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Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 107356 March 31, 1995


SINGAPORE AIRLINES LIMITED, petitioner,
vs.
THE COURT OF APPEALS and PHILIPPINE AIRLINES, respondents.

ROMERO, J.:
Sancho Rayos was an overseas contract worker who had a renewed contract with the Arabian American Oil
Company (Aramco) for the period covering April 16, 1980, to April 15, 1981. As part of Aramco's policy, its employees
returning to Dhahran, Saudi Arabia from Manila are allowed to claim reimbursement for amounts paid for excess
baggage of up to 50 kilograms, as long as it is properly supported by receipt. On April 1980, Rayos took a Singapore
Airlines (SIA) flight to report for his new assignment, with a 50-kilogram excess baggage for which he paid P4,147.50.
Aramco reimbursed said. amount upon presentation of the excess baggage ticket.
In December 1980, Rayos learned that he was one of several employees being investigated by Aramco for fraudulent
claims. He immediately asked his wife Beatriz in Manila to seek a written confirmation from SIA that he indeed paid
for an excess baggage of 50 kilograms. On December 10, 1980, SIA's manager, Johnny Khoo, notified Beatriz of
their inability to issue the certification requested because their records showed that only three kilograms were entered
as excess and accordingly charged. SIA issued the certification requested by the spouses Rayos only on April 8,
1981, after its investigation of the anomaly and after Beatriz, assisted by a lawyer, threatened it with a lawsuit. On
April 14, 1981, Aramco gave Rayos his travel documents without a return visa. His employment contract was not
renewed.
On August 5, 1981, the spouses Rayos, convinced that SIA was responsible for the non-renewal of Rayos'
employment contract with Aramco, sued it for damages. SIA claimed that it was not liable to the Rayoses because the
tampering was committed by its handling agent, Philippine Airlines (PAL). It then filed a third-party complaint against
PAL. PAL, in turn, countered that its personnel did not collect any charges for excess baggage; that it had no
participation in the tampering of any excess baggage ticket; and that if any tampering was made, it was done by SIA's
personnel.
Judge Jesus O. Ibay of the Regional Trial Court of Manila, Branch 30, rendered judgment on September 9, 1988, in
favor of the plaintiffs, the dispositive portion of which reads thus:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant
Singapore Airlines Limited, sentencing the latter to pay the former the following:
1. The sum of Four Hundred Thirty Thousand Nine Hundred Pesos and Eighty Centavos
(P430,900.80) as actual damages, with interest at the legal rate from the date of the filing of the
complaint until fully paid.
2. The sum of Four Thousand One Hundred Forty-Seven Pesos and Fifty Centavos (P4,147.50) as
reimbursement for the amount deducted from Mr. Rayos' salary, also with legal rate of interest from
the filing of the complaint until paid in full;
3. The sum of Fifty Thousand Pesos (P50,000.00) as moral damages;

4. The sum equivalent to ten Per Cent (10th) of the total amount due as and for attorney's fees; and
5. The cost of suit.
The defendant's counterclaim is hereby dismissed.
ON THE THIRD PARTY COMPLAINT, the third-party defendant PAL is ordered to pay defendant
and third-party plaintiff SIA whatever the latter has paid the plaintiffs.
SO ORDERED.
In so ruling, the court a quo concluded that the excess baggage ticket of Rayos was tampered with by the employees
of PAL and that the fraud was the direct and proximate cause of the non-renewal of Rayos' contract with Aramco.
All parties appealed to the Court of Appeals. SIA's appeal was dismissed for non-payment of docket fees, which
dismissal was eventually sustained by this Court. The Rayos spouses withdrew their appeal when SIA satisfied the
judgment totaling P802,435.34.
In its appeal, PAL claimed that the spouses Rayos had no valid claim against SIA because it was the inefficiency of
Rayos which led to the non-renewal of his contract with Aramco, and not the alleged tampering of his excess bagged
ticket On the other hand, SIA argued that the only issue in the said appeal is whether or not it was entitled to
reimbursement from PAL, citing
the case of Firestone Tire and Rubber Company of the Philippines v. Tempongko. 1
The appellate court disagreed with SIA's contention that PAL could no longer raise the issue of SIA's liability to the
Rayoses and opined "that SIA's answer to the complaint should inure to the benefit of PAL, and the latter may
challenge the lower court's findings against SIA in favor of plaintiffs-appellees (the Rayos spouses) for the purpose of
defeating SIA's claim against it, and not for the purpose of altering in any way the executed judgment against SIA." In
its answer to the main complaint, SIA set up the defense that the excess baggage ticket was indeed tampered with
but it was committed by PAL's personnel. On September 21, 1992, the appellate court granted PAL's appeal and
absolved it from any liability to SIA.
In this petition for review, SIA argues that PAL cannot validly assail for the first time on appeal the trial court's decision
sustaining the validity of plaintiff's complaint against SIA if PAL did not raise this issue in the lower court. It added that
the appellate court should have restricted its ruling on the right of SIA to seek reimbursement from PAL, as this was
the only issue raised by SIA in its third-party complaint against PAL.
The instant appeal is impressed with merit.
The petitioner correctly pointed out that the case of Firestone squarely applies to the case at bench. In said case, the
Court expounded on the nature of a third-party complaint and the effect of a judgment in favor of the plaintiff against
the defendant and in favor of such defendant as third-party plaintiff against, ultimately, the third-party defendant.
Speaking through then Justice and later Chief Justice Claudio Teehankee, the Court stated:
The third-party complaint is, therefore, a procedural device whereby a "third party" who is neither a
party nor privy to the act or deed complained of by the plaintiff, may be brought into the case with
leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-party
defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the
plaintiff's claim. The third-party complaint is actually independent of and separate and distinct from
the plaintiff's complaint. . . . When leave to file the third-party complaint is properly granted, the
Court renders in effect two judgments in the same case, one on the plaintiff's complaint and the
other on the third-party complaint. When he finds favorably on both complaints, as in this case, he
renders judgment on the principal complaint in favor of plaintiff against defendant and renders
another judgment on the third-party complaint in favor of defendant as third-party plaintiff, ordering
the third-party defendant to reimburse the defendant whatever amount said defendant is ordered to
pay plaintiff in the case. Failure of any of said parties in such a case to appeal the judgment as
against him makes such judgment final and executory. By the same token, an appeal by one party

from such judgment does not inure to the benefit of the other party who has not appealed nor can it
be deemed to be an appeal of such other party from the judgment against him.
It must be noted that in the proceedings below, PAL disclaimed any liability to the Rayoses and imputed the alleged
tampering to SIA's personnel. On appeal, however, PAL changed its theory and averred that the spouses Rayos had
no valid claim against SIA on the around that the non-renewal of Sancho's contract with Aramco was his
unsatisfactory performance rather than the alleged tampering of his excess baggage ticket. In response to PAL's
appeal, SIA argued that it was improper for PAL to question SIA's liability to the plaintiff, since this was no longer an
issue on account of the finality and, in fact, satisfaction of the judgment.
Surprisingly, the appellate court ignored the Court's pronouncements in Firestone and declared:
[T]here is nothing in the citation which would suggest that the appellant cannot avail of the
defenses which would have been available to the non-appealing party against the prevailing party
which would be beneficial to the appellant. After all, PAL's liability here is premised on the liability of
SIA to plaintiffs-appellees, In its own defense, it should have the right to avail of defenses of SIA
against plaintiffs-appellees which would redound to its benefit. This is especially true here where
SIA lost the capability to defend itself on the technicality of failure to pay docket fee, rather than on
the merits of its appeal. To hold otherwise would be to open the door to a possible collusion
between the plaintiff and defendant which would leave the third-party defendant holding the bag.
There is no question that a third-party defendant is allowed to set up in his answer the defenses which the third-party
plaintiff (original defendant) has or may have to the plaintiff's claim. There are, however, special circumstances
present in this case which preclude third-party defendant PAL from benefiting from the said principle.
One of the defenses available to SIA was that the plaintiffs had no cause of action, that is, it had no valid claim
against SIA. SIA investigated the matter and discovered that tampering was, indeed, committed, not by its personnel
but by PAL's. This became its defense as well as its main cause of action in the third-party complaint it filed against
PAL. For its part, PAL could have used the defense that the plaintiffs had no valid claim against it or against SIA. This
could be done indirectly by adopting such a defense in its answer to the third-party complaint if only SIA had raised
the same in its answer to the main complaint, or directly by so stating in unequivocal terms in its answer to SIA's
complaint that SIA and PAL were both blameless. Yet, PAL opted to deny any liability which it imputed to SIA's
personnel. It was only on appeal in a complete turn around of theory that PAL raised the issue of no valid claim
by the plaintiff against SIA. This simply cannot be allowed.
While the third-party defendant; would benefit from a victory by the third-party plaintiff against the plaintiff, this is true
only when the third-party plaintiff and third-party defendant have non-contradictory defenses. Here, the defendant and
third-party defendant had no common defense against the plaintiffs' complaint, and they were even blaming each
other for the fiasco.
Fear of collusion between the third-party plaintiff and the plaintiffs aired by the appellate court is misplaced if not
totally unfounded. The stand of SIA as against the plaintiffs' claim was transparent from the beginning. PAL was
aware of SIA's defense, and if it was convinced that SIA should have raised the defense of no valid claim by the
plaintiffs, it should have so stated in its answer as one of its defenses, instead of waiting for an adverse judgment and
raising it for the first time on appeal.
The judgment, therefore, as far as the Rayoses and SIA are concerned, has already gained finality. What remains to
be resolved, as correctly pointed out by petitioner, is whether it is entitled to reimbursement from PAL, considering
that PAL appealed that part of the decision to the appellate court. This is where the rule laid down
inFirestone becomes applicable.
The trial court's decision, although adverse to SIA as defendant, made PAL ultimately answerable for the judgment by
ordering the latter to reimburse the former for the entire monetary award. On appeal, PAL tried to exonerate itself by
arguing that the Rayoses had no valid claim against SIA. From PAL's viewpoint, this seemed to be the only way to
extricate itself from a mess which the court a quo ascribed to it. This cannot, however, be allowed because it was
neither raised by SIA in its answer to the main complaint nor by PAL in its answer to the third-party complaint. The
prudent thing that PAL should have done was to state in its answer to the third-party complaint filed by SIA against it
everything that it may conceivably interpose by way of its defense, including specific denials of allegations in the main
complaint which implicated it along with SIA.

The appellate court was in error when it opined that SIA's answer inured to the benefit of PAL for the simple reason
that the complaint and the third-party complaint are actually two separate cases involving the same set of facts which
is allowed by the court to be resolved in a single proceeding only to avoid a multiplicity of actions. Such a proceeding
obviates the need of trying two cases, receiving the same or similar evidence for both, and enforcing separate
judgments therefor. This situation is not, as claimed by the appellate court, analogous to a case where there are
several defendants against whom a complaint is filed stating a common cause of action, where the answer of some of
the defendants inures to the benefit of those who did not file an answer. While such a complaint speaks of a single
suit, a third-party complaint involves an action separate and distinct from, although related to the main complaint. A
third-party defendant who feels aggrieved by some allegations in the main complaint should, aside from answering
the third-party complaint, also answer the main complaint.
We do not, however, agree with the petitioner that PAL is solely liable for the satisfaction of the judgment. While the
trial court found, and this has not been adequately rebutted by PAL, that the proximate cause of the non-renewal of
Rayos' employment contract with Aramco was the tampering of his excess baggage ticket by PAL's personnel, it
failed to consider that the immediate cause of such non-renewal was SIA's delayed transmittal of the certification
needed by Rayos to prove his innocence to his employer.
SIA was informed of the anomaly in December 1980 but only issued the certification four months later or, more
specifically, on April 8, 1981, a few days before the expiration of Rayos' contract. Surely, the investigation conducted
by SIA could not have lasted for four months as the information needed by the Rayoses could easily be verified by
comparing the duplicate excess baggage tickets which they and their handling agent, PAL, kept the record purposes.
The fact that the Rayos spouses had to be assisted by counsel who threatened to file a damage suit against SIA if the
certification they urgently needed was not immediately issued only strengthens the suspicion that SIA was not dealing
with them in utmost good faith. The effect of SIA's mishandling of Beatriz Rayos' request became instantly apparent
when her husband's contract was not renewed in spite of his performance which was constantly "highly regarded" by
the manager of Aramco's equipment services department.
Former Chief Justice and noted remedial law expert Manuel V. Moran opined that "in an action upon a tort, the
defendant may file a third-party complaint against a joint tort-feasor for contribution." 2
The non-renewal of Rayos employment contract was the natural and probable consequence of the separate tortious
acts of SIA and PAL. Under mandate of Article 2176 of the Civil Code, Rayos is entitled to be compensated for such
damages. Inasmuch as the responsibility of two or more persons, or tort-feasors, liable for a quasi-delict is joint and
several, 3 and the sharing as between such solidary debtors is pro-rata, 4 it is but logical, fair, and equitable

to require PAL to contribute to the amount awarded to the Rayos spouses and already paid by SIA,
instead of totally indemnifying the latter.
WHEREFORE, the decision of the respondent Court of Appeals in CA-G.R. CV No. 20488 dated September 21,
1992, is hereby REVERSED and a new one is entered ordering private respondent Philippine Airlines to pay, by way
of contribution, petitioner Singapore Airlines one-half (1/2) of the amount it actually paid to Sancho and Beatriz Rayos
in satisfaction of the judgment in Civil Case No. 142252, dated September 9, 1988.
SO ORDERED.
Feliciano, Melo, Vitug and Francisco, JJ., concur.

Footnotes
1 G.R. No. L-24399, March 28, 1969, 27 SCRA 418.
2 Moran, Comments on the Rules of Court, I, 1979 ed., p. 281.
3 Art. 2194, Civil Code.

4 Opinion of Retired Justice Edgardo L. Paras in interpreting Art. 1217 of the Civil Code, Civil Code
of the Philippines Annotated, IV, 11th ed., pp. 271-272.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC

G.R. No. 92594 March 4, 1994


REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
HON. SANDIGANBAYAN, FERDINAND E. MARCOS, IMELDA R. MARCOS, ROSENDO D.
BONDOC, CESAR E. A. VIRATA, RUBEN ANCHETA, JAIME C. LAYA, PLACIDO MAPA, JR.,
ROBERTO ONGPIN and CESAR C. ZALAMEA, respondents.
The Solicitor General for petitioner.
Belo, Abiera & Associates for respondent Laya.
Ledesma, Saludo & Associates for respondent Laya.
De Castro & Cagampang Law Offices for C.C. Zalamea.
Estelito P. Mendoza for respondent Ongpin.
Ponce Enrile, Cayetano, Reyes & Manalastas for respondents C.E.A. Virata and P. Mapa, Jr.
Mario V. Andres and Vicente F. Ruaro for R. Ancheta.

PUNO, J.:
An enduring touchstone of a republican form of government is its guarantee of equal protection of
law. To the powerless, it is the promise of parity of treatment with the powerful when they are
similarly situated. This promise must be matched with performance, and to the extent that the
resolutions of the respondent court dated November 29, 1989 and March 9, 1990 accord fidelity to
this constitutional precept, we affirm them.

Less the fat of legalesse, the facts are few and uncontroverted. Before 1986, the Landoil Group of
Companies spearheaded by then Congressman Jose de Venecia, Jr., was able to obtain foreign
loans syndicated by various banks aggregating approximately one hundred twenty million US dollars
($120 M). These foreign loans were guaranteed by PHILGUARANTEE, whose Board of Directors
was then composed of private respondents, Rosendo D. Bondoc, Cesar E. A. Virata, Ruben
Ancheta, Jaime C. Laya, Placido Mapa, Jr., Roberto Ongpin, and Cezar Zalamea. Congressman de
Venecia's group of companies was unable to seasonably service these foreign loans and this
compelled PHILGUARANTEE to assume its obligation as guarantor.
The EDSA revolution in February 1986 swept the Marcoses out of power. One of the first official acts
of then President Corazon C. Aquino was the creation of the Presidential Commission on Good
Government (PCGG) under E.O No. 1. It was given the difficult task of recovering the illegal wealth
of the Marcoses, their family, subordinates and close associates. In due time, the Marcoses and their
cronies had to face a flurry of cases, both civil and criminal, all designed to recover the Republic's
wealth allegedly plundered by them while in power. Case No. 0020 for Reconveyance, Reversion,
Accounting, Restitution and Damages was one of these cases. It was filed by the petitioner Republic
against Jose de Venecia, Jr., Ferdinand E. Marcos, Imelda R. Marcos, Rosendo D. Bondoc, Cesar
E. A. Virata, Ruben Ancheta, Jaime C. Laya, Placido Mapa, Jr., Roberto Ongpin and Cesar C.
Zalamea. We quote its relevant allegations:
IV
GENERAL AVERMENTS
OF
DEFENDANTS' ILLEGAL ACTS
8. From the early years of his presidency, Defendant Ferdinand E. Marcos took
undue advantage of his powers as President. All throughout the period from
September 21, 1972 to February 25, 1986, he gravely abused his powers under
martial law and ruled as Dictator under the 1973 Marcos promulgated Constitution.
Defendant Ferdinand E. Marcos, together with other Defendants, acting singly or
collectively, and/or in unlawful concert with one another, in flagrant breach of public
trust and of their fiduciary obligations as public officers, with gross and scandalous
abuse of right and power and in brazen violation of the Constitution and laws of the
Philippines embarked upon a systematic plan to accumulate ill-gotten wealth. Among
others, in furtherance of said plan and acting in unlawful concert with one another
and with gross abuse of power and authority, Defendant Ferdinand E. Marcos and
Imelda R. Marcos:
(a) awarded contracts with the Government to their relatives,
business associates, dummies, nominees, agents or persons who
were beholden to said Defendants, under terms and conditions
grossly and manifestly disadvantageous to the government;
(b) misappropriated, embezzled and/or converted to their own use
funds of Government financial institutions;
(c) engaged in other illegal and improper acts and practices designed
to defraud Plaintiffs and the Filipino people, or otherwise
misappropriated and converted to their own use, benefit and
enrichment the lawful patrimony and revenues of Plaintiff and the
Filipino people.

9. Among the assets acquired by Defendants in the manner above-described and


discovered by the Commission in the exercise of its official responsibilities are funds
and other property listed in Annex "A" hereof and made an integral part of this
Complaint.
10. Defendants, acting singly or collectively, and/or in unlawful concert with one
another, for the purpose of preventing disclosure and avoiding discovery of their
unmitigated plunder of the National Treasury and of their other illegal acts, and
employing the services of prominent lawyers, accountants, financial experts,
businessman [sic] and other persons, deposited, kept and invested funds, securities
and other assets in various banks, financial institutions, trust or investment
companies and with persons here and abroad.
V
SPECIFIC AVERMENTS OF
DEFENDANTS' ILLEGAL ACTS
11. Defendant Jose de Venecia, Jr. taking undue advantage of his relationship,
influence and connection with Defendants Ferdinand E. Marcos and Imelda R.
Marcos, acting by himself and/or in active collaboration with the other Defendants,
embarked upon devices, schemes and strategems to unjustly enrich themselves at
the expense of Plaintiff and the Filipino people, among others:
(a) Organized and headed the Land Oil Group, a big business
conglomerate engaged in a wide range of economic activity, such as
petroleum exploration and engineering, port management and
operation, and other services. The Land Oil Group, more particularly,
the Land Oil Resources Corporation, its parent company, and its
major subsidiaries, the Philippine-Singapore Ports Corporation, the
Greater Manila Land Corporation, Construction Consortium, Inc. and
the Philippine Hospitals and Health Services, had operations in the
Philippines and abroad, particularly, in the Middle East;
(b) To finance his huge domestic and overseas operations, Defendant
Jose de Venecia, acting through the Land Oil Group, borrowed
enormous amounts in foreign currency denominated loans from
several syndicates of international banks, such as, but not limited to,
Arab Banking Corporation, Ahli Bank of Kuwait, Credit Suisse, First of
Boston's, Saudi Cairo Bank, Mellon Bank and the Bank of Montreal.
In view of the magnitude of the loans and the project risks involved,
the banks required that their loans be fully covered by the absolute
and unconditional guarantee of the Government of the Republic of
the Philippines;
(c) Accordingly, Defendant Jose de Venecia applied for Philippine
Government guarantee from the Philippine Export and Foreign Loan
Guarantee Corporation (Philguarantee), a government-owned and
controlled corporation organized to provide Philippine Government
guarantees, and, with the active collaboration of Defendants
Rosendo D. Bondoc, who was then the President of Philguarantee
and the members of its Board of Directors, Defendants Cesar E. A.

Virata, Ruben Ancheta, Jaime C. Laya, Placido Mapa, Jr., Roberto


Ongpin and Cesar C. Zalamea was granted full Philippine
Government guarantee coverage;
(d) Defendant Jose de Venecia misused the proceeds of the loans by
diverting them to other uses and/or appropriation, then for his own
personal benefit using for this purpose a string of local and overseas
banks, such as, but not limited to, PNB (New York), PNB (Buendia
Branch), PCTB (Makati Branch), Swiss Banking Corp. of Hongkong,
and the Hongkong and Shanghai Banking Corp. in Hongkong, and in
an effort to hide his complicity in the diversion, refused to submit
regular accounting and reports, all in violation of the provisions of the
loan and guarantee agreements;
(e) Notwithstanding the aforesaid repeated violations Philguarantee,
with the active collaboration of Defendants Rosendo D. Bondoc,
Cesar E. A. Virata, Ruben Ancheta, Jaime C. Laya, Placido Mapa, Jr.,
Roberto Ongpin and Cesar C. Zalamea, continued to provide
financial assistance to the companies owned and controlled by
Defendant Jose de Venecia;
(f) As a result of gross mismanagement and wanton diversion of the
loans, the major operations of the Land Oil Group collapsed, Land Oil
defaulted in the payment of its maturing principal and interests
amortization and, like the man holding the proverbial empty bag,
Philguarantee had to advance on its guarantee using for this purpose
multi-millions of pesos in scarce government and taxpayers' money,
resulting in grave and irreparable damage to Plaintiff and to the entire
Filipino people.
12. The acts of Defendants, singly or collectively, and/or in unlawful concert with one
another, constitute gross abuse of official position and authority, flagrant breach of
public trust and fiduciary obligations, brazen abuse of right and power, unjust
enrichment, violation of the Constitution and laws of the Republic of the Philippines,
to the grave and irreparable damage of Plaintiff and the Filipino people.
VI
CAUSE OF ACTION
13. First Cause of Action: ABUSE OF RIGHT AND POWER (a) Defendants, in
perpetrating the unlawful acts described above, committed abuse of right and power
which caused untold misery, suffering and damage to Plaintiff. Defendants violated,
among others, Articles 19, 20 and 21 of the Civil Code of the Philippines;
(b) As a result of the foregoing acts, Defendants acquired title to and
beneficial interests in funds and other property and concealed such
title, funds and interests through the use of relatives, business
associates, nominees, agents or dummies. Defendants are,
therefore, jointly and severally, liable to Plaintiff to return and
reconvey all such funds and other property unlawfully acquired; or
alternatively, to pay Plaintiff, jointly and severally, by way of indemnity,

the damage cause to Plaintiff equivalent to the amount of such funds


and the value of other property not returned or restored to Plaintiff,
plus interest thereon from the date of unlawful acquisition until full
payment.
14. Second Cause of Action: UNJUST ENRICHMENT Defendants illegally
accumulated funds and other property in violation of the laws of the Philippines and
in breach of their official functions and fiduciary obligations. Defendants, therefore,
have unjustly enriched themselves to the grave and irreparable damage and
prejudice of Plaintiff. Defendants have an obligation at law, independently of breach
of trust and abuse of right and power and; as an alternative, to jointly and severally
return to Plaintiff such funds and other property with which Defendants, in gross and
evident bad faith, have unjustly enriched themselves or, in default thereof, restore to
Plaintiff the amount of such funds and the value of the other property including those
which may have been wasted, and/or lost, with interest thereon from the date of
unlawful acquisition until full payment.
15. Third Cause of Action: BREACH OF TRUST A public office is a public trust. By
committing all the acts described above, Defendants repeatedly breached public trust
and the law, making them jointly and severally liable to Plaintiff. The funds and other
property acquired by Defendants as a result of their breach of public trust are
deemed to have been acquired for the Benefit of Plaintiff and are, therefore,
impressed with constructive trust in favor of Plaintiff and the Filipino people.
16. Fourth Cause of Action: ACCOUNTING The Commission, acting pursuant to
the provisions of applicable law, respectfully maintains that Defendants, acting singly
or collectively, and/or in unlawful concert with one another, acquired funds, assets
and property during the incumbency of Defendant public officers, or while acting in
unlawful concert with public officers, manifestly out of proportion to their salaries, to
their other lawful income and income from legitimately acquired property.
Consequently, they are required to show to the satisfaction of this Honorable Court
that they have lawfully acquired all such funds, assets and property which are in
excess of their legal net income, and for this Honorable Court to decree that the
Defendants are under obligation to account to Plaintiff with respect to all legal or
beneficial interests in funds, properties and assets of whatever kind and wherever
located in excess of their lawful earnings.
17. Fifth Cause of Action: LIABILITY FOR DAMAGES (a) By reason of the
unlawful acts set forth above, Plaintiff and the Filipino people have suffered actual
damages in an amount representing the pecuniary loss sustained by the latter as a
result of Defendants' unlawful acts, the approximate value and interest on which,
from the time of their wrongful acquisition, plus expenses which Plaintiff has been
compelled to incur and shall continue to incur in its effort to recover Defendants' illgotten wealth all over the world. Defendants are, therefore, jointly and severally liable
to Plaintiff for actual damages and for expenses incurred in the recovery of
Defendants' ill-gotten wealth.
(b) As a result of Defendants' unlawful, malicious, immoral and
wanton acts described above, Plaintiff and the Filipino people had
painfully endured and suffered for more than twenty long years, and
still continue to endure and suffer anguish, fright, sleepless nights,
serious anxiety, wounded feelings and moral shock, as well as

besmirched reputation and social humiliation before the international


community, for which Defendants are jointly and severally liable to
Plaintiff and the Filipino people for moral damages.
(c) In addition, Plaintiff and the Filipino people are entitled to
temperate damages for their suffering which, by their very nature, are
incapable of pecuniary estimation, but which this Honorable Court
may determine in the exercise of its sound discretion.
(d) Defendants, by reason of the above described unlawful acts, have
violated and invaded the inalienable right of Plaintiff and the Filipino
people to a fair and decent way of life befitting a Nation with rich
natural and human resources. This basic, and fundamental right of
Plaintiff and the Filipino people should be recognized and vindicated
by awarding nominal damages in an amount to be determined by the
Honorable Court in the exercise of its sound discretion.
(e) By way of example and correction for the public good and in order
to ensure that Defendants' unlawful, malicious, immoral and wanton
acts are not repeated, said Defendants are jointly and severally liable
to Plaintiff for exemplary damages.
Needless to state, the de Venecia group of companies and PHILGUARANTEE were sequestered by
the petitioner, through the PCGG.
The filing of Case No. 0020 notwithstanding, an investigation was conducted to determine the
veracity of the above allegations. The investigation culminated in the signing of a Deed of
Assignment between the petitioner and de Venecia, Jr., representing seven (7) of the eighteen (18)
companies of the Land Oil Group. The Deed was premised on the following facts found by the
petitioner after its investigation, and recited in its whereas clauses,viz:
. . . . As a result of such investigation Philguarantee has satisfied itself (i) that such
guarantee facility was obtained in the ordinary and regular course of business, and
that no favor was accorded to the Landoil officers, in the grant of such guarantee
facility; and (ii) that the business reversals experienced by the Landoil Group in
connection with its various construction and other projects in the Middle East and
elsewhere were due, firstly, to the inability of the Landoil Group to collect its contract
receivables from such projects due to the reasons specified in the sixth "whereas"
clause, and,secondly, due to the non-payment of its insurance claim under the
insurance policy referred to in the succeeding (ninth), "whereas" clause.
Certain obligations were then assumed by de Venecia, Jr., and his group, viz:
1.1 Upon the request of the Assignee (referring to petitioner), the Assignors (being
the above-named companies making up Landoil Group) shall immediately cause to
be transferred to the Assignee (or its nominee/s) all the shares of the capital stock of
Landoil (up to 45% of the total outstanding issued and subscribed capital stock of
Landoil) which have or may hereafter be identified as belonging to Marcos (whether
standing in his name or the name [of] any of his nominee/s). . . .
1.2 Upon the effectiveness of this Agreement, the Assignors shall cause to be paid to
the Assignee, through PCGG, the amount of P13 million, which amount represents a

portion of Landoil's recovery from an arbitration proceeding which Landoil had


caused to be instituted in London against the Lloyd's Syndicate of Insurance
Underwriters;
1.3 Effective immediately, the Assignors hereby assign, transfer and convey to the
PCGG: (a) the entire proceeds of the Assignors' claims in the New York case which
Landoil has instituted against the insurance brokers, namely, the firm of Alexander
and Alexander, and (b) the entire proceeds of the Assignors' contract receivables
from all the Assignors' construction and other projects in the Middle East and
elsewhere, net of any amount required for the settlement of any compulsory statutory
liens for unpaid wages or salaries and ordinary administrative overhead and costs,
and attorney's fees and expenses of litigation.
xxx xxx xxx
1.5 The Assignors, and or their respective officers, hereby undertake to fully
cooperate with the Philippine Government, acting through the PCGG or any other
governmental agency, in the prosecution of any case which the Philippine
Government may cause to be filed against former President Marcos and his cronies,
either by furnishing testimony in any such case, or by providing information in any
investigation undertaken in the Philippines or elsewhere, as may be required or
directed by the PCGG, or by other appropriate governmental agency from time to
time.
In reciprocity, petitioner agreed to cause the dismissal without prejudice of the complaint in Civil
Case No. 0020 against de Venecia and his group of co-signors.
Pursuant to this Deed of Assignment, de Venecia, Jr., with the express conformity of PCGG, moved
to dismiss Civil Case No. 0020 against him. On September 8, 1989, the respondent court granted
the motion to dismiss. The dismissal became final and executory. The other private respondents
followed suit with their respective motions to dismiss. The motions were opposed by the petitioner.
Nonetheless, on December 4, 1989, the respondent court dismissed the Expanded Complaint
against herein private respondents. The dismissal was based on two (2) grounds: (1) removal of an
indispensable party in the person of de Venecia, Jr., from the Expanded Complaint; and (2) lack of
cause of action in view of the facts established and admitted by the petitioner in the Deed of
Assignment. Petitioner's motion for reconsideration and its Supplement were denied by the
respondent court on March 9, 1990. Petitioner then filed the petition at bar, where it is contended:
16. The respondent Court committed grave abuse of discretion amounting to lack or
excess of jurisdiction in dismissing the case against defendant de Venecia's codefendants, on the following grounds:
a) The Deed of Assignment executed on July 19, 1989 by Landoil in
favor of the petitioner should not be made to benefit de Venecia's codefendant;
b) Defendant de Venecia is not an indispensable party in the
prosecution of the case against his co-defendants;
c) The liabilities of de Venecia's co-defendants arose not only from
their alleged conspiracy with defendant de Venecia but also by virtue

of their individual or collective actions done in unlawful concert with


one another;
d) The causes of action against defendants Ferdinand E. Marcos and
Imelda R. Marcos have nothing to do with the Deed of Assignment
executed by Landoil in favor of the petitioner; and
e) The parties manifestly intended to exclude defendant de Venecia's
co-defendants from the benefit of the Deed of Assignment in
question.
We find partial merit in the petition.
The threshold question is whether the subject Deed of Assignment justifies the dismissal of Civil
Case No. 0020 against, first, private respondents Bondoc, Virata, Ancheta, Laya, Mapa, Jr., Ongpin,
Zalamea, and second, against the private respondents, Ferdinand and Imelda R. Marcos.
We shall first determine the effect of the Deed of Assignment on the cause of action of petitioner
against the first group of private respondents Bondoc, et al. Petitioner submits that the execution
of the Deed need not result in the dismissal of Expanded Complaint against Bondoc, et al. It cites
two (2) reasons: (1) Bondoc, et al. were not parties to the Deed, and (2) petitioner did not receive
any consideration or benefit from Bondoc, et al., when it executed the said Deed.
Petitioner's submission misses the rationale of the ruling of the respondent court. The respondent
court ordered the dismissal of the Expanded Complaint because the Deed contained averments
which nullified petitioner's cause of action. More specifically, the Deed averred ". . . as a result of
such investigation Philguarantee has satisfied itself (1) that such guarantee facility was obtained in
the ordinary and regular course of business, and that no favor was accorded to the Landoil officers,
in the grant of such guarantee facility; . . ." If after investigation, petitioner has satisfied itself that the
guaranty facility was obtained in the ordinary and regular course of business, it follows that it can no
longer insist it has a cause of action against Bondoc and company. This admission of lack of cause
of action constitutes an admission against interest. It binds the petitioner as it is not alleged that it
was given due to fraud, mistake or inadvertence. The adverse effects of the admission bind
petitioner and it is not material that respondents Bondoc and company were not parties to the Deed
or that in executing the said Deed, petitioner did not receive any consideration from respondents
Bondoc and company. An admission against interest is a voluntary act and its effects do not depend
on the concurrence of any other party or consideration of any kind.
Petitioner next contends that the respondent court erred in ruling that it has only one cause of action
against the respondents Bondoc and company i.e., that as members of the Board of Directors of
PHILGUARANTEE, they continuously extended and maintained unwarranted guarantees to cover
the foreign loans of de Venecia's Land Oil Group of Companies, cronies of the Marcoses.
Petitioner's submission is shared by our brethren who dissented from the majority. They are of the
view that petitioner pleaded several causes of action. They then point to the introductory part of par.
11 of the Expanded Complaint which used the phrase "among others," viz:
11. Defendant Jose de Venecia, Jr., taking undue advantage of his relationship,
influence and connection with Defendants Ferdinand E. Marcos and Imelda R.
Marcos, acting by himself and/or in active collaboration with the other Defendants,
embarked upon devices, schemes and strategems to unjustly enrich themselves at
the expense of plaintiff and the Filipino People, among others. (Emphasis supplied.)

They also cite par. 8 which used the same phrase "among others," viz:
. . . Defendant Ferdinand E. Marcos, together with other Defendants, acting singly or
collectively, and/or in unlawful concert with one another, in flagrant breach of public
trust and of their fiduciary obligations as public officers, with gross and scandalous
abuse of right and power and in brazen violation of the Constitution and laws of the
Philippines, embarked upon a systematic plan to accumulate ill-gotten
wealth. Among others, in furtherance of said plan and acting in unlawful concert with
one another and with gross abuse of power and authority, . . . (Emphasis supplied.)
They also refer to par. 9 which also used the word "among," viz:
Among the assets acquired by Defendants in the manner above-described and
discovered by the Commission in the exercise of its official responsibilities are funds
and other property listed in Annex "A" hereof and made an integral part of this
Complaint. (Emphasis supplied.)
They then cite paragraphs 13, 14, 15, 16, 17 and of the Expanded Complaint which allegedly
enumerated five (5) causes of action.
This stand cannot be sustained. Par 8 of the Expanded Complaint merely laid down the
"General Averments of Defendants' Illegal Acts." The specific allegations of the acts and omissions
committed by respondents Bondoc and company and constitutive of petitioner's cause of action are
recited in par. 11 of the Expanded Complaint. It is for this reason that par. 11 bears the descriptive
title "Specific Averments of Defendants' Illegal Acts." Needless to stress, the cause of action of the
petitioner against the said respondents is spelled out in par. 11 (a) to (f). A perusal of par. 11 will yield
no other conclusion than that there is but one cause of action against these respondents -- that with
conspiracy, they allegedly extended unwarranted guarantees to enable the de Venecia group of
companies, all cronies of the Marcoses, to obtain foreign loans. The use of the phrase "among
others" in the Expanded Complaint does not in any manner mean that petitioner has other concealed
causes of action against these respondents. Smart pleaders resort to said artful phrase only to gain
more leeway in presenting their evidence. By no stretch of the imagination, however, can it be
maintained that the opaque phrase "among others" can confer a cause of action. Such a ruling
cannot be reconciled with substantive due process which bars roaming generalities in any kind of
complaint, whether civil or criminal. It is for this reason that section 1 of rule 8 of the Rules of Court
requires that "every pleading shall contain in a methodical and logical form, a plain, concise and
direct statement of the ultimate facts on which the party pleading relies for his claim or defense, as
the case may be . . ." A transgression of this rule is fatal. Upon the other hand, paragraphs 13 to 17
of the Expanded Complaint contain mere general averments and do not allege petitioner's specific
cause of action against these respondents. They speak for themselves and they need not undergo
the scalpel of judicial scrutiny.
Petitioner and the dissent further forward the thesis: The averments earlier mentioned and the deed
of assignment, juxtaposed with Annex "A", show prima facie that (a) the petitioner did not intend to
enter into any amicable settlement with the remaining eleven (11) corporations or regarding the
frozen assets listed in said Annex "A", and (b) the assets of the defendants in the said eleven (11)
corporations were not necessarilyobtained through or as a consequence of the acts or transactions
described in subparagraphs (a) to (f), paragraph 11 of the Expanded Complaint,
but probably through "the other devices, schemes or strategems."
Again, we find the thesis untenable. We need not agonize in search for the subjective intent of the
petitioner in concluding the Deed of Assignment only with the seven (7) corporations of the de

Venecia group of companies. Speculations on intent can be endless for it is the nature of
unmanifested intent to be fugitive. But the effort is superfluous for we need not engage in this difficult
intellectual jujitsu. For, whether or not it was petitioner's furtive intent to settle amicably with all the
corporations of de Venecia and the respondents Bondoc and company, is not decisive of the case at
bar. What is determinative is that in the Deed of Assignment, petitioner itself admitted that it has no
cause of action against these respondents in Civil Case No. 0020. The admission was made when,
after conducting its own investigation, it found out that (1) de Venecia, Jr., was not a crony but a
victim of the Marcoses; (2) the guarantees extended by the private respondents as members of the
Board of Director of PHILGUARANTEE were given in "the ordinary and regular course of business
and that no favor was accorded to the Landoil officers in the grant of such guarantee facility," and (3)
that the business reversals experienced by the Landoil Group in connection with its various
construction and other projects in the Middle East and elsewhere were due, firstly, to the inability of
the Landoil Group to collect its contract receivables from such projects due to the reasons specified
in the sixth "whereas" clause, and, secondly, due to the non-payment of its insurance claim. In light
of these specific admissions, there is no need to speculate why the other corporations of de Venecia
were not made parties to the Deed of Assignment.
The dissent likewise posits the highly stretched submission that there is a prima facie showing that
the "assets of the defendants in the said eleven (11) corporations were not necessarily obtained
through or as a consequence of the acts or transactions described in subparagraphs (a) to (f), par.
11 of the Expanded Complaint but probablythrough "the other devices, schemes or strategems." This
submission of a prima facie showing self-destructs for the factual basis given for its support is a
mere guesswork i.e., that probably the aforementioned assets were obtained through other
devices, schemes or strategems. Moreover, we are dealing with a petition for certiorari, where it may
not be proper for this Court, concededly not a trier of fact, to rule about the existence of a prima
facie case. To be sure, the facts of the case were not fully developed, for petitioner's Expanded
Complaint was dismissed on the basis of private respondents' motion to dismiss.
Additionally, the dissent urges that the petitioner's admissions ". . . do not by themselves clear the
Board of Directors or the officers of the Philguarantee from any liability which could have arisen from
the grant of the guaranty facility." The given reason is that "private respondents were not sued as
directors or officers of a private corporation, but as government officials who under the Constitution
were obliged to serve with the highest degree of responsibility, integrity, loyalty and efficiency and to
remain accountable to the people." With due deference this view that respondents Bondoc and
company were not sued as members of the Board of PHILGUARANTEE but as public officials is
simply irreconcilable with the allegations in the Expanded Complaint of the petitioner, viz:
xxx xxx xxx
5. Defendants ROSENDO D. BONDOC was the President of the Philippine Export
and Foreign Loan Guarantee Corporation (Philguarantee) while Defendants CESAR
E. A. VIRATA, RUBEN ANCHETA, JAIME C. LAYA, PLACIDO MAPA, JR.,
ROBERTO ONGPIN, and CESAR C. ZALAMEA were the members of its Board of
Directors.
xxx xxx xxx
V
SPECIFIC AVERMENTS
OF DEFENDANTS' ILLEGAL ACTS

xxx xxx xxx


(b) To finance his huge domestic and overseas operations, Defendant Jose de
Venecia, acting through the Land Oil Group, borrowed enormous amounts in foreign
currency denominated loans from several syndicates of international banks, such as,
but not limited to, Arab Banking Corporation, Ahli Bank of Kuwait, Credit Swisse First
of Boston, Saudi Cairo Bank, Mellon Bank and the Bank of Montreal. In view of the
magnitude of the loans and the project risks involved, the banks required that their
loans be fully covered by the absolute and unconditional guarantee of the
Government of the Republic of the Philippines.
(c) Accordingly, Defendant Jose de Venecia applied for Philippine Government
guarantee from the Philippine Export and Foreign Loan Guarantee Corporation
(Philguarantee), a government-owned and controlled corporation organized to
provide Philippine Government guarantees, and, with the active collaboration of
Defendants Rosendo D. Bondoc, who was then the President of the Philguarantee
and the members of its Board of Directors, Defendants Cesar E. A. Virata, Ruben
Ancheta, Jaime C. Laya, Placido Mapa, Jr., Roberto Ongpin and Cesar C. Zalamea
was granted full Philippine government guarantee coverage;
(d) Defendant Jose de Venecia misused the proceeds of the loans by diverting them
to other uses and/or appropriation, then for his own personal benefit using for this
purpose a string of local and overseas banks, such as, but not limited to, PNB (New
York), PNB (Buendia Branch), PCTB (Makati Branch), Swiss Banking Corp. of
Hongkong, and the Hongkong and Shanghai Banking Corp. in Hongkong, and in an
effect to hide his complicity in the diversion, refused to submit regular accounting and
reports, all in violation of the provisions of the loan and guarantee agreements;
(e) Notwithstanding the aforesaid repeated violations, Philguarantee, with the active
collaboration of Defendants Rosendo D. Bondoc, Cesar E. A. Virata, Ruben Ancheta,
Jaime C. Laya, Placido Mapa, Jr., Roberto Ongpin and Cesar C. Zalamea, continued
to provide financial assistance to the companies and controlled by Defendant Jose
de Venecia. (Emphasis supplied).
There cannot be any iota of doubt that said respondents were sued as members of the Board of
PHILGUARANTEE and not as public officials. Indeed, if they were able to guaranty the foreign loans
of petitioner it was because they were members of the Board of PHILGUARANTEE and for no other
reason. But even grantingarguendo that these respondents were sued as public officials, we cannot
perceive how they could be charged with betrayal of their trust considering again petitioner's
admission that the guarantee facilities were extended in the "ordinary and regular course of
business."
Petitioner further contends that the emerging rule in the United States is that the release of one
tortfeasor does not automatically result in the release of the other tortfeasors, hence, the case
against the private respondents should not be dismissed even if it had consented to the dismissal of
the case against de Venecia, Jr. We fail to see how the principles of tort can apply to the case at
bench. Civil Case No. 0020 can hardly be classified as a tort case for, as petitioner itself labels its
complaint, it is one for reconveyance, reversion, accounting, restitution and damages. Petitioner has
never taken the stance that its cause of action is predicated on tort.
But even if we apply the principles of tort to the case at bench, we still affirm the ruling of the
respondent court that the complaint against private respondents as former directors of

PHILGUARANTEE should be dismissed. It is true that in Zenith Radio Corp. v. Hazeltine Research,
Inc., 401 US 321, 91 S. Ct. 795, the US Supreme Court held that "a party releases only those other
parties whom he intends to release." Nonetheless, the ruling should be interpreted in light of the text
of the release document executed by Zenith, viz:
To All To Whom These Presents Shall Come Or May Concern, Greeting: Know ye,
That Zenith Radio Corporation and The Rauland Corporation, each a corporation
organized and existing under and by virtue of the laws of the State of Illinois, for and
in consideration of the sum of One Dollar ($1.00) lawful money of the United States
of America and other good and valuable consideration, to them in hand paid by . . .
the receipt whereof is hereby acknowledged, have each remised, released and
forever discharged, and by these presents does each for itself and its respective
subsidiaries, successors and assigns remise, release and forever discharge the
said . . . and its subsidiaries and their respective successors and assigns of and from
all, and all manner of action and actions, cause and causes of action, suits, debts,
dues, sums of money, accounts, reckoning, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, extents, executions, claims and demands whatsoever, in law, in
admiralty, or in equity, which against
said . . ., its subsidiaries and their respective successors and assigns, said Zenith
Radio Corporation and the Rauland Corporation and each of them ever had, now has
or which each of them and their respective subsidiaries, successors and assigns,
hereafter can, shall or may have for, upon or by reason of any matter, cause or thing
whatsoever from the beginning of the world to the day of the date of these presents,
not including however, claims, if any, for unpaid balances on any goods sold and
delivered.
"Insert
"Radio Corporation of America", or
"General Electric Company," or
"Western Electric Company."
"This release may not be changed orally." 1
It is clear from the text of this release document in Zenith that the release was made in exchange for
a valuable consideration, thus, in satisfaction of Zenith's claim. In the case at bench, petitioner
released de Venecia, Jr. and some of his companies not because its claim has already been
satisfied by a sufficient consideration, but because of the fact that it could not establish its cause of
action against them. Petitioner's investigation showed that de Venecia, Jr., was not a crony of former
President Marcos and that he obtained the guarantees to his foreign loans in the regular and
ordinary course of business. In plain language, petitioner was convinced that de Venecia, Jr., and
company did not commit any actionable wrong, including any tortious act. It ought to follow that the
complaint against the respondents Bondoc and company for extending the said guarantees in favor
of de Venecia, Jr., cannot also be pursued any further. The complaint against de Venecia, Jr., and
these respondents are inseparable, especially because petitioner relied on the theory of conspiracy.
In any event, the rule with respect to the effect of release of one tortfeasor on other tortfeasors is still
in a state of fluctuation even in the United States. Thus, the 2nd Restatement of the Law on Torts
states:

Statutes. About half of the states have now passed statutes covering the matter.
They change the early common law with varying positions, but a substantial number
provide that neither a release nor a covenant not to sue discharges the other
tortfeasor unless its terms so provide. This is the provision in both the 1955 Uniform
Contribution Among Tortfeasors Act and the Uniform Comparative Fault Act.
Present status. States may now be classed as follows:
(1) A release amounts to a complete discharge, no matter what language is used.
(2) An instrument in the form of a release discharges all tortfeasors; a covenant not
to sue does not.
(3) The intent is controlling, irrespective of the language sometimes with a
rebuttable presumption either for or against discharge of the other tortfeasor.
(4) A release of one tortfeasor does not discharge the other unless it so provides.
There is frequent change in the alignment of the states, usually in the direction
toward classification.
Next, petitioner argues that the respondent court gravely abused its discretion when it held that de
Venecia, Jr., was an indispensable party; hence, his exclusion in the Expanded Complaint ought to
result in the dismissal of the same Complaint against the private respondents. The argument has
merit considering that the case can be decided without impleading de Venecia, Jr. Be that as it may,
this ruling is not enough reason to completely reverse the respondent court. As discussed above, the
petitioner dropped its cause of action in its Expanded Complaint by signing the said Deed of
Assignment. It has precluded itself from further pursuing its complaint not only against de Venecia,
Jr., but also against respondents Bondoc and company who served as former directors of
PHILGUARANTEE.
We now come to the submission of petitioner that the dismissal of the complaint against the
respondents Marcoses ordered by the respondent court is a grave abuse of discretion. We agree
that the Marcoses should be treated differently from de Venecia, Jr., and the respondents Bondoc
and company. For in the aforementioned Deed of Assignment, the petitioner only recognized the lack
of culpability of de Venecia, Jr., and by necessary inference, the respondents Bondoc and company.
In contrast, however, the said Deed did not exculpate the Marcoses, but on the contrary, inculpated
them. More specifically, the Deed alleged that former President Marcos "by himself and/or through
his designated nominees or cronies, owns approximately 45% of the outstanding capital stock of
Landoil, and through Landoil, a proportionate portion of the outstanding capital stock of each of the
other companies of the Landoil Group". According to the same Deed, the former President and his
cronies "coveted the Landoil groups and caused the same to betaken over by his (referring the
Marcos) agents and business associates . . .". It was for this reason that in the same Deed, de
Venecia, Jr., agreed to surrender to petitioner all the Marcoses' shares in the Landoil group of
companies and to cooperate in the prosecution of any case to be filed against the Marcoses. In fine,
the Deed of Assignment leaves it crystal clear that petitioner has not surrendered its cause of action
against the Marcoses as it did with respect to the respondents Bondoc and company.
One final point. The dismissal of the Complaint against Bondoc and company is compelled by the
equal protection clause of the Constitution. De Venecia, Jr., and the respondents Bondoc and
company are similarly situated. Respondent Bondoc, et al. were included in the Complaint only
because they allegedly gave unwarranted favors to de Venecia, Jr., in guaranteeing the latter's
foreign loans. When petitioner admitted that no undue favor was granted to de Venecia, Jr. in the

grant of such guaranty facilities and dismissed its complaint against him, petitioner cannot avoid its
duty of dismissing its complaint against respondents Bondoc and company. To give a more favored
treatment to de Venecia, Jr., when the parties are equally situated is to indulge in invidious
discrimination.
IN VIEW WHEREOF, the resolutions dated November 29, 1989 and March 9, 1990 of the
respondent court are affirmed with the modification that the Expanded Complaint against the
respondents Marcoses in Civil Case
No. 0020 is reinstated and ordered to be remanded to the respondent court for further proceedings.
SO ORDERED.
Feliciano, Bidin, Regalado, Nocon, Bellosillo, Melo, Vitug and Kapunan, JJ., concur.
Narvasa, C.J., Cruz, Romero and Quiason, JJ., took no part.

Separate Opinions

DAVIDE, JR., J., dissenting:


I respectfully submit that the respondent Sandiganbayan committed grave abuse of discretion in
promulgating the challenged resolutions. I am, therefore, unable to concur with the majority opinion
except insofar as it orders the reinstatement of the Expanded Complaint in Civil Case No. 0020
against the Marcoses.
The principal issue in this case is whether the dismissal by the Sandiganbayan of Civil Case No.
0020 as against defendant Jose De Venecia, by virtue of a Deed of Assignment executed between
the Presidential Commission on Good Government (PCGG) and seven corporations belonging to the
Landoil Group, should likewise inure to the benefit of De Venecia's co-defendants. The
Sandiganbayan thought that it should and dismissed the case against the co-defendants. The
petitioner thinks otherwise and submits that the Sandiganbayan acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in so doing.
The material operative facts and procedural antecedents generative of this controversy are not
disputed.
The Petitioner, represented by the PCGG, filed on 27 July 1987 with the Sandiganbayan a complaint
for Reconveyance, Reversion, Accounting, Restitution and Damages against JOSE DE VENECIA,
JR., FERDINAND E. MARCOS, IMELDA R. MARCOS, ROSENDO D. BONDOC, CESAR E. A.
VIRATA, RUBEN ANCHETA, JAIME C. LAYA, PLACIDO MAPA, JR., ROBERTO ONGPIN and
CESAR C. ZALAMEA. 1 The complaint was docketed as Civil Case No. 0020. Upon prior leave of the
Sandiganbayan, the Petitioner filed on 25 January 1988 an Expanded Complaint, 2the pertinent portions of
which read as follows:

IV
GENERAL AVERMENTS
OF
DEFENDANTS' ILLEGAL ACTS
8. From the early years of his presidency, Defendant Ferdinand E. Marcos took
undue advantage of his powers as President. All throughout the period from
September 21, 1972 to February 25, 1986, he gravely abused his powers under
martial law and ruled as Dictator under the 1973 Marcos promulgated Constitution.
Defendant Ferdinand E. Marcos, together with other Defendants, acting singly or
collectively, and/or in unlawful concert with one another, in flagrant breach of public
trust and of their fiduciary obligations as public officers, with gross and scandalous
abuse of right and power and in brazen violation of the Constitution and laws of the
Philippines embarked upon a systematic plan to accumulate ill-gotten wealth. Among
others, in furtherance of said plan and acting in unlawful concert with one another
and with gross abuse of power and authority, Defendant Ferdinand E. Marcos and
Imelda R. Marcos:
(a) awarded contracts with the Government to their relatives,
business associates, dummies, nominees, agents or persons who
were beholden to said Defendants, under terms and conditions
grossly and manifestly disadvantageous to the government;
(b) misappropriated, embezzled and/or converted to their own use
funds of Government financial institutions;
(c) engaged in other illegal and improper acts and practices designed
to defraud Plaintiffs and the Filipino people, or otherwise
misappropriated and converted to their own use, benefit and
enrichment the lawful patrimony and revenues of Plaintiff and the
Filipino people.
9. Among the assets acquired by Defendants in the manner above-described and
discovered by the Commission in the exercise of its official responsibilities are funds
and other property listed in Annex "A" hereof and made an integral part of this
Complaint.
10. Defendants, acting singly or collectively, and/or in unlawful concert with one
another, for the purpose of preventing disclosure and avoiding discovery of their
unmitigated plunder of the National Treasury and of their other illegal acts, and
employing the services of prominent lawyers, accountants, financial experts,
businessman [sic] and other persons, deposited, kept and invested funds, securities
and other assets in various banks, financial institutions, trust or investment
companies and with persons here and abroad.
V
SPECIFIC AVERMENTS OF
DEFENDANTS' ILLEGAL ACTS

11. Defendant Jose de Venecia, Jr. taking undue advantage of his relationship,
influence and connection with Defendants Ferdinand E. Marcos and Imelda R.
Marcos, acting by himself and/or in active collaboration with the other Defendants,
embarked upon devices, schemes and strategems to unjustly enrich themselves at
the expense of Plaintiff and the Filipino people, among others:
(a) Organized and headed the Land Oil Group, a big business
conglomerate engaged in a wide range of economic activity, such as
petroleum exploration and engineering, port management and
operation, and other services. The Land Oil Group, more particularly,
the Land Oil Resources Corporation, its parent company, and its
major subsidiaries, the Philippine-Singapore Ports Corporation, the
Greater Manila Land Corporation,Construction Consortium, Inc.
and the Philippine Hospitals and Health Services, had operations in
the Philippines and abroad, particularly, in the Middle East;
(b) To finance his huge domestic and overseas operations, Defendant
Jose de Venecia, acting through the Land Oil Group, borrowed
enormous amounts in foreign currency denominated loans from
several syndicates of international banks, such as, but not limited to,
Arab Banking Corporation, Ahli Bank of Kuwait, Credit Suisse, First of
Boston's, Saudi Cairo Bank, Mellon Bank and the Bank of Montreal.
In view of the magnitude of the loans and the project risks involved,
the banks required that their loans be fully covered by the absolute
and unconditional guarantee of the Government of the Republic of
the Philippines;
(c) Accordingly, Defendant Jose de Venecia applied for Philippine
Government guarantee from the Philippine Export and Foreign Loan
Guarantee Corporation (Philguarantee), a government-owned and
controlled corporation organized to provide Philippine Government
guarantees, and, with the active collaboration of Defendants
Rosendo D. Bondoc, who was then the President of Philguarantee
and the members of its Board of Directors, Defendants Cesar E. A.
Virata, Ruben Ancheta, Jaime C. Laya, Placido Mapa, Jr., Roberto
Ongpin and Cesar C. Zalamea was granted full Philippine
Government guarantee coverage;
(d) Defendant Jose de Venecia misused the proceeds of the loans by
diverting them to other uses and/or appropriation, then for his own
personal benefit using for this purpose a string of local and overseas
banks, such as, but not limited to, PNB (New York), PNB (Buendia
Branch), PCTB (Makati Branch), Swiss Banking Corp. of Hongkong,
and the Hongkong and Shanghai Banking Corp. in Hongkong, and in
an effort to hide his complicity in the diversion, refused to submit
regular accounting and reports, all in violation of the provisions of the
loan and guarantee agreements;
(e) Notwithstanding the aforesaid repeated violations Philguarantee,
with the active collaboration of Defendants Rosendo D. Bondoc,
Cesar E. A. Virata, Ruben Ancheta, Jaime C. Laya, Placido Mapa, Jr.,
Roberto Ongpin and Cesar C. Zalamea, continued to provide

financial assistance to the companies owned and controlled by


Defendant Jose de Venecia;
(f) As a result of gross mismanagement and wanton diversion of the
loans, the major operations of the Land Oil Group collapsed, Land Oil
defaulted in the payment of its maturing principal and interests
amortization and, like the man holding the proverbial empty bag,
Philguarantee had to advance on its guarantee using for this purpose
multi-millions of pesos in scarce government and taxpayers' money,
resulting in grave and irreparable damage to Plaintiff and to the entire
Filipino people.
12. The acts of Defendants, singly or collectively, and/or in unlawful concert with one
another, constitute gross abuse of official position and authority, flagrant breach of
public trust and fiduciary obligations, brazen abuse of right and power, unjust
enrichment, violation of the Constitution and laws of the Republic of the Philippines,
to the grave and irreparable damage of Plaintiff and the Filipino people.
VI
CAUSE OF ACTION
13. First Cause of Action: ABUSE OF RIGHT AND POWER (a) Defendants, in
perpetrating the unlawful acts described above, committed abuse of right and power
which caused untold misery, suffering and damage to Plaintiff. Defendants violated,
among others, Articles 19, 20 and 21 of the Civil Code of the Philippines;
(b) As a result of the foregoing acts, Defendants acquired title to and
beneficial interests in funds and other property and concealed such
title, funds and interests through the use of relatives, business
associates, nominees, agents or dummies. Defendants are,
therefore, jointly and severally, liable to Plaintiff to return and
reconvey all such funds and other property unlawfully acquired; or
alternatively, to pay Plaintiff, jointly and severally, by way of indemnity,
the damage cause to Plaintiff equivalent to the amount of such funds
and the value of other property not returned or restored to Plaintiff,
plus interest thereon from the date of unlawful acquisition until full
payment.
14. Second Cause of Action: UNJUST ENRICHMENT Defendants illegally
accumulated funds and other property in violation of the laws of the Philippines and
in breach of their official functions and fiduciary obligations. Defendants, therefore,
have unjustly enriched themselves to the grave and irreparable damage and
prejudice of Plaintiff. Defendants have an obligation at law, independently of breach
of trust and abuse of right and power and; as an alternative, to jointly and severally
return to Plaintiff such funds and other property with which Defendants, in gross and
evident bad faith, have unjustly enriched themselves or, in default thereof, restore to
Plaintiff the amount of such funds and the value of the other property including those
which may have been wasted, and/or lost, with interest thereon from the date of
unlawful acquisition until full payment.

15. Third Cause of Action: BREACH OF TRUST A public office is a public trust. By
committing all the acts described above, Defendants repeatedly breached public trust
and the law, making them jointly and severally liable to Plaintiff. The funds and other
property acquired by Defendants as a result of their breach of public trust are
deemed to have been acquired for the Benefit of Plaintiff and are, therefore,
impressed with constructive trust in favor of Plaintiff and the Filipino people.
16. Fourth Cause of Action: ACCOUNTING The Commission, acting pursuant to
the provisions of applicable law, respectfully maintains that Defendants, acting singly
or collectively, and/or in unlawful concert with one another, acquired funds, assets
and property during the incumbency of Defendant public officers, or while acting in
unlawful concert with public officers, manifestly out of proportion to their salaries, to
their other lawful income and income from legitimately acquired property.
Consequently, they are required to show to the satisfaction of this Honorable Court
that they have lawfully acquired all such funds, assets and property which are in
excess of their legal net income, and for this Honorable Court to decree that the
Defendants are under obligation to account to Plaintiff with respect to all legal or
beneficial interests in funds, properties and assets of whatever kind and wherever
located in excess of their lawful earnings.
17. Fifth Cause of Action: LIABILITY FOR DAMAGES (a) By reason of the
unlawful acts set forth above, Plaintiff and the Filipino people have suffered actual
damages in an amount representing the pecuniary loss sustained by the latter as a
result of Defendants' unlawful acts, the approximate value and interest on which,
from the time of their wrongful acquisition, plus expenses which Plaintiff has been
compelled to incur and shall continue to incur in its effort to recover Defendants' illgotten wealth all over the world. Defendants are, therefore, jointly and severally liable
to Plaintiff for actual damages and for expenses incurred in the recovery of
Defendants' ill-gotten wealth.
(b) As a result of Defendants' unlawful, malicious, immoral and
wanton acts described above, Plaintiff and the Filipino people had
painfully endured and suffered for more than twenty long years, and
still continue to endure and suffer anguish, fright, sleepless nights,
serious anxiety, wounded feelings and moral shock, as well as
besmirched reputation and social humiliation before the international
community, for which Defendants are jointly and severally liable to
Plaintiff and the Filipino people for moral damages.
(c) In addition, Plaintiff and the Filipino people are entitled to
temperate damages for their suffering which, by their very nature, are
incapable of pecuniary estimation, but which this Honorable Court
may determine in the exercise of its sound discretion.
(d) Defendants, by reason of the above described unlawful acts, have
violated and invaded the inalienable right of Plaintiff and the Filipino
people to a fair and decent way of life befitting a Nation with rich
natural and human resources. This basic, and fundamental right of
Plaintiff and the Filipino people should be recognized and vindicated
by awarding nominal damages in an amount to be determined by the
Honorable Court in the exercise of its sound discretion.

(e) By way of example and correction for the public good and in order
to ensure that Defendants' unlawful, malicious, immoral and wanton
acts are not repeated, said Defendants are jointly and severally liable
to Plaintiff for exemplary damages. 3
The Annex "A" mentioned in paragraph 9 of the Expanded Complaint read as follows:
ASSETS AND OTHER PROPERTY OF
JOSE DE VENECIA, JR.
PERSONAL PROPERTY
A. SHARES OF STOCK IN:
1. Landoil Resources Corporation
2. Pacific Asia Builders Corporation
3. Greater Manila Land Corporation
4. Construction Consortium, Inc.
5. Asian Water and Sewer System, Inc.
6. International Medical Group, Inc.
7. Philippine Hospitals and Health Services, Inc.
8. Global Electrification Systems, Inc.
9. Philippine-Singapore Ports Corporation
10. Asiaphil Fisheries Corporation
11. Transnational Systems, Inc.
12. International Agribusiness Corporation
13. IOMC Philippines, Inc.
14. International Centers for Technology Transfer, Inc.
15. Landoil Trading Corporation
16. Multiland Insurance Agency, Inc.
17. Freeport Security Agency, Inc.
18. International Caterer's, Inc.
BANK ACCOUNTS:
1. Frozen Bank Accounts and other Assets of Placido Mapa, Jr.
2. Frozen Bank Accounts and other Assets of Cesar C. Zalamea
AND ALL OTHER ASSETS OF ALL DEFENDANTS SEQUESTERED AND/OR
FROZEN BY THE COMMISSION PURSUANT TO EXECUTIVE ORDER NOS. 1
AND 2. 4
The five (5) volumes of the original records of Civil Case No. 0020 readily disclose that the case has
undergone unnecessary delays through the filing of motions for extension of time to file answer or
other responsive pleading, motions for bill of particulars and motions to dismiss, which were followed
by exchanges of related pleadings such as opposition, reply to opposition and others. These motions
for bill of particulars or motions to dismiss were denied by the Sandiganbayan. Thereafter, separate
answers were successively filed by defendants (now private respondents) Ongpin, Laya, Ancheta,
Bondoc, Mapa, Jr., Virata and Zalamea. These answers were filed between 21 January 1988 and 10
August 1989. 5

Alias summons were served upon Ferdinand E. Marcos and Imelda R. Marcos on 10 November
1988 at 2338 Makiki Heights, Honolulu, Hawaii. 6 In its Resolution of 6 April 1989, 7 the Sandiganbayan
declared them in default in Civil Case No. 0020 and other cases.
On 30 June 1989, defendant De Venecia filed a motion to dismiss Civil Case No. 0020 insofar as he
is concerned in view of a Deed of Assignment executed on 19 July 1988 between Landoil Resources
Corporation, including its subsidiaries, and the Petitioner, through the PCGG as represented by its
Acting Chairman, Hon. Adolfo S. Azcuna. 8 On 16 July 1989, De Venecia filed an amended motion to
dismiss 9 which the Petitioner opposed on the ground that De Venecia is not a party to the Deed of
Assignment and that the said deed is still subject to the approval of the PCGG. 10
On 8 September 1989, the Sandiganbayan promulgated a Resolution dated 7 September 1989
granting De Venecia's amended motion to dismiss and dismissing Civil Case No. 0020 as against
him. 11 As a consequence thereof, Ongpin filed on 11 September 1989 a motion for a hearing on his
affirmative defenses. 12 On 12 September 1989, Zalamea filed a motion to dismiss on the ground that
there is no more legal and factual basis to proceed against him in view of the dismissal of the case as
against De Venecia. 13 He argued that the latter is an indispensable party; hence, the dismissal of the
case against De Venecia should result in the dismissal of the case against the other co-defendants
pursuant to Section 7, Rule 3 of the Rules of Court. Separate motions to dismiss on the same ground as
that of Zalamea's were successively filed by Ongpin, Ancheta, Mapa, Jr. and Laya. 14 Laya filed his motion
on 28 September 1989.
In the meantime, the Petitioner filed on 28 September 1989 a motion to reconsider the Resolution of
7 September 1989. 15 However, on 17 October 1989, counsel for De Venecia submitted to the
Sandiganbayan a letter of the PCGG dated 16 October 1989 and addressed to the Solicitor General
requesting the latter to withdraw the motion for reconsideration. 16
The Petitioner filed on 17 October 1989 a Consolidated Opposition 17 to the motions to dismiss
wherein it alleged the prematurity of the filing of the motions to dismiss since it had filed a motion to
reconsider the 8 September 1989 Resolution dismissing the case as against De Venecia.
On 28 September 1989, defendant Ferdinand E. Marcos died and on 10 November 1989, the
Petitioner filed a motion for his substitution by his heirs, viz., Imelda R. Marcos, Ferdinand Marcos,
Jr., Irene Marcos-Araneta and Imee Marcos-Manotoc. 18 This was granted by the Sandiganbayan in its
Resolution of 16 November 1989. 19
On 4 December 1989, the Sandiganbayan (Second Division) promulgated a Resolution, dated 29
November 1989, dismissing Civil Case No. 0020 as against De Venecia's co-defendants, the private
respondents in the instant
case. 20 Petitioner's motion of 27 December 1989 21 and supplemental motion of 25 January 1990 22 to
reconsider the said Resolution were denied in the Sandiganbayan's Resolution of 9 March 1990. 23 These
Resolutions are now challenged in this petition which was filed on 24 April 1990. 24 Petitioner claims that
these were issued by the respondent Sandiganbayan with grave abuse of discretion amounting to lack or
excess of jurisdiction. In support thereof, the Petitioner contends that:
a) The Deed of Assignment executed on July 19, 1989 [should be 1988] by Landoil in
favor of the petitioner should not be made to benefit De Venecia's co-defendants;
b) Defendant De Venecia is not an indispensable party in the prosecution of the case
against his co-defendants;

c) The liabilities of De Venecia's co-defendants arose not only from their alleged
conspiracy with defendant De Venecia but also by virtue of their individual or
collective actions done in unlawful concert with one another;
d) The causes of action against defendants Ferdinand E. Marcos and Imelda R.
Marcos have nothing to do with the Deed of Assignment executed by Landoil in favor
of the petitioner; and
e) The parties manifestly intended to exclude defendant De Venecia's co-defendants
from the benefit of the Deed of Assignment in question. 25
I find merit in this petition.
The Deed of Assignment, 26 upon which the dismissal of Civil Case
No. 0020 as against De Venecia is based, was executed between the (1) Landoil Resources Corporation,
(2) Philippine Singapore Ports Corporation, (3) Asian Water and Sewer System, Inc., (4) Construction
Consortium, Inc., (5) Pacific Asia Builders and Developers, Inc., (6) Philippine Hospitals and Health
Service, Inc. and (7) Greater Manila Land Corporation, as ASSIGNORS, and represented therein by
Ambrosio C. Collado as President of the Landoil Resources Corporation and attorney-in-fact for the
others, and the Republic of the Philippines, represented by the PCGG through its then Acting Chairman,
Hon. Adolfo S. Azcuna, as the ASSIGNEE. As described therein, the former "constitute a group of related
companies" sometimes referred to as the "Landoil Group," with the Landoil Resources Corporation,
"organized by or at the initiative of Jose de Venecia," as their "flagship." These ASSIGNORS are but
seven (7) of the eighteen (18) corporations enumerated in Annex "A" of the Expanded Complaint in Civil
Case No. 0020. 27 Not parties to the deed of assignment are International Medical Group, Inc.; Global
Electrification Systems, Inc.; Asiaphil Fisheries Corporation; Transnational Systems, Inc.; International
Agribusiness Corporation; IOMC Philippines, Inc.; International Centers for Technology Transfer, Inc.;
Landoil Trading Corporation; Multiland Insurance Agency, Inc.; Freeport Security Agency, Inc.; and
International Caterer's, Incorporated. Pertinent portions of the recital part of the deed of assignment read
as follows:
xxx xxx xxx
(2) Immediately after the organization of the Presidential Commission on Good
Government (PCGG) in February 1986, the Landoil Group, acting through Landoil
itself, asked the PCGG to place the Landoil Group under sequestration for the
reason that former President Ferdinand E. Marcos, by himself and/or through his
designated nominees or cronies, owns approximately 45% of the outstanding capital
stock of Landoil, and through Landoil, a proportionate portion of the outstanding
capital stock of each of the other companies of the Landoil Group;
xxx xxx xxx
(7) To negate the imputation that the Landoil Group are Marcos "crony" companions,
and that Jose de Venecia and other officers of the Landoil Group are Marcos
"cronies," the Landoil Group submitted proof tending to show that they were in fact
the victims rather than the "cronies" of Marcos who, in 1977, coveted the Landoil
Group and caused the same to be taken over by his (Marcos') agents and business
associates for his (Marcos') benefit after the discovery of oil deposits off Palawan by
a consortium of oil exploration companies of which Landoil was a substantial
member, and the acquisition of Landoil, also in 1977, of a prime port operations
contract in Saudi Arabia with a value of US$350 million;

(8) After the establishment of the present Aquino Government, Philguarantee caused
an investigation to be undertaken as to (a) the background of the issuance of the
alleged "behest" guarantee facility in favor of the Landoil Group, and (b) the
management and operations of the Landoil Group, both in the Philippines and in the
Middle East. As a result of such investigation Philguarantee has satisfied itself (i) that
such guarantee facility was obtained in the ordinary and regular course of business,
and that no favor was accorded to the Landoil officers, in the grant of such guarantee
facility; and (ii) that the business reversals experienced by the Landoil Group in
connection with its various construction and other projects in the Middle East and
elsewhere were due, firstly, to the inability of the Landoil Group to collect its contract
receivables from such projects due to the reasons specified in the sixth "whereas"
clause, and, secondly, due to the non-payment of its insurance claim under the
insurance policy referred to in the succeeding (ninth) "whereas" clause. 28
Subject to certain conditions, the ASSIGNORS assumed the following obligations:
1.1. Upon the request of the Assignee, the Assignors (being the above-named
companies making up Landoil Group) shall immediately cause to be transferred to
the Assignee (or its nominee/s) all the shares of the capital stock of Landoil (up to
45% of the total outstanding issued and subscribed capital stock of Landoil) which
have or may hereafter be identified as belonging to Marcos (whether standing in his
name or the name [of] any of his nominee/s). . . .
1.2. Upon the effectiveness of this Agreement, the Assignors shall cause to be paid
to the Assignee, through PCGG, the amount of P13 million, which amount represents
a portion of Landoil's recovery from an arbitration proceeding which Landoil had
caused to be instituted in London against the Lloyd's Syndicate of Insurance
Underwriters;
1.3. Effective immediately, the Assignors hereby assign, transfer and convey to the
PCGG: (a) the entire proceeds of the Assignors' claims in the New York case which
Landoil has instituted against the insurance brokers, namely, the firm of Alexander
and Alexander, and (b) the entire proceeds of the Assignors' contract receivables
from all the Assignors' construction and other projects in the Middle East and
elsewhere, net of any amount required for the settlement of any compulsory statutory
liens for unpaid wages or salaries and ordinary administrative overhead and costs,
and attorney's fees and expenses of litigation.
xxx xxx xxx
1.5. The Assignors, and or their respective officers, hereby undertake to fully
cooperate with the Philippine Government, acting through the PCGG or any other
governmental agency, in the prosecution of any case which the Philippine
Government may cause to be filed against former President Marcos and his cronies,
either by furnishing testimony in any such case, or by providing information in any
investigation undertaken in contemplation of the filing of such case, whether in the
Philippines or elsewhere, as may be required or directed by the PCGG, or by other
appropriate governmental agency from time to time. 29
In consideration of the ASSIGNORS' undertakings, the ASSIGNEE, viz., the Republic of the
Philippines, agreed:

2.1. . . . to cause the sequestration order issued against Landoil to be lifted upon the
effectiveness of this Agreement. In addition, the Assignee shall cause the dismissal,
without prejudice, of Civil Case No. 0020, entitled "Republic of the Philippines vs.
Jose de Venecia, Jr., et al.," in so far as the Assignors and Jose de Venecia are
concerned: provided, however, that such case shall be deemed automatically
reinstated in the event of non-compliance by any of the Assignors with any of its
obligations and undertakings hereunder. 30
The dismissal by the Sandiganbayan of Civil Case No. 0020 as against De Venecia's co-defendants
is anchored on the following grounds:
a) The dismissal of the case as against de Venecia pursuant to the Resolution of 8
September 1989, "which . . . has now become final and executory after the plaintiff
withdrew its 'Motion for Reconsideration,'" "in effect, removed an indispensable party
from this case." De Venecia is an indispensable party because his involvement in the
transactions, together with the Landoil Group, which are described in paragraph 11 of
the Expanded Complaint, "constitute and/or comprise the very essence of the only
cause of action which is specifically averred in said Complaint, the other causes of
action alleged therein being premised on mere general averments." With the removal
of De Venecia from the case with the express conformity of the plaintiff, no judgment
can be rendered or liability enforced against the other defendants who are alleged to
have acted in conspiracy with him. 31
(2) The motions to dismiss filed by de Venecia's co-defendants may be treated as
motions for summary judgment because when an indispensable party "has . . . been
dropped from the complaint by reason of a compromise or amicable settlement which
practically negates the legal or factual basis for the principal cause of action, then
a fortiori, . . . the cause of action has become not only insufficient but in existent." The
"issues having been joined already . . ., there is nothing which could prevent defendants
from submitting the case for summary judgment." 32
(3) As to defendants Ferdinand E. Marcos and Imelda R. Marcos, although they were
declared in default, a "perusal of the General and Specific Averments of the Expanded
complaint, in relation to the causes of action described therein, will indubitably show that
above-named defendants' alleged liabilities are intimately intertwined and closely related
to the transactions subject matter of the compromise agreement between the PCGG and
defendant De Venecia. "Accordingly, the "compromise, . . . inures to, and benefits,
defendants spouses Marcoses and completely removes any legal or factual bases for
their retention as defendants in this case." 33

In its Resolution of 9 March 1990 34 denying the Petitioner's motion to reconsider the said dismissal, the
Sandiganbayan stressed that:
. . . the one and only cause of action set out in the Expanded Complaint appears in
paragraph 11 thereof, and outlined in detail under sub-paragraphs (a) and (f),
inclusive. The Compromise Agreement, as we had pointed out, not only removed De
Venecia as an indispensable party but also deprived the Expanded Complaint of any
and all factual or legal support for the sole cause of action set forth therein. 35
I cannot agree.
In the first place, the Sandiganbayan got itself entangled in a web of incorrect premises which,
unfortunately, became the bases for its conclusions. For one, it is not true that the Petitioner has only

one (1) cause of action as described in paragraph 11 of the Expanded Complaint. As could be
gathered from the introductory portion of said paragraph 11 under subheading V on Specific
Averments of Defendants' Illegal Acts, the acts or transactions enumerated in subparagraphs (a) to
(f) thereof are merely "among others." It reads:
11. Defendant Jose de Venecia, Jr., taking undue advantage of his relationship,
influence and connection with Defendants Ferdinand E. Marcos and Imelda
R. Marcos, acting by himself and/or in active collaboration with the other Defendants,
embarked upon devices, schemes and strategems to unjustly enrich themselves at
the expense of Plaintiff and the Filipino People, among others:
xxx xxx xxx
Among simply means "mingled with or in the same group or class" or "in or through the midst
of." 36Moreover, paragraph 8 thereof on General Averments states that:
. . . Defendant Ferdinand E. Marcos, together with other Defendants, acting singly or
collectively, and/or in unlawful concert with one another, in flagrant breach of public
trust and of their fiduciary obligations as public officers, with gross and scandalous
abuse of right and power and in brazen violation of the Constitution and laws of the
Philippines, embarked upon a systematic plan to accumulate ill-gotten wealth.
Among others, in furtherance of said plan and acting in unlawful concert with one
another and with gross abuse of power and authority, . . . .
and paragraph 9 states:
(9) Among the assets acquired by Defendants in the manner above-described and
discovered by the Commission in the exercise of its official responsibilities are funds
and other property listed in Annex "A" hereof and made an integral part of this
complaint.
Finally, paragraphs 13, 14, 15, 16 and 17 enumerate five (5) causes of action.
As earlier noted, of the eighteen (18) corporations enumerated in Annex "A" of the complaint, only
SEVEN (7) are parties to the Deed of Assignment as ASSIGNORS therein. Also listed in said Annex
"A" are (1) frozen bank accounts and other assets of defendant Placido E. Mapa, Jr., (2) frozen bank
accounts and other assets of defendant Cesar Zalamea, and (3) all other assets of all defendants
sequestered and/or frozen by the Commission pursuant to Executive Order Nos. 1 and 2. The
averments earlier mentioned and the deed of assignment, juxtaposed with Annex "A," show prima
facie that (a) the Petitioner did not intend to enter into any amicable settlement with the remaining
eleven (11) corporations or regarding the frozen assets listed in said Annex "A," and
(b) the assets of the defendants in the said eleven corporations were not necessarily obtained
through or as a consequence of the acts or transactions described in subparagraphs (a) to (f),
paragraph 11 of the Expanded Complaint, but probably through "the other devices, schemes or
strategems." Otherwise, these remaining corporations should have been made parties to the deed of
assignment. Inclusio unius est exclusio alterius.
For another, it is not true that De Venecia is the principal party either in the specific acts described in
subparagraphs (a) to (f), paragraph 11 of the Expanded Complaint or in the other "devices, schemes
or strategems." If, at all, there are principal party defendants in Civil Case No. 0020, then a reading
of the Expanded Complaint readily reveals that they are Ferdinand E. Marcos and Imelda R. Marcos.
Of course, there are allegations of conspiracy which, for purposes of the nature of the action

pursued, must be understood to be civil conspiracy, 37 as distinguished from conspiracy in criminal


law. 38
Nor is it true that De Venecia is an indispensable party with respect to the acts or transactions
subject of the causes of action. An indispensable party is defined as one without whom the action
cannot be finally determined, whose interest in the subject matter of the suit and in the relief sought
is so intertwined with that of the other parties that his legal presence as a party to the proceeding is
an absolute necessity. 39 No valid judgment can be rendered where an indispensable party is not
impleaded or brought before the court; 40 his non-inclusion in a case is a fatal defect and any judgment
rendered therein would be ineffective. 41
In the instant case, it is clear that De Venecia is not an indispensable party because a final
determination of the case can be had without his legal presence. Since the defendants in Civil Case
No. 0020 are sued for (a)collective or conspirational and (b) individual acts, it follows that the nature
of their corresponding obligations to the Petitioner could be joint and several as to the first and
individual or personal as to the second. And if they are solidarily liable, it cannot be successfully
maintained that De Venecia is an indispensable party. Article 1216 of the Civil code provides that:
The creditor may proceed against any one of the solidary debtors or some or all of
them simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the others, so long as
the debt had not been fully collected.
Hence, a solidary debtor is not an indispensable party. We held so categorically in Republic
vs. Sandiganbayan,42 a case which also involves an action for reconveyance, reversion, accounting,
restitution and damages filed with the Sandiganbayan against Alfredo (Bejo) Romualdez, Ferdinand E.
Marcos, Imelda R. Marcos, Jose P. Campos, Jr. and 45 other defendants. In the said case, we set aside
the challenged resolution of the Sandiganbayan denying a motion to drop defendant Campos, Jr. We
stated that since the Presidential Commission on Good Government had granted immunity to Jose Y.
Campos and his family, such immunity necessarily extended to movant Jose Campos, Jr., who is the son
of Jose Y. Campos. Inter alia, we noted:
The fact that Campos, Jr. and all the other defendants were charged solidarily in the
complaint does not make him an indispensable party. We have ruled in the case
of Operators Incorporated vs.American Biscuit Co., Inc., [154 SCRA 738 (1987)] that
"Solidarity does not make a solidary obligor an indispensable party in a suit filed by
the creditor." Article 1216 of the Civil Code says that the creditor "may proceed
against anyone of the solidary debtors or some or all of them simultaneously."
Even assuming for the sake of argument that De Venecia is indeed a principal party, still, based on a
principle of tort upon which the cause of action is also predicated, his release did not operate to
release the other tortfeasors. Under American jurisprudence three rules have developed which deal
with the question of whether the release of one joint tortfeasor releases other tortfeasors who are not
parties to or named in the release. The first is the ancient common-law rule that a release of one
joint tortfeasor releases all other parties jointly liable, regardless of the intent of the parties. The
second, otherwise known as the "First Restatement rule," states that a release of one co-conspirator
normally releases all others unless the plaintiff expressly reserves his rights against the others. The
third provides that the effect of the release upon co-conspirators shall be determined in accordance
with the intentions of the parties. In Zenith Radio Corp. vs. Hazeltine Research, Inc., 43 the Supreme
Court of the United States adopted the third rule thus:

We recently adopted the final rule giving effect to the intentions of the parties in Aro
Mfg. Co. vs.Convertible Top Co., supra, a patent infringement case. . . . We
concluded that a release, "which clearly intends to save the releasor's rights against
a past contributory infringer, does not automatically surrender those rights."
xxx xxx xxx
The straightforward rule is that a party releases only those other parties whom he
intends to release.
The Court observed that "[t]o adopt the ancient common-law rule would frustrate . . . partial
settlements, and thereby promote litigation, while adoption of the First Restatement rule would
create a trap for unwary plaintiffs' attorneys."
In the instant case, the release of De Venecia is clearly intended to apply only to him. There was,
evidently, no intent to spread the benefit to the other tortfeasors.
For still another reason, the "admissions" by the Petitioner in paragraph 8 of the deed of assignment
that the guaranty facility in favor of the Assignors "was obtained in the ordinary and regular course of
business," that " no favor was accorded to the Landoil officers in the grant" thereof and that the
business reversals experienced by the Landoil Group in connection with its various construction and
other projects were due to the special reasons therein enumerated are not equivalent to an
admission that De Venecia's
co-defendants incurred no liability whatsoever with respect thereto. That the facility was obtained in
such manner with no favor to the Landoil officers do not, by themselves, clear the Board of Directors
or the officers of the Philguarantee from any liability which could have arisen from the grant of the
guaranty facility. Private respondents were not sued as directors or officers of a private corporation,
but as government officials who under the Constitution were obliged to serve with the highest degree
of responsibility, integrity, loyalty, and efficiency and to remain accountable to the people. 44 Indeed, if
it were the intention of the parties in the deed of assignment to accord to the private respondents the
same benefit as that granted to De Venecia, they could have easily done so without loss of time or effort.
Better yet, the parties could have explicitly stipulated that, in consideration of the assignment made by the
Assignors, the Petitioner shall (a) lift the sequestration issued against Landoil and (b) dismiss Civil Case
No. 0020. It is evident from the deed of assignment that the only non-signatory thereto who is to be
benefited thereby is defendant De Venecia. That favor granted him is known as a stipulation pour
autrui under Article 1311 of the Civil Code as the Sandiganbayan correctly stated in its Resolution of 8
September 1989 granting De Venecia's amended motion to dismiss. 45 Under the said article, for such a
stipulation to be effective and binding it is necessary that the contracting parties "must have clearly and
deliberately conferred a favor upon a third person." 46 A "mere incidental benefit or interest of a person is
not sufficient." The deed of assignment in question fails to even remotely suggest such a grant in favor of
the private respondents, and for the Sandiganbayan to read into the document that which the parties
themselves have not even thought of would be to stipulate for the parties, which is beyond its power to do
so.
Moreover, these "admissions" are contained in the "whereas" clauses or in the recital part of the
Deed of Assignment and are inconsistent with the following provisions in the operative part thereof,
to wit: (1) the ASSIGNORS shall transfer to the ASSIGNEE all the capital shares of Landoil (up to
45% of the capital stock) identified as belonging to Marcos; (2) the ASSIGNORS shall fully cooperate
with the PCGG or any government agency in the prosecution of any case to be filed against Marcos
and his cronies; and (3) the dismissal of Civil Case No. 0020 against the ASSIGNORS and De
Venecia shall be without prejudice, and the case shall be deemed automatically reinstated in the
event of the ASSIGNORS' non-compliance with any of their obligations. These obligations are, in
fact, consistent with the 14th to 16th causes of action enumerated in the Expanded Complaint.

These "admissions" are merely embodied in the recital part of the deed. It is a settled rule in the
construction of contracts that in case of a conflict between the operative part of a contract and the
recitals thereof, the former will
prevail. 47 The recitals are but merely introductory and prefatory statements of a deed and are not an
essential part of the operating portions of the contract. They may be used as a guide in interpreting
ambiguous portions of the operative part, but cannot supersede the latter.
Finally, the Sandiganbayan's grave abuse of discretion became more pronounced insofar as the
challenged resolutions benefit defendant Ferdinand E. Marcos and Imelda R. Marcos. They are the
principal dramatis personae in Civil Case No. 0020, and the allegations in the Expanded Complaint
do not limit the causes of action against them to transactions involving Philguarantee which, if
proven, do not at all, by any standard, make them the least culpable. As a matter of fact, the
ASSIGNORS in the deed of assignment admit that approximately 45% of the outstanding capital
stock of the flagship corporation, Landoil Resources Corporation, and through the latter, "a
proportionate portion of the outstanding capital stock of the six other corporations" are owned by
defendant Ferdinand E. Marcos. Since the remaining eleven (11) corporations listed in Annex "A" of
the Expanded Complaint are not parties to the deed of assignment, the allegations with respect
thereto as against the Marcoses stand. It must, however, be stressed that, because of his death,
Ferdinand E. Marcos had been substituted in Civil Case No. 0020 by his heirs pursuant to the
Sandiganbayan's Resolution of 16 November 1989. Accordingly, he ceased to be a party and the
challenged resolutions are, insofar as he is concerned, ineffective. Be that as it may, the error
committed by the Sandiganbayan in granting him such unusual benefit compounded the
arbitrariness of the resolutions. Finally, as an additional indicium of such arbitrariness, although
under the deed of assignment the dismissal of the case against the Assignors and De Venecia was
to be "without prejudice," the challenged dismissal against the latter's co-defendants was without
qualification.
WHEREFORE, I vote to grant the petition and to set aside the challenged resolutions, with costs
against the private respondents.
Padilla, J., concurs.

# Separate Opinions
DAVIDE, JR., J., dissenting:
I respectfully submit that the respondent Sandiganbayan committed grave abuse of discretion in
promulgating the challenged resolutions. I am, therefore, unable to concur with the majority opinion
except insofar as it orders the reinstatement of the Expanded Complaint in Civil Case No. 0020
against the Marcoses.
The principal issue in this case is whether the dismissal by the Sandiganbayan of Civil Case No.
0020 as against defendant Jose De Venecia, by virtue of a Deed of Assignment executed between

the Presidential Commission on Good Government (PCGG) and seven corporations belonging to the
Landoil Group, should likewise inure to the benefit of De Venecia's co-defendants. The
Sandiganbayan thought that it should and dismissed the case against the co-defendants. The
petitioner thinks otherwise and submits that the Sandiganbayan acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in so doing.
The material operative facts and procedural antecedents generative of this controversy are not
disputed.
The Petitioner, represented by the PCGG, filed on 27 July 1987 with the Sandiganbayan a complaint
for Reconveyance, Reversion, Accounting, Restitution and Damages against JOSE DE VENECIA,
JR., FERDINAND E. MARCOS, IMELDA R. MARCOS, ROSENDO D. BONDOC, CESAR E. A.
VIRATA, RUBEN ANCHETA, JAIME C. LAYA, PLACIDO MAPA, JR., ROBERTO ONGPIN and
CESAR C. ZALAMEA. 1 The complaint was docketed as Civil Case No. 0020. Upon prior leave of the
Sandiganbayan, the Petitioner filed on 25 January 1988 an Expanded Complaint, 2the pertinent portions of
which read as follows:
IV
GENERAL AVERMENTS
OF
DEFENDANTS' ILLEGAL ACTS
8. From the early years of his presidency, Defendant Ferdinand E. Marcos took
undue advantage of his powers as President. All throughout the period from
September 21, 1972 to February 25, 1986, he gravely abused his powers under
martial law and ruled as Dictator under the 1973 Marcos promulgated Constitution.
Defendant Ferdinand E. Marcos, together with other Defendants, acting singly or
collectively, and/or in unlawful concert with one another, in flagrant breach of public
trust and of their fiduciary obligations as public officers, with gross and scandalous
abuse of right and power and in brazen violation of the Constitution and laws of the
Philippines embarked upon a systematic plan to accumulate ill-gotten wealth. Among
others, in furtherance of said plan and acting in unlawful concert with one another
and with gross abuse of power and authority, Defendant Ferdinand E. Marcos and
Imelda R. Marcos:
(a) awarded contracts with the Government to their relatives,
business associates, dummies, nominees, agents or persons who
were beholden to said Defendants, under terms and conditions
grossly and manifestly disadvantageous to the government;
(b) misappropriated, embezzled and/or converted to their own use
funds of Government financial institutions;
(c) engaged in other illegal and improper acts and practices designed
to defraud Plaintiffs and the Filipino people, or otherwise
misappropriated and converted to their own use, benefit and
enrichment the lawful patrimony and revenues of Plaintiff and the
Filipino people.
9. Among the assets acquired by Defendants in the manner above-described and
discovered by the Commission in the exercise of its official responsibilities are funds

and other property listed in Annex "A" hereof and made an integral part of this
Complaint.
10. Defendants, acting singly or collectively, and/or in unlawful concert with one
another, for the purpose of preventing disclosure and avoiding discovery of their
unmitigated plunder of the National Treasury and of their other illegal acts, and
employing the services of prominent lawyers, accountants, financial experts,
businessman [sic] and other persons, deposited, kept and invested funds, securities
and other assets in various banks, financial institutions, trust or investment
companies and with persons here and abroad.
V
SPECIFIC AVERMENTS OF
DEFENDANTS' ILLEGAL ACTS
11. Defendant Jose de Venecia, Jr. taking undue advantage of his relationship,
influence and connection with Defendants Ferdinand E. Marcos and Imelda R.
Marcos, acting by himself and/or in active collaboration with the other Defendants,
embarked upon devices, schemes and strategems to unjustly enrich themselves at
the expense of Plaintiff and the Filipino people, among others:
(a) Organized and headed the Land Oil Group, a big business
conglomerate engaged in a wide range of economic activity, such as
petroleum exploration and engineering, port management and
operation, and other services. The Land Oil Group, more particularly,
the Land Oil Resources Corporation, its parent company, and its
major subsidiaries, the Philippine-Singapore Ports Corporation, the
Greater Manila Land Corporation,Construction Consortium, Inc.
and the Philippine Hospitals and Health Services, had operations in
the Philippines and abroad, particularly, in the Middle East;
(b) To finance his huge domestic and overseas operations, Defendant
Jose de Venecia, acting through the Land Oil Group, borrowed
enormous amounts in foreign currency denominated loans from
several syndicates of international banks, such as, but not limited to,
Arab Banking Corporation, Ahli Bank of Kuwait, Credit Suisse, First of
Boston's, Saudi Cairo Bank, Mellon Bank and the Bank of Montreal.
In view of the magnitude of the loans and the project risks involved,
the banks required that their loans be fully covered by the absolute
and unconditional guarantee of the Government of the Republic of
the Philippines;
(c) Accordingly, Defendant Jose de Venecia applied for Philippine
Government guarantee from the Philippine Export and Foreign Loan
Guarantee Corporation (Philguarantee), a government-owned and
controlled corporation organized to provide Philippine Government
guarantees, and, with the active collaboration of Defendants
Rosendo D. Bondoc, who was then the President of Philguarantee
and the members of its Board of Directors, Defendants Cesar E. A.
Virata, Ruben Ancheta, Jaime C. Laya, Placido Mapa, Jr., Roberto

Ongpin and Cesar C. Zalamea was granted full Philippine


Government guarantee coverage;
(d) Defendant Jose de Venecia misused the proceeds of the loans by
diverting them to other uses and/or appropriation, then for his own
personal benefit using for this purpose a string of local and overseas
banks, such as, but not limited to, PNB (New York), PNB (Buendia
Branch), PCTB (Makati Branch), Swiss Banking Corp. of Hongkong,
and the Hongkong and Shanghai Banking Corp. in Hongkong, and in
an effort to hide his complicity in the diversion, refused to submit
regular accounting and reports, all in violation of the provisions of the
loan and guarantee agreements;
(e) Notwithstanding the aforesaid repeated violations Philguarantee,
with the active collaboration of Defendants Rosendo D. Bondoc,
Cesar E. A. Virata, Ruben Ancheta, Jaime C. Laya, Placido Mapa, Jr.,
Roberto Ongpin and Cesar C. Zalamea, continued to provide
financial assistance to the companies owned and controlled by
Defendant Jose de Venecia;
(f) As a result of gross mismanagement and wanton diversion of the
loans, the major operations of the Land Oil Group collapsed, Land Oil
defaulted in the payment of its maturing principal and interests
amortization and, like the man holding the proverbial empty bag,
Philguarantee had to advance on its guarantee using for this purpose
multi-millions of pesos in scarce government and taxpayers' money,
resulting in grave and irreparable damage to Plaintiff and to the entire
Filipino people.
12. The acts of Defendants, singly or collectively, and/or in unlawful concert with one
another, constitute gross abuse of official position and authority, flagrant breach of
public trust and fiduciary obligations, brazen abuse of right and power, unjust
enrichment, violation of the Constitution and laws of the Republic of the Philippines,
to the grave and irreparable damage of Plaintiff and the Filipino people.
VI
CAUSE OF ACTION
13. First Cause of Action: ABUSE OF RIGHT AND POWER (a) Defendants, in
perpetrating the unlawful acts described above, committed abuse of right and power
which caused untold misery, suffering and damage to Plaintiff. Defendants violated,
among others, Articles 19, 20 and 21 of the Civil Code of the Philippines;
(b) As a result of the foregoing acts, Defendants acquired title to and
beneficial interests in funds and other property and concealed such
title, funds and interests through the use of relatives, business
associates, nominees, agents or dummies. Defendants are,
therefore, jointly and severally, liable to Plaintiff to return and
reconvey all such funds and other property unlawfully acquired; or
alternatively, to pay Plaintiff, jointly and severally, by way of indemnity,
the damage cause to Plaintiff equivalent to the amount of such funds

and the value of other property not returned or restored to Plaintiff,


plus interest thereon from the date of unlawful acquisition until full
payment.
14. Second Cause of Action: UNJUST ENRICHMENT Defendants illegally
accumulated funds and other property in violation of the laws of the Philippines and
in breach of their official functions and fiduciary obligations. Defendants, therefore,
have unjustly enriched themselves to the grave and irreparable damage and
prejudice of Plaintiff. Defendants have an obligation at law, independently of breach
of trust and abuse of right and power and; as an alternative, to jointly and severally
return to Plaintiff such funds and other property with which Defendants, in gross and
evident bad faith, have unjustly enriched themselves or, in default thereof, restore to
Plaintiff the amount of such funds and the value of the other property including those
which may have been wasted, and/or lost, with interest thereon from the date of
unlawful acquisition until full payment.
15. Third Cause of Action: BREACH OF TRUST A public office is a public trust. By
committing all the acts described above, Defendants repeatedly breached public trust
and the law, making them jointly and severally liable to Plaintiff. The funds and other
property acquired by Defendants as a result of their breach of public trust are
deemed to have been acquired for the Benefit of Plaintiff and are, therefore,
impressed with constructive trust in favor of Plaintiff and the Filipino people.
16. Fourth Cause of Action: ACCOUNTING The Commission, acting pursuant to
the provisions of applicable law, respectfully maintains that Defendants, acting singly
or collectively, and/or in unlawful concert with one another, acquired funds, assets
and property during the incumbency of Defendant public officers, or while acting in
unlawful concert with public officers, manifestly out of proportion to their salaries, to
their other lawful income and income from legitimately acquired property.
Consequently, they are required to show to the satisfaction of this Honorable Court
that they have lawfully acquired all such funds, assets and property which are in
excess of their legal net income, and for this Honorable Court to decree that the
Defendants are under obligation to account to Plaintiff with respect to all legal or
beneficial interests in funds, properties and assets of whatever kind and wherever
located in excess of their lawful earnings.
17. Fifth Cause of Action: LIABILITY FOR DAMAGES (a) By reason of the
unlawful acts set forth above, Plaintiff and the Filipino people have suffered actual
damages in an amount representing the pecuniary loss sustained by the latter as a
result of Defendants' unlawful acts, the approximate value and interest on which,
from the time of their wrongful acquisition, plus expenses which Plaintiff has been
compelled to incur and shall continue to incur in its effort to recover Defendants' illgotten wealth all over the world. Defendants are, therefore, jointly and severally liable
to Plaintiff for actual damages and for expenses incurred in the recovery of
Defendants' ill-gotten wealth.
(b) As a result of Defendants' unlawful, malicious, immoral and
wanton acts described above, Plaintiff and the Filipino people had
painfully endured and suffered for more than twenty long years, and
still continue to endure and suffer anguish, fright, sleepless nights,
serious anxiety, wounded feelings and moral shock, as well as
besmirched reputation and social humiliation before the international

community, for which Defendants are jointly and severally liable to


Plaintiff and the Filipino people for moral damages.
(c) In addition, Plaintiff and the Filipino people are entitled to
temperate damages for their suffering which, by their very nature, are
incapable of pecuniary estimation, but which this Honorable Court
may determine in the exercise of its sound discretion.
(d) Defendants, by reason of the above described unlawful acts, have
violated and invaded the inalienable right of Plaintiff and the Filipino
people to a fair and decent way of life befitting a Nation with rich
natural and human resources. This basic, and fundamental right of
Plaintiff and the Filipino people should be recognized and vindicated
by awarding nominal damages in an amount to be determined by the
Honorable Court in the exercise of its sound discretion.
(e) By way of example and correction for the public good and in order
to ensure that Defendants' unlawful, malicious, immoral and wanton
acts are not repeated, said Defendants are jointly and severally liable
to Plaintiff for exemplary damages.
The Annex "A" mentioned in paragraph 9 of the Expanded Complaint read as follows:
ASSETS AND OTHER PROPERTY OF
JOSE DE VENECIA, JR.
PERSONAL PROPERTY
A. SHARES OF STOCK IN:
1. Landoil Resources Corporation
2. Pacific Asia Builders Corporation
3. Greater Manila Land Corporation
4. Construction Consortium, Inc.
5. Asian Water and Sewer System, Inc.
6. International Medical Group, Inc.
7. Philippine Hospitals and Health Services, Inc.
8. Global Electrification Systems, Inc.
9. Philippine-Singapore Ports Corporation
10. Asiaphil Fisheries Corporation
11. Transnational Systems, Inc.
12. International Agribusiness Corporation
13. IOMC Philippines, Inc.
14. International Centers for Technology Transfer, Inc.
15. Landoil Trading Corporation
16. Multiland Insurance Agency, Inc.
17. Freeport Security Agency, Inc.
18. International Caterer's, Inc.
BANK ACCOUNTS:

1. Frozen Bank Accounts and other Assets of Placido Mapa, Jr.


2. Frozen Bank Accounts and other Assets of Cesar C. Zalamea
AND ALL OTHER ASSETS OF ALL DEFENDANTS SEQUESTERED AND/OR
FROZEN BY THE COMMISSION PURSUANT TO EXECUTIVE ORDER NOS. 1
AND 2. 4
The five (5) volumes of the original records of Civil Case No. 0020 readily disclose that the case has
undergone unnecessary delays through the filing of motions for extension of time to file answer or
other responsive pleading, motions for bill of particulars and motions to dismiss, which were followed
by exchanges of related pleadings such as opposition, reply to opposition and others. These motions
for bill of particulars or motions to dismiss were denied by the Sandiganbayan. Thereafter, separate
answers were successively filed by defendants (now private respondents) Ongpin, Laya, Ancheta,
Bondoc, Mapa, Jr., Virata and Zalamea. These answers were filed between 21 January 1988 and 10
August 1989. 5
Alias summons were served upon Ferdinand E. Marcos and Imelda R. Marcos on 10 November
1988 at 2338 Makiki Heights, Honolulu, Hawaii. 6 In its Resolution of 6 April 1989, 7 the Sandiganbayan
declared them in default in Civil Case No. 0020 and other cases.
On 30 June 1989, defendant De Venecia filed a motion to dismiss Civil Case No. 0020 insofar as he
is concerned in view of a Deed of Assignment executed on 19 July 1988 between Landoil Resources
Corporation, including its subsidiaries, and the Petitioner, through the PCGG as represented by its
Acting Chairman, Hon. Adolfo S. Azcuna. 8 On 16 July 1989, De Venecia filed an amended motion to
dismiss 9 which the Petitioner opposed on the ground that De Venecia is not a party to the Deed of
Assignment and that the said deed is still subject to the approval of the PCGG. 10
On 8 September 1989, the Sandiganbayan promulgated a Resolution dated 7 September 1989
granting De Venecia's amended motion to dismiss and dismissing Civil Case No. 0020 as against
him. 11 As a consequence thereof, Ongpin filed on 11 September 1989 a motion for a hearing on his
affirmative defenses. 12 On 12 September 1989, Zalamea filed a motion to dismiss on the ground that
there is no more legal and factual basis to proceed against him in view of the dismissal of the case as
against De Venecia. 13 He argued that the latter is an indispensable party; hence, the dismissal of the
case against De Venecia should result in the dismissal of the case against the other co-defendants
pursuant to Section 7, Rule 3 of the Rules of Court. Separate motions to dismiss on the same ground as
that of Zalamea's were successively filed by Ongpin, Ancheta, Mapa, Jr. and Laya. 14 Laya filed his motion
on 28 September 1989.
In the meantime, the Petitioner filed on 28 September 1989 a motion to reconsider the Resolution of
7 September 1989. 15 However, on 17 October 1989, counsel for De Venecia submitted to the
Sandiganbayan a letter of the PCGG dated 16 October 1989 and addressed to the Solicitor General
requesting the latter to withdraw the motion for reconsideration. 16
The Petitioner filed on 17 October 1989 a Consolidated Opposition 17 to the motions to dismiss
wherein it alleged the prematurity of the filing of the motions to dismiss since it had filed a motion to
reconsider the 8 September 1989 Resolution dismissing the case as against De Venecia.
On 28 September 1989, defendant Ferdinand E. Marcos died and on 10 November 1989, the
Petitioner filed a motion for his substitution by his heirs, viz., Imelda R. Marcos, Ferdinand Marcos,
Jr., Irene Marcos-Araneta and Imee Marcos-Manotoc. 18 This was granted by the Sandiganbayan in its
Resolution of 16 November 1989. 19

On 4 December 1989, the Sandiganbayan (Second Division) promulgated a Resolution, dated 29


November 1989, dismissing Civil Case No. 0020 as against De Venecia's co-defendants, the private
respondents in the instant
case. 20 Petitioner's motion of 27 December 1989 21 and supplemental motion of 25 January 1990 22 to
reconsider the said Resolution were denied in the Sandiganbayan's Resolution of 9 March 1990. 23 These
Resolutions are now challenged in this petition which was filed on 24 April 1990. 24 Petitioner claims that
these were issued by the respondent Sandiganbayan with grave abuse of discretion amounting to lack or
excess of jurisdiction. In support thereof, the Petitioner contends that:
a) The Deed of Assignment executed on July 19, 1989 [should be 1988] by Landoil in
favor of the petitioner should not be made to benefit De Venecia's co-defendants;
b) Defendant De Venecia is not an indispensable party in the prosecution of the case
against his co-defendants;
c) The liabilities of De Venecia's co-defendants arose not only from their alleged
conspiracy with defendant De Venecia but also by virtue of their individual or
collective actions done in unlawful concert with one another;
d) The causes of action against defendants Ferdinand E. Marcos and Imelda R.
Marcos have nothing to do with the Deed of Assignment executed by Landoil in favor
of the petitioner; and
e) The parties manifestly intended to exclude defendant De Venecia's co-defendants
from the benefit of the Deed of Assignment in question. 25
I find merit in this petition.
The Deed of Assignment, 26 upon which the dismissal of Civil Case
No. 0020 as against De Venecia is based, was executed between the (1) Landoil Resources Corporation,
(2) Philippine Singapore Ports Corporation, (3) Asian Water and Sewer System, Inc., (4) Construction
Consortium, Inc., (5) Pacific Asia Builders and Developers, Inc., (6) Philippine Hospitals and Health
Service, Inc. and (7) Greater Manila Land Corporation, as ASSIGNORS, and represented therein by
Ambrosio C. Collado as President of the Landoil Resources Corporation and attorney-in-fact for the
others, and the Republic of the Philippines, represented by the PCGG through its then Acting Chairman,
Hon. Adolfo S. Azcuna, as the ASSIGNEE. As described therein, the former "constitute a group of related
companies" sometimes referred to as the "Landoil Group," with the Landoil Resources Corporation,
"organized by or at the initiative of Jose de Venecia," as their "flagship." These ASSIGNORS are but
seven (7) of the eighteen (18) corporations enumerated in Annex "A" of the Expanded Complaint in Civil
Case No. 0020. 27 Not parties to the deed of assignment are International Medical Group, Inc.; Global
Electrification Systems, Inc.; Asiaphil Fisheries Corporation; Transnational Systems, Inc.; International
Agribusiness Corporation; IOMC Philippines, Inc.; International Centers for Technology Transfer, Inc.;
Landoil Trading Corporation; Multiland Insurance Agency, Inc.; Freeport Security Agency, Inc.; and
International Caterer's, Incorporated. Pertinent portions of the recital part of the deed of assignment read
as follows:
xxx xxx xxx
(2) Immediately after the organization of the Presidential Commission on Good
Government (PCGG) in February 1986, the Landoil Group, acting through Landoil
itself, asked the PCGG to place the Landoil Group under sequestration for the
reason that former President Ferdinand E. Marcos, by himself and/or through his
designated nominees or cronies, owns approximately 45% of the outstanding capital

stock of Landoil, and through Landoil, a proportionate portion of the outstanding


capital stock of each of the other companies of the Landoil Group;
xxx xxx xxx
(7) To negate the imputation that the Landoil Group are Marcos "crony" companions,
and that Jose de Venecia and other officers of the Landoil Group are Marcos
"cronies," the Landoil Group submitted proof tending to show that they were in fact
the victims rather than the "cronies" of Marcos who, in 1977, coveted the Landoil
Group and caused the same to be taken over by his (Marcos') agents and business
associates for his (Marcos') benefit after the discovery of oil deposits off Palawan by
a consortium of oil exploration companies of which Landoil was a substantial
member, and the acquisition of Landoil, also in 1977, of a prime port operations
contract in Saudi Arabia with a value of US$350 million;
(8) After the establishment of the present Aquino Government, Philguarantee caused
an investigation to be undertaken as to (a) the background of the issuance of the
alleged "behest" guarantee facility in favor of the Landoil Group, and (b) the
management and operations of the Landoil Group, both in the Philippines and in the
Middle East. As a result of such investigation Philguarantee has satisfied itself (i) that
such guarantee facility was obtained in the ordinary and regular course of business,
and that no favor was accorded to the Landoil officers, in the grant of such guarantee
facility; and (ii) that the business reversals experienced by the Landoil Group in
connection with its various construction and other projects in the Middle East and
elsewhere were due, firstly, to the inability of the Landoil Group to collect its contract
receivables from such projects due to the reasons specified in the sixth "whereas"
clause, and, secondly, due to the non-payment of its insurance claim under the
insurance policy referred to in the succeeding (ninth) "whereas" clause. 28
Subject to certain conditions, the ASSIGNORS assumed the following obligations:
1.1. Upon the request of the Assignee, the Assignors (being the above-named
companies making up Landoil Group) shall immediately cause to be transferred to
the Assignee (or its nominee/s) all the shares of the capital stock of Landoil (up to
45% of the total outstanding issued and subscribed capital stock of Landoil) which
have or may hereafter be identified as belonging to Marcos (whether standing in his
name or the name [of] any of his nominee/s). . . .
1.2. Upon the effectiveness of this Agreement, the Assignors shall cause to be paid
to the Assignee, through PCGG, the amount of P13 million, which amount represents
a portion of Landoil's recovery from an arbitration proceeding which Landoil had
caused to be instituted in London against the Lloyd's Syndicate of Insurance
Underwriters;
1.3. Effective immediately, the Assignors hereby assign, transfer and convey to the
PCGG: (a) the entire proceeds of the Assignors' claims in the New York case which
Landoil has instituted against the insurance brokers, namely, the firm of Alexander
and Alexander, and (b) the entire proceeds of the Assignors' contract receivables
from all the Assignors' construction and other projects in the Middle East and
elsewhere, net of any amount required for the settlement of any compulsory statutory
liens for unpaid wages or salaries and ordinary administrative overhead and costs,
and attorney's fees and expenses of litigation.

xxx xxx xxx


1.5. The Assignors, and or their respective officers, hereby undertake to fully
cooperate with the Philippine Government, acting through the PCGG or any other
governmental agency, in the prosecution of any case which the Philippine
Government may cause to be filed against former President Marcos and his cronies,
either by furnishing testimony in any such case, or by providing information in any
investigation undertaken in contemplation of the filing of such case, whether in the
Philippines or elsewhere, as may be required or directed by the PCGG, or by other
appropriate governmental agency from time to time. 29
In consideration of the ASSIGNORS' undertakings, the ASSIGNEE, viz., the Republic of the
Philippines, agreed:
2.1. . . . to cause the sequestration order issued against Landoil to be lifted upon the
effectiveness of this Agreement. In addition, the Assignee shall cause the dismissal,
without prejudice, of Civil Case No. 0020, entitled "Republic of the Philippines vs.
Jose de Venecia, Jr., et al.," in so far as the Assignors and Jose de Venecia are
concerned: provided, however, that such case shall be deemed automatically
reinstated in the event of non-compliance by any of the Assignors with any of its
obligations and undertakings hereunder. 30
The dismissal by the Sandiganbayan of Civil Case No. 0020 as against De Venecia's co-defendants
is anchored on the following grounds:
a) The dismissal of the case as against de Venecia pursuant to the Resolution of 8
September 1989, "which . . . has now become final and executory after the plaintiff
withdrew its 'Motion for Reconsideration,'" "in effect, removed an indispensable party
from this case." De Venecia is an indispensable party because his involvement in the
transactions, together with the Landoil Group, which are described in paragraph 11 of
the Expanded Complaint, "constitute and/or comprise the very essence of the only
cause of action which is specifically averred in said Complaint, the other causes of
action alleged therein being premised on mere general averments." With the removal
of De Venecia from the case with the express conformity of the plaintiff, no judgment
can be rendered or liability enforced against the other defendants who are alleged to
have acted in conspiracy with him. 31
(2) The motions to dismiss filed by de Venecia's co-defendants may be treated as
motions for summary judgment because when an indispensable party "has . . . been
dropped from the complaint by reason of a compromise or amicable settlement which
practically negates the legal or factual basis for the principal cause of action, then
a fortiori, . . . the cause of action has become not only insufficient but in existent." The
"issues having been joined already . . ., there is nothing which could prevent defendants
from submitting the case for summary judgment." 32
(3) As to defendants Ferdinand E. Marcos and Imelda R. Marcos, although they were
declared in default, a "perusal of the General and Specific Averments of the Expanded
complaint, in relation to the causes of action described therein, will indubitably show that
above-named defendants' alleged liabilities are intimately intertwined and closely related
to the transactions subject matter of the compromise agreement between the PCGG and
defendant De Venecia. "Accordingly, the "compromise, . . . inures to, and benefits,
defendants spouses Marcoses and completely removes any legal or factual bases for
their retention as defendants in this case." 33

In its Resolution of 9 March 1990 34 denying the Petitioner's motion to reconsider the said dismissal, the
Sandiganbayan stressed that:
. . . the one and only cause of action set out in the Expanded Complaint appears in
paragraph 11 thereof, and outlined in detail under sub-paragraphs (a) and (f),
inclusive. The Compromise Agreement, as we had pointed out, not only removed De
Venecia as an indispensable party but also deprived the Expanded Complaint of any
and all factual or legal support for the sole cause of action set forth therein. 35
I cannot agree.
In the first place, the Sandiganbayan got itself entangled in a web of incorrect premises which,
unfortunately, became the bases for its conclusions. For one, it is not true that the Petitioner has only
one (1) cause of action as described in paragraph 11 of the Expanded Complaint. As could be
gathered from the introductory portion of said paragraph 11 under subheading V on Specific
Averments of Defendants' Illegal Acts, the acts or transactions enumerated in subparagraphs (a) to
(f) thereof are merely "among others." It reads:
11. Defendant Jose de Venecia, Jr., taking undue advantage of his relationship,
influence and connection with Defendants Ferdinand E. Marcos and Imelda
R. Marcos, acting by himself and/or in active collaboration with the other Defendants,
embarked upon devices, schemes and strategems to unjustly enrich themselves at
the expense of Plaintiff and the Filipino People, among others:
xxx xxx xxx
Among simply means "mingled with or in the same group or class" or "in or through the midst
of." 36Moreover, paragraph 8 thereof on General Averments states that:
. . . Defendant Ferdinand E. Marcos, together with other Defendants, acting singly or
collectively, and/or in unlawful concert with one another, in flagrant breach of public
trust and of their fiduciary obligations as public officers, with gross and scandalous
abuse of right and power and in brazen violation of the Constitution and laws of the
Philippines, embarked upon a systematic plan to accumulate ill-gotten wealth.
Among others, in furtherance of said plan and acting in unlawful concert with one
another and with gross abuse of power and authority, . . . .
and paragraph 9 states:
(9) Among the assets acquired by Defendants in the manner above-described and
discovered by the Commission in the exercise of its official responsibilities are funds
and other property listed in Annex "A" hereof and made an integral part of this
complaint.
Finally, paragraphs 13, 14, 15, 16 and 17 enumerate five (5) causes of action.
As earlier noted, of the eighteen (18) corporations enumerated in Annex "A" of the complaint, only
SEVEN (7) are parties to the Deed of Assignment as ASSIGNORS therein. Also listed in said Annex
"A" are (1) frozen bank accounts and other assets of defendant Placido E. Mapa, Jr., (2) frozen bank
accounts and other assets of defendant Cesar Zalamea, and (3) all other assets of all defendants
sequestered and/or frozen by the Commission pursuant to Executive Order Nos. 1 and 2. The

averments earlier mentioned and the deed of assignment, juxtaposed with Annex "A," show prima
facie that (a) the Petitioner did not intend to enter into any amicable settlement with the remaining
eleven (11) corporations or regarding the frozen assets listed in said Annex "A," and
(b) the assets of the defendants in the said eleven corporations were not necessarily obtained
through or as a consequence of the acts or transactions described in subparagraphs (a) to (f),
paragraph 11 of the Expanded Complaint, but probably through "the other devices, schemes or
strategems." Otherwise, these remaining corporations should have been made parties to the deed of
assignment. Inclusio unius est exclusio alterius.
For another, it is not true that De Venecia is the principal party either in the specific acts described in
subparagraphs (a) to (f), paragraph 11 of the Expanded Complaint or in the other "devices, schemes
or strategems." If, at all, there are principal party defendants in Civil Case No. 0020, then a reading
of the Expanded Complaint readily reveals that they are Ferdinand E. Marcos and Imelda R. Marcos.
Of course, there are allegations of conspiracy which, for purposes of the nature of the action
pursued, must be understood to be civil conspiracy, 37 as distinguished from conspiracy in criminal
law. 38
Nor is it true that De Venecia is an indispensable party with respect to the acts or transactions
subject of the causes of action. An indispensable party is defined as one without whom the action
cannot be finally determined, whose interest in the subject matter of the suit and in the relief sought
is so intertwined with that of the other parties that his legal presence as a party to the proceeding is
an absolute necessity. 39 No valid judgment can be rendered where an indispensable party is not
impleaded or brought before the court; 40 his non-inclusion in a case is a fatal defect and any judgment
rendered therein would be ineffective. 41
In the instant case, it is clear that De Venecia is not an indispensable party because a final
determination of the case can be had without his legal presence. Since the defendants in Civil Case
No. 0020 are sued for (a)collective or conspirational and (b) individual acts, it follows that the nature
of their corresponding obligations to the Petitioner could be joint and several as to the first and
individual or personal as to the second. And if they are solidarily liable, it cannot be successfully
maintained that De Venecia is an indispensable party. Article 1216 of the Civil code provides that:
The creditor may proceed against any one of the solidary debtors or some or all of
them simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the others, so long as
the debt had not been fully collected.
Hence, a solidary debtor is not an indispensable party. We held so categorically in Republic
vs. Sandiganbayan,42 a case which also involves an action for reconveyance, reversion, accounting,
restitution and damages filed with the Sandiganbayan against Alfredo (Bejo) Romualdez, Ferdinand E.
Marcos, Imelda R. Marcos, Jose P. Campos, Jr. and 45 other defendants. In the said case, we set aside
the challenged resolution of the Sandiganbayan denying a motion to drop defendant Campos, Jr. We
stated that since the Presidential Commission on Good Government had granted immunity to Jose Y.
Campos and his family, such immunity necessarily extended to movant Jose Campos, Jr., who is the son
of Jose Y. Campos. Inter alia, we noted:
The fact that Campos, Jr. and all the other defendants were charged solidarily in the
complaint does not make him an indispensable party. We have ruled in the case
of Operators Incorporated vs.American Biscuit Co., Inc., [154 SCRA 738 (1987)] that
"Solidarity does not make a solidary obligor an indispensable party in a suit filed by
the creditor." Article 1216 of the Civil Code says that the creditor "may proceed
against anyone of the solidary debtors or some or all of them simultaneously."

Even assuming for the sake of argument that De Venecia is indeed a principal party, still, based on a
principle of tort upon which the cause of action is also predicated, his release did not operate to
release the other tortfeasors. Under American jurisprudence three rules have developed which deal
with the question of whether the release of one joint tortfeasor releases other tortfeasors who are not
parties to or named in the release. The first is the ancient common-law rule that a release of one
joint tortfeasor releases all other parties jointly liable, regardless of the intent of the parties. The
second, otherwise known as the "First Restatement rule," states that a release of one co-conspirator
normally releases all others unless the plaintiff expressly reserves his rights against the others. The
third provides that the effect of the release upon co-conspirators shall be determined in accordance
with the intentions of the parties. In Zenith Radio Corp. vs. Hazeltine Research, Inc., 43 the Supreme
Court of the United States adopted the third rule thus:
We recently adopted the final rule giving effect to the intentions of the parties in Aro
Mfg. Co. vs.Convertible Top Co., supra, a patent infringement case. . . . We
concluded that a release, "which clearly intends to save the releasor's rights against
a past contributory infringer, does not automatically surrender those rights."
xxx xxx xxx
The straightforward rule is that a party releases only those other parties whom he
intends to release.
The Court observed that "[t]o adopt the ancient common-law rule would frustrate . . . partial
settlements, and thereby promote litigation, while adoption of the First Restatement rule would
create a trap for unwary plaintiffs' attorneys."
In the instant case, the release of De Venecia is clearly intended to apply only to him. There was,
evidently, no intent to spread the benefit to the other tortfeasors.
For still another reason, the "admissions" by the Petitioner in paragraph 8 of the deed of assignment
that the guaranty facility in favor of the Assignors "was obtained in the ordinary and regular course of
business," that " no favor was accorded to the Landoil officers in the grant" thereof and that the
business reversals experienced by the Landoil Group in connection with its various construction and
other projects were due to the special reasons therein enumerated are not equivalent to an
admission that De Venecia's
co-defendants incurred no liability whatsoever with respect thereto. That the facility was obtained in
such manner with no favor to the Landoil officers do not, by themselves, clear the Board of Directors
or the officers of the Philguarantee from any liability which could have arisen from the grant of the
guaranty facility. Private respondents were not sued as directors or officers of a private corporation,
but as government officials who under the Constitution were obliged to serve with the highest degree
of responsibility, integrity, loyalty, and efficiency and to remain accountable to the people. 44 Indeed, if
it were the intention of the parties in the deed of assignment to accord to the private respondents the
same benefit as that granted to De Venecia, they could have easily done so without loss of time or effort.
Better yet, the parties could have explicitly stipulated that, in consideration of the assignment made by the
Assignors, the Petitioner shall (a) lift the sequestration issued against Landoil and (b) dismiss Civil Case
No. 0020. It is evident from the deed of assignment that the only non-signatory thereto who is to be
benefited thereby is defendant De Venecia. That favor granted him is known as a stipulation pour
autrui under Article 1311 of the Civil Code as the Sandiganbayan correctly stated in its Resolution of 8
September 1989 granting De Venecia's amended motion to dismiss. 45 Under the said article, for such a
stipulation to be effective and binding it is necessary that the contracting parties "must have clearly and
deliberately conferred a favor upon a third person." 46 A "mere incidental benefit or interest of a person is
not sufficient." The deed of assignment in question fails to even remotely suggest such a grant in favor of
the private respondents, and for the Sandiganbayan to read into the document that which the parties

themselves have not even thought of would be to stipulate for the parties, which is beyond its power to do
so.

Moreover, these "admissions" are contained in the "whereas" clauses or in the recital part of the
Deed of Assignment and are inconsistent with the following provisions in the operative part thereof,
to wit: (1) the ASSIGNORS shall transfer to the ASSIGNEE all the capital shares of Landoil (up to
45% of the capital stock) identified as belonging to Marcos; (2) the ASSIGNORS shall fully cooperate
with the PCGG or any government agency in the prosecution of any case to be filed against Marcos
and his cronies; and (3) the dismissal of Civil Case No. 0020 against the ASSIGNORS and De
Venecia shall be without prejudice, and the case shall be deemed automatically reinstated in the
event of the ASSIGNORS' non-compliance with any of their obligations. These obligations are, in
fact, consistent with the 14th to 16th causes of action enumerated in the Expanded Complaint.
These "admissions" are merely embodied in the recital part of the deed. It is a settled rule in the
construction of contracts that in case of a conflict between the operative part of a contract and the
recitals thereof, the former will
prevail. 47 The recitals are but merely introductory and prefatory statements of a deed and are not an
essential part of the operating portions of the contract. They may be used as a guide in interpreting
ambiguous portions of the operative part, but cannot supersede the latter.
Finally, the Sandiganbayan's grave abuse of discretion became more pronounced insofar as the
challenged resolutions benefit defendant Ferdinand E. Marcos and Imelda R. Marcos. They are the
principal dramatis personae in Civil Case No. 0020, and the allegations in the Expanded Complaint
do not limit the causes of action against them to transactions involving Philguarantee which, if
proven, do not at all, by any standard, make them the least culpable. As a matter of fact, the
ASSIGNORS in the deed of assignment admit that approximately 45% of the outstanding capital
stock of the flagship corporation, Landoil Resources Corporation, and through the latter, "a
proportionate portion of the outstanding capital stock of the six other corporations" are owned by
defendant Ferdinand E. Marcos. Since the remaining eleven (11) corporations listed in Annex "A" of
the Expanded Complaint are not parties to the deed of assignment, the allegations with respect
thereto as against the Marcoses stand. It must, however, be stressed that, because of his death,
Ferdinand E. Marcos had been substituted in Civil Case No. 0020 by his heirs pursuant to the
Sandiganbayan's Resolution of 16 November 1989. Accordingly, he ceased to be a party and the
challenged resolutions are, insofar as he is concerned, ineffective. Be that as it may, the error
committed by the Sandiganbayan in granting him such unusual benefit compounded the
arbitrariness of the resolutions. Finally, as an additional indicium of such arbitrariness, although
under the deed of assignment the dismissal of the case against the Assignors and De Venecia was
to be "without prejudice," the challenged dismissal against the latter's co-defendants was without
qualification.
WHEREFORE, I vote to grant the petition and to set aside the challenged resolutions, with costs
against the private respondents.
Padilla, J., concurs.
# Footnotes
1 28 L. Ed., 2d, 94.
DAVIDE, JR., J., dissenting:
1 Original Records (OR), Civil Case No. 0020, vol. 1, 1-24.

2 Id., vol. 2, 583-D to 583-Y; Annex "E" of Petition; Rollo, 52-84.


3 Rollo, 59-79.
4 Rollo, 84.
5 OR, Civil Case No. 0020, vol. 2, 566-576; 592-607; 769-777; 883-893; and vol. 3,
1072-1085; 1086-1105; and 1286-1293, respectively.
6 Id., vol. 3, 1065-1071.
7 Id., 1174-1181.
8 OR, Civil Case No. 0020, vol. 3, 1233-1250. Copy of the Deed of Assignment is
attached to the motion as Annex "A".
9 Id., 1233-1250.
10 Id., 1263-1265.
11 Id., 1333-1336.
12 Id., 1343-1348.
13 Id., 1352-1354.
14 OR, Civil Case No. 0020, vol. 3, 1370-1376; 1382-1385; 1387-1393; and 14151417, respectively.
15 Id., 1405-1409.
16 Id., 1469.
17 Id., 1472-1475.
18 Id., 1493-1495.
19 Id., 1497-1500.
20 OR, Civil Case No. 0020, vol. 4, 1504-1519; Annex "A" of Petition; Rollo, 31-42.
per Associate Justice Romeo M. Escareal, concurred in by Associate Justices Jose
Balajadia, who wrote a separate concurring opinion, and Cipriano A. del Rosario.
21 Id., 1524-1529.
22 Id., 1566-1571.
23 Id., 1636-1639.
24 Rollo, op. cit., 8-28.

25 Rollo, 17-18.
26 Annex "F" of Petition; Id., 85-97.
27 Id., 84.
28 Rollo, 85-89.
29 Rollo, 90-94.
30 Id., 94.
31 Id., 37-39.
32 Rollo, 40.
33 Id., 41.
34 Id., 43-46.
35 Id., 45.
36 Black's Law Dictionary, 83 (6th ed. 1990).
37 Civil conspiracy that gives rise to a cause of action is the combination of two or
more persons for purposes of accomplishing by concerted action either lawful
purpose by unlawful means or unlawful purpose by lawful means. (Black's Law
Dictionary, 223, 5th ed).
38 Article 8, Revised Penal Code.
39 Borlasa vs. Polistico, 47 Phil., 345 [1925]; Co. vs. Intermediate Appellate Court,
162 SCRA 390 [1988]; Lozano vs. Ballesteros, 195 SCRA 681 [1991].
40 Leyte-Samar Sales Co. vs. Cea, 93 Phil. 100 [1953].
41 Dacudao vs. Duenas, 108 Phil 94 [1960]; see also, Espiritu vs. Court of Appeals,
58 SCRA 195 [1974].
42 173 SCRA 72 [1989].
43 401 U.S. 321, 28 L Ed 2d 77, 91 S Ct 795 [1971].
44 Section 1, Article XIII, 1973 Constitution. Now Section 1, Article XI, 1987
Constitution.
45 Rollo, 104.
46 See Marmont Resort Hotels Enterprises vs. Guiang, 168 SCRA 373, 382 [1988],
Citing Florentino vs. Encarnacion, 79 SCRA 193 [1977].

47 Jamison vs. Franklin Life Insurance Co., 136 P. 2d 265 (Ariz. Sup. Ct. 1943). The
same rule applies to a statute. Whereas clauses do not form a part thereof, strictly
speaking; they are not part of the operative language of the statute; they are,
nonetheless, helpful to the extent that they articulate the general purpose or reason
underlying a new enactment. (Llamado vs. Court of Appeals, 174 SCRA 566 [1989]).
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-12191

October 14, 1918

JOSE CANGCO, plaintiff-appellant,


vs.
MANILA RAILROAD CO., defendant-appellee.
Ramon Sotelo for appellant.
Kincaid & Hartigan for appellee.

FISHER, J.:
At the time of the occurrence which gave rise to this litigation the plaintiff, Jose Cangco, was in the
employment of Manila Railroad Company in the capacity of clerk, with a monthly wage of P25. He
lived in the pueblo of San Mateo, in the province of Rizal, which is located upon the line of the
defendant railroad company; and in coming daily by train to the company's office in the city of Manila
where he worked, he used a pass, supplied by the company, which entitled him to ride upon the
company's trains free of charge. Upon the occasion in question, January 20, 1915, the plaintiff arose
from his seat in the second class-car where he was riding and, making, his exit through the door,
took his position upon the steps of the coach, seizing the upright guardrail with his right hand for
support.
On the side of the train where passengers alight at the San Mateo station there is a cement platform
which begins to rise with a moderate gradient some distance away from the company's office and
extends along in front of said office for a distance sufficient to cover the length of several coaches.
As the train slowed down another passenger, named Emilio Zuiga, also an employee of the railroad
company, got off the same car, alighting safely at the point where the platform begins to rise from the
level of the ground. When the train had proceeded a little farther the plaintiff Jose Cangco stepped
off also, but one or both of his feet came in contact with a sack of watermelons with the result that
his feet slipped from under him and he fell violently on the platform. His body at once rolled from the
platform and was drawn under the moving car, where his right arm was badly crushed and lacerated.

It appears that after the plaintiff alighted from the train the car moved forward possibly six meters
before it came to a full stop.
The accident occurred between 7 and 8 o'clock on a dark night, and as the railroad station was
lighted dimly by a single light located some distance away, objects on the platform where the
accident occurred were difficult to discern especially to a person emerging from a lighted car.
The explanation of the presence of a sack of melons on the platform where the plaintiff alighted is
found in the fact that it was the customary season for harvesting these melons and a large lot had
been brought to the station for the shipment to the market. They were contained in numerous sacks
which has been piled on the platform in a row one upon another. The testimony shows that this row
of sacks was so placed of melons and the edge of platform; and it is clear that the fall of the plaintiff
was due to the fact that his foot alighted upon one of these melons at the moment he stepped upon
the platform. His statement that he failed to see these objects in the darkness is readily to be
credited.
The plaintiff was drawn from under the car in an unconscious condition, and it appeared that the
injuries which he had received were very serious. He was therefore brought at once to a certain
hospital in the city of Manila where an examination was made and his arm was amputated. The
result of this operation was unsatisfactory, and the plaintiff was then carried to another hospital
where a second operation was performed and the member was again amputated higher up near the
shoulder. It appears in evidence that the plaintiff expended the sum of P790.25 in the form of
medical and surgical fees and for other expenses in connection with the process of his curation.
Upon August 31, 1915, he instituted this proceeding in the Court of First Instance of the city of
Manila to recover damages of the defendant company, founding his action upon the negligence of
the servants and employees of the defendant in placing the sacks of melons upon the platform and
leaving them so placed as to be a menace to the security of passenger alighting from the company's
trains. At the hearing in the Court of First Instance, his Honor, the trial judge, found the facts
substantially as above stated, and drew therefrom his conclusion to the effect that, although
negligence was attributable to the defendant by reason of the fact that the sacks of melons were so
placed as to obstruct passengers passing to and from the cars, nevertheless, the plaintiff himself
had failed to use due caution in alighting from the coach and was therefore precluded form
recovering. Judgment was accordingly entered in favor of the defendant company, and the plaintiff
appealed.
It can not be doubted that the employees of the railroad company were guilty of negligence in piling
these sacks on the platform in the manner above stated; that their presence caused the plaintiff to
fall as he alighted from the train; and that they therefore constituted an effective legal cause of the
injuries sustained by the plaintiff. It necessarily follows that the defendant company is liable for the
damage thereby occasioned unless recovery is barred by the plaintiff's own contributory negligence.
In resolving this problem it is necessary that each of these conceptions of liability, to-wit, the primary
responsibility of the defendant company and the contributory negligence of the plaintiff should be
separately examined.
It is important to note that the foundation of the legal liability of the defendant is the contract of
carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at
all, from the breach of that contract by reason of the failure of defendant to exercise due care in its
performance. That is to say, its liability is direct and immediate, differing essentially, in legal viewpoint
from that presumptive responsibility for the negligence of its servants, imposed by article 1903 of the
Civil Code, which can be rebutted by proof of the exercise of due care in their selection and
supervision. Article 1903 of the Civil Code is not applicable to obligations arising ex contractu, but

only to extra-contractual obligations or to use the technical form of expression, that article relates
only to culpa aquiliana and not to culpa contractual.
Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly
points out this distinction, which was also recognized by this Court in its decision in the case of
Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa
clearly points out the difference between "culpa, substantive and independent, which of itself
constitutes the source of an obligation between persons not formerly connected by any legal tie"
and culpa considered as an accident in the performance of an obligation already existing . . . ."
In the Rakes case (supra) the decision of this court was made to rest squarely upon the proposition
that article 1903 of the Civil Code is not applicable to acts of negligence which constitute the breach
of a contract.
Upon this point the Court said:
The acts to which these articles [1902 and 1903 of the Civil Code] are applicable are
understood to be those not growing out of pre-existing duties of the parties to one another.
But where relations already formed give rise to duties, whether springing from contract or
quasi-contract, then breaches of those duties are subject to article 1101, 1103, and 1104 of
the same code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.)
This distinction is of the utmost importance. The liability, which, under the Spanish law, is, in certain
cases imposed upon employers with respect to damages occasioned by the negligence of their
employees to persons to whom they are not bound by contract, is not based, as in the English
Common Law, upon the principle ofrespondeat superior if it were, the master would be liable in
every case and unconditionally but upon the principle announced in article 1902 of the Civil Code,
which imposes upon all persons who by their fault or negligence, do injury to another, the obligation
of making good the damage caused. One who places a powerful automobile in the hands of a
servant whom he knows to be ignorant of the method of managing such a vehicle, is himself guilty of
an act of negligence which makes him liable for all the consequences of his imprudence. The
obligation to make good the damage arises at the very instant that the unskillful servant, while acting
within the scope of his employment causes the injury. The liability of the master is personal and
direct. But, if the master has not been guilty of any negligence whatever in the selection and
direction of the servant, he is not liable for the acts of the latter, whatever done within the scope of
his employment or not, if the damage done by the servant does not amount to a breach of the
contract between the master and the person injured.
It is not accurate to say that proof of diligence and care in the selection and control of the servant
relieves the master from liability for the latter's acts on the contrary, that proof shows that the
responsibility has never existed. As Manresa says (vol. 8, p. 68) the liability arising from extracontractual culpa is always based upon a voluntary act or omission which, without willful intent, but
by mere negligence or inattention, has caused damage to another. A master who exercises all
possible care in the selection of his servant, taking into consideration the qualifications they should
possess for the discharge of the duties which it is his purpose to confide to them, and directs them
with equal diligence, thereby performs his duty to third persons to whom he is bound by no
contractual ties, and he incurs no liability whatever if, by reason of the negligence of his servants,
even within the scope of their employment, such third person suffer damage. True it is that under
article 1903 of the Civil Code the law creates a presumption that he has been negligent in the
selection or direction of his servant, but the presumption is rebuttable and yield to proof of due care
and diligence in this respect.

The supreme court of Porto Rico, in interpreting identical provisions, as found in the Porto Rico
Code, has held that these articles are applicable to cases of extra-contractual culpa exclusively.
(Carmona vs. Cuesta, 20 Porto Rico Reports, 215.)
This distinction was again made patent by this Court in its decision in the case of Bahia vs. Litonjua
and Leynes, (30 Phil. rep., 624), which was an action brought upon the theory of the extracontractual liability of the defendant to respond for the damage caused by the carelessness of his
employee while acting within the scope of his employment. The Court, after citing the last paragraph
of article 1903 of the Civil Code, said:
From this article two things are apparent: (1) That when an injury is caused by the
negligence of a servant or employee there instantly arises a presumption of law that there
was negligence on the part of the master or employer either in selection of the servant or
employee, or in supervision over him after the selection, or both; and (2) that that
presumption is juris tantum and not juris et de jure, and consequently, may be rebutted. It
follows necessarily that if the employer shows to the satisfaction of the court that in selection
and supervision he has exercised the care and diligence of a good father of a family, the
presumption is overcome and he is relieved from liability.
This theory bases the responsibility of the master ultimately on his own negligence and not
on that of his servant. This is the notable peculiarity of the Spanish law of negligence. It is, of
course, in striking contrast to the American doctrine that, in relations with strangers, the
negligence of the servant in conclusively the negligence of the master.
The opinion there expressed by this Court, to the effect that in case of extra-contractual culpa based
upon negligence, it is necessary that there shall have been some fault attributable to the defendant
personally, and that the last paragraph of article 1903 merely establishes a rebuttable presumption,
is in complete accord with the authoritative opinion of Manresa, who says (vol. 12, p. 611) that the
liability created by article 1903 is imposed by reason of the breach of the duties inherent in the
special relations of authority or superiority existing between the person called upon to repair the
damage and the one who, by his act or omission, was the cause of it.
On the other hand, the liability of masters and employers for the negligent acts or omissions of their
servants or agents, when such acts or omissions cause damages which amount to the breach of a
contact, is not based upon a mere presumption of the master's negligence in their selection or
control, and proof of exercise of the utmost diligence and care in this regard does not relieve the
master of his liability for the breach of his contract.
Every legal obligation must of necessity be extra-contractual or contractual. Extra-contractual
obligation has its source in the breach or omission of those mutual duties which civilized society
imposes upon it members, or which arise from these relations, other than contractual, of certain
members of society to others, generally embraced in the concept of status. The legal rights of each
member of society constitute the measure of the corresponding legal duties, mainly negative in
character, which the existence of those rights imposes upon all other members of society. The
breach of these general duties whether due to willful intent or to mere inattention, if productive of
injury, give rise to an obligation to indemnify the injured party. The fundamental distinction between
obligations of this character and those which arise from contract, rests upon the fact that in cases of
non-contractual obligation it is the wrongful or negligent act or omission itself which creates
the vinculum juris, whereas in contractual relations the vinculum exists independently of the breach
of the voluntary duty assumed by the parties when entering into the contractual relation.

With respect to extra-contractual obligation arising from negligence, whether of act or omission, it is
competent for the legislature to elect and our Legislature has so elected whom such an
obligation is imposed is morally culpable, or, on the contrary, for reasons of public policy, to extend
that liability, without regard to the lack of moral culpability, so as to include responsibility for the
negligence of those person who acts or mission are imputable, by a legal fiction, to others who are in
a position to exercise an absolute or limited control over them. The legislature which adopted our
Civil Code has elected to limit extra-contractual liability with certain well-defined exceptions to
cases in which moral culpability can be directly imputed to the persons to be charged. This moral
responsibility may consist in having failed to exercise due care in the selection and control of one's
agents or servants, or in the control of persons who, by reason of their status, occupy a position of
dependency with respect to the person made liable for their conduct.
The position of a natural or juridical person who has undertaken by contract to render service to
another, is wholly different from that to which article 1903 relates. When the sources of the obligation
upon which plaintiff's cause of action depends is a negligent act or omission, the burden of proof
rests upon plaintiff to prove the negligence if he does not his action fails. But when the facts
averred show a contractual undertaking by defendant for the benefit of plaintiff, and it is alleged that
plaintiff has failed or refused to perform the contract, it is not necessary for plaintiff to specify in his
pleadings whether the breach of the contract is due to willful fault or to negligence on the part of the
defendant, or of his servants or agents. Proof of the contract and of its nonperformance is
sufficientprima facie to warrant a recovery.
As a general rule . . . it is logical that in case of extra-contractual culpa, a suing creditor
should assume the burden of proof of its existence, as the only fact upon which his action is
based; while on the contrary, in a case of negligence which presupposes the existence of a
contractual obligation, if the creditor shows that it exists and that it has been broken, it is not
necessary for him to prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p. 76]).
As it is not necessary for the plaintiff in an action for the breach of a contract to show that the breach
was due to the negligent conduct of defendant or of his servants, even though such be in fact the
actual cause of the breach, it is obvious that proof on the part of defendant that the negligence or
omission of his servants or agents caused the breach of the contract would not constitute a defense
to the action. If the negligence of servants or agents could be invoked as a means of discharging the
liability arising from contract, the anomalous result would be that person acting through the medium
of agents or servants in the performance of their contracts, would be in a better position than those
acting in person. If one delivers a valuable watch to watchmaker who contract to repair it, and the
bailee, by a personal negligent act causes its destruction, he is unquestionably liable. Would it be
logical to free him from his liability for the breach of his contract, which involves the duty to exercise
due care in the preservation of the watch, if he shows that it was his servant whose negligence
caused the injury? If such a theory could be accepted, juridical persons would enjoy practically
complete immunity from damages arising from the breach of their contracts if caused by negligent
acts as such juridical persons can of necessity only act through agents or servants, and it would no
doubt be true in most instances that reasonable care had been taken in selection and direction of
such servants. If one delivers securities to a banking corporation as collateral, and they are lost by
reason of the negligence of some clerk employed by the bank, would it be just and reasonable to
permit the bank to relieve itself of liability for the breach of its contract to return the collateral upon
the payment of the debt by proving that due care had been exercised in the selection and direction
of the clerk?
This distinction between culpa aquiliana, as the source of an obligation, and culpa contractual as a
mere incident to the performance of a contract has frequently been recognized by the supreme court
of Spain. (Sentencias of June 27, 1894; November 20, 1896; and December 13, 1896.) In the

decisions of November 20, 1896, it appeared that plaintiff's action arose ex contractu, but that
defendant sought to avail himself of the provisions of article 1902 of the Civil Code as a defense.
The Spanish Supreme Court rejected defendant's contention, saying:
These are not cases of injury caused, without any pre-existing obligation, by fault or
negligence, such as those to which article 1902 of the Civil Code relates, but of damages
caused by the defendant's failure to carry out the undertakings imposed by the
contracts . . . .
A brief review of the earlier decision of this court involving the liability of employers for damage done
by the negligent acts of their servants will show that in no case has the court ever decided that the
negligence of the defendant's servants has been held to constitute a defense to an action for
damages for breach of contract.
In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner of a carriage was
not liable for the damages caused by the negligence of his driver. In that case the court commented
on the fact that no evidence had been adduced in the trial court that the defendant had been
negligent in the employment of the driver, or that he had any knowledge of his lack of skill or
carefulness.
In the case of Baer Senior & Co's Successors vs. Compania Maritima (6 Phil. Rep., 215), the plaintiff
sued the defendant for damages caused by the loss of a barge belonging to plaintiff which was
allowed to get adrift by the negligence of defendant's servants in the course of the performance of a
contract of towage. The court held, citing Manresa (vol. 8, pp. 29, 69) that if the "obligation of the
defendant grew out of a contract made between it and the plaintiff . . . we do not think that the
provisions of articles 1902 and 1903 are applicable to the case."
In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the defendant to recover
damages for the personal injuries caused by the negligence of defendant's chauffeur while driving
defendant's automobile in which defendant was riding at the time. The court found that the damages
were caused by the negligence of the driver of the automobile, but held that the master was not
liable, although he was present at the time, saying:
. . . unless the negligent acts of the driver are continued for a length of time as to give the
owner a reasonable opportunity to observe them and to direct the driver to desist therefrom. .
. . The act complained of must be continued in the presence of the owner for such length of
time that the owner by his acquiescence, makes the driver's acts his own.
In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co. (33 Phil. Rep.,
8), it is true that the court rested its conclusion as to the liability of the defendant upon article 1903,
although the facts disclosed that the injury complaint of by plaintiff constituted a breach of the duty to
him arising out of the contract of transportation. The express ground of the decision in this case was
that article 1903, in dealing with the liability of a master for the negligent acts of his servants "makes
the distinction between private individuals and public enterprise;" that as to the latter the law creates
a rebuttable presumption of negligence in the selection or direction of servants; and that in the
particular case the presumption of negligence had not been overcome.
It is evident, therefore that in its decision Yamada case, the court treated plaintiff's action as though
founded in tort rather than as based upon the breach of the contract of carriage, and an examination
of the pleadings and of the briefs shows that the questions of law were in fact discussed upon this
theory. Viewed from the standpoint of the defendant the practical result must have been the same in
any event. The proof disclosed beyond doubt that the defendant's servant was grossly negligent and

that his negligence was the proximate cause of plaintiff's injury. It also affirmatively appeared that
defendant had been guilty of negligence in its failure to exercise proper discretion in the direction of
the servant. Defendant was, therefore, liable for the injury suffered by plaintiff, whether the breach of
the duty were to be regarded as constituting culpa aquiliana or culpa contractual. As Manresa points
out (vol. 8, pp. 29 and 69) whether negligence occurs an incident in the course of the performance of
a contractual undertaking or its itself the source of an extra-contractual undertaking obligation, its
essential characteristics are identical. There is always an act or omission productive of damage due
to carelessness or inattention on the part of the defendant. Consequently, when the court holds that
a defendant is liable in damages for having failed to exercise due care, either directly, or in failing to
exercise proper care in the selection and direction of his servants, the practical result is identical in
either case. Therefore, it follows that it is not to be inferred, because the court held in the Yamada
case that defendant was liable for the damages negligently caused by its servants to a person to
whom it was bound by contract, and made reference to the fact that the defendant was negligent in
the selection and control of its servants, that in such a case the court would have held that it would
have been a good defense to the action, if presented squarely upon the theory of the breach of the
contract, for defendant to have proved that it did in fact exercise care in the selection and control of
the servant.
The true explanation of such cases is to be found by directing the attention to the relative spheres of
contractual and extra-contractual obligations. The field of non- contractual obligation is much more
broader than that of contractual obligations, comprising, as it does, the whole extent of juridical
human relations. These two fields, figuratively speaking, concentric; that is to say, the mere fact that
a person is bound to another by contract does not relieve him from extra-contractual liability to such
person. When such a contractual relation exists the obligor may break the contract under such
conditions that the same act which constitutes the source of an extra-contractual obligation had no
contract existed between the parties.
The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry him in
safety and to provide safe means of entering and leaving its trains (civil code, article 1258). That
duty, being contractual, was direct and immediate, and its non-performance could not be excused by
proof that the fault was morally imputable to defendant's servants.
The railroad company's defense involves the assumption that even granting that the negligent
conduct of its servants in placing an obstruction upon the platform was a breach of its contractual
obligation to maintain safe means of approaching and leaving its trains, the direct and proximate
cause of the injury suffered by plaintiff was his own contributory negligence in failing to wait until the
train had come to a complete stop before alighting. Under the doctrine of comparative negligence
announced in the Rakes case (supra), if the accident was caused by plaintiff's own negligence, no
liability is imposed upon defendant's negligence and plaintiff's negligence merely contributed to his
injury, the damages should be apportioned. It is, therefore, important to ascertain if defendant was in
fact guilty of negligence.
It may be admitted that had plaintiff waited until the train had come to a full stop before alighting, the
particular injury suffered by him could not have occurred. Defendant contends, and cites many
authorities in support of the contention, that it is negligence per se for a passenger to alight from a
moving train. We are not disposed to subscribe to this doctrine in its absolute form. We are of the
opinion that this proposition is too badly stated and is at variance with the experience of every-day
life. In this particular instance, that the train was barely moving when plaintiff alighted is shown
conclusively by the fact that it came to stop within six meters from the place where he stepped from
it. Thousands of person alight from trains under these conditions every day of the year, and sustain
no injury where the company has kept its platform free from dangerous obstructions. There is no

reason to believe that plaintiff would have suffered any injury whatever in alighting as he did had it
not been for defendant's negligent failure to perform its duty to provide a safe alighting place.
We are of the opinion that the correct doctrine relating to this subject is that expressed in
Thompson's work on Negligence (vol. 3, sec. 3010) as follows:
The test by which to determine whether the passenger has been guilty of negligence in
attempting to alight from a moving railway train, is that of ordinary or reasonable care. It is to
be considered whether an ordinarily prudent person, of the age, sex and condition of the
passenger, would have acted as the passenger acted under the circumstances disclosed by
the evidence. This care has been defined to be, not the care which may or should be used
by the prudent man generally, but the care which a man of ordinary prudence would use
under similar circumstances, to avoid injury." (Thompson, Commentaries on Negligence, vol.
3, sec. 3010.)
Or, it we prefer to adopt the mode of exposition used by this court in Picart vs. Smith (37 Phil. rep.,
809), we may say that the test is this; Was there anything in the circumstances surrounding the
plaintiff at the time he alighted from the train which would have admonished a person of average
prudence that to get off the train under the conditions then existing was dangerous? If so, the plaintiff
should have desisted from alighting; and his failure so to desist was contributory negligence.
1awph!l.net

As the case now before us presents itself, the only fact from which a conclusion can be drawn to the
effect that plaintiff was guilty of contributory negligence is that he stepped off the car without being
able to discern clearly the condition of the platform and while the train was yet slowly moving. In
considering the situation thus presented, it should not be overlooked that the plaintiff was, as we
find, ignorant of the fact that the obstruction which was caused by the sacks of melons piled on the
platform existed; and as the defendant was bound by reason of its duty as a public carrier to afford
to its passengers facilities for safe egress from its trains, the plaintiff had a right to assume, in the
absence of some circumstance to warn him to the contrary, that the platform was clear. The place,
as we have already stated, was dark, or dimly lighted, and this also is proof of a failure upon the part
of the defendant in the performance of a duty owing by it to the plaintiff; for if it were by any
possibility concede that it had right to pile these sacks in the path of alighting passengers, the
placing of them adequately so that their presence would be revealed.
As pertinent to the question of contributory negligence on the part of the plaintiff in this case the
following circumstances are to be noted: The company's platform was constructed upon a level
higher than that of the roadbed and the surrounding ground. The distance from the steps of the car
to the spot where the alighting passenger would place his feet on the platform was thus reduced,
thereby decreasing the risk incident to stepping off. The nature of the platform, constructed as it was
of cement material, also assured to the passenger a stable and even surface on which to alight.
Furthermore, the plaintiff was possessed of the vigor and agility of young manhood, and it was by no
means so risky for him to get off while the train was yet moving as the same act would have been in
an aged or feeble person. In determining the question of contributory negligence in performing such
act that is to say, whether the passenger acted prudently or recklessly the age, sex, and
physical condition of the passenger are circumstances necessarily affecting the safety of the
passenger, and should be considered. Women, it has been observed, as a general rule are less
capable than men of alighting with safety under such conditions, as the nature of their wearing
apparel obstructs the free movement of the limbs. Again, it may be noted that the place was perfectly
familiar to the plaintiff as it was his daily custom to get on and of the train at this station. There could,
therefore, be no uncertainty in his mind with regard either to the length of the step which he was
required to take or the character of the platform where he was alighting. Our conclusion is that the

conduct of the plaintiff in undertaking to alight while the train was yet slightly under way was not
characterized by imprudence and that therefore he was not guilty of contributory negligence.
The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as a
copyist clerk, and that the injuries he has suffered have permanently disabled him from continuing
that employment. Defendant has not shown that any other gainful occupation is open to plaintiff. His
expectancy of life, according to the standard mortality tables, is approximately thirty-three years. We
are of the opinion that a fair compensation for the damage suffered by him for his permanent
disability is the sum of P2,500, and that he is also entitled to recover of defendant the additional sum
of P790.25 for medical attention, hospital services, and other incidental expenditures connected with
the treatment of his injuries.
The decision of lower court is reversed, and judgment is hereby rendered plaintiff for the sum of
P3,290.25, and for the costs of both instances. So ordered.
Arellano, C.J., Torres, Street and Avancea, JJ., concur.

Separate Opinions

MALCOLM, J., dissenting:


With one sentence in the majority decision, we are of full accord, namely, "It may be admitted that
had plaintiff waited until the train had come to a full stop before alighting, the particular injury
suffered by him could not have occurred." With the general rule relative to a passenger's contributory
negligence, we are likewise in full accord, namely, "An attempt to alight from a moving train is
negligence per se." Adding these two points together, should be absolved from the complaint, and
judgment affirmed.
Johnson, J., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 104408 June 21, 1993


METRO MANILA TRANSIT CORPORATION, petitioner,
vs.
THE COURT OF APPEALS AND NENITA CUSTODIA, respondents.
Office of the Government Corporate Counsel for petitioner.
Renato P. Decena and Restituto Abjero for private respondent.

REGALADO, J.:
This appeal calls for a review of the legal validity and sufficiency of petitioner's invocation of due
diligence in the selection and supervision of employees as its defense against liability resulting from
a vehicular collision. With the facility by which such a defense can be contrived and our country
having reputedly the highest traffic accident rate in its geographical region, it is indeed high time for
us to once again address this matter which poses not only a litigation issue for the courts but affects
the very safety of our streets.
The facts of the case at bar are recounted for us by respondent court, thus
At about six o'clock in the morning of August 28, 1979, plaintiff-appellant Nenita
Custodio boarded as a paying passenger a public utility jeepney with plate No. D7
305 PUJ Pilipinas 1979, then driven by defendant Agudo Calebag and owned by his
co-defendant Victorino Lamayo, bound for her work at Dynetics Incorporated located
in Bicutan, Taguig, Metro Manila, where she then worked as a machine operator
earning P16.25 a day. While the passenger jeepney was travelling at (a) fast clip
along DBP Avenue, Bicutan, Taguig, Metro Manila another fast moving vehicle, a
Metro Manila Transit Corp. (MMTC, for short) bus bearing plate no. 3Z 307 PUB
(Philippines) "79 driven by defendant Godofredo C. Leonardo was negotiating
Honeydew Road, Bicutan, Taguig, Metro Manila bound for its terminal at Bicutan. As
both vehicles approached the intersection of DBP Avenue and Honeydew Road they
failed to slow down and slacken their speed; neither did they blow their horns to warn
approaching vehicles. As a consequence, a collision between them occurred, the
passenger jeepney ramming the left side portion of the MMTC bus. The collision
impact caused plaintiff-appellant Nenita Custodio to hit the front windshield of the
passenger jeepney and (she) was thrown out therefrom, falling onto the pavement
unconscious with serious physical injuries. She was brought to the Medical City
Hospital where she regained consciousness only after one (1) week. Thereat, she
was confined for twenty-four (24) days, and as a consequence, she was unable to
work for three and one half months (31/2). 1
A complaint for damages 2 was filed by herein private respondent, who being then a minor was assisted
by her parents, against all of therein named defendants following their refusal to pay the expenses
incurred by the former as a result of the collision.

Said defendants denied all the material allegations in the complaint and pointed an accusing finger
at each other as being the party at fault. Further, herein petitioner Metro Manila Transit Corporation
(MMTC), a government-owned corporation and one of the defendants in the court a quo, along with
its driver, Godofredo Leonardo, contrarily averred in its answer with cross-claim and
counterclaim 3 that the MMTC bus was driven in a prudent and careful manner by driver Leonardo and
that it was the passenger jeepney which was driven recklessly considering that it hit the left middle portion
of the MMTC bus, and that it was defendant Lamayo, the owner of the jeepney and employer of driver
Calebag, who failed to exercise due diligence in the selection and supervision of employees and should
thus be held solidarily liable for damages caused to the MMTC bus through the fault and negligence of its
employees.
Defendant Victorino Lamayo, for his part, alleged in his answer with cross-claim and
counterclaim 4 that the damages suffered by therein plaintiff should be borne by defendants MMTC and
its driver, Godofredo Leonardo, because the latter's negligence was the sole and proximate cause of the
accident and that MMTC failed to exercise due diligence in the selection and supervision of its
employees.
By order of the trial court, defendant Calebag was declared in default for failure to file an
answer. 5 Thereafter, as no amicable settlement was reached during the pre-trial conference, 6 trial on the
merits ensued with the opposing parties presenting their respective witnesses and documentary
evidence.
Herein private respondent Nenita Custodia, along with her parents, were presented as witnesses for
the prosecution. In addition, Dr. Edgardo del Mundo, the attending physician, testified on the cause,
nature and extent of the injuries she sustained as a result of the vehicular mishap. 7 On the other
hand, defendant MMTC presented as witnesses Godofredo Leonardo, Christian Bautista and Milagros
Garbo. Defendant Lamayo, however, failed to present any witness.
Milagros Garbo testified that, as a training officer of MMTC, she was in charge of the selection of the
company's bus drivers, conducting for this purpose a series of training programs and examinations.
According to her, new applicants for job openings at MMTC are preliminarily required to submit
certain documents such as National Bureau of Investigation (NBI) clearance, birth or residence
certificate, ID pictures, certificate or diploma of highest educational attainment, professional driver's
license, and work experience certification. Re-entry applicants, aside from the foregoing
requirements, are additionally supposed to submit company clearance for shortages and damages
and revenue performance for the preceding year. Upon satisfactory compliance with said requisites,
applicants are recommended for and subjected to a Preliminary interview, followed by a record
check to find out whether they are included in the list of undesirable employees given by other
companies.
Thereafter, she continued, if an applicant is found to be acceptable, a final interview by the Chief
Supervisor is scheduled and followed by a training program which consists of seminars and actual
driving and Psycho-physical tests and X-ray examinations. The seminars, which last for a total of
eighteen (18) days, include familiarization with assigned routes, existing traffic rules and regulations,
Constabulary Highway Patrol Group (CHPG) seminar on defensive driving, preventive maintenance,
proper vehicle handling, interpersonal relationship ,and administrative rules on discipline and on-thejob training. Upon completion of all the seminars and tests, a final clearance is issued, an
employment contract is executed and the driver is ready to report for duty. 8
MMTC's Transport Supervisor, Christian Bautista, testified that it was his duty to monitor the daily
operation of buses in the field, to countercheck the dispatcher on duty prior to the operation of the
buses in the morning and to see to it that the bus crew follow written guidelines of the company,
which include seeing to it that its employees are in proper uniform, briefed in traffic rules and

regulations before the start of duty, fit to drive and, in general, follow other rules and regulations of
the Bureau of Land Transportation as well as of the company. 9
The reorganized trial court, in its decision of August 1, 1989, 10 found both drivers of the colliding
vehicles concurrently negligent for non-observance of appropriate traffic rules and regulations and for
failure to take the usual precautions when approaching an intersection. As joint tortfeasors, both drivers,
as well as defendant Lamayo, were held solidarily liable for damages sustained by plaintiff Custodio.
Defendant MMTC, on the bases of the evidence presented was, however, absolved from liability for the
accident on the ground that it was not only careful and diligent in choosing and screening applicants for
job openings but was also strict and diligent in supervising its employees by seeing to it that its
employees were in proper uniforms, briefed in traffic rules and regulations before the start of duty, and
that it checked its employees to determine whether or not they were positive for alcohol and followed
other rules and regulations and guidelines of the Bureau of Land Transportation and of the company.
The trial court accordingly ruled:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered dismissing
the complaint against the Metro Manila Transit Corporation and ordering defendants
Agudo P. Calebag, Victorino Lamayo and Godofredo C. Leonardo to pay plaintiffs,
jointly and severally, the following:
a) the sum of P10,000.00 by way of medical expenses;
b) the sum of P5,000.00 by way of expenses of litigation;
c) the sum of P15,000.00 by way of moral damages;
d) the sum of P2,672.00 by way of loss of earnings;
e) the sum of P5,000.00 by way of exemplary damages;
f) the sum of P6,000.00 by way of attorney's fees; and
g) costs of suit.
SO ORDERED. 11
Plaintiff's motion to have that portion of the trial court's decision absolving MMTC from liability
reconsidered 12having been denied for lack of merit, 13 an appeal was filed by her with respondent
appellate court. After consideration of the appropriate pleadings on appeal and finding the appeal
meritorious, the Court of Appeals modified the trial court's decision by holding MMTC solidarily liable with
the other defendants for the damages awarded by the trial court because of their concurrent negligence,
concluding that while there is no hard and fast rule as to what constitutes sufficient evidence to prove that
an employer has exercised the due diligence required of it in the selection and supervision of its
employees, based on the quantum of evidence adduced the said appellate court was not disposed to say
that MMTC had exercised the diligence required of a good father of a family in the selection and
supervision of its driver, Godofredo Leonardo. 14
The Court of Appeals was resolute in its conclusion and denied the motions for reconsideration of
appellee Custodio and appellant MMTC in a resolution dated February 17, 1982, 15 thus prompting
MMTC to file the instant petition invoking the review powers of this Court over the decision of the Court of
Appeals, raising as issues for resolution whether or not (1) the documentary evidence to support the

positive testimonies of witnesses Garbo and Bautista are still necessary; (2) the testimonies of witnesses
Garbo and Bautista may still be disturbed on appeal; and (3) the evidence presented during the trial with
respect to the proof of due diligence of petitioner MMTC in the selection and supervision of its employees,
particularly driver Leonardo, is sufficient.

Prefatorily, private respondent questions the timeliness of the filing of the petition at bar in view of
the procedural stricture that the timely perfection of an appeal is both a mandatory and jurisdictional
requirement. This is a legitimate concern on the part of private respondent and presents an
opportune occasion to once again clarify this point as there appears to be some confusion in the
application of the rules and interpretative rulings regarding the computation of reglementary periods
at this stage of the proceedings.
The records of this case reveal that the decision of respondent Court of Appeals, dated October 31,
1991, was received by MMTC on November 18, 1991 16 and it seasonably filed a motion for the
reconsideration thereof on November 28, 1991. 17 Said motion for reconsideration was denied by
respondent court in its resolution dated February 17, 1992, which in turn was received by MMTC on
March 9, 1992. 18 Therefore, it had, pursuant to Section 1, Rule 45 of the Rules of Court, fifteen (15) days
therefrom or up to March 24, 1992 within which to file its petition, for review on certiorari. Anticipating,
however, that it may not be able to file said petition before the lapse of the reglementary period therefor,
MMTC filed a motion on March 19, 1992 for an extension of thirty (30) days to file the present petition,
with proof of service of copies thereof to respondent court and the adverse parties. The Court granted
said motion, with the extended period to be counted from the expiration of the reglementary
period. 19 Consequently, private respondent had thirty (30) days from March 24, 1992 within which to file
its petition, or up to April 23, 1992, and the eventual filing of said petition on April 14, 1992 was well within
the period granted by the Court.
We digress to reiterate, in view of erroneous submissions that we continue to receive, that in the
case of a petition for review on certiorari from a decision rendered by the Court of Appeals, Section
1, Rule 45 of the Rules of Court, which has long since been clarified in Lacsamana vs. The Hon.
Second Special Cases Division of the Intermediate Appellate Court, et al., 20 allows the same to be
filed "within fifteen (15) days from notice of judgment or of the denial of the motion for reconsideration
filed in due time, and paying at the same time to the corresponding docket fee." In other words, in the
event a motion for reconsideration is filed and denied, the period of fifteen (15) days begins to run all over
again from notice of the denial resolution. Otherwise put, if a motion for reconsideration is filed, the
reglementary period within which to appeal the decision of the Court of Appeals to the Supreme Court is
reckoned from the date the party who intends to appeal received the order denying the motion for
reconsideration. 21 Furthermore, a motion for extension of time to file a petition for review may be filed with
this Court within said reglementary period, paying at the same time the corresponding docket fee.
1. The first two issues raised by petitioner shall be correlatively discussed in view of their
interrelation.
In its present petition, MMTC insists that the oral testimonies of its employees were presented as
witnesses in its behalf sufficiently prove, even without the presentation documentary evidence, that
driver Leonardo had complied with all the hiring and clearance requirements and had undergone all
trainings, tests and examinations preparatory to actual employment, and that said positive
testimonies spell out the rigid procedure for screening of job applicants and the supervision of its
employees in the field. It underscored the fact that it had indeed complied with the measure of
diligence in the selection and supervision of its employees as enunciated in Campo, et al. vs.
Camarote, et al. 22 requiring an employer, in the exercise of the diligence of a good father of a family, to
carefully examine the applicant for employment as to his qualifications, experience and record service,
and not merely be satisfied with the possession of a professional driver's license.

It goes on to say since the testimonies of these witnesses were allegedly neither discredited nor
impeached by the adverse party, they should be believed and not arbitrarily disregarded or rejected
nor disturbed on appeal. It assiduously argues that inasmuch as there is no law requiring that facts
alleged by petitioner be established by documentary evidence, the probative force and weight of
their testimonies should not be discredited, with the further note that the lower court having passed
upon the relevancy of the oral testimonies and considered the same as unrebutted, its consideration
should no longer be disturbed on appeal. 23
Private respondent, on the other hand, retorts that the factual findings of respondent court are
conclusive upon the High Court which cannot be burdened with the task of analyzing and weighing
the evidence all over again. 24
At this juncture, it suffices to note that factual findings of the trial court may be reversed by the Court
of Appeals, which is vested by law with the power to review both legal and factual issues, if on the
evidence of record, it appears that the trial court may have been mistaken 25 particularly in the
appreciation of evidence, which is within the domain of the Court of Appeals. 26 The general rule laid down
in a plethora of cases is that such findings of fact by the Court of Appeals are conclusive upon and
beyond the power of review of the Supreme Court. 27 However, it is now well-settled that while the findings
of fact of the Court of Appeals are entitled to great respect, and even finality at times, that rule is not
inflexible and is subject to well established exceptions, to wit: (1) when the conclusion is a finding
grounded entirely on speculation, surmises and conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) where there is grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of
Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to
those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence
on which they are based; (9) when the facts set forth in the petition, as well as in the petitioner's main and
reply briefs are not disputed by the respondents and (10) when the findings of fact of the Court of Appeals
are premised on the supposed absence of evidence and are contradicted by the evidence on record. 28
When as in this case, the findings of the Court of Appeals and the trial court are contrary to each
other, this court may scrutinize the evidence on record, 29 in order to arrive at a correct finding based
thereon. 30
A perusal of the same shows that since there is no dispute as to the finding of concurrent negligence
on the part of the defendant Calebag, the driver of the passenger jeepney, and co-defendant
Leonardo, the bus driver of petitioner MMTC, both of whom were solidarily held liable with defendant
Lamayo, the owner of the jeepney, we are spared the necessity of determining the sufficiency of
evidence establishing the fact of negligence. 31 The contrariety is in the findings of the two lower courts,
and which is the subject of this present controversy, with regard to the liability of MMTC as employer of
one the erring drivers.
The trial court, in absolving MMTC from liability ruled that
On the question as to whether defendant MMTC was successful in proving its
defense that indeed it had exercised the due diligence of a good father of a family in
the selection and supervision of defendant Leonardo, this Court finds that based on
the evidence presented during the trial, defendant MMTC was able to prove that it
was not only careful and diligent in choosing and screening applicants for job
openings but also strict (and) diligent in supervising its employees by seeing to it that
its employees were in proper uniforms, briefed in traffic rules and regulations before
the start of duty, checked employees to determine whether they were positive for
alcohol and followed other rules and regulations and guidelines of the Bureau of

Land Transportation as well as its company. Having successfully proven such


defense, defendant MMTC therefore, cannot be held liable for the accident.
Having reached this conclusion, the Court now, holds that defendant MMTC be
totally absolved from liability and that the complaint against it be dismissed. . . .

32

whereas respondent court was of the opinion that


It is surprising though that witness Milagros Garbo did not testify nor present any
evidence that defendant-appellee's driver, defendant Godofredo Leonardo has
complied with or has undergone all clearances and trainings she referred to. The
clearances, result of seminars and tests which Godofredo Leonardo submitted and
complied with, if any, were not presented in court despite the fact that they are
obviously in the possession and control of defendant-appellee. Instead, it resorted to
generalities. The Court has ruled that due diligence in (the) selection and supervision
of employee(s) are not proved by mere testimonies to the effect that its applicant has
complied with all the company requirements before one is admitted as an employee
but without proof thereof. . . .
On the part of Christian Bautista, the transport supervisor of defendant-appellee, he
testified that it is his duty to monitor the operation of buses in the field; to
countercheck the dispatchers' duty prior to the operation of the buses in the morning;
to see to it that bus crew follows written guidelines of the company (t.s.n., April 29,
1988, pp. 4-5), but when asked to present in court the alleged written guidelines of
the company he merely stated that he brought with him a "wrong document" and
defendant-appellee's counsel asked for reservation to present such written
guidelines in the next hearing but the same was (sic) never presented in court. 33
A thorough and scrupulous review of the records of this case reveals that the conclusion of
respondent Court of Appeals is more firmly grounded on jurisprudence and amply supported by the
evidence of record than that of the court below.
It is procedurally required for each party in a case to prove his own affirmative assertion by the
degree of evidence required by law. 34 In civil cases, the degree of evidence required of a party in order
to support his claim is preponderance of evidence, or that evidence adduced by one party which is more
conclusive and credible than that of the other party. It is, therefore, incumbent on the plaintiff who is
claiming a right to prove his case. Corollarily, defendant must likewise prove own allegation to buttress its
claim that it is not liable. 35
In fine, the party, whether plaintiff or defendant, who asserts the affirmative of the issue has the
burden of presenting at the trial such amount of evidence required by law to obtain a favorable
judgment. 36 It is entirely within each of the parties discretion, consonant with the theory of the case it or
he seeks to advance and subject to such procedural strategy followed thereby, to present all available
evidence at its or his disposal in the manner which may be deemed necessary and beneficial to prove its
or his position, provided only that the same shall measure up to the quantum of evidence required by law.
In making proof in its or his case, it is paramount that the best and most complete evidence be formally
entered. 37
Coming now to the case at bar, while there is no rule which requires that testimonial evidence, to
hold sway, must be corroborated by documentary evidence, or even subject evidence for that matter,
inasmuch as the witnesses' testimonies dwelt on mere generalities, we cannot consider the same as
sufficiently persuasive proof that there was observance of due diligence in the selection and

supervision of employees. 38 Petitioner's attempt to prove itsdiligentissimi patris familias in the selection
and supervision of employees through oral evidence must fail as it was unable to buttress the same with
any other evidence, object or documentary, which might obviate the apparent biased nature of the
testimony. 39
Our view that the evidence for petitioner MMTC falls short of the required evidentiary quantum as
would convincingly and undoubtedly prove its observance of the diligence of a good father of a
family has its precursor in the underlying rationale pronounced in the earlier case of Central Taxicab
Corp. vs. Ex-Meralco Employees Transportation Co., et al., 40 set amidst an almost identical factual
setting, where we held that:
. . . . This witness spoke of an "affidavit of experience" which a driver-applicant must
accomplish before he is employed by the company, a written "time schedule" for
each bus, and a record of the inspections and thorough checks pertaining to each
bus before it leaves the car barn; yet no attempt was ever made to present in
evidence any of these documents, despite the fact that they were obviously in the
possession and control of the defendant company.
xxx xxx xxx
Albert also testified that he kept records of the preliminary and final tests given him
as well as a record of the qualifications and experience of each of the drivers of the
company. It is rather strange, therefore, that he failed to produce in court the all
important record of Roberto, the driver involved in this case.
The failure of the defendant company to produce in court any "record" or other
documentary proof tending to establish that it had exercised all the diligence of a
good father of a family in the selection and supervision of its drivers and buses,
notwithstanding the calls therefor by both the trial court and the opposing counsel,
argues strongly against its pretensions.
We are fully aware that there is no hard-and-fast rule on the quantum of evidence
needed to prove due observance of all the diligence of a good father of a family as
would constitute a valid defense to the legal presumption of negligence on the part of
an employer or master whose employee has by his negligence, caused damage to
another. . . . (R)educing the testimony of Albert to its proper proportions, we do not
have enough trustworthy evidence left to go by. We are of the considered opinion,
therefore, that the believable evidence on the degree of care and diligence that has
been exercised in the selection and supervision of Roberto Leon y Salazar, is not
legally sufficient to overcome the presumption of negligence against the defendant
company.
Whether or not the diligence of a good father of a family has been observed by petitioner is a matter
of proof which under the circumstances in the case at bar has not been clearly established. It is not
felt by the Court that there is enough evidence on record as would overturn the presumption of
negligence, and for failure to submit all evidence within its control, assuming the putative existence
thereof, petitioner MMTC must suffer the consequences of its own inaction and indifference.
2. In any event, we do not find the evidence presented by petitioner sufficiently convincing to prove
the diligence of a good father of a family, which for an employer doctrinally translates into its
observance of due diligence in the selection and supervision of its employees but which mandate, to
use an oft-quoted phrase, is more often honored in the breach than in the observance.

Petitioner attempted to essay in detail the company's procedure for screening job applicants and
supervising its employees in the field, through the testimonies of Milagros Garbo, as its training
officer, and Christian Bautista, as its transport supervisor, both of whom naturally and expectedly
testified for MMTC. It then concluded with its sweeping pontifications that "thus, there is no doubt
that considering the nature of the business of petitioner, it would not let any applicant-drivers to be
(sic) admitted without undergoing the rigid selection and training process with the end (in) view of
protecting the public in general and its passengers in particular; . . . thus, there is no doubt that
applicant had fully complied with the said requirements otherwise Garbo should not have allowed
him to undertake the next set of requirements . . . and the training conducted consisting of seminars
and actual driving tests were satisfactory otherwise he should have not been allowed to drive the
subject vehicle. 41
These statements strike us as both presumptuous and in the nature of petitio principii, couched in
generalities and shorn of any supporting evidence to boost their verity. As earlier observed,
respondent court could not but express surprise, and thereby its incredulity, that witness Garbo
neither testified nor presented any evidence that driver Leonardo had complied with or had
undergone all the clearances and trainings she took pains to recite and enumerate. The supposed
clearances, results of seminars and tests which Leonardo allegedly submitted and complied with
were never presented in court despite the fact that, if true, then they were obviously in the
possession and control of petitioner. 42
The case at bar is clearly within the coverage of Article 2176 and 2177, in relation to Article 2180, of
the Civil Code provisions on quasi-delicts as all the elements thereof are present, to wit: (1)
damages suffered by the plaintiff, (2) fault or negligence of the defendant or some other person for
whose act he must respond, and (3) the connection of cause and effect between fault or negligence
of the defendant and the damages incurred by plaintiff. 43 It is to be noted that petitioner was originally
sued as employer of driver Leonardo under Article 2180, the pertinent parts of which provides that:
The obligation imposed by article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for 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.
xxx xxx xxx
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage.
The basis of the employer's vicarious liability has been explained under this ratiocination:
The responsibility imposed by this article arises by virtue of a presumption juris
tantum of negligence on the part of the persons made responsible under the article,
derived from their failure to exercise due care and vigilance over the acts of
subordinates to prevent them from causing damage. Negligence is imputed to them
by law, unless they prove the contrary. Thus, the last paragraph of the article says
that such responsibility ceases if is proved that the persons who might be held
responsible under it exercised the diligence of a good father of a family (diligentissimi

patris familias) to prevent damage. It is clear, therefore, that it is not representation,


nor interest, nor even the necessity of having somebody else answer for the
damages caused by the persons devoid of personality, but it is the non-performance
of certain duties of precaution and prudence imposed upon the persons who become
responsible by civil bond uniting the actor to them, which forms the foundation of
such responsibility. 44
The above rule is, of course, applicable only where there is an employer-employee relationship,
although it is not necessary that the employer be engaged in business or industry. Whether or not
engaged in any business or industry, the employer under Article 2180 is liable for torts committed by
his employees within the scope of their assigned tasks. But, it is necessary first to establish the
employment relationship. Once this is done, the plaintiff must show, to hold the employer liable, that
the employee was acting within the scope of his assigned task when the tort complained of was
committed. It is only then that the defendant, as employer, may find it necessary to interpose the
defense of due diligence in the selection and supervision of employees. 45 The diligence of a good
father of a family required to be observed by employers to prevent damages under Article 2180 refers to
due diligence in the selection and supervision of employees in order to protect the public. 46
With the allegation and subsequent proof of negligence against the defendant driver and of an
employer-employee relation between him and his co-defendant MMTC in this instance, the case in
undoubtedly based on aquasi-delict under Article 2180 47 When the employee causes damage due to
his own negligence while performing his own duties, there arises the juris tantum presumption that the
employer is negligent, 48 rebuttable only by proof of observance of the diligence of a good father of a
family. For failure to rebut such legal presumption of negligence in the selection and supervision of
employees, the employer is likewise responsible for damages, 49 the basis of the liability being the
relationship of pater familias or on the employer's own negligence. 50
As early as the case of Gutierrez vs. Gutierrez, 51 and thereafter, we have consistently held that where
the injury is due to the concurrent negligence of the drivers of the colliding vehicles, the drivers and
owners of the said vehicles shall be primarily, directly and solidarily liable for damages and it is immaterial
that one action is based on quasi-delict and the other on culpa contractual, as the solidarily of the
obligation is justified by the very nature thereof. 52
It should be borne in mind that the legal obligation of employers to observe due diligence in the
selection and supervision of employees is not to be considered as an empty play of words or a mere
formalism, as appears to be the fashion of the times, since the non-observance thereof actually
becomes the basis of their vicarious liability under Article 2180.
On the matter of selection of employees, Campo vs. Camarote, supra, lays down this admonition:
. . . . In order tat the owner of a vehicle may be considered as having exercised all
diligence of a good father of a family, he should not have been satisfied with the
mere possession of a professional driver's license; he should have carefully
examined the applicant for employment as to his qualifications, his experience and
record of service. These steps appellant failed to observe; he has therefore, failed to
exercise all due diligence required of a good father of a family in the choice or
selection of driver.
Due diligence in the supervision of employees, on the other hand, includes the formulation of
suitable rules and regulations for the guidance of employees and the issuance of proper instructions
intended for the protection of the public and persons with whom the employer has relations through
his or its employees and the imposition of necessary disciplinary measures upon employees in case
of breach or as may be warranted to ensure the performance of acts indispensable to the business

of and beneficial to their employer. 53 To this, we add that actual implementation and monitoring of
consistent compliance with said rules should be the constant concern of the employer, acting through
dependable supervisors who should regularly report on their supervisory functions.
In order that the defense of due diligence in the selection and supervision of employees may be
deemed sufficient and plausible, it is not enough to emptily invoke the existence of said company
guidelines and policies on hiring and supervision. As the negligence of the employee gives rise to
the presumption of negligence on the part of the employer, the latter has the burden of proving that it
has been diligent not only in the selection of employees but also in the actual supervision of their
work. The mere allegation of the existence of hiring procedures and supervisory policies, without
anything more, is decidedly not sufficient to overcome presumption.
We emphatically reiterate our holding, as a warning to all employers, that "(t)he mere formulation of
various company policies on safety without showing that they were being complied with is not
sufficient to exempt petitioner from liability arising from negligence of its employees. It is incumbent
upon petitioner to show that in recruiting and employing the erring driver the recruitment procedures
and company policies on efficiency and safety were followed." 54 Paying lip-service to these injunctions
or merely going through the motions of compliance therewith will warrant stern sanctions from the Court.
These obligations, imposed by the law and public policy in the interests and for the safety of the
commuting public, herein petitioner failed to perform. Respondent court was definitely correct in
ruling that ". . . due diligence in the selection and supervision of employee (is) not proved by mere
testimonies to the effect that its applicant has complied with all the company requirements before
one is admitted as an employee but without proof thereof." 55 It is further a distressing commentary on
petitioner that it is a government-owned public utility, maintained by public funds, and organized for the
public welfare.
The Court it is necessary to once again stress the following rationale behind these all-important
statutory and jurisprudential mandates, for it has been observed that despite its pronouncement
in Kapalaran Bus Line vs. Coronado, et al., supra, there has been little improvement in the transport
situation in the country:
In requiring the highest possible degree of diligence from common carriers and
creating a presumption of negligence against them, the law compels them to curb the
recklessness of their drivers. While the immediate beneficiaries of the standard of
extraordinary diligence are, of course, the passengers and owners of the cargo
carried by a common carrier, they are not the only persons that the law seeks to
benefit. For if common carriers carefully observe the statutory standard of
extraordinary diligence in respect of their own passengers, they cannot help but
simultaneously benefit pedestrians and the owners and passengers of other vehicles
who are equally entitled to the safe and convenient use of our roads and highways.
The law seeks to stop and prevent the slaughter and maiming of people (whether
passengers or not) and the destruction of property (whether freight or not) on our
highways by buses, the very size and power of which seem often to inflame the
minds of their drivers. . . .
Finally, we believe that respondent court acted in the exercise of sound discretion when it affirmed
the trial court's award, without requiring the payment of interest thereon as an item of damages just
because of delay in the determination thereof, especially since private respondent did not specifically
pray therefor in her complaint. Article 2211 of the Civil Code provides that in quasi-delicts, interest as
a part of the damages may be awarded in the discretion of the court, and not as a matter of right. We

do not perceive that there have been international dilatory maneuvers or any special circumstances
which would justify that additional award and, consequently, we find no reason to disturb said ruling.
WHEREFORE, the impugned decision of respondent Court of Appeals is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J. and Nocon, JJ., concur.
Padilla, J., is on leave.

# Footnotes
1 Rollo, 24-25.
2 Civil Case No. C-8176, entitled "Nenita R. Custodio, assisted by her parents,
Rodolfo A. Custodio and Gloria R. Custodio vs. Agudo R. Calebag, Victorino
Lamayo, Godofredo C. Leonardo, and Metro Manila Transit Corporation," Court of
First Instance of Rizal, Branch 35, Caloocan City; Original Record, 1-4.
3 Ibid., 17-22.
4 Ibid., 36-41.
5 Ibid., 54.
6 Ibid., 57.
7 TSN, September 2, 1982, 4-16.
8 Ibid., June 10, 1988, 3-12.
9 Ibid., April 29, 1988, 2-8.
10 Civil Case No. 8176, Regional Trial Court, Branch 125, Caloocan City; Judge
Geronimo S. Mangay, presiding.
11 Original Record, 177.
12 Ibid., 178-181.
13 Ibid., 195.
14 Ca-G.R. CV No. 24680; per Justice Regina G. Ordoez-Benitez, with Justices
Jose A.R. Melo and Emilio C. Cui, concurring; Rollo, 24-30.
15 Rollo, 33-34.

16 Ibid., 2.
17 Ibid., CA-G.R CV No. 24680, 63-72.
18 Rollo, 2.
19 Ibid., 7.
20 143 SCRA 643 (1986).
21 American General Insurance Co. vs. Intermediate Appellee Court, et al., 150
SCRA 133 (1987).
22 100 Phil. 459 (1956).
23 Memorandum for Petitioner, 11-15; Rollo, 16-21.
24 Comment of Private Respondent, 3-4; Rollo, 47-48.
25 San Miguel Corporation vs. Court of Appeals, et al., 185 SCRA 722 (1990).
26 Medina vs. Asistio, Jr., et al., 191 SCRA 218 (1990).
27 Cathay Insurance Co. vs. Court of Appeals, e al., 151 SCRA 710 (1987);
Hernandez vs. Court of Appeals, et al., 160 SCRA 821 (1988); Philippine National
Bank vs. Court of Appeals, et al., 183 SCRA 133 (1990); BA Finance Corporation vs.
Court of Appeals, et al., 201 SCRA 157 (1991).
28 Manlapaz vs. Court of Appeals, et al., 147 SCRA 236 (1987); Medina vs. Asistio,
Jr., supra; Calalang vs. Intermediate Appellate Court, et al., 194 SCRA 514 (1991).
29 Valenzuela, et al. vs. Court of Appeals, et al., 191 SCRA 1 (1991).
30 Roman Catholic Bishop of Malolos, et al. vs. Intermediate Appellate Court, et al.,
191 SCRA 411 (1990).
31 Cea vs. Villanueva, 18 Phil. 538 (1911); Barcelo, etc. vs. The Manila Electric
Railroad and Light Company, 29 Phil. 351 (1915); De la Riva vs. Molina, 32 Phil. 277
(1915); Agdoro vs. Philippine Mining Industrial Co., 45 Phil. 816 (1924).
32 Annex C, Petition; Rollo, 41-42.
33 Annex B, ibid.; id., 28-29.
34 Section 1, Rule 131, Rules of Court.
35 Stronghold Insurance Company, Inc. vs. Court of Appeals, et al., 173 SCRA 619
(1989).

36 Republic vs. Court of Appeals, et al., 182 SCRA 290 (1990), citing Tai Tong
Chuache & Co. vs. The Insurance Commission, et al., 158 SCRA 366 (1988);
Republic vs. Court of Appeals, et al., 204 SCRA 160 (1991).
37 U.S. vs. Tria, 17 Phil. 303 (1910).
38 See Pleno vs. Court of Appeals, et al., 161 SCRA 160 (1991).
39 See Garcia, et al. vs. Gonzales, et al., 183 SCRA 72 (1990).
40 54 O.G., No. 31, 7415 (1958).
41 Petition, 6-7; Rollo, 14-15.
42 Supra, Fn. 34.
43 Andamo, et al. vs. Intermediate Appellate Court, et al., 191 SCRA 195 (1990).
44 Tolentino, A., Commentaries and Jurisprudence on the Civil Code of the
Philippines, Vol. V, 1959 ed., 519.
45 Martin vs. Court of Appeals, et al., 205 SCRA 591 (1992).
46 Barredo vs. Garcia, 73 Phil. 607 (1942).
47 Lanuzo vs. Ping, et al., 100 SCRA 205 (1980).
48 Bahia vs. Litonjua, et al., 30 Phil. 624 (1915); Campo vs. Camarote, supra;
Phoenix Construction, Inc. vs. Intermediate Appellate Court, et al., 148 SCRA 353
(1987); McKee, et al. vs. Intermediate Appellate Court, et al., 211 SCRA 517 (1992).
49 Lanuzo vs. Ping, et al., supra, and cases cited therein.
50 Bahia vs. Litonjua, et al., supra; Yamada vs. Manila Railroad Co., 33 Phil. 8
(1915); McKee, et al. vs. Intermediate Appellate Court, et al., supra.
51 56 Phil. 177 (1913); Cf. Barredo vs. Garcia, supra; Viluan vs. Court of Appeals, et
al., 16 SCRA 742, (1966); Anuran vs. Buo, 17 SCRA 224 (1966); Malipol vs. Tan, 55
SCRA 202 (1974); Poblete vs. Fabron, 93 SCRA 200 (1979); Pleno vs. Court of
Appeals, et al., supra; Kapalaran Bus Line vs. Coronado, 176 SCRA 792 (1989).
52 Art. 1207, Civil Code.
53 Filamer Christian Institute vs. Intermediate Appellate Court, et al., 212 SCRA 637
(1992).
54 Pantranco North Express Inc. vs. Baesa, 179 SCRA 384 (1989). See also Franco,
et al. vs. Intermediate Appellate Court, et al., 178 SCRA 331 (1989).
55 Rollo, 28.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 85044 June 3, 1992


MACARIO TAMARGO, CELSO TAMARGO and AURELIA TAMARGO, petitioners,
vs.
HON. COURT OF APPEALS, THE HON. ARISTON L. RUBIO, RTC Judge, Branch 20, Vigan,
Ilocos Sur; VICTOR BUNDOC; and CLARA BUNDOC, respondents.

FELICIANO, J.:
On 20 October 1982, Adelberto Bundoc, then a minor of 10 years of age, shot Jennifer Tamargo with
an air rifle causing injuries which resulted in her death. Accordingly, a civil complaint for damages
was filed with the Regional Trial Court, Branch 20, Vigan, Ilocos Sur, docketed as Civil Case No.
3457-V, by petitioner Macario Tamargo, Jennifer's adopting parent, and petitioner spouses Celso and
Aurelia Tamargo, Jennifer's natural parents against respondent spouses Victor and Clara Bundoc,
Adelberto's natural parents with whom he was living at the time of the tragic incident. In addition to
this case for damages, a criminal information or Homicide through Reckless Imprudence was filed
[Criminal Case No. 1722-V] against Adelberto Bundoc. Adelberto, however, was acquitted and
exempted from criminal liability on the ground that he bad acted without discernment.
Prior to the incident, or on 10 December 1981, the spouses Sabas and Felisa Rapisura had filed a
petition to adopt the minor Adelberto Bundoc in Special Proceedings No. 0373-T before the then
Court of First Instance of Ilocos Sur. This petition for adoption was grunted on, 18 November 1982,
that is, after Adelberto had shot and killed Jennifer.
In their Answer, respondent spouses Bundoc, Adelberto's natural parents, reciting the result of the
foregoing petition for adoption, claimed that not they, but rather the adopting parents, namely the
spouses Sabas and Felisa Rapisura, were indispensable parties to the action since parental
authority had shifted to the adopting parents from the moment the successful petition for adoption
was filed.
Petitioners in their Reply contended that since Adelberto Bundoc was then actually living with his
natural parents, parental authority had not ceased nor been relinquished by the mere filing and
granting of a petition for adoption.

The trial court on 3 December 1987 dismissed petitioners' complaint, ruling that respondent natural
parents of Adelberto indeed were not indispensable parties to the action.
Petitioners received a copy of the trial court's Decision on 7 December 1987. Within the 15-day
reglementary period, or on 14 December 1987, petitioners filed a motion for reconsideration followed
by a supplemental motion for reconsideration on 15 January 1988. It appearing, however, that the
motions failed to comply with Sections 4 and 5 of Rule 15 of the Revised Rules of Court that
notice of the motion shall be given to all parties concerned at least three (3) days before the hearing
of said motion; and that said notice shall state the time and place of hearing both motions were
denied by the trial court in an Order dated 18 April 1988. On 28 April 1988, petitioners filed a notice
of appeal. In its Order dated 6 June 1988, the trial court dismissed the notice at appeal, this time
ruling that the notice had been filed beyond the 15-day reglementary period ending 22 December
1987.
Petitioners went to the Court of Appeals on a petition for mandamus and certiorari questioning the
trial court's Decision dated 3 December 1987 and the Orders dated 18 April 1988 and 6 June 1988,
The Court of Appeals dismissed the petition, ruling that petitioners had lost their right to appeal.
In the present Petition for Review, petitioners once again contend that respondent spouses Bundoc
are the indispensable parties to the action for damages caused by the acts of their minor child,
Adelberto Bundoc. Resolution of this Petition hinges on the following issues: (1) whether or not
petitioners, notwithstanding loss of their right to appeal, may still file the instant Petition; conversely,
whether the Court may still take cognizance of the case even through petitioners' appeal had been
filed out of time; and (2) whether or not the effects of adoption, insofar as parental authority is
concerned may be given retroactive effect so as to make the adopting parents the indispensable
parties in a damage case filed against their adopted child, for acts committed by the latter, when
actual custody was yet lodged with the biological parents.
1. It will be recalled that, petitioners' motion (and supplemental motion) for reconsideration filed
before the trial court, not having complied with the requirements of Section 13, Rule 41, and Section
4, Rule 15, of the Revised Rules of Court, were considered pro forma and hence did not interrupt
and suspend the reglementary period to appeal: the trial court held that the motions, not having
contained a notice of time and place of hearing, had become useless pieces of paper which did not
interrupt the reglementary period. 1 As in fact repeatedly held by this Court, what is mandatory is the
service of the motion on the opposing counsel indicating the time and place of hearing. 2
In view, however, of the nature of the issue raised in the instant. Petition, and in order that
substantial justice may be served, the Court, invoking its right to suspend the application of technical
rules to prevent manifest injustice, elects to treat the notice of appeal as having been seasonably
filed before the trial court, and the motion (and supplemental motion) for reconsideration filed by
petitioner in the trial court as having interrupted the reglementary period for appeal. As the Court
held in Gregorio v. Court of Appeals: 3
Dismissal of appeal; purely on technical grounds is frowned upon where the policy of
the courts is to encourage hearings of appeal on their merits. The rules of procedure
ought not be applied in a very rigid technical sense, rules of procedure are used only
to help secure not override, substantial justice. if d technical and rigid enforcement of
the rules is made their aim would be defeated. 4
2. It is not disputed that Adelberto Bundoc's voluntary act of shooting Jennifer Tamargo with an air
rifle gave rise to a cause of action on quasi-delict against him. As Article 2176 of the Civil Code
provides:

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 . . .
Upon the other hand, the law imposes civil liability upon the father and, in case of his death or
incapacity, the mother, for any damages that may be caused by a minor child who lives with them.
Article 2180 of the Civil Code reads:
The obligation imposed by article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the
damages caused by the minor children who live in their company.
xxx xxx xxx
The responsibility treated of in this Article shall cease when the person herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage. (Emphasis supplied)
This principle of parental liability is a species of what is frequently designated as vicarious liability, or
the doctrine of "imputed negligence" under Anglo-American tort law, where a person is not only liable
for torts committed by himself, but also for torts committed by others with whom he has a certain
relationship and for whom he is responsible. Thus, parental liability is made a natural or logical
consequence of the duties and responsibilities of parents their parental authority which
includes the instructing, controlling and disciplining of the child. 5 The basis for the doctrine of vicarious
liability was explained by the Court in Cangco v. Manila Railroad Co. 6 in the following terms:
With respect to extra-contractual obligation arising from negligence, whether of act or
omission, it is competent for the legislature to elect and our Legislature has so
elected to limit such liability to cases in which the person upon whom such an
obligation is imposed is morally culpable or, on the contrary, for reasons of public
policy. to extend that liability, without regard to the lack of moral culpability, so as to
include responsibility for the negligence of those persons whose acts or omissions
are imputable, by a legal fiction, to others who are in a position to exercise an
absolute or limited control over them. The legislature which adopted our Civil Code
has elected to limit extra-contractual liability with certain well-defined exceptions
to cases in which moral culpability can be directly imputed to the persons to be
charged. This moral responsibility may consist in having failed to exercise due care
in one's own acts, or in having failed to exercise due care in the selection and control
of one's agent or servants, or in the control of persons who, by reasons of their
status, occupy a position of dependency with respect to the person made liable for
their conduct. 7(Emphasis Supplied)
The civil liability imposed upon parents for the torts of their minor children living with them,
may be seen to be based upon the parental authority vested by the Civil Code upon such
parents. The civil law assumes that when an unemancipated child living with its parents
commits a tortious acts, the parents were negligent in the performance of their legal and
natural duty closely to supervise the child who is in their custody and control. Parental
liability is, in other words, anchored upon parental authority coupled with presumed parental
dereliction in the discharge of the duties accompanying such authority. The parental
dereliction is, of course, only presumed and the presumption can be overtuned under Article

2180 of the Civil Code by proof that the parents had exercised all the diligence of a good
father of a family to prevent the damage.
In the instant case, the shooting of Jennifer by Adelberto with an air rifle occured when parental
authority was still lodged in respondent Bundoc spouses, the natural parents of the minor Adelberto.
It would thus follow that the natural parents who had then actual custody of the minor Adelberto, are
the indispensable parties to the suit for damages.
The natural parents of Adelberto, however, stoutly maintain that because a decree of adoption was
issued by the adoption court in favor of the Rapisura spouses, parental authority was vested in the
latter as adopting parents as of the time of the filing of the petition for adoption that
is, before Adelberto had shot Jennifer which an air rifle. The Bundoc spouses contend that they were
therefore free of any parental responsibility for Adelberto's allegedly tortious conduct.
Respondent Bundoc spouses rely on Article 36 of the Child and Youth Welfare Code

8 which reads as

follows:

Art. 36. Decree of Adoption. If, after considering the report of the Department of
Social Welfare or duly licensed child placement agency and the evidence submitted
before it, the court is satisfied that the petitioner is qualified to maintain, care for, and
educate the child, that the trial custody period has been completed, and that the best
interests of the child will be promoted by the adoption, a decree of adoption shall be
entered, which shall be effective he date the original petition was filed. The decree
shall state the name by which the child is thenceforth to be known. (Emphasis
supplied)
The Bundoc spouses further argue that the above Article 36 should be read in relation to
Article 39 of the same Code:
Art. 39. Effect of Adoption. The adoption shall:
xxx xxx xxx
(2) Dissolve the authority vested in the natural parents, except where the adopter is
the spouse of the surviving natural parent;
xxx xxx xxx
(Emphasis supplied)
and urge that their Parental authority must be deemed to have been dissolved as of the time the
Petition for adoption was filed.
The Court is not persuaded. As earlier noted, under the Civil Code, the basis of parental liability for
the torts of a minor child is the relationship existing between the parents and the minor child living
with them and over whom, the law presumes, the parents exercise supervision and control. Article
58 of the Child and Youth Welfare Code, re-enacted this rule:
Article 58 Torts Parents and guardians are responsible for the damage caused by
the child under their parental authority in accordance with the civil Code. (Emphasis
supplied)

Article 221 of the Family Code of the Philippines 9 has similarly insisted upon the requisite that the
child, doer of the tortious act, shall have beer in the actual custody of the parents sought to be held liable
for the ensuing damage:
Art. 221. Parents and other persons exercising parental authority shall be civilly liable
for the injuries and damages caused by the acts or omissions of their unemancipated
children living in their company and under their parental authority subject to the
appropriate defenses provided by law. (Emphasis supplied)
We do not believe that parental authority is properly regarded as having been retroactively
transferred to and vested in the adopting parents, the Rapisura spouses, at the time the air rifle
shooting happened. We do not consider that retroactive effect may be giver to the decree of
adoption so as to impose a liability upon the adopting parents accruing at a time when adopting
parents had no actual or physically custody over the adopted child. Retroactive affect may perhaps
be given to the granting of the petition for adoption where such is essential to permit the accrual of
some benefit or advantage in favor of the adopted child. In the instant case, however, to hold that
parental authority had been retroactively lodged in the Rapisura spouses so as to burden them with
liability for a tortious act that they could not have foreseen and which they could not have prevented
(since they were at the time in the United States and had no physical custody over the child
Adelberto) would be unfair and unconscionable. Such a result, moreover, would be inconsistent with
the philosophical and policy basis underlying the doctrine of vicarious liability. Put a little differently,
no presumption of parental dereliction on the part of the adopting parents, the Rapisura spouses,
could have arisen since Adelberto was not in fact subject to their control at the time the tort was
committed.
Article 35 of the Child and Youth Welfare Code fortifies the conclusion reached above. Article 35
provides as follows:
Art. 35. Trial Custody. No petition for adoption shall be finally granted unless and
until the adopting parents are given by the courts a supervised trial custody period of
at least six months to assess their adjustment and emotional readiness for the legal
union. During the period of trial custody, parental authority shall be vested in the
adopting parents. (Emphasis supplied)
Under the above Article 35, parental authority is provisionally vested in the adopting parents during
the period of trial custody, i.e., before the issuance of a decree of adoption, precisely because the
adopting parents are given actual custody of the child during such trial period. In the instant case,
the trial custody period either had not yet begun or bad already been completed at the time of the air
rifle shooting; in any case, actual custody of Adelberto was then with his natural parents, not the
adopting parents.
Accordingly, we conclude that respondent Bundoc spouses, Adelberto's natural parents, were
indispensable parties to the suit for damages brought by petitioners, and that the dismissal by the
trial court of petitioners' complaint, the indispensable parties being already before the court,
constituted grave abuse of discretion amounting to lack or excess of jurisdiction.
WHEREFORE, premises considered, the Petition for Review is hereby GRANTED DUE COURSE
and the Decision of the Court of Appeals dated 6 September 1988, in C.A.-G.R. No. SP-15016 is
hereby REVERSED and SET ASIDE. Petitioners' complaint filed before the trial court is hereby
REINSTATED and this case is REMANDED to that court for further proceedings consistent with this
Decision. Costs against respondent Bundoc spouses. This Decision is immediately executory.

SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, concur.

Footnotes
1 Pojas v. Hon. Gozo-Dalole, 192 SCRA 575 (1990).
2 Fecundo v. Berjamen, 180 SCRA 235 (1989); Filipinas Fabricators and Sales, Inc.
v. Magsino, 157 SCRA 469 (1988).
3 72 SCRA 120 (1976).
4 Id., at 126.
5 See in this connection. Art. 311, 316. 357, Civil Code; Exconde v. Capuno, 101
Phil. 843 (1957).
6 38 Phil. 768 (1918).
7 Id., at 775-776.
8 Presidential Decree No. 603, dated 10 December 1974.
9 Executive Order No. 209, dated 6 July 1967.
The Lawphil Project - Arellano Law Foundation

EN BANC
[G.R. No. 70890. September 18, 1992.]
CRESENCIO LIBI * and AMELIA YAP LIBI, Petitioners, v. HON. INTERMEDIATE APPELLATE
COURT, FELIPE GOTIONG and SHIRLEY GOTIONG, Respondents.
Alex Y. Tan, for Petitioners.
Mario D. Ortiz and Danilo V. Ortiz for Private Respondents.

SYLLABUS

1. CIVIL LAW; QUASI DELICT; LIABILITY OF PARENTS FOR CIVIL LIABILITY ARISING FROM CRIMINAL
OFFENSES COMMITTED BY THEIR MINOR CHILDREN; RULE. The parents are and should be held primarily
liable for the civil liability arising from criminal offenses committed by their minor children under their legal
authority or control, or who live in their company, unless it is proven that the former acted with the diligence
of a good father of a family to prevent such damages. That primary liability is premised on the provisions of
Article 101 of the Revised Penal Code with respect to damages ex delicto caused by their children 9 years of

age or under, or over 9 but under 15 years of age who acted without discernment; and, with regard to their
children over 9 but under 15 years of age who acted with discernment, or 15 years or over but under 21
years of age, such primary liability shall be imposed pursuant to Article 2180 of the Civil Code. Under said
Article 2180, the enforcement of such liability shall be effected against the father and, in case of his death or
incapacity, the mother. This was amplified by the Child and Youth Welfare Code which provides that the
same shall devolve upon the father and, in case of his death or incapacity, upon the mother or, in case of her
death or incapacity, upon the guardian, but the liability may also be voluntarily assumed by a relative or
family friend of the youthful offender. However, under the Family Code, this civil liability is now, without such
alternative qualification, the responsibility of the parents and those who exercise parental authority over the
minor offender. For civil liability arising from quasi-delicts committed by minors, the same rules shall apply
in accordance with Articles 2180 and 2182 of the Civil Code, as so modified.

DECISION

REGALADO, J.:

One of the ironic verities of life, it has been said, is that sorrow is sometimes a touchstone of love. A tragic
illustration is provided by the instant case, wherein two lovers died while still in the prime of their years, a
bitter episode for those whose lives they have touched. While we cannot expect to award complete
assuagement to their families through seemingly prosaic legal verbiage, this disposition should at least
terminate the acrimony and rancor of an extended judicial contest resulting from the unfortunate
occurrence.
In this final denouement of the judicial recourse the stages whereof were alternately initiated by the parties,
petitioners are now before us seeking the reversal of the judgment of respondent court promulgated on
January 2, 1985 in AC-G.R. CV No. 69060 with the following decretal portion:
jgc:chanroble s.com.ph

"WHEREFORE, the decision of the lower court dismissing plaintiffs complaint is hereby reversed; and
instead, judgment is hereby rendered sentencing defendants, jointly and solidarily, to pay to plaintiffs the
following amounts:
chanrobles.com : virtual law library

1. Moral damages, P30,000.000;


2. Exemplary damages, P10,000.00;
3. Attorneys fees, P20,000.00, and costs.
However, denial of defendants-appellees counterclaims is affirmed." 1
Synthesized from the findings of the lower courts, it appears that respondent spouses are the legitimate
parents of Julie Ann Gotiong who, at the time of the deplorable incident which took place and from which
she died on January 14, 1979, was an 18-year old first year commerce student of the University of San
Carlos, Cebu City; while petitioners are the parents of Wendell Libi, then a minor between 18 and 19 years
of age living with his aforesaid parents, and who also died in the same event on the same date.
For more than two (2) years before their deaths, Julie Ann Gotiong and Wendell Libi were sweethearts until
December, 1978 when Julie Ann broke up her relationship with Wendell after she supposedly found him to be
sadistic and irresponsible. During the first and second weeks of January, 1979, Wendell kept pestering Julie
Ann with demands for reconciliation but the latter persisted in her refusal, prompting the former to resort to
threats against her. In order to avoid him, Julie Ann stayed in the house of her best friend, Malou Alfonso, at
the corner of Maria Cristina and Juana Osmea Streets, Cebu City, from January 7 to 13, 1978.
On January 14, 1979, Julie Ann and Wendell died, each from a single gunshot wound inflicted with the same
firearm, a Smith and Wesson revolver licensed in the name of petitioner Cresencio Libi, which was recovered
from the scene of the crime inside the residence of private respondents at the corner of General Maxilom
and D. Jakosalem streets of the same city.
Due to the absence of an eyewitness account of the circumstances surrounding the death of both minors,

their parents, who are the contending parties herein, posited their respective theories drawn from their
interpretation of circumstantial evidence, available reports, documents and evidence of physical facts.
Private respondents, bereaved over the death of their daughter, submitted that Wendell caused her death by
shooting her with the aforesaid firearm and, thereafter, turning the gun on himself to commit suicide. On the
other hand, Petitioners, puzzled and likewise distressed over the death of their son, rejected the imputation
and contended that an unknown third party, whom Wendell may have displeased or antagonized by reason
of his work as a narcotics informer of the Constabulary Anti-Narcotics Unit (CANU), must have caused
Wendells death and then shot Julie Ann to eliminate any witness and thereby avoid identification.
chanroble s.com:cralaw:red

As a result of the tragedy, the parents of Julie Ann filed Civil Case No. R-17774 in the then Court of First
Instance of Cebu against the parents of Wendell to recover damages arising from the latters vicarious
liability under Article 2180 of the Civil Code. After trial, the court below rendered judgment on October 20,
1980 as follows:
jgc:chanroble s.com.ph

"WHEREFORE, premises duly considered, judgment is hereby rendered dismissing plaintiffs complaint for
insufficiency of the evidence. Defendants counterclaim is likewise denied for lack of sufficient merit." 2
On appeal to respondent court, said judgment of the lower court dismissing the complaint of therein
plaintiffs-appellants was set aside and another judgment was rendered against defendants-appellees who, as
petitioners in the present appeal by certiorari, now submit for resolution the following issues in this case:
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1. Whether or not respondent court correctly reversed the trial court in accordance with established
decisional laws; and
2. Whether or not Article 2180 of the Civil Code was correctly interpreted by respondent court to make
petitioners liable for vicarious liability. 3
In the proceedings before the trial court, Dr. Jesus P. Cerna, Police Medico-Legal Officer of Cebu, submitted
his findings and opinions on some postulates for determining whether or not the gunshot wound was
inflicted on Wendell Libi by his own suicidal act. However, undue emphasis was placed by the lower court on
the absence of gunpowder or tattooing around the wound at the point of entry of the bullet. It should be
emphasized, however, that this is not the only circumstance to be taken into account in the determination of
whether it was suicide or not.
It is true that said witness declared that he found no evidence of contact or close-contact of an explosive
discharge in the entrance wound. However, as pointed out by private respondents, the body of deceased
Wendell Libi must have been washed at the funeral parlor, considering the hasty interment thereof a little
after eight (8) hours from the occurrence wherein he died. Dr. Cerna himself could not categorically state
that the body of Wendell Libi was left untouched at the funeral parlor before he was able to conduct his
autopsy. It will also be noted that Dr. Cerna was negligent in not conducting a paraffin test on Wendell Libi,
hence possible evidence of gunpowder residue on Wendells hands was forever lost when Wendell was hastily
buried.
cralawnad

More specifically, Dr. Cerna testified that he conducted an autopsy on the body of Wendell Libi about eight
(8) hours after the incident or, to be exact, eight (8) hours and twenty (20) minutes based on the record of
death; that when he arrived at the Cosmopolitan Funeral Homes, the body of the deceased was already on
the autopsy table and in the stage of rigor mortis; and that said body was not washed, but it was dried. 4
However, on redirect examination, he admitted that during the 8-hour interval, he never saw the body nor
did he see whether said body was wiped or washed in the area of the wound on the head which he examined
because the deceased was inside the morgue. 5 In fact, on cross-examination, he had earlier admitted that
as far as the entrance of the wound, the trajectory of the bullet and the exit of the wound are concerned, it
is possible that Wendell Libi shot himself. 6
He further testified that the muzzle of the gun was not pressed on the head of the victim and that he found
no burning or singeing of the hair or extensive laceration on the gunshot wound of entrance which are
general characteristics of contact or near-contact fire. On direct examination, Dr. Cerna nonetheless made
these clarification:
jgc:chanrobles.com .ph

"Q Is it not a fact that there are certain guns which are so made that there would be no black residue or
tattooing that could result from these guns because they are what we call clean?

A Yes, sir. I know that there are what we call smokeless powder.
ATTY. ORTIZ:

chanrob1es virtual 1aw library

Q Yes. So, in cases, therefore, of guns where the powder is smokeless, those indications that you said may
not rule out the possibility that the gun was closer than 24 inches, is that correct?
A If the . . . assuming that the gun used was .. the bullet used was a smokeless powder.
Q At any rate, doctor, from . . . disregarding those other matters that you have noticed, the singeing, etc.,
from the trajectory, based on the trajectory of the bullet as shown in your own sketch, is it not a fact that
the gun could have been fired by the person himself, the victim himself, Wendell Libi, because it shows a
point of entry a little above the right ear and point of exit a little above that, to be very fair and on your
oath?
A As far as the point of entrance is concerned and as far as the trajectory of the bullet is concerned and as
far as the angle or the manner of fire is concerned, it could have been fired by the victim." 7
As shown by the evidence, there were only two used bullets 8 found at the scene of the crime, each of which
were the bullets that hit Julie Ann Gotiong and Wendell Libi, respectively. Also, the sketch prepared by the
Medico-Legal Division of the National Bureau of Investigation, 9 shows that there is only one gunshot wound
of entrance located at the right temple of Wendell Libi. The necropsy report prepared by Dr. Cerna states:
chanrob1es virtual 1aw

library

"Gunshot wound, ENTRANCE, ovaloid, 0.5 x 0.4 cm., with contusion collar widest inferiorly by 0.2 cm., edges
inverted, oriented upward, located at the head, temporal region, right, 2.8 cms. behind and 5.5 cms. above
right external auditory meatus, directed slightly forward, upward and to the left, involving skin and soft
tissues, making a punch-in fracture on the temporal bone, right, penetrating cranial cavity, lacerating
extensively along its course the brain tissues, fracturing parietal bone, left, and finally making an EXIT
wound, irregular, 2.0 x 1.8 cms., edges (e)verted, parietal region, left, 2.0 cms. behind and 12.9 cms. above
left external auditory meatus.
chanrobles virtualawlibrary chanroble s.com :chanrobles.com .ph

"Evidence of contact or close-contact fire, such as burning around the gunshot wound of entrance,
gunpowder tatooing (sic), smudging, singeing of hair, extensive laceration or bursting of the gunshot wound
of entrance, or separation of the skin from the underlying tissue, are absent." 10
On cross-examination, Dr. Cerna demonstrated his theory which was made of record, thus:

jgc:chanroble s.com.ph

"Q Now, will you please use yourself as Wendell Libi, and following the entrance of the wound, the trajectory
of the bullet and the exit of the wound, and measuring yourself 24 inches, will you please indicate to the
Honorable Court how would it have been possible for Wendell Libi to kill himself? Will you please indicate the
24 inches?
WITNESS:

chanrob1es virtual 1aw library

A Actually, sir, the 24 inches is approximately one arms length.


ATTY. SENINING:

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I would like to make of record that the witness has demonstrated by extending his right arm almost straight
towards his head." 11
Private respondents assail the fact that the trial court gave credence to the testimonies of defendants
witnesses Lydia Ang and James Enrique Tan, the first being a resident of an apartment across the street
from the Gotiongs and the second, a resident of the house adjacent to the Gotiong residence, who declared
having seen a "shadow" of a person at the gate of the Gotiong house after hearing shots therefrom.

On cross-examination, Lydia Ang testified that the apartment where she was staying faces the gas station;
that it is the second apartment; that from her window she can see directly the gate of the Gotiongs and,
that there is a firewall between her apartment and the gas station. 12 After seeing a man jump from the
gate of the Gotiongs to the rooftop of the Tans, she called the police station but the telephone lines were
busy. Later on, she talked with James Enrique Tan and told him that she saw a man leap from the gate
towards his rooftop. 13
However, James Enrique Tan testified that he saw a "shadow" on top of the gate of the Gotiongs, but denied
having talked with anyone regarding what he saw. He explained that he lives in a duplex house with a
garden in front of it; that his house is next to Felipe Gotiongs house; and he further gave the following
answers to these questions:
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"ATTY. ORTIZ: (TO WITNESS).


Q What is the height of the wall of the Gotiongs in relation to your house?
WITNESS:

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A It is about 8 feet.
ATTY. ORTIZ: (TO WITNESS)
Q And where were you looking from?
WITNESS:

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A From upstairs in my living room.


ATTY. ORTIZ (TO WITNESS)
Q From Your living room window, is that correct?
WITNESS:

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A Yes, but not very clear because the wall is high." 14


Analyzing the foregoing testimonies, we agree with respondent court that the same do not inspire credence
as to the reliability and accuracy of the witnesses observations, since the visual perceptions of both were
obstructed by high walls in their respective houses in relation to the house of herein private respondents. On
the other hand, witness Manolo Alfonso, testifying on rebuttal, attested without contradiction that he and his
sister, Malou Alfonso, were waiting for Julie Ann Gotiong when they heard her scream; that when Manolo
climbed the fence to see what was going on inside the Gotiong house, he heard the first shot; and, not more
than five (5) seconds later, he heard another shot. Consequently, he went down from the fence and drove to
the police station to report the incident. 15 Manolos direct and candid testimony establishes and explains
the fact that it was he whom Lydia Ang and James Enrique Tan saw as the "shadow" of a man at the gate of
the Gotiong house.
We have perforce to reject petitioners effete and unsubstantiated pretension that it was another man who
shot Wendell and Julie Ann. It is significant that the Libi family did not even point to or present any suspect
in the crime nor did they file any case against any alleged "John Doe." Nor can we sustain the trial courts
dubious theory that Wendell Libi did not die by his own hand because of the overwhelming evidence
testimonial, documentary and pictorial the confluence of which point to Wendell as the assailant of Julie
Ann, his motive being revenge for her rejection of his persistent pleas for a reconciliation.
chanrobles.com :cralaw:re d

Petitioners defense that they had exercised the due diligence of a good father of a family, hence they should
not be civilly liable for the crime committed by their minor son, is not borne out by the evidence on record
either.
Petitioner Amelita Yap Libi, mother of Wendell, testified that her husband, Cresencio Libi, owns a gun which
he kept in a safety deposit box inside a drawer in their bedroom. Each of these petitioners holds a key to the
safety deposit box and Amelitas key is always in her bag, all of which facts were known to Wendell. They
have never seen their son Wendell taking or using the gun. She admitted, however, that on that fateful night

the gun was no longer in the safety deposit box. 16 We, accordingly, cannot but entertain serious doubts
that petitioner spouses had really been exercising the diligence of a good father of a family by safely locking
the fatal gun away. Wendell could not have gotten hold thereof unless one of the keys to the safety deposit
box was negligently left lying around or he had free access to the bag of his mother where the other key
was.
The diligence of a good father of a family required by law in a parent and child relationship consists, to a
large extent, of the instruction and supervision of the child. Petitioners were gravely remiss in their duties as
parents in not diligently supervising the activities of their son, despite his minority and immaturity, so much
so that it was only at the time of Wendells death that they allegedly discovered that he was a CANU agent
and that Cresencios gun was missing from the safety deposit box. Both parents were sadly wanting in their
duty and responsibility in monitoring and knowing the activities of their children who, for all they know, may
be engaged in dangerous work such as being drug informers, 17 or even drug users. Neither was a plausible
explanation given for the photograph of Wendell, with a handwritten dedication to Julie Ann at the back
thereof, 18 holding upright what clearly appears as a revolver and on how or why he was in possession of
that firearm.
In setting aside the judgment of the court a quo and holding petitioners civilly liable, as explained at the
start of this opinion, respondent court waved aside the protestations of diligence on the part of petitioners
and had this to say:
jgc:chanrobles.com .ph

". . . It is still the duty of parents to know the activity of their children who may be engaged in this
dangerous activity involving the menace of drugs. Had the defendants-appellees been diligent in supervising
the activities of their son, Wendell, and in keeping said gun from his reach, they could have prevented
Wendell from killing Julie Ann Gotiong. Therefore, appellants are liable under Article 2180 of the Civil Code
which provides:
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The father, and in case of his death or incapacity, the mother, are responsible for the damages caused by
their minor children who live in their company.
"Having been grossly negligent in preventing Wendell Libi from having access to said gun which was
allegedly kept in a safety deposit box, defendants-appellees are subsidiarily liable for the natural
consequence of the criminal act of said minor who was living in their company. This vicarious liability of
herein defendants-appellees has been reiterated by the Supreme Court in many cases, prominent of which is
the case of Fuellas v. Cadano, et. al. (L-14409, Oct. 31, 1961, 3 SCRA 361-367), which held that:
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The subsidiary liability of parents for damages caused by their minor children imposed by Article 2180 of
the New Civil Code covers obligations arising from both quasi-delicts and criminal offenses.
The subsidiary liability of parents arising from the criminal acts of their minor children who acted with
discernment is determined under the provisions of Article 2180, N.C.C. and under Article 101 of the Revised
Penal Code, because to hold that the former only covers obligations which arise from quasi-delicts and not
obligations which arise from criminal offenses, would result in the absurdity that while for an act where mere
negligence intervenes the father or mother may stand subsidiarily liable for the damages caused by his or
her son, no liability would attach if the damage is caused with criminal intent. (3 SCRA 361-362).
". . . In the instant case, minor son of herein defendants-appellees, Wendell Libi somehow got hold of the
key to the drawer where said gun was kept under lock without defendant-spouses ever knowing that said
gun had been missing from that safety box since 1978 when Wendell Libi had) a picture taken wherein he
proudly displayed said gun and dedicated this picture to his sweetheart, Julie Ann Gotiong; also since then,
Wendell Libi was said to have kept said gun in his car, in keeping up with his supposed role of a CANU
agent . . ."
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"Based on the foregoing discussions of the assigned errors, this Court holds that the lower court was not
correct in dismissing herein plaintiffs-appellants complaint because as preponderantly shown by evidence,
defendants-appellees utterly failed to exercise all the diligence of a good father of the family in preventing
their minor son from committing this crime by means of the gun of defendants-appellees which was freely
accessible to Wendell Libi for they have not regularly checked whether said gun was still under lock, but
learned that it was missing from the safety deposit box only after the crime had been committed."

(Emphases ours.) 19
We agree with the conclusion of respondent court that petitioners should be held liable for the civil liability
based on what appears from all indications was a crime committed by their minor son. We take this
opportunity, however, to digress and discuss its ratiocination therefor on jurisprudential dicta which we feel
require clarification.
In imposing sanctions for the so-called vicarious liability of petitioners, respondent court cites Fuellas v.
Cadano, Et. Al. 20 which supposedly holds that" (t)he subsidiary liability of parents for damages caused by
their minor children imposed by Article 2180 of the New Civil Code covers obligations arising from both
quasi-delicts and criminal offenses," followed by an extended quotation ostensibly from the same case
explaining why under Article 2180 of the Civil Code and Article 101 of the Revised Penal Code parents should
assume subsidiary liability for damages caused by their minor children. The quoted passages are set out two
paragraphs back, with pertinent underscoring for purposes of the discussion hereunder.
chanroble s law library

Now, we do not have any objection to the doctrinal rule holding, the parents liable, but the categorization of
their liability as being subsidiary, and not primary, in nature requires a hard second look considering
previous decisions of this court on the matter which warrant comparative analyses. Our concern stems from
our readings that if the liability of the parents for crimes or quasi-delicts of their minor children is subsidiary,
then the parents can neither invoke nor be absolved of civil liability on the defense that they acted with the
diligence of a good father of a family to prevent damages. On the other hand, if such liability imputed to the
parents is considered direct and primary, that diligence would constitute a valid and substantial defense.
We believe that the civil liability of parents for quasi-delicts of their minor children, as contemplated in
Article 2180 of the Civil Code, is primary and not subsidiary. In fact, if we apply Article 2194 of said code
which provides for solidary liability of joint tortfeasors, the persons responsible for the act or omission, in
this case the minor and the father and, in case of his death of incapacity, the mother, are solidarily liable.
Accordingly, such parental liability is primary and not subsidiary, hence the last paragraph of Article 2180
provides that" (t)he 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."
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We are also persuaded that the liability of the parents for felonies committed by their minor children is
likewise primary, not subsidiary. Article 101 of the Revised Penal Code provides:
jgc:chanroble s.com.ph

"ARTICLE 101. Rules regarding civil liability in certain cases.


x

First. In cases of subdivisions . . . 2, and 3 of Article 12, the civil liability for acts committed by . . . a person
under nine years of age, or by one over nine but under fifteen years of age, who has acted without
discernment, shall devolve upon those having such person under their legal authority or control, unless it
appears that there was no fault or negligence on their part." (Emphasis supplied.) 21
Accordingly, just like the rule in Article 2180 of the Civil Code, under the foregoing provision the civil liability
of the parents for crimes committed by their minor children is likewise direct and primary, and also subject
to the defense of lack of fault or negligence on their part, that is, the exercise of the diligence of a good
father of a family.
That in both quasi-delicts and crimes the parents primarily respond for such damages is buttressed by the
corresponding provisions in both codes that the minor transgressor shall be answerable or shall respond with
his own property only in the absence or in case of insolvency of the former. Thus, for civil liability ex quasi
delicto of minors, Article 2182 of the Civil Code states that" (i)f the minor causing damage has no parents or
guardian, the minor . . . shall be answerable with his own property in an action against him where a
guardian ad litem shall be appointed." For civil liability ex delicto of minors, an equivalent provision is found
in the third paragraph of Article 101 of the Revised Penal Code, to wit:
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"Should there be no person having such . . . minor under his authority, legal guardianship or control, or if
such person be insolvent, said . . . minor shall respond with (his) own property, excepting property exempt
from execution, in accordance with civil law."
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The civil liability of parents for felonies committed by their minor children contemplated in the aforesaid rule

in Article 101 of the Revised Penal Code in relation to Article 2180 of the Civil Code has, aside from the
aforecited case of Fuellas, been the subject of a number of cases adjudicated by this Court, viz.: Exconde v.
Capuno, Et Al., 22 Araneta v. Arreglado, 23 Salen, Et. Al. v. Balce, 24 Paleyan, etc., Et. Al. v. Bangkili, Et Al.,
25 and Elcano, et al, v. Hill, Et. Al. 26 Parenthetically, the aforesaid cases were basically on the issue of the
civil liability of parents for crimes committed by their minor children over 9 but under 15 years of age, who
acted with discernment, and also of minors 15 years of aye or over, since these situations are not covered
by Article 101, Revised Penal Code. In both instances, this Court held that the issue of parental civil liability
should be resolved in accordance with the provisions of Article 2180 of the Civil Code for the reasons well
expressed in Salen and adopted in the cases hereinbefore enumerated that to hold that the civil liability
under Article 2180 would apply only to quasi-delicts and not to criminal offenses would result in the
absurdity that in an act involving mere negligence the parents would be liable but not where the damage is
caused with criminal intent. In said cases, however, there are unfortunate variances resulting in a
regrettable inconsistency in the Courts determination of whether the liability of the parents, in cases
involving either crimes or quasi-delicts of their minor children, is primary or subsidiary.
In Exconde, where the 15-year old minor was convicted of double homicide through reckless imprudence, in
a separate civil action arising from the crime the minor and his father were held jointly and severally liable
for failure of the latter to prove the diligence of a good father of a family. The same liability in solidum and,
therefore, primary liability was imposed in a separate civil action in Araneta on the parents and their 14-year
old son who was found guilty of frustrated homicide, but on the authority of Article 2194 of the Civil Code
providing for solidary responsibility of two or more persons who are liable for a quasi-delict.
However, in Salen, the father was declared subsidiarily liable for damages arising from the conviction of his
son, who was over 15 but less than 18 years of age, by applying Article 2180 but, this time, disregarding
Article 2194 of the Civil Code. In the present case, as already explained, the petitioners herein were also
held liable but supposedly in line with Fuellas which purportedly declared the parents subsidiarily liable for
the civil liability for serious physical injuries committed by their 13-year old son. On the other hand, in
Paleyan, the mother and her 19-year old son were adjudged solidarily liable for damages arising from his
conviction for homicide by the application of Article 2180 of the Civil Code since this is likewise not covered
by Article 101 of the Revised Penal Code. Finally, in Elcano, although the son was acquitted in a homicide
charge due to "lack of intent, coupled with mistake," it was ruled that while under Article 2180 of the Civil
Code there should be solidary liability for damages, since the son, "although married, was living with his
father and getting subsistence from him at the time of the occurrence," but "is now of age, as a matter of
equity" the father was only held subsidiarily liable.
It bears stressing, however, that the Revised Penal Code provides for subsidiary liability only for persons
causing damages under the compulsion of irresistible force or under the impulse of an uncontrollable fear;
27 innkeepers, tavernkeepers and proprietors of establishments; 28 employers, teachers, persons and
corporations engaged in industry; 29 and principals, accomplices and accessories for the unpaid civil liability
of their co-accused in the other classes. 30
Also, coming back to respondent courts reliance on Fuellas in its decision in the present case, it is not
exactly accurate to say that Fuellas provided for subsidiary liability of the parents therein. A careful scrutiny
shows that what respondent court quoted verbatim in its decision now on appeal in the present case, and
which it attributed to Fuellas, was the syllabus on the law report of said case which spoke of "subsidiary"
liability. However, such categorization does not specifically appear in the text of the decision in Fuellas. In
fact, after reviewing therein the cases of Exconde, Araneta and Salen and the discussions in said cases of
Article 101 of the Revised Penal Code in relation to Article 2180 of the Civil Code, this Court concluded its
decision in this wise:
jgc:chanrobles.com .ph

"Moreover, the case at bar was decided by the Court of Appeals on the basis of evidence submitted therein
by both parties, independent of the criminal case. And responsibility for fault or negligence under Article
2176 upon which the present action was instituted, is entirely separate and distinct from the civil liability
arising from fault or negligence under the Penal Code (Art. 2177), and having in mind the reasons behind
the law as heretofore stated, any discussion as to the minors criminal responsibility is of no moment."
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Under the foregoing considerations, therefore, we hereby rule that the parents are and should be held
primarily liable for the civil liability arising from criminal offenses committed by their minor children under
their legal authority or control, or who live in their company, unless it is proven that the former acted with
the diligence of a good father of a family to prevent such damages. That primary liability is premised on the
provisions of Article 101 of the Revised Penal Code with respect to damages ex delicto caused by their
children 9 years of age or under, or over 9 but under 15 years of age who acted without discernment; and,

with regard to their children over 9 but under 15 years of age who acted with discernment, or 15 years or
over but under 21 years of age, such primary liability shall be imposed pursuant to Article 2180 of the Civil
Code. 31
Under said Article 2180, the enforcement of such liability shall be effected against the father and, in case of
his death or incapacity, the mother. This was amplified by the Child and Youth Welfare Code which provides
that the same shall devolve upon the father and, in case of his death or incapacity, upon the mother or, in
case of her death or incapacity, upon the guardian, but the liability may also be voluntarily assumed by a
relative or family friend of the youthful offender. 32 However, under the Family Code, this civil liability is
now, without such alternative qualification, the responsibility of the parents and those who exercise parental
authority over the minor offender. 33 For civil liability arising from quasi-delicts committed by minors, the
same rules shall apply in accordance with Articles 2180 and 2182 of the Civil Code, as so modified.
In the case at bar, whether the death of the hapless Julie Ann Gotiong was caused by a felony or a quasidelict committed by Wendell Libi, respondent court did not err in holding petitioners liable for damages
arising therefrom. Subject to the preceding modifications of the premises relied upon by it therefor and on
the bases of the legal imperatives herein explained, we conjoin in its findings that said petitioners failed to
duly exercise the requisite diligentissimi patris familias to prevent such damages.
ACCORDINGLY, the instant Petition is DENIED and the assailed judgment of respondent Court of Appeals is
hereby AFFIRMED, with costs against petitioners.
SO ORDERED.
Narvasa, C.J., Gutierrez, Jr., Cruz, Padilla, Bidin, Grio-Aquino, Medialdea, Romero, Nocon and Bellosillo,
Jr., JJ., concur.
Feliciano, J., is on leave.
Davide, Jr., J., took no part. I used to be counsel of one of the parties.
Melo and Campos, Jr., JJ., took no part.
Endnotes:

* This petitioner is indicated or referred to in some pleadings as "Cresencio alias William Libi."

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1. Penned by Justice Bienvenido C. Ejercito, with the concurrence of Justices Jorge R. Coquia, Mariano A.
Zosa and Floreliana Castro-Bartolome; Rollo, 17-34.
2. Per Judge Mario D. Ortiz; Record on Appeal, AC-G.R. CV No. 69060, 29.
3. Rollo, 59.
4. TSN, November 9, 1979, 7-8.
5. Ibid., id., 19-20.
6. Ibid., id., 10.
7. Ibid., id., 16-17.
8. Exh. EB-1 and EB-2.
9. Exh. X; Folder of Exhibits, Civil Case No. R-17774, 38.
10. Exh. W; ibid., id., 37.
11. TSN, November 9, 1979, 22.

12. TSN, December 27, 1979, 56-61.


13. Ibid., id., 62-68.
14. Ibid., id., 82-83.
15. TSN, June 4, 1980, 4-6, 8-15.
16. TSN, April 11, 1980, 22-28; April 28, 1980, 6-7.
17. TSN, April 11, 1980, 27-28.
18. Exh. J and J-1, Folder of Exhibits, Civil Case No. R-17774, 29.
19. Rollo, 31-33.
20. 3 SCRA 361 (1961).
21. Par. 2 of Art. 12 refers to "a person under nine years of age," which should more accurately read "nine
years of age or under" since Par. 3 thereof speaks of one "over nine . . . ." See also the complementary
provisions of Art. 201, P.D. No. 603 and Art. 221, E.O. No. 209, as amended, infra, Fn 32 and 33.
22. 101 Phil. 843 (1957).
23. 104 Phil. 529 (1958).
24. 107 Phil. 748 (1960).
25. 40 SCRA 132 (1971).
26. 77 SCRA 98 (1977).
27. Third rule, Art. 101, in relation to pars. 5 and 6 of Art. 12.
28. Art. 102.
29. Art. 103.
30. Art. 110.
31. While R.A. No. 6809 amended Art. 234 of the Family Code to provide that majority commences at the
age of 18 years, Art. 236 thereof, as likewise amended, states that" (n)othing in this Code shall be
construed to derogate from the duty or responsibility of parents and guardians for children and wards below
twenty-one years of age mentioned in the second and third paragraphs of Article 2180 of the Civil Code."
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32. Art. 201, P.D. No. 603.


33. Art. 221 of E.O. No. 209, as amended by E.O. No 227, provides: "Parents and other persons exercising
parental authority shall be civilly liable for the injuries and damages caused by the act or omissions of their
unemancipated children living in their company and under their parental authority subject to the appropriate
defenses provided by law."

FIRST DIVISION

[G.R. No. 132266. December 21, 1999]

CASTILEX INDUSTRIAL CORPORATION, petitioner, vs. VICENTE


VASQUEZ, JR. and LUISA SO VASQUEZ, and CEBU DOCTORS
HOSPITAL, INC.,respondents.
DECISION
DAVIDE, JR., C.J.:

The pivotal issue in this petition is whether an employer may be held vicariously liable
for the death resulting from the negligent operation by a managerial employee of a
company-issued vehicle.
The antecedents, as succinctly summarized by the Court of Appeals, are as follows:

On 28 August 1988, at around 1:30 to 2:00 in the morning, Romeo So Vasquez,


was driving a Honda motorcycle around Fuente Osmea Rotunda. He was
traveling counter-clockwise, (the normal flow of traffic in a rotunda) but without
any protective helmet or goggles. He was also only carrying a Students Permit to
Drive at the time. Upon the other hand, Benjamin Abad [was a] manager of
Appellant Castilex Industrial Corporation, registered owner [of] a Toyota Hi-Lux
Pick-up with plate no. GBW-794. On the same date and time, Abad drove the said
company car out of a parking lot but instead of going around the Osmea rotunda
he made a short cut against [the] flow of the traffic in proceeding to his route to
General Maxilom St. or to Belvic St.
In the process, the motorcycle of Vasquez and the pick-up of Abad collided with
each other causing severe injuries to the former. Abad stopped his vehicle and
brought Vasquez to the Southern Islands Hospital and later to the Cebu Doctors
Hospital.
On September 5, 1988, Vasquez died at the Cebu Doctors Hospital. It was there
that Abad signed an acknowledgment of Responsible Party (Exhibit K) wherein
he agreed to pay whatever hospital bills, professional fees and other incidental
charges Vasquez may incur.
After the police authorities had conducted the investigation of the accident, a Criminal Case
was filed against Abad but which was subsequently dismissed for failure to prosecute. So,
the present action for damages was commenced by Vicente Vasquez, Jr. and Luisa So
Vasquez, parents of the deceased Romeo So Vasquez, against Jose Benjamin Abad and
Castilex Industrial Corporation. In the same action, Cebu Doctors Hospital intervened to
collect unpaid balance for the medical expense given to Romeo So Vasquez.[1]
The trial court ruled in favor of private respondents Vicente and Luisa Vasquez and
ordered Jose Benjamin Abad (hereafter ABAD) and petitioner Castilex Industrial
Corporation (hereafter CASTILEX) to pay jointly and solidarily (1) Spouses Vasquez, the

amounts of P8,000.00 for burial expenses; P50,000.00 as moral damages; P10,000.00 as


attorneys fees; and P778,752.00 for loss of earning capacity; and (2) Cebu Doctors
Hospital, the sum of P50,927.83 for unpaid medical and hospital bills at 3% monthly
interest from 27 July 1989 until fully paid, plus the costs of litigation.[2]
CASTILEX and ABAD separately appealed the decision.
In its decision[3] of 21 May 1997, the Court of Appeals affirmed the ruling of the trial
court holding ABAD and CASTILEX liable but held that the liability of the latter is only
vicarious and not solidary with the former. It reduced the award of damages representing
loss of earning capacity from P778,752.00 to P214,156.80; and the interest on the hospital
and medical bills, from 3% per month to 12% per annum from 5 September 1988 until fully
paid.
Upon CASTILEXs motion for reconsideration, the Court of Appeals modified its
decision by (1) reducing the award of moral damages from P50,000 to P30,000 in view of
the deceaseds contributory negligence; (b) deleting the award of attorneys fees for lack of
evidence; and (c) reducing the interest on hospital and medical bills to 6% per annum from
5 September 1988 until fully paid.[4]
Hence, CASTILEX filed the instant petition contending that the Court of Appeals erred
in (1) applying to the case the fifth paragraph of Article 2180 of the Civil Code, instead of
the fourth paragraph thereof; (2) that as a managerial employee, ABAD was deemed to
have been always acting within the scope of his assigned task even outside office hours
because he was using a vehicle issued to him by petitioner; and (3) ruling that petitioner had
the burden to prove that the employee was not acting within the scope of his assigned task.
Jose Benjamin ABAD merely adopted the statement of facts of petitioner which holds
fast on the theory of negligence on the part of the deceased.
On the other hand, respondents Spouses Vasquez argue that their sons death was caused
by the negligence of petitioners employee who was driving a vehicle issued by petitioner
and who was on his way home from overtime work for petitioner; and that petitioner is thus
liable for the resulting injury and subsequent death of their son on the basis of the fifth
paragraph of Article 2180. Even if the fourth paragraph of Article 2180 were applied,
petitioner cannot escape liability therefor. They moreover argue that the Court of Appeals
erred in reducing the amount of compensatory damages when the award made by the trial
court was borne both by evidence adduced during the trial regarding deceaseds wages and
by jurisprudence on life expectancy. Moreover, they point out that the petition is
procedurally not acceptable on the following grounds: (1) lack of an explanation for serving
the petition upon the Court of Appeals by registered mail, as required under Section 11,
Rule 13 of the Rules of Civil Procedure; and (2) lack of a statement of the dates of the
expiration of the original reglementary period and of the filing of the motion for extension
of time to file a petition for review.
For its part, respondent Cebu Doctors Hospital maintains that petitioner CASTILEX is
indeed vicariously liable for the injuries and subsequent death of Romeo Vasquez caused by
ABAD, who was on his way home from taking snacks after doing overtime work for
petitioner. Although the incident occurred when ABAD was not working anymore the
inescapable fact remains that said employee would not have been situated at such time and

place had he not been required by petitioner to do overtime work. Moreover, since
petitioner adopted the evidence adduced by ABAD, it cannot, as the latters employer,
inveigle itself from the ambit of liability, and is thus estopped by the records of the case,
which it failed to refute.
We shall first address the issue raised by the private respondents regarding some
alleged procedural lapses in the petition.
Private respondents contention of petitioners violation of Section 11 of Rule 13 and
Section 4 of Rule 45 of the 1997 Rules of Civil Procedure holds no water.
Section 11 of Rule 13 provides:

SEC. 11. Priorities in modes of service and filing. -- Whenever practicable, the
service and filing of pleadings and other papers shall be done personally. Except
with respect to papers emanating from the court, a resort to other modes must be
accompanied by a written explanation why the service or filing was not done
personally. A violation of this Rule may be cause to consider the paper as not
filed.
The explanation why service of a copy of the petition upon the Court of Appeals was
done by registered mail is found on Page 28 of the petition. Thus, there has been
compliance with the aforequoted provision.
As regards the allegation of violation of the material data rule under Section 4 of Rule
45, the same is unfounded. The material dates required to be stated in the petition are the
following: (1) the date of receipt of the judgment or final order or resolution subject of the
petition; (2) the date of filing of a motion for new trial or reconsideration, if any; and (3) the
date of receipt of the notice of the denial of the motion. Contrary to private respondents
claim, the petition need not indicate the dates of the expiration of the original reglementary
period and the filing of a motion for extension of time to file the petition. At any rate, aside
from the material dates required under Section 4 of Rule 45, petitioner CASTILEX also
stated in the first page of the petition the date it filed the motion for extension of time to file
the petition.
Now on the merits of the case.
The negligence of ABAD is not an issue at this instance. Petitioner CASTILEX
presumes said negligence but claims that it is not vicariously liable for the injuries and
subsequent death caused by ABAD.
Petitioner contends that the fifth paragraph of Article 2180 of the Civil Code should
only apply to instances where the employer is not engaged in business or industry. Since it
is engaged in the business of manufacturing and selling furniture it is therefore not covered
by said provision. Instead, the fourth paragraph should apply.
Petitioners interpretation of the fifth paragraph is not accurate. The phrase even though
the former are not engaged in any business or industry found in the fifth paragraph should
be interpreted to mean that it is not necessary for the employer to be engaged in any

business or industry to be liable for the negligence of his employee who is acting within the
scope of his assigned task.[5]
A distinction must be made between the two provisions to determine what is
applicable. Both provisions apply to employers: the fourth paragraph, to owners and
managers of an establishment or enterprise; and the fifth paragraph, to employers in
general, whether or not engaged in any business or industry. The fourth paragraph covers
negligent acts of employees committed either in the service of the branches or on the
occasion of their functions, while the fifth paragraph encompasses negligent acts of
employees acting within the scope of their assigned task. The latter is an expansion of the
former in both employer coverage and acts included. Negligent acts of employees, whether
or not the employer is engaged in a business or industry, are covered so long as they were
acting within the scope of their assigned task, even though committed neither in the service
of the branches nor on the occasion of their functions. For, admittedly, employees
oftentimes wear different hats. They perform functions which are beyond their office, title
or designation but which, nevertheless, are still within the call of duty.
This court has applied the fifth paragraph to cases where the employer was engaged in
a business or industry such as truck operators[6] and banks.[7] The Court of Appeals cannot,
therefore, be faulted in applying the said paragraph of Article 2180 of the Civil Code to this
case.
Under the fifth paragraph of Article 2180, whether or not engaged in any business or
industry, an employer is liable for the torts committed by employees within the scope of his
assigned tasks. But it is necessary to establish the employer-employee relationship; once
this is done, the plaintiff must show, to hold the employer liable, that the employee was
acting within the scope of his assigned task when the tort complained of was committed. It
is only then that the employer may find it necessary to interpose the defense of due
diligence in the selection and supervision of the employee.[8]
It is undisputed that ABAD was a Production Manager of petitioner CASTILEX at the
time of the tort occurrence. As to whether he was acting within the scope of his assigned
task is a question of fact, which the court a quo and the Court of Appeals resolved in the
affirmative.
Well-entrenched in our jurisprudence is the rule that the factual findings of the Court of
Appeals are entitled to great respect, and even finality at times. This rule is, however,
subject to exceptions such as when the conclusion is grounded on speculations, surmises, or
conjectures.[9] Such exception obtain in the present case to warrant review by this Court of
the finding of the Court of Appeals that since ABAD was driving petitioners vehicle he was
acting within the scope of his duties as a manager.
Before we pass upon the issue of whether ABAD was performing acts within the range
of his employment, we shall first take up the other reason invoked by the Court of Appeals
in holding petitioner CASTILEX vicariously liable for ABADs negligence, i.e., that the
petitioner did not present evidence that ABAD was not acting within the scope of his
assigned tasks at the time of the motor vehicle mishap. Contrary to the ruling of the Court
of Appeals, it was not incumbent upon the petitioner to prove the same. It was enough for
petitioner CASTILEX to deny that ABAD was acting within the scope of his duties;

petitioner was not under obligation to prove this negative averment. Ei incumbit probatio
qui dicit, non qui negat (He who asserts, not he who denies, must prove). The Court has
consistently applied the ancient rule that if the plaintiff, upon whom rests the burden of
proving his cause of action, fails to show in a satisfactory manner facts which he bases his
claim, the defendant is under no obligation to prove his exception or defense.[10]
Now on the issue of whether the private respondents have sufficiently established that
ABAD was acting within the scope of his assigned tasks.
ABAD, who was presented as a hostile witness, testified that at the time of the incident,
he was driving a company-issued vehicle, registered under the name of petitioner. He was
then leaving the restaurant where he had some snacks and had a chat with his friends after
having done overtime work for the petitioner.
No absolutely hard and fast rule can be stated which will furnish the complete answer
to the problem of whether at a given moment, an employee is engaged in his employers
business in the operation of a motor vehicle, so as to fix liability upon the employer because
of the employees action or inaction; but rather, the result varies with each state of facts.[11]
In Filamer Christian Institute v. Intermediate Appellate Court,[12] this Court had the
occasion to hold that acts done within the scope of the employees assigned tasks 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 damages.
The court a quo and the Court of Appeals were one in holding that the driving by a
manager of a company-issued vehicle is within the scope of his assigned tasks regardless of
the time and circumstances.
We do not agree. The mere fact that ABAD was using a service vehicle at the time of
the injurious incident is not of itself sufficient to charge petitioner with liability for the
negligent operation of said vehicle unless it appears that he was operating the vehicle within
the course or scope of his employment.
The following are principles in American Jurisprudence on the employers liability for
the injuries inflicted by the negligence of an employee in the use of an employers motor
vehicle:
I. Operation of Employers Motor Vehicle in Going to or from Meals

It has been held that an employee who uses his employers vehicle in going from his
work to a place where he intends to eat or in returning to work from a meal is not ordinarily
acting within the scope of his employment in the absence of evidence of some special
business benefit to the employer. Evidence that by using the employers vehicle to go to and
from meals, an employee is enabled to reduce his time-off and so devote more time to the
performance of his duties supports the finding that an employee is acting within the scope
of his employment while so driving the vehicle.[13]

II. Operation of Employers Vehicle in Going to or from Work

In the same vein, traveling to and from the place of work is ordinarily a personal
problem or concern of the employee, and not a part of his services to his employer. Hence,
in the absence of some special benefit to the employer other than the mere performance of
the services available at the place where he is needed, the employee is not acting within the
scope of his employment even though he uses his employers motor vehicle.[14]
The employer may, however, be liable where he derives some special benefit from
having the employee drive home in the employers vehicle as when the employer benefits
from having the employee at work earlier and, presumably, spending more time at his actual
duties. Where the employees duties require him to circulate in a general area with no fixed
place or hours of work, or to go to and from his home to various outside places of work,
and his employer furnishes him with a vehicle to use in his work, the courts have frequently
applied what has been called the special errand or roving commission rule, under which it
can be found that the employee continues in the service of his employer until he actually
reaches home. However, even if the employee be deemed to be acting within the scope of
his employment in going to or from work in his employers vehicle, the employer is not
liable for his negligence where at the time of the accident, the employee has left the direct
route to his work or back home and is pursuing a personal errand of his own.
III. Use of Employers Vehicle Outside Regular Working Hours

An employer who loans his motor vehicle to an employee for the latters personal use
outside of regular working hours is generally not liable for the employees negligent
operation of the vehicle during the period of permissive use, even where the employer
contemplates that a regularly assigned motor vehicle will be used by the employee for
personal as well as business purposes and there is some incidental benefit to the
employer. Even where the employees personal purpose in using the vehicle has been
accomplished and he has started the return trip to his house where the vehicle is normally
kept, it has been held that he has not resumed his employment, and the employer is not
liable for the employees negligent operation of the vehicle during the return trip.[15]
The foregoing principles and jurisprudence are applicable in our jurisdiction albeit
based on the doctrine of respondeat superior, not on the principle of bonus pater familias as
in ours. Whether the fault or negligence of the employee is conclusive on his employer as in
American law or jurisprudence, or merely gives rise to the presumption juris tantum of
negligence on the part of the employer as in ours, it is indispensable that the employee was
acting in his employers business or within the scope of his assigned task.[16]
In the case at bar, it is undisputed that ABAD did some overtime work at the petitioners
office, which was located in Cabangcalan, Mandaue City. Thereafter, he went to Goldies
Restaurant in Fuente Osmea, Cebu City, which is about seven kilometers away from
petitioners place of business.[17] A witness for the private respondents, a sidewalk vendor,
testified that Fuente Osmea is a lively place even at dawn because Goldies Restaurant and

Back Street were still open and people were drinking thereat. Moreover, prostitutes, pimps,
and drug addicts littered the place.[18]
At the Goldies Restaurant, ABAD took some snacks and had a chat with friends. It was
when ABAD was leaving the restaurant that the incident in question occurred. That same
witness for the private respondents testified that at the time of the vehicular accident,
ABAD was with a woman in his car, who then shouted: Daddy, Daddy![19] This woman
could not have been ABADs daughter, for ABAD was only 29 years old at the time.
To the mind of this Court, ABAD was engaged in affairs of his own or was carrying out
a personal purpose not in line with his duties at the time he figured in a vehicular
accident. It was then about 2:00 a.m. of 28 August 1988, way beyond the normal working
hours. ABADs working day had ended; his overtime work had already been completed. His
being at a place which, as petitioner put it, was known as a haven for prostitutes, pimps, and
drug pushers and addicts, had no connection to petitioners business; neither had it any
relation to his duties as a manager. Rather, using his service vehicle even for personal
purposes was a form of a fringe benefit or one of the perks attached to his position.
Since there is paucity of evidence that ABAD was acting within the scope of the
functions entrusted to him, petitioner CASTILEX had no duty to show that it exercised the
diligence of a good father of a family in providing ABAD with a service vehicle. Thus,
justice and equity require that petitioner be relieved of vicarious liability for the
consequences of the negligence of ABAD in driving its vehicle.[20]
WHEREFORE, the petition is GRANTED, and the appealed decision and resolution
of the Court of Appeals is AFFIRMED with the modification that petitioner Castilex
Industrial Corporation be absolved of any liability for the damages caused by its employee,
Jose Benjamin Abad.
SO ORDERED.
Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur.

[1]

Rollo, 44-45.
Per Judge Pedro T. Garcia. Rollo, 58-75.
[3]
Per Vasquez, C. Jr., J., with De Pano, N., and Salas, B. Jr., JJ., concurring. Rollo, 44-51.
[4]
Rollo, 56.
[5]
V Arturo M. Tolentino, Civil Code of the Philippines 615 (1992).
[6]
Lanuzo v. Ping, 100 SCRA 205, 209-210 [1980]; Layugan v. Intermediate Appellate Court, 167 SCRA 363, 377
[1988].
[7]
Pacific Banking Corporation v. Court of Appeals, 173 SCRA 102, 117 [1989]; Go v. Intermediate Appellate Court,
197 SCRA 22, 31 [1991]
[8]
Martin v. Court of Appeals, 205 SCRA 591 [1992]; Metro Manila Transit Corp. v. Court of Appeals, 223 SCRA
521, 539 [1993].
[9]
Layugan v. IAC, supra note 6, at 370-371; Vda. de Alcantara v. Court of Appeals, 252 SCRA 457, 468 [1996]
[10]
Belen v. Belen, 13 Phil. 202, 206 [1909], cited in Martin v. Court of Appeals, supra note 8.
[11]
7A AM. JUR. 2D AUTOMOBILES AND HIGHWAY TRAFFIC 687 (1980).
[12]
212 SCRA 637, 643 [1992].
[13]
7A AM. JUR. 2D AUTOMOBILES AND HIGHWAY TRAFFIC 699.
[14]
Id., 700.
[2]

[15]

7A AM. JUR. 2D AUTOMOBILES AND HIGHWAY TRAFFIC 698.


2 Cezar S. Sangco, Philippine Law On Torts And Damages 573 (1993) [Hereafter 2 Sangco].
[17]
TSN, 9 July 1991, 2-3, 13.
[18]
TSN, 10 October 1989, 3; 7 August 1989, 8, 10.
[19]
TSN, 7 August 1989, 7-8.
[20]
2 SANGCO 573.
[16]

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION

G.R. No. L-68138

May 13, 1991

AGUSTIN Y. GO and THE CONSOLIDATED BANK AND TRUST CORPORATION


(Solidbank), petitioners,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT and FLOVERTO JAZMIN, respondents.
C.M. De los Reyes & Associates for petitioners.
Millora & Maningding Law Offices for private respondent.

FERNAN, C.J.:
The instant petition for review on certiorari questions the propriety of the respondent appellate
court's award of nominal damages and attorney's fees to private respondent whose name was used
by a syndicate in encashing two U.S. treasury checks at petitioner bank.
Floverto Jazmin is an American citizen and retired employee of the United States Federal
Government. He had been a visitor in the Philippines since 1972 residing at 34 Maravilla Street,
Mangatarem, Pangasinan. Aspensionado of the U.S. government, he received annuity checks in the
amounts of $ 67.00 for disability and $ 620.00 for retirement through the Mangatarem post office. He
used to encash the checks at the Prudential Bank branch at Clark Air Base, Pampanga.
In January, 1975, Jazmin failed to receive one of the checks on time thus prompting him to inquire
from the post offices at Mangatarem and Dagupan City. As the result of his inquiries proved
unsatisfactory, on March 4, 1975, Jazmin wrote the U.S. Civil Service Commission, Bureau of
Retirement at Washington, D.C. complaining about the delay in receiving his check. Thereafter, he
received a substitute check which he encashed at the Prudential Bank at Clark Air Base.
Meanwhile, on April 22, 1975, Agustin Go, in his capacity as branch manager of the then Solidbank
(which later became the Consolidated Bank and Trust Corporation) in Baguio City, allowed a person
named "Floverto Jazmin" to open Savings Account No. BG 5206 by depositing two (2) U. S. treasury
checks Nos. 5-449-076 and 5-448-890 in the respective amounts of $1810.00 and

$913.40 equivalent to the total amount of P 20,565.69, both payable to the order of Floverto Jasmin
of Maranilla St., Mangatarem, Pangasinan and drawn on the First National City Bank, Manila.
1

The savings account was opened in the ordinary course of business. Thus, the bank, through its
manager Go, required the depositor to fill up the information sheet for new accounts to reflect his
personal circumstances. The depositor indicated therein that he was Floverto Jazmin with mailing
address at Mangatarem, Pangasinan and home address at Maravilla St., Mangatarem, Pangasinan;
that he was a Filipino citizen and a security officer of the US Army with the rank of a sergeant
bearing AFUS Car No. H-2711659; that he was married to Milagros Bautista; and that his initial
deposit was P3,565.35. He wrote CSA No. 138134 under remarks or instructions and left blank the
spaces under telephone number, residence certificate/alien certificate of registration/passport, bank
and trade performance and as to who introduced him to the bank. The depositor's signature
specimens were also taken.
2

Thereafter, the deposited checks were sent to the drawee bank for clearance. Inasmuch as
Solidbank did not receive any word from the drawee bank, after three (3) weeks, it allowed the
depositor to withdraw the amount indicated in the checks.
On June 29, 1976 or more than a year later, the two dollar cheeks were returned to Solidbank with
the notation that the amounts were altered. Consequently, Go reported the matter to the Philippine
Constabulary in Baguio City.
3

On August 3, 1976, Jazmin received radio messages requiring him to appear before the Philippine
Constabulary headquarters in Benguet on September 7, 1976 for investigation regarding the
complaint filed by Go against him for estafa by passing altered dollar checks. Initially, Jazmin was
investigated by constabulary officers in Lingayen, Pangasinan and later, at Camp Holmes, La
Trinidad, Benguet. He was shown xerox copies of U.S. Government checks Nos. 5-449-076 and 5448-890 payable to the order of Floverto Jasmin in the respective amounts of $1,810.00 and
$913.40. The latter amount was actually for only $13.40; while the records do not show the unaltered
amount of the other treasury check.
Jazmin denied that he was the person whose name appeared on the checks; that he received the
same and that the signature on the indorsement was his. He likewise denied that he opened an
account with Solidbank or that he deposited and encashed therein the said checks. Eventually, the
investigators found that the person named "Floverto Jazmin" who made the deposit and withdrawal
with Solidbank was an impostor.
On September 24, 1976, Jazmin filed with the then Court of First Instance of Pangasinan, Branch II
at Lingayen a complaint against Agustin Y. Go and the Consolidated Bank and Trust Corporation for
moral and exemplary damages in the total amount of P90,000 plus attorney's fees of P5,000. He
alleged therein that Go allowed the deposit of the dollar checks and the withdrawal of their peso
equivalent "without ascertaining the identity of the depositor considering the highly suspicious
circumstances under which said deposit was made; that instead of taking steps to establish the
correct identity of the depositor, Go "immediately and recklessly filed (the) complaint for estafa
through alteration of dollar check" against him; that Go's complaint was "an act of vicious and
wanton recklessness and clearly intended for no other purpose than to harass and coerce the
plaintiff into paying the peso equivalent of said dollar checks to the CBTC branch office in Baguio
City" so that Go would not be "disciplined by his employer;" that by reason of said complaint, he was
"compelled to present and submit himself" to investigations by the constabulary authorities; and that
he suffered humiliation and embarrassment as a result of the filing of the complaint against him as
well as "great inconvenience" on account of his age (he was a septuagenarian) and the distance
between his residence and the constabulary headquarters. He averred that his peace of mind and

mental and emotional tranquility as a respected citizen of the community would not have suffered
had Go exercised "a little prudence" in ascertaining the identity of the depositor and, for the "grossly
negligent and reckless act" of its employee, the defendant CBTC should also be held responsible.
4

In their answer, the defendants contended that the plaintiff had no cause of action against them
because they acted in good faith in seeking the "investigative assistance" of the Philippine
Constabulary on the swindling operations against banks by a syndicate which specialized in the
theft, alteration and encashment of dollar checks. They contended that contrary to plaintiff s
allegations, they verified the signature of the depositor and their tellers conducted an Identity check.
As counterclaim, they prayed for the award of P100,000 as compensatory and moral damages;
P20,000 as exemplary damages; P20,000 as attorney's fees and P5,000 as litigation, incidental
expenses and costs.
5

In its decision of March 27, 1978 the lower court found that Go was negligent in failing to exercise
"more care, caution and vigilance" in accepting the checks for deposit and encashment. It noted that
the checks were payable to the order of Floverto Jasmin, Maranilla St., Mangatarem, Pangasinan
and not to Floverto Jazmin, Maravilla St., Mangatarem, Pangasinan and that the differences in name
and address should have put Go on guard. It held that more care should have been exercised by Go
in the encashment of the U.S. treasury checks as there was no time limit for returning them for
clearing unlike in ordinary checks wherein a two to three-week limit is allowed.
6

Emphasizing that the main thrust of the complaint was "the failure of the defendants to take steps to
ascertain the identity of the depositor," the court noted that the depositor was allegedly a security
officer while the plaintiff was a retiree-pensioner. It considered as "reckless" the defendants' filing of
the complaint with the Philippine Constabulary noting that since the article on a fake dollar check
ring appeared on July 18, 1976 in the Baguio Midland Courier, it was only on August 24, 1976 or
more than a month after the bank had learned of the altered checks that it filed the complaint and
therefore, it had sufficient time to ascertain the identity of the depositor.
The court also noted that instead of complying with the Central Bank Circular Letter of January 17,
1973 requesting all banking institutions to report to the Central Bank all crimes involving their
property within 48 hours from knowledge of the crime, the bank reported the matter to the Philippine
Constabulary.
Finding that the plaintiff had sufficiently shown that prejudice had been caused to him in the form of
mental anguish, moral shock and social humiliation on account of the defendants' gross negligence,
the court, invoking Articles 2176, 2217 and 2219 (10) in conjunction with Article 21 of the Civil Code,
ruled in favor of the plaintiff. The dispositive portion of the decision states:
WHEREFORE, this Court finds for plaintiff and that he is entitled to the reliefs prayed for in
the following manner: Defendant Agustin Y. Co and the CONSOLIDATED BANK AND
TRUST CORPORATION are hereby ordered to pay, jointly and severally, to the plaintiff the
amount of SIX THOUSAND PESOS (P6,000.00) as moral damages; ONE THOUSAND
PESOS (P1,000.00) as attorney's fees and costs of litigation and to pay the costs and
defendant AGUSTIN Y. Go in addition thereto in his sole and personal capacity to pay the
plaintiff the amount of THREE THOUSAND PESOS (P3,000.00) as exemplary damages, all
with interest at six (6) percent per annum until fully paid.
SO ORDERED.
The defendants appealed to the Court of Appeals. On January 24, 1984, said court (then named
Intermediate Appellate Court) rendered a decision finding as evident negligence Go's failure to
7

notice the substantial difference in the identity of the depositor and the payee in the check,
concluded that Go's negligence in the performance of his duties was "the proximate cause why
appellant bank was swindled" and that denouncing the crime to the constabulary authorities "merely
aggravated the situation." It ruled that there was a cause of action against the defendants although
Jazmin had nothing to do with the alteration of the checks, because he suffered damages due to the
negligence of Go. Hence, under Article 2180 of the Civil Code, the bank shall be held liable for its
manager's negligence.
The appellate court, however, disallowed the award of moral and exemplary damages and granted
nominal damages instead. It explained thus:
While it is true that denouncing a crime is not negligence under which a claim for moral
damages is available, still appellants are liable under the law for nominal damages. The fact
that appellee did not suffer from any loss is of no moment for nominal damages are
adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, maybe vindicated or recognized and not for the purpose of indemnifying the
plaintiff for any loss suffered by him (Article 2221, New Civil Code). These are damages
recoverable where a legal right is technically violated and must be vindicated against an
invasion that has produced no actual present loss of any kind, or where there has been a
breach of contract and no substantial injury or actual damages whatsoever have been or can
be shown (Elgara vs. Sandijas, 27 Phil. 284). They are not intended for indemnification of
loss suffered but for the vindication or recognition of a right violated or invaded (Ventanilla vs.
Centeno, L-14333, January 28, 1961). And, where the plaintiff as in the case at bar, the
herein appellee has established a cause of action, but was not able to adduce evidence
showing actual damages then nominal damages may be recovered (Sia vs. Espenilla CAG.R. Nos. 45200-45201-R, April 21, 1975). Consequently, since appellee has no right to
claim for moral damages, then he may not likewise be entitled to exemplary damages
(Estopa vs. Piansay, No. L-14503, September 30, 1960). Considering that he had to defend
himself in the criminal charges filed against him, and that he was constrained to file the
instant case, the attorney's fees to be amended (sic) to plaintiff should be increased to
P3,000.00.
Accordingly, the appellate court ordered Go and Consolidated Bank and Trust Corporation to pay
jointly and severally Floverto Jazmin only NOMINAL DAMAGES in the sum of Three Thousand
Pesos (P 3,000.00) with interest at six (6%) percent per annum until fully paid and One Thousand
Pesos (P 1,000.00) as attorney's fees and costs of litigation.
Go and the bank filed a motion for the reconsideration of said decision contending that in view of the
finding of the appellate court that "denouncing a crime is not negligence under which a claim for
moral damages is available," the award of nominal damages is unjustified as they did not violate or
invade Jazmin's rights. Corollarily, there being no negligence on the part of Go, his employer may
not be held liable for nominal damages.
The motion for reconsideration having been denied, Go and the bank interposed the instant petition
for review oncertiorari arguing primarily that the employer bank may not be held "co-equally liable" to
pay nominal damages in the absence of proof that it was negligent in the selection of and
supervision over its employee.
8

The facts of this case reveal that damages in the form of mental anguish, moral shock and social
humiliation were suffered by private respondent only after the filing of the petitioners' complaint with
the Philippine Constabulary. It was only then that he had to bear the inconvenience of travelling to
Benguet and Lingayen for the investigations as it was only then that he was subjected to

embarrassment for being a suspect in the unauthorized alteration of the treasury checks. Hence, it is
understandable why petitioners appear to have overlooked the facts antecedent to the filing of the
complaint to the constabulary authorities and to have put undue emphasis on the appellate court's
statement that "denouncing a crime is not negligence."
Although this Court has consistently held that there should be no penalty on the right to litigate and
that error alone in the filing of a case be it before the courts or the proper police authorities, is not a
ground for moral damages, we hold that under the peculiar circumstances of this case, private
respondent is entitled to an award of damages.
9

Indeed, it would be unjust to overlook the fact that petitioners' negligence was the root of all the
inconvenience and embarrassment experienced by the private respondent albeit they happened
after the filing of the complaint with the constabulary authorities. Petitioner Go's negligence in fact
led to the swindling of his employer. Had Go exercised the diligence expected of him as a bank
officer and employee, he would have noticed the glaring disparity between the payee's name and
address on the treasury checks involved and the name and address of the depositor appearing in
the bank's records. The situation would have been different if the treasury checks were tampered
with only as to their amounts because the alteration would have been unnoticeable and hard to
detect as the herein altered check bearing the amount of $ 913.40 shows. But the error in the name
and address of the payee was very patent and could not have escaped the trained eyes of bank
officers and employees. There is therefore, no other conclusion than that the bank through its
employees (including the tellers who allegedly conducted an identification check on the depositor)
was grossly negligent in handling the business transaction herein involved.
1wphi1

While at that stage of events private respondent was still out of the picture, it definitely was the start
of his consequent involvement as his name was illegally used in the illicit transaction. Again, knowing
that its viability depended on the confidence reposed upon it by the public, the bank through its
employees should have exercised the caution expected of it.
In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural and
probable consequences of the act or omission complained of. It is not necessary that such damages
have been foreseen or could have reasonably been foreseen by the defendant. As Go's negligence
was the root cause of the complained inconvenience, humiliation and embarrassment, Go is liable to
private respondents for damages.
10

Anent petitioner bank's claim that it is not "co-equally liable" with Go for damages, under the fifth
paragraph of Article 2180 of the Civil Code, "(E)mployers shall be liable for the damages caused by
their employees . . . acting within the scope of their assigned tasks." Pursuant to this provision, the
bank is responsible for the acts of its employee unless there is proof that it exercised the diligence of
a good father of a family to prevent the damage. Hence, the burden of proof lies upon the bank and
it cannot now disclaim liability in view of its own failure to prove not only that it exercised due
diligence to prevent damage but that it was not negligent in the selection and supervision of its
employees.
11

WHEREFORE, the decision of the respondent appellate court is hereby affirmed. Costs against the
petitioners.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Davide, Jr., JJ., concur.

Footnotes
1

Exhs. 8 & 9.

Exh. D.

Exh. 6.

Record on Appeal, pp. 1-7.

Ibid, pp. 8-15.

Penned by Judge Emmanuel G. Cleto.

Penned by Justice Jorge R. Coquia and concurred in by Justices Mariano A. Zosa and
Floreliana Castro-Bartolome.
7

Petition, p. 8.

Lagman vs. Intermediate Appellate Court, G.R. No. 72281, October 28, 1988, 166 SCRA
734.
9

10

Art. 2202, Civil Code of the Philippines.

11

Campo, et al. vs, Camarote and Gemilga, 100 Phil. 459 (1956).

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 82248 January 30, 1992


ERNESTO MARTIN, petitioner,
vs.
HON. COURT OF APPEALS and MANILA ELECTRIC COMPANY, respondents.

Roberto M. Cabangis for petitioner.


Benjamin R. Reonal for private respondent.

CRUZ, J.:
This case turns on the proper application of the familiar rule that he who alleges must prove his
allegation.
Ernesto Martin was the owner of a private car bearing license plate No. NPA-930. At around 2
o'clock in the morning of May 11, 1982, while being driven by Nestor Martin, it crashed into a
Meralco electric post on Valley Golf Road, in Antipolo, Rizal. The car was wrecked and the pole
severely damaged. Meralco subsequently demanded reparation from Ernesto Martin, but the
demand was rejected. It thereupon sued him for damages in the Regional Trial Court of Pasig,
alleging inter alia that he was liable to it in the sum of P17,352.00 plus attorney's fees and litigation
costs as the employer of Nestor Martin. The petitioner's main defense was that Nestor Martin was
not his employee.
After the plaintiff had rested, the defendant moved to dismiss the complaint on the ground that no
evidence had been adduced to show that Nestor Martin was his employee. The motion was denied.
The case was considered submitted for decision with the express waiver by the defendant of his
right to present his own evidence. The defendant thus did not rebut the plaintiff's allegation that he
was Nestor Martin's employer.
In the decision dated August 27, 1985, Judge Eutropio Migrio held in favor of the plaintiff, awarding
him the amount claimed, with 12% interest, and P4,000.00 attorney's fees, plus costs. 1 The decision
was seasonably elevated to the Court of Appeals, which affirmed it in toto on February 22,
1988, 2 prompting this petition for review.
The petition has merit.
It is important to stress that the complaint for damages was filed by the private respondent against
only Ernesto Martin as alleged employer of Nestor Martin, the driver of the car at the time of the
accident. Nestor Martin was not impleaded. The action was based on tort under Article 2180 of the
Civil Code, providing in part that:
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are
not engaged in any business or industry.
The above rule is applicable only if there is an employer-employee relationship although it is not
necessary that the employer be engaged in any business or industry. It differs in this sense from
Article 103 of the Revised Penal Code, which requires that the employer be engaged in an industry
to be subsidiarily liable for the felony committed by his employee in the course of his employment.
Whether or not engaged in any business or industry, the employer under Article 2180 is liable for the
torts committed by his employees within the scope of their assigned task. But it is necessary first to
establish the employment relationship. Once this is done, the plaintiff must show, to hold the
employer liable, that the employee was acting within the scope of his assigned task when the tort

complained of was committed. It is only then that the defendant, as employer, may find it necessary
to interpose the defense of due diligence in the selection and supervision of the employee as
allowed in that article. 3
In the case at bar, no evidence whatsoever was adduced by the plaintiff to show that the defendant
was the employer of Nestor Martin at the time of the accident. The trial court merely presumed the
existence of the employer-employee relationship and held that the petitioner had not refuted that
presumption. It noted that although the defendant alleged that he was not Nestor Martin's employer,
"he did not present any proof to substantiate his allegation."
As the trial court put it:
There is no need to stretch one's imagination to realize that a car owner entrusts his
vehicle only to his driver or to anyone whom he allows to drive it. Since neither
plaintiff nor defendant has presented any evidence on the status of Nestor Martin,
the Court presumes that he was at the time of the incident, an employee of the
defendant. It is elementary that he who makes an allegation is required to prove the
same. Defendant alleges that Nestor Martin was not his employee but he did not
present any proof to substantiate his allegation. While it is true plaintiff did not
present evidence on its allegation that Nestor Martin was defendant's employee, the
Court believes and so holds, that there was no need for such evidence. As above
adverted to, the Court can proceed on the presumption that one who drives the
motor vehicle is an employee of the owner thereof.
A presumption is defined as an inference as to the existence of a fact not actually known, arising
from its usual connection with another which is known, 4 or a conjecture based on past experience as
to what course human affairs ordinarily take. 5 It is either a presumption juris, or of law, or a
presumption hominis, or of fact. 6
There is no law directing the deduction made by the courts below from the particular facts presented
to them by the parties. Such deduction is not among the conclusive presumptions under Section 2 or
the disputable presumptions under Section 3 of Rule 131 of the Rules of Court. In other words, it is
not a presumption juris.
Neither is it a presumption hominis, which is a reasonable deduction from the facts proved without
an express direction of law to that effect. 7 The facts proved, or not denied, viz., the ownership of the car
and the circumstances of the accident, are not enough bases for the inference that the petitioner is the
employer of Nestor Martin.
In the modern urban society, most male persons know how to drive and do not have to employ
others to drive for them unless this is needed for business reasons. Many cannot afford this luxury,
and even if they could, may consider it an unnecessary expense and inconvenience. In the present
case, the more plausible assumption is that Nestor Martin is a close relative of Ernesto Martin and
on the date in question borrowed the car for some private purpose. Nestor would probably not have
been accommodated if he were a mere employee for employees do not usually enjoy the use of their
employer's car at two o'clock in the morning.
As the employment relationship between Ernesto Martin and Nestor Martin could not be presumed, it
was necessary for the plaintiff to establish it by evidence. Meralco had the burden of proof, or the
duty "to present evidence on the fact in issue necessary to establish his claim" as required by Rule
131, Section 1 of the Revised Rules of Court. Failure to do this was fatal to its action.

It was enough for the defendant to deny the alleged employment relationship, without more, for he
was not under obligation to prove this negative
averment. Ei incumbit probatio qui dicit, non qui negat. 8 This Court has consistently applied the ancient rule that "if the
plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner the facts upon which he bases his
claim, the defendant is under no obligation to prove his exception or defense." 9

The case of Amor v. Soberano, 10 a Court of Appeals decision not elevated to this Court, was misapplied
by the respondent court in support of the petitioner's position. The vehicle involved in that case was a sixby-six truck, which reasonably raised the factual presumption that it was engaged in business and that its
driver was employed by the owner of the vehicle. The case at bar involves a private vehicle as its license
plate indicates. No evidence was ever offered that it was being used for business purposes or that, in any
case, its driver at the time of the accident was an employee of the petitioner.
It is worth mentioning in this connection that in Filamer Christian Institute v. Court of Appeals, 11 the
owner of the jeep involved in the accident was absolved from liability when it was shown that the driver of
the vehicle was not employed as such by the latter but was a "working scholar" as that term is defined by
the Omnibus Rules Implementing the Labor Code. 12 He was assigned to janitorial duties. Evidence was
introduced to establish the employment relationship but it failed nonetheless to hold the owner
responsible. Significantly, no similar evidence was even presented in the case at bar, the private
respondent merely relying on its mere allegation that Nestor Martin was the petitioner's employee.
Allegation is not synonymous with proof.
The above observations make it unnecessary to examine the question of the driver's alleged
negligence or the lack of diligence on the part of the petitioner in the selection and supervision of his
employee. These questions have not arisen because the employment relationship contemplated in
Article 1860 of the Civil Code has not been established.
WHEREFORE, the petition is GRANTED. The decision of the respondent court is REVERSED, and
Civil Case No. 48045 in the Regional Trial Court of Pasig, Branch 151, is DISMISSED, with costs
against the respondent. It is so ordered.
Narvasa, C.J., Grio-Aquino and Medidialdea, JJ., concur.
Footnotes
1 Original Records, p. 103.
2 Penned by Herrera, O., J., with Ejercito and Torres, JJ., concurring.
3 Cerf v. Medel, 33 Phil. 37.
4 Moran, Comments on the Rules of Court, Vol. 6, 1980 ed., p. 12.
5 Perez v. Ysip, 81 Phil. 218.
6 Moran, supra.
7 Ibid.
8 "He who asserts, not he who denies, must prove."
9 Belen v. Belen, 13 Phil. 202.

10 63 O.G. No. 32. 6850.


11 190 SCRA 485.
12 Sec. 14, Rule X of Book III of the Omnibus Rules Implementing the Labor Code.
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 104408 June 21, 1993


METRO MANILA TRANSIT CORPORATION, petitioner,
vs.
THE COURT OF APPEALS AND NENITA CUSTODIA, respondents.
Office of the Government Corporate Counsel for petitioner.
Renato P. Decena and Restituto Abjero for private respondent.

REGALADO, J.:
This appeal calls for a review of the legal validity and sufficiency of petitioner's invocation of due
diligence in the selection and supervision of employees as its defense against liability resulting from
a vehicular collision. With the facility by which such a defense can be contrived and our country
having reputedly the highest traffic accident rate in its geographical region, it is indeed high time for
us to once again address this matter which poses not only a litigation issue for the courts but affects
the very safety of our streets.
The facts of the case at bar are recounted for us by respondent court, thus
At about six o'clock in the morning of August 28, 1979, plaintiff-appellant Nenita
Custodio boarded as a paying passenger a public utility jeepney with plate No. D7
305 PUJ Pilipinas 1979, then driven by defendant Agudo Calebag and owned by his
co-defendant Victorino Lamayo, bound for her work at Dynetics Incorporated located
in Bicutan, Taguig, Metro Manila, where she then worked as a machine operator
earning P16.25 a day. While the passenger jeepney was travelling at (a) fast clip
along DBP Avenue, Bicutan, Taguig, Metro Manila another fast moving vehicle, a
Metro Manila Transit Corp. (MMTC, for short) bus bearing plate no. 3Z 307 PUB
(Philippines) "79 driven by defendant Godofredo C. Leonardo was negotiating

Honeydew Road, Bicutan, Taguig, Metro Manila bound for its terminal at Bicutan. As
both vehicles approached the intersection of DBP Avenue and Honeydew Road they
failed to slow down and slacken their speed; neither did they blow their horns to warn
approaching vehicles. As a consequence, a collision between them occurred, the
passenger jeepney ramming the left side portion of the MMTC bus. The collision
impact caused plaintiff-appellant Nenita Custodio to hit the front windshield of the
passenger jeepney and (she) was thrown out therefrom, falling onto the pavement
unconscious with serious physical injuries. She was brought to the Medical City
Hospital where she regained consciousness only after one (1) week. Thereat, she
was confined for twenty-four (24) days, and as a consequence, she was unable to
work for three and one half months (31/2). 1
A complaint for damages 2 was filed by herein private respondent, who being then a minor was assisted
by her parents, against all of therein named defendants following their refusal to pay the expenses
incurred by the former as a result of the collision.
Said defendants denied all the material allegations in the complaint and pointed an accusing finger
at each other as being the party at fault. Further, herein petitioner Metro Manila Transit Corporation
(MMTC), a government-owned corporation and one of the defendants in the court a quo, along with
its driver, Godofredo Leonardo, contrarily averred in its answer with cross-claim and
counterclaim 3 that the MMTC bus was driven in a prudent and careful manner by driver Leonardo and
that it was the passenger jeepney which was driven recklessly considering that it hit the left middle portion
of the MMTC bus, and that it was defendant Lamayo, the owner of the jeepney and employer of driver
Calebag, who failed to exercise due diligence in the selection and supervision of employees and should
thus be held solidarily liable for damages caused to the MMTC bus through the fault and negligence of its
employees.
Defendant Victorino Lamayo, for his part, alleged in his answer with cross-claim and
counterclaim 4 that the damages suffered by therein plaintiff should be borne by defendants MMTC and
its driver, Godofredo Leonardo, because the latter's negligence was the sole and proximate cause of the
accident and that MMTC failed to exercise due diligence in the selection and supervision of its
employees.
By order of the trial court, defendant Calebag was declared in default for failure to file an
answer. 5 Thereafter, as no amicable settlement was reached during the pre-trial conference, 6 trial on the
merits ensued with the opposing parties presenting their respective witnesses and documentary
evidence.
Herein private respondent Nenita Custodia, along with her parents, were presented as witnesses for
the prosecution. In addition, Dr. Edgardo del Mundo, the attending physician, testified on the cause,
nature and extent of the injuries she sustained as a result of the vehicular mishap. 7 On the other
hand, defendant MMTC presented as witnesses Godofredo Leonardo, Christian Bautista and Milagros
Garbo. Defendant Lamayo, however, failed to present any witness.
Milagros Garbo testified that, as a training officer of MMTC, she was in charge of the selection of the
company's bus drivers, conducting for this purpose a series of training programs and examinations.
According to her, new applicants for job openings at MMTC are preliminarily required to submit
certain documents such as National Bureau of Investigation (NBI) clearance, birth or residence
certificate, ID pictures, certificate or diploma of highest educational attainment, professional driver's
license, and work experience certification. Re-entry applicants, aside from the foregoing
requirements, are additionally supposed to submit company clearance for shortages and damages
and revenue performance for the preceding year. Upon satisfactory compliance with said requisites,
applicants are recommended for and subjected to a Preliminary interview, followed by a record

check to find out whether they are included in the list of undesirable employees given by other
companies.
Thereafter, she continued, if an applicant is found to be acceptable, a final interview by the Chief
Supervisor is scheduled and followed by a training program which consists of seminars and actual
driving and Psycho-physical tests and X-ray examinations. The seminars, which last for a total of
eighteen (18) days, include familiarization with assigned routes, existing traffic rules and regulations,
Constabulary Highway Patrol Group (CHPG) seminar on defensive driving, preventive maintenance,
proper vehicle handling, interpersonal relationship ,and administrative rules on discipline and on-thejob training. Upon completion of all the seminars and tests, a final clearance is issued, an
employment contract is executed and the driver is ready to report for duty. 8
MMTC's Transport Supervisor, Christian Bautista, testified that it was his duty to monitor the daily
operation of buses in the field, to countercheck the dispatcher on duty prior to the operation of the
buses in the morning and to see to it that the bus crew follow written guidelines of the company,
which include seeing to it that its employees are in proper uniform, briefed in traffic rules and
regulations before the start of duty, fit to drive and, in general, follow other rules and regulations of
the Bureau of Land Transportation as well as of the company. 9
The reorganized trial court, in its decision of August 1, 1989, 10 found both drivers of the colliding
vehicles concurrently negligent for non-observance of appropriate traffic rules and regulations and for
failure to take the usual precautions when approaching an intersection. As joint tortfeasors, both drivers,
as well as defendant Lamayo, were held solidarily liable for damages sustained by plaintiff Custodio.
Defendant MMTC, on the bases of the evidence presented was, however, absolved from liability for the
accident on the ground that it was not only careful and diligent in choosing and screening applicants for
job openings but was also strict and diligent in supervising its employees by seeing to it that its
employees were in proper uniforms, briefed in traffic rules and regulations before the start of duty, and
that it checked its employees to determine whether or not they were positive for alcohol and followed
other rules and regulations and guidelines of the Bureau of Land Transportation and of the company.
The trial court accordingly ruled:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered dismissing
the complaint against the Metro Manila Transit Corporation and ordering defendants
Agudo P. Calebag, Victorino Lamayo and Godofredo C. Leonardo to pay plaintiffs,
jointly and severally, the following:
a) the sum of P10,000.00 by way of medical expenses;
b) the sum of P5,000.00 by way of expenses of litigation;
c) the sum of P15,000.00 by way of moral damages;
d) the sum of P2,672.00 by way of loss of earnings;
e) the sum of P5,000.00 by way of exemplary damages;
f) the sum of P6,000.00 by way of attorney's fees; and
g) costs of suit.

SO ORDERED. 11
Plaintiff's motion to have that portion of the trial court's decision absolving MMTC from liability
reconsidered 12having been denied for lack of merit, 13 an appeal was filed by her with respondent
appellate court. After consideration of the appropriate pleadings on appeal and finding the appeal
meritorious, the Court of Appeals modified the trial court's decision by holding MMTC solidarily liable with
the other defendants for the damages awarded by the trial court because of their concurrent negligence,
concluding that while there is no hard and fast rule as to what constitutes sufficient evidence to prove that
an employer has exercised the due diligence required of it in the selection and supervision of its
employees, based on the quantum of evidence adduced the said appellate court was not disposed to say
that MMTC had exercised the diligence required of a good father of a family in the selection and
supervision of its driver, Godofredo Leonardo. 14
The Court of Appeals was resolute in its conclusion and denied the motions for reconsideration of
appellee Custodio and appellant MMTC in a resolution dated February 17, 1982, 15 thus prompting
MMTC to file the instant petition invoking the review powers of this Court over the decision of the Court of
Appeals, raising as issues for resolution whether or not (1) the documentary evidence to support the
positive testimonies of witnesses Garbo and Bautista are still necessary; (2) the testimonies of witnesses
Garbo and Bautista may still be disturbed on appeal; and (3) the evidence presented during the trial with
respect to the proof of due diligence of petitioner MMTC in the selection and supervision of its employees,
particularly driver Leonardo, is sufficient.
Prefatorily, private respondent questions the timeliness of the filing of the petition at bar in view of
the procedural stricture that the timely perfection of an appeal is both a mandatory and jurisdictional
requirement. This is a legitimate concern on the part of private respondent and presents an
opportune occasion to once again clarify this point as there appears to be some confusion in the
application of the rules and interpretative rulings regarding the computation of reglementary periods
at this stage of the proceedings.
The records of this case reveal that the decision of respondent Court of Appeals, dated October 31,
1991, was received by MMTC on November 18, 1991 16 and it seasonably filed a motion for the
reconsideration thereof on November 28, 1991. 17 Said motion for reconsideration was denied by
respondent court in its resolution dated February 17, 1992, which in turn was received by MMTC on
March 9, 1992. 18 Therefore, it had, pursuant to Section 1, Rule 45 of the Rules of Court, fifteen (15) days
therefrom or up to March 24, 1992 within which to file its petition, for review on certiorari. Anticipating,
however, that it may not be able to file said petition before the lapse of the reglementary period therefor,
MMTC filed a motion on March 19, 1992 for an extension of thirty (30) days to file the present petition,
with proof of service of copies thereof to respondent court and the adverse parties. The Court granted
said motion, with the extended period to be counted from the expiration of the reglementary
period. 19 Consequently, private respondent had thirty (30) days from March 24, 1992 within which to file
its petition, or up to April 23, 1992, and the eventual filing of said petition on April 14, 1992 was well within
the period granted by the Court.
We digress to reiterate, in view of erroneous submissions that we continue to receive, that in the
case of a petition for review on certiorari from a decision rendered by the Court of Appeals, Section
1, Rule 45 of the Rules of Court, which has long since been clarified in Lacsamana vs. The Hon.
Second Special Cases Division of the Intermediate Appellate Court, et al., 20 allows the same to be
filed "within fifteen (15) days from notice of judgment or of the denial of the motion for reconsideration
filed in due time, and paying at the same time to the corresponding docket fee." In other words, in the
event a motion for reconsideration is filed and denied, the period of fifteen (15) days begins to run all over
again from notice of the denial resolution. Otherwise put, if a motion for reconsideration is filed, the
reglementary period within which to appeal the decision of the Court of Appeals to the Supreme Court is
reckoned from the date the party who intends to appeal received the order denying the motion for

reconsideration. 21 Furthermore, a motion for extension of time to file a petition for review may be filed with
this Court within said reglementary period, paying at the same time the corresponding docket fee.

1. The first two issues raised by petitioner shall be correlatively discussed in view of their
interrelation.
In its present petition, MMTC insists that the oral testimonies of its employees were presented as
witnesses in its behalf sufficiently prove, even without the presentation documentary evidence, that
driver Leonardo had complied with all the hiring and clearance requirements and had undergone all
trainings, tests and examinations preparatory to actual employment, and that said positive
testimonies spell out the rigid procedure for screening of job applicants and the supervision of its
employees in the field. It underscored the fact that it had indeed complied with the measure of
diligence in the selection and supervision of its employees as enunciated in Campo, et al. vs.
Camarote, et al. 22 requiring an employer, in the exercise of the diligence of a good father of a family, to
carefully examine the applicant for employment as to his qualifications, experience and record service,
and not merely be satisfied with the possession of a professional driver's license.
It goes on to say since the testimonies of these witnesses were allegedly neither discredited nor
impeached by the adverse party, they should be believed and not arbitrarily disregarded or rejected
nor disturbed on appeal. It assiduously argues that inasmuch as there is no law requiring that facts
alleged by petitioner be established by documentary evidence, the probative force and weight of
their testimonies should not be discredited, with the further note that the lower court having passed
upon the relevancy of the oral testimonies and considered the same as unrebutted, its consideration
should no longer be disturbed on appeal. 23
Private respondent, on the other hand, retorts that the factual findings of respondent court are
conclusive upon the High Court which cannot be burdened with the task of analyzing and weighing
the evidence all over again. 24
At this juncture, it suffices to note that factual findings of the trial court may be reversed by the Court
of Appeals, which is vested by law with the power to review both legal and factual issues, if on the
evidence of record, it appears that the trial court may have been mistaken 25 particularly in the
appreciation of evidence, which is within the domain of the Court of Appeals. 26 The general rule laid down
in a plethora of cases is that such findings of fact by the Court of Appeals are conclusive upon and
beyond the power of review of the Supreme Court. 27 However, it is now well-settled that while the findings
of fact of the Court of Appeals are entitled to great respect, and even finality at times, that rule is not
inflexible and is subject to well established exceptions, to wit: (1) when the conclusion is a finding
grounded entirely on speculation, surmises and conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) where there is grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of
Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to
those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence
on which they are based; (9) when the facts set forth in the petition, as well as in the petitioner's main and
reply briefs are not disputed by the respondents and (10) when the findings of fact of the Court of Appeals
are premised on the supposed absence of evidence and are contradicted by the evidence on record. 28
When as in this case, the findings of the Court of Appeals and the trial court are contrary to each
other, this court may scrutinize the evidence on record, 29 in order to arrive at a correct finding based
thereon. 30
A perusal of the same shows that since there is no dispute as to the finding of concurrent negligence
on the part of the defendant Calebag, the driver of the passenger jeepney, and co-defendant

Leonardo, the bus driver of petitioner MMTC, both of whom were solidarily held liable with defendant
Lamayo, the owner of the jeepney, we are spared the necessity of determining the sufficiency of
evidence establishing the fact of negligence. 31 The contrariety is in the findings of the two lower courts,
and which is the subject of this present controversy, with regard to the liability of MMTC as employer of
one the erring drivers.
The trial court, in absolving MMTC from liability ruled that
On the question as to whether defendant MMTC was successful in proving its
defense that indeed it had exercised the due diligence of a good father of a family in
the selection and supervision of defendant Leonardo, this Court finds that based on
the evidence presented during the trial, defendant MMTC was able to prove that it
was not only careful and diligent in choosing and screening applicants for job
openings but also strict (and) diligent in supervising its employees by seeing to it that
its employees were in proper uniforms, briefed in traffic rules and regulations before
the start of duty, checked employees to determine whether they were positive for
alcohol and followed other rules and regulations and guidelines of the Bureau of
Land Transportation as well as its company. Having successfully proven such
defense, defendant MMTC therefore, cannot be held liable for the accident.
Having reached this conclusion, the Court now, holds that defendant MMTC be
totally absolved from liability and that the complaint against it be dismissed. . . .

32

whereas respondent court was of the opinion that


It is surprising though that witness Milagros Garbo did not testify nor present any
evidence that defendant-appellee's driver, defendant Godofredo Leonardo has
complied with or has undergone all clearances and trainings she referred to. The
clearances, result of seminars and tests which Godofredo Leonardo submitted and
complied with, if any, were not presented in court despite the fact that they are
obviously in the possession and control of defendant-appellee. Instead, it resorted to
generalities. The Court has ruled that due diligence in (the) selection and supervision
of employee(s) are not proved by mere testimonies to the effect that its applicant has
complied with all the company requirements before one is admitted as an employee
but without proof thereof. . . .
On the part of Christian Bautista, the transport supervisor of defendant-appellee, he
testified that it is his duty to monitor the operation of buses in the field; to
countercheck the dispatchers' duty prior to the operation of the buses in the morning;
to see to it that bus crew follows written guidelines of the company (t.s.n., April 29,
1988, pp. 4-5), but when asked to present in court the alleged written guidelines of
the company he merely stated that he brought with him a "wrong document" and
defendant-appellee's counsel asked for reservation to present such written
guidelines in the next hearing but the same was (sic) never presented in court. 33
A thorough and scrupulous review of the records of this case reveals that the conclusion of
respondent Court of Appeals is more firmly grounded on jurisprudence and amply supported by the
evidence of record than that of the court below.
It is procedurally required for each party in a case to prove his own affirmative assertion by the
degree of evidence required by law. 34 In civil cases, the degree of evidence required of a party in order
to support his claim is preponderance of evidence, or that evidence adduced by one party which is more

conclusive and credible than that of the other party. It is, therefore, incumbent on the plaintiff who is
claiming a right to prove his case. Corollarily, defendant must likewise prove own allegation to buttress its
claim that it is not liable. 35

In fine, the party, whether plaintiff or defendant, who asserts the affirmative of the issue has the
burden of presenting at the trial such amount of evidence required by law to obtain a favorable
judgment. 36 It is entirely within each of the parties discretion, consonant with the theory of the case it or
he seeks to advance and subject to such procedural strategy followed thereby, to present all available
evidence at its or his disposal in the manner which may be deemed necessary and beneficial to prove its
or his position, provided only that the same shall measure up to the quantum of evidence required by law.
In making proof in its or his case, it is paramount that the best and most complete evidence be formally
entered. 37
Coming now to the case at bar, while there is no rule which requires that testimonial evidence, to
hold sway, must be corroborated by documentary evidence, or even subject evidence for that matter,
inasmuch as the witnesses' testimonies dwelt on mere generalities, we cannot consider the same as
sufficiently persuasive proof that there was observance of due diligence in the selection and
supervision of employees. 38 Petitioner's attempt to prove itsdiligentissimi patris familias in the selection
and supervision of employees through oral evidence must fail as it was unable to buttress the same with
any other evidence, object or documentary, which might obviate the apparent biased nature of the
testimony. 39
Our view that the evidence for petitioner MMTC falls short of the required evidentiary quantum as
would convincingly and undoubtedly prove its observance of the diligence of a good father of a
family has its precursor in the underlying rationale pronounced in the earlier case of Central Taxicab
Corp. vs. Ex-Meralco Employees Transportation Co., et al., 40 set amidst an almost identical factual
setting, where we held that:
. . . . This witness spoke of an "affidavit of experience" which a driver-applicant must
accomplish before he is employed by the company, a written "time schedule" for
each bus, and a record of the inspections and thorough checks pertaining to each
bus before it leaves the car barn; yet no attempt was ever made to present in
evidence any of these documents, despite the fact that they were obviously in the
possession and control of the defendant company.
xxx xxx xxx
Albert also testified that he kept records of the preliminary and final tests given him
as well as a record of the qualifications and experience of each of the drivers of the
company. It is rather strange, therefore, that he failed to produce in court the all
important record of Roberto, the driver involved in this case.
The failure of the defendant company to produce in court any "record" or other
documentary proof tending to establish that it had exercised all the diligence of a
good father of a family in the selection and supervision of its drivers and buses,
notwithstanding the calls therefor by both the trial court and the opposing counsel,
argues strongly against its pretensions.
We are fully aware that there is no hard-and-fast rule on the quantum of evidence
needed to prove due observance of all the diligence of a good father of a family as
would constitute a valid defense to the legal presumption of negligence on the part of
an employer or master whose employee has by his negligence, caused damage to

another. . . . (R)educing the testimony of Albert to its proper proportions, we do not


have enough trustworthy evidence left to go by. We are of the considered opinion,
therefore, that the believable evidence on the degree of care and diligence that has
been exercised in the selection and supervision of Roberto Leon y Salazar, is not
legally sufficient to overcome the presumption of negligence against the defendant
company.
Whether or not the diligence of a good father of a family has been observed by petitioner is a matter
of proof which under the circumstances in the case at bar has not been clearly established. It is not
felt by the Court that there is enough evidence on record as would overturn the presumption of
negligence, and for failure to submit all evidence within its control, assuming the putative existence
thereof, petitioner MMTC must suffer the consequences of its own inaction and indifference.
2. In any event, we do not find the evidence presented by petitioner sufficiently convincing to prove
the diligence of a good father of a family, which for an employer doctrinally translates into its
observance of due diligence in the selection and supervision of its employees but which mandate, to
use an oft-quoted phrase, is more often honored in the breach than in the observance.
Petitioner attempted to essay in detail the company's procedure for screening job applicants and
supervising its employees in the field, through the testimonies of Milagros Garbo, as its training
officer, and Christian Bautista, as its transport supervisor, both of whom naturally and expectedly
testified for MMTC. It then concluded with its sweeping pontifications that "thus, there is no doubt
that considering the nature of the business of petitioner, it would not let any applicant-drivers to be
(sic) admitted without undergoing the rigid selection and training process with the end (in) view of
protecting the public in general and its passengers in particular; . . . thus, there is no doubt that
applicant had fully complied with the said requirements otherwise Garbo should not have allowed
him to undertake the next set of requirements . . . and the training conducted consisting of seminars
and actual driving tests were satisfactory otherwise he should have not been allowed to drive the
subject vehicle. 41
These statements strike us as both presumptuous and in the nature of petitio principii, couched in
generalities and shorn of any supporting evidence to boost their verity. As earlier observed,
respondent court could not but express surprise, and thereby its incredulity, that witness Garbo
neither testified nor presented any evidence that driver Leonardo had complied with or had
undergone all the clearances and trainings she took pains to recite and enumerate. The supposed
clearances, results of seminars and tests which Leonardo allegedly submitted and complied with
were never presented in court despite the fact that, if true, then they were obviously in the
possession and control of petitioner. 42
The case at bar is clearly within the coverage of Article 2176 and 2177, in relation to Article 2180, of
the Civil Code provisions on quasi-delicts as all the elements thereof are present, to wit: (1)
damages suffered by the plaintiff, (2) fault or negligence of the defendant or some other person for
whose act he must respond, and (3) the connection of cause and effect between fault or negligence
of the defendant and the damages incurred by plaintiff. 43 It is to be noted that petitioner was originally
sued as employer of driver Leonardo under Article 2180, the pertinent parts of which provides that:
The obligation imposed by article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is responsible.
xxx xxx xxx

Employers shall be liable for 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.
xxx xxx xxx
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage.
The basis of the employer's vicarious liability has been explained under this ratiocination:
The responsibility imposed by this article arises by virtue of a presumption juris
tantum of negligence on the part of the persons made responsible under the article,
derived from their failure to exercise due care and vigilance over the acts of
subordinates to prevent them from causing damage. Negligence is imputed to them
by law, unless they prove the contrary. Thus, the last paragraph of the article says
that such responsibility ceases if is proved that the persons who might be held
responsible under it exercised the diligence of a good father of a family (diligentissimi
patris familias) to prevent damage. It is clear, therefore, that it is not representation,
nor interest, nor even the necessity of having somebody else answer for the
damages caused by the persons devoid of personality, but it is the non-performance
of certain duties of precaution and prudence imposed upon the persons who become
responsible by civil bond uniting the actor to them, which forms the foundation of
such responsibility. 44
The above rule is, of course, applicable only where there is an employer-employee relationship,
although it is not necessary that the employer be engaged in business or industry. Whether or not
engaged in any business or industry, the employer under Article 2180 is liable for torts committed by
his employees within the scope of their assigned tasks. But, it is necessary first to establish the
employment relationship. Once this is done, the plaintiff must show, to hold the employer liable, that
the employee was acting within the scope of his assigned task when the tort complained of was
committed. It is only then that the defendant, as employer, may find it necessary to interpose the
defense of due diligence in the selection and supervision of employees. 45 The diligence of a good
father of a family required to be observed by employers to prevent damages under Article 2180 refers to
due diligence in the selection and supervision of employees in order to protect the public. 46
With the allegation and subsequent proof of negligence against the defendant driver and of an
employer-employee relation between him and his co-defendant MMTC in this instance, the case in
undoubtedly based on aquasi-delict under Article 2180 47 When the employee causes damage due to
his own negligence while performing his own duties, there arises the juris tantum presumption that the
employer is negligent, 48 rebuttable only by proof of observance of the diligence of a good father of a
family. For failure to rebut such legal presumption of negligence in the selection and supervision of
employees, the employer is likewise responsible for damages, 49 the basis of the liability being the
relationship of pater familias or on the employer's own negligence. 50
As early as the case of Gutierrez vs. Gutierrez, 51 and thereafter, we have consistently held that where
the injury is due to the concurrent negligence of the drivers of the colliding vehicles, the drivers and
owners of the said vehicles shall be primarily, directly and solidarily liable for damages and it is immaterial
that one action is based on quasi-delict and the other on culpa contractual, as the solidarily of the
obligation is justified by the very nature thereof. 52

It should be borne in mind that the legal obligation of employers to observe due diligence in the
selection and supervision of employees is not to be considered as an empty play of words or a mere
formalism, as appears to be the fashion of the times, since the non-observance thereof actually
becomes the basis of their vicarious liability under Article 2180.
On the matter of selection of employees, Campo vs. Camarote, supra, lays down this admonition:
. . . . In order tat the owner of a vehicle may be considered as having exercised all
diligence of a good father of a family, he should not have been satisfied with the
mere possession of a professional driver's license; he should have carefully
examined the applicant for employment as to his qualifications, his experience and
record of service. These steps appellant failed to observe; he has therefore, failed to
exercise all due diligence required of a good father of a family in the choice or
selection of driver.
Due diligence in the supervision of employees, on the other hand, includes the formulation of
suitable rules and regulations for the guidance of employees and the issuance of proper instructions
intended for the protection of the public and persons with whom the employer has relations through
his or its employees and the imposition of necessary disciplinary measures upon employees in case
of breach or as may be warranted to ensure the performance of acts indispensable to the business
of and beneficial to their employer. 53 To this, we add that actual implementation and monitoring of
consistent compliance with said rules should be the constant concern of the employer, acting through
dependable supervisors who should regularly report on their supervisory functions.
In order that the defense of due diligence in the selection and supervision of employees may be
deemed sufficient and plausible, it is not enough to emptily invoke the existence of said company
guidelines and policies on hiring and supervision. As the negligence of the employee gives rise to
the presumption of negligence on the part of the employer, the latter has the burden of proving that it
has been diligent not only in the selection of employees but also in the actual supervision of their
work. The mere allegation of the existence of hiring procedures and supervisory policies, without
anything more, is decidedly not sufficient to overcome presumption.
We emphatically reiterate our holding, as a warning to all employers, that "(t)he mere formulation of
various company policies on safety without showing that they were being complied with is not
sufficient to exempt petitioner from liability arising from negligence of its employees. It is incumbent
upon petitioner to show that in recruiting and employing the erring driver the recruitment procedures
and company policies on efficiency and safety were followed." 54 Paying lip-service to these injunctions
or merely going through the motions of compliance therewith will warrant stern sanctions from the Court.
These obligations, imposed by the law and public policy in the interests and for the safety of the
commuting public, herein petitioner failed to perform. Respondent court was definitely correct in
ruling that ". . . due diligence in the selection and supervision of employee (is) not proved by mere
testimonies to the effect that its applicant has complied with all the company requirements before
one is admitted as an employee but without proof thereof." 55 It is further a distressing commentary on
petitioner that it is a government-owned public utility, maintained by public funds, and organized for the
public welfare.
The Court it is necessary to once again stress the following rationale behind these all-important
statutory and jurisprudential mandates, for it has been observed that despite its pronouncement
in Kapalaran Bus Line vs. Coronado, et al., supra, there has been little improvement in the transport
situation in the country:

In requiring the highest possible degree of diligence from common carriers and
creating a presumption of negligence against them, the law compels them to curb the
recklessness of their drivers. While the immediate beneficiaries of the standard of
extraordinary diligence are, of course, the passengers and owners of the cargo
carried by a common carrier, they are not the only persons that the law seeks to
benefit. For if common carriers carefully observe the statutory standard of
extraordinary diligence in respect of their own passengers, they cannot help but
simultaneously benefit pedestrians and the owners and passengers of other vehicles
who are equally entitled to the safe and convenient use of our roads and highways.
The law seeks to stop and prevent the slaughter and maiming of people (whether
passengers or not) and the destruction of property (whether freight or not) on our
highways by buses, the very size and power of which seem often to inflame the
minds of their drivers. . . .
Finally, we believe that respondent court acted in the exercise of sound discretion when it affirmed
the trial court's award, without requiring the payment of interest thereon as an item of damages just
because of delay in the determination thereof, especially since private respondent did not specifically
pray therefor in her complaint. Article 2211 of the Civil Code provides that in quasi-delicts, interest as
a part of the damages may be awarded in the discretion of the court, and not as a matter of right. We
do not perceive that there have been international dilatory maneuvers or any special circumstances
which would justify that additional award and, consequently, we find no reason to disturb said ruling.
WHEREFORE, the impugned decision of respondent Court of Appeals is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J. and Nocon, JJ., concur.
Padilla, J., is on leave.

# Footnotes
1 Rollo, 24-25.
2 Civil Case No. C-8176, entitled "Nenita R. Custodio, assisted by her parents,
Rodolfo A. Custodio and Gloria R. Custodio vs. Agudo R. Calebag, Victorino
Lamayo, Godofredo C. Leonardo, and Metro Manila Transit Corporation," Court of
First Instance of Rizal, Branch 35, Caloocan City; Original Record, 1-4.
3 Ibid., 17-22.
4 Ibid., 36-41.
5 Ibid., 54.
6 Ibid., 57.
7 TSN, September 2, 1982, 4-16.

8 Ibid., June 10, 1988, 3-12.


9 Ibid., April 29, 1988, 2-8.
10 Civil Case No. 8176, Regional Trial Court, Branch 125, Caloocan City; Judge
Geronimo S. Mangay, presiding.
11 Original Record, 177.
12 Ibid., 178-181.
13 Ibid., 195.
14 Ca-G.R. CV No. 24680; per Justice Regina G. Ordoez-Benitez, with Justices
Jose A.R. Melo and Emilio C. Cui, concurring; Rollo, 24-30.
15 Rollo, 33-34.
16 Ibid., 2.
17 Ibid., CA-G.R CV No. 24680, 63-72.
18 Rollo, 2.
19 Ibid., 7.
20 143 SCRA 643 (1986).
21 American General Insurance Co. vs. Intermediate Appellee Court, et al., 150
SCRA 133 (1987).
22 100 Phil. 459 (1956).
23 Memorandum for Petitioner, 11-15; Rollo, 16-21.
24 Comment of Private Respondent, 3-4; Rollo, 47-48.
25 San Miguel Corporation vs. Court of Appeals, et al., 185 SCRA 722 (1990).
26 Medina vs. Asistio, Jr., et al., 191 SCRA 218 (1990).
27 Cathay Insurance Co. vs. Court of Appeals, e al., 151 SCRA 710 (1987);
Hernandez vs. Court of Appeals, et al., 160 SCRA 821 (1988); Philippine National
Bank vs. Court of Appeals, et al., 183 SCRA 133 (1990); BA Finance Corporation vs.
Court of Appeals, et al., 201 SCRA 157 (1991).
28 Manlapaz vs. Court of Appeals, et al., 147 SCRA 236 (1987); Medina vs. Asistio,
Jr., supra; Calalang vs. Intermediate Appellate Court, et al., 194 SCRA 514 (1991).
29 Valenzuela, et al. vs. Court of Appeals, et al., 191 SCRA 1 (1991).

30 Roman Catholic Bishop of Malolos, et al. vs. Intermediate Appellate Court, et al.,
191 SCRA 411 (1990).
31 Cea vs. Villanueva, 18 Phil. 538 (1911); Barcelo, etc. vs. The Manila Electric
Railroad and Light Company, 29 Phil. 351 (1915); De la Riva vs. Molina, 32 Phil. 277
(1915); Agdoro vs. Philippine Mining Industrial Co., 45 Phil. 816 (1924).
32 Annex C, Petition; Rollo, 41-42.
33 Annex B, ibid.; id., 28-29.
34 Section 1, Rule 131, Rules of Court.
35 Stronghold Insurance Company, Inc. vs. Court of Appeals, et al., 173 SCRA 619
(1989).
36 Republic vs. Court of Appeals, et al., 182 SCRA 290 (1990), citing Tai Tong
Chuache & Co. vs. The Insurance Commission, et al., 158 SCRA 366 (1988);
Republic vs. Court of Appeals, et al., 204 SCRA 160 (1991).
37 U.S. vs. Tria, 17 Phil. 303 (1910).
38 See Pleno vs. Court of Appeals, et al., 161 SCRA 160 (1991).
39 See Garcia, et al. vs. Gonzales, et al., 183 SCRA 72 (1990).
40 54 O.G., No. 31, 7415 (1958).
41 Petition, 6-7; Rollo, 14-15.
42 Supra, Fn. 34.
43 Andamo, et al. vs. Intermediate Appellate Court, et al., 191 SCRA 195 (1990).
44 Tolentino, A., Commentaries and Jurisprudence on the Civil Code of the
Philippines, Vol. V, 1959 ed., 519.
45 Martin vs. Court of Appeals, et al., 205 SCRA 591 (1992).
46 Barredo vs. Garcia, 73 Phil. 607 (1942).
47 Lanuzo vs. Ping, et al., 100 SCRA 205 (1980).
48 Bahia vs. Litonjua, et al., 30 Phil. 624 (1915); Campo vs. Camarote, supra;
Phoenix Construction, Inc. vs. Intermediate Appellate Court, et al., 148 SCRA 353
(1987); McKee, et al. vs. Intermediate Appellate Court, et al., 211 SCRA 517 (1992).
49 Lanuzo vs. Ping, et al., supra, and cases cited therein.

50 Bahia vs. Litonjua, et al., supra; Yamada vs. Manila Railroad Co., 33 Phil. 8
(1915); McKee, et al. vs. Intermediate Appellate Court, et al., supra.
51 56 Phil. 177 (1913); Cf. Barredo vs. Garcia, supra; Viluan vs. Court of Appeals, et
al., 16 SCRA 742, (1966); Anuran vs. Buo, 17 SCRA 224 (1966); Malipol vs. Tan, 55
SCRA 202 (1974); Poblete vs. Fabron, 93 SCRA 200 (1979); Pleno vs. Court of
Appeals, et al., supra; Kapalaran Bus Line vs. Coronado, 176 SCRA 792 (1989).
52 Art. 1207, Civil Code.
53 Filamer Christian Institute vs. Intermediate Appellate Court, et al., 212 SCRA 637
(1992).
54 Pantranco North Express Inc. vs. Baesa, 179 SCRA 384 (1989). See also Franco,
et al. vs. Intermediate Appellate Court, et al., 178 SCRA 331 (1989).
55 Rollo, 28.
The Lawphil Project - Arellano Law Foundation

SECOND DIVISION

[G.R. No. 116110. May 15,1996]

BALIWAG TRANSIT, INC., petitioner, vs. COURT OF APPEALS,


SPOUSES ANTONIO GARCIA & LETICIA GARCIA, A & J
TRADING, AND JULIO RECONTIQUE, respondents.
SYLLABUS
1. CIVIL LAW; CONTRACTS; SPECIAL CONTRACTS; COMMON CARRIERS;
LIABILITY FOR DAMAGES; ESTABLISHED IN CASE AT BAR. As a common
carrier, Baliwag breached its contract of carriage when it failed to deliver its
passengers, Leticia and Allan Garcia to their destination safe and sound. A common
carrier is bound to carry its passengers safely as far as human care and foresight
can provide, using the utmost diligence of a very cautious person, with due regard
for all the circumstances. In a contract of carriage, it is presumed that the common
carrier was at fault or was negligent when a passenger dies or is injured. Unless the
presumption is rebutted, the court need not even make an express finding of fault or
negligence on the part of the common carrier. This statutory presumption may only
be overcome by evidence that the carrier exercised extraordinary diligence as
prescribed in Articles 1733 and 1755 of the Civil Code. The records are bereft of

any proof to show that Baliwag exercised extraordinary diligence. On the contrary,
the evidence demonstrates its driver's recklessness. Leticia Garcia testified that the
bus was running at a very high speed despite the drizzle and the darkness of the
highway. The passengers pleaded for its driver to slow down, but their plea was
ignored. Leticia also revealed that the driver was smelling of liquor. She could smell
him as she was seated right behind the driver. Another passenger, Felix Cruz
testified that immediately before the collision, the bus driver was conversing with a
co-employee. All these prove the bus driver's wanton disregard for the physical
safety of his passengers, which make Baliwag as a common carrier liable for
damages under Article 1759 of the Civil Code.
2. ID.; ID.; ID.; ID.; LAND TRANSPORTATION AND TRAFFIC CODE; SECTION 34(g)
THEREOF; SUBSTANTIALLY COMPLIED WITH IN CASE AT BAR. Baliwag
cannot evade its liability by insisting that the accident was caused solely by the
negligence of A & J Trading and Julio Recontique. It harps on their alleged non use
of early warning device as testified to by Col. Demetrio dela Cruz, the station
commander of Gapan, Nueva Ecija who investigated the incident, and Francisco
Romano, the bus conductor. The records do not bear out Baliwag's contention. Col.
dela Cruz and Romano testified that they did not see any early warning device at
the scene of the accident. They were referring to the triangular reflectorized plates
in red and yellow issued by the Land Transportation Office. However, the evidence
shows that Recontique and Ecala placed a kerosene lamp or torch at the edge of
the road, near the rear portion of the truck to serve as an early warning device. This
substantially complies with Section 34 (g) of the Land Transportation and Traffic
Code, to wit: "(g) lights and reflector when parked or disabled. Appropriate parking
lights or flares visible one hundred meters away shall be displayed at the corner of
the vehicle whenever such vehicle is parked on highways or in places that are not
well-lighted or, is placed in such manner as to endanger passing
traffic. Furthermore, every motor vehicle shall be provided at all times with built-in
reflectors or other similar warning devices either pasted, painted or attached at its
front and back which shall likewise be visible at night at least one hundred meters
away. No vehicle not provided with any of the requirements mentioned in this
subsection shall be registered." Baliwag's argument that the kerosene lamp or torch
does not substantially comply with the law is untenable. The aforequoted law clearly
allows the use not only of an early warning device of the triangular reflectorized
plates variety but also parking lights or flares visible one hundred meters
away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an
acceptable substitute for the reflectorized plates. No negligence, therefore, may be
imputed to A & J Trading and its driver, Recontique.
3. ID.; DAMAGES; To PROVE ACTUAL DAMAGES, THE BEST EVIDENCE
AVAILABLE TO THE PARTIES MUST BE PRESENTED. The propriety of the
amount awarded as hospitalization and medical fees. The award of P25,000.00 is
not supported by the evidence on record. The Garcias presented receipts marked
as Exhibits "B-1 " to "B-42" but their total amounted only to P5,017.74. To be sure,
Leticia testified as to the extra amount spent for her medical needs but without more
reliable evidence, her lone testimony cannot justify the award of P25,000.00. To

prove actual damages, the best evidence available to the injured party must be
presented. The court cannot rely on uncorroborated testimony whose truth is
suspect, but must depend upon competent proof that damages have been actually
suffered. Thus, we reduce the actual damages for medical and hospitalization
expenses to P5,017.74.
4. ID.; ID.; MORAL DAMAGES; RECOVERABLE IF THE CARRIER THROUGH ITS
AGENT, ACTED FRAUDULENTLY OR IN BAD FAITH. The award of moral
damages is in accord with law. In a breach of contract of carriage, moral damages
are recoverable if the carrier, through its agent, acted fraudulently or in bad
faith. The evidence shows the gross negligence of the driver of Baliwag bus which
amounted to bad faith. Without doubt, Leticia and Allan experienced physical
suffering, mental anguish and serious anxiety by reason of the accident.
APPEARANCES OF COUNSEL
Leopoldo C. Sta. Maria for Baliwag Transit, Inc.
Arturo D. Vallar for Sps. Antonio & Leticia Garcia.
Allan A. Leynes for A & J Trading, and Julio Recontique.
DECISION
PUNO, J.:

This is a petition for certiorari to review the Decision[1] of the Court of Appeals in CAG.R. CV-31246 awarding damages in favor of the spouses Antonio and Leticia Garcia
for breach of contract of carriage. [2] filed by the spouses Garcia questioning the same
Court of Appeals' Decision which reduced their award of damages. On November 13,
1995, we denied their petition for review.
The records show that on July 31, 1980, Leticia Garcia, and her five-year old son,
Allan Garcia, boarded Baliwag Transit Bus No. 2036 bound for Cabanatuan City driven
by Jaime Santiago. They took the seat behind the driver.
At about 7:30 in the evening, in Malimba, Gapan, Nueva Ecija, the bus passengers
saw a cargo truck parked at the shoulder of the national highway. Its left rear portion
jutted to the outer lane, the shoulder of the road was too narrow to accommodate the
whole truck. A kerosene lamp appeared at the edge of the road obviously to serve as a
warning device. The truck driver, Julio Recontique, and his helper, Arturo Escala, were
then replacing a flat tire. The truck is owned by respondent A & J Trading.
Bus driver Santiago was driving at an inordinately fast speed and failed to notice the
truck and the kerosene lamp at the edge of the road. Santiago's passengers urged him
to slow down but he paid them no heed. Santiago even carried animated conversations
with his co-employees while driving. When the danger of collision became imminent, the
bus passengers shouted "Babangga tayo!". Santiago stepped on the brake, but it was
too late. His bus rammed into the stalled cargo truck. It caused the instant death of
Santiago and Escala, and injury to several others. Leticia and Allan Garcia were among
the injured passengers.

Leticia suffered a fracture in her pelvis and right leg. They rushed her to the
provincial hospital in Cabanatuan City where she was given emergency treatment. After
three days, she was transferred to the National Orthopedic Hospital where she was
confined for more than a month.[3] She underwent an operation for partial hip prosthesis.
[4]

Allan, on the other hand, broke a leg. He was also given emergency treatment at
the provincial hospital.
Spouses Antonio and Leticia Garcia sued Baliwag Transit, Inc., A & J Trading and
Julio Recontique for damages in the Regional Trial Court of Bulacan. [5] Leticia sued as
an injured passenger of Baliwag and as mother of Allan. At the time of the complaint,
Allan was a minor, hence, the suit initiated by his parents in his favor.
Baliwag, A & J Trading and Recontique disclaimed responsibility for the
mishap. Baliwag alleged that the accident was caused solely by the fault and
negligence of A & J Trading and its driver, Recontique. Baliwag charged that Recontigue
failed to place an early warning device at the corner of the disabled cargo truck to warn
oncoming vehicles.[6] On the other hand, A & J Trading and Recontique alleged that the
accident was the result of the negligence and reckless driving of Santiago, bus driver of
Baliwag.[7]
After hearing, the trial court found all the defendants liable, thus:

xxxxxxxxx
"In view thereof, the Court holds that both defendants should be held liable; the
defendant Baliwag Transit, Inc. for having failed to deliver the plaintiff and her son to
their point of destination safely in violation of plaintiff's and defendant Baliwag
Transit's contractual relation.
The defendant A & J and Julio Recontique for failure to provide its cargo truck with an early
warning device in violation of the Motor Vehicle Law."[8]
The trial court ordered Baliwag, A & J Trading and Recontique to pay jointly and
severally the Garcia spouses the following: (1) P25,000.00 hospitalization and
medication fee, (2) P450,000.00 loss of earnings in eight (8) years, (3) P2,000.00 for the
hospitalization of their son Allan Garcia, (4) P50,000.00 moral damages, and (5)
P30,000.00 attorney's fee.[9]
On appeal, the Court of Appeals modified the trial court's Decision by absolving A &
J Trading from liability and by reducing the award of attorney's fees to P10,000.00 and
loss of earnings to P300,000.00, respectively.[10]
Baliwag filed the present petition for review raising the following issues:

1. Did the Court of Appeals err in absolving A & J Trading from liability and holding
Baliwag solely liable for the injuries suffered by Leticia and Allan Garcia in the
accident?
2. Is the amount of damages awarded by the Court of Appeals to the Garcia spouses
correct?
We affirm the factual findings of the Court of Appeals.
I
As a common carrier, Baliwag breached its contract of carriage when it failed to
deliver its passengers, Leticia and Allan Garcia to their destination safe and sound. A
common carrier is bound to carry its passengers safely as far as human care and
foresight can provide, using the utmost diligence of a very cautious person, with due
regard for all the circumstances.[11] In a contract of carriage, it is presumed that the
common carrier was at fault or was negligent when a passenger dies or is
injured. Unless the presumption is rebutted, the court need not even make an express
finding of fault or negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier exercised extraordinary
diligence as prescribed in Articles 1733 and 1755 of the Civil Code. [12]
The records are bereft of any proof to show that Baliwag exercised extraordinary
diligence. On the contrary, the evidence demonstrates its driver's recklessness. Leticia
Garcia testified that the bus was running at a very high speed despite the drizzle and
the darkness of the highway. The passengers pleaded for its driver to slow down, but
their plea was ignored.[13]Leticia also revealed that the driver was smelling of liquor.
[14]
She could smell him as she was seated right behind the driver. Another passenger,
Felix Cruz testified that immediately before the collision, the bus driver was conversing
with a co-employee.[15] All these prove the bus driver's wanton disregard for the physical
safety of his passengers, which makes Baliwag as a common carrier liable for damages
under Article 1759 of the Civil Code:

Art. 1759. Common carriers are liable for the death of or injuries to passengers
through the negligence or willfull acts of the former's employees, although such
employees may have acted beyond the scope of their authority or in violation of the
orders of the common carriers.
This liability of the common carriers do not cease upon proof that they exercised all
the diligence of a good father of a family in the selection or supervision of their
employees.
Baliwag cannot evade its liability by insisting that the accident was caused solely by
the negligence of A & J Trading and Julio Recontique. It harps on their alleged non use
of an early warning device as testified to by Col. Demetrio dela Cruz, the station

commander of Gapan, Nueva Ecija who investigated the incident, and Francisco
Romano, the bus conductor.
The records do not bear out Baliwag's contention. Col. dela Cruz and Romano
testified that they did not see any early warning device at the scene of the accident.
[16]
They were referring to the triangular reflectorized plates in red and yellow issued by
the Land Transportation Office. However, the evidence shows that Recontique and
Ecala placed a kerosene lamp or torch at the edge of the road, near the rear portion of
the truck to serve as an early warning device. [17] This substantially complies with Section
34 (g) of the Land Transportation and Traffic Code, to wit:

(g) Lights and reflector when parked or disabled. Appropriate parking lights or
flares visible one hundred meters away shall be displayed at the corner of the
vehicle whenever such vehicle is parked on highways or in places that are not welllighted or, is placed in such manner as to endanger passing traffic. Furthermore, every
motor vehicle shall be provided at all times with built-in reflectors or other similar
warning devices either pasted, painted or attached at its front and back which shall
likewise be visible at night at least one hundred meters away. No vehicle not provided
with any of the requirements mentioned in this subsection shall be registered. (Italics
supplied)
Baliwag's argument that the kerosene lamp or torch does not substantially comply
with the law is untenable. The aforequoted law clearly allows the use not only of an
early warning device of the triangular reflectorized plates variety but also parking lights
or flares visible one hundred meters away. Indeed, Col. dela Cruz himself admitted that
a kerosene lamp is an acceptable substitute for the reflectorized plates. [18] No
negligence, therefore, may be imputed to A & J Trading and its driver, Recontique.
Anent this factual issue, the analysis of evidence made by the Court of Appeals
deserves our concurrence, viz:
xxx xxx xxx

In the case at bar, both the injured passengers of the Baliwag involved in the accident
testified that they saw some sort of kerosene or a torch on the rear portion of the truck
before the accident. Baliwag Transit's conductor attempted to defeat such testimony
by declaring that he noticed no early warning device in front of the truck.
Among the testimonies offered by the witnesses who were present at the scene of
the accident, we rule to uphold the affirmative testimonies given by the two injured
passengers and give less credence to the testimony of the bus conductor who solely
testified that no such early warning device exists.
The testimonies of injured passengers who may well be considered as disinterested
witness appear to be natural and more probable than the testimony given by Francisco
Romano who is undoubtedly interested in the outcome of the case, being the conductor
of the defendant-appellant Baliwag Transit Inc.

It must be borne in mind that the situation then prevailing at the time of the accident
was admittedly drizzly and all dark. This being so, it would be improbable and perhaps
impossible on the part of the truck helper without the torch nor the kerosene to remove
the flat tires of the truck. Moreover, witness including the bits conductor himself
admitted that the passengers shouted, that they are going to bump before the collision
which consequently caused the bus driver to apply the brake 3 to 4 meters away from
the truck. Again, without the kerosene nor the torch in front of the truck, it would be
improbable for the driver, more so the passengers to notice the truck to be bumped by
the bus considering the darkness of the place at the time of the accident.
xxxxxxxxx
While it is true that the investigating officer testified that he found no early warning
device at the time of his investigation, We rule to give less credence to such testimony
insofar as he himself admitted on cross examination that he did not notice the presence
of any kerosene lamp at the back of the truck because when he arrived at the scene of
the accident, there were already many people surrounding the place (TSN, Aug, 22,
1989, p. 13). He further admitted that there exists a probability that the lights of the
truck may have been smashed by the bus at the time of the accident considering the
location of the truck where its rear portion was connected with the front portion of the
bus (TSN, March 29, 1985, pp. 11-13). Investigator's testimony therefore did not confirm
nor deny the existence of such warning device, making his testimony of little probative
value.[19]
II
We now review the amount of damages awarded to the Garcia spouses.
First, the propriety of the amount awarded as hospitalization and medical fees. The
award of P25,000.00 is not supported by the evidence on record. The Garcias
presented receipts marked as Exhibits B-1 to B 42 but their total amounted only to
P5,017.74. To be sure, Leticia testified as to the extra amount spent for her medical
needs but without more reliable evidence, her lone testimony cannot justify the award of
P25,000.00. To prove actual damages, the best evidence available to the injured party
must be presented. The court cannot rely on uncorroborated testimony whose truth is
suspect, but must depend upon competent proof that damages have been actually
suffered[20] Thus, we reduce the actual damages for medical and hospitalization
expenses to P5,017.74.
Second, we find as reasonable the award of P300,000.00 representing Leticia's lost
earnings. Before the accident, Leticia was engaged in embroidery, earning P5,000.00
per month.[21] Her injuries forced her to stop working. Considering the nature and extent
of her injuries and the length of time it would take her to recover,[22] we find it proper that
Baliwag should compensate her lost income for five (5) years. [23]
Third, the award of moral damages is in accord with law. In a breach of contract of
carriage, moral damages are recoverable if the carrier, through its agent, acted
fraudulently or in bad faith. [24] The evidence shows the gross negligence of the driver of
Baliwag bus which amounted to bad faith. Without doubt, Leticia and Allan experienced
physical suffering, mental anguish and serious anxiety by reason of the accident. Leticia

underwent an operation to replace her broken hip bone with a metal plate. She was
confined at the National Orthopedic Hospital for 45 days. The young Allan was also
confined in the hospital for his foot injury. Contrary to the contention of Baliwag, the
decision of the trial court as affirmed by the Court of Appeals awarded moral damages
to Antonio and Leticia Garcia not in their capacity as parents of Allan. Leticia was given
moral damages as an injured party. Allan was also granted moral damages as an
injured party but because of his minority, the award in his favor has to be given to his
father who represented him in the suit.
Finally, we find the award of attorney's fees justified. The complaint for damages
was instituted by the Garcia spouses on December 15, 1982, following the unjustified
refusal of Baliwag to settle their claim. The Decision was promulgated by the trial court
only on January 29, 1991 or about nine years later. Numerous pleadings were filed
before the trial court, the appellate court and to this Court. Given the complexity of the
case and the amount of damages involved, [25] the award of attorney's fee for P10,000.00
is just and reasonable.
IN VIEW WHEREOF, the Decision of the respondent Court of Appeals in CA-G.R.
CV-31246 is AFFIRMED with the MODIFICATION reducing the actual damages for
hospitalization and medical fees to P5,017.74. No costs.
SO ORDERED.
Regalado (Chairman), Romero, Mendoza, and Torres, Jr., JJ., concur.

[1]

Penned by Associate Justice Corona Ibay-Somera, with Associate Justices Fidel P. Purisima and Asaali
S. Isnani concurring.
[2]

The case at bar is related with GR No. 11715 filed by the spouses Garcia questioning the same Court of
Appeals Decision which reduced their award of damages. On November 13, 1995, we denied their
position for review.
[3]

From August 2, 1980 to September 15, 1980.

[4]

Exhibit "A", Records, p. 116.

[5]

Annex "A" of the Petition, Rollo, pp.23-25.

[6]

Records, p. 43.

[7]

Records, pp. 17-18.

[8]

Decision of Regional Trial Court of Malolos, Bulacan, Branch 14, Rollo, pp. 47-48.

[9]

Decision of Regional Trial Court of Malolos, Bulacan, Branch 14, Rollo, p. 48.

[10]

Decision of the Court of Appeals, Rollo, p. 62.

[11]

Article 1755, Civil Code.

[12]

Article 1756, Civil Code; Philippine Rabbit Bus Lines, Inc. vs. Intermediate Appellate Court, 189 SCRA
158 (1990).
[13]

TSN, February 9, 1989, p. 4.

[14]

TSN, February 9, 1989, p. 10.

[15]

Exhibit "6" (A & J Trading), Records, p. 206.

[16]

TSN, August 22, 1989, p. 5; Exhibit "5" (Baliwag), Records, pp. 196-197.

[17]

TSN, February 9,1989,p. 18; Exhibit "6" (A & J Trading), Records, p. 207.

[18]

TSN, August 22, 1989, p. 12.

[19]

Decision of the Court of Appeals, Rollo, pp. 55-57.

[20]

Development Bank of the Philippines vs. Court of Appeals, et al. , G.R. No. 110053, October 15, 1995;
Alejandro Fuentes, Jr. vs. Court of Appeals and People, G.R. No. 111692, February 9, 1996.
[21]

TSN, February 9, 1989, p. 13.

[22]

The Medical Report issued by the attending physician, Dr. Jaime Tamayo, indicates that Leticia Garcia
suffered partial permanent disability (Annex "A", Records, p. 116).
[23]

See Manuel vs. Court of Appeals, 227 SCRA 29, (1993).

[24]

Philippine National Railways vs. Intermediate Appellate Court, 217 SCRA 401 (1994); Metro Manila
Transit Corp. vs. Court of Appeals, 223 SCRA 521 (1994).
[25]

See Del Rosario vs. Court of Appeals, 237 SCRA 39 (1994).

SECOND DIVISION

[G.R. No. 116617. November 16, 1998]

METRO MANILA TRANSIT CORPORATION (MMTC), PEDRO A. MUSA,


CONRADO TOLENTINO, FELICIANA CELEBRADO and THE
GOVERNMENTSERVICE INSURANCE SYSTEM, petitioners, vs.
COURT OF APPEALS, SPS. RODOLFO V. ROSALES and LILY
ROSALES, respondents.

[G.R. No. 126395. November 16, 1998]

RODOLFO V. ROSALES and LILY R. ROSALES, petitioners, vs. THE


COURT
OF
APPEALS,
METRO
MANILA
TRANSIT
CORPORATION (MMTC), PEDRO A. MUSA, CONRADO
TOLENTINO, FELICIANA CELEBRADO and THE GOVERNMENT
SERVICE INSURANCE SYSTEM, respondents.

DECISION
MENDOZA, J.:

These are appeals brought, on the one hand, by the Metro Manila Transit Corporation
(MMTC) and Pedro Musa and, on the other, by the spouses Rodolfo V. Rosales and Lily R.
Rosales from the decision,[1] dated August 5, 1994, of the Court of Appeals, which affirmed with
modification the judgment of the Regional Trial Court of Quezon City holding MMTC and Musa
liable to the spouses Rosales for actual, moral, and exemplary damages, attorneys fees, and the
costs of suit for the death of the latters daughter. MMTC and Musa in G.R. No. 116617 appeal
insofar as they are held liable for damages, while the spouses Rosales in G.R. No. 126395 appeal
insofar as the amounts awarded are concerned.
The facts are as follows:
MMTC is the operator of a fleet of passenger buses within the Metro Manila area. Musa was
its driver assigned to MMTC Bus No. 27. The spouses Rosales were parents of Liza Rosalie, a
third-year high school student at the University of the Philippines Integrated School.
At around a quarter past one in the afternoon of August 9, 1986, MMTC Bus No. 27, which
was driven by Musa, hit Liza Rosalie who was then crossing Katipunan Avenue in Quezon
City. An eye witness said the girl was already near the center of the street when the bus, then
bound for the south, hit her.[2] She fell to the ground upon impact, rolled between the two front
wheels of the bus, and was run over by the left rear tires thereof. [3] Her body was dragged several
meters away from the point of impact. Liza Rosalie was taken to the Philippine Heart Center,
[4]
but efforts to revive her proved futile.
Pedro Musa was found guilty of reckless imprudence resulting in homicide and sentenced to
imprisonment for a term of 2 years and 4 months, as minimum, to 6 years, as maximum, by the
Regional Trial Court of Quezon City.[5] The trial court found:

All told, this Court, therefore, holds that the accused, who was then the driver of
MMTC Bus No. 027, is criminally responsible for the death of the girl victim in
violation of Article 365(2) of the Revised Penal Code. For, in the light of the evidence
that the girl victim was already at the center of the Katipunan Road when she was
bumped, and, therefore, already past the right lane when the MMTC Bus No. 027 was
supposed to have passed; and, since the said bus was then running at a speed of about
25 kilometers per hour which is inappropriate since Katipunan road is a busy street,
there is, consequently, sufficient proof to show that the accused was careless, reckless
and imprudent in the operation of his MMTC Bus No. 027, which is made more
evident by the circumstance that the accused did not blow his horn at the time of the
accident, and he did not even know that he had bumped the girl victim and had ran
over her, demonstrating thereby that he did not exercise diligence and take the
necessary precaution to avoid injury to persons in the operation of his vehicle, as, in
fact, he ran over the girl victim who died as a result thereof.[6]

The spouses Rosales filed an independent civil action for damages against MMTC, Musa,
MMTC Acting General Manager Conrado Tolentino, and the Government Service Insurance
System (GSIS). They subsequently amended their complaint to include Feliciana Celebrado, a
dispatcher of the MMTC, as a defendant therein. The counsel of MMTC and Musa attempted to
introduce testimony that Musa was not negligent in driving Bus No. 27 but was told by the trial
judge:

COURT:
That is it. You can now limit your question to the other defendant here but to re-try
again the actual facts of the accident, this Court would not be in the position. It would
be improper for this Court to make any findings with respect to the negligence of
herein driver. You ask questions only regarding the civil aspect as to the other
defendant but not as to the accused.[7]
The counsel submitted to the ruling of the court.[8]
In a decision rendered on March 6, 1990, the Regional Trial Court of Quezon City found
MMTC and Musa guilty of negligence and ordered them to pay damages and attorneys fees, as
follows:

WHEREFORE, foregoing premises considered, judgment is hereby rendered ordering


defendant Metro Manila Transit Corporation primarily and defendant Pedro Musa
subsidiarily liable to plaintiffs-spouses Rodolfo V. Rosales and Lily R. Rosales as
follows:
1. Actual damages in the amount of P150,000.00;
2. Moral damages in the amount of P500,000.00;
3. Exemplary damages in the amount of P100,000.00;
4. Attorneys fees in the amount of P50,000.00; and
5. Costs of suit.[9]

Both parties appealed to the Court of Appeals. On August 5, 1994, the Court of Appeals
affirmed the decision of the trial court with the following modification:

WHEREFORE, except for the modification deleting the award of P150,000.00 as


actual damages and awarding in lieu thereof the amount of P30,000.00 as death
indemnity, the decision appealed from is, in all other aspects, hereby AFFIRMED. [10]
The spouses Rosales filed a motion for reconsideration, which the appellate court, in a
resolution, dated September 12, 1996, partly granted by increasing the indemnity for the death of
Liza Rosalie fromP30,000.00 to P50,000.00. Hence, these appeals.
In G.R. No. 116617, MMTC and Musa assail the decision of the Court of Appeals on the
following grounds:

PUBLIC RESPONDENT COURT OF APPEALS ERRED IN


AFFIRMING THE COURT A QUOS DECISION PARTICULARLY IN
NOT HOLDING THAT PETITIONER-APPELLANT MMTC
EXERCISED THE DILIGENCE OF A GOOD FATHER OF A FAMILY
IN THE SELECTION AND SUPERVISION OF ITS DRIVERS. THIS
BEING THE CASE, APPELLANT MMTC IS ENTITLED TO BE
ABSOLVED FROM ANY LIABILITY OR AT LEAST TO A
REDUCTION OF THE RECOVERABLE DAMAGES.
THE PUBLIC RESPONDENT COURT OF APPEALS, JUST LIKE THE
COURT A QUO, OVERLOOKED THE FACT THAT PETITIONER
MMTC, A GOVERNMENT-OWNED CORPORATION, COMMITTED
NO FRAUD, MALICE, BAD FAITH, NOR WANTON, FRAUDULENT,
OPPRESSIVE AND MALEVOLENT ACTUATIONS AGAINST
HEREIN RESPONDENTS-APPELLEES.
THE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN
AFFIRMING THE COURT A QUOS DECISION TO HOLD
PETITIONER-APPELLANT MMTC PRIMARILY LIABLE TO
PRIVATE RESPONDENTS-APPELLEES IN THE AMOUNT
OF P500,000 AS MORAL DAMAGES, P100,000 AS EXEMPLARY
DAMAGES AND P30,000 BY WAY OF DEATH INDEMNITY.
THE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN
AFFIRMING THE COURT A QUOS DECISION IN RENDERING
JUDGMENT FOR ATTORNEYS FEES IN THE AMOUNT
OF P50,000.00 IN FAVOR OF PRIVATE RESPONDENTSAPPELLEES.
On the other hand, in G.R. No. 126395, the spouses Rosales contend:

The Court of Appeals erred in:


First, considering that death indemnity which this Honorable Court set at P50,000.00
is akin to actual damages;
Second, not increasing the amount of damages awarded;
Third, refusing to hold all the defendants, now private respondents, solidarily liable.
MMTC and Musa do not specifically question the findings of the Court of Appeals and the
Regional Trial Court of Quezon City that Liza Rosalie was hit by MMTC Bus No.
27. Nonetheless, their petition contains discussions which cast doubts on this point. [11] Not only
can they not do this as the rule is that an appellant may not be heard on a question not
specifically assigned as error, but the rule giving great weight, and even finality, to the factual

conclusions of the Court of Appeals which affirm those of the trial court bars a reversal of the
finding of liability against petitioners MMTC and Musa. Only where it is shown that such
findings are whimsical, capricious, and arbitrary can they be overturned. To the contrary, the
findings of both the Court of Appeals and the Regional Trial Court are solidly anchored on the
evidence submitted by the parties. We, therefore, regard them as conclusive in resolving the
petitions at bar.[12] Indeed, as already stated, petitioners counsel submitted to the ruling of the
court that the finding of the trial court in the criminal case was conclusive on them with regard to
the questions of whether Liza Rosalie was hit by MMTC Bus No. 27 and whether its driver was
negligent.Rather, the issue in this case turns on Art. 2180 of the Civil Code, which provides that
employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry. The responsibility of employers for the negligence of their employees in the
performance of their duties is primary, that is, the injured party may recover from the employers
directly, regardless of the solvency of their employees. [13] The rationale for the rule on vicarious
liability has been adumbrated thus:

What has emerged as the modern justification for vicarious liability is a rule of policy,
a deliberate allocation of a risk. The losses caused by the torts of employees, which as
a practical matter are sure to occur in the conduct of the employers enterprise, are
placed upon that enterprise itself, as a required cost of doing business. They are placed
upon the employer because, having engaged in an enterprise, which will on the basis
of all past experience involve harm to others through the tort of employees, and
sought to profit by it, it is just that he, rather than the innocent injured plaintiff, should
bear them; and because he is better able to absorb them, and to distribute them,
through prices, rates or liability insurance, to the public, and so to shift them to
society, to the community at large. Added to this is the makeweight argument that an
employer who is held strictly liable is under the greatest incentive to be careful in the
selection, instruction and supervision of his servants, and to take every precaution to
see that the enterprise is conducted safely.[14]
In Campo v. Camarote,[15] we explained the basis of the presumption of negligence in this
wise:

The reason for the law is obvious. It is indeed difficult for any person injured by the
carelessness of a driver to prove the negligence or lack of due diligence of the owner
of the vehicle in the choice of the driver. Were we to require the injured party to prove
the owners lack of diligence, the right will in many cases prove illusory, as seldom
does a person in the community, especially in the cities, have the opportunity to
observe the conduct of all possible car owners therein. So the law imposes the burden
of proof of innocence on the vehicle owner. If the driver is negligent and causes
damage, the law presumes that the owner was negligent and imposes upon him the
burden of proving the contrary.

Employers may be relieved of responsibility for the negligent acts of their employees within
the scope of their assigned tasks only if they can show that they observed all the diligence of a
good father of a family to prevent damage. [16] For this purpose, they have the burden of proving
that they have indeed exercised such diligence, both in the selection of the employee who
committed the quasi-delict and in the supervision of the performance of his duties.
In the selection of prospective employees, employers are required to examine them as to
their qualifications, experience, and service records.[17] On the other hand, with respect to the
supervision of employees, employers should formulate standard operating procedures, monitor
their implementation, and impose disciplinary measures for breaches thereof. [18] To establish these
factors in a trial involving the issue of vicarious liability, employers must submit concrete proof,
including documentary evidence.[19]
In this case, MMTC sought to prove that it exercised the diligence of a good father of a
family with respect to the selection of employees by presenting mainly testimonial evidence on
its hiring procedure. According to MMTC, applicants are required to submit professional driving
licenses, certifications of work experience, and clearances from the National Bureau of
Investigation; to undergo tests of their driving skills, concentration, reflexes, and vision; and, to
complete training programs on traffic rules, vehicle maintenance, and standard operating
procedures during emergency cases.[20]
MMTCs evidence consists entirely of testimonial evidence (1) that transport supervisors are
assigned to oversee field operations in designated areas; (2) that the maintenance department
daily inspects the engines of the vehicles; and, (3) that for infractions of company rules there are
corresponding penalties.[21] Although testimonies were offered that in the case of Pedro Musa all
these precautions were followed,[22] the records of his interview, of the results of his
examinations, and of his service were not presented.
MMTC submitted brochures and programs of seminars for prospective employees on
vehicle maintenance, traffic regulations, and driving skills and claimed that applicants are given
tests to determine driving skills, concentration, reflexes, and vision, [23] but there is no record that
Musa attended such training programs and passed the said examinations before he was
employed. No proof was presented that Musa did not have any record of traffic violations. Nor
were records of daily inspections, allegedly conducted by supervisors, ever presented.
Normally, employers keep files concerning the qualifications, work experience, training,
evaluation, and discipline of their employees. The failure of MMTC to present such documentary
proof puts in doubt the credibility of its witnesses. What was said in Central Taxicab
Corporation v. Ex-Meralco Employees Transportation Corporation[24] applies to this case:

This witness spoke of an affidavit of experience which a driver-applicant must


accomplish before he is employed by the company, a written time schedule for each
bus, and a record of the inspections and thorough checks pertaining to each bus before
it leaves the car barn; yet no attempt was ever made to present in evidence any of
these documents, despite the fact that they were obviously in the possession and
control of the defendant company.
....

Albert also testified that he kept records of the preliminary and final tests given by
him as well as a record of the qualifications and experience of each of the drivers of
the company. It is rather strange, therefore, that he failed to produce in court the all
important record of Roberto, the driver involved in this case.
The failure of the defendant company to produce in court any record or other
documentary proof tending to establish that it had exercised all the diligence of a good
father of a family in the selection and supervision of its drivers and buses,
notwithstanding the calls therefor by both the trial court and the opposing counsel,
argues strongly against its pretensions.
It is noteworthy that, in another case involving MMTC, testimonial evidence of identical
content, which MMTC presented to show that it exercised the diligence of a good father of a
family in the selection and supervision of employees and thus avoid vicarious liability for the
negligent acts of its employees, was held to be insufficient to overcome the presumption of
negligence against it. In Metro Manila Transit Corp. v. Court of Appeals, [25] this Court said:

Coming now to the case at bar, while there is no rule which requires that testimonial
evidence, to hold sway, must be corroborated by documentary evidence, or even
object evidence for that matter, inasmuch as the witnesses testimonies dwelt on mere
generalities, we cannot consider the same as sufficiently persuasive proof that there
was observance of due diligence in the selection and supervision of
employees.Petitioners attempt to prove its diligentissimi patris familias in the
selection and supervision of employees through oral evidence must fail as it was
unable to buttress the same with any other evidence, object or documentary, which
might obviate the apparent biased nature of the testimony.
Having found both MMTC and its driver Pedro Musa liable for negligence for the death of
Liza Rosalie on August 9, 1986, we now consider the question of damages which her parents, the
spouses Rosales, are entitled to recover, which is the subject of the appeal in G.R. No. 126395.
Indemnity for Death. Art. 2206 provides for the payment of indemnity for death caused by a
crime or quasi-delict. Initially fixed in said article of the Civil Code at P3,000.00, the amount of
the indemnity has through the years been gradually increased based on the value of the peso. At
present, it is fixed at P50,000.00.[26] To conform to this new ruling, the Court of Appeals correctly
increased the indemnity it had originally ordered the spouses Rosales to be paid from P30,000.00
to P50,000.00 in its resolution, dated September 12, 1996.
Actual Damages. Art. 2199 provides that except as provided by law or by stipulation, one is
entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. The spouses Rosales are claiming actual damages in the amount
of P239,245.40. However, during the trial, they submitted receipts showing that expenses for the
funeral, wake, and interment of Liza Rosalie amounted only to P60,226.65 itemized as
follows: [27]

Medical Attendance P 739.65


Funeral Services 5,100.00
Wreaths 2,500.00
Embalment 1,000.00
Obituaries 7,125.00
Interment fees 2,350.00
Expenses during wake 14,935.00
Mourning clothes 5,000.00
Photography 3,500.00
Video Coverage 10,000.00
Printing of invitation cards 7,977.00
TOTAL 60,226.65
Hence, apart from the indemnity for death, the spouses Rosales are entitled to recover the
above amount as actual damages.
Moral Damages. Under Art. 2206, the spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental anguish by reason of the
death of the deceased. The reason for the grant of moral damages has been explained thus:

. . . the award of moral damages is aimed at a restoration, within the limits of the
possible, of the spiritual status quo ante; and therefore, it must be proportionate to the
suffering inflicted. The intensity of the pain experienced by the relatives of the victim
is proportionate to the intensity of affection for him and bears no relation whatsoever
with the wealth or means of the offender.[28]
In the instant case, the spouses Rosales presented evidence of the intense moral suffering
they had gone through as a result of the loss of Liza Rosalie who was their youngest
child. Rodolfo Rosales recounted the place of Liza Rosalie in the family and their relationship
with her in the following words:
Q: Mr. Rosales, how was Liza to you as a daughter?
A: Well, Liza as a daughter was the greatest joy of the family; she was our pride, and everybody loved
her - all her brothers and sisters - because she was sweet and unspoiled. . . . She was soft-spoken

to all of us; and she still slept with us at night although she had her own room. Sometimes in the
middle of the night she would open our door and ask if she could sleep with us. So we let her
sleep with us, as she was the youngest.[29]

The death of Liza Rosalie left a void in their lives. Rodolfo Rosales testified on the
devastating effect of the death of Liza Rosalie:
Q: And after she died, what changes, if any, did you feel in your family?
A: Well, there is something hollow in our family, something is missing. She used to greet me when I
came home and smell if I was drunk and would tell me to dress up and take a shower before her
mommy could see me.She would call me up at the office and say: Daddy, come home, please help
me with my homework. Now, all these things, I am missing, you know. . . . I do not feel like
going home early. Sometimes my wife would complain and ask: Where did you go? But I cannot
explain to her how I feel.[30]

Lily Rosales described life without Liza Rosalie thus:


Q: Now, your life without Liza, how would you describe it, Dr. Rosales?
A: You know it is very hard to describe. The family was broken apart. We could not go together
because we remember Liza. Every time we go to the cemetery we try as much as possible not to
go together. So, we go to the cemetery one at a time, sometimes, my husband and I, or my son
and another one, but we never go together because we remember Liza. But before her death we
would always be together, the whole family on weekends and on our days off. My husband works
very hard, I also work very hard and my children go to school. They study very hard. Now we
cannot go together on outings because of the absence of Liza. [31]

The spouses Rosales claim moral damages in the amount of P5,000,000.00. In People v.
Teehankee, Jr.,[32] this Court awarded P1 million as moral damages to the heirs of a seventeenyear-old girl who was murdered. This amount seems reasonable to us as moral damages for the
loss of a minor child, whether he or she was a victim of a crime or a quasi-delict. Hence, we hold
that the MMTC and Musa are solidarily liable to the spouses Rosales in the amount
of P1,000,000.00 as moral damages for the death of Liza Rosalie.
Exemplary Damages. Art. 2231 provides that exemplary damages may be recovered in cases
involving quasi-delicts if the defendant acted with gross negligence. This circumstance obtains in
the instant case. The records indicate that at the time of the mishap, there was a pending criminal
case against Musa for reckless imprudence resulting in slight physical injuries with another
branch of the Regional Trial Court, Quezon City.[33] The evidence also shows that he failed to stop
his vehicle at once even after eye witnesses shouted at him. The spouses Rosales claim
exemplary damages in the amount ofP5,000,000.00. Under the circumstances, we deem it
reasonable to award the spouses Rosales exemplary damages in the amount of five hundred
thousand pesos (P500,000.00).
Attorneys Fees. Pursuant to Art. 2208, attorneys fees may be recovered when, as in the
instant case, exemplary damages are awarded. In the recent case of Sulpicio Lines, Inc. v. Court
of Appeals,[34]which involved the death of a minor child in the sinking of a vessel, we held an
award of P50,000.00 as attorneys fees to be reasonable. Hence, we affirm the award of attorneys
fees made by the Court of Appeals to the spouses Rosales in that amount.
Compensation for Loss of Earning Capacity. Art. 2206 of the Civil Code provides that in
addition to the indemnity for death caused by a crime or quasi delict, the defendant shall be liable

for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs
of the latter; . . . . Compensation of this nature is awarded not for loss of earnings but for loss of
capacity to earn money.[35]Evidence must be presented that the victim, if not yet employed at the
time of death, was reasonably certain to complete training for a specific profession. [36] In People
v. Teehankee,[37] no award of compensation for loss of earning capacity was granted to the heirs of
a college freshman because there was no sufficient evidence on record to show that the victim
would eventually become a professional pilot.[38] But compensation should be allowed for loss of
earning capacity resulting from the death of a minor who has not yet commenced employment or
training for a specific profession if sufficient evidence is presented to establish the amount
thereof. In the United States it has been observed:

This raises the broader question of the proper measure of damages in death
cases involving children, housewives, the old, and others who do not have market
income so that there is no pecuniary loss tosurvivors or to the estate of the
decedent. The traditional approach was to award no or merely
nominal damages in such cases. . . . Increasingly, however, courts allow expert
testimony to be used to project those lost earnings. [39]
Thus, in Haumersen v. Ford Motor Co.,[40] the court allowed the heirs of a seven-year-old
boy who was killed in a car accident to recover compensation for loss of earning capacity:

Considerable evidence was presented by plaintiffs in an effort to give the jury a


foundation on which to make an award. Briefly stated, this evidence showed Charles
Haumersen was a seven-year-old of above average characteristics. He was described
as very intelligent and all-American. He received high marks in school. He was active
in church affairs and participated in recreational and athletic events, often with
children older than himself. In addition, he had an unusual talent for creating
numerous cartoons and other drawings, some of which plaintiffs introduced at trial.
The record does not disclose passion and prejudice. The key question is whether the
verdict of $100,000 has support in the evidence.
Upon analysis of the record, we conclude that we should not disturb the award.
The argument for allowing compensation for loss of earning capacity of a minor is even
stronger if he or she was a student, whether already training for a specific profession or still
engaged in general studies. In Krohmer v. Dahl,[41] the court, in affirming the award by the jury of
$85,000.00 to the heirs of an eighteen-year-old college freshman who died of carbon monoxide
poisoning, stated as follows:

There are numerous cases that have held admissible evidence of prospective earnings
of a student or trainee. . . . The appellants contend that such evidence is not admissible
unless the course under study relates to a given occupation or profession and it is
shown that the student is reasonably certain to follow that occupation or profession. It

is true that the majority of these decisions deal with students who are studying for a
specific occupation or profession. However, not one of these cases indicate that
evidence of ones education as a guide to future earnings is not admissible where the
student is engaged in general studies or whose education does not relate to a specific
occupation.
In sharp contrast with the situation obtaining in People v. Teehankee, where the prosecution
merely presented evidence to show the fact of the victims graduation from high school and the
fact of his enrollment in a flying school, the spouses Rosales did not content themselves with
simply establishing Liza Rosalies enrollment at UP Integrated School. They presented evidence
to show that Liza Rosalie was a good student, promising artist, and obedient child. She
consistently performed well in her studies since grade school. [42] A survey taken in 1984 when
Liza Rosalie was twelve years old showed that she had good study habits and attitudes. [43] Cleofe
Chi, guidance counselor of the University of the Philippines Integrated School, described Liza
Rosalie as personable, well-liked, and with a balanced personality.[44] Professor Alfredo Rebillon,
a faculty member of the University of the Philippines College of Fine Arts, who
organized workshops
which
Liza
Rosalie
attended
in
1982
and
1983,
testified thatLiza Rosalie had the potential of eventually becoming an artist.[45] Professor
Rebillons testimony is more than sufficiently established by the 51 samples of Liza Rosalies
watercolor, charcoal, and pencil drawings submitted as exhibits by the spouses Rosales.
[46]
Neither MMTC nor Pedro Musa controverted this evidence.
Considering her good academic record, extra-curricular activities, and varied interests, it is
reasonable to assume that Liza Rosalie would have enjoyed a successful professional career had
it not been for her untimely death. Hence, it is proper that compensation for loss of earning
capacity should be awarded to her heirs in accordance with the formula established in decided
cases[47] for computing net earning capacity, to wit:
Gross Necessary
Net Earning Life x Annual - Living
Capacity Expectancy Income Expenses
=

Life expectancy is equivalent to two thirds ( / ) multiplied by the difference of eighty (80)
and the age of the deceased.[48] Since Liza Rosalie was 16 at the time of her death, her life
expectancy was 44 more years.[49] Her projected gross annual income, computed based on the
minimum wage for workers in the non-agricultural sector in effect at the time of her death, [50] then
fixed at P37.00,[51] isP14,630.46.[52] Allowing for necessary living expenses of fifty percent (50%)
of her projected gross annual income,[53] her total net earning capacity amounts to P321,870.12.[54]
2

Finally, the spouses Rosales argue that the Court of Appeals erred in absolving Conrado
Tolentino, Feliciana Celebrado, and the GSIS of liability. The spouses Rosales alleged that
Tolentino, as Acting General Manager of the MMTC, and Celebrado, as a dispatcher thereof,
were charged with the supervision of Musa and should, therefore, be held vicariously liable
under Art. 2180 of the Civil Code. With respect to the GSIS, they contend that it was the insurer
in a contract for third party liability it had with the MMTC.

Although the fourth paragraph of Art. 2180 mentions managers among those made
responsible for the negligent acts of others, it is settled that this term is used in the said provision
in the sense of employers.[55] Thus, Tolentino and Celebrado cannot be held liable for the tort of
Pedro Musa.
In Vda. de Maglana v. Consolacion,[56] it was ruled that an insurer in an indemnity contract
for third party liability is directly liable to the injured party up to the extent specified in the
agreement, but it cannot be held solidarily liable beyond that amount. The GSIS admitted in its
answer that it was the insurer of the MMTC for third party liability with respect to MMTC Bus
No. 27 to the extent ofP50,000.00.[57] Hence, the spouses Rosales have the option either to claim
the said amount from the GSIS and the balance of the award from MMTC and Musa or to
enforce the entire judgment against the latter, subject to reimbursement from the former to the
extent of the insurance coverage.[58]
One last word. The Regional Trial Court of Quezon City erred in holding MMTC primarily
and Musa secondarily liable for damages arising from the death of Liza Rosalie. It was error for
the appellate court to affirm this aspect of the trial courts decision.
As already stated, MMTC is primarily liable for damages for the negligence of its employee
in view of Art. 2180. Pursuant to Art. 2181, it can recover from its employee what it may
pay. This does not make the employees liability subsidiary. It only means that if the judgment for
damages is satisfied by the common carrier, the latter has a right to recover what it has paid from
its employee who committed the fault or negligence which gave rise to the action based on quasidelict.[59] Hence, the spouses Rosales have the option of enforcing the judgment against either
MMTC or Musa.
From another point of view, Art. 2194 provides that the responsibility of two or more
persons who are liable for a quasi-delict is solidary. We ruled in Gelisan v. Alday[60] that the
registered owner/operator of a public service vehicle is 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 vehicle. In Baliwag Transit, Inc. v. Court of Appeals [61]it was held that to
escape solidary liability for a quasi-delict committed by an employee, the employer must adduce
sufficient proof that it exercised such degree of care. Finally, we held in the recent case
of Philtranco Service Enterprises, Inc. v. Court of Appeals[62] that the liability of the registered
owner of a public service vehicle . . . for damages arising from the tortious acts of the driver is
primary, direct, and joint and several or solidary with the driver.
WHEREFORE, the decision of the Court of Appeals is SET ASIDE and another one is
RENDERED holding the Metro Manila Transit Corporation and Pedro Musa jointly and
severally liable for the death of Liza Rosalie R. Rosales and ORDERING them as such to pay to
the spouses Rodolfo V. Rosales and Lily R. Rosales the following amounts:
1) death indemnity in the amount of fifty thousand pesos (P50,000.00);
2) actual damages in the amount of sixty thousand two hundred twenty six pesos and sixty five
centavos (P60,226.65);
3) moral damages in the amount of one million pesos (P1,000,000.00);
4) exemplary damages in the amount of five hundred thousand pesos (P500,000.00);
5) attorneys fees in the amount of fifty thousand pesos (P50,000.00);

6) compensation for loss of earning capacity in the amount of three hundred twenty-one
thousand eight hundred seventy pesos and twelve centavos (P321,870.12); and
7) the costs of suit.

SO ORDERED.
Melo (Acting Chairman) and Puno, JJ., concur.
Martinez, J., no part. On official leave.

[1]

Per Justice Emeterio C. Cui and concurred in by Justices Fermin A. Martin, Jr. and Eugenio S. Labitoria.

[2]

TSN, p. 3, March 31, 1987.

[3]

Id., pp. 12-13

[4]

Id., pp. 15-18.

[5]

Exh. S-5, Records, pp. 37-42.

[6]

Id., p. 42.

[7]

TSN, pp. 20-21, May 27, 1988.

[8]

Id., p. 21.

[9]

Rollo, p. 58.

[10]

Id., p. 53.

[11]

Id., pp. 18-20.

[12]

Cf., Heirs of the Late Teodoro Guaring, Jr. v. Court of Appeals, 269 SCRA 283 (1997).

[13]

Philtranco Service Enterprises, Inc. v. Court of Appeals, 273 SCRA 562 (1997).

[14]

WILLIAM L. PROSSER AND ROBERT E. KEETON, THE LAW OF TORTS 500-501 (5th ed., 1989).

[15]

100 Phil. 459, 463-64 (1956).

[16]

Bahia v. Litonjua, 30 Phil. 624 (1915).

[17]

Supra note 15, at 463.

[18]

Metro Manila Transit Corporation v. Court of Appeals, 223 SCRA 521, 540-41 (1993).

[19]

Central Taxicab Corporation v. Ex-Meralco Employees Transportation Corporation, 54 O.G. 7415, 7417-7418
(1958).
[20]

TSN, pp. 1-31, Feb. 10, 1989.

[21]

Id., pp. 34-36.

[22]

Id., pp. 36-37.

[23]

Exhs. 2-5, Records, pp. 268-272.

[24]

Supra note 19.

[25]

223 SCRA 521, 534-535 (1993).

[26]

E.g., Philtranco Service Enterprises, Inc. v. Court of Appeals, 273 SCRA 562, 573 (1997).

[27]

Exhs. W to W-42, Records, pp. 168-210.

[28]

CESAR SANGCO, TORTS AND DAMAGES 986 (Rev. ed., 1994).

[29]

TSN, p. 19, May 28, 1987.

[30]

Id., pp. 19-20, May 28, 1987.

[31]

TSN, pp. 17-18, June 11, 1987.

[32]

249 SCRA 54, 116 (1995).

[33]

Exh. FF, Records, p. 265.

[34]

246 SCRA 376 (1995).

[35]

People v. Teehankee, 249 SCRA 54, 118 (1995).

[36]

E.g., Cariaga v. Laguna Tayabas Bus Company, 110 Phil. 346 (1960).

[37]

249 SCRA 54, 118-119 (1995).

[38]

Supra note 35, at 119.

[39]

RICHARD A. POSNER, TORT LAW: CASES AND ECONOMIC ANALYSIS 123-25 (1982)

[40]

257 N.W. 2d 7, 17 (1977).

[41]

402 P. 2d 979, 982 (1965).

[42]

TSN, pp. 8-9, Aug. 27, 1987.

[43]

Exh. DD, Records, p. 263.

[44]

TSN, pp. 9-11, Aug. 27, 1987.

[45]

TSN, pp. 1-7, June 22, 1987.

[46]

Exhs. U-1 to U-51, Records, pp. 46-96.

[47]

E.g., Negros Navigation Co., Inc. v. Court of Appeals, 281 SCRA 534 (1997).

[48]

Villa Rey Transit, Inc. v. Court of Appeals, 31 SCRA 511 (1970).

[49]

[50]

As adopted in People v. Teehankee, note 1, supra.

[51]

Wage Order No. 6, effective November 1, 1984.

[52]

37.00 P1,125.42

/3 x (80-14) = 44.

x365___ x 13_____
P13,505.00 P14,630.46 gross annual income
12___
P 1,125.42 equivalent monthly rate
To account for the thirteenth month pay, the equivalent monthly rate is multiplied by thirteen.
[53]

See note 47, supra.

[54]

P14,630.46 P7,315.23

x .50 x 44
P7,315.23 net annual income P321,870.12 net earning capacity
[55]

Philippine Rabbit Bus Lines, Inc. v. Phil-American Forwarders, Inc., 63 SCRA 231 (1975).

[56]

212 SCRA 218, 272-274 (1992).

[57]

Records, p. 32.

[58]

Supra note 56.

[59]

See Philtranco Service Enterprises, Inc. v. Court of Appeals, 273 SCRA 562 (1997).

[60]

154 SCRA 388, 394 (1987).

[61]

262 SCRA 230, 234 (1996) (emphasis added).

[62]

Supra note 59 at 572.

SECOND DIVISION

[G. R. No. 154278. December 27, 2002]

VICTORY
LINER,
INC. petitioner, vs.
MALECDAN, respondents.

HEIRS

OF

ANDRES

DECISION
MENDOZA, J.:

This is a petition for review of the decision of the Eighth Division of the Court of
Appeals, which affirmed the decision of the Regional Trial Court of Baguio City, Branch
5, in Civil Case No. 3082-R, ordering petitioner and its driver, Ricardo Joson, Jr., to pay
damages to the heirs of Andres Malecdan, who had been killed after being hit by a bus
while attempting to cross the National Highway in Barangay Nungnungan 2 in Cauayan,
Isabela.
[1]

[2]

The facts of the case are as follows:


Petitioner is a common carrier. Private respondent Elena Malecdan is the widow of
the deceased, while private respondents Veronica, Virginia, Mary Pauline, Arthur, Viola,
Manuel and Valentin Malecdan are their children.
Andres Malecdan was a 75 year-old farmer residing in Barangay Nungnungan 2,
Municipality of Cauayan, Province of Isabela. On July 15, 1994, at around 7:00 p.m.,
while Andres was crossing the National Highway on his way home from the farm, a
Dalin Liner bus on the southbound lane stopped to allow him and his carabao to
pass. However, as Andres was crossing the highway, a bus of petitioner Victory Liner,
driven by Ricardo C. Joson, Jr., bypassed the Dalin bus. In so doing, respondent hit the
old man and the carabao on which he was riding. As a result, Andres Malecdan was
thrown off the carabao, while the beast toppled over. The Victory Liner bus sped past
the old man, while the Dalin bus proceeded to its destination without helping him.
[3]

[4]

The incident was witnessed by Andres Malecdans neighbor, Virgilio Lorena, who
was resting in a nearby waiting shed after working on his farm. Malecdan sustained a
wound on his left shoulder, from which bone fragments protruded. He was taken by
Lorena and another person to the Cagayan District Hospital where he died a few hours
after arrival. The carabao also died soon afterwards. Lorena executed a sworn
statement before the police authorities. Subsequently, a criminal complaint for reckless
imprudence resulting in homicide and damage to property was filed against the Victory
Liner bus driver Ricardo Joson, Jr.
[5]

[6]

[7]

On October 5, 1994, private respondents brought this suit for damages in the
Regional Trial Court, Branch 5, Baguio City, which, in a decision rendered on July 17,
2000, found the driver guilty of gross negligence in the operation of his vehicle and
Victory Liner, Inc. also guilty of gross negligence in the selection and supervision of
Joson, Jr. Petitioner and its driver were held liable for damages. The dispositive portion
of the trial courts decision reads:
[8]

WHEREFORE, judgment is hereby rendered ordering the defendants to pay, jointly


and severally to the plaintiffs the amounts of:
a. P50,000.00 as death indemnity;
b. P88,339.00 for actual damages;
c. P200,000.00 for moral damages;
d. P50,000.00 as exemplary damages;
e. Thirty percent (30%) as attorneys fees of whatever amount that can be collected by
the plaintiff; and
f. The costs of the suit.
The counterclaim of the defendant Victory Liner, Inc. against the plaintiffs and the
third-party complaint of the same defendant against the Zenith Insurance Corporation
are dismissed.
SO ORDERED.

[9]

On appeal, the decision was affirmed by the Court of Appeals, with the modification
that the award of attorneys fees was fixed at P50,000.00.
[10]

Hence, this appeal raising the following issues:


I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
AFFIRMING THE APPEALED DECISION OF THE REGIONAL TRIAL COURT
GRANTING P200,000.00 AS MORAL DAMAGES WHICH IS DOUBLE

THE P100,000.00 AS PRAYED FOR BY THE PRIVATE RESPONDENTS IN THEIR


COMPLAINT AND IN GRANTING ACTUAL DAMAGES NOT SUPPORTED BY
OFFICIAL RECEIPTS AND SPENT WAY BEYOND THE BURIAL OF THE
DECEASED VICTIM.
II. WHETHER OR NOT THE AFFIRMATION BY THE HONORABLE COURT OF
APPEALS OF THE APPEALED DECISION OF THE REGIONAL TRIAL COURT
GRANTING THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND
ATTORNEYS FEES WHICH WERE NOT PROVED AND CONSIDERING THAT
THERE IS NO FINDING OF BAD FAITH AND GROSS NEGLIGENCE ON THE
PART OF THE PETITIONER WAS NOT ESTABLISHED, IS IN ACCORD WITH LAW
AND JURISPRUDENCE.
III. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
AFFIRMING THE APPEALED DECISION OF THE REGIONAL TRIAL COURT
WHICH DISREGARDED THE APPELLANTS TESTIMONIAL AND DOCUMENTARY
EVIDENCE THAT IT HAS EXERCISED EXTRAORDINARY DILIGENCE IN THE
SELECTION AND SUPERVISION OF ITS EMPLOYEES, OR STATED
DIFFERENTLY, WHETHER OR NOT THE AFFIRMATION BY THE COURT OF
APPEALS OF THE APPEALED DECISION OF THE TRIAL COURT THAT IS
CONTRARY TO LAW AND JURISPRUDENCE CONSTITUTES GRAVE ABUSE
AND EXCESS OF JURISDICTION.[11]

We find the appealed decision to be in order.


First. Victory Liner, Inc. no longer questions the findings of the Regional Trial Court
that Andres Malecdan was injured as a result of the gross negligence of its driver,
Ricardo Joson, Jr.What petitioner now questions is the finding that it (petitioner) failed to
exercise the diligence of a good father of the family in the selection and supervision of
its employee. Petitioner argues,
With all due respect, the assignment of three inspectors to check and remind the drivers of
petitioner Victory Liner of its policies in a two-and-a-half hour driving distance, the installation of
tachometers to monitor the speed of the bus all throughout the trip, the periodic monitoring and
checking of the trips from one station to another through a trip ticket from station to station, the
regular periodic conducting of safety and defensive driving [training sessions] for its drivers are
concrete and physical proofs of the formulated operating standards, the implementation and
monitoring of the same, designed for the exercise of due diligence of a good father of a family in
the supervision of its employees.[12]

It explained that it did not present bus driver Joson, Jr. on the witness stands
because he had been dismissed from the company after the incident, which it found
was a breach in the company regulations. Petitioner blames private respondents for the
death of their father, Andres Malecdan, who was already 75 years old, for allowing him
to plough their field by himself.
[13]

The contention has no merit.


Article 2176 provides:

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.
Article 2180 provides for the solidary liability of an employer for the quasi-delict
committed by an employee. The responsibility of employers for the negligence of their
employees in the performance of their duties is primary and, therefore, the injured party
may recover from the employers directly, regardless of the solvency of their employees.
The rationale for the rule on vicarious liability has been explained thus:
[14]

What has emerged as the modern justification for vicarious liability is a rule of
policy, a deliberate allocation of a risk. The losses caused by the torts of employees,
which as a practical matter are sure to occur in the conduct of the employers enterprise,
are placed upon that enterprise itself, as a required cost of doing business. They are
placed upon the employer because, having engaged in an enterprise, which will on the
basis of all past experience involve harm to others through the tort of employees, and
sought to profit by it, it is just that he, rather than the innocent injured plaintiff, should
bear them; and because he is better able to absorb them and to distribute them, through
prices, rates or liability insurance, to the public, and so to shift them to society, to the
community at large. Added to this is the makeweight argument that an employer who is
held strictly liable is under the greatest incentive to be careful in the selection,
instruction and supervision of his servants, and to take every precaution to see that the
enterprise is conducted safely.
[15]

Employers may be relieved of responsibility for the negligent acts of their


employees acting within the scope of their assigned task only if they can show that they
observed all the diligence of a good father of a family to prevent damage. For this
purpose, they have the burden of proving that they have indeed exercised such
diligence, both in the selection of the employee and in the supervision of the
performance of his duties.
[16]

[17]

In the selection of prospective employees, employers are required to examine them


as to their qualifications, experience and service records. With respect to the
supervision of employees, employers must formulate standard operating procedures,
monitor their implementation and impose disciplinary measures for breaches thereof.
These facts must be shown by concrete proof, including documentary evidence.
[18]

[19]

[20]

In the instant case, petitioner presented the results of Joson, Jr.s written
examination, actual driving tests, x-ray examination, psychological examination,
NBI
clearance, physical
examination, hematology
examination, urinalysis,
student driver training, shop training, birth certificate, high school diploma and
reports from the General Maintenance Manager and the Personnel Manager showing
that he had passed all the tests and training sessions and was ready to work as a
professional driver. However, as the trial court noted, petitioner did not present proof
that Joson, Jr. had nine years of driving experience.
[21]

[24]

[22]

[23]

[25]

[28]

[26]

[29]

[27]

[30]

[31]

[32]

[33]

[34]

Petitioner also presented testimonial evidence that drivers of the company were
given seminars on driving safety at least twice a year. Again, however, as the trial
court noted there is no record of Joson, Jr. ever attending such a seminar. Petitioner
likewise failed to establish the speed of its buses during its daily trips or to submit in
[35]

[36]

evidence the trip tickets, speed meters and reports of field inspectors. The finding of the
trial court that petitioners bus was running at a very fast speed when it overtook the
Dalin bus and hit the deceased was not disputed by petitioner. For these reasons, we
hold that the trial court did not err in finding petitioner to be negligent in the supervision
of its driver Joson, Jr.
Second. To justify an award of actual damages, there should be proof of the actual
amount of loss incurred in connection with the death, wake or burial of the victim. We
cannot take into account receipts showing expenses incurred some time after the burial
of the victim, such as expenses relating to the 9 th day, 40th day and 1st year death
anniversaries. In this case, the trial court awarded P88,339.00 as actual
damages. While these were duly supported by receipts, these included the amount
of P5,900.00, the cost of one pig which had been butchered for the 9 th day death
anniversary of the deceased. This item cannot be allowed. We, therefore, reduce the
amount of actual damages to P82,439.00.00. The award of P200,000.00 for moral
damages should likewise be reduced. The trial court found that the wife and children of
the deceased underwent intense moral suffering as a result of the latters death. Under
Art. 2206 of the Civil Code, the spouse, legitimate children and illegitimate descendants
and ascendants of the deceased may demand moral damages for mental anguish by
reason of the death of the deceased. Under the circumstances of this case an award
of P100,000.00 would be in keeping with the purpose of the law in allowing moral
damages.
[37]

[38]

[39]

[40]

On the other hand, the award of P50,000.00 for indemnity is in accordance with
current rulings of the Court.
[41]

Art. 2231 provides that exemplary damages may be recovered in cases involving
quasi-delicts if the defendant acted with gross negligence. Exemplary damages are
imposed not to enrich one party or impoverish another but to serve as a deterrent
against or as a negative incentive to curb socially deleterious actions. In this case,
petitioners driver Joson, Jr. was grossly negligent in driving at such a high speed along
the national highway and overtaking another vehicle which had stopped to allow a
pedestrian to cross. Worse, after the accident, Joson, Jr. did not stop the bus to help the
victim. Under the circumstances, we believe that the trial courts award of P50,000.00 as
exemplary damages is proper.
[42]

Finally, private respondents are entitled to attorneys fees. Under Art. 2008 of the
Civil Code, attorneys fees may be recovered when, as in the instant case, exemplary
damages are awarded. In the recent case of Metro Manila Transit Corporation v. Court
of Appeals, we held an award of P50,000.00 as attorneys fees to be
reasonable. Hence, private respondents are entitled to attorneys fees in that amount.
[43]

WHEREFORE, the decision of the Court of Appeals, dated January 17, 2002, is
hereby AFFIRMED, with the MODIFICATION that petitioner Victory Liner, Inc. is ordered
to pay the following amounts to the respondent heirs of Andres Malecdan:

1. Death indemnity in the amount of Fifty Thousand Pesos (P50,000.00);

2. Actual damages in the amount of Eighty-Two Thousand Four Hundred Thirty-Nine


Pesos (P82,439.00);
3. Moral damages in the amount of One Hundred Thousand Pesos (P100,000.00);
4. Exemplary damages in the amount of Fifty Thousand Pesos (P50,000.00);
5. Attorneys fees in the amount of Fifty Thousand Pesos (P50,000.00); and
6. Costs of suit.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.

[1]

Per Justice Martin S. Villarama, Jr., with the concurrence of Justices Conchita Carpio-Morales and
Sergio L. Pestao.

[2]

Per Judge Antonio M. Esteves.

[3]

Certificate of Death, Records, p. 409

[4]

TSN (Virgilio Lorena) pp. 4-8, July 29, 1997.

[5]

Id., pp. 8-10.


id., p. 10.

[6]

[7]

Exhs. C and D; Records, pp. 406-407.

[8]

Records, pp. 1-5.

[9]

RTC Decision dated July 17, 2000, p. 14; Rollo, p. 50.

[10]

CA Decision dated Jan. 17, 2002; id., pp. 26-33.

[11]

Petition for review, pp. 7-8; id., pp. 10-11.

[12]

Id., p. 17; id., p. 20.

[13]

Id., pp. 17-19; Records, pp. 20-22.

[14]

Metro Manila Transit Corporation v. Court of Appeals, 298 SCRA 495 (1998); Philtranco Service
Enterprises, Inc. v. Court of Appeals, 298 SCRA 495 (1997).

[15]

WILLIAM L. PROSSER AND ROBERT E. KEETON, THE LAW OF TORTS 500-501 (1989), cited in
Metro Manila Transit Corporation v. Court of Appeals, 359 SCRA 18 (1998).

[16]

Pestao v. Sumayang, 346 SCRA 870 (2000); Bahia v. Litonjua, 30 Phil. 624 (1915).

[17]

Metro Manila Transit Corporation v. Court of Appeals, 298 SCRA 495 (1998); Baliwag Transit, Inc. v.
Court of Appeals, 262 SCRA 230 (1996); China Airlines, Ltd. v. Court of Appeals, 185 SCRA 449
(1990); Pantranco North Express, Inc. v. Baesa, 179 SCRA 384 (1989); Umali v. Bacani, 69
SCRA 623, (1976); Lilius v. Manila Railroad Company, 59 Phil. 758 (1934).

[18]

Campo v. Camarote, 100 Phil. 459 (1956).

[19]

Metro Manila Transit Corporation v. Court of Appeals, 223 SCRA 521 (1993).

[20]

Metro Manila Transit Corporation v. Court of Appeals, 298 SCRA 495 (1998); Central Taxicab
Corporation v. Ex-Meralco Employees Transportation Corporation, 54 O.G. 7415 (1958).

[21]

Exh. 3; Records, p. 505.

[22]

Exh. 4; Id., p. 506.

[23]

Exh. 10; id., p. 512.

[24]

Exh. 5; id., p. 507.

[25]

Exh. 8; id., p. 510.

[26]

Exh. 9; id., p. 511.

[27]

Exh. 11; id., p. 513.

[28]

Exh. 12; id., p. 514.

[29]

Exh. 14; id., p. 516.

[30]

Exh. 15; id., p. 518.

[31]

Exh. 6, id., p. 508.

[32]

Exh. 7, id., p. 509.

[33]

Exhs. 16 and 17; id., pp. 519-520.

[34]

RTC Decision, pp. 10-11; Rollo, pp. 46-47.

[35]

TSN (Virgilio Punzalan), pp. 7-8, February 3, 1999.

[36]

RTC Decision, p. 11; Rollo, p. 47.

[37]

People v. Guillermo, 302 SCRA 257 (1999).

[38]

People v. Mangahas, 311 SCRA 384 (1999).

[39]

RTC Decision, p. 13; Records, p. 49.

[40]

See Fortune Express, Inc. v. Court of Appeals, 305 SCRA 14 (1999).

[41]

Fortune Express, Inc. v. Court of Appeals, 305 SCRA 14 (1999); Negros Navigation Co., Inc. v. Court of
Appeals, 281 SCRA 534 (1997); Philtranco Service Enterprises, Inc. v. Court of Appeals, 273
SCRA 562 (1997).

[42]

Macenas v. Court of Appeals, 180 SCRA 83 (1989).

[43]

298 SCRA 495 (1998).

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 75112 October 16, 1990

FILAMER CHRISTIAN INSTITUTE, petitioner,


vs.
HONORABLE COURT OF APPEALS, HONORABLE ENRIQUE P. SUPLICO, in his capacity as
Judge of the Regional Trial Court,. Branch XIV, Roxas City and the late POTENCIANO
KAPUNAN, SR., as substituted by his heirs, namely: LEONA KAPUNAN TIANGCO, CICERO
KAPUNAN, JESUS KAPUNAN, SANTIAGO KAPUNAN, POTENCIANO KAPUNAN, JR., PAZ
KAPUNAN PUBLICO, SUSA KAPUNAN GENUINO and ERLINDA KAPUNAN
TESORO, respondents.
Aquilina B. Brotarlo for petitioner.
Rhodora G. Kapunan for the Substituted Heirs of the late respondent.

FERNAN, C.J.:
This is a petition for review of the decision 1 of the Court of Appeals affirming the judgment of the
Regional Trial Court (RTC) of Roxas City, Branch 14 in Civil Case No. V-4222 which found petitioner
Filamer Christian Institute and Daniel Funtecha negligent and therefore answerable for the resulting
injuries caused to private respondent Potenciano Kapunan, Sr.
Private respondent Potenciano Kapunan, Sr., an eighty-two-year old retired schoolteacher (now
deceased), was struck by the Pinoy jeep owned by petitioner Filamer and driven by its alleged
employee, Funtecha, as Kapunan, Sr. was walking along Roxas Avenue, Roxas City at 6:30 in the
evening of October 20, 1977. As a result of the accident, Kapunan, Sr. suffered multiple injuries for
which he was hospitalized for a total of twenty (20) days.
Evidence showed that at the precise time of the vehicular accident, only one headlight of the jeep
was functioning. Funtecha, who only had a student driver's permit, was driving after having
persuaded Allan Masa, the authorized driver, to turn over the wheels to him. The two fled from the
scene after the incident. A tricycle driver brought the unconscious victim to the hospital.
Thereafter, Kapunan, Sr. instituted a criminal case against Funtecha alone in the City Court of Roxas
City for serious physical injuries through reckless imprudence. Kapunan, Sr. reserved his right to file
an independent civil action. The inferior court found Funtecha guilty as charged and on appeal, his
conviction was affirmed by the then Court of First Instance of Capiz. 2
Pursuant to his reservation, Kapunan, Sr. commenced a civil case for damages 3 before the RTC of
Roxas City. Named defendants in the complaint were petitioner Filamer and Funtecha. Also included was
Agustin Masa, the director and president of Filamer Christian Institute, in his personal capacity in that he
personally authorized and allowed said Daniel Funtecha who was his houseboy at the time of the
incident, to drive the vehicle in question despite his knowledge and awareness that the latter did not have
the necessary license or permit to drive said vehicle. His son, Allan Masa, who was with Funtecha at the
time of the accident, was not impleaded as a co-defendant. 4
On December 14, 1983, the trial court rendered judgment finding not only petitioner Filamer and
Funtecha to be at fault but also Allan Masa, a non-party. Thus:
WHEREFORE, finding the averments in the complaint as supported by preponderance of evidence
to be reasonable and justified, and that defendants Daniel Funtecha, Filamer Christian Institute and
Allan Masa are at fault and negligent of the acts complained of which causes (sic) injury to plaintiff,

judgment is hereby rendered in favor of the plaintiff and against the defendants, namely: Daniel
Funtecha and Filamer Christian Institute, the employer whose liability is primary and direct, jointly
and severally, to pay plaintiff the following:
(1) to pay the sum of TWO THOUSAND NINE HUNDRED FIFTY PESOS AND
FIFTY CENTAVOS (P2,950.50) as medical expenses (Exh. "A");
(2) to pay TWO HUNDRED FORTY ONE PESOS (P241.00) as doctor's fee (Exh.
"C");
(3) to pay THREE HUNDRED NINETY PESOS (P390.00) as additional expenses
incurred for thirty-nine days at P10.00 a day, for remuneration of plaintiff's helper
while recuperating;
(4) to pay FOUR THOUSAND PESOS (P4,000.00) as Court litigation expenses;
(5) to pay THREE THOUSAND PESOS (P3,000.00) as loss of earnings capacity;
(6) to pay TWENTY THOUSAND (P20,000.00) pesos as moral damages;
(7) to pay FOUR THOUSAND FIVE HUNDRED PESOS (P4,500.00) as attorney's
fees;
(8) to pay TWENTY THOUSAND PESOS (P20,000.00)as insurance indemnity on the
policy contract;
and without prejudice to the right of defendant Filamer Christian Institute to demand
from co-defendant Daniel Funtecha part-time employee and/or Allan Masa a full time
employee reimbursement of the damages paid to herein plaintiff.
The defendant Agustin Masa as director of defendant Filamer Christian Institute has
also failed to exercise the diligence required of a good father of a family in the
supervision of his employee Allan Masa, being his son. However, the court absolved
defendant Agustin Masa from any personal liability with respect to the complaint filed
against him in his personal and private capacity, cause he was not in the vehicle
during the alleged incident.
For failure to prove their respective counterclaims filed by the defendant Daniel
Funtecha, Dr. Agustin Masa, and Filamer Christian Institute, as against the herein
plaintiff, same are hereby dismissed.
The Zenith Insurance Corporation as third party defendant has failed to prove that
there was a policy violation made by the defendant Filamer Christian Institute which
absolves them from liability under the aforesaid insurance policy. The record shows
that the defendant Daniel Funtecha while driving the said vehicle was having a
student drivers license marked Exh. "1" and accompanied by Allan Masa who is the
authorized driver of said vehicle with a professional drivers license as shown by Exh.
"3".

This Court finds that defendant Daniel Funtecha while driving the said vehicle is
considered as authorized driver in accordance with the policy in question marked
Exh. "2-Masa and FCI".
Finding the averments in the third party complaint filed by defendant Filamer
Christian Institute as supported by preponderance of evidence as shown by their
exhibits to be reasonable and justified, judgment is hereby rendered in favor of the
said defendant and third party plaintiff Filamer Christian Institute as against third
party defendant Zenith Insurance Corporation.
The Zenith Insurance Corporation as third party defendant is hereby ordered to pay
in favor of the defendant and third party plaintiff, Filamer Christian Institute, the
following:
(1) to pay TWENTY THOUSAND PESOS (P20,000.00) as third party
liability as provided in the Zenith Insurance Corporation policy (Exh.
"2");
(2) to pay TEN THOUSAND PESOS (P10,000.00)as moral damages;
(3) to pay FOUR THOUSAND PESOS (P4,000.00) as Court litigation
and actual expenses;
(4) to pay THREE THOUSAND PESOS (P3,000.00) as attorney's
fees;
The defendants Daniel Funtecha, Filamer Christian Institute and third party
defendant Zenith Insurance Corporation are hereby ordered jointly and severally, to
pay the costs of the suit. 5
Only petitioner Filamer and third-party defendant Zenith Insurance Corporation appealed the lower
court's judgment to the Court of Appeals and as a consequence, said lower court's decision became
final as to Funtecha. For failure of the insurance firm to pay the docket fees, its appeal was
dismissed on September 18, 1984. On December 17, 1985, the Appellate Court rendered the
assailed judgment affirming the trial court's decision in toto.6 Hence the present recourse by petitioner
Filamer.
It is petitioner Filamer's basic contention that it cannot be held responsible for the tortious act of
Funtecha on the ground that there is no existing employer-employee relationship between them. We
agree.
The Civil Code provides:
Art. 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasidelict and is governed by the provisions of this Chapter.
Art. 2180. The obligation imposed by article 2176 is demandable not only for one's
own acts or omissions but also for those of persons for whom one is responsible.

xxx xxx xxx


Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are
not engaged in any business or industry.
xxx xxx xxx
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observe all the diligence of a good father of a family to
prevent damage. (Emphasis supplied).
The legal issue in this appeal is whether or not the term "employer" as used in Article 2180 is
applicable to petitioner Filamer with reference to Funtecha.
In disclaiming liability, petitioner Filamer has invoked the provisions of the Labor Code, 7 specifically
Section 14, Rule X of Book III which reads:
Sec. 14. Working scholars. There is no employer-employee relationship between
students on the one hand, and schools, colleges or universities on the other, where
students work for the latter in exchange for the privilege to study free of charge;
provided the students are given real opportunity, including such facilities as may be
reasonable, necessary to finish their chosen court under such arrangement.
(Emphasis supplied).
It is manifest that under the just-quoted provision of law, petitioner Filamer cannot be considered as
Funtecha's employer. Funtecha belongs to that special category of students who render service to
the school in exchange for free tuition Funtecha worked for petitioner for two hours daily for five days
a week. He was assigned to clean the school passageways from 4:00 a.m. to 6:00 a.m. with
sufficient time to prepare for his 7:30 a.m. classes. As admitted by Agustin Masa in open court,
Funtecha was not included in the company payroll. 8
The wording of Section 14 is clear and explicit and leaves no room for equivocation. To dismiss the
implementing rule as one which governs only the "personal relationship" between the school and its
students and not where there is already a third person involved, as espoused by private
respondents, is to read into the law something that was not legislated there in the first place. The
provision of Section 14 is obviously intended to eliminate an erstwhile gray area in labor relations
and seeks to define in categorical terms the precise status of working scholars in relation to the
learning institutions in which they work for the privilege of a free education.
But even if we were to concede the status of an employee on Funtecha, still the primary
responsibility for his wrongdoing cannot be imputed to petitioner Filamer for the plain reason that at
the time of the accident, it has been satisfactorily shown that Funtecha was not acting within the
scope of his supposed employment. His duty was to sweep the school passages for two hours every
morning before his regular classes. Taking the wheels of the Pinoy jeep from the authorized driver at
6:30 in the evening and then driving the vehicle in a reckless manner resulting in multiple injuries to
a third person were certainly not within the ambit of his assigned tasks. In other words, at the time of
the injury, Funtecha was not engaged in the execution of the janitorial services for which he was
employed, but for some purpose of his own. It is but fair therefore that Funtecha should bear the full
brunt of his tortious negligence. Petitioner Filamer cannot be made liable for the damages he had
caused.

Private respondents' attempt to hold petitioner Filamer directly and primarily answerable to the
injured party under Article 2180 of the Civil Code would have prospered had they proceeded against
Allan Masa, the authorized driver of the Pinoy jeep and undisputably an employee of petitioner. It
was Allan's irresponsible act of entrusting the wheels of the vehicle to the inexperienced Funtecha
which set into motion the chain of events leading to the accident resulting in injuries to Kapunan, Sr.
But under the present set of circumstances, even if the trial court did find Allan guilty of negligence,
such conclusion would not be binding on Allan. It must be recalled that Allan was never impleaded in
the complaint for damages and should be considered as a stranger as far as the trial court's
judgment is concerned. It is axiomatic that no man shall be affected by a proceeding to which he is a
stranger. 9
WHEREFORE, in view of the foregoing, the decision under review of the Court of Appeals is hereby
SET ASIDE. The complaint for damages 10 is ordered DISMISSED as against petitioner Filamer
Christian Institute for lack of cause of action. No costs.
SO ORDERED.
Bidin and Cortes, JJ., concur.
Feliciano, J., is on leave.

Separate Opinions

GUTIERREZ, JR., J., concurring:


I concur but limit my concurrence on the employee-employer relationship to labor law situations.

Separate Opinions
GUTIERREZ, JR., J., concurring:
I concur but limit my concurrence on the employee-employer relationship to labor law situations.
Footnotes
1 Penned by Associate Justice Desiderio P. Jurado and concurred in by Associate
Justices Jose C. Campos, Jr. and Serafin E. Camilon. Associate Justice Crisolito
Pascual did not take part.
2 Annex E of Petition, p. 49. Rollo.

3 Civil Case No. V-4222.


4 Records. pp. 1 and 3.
5 Records, pp, 572-573.
6 Rollo, pp. 177 and 21.
7 Presidential Decree No. 442.
8 Records, p. 569.
9 Church Assistance Program vs. Sibulo, G.R. No. 76552, March 21, 1989.
10 Civil Case No. V-4222.
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 75112 August 17, 1992


FILAMER CHRISTIAN INSTITUTE, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity as
Judge of the Regional Trial Court, Branch XIV, Roxas City and POTENCIANO KAPUNAN,
SR., respondents.
Bedona & Bedona Law Office for petitioner.
Rhodora G. Kapunan for private respondents.

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 of Appeals, 190
SCRA 477) reviewing the appellate court's 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.
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 C. 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 attorney's
fees.
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 driver's 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
Allan's 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 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.
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. Allan's 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 Funtecha's possession of a student driver's 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 Allan's 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. Fieldmen's 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 master's business. (Kohlman v. Hyland, 210 NW 643, 50
ALR 1437 [1926]; Jameson v. Gavett, 71 P 2d 937 [1937])
Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the petitioner
anchors its defense, was 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 avoid liability under the substantive provisions of the Civil Code.
There is evidence to show that there exists in the present case an extra-contractual 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
driver's 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 within 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 regulations 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, 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.
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. 768, 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 [1976]; 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.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.
The Lawphil Project - Arellano Law Foundation

[Syllabus]

FIRST DIVISION

[G.R. No. 116624. September 20, 1996]

BALIWAG TRANSIT, INC., petitioner, vs. COURT OF APPEALS, DIVINA


VDA. DE DIONISIO, for herself and in behalf of her minor
children MARK ANGELO and MA. LIZA, both surnamed
DIONISIO, respondents.
DECISION
BELLOSILLO, J.:

The wages earned by Mario Dionisio were the lifeblood of his family - his wife Divina
and their children Mark Angelo and Ma. Liza, both minors. A work-related disruption
unfortunately abruptly ended the means of livelihood of Mario prompting his dependent
family to sue his employer and a co-employee for damages.
On 2 November 1990, at about 3:30 in the afternoon, petitioner's Baliwag Transit
Bus No. 117 was driven by Juanito Fidel to its terminal on 2nd Avenue, Caloocan City,
for repair of its brake system. Juanito Fidel told mechanic Mario Dionisio to inform the
headman about the matter so that proper order to the mechanics could be made. Fidel
then alighted from the bus and told the gasman to fill up the gas tank.
Shortly after, Juanito Fidel returned to the bus and sat on the driver's
seat. Suddenly the bus moved; he felt something was hit. When he went down to
investigate he saw Mario Dionisio lying on the ground bleeding and convulsive,
sandwiched between Bus No. 117 and another bus parked thereat owned by the same
petitioner. Fidel summoned his co-employees and they all helped to extricate Mario
Dionisio. They rushed him to St. Luke's Hospital in Quezon City. On 6 November
1990 however he expired as evidenced by his Certificate of Death issued 22 November
1990.
Thereafter a complaint for damages was lodged by private respondents Divina Vda.
de Dionisio, for herself and in behalf of her minor children Mark Angelo and Ma. Liza as
heirs of the deceased, before the Regional Trial Court of Quezon City. On 3 February
1993 the trial court rendered a decision ordering petitioner Baliwag Transit, Inc., and its
employee Juanito Fidel jointly and severally to pay the heirs of Mario Dionisio the
following amounts: P50,000.00 as death indemnity, P6,691.00 as litigation
expenses, P10,000.00 as attorney's fees, P3,000.00 as funeral expenses, and costs of
suit.
[1]

Private respondents appealed to the Court of Appeals which on 23 March 1994


rendered a decision modifying the appealed judgment and ordering petitioners instead
to pay jointly and severally P50.000.00 as death indemnity, P1,429,050.00 for loss of
earning capacity, P3,000.00 for funeral expenses, P 60,000.00 for moral
damages, P30,000.00 for exemplary damages,P50,000.00 for attorney's fees, plus the
costs of suit. On 8 August 1994 the motion to reconsider the decision was denied.
Hence, this petition.
[2]

[3]

Petitioners maintain that respondent Court of Appeals erred in affirming the


appealed judgment despite the contributory negligence of the deceased Mario Dionisio,
i.e., in failing to take the necessary precaution while doing repair work on the brake
system of Bus No. 117, and that the increase of the award of damages is unreasonable
being unsupported by law and the evidence.
The petition must fail. The circumstances clearly show that the proximate cause of
the death of Mario Dionisio was the negligence of driver Juanito Fidel when he failed to
take the necessary precaution to prevent the accident. He boarded his bus, sat on the
driver's seat and was at the steering wheel when the bus moved pinning down the
deceased who was repairing the defective brake system below. Driver Fidel should
have known that his brake system was being repaired as he was in fact the one who
told Dionisio to do the repair. Fidel should have parked the bus properly and
safely. After alighting from the bus to tell the gasman to fill the tank, he should have
placed a stopper or any hard object against a tire or two of the bus. But without taking
the necessary precaution he boarded Bus No. 117 causing it to move and roll, pinning
down the deceased which resulted in his serious injuries and eventual death.The
reckless imprudence of Juanito Fidel makes him liable to the heirs of offended party for
damages together with his employer. Article 2176 of the Civil Code provides -

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.
Complementing Art. 2176 is Art. 2180 which states -

The obligation imposed by article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is responsible x x x x
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 x x x 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.

Article 2180, in relation to Art. 2176, of the Civil Code provides that the employer of
a negligent employee is liable for the damages caused by the latter. When an injury is
caused by the negligence of an employee there instantly arises a presumption of the
law that there was negligence on the part of the employer either in the selection of his
employee or in the supervision over him after such selection. The presumption however
may be rebutted by a clear showing on the part of the employer that it had exercised the
care and diligence of a good father of a family in the selection and supervision of his
employee. Hence, to escape solidary liability for quasi-delict committed by an employee,
the employer must adduce sufficient proof that it exercised such degree of care.
Petitioner's failure to prove that it exercised the due diligence of a good father of a
family in the selection and supervision of its driver Juanito Fidel will make it solidarily
liable with the latter for damages caused by him.
[4]

As regards the reasonableness of the damages awarded, under Art. 1764, in


conjunction with Art. 2206, of the Civil Code, as well as established jurisprudence,
several factors are considered, namely: (a) life expectancy (considering the health of
the deceased and the mortality table being deemed conclusive) and loss of earning
capacity; (b) pecuniary loss, loss of support and service; and, (c) moral and mental
sufferings. The loss of earning capacity is based mainly on two factors, namely, the
number of years on the basis of which the damages shall be computed, and the rate at
which the loss sustained by the heirs should be fixed.
[5]

Finding discrepancies in the computation of respondent Court of Appeals, we here


opine that the correct computation of the loss of earning capacity of the deceased,
considering that he was the sole bread-winner of the family and only 29 years old when
he met his untimely death, should be based on the formula: 2/3 x 51 (80 - 29 [age at
time of death]) = life expectancy.Thus -

P33,273.60 - gross annual income (P2,772.80 x 12 mos.)


Add: 4,244.64 - gross annual allowance (P353.72 x 12 mos.)
3,199.00 - 13th month pay
P40,717.24 - total annual income
Less: 6,000.00 - annual expenses (P500.00 x 12 mos.)
13,776.00 - annual pension (P1,148.00 x 12 mos.)
P20,941.24 - total annual net income
Multiply: 34 - life expectancy of Mario (2/3 x 51 [80 - 29 age at time of
death])
P712,002.16 - total loss of earning capacity
Article 2206 grants the spouse, legitimate and illegitimate descendants and
ascendants of the deceased moral damages for mental anguish by reason of
death. Indisputably, the heirs of Mario suffered no small amount of mental anguish
brought about by the manner he died and bearing in mind that he was the sole
breadwinner of the family.
Article 2231 also awards exemplary damages if the defendant acted with gross
negligence, as Juanito did, when he moved Bus No. 117 without first ascertaining if the

repair of its break system was already undertaken. Exemplary damages having been
awarded, recovery of attorney's fees follows under Art. 2208, par. (1), of the Civil Code.
WHEREFORE, the decision and resolution of respondent Court of Appeals subject
of the instant petition are MODIFIED as follows: petitioner BALIWAG TRANSIT, INC.,
and JUANITO FIDEL are ordered to pay jointly and severally the heirs of Mario Dionisio
(a) P50,000.00 for death indemnity, (b) P712,002.16 for loss of earning capacity,
(c) P3,000.00 for funeral expenses, (d) P40,000.00 for moral damages, (e) P15,000.00
for exemplary damages (f) P20,000.00 for attorney's fees, and, (g) to pay the costs of
suit.
SO ORDERED.
Padilla, (Chairman), Vitug, Kapunan, and Hermosisima, Jr., JJ., concur.

[1]

Decision penned by Judge Celia Lipana-Reyes, RTC-Br. 81, Quezon City.

Decision penned by Justice Corona Ibay-Somera, concurred in by Justices Nathanael P. de Pano Jr.
and Asaali S. Isnani, Fourth Division, Court of Appeals; Rollo, pp. 39-40.
[2]

[3]

Rollo, p. 43.

China Air Lines, Ltd. v. Court of Appeals, No. L- 45985 and Philippine Air Lines, Inc. v. Court of
Appeals, No. L- 46036, 18 May 1990, 185 SCRA 449.
[4]

Bachelor Express Incorporated v. Court of Appeals, G.R. No. 85691, 31 July 1990, 188 SCRA 216; Villa
Rey Transit, Inc. v. Court of Appeals, No. L-25499, 18 February 1970, 31 SCRA 511.
[5]

SECOND DIVISION

[G.R. No. 138060. September 1, 2004]

WILLIAM TIU, doing business under the name and style of D Rough
Riders, and VIRGILIO TE LAS PIAS petitioners, vs. PEDRO A.
ARRIESGADO, BENJAMIN CONDOR, SERGIO PEDRANO and
PHILIPPINE
PHOENIX
SURETY
AND
INSURANCE,
INC., respondents.
DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court from
the Decision of the Court of Appeals in CA-G.R. CV No. 54354 affirming with
[1]

modification the Decision of the Regional Trial Court, 7th Judicial Region, Cebu City,
Branch 20, in Civil Case No. CEB-5963 for breach of contract of carriage, damages and
attorneys fees, and the Resolution dated February 26, 1999 denying the motion for
reconsideration thereof.
[2]

The following facts are undisputed:


At about 10:00 p.m. of March 15, 1987, the cargo truck marked Condor Hollow
Blocks and General Merchandise bearing plate number GBP-675 was loaded with
firewood in Bogo, Cebu and left for Cebu City. Upon reaching Sitio Aggies, Poblacion,
Compostela, Cebu, just as the truck passed over a bridge, one of its rear tires exploded.
The driver, Sergio Pedrano, then parked along the right side of the national highway and
removed the damaged tire to have it vulcanized at a nearby shop, about 700 meters
away. Pedrano left his helper, Jose Mitante, Jr. to keep watch over the stalled vehicle,
and instructed the latter to place a spare tire six fathoms away behind the stalled truck
to serve as a warning for oncoming vehicles. The trucks tail lights were also left on. It
was about 12:00 a.m., March 16, 1987.
[3]

[4]

At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-724
driven by Virgilio Te Laspias was cruising along the national highway of Sitio Aggies,
Poblacion, Compostela, Cebu. The passenger bus was also bound for Cebu City, and
had come from Maya, Daanbantayan, Cebu. Among its passengers were the Spouses
Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at the right side of
the bus, about three (3) or four (4) places from the front seat.
As the bus was approaching the bridge, Laspias saw the stalled truck, which was
then about 25 meters away. He applied the breaks and tried to swerve to the left to
avoid hitting the truck. But it was too late; the bus rammed into the trucks left rear. The
impact damaged the right side of the bus and left several passengers injured. Pedro
Arriesgado lost consciousness and suffered a fracture in his right colles. His wife,
Felisa, was brought to the Danao City Hospital. She was later transferred to the
Southern Island Medical Center where she died shortly thereafter.
[5]

[6]

[7]

Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of


carriage, damages and attorneys fees before the Regional Trial Court of Cebu City,
Branch 20, against the petitioners, D Rough Riders bus operator William Tiu and his
driver, Virgilio Te Laspias on May 27, 1987. The respondent alleged that the passenger
bus in question was cruising at a fast and high speed along the national road, and that
petitioner Laspias did not take precautionary measures to avoid the accident. Thus:
[8]

6. That the accident resulted to the death of the plaintiffs wife, Felisa Pepito
Arriesgado, as evidenced by a Certificate of Death, a xerox copy of which is hereto
attached as integral part hereof and marked as ANNEX A, and physical injuries to
several of its passengers, including plaintiff himself who suffered a COLLES
FRACTURE RIGHT, per Medical Certificate, a xerox copy of which is hereto
attached as integral part hereof and marked as ANNEX B hereof.

7. That due to the reckless and imprudent driving by defendant Virgilio Te Laspias of
the said Rough Riders passenger bus, plaintiff and his wife, Felisa Pepito Arriesgado,
failed to safely reach their destination which was Cebu City, the proximate cause of
which was defendant-drivers failure to observe utmost diligence required of a very
cautious person under all circumstances.
8. That defendant William Tiu, being the owner and operator of the said Rough Riders
passenger bus which figured in the said accident, wherein plaintiff and his wife were
riding at the time of the accident, is therefore directly liable for the breach of contract
of carriage for his failure to transport plaintiff and his wife safely to their place of
destination which was Cebu City, and which failure in his obligation to transport
safely his passengers was due to and in consequence of his failure to exercise the
diligence of a good father of the family in the selection and supervision of his
employees, particularly defendant-driver Virgilio Te Laspias.
[9]

The respondent prayed that judgment be rendered in his favor and that the
petitioners be condemned to pay the following damages:

1). To pay to plaintiff, jointly and severally, the amount of P30,000.00 for the death
and untimely demise of plaintiffs wife, Felisa Pepito Arriesgado;
2). To pay to plaintiff, jointly and severally, the amount of P38,441.50, representing
actual expenses incurred by the plaintiff in connection with the death/burial of
plaintiffs wife;
3). To pay to plaintiff, jointly and severally, the amount of P1,113.80, representing
medical/hospitalization expenses incurred by plaintiff for the injuries sustained by
him;
4). To pay to plaintiff, jointly and severally, the amount of P50,000.00 for moral
damages;
5). To pay to plaintiff, jointly and severally, the amount of P50,000.00 by way of
exemplary damages;
6). To pay to plaintiff, jointly and severally, the amount of P20,000.00 for attorneys
fees;
7). To pay to plaintiff, jointly and severally, the amount of P5,000.00 for litigation
expenses.

PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS AND REMEDIES


IN LAW AND EQUITY.
[10]

The petitioners, for their part, filed a Third-Party Complaint on August 21, 1987
against the following: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII),
petitioner Tius insurer; respondent Benjamin Condor, the registered owner of the cargo
truck; and respondent Sergio Pedrano, the driver of the truck. They alleged that
petitioner Laspias was negotiating the uphill climb along the national highway
of Sitio Aggies, Poblacion, Compostela, in a moderate and normal speed. It was further
alleged that the truck was parked in a slanted manner, its rear portion almost in the
middle of the highway, and that no early warning device was displayed. Petitioner
Laspias promptly applied the brakes and swerved to the left to avoid hitting the truck
head-on, but despite his efforts to avoid damage to property and physical injuries on the
passengers, the right side portion of the bus hit the cargo trucks left rear. The petitioners
further alleged, thus:
[11]

5. That the cargo truck mentioned in the aforequoted paragraph is owned and
registered in the name of the third-party defendant Benjamin Condor and was left
unattended by its driver Sergio Pedrano, one of the third-party defendants, at the time
of the incident;
6. That third-party defendant Sergio Pedrano, as driver of the cargo truck with marked
(sic) Condor Hollow Blocks & General Merchandise, with Plate No. GBP-675 which
was recklessly and imprudently parked along the national highway of Compostela,
Cebu during the vehicular accident in question, and third-party defendant Benjamin
Condor, as the registered owner of the cargo truck who failed to exercise due
diligence in the selection and supervision of third-party defendant Sergio Pedrano, are
jointly and severally liable to the third-party plaintiffs for whatever liability that may
be adjudged against said third-party plaintiffs or are directly liable of (sic) the alleged
death of plaintiffs wife;
7. That in addition to all that are stated above and in the answer which are intended to
show reckless imprudence on the part of the third-party defendants, the third-party
plaintiffs hereby declare that during the vehicular accident in question, third-party
defendant was clearly violating Section 34, par. (g) of the Land Transportation and
Traffic Code
10. That the aforesaid passenger bus, owned and operated by third-party plaintiff
William Tiu, is covered by a common carrier liability insurance with Certificate of
Cover No. 054940 issued by Philippine Phoenix Surety and Insurance, Inc., Cebu City
Branch, in favor of third-party plaintiff William Tiu which covers the period from July
22, 1986 to July 22, 1987 and that the said insurance coverage was valid, binding and
subsisting during the time of the aforementioned incident (Annex A as part hereof);

11. That after the aforesaid alleged incident, third-party plaintiff notified third-party
defendant Philippine Phoenix Surety and Insurance, Inc., of the alleged incident
hereto mentioned, but to no avail;
12. That granting, et arguendo et arguendi, if herein third-party plaintiffs will be
adversely adjudged, they stand to pay damages sought by the plaintiff and therefore
could also look up to the Philippine Phoenix Surety and Insurance, Inc., for
contribution, indemnification and/or reimbursement of any liability or obligation that
they might [be] adjudged per insurance coverage duly entered into by and between
third-party plaintiff William Tiu and third-party defendant Philippine Phoenix Surety
and Insurance, Inc.;
[12]

The respondent PPSII, for its part, admitted that it had an existing contract with
petitioner Tiu, but averred that it had already attended to and settled the claims of those
who were injured during the incident. It could not accede to the claim of respondent
Arriesgado, as such claim was way beyond the scheduled indemnity as contained in the
contract of insurance.
[13]

[14]

After the parties presented their respective evidence, the trial court ruled in favor of
respondent Arriesgado. The dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of


plaintiff as against defendant William Tiu ordering the latter to pay the plaintiff the
following amounts:
1 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages;
2 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages;
3 - The sum of THIRTY-EIGHT THOUSAND FOUR HUNDRED FORTY-ONE
PESOS (P38,441.00) as actual damages;
4 - The sum of TWENTY THOUSAND PESOS (P20,000.00) as attorneys fees;
5 - The sum of FIVE THOUSAND PESOS (P5,000.00) as costs of suit;
SO ORDERED.

[15]

According to the trial court, there was no dispute that petitioner William Tiu was
engaged in business as a common carrier, in view of his admission that D Rough Rider
passenger bus which figured in the accident was owned by him; that he had been
engaged in the transportation business for 25 years with a sole proprietorship; and that
he owned 34 buses. The trial court ruled that if petitioner Laspias had not been driving
at a fast pace, he could have easily swerved to the left to avoid hitting the truck, thus,

averting the unfortunate incident. It then concluded that petitioner Laspias was
negligent.
The trial court also ruled that the absence of an early warning device near the place
where the truck was parked was not sufficient to impute negligence on the part of
respondent Pedrano, since the tail lights of the truck were fully on, and the vicinity was
well lighted by street lamps. It also found that the testimony of petitioner Tiu, that he
based the selection of his driver Laspias on efficiency and in-service training, and that
the latter had been so far an efficient and good driver for the past six years of his
employment, was insufficient to prove that he observed the diligence of a good father of
a family in the selection and supervision of his employees.
[16]

After the petitioners motion for reconsideration of the said decision was denied, the
petitioners elevated the case to the Court of Appeals on the following issues:
I WHETHER THIRD PARTY DEFENDANT SERGIO PEDRANO WAS RECKLESS
AND IMPRUDENT WHEN HE PARKED THE CARGO TRUCK IN AN OBLIQUE
MANNER;
II WHETHER THE THIRD PARTY DEFENDANTS ARE JOINTLY AND SEVERALLY
LIABLE DIRECTLY TO PLAINTIFF-APPELLEE OR TO DEFENDANTSAPPELLANTS FOR WHATEVER LIABILITY THAT MAY BE ADJUDGED TO THE
SAID DEFENDANTS-APPELLANTS;
III WHETHER DEFENDANT-APPELLANT VIRGILIO TE LASPIAS WAS GUILTY OF
GROSS NEGLIGENCE;
IV WHETHER DEFENDANT-APPELLANT WILLIAM TIU HAD EXERCISED THE DUE
DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE SELECTION AND
SUPERVISION OF HIS DRIVERS;
V GRANTING FOR THE SAKE OF ARGUMENT THAT DEFENDANT-APPELLANT
WILLIAM TIU IS LIABLE TO PLAINTIFF-APPELLEE, WHETHER THERE IS LEGAL
AND FACTUAL BASIS IN AWARDING EXCESSIVE MORAL DAMAGES,
EX[E]MPLARY DAMAGES, ATTORNEYS FEES AND LITIGATION EXPENSES TO
PLAINTIFF-APPELLEE;
VI WHETHER THIRD PARTY DEFENDANT PHILIPPINE PHOENIX SURETY AND
INSURANCE, INC. IS LIABLE TO DEFENDANT- APPELLANT WILLIAM TIU.[17]

The appellate court rendered judgment affirming the trial courts decision with the
modification that the awards for moral and exemplary damages were reduced
to P25,000. The dispositive portion reads:

WHEREFORE, the appealed Decision dated November 6, 1995 is


hereby MODIFIED such that the awards for moral and exemplary damages are each
reduced to P25,000.00 or a total of P50,000.00 for both. The judgment
is AFFIRMED in all other respects.
SO ORDERED.

[18]

According to the appellate court, the action of respondent Arriesgado was based not
on quasi-delict but on breach of contract of carriage. As a common carrier, it was
incumbent upon petitioner Tiu to prove that extraordinary diligence was observed in
ensuring the safety of passengers during transportation. Since the latter failed to do so,
he should be held liable for respondent Arriesgados claim. The CA also ruled that no
evidence was presented against the respondent PPSII, and as such, it could not be held
liable for respondent Arriesgados claim, nor for contribution, indemnification and/or
reimbursement in case the petitioners were adjudged liable.
The petitioners now come to this Court and ascribe the following errors committed
by the appellate court:
I. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING
RESPONDENTS BENJAMIN CONDOR AND SERGIO PEDRANO GUILTY OF
NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A.
ARRIESGADO OR TO PETITIONERS FOR WHATEVER LIABILITY THAT MAY BE
ADJUDGED AGAINST THEM.
II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS
GUILTY OF NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A.
ARRIESGADO.
III. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONER
WILLIAM TIU LIABLE FOR EXEMPLARY DAMAGES, ATTORNEYS FEES AND
LITIGATION EXPENSES.
IV.THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING
RESPONDENT PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. LIABLE
TO RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONER WILLIAM TIU.
[19]

According to the petitioners, the appellate court erred in failing to appreciate the
absence of an early warning device and/or built-in reflectors at the front and back of the
cargo truck, in clear violation of Section 34, par. (g) of the Land Transportation and
Traffic Code. They aver that such violation is only a proof of respondent Pedranos
negligence, as provided under Article 2185 of the New Civil Code. They also question
the appellate courts failure to take into account that the truck was parked in an oblique
manner, its rear portion almost at the center of the road. As such, the proximate cause
of the incident was the gross recklessness and imprudence of respondent Pedrano,
creating the presumption of negligence on the part of respondent Condor in supervising
his employees, which presumption was not rebutted. The petitioners then contend that
respondents Condor and Pedrano should be held jointly and severally liable to
respondent Arriesgado for the payment of the latters claim.
The petitioners, likewise, aver that expert evidence should have been presented to
prove that petitioner Laspias was driving at a very fast speed, and that the CA could not
reach such conclusion by merely considering the damages on the cargo truck. It was
also pointed out that petitioner Tiu presented evidence that he had exercised the
diligence of a good father of a family in the selection and supervision of his drivers.
The petitioners further allege that there is no legal and factual basis to require
petitioner Tiu to pay exemplary damages as no evidence was presented to show that

the latter acted in a fraudulent, reckless and oppressive manner, or that he had an
active participation in the negligent act of petitioner Laspias.
Finally, the petitioners contend that respondent PPSII admitted in its answer that
while it had attended to and settled the claims of the other injured passengers,
respondent Arriesgados claim remained unsettled as it was beyond the scheduled
indemnity under the insurance contract. The petitioners argue that said respondent
PPSII should have settled the said claim in accordance with the scheduled indemnity
instead of just denying the same.
On the other hand, respondent Arriesgado argues that two of the issues raised by
the petitioners involved questions of fact, not reviewable by the Supreme Court: the
finding of negligence on the part of the petitioners and their liability to him; and the
award of exemplary damages, attorneys fees and litigation expenses in his favor.
Invoking the principle of equity and justice, respondent Arriesgado pointed out that if
there was an error to be reviewed in the CA decision, it should be geared towards the
restoration of the moral and exemplary damages to P50,000 each, or a total
of P100,000 which was reduced by the Court of Appeals to P25,000 each, or a total of
only P50,000.
Respondent Arriesgado also alleged that respondents Condor and Pedrano, and
respondent Phoenix Surety, are parties with whom he had no contract of carriage, and
had no cause of action against. It was pointed out that only the petitioners needed to be
sued, as driver and operator of the ill-fated bus, on account of their failure to bring the
Arriesgado Spouses to their place of destination as agreed upon in the contract of
carriage, using the utmost diligence of very cautious persons with due regard for all
circumstances.
Respondents Condor and Pedrano point out that, as correctly ruled by the Court of
Appeals, the proximate cause of the unfortunate incident was the fast speed at which
petitioner Laspias was driving the bus owned by petitioner Tiu. According to the
respondents, the allegation that the truck was not equipped with an early warning
device could not in any way have prevented the incident from happening. It was also
pointed out that respondent Condor had always exercised the due diligence required in
the selection and supervision of his employees, and that he was not a party to the
contract of carriage between the petitioners and respondent Arriesgado.
Respondent PPSII, for its part, alleges that contrary to the allegation of petitioner
Tiu, it settled all the claims of those injured in accordance with the insurance contract. It
further avers that it did not deny respondent Arriesgados claim, and emphasizes that its
liability should be within the scheduled limits of indemnity under the said contract. The
respondent concludes that while it is true that insurance contracts are contracts of
indemnity, the measure of the insurers liability is determined by the insureds compliance
with the terms thereof.
The Courts Ruling

At the outset, it must be stressed that this Court is not a trier of facts. Factual
findings of the Court of Appeals are final and may not be reviewed on appeal by this
Court, except when the lower court and the CA arrived at diverse factual findings. The
petitioners in this case assail the finding of both the trial and the appellate courts that
petitioner Laspias was driving at a very fast speed before the bus owned by petitioner
Tiu collided with respondent Condors stalled truck. This is clearly one of fact, not
reviewable by the Court in a petition for review under Rule 45.
[20]

[21]

[22]

On this ground alone, the petition is destined to fail.


However, considering that novel questions of law are likewise involved, the Court
resolves to examine and rule on the merits of the case.
Petitioner Laspias
Was negligent in driving
The Ill-fated bus
In his testimony before the trial court, petitioner Laspias claimed that he was
traversing the two-lane road at Compostela, Cebu at a speed of only forty (40) to fifty
(50) kilometers per hour before the incident occurred. He also admitted that
he saw the truck which was parked in an oblique position at about 25 meters before
impact, and tried to avoid hitting it by swerving to the left. However, even in the
absence of expert evidence, the damage sustained by the truck itself supports the
finding of both the trial court and the appellate court, that the D Rough Rider bus driven
by petitioner Laspias was traveling at a fast pace. Since he saw the stalled truck at a
distance of 25 meters, petitioner Laspias had more than enough time to swerve to his
left to avoid hitting it; that is, if the speed of the bus was only 40 to 50 kilometers per
hour as he claimed. As found by the Court of Appeals, it is easier to believe that
petitioner Laspias was driving at a very fast speed, since at 4:45 a.m., the hour of the
accident, there were no oncoming vehicles at the opposite direction. Petitioner Laspias
could have swerved to the left lane with proper clearance, and, thus, could have
avoided the truck. Instinct, at the very least, would have prompted him to apply the
breaks to avert the impending disaster which he must have foreseen when he caught
sight of the stalled truck. As we had occasion to reiterate:
[23]

[24]

[25]

[26]

A man must use common sense, and exercise due reflection in all his acts; it is his
duty to be cautious, careful and prudent, if not from instinct, then through fear of
recurring punishment. He is responsible for such results as anyone might foresee and
for acts which no one would have performed except through culpable abandon.
Otherwise, his own person, rights and property, and those of his fellow beings, would
ever be exposed to all manner of danger and injury.
[27]

We agree with the following findings of the trial court, which were affirmed by the CA
on appeal:

A close study and evaluation of the testimonies and the documentary proofs submitted
by the parties which have direct bearing on the issue of negligence, this Court as

shown by preponderance of evidence that defendant Virgilio Te Laspias failed to


observe extraordinary diligence as a driver of the common carrier in this case. It is
quite hard to accept his version of the incident that he did not see at a reasonable
distance ahead the cargo truck that was parked when the Rough Rider [Bus] just came
out of the bridge which is on an (sic) [more] elevated position than the place where
the cargo truck was parked. With its headlights fully on, defendant driver of the
Rough Rider was in a vantage position to see the cargo truck ahead which was parked
and he could just easily have avoided hitting and bumping the same by maneuvering
to the left without hitting the said cargo truck. Besides, it is (sic) shown that there was
still much room or space for the Rough Rider to pass at the left lane of the said
national highway even if the cargo truck had occupied the entire right lane thereof. It
is not true that if the Rough Rider would proceed to pass through the left lane it would
fall into a canal considering that there was much space for it to pass without hitting
and bumping the cargo truck at the left lane of said national highway. The records,
further, showed that there was no incoming vehicle at the opposite lane of the national
highway which would have prevented the Rough Rider from not swerving to its left in
order to avoid hitting and bumping the parked cargo truck. But the evidence showed
that the Rough Rider instead of swerving to the still spacious left lane of the national
highway plowed directly into the parked cargo truck hitting the latter at its rear
portion; and thus, the (sic) causing damages not only to herein plaintiff but to the
cargo truck as well.
[28]

Indeed, petitioner Laspias negligence in driving the bus is apparent in the records.
By his own admission, he had just passed a bridge and was traversing the highway of
Compostela,Cebu at a speed of 40 to 50 kilometers per hour before the collision
occurred. The maximum speed allowed by law on a bridge is only 30 kilometers per
hour. And, as correctly pointed out by the trial court, petitioner Laspias also violated
Section 35 of the Land Transportation and Traffic Code, Republic Act No. 4136, as
amended:
[29]

Sec. 35. Restriction as to speed. (a) Any person driving a motor vehicle on a highway
shall drive the same at a careful and prudent speed, not greater nor less than is
reasonable and proper, having due regard for the traffic, the width of the highway, and
or any other condition then and there existing; and no person shall drive any motor
vehicle upon a highway at such speed as to endanger the life, limb and property of any
person, nor at a speed greater than will permit him to bring the vehicle to a stop
within the assured clear distance ahead.
[30]

Under Article 2185 of the Civil Code, a person driving a vehicle is presumed
negligent if at the time of the mishap, he was violating any traffic regulation.
[31]

Petitioner Tiu failed to


Overcome the presumption

Of negligence against him as


One engaged in the business
Of common carriage
The rules which common carriers should observe as to the safety of their
passengers are set forth in the Civil Code, Articles 1733, 1755 and 1756. In this
case, respondent Arriesgado and his deceased wife contracted with petitioner Tiu, as
owner and operator of D Rough Riders bus service, for transportation from Maya,
Daanbantayan, Cebu, to Cebu City for the price of P18.00. It is undisputed that the
respondent and his wife were not safely transported to the destination agreed upon. In
actions for breach of contract, only the existence of such contract, and the fact that the
obligor, in this case the common carrier, failed to transport his passenger safely to his
destination are the matters that need to be proved. This is because under the said
contract of carriage, the petitioners assumed the express obligation to transport the
respondent and his wife to their destination safely and to observe extraordinary
diligence with due regard for all circumstances. Any injury suffered by the passengers
in the course thereof is immediately attributable to the negligence of the carrier. Upon
the happening of the accident, the presumption of negligence at once arises, and it
becomes the duty of a common carrier to prove that he observed extraordinary
diligence in the care of his passengers. It must be stressed that in requiring the
highest possible degree of diligence from common carriers and in creating a
presumption of negligence against them, the law compels them to curb the
recklessness of their drivers.
[32]

[33]

[34]

[35]

[36]

[37]

[38]

[39]

[40]

While evidence may be submitted to overcome such presumption of negligence, it


must be shown that the carrier observed the required extraordinary diligence, which
means that the carrier must show the utmost diligence of very cautious persons as far
as human care and foresight can provide, or that the accident was caused by fortuitous
event. As correctly found by the trial court, petitioner Tiu failed to conclusively rebut
such presumption. The negligence of petitioner Laspias as driver of the passenger bus
is, thus, binding against petitioner Tiu, as the owner of the passenger bus engaged as a
common carrier.
[41]

[42]

The Doctrine of
Last Clear Chance
Is Inapplicable in the
Case at Bar
Contrary to the petitioners contention, the principle of last clear chance is
inapplicable in the instant case, as it only applies in a suit between the owners and
drivers of two colliding vehicles. It does not arise where a passenger demands
responsibility from the carrier to enforce its contractual obligations, for it would be
inequitable to exempt the negligent driver and its owner on the ground that the other
driver was likewise guilty of negligence. The common law notion of last clear chance
permitted courts to grant recovery to a plaintiff who has also been negligent provided
that the defendant had the last clear chance to avoid the casualty and failed to do so.
Accordingly, it is difficult to see what role, if any, the common law of last clear chance
doctrine has to play in a jurisdiction where the common law concept of contributory
[43]

negligence as an absolute bar to recovery by the plaintiff, has itself been rejected, as it
has been in Article 2179 of the Civil Code.
[44]

Thus, petitioner Tiu cannot escape liability for the death of respondent Arriesgados
wife due to the negligence of petitioner Laspias, his employee, on this score.
Respondents Pedrano and
Condor were likewise
Negligent
In Phoenix Construction, Inc. v. Intermediate Appellate Court, where therein
respondent Dionisio sustained injuries when his vehicle rammed against a dump truck
parked askew, the Court ruled that the improper parking of a dump truck without any
warning lights or reflector devices created an unreasonable risk for anyone driving
within the vicinity, and for having created such risk, the truck driver must be held
responsible. In ruling against the petitioner therein, the Court elucidated, thus:
[45]

In our view, Dionisios negligence, although later in point of time than the truck
drivers negligence, and therefore closer to the accident, was not an efficient
intervening or independent cause. What the petitioners describe as an intervening
cause was no more than a foreseeable consequence of the risk created by the negligent
manner in which the truck driver had parked the dump truck. In other words, the
petitioner truck driver owed a duty to private respondent Dionisio and others similarly
situated not to impose upon them the very risk the truck driver had created. Dionisios
negligence was not that of an independent and overpowering nature as to cut, as it
were, the chain of causation in fact between the improper parking of the dump truck
and the accident, nor to sever the juris vinculum of liability.
We hold that private respondent Dionisios negligence was only contributory, that the
immediate and proximate cause of the injury remained the truck drivers lack of due
care.
[46]

In this case, both the trial and the appellate courts failed to consider that respondent
Pedrano was also negligent in leaving the truck parked askew without any warning
lights or reflector devices to alert oncoming vehicles, and that such failure created the
presumption of negligence on the part of his employer, respondent Condor, in
supervising his employees properly and adequately. As we ruled in Poblete v. Fabros:
[47]

It is such a firmly established principle, as to have virtually formed part of the law
itself, that the negligence of the employee gives rise to the presumption of negligence
on the part of the employer. This is the presumed negligence in the selection and
supervision of employee. The theory of presumed negligence, in contrast with the
American doctrine of respondeat superior, where the negligence of the employee
isconclusively presumed to be the negligence of the employer, is clearly deducible
from the last paragraph of Article 2180 of the Civil Code which provides that the

responsibility therein mentioned shall cease if the employers prove that they observed
all the diligence of a good father of a family to prevent damages.
[48]

The petitioners were correct in invoking respondent Pedranos failure to observe


Article IV, Section 34(g) of the Rep. Act No. 4136, which provides:

(g) Lights when parked or disabled. Appropriate parking lights or flares visible one
hundred meters away shall be displayed at a corner of the vehicle whenever such
vehicle is parked on highways or in places that are not well-lighted or is placed in
such manner as to endanger passing traffic.
The manner in which the truck was parked clearly endangered oncoming traffic on
both sides, considering that the tire blowout which stalled the truck in the first place
occurred in the wee hours of the morning. The Court can only now surmise that the
unfortunate incident could have been averted had respondent Condor, the owner of the
truck, equipped the said vehicle with lights, flares, or, at the very least, an early warning
device. Hence, we cannot subscribe to respondents Condor and Pedranos claim that
they should be absolved from liability because, as found by the trial and appellate
courts, the proximate cause of the collision was the fast speed at which petitioner
Laspias drove the bus. To accept this proposition would be to come too close to wiping
out the fundamental principle of law that a man must respond for the foreseeable
consequences of his own negligent act or omission. Indeed, our law on quasi-delicts
seeks to reduce the risks and burdens of living in society and to allocate them among its
members. To accept this proposition would be to weaken the very bonds of society.
[49]

[50]

The Liability of
Respondent PPSII
as Insurer
The trial court in this case did not rule on the liability of respondent PPSII, while the
appellate court ruled that, as no evidence was presented against it, the insurance
company is not liable.
A perusal of the records will show that when the petitioners filed the Third-Party
Complaint against respondent PPSII, they failed to attach a copy of the terms of the
insurance contract itself. Only Certificate of Cover No. 054940 issued in favor of Mr.
William Tiu, Lahug, Cebu City signed by Cosme H. Boniel was appended to the thirdparty complaint. The date of issuance, July 22, 1986, the period of insurance, from July
22, 1986 to July 22, 1987, as well as the following items, were also indicated therein:
[51]

SCHEDULED VEHICLE
MODEL

MAKE

TYPE
BODY

Isuzu Forward

Bus

OF COLOR
blue mixed

BLT FILE NO.

PLATE
NO. SERIAL/CHASSI
MOTOR
PBP-724
S NO. SER450- 677836
1584124
SECTION 1/11

NO. AUTHORIZED
CAPACITY 50

*LIMITS
OF
P50,000.00

UNLADEN
WEIGHT
6Cyls. Kgs.

LIABILITY PREMIUMS
PAID

A. THIRD PARTY LIABILITY


B. PASSENGER LIABILITY

Per
Person Per Accident P540.00
P12,000.00
P50,000

52

In its Answer to the Third-Party Complaint, the respondent PPSII admitted the
existence of the contract of insurance, in view of its failure to specifically deny the same
as required under then Section 8(a), Rule 8 of the Rules of Court, which reads:
53

54

Sec. 8. How to contest genuineness of such documents. When an action or defense is


founded upon a written instrument copied in or attached to the corresponding pleading
as provided in the preceding section, the genuineness and due execution of the
instrument shall be deemed admitted unless the adverse party, under oath, specifically
denies them, and sets forth what he claims to be the facts; but the requirement of an
oath does not apply when the adverse party does not appear to be a party to the
instrument or when compliance with an order for inspection of the original instrument
is refused.
In fact, respondent PPSII did not dispute the existence of such contract, and
admitted that it was liable thereon. It claimed, however, that it had attended to and
settled the claims of those injured during the incident, and set up the following as
special affirmative defenses:

Third party defendant Philippine Phoenix Surety and Insurance, Inc. hereby reiterates
and incorporates by way of reference the preceding paragraphs and further states
THAT:8. It has attended to the claims of Vincent Canales, Asuncion Batiancila and Neptali
Palces who sustained injuries during the incident in question. In fact, it settled
financially their claims per vouchers duly signed by them and they duly executed
Affidavit[s] of Desistance to that effect, xerox copies of which are hereto attached as
Annexes 1, 2, 3, 4, 5, and 6 respectively;
9. With respect to the claim of plaintiff, herein answering third party defendant
through its authorized insurance adjuster attended to said claim. In fact, there were
negotiations to that effect. Only that it cannot accede to the demand of said claimant
considering that the claim was way beyond the scheduled indemnity as per contract

entered into with third party plaintiff William Tiu and third party defendant
(Philippine Phoenix Surety and Insurance, Inc.). Third party Plaintiff William Tiu
knew all along the limitation as earlier stated, he being an old hand in the
transportation business;
55

Considering the admissions made by respondent PPSII, the existence of the


insurance contract and the salient terms thereof cannot be dispatched. It must be noted
that after filing its answer, respondent PPSII no longer objected to the presentation of
evidence by respondent Arriesgado and the insured petitioner Tiu. Even in its
Memorandum before the Court, respondent PPSII admitted the existence of the
contract, but averred as follows:
56

Petitioner Tiu is insisting that PPSII is liable to him for contribution, indemnification
and/or reimbursement. This has no basis under the contract. Under the contract, PPSII
will pay all sums necessary to discharge liability of the insured subject to the limits of
liability but not to exceed the limits of liability as so stated in the contract. Also, it is
stated in the contract that in the event of accident involving indemnity to more than
one person, the limits of liability shall not exceed the aggregate amount so specified
by law to all persons to be indemnified.
57

As can be gleaned from the Certificate of Cover, such insurance contract was
issued pursuant to the Compulsory Motor Vehicle Liability Insurance Law. It was
expressly provided therein that the limit of the insurers liability for each person
was P12,000, while the limit per accident was pegged at P50,000. An insurer in an
indemnity contract for third party liability is directly liable to the injured party up to the
extent specified in the agreement but it cannot be held solidarily liable beyond that
amount. The respondent PPSII could not then just deny petitioner Tius claim; it should
have paid P12,000 for the death of Felisa Arriesgado, and respondent Arriesgados
hospitalization expenses of P1,113.80, which the trial court found to have been duly
supported by receipts. The total amount of the claims, even when added to that of the
other injured passengers which the respondent PPSII claimed to have settled, would
not exceed the P50,000 limit under the insurance agreement.
58

59

60

Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is
primarily intended to provide compensation for the death or bodily injuries suffered by
innocent third parties or passengers as a result of the negligent operation and use of
motor vehicles. The victims and/or their dependents are assured of immediate financial
assistance, regardless of the financial capacity of motor vehicle owners. As the Court,
speaking through Associate Justice Leonardo A. Quisumbing, explained in Government
Service Insurance System v. Court of Appeals:
61

62

However, although the victim may proceed directly against the insurer for indemnity,
the third party liability is only up to the extent of the insurance policy and those
required by law. While it is true that where the insurance contract provides for
indemnity against liability to third persons, and such persons can directly sue the

insurer, the direct liability of the insurer under indemnity contracts against third party
liability does not mean that the insurer can be held liable in solidum with the insured
and/or the other parties found at fault. For the liability of the insurer is based on
contract; that of the insured carrier or vehicle owner is based on tort.
Obviously, the insurer could be held liable only up to the extent of what was provided
for by the contract of insurance, in accordance with the CMVLI law. At the time of the
incident, the schedule of indemnities for death and bodily injuries, professional fees
and other charges payable under a CMVLI coverage was provided for under the
Insurance Memorandum Circular (IMC) No. 5-78 which was approved on November
10, 1978. As therein provided, the maximum indemnity for death was twelve thousand
(P12,000.00) pesos per victim. The schedules for medical expenses were also
provided by said IMC, specifically in paragraphs (C) to (G).
63

Damages to be
Awarded
The trial court correctly awarded moral damages in the amount of P50,000 in favor
of respondent Arriesgado. The award of exemplary damages by way of example or
correction of the public good, is likewise in order. As the Court ratiocinated
in Kapalaran Bus Line v. Coronado:
64

65

While the immediate beneficiaries of the standard of extraordinary diligence are, of


course, the passengers and owners of cargo carried by a common carrier, they are not
the only persons that the law seeks to benefit. For if common carriers carefully
observed the statutory standard of extraordinary diligence in respect of their own
passengers, they cannot help but simultaneously benefit pedestrians and the
passengers of other vehicles who are equally entitled to the safe and convenient use of
our roads and highways. The law seeks to stop and prevent the slaughter and maiming
of people (whether passengers or not) on our highways and buses, the very size and
power of which seem to inflame the minds of their drivers. Article 2231 of the Civil
Code explicitly authorizes the imposition of exemplary damages in cases of quasidelicts if the defendant acted with gross negligence.
66

The respondent Pedro A. Arriesgado, as the surviving spouse and heir of Felisa
Arriesgado, is entitled to indemnity in the amount of P50,000.00.
67

The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano
are jointly and severally liable for said amount, conformably with the following
pronouncement of the Court in Fabre, Jr. vs. Court of Appeals:
68

The same rule of liability was applied in situations where the negligence of the driver
of the bus on which plaintiff was riding concurred with the negligence of a third party
who was the driver of another vehicle, thus causing an accident. In Anuran v. Buo,

Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, and Metro
Manila Transit Corporation v. Court of Appeals, the bus company, its driver, the
operator of the other vehicle and the driver of the vehicle were jointly and severally
held liable to the injured passenger or the latters heirs. The basis of this allocation of
liability was explained inViluan v. Court of Appeals, thus:
Nor should it make difference that the liability of petitioner [bus owner] springs from
contract while that of respondents [owner and driver of other vehicle] arises from
quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil.
177, that in case of injury to a passenger due to the negligence of the driver of the bus
on which he was riding and of the driver of another vehicle, the drivers as well as the
owners of the two vehicles are jointly and severally liable for damages. Some
members of the Court, though, are of the view that under the circumstances they are
liable on quasi-delict.
69

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The


Decision of the Court of Appeals is AFFIRMED with MODIFICATIONS:
(1) Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner William
Tiu are ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado the
total amount ofP13,113.80;
(2) The petitioners and the respondents Benjamin Condor and Sergio Pedrano
are ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado P50,000.00
as
indemnity;P26,441.50
as
actual
damages; P50,000.00
as
moral
damages; P50,000.00 as exemplary damages; and P20,000.00 as attorneys fees.
SO ORDERED.
Austria-Martinez, (Acting Chairman), Tinga, and Chico-Nazario, JJ., concur.
Puno J., (Chairman), on official leave.

[1]

Penned by Associate Justice Delilah Vidallon-Magtolis, with Associate Justices Artemon D. Luna and
Rodrigo V. Cosico concurring.

[2]

Penned by Judge Ferdinand J. Marcos.

[3]

TSN, 3 September 1990, p. 7 (Pedrano).

[4]

TSN, 4 September 1990, p. 14 (Mitante, Jr.).

[5]

TSN, 20 November 1989, p. 6.

[6]

Exhibit G, Records, p. 8.

[7]

TSN, 23 January 1989, pp. 7-13; Exhibit B.

[8]

Records, p. 2

[9]

Id. at 2-3.

[10]

Id. at 5.

[11]

Id. at 35-39.

[12]

Id. at 37-39.

[13]

Annexes 1 to 6, Records, pp. 57-62.

[14]

Records, p. 55.

[15]

Id. at 311.

[16]

Id. at 308.

[17]

CA Rollo, pp 29-30.

[18]

Rollo, p. 29.

[19]

Id. at 12-13.

[20]

Flores v. Uy, 368 SCRA 347 (2001).

[21]

Yobido v. Court of Appeals, 281 SCRA 1 (1997).

[22]

Cresenciano Duremdes v. Agustin Duremdes, G.R. No. 138256, November 12, 2003.

[23]

TSN, 20 November 1989, p. 6

[24]

Ibid.

[25]

Exhibits 1 to 7.

[26]

CA Rollo, p. 79.

[27]

Picart v. Smith, 37 Phil. 809 (1918), cited in People v. De los Santos, 355 SCRA 415, 430 (2001).

[28]

Records, p. 307.

[29]

Section 53, Motor Vehicle Law, cited in McKee v. Intermediate Appellate Court, 211 SCRA 517, 541
(1992).

[30]

Emphasis supplied.

[31]

Mallari, Sr. v. Court of Appeals, 324 SCRA 147 (2000).

[32]

Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of
passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735,
and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of passengers is
further set forth in articles 1755 and 1756.
[33]

Article 1755. A common carrier is bound to carry passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances.

[34]

Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been
at fault or to have acted negligently, unless they prove that they observed extraordinary diligence
as prescribed in articles 1733 and 1755.

[35]

TSN, 23 January 1989, p. 8 (Arriesgado).

[36]

Calalas v. Court of Appeals, 332 SCRA 356 (2000).

[37]

Light Rail Transit Authority v. Navidad, 397 SCRA 75 (2003).

[38]

Estrada v. Consolacion, 71 SCRA 523 (1976).

[39]

Calalas v. Court of Appeals, supra.

[40]

Kapalaran Bus Line v. Coronado, 176 SCRA 792 (1989).

[41]

Estrada v. Consolacion, supra at 530.

[42]

Mallari, Sr. v. Court of Appeals, supra.

[43]

Phil. Rabbit Bus Lines, Inc. v. Intermediate Appellate Court, 189 SCRA 158 (1990), citing Anuran v.
Buo, 17 SCRA 224 (1966).

[44]

Phoenix Construction, Inc. v. Intermediate Appellate Court, 148 SCRA 353 (1987).

[45]

Supra.

[46]

Id. at 367-368.

[47]

93 SCRA 200 (1979).

[48]

Id. at 204.

[49]

Letter of Instructions (LOI) No. 229 which was issued by then President Ferdinand E. Marcos on
December 2, 1974 in recognition of the fact that as statistics then showed, one of the major
causes of fatal or serious accidents in land transportation is the presence of disabled, stalled, or
parked motor vehicles or highways without any appropriate early warning device, requires
vehicles to have such devices at all times. It was later on amended by LOI No. 479, issued on
November 15, 1976. The pertinent provisions are as follows:

1. That all powers, users or drivers of motor vehicles shall have at all times in their motor vehicles at least
one (1) pair of early warning device consisting of a triangular, collapsible reflectorized plates in
red and yellow colors at least 5 cm. at the base and 40 cms. at the sides.
2. Whenever any motor vehicle is stalled or disabled or is parked for thirty (30) minutes or more on any
street or highways, including expressways or limited access roads, the owner, user or driver
thereof shall cause the warning device mentioned herein to be installed at least four meters away
to the front and rear of the motor vehicle stalled, disabled or parked.
3. The Land Transportation Commissioner shall require every motor vehicle owner to procure from any
source and present at registration of his vehicle, one pair of reflectorized triangular early warning
device, as described herein, of any brand or make chosen by said motor vehicle owner. The Land
Transportation Commissioner shall also promulgate such rules and regulations as are appropriate
to effectively implement this order.
[50]

Phoenix Construction, Inc. v. Intermediate Appellate Court, supra at 370.

[51]

Records, p. 41.

52

Ibid.

53

Id. at 54-62.

54

Now Section 8, rule 8 of the Revised Rules of Civil Procedure, as amended, and the epitaph now
reads, How to contest such documents.

55

Records, p. 55; Answer, p. 2.

56

Rollo, pp. 161-169.

57

Id. at 166.

58

Metro Manila Transit Corporation vs. Court of Appeals, 298 SCRA 494 (1998).

59

See Perla Campania de Seguros, Inc. v. Court of Appeals, 185 SCRA 741 (1990).

60

Annexes 1 to 6 (Answer to the Third-party Complaint), Records, pp. 57-62.

61

Shafer v. Judge, RTC of Olongapo City, Branch 75, 167 SCRA 386 (1988).

62

308 SCRA 559 (1999).

63

Id. at 569-570

64

Article 2229, Civil Code.

65

Supra.

66

Id. at 801-802.

67

Metro Manila Transit Corporation, supra.

68

259 SCRA 426 (1996).

69

Id. at 438.

SECOND DIVISION
L.G. FOODS CORPORATION and G.R. No. 158995
VICTORINO
GABOR,
VicePresident and General Manager,
Present:
Petitioners,
PUNO, J., Chairperson,
SANDOVAL-GUTIERREZ,
- versus CORONA,
HON.
PHILADELFA
B. AZCUNA, and
PAGAPONG-AGRAVIADOR, in GARCIA, JJ.
her capacity as Presiding Judge of
Regional Trial Court, Branch 43, Promulgated:
Bacolod
City,
and
SPS.
FLORENTINO and THERESA September 26, 2006
VALLEJERA,
Respondents.
x------------------------------------------------------------------------------------x

DECISION
GARCIA, J.:

Assailed and sought to be set aside in this petition for review on certiorari is the
Decision[1] dated April 25, 2003 of the Court of Appeals (CA), as reiterated in its
Resolution of July 10, 2003,[2] in CA-G.R. SP No. 67600, affirming an earlier Order
of the Regional Trial Court (RTC) of Bacolod City, Branch 43, which denied the
petitioners motion to dismiss in Civil Case No. 99-10845, an action for damages
arising from a vehicular accident thereat instituted by the herein private
respondents - the spouses Florentino Vallejera and Theresa Vallejera - against the
petitioners.
The antecedent facts may be briefly stated as follows:
On February 26, 1996, Charles Vallereja, a 7-year old son of the spouses Florentino
Vallejera and Theresa Vallejera, was hit by a Ford Fiera van owned by the
petitioners and driven at the time by their employee, Vincent Norman Yeneza y
Ferrer. Charles died as a result of the accident.
In time, an Information for Reckless Imprudence Resulting to Homicide was filed
against the driver before the Municipal Trial Court in Cities
(MTCC), Bacolod City, docketed as Criminal Case No. 67787, entitled People of
the Philippines v. Vincent Norman Yeneza.
Unfortunately, before the trial could be concluded, the accused driver committed
suicide, evidently bothered by conscience and remorse. On account thereof, the
MTCC, in its order of September 30, 1998, dismissed the criminal case.
On June 23, 1999, in the RTC of Bacolod City, the spouses Vallejera filed a
complaint[3] for damages against the petitioners as employers of the deceased
driver, basically alleging that as such employers, they failed to exercise due
diligence in the selection and supervision of their employees. Thereat docketed as
Civil Case No. 99-10845, the complaint was raffled to Branch 43 of the court.
In their Answer with Compulsory Counterclaim,[4] the petitioners as defendants
denied liability for the death of the Vallejeras 7-year old son, claiming that they
had exercised the required due diligence in the selection and supervision of their

employees, including the deceased driver. They thus prayed in their Answer for the
dismissal of the complaint for lack of cause of action on the part of the Vallejera
couple.
During pre-trial, the defendant petitioners insisted that their dismissal prayer be
resolved. Hence, the trial court required them to file within ten days a
memorandum of authorities supportive of their position.
Instead, however, of the required memorandum of authorities, the defendant
petitioners filed a Motion to Dismiss, principally arguing that the complaint is
basically a claim for subsidiary liability against an employer under the provision of
Article 103[5] of the Revised Penal Code. Prescinding therefrom, they contend that
there must first be a judgment of conviction against their driver as a condition sine
qua non to hold them liable. Ergo, since the driver died during the pendency of the
criminal action, the sine qua noncondition for their subsidiary liability was not
fulfilled, hence the of lack of cause of action on the part of the plaintiffs. They
further argue that since the plaintiffs did not make a reservation to institute a
separate action for damages when the criminal case was filed, the damage suit in
question is thereby deemed instituted with the criminal action. which was already
dismissed.
In an Order dated September 4, 2001,[6] the trial court denied the motion to dismiss
for lack of merit and set the case for pre-trial. With their motion for reconsideration
having been denied by the same court in its subsequent order[7] of September 26,
2001, the petitioners then went on certiorari to the CA in CA-G.R. SP No.
67600, imputing grave abuse of discretion on the part of the trial judge in refusing
to dismiss the basic complaint for damages in Civil Case No. 99-10845.
In the herein assailed decision[8] dated April 25, 2003, the CA denied the petition
and upheld the trial court. Partly says the CA in its challenged issuance:
xxx xxx xxx
It is clear that the complaint neither represents nor implies that the
responsibility charged was the petitioners subsidiary liability under Art.
103, Revised Penal Code. As pointed out [by the trial court] in the Order
of September 4, 2001, the complaint does not even allege the basic elements for

such a liability, like the conviction of the accused employee and his insolvency.
Truly enough, a civil action to enforce subsidiary liability separate and distinct
from the criminal action is even unnecessary.
xxx xxx xxx
Specifically, Civil Case No. 99-10845 exacts responsibility for fault or
negligence
under
Art.
2176, Civil
Code, which
is
entirely separate and distinct from the civil liability arising from negligence under
the Revised Penal Code. Verily, therefore, the liability under Art. 2180, Civil
Code, is direct and immediate, and not conditioned upon prior recourse against
the negligent employee or prior showing of the latters insolvency. (Underscoring
in the original.)

In time, the petitioners moved for a reconsideration but their motion was
denied by the CA in its resolution[9] of July 10, 2003. Hence, the petitioners present
recourse on their submission that the appellate court committed reversible error in
upholding the trial courts denial of their motion to dismiss.
We DENY.
As the Court sees it, the sole issue for resolution is whether the spouses
Vallejeras cause of action in Civil Case No. 99-10845 is founded on Article 103 of
the Revised Penal Code, as maintained by the petitioners, or derived from Article
2180[10] of the Civil Code, as ruled by the two courts below.
It thus behooves us to examine the allegations of the complaint for damages
in Civil Case No. 99-10845. That complaint alleged, inter alia, as follows:
xxx xxx xxx
3. That defendant [LG Food Corporation] is the registered owner of a Ford Fiera
Van with Plate No. NMS 881 and employer sometime February of 1996 of one
Vincent Norman Yeneza y Ferrer, a salesman of said corporation;
4. That sometime February 26, 1996 at around 2:00 P.M. at Rosario
St., Bacolod City, the minor son of said plaintiffs [now respondents], Charles

Vallejera, 7 years old, was hit and bumped by above-described vehicle then driven
by said employee, Vincent Norman Yeneza y Ferrer;
5. That the mishap was due to the gross fault and negligence of defendants
employee, who drove said vehicle, recklessly, negligently and at a high speed
without regard to traffic condition and safety of other road users and likewise to
the fault and negligence of the owner employer, herein defendants LG Food
Corporation who failed to exercise due diligence in the selection and supervision
of his employee, Vincent Norman Yeneza y Ferrer;
6. That as a result of said incident, plaintiffs son suffered multiple body injuries
which led to his untimely demise on that very day;
7. That a criminal case was filed against the defendants employee, docketed as
Criminal Case No. 67787, (earlier filed as Crim. Case No. 96-17570 before RTC)
before MTC-Branch III, entitled People v. Yeneza for Reckless Imprudence
resulting to Homicide, but the same was dismissed because pending litigation,
then remorse-stricken [accused] committed suicide;
xxx xxx xxx
8. That the injuries and complications as well as the resultant death suffered by
the late minor Charles Vallejera were due to the negligence and imprudence of
defendants employee;
9. That defendant LG Foods Corporation is civilly liable for the
negligence/imprudence of its employee since it failed to exercise the necessary
diligence required of a good father of the family in the selection and
supervision of his employee, Vincent Norman Yeneza y Ferrer which
diligence if exercised, would have prevented said incident. (Bracketed words
and emphasis ours.)

Nothing in the foregoing allegations suggests, even remotely, that the herein
petitioners are being made to account for their subsidiary liability under Article
103 of the Revised Penal Code. As correctly pointed out by the trial court in its
order of September 4, 2001 denying the petitioners Motion to Dismiss, the
complaint did not even aver the basic elements for the subsidiary liability of an
employer under Article 103 of the Revised Penal Code, such as the prior
conviction of the driver in the criminal case filed against him nor his insolvency.
Admittedly, the complaint did not explicitly state that plaintiff Vallejeras were
suing the defendant petitioners for damages based on quasi-delict. Clear it is,
however, from the allegations of the complaint that quasi-delict was their choice of

remedy against the petitioners. To stress, the plaintiff spouses alleged in their
complaint gross fault and negligence on the part of the driver and the failure of the
petitioners, as employers, to exercise due diligence in the selection and supervision
of their employees. The spouses further alleged that the petitioners are civilly liable
for the negligence/imprudence of their driver since they failed to exercise the
necessary diligence required of a good father of the family in the selection and
supervision of their employees, which diligence, if exercised, could have prevented
the vehicular accident that resulted to the death of their 7-year old son.
Section 2, Rule 2, of the 1997 Rules of Civil Procedure defines cause of action as
the act or omission by which a party violates the right of another. Such act or
omission gives rise to an obligation which may come from law,
contracts, quasi contracts, delicts or quasi-delicts.[11]
Corollarily, an act or omission causing damage to another may give rise to two
separate civil liabilities on the part of the offender, i.e., 1) civil liability ex delicto;
[12]
and 2) independent civil liabilities, such as those (a) not arising from an act or
omission complained of as felony (e.g., culpa contractual or obligations arising
from law;[13] the intentional torts;[14] and culpa aquiliana[15]); or (b) where the
injured party is granted a right to file an action independent and distinct from the
criminal action.[16] Either of these two possible liabilities may be enforced against
the offender.[17]
Stated otherwise, victims of negligence or their heirs have a choice between an
action to enforce the civil liability arising from culpa criminal under Article 100 of
the Revised Penal Code, and an action for quasi-delict (culpa aquiliana) under
Articles 2176 to 2194 of the Civil Code. If, as here, the action chosen is for quasidelict, the plaintiff may hold the employer liable for the negligent act of its
employee, subject to the employers defense of exercise of the diligence of a good
father of the family. On the other hand, if the action chosen is for culpa

criminal, the plaintiff can hold the employer subsidiarily liable only upon proof
of prior conviction of its employee.[18]
Article 1161[19] of the Civil Code provides that civil obligation arising from
criminal offenses shall be governed by penal laws subject to the provision of
Article 2177[20] and of the pertinent provision of Chapter 2, Preliminary Title on
Human Relation, and of Title XVIII of this Book, regulating damages. Plainly,
Article 2177 provides for the alternative remedies the plaintiff may choose from in
case the obligation has the possibility of arising indirectly from the delict/crime or
directly from quasi-delict/tort. The choice is with the plaintiff who makes known
his cause of action in his initiatory pleading or complaint, [21] and not with the
defendant who can not ask for the dismissal of the plaintiffs cause of action or lack
of it based on the defendants perception that the plaintiff should have opted to file
a claim under Article 103 of the Revised Penal Code.
Under Article 2180 of the Civil Code, the liability of the employer is direct or
immediate. It is not conditioned upon prior recourse against the negligent
employee and a prior showing of insolvency of such employee.[22]
Here, the complaint sufficiently alleged that the death of the couples
minor son was caused by the negligent act of the petitioners driver; and that the
petitioners themselves were civilly liable for the negligence of their driver for
failing to exercise the necessary diligence required of a good father of the family in
the selection and supervision of [their] employee, the driver, which diligence, if
exercised, would have prevented said accident.
Had the respondent spouses elected to sue the petitioners based on
Article 103 of the Revised Penal
Code, they would have
alleged
that
the guilt of the driver had been proven beyond reasonable doubt; that such accused
driver is insolvent; that it is the subsidiary liability of the defendant petitioners as

employers to pay for the damage done by their employee (driver) based on the
principle that every person criminally liable is also civilly liable. [23] Since there was
no conviction in the criminal case against the driver, precisely because death
intervened prior to the termination of the criminal proceedings, the spouses
recourse was, therefore, to sue the petitioners for their direct and primary liability
based on quasi-delict.
Besides, it is worthy to note that the petitioners, in their Answer with Compulsory
Counter-Claim,[24] repeatedly made mention of Article 2180 of the Civil Code and
anchored their defense on their allegation that they had exercised due diligence in
the selection and supervision of [their] employees. The Court views this defense as
an admission that indeed the petitioners acknowledged the private respondents
cause of action as one for quasi-delict under Article 2180 of the Civil Code.
All told, Civil Case No. 99-10845 is a negligence suit brought under Article 2176 Civil Code to recover damages primarily from the petitioners as employers
responsible for their negligent driver pursuant to Article 2180 of the Civil
Code. The obligation imposed by Article 2176 is demandable not only for ones
own acts or omissions, but also for those of persons for whom one is responsible.
Thus, the employer is liable for damages caused by his employees and household
helpers acting within the scope of their assigned tasks, even though the former is
not engaged in any business or industry.
Citing Maniago v. CA,[25] petitioner would argue that Civil Case No. 99-10845
should have been dismissed for failure of the respondent spouses to make a
reservation to institute a separate civil action for damages when the criminal case
against the driver was filed.
The argument is specious.
To start with, the petitioners reliance on Maniago is obviously misplaced. There,
the civil case was filed while the criminal case against the employee was still
pending. Here, the criminal case against the employee driver was prematurely

terminated due to his death. Precisely, Civil Case No. 99-10845 was filed by the
respondent spouses because no remedy can be obtained by them against the
petitioners with the dismissal of the criminal case against their driver during the
pendency thereof.
The circumstance that no reservation to institute a separate civil action for damages
was made when the criminal case was filed is of no moment for the simple reason
that the criminal case was dismissed without any pronouncement having been
made therein. In reality, therefor, it is as if there was no criminal case to speak of in
the first place. And for the petitioners to insist for the conviction of their driver as a
condition sine qua non to hold them liable for damages is to ask for the impossible.
IN VIEW WHEREOF, the instant petition is DENIED for lack of merit.
Costs against the petitioners.
SO ORDERED.

CANCIO C. GARCIA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Associate Justice
Chairperson

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

RENATO C. CORONA
Associate Justice

ADOLFO S. AZCUNA
Associate Justice

AT T E S TAT I O N
I attest that the conclusions in the above decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Associate Justice
Chairperson, Second Division

C E R T I F I C AT I O N
Pursuant to Article VIII, Section 13 of the Constitution, and the Division
Chairperson's Attestation, it is hereby certified that the conclusions in the above
decision were reached in consultation before the case was assigned to the writer of
the opinion of the Court.
ARTEMIO V. PANGANIBAN
Chief Justice

[1]

Penned by Associate Justice Lucas P. Bersamin with Associate Justices Ruben T. Reyes (now Presiding Justice)
and Elvi John Asuncion, concurring. Rollo, pp. 17-22.
[2]
Id. at 23.
[3]
Id. at 93-98.
[4]
Id. at 85-91.
[5]
Article 103. Subsidiary civil liability of other persons. The subsidiary liability established in the next preceding
article shall also apply to employers, teachers, persons and corporations engaged in any kind of industry for
felonies committed by their servants, pupils, workmen, apprentices, or employees in the discharge of their
duties.
[6]
Rollo, pp. 71-74.
[7]
Id. at 65.
[8]
Supra note 1.
[9]
Rollo, p. 23.
[10]
Article 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.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope
of their assigned tasks, even though the former are not engaged in any business or industry.
xxx xxx xxx
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. (1903a)
[11]
Article 1157, Civil Code of the Philippines.
[12]
Article 100, Revised Penal Code.
[13]
Article 31, Civil Code.
[14]
Articles 32 and 34, Civil Code.
[15]
Article 2176, Civil Code.
[16]
Article 33, Civil Code.
[17]
Cancio, Jr. v. Isip, G.R. No. 133978, November 12, 2002, 391 SCRA 393.
[18]
Joaquin, et al. v. Aniceto, et al., 120 Phil. 1100 (1964).
[19]
ARTICLE 1161. Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to
the provisions of article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human
Relations, and of Title XVIII of this Book, regulating damages. (1092a)
[20]
ARTICLE 2177. Responsibility for fault or negligence under the preceding article is entirely separate and distinct
from the civil liability arising from negligence under the Penal Code. But the plaintiff cannot recover
damages twice for the same act or omission of the defendant. (n)
[21]
Section 3, Rule 6, 1997 Rules on Criminal Procedure.
[22]
Kapalaran Bus Lines v. Coronado, G.R. No. 85331, August 25, 1989, 176 SCRA 792.
[23]

Article 100, Revised Penal Code.


Supra note 4.
[25]
G.R. 104392, February 20, 1996, 253 SCRA 674.
[24]

SECOND DIVISION

[G.R. No. 146173. December 11, 2003]

CECILIA YAMBAO, petitioner, vs. MELCHORITA C. ZUIGA,


LEOVIGILDO C. ZUIGA, REGINALDO C. ZUIGA, AND THE
MINORS, HERMINIGILDO C. ZUIGA, JR., AND LOVELY EMILY C.
ZUIGA both represented by their legal guardian, the aforenamed
MELCHORITA C. ZUIGA, respondents.
DECISION
QUISUMBING, J.:

This petition for review on certiorari seeks to reverse and set aside the decision of
the Court of Appeals, dated September 8, 2000, in CA-G.R. CV No. 52275. The
appellate court affirmed the judgment of the Regional Trial Court (RTC) of Malolos City,
Bulacan, Branch 8, in Civil Case No. 581-M-92, finding herein petitioner, among others,
liable for the untimely death of Herminigildo Zuiga in a vehicular accident and ordering
her to indemnify his legal heirs, the respondents herein. Also challenged in this petition
is the resolution of the Court of Appeals, dated November 27, 2000, denying the
petitioners Motion for Reconsideration.
[1]

[2]

[3]

Petitioner Cecilia Yambao is the registered owner of Lady Cecil and Rome Trans
passenger bus with Plate No. CVK 606, with a public transport franchise to ply the
Novaliches-via Quirino-Alabang route.
The respondents are the legal heirs of the late Herminigildo Zuiga. Melchorita Zuiga
is the surviving spouse, while Leovigildo, Reginaldo, Herminigildo, Jr., and Lovely Emily
are their children.
The facts, as established by the trial court and affirmed by the appellate court, are
as follows:
At around 3:30 p.m. of May 6, 1992, the bus owned by the petitioner was being
driven by her driver, one Ceferino G. Venturina along the northbound lane of
Epifanio delos
Santos
Avenue (EDSA),
within
the
vicinity
of
Bagong
Barrio, Kalookan City. With
Venturina
was
the
bus
conductor,
Fernando
Dumaliang. Suddenly, the bus bumped Herminigildo Zuiga, a pedestrian. Such was the
force of the impact that the left side of the front windshield of the bus was
cracked. Zuiga was rushed to the Quezon City General Hospital where he was given
medical attention, but due to the massive injuries sustained, he succumbed shortly
thereafter.
Private respondents, as heirs of the victim, filed a Complaint against petitioner and
her driver, Venturina, for damages, docketed as Civil Case No. 581-M-92 at the RTC of
Malolos City. The complaint essentially alleged that Venturina drove the bus in a
reckless, careless and imprudent manner, in violation of traffic rules and regulations,
without due regard to public safety, thus resulting in the victims premature death.
[4]

In her Answer, the petitioner vehemently denied the material allegations of the
complaint. She tried to shift the blame for the accident upon the victim, theorizing that
Herminigildo bumped into her bus, while avoiding an unidentified woman who was

chasing him. She further alleged that she was not liable for any damages because as
an employer, she exercised the proper diligence of a good father of a family, both in the
selection and supervision of her bus driver.
On September 8, 1995, the trial court rendered judgment, the dispositive portion of
which reads:

In view of the foregoing consideration, judgment is hereby rendered in favor of the


plaintiffs and against the defendants ordering the herein defendants jointly and
severally, with Plaridel Surety & Insurance Co., and Times Surety & Insurance Co.
Inc. to the extent of their respective liabilities under their respective insurance policies
to pay the herein plaintiffs the following sums of money:
1. P50,000.00 as indemnity for the death of Herminigildo Zuiga;
2. P92,000.00 as funeral expenses;
3. P200,000.00 as moral damages;
4. P30,000.00 as exemplary damages;
5. P30,000.00 as attorneys fees;
6. P5,000.00 as litigation expenses; and
7. To pay the cost of the suit
to be paid by all the herein defendants and third party defendants within thirty (30)
days from receipt of this Decision.
The counterclaim of the defendant Cecilia Yambao is hereby dismissed for lack of
merit.
SO ORDERED.

[5]

In finding for the respondents herein, the trial court observed:

[T]he allegations and evidence presented by the defendants that it was the victim
Herminigildo Zuiga who bumped the bus owned by defendant Cecilia Yambao and
her husband is incredible if not preposterous. No sane person would bump his head or
body against a running bus along a big highway like EDSA at Bagong Barrio,
Caloocan City and neither did any of the defendants presented (sic) any evidence or
proof to show that the victim was mentally deranged at the time of the accident and
the presumption therefore is that he was in his normal senses.
[6]

In holding the petitioner liable for Herminigildos death, the trial court applied Article
1756 of the Civil Code, observing that petitioner had failed to prove that she observed
the diligence required by Articles 1733 and 1755 of the said Code.
[7]

[8]

[9]

Dissatisfied, Yambao filed an appeal with the Court of Appeals, docketed as CAG.R. CV No. 52275, faulting the trial court for failing to appreciate that: (a) it was the
victim who ran into her bus, and (b) she had exercised the proper diligence of a bonus
pater familias in the selection and supervision of her employee, the driver of said bus.
On September 8, 2000, the Court of Appeals decided CA-G.R. CV No. 52275 as
follows:

WHEREFORE, on the foregoing modificatory premises, and considering that the


same result has been reached by the trial court, its Decision dated September 8,
1995 is hereby AFFIRMED.
Costs against defendant-appellant.
SO ORDERED.

[10]

While sustaining the trial courts findings that Venturina had been reckless and
negligent in driving the petitioners bus, thus hitting the victim with fatal results, the
appellate court, however, found the trial courts reliance on Articles 1755 and 1756 of the
Civil Code misplaced. It held that this was a case of quasi-delict, there being no preexisting contractual relationship between the parties. Hence, the law on common
carriers was inapplicable. The court a quo then found the petitioner directly and
primarily liable as Venturinas employer pursuant to Article 2180 of the Civil Code as she
failed to present evidence to prove that she has observed the diligence of a good father
of a family in the selection and supervision of her employees.
Yambao then duly moved for reconsideration, but her motion was denied for want of
merit.
[11]

Hence, this petition for review, anchored on the following formulation of issues:
I

WHETHER OR NOT THE ALLEGATIONS AND EVIDENCE PRESENTED BY


THE PETITIONER, THE VICTIM HERMINIGILDO ZUIGA WAS THE ONE WHO
BUMPED THE BUS OWNED BY HEREIN PETITIONER CECILIA YAMBAO
AND HER HUSBAND AND WHO DISREGARDED THE TRAFFIC RULES AND
REGULATIONS AT THE PLACE AND TIME OF THE INCIDENT WHICH
UNDOUBTEDLY AND CONCLUSIVELY PROVED THAT IT WAS THE
PLAINTIFFS OWN NEGLIGENCE THAT WAS THE IMMEDIATE AND
PROXIMATE CAUSE OF HIS DEATH.
II

WHETHER OR NOT, PETITIONER CECILIA YAMBAO IS NOT LIABLE FOR


ANY DAMAGES AND THAT SHE EXERCISED THE PROPER DILIGENCE OF A
GOOD FATHER OF THE FAMILY, BOTH IN THE SELECTION AND
SUPERVISION OF HER DRIVER AND/OR EMPLOYEE.
[12]

At the outset, we must state that the first issue raised by the petitioner is a factual
one. Whether a person is negligent or not is a question of fact, which this Court cannot
pass upon in a petition for review on certiorari, as our jurisdiction is limited to reviewing
errors of law. The resolution of factual issues is the function of the trial court and its
findings on these matters are, as a general rule, binding on this Court, more so where
these have been affirmed by the Court of Appeals. We have carefully examined and
weighed the petitioners arguments on the first issue submitted, as well as the evidence
on record, and find no cogent reason to disregard the cited general rule, much less to
reverse the factual findings of the trial court as upheld by the court a quo. Hence, we
sustain the trial courts finding, as affirmed by the Court of Appeals, that it was
Venturinas reckless and imprudent driving of petitioners bus, which is the proximate
cause of the victims death.
[13]

[14]

[15]

[16]

To our mind, therefore, the only issue before the Court properly is whether petitioner
exercised the diligence of a good father of a family in the selection and supervision of
her employees, thus absolving her from any liability.
Petitioner contends that as an employer, she observed the proper diligence of a
good father of a family, both in the selection and supervision of her driver and therefore,
is relieved from any liability for the latters misdeed. To support her claim, she points out
that when Venturina applied with her as a driver in January 1992, she required him to
produce not just his drivers license, but also clearances from the National Bureau of
Investigation (NBI), the Philippine National Police, and the barangay where he
resides. She also required him to present his Social Security System (SSS) Number
prior to accepting him for employment. She likewise stresses that she inquired from
Venturinas previous employer about his employment record, and only hired him after it
was shown to her satisfaction that he had no blot upon his record.
The petitioners arguments ring hollow and fail to sway this Court.
The law governing petitioners liability, as the employer of bus driver Venturina, is
Article 2180 of the Civil Code, the full text of which reads:

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.
[17]

The father and, in case of his death or incapacity, the mother, are responsible for the
damages caused by the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons who
are under their authority and live in their company.

The owners and managers of an establishment or enterprise are likewise responsible


for damages caused by their employees in the service of the branches in which the
latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry.
The State is responsible in like manner when it acts through a special agent; but not
when the damage has been caused by the official to whom the task done properly
pertains, in which case what is provided in Article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for
damages caused by their pupils and students or apprentices, so long as they remain in
their custody.
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage. (Italics ours)
The diligence of a good father referred to in the last paragraph of the aforecited statute
means diligence in the selection and supervision of employees. Thus, when an
employee, while performing his duties, causes damage to persons or property due to
his own negligence, there arises the juris tantum presumption that the employer is
negligent, either in the selection of the employee or in the supervision over him after the
selection. For the employer to avoid the solidary liability for a tort committed by his
employee, an employer must rebut the presumption by presenting adequate and
convincing proof that in the selection and supervision of his employee, he or she
exercises the care and diligence of a good father of a family. In the instant case, we
find that petitioner has failed to rebut the presumption of negligence on her part.
[18]

[19]

[20]

Petitioners claim that she exercised due diligence in the selection and supervision
of her driver, Venturina, deserves but scant consideration. Her allegation that before she
hired Venturina she required him to submit his drivers license and clearances is
worthless, in view of her failure to offer in evidence certified true copies of said license
and clearances. Bare allegations, unsubstantiated by evidence, are not equivalent to
proof under the rules of evidence. Moreover, as the court a quo aptly observed,
petitioner contradicts herself. She declared that Venturina applied with her sometime in
January 1992 and she then required him to submit his license and
clearances. However, the record likewise shows that she did admit that Venturina
submitted the said requirements only on May 6, 1992, or on the very day of the fatal
accident itself (italics for emphasis). In other words, petitioners own admissions clearly
and categorically show that she did not exercise due diligence in the selection of her
bus driver.
[21]

In any case, assuming arguendo that Venturina did submit his license and
clearances when he applied with petitioner in January 1992, the latter still fails the test
of due diligence in the selection of her bus driver. Case law teaches that for an
employer to have exercised the diligence of a good father of a family, he should not be
satisfied with the applicants mere possession of a professional drivers license; he must
also carefully examine the applicant for employment as to his qualifications, his
experience and record of service. Petitioner failed to present convincing proof that she
went to this extent of verifying Venturinas qualifications, safety record, and driving
history. The presumption juris tantum that there was negligence in the selection of her
bus driver, thus, remains unrebutted.
[22]

Nor did petitioner show that she exercised due supervision over Venturina after his
selection. For as pointed out by the Court of Appeals, petitioner did not present any
proof that she drafted and implemented training programs and guidelines on road safety
for her employees. In fact, the record is bare of any showing that petitioner required
Venturina to attend periodic seminars on road safety and traffic efficiency. Hence,
petitioner cannot claim exemption from any liability arising from the recklessness or
negligence of Venturina.
In sum, petitioners liability to private respondents for the negligent and imprudent
acts of her driver, Venturina, under Article 2180 of the Civil Code is both manifest and
clear. Petitioner, having failed to rebut the legal presumption of negligence in the
selection and supervision of her driver, is responsible for damages, the basis of the
liability being the relationship of pater familias or on the employers own negligence.
Thus, this Court has no option but to uphold the ruling of the appellate court.
[23]

WHEREFORE, the instant petition is DENIED. The assailed decision of the Court of
Appeals, dated September 8, 2000, in CA-G.R. CV No. 52275, as well as its resolution
dated November 27, 2000, denying petitioner Cecilia Yambaos motion for
reconsideration are hereby AFFIRMED. Costs against the petitioner.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

[1]

Rollo, pp. 14-26. Per Associate Justice Teodoro P. Regino, and concurred in by Associate Justices
Conchita Carpio Morales and Perlita J. Tria-Tirona.

[2]

CA Rollo, pp. 47-55.

[3]

Rollo, p. 27.

[4]

A separate criminal complaint for reckless imprudence resulting in homicide, docketed as Crim. Case
No. 156134, was also filed against Venturina before the Metropolitan Trial Court in Caloocan City,
Branch 52. However, the lower court could not proceed with the trial due to the failure and refusal
of the accused Venturina to appear. See Rollo, p. 16.

[5]

Id. at 35-36.

[6]

CA Rollo, pp. 53-54.

[7]

Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
prescribed in Articles 1733 and 1755.

[8]

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735,
and 1745, nos. 5,6, and 7 while the extraordinary diligence for the safety of the passengers is
further set forth in articles 1755 and 1756.
[9]

Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances.

[10]

Rollo, p. 25.

[11]

Supra, note 3.

[12]

Rollo, p. 97.

[13]

Thermochem Incorporated v. Naval, G.R. No. 131541, 20 October 2000, 344 SCRA 76, 82.

[14]

Almira v. Court of Appeals, G.R. No. 115966, 20 March 2003, p. 7.

[15]

Mckee v. Intermediate Appellate Court, G.R. Nos. 68102-03, 16 July 1992, 211 SCRA 517, 537.

[16]

Supra, note 13 at 83.

[17]

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.

[18]

Supra, note 15 at 544-545.

[19]

Pantranco North Express, Inc. v. Baesa, G.R. Nos. 79050-51, 14 November 1989, 179 SCRA 384, 393.

[20]

Metro Manila Transit Corp. v. Court of Appeals, G.R. No. 141089, 1 August 2002, pp. 8-9 citing
Pantranco North Express, Inc. v. Baesa, supra, note 19; Umali v. Hon. Bacani, 161 Phil. 351, 357
(1976).

[21]

Manzano v. Perez, Sr., 414 Phil., 728, 738 (2001).

[22]

Ramos v. Pepsi-Cola Bottling Co. of the Philippines, 125 Phil. 701, 703-704 (1967) citing Campo v.
Camarote, 100 Phil. 459, 463 (1956).

[23]

Metro Manila Transit Corp. v. Court of Appeals, G.R. No. 104408, 21 June 1993, 223 SCRA 521, 539.

THIRD DIVISION

[G.R. No. 143360. September 5, 2002]

EQUITABLE LEASING CORPORATION, petitioner, vs. LUCITA SUYOM,


MARISSA
ENANO,
MYRNA
TAMAYO
and
FELIX
OLEDAN, respondents.
DECISION
PANGANIBAN, J.:

In an action based on quasi delict, the registered owner of a motor vehicle is


solidarily liable for the injuries and damages caused by the negligence of the driver, in
spite of the fact that the vehicle may have already been the subject of an unregistered
Deed of Sale in favor of another person. Unless registered with the Land Transportation
Office, the sale -- while valid and binding between the parties -- does not affect third
parties, especially the victims of accidents involving the said transport equipment. Thus,
in the present case, petitioner, which is the registered owner, is liable for the acts of the
driver employed by its former lessee who has become the owner of that vehicle by
virtue of an unregistered Deed of Sale.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the
May 12, 2000 Decision of the Court of Appeals (CA) in CA-GR CV No. 55474. The
decretal portion of the Decision reads as follows:
[1]

[2]

WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for


lack of merit. The assailed decision, dated May 5, 1997, of the Regional Trial Court of
Manila, Branch 14, in Civil Case No. 95-73522, is
hereby AFFIRMED with MODIFICATION that the award of attorneys fees
is DELETED.
[3]

On the other hand, in Civil Case No. 95-73522, the Regional Trial Court (RTC) of
Manila (Branch 14) had earlier disposed in this wise:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendant Equitable Leasing Corporation ordering said defendant to pay to the
plaintiffs the following:
A. TO MYRNA TAMAYO
1. the sum of P50,000.00 for the death of Reniel Tamayo;
2. P50,000.00 as moral damages; and

3. P56,000.00 for the damage to the store and its contents, and funeral expenses.
B. TO FELIX OLEDAN
1. the sum of P50,000.00 for the death of Felmarie Oledan;
2. P50,000.00 as moral damages; and
3. P30,000.00 for medical expenses, and funeral expenses.
C. TO MARISSA ENANO
1. P7,000.00 as actual damages
D. TO LUCITA SUYOM
1. The sum of P5,000.00 for the medical treatment of her two sons.
The sum of P120,000.00 as and for attorneys fees.

[4]

The Facts
On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into the house
cum store of Myrna Tamayo located at Pier 18, Vitas, Tondo, Manila. A portion of the
house was destroyed. Pinned to death under the engine of the tractor were Respondent
Myrna Tamayos son, Reniel Tamayo, and Respondent Felix Oledans daughter, Felmarie
Oledan. Injured were Respondent Oledan himself, Respondent Marissa Enano, and two
sons of Respondent Lucita Suyom.
Tutor was charged with and later convicted of reckless imprudence resulting in
multiple homicide and multiple physical injuries in Criminal Case No. 296094-SA,
Metropolitan Trial Court of Manila, Branch 12.
[5]

Upon verification with the Land Transportation Office, respondents were furnished a
copy of Official Receipt No. 62204139 and Certificate of Registration No. 08262797,
showing that the registered owner of the tractor was Equitable Leasing
Corporation/leased to Edwin Lim. On April 15, 1995, respondents filed against Raul
Tutor, Ecatine Corporation (Ecatine) and Equitable Leasing Corporation (Equitable) a
Complaint for damages docketed as Civil Case No. 95-73522 in the RTC of Manila,
Branch 14.
[6]

[7]

[8]

The trial court, upon motion of plaintiffs counsel, issued an Order dropping Raul
Tutor, Ecatine and Edwin Lim from the Complaint, because they could not be located
and served with summonses. On the other hand, in its Answer with Counterclaim,
petitioner alleged that the vehicle had already been sold to Ecatine and that the
[9]

[10]

former was no longer in possession and control thereof at the time of the incident. It
also claimed that Tutor was an employee, not of Equitable, but of Ecatine.
After trial on the merits, the RTC rendered its Decision ordering petitioner to pay
actual and moral damages and attorneys fees to respondents. It held that since the
Deed of Sale between petitioner and Ecatine had not been registered with the Land
Transportation Office (LTO), the legal owner was still Equitable. Thus, petitioner was
liable to respondents.
[11]

[12]

Ruling of the Court of Appeals


Sustaining the RTC, the CA held that petitioner was still to be legally deemed the
owner/operator of the tractor, even if that vehicle had been the subject of a Deed of Sale
in favor of Ecatine on December 9, 1992. The reason cited by the CA was that the
Certificate of Registration on file with the LTO still remained in petitioners name. In
order that a transfer of ownership of a motor vehicle can bind third persons, it must be
duly recorded in the LTO.
[13]

[14]

The CA likewise upheld respondents claim for moral damages against petitioner
because the appellate court considered Tutor, the driver of the tractor, to be an agent of
the registered owner/operator.
[15]

Hence, this Petition.

[16]

Issues
In its Memorandum, petitioner raises the following issues for the Courts
consideration:
I

Whether or not the Court of Appeals and the trial court gravely erred when they
decided and held that petitioner [was] liable for damages suffered by private
respondents in an action based on quasi delict for the negligent acts of a driver who
[was] not the employee of the petitioner.
II

Whether or not the Court of Appeals and the trial court gravely erred when they
awarded moral damages to private respondents despite their failure to prove that the
injuries they suffered were brought by petitioners wrongful act.
[17]

This Courts Ruling

The Petition has no merit.


First Issue:
Liability for Wrongful Acts
Petitioner contends that it should not be held liable for the damages sustained by
respondents and that arose from the negligence of the driver of the Fuso Road Tractor,
which it had already sold to Ecatine at the time of the accident. Not having employed
Raul Tutor, the driver of the vehicle, it could not have controlled or supervised him.
[18]

We are not persuaded. In negligence cases, the aggrieved party may sue the
negligent party under (1) Article 100 of the Revised Penal Code, for civil liability ex
delicto; or (2) under Article 2176 of the Civil Code, for civil liability ex quasi delicto.
[19]

[20]

[21]

Furthermore, under Article 103 of the Revised Penal Code, employers may be
held subsidiarily liable for felonies committed by their employees in the discharge of the
latters duties. This liability attaches when the employees who are convicted of crimes
committed in the performance of their work are found to be insolvent and are thus
unable to satisfy the civil liability adjudged.
[22]

[23]

On the other hand, under Article 2176 in relation to Article 2180 of the Civil Code,
an action predicated on quasi delict may be instituted against the employer for an
employees act or omission. The liability for the negligent conduct of the subordinate
is direct and primary, but is subject to the defense of due diligence in the selection and
supervision of the employee. The enforcement of the judgment against the employer
for an action based on Article 2176 does not require the employee to be insolvent, since
the liability of the former is solidary -- the latter being statutorily considered a joint
tortfeasor. To sustain a claim based on quasi delict, the following requisites must be
proven: (a) damage suffered by the plaintiff, (b) fault or negligence of the defendant, and
(c) connection of cause and effect between the fault or negligence of the defendant and
the damage incurred by the plaintiff.
[24]

[25]

[26]

[27]

These two causes of action (ex delicto or ex quasi delicto) may be availed
of, subject to the caveat that the offended party cannot recover damages twice for the
same act or omission or under both causes. Since these two civil liabilities are distinct
and independent of each other, the failure to recover in one will not necessarily preclude
recovery in the other.
[28]

[29]

[30]

In the instant case, respondents -- having failed to recover anything in the criminal
case -- elected to file a separate civil action for damages, based on quasi delict under
Article 2176 of the Civil Code. The evidence is clear that the deaths and the injuries
suffered by respondents and their kins were due to the fault of the driver of the Fuso
tractor.
[31]

Dated June 4, 1991, the Lease Agreement between petitioner and Edwin Lim
stipulated that it is the intention of the parties to enter into a FINANCE LEASE
AGREEMENT. Under such scheme, ownership of the subject tractor was to be
registered in the name of petitioner, until the value of the vehicle has been fully paid by
[32]

[33]

Edwin Lim. Further, in the Lease Schedule, the monthly rental for the tractor was
stipulated, and the term of the Lease was scheduled to expire on December 4, 1992.
After a few months, Lim completed the payments to cover the full price of the tractor.
Thus, on December 9, 1992, a Deed of Sale over the tractor was executed by
petitioner in favor of Ecatine represented by Edwin Lim. However, the Deed was not
registered with the LTO.
[34]

[35]

[36]

[37]

We hold petitioner liable for the deaths and the injuries complained of, because it
was the registered owner of the tractor at the time of the accident on July 17, 1994.
The Court has consistently ruled that, regardless of sales made of a motor vehicle,
the registered owner is the lawful operator insofar as the public and third persons are
concerned; consequently, it is 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 as merely its agent. The
same principle applies even if the registered owner of any vehicle does not use it for
public service.
[38]

[39]

[40]

[41]

Since Equitable remained the registered owner of the tractor, it could not escape
primary liability for the deaths and the injuries arising from the negligence of the driver.
[42]

The finance-lease agreement between Equitable on the one hand and Lim or
Ecatine on the other has already been superseded by the sale. In any event, it does not
bind third persons.The rationale for this rule has been aptly explained in Erezo v. Jepte,
which we quote hereunder:
[43]

x x x. The main aim of motor vehicle registration is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on a definite individual, the registered
owner. Instances are numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without positive identification of
the owner or drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways.
[44]

Further, petitioners insistence on FGU Insurance Corp. v. Court of Appeals is


misplaced. First, in FGU Insurance, the registered vehicle owner, which was engaged
in a rent-a-car business, rented out the car. In this case, the registered owner of the
truck, which is engaged in the business of financing motor vehicle acquisitions, has
actually sold the truck to Ecatine, which in turn employed Tutor. Second, in FGU
Insurance, the registered owner of the vehicle was not held responsible for the negligent
acts of the person who rented one of its cars, because Article 2180 of the Civil Code
was not applicable. We held that no vinculum juris as employer and employee existed
between the owner and the driver. In this case, the registered owner of the tractor is
considered under the law to be the employer of the driver, while the actual operator is
deemed to be its agent. Thus, Equitable, the registered owner of the tractor, is -- for
[45]

[46]

[47]

purposes of the law on quasi delict -- the employer of Raul Tutor, the driver of the
tractor. Ecatine, Tutors actual employer, is deemed as merely an agent of Equitable.
[48]

True, the LTO Certificate of Registration, dated 5/31/91, qualifies the name of the
registered owner as EQUITABLE LEASING CORPORATION/Leased to Edwin Lim. But
the lease agreement between Equitable and Lim has been overtaken by the Deed of
Sale on December 9, 1992, between petitioner and Ecatine. While this Deed does not
affect respondents in this quasi delict suit, it definitely binds petitioner because, unlike
them, it is a party to it.
We must stress that the failure of Equitable and/or Ecatine to register the sale with
the LTO should not prejudice respondents, who have the legal right to rely on the legal
principle that the registered vehicle owner is liable for the damages caused by the
negligence of the driver. Petitioner cannot hide behind its allegation that Tutor was the
employee of Ecatine. This will effectively prevent respondents from recovering their
losses on the basis of the inaction or fault of petitioner in failing to register the sale. The
non-registration is the fault of petitioner, which should thus face the legal consequences
thereof.
Second Issue:
Moral Damages
Petitioner further claims that it is not liable for moral damages, because
respondents failed to establish or show the causal connection or relation between the
factual basis of their claim and their wrongful act or omission, if any.
[49]

Moral damages are not punitive in nature, but are designed to compensate and
alleviate in some way the physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury unjustly caused a person. Although incapable of pecuniary computation, moral
damages must nevertheless be somehow proportional to and in approximation of the
suffering inflicted. This is so because moral damages are in the category of an award
designed to compensate the claimant for actual injury suffered, not to impose a penalty
on the wrongdoer.
[50]

[51]

[52]

[53]

Viewed as an action for quasi delict, the present case falls squarely within the
purview of Article 2219 (2), which provides for the payment of moral damages in cases
of quasi delict. Having established the liability of petitioner as the registered owner of
the vehicle, respondents have satisfactorily shown the existence of the factual basis
for the award and its causal connection to the acts of Raul Tutor, who is deemed as
petitioners employee. Indeed, the damages and injuries suffered by respondents were
the proximate result of petitioners tortious act or omission.
[54]

[55]

[56]

[57]

[58]

[59]

Further, no proof of pecuniary loss is necessary in order that moral damages may
be awarded, the amount of indemnity being left to the discretion of the court. The
evidence gives no ground for doubt that such discretion was properly and judiciously
exercised by the trial court. The award is in fact consistent with the rule that moral
[60]

[61]

damages are not intended to enrich the injured party, but to alleviate the moral suffering
undergone by that party by reason of the defendants culpable action.
[62]

WHEREFORE, the
Petition
is DENIED and
Decision AFFIRMED. Costs against petitioner.

the

assailed

SO ORDERED.
Puno, (Chairman), Corona, and Carpio-Morales, JJ., concur.
Sandoval-Gutierrez, J., on leave.

[1]

Rollo, pp. 21-31.

Third Division. Written by Justice B. A. Adefuin-de la Cruz and concurred in by Justices Quirino D. Abad
Santos Jr. (Division chairman) and Renato C. Dacudao (member).
[2]

[3]

Assailed Decision, p. 11; rollo, p. 31.

[4]

RTC Decision, p. 8; rollo, p. 57; penned by Judge Inocencio D. Maliaman.

[5]

See Annex E; rollo, p 38.

[6]

See Annex C; id., p. 35.

[7]

See Annex C-1; ibid.

[8]

Annex F; rollo, p. 38.

[9]

Respondents Memorandum, p. 1; rollo, p. 117.

[10]

Annex G; rollo, p. 45; penned by Judge Lydia Querubin Layosa.

[11]

RTC Decision, p. 5; rollo, p. 54.

[12]

Petitioners Memorandum, p. 5; rollo, p. 11.

[13]

CA Decision, p. 7; rollo, p. 27.

[14]

Id., pp. 9 & 29.

[15]

Id., pp. 10 & 30.

The case was deemed submitted for decision on December 13, 2001, upon the Courts receipt of
respondents Memorandum, which was signed by Atty. Yolando F. Lim of Mercado Lim and Associates.
Petitioners Memorandum, filed on October 24, 2001, was signed by Atty. Sergio M. Ceniza of Santos
Pilapil and Associates.
[16]

[17]

Page 7; rollo, p. 101. Original in upper case.

[18]

Petitioners Memorandum, p. 9; rollo, p. 103.

[19]

This article provides:

ART. 100. Civil Liability of a person guilty of felony. - Every person criminally liable for a felony is also
civilly liable.
[20]

This article provides:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by the provision of this Chapter.
Rafael Reyes Trucking Corporation v. People, 329 SCRA 600, April 3, 2000; Casupanan and Capitulo
v. Laroya, GR No. 145391, August 26, 2002.
[21]

[22]

Ibid.

[23]

Franco v. Intermediate Appellate Court, 178 SCRA 333, October 5, 1989.

[24]

This article provides:

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.
xxxxxxxxx
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.
xxxxxxxxx
[25]

Rafael Reyes Trucking Corporation v. People, supra.

Article 2194 Civil Code provides, Art. 2194. The responsibility of two or more persons who are liable for
a quasi-delict is solidary.
[26]

FGU Insurance Corporation v. Court of Appeals, 287 SCRA 718, March 23, 1998, citing Andamo v.
Intermediate Appellate Court, 191 SCRA 195, November 6, 1990.
[27]

[28]

This caveat is found in Art. 2177 of the Civil Code which states:

ART. 2177. Responsibility for fault or negligence under the preceding article is entirely separate and
distinct from the civil liability arising from negligence under the Penal Code. But the plaintiff cannot
recover damages twice for the same act or omission of the defendant.
Padilla v. Court of Appeals, 129 SCRA 558, March 31, 1984; Mendoza v. Arrieta, 91 SCRA 113, June
29, 1979; Barredo v. Garcia, 73 Phil. 607, July 8, 1942.
[29]

[30]

Rafael Reyes Trucking Corpration v. People, supra.

[31]

Ibid.

[32]

Annex B; rollo, p. 32

[33]

Annex B-1; rollo, p. 34.

[34]

Petitioners Memorandum, p. 2; rollo, p. 8.

[35]

Annex B-1; rollo, p. 34.

[36]

Petitioners Memorandum, p. 2; rollo, p. 8.

[37]

Annex D; rollo, p. 36

[38]

Aguilar v. Commercial Savings Bank, GR No. 128705, June 29, 2001.

MYC-Agro-Industrial Corporation v. Vda. de Caldo, 132 SCRA 10, September 7, 1984, citing Vargas v.
Langcay, 6 SCRA 174, September 29, 1962; Vda. de Medina v. Cresencia, 99 Phil. 506, July 11, 1956;
Timbol v. Osias, 96 Phil. 989, April 30, 1955; Montoya v. Ignacio, 94 Phil. 182, December 29, 1953;
Tamayo v. Aquino et al., 105 Phil. 949, May 29, 1959.
[39]

[40]

First Malayan Leasing and Finance Corporation v. Court of Appeals, 209 SCRA 660, June 9, 1992.

[41]

BA Finance Corporation v. Court of Appeals, 215 SCRA 715, November 13, 1992.

[42]

Aguilar v. Commercial Savings Bank, supra.

[43]

102 Phil. 103, September 30, 1957, per Labrador, J.

[44]

Id., p. 108, per Labrador, J.

[45]

Maloles II v. Philips, 324 SCRA 172, January 31, 2000.

[46]

[47]

First Malayan Leasing and Finance Corporation v. Court of Appeals, 209 SCRA 660, June 9, 1992.

[48]

Ibid.

[49]

Petitioners Memorandum, p. 15; rollo, p. 109.

[50]

Dee Hua Liong Electrical Equipment Corp. v. Reyes, 145 SCRA 713, November 25, 1986.

[51]

Expertravel & Tours Inc. v. Court of Appeals, 309 SCRA 141, June 25, 1999.

[52]

Philtranco Services Enterprises Inc. v. Court of Appeals, 273 SCRA 562, June 17, 1997.

Radio Communication v. Rodriguez, 182 SCRA 899 February 28, 1990; San Miguel Brewery Inc., 21
SCRA 292, September 29, 1967
[53]

[54]

Art. 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries;


(2) Quasi-delicts causing physical injuries;
x x x x x x x x x.
[55]

Fabre Jr. v. Court of Appeals, 259 SCRA 426, July 26, 1996.

[56]

BA Finance Corporation v. Court of Appeals, supra.

ART. 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.
[57]

[58]

Philippine Veterans Bank v. NLRC, 317 SCRA 510, October 26, 1999.

San Miguel Brewery, Inc. v. Magno, 21 SCRA 292, September 29, 1967; Dee Hua Liong Electrical
Equipment Corp v. Reyes, supra.
[59]

ART. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated
or exemplary damages, may be adjudicated. The assessment of such damages, except liquidated ones,
is left to the discretion of the court, according to the circumstances of each case.
[60]

[61]

Salao v. Court of Appeals, 284 SCRA 493, January 22, 1998.

[62]

Philippine Airlines v. Court of Appeals, supra.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 84516 December 5, 1989


DIONISIO CARPIO, petitioner,
vs.
HON. SERGIO DOROJA, (Presiding Judge, MTC, Branch IV, Zamboanga City) and EDWIN
RAMIREZ Y WEE,respondents.

PARAS, J.:
Before us is a petition to review by certiorari the decision of the Municipal Trial Court of Zamboanga
City, Branch IV, which denied petitioner's motion for subsidiary writ of execution against the owneroperator of the vehicle which figured in the accident.
The facts of the case are undisputed.
Sometime on October 23, 1985, accused-respondent Edwin Ramirez, while driving a passenger
Fuso Jitney owned and operated by Eduardo Toribio, bumped Dionisio Carpio, a pedestrian crossing
the street, as a consequence of which the latter suffered from a fractured left clavicle as reflected in
the medico-legal certificate and sustained injuries which required medical attention for a period of (3)
three months.
An information for Reckless Imprudence Resulting to Serious Physical Injuries was filed against
Edwin Ramirez with the Municipal Trial Court of Zamboanga City, Branch IV. On January 14, 1987,
the accused voluntarily pleaded guilty to a lesser offense and was accordingly convicted for
Reckless Imprudence Resulting to Less Serious Physical Injuries under an amended information
punishable under Article 365 of the Revised Penal Code. The dispositive portion of the decision
handed down on May 27, 1987 reads as follows:
WHEREFORE, finding the accused EDWIN RAMIREZ y WEE guilty as a principal beyond
reasonable doubt of the Amended Information to which he voluntarily pleaded guilty and appreciating
this mitigating circumstance in his favor, hereby sentences him to suffer the penalty of One (1)
month and One (1) day to Two (2) months of Arresto Mayor in its minimum period. The accused is
likewise ordered to indemnify the complainant Dionisio A. Carpio the amount of P45.00 representing
the value of the 1/2 can of tomatoes lost; the amount of P200.00 which complainant paid to the
Zamboanga General Hospital, to pay complainant the amount of Pl,500.00 as attorney's fees and to
pay the cost of this suit. SO ORDERED. (p. 7, Rollo)
Thereafter, the accused filed an application for probation.
At the early stage of the trial, the private prosecutor manifested his desire to present evidence to
establish the civil liability of either the accused driver or the owner-operator of the vehicle. Accused's
counsel moved that the court summon the owner of the vehicle to afford the latter a day in court, on
the ground that the accused is not only indigent but also jobless and thus cannot answer any civil
liability that may be imposed upon him by the court. The private prosecutor, however, did not move
for the appearance of Eduardo Toribio.
The civil aspect of the above-quoted decision was appealed by the private prosecutor to the
Regional Trial Court Branch XVI, appellant praying for moral damages in the amount of P 10,000.00,
compensatory damages at P6,186.40, and attorney's fees of P 5,000.00. The appellate court, on

January 20, 1988, modified the trial court's decision, granting the appellant moral damages in the
amount of Five Thousand Pesos (P 5,000.00), while affirming all other civil liabilities.
Thereafter, a writ of execution dated March 10, 1988 was duly served upon the accused but was,
however, returned unsatisfied due to the insolvency of the accused as shown by the sheriffs return.
Thus, complainant moved for a subsidiary writ of execution against the subsidiary liability of the
owner-operator of the vehicle. The same was denied by the trial court on two grounds, namely, the
decision of the appellate court made no mention of the subsidiary liability of Eduardo Toribio, and the
nature of the accident falls under "culpa-aquiliana" and not culpa-contractual." A motion for
reconsideration of the said order was disallowed for the reason that complainant having failed to
raise the matter of subsidiary liability with the appellate court, said court rendered its decision which
has become final and executory and the trial court has no power to alter or modify such decision.
Hence, the instant petition.
Petitioner relies heavily on the case of Pajarito v. Seneris, 87 SCRA 275, which enunciates that "the
subsidiary liability of the owner-operator is fixed by the judgment, because if a case were to be filed
against said operator, the court called upon to act thereto has no other function than to render a
decision based on the indemnity award in the criminal case without power to amend or modify it
even if in his opinion an error has been committed in the decision." Petitioner maintains that the
tenor of the aforesaid decision implies that the subsidiary liability of the owner-operator may be
enforced in the same proceeding and a separate action is no longer necessary in order to avoid
undue delay, notwithstanding the fact that said employer was not made a party in the criminal action.
It is the theory of respondent that the owner-operator cannot be validly held subsidiarily liable for the
following reasons, namely: (a) the matter of subsidiary liability was not raised on appeal; (b) contrary
to the case of Pajarito v. Seneris, the injuries sustained by the complainant did not arise from the socalled "culpa-contractual" but from "culpa-aquiliana"; (c) the judgments of appellate courts may not
be altered, modified, or changed by the court of origin; and (d) said owner was never made a party
to the criminal proceedings.
Thus, the underlying issue raised in this case is; whether or not the subsidiary liability of the owneroperator may be enforced in the same criminal proceeding against the driver where the award was
given, or in a separate civil action.
The law involved in the instant case is Article 103 in relation to Article 100, both of the Revised Penal
Code, which reads thus:
Art. 103. Subsidiary civil liability of other persons. The subsidiary liability established in the next
preceding article shall apply to employers, teachers, persons, and corporations engaged in any kind
of industry for felonies committed by their servants, pupils, workmen, apprentices, or employees in
the discharge of their duties.
Respondent contends that the case of Pajarito v. Seneris cannot be applied to the present case, the
former being an action involving culpa-contractual, while the latter being one of culpa-aquiliana.
Such a declaration is erroneous. The subsidiary liability in Art. 103 should be distinguished from the
primary liability of employers, which is quasi-delictual in character as provided in Art. 2180 of the
New Civil Code. Under Art. 103, the liability emanated from a delict. On the other hand, the liability
under Art. 2180 is founded on culpa-aquiliana. The present case is neither an action for culpacontractual nor for culpa-aquiliana. This is basically an action to enforce the civil liability arising from
crime under Art. 100 of the Revised Penal Code. In no case can this be regarded as a civil action for

the primary liability of the employer under Art. 2180 of the New Civil Code, i.e., action for culpaaquiliana.
In order that an employer may be held subsidiarily liable for the employee's civil liability in the
criminal action, it should be shown (1) that the employer, etc. is engaged in any kind of industry, (2)
that the employee committed the offense in the discharge of his duties and (3) that he is insolvent
(Basa Marketing Corp. v. Bolinao, 117 SCRA 156). The subsidiary liability of the employer, however,
arises only after conviction of the employee in the criminal action. All these requisites present, the
employer becomes ipso facto subsidiarily liable upon the employee's conviction and upon proof of
the latter's insolvency. Needless to say, the case at bar satisfies all these requirements.
Furthermore, we are not convinced that the owner-operator has been deprived of his day in court,
because the case before us is not one wherein the operator is sued for a primary liability under the
Civil Code but one in which the subsidiary civil liability incident to and dependent upon his
employee's criminal negligence is sought to be enforced. Considering the subsidiary liability imposed
upon the employer by law, he is in substance and in effect a party to the criminal case. Ergo, the
employer's subsidiary liability may be determined and enforced in the criminal case as part of the
execution proceedings against the employee. This Court held in the earlier case of Pajarito v.
Seneris, supra, that "The proceeding for the enforcement of the subsidiary civil liability may be
considered as part of the proceeding for the execution of the judgment. A case in which an execution
has been issued is regarded as still pending so that all proceedings on the execution are
proceedings in the suit. There is no question that the court which rendered the judgment has a
general supervisory control over its process of execution, and this power carries with it the right to
determine every question of fact and law which may be involved in the execution."
The argument that the owner-operator cannot be held subsidiarily liable because the matter of
subsidiary liability was not raised on appeal and in like manner, the appellate court's decision made
no mention of such subsidiary liability is of no moment. As already discussed, the filing of a separate
complaint against the operator for recovery of subsidiary liability is not necessary since his liability is
clear from the decision against the accused. Such being the case, it is not indispensable for the
question of subsidiary liability to be passed upon by the appellate court. Such subsidiary liability is
already implied from the appellate court's decision. In the recent case of Vda. de Paman v. Seneris,
115 SCRA 709, this Court reiterated the following pronouncement: "A judgment of conviction
sentencing a defendant employer to pay an indemnity in the absence of any collusion between the
defendant and the offended party, is conclusive upon the employer in an action for the enforcement
of the latter's subsidiary liability not only with regard to the civil liability, but also with regard to its
amount." This being the case, this Court stated in Rotea v. Halili, 109 Phil. 495, "that the court has
no other function than to render decision based upon the indemnity awarded in the criminal case and
has no power to amend or modify it even if in its opinion an error has been committed in the
decision. A separate and independent action is, therefore, unnecessary and would only unduly
prolong the agony of the heirs of the victim."
Finally, the position taken by the respondent appellate court that to grant the motion for subsidiary
writ of execution would in effect be to amend its decision which has already become final and
executory cannot be sustained. Compelling the owner-operator to pay on the basis of his subsidiary
liability does not constitute an amendment of the judgment because in an action under Art. 103 of
the Revised Penal Code, once all the requisites as earlier discussed are met, the employer becomes
ipso facto subsidiarily liable, without need of a separate action. Such being the case, the subsidiary
liability can be enforced in the same case where the award was given, and this does not constitute
an act of amending the decision. It becomes incumbent upon the court to grant a motion for
subsidiary writ of execution (but only after the employer has been heard), upon conviction of the
employee and after execution is returned unsatisfied due to the employee's insolvency.

WHEREFORE, the order of respondent court disallowing the motion for subsidiary writ of execution
is hereby SET ASIDE. The Court a quo is directed to hear and decide in the same proceeding the
subsidiary liability of the alleged owner-operator of the passenger jitney. Costs against private
respondent.
SO ORDERED.
Padilla, Sarmiento and Regalado, JJ., concur.
Melencio-Herrera, J., is on leave.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-59621 February 23, 1988
MAXIMILIANO ALVAREZ, petitioner,
vs.
HON. COURT OF APPEALS, HON. MILAGROS V. CAGUIOA, as Presiding Judge of Branch VIII,
Court of First Instance of Quezon & Lucena City, Atty. ELENO M. JOYAS, as Provincial Sheriff
of Quezon, FRANCISCO T. FORTUNADO, Deputy Sheriff of Quezon and ATTY. FELICISIMO S.
GARIN, respondents.
PADILLA, J.:
Petition for review on certiorari of the Resolution * of the Court of Appeals dated 23 October 1980 in CA-G.R. No. SP10069, entitled "Maximiliano Alvarez, petitioner, versus Hon. Milagros V. Caguioa, etc. et al., respondents" setting aside its earlier decision of
16 May 1980,** and the Resolution dated 20 January 1982 denying petitioner's Motion for Reconsideration of the Resolution of 23 October
1980.

Renato Ramos was charged with Double Homicide with Multiple Serious Physical Injuries Through
Reckless Imprudence in the Court of First Instance of Quezon Province. After trial, the court
rendered judgment against the accused, the dispositive part of which reads as follows:
This Court, therefore, finds the accused Renato Ramos guilty of negligence and
sentences him to pay a fine of TWO HUNDRED (P200.00) PESOS, with subsidiary
imprisonment in case of insolvency. He is civilly liable for the death and physical
injuries that resulted from the collision of the sakbayan and the weapon's [sic] carrier.
He should indemnify the heirs of the deceased Rodolfo Briones the amount of
TWELVE THOUSAND (P12,000.00) PESOS, as actual damages; the heirs of the
deceased Juan Briones, the amount of TWELVE THOUSAND (Pl2,000.00) PESOS,
as actual damages; Socorro Briones, the amount of FIFTEEN THOUSAND (P

l5,000.00) PESOS, hospitalization and burial expenses; Exaltacion de Gala the


amount of THREE THOUSAND (P3,000.00) PESOS, hospitalization and incidental
expenses; Basilica de Gala the amount of THREE THOUSAND (P3,000.00) PESOS,
hospitalization and incidental expenses; to Joselito Leonor and Cenon Leonor, for
actual damages and for permanent facial deformity, the amount of FIFTEEN
THOUSAND (Pl5,000.00) PESOS and for attomey's fees, the amount of TWO
THOUSAND (P2,000.00) PESOS. . . .
The records show that Maximiliano Alvarez is engaged in his business of buying
coconuts and copra for re-sale, therefore, he is ' . . . engaged in any kind of industry .
. . .' He should, therefore, be subsidiarily liable and pay the amount above-mentioned
to the persons concerned jointly and severally with Renato Ramos The bail bond
filed by the accused Renato Ramos for his provisional liberty is hereby ordered
cancelled. 1
The accused appealed to the Court of Appeals, where the appeal was docketed as CA-G.R. No.
19077-CR. On 13 December 1977, the Court of appeals affirmed the trial court's decision but
deleted that part thereof making herein petitioner, as employer of Renato Ramos, subsidiarily liable
for payment of the adjudged indemnities to the offended parties. The Court of appeals, in said CAG.R. No. 19077-CR, reasoned thus:
There is merit in the appellant's contention that the trial court erred in ordering
Maximiliano Alvarez to be subsidiarily liable with the appellant in the payment of the
indemnities awarded in favor of the offended parties and the heirs of the deceased.
Maximiliano Alvarez is not a party in this action. Altho it is the law that employers are
subsidiarily liable for the civil liability of their employees for felonies committed in the
discharge of the latter's duties if they are engaged in any kind of industry (Art. 103,
Revised Penal Code), such subsidiary liability is not litigated in connection with the
criminal prosecution of the employees and may not therefore be adjudged therein
(Philippine Railways Company v. Jalandoni, CA, 40 O.G. 19). It is true that the
judgment of conviction in the criminal case binds the person subsidiarily liable with
the accused (Martinez v. Barredo, 81 Phil. 1), and it is therefore the duty of the
employer to participate in the defense of his employee (Miranda v. Malate Garage,
99 Phil. 670). The law, however, does not authorize that the subsidiary liability of the
employer be adjudged in the criminal action. This is because, in the criminal
proceeding, the employer, not being a party, is denied the opportunity to present his
defense against such subsidiary liability, such as, his not being engaged in any kind
of industry or that the crime committed by his employee was not on the occasion of
the discharge of the latter's duties. Due regard to due process and observance of
procedural requirements demand that a separate action should be filed against the
supposed employer to enforce the subsidiary liability under Article 103 of the Revised
Penal Code. 2
The appellate court's decision in CA-G.R. No. 19077-CR was not appealed. Meanwhile, on 14
December 1978,Pajarito v. Seneris 3 was decided by this Court, holding inter alia that-Considering that the judgment of conviction, sentencing a defendant employee to
pay an indemnity under Articles 102 and 103 of the Revised Penal Code, is
conclusive upon the employer not only with regard to the latter's civil liability but also
with regard to its amount, . . . in the action to enforce the employer's subsidiary
liability, the court has no other function than to render decision based upon the

indemnity awarded in the criminal case and has no power to amend or modify it even
if in its opinion an error has been committed in the decision.
In view of the foregoing principles, . . . it would serve no important purpose to require
petitioner to file a separate and independent action against the employer for the
enforcement of the latter's subsidiary civil liability. Under the circumstances, it would
not only prolong the litigation but would require the heirs of the d victim to incur
unnecessary expenses. At any rate, the proceeding for the enforcement of the
subsidiary civil liability may be considered as part of the proceeding for the execution
of the judgment. A case in which an execution has been issued is regarded as still
pending so that all proceedings on the execution are proceedings in the suit. There is
no question that the court which rendered the judgment has a general supervisory
control over its process of execution, and this power carries with it the right to
determine every question of fact and law which may be involved in the execution.
... Indeed, the enforcement of the employer's subsidiary civil liability may be
conveniently litigated within the same proceeding because the execution of the
judgment is a logical and integral part of the case itself. This would certainly facilitate
the application of justice to the rival claims of the contending parties. "The purpose of
procedure," observed this Court in Manila Railroad Co. v. Attorney General, is not to
thwart justice. Its proper aim is to facilitate the application of justice to the rival claims
of the contending parties. It was created not to hinder and delay but to facilitate and
promote the administration of justice.' In proceedings to apply justice, it is the duty of
the courts 'to assist the parties in obtaining just, speedy, and inexpensive
determination' of their rival claims. Thus, the Rules require that they should liberally
construed "to promote their object and to assist the parties in obtaining just, speedy,
and inexpensive determination of every action and proceedings." 4
After finality of the Court of appeal judgment in CA-G.R. No. 19077-CR, the case was remanded to
the trial court where, on 2 July 1979, the private prosecutor filed a "Motion for Issuance of Subsidiary
Writ of Execution" after the writ of execution against the accused was returned unsatisfied on 27
February 1979. 5 Petitioner opposed the Motion. However, on 14 November 1979, respondent Judge
ordered the issuance of the subsidiary writ of execution. A motion for reconsideration of this order was
denied in an order dated 26 November 1979.
Consequently, on 29 November 1979, petitioner filed a petition for certiorari with the Court of
appeals, questioning the acts of the respondent Judge and the Sheriff who had levied on his
properties pursuant to said subsidiary writ of execution. The petition was docketed as CA-G.R. No.
SP-10069.
On 16 May 1980, the Court of appeals granted the petition and declared the Orders of the
respondent Judge, dated 14 November 1979 and 26 November 1979, as well as the Subsidiary Writ
of Execution issued on 15 November 1979 null and void. It reasoned that, as its judgment in the
criminal case (CA-G.R. No. 19077-CR) was promulgated on 13 December 1977,
whereas, Pajarito was promulgated by the Supreme Court only on 14 December 1978, the final
judgment in the criminal case, which expressly declared that a separate action should be instituted
to enforce petitioner's subsidiary civil liability, had long become the "law of the case" 6 and, therefore,
prevails.
On 24 July 1980, respondents filed a Motion for Reconsideration. On 23 October 1980, the Motion
was granted and the decision of 16 May 1980 was set aside on the strength of the Pajarito decision.
said the Court of Appeals:

The doctrine of the "law of the case" is ordinarily a very wise rule of action, but it is
not a universal, inexorable command. For while the doctrine is generally deemed
applicable whether the former determination is right or wrong, (Wills vs. Lloyd, 21
Cal. 2d 452,132 p. 20 471, 474; In re Taylor's Estate, 110 Vt. 80, 2 A. 2d 317, 319;
Greenwood Country vs. Watkins, 196 S.C. 51, 12 S.E. 2d 545, 550), there are some
cases which hold that the doctrine is in applicable where [the] prior decision is
unsound (Standard Oil Co. of California vs. Johnson, 56 Cal. App. 2d 411, 132 P. 2d
910, 913; Atchison T.& S.F. Ry Co. vs. Ballard, C.C.A. Tax 108 F. 2d 768, 772); or
incorrect principles were announced or [al mistake of fact was made on first appeal.
(Nation of Match Co. vs. Empire Storage & Ice Co., 227 Mo Supp. 11 5, 58 S.W. 2d
997; Morris vs. E.I.Du Pont De Nemours & Com; 346 Mo. 126,139 S.W. 2d 984,986,
129 A.L.R. 352).
It is a peculiar virtue of our system of law that in the search for truth through the
process of inclusion and exclusion, it behooves us to correct the application of the
doctrine of "the law of the case" upon such questions which prove to have been
mistaken.
. . . [T]he Honorable Supreme Court in the case of Lucia Pajarito vs. Hon. Alberto V.
Seneris, et. al. (G.R. No. L-44627, December 14, 1978; 87 SCRA 275) has definitely
set the rule that;
. . . considering that Felipe Aizon does not deny that he was the
registered operator of the bus . . ., it would serve no important
purpose to require petitioner to file a separate and independent
action against the employer for the enforcement of the latter's
subsidiary civil liability . . . . At any rate, the proceeding for the
enforcement of the subsidiary civil liability may be considered as part
of the proceeding for the execution of the judgment. A case in which
an execution has been issued is regarded as still pending so that all
proceedings on the execution are proceedings in the suit."
xxx xxx xxx
xxx xxx xxx
xxx xxx xxx
Indeed, the enforcement of the employer's subsidiary civil liability
may be conveniently litigated within the same proceeding because
the execution of the judgment is a logical and integral part of the case
itself. (pp. 282, 283)
[W]hile We had, by our Decision in CA-G.R. No. 19077-CR, modified the decision of
the trial court when, among such modifications. We deleted the trial court's direction,
in the dispositive portion of said decision, that Maximiliano Alverez 'should, therefore,
be subsidiarily liable and pay the amount above-mentioned to the persons concerned
jointly and severally with Renato Ramos,' and all other references of the trial court of
Articles 102 and 103 of the Revised Penal Code, yet such modification does not
reduce the effectiveness nor prevent the application of the ruling laid down in the
case ofLucia S. Pajarito vs. Hon. Alberto V. Seneris et. al. Indeed, it was not
necessary at all for the trial court to have pronounced, in the dispositive portion of its

decision, on the subsidiary liability of the employer, Maximiliano Alvarez, because the
provisions of the Revised Penal Code on subsidiary liability (Articles 102 and 103)
are deemed written in the judgment in the respective cases in which they are
applicable. In a word, such a pronouncement and a direction of such subsidiary
liability is a surplausage although We should not, in the least, begrudge the trial court
in having done so. It was, perhaps, to him, an attempt to be emphatic, or if not, a
matter of legal taste than an answer to a legal requirement. In other words, even if
the pronouncement and direction of the subsidiary liability of the employer were not
written in the dispositive portion of the decision, or any part of the decision for that
matter, just the same the trial court, upon the finality of its decision, can order the
employer, on its subsidiary liability, to answer for the civil liability of the convicted
employee, if the latter is shown to be unable to satisfy his civil liability because of his
insolvency.
To underscore, Our deletion from Our decision in CA-G.R. No. 19077-CR, therefore,
of the trial court's pronouncement and directions on the subsidiary liability of
Maximiliano Alverez would have not prevented the respondent court from issuing the
writ of subsidiary execution and all other matters now under question.
On the issue of the deprivation of the employer of due process, unless he is allowed
his day in court in the enforcement of his subsidiary liability in a separate civil action,
the Honorable Supreme Court, citing relevant holdings in previous cases said:
The employer cannot be said to have been deprived of his day in
court, because the situation before us is not one wherein the
employer is sued for a primary liability under articles 1903 of the Civil
Code, but one in which enforcement is sought of a subsidiary civil
liability incident to and dependent upon his driver's criminal
negligence which is a proper issue to be tried and decided only in a
criminal action. In other words, the employer becomes ipso
facto subsidiarily liable upon his driver's conviction and upon proof of
the latter's insolvency, in the same way that acquittal wipes out not
only the employee's primary civil liability but also his employer's
subsidiary liability for such criminal negligence. (Almeda et al. vs.
Albaroa, 8 Phil. 178, affirmed in 218 U.S. 476, 54 Law ed., 116; Wise
& Co. vs. Larion 45 Phil. 314, 320; Francisco vs. Onrubia, 46 Phil.
327; Province of Ilocos Sur vs. Tolentino, G.R. No. 34186,56 Phil.
829; Moran, Comments on the Rules of Court, Vol. II, p. 403)
(Martinez vs. Barredo, 81 Phil. 1).
Then, the Supreme Court went on to say:
In Miranda vs. Malate Garage & Taxicab Inc. this Court father
amplified the rule that the decision convicting the employee is binding
and conclusive upon the employer, "not only with regard to (the
latter's) civil liability but also with regard to its amount because the
liability of an employer can not be separated but following that of his
employee ... And this Court, in Miranda further explained that the
employer is in substance and in effect a party to the criminal case,
considering the subsidiary liability imposed upon him by law.

It is true that an employer, exactly speaking, is not a party to the


criminal case instituted against his employee, but, in substance and
in effect he is [,] considering the subsidiary liability imposed upon him
by law. It is his concern. as well as of his employee, to see to it that
his interest be protected in the criminal case by taking virtual
participation in the defense of his employee. He cannot leave him to
his own fate because his failure is also his. And if because of his
indifference or inaction the employee is convicted and damages are
awarded against him, he cannot later be heard to complain, if brought
to court, for the enforcement of his subsidiary liability, that he was not
given his day in court.
This is the rule that governs the case at bar. It does not matter now that Our decision
in CA-G.R. No. 19077-CR was promulgated on December 13, 1977 while the case of
Pajarito vs. Seneris was promulgated later on on [sic] December 14, 1978. This fact
alone would not prevent the application of the Pajarito vs. Seneris ruling to the
execution of the case at bar, because, firstly, the Seneris case is merely a reiteration
and perhaps an amplification of the previous rulings in the Miranda and the Martinez
cases adopted much earlier than the rendition of the trial court's decision, subject of
the appeal in CA G.R. No. 19077-CR; and secondly, because, for all purposes of the
execution of Our decision in CA-G.R. No. 19077-CR, the said case is still pending
and there is no legal impediment to the application, even retroactively if private
respondents think it that way, of the Seneris ruling to the execution of Our decision.
We hold, therefore, that the respondent Court has not committed any grave abuse of
discretion in the issuance of the questioned orders for such issuance has been made
in pursuance of law and jurisprudence.
WHEREFORE, We set aside Our decision promulgated on May 16,1980, and enter
another dismissing the instant petition for lack of merit. With costs against petitioner. 7
Petitioner filed a motion for reconsideration of the above Resolution. He pointed out that the 16 May
1980 decision of the Court of Appeals had already become final and executory when respondents,
through counsel, filed their Motion for Reconsideration, hence, the Court of appeals no longer had
jurisdiction to reverse itself. He argued that the 16 May 1980 decision was already the "law of the
case' as far as petitioner's subsidiary liability is concerned, notwithstanding Pajarito.
Petitioner also cited the "bad faith" of respondents' counsel in deliberately instructing his clerks not to
receive the 16 May 1980 decision on the day of its service on 22 May 1980, while he was still in the
United States, with the consequent finality of the decision thirty (30) days from the day it should have
been received by respondents' counsel. Respondents could not, according to petitioner, have
belatedly asked for reconsideration on 24 July 1980. 8 He further pointed to the none-existence of
the Pajarito doctrine on 13 December 1977, the day judgment of conviction against the accused
employee Renato Ramos was affirmed by the Court of Appeals, excluding the trial court's order finding
petitioner-employer subsidiarily liable in case Ramos was found insolvent.
The Court of Appeals denied petitioner's motion for reconsideration in its Resolution dated 20
January 1982.
Hence, petitioner's present recourse to this Court. The petition is not impressed with merit.

While counsel for respondents could have been more efficient and even scrupulous in the receipt of
the adverted to decision of 16 May 1980, his censurable act cannot be made the basis for a strict
and rigorously technical interpretation of procedural rules on grounds which do not touch on the
merits of the criminal case but win only needlessly prolong its course and unjustly delay relief to the
victims of petitioner-employer's criminally negligent driver.
It is already a settled rule that the subsidiary liability of an employer automatically arises upon his
employee's conviction, and subsequent proof of inability to pay. In this light, the application
of Pajarito is merely the enforcement of a procedural remedy designed to ease the burden of
litigation for recovery of indemnity by the victims of a judicially-declared criminally negligent act.
As has been aptly stated,
A separate civil action may be warranted where additional facts have to be
established or more evidence must be adduced or where the criminal case has been
fully terminated and a separate complaint would be just as efficacious or even more
expedient than a timely remand to the trial court where the criminal action was
decided for further hearings on the civil aspects of the case.... These do not exist in
this case. Considering moreover the delays suffered by the case in the trial,
appellate, and review stages, it would be unjust to the complainants in this case to
require at this time a separate civil action to be filed. 9 (Emphasis supplied)
Moreover, the principle of "law of the case" as discussed in People vs. Pinuila 10 is not applicable to a
Court of Appeals decision at odds with this Court's decision, and where the Supreme Court still has the
power to decide on the applicable doctrine to the issue at hand. The rule cannot be utilized to accomplish
injustice or manifest delay in the execution of justice. The principle is merely a rule of convenience and
public policy to stabilize judicial decisions of tribunals of coordinate jurisdiction, to prevent re-litigation of
questions in the same action, and to obviate undue prolongation of litigation, purposes which would be
negated if Pajarito were not to be applied in this case simply because of purely technical reasons not
touching on the merits of the case.
One last word: there is sufficient evidence to hold that counsel for respondents, Felicisimo S. Garin,
deliberately skirted the first service on him of the Court of Appeals judgment of 16 May 1980. He
wanted it served on him at his own convenience. We note his action with great disapproval. As an
officer of the court, he must conduct himself with candor and sincerity. He is warned that any
repetition of this or similar misconduct will be dealt with severely.
WHEREFORE, the petition is hereby DENIED. The Resolutions of the Court of Appeals, dated 23
October 1980 and 20 January 1982, are AFFIRMED Costs against the petitioner.
SO ORDERED.
Yap (Chairman), Melencio-Herrera, Paras and Sarmiento, JJ., concur.
Footnotes
* Penned by Justice Elias B. Asuncion with the concurrence of Justice Guillermo P.
Villasor and concurrence in the result of Justice Oscar R. Victorians.
** In CA-G.R. No. 10069-SP, penned by Justice Corazon Juliano Agrava, with the
concurrence of Justices Guillermo P. Villasor and Elias B. Asuncion.

1 Rollo at 61.
2 Rollo at 74-75.
3 G.R. No. L-44627, December 14,1978,87 SCRA 275.
4 Id at 282-283.
5 Rollo at 77.
6 Rollo at 171-172.
7 Rollo at 190-194.
8 REVISED RULES OF COURT, Sec. 3, Rule 41, now Sec. 39 BP Blg. No. 129,
otherwise known as the Judiciary Act of 1981, which has reduced the period within
which appeal may be taken to fifteen (15) days, except in habeas corpus cases.
9 Padilla vs. CA, 129 SCRA 559, 570 (1984).
10 103 Phil. 992 (1958). "'Law of the case' has been defined as the opinion delivered
on a former appeal. More specifically, it means that whatever is once irrevocably
established as the controlling legal rule of decision between the same parties in the
same case continues to be the law of the case,whether correct on general principles
or not, so long as the facts on which such decision was predicated continue to be the
facts of the case before the court,' et seq. (Id. at 999).
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-9010

March 28, 1914

J. H. CHAPMAN, plaintiff-appellant,
vs.
JAMES M. UNDERWOOD, defendant-appellee.
Wolfson & Wolfson for appellant.
Bruce, Lawrence, Ross & Block for appellee.
MORELAND, J.:

At the time the accident occurred, which is the basis of this action, there was a single-track street-car
line running along Calle Herran, with occasional switches to allow cars to meet and pass each other.
One of these switches was located at the scene of the accident.
The plaintiff had been visiting his friend, a man by the name of Creveling, in front of whose house
the accident happened. He desired to board a certain "San Marcelino" car coming from Santa Ana
and bound for Manila. Being told by Creveling that the car was approaching, he immediately, and
somewhat hurriedly, passed from the gate into the street for the purpose of signaling and boarding
the car. The car was a closed one, the entrance being from the front or the rear flatform. Plaintiff
attempted to board the front platform but, seeing that he could not reached it without extra exertion,
stopped beside the car, facing toward the rear platform, and waited for it to come abreast of him in
order to board. While in this position he was struck from behind and run over by the defendant's
automobile.
The defendant entered Calle Herran at Calle Peafrancia in his automobile driven by his chauffeur, a
competent driver. A street car bound from Manila to Santa Ana being immediately in front of him, he
followed along behind it. Just before reaching the scene of the accident the street car which was
following took the switch that is, went off the main line to the left upon the switch lying alongside
of the main track. Thereupon the defendant no longer followed that the street car nor went to the left,
but either kept straight ahead on the main street-car track or a bit to the right. The car which the
plaintiff intended to board was on the main line and bound in an opposite direction to that in which
the defendant was going. When the front of the "San Marcelino" car, the one the plaintiff attempted
to board, was almost in front of the defendant's automobile, defendant's driver suddenly went to the
right and struck and ran over the plaintiff, as above described.
The judgment of the trial court was for defendant.
A careful examination of the record leads us to the conclusion that the defendant's driver was guilty
of negligence in running upon and over the plaintiff. He was passing an oncoming car upon the
wrong side. The plaintiff, in common out to board the car, was not obliged, for his own protection, to
observe whether a car was coming upon him from his left hand. He had only to guard against those
coming from the right. He knew that, according to the law of the road, no automobile or other vehicle
coming from his left should pass upon his side of the car. He needed only to watch for cars coming
from his right, as they were the only ones under the law permitted to pass upon that side of the
street car.
The defendant, however, is not responsible for the negligence of his driver, under the facts and
circumstances of this case. As we have said in the case of Johnson vs. David (5 Phil. Rep., 663), the
driver does not fall within the list of persons in article 1903 of the Civil Code for whose acts the
defendant would be responsible.
Although in the David case the owner of the vehicle was not present at the time the alleged negligent
acts were committed by the driver, the same rule applies where the owner is present, unless the
negligent act of the driver are continued for such a length of time as to give the owner a reasonable
opportunity to observe them and to direct his driver to desist therefrom. An owner who sits in his
automobile, or other vehicle, and permits his driver to continue in a violation of the law by the
performance of negligent acts, after he has had a reasonable opportunity to observe them and to
direct that the driver cease therefrom, becomes himself responsible for such acts. The owner of an
automobile who permits his chauffeur to drive up to Escolta, for example, at a speed of 60 miles an
hour, without any effort to stop him, although he has had a reasonable opportunity to do so,
becomes himself responsible, both criminally and civilly, for the results produced by the acts of his
chauffeur. On the other hand, if the driver, by a sudden act of negligence, and without the owner

having a reasonable opportunity to prevent the acts or its continuance, injures a person or violates
the criminal law, the owner of the automobile, although present therein at the time the act was
committed, is not responsible, either civilly or criminally, therefor. The act complained of must be
continued in the presence of the owner for such a length a time that the owner, by his acquiescence,
makes his driver's act his own.
In the case before us it does not appear from the record that, from the time the automobile took the
wrong side of the road to the commission of the injury, sufficient time intervened to give the
defendant an opportunity to correct the act of his driver. Instead, it appears with fair clearness that
the interval between the turning out to meet and pass the street car and the happening of the
accident was so small as not to be sufficient to charge defendant with the negligence of the driver.
Whether or not the owner of an automobile driven by a competent driver, would be responsible,
whether present or not, for the negligent acts of his driver when the automobile was a part of a
business enterprise, and was being driven at the time of the accident in furtherance of the owner's
business, we do not now decide.
The judgment appealed from is affirmed, with costs against the appellant.
Arellano, C.J., Carson and Araullo, JJ., concur.
Trent, J., concurs in the result.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 82318 May 18, 1989
GILBERTO M. DUAVIT, petitioner,
vs.
THE HON. COURT OF APPEALS, Acting through the Third Division, as Public Respondent,
and ANTONIO SARMIENTO, SR. & VIRGILIO CATUAR respondents.
Rodolfo d. Dela Cruz for petitioner.
Bito, Lozada, Ortega & Castillo for respondents.

GUTIERREZ, JR., J.:

This petition raises the sole issue of whether or not the owner of a private vehicle which figured in an
accident can be held liable under Article 2180 of the Civil Code when the said vehicle was neither
driven by an employee of the owner nor taken with the consent of the latter.
The facts are summarized in the contested decision, as follows:
From the evidence adduced by the plaintiffs, consisting of the testimonies of
witnesses Virgilio Catuar, Antonio Sarmiento, Jr., Ruperto Catuar, Jr. and Norberto
Bernarte it appears that on July 28, 1971 plaintiffs Antonio Sarmiento, Sr. and Virgilio
Catuar were aboard a jeep with plate number 77-99-F-I Manila, 1971, owned by
plaintiff, Ruperto Catuar was driving the said jeep on Ortigas Avenue, San Juan,
Rizal; that plaintiff's jeep, at the time, was running moderately at 20 to 35 kilometers
per hour and while approaching Roosevelt Avenue, Virgilio Catuar slowed down; that
suddenly, another jeep with plate number 99-97-F-J Manila 1971 driven by defendant
Oscar Sabiniano hit and bumped plaintiff's jeep on the portion near the left rear
wheel, and as a result of the impact plaintiff's jeep fell on its right and skidded by
about 30 yards; that as a result plaintiffs jeep was damaged, particularly the
windshield, the differential, the part near the left rear wheel and the top cover of the
jeep; that plaintiff Virgilio Catuar was thrown to the middle of the road; his wrist was
broken and he sustained contusions on the head; that likewise plaintiff Antonio
Sarmiento, Sr. was trapped inside the fallen jeep, and one of his legs was fractured.
Evidence also shows that the plaintiff Virgilio Catuar spent a total of P2,464.00 for
repairs of the jeep, as shown by the receipts of payment of labor and spare parts
(Exhs. H to H-7 Plaintiffs likewise tried to prove that plaintiff Virgilio Catuar,
immediately after the accident was taken to Immaculate Concepcion Hospital, and
then was transferred to the National Orthopedic Hospital; that while plaintiff Catuar
was not confined in the hospital, his wrist was in a plaster cast for a period of one
month, and the contusions on his head were under treatment for about two (2)
weeks; that for hospitalization, medicine and allied expenses, plaintiff Catuar spent
P5,000.00.
Evidence also shows that as a result of the incident, plaintiff Antonio Sarmiento, Sr.
sustained injuries on his leg; that at first, he was taken to the National Orthopedic
Hospital (Exh. K but later he was confined at the Makati Medical Center from July 29,
to August 29, 1971 and then from September 15 to 25, 1971; that his leg was in a
plaster cast for a period of eight (8) months; and that for hospitalization and medical
attendance, plaintiff Antonio Sarmiento, Sr. spent no less than P13,785.25 as
evidenced by receipts in his possession. (Exhs. N to N-1).
Proofs were adduced also to show that plaintiff Antonio sarmiento Sr. is employed as
Assistant Accountant of the Canlubang Sugar Estate with a salary of P1,200.00 a
month; that as sideline he also works as accountant of United Haulers Inc. with a
salary of P500.00 a month; and that as a result of this incident, plaintiff Sarmiento
was unable to perform his normal work for a period of at least 8 months. On the other
hand, evidence shows that the other plaintiff Virgilio Catuar is a Chief Clerk in
Canlubang Sugar Estate with a salary of P500.00 a month, and as a result of the
incident, he was incapacitated to work for a period of one (1) month.
The plaintiffs have filed this case both against Oscar Sabiniano as driver, and against
Gualberto Duavit as owner of the jeep.

Defendant Gualberto Duavit, while admitting ownership of the other jeep (Plate No.
99-07-F-J Manila, 1971), denied that the other defendant (Oscar Sabiniano) was his
employee. Duavit claimed that he has not been an employer of defendant Oscar
Sabiniano at any time up to the present.
On the other hand documentary and testimonial evidence show that defendant Oscar
Sabiniano was an employee of the Board of Liquidators from November 14, 1966 up
to January 4, 1973 (Annex A of Answer).
Defendant Sabiniano, in his testimony, categorically admitted that he took the jeep
from the garage of defendant Duavit without the consent or authority of the latter
(TSN, September 7, 1978, p. 8). He testified further, that Duavit even filed charges
against him for theft of the jeep, but which Duavit did not push through as his
(Sabiniano's) parents apologized to Duavit on his behalf.
Defendant Oscar Sabiniano, on the other hand in an attempt to exculpate himself
from liability, makes it appear that he was taking all necessary precaution while
driving and the accident occurred due to the negligence of Virgilio Catuar. Sabiniano
claims that it was plaintiffs vehicle which hit and bumped their jeep. (Reno, pp. 2123)
The trial court found Oscar Sabiniano negligent in driving the vehicle but found no employeremployee relationship between him and the petitioner because the latter was then a government
employee and he took the vehicle without the authority and consent of the owner. The petitioner
was, thus, absolved from liability under Article 2180 of the Civil Code.
The private respondents appealed the case.
On January 7, 1988, the Court of Appeals rendered the questioned decision holding the petitioner
jointly and severally liable with Sabiniano. The appellate court in part ruled:
We cannot go along with appellee's argument. It will be seen that in Vargas v.
Langcay, supra, it was held that it is immaterial whether or not the driver was actually
employed by the operator of record or registered owner, and it is even not necessary
to prove who the actual owner of the vehicle and who the employer of the driver is.
When the Supreme Court ruled, thus: 'We must hold and consider such owneroperator of record (registered owner) as the employer in contemplation of law, of the
driver,' it cannot be construed other than that the registered owner is the employer of
the driver in contemplation of law. It is a conclusive presumption of fact and law, and
is not subject to rebuttal of proof to the contrary. Otherwise, as stated in the decision,
we quote:
The purpose of the principles evolved by the decisions in these matters will be
defeated and thwarted if we entertain the argument of petitioner that she is not liable
because the actual owner and employer was established by the evidence. . . .
Along the same vein, the defendant-appellee Gualberto Duavit cannot be allowed to prove that the
driver Sabiniano was not his employee at the time of the vehicular accident.
The ruling laid down in Amar V. Soberano (1966), 63 O.G. 6850, by this Court to the
effect that the burden of proving the non-existence of an employer-employee

relationship is upon the defendant and this he must do by a satisfactory


preponderance of evidence, has to defer to the doctrines evolved by the Supreme
Court in cases of damages arising from vehicular mishaps involving registered motor
vehicle. (See Tugade v. Court of Appeals, 85 SCRA 226, 230). (Rollo, pp. 26-27)
The appellate court also denied the petitioner's motion for reconsideration. Hence, this petition.
The petitioner contends that the respondent appellate court committed grave abuse of discretion in
holding him jointly and severally liable with Sabiniano in spite of the absence of an employeremployee relationship between them and despite the fact that the petitioner's jeep was taken out of
his garage and was driven by Sabiniano without his consent.
As early as in 1939, we have ruled that an owner of a vehicle cannot be held liable for an accident
involving the said vehicle if the same was driven without his consent or knowledge and by a person
not employed by him. Thus, in Duquillo v. Bayot (67 Phil. 131-133-134) [1939] we said:
Under the facts established, the defendant cannot be held liable for anything. At the
time of the accident, James McGurk was driving the truck, and he was not an
employee of the defendant, nor did he have anything to do with the latter's business;
neither the defendant nor Father Ayson, who was in charge of her business,
consented to have any of her trucks driven on the day of the accident, as it was a
holy day, and much less by a chauffeur who was not in charge of driving it; the use of
the defendant's truck in the circumstances indicated was done without her consent or
knowledge; it may, therefore, be said, that there was not the remotest contractual
relation between the deceased Pio Duquillo and the defendant. It necessarily follows
from all this that articles 1101 and following of the Civil Code, cited by the appellant,
have no application in this case, and, therefore, the errors attributed to the inferior
court are without basis.
The Court upholds the above ruling as still relevant and better applicable to present day
circumstances.
The respondent court's misplaced reliance on the cases of Erezo v. Jepte (102 Phil. 103 [1957]
and Vargas v. Langcay (6 SCRA 174 [1962]) cannot be sustained. In the Erezo case, Jepte, the
registered owner of the truck which collided with a taxicab, and which resulted in the killing of Erezo,
claimed that at the time of the accident, the truck belonged to the Port Brokerage in an arrangement
with the corporation but the same was not known to the Motor Vehicles Office. This Court sustained
the trial court's ruling that since Jepte represented himself to be the owner of the truck and the Motor
Vehicles Office, relying on his representation, registered the vehicle in his name, the Government
and all persons affected by the representation had the right to rely on his declaration of ownership
and registration. Thus, even if Jepte were not the owner of the truck at the time of the accident, he
was still held liable for the death of Erezo significantly, the driver of the truck was fully authorized to
drive it.
Likewise, in the Vargas case, just before the accident occurred Vargas had sold her jeepney to a
third person, so that at the time of the accident she was no longer the owner of the jeepney. This
court, nevertheless, affirmed Vargas' liability since she failed to surrender to the Motor Vehicles
Office the corresponding AC plates in violation of the Revised Motor Vehicle Law and
Commonwealth Act No. 146. We further ruled 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 operator. The vehicle involved was a public utility
jeepney for hire. In such cases, the law does not only require the surrender of the AC plates but

orders the vendor operator to stop the operation of the jeepney as a form of public transportation
until the matter is reported to the authorities.
As can be seen, the circumstances of the above cases are entirely different from those in the
present case. Herein petitioner does not deny ownership of the vehicle involved in tire mishap but
completely denies having employed the driver Sabiniano or even having authorized the latter to drive
his jeep. The jeep was virtually stolen from the petitioner's garage. To hold, therefore, the petitioner
liable for the accident caused by the negligence of Sabiniano who was neither his driver nor
employee would be absurd as it would be like holding liable the owner of a stolen vehicle for an
accident caused by the person who stole such vehicle. In this regard, we cannot ignore the many
cases of vehicles forcibly taken from their owners at gunpoint or stolen from garages and parking
areas and the instances of service station attendants or mechanics of auto repair shops using,
without the owner's consent, vehicles entrusted to them for servicing or repair.
We cannot blindly apply absolute rules based on precedents whose facts do not jibe four square with
pending cases. Every case must be determined on its own peculiar factual circumstances. Where,
as in this case, the records of the petition fail to indicate the slightest indicia of an employeremployee relationship between the owner and the erring driver or any consent given by the owner
for the vehicle's use, we cannot hold the owner liable.
We, therefore, find that the respondent appellate court committed reversible error in holding the
petitioner jointly and severally liable with Sabiniano to the private respondent.
WHEREFORE, the petition is GRANTED and the decision and resolution appealed from are hereby
ANNULLED and SET ASIDE. The decision of the then Court of First Instance (now Regional Trial
Court) of Laguna, 8th Judicial District, Branch 6, dated July 30, 1981 is REINSTATED.
SO ORDERED.
Fernan, C.J., (Chairman), Feliciano, Bidin and Cortes JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-55963 December 1, 1989
SPOUSES JOSE FONTANILLA AND VIRGINIA FONTANILLA, petitioners,
vs.
HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION
ADMINISTRATION, respondents.

G.R. No. L-61045 December 1, 1989


NATIONAL IRRIGATION ADMINISTRATION, appellant,
vs.
SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees.
Cecilio V. Suarez, Jr. for Spouses Fontanilla.
Felicisimo C. Villaflor for NIA.

PARAS, J.:
In G.R. No. L-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 petitioner's 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 pickup 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 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.
The within petition is thus an off-shot of the action (Civil Case No. SJC-56) instituted by petitionersspouses 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 here 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 attorney's 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:
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 the deceased. Should moral
damages be granted, the award should be made to each of petitionersspouses 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.
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 attorney's 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
attorney's 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:
1. The filing of the instant petition is rot 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 respondent's 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
respondent's 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 PlaintiffAppellee's 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 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 attorney's fees can very well be answered with the application of Arts. 2176
and 2180 of theNew Civil Code.
Art. 2176 thus provides:
Whoever by act omission causes damage to another, there being fault or negligence,
is obliged to pay for damage done. Such fault or negligence, if there is no preexisting cotractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter
Paragraphs 5 and 6 of Art. 21 80 read as follows:
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even the though the former
are not engaged in any business or industry.

The State is responsible in like manner when it acts through a special agent.; but not
when the damage has been caused by the official to whom the task done properly
pertains, in which case what is provided in Art. 2176 shall be applicable.
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.
Under the aforequoted paragrah 6 of Art. 2180, the State has voluntarily assumed liability for acts
done through special agents. The State's 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 official's usual
governmental functions. If the State's agent is not a public official, and is commissioned to perform
non-governmental functions, then the State assumes the role of an ordinary employer and will be
held liable as such for its agent's 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.)
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.
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:
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 shall have representatives in all
provinces for the proper conduct of its business.
Section 2 of said law spells out some of the NIA's proprietary functions. ThusSec. 2. Powers and objectives.-The NIA shall have the following powers and
objectives:
(a) x x x x x x x x x x x x x x x x x x
(b) x x x x x x x x x x x x x x x x x x
(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
(d) To do all such other tthings and to transact all such business as are directly or
indirectly necessary, incidental or conducive to the attainment of the above
objectives.
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.
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.
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.
It will be noted from the assailed decision of the trial court that "as a result of the impact, Francisco
Fontanilla wasthrown to a distance 50 meters away from the point of impact while Restituto Deligo
was thrown a little bit further away. The impact took place almost at the edge of the cemented
portion of the road." (Emphasis supplied,) [page 26, Rollo]
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 reckelessness on the part of both the driver and the supervisor in the group.
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
vs. Manila Railroad Co., 44 Phil. 597).

Thus, too, in the case of Vda. de Bonifacio vs. 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 aforenamed deceased; P30,000.00 as moral damages; P8,000.00 as exemplary
damages and attorney's fees of 20% of the total award.
SO ORDERED.
Padilla, Sarmiento and Regalado, JJ., concur.
Melencio- Herrera (Chairperson,), J., is on leave.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. Nos. L-55963 & 61045

February 27, 1991

SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, petitioners,


vs.
HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION
ADMINISTRATION, respondents.

NATIONAL IRRIGATION ADMINISTRATION, appellant,


vs.
SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees.
RESOLUTION

PARAS, J.:
In its Motion for Reconsideration of the Court's Second Division decision in G.R. No. 55963 and
G.R. No. 61045, the National Irrigation Administration (NIA, for brevity), through the Solicitor
General, maintains that, on the strength of Presidential Decree No. 552 (which amended certain
1

provisions of Republic Act 3601, the law creating the NIA) and the case of Angat River Irrigation
System, et al. vs. Angat River Workers' Union, et al., 102 Phil. 790 "the NIA does not perform solely
and primarily proprietary functions but is an agency of the government tasked with governmental
functions, and is therefore not liable for the tortious act of its driver Hugo Garcia, who was not its
special agent."
Although the majority opinion in the cited case of Angat System declares that the Angat
System (like the NIA) exercised a governmental function because the nature of the powers
and functions of said agency does not show that it was intended to "bring to the Government
any special corporate benefit or pecuniary profit," there is a strong dissenting opinion penned
by then Associate Justice and later Chief Justice Roberto Concepcion and concurred in by
then Associate Justice J.B.L. Reyes which held the contrary view that the Angat River
System is a government entity exercising proprietary functions. To buttress said stand, the
former Chief Justice cited some authorities which will be useful in the proper resolution of
this case.
Quoting from said dissenting opinion which cited McQuillin's The Law of Municipal Corporations, 3rd
ed., Vol. 18, pp. 423424:
In undertaking to supply water at price, municipality is not performing governmental function
but is engaged in trade, and is liable first as private company would be for any negligence in
laying out of its pipes, in keeping them in repair, or in furnishing potable water through them.
Harvard Furniture Co., Inc. vs. City of Cambridge, 320 Mass. 227, 68 N.E. (2d) 684.
Municipality in contracting to provide water supply acts under its proprietary power and not
under its legislative, public or governmental powers. Farmers' State Bank vs. Conrad, 100
Mont. 415,47 P. (2d) 853.
In this connection, the opinion is that irrigation districts in the United States are basically identical to
our irrigation systems under Act No. 2152. Because of such similarity, it is found appropriate to
consider certain doctrines from American jurisprudence, which are as follows, to wit:
An irrigation district is a public quasi corporation, organized, however, to conduct a business
for the private benefit of the owners of land within its limits. They are members of the
corporation, control its affairs, and alone are benefited by its operations. It is, in the
administration of its business, the owner of its system in a proprietary rather than a public
capacity, and must assume and bear the burdens of proprietary ownership. (Nampa vs.
Nampa & M. Irrig. Dist. 19 Idaho, 779,115 Pac. 979)
. . . the plaintiff sought damages for injuries to crops on his land during 1923, 1924, 1925,
and 1926, caused by water seeping, percolating, and escaping from the defendant's canal.
The defendant contended that irrigation districts were agencies of the state, and were,
therefore, not liable for the negligent construction or operation of their canals or ditches. The
court, after a careful review of the authorities defining an irrigation district, conceded that
such a quasi public corporation possessed some governmental powers and exercised some
governmental functions, but held that the construction and operation of its irrigation canals
and ditches was a proprietary rather than a governmental function, and hence the district
was responsible in damages for the negligent construction or operation of its canal system.
(69 A.L.R., p. 1233)
It may not be amiss to state at this point that the functions of government have been classified into
governmental or constituent and proprietary or ministrant. The former involves the exercise of

sovereignty and considered as compulsory; the latter connotes merely the exercise of proprietary
functions and thus considered as optional. The Solicitor General argues that the reasons presented
by P.D. 552 for the existence of the NIA (the WHEREAS clauses of said decree) indubitably reveal
that the responsibility vested in said agency concerns public welfare and public benefit, and is
therefore an exercise of sovereignty. On the contrary, We agree with the former Chief Justice
Concepcion in saying that the same purpose such as public benefit and public welfare may be found
in the operation of certain enterprises (those engaged in the supply of electric power, or in supplying
telegraphic, telephonic, and radio communication, or in the production and distribution of prime
necessities, etc.) yet it is certain that the functions performed by such enterprises are basically
proprietary in nature. Thus, as held in Holderbaum vs. Hidalgo County Water Improvement District
(297 S.W. 865, aff'd in 11 S.W. [2d] 506) cited in the dissenting opinion by Justice Concepcion:
. . . Primarily, a water improvement district is in no better position than a city is when
exercising its purely local powers and duties. Its general purposes are not essentially public
in their nature, but are only incidentally so; those purposes may be likened to those of a city
which is operating a waterworks system, or an irrigation system. . . . A water improvement
district can do nothing, it has and furnishes no facilities, for the administration of the
sovereign government. Its officers have no power or authority to exercise any of the
functions of the general government, or to enforce any of the laws of the state or any of its
other subdivisions, or collect taxes other than those assessed by the district. They have no
more power or authority than that of the officers of a private corporation organized for like
purposes. As a practical matter, the primary objects and purposes of such district are of a
purely local nature, for the district is created and operated for the sole benefit of its own
members, and an analysis of those objects and purposes discloses that they directly benefit
only the landowners who reside within and whose lands form a part of the district, to the
exclusion of all other residents therein. It is true, of course, that the state and the general
public are greatly benefited by the proper operation of the district, and to that extent its
objects and accomplishments are public in their nature, but this characteristic is only
incidental to the primary and chief object of the corporation, which is the irrigation of lands
forming a part of the district. It is obvious, then, that the purposes and duties of such districts
do not come within the definition of public rights, purposes, and duties which would entitle
the district to the exemption raised by the common law as a protection to corporations having
a purely public purpose and performing essentially public duties.
Of equal importance is the case of National Waterworks and Sewerage Authority (NAWASA) vs.
NWSA Consolidated Unions, 11 SCRA 766, which propounds the thesis that "the NAWASA is not an
agency performing governmental functions; rather it performs proprietary functions . . . ." The
functions of providing water supply and sewerage service are regarded as mere optional functions of
government even though the service rendered caters to the community as a whole and the goal is
for the general interest of society. The business of furnishing water supply and sewerage service, as
held in the case of Metropolitan Water District vs. Court of Industrial Relations, et al., 91 Phil. 840,
"may for all practical purposes be likened to an industry engaged in by coal companies, gas
companies, power plants, ice plants, and the like." Withal, it has been enunciated that "although the
State may regulate the service and rates of water plants owned and operated by municipalities, such
property is not employed for governmental purposes and in the ownership and operation thereof the
municipality acts in its proprietary capacity, free from legislative interference." (1 McQuillin, p. 683)
Like the NAWASA, the National Irrigation Administration was not created for purposes of local
government. While it may be true that the NIA was essentially a service agency of the government
aimed at promoting public interest and public welfare, such fact does not make the NIA essentially
and purely a "government-function" corporation. NIA was created for the purpose of "constructing,
improving, rehabilitating, and administering all national irrigation systems in the Philippines, including
all communal and pump irrigation projects." Certainly, the state and the community as a whole are

largely benefited by the services the agency renders, but these functions are only incidental to the
principal aim of the agency, which is the irrigation of lands.
We must not lose sight of the fact that the NIA is a government agency invested with a corporate
personality separate and distinct from the government, thus is governed by the Corporation Law.
Section 1 of Republic Act No. 3601 provides:
Sec. 1. Name and Domicile A body corporate is hereby created which shall be known as
the National Irrigation Administration. . . . 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 shall
have representatives in all provinces, for the proper conduct of its business. (Emphasis for
emphasis).
Besides, Section 2, subsection b of P.D. 552 provides that:
(b) To charge and collect from the beneficiaries of the water from all irrigation systems
constructed by or under its administration, such fees or administration charges as may be
necessary to cover the cost of operation, maintenance and insurance, and to recover the
cost of construction within a reasonable period of time to the extent consistent with
government policy; to recover funds or portions thereof expended for the construction and/or
rehabilitation of communal irrigation systems which funds shall accrue to a special fund for
irrigation development under section 2 hereof;
Unpaid irrigation fees or administration charges shall be preferred liens first, upon the land
benefited, and then on the crops raised thereon, which liens shall have preference over all
other liens except for taxes on the land, and such preferred liens shall not be removed until
all fees or administration charges are paid or the property is levied upon and sold by the
National Irrigation Administration for the satisfaction thereof. . . .
The same section also provides that NIA may sue and be sued in court. Thus,
b) . . . Judicial actions for the collection of unpaid irrigation fees or charges, drainage fees or
other charges which the National Irrigation Administration is authorized to impose and
collect, shall henceforth be governed by the provisions of the Rules of Court of the
Philippines for similar actions, the provisions of other laws to the contrary notwithstanding.
xxx

xxx

xxx

xxx

xxx

xxx

(e) . . . .

All actions for the recovery of compensation and damages against the National Irrigation
Administration under paragraphs (1), (2), and (3) hereof, shall be filed with a competent court
within five (5) years from the date of entry of the land or destruction of the improvements or
crops, after which period, the right of possession and/or ownership of the National Irrigation
Administration shall be considered vested and absolute. All other actions for the recovery of
compensation and damages to private property and improvements occasioned by the
construction, operation and maintenance of irrigation facilities and other hydraulic structures
under the administration of the National Irrigation Administration, which have accrued ten

(10) or more years prior to the approval of this decree are deemed to have prescribed and
are barred forever.
It has its own assets and liabilities. It also has corporate powers to be exercised by a Board of
Directors. To quote Section 2, subsection (f):
(f) . . . and to transact such business, as are directly or indirectly necessary, incidental or
conducive to the attainment of the above powers and objectives, including the power to
establish and maintain subsidiaries, and in general, to exercise all the powers of a
corporation under the Corporation Law, insofar as they are not inconsistent with the
provisions of this Act. (Emphasis supplied).
On the basis of the foregoing considerations, We conclude that the National Irrigation Administration
is a government agency with a juridical personality separate and distinct from the government. It is
not a mere agency of the government but a corporate body performing proprietary functions.
Therefore, it may be held liable for the damages caused by the negligent act of its driver who was
not its special agent.
ACCORDINGLY, the Motion for Reconsideration dated January 26, 1990 is DENIED WITH
FINALITY. The decision of this Court in G.R. No. 55963 and G.R. No. 61045 dated December 1,
1989 is hereby AFFIRMED.
Gancayco, Bidin, Sarmiento, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Gutierrez, Jr., Fernan, C.J. and Melencio-Herrera, JJ., concur in the result.
, J., concur in the result and in Mr. Justice Feliciano's concurrence.

Separate Opinions

FELICIANO, J., concurring:


I agree with the result reached by my distinguished brother in the Court, Mr. Justice Edgardo L.
Paras, both in the Decision of the Court's Second Division dated 1 December 1989 (179 SCRA 685
[1989]) and in the present Resolution on the motion for reconsideration, which has been referred to
the Court En Banc.
I agree, in other words, that the National Irrigation Administration (NIA) is liable for the acts of its
employee Hugo Garcia which resulted in injury to the spouses Jose Fontanilla and Virginia
Fontanilla. However, I reach this result through a slightly different route which is traced below.
In the original decision of the Court's Second Division, it is stated that:

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 night 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.
The original Decision and the Resolution on the motion for reconsideration hold that the NIA is "an
agency of the government exercising proprietary functions."
I would respectfully submit that the liability of an agency or instrumentality of the Government for
torts of its employees under Article 2180, 6th paragraph, of the Civil Code is not contingent upon the
technical characterization of the functions or activities carried out by that agency or instrumentality
as "governmental," on the one hand, or "proprietary," upon the other.
In the first place, it is merely commonplace to note that governments in our day and age do not
restrict themselves to the original basic and primitive functions of repelling invasion by a foreign
enemy, maintaining peace and order in society and protecting the physical integrity or the food
supplies of its citizens or inhabitants, but instead assumed and carry out all kinds of activities which
they may determine to redound to the general interest and benefit of the population. Thus, the
classical laissez-faire concept of a state, which prevailed during the 19th century, has today been
replaced by the concept of the welfare state. Moreover, activities which in other states more
economically advanced than our own have been undertaken by private enterprise, are here still
being carried out by the Government or, more generally, the public sector in view of the inadequacy
of private capital and private entrepreneurial spirit.
Secondly, under Section 2(l) of Article IX of the Constitution, whether or not a government owned or
controlled corporation or entity forms part of the Government and is embraced within the civil service
depends, not upon the "governmental," as distinguished from "proprietary," nature of the activities
performed by such entity or corporation, but rather upon whether or not the corporation or entity is
possessed of an "original charter." Thus, it appears to me that the framers of the 1987 Constitution
had given up the notion of trying to distinguish between "governmental" and "proprietary" functions
for purposes of determining whether employees of a particular agency or instrumentality should be
governed by the Civil Service Law and Regulations or, alternatively, by the Labor Code and its
Implementing Regulations administered by the National Labor Relations Commission and the
Department of Labor and Employment.
Article 2180 of the Civil Code provides in part as follows:
xxx

xxx

xxx

Employers shall be liable for the damage 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 entity.
The State is responsible in like manner when it acts through a special agent; but not when
the damage has been caused by the official to whom the task done properly pertains, in
which case what is provided in Article 2176 shall be applicable.
xxx

xxx

xxx

(Emphasis supplied)
My basic submission that the term "State" as used above properly refers to the "Government of the
Republic of the Philippines." This latter term is defined in Section 2 of the Revised Administrative
Code of 1987 in the following manner:
The Government of the Republic of the Philippines refers to the corporate governmental
entity through which the functions of government are exercised throughout the Philippines,
including save as the contrary appears from the context, the various arms through
which political authority is made effective in the Philippines, whether pertaining to the
autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms
of local government. (Emphasis supplied)
In other words, the term "State" as used in Article 2180 of the Civil Code refers to that juridical
person that is constituted b the Government of the Republic of the Philippines and logically does not
include agencies, instrumentalities or other entities which their enabling laws have invested
with juridical personality separate and distinct from that of the Republic of the Philippines.
It should be noted in this connection, that in Merritt v. Government of the Philippine Islands (34 Phil.
311 [1960]), the Court said:
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 acts of its
agents, officers and employees when they act as special agents within the meaning of
paragraph 5 of Article 1903 [of the Civil Code of Spain of 1889] and that the chauffeur of the
ambulance of the General Hospital was not such an agent. (Emphasis supplied; parentheses
in the original; 34 Phil. at 323)
Clearly, Mr. Justice Trent considered "the State" and "the Government of the Philippine Islands" as
equivalent terms. The decision of the Supreme Court of Spain dated 7 January 1898 which the Court
in Merritt cited, read in part as follows:
That the obligation to indemnify for damages, which a third person causes to 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
provisions of law, is not responsible for the damages suffered by private individual 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
[juridical] person capable of acquiring rights and contracting obligation(Emphases and
brackets supplied)
The term "juridical" person was translated (by Mr. Justice Trent?) as "judicial" person. This appears
plain error for the judgment of 7 January 1898 in fact read:

. . . entre los cuales y el Estado, por tanto, no pueden surgir relaciones de orden privado
regidas por el derecho civil, salvo el caso de que el mismo Estado obre como persona
juridica capaz de adquirir derechos y contraer obligaciones:
xxx

xxx

xxx

(Emphasis supplied; 83 Jurisprudencia Civil 36 [1898])


Thus, the decision of the Supreme Court of Spain itself recognized that between private persons and
the State,relations of a private nature governed by the Civil Code can arise where the State acts as
or through the medium of a separate juridical person that is capable of acquiring lights and entering
into obligations.
In the present case, there is no question that the NIA has juridical personality separate and distinct
from that of the Government of the Republic of the Philippines which owns all NIA's capital and
assets. In other words, the NIA is not part of the "State" or of the "Government of the Republic of the
Philippines"; it follows, I respectfully submit, that the NIA should not be regarded as part of the State
for purposes of application of Article 2180 of the Civil Code.
What I have outlined above is in fact very close to the position taken by Mr. Justice Paras in the
Resolution on the motion for reconsideration. For he has rightly stressed that the NIA has clearly
been invested with a distinct legal personality and thus with capacity to sue and be sued. Judicial
actions may be brought by the NIA for the collection of unpaid irrigation fees, drainage fees or other
charges which the NIA is authorized to impose and collect, under the provisions of the Rules of
Court. Correlatively, actions against the NIA for the recovery of compensation and damages are
expressly allowed and prescribe in either five (5) or ten (10) years depending upon the subject
matter thereof. The State itself has determined, in other words, that the NIA shall not be covered by
the general immunity from suit without its consent pertaining to the State.
Finally, the Resolution underscores the fact that under Section 2(f) of the NIA charter, the NIA is
generally authorized "to exercise all the powers of a corporation under the Corporation Law, insofar
as they are not inconsistent with the provisions of [the NIA charter]." Since the NIA has been vested
with an the powers of a corporate person, it seems only reasonable to believe that it is at the same
time subjected to all the ordinary liabilities of a corporate person: one of those liabilities is the
vicarious liability of an employer under Article 2180 of the Civil Code, 6th paragraph, for injurious
acts done by its employees within the scope of their assigned tasks.
I suggest then that the investing of an agency or instrumentality of the Government with separate
juridical personality is not a matter of "form" as suggested by my equally distinguished brother in the
Court, Mr. Justice Padilla, in his dissenting opinion. The effect of the foregoing provisions of its
charter may be seen to be clearly a matter of "substance": to render the NIA both suable and liable
on the same causes of action which may be asserted against any corporate entity that is a separate
juridical person.
It seems also relevant to point out that the Philippine General Hospital (PGH), the agency or
instrumentality involved in the Merritt case, did not (in contrast with the NIA) have legal personality
separate and distinct from that of the Philippine Government at the time that Merritt was decided.
The PGH was established under Act No. 1688 of the Philippine Commission as a division of the
Bureau of Health, a non-incorporated entity. Later, it was removed from the administrative jurisdiction
of the Bureau of Health and made into an independent bureau under the supervision of the
Department of the Interior. Still later, the PGH was placed under the Department of Instruction and
subsequently, under the Office of the President. In 1947, by virtue of Executive Order No. 94, the

PGH was made a part of the University of the Philippines, itself a separate corporate entity. Clearly,
therefore, at the time Merritt was decided, the PGH was part and parcel of the Government of the
Republic of the Philippines as defined by the Revised Administrative Code of 1917.
For all the foregoing, I vote to DENY the motion for reconsideration and to AFFIRM the Decision
dated 1 December 1989 in G.R. Nos. 55963 and 61045.
Narvasa and Cruz, JJ., concur.
PADILLA, J., dissenting:
On 1 December 1989, this Court, through its Second Division, rendered a decision declaring
petitioner National Irrigation Administration (NIA, for brevity) a government agency performing
proprietary functions. Like an ordinary employer, NIA was held liable for the injuries, resulting in
death, of Francisco Fontanilla, caused by the fault and/or negligence of NIA's driver employee Hugo
Garcia; and NIA was ordered to pay petitioner spouses Fontanilla, the victim's parents, the amounts
of P12,000.00 for the death of the victim; P3,389.00 for hospitalization and burial expenses;
P30,000.00 as moral damages; P8,000.00 as exemplary damages, and attorney's fees of 20% of the
total award.
Assailing the said decision of this Court, NIA filed the present Motion for Reconsideration, alleging
that NIA does not perform solely or primarily proprietary functions but is an agency of the
government tasked with governmental functions; thus, it may not be held liable for damages for
injuries caused by its employee to a third person. CitingPD 552, NIA argues that its functions and
responsibilities directly concern public benefit and public welfare.
To start with, NIA is an agency of the government with an original charter. Section 1 of Republic Act
3601 provides:
1

Sec. 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 shall have representatives in all provinces for the proper
conduct of its business.
NIA's said charter confers upon it a separate juridical personality to exercise all the powers of a
corporation under the Corporation Law, insofar as they are not inconsistent with said charter.
2

Under PD 552 amending NIA's original charter, it is made clear that said agency was created
primarily for the purpose of undertaking integrated irrigation projects, by the construction of multiplepurpose water resource projects to increase agricultural production for the financial upliftment of the
people. In relation to its purpose, NIA has the power and authority to undertake concomitant
projects, such as, flood control, drainage, land reclamation, hydraulic power development, domestic
water supply, road or highway construction, reforestation and projects to maintain ecological
balance, in coordination with other agencies concerned. Thus
WHEREAS, the enunciation policy is for a comprehensive development, utilization and
conservation of water resources of the Philippines, and in pursuit of its policy, one of the
primary objectives of the National Irrigation Administration is to effectuate an economic
means of achieving the optimal and diversified utilization and control of water by undertaking
integrated litigation projects.

WHEREAS, the National Irrigation Administration assumes as its primary responsibility, the
implementation of the irrigation integrated program of the government and the attainment of
the "Irrigation Age", as envisioned under Republic Act No. 3601;
WHEREAS, an effective means of implementing multiple-purpose projects in line with
program-oriented and comprehensive water resources development necessitates broader
powers and authority of the NIA to undertake concomitant projects such as flood control,
drainage, land reclamation, hydraulic power development, domestic water supply, road or
highway construction, reforestation, and projects to maintain ecological balance, in
coordination with the agencies concerned;
WHEREAS, the construction of multiple-purpose water resources projects involves
substantial investment of government funds to increase agricultural production for the
financial upliftment of the People for them to be able to assume and comply with their
obligations and responsibilities to the government.
NIA is thus maintained and operated by the government in the performance of its governmental
function of providing the Filipino people, particularly, the farmers nationwide, improved irrigation
systems to increase the country's agricultural production. Only the government has the capacity and
facilities to successfully undertake a project or venture of such magnitude. That the NIA is
empowered to charge minimal fees from all the beneficiaries of the irrigation systems that it
establishes and operates, does not change the nature of the function or purpose for which it was
created. The fees that are collected by NIA are used to cover the cost of operation, maintenance,
insurance, cost of construction, and the rehabilitation of irrigation systems. Such monetary charges
do not constitute monetary gain or profit to NIA, but are merely reimbursements of the operational
cost of the agency's projects.
3

It cannot be denied that public service is the thrust in the creation of NIA in contrast to a business
venture or proprietary enterprise for monetary gain. That the NIA is also empowered to enter into
transactions in order to acquire real and personal properties, appurtenant rights, easements,
privileges in the development of its projects and enter into other business transactions, does not
mean that it performs proprietary functions, for it is expressly provided in its charter that the business
transactions it may enter into are only those which are directly or indirectly necessary, incidental or
conducive to the attain-judgment of its purposes and objectives.
4

Furthermore, the fact that its charter treats the NIA as incorporated under the Corporation Law, and
confers upon it a separate juridical personality, is not the test in determining whether it is performing
a governmental or proprietary function. The spirit, intent or purpose behind its creation determines its
true character. It has been held that were the nature of the duties imposed on an agency and
performed by it does not reveal that it was intended to bring any special corporate benefit or
pecuniary profit to the government, said agency is deemed to be exercising a governmental
function.
6

After having established that the NIA is a government agency, with an original charter, possessed of
juridical personality under the Corporation Law, and performing governmental functions, it is equally
important to determine whether (1) the sovereign immunity of the state from suit is enjoyed, or has
been waived by NIA and (2) the NIA is liable for damages arising from tort committed by its
employees.
For incorporated agencies of the government, the test of its suability is found in its charter. The
simple rule is that it is suable if its charter says so, and this is true regardless of the functions it is
performing. The charter of the NIA provides that it may sue and be sued, thus, consent of the state
7

for NIA to be sued has been given, so that the rule, on immunity from suit normally extended to
government agencies performing governmental functions is no longer available to NIA. By waiving
that immunity from suit in its charter, it would appear that NIA has opened itself to suits based on
causes of action arising from law, contracts, quasi-contracts, delicts, and even quasi-delicts.
8

But to say that NIA has opened itself to suit is one thing; to say that it is liable for damages arising
from tort committed by its employees, is still another thing.
As discussed in the now assailed decision, pursuant to the provisions of substantive law on quasidelict, whoever by his act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage caused. The obligation imposed by the foregoing rule is demandable
not only for one's own acts or omissions, but also for those of persons for whom one is responsible,
such that an employer is held liable for damages caused by its employees who were acting within
the scope of their assigned tasks.
9

10

But the state or a government agency performing governmental functions may be held liable for tort
committed by its employees only when it acts through a special agent.
11

This is not the first time this Court is confronted with a situation akin to the one at bar. In Merritt vs.
Government of the Phil. Islands, the plaintiff was hit by an ambulance of the Philippine General
Hospital, while operated by its regular driver. Since the Philippine government was immune from
suit, Act No. 2457 was approved by the Philippine legislature which authorized Merritt to sue the
Philippine government in the CFI in order to fix the responsibility for the collision and to determine
the amount or extent of the damages.
12

In due course, it was determined that the ambulance operated by the General Hospital's regular
driver was responsible for the mishap. The damages sustained by Merritt as a result of the accident
was likewise quantified by the trial court and ultimately increased by the Supreme Court.
But then the crucial question remained thus
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 no
Act created any new cause of action in favor of the plaintiff or extended the defendant's
liability to any case not previously recognized.
The Court answered its own query thus
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 vs. City of Luverne 103 Minn 491 citingU.S. vs. Kirkpatrick 9
Wheat, 720; 6 L.Ed., 199; and Beers vs. State, 20 How., 527; 15 L.Ed., 991.)
xxx

xxx

xxx

. . . we will now examine the substantive law touching the defendant's liability for the
negligent acts of its officers, agents, and employees. Paragraph 5 of article 1903 of the Civil
Code reads:

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.
The Supreme Court of Spain in defining the scope of this paragraph said:
That the obligation to indemnify for damages which a third person causes to 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
provisions 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 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,
1988; 83 Jur. Civ. 24.)
The dispositive part of the Merritt decision states:
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.
This Court in the now assailed decision found that NIA was negligent in the supervision of its driver
Hugo Garcia who bumped petitioner-spouses' son, causing the death of the latter
It should be emphasized that the accident happened along the Marikina 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
traveling 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.
13

There is thus no doubt that NIA should be held responsible for the negligent acts of its regular driver,
resulting in the death of petitioner-spouses' son, except that under Article 2180, par. 6 in relation to

Article 2176 of the Civil Code, the state is not liable for tort save when it acts through a special
agent, and Hugo Garcia was not a special agent but NIA's regular driver.
Under the circumstances, and in order not to perpetuate a cruel injustice, I believe that this Court,
while granting the Solicitor General's motion for reconsideration, should recommend to Congress the
enactment of the appropriate legislation to compensate the petitioner-spouses, parents of the victim
Francisco Fontanilla, and to appropriate the necessary funds therefor, which could be equal to the
amount of damages already determined by this Court.
During the deliberations of this case, it was suggested that the term "State" as used in Article 2180,
par. 6 of the Civil Code could be limited to the State proper and not construed to include
incorporated entities even if performing governmental functions, such as the NIA. The intended
effect of this suggestion would be to render only the State, meaning, the government of the Republic
of the Philippines and its unincorporated agencies, such as government bureaus, exempt from
liability for tort committed by their officials and employees, except their special agents, but
incorporated governmental entities, even if performing governmental (as distinguished from business
functions) will be liable for the tort committed by their officials and employees.
14

I am of the considered opinion that the aforestated suggestion is untenable because it would lay
stress on formrather than substance. To me, the test should still be whether the governmental entity
performs governmental and, therefore, sovereign functions, regardless of whether it is incorporated
or not. If the government agency performs governmental and, therefore, sovereign functions, such
as the NIA, it is within the context of the term "State" as used in Art. 2180, par. 6 of the Civil Code
and may not, as a consequence, be held liable for tort committed by its officials and employees,
except when they are "special agents."
From the ruling of this Court in Manila Hotel Employees Asso. vs. Manila Hotel, which states that
by "engaging in a particular business thru the instrumentality of a corporation, the government
divests itself pro hoc vice of its sovereign character, so as to render the corporation subject to the
rules governing private corporations," it can be reasonably inferred that it is the business
character of the corporation and not its corporate form which divests it of the immunity (and,
similarly, exemption from liability for tort committed by its employees) which its owner-sovereign
enjoys. In the case of Prisco vs.
CIR, the suability and liability under labor laws of the Price Stabilization Corporation was based not
really on its corporate form but on its abdication of sovereign prerogatives by its descent to the level
of an ordinary business operation.
15

16

17

In an advisory opinion of the Supreme Court of the State of Michigan with respect to the creation of
the state housing authority, it was held that a state agency intended to take measures to promote
construction of housing, performs a proper governmental function, and that the grant of corporate
powers to such an agency makes it a quasi-corporation only but it remains an instrumentality of the
state. Such quasi-corporations are described as bodies of citizens who have no personal nor private
interests to be subserved, but are simply required by the state to do some public work. The state
merely clothes one of its agencies or instrumentalities with such corporate powers. It is neither a
private corporation but a class of artificial entity. The NIA qualifies as a quasi-corporation, retaining
at all times the attributes and prerogatives of the sovereign State which entirely owns and operates
it.
18

FOR THE FOREGOING REASONS, I vote to GRANT the Motion for Reconsideration and to SET
ASIDE the decision of this Court dated 1 December 1989, subject to the recommendation to
Congress as earlier stated.

Separate Opinions
FELICIANO, J., concurring:
I agree with the result reached by my distinguished brother in the Court, Mr. Justice Edgardo L.
Paras, both in the Decision of the Court's Second Division dated 1 December 1989 (179 SCRA 685
[1989]) and in the present Resolution on the motion for reconsideration, which has been referred to
the Court En Banc.
I agree, in other words, that the National Irrigation Administration (NIA) is liable for the acts of its
employee Hugo Garcia which resulted in injury to the spouses Jose Fontanilla and Virginia
Fontanilla. However, I reach this result through a slightly different route which is traced below.
In the original decision of the Court's Second Division, it is stated that:
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 night 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.
The original Decision and the Resolution on the motion for reconsideration hold that the NIA is "an
agency of the government exercising proprietary functions."
I would respectfully submit that the liability of an agency or instrumentality of the Government for
torts of its employees under Article 2180, 6th paragraph, of the Civil Code is not contingent upon the
technical characterization of the functions or activities carried out by that agency or instrumentality
as "governmental," on the one hand, or "proprietary," upon the other.
In the first place, it is merely commonplace to note that governments in our day and age do not
restrict themselves to the original basic and primitive functions of repelling invasion by a foreign
enemy, maintaining peace and order in society and protecting the physical integrity or the food
supplies of its citizens or inhabitants, but instead assumed and carry out all kinds of activities which
they may determine to redound to the general interest and benefit of the population. Thus, the
classical laissez-faire concept of a state, which prevailed during the 19th century, has today been
replaced by the concept of the welfare state. Moreover, activities which in other states more
economically advanced than our own have been undertaken by private enterprise, are here still
being carried out by the Government or, more generally, the public sector in view of the inadequacy
of private capital and private entrepreneurial spirit.
Secondly, under Section 2(l) of Article IX of the Constitution, whether or not a government owned or
controlled corporation or entity forms part of the Government and is embraced within the civil service
depends, not upon the "governmental," as distinguished from "proprietary," nature of the activities
performed by such entity or corporation, but rather upon whether or not the corporation or entity is
possessed of an "original charter." Thus, it appears to me that the framers of the 1987 Constitution
had given up the notion of trying to distinguish between "governmental" and "proprietary" functions

for purposes of determining whether employees of a particular agency or instrumentality should be


governed by the Civil Service Law and Regulations or, alternatively, by the Labor Code and its
Implementing Regulations administered by the National Labor Relations Commission and the
Department of Labor and Employment.
Article 2180 of the Civil Code provides in part as follows:
xxx

xxx

xxx

Employers shall be liable for the damage 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 entity.
The State is responsible in like manner when it acts through a special agent; but not when
the damage has been caused by the official to whom the task done properly pertains, in
which case what is provided in Article 2176 shall be applicable.
xxx

xxx

xxx

(Emphasis supplied)
My basic submission that the term "State" as used above properly refers to the "Government of the
Republic of the Philippines." This latter term is defined in Section 2 of the Revised Administrative
Code of 1987 in the following manner:
The Government of the Republic of the Philippines refers to the corporate governmental
entity through which the functions of government are exercised throughout the Philippines,
including save as the contrary appears from the context, the various arms through
which political authority is made effective in the Philippines, whether pertaining to the
autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms
of local government. (Emphasis supplied)
In other words, the term "State" as used in Article 2180 of the Civil Code refers to that juridical
person that is constituted b the Government of the Republic of the Philippines and logically does not
include agencies, instrumentalities or other entities which their enabling laws have invested
with juridical personality separate and distinct from that of the Republic of the Philippines.
It should be noted in this connection, that in Merritt v. Government of the Philippine Islands (34 Phil.
311 [1960]), the Court said:
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 acts of its
agents, officers and employees when they act as special agents within the meaning of
paragraph 5 of Article 1903 [of the Civil Code of Spain of 1889] and that the chauffeur of the
ambulance of the General Hospital was not such an agent. (Emphasis supplied; parentheses
in the original; 34 Phil. at 323)
Clearly, Mr. Justice Trent considered "the State" and "the Government of the Philippine Islands" as
equivalent terms. The decision of the Supreme Court of Spain dated 7 January 1898 which the Court
in Merritt cited, read in part as follows:

That the obligation to indemnify for damages, which a third person causes to 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
provisions of law, is not responsible for the damages suffered by private individual 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
[juridical] person capable of acquiring rights and contracting obligation(Emphases and
brackets supplied)
The term "juridical" person was translated (by Mr. Justice Trent?) as "judicial" person. This appears
plain error for the judgment of 7 January 1898 in fact read:
. . . entre los cuales y el Estado, por tanto, no pueden surgir relaciones de orden privado
regidas por el derecho civil, salvo el caso de que el mismo Estado obre como persona
juridica capaz de adquirir derechos y contraer obligaciones:
xxx

xxx

xxx

(Emphasis supplied; 83 Jurisprudencia Civil 36 [1898])


Thus, the decision of the Supreme Court of Spain itself recognized that between private persons and
the State,relations of a private nature governed by the Civil Code can arise where the State acts as
or through the medium of a separate juridical person that is capable of acquiring lights and entering
into obligations.
In the present case, there is no question that the NIA has juridical personality separate and distinct
from that of the Government of the Republic of the Philippines which owns all NIA's capital and
assets. In other words, the NIA is not part of the "State" or of the "Government of the Republic of the
Philippines"; it follows, I respectfully submit, that the NIA should not be regarded as part of the State
for purposes of application of Article 2180 of the Civil Code.
What I have outlined above is in fact very close to the position taken by Mr. Justice Paras in the
Resolution on the motion for reconsideration. For he has rightly stressed that the NIA has clearly
been invested with a distinct legal personality and thus with capacity to sue and be sued. Judicial
actions may be brought by the NIA for the collection of unpaid irrigation fees, drainage fees or other
charges which the NIA is authorized to impose and collect, under the provisions of the Rules of
Court. Correlatively, actions against the NIA for the recovery of compensation and damages are
expressly allowed and prescribe in either five (5) or ten (10) years depending upon the subject
matter thereof. The State itself has determined, in other words, that the NIA shall not be covered by
the general immunity from suit without its consent pertaining to the State.
Finally, the Resolution underscores the fact that under Section 2(f) of the NIA charter, the NIA is
generally authorized "to exercise all the powers of a corporation under the Corporation Law, insofar
as they are not inconsistent with the provisions of [the NIA charter]." Since the NIA has been vested
with an the powers of a corporate person, it seems only reasonable to believe that it is at the same
time subjected to all the ordinary liabilities of a corporate person: one of those liabilities is the

vicarious liability of an employer under Article 2180 of the Civil Code, 6th paragraph, for injurious
acts done by its employees within the scope of their assigned tasks.
I suggest then that the investing of an agency or instrumentality of the Government with separate
juridical personality is not a matter of "form" as suggested by my equally distinguished brother in the
Court, Mr. Justice Padilla, in his dissenting opinion. The effect of the foregoing provisions of its
charter may be seen to be clearly a matter of "substance": to render the NIA both suable and liable
on the same causes of action which may be asserted against any corporate entity that is a separate
juridical person.
It seems also relevant to point out that the Philippine General Hospital (PGH), the agency or
instrumentality involved in the Merritt case, did not (in contrast with the NIA) have legal personality
separate and distinct from that of the Philippine Government at the time that Merritt was decided.
The PGH was established under Act No. 1688 of the Philippine Commission as a division of the
Bureau of Health, a non-incorporated entity. Later, it was removed from the administrative jurisdiction
of the Bureau of Health and made into an independent bureau under the supervision of the
Department of the Interior. Still later, the PGH was placed under the Department of Instruction and
subsequently, under the Office of the President. In 1947, by virtue of Executive Order No. 94, the
PGH was made a part of the University of the Philippines, itself a separate corporate entity. Clearly,
therefore, at the time Merritt was decided, the PGH was part and parcel of the Government of the
Republic of the Philippines as defined by the Revised Administrative Code of 1917.
For all the foregoing, I vote to DENY the motion for reconsideration and to AFFIRM the Decision
dated 1 December 1989 in G.R. Nos. 55963 and 61045.
Narvasa and Cruz, JJ., concur.

PADILLA, J., dissenting:


On 1 December 1989, this Court, through its Second Division, rendered a decision declaring
petitioner National Irrigation Administration (NIA, for brevity) a government agency performing
proprietary functions. Like an ordinary employer, NIA was held liable for the injuries, resulting in
death, of Francisco Fontanilla, caused by the fault and/or negligence of NIA's driver employee Hugo
Garcia; and NIA was ordered to pay petitioner spouses Fontanilla, the victim's parents, the amounts
of P12,000.00 for the death of the victim; P3,389.00 for hospitalization and burial expenses;
P30,000.00 as moral damages; P8,000.00 as exemplary damages, and attorney's fees of 20% of the
total award.
Assailing the said decision of this Court, NIA filed the present Motion for Reconsideration, alleging
that NIA does not perform solely or primarily proprietary functions but is an agency of the
government tasked with governmental functions; thus, it may not be held liable for damages for
injuries caused by its employee to a third person. CitingPD 552, NIA argues that its functions and
responsibilities directly concern public benefit and public welfare.
To start with, NIA is an agency of the government with an original charter. Section 1 of Republic Act
3601 provides:
1

Sec. 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 shall have representatives in all provinces for the proper
conduct of its business.
NIA's said charter confers upon it a separate juridical personality to exercise all the powers of a
corporation under the Corporation Law, insofar as they are not inconsistent with said charter.
2

Under PD 552 amending NIA's original charter, it is made clear that said agency was created
primarily for the purpose of undertaking integrated irrigation projects, by the construction of multiplepurpose water resource projects to increase agricultural production for the financial upliftment of the
people. In relation to its purpose, NIA has the power and authority to undertake concomitant
projects, such as, flood control, drainage, land reclamation, hydraulic power development, domestic
water supply, road or highway construction, reforestation and projects to maintain ecological
balance, in coordination with other agencies concerned. Thus
WHEREAS, the enunciation policy is for a comprehensive development, utilization and
conservation of water resources of the Philippines, and in pursuit of its policy, one of the
primary objectives of the National Irrigation Administration is to effectuate an economic
means of achieving the optimal and diversified utilization and control of water by undertaking
integrated litigation projects.
WHEREAS, the National Irrigation Administration assumes as its primary responsibility, the
implementation of the irrigation integrated program of the government and the attainment of
the "Irrigation Age", as envisioned under Republic Act No. 3601;
WHEREAS, an effective means of implementing multiple-purpose projects in line with
program-oriented and comprehensive water resources development necessitates broader
powers and authority of the NIA to undertake concomitant projects such as flood control,
drainage, land reclamation, hydraulic power development, domestic water supply, road or
highway construction, reforestation, and projects to maintain ecological balance, in
coordination with the agencies concerned;
WHEREAS, the construction of multiple-purpose water resources projects involves
substantial investment of government funds to increase agricultural production for the
financial upliftment of the People for them to be able to assume and comply with their
obligations and responsibilities to the government.
NIA is thus maintained and operated by the government in the performance of its governmental
function of providing the Filipino people, particularly, the farmers nationwide, improved irrigation
systems to increase the country's agricultural production. Only the government has the capacity and
facilities to successfully undertake a project or venture of such magnitude. That the NIA is
empowered to charge minimal fees from all the beneficiaries of the irrigation systems that it
establishes and operates, does not change the nature of the function or purpose for which it was
created. The fees that are collected by NIA are used to cover the cost of operation, maintenance,
insurance, cost of construction, and the rehabilitation of irrigation systems.
3

Such monetary charges do not constitute monetary gain or profit to NIA, but are merely
reimbursements of the operational cost of the agency's projects.
It cannot be denied that public service is the thrust in the creation of NIA in contrast to a business
venture or proprietary enterprise for monetary gain. That the NIA is also empowered to enter into
transactions in order to acquire real and personal properties, appurtenant rights, easements,

privileges in the development of its projects and enter into other business transactions, does not
mean that it performs proprietary functions, for it is expressly provided in its charter that the business
transactions it may enter into are only those which are directly or indirectly necessary, incidental or
conducive to the attain-judgment of its purposes and objectives.
4

Furthermore, the fact that its charter treats the NIA as incorporated under the Corporation Law, and
confers upon it a separate juridical personality, is not the test in determining whether it is performing
a governmental or proprietary function. The spirit, intent or purpose behind its creation determines its
true character. It has been held that were the nature of the duties imposed on an agency and
performed by it does not reveal that it was intended to bring any special corporate benefit or
pecuniary profit to the government, said agency is deemed to be exercising a governmental
function.
6

After having established that the NIA is a government agency, with an original charter, possessed of
juridical personality under the Corporation Law, and performing governmental functions, it is equally
important to determine whether (1) the sovereign immunity of the state from suit is enjoyed, or has
been waived by NIA and (2) the NIA is liable for damages arising from tort committed by its
employees.
For incorporated agencies of the government, the test of its suability is found in its charter. The
simple rule is that it is suable if its charter says so, and this is true regardless of the functions it is
performing. The charter of the NIA provides that it may sue and be sued, thus, consent of the state
for NIA to be sued has been given, so that the rule, on immunity from suit normally extended to
government agencies performing governmental functions is no longer available to NIA. By waiving
that immunity from suit in its charter, it would appear that NIA has opened itself to suits based on
causes of action arising from law, contracts, quasi-contracts, delicts, and even quasi-delicts.
7

But to say that NIA has opened itself to suit is one thing; to say that it is liable for damages arising
from tort committed by its employees, is still another thing.
As discussed in the now assailed decision, pursuant to the provisions of substantive law on quasidelict, whoever by his act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage caused. The obligation imposed by the foregoing rule is demandable
not only for one's own acts or omissions, but also for those of persons for whom one is responsible,
such that an employer is held liable for damages caused by its employees who were acting within
the scope of their assigned tasks.
9

10

But the state or a government agency performing governmental functions may be held liable for tort
committed by its employees only when it acts through a special agent.
11

This is not the first time this Court is confronted with a situation akin to the one at bar. In Merritt vs.
Government of the Phil. Islands, the plaintiff was hit by an ambulance of the Philippine General
Hospital, while operated by its regular driver. Since the Philippine government was immune from
suit, Act No. 2457 was approved by the Philippine legislature which authorized Merritt to sue the
Philippine government in the CFI in order to fix the responsibility for the collision and to determine
the amount or extent of the damages.
12

In due course, it was determined that the ambulance operated by the General Hospital's regular
driver was responsible for the mishap. The damages sustained by Merritt as a result of the accident
was likewise quantified by the trial court and ultimately increased by the Supreme Court.
But then the crucial question remained thus

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 no
Act created any new cause of action in favor of the plaintiff or extended the defendant's
liability to any case not previously recognized.
The Court answered its own query thus
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 vs. City of Luverne 103 Minn 491 citingU.S. vs. Kirkpatrick 9
Wheat, 720; 6 L.Ed., 199; and Beers vs. State, 20 How., 527; 15 L.Ed., 991.)
xxx

xxx

xxx

. . . we will now examine the substantive law touching the defendant's liability for the
negligent acts of its officers, agents, and employees. Paragraph 5 of article 1903 of the Civil
Code reads:
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.
The Supreme Court of Spain in defining the scope of this paragraph said:
That the obligation to indemnify for damages which a third person causes to 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
provisions 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 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,
1988; 83 Jur. Civ. 24.)
The dispositive part of the Merritt decision states:
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.

This Court in the now assailed decision found that NIA was negligent in the supervision of its driver
Hugo Garcia who bumped petitioner-spouses' son, causing the death of the latter
It should be emphasized that the accident happened along the Marikina 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
traveling 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.
13

There is thus no doubt that NIA should be held responsible for the negligent acts of its regular driver,
resulting in the death of petitioner-spouses' son, except that under Article 2180, par. 6 in relation to
Article 2176 of the Civil Code, the state is not liable for tort save when it acts through a special
agent, and Hugo Garcia was not a special agent but NIA's regular driver.
Under the circumstances, and in order not to perpetuate a cruel injustice, I believe that this Court,
while granting the Solicitor General's motion for reconsideration, should recommend to Congress the
enactment of the appropriate legislation to compensate the petitioner-spouses, parents of the victim
Francisco Fontanilla, and to appropriate the necessary funds therefor, which could be equal to the
amount of damages already determined by this Court.
During the deliberations of this case, it was suggested that the term "State" as used in Article 2180,
par. 6 of the Civil Code could be limited to the State proper and not construed to include
incorporated entities even if performing governmental functions, such as the NIA. The intended
effect of this suggestion would be to render only the State, meaning, the government of the Republic
of the Philippines and its unincorporated agencies, such as government bureaus, exempt from
liability for tort committed by their officials and employees, except their special agents, but
incorporated governmental entities, even if performing governmental (as distinguished from business
functions) will be liable for the tort committed by their officials and employees.
14

I am of the considered opinion that the aforestated suggestion is untenable because it would lay
stress on formrather than substance. To me, the test should still be whether the governmental entity
performs governmental and, therefore, sovereign functions, regardless of whether it is incorporated
or not. If the government agency performs governmental and, therefore, sovereign functions, such
as the NIA, it is within the context of the term "State" as used in Art. 2180, par. 6 of the Civil Code
and may not, as a consequence, be held liable for tort committed by its officials and employees,
except when they are "special agents."
From the ruling of this Court in Manila Hotel Employees Asso. vs. Manila Hotel, which states that
by "engaging in a particular business thru the instrumentality of a corporation, the government
divests itself pro hoc vice of its sovereign character, so as to render the corporation subject to the
rules governing private corporations," it can be reasonably inferred that it is the business
character of the corporation and not its corporate form which divests it of the immunity (and,
15

similarly, exemption from liability for tort committed by its employees) which its owner-sovereign
enjoys. In the case of Prisco vs. CIR, the suability and liability under labor laws of the Price
Stabilization Corporation was based not really on its corporate form but on its abdication of
sovereign prerogatives by its descent to the level of an ordinary business operation.
16

17

In an advisory opinion of the Supreme Court of the State of Michigan with respect to the creation of
the state housing authority, it was held that a state agency intended to take measures to promote
construction of housing, performs a proper governmental function, and that the grant of corporate
powers to such an agency makes it a quasi-corporation only but it remains an instrumentality of the
state. Such quasi-corporations are described as bodies of citizens who have no personal nor private
interests to be subserved, but are simply required by the state to do some public work. The state
merely clothes one of its agencies or instrumentalities with such corporate powers. It is neither a
private corporation but a class of artificial entity. The NIA qualifies as a quasi-corporation, retaining
at all times the attributes and prerogatives of the sovereign State which entirely owns and operates
it.
18

FOR THE FOREGOING REASONS, I vote to GRANT the Motion for Reconsideration and to SET
ASIDE the decision of this Court dated 1 December 1989, subject to the recommendation to
Congress as earlier stated.

Footnotes
1

This motion was referred to the court en banc per resolution dated May 9, 1990.

PADILLA, J. dissenting opinion:


Republic Act No. 3601, entitled "An Act creating the National Irrigation Administration", as
amended by PD 552.
1

Section 2(f) of PD 552.

Section 2(b) of PD 552.

Section 2(e) of PD 552.

Section 2(f) of PD 552.

Angat River Irrigation System v. Angat River Worker Union, 102 Phil. 790.

Comment of Justice Isagani Cruz, Philippine Political Law, Vol. I, p. 39, 1989 Edition.

Olizon v. Central Bank, G.R. No. L-16524, 30 June 1954, 11 SCRA 357.

Civil Code, Article 2176.

10

Ibid., Article 2180.

11

Ibid., par. (6).

12

34 Phil. 311 (21 March 1916).

13

Decision dated 1 December 1989, pp. 10-11.

Art. 2180. par. 6, Civil Code states: The obligation imposed by article 2176 is demandable
not only for one's own acts or omissions, but also for those of persons for whom one is
responsible.
14

xxx

xxx

xxx

The State is responsible in like manner when it acts through a special agent; but not
when the damage has been caused by the official to whom the task done properly
pertains, in which case what is provided in article 2176 shall be applicable."
15

73 Phil. 374.

16

102 Phil. 515.

17

Phil. Constitutional Law by J. Bernas, p. 783, Vol. 1, 1984 Edition.

In re: Advisory Opinion on the Constitutionality of Act No. 346 of Public Acts of 1966,158
N.W. 2d 416.
18

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-11154

March 21, 1916

E. MERRITT, plaintiff-appellant,
vs.
GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.
Crossfield and O'Brien for plaintiff.
Attorney-General Avancea for defendant..
TRENT, J.:

This is an appeal by both parties 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."
The Attorney-General on behalf of the defendant urges that the trial court erred: (a) in finding that the
collision between the plaintiff's 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 the
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 court's findings of fact, which are fully supported by the record, are as follows:
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 an 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 place 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 would in the same
place and in the back part of his head, while blood issued from his nose and he was entirely
unconscious.
The marks revealed that he had one or more fractures of the skull and that the grey matter
and brain was had suffered material injury. At ten o'clock 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 would be exposed to infection, for which reason it was of the most serious nature.
At another examination six days before the day of the trial, Dr. Saleeby noticed that the
plaintiff's 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
readjustment of the functions of the brain and nerves. The patient apparently was slightly
deaf, had a light 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 money for mathematical calculations.
According to the various merchants who testified as witnesses, the plaintiff's 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 dissolved 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."
We may say at the outset that we are in full accord with the trial court to the effect that the collision
between the plaintiff's 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 award 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
find 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 plaintiff's 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 six
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:
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 recommended 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:

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 authorized and directed to appear at the trial on the behalf of the Government of said
Islands, to defendant said Government at the same.
SEC. 2. This Act shall take effect on its passage.
Enacted, February 3, 1915.
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 defendant's 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
vs. City of Luverne, 103 Minn., 491, citing U. S. vs. Kirkpatrick, 9 Wheat, 720; 6 L. Ed., 199; and
Beers vs. States, 20 How., 527; 15 L. Ed., 991.)
In the case of Melvin vs. 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 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 state's liability for the negligent acts of
its officers or agents, the court said:

No claim arises against any government is favor of an individual, by reason of the


misfeasance, laches, or unauthorized exercise of powers by its officers or agents. (Citing
Gibbons vs. U. S., 8 Wall., 269; Clodfelter vs. State, 86 N. C., 51, 53; 41 Am. Rep., 440;
Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Green vs. State, 73 Cal., 29; Bourn
vs. 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 fort or contract, the rule is stated in 36 Cyc., 915, thus:
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.
In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16, 1915, the Act of 1913,
which authorized the bringing of this suit, read:
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 authorized officers and agents, relative
to the mill property of said George Apfelbacher, the fish hatchery of the State of 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.
In determining the scope of this act, the court said:
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 state's immunity from suit. It simply gives authority to commence suit for the
purpose of settling plaintiff's controversies with the estate. 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 state's 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. (Murdock Grate Co. vs.
Commonwealth, 152 Mass., 28; 24 N.E., 854; 8 L. R. A., 399.)
In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied upon and considered,
are as follows:
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.

And the court said:


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
vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Melvin vs. 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. vs. Commonwealth (152
Mass., 28), said:
The statute we are discussing disclose 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.
In Sipple vs. 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."
It being quite clear that Act No. 2457 does not operate to extend the Government's liability to any
cause not previously recognized, we will now examine the substantive law touching the defendant's
liability for the negligent acts of its officers, agents, and employees. Paragraph 5 of article 1903 of
the Civil Code reads:
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.
The supreme court of Spain in defining the scope of this paragraph said:
That the obligation to indemnify for damages which a third person causes to 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
provisions 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 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 an 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 Jur. Civ., 24.)
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 article 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 articles refers to this 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 upon 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 directors 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 executes the trust confided to him. This
concept does not apply to any executive agent who is an employee of the acting
administration and who on 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, 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 charged 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, evidence 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.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 76607 February 26, 1990
UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND YVONNE REEVES, petitioners,
vs.
HON. ELIODORO B. GUINTO, Presiding Judge, Branch LVII, Regional Trial Court, Angeles
City, ROBERTO T. VALENCIA, EMERENCIANA C. TANGLAO, AND PABLO C. DEL
PILAR, respondents.
G.R. No. 79470 February 26, 1990
UNITED STATES OF AMERICA, ANTHONY LAMACHIA, T/SGT. USAF, WILFREDO BELSA,
PETER ORASCION AND ROSE CARTALLA, petitioners,
vs.
HON. RODOLFO D. RODRIGO, as Presiding Judge of Branch 7, Regional Trial Court (BAGUIO
CITY), La Trinidad, Benguet and FABIAN GENOVE, respondents.
G.R. No. 80018 February 26, 1990
UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D. DYE and STEVEN F.
BOSTICK, petitioners,
vs.
HON. JOSEFINA D. CEBALLOS, As Presiding Judge, Regional Trial Court, Branch 66, Capas,
Tarlac, and LUIS BAUTISTA, respondents.
G.R. No. 80258 February 26, 1990
UNITED STATES OF AMERICA, MAJOR GENERAL MICHAEL P. C. CARNS, AIC ERNEST E.
RIVENBURGH, AIC ROBIN BLEVINS, SGT. NOEL A. GONZALES, SGT. THOMAS MITCHELL,
SGT. WAYNE L. BENJAMIN, ET AL., petitioners,
vs.

HON. CONCEPCION S. ALARCON VERGARA, as Presiding Judge, Branch 62 REGIONAL


TRIAL COURT, Angeles City, and RICKY SANCHEZ, FREDDIE SANCHEZ AKA FREDDIE
RIVERA, EDWIN MARIANO, AKA JESSIE DOLORES SANGALANG, ET AL., respondents.
Luna, Sison & Manas Law Office for petitioners.

CRUZ, J.:
These cases have been consolidated because they all involve the doctrine of state immunity.
The United States of America was not impleaded in the complaints below but has moved to
dismiss on the ground that they are in effect suits against it to which it has not consented. It
is now contesting the denial of its motions by the respondent judges.
In G.R. No. 76607, the private respondents are suing several officers of the U.S. Air Force
stationed in Clark Air Base in connection with the bidding conducted by them for contracts
for barber services in the said base.
On February 24, 1986, the Western Pacific Contracting Office, Okinawa Area Exchange, U.S.
Air Force, solicited bids for such contracts through its contracting officer, James F. Shaw.
Among those who submitted their bids were private respondents Roberto T. Valencia,
Emerenciana C. Tanglao, and Pablo C. del Pilar. Valencia had been a concessionaire inside
Clark for 34 years; del Pilar for 12 years; and Tanglao for 50 years.
The bidding was won by Ramon Dizon, over the objection of the private respondents, who
claimed that he had made a bid for four facilities, including the Civil Engineering Area, which
was not included in the invitation to bid.
The private respondents complained to the Philippine Area Exchange (PHAX). The latter,
through its representatives, petitioners Yvonne Reeves and Frederic M. Smouse explained
that the Civil Engineering concession had not been awarded to Dizon as a result of the
February 24, 1986 solicitation. Dizon was already operating this concession, then known as
the NCO club concession, and the expiration of the contract had been extended from June
30, 1986 to August 31, 1986. They further explained that the solicitation of the CE barbershop
would be available only by the end of June and the private respondents would be notified.
On June 30, 1986, the private respondents filed a complaint in the court below to compel
PHAX and the individual petitioners to cancel the award to defendant Dizon, to conduct a
rebidding for the barbershop concessions and to allow the private respondents by a writ of
preliminary injunction to continue operating the concessions pending litigation. 1
Upon the filing of the complaint, the respondent court issued an ex parte order directing the
individual petitioners to maintain the status quo.
On July 22, 1986, the petitioners filed a motion to dismiss and opposition to the petition for
preliminary injunction on the ground that the action was in effect a suit against the United
States of America, which had not waived its non-suability. The individual defendants, as
official employees of the U.S. Air Force, were also immune from suit.

On the same date, July 22, 1986, the trial court denied the application for a writ of preliminary
injunction.
On October 10, 1988, the trial court denied the petitioners' motion to dismiss, holding in part
as follows:
From the pleadings thus far presented to this Court by the parties, the Court's
attention is called by the relationship between the plaintiffs as well as the
defendants, including the US Government, in that prior to the bidding or
solicitation in question, there was a binding contract between the plaintiffs as
well as the defendants, including the US Government. By virtue of said
contract of concession it is the Court's understanding that neither the US
Government nor the herein principal defendants would become the employer/s
of the plaintiffs but that the latter are the employers themselves of the barbers,
etc. with the employer, the plaintiffs herein, remitting the stipulated percentage
of commissions to the Philippine Area Exchange. The same circumstance
would become in effect when the Philippine Area Exchange opened for bidding
or solicitation the questioned barber shop concessions. To this extent,
therefore, indeed a commercial transaction has been entered, and for purposes
of the said solicitation, would necessarily be entered between the plaintiffs as
well as the defendants.
The Court, further, is of the view that Article XVIII of the RP-US Bases
Agreement does not cover such kind of services falling under the
concessionaireship, such as a barber shop concession. 2
On December 11, 1986, following the filing of the herein petition for certiorari and prohibition
with preliminary injunction, we issued a temporary restraining order against further
proceedings in the court below. 3
In G.R. No. 79470, Fabian Genove filed a complaint for damages against petitioners Anthony
Lamachia, Wilfredo Belsa, Rose Cartalla and Peter Orascion for his dismissal as cook in the
U.S. Air Force Recreation Center at the John Hay Air Station in Baguio City. It had been
ascertained after investigation, from the testimony of Belsa Cartalla and Orascion, that
Genove had poured urine into the soup stock used in cooking the vegetables served to the
club customers. Lamachia, as club manager, suspended him and thereafter referred the case
to a board of arbitrators conformably to the collective bargaining agreement between the
Center and its employees. The board unanimously found him guilty and recommended his
dismissal. This was effected on March 5, 1986, by Col. David C. Kimball, Commander of the
3rd Combat Support Group, PACAF Clark Air Force Base. Genove's reaction was to file Ms
complaint in the Regional Trial Court of Baguio City against the individual petitioners. 4
On March 13, 1987, the defendants, joined by the United States of America, moved to dismiss
the complaint, alleging that Lamachia, as an officer of the U.S. Air Force stationed at John
Hay Air Station, was immune from suit for the acts done by him in his official capacity. They
argued that the suit was in effect against the United States, which had not given its consent
to be sued.
This motion was denied by the respondent judge on June 4, 1987, in an order which read in
part:

It is the understanding of the Court, based on the allegations of the complaint


which have been hypothetically admitted by defendants upon the filing of
their motion to dismiss that although defendants acted initially in their
official capacities, their going beyond what their functions called for brought
them out of the protective mantle of whatever immunities they may have had in
the beginning. Thus, the allegation that the acts complained of were illegal,
done. with extreme bad faith and with pre-conceived sinister plan to harass
and finally dismiss the plaintiff, gains significance. 5
The petitioners then came to this Court seeking certiorari and prohibition with preliminary
injunction.
In G.R. No. 80018, Luis Bautista, who was employed as a barracks boy in Camp O' Donnell,
an extension of Clark Air Base, was arrested following a buy-bust operation conducted by the
individual petitioners herein, namely, Tomi J. King, Darrel D. Dye and Stephen F. Bostick,
officers of the U.S. Air Force and special agents of the Air Force Office of Special
Investigators (AFOSI). On the basis of the sworn statements made by them, an information
for violation of R.A. 6425, otherwise known as the Dangerous Drugs Act, was filed against
Bautista in the Regional Trial Court of Tarlac. The above-named officers testified against him
at his trial. As a result of the filing of the charge, Bautista was dismissed from his
employment. He then filed a complaint for damages against the individual petitioners herein
claiming that it was because of their acts that he was removed. 6
During the period for filing of the answer, Mariano Y. Navarro a special counsel assigned to
the International Law Division, Office of the Staff Judge Advocate of Clark Air Base, entered a
special appearance for the defendants and moved for an extension within which to file an
"answer and/or other pleadings." His reason was that the Attorney General of the United
States had not yet designated counsel to represent the defendants, who were being sued for
their official acts. Within the extended period, the defendants, without the assistance of
counsel or authority from the U.S. Department of Justice, filed their answer. They alleged
therein as affirmative defenses that they had only done their duty in the enforcement of the
laws of the Philippines inside the American bases pursuant to the RP-US Military Bases
Agreement.
On May 7, 1987, the law firm of Luna, Sison and Manas, having been retained to represent the
defendants, filed with leave of court a motion to withdraw the answer and dismiss the
complaint. The ground invoked was that the defendants were acting in their official capacity
when they did the acts complained of and that the complaint against them was in effect a suit
against the United States without its consent.
The motion was denied by the respondent judge in his order dated September 11, 1987,
which held that the claimed immunity under the Military Bases Agreement covered only
criminal and not civil cases. Moreover, the defendants had come under the jurisdiction of the
court when they submitted their answer. 7
Following the filing of the herein petition for certiorari and prohibition with preliminary
injunction, we issued on October 14, 1987, a temporary restraining order. 8
In G.R. No. 80258, a complaint for damages was filed by the private respondents against the
herein petitioners (except the United States of America), for injuries allegedly sustained by
the plaintiffs as a result of the acts of the defendants. 9 There is a conflict of factual allegations
here. According to the plaintiffs, the defendants beat them up, handcuffed them and unleashed

dogs on them which bit them in several parts of their bodies and caused extensive injuries to
them. The defendants deny this and claim the plaintiffs were arrested for theft and were bitten by
the dogs because they were struggling and resisting arrest, The defendants stress that the dogs
were called off and the plaintiffs were immediately taken to the medical center for treatment of
their wounds.

In a motion to dismiss the complaint, the United States of America and the individually
named defendants argued that the suit was in effect a suit against the United States, which
had not given its consent to be sued. The defendants were also immune from suit under the
RP-US Bases Treaty for acts done by them in the performance of their official functions.
The motion to dismiss was denied by the trial court in its order dated August 10, 1987,
reading in part as follows:
The defendants certainly cannot correctly argue that they are immune from
suit. The allegations, of the complaint which is sought to be dismissed, had to
be hypothetically admitted and whatever ground the defendants may have, had
to be ventilated during the trial of the case on the merits. The complaint
alleged criminal acts against the individually-named defendants and from the
nature of said acts it could not be said that they are Acts of State, for which
immunity should be invoked. If the Filipinos themselves are duty bound to
respect, obey and submit themselves to the laws of the country, with more
reason, the members of the United States Armed Forces who are being treated
as guests of this country should respect, obey and submit themselves to its
laws. 10
and so was the motion for reconsideration. The defendants submitted their answer as
required but subsequently filed their petition for certiorari and prohibition with preliminary
injunction with this Court. We issued a temporary restraining order on October 27, 1987. 11
II
The rule that a state may not be sued without its consent, now expressed in Article XVI,
Section 3, of the 1987 Constitution, is one of the generally accepted principles of
international law that we have adopted as part of the law of our land under Article II, Section
2. This latter provision merely reiterates a policy earlier embodied in the 1935 and 1973
Constitutions and also intended to manifest our resolve to abide by the rules of the
international community.
Even without such affirmation, we would still be bound by the generally accepted principles
of international law under the doctrine of incorporation. Under this doctrine, as accepted by
the majority of states, such principles are deemed incorporated in the law of every civilized
state as a condition and consequence of its membership in the society of nations. Upon its
admission to such society, the state is automatically obligated to comply with these
principles in its relations with other states.
As applied to the local state, the doctrine of state immunity is based on the justification given
by Justice Holmes that "there can be no legal right against the authority which makes the law
on which the right depends." 12 There are other practical reasons for the enforcement of the
doctrine. In the case of the foreign state sought to be impleaded in the local jurisdiction, the
added inhibition is expressed in the maxim par in parem, non habet imperium. All states are

sovereign equals and cannot assert jurisdiction over one another. A contrary disposition would, in
the language of a celebrated case, "unduly vex the peace of nations." 13

While the doctrine appears to prohibit only suits against the state without its consent, it is
also applicable to complaints filed against officials of the state for acts allegedly performed
by them in the discharge of their duties. The rule is that if the judgment against such officials
will require the state itself to perform an affirmative act to satisfy the same, such as the
appropriation of the amount needed to pay the damages awarded against them, the suit must
be regarded as against the state itself although it has not been formally impleaded. 14 In such
a situation, the state may move to dismiss the complaint on the ground that it has been filed
without its consent.
The doctrine is sometimes derisively called "the royal prerogative of dishonesty" because of
the privilege it grants the state to defeat any legitimate claim against it by simply invoking its
non-suability. That is hardly fair, at least in democratic societies, for the state is not an
unfeeling tyrant unmoved by the valid claims of its citizens. In fact, the doctrine is not
absolute and does not say the state may not be sued under any circumstance. On the
contrary, the rule says that the state may not be sued without its consent, which clearly
imports that it may be sued if it consents.
The consent of the state to be sued may be manifested expressly or impliedly. Express
consent may be embodied in a general law or a special law. Consent is implied when the
state enters into a contract or it itself commences litigation.
The general law waiving the immunity of the state from suit is found in Act No. 3083, under
which the Philippine government "consents and submits to be sued upon any moneyed claim
involving liability arising from contract, express or implied, which could serve as a basis of
civil action between private parties." In Merritt v. Government of the Philippine Islands, 15 a
special law was passed to enable a person to sue the government for an alleged tort. When the
government enters into a contract, it is deemed to have descended to the level of the other
contracting party and divested of its sovereign immunity from suit with its implied
consent.16 Waiver is also implied when the government files a complaint, thus opening itself to a
counterclaim. 17
The above rules are subject to qualification. Express consent is effected only by the will of
the legislature through the medium of a duly enacted statute. 18 We have held that not all
contracts entered into by the government will operate as a waiver of its non-suability; distinction
must be made between its sovereign and proprietary acts. 19 As for the filing of a complaint by the
government, suability will result only where the government is claiming affirmative relief from the
defendant. 20
In the case of the United States of America, the customary rule of international law on state
immunity is expressed with more specificity in the RP-US Bases Treaty. Article III thereof
provides as follows:
It is mutually agreed that the United States shall have the rights, power and
authority within the bases which are necessary for the establishment, use,
operation and defense thereof or appropriate for the control thereof and all the
rights, power and authority within the limits of the territorial waters and air
space adjacent to, or in the vicinity of, the bases which are necessary to
provide access to them or appropriate for their control.

The petitioners also rely heavily on Baer v. Tizon, 21 along with several other decisions, to
support their position that they are not suable in the cases below, the United States not having
waived its sovereign immunity from suit. It is emphasized that in Baer, the Court held:
The invocation of the doctrine of immunity from suit of a foreign state without
its consent is appropriate. More specifically, insofar as alien armed forces is
concerned, the starting point is Raquiza v. Bradford, a 1945 decision. In
dismissing a habeas corpus petition for the release of petitioners confined by
American army authorities, Justice Hilado speaking for the Court,
cited Coleman v. Tennessee, where it was explicitly declared: 'It is well settled
that a foreign army, permitted to march through a friendly country or to be
stationed in it, by permission of its government or sovereign, is exempt from
the civil and criminal jurisdiction of the place.' Two years later, in Tubb and
Tedrow v. Griess, this Court relied on the ruling in Raquiza v. Bradford and
cited in support thereof excerpts from the works of the following authoritative
writers: Vattel, Wheaton, Hall, Lawrence, Oppenheim, Westlake, Hyde, and
McNair and Lauterpacht. Accuracy demands the clarification that after the
conclusion of the Philippine-American Military Bases Agreement, the treaty
provisions should control on such matter, the assumption being that there was
a manifestation of the submission to jurisdiction on the part of the foreign
power whenever appropriate. More to the point is Syquia v. Almeda Lopez,
where plaintiffs as lessors sued the Commanding General of the United States
Army in the Philippines, seeking the restoration to them of the apartment
buildings they owned leased to the United States armed forces stationed in the
Manila area. A motion to dismiss on the ground of non-suability was filed and
upheld by respondent Judge. The matter was taken to this Court in a
mandamus proceeding. It failed. It was the ruling that respondent Judge acted
correctly considering that the 4 action must be considered as one against the
U.S. Government. The opinion of Justice Montemayor continued: 'It is clear
that the courts of the Philippines including the Municipal Court of Manila have
no jurisdiction over the present case for unlawful detainer. The question of
lack of jurisdiction was raised and interposed at the very beginning of the
action. The U.S. Government has not given its consent to the filing of this suit
which is essentially against her, though not in name. Moreover, this is not only
a case of a citizen filing a suit against his own Government without the latter's
consent but it is of a citizen firing an action against a foreign government
without said government's consent, which renders more obvious the lack of
jurisdiction of the courts of his country. The principles of law behind this rule
are so elementary and of such general acceptance that we deem it
unnecessary to cite authorities in support thereof then came Marvel Building
Corporation v. Philippine War Damage Commission, where respondent, a
United States Agency established to compensate damages suffered by the
Philippines during World War II was held as falling within the above doctrine as
the suit against it would eventually be a charge against or financial liability of
the United States Government because ... , the Commission has no funds of its
own for the purpose of paying money judgments.' The Syquia ruling was again
explicitly relied upon in Marquez Lim v. Nelson, involving a complaint for the
recovery of a motor launch, plus damages, the special defense interposed
being 'that the vessel belonged to the United States Government, that the
defendants merely acted as agents of said Government, and that the United
States Government is therefore the real party in interest.' So it was
in Philippine Alien Property Administration v. Castelo, where it was held that a
suit against Alien Property Custodian and the Attorney General of the United

States involving vested property under the Trading with the Enemy Act is in
substance a suit against the United States. To the same effect is Parreno v.
McGranery, as the following excerpt from the opinion of justice Tuazon clearly
shows: 'It is a widely accepted principle of international law, which is made a
part of the law of the land (Article II, Section 3 of the Constitution), that a
foreign state may not be brought to suit before the courts of another state or
its own courts without its consent.' Finally, there is Johnson v. Turner, an
appeal by the defendant, then Commanding General, Philippine Command (Air
Force, with office at Clark Field) from a decision ordering the return to plaintiff
of the confiscated military payment certificates known as scrip money. In
reversing the lower court decision, this Tribunal, through Justice Montemayor,
relied on Syquia v. Almeda Lopez, explaining why it could not be sustained.
It bears stressing at this point that the above observations do not confer on the United States
of America a blanket immunity for all acts done by it or its agents in the Philippines. Neither
may the other petitioners claim that they are also insulated from suit in this country merely
because they have acted as agents of the United States in the discharge of their official
functions.
There is no question that the United States of America, like any other state, will be deemed to
have impliedly waived its non-suability if it has entered into a contract in its proprietary or
private capacity. It is only when the contract involves its sovereign or governmental capacity
that no such waiver may be implied. This was our ruling in United States of America v.
Ruiz, 22 where the transaction in question dealt with the improvement of the wharves in the naval
installation at Subic Bay. As this was a clearly governmental function, we held that the contract
did not operate to divest the United States of its sovereign immunity from suit. In the words of
Justice Vicente Abad Santos:
The traditional rule of immunity exempts a State from being sued in the courts
of another State without its consent or waiver. This rule is a necessary
consequence of the principles of independence and equality of States.
However, the rules of International Law are not petrified; they are constantly
developing and evolving. And because the activities of states have multiplied,
it has been necessary to distinguish them between sovereign and
governmental acts (jure imperii) and private, commercial and proprietary acts
(jure gestionis). The result is that State immunity now extends only to acts jure
imperii The restrictive application of State immunity is now the rule in the
United States, the United kingdom and other states in Western Europe.
xxx xxx xxx
The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign sovereign, its
commercial activities or economic affairs. Stated differently, a State may be
said to have descended to the level of an individual and can thus be deemed to
have tacitly given its consent to be sued only when it enters into business
contracts. It does not apply where the contract relates to the exercise of its
sovereign functions. In this case the projects are an integral part of the naval
base which is devoted to the defense of both the United States and the
Philippines, indisputably a function of the government of the highest order;
they are not utilized for nor dedicated to commercial or business purposes.

The other petitioners in the cases before us all aver they have acted in the discharge of their
official functions as officers or agents of the United States. However, this is a matter of
evidence. The charges against them may not be summarily dismissed on their mere assertion
that their acts are imputable to the United States of America, which has not given its consent
to be sued. In fact, the defendants are sought to be held answerable for personal torts in
which the United States itself is not involved. If found liable, they and they alone must satisfy
the judgment.
In Festejo v. Fernando, 23 a bureau director, acting without any authority whatsoever,
appropriated private land and converted it into public irrigation ditches. Sued for the value of the
lots invalidly taken by him, he moved to dismiss the complaint on the ground that the suit was in
effect against the Philippine government, which had not given its consent to be sued. This Court
sustained the denial of the motion and held that the doctrine of state immunity was not applicable.
The director was being sued in his private capacity for a personal tort.
With these considerations in mind, we now proceed to resolve the cases at hand.
III
It is clear from a study of the records of G.R. No. 80018 that the individually-named
petitioners therein were acting in the exercise of their official functions when they conducted
the buy-bust operation against the complainant and thereafter testified against him at his
trial. The said petitioners were in fact connected with the Air Force Office of Special
Investigators and were charged precisely with the function of preventing the distribution,
possession and use of prohibited drugs and prosecuting those guilty of such acts. It cannot
for a moment be imagined that they were acting in their private or unofficial capacity when
they apprehended and later testified against the complainant. It follows that for discharging
their duties as agents of the United States, they cannot be directly impleaded for acts
imputable to their principal, which has not given its consent to be sued. As we observed
in Sanders v. Veridiano: 24
Given the official character of the above-described letters, we have to conclude
that the petitioners were, legally speaking, being sued as officers of the United
States government. As they have acted on behalf of that government, and
within the scope of their authority, it is that government, and not the
petitioners personally, that is responsible for their acts.
The private respondent invokes Article 2180 of the Civil Code which holds the government
liable if it acts through a special agent. The argument, it would seem, is premised on the
ground that since the officers are designated "special agents," the United States government
should be liable for their torts.
There seems to be a failure to distinguish between suability and liability and a misconception
that the two terms are synonymous. Suability depends on the consent of the state to be sued,
liability on the applicable law and the established facts. The circumstance that a state is
suable does not necessarily mean that it is liable; on the other hand, it can never be held
liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the
state has allowed itself to be sued. When the state does waive its sovereign immunity, it is
only giving the plaintiff the chance to prove, if it can, that the defendant is liable.

The said article establishes a rule of liability, not suability. The government may be held liable
under this rule only if it first allows itself to be sued through any of the accepted forms of
consent.
Moreover, the agent performing his regular functions is not a special agent even if he is so
denominated, as in the case at bar. No less important, the said provision appears to regulate
only the relations of the local state with its inhabitants and, hence, applies only to the
Philippine government and not to foreign governments impleaded in our courts.
We reject the conclusion of the trial court that the answer filed by the special counsel of the
Office of the Sheriff Judge Advocate of Clark Air Base was a submission by the United States
government to its jurisdiction. As we noted in Republic v. Purisima, 25 express waiver of
immunity cannot be made by a mere counsel of the government but must be effected through a
duly-enacted statute. Neither does such answer come under the implied forms of consent as
earlier discussed.
But even as we are certain that the individual petitioners in G.R. No. 80018 were acting in the
discharge of their official functions, we hesitate to make the same conclusion in G.R. No.
80258. The contradictory factual allegations in this case deserve in our view a closer study of
what actually happened to the plaintiffs. The record is too meager to indicate if the
defendants were really discharging their official duties or had actually exceeded their
authority when the incident in question occurred. Lacking this information, this Court cannot
directly decide this case. The needed inquiry must first be made by the lower court so it may
assess and resolve the conflicting claims of the parties on the basis of the evidence that has
yet to be presented at the trial. Only after it shall have determined in what capacity the
petitioners were acting at the time of the incident in question will this Court determine, if still
necessary, if the doctrine of state immunity is applicable.
In G.R. No. 79470, private respondent Genove was employed as a cook in the Main Club
located at the U.S. Air Force Recreation Center, also known as the Open Mess Complex, at
John Hay Air Station. As manager of this complex, petitioner Lamachia is responsible for
eleven diversified activities generating an annual income of $2 million. Under his executive
management are three service restaurants, a cafeteria, a bakery, a Class VI store, a coffee and
pantry shop, a main cashier cage, an administrative office, and a decentralized warehouse
which maintains a stock level of $200,000.00 per month in resale items. He supervises 167
employees, one of whom was Genove, with whom the United States government has
concluded a collective bargaining agreement.
From these circumstances, the Court can assume that the restaurant services offered at the
John Hay Air Station partake of the nature of a business enterprise undertaken by the United
States government in its proprietary capacity. Such services are not extended to the
American servicemen for free as a perquisite of membership in the Armed Forces of the
United States. Neither does it appear that they are exclusively offered to these servicemen;
on the contrary, it is well known that they are available to the general public as well, including
the tourists in Baguio City, many of whom make it a point to visit John Hay for this reason. All
persons availing themselves of this facility pay for the privilege like all other customers as in
ordinary restaurants. Although the prices are concededly reasonable and relatively low, such
services are undoubtedly operated for profit, as a commercial and not a governmental
activity.
The consequence of this finding is that the petitioners cannot invoke the doctrine of state
immunity to justify the dismissal of the damage suit against them by Genove. Such defense

will not prosper even if it be established that they were acting as agents of the United States
when they investigated and later dismissed Genove. For that matter, not even the United
States government itself can claim such immunity. The reason is that by entering into the
employment contract with Genove in the discharge of its proprietary functions, it impliedly
divested itself of its sovereign immunity from suit.
But these considerations notwithstanding, we hold that the complaint against the petitioners
in the court below must still be dismissed. While suable, the petitioners are nevertheless not
liable. It is obvious that the claim for damages cannot be allowed on the strength of the
evidence before us, which we have carefully examined.
The dismissal of the private respondent was decided upon only after a thorough
investigation where it was established beyond doubt that he had polluted the soup stock with
urine. The investigation, in fact, did not stop there. Despite the definitive finding of Genove's
guilt, the case was still referred to the board of arbitrators provided for in the collective
bargaining agreement. This board unanimously affirmed the findings of the investigators and
recommended Genove's dismissal. There was nothing arbitrary about the proceedings. The
petitioners acted quite properly in terminating the private respondent's employment for his
unbelievably nauseating act. It is surprising that he should still have the temerity to file his
complaint for damages after committing his utterly disgusting offense.
Concerning G.R. No. 76607, we also find that the barbershops subject of the concessions
granted by the United States government are commercial enterprises operated by private
person's. They are not agencies of the United States Armed Forces nor are their facilities
demandable as a matter of right by the American servicemen. These establishments provide
for the grooming needs of their customers and offer not only the basic haircut and shave (as
required in most military organizations) but such other amenities as shampoo, massage,
manicure and other similar indulgences. And all for a fee. Interestingly, one of the
concessionaires, private respondent Valencia, was even sent abroad to improve his tonsorial
business, presumably for the benefit of his customers. No less significantly, if not more so,
all the barbershop concessionaires are under the terms of their contracts, required to remit
to the United States government fixed commissions in consideration of the exclusive
concessions granted to them in their respective areas.
This being the case, the petitioners cannot plead any immunity from the complaint filed by
the private respondents in the court below. The contracts in question being decidedly
commercial, the conclusion reached in the United States of America v. Ruiz case cannot be
applied here.
The Court would have directly resolved the claims against the defendants as we have done in
G.R. No. 79470, except for the paucity of the record in the case at hand. The evidence of the
alleged irregularity in the grant of the barbershop concessions is not before us. This means
that, as in G.R. No. 80258, the respondent court will have to receive that evidence first, so it
can later determine on the basis thereof if the plaintiffs are entitled to the relief they seek.
Accordingly, this case must also be remanded to the court below for further proceedings.
IV
There are a number of other cases now pending before us which also involve the question of
the immunity of the United States from the jurisdiction of the Philippines. This is cause for
regret, indeed, as they mar the traditional friendship between two countries long allied in the
cause of democracy. It is hoped that the so-called "irritants" in their relations will be resolved

in a spirit of mutual accommodation and respect, without the inconvenience and asperity of
litigation and always with justice to both parties.
WHEREFORE, after considering all the above premises, the Court hereby renders judgment
as follows:
1. In G.R. No. 76607, the petition is DISMISSED and the respondent judge is
directed to proceed with the hearing and decision of Civil Case No. 4772. The
temporary restraining order dated December 11, 1986, is LIFTED.
2. In G.R. No. 79470, the petition is GRANTED and Civil Case No. 829-R(298) is
DISMISSED.
3. In G.R. No. 80018, the petition is GRANTED and Civil Case No. 115-C-87 is
DISMISSED. The temporary restraining order dated October 14, 1987, is made
permanent.
4. In G.R. No. 80258, the petition is DISMISSED and the respondent court is
directed to proceed with the hearing and decision of Civil Case No. 4996. The
temporary restraining order dated October 27, 1987, is LIFTED.
All without any pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Footnotes
1 Civil Case No. 4772.
2 Annex "B", Rollo, pp. 36-38.
3 Rollo, p. 88.
4 Civil Case No. 829-R(298).
5 Annex "A", Rollo, p. 38.
6 Civil Case No. 115-C-87.
7 Annex "A," Rollo, p. 33.
8 Rollo, p. 69.
9 Civil Case No. 4996.

10 Annex "A," Rollo, p. 58.


11 Rollo, p. 181.
12 Kawanakoa v. Polybank, 205 U.S. 349.
13 De Haber v. Queen of Portugal, 17 Q.B. 171.
14 Garcia v. Chief of Staff, 16 SCRA 120.
15 4 Phil. 311.
16 Santos v. Santos, 92 Phil. 281; Lyons v. United States of America, 104 Phil.
593.
17 Froilan v. Pan Oriental Shipping Co., G.R. No. 6060, September 30, 1950.
18 Republic v. Purisima, 78 SCRA 470.
19 United States of America v. Ruiz, 136 SCRA 487.
20 Lim v. Brownell, 107 Phil. 345.
21 57 SCRA 1.
22 136 SCRA 487.
23 50 O.G. 1556.
24 162 SCRA 88.
25 Supra.
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 61516 March 21, 1989
FLORENTINA A. GUILATCO, petitioner,
vs.
CITY OF DAGUPAN, and the HONORABLE COURT OF APPEALS, respondents.

Nolan R. Evangelista for petitioner.


The City Legal Officer for respondents.

SARMIENTO, J.:
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:

xxx
(1) Ordering defendant City of Dagupan to pay plaintiff actual damages in the amount
of P 15,924 (namely P8,054.00 as hospital, medical and other expenses [Exhs. H to
H-60], P 7,420.00 as lost income for one (1) year [Exh. F] and P 450.00 as bonus). P
150,000.00 as moral damages, P 50,000.00 as exemplary damages, and P 3,000.00
as attorney's 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 P
8,053.65 (Exh. H to H-60) or a total of P 10,000.00 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 P 720.00 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 ex-officio
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. 71 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.
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 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.
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:
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:
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:
xxx
(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.
xxx
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 . 7Thus 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 appliesin 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 exofficio 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: P 1,810.66 from
Dagupan City; P 200.00 from the Ministry of Public Highways; P 100.00 from the Bureau of Public
Works and P 500.00 by virtue of P.D. 1096, respectively." 10This 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.

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.
Be all that as it may, the actual damages awarded to the petitioner in the amount of P 10,000.00
should be reduced to the proven expenses of P 8,053.65 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 work" 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:

(1) First, the proximate cause of the injury must be the claimee's 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 petitioner's place of work testified to the degeneration in her disposition-from
being jovial to depressed. She refrained from attending social and civic activities. 17
Nevertheless the award of moral damages at P 150,000.00 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 P 20,000.00.

As for the award of exemplary damages, the trial court correctly pointed out the basis:
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 petitioner's 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:
(1) Ordering the defendant City of Dagupan to pay the plaintiff actual damages in the
amount of P 15,924 (namely P 8,054.00 as hospital, medical and other expenses; P
7,420.00 as lost income for one (1) year and P 450.00 as bonus); P 20,000.00 as
moral damages and P 10,000.00 as exemplary damages.
The attorney's fees of P 3,000.00 remain the same.
SO ORDERED.
Melencio-Herrera, (Chaiperson), Paras, Padilla and Regalado, JJ., concur.

Footnotes
1 Florentina A. Guilatco v. City of Dagupan and Alfredo G. Tangco, RTC (Lingayen,
Pangasinan), Civil Case No. 15463, March 12, 1979.
2 Rollo, 25 (Record on Appeal, 57).
3 Id., (Record on Appeal, 47-49).
4 Florentina A. Guilatco v. City of Dagupan, CA-G.R. No. 65470-R, May 31, 1982; De
la Fuente, B.S. J., ponente; German, Milagros A. and Cuevas, Serafin R., JJ.,
concurring.
5 Rollo, 29.
6 City of Manila v. Teotico, No. L-23052, January 29, 1968, 22 SCRA 267.
7 RA. 170, sec. 15(y).
8 RA. 170, sec. 5.
9 Jimenez v. City of Manila, No. 71049, May 29, 1987, 150 SCRA 510.

10 Rollo, 25 (Record on Appeal, 25).


11 Rollo, 25 (Record on Appeal, 61).
12 Medelo v. Gorospe, G.R. 41970, March 25, 1988.
13 Civil Code, Article 2216.
14 Ledesma v. Court of Appeals, No. 54598, April 15, 1988.
15 San Miguel Brewery, Inc. v. Magno, No. L-21879, September 29, 1967, 21 SCRA
300.
16 Bagumbayan Corp. v. Intermediate Appellate Court, No. 66274, September 30,
1984, 132 SCRA 444.
17 Record on Appeal, 55.
18 Guita v. Court of Appeals, No. 60409, November 11, 1985, 139 SCRA 576.
19 Felisilda v. Villanueva, No. 60372, October 29, 1985, 139 SCRA431.
20 R & B Surety and Insurance Co., Inc. v. Intermediate Appellate Court, No. 64515,
June 22, 1984, 129 SCRA 736.
21 Pleno v. Court of Appeals, G.R. 56505, May 9, 1988.
22 Rollo, 25 (Record on Appeal, pp. 55-56). See also De Leon and Gonzales De
Leon v. Hon. Court of Appeals, G.R. No. L-31931, August 31, 1988.
23 Rollo, 29.
24 Rules of Court, Rule 39, sec. 2.
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 71049 May 29, 1987

BERNARDINO JIMENEZ, petitioner,


vs.
CITY OF MANILA and INTERMEDIATE APPELLATE COURT, respondents.

PARAS, J.:
This is a petition for review on certiorari of: (1) the decision

* of the Intermediate Appellate Court in AC-G.R. No.


013887-CVBernardino Jimenez v. Asiatic Integrated Corporation and City of Manila, reversing the decision ** of the Court of First Instance of
Manila, Branch XXII in Civil Case No. 96390 between the same parties, but only insofar as holding Asiatic Integrated Corporation solely liable
for damages and attorney's fees instead of making the City of Manila jointly and solidarily liable with it as prayed for by the petitioner and (2)
the resolution of the same Appellate Court denying his Partial Motion for Reconsideration (Rollo, p. 2).

The dispositive portion of the Intermediate Appellate Court's decision is as follows:


WHEREFORE, the decision appealed from is hereby REVERSED. A new one is
hereby entered ordering the defendant Asiatic Integrated Corporation to pay the
plaintiff P221.90 actual medical expenses, P900.00 for the amount paid for the
operation and management of a school bus, P20,000.00 as moral damages due to
pains, sufferings and sleepless nights and P l0,000.00 as attorney's fees.
SO ORDERED. (p. 20, Rollo)
The findings of respondent Appellate Court are as follows:
The evidence of the plaintiff (petitioner herein) shows that in the morning of August 15, 1974 he,
together with his neighbors, went to Sta. Ana public market to buy "bagoong" at the time when the
public market was flooded with ankle deep rainwater. After purchasing the "bagoong" he turned
around to return home but he stepped on an uncovered opening which could not be seen because of
the dirty rainwater, causing a dirty and rusty four- inch nail, stuck inside the uncovered opening, to
pierce the left leg of plaintiff-petitioner penetrating to a depth of about one and a half inches. After
administering first aid treatment at a nearby drugstore, his companions helped him hobble home. He
felt ill and developed fever and he had to be carried to Dr. Juanita Mascardo. Despite the medicine
administered to him by the latter, his left leg swelled with great pain. He was then rushed to the
Veterans Memorial Hospital where he had to be confined for twenty (20) days due to high fever and
severe pain.
Upon his discharge from the hospital, he had to walk around with crutches for fifteen (15) days. His
injury prevented him from attending to the school buses he is operating. As a result, he had to
engage the services of one Bienvenido Valdez to supervise his business for an aggregate
compensation of nine hundred pesos (P900.00). (Decision, AC-G.R. CV No. 01387, Rollo, pp. 1320).
Petitioner sued for damages the City of Manila and the Asiatic Integrated Corporation under whose
administration the Sta. Ana Public Market had been placed by virtue of a Management and
Operating Contract (Rollo, p. 47).
The lower court decided in favor of respondents, the dispositive portion of the decision reading:
WHEREFORE, judgment is hereby rendered in favor of the defendants and against
the plaintiff dismissing the complaint with costs against the plaintiff. For lack of

sufficient evidence, the counterclaims of the defendants are likewise dismissed.


(Decision, Civil Case No. 96390, Rollo, p. 42).
As above stated, on appeal, the Intermediate Appellate Court held the Asiatic Integrated Corporation
liable for damages but absolved respondent City of Manila.
Hence this petition.
The lone assignment of error raised in this petition is on whether or not the Intermediate Appellate
Court erred in not ruling that respondent City of Manila should be jointly and severally liable with
Asiatic Integrated Corporation for the injuries petitioner suffered.
In compliance with the resolution of July 1, 1985 of the First Division of this Court (Rollo, p. 29)
respondent City of Manila filed its comment on August 13, 1985 (Rollo, p. 34) while petitioner filed its
reply on August 21, 1985 (Reno, p. 51).
Thereafter, the Court in the resolution of September 11, 1985 (Rollo, p. 62) gave due course to the
petition and required both parties to submit simultaneous memoranda
Petitioner filed his memorandum on October 1, 1985 (Rollo, p. 65) while respondent filed its
memorandum on October 24, 1985 (Rollo, p. 82).
In the resolution of October 13, 1986, this case was transferred to the Second Division of this Court,
the same having been assigned to a member of said Division (Rollo, p. 92).
The petition is impressed with merit.
As correctly found by the Intermediate Appellate Court, there is no doubt that the plaintiff suffered
injuries when he fell into a drainage opening without any cover in the Sta. Ana Public Market.
Defendants do not deny that plaintiff was in fact injured although the Asiatic Integrated Corporation
tries to minimize the extent of the injuries, claiming that it was only a small puncture and that as a
war veteran, plaintiff's hospitalization at the War Veteran's Hospital was free. (Decision, AC-G.R. CV
No. 01387, Rollo, p. 6).
Respondent City of Manila maintains that it cannot be held liable for the injuries sustained by the
petitioner because under the Management and Operating Contract, Asiatic Integrated Corporation
assumed all responsibility for damages which may be suffered by third persons for any cause
attributable to it.
It has also been argued that the City of Manila cannot be held liable under Article 1, Section 4 of
Republic Act No. 409 as amended (Revised Charter of Manila) which provides:
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 any other officers while enforcing or
attempting to enforce said provisions.
This issue has been laid to rest in the case of City of Manila v. Teotico (22 SCRA 269-272 [1968])
where the Supreme Court squarely ruled that Republic Act No. 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 of the Philippines which provides that:
Provinces, cities and municipalities shall be liable for damages for the death of, or
injuries suffered by any person by reason of defective conditions of roads, streets,
bridges, public buildings and other public works under their control or supervision.
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 or
supervision." In other words, Art. 1, sec. 4, R.A. No. 409 refers to liability arising from negligence, in
general, regardless of the object, thereof, while Article 2189 of the Civil Code governs liability due to
"defective streets, public buildings and other public works" in particular and is therefore decisive on
this specific case.
In the same suit, the Supreme Court clarified further that under Article 2189 of the Civil Code, it is
not necessary for the liability therein established to attach, that the defective public works belong to
the province, city or municipality from which responsibility is exacted. What said article requires is
that the province, city or municipality has either "control or supervision" over the public building in
question.
In the case at bar, there is no question that the Sta. Ana Public Market, despite the Management and
Operating Contract between respondent City and Asiatic Integrated Corporation remained under the
control of the former.
For one thing, said contract is explicit in this regard, when it provides:
II
That immediately after the execution of this contract, the SECOND PARTY shall start
the painting, cleaning, sanitizing and repair of the public markets and talipapas and
within ninety (90) days thereof, the SECOND PARTY shall submit a program of
improvement, development, rehabilitation and reconstruction of the city public
markets and talipapas subject to prior approval of the FIRST PARTY. (Rollo, p. 44)
xxx xxx xxx
VI
That all present personnel of the City public markets and talipapas shall be retained
by the SECOND PARTY as long as their services remain satisfactory and they shall
be extended the same rights and privileges as heretofore enjoyed by them. Provided,
however, that the SECOND PARTY shall have the right, subject to prior approval of
the FIRST PARTY to discharge any of the present employees for cause. (Rollo, p.
45).
VII

That the SECOND PARTY may from time to time be required by the FIRST PARTY,
or his duly authorized representative or representatives, to report, on the activities
and operation of the City public markets and talipapas and the facilities and
conveniences installed therein, particularly as to their cost of construction, operation
and maintenance in connection with the stipulations contained in this Contract. (lbid)
The fact of supervision and control of the City over subject public market was admitted by Mayor
Ramon Bagatsing in his letter to Secretary of Finance Cesar Virata which reads:
These cases arose from the controversy over the Management and Operating
Contract entered into on December 28, 1972 by and between the City of Manila and
the Asiatic Integrated Corporation, whereby in consideration of a fixed service fee,
the City hired the services of the said corporation to undertake the physical
management, maintenance, rehabilitation and development of the City's public
markets and' Talipapas' subject to the control and supervision of the City.
xxx xxx xxx
It is believed that there is nothing incongruous in the exercise of these powers vis-avis the existence of the contract, inasmuch as the City retains the power of
supervision and control over its public markets and talipapas under the terms of the
contract. (Exhibit "7-A") (Emphasis supplied.) (Rollo, p. 75).
In fact, the City of Manila employed a market master for the Sta. Ana Public Market whose primary
duty is to take direct supervision and control of that particular market, more specifically, to check the
safety of the place for the public.
Thus the Asst. Chief of the Market Division and Deputy Market Administrator of the City of Manila
testified as follows:
Court This market master is an employee of the City of Manila?
Mr. Ymson Yes, Your Honor.
Q What are his functions?
A Direct supervision and control over the market area assigned to
him."(T.s.n.,pp. 41-42, Hearing of May 20, 1977.)
xxx xxx xxx
Court As far as you know there is or is there any specific employee
assigned with the task of seeing to it that the Sta. Ana Market is safe
for the public?
Mr. Ymson Actually, as I stated, Your Honor, that the Sta. Ana has its
own market master. The primary duty of that market master is to
make the direct supervision and control of that particular market, the
check or verifying whether the place is safe for public safety is vested
in the market master. (T.s.n., pp. 2425, Hearing of July 27, 1977.)
(Emphasis supplied.) (Rollo, p. 76).

Finally, Section 30 (g) of the Local Tax Code as amended, provides:


The treasurer shall exercise direct and immediate supervision administration and
control over public markets and the personnel thereof, including those whose duties
concern the maintenance and upkeep of the market and ordinances and other
pertinent rules and regulations. (Emphasis supplied.) (Rollo, p. 76)
The contention of respondent City of Manila that petitioner should not have ventured to go to Sta.
Ana Public Market during a stormy weather is indeed untenable. As observed by respondent Court
of Appeals, it is an error for the trial court to attribute the negligence to herein petitioner. More
specifically stated, the findings of appellate court are as follows:
... The trial court even chastised the plaintiff for going to market on a rainy day just to
buy bagoong. A customer in a store has the right to assume that the owner will
comply with his duty to keep the premises safe for customers. If he ventures to the
store on the basis of such assumption and is injured because the owner did not
comply with his duty, no negligence can be imputed to the customer. (Decision, ACG. R. CV No. 01387, Rollo, p. 19).
As a defense against liability on the basis of a quasi-delict, one must have exercised the diligence of
a good father of a family. (Art. 1173 of the Civil Code).
There is no argument that it is the duty of the City of Manila to exercise reasonable care to keep the
public market reasonably safe for people frequenting the place for their marketing needs.
While it may be conceded that the fulfillment of such duties is extremely difficult during storms and
floods, it must however, be admitted that ordinary precautions could have been taken during good
weather to minimize the dangers to life and limb under those difficult circumstances.
For instance, the drainage hole could have been placed under the stalls instead of on the passage
ways. Even more important is the fact, that the City should have seen to it that the openings were
covered. Sadly, the evidence indicates that long before petitioner fell into the opening, it was already
uncovered, and five (5) months after the incident happened, the opening was still uncovered. (Rollo,
pp. 57; 59). Moreover, while there are findings that during floods the vendors remove the iron grills to
hasten the flow of water (Decision, AC-G.R. CV No. 0 1387; Rollo, p. 17), there is no showing that
such practice has ever been prohibited, much less penalized by the City of Manila. Neither was it
shown that any sign had been placed thereabouts to warn passersby of the impending danger.
To recapitulate, it appears evident that the City of Manila is likewise liable for damages under Article
2189 of the Civil Code, respondent City having retained control and supervision over the Sta. Ana
Public Market and as tort-feasor under Article 2176 of the Civil Code on quasi-delicts
Petitioner had the right to assume that there were no openings in the middle of the passageways
and if any, that they were adequately covered. Had the opening been covered, petitioner could not
have fallen into it. Thus the negligence of the City of Manila is the proximate cause of the injury
suffered, the City is therefore liable for the injury suffered by the peti- 4 petitioner.
Respondent City of Manila and Asiatic Integrated Corporation being joint tort-feasors are solidarily
liable under Article 2194 of the Civil Code.

PREMISES CONSIDERED, the decision of the Court of Appeals is hereby MODIFIED, making the
City of Manila and the Asiatic Integrated Corporation solidarily liable to pay the plaintiff P221.90
actual medical expenses, P900.00 for the amount paid for the operation and management of the
school bus, P20,000.00 as moral damages due to pain, sufferings and sleepless nights and
P10,000.00 as attorney's fees.
SO ORDERED.
Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin and Cortes JJ., concur.

Footnotes
* Penned by Justice Jorge R. Coquia and concurred in by Justices Mariano A. Zosa,
Floreliana Castro-Bartolome, and Bienvenido C. Ejercito.
** Written by Judge Amador T. Vallejos.
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-52179

April 8, 1991

MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner


vs.
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIA, IAUREANO BANIA, JR., SOR
MARIETA BANIA, MONTANO BANIA, ORJA BANIA, AND LYDIA R. BANIA, respondents.
Mauro C. Cabading, Jr. for petitioner.
Simeon G. Hipol for private respondent.

MEDIALDEA, J.:
This is a petition for certiorari with prayer for the issuance of a writ of preliminary mandatory
injunction seeking the nullification or modification of the proceedings and the orders issued by the
respondent Judge Romeo N. Firme, in his capacity as the presiding judge of the Court of First
Instance of La Union, Second Judicial District, Branch IV, Bauang, La Union in Civil Case No. 107BG, entitled "Juana Rimando Bania, et al. vs. Macario Nieveras, et al." dated November 4, 1975;

July 13, 1976; August 23,1976; February 23, 1977; March 16, 1977; July 26, 1979; September 7,
1979; November 7, 1979 and December 3, 1979 and the decision dated October 10, 1979 ordering
defendants Municipality of San Fernando, La Union and Alfredo Bislig to pay, jointly and severally,
the plaintiffs for funeral expenses, actual damages consisting of the loss of earning capacity of the
deceased, attorney's fees and costs of suit and dismissing the complaint against the Estate of
Macario Nieveras and Bernardo Balagot.
The antecedent facts are as follows:
Petitioner Municipality of San Fernando, La Union is a municipal corporation existing under and in
accordance with the laws of the Republic of the Philippines. Respondent Honorable Judge Romeo
N. Firme is impleaded in his official capacity as the presiding judge of the Court of First Instance of
La Union, Branch IV, Bauang, La Union. While private respondents Juana Rimando-Bania,
Laureano Bania, Jr., Sor Marietta Bania, Montano Bania, Orja Bania and Lydia R. Bania are
heirs of the deceased Laureano Bania Sr. and plaintiffs in Civil Case No. 107-Bg before the
aforesaid court.
At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a passenger
jeepney driven by Bernardo Balagot and owned by the Estate of Macario Nieveras, a gravel and
sand truck driven by Jose Manandeg and owned by Tanquilino Velasquez and a dump truck of the
Municipality of San Fernando, La Union and driven by Alfredo Bislig. Due to the impact, several
passengers of the jeepney including Laureano Bania Sr. died as a result of the injuries they
sustained and four (4) others suffered varying degrees of physical injuries.
On December 11, 1966, the private respondents instituted a compliant for damages against the
Estate of Macario Nieveras and Bernardo Balagot, owner and driver, respectively, of the passenger
jeepney, which was docketed Civil Case No. 2183 in the Court of First Instance of La Union, Branch
I, San Fernando, La Union. However, the aforesaid defendants filed a Third Party Complaint against
the petitioner and the driver of a dump truck of petitioner.
Thereafter, the case was subsequently transferred to Branch IV, presided over by respondent judge
and was subsequently docketed as Civil Case No. 107-Bg. By virtue of a court order dated May 7,
1975, the private respondents amended the complaint wherein the petitioner and its regular
employee, Alfredo Bislig were impleaded for the first time as defendants. Petitioner filed its answer
and raised affirmative defenses such as lack of cause of action, non-suability of the State,
prescription of cause of action and the negligence of the owner and driver of the passenger jeepney
as the proximate cause of the collision.
In the course of the proceedings, the respondent judge issued the following questioned orders, to
wit:
(1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo Balagot;
(2) Order dated July 13, 1976 admitting the Amended Answer of the Municipality of San
Fernando, La Union and Bislig and setting the hearing on the affirmative defenses only with
respect to the supposed lack of jurisdiction;
(3) Order dated August 23, 1976 deferring there resolution of the grounds for the Motion to
Dismiss until the trial;

(4) Order dated February 23, 1977 denying the motion for reconsideration of the order of
July 13, 1976 filed by the Municipality and Bislig for having been filed out of time;
(5) Order dated March 16, 1977 reiterating the denial of the motion for reconsideration of the
order of July 13, 1976;
(6) Order dated July 26, 1979 declaring the case deemed submitted for decision it appearing
that parties have not yet submitted their respective memoranda despite the court's direction;
and
(7) Order dated September 7, 1979 denying the petitioner's motion for reconsideration and/or
order to recall prosecution witnesses for cross examination.
On October 10, 1979 the trial court rendered a decision, the dispositive portion is hereunder quoted
as follows:
IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for the plaintiffs,
and defendants Municipality of San Fernando, La Union and Alfredo Bislig are ordered to
pay jointly and severally, plaintiffs Juana Rimando-Bania, Mrs. Priscilla B. Surell, Laureano
Bania Jr., Sor Marietta Bania, Mrs. Fe B. Soriano, Montano Bania, Orja Bania and Lydia
B. Bania the sums of P1,500.00 as funeral expenses and P24,744.24 as the lost expected
earnings of the late Laureano Bania Sr., P30,000.00 as moral damages, and P2,500.00 as
attorney's fees. Costs against said defendants.
The Complaint is dismissed as to defendants Estate of Macario Nieveras and Bernardo
Balagot.
SO ORDERED. (Rollo, p. 30)
Petitioner filed a motion for reconsideration and for a new trial without prejudice to another motion
which was then pending. However, respondent judge issued another order dated November 7, 1979
denying the motion for reconsideration of the order of September 7, 1979 for having been filed out of
time.
Finally, the respondent judge issued an order dated December 3, 1979 providing that if defendants
municipality and Bislig further wish to pursue the matter disposed of in the order of July 26, 1979,
such should be elevated to a higher court in accordance with the Rules of Court. Hence, this petition.
Petitioner maintains that the respondent judge committed grave abuse of discretion amounting to
excess of jurisdiction in issuing the aforesaid orders and in rendering a decision. Furthermore,
petitioner asserts that while appeal of the decision maybe available, the same is not the speedy and
adequate remedy in the ordinary course of law.
On the other hand, private respondents controvert the position of the petitioner and allege that the
petition is devoid of merit, utterly lacking the good faith which is indispensable in a petition
for certiorari and prohibition. (Rollo, p. 42.) In addition, the private respondents stress that petitioner
has not considered that every court, including respondent court, has the inherent power to amend
and control its process and orders so as to make them conformable to law and justice. (Rollo, p. 43.)

The controversy boils down to the main issue of whether or not the respondent court committed
grave abuse of discretion when it deferred and failed to resolve the defense of non-suability of the
State amounting to lack of jurisdiction in a motion to dismiss.
In the case at bar, the respondent judge deferred the resolution of the defense of non-suability of the
State amounting to lack of jurisdiction until trial. However, said respondent judge failed to resolve
such defense, proceeded with the trial and thereafter rendered a decision against the municipality
and its driver.
The respondent judge did not commit grave abuse of discretion when in the exercise of its judgment
it arbitrarily failed to resolve the vital issue of non-suability of the State in the guise of the
municipality. However, said judge acted in excess of his jurisdiction when in his decision dated
October 10, 1979 he held the municipality liable for the quasi-delict committed by its regular
employee.
The doctrine of non-suability of the State is expressly provided for in Article XVI, Section 3 of the
Constitution, to wit: "the State may not be sued without its consent."
Stated in simple parlance, the general rule is that the State may not be sued except when it gives
consent to be sued. Consent takes the form of express or implied consent.
Express consent may be embodied in a general law or a special law. The standing consent of the
State to be sued in case of money claims involving liability arising from contracts is found in Act No.
3083. A special law may be passed to enable a person to sue the government for an alleged quasidelict, as in Merritt v. Government of the Philippine Islands (34 Phil 311). (see United States of
America v. Guinto, G.R. No. 76607, February 26, 1990, 182 SCRA 644, 654.)
Consent is implied when the government enters into business contracts, thereby descending to the
level of the other contracting party, and also when the State files a complaint, thus opening itself to a
counterclaim. (Ibid)
Municipal corporations, for example, like provinces and cities, are agencies of the State when they
are engaged in governmental functions and therefore should enjoy the sovereign immunity from suit.
Nevertheless, they are subject to suit even in the performance of such functions because their
charter provided that they can sue and be sued. (Cruz, Philippine Political Law, 1987 Edition, p. 39)
A distinction should first be made between suability and liability. "Suability depends on the consent of
the state to be sued, liability on the applicable law and the established facts. The circumstance that a
state is suable does not necessarily mean that it is liable; on the other hand, it can never be held
liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the state
has allowed itself to be sued. When the state does waive its sovereign immunity, it is only giving the
plaintiff the chance to prove, if it can, that the defendant is liable." (United States of America vs.
Guinto, supra, p. 659-660)
Anent the issue of whether or not the municipality is liable for the torts committed by its employee,
the test of liability of the municipality depends on whether or not the driver, acting in behalf of the
municipality, is performing governmental or proprietary functions. As emphasized in the case of Torio
vs. Fontanilla (G. R. No. L-29993, October 23, 1978. 85 SCRA 599, 606), the distinction of powers
becomes important for purposes of determining the liability of the municipality for the acts of its
agents which result in an injury to third persons.

Another statement of the test is given in City of Kokomo vs. Loy, decided by the Supreme Court of
Indiana in 1916, thus:
Municipal corporations exist in a dual capacity, and their functions are twofold. In one they
exercise the right springing from sovereignty, and while in the performance of the duties
pertaining thereto, their acts are political and governmental. Their officers and agents in such
capacity, though elected or appointed by them, are nevertheless public functionaries
performing a public service, and as such they are officers, agents, and servants of the state.
In the other capacity the municipalities exercise a private, proprietary or corporate right,
arising from their existence as legal persons and not as public agencies. Their officers and
agents in the performance of such functions act in behalf of the municipalities in their
corporate or individual capacity, and not for the state or sovereign power." (112 N.E., 994995) (Ibid, pp. 605-606.)
It has already been remarked that municipal corporations are suable because their charters grant
them the competence to sue and be sued. Nevertheless, they are generally not liable for torts
committed by them in the discharge of governmental functions and can be held answerable only if it
can be shown that they were acting in a proprietary capacity. In permitting such entities to be sued,
the State merely gives the claimant the right to show that the defendant was not acting in its
governmental capacity when the injury was committed or that the case comes under the exceptions
recognized by law. Failing this, the claimant cannot recover. (Cruz, supra, p. 44.)
In the case at bar, the driver of the dump truck of the municipality insists that "he was on his way to
the Naguilian river to get a load of sand and gravel for the repair of San Fernando's municipal
streets." (Rollo, p. 29.)
In the absence of any evidence to the contrary, the regularity of the performance of official duty is
presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule that
the driver of the dump truck was performing duties or tasks pertaining to his office.
We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte, the District Engineer,
and the Provincial Treasurer (102 Phil 1186) that "the construction or maintenance of roads in which
the truck and the driver worked at the time of the accident are admittedly governmental activities."
After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that the
municipality cannot be held liable for the torts committed by its regular employee, who was then
engaged in the discharge of governmental functions. Hence, the death of the passenger tragic
and deplorable though it may be imposed on the municipality no duty to pay monetary
compensation.
All premises considered, the Court is convinced that the respondent judge's dereliction in failing to
resolve the issue of non-suability did not amount to grave abuse of discretion. But said judge
exceeded his jurisdiction when it ruled on the issue of liability.
ACCORDINGLY, the petition is GRANTED and the decision of the respondent court is hereby
modified, absolving the petitioner municipality of any liability in favor of private respondents.
SO ORDERED.
Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
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
vs.
HONORABLE COURT OF APPEALS, COLEGIO DE SAN JOSE-RECOLETOS, VICTOR LLUCH
SERGIO P. DLMASO JR., CELESTINO DICON, ANIANO ABELLANA, PABLITO DAFFON thru
his parents and natural guardians, MR. and MRS. NICANOR GUMBAN, and ROLANDO
VALENCIA, thru his guardian, A. FRANCISCO ALONSO, respondents.
Jose S. Amadora & Associates for petitioners.
Padilla Law Office for respondents.

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 Jose-Recoletos, a classmate, Pablito
Damon, 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 victim's parents, filed a civil action for damages under Article 2180 of the Civil Code against the
Colegio de San Jose-Recoletos, 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
attorney's 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
defendant, had exercised the necessary diligence in preventing the injury. 5
The basic undisputed facts are that Alfredo Amadora went to the San Jose-Recoletos 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.
The petitioners contend that their son was in the school to show 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:
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.
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 flied 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 riot 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
rule, 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."

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. Moreover, 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.
In Palisoc vs. 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:
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.
This decision was concurred in by five other members, 10 including Justice 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.
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."
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."
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

ofreddendo singula singulis "teachers" should apply to the words "pupils and students" and "heads
of establishments of arts and trades" to the word "apprentices."
The Court thus conforms to the dissenting opinion expressed by Justice J.B.L. Reyes in Exconde
where he said in part:
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 and vice 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 someculpa 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 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. 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.
These questions, though, may be asked: If the teacher of the academic school is to be held
answerable for the torts com