitor doing a driving chore for the petitioner even for a short
while. For the purpose of recovering damages under the prevailing
circumstances, it is enough that the plaintiff and the private respondent heirs
were able to establish the existence of employer-employee relationship
between Funtecha and petitioner Filamer and the fact that Funtecha was
engaged in an act not for an independent purpose of his own but in
furtherance of the business of his employer. A position of responsibility on
the part of the petitioner has thus been satisfactorily demonstrated.
WHEREFORE, the motion for reconsideration of the decision dated October
16, 1990 is hereby GRANTED. The decision of the respondent appellate
court affirming the trial court decision is REINSTATED.
SO ORDERED.

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business and beneficial to their employer.chanroblesvirtualawlibrary

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Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.

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vicarious liability upon the Colleges for the acts of security guard Solomon.

1. CIVIL LAW; QUASI-DELICT; LIABILITY OF EMPLOYER FOR ALLEGED


WRONGFUL ACTS OF ITS EMPLOYEES; RULE NOT APPLICABLE TO
SECURITY GUARDS ASSIGNED THERETO; REASONS THEREFOR.
The first paragraph of Article 2180 of the Civil Code offers no basis for
holding the Colleges liable for the alleged wrongful acts of security guard
Jimmy Solomon inflicted upon petitioner Soliman, Jr. Private respondent
school was not the employer of Jimmy Solomon. The employer of Jimmy
Solomon was the R.L. Security Agency Inc., while the school was the client
or customer of the R.L. Security Agency Inc.. It is settled that where the
security agency, as here, recruits, hires and assigns the work of its
watchmen or security guards, the agency is the employer of such guards or
watchmen. Liability for illegal or harmful acts committed by the security
guards attaches to the employer agency, and not to the clients or customers
of such agency. As a general rule, a clients or customers of a security
agency has no hand in selecting who among the pool of security guards or
watchmen employed by the agency shall be assigned to it; the duty to
observe the diligence of a good father of a family in the selection of the
guards cannot, in the ordinary course of events, be demanded from the
client whose premises or property are protected by the security guards. The
fact that a client company may give instructions or directions to the security
guards assigned to it, does not, by itself, render the client responsible as an
employer of the security guards concerned and liable for their wrongful acts
or omissions. Those instructions or directions are ordinarily no more than
requests commonly envisaged in the contract for services entered into with
the security agency. There being no employer-employee relationship
between the Colleges and Jimmy Solomon, petitioner student cannot impose

3. ID.; ID.; ID.; CONTRACTUAL OBLIGATIONS OF SCHOOLS AND ITS


STUDENTS; CONSTRUED. In PSBA v. CA, (G.R. No. 84698, 4 February
1992) the Court held that Article 2180 of the Civil Case was not applicable
where a student had been injured by one who was an outsider or by one
over whom the school did not exercise any custody or control or supervision.
At the same time, however, the Court stressed that an implied contract may
be held to be established between a school which accepts students for
enrollment, on the one hand, and the students who are enrolled, on the other
hand, which contract results in obligations for both parties: "When an
academic institution accepts students for enrollment, there is established a
contract between them, resulting in bilateral obligations which parties are
bound to comply with. For its part, the school undertakes to provide the
student with an education that would presumably suffice to equip him with
the necessary tools and skills to pursue higher education or a profession. On
the other hand, the student covenants to abide by the schools academic
requirements and observe its rules and regulations. Institutions of learning
must also meet the implicit or built-in obligation of providing their students
with an atmosphere that promotes or assists in attaining its primary
undertaking of imparting knowledge. Certainly, no student can absorb the
intricacies of physics or higher mathematics or explore the realm of the arts
and other sciences when bullets are flying or grenades exploding in the air
or where there looms around the school premises a constant threat to life
and limb. Necessarily, the school must ensure that adequate steps are taken
to maintain peace and order within the campus premises and to prevent the
breakdown thereof." In that case, the Court was careful to point out that: "In
the circumstances obtaining in the case at bar, however, there is, as yet, no
finding that the contract between the school and Bautista had been
breached thru the formers negligence in providing proper security

[G.R. No. 66207. May 18, 1992.]


MAXIMINO SOLIMAN, JR., represented by his judicial guardian
VIRGINIA C. SOLIMAN,Petitioner, v. HON. JUDGE RAMON TUAZON,
Presiding Judge of Branch LXI, Regional Trial Court of Region III,
Angeles City, and the REPUBLIC CENTRAL COLLEGES, represented
by its President, Respondents.
Mariano Y. Navarro for Republic Central Colleges.

Page

SYLLABUS

2. ID.; ID.; LIABILITY OF HEADS OF ESTABLISHMENT OF ARTS AND


TRADE FOR DAMAGES INFLICTED UPON ITS STUDENTS; NOT
APPLICABLE IN CASE AT BAR. Since there is no question that Jimmy
Solomon was not a pupil or student or an apprentice of the Colleges, he
being in fact an employee of the R.L. Security Agency Inc., the 7th
paragraph of Article 2180 of the Civil Code is similarly not available for
imposing liability upon the Republic Central Colleges for the acts or
omissions of Jimmy Solomon. Persons exercising substitute parental
authority are made responsible for damage inflicted upon a third person by
the child or person subject to such substitute parental authority. In the instant
case, as already noted, Jimmy Solomon who committed allegedly tortious
acts resulting in injury to petitioner, was not a pupil, student or apprentice of
the Republic Central Colleges; the school had no substitute parental
authority over Solomon..

THIRD DIVISION

RESOLUTION

FELICIANO, J.:

On 22 March 1983, petitioner Soliman, Jr. filed a civil complaint for damages
against private respondent Republic Central Colleges ("Colleges"), the R.L.
Security Agency Inc. and one Jimmy B. Solomon, a security guard, as
defendants. The complaint alleged that:jgc:chanrobles.com.ph
". . . on 13 August 1982, in the morning thereof, while the plaintiff was in the
campus ground and premises of the defendant, REPUBLIC CENTRAL
COLLEGES, as he was and is still a regular classes, the defendant, JIMMY
B. SOLOMON, who was on said date and hour in the premises of said
school performing his duties and obligations as a duly appointed security
guard under the employment, supervision and control of his employerdefendant R.L. SECURITY AGENCY, INC., headed by Mr. Benjamin

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measures. This would be for the trial court to determine. And, even if there
be a finding of negligence, the same could give rise generally to a breach of
contractual obligation only. Using the test of Cangco, supra, the negligence
of the school would not be relevant absent a contract. In fact, that
negligence becomes material only because of the contractual relation
between PSBA and Bautista. In other words, a contractual relation is a
condition sine qua non to the schools liability. The negligence of the school
cannot exist independently of the contract, unless the negligence occurs
under the circumstances set out in Article 21 of the Civil Code. The Court is
not unmindful of the attendant difficulties posed by the obligation of schools,
above-mentioned, for conceptually a school, like a common carrier, cannot
be an insurer of its students against all risks. This is specially true in the
populous student communities of the so-called university belt in Manila
where there have been reported several incidents ranging from gang wars to
other forms of hooliganism. It would not be equitable to expect of schools to
anticipate all types of violent trespass upon their premises, for
notwithstanding the security measures installed, the same may still fail
against an individual or group determined to carry out a nefarious deed
inside school premises and environs. Should this be the case, the school
may still avoid liability by proving that the breach of its contractual obligation
to the students was not due to its negligence, here statutorily defined to be
the omission of that degree of diligence which is required by the nature of
obligation and corresponding to the circumstances of person, time and
place."

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Serrano, without any provocation, in a wanton, fraudulent, reckless,
oppressive or malevolent manner, with intent to kill, attack, assault, strike
and shoot the plaintiff on the abdomen with a .38 Caliber Revolver, a deadly
weapon, which ordinarily such wound sustained would have caused
plaintiffs death were it not for the timely medical assistance given to him.
The plaintiff was treated and confined at Angeles Medical Center, Angeles
City, and as per doctors opinion, the plaintiff may not be able to attend to his
regular classes and will be incapacitated in the performance of his usual
work for a duration of from three to four months before his wounds would be
completely healed." 1
Private respondent Colleges filed a motion to dismiss, contending that the
complaint stated no cause of action against it. Private respondent argued
that it is free from any liability for the injuries sustained by petitioner student
for the reason that private respondent school was not the employer of the
security guard charged, Jimmy Solomon, and hence was not responsible for
any wrongful act of Solomon. Private respondent school further argued that
Article 2180, 7th paragraph, of the Civil Code did not apply, since said
paragraph holds teachers and heads of establishment of arts and trades
liable for damages caused by their pupils and students or apprentices, while
security guard Jimmy Solomon was not a pupil, student or apprentice of the
school.
In an order dated 29 November 1983, respondent Judge granted private
respondent schools motion to dismiss, holding that security guard Jimmy
Solomon was not an employee of the school which accordingly could not be
held liable for his acts or omissions. Petitioner moved for reconsideration,
without success.
In this Petition for Certiorari and Prohibition, it is contended that respondent
trial judge committed a grave abuse of discretion when he refused to apply
the provisions of Article 2180, as well as those of Articles 349, 350 and 352,
of the Civil Code and granted the schools motion to dismiss.
Under Article 2180 of the Civil Code, the obligation to respond for damage
inflicted by one against another by fault or negligence exists not only for
ones own act or omission, but also for acts or omissions of a person for
whom one is by law responsible. Among the persons held vicariously
responsible for acts or omissions of another person are the
following:chanrob1es virtual 1aw library
x

Employers shall be liable for the damages caused by their employees and

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

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The relevant portions of the other Articles of the Civil Code invoked by
petitioner are as follows:jgc:chanrobles.com.ph
"Art. 349. The following persons shall exercise substitute parental
authority:chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

Lastly, teachers or heads of establishments of arts and trades shall be liable


for damages caused by their pupils, their students or apprentices, so long as
they remain in their custody.chanrobles.com : virtual law library

(2) Teachers and professors;


x

The first paragraph quoted above offers no basis for holding the Colleges
liable for the alleged wrongful acts of security guard Jimmy B. Solomon
inflicted upon petitioner Soliman, Jr. Private respondent school was not the
employer of Jimmy Solomon. The employer of Jimmy Solomon was the R.L.
Security Agency Inc., while the school was the client or customer of the R.L.
Security Agency Inc. It is settled that where the security agency, as here,
recruits, hires and assigns the work of its watchmen or security guards, the
agency is the employer of such guards or watchmen. 2 Liability for illegal or
harmful acts committed by the security guards attaches to the employer
agency, and not to the clients or customers of such agency. 3 As a general
rule, a client or customer of a security agency has no hand in selecting who
among the pool of security guards or watchmen employed by the agency
shall be assigned to it; the duty to observe the diligence of a good father of a
family in the selection of the guards cannot, in the ordinary course of events,
be demanded from the client whose premises or property are protected by
the security guards. The fact that a client company may give instructions or
directions to the security guards assigned to it, does not, by itself, render the
client responsible as an employer of the security guards concerned and
liable for their wrongful acts or omissions. Those instructions or directions
are ordinarily no more than requests commonly envisaged in the contract for
services entered into with the security agency. There being no employeremployee relationship between the Colleges and Jimmy Solomon, petitioner
student cannot impose vicarious liability upon the Colleges for the acts of
security guard Solomon.
Since there is no question that Jimmy Solomon was not a pupil or student or
an apprentice of the Colleges, he being in fact an employee of the R.L.
Security Agency Inc., the other above-quoted paragraph of Article 2180 of
the Civil Code is similarly not available for imposing liability upon the
Republic Central Colleges for the acts or omissions of Jimmy Solomon.

(4) Directors of trade establishments with regard to apprentices;


x

Art. 350. The persons named in the preceding article shall exercise
reasonable supervision over the conduct of the child.
x

Art. 352. The relations between teacher and pupil, professor and student are
fixed by government regulations and those of each school or institution. In
no case shall corporal punishment be countenanced. The teacher or
professor shall cultivate the best potentialities of the heart and mind of the
pupil or student."cralaw virtua1aw library
In Palisoc v. Brillantes, 4 invoked by petitioner, the Court held the owner and
president of a school of arts and trades known as the "Manila Technical
Institute," Quezon Blvd., Manila, responsible in damages for the death of
Dominador Palisoc, a student of that Institute, which resulted from fist blows
delivered by Virgilio L. Daffon, another student of the Institute. It will be seen
that the facts of Palisoc v. Brillantes brought it expressly within the 7th
paragraph of Article 2180, quoted above; but those facts are entirely different
from the facts existing in the instant case.
Persons exercising substitute parental authority are made responsible for
damage inflicted upon a third person by the child or person subject to such
substitute parental authority. In the instant case, as already noted, Jimmy
Solomon who committed allegedly tortious acts resulting in injury to

Clearly, within the confines of its limited logic, i.e., treating the petitioners
claim as one based wholly and exclusively on Article 2180 of the Civil Code,
the order of the respondent trial judge was correct. Does it follow, however,
that respondent Colleges could not be held liable upon any other basis in
law, for or in respect of the injury sustained by petitioner, so as to entitle
respondent school to dismissal of petitioners complaint in respect of itself?
The very recent case of the Philippine School of Business Administration
(PSBA) v. Court of Appeals, 5 requires us to give a negative answer to that
question.
In PSBA, the Court held that Article 2180 of the Civil Code was not
applicable where a student had been injured by one who was an outsider or
by one over whom the school did not exercise any custody or control or
supervision. At the same time, however, the court stressed that an implied
contract may be held to be established between a school which accepts
students for enrollment, on the one hand, and the students who are enrolled,
on the other hand, which contract results in obligations for both
parties:jgc:chanrobles.com.ph
"When an academic institution accepts students for enrollment, there is
established a contract between them, resulting in bilateral obligations which
parties are bound to comply with. For its part, the school undertakes to
provide the student with an education that would presumably suffice to equip
him with the necessary tools and skills to pursue higher education or a
profession. On the other hand, the student covenants to abide by the
schools academic requirements and observe its rules and regulations.
Institutions of learning must also meet the implicit or built-in obligation of
providing their students with an atmosphere that promotes or assists in
attaining its primary undertaking of imparting knowledge. Certainly, no
student can absorb the intricacies of physics or higher mathematics or
explore the realm of the arts and other sciences when bullets are flying or
grenades exploding in the air or where there looms around the school
premises a constant threat to life and limb. Necessarily, the school must
ensure that adequate steps are taken to maintain peace and order within the
campus premises and to prevent the breakdown thereof." 6
In that case, the Court was careful to point out that:chanrobles.com : virtual
law library
"In the circumstances obtaining in the case at bar, however, there is, as yet,

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petitioner, was not a pupil, student or apprentice of the Republic Central


Colleges; the school had no substitute parental authority over Solomon.

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no finding that the contract between school and Bautista had been breached
thru the formers negligence in providing proper security measures. This
would be for the trial court to determine. And, even if there be a finding of
negligence, the same could give rise generally to a breach of contractual
obligation only. Using the test of Cangco, supra, the negligence of the school
would not be relevant absent a contract. In fact, that negligence becomes
material only because of the contractual relation between PSBA and
Bautista. In other words, a contractual relation is a condition sine qua non to
the schools liability. The negligence of the school cannot exist independently
of the contract, unless the negligence occurs under the circumstances set
out in Article 21 of the Civil Code.
The Court is not unmindful of the attendant difficulties posed by the
obligation of schools, above-mentioned, for conceptually a school, like a
common carrier, cannot be an insurer of its students against all risks. This is
specially true in the populous student communities of the so-called
university belt in Manila where there have been reported several incidents
ranging from gang wars to other forms of hooliganism. It would not be
equitable to expect of schools to anticipate all types of violent trespass upon
their premises, for notwithstanding the security measures installed, the same
still fail against an individual or group determined to carry out a nefarious
deed inside school premises and environs. Should this be the case, the
school may still avoid liability by proving that the breach of its contractual
obligation to the students was not due to its negligence, here statutorily
defined to be the omission of that degree of diligence which is required by
the nature of obligation and corresponding to the circumstances of person,
time and place." 7
In the PSBA case, the trial court had denied the schools motion to dismiss
the complaint against it, and both the Court of Appeals and this Court
affirmed the trial courts order. In the case at bar, the court a quo granted the
motion to dismiss filed by respondent Colleges, upon the assumption that
petitioners cause of action was based, and could have been based, only on
Article 2180 of the Civil Code. As PSBA, however, states, acts which are
tortious or allegedly tortious in character may at the same time constitute
breach of a contractual, or other legal, obligation. Respondent trial judge
was in serious error when he supposed that petitioner could have no cause
of action other than one based on Article 2180 of the Civil Code. Respondent
trial judge should not have granted the motion to dismiss but rather should
have, in the interest of justice, allowed petitioner to prove acts constituting
breach of an obligation ex contractu or ex lege on the part of respondent
Colleges.
In line, therefore, with the most recent jurisprudence of this Court, and in
order to avoid a possible substantial miscarriage of justice, and putting aside

ACCORDINGLY, the court Resolved to GRANT DUE COURSE to the


Petition, to TREAT the comment of respondent Colleges as its answer, and
to REVERSE and SET ASIDE the Order dated 29 November 1983. This
case is REMANDED to the court a quo for further proceedings consistent
with this Resolution.
Gutierrez, Jr. Bidin, Davide, Jr. and Romero, JJ., concur.

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technical considerations, we consider that respondent trial judge committed


serious error correctable by this Court in the instant case.

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FIRST DIVISION
[G.R. No. 11154. March 21, 1916. ]
E. MERRITT, Plaintiff-Appellant, v. GOVERNMENT OF THE PHILIPPINE
ISLANDS, Defendant-Appellant.
Crossfield & OBrien for plaintiff.
Attorney-General Avancea for defendant.
SYLLABUS
1. DAMAGES; MEASURE OF. Where the evidence shows that the
plaintiff was wholly incapacitated for six months it is an error to restrict the
damages to a shorter period during which he was confined in the hospital.
2. SPECIAL STATUTES; CONSENT OF THE STATE TO BE SUED;
CONSTRUCTION. The Government of the Philippine Islands having been
"modeled after the federal and state governments of the United States the
decisions of the high courts of that country may be used in determining the
scope and purpose of a special statute.
3. ID.; ID.; ID. The state not being liable to suit except by its express
consent, an act abrogating that immunity will be strictly construed.
4. ID.; ID.; ID. An act permitting a suit against the state gives rise to no
liability not previously existing unless it is clearly expressed in the act.
5. GOVERNMENT OF THE PHILIPPINE ISLANDS; LIABILITY FOR THE
NEGLIGENT ACTS OF ITS OFFICERS, AGENTS, AND EMPLOYEES.
The Government of the Philippine Islands in only liable for the negligent acts
of its officers, agents, and employees when they are acting as special
agents within the meaning of paragraph 5 of article 1903 of the Civil code,
and a chauffeur of the General Hospital is not such a special agent.

DECISION

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TRENT, J. :

This is an appeal by both partied from a judgment of the Court of First


Instance of the city of Manila in favor of the plaintiff for the sum of P14,741,
together with the costs of the cause.
Counsel for the plaintiff insist that the trial court erred (1) "in limiting the
general damages which the plaintiff suffered to P5,000, instead of P25,000
as claimed in the complaint," and (2) "in limiting the time when plaintiff was
entirely disabled to two months and twenty-one days and fixing the damage
accordingly in the sum of P2,666, instead of P6,000 as claimed by plaintiff in
his complaint."cralaw virtua1aw library
The Attorney-General on behalf of the defendant urges that the trial court
erred: (a) in finding that the collision between the plaintiffs motorcycle and
the ambulance of the General Hospital was due to the negligence of the
chauffeur; (b) in holding that the Government of the Philippine Islands is
liable for the damages sustained by the plaintiff as a result of the collision,
even if it be true that collision was due to the negligence of the chauffeur;
and (c) in rendering judgment against the defendant for the sum of P14,741.
The trial courts findings of fact, which are fully supported by the record, are
as follows:jgc:chanrobles.com.ph
"It is a fact not disputed by counsel for the defendant that when the plaintiff,
riding on a motorcycle, was going toward the western part of Calle Padre
Faura, passing along the west side thereof at a speed of ten to twelve miles
and hour, upon crossing Taft Avenue and when he was ten feet from the
southwestern intersection of said streets, the General Hospital ambulance,
upon reaching said avenue, instead of turning toward the south, after
passing the center thereof, so that it would be on the left side of said
avenue, as is prescribed by the ordinance and the Motor Vehicle Act, turned
suddenly and unexpectedly and long before reaching the center of the
street, into the right side of Taft Avenue, without having sounded any whistle
or horn, by which movement it struck the plaintiff, who was already six feet
from the southwestern point or from the post placed there.
"By reason of the resulting collision, the plaintiff was so severely injured that,
according to Dr. Saleeby, who examined him on the very same day that he
was taken to the General Hospital, he was suffering from a depression in the
left parietal region, a wound in the same place and in beck part of his head,
while blood issued from his nose and he was entirely unconscious.

"At another examination six days before the day of the trial, Dr. Saleeby
notice that the plaintiffs leg showed a contraction of an inch and a half and a
curvature that made his leg very weak and painful at the point of the fracture.
Examination of his head revealed a notable re-adjustment of the functions of
the brain and nerves. The patient apparently was slightly deaf, had a slight
weakness in his eyes and in his mental condition. This latter weakness was
always noticed when the plaintiff had to do any difficult mental labor,
especially when he attempted to use his memory for mathematical
calculations.
"According to the various merchants who testified as witnesses, the plaintiffs
mental and physical condition prior to the accident was excellent, and that
after having received the injuries that have been discussed, his physical
condition had undergone a noticeable depreciation, for he had lost the
agility, energy, and ability that he had constantly displayed before the
accident as one of the best constructors of wooden buildings and he could
not now earn even a half of the income that he had secured for his work
because he had lost 50 per cent of his efficiency. As a contractor, he could
no longer, as he had before done, climb up ladders and scaffoldings to reach
the highest parts of the building.
"As a consequence of the loss the plaintiff suffered in the efficiency of his
work as a contractor, he had to dissolve the partnership he had formed with
the engineer, Wilson, because he was incapacitated from making
mathematical calculations on account of the condition of his leg and of his
mental faculties, and he had to give up a contract he had for the construction
of the Uy Chaco building."cralaw virtua1aw library
We may say at the outset that we are in full accord with the trial court to the
effect that the collision between the plaintiffs motorcycle and the ambulance
of the General Hospital was due solely to the negligence of the chauffeur.
The two items which constitute a part of the P14,741 and which are drawn in
question by the plaintiff are (a) P5,000, the amount awarded for permanent
injuries, and (b) the P2,666, the amount allowed for the loss of wages during
the time the plaintiff was incapacitated from pursuing his occupation. We

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"The marks revealed that he had one or more fractures of the skull and that
the grey matter and brain mass had suffered material injury. At ten oclock of
the night in question, which was the time set for performing the operation,
his pulse was so weak and so irregular that, in his opinion, there was little
hope that he would live. His right leg was broken in such a way that the
fracture extended to the outer skin in such manner that it might be regarded
as double and the wound would be expose to infection, for which reason it
was of the most serious nature.

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fund nothing in the record which would justify us in increasing the amount of
the first. as to the second, the record shows, and the trial court so found, that
the plaintiffs services as a contractor were worth P1,000 per month. The
court, however, limited the time to two months and twenty-one days, which
the plaintiff was actually confined in the hospital. In this we think there was
error, because it was clearly established that the plaintiff was wholly
incapacitated for a period of sex months. The mere fact that he remained in
the hospital only two months and twenty-one days while the remainder of the
six months was spent in his home, would not prevent recovery for the whole
time. We, therefore, find that the amount of damages sustained by the
plaintiff, without any fault on his part, is P18,075.
As the negligence which caused the collision is a tort committed by an agent
or employee of the Government, the inquiry at once arises whether the
Government is legally liable for the damages resulting therefrom.
Act No. 2457, effective February 3, 1915, reads:jgc:chanrobles.com.ph
"An act authorizing E. Merritt to bring suit against the Government of the
Philippine Islands and authorizing the Attorney-General of said Islands to
appear in said suit.
"Whereas a claim has been filed against the Government of the Philippine
Islands by Mr. E. Merritt, of Manila, for damages resulting from a collision
between his motorcycle and the ambulance of the General Hospital on
March twenty-fifth, nineteen hundred and thirteen;
"Whereas it is not known who is responsible for the accident nor is it
possible to determine the amount of damages, if any , to which the claimant
is entitled; and
"Whereas the Director of Public Works and the Attorney-General
recommend that an act be passed by the Legislature authorizing Mr. E.
Merritt to bring suit in the courts against the Government, in order that said
questions may be decided: Now, therefore,
"By authority of the United States, be it enacted by the Philippine
Legislature, that:jgc:chanrobles.com.ph
"SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First
Instance of the city of Manila against the Government of the Philippine
Islands in order to fix the responsibility for the collision between his
motorcycle and the ambulance of the General Hospital, and to determine the
amount of the damages, if any, to which Mr. E. Merritt is entitled on account
of said collision, and the attorney-General of the Philippine Islands is hereby

"SEC. 2. This Act shall take effect on its passage.


"Enacted, February 3, 1915."cralaw virtua1aw library
Did the defendant, in enacting the above quoted act, simply waive its
immunity from suit or did it also concede its liability to the plaintiff? If only the
former, then it cannot be held that the Act created any new cause of action in
favor of the plaintiff or extended the defendants liability to any case not
previously recognized.
All admit that the Insular Government (the defendant) cannot be sued by an
individual without its consent. It is also admitted that the instant case is one
against the Government. As the consent of the Government to be sued by
the plaintiff was entirely voluntary on its part, it is our duty to look carefully
into the terms of the consent, and render judgment accordingly.
The plaintiff was authorized to bring this action against the Government "in
order to fix the responsibility for the collision between his motorcycle and the
ambulance of the General Hospital and to determine the amount of the
damages, if any, to which Mr. E. Merritt is entitled on account of said
collision, . . . ." These were the two questions submitted to the court for
determination. The Act was passed "in order that said questions may be
decided." We have "decided" that the accident was due solely to the
negligence of the chauffeur, who was at the time an employee of the
defendant, and we have also fixed the amount of damages sustained by the
plaintiff as a result of the collision. Does the Act authorize us to hold that the
Government is legally liable for that amount? If not, we must look elsewhere
for such authority, if it exists.
The Government of the Philippine Islands having been "modeled after the
Federal and state Governments in the United States," we may look to the
decisions of the high courts of that country for aid in determining the purpose
and scope of Act No. 2457.
In the United States the rule that the state is not liable for the torts committed
by its officers or agents whom it employs, except when expressly made so
by legislative enactment, is well settled. "The Government," says Justice
Story, "does not undertake to guarantee to any person the fidelity of the
officers or agents whom it employs, since that would involve it in all its
operations in endless embarrassments, difficulties and losses, which would
be subversive of the public interest." (Claussen v. City of Luverne, 103
Minn., 491, citing U.S. v. Kirkpatrick, 9 Wheat, 720; 6 L. Ed., 199; and Beers

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authorized and directed to appear at the trial on the behalf of the


Government of said Islands, to defend said Government at the same.

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v. State, 20 How., 527; 15 L. Ed., 991.)
In the case of Melvin v. State (121 Cal., 16), the plaintiff sought to recover
damages from the state for personal injuries received on account of the
negligence of the state officers at the state fair, a state institution created by
the legislature for the purpose of improving agricultural and kindred
industries; to disseminate information calculated to educate and benefit the
industrial classes; and to advance to educate and benefit the industrial
classes; and to advance by such means the material interests of the state,
being objects similar to those sought by the public school system. In passing
upon the question of the states liability for the negligent acts of its officers or
agents, the court said:jgc:chanrobles.com.ph
"No claim arises against any government in favor of an individual, by reason
of the misfeasance, laces, or unauthorized exercise of powers by its officers
or agents." (Citing Gibbons v. U.S., 8 Wall., 269; Clodfelter v. State, 86 N.C.,
51, 53; 41 Am. Rep., 440; Chapman v. State, 104 Cal., 690; 43 Am. St. Rep.,
158; Green v. State, 73 Cal., 29; Bourn v. Hart, 93 Cal., 321; 27 Am. St.
Rep., 203; Story on Agency, sec. 319.)
As to the scope of legislative enactments permitting individuals to sue the
state where the cause of action arises out of either tort or contract, the rule is
stated in 36 Cyc., 915, thus:jgc:chanrobles.com.ph
"By consenting to be sued a state simply waives its immunity from suit. It
does not thereby concede its liability to plaintiff, or create any cause of
action in his favor, or extend its liability to any cause not previously
recognized. It merely gives a remedy to enforce a preexisting liability and
submits itself to the jurisdiction of the court, subject to its right to interpose
any lawful defense."cralaw virtua1aw library
In Apfelbacher v. State (152 N. W., 144, advanced sheets), decided April 16,
1915, the Act of 1913, which authorized the bringing of this suit,
read:jgc:chanrobles.com.ph
"SECTION 1. Authority is hereby given to George Apfelbacher, of the town of
Summit, Waukesha County, Wisconsin, to bring suit in such court or courts
and in such form or forms as he may be advised for the purpose of settling
and determining all controversies which he may now have with the State of
Wisconsin, or its duly authorizes officers and agents, relative to the mill
property of said George Apfelbacher, the fish hatchery of the State
Wisconsin on the Bark River, and the mill property of Evan Humphrey at the
lower end of Nagawicka Lake, and relative to the use of the waters of said
Bark River and Nagawicka Lake, all in the county of Waukesha,
Wisconsin."cralaw virtua1aw library

"Plaintiff claims that by the enactment of this law the legislature admitted
liability on the part of the state for the acts of its officers, and that the suit
now stands just as it would stand between private parties. It is difficult to see
how the act does, or was intended to do, more than remove the states
immunity from suit. It simply gives authority commence suit for the purpose
of settling plaintiffs controversies with the state. Nowhere in the act is there
a whisper or suggestion that the court or courts in the disposition of the suit
shall depart from well established principles of law, or that the amount of
damages is the only question to be settled. The act opened the door of the
court to the plaintiff. It did not pass upon the question of liability, but left the
suit just where it would be in the absence of the states immunity from suit. If
the Legislature had intended to change the rule that obtained in this state so
long and to declare liability on the part of the state, it would not have left so
important a matter to mere inference but would have done so in express
terms. (Murdoc Grate Co. v. Commonwealth, 152 Mass., 28; 24 N. E., 854; 8
L. R.A., 399)"
In Denning v. state (123 Cal., 316), the provisions of the Act of 1893, relied
upon and considered, are as follows:jgc:chanrobles.com.ph
"All persons who have, or shall hereafter have claims on contract or for
negligence against the state not allowed by the state board of examiners,
are hereby authorized, on the terms and conditions herein contained, to
bring suit thereon against the state in any of the courts of this state of
competent jurisdiction, and prosecute the same to final judgment. The rules
of practice in civil cases shall apply to such suits, except as herein otherwise
provided."cralaw virtua1aw library
And the court said:jgc:chanrobles.com.ph
"This statute has been considered by this court in at least two cases, arising
under different facts, and in both it was held that said statute did not create
any liability or cause of action against the state where none existed before,
but merely gave an additional remedy to enforce such liability as would have
existed if the statute had not been enacted. (Chapman v. State, 104 Cal.,
690; 43 Am. St. Rep., 158; Melvin v. State, 121 Cal., 16.)"
A statute of Massachusetts enacted in 1887 gave to the superior court
"jurisdiction of all claims against the commonwealth, whether at law or in
equity," with an exception not necessary to be here mentioned. In construing
this statute the court, in Murdock Grate Co. v. Commonwealth (152 Mass.,
28), said:jgc:chanrobles.com.ph

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In determining the scope of this act, the court said;

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"The statute we are discussing discloses no intention to create against the
state a new and heretofore unrecognized class of liabilities, but only an
intention to provide a judicial tribunal where well recognized existing
liabilities can be adjudicated."cralaw virtua1aw library
In Sipple v. State (99 N. Y., 284), where the board of the canal claims had,
by the terms of the statute of New York, jurisdiction of claims for damages for
injuries in the management of the canals such as the plaintiff had sustained,
Chief Justice Ruger remarks; "It must be conceded
that the state can be made liable for injuries arising from the negligence of
its agents or servants, only by force of some positive statute assuming such
liability."cralaw virtua1aw library
It being quite clear that Act No. 2457 does not operate to extend the
Governments liability to any cause not previously recognized, we will now
examine the substantive law touching the defendants liability for the
negligent acts of its officers, agents, and employees. Paragraph 5 of article
1903 of the civil Code reads:jgc:chanrobles.com.ph
"The state is liable in this sense when it acts through a special agent, but not
when the damage should have been caused by the official to whom properly
it pertained to do the act performed, in which case the provisions of the
preceding article shall be applicable."cralaw virtua1aw library
The supreme court of Spain in defining the scope of this paragraph
said:jgc:chanrobles.com.ph
"That the obligation to indemnify for damages which a third person causes
another by his fault or negligence is based, as is evidenced by the same
Law 3, Title 15, Partida 7, on that the person obligated, by his own fault or
negligence, takes part in the act or omission of the third party who caused
the damage. It follows therefrom that the state by virtue of such provision of
law, is not responsible for the damages suffered by private individuals in
consequence of acts performed by its employees in the discharge of the
functions pertaining to their office, because neither fault nor even negligence
can be presumed on the part of the state in the organization of branches of
the public service and in the appointment of its agents; on the contrary, we
must presuppose all foresight humanly possible on its part in order that each
branch of service serves the general weal and that of private persons
interested in its operation. Between these latter and the state therefore, no
relations of a private nature governed by the civil law can arise except in a
case where the state acts as a judicial person capable of acquiring rights
and contracting obligations." (Supreme Court of Spain, January 7, 1898; 83

"That the Civil Code in chapter 2, title 16, book 4, regulates the obligations
which arise out of fault or negligence; and whereas in the first articles
thereof, No. 1902, where the general principle is laid down that where a
person who by an act or omission causes damage to another through fault
or negligence, shall be obliged to repair the damage so done, reference is
made to acts or omissions of the persons who directly or indirectly cause the
damage, the following article refers to third persons and imposes an identical
obligation upon those who maintain fixed relations of authority and
superiority over the authors of the damage, because the law presumes that
in consequence of such relations the evil caused by their own fault or
negligence is imputable to them. This legal presumption gives way to proof,
however, because, as held in the last paragraph of article 1903,
responsibility for acts of third persons ceases when the persons mentioned
in said article prove that they employed all the diligence of a good father of a
family to avoid the damage, and among these persons, called up[on to
answer in a direct and not a subsidiary manner, are found, in addition to the
mother or the father in a proper case, guardians and owners or director of an
establishment or enterprise, the state, but not always, except when it acts
through the agency of a special agent, doubtless because and only in this
case, the fault or negligence, which is the original basis of this kind of
objections, must be presumed to lie with the state.
"That although in some cases the state might by virtue of the general
principle set forth in article 1902 respond for all the damage that is
occasioned to private parties by orders or resolutions which by fault or
negligence are made by branches of the central administration acting in the
name and representation of the state itself and as an external expression of
its sovereignty in the exercise of its executive powers, yet said article is not
applicable in the case of damages said to have been occasioned to the
petitioners by an executive official, acting in the exercise of his powers, in
proceedings to enforce the collections of certain property taxes owing by the
owner of the property which they hold in sublease.
"That the responsibility of the state is limited by article 1903 to the case
wherein it acts through a special agent (and a special agent, in the sense in
which these words are employed, is one who receives a definite and fixed
order or commission, foreign to the exercise of the duties of his office if he is
a special official) so that in representation of the state and being bound to
act as an agent thereof he executed the trust confided to him. this concept
does not apply to any executive agent who is an employee of the active
administration and who in his own responsibility performs the functions
which are inherent in and naturally pertain to his office and which are
regulated by law and the regulations." (Supreme Court of Spain, May 18,

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Jur. Civ., 24.)

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1904; 98 Jur. Civ., 389, 390.)
"That according to paragraph 5 of article 1903 of the Civil Code and the
principle laid down in a decision, among others, of the 18th of May, 1904, in
a damage case, the responsibility of the state is limited to that which it
contracts through a special agent, duly empowered by a definite order or
commission to perform some act or charged with some definite purpose
which gives rise to the claim, and not where the claim is based on acts or
omissions imputable to a public official charge with some administrative or
technical office who can be held to the proper responsibility in the manner
laid down by the law of civil responsibility. Consequently, the trial court in not
so deciding and in sentencing the said entity to the payment of damages,
caused by an official of the second class referred to, has by erroneous
interpretation infringed the provisions of articles 1902 and 1903 of the Civil
Code." (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146)
It is, therefore, evident that the State (the Government of the Philippine
Islands) is only liable, according to the above quoted decisions of the
Supreme Court of Spain, for the acts of its agents, officers and employees
when they act as special agents within the meaning of paragraph 5 of article
1903, supra, and that the chauffeur of the ambulance of the General
Hospital was not such an agent.
For the foregoing reasons, the judgment appealed from must be reversed,
without costs in this instance. Whether the Government intends to make
itself legally liable for the amount of damages above set forth, which the
plaintiff has sustained by reason of the negligent acts of one of its
employees, by legislative enactment and by appropriating sufficient funds
therefor, we are not called upon to determine. This matter rests solely with
the Legislature and not with the courts.
Arellano, C.J., Torres, Johnson and Moreland, JJ., concur.

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SECOND DIVISION
[G.R. No. 55963. December 1, 1989.]
SPOUSES JOSE FONTANILLA AND VIRGINIA
FONTANILLA, Petitioners, v. HONORABLE INOCENCIO D. MALIAMAN
and NATIONAL IRRIGATION ADMINISTRATION, Respondents.
[G.R. No. 61045. December 1, 1989.]
NATIONAL IRRIGATION ADMINISTRATION, appellant, v. SPOUSES
JOSE FONTANILLA and VIRGINIA FONTANILLA, Appellees.
Cecilio V. Suarez, Jr. for Spouses Fontanilla.
Felicisimo C. Villaflor for NIA.

SYLLABUS

1. CIVIL LAW; TORTS AND DAMAGES; ASPECTS OF THE LIABILITY OF


STATE FOR DAMAGES. The liability of the State has two aspects,
namely: 1. Its public or governmental aspects where it is liable for the
tortious acts of special agents only. 2. Its private or business aspects (as
when it engages in private enterprises) where it becomes liable as an
ordinary employer. (p. 961, Civil Code of the Philippines; Annotated, Paras,
1986 Ed.). In this jurisdiction, the State assumes a limited liability for the
damage caused by the tortious acts or conduct of its special agent.
2. ID.; ID.; ID.; INSTANCES WHEN THE GOVERNMENT ASSUMES
LIABILITY FOR ACTS DONE THROUGH ITS SPECIAL AGENTS. Under
paragraph 6 of Art. 2180, the State has voluntarily assumed liability for acts
done through special agents. The States agent, if a public official, must not
only be specially commissioned to do a particular task but that such task
must be foreign to said officials usual governmental functions. If the States
agent is not a public official, and is commissioned to perform non-govern
mental functions, then the State assumes the role of an ordinary employer

and will be held liable as such for its agents tort. Where the government
commissions a private individual for a special governmental task, it is acting
through a special agent within the meaning of the provision. (Torts and
Damages, Sangco, p. 347, 1984 Ed.).
3. ADMINISTRATIVE LAW; GOVERNMENTAL AND PROPRIETARY
FUNCTIONS DINSTINGUISHED. Certain functions and activities, which
can be performed only by the government, are more or less generally
agreed to be "governmental" in character, and so the State is immune from
tort liability. On the other hand, a service which might as well be provided by
a private corporation, and particularly when it collects revenues from it, the
function is considered a "proprietary" one, as to which there may be liability
for the torts of agents within the scope of their employment.
4. ID.; NATIONAL IRRIGATION ADMINISTRATION; A GOVERNMENT
CORPORATION WITH JURIDICAL PERSONALITY WHICH CAN BE HELD
ANSWERABLE FOR DAMAGES. The National Irrigation Administration is
an agency of the government exercising proprietary functions, by express
provision of Rep. Act No. 3601. It is a government corporation with juridical
personality and not a mere agency of the government. Since it is a corporate
body performing non-governmental functions, it now becomes liable for the
damage caused by the accident resulting from the tortious act of its driveremployee. In this particular case, the NIA assumes the responsibility of an
ordinary employer and as such, it becomes answerable for damages.
5. CIVIL LAW; TORTS AND DAMAGES; NEGLIGENCE IN THE
SELECTION AND SUPERVISION OF EMPLOYEE; CASE OF. It should
be emphasized that the accident happened along the Maharlika National
Road within the city limits of San Jose City, an urban area. Considering the
fact that the victim was thrown 50 meters away from the point of impact,
there is a strong indication that driver Garcia was driving at a high speed.
This is confirmed by the fact that the pick-up suffered substantial and heavy
damage as above-described and the fact that the NIA group was then "in a
hurry to reach the campsite as early as possible", as shown by their not
stopping to find out what they bumped as would have been their normal and
initial reaction. Evidently, there was negligence in the supervision of the
driver for the reason that they were travelling at a high speed within the city
limits and yet the supervisor of the group, Ely Salonga, failed to caution and
make the driver observe the proper and allowed speed limit within the city.
Under the situation, such negligence is further aggravated by their desire to
reach their destination without even checking whether or not the vehicle
suffered damage from the object it bumped, thus showing imprudence and
recklessness on the part of both the driver and the supervisor in the group.
6. ID.; ID.; ID.; INSTANCES WHEN EMPLOYER WOULD STILL BE LIABLE

7. ID.; ID.; FAILURE OF DRIVER TO KEEP A PROPER LOOK OUT IN THE


LINE TO BE TRAVERSED CONSTITUTES NEGLIGENCE. In the case of
Vda. de Bonifacio v. B.L.T. Bus Co. (L-26810, August 31, 1970, 34 SCRA
618), this Court held that a driver should be especially watchful in
anticipation of others who may be using the highway, and his failure to keep
a proper look out for reasons and objects in the line to be traversed
constitutes negligence.

DECISION

PARAS, J.:

In G.R. No. 55963, the petition for review on certiorari seeks the affirmance
of the decision dated March 20, 1980 of the then Court of First Instance of
Nueva Ecija, Branch VIII, at San Jose City, and its modification with respect
to the denial of petitioners claim for moral and exemplary damages and
attorneys fees.
In G.R. No. 61045, respondent National Irrigation Administration seeks the
reversal of the aforesaid decision of the lower court. The original appeal of
this case before the Court of Appeals was certified to this Court and in the
resolution of July 7, 1982, it was docketed with the aforecited number. And in
the resolution of April 3, this case was consolidated with G.R. No. 55963.
It appears that on August 21, 1976 at about 6:30 P.M., a pick-up owned and
operated by respondent National Irrigation Administration, a government
agency bearing Plate No. IN-651, then driven officially by Hugo Garcia, an
employee of said agency as its regular driver, bumped a bicycle ridden by
Francisco Fontanilla, son of herein petitioners, and Restituto Deligo, at
Maasin, San Jose City along the Maharlika Highway. As a result of the
impact, Francisco Fontanilla and Restituto Deligo were injured and brought
to the San Jose City Emergency Hospital for treatment. Fontanilla was later
transferred to the Cabanatuan Provincial Hospital where he died.
Garcia was then a regular driver of respondent National Irrigation

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EVEN IN THE ABSENCE THEREOF. This Court has ruled that even if the
employer can prove the diligence in the selection and supervision (the latter
aspect has not been established herein) of the employee, still if he ratifies
the wrongful acts, or take no step to avert further damage, the employer
would still be liable. (Maxion v. Manila Railroad Co., 44 Phil. 597).

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Administration who, at the time of the accident, was a licensed professional
driver and who qualified for employment as such regular driver of
respondent after having passed the written and oral examinations on traffic
rules and maintenance of vehicles given by National Irrigation Administration
authorities.chanrobles.com.ph : virtual law library
The within petition is thus an offshot of the action (Civil Case No. SJC-56)
instituted by petitioners-spouses on April 17, 1978 against respondent NIA
before the then Court of First Instance of Nueva Ecija, Branch VIII at San
Jose City, for damages in connection with the death of their son resulting
from the aforestated accident.
After trial, the trial court rendered judgment on March 20, 1980 which
directed respondent National Irrigation Administration to pay damages
(death benefits) and actual expenses to petitioners. The dispositive portion
of the decision reads thus.
". . . Judgment is hereby rendered ordering the defendant National Irrigation
Administration to pay to the heirs of the deceased P12,000.00 for the death
of Francisco Fontanilla; P3,389.00 which the parents of the deceased had
spent for the hospitalization and burial of the deceased Francisco Fontanilla;
and to pay the costs." (Brief for the petitioners spouses Fontanilla, p. 4;
Rollo, p. 132).
Respondent National Irrigation Administration filed on April 21, 1980, its
motion for reconsideration of the aforesaid decision which respondent trial
court denied in its Order of June 13, 1980. Respondent National Irrigation
Administration thus appealed said decision to the Court of Appeals (C.A.G.R. No. 67237-R) where it filed its brief for appellant in support of its
position.
Instead of filing the required brief in the aforecited Court of Appeals case,
petitioners filed the instant petition with this Court.
The sole issue for the resolution of the Court is: Whether or not the award of
moral damages, exemplary damages and attorneys fees is legally proper in
a complaint for damages based on quasi-delict which resulted in the death of
the son of herein petitioners.
Petitioners allege:chanrob1es virtual 1aw library
1. The award of moral damages is specifically allowable under paragraph 3
of Article 2206 of the New Civil Code which provides that the spouse,
legitimate and illegitimate descendants and ascendants of the deceased
may demand moral damages for mental anguish by reason of the death of

2. The decision of the trial court had made an impression that respondent
National Irrigation Administration acted with gross negligence because of the
accident and the subsequent failure of the National Irrigation Administration
personnel including the driver to stop in order to give assistance to the
victims. Thus, by reason of the gross negligence of respondent, petitioners
become entitled to exemplary damages under Arts. 2231 and 2229 of the
New Civil Code.
3. Petitioners are entitled to an award of attorneys fees, the amount of which
(20%) had been sufficiently established in the hearing of May 23, 1979.
4. This petition has been filed only for the purpose of reviewing the findings
of the lower court upon which the disallowance of moral damages,
exemplary damages and attorneys fees was based and not for the purpose
of disturbing the other findings of fact and conclusions of law.
The Solicitor General, taking up the cudgels for public respondent National
Irrigation Administration, contends thus:chanrobles law library
1. The filing of the instant petition is not proper in view of the appeal taken by
respondent National Irrigation Administration to the Court of Appeals against
the judgment sought to be reviewed. The focal issue raised in respondents
appeal to the Court of Appeals involves the question as to whether or not the
driver of the vehicle that bumped the victims was negligent in his operation
of said vehicle. It thus becomes necessary that before petitioners claim for
moral and exemplary damages could be resolved, there should first be a
finding of negligence on the part of respondents employee-driver. In this
regard, the Solicitor General alleges that the trial court decision does not
categorically contain such finding.
2. The filing of the "Appearance and Urgent Motion For Leave to File
Plaintiff-Appellees Brief dated December 28, 1981 by petitioners in the
appeal (CA-G.R. No. 67237-R; and G.R. No. 61045) of the respondent
National Irrigation Administration before the Court of Appeals, is an explicit
admission of said petitioners that the herein petition, is not proper.
Inconsistent procedures are manifest because while petitioners question the
findings of fact in the Court of Appeals, they present only the questions of
law before this Court which posture confirms their admission of the facts.
3. The fact that the parties failed to agree on whether or not negligence

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the deceased. Should moral damages be granted, the award should be


made to each of petitioners-spouses individually and in varying amounts
depending upon proof of mental and depth of intensity of the same, which
should not be less than P50,000.00 for each of them.

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caused the vehicular accident involves a question of fact which petitioners
should have brought to the Court of Appeals within the reglementary period.
Hence, the decision of the trial court has become final as to the petitioners
and for this reason alone, the petition should be dismissed.
4. Respondent Judge acted within his jurisdiction, sound discretion and in
conformity with the law.
5. Respondents do not assail petitioners claim to moral and exemplary
damages by reason of the shock and subsequent illness they suffered
because of the death of their son. Respondent National Irrigation
Administration, however, avers that it cannot be held liable for the damages
because it is an agency of the State performing governmental functions and
driver Hugo Garcia was a regular driver of the vehicle, not a special agent
who was performing a job or act foreign to his usual duties. Hence, the
liability for the tortious act should not be borne by respondent government
agency but by driver Garcia who should answer for the consequences of his
act.
6. Even as the trial court touched on the failure or laxity of respondent
National Irrigation Administration in exercising due diligence in the selection
and supervision of its employee, the matter of due diligence is not an issue
in this case since driver Garcia was not its special agent but a regular driver
of the vehicle.
The sole legal question on whether or not petitioners may be entitled to an
award of moral and exemplary damages and attorneys fees can very well
be answered with the application of Arts. 2176 and 2180 of the New Civil
Code.chanroblesvirtualawlibrary
Art. 2176 thus provides:jgc:chanrobles.com.ph
"Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence,
if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter."cralaw
virtua1aw library
Paragraphs 5 and 6 of Art. 2180 read as follows:jgc:chanrobles.com.ph
"Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or industry."cralaw
virtua1aw library

The liability of the State has two aspects, namely:chanrob1es virtual 1aw
library
1. Its public or governmental aspects where it is liable for the tortious acts of
special agents only.
2 Its private or business aspects (as when it engages in private enterprises)
where it becomes liable as an ordinary employer. (p. 961, Civil Code of the
Philippines; Annotated, Paras, 1986 Ed.).
In this jurisdiction, the State assumes a limited liability for the damage
caused by the tortious acts or conduct of its special agent.

Page

"The State is responsible in like manner when it acts through a special


agent; but not when the damage has been caused by the official to whom
the task done properly pertains, in which case what is provided in Art. 2176
shall be applicable."cralaw virtua1aw library

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
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shall have representatives in all provinces for the proper conduct of its
business.
Section 2 of said law spells out some of the NIAs proprietary functions. Thus

"Sec. 2. Powers and objectives. The NIA shall have the following powers
and objectives:jgc:chanrobles.com.ph
"(a) . . .
"(b) . . .
"(c) To collect from the users of each irrigation system constructed by it such
fees as may be necessary to finance the continuous operation of the system
and reimburse within a certain period not less than twenty-five years cost of
construction thereof; and

Under the aforequoted paragraph 6 of Art. 2180, the State has voluntarily
assumed liability for acts done through special agents. The States agent, if a
public official, must not only be specially commissioned to do a particular
task but that such task must be foreign to said officials usual governmental
functions. If the States agent is not a public official, and is commissioned to
perform non-govern mental functions, then the State assumes the role of an
ordinary employer and will be held liable as such for its agents tort. Where
the government commissions a private individual for a special governmental
task, it is acting through a special agent within the meaning of the provision.
(Torts and Damages, Sangco, p. 347, 1984 Ed.).

"(d) To do all such other things and to transact all such business as are
directly or indirectly necessary, incidental or conducive to the attainment of
the above objectives."cralaw virtua1aw library

Certain functions and activities, which can be performed only by the


government, are more or less generally agreed to be "governmental" in
character, and so the State is immune from tort liability. On the other hand, a
service which might as well be provided by a private corporation, and
particularly when it collects revenues from it, the function is considered a
"proprietary" one, as to which there may be liability for the torts of agents
within the scope of their employment.chanrobles law library

This assumption of liability, however, is predicated upon the existence of


negligence on the part of respondent NIA. The negligence referred to here is
the negligence of supervision.

The National Irrigation Administration is an agency of the government


exercising proprietary functions, by express provision of Rep. Act No. 3601.
Section 1 of said Act provides:jgc:chanrobles.com.ph
"Section 1. Name and domicile. A body corporate is hereby created which
shall be known as the National Irrigation Administration, hereinafter called
the NIA for short, which shall be organized immediately after the approval of
this Act. It shall have its principal seat of business in the City of Manila and

Indubitably, the NIA is a government corporation with juridical personality


and not a mere agency of the government. Since it is a corporate body
performing non-governmental functions, it now becomes liable for the
damage caused by the accident resulting from the tortious act of its driveremployee. In this particular case, the NIA assumes the responsibility of an
ordinary employer and as such, it becomes answerable for damages.

At this juncture, the matter of due diligence on the part of respondent NIA
becomes a crucial issue in determining its liability since it has been
established that respondent is a government agency performing proprietary
functions and as such, it assumes the posture of an ordinary employer
which, under Par. 5 of Art. 2180, is responsible for the damages caused by
its employees provided that it has failed to observe or exercise due diligence
in the selection and supervision of the driver.chanrobles.com : virtual law
library
It will be noted from the assailed decision of the trial court that "as a result of
the impact, Francisco Fontanilla was thrown to a distance 50 meters away
from the point of impact while Restituto Deligo was thrown a little bit further

The lower court further declared that "a speeding vehicle coming in contact
with a person causes force and impact upon the vehicle that anyone in the
vehicle cannot fail to notice. As a matter of fact, the impact was so strong as
shown by the fact that the vehicle suffered dents on the right side of the
radiator guard, the hood, the fender and a crack on the radiator as shown by
the investigation report (Exhibit "E"). (Emphasis supplied) [page 29, Rollo].
It should be emphasized that the accident happened along the Maharlika
National Road within the city limits of San Jose City, an urban area.
Considering the fact that the victim was thrown 50 meters away from the
point of impact, there is a strong indication that driver Garcia was driving at a
high speed. This is confirmed by the fact that the pick-up suffered substantial
and heavy damage as above-described and the fact that the NIA group was
then "in a hurry to reach the campsite as early as possible", as shown by
their not stopping to find out what they bumped as would have been their
normal and initial reaction.
Evidently, there was negligence in the supervision of the driver for the
reason that they were travelling at a high speed within the city limits and yet
the supervisor of the group, Ely Salonga, failed to caution and make the
driver observe the proper and allowed speed limit within the city. Under the
situation, such negligence is further aggravated by their desire to reach their
destination without even checking whether or not the vehicle suffered
damage from the object it bumped, thus showing imprudence and
recklessness on the part of both the driver and the supervisor in the
group.chanrobles virtual lawlibrary
Significantly, this Court has ruled that even if the employer can prove the
diligence in the selection and supervision (the latter aspect has not been
established herein) of the employee, still if he ratifies the wrongful acts, or
take no step to avert further damage, the employer would still be liable.
(Maxion v. Manila Railroad Co., 44 Phil. 597).
Thus, too, in the case of Vda. de Bonifacio v. B.L.T. Bus Co. (L-26810,
August 31, 1970, 34 SCRA 618), this Court held that a driver should be
especially watchful in anticipation of others who may be using the highway,
and his failure to keep a proper look out for reasons and objects in the line to
be traversed constitutes negligence.
Considering the foregoing, respondent NIA is hereby directed to pay herein
petitioners-spouses the amounts of P12,000.00 for the death of Francisco
Fontanilla; P3,389.00 for hospitalization and burial expenses of the

Page

away. The impact took place almost at the edge of the cemented portion of
the road." (Italics supplied) [page 26, Rollo].

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
Atty. DG
aforenamed deceased; P30,000.00 as moral damages; P8,000.00 as
exemplary damages and attorneys fees of 20% of the total award.
SO ORDERED.
Padilla, Sarmiento and Regalado, JJ., concur.
Melencio-Herrera (Chairman), J., is on leave.

Page

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
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EN BANC
[G.R. No. L-47745. April 15, 1988.]
JOSE S. AMADORA, LORETA A. AMADORA, JOSE A. AMADORA JR.,
NORMA A. YLAYA, PANTALEON A. AMADORA, JOSE A. AMADORA III,
LUCY A. AMADORA, ROSALINDA A. AMADORA, PERFECTO A.
AMADORA, SERREC A. AMADORA, VICENTE A. AMADORA and MARIA
TISCALINA A. AMADORA, Petitioners, v. HONORABLE COURT OF
APPEALS, COLEGIO DE SAN JOSE-RECOLETOS, VICTOR LLUCH,
SERGIO P. DAMASO, JR., CELESTINO DICON, ANIANO, ABELLANA,
PABLITO DAFFON, thru his parents and natural guardians, MR. and
MRS. NICANOR GUMBAN, and ROLANDO VALENCIA, thru his
guardian, ATTY. FRANCISCO ALONSO,Respondents.
Jose S. Amadora & Associates, for Petitioners.
Padilla Law Office for Respondents.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; QUASI-DELICT;


LIABILITY OF TEACHERS AND HEADS OF ESTABLISHMENTS; APPLIES
TO ALL SCHOOLS, WHETHER ACADEMIC OR NOT; RATIONAL. The
provision in Article 2180 of the Civil Code should apply to all schools,
academic as well as non-academic. Where the school is academic rather
than technical or vocational in nature, responsibility for the tort committed by
the student will attach to the teacher in charge of such student, following the
first part of the provision. This is the general rule. In other words, teachers in
general shall be liable for the acts of their students except where the school
is technical in nature, in which case it is the head thereof who shall be
answerable. There is really no substantial distinction between the academic
and the non-academic schools insofar as torts committed by their students
are concerned. The same vigilance is expected from the teacher over the
students under his control and supervision, whatever the nature of the
school where he is teaching.

2. STATUTORY CONSTRUCTION AND INTERPRETATION; REDDENDO


SINGULA SINGULIS; APPLIED IN ARTICLE 2180 OF THE CIVIL CODE.
Article 2180 of the Civil Code provides: "Lastly, teachers or heads of
establishments of arts and trades shall be liable for damages caused by their
pupils and students or apprentices so long as they remain in their custody."
Following the canon of reddendo singula singulis, "teachers should apply to
the words "pupils and students and "heads of establishments of arts and
trades" to the word "apprentices."cralaw virtua1aw library
3. CIVIL LAW; OBLIGATIONS AND CONTRACTS; QUASI-DELICT;
LIABILITY OF TEACHERS AND HEADS OF ESTABLISHMENTS COEXTENSIVE WITH THE PERIOD THE STUDENT IS IN SCHOOL
PREMISES IN PURSUANCE OF LEGITIMATE OBJECTIVE. The student
is in the custody of the school authorities as long as he is under the control
and influence of the school and within its premises, whether the semester
has not yet begun or has already ended. As long as it can be shown that the
student is in the school premises in pursuance of a legitimate student
objective, in the exercise of a legitimate student right, and even in the
enjoyment of a legitimate student right, and even in the enjoyment of a
legitimate student privilege, the responsibility of the school authorities over
the student continues.
4. ID.; ID.; ID.; ID.; TEACHER-IN-CHARGE, DEFINED. The teacher-incharge is the one designated by the dean, principal, or other administrative
superior to exercise supervision over the pupils in the specific classes or
sections to which they are assigned.
5. ID.; ID.; ID.; ID.; LIABILITY FALLS DIRECTLY ON THE TEACHER OR
HEAD OF SCHOOL. It should be noted that the liability imposed by this
article is supposed to fall directly on the teacher or the head of the school of
arts and trades and not on the school itself.
6. ID.; ID.; ID.; ID.; RESPONDEAT SUPERIOR, BASIS OF LIABILITY OF
SCHOOL FOR NEGLIGENCE OF TEACHERS AND HEADS. If at all, the
school, whatever its nature, may be held to answer for the acts of its
teachers or even of the head thereof under the general principle of
respondeat superior, but then it may exculpate itself from liability by proof
that it had exercised the diligence of a bonus paterfamilias.
7. ID.; ID.; ID.; ID.; DILIGENCE OF A GOOD FATHER OF A FAMILY,
PROPER DEFENSE. Such defense of bonus pater familias is also
available to the teacher or the head of the school of arts and trades directly
held to answer for the tort committed by the student. As long as the
defendant can show that he had taken the necessary precautions to prevent

8. ID.; ID.; ID.; ID.; LIABILITY ATTACHES REGARDLESS OF AGE OF


STUDENT. It should be observed that the teacher will be held liable not
only when he is acting in loco parentis for the law does not require that the
offending student be of minority age. Unlike the parent, who will be liable
only if his child is still a minor, the teacher is held answerable by the law for
the act of the student under him regardless of the students age.
MELENCIO-HERRERA, J., concurring and dissenting:chanrob1es virtual
1aw library
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; QUASI-DELICT;
LIABILITY OF TEACHERS AND HEADS OF ESTABLISHMENTS; TERM
NOT LIMITED TO TEACHER-IN-CHARGE; EMBRACES ONE THAT
STANDS IN LOCO PARENTIS. I concur, except with respect to the
restricted meaning given the term "teacher" in Article 2180 of the Civil Code
as "teacher-in-charge." This would limit liability to occasions where there are
classes under the immediate charge of a teacher, which does not seem to
be the intendment of the law. The philosophy of the law is that whoever
stands in loco parentis will have the same duties and obligations as parents
whenever in such a standing. Those persons are mandatorily held liable for
the tortious acts of pupils and students so long as the latter remain in their
custody, meaning their protective and supervisory custody.
2. ID.; ID.; ID.; ID.; RATIONAL OF LIABILITY. "The protective custody of
the school heads and teachers is mandatorily substituted for that of the
parents, and hence, it becomes their obligation as well as that of the school
itself to provide proper supervision of the students activities during the whole
time that they are at attendance in the school, including recess time, as well
as to take the necessary precautions to protect the students in their custody
from dangers and hazards that would reasonably be anticipated, including
injuries that some students themselves may inflict wilfully or through
negligence on their fellow students. (Palisoc vs, Brillantes, 41 SCRA 548)
3. ID.; ID.; ID.; ID.; DEFENSE AGAINST LIABILITY. As provided for in the
same Article 2180, the responsibility treated of shall cease when the persons
mentioned prove that they observed all the diligence of a good father of a
family to prevent damage.
4. ID.; ID.; ID.; ID.; LIABILITY OF SCHOOLS, EXPLAINED; DEFENSE
AVAILABLE. And while a school is, admittedly, not directly liable since
Article 2180 speaks only of teachers and schools heads, yet, by virtue of the
same provision, the school, as their employer, may be held liable for the

Page

the injury complained of, he can exonerate himself from the liability imposed
by Article 2180.

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failure of its teachers or school heads to perform their mandatory legal duties
as substitute parents (Sangco, Philippine Law on Torts & Damages, 1978
ed., p. 201). Again, the school may exculpate itself from liability by proving
that it had exercised the diligence of a good father of the family.

DECISION

CRUZ, J.:

Like any prospective graduate, Alfredo Amadora was looking forward to the
commencement exercises where he would ascend the stage and in the
presence of his relatives and friends receive his high school diploma. These
ceremonies were scheduled on April 16, 1972. As it turned out, though, fate
would intervene and deny him that awaited experience. On April 13, 1972,
while they were in the auditorium of their school, the Colegio de San JoseRecoletes, a classmate, Pablito Daffon, fired a gun that mortally hit Alfredo,
ending all his expectations and his life as well. The victim was only
seventeen years old. 1
Daffon was convicted of homicide thru reckless imprudence. 2 Additionally,
the herein petitioners, as the victims parents, filed a civil action for damages
under Article 2180 of the Civil Code against the Colegio de San JoseRecoletos, its rector, the high school principal, the dean of boys, and the
physics teacher, together with Daffon and two other students, through their
respective parents. The complaint against the students was later dropped.
After trial, the Court of First Instance of Cebu held the remaining defendants
liable to the plaintiffs in the sum of P294,984.00, representing death
compensation, loss of earning capacity, costs of litigation, funeral expenses,
moral damages, exemplary damages, and attorneys fees. 3 On appeal to
the respondent court, however, the decision was reversed and all the
defendants were completely absolved. 4
In its decision, which is now the subject of this petition for certiorari under
Rule 45 of the Rules of Court, the respondent court found that Article 2180
was not applicable as the Colegio de San Jose-Recoletos was not a school
of arts and trades but an academic institution of learning. It also held that the
students were not in the custody of the school at the time of the incident as
the semester had already ended, that there was no clear identification of the
fatal gun, and that in any event the defendants had exercised the necessary
diligence in preventing the injury. 5

The petitioners contend that their son was in the school to finish his physics
experiment as a prerequisite to his graduation; hence, he was then under
the custody of the private respondents. The private respondents submit that
Alfredo Amadora had gone to the school only for the purpose of submitting
his physics report and that he was no longer in their custody because the
semester had already ended.
There is also the question of the identity of the gun used which the
petitioners consider important because of an earlier incident which they
claim underscores the negligence of the school and at least one of the
private respondents. It is not denied by the respondents that on April 7,
1972, Sergio Damaso, Jr., the dean of boys, confiscated from Jose Gumban
an unlicensed pistol but later returned it to him without making a report to the
principal or taking any further action. 6 As Gumban was one of the
companions of Daffon when the latter fired the gun that killed Alfredo, the
petitioners contend that this was the same pistol that had been confiscated
from Gumban and that their son would not have been killed if it had not been
returned by Damaso. The respondents say, however, that there is no proof
that the gun was the same firearm that killed Alfredo.
Resolution of all these disagreements will depend on the interpretation of
Article 2180 which, as it happens, is invoked by both parties in support of
their conflicting positions. The pertinent part of this article reads as
follows:jgc:chanrobles.com.ph
"Lastly, teachers or heads of establishments of arts and trades shall be liable
for damages caused by their pupils and students or apprentices so long as
they remain in their custody."cralaw virtua1aw library
Three cases have so far been decided by the Court in connection with the
above-quoted provision, to wit: Exconde v. Capuno, 7 Mercado v. Court of
Appeals, 8 and Palisoc v. Brillantes. 9 These will be briefly reviewed in this
opinion for a better resolution of the case at bar.
In the Exconde Case, Dante Capuno, a student of the Balintawak
Elementary School and a Boy Scout, attended a Rizal Day parade on
instructions of the city school supervisor. After the parade, the boy boarded a
jeep, took over its wheel and drove it so recklessly that it turned turtle,
resulting in the death of two of its passengers. Dante was found guilty of
double homicide with reckless imprudence. In the separate civil action filed

Page

The basic undisputed facts are that Alfredo Amadora went to the San JoseRecoletos on April 13, 1972, and while in its auditorium was shot to death by
Pablito Daffon, a classmate. On the implications and consequences of these
facts, the parties sharply disagree.chanrobles.com.ph : virtual law library

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against them, his father was held solidarily liable with him in damages under
Article 1903 (now Article 2180) of the Civil Code for the tort committed by the
15-year old boy.
This decision, which was penned by Justice Bautista Angelo on June 29,
1957, exculpated the school in an obiter dictum (as it was not a party to the
case) on the ground that it was not a school of arts and trades. Justice J.B.L.
Reyes, with whom Justices Sabino Padilla and Alex Reyes concurred,
dissented, arguing that it was the school authorities who should be held
liable. Liability under this role, he said, was imposed on (1) teachers in
general; and (2) heads of schools of arts and trades in particular. The
modifying clause "of establishments of arts and trades" should apply only to
"heads" and not "teachers."cralaw virtua1aw library
Exconde was reiterated in the Mercado Case, and with an elaboration. A
student cut a classmate with a razor blade during recess time at the Lourdes
Catholic School in Quezon City, and the parents of the victim sued the
culprits parents for damages. Through Justice Labrador, the Court declared
in another obiter (as the school itself had also not been sued) that the school
was not liable because it was not an establishment of arts and trades.
Morever, the custody requirement had not been proved as this
"contemplates a situation where the student lives and boards with the
teacher, such that the control, direction and influences on the pupil
supersede those of the parents." Justice J.B.L. Reyes did not take part but
the other members of the court concurred in this decision promulgated on
May 30, 1960.chanrobles virtual lawlibrary
In Palisoc v. Brillantes, decided on October 4, 1971, a 16-year old student
was killed by a classmate with fist blows in the laboratory of the Manila
Technical Institute. Although the wrongdoer who was already of age
was not boarding in the school, the head thereof and the teacher in charge
were held solidarily liable with him. The Court declared through Justice
Teehankee:jgc:chanrobles.com.ph
"The phrase used in the cited article so long as (the students) remain in
their custody means the protective and supervisory custody that the
school and its heads and teachers exercise over the pupils and students for
as long as they are at attendance in the school, including recess time. There
is nothing in the law that requires that for such liability to attach, the pupil or
student who commits the tortious act must live and board in the school, as
erroneously held by the lower court, and the dicta in Mercado (as well as in
Exconde) on which it relied, must now be deemed to have been set aside by
the present decision."cralaw virtua1aw library
This decision was concurred in by five other members, 10 including Justice

In a footnote, Justice Teehankee said he agreed with Justice Reyes dissent


in the Exconde Case but added that "since the school involved at bar is a
non-academic school, the question as to the applicability of the cited codal
provision to academic institutions will have to await another case wherein it
may properly be raised."cralaw virtua1aw library
This is the case.
Unlike in Exconde and Mercado, the Colegio de San Jose-Recoletos has
been directly impleaded and is sought to be held liable under Article 2180;
and unlike in Palisoc, it is not a school of arts and trades but an academic
institution of learning. The parties herein have also directly raised the
question of whether or not Article 2180 covers even establishments which
are technically not schools of arts and trades, and, if so, when the offending
student is supposed to be "in its custody."cralaw virtua1aw library
After an exhaustive examination of the problem, the Court has come to the
conclusion that the provision in question should apply to all schools,
academic as well as non-academic. Where the school is academic rather
than technical or vocational in nature, responsibility for the tort committed by
the student will attach to the teacher in charge of such student, following the
first part of the provision. This is the general rule. In the case of
establishments of arts and trades, it is the head thereof, and only he, who
shall be held liable as an exception to the general rule. In other words,
teachers in general shall be liable for the acts of their students except where
the school is technical in nature, in which case it is the head thereof who
shall be answerable. Following the canon of reddendo singula singulis,
"teachers" should apply to the words "pupils and students" and "heads of
establishments of arts and trades" to the word "apprentices."cralaw
virtua1aw library
The Court thus conforms to the dissenting opinion expressed by Justice
J.B.L. Reyes in Exconde where he said in part:jgc:chanrobles.com.ph
"I can see no sound reason for limiting Art. 1903 of the Old Civil Code to
teachers of arts and trades and not to academic ones. What substantial
difference is there between them insofar as concerns the proper supervision

Page

J.B.L. Reyes, who stressed, in answer to the dissenting opinion, that even
students already of age were covered by the provision since they were
equally in the custody of the school and subject to its discipline. Dissenting
with three others, 11 Justice Makalintal was for retaining the custody
interpretation in Mercado and submitted that the rule should apply only to
torts committed by students not yet of age as the school would be acting
only in loco parentis.

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and vigilance over their pupils? It cannot be seriously contended that an
academic teacher is exempt from the duty of watching that his pupils do not
commit a tort to the detriment of third persons, so long as they are in a
position to exercise authority and supervision over the pupil. In my opinion,
in the phrase teachers or heads of establishments of arts and trades used
in Art. 1903 of the old Civil Code, the words arts and trades does not qualify
teachers but only heads of establishments. The phrase is only an updated
version of the equivalent terms `preceptores y artesanos used in the Italian
and French Civil Codes.chanrobles virtual lawlibrary
"If, as conceded by all commentators, the basis of the presumption of
negligence of Art. 1903 in some culpa in vigilando that the parents, teachers,
etc. are supposed to have incurred in the exercise of their authority, it would
seem clear that where the parent places the child under the effective
authority of the teacher, the latter, and not the parent, should be the one
answerable for the torts committed while under his custody, for the very
reason that the parent is not supposed to interfere with the discipline of the
school nor with the authority and supervision of the teacher while the child is
under instruction. And if there is no authority, there can be no responsibility.
There is really no substantial distinction between the academic and the nonacademic schools insofar as torts committed by their students are
concerned. The same vigilance is expected from the teacher over the
students under his control and supervision, whatever the nature of the
school where he is teaching. The suggestion in the Exconde and Mercado
Cases is that the provision would make the teacher or even the head of the
school of arts and trades liable for an injury caused by any student in its
custody but if that same tort were committed in an academic school, no
liability would attach to the teacher or the school head. All other
circumstances being the same, the teacher or the head of the academic
school would be absolved whereas the teacher and the head of the nonacademic school would be held liable, and simply because the latter is a
school of arts and trades.
The Court cannot see why different degrees of vigilance should be exercised
by the school authorities on the basis only of the nature of their respective
schools. There does not seem to be any plausible reason for relaxing that
vigilance simply because the school is academic in nature and for increasing
such vigilance where the school is non-academic. Notably, the injury subject
of liability is caused by the student and not by the school itself nor is it a
result of the operations of the school or its equipment. The injury
contemplated may be caused by any student regardless of the school where
he is registered. The teacher certainly should not be able to excuse himself
by simply showing that he is teaching in an academic school where, on the
other hand, the head would be held liable if the school were non-academic.

The reason for the disparity can be traced to the fact that historically the
head of the school of arts and trades exercised a closer tutelage over his
pupils than the head of the academic school. The old schools of arts and
trades were engaged in the training of artisans apprenticed to their master
who personally and directly instructed them on the technique and secrets of
their craft. The head of the school of arts and trades was such a master and
so was personally involved in the task of teaching his students, who usually
even boarded with him and so came under his constant control, supervision
and influence. By contrast, the head of the academic school was not as
involved with his students and exercised only administrative duties over the
teachers who were the persons directly dealing with the students. The head
of the academic school had then (as now) only a vicarious relationship with
the students. Consequently, while he could not be directly faulted for the acts
of the students, the head of the school of arts and trades, because of his
closer ties with them, could be so blamed.
It is conceded that the distinction no longer obtains at present in view of the
expansion of the schools of arts and trades, the consequent increase in their
enrollment, and the corresponding diminution of the direct and personal
contract of their heads with the students. Article 2180, however, remains
unchanged. In its present state, the provision must be interpreted by the
Court according to its clear and original mandate until the legislature, taking
into account the changes in the situation subject to be regulated, sees fit to
enact the necessary amendment.chanrobles law library : red
The other matter to be resolved is the duration of the responsibility of the
teacher or the head of the school of arts and trades over the students. Is
such responsibility co-extensive with the period when the student is actually
undergoing studies during the school term, as contended by the respondents
and impliedly admitted by the petitioners themselves?
From a reading of the provision under examination, it is clear that while the
custody requirement, to repeat Palisoc v. Brillantes, does not mean that the
student must be boarding with the school authorities, it does signify that the
student should be within the control and under the influence of the school
authorities at the time of the occurrence of the injury. This does not
necessarily mean that such, custody be co-terminous with the semester,

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These questions, though, may be asked: If the teacher of the academic


school is to be held answerable for the torts committed by his students, why
is it the head of the school only who is held liable where the injury is caused
in a school of arts and trades? And in the case of the academic or nontechnical school, why not apply the rule also to the head thereof instead of
imposing the liability only on the teacher?

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beginning with the start of classes and ending upon the close thereof, and
excluding the time before or after such period, such as the period of
registration, and in the case of graduating students, the period before the
commencement exercises. In the view of the Court, the student is in the
custody of the school authorities as long as he is under the control and
influence of the school and within its premises, whether the semester has
not yet begun or has already ended.
It is too tenuous to argue that the student comes under the discipline of the
school only upon the start of classes notwithstanding that before that day he
has already registered and thus placed himself under its rules. Neither
should such discipline be deemed ended upon the last day of classes
notwithstanding that there may still be certain requisites to be satisfied for
completion of the course, such as submission of reports, term papers,
clearances and the like. During such periods, the student is still subject to
the disciplinary authority of the school and cannot consider himself released
altogether from observance of its rules.
As long as it can be shown that the student is in the school premises in
pursuance of a legitimate student objective, in the exercise of a legitimate
student right, and even in the enjoyment of a legitimate student right, and
even in the enjoyment of a legitimate student privilege, the responsibility of
the school authorities over the student continues. Indeed, even if the student
should be doing nothing more than relaxing in the campus in the company of
his classmates and friends and enjoying the ambience and atmosphere of
the school, he is still within the custody and subject to the discipline of the
school authorities under the provisions of Article 2180.
During all these occasions, it is obviously the teacher-in-charge who must
answer for his students torts, in practically the same way that the parents
are responsible for the child when he is in their custody. The teacher-incharge is the one designated by the dean, principal, or other administrative
superior to exercise supervision over the pupils in the specific classes or
sections to which they are assigned. It is not necessary that at the time of
the injury, the teacher be physically present and in a position to prevent it.
Custody does not connote immediate and actual physical control but refers
more to the influence exerted on the child and the discipline instilled in him
as a result of such influence. Thus, for the injuries caused by the student,
the teacher and not the parent shall be held responsible if the tort was
committed within the premises of the school at any time when its authority
could be validly exercised over him.
In any event, it should be noted that the liability imposed by this article is
supposed to fall directly on the teacher or the head of the school of arts and
trades and not on the school itself. If at all, the school, whatever its nature,

Such defense is, of course, also available to the teacher or the head of the
school of arts and trades directly held to answer for the tort committed by the
student. As long as the defendant can show that he had taken the necessary
precautions to prevent the injury complained of, he can exonerate himself
from the liability imposed by Article 2180, which also states
that:jgc:chanrobles.com.ph
"The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father
of a family to prevent damages."cralaw virtua1aw library
In this connection, it should be observed that the teacher will be held liable
not only when he is acting in loco parentis for the law does not require that
the offending student be of minority age. Unlike the parent, who will be liable
only if his child is still a minor, the teacher is held answerable by the law for
the act of the student under him regardless of the students age. Thus, in the
Palisoc Case, liability attached to the teacher and the head of the technical
school although the wrongdoer was already of age. In this sense, Article
2180 treats the parent more favorably than the teacher.
The Court is not unmindful of the apprehensions expressed by Justice
Makalintal in his dissenting opinion in Palisoc that the school may be unduly
exposed to liability under this article in view of the increasing activism among
the students that is likely to cause violence and resulting injuries in the
school premises. That is a valid fear, to be sure. Nevertheless, it should be
repeated that, under the present ruling, it is not the school that will be held
directly liable. Moreover, the defense of due diligence is available to it in
case it is sought to be held answerable as principal for the acts or omission
of its head or the teacher in its employ.chanroblesvirtualawlibrary
The school can show that it exercised proper measures in selecting the head
or its teachers and the appropriate supervision over them in the custody and
instruction of the pupils pursuant to its rules and regulations for the
maintenance of discipline among them. In almost all cases now, in fact,
these measures are effected through the assistance of an adequate security
force to help the teacher physically enforce those rules upon the students.
This should bolster the claim of the school that it has taken adequate steps
to prevent any injury that may be committed by its students.
A fortiori, the teacher himself may invoke this defense as it would otherwise

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may be held to answer for the acts of its teachers or even of the head
thereof under the general principle of respondeat superior, but then it may
exculpate itself from liability by proof that it had exercised the diligence of a
bonus paterfamilias.

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be unfair to hold him directly answerable for the damage caused by his
students as long as they are in the school premises and presumably under
his influence. In this respect, the Court is disposed not to expect from the
teacher the same measure of responsibility imposed on the parent for their
influence over the child is not equal in degree. Obviously, the parent can
expect more obedience from the child because the latters dependence on
him is greater than on the teacher. It need not be stressed that such
dependence includes the childs support and sustenance whereas
submission to the teachers influence, besides being co-terminous with the
period of custody, is usually enforced only because of the students desire to
pass the course. The parent can instill more lasting discipline on the child
than the teacher and so should be held to a greater accountability than the
teacher for the tort committed by the child.
And if it is also considered that under the article in question, the teacher or
the head of the school of arts and trades is responsible for the damage
caused by the student or apprentice even if he is already of age and
therefore less tractable than the minor then there should all the more be
justification to require from the school authorities less accountability as long
as they can prove reasonable diligence in preventing the injury. After all, if
the parent himself is no longer liable for the students acts because he has
reached majority age and so is no longer under the formers control, there is
then all the more reason for leniency in assessing the teachers
responsibility for the acts of the student.
Applying the foregoing considerations, the Court has arrived at the following
conclusions:chanrob1es virtual 1aw library
1. At the time Alfredo Amadora was fatally shot, he was still in the custody of
the authorities of Colegio de San Jose-Recoletos notwithstanding that the
fourth year classes had formally ended. It was immaterial if he was in the
school auditorium to finish his physics experiment or merely to submit his
physics report for what is important is that he was there for a legitimate
purpose. As previously observed, even the mere savoring of the company of
his friends in the premises of the school is a legitimate purpose that would
have also brought him in the custody of the school authorities.
2. The rector, the high school principal and the dean of boys cannot be held
liable because none of them was the teacher-in-charge as previously
defined. Each of them was exercising only a general authority over the
student body and not the direct control and influence exerted by the teacher
placed in charge of particular classes or sections and thus immediately
involved in its discipline. The evidence of the parties does not disclose who
the teacher-in-charge of the offending student was. The mere fact that
Alfredo Amadora had gone to school that day in connection with his physics

3. At any rate, assuming that he was the teacher-in-charge, there is no


showing that Dicon was negligent in enforcing discipline upon Daffon or that
he had waived observance of the rules and regulations of the school or
condoned their non-observance. His absence when the tragedy happened
cannot be considered against him because he was not supposed or required
to report to school on that day. And while it is true that the offending student
was still in the custody of the teacher-in-charge even if the latter was
physically absent when the tort was committed, it has not been established
that it was caused by his laxness in enforcing discipline upon the student.
On the contrary, the private respondents have proved that they had
exercised due diligence, through the enforcement of the school regulations,
in maintaining that discipline.chanrobles lawlibrary : rednad
4. In the absence of a teacher-in-charge, it is probably the dean of boys who
should be held liable, especially in view of the unrefuted evidence that he
had earlier confiscated an unlicensed gun from one of the students and
returned the same later to him without taking disciplinary action or reporting
the matter to higher authorities. While this was clearly negligence on his
part, for which he deserves sanctions from the school, it does not
necessarily link him to the shooting of Amador as it has not been shown that
he confiscated and returned pistol was the gun that killed the petitioners
son.
5. Finally, as previously observed, the Colegio de San Jose-Recoletos
cannot be held directly liable under the article because only the teacher or
the head of the school of arts and trades is made responsible for the
damage caused by the student or apprentice. Neither can it be held to
answer for the tort committed by any of the other private respondents for
none of them has been found to have been charged with the custody of the
offending student or has been remiss in the discharge of his duties in
connection with such custody.
In sum, the Court finds under the facts as disclosed by the record and in the
light of the principles herein announced that none of the respondents is
liable for the injury inflicted by Pablito Daffon on Alfredo Amadora that
resulted in the latters death at the auditorium of the Colegio de San JoseRecoletos on April 13, 1972. While we deeply sympathize with the
petitioners over the loss of their son under the tragic circumstances here
related, we nevertheless are unable to extend them the material relief they
seek, as a balm to their grief, under the law they have invoked.
WHEREFORE, the petition is DENIED, without any pronouncement as to

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report did not necessarily make the physics teacher, respondent Celestino
Dicon, the teacher-in-charge of Alfredos killer.

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costs. It is so ordered.
Yap, Narvasa, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes and
Grio-Aquino, JJ., concur.
Teehankee, C.J., did not participate in deliberations.
Fernan and Padilla, JJ., no part, formerly counsel for Colegio de San JoseRecoletos.

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SECOND DIVISION
[G.R. No. L-70458. October 5, 1988.]
BENJAMIN SALVOSA and BAGUIO COLLEGES
FOUNDATION, Petitioners, v. THE INTERMEDIATE APPELLATE COURT,
EDUARDO B. CASTRO, DIOMEDES B. CASTRO, VIRGINIA B. CASTRO
and RODOLFO B. CASTRO, Respondents.
Edilberto B. Tenefrancia, for Petitioners.
Leonardo L. Cocjin, Jr. for Respondents.

SYLLABUS

activities where the student still remains within call of his mentor and is not
permitted to leave the school premises, or the area within which the school
activity is conducted. Recess by its nature does not include dismissal.
Likewise, the mere fact of being enrolled or being in the premises of a school
without more does not constitute "attending school" or being in the
"protective and supervisory custody" of the school, as contemplated in the
law.
3. ID.; ID.; SCHOOL HEAD NOT SOLIDARILY LIABLE; CASE AT BAR.
We hold that Jimmy B. Abon cannot be considered to have been "at
attendance in the school," or in the custody of BCF, when he shot Napoleon
Castro. Logically, therefore, petitioners cannot under Art. 2180 of the Civil
Code be held solidarily liable with Jimmy B. Abon for damages resulting from
his acts. Besides, the record shows that before the shooting incident,
Roberto B. Ungos ROTC Unit Commandant, AFP, had instructed Jimmy B.
Abon "not to leave the office and [to keep the armory] well guarded. Apart
from negating a finding that Jimmy B. Abon was under the custody of the
school when he committed the act for which the petitioners are sought to be
held liable, this circumstance shows that Jimmy B. Abon was supposed to be
working in the armory with definite instructions from his superior, the ROTC
Commandant, when he shot Napoleon Castro.

DECISION

1. CIVIL LAW; TORTS AND DAMAGES; LIABILITY OF TEACHERS OR


HEADS OF ESTABLISHMENTS. Under the penultimate paragraph of Art.
2180 of the Civil Code, teachers or heads of establishments of arts and
trades are liable for "damages caused by their pupils and students or
apprentices, so long as they remain in their custody." The rationale of such
liability is that so long as the student remains in the custody of a teacher, the
latter "stands, to a certain extent, in loco parentis [as to the student] and [is]
called upon to exercise reasonable supervision over the conduct of the
[student]." Likewise, "the phrase used in [Art. 2180 - so long as (the
students) remain in their custody means the protective and supervisory
custody that the school and its heads and teachers exercise over the pupils
and students for as long as they are at attendance in the school, including
recess time.

In this petition for review on certiorari, petitioners seek the reversal of the
decision 1 of respondent Intermediate Appellate Court, dated 7 December
1984, in AC-G.R. No. CV 69876, in so far as it affirmed the decision 2 of the
Court of First Instance of Tarlac (hereinafter referred to as the Trial Court),
which held, among others, petitioners solidarily liable with Jimmy B. Abon,
under Art. 2180 of the Civil Code.chanrobles.com:cralaw:red

2. ID.; ID.; ID.; TERM "RECESS" CONSTRUED; SEE PALISOC V.


BRILLANTES, ET AL. (41 SCRA 548). In line with the case of Palisoc, a
student not "at attendance in the school" cannot be in "recess" thereat. A
"recess," as the concept is embraced in the phrase "at attendance in the
school," contemplates a situation of temporary adjournment of school

". . . Baguio Colleges Foundation (BCF, hereafter) is an academic


institution. . . . [However], it is also an institution of arts and trade. It has so
advertised itself, as its own evidence shows. Its brochure (Exh. 2) shows
that BCF has a full-fledged technical-vocational department offering
Communication, Broadcast and Telytype Technician courses as well as

PADILLA, J.:

The relevant facts, as found by the Trial Court and adopted by reference by
the respondent Court, are:jgc:chanrobles.com.ph

Within the premises of the BCF is an ROTC Unit, the Baguio Colleges
Foundation Reserve Officers Training Corps (ROTC) Unit, which is under the
full control of the Armed Forces of the Philippines. 4 The ROTC Unit, by way
of accommodation to the Armed Forces of the Philippines (AFP), pursuant to
Department Order No. 14, Series of 1975 of the Department of Education
and Culture, 5 is provided by the BCF an office and an armory located at the
basement of its main building. 6
The Baguio Colleges Foundation ROTC Unit had Jimmy B. Abon as its duly
appointed armorer. 7 As armorer of the ROTC Unit, Jimmy B. Abon received
his appointment from the AFP. Not being an employee of the BCF, he also
received his salary from the AFP, 8 as well as orders from Captain Roberto
C. Ungos, the Commandant of the Baguio Colleges Foundation ROTC Unit,
concurrent Commandant of other ROTC units in Baguio and an employee
(officer) of the AFP. 9 Jimmy B. Abon was also a commerce student of the
BCF. 10
On 3 March 1977, at around 8:00 p.m., in the parking space of BCF, Jimmy
B. Abon shot Napoleon Castro a student of the University of Baguio with an
unlicensed firearm which the former took from the armory of the ROTC Unit
of the BCF. 11 As a result, Napoleon Castro died and Jimmy B. Abon was
prosecuted for, and convicted of the crime of Homicide by Military
Commission No. 30, AFP. 12
Subsequently, the heirs of Napoleon Castro sued for damages, impleading
Jimmy B. Abon, Roberto C. Ungos (ROTC Commandant), Benjamin Salvosa
(President and Chairman of the Board of BCF), Jesus Salvosa (Executive
Vice President of BCF), Libertad D. Quetolio (Dean of the College of
Education and Executive Trustee of BCF) and the Baguio Colleges
Foundation, Inc. as party defendants. After hearing, the Trial Court rendered
a decision, (1) sentencing defendants Jimmy B. Abon, Benjamin Salvosa
and Baguio Colleges Foundation, Inc., jointly and severally, to pay private
respondents, as heirs of Napoleon Castro: a) P12,000.00 for the death of
Napoleon Castro, (b) P316,000.00 as indemnity for the loss of earning
capacity of the deceased, (c) P5,000.00 as moral damages, (d) P6,000.00
as actual damages, and (e) P5,000.00 as attorneys fees, plus costs; (2)
absolving the other defendants; and (3) dismissing the defendants
counterclaim for lack of merit. 13 On appeal by petitioners, the respondent
Court affirmed with modification the decision of the Trial Court. The
modification consisted in reducing the award for loss of earning capacity of
the deceased from P316,000.00 to P30,000.00 by way of temperate

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Electronics Serviceman and Automotive Mechanics courses . . . these


courses divest BCF of the nature or character of being purely or exclusively
an academic institution." 3

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damages, and increasing the indemnity for the death of Napoleon Castro
from P12,000.00 to P30,000.00.
Hence, this petition.
The central issue in this case is whether or not petitioners can be held
solidarily liable with Jimmy B. Abon for damages under Article 2180 of the
Civil Code, as a consequence of the tortious act of Jimmy B. Abon.
Under the penultimate paragraph of Art. 2180 of the Civil Code, teachers or
heads of establishments of arts and trades are liable for "damages caused
by their pupils and students or apprentices, so long as they remain in their
custody." The rationale of such liability is that so long as the student remains
in the custody of a teacher, the latter "stands, to a certain extent, in loco
parentis [as to the student] and [is] called upon to exercise reasonable
supervision over the conduct of the [student]." 14 Likewise, "the phrase used
in [Art. 2180 - so long as (the students) remain in their custody means the
protective and supervisory custody that the school and its heads and
teachers exercise over the pupils and students for as long as they are at
attendance in the school, including recess time. 15
In the case at bar, in holding that Jimmy B. Abon was still in the protective
and supervisory custody of the Baguio Colleges Foundation when he shot
Napoleon Castro, the respondent Court ruled that:jgc:chanrobles.com.ph
"it is true that Abon was not attending any class or school function at the time
of the shooting incident, which was at about 8 oclock in the evening; but
considering that Abon was employed as an armorer and property custodian
of the BCF ROTC unit, he must have been attending night classes and
therefore that hour in the evening was just about dismissal time for him or
soon thereafter. The time internal is safely within the recess time that the
trial court spoke of and envisioned by the Palisoc case, supra." 16
(Emphasis supplied)
In line with the case of Palisoc, 17 a student not "at attendance in the
school" cannot be in "recess" thereat. A "recess," as the concept is
embraced in the phrase "at attendance in the school," contemplates a
situation of temporary adjournment of school activities where the student still
remains within call of his mentor and is not permitted to leave the school
premises, or the area within which the school activity is conducted. Recess
by its nature does not include dismissal. 18 Likewise, the mere fact of being
enrolled or being in the premises of a school without more does not
constitute "attending school" or being in the "protective and supervisory
custody" of the school, as contemplated in the law.chanrobles.com : virtual
law library

Besides, the record shows that before the shooting incident, Roberto B.
Ungos ROTC Unit Commandant, AFP, had instructed Jimmy B. Abon "not to
leave the office and [to keep the armory] well guarded. 19 Apart from
negating a finding that Jimmy B. Abon was under the custody of the school
when he committed the act for which the petitioners are sought to be held
liable, this circumstance shows that Jimmy B. Abon was supposed to be
working in the armory with definite instructions from his superior, the ROTC
Commandant, when he shot Napoleon Castro.
Petitioners also raise the issue that, under Art. 2180 of the Civil Code, a
school which offers both academic and technical vocational courses cannot
be held liable for a tort committed by a student enrolled only in its academic
program; however, considering that Jimmy B. Abon was not in the custody of
BCF when he shot Napoleon Castro, the Court deems it unnecessary to
pass upon such other issue. 20
WHEREFORE, the decision appealed from is hereby REVERSED in so far
as it holds petitioners solidarily liable with Jimmy B. Abon for his tortious act
in the killing of Napoleon Castro. No costs.
SO ORDERED.
Melencio-Herrera (Chairperson), Paras, Sarmiento and Regalado, JJ.,
concur.

Page

Upon the foregoing considerations, we hold that Jimmy B. Abon cannot be


considered to have been "at attendance in the school," or in the custody of
BCF, when he shot Napoleon Castro. Logically, therefore, petitioners cannot
under Art. 2180 of the Civil Code be held solidarily liable with Jimmy B. Abon
for damages resulting from his acts.

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FIRST DIVISION
[G.R. No. 74431. November 6, 1989.]
PURITA MIRANDA VESTIL and AGUSTIN VESTIL, Petitioners, v.
INTERMEDIATE APPELLATE COURT, DAVID UY and TERESITA
UY, Respondents.
Pablo P. Garcia, for Petitioners.

cause injury. As for the alleged provocation, the petitioners forget that
Theness was only three years old at the time she was attacked and can
hardly be faulted for whatever she might have done to the animal.
3. ID.; ID.; ID.; BASIS THEREOF. According to Manresa, the obligation
imposed by Article 2183 of the Civil Code is not based on the negligence or
on the presumed lack of vigilance of the possessor or user of the animal
causing the damage. It is based on natural equity and on the principle of
social interest that he who possesses animals for his utility, pleasure or
service must answer for the damage which such animal may cause.
4. ID.; DAMAGES; ACTUAL DAMAGES; MEDICAL AND HOSPITALIZATION
EXPENSES, REDUCED. We sustain the findings of the Court of Appeals
and approve the monetary awards except only as to the medical and
hospitalization expenses, which are reduced to P2,026.69, as prayed for in
the complaint. While there is no recompense that can bring back to the
private respondents the child they have lost, their pain should at least be
assuaged by the civil damages to which they are entitled.

Roberto R. Palmares for Private Respondents.


DECISION
SYLLABUS
CRUZ, J.:
1. REMEDIAL LAW; EVIDENCE; WEIGHT AND SUFFICIENCY; DEATH
CERTIFICATE NOT CONCLUSIVE PROOF OF CAUSE OF DEATH BUT
ONLY OF FACT OF DEATH. The Court finds that the link between the
dog bites and the certified cause of death has been satisfactorily
established. We also reiterate our ruling in Sison v. Sun Life Assurance
Company of Canada, that the death certificate is not conclusive proof of the
cause of death but only of the fact of death. Indeed, the evidence of the
childs hydrophobia is sufficient to convince us that she died because she
was bitten by the dog even if the death certificate stated a different cause of
death.
2. CIVIL LAW; QUASI-DELICTS; ARTICLE 2183 OF CIVIL CODE;
POSSESSOR LIABLE EVEN IF ANIMAL SHOULD "ESCAPE OR BE LOST"
AND BE REMOVED FROM HIS CONTROL; THAT DOG WAS TAME AND
WAS MERELY PROVOKED BY CHILD INTO BITING HER, IMMATERIAL.
Article 2183 of the Civil Code holds the possessor liable even if the
animal should "escape or be lost" and so be removed from his control. And it
does not matter either that as the petitioners also contend, the dog was tame
and was merely provoked by the child into biting her. The law does not
speak only of vicious animals but covers even tame ones as long as they

Little Theness Tan Uy was dead at the age of three. Her parents said she
died because she was bitten by a dog of the petitioners, but the latter denied
this, claiming they had nothing to do with the dog. The Uys sued the Vestils,
who were sustained by the trial court. On appeal, the decision of the court a
quo was reversed in favor of the Uys. The Vestils are now before v. They ask
us to set aside the judgment of the respondent court and to reinstate that of
the trial court.chanrobles.com : virtual law library
On July 29, 1975, Theness was bitten by a dog while she was playing with a
child of the petitioners in the house of the late Vicente Miranda, the father of
Purita Vestil, at F. Ramos Street in Cebu City. She was rushed to the Cebu
General Hospital, where she was treated for "multiple lacerated wounds on
the forehead" 1 and administered an anti-rabies vaccine by Dr. Antonio
Tautjo. She was discharged after nine days but was re-admitted one week
later due to "vomiting of saliva." 2 The following day, on August 15, 1975, the
child died. The cause of death was certified as broncho-pneumonia. 3
Seven months later, the Uys sued for damages, alleging that the Vestils

The respondent court arrived at a different conclusion when the case was
appealed. 5 It found that the Vestils were in possession of the house and the
dog and so should be responsible under Article 2183 of the Civil Code for
the injuries caused by the dog. It also held that the child had died as a result
of the dog bites and not for causes independent thereof as submitted by the
appellees. Accordingly, the Vestils were ordered to pay the Uys damages in
the amount of P30,000.00 for the death of Theness, P12,000.00 for medical
and hospitalization expenses, and P2,000.00 as attorneys fees.
In the proceedings now before us, Purita Vestil insists that she is not the
owner of the house or of the dog left by her father as his estate has not yet
been partitioned and there are other heirs to the property. Pursuing the logic
of the Uys, she claims, even her sister living in Canada would be held
responsible for the acts of the dog simply because she is one of Mirandas
heirs. However, that is hardly the point. What must be determined is the
possession of the dog that admittedly was staying in the house in question,
regardless of the ownership of the dog or of the house.

Page

were liable to them as the possessors of "Andoy," the dog that bit and
eventually killed their daughter. The Vestils rejected the charge, insisting that
the dog belonged to the deceased Vicente Miranda, that it was a tame
animal, and that in any case no one had witnessed it bite Theness. After
trial, Judge Jose R. Ramolete of the Court of First Instance of Cebu
sustained the defendants and dismissed the complaint. 4

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presumably because of their relation with Vicente Miranda notwithstanding
that she herself did not seem to know them very well.chanrobles virtual
lawlibrary
There is contrary evidence that the occupants of the house were boarders
(or more of boarders than relatives) who paid the petitioners for providing
them with meals and accommodations. It also appears that Purita Vestil had
hired a maid, Dolores Jumao-as, who did the cooking and cleaning in the
said house for its occupants. 9 Her mother, Pacita, who was a nursemaid of
Purita herself, categorically declared that the petitioners were maintaining
boarders in the house where Theness was bitten by a dog. 10 Another
witness, Marcial Lao, testified that he was indeed a boarder and that the
Vestils were maintaining the house for business purposes. 11 And although
Purita denied paying the water bills for the house, the private respondents
submitted documentary evidence of her application for water connection with
the Cebu Water District, which strongly suggested that she was
administering the house in question. 12

The possessor of an animal or whoever may make use of the same is


responsible for the damage which it may cause, although it may escape or
be lost. This responsibility shall cease only in case the damage should come
from force majeure or from the fault of the person who has suffered damage.

While it is true that she is not really the owner of the house, which was still
part of Vicente Mirandas estate, there is no doubt that she and her husband
were its possessors at the time of the incident in question. She was the only
heir residing in Cebu City and the most logical person to take care of the
property, which was only six kilometers from her own house. 13 Moreover,
there is evidence showing that she and her family regularly went to the
house, once or twice weekly, according to at least one witness, 14 and used
it virtually as a second house. Interestingly, her own daughter was playing in
the house with Theness when the little girl was bitten by the dog. 15 The dog
itself remained in the house even after the death of Vicente Miranda in 1973
and until 1975, when the incident in question occurred. It is also noteworthy
that the petitioners offered to assist the Uys with their hospitalization
expenses although Purita said she knew them only casually. 16

Thus, in Afialda v. Hisole, 6 a person hired as caretaker of a carabao gored


him to death and his heirs thereupon sued the owner of the animal for
damages. The complaint was dismissed on the ground that it was the
caretakers duty to prevent the carabao from causing injury to any one,
including himself.

The petitioners also argue that even assuming that they were the
possessors of the dog that bit Theness, there was no clear showing that she
died as a result thereof. On the contrary, the death certificate 17 declared
that she died of broncho-pneumonia, which had nothing to do with the dog
bites for which she had been previously hospitalized.

Purita Vestils testimony that she was not in possession of Mirandas house
is hardly credible. She said that the occupants of the house left by her father
were related to him ("one way or the other") and maintained themselves out
of a common fund or by some kind of arrangement (on which, however, she
did not elaborate). 7 She mentioned as many as ten of such relatives who
had stayed in the house at one time or another although they did not appear
to be close kin. 8 She at least implied that they did not pay any rent,

The Court need not involve itself in an extended scientific discussion of the
causal connection between the dog bites and the certified cause of death
except to note that, first, Theness developed hydrophobia, a symptom of
rabies, as a result of the dog bites, and second, that asphyxia bronchopneumonia, which ultimately caused her death, was a complication of rabies.

Article 2183 reads as follows:chanrob1es virtual 1aw library

That Theness became afraid of water after she was bitten by the dog is

COURT: I think there was mention of rabies in the report in the second
admission?
A: Now, the child was continuously vomiting just before I referred to Dr. Co
earlier in the morning and then the father, because the child was asking for
water, the father tried to give the child water and this child went under the
bed, she did not like to drink the water and there was fright in her eyeballs.
For this reason, because I was in danger there was rabies, I called Dr. Co.
Q: In other words, the child had hydrophobia?
A: Yes, sir. 18
As for the link between rabies and broncho-pneumonia, the doctor had the
following to say under oath:chanrob1es virtual 1aw library
A: Now, as I said before, broncho-pneumonia can result from physical,
chemical and bacterial means . . . It can be the result of infection, now, so if
you have any other disease which can lower your resistance you can also
get pneumonia.
x

Q: Would you say that a person who has rabies may die of complication
which is broncho-pneumonia?
A: Yes.
Q: For the record, I am manifesting that this book shown the witness is
known as CURRENT DIANOSIS & TREATMENT, 1968 by Henry Brainerd,
Sheldon Margen and Milton Chaton. Now, I invite your attention, doctor, to
page 751 of this book under the title "Rabies." There is on this page,
"Prognosis" as a result of rabies and it says:chanrob1es virtual 1aw library

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established by the following testimony of Dr. Tautjo:chanrobles law library

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Q: Would you say therefore that persons who have rabies may die of
respiratory failure which leave in the form of broncho-pneumonia?
A: Broncho-pneumonia can be a complication of rabies. 19
On the strength of the foregoing testimony, the Court finds that the link
between the dog bites and the certified cause of death has been
satisfactorily established. We also reiterate our ruling in Sison v. Sun Life
Assurance Company of Canada, 20 that the death certificate is not
conclusive proof of the cause of death but only of the fact of death. Indeed,
the evidence of the childs hydrophobia is sufficient to convince us that she
died because she was bitten by the dog even if the death certificate stated a
different cause of death.
The petitioners contention that they could not be expected to exercise
remote control of the dog is not acceptable. In fact, Article 2183 of the Civil
Code holds the possessor liable even if the animal should "escape or be
lost" and so be removed from his control. And it does not matter either that
as the petitioners also contend, the dog was tame and was merely provoked
by the child into biting her. The law does not speak only of vicious animals
but covers even tame ones as long as they cause injury. As for the alleged
provocation, the petitioners forget that Theness was only three years old at
the time she was attacked and can hardly be faulted for whatever she might
have done to the animal.cralawnad
It is worth observing that the above defenses of the petitioners are an
implied rejection of their original posture that there was no proof that it was
the dog in their fathers house that bit Theness.
According to Manresa, the obligation imposed by Article 2183 of the Civil
Code is not based on the negligence or on the presumed lack of vigilance of
the possessor or user of the animal causing the damage. It is based on
natural equity and on the principle of social interest that he who possesses
animals for his utility, pleasure or service must answer for the damage which
such animal may cause. 21

After a positive diagnosis of rabies or after a bite by a suspected animal if


the animal cannot be observed or if the bite is on the head, give rabies
vaccine (duck embryo). Do you believe in this statement?

We sustain the findings of the Court of Appeals and approve the monetary
awards except only as to the medical and hospitalization expenses, which
are reduced to P2,026.69, as prayed for in the complaint. While there is no
recompense that can bring back to the private respondents the child they
have lost, their pain should at least be assuaged by the civil damages to
which they are entitled.

A: Yes.

WHEREFORE, the challenged decision is AFFIRMED as above modified.

Once the symptoms have appeared death inevitably occurs after 2-3 days
as a result of cardiac or respiratory failure or generalized paralysis.

The petition is DENIED, with costs against the petitioners. It is so ordered.

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Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

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FIRST DIVISION
[G.R. No. 91378. June 9, 1992.]
FIRST MALAYAN LEASING AND FINANCE CORPORATION, Petitioner,
v. THE HON. COURT OF APPEALS, CRISOSTOMO B. VITUG and
ESTATE OF VICENTE TRINIDAD, represented by widow GLORIA D.
TRINIDAD, Respondents.
Anacleto T. Lacanilao, Jr. for Petitioner.
Rebeck Espiritu & Associates Lawyers Pool for C. Vitug.

SYLLABUS

1. COMMERCIAL LAND; LAND TRANSPORTATION; MOTOR VEHICLE;


REGISTERED OWNER OR OPERATOR OF RECORD; LIABLE FOR
DAMAGES CAUSED REGARDLESS OF ANY ALLEGED SALE OR
LEASE.- This Court has consistently ruled that regardless of who the actual
owner of a motor vehicle might be, the registered owner is the operator of
the same with respect to the public and third persons, and as such, directly
and primarily responsible for the consequences of its operation. In
contemplation of law, the owner/operator of record is the employer of the
driver, the actual operator and employer being considered merely as his
agent (MYC-Agro-Industrial Corporation v. Vda. de Caldo, 132 SCRA 10,
citing Vargas v. Langcay, 6 SCRA 174; Tamayo v. Aquino, 105 Phil. 949).
"We believe that it is immaterial whether or not the driver was actually
employed by the operator of record. It is even not necessary to prove who
the actual owner of the vehicle and the employer of the driver is. Granting
that, in this case, the father of the driver is the actual owner and that he is
the actual employer, following the well-settled principle that the operator of
record continues to be the operator of the vehicle in contemplation of law, as

regards the public and third persons, and as such is responsible for the
consequences incident to its operation, we must hold and consider such
owner-operator of record as the employer, in contemplation of law, of the
driver. And, to give effect to this policy of law as enunciated in the above
cited decisions of this Court, we must now extend the same and consider the
actual operator and employer as the agent of the operator of record."
(Vargas v. Langcay, 6 SCRA 178; citing Montoya v. Ignacio, G.R. No. L5868, Dec. 29, 1953, Timbol v. Osias, G.R. No. L-7547, April 30, 1955; Vda.
de Medina v. Cresencia, G.R. No. L-8194, July 11, 1956; Necesito v. Paras,
G.R. No. L-10605, June 30, 1955.)." . . Were the registered owner allowed to
evade responsibility by proving who the supposed transferee or owner is, it
would be easy for him by collusion with others or otherwise, to escape said
responsibility and transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for the damage or
injury done." (Eerezo v. Jepte. 102 Phil. 103.)." . . The registered owner or
operator of record is the one liable for damages caused by a vehicle
regardless of any alleged sale or lease made thereon." (MYC-Agro-Industrial
Corp. v. Vda. de Caldo, 132 SCRA 11.)
2. ID.; ID.; ID.; TRANSFER OF OWNERSHIP; MUST BE RECORDED IN
THE LAND TRANSPORTATION OFFICE TO BIND THIRD PERSON. In
order for a transfer of ownership of a motor vehicle to be valid against third
persons, it must be recorded in the Land Transportation Office. For, although
valid between the parties, the sale cannot affect third persons who rely on
the public registration of the motor vehicle as conclusive evidence of
ownership. In law, FMLFC was the owner and operator of the Izusu cargo
truck, hence, fully liable to third parties injured by its operation due to the
fault or negligence of the driver thereof.

DECISION

GRIO-AQUINO, J.:

This case brings to the force the importance of motor vehicle registration in
determining who should be liable for the death or injuries suffered by
passengers or third persons as a consequence of the operation of a motor
vehicle.
On June 26, 1984, Crisostomo B. Vitug filed Civil Case No. 84-25186 in the
Regional Trial Court of Manila, Branch XLIII, against the defendant. First
Malayan Leasing and Finance Corporation (FMLFC for short), to recover

The evidence shows that while Vitugs car was at a full stop at the
intersection of New York Street and Epifanio delos Santos Avenue (EDSA) in
Cubao, Quezon City, northward-bound, the on-coming Isuzu cargo truck
bumped a Ford Granada car behind him with such force that the Ford car
was thrown on top of Vitugs car crushing its roof. The cargo truck thereafter
struck Vitugs car in the rear causing the gas tank to explode and setting the
car ablaze.
Stunned by the impact, Vitug was fortunately extricated from his car by
solicitous bystanders before the vehicle exploded. However, two of his
passengers were burned to death. Vitugs car, valued at P70,000, was a total
loss.
When he regained consciousness in the hospital, Vitug discovered that he
had lost various personal articles valued at P48,950, namely a necklace with
a diamond pendant, a GP watch, a pair of Christian Dior eyeglasses, a gold
Cross pen and a pair of Bally shoes. Vitug also suffered injuries producing
recurring pains in his neck and back. Upon his physicians advice, he
received further medical treatment in the United States which cost him
US$2373.64 for his first trip, and US$5,596.64 for the second.
At the time of the accident on December 14, 1983, the Isuzu cargo truck was
registered in the name of the First Malayan Leasing and Finance
Corporation (FMLFC).
However, FMLFC denied any liability, alleging that it was not the owner of
the truck, neither the employer of the driver Crispin Sicat, because it had
sold the truck to Vicente Trinidad on September 24, 1980, after the latter had
paid all his monthly amortizations under the financing lease agreement
between FMLFC and Trinidad.chanrobles.com:cralaw:red
On FMLFCs motion, the lower court granted FMLFCs leave to file a thirdparty complaint against Trinidad and admitted the third-party complaint filed
therewith.
Answering the third-party complaint, the Estate of Vicente Trinidad admitted
that the truck was operated by the deceased during his lifetime.
Nevertheless, it raised the defense that the estate of Vicente Trinidad was
no longer existing because the same had long been settled and partitioned

Page

damages for physical injuries, loss of personal effects, and the wreck of his
car as a result of a three-vehicle collision on December 14, 1983, involving
his car, another car, and an Isuzu cargo truck registered in the name of
FMLFC and driven by one Crispin Sicat.chanrobles.com.ph : virtual law
library

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extrajudicially by his heirs.
On August 25, 1986, the trial court rendered a decision sentencing FMLFC
to pay Vitug the sum of P133,950 with interest at the legal rate from the filing
of the complaint until fully paid, plus the sum of P10,000 as attorneys fees
and costs.
FMLFC appealed in due time to the Court of Appeals which rendered a
decision on November 27, 1989 modifying the appealed judgment by
ordering the third-party defendant-appellee (Estate of Vicente Trinidad) to
indemnify the appellant, FMLFC, for whatever amount the latter may pay
Vitug under the judgment. In all other respects, the trial courts decision was
affirmed.
FMLFC has filed this petition for review on certiorari praying that the decision
of the appellate court be reversed and set aside.
On February 14, 1990, the Court dismissed the petition for insufficiency in
form and substance, having failed to comply with the Rules of Court and
Circular 1-88 requiring the submission of: (1) proof of service of the petition
on the adverse party, and (2) a certified true copy of the decision of the
Court of Appeals. Moreover, the petition was filed late on February 1, 1990,
the due date being January 27, 1990.
The petitioner filed a motion for reconsideration. On April 16, 1990, we
granted the same and reinstated the petition. Without giving it due course,
we required the respondents to comment.chanrobles virtual lawlibrary
After deliberating on the petition, the comments of the private respondents,
and the petitioners reply thereto, we find the petition to the bereft of merit,
hence, resolved to deny it.
In the first place, the factual finding of the trial court and the Court of Appeals
that the Isuzu vehicle which figured in the mishap was still registered in the
name of FMLFC at the time of the accident, is not reviewable by this Court in
a petition for certiorari under Rule 45 of Rules of Court.
This Court has consistently ruled that regardless of who the actual owner of
a motor vehicle might be, the registered owner is the operator of the same
with respect to the public and third persons, and as such, directly and
primarily responsible for the consequences of its operation. In contemplation
of law, the owner/operator of record is the employer of the driver, the actual
operator and employer being considered merely as his agent (MYC-AgroIndustrial Corporation v. Vda. de Caldo, 132 SCRA 10, citing Vargas v.
Langcay, 6 SCRA 174; Tamayo v. Aguino, 105 Phil. 949).

". . . Were the registered owner allowed to evade responsibility by proving


who the supposed transferee or owner is, it would be easy for him by
collusion with others or otherwise, to escape said responsibility and transfer
the same to an indefinite person, or to one who possesses no property with
which to respond financially for the damage or injury done." (Erezo v. Jepte,
102 Phil. 103.)
". . . The registered owner or operator of record is the one liable for damages
caused by a vehicle regardless of any alleged sale or lease made thereon."
(MYC-Agro-Industrial Corp. v. Vda. de Caldo, 132 SCRA 11.)
In order for a transfer of ownership of a motor vehicle to be valid against
third persons, it must be recorded in the Land Transportation Office. For,
although valid between the parties, the sale cannot affect third persons who
rely on the public registration of the motor vehicle as conclusive evidence of
ownership. In law, FMLFC was the owner and operator of the Isuzu cargo
truck, hence, fully liable to third parties injured by its operation due to the
fault or negligence of the driver thereof.chanrobles virtual lawlibrary
WHEREFORE, the petition for review is DENIED for lack of merit. Costs
against the petitioner.
SO ORDERED.
Cruz, Medialdea and Bellosillo, JJ., concur.

Page

"We believe that it is immaterial whether or not the driver was actually
employed by the operator of record. It is even not necessary to prove who
the actual owner of the vehicle and the employer of the driver is. Granting
that, in this case, the father of the driver is the actual owner and that he is
the actual employer, following the well-settled principle that the operator of
record continues to be the operator for the vehicle in contemplation of law,
as regards the public and third persons, and as such is responsible for the
consequences incident to its operation, we must hold and consider such
owner-operator of record as the employer, in contemplation of law, of the
driver. And, to give effect to this policy of law as enunciated in the above
cited decisions of this Court, we must now extend the same and consider the
actual operator and employer as the agent of the operator of record."
(Vargas v. Langcay, 6 SCRA 178; citing Montoya v. Ignacio, G.R. No. L5868, Dec. 29, 1953; Timbol v. Osias, G.R. No. L-7524, April 30, 1955; Vda.
de Medina v. Cresencia, G.R. No. L-8194, July 11, 1956; Necesito v. Paras,
G.R. No. L-10605, June 30, 1955.)

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EN BANC
[G.R. No. L-23052. January 29, 1968.]
CITY OF MANILA, Petitioner, v. GENERO M. TEOTICO and THE COURT
OF APPEALS,Respondents.

CANNOT BE RAISED FOR FIRST TIME ON APPEAL. The assertion that


P. Burgos Avenue is a national highway for which the City of Manila is not
liable, was made for the first time in the petitioners motion for
reconsideration of the decision of the Court of Appeals. It was not alleged in
the answer. Such assertion raised a question of fact which had not been put
in issue in the trial court and cannot, therefore, be raised for the first time on
appeal much less after the rendition of the decision of the appellate court.
3. ID.; FINDINGS OF FACT OF COURT OF APPEALS, CONCLUSIVE.
The determination of whether or not P. Burgos Avenue is under the control or
supervision of the City of Manila and whether the latter is guilty of negligence
in connection with the maintenance of said road is a question of fact a
question already decided by the Court of Appeals and the factual findings of
said Court are not subject to a review by the Supreme Court.

DECISION

City Fiscal Manuel T. Reyes for Petitioner.


Sevilla, Daza & Associates for Respondents.

SYLLABUS

1. STATUTORY CONSTRUCTION; SPECIFIC PROVISIONS OF CIVIL


CODE, THOUGH A GENERAL LAW, PREVAIL OVER MANILA CHARTER,
SPECIAL LAW. Insofar as its territorial application is concerned, Republic
Act 409 is a special law and the Civil Code is a general legislation; but as
regards the subject-matter of the provisions of sec. 4, Rep. Act 409 and
Article 2189 of the Civil Code, the former establishes a general rule
regulating the liability of the City of Manila for damages or injury to persons
or property arising from the failure of city officers to enforce the provisions of
said Act; while article 2189 of the Civil Code constitutes a particular
prescription making provinces, cities and municipalities liable for damages
for the death or injury suffered by any person by reason of the defective
condition of roads, streets and other public works under the control or
supervision of said municipal governments. In other words, sec. 4 of Rep.
Act 409 refers to liability arising from negligence in general regardless of the
object thereof, whereas Article 2189 of the Civil Code, governs liability due to
defective streets in particular. The Civil Code is decisive herein because the
present action is based on the alleged defective condition of a road.
2. PLEADINGS; ANSWER; ALLEGATIONS NOT SET FORTH IN ANSWER,

CONCEPCION, C.J.:

Appeal by certiorari from a decision of the Court of Appeals.


On January 27, 1958, at about 8:00 p.m., Genaro N. Teotico was at the
corner of the Old Luneta and P. Burgos Avenue, Manila, within a "loading
and unloading" zone, waiting for a jeepney to take him down town. After
waiting for about five minutes, he managed to hail a jeepney that came
along to a stop. As he stepped down from the curb to board the jeepney, and
took a few steps, he fell inside an uncovered and unlighted catchbasin or
manhole on P. Burgos Avenue. Due to the fall, his head hit the rim of the
manhole breaking his eyeglasses and causing broken pieces thereof to
pierce his left eyelid. As blood flowed therefrom, impairing his vision, several
persons came to his assistance and pulled him out of the manhole. One of
them brought Teotico to the Philippine General Hospital, where his injuries
were treated, after which he was taken home. In addition to the lacerated
wound in his left upper eyelid, Teotico suffered contusions on the left thigh,
the left upper arm, the right leg and the upper lip, apart from an abrasion on
the right infra-patella region. These injuries and the allergic eruptions caused
by anti-tetanus injections administered to him in the hospital, required further
medical treatment by a private practitioner who charged therefor P1,400.00.
As a consequence of the foregoing occurrence, Teotico filed, with the Court
of First Instance of Manila, a complaint which was, subsequently,

"At the time of the incident, plaintiff was a practicing public accountant, a
businessman and a professor at the University of the East. He held
responsible positions in various business firms like the Philippine
Merchandising Co., the A. U. Valencia and Co., the Silver Swan
Manufacturing Company and the Sincere Packing Corporation. He was also
associated with several civic organizations such as the Wack Wack Golf
Club, the Chamber of Commerce of the Philippines, Ys Men Club of Manila
and the Knights of Rizal. As a result of the incident, plaintiff was prevented
from engaging in his customary occupation for twenty days. Plaintiff has lost
a daily income of about P50.00 during his incapacity to work. Because of the
incident, he was subjected to humiliation and ridicule by his business
associates and friends. During the period of his treatment, plaintiff was under
constant fear and anxiety for the welfare of his minor children since he was
their only support. Due to the filing of this case, plaintiff has obligated himself
to pay his counsel the sum of P2,000.00.
"On the other hand, the defense presented evidence, oral and documentary,
to prove that the Storm Drain Section, Office of the City Engineer of Manila,
received a report of the uncovered condition of a catchbasin at the corner of
P. Burgos and Old Luneta Streets, Manila, on January 24, 1958, but the
same was covered on the same day (Exhibit 4); that again the iron cover of
the same catchbasin was reported missing on January 30, 1958, but the
said cover was replaced the next day (Exhibit 5); that the Office of the City
Engineer never received any report to the effect that the catchbasin in
question was not covered between January 25 and 29, 1958; that it has
always been a policy of the said office, which is charged with the duty of
installation, repair and care of storm drains in the City of Manila, that
whenever a report is received from whatever source of the loss of a
catchbasin cover, the matter is immediately attended to, either by
immediately replacing the missing cover or covering the catchbasin with
steel matting; that because of the lucrative scrap iron business then
prevailing, stealing of iron catchbasin covers was rampant; that the Office of
the City Engineer has filed complaints in court resulting from theft of said
iron covers; that in order to prevent such thefts, the city government has
changed the position and layout of catch basins in the City by constructing
them under the sidewalk with concrete cement covers and openings on the
sides of the gutter; and that these changes had been undertaken by the city
from time to time whenever funds were available."cralaw virtua1aw library
After appropriate proceedings the Court of First Instance of Manila rendered
the aforementioned decision sustaining the theory of the defendants and

Page

amended for damages against the City of Manila, its mayor, city engineer,
city health officer, city treasurer and chief of police. As stated in the decision
of the trial court, and quoted with approval by the Court of Appeals,

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dismissing the amended complaint, without costs.
On appeal taken by plaintiff, this decision was affirmed by the Court of
Appeals, except insofar as the City of Manila is concerned, which was
sentenced to pay damages in the aggregate sum of P6,750.00. 1 Hence,
this appeal by the City of Manila.
The first issue raised by the latter is whether the present case is governed
by Section 4 of Republic Act No. 409 (Charter of the City of Manila)
reading:jgc:chanrobles.com.ph
"The city shall not be liable or held for damages or injuries to persons or
property arising from the failure of the Mayor, the Municipal Board, or any
other city officer, to enforce the provisions of this chapter, or any other law or
ordinance, or from negligence of said Mayor, Municipal Board, or other
officers while enforcing or attempting to enforce said provisions."cralaw
virtua1aw library
or by Article 2189 of the Civil Code of the Philippines, which
provides:jgc:chanrobles.com.ph
"Provinces, cities and municipalities shall be liable for damages for the death
of, or injuries suffered by, any person by reason of the defective condition of
roads, streets, bridges, public buildings, and other public works under their
control or supervision."cralaw virtua1aw library
Manila maintains that the former provision should prevail over the latter,
because Republic Act 409 is a special law, intended exclusively for the City
of Manila, whereas the Civil Code is a general law, applicable to the entire
Philippines.
The Court of Appeals, however, applied the Civil Code, and, we think,
correctly. It is true that, insofar as its territorial application is concerned,
Republic Act No. 409 is a special law and the Civil Code a general
legislation; but, as regards the subject- matter of the provisions above
quoted, Section 4 of Republic Act 409 establishes a general rule regulating
the liability of the City of Manila for "damages or injury to persons or property
arising from the failure of" city officers "to enforce the provisions of" said Act
"or any other law or ordinance, or from negligence" of the city "Mayor,
Municipal Board, or other officers while enforcing or attempting to enforce
said provisions." Upon the other hand, Article 2189 of the Civil Code
constitutes a particular prescription making "provinces, cities and
municipalities . . . liable for damages for the death of, or injury suffered by,
any person by reason" specifically "of the defective condition of roads,
streets, bridges, public buildings, and other public works under their control

It is urged that the City of Manila cannot be held liable to Teotico for
damages: 1) because the accident involving him took place in a national
highway; and 2) because the City of Manila has not been negligent in
connection therewith.
As regards the first issue, we note that it is based upon an allegation of fact
not made in the answer of the City. Moreover, Teotico alleged in his
complaint, as well as in his amended complaint, that his injuries were due to
the defective condition of a street which is "under the supervision and
control" of the City. In its answer to the amended complaint, the City, in turn,
alleged that "the streets aforementioned were and have been constantly
kept in good condition and regularly inspected and the storm drains and
manholes thereof covered, by the defendant City and its officers concerned"
who "have been ever vigilant and zealous in the performance of their
respective functions and duties as imposed upon them by law." Thus, the
City had, in effect, admitted that P. Burgos Avenue was and is under its
control and supervision.
Moreover, the assertion to the effect that said avenue is a national highway
was made, for the first time, in its motion for reconsideration of the decision
of the Court of Appeals. Such assertion raised, therefore, a question of fact,
which had not been put in issue in the trial court, and can not be set up, for
the first time, on appeal, much less after the rendition of the decision of the
appellate court, in a motion for the reconsideration thereof.
At any rate, under Article 2189 of the Civil Code, it is not necessary for the
liability therein established to attach that the defective roads or streets
belong to the province, city or municipality from which responsibility is
exacted. What said article requires is that the province, city or municipality
have either "control or supervision" over said street or road. Even if P.
Burgos avenue were, therefore, a national highway, this circumstance would
not necessarily detract from its "control or supervision" by the City of Manila,
under Republic Act 409. In fact Section 18(x) thereof
provides:jgc:chanrobles.com.ph
"SEC. 18. Legislative powers. The Municipal Board shall have the
following legislative powers:chanrob1es virtual 1aw library
x

Page

or supervision." In other words, said section 4 refers to liability arising from


negligence, in general, regardless of the object thereof, whereas Article 2189
governs liability due to "defective streets, "in particular. Since the present
action is based upon the alleged defective condition of a road, said Article
2189 is decisive thereon.

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"(x) Subject to the provisions of existing law to provide for the laying out,
construction and improvement, and to regulate the use of streets, avenues,
alleys, sidewalks, wharves, piers, parks, cemeteries, and other public
places; to provide for lighting, cleaning, and sprinkling of streets and public
places; . . . to provide for the inspection of, fix the license fees for and
regulate the openings in the same for the laying of gas, water, sewer and
other pipes, the building and repair of tunnels, sewers, and drains, and all
structures in and under the same and the erecting of poles and the stringing
of wires therein; to provide for and regulate cross-walks, curbs, and gutters
therein; . . . to regulate traffic and sales upon the streets and other public
places; to provide for the abatement of nuisances in the same and punish
the authors or owners thereof; to provide for the construction and
maintenance, and regulate the use, of bridges, viaducts, and culverts; to
prohibit and regulate ball playing, kiteflying, hoop rolling, and other
amusements which may annoy persons using the streets and public places,
or frighten horses or other animals; to regulate the speed of horses and
other animals, motor and other vehicles, cars, and locomotives within the
limits of the city; to regulate the lights used on all such vehicles, cars, and
locomotives; . . . to provide for and change the location, grade, and crossing
of railroads, and compel any such railroad to raise or lower its tracks to
conform to such provisions or changes; and to require railroad companies to
fence their property, or any part thereof, to provide suitable protection
against injury to persons or property, and to construct and repair ditches,
drains, sewers, and culverts along and under their tracts, so that the natural
drainage of the streets and adjacent property shall not be obstructed."cralaw
virtua1aw library
This authority has been neither withdrawn nor restricted by Republic Act No.
917 and Executive Order No. 113, dated May 2, 1955, upon which the City
relies. Said Act governs the disposition or appropriation of the highway funds
and the giving of aid to provinces, chartered cities and municipalities in the
construction of roads and streets within their respective boundaries, and
Executive Order No. 113 merely implements the provisions of said Republic
Act No. 917, concerning the disposition and appropriation of the highway
funds. Moreover, it provides that "the construction, maintenance and
improvement of national primary, national secondary and national aid
provincial and city roads shall be accomplished by the Highway District
Engineers and Highway City Engineers under the supervision of the
Commissioner of Public Highways and shall be financed from such
appropriations as may be authorized by the Republic of the Philippines in
annual or special appropriation Acts."cralaw virtua1aw library
Then, again, the determination of whether or not P. Burgos Avenue is under

WHEREFORE, the decision appealed from should be as it is hereby


affirmed, with costs against the City of Manila. It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Ruiz
Castro, Angeles and Fernando,JJ., concur.
SECOND DIVISION
[G.R. No. 61516. March 21, 1989.]
FLORENTINA A. GUILATCO, Petitioner, v. CITY OF DAGUPAN, and the
HONORABLE COURT OF APPEALS, Respondents.
Nolan R. Evangelista for Petitioner.
The City Legal Officer for Respondents.

SYLLABUS

1. CIVIL LAW; QUASI-DELICTS; ARTICLE 2189 OF NEW CIVIL CODE;


NOT NECESSARY FOR DEFECTIVE ROAD OR STREET TO BELONG TO
PROVINCE, CITY OR MUNICIPALITY FOR LIABILITY TO ATTACH;
ARTICLE ONLY REQUIRES THAT EITHER CONTROL OR SUPERVISION
IS EXERCISED OVER DEFECTIVE ROAD OR STREET. It is not even
necessary for the defective road or street to belong to the province, city or
municipality for liability to attach. The article only requires that either control
or supervision is exercised over the defective road or
street.chanroblesvirtuallawlibrary
2. ID.; ID.; ID.; APPLIES IN PARTICULAR TO LIABILITY ARISING FROM
"DEFECTIVE STREETS, PUBLIC BUILDINGS AND OTHER PUBLIC
WORKS" ; CHARTER ONLY LAYS DOWN GENERAL RULES
REGULATING LIABILITY OF CITY. The charter only lays down general
rules regulating the liability of the city. On the other hand article 2189 applies
in particular to the liability arising from "defective streets, public buildings and
other public works."cralaw virtua1aw library

Page

the control or supervision of the City of Manila and whether the latter is guilty
of negligence, in connection with the maintenance of said road, which were
decided by the Court of Appeals in the affirmative, is one of fact, and the
findings of said Court, thereon are not subject to our review.

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3. ID.; DAMAGES; ACTUAL DAMAGES; AMOUNT MAY NOT BE BASED
ON "SPECULATION, CONJECTURE OR GUESS WORK" ; WITHOUT
ACTUAL PROOF OF LOSS, AWARD BECOMES ERRONEOUS. The
actual damages awarded to the petitioner in the amount of P10,000.00
should be reduced to the proven expenses of P8,053.65 only. The trial court
should not have rounded off the amount. In determining actual damages, the
court can not rely on "speculation, conjecture or guess works as to the
amount. Without the actual proof of loss, the award of actual damages
becomes erroneous.
4. ID.; ID.; MORAL DAMAGES; MAY BE AWARDED EVEN WITHOUT
PROOF OF PECUNIARY LOSS AS DETERMINATION OF AMOUNT IS
DISCRETIONARY ON COURT; NATURE, EXPLAINED. Moral damages
may be awarded even without proof of pecuniary loss, inasmuch as the
determination of the amount is discretionary on the court. Though incapable
of pecuniary estimation, moral damages are in the nature of an award to
compensate the claimant for actual injury suffered but which for some
reason can not be proven.
5. ID.; ID.; ID.; REQUISITES THEREOF, CITED. In awarding moral
damages, the following should be taken into consideration: (1) First, the
proximate cause of the injury must be the claimees acts. (2) Second, there
must be compensatory or actual damages as satisfactory proof of the factual
basis for damages. (3) Third, the award of moral damages must be
predicated on any of the cases enumerated in the Civil
Code.chanroblesvirtuallawlibrary:red
6. ID.; ID.; ID.; AWARD OF DAMAGES WITHOUT BASIS RESULTING IN
EXHORBITANT AMOUNTS, REPREHENSIBLE; EXCESSIVE DAMAGES,
REDUCED. The award of moral damages at P150,000.00 is excessive.
Her handicap was not permanent and disabled her only during her treatment
which lasted for one year. Though evidence of moral loss and anguish
existed to warrant the award of damages, the moderating hand of the law is
called for. The Court has time and again called attention to the reprehensible
propensity of trial judges to award damages without basis, resulting in
exhorbitant amounts. Although the assessment of the amount is better left to
the discretion of the trial court, under preceding jurisprudence, the amount of
moral damages should be reduced to P20,000.00.

DECISION

SARMIENTO, J.:

45

In a civil action 1 for recovery of damages filed by the petitioner Florentina A.


Guilatco, the following judgment was rendered against the respondent City
of Dagupan:chanrob1es virtual 1aw library

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(1) Ordering defendant City of Dagupan to pay plaintiff, actual damages in


the amount of P15,924 (namely P8,054.00 as hospital, medical and other
expenses [Exhs. H to H-60], P7,420.00 as lost income for one (1) year [Exh.
F] and P450.00 as bonus). P150,000.00 as moral damages, P50,000.00 as
exemplary damages, and P3,000.00 as attorneys fees, and litigation
expenses, plus costs and to appropriate through its Sangguniang
Panglunsod (City Council) said amounts for said purpose;
(2) Dismissing plaintiffs complaint as against defendant City Engr. Alfredo G.
Tangco; and
(3) Dismissing the counterclaims of defendant City of Dagupan and
defendant City Engr. Alfredo G. Tangco, for lack of merit. 2
The facts found by the trial court are as follows: 3
It would appear from the evidences that on July 25, 1978, herein plaintiff, a
Court Interpreter of Branch III, CFI-Dagupan City, while she was about to
board a motorized tricycle at a sidewalk located at Perez Blvd. (a National
Road, under the control and supervision of the City of Dagupan) accidentally
fell into a manhole located on said sidewalk, thereby causing her right leg to
be fractured. As a result thereof, she had to be hospitalized, operated on,
confined, at first at the Pangasinan Provincial Hospital, from July 25 to
August 3, 1978 (or for a period of 16 days). She also incurred
hospitalization, medication and other expenses to the tune of P8,053.65
(Exh. H to H-60) or a total of P10,000.00 in all, as other receipts were either
lost or misplaced; during the period of her confinement in said two hospitals,
plaintiff suffered severe or excruciating pain not only on her right leg which
was fractured but also on all parts of her body; the pain has persisted even
after her discharge from the Medical City General Hospital on October 9,
1978, to the present. Despite her discharge from the Hospital plaintiff is
presently still wearing crutches and the Court has actually observed that she
has difficulty in locomotion. From the time of the mishap on July 25, 1978 up
to the present, plaintiff has not yet reported for duty as court interpreter, as

she has difficulty of locomotion in going up the stairs of her office, located
near the city hall in Dagupan City. She earns at least P720.00 a month
consisting of her monthly salary and other means of income, but since July
25, 1978 up to the present she has been deprived of said income as she has
already consumed her accrued leaves in the government service. She has
lost several pounds as a result of the accident and she is no longer her
former jovial self; she has been unable to perform her religious, social, and
other activities which she used to do prior to the incident.
Dr. Norberto Felix and Dr. Dominado Manzano of the Provincial Hospital, as
well as Dr. Antonio Sison of the Medical City General Hospital in
Mandaluyong Rizal (Exh. I; see also Exhs. F, G, G-1 to G-19) have
confirmed beyond shadow of any doubt the extent of the fracture and injuries
sustained by the plaintiff as a result of the mishap. On the other hand,
Patrolman Claveria, De Asis and Cerezo corroborated the testimony of the
plaintiff regarding the mishap and they have confirmed the existence of the
manhole (Exhs. A, B, C and sub-exhibits) on the sidewalk along Perez Blvd.,
at the time of the incident on July 25, 1978 which was partially covered by a
concrete flower pot by leaving gaping hole about 2 ft. long by 1 1/2 feet wide
or 42 cms. wide by 75 cms. long by 150 cms. deep (see Exhs. D and D-1).
Defendant Alfredo Tangco, City Engineer of Dagupan City and admittedly exofficio Highway Engineer, City Engineer of the Public Works and Building
Official for Dagupan City, admitted the existence of said manhole along the
sidewalk in Perez Blvd., admittedly a National Road in front of the Luzon
Colleges. He also admitted that said manhole (there are at least 11 in all in
Perez Blvd.) is owned by the National Government and the sidewalk on
which they are found along Perez Blvd. are also owned by the National
Government. But as City Engineer of Dagupan City, he supervises the
maintenance of said manholes or drainage system and sees to it that they
are properly covered, and the job is specifically done by his subordinates,
Mr. Santiago de Vera (Maintenance Foreman) and Engr. Ernesto Solermo,
also a maintenance Engineer. In his answer defendant Tangco expressly
admitted in par. 7-1 thereof, that in his capacity as ex-officio Highway
Engineer for Dagupan City he exercises supervision and control over
National roads, including the Perez Blvd. where the incident
happened.chanrobles virtual lawlibrary
On appeal by the respondent City of Dagupan, the appellate court 4
reversed the lower court findings on the ground that no evidence was
presented by the plaintiff-appellee to prove that the City of Dagupan had
"control or supervision" over Perez Boulevard. 5
The city contends that Perez Boulevard, where the fatal drainage hole is
located, is a national road that is not under the control or supervision of the

After examination of the findings and conclusions of the trial court and those
of the appellate court, as well as the arguments presented by the parties, we
agree with those of the trial court and of the petitioner. Hence, we grant the
petition.
In this review on certiorari, we have simplified the errors assigned by the
petitioner to a single issue: whether or not control or supervision over a
national road by the City of Dagupan exists, in effect binding the city to
answer for damages in accordance with article 2189 of the Civil Code.
The liability of public corporations for damages arising from injuries suffered
by pedestrians from the defective condition of roads is expressed in the Civil
Code as follows:chanrob1es virtual 1aw library
Article 2189. Provinces, cities and municipalities shall be liable for damages
for the death of, or injuries suffered by, any person by reason of the defective
condition of roads, streets, bridges, public buildings, and other public works
under their control or supervision.
It is not even necessary for the defective road or street to belong to the
province, city or municipality for liability to attach. The article only requires
that either control or supervision is exercised over the defective road or
street. 6
In the case at bar, this control or supervision is provided for in the charter of
Dagupan and is exercised through the City Engineer who has the following
duties:chanrob1es virtual 1aw library
Sec. 22. The City Engineer His powers, duties and compensation
There shall be a city engineer, who shall be in charge of the department of
Engineering and Public Works. He shall receive a salary of not exceeding
three thousand pesos per annum. He shall have the following
duties:chanrobles virtual lawlibrary
x

(j) He shall have the care and custody of the public system of waterworks
and sewers, and all sources of water supply, and shall control, maintain and
regulate the use of the same, in accordance with the ordinance relating

thereto; shall inspect and regulate the use of all private systems for
supplying water to the city and its inhabitants, and all private sewers, and
their connection with the public sewer system.

Page

City of Dagupan. Hence, no liability should attach to the city. It submits that it
is actually the Ministry of Public Highways that has control or supervision
through the Highway Engineer which, by mere coincidence, is held
concurrently by the same person who is also the City Engineer of Dagupan.

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The same charter of Dagupan also provides that the laying out, construction
and improvement of streets, avenues and alleys and sidewalks, and
regulation of the use thereof, may be legislated by the Municipal Board. 7
Thus the charter clearly indicates that the city indeed has supervision and
control over the sidewalk where the open drainage hole is located.
The express provision in the charter holding the city not liable for damages
or injuries sustained by persons or property due to the failure of any city
officer to enforce the provisions of the charter, can not be used to exempt
the city, as in the case at bar. 8
The charter only lays down general rules regulating the liability of the city.
On the other hand article 2189 applies in particular to the liability arising from
"defective streets, public buildings and other public works. 9
The City Engineer, Mr. Alfredo G. Tangco, admits that he exercises control or
supervision over the said road. But the city can not be excused from liability
by the argument that the duty of the City Engineer to supervise or control the
said provincial road belongs more to his functions as an ex-officio Highway
Engineer of the Ministry of Public Highway than as a city officer. This is
because while he is entitled to an honorarium from the Ministry of Public
Highways, his salary from the city government substantially exceeds the
honorarium.
We do not agree.
Alfredo G. Tangco" (i)n his official capacity as City Engineer of Dagupan, as
Ex-Officio Highway Engineer, as Ex-Officio City Engineer of the Bureau of
Public Works, and, last but not the least, as Building Official for Dagupan
City, receives the following monthly compensation: P1,810.66 from Dagupan
City; P200.00 from the Ministry of Public Highways; P100.00 from the
Bureau of Public Works and P500.00 by virtue of P.D. 1096, respectively." 10
This function of supervision over streets, public buildings, and other public
works pertaining to the City Engineer is coursed through a Maintenance
Foreman and a Maintenance Engineer. 11 Although these last two officials
are employees of the National Government, they are detailed with the City of
Dagupan and hence receive instruction and supervision from the city
through the City Engineer.chanrobles law library

Be all that as it may, the actual damages awarded to the petitioner in the
amount of P10,000.00 should be reduced to the proven expenses of
P8,053.65 only. The trial court should not have rounded off the amount. In
determining actual damages, the court can not rely on "speculation,
conjecture or guess works as to the amount. Without the actual proof of loss,
the award of actual damages becomes erroneous. 12
On the other hand, moral damages may be awarded even without proof of
pecuniary loss, inasmuch as the determination of the amount is discretionary
on the court. 13 Though incapable of pecuniary estimation, moral damages
are in the nature of an award to compensate the claimant for actual injury
suffered but which for some reason can not be proven. However, in
awarding moral damages, the following should be taken into
consideration:chanrob1es virtual 1aw library
(1) First, the proximate cause of the injury must be the claimees acts. 14
(2) Second, there must be compensatory or actual damages as satisfactory
proof of the factual basis for damages. 15
(3) Third, the award of moral damages must be predicated on any of the
cases enumerated in the Civil Code. 16
In the case at bar, the physical suffering and mental anguish suffered by the
petitioner were proven. Witnesses from the petitioners place of work
testified to the degeneration in her disposition from being jovial to
depessed. She refrained from attending social and civic activities. 17
Nevertheless the award of moral damages at P150,000.00 is excessive. Her
handicap was not permanent and disabled her only during her treatment
which lasted for one year. Though evidence of moral loss and anguish
existed to warrant the award of damages, 18 the moderating hand of the law
is called for. The Court has time and again called attention to the
reprehensible propensity of trial judges to award damages without basis, 19
resulting in exhorbitant amounts. 20
Although the assessment of the amount is better left to the discretion of the
trial court, 21 under preceding jurisprudence, the amount of moral damages
should be reduced to P20,000.00.chanroblesvirtuallawlibrary

Page

There is, therefore, no doubt that the City Engineer exercises control or
supervision over the public works in question. Hence, the liability of the city
to the petitioner under article 2198 of the Civil Code is clear.

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As for the award of exemplary damages, the trial court correctly pointed out
the basis:chanrob1es virtual 1aw library
To serve as an example for the public good, it is high time that the Court,
through this case, should serve warning to the city or cities concerned to be
more conscious of their duty and responsibility to their constituents,
especially when they are engaged in construction work or when there are
manholes on their sidewalks or streets which are uncovered, to immediately
cover the same, in order to minimize or prevent accidents to the poor
pedestrians. 22
Too often in the zeal to put up "public impact" projects such as beautification
drives, the end is more important than the manner in which the work is
carried out. Because of this obsession for showing off, such trivial details as
misplaced flower pots betray the careless execution of the projects, causing
public inconvenience and inviting accidents.
Pending appeal by the respondent City of Dagupan from the trial court to the
appellate court, the petitioner was able to secure an order for garnishment of
the funds of the City deposited with the Philippine National Bank, from the
then presiding judge, Hon. Willelmo Fortun. This order for garnishment was
revoked subsequently by the succeeding presiding judge, Hon. Romeo D.
Magat, and became the basis for the petitioners motion for reconsideration
which was also denied. 23
We rule that the execution of the judgment of the trial court pending appeal
was premature. We do not find any good reason to justify the issuance of an
order of execution even before the expiration of the time to appeal. 24
WHEREFORE, the petition is GRANTED. The assailed decision and
resolution of the respondent Court of Appeals are hereby REVERSED and
SET ASIDE and the decision of the trial court, dated March 12, 1979 and
amended on March 13, 1979, is hereby REINSTATED with the indicated
modifications as regards the amounts awarded:chanrobles virtual lawlibrary
(1) Ordering the defendant City of Dagupan to pay the plaintiff actual
damages in the amount of P15,924 (namely P8,054.00 as hospital, medical
and other expenses; P7,420.00 as lost income for one (1) year and P450.00
as bonus); P20,000.00 as moral damages and P10,000.00 as exemplary
damages.
The attorneys fees of P3,000.00 remain the same.
SO ORDERED.

Page

Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.

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SECOND DIVISION
[G.R. No. L-47851. October 3, 1986.]
JUAN F. NAKPIL & SONS, and JUAN F. NAKPIL, Petitioners, v. THE
COURT OF APPEALS, UNITED CONSTRUCTION COMPANY, INC., JUAN
J. CARLOS, and the PHILIPPINE BAR ASSOCIATION, Respondents.
[G.R. No. L-47863. October 3, 1986.]
THE UNITED CONSTRUCTION CO., INC., Petitioner, v. COURT OF
APPEALS, ET AL.,Respondents.
[G.R. No. L-47896. October 3, 1986.]
PHILIPPINE BAR ASSOCIATION, ET AL., Petitioners, v. COURT OF
APPEALS, ET AL.,Respondents.

SYLLABUS

1. CIVIL LAW; ACT OF GOD; DEFINED. An act of God has been defined
as an accident, due directly and exclusively to natural causes without human
intervention, which by no amount of foresight, pains or care, reasonably to
have been expected, could have been prevented. (1 Corpus Juris 1174).
2. ID.; ID.; GENERAL RULE; REQUISITES TO EXEMPT OBLIGOR FROM
LIABILITY. The general rule is that no person shall be responsible for

events which could not be foreseen or which, though foreseen, were


inevitable (Article 1174, New Civil Code). To exempt the obligor from liability
under this Article, for a breach of an obligation due to an "act of God", the
following must concur: (a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must be either
unforeseeable or unavoidable; (c) the event must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner; and (d)
the debtor must be free from any participation in, or aggravation of the injury
to the creditor. (Vasquez v. Court of Appeals, 138 SCRA 553; Estrada v.
Consolacion, 71 SCRA 423; Austria v. Court of Appeals, 39 SCRA 527;
Republic of the Phil. v. Luzon Stevedoring Corp., 21 SCRA 279; Lasam v.
Smith, 45 Phil. 657). The principle embodied in the act of God doctrine
strictly requires that the act must be one occasioned exclusively by the
violence of nature and all human agencies are to be excluded from creating
or entering into the cause of the mischief.
3. ID.; ID.; INSTANCES WHEN THE RULE DOES NOT APPLY. When the
effect, the cause of which is to be considered, is found to be in part the result
of the participation of man, whether it be from active intervention or neglect,
or failure to act, the whole occurrence is thereby humanized, as it were, and
removed from the rules applicable to the acts of God. (1 Corpus Juris, pp.
1174-1175) Thus, if upon the happening of a fortuitous event or an act of
God, there concurs a corresponding fraud, negligence, delay or violation or
contravention in any manner of the tenor of the obligation as provided for in
Article 1170 of the Civil Code, which results in loss or damage, the obligor
cannot escape liability. It has also been held that when the negligence of a
person concurs with an act of God in producing a loss, such person is not
exempt from liability by showing that the immediate cause of the damage
was the act of God. To be exempt from liability for loss because of an act of
God, he must be free from any previous negligence or misconduct by which
that loss or damage may have been occasioned. (Fish & Elective Co. v. Phil.
Motors, 55 Phil. 129; Tucker v. Milan, 49 O.G. 4379; Limpangco & Sons v.
Yangco Steamship Co., 34 Phil. 594, 604; Lasam v. Smith, 45 Phil. 657)
4. ID.; QUASI-DELICTS; NEGLIGENCE EQUIVALENT TO BAD FAITH;
The afore-mentioned facts clearly indicate the wanton negligence of both the
defendant and the third-party defendants in effecting the plans, designs,
specifications, and construction of the PBA building and We hold such
negligence as equivalent to bad faith in the performance of their respective
tasks. Relative thereto, the ruling of the Supreme Court in Tucker v. Milan
(49 O.G. 4379 ,4380) which may be in point in this case, reads: "One who
negligently creates a dangerous condition cannot escape liability for the
natural and probable consequences thereof, although the act of a third
person, or an act of God for which he is not responsible, intervenes to
precipitate the loss."cralaw virtua1aw library

DECISION

PARAS, J.:

These are petitions for review on certiorari of the November 28, 1977
decision of the Court of Appeals in CA G.R. No. 51771-R modifying the
decision of the Court of First Instance of Manila, Branch V, in Civil Case No.
74958 dated September 21, 1971 as modified by the Order of the lower
court dated December 8, 1971. The Court of Appeals in modifying the
decision of the lower court included an award of an additional amount of
P200,000.00 to the Philippine Bar Association to be paid jointly and severally
by the defendant United Construction Co. and by the third-party defendants
Juan F. Nakpil and Sons and Juan F. Nakpil.
The dispositive portion of the modified decision of the lower court
reads:chanroblesvirtualawlibrary

Page

5. REMEDIAL LAW; COURT OF APPEALS; FINDINGS OF FACTS


CONCLUSIVE ON THE PARTIES AND ON THE SUPREME COURT;
EXCEPTIONS. It is well settled that the findings of facts of the Court of
Appeals are conclusive on the parties and on this Court (cases cited in
Tolentino v. de Jesus, 56 SCRA 67; Cesar v. Sandiganbayan, January 17,
1985, 134 SCRA 105, 121), unless (1) the conclusion is a finding grounded
entirely on speculation, surmise and conjectures; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment
is based on misapprehension of facts; (5) the findings of fact are conflicting;
(6) the Court of Appeals went beyond the issues of the case and its findings
are contrary to the admissions of both appellant and appellees (Ramos v.
Pepsi-Cola Bottling Co., February 8, 1967, 19 SCRA 289, 291-292; Roque v.
Buan, Oct. 31, 1967, 21 SCRA 648, 651); (7) the findings of facts of the
Court of Appeals are contrary to those of the trial court; (8) said findings of
facts are conclusions without citation of specific evidence on which they are
based; (9) the facts set forth in the petition as well as in the petitioners main
and reply briefs are not disputed by the respondents (Garcia v. CA, June 30,
1970, 33 SCRA 622; Alsua-Bett v. Court of Appeals, July 30, 1979, 92 SCRA
322, 366); (10) the finding of fact of the Court of Appeals is premised on the
supposed absence of evidence and is contradicted by evidence on record
(Salazar v. Gutierrez, May 29, 1970, 33 SCRA 243, 247; Cited in G.R. No.
66497-98, Sacay v. Sandiganbayan, July 10, 1986).

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"WHEREFORE, judgment is hereby rendered:jgc:chanrobles.com.ph
"(a) Ordering defendant United Construction Co., Inc. and third-party
defendants (except Roman Ozaeta) to pay the plaintiff, jointly and severally,
the sum of P989,335.68 with interest at the legal rate from November 29,
1968, the date of the filing of the complaint until full payment;
"(b) Dismissing the complaint with respect to defendant Juan J. Carlos;
"(c) Dismissing the third-party complaint;
"(d) Dismissing the defendants and third-party defendants counterclaims for
lack of merit;
"(e) Ordering defendant United Construction Co., Inc. and third-party
defendants (except Roman Ozaeta) to pay the costs in equal shares.
"SO ORDERED." (Record on Appeal, p. 521; Rollo, L-47851, p. 169).
The dispositive portion of the decision of the Court of Appeals
reads:jgc:chanrobles.com.ph
"WHEREFORE, the judgment appealed from is modified to include an award
of P200,000.00 in favor of plaintiff-appellant Philippine Bar Association, with
interest at the legal rate from November 29, 1968 until full payment to be
paid jointly and severally by defendant United Construction Co., Inc. and
third party defendants (except Roman Ozaeta). In all other respects, the
judgment dated September 21, 1971 as modified in the December 8, 1971
Order of the lower court is hereby affirmed with COSTS to be paid by the
defendant and third party defendant (except Roman Ozaeta) in equal
shares.
"SO ORDERED."cralaw virtua1aw library
Petitioners Juan F. Nakpil & Sons in L-47851 and United Construction Co.,
Inc. and Juan J. Carlos in L-47863 seek the reversal of the decision of the
Court of Appeals, among other things, for exoneration from liability while
petitioner Philippine Bar Association in L-47896 seeks the modification of
aforesaid decision to obtain an award of P1,830,000.00 for the loss of the
PBA building plus four (4) times such amount as damages resulting in
increased cost of the building; P100,000.00 as exemplary damages; and
P100,000.00 as attorneys fees.chanrobles virtual lawlibrary
These petitions arising from the same case filed in the Court of First
Instance of Manila were consolidated by this Court in the resolution of May

The facts as found by the lower court (Decision, C.C. No. 74958; Record on
Appeal, pp. 269-348; pp. 520-521; Rollo, L-47851, p. 169) and affirmed by
the Court of Appeals are as follows:chanrob1es virtual 1aw library
The plaintiff, Philippine Bar Association, a civic-non-profit association,
incorporated under the Corporation Law, decided to construct an office
building on its 840 square meters lot located at the corner of Aduana and
Arzobispo Streets, Intramuros, Manila. The construction was undertaken by
the United Construction, Inc. on an "administration" basis, on the suggestion
of Juan J. Carlos, the president and general manager of said corporation.
The proposal was approved by plaintiffs board of directors and signed by its
president Roman Ozaeta, a third-party defendant in this case. The plans and
specifications for the building were prepared by the other third-party
defendants Juan F. Nakpil & Sons. The building was completed in June,
1966.
In the early morning of August 2, 1968 an unusually strong earthquake hit
Manila and its environs and the building in question sustained major
damage. The front columns of the building buckled, causing the building to
tilt forward dangerously. The tenants vacated the building in view of its
precarious condition. As a temporary remedial measure, the building was
shored up by United Construction, Inc. at the cost of P13,661.28.
On November 29, 1968, the plaintiff commenced this action for the recovery
of damages arising from the partial collapse of the building against United
Construction, Inc. and its President and General Manager Juan J. Carlos as
defendants. Plaintiff alleges that the collapse of the building was accused by
defects in the construction, the failure of the contractors to follow plans and
specifications and violations by the defendants of the terms of the contract.
Defendants in turn filed a third-party complaint against the architects who
prepared the plans and specifications, alleging in essence that the collapse
of the building was due to the defects in the said plans and specifications.
Roman Ozaeta, the then president of the plaintiff Bar Association was
included as a third-party defendant for damages for having included Juan J.
Carlos, President of the United Construction Co., Inc. as party
defendant.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
On March 3, 1969, the plaintiff and third-party defendants Juan F. Nakpil &
Sons and Juan F. Nakpil presented a written stipulation which
reads:jgc:chanrobles.com.ph

Page

10, 1978 requiring the respective respondents to comment. (Rollo, L-47851,


p. 172).

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"1. That in relation to defendants answer with counterclaims and third-party
complaints and the third-party defendants Nakpil & Sons answer thereto, the
plaintiff need not amend its complaint by including the said Juan F. Nakpil &
Sons and Juan F. Nakpil personally as parties defendant.
2. That in the event (unexpected by the undersigned) that the Court should
find after the trial that the above-named defendants Juan J. Carlos and
United Construction Co., Inc. are free from any blame and liability for the
collapse of the PBA Building, and should further find that the collapse of said
building was due to defects and/or inadequacy of the plans, designs, and
specifications prepared by the third-party defendants, or in the event that the
Court may find Juan F. Nakpil and Sons and/or Juan F. Nakpil contributorily
negligent or in any way jointly and solidarily liable with the defendants,
judgment may be rendered in whole or in part, as the case may be, against
Juan F. Nakpil & Sons and/or Juan F. Nakpil in favor of the plaintiff to all
intents and purposes as if plaintiffs complaint has been duly amended by
including the said Juan F. Nakpil & Sons and Juan F. Nakpil as parties
defendant and by alleging causes of action against them including, among
others, the defects or inadequacy of the plans, designs, and specifications
prepared by them and/or failure in the performance of their contract with
plaintiff.
3. Both parties hereby jointly petition this Honorable Court to approve this
stipulation." (Record on Appeal, pp. 274-275; Rollo, L-47851, p. 169).
Upon the issues being joined, a pre-trial was conducted on March 7, 1969,
during which among others, the parties agreed to refer the technical issues
involved in the case to a Commissioner. Mr. Andres O. Hizon, who was
ultimately appointed by the trial court, assumed his office as Commissioner,
charged with the duty to try the following issues:jgc:chanrobles.com.ph
"1. Whether the damage sustained by the PBA building during the August 2,
1968 earthquake had been caused, directly or indirectly, by:chanrob1es
virtual 1aw library
(a) The inadequacies or defects in the plans and specifications prepared by
third-party defendants;
(b) The deviations, if any, made by the defendants from said plans and
specifications and how said deviations contributed to the damage sustained;
(c) The alleged failure of defendants to observe the requisite quality of
materials and workmanship in the construction of the building;
(d) The alleged failure to exercise the requisite degree of supervision

(e) An act of God or a fortuitous event; and


(f) Any other cause not herein above specified.

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expected of the architect, the contractor and/or the owner of the building;

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The trial court agreed with the findings of the Commissioner except as to the
holding that the owner is charged with full time supervision of the
construction. The Court sees no legal or contractual basis for such
conclusion. (Record on Appeal, pp. 309-328; Ibid.).

2. If the cause of the damage suffered by the building arose from a


combination of the above-enumerated factors, the degree or proportion in
which each individual factor contributed to the damage sustained;

Thus, on September 21, 1971, the lower court rendered the assailed
decision which was modified by the Intermediate Appellate Court on
November 28, 1977.

3. Whether the building is now a total loss and should be completely


demolished or whether it may still be repaired and restored to a tenantable
condition. In the latter case, the determination of the cost of such restoration
or repair, and the value of any remaining construction, such as the
foundation, which may still be utilized or availed of." (Record on Appeal pp.
275-276; Rollo, L-47851, p. 169).

All the parties herein appealed from the decision of the Intermediate
Appellate Court. Hence, these petitions.

Thus, the issues of this case were divided into technical issues and nontechnical issues. As aforestated the technical issues were referred to the
Commissioner. The non-technical issues were tried by the
Court.chanrobles.com : virtual law library
Meanwhile, plaintiff moved twice for the demolition of the building on the
ground that it may topple down in case of a strong earthquake. The motions
were opposed by the defendants and the matter was referred to the
Commissioner. Finally, on April 30, 1979 the building was authorized to be
demolished at the expense of the plaintiff, but not another earthquake of
high intensity on April 7, 1970 followed by other strong earthquakes on April
9, and 12, 1970, caused further damage to the property. The actual
demolition was undertaken by the buyer of the damaged building. (Record
on Appeal, pp. 278-280; Ibid.).
After the protracted hearings, the Commissioner eventually submitted his
report on September 25, 1970 with the findings that while the damage
sustained by the PBA building was caused directly by the August 2, 1968
earthquake whose magnitude was estimated at 7.3 they were also caused
by the defects in the plans and specifications prepared by the third-party
defendants architects, deviations from said plans and specifications by the
defendant contractors and failure of the latter to observe the requisite
workmanship in the construction of the building and of the contractors,
architects and even the owners to exercise the requisite degree of
supervision in the construction of subject building.
All the parties registered their objections to aforesaid findings which in turn
were answered by the Commissioner.

On May 11, 1978, the United Architects of the Philippines, the Association of
Civil Engineers, and the Philippine Institute of Architects filed with the Court
a motion to intervene as amicus curiae. They proposed to present a position
paper on the liability of architects when a building collapses and to submit
likewise a critical analysis with computations on the divergent views on the
design and plans as submitted by the experts procured by the parties. The
motion having been granted, the amicus curiae were granted a period of 60
days within which to submit their position.
After the parties had all filed their comments, We gave due course to the
petitions in Our Resolution of July 21, 1978.
The position papers of the amicus curiae (submitted on November 24, 1978)
were duly noted.
The amicus curiae gave the opinion that the plans and specifications of the
Nakpils were not defective. But the Commissioner, when asked by Us to
comment, reiterated his conclusion that the defects in the plans and
specifications indeed existed.chanrobles law library : red
Using the same authorities availed of by the amicus curiae such as the
Manila Code (Ord. No. 4131) and the 1966 Asep Code, the Commissioner
added that even if it can be proved that the defects in the construction alone
(and not in the plans and design) caused the damage to the building, still the
deficiency in the original design and lack of specific provisions against
torsion in the original plans and the overload on the ground floor columns
(found by all the experts including the original designer) certainly contributed
to the damage which occurred. (Ibid, p. 174).
In their respective briefs petitioners, among others, raised the following
assignments of errors: Philippine Bar Association claimed that the measure
of damages should not be limited to P1,100,000.00 as estimated cost of

The pivotal issue in this case is whether or not an act of God, an


unusually strong earthquake which caused the failure of the building,
exempts from liability, parties who are otherwise liable because of their
negligence.
The applicable law governing the rights and liabilities of the parties herein is
Article 1723 of the New Civil Code, which provides:jgc:chanrobles.com.ph
"Art. 1723. The engineer or architect who drew up the plans and
specifications for a building is liable for damages if within fifteen years from
the completion of the structure the same should collapse by reason of a
defect in those plans and specifications, or due to the defects in the ground.
The contractor is likewise responsible for the damage if the edifice falls
within the same period on account of defects in the construction or the use
of materials of inferior quality furnished by him, or due to any violation of the
terms of the contract. If the engineer or architect supervises the construction,
he shall be solidarily liable with the contractor.
Acceptance of the building, after completion, does not imply waiver of any of
the causes of action by reason of any defect mentioned in the preceding
paragraph.
The action must be brought within ten years following the collapse of the
building."cralaw virtua1aw library
On the other hand, the general rule is that no person shall be responsible for
events which could not be foreseen or which, though foreseen, were
inevitable (Article 1174, New Civil Code).
An act of God has been defined as an accident, due directly and exclusively
to natural causes without human intervention, which by no amount of
foresight, pains or care, reasonably to have been expected, could have been

Page

repairs or to the period of six (6) months for loss of rentals while United
Construction Co., Inc. and the Nakpils claimed that it was an act of God that
caused the failure of the building which should exempt them from
responsibility and not the defective construction, poor workmanship,
deviations from plans and specifications and other imperfections in the case
of United Construction Co., Inc. or the deficiencies in the design, plans and
specifications prepared by petitioners in the case of the Nakpils. Both UCCI
and the Nakpils object to the payment of the additional amount of
P200,000.00 imposed by the Court of Appeals. UCCI also claimed that it
should be reimbursed the expenses of shoring the building in the amount of
P13,661.28 while the Nakpils opposed the payment of damages jointly and
solidarily with UCCI.chanroblesvirtualawlibrary

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prevented. (1 Corpus Juris 1174).
There is no dispute that the earthquake of August 2, 1968 is a fortuitous
event or an act of God.
To exempt the obligor from liability under Article 1174 of the Civil Code, for a
breach of an obligation due to an "act of God," the following must concur: (a)
the cause of the breach of the obligation must be independent of the will of
the debtor; (b) the event must be either unforseeable or unavoidable; (c) the
event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and (d) the debtor must be free from any
participation in, or aggravation of the injury to the creditor. (Vasquez v. Court
of Appeals, 138 SCRA 553; Estrada v. Consolacion, 71 SCRA 423; Austria v.
Court of Appeals, 39 SCRA 527; Republic of the Phil. v. Luzon Stevedoring
Corp., 21 SCRA 279; Lasam v. Smith, 45 Phil. 657).
Thus, if upon the happening of a fortuitous event or an act of God, there
concurs a corresponding fraud, negligence, delay or violation or
contravention in any manner of the tenor of the obligation as provided for in
Article 1170 of the Civil Code, which results in loss or damage, the obligor
cannot escape liability.
The principle embodied in the act of God doctrine strictly requires that the
act must be one occasioned exclusively by the violence of nature and all
human agencies are to be excluded from creating or entering into the cause
of the mischief. When the effect, the cause of which is to be considered, is
found to be in part the result of the participation of man, whether it be from
active intervention or neglect, or failure to act, the whole occurrence is
thereby humanized, as it were, and removed from the rules applicable to the
acts of God. (1 Corpus Juris, pp. 1174-1175).
Thus it has been held that when the negligence of a person concurs with an
act of God in producing a loss, such person is not exempt from liability by
showing that the immediate cause of the damage was the act of God. To be
exempt from liability for loss because of an act of God, he must be free from
any previous negligence or misconduct by which that loss or damage may
have been occasioned. (Fish & Elective Co. v. Phil. Motors, 55 Phil. 129;
Tucker v. Milan, 49 O.G. 4379; Limpangco & Sons v. Yangco Steamship Co.,
34 Phil. 594, 604; Lasam v. Smith, 45 Phil. 657).chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
The negligence of the defendant and the third-party defendants petitioners
was established beyond dispute both in the lower court and in the
Intermediate Appellate Court. Defendant United Construction Co., Inc. was
found to have made substantial deviations from the plans and specifications,

It is well settled that the findings of facts of the Court of Appeals are
conclusive on the parties and on this court (cases cited in Tolentino v. de
Jesus, 56 SCRA 67; Cesar v. Sandiganbayan, January 17, 1985, 134 SCRA
105, 121), unless (1) the conclusion is a finding grounded entirely on
speculation surmise and conjectures; (2) the inference made is manifestly
mistaken; (3) there is grave abuse of discretion; (4) the judgment is based
on misapprehension of facts; (5) the findings of fact are conflicting; (6) the
Court of Appeals went beyond the issues of the case and its findings are
contrary to the admissions of both appellant and appellees (Ramos v. PepsiCola Bottling Co., February 8, 1967, 19 SCRA 289, 291-292; Roque v. Buan,
Oct. 31, 1967, 21 SCRA 648, 651); (7) the findings of facts of the Court of
Appeals are contrary to those of the trial court; (8) said findings of facts are
conclusions without citation of specific evidence on which they are based;
(9) the facts set forth in the petition as well as in the petitioners main and
reply briefs are not disputed by the respondents (Garcia v. CA, June 30,
1970, 33 SCRA 622; Alsua-Bett v. Court of Appeals, July 30, 1979, 92 SCRA
322, 366); (10) the finding of fact of the Court of Appeals is premised on the
supposed absence of evidence and is contradicted by evidence on record
(Salazar v. Gutierrez, May 29, 1970, 33 SCRA 243, 247; Cited in G.R. No.
66497-98, Sacay v. Sandiganbayan, July 10, 1986).
It is evident that the case at bar does not fall under any of the exceptions
above-mentioned. On the contrary, the records show that the lower court
spared no effort in arriving at the correct appreciation of facts by the referral
of technical issues to a Commissioner chosen by the parties whose findings
and conclusions remained convincingly unrebutted by the
intervenors/amicus curiae who were allowed to intervene in the Supreme
Court.
In any event, the relevant and logical observations of the trial court as
affirmed by the Court of Appeals that "while it is not possible to state with
certainty that the building would not have collapsed were those defects not
present, the fact remains that several buildings in the same area withstood
the earthquake to which the building of the plaintiff was similarly subjected,"
cannot be ignored.

Page

and to have failed to observe the requisite workmanship in the construction


as well as to exercise the requisite degree of supervision; while the thirdparty defendants were found to have inadequacies or defects in the plans
and specifications prepared by them. As correctly assessed by both courts,
the defects in the construction and in the plans and specifications were the
proximate causes that rendered the PBA building unable to withstand the
earthquake of August 2, 1968. For this reason the defendant and third-party
defendants cannot claim exemption from liability. (Decision, Court of
Appeals, pp. 30-31).

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The next issue to be resolved is the amount of damages to be awarded to
the PBA for the partial collapse (and eventual complete collapse) of its
building.
The Court of Appeals affirmed the finding of the trial court based on the
report of the Commissioner that the total amount required to repair the PBA
building and to restore it to tenantable condition was P900,000.00 inasmuch
as it was not initially a total loss. However, while the trial court awarded the
PBA said amount as damages, plus unrealized rental income for one-half
year, the Court of Appeals modified the amount by awarding in favor of PBA
an additional sum of P200,000.00 representing the damage suffered by the
PBA building as a result of another earthquake that occurred on April 7, 1970
(L-47896, Vol. I, p. 92).chanrobles law library
The PBA in its brief insists that the proper award should be P1,830,000.00
representing the total value of the building (L-47896, PBAs No. 1
Assignment of Error, p. 19), while both the NAKPILS and UNITED question
the additional award of P200,000.00 in favor of the PBA (L-47851, NAKPILs
Brief as Petitioner, p. 6, UNITEDs Brief as Petitioner, p, 25). The PBA further
urges that the unrealized rental income awarded to it should not be limited to
a period of one-half year but should be computed on a continuing basis at
the rate of P178,671.76 a year until the judgment for the principal amount
shall have been satisfied (L-47896, PBAs No. 11 Assignment of Errors, p.
19).
The collapse of the PBA building as a result of the August 2, 1968
earthquake was only partial and it is undisputed that the building could then
still be repaired and restored to its tenantable condition. The PBA, however,
in view of its lack of needed funding, was unable, thru no fault of its own, to
have the building repaired. UNITED, on the other hand, spent P13,661.28 to
shore up the building after the August 2, 1968 earthquake (L-47896, CA
Decision, p. 46). Because of the earthquake on April 7, 1970, the trial court
after the needed consultations, authorized the total demolition of the building
(L-47896, Vol. 1, pp. 53-54).
There should be no question that the NAKPILS and UNITED are liable for
the damage resulting from the partial and eventual collapse of the PBA
building as a result of the earthquakes.
We quote with approval the following from the erudite decision penned by
Justice Hugo E. Gutierrez (now an Associate Justice of the Supreme Court)
while still an Associate Justice of the Court of,
Appeals:jgc:chanrobles.com.ph

The record is replete with evidence of defects and deficiencies in the


designs and plans, defective construction, poor workmanship, deviation from
plans and specifications and other imperfections. These deficiencies are
attributable to negligent men and not to a perfect God.
The act-of-God arguments of the defendants-appellants and third party
defendants-appellants presented in their briefs are premised on legal
generalizations or speculations and on theological fatalism both of which
ignore the plain facts. The lengthy discussion of United on ordinary
earthquakes and unusually strong earthquakes and on ordinary fortuitous
events and extraordinary fortuitous events leads to its argument that the
August 2, 1968 earthquake was of such an overwhelming and destructive
character that by its own force and independent of the particular negligence
alleged, the injury would have been produced. If we follow this line of
speculative reasoning, we will be forced to conclude that under such a
situation scores of buildings in the vicinity and in other parts of Manila would
have toppled down. Following the same line of reasoning, Nakpil and Sons
alleges that the designs were adequate in accordance with pre-August 2,
1968 knowledge and appear inadequate only in the light of engineering
information acquired after the earthquake. If this were so, hundreds of
ancient buildings which survived the earthquake better than the two-year old
PBA building must have been designed and constructed by architects and
contractors whose knowledge and foresight were unexplainably auspicious
and prophetic. Fortunately, the facts on record allow a more down to earth
explanation of the collapse. The failure of the PBA building, as a unique and
distinct construction with no reference or comparison to other buildings, to
weather the severe earthquake forces was traced to design deficiencies and
defective construction, factors which are neither mysterious nor esoteric.
The theological allusion of appellant United that God acts in mysterious
ways His wonders to perform impresses us to be inappropriate. The
evidence reveals defects and deficiencies in design and construction. There
is no mystery about these acts of negligence. The collapse of the PBA
building was no wonder performed by God. It was a result of the
imperfections in the work of the architects and the people in the construction
company. More relevant to our mind is the lesson from the parable of the

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"There is no question that an earthquake and other forces of nature such as


cyclones, drought, floods, lightning, and perils of the sea are acts of God. It
does not necessarily follow, however, that specific losses and suffering
resulting from the occurrence of these natural force are also acts of God. We
are not convinced on the basis of the evidence on record that from the
thousands of structures in Manila, God singled out the blameless PBA
building in Intramuros and around six or seven other buildings in various
parts of the city for collapse or severe damage and that God alone was
responsible for the damages and losses thus suffered.

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wise man in the Sermon on the Mount, "which built his house upon a rock;
and the rain descended and the floods came and the winds blew and beat
upon that house: and it fell not; for it was founded upon a rock" and of the
"foolish man which built his house upon the sand. And the rain descended
and the floods came, and the winds blew, and beat upon that house; and it
fell and great was the fall of it. (St. Matthew 7: 24-27)." The requirement that
a building should withstand rains, floods, winds, earthquakes, and natural
forces is precisely the reason why we have professional experts like
architects, and engineers. Designs and constructions vary under varying
circumstances and conditions but the requirement to design and build well
does not change.
The findings of the lower Court on the cause of the collapse are more
rational and accurate. Instead of laying the blame solely on the motions and
forces generated by the earthquake, it also examined the ability of the PBA
building, as designed and constructed, to withstand and successfully
weather those forces.
The evidence sufficiently supports a conclusion that the negligence and fault
of both United and Nakpil and Sons, not a mysterious act of an inscrutable
God, were responsible for the damages. The Report of the Commissioner,
Plaintiffs Objections to the Report, Third Party Defendants Objections to the
Report, Defendants Objections to the Report, Commissioners Answer to the
various Objections, Plaintiffs Reply to the Commissioners Answer,
Defendants Reply to the Commissioners Answer, Counter-Reply to
Defendants Reply, and Third-Party Defendants Reply to the
Commissioners Report not to mention the exhibits and the testimonies show
that the main arguments raised on appeal were already raised during the
trial and fully considered by the lower Court. A reiteration of these same
arguments on appeal fails to convince us that we should reverse or disturb
the lower Courts factual findings and its conclusions drawn from the facts,
among them:jgc:chanrobles.com.ph
"The Commissioner also found merit in the allegations of the defendants as
to the physical evidence before and after the earthquake showing the
inadequacy of design, to wit:jgc:chanrobles.com.ph
"Physical evidence before the earthquake, providing (sic) inadequacy of
design;
1. Inadequate design was the cause of the failure of the building.
2. Sub-baffles on the two sides and in front of the building;
a. Increase the inertia forces that move the building laterally toward the

b. Create another stiffness-imbalance.


3. The embedded 4" diameter cast iron downspout on all exterior columns
reduces the cross-sectional area of each of the columns and the strength
thereof.
4. Two front corners, A7 and D7 columns were very much less reinforced.
Physical Evidence After the Earthquake, Proving Inadequacy of design;
1. Column A7 suffered the severest fracture and maximum sagging Also D7.
2. There are more damages in the front part of the building than towards the
rear, not only in columns but also in slabs.
3. Building leaned and sagged more on the front part of the building.
4. Floors showed maximum sagging on the sides and toward the front corner
parts of the building.
5. There was a lateral displacement of the building of about 8", Maximum
sagging occurs at the column A7 where the floor is lower by 80 cm. than the
highest slab level.

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outright error; (c) the Commissioner has failed to back up or support his
finding with extensive, complex and highly specialized computations and
analyzes which he himself emphasizes are necessary in the determination of
such a highly technical question; and (d) the Commissioner has analyzed
the design of the PBA building not in the light of existing and available
earthquake engineering knowledge at the time of the preparation of the
design, but in the light of recent and current standards.
The Commissioner answered the said objections alleging that third-party
defendants objections were based on estimates or exhibits not presented
during the hearing; that the resort to engineering references posterior to the
date of the preparation of the plans was induced by the third-party
defendants themselves who submitted computations of the third-party
defendants are erroneous.
The issue presently considered is admittedly a technical one of the highest
degree. It involves questions not within the ordinary competence of the
bench and the bar to resolve by themselves. Counsel for the third-party
defendants has aptly remarked that "engineering, although dealing in
mathematics, is not an exact science and that the present knowledge as to
the nature of earthquakes and the behavior of forces generated by them still
leaves much to be desired; so much so "that the experts of the different
parties, who are all engineers, cannot agree on what equation to use, as to
what earthquake co-efficients are, on the codes to be used and even as to
the type of structure that the PBA building (is) was" (p. 29, Memo, of thirdparty defendants before the Commissioner).

6. Slab at the corner column D7 sagged by 38 cm."cralaw virtua1aw library


The Commissioner concluded that there were deficiencies or defects in the
design, plans and specifications of the PBA building which involved
appreciable risks with respect to the accidental forces which may result from
earthquake shocks. He conceded, however, that the fact that those
deficiencies or defects may have arisen from an obsolete or not too
conservative code or even a code that does not require a design for
earthquake forces mitigates in a large measure the responsibility or liability
of the architect and engineer designer.
The Third-party defendants, who are the most concerned with this portion of
the Commissioners report, voiced opposition to the same on the grounds
that (a) the finding is based on a basic erroneous conception as to the
design concept of the building, to wit, that the design is essentially that of a
heavy rectangular box on stilts with shear wall at one end; (b) the finding that
there were defects and a deficiency in the design of the building would at
best be based on an approximation and, therefore, rightly belonged to the
realm of speculation, rather than of certainty and could very possibly be

The difficulty expected by the Court if this technical matter were to be tried
and inquired into by the Court itself, coupled with the intrinsic nature of the
questions involved therein, constituted the reason for the reference of the
said issues to a Commissioner whose qualifications and experience have
eminently qualified him for the task, and whose competence had not been
questioned by the parties until he submitted his report. Within the
pardonable limit of the Courts ability to comprehend the meaning of the
Commissioners report on this issue, and the objections voiced to the same,
the Court sees no compelling reasons to disturb the findings of the
Commissioner that there were defects and deficiencies in the design, plans
and specifications prepared by third-party defendants, and that said defects
and deficiencies involved appreciable risks with respect to the accidental
forces which may result from earthquake shocks.
(2) (a) The deviations, if any, made by the defendants from the plans and
specifications, and how said deviations contributed to the damage sustained
by the building.

These two issues, being interrelated with each other, will be discussed
together.
The findings of the Commissioner on these issues were as
follows:jgc:chanrobles.com.ph

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(b) The alleged failure of defendants to observe the requisite quality of


materials and workmanship in the construction of the building.

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is more acute.
b. Summary of alleged defects as reported by Engr. Antonio Avecilla.
Columns are first (or ground) floor, unless otherwise stated.
(1) Column D4 Spacing of spiral is changed from 2" to 5" on centers,
(2) Column D5 No spiral up to a height of 22" from the ground floor,
"We now turn to the construction of the PBA Building and the alleged
deficiencies or defects in the construction and violations or deviations from
the plans and specifications. All these may be summarized as
follows:chanrob1es virtual 1aw library

(3) Column D6 Spacing of spiral over 4 1/2,(4) Column D7 - Lack of


lateral ties,

a. Summary of alleged defects as reported by Engineer Mario M. Bundalian.

(5) Column C7 Absence of spiral to a height of 20" from the ground level,
Spirals are at 2" from the exterior column face and 6" from the inner column
face,

(1) Wrongful and defective placing of reinforcing bars.


(6) Column B6 Lack of spiral on 2 feet below the floor beams,
(2) Absence of effective and desirable integration of the 3 bars in the cluster.
(7) Column B5 Lack of spirals at a distance of 26" below the beam,
(3) Oversize coarse aggregates: 1-1/4 to 2" were used. Specification
requires no larger than 1 inch.
(4) Reinforcement assembly is not concentric with the column, eccentricity
being 3" off when on one face the main bars are only 1 1/2" from the
surface.
(5) Prevalence of honeycombs,
(6) Contraband construction joints,

(8) Column B7 Spirals not tied to vertical reinforcing bars, Spirals are
uneven 2" to 4",
(9) Column A3 Lack of lateral ties,
(10) Column A4 Spirals cut off and welded to two separate clustered
vertical bars,
(11) Column A4 (second floor) Column is completely hollow to a height of
30"

(7) Absence, or omission, or over spacing of spiral hoops,


(8) Deliberate severance of spirals into semi-circles in noted on Col. A5,
ground floor,

(12) Column A5 Spirals were cut from the floor level to the bottom of the
spandrel beam to a height of 6 feet,

(9) Defective construction joints in Columns A3, C7, D7 and D4, ground floor.

(13) Column A6 No spirals up to a height of 30" above the ground floor


level,

(10) Undergraduate concrete is evident,

(14) Column A7 Lack of lateral ties or spirals,

(11) Big cavity in core of Column 2A-4, second floor,

c. Summary of alleged defects as reported by the experts of the Third-Party


defendants.

(12) Columns buckled at different planes. Columns buckled worst where


there are no spirals or where spirals are cut. Columns suffered worst
displacement where the eccentricity of the columnar reinforcement assembly

Ground floor columns.

(2) Column A5 Spirals are cut,


(3) Column A6 At lower 18" spirals are absent,
(4) Column A7 Ties are too far apart,
(5) Column B5 At upper fourth of column spirals are either absent or
improperly spliced,

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(1) Column A4 Spirals are cut,

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ties in the columns were in many cases greater than those called for in the
plans and specifications resulting again in loss of earthquake-resistant
strength. The assertion of the engineering experts for the defendants that
the improper spacings and the cutting of the spirals did not result in loss of
strength in the column cannot be maintained and is certainly contrary to the
general principles of column design and construction. And even granting that
there be no loss in strength at the yield point (an assumption which is very
doubtful) the cutting or improper spacings of spirals will certainly result in the
loss of the plastic range or ductility in the column and it is precisely this
plastic range or ductility which is desirable and needed for earthquakeresistant strength.chanrobles virtual lawlibrary

(6) Column B6 At upper 2 feet spirals are absent,


(7) Column B7 At upper fourth of column spirals missing or improperly
spliced.
(8) Column C7 Spirals are absent at lowest 18"
(9) Column D5 At lowest 2 feet spirals are absent,
(10) Column D6 Spirals are too far apart and apparently improperly
spliced,
(11) Column D7 Lateral ties are too far apart, spaced 16" on centers.
There is merit in many of these allegations. The explanations given by the
engineering experts for the defendants are either contrary to general
principles of engineering design for reinforced concrete or not applicable to
the requirements for ductility and strength of reinforced concrete in
earthquake-resistant design and construction.
We shall first classify and consider defects which may have appreciable
bearing or relation to the earthquake-resistant property of the building.
As heretofore mentioned, details which insure ductility at or near the
connections between columns and girders are desirable in earthquakeresistant design and construction. The omission of spirals and ties or hoops
at the bottom and/or tops of columns contributed greatly to the loss of
earthquake-resistant strength. The plans and specifications required that
these spirals and ties be carried from the floor level to the bottom
reinforcement of the deeper beam (p. 1, Specifications, p. 970, Reference
11). There were several clear evidences where this was not done especially
in some of the ground floor columns which failed.
There were also unmistakable evidences that the spacings of the spirals and

There is no excuse for the cavity or hollow portion in the column A4, second
floor, and although this column did not fail, this is certainly an evidence on
the part of the contractor of poor construction.
The effect of eccentricities in the columns which were measured at about 2
1/2 inches maximum may be approximated in relation to column loads and
column and beam moments. The main effect of eccentricity is to change the
beam or girder span. The effect on the measured eccentricity of 2 1/2
inches, therefore, is to increase or diminish the column load by a maximum
of about 1% and to increase or diminish the column or beam movements by
about a maximum of 2%. While these can certainly be absorbed within the
factor of safety, they nevertheless diminish said factor of safety.
The cutting of the spirals in column A5, ground floor is the subject of great
contention between the parties and deserves special consideration.
The proper placing of the main reinforcements and spirals in column A5,
ground floor, is the responsibility of the general contractor which is the UCCI.
The burden of proof, therefore that this cutting was done by others is upon
the defendants. Other than a strong allegation and assertion that it is the
plumber or his men who may have done the cutting (and this was flatly
denied by the plumber) no conclusive proof was presented. The engineering
experts for the defendants asserted that they could have no motivation for
cutting the bar because they can simply replace the spirals by wrapping
around a new set of spirals. This is not quite correct. There is evidence to
show that the pouring of concrete for columns was sometimes done through
the beam and girder reinforcements which were already in place as in the
case of column A4 second floor. If the reinforcement for the girder and
column is to subsequently wrap around the spirals, this would not do for the
elasticity of steel would prevent the making of tight column spirals and loose
or improper spirals would result. The proper way is to produce correct spirals
down from the top of the main column bars, a procedure which can not be
done if either the beam or girder reinforcement is already in place. The

The lack of proper length of splicing of spirals was also proven in the visible
spirals of the columns where spalling of the concrete cover had taken place.
This lack of proper splicing contributed in a small measure to the loss of
strength.
The effects of all the other proven and visible defects although minor can
certainly be accumulated so that they can contribute to an appreciable loss
in earthquake-resistant strength. The engineering experts for the defendants
submitted an estimate on some of these defects in the amount of a few
percent. If accumulated, therefore, including the effect of eccentricity in the
column the loss in strength due to these minor defects may run to as much
as ten percent.
To recapitulate: the omission or lack of spirals and ties at the bottom and/or
at the top of some of the ground floor columns contributed greatly to the
collapse of the PBA building since it is at these points where the greater part
of the failure occurred. The liability for the cutting of the spirals in column A5,
ground floor, in the considered opinion of the Commissioner rests on the
shoulders of the defendants and the loss of strength in this column
contributed to the damage which occurred.
It is reasonable to conclude, therefore, that the proven defects, deficiencies
and violations of the plans and specifications of the PBA building contributed
to the damages which resulted during the earthquake of August 2, 1968 and
the vice of these defects and deficiencies is that they not only increase but
also aggravate the weakness mentioned in the design of the structure. In
other words, these defects and deficiencies not only tend to add but also to
multiply the effects of the shortcomings in the design of the building. We may
say, therefore, that the defects and deficiencies in the construction
contributed greatly to the damage which occurred.
Since the execution and supervision of the construction work in the hands of
the contractor is direct and positive, the presence of existence of all the
major defects and deficiencies noted and proven manifests an element of
negligence which may amount to imprudence in the construction work." (pp.
42-49, Commissioners Report).

Page

engineering experts for the defendants strongly assert and apparently


believe that the cutting of the spirals did not materially diminish the strength
of the column. This belief together with the difficulty of slipping the spirals on
the top of the column once the beam reinforcement is in place may be a
sufficient motivation for the cutting of the spirals themselves. The
defendants, therefore, should be held responsible for the consequences
arising from the loss of strength or ductility in column A5 which may have
contributed to the damages sustained by the building.

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As the parties most directly concerned with this portion of the
Commissioners report, the defendants voiced their objections to the same
on the grounds that the Commissioner should have specified the defects
found by him to be "meritorious" ; that the Commissioner failed to indicate
the number of cases where the spirals and ties were not carried from the
floor level to the bottom reinforcement of the deeper beam, or where the
spacing of the spirals and ties in the columns were greater than that called
for in the specifications; that the hollow in column A-4, second floor, the
eccentricities in the columns, the lack of proper length of splicing of spirals,
and the cut in the spirals in column A-5, ground floor, did not aggravate or
contribute to the damage suffered by the building; that the defects in the
construction were within the tolerable margin of safety; and that the cutting
of the spirals in column A-5, ground floor, was done by the lumber or his
men, and not by the defendants.
Answering the said objections, the Commissioner stated that, since many of
the defects were minor only the totality of the defects was considered. As
regards the objection as to failure to state the number of cases where the
spirals and ties were not carried from the floor level to the bottom
reinforcement, the Commissioner specified groundfloor columns B-6 and C5, the first one without spirals for 03 inches at the top, and in the latter, there
were no spirals for 10 inches at the bottom. The Commissioner likewise
specified the first storey columns where the spacings were greater than that
called for in the specifications to be columns B-5, B-6, C-7, C-6, C-5, D-5
and B-7. The objection to the failure of the Commissioner to specify the
number of columns where there was lack of proper length of splicing of
spirals, the Commissioner mentioned groundfloor columns B-6 and B-5
where all the splices were less than 1-1/2 turns and were not welded,
resulting in some loss of strength which could be critical near the ends of the
columns. He answered the supposition of the defendants that the spirals and
the ties must have been looted, by calling attention to the fact that the
missing spirals and ties were only in two out of the 25 columns, which
rendered said supposition to be improbable.
The Commissioner conceded that the hollow in column A-4, second floor, did
not aggravate or contribute to the damage, but averred that it is "evidence of
poor construction." On the claim that the eccentricity could be absorbed
within the factor of safety, the Commissioner answered that, while the same
may be true, it also contributed to or aggravated the damage suffered by the
building.
The objection regarding the cutting of the spirals in Column A-5, groundfloor,
was answered by the Commissioner by reiterating the observation in his
report that irrespective of who did the cutting of the spirals, the defendants

Again, the Court concurs in the findings of the Commissioner on these


issues and fails to find any sufficient cause to disregard or modify the same.
As found by the Commissioner, the "deviations made by the defendants from
the plans and specifications caused indirectly the damage sustained and
that those deviations not only added but also aggravated the damage
caused by the defects in the plans and specifications prepared by third-party
defendants." (Rollo, Vol. I, pp. 128-142)
The afore-mentioned facts clearly indicate the wanton negligence of both the
defendant and the third-party defendants in effecting the plans, designs,
specifications, and construction of the PBA building and We hold such
negligence as equivalent to bad faith in the performance of their respective
tasks.
Relative thereto, the ruling of the Supreme Court in Tucker v. Milan (49 O.G.
4379, 4380) which may be in point in this case, reads:jgc:chanrobles.com.ph
"One who negligently creates a dangerous condition cannot escape liability
for the natural and probable consequences thereof, although the act of a
third person, or an act of God for which he is not responsible, intervenes to
precipitate the loss."cralaw virtua1aw library
As already discussed, the destruction was not purely an act of God. Truth to
tell hundreds of ancient buildings in the vicinity were hardly affected by the
earthquake. Only one thing spells out the fatal difference; gross negligence
and evident bad faith, without which the damage would not have occurred.
WHEREFORE, the decision appealed from is hereby MODIFIED and
considering the special and environmental circumstances of this case, We
deem it reasonable to render a decision imposing, as We do hereby impose,
upon the defendant and the third-party defendants (with the exception of
Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra, p. 10) indemnity in
favor of the Philippine Bar Association of FIVE MILLION (P5,000,000.00)
Pesos to cover all damages (with the exception of attorneys fees)
occasioned by the loss of the building (including interest charges and lost
rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00)
Pesos as and for attorneys fees, the total sum being payable upon the
finality of this decision. Upon failure to pay on such finality, twelve (12%) per
cent interest per annum shall be imposed upon afore-mentioned amounts

Page

should be held liable for the same as the general contractor of the building.
The Commissioner further stated that the loss of strength of the cut spirals
and inelastic deflections of the supposed lattice work defeated the purpose
of the spiral containment in the column and resulted in the loss of strength,
as evidenced by the actual failure of this column.

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from finality until paid. Solidary costs against the defendant and third-party
defendants (except Roman Ozaeta).
SO ORDERED
Feria (Chairman), Fernan, Alampay and Cruz, JJ., concur.

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[G.R. No. 103372. June 22, 1992.]


EPG CONSTRUCTION COMPANY, INC., and EMMANUEL P. DE
GUZMAN, Petitioners, v. HONORABLE COURT OF APPEALS (17th
Division), (Republic of the Philippines), UNIVERSITY OF THE
PHILIPPINES, Respondents.
Farolan, Dumlao, Ignacio & Associates Law Offices, for Petitioners.
UP Office of Legal Services for Private Respondent.

SYLLABUS

1. CIVIL LAW; SPECIAL CONTRACTS; CONTRACT FOR PIECE OF


WORK; AS A RULE, ACCEPTANCE OF THE WORK BY EMPLOYER
RELIEVE THE CONTRACTS OF LIABILITY; CASE AT BAR. The
petitioners bolster their argument by quoting Article 1719 of the Civil Code
thus, "Acceptance of the work by the employer relieves the contractor of
liability . . ." and stopping there. The exceptions were omitted by the
petitioners for obvious reasons. The defects complained against were
hidden and the employer was not expected to recognize them at the time the
work was accepted. Moreover, there was an express reservation by UP of its
right to hold the contractor liable for the defects during a period of one year.
The petitioners contention that the defects were caused by force majeure or
fortuitous event as a result of the frequent brown-outs in Metro Manila is not
meritorious. The Court is not prepared to accept that the recurrent power

cut-off can be classified as force majeure or a fortuitous event. We agree


that the real cause of the problem, according to the petitioners own
subcontractor, was poor workmanship, as discovered upon inspection of the
cooling system. Among the defects noted were improper interlocking of the
entire electrical system in all the six units; wrong specification of the time
delay relay, also in all the six units; incorrect wiring connections on the oil
pressure switches; improper setting of the Hi and Lo pressure switches; and
many missing parts like bolts and screws of panels, and the compressor
terminal insulation, and the terminal screws of a circuit breaker. Curiously, it
has not been shown that the cooling system in buildings within the same
area have been similarly damaged by the power cut-offs. The brown-outs
have become an intolerable annoyance, but they cannot excuse all
contractual irregularities, including the petitioners shortcomings.
2. COMMERCIAL LAW; CORPORATIONS; OFFICIALS THEREOF NOT
SOLIDARILY LIABLE FOR THE ACTS THEREOF; EXCEPTION. A
corporation is invested by law with a personality separate and distinct from
those of the persons composing it as well as from that of any other entity to
which it may be related. Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of a corporation is
not of itself sufficient ground for disregarding the separate corporation
therefore should not be made personally answerable for the payment of the
employees backwages unless he had acted maliciously or in bad faith in
terminating the services of the employee. The exception noted is where the
official "had acted maliciously or in bad faith," in which event he may be
made personally liable for his own act. That exception is not applicable in the
case at bar, because it has not been proved that De Guzman acted
maliciously or in bad faith when, as President of EPG, he sought to protect
its interests and resisted UPs claims. Whatever damage was caused to UP
as a result of his acts is the sole responsibility of EPG even though De
Guzman was its principal officer and controlling stockholder.

DECISION

CRUZ, J.:

Petitioner EPG Construction Co., Inc. and the University of the Philippines,
herein private respondent, entered into a contract for the construction of the
UP Law Library Building for the stipulated price of P7,545,000.00. The
agreement included the following provision:chanrob1es virtual 1aw library

GUARANTEE
CONTRACTOR guarantees that the work completed under the contract and
any change order, thereto, shall be in accordance with the plans and
specification prepared by ARCHITECT, and shall conform to the specific
requirements, performances, and capacities required by the contract, and
shall be free from imperfect workmanship or materials. CONTRACTOR shall
repair at his own cost and expenses for a period of one (1) year from date of
substantial completion and acceptance of the work by the OWNER, all the
work covered under the contract and change orders that may prove
defective except maintenance works. The CONTRACTOR shall be liable in
accordance with Art. 1723 of the Civil Code in case, within 15 years from
completion of the project, the building collapses on account of defects in the
construction or the use of materials of inferior quality furnished by him or due
to any violation of the terms of contract.
Upon its completion, the building was formally turned over by EPG to the
private respondent UP issued a certification of acceptance dated January
13, 1583, reading as follows:jgc:chanrobles.com.ph
"This is to certify that the General Construction Work of the College of Law
Library Annex Building, University of the Philippines, Diliman, Quezon City,
has been satisfactorily completed as per plans and specifications as of
January 11, 1583 without any defects whatsoever and therefore accepted.
Release of the 10% retention is hereby recommended in favor of EPG
Construction. Inc.chanrobles lawlibrary : rednad
Sometime in July, 1983, the private respondent complained to the petitioner
that 6 air-conditioning units on the third floor of the building were not cooling
properly. After inspection of the equipment. EPG agreed to shoulder the
expenses for their repair, including labor and materials. in the amount of
P38,000.00.
For whatever reason, the repair was never undertaken. UP repeated its
complaints to EPG. which again sent its representatives to assess the
defects. Finally, it made UP a written offer to repair the system for
P194,000.00.
UP insisted that EPG was obligated to repair the defects at its own expense
under the guarantee provision in their, contract, EPG demurred. UP then
contracted with another company, which repaired the defects for
P190,000.00.

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ARTICLE XI

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The private respondent subsequently demanded from EPG reimbursement
of the said amount plus an equal sum as liquidated damages. When the
demand was rejected, UP sued EPG and its president, Emmanuel P. de
Guzman, in the Regional Trial Court of Quezon City. De Guzman moved to
dismiss the complaint as to him for lack of a cause of action, but the motion
was denied.
After trial, judgment was rendered by Judge Antonio P. Solano requiring both
defendants jointly and severally to pay the plaintiff P190,000.00 as actual
damages. P50,000.00 as liquidated damages, P10,000.00 as attorneys
fees, and costs.
The petitioners appealed to the Court of Appeals, which sustained the trial
court. 1 They then came to this Court to fault the respondent court for not
holding that: 1) UP was estopped by its certificate of acceptance from
imputing liability to EPG for the defects; 2) the defects were due to force
majeure or fortuitous event; and 3) Emmanuel de Guzman has a separate
personality from that of EPG Construction Co., Inc.
The petitioners argue that by issuing the certificate of acceptance, UP
waived the guarantee provision and is now estopped from invoking it. This
argument is absurd. All UP certified to was that the building was in good
condition at the time it was turned over to it on January 13, 1983. It did not
thereby relieve the petitioners of liability for any defect that might arise or be
discovered later during the one-year period of the guarantee. Any other
interpretation would make the guarantee provision useless to begin with as it
would have automatically become functus officio with the turn-over of the
construction.
The petitioners bolster their argument by quoting Article 1719 of the Civil
Code thus, "Acceptance of the work by the employer relieves the contractor
of liability . . ." and stopping there. The Article reads in full as
follows:chanrob1es virtual 1aw library
Art. 1719. Acceptance of the work by the employer relieves the contractor of
liability for any defect in the work, unless:chanrob1es virtual 1aw library
(1) The defect is hidden and the employer is not, by his special knowledge,
expected to recognize the same; or
(2) The employer expressly reserves his rights against the contractor by
reason of the defect.
The exceptions were omitted by the petitioners for obvious reasons. The

The petitioners contention that the defects were caused by force majeure or
fortuitous event as a result of the frequent brown-outs in Metro Manila is not
meritorious. The Court is not prepared to accept that the recurrent power
cut-offs can be classified as force majeure or a fortuitous event. We agree
that the real cause of the problem, according to the petitioners own
subcontractor, was poor workmanship, as discovered upon inspection of the
cooling system. Among the defects noted were improper interlocking of the
entire electrical system in all the six units; wrong specification of the time
delay relay, also in all the six units; incorrect wiring connections on the oil
pressure switches; improper setting of the Hi and Lo pressure switches; and
many missing parts like bolts and screws of panels, and the compressor
terminal insulation, and the terminal screws of a circuit breaker. 2

Page

defects complained against were hidden and the employer was not expected
to recognize them at the time the work was accepted. Moreover, there was
an express reservation by UP of its right to hold the contractor liable for the
defects during a period of one year.chanrobles law library : red

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liable with EPG Construction Co., Inc., and neither did the respondent court
when it affirmed the appealed decision. In its Comment on the present
petition, UP also did not refute the petitioners argument and simply passed
upon it sub silentio although the matter was squarely raised and discussed
in the petition.chanroblesvirtualawlibrary
Notably, when Manuel de Guzman moved to dismiss the complaint as to
him, UP said in its opposition to the motion that it was suing him "in his
official capacity and not in his personal capacity." His inclusion as President
of the company was therefore superfluous, as De Guzman correctly
contended, because his acts as such were corporate acts imputable to EPG
itself as his principal. It is settled that:chanrob1es virtual 1aw library

Curiously, it has not been shown that the cooling system in buildings within
the same area have been similarly damaged by the power cut-offs. The
brown-outs have become an intolerable annoyance, but they cannot excuse
all contractual irregularities, including the petitioners shortcomings.

A corporation is invested by law with a personality separate and distinct from


those of the persons composing it as well as from that of any other entity to
which it may be related. Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of a corporation is
not of itself sufficient ground for disregarding the separate corporate
personality. The general manager of a corporation therefore should not be
made personally answerable for the payment of the employees backwages
unless he had acted maliciously or in bad faith in terminating the services of
the employee. 4

The petitioners also claim that the breakdown of the cooling system was
caused by the failure of UP to do maintenance work thereon. We do not see
how mere maintenance work could have corrected the above-mentioned
defects. At any rate, whether the repairs in the air-conditioning system can
be considered mere maintenance work is a factual issue. The resolution
thereof by the lower. courts is binding upon this Court in the absence of a
clear showing that it comes under the accepted exceptions to the rule. There
is no such showing here.

The exception noted is where the official "had acted maliciously or in bad
faith," in which event he may be made personally liable for his own act. That
exception is not applicable in the case at bar, because it has not been
proved that De Guzman acted maliciously or in bad faith when, as President
of EPG, he sought to protect its interests and resisted UPs claims.
Whatever damage was caused to UP as a result of his acts is the sole
responsibility of EPG even though De Guzman was its principal officer and
controlling stockholder.

The final point of the petition is that Emmanuel P. de Guzman has a


separate legal personality from EPG Construction Co., Inc. and should not
be held solidarily liable with it. He stresses that the acts of the company are
its own responsibility and there is no reason why any liability arising from
such acts should be ascribed to him. Thus:chanrob1es virtual 1aw library

In sum, we hold that the lower court did not err in holding EPG liable for the
repair of the air-conditioning system at its expense pursuant to the
guarantee provision in the construction contract with UP. However.
Emmanuel de Guzman is not solidarily liable with it, having acted on its
behalf within the scope of his authority and without any demonstrated malice
or bad faith.

It is a doctrine well-established and obtains both at law and in equity that a


corporation is a distinct legal entity to be considered as separate and apart
from the individual stockholders or members who compose it, and is not
affected by the personal rights, obligations and transactions of its
stockholders or members. 3

WHEREFORE, the appealed decision is AFFIRMED but with the


modification that EPG Construction Co., Inc. shall be solely liable for the
damages awarded in favor of the University of the Philippines. It is so
ordered.

The trial court did not explain why Emmanuel de Guzman was held solidarily

Grio-Aquino, Medialdea and Bellosillo, JJ., concur.

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SECOND DIVISION
[G.R. No. L-30212. September 30, 1987.]
BIENVENIDO GELISAN, Petitioner, v. BENITO ALDAY, Respondent.

DECISION

PADILLA, J.:

Review on certiorari of the judgment * rendered by the Court of Appeals,


dated 11 October 1968, as amended by its resolution, dated 11 February
1969, in CA-G.R. No. 32670-R, entitled: "Benito Alday,Plaintiff-Appellant, v.
Roberto Espiritu and Bienvenido Gelisan, defendants-appellees," which
ordered the herein petitioner Bienvenido Gelisan to pay, jointly and severally,
with Roberto Espiritu, the respondent Benito Alday the amount of P5,397.30,
with legal interest thereon from the filing of the complaint, and the costs of
suit; and for the said Roberto Espiritu to pay or refund the petitioner
Bienvenido Gelisan whatever amount the latter may have paid to the
respondent Benito Alday by virtue of the judgment.chanrobles law library :
red
The uncontroverted facts of the case are, as follows:jgc:chanrobles.com.ph

"Defendant Bienvenido Gelisan is the owner of a freight truck bearing plate


No. TH-2377. On January 31, 1962, defendant Bienvenido Gelisan and
Roberto Espiritu entered into a contract marked Exhibit 3-Gelisan under
which Espiritu hired the same freight truck of Gelisan for the purpose of
hauling rice, sugar, flour and fertilizer at an agreed price of P18.00 per trip
within the limits of the City of Manila provided the loads shall not exceed 200
sacks. It is also agreed that Espiritu shall hear and pay all losses and
damages attending the carriage of the goods to be hauled by him. The truck
was taken by a driver of Roberto Espiritu on February 1, 1962. Plaintiff
Benito Alday, a trucking operator, and who owns about 15 freight trucks, had
known the defendant Roberto Espiritu since 1948 as a truck operator.
Plaintiff had a contract to haul the fertilizers of the Atlas Fertilizer Corporation
from Pier 4, North Harbor, to its Warehouse in Mandaluyong Alday met
Espiritu at the gate of Pier 4 and the latter offered the use of his truck with
the driver and helper at 9 centavos per bag of fertilizer. The offer was
accepted by plaintiff Alday and he instructed his checker Celso Henson to let
Roberto Espiritu haul the fertilizer. Espiritu made two hauls of 200 bags of
fertilizer per trip. The fertilizer was delivered to the driver and helper of
Espiritu with the necessary way bill receipts, Exhibits A and B. Espiritu,
however, did not deliver the fertilizer to the Atlas Fertilizer bodega at
Mandaluyong. The signatures appearing in the way bill receipts Exhibits A
and B of the Alday Transportation admittedly not the signature of any
representative or employee of the Atlas Fertilizer Corporation. Roberto
Espiritu could not be found, and plaintiff reported the loss to the Manila
Police Department. Roberto Espiritu was later arrested and booked for
theft. . . ..
"Subsequently, plaintiff Alday saw the truck in question on Sto. Cristo St. and
he notified the Manila Police Department, and it was impounded by the
police, It was claimed by Bienvenido Gelisan from the Police Department
after he had been notified by his employees that the truck had been
impounded by the police; but as he could not produce at the time the
registration papers, the police would not release the truck to Gelisan. As a
result of the impounding of the truck according to Gelisan, . . . and that for
the release of the truck he paid the premium of P300 to the surety company."
1
Benito Alday was compelled to pay the value of the 400 bags of fertilizer, in
the amount of P5,397.33, to Atlas Fertilizer Corporation so that, on 12
February 1962, he (Alday) filed a complaint against Roberto Espiritu and
Bienvenido Gelisan with the Court of First Instance of Manila, docketed
therein as Civil Case No. 49603, for the recovery of damages suffered by
him thru the criminal acts committed by the defendants.
The defendant, Roberto Espiritu failed to file an answer and was,

The defendant, Bienvenido Gelisan, upon the other hand, disowned


responsibility. He claimed that he had no contractual relations with the
plaintiff Benito Alday as regards the hauling and/or delivery of the 400 bags
of fertilizer mentioned in the complaint; that the alleged misappropriation or
non-delivery by defendant Roberto Espiritu of plaintiffs 400 bags of fertilizer,
was entirely beyond his (Gelisans) control and knowledge, and which fact
became known to him, for the first time, on 8 February 1962 when his freight
truck, with plate No. TH-2377, was impounded by the Manila Police
Department, at the instance of the plaintiff; and that in his written contract of
hire with Roberto Espiritu, it was expressly provided that the latter will bear
and pay all losses and damages attending the carriage of goods to be
hauled by said Roberto Espiritu.cralawnad
After trial, the Court of First Instance of Manila ruled that Roberto Espiritu
alone was liable to Benito Alday, since Bienvenido Gelisan was not privy to
the contract between Espiritu and Alday. The dispositive portion of the
decision reads, as follows:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the defendant Roberto Espiritu for the sum of P6,000 with interest at
the legal rate from the time of the filing of the complaint, and the costs of the
suit. Plaintiffs complaint is dismissed with respect to defendant Bienvenido
Gelisan, and judgment is rendered in favor of defendant Bienvenido Gelisan
and against the plaintiff for the sum of P350." 2
On appeal, however, the Court of Appeals, citing the case of Montoya v.
Ignacio, 3 a found that Bienvenido Gelisan is likewise liable for being the
registered owner of the truck; and that the lease contract, executed by and
between Bienvenido Gelisan and Roberto Espiritu, is not binding upon
Benito Alday for not having been previously approved by the Public Service
Commission. Accordingly, it sentenced Bienvenido Gelisan to pay, jointly and
severally with Roberto Espiritu, Benito Alday the amount of P5,397.30, with
legal interest thereon from the filing of the complaint; and to pay the costs.
Roberto Espiritu, in turn, was ordered to pay or refund Bienvenido Gelisan
whatever amount the latter may have paid to Benito Alday by virtue of the
judgment. 4
Hence, the present recourse by Bienvenido Gelisan.
The petition is without merit. The judgment rendered by the Court of
Appeals, which is sought to be reviewed, is in accord with the facts and the
law on the case and we find no cogent reason to disturb the same. The
Court has invariably held in several decisions that the registered owner of a

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public service vehicle is responsible for damages that may arise from
consequences incident to its operation or that may be caused to any of the
passengers therein. 5 The claim of the petitioner that he is not liable in view
of the lease contract executed by and between him and Roberto Espiritu
which exempts him from liability to third persons, cannot be sustained
because it appears that the lease contract, adverted to, had not been
approved by the Public Service Commission. It is settled in our jurisprudence
that if the property covered by a franchise is transferred or leased to another
without obtaining the requisite approval, the transfer is not binding upon the
public and third persons. 6
We also find no merit in the petitioners argument that the rule requiring the
previous approval by the Public Service Commission of the transfer or lease
of the motor vehicle, may be applied only in cases where there is no positive
identification of the owner or driver, or where there are very scant means of
identification, but not in those instances where the person responsible for
damages has been fixed or determined before hand, as in the case at bar.
The reason for the rule we reiterate in the present case, was explained by
the Court in Montoya v. Ignacio, 7 thus:jgc:chanrobles.com.ph
"There is merit in this contention. The law really requires the approval of the
Public Service Commission in order that a franchise, or any privilege
pertaining thereto, may be sold or leased without infringing the certificate
issued to the grantee. The reason is obvious. Since a franchise is personal
in nature any transfer or lease thereof should be notified to the Public
Service Commission so that the latter may take proper safeguards to protect
the interest of the public. In fact, the law requires that, before the approval is
granted, there should be a public hearing, with notice to all interested
parties, in order that the Commission may determine if there are good and
reasonable grounds justifying the transfer or lease of the property covered
by the franchise, or if the sale or lease is detrimental to public interest. Such
being the reason and philosophy behind this requirement, it follows that if the
property covered by the franchise is transferred, or leased to another without
obtaining the requisite approval the transfer is not binding against the Public
Service Commission and in contemplation of law the grantee continues to be
responsible under the franchise in relation to the Commission and to the
Public. Since the lease of the jeepney in question was made without such
approval, the only conclusion that can be drawn is that Marcelino Ignacio still
continues to be its operator in contemplation of law, and as such is
responsible for the consequences incident to its operation, one of them
being the collision under consideration."cralaw virtua1aw library
Bienvenido Gelisan, the registered owner, is not however without recourse.
He has a right to be indemnified by Roberto Espiritu for the amount that he
may be required to pay as damages for the injury caused to Benito Alday,

We also find no merit in the petitioners contention that his liability is only
subsidiary. The Court has consistently considered the registered
owner/operator of a public service vehicle to be jointly and severally liable
with the driver for damages incurred by passengers or third persons as a
consequence of injuries sustained in the operation of said vehicles. Thus, in
the case of Vargas v. Langcay, 9 the Court said:jgc:chanrobles.com.ph
"We hold that the Court of Appeals erred in considering appellant-petitioner
Diwata Vargas only subsidiarily liable under Article 103 of the Revised Penal
Code. This court, in previous decisions, has always considered the
registered owner/operator of a passenger vehicle, jointly and severally liable
with the driver, for damages incurred by passengers or third persons as a
consequence of injuries (or death) sustained in the operation of said
vehicles. (Montoya v. Ignacio, 94 Phil., 182; Timbol v. Osias, G.R. No. L7547, April 30, 1955; Vda. de Medina v. Cresencia, 99 Phil., 506; Necesito v.
Paras, 104 Phil., 75; Erezo v. Jepte, 102 Phil., 103; Tamayo v. Aquino and
Rayos v. Tamayo, 105 Phil., 949; 56 Off. Gaz. [36] 5617.) In the case of
Erezo v. Jepte, Supra, We held:jgc:chanrobles.com.ph
". . . In synthesis, we hold that the registered owner, the defendant-appellant
herein, is primarily responsible for the damage caused . . ." (Emphasis
supplied)
In the case of Tamayo v. Aquino, supra, We said:jgc:chanrobles.com.ph
". . . As Tamayo is the registered owner of the truck, his responsibility to the
public or to any passenger riding in the vehicle or truck must be direct . . .
(Emphasis supplied)
WHEREFORE, the petition is hereby DENIED. With costs against the
petitioner.
SO ORDERED.
Yap (Chairman), Melencio-Herrera, Paras and Sarmiento, JJ., concur.

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since the lease contract in question, although not effective against the public
for not having been approved by the Public Service Commission, is valid and
binding between the contracting parties. 8

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FIRST DIVISION
[G.R. No. 90856. July 23, 1992.]
ARTURO DE GUZMAN, Petitioner, v. NATIONAL LABOR RELATIONS
COMMISSION, LABOR ARBITER MA. LOURDES A. SALES AVELINO D.
VALLESTEROL, ALEJANDRO Q. FRIAS, LINDA DE LA CRUZ,
CORAZON M. DE LA FUENTE, LILIA F. FLORO, and MARIO F.
JAYME,Respondents.
Benjamin C. Santos Law Office for Petitioner.
Urbina & Associates Law Office for Private Respondents.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; MONEY CLAIMS;


MANAGERIAL EMPLOYEES NOT LIABLE THERETO; CASE OF A.C.
RANSOM LABOR UNION-CCLU VS. NLRC (142 SCRA 269), NOT
APPLICABLE TO CASE AT BAR. In the leading case of A.C. Ransom
Labor Union-CCLU v. NLRC, (142 SCRA 269) as affirmed in the subsequent
cases of Gudez v. NLRC, (183 SCRA 644) and Maglutac v. NLRC, (189
SCRA 767) this Court treated the president of the employer corporation as
an "employer" and held him solidarily liable with the said corporation for the

payment of the employees money claims. So was the vice-president of the


employer corporation in the case of Chua v. NLRC. (182 SCRA 353). The
aforecited cases will not apply to the instant case, however, because the
persons who were there made personally liable for the employees claims
were stockholders-officers of the respondent corporation. In the case at bar,
the petitioner, while admittedly the highest ranking local representative of
AMAL in the Philippines, is nevertheless not a stockholder and much less a
member of the board of directors or an officer thereof. He is at most only a
managerial employee under Art. 212 (m) of the Labor Code.
2. CIVIL LAW; HUMAN RELATIONS; GRANT OF INDEMNITY FOR
DAMAGES WHERE THERE IS ABUSE OF RIGHTS; CASE AT BAR. The
modern tendency, he continues, is to depart from the classical and traditional
theory, and to grant indemnity for damages in cases where there is an abuse
of rights, even when the act is not illicit. Law cannot be given an anti-social
effect. If mere fault or negligence in ones acts can make him liable for
damages for injury caused thereby, with more reason should abuse or bad
faith make him liable. A person should be protected only when he acts in the
legitimate exercise of his right, that is, when he acts with prudence and in
good faith; but not when he acts with negligence or abuse (Articles 19 and
21 of the New Civil Code). Applying these provisions, we hold that although
the petitioner cannot be made solidarily liable with AMAL for the monetary
demand of its employees, he is nevertheless directly liable to them for his
questionable conduct in attempting to deprive them of their just share in the
assets of AMAL.
3. ID.; DAMAGES; MORAL DAMAGES; WHEN RECOVERABLE. Under
Art. 2219, (10) of the Civil Code, moral damages may be recovered for the
acts referred to in Art. 21. In Bert Osmea & Associates v. Court of Appeals,
(120 SCRA 395) we held that "fraud and bad faith having been established,
the award of moral damages is in order." And in Pan Pacific Company (Phil.)
v. Phil Advertising Corp., (23 SCRA 977) moral damages were awarded
against the defendant for its wanton and deliberate refusal to pay the just
debt due the plaintiff.
4. REMEDIAL LAW; ACTIONS; COURTS CAN GRANT RELIEF
WARRANTED BY THE ALLEGATIONS AND THE PROOF EVEN IF NOT
SPECIFICALLY SOUGHT; CASE AT BAR. It is settled that the court can
grant the relief warranted by the allegation and the proof even if it is not
specifically sought by the injured party. (Ras v. Sua, 25 SCRA 153; Northern
Cement Corp. v. IAC, 158 SCRA 408; Heirs of Celso Amarante v. CA 185
SCRA 585) In the case at bar, while the private respondents did not
categorically pray for damages, they did allege that the petitioner, taking
advantage of his position as general manager, had appropriated the
properties of AMAL in payment of his own claims against the company. That

5. CIVIL LAW; DAMAGES; MORAL DAMAGES; MAY BE AWARDED EVEN


WITHOUT PHYSICAL INJURY TO COMPLAINANT. The fact that no
actual or compensatory damages was proven before the trial court does not
adversely affect the private respondents right to recover moral damages.
We have held that moral damages may be awarded in the cases referred to
in the chapter on Human Relations of the Civil Code (Articles 19-36) without
need of proof that the wrongful act complained of had caused any physical
injury upon the complainant.
6. ID.; ID.; EXEMPLARY DAMAGES; IMPOSED BY WAY OF CORRECTION
FOR PUBLIC GOOD. When moral damages are awarded, exemplary
damages may also be decreed. Exemplary damages are imposed by way of
example or correction for the public good, in addition to moral, temperate,
liquidated or compensatory damages. According to the Code Commission,
"exemplary damages are required by public policy, for wanton acts must be
suppressed. They are an antidote so that the poison of wickedness may not
run through the body politic." These damages are legally assessible against
him.
7. LABOR AND SOCIAL LEGISLATION; LABOR CODE; MONEY CLAIMS;
DAMAGES ARISING FROM ILLEGAL DISMISSAL COGNIZABLE BY THE
LABOR ARBITER. Although the question of damages arising from the
petitioners bad faith has not directly sprung from the illegal dismissal, it is
clearly intertwined therewith. The predicament of the private respondents
caused by their dismissal was aggravated by the petitioners act in
arrogating to himself all of AMALs assets to the exclusion of its other
creditors, including its employees. The issue of bad faith is incidental to the
main action for illegal dismissal and is thus properly cognizable by the Labor
Arbiter.
8. REMEDIAL LAW; SUPREME COURT; MAY RESOLVE ACTIONS ON
THE MERITS INSTEAD OF REMANDING THEM TO THE TRIAL COURT
FOR FURTHER PROCEEDINGS; RATIONALE. We agree that, strictly
speaking, the determination of the amount thereof would require a remand to
the Labor Arbiter. However, inasmuch as the private respondents were
separated in 1986 and this case has been pending since then, the interests
of justice demand the direct resolution of this motion in this proceeding.

DECISION

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was averment enough of the injury they suffered as a result of the


petitioners bad faith.

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CRUZ, J.:

It is a fundamental principle of law and human conduct that a person "must,


in the exercise of his rights and in the performance of his duties, act with
justice, give every one his due, and observe honesty and good faith." 1 This
is the principle we shall apply in the case at bar to gauge the petitioners
motives in his dealings with the private respondents.
Arturo de Guzman was the general manager of the Manila office of the
Affiliated Machineries Agency, Ltd., which was based in Hongkong. On June
30, 1986, he received a telex message from Leo A. Fialla, managing director
of AMAL in its main office, advising him of the closure of the company due to
financial reverses. This message triggered the series of events that are the
subject of this litigation.
Immediately upon receipt of the advise, De Guzman notified all the
personnel of the Manila office. The employees then sent a letter to AMAL
accepting its decision to close, subject to the payment to them of their
current salaries, severance pay, and other statutory benefits. De Guzman
joined them in these representations.
These requests were, however, not heeded. Consequently, the employees,
now herein private respondents, lodged a complaint with the NLRC against
AMAL, through Leo A. Fialla and Arturo de Guzman, for illegal dismissal,
unpaid wages or commissions, separation pay, sick and vacation leave
benefits, 13th month pay, and bonus.
For his part, the petitioner began selling some of AMALs assets and applied
the proceeds thereof, as well as the remaining assets, to the payment of his
claims against the company. He also organized Susarco, Inc., with himself
as its president and his wife as one of the incorporators and a member of the
board of directors. This company is engaged in the same line of business
and has the same clients as that of the dissolved AMAL.cralawnad
With this development, Susarco and its officers were impleaded in the
amended complaint of the private respondents. Later, William Quasha
and/or Cirilo Asperilla were also included in the suit as the resident agents of
AMAL in the Philippines.
On November 7, 1986, the petitioner filed his own complaint with the NLRC
against AMAL for his remaining unsatisfied claims.

On September 30, 1987, Labor Arbiter Ma. Lourdes A. Sales, who tried the
private respondents complaint, rendered a decision
1. Ordering Respondents AMAL and Arturo de Guzman to pay jointly and
severally to each Complainant separation pay computed at one-half month
pay for every year of service, backwages for one month, unpaid salaries for
June 16-30 1986, 13th month pay from January to June 30, 1986 and
incentive leave pay equivalent to two and-a-half days pay;
2. Dismissing the complaint against respondents Leo Fialla, William Quasha,
Susarco, Inc. and its directors Susan de Guzman, Pacita Castaneda,
George Estomata and Cynthia Serrano for lack of basis and/or merit;
3. Dismissing the claims for damages for lack of basis;
4. Ordering respondents AMAL and Arturo de Guzman to pay jointly and
severally attorneys fees to Complaints equivalent to 10% of the monetary
awards herein. 3
This decision was on appeal affirmed in toto by the NLRC, which is now
faulted for grave abuse of discretion in this petition for certiorari.
The petitioner does not dispute the jurisdiction of the Labor Arbiter and
NLRC over the complaint of the private respondents against AMAL in view of
their previous employment relationship. He argues, however, that the public
respondents acted without or in excess of jurisdiction in holding him jointly
and severally liable with AMAL as he was not an employer of the private
respondents.
The Solicitor General and the private respondents disagree. They maintain
that the petitioner, being AMALs highest local representative in the
Philippines, may be held personally answerable for the private respondents
claims because he is included in the term "employer" under Art. 212 (c),
(now e) of the Labor Code which provides:chanrobles.com : virtual law
library
"Art. 212. Definitions.

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On May 29, 1987, Labor Arbiter Eduardo G. Magno, to whom the petitioners
complaint was assigned, rendered a decision ordering AMAL to pay the
petitioner the amount of P371,469.59 as separation pay, unpaid salary and
commissions, after deducting the value of the assets earlier appropriated by
the petitioner. 2

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x

c. "Employer" includes any person acting in the interest of an employer,


directly or indirectly. . . ."cralaw virtua1aw library
In the leading case of A.C. Ransom Labor Union-CCLU v. NLRC, 4 as
affirmed in the subsequent cases of Gudez v. NLRC, 5 and Maglutac v.
NLRC, 6 this Court treated the president of the employer corporation as an
"employer" and held him solidarily liable with the said corporation for the
payment of the employees money claims. So was the vice-president of the
employer corporation in the case of Chua v. NLRC. 7
The aforecited cases will not apply to the instant case, however, because the
persons who were there made personally liable for the employees claims
were stockholders-officers of the respondent corporation. In the case at bar,
the petitioner, while admittedly the highest ranking local representative of
AMAL in the Philippines, is nevertheless not a stockholder and much less a
member of the board of directors or an officer thereof. He is at most only a
managerial employee under Art. 212 (m) of the Labor Code, which reads in
relevant part as follows:jgc:chanrobles.com.ph
"Art. 212. Definitions.
x

m. Managerial employee is one who is vested with powers and prerogatives


to lay down and execute management policies and/or to hire, transfer,
suspend, lay off, recall, discharge, assign or discipline
employees. . . ."cralaw virtua1aw library
As such, the petitioner cannot be held directly responsible for the decision to
close the business that resulted in his separation and that of the private
respondents. That decision came directly and exclusively from AMAL. The
petitioners participation was limited to the enforcement of this decision in
line with his duties as general manager of the company. Even in a normal
situation, in fact, he would not be liable, as a managerial employee of AMAL,
for the monetary claims of its employees. There should be no question that
the private respondents recourse for such claims cannot be against the
petitioner but against AMAL and AMAL alone.
The judgment in favor of the private respondents could have been enforced
against the properties of AMAL located in this country except for one
difficulty. The problem is that these properties have already been

By so doing, has the petitioner incurred liability to the private respondents?


The Labor Arbiter believed he had because of his bad faith and ruled as
follows:chanrob1es virtual 1aw library
Considering that Respondent A. de Guzman is guilty of bad faith in
appropriating for himself the properties of Respondent AMAL to the prejudice
of Complainants herein whose claims are known to Respondent at the time
he made the disposition of AMALs properties, he is held jointly and severally
liable with Respondent AMAL for the award of unpaid wages, separation pay,
backwages for one month, 13th month pay and cash value of unused
vacation leave.chanrobles.com:cralaw:red
In Velayo v. Shell Co. of the Philippines, 8 Commercial Air Lines, Inc. (CALI),
knowing that it did not have enough assets to pay off its liabilities, called a
meeting of its creditors where it announced that in case of non-agreement
on a pro-rata distribution of its assets, including the C-54 plane in California,
it would file insolvency proceedings. Shell Company of the Philippines, one
of its creditors, took advantage of this information and immediately made a
telegraphic assignment of its credits in favor of its sister corporation in the
United States. The Latter thereupon promptly attached the plane in
California and disposed of the same, thus depriving the other creditors of
their proportionate share in its value. The Court declared that Shell had
acted in bad faith and betrayed the trust of the other creditors of CALI. The
said company was ordered to pay them compensatory damages in a sum
equal to the value of the C-54 plane at the time it assigned its credit and
exemplary damages in the sum of P25,000.00.
We quote with approval the following observation of Labor Arbiter Sales in
her decision:chanrob1es virtual 1aw library
While the legitimacy of Respondent A. de Guzmans claims against AMAL is
not questioned, it must be stated that the manner and the means by which
he satisfied such claims are evidently characterized by bad faith on his part.
For one, Respondent A. de Guzman took advantage of his position as
General Manager and arrogated to himself the right to retain possession and
ownership of all properties owned and left by AMAL in the Philippines, even
if he knew that Complainants herein have similar valid claims for unpaid
wages and other employee benefits from the Respondent AMAL. . . .
Another strong indication of bad faith on the part of Respondent A. de
Guzman is his filing of a separate complaint against AMAL before the NLRC
Arbitration Branch about four (4) months after the filing of the instant case

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appropriated by the petitioner to satisfy his own claims against the company.

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without informing this Office about the existence of said case during the
proceedings in the instant case. This case was deemed submitted for
decision on May 18, 1987 but it was only on June 2, 1987 that Respondent
A. de Guzman formally notified this Office through his Supplemental Position
Paper of his pending complaint before Arbiter Eduardo Magno docketed as
NLRC Case No. 11-4441-86. Under Rule V, Section 4 of the revised rules of
the NLRC, it is provided that:jgc:chanrobles.com.ph
"Sec. 4. CONSOLIDATION OF CASES where there are two or more
cases pending before different Labor Arbiters in the same Regional
Arbitration Branch involving the same employer and issues or the same
parties with different issues, the case which was filed last shall be
consolidated with the first to avoid unnecessary costs of delay. Such cases
shall be disposed of by the Labor Arbiter to whom the first case was
assigned." (Emphasis supplied).
Had Respondent A. de Guzman given timely notice of his complaint, his
case could have been consolidated with this case and the issues in both
cases could have been resolved in a manner that would give due
consideration to the rights and liabilities of all parties in interest at the least,
in case consolidation is objected to or no longer possible, the Complainants
herein could have been given a chance to intervene in the other case so that
whatever disposition might be rendered by Arbiter Magno would include
consideration of Complaints claims herein.
It is not disputed that the petitioner in the case at bar had his own claims
against AMAL and consequently had some proportionate right over its
assets. However, this right ceased to exist when, knowing fully well that the
private respondents had similarly valid claims, he took advantage of his
position as general manager and applied AMALs assets in payment
exclusively of his own claims.
According to Tolentino in his distinguished work on the Civil
Code:chanrob1es virtual 1aw library
The exercise of a right ends when the right disappears, and it disappears
when it is abused, especially to the prejudice of others. The mask of a right
without the spirit of justice which gives it life, is repugnant to the modern
concept of social law. It cannot be said that a person exercises a right when
he unnecessarily prejudices another or offends morals or good customs.
Over and above the specific precepts of positive law are the supreme norms
of justice which the law develops and which are expressed in three
principles: honeste vivere, alterum non laedre and jus suum quique tribuere;
and he who violates them violates the law. For this reason, it is not
permissible to abuse our rights to prejudice others. 9

The above-mentioned principles are contained in Article 19 of the Civil Code


which provides:chanrobles law library : red
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
This is supplemented by Article 21 of the same Code, thus:chanrob1es
virtual 1aw library
Art. 21. Any person who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate
the latter for the damage.
Applying these provisions, we hold that although the petitioner cannot be
made solidarily liable with AMAL for the monetary demand of its employees,
he is nevertheless directly liable to them for his questionable conduct in
attempting to deprive them of their just share in the assets of AMAL.
Under Art. 2219, (10) of the Civil Code, moral damages may be recovered
for the acts referred to in Art. 21. In Bert Osmea & Associates v. Court of
Appeals, 11 we held that "fraud and bad faith having been established, the
award of moral damages is in order." And in Pan Pacific Company (Phil.) v.
Phil Advertising Corp., 12 moral damages were awarded against the
defendant for its wanton and deliberate refusal to pay the just debt due the
plaintiff.
It is settled that the court can grant the relief warranted by the allegation and
the proof even if it is not specifically sought by the injured party. 13 In the
case at bar, while the private respondents did not categorically pray for
damages, they did allege that the petitioner, taking advantage of his position
as general manager, had appropriated the properties of AMAL in payment of
his own claims against the company. That was averment enough of the
injury they suffered as a result of the petitioners bad faith.

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The modern tendency, he continues, is to depart from the classical and


traditional theory, and to grant indemnity for damages in cases where there
is an abuse of rights, even when the act is not illicit. Law cannot be given an
anti-social effect. If mere fault or negligence in ones acts can make him
liable for damages for injury caused thereby, with more reason should abuse
or bad faith make him liable. A person should be protected only when he
acts in the legitimate exercise of his right, that is, when he acts with
prudence and in good faith; but not when he acts with negligence or abuse.
10

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The fact that no actual or compensatory damages was proven before the
trial court does not adversely affect the private respondents right to recover
moral damages. We have held that moral damages may be awarded in the
cases referred to in the chapter on Human Relations of the Civil Code
(Articles 19-36) without need of proof that the wrongful act complained of
had caused any physical injury upon the complainant. 14
When moral damages are awarded, exemplary damages may also be
decree. 15 Exemplary damages are imposed by way of example or
correction for the public good, in addition to moral, temperate, liquidated or
compensatory damages. 16 According to the Code Commission, "exemplary
damages are required by public policy, for wanton acts must be suppressed.
They are an antidote so that the poison of wickedness may not run through
the body politic." 17 These damages are legally assessible against him.
The petitioner asserts that, assuming the private respondents to have a
cause of action against him for his alleged bad faith, the civil courts and not
the Labor Arbiter have jurisdiction over the case.
In Associated Citizens Bank, Et. Al. v. Judge Japson, 18 this Court
held:chanrob1es virtual 1aw library
Primarily, the issue to be resolved is whether or not the respondent court has
jurisdiction to hear and decide an action for damages based on the dismissal
of an employee.
On all fours to the above issue is the ruling of this Court in Primero v.
Intermediate Appellate Court (156 SCRA 435 [1987]) Labor Arbiter under
Article 217 of the Labor Code is broad and comprehensive enough to
include claims for moral and exemplary damages sought to be recovered by
an employee whose services has been illegally terminated by his employer
(Ebon v. De Guzman, 113 SCRA 55 [1982]; Aguda v. Vallejos, 113 SCRA 69
[1982]; Getz Corporation v. Court of Appeals, 116 SCRA 86 [1982]).
For the unlawful termination of employment, this Court in Primero v.
Intermediate Appellate Court, supra, ruled that the Labor Arbiter had the
exclusive and original jurisdiction over claims for moral and other forms of
damages, so that the employee in the proceedings before the Labor Arbiter
should prosecute his claims not only for reliefs specified under the Labor
Code but also for damages under the Civil Code.
. . . Question of damages which arose out of or connected with the labor
dispute should be determined by the labor tribunal to the exclusion of the
regular courts of justice (Limquiaco, Jr. v. Ramolete, 156 SCRA 162 [1987]).

Although the question of damages arising from the petitioners bad faith has
not directly sprung from the illegal dismissal, it is clearly intertwined
therewith. The predicament of the private respondents caused by their
dismissal was aggravated by the petitioners act in arrogating to himself all of
AMALs assets to the exclusion of its other creditors, including its
employees. The issue of bad faith is incidental to the main action for illegal
dismissal and is thus properly cognizable by the Labor Arbiter.
We agree that, strictly speaking, the determination of the amount thereof
would require a remand to the Labor Arbiter. However, inasmuch as the
private respondents were separated in 1986 and this case has been pending
since then, the interests of justice demand the direct resolution of this motion
in this proceeding.cralawnad
As this Court has consistently declared:jgc:chanrobles.com.ph
". . . it is a cherished rule of procedure for this Court to always strive to settle
the entire controversy in a single proceeding leaving no root or branch to
bear the seeds of future litigation. No useful purpose will be served if this
case is remanded to the trial court only to have its decision raised again to
the Intermediate Appellate Court and from there to this Court." (Alger
Electric, Inc. v. Court of Appeals, 135 SCRA 37)
Remand of the case to the lower court for further reception of evidence is not
necessary where the court is in a position to resolve the dispute based on
the records before it. On many occasions, the Court, in the public interest
and the expeditious administration of justice, has resolved actions on the
merits instead of remanding them to the trial court for further proceedings,
such as where the ends of justice would not be subserved by the remand of
the case or when public interest demands an early disposition of the case.
(Lianga Bay Logging Co., Inc. v. CA 157 SCRA 357)
Sound practice seeks to accommodate the theory which avoids waste of
time, effort and expense, both to the parties and the government, not to
speak of delay in the disposal of the case (cf. Fernandez v. Garcia, 92 Phil.
592, 597). A marked characteristic of our judicial set-up is that where the
dictates of justice so demand . . . the Supreme Court should act, and act
with finality. (Li Siu Liat v. Republic, 21 SCRA 1039, 1046, citing Samal v.
CA, 99 Phil. 230 and U.S. v. Gimenez, 34 Phil. 74). In this case, the dictates
of justice do demand that this Court act, and act with finality. (Beautifont, Inc.
v. CA, 157 SCRA 481)

Page

The regular courts have no jurisdiction over claims for moral and exemplary
damages arising from the illegal dismissal of an employee (Vargas v. Akai
Philippines, Inc. 156 SCRA 531 [1987]).

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It is stressed that the petitioners liability to the private respondents is a direct
liability in the form of moral and exemplary damages and not a solidary
liability with AMAL for the claims of its employees against the company. He is
being held liable not because he is the general manager of AMAL but
because he took advantage of his positions by applying the properties of
AMAL to the payment exclusively of his own claims to the detriment of the
other employees.
WHEREFORE, the questioned decision is AFFIRMED but with the
modification that the petitioner shall not be held jointly and severally liable
with AMAL for the private respondents money claims against the latter.
However, for his bad faith in arrogating to himself AMALs properties to the
prejudice of the private respondents, the petitioner is ordered: 1) to pay the
private respondents moral damages in the sum of P20,000.00 and
exemplary damages in the sum of P20,000.00; and 2) to return the assets of
AMAL that he has appropriated, or the value thereof, with legal interest
thereon from the date of the appropriation until they are actually restored,
these amounts to be proportionately distributed among the private
respondents in satisfaction of the judgment rendered in their favor against
AMAL.
SO ORDERED.

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EN BANC
[G.R. No. L-7817. October 31, 1956.]
ALFREDO M. VELAYO, in his capacity as Assignee of the insolvent
COMMERCIAL AIR LINES, INC. (CALI), Plaintiff-Appellant, vs. SHELL
COMPANY OF THE PHILIPPINE ISLANDS, LTD., Defendant-Appellee,
YEK HUA TRADING CORPORATION, PAUL SYCIP and MABASA & CO.,
intervenors.

DECISION
FELIX, J.:
Antecedents The Commercial Air Lines, Inc., which will be hereinafter
referred to as CALI, is a corporation duly organized and existing in
accordance with the Philippines laws, with offices in the City of Manila and
previously engaged in air transportation business. The Shell Company of the
P. I., Ltd., which will be designated as the Defendant, is on the other hand, a
corporation organized under the laws of England and duly licensed to do
business in the Philippines, with principal offices at the Hongkong and
Shanghai Bank building in the City of Manila.
Since the start of CALIs operations, its fuel needs were all supplied by
the Defendant. Mr. Desmond Fitzgerald, its Credit Manager who extended
credit to CALI, was in charge of the collection thereof. However, all matters
referring to extensions of the term of payment had to be decided first by Mr.

Stephen Crawford and later by Mr. Wildred Wooding, who represented in


this country Defendants Board of Directors, the residence of which is in
London, England (Exhs. 4-B and 4-A).
As of August, 1948, the books of the Defendant showed a balance of
P170,162.58 in its favor for goods it sold and delivered to CALI. Even before
August 6, 1948, Defendant had reasons to believe that the financial
condition of the CALI was for from being satisfactory. As a matter of fact,
according to Mr. Fitzgerald, CALIs Douglas C-54 plane, then in California,
was offered to him by Mr. Alfonso Sycip, CALIs President of the Board of
Directors, in partial settlement of their accounts, which offer was, however,
declined by Mr. Crawford, probably because upon inquiries made by Mr.
Fitzgerald sometime before August 6, 1948, for the purpose of preparing the
report for its London office regarding CALIs indebtedness, Col. Lambert,
CALIs Vice President and General Manager, answered that the total
outstanding liabilities of his corporation was only P550,000, and the
management of Defendant probably assumed that the assets of the CALI
could very well meet said liabilities and were not included to take charge of
the sale of CALIs said Douglas C-54 plane to collect its credit.
On August 6, 1948, the management of CALI informally convened its
principal creditors (excepting only the insignificant small claims) who were
invited to a luncheon that was held between 12:chanroblesvirtuallawlibrary00
and 2:chanroblesvirtuallawlibrary00 oclock in the afternoon of that day in the
Trade and Commerce Building at 123 Juan Luna St., Manila, and informed
them that CALI was in a state of insolvency and had to stop operation. The
creditors
present,
or
represented
at
the
meeting,
were:chanroblesvirtuallawlibrary Mr. A. L. Bartolini, representing Firestone
Tire & Rubber Co.; chan roblesvirtualawlibraryMr. Quintin Yu, representing
Commercial News; chan roblesvirtualawlibraryMr. Mark Pringle, representing
Smith, Bell & Co. (Lloyds of London); chan roblesvirtualawlibraryMessrs.
Vicente Liwag, C. Dominguez and Pacifico Agcaoili, representing National
Airports Corporation; chan roblesvirtualawlibraryMessrs. W. J. Bunnel and
Manuel Chan, representing Goodrich International Rubber Co.; chan
roblesvirtualawlibraryMr. G. E. Adair, representing Goodyear Tire & Rubber
Co.; chan roblesvirtualawlibraryMr. J. T. Chuidian, representing Gibbs,
Gibbs, Chuidian & Quasha; chan roblesvirtualawlibraryMr. E. Valera,
representing Mabasa & Co.; chan roblesvirtualawlibraryMr. D. Fitzgerald,
representing Shell Co. P.I. Ltd.; chan roblesvirtualawlibraryand Mr. Alfonso Z.
Sycip, representing himself, Yek Hua Trading Corporation and Paul Sycip
(Exhs. NN, JJJ, MM, QQQ, II-4, SS, TT, UU, VV, WW, XX, YY, ZZ, AAA,
BBB, CCC, DDD, EEE, FFF, GGG, and HHH).
The persons present, including Mr. Desmond Fitzgerald, signed their names
and the names of the companies they represented on a memorandum pad
of the law firm Quisumbing, Sycip, and Quisumbing (Exhs. VV and VV-1).

13th Air Force P12,880.00


Civil Aeronautics Administration 98,127.00
Gibbs, Giibs, Chuidian & Quasha 5,544.90
Goodrich Intl Rubber Co. 3,142.47
Goodyear Tire & Rubber Co. 1,727.50
Mabasa & Co. 4,867.72
Manila Intl Airport 55,280.04
Manila Intl Air Terminal (PAL) 36,163.68
Shell Co. of the Phil., Ltd. 152,641.68
Smith, Bell & Co., Ltd. 45,534.00
Paul Sycip 8,189.33
Mrs. Buenaventura 20,000.00
Firestone Tire & Rubber Co. 4,911.72
Alfonso Sycip 575,880.83
Yek Hua Trading Corp. 487,871.20

P1,512,762.87
What
occurred
in
that
meeting
may
be
summarized
as
follows:chanroblesvirtuallawlibrary Mr. Alexander Sycip, Secretary of the
Board of Directors of the CALI, informed the creditors present that this
corporation was insolvent and had to stop operations. He explained the
memorandum agreement executed by the CALI with the Philippine Air Lines,
Inc., on August 4, 1948, regarding the proposed sale to the latter of the
aviation equipments of the former (Exhs. MM and QQQ, par. 1 memo of
meeting;chan roblesvirtualawlibraryExhs. III and PPP P. Agcaoilis
memorandum dated August 7, 1948, to the General Manager of the National
Airports Corp.). Mr. Alexander Sycip was assisted in the explanation by CPA
Alfredo Velayo of Washington, Sycip & Company, Auditors of the CALI, who
discussed the balance sheets and distributed copies thereof to the creditors
present (Exhs. NN, NN-1 to 7; chan roblesvirtualawlibraryExh. JJ P.
Agcaoilis copy of balance sheet p. 229- 230 t.s.n., Nov. 27, 1951, of the

Page

In that meeting at noontime of August 6, 1948, out of the 194 creditors in all
(Exh. OO) 15 were listed as principal creditors having big balances (Exh.
NN), to wit:chanroblesvirtuallawlibrary

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
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testimony of D. Fitzgerald). The said balance sheet made mention of a C-54
plane in the United States, the property now involved in this suit. He was
likewise assisted in his explanation by Mr. Curtis L. Lambert, Vice President
and General Manager of the CALI, who described in greater detail the
assets of the CALI. There was a general understanding among all the
creditors present on the desirability of consummating the sale in favor of the
Philippine Air Lines Inc. (Exhs. MM and QQQ, par. 2 Memo of
meeting; chan roblesvirtualawlibraryExhs. III and PPP, par. 5 P. Agcoailis
memorandum dated August 7, 1948, to the General Manager of the National
Airports Corp.; chan roblesvirtualawlibraryand pp. 299-300 t.s.n., January
15, 1952, of the testimony of Desmond Fitzgerald).
Then followed a discussion on the payment of claims of creditors and the
preferences claimed for the accounts due to the employees, the Government
and the National Airports Corporation. The representatives of the latter
Messrs. Vicente H. Liwag, C. Dominguez and Pacifico V. Agcaoili, contended
that their accounts were preferred. The other creditors disputed such
contention of preference (Exhs. MM and QQQ, par. 3 0151 Memo of
meeting; chan roblesvirtualawlibraryExhs. III and PPP, par. 3 P. Agcaoilis
memorandum dated August 1, 1948, to the General Manager of the National
Airports Corp.; chan roblesvirtualawlibraryand pp. 247-248 t.s.n., January
10, 1952, of the testimony of D. Fitzgerald). No understanding was reached
on this point and it was then generally agreed that the matter of preference
be further studied by a working committee to be formed (Exhs. MM, par. 3
Memo of meeting). The creditors present agreed to the formation of a
working committee to continue the discussion of the payment of claims and
preferences alleged by certain creditors, and it was further agreed that said
working committee would supervise the preservation of the properties of the
corporation while the creditors attempted to come to an understanding as to
a fair distribution of the assets among them (Exhs. MM and QQQ, Memo of
meeting).
From
the
latter
exhibit
the
following
is
copied:chanroblesvirtuallawlibrary
4. Certain specific matters such as the amount owing to the Philippine Air
Lines, Inc., and the claims of Smith, Bell vs. Co., (representing Lloyds of
London) that its claim should be offset against the payments which may be
due to CALI from insurance claims were not taken up in detail. It was agreed
that these matters together with the general question of what are preferred
claims should be the subject of further discussions, but shall not interfere
with the consummation of the sale in favor of PAL.
5. The creditors present agreed to the formation of the working committee
to supervise the preservation of the properties of the corporation and agreed
further that Mr. Fitzgerald shall represent the creditors as a whole in this
committee. It was understood, however, that all questions relating to
preference of claims can be decided only by the creditors assembled.

To this working committee, Mr. Desmond Fitzgerald, Credit Manager, of


the Defendant, Atty. Agcaoili of the National Airports Corporation and Atty.
Alexander Sycip (Exhs. III and PPP, par. 5 P. Agcaoilis memorandum
dated August 7, 1948, to the General Manager of the National Airports
(Corp.) were appointed. After the creditors present knew the balance sheet
and heard the explanations of the officers of the CALI, it was their
unanimous opinion that it would be advantageous not to present suits
against this corporation but to strive for a fair pro-rata division of its assets
(Exh. MM, par 6, Memo of meeting), although the management of the CALI
announced that in case of non-agreement of the creditors on a pro-rata
division of the assets, it would file insolvency proceedings (p. 70, t.s.n.,
October 22, 1951).
Mr. Fitzgerald did not decline the nomination to form part of said working
committee and on August 9, 1948, the 3 members thereof discussed
methods of achieving the objectives of the committee as decided at the
creditors meeting, which were to preserve the assets of the CALI and to
study the way of making a fair division of all the assets among the creditors.
Atty. Sycip made an offer to Mr. D. Fitzgerald to name a representative to
oversee the preservation of the assets of the CALI, but Mr. Fitzgerald replied
that the creditors could rely on Col. Lambert. Atty. Pacifico Agcaoili promised
to refer the arguments adduced at the second meeting to the General
Manager of the National Airports Corporations and to obtain the advice of
the Corporate Counsel, so the negotiation with respect to the division of
assets of the CALI among the creditors was left pending or under advice
when on that very day of the meeting of the working committee, August 9,
1948, which Mr. Fitzgerald attended, Defendant effected a telegraphic
transfer of its credit against the CALI to the American corporation Shell Oil
Company, Inc., assigning its credit, amounting to $79,440.00, which was
subsequently followed by a deed of assignment of credit dated August 10,
1948, the credit amounting this time to the sum of $85,081.29 (Exh. I).
On August 12, 1948, the American corporation Shell Oil Company, Inc., filed
a complaint against the CALI in the Superior Court of the State of California,
U.S.A. in and for the County of San Bernardino, for the collection of an
assigned credit of $79,440.00 Case No. 62576 of said Court (Exhs. A, E,
F, G, H, V, and Z) and a writ of attachment was applied for and issued on the
same date against a C-54 plane (Exhs. B, C, D, Y, W, X, and X-1).
On September 17, 1948, an amended complaint was filed to recover an
assigned credit of $85,081.29 (Exhs. I, K, L, M, Q, R, S, T, U, DD) and a

Page

6. It was the sense of the persons present that, if possible, the insolvency
court be avoided but that should the creditors not meet in agreement, then
all the profits from the sale will be submitted to an insolvency court for proper
division among the creditors.

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
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supplemental attachment for a higher sum was applied for and issued
against the C-54 plane, plus miscellaneous personal properties held by
Pacific Overseas Air Lines for the CALI (Exhs. N, O, P, AA, BB, BB-1 and
CC) and on January 5, 1949, a judgment by default was entered by the
American court (Exhs. J, EE, FF, GG, and HH).
Unaware of Defendants assignments of credit and attachment suit, the
stockholders of CALI resolved in a special meeting of August 12, 1948, to
approve the memorandum agreement of sale to the Philippine Air Lines, Inc,
and noted that the Board had been trying to reach an agreement with the
creditors of the corporation to prevent insolvency proceedings, but so far no
definite agreement had been reached (Exh. OO Minutes of August 12,
1948, stockholders meeting).
By the first week of September, 1948, the National Airports Corporation
learned of Defendants action in the United States and hastened to file its
own complaint with attachment against the CALI in the Court of First
Instance of Manila (Exhs. KKK, LLL, and MMM). The CALI, also prompted
by Defendants action in getting the alleged undue preference over the other
creditors by attaching the C-54 plane in the United States, beyond the
jurisdiction of the Philippines, filed on October 7, 1948, a petition for
voluntary insolvency. On this date, an order of insolvency was issued by the
court (Exh. JJ) which necessarily stayed the National Airports Corporations
action against the CALI and dissolved its attachment (Exh. NNN), thus
compelling the National Airports Corporation to file its claims with the
insolvency court (Exh. SS).
By order of October 28, 1948, the Court confirmed the appointment of Mr.
Alfredo M. Velayo, who was unanimously elected by the creditors as
Assignee in the proceedings, and ordered him to qualify as such by taking
the oath of office within 5 days from notice and filing a bond in the sum of
P30,000.00 to be approved by the Court conditioned upon the faithful
performance of his duties, and providing further that all funds that the
Assignee may collect or receive from the debtors of the corporation, or from
any other source or sources, be deposited in a local bank (Exh. KK). On
November 3, 1948, the clerk of court executed a deed of conveyance in
favor of the Assignee (Alfredo M. Velayo) over all the assets of the CALI
(Exh. LL).
The Case. After properly qualifying as Assignee, Alfredo M. Velayo
instituted this case (No. 6966 of the Court of First Instance of Manila) on
December 17, 1948, against the Shell Company of P. I., Ltd., for the purpose
of securing from the Court a writ of injunction restraining Defendant, its
agents, servants, attorneys and solicitors from prosecuting in and for the
County of San Bernardino in the Superior Court of the State of California,
U.S.A. the aforementioned Civil Case No. 62576 against the insolvent

The complaint further prays that upon the filing of a bond executed to
the Defendant in an amount to be fixed by the Court, to the effect
that Plaintiff will pay to Defendant all damages the latter may sustain by
reason of the injunction if the Court should finally decide that the Plaintiffwas
not entitled thereto, the Court issued a writ of preliminary injunction enjoining
theDefendant, its agent, servants, attorneys and solicitor, from prosecuting
the aforementioned case No. 62576, the same writ of preliminary injunction
to issue without notice to the Defendantit appearing by verified complaint
that the great irreparable injury will result to the Plaintiff-Appellant before the
matter could be on notice. The Plaintiff also prays for such other remedies
that the Court may deem proper in the premises.
On December 20, 1948, the Defendant filed an opposition to the Plaintiffs
petition for the issuance of a writ of the preliminary injunction, and on
December 22, 1948, the Court denied the same because whether the
conveyance of Defendants credit was fraudulent or not, the Philippine court
would not be in position to enforce its orders as against the American
corporation Shell Oil Company, Inc., which is outside of the jurisdiction of the
Philippines.
Plaintiff having failed to restrain the progress of the attachment suit in the
United States by denial of his application for a writ of preliminary injunction
and the consequences on execution of the C-54 plane in the County of San
Bernardino, State of California, U. S. A., he confines his action to the
recovery of damages against the Defendant.
On December 28, 1948, Defendant filed its answer to the complaint, which
was amended on February 3, 1949. In its answer, Defendant, besides
denying certain averments of the complaint alleged, among other reasons,
that the assignment of its credit in favor of the Shell Oil Company, Inc., in the
United States was for a valuable consideration and made in accordance with
the established commercial practices, there being no law prohibiting a
creditor from assigning his credit to another; chan roblesvirtualawlibrarythat
it had no interest whatsoever in Civil Case No. 62576 instituted in the
Superior Court in the State of California by the Shell Oil Company, Inc.,

Page

Commercial Air Lines, Inc., begun by it in the name of the American


corporation Shell Oil Company, Inc., and as an alternative remedy, in case
the purported assignment of Defendants alleged credit to the American
corporation Shell Oil Company, Inc., and the attachment issued against CALI
in the said Superior Court of California shall have the effect of defeating the
procurement by Plaintiff as Assignee in insolvency of the above- mentioned
airplane, which is the property of the insolvent CALI, situated in the Ontario
International Airport, with in the County of San Bernardino, State of
California, U.S.A., that judgment for damages in double the value of the
airplane be awarded in favor of Plaintiff againstDefendant, with costs.

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
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which is a separate and distinct corporation organized and existing in the
State of Virginia and doing business in the State of California, U. S. A.,
the Defendant having as its stockholders the Shell Petroleum Company of
London and other persons residing in that City, while the Shell Oil Company
Inc., of the United State has its principal stockholders the Shell Union Oil
Company of the U.S. and presumably countless American investors
inasmuch as its shares of stock are being traded daily in the New York stock
market; chan roblesvirtualawlibrarythat Mr. Fitzgerald, Defendants Credit
Manager, was merely invited to a luncheon-meeting at the Trade and
Commerce Building in the City of Manila on August 6, 1948, without knowing
the purpose for which it was called; chan roblesvirtualawlibraryand that Mr.
Fitzgerald could not have officially represented the Defendant at that time
because such authority resides on Mr. Stephen Crawfurd. Defendant,
therefore, prays that the complaint be dismissed with costs against
thePlaintiff.
Then Alfonso Sycip, Yek Hua Trading Corporation and Paul Sycip, as well as
Mabasa & Co., filed, with permission of the Court, their respective
complaints in intervention taking the side of thePlaintiff. These complaints in
intervention were timely answered by Defendant which prayed that they be
dismissed.
After proper proceedings and hearing, the Court rendered decision on
February 26, 1954, dismissing the complaint as well as the complaints in
intervention, with costs against the Plaintiff. In view of this
outcome, Plaintiff comes to us praying that the judgment of the lower court
be reversed and that the Defendant be ordered to pay him damages in the
sum of P660,000 (being double the value of the airplane as established by
evidence, i.e., P330,000), with costs, and for such other remedy as the Court
may deem just and equitable in the premises.
The Issues. Either admission of the parties, or by preponderance of
evidence, or by sheer weight of the circumstance attending the transactions
herein involved, We find that the facts narrated in the preceding statement of
the antecedents have been sufficiently established, and the questions at
issue submitted to our determination in this instance may be boiled down to
the following propositions:chanroblesvirtuallawlibrary
(1) Whether or not under the facts of the case, the Defendant Shell
Company of the P. I., Ltd., taking advantage of its knowledge of the
existence of CALIs airplane C-54 at the Ontario International Airport within
the Country of San Bernardino, State of California, U. S. A.,
(Which knowledge it acquired:chanroblesvirtuallawlibrary first at the informal
luncheon-meeting of the principal creditors of CALI on August 5, 1948,
where its Credit Manager, Mr. Desmond Fitzgerald, was selected to form
part of the Working Committee to supervise the preservation of CALIs

Subsequently, at the meeting of August 9, 1948, when said Mr. Fitzgerald


met the other members of the said Working Committee and heard and
discussed the contention of certain creditors of CALI on the accounts due
the employees, the Government and the National Airports Corporation
who alleged that their claims were preferred),
acted in bad faith and betrayed the confidence and trust of the other
creditors of CALI present in said meeting by affecting a hasty telegraphic
transfer of its credit to the American corporation Shell Oil Company, Inc., for
the sum of $79,440 which was subsequently followed by a deed of
assignment of credit dated August 10, 1948, amounting this time to the sum
of $85,081.28 (Exhs. Z), thus defeating the purpose of the informal meetings
of CALIs principal creditors end depriving the Plaintiff, as its Assignee, of the
means of obtaining said C-54 plane, or the value thereof, to the detriment
and prejudice of the other CALIs creditors who were consequently deprived
of their share in the distribution of said value; chan roblesvirtualawlibraryand
(2) Whether or not by reason of said betrayal of confidence and
trust, Defendant may be made under the law to answer for the damages
prayed by the Plaintiff; chan roblesvirtualawlibraryand if so, what should be
the amount of such damages.
DISCUSSION OF THE CONTROVERSY
I. The mere enunciation of the first proposition can lead to no other
conclusion than thatDefendant, upon learning the precarious economic
situation of CALI and that with all probability, it could not get much of its
outstanding credit because of the preferred claims of certain other creditors,
forgot that Man does not live by bread alone and entirely disregarded all
moral inhibitory tenets. So, on the very day its Credit Manager attended the
meeting of the Working Committee on August 9, 1948, it hastily made a
telegraphic assignment of its credit against the CALI to its sister American
Corporation, the Shell Oil Company, Inc., and by what is stated in the
preceding pages hereof, We know that were the damaging effects of said
assignment upon the right of other creditors of the CALI to participate in the
proceeds of said CALIs plane C-54.
Defendants endeavor to extricate itself from any liability caused by such
evident misdeed of its part, alleging that Mr. Fitzgerald had no authority from
his principal to commit the latter on any agreement; chan
roblesvirtualawlibrarythat the assignment of its credit in favor of its sister
corporation, Shell Oil Company, Inc., was for a valuable consideration and in
accordance
with
the
established
commercial
practices; chan
roblesvirtualawlibrarythat there is no law prohibiting a creditor from assigning

Page

properties and to study the way of making a fair division of all the assets
among the creditors and thus avoid the institution of insolvency proceedings
in court; chan roblesvirtualawlibraryand

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
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his credit to another; chan roblesvirtualawlibraryand that the Shell Oil
Company Inc., of the United States is a corporation different and
independent from the Defendant. But all these defenses are entirely
immaterial and have no bearing on the main question at issue in this appeal.
Moreover, we might say that Defendantcould not have accomplished the
transfer of its credit to its sister corporation if all the Shell companies
throughout the world would not have a sort of union, relation or
understanding among themselves to come to the aid of each other. The
telegraphic transfer made without knowledge and at the back of the other
creditors of CALI may be a shrewd and surprise move that
enabled Defendant to collect almost all if not the entire amount of its credit,
but the Court of Justice cannot countenance such attitude at all, and much
less from a foreign corporation to the detriment of our Government and local
business.
To justify its actions, Defendant may also claim that Mr. Fitzgerald, based on
his feeling of distrust and apprehension, entertained the conviction that
intervenors Alfonso Sycip and Yek Hua Trading Corporation tried to take
undue advantage by infiltrating their credits. But even assuming for the sake
of argument, that these intervenors really resorted to such strategem or
fraudulent device, yet Defendants act finds not justification for no misdeed
on the part of a person is cured by any misdeed of another, and it is to be
noted that neither Alfonso Z. Sycip, nor Yek Hua Trading Corporation were
the only creditors of CALI, nor even preferred ones, and that the infiltration of
ones credit is of no sequence if it cannot be proven in the insolvency
proceedings to the satisfaction of the court. Under the circumstances of the
case, Defendants transfer of its aforementioned credit would have been
justified only if Mr. Fitzgerald had declined to take part in the Working
Committee and frankly and honestly informed the other creditors present
that he had no authority to bind his principal and that the latter was to be left
free to collect its credit from CALI by whatever means his principal deemed
wise and were available to it. But then such information would have
immediately dissolved all attempts to come to an amicable conciliation
among the creditors and would have precipitated the filing in court of CALIs
voluntary insolvency proceedings and nulified the intended transfer
of Defendants credit to its above-mentioned sister corporation.
II. We may agree with the trial judge, that the assignment of Defendants
credit for a valuable consideration is not violative of the provisions of
sections 32 and 70 of the Insolvency Law (Public Act No. 1956), because the
assignment was made since August 9, 1948, the original complaint in the
United States was filed on August 12, 1948, and the writ of attachment
issued on this same date, while CALI filed its petition for insolvency on
October 7, 1948. At his Honor correctly states, said Sections 32 and 70 only
contemplate acts and transactions occuring within 30 days prior to the
commencement of the proceedings in insolvency and, consequently, all

SEC. 33. The assignee shall have the right to recover all the estate, debt
and effects of said insolvent. If at the time of the commencement of the
proceedings in insolvency, an action is pending in the name of the debtor, for
the recovery of a debt or other thing might or ought to pass to the assignee
by the assignment, the assignee shall be allowed to prosecute the action, in
like manner and with life effect as if it had been originally commenced by
him. If there are any rights of action in favor of the insolvency for damages,
on any account, for which an action is not pending the assignee shall have
the right to prosecute the same with effect as the insolvent might have done
himself if no proceedings in insolvency had been instituted cralaw .
It must not be forgotten that in accordance with the spirit of the Insolvency
Law and with the provisions of Chapter V thereof which deal with the powers
and duties of a receiver, the assignee represents the insolvent as well as the
creditors in voluntary and involuntary proceedings Intestate of Mariano G.
Veloso, etc. vs. Vda. de Veloso S. C. G. R. No. 42454; chan
roblesvirtualawlibraryHunter, Kerr & Co. vs. Samuel Murray, 48 Phil.
449; chan roblesvirtualawlibraryChartered Bank vs. Imperial, 48 Phil.
931; chan roblesvirtualawlibraryAsia Banking Corporation vs. Herridge, 45
Phil. 527 (II Tolentinos Commercial Laws of the Philippines, 633). See
also Section 36 of the Insolvency Law.From the foregoing, We see
that Plaintiff, as Assignee of the Insolvent CALI, had personality and
authority to institute this case for damages, and the only question that
remains determination is whether the payment of damages sought to be
recovered from Defendant may be ordered under the Law and the evidence
of record.
IF ANY PERSON, before the assignment is made, having notice of the
commencement of the proceedings in insolvency, or having reason to
believe that insolvency proceedings are about to be commenced, embezzles
or disposes of any money, goods, chattels, or effects of the insolvent, he is
chargeable therewith, and liable to an action by the assignee for double the
value of the property sought to be embezzled or disposed of, to be received
for the benefit of the insolvent estate.
The writer of this decision does not entertain any doubt that
the Defendant taking advantage of his knowledge that insolvency
proceedings were to be instituted by CALI if the creditors did not come to an

Page

other acts outside of the 30-day period cannot possibly be considered as


coming within the orbit of the operation. In addition to this, We may add that
Article 70 of the Insolvency Law refers to acts of the debtor (in this case the
insolvent CALI) and not of the creditor, the Shell Company of the P. I. Ltd.
But section 70 does not constitute the only provisions of the law pertinent to
the
matter.
The
Insolvency
Law
also
provides
the
following:chanroblesvirtuallawlibrary

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
Atty. DG
understanding as to the manner of distribution of the insolvent asset among
them, and believing it most probable that they would not arrive at such
understanding as it was really the case schemed and effected the transfer
of its sister corporation in the United States, where CALIs plane C-54 was
by that swift and unsuspected operation efficaciously disposed of said
insolvents property depriving the latter and the Assignee that was latter
appointed, of the opportunity to recover said plane. In addition to the
aforementioned Section 37, Chapter 2 of the PRELIMINARY TITLE of the
Civil
Code,
dealing
on
Human
Relations,
provides
the
following:chanroblesvirtuallawlibrary
Art 19. Any person must, in the exercise of his rights and in the
performances of his duties, act with justice, give everyone his due and
observe honesty and good faith.
It maybe said that this article only contains a mere declarations of principles
and while such statement may be is essentially correct, yet We find that
such declaration is implemented by Article 21 and sequence of the same
Chapter which prescribe the following:chanroblesvirtuallawlibrary
Art. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
The Code Commission commenting
following:chanroblesvirtuallawlibrary

on

this

article,

says

the

Thus at one stroke, the legislator, if the forgoing rule is approved (as it was
approved), would vouchsafe adequate legal remedy for that untold numbers
of moral wrongs which is impossible for human foresight to provide for
specifically in the statutes.
But, it may be asked, would this proposed article obliterate the boundary
line between morality and law? The answer is that, in the last analysis, every
good law draws its breath of life from morals, from those principles which are
written with words of fire in the conscience of man. If this premises is
admitted, then the proposed rule is a prudent earnest of justice in the face of
the impossibility of enumerating, one by one, all wrongs which cause
damages. When it is reflected that while codes of law and statutes have
changed from age to age, the conscience of man has remained fixed to its
ancient moorings, one cannot but feel that it is safe and salutary to
transmute, as far as may be, moral norms into legal rules, thus imparting to
every legal system that enduring quality which ought to be one of its
superlative attributes.
Furthermore, there is no belief of more baneful consequence upon the
social order than that a person may with impunity cause damage to his
fellow-men so long as he does not break any law of the State, though he

may be defying the most sacred postulates of morality. What is more, the
victim loses faith in the ability of the government to afford him protection or
relief.

78

A provision similar to the one under consideration is embodied in article 826


of the German Civil Code.

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The same observations may be made concerning injurious acts that are
contrary to public policy but are not forbidden by statute. There are countless
acts of such character, but have not been foreseen by the lawmakers.
Among these are many business practices that are unfair or oppressive, and
certain acts of landholders and employers affecting their tenants and
employees which contravene the public policy of social justice.
Another rule is expressed in Article 24 which compels the return of a thing
acquired without just or legal grounds. This provision embodies the doctrine
that no person should unjustly enrich himself at the expense of another,
which has been one of the mainstays of every legal system for centuries. It
is most needful that this ancient principles be clearly and specifically
consecrated in the proposed Civil Code to the end that in cases not foreseen
by the lawmaker, no one may unjustly benefit himself to the prejudice of
another. The German Civil Code has a similar provision (art. 812). (Report
of the Code Commission on the Proposed Civil Code of the Philippines, p.
40- 41).
From the Civil Code Annotated by Ambrosio Padilla, Vol. I, p. 51, 1956
edition, We also copy the following:chanroblesvirtuallawlibrary
A moral wrong or injury, even if it does not constitute a violation of a statute
law, should be compensated by damages. Moral damages (Art. 2217) may
be recovered (Art. 2219). In Article 20, the liability for damages arises from a
willful or negligent act contrary to law. In this article, the act is contrary to
morals, good customs or public policy.
Now, if Article 23 of the Civil Code goes as far as to provide
that:chanroblesvirtuallawlibrary
Even if an act or event causing damage to anothers property was not due
to the fault or negligence of the Defendant, the latter shall be liable for
indemnity if through the act or event he was benefited.
with mere much more reason the Defendant should be liable for indemnity
for acts it committed in bad faith and with betrayal of confidence.
It may be argued that the aforequoted provisions of the Civil Code only came
into effect on August 30, 1950, and that they cannot be applicable to acts
that took place in 1948, prior to its effectivity. But Article 2252 of the Civil
Code, though providing that:chanroblesvirtuallawlibrary

Changes made and new provisions and rules laid down by this Code which
may be prejudice or impair vested or acquired rights in accordance with the
old legislation, shall have no retroactive effect cralaw .
implies that when the new provisions of the Code does nor prejudice or
impair vested or acquired rights in accordance with the old legislation and
it cannot be alleged that in the case at barDefendant had any vested or
acquired right to betray the confidence of the insolvent CALI or of its
creditors said new provisions, like those on Human Relations, can be
given retroactive effect. Moreover, Article 2253 of the Civil Code further
provides:chanroblesvirtuallawlibrary
cralaw But if a right should be declared for the first time in this Code, it shall
be effective at once, even though the act or event which may give rise
thereto may have been done or may have occurred under the prior
legislation, provided said new right does not prejudice or impair any vested
or acquired right, of the same origin.
and according to Article 2254, no vested or acquired right can arise from
acts or omissions which are against the law or which infringe upon the right
of others.
In case of Juan Castro vs. Acro Taxicab Company, (82 Phil., 359; chan
roblesvirtualawlibrary47 Off. Gaz., [5] 2023), one of the question at issue
was whether or not the provisions of the New Civil Code of the Philippines
on moral damages should be applied to an act of negligence which occurred
before the effectivity of said code, and this Court, through Mr. Justice
Briones, sustaining the affirmative proposition and citing decisions of the
Supreme Court of Spain of February 14, 1941, and November 14, 1934, as
well as the comment of Mr. Castan, Chief Justice of the Supreme Court of
Spain, about the revolutionary tendency of Spanish jurisprudence, said the
following:chanroblesvirtuallawlibrary
We conclude, therefore, reaffirming the doctrine laid down in the case of
Lilius (59 J. F. 800) in the sense that indemnity lies for moral and patrimonial
damages which include physical and pain sufferings. With this (doctrine), We
effect in this jurisdiction a real symbiosis 1 of the Spanish and American
Laws and, at the same time, We act in consonance with the spirit and
progressive march of time (translation)
The writer of this decision does not see any reason for not applying the
provisions of Section 37 of the Insolvency Law to the case at bar, specially if
We take into consideration that the term any person used therein cannot
be limited to the officers or employee of the insolvent, as no such limitation
exist in the wording of the section (See also Sec. 38 of the same Act), and
that, as stated before, the Defendant schemed and affected the transfer of
its credits (from which it could derive practically nothing) to its sister

Articles 2229, 2232, 2234, 2142, and 2143 of the Civil Code read as
follows:chanroblesvirtuallawlibrary
Art. 2229. Exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages.
Art. 2232. In contracts quasi-contracts, the Court may award exemplary
damages if theDefendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner.
Art. 2234. While the amount of the exemplary damages need not be
proved, the Plaintiff must show that he is entitled to moral, temperate, or
compensatory damages before the court may consider the question of
whether or not exemplary damages should be awarded. In case liquidated
damages should be upon, although no proof of loss is necessary in order
that such liquidated damages be recovered, nevertheless, before the court
may consider the question of granting exemplary in addition to the liquidated
damages, the Plaintiff must show that he would be entitled to moral,
temperate or compensatory damages were it not for the stipulation for
liquidated damages.
Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no one shall be unjustly
enriched or benefited at the expense of another.
Art, 2143. The provisions for quasi-contracts in this Chapter do not exclude
other quasi-contracts which may come within the purview of the preceding
article.
In accordance with these quoted provisions of the Civil Code, We
hold Defendant liable to pay to the Plaintiff, for the benefit of the insolvent
CALI and its creditors, as compensatory damages a sum equivalent to the

Page

corporation in the United States where CALIs plane C-54 was then situated,
succeeding by such swift and unsuspected operation in disposing of said
insolvents property by removing it from the possession and ownership of the
insolvent. However, some members of this Court entertain doubt as to the
applicability of said section 37 because in their opinion what Defendant in
reality disposed of was its own credit and not the insolvents property,
although this was practically the effect and result of the scheme. Having in
mind this objection and that the provisions of Article 37 making the person
coming within its purview liable for double the value of the property sought to
be disposed of constitute a sort of penal clause which shall be strictly
construed, and considering further that the same result may be obtained, by
applying only the provisions of the Civil Code, the writer of this decision
yields to the objection aforementioned.

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
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value of the plane at the time aforementioned and another equal sum as
exemplary damages.
There is no clear proof in the record about the real value of CALIs plane C54 at the time whenDefendants credit was assigned to its sister corporation
in the United States.
Judgment
Wherefore, and on the strength of the foregoing considerations, the decision
appealed from is reversed and Defendant-Appellee-, Shell Company of the
Philippine Islands, Ltd., is hereby sentenced to pay to Plaintiff-Appellant, as
Assignee of the insolvent CALI, damages in a sum double the amount of the
value of the insolvents airplane C-54 at the time Defendants credit against
the CALI was assigned to its sister corporation in the United States, which
value shall be determined in the corresponding incident in the lower court
after this decision becomes final. Costs are taxed against DefendantAppellee. It is SO ORDERED.
Paras, C.J., Padilla, Montemayor, Bautista Angelo,
Concepcion, Reyes, J. B. L., and Endencia, concur.

Labrador,

RESOLUTION
July 30, 1957

FELIX, J.:
Plaintiff-Appellant and intervenors on one hand and Defendant Shell
Company of the Philippine Islands, Ltd., on the other, have filed their
respective motions for reconsideration of Our decision rendered in this case.
The motion of Plaintiff Appellant and the intervenors seeks the
reconsideration
of
said
decision
in
so
far
as
it
held
that:chanroblesvirtuallawlibrary
There is no clear proof in the record about the real value of CALIs plane C54, at the time whenDefendants credit was assigned to its sister corporation
in the United States.
and, upon such holding, it orders that the value of the C-54 plane
be determined in the corresponding incident in the lower Court after this
decision becomes final.
The movants maintain that there is evidence sufficient to support a finding
that CALIs C-54 plane had a fair market value of $165,000 at or about the
time Defendant credit was assigned to its sister corporation in the United

After considering the evidence pointed out by said parties in support of their
respective contentions, we are more convinced that the proofs relative to the
real value of CALI plane C-54 at the time Defendants credit was assigned to
its sister corporation in the United States, is not clear. Hence, PlaintiffAppellants and intervenors motion for reconsideration is hereby overruled.
The main grounds on which Defendant-Appellee bases its motion for
reconsideration, as relied upon in its counsels memoranda and oral
argument, may be reduced to the following:chanroblesvirtuallawlibrary
(1) That the Defendant Appellee is not guilty of bad faith, it having done
nothing but to protect legitimately its own interest or credit against the bad
faith of its debtor, the insolvent CALI, under the control of the latters
President Alfonso Sycip;
(2) That Appellees transfer of its credit to its sister corporation in the United
States, did not prejudice the Government, because its claims were fully paid,
nor caused any loss or injury to other creditors, except the entities and
groups controlled by Alfonso Z. Sycip;
(3) That Appellee is not liable for exemplary damages because the
provisions of the new Civil Code on the matter are not applicable to this
case;
(4) That the Plaintiff-Appellant has no cause of action against DefendantAppellant and is not the real party in interest; chan roblesvirtualawlibraryand
(5) That Plaintiffs right of action was based and prosecuted in the lower
court under the provisions of the Insolvency Law and consequently that he is
stopped from pursuing another theory and is not entitled to damages under
the provisions of the New Civil Code.
I. The
facts
on
which
this
Court
based
its
conclusion
that Defendant corporation acted in bad faith are plainly and explicitly
narrated in the decision. They are not and cannot be denied or contradicted
by said Defendant. On the contrary they are in many respects admitted by
theDefendant and no amount of reasoning can make Us change that
conclusion.
II. As pointed out by counsel for Plaintiff, Defendant choses to ignore that
besides the claims of intervenors Alfonso Z. Sycip and Yek Hua Trading
Corporation, which counsel for the Shell says to constitute 10/11 of the
approved ordinary claims, there is still 1/11 of the other creditors whose

Page

States and the plane attached. This motion was opposed byDefendantAppellee which was replied by Plaintiff- Appellant with a supplemental
motion for reconsideration, and then retorted with a manifestation and
motion of Defendant-Appellantfollowed by Defendants answer to Plaintiffs
motion for reconsideration.

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
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claims have been also approved by the insolvency Court, in addition to the
ordinary creditors whose claims are yet unapproved by the insolvency Court,
amounting to P560,296,32, and no good reason suggests itself why these
unapproved but pending claims should be taken into account in considering
the prejudice caused all the creditors of the insolvent CALI. As long as these
claims are pending, the contingency exist, that these creditors may recover
from the insolvent estate and when they do, they will suffer to the diminution
of CALIs asset resulting from the attachment of the plane
by Appellee Shell.
Answering Defendants contention that the transfer of its credit to its sister
corporation in the United States did not prejudice the Government or the
other creditors of CALI, counsel forPlaintiff-Appellant has the following to
say:chanroblesvirtuallawlibrary
So far as the claims of the Government are concerned, it is true that they
were preferred claims and have all been paid. But this circumstance cannot
erase the fact that the Appellees action jeopardised the Governments
claims as well as the other claims. There was doubt as to the preferential
character of the Governments claims. Indeed, the preferential character of
one of the Governments claims necessitated a litigation to establish. Had it
been held to be an ordinary claim, the Government would have suffered as
other
creditors.
But
that
is
neither
here
nor
there;chan
roblesvirtualawlibraryneither the character of the claim nor the identity of the
claimant can possibly affect the application of a principle that no person may
profit from his betrayal of a trust.
And the Appellant continues thus:chanroblesvirtuallawlibrary
Appellee had a credit of P170,000 against the insolvent CALI as of August
1948, which is assigned to its sister corporation in the United States for
P120.000. Hence, Appellee recovered 70% of its credit and immediately
upon making the assignment in 1948. More than this, the stated
consideration was fixed by and and between two sister companies. The fact
remains thatAppellees sister company was enabled to get hold of a C-54
plane worth about P330,000.
On the other hand, the ordinary creditors who filed their claims against the
insolvent CALI had to wait until November 1956 to get their dividends and
only at the rate of 30%, computed as follows:chanroblesvirtuallawlibrary
Assets as of October 30, 1956 P668,605.15
Less:chanroblesvirtuallawlibrary
Preferred claims still uncollected,
assignee and attorneys fees and


Amount available for distribution P529,885.59
Divident:chanroblesvirtuallawlibrary
Amount available for distribution P529,885.59
= 30%
Total of all ordinary claims approved
and unapproved P1,746,222.33
Had Appellee not assigned its credit in 1948, the insolvent CALI would have
realized from the sale of the plane (which was attached by Appellee)
P330,000 representing the fair market value of the plane at the time of the
attachment. Therefore, if this amount of P330,000 is added to the
distributable amount of P529,- 885.59, the share of each of the ordinary
creditos would certainly amount to approximately 1 1/2 times the dividend
each of them has received; chan roblesvirtualawlibraryin other words, each
ordinary creditors would received not 30% but approximately 45% of his
claim, and Appelleewould recover approximately only 45% and not 70% of
its credit.
And even if the sale of CALIs plane would not have obtained the sum of
P330,000.00, the proceeds thereof that might be diminished though
affecting, no doubt, the calculated dividend of each of the ordinary creditors,
estimated at 45% by reducing it proportionately, such diminution would at the
same time increase the difference between the dividend paid CALIs ordinary
creditors in November, 1956, and the dividend of 70% secured
by Defendant Shell in 1948.
III and IV. That Appellee Shell is not liable for exemplary damages in this
case and that Plaintiff-Appellant has no cause of action against DefendantAppellee, for he is not the real party in interest, are matters fully discussed in
Our decision and We find no sensible reason for disturbing the conclusions
We reached therein.
V. As to the fifth question raised by counsel for Appellee in the course of his
oral argument at the hearing in the City of Baguio of his motion, i.e.,
that Plaintiffs right of action was based and prosecuted in the lower court
under the provisions of the Insolvency Law and he is, therefore, stopped
from pursuing on appeal another theory under which he might be entitled to
damages in consonance with the provisions of the new Civil Code, We may
invoke the decision in the case of Dimaliwat vs. Asuncion, 59 Phil., 396, 401.
In that decision We said the following:chanroblesvirtuallawlibrary

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other reserves P138,719.56

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Vicente Dimaliwat contends that Esperanza Dimaliwat has no right to claim
the ownership of the property in question to the exclusion of the children of
the third marriage, under the foregoing provisions of the Civil Code, because
the case was not tried on that theory in the lower court. We find no merit in
that contention. The decision cited are not in point. Articles 968 and 969 of
the Civil Code are rules of substantive law, and if they are applicable to the
facts of this case they must be given effect.
The same thing can be said in the case at bar. Articles 19, 21, 2229, 2232,
2234, 2142 and 2143 of the new Civil Code are rules of substantive law, and
if they are applicable to the facts of this case, which We hold they do, they
must be made operative and given effect in this litigation.
xxx

xxx

xxx

It maybe seen from the foregoing that the above mentioned grounds on
which the motion for reconsideration of the Defendant Shell stand, are not
well taken. However, and despite this finding, We insist to delve in the
question of whether the exemplary damages imposed in this Court
upon Defendant Appellee, which the latters counsel contends to be
inequitable and unfair, may be modified.
It will be remembered that this case was looked into from the point of view of
the provisions of Section 37 of the Insolvency Law, which reads as
follows:chanroblesvirtuallawlibrary
SEC. 37. IF ANY PERSON, before the assignment is made, having notice
of the commencement of the proceedings in insolvency, or having reason to
believe that insolvency proceedings are about to be commenced, embezzles
or disposses of any of the money, goods, chattels, or effects of the insolvent,
he is chargeable therewith, and liable to an action by the assignee for double
the value of the property sought to be embezzled or disposed of, to be
received for the benefit of the insolvent estate.
The writer of the decision was then and still is of the opinion that the
provisions of this section were applicable to the case, and accordingly,
that Defendant Shell was liable in this action instituted by the Assignee for
double the value of the property disposed of, to be received for the benefit of
the Insolvent estate. However, some of the members of this Court, for the
reasons already stated in the decision, entertained some doubt as to the
applicability of said Section 37, and yielding to their objections the writer of
the decision turned his eyes to the provisions of the new Civil Code,
inasmuch as the same result could be achieved. In the case at bar, it cannot
be denied that:chanroblesvirtuallawlibrary
Defendant taking advantage of his knowledge that insolvency
proceedings were to be instituted by CALI if the creditors did not come to an
understanding as to the manner of distribution of the insolvent assets among

These acts of Defendant Shell come squarely within the sanction prescribed
by Congress by similar acts and no reflection can be reasonably cast on Us
if in the measure of the exemplary damages that were to be imposed
upon Defendant-Appellee, We were influenced by the provisions of Section
37 of the Insolvency Law. In this connection it is to be noted that, according
to the Civil Code, exemplary or corrective damages are imposed by way of
example or correction for the public good, in addition of the moral,
temperate, liquidated or compensatory damages Art. 2229, and that the
amount of the exemplary damages need not be proved (Art. 2234), for it is
left to the sound discretion of the Court.
Notwithstanding the foregoing, a majority of this Court was of the belief that
the value of CALIs plane C-54, at the time when Defendants credit was
assigned to its sister corporation in the United States, might result quite high,
and that exemplary damages should not be left to speculation but properly
determined by a certain and fixed amount. So they voted for the
reconsideration of the decision with regard to the amount of exemplary
damages which this Court fixed at P25,000.00.
Because of this attitude of the Court, the dispositive part of our decision
rendered
in
this
case
is
hereby
amended
to
read
as
follows:chanroblesvirtuallawlibrary
Wherefore, and on the strength of the foregoing considerations, the decision
appealed from is reversed and Defendant-Appellee, Shell Company of the
Philippine Islands Ltd., is hereby sentenced to pay Plaintiff-Appellant, as
Assignee of the insolvent CALI, compensatory damages in a sum equal to
the value of the insolvents airplane C-54 at the time Defendants credit
against CALI was assigned to its sister corporation in the United States which shall be determined in the corresponding incident in the lower Court
after this decision becomes final - and exemplary damages in the sum of
P25,000. Costs are taxed against Defendant-Appellee. It is SO ORDERED.
Pars, C.J., Padilla, Concepcion and Endencia, JJ., concur.

Page

them, and believing as most probable that they would not arrive at such
understanding, as it was really the case- schemed and effected the transfer
of its credit to its sister corporation in the United States where CALIs plane
C-54 was and by this swift and unsuspected operation efficaciously disposed
of said insolvents property depriving the latter and the Assignee that was
later appointed, of the opportunity to recover said plane.

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FIRST DIVISION
[G.R. No. 115902. September 27, 1995.]
FILINVEST CREDIT CORPORATION, Petitioner, v. HON. COURT OF
APPEALS and SPOUSES EDILBERTO and MARCIANA
TADIAMAN, Respondents.
Labaguis, Loyola, Atienza, Felipe, Santos & Associates for Petitioner.
Napoleon R. Sta. Romana for Private Respondents.

SYLLABUS

1. REMEDIAL LAW; PROVISIONAL REMEDIES; REPLEVIN; RULE IN


CARRYING OUT THE WRIT. The Court of Appeals correctly ruled that
Filinvest is liable for damages not because it commenced an action for
replevin to recover possession of the truck prior to its foreclosure, but
because of the manner it carried out the seizure of the vehicle. Sections 3
and 4, Rule 60 of the Rules of Court are very clear and direct as to the
procedure for the seizure of property under a writ of replevin. In the instant
case, it was not the sheriff or any other proper officer of the trial court who
implement the writ of replevin. Because it was aware that no other person
can implement the writ, Filinvest asked the trial court to appoint a special
sheriff. Yet, it used its own employees who misrepresented themselves as

deputy sheriff to seize the truck without having been authorized by the court
to do so. Filinvest justified its seizure by citing a statement in Bachrach
Motor Co. v. Summers (42 Phil. 3 [1921]), to wit, "the only restriction on the
mode by which the mortgagee shall secure possession of the mortgaged
property after breach of condition is that he must act in an orderly manner
and without creating a breach of the peace, subjecting himself to an action
for trespass." This justification is misplaced and misleading for Bachrach
itself had ruled that if a mortgagee cannot obtain possession of a mortgaged
property for its sale on foreclosure, it must bring a civil action either to
recover such possession as a preliminary step to the sale or to obtain
judicial foreclosure.chanroblesvirtuallawlibrary
2. ID.; ID.; ID.; UPON THE DEFAULT OF THE MORTGAGOR OF HIS
OBLIGATION, MORTGAGEE IS ENTITLED TO INSTITUTE THEREOF.
Replevin is, of course, the appropriate action to recover possession
preliminary, to the extrajudicial foreclosure of a chattel mortgage. Filinvest
did in fact instituted such an action and obtained a writ of replevin. And, by
filing it, Filinvest admitted that it cannot acquire possession of the mortgaged
vehicle in an orderly or peaceful manner. Accordingly, it should have left the
enforcement of the writ in accordance with Rule 60 of the Rules of Court
which it had voluntarily invoked. Parenthetically, it must be observed that the
trial court erred in holding that the action for replevin was "not in order as
[Filinvest] is not the owner of the property (Sec. 2 par. (a) Rule 60)." It is not
only the owner who can institute a replevin suit. A person "entitled to the
possession" of the property also can, as provided in the same paragraph
cited by the trial court. Upon the default by the mortgagor in his obligations,
Filinvest, as a mortgagee, had the right to the possession of the property
mortgaged preparatory to its sale in a public auction.
3. CIVIL LAW; HUMAN RELATIONS; GOOD FAITH; DEFINED. In
common usage, good faith is ordinarily used to describe that state of mind
denoting honesty of purpose, freedom from intention to defraud, and,
generally speaking, means being faithful to ones duty or obligation. It
consists of the honest intention to abstain from taking an unconscionable
and unscrupulous advantage of another.
4. ID.; DAMAGES; MORAL DAMAGES; MAY BE RECOVERED IN CASES
INVOLVING ACTS REFERRED TO IN ARTICLE 21 OF THE CIVIL CODE.
Anent the moral damages, the trial court ruled that the acts of the
petitioner were in total disregard of Articles 19, 20, and 21 of the Civil Code.
It added that the petitioner had not only caused actual damages in lost
earnings, but had also caused the private respondents to suffer indignities at
the hands of the petitioners personnel in hiding the truck in question,
misleading them, and making them work for the release of the truck for
about two weeks, thereby justifying the award of moral damages along with

5. ID.; ID.; EXEMPLARY DAMAGES; DETERMINATION THEREOF


ADDRESSED TO THE SOUND DISCRETION OF THE COURT UPON
PROOF OF PLAINTIFFS ENTITLEMENT THERETO. The award of
exemplary damages is in order in view of the wanton, fraudulent, and
oppressive manner by which the petitioner sought to enforce its right to the
possession of the mortgaged vehicle. Article 2232 of the Civil Code provides:
In contracts and quasi-contracts, the court may award exemplary damages if
the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner. Of course, a plaintiff need not prove the actual extent of
exemplary damages, for its determination is addressed to the sound
discretion of the court upon proof of the plaintiffs entitlement to moral,
temperate, or actual or compensatory damages.
6. LEGAL ETHICS; ATTORNEYS FEES; AWARD THEREOF, NOT
PROPER IN THE ABSENCE OF BAD FAITH IN FILING THE COMPLAINT.
The award for attorneys fees must, however, be set aside. There is no
question that the petitioner filed in good faith its complaint for replevin and
damages to protect its rights under the promissory note and the chattel
mortgage. That the private respondents had defaulted in its obligation under
the promissory note thereby authorizing the petitioner to seek enforcement
of its claim thereunder and proceed against the mortgage of the vehicle was
duly recognized by the trial court by its judgment against the private
respondents incorporated in the first part of the dispositive portion. The
private respondents did not appeal therefrom. There would then be no basis
for awarding attorneys fees in favor of the private respondents for whatever
physical suffering, mental anguish, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, or any other similar injury
they had suffered, even if proven, were only such as are usually caused to
parties haled into court as a defendant and which are not compensable, for
the law could not have meant to impose a penalty on the right to litigate.

DECISION

Page

the exemplary and other damages in favor of the private respondents. We


agree with this finding of the trial court. The petitioners acts clearly fall within
the contemplation of Articles 19 and 21 of the Civil Code. The acts of
fraudulently taking the truck, hiding it from the private respondents, and
removing its spare parts show nothing but a willful intention to cause loss to
the private respondents that is punctuated with bad faith and is obviously
contrary to good customs. Thus, the private respondents are entitled to the
moral damages they prayed for, for under Article 2219 of the Civil Code,
moral damages may be recovered in cases involving acts referred to in
Article 21 of the same Code.chanroblesvirtual|awlibrary

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DAVID, JR., J.:

This petition for review on certiorari seeks to set aside the decision of the
Court of Appeals in CA-G.R. CV No. 30231 1 affirming in toto the decision of
the Regional Trial Court (RTC) of San Fernando (Pampanga), Branch 46, in
Civil Case No. 6599. 2chanroblesvirtuallawlibrary
The antecedent facts are summarized by the Court of Appeals as
follows:chanrob1es virtual 1aw library
Defendants-appellees, spouses Edilberto and Marciana Tadiaman, residents
of Cabanatuan City, purchased a 10-wheeler Isuzu cargo truck from Jordan
Enterprises, Inc., in Quezon City, in installments. Said spouses executed a
promissory note for P196,680.00 payable in 24 monthly installments in favor
of Jordan Enterprises, Inc., and a Chattel Mortgage over the motor vehicle
purchased to secure the payment of the promissory note. Jordan
Enterprises, Inc. assigned its rights and interest over the said instruments to
Filinvest Finance and Leasing Corporation, which in turn assigned them to
plaintiff-appellant Filinvest Credit Corporation.
Subsequently, the spouses Tadiaman defaulted in the payment of the
installments due on the promissory note, and plaintiff-appellant filed an
action for replevin and damages against them with the court below. Upon
motion of the plaintiff-appellant, a writ of replevin was issued, and the truck
was seized in the province of Isabela, by persons who represented
themselves to be special sheriffs of the court, but who turned out to be
employees of the plaintiff-appellant. The truck was brought by such persons
all the way back to Metro Manila.chanrobles.com : virtual lawlibrary
Thereafter, defendant spouses filed a counterbond, and the lower court
ordered the return of the truck. This was not immediately implemented
because the defendant spouses were met with delaying tactics of the
plaintiff-appellant, and when they finally recovered the truck, they found the
same to be "cannibalized." This was graphically recounted in the report
(Exhibit "3") of Deputy Sheriff Anastacio Dizon, who assisted the spouses in
recovering the vehicle, excerpts of which are as
follows:jgc:chanrobles.com.ph
"On February 14, 1983, the undersigned contacted Mr. Villanueva, Branch
Manager of the FILINVEST at Bo. Dolores, San Fernando, Pampanga and
he gave the information that the said Isuzu Cargo Truck, subject of the

On February 18, 1983, defendant Marciana Tadiaman, Atty. Benites and the
undersigned contacted Messrs. Gaspar Antonio delos Santos and Telesforo
(Jun) Isidro at the main office, FILINVEST at Paseo de Roxas, Makati, Metro
Manila and we discussed the smooth retaking of possession by the
defendants of the 10-wheeler Isuzu Cargo Truck with motor No. E 12022041, Serial No. SPM 710164864. Messrs. Delos Santos and Isidro
alternatively argued that the Travelers Insurance Company is one of the
black listed Insurance firm, so much so, it is only the companys lawyer who
can direct the delivery of the above-cited Cargo Truck to us. They told us to
wait for the arrival of their lawyer at 5:40 p.m., and we agreed that in the
meantime that their lawyer is not around, the said vehicle would not be
transferred to any other place.
Came 5:30 P.M., but the companys Lawyer never arrived and we were told
to go back February 21, 1983. Mr. delos Santos finally told us that the
company will not deliver to us the said Cargo Truck until and after their
Company Lawyer would say so.
On February 19, 1983, Mr. Felicisimo Hogaldo, Atty. Benites, defendant
Marciana Tadiaman, three policemen of Las Pias, Metro Manila, and the
undersigned went directly to the FILINVEST garage at Bo. Talon, Las Pias,
Metro Manila and there contracted Mr. Ismael Pascual Custodian of all
repossessed vehicles of the said company, and Mr. Pedro Gervacio,
Security Guard of the company assigned by the Allied Investigation Bureau
at 6th Floor, Ramon Santos Bldg. They told us that the 10-wheeler Cargo
Truck subject of the above-cited court order is not one of the vehicles listed
in their in-coming and out-going Ledger books and they told us to examine
their books.

Page

aforesaid Court Order, was already delivered to their main garage at Bo.
Talon, Las Pias, Metro Manila. Mr. Villanueva further told the undersigned
that in order to effectively enforce the aforementioned Court Order, the
undersigned should discuss the matter with Mr. Telesforo (Jun) Isidro,
Collection in-charge, and Mr. Gaspar Antonio delos Santos, Vice President
for Branch Administration of the FILINVEST main office at Makati, Metro
Manila.

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which she believed came from the vehicle we were looking for. We also saw
skid marks of tires of a truck starting from the site where the cargo truck was
previously placed as pointed to by defendant Marciana Tadiaman up to
around 20 meters before reaching the gate of the compound. The other skid
marks of tires of a truck was also seen on a portion of a road leading to a
compound owned by other person.
Mr. Gervacio and Pascual strongly insisted that they do not know the
whereabouts of the said Cargo Truck. The undersigned requested the
Policemen of Las Pias, Metro Manila, Atty. Benites and defendant Marciana
Tadiaman to see for ourselves the road leading to a compound owned by
another firm, about 1/3 of the length of which road is completely blocked by
a big and tall building. It was at this portion where the subject Cargo Truck
was placed.
Mr. Ismael Pascual called their main office, FILINVEST, by telephone about
the discovery of the whereabouts of said cargo truck by the undersigned
Defendant Marciana Tadiaman to Mr. Pascual that there were missing parts
and that other parts of the truck were completely changed with worn-out
spare parts. Mr. Pascual told the undersigned that he will only affix his
signature on the acknowledgment receipt, below the line "GIVEN BY", if the
missing parts and replaced parts were not mentioned in said
receipt.chanroblesvirtual|awlibrary
It was because of the said actuations of the plaintiff-appellant that the
defendants-appellee [sic] filed a counterclaim for damages. . . ." 3
After trial, the trial court rendered a decision the dispositive portion of which
reads as follow:chanrob1es virtual 1aw library
WHEREFORE, judgment is hereby rendered on the main action, in favor of
plaintiff and against defendants, ordering the latter, jointly and severally, to
pay the plaintiff the following sums:chanroblesvirtuallawlibrary
(a) The sum of P88,333.32 which is the balance of the promissory note as of
September 26, 1982, with interest thereon at 14% per annum from said date.

Defendant Marciana Tadiaman told Messrs. Pedro Gervacio and Ismael


Pascual that she saw the above-mentioned Cargo-Truck Last February 14,
1983 at the end corner of the garage. And for that purpose she requested
us, including Mr. Pascual and the Security Guard, to inspect the site where
the said truck was supposed to have been placed when she for the first time
saw it on February 14, 1983.chanroblesvirtuallawlibrary

(b) The sum equivalent to 25% of the amount sued upon, as and for
attorneys fees, that is P88,333.32 plus the stipulated interest; and

Unexpectedly, she saw and pointed to us on the site oil leaks on the ground

Plaintiff not having successfully rebutted the defendants evidence

(c) The cost of suit.chanrobles.com : virtual lawlibrary


On the Counterclaim:chanrob1es virtual 1aw library

WHEREFORE, judgment is rendered in favor of counter-claimants


defendants and against plaintiff, ordering the latter to pay to the defendants
the following sums:chanrob1es virtual 1aw library
(1) Actual damages representing lost spare parts while in the custody of
plaintiff in its garage being hidden from defendants, in the sum of
P50,000.00;
(2) P50,000.00 as moral damages;
(3) P20,000.00 exemplary damages;chanroblesvirtuallawlibrary
(4) P2,000.00 as attorneys fee; and
(5) Proportionate part of the costs adjudged against plaintiff."cralaw
virtua1aw library
SO ORDERED. 4chanroblesvirtual|awlibrary
Petitioner Filinvest Credit Corporation (hereinafter Filinvest) appealed that
portion of the judgment on the counterclaim to the Court of Appeals (CAG.R. CV No. 30231) and assigned the following errors of the lower
court:chanrob1es virtual 1aw library
I
THE TRIAL COURT ERRED IN AWARDING DAMAGES; ACTUAL, MORAL,
EXEMPLARY AND ATTORNEYS FEES AND PROPORTIONATE PART OF
THE COSTS IN FAVOR OF THE DEFENDANTS IN THEIR COUNTERCLAIMS IN THE ABSENCE OF ANY ACTIONABLE LOSS SUSTAINED BY
THEM FOR IT WAS THE DEFENDANTS WHO VIOLATED THEIR
PROMISSORY NOTE AND CHATTEL MORTGAGE WITH THE PLAINTIFF.

Page

respecting damages caused to them by virtue of the illegal seizure of the


property, and hiding the truck in some other place not their garage, feigning
knowledge that the same had been recorded in their incoming ledger books,
the "cannibalizing" done while the truck was in the custody of plaintiffs
garage, the frustrations which the defendants had to undergo for two weeks
before the truck was finally placed in the hands of Sheriff Dizon, all point to
the liability of plaintiff for its failure intentionally or otherwise "to observe
certain norms that spring from the fountain of good conscience and guide
human conduct to the end that law may approach its supreme ideal, which is
the sway and dominance of justice."cralaw virtua1aw library

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II
THE TRIAL COURT ERRED IN HOLDING THAT THE PLAINTIFF OR ANY
OF ITS REPRESENTATIVES HAD NO RIGHT TO TAKE THE
MORTGAGED PROPERTY AFTER THE BREACH OF THE CONDITIONS
IN THE PROMISSORY NOTE AND CHATTEL MORTGAGE BY THE
DEFENDANTS. 5chanroblesvirtuallawlibrary
In its decision of 26 May 1994, the Court of Appeals affirmed in toto the
decision of the trial court. It found no merit in the appeal. Thus:chanrob1es
virtual 1aw library
The plaintiff-appellant argues that it had the right to seize the truck from the
moment that the defendants-appellees defaulted in the payment of the
monthly installments, and to institute an action for replevin preliminary to
effecting a foreclosure of the property mortgaged extrajudicially. The plaintiffappellant misses the point entirely. In the first place, it has not been held
liable for filing an action for replevin in order to recover possession of the
truck prior to its foreclosure, but for the manner in which it carried out the
seizure of the vehicle. It is ironic that, in spite of plaintiff-appellants apparent
recognition of the necessity of legal means for the recovery of the truck, in
the end, it utilized illegal means in the actual seizure of the vehicle by having
its employees pose as special agents of the court in effecting the same.
Plaintiff-appellant even went to the extent of asking the appointment of a
special sheriff to enforce the order of seizure, but still had the truck seized by
its own people instead. It is as if the plaintiff-appellant utilized the court only
to clothe its employees with apparent authority to seize the vehicle
concerned.
In the second place, plaintiff-appellant was held liable for hiding the truck
and making it difficult for the defendants-appellees to recover the same.
Defendants-appell[ees] were able to have the writ of seizure quashed on the
basis of a counterbond. Plaintiff-appellant should have been the first to obey
the order for the return of the seized truck, considering its avowed
adherence to law and order. And yet, is made it difficult for the defendantsappellees to actually recover the vehicle, as reported by the deputy sheriff
above.chanrobles.com : virtual lawlibrary
In the third place, there is unrebutted evidence that the truck was
"cannibalized" while in the custody of the plaintiff-appellant. The latter argues
that such evidence is not credible, because, if the truck was stripped of vital
parts, it could not have been driven by the defendants-appellees all the way
back to Cabanatuan City. Plaintiff-appellant conveniently overlooks the
testimony of defendant-appellee Mrs. Tadiaman that they had to buy the

Filinvest now comes to us alleging that the Court of Appeals


(a) . . . DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH LAW AND THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT WHEN IT REVERSED THE DECISION OF THE
REGIONAL TRIAL COURT OF MANILA, BRANCH 9;
(b) . . . .ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION WHEN IT SUSTAINED THE ERRONEOUS
DECISION OF THE HONORABLE REGIONAL TRIAL COURT BRANCH 46
OF SAN FERNANDO, PAMPANGA;
(c) . . . . ACTED WITH GRAVE ABUSE OF DISCRETION AND CONTRARY
TO EXISTING LAW AND JURISPRUDENCE WHEN [IT] SUSTAINED THE
SPECULATIVE FINDING OF THE RTC THAT THE PETITIONER
"CANNIBALIZED" THE MORTGAGED VEHICLE;
(d) . . . ERRED GRIEVOUSLY WHEN IT EXONERATED PRIVATE
RESPONDENTS FROM PAYING THE PETITIONER ON THE LATTERS
LEGITIMATE CLAIMS UNDER THE COMPLAINT PARTICULARLY ON THE
UNPAID PROMISSORY NOTE MADE BY THE PRIVATE
RESPONDENTS;chanroblesvirtuallawlibrary
(e) . . . ACTED CONTRARY TO LAW WHEN IT IGNORED THE PLAIN
ADMISSIONS IN THE ANSWER (AT PARAGRAPH 2, & 3, PAGE 1) OF THE
DEFENDANTS (PRIVATE RESPONDENTS) THAT THEY HAVE DULY
EXECUTED A PROMISSORY NOTE SECURED BY A DEED OF CHATTEL
MORTGAGE AND THAT THE PRIVATE RESPONDENTS VIOLATED THE
TERMS OF THE PROMISSORY NOTE IN FAILING TO PAY THE
INSTALLMENTS DUE THEREON FOR NOV. 15, 1981 AND THE
SUBSEQUENT 9 INSTALLMENTS OR UP TO AUGUST 15, 1982;
(f) . . . ERRED IN REFUSING TO APPLY THE TERMS AND CONDITIONS
OF THE PROMISSORY NOTE AND THE DEED OF CHATTEL MORTGAGE
SIGNED BY THE PONCES "AS THE LAW BETWEEN THE PARTIES" TO
THE CONTRACT SUBJECT OF THE SUIT IN THE RTC. 7
Additionally, Filinvest maintains that:chanroblesvirtuallawlibrary
(g) THERE IS NO PROOF TO SUSTAIN THE AWARD OF MORAL
DAMAGES FOR P50,000.00 ACCORDINGLY THERE IS NO BASIS FOR
THE AWARD OF EXEMPLARY DAMAGES. 8

Page

missing parts in order to make the truck run (t.s.n., p. 40, October 2, 1986,
Exhibits "9", "10" and "11"). 6

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We gave due course to the petition and required the parties to submit their
respective memoranda after the filing of the comment to the petition by the
private respondents and of the reply thereto by Filinvest. The parties
subsequently filed their memoranda which merely reiterated the arguments
in their respective initiatory pleadings.
The only relevant issue in this petition is whether or not the Court of Appeals
committed reversible error in dismissing Filinvests appeal from the decision
of the trial court on the private respondents counterclaim and in affirming in
toto the said decision. The first ground raised herein by Filinvest is baseless
since the discussions or arguments in Filinvests petition and memorandum
fail to disclose what the decision of Branch 9 of the RTC of Manila is all
about. So is the fourth ground, for, the unappealed portion of the trial courts
decision did in fact order the private respondents to pay Filinvest the unpaid
balance of the promissory note, with interest and attorneys fees. All the
other grounds are deemed waived for not having been raised in the appeal
to the Court of Appeals. In any event, Filinvests disquisitions on such
irrelevant issues are confounded.chanroblesvirtual|awlibrary
As to the sole issue defined above, the Court of Appeals correctly ruled that
Filinvest is liable for damages not because it commenced an action for
replevin to recover possession of the truck prior to its foreclosure, but
because of the manner it carried out the seizure of the vehicle. Sections 3
and 4, Rule 60 of the Rules of Court are very clear and direct as to the
procedure for the seizure of property under a writ of replevin,
thus:chanrob1es virtual 1aw library
SECTION 3. Order. Upon the filing of such affidavit and bond with the
clerk or judge of the court in which the action is pending, the judge of such
court shall issue an order describing the personal property alleged to be
wrongfully detained, and requiring the sheriff or other proper officer of the
court forthwith to take such property into his custody.
SECTION 4. Duty of the officer. Upon receiving such order the officer
must serve a copy thereof on the defendant together with a copy of the
application, affidavit and bond, and must forthwith take the property, if it be in
the possession of the defendant or his agent, and retain it in his custody . . .
(Emphasis supplied)chanrobles.com : virtual lawlibrary
In the instant case, it was not the sheriff or any other proper officer of the trial
court who implemented the writ of replevin. Because it was aware that no
other person can implement the writ, Filinvest asked the trial court to appoint
a special sheriff. Yet, it used its own employees who misrepresented
themselves as deputy sheriff to seize the truck without having been

This justification is misplaced and misleading for Bachrach itself had ruled
that if a mortgagee cannot obtain possession of a mortgaged property for its
sale on foreclosure, it must bring a civil action either to recover such
possession as a preliminary step to the sale or to obtain judicial foreclosure.
Pertinent portions of Bachrach read as follows:chanrob1es virtual 1aw library
Where, however, debtor refuses to yield up the property, the creditor must
institute an action, either to effect a judicial foreclosure directly, or to secure
possession as a preliminary to the sale contemplated in the provision above
quoted. He cannot lawfully take the property by force against the will of the
debtor. Upon this point the American authorities are even more harmonious
than they are upon the point that the creditor is entitled to possession. As
was said many years ago by the writer of this opinion in a monographic
article contributed to an encyclopedic legal treatise, "if possession cannot be
peaceably obtained the mortgagee must bring an action." (Trust Deeds and
Power of Sale Mortgages, 28 Am. & Eng. Encyc. of Law, 2d ed., 783.) In the
Article of Chattel Mortgages, in Corpus Juris, we find the following statement
of the law on the same point: "The only restriction on the mode by which the
mortgagee shall secure possession of the mortgaged property after breach
of condition is that he must act in an orderly manner and without creating a
breach of the peace, subjecting himself to an action to trespass." (11 C.J.,
560; see also 5 R.C.L., 462.)
The reason why the law does not allow the creditor to possess himself of the
mortgaged property with violence and against the will of the debtor is to be
found in the fact that the creditors right of possession is conditioned upon
the fact of default, and the existence of this fact my naturally be the subject
of controversy. The debtor, for instance, may claim good faith, and rightly or
wrongly, that the debt is paid, or that for some other reason the alleged
default is nonexistent. His possession in this situation is as fully entitled to
protection as that of any other person, and in the language of article 446 of
the Civil Code he must be respected therein. To allow the creditor to seize
the property against the will of the debtor would make the former to a certain
extent both judge and executioner in his own cause a thing which is
inadmissible in the absence of unequivocal agreement in the contract itself
or express provision to that effect in the statute.
It will be observed that the law places the responsibility of conducting the

Page

authorized by the court to do so. Filinvest justified its seizure by citing a


statement in Bachrach Motor Co. v. Summers, 9 to wit, "the only restriction
on the mode by which the mortgagee shall secure possession of the
mortgaged property after breach of condition is that he must act in an orderly
manner and without creating a breach of the peace, subjecting himself to an
action for trespass."cralaw virtua1aw library

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sale upon "a public officer;" and it might be supposed that an officer, such as
the sheriff, can seize the property where the creditor could not. This
suggestion is, we think, without force, as it is manifest that the sheriff or
other officer proceeding under the authority of the language already quoted
from section 14 of the Chattel Mortgage Law, becomes pro hac vice the
mere agent of the creditor. There is nothing in this provision which creates a
specific duty on the part of the officer to seize the mortgaged property; and
no intention on the part of the law-making body to impose such a duty can
be implied. The conclusion is clear that for the recovery of possession,
where the right is disputed, the creditor must proceed along the usual
channels by action in court. Whether the sheriff, upon being indemnified by
the creditor, could safely proceed to take the property from the debtor, is a
point upon which we express no opinion. . . .
But whatever conclusion may be drawn in the premises with respect to the
true nature of a chattel mortgage, the result must in this case be the same;
for whether the mortgagee becomes the real owner of the mortgaged
property as some suppose or acquires only certain rights therein, it is
none the less clear that he has after default the right of possession; though it
cannot be admitted that he may take the law into his own hands and wrest
the property violently from the possession of the mortgagor. Neither can he
do through the medium of a public officer that which he cannot directly do
himself. The consequence is that in such case the creditor must either resort
to a civil action to recover possession as a preliminary to a sale, or
preferably he may bring an action to obtain a judicial foreclosure in
conformity, so far as practicable, with the provisions of the Chattel Mortgage
Law. 10chanroblesvirtuallawlibrary
Replevin is, of course, the appropriate action to recover possession
preliminary, to the extrajudicial foreclosure of a chattel mortgage. Filinvest
did in fact instituted such an action and obtained a writ of replevin. And, by
filing it, Filinvest admitted that it cannot acquire possession of the mortgaged
vehicle in an orderly or peaceful manner. Accordingly, it should have left the
enforcement of the writ in accordance with Rule 60 of the Rules of Court
which it had voluntarily invoked.
Parenthetically, it must be observed that the trial court erred in holding that
the action for replevin was "not in order as [Filinvest] is not the owner of the
property (Sec. 2 par. (a) Rule 60)." 11 It is not only the owner who can
institute a replevin suit. A person "entitled to the possession" of the property
also can, as provided in the same paragraph cited by the trial court, which
reads:chanrob1es virtual 1aw library
SECTION 2. Affidavit and bond. Upon applying for such order the plaintiff
must show . . .chanroblesvirtual|awlibrary

Upon the default by the mortgagor in his obligations, Filinvest, as a


mortgagee, had the right to the possession of the property mortgaged
preparatory to its sale in a public auction. 12 However, for employing
subterfuge in seizing the truck by misrepresenting its employees as deputy
sheriffs and then hiding and cannibalizing it, Filinvest committed bad faith in
violation of Article 19 of the Civil Code which provides:chanrob1es virtual
1aw library
Every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and
good faith.chanroblesvirtuallawlibrary
In common usage, good faith is ordinarily used to describe that state of mind
denoting honesty of purpose, freedom from intention to defraud, and,
generally speaking, means being faithful to ones duty or obligation. 13 It
consists of the honest intention to abstain from taking an unconscionable
and unscrupulous advantage of another. 14
This leaves us to the issue of damages and attorneys fees.
In their answer with counterclaim, the private respondents asked for (a)
actual damages of P50,000.00 for the spare parts found missing after their
recovery of the truck and another P50,000.00 for unearned profits due to the
failure to use the truck in their ricemill business; (b) moral damages of
P50,000.00 for "the mental anguish, serious anxiety, physical suffering,
wounded feelings, social humiliation, moral shock, sleepless nights and
other similar injury" which they suffered as a "proximate result of the
[petitioners] illegal, wrongful and unlawful acts" ; (c) nominal damages of
P30,000.00; (d) exemplary damages of P20,000.00; and (e) attorneys fees
of ,P20,000.00 which they incurred "as a direct result of [petitioners] illegal
and unwarranted actuations and in connection with the defense of this
action." 15chanroblesvirtual|awlibrary
As to actual damages, the petitioner admits that per Exhibits "1," "9," and
"10" of the private respondents, only the sum of P33,22.00 and not
P50,000.00 was "supposedly spent for the alleged lost spare parts." 16
The petitioner may thus be held liable only for such amount for actual or
compensatory damages.
Anent the moral damages, the trial court ruled that the acts of the petitioner

Page

(a) That the plaintiff is the owner of the property claimed particularly
describing it, or is entitled to the possession thereof; . . . (Emphasis
supplied)

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were in total disregard of Articles 19, 20, and 21 of the Civil Code. 17 It
added that the petitioner had not only caused actual damages in lost
earnings, but had also caused the private respondents to suffer indignities at
the hands of the petitioners personnel in hiding the truck in question,
misleading them, and making them work for the release of the truck for
about two weeks, thereby justifying the award of moral damages along with
the exemplary and other damages in favor of the private respondents. 18
We agree with this finding of the trial court. The petitioners acts clearly fall
within the contemplation of Articles 19 and 21 of the Civil Code. 19 The acts
of fraudulently taking the truck, hiding it from the private respondents, and
removing its spare parts show nothing but a willful intention to cause loss to
the private respondents that is punctuated with bad faith and is obviously
contrary to good customs. Thus, the private respondents are entitled to the
moral damages they prayed for, for under Article 2219 of the Civil Code,
moral damages may be recovered in cases involving acts referred to in
Article 21 of the same Code.chanroblesvirtuallawlibrary
The private respondents prayed for nominal damages of P30,000.00 which
the trial court did not award them. Having failed to appeal this omission by
the trial court, we cannot make anymore such award at this point.
The award of exemplary damages is in order in view of the wanton,
fraudulent, and oppressive manner by which the petitioner sought to enforce
its right to the possession of the mortgaged vehicle. Article 2232 of the Civil
Code provides:chanrob1es virtual 1aw library
In contracts and quasi-contracts, the court may award exemplary damages if
the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.chanrobles.com : virtual lawlibrary
Of course, a plaintiff need not prove the actual extent of exemplary
damages, for its determination is addressed to the sound discretion of the
court upon proof of the plaintiffs entitlement to moral, temperate, or actual or
compensatory damages. Article 2234 of the Civil Code thus provides in part
as follows:chanrob1es virtual 1aw library
While the amount of the exemplary damages need not be proved, the
plaintiff must show that he is entitled to moral, temperate or compensatory
damages before the court may consider the question of whether or not
exemplary damages should be awarded. . . .
The award for attorneys fees must, however, be set aside. There is no
question that the petitioner filed in good faith its complaint for replevin and
damages to protect its rights under the promissory note and the chattel

WHEREFORE, the assailed judgment of the Court of Appeals in CA-G.R.


CV No. 30231 as well as that of the Regional Trial Court of San Fernando,
Pampanga, Branch 46 in Civil Case No. 6599 on the counterclaim is
AFFIRMED, subject to the modifications abovestated. As so modified, the
petitioner is hereby ordered to pay the private respondents only the
following:chanrob1es virtual 1aw library
(a) actual damages in the reduced amount of P33,222.00;
(b) moral damages in the amount of P50.000.00; andchanrobles.com :
virtual lawlibrary
(c) exemplary damages in the amount of P20,000.00.
No pronouncement as to costs.
SO ORDERED.
Padilla, Bellosillo and Kapunan, JJ., concur.chanroblesvirtuallawlibrary
Hermosisima, Jr., J., is on leave.

Page

mortgage. That the private respondents had defaulted in its obligation under
the promissory note thereby authorizing the petitioner to seek enforcement
of its claim thereunder and proceed against the mortgage of the vehicle was
duly recognized by the trial court by its judgment against the private
respondents incorporated in the first part of the dispositive portion. The
private respondents did not appeal therefrom. There would then be no basis
for awarding attorneys fees in favor of the private respondents for whatever
physical suffering, mental anguish, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, or any other similar injury
they had suffered, even if proven, were only such as are usually caused to
parties haled into court as a defendant and which are not compensable, for
the law could not have meant to impose a penalty on the right to litigate. 20

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3. ID.; ID.; ID.; ID.; WHEN SEDUCTION DOES NOT EXIST. Where a
woman, who was an insurance agent and former high school teacher,
around 36 years of age and approximately 10 years older than the man,
"overwhelmed by her love" for a man approximately 10 years younger then
her, had intimate relations with him, because she "wanted to bind" him "by
having a fruit of their engagement even before they had the benefit of
clergy," it cannot be said that he is morally guilty of seduction.

DECISION

CONCEPCION, J.:

EN BANC
[G.R. No. L-14628. September 30, 1960.]
FRANCISCO HERMOSISIMA, Petitioner, v. THE HON. COURT OF
APPEALS, ET AL.,Respondents.
Regino Hermosisima for Petitioner.
F. P. Gabriel, Jr. for Respondents.

SYLLABUS

1. DAMAGES; BREACH OF PROMISE TO MARRY; NOT ACTIONABLE.


It is the clear and manifest intent of Congress not to sanction actions for
breach of promise to marry.
2. ID.; ID.; SEDUCTION AS GROUND FOR AWARD OF MORAL
DAMAGES; NATURE OF SEDUCTION CONTEMPLATED IN ARTICLE
2219 OF NEW CIVIL CODE. The "seduction" contemplated in Article
2219 of the New Civil Code as one of the cases where moral damages may
be recovered, is the crime punished as such in Articles 337 and 338 of the
Revised Penal Code.

An appeal by certiorari, taken by petitioner Francisco Hermosisima, from a


decision of the Court of Appeals modifying that of the Court of First Instance
of Cebu.
On October 4, 1954, Soledad Cagigas, hereinafter referred to as
complainant, filed with said court of first instance a complaint for the
acknowledgment of her child, Chris Hermosisima, as natural child of said
petitioner, as well as for support of said child and moral damages for alleged
breach of promise. Petitioner admitted the paternity of child and expressed
willingness to support the later, but denied having ever promised to marry
the complainant. Upon her motion, said court ordered petitioner, on October
27, 1954, to pay, by way of alimony pendente lite, P50.00 a month, which
was, on February 16, 1955, reduced to P30.00 a month. In due course, later
on, said court rendered a decision the dispositive part of which
reads:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered, declaring the child, Chris
Hermosisima, as the natural daughter of defendant, and confirming the order
pendente lite, ordering defendant to pay to the said child, through plaintiff,
the sum of thirty pesos (P30.00), payable on or before the fifth day of every
month; sentencing defendant to pay to plaintiff the sum of FOUR
THOUSAND FIVE HUNDRED PESOS (P4,500.00) for actual and
compensatory damages; the sum Of FIVE THOUSAND PESOS (P5,000.00)
as moral damages; and the further sum of FIVE HUNDRED PESOS
(P500.00) as attorneys fees for plaintiff, with costs against
defendant."cralaw virtua1aw library
On appeal taken by petitioner, the Court of Appeals affirmed this decision,

The main issue before us is whether moral damages are recoverable, under
our laws, for breach of promise to marry. The pertinent facts are:chanrob1es
virtual 1aw library
Complainant Soledad Cagigas, was born in July 1917. Since 1950, Soledad
then a teacher in the Sibonga Provincial High School in Cebu, and petitioner,
who was almost ten (10) years younger than she, used to go around
together and were regarded as engaged, although he had made no promise
of marriage prior thereto. In 1951, she gave up teaching and became a life
insurance underwriter in the City of Cebu, where intimacy developed among
her and the petitioner, since one evening, in 1953, when after coming from
the movies, they had sexual intercourse in his cabin on board M/V "Escao"
to which he was then attached as apprentice pilot. In February, 1954,
Soledad advised petitioner that she was in the family way, whereupon he
promised to marry her. Their child, Chris Hermosisima, was born on June
17, 1954, in a private maternity and clinic. However, subsequently, or on July
24, 1954, defendant married one Romanita Perez. Hence, the present
action, which was commenced on or about October 4, 1954.
Referring now to the issue above referred to, it will be noted that the Civil
Code of Spain permitted the recovery of damages for breach of promise to
marry. Articles 43 and 44 of said Code provides:chanrob1es virtual 1aw
library
ART. 43. "A mutual promise of marriage shell not give rise to an obligation to
contract marriage. No court shell entertain any complaint by which the
enforcement of such promise is sought."cralaw virtua1aw library
ART. 44. "If the promise has been in a public or private instrument by an
adult, or by a minor with the concurrence of the person whose consent is
necessary for the celebration of the marriage, or if the banns have been
published, the one who without just cause refuses to marry shall be obliged
to reimburse the other for the expenses which he or she may have incurred
by reason of the promised marriage.

Page

except as to the actual and compensatory damages and the moral damages,
which were increased to P5,614.25 and P7,000.00, respectively.

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recover money or property advanced . . . upon the faith of such promise."
The Code Commission charged with the drafting of the Proposed Civil Code
of the Philippines deemed it best, however, to change the law thereon. We
quote from the report of the Code Commission on said Proposed Civil
Code:jgc:chanrobles.com.ph
"Articles 43 and 44 of the Civil Code of 1889 refer to the promise of
marriage. But these articles are not in force in the Philippines. The subject is
regulated in the proposed Civil Code not only as to the aspects treated of in
said articles but also in other particulars. It is advisable to furnish legislative
solutions to some questions that might arise relative to betrothal. Among the
provisions proposed are: That authorizing the adjudication of moral
damages, in case of breach of promise of marriage, and that creating liability
for causing a marriage engagement to be broken."cralaw virtua1aw library
Accordingly, the following provisions were inserted in said Proposed Civil
Code, under Chapter I, Title III, Book I thereof:jgc:chanrobles.com.ph
"ART. 56. A mutual promise to marry may be made expressly or
impliedly."cralaw virtua1aw library
"ART. 57. An engagement to be married must be agreed directly by the
future spouses."cralaw virtua1aw library
"ART. 58. A contract for a future marriage cannot, without the consent of the
parent or guardian, be entered into by a male between the ages of sixteen
and twenty years or by a female between the ages of sixteen and eighteen
years. Without such consent of the parents or guardian, the engagement to
marry cannot be the basis of a civil action for damages in case of breach of
the promise.
"ART. 59. A promise to marry when made by a female under the age of
fourteen years is not civilly actionable, even though approved by the parent
or guardian."cralaw virtua1aw library
"ART. 60. In cases referred to in the preceding articles, the criminal and civil
responsibility of a male for seduction shall not be affected."cralaw virtua1aw
library

"The action for reimbursement of expenses to which the foregoing article


refers must be brought within one year, computed from the day of the refusal
to celebrate the marriage."cralaw virtua1aw library

"ART. 61. No action for specific performance of a mutual promise to marry


may be brought."cralaw virtua1aw library

Inasmuch as these articles were never in force in the Philippines, this Court
ruled in de Jesus v. Syquia (58 Phil., 866), that "the action for breach of
promise to marry has no standing in the civil law, apart from the right to

"ART. 62. An action for breach of promise to marry may be brought by the
aggrieved party even though a minor without the assistance of his or her
parent or guardian. Should the minor refuse to bring suit, the parent or

"ART. 63. Damages for breach of promise to marry shall include not only
material and pecuniary losses but also compensation for mental and moral
suffering."cralaw virtua1aw library
"ART. 64. Any person, other than a rival, the parents, guardians and
grandparents, of the affianced parties, who causes a marriage engagement
to be broken shall be liable for damages, both material and moral, to the
engaged person who is rejected."cralaw virtua1aw library
"ART. 65. In case of breach of promise to marry, the party breaking the
engagement shall be obliged to return what he or she has received from the
other as gift on account of the promise of the marriage."cralaw virtua1aw
library
These articles were, however, eliminated in Congress. The reason therefor
are set forth in the report of the corresponding Senate Committee, from
which we quote:jgc:chanrobles.com.ph
"The elimination of this Chapter is proposed. That breach of promise to
marry is not actionable has been definitely decided in the case of De Jesus
v. Syquia, 53 Phil., 366. The history of bleach of promise suits in the United
States and in England has shown that no other action lends itself more
readily to abuse by designing women and unscrupulous man. It is this
experience which has led to the abolition of rights of action in the so-called
Balm suits in many of the American States.
See statutes of:chanrob1es virtual 1aw library
Florida 1945 pp. 1342-1344
Maryland 1945 pp. 1759-1762
Nevada 1948 p. 74
Maine 1941 pp. 140-141
New Hampshire 1941 p. 223
California 1939 p. 1245

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guardian may institute the action."cralaw virtua1aw library

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Michigan 1935 p. 201
New York 1935
Pennsylvania p. 450
"The Commission perhaps thought that it has followed the more progressive
trend in legislation when it provided for breach of promise to marry suits. But
it is clear that the creation of such causes of action at a time when so many
States, in consequence of years of experience are doing away with them,
may well prove to be a step in the wrong direction. (Congressional Record,
Vol. IV, No. 79, Thursday, May 19, 1949, p. 2352.)"
The views thus expressed were accepted by both houses of Congress. In
the light of the clear and manifest intent of our law making body not to
sanction actions for breach of promise to marry, the award of moral
damages made by the lower court is, accordingly, untenable. The Court of
Appeals said in justification of said award:jgc:chanrobles.com.ph
"Moreover, it appearing that because of defendant-appellants seductive
powers, plaintiff-appellee, overwhelmed by her love for him finally yielded to
his sexual desires in spite of her age and self- control, she being a woman
after all, we hold that said defendant- appellant is liable for seduction and,
therefore, moral damages may be recovered from him under the provisions
of Article 2219, paragraph 3, of the new Civil Code."cralaw virtua1aw library
Apart from the fact that the general tenor of said Article 2219, particularly the
paragraphs preceding and those following the one cited by the Court of
Appeals, and the language used in said paragraph strongly indicates that the
"seduction" therein contemplated is the crime punished as such in Articles
337 and 338 of the Revised Penal Code, which admittedly does not exist in
the present case, we find ourselves unable to say that petitioner is morally
guilty of seduction, not only because he is approximately ten (10) years
younger than the complainant who was around thirty-six (36) years of
age, and as highly enlightened as a former high school teacher and a life
insurance agent are supposed to be when she became intimate with
petitioner, then a mere apprentice pilot, but, also, because, the court of first
instance found that, complainant "surrendered herself" to petitioner because,
"overwhelmed by her love" for him, she "wanted to bind" him "by having a
fruit of their engagement even before they had the benefit of clergy."cralaw
virtua1aw library

Massachusetts 1938 p. 326


Indiana 1936 p. 1009

The court of first instance sentenced petitioner to pay the following: (1) a
monthly pension of P30.00 for the support of the child; (2) P4,500,

With the elimination of this award for moral damages, the decision of the
Court of Appeals is hereby affirmed, therefore, in all other respects, without
special pronouncement as to costs in this instance. It is so ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L.,
Barrera, Gutierrez David, Paredes, and Dizon, JJ., concur.

THIRD DIVISION
[G.R. No. 97336. February 19, 1993.]
GASHEM SHOOKAT BAKSH, Petitioner, v. HON. COURT OF APPEALS
and MARILOU T. GONZALES, Respondents.
Public Attorneys Office for Petitioner.
Corleto R. Castro for Private Respondent.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; CREDIBILITY OF WITNESSES;


FINDINGS OF THE TRIAL COURT; RULE AND EXCEPTIONS. It is the
rule in this jurisdiction that appellate courts will not disturb the trial courts
findings as to the credibility of witnesses, the latter court having heard the
witnesses and having had the opportunity to observe closely their
deportment and manner of testifying, unless the trial court had plainly
overlooked facts of substance or value which, if considered, might affect the
result of the case. (People v. Garcia, 89 SCRA 440 [1979]; People v.

Page

representing the income that complainant had allegedly failed to earn during
her pregnancy and shortly after the birth of the child, as actual and
compensatory damages; (3) P5,000, as moral damages; and (4) P500.00,
as attorneys fees. The Court of Appeals added to the second item the sum
of P1,114.25 consisting of P144.20, for hospitalization and medical
attendance, in connection with the parturiation, and the balance representing
expenses incurred to support the child and increased the moral damages
to P7,000.00.

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Bautista, 92 SCRA 465 [1979]; People v. Abejuela, 92 SCRA 503 [1979];
People v. Arciaga, 98 SCRA 1 [1980]; People v. Marzan, 128 SCRA 203
[1984]; People v. , Alcid, 135 SCRA 280 [1985]; People v. Sanchez, 199
SCRA 414 [1991]; People v. Atilano, 204 SCRA 278 [1991]). Equally settled
is the rule that only questions of law may be raised in a petition for review
on certiorari under Rule 45 of the Rules of Court. It is not the function of this
Court to analyze or weigh all over again the evidence introduced by the
parties before the lower court. There are, however, recognized exceptions to
this rule. Thus, in Medina v. Asistio, Jr., this Court took the time, again, to
enumerate these exceptions:" (1) When the conclusion is a finding grounded
entirely on speculation, surmises or conjectures (Joaquin v. Navarro, 93 Phil.
257 [1953]); (2) When the inference made is manifestly mistaken, absurd or
impossible (Luna v. Linatok, 74 Phil. 15 [1942]); (3) Where there is a grave
abuse of discretion (Buyco v. People, 95 Phil. 453 [1955]); (4) When the
judgment is based on a misapprehension of facts (Cruz v. Sosing, L-4875,
Nov. 27, 1953); (5) When the findings of fact are conflicting (Casica v.
Villaseca, L-9590 Ap. 30, 1957; unrep.) (6) When the Court of Appeals, in
making its findings, went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee (Evangelista v.
Alto Surety and Insurance Co., 103 Phil. 401 [1958]); (7) The findings of the
Court of Appeals are contrary to those of the trial court (Garcia v. Court of
Appeals, 33 SCRA 622 [1970]; Sacay v. Sandiganbayan, 142 SCRA 593
[1986]); (8) When the findings of fact are conclusions without citation of
specific evidence on which they are based (Ibid.,); (9) When the facts set
forth in the petition as well as in the petitioners main and reply briefs are not
disputed by the respondents (Ibid.,); and (10) The finding of fact of the Court
of Appeals is premised on the supposed absence of evidence and is
contradicted by the evidence on record (Salazar v. Gutierrez, 33 SCRA 242
[1970])." Petitioner has not endeavored to point out to Us the existence of
any of the above quoted exceptions in this case. Consequently, the factual
findings of the trial and appellate courts must be respected.
2. CIVIL LAW; QUASI-DELICT; TORTS; ART. 21 OF THE CIVIL CODE;
CONSTRUED. Article 2176 of the Civil Code, which defines a quasi-delict
is limited to negligent acts or omissions and excludes the notion of
willfulness or intent. Quasi-delict, known in Spanish legal treatises as culpa
aquiliana, is a civil law concept while torts is an Anglo-American or common
law concept. Torts is much broader than culpa aquiliana because it includes
not only negligence, but intentional criminal acts as well such as assault and
battery, false imprisonment and deceit. In the general scheme of the
Philippine legal system envisioned by the Commission responsible for
drafting the New Civil Code, intentional and malicious acts. with certain
exceptions, are to. be governed by the Revised Penal Code while negligent
acts or omissions are to be covered by Article 2176 of the Civil Code. In
between these opposite spectrums are injurious acts which, in the absence

3. ID.; ID.; ID.; ID.; BREACH OF PROMISE TO MARRY; RULE;


RATIONALE. The existing rule is that a breach of promise to marry per se
is not an actionable wrong (Hermosisima v. Court of Appeals, 109 Phil. 629
[1960]; Estopa v. Piansay, 109 Phil. 640 [1960]) Congress deliberately
eliminated from the draft of the New Civil Code the provisions that would
have made it so. The reason therefor is set forth in the report of the Senate
Committee on the Proposed Civil Code, from which We quote: "The
elimination of this chapter is proposed. That breach of promise to marry is
not actionable has been definitely decided in the case of De Jesus v. Syquia
(58 Phil. 866 [1933]). The history of breach of promise suits in the United
States and in England has shown that no other action lends itself more
readily to abuse by designing women and unscrupulous men. It is this
experience which has led to the abolition of rights of action in the so-called
Heart Balm suits in many of the American states . . ." This notwithstanding,
the said Code contains a provision, Article 21, which is designed to expand
the concept of torts or quasi-delict in this jurisdiction by granting adequate
legal remedy for the untold number of moral wrongs which is impossible for
human foresight to specifically enumerate and punish in the statute books
(Philippine National Bank v. Court of Appeals, 83 SCRA 237 [1978]).
4. ID.; ID.; ID.; ID.; ID.; AWARD OF DAMAGES, JUSTIFIED BECAUSE OF
FRAUD AND DECEIT BEHIND IT; CASE AT BAR. In the light of the
above laudable purpose of Article 21, We are of the opinion, and so hold,
that where a mans promise to marry is in fact the proximate cause of the
acceptance of his love by a woman and his representation to fulfill that
promise thereafter becomes the proximate cause of the giving of herself
unto him in a sexual congress, proof that he had, in reality, no intention of
marrying her and that the promise was only a subtle scheme or deceptive
device to entice or inveigle her to accept him and to obtain her consent to
the sexual act, could justify the award of damages pursuant to Article 21 not
because of such promise to marry but because of the fraud and deceit
behind it and the willful injury to her honor and reputation which followed
thereafter. It is essential, however, that such injury should have been
committed in a manner contrary to morals, good customs or public policy. In
the instant case, respondent Court found that it was the petitioners
"fraudulent and deceptive protestations of love for and promise to marry
plaintiff that made her surrender her virtue and womanhood to him and to
live with him on the honest and sincere belief that he would keep said

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of Article 21, would have been beyond redress. Thus, Article 21 fills that
vacuum. It is even postulated that together with Articles 19 and 20 of the
Civil Code, Article 21 has greatly broadened the scope of the law on civil
wrongs; it has become much more supple and adaptable than the AngloAmerican law on torts. (TOLENTINO, A.M. Commentaries and
Jurisprudence on the Civil Code of the Philippines, vol. 1, 1985 ed., 72).

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promise, and it was likewise these fraud and deception on appellants part
that made plaintiffs parents agree to their daughters living-in with him
preparatory to their supposed marriage." In short, the private respondent
surrendered her virginity, the cherished possession of every single Filipina,
not because of lust but because of moral seduction the kind illustrated by
the Code Commission in its example earlier adverted to. The petitioner could
not be held liable for criminal seduction punished under either Article 337 or
Article 338 of the Revised Penal Code because the private respondent was
above eighteen (18) years of age at the time of the seduction. Prior
decisions of this Court clearly suggest that Article 21 may be applied-in a
breach of promise to marry where the woman is a victim of moral seduction.
5. ID.; PARI DELICTO RULE; DEFINED; NOT APPRECIATED IN CASE AT
BAR. The pari delicto rule does not apply in this case for while indeed, the
private respondent may not have been impelled by the purest of intentions,
she eventually submitted to the petitioner in sexual congress not out of lust,
but because of moral seduction. In fact, it is apparent that she had qualms of
conscience about the entire episode for as soon as she found out that the
petitioner was not going to marry her after all, she left him. She is not,
therefore, in pari delicto with the petitioner. Pari delicto means "in equal fault;
in a similar offense or crime; equal in guilt or in legal fault." (Blacks Laws
Dictionary, Fifth ed., 1004). At most, it could be conceded that she is merely
in delicto. "Equity often interferes for the relief of the less guilty of the parties,
where his transgression has been brought about by the imposition or undue
influence of the party on whom the burden of the original wrong principally
rests, or where his consent to the transaction was itself procured by fraud."
(37 AM Jur 2d. 401). In Mangayao v. Lasud, (11 SCRA 158 [1964]) We
declared: "Appellants likewise stress that both parties being at fault, there
should be no action by one against the other (Art. 1412, New Civil Code).
This rule, however, has been interpreted as applicable only where the fault
on both sides is, more or less, equivalent. It does not apply where one party
is literate or intelligent and the other one is not (c.f. Bough v. Cantiveros, 40
Phil. 209)."

DECISION

DAVIDE, JR., J.:

This is an appeal by certiorari under Rule 45 of the Rules of Court seeking to


review and set aside the Decision 1 of the respondent Court of Appeals in
CA-G.R. CV No. 24256 which affirmed in toto the 16 October 1989 Decision

The antecedents of this case are not complicated:chanrob1es virtual 1aw


library

Page

or Branch 38 (Lingayen) of the Regional Trial Court (RTC) of Pangasinan in


Civil Case No. 16503. Presented is the issue of whether or not damages
may be recovered for a breach of promise to marry on the basis of Article 21
of the Civil Code of the Philippines.chanrobles virtual lawlibrary

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him by stealing his money and passport; and finally, no confrontation took
place with a representative of the barangay captain. Insisting, in his
Counterclaim, that the complaint is baseless and unfounded and that as a
result thereof, he was unnecessarily dragged into court and compelled to
incur expenses, and has suffered mental anxiety and a besmirched
reputation, he prayed for an award of P5,000.00 for miscellaneous expenses
and P25,000.00 as moral damages.

On 27 October 1987, private respondent, without the assistance of counsel,


filed with the aforesaid trial court a complaint 2 for damages against the
petitioner for the alleged violation of their agreement to get married. She
alleges in said complaint that: she is twenty-two (22) years old, single,
Filipino and a pretty lass of good moral character and reputation duly
respected in her community; petitioner, on the other hand, is an Iranian
citizen residing at the Lozano Apartments, Guilig, Dagupan City, and is an
exchange student taking a medical course at the Lyceum Northwestern
Colleges in Dagupan City; before 20 August 1987, the latter courted and
proposed to marry her; she accepted his love on the condition that they
would get married; they therefore argued to get married after the end of the
school semester, which was in October of that year; petitioner then visited
the private respondents parents in Baaga, Bugallon, Pangasinan to secure
their approval to the marriage; sometime in 20 August 1987, the petitioner
forced her to live with him in the Lozano Apartments; she was a virgin before
she began living with him; a week before the filing of the complaint,
petitioners attitude towards her started to change; he maltreated and
threatened to kill her; as a result of such maltreatment, she sustained
injuries, during a confrontation with a representative of the barangay captain
of Guilig a day before the filing of the complaint, petitioner repudiated their
marriage agreement and asked her not to live with him anymore and; the
petitioner is already married to someone living in Bacolod City. Private
respondent then prayed for judgment ordering the petitioner to pay her
damages in the amount of not less than P45,000.00, reimbursement for
actual expenses amounting to P600.00, attorneys fees and costs, and
granting her such other relief and remedies as may be just and equitable.
The complaint was docketed as Civil Case No 16503.

After conducting a pre-trial on 25 January 1988, the trial court issued a PreTrial Order 4 embodying the stipulated facts which the parties had agreed
upon, to wit:jgc:chanrobles.com.ph

In his Answer with Counterclaim, 3 petitioner admitted only the personal


circumstances of the parties as averred in the complaint and denied the rest
of the allegations either for lack of knowledge or information sufficient to
form a belief as to the truth thereof or because the true facts are those
alleged as his Special and Affirmative Defenses. He thus claimed that he
never proposed marriage to or agreed to be married with the private
respondent; he neither sought the consent and approval of her parents nor
forced her to live in his apartment; he did not maltreat her, but only told her
to stop coming to his place because he discovered that she had deceived

1. Condemning (sic) the defendant to pay the plaintiff the sum of twenty
thousand (P20,000.00) pesos as moral damages.

"1. That the plaintiff is single and resident (sic) of Baaga, Bugallon,
Pangasinan, while the defendant is single, Iranian, citizen and resident (sic)
of Lozano Apartment, Guilig, Dagupan City since September 1, 1987 up to
the present;
2. That the defendant is presently studying at Lyceum-Northwestern,
Dagupan City, College of Medicine, second year medicine proper.
3. That the plaintiff is (sic) an employee at Mabuhay Luncheonette,
Fernandez Avenue, Dagupan City since July, 1986 up to the present and a
(sic) high school graduate;
4. That the parties happened to know each other when the Manager of the
Mabuhay Luncheonette, Johnny Rabino introduced the defendant to the
plaintiff on August 3, 1986." chanroblesvirtualawlibrary
After trial on the merits, the lower court, applying Article 21 of the Civil Code,
rendered on 16 October 1989 a decision 5 favoring the private Respondent.
The petitioner was thus ordered to pay the latter damages and attorneys
fees; the dispositive portion of the decision reads:jgc:chanrobles.com.ph
"IN THE LIGHT of the foregoing consideration, judgment is hereby rendered
in favor of the plaintiff and against the defendant.

2. Condemning further the defendant to pay the plaintiff the sum of three
thousand (P3,000.00) pesos as attys fees and two thousand (P2,000.00)
pesos at (sic) litigation expenses and to pay the costs.
3. All other claims are denied." 6

The above findings and conclusions were culled from the detailed summary
of the evidence for the private respondent in the foregoing decision, digested
by the respondent Court as follows:jgc:chanrobles.com.ph
"According to plaintiff, who claimed that she was a virgin at the time and that
she never had a boyfriend before, defendant started courting her just a few
days after they first met. He later proposed marriage to her several times
and she accepted his love as well as his proposal of marriage on August 20,
1987, on which same day he went with her to her hometown of Banaga,
Bugallon, Pangasinan, as he wanted to meet her parents and inform them of
their relationship and their intention to get married. The photographs Exhs.
"A" to "E" (and their submarkings) of defendant with members of plaintiffs
family or with plaintiff, were taken that day. Also on that occasion, defendant
told plaintiffs parents and brothers and sisters that he intended to marry her
during the semestral break in October, 1987, and because plaintiffs parents
thought he was good and trusted him, they agreed to his proposal for him to
marry their daughter, and they likewise allowed him to stay in their house
and sleep with plaintiff during the few days that they were in Bugallon. When
plaintiff and defendant later returned to Dagupan City, they continued to live
together in defendants apartment. However, in the early days of October,
1987, defendant would tie plaintiffs hands and feet while he went to school,
and he even gave her medicine at 4 oclock in the morning that made her
sleep the whole day and night until the following day. As a result of this livein relationship, plaintiff became pregnant, but defendant gave her some
medicine to abort the foetus. Still plaintiff continued to live with defendant
and kept reminding him of his promise to marry her until he told her that he
could not do so because he was already married to a girl in Bacolod City.

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The decision is anchored on the trial courts findings and conclusions that (a)
petitioner and private respondent were lovers, (b) private respondent is not a
woman of loose morals or questionable virtue who readily submits to sexual
advances, (c) petitioner, through machinations, deceit and false pretenses,
promised to marry private respondent, (d) because of his persuasive
promise to marry her, she allowed herself to be deflowered by him, (e) by
reason of that deceitful promise, private respondent and her parents in
accordance with Filipino customs and traditions made some preparations
for the wedding that was to be held at the end of October 1987 by looking for
pigs and chickens, inviting friends and relatives and contracting sponsors, (f)
petitioner did not fulfill his promise to marry her and (g) such acts of the
petitioner, who is a foreigner and who has abused Philippine hospitality,
have offended our sense of morality, good customs, culture and traditions.
The trial court gave full credit to the private respondents testimony because,
inter alia, she would not have had the temerity and courage to come to court
and expose her honor and reputation to public scrutiny and ridicule if her
claim was false. 7

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That was the time plaintiff left defendant, went home to her parents, and
thereafter consulted a lawyer who accompanied her to the barangay captain
in Dagupan City. Plaintiff, her lawyer, her godmother, and a barangay tanod
send by the barangay captain went to talk to defendant to still convince him
to marry plaintiff, but defendant insisted that he could not do so because he
was already married to a girl in Bacolod City, although the truth, as stipulated
by the parties at the pre-trial, is that defendant is still single.
Plaintiffs father, a tricycle driver, also claimed that after defendant had
informed them of his desire to marry Marilou, he already looked for sponsors
for the wedding, started preparing for the reception by looking for pigs and
chickens, and even already invited many relatives and friends to the
forthcoming wedding." 8
Petitioner appealed the trial courts decision to the respondent Court of
Appeals which docketed the case as CA-G R. CV No. 24256. In his Brief, 9
he contended that the trial court erred (a) in not dismissing the case for lack
of factual and legal basis and (b) in ordering him to pay moral damages,
attorneys fees, litigation expenses and costs.chanrobles virtual lawlibrary
On 18 February 1991, respondent Court promulgated the challenged
decision 10 affirming in toto the trial courts ruling of 16 October 1989. In
sustaining the trial courts findings of fact, respondent Court made the
following analysis:jgc:chanrobles.com.ph
"First of all, plaintiff, then only 21 years old when she met defendant who
was already 23 years old at the time, does not appear to be a girl of loose
morals. It is uncontradicted that she was a virgin prior to her unfortunate
experience with defendant and never had a boyfriend. She is, as described
by the lower court, a barrio lass not used and accustomed to the trend of
modern urban life, and certainly would (sic) not have allowed herself to be
deflowered by the defendant if there was no persuasive promise made by
the defendant to marry her. In fact, we agree with the lower court that
plaintiff and defendant must have been sweethearts or so the plaintiff must
have thought because of the deception of defendant, for otherwise, she
would not have allowed herself to be photographed with defendant in public
in so (sic) loving and tender poses as those depicted in the pictures Exhs.
"D" and "E." We cannot believe, therefore, defendants pretense that plaintiff
was a nobody to him except a waitress at the restaurant where he usually
ate. Defendant in fact admitted that he went to plaintiffs hometown of
Banaga, Bugallon, Pangasinan, at least thrice; at (sic) the town fiesta on
February 27, 1987 (p. 54, tsn May 18, 1988), at (sic) a beach party together
with the manager and employees of the Mabuhay Luncheonette on March 3,
1987 (p. 50, tsn id.), and on April 1, 1987 when he allegedly talked to
plaintiffs mother who told him to marry her daughter (pp. 55-56, tsn id.).

Upon the other hand, appellant does not appear to be a man of good moral
character and must think so low and have so little respect and regard for
Filipino women that he openly admitted that when he studied in Bacolod City
for several years where he finished his B.S. Biology before he came to
Dagupan City to study medicine, he had a common-law wife in Bacolod City.
In other words, he also lived with another woman in Bacolod City but did not
marry that woman, just like what he did to plaintiff. It is not surprising, then,
that he felt so little compunction or remorse in pretending to love and
promising to marry plaintiff, a young, innocent, trustful country girl, in order to
satisfy his lust on her." 11

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Would defendant have left Dagupan City where he was involved in the
serious study of medicine to go to plaintiffs hometown in Banaga, Bugallon,
unless there was (sic) some kind of special relationship between them? And
this special relationship must indeed have led to defendants insincere
proposal of marriage to plaintiff, communicated not only to her but also to
her parents, and (sic) Marites Rabino, the owner of the restaurant where
plaintiff was working and where defendant first proposed marriage to her,
also knew of this love affair and defendants proposal of marriage to plaintiff,
which she declared was the reason why plaintiff resigned from her job at the
restaurant after she had accepted defendants proposal (pp. 6-7, tsn March
7, 1988).

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It is petitioners thesis that said Article 21 is not applicable because he had
not committed any moral wrong or injury or violated any good custom or
public policy; he has not professed love or proposed marriage to the private
respondent; and he has never maltreated her. He criticizes the trial court for
liberally invoking Filipino customs, traditions and culture, and ignoring the
fact that since he is a foreigner, he is not conversant with such Filipino
customs, traditions and culture. As an Iranian Moslem, he is not familiar with
Catholic and Christian ways. He stresses that even if he had made a
promise to marry, the subsequent failure to fulfill the same is excusable or
tolerable because of his Moslem upbringing; he then alludes to the Muslim
Code which purportedly allows a Muslim to take four (4) wives and
concludes that on the basis thereof, the trial court erred in ruling that he
does not possess good moral character. Moreover, his controversial
"common law wife" is now his legal wife as their marriage had been
solemnized in civil ceremonies in the Iranian Embassy. As to his unlawful
cohabitation with the private respondent, petitioner claims that even if
responsibility could be pinned on him for the live-in relationship, the private
respondent should also be faulted for consenting to an illicit arrangement.
Finally, petitioner asseverates that even if it was to be assumed arguendo
that he had professed his love to the private respondent and had also
promised to marry her, such acts would not be actionable in view of the
special circumstances of the case. The mere breach of promise is not
actionable. 14

and then concluded:jgc:chanrobles.com.ph


"In sum, we are strongly convinced and so hold that it was defendantappellants fraudulent and deceptive protestations of love for and promise to
marry plaintiff that made her surrender her virtue and womanhood to him
and to live with him on the honest and sincere belief that he would keep said
promise, and it was likewise these (sic) fraud and deception on appellants
part that made plaintiffs parents agree to their daughters living-in with him
preparatory to their supposed marriage. And as these acts of appellant are
palpably and undoubtedly against morals, good customs, and public policy,
and are even gravely and deeply derogatory and insulting to our women,
coming as they do from a foreigner who has been enjoying the hospitality of
our people and taking advantage of the opportunity to study in one of our
institutions of learning, Defendant-Appellant should indeed be made, under
Art. 21 of the Civil Code of the Philippines, to compensate for the moral
damages and injury that he had caused plaintiff, as the lower court ordered
him to do in its decision in this case." 12
Unfazed by his second defeat, petitioner filed the instant petition on 26
March 1991; he raises therein the single issue of whether or not Article 21 of
the Civil Code applies to the case at bar. 13

On 26 August 1991, after the private respondent had filed her Comment to
the petition and the petitioner had filed his Reply thereto, this Court gave due
course to the petition and required the parties to submit their respective
Memoranda, which they subsequently complied with.chanrobles.com.ph :
virtual law library
As may be gleaned from the foregoing summation of the petitioners
arguments in support of his thesis, it is clear that questions of fact, which boil
down to the issue of the credibility of witnesses, are also raised. It is the rule
in this jurisdiction that appellate courts will not disturb the trial courts
findings as to the credibility of witnesses, the latter court having heard the
witnesses and having had the opportunity to observe closely their
deportment and manner of testifying, unless the trial court had plainly
overlooked facts of substance or value which, if considered, might affect the
result of the case. 15
Petitioner has miserably failed to convince Us that both the appellate and
trial courts had overlooked any fact of substance or value which could alter
the result of the case.
Equally settled is the rule that only questions of law may be raised in a

"(1) When the conclusion is a finding grounded entirely on speculation,


surmises or conjectures (Joaquin v. Navarro, 93 Phil. 257 [1953]); (2) When
the inference made is manifestly mistaken, absurd or impossible (Luna v.
Linatok, 74 Phil. 15 [1942]); (3) Where there is a grave abuse of discretion
(Buyco v. People, 95 Phil. 453 [1955]); (4) When the judgment is based on a
misapprehension of facts (Cruz v. Sosing, L-4875, Nov. 27, 1953); (5) When
the findings of fact are conflicting (Casica v. Villaseca, L-9590 Ap. 30, 1957;
unrep.) (6) When the Court of Appeals, in making its findings, went beyond
the issues of the case and the same is contrary to the admissions of both
appellant and appellee (Evangelista v. Alto Surety and Insurance Co., 103
Phil. 401 [1958]); (7) The findings of the Court of Appeals are contrary to
those of the trial court (Garcia v. Court of Appeals, 33 SCRA 622 [1970];
Sacay v. Sandiganbayan, 142 SCRA 593 [1986]); (8) When the findings of
fact are conclusions without citation of specific evidence on which they are
based (Ibid.,); (9) When the facts set forth in the petition as well as in the
petitioners main and reply briefs are not disputed by the respondents (Ibid.,);
and (10) The finding of fact of the Court of Appeals is premised on the
supposed absence of evidence and is contradicted by the evidence on
record (Salazar v. Gutierrez, 33 SCRA 242 [1970])."cralaw virtua1aw library
Petitioner has not endeavored to point out to Us the existence of any of the
above quoted exceptions in this case. Consequently, the factual findings of
the trial and appellate courts must be respected.
And now to the legal issue.
The existing rule is that a breach of promise to marry per se is not an
actionable wrong. 17 Congress deliberately eliminated from the draft of the
New Civil Code the provisions that would have made it so. The reason
therefor is set forth in the report of the Senate Committee on the Proposed
Civil Code, from which We quote:jgc:chanrobles.com.ph
"The elimination of this chapter is proposed. That breach of promise to marry
is not actionable has been definitely decided in the case of De Jesus v.
Syquia. 18 The history of breach of promise suits in the United States and in

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petition for review oncertiorari under Rule 45 of the Rules of Court. It is not
the function of this Court to analyze or weigh all over again the evidence
introduced by the parties before the lower court. There are, however,
recognized exceptions to this rule. Thus, in Medina v. Asistio, Jr., 16 this
Court took the time, again, to enumerate these exceptions:chanrob1es
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England has shown that no other action lends itself more readily to abuse by
designing women and unscrupulous men. It is this experience which has led
to the abolition of rights of action in the so-called Heart Balm suits in many of
the American states .." 19
This notwithstanding, the said Code contains a provision, Article 21, which is
designed to expand the concept of torts or quasi-delict in this jurisdiction by
granting adequate legal remedy for the untold number of moral wrongs
which is impossible for human foresight to specifically enumerate and punish
in the statute books. 20
As the Code Commission itself stated in its Report:jgc:chanrobles.com.ph
"But the Code Commission has gone farther than the sphere of wrongs
defined or determined by positive law. Fully sensible that there are countless
gaps in the statutes, which leave so many victims of moral wrongs helpless,
even though they have actually suffered material and moral injury, the
Commission has deemed it necessary, in the interest of justice, to
incorporate in the proposed Civil Code the following rule:chanrobles law
library : red
ARTICLE 23. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
An example will illustrate the purview of the foregoing norm: A seduces the
nineteen-year old daughter of X. A promise of marriage either has not been
made, or can not be proved. The girl becomes pregnant. Under the present
laws, there is no crime, as the girl is above eighteen years of age. Neither
can any civil action for breach of promise of marriage be filed. Therefore,
though the grievous moral wrong has been committed, and though the girl
and her family have suffered incalculable moral damage, she and her
parents cannot bring any action for damages. But under the proposed
article, she and her parents would have such a right of action.
Thus at one stroke, the legislator, if the foregoing rule is approved, would
vouchsafe adequate legal remedy for that untold number of moral wrongs
which it is impossible for human foresight to provide for specifically in the
statutes." 21
Article 2176, of the Civil Code, which defines a quasi-delict
thus:jgc:chanrobles.com.ph
"Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence,

is limited to negligent acts or omissions and excludes the notion of


willfulness or intent. Quasi-delict, known in Spanish legal treatises as culpa
aquiliana, is a civil law concept while torts is an Anglo-American or common
law concept. Torts is much broader than culpa aquiliana because it includes
not only negligence, but intentional criminal acts as well such as assault and
battery, false imprisonment and deceit. In the general scheme of the
Philippine legal system envisioned by the Commission responsible for
drafting the New Civil Code, intentional and malicious acts. with certain
exceptions, are to. be governed by the Revised Penal Code while negligent
acts or omissions are to be covered by Article 2176 of the Civil Code. 22 In
between these opposite spectrums are injurious acts which, in the absence
of Article 21, would have been beyond redress. Thus, Article 21 fills that
vacuum. It is even postulated that together with Articles 19 and 20 of the
Civil Code, Article 21 has greatly broadened the scope of the law on civil
wrongs; it has become much more supple and adaptable than the AngloAmerican law on torts. 23
In the light of the above laudable purpose of Article 21, We are of the
opinion, and so hold, that where a mans promise to marry is in fact the
proximate cause of the acceptance of his love by a woman and his
representation to fulfill that promise thereafter becomes the proximate cause
of the giving of herself unto him in a sexual congress, proof that he had, in
reality, no intention of marrying her and that the promise was only a subtle
scheme or deceptive device to entice or inveigle her to accept him and to
obtain her consent to the sexual act, could justify the award of damages
pursuant to Article 21 not because of such promise to marry but because of
the fraud and deceit behind it and the willful injury to her honor and
reputation which followed thereafter. It is essential, however, that such injury
should have been committed in a manner contrary to morals, good customs
or public policy.
In the instant case, respondent Court found that it was the petitioners
"fraudulent and deceptive protestations of love for and promise to marry
plaintiff that made her surrender her virtue and womanhood to him and to
live with him on the honest and sincere belief that he would keep said
promise, and it was likewise these fraud and deception on appellants part
that made plaintiffs parents agree to their daughters living-in with him
preparatory to their supposed marriage." 24 In short, the private respondent
surrendered her virginity, the cherished possession of every single Filipina,
not because of lust but because of moral seduction the kind illustrated by
the Code Commission in its example earlier adverted to. The petitioner could

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if there is no pre-existing contractual relation between the parties, is called a


quasi-delict and is governed by the provisions of this Chapter."cralaw
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not be held liable for criminal seduction punished under either Article 337 or
Article 338 of the Revised Penal Code because the private respondent was
above eighteen (18) years of age at the time of the seduction.
Prior decisions of this Court clearly suggest that Article 21 may be applied-in
a breach of promise to marry where the woman is a victim of moral
seduction. Thus, in Hermosisima v. Court of Appeals, 25 this Court denied
recovery of damages to the woman because:chanrobles.com:cralaw:red
". . . we find ourselves unable to say that petitioner is morally guilty of
seduction, not only because he is approximately ten (10) years younger than
the complainant who was around thirty-six (36) years of age, and as
highly enlightened as a former high school teacher and a life insurance
agent are supposed to be when she became intimate with petitioner, then
a mere apprentice pilot, but, also, because the court of first instance found
that, complainant surrendered herself to petitioner because, overwhelmed
by her love for him, she wanted to bind him by having a fruit of their
engagement even before they had the benefit of clergy."
In Tanjanco v. Court of Appeals, 26 while this Court likewise hinted at
possible recovery if there had been moral seduction, recovery was
eventually denied because We were not convinced that such seduction
existed. The following enlightening disquisition and conclusion were made in
the said case:jgc:chanrobles.com.ph
"The Court of Appeals seems to have overlooked that the example set forth
in the Code Commissions memorandum refers to a tort upon a minor who
had been seduced. The essential feature is seduction, that in law is more
than mere sexual intercourse, or a breach of a promise of marriage; it
connotes essentially the idea of deceit, enticement, superior power or abuse
of confidence on the part of the seducer to which the woman has yielded
(U.S. v. Buenaventura, 27 Phil. 121; U.S. v. Arlante, 9 Phil. 595).
It has been ruled in the Buenaventura case (supra) that
To constitute seduction there must in all cases be some sufficient promise or
inducement and the woman must yield because of the promise or other
inducement. If she consents merely from carnal lust and the intercourse is
from mutual desire, there is no seduction (43 Cent Dig. tit. Seduction, par.
56). She must be induced to depart from the path of virtue by the use of
some species of arts, persuasions and wiles, which are calculated to have
and do have that effect, and which result in her ultimately submitting her
person to the sexual embraces of her seducer (27 Phil. 123).
And in American Jurisprudence we find:chanrob1es virtual 1aw library

Accordingly it is not seduction where the willingness arises out sexual desire
or curiosity of the female, and the defendant merely affords her the needed
opportunity for the commission of the act. It has been emphasized that to
allow a recovery in all such cases would tend to the demoralization of the
female sex, and would be a reward for unchastity by; which a class of
adventuresses would be swift to profit. (47 Am. Jur. 662).
x

Over and above the partisan allegations, the facts stand out that for one
whole year, from 1958 to 1959, the plaintiff-appellee, a woman of adult age,
maintained intimate sexual relations with appellant, with repeated acts of
intercourse. Such conduct is incompatible with the idea of seduction. Plainly
there is here voluntariness and mutual passion; for had the appellant been
deceived, had she surrendered exclusively because of the deceit, artful
persuasions and wiles of the defendant, she would not have again yielded to
his embraces, much less for one year, without exacting early fulfillment of
the alleged promises of marriage, and would have cut short all sexual
relations upon finding that defendant did not intend to fulfill his promise.
Hence, we conclude that no case is made under Article 21 of the Civil Code,
and no other cause of action being alleged, no error was committed by the
Court of First Instance in dismissing the complaint." 27
In his annotations on the Civil Code, 28 Associate Justice Edgardo L. Paras,
who recently retired from this Court, opined that in a breach of promise to
marry where there had been carnal knowledge, moral damages may be
recovered:jgc:chanrobles.com.ph
". . . if there be criminal or moral seduction, but not if the intercourse was due
to mutual lust. (Hermosisima v. Court of Appeals, L-14628, Sept. 30, 1960;
Estopa v. Piansay, Jr., L-14733, Sept. 30, 1960; Batarra v. Marcos, 7 Phil. 56
(sic); Beatriz Galang v. Court of Appeals, Et Al., L-17248, Jan. 29, 1962). (In
other words, if the CAUSE be the promise to marry, and the EFFECT be the
carnal knowledge, there is a chance that there was criminal or moral
seduction, hence recovery of moral damages will prosper. If it be the other
way around, there can be no recovery of moral damages, because here
mutual lust has intervened). . . . ."cralaw virtua1aw library
together with "ACTUAL damages, should there be any, such as the

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On the other hand, in an action by the woman, the enticement, persuasion


or deception is the essence of the injury; and a mere proof of intercourse is
insufficient to warrant a recovery.

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expenses for the wedding preparations (See Domalagon v. Bolifer, 33 Phil.
471)." chanrobles law library : red
Senator Arturo M. Tolentino 29 is also of the same
persuasion:jgc:chanrobles.com.ph
"It is submitted that the rule in Batarra v. Marcos 30 still subsists,
notwithstanding the incorporation of the present article 31 in the Code. The
example given by the Code Commission is correct, if there was seduction,
not necessarily in the legal sense, but in the vulgar sense of deception. But
when the sexual act is accomplished without any deceit or qualifying
circumstance of abuse of authority or influence, but the woman, already of
age, has knowingly given herself to a man, it cannot be said that there is an
injury which can be the basis for indemnity.
But so long as there is fraud, which is characterized by wilfullness (sic), the
action lies. The court, however, must weigh the degree of fraud, if it is
sufficient to deceive the woman under the circumstances, because an act
which would deceive a girl sixteen years of age may not constitute deceit as
to an experienced woman thirty years of age. But so long as there is a
wrongful act and a resulting injury, there should be civil liability, even if the
act is not punishable under the criminal law and there should have been an
acquittal or dismissal of the criminal case for that reason."cralaw virtua1aw
library
We are unable to agree with the petitioners alternative proposition to the
effect that granting, for arguments sake, that he did promise to marry the
private respondent, the latter is nevertheless also at fault. According to him,
both parties are in pari delicto; hence, pursuant to Article 1412(1) of the Civil
Code and the doctrine laid down in Batarra v. Marcos, 32 the private
respondent cannot recover damages from the petitioner. The latter even
goes as far as stating that if the private respondent had "sustained any injury
or damage in their relationship, it is primarily because of her own doing," 33
for:jgc:chanrobles.com.ph
". . . She is also interested in the petitioner as the latter will become a doctor
sooner or later. Take notice that she is a plain high school graduate and a
mere employee . . (Annex C) or a waitress (TSN, p. 51, January 25, 1988) in
a luncheonette and without doubt, is in need of a man who can give her
economic security. Her family is in dire need of financial assistance (TSN,
pp. 51-53, May 18, 1988). And this predicament prompted her to accept a
proposition that may have been offered by the petitioner." 34
These statements reveal the true character and motive of the petitioner. It is
clear that he harbors a condescending, if not sarcastic, regard for the private

No foreigner must be allowed to make a mockery of our laws, customs and


traditions.
The pari delicto rule does not apply in this case for while indeed, the private
respondent may not have been impelled by the purest of intentions, she
eventually submitted to the petitioner in sexual congress not out of lust, but
because of moral seduction. In fact, it is apparent that she had qualms of
conscience about the entire episode for as soon as she found out that the
petitioner was not going to marry her after all, she left him. She is not,
therefore, in pari delicto with the petitioner. Pari delicto means "in equal fault;
in a similar offense or crime; equal in guilt or in legal fault." 35 At most, it
could be conceded that she is merely in delicto.chanrobles virtual lawlibrary
"Equity often interferes for the relief of the less guilty of the parties, where his
transgression has been brought about by the imposition or undue influence
of the party on whom the burden of the original wrong principally rests, or
where his consent to the transaction was itself procured by fraud." 36
In Mangayao v. Lasud, 37 We declared:jgc:chanrobles.com.ph
"Appellants likewise stress that both parties being at fault, there should be
no action by one against the other (Art. 1412, New Civil Code). This rule,
however, has been interpreted as applicable only where the fault on both
sides is, more or less, equivalent. It does not apply where one party is
literate or intelligent and the other one is not (c.f. Bough v. Cantiveros, 40
Phil. 209)."cralaw virtua1aw library

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respondent on account of the latters ignoble birth, inferior educational


background, poverty and, as perceived by him, dishonorable employment.
Obviously then, from the very beginning, he was not at all moved by good
faith and an honest motive. Marrying with a woman so circumstanced could
not have even remotely occurred to him. Thus, his profession of love and
promise to marry were empty words directly intended to fool, dupe, entice,
beguile and deceive the poor woman into believing that indeed, he loved her
and would want her to be his life s partner. His was nothing but pure lust
which he wanted satisfied by a Filipina who honestly believed that by
accepting his proffer of love and proposal of marriage, she would be able to
enjoy a life of ease and security. Petitioner clearly violated the Filipino s
concept of morality and so brazenly defied the traditional respect Filipinos
have for their women. It can even be said that the petitioner committed such
deplorable acts in blatant disregard of Article 19 of the Civil Code which
directs every person to act with justice, give everyone his due and observe
honesty and good faith in the exercise of his rights and in the performance of
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We should stress, however, that while We find for the private respondent, let
it not be said that this Court condones the deplorable behavior of her parents
in letting her and the petitioner stay together in the same room in their house
after giving approval to their marriage. It is the solemn duty of parents to
protect the honor of their daughters and infuse upon them the higher values
of morality and dignity.
WHEREFORE, finding no reversible error in the challenged decision, the
instant petition is hereby DENIED, with costs against the
petitioner.chanroblesvirtualawlibrary
SO ORDERED.
Feliciano, J., Bidin, Romero and Melo, JJ., concur.
Gutierrez, Jr., J., is on terminal leave.

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THIRD DIVISION
[G.R. No. 79184. May 6, 1992.]
ERLINDA L. PONCE, Petitioner, v. VALENTINO L. LEGASPI and THE
HON. COURT OF APPEALS,Respondents.
F.S. Farolan & Associates Law Offices for Petitioner.

SYLLABUS

1. CIVIL LAW; DAMAGES; CLAIM THEREOF BASED ON THE GROUND


OF MALICIOUS PROSECUTION; DISBARMENT PROCEEDINGS MAY BE
THE BASIS FOR A SUBSEQUENT ACTION FOR MALICIOUS
PROSECUTION. Both the Court of Appeals and the petitioner are of the
belief that the suit for damages filed by Atty. Legaspi is not one arising from
malicious prosecution because "a disbarment proceeding is not a criminal
action. (De Jesus-Paras v. Vailoces, 1 SCRA 954 [1961]." The obvious
inference is that only an unsuccessful criminal action may subsequently give
rise to a claim for damages based on malicious prosecution. This is not
correct. While generally, malicious prosecution refers to unfounded criminal

actions and has been expanded to include unfounded civil suits just to vex
and humiliate the defendant despite the absence of a cause of action or
probable cause (Equitable Banking Corporation v. Intermediate Appellate
Court, 133 SCRA 13B [1984]) the foundation of an action for malicious
prosecution is an original proceeding, judicial in character. (Lorber v.
Storrow, 70 P. 2d 513 [1937]; Shigeru Hayashida v. Tsunehachi Kakimoto, 23
P. 2d 311 [1933]; Graves v. Rudman, 257 N.Y.S. 212 [1932]). A disbarment
proceeding is, without doubt, judicial in character and therefore may be the
basis for a subsequent action for malicious prosecution.
2. ID.; ID.; ID.; COVERAGE. An action for damages arising from
malicious prosecution is anchored on the provisions of Article 21, 2217 and
2219 [8] of the New Civil Code. Under these Articles: "Article 21. Any person
who willfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for
damages. "Article 2217. Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation and similar injury. Though incapable of
pecuniary computation, moral damages may be recovered if they are the
proximate result of the defendants wrongful act or omission. "Article 2219.
Moral damages may be recovered in the following and analogous cases: . . .
(8) Malicious prosecution.
3. ID.; ID.; INJURY SUFFERED AS A CONSEQUENCE OF A PERSONS
RIGHT TO LITIGATE; WILL NOT AUTOMATICALLY RISE THERETO.
Atty. Legaspi may have suffered injury as a consequence of the disbarment
proceedings. But the adverse result of an action does not per se make the
action wrongful and subject the actor to make payment of damages for the
law could not have meant to impose a penalty on the right to litigate (Saba v.
Court of Appeals, 189 SCRA 50 [1990], citing Rubio v. Court of Appeals, 141
SCRA 488 [1986]. If damage results from a persons exercising his legal
rights, it is damnum absque injuria.
4. CRIMINAL LAW; MALICIOUS PROSECUTION; REQUISITES; PURPOSE
THEREOF. For the malicious prosecution suit to prosper, the plaintiff must
prove: (1) the fact of the prosecution and the further fact that the defendant
was himself the prosecutor, and that the action finally terminated with an
acquittal; (2) that in bringing the action, the prosecutor acted without
probable cause; and (3) that the prosecutor was actuated or impelled by
legal malice, that is by improper or sinister motive. (Lao v. Court of Appeals,
199 SCRA 58 [1991] and other cases. The foregoing requisites are
necessary safeguards to preserve a persons right to litigate which may
otherwise be emasculated by the undue filing of malicious prosecution
cases.

6. ID.; ID.; ID.; "PROBABLE CAUSE" DEFINED. Probable cause is the


existence of such facts and circumstances as would excite the belief, in a
reasonable mind, acting on the facts within the knowledge of the prosecutor,
that the person charged was guilty of the crime (or in this case, the
wrongdoing) for which he was prosecuted. (See Buchanan v. Viuda de
Esteban, (32 Phil. 263).
7. ID.; ID.; ID.; ID.; EXISTENCE THEREOF, SUFFICIENT TO DEFEAT THE
CHARGE THEREOF. We adjudge that petitioner Ponce was moved by
probable cause, we need not anymore ascertain whether or not the
petitioner acted with malice in filing the complaint. The existence of probable
cause alone, regardless of considerations of malice, is sufficient to defeat
the charge of malicious prosecution.
8. ID.; ID.; ID.; ABSENCE THEREOF WILL GIVE RISE TO CLAIM FOR
DAMAGES. The general rule is well settled that one cannot be held liable
in damages for maliciously instituting a prosecution where he acted with
probable cause. In other words, a suit will lie only in cases where a legal
prosecution has been carried on without probable cause.
9. COMMERCIAL LAW; CORPORATIONS; OFFICERS THEREOF
OCCUPYING FIDUCIARY POSITIONS; LIMITATIONS ON THE POWER
THEREOF; CASE AT BAR. We take exception to the respondents
comment that, assuming the petitioners accusation to be true, "there is
nothing in Philippine law which considers as unethical the formation of
competitive corporations and neither can it be considered with evident bad
faith and absolute lack of fidelity." (Records, Administrative Case No. 1819,
p. 69). The circumstances of the case do not depict a simple case of
formation of competitive corporations. What the petitioner objects to is the

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5. ID.; ID.; ELEMENTS OF MALICE AND WANT OF PROBABLE CAUSE;


ESSENTIAL FOR THE MAINTENANCE OF AN ACTION THEREOF. As
held in the case of Buchanan v. Viuda de Esteban, (32 Phil. 263) "Malice is
essential to the maintenance of an action for malicious prosecution and not
merely to the recovery of exemplary damages. But malice alone does not
make one liable for malicious prosecution, where probable cause is shown,
even where it appears that the suit was brought for the mere purpose of
vexing, harassing and injuring his adversary. In other words malice and want
of probable cause must both exist in order to justify the action." Facts and
circumstances existed which excited belief in Mrs. Ponces mind that the
respondent indeed committed unethical acts which warranted the imposition
of administrative sanctions. Whether or not the petitioners perception of
these facts and circumstances is actually correct is irrelevant to our inquiry,
the only issue being whether or not the petitioner had probable cause in
filing the complaint.

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fact that both the respondent lawyer and Porter are fiduciaries of LNOR and
are at the same time fiduciaries of YRASPORT, both of which are engaged
in the same line of business. The Corporation Law did not prohibit a director
or any other person occupying a fiduciary position in the corporate hierarchy
from engaging in a venture which competed with that of the corporation. But
as a lawyer, Atty. Legaspi should have known that while some acts may
appear to be permitted through sheer lack of statutory prohibition, these acts
are nevertheless circumscribed upon ethical and moral considerations. And
had Atty. Legaspi turned to American jurisprudence which then, as now,
wielded a persuasive influence on our law on corporations, he would have
known that it was unfair for him or for Porter, acting as fiduciary, to take
advantage of an opportunity when the interest of the corporation justly calls
for protection. (See Ballantine, Corporations, 204, Callaghan & Co., N. Y.
[1946]). Parenthetically, this lapse in the old Corporation Law is now cured
by sections 31 and 34 of the Corporation Code.
10. REMEDIAL LAW; CIVIL PROCEDURE; PLEADINGS; ALLEGATIONS
AND AVERMENTS THEREIN; TREATED AS ABSOLUTELY PRIVILEGED;
CASE AT BAR. Allegations and averments in pleadings are absolutely
privileged as long as they are relevant or pertinent to the issues (See
Montenegro v. Medina, 73 Phil. 602 [1942]). The test of good faith applies
only to a qualified privileged communication. Had the respondent court
studied the Deles case more closely, it would have traced the "bona fides"
test to the case of U.S. v. Bustos, (37 Phil. 731 [1918]). In the latter case, the
Court was referring to a qualified privileged communication when it
formulated the "bona fides" test. The test to break through the protective
barrier of an absolutely privileged communication is not "bona fides" but
relevance. In the present case, Atty. Legaspis complaint nowhere alleged
that the statements made by the petitioner were irrelevant. Thus, we, find
that the petitioners complaint for disbarment is still covered by the privilege
and may not be the basis of a damage suit arising from libel.

DECISION

GUTIERREZ, JR., J.:

This controversy calls for the balancing of two conflicting interests: the
petitioners right to litigate versus the respondents right to be protected from
malicious prosecution.
The present case stemmed from the filing before the Supreme Court on

At the time of the filing of the disbarment proceedings, petitioner Ponce,


together with her husband Manuel, owned forty three percent (43%) of the
stockholdings of LNOR Marine Services, Inc. (LNOR). She was then
Treasurer and director of the Board of Directors of LNOR while her husband
was a director. Forty eight percent (48%)) of LNORs stocks was owned by
the spouses Edward and Norma Porter who were then serving as
President/General Manager and Secretary respectively.
The pertinent portions of the complaint are reproduced below:chanrob1es
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October 3, 1977 of a complaint for disbarment against respondent Atty.


Valentino Legaspi by petitioner Erlinda Ponce.

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and whose line of business is in direct competition with LNOR;
15. YRASPORT, like Yrasport Enterprises, was launched without the
knowledge of the minority stockholders owning 43% of LNOR, and was
really designed to compete, if not eliminate, LNOR as a competitor;
16. That as a matter of fact attempts were made to secure one of LNOR
jobs in favor of YRASPORT, which fraudulent scheme was however
frustrated only by the timely opposition of herein complainant;
17. YRASPORT likewise availed of and used the office space, equipment,
personnel, funds, other physical facilities, and goodwill of LNOR while
competing at the same time against and causing the latter great damage
and irreparable injury;
x
"10. During the time or period while respondent is the legal counsel of the
aforecited corporation, there occurred certain fraudulent manipulations,
anomalous management and prejudicial operations by certain officers of
said corporation, namely: Edward J. Porter, President/General Manager;
Norma Y. Porter, Secretary; and Zenaida T. Manaloto" Director, who caused
great damage and prejudice which will be related hereunder;
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"14. About July, 1976, said spouses Edward J. Porter and Norma Y. Porter,
together with Zenaida T. Manaloto, facilitated, assisted and aided by herein
respondent Legaspi (Annexes "B" and "B-1" herewith), incorporated the
Yrasport Drydocks, Inc., hereinafter designated YRASPORT, which they
control with the following stockholdings:chanrob1es virtual 1aw library
Edward J. Porter 180 shares
Norma Y. Porter 180 shares
Eriberto F. Yrastorza 16 shares
Zenaida T. Manaloto 8 shares
Roman M. Maceda 8 shares
Andres A. Nombrado 8 shares

21. Edward J. Porter, President-General Manager of LNOR, purchased from


ISECOR (Industrial Supply Corporation) on November 3, 1974 one skaagit
winch with its cables for P10,000.00; that on November 18, 1974 said
Edward J. Porter assigned the purchase of said skaagit winch with its cables
in favor of LNOR at the price of P10,000.00; and that the latter corporation
then assumed the agreed obligation covering the P10,000.00 purchase price
in favor of ISECOR;
22. Subsequently, on or about October 18, 1975, said President-General
Manager Edward J. Porter misrepresented facts regarding the acquisition
cost of said skaagit winch with its cables to the effect that the same was sold
by ISECOR at the cost of P20,000.00; that he collected the sum from LNOR
for direct payment to ISECOR allegedly to liquidate in full the obligation of
P20,000.00 in favor of ISECOR, when, in truth and in fact, the obligation is
only P10,000.00 and not more;
23. On account of the aforecited flagrant fraud, a charge of Estafa was filed
against Edward J. Porter and the office of the City Fiscal handed down a
resolution to prosecute him in court, copy of pertinent exhibits herewith
marked as Annexes "C", "C-1", "C-2", "C-3", "C-4" and "C-5" ;
24. In view of the aforesaid illegal manipulations, illicit schemes, palpable
frauds and estafa committed by said President-General Manager Edward J.
Porter, in confabulation and conspiracy with the other officers of the
corporation, namely: his wife Norma Y. Porter and Zenaida T. Manaloto,
herein complainant requested respondent Valentino Legaspi to take and

25. On account of the refusal of said corporate attorney of LNOR,


respondent Legaspi, complainant was forced to retain the services of
another counsel to prosecute the appropriate derivative suit in the Court of
First Instance of Cebu, copy herewith marked Annex "D" ; and that, in
opposition to the same, respondent Legaspi appeared as legal counsel and
attorney of Edward J. Porter and, his confederates, copy of exhibits marked
Annex "D-1" herewith;
26. In the Criminal Case filed against Edward J. Porter for Estafa (Annex "C"
supra), respondent Legaspi likewise appeared as counsel for respondent
Porter despite the fact that he is the legal counsel of LNOR which is the
prejudiced party and for whose benefit the criminal case was really being
prosecuted, copy of letter of respondent, marked as Annex "C-6" herewith;
27. Up to the present time respondent is still collecting his monthly retainer,
and for his appearance for Edward J. Porter, et. al. in the derivative suit, he
collected the sum of P2,000.00 from LNOR as payment for his illicit legal
services in defending the Porters and Manaloto against the very interest of
the corporation paying him monthly retainer;
28. Said Edward J. Porter and his confederates, in their respective capacity
as such officers of LNOR, continue and persist in perpetrating malicious
acts, anomalous management and fraudulent operations against the interest
of LNOR, and that respondent Legaspi was duly advised verbally and also
in writing by complainant to take the necessary action in his capacity as legal
counsel of LNOR to protect zealously the interest of the latter, but
respondent Legaspi has done absolutely nothing, and grossly neglected and
flagrantly violated his duties as legal counsel up to the present time,
pertinent exhibits herewith marked as Annexes "E", "E1", "E-2", "E-4", "E-5",
"E-6" ;
29. That, on the contrary, respondent Legaspi in his dual capacity as legal
counsel of LNOR and YRASPORT, and at the same time acting in his
capacity as corporate secretary of YRASPORT, facilitated, assisted, aided or
otherwise abetted the illegal manipulations, illicit schemes, fraudulent
operations and grave frauds committed by said Edward J. Porter and his
confederates who are officers of LNOR against the interest of the latter and
to further the malicious competitive sabotage of YRASPORT alleged
heretofore; and

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pursue appropriate legal steps and seasonable actions in order to protect


the paramount interest of LNOR of which he is the legal counsel by retainer,
but the latter, without any valid excuse whatsoever, refused to do so,
although he is still collecting his monthly retainer;

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30. That, upon the foregoing, we most respectfully prefer against respondent
Valentino Legaspi the following charges:chanrob1es virtual 1aw library
First Specification:chanrob1es virtual 1aw library
That respondent Valentino Legaspi has committed gross misconduct in office
as a practicing lawyer and member of the Philippine Bar, because, as legal
counsel, he violated his duty to and the trust of his client, LNOR Marine
Services, Inc., whom he is professionally duty bound to represent with entire
devotion faithfully as such attorney, and whose paramount interest he should
protect in all good faith with absolute fidelity, but that, in truth and in fact, he
did not do so.
Second Specification:chanrob1es virtual 1aw library
That respondent Valentino Legaspi, while acting as legal counsel of LNOR
under continuing monthly retainer, has acted at the same time as lawyer of
Edward J. Porter, et. al., who have committed anomalous acts, prejudicial
manipulations and grave frauds against his client LNOR Marine Services,
Inc., that he therefore represented professionally conflicting interest; and that
he committed grave malpractice that is in flagrant violation of the recognized
canons of legal ethics.
Third Specification:chanrob1es virtual 1aw library
That respondent Valentino Legaspi committed grossly corrupt or dishonest
conduct while under retainer and acting as attorney of LNOR Marine
Services, Inc., when he facilitated, assisted, aided or otherwise abetted the
organization, registration and operation of another competing entity, Yrasport
Drydocks, Inc., in which he is also the lawyer and corporate Secretary, at the
expense of and to which the business and transactions of LNOR are being
diverted or otherwise appropriated, including the pirating of skilled personnel
and also facilities, and that respondent committed the same with evident bad
faith and absolute lack of fidelity to his client LNOR, thereby degrading the
good esteem, integrity and honor of the profession." (Records,
Administrative Case No. 1819, pp. 4-13).chanrobles.com.ph : virtual law
library
In his comment, Atty. Legaspi denied the allegations in paragraphs 10, 11,
22, 23, 24, 28, 29 and 30. He qualifiedly admitted the allegations in
paragraphs 14 and 15, stating that Yrasport was not organized to compete
directly with LNOR. He averred that LNOR could not cope up with the
business and Yrasport was formed for the purpose of complementing
LNORs business. He added that there is nothing in the law nor contract
which prohibits a stockholder from competing with the business of the

Atty. Legaspi admitted the allegations in paragraphs 26 and 27 that he


appeared for Edward Porter in the estafa case filed against the latter,
reasoning that his appearances were direct orders of management and that
it was not improper for counsel to represent both the corporate officers when
they are being sued at the same time.
As to the allegations in paragraphs 16 and 17, Atty. Legaspi declared that he
has no sufficient knowledge to form a belief as to the truth or falsity of the
statements contained therein.
On January 23, 1978, the Court issued a resolution dismissing the
disbarment complaint against Legaspi. The resolution is quoted
hereunder:jgc:chanrobles.com.ph
"Administrative Case No. 1819 (Erlinda L. Ponce v. Valentino L. Legaspi).
Considering the complaint for disbarment against Atty. Valentino L. Legaspi
as well as said respondents comment thereon, the Court Resolved to
DISMISS the complaint for lack of merit." (Records, Administrative Case No.
1819 p. 91)
The petitioner filed a motion for reconsideration which was denied by the
Court on March 31, 1978.
On February 10, 1978, Atty. Legaspi filed before the Court of First Instance
(now Regional Trial Court of Cebu) a complaint for damages against the
petitioner.

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corporation.

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decision, the Court of Appeals reasoned:jgc:chanrobles.com.ph
"Defendant-appellant contends that plaintiff-appellees action for damages is
purely retaliatory in character and stems from an alleged feeling of wounded
pride or amor proprio; that granting without admitting that the appellee has
suffered certain adverse effects in his reputation because of the disbarment
case, it does not constitute malicious prosecution as would otherwise
perhaps render the appellant liable for damages; that the facts on record
indubitably show that the appellant was merely exercising her right of access
to courts for redress of legitimate grievances when she filed the disbarment
case believing then as she still does, that appellee committed a breach of his
professional duties as a lawyer. In refutation, appellee alleges that appellant
belittles this action for damages as purely retaliatory in character and stems
from an alleged feeling of wounded pride or amor proprio; that by such
statement, appellant has unmasked herself as to how little regard she has
for the feelings of others and how she clings to the law if only to secure her
purpose; that what is being sought by appellee is compensation for
appellees malice, falsehoods and deceit in trying to destroy the professional
standing of a humble practitioner just because he did better than the
other.chanroblesvirtualawlibrary
While free access to the courts is guaranteed under Section 9, Article IV of
the 1973 Constitution (now Section 11, Article III of the 1986 Constitution), it
does not give unbridled license to file any case, whatever the motives are.
Whoever files a case shall be responsible for the consequences thereof
whenever his act of filing infringes upon the rights of others. In the same way
that although freedom of speech is guaranteed, one cannot claim to be
protected under such freedom when he is being held liable for the libel he
commits.

The petitioner filed a motion to dismiss which was denied by the trial court.
On July 18, 1983, the lower court rendered judgment the dispositive portion
of which reads as follows:jgc:chanrobles.com.ph
"WHEREFORE, this court being satisfied that the material allegations of the
complaint have been proved and remained uncontradicted with the
testimonial and documentary evidence introduced and admitted by the court,
judgment is hereby rendered in favor of the plaintiff and against the
defendant Erlinda L. Ponce ordering the defendant to pay Valentino L.
Legaspi, plaintiff herein, the amount of P1,000.00 as actual damages,
P50,000.00 as moral damages and P25,000.00 as exemplary damages and
to pay the costs." (Rollo, p. 115)
The petitioner appealed to the Court of Appeals. On May 26, 1987, the Court
of Appeals affirmed the lower courts judgment. In affirming the appealed

The case at bar cannot be considered as one for recovery of damages


arising from malicious prosecution, for a disbarment proceeding is not a
criminal action. (De Jesus-Paras v. Vailoces, 111 Phil. 569; 1 SCRA 954,
957). However, we should not lose sight of the fact that utterances made in
the course of judicial proceedings, including all kinds of pleadings, petitions
and motions, belong to the class of communications that are absolutely
privileged. (Sison v. David, 110 Phil. 662; 1 SCRA 60, 71 citing authorities)
and no civil action for libel or slander may arise therefrom unless the
contents of the petition are irrelevant to the subject matter thereof. (1 SCRA
71). It has also been held that a privileged communication should not be
subjected to microscopic examination to discover grounds of malice or
falsity. Such excessive scrutiny would defeat the protection which the law
throws over privileged communications. The ultimate test is that of bona
fides. (Deles v. Aragona, Jr., 27 SCRA 633, 642). The privileged character of
her complaint filed with the Supreme Court must have been what defendant

Yet, the uncontroverted evidence before the court belie these allegations
because there are antecedent incidents between plaintiff and defendant that
speak otherwise; that she filed this disbarment complaint against plaintiff
with malice aforethought. This conclusion is founded on the fact that
defendant was embittered against him for failing to obtain a compromise
against Eduardo Coronel before the military due to plaintiffs defense of his
client; that she wanted to dissolve the LNor Corporation in order to
repossess the premises leased to the former upon the corporations
dissolution and Porters ouster which was thwarted by plaintiffs advice as
counsel for LNor; plaintiffs letter (Exhibit "H") that she was not authorized to
use the title of Chairman of the Board; not counter-signing plaintiffs check
(Exhibits I, I-1, and I-2); her insistence to have the surplus profits declared
as cash dividend which likewise failed due to plaintiffs advice; her letter
(Exh. J) asking plaintiff to desist from defending the corporation and its
officers; plaintiffs refusal to give her advice without authority from the Board
of Directors; numerous cases filed with the Security and Exchange
Commission which were all dismissed and with the Court of First Instance
and Circuit Criminal Court which plaintiff ably defended causing their
eventual dismissal and other acts against plaintiff which demonstrated
palpably defendants hatred for the plaintiff acts clearly evidencing malice
contrary to her averments in the Answer.
To top it all, notwithstanding her evident support and advice by counsel, she
cleverly hid the identity of said counsel prosecuting all her acts of vilification
and harassment in her own name. Furthermore, the testimony of plaintiff that
she distributed copies of her complaint for disbarment against plaintiff to his
clients remain uncontradicted. Finally, instead of coming to court in good
faith she instead moved from her residence at Seaview Heights, Lawaan,
Talisay, Cebu without informing the court nor her counsel and has not been
heard from. From the foregoing, malice is evident.
Appellant claims that the finding of the lower court that appellant
disseminated information regarding the filing of her complaint for disbarment
and caused a copy of the same to be furnished appellees clients is totally
unsupported by any evidence on record. The contention is untenable.
Plaintiff declared that he came to know of the complaint against him even
before the Supreme Court required him to comment because two or three of
his clients told him that they had a copy given to them. (p. 8, t.s.n., June 3,
1983)

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had in mind when she invokes her right to free access to the courts.
However, defendants actuations before and after the filing of administrative
complaint with the Supreme Court disprove her bona fides. On this issue,
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The foregoing acts committed by the defendant violate the conduct that she
should have observed in her relation to plaintiff, as provided in the following
provisions of the Civil Code of the Philippines, to wit:chanrob1es virtual 1aw
library
ARTICLE 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
ARTICLE 20. Every person who, contrary to law, willfully or negligently
causes damage to another, shall indemnify the latter for the same.
ARTICLE 26. Every person shall respect the dignity, personality, privacy and
peace of mind of his neighbors and other persons. The following and similar
acts, though they may not constitute a criminal offense, shall produce a
cause of action for damages, prevention and other relief:chanrob1es virtual
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(1) Prying into the privacy of anothers residence;
(2) Meddling with or disturbing the private life or family relations of another;
(3) Intriguing to cause another to be alienated from his friends;
(4) Vexing or humiliating another on account of his religious beliefs, lowly
station in life, place of birth, physical defect, or other personal condition."
(Rollo, pp. 45-48)
The petitioners motion for reconsideration was denied by the respondent
Court in its resolution dated July 7, 1987. Hence, this petition.
The petitioner assigns the following errors:chanrob1es virtual 1aw library
I
"THE RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE
DECISION OF THE REGIONAL TRIAL COURT OF CEBU, BRANCH XXI,
WHICH FOUND THE HEREIN PETITIONER GUILTY OF BAD FAITH IN
INSTITUTING A COMPLAINT FOR DISBARMENT AGAINST THE PRIVATE
RESPONDENT.
II

Before proceeding with the merits of the case, the scope of an action for
damages arising from malicious prosecution needs to be clarified. Both the
Court of Appeals and the petitioner are of the belief that the suit for damages
filed by Atty. Legaspi is not one arising from malicious prosecution because
"a disbarment proceeding is not a criminal action. (De Jesus-Paras v.
Vailoces, 1 SCRA 954 [1961]." The obvious inference is that only an
unsuccessful criminal action may subsequently give rise to a claim for
damages based on malicious prosecution. This is not correct. While
generally, malicious prosecution refers to unfounded criminal actions and
has been expanded to include unfounded civil suits just to vex and humiliate
the defendant despite the absence of a cause of action or probable cause
(Equitable Banking Corporation v. Intermediate Appellate Court, 133 SCRA
13B [1984]) the foundation of an action for malicious prosecution is an
original proceeding, judicial in character. (Lorber v. Storrow, 70 P. 2d 513
[1937]; Shigeru Hayashida v. Tsunehachi Kakimoto, 23 P. 2d 311 [1933];
Graves v. Rudman, 257 N.Y.S. 212 [1932]). A disbarment proceeding is,
without doubt, judicial in character and therefore may be the basis for a
subsequent action for malicious prosecution.chanrobles virtual lawlibrary
A perusal of the allegations in Atty. Legaspis complaint for damages,
particularly paragraphs 10, 11, 12 and 15 thereof (Rollo, pp. 56-59) shows
that his main cause of action was predicated on injury resulting from the
institution of the disbarment case against him. This being the case, we find
that the suit filed by the respondent lawyer makes out a case of damages for
malicious prosecution.
An action for damages arising from malicious prosecution is anchored on the
provisions of Article 21, 2217 and 2219 [8] of the New Civil Code. Under
these Articles:jgc:chanrobles.com.ph
"ARTICLE 21. Any person who willfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for damages.
"ARTICLE 2217. Moral damages include physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation and similar injury. Though incapable of pecuniary
computation, moral damages may be recovered if they are the proximate
result of the defendants wrongful act or omission.

"ARTICLE 2219. Moral damages may be recovered in the following and


analogous cases:chanrob1es virtual 1aw library
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THE RESPONDENT COURT OF APPEALS ERRED IN ORDERING THE


PETITIONER TO PAY THE PRIVATE RESPONDENT ACTUAL, MORAL
AND EXEMPLARY DAMAGES TO PAY THE COSTS. (Rollo, p. 21)

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(8) Malicious prosecution.


In order, however, for the malicious prosecution suit to prosper, the plaintiff
must prove: (1) the fact of the prosecution and the further fact that the
defendant was himself the prosecutor, and that the action finally terminated
with an acquittal; (2) that in bringing the action, the prosecutor acted without
probable cause; and (3) that the prosecutor was actuated or impelled by
legal malice, that is by improper or sinister motive. (Lao v. Court of Appeals,
199 SCRA 58 [1991]; Rehabilitation Finance Corporation v. Koh, 4 SCRA
535 [1962]; Buchanan v. Viuda de Esteban, 32 Phil. 363 [1915])
The foregoing requisites are necessary safeguards to preserve a persons
right to litigate which may otherwise be emasculated by the undue filing of
malicious prosecution cases. Thus, as further held in the aforecited case of
Buchanan v. Viuda. de Esteban, supra: "Malice is essential to the
maintenance of an action for malicious prosecution and not merely to the
recovery of exemplary damages. But malice alone does not make one liable
for malicious prosecution, where probable cause is shown, even where it
appears that the suit was brought for the mere purpose of vexing, harassing
and injuring his adversary. In other words malice and want of probable cause
must both exist in order to justify the action." (Underlining supplied; see also
Rehabilitation Finance Corp. v. Koh, supra)
Probable cause is the existence of such facts and circumstances as would
excite the belief, in a reasonable mind, acting on the facts within the
knowledge of the prosecutor, that the person charged was guilty of the crime
(or in this case, the wrongdoing) for which he was prosecuted. (See
Buchanan v. Viuda de Esteban, supra).
The general rule is well settled that one cannot be held liable in damages for
maliciously instituting a prosecution where he acted with probable cause. In
other words, a suit will lie only in cases where a legal prosecution has been
carried on without probable cause. (Id.; Emphasis supplied)
The petitioner, at the time of her filing of the administrative complaint against
the respondent, held substantial stockholdings in LNOR. She believed that
LNOR was defrauded by its President/General Manager, Edward Porter,
and filed a complaint for estafa against the latter. Porter was convicted by

Respondent did not deny that he represented Porter during the preliminary
investigation and trial of the criminal case. In his comment in the disbarment
complaint against him, he justified his action by saying that they were "direct
orders of management" and that there is "nothing improper for counsel to
represent both the corporation and corporate officers at the same time when
they are being sued." (Records, Administrative Case No. 1819, p.
64)chanrobles lawlibrary : rednad
It is of no moment now that Porter was acquitted of the estafa charge.
Apparently, at that time, petitioner Ponce saw a conflict of interest situation.
To her mind, the act of the respondent in appearing as counsel for Porter,
who had allegedly swindled LNOR, the interest of which he was duty bound
to protect by virtue of the retainer contract, constituted grave misconduct and
gross malpractice.
Atty. Legaspi did not deny that he aided the Porters in facilitating the
incorporation of YRASPORT and that he himself was its corporate secretary.
He emphasized, though, that due to LNORS limited capitalization,
YRASPORT was organized to complement LNORS business and not to
compete with the latters undertakings.
Since the petitioner, however, was of the honest perception that YRASPORT
was actually organized to appropriate for itself some of LNORS business,
then we find that she had probable cause to file the disbarment suit.
We take exception to the respondents comment that, assuming the
petitioners accusation to be true, "there is nothing in Philippine law which
considers as unethical the formation of competitive corporations and neither
can it be considered with evident bad faith and absolute lack of fidelity."
(Records, Administrative Case No. 1819, p. 69).
The circumstances of the case do not depict a simple case of formation of
competitive corporations. What the petitioner objects to is the fact that both
the respondent lawyer and Porter are fiduciaries of LNOR and are at the
same time fiduciaries of YRASPORT, both of which are engaged in the same
line of business.
True, at that time, the Corporation Law did not prohibit a director or any other
person occupying a fiduciary position in the corporate hierarchy from
engaging in a venture which competed with that of the corporation. But as a
lawyer, Atty. Legaspi should have known that while some acts may appear to
be permitted through sheer lack of statutory prohibition, these acts are
nevertheless circumscribed upon ethical and moral considerations. And had

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the trial court but, upon appeal, was acquitted by the appellate court.

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Atty. Legaspi turned to American jurisprudence which then, as now, wielded
a persuasive influence on our law on corporations, he would have known
that it was unfair for him or for Porter, acting as fiduciary, to take advantage
of an opportunity when the interest of the corporation justly calls for
protection. (See Ballantine, Corporations, 204, Callaghan & Co., N. Y.
[1946]).
Parenthetically, this lapse in the old Corporation Law is now cured by
sections 31 and 34 of the Corporation Code which
provide:jgc:chanrobles.com.ph
"SECTION 31. Liability of directors, trustees or officers. Directors or
trustees who willfully and knowingly vote for or assent to patently unlawful
acts of the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or pecuniary
interest in conflict with their duty as such directors or trustees shall be liable
jointly and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons.
When a director, trustee or officer attempts to acquire or acquires, in
violation of his duty, any interest adverse to the corporation in respect of any
matter which has been reposed in him in confidence, as to which equity
imposes a disability upon him to deal in his own behalf, he shall be liable as
a trustee for the corporation and must account for the profits which otherwise
have accrued to the corporation.
"SECTION 34. Disloyalty of a director. Where a director, by virtue of his
office, acquires for himself a business opportunity which should belong to
the corporation, thereby obtaining profits to the prejudice of such
corporation, he must account to the latter for all such profits by refunding the
same, unless his act has been ratified by a vote of the stockholders owning
or representing at least two-thirds (2/3) of the outstanding capital stock. This
provision shall be applicable, notwithstanding the fact that the director risked
his own funds in the venture."cralaw virtua1aw library
The Court finds it unnecessary to discuss all the other charges imputed to
the respondent lawyer in the disbarment complaint. From the foregoing
discussion, we have sufficient basis to declare that the petitioner had
probable cause in filing the administrative case against Atty. Legaspi. Facts
and circumstances existed which excited belief in Mrs. Ponces mind that the
respondent indeed committed unethical acts which warranted the imposition
of administrative sanctions. Whether or not the petitioners perception of
these facts and circumstances is actually correct is irrelevant to our inquiry,
the only issue being whether or not the petitioner had probable cause in
filing the complaint.chanrobles virtualawlibrary

The above discussion should not be construed as re-opening of the


disbarment proceeding against Atty. Legaspi. References to the complaint
for disbarment and the respondents comment thereto are made only for the
purpose of determining the existence of probable cause.
Since we adjudge that petitioner Ponce was moved by probable cause, we
need not anymore ascertain whether or not the petitioner acted with malice
in filing the complaint. The existence of probable cause alone, regardless of
considerations of malice, is sufficient to defeat the charge of malicious
prosecution.

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chanrobles.com:chanrobles.com.ph

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law could not have meant to impose a penalty on the right to litigate (Saba v.
Court of Appeals, 189 SCRA 50 [1990], citing Rubio v. Court of Appeals, 141
SCRA 488 [1986]; see also Salao v. Salao, 70 SCRA 65 [1976] and Ramos
v. Ramos, 61 SCRA 284 [1974], citing Barreto v. Arevalo, 99 Phil. 771
[1956]). One who exercises his rights does no injury. (Saba v. Court of
Appeals, supra, citing Auyong Hian v. Court of Tax Appeals, 59 SCRA 110
[1974]). If damage results from a persons exercising his legal rights, it is
damnum absque injuria. [Id.]
WHEREFORE, the petition is hereby GRANTED. The decision of the
respondent Court of Appeals is SET ASIDE and REVERSED.
SO ORDERED.
The respondent court treated Atty. Legaspis complaint as one for damages
arising from libel and applied the test of bona fides, citing the case of Deles
v. Aragona (27 SCRA 633 [1969]). This is incorrect.
In the first place, allegations and averments in pleadings are absolutely
privileged as long as they are relevant or pertinent to the issues (See
Montenegro v. Medina, 73 Phil. 602 [1942]). The test of good faith applies
only to a qualified privileged communication. Had the respondent court
studied the Deles case more closely, it would have traced the "bona fides"
test to the case of U.S. v. Bustos, (37 Phil. 731 [1918]). In the latter case, the
Court was referring to a qualified privileged communication when it
formulated the "bona fides" test.
Moreover, the test to break through the protective barrier of an absolutely
privileged communication is not "bona fides" but relevance. In the present
case, Atty. Legaspis complaint nowhere alleged that the statements made
by the petitioner were irrelevant. Thus, we, find that the petitioners
complaint for disbarment is still covered by the privilege and may not be the
basis of a damage suit arising from libel.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
We disagree with the findings of the two lower courts that it was the
petitioner who distributed copies of the complaint for disbarment to Atty.
Legaspis clients. It should be noted that Atty. Legaspi did not even present
these alleged clients in court to testify to the source of these copies.
Considering that a complaint for disbarment becomes of public record once
it is filed with the Court, then the petitioner may not be pinpointed as the sole
and indisputable source of the copies received by the respondents clients.
Atty. Legaspi may have suffered injury as a consequence of the disbarment
proceedings. But the adverse result of an action does not per se make the
action wrongful and subject the actor to make payment of damages for the

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This petition for review on Certiorari seeks to set aside the decision 1 of the
Court of Appeals in CA-G.R. SP No. 32679 affirming in part the order 2 of
the Regional Trial Court (RTC) of Quezon City, Branch 101, in Civil Case No.
Q-41470.
The factual and procedural antecedents of this case as gathered from the
record are as follows:nadchanroblesvirtualawlibrary
Petitioner Pedro P. Pecson was the owner of a commercial lot located in
Kamias Street, Quezon City, on which he built a four-door two-storey
apartment building. For his failure to pay realty taxes amounting to twelve
thousand pesos (P12,000.00), the lot was sold at public auction by the City
Treasurer of Quezon City to Mamerto Nepomuceno who in turn sold it on 12
October 1983 to the private respondents, the spouses Juan Nuguid and
Erlinda Tan-Nuguid, for one hundred three thousand pesos (P103,000.00).
The petitioner challenged the validity of the auction sale in Civil Case No. Q41470 before the RTC of Quezon City. In its decision of 8 February 1989, the
RTC dismissed the complaint, but as to the private respondent's claim that
the sale included the apartment building, it held that the issue concerning it
was "not a subject of the . . . litigation." In resolving the private respondent's
motion to reconsider this issue, the trial court held that there was no legal
basis for the contention that the apartment building was included in the sale.
3

FIRST DIVISION

Both parties then appealed the decision to the Court of Appeals. The case
was docketed as CA-G.R. CV No. 2931. In its decision of 30 April 1992, 4
the Court of Appeals affirmed in toto the assailed decision. It also agreed
with the trial court that the apartment building was not included in the auction
sale of the commercial lot. Thus:nadchanroblesvirtualawlibrary

[G.R. No. 115814. May 26, 1995.]

PEDRO P. PECSON, Petitioner, v. COURT OF APPEALS, SPOUSES JUAN


NUGUID and ERLINDA NUGUID,Respondents.

DECISION

DAVIDE, JR., J.:

Indeed, examining the record we are fully convinced that it was only the land
without the apartment building which was sold at the auction sale, for
plaintiff's failure to pay the taxes due thereon. Thus, in the Certificate of Sale
of Delinquent Property To Purchaser (Exh. K, p. 352, Record) the property
subject of the auction sale at which Mamerto Nepomuceno was the
purchaser is referred to as Lot No. 21-A, Block No. K-34, at Kamias,
Barangay Piahan, with an area of 256.3 s.q.m., with no mention
whatsoever, of the building thereon. The same description of the subject
property appears in the Final Notice To Exercise The Right of Redemption
(over subject property) dated September 14, 1981 (Exh. L, p. 353, Record)
and in the Final Bill of Sale over the same property dated April 19, 1982

Page

(Exh. P, p. 357, Record). Needless to say, as it was only the land without any
building which Nepomuceno had acquired at the auction sale, it was also
only that land without any building which he could have legally sold to the
Nuguids. Verily, in the Deed of Absolute Sale of Registered Land executed
by Mamerto Nepomuceno in favor of the Nuguids on October 25, 1983 (Exh.
U, p. 366, Record) it clearly appears that the property subject of the sale for
P103,000.00 was only the parcel of land, Lot 21-A, Blk. K-34 containing an
area of 256.3 sq. meters, without any mention of any improvement, much
less any building thereon. (Emphases supplied)

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1993 and from this date on, being the uncontested owner of the property, the
rents should be paid to him instead of the plaintiff collecting them. From
June 23, 1993, the rents collected by the plaintiff amounting to more than
P53,000.00 from tenants should be offset from the rents due to the lot which
according to movant's affidavit is more than P21,000.00 a month.
WHEREFORE, finding merit in the Motion, the Court hereby grants the
following prayer that:nadchanroblesvirtualawlibrary
1. The movant shall reimburse plaintiff the construction cost of P53,000.00.
The petition to review the said decision was subsequently denied by this
Court. 5 Entry of judgment was made on 23 June 1993. 6
On November 1993, the private respondents filed with the trial court a
motion for delivery of possession of the lot and the apartment building, citing
Article 546 of the Civil Code. 7 Acting thereon, the trial court issued on 15
November 1993 the challenged order 8 which reads as
follows:nadchanroblesvirtualawlibrary
Submitted for resolution before this Court is an uncontroverted [sic] for the
Delivery of Possession filed by defendants Erlinda Tan, Juan Nuguid, et al.
considering that despite personal service of the Order for plaintiff to file
within five (5) days his opposition to said motion, he did not file any.
In support of defendant's motion, movant cites the law in point as Article 546
of the Civil Code . . .
Movant agrees to comply with the provisions of the law considering that
plaintiff is a builder in good faith and he has in fact, opted to pay the cost of
the construction spent by plaintiff. From the complaint itself the plaintiff
stated that the construction cost of the apartment is much more than the lot,
which apartment he constructed at a cost of P53,000.00 in 1965 (par. 8
complaint). This amount of P53,000.00 is what the movant is supposed to
pay under the law before a writ of possession placing him in possession of
both the lot and apartment would be issued.
However, the complaint alleges in paragraph 9 that three doors of the
apartment are being leased. This is further confirmed by the affidavit of the
movant presented in support of the motion that said three doors are being
leased at a rental of P7,000.00 a month each. The movant further alleges in
his said affidavit that the present commercial value of the lot is P10,000.00
per square meter or P2,500,000.00 and the reasonable rental value of said
lot is no less than P21,000.00 per month.
The decision having become final as per Entry of Judgment dated June 23,

2. The payment of P53,000.00 as reimbursement for the construction cost,


movant Juan Nuguid is hereby entitled to immediate issuance of a writ of
possession over the lot and improvements thereon.
3. The movant having been declared as the uncontested owner of the lot in
question as per Entry of Judgment of the Supreme Court dated June 23,
1993, the plaintiff should pay rent to the movant of no less than P21,000.00
per month from said date as this is the very same amount paid monthly by
the tenants occupying the lot.
4. The amount of P53,000.00 due from the movant is hereby offset against
the amount of rents collected by the plaintiff from June 23, 1993, to
September 23, 1993."
SO ORDERED.
The petitioner moved for the reconsideration of the order but it was not acted
upon by the trial court. Instead, on 18 November 1993, it issued a writ of
possession directing the deputy sheriff "to place said movant Juan Nuguid in
possession of subject property located at No. 79 Kamias Road, Quezon City,
with all the improvements thereon and to eject therefrom all occupants
therein, their agents, assignees, heirs and representatives." 9
The petitioner then filed with the Court of Appeals a special civil action
for Certiorari and prohibition assailing the order of 15 November 1993, which
was docketed as CA-G.R. SP No. 32679. 10 In its decision of 7 June 1994,
the Court of Appeals affirmed in part the order of the trial court citing Articles
448 of the Civil Code. In disposing of the issues, it stated:
As earlier pointed out, private respondents opted to appropriate the
improvement introduced by petitioner on the subject lot, giving rise to the
right of petitioner to be reimbursed of the cost of constructing said apartment
building, in accordance with Article 546 of the . . . Civil Code, and of the right
to retain the improvements until he is reimbursed of the cost of the

We, however, agree with the finding of respondent judge that the amount of
P53,000.00 earlier admitted as the cost of constructing the apartment
building can be offset from the amount of rents collected by petitioner from
June 23, 1993 up to September 23, 1993 which was fixed at P7,000.00 per
month for each of the three doors. Our underlying reason is that during the
period of retention, petitioner as such possessor and receiving the fruits from
the property, is obliged to account for such fruits, so that the amount thereof
may be deducted from the amount of indemnity to be paid to him by the
owner of the land, in line with Mendoza vs. De Guzman, 52 Phil. 164. . . .
The Court of Appeals then ruled as follows:nadchanroblesvirtualawlibrary
WHEREFORE, while it appears that private respondents have not yet
indemnified petitioner with the cost of the improvements, since Annex I
shows that the Deputy Sheriff has enforced the Writ of Possession and the
premises have been turned over to the possession of private respondents,
the quest of petitioner that he be restored in possession of the premises is
rendered moot and academic, although it is but fair and just that private
respondents pay petitioner the construction cost of P53,000.00; and that
petitioner be ordered to account for any and all fruits of the improvements
received by him starting on June 23, 1993, with the amount of P53,000.00 to
be offset therefrom.
IT IS SO ORDERED. 11
Aggrieved by the Court of Appeals' decision, the petitioner filed the instant
petition.
The parties agree that the petitioner was a builder in good faith of the
apartment building on the theory that he constructed it at the time when he
was still the owner of the lot, and that the key issue in this case is the
application of Articles 448 and 456 of the Civil Code.
The trial court and the Court of Appeals, as well as the parties, concerned

Page

improvements, because, basically, the right to retain the improvement while


the corresponding indemnity is not paid implies the tenancy or possession in
fact of the land on which they are built . . . . [2 TOLENTINO, CIVIL CODE OF
THE PHILIPPINES (1992) p. 112]. With the facts extant and the settled
principle as guides, we agree with petitioner that respondent judge erred in
ordering that "the movant having been declared as the uncontested owner of
the lot in question as per Entry of Judgment of the Supreme Court dated
June 23, 1993, the plaintiff should pay rent to the movant of no less than
P21,000.00 per month from said date as this is the very same amount paid
monthly by the tenants occupying the lot."

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themselves with the application of Articles 448 and 546 of the Civil Code.
These articles read as follows:nadchanroblesvirtualawlibrary
Art. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the
works, sowing or planting, after payment of the indemnity provided for in
articles 546 and 548, or to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall
pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement, the court shall fix the terms
thereof. (361a)
xxx xxx xxx
Art. 546. Necessary expenses shall be refunded to every possessor; but
only the possessor in good faith may retain the thing until he has been
reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with
the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses or of
paying the increase in value which the thing may have acquired by reason
thereof. (453a)
By its clear language, Article 448 refers to a land whose ownership is
claimed by two or more parties, one of whom has built some works, or sown
or planted something. The building, sowing or planting may have been made
in good faith or in bad faith. The rule on good faith laid down in Article 526 of
the Civil Code shall be applied in determining whether a builder, sower or
planter had acted in good faith. 12
Article 448 does not apply to a case where the owner of the land is the
builder, sower, or planter who then later loses ownership of the land by sale
or donation. This Court said so in Coleongco vs. Regalado: 13
Article 361 of the old Civil Code is not applicable in this case, for Regalado
constructed the house on his own land before he sold said land to
Coleongco. Article 361 applies only in cases where a person constructs a
building on the land of another in good or in bad faith, as the case may be. It
does not apply to a case where a person constructs a building on his own
land, for then there can be no questions as to good or bad faith on the part

Elsewise stated, where the true owner himself is the builder of works on his
own land, the issue of good faith or bad faith is entirely
irrelevant. nadchanroblesvirtuallawlibrary
Thus in strict point of law, Article 448 is not opposite to the case at bar.
Nevertheless, we believe that the provision therein on indemnity may be
applied by analogy considering that the primary intent of Article 448 is to
avoid a state of forced co-ownership and that the parties, including the two
courts below, in the main agree that Articles 448 and 546 of the Civil Code
are applicable and indemnity for the improvements may be paid although
they differ as to the basis of the indemnity.
Article 546 does not specifically state how the value of the useful
improvements should be determined. The respondent court and the private
respondents espouse the belief that the cost of construction of the apartment
building in 1965, and not its current market value, is sufficient
reimbursement for necessary and useful improvements made by the
petitioner. This position is, however, not in consonance with previous rulings
of this Court in similar cases. In Javier vs. Concepcion, Jr., 14 this Court
pegged the value of the useful improvements consisting of various fruits,
bamboos, a house and camarin made of strong material based on the
market value of the said improvements. In Sarmiento vs. Agana, 15 despite
the finding that the useful improvement, a residential house, was built in
1967 at a cost of between eight thousand pesos (P8,000.00) to ten thousand
pesos (P10,000.00), the landowner was ordered to reimburse the builder in
the amount of forty thousand pesos (P40,000.00), the value of the house at
the time of the trial. In the same way, the landowner was required to pay the
"present value" of the house, a useful improvement, in the case of De
Guzman vs. De la Fuente, 16 cited by the petitioner.

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amount of reimbursement to be paid by the landowner.
The trial court also erred in ordering the petitioner to pay monthly rentals
equal to the aggregate rentals paid by the lessees of the apartment building.
Since the private respondents have opted to appropriate the apartment
building, the petitioner is thus entitled to the possession and enjoyment of
the apartment building, until he is paid the proper indemnity, as well as of the
portion of the lot where the building has been constructed. This is so
because the right to retain the improvements while the corresponding
indemnity is not paid implies the tenancy or possession in fact of the land in
which it is built, planted or sown. 18 The petitioner not having been so paid,
he was entitled to retain ownership of the building and, necessarily, the
income therefrom.
It follows, too, that the Court of Appeals erred not only in upholding the trial
court's determination of the indemnity, but also in ordering the petitioner to
account for the rentals of the apartment building from 23 June 1993 to 23
September 1993. nadchanroblesvirtuallawlibrary
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No.
32679 and the Order of 15 November 1993 of the Regional Trial Court,
Branch 101, Quezon City in Civil Case No. Q-41470 are hereby SET ASIDE.
The case is hereby remanded to the trial court for it to determine the current
market value of the apartment building on the lot. For this purpose, the
parties shall be allowed to adduce evidence on the current market value of
the apartment building. The value so determined shall be forthwith paid by
the private respondents to the petitioner otherwise the petitioner shall be
restored to the possession of the apartment building until payment of the
required indemnity.
No costs.
The objective of Article 546 of the Civil Code is to administer justice between
the parties involved. In this regard, this Court had long ago stated in Rivera
vs. Roman Catholic Archbishop of Manila 17 that the said provision was
formulated in trying to adjust the rights of the owner and possessor in good
faith of a piece of land, to administer complete justice to both of them is such
a way as neither one nor the other may enrich himself of that which does not
belong to him. Guided by this precept, it is therefore the current market value
of the improvements which should be made the basis of reimbursement. A
contrary ruling would unjustly enrich the private respondents who would
otherwise be allowed to acquire a highly valued income-yielding four-unit
apartment building for a measly amount. Consequently, the parties should
therefore be allowed to adduce evidence on the present market value of the
apartment building upon which the trial court should base its finding as to the

SO ORDERED.

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SYLLABUS

1. CIVIL LAW; HUMAN RELATIONS; UNJUST ENRICHMENT; NOT


ALLOWED. Under Article 1182 of the Civil Code, a conditional obligation
shall be void if its fulfillment depends upon the sole will of the debtor. In the
present case, the mutual agreement, the absence of which petitioner bank
relies upon to support its non-liability for the increased construction cost, is
in effect a condition dependent on petitioner banks sole will, since, private
respondent would naturally and logically give consent to such an agreement
which would allow him recovery of the increased cost. Further, it cannot be
denied that petitioner bank derived benefits when private respondent
completed the construction even at an increased cost. Hence, to allow
petitioner bank to acquire the constructed building at a price far below its
actual construction cost would undoubtedly constitute unjust enrichment for
the bank to the prejudice of private Respondent. Such unjust enrichment, as
previously discussed, is not allowed by law.
2. ID.; AWARD OF ATTORNEYS FEES; REDUCED WHEN THE AMOUNT
THEREOF APPEARS TO BE UNCONSCIONABLE OR UNREASONABLE;
CASE AT BAR. With respect to the award of attorneys fees to
respondent, the Court has previously held that, "even with the presence of
an agreement between the parties, the court may nevertheless reduce
attorneys fees though fixed in the contract when the amount thereof
appears to be unconscionable or unreasonable." As previously noted, the
diligence and legal know-how exhibited by counsel for private respondent
hardly justify an award of 25 % of the principal amount due, which would be
at least P60,000.00. Besides, the issues in this case are far from complex
and intricate. The award of attorneys fees is thus reduced to P10,000.00.

FIRST DIVISION
[G.R. No. 117009. October 11, 1995.]
SECURITY BANK & TRUST COMPANY and ROSITO C.
MANHIT, Petitioners, v. COURT OF APPEALS and YSMAEL C.
FERRER, Respondents.
Cauton & Associates, for Petitioners.
Jesus B. Santos for Private Respondent.

DECISION

PADILLA, J.:

In this petition for review under Rule 45 of the Rules of Court, petitioners
seek a review and reversal of the decision * of respondent Court of Appeals
in CA-G.R. CV No. 40450, entitled "Ysmael C. Ferrer v. Security Bank and
Trust Company, Et. Al." dated 31 August 1994, which affirmed the decision **
of the Regional Trial Court, Branch 63, Makati in Civil Case No. 42712, a
complaint for breach of contract with damages.chanroblesvirtuallawlibrary

In March 1981, SBTC thru Assistant Vice-President Susan Guanio and a


representative of an architectural firm consulted by SBTC, verified Ferrers
claims for additional cost. A recommendation was then made to settle
Ferrers claim but only for P200,000.00. SBTC, instead of paying the
recommended additional amount, denied ever authorizing payment of any
amount beyond the original contract price. SBTC likewise denied any liability
for the additional cost based on Article IX of the building contract which
states:jgc:chanrobles.com.ph
"If at any time prior to the completion of the work to be performed hereunder,
increase in prices of construction materials and/or labor shall supervene,
through no fault on the part of the contractor whatsoever or any act of the
government and its instrumentalities which directly or indirectly affects the
increase of the cost of the project, OWNER shall equitably make the
appropriate adjustment on mutual agreement of both
parties." chanroblesvirtual|awlibrary
Ysmael C. Ferrer then filed a complaint for breach of contract with damages.
The trial court ruled for Ferrer and ordered defendants SBTC and Rosito C.
Manhit to pay:chanrob1es virtual 1aw library
a) P259,417.23 for the increase in price of labor and materials plus 12%
interest thereon per annum from 15 August 1980 until fully paid;
b) P24,000.00 as actual damages;chanroblesvirtuallawlibrary
c) P20,000.00 as moral damages;
d) P20,000.00 as exemplary damages;

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Private respondent Ysmael C. Ferrer was contracted by herein petitioners


Security Bank and Trust Company (SBTC) and Rosito C. Manhit to construct
the building of SBTC in Davao City for the price of P1,760,000.00. The
contract dated 4 February 1980 provided that Ferrer would finish the
construction in two hundred (200) working days. Respondent Ferrer was
able to complete the construction of the building on 15 August 1980 (within
the contracted period) but he was compelled by a drastic increase in the cost
of construction materials to incur expenses of about P300.000.00 on top of
the original cost. The additional expenses were made known to petitioner
SBTC thru its Vice-President Fely Sebastian and Supervising Architect Rudy
de la Rama as early as March 1 980. Respondent Ferrer made timely
demands for payment of the increased cost. Said demands were supported
by receipts, invoices, payrolls and other documents proving the additional
expenses.

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e) attorneys fees equivalent to 25% of the principal amount due and
f) costs of suit.chanrobles.com : virtual lawlibrary
On appeal, the Court of Appeals affirmed the trial court decision.
In the present petition for review, petitioners assign the following errors to
the appellate court:jgc:chanrobles.com.ph
". . . IN HOLDING THAT PLAINTIFF-APPELLEE HAS, BY
PREPONDERANCE OF EVIDENCE SUFFICIENTLY PROVEN HIS CLAIM
AGAINST THE DEFENDANTS-APPELLANTS
. . . IN INTERPRETING AN OTHERWISE CLEAR AND UNAMBIGUOUS
PROVISION OF THE CONSTRUCTION
CONTRACTchanroblesvirtuallawlibrary
. . . IN DISREGARDING THE EXPRESS PROVISION OF THE
CONSTRUCTION CONTRACT, THE LOWER COURT VIOLATED
DEFENDANTS-APPELLANTS CONSTITUTIONAL GUARANTY OF NONIMPAIRMENT OF THE OBLIGATION OF CONTRACT. 1
Petitioners argue that under the aforequoted Article IX of the building
contract, any increase in the price of labor and/or materials resulting in an
increase in construction cost above the stipulated contract price will not
automatically make petitioners liable to pay for such increased cost, as any
payment above the stipulated contract price has been made subject to the
condition that the "appropriate adjustment" will be made "upon mutual
agreement of both parties." It is contended that since there was no mutual
agreement between the parties, petitioners obligation to pay amounts above
the original contract price never materialized.chanroblesvirtual|awlibrary
Respondent Ysmael C. Ferrer, through counsel, on the other hand, opposed
the arguments raised by petitioners. It is of note however that the pleadings
filed with this Court by counsel for Ferrer hardly refute the arguments raised
by petitioners, as the contents of said pleadings are mostly quoted portions
of the decision of the Court of Appeals, devoid of adequate discussion of the
merits of respondents case. The Court, to be sure, expects more diligence
and legal know-how from lawyers than what has been exhibited by counsel
for respondent in the present case. Under these circumstances, the Court
had to review the entire records of this case to evaluate the merits of the
issues raised by the contending parties.
Article 22 of the Civil Code which embodies the maxim, Nemo ex alterius
incommodo debet lecupletari (no man ought to be made rich out of anothers

"ARTICLE 22. Every person who through an act of performance by another,


or any other means, acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall return the same to
him." chanroblesvirtuallawlibrary
The above-quoted article is part of the chapter of the Civil Code on Human
Relations, the provisions of which were formulated as "basic principles to be
observed for the rightful relationship between human beings and for the
stability of the social order, . . . designed to indicate certain norms that spring
from the fountain of good conscience, . . . guides for human conduct [that]
should run as golden threads through society to the end that law may
approach its supreme ideal which is the sway and dominance of justice." 2
In the present case, petitioners arguments to support absence of liability for
the cost of construction beyond the original contract price are not
persuasive.
Under the previously quoted Article IX of the construction contract,
petitioners would make the appropriate adjustment to the contract price in
case the cost of the project increases through no fault of the contractor
(private respondent). Private respondent informed petitioners of the drastic
increase in construction cost as early as March 1980.chanrobles.com :
virtual lawlibrary
Petitioners in turn had the increased cost evaluated and audited. When
private respondent demanded payment of P259,417.23, petitioner banks
Vice-President Rosito C. Manhit and the banks architectural consultant were
directed by the bank to verify and compute private respondents claims of
increased cost. A recommendation was then made to settle private
respondents claim for P200,000.00. Despite this recommendation and
several demands from private respondent, SBTC failed to make payment. It
denied authorizing anyone to make settlement of private respondents claim
and likewise denied any liability, contending that the absence of mutual
agreement made private respondents demand premature and baseless.
Petitioners arguments are specious.
It is not denied that private respondent incurred additional expenses in
constructing petitioner banks building due to a drastic and unexpected
increase in construction cost. In fact, petitioner bank admitted liability for
increased cost when a recommendation was made to settle private
respondents claim for P200,000.00. Private respondent s claim for the
increased amount was adequately proven during the trial by receipts,

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injury) states:jgc:chanrobles.com.ph

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invoices and other supporting documents.
Under Article 1182 of the Civil Code, a conditional obligation shall be void if
its fulfillment depends upon the sole will of the debtor. In the present case,
the mutual agreement, the absence of which petitioner bank relies upon to
support its non-liability for the increased construction cost, is in effect a
condition dependent on petitioner bank s sole will, since private respondent
would naturally and logically give consent to such an agreement which
would allow him recovery of the increased cost.
Further, it cannot be denied that petitioner bank derived benefits when
private respondent completed the construction even at an increased cost.
Hence, to allow petitioner bank to acquire the constructed building at a price
far below its actual construction cost would undoubtedly constitute unjust
enrichment for the bank to the prejudice of private Respondent. Such unjust
enrichment, as previously discussed, is not allowed by
law.chanroblesvirtuallawlibrary
Finally, with respect to the award of attorney s fees to respondent, the Court
has previously held that, "even with the presence of an agreement between
the parties, the court may nevertheless reduce attorneys fees though fixed
in the contract when the amount thereof appears to be unconscionable or
unreasonable." 3 As previously noted, the diligence and legal know-how
exhibited by counsel for private respondent hardly justify an award of 25% of
the principal amount due, which would be at least P60,000.00. Besides, the
issues in this case are far from complex and intricate. The award of
attorneys fees is thus reduced to P10,000.00.
WHEREFORE, with the above modification in respect of the amount of
attorneys fees, the appealed decision of the Court of Appeals in CA G.R. CV
No. 40450 is AFFIRMED.
SO ORDERED.
Davide, Jr., Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur.

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Manuel T. Collado for Private Respondent.

SYLLABUS

1. CIVIL LAW; CONTRACTS; QUITCLAIM, VIOLATIVE OF PUBLIC POLICY


IN CASE AT BAR. The Court is convinced that the petitioner was not fully
aware of the import and consequences of the Affidavit of Desistance when
she executed it, allegedly with the assistance of counsel. Except for the
disputable presumptions invoked by the private respondent, such assistance
has not been established against the petitioners allegation that the
"Attorney" Alvarado who supposedly counseled her was not even a lawyer.
Indeed, even assuming that such assistance had been duly given, there is
still the question of the intrinsic validity of the quitclain in view of the gross
disparity between the amount of the settlement and the petitioners original
claim. It is difficult to believe that the petitioner would agree to waive her total
claim of P88,840.00 for the unseemly settlement of only P2,400.00. And
even if she did, the waiver would still be null and void as violative of public
policy.
2. LABOR AND SOCIAL LEGISLATION; ILLEGAL RECRUITER;
SOLIDARILY LIABLE WITH THE FOREIGN PRINCIPAL FOR ALL
DAMAGES SUSTAINED BY OVERSEAS WORKERS. It remains to state
that, contrary to the contention of the private respondent in the proceedings
below that it has no privity of contract with the petitioner, we have held in a
long line of cases that the local recruiter is solidarily liable with the foreign
principal for all damages sustained by the overseas worker in connection
with his contract of employment. Such liability is provided for in Section 1,
Rule II, Book II, of the POEA Rules and Regulations, which we have
consistently sustained.
FIRST DIVISION

DECISION

[G.R. No. 98273. October 28, 1991.]


CLARITA V. CRUZ, Petitioner, v. NATIONAL LABOR RELATIONS
COMMISSION (NLRC), PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION (POEA), EMS MANPOWER & PLACEMENT SERVICE
(PHIL.), ABDUL KARIM AL YAHYA, and TRAVELLERS
INSURANCE,Respondents.
Public Attorneys Office for Petitioner.

CRUZ, J.:

Clarita V. Cruz * went abroad pursuant to an employment contract that she


hoped would improve her future. Although a high school graduate, she
agreed to work as a domestic helper in Kuwait in consideration of an
attractive salary and vacation leave benefits she could not expect to earn in

On March 23, 1988, she filed a complaint against EMS Manpower and
Placement Services (Phil.) and its foreign principal, Abdul Karim Al Yahya,
for underpayment of her salary and non-payment of her vacation leave. She
also claimed that she was charged a placement fee of P7,000.00 instead of
the legal maximum of only P5,000.00. She alleged that her foreign employer
treated her as a slave and required her to work 18 hours a day. She was
beaten up and suffered facial deformity, head trauma and decreased
sensation in the right portion of her body. On top of all this, she was paid
only $120 per month and her total salaries were given to her only three
hours before her flight back to Manila. This was after the plane she was
supposed to take had left and she had to stay in the airport for 24 hours
before her employer finally heard her pleas and delivered her passport and
ticket to her.chanrobles law library
In its answer and position paper, the private respondent raised the principal
defense of settlement as evidenced by the Affidavit of Desistance executed
by the complainant on June 21, 1988. In this document, she declared inter
alia that
x

2. Thereafter going thoroughly over the facts of the case by reconciling our
records, we came to discover that it was only a plain case of
misunderstanding on our part, and that we have already settled our
differences;
3. That I am no longer interested in further continuance of the above case
against EMS Manpower & Placement Services either criminal, civil or
administrative or whatever nature as I hereby desist now and hereafter;
4. That I am executing this affidavit of desistance to attest to the truth of the
foregoing facts and circumstances and for the purpose of asking the
dismissal of my said complaint against EMS Manpower & Placement
Services.
On the basis of this affidavit, the Philippine Overseas Employment
Administration (POEA) dismissed her complaint in a decision dated May 16,
1989. This was affirmed by the National Labor Relations Commission
(NLRC) in its resolution dated December 28, 1990, reconsideration of which
was denied on February 21, 1991.

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this country. But her foreign adventure proved to be a bitter disappointment.


On March 18, 1988, after completing her two-year engagement, she was
back home in the Philippines with her dead dreams and an angry grievance.

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The petition now before us faults the POEA and the NLRC with grave abuse
of discretion for having upheld the Affidavit of Desistance. Cruz rejects the
settlement as having been obtained from her under duress and false
pretenses and insists on her original claim for the balance of her salaries
and vacation-leave pay at the agreed rate of P250.00 per month.
Her contention is that she was inveigled into signing the Affidavit of
Desistance without the assistance of counsel. The "Attorney" Alvarado who
assisted her was not really a lawyer but only a helper in the Overseas
Workers Welfare Administration. Atty. Biolena, on the other hand, merely
acknowledged the document. Moreover, when she signed the affidavit, she
was under the impression when she was agreeing to settle only her claim for
one month unpaid vacation leave, as the wording of the receipt she issued
on the same date showed, to wit:chanrob1es virtual 1aw library
June 21, 1988
Receipt
This is to certify that I received the amount of P2,400.00 from EMS
Manpower & Placement Services in settlement of 1 month unpaid vacation
leave.
(Sgd.) CLARITA V. CRUZ
IN THE PRESENCE OF:chanrob1es virtual 1aw library
(Sgd.) O.G. ALVARADO
OWWA Legal Dept.
For its part, the private respondent argues that the petitioner is bound by her
Affidavit of Desistance, which she freely and knowingly executed. After all,
she was not an ignorant and illiterate person but a high school graduate who
understood what she was signing. The due execution of the instrument must
also be sustained on the basis of the presumptions of regularity of official
functions and of good faith.
Significantly, neither the private respondent nor the Solicitor General refuted
the petitioners submission that the person who allegedly assisted her in the
execution of the Affidavit of Desistance and explained to her its content and
meaning was not a lawyer but a mere employee in the OWWA. His status
was merely assumed but not established by the respondents although it was
directly questioned. The comments of the public and private respondents did

It is no less noteworthy that the receipt the petitioner issued on the same day
was only for "P2,400.00 . . . in settlement of 1 month unpaid vacation." This
clearly shows that she was not waiving the rest of her demands in exchange
for that measly amount (which did not even really represent the commutable
value of the 1 month vacation leave at the rate of $250.00). In fact, the total
claim of the petitioner is for P88,840.00, itemized as follows:chanrob1es
virtual 1aw library
a) P84,240.00, representing the salary differentials of $130 for 24 months
(US $3,120.00 x P27.00).
b) P2,600.00, representing the balance of her vacation leave pay.

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not meet this challenge squarely.chanrobles virtual lawlibrary

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Alvarado who supposedly counseled her was not even a lawyer. Indeed,
even assuming that such assistance had been duly given, there is still the
question of the intrinsic validity of the quitclaim in view of the gross disparity
between the amount of the settlement and the petitioners original claim. It is
difficult to believe that the petitioner would agree to waive her total claim of
P88,840.00 for the unseemly settlement of only P2,400.00. And even if she
did, the waiver would still be null and void as violative of public policy.
It remains to state that, contrary to the contention of the private respondent
in the proceedings below that it has no privity of contract with the petitioner,
we have held in a long line of cases that the local recruiter is solidarily liable
with the foreign principal for all damages sustained by the overseas worker
in connection with his contract of employment. Such liability is provided for in
Section 1, Rule II, Book II, of the POEA Rules and Regulations, which we
have consistently sustained.

c) P2,000.00, representing her excess placement fee.


In Principe v. Philippine-Singapore Transport Service, Inc., 1 this Court
held:chanrob1es virtual 1aw library
Even assuming for the sake of argument that the quitclaim had foreclosed
petitioners right over the death benefits of her husband, the fact that the
consideration given in exchange thereof was very much less than the
amount petitioner is claiming renders the quitclaim null and void for being
contrary to public policy. The State must be firm in affording protection to
labor. The quitclaim wherein the consideration is scandalously low and
inequitable cannot be an obstacle to petitioners pursuing her legitimate
claim Equity dictates that the compromise agreement should be voided in
this instance. (Emphasis supplied.)
The following guidelines were likewise set in Periquet v. NLRC : 2
Not all waivers and quitclaims are invalid as against public policy. If the
agreement was voluntarily entered into and represents a reasonable
settlement, it is binding on the parties and may not later be disowned simply
because of a change of mind. It is only where there is clear proof that the
waiver was wangled from an unsuspecting or gullible person, or the terms of
settlement are unconscionable on its face, that the law will step in to annul
the questionable transaction. (Emphasis supplied.)
The Court is convinced that the petitioner was not fully aware of the import
and consequences of the Affidavit of Desistance when she executed it,
allegedly with the assistance of counsel. Except for the disputable
presumptions invoked by the private respondent, such assistance has not
been established against the petitioners allegation that the "Attorney"

This decision demonstrates once again the tenderness of the Court toward
the worker subjected to the lawless exploitation and impositions of his
employer. The protection of our overseas workers is especially necessary
because of the inconveniences and even risks they have to undergo in their
quest for a better life in a foreign land away from their loved ones and their
own government.
The domestic helper is particularly susceptible to abuse because she usually
works only by herself in a private household unlike other workers employed
in an open business concern who are able to share and discuss their
problems and bear or solve them together. The domestic helper is denied
that comfort. She has no companions in her misery. She usually broods
alone. There is no one to turn to for help. That is why we must carefully listen
to her when she is finally able to complain against those who would rob her
of her just rewards and even of her dignity as a human being.
WHEREFORE, the resolutions of the NLRC dated December 28, 1990, and
February 21, 1991, are SET ASIDE, and the Affidavit of Desistance is
DECLARED null and void. POEA Case No. 88-03-255 is REMANDED to the
POEA for further proceedings and expeditious resolution.chanrobles virtual
lawlibrary
SO ORDERED.

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Nazario Pacquiao, Metudio P. Belarmino & Ceferino Jomuad
for Appellees.
SYNOPSIS
Appellant assailed the legality of the sales tax which the city treasurer of
Cebu collected on out-of-town deliveries of matches, to wit: (1) sales of
matches booked and paid for in Cebu City but shipped directly to customers
outside of the city; (2) transfers of matches to salesman assigned to different
agencies outside of the city; and (3) shipments of matches to provincial
customers pursuant to salesmens instructions. Appellant paid under protest
the sales tax on those three categories of out-of-town deliveries.
The trial court sustained the tax imposed on the first transaction, and
invalidated the tax in the other two. It characterized the tax on the other two
transactions as a "storage tax", not a sales tax, since the sales were
consummated outside of the city, and hence, beyond the citys taxing power.
The city did not appeal from the decision. But the appellant appealed from
that portion of the decision sustaining the tax on sales of matches to
customers outside of the city, which sales were bocked and paid for in Cebu
City and also from the dismissal of its claim for damages against the city
treasurer.
In affirming the appealed decisions, the Supreme Court held that the
municipal board of Cebu City is empowered "to provide for the levy and
collection of taxes for general and special purposes in accordance with law."
The prohibition against the imposition of percentage taxes refers to
municipalities and municipal districts but not to chartered cities. The fact that
the matches were delivered to customers outside the of the city did not place
the sales beyond the citys taxing power. The sales formed part of the
merchandising business being carried on by the appellant in the city. As the
city treasurer acted within the scope of his authority and n consonance with
his bona fide interpretation of the tax ordinance, though not sustained
completely by the court, his action did not render him liable for damages.
SECOND DIVISION
[G.R. No. L-30745. January 18, 1978.]
PHILIPPINE MATCH CO., LTD., Plaintiff-Appellant, v. THE CITY OF
CEBU and JESUS E. ZABATE, Acting City Treasurer, DefendantsAppellees.
Pelaez, Pelaez & Pelaez for Appellant.

SYLLABUS

1. TAXATION; TAXING POWER OF CITIES AND MUNICIPALITIES,


DEFEND BY LOCAL AUTONOMY ACT. The taxing power validly
delegated to cities and municipalities is defined in the local Autonomy Act,
Republic Act No. 2264 which took effect on June 19, 1959.

3. ID.; SCOPE OF TAXING POWER OF LOCAL GOVERNMENT. The


taxing power of cities, municipalities and municipal districts may be used (1)
upon any person engaged in any occupation or business, or exercising any
privilege therein; (2) for services rendered by those political subdivisions or
rendered in connection with any business, profession or occupation being
conducted therein, and (3) to levy, for public purposes just and uniform
taxes. licenses or fees.
4. ID.; MUNICIPAL BOARDS OF CEBU CITY; EMPOWERED TO PROVIDE
FOR THE LEVY AND COLLECTION OF TAXES. The municipal board of
Cebu City is empowered "to provide for the levy and collection of taxes for
general and special purposes in accordance with law."cralaw virtua1aw
library
5. ID.; MUNICIPAL CORPORATIONS; TAX ON SALES OF GOODS IN THE
CITY. Under a city ordinance which imposes tax on sales of goods in the
city, the city can validly tax sales of matches to customers outside of the city
as long as the orders were booked and paid for, and the matches were
delivered to the carrier, in the city. The matches can be regarded as sold in
the city, as contemplated in the ordinance, because delivery to the carrier is
delivery to the buyer. As the sales were finalized in the city and the matches
sold were stored in the city, the fact that the matches were delivered to
customers, whose places of business were outside of the city, would not
place those sales beyond the citys taxing power. Those sales formed part of
the merchandising business being carried on by the taxpayer in the city. In
essence, they are the same as sales of matches fully consummated in the
city.
6. DAMAGES, AWARD OF; ARTICLE 27, NEW CIVIL CODE, CONSTRUED.
Article 27 presupposes that the refusal or omission of a public official is
attributed to malice or inexcusable negligence.
7. PUBLIC OFFICERS; LIABILITY, GENERAL RULE. As a rule, a public
officer, whether judicial, quasi-judicial or executive, is not personally liable to
one injured in consequence of an act performed within the scope of his
official authority, and in the line of his official duty. Where an officer is
invested with discretion and is empowered to exercise his judgment in
matters brought before him, he is sometimes called a quasi-judicial officer,

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2. ID.; CONSTITUTIONAL PROVISIONS. Article XI of the Constitution


provides that "each local government unit shall have the power to create its
own sources of revenue and to levy taxes, subject to such limitations as may
be provided by law." This was implemented by Presidential Decree No. 231,
the Local Tax Code, which took effect on July 1, 1973.

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and when so acting he is usually given immunity from liability to persons who
may be injured as the result of an erroneous or mistaken decision, however
erroneous his judgment may be, provided the acts complained of are done
within the scope of the officers authority, and without willfulness, malice of
corruption.
8. ID.; CITY TREASURER WHO ACTED WITHIN THE SCOPE OF
AUTHORITY, NOT LIABLE. Where the city treasurer honestly believed
that he was justified under section 9 of the tax ordinance in collecting the
sales tax on out-of-town deliveries, considering that the companys branch
office was located in the city and that all out-of-town purchase orders for
matches were filled up by the branch office and the sales were duly reported
to it and the city treasurer acted within the scope of his authority and in
consonance with his bona fide interpretation of the tax ordinance, the fact
that his action was not completely sustained by the courts would not render
him liable for damages.
9. ID.; ERRONEOUS INTERPRETATION OF ORDINANCE, NOT GROUND
FOR DAMAGES. An erroneous interpretation of an ordinance does not
constitute nor does it amount to bad faith that would entitle and aggrieved
party to an award for damages.

DECISION

AQUINO, J.:

This case is about the legality of the tax collected by the City of Cebu on
sales of matches stored by the Philippine Match Co., Ltd. in Cebu City but
delivered to customers outside of the city.
Ordinance No. 279 of Cebu City (approved by the mayor on March 10, 1960
and also approved by the provincial board) is "an ordinance imposing a
quarterly tax on gross sales or receipts of merchants, dealers, importers and
manufacturers or any commodity doing business" in Cebu City. It imposes a
sales tax of one percent (1%) on the gross sales, receipt or value of
commodities sold, bartered, exchanged or manufactured in the city in excess
of P2,000 a quarter.chanrobles virtual lawlibrary
Section 9 of the ordinance provides that, for purpose of the tax, "all delivers
of goods or commodities stored in the City of Cebu, or if not stored are sold"
in that city, "shall be considered as sales" in the city and shall be taxable.

The Philippine Match Co., Ltd., whose principal office is in Manila, is


engaged in the manufacture of matches. Its factory is located at Punta, Sta.
Ana, Manila. It ships cases or cartons of matches from Manila to its branch
office in Cebu City for storage, sale and distribution within the territories and
districts under its Cebu branch or the whole Visayas-Mindanao region. Cebu
City itself is just one of the eleven districts under the companys Cebu City
branch office.
The company does not question the tax on the sales of matches
consummated in Cebu City, meaning matches sold and delivered within the
city.
It assails the legality of the tax which the city treasurer collected on out-oftown deliveries of matches, to wit: (1) sales of matches booked and paid for
in Cebu City but shipped directly to customers outside of the city; (2)
transfers of matches to salesmen assigned to different agencies outside of
the city and (3) shipments of matches to provincial customers pursuant to
salesmens instructions.
The company paid under protest to the city treasurer the sum of P12,844.61
as one percent sales tax on those three classes of out-of-town deliveries of
matches for the second quarter of 1961 to the second quarter of 1963.
In paying the tax the company accomplished the verified forms furnished by
the city treasurers office. It submitted a statement indicating the four kinds of
transactions enumerated above, the total sales, and a summary of the
deliveries to the different agencies, as well as the invoice numbers, names
of customers, the value of the sales, the transfers of matches to salesmen
outside of Cebu City, and the computation of taxes.
Sales of matches booked and paid for in Cebu City but shipped directly to
customers outside of the city refer to orders for matches made in the city by
the companys customers, by means of personal or phone calls, for which
sales invoices are issued, and then the matches are shipped from the
bodega in the city, where the matches had been stored, to the place of
business or residences of the customers outside of the city, duly covered by
bills of lading. The matches are used and consumed outside of the
city.chanrobles law library
Transfers of matches to salesmen assigned to different agencies outside of

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Thus, it would seem that under the tax ordinance sales of matches
consummated outside of the city are taxable as long as the matches sold are
taken from the companys stock stored in Cebu City.

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the city embrace shipments of matches from the branch office in the city to
the salesmen (provided with panel cars) assigned within the province of
Cebu and in the different districts in the Visayas and Mindanao under the
jurisdiction or supervision of the Cebu City branch office. The shipments are
covered by bills of lading. No sales invoices whatsoever are issued. The
matches received by the salesmen constitute their direct cash accountability
to the company. The salesmen sell the matches within their respective
territories. They issue cash sales invoices and remit the proceeds of the
sales to the companys Cebu branch office. The value of the unsold matches
constitutes their stock liability. The matches are used and consumed outside
of the city.
Shipments of matches to provincial customers pursuant to salesmens
instructions embrace orders, by letter or telegram, sent to the branch office
by the companys salesman assigned outside of the city. The matches are
shipped from the companys bodega in the city to the customers residing
outside of the city. The salesmen issue the sales invoices. The proceeds of
the sale, for which the salesman are accountable, are remitted to the branch
office. As in the first and second kinds of transactions above-mentioned, the
matches are consumed and used outside the city.chanrobles virtual
lawlibrary
The company in its letter of April 15, 1961 to the city treasurer sought the
refund of the sales tax paid for out-of-town deliveries of matches. It invoked
Shell Company of the Philippines, Ltd. v. Municipality of Sipocot, Camarines
Sur, 105 Phil. 1263. In that the case sales of oil and petroleum products
effected outside the territorial limits of Sipocot were held not to be subject to
the tax imposed by an ordinance of that municipality.
The city treasurer denied the request. His stand is that under section 9 of the
ordinance all out-of-town deliveries of matches stored in the city are subject
to the sales tax imposed by the ordinance.
On August 12, 1963 the company filed the complaint herein, praying that the
ordinance be declared void insofar as it taxed the deliveries of matches
outside of Cebu City, that the city be ordered to refund to the company the
said sum of P12,844.61 as excess sales tax paid, and that the city treasurer
be ordered to pay damages.
After hearing, the trial court sustained the tax on the sales of matches
booked and paid for in Cebu City although the matches were shipped
directly to customers outside of the city. The lower court held that the said
sales were consummated in Cebu City because delivery to the carrier in the
city is deemed to be a delivery to the customers outside of the city.

The trial court characterized the tax on the other two transactions as a
"storage tax" and not a sales tax. It assumed that the sales were
consummated outside of the city and, hence, beyond the citys taxing power.
The city did not appeal from that decision. The company appealed from that
portion of the decision upholding the tax on sales of matches to customers
outside of the city but which sales were booked and paid for in Cebu City,
and also from the dismissal of its claim for damages against the city
treasurer.
The issue is whether the City of Cebu can tax sales of matches which were
perfected and paid for in Cebu City but the matches were delivered to
customers outside of the City.
We hold that the appeal is devoid of merit because the city can validly tax
the sales of matches to customers outside of the city as long as the orders
were booked and paid for in the companys branch office in the city. Those
matches can be regarded as sold in the city, as contemplated in the
ordinance, because the matches were delivered to the carrier in Cebu City.
Generally, delivery to the carrier is delivery to the buyer (Art. 1523, Civil
Code; Behn, Meyer & Co. v. Yangco, 38 Phil. 602).
A different interpretation would defeat the tax ordinance in question or
encourage tax evasion through the simple expedient of arranging for the
delivery of the matches at the out-skirts of the city through the purchases
were effected and paid for in the companys branch office in the city.
The municipal board of Cebu City is empowered "to provide for the levy and
collection of taxes for general and special purposes in accordance with law"
(Sec. 17[a], Commonwealth Act No. 58; See. 31[1], Rep. Act No. 3857,
Revised Charter of Cebu City).chanrobles law library
The taxing power validly delegated to cities and municipalities is defined in
the Local Autonomy Act, Republic Act No. 2264 (Pepsi-Cola Bottling Co. of
the Philippines, Inc. v. Municipality of Tanauan, Leyte, L-31156, February 27,
1976, 69 SCRA 460), which took effect on June 19, 1959 and which
provides:jgc:chanrobles.com.ph

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But the trial court invalidated the tax on transfers of matches to salesmen
assigned to different agencies outside of the city and on shipments of
matches to provincial customers pursuant to the instructions of the
salesmen. It ordered the defendants to refund to the plaintiff the sum of
P8,923.55 as taxes paid on the said out-of-town deliveries with legal rate of
interest from the respective dates of payment.

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"SEC. 2. Taxation. Any provision of law to the contrary notwithstanding, all
chartered cities, municipalities and municipal districts shall have authority to
impose municipal license taxes or fees upon persons engaged in any
occupation or business, or exercising privileges in chartered cities,
municipalities or municipal districts by requiring them to secure licenses at
rates fixed by the municipal board or city council of the city, the municipal
council of the municipality, or the municipal district council of the municipal
district; to collect fees and charges for services rendered by the city,
municipality or municipal district; to regulate and impose reasonable fees for
services rendered in connection with any business, profession or occupation
being conducted within the city, municipality or municipal district and
otherwise to levy for public purposes, just and uniform taxes, licenses or
fees;
"Provided, That municipalities and municipal districts shall, in no case,
impose any percentage tax on sales or other taxes in any form based
thereon nor impose taxes on articles subject to specific tax, except gasoline,
under the provisions of the National International Revenue Code;
"Provided, however, That no city, municipality or municipal district may levy
or impose any of the following: (here follows an enumeration of internal
revenue taxes)
x

x" **

Note that the prohibition against the imposition of percentage taxes (formerly
provided for in section 1 of Commonwealth Act No. 472) refers to
municipalities and municipal districts but not to chartered cities. (See sec.
5[1], Local Tax Code, P.D. No. 231. Marinduque Iron Mines Agents, Inc. v.
Municipal Council of Hinabangan, Samar, 120 Phil. 413; Ormoc Sugar Co.,
Inc. v. Treasurer of Ormoc City, L-23794, February 17, 1968, 22 SCRA 603).
Note further that the taxing power of cities, municipalities and municipal
districts may be used (1) "upon any person engaged in any occupation or
business, or exercising any privilege" therein; (2) for services rendered by
those political subdivisions or rendered in connection with any business,
profession or occupation being conducted therein, and (3) to levy, for public
purposes, just and uniform taxes, licenses or fees (C. N. Hodges v.
Municipal Board of the City of Iloilo, 117 Phil. 164, 167. See sec. 31[25],
Revised Charter of Cebu City).
Applying that jurisdictional test to the instant case, it is at once obvious that
sales of matches to customers outside of Cebu City, which sales were
booked and paid for in the companys branch office in the city, are subject to
the citys taxing power. The instant case is easily distinguishable from the

On the other hand, the ruling in Municipality of Jose Panganiban, Province of


Camarines Norte v. Shell Company of the Philippines, Ltd., L-18349, July 30,
1966, 17 SCRA 778 that the place of delivery determines the taxable situs of
the property to be taxed cannot properly be invoked in this case. Republic
Act No. 1435, the law which enabled the Municipality of Jose Panganiban to
levy the sales tax involved in that case, specifies that the tax may be levied
upon oils "distributed within the limits of the city or municipality", meaning the
place where the oils were delivered. That feature of the Jose Panganiban
case distinguishes it from this case.
The sales in the instant case were finalized in the city and the matches sold
were stored in the city. The fact that the matches were delivered to
customers, whose places of business were outside of the city, would not
place those sales beyond the citys taxing power. Those sales formed part of
the merchandising business being carried on by the company in the city. In
essence, they are the same as sales of matches fully consummated in the
city.
Furthermore, because the sellers place of business is in Cebu City, it cannot
be sensibly argued that such sales should be considered as transactions
subject to the taxing power of the political subdivisions where the customers
resided and accepted delivery of the matches sold.
The company in its second assignment of error contends that the trial court
erred in not ordering defendant acting city treasurer to pay exemplary
damages of P20,000 and attorneys fees.cralawnad
The claim for damages is predicated on articles 19, 20, 21, 27 and 2229 of
the Civil Code. It is argued that the city treasurer refused and neglected
without just cause to perform his duty and to act with justice and good faith.
The company faults the city treasurer for not following the opinion of the city
fiscal, as legal adviser of the city, that all out-of-town deliveries of matches
are not subject to sales tax because such transaction were effected outside
of the citys territorial limits.
In reply, it is argued for defendant city treasurer that in enforcing the tax
ordinance in question he was simply complying with his duty as collector of
taxes (Sec. 50, Revised Charter of Cebu City). Moreover, he had no choice
but to enforce the ordinance because according to section 357 of the
Revised Manual of Instructions to Treasurers, "a tax ordinance will be
enforced in accordance with its provisions" until declared illegal or void by a
competent court, or otherwise revoked by the council or board from which it

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Shell Company case where the price of the oil sold was paid outside of the
municipality of Sipocot, the entity imposing the tax.

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originated.
Furthermore, the Secretary of Finance had reminded the city treasurer that a
tax ordinance approved by the provincial board is operative and must be
enforced without prejudice to the right of any affected taxpayer to assail its
legality in the judicial forum. The fiscals opinion on the legality of an
ordinance is merely advisory and has no binding effect.
Article 27 of the Civil Code provides that "any person suffering material or
moral loss because a public servant or employee refuses or neglects,
without just cause, to perform his official duty may file an action for damages
and other relief against the latter, without prejudice to any disciplinary
administrative action that may be taken."cralaw virtua1aw library
Article 27 presupposes that the refusal or omission of a public official is
attributable to malice or inexcusable negligence. In this case, it cannot be
said that the city treasurer acted wilfully or was grossly negligent in not
refunding to the plaintiff the taxes which it paid under protest on out-of-town
sales of matches.
The record clearly reveals that the city treasurer honestly believed that he
was justified under section 9 of the tax ordinance in collecting the sales tax
on out-of-town deliveries, considering that the companys branch office was
located in Cebu City and that all out-of-town purchase orders for matches
were filled up by the branch office and the sales were duly reported to it.
The city treasurer acted within the scope of his authority and in consonance
with his bona fide interpretation of the tax ordinance. The fact that his action
was not completely sustained by the courts would not render him liable for
damages. We have upheld his act of taxing sales of matches booked and
paid for in the city.chanrobles.com.ph : virtual law library
"As a rule, a public officer, whether judicial, quasi-judicial, or executive, is not
personally liable to one injured in consequence of an act performed within
the scope of his official authority, and in the line of his official duty." "Where
an officer is invested with discretion and is empowered to exercise his
judgment in matters brought before him, he is sometimes called a quasijudicial officer, and when so acting he is usually given immunity from liability
to persons who may be injured as the result or an erroneous or mistaken
decision, however erroneous his judgment may be, provided the acts
complained of are done within the scope of the officers authority, and
without willfulness, malice or corruption." (63 Am Jur 2nd 798, 799 cited in
Philippine Racing Club, Inc. v. Bonifacio, 109 Phil. 233, 240-241).
It has been held that an erroneous interpretation of an ordinance does not

Exemplary damages may be claimed in addition to moral, temperate,


liquidated or compensatory damages (Art. 2229, Civil Code). Attorneys fees
are being claimed herein as actual damages. We find that it would not be
just and equitable to award attorneys fees in this case against the City of
Cebu and its treasurer (See Art. 2208, Civil Code).
WHEREFORE, the trial courts judgment is affirmed. No costs.
SO ORDERED.
Fernando (Chairman), Antonio and Concepcion, Jr., JJ., concur.
Santos, J., is on leave.
Separate Opinions
BARREDO, J., concurring:chanrob1es virtual 1aw library
Concurs. Anent appellants claim for damages, it should be happy the trial
court did not sustain the city fully, which in my opinion, could have been
possible.

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constitute nor does it amount to bad faith that would entitle an aggrieved
party to an award for damages (Cabungcal v. Cordova, 120 Phil. 567, 5723). That salutary rule may be applied in this case.

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Ricardo L. Manalilig, for Plaintiffs-Appellants.
Iigo R. Pea for Defendants-Appellees.
SYNOPSIS
A complaint was filed against Jikil Taha alleging that a year after he sold his
motor launch, he forcibly took the same. After the preliminary investigation,
Fiscal Ponce de Leon filed an information for robbery with force and
intimidation filed an information for robbery with force and intimidation upon
person and directed the Provincial Commander of Palawan to impound the
motor launch subject of the criminal offense. The Provincial Commander in
turn directed Detachment Commander Orlando Maddela to seize the motor
launch from Delfin Lim, a subsequent vendee, Jikil Taha and Delfin Lim filed
a complaint for damages against Fiscal Ponce de Leon and Orlando
Maddela alleging, among others, that the motor launch was seized without a
search warrant. The trial court upheld the validity of the seizure and ordered
plaintiffs to pay jointly and severally actual and exemplary damages plus
attorneys fees. Hence, this appeal.
The Supreme Court reversed the ruling holding that the seizure without a
warrant was illegal and violative of the constitutional provision against
unreasonable searches and seizure even if the thing seized was the corpus
delicti of a crime; and ordered fiscal Ponce de Leon to pay Delfin Lim actual
and moral damages plus attorneys fees.

SYLLABUS

[G.R. No. L-22554. August 29, 1975.]

1. CONSTITUTIONAL LAW; BILL OF RIGHTS; RIGHT AGAINST


UNREASONABLE SEARCHES AND SEIZURE; REQUISITES OF A VALID
SEARCH WARRANT. A search and seizure to be reasonable, must be
effected by means of a valid search warrant. And for a search warrant to be
valid: (1) it must be issued upon probable cause; (2) the probable cause
must be determined by the judge himself and not by the applicant or any
other person; (3) in the determination of probable cause , the judge must
examine, under oath or affirmation, the complainant and such witnesses as
the latter may produce; and (4) the warrant issued must particularly describe
the place to be searched and persons or things to be seized.

DELFIN LIM and JIKIL TAHA, Plaintiffs-Appellants, v. FRANCISCO


PONCE DE LEON AND ORLANDO MADDELA, Defendants-Appellees.

2. ID.; ID.; ID.; SECTIONS 2 and 3 OF RULE 122, RULES OF COURT.


Under Section 2 and 3 of Rule 122 of the Rules of Court which complement

FIRST DIVISION

3. ID.; ID.; ID.; CASE AT BAR. Where entrance into the premises and
impounding of the motor launch were effected without a valid search warrant
and without the consent of the owner, said seizure is illegal and violative of
the constitutional rights against unreasonable search and seizure, for no
public official has the right to enter the premises of another without his
consent for the purpose of search and seizure.
4. ID.; ID.; ID.; FISCAL MAY NOT ISSUE SEARCH WARRANT. Under the
1935 Constitution the power to issue a search warrant is vested in a judge or
magistrate and in no other officer and no search and seizure can be made
without a proper warrant. There is nothing in Republic Act No. 732, which
amended Section 1674 and 1687 of the Revised Administrative Code, which
confers upon the provincial fiscals the authority to issue warrants, much less
to order without warrant the seizure of a personal property even if it is the
corpus delicti of a crime. Although Republic Act No. 732 has broadened the
power of provincial fiscals to conduct preliminary investigation, said law did
not divest the judge or magistrate of the power to determine, before the
corresponding warrant, whether or not probable cause exists therefor.
5. ID.; ID.; ID.; LACK OF TIMES DOES JUSTIFY UNREASONABLE
SEARCH AND SEIZURE. Where there is sufficient time to procure a
search warrant and there is no basis for the apprehension that the object of
search and seizure might be moved out of place, lack of time cannot justify a
search without a search warrant.
6. ID.; ID.; ID.; LEGALITY OF SEIZURE MUST BE RAISED BY ONE
WHOSE RIGHTS HAVE BEEN IMPAIRED. The legality of seizure can be
contested only by the party whose rights have been impaired thereby, and
the objection to an unlawful search and seizure is purely personal and
cannot be availed of by third parties. Consequently, one who is not the
owner, lessees, or lawful occupant of the premises searched cannot raise
the question of validity of the search and seizure.
7. DAMAGES; AWARD OF ACTUAL AND MORAL DAMAGES FOR
VIOLATION OF CONSTITUTIONAL RIGHT. Under Article 32 and 2219 of
the New Civil Code, a person whose constitutional rights have been violated
or impaired is entitled to actual and moral damages from the public officer or
employee responsible therefore. In addition, exemplary damages may also

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the constitutional provision on unreasonable search and seizure, two


principles are made clear, namely: (1) that in the seizure of a stolen property
search warrant is still necessary; and (2) that in issuing a search warrant, the
judge alone determines whether or not there is a probable cause. The fact
that a thing is a corpus delicti of a crime does not justify its seizure without a
warrant

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be awarded.
8. ID.; ID.; MALICE AND BAD FAITH, NOT REQUIRED TO BE LIABLE
UNDER ARTICLE 32 NEW CIVIL CODE. To be liable under Article 32 of
the New Civil Code it is enough that there is a violation of the constitutional
rights of the plaintiffs and it is not required that defendants should have
acted with malice or bad faith.
9. ID.; ID.; REASONS. Public officials in the past have abused their
powers on the pretext of justifiable motives or good faith in the performance
of their duties. Precisely, the object of Article 32 of the Civil Code is to put an
end to official abuse by the plea of good faith.
10. ID.; SUBORDINATE OFFICER MAY BE HELD LIABLE FOR
EXECUTING UNLAWFUL ORDER; EXCEPTION. While a subordinate
officer may be held liable for executing an unlawful order of his superior
officer, there are certain circumstances which would warrant exculpation
from liability. Thus, where it is shown that the motor launch was impounded
by a subordinate officer only after repeated request by the fiscal, after being
shown a letter justifying the necessity of seizure, and after he was made to
explain the delay of the seizure by his superior, he cannot be held liable for
damages.

DECISION

MARTIN, J.:

Appeal on a question of law from the decision of the Court of First Instance
of Palawan in Civil Case No. 416, entitled "Delfin Lim and Jikil Taha v.
Francisco Ponce de Leon and Orlando Maddela, dismissing the complaint of
the plaintiffs and ordering them to pay each of the defendants jointly and
severally the sum of P500.00 by way of actual damages; P500.00 by way of
attorneys fees; and P1,000.00 by way of exemplary damages.
On April 29, 1961, plaintiff-appellant Jikil Taha sold to a certain Alberto
Timbangcaya of Brookes Point, Palawan a motor launch named M/L "SAN
RAFAEL." A year later or on April 9, 1962 Alberto Timbangcaya filed a
complaint with the Office of the Provincial Fiscal of Palawan alleging that
after the sale Jikil Taha forcibly took away the motor launch from him.
On May 14, 1962, after conducting a preliminary investigation, Fiscal

On June 15, 1962, Fiscal Francisco Ponce de Leon, upon being informed
that the motor launch was in Balabac, Palawan, wrote the Provincial
Commander of Palawan requesting him to direct the detachment
commander in Balabac to impound and take custody of the motor launch. 1
On June 26, 1962, Fiscal Ponce de Leon reiterated his request to the
Provincial Commander to impound the motor launch, explaining that its
subsequent sale to a third party, plaintiff-appellant Delfin Lim, cannot prevent
the court from taking custody of the same. 2 So, on July 6, 1962 upon order
of the Provincial Commander, defendant-appellee Orlando Maddela,
Detachment Commander of Balabac, Palawan, seized the motor launch
"SAN RAFAEL" from plaintiff-appellant Delfin Lim and impounded it.
On July 15, 1962 plaintiff-appellant Delfin Lim pleaded with Orlando Maddela
to return the motor launch but the latter refused. Likewise, on September 20,
1962, kill Taha through his counsel made representations with Fiscal Ponce
de Leon to return the seized property to plaintiff-appellant Delfin Lim but
Fiscal Ponce de Leon refused, on the ground that the same was the subject
of a criminal offense.
All efforts to recover the motor launch going to naught, plaintiffs-appellants
Delfin Lim and Jikil Taha, on November 19, 1962, filed with the Court of First
Instance of Palawan a complaint for damages against defendants-appellees
Fiscal Francisco Ponce de Leon and Orlando Maddela, alleging that on July
6, 1962 Orlando Maddela entered the premises of Delfin Lim without a
search warrant and then and there took away the hull of the motor launch
without his consent; that he effected the seizure upon order of Fiscal Ponce
de Leon who knew fully well that his office was not vested with authority to
order the seizure of a private property; that said motor launch was
purchased by Delfin Lim from Jikil Taha in consideration of Three Thousand
Pesos (P3,000.00), Two Thousand Pesos (P,000.00) of which has been
given to Jikil Taha as advance payment; that as a consequence of the
unlawful seizure of the motor launch, its sale did not materialize; and that
since July 6, 1962, the said motor launch had been moored at the Balabac
Bay, Palawan and because of exposure to the elements it had become
worthless and beyond repair. For the alleged violation of their constitutional
rights, plaintiffs-appellants prayed that defendants-appellees be ordered to
pay jointly and severally each of them the sum of P5,750.00 representing
actual, moral and exemplary damages and attorneys fees.

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Francisco Ponce de Leon, in his capacity as Acting Provincial Fiscal of


Palawan, filed with the Court of First Instance of Palawan the corresponding
information for Robbery with Force and Intimidation upon Persons against
Jikil Taha. The case was docketed as Criminal Case No. 2719.

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In their answer, defendants-appellees denied the material allegations of the
complaint and as affirmative defenses alleged that the motor launch in
question which was sold by Jikil Taha to Alberto Timbangcaya on April 29,
1961 was sometime in April 1962, forcibly taken with violence upon persons
and with intent to gain by Jikil Taha from Alfredo Timbangcaya without the
latters knowledge and consent, thus giving rise to the filing of a criminal
charge of robbery against Jikil Taha; that Fiscal Ponce de Leon, in his
capacity as Acting Provincial Fiscal of Palawan ordered Orlando Maddela to
seize and impound the motor launch "SAN RAFAEL", for being the corpus
delicti of the robbery; and that Orlando Maddela merely obeyed the orders of
his superior officer to impound said launch. By way of counterclaim,
defendants-appellees alleged that because of the malicious and groundless
filing of the complaint by plaintiffs-appellants, they were constrained to
engage the services of lawyers, each of them paying P500.00 as attorneys
fees; and that they suffered moral damages in the amount of P5,000.00
each and actual damages in the amount of P500.00 each. They also prayed
that each of them awarded exemplary damages in the amount of P1,000.00.
On September 13, 1965, the trial court rendered its decision, upholding the
validity of the seizure of the motor launch on the ground that "the authority to
impound evidences or exhibits or corpus delicti in a case pending
investigation is inherent in the Provincial Fiscal who controls the prosecution
and who introduces those exhibits in the court." Accordingly, the trial court
dismissed the complaint of plaintiffs-appellants and ordered them to pay
jointly and severally each of the defendants-appellees the amount of
P500.00 by way of actual damages another amount of P500.00 for
attorneys fees and P1,000.00 as exemplary damages.
Hence, this appeal.
Two vital issues call for resolution by this Court. First, whether or not
defendant-appellee Fiscal Ponce de Leon had the power to order the seizure
of the motor launch in question without a warrant of search and seizure even
if the same was admittedly the corpus delicti of the crime. Second, whether
or not defendants-appellees are civilly liable to plaintiffs-appellants for
damages allegedly suffered by them granting that the seizure of the motor
launch was unlawful.
The gravamen of plaintiffs-appellants argument is that the taking of the
motor launch on July 6, 1962 by Orlando Maddela upon the order of Fiscal
Ponce de Leon was in violation of the constitutional guarantee against
unreasonable searches and seizures since it was done without a search
warrant.
The pertinent provision of the Constitution then in force

"3) The right of the people to be secure in their persons, houses, papers and
effects against unreasonable searches and seizures shall not be violated,
and no warrants shall issue but upon probable cause, to be determined by
the judge after examination under oath or affirmation of the complainant and
the witnesses he may produce, and particularly describing the place to be
searched, and the persons or things to be seized." 3
A cursory reading of the above provision easily brings into focus the
unreasonableness of the seizure of the aforementioned motor launch. A
search and seizure to be reasonable, must be effected by means of a valid
search warrant. And for a search warrant to be valid: (1) it must be issued
upon probable cause; (2) the probable cause must be determined by the
judge himself and not by the applicant or any other person; (3) in the
determination of probable cause, the judge must examine, under oath or
affirmation, the complainant and such witnesses as the latter may produce;
and (4) the warrant issued must particularly describe the place to be
searched and persons or things to be seized. 4 Thus in a long line of
decisions, this Court has declared invalid search warrants which were issued
in utter disregard of the constitutional injunction. 5
Defendant-appellees admitted that when Orlando Maddela entered the
premises of Delfin Lim and impounded the motor launch he was not armed
with a search warrant; that he effected the seizure of the motor launch in the
absence of and without the consent of Delfin Lim. There can be no question
that without the proper search warrant, no public official has the right to enter
the premises of another without his consent for the purpose of search and
seizure. 6 And since in the present case defendants-appellees seized the
motor launch without a warrant, they have violated the constitutional right of
plaintiffs-appellants against unreasonable search and seizure.
Defendants-appellees however would want to justify the seizure of the motor
launch even without a warrant because of Fiscal Ponce de Leons alleged,
inherent power to order the seizure of a personal property which is the
corpus delicti of a crime, he being a quasi judicial officer who has the control
of the prosecution and the presentation of the evidence in the criminal case.
They argue that inasmuch as the motor launch in question was allegedly
stolen by Jikil Taha from Timbangcaya, Fiscal Ponce de Leon could order its
seizure even without a search warrant. We cannot agree. Under the old
Constitution 7 the power to issue a search warrant is vested in a judge or
magistrate and in no other officer and no search and seizure can be made
without a proper warrant. At the time the act complained of was committed,
there was no law or rule that recognized the authority of Provincial Fiscals to
issue a search warrant. In his vain attempt to justify the seizure of the motor

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launch in question without a warrant Fiscal Ponce de Leon invoked the
provisions of Republic Act No. 732, which amended Sections 1674 and 1687
of the Revised Administrative Code. But there is nothing in said law which
confers upon the provincial fiscals the authority to issue warrants, much less
to order without warrant the seizure of a personal property even if it is the
corpus delicti of a crime. True, Republic Act No. 732 has broadened the
power of provincial fiscals to conduct preliminary investigations, but said law
did not divest the judge or magistrate of its power to determine, before
issuing the corresponding warrant, whether or not probable cause exists
therefor. 8
Moreover, under Sections 2 and 3 of Rule 122 of the Rules of Court 9 which
complement the constitutional provision earlier cited, two principles are
made clear, namely: (1) that in the seizure of a stolen property search
warrant is still necessary; and (2) that in issuing a search warrant the judge
alone determines whether or not there is a probable cause. The fact that a
thing is a corpus delicti of a crime does not justify its seizure without a
warrant. As held in U.S. v. de los Reyes and Esguerra, 10 citing McClurg v.
Brenton: 11
"The mere fact that a man is an officer, whether of high or low degree, gives
him no more right than is possessed by the ordinary private citizen to break
in upon the privacy of a home and subject its occupant to the indignity of a
search for the evidence of crime, without a legal warrant procured for that
purpose. No amount of incriminating evidence, whatever its source, will
supply the place of such warrant. At the closed door of the home be it palace
or hovel, even bloodhounds must wait till the law, by authoritative process,
bids it open." (Emphasis supplied.)
Defendant-appellee Fiscal Ponce de Leon would also invoke lack of time to
procure a search warrant as an excuse for the seizure of the motor launch
without one. He claimed that the motor launch had to be seized immediately
in order to preserve it and to prevent its removal out of the locality, since
Balabac, Palawan, where the motor launch was at the time, could only he
reached after three to four days travel by boat. 12 The claim cannot be
sustained. The records show that on June 15, 1962 13 Fiscal Ponce de
Leon made the first request to the Provincial Commander for the impounding
of the motor launch; and on June 26, 1962 14 another request was made.
The seizure was not effected until July 6, 1962. In short, Fiscal Ponce de
Leon had all the time to procure a search warrant had he wanted to and
which he could have taken in less than a day, but he did not. Besides, there
is no basis for the apprehension that the motor launch might be moved out
of Balabac because even prior to its seizure the motor launch was already
without its engine. 15 In sum, the fact that there was no time to secure a
search warrant would not legally justify a search without one. 16

"ART. 32. Any public officer or employee, or any private individual, who
directly or indirectly obstructs, defeats, violates or in any manner impedes or
impairs any of the following rights and liberties of another person shall be
liable to the latter for damages.
x

"(9) The rights to be secure in ones person, house, papers, and effects
against unreasonable searches and seizures.
x

"The indemnity shall include moral damages. Exemplary damages may also
be adjudicated."cralaw virtua1aw library
"ART. 2219. Moral damages may be recovered in the following and
analogous cases:chanrob1es virtual 1aw library
x

"(6) Illegal search;

"(1) Acts and action referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and
36."cralaw virtua1aw library
Pursuant to the foregoing provisions, a person whose constitutional rights
have been violated or impaired is entitled to actual and moral damages from
the public officer or employee responsible therefor. In addition, exemplary
damages may also be awarded. In the instant case, plaintiff-appellant Delfin
Lim claimed that he purchased the motor launch from Jikil Taha in
consideration of P3,000.00, having given P2,000.00 as advanced payment;
that since its seizure on July 6, 1962 the motor launch had been moored at
Balabac Bay and because of exposure to the elements it has become

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As to whether or not they are entitled to damages, plaintiffs-appellants


anchor their claim for damages on Articles 32 and 2219 of the New Civil
Code which provide in part as follows:jgc:chanrobles.com.ph

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worthless at the time of the filing of the present action; that because of the
illegality of the seizure of the motor launch, he suffered moral damages in
the sum of P1,000.00; and that because of the violation of their constitutional
rights they were constrained to engage the services of a lawyer whom they
have paid P1,500.00 for attorneys fees. We find these claims of Delfin Lim
amply supported by the evidence and therefore should be awarded the sum
of P3,000.00 as actual damages; P1,000.00 as moral damages and P750.00
for attorneys fees. However, with respect to plaintiff Jikil Taha, he is not
entitled to recover any damage which he alleged he had suffered from the
unlawful seizure of the motor launch inasmuch as he had already transferred
the ownership and possession of the motor launch to Delfin Lim at the time it
was seized and therefore he has no legal standing to question the validity of
the seizure. Well settled is the rule that the legality of a seizure can be
contested only by the party whose rights have been impaired thereby, and
that the objection to an unlawful search and seizure is purely personal and
cannot be availed of by third parties. 17 Consequently, one who is not the
owner, lessee, or lawful occupant of the premises searched cannot raise the
question of validity of the search and seizure. 18 Jikil Taha is not without
recourse though. He can still collect from his co-plaintiff, Delfin Lim the
unpaid balance of P1,000.00.
Defendant-appellee Fiscal Ponce de Leon wanted to wash his hands of the
incident by claiming that "he was in good faith, without malice and without
the slightest intention of inflicting injury to plaintiff-appellant, Jikil Taha" 19
when he ordered the seizure of the motor launch. We are not prepared to
sustain his defense of good faith. To be liable under Article 32 of the New
Civil Code it is enough that there was a violation of the constitutional rights
of the plaintiffs and it is not required that defendants should have acted with
malice or bad faith. Dr. Jorge Bocobo, Chairman of the Code Commission,
gave the following reasons during the public hearings of the Joint Senate
and House Committees, why good faith on the part of the public officer or
employee is immaterial. Thus:jgc:chanrobles.com.ph
"DEAN BOCOBO. Article 32, regarding individual rights, Attorney Cirilo
Paredes proposes that Article 32 he so amended as to make a public official
liable for violation of another persons constitutional rights only if the public
official acted maliciously or in bad faith. The Code Commission opposes this
suggestion for these reasons:jgc:chanrobles.com.ph
"The very nature of Article 3219 that the wrong may be civil or criminal. It is
not necessary therefore that there should be malice or bad faith. To make
such a requisite would defeat the main purpose of Article 32 which is the
effective protection of individual rights. Public officials in the past have
abused their powers on the pretext of justifiable motives or good faith in the
performance of their duties. Precisely, the object of the Article is to put an

"Mr. Chairman, this article is firmly one of the fundamental articles introduced
in the New Civil Code to implement democracy. There is no real democracy
if a public official is abusing and we made the article so strong and so
comprehensive that it concludes an abuse of individual rights even if done in
good faith, that official is liable. As a matter of fact, we know that there are
very few public officials who openly and definitely abuse the individual rights
of the citizens. In most cases, the abuse is justified on a plea of desire to
enforce the law to comply with ones duty. And so, if we should limit the
scope of this article, that would practically nullify the object of the article.
Precisely, the opening object of the article is to put an end to abuses which
are justified by a plea of good faith, which is in most cases the plea of
officials abusing individual rights." 20
But defendant-appellee Orlando Maddela cannot be held accountable
because he impounded the motor launch upon the order of his superior
officer. While a subordinate officer may be held liable for executing unlawful
orders of his superior officer, there are certain circumstances which would
warrant Maddelas exculpation from liability. The records show that after
Fiscal Ponce de Leon made his first request to the Provincial Commander
on June 15, 1962 Maddela was reluctant to impound the motor launch
despite repeated orders from his superior officer. 21 It was only after he was
furnished a copy of the reply of Fiscal Ponce de Leon, dated June 26, 1962,
to the letter of the Provincial Commander, justifying the necessity of the
seizure of the motor launch on the ground that the subsequent sale of the
launch to Delfin Lim could not prevent the court from taking custody of the
same, 22 that he impounded the motor launch on July 6, 1962. With said
letter coming from the legal officer of the province, Maddela was led to
believe that there was a legal basis and authority to impound the launch.
Then came the order of his superior officer to explain for the delay in the
seizure of the motor launch. 23 Faced with a possible disciplinary action
from his commander, Maddela was left with no alternative but to seize the
vessel. In the light of the above circumstances. We are not disposed to hold
Maddela answerable for damages.
IN VIEW OF THE FOREGOING, the decision appealed from is hereby
reversed and another one entered declaring the seizure illegal and ordering
defendant-appellee Fiscal Francisco Ponce de Leon to pay to plaintiffappellant Delfin Lim the sum of P3,000.00 as actual damages, plus
P1,000.00 moral damages, and, in addition, P750.00 for attorneys fees.
With costs against defendant-appellee Fiscal Ponce de Leon.
SO ORDERED.

Page

end to official abuse by the plea of good faith. In the United States this
remedy is in the nature of a tort.

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Castro (Chairman), Teehankee, Makasiar and Esguerra, JJ., concur.
Muoz Palma, J., is on leave.

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DECISION

PUNO, J.:

The constitutional protection of our people against unreasonable search and


seizure is not merely a pleasing platitude. It vouchsafes our right to privacy
and dignity against undesirable intrusions committed by any public officer or
private individual. An infringement of this right justifies an award for
damages.
On February 22, 1983, petitioner MHP Garments, Inc., was awarded by the
Boy Scouts of the Philippines, the exclusive franchise to sell and distribute
official Boy Scouts uniforms, supplies, badges, and insignias. In their
Memorandum Agreement, petitioner corporation was given the authority to
"undertake or cause to be undertaken the prosecution in court of all illegal
sources of scout uniforms and other scouting supplies." 1
Sometime in October 1983, petitioner corporation received information that
private respondents Agnes Villa Cruz, Mirasol Lugatiman, and Gertrudes
Gonzales were selling Boy Scouts items and paraphernalia without any
authority. Petitioner de Guzman, an employee of petitioner corporation, was
tasked to undertake the necessary surveillance and to make a report of the
Philippine Constabulary (PC).chanroblesvirtualawlibrary
On October 25, 1983, at about 10:30 A.M., petitioner de Guzman, Captain
Renato M. Peafiel, and two (2) other constabulary men of the Reaction
Force Battalion, Sikatuna Village, Diliman, Quezon City went to the stores of
respondents at the Marikina Public Market. Without any warrant, they seized
the boy and girl scouts pants, dresses, and suits on display at respondents
stalls. The seizure caused a commotion and embarrassed private
respondents. Receipts were issued for the seized items. The items were
then turned over by Captain Peafiel to petitioner corporation for
safekeeping.
SECOND DIVISION
[G.R. No. 86720. September 2, 1994.]
MHP GARMENTS, INC., and LARRY C. DE GUZMAN, Petitioners, v. THE
HONORABLE COURT OF APPEALS, AGNES VILLA CRUZ, MIRASOL,
LUGATIMAN, and GERTRUDES GONZALES,Respondents.

A criminal complaint for unfair competition was then filed against private
respondents. 2 During its pendency, petitioner de Guzman exacted from
private respondent Lugatiman the sum of THREE THOUSAND ONE
HUNDRED PESOS (P3,100.00) in order to be dropped from the complaint.
On December 6, 1983, after a preliminary investigation, the Provincial Fiscal
of Rizal dismissed the complaint against all the private respondents. On

Private respondent then filed Civil Case No. 51144 against the petitioners for
sums of money and damages. 4 In its Decision dated January 9, 1987, the
trial court ruled for the private respondents, thus:chanrobles.com:cralaw:red

Page

February 6, 1984, he also ordered the return of the seized items. The seized
items were not immediately returned despite demands. 3 Private
respondents had to go personally to petitioners place of business to recover
their goods. Even then, not all the seized items were turned. The other items
returned were of inferior quality.

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
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unreturned 26 pieces of girl scouts items with interest at 12% per annum
from June 4, 1984 (date the complaint was filed) until it is fully paid;
3. To pay plaintiffs (respondents) the amount of P10,000.00 each, or a total
of P30,000.00, for and as moral damages; and P5,000.00 each, or a total of
P15,000.00, for and as exemplary damages; and
4. To pay plaintiffs (respondents) P5,000.00 for and as attorneys fees and
litigation expenses.

"WHEREFORE, judgment is hereby rendered in favor of plaintiffs and


against defendants, ordering the latter jointly and severally:chanrob1es
virtual 1aw library

Costs of the case a quo and the instant appeal are assessed jointly and
severally against defendants-appellants (petitioners) MHP Garments, Inc.
and Larry de Guzman.

1. To return the amount of P3,100.00 to plaintiff Mirasol Lugatiman with


interest at 12% per annum from January 12, 1984, the date of the last
receipt issued, until fully paid;

SO ORDERED."cralaw virtua1aw library

2. To pay plaintiff Agnes Villa Cruz the sum of P2,000.00 for the 26 pieces of
girl scout items not returned;
3. To pay plaintiffs the amount of P50,000.00 for and as moral damages and
P15,000.00 for and as exemplary damages; and

In this petition for certiorari, petitioners contend:chanrob1es virtual 1aw


library
FIRST ASSIGNMENT OF ERROR
THE COURT OF APPEALS ERRED IN IMPUTING LIABILITY FOR
DAMAGES TO THE PETITIONERS WHO DID NOT EFFECT THE SEIZURE
OF THE SUBJECT MERCHANDISE.

4. P5,000.00 for and as attorneys fees and litigation expenses.


SECOND ASSIGNMENT OF ERROR
Costs against the defendants.
SO ORDERED."cralaw virtua1aw library
The decision was appealed to the respondent court. On January 18, 1989,
its Fifth Division, 5 affirmed the Decision with modification,
thus:jgc:chanrobles.com.ph
"WHEREFORE, the decision appealed from is AFFIRMED with
MODIFICATION, and, as modified, the dispositive portion thereof now reads
as follows:chanrob1es virtual 1aw library

THE COURT OF APPEALS ERRED WHEN IT MADE A FINDING THAT THE


MANNER WITH WHICH THE CONFISCATION OF PRIVATE
RESPONDENTS WAS TORTIOUS BUT PENALIZED INSTEAD THE
PETITIONERS WHO DID NOT COMMIT THE ACT OF CONFISCATION.
THIRD ASSIGNMENT OF ERROR
THE COURT OF APPEALS ERRED WHEN IT FOUND FOR THE PRIVATE
RESPONDENTS AND AGAINST THE PETITIONERS.
We affirm.

Judgment is hereby rendered in favor of plaintiffs (private respondents) and


against defendants (petitioners), ordering the latter jointly and severally;
1. To return the amount of P3,100.00 to plaintiff (respondent) Mirasol
Lugatiman and cancel her application for distributors license;
2. To pay plaintiff (respondent) Agnes Villa Cruz the sum of P2,000.00 for the

Article III, section 2, of the Constitution protects our people from


unreasonable search and seizure. It provides:jgc:chanrobles.com.ph
"The right of the people to be secure in their persons, houses, papers, and
effects against unreasonable searches and seizures of whatever nature for
any purpose shall be inviolable, and no search warrant or warrant of arrest

This provision protects not only those who appear to be innocent but also
those who appear to be guilty but are nevertheless to be presumed innocent
until the contrary is proved. 6 In the case at bench, the seizure was made
without any warrant. Under the Rules of Court, 7 a warrantless search can
only be undertaken under the following
circumstance:chanroblesvirtualawlibrary
"SEC. 12. Search incident to a lawful arrest. A person lawfully arrested
may be searched for dangerous weapons or anything which may be used a
proof of the commission of an offense, without a search warrant."cralaw
virtua1aw library

Page

shall issue except upon probable cause to be determined personally by the


judge after examination under oath or affirmation of the complainant and the
witnesses he may produce, and particularly describing the place to be
searched and the persons or things to be seized."cralaw virtua1aw library

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only to report the alleged illegal activity of private respondents.
While undoubtedly, the members of the PC raiding team should have been
included in the complaint for violation of the private respondents
constitutional rights, still, the omission will not exculpate petitioners.
In the case of Lim v. Ponce de Leon, 9 we ruled for the recovery of damages
for violation of constitutional rights and liberties from public officer or private
individual, thus:jgc:chanrobles.com.ph
"ART. 32. Any public officer or employee, or any private individual, who
directly or indirectly obstructs, defeats, violates or in any manner impedes or
impairs any of the following rights and liberties of another person shall be
liable to the latter for damages.
"x

We hold that the evidence did not justify the warrantless search and seizure
of private respondents goods. Petitioner corporation received information
that private respondents were illegally selling Boy Scouts items and
paraphernalia in October 1983. The specific date and time are not
established in the evidence adduced by the parties. Petitioner de Guzman
then made a surveillance of the stores of private respondents. They reported
to the Philippine Constabulary and on October 25, 1983, the raid was made
on the stores of private respondents and the supposed illicit goods were
seized. The progression of time between the receipt of the information and
the raid of the stores of private respondents shows there was sufficient time
for petitioners and the PC raiding party to apply for a judicial warrant.
Despite the sufficiency of time, they did not apply for a warrant and seized
the goods of private respondents. In doing so, they took the risk of a suit for
damages in case the seizure would be proved to violate the right of private
respondents against unreasonable search and seizure. In the case at bench,
the search and seizure were clearly illegal. There was no probable cause for
the seizure. Probable cause for a search has been defined as "such facts
and circumstances which would lead a reasonably discreet and prudent man
to believe that an offense has been committed and that the objects sought in
connection with the offense are in the place sought to be searched." 8 These
facts and circumstances were not in any way shown by the petitioners to
justify their warrantless search and seizure. Indeed, after a preliminary
investigation, the Provincial Fiscal of Rizal dismissed their complaint for
unfair competition and later ordered the return of the seized
goods.chanrobles.com : virtual law library

"(9) The rights to be secure in ones person, house, papers, and effects
against unreasonable searches and seizures.

Petitioners would deflect their liability with the argument that it was the
Philippine Constabulary that conducted the raid and their participation was

"The very nature of Article 32 is that the wrong may be civil or criminal. It is
not necessary therefore that there should be malice or bad faith. To make

"x

"The indemnity shall include moral damages. Exemplary damages may also
be adjudged."cralaw virtua1aw library
"ART. 2219. Moral damages may be recovered in the following and
analogous cases:jgc:chanrobles.com.ph
"x

"(6) Illegal search;.


"(1) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and
35.
Pursuant to the foregoing provisions, a person whose constitutional rights
have been violated or impaired is entitled to actual and moral damages from
the public officer or employee responsible therefor. In addition, exemplary
damages may also be awarded."cralaw virtua1aw library
x

In the subsequent case of Aberca v. Ver, 10 the Court En Banc explained the
liability of persons indirectly responsible, viz:jgc:chanrobles.com.ph
" [T]he decisive factor in this case, in our view, is the language of Article 32.
The law speaks of an officer or employee or person "directly or indirectly"
responsible for the violation of the constitutional rights and liberties of
another. Thus, it is not the actor alone (i.e. the one directly responsible) who
must answer for damages under Article 32; the person indirectly responsible
has also to answer for the damages or injury caused to the aggrieved party.
x

While it would certainly be too naive to expect the violators of human rights
would easily be deterred by the prospect of facing damages suits, it should
nonetheless be made clear in no uncertain terms that Article 32 of the Civil
Code makes the persons who are directly, as well as indirectly, responsible
for the transgression joint tortfeasors.
x

[N]either can it be said that only those shown to have participated "directly"
should be held liable. Article 32 of the Civil Code encompasses within the
ambit of its provisions those directly, as well as indirectly, responsible for its
violations." (Emphasis supplied)
Applying the aforecited provisions and leading cases, the respondent court
correctly granted damages to private respondents. Petitioners were indirectly
involved in transgressing the right of private respondents against
unreasonable search and seizure. Firstly, they instigated the raid pursuant to
their covenant in the Memorandum Agreement to undertake the prosecution
in court of all illegal sources of scouting supplies. 11 As correctly observed
by respondent court:chanroblesvirtualawlibrary
"Indeed, the acts committed by the PC soldiers of unlawfully appellees
(respondents) merchandise and of filing the criminal complaint for unfair

Page

such a requisite would defeat the main purpose of Article 32 which is the
effective protection of individual rights. Public officials in the past have
abused their powers on the pretext of justifiable motives or good faith in the
performance of their duties. Precisely, the object of the Article is to put an
end to official abuse by plea of the good faith. In the United States this
remedy is in the nature of a tort." (Emphasis supplied)

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TORTS Cases Types of Liabilities and Other Types of Torts (pp.4-6 of the outline)
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competition against appellees (respondents) were for the protection and
benefit of appellant (petitioner) corporation. Such being the case, it is, thus,
reasonably fair to infer from those acts that it was upon appellant (petitioner)
corporations instance that the PC soldiers conducted the raid and effected
the illegal seizure. These circumstances should answer the trial courts query
posed in its decision now under consideration as to why the PC
soldiers immediately turned over the seized merchandise to appellant
(petitioner) corporation." 12
The raid was conducted with the active participation of their employee. Larry
de Guzman did not lift a finger to stop the seizure of the boy and girl scouts
items. By standing by and apparently assenting thereto, he was liable to the
same extent as the officers themselves. 13 So with the petitioner corporation
which even received for safekeeping the goods unreasonably seized by the
PC raiding team and de Guzman, and refused to surrender them for quite a
time despite the dismissal of its complaint for unfair competition.
Secondly, Letter of Instruction No. 1299 was precisely crafted on March 9,
1983 to safeguard not only the privilege of franchise holder of scouting items
but also the citizens constitutional rights, to wit:jgc:chanrobles.com.ph
"TITLE : APPREHENSION OF UNAUTHORIZED
MANUFACTURERS AND DISTRIBUTORS OF
SCOUT PARAPHERNALIA AND IMPOUNDING
OF SAID PARAPHERNALIA.
ABSTRACT:chanrob1es virtual 1aw library
Directs all law enforcement agencies of the Republic of the Philippines, to
apprehend immediately unauthorized manufacturers and distributors of
Scout paraphernalia, upon proper application by the Boy Scouts of the
Philippines and/or Girl Scouts of the Philippines for warrant of arrest and/or
search warrant with a judge, or such other responsible officer as may be
authorized by law; and to impound the said paraphernalia to be used as
evidence in court or other appropriate administrative body. Orders the
immediate and strict compliance with the Instructions." 14
Under the above provision and as aforediscussed, petitioners miserably
failed to report the unlawful peddling of scouting goods to the Boy Scouts of
the Philippines for the proper application of a warrant. Private respondents
rights are immutable and cannot be sacrificed to transient needs. 15
Petitioners did not have the unbridled license to cause the seizure of

And thirdly, if petitioners did not have a hand in the raid, they should have
filed a third-party complaint against the raiding team for contribution or any
other relief, 16 in respect of respondents claim for Recovery of Sum of
Money with Damages. Again, they did not.
We have consistently ruled that moral damages are not awarded to penalize
the defendant but to compensate the plaintiff for the injuries he may have
suffered. 17 Conformably with our ruling in Lim v. Ponce de Leon, op. cit.,
moral damages can be awarded in the case at bench. There can be no
doubt that petitioners must have suffered sleepless nights, serious anxiety,
and wounded feelings due the tortious raid caused by petitioners. Private
respondents avowals of embarrassment and humiliation during the seizure
of their merchandise were supported by their testimonies. Respondent Cruz
declared:jgc:chanrobles.com.ph
"I felt very nervous. I was crying to loss (sic) my goods and capital because I
am doing business with borrowed money only, there was commotion created
by the raiding team and they even stepped on some of the pants and
dresses on display for sale. All passersby stopped to watch and stared at me
with accusing expressions. I was trembling and terribly ashamed, sir." 18
Respondent Lugatiman testified:jgc:chanrobles.com.ph
"I felt very nervous. I was crying and I was very much ashamed because
many people have been watching the PC soldiers hauling my items, and
many/I (sic) hear say nakaw pala ang mga iyan for which I am claiming
P25,000.00 for damages." 19
While respondent Gonzalez stated thus:jgc:chanrobles.com.ph
"I do not like the way the raid was conducted by the team sir because it
looked like that what I have been selling were stolen items that they should
be confiscated by uniformed soldiers. Many people were around and the
more the confiscation was made in a scandalous manner; every clothes, Tshirts, pants and dresses even those not wrapped dropped to the ground. I
was terribly shamed in the presence of market goers that morning." 20
Needles to state, the wantonness of the wrongful seizure justifies the award
of exemplary damages. 21 It will also serve as a stern reminder to all and
sundry that the constitutional protection against unreasonable search and
seizure is a virile reality and not a mere burst of rhetoric. The all
encompassing protection extends against intrusions directly done both by
government and indirectly by private entities.

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respondents goods without any warrant.chanrobles virtual lawlibrary

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IN VIEW WHEREFORE, the appealed decision is AFFIRMED WITH
MODIFICATION. We impose a SIX PERCENT (6%) interest from January 9,
1987 on the TWO THOUSAND PESOS (P2,000.00) for the unreturned
twenty-six (26) pieces of girl scouts items and a TWELVE PERCENT (12%)
interest, in lieu of SIX PERCENT (6%), on the said amount upon finality of
this Decision until the payment thereof. 22 Costs against
petitioners.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
SO ORDERED.

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EN BANC
[G.R. No. 13505. February 4, 1919. ]
GEO. W. DAYWALT, Plaintiff-Appellant, v. LA CORPORATION DE LOS
PADRES AGUSTINOS RECOLETOS ET. AL., Defendants-Appellees.
SYLLABUS
1. CONTRACTS; DAMAGES FOR BREACH; LIABILITY OF THIRD PARTY.
Whatever may be the character of the liability, if any, which a stranger to a
contract may incur by advising or assisting one of the parties to evade
performance, he cannot become more extensively liable in damages for the
nonperformance of the contract than the party in whose behalf he inter
meddles.
2. ID.; ID.; MEASURE OF DAMAGES FOR BREACH OF CONTRACT.
The damages recoverable upon breach of contract are, primarily, the
ordinary, natural and in a sense the necessary damage resulting from the
breach. Other damages, known as special damages, are recoverable where
it appears that the particular conditions which made such damages a
probable consequence of the breach were known to the delinquent party at
the time the contract was made. This proposition must be understood with
the qualification that, if the damages are in the legal sells remote or
speculative, knowledge of the special conditions which render such
damages possible will not make them recoverable. Special damages of this
character cannot be recovered unless made the subject of special
stipulation.
3. ID; ID.; ID.; DAMAGES FOR BREACH OF CONTRACT FOR SALE OF
LAND. The damages ordinarily recoverable against a vendor for failure to
deliver land which he has contracted to deliver is the value of the use and
occupation of the land for the tune during which it is wrongfully withheld.

DECISION

STREET, J. :

In the year 1902, Teodorica Endencia, an unmarried woman, resident in the


Province of Mindoro, executed a contract whereby she obligated herself to
convey to Geo. W. Daywalt,. a tract of land situated in the barrio of

The second contract was not immediately carried into effect for the reason
that the Torrens certificate was not yet obtainable and in fact said certificate
was not issued until the period of performance contemplated in the contract
had expired. Accordingly, upon October 3, 1908, the parties entered into still
another agreement, superseding the old, by which Teodorica Endencia
agreed, upon receiving the Torrens title to the land in question, to deliver the
same to the Hongkong and Shanghai Bank in Manila, to be forwarded to the
Crocker National Bank in San Francisco, where it was to be delivered to the
plaintiff upon payment of a balance of P3,100.
The Torrens certificate was in time issued to Teodorica Endencia, but in the
course of the proceedings relative to the registration of the land, it was found
by official survey that the area of the tract inclosed in the boundaries stated
in the contract was about 1,248 hectares instead of 452 hectares as stated
in the contract. In view of this development Teodorica Endencia became
reluctant to transfer the whole tract to the purchaser, asserting that she
never intended to sell so large an amount of land and that she had been
misinformed as to its area.
This attitude of hers led to litigation in which Daywalt finally succeeded, upon
appeal to the Supreme Court, in obtaining a decree for specific performance;
and Teodorica Endencia was ordered to convey the entire tract of land to
Daywalt pursuant to the contract of October 3, 1908, which contract was
declared to be in full force and effect. This decree appears to have become
finally effective in the early part of the year 1914.1
The defendant, La Corporacion de los Padres Recoletos, is a religious
corporation, with its domicile in the city of Manila. Said corporation was
formerly the owner of a large tract of land, known as the San Jose Estate, on
the island of Mindoro, which was sold to the Government of the Philippine
Islands in the year 1909. The same corporation was at this time also the
owner of another estate on the same island immediately adjacent to the land

Page

Mangarin, municipality of Bulalacao, now San Jose, in said province. It was


agreed that a deed should be executed as soon as the title to the land
should be perfected by proceedings in the Court of Land Registration and a
Torrens certificate should be procured therefor in the name of Teodorica
Endencia. A decree recognizing the right of Teodorica as owner was entered
in said court in August 1906, but the Torrens certificate was not issued until
later. The parties, however, met immediately upon the entering of this decree
and made a new contract with a view to carrying their original agreement
into effect. This new contract was executed in the form of a deed of
conveyance and bears date of August 16, 1906. The stipulated price was
fixed at P4,000, and the area of the land enclosed in the boundaries defined
in the contract was stated to be 452 hectares and a fraction.

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which Teoderica Endencia had sold to Geo. W. Daywalt; and for many years
the Recoletos Fathers had maintained large herds of cattle on the farms
referred to. Their representative, charged with the management of these
farms, was father Isidoro Sanz, himself a member of the order. Father Sanz
had long been well acquainted with Teodorica Endencia and exerted over
her an influence and as cendency due to his religious character as well as to
the personal friendship which existed between them. Teodorica appears to
be a woman of little personal force, easily subject to influence, and upon all
the important matters of business was accustomed to seek, and was given,
the advice of Father Sanz and other members of his order with whom she
came in contact.
Father Sanz was fully aware of the existence of the contract of 1902 by
which Teodorica Endencia agreed to sell her land to the plaintiff as well as of
the later important developments connected with the history of that contract
and the contract substituted successively for it; and in particular Father
Sanz, as well as other members of the defendant corporation, knew of the
existence of the contract of October 3, 1908, which, as we have already
seen, finally fixed the rights of the parties to the property in question. When
the Torrens certificate was finally issued in 1909 in favor of Teodorica
Endencia, she delivered it for safekeeping to the defendant corporation, and
it was then taken to Manila where it remained in the custody and under the
control of P. Juan Labarga the procurador and chief official of the defendant
corporation, until the delivery thereof to the plaintiff was made compulsory by
reason of the decree of the Supreme Court in 1914.
When the defendant corporation sold the San Jose Estate, it was necessary
to bring the cattle off of that property; and, in the first half of 1909, some
2,368 head were removed to the estate of the corporation immediately
adjacent to the property which the plaintiff had purchased from Teodorica
Endencia. As Teodorica still retained possession of said property Father
Sanz entered into an arrangement with her whereby large numbers of cattle
belonging to the defendant corporation were pastured upon said land during
a period extending from June 1, 1909, to May 1, 1914.
Under the first cause stated in the complaint in the present action the plaintiff
seeks to recover from the defendant corporation the sum of P24,000, as
damages for the use and occupation of the land in question by reason of the
pasturing of cattle thereon during the period stated. The trial court came to
the conclusion that the defendant corporation was liable for damages by
reason of the use and occupation of the premises in the manner stated; and
fixed the amount to be recovered at P2,497. The plaintiff appealed and has
assigned error to this part of the judgment of the court below, insisting that
damages should have been awarded in a much larger sum and at least to
the full extent of P24,000, the amount claimed in the complaint.

With reference to the rate at which compensation should be estimated the


trial court came to the following conclusion:jgc:chanrobles.com.ph
"As to the rate of the compensation, the plaintiff contends that the defendant
corporation maintained at least one thousand head of cattle on the land and
that the pasturage was of the value of forty centavos per head monthly, or
P4,800 annually, for the whole tract. The court can not accept this view. It is
rather improbable that 1,248 hectares of wild Mindoro land would furnish
sufficient pasturage for one thousand head of cattle during the entire year,
and, considering the locality, the rate of forty centavos per head monthly
seems too high. The evidence shows that after having recovered possession
of the land the plaintiff rented it to the defendant corporation for fifty
centavos per hectare annually, the tenant to pay the taxes on the land, and
this appears to be a reasonable rent. There is no reason to suppose that the
land was worth more for grazing purposes during the period from 1909 to
1913, than it was at the later period. Upon this basis the plaintiff is entitled to
damages in the sum of P2,497, and is under no obligation to reimburse the
defendants for the land taxes paid by either of them during the period the
land was occupied by the defendant corporation. It may be mentioned in this
connection that the Lontok tract adjoining the land in question and containing
over three thousand hectares appears to have been leased for only P1,000
a year, plus the taxes."cralaw virtua1aw library
From this it will be seen that the trial court estimated the rental value of the
land for grazing purposes at 50 centavos per hectare per annum, and
roughly adopted the period of four years as the time for which compensation
at that rate should be made. As the court had already found that the
defendant was liable for these damages from June, 1, 1909, to May 1, 1914,
or a period of four years and eleven months, there seems some ground for
the contention made in the appellants first assignment of error that the

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As the defendant did not appeal, the propriety of allowing damages for the
use and occupation of the land to the extent of P2,497, the mount awarded,
is not now in question; and the only thing here to be considered, in
connection with this branch of the case, is whether the damages allowed
under this head should be increased. The trial court lightly ignored the fact
that the defendant corporation had paid Teodorica Endencia for use and
occupation of the same land during the period in question at the rate of P425
per annum, inasmuch as the final decree of this court in the action for
specific performance is conclusive against her right, and as the defendant
corporation had notice of the rights of the plaintiff under his contract of
purchase, it can not be permitted that the corporation should escape liability
in this action by proving payment of rent to a person other than the true
owner.

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courts computation was erroneous, even accepting the rule upon which the
damages were assessed, as it is manifest that at the rate of 50 centavos per
hectare per annum, the damages for four years and eleven months would be
P3,090.
Notwithstanding this circumstance, we are of the opinion that the damages
assessed are sufficient to compensate the plaintiff for the use and
occupation of the land during the whole time it was used. There is evidence
in the record strongly tending to show that the wrongful use of the land by
the defendant was not continuous throughout the year but was confined
mostly to the season when the forage obtainable on the land of the
defendant corporation was not sufficient to maintain its cattle, for which
reason it became necessary to allow them to go over to pasture on the land
in question; and it is not clear that the whole of the land was used for
pasturage at any time. Considerations of this character probably led the trial
court to adopt four years as roughly being the period during which
compensation should be allowed. But whether this was advertently done or
not, we see no sufficient reason, in the uncertainty of the record with
reference to the number of the cattle grazed and the period when the land
was used, for substituting our guess for the estimate made by the trial court.
In the second cause of action stated in the complaint the plaintiff seeks to
recover from the defendant corporation the sum of P500,000, as damages,
on the ground that said corporation, for its own selfish purposes, unlawfully
induced Teodorica Endencia to refrain from the performance of her contract
for the sale of the land in question and to withhold delivery to the plaintiff of
the Torrens title, and further, maliciously and without reasonable cause,
maintained her in her defense to the action of specific performance which
was finally decided in favor of the plaintiff in this court. The cause of action
here stated is based on a liability derived from the wrongful interference of
the defendant in the performance of the contract between the plaintiff and
Teodorica Endencia; and the large damages laid in the complaint were,
according to the proof submitted by the plaintiff, incurred as a result of a
combination of circumstances of the following nature: In 1911, it appears, the
plaintiff, as the owner of the land which he had bought from Teodorica
Endencia entered into a contract (Exhibit C) with S.B. Wakefield, of San
Francisco, for the sale and disposal of said lands to a sugar growing and
milling enterprise, the successful launching of which depended on the ability
of Daywalt to get possession of the land and the Torrens certificate of title. In
order to accomplish this end, the plaintiff returned to the Philippine Islands,
communicated his arrangement to the defendant, and made repeated efforts
to secure the registered title for delivery in compliance with said agreement
with Wakefield. Teodorica Endencia seems to have yielded her consent to
the consummation of her contract, but the Torrens title was then in the
possession of Padre Juan Labarga in Manila, who refused to deliver the

The determination of the issue presented in this second cause of action


requires a consideration of two points. The first is whether a person who is
not a party to a contract for the sale of land makes himself liable for
damages to the vendee, beyond the value of the use and occupation, by
colluding with the vendor and maintaining him in the effort to resist an action
for specific performance. The second is whether the damages which the
plaintiff seeks to recover under this head are too remote and speculative to
be the subject of recovery.
As preliminary to a consideration of the first of these questions, we deem it
well to dispose of the contention that the members of the defendant
corporation, in advising and prompting Teodorica Endencia not to comply
with the contract of sale, were actuated by improper and malicious motives.
The trial court found that this contention was not sustained, observing that
while it was true that the circumstances pointed to an entire sympathy on the
part of the defendant corporation with the efforts of Teodorica Endencia to
defeat the plaintiffs claim to the land, the fact that its officials may have
advised her not to carry the contract into effect would not constitute
actionable interference with such contract. It may be added that when one
considers the hardship that the ultimate performance of that contract
entailed on the vendor, and the doubt in which the issue was involved to
the extent that the decision of the Court of the First Instance was
unfavorable to the plaintiff and the Supreme Court itself was divided the
attitude of the defendant corporation, as exhibited in the conduct of its
procurador, Juan Labarga, and other members of the order of the Recollect
Fathers, is not difficult to understand. To our mind a fair conclusion on this
feature of the case is that father Juan Labarga and his associates believed
in good faith that the contract could not be enforced and that Teodorica
would be wronged if it should be carried into effect. Any advice or assistance
which they may have given was, therefore, prompted by no mean or
improper motive. It is not, in our opinion, to be denied that Teodorica would
have surrendered the documents of title and given possession of the land
but for the influence and promptings of members of the defendant
corporation. But we do not credit the idea that they were in any degree
influenced to the giving of such advice by the desire to secure to themselves
the paltry privilege of grazing their cattle upon the land in question to the
prejudice of the just rights of the plaintiff.

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document. Teodorica also was in the end prevailed upon to stand out against
the performance of her contract with the plaintiff with the result that the
plaintiff was kept out of possession until the Wakefield project for the
establishment of a large sugar growing and milling enterprise fell through. In
the light of what has happened in recent years in the sugar industry, we feel
justified in saying that the project above referred to, if carried into effect,
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The attorney for the plaintiff maintains that, by interfering in the performance
of the contract in question and obstructing the plaintiff in his efforts to secure
the certificate of title to the land, the defendant corporation made itself a coparticipant with Teodorica Endencia in the breach of said contract; and
inasmuch as father Juan Labarga, at the time of said unlawful intervention
between the contracting parties, was fully aware of the existence of the
contract (Exhibit C) which the plaintiff had made with S.B. Wakefield,
Francisco, it is insisted that the defendant corporation is liable for the loss
consequent upon the failure of the project outlined in said contract.
In this connection reliance is placed by the plaintiff upon certain American
and English decisions in which it is held that a person who is a stranger to a
contract may, by an unjustifiable interference in the performance thereof,
render himself liable for the damages consequent upon non-performance. It
is said that the doctrine of these cases was recognized by this court in
Gilchrist v. Cuddy (29 Phil. Rep., 542); and we have been earnestly pressed
to extend the rule there enunciated to the situation here presented.
Somewhat more than half a century ago the English Court of the Queens
Bench saw its way clear to permit an action for damages to be maintained
against a stranger to a contract wrongfully interfering in its performance. The
leading case on this subject is Lumley v. Gye ([1853], 2 El. & Bl., 216). It
there appeared that the plaintiff, as manager of a theatre, had entered into a
contract with Miss Johanna Wagner, an opera singer, whereby she bound
herself for a period to sing in the plaintiffs theatre and nowhere else. The
defendant, knowing of the existence of this contract, and, as the declaration
alleged, "maliciously intending to injure the plaintiff," enticed and procured
Miss Wagner to leave the plaintiffs employment. It was held that the plaintiff
was entitled to recover damages. The right which was here recognized had
its origin in a rule, long familiar to the courts of the common law, to the effect
that any person who entices a servant from his employment is liable in
damages to the master. The masters interest in the service rendered by his
employee is here considered as a distinct subject of juridical right. It being
thus accepted that it is a legal wrong to break up a relation of personal
service, the question now arose whether it is illegal for one person to
interfere with any contract relation subsisting between others. Prior to the
decision of Lumley v. Gye [ supra] it had been supposed that the liability
here under consideration was limited to the cases of the enticement of
menial servants, apprentices, and others to whom the English Statutes of
Laborers were applicable. But in the case cited the majority of the judges
concurred in the opinion that the principle extended to all cases of hiring.
This doctrine was followed by the Court of Appeal in Bowen v. Hall ([1881], 6
Q.B., Div., 333); and in Temperton v. Russell ([1893], 1 Q.B., 715), it was
held that the right of action for maliciously procuring a breach of contract is

Malice in some form is generally supposed to be an essential ingredient in


cases of interference with contract relations. But upon the authorities it is
enough if the wrongdoer, having knowledge of the existence of the contract
relation, in bad faith sets about to break it up. Whether his motive is to
benefit himself or gratify his spite by working mischief to the employer is
immaterial. Malice in the sense of ill-will or spite is not essential.
Upon the question as to what constitutes legal justification, a good
illustration was put in the leading case. If a party enters into contract to go
for another upon a journey to a remote and unhealthful climate, and a third
per son, with a bona fide purpose of benefiting the one who is under contract
to go, dissuades him from the step, no action will lie. But if the advice is not
disinterested and the persuasion is used for "the indirect purpose of
benefiting the defendant at the expense of the plaintiff," the intermedler is
liable if his advice is taken and the contract broken.
The doctrine embodied in the cases just cited has sometimes been found
useful, in the complicated relations of modern industry, as a means of
restraining the activities of labor unions and industrial societies when
improperly engaged in the promotion of strikes. An illustration of the
application of the doctrine in question in a case of this kind is found in South
Wales Miners Federation v. Glamorgan Coal Co. ([1905], A. C., 239) . It
there appeared that certain miners employed in the plaintiffs collieries,
acting under the order of the executive council of the defendant federation,
violated their contract with the plaintiff by abstaining from work on certain
days. The federation and council acted without any actual malice or ill-will
towards the plaintiff, and the only object of the order in question was that the
price of coal might thereby be kept up, a factor which affected the miners
wage scale. It was held that no sufficient justification was shown and that the
federation was liable.
In the United States, the rule established in England by Lumley v. Gye
[supra] and subsequent cases is commonly accepted, though in a few of the
States the broad idea that a stranger to a contract can be held liable upon it
is rejected, and in these jurisdictions the doctrine, if accepted at all, is limited
to the situation where the contract is strictly for personal service. (Boyson v.
Thorn, 98 Cal., 578; Chambers & Marshall v. Baldwin 91 Ky., 121; bourlier v.
Macauley, 91 Ky., 135; Glencoe Land & Gravel Co. v. Hudson Bros. Com.
Co., 138 Mo., 439.)
It should be observed in this connection that, according to the English and

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not confined to contracts for personal services, but extends to contracts in


general. In that case the contract which the defendant had procured to be
breached was a contract for the supply of building material.

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American authorities, no question can be made as to the liability of one who
interferes with a contract existing between others by means which, under
known gal canons, can be denominated an unlawful means. Thus, if
performance is prevented by force, intimidation, coercion, or threats, or by
false or defamatory statements, or by nuisance or riot, the person using such
unlawful means is, under all the authorities, liable for the damage which
ensues. And in jurisdictions where the doctrine of Lumley is. Gye [supra] is
rejected, no liability can arise from a neddlesome and malicious interference
with a contract relation unless some such unlawful means as those just
indicated are used. (See cases last above cited.)
This brings us to the decision made by this court in Gilchrist v. Cuddy (29
Phil. Rep., 542) It there appeared that one Cuddy, the owner of a
cinematographic film, let it under a rental contract to the plaintiff Gilchrist for
a specified period of time. In violation of the terms of this agreement, Cuddy
proceeded to turn over the film also under a rental contract, to the
defendants Espejo and Zaldarriaga. Gilchrist thereupon restored to the Court
of First Instance and procured an injunction restraining the defendants from
exhibiting the film in question in their theater during the period specified in
the contract of Cuddy with Gilchrist. Upon appeal to this court it was in effect
held that the injunction was not improperly granted, although the defendants
did not, at the time their contract was made, know the identity of the plaintiff
as the person holding the prior contract but did know of the existence of a
contracting favor of someone. It was also said argue do, that the defendants
would have been liable in damages under Article 1902 of the Civil Code, if
the action had been brought by the plaintiff to recover damages. The force of
the opinion is, we think, somewhat weakened by the criticism contained in
the concurring opinion, wherein it is said that the question of breach of
contract by inducement was not really involved in the case. Taking the
decision upon the point which was really decided, it is authority for the
proposition that one who buys something which he knows has been sold to
some other person can be restrained from using that thing to the prejudice of
the person having the prior and better right.
Translated into terms applicable to the case at bar, the decision in Gilchrist v.
Cuddy (29 Phil. Rep., 542), indicates that the defendant corporation, having
notice of the sale of the land in question to Daywalt, might have been
enjoined by the latter from using the property for grazing its cattle thereon.
That the defendant corporation is also liable in this action for the damage
resulting to the plaintiff from the wrongful use and occupation of the property
has also been already determined. But it will be observed that in order to
sustain this liability it is not necessary toresort to any subtle exegesis relative
to the liability of a stranger to a contract for unlawful interference in the
performance thereof. It is enough that defendant used the property with
notice that the plaintiff had a prior and better right.

Nevertheless, it must be admitted that the codes and jurisprudence of the


civil law furnish a somewhat uncongenial field in which to propagate the idea
that a stranger to a contract may be sued for the breach thereof. Article 1257
of the Civil Code declares that contracts are binding only between the
parties and their privies. In conformity with this it has been held that a
stranger to a contract has no right of action for the nonfulfillment of the
contract except in the case especially contemplated in the second paragraph
of the same article. (Uy Tam and Uy Yet v. Leonard, 30 Phil. Rep., 471.) As
observed by this court in Manila Railroad Co. v. Compania Trasatlantica,
R.G. No. 11318 (38 Phil. Rep., 875), a contract, when effectually entered into
between certain parties, determines not only the character and extent of the
liability of the contracting parties but also the person or entity by whom the
obligation is exigible. The same idea should apparently be applicable with
respect to the person against whom the obligation of the contract may be
enforced; for it is evident that there must be a certain mutuality in the
obligation, and if the stranger to a contract is not permitted to sue to enforce
it, he cannot consistently be held liable upon it.
If the two antagonistic ideas which we have just brought into juxtaposition
are capable of reconciliation, the process must be accomplished by
distinguishing clearly between the right of action arising from the improper
interference with the contract by a stranger thereto, considered as an
independent act generative of civil liability, and the right of action ex
contractu against a party to the contract resulting from the breach thereof.
However, we do not propose here to pursue the matter further, inasmuch as,
for reasons presently to be stated, we are of the opinion that neither the
doctrine of Lumley v. Gye [supra] nor the application made of it by this court
in Gilchrist v. Cuddy (29 Phil. Rep., 542), affords any basis for the recovery
of the damages which the plaintiff is supposed to have suffered by reason of
his inability to comply with the terms of the Wakefield contract.
Whatever may be the character of the liability which a stranger to a contract

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Article 1902 of the Civil Code declares that any person who by an act or
omission, characterized by fault or negligence, causes damage to another
shall be liable for the damage so done. Ignoring so much of this article as
relates to liability for negligence, we take the rule to be that a person is liable
for damage done to another by any culpable act and by "culpable act" we
mean any act which is blameworthy when judged by accepted legal
standards. The idea thus expressed is undoubtedly broad enough to include
any rational conception of liability for the tortious acts likely to be developed
in any society. Thus considered, it cannot be said that the doctrine of Lumley
v. Gye [supra] and related cases is repugnant to the principles of the civil
law.

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may incur by advising or assisting one of the parties to evade performance,
there is one proposition upon which all must agree. This is, that the stranger
cannot become more extensively liable in damages for the nonperformance
of the contract than the party in whose behalf he intermeddles. To hold the
stranger liable for damages in excess of those that could be recovered
against the immediate party to the contract would lead to results at once
grotesque and unjust. In the case at bar, as Teodorica Endencia was the
party directly bound by the contract, it is obvious that the liability of the
defendant corporation, even admitting that it has made itself co-participant in
the breach of the contract, can in no event exceed hers. This leads us to
consider at this point the extent of the liability of Teodorica Endencia to the
plaintiff by reason of her failure to surrender the certificate of title and to
place the plaintiff in possession.
It should in the first place be noted that the liability of Teodorica Endencia for
damages resulting from the breach of her contract with Daywalt was a
proper subject for adjudication in the action for specific performance which
Daywalt instituted against her in 1909 and which was litigated by him to a
successful conclusion in this court, but without obtaining any special
adjudication with reference to damages. Indemnification for damages
resulting from the breach of a contract is a right inseparably annexed to
every action for the fulfillment of the obligation (Art. 1124, Civil Code); and it
is clear that if damages are not sought or recovered in the action to enforce
performance they cannot be recovered in an independent action. As to
Teodorica Endencia, therefore, it should be considered that the right of
action to recover damages for the breach of the contract in question was
exhausted in the prior suit. However, her attorneys have not seen fit to
interpose the defense of res judicata in her behalf; and as the defendant
corporation was not a party to that action, and such defense could not in any
event be of any avail to it, we proceed to consider the question of the liability
of Teodorica Endencia for damages without reference to this point.
The most that can be said with reference to the conduct of Teodorica
Endencia is that she refused to carry out a contract for the sale of certain
land and resisted to the last an action for specific performance in court. The
result was that the plaintiff was prevented during a period of several years
from exerting that control over the property which he was entitled to exert
and was meanwhile unable to dispose of the property advantageously. Now,
what is the measure of damages for the wrongful detention of real property
by the vender after the time has come for him to place the purchaser in
possession?
The damages ordinarily and normally recoverable against a vendor for
failure to deliver land which he has contracted to deliver is the value of the
use and occupation of the land for the time during which it is wrongfully

We recognize the possibility that more extensive damages may be


recovered where, at the time of the creation of the contractual obligation, the
vendor, or lessor, is aware of the use to which the purchaser or lessee
desires to put the property which is the subject of the contract, and the
contract is made with the eyes of the vendor or lessor open to the possibility
of the damage which may result to the other party from his own failure to
give possession. The case before us is not of this character, inasmuch as at
the time when the rights of the parties under the contract were determined,
nothing was known to any of them about the San Francisco capitalist who
would be willing at back the project portrayed in Exhibit C.
The extent of the liability for the breach of a contract must be determined in
the light of the situation in existence at the time the contract is made; and the
damages ordinarily recoverable are in all events limited to such as might be
reasonably foreseen in the light of the facts then known to the contracting
parties. Where the purchaser desires to protect himself, in the contingency
of the failure of the vendor promptly to give possession, from the possibility
of incurring other damages than such as are incident to the normal value of
the use and occupation, he should cause to be inserted in the contract a
clause providing for stipulated amount to be paid upon failure of the vendor
to give possession; and no case has been called to our attention where, in
the absence of such a stipulation, damages have been held to be
recoverable by the purchaser in excess of the normal value of use and
occupation. On the contrary, the most fundamental conceptions of the law
relative to the assessment of damages are inconsistent with such idea.
The principles governing this branch of the law were profoundly considered
in the case of Hadley v. Baxendale (9 Exch., 341), decided in the English
Court of Exchequer in 1854; and a few words relative to the principles
governing the recovery of damages, as expounded in that decision, will here
be found instructive. The decision in that case is considered a leading
authority in the jurisprudence of the common law. The plaintiffs in that case

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withheld. And of course where the purchaser has not paid the purchase
money, a deduction may be made in respect to the interest on the money
which constitutes the purchase price. Substantially the same rule holds with
respect to the liability of a landlord who fails to put his tenant in possession
pursuant to a contract of lease. The measure of damages is the value of the
leasehold interest, or use and occupation, less the stipulated rent, where this
has not been paid. The rule that the measure of damages for the wrongful
detention of land is normally to be found in the value of use and occupation
is, we believe, one of the things that may be considered certain in the law
(39 Cyc., 1630; 24 Cyc., 1052; Sedgewick on Damages, Ninth ed., Sec.
185.) almost as well settled, indeed, as the rule that the measure of
damages for the wrongful detention of money is to be found in the interest.

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were proprietors of a mill in Gloucester, which was propelled by steam, and
which was engaged in grinding and supplying meal and flour to customers.
The shaft of the engine got broken, and it became necessary that the broken
shaft be sent to an engineer or foundry man at Greenwich, to serve as a
model for casting or manufacturing another that would fit into the machinery.
The broken shaft could be delivered at Greenwich on the second day after
its receipt by the carrier It was delivered to the defendants, who were
common carriers engaged in that business between these points, and who
had told plaintiffs it would be delivered at Greenwich on the second day after
its delivery to them, if delivered at a given hour. The carriers were informed
that the mill was stopped, but were not informed of the special purpose for
which the broken shaft was desired to be forwarded. They were not told the
mill would remain idle until the new shaft would be returned, or that the new
shaft could not be manufactured at Greenwich until the broken one arrived to
serve as a model. There was delay beyond the two days in delivering the
broken shaft at Greenwich, and a corresponding delay in starting the mill. No
explanation of the delay was offered by the carriers. The suit was brought to
recover damages for the lost profits of the mill, caused by the delay in
delivering the broken shaft. It was held that the plaintiff could not recover.
The discussion contained in the opinion of the court in that case leads to the
conclusion that the damages recoverable in case of the breach of a contract
are two sorts, namely, (1) the ordinary, natural, and in a sense necessary
damage; and (2) special damages.
Ordinary damages is found in all breaches of contract where there are no
special circumstances to distinguish the case specially from other contracts.
The consideration paid for an unperformed promise is an instance of this
sort of damage. In all such cases the damages recoverable are such as
naturally and generally would result from such a breach, "according to the
usual course of things." In cases involving only ordinary damage no
discussion is ever indulged as to whether that damage was contemplated or
not. This is conclusively presumed from the immediateness and
inevitableness of the damage, and the recovery of such damage follows as a
necessary legal consequence of the breach. Ordinary damage is assumed
as a matter of law to be within the contemplation of the parties.
Special damage, on the other hand, is such as follows less directly from the
breach than ordinary damage. It is only found in case where some external
condition, apart from the actual terms to the contract exists or intervenes, as
it were, to give a turn to affairs and to increase damage in a way that the
promisor, without actual notice of that external condition, could not
reasonably be expected to foresee. Concerning this sort of damage, Hadley
v. Baxendale (1854) [supra] lays down the definite and just rule that before
such damage can be recovered the plaintiff must show that the particular

The statement that special damages may be recovered where the likelihood
of such damages flowing from the breach of the contract is contemplated
and foreseen by the parties needs to be supplemented by a proposition
which, though not enunciated in Hadley v. Baxendale, is yet clearly to be
drawn from subsequent cases. This is that where the damage which a
plaintiff seeks to recover as special damage is so far speculative as to be in
contemplation of law remote, notification of the special conditions which
make that damage possible cannot render the defendant liable therefor. To
bring damages which would ordinarily be treated as remote within the
category of recoverable special damages, it is necessary that the condition
should be made the subject of contract in such sense as to become an
express or implied term of the engagement. Horne v. Midland R. Co. (L R., 8
C.P., 131) is a case where the damage which was sought to be recovered as
special damage was really remote, and some of the judges rightly placed the
disallowance of the damage on the ground that to make such damage
recoverable, it must so far have been within the contemplation of the parties
as to form at least an implied term of the contract. But others proceeded on
the idea that the notice given to the defendant was not sufficiently full and
definite. The result was the same in either view. The facts in that case were
as follows: The plaintiffs, shoe manufacturers at K, were under contract to
supply by a certain day shoes to a firm in London for the French
government. They delivered the shoes to a carrier in sufficient time for the
goods to reach London at the time stipulated in the contract and informed
the railroad agent that the shoes would be thrown back upon their hands if
they did not reach the destination in time. The defendants negligently failed
to forward the good in due season. The sale was therefore lost, and the
market having fallen, the plaintiffs had to sell at a loss.
In the preceding discussion we have considered the plaintiffs right chiefly as
against Teodorica Endencia; and what has been said suffices in our opinion
to demonstrate that the damages laid under the second cause of action in
the complaint could not be recovered from her, first, because the damages in
question are special damages which were not within contemplation of the
parties when the contract was made, and secondly, because said damages
are too remote to be the subject of recovery. This conclusion is also
necessarily fatal to the right of the plaintiff to recover such damages from the
defendant corporation, for, as already suggested, by advising Teodorica not
to perform the contract, said corporation could in no event render itself more
extensively liable than the principal in the contract.
Our conclusion is that the judgment of the trial court should be affirmed, and

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condition which made the damage a possible and likely consequence of the
breach was known to the defendant at the time the contract was made.

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it is so ordered, with costs against the Appellant. Arellano, C.J., Torres,
Carson, Araullo, Malcolm, Avancea and Moir, JJ., concur.
FIRST DIVISION
[G.R. No. L-50911. March 12, 1986.]
MIGUEL PEREZ RUBIO, Petitioner, v. COURT OF APPEALS, ROBERT
O. PHILLIPS & SONS, INC., MAGDALENA YSMAEL PHILLIPS,
MANUFACTURERS BANK & TRUST COMPANY, INC., HACIENDA
BENITO, INC., VICTORIA VALLEY DEVELOPMENT CORPORATION and
ROBERT O. PHILLIPS, Respondents.

DECISION

GUTIERREZ, JR., J.:

This is a petition to review the decision of the Court of Appeals, now the
Intermediate Appellate Court, in CA-G.R. No. 60896-R, which affirmed the
trial courts decision ordering Robert O. Phillips & Sons, Inc., and the
plaintiff-spouses to pay Miguel Perez Rubio the sum of P4,250,000.00 but
ordered Perez Rubio to pay Robert O. Phillips & Sons, Inc. and the other
plaintiffs damages in the amount of P4,404,510.76. The appellate court,
however, modified the lower courts order to pay P4,250,000.00 by removing
the eight (8%) percent per annum interests on that amount, dispensing with
the ten (10%) percent attorneys fees and limiting the liability to Robert O.
Phillips and Sons, Inc., only. Also affirmed was the order directing Perez
Rubio, as third party plaintiff, to pay Hacienda Benito, Inc. the sum of
P7,051,496.23 as actual damages and P150,000.00 attorneys fees and to
pay Manufacturers Bank and Trust Co. P895,085.16 actual damages, plus
ten (10%) percent of that amount as attorneys fees.
The decision of the trial court in Civil Case No. 8632 has actually been the
subject matter of two earlier petitions for certiorari filed by the petitioner
against the same respondents. These are G.R. No. L-24581 entitled Miguel
Perez Rubio v. The Honorable Samuel Reyes, Roberto O. Phillips and
Magdalena Ysmael Phillips, Manufacturers Bank and Trust Company,
Victoria Valley Development Corporation and Hacienda Benito, Inc. and G.R.
No. L-30404 entitled Miguel Perez Rubio v. Honorable Judge Herminio
Mariano in his capacity as Presiding Judge of Branch X of the Court of First
Instance of Rizal, Robert O. Phillips and Sons, Inc. Robert O. Phillips,
Magdalena Ysmael Phillips, Victoria Valley Development Corporation

This petition arose from the same facts and events which triggered off the
filing of the earlier petitions. These facts and events are cited in our
Resolution dated January 31, 1966 issued in G.R. No. L-24581, as
follows:jgc:chanrobles.com.ph
"Upon the facts alleged in the complaint filed in Civil Case No. 8632 of the
Court of First Instance of Rizal by Robert O. Phillips and Sons, Inc., Et. Al. v.
Miguel Perez Rubio, said plaintiffs prayed for judgment as
follows:jgc:chanrobles.com.ph
"1. That a Temporary restraining order and/or ex parte writ of preliminary
injunction be issued against the defendant to prevent and restrain them from
further unlawful and willful interference with the transaction between the
plaintiff corporation with Alfonso T. Yuchengco on the sale of the shares of
stock of Hacienda Benito, Inc., and from enforcing whatever amount he may
claim to be due to them from the plaintiffs under the Agreements (Annexes
"A", "A-1" and "A-2"), after the approval of the injunction bond;
"2. That, after the hearing, judgment be rendered in favor of the plaintiffs
against the defendant:jgc:chanrobles.com.ph
"a) Restraining him from willfully and unlawfully interfering with the
transaction of the plaintiffs with Alfonso T. Yuchengco on the sale of the
shares of stock of Hacienda Benito, Inc.;
"b) Declaring that the defendant has no right to rescind the Agreements as
referred to in Annexes "A", "A-1" and "A-2" ;"
c) Declaring that the defendant has no vendors lien over the shares of stock
of Hacienda Benito, Inc., sold by them to the plaintiff corporation;
"d) Restraining the defendant from enforcing any collection action against
the plaintiffs until the obligations, if any, mature;"
e) Making the writ of preliminary injunction permanent;
"f) Sentencing the defendant to pay the plaintiffs;
(1) P2,500,000.00, more or less, as actual damages;
(2) Moral damages which this Honorable Court may deem just and
reasonable;

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Manufacturers Bank and Trust Company and Hacienda Benito, Inc.

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(3) Exemplary damages, which this Honorable Court may deem just and
reasonable;
(4) P50,000.00, as attorneys fees; and
(5) Costs of suit; and
"3. That the plaintiffs be granted such further and other reliefs to which they
may be entitled in law and in equity.
"Upon an ex-parte petition filed by the plaintiffs, the respondent judge issued
on April 1, 1965 a writ of preliminary injunction to be mentioned again later.
Subsequently, the respondent judge also denied Perez Rubios motion to
dissolve the preliminary injunction.
"It appears that the Perez Rubio spouses owned shares of stock in Hacienda
Benito, Inc. registered in their names and in the names of Joaquin Ramirez
and Joaquin Ramirez, Jr. On August 13, 1963 the Perez Rubios, with the
conformity of the Ramirezes, sold said shares to Robert O. Phillips and
Sons, Inc. for P5,500,000.00 payable in installments and other conditions
agreed upon as follows:chanrob1es virtual 1aw library
x

"3. That for and in consideration of the mutual agreements and promises,
MIGUEL and MARIA LUISA hereby sell to PHILLIPS all the shares of stock
of Hacienda Benito, Inc. registered in their names and in the names of
Joaquin Ramirez and Joaquin Jr. for the total price of FIVE MILLION FIVE
HUNDRED THOUSAND PESOS (P5,500,000.00), Philippine Currency,
payable as follows:jgc:chanrobles.com.ph
"a. FIFTY THOUSAND PESOS (P50,000.00) upon execution of this
agreement.
"b. ONE MILLION TWO HUNDRED THOUSAND PESOS (P1,200,000.00)
within sixty (60) days from this date.
"c. ONE MILLION TWO HUNDRED AND FIFTY THOUSAND PESOS
(P1,250,000.00) on April 30, 1964 less than the amount of P96,830.56 due
the Hacienda Benito, Inc. from MARIA LUISA and the amount of
P127,036.09 from MIGUEL; hereby authorized PHILLIPS to deduct said
amounts and to pay the same to Hacienda Benito, Inc.
"d. ONE MILLION TWO HUNDRED AND FIFTY THOUSAND PESOS

"e. ONE MILLION TWO HUNDRED AND FIFTY THOUSAND PESOS


(P1,250,000.00) on or before April 30, 1965. "f. FIVE HUNDRED
THOUSAND PESOS (P500,000.00) on or before April 30, 1967.
"4. That should PHILLIPS fail to pay the amount of ONE MILLION TWO
HUNDRED THOUSAND PESOS (P1,200,000.00) due sixty days from this
date and to execute the letter of credit and/or bond or both to secure the
payment of the remaining installments, as agreed upon, then the Seller shall
have the right, at their own discretion, either to rescind this agreement or to
enforce the same, provided that any number of days used by the Sellers to
consider the acceptability of the bank or bonding company proposed by
PHILLIPS shall be added to the period of sixty (60) days herein mentioned;
"5. That in case of default, PHILLIPS shall pay interest at the rate of eight
percent (8%) per annum on all amounts in arrears until paid in full either by
the guaranteeing bank, bonding company or PHILLIPS;
"6. That all the installments due during the years 1964, 1965, 1966, and
1967 with all the conditions above mentioned, shall be jointly and severally
guaranteed by means of Irrevocable Standby Letter of Credit from a bank in
favor of MIGUEL and MARIA LUISA, in the proportion they may agree, which
shall be communicated to the bank and to PHILLIPS before final contract is
entered into with the bank, or by a bond from a bonding company duly
approved by MIGUEL and MARIA LUISA;
"7. That the stock certificates corresponding to the shares sold, including
those in the names of Joaquin Ramirez and Joaquin Ramirez, Jr. shall not
be transferred to PHILLIPS until the installments due within sixty (60) days
from this date is paid in full.
"On June 23, 1964 Robert O. Phillips and Sons, Inc., and Robert O. Phillips
himself and his wife, entered into an agreement with the Perez Rubios
deferring payment of the April 31, 1964 under the following
conditions:jgc:chanrobles.com.ph
"(a) The deferred installment would bear an interest of eight (8%) per cent
per annum from April 30, 1964 although partial payments on the principal
and on the interest due may be paid during the period granted, in such
amounts and at such times as funds are available to Robert O. Phillips &
Sons, Inc.;
"(b) Should Robert O. Phillips & Sons, Inc. fail to pay the particular
installment now due on August 31, 1964 or any of the subsequent

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(P1,250,000.00) on or before April 30, 1965.

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installments on the exact date due, the whole obligation would become
immediately demandable without notice;
"(c) In consideration of this extension granted to Robert O. Philipps & Sons,
Inc., Robert O. Phillips himself and his wife, Magdalena Ysmael Phillips,
jointly and severally guaranteed all the installments and other obligations of
Robert O. Phillips & Sons, Inc. under the original contract of sale dated April
13, 1963.
"In the meantime, Robert O. Phillips, in his behalf and in that of his wife and
Robert O. Phillips and Sons, Inc., entered into negotiations for the sale of
their shares of stock in Hacienda Benito, Inc. to Alfonso Yuchengco. Upon
being informed of this, the Perez Rubios, through their attorney-in-fact,
Joaquin Ramirez, reminded the Phillips spouses and the Phillips corporation
in writing of their obligations under the contract of sale of April 13, 1963 and
reminded them in particular that the shares subject matter thereof were still
subject to the payment of the unpaid balance of the sale price. They gave a
similar notice to Alfonso Yuchengco, but expressed no objection to the sale
provided the obligations in their favor were satisfied.
"On March 26, 1965, the Phillips (individuals and corporation), through their
attorney, Juan T. David, sent a letter to the Perez Rubios telling them, in
substance, that the only obstacle to the consummation of the PhillipsYuchengco sale of the shares of stock of Hacienda Benito, Inc. was their
letter of November 24, 1964 and warned that unless the same was
withdrawn by March 29, they would seek redress elsewhere. On March 27,
1965, the Perez Rubios, for their part, wrote the Phillips that due to the
latters inability to comply with the formers conditions, the negotiations going
on between them were cancelled, and should the full amount due to them
remained unpaid by noon of March 31, 1965, they would file action in court
in the afternoon thereof. However, on March 30, 1965, stealing a march on
the Perez Rubios, the Phillips (individuals and corporation) filed Civil Case
No. 8632 mentioned heretofore where they obtained, ex-parte, a preliminary
injunction to this effect:jgc:chanrobles.com.ph
"IT IS HEREBY ORDERED by the undersigned Judge of the Court of First
Instance that, until further orders, you, all your attorneys, representatives,
agents, and any other person assisting you, REFRAIN from interfering with
the transaction between the plaintiff-corporation with Alfonso T. Yuchengco
on the sale of the shares of stock of Hacienda Benito, Inc., and from
enforcing whatever amount he may claim to be due to them from the
plaintiffs under the Agreements (Annexes A, A-1, and A-2) mentioned in
the complaint.
"On April 8, 1965 the Perez Rubios filed a motion to dissolve the above

Because of the above incidents and orders, Perez Rubio filed a petition
for certiorari against Robert O. Phillips in G.R. No. L-24581 alleging that in
taking cognizance of Civil Case No. 8632 and in issuing the writ of
preliminary injunction ex parte, the respondent court committed a grave
abuse of discretion. The petitioner prayed that the respondent court be
restrained from in any way proceeding with the case, and that, respondent
Phillips be enjoined from proceeding with the sale of the shares of stock of
Hacienda Benito, Inc. or any of its assets to Alfonso Yuchengco or to any
other person, or from performing any act which would diminish the value of
said shares of stock or deplete the assets of the company.
Upon the filing of the original Perez Rubio petition, we issued on July 26,
1965 a writ of preliminary injunction restraining all the respondents named in
the original petition (1) from taking further proceedings in Civil Case No.
8632; (2) from proceeding with the sale of shares of stock of Hacienda
Benito, Inc. or any of its assets to Alfonso T. Yuchengco or to any other
person, and (3) from performing any act which would either diminish the
value of said shares of stock or deplete the assets of the Hacienda subject
matter of Civil Case No. 8632.
On June 10, 1965, the Manufacturers Bank and Trust Company filed a
complaint against Phillips and Sons and Hacienda Benito, Inc. as well as the
other corporations controlled by Robert O. Phillips for the foreclosure of a
real estate mortgage constituted on the properties of the Hacienda. The
case was filed in another branch of the Court of First Instance of Rizal and
was docketed as Civil Case No. 8766. On the premise that the foreclosure
by the bank of the mortgage constituted on the properties of Hacienda
Benito, Inc., was intended simply to remove properties and the assets of the
Hacienda pertaining to the Phillips spouses beyond Perez Rubios reach and
thus make it impossible for him to collect the sum of P4,250,000.00, Perez
Rubio filed a motion for the admission of a supplemental petition, to include
Manufacturers Bank and Victoria Valley Development Corporation as
additional respondents. Victoria Valley was a newly formed corporation
which Perez Rubio alleged had been hurriedly organized and to which
Manufacturers Bank would transfer all the foreclosed properties thus making

Page

reproduced writ of preliminary injunction, which the respondent judge denied


on May 6, 1964. But even before the motion aforesaid could be acted upon,
they also filed their answer to the complaint with a counterclaim of
P4,500,000.00 representing the unpaid balance of the sale price of their
shares. Because of this the Perez Rubios were charged with contempt." (16
SCRA 168, 172).

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it difficult for him to enforce his vendors lien. Before the first amended
supplemental petition could be acted upon, Perez Rubio filed a second
amended supplemental petition to implead Hacienda Benito, Inc. as
additional party respondent with a specific plea that pending the issuance of
a writ of preliminary injunction, Hacienda Benito be restrained from disposing
of its properties or assets in any way save in the ordinary course of its
business of selling lots of the subdivision. Both supplemental amended
petitions were admitted.chanrobles virtual lawlibrary
After all the respondents had filed their answers to the amended petition and
after the petitioner filed an answer to the counterclaim interposed by
respondents Phillips and Sons, Inc. and the Hacienda, this Court
promulgated a decision dated May 27, 1968 wherein, among others, we
ruled:jgc:chanrobles.com.ph
"(1) In connection with the writ of preliminary injunction issued by the
respondent judge in Civil Case 8632 on April 1, 1965 mentioned heretofore,
the same is hereby declared null and void and is, consequently, set aside
with the result that the writ of preliminary injunction issued by Us in this case
enjoining its enforcement is hereby made final. The order of the respondent
judge of May 6, 1965 denying petitioners motion to set aside the aforesaid
writ of preliminary injunction of April 1 of the same year is hereby reversed;
"(2) The writ of certiorari prayed for by petitioner is hereby denied insofar as
it seeks to annul the judicial proceedings had in Civil Case 8766 of the Court
of First Instance of Rizal, instituted by the Bank against Hacienda and other
parties for the foreclosure of the mortgage constituted in its favor upon the
properties of Hacienda; without prejudice, however, to the right of petitioner
to seek such relief and any other relief that he might be lawfully entitled to
against the herein respondents, singly or collectively, in the aforesaid Civil
Case 8766 of the Court of First Instance of Rizal or in a separate action. In
this connection, it is our judgment that the writ of preliminary injunction
issued in this case shall remain subsisting and binding for a period of thirty
days from the date of finality of this decision, upon the expiration of which
period the same shall be deemed automatically lifted or dissolved,
irrespective of whether petitioner had or had not taken steps required for the
enforcement and protection of his rights as already indicated:" (23 SCRA
773, 789 & 790)
In the belief that the forum for the "separate action" referred to in our
decision meant Civil Case No. 8632, petitioner Perez Rubio filed in the said
case on July 9, 1968 an "Urgent Motion to Admit Amended and
Supplemental Answer and Third-Party complaint," the third-party complaint
being directed against Manufacturers Bank, Victoria Valley and Hacienda
Benito.chanrobles.com:cralaw:red

"WHEREFORE, the orders complained of are set aside and respondent


Judge or whosoever is assigned to try the case below is instructed to admit
the amended and supplemental answer and third-party complaint filed by
Miguel Perez Rubio. Thereafter, these cases shall proceed accordingly. The
restraining order hereinbefore issued by this Court is hereby lifted insofar as
it restrains respondent Judge from proceeding with the hearing of Civil Case
No. 8632 of the Court of First Instance of Rizal Branch X (Pasig, Rizal), and
maintained insofar as it restrains (the other respondents) from proceeding
with the transfer of the shares and/or of the assets of Hacienda Benito, Inc.
to each other or to any other person, except in the ordinary course of selling
subdivision lots, without prejudice to the judgment that may be rendered by
the court a quo in the case. Costs against the respondents." (49 SCRA 319,
337).
The third-party complaint sought to secure the return by Manufacturers
Bank and/or Victoria Valley of the properties it and/or they bought as a
consequence of the judicial foreclosure of mortgage case, Civil Case No.
8766, with a further plea that in the event the Phillips spouses are ordered to
pay Miguel Perez Rubio the judgment on his counterclaim said properties
and funds foreclosed by the defendant Bank be held to answer for such
judgment or any part thereof unpaid by the Phillips spouses together with
damages.
The third-party defendants, respondents herein, filed their separate answers.
In addition to their answer, Manufacturers Bank and Hacienda Benito filed
separate counterclaims for actual damages for malicious prosecution plus
attorneys fees.
After trial on the merits, the lower court rendered a decision the dispositive
portion of which reads:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered:jgc:chanrobles.com.ph

Page

The motion was denied by the lower court. Hence, the petitioner filed
another petition for certiorari to review and set aside the lower courts order
dated September 13, 1968 with the additional prayer that pending
determination of the issues raised in the petition, the respondent court be
restrained from proceeding with the hearing of the case below and the other
respondents from transferring or proceeding with the agreement to transfer
any of the assets of Hacienda Benito, Inc. to any third person except in the
ordinary course of selling subdivision lots. The case was docketed as G.R.
No. 30904. On April 16, 1969, we issued a prayed for temporary restraining
order. The petition was later granted. In our decision dated January 31,
1973, we ruled:jgc:chanrobles.com.ph

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"(1) Sentencing the plaintiffs to pay jointly and severally the amount of
P4,250,000 to defendant Miguel Perez-Rubio, with interest of 8% per annum
from April 30, 1964 and attorneys fees equivalent to 10% of the said
amount. The plaintiffs however, may offset the foregoing amount by the
damages which Perez-Rubio should pay to them for having unlawfully
interfered in the transaction with Alfonso Yuchengco which is merely
assessed at P4,404,510.76.
"(2) Sentencing the defendant Perez-Rubio to pay to HBI the sum of
P7,051,496.23; attorneys fees of P150,000.00, and to MBTC the sum of
P895,085.16 as actual damages and the sum of 10% thereof as attorneys
fees.
"(3) Dismissing all other causes of action of the parties in this case without
pronouncement as to costs."cralaw virtua1aw library
Plaintiffs Phillips and Sons and the Phillips spouses as well as defendant
and third-party plaintiff Perez Rubio appealed the decision to the Court of
Appeals.cralawnad
As earlier stated, the appealed decision was amended by the appellate court
in so far as it related to the liability of the plaintiffs on their P4,250,000.00
debt. The appellate court ruled that only plaintiff Phillips and Sons was liable
to pay the amount of P4,250,000.00 to defendant Perez Rubio without
interest and without attorneys fees. The rest of the trial courts decision was
affirmed in full. A motion for reconsideration filed by Perez Rubio was denied
by the appellate court. Hence the instant petition was filed.
Petitioner Perez Rubio raises the following assignments of
errors:chanrob1es virtual 1aw library
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT YOUR
PETITIONER UNLAWFULLY AND INOFFICIOUSLY INTERFERED IN THE
TRANSACTION BETWEEN RESPONDENTS ROBERT O. PHILLIPS &
SONS, INC., ROBERT O. PHILLIPS & SONS AND HIS WIFE MAGDALENA
WHEN THE SUPREME COURT ITSELF DESCRIBED THE ACTS TAKEN
BY YOUR PETITIONER AS A VALID ENFORCEMENT OF ONES RIGHT
AS A CREDITOR.
II

Page

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING DAMAGES


TO RESPONDENTS ROBERT O. PHILLIPS, HIS WIFE, AND ROBERT O.
PHILLIPS & SONS, INC., ON THE ALLEGED GROUND OF UNLAWFUL
INTERFERENCE WITHOUT BASIS IN FACT AS TO WHAT THE DAMAGE
CONSISTED OF NOR OF THE MEASURE FOR SAID DAMAGES.

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THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE AWARD


OF DAMAGES IN FAVOR OF RESPONDENT HACIENDA BENITO, INC.
DESPITE THE FACT THAT THERE WAS NO BASIS IN THE EVIDENCE
FOR THE AWARD.
VII

III
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT YOUR
PETITIONER WAS LIABLE FOR DAMAGES TO THE MANUFACTURERS
BANK AND TRUST COMPANY, INC. BY REASON OF THE TWO
INJUNCTIONS ISSUED BY THIS HONORABLE COURT IN L-24581
(MIGUEL PEREZ RUBIO, ET AL.) AND L-30404 (MIGUEL PEREZ RUBIO
VERSUS THE HON. HERMINIO MARIANO, ET AL.), DESPITE THE FACT
THAT THERE WAS ACTUALLY ONE RESTRAINING ORDER ISSUED BY
THIS HONORABLE COURT INSOFAR AS RESPONDENT MBTC IS
CONCERNED AND DESPITE THE FACT THAT NO VALID PROOF OF
DAMAGES WAS PRESENTED.
IV
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THAT YOUR
PETITIONER PEREZ RUBIO WAS LIABLE TO HACIENDA BENITO, INC.,
WITHOUT MAKING SO MUCH AS A COMMENT OF FINDING THEREOF,
BUT BY THE MERE EXPEDIENT OF AFFIRMING THE DECISION OF THE
TRIAL COURT.
V
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
DECISION OF THE TRIAL COURT IN FINDING YOUR PETITIONER
LIABLE TO RESPONDENT HACIENDA BENITO, INC. FOR THE ALLEGED
DAMAGES IT SUFFERED BY REASON OF THE INJUNCTION
ALLEGEDLY ISSUED BY THE SUPREME COURT AGAINST HACIENDA
BENITO, DESPITE THE FACT THAT THE SUPREME COURT AFFIRMED
THE PROPRIETY OF THE INJUNCTION ISSUED BY IT.
VI

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN


DISCHARGING THE RESPONDENT SPOUSES PHILLIPS FROM THEIR
JOINT AND SEVERAL GUARANTEE OF YOUR PETITIONERS CREDIT
AND IN DISALLOWING INTEREST TO RUN THEREON WITHOUT ANY
BASIS OR REASON DESPITE THE FACT THEY WERE EXPRESSLY
PROVIDED IN THE AGREEMENTS ENTERED INTO BETWEEN YOUR
PETITIONER, THE RESPONDENTS ROBERT O. PHILLIPS HIS WIFE
MAGDALENA AND ROBERT O. PHILLIPS & SONS, INC.
VIII
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
DISALLOWING ATTORNEYS FEES AND MORAL AS WELL AS
EXEMPLARY DAMAGES IN FAVOR OF YOUR PETITIONER PEREZ
RUBIO DESPITE THE FACT THAT THIS HONORABLE COURT HAD
CLEARLY SHOWN THAT YOUR PETITIONER HAD BEEN IMPROPERLY
SUED AND DESPITE THE FACT THAT THIS HONORABLE COURT HAD
ALREADY RULED THAT THE IMPLEADING OF OTHER PARTIES WAS
PROPER AND NECESSARY FOR THE PROTECTION OF HIS RIGHTS.
IX
THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
DISCHARGING RESPONDENTS MANUFACTURERS BANK AND TRUST
CO., INC., (MBTC) AND VICTORIA VALLEY DEVELOPMENT
CORPORATION FROM ANY LIABILITY TO YOUR PETITIONER DESPITE
THEIR VERY ACTIVE PARTICIPATION IN ATTEMPTING TO AND IN
ACTUALLY COMMENCING TO REMOVE ALL OF THE ASSETS OF
HACIENDA BENITO, INC., AND TRANSFERRING THEM TO
RESPONDENT VVDC.
The first two assigned errors are in relation to the original complaint in Civil

As earlier stated, because of the issuance of a preliminary injunction ex


parte which restrained petitioner Perez Rubio from interfering with the
Yuchengco transaction and the denial of a motion to dissolve the injunction
in Civil Case No. 8632, petitioner Perez Rubio was constrained to file a
petition for certiorari with this Court in G.R. No. 24581 alleging that the lower
court committed a grave abuse of discretion in issuing the preliminary
injunction.
Resolving the matter on the propriety of the preliminary injunction, we
ruled:cralawnad
"It is obvious that what the plaintiffs in Civil Case No. 8632 considered as
interference, on the part of the therein defendant (petitioner herein) with the
negotiations or transaction at that time being carried on between said
plaintiffs, on one hand, and Alfonso T. Yuchengco, on the other, regarding
the sale of the shares of stock of Hacienda was said defendants intention to
enforce his right to collect from Robert O. Phillips and Sons, Inc. and its
guarantors, the Phillips spouses, the unpaid balance P4,250,000.00
due to him from the latter of the purchase price of their shares in Hacienda
mentioned at the beginning hereof. As a matter of fact, when said defendant
filed his answer in Civil Case No. 8632 interposing therein a counterclaim for
the collection of said unpaid balance, the plaintiffs therein charged him with
having violated the terms of the writ of preliminary injunction issued by the
respondent judge. Proceedings in connection with this charge, however,
were held in abeyance by reason of the writ of preliminary injunction We
issued in the present case.
After a careful consideration of the material facts and the law applicable to
them, We are of the opinion and so hold, that the writ of preliminary
injunction issued ex parte by the respondent judge was unjust and
improvident. Without hearing the party concerned, and without any legal
justification, it restrained a creditor (Perez Rubio) from enforcing his
undenied right to collect from his debtor and the latters guarantors the sum
of P4,250,000.00 representing the unpaid balance of the purchase price of
his shares in Hacienda. It is a fact that the debtor Corporation (Robert O.
Phillips and Sons, Inc.) and its guarantors, the Phillips spouses, do not deny
the indebtedness, and yet, notwithstanding its extraordinary amount, they
attempted to sell all the shares of stock of Hacienda without making any
reasonable provision for the payment thereof. For them to prevent their
creditor from enforcing his right to collect, and for the Court to enjoin said

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Case No. 8632 filed by Phillips and Sons, Inc., and the Phillips spouses
against petitioner Perez Rubio for alleged unlawful interference in the
transaction between the respondents on one hand and Alfonso Yuchengco
on the other hand.

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creditor from enforcing that right in any lawful manner is, in any language,
rank injustice." (23 SCRA 773, 780).
The petitioner assumes that the foregoing pronouncement categorically
ruled that he did not unlawfully and inofficiously interfere in the transaction
between respondents Phillips and Sons and the Phillips spouses on one
hand and Alfonso Yuchengco on the other hand and that his acts were a
valid enforcement of his rights as a creditor.chanrobles lawlibrary : rednad
This assumption is incorrect. It is very clear from the decision that we ruled
on the impropriety of the manner in which the preliminary injunction was
issued. We stated that without hearing the party concerned and without any
legal justification, the trial court restrained creditor Perez Rubio from
enforcing his undenied right. We could not have possibly ruled as suggested
because the case before us was a petition for certiorari alleging that the trial
court committed a grave abuse of discretion in issuing the preliminary
injunction ex parte. The issue to be resolved was a pure question of law
based on the circumstances surrounding the issuance of the questioned
preliminary injunction ex parte. Whether or not the petitioner unlawfully and
inofficiously interfered with the aforementioned transaction was a question of
fact and any grave abuse of discretion could not, at that time, be resolved by
this Court. A trial on the merits was necessary. Our decision in the second
petition forcertiorari, filed by the petitioner in connection with Civil Case No.
8632 lifted the temporary restraining order in so far as it restrained the trial
court from proceeding with the hearing and ordered the cases including the
third party complaint to proceed accordingly.
Trial on the merits accordingly proceeded after which the trial court
concluded that the petitioner unlawfully and inofficiously interfered with the
subject transaction as a result of which Phillips and Sons and the Phillips
spouses suffered damages. This conclusion was upheld by the Court of
Appeals. The appellate court justified its ruling as follows:chanrob1es virtual
1aw library
It is a fact, which defendant Perez Rubio does not and can not deny, that he
had informed Alfonso Yuchengco of his vendors lien over the unpaid shares
of stock in the Hacienda Benito, Inc., and that he still had the right to rescind
the sale of his stocks to ROPSI (t.s.n., August 7, 1974, pp. 31-35; Exhibit D1-A-Plaintiffs, I Folder of Exhibits, p. 2). As stated before, Alfonso Yuchengco
cooled off, as it were, and withdrew from the transaction (t.s.n., October 30,
1974, pp. 94-95) to which he had previously given his conformity (Exhibits
18 , 21 Rubio II Folder of Exhibits, pp. 37, 43) because of Perez
Rubios refusal to withdraw his letter to Yuchengco containing his threat to
rescind the sale of his stocks to ROPSI. If this Court has said it before it is
repeated here for emphasis that Alfonso Yuchengco had no intention to

"It should be noted that defendant Perez Rubio had already delivered
completely the shares of stock of Hacienda Benito, Inc. which he had sold to
plaintiff ROPSI and that these shares were transferred in the books of the
Hacienda in the name of ROPSI (t.s.n., August 5, 1974, pp. 129-130, 131132, 133-134; August 7, 1974, p. 62; May 14, 1975, p. 32). The plaintiffs
therefore had all the right to dispose of the shares of stock. Defendant Perez
Rubio also admitted that there was no agreement or document prohibiting
plaintiff ROPSI from selling the said shares of stock to any person (t.s.n.,
August 3, 1974, pp. 12-13) nor any agreement or document requiring his
prior permission before ROPSI could sell or otherwise dispose of the said
shares of stock (Ibid., p. 14). There was also no vendors lien annotated in
the books of Hacienda Benito, Inc. over the said shares of stock (t.s.n.,
August 7, 1974, pp. 14-16, 63, 66-67). What is more, the plaintiffs have
made reasonable provisions for the payment of the unpaid balance due the
defendant in their transaction with Alfonso Yuchengco (Exhibit 18 Rubio,
paragraph 19, II Folder of Exhibits, pp. 36-37, Exhibit 20 Rubio,
paragraphs 8 and 12, Ibid., pp. 41-42, Exhibit 22 Rubio, paragraph 5,
Ibid., p. 46: t.s.n., May 14, 1975, pp. 46, 119-120). Clearly, there appears no
valid reason why defendant Perez Rubio had to block the plaintiffs
transaction with Alfonso Yuchengco, except to destroy and ruin the
plaintiffs (t.s.n., May 14, 1975, pp. 129-130), which defendant Perez Rubio
himself vowed he would do (t.s.n., May 14, 1975, p. 136)."cralaw virtua1aw
library
A thorough examination of the record reveals that the factual findings of the
appellate court are incomplete and do not reflect the actual events that
transpired concerning the sale of shares of stock of Hacienda Benito to
Alfonso Yuchengco. The important point left out by the appellate court refers
to the controversial November 24, 1964 letter of the petitioner to Phillips and
Sons and to the Phillips spouses wherein the petitioner stated that he has a
vendors lien over the shares of stock of Hacienda Benito and that he still
has the option to rescind the contract as regards his sale of stock of the
Hacienda. A copy of the letter was sent to Alfonso Yuchengco, the
prospective buyer of the shares of stock of Hacienda Benito, but even after
receipt of the letter, the negotiations on the sale of the shares of stock of
Hacienda Benito to Alfonso Yuchengco continued. This is shown by the
following events:chanrob1es virtual 1aw library
1. In a letter dated December 17, 1964, Hacienda Benito through Robert O.
Phillips as president, Phillips and Sons, through Robert Phillips as president

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holding an empty bag, and for defendant Perez Rubio to block the plaintiffs
from consummating a transaction the terms of which have already been
approved in principle providing for the payment of Perez Rubios credit is
unlawful and inofficious interference.

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and Robert Phillips in his own behalf offered to Alfonso Yuchengco an option
to buy 100% of the shares of stock of Hacienda Benito. It is to be noted that
the first option contained in the letter of November 17, 1964 offered to
Alfonso Yuchengco was the sale of 80% of the shares of stock of Hacienda
Benito. In reply Alfonso Yuchengco in his letter to the Phillips spouses and
Phillips and Sons dated January 6, 1965 accepted the option but with
modifications as to the terms of the sale. Included in the terms of the sale
were provisions for the payment of the sellers debts.
2. In a letter dated February 12, 1965 from the law firm of Ramirez and
Ortigas, counsel of the petitioner to Phillips and Sons and the Phillips
spouses in relation to the ongoing negotiations for the settlement of the
P3,800,000.00, it was stated that the petitioner was not willing to extend the
manner of payment of the credit further than April 30, 1967. Contained in the
same letter of the law firm was an offer of a compromise as to the manner of
payment.
3. In reply to the aforementioned letter, Phillips and Sons and the Phillips
spouses wrote a letter dated February 16, 1965 stating their final proposal
as to the manner of payment. In accordance with the final proposal, the last
payment of the debt would be on April 30, 1968. On the basis of the terms
and conditions of the final proposal, Phillips and Sons and the Phillips
spouses requested a "waiver for the consummation of the proposed sale to
Mr. Alfonso Yuchengco" (Exhibit 22 - Perez Rubio, Exhibits II, p. 46).4. In a
letter dated February 22, 1965, the law firm of Ramirez and Ortigas informed
Phillips and Sons that their client, the petitioner, rejected the plan to modify
in any way the original agreements for payment and that the letter was a
formal notice that the complaint for the enforcement of the original contracts
would be filed on March 8, 1965 unless the case is settled in a satisfactory
manner. (Exhibit 23 Perez Rubio, Exhibit II, p. 80).
As a consequence of the February 22, 1965 letter of the petitioner, Juan T.
David, counsel for Phillips and Sons wrote the petitioner himself. In this letter
dated March 12, 1965, Atty. David requested that the petitioner withdraw his
controversial November 24, 1964 letter. According to David the said letter
was the "only obstacle to the conclusion of the transaction between my
client, Robert O. Phillips and Sons, Inc. and Mr. Yuchengco involving the
shares of stock of Hacienda Benito, Inc." A copy of the letter was attached to
a letter sent to Yuchengco also dated March 12, 1965 informing him about
the failure to obtain the desired waiver and expressing the view that "waiver
is unnecessary."cralaw virtua1aw library
In another letter dated March 26, 1965 addressed to the petitioner, Atty.
David gave the petitioner until March 29, 1965 to withdraw unconditionally
the controversial letter. The petitioner was informed that Yuchengco had

In reply to the March 26, 1965 letter, the petitioner sent a letter addressed to
Phillips and Sons and the Phillips spouses informing them that the letter
served as notice that all negotiations had been cancelled. Perez Rubio gave
them until March 31, 1965 to pay the balance of the payment for his shares
of stock plus interests and attorneys fees.

Page

given an ultimatum that if waiver was not obtained by March 31, 1965, the
transaction would have to be cancelled.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph

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Whether or not Yuchengco, the prospective buyer, believed that Perez Rubio
had a good ground to rescind and whether or not the buyers interest would
be prejudiced were matters of decision-making dependent solely on him. In
fact the March 12, 1965 letter of Atty. Juan T. David to the petitioner is quite
revealing. Phillips and Sons admitted that under the circumstances, the
petitioners waiver of the controversial November 24, 1964 letter was
unnecessary. The letter disclosed the fact that the waiver issue was
extensively discussed by the parties including their counsels maintaining the
view that waiver was unnecessary. Thus:chanrobles law library

The letter served as the last communications between the petitioner and
Phillips and Sons and the Phillips spouses before March 31, 1965 when Civil
Case No. 8632 was filed.

"March 12, 1965

Taking into consideration, all the details of the negotiations in the sale of the
shares of stock of Hacienda Benito, Inc. from Phillips and Sons to Mr.
Yuchengco, there is no factual or legal basis for the appellate courts
conclusion that the petitioner unlawfully and inofficiously interfered with the
negotiations.

c/o Ramirez and Ortigas Law Office

We fail to see any reason why the petitioner should be accused of unlawful
interference in maintaining his stand regarding the sale of shares of stock of
Hacienda Benito, Inc. that he still had the option to rescind the contract
between him and Phillips and Sons and stating the existence of his vendors
lien over said shares of stock.

Sir:chanrob1es virtual 1aw library

The petitioner never pretended that he still had full control of the shares of
stock which he sold to Phillips and Sons. He in fact admitted that the shares
of stock were already transferred to the corporation and that he did not have
a recorded lien therein. He merely made of record his right to rescind under
the original contract of sale. The details pertaining to the earlier transaction
governing the sale of the shares of stock between the petitioner and Phillips
and Sons were in fact, all known to Yuchengco. And, more important, it is
obvious from the records that the petitioners interest was only in the
payment of the P4,250,000.00 balance due him from Phillips and Sons.
Thus, in a meeting called by Yuchengco where the negotiations for the sale
of the shares of stock of Hacienda Benito were discussed, the petitioner
made it clear that he was amenable to his waiving or withdrawing the
controversial November 24, 1964 letter provided his interests would be taken
care of and protected. (Testimony of Perez Rubio, TSN., August 5, 1970, pp.
44-50). Obviously, the petitioner felt that the payment of his P4,250,000.00
was not secured under the terms of payment proposed by Yuchengco. He
had the right to refuse to withdraw the November 24, 1964 letter. We see
nothing illegal or inofficious about the letter or the refusal to withdraw it.

"MR. MIGUEL PEREZ RUBIO

1515 Roxas Boulevard


Manila

"Taking advantage of the permission given to us by Mr. Yuchengco, to take


up the aforementioned legal aspect of the waiver, with his counsel, Atty.
Alberto M. Meer, we conferred with the latter and expressed our
understanding of a waiver, and the conclusion that it has no place in the
present case, considering the fact that a waiver is only appropriate where
the person from whom it is sought has a direct recorded lien on the subject
thereof, particularly when the subject is a negotiable instrument; that, at
best, a withdrawal of your aforementioned letter should be sufficient to allay
the fear of Mr. Yuchengco on the possibility of a suit which might involve him
after the sale, if the waiver is not obtained from you.
"We also called the attention of Mr. Yuchengco that the shares of stock
subject of the transaction are clean and unencumbered, therefore, there is
nothing to waive on the part of any person; that the negotiability of the said
shares of stock is not impaired by the fact that the owner thereof is indebted
to another, especially considering the fact that, instead of securing your
credit against my client with the encumbrance of its shares of stock, you
preferred the personal guaranty of Mr. and Mrs. Robert O. Phillips, as
recorded in the corresponding instruments.

Very truly yours,


(SGD.)
JUAN T. DAVID
Counsel
for ROBERT O. PHILLIPS
& SONS, INC."cralaw virtua1aw library
A carbon copy of a March 12, 1965 letter from Atty. David to Mr. Alfonso
Yuchengco was attached to the letter addressed to Mr. Perez Rubio. In the
letter to Mr. Yuchengco, the counsel for Phillips and Sons stressed the view
that the waiver or withdrawal of the Perez Rubio letter was unnecessary.
The conclusion to be drawn from these facts is that the petitioner is not liable
for any form of damages in favor of Phillips and Sons and the Phillips
spouses. Consequently, we come to the issue of whether or not the Phillips
spouses are solidarily liable for the debt of Phillips and Sons. This is the
issue raised in the seventh assignment of error.
It should be remembered that on June 23, 1964, Phillips and Sons and the
Phillips spouses entered into an agreement wherein, in consideration of the
extension granted to Phillips and Sons in the payment of the latters
outstanding debt to the petitioner, the Phillips spouses." . . jointly and
severally guaranteed all the installments and other obligations of Robert O.
Phillips & Sons, Inc. under the signed contract of sale dated April 13, 1963."
Phillips and Sons was not able to pay the petitioner as covenanted in the
agreement.
The agreement was not assailed in any of the cases involving the petitioner
Phillips and Sons and the Phillips spouses. Both parties admit the veracity of
the agreement. The agreement serves as the law between the parties. The

Page

"Atty. Meer told us that, if we could obtain from you the letter of withdrawal
and the phraseology thereof is adequate, the only obstacle to the
consummation of the transaction will have been removed and he is disposed
to advise his client, Mr. Yuchengco, to go through with the purchase of the
shares of stocks of the Hacienda Benito, Inc., therefore, we reiterate our
request for the withdrawal of your aforementioned letter.

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full enforcement of the agreements provisions necessarily is in order. We
rule that per agreement, the Phillips spouses are jointly and severally liable
to the petitioner for the outstanding debt of Phillips and Sons with interest
therein from April 30, 1964 until fully paid.
The third, fourth, fifth and sixth assignments of errors refer to the actual
damages awarded to Manufacturers Bank and Hacienda Benito by the
appellate court.
Both awards were premised on the appellate courts finding that
Manufacturers Bank and Hacienda Benito were wrongfully impleaded as
parties by the petitioner in his two petitions earlier filed wherein two
injunctions were issued by this Court. As a result, the parties allegedly
suffered damages. The appellate court premises its findings on the following
justifications:jgc:chanrobles.com.ph
"(a) Even before the aborted transaction between ROPSI and Alfonso
Yuchengco, Hacienda Benito, Inc. was already indebted to the
Manufacturers Bank the year before. Appellant ROPSI had also executed
real estate mortgages on 78 hectares out of the 135-hectare holding of
Hacienda Benito, Inc. in favor of the Manufacturers Bank. Subsequently, the
Hacienda executed a Memorandum Agreement on June 5, 1965 with
Victoria Valley Development Corporation, with the conformity of the
Manufacturers Bank as mortgage creditor, where the financial obligations of
the Hacienda and its other affiliate corporations were restructured thus
freeing them from their financial obligations to the Manufacturers Bank in
exchange for 78 hectares of land which were then mortgaged with the
Manufacturers Bank, let alone the payment of a huge amount of interest on
the principal. As of May 21, 1965, the Hacienda and its affiliates have not
paid the Manufacturers Bank P7,459,042.98 which was already due and
demandable forcing the Manufacturers Bank to file Civil Case No. 8766
against the Hacienda for the foreclosure of the mortgages which resulted in
a compromise agreement between the parties, which the court below
approved. (Defendants Record on Appeal, pp. 498-499).
"(b) As early as October 8, 1965, Miguel Perez Rubio knew that no assets
have been transferred under the Memorandum Agreement of June 5, 1965
and that Victoria Valley Development Corporation has considered said
Agreement without force and effect making it moot and academic for
purposes of rescission (Ibid., p. 501).
"(c) There is nothing in the promissory notes and the real estate mortgages
forming part of the records of Civil Case No. 8766 to show that they have
been executed in bad faith or to defeat the credit of Miguel Perez Rubio
against ROPSI since they were executed in 1963 over 78 hectares out of the

"(d) The existence of sufficient assets for the payment of the credit of Perez
Rubio failed to contradict the evidence showing the existence of
unencumbered properties of Hacienda Benito, Inc. which were more than
sufficient to meet his credit against ROPSI in the amount of P4,250,000.00
as well as the evidence showing the good financial position of the Hacienda
as shown by Exhibit 11 Benito, also marked as Exhibit 9 MBTC, III
Folder of Exhibits, p. 129 (Ibid., pp. 502-503).
"(e) The admission of Perez Rubio that he did not investigate with the
corresponding registers of deeds and other entities the status of the
unencumbered properties of Hacienda Benito, Inc., ROPSI, Robert O.
Phillips and his wife, and the other corporations owned by the Phillips
spouses before filing the third-party complaints against the Manufacturers
Bank & Trust Company, Hacienda Benito, Inc. and Victoria Valley
Development Corporation (t.s.n., August 21, 1974, pp. 133-138) . . .
x

These findings do not justify the appellate courts conclusion that


Manufacturers Bank and Hacienda Benito were wrongfully impleaded and
that Perez Rubio owes them millions of pesos in damages as a result.

Page

135-hectare holding of Hacienda Benito, Inc. in the Victoria Valley


Subdivision so that prior to the default of ROPSI in the payment of the third
installment on August 31, 1964 in favor of Perez Rubio, there were already
prior and existing mortgages over the 78 hectares owned by the Hacienda in
favor of the Manufacturers Bank (Ibid., pp. 501-502).

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Manufacturers Bank, Hacienda Benito, Phillips and Sons, and the Phillips
spouses were entered into at the time when payments on the petitioners
shares of stock were overdue. A person who has not been paid a balance of
P4,250,000.00 on a sale of P5,500,000.00 will naturally be extremely
disturbed to see the buyers and other parties dealing with the properties in a
manner which could be reasonably construed as calculated to bring them
beyond his reach and making full payment of the debt extremely difficult, if
not impossible. It was a normal reaction and to be expected for the original
owner to inform third persons trying to buy the still unpaid properties about
that fact of non-payment and to emphasize to them his right and options
under the original contract of sale. It was also normal to include the third
party would-be-buyers who had taken sides with the defaulting original buyer
in the litigations brought against Perez Rubio, the man seeking to protect his
endangered interests.cralawnad
The inclusion of Manufacturers Bank and Hacienda Benito was part and
parcel of the efforts to protect Perez Rubios interests. It should be noted that
petitions wherein they were impleaded had for their subject matter the same
unpaid obligation of P4,250,000.00 from Phillips and Sons. The properties to
be foreclosed by the Bank represented properties of Perez Rubio for which
he had not yet been paid.
There is nothing in the records to show that, far from protecting his P4.25
million, Perez Rubio filed the third party complaint to vex and humiliate
Manufacturers Bank and Hacienda Benito. As we ruled in the case of R & B
Surety and Insurance Company, Inc. v. Intermediate Appellate Court (129
SCRA 736):chanrob1es virtual 1aw library
x
In the welter of cases filed by the contending parties over the same
properties and the confusion spawned by the many incidents which gave
rise to separate petitions, one basic fact tends to be forgotten. It is this. The
Perez Rubio spouses sold Hacienda Benito, Inc. to Phillips and Sons for
P5,500,000.00 in 1963 or more than 22 years ago. P50,000.00 was paid
immediately; P1,2000,000.00 was due in 60 days; in another 6 months, a
third payment of P1,250,000.00 was to be paid. The full amount should have
been paid by April 30, 1967. Up to now, P4.25 million of the basic
indebtedness has not been paid.
The Perez Rubio spouses were not paid as agreed in the contract. When the
buyers could not comply with their commitments, the Perez Rubios
graciously acceded to a deferment of overdue accounts under a new
agreement. Still, the payments could not be effected under the extension.
All the transactions which led to the litigations by, against, or among

"While petitioner might have been negligent in not verifying the authenticity
of the signatures in the indemnity agreement, still the same does not amount
to bad faith as to justify the award of damages and the conclusion that the
act of filing the complaint against respondent Uson amounts to malicious
prosecution. In filing the action, the petitioner was only protecting its
business interests by trying to recover the amount it had already paid to the
Philippine National Bank.
"In a long line of cases, we have consistently ruled that in the absence of a
wrongful act or omission or of fraud or bad faith, moral damages cannot be
awarded and that the adverse result of an action does not per se make the
action wrongful and subject the actor to the payment of damages, for the law
could not have meant to impose a penalty on the right to litigate . . ."cralaw
virtua1aw library

This can not be done. As we ruled in Perfecto v. Gonzales (128 SCRA


635):chanrob1es virtual 1aw library
x

". . . [A]ctual or compensatory damages are those recoverable because of


pecuniary loss in business, trade, property, profession, job, or occupation,
and the same must be proved; otherwise, if the proof is flimsy and nonsubstantial, no damages will be given. In the case of Malonzo v. Galang, 109
Phil. 16, the Court, speaking through Justice J.B.L. Reyes, held that with
respect to compensatory damages assuming that they are recoverable
under the theory that petitioner had filed a clearly unfounded suit against
respondent, the same constitutes a tort against the latter that makes the
former liable for all damages which are the natural and probable
consequences of the act or omissions complained of. These damages,
cannot, however, be presumed and must be duly proved (Article 2199, New
Civil Code). Well settled is the rule that even if the complaint filed by one
against the other is clearly unfounded this does not necessarily mean, in the
absence of specific facts proving damages, that said defendant really
suffered actual damage over and above attorneys fees and costs. The Court
cannot rely on its speculations as to the fact and amount of damages. It
must depend on actual proof of the damages alleged to have been
suffered."cralaw virtua1aw library

Page

The actual damages awarded to both the Manufacturers Bank and Hacienda
Benito apart from having no legal basis were also not duly proven. In fact,
the appellate court made no findings of fact on how it arrived at the total
amount of P895,085.14 awarded to Manufacturers Bank much less did the
court discuss the damages awarded to Hacienda Benito. The damages
awarded to Hacienda Benito were only impliedly affirmed by the dispositive
portion of the decision wherein it declared that the decision of the lower court
was affirmed in toto.

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Considering these conclusions, the final question to be resolved is whether
or not the petitioner is entitled to moral and exemplary damages? This is the
subject matter of the eighth and ninth assigned errors.
We have stated that the petitioner had valid reasons to implead
Manufacturers Bank and Hacienda Benito in his cases against Phillips and
Sons and the Phillips spouses. An assessment of the evidence in record
shows that the filing of the complaint may likewise be characterized as a
sincere attempt on the part of Phillips and Sons and the Phillips spouses to
find means or to buy time to pay their debt to the petitioner. In the case of
Manufacturers Bank, the record shows that its active participation in the
transaction involving the properties of Hacienda was legitimate. While no
damages are due the Bank, neither is it liable for damages. As far as Victoria
Valley is concerned, we find no reason to conclude that it was really
organized or actively participated to prejudice the interests of the petitioner.
The record shows that Victoria Valley withdrew from the transaction involving
the properties of Hacienda Benito even before the filing of the third party
complaint. The eighth and ninth assignments of errors under consideration
are, therefore, without merit.chanrobles.com : virtual law library
WHEREFORE, the petition is GRANTED. The decision of the former Court
of Appeals is hereby REVERSED and SET ASIDE. The respondents Robert
O. Phillips and Sons and the Phillips spouses are declared to be jointly and
severally liable to the petitioner for the outstanding debt of Phillips and Sons
in the amount of FOUR MILLION, TWO HUNDRED FIFTY THOUSAND
PESOS (P4,250,000.00) with interest at the rate of eight (8%) percent per
annum from April 30, 1964 until fully paid as provided for in the parties
agreement dated August 13, 1963. Costs against the respondents.
SO ORDERED.
Teehankee, Actg. C.J., Melencio-Herrera, Plana and Patajo, JJ., concur.