The facts are as follows:

FIRST DIVISION During the incumbency of President Corazon C. Aquino, Tarlac Province was chosen
as one of the four provinces that would serve as a test case on decentralization of local
MARIANO UN OCAMPO III, G.R. Nos. 156547-51
Petitioner, government administration.
- versus -
PEOPLE OF THE PHILIPPINES,
Respondent. For this purpose, the Department of Budget and Management (DBM) released National
X -------------------------------------------------------------------------------------- X Aid for Local Government Units (NALGU) funds in the total amount of P100 million to the
ANDRES S. FLORES, G.R. Nos. 156384-85 Province of Tarlac.The NALGU is a fund set aside in the General Appropriations Act to assist
Petitioner,
Present: local governments in their various projects and services. The distribution of this fund is entirely
vested with the Secretary of the DBM.
- versus - PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
CORONA, Petitioner Ocampo, provincial governor of Tarlac from February 22, 1988 up to June
AZCUNA, and
LEONARDO-DE CASTRO, JJ. 30, 1992, loaned out P56.6 million of the P100 million to the Lingkod Tarlac Foundation, Inc.
PEOPLE OF THE PHILIPPINES, (LTFI) for the implementation of various livelihood projects. The loan was made pursuant to a
Respondent. Promulgated:
February 4, 2008 Memorandum of Agreement (MOA) entered into by the Province of Tarlac, represented by

X ---------------------------------------------------------------------------------------X petitioner Ocampo, and LTFI, represented by petitioner Flores, on August 8, 1988.

LTFI is a private non-stock corporation with petitioner Ocampo as its first chairperson
DECISION
and petitioner Andres S. Flores as its executive director. The Sandiganbayan, in its Resolution
dated January 6, 2000, admitted the annexes[2] submitted by petitioner Ocampo, which annexes
AZCUNA, J.:
proved that petitioner Ocampo resigned as chairperson and trustee of the LTFI prior to August
8, 1988, the date when petitioner Ocampo and LTFI entered into the MOA.
These are consolidated petitions for review on certiorari[1] of the Sandiganbayans
Decision promulgated on March 8, 2002 and its Resolution promulgated on January 6, 2003.
How the P56.6 million released to LTFI was utilized became the subject matter of 25
criminal cases. In a Resolution in G.R. Nos. 103754-78 dated October 22, 1992,[3] this Court
The Decision and Resolution of the Sandiganbayan held petitioners Mariano Un
quashed 19 of the 25 Informations filed against petitioner Ocampo. The Fifth Division of the
Ocampo III and Andres S. Flores guilty of malversation of public funds in Crim. Case Nos.
Sandiganbayan dismissed one case[4] on demurrer to evidence. In its Decision promulgated
16794 and 16795.
on March 8, 2002, the Fifth Division of the Sandiganbayan dismissed two[5] of five criminal
cases for malversation of public funds against petitioners. On motion for reconsideration, the
Sandiganbayan dismissed one[6] more case in a Resolution promulgated on January 6,
2003. The two remaining cases are the subject matters in the instant consolidated petitions.
The Informations of the remaining two cases filed on May 28, 1991 state:
Crim. Case No. 16794
That on or about the periods between November 2, 1988 to February 27, 1989, or
sometime subsequent thereto, in the Province of Tarlac, Philippines and within the jurisdiction of
this Honorable Court, accused Mariano Un Ocampo III, then the Governor of the province of
Tarlac and at the same time President-Chairman of the Board of Trustees of the Lingkod Tarlac
Foundation, Inc. (LTFI), a private entity, having received by reason of his position, public funds
amounting to more than Fifty Two Million Pesos (P52,000,000) x x x from the National Aid for
Local Government Unit (NALGU) funds, which he is accountable by reason of his official
duties, did then and there with intent to defraud the government aforethought release out of the
aforesaid funds thru the said LTFI, the amount of EIGHT MILLION EIGHT HUNDRED
SIXTY THOUSAND PESOS (P8,860,000) x x x for the payment of the importation of Juki
Embroidery Machines which actually cost SEVEN MILLION SIX HUNDRED SEVENTY
NINE THOUSAND FIVE HUNDRED THIRTY PESOS AND FIFTY TWO CENTAVOS
(P7,679,530.52) x x x thereby leaving a balance of P1,180,463.48 which ought to have been
returned, but far from returning the said amount, accused Mariano Un Ocampo III, in connivance
with his co-accused, Andres S. Flores and William Uy wilfully, unlawfully and feloniously
misapply, misappropriate and convert for their own personal use and benefit the said amount
resulting to the damage and prejudice of the government in the aforesaid sum of One Million
One Hundred Eighty Thousand Four Hundred Sixty Three Pesos and Forty Eight Centavos
(P1,180,463.48).
CONTRARY TO LAW.
Crim. Case No. 16795
That on or about the periods between November 2, 1988 to February 27, 1989, or
sometime subsequent thereto, in the Province of Tarlac, Philippines and within the jurisdiction of
this Honorable Court, accused Mariano Un Ocampo III, then the Governor of the province of
Tarlac, and at the same time President-Chairman of the Board of Trustees of the Lingkod Tarlac
Foundation, Inc. (LTFI), a private entity, having received by reason of his position, public funds
amounting to more than Fifty Two Million Pesos (P52,000,000.00) x x x from the National Aid
for Local Government Unit (NALGU) Funds, which he is accountable by reason of his official
duties, caused the withdrawal by co-accused Andres S. Flores on April 28, 1989, then Executive
Officer, LTFI, from the PHILIPPINE NATIONAL BANK LTFI account the sum of FIFTY
EIGHT THOUSAND PESOS (P58,000.00), portion of the said NALGU funds deposited by
LTFI under Account No. 490-555744, both accused conniving and confederating with one
another, with intent to gain and to defraud the government, did then and there, wilfully,
unlawfully and feloniously misappropriate, misapply and convert the same to their own personal
use and benefit to the damage and prejudice of the government in the aforesaid amount
of P58,000.00, Philippine Currency.
CONTRARY TO LAW.[7]
The Prosecution relied mainly on an audit conducted by the Commission on Audit on
LTFI from February 12, 1990 up to April 2, 1990. The audit covered the period from July 1,
1988 to December 31, 1989 and was confined to the examination of the loans granted by the
Provincial Government of Tarlac for the implementation of its Rural Industrialization Can
Happen Program. The result of the audit was embodied in Special Audit Report No. 90-91,
offered as Exhibit B by the prosecution.
According to the Sandiganbayan, the money trail with respect to the two cases, as
proven by the prosecution, is as follows:
(1) Accused Ocampo released P11.5 Million to LTFI, P7,023,836.00 of which was intended
for the purchase of 400 embroidery machines;
(2) The total amount released was deposited by LTFI to the Rural Bank of Tarlac, Inc.;
(3) Within two (2) months from the deposit, a total of P5,465,000.00 was withdrawn and
given to William Uy (LTFIs broker for the importation of the machines);
(4) This amount (P5,465,000) was thereafter deposited to the personal account of Willam Uy
and/or Andres Flores under S/A No. 26127;
(5) Another account (PNB S/A No. 490-555744-6) was opened by LTFI by Andres
Flores, this time with PNB, intended solely for the purchase of the machines;
(6) A check in the amount of P3,395,000.00 dated February 27, 1989, was remitted for the
payment of the machines;
(7) This amount, together with the P5,465,000.00 placed on the personal account of William
Uy and/or Andres Flores, made up the cost of he machines or a total
of P8,860,000.00 as recorded in the books of LTFI;
(8) To the PNB account was added a total of P4,332,261.00 deposited on different dates from
March 6 to April 17, 1989 which funds came from S/A No. 26127;
(9) Thus, the total amount on deposit with PNB was P7,727,261.00 plus interest;
(10) Of this amount, P7,679,530.52 was used for the opening of the LC (for the payment of
the machines) leaving a balance of P47,730,48.00 plus interest;
(11) Between the amount listed in the books of the corporation (P8,860,000) and the amount
of the LC (P7,679,530), a discrepancy of P1,180,496.48 existed.
 (12) Between the total amount deposited in PNB S/A No. 490-555744-6 (P7,727,261.00) and bonds, contracts and obligations and other official documents made in accordance with law or
the total amount withdrawn from the account for the payment of the
ordinance.
machines (P7,679,530.52), a balance of P47,730.48 remained.This balance (plus
interest), in the amount of P58,000.00, was later withdrawn upon authorization of
accused Flores.[8]
Sec. 2 (c) of Rule XI[11] of the Rules and Regulations Implementing the Local
Government Code of 1983 provides that the local chief executive of a local government unit
Petitioner Ocampo did not testify regarding the subject cases on the ground that he was
shall [r]epresent the respective local units in all their business transactions and sign on its
not competent to testify on the disbursements made by LTFI but only as to the receipt of the
behalf all bonds, contracts and obligations and other official documents made in accordance
NALGU funds from the government.
with law or ordinance. Sec. 2 of Rule VI[12] states that [t]he power to sue, to acquire and convey
real or personal property, and to enter into contracts shall be exercised by the local chief
The Sandiganbayan declared that petitioner Ocampo as governor of Tarlac, who
executive upon authority of the Sanggunian concerned. Thus, the Sandiganbayan declared that
personally received the NALGU funds from the DBM and thereafter released some of them to
since the required authority from the Sangguniang Panlalawigan was not shown to have been
the LTFI, was duty bound to put up regular and effective measures for the monitoring of the
obtained by petitioner Ocampo, the MOA is ineffective as far as the Province of Tarlac is
projects approved by him.
concerned.

According to the Sandiganbayan, Sec. 203(t) of the Local Government Code obligated
Petitioner Flores, as executive director of LTFI, was charged with malversation of
provincial governors to adopt measures to safeguard all the lands, buildings, records, monies,
public funds in connivance with a public officer. However, the Sandiganbayan found that there
credits and other property rights of the province. However, petitioner Ocampo, as governor of
was no conspiracy between the petitioners, and held petitioner Flores guilty of malversation
Tarlac, neglected to set up safeguards for the proper handling of the NALGU funds in the hands
through his independent acts under Art. 222 of the Revised Penal Code,[13] since the purpose of
of LTFI which resulted in the disappearance of P1,132,739 and P58,000 of the said funds. The
Art. 222 is to extend the provisions of the Penal Code on malversation to private individuals.
Sandiganbayan held:
According to the Sandiganbayan, petitioner Flores bound himself, as a signatory of the MOA
For such gross and inexcusable negligence, accused is liable for malversation. In so representing LTFI, to receive NALGU funds from the province of Tarlac. In such capacity, he
ruling, we are guided by the oft-repeated principle that malversation may be committed through had charge of these funds.
a positive act of misappropriation of public funds or passively though negligence by allowing
another to commit such misappropriation (Cabello vs. Sandiganbayan, 197 SCRA 94 In Crim. Case No. 16794, petitioner Flores was found to have charge of missing
[1991]). Although accused was charged with willful malversation, he can validly be convicted of
malversation through negligence where the evidence sustains the latter mode of committing the NALGU funds deposited in his personal account in the amount of P1,132,739, which formed
offense (Cabello, supra).[9]
part of the discrepancy of the actual cost of the embroidery machines and the NALGU funds
released for payment of the said machines.

Further, the Sandiganbayan stated that under Sec. 203(f) of the Local Government
In defense, petitioner Flores claimed that the broker for the importation of the machines
Code of 1983,[10] the provincial governor, as chief executive of the provincial government, has
made an initial payment to the supplier of the machines, which initial payment would explain
the power to represent the province in all its business transactions and sign on its behalf all
the discrepancy between the reported cost as stated in the books of the corporation and the letter
of credit. However, the Sandiganbayan stated that the explanation was hearsay as the broker
was not presented in court, and there was no proof of the initial payment.
In Crim. Case No. 16795, the Sandiganbayan held that petitioner Flores failure to
explain the purpose of the withdrawal on April 28, 1989 of P58,000 upon his authorization,
considering that he was in charge of the PNB savings account, made him liable for
malversation of public funds.
Petitioners presented five documents to show that LTFIs obligations to
the Province of Tarlac, in the amount of P56.6 million, have been extinguished. The documents
are as follows:
1) The Tripartite Memorandum of Agreement (TMOA) dated May 23, 1990
executed by the Province of Tarlac, LTFI and the Barangay Unity for Industrial
and Leadership Development (BUILD) Foundation whereby the liability of
LTFI in favor of the Province of Tarlac was transferred and assumed by
BUILD in the total amount of P40 million.
2) Resolution No. 76 of the Sangguniang Panlalawigan of Tarlac dated April 5,
1990 showing that the authority of petitioner Ocampo in entering into the
TMOA was with prior approval of the Sangguniang Panlalawigan.
3) A Deed of Assignment between Tarlac and LTFI whereby the latter assigned its
loan portfolios (including interests and certificates of time deposit), the Juki
embroidery machines and other assignable documents to the Province of Tarlac
in the total amount of P16,618,403.
4) Resolution No. 199 of the Sangguniang Panlalawigan of Tarlac dated October
18, 1990 authorizing petitioner Ocampo to enter into the Deed of Assignment
with LTFI.
5) A certified photocopy of a document dated June 16, 1992 issued by the OIC
provincial treasurer of Tarlac whereby the treasurer affirmed the existence of
the above documents.
The Sandiganbayan declared that the documents showing the extinguishment of LTFIs
obligations to the Province of Tarlace do not mitigate the liability of petitioners since the crime
is consummated as of asportation, akin to the taking of anothers property in theft. It held that
the return of the amount malversed is neither an exempting circumstance nor a ground for
extinguishing the criminal liability of petitioners.
On March 8, 2002, the Fifth Division of the Sandiganbayan rendered a Decision
acquitting petitioners of the crime of malversation of public funds in Crim. Case Nos. 16796
and 16802, but finding them guilty of the crime in Crim. Case Nos. 16787, 16794 and
16795. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, accused Mariano Un Ocampo III and Andres S.
Flores are hereby found GUILTY beyond reasonable doubt of the crime of malversation of
Public Funds under Crim. Case No. 16787 and are sentenced to suffer the indeterminate penalty
of (10) years, and one (1) day of prision mayor, as minimum, to eighteen (18) years, eight (8)
months and one (1) day of reclusion temporal as maximum and to pay a fine of sixty-six
thousand nine hundred thirty-two pesos and seventy centavos (P66,932.70). They shall also
suffer the penalty of perpetual special disqualification. Costs against the accused.
For Crim. Case No. 16794, accused Mariano Un Ocampo III and Andres S. Flores are
hereby found GUILTY beyond reasonable doubt of the crime of Malversation of Public Funds
and are sentenced to suffer the indeterminate penalty of (10) years, and one (1) day of prision
mayor, as minimum, to eighteen (18) years, eight (8) months and one (1) day of reclusion
temporal as maximum and to pay a fine of one million one hundred thirty-two thousand seven
hundred thirty-nine pesos (P1,132,739.00). They shall also suffer the penalty of perpetual special
disqualification. Costs against the accused.
For Crim. Case No. 16795, accused Mariano Un Ocampo III and Andres S. Flores are
hereby found GUILTY beyond reasonable doubt of the crime of Malversation of Public Funds
and are sentenced to suffer the indeterminate penalty of (10) years, and one (1) day of prision
mayor, as minimum, to eighteen (18) years, eight (8) months and one (1) day of reclusion
temporal as maximum and to pay a fine of fifty-eight thousand pesos (P58,000.00). They shall
also suffer the penalty of perpetual special disqualification. Costs against the accused.
For Crim. Case No. 16796, on ground that the crime was not committed by the
accused, accused Mariano Un Ocampo III and Andres S. Flores are hereby ACQUITTED of the
crime charged. The surety bonds posted by them for their provisional liberty are cancelled.
 For Crim. Case No. 16802, on ground of reasonable doubt, accused Mariano Un
Ocampo III and Andres S. Flores are hereby ACQUITTED of the crime charged. The surety petitioner Ocampo without authority from the Sangguniang Panlalawigan in
bonds posted by them for their provisional liberty are cancelled.
violation of the Local Government Code of 1983.
SO ORDERED.[14]

Petitioners separately filed a motion for reconsideration of the Decision.

First Issue: Whether or not petitioners Ocampo and Flores are guilty of the
In a Resolution promulgated on January 6, 2003, the Sandiganbayan reconsidered its crime of malversation of public funds under Art. 217 and Art. 220
respectively of the Revised Penal Code?
Decision in Crim. Case No. 16787, and acquitted petitioners of the crime charged. In that case,
the prosecution alleged that P5 million of the NALGU funds loaned to LTFI were placed in
Crucial to the resolution of the first issue is the nature of the transaction entered into by
time deposits with the Rural Bank of Tarlac and earned a total interest of P116,932.77, of
the Province of Tarlac and LTFI.
which amount only P50,000.00 was recorded in the books of LTFI. The unrecorded interest
of P66,932.77 was said to have been withdrawn from December 27, 1988 to February 2,
Petitioners claim that in the instant cases, the public funds alleged to have been
1989 and allegedly malversed by petitioners. The Sandiganbayan held that as this Court has
malversed were loaned by the Province of Tarlac to LTFI per the MOA; hence, LTFI acquired
already labeled the subject agreement as one of loan, the said interest are private funds, hence,
ownership of the funds which thus shed their public character and became private funds.
not the proper subject for malversation of public funds. Thus, petitioners were acquitted in
Petitioner Ocampo also asserts that the Sandiganbayan impliedly ruled that the funds
Crim. Case No. 16787.
were private in character and owned by LTFI when it ruled in Crim. Case No. 16787 that since
this Court has already labeled the subject agreement as one of loan, the interests from the loan
Petitioners thereafter filed their respective petitions, which were consolidated by the
are private funds; hence, not the proper subject for malversation of public funds. Having
Court in a Resolution dated February 20, 2006.
declared the interests earned by the funds loaned to LTFI as private funds, the Sandiganbayan
should have also declared the funds loaned as private.
The pertinent issues raised by petitioners may be summarized as follows:

Petitioners arguments are meritorious.

1) Whether or not petitioners Ocampo and Flores are guilty of the crime of
malversation of public funds under Art. 217 and Art. 220 respectively of the
Revised Penal Code;
2) Whether or not the Sandiganbayan erred in holding that the MOA is void and did
not bind the Province of Tarlac on the ground that the MOA was entered into by
The MOA states:
xxx
WHEREAS, the First Party [the Provincial Government of Tarlac], in order to
vigorously pursue its livelihood program for rural development, has identified the need to
establish a RICH (Rural Industrialization Can Happen) Program;
 WHEREAS, the First Party now realizes the effectivity and efficiency of designating a
professional private non-profit organization to implement the various livelihood projects under ARTICLE V
the RICH Program; TERMS OF REPAYMENT

WHEREAS, the Second Party [Lingkod Tarlac Foundation], has represented that it has 1. The Second Party shall repay the First Party only the total amount of capital without interest
the technical expertise required by the First Party in the implementation of the various livelihood in consideration of the following:
projects under the RICH Program;
a) The Second Party shall shoulder all its operating expenses.
WHEREAS, the First Party desires to engage the Second Party and the latter agrees as b) The Second Party shall not charge the Province any management fees or
the implementing arm of the Provincial Government for its livelihood projects; whatever fees.
c) The Second Party shall, whenever necessary, assure the beneficiaries of the
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the project interests and management fees at rates lower than the commercial
Parties hereby agree as follows: financial rates.

ARTICLE I 2. The terms of repayment shall be based on the projects ability to pay without sacrificing on
UNDERTAKINGS OF THE FIRST PARTY the projects viability.

1. The First Party shall provide all the data and information as may be required by [the] Second ARTICLE VI
Party in the implementation of the RICH Program; SUCCESSORS AND ASSIGNEES

ARTICLE III Except as may be mutually agreed in writing, neither party can assign, sublet, or
DESCRIPTION OF THE PRIORITY PROJECTS transfer its interest or duties under this Agreement.

A. Program For Lease Purchase Agreements on equipment, machineries, buildings and ARTICLE VII
structures: TERMS OF THE AGREEMENT
xxx
This Agreement shall exist for as long as the Program exists or any extension thereof.
B. Direct Lending Pogram:
IN WITNESS WHEREOF, the Parties have hereunto set their hands on this 8th day of
Under this scheme, the Lingkod Tarlac Foundation shall engage in direct August, 1988 in Tarlac, Tarlac.
lending operations to proponents of livelihood activities under the Rural Industrialization
Can Happen (RICH PROGRAM) at variable interest rates and loan conditions depending
on the viability and nature of the livelihood projects availing of the loan. LINGKOD TARLAC FOUNDATION PROVINCE OF TARLAC
Second Party First Party
C. Direct Borrowing by Lingkod Tarlac Foundation: (Signed) (Signed)
ANDRES S, FLORES MARIANO UN OCAMPO III
The Lingkod Tarlac Foundation shall be allowed to borrow funds directly Executive Director Governor
from the Provincial government to fund Lingkod Tarlac Foundation
projects provided the projects are livelihood projects under the Rural Industrialization CONCURRED IN BY:
Can Happen (RICH Program). (Signed)
GUILLERMO N. CARAGUE
D. Other project financing schemes that may be developed for the RICH Program. Secretary of Budget
& Management
ARTICLE IV
CONDITIONS FOR RELEASE OF FUNDS

The First Party shall release in lump sum the appropriate funds for the approved The MOA shows that LTFI is allowed to borrow funds directly from the Provincial
projects covered by individual loan documents upon signing of [the] respective loan agreement
Government to fund Lingkod Tarlac Foundation projects provided the projects are livelihood
and approval of the Commission on Audit.
projects under the Rural Industrialization Can Happen Program. Moreover, the agreement
stipulates under the Conditions for Release of Funds that the Province of Tarlac shall release in
 12 08 88 1,500, 000
lump sum the appropriate funds for the approved projects covered by individual loan 02 22 89 4,000, 000
04 12 89 18,000, 000
documents upon signing of the respective loan agreement....[15]
06 14 89 12,718, 403
Total P56,618, 403

In Crim. Case No. 16794, the fund alleged to have been malversed in the amount xxx
On October 24, 1988, the Provincial Government of Tarlac approved and released an
of P1,180,496.48 represents the discrepancy of the cost of the Juki embroidery machines as amount of P11,500,000 to Lingkod Tarlac Foundation, Inc. (LTFI) for the Rural Industrialization
listed in the books of LTFI and the amount actually paid to open the letter of credit for the Can Happen (RICH) Program. Of the amount released, P7,023,836 was intended for the
purchase of 400 sets embroidery machines for the Embroidery Skills Training Project. [17]
payment of the machines. In the books of LTFI, the cost of the Juki embroidery machines was
listed as P8,860,000, while the amount paid to open the letter of credit for the payment of the
Based on the foregoing, it is clear that the funds released by the Province of Tarlac,
machines was P7,679,530.52. Petitioner Flores was held liable only up to the amount
including the money allegedly malversed by petitioners in Crim. Case Nos. 16794 and 16795,
of P1,132,739.
were in the nature of a loan to LTFI.

In Crim. Case No. 16795, the fund alleged to have been malversed in the amount
Art. 1953 of the Civil Code provides that [a] person who receives a loan of money or
of P58,000 is the money left (P47,730) in PNB S/A No. 490-555744-6 after the withdrawal
any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an
of the purchase price of the Juki embroidery machines, plus interest. The amount of P58,000
equal amount of the same kind and quality.
was withdrawn upon the authorization of petitioner Flores. The withdrawal was neither
reflected as deposit in the bank accounts of LTFI nor spent by it.
Hence, petitioner Ocampo correctly argued that the NALGU funds shed their public
character when they were lent to LTFI as it acquired ownership of the funds with an obligation
In both cases, the money trail proven by the prosecution shows that the subject funds or
to repay the Provinceof Tarlac the amount borrowed. The relationship between
the money used for the purchase of the Juki embroidery machines came from the release of
the Province of Tarlac and the LTFI is that of a creditor and debtor. Failure to pay the
the Province of Tarlacthrough petitioner Ocampo of NALGU funds in the amount of P11.5
indebtedness would give rise to a collection suit.
million to LTFI on October 24, 1988. The release of the funds was covered by a loan document
in accordance with the MOA which states that the Province of Tarlac shall release in lump sum
The Sandiganbayan convicted petitioner Ocampo of malversation of public funds under
the appropriate funds for the approved projects covered by individual loan documents upon
Art. 217 of the Revised Penal Code for his gross and inexcusable negligence in not setting up
signing of the respective loan agreement....
safeguards in accordance with Sec. 203(t) of the Local Government Code [18] for the proper
[16]
The Report on the Special Audit of LTFI stated:
handling of the NALGU funds in the hands of LTFI which resulted in the disappearance

. . . For the period July 1988 to December 1989, LTFI received a total of P56.6 million which
of P1,132,739 allegedly malversed in Crim. Case No. 16794 and the disappearance of P58,000
consisted of six releases and covered by individual loan agreements, as follows: in Crim. Case No. 16795.
Date Amount
08 30 88 P7, 000, 000
10 24 88 11,500, 000
 In his petition, petitioner Ocampo states that he made sure that proper safeguards were
in place within LTFI to ensure the proper handling of NALGU funds by LTFI. On August 5,
1988, before the Province of Tarlac and LTFI entered into the MOA, LTFIs Articles of
Incorporation were amended to add the following:
TENTH: That no part of the net income of the Foundation shall inure to the benefit of
any member of the Foundation and that at least seventy percent (70%) of the funds shall be used
for the projects and not more than thirty percent (30%) of said funds shall be used for
administrative purposes.
There can be no malversation of public funds by petitioner Ocampo in the instant cases
since the loan of P11.5 million transferred ownership and custody of the funds, which
included the sum of moneyallegedly malversed, to LTFI for which Ocampo could no longer be
held accountable. Thus, contrary to the allegation of the Office of the Special Prosecutor,
petitioner Ocampo cannot be held culpable for malversation committed through negligence
in adopting measures to safeguard the money of the Province of Tarlac, since the same were
neither in his custody nor was he accountable therefor after the loan to LTFI.

Petitioner Ocampo argues that since he had resigned from LTFI both as chairperson
and as trustee on June 22, 1988, he ceased to become accountable for the handling of the Thus, petitioner Flores, as the executive director of LTFI, cannot also be held liable for

NALGU funds after the same were loaned to LTFI pursuant to the MOA dated August 8, malversation of public funds in a contract of loan which transferred ownership of the funds to

1988. Consequently, he may not be held criminally liable for disbursements made by LTFI LTFI making them private in character. Liwanag v. Court of Appeals[22] held:

since he had nothing to do with its operations after his resignation. . . . in a contract of loan once the money is received by the debtor, ownership over the same is
transferred. Being the owner, the borrower can dispose of it for whatever purpose he may deem
proper.
Malversation may be committed by appropriating public funds or property; by taking or
misappropriating the same; by consenting, or through abandonment or negligence, by
The Sandiganbayan erred when it stated that the intention of the parties was for the
permitting any other person to take such public funds or property; or by being otherwise guilty
funds to remain public, citing the MOA which allegedly provided, thus:
of the misappropriation or malversation of such funds or property.[19]
The Province shall have the right to have access to all resources and records of either
LTF[I] or BUILD and may conduct COA examination or audit on any or all matter affecting the
The essential elements common to all acts of malversation under Art. 217 of the
loans or assets covered by this agreement and funds from the Province of Tarlac.
Revised Penal Code[20] are:

A review of the MOA did not show the presence of such provision. But the cited
(a) That the offender be a public officer;
provision is contained in the TMOA, which was later entered into by the Province of Tarlac,
(b) That he had the custody or control of funds or property by reason of the duties of
LTFI and BUILD, whereby LTFI transferred part of its obligation to BUILD.
his office;
(c) That those funds or property were public funds or property for which he was
What is controlling in the instant cases is that the parties entered into a contract of
accountable;
loan for each release of NALGU funds. The second release on October 24, 1988 included the
(d) That he appropriated, took, misappropriated or consented or, through abandonment
subject funds in controversy. By virtue of the contract of loan, ownership of the subject funds
or negligence, permitted another person to take them.[21]
was transferred to LTFI making them private in character, and therefore not subject of the
instant cases of malversation of public funds.
The Court notes that the obligation of LTFI to repay the NALGU Funds
of P56,618,403 obtained by it from the Province of Tarlac pursuant to the MOA was
extinguished as follows:
(1) BUILD assumed LTFIs principal loan of P40 million;
(2) LTFI ceded, transferred and assigned to the Province of Tarlac all the rights and
interests of LTFI in certain loans including interests, certificate of time deposit
and certain Juki embroidery machines in the total amount of P16,618,403.
Second Issue: Whether or not the Sandiganbayan erred in holding that the MOA is void
and did not bind the Province of Tarlac on the ground that the MOA was entered
into by petitioner Ocampo without authority from the Sangguniang Panlalawigan
in violation of the Local Government Code of 1983?
In its Resolution dated January 6, 2003, the Sandiganbayan concedes that the
transaction between the Province of Tarlac through petitioner Ocampo and the LTFI was one of
loan. However, it stated that since Ocampo was not authorized by the Sangguniang
Panlalawigan to enter into the MOA as required by the Local Government Code of 1983, the
MOA did not bind the province nor did it give any benefits to the LTFI because a void contract
has no effect whatsoever.
Petitioner Ocampo alleges that he had ample authority to enter into the MOA for the
following reasons:
1) NALGU funds received by the Province of Tarlac came straight from the national
government and were intended for a specific purpose, that is, the
implementation of various livelihood projects in the Province of Tarlac, as
evidenced by the exchange of correspondence between him (petitioner
Ocampo) and DBM Secretary Guillermo N. Carague.[23]
2) On July 15, 1988, the DBM released a revolving fund for the implementation of
various livelihood projects in the Province of Tarlac under Advice Allotment
No. BCS-0183-88-301.[24] In August 1988, he (petitioner Ocampo) informed
the DBM that the Province of Tarlac had designated LTFI as the implementing
arm for its livelihood projects, and requested authority to extend loans to LTFI,
which request was approved by the DBM Secretary.[25]
3) The DBMs approval of petitioner Ocampos request constituted the authority of
petitioner Ocampo to enter into the MOA with LTFI.
4) DBM also approved and concurred with the terms of the MOA as evidenced by
the DBM Secretarys signature on the MOA.
Petitioner Ocampo also asserts that Sec. 203(f) of the Local Government Code of
1983,[26] which authorized the provincial governor to enter into business transactions on behalf
of the province, did not expressly require the concurrence of the provincial board unlike its
counterpart provision in the Local Government Code of 1991.[27]
Further, petitioner Ocampo states that in any case, the lack of authority of one who
enters into a contract in the name of another does not render the contract void under Art. 1409
of the Civil Code,[28] as ruled by the Sandiganbayan, but only unenforceable under Art. 1403(1)
of the Civil Code. He points out that unenforceable contracts are susceptible of ratification, and
in this case, the Provincial Board of Tarlac can be deemed to have ratified the MOA when it
passed the following resolutions:
(1) Resolution No. 76, which confirmed and ratified the TMOA among the Province
of Tarlac, LTFI and the BUILD, whereby the liability of LTFI in favor of the
 Province of Tarlac in the total amount of P40 million was transferred to and 1) The Sangguniang Panlalawigan subsequently recognized the transfer of
assumed by BUILD;[29] and liabilities of LTFI in favor of the Province of Tarlac to BUILD in the
amount of P40 million contained in a TMOA.[32]
(2) Resolution No. 199, which authorized petitioner Ocampo to sign the Deed of
Assignment between the Province of Tarlac and LTFI, whereby LTFI assigned 2) It authorized petitioner Ocampo to sign in behalf of the Province of Tarlac the
loans, sewing machines and other assignable documents in favor of the Deed of Assignment entered into by the Province of Tarlac and
Province of Tarlac to settle the balance of its obligation in the amount LTFI[33] which extinguished the remaining loan obligations of LTFI
of P16,618,403.00. [30] obtained under the MOA.

The Court holds that since petitioner Ocampo was not duly authorized by
the Sangguniang Panlalawigan to enter into the MOA, the agreement is an unenforceable
contract under Sec. 1403 of the Civil Code:
Art. 403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers; x x x.
WHEREFORE, the consolidated petitions are GRANTED. The Decision of the
Sandiganbayan promulgated on March 8, 2002 and its Resolution promulgated on January 6,
2003 are SET ASIDE. Petitioner Mariano Un Ocampo III and petitioner Andres S. Flores are
hereby ACQUITTED of the crime of malversation of public funds in Crim. Case Nos. 16794
and 16795.
No costs.

Unenforceable contracts are governed by the following provisions of the Civil Code: SO ORDERED.

Art. 1404. Unauthorized contracts are governed by article 1317 and the principles
of agency in Title X of this Book.
Art. 1317. No one may contract in the name of another without being authorized by the
latter, or unless he has by law or right to represent him.

A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified,
expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked
by the other contracting party.[31]

The Court finds that the MOA has been impliedly ratified by the Sangguniang
Panlalawigan as it has not directly impugned the validity of the MOA despite knowledge of
this controversy. Implied ratification is also shown by the following acts:
 38 Phil. 182
STREET, J.:
This is an application for a writ of certiorari, the purpose of which is to quash an
attachment issued from the Court of First Instance of the City of Manila under circumstances
hereinbelow stated.
Upon December 12, 1917, an action was instituted in the Court of First Instance of the
city of Manila by P. J. O'Brien to recover of Leung Ben the sum of P15,000, alleged to have
been lost by the plaintiff to the defendant in a series of gambling, banking, and percentage
games conducted during the two or three months prior to the institution of the suit. In his
verified-complaint the plaintiff asked for an attachment, under sections 424 and 412 (1) of the
Code of Civil Procedure, against the property of the defendant, on the ground that the latter was
about to depart from the Philippine Islands with intent to defraud his creditors. This attachment
was issued; and acting under the authority thereof, the sheriff attached the sum of P15,000
which had been deposited by the defendant with the International Banking Corporation.
The defendant thereupon appeared by his attorney and moved the court to quash the
attachment. Said motion having been dismissed in the Court of First Instance, the petitioner,
Leung Ben, the defendant in that action, presented to this court, upon January 8, 1918, his
petition for the writ of certiorari directed against P. J. O'Brien and the judges of the Court of
First Instance of the city of Manila whose names are mentioned in the caption hereof. The
prayer is that the Honorable James A. Ostrand, as the judge having cognizance of the action in
said court (P. J. O'Brien vs. Leung Ben) be required to certify the record to this court for review
and that the order of attachment which had been issued should be revoked and discharged, with
costs. Upon the filing of said petition in this court the usual order was entered requiring the
defendants to show cause why the writ should not issue. The response of the defendants, in the
nature of a demurrer, was filed upon January 21, 1918; and the matter is now heard upon the
pleadings thus presented.
The provision of law under which this attachment was issued requires that there should
be a "cause of action arising upon contract, express or implied." The contention of the petitioner
is that the statutory action to recover money lost at gaming is not such an action as is
contemplated in this provision, and he therefore insists that the original complaint shows on its
face that the remedy of attachment is not available in aid thereof; that the Court of First
Instance acted in excess of its jurisdiction in granting the writ of attachment; that the petitioner
has no plain, speedy, and adequate remedy by appeal or otherwise; and that consequently the
writ of certiorari supplies the appropriate remedy for his relief.
The case presents the two following questions of law, either of which, if decided
unfavorably to the petitioner, will be fatal to his application:
(1) Supposing that the Court of First Instance has granted an attachment for which there
is no statutory authority; can this court entertain the present petition and grant the desired
relief?
(2) Is the statutory obligation to restore money won at gaming an obligation arising
from "contract, express or implied?"
We are of the opinion that the answer to the first question should be in the affirmative.
Under section 514 of the Code of Civil Procedure the Supreme Court has original jurisdiction
by the writ of certiorari over the proceedings of Courts of First Instance, "wherever said courts
have exceeded their jurisdiction and there is no plain, speedy, and adequate remedy." In the
same section, it is further declared that the proceedings in the Supreme Court in such cases
shall be as prescribed for Courts of First Instance in sections 217-221, inclusive, of said Code.
This has the effect of incorporating into the practice of the Supreme Court, so far as applicable,
the provisions contained in those sections to the same extent as if they had been reproduced
verbatim immediately after section 514. Turning to section 217, we find that, in defining the
conditions under which certiorari can be maintained in a Court of First Instance, substantially
the same language is used as is found in section 514 relative to the conditions under which the
same remedy can be maintained in the Supreme Court, namely, when the inferior tribunal has
exceeded its jurisdiction and there is no appeal, nor any plain, speedy, and adequate remedy. In
using these expressions the author of the Code of Civil Procedure merely adopted the language
which, in American jurisdictions at least, had long ago reached the stage of a stereotyped
formula.
In section 220 of the same Code, we have a provision relative to the final proceedings
in certiorari, and herein it is stated that the court shall determine whether the inferior tribunal
has regularly pursued its authority and that if it finds that such inferior tribunal has not regularly
pursued its authority, it shall give judgment, either affirming, annulling, or modifying the
proceedings below, as the law requires. The expression, "has not regularly pursued its
authority," as here, used, is suggestive, and we think it should be construed in connection with
the other expressions "have exceeded their jurisdiction," as used in section 514, and "has
exceeded the jurisdiction," as used in section 217. Taking the three together, it results in our
opinion that any irregular exercise of judicial power by a Court of First Instance, in excess of its
lawful jurisdiction, is remediable by the writ of certiorari, provided there is no other plain,
speedy, and adequate remedy; and in order to make out a case for the granting of the writ it is
not necessary that the court should have acted in the matter without any jurisdiction whatever.
Indeed the repeated use of the expression "excess of jurisdiction" shows that the lawmaker
contemplated the situation where a court, having jurisdiction, should irregularly transcend its
authority as well as the situation where the court is totally devoid of lawful power.
It may be observed in this connection that the word "jurisdiction," as used in
attachment cases, has reference not only to the authority of the court to entertain the principal
action but also to its authority to issue the attachment, as dependent upon the existence of the
statutory ground. (6 C. J., 89.) This distinction between jurisdiction over the main cause and
jurisdiction to issue the attachment as an ancillary remedy incident to the principal litigation is
of importance; as a court's jurisdiction over the main action may be complete, and yet it may
lack authority to grant an attachment as ancillary to such action. This distinction between
jurisdiction over the principal proceeding and jurisdiction over the ancillary has been
recognized by this court in connection with actions involving the appointment of a receiver.
Thus, in Rocha & Co. vs. Crossfield and Figueras (6 Phil. Rep., 355), a receiver had been
appointed without legal justification. It was held that the order making the appointment was
beyond the jurisdiction of the court; and though the court admittedly had jurisdiction of the
main cause, the order was vacated by this court upon application for a writ of certiorari. (See
Blanco vs. Ambler, 3 Phil. Rep., 358, Blanco vs. Ambler and McMicking 3 Phil. Rep., 735;
Yangco vs. Rohde, 1 Phil. Rep., 404.)
By parity of reasoning it must follow that when a court issues a writ of attachment for
which there is no statutory authority, it is acting irregularly and in excess of its jurisdiction, in
the sense necessary to justify the Supreme Court in granting relief by the writ of certiorari. In
applying this proposition it is of course necessary to take account of the difference between a
ground of attachment based on the nature of the action and a ground of attachment based on the
acts or the condition of the defendant. Every complaint must show a cause of action of some
sort; and when the statute declares" that the attachment may issue in an action arising upon
contract, express or implied, it announces a criterion which may be determined from an
inspection of the language of the complaint. The determination of this question is purely a
matter of law. On the other hand, when the statute declares that an attachment may be issued
when the defendant is about to depart from the Islands, a criterion is announced which is
wholly foreign to the cause of action; and the determination of it may involve a disputed
question of fact which must be decided by the court. In making this determination, the court
obviously acts within its powers; and it would be idle to suppose that the writ of certiorari
would be available to reverse the action of a Court of First Instance in determining the
sufficiency of the proof on such a disputed point, and in granting or refusing the attachment
accordingly.
We should not be understood, in anything that has been said, as intending to infringe
the doctrine enunciated by this court in Herrera vs. Barretto and Joaquin (25 Phil. Rep., 245),
when properly applied. It was there held that we would not, upon an application for a writ of
certiorari, dissolve an interlocutory mandatory injunction that had been issued in a Court of
First Instance as an incident in an action of mandamus. The issuance of an interlocutory
injunction depends upon conditions essentially different from those involved in the issuance of
an attachment. The injunction is designed primarily for the prevention of irreparable injury and
the use of the remedy is in a great measure dependent upon the exercise of discretion. Generally
speaking, it may be said" that the exercise of the injunctive power is inherent in judicial
authority; and ordinarily it would be impossible to distinguish between the jurisdiction of the
court in the main litigation and its jurisdiction to grant an interlocutory injunction, for the latter
is involved in the former. That the writ of certiorari can not be used to reverse an order denying
a motion for a preliminary injunction is of course not open to cavil. (Somes vs. Crossfield and
Molina, 8 Phil. Rep., 284.)
But it will be said that the writ of certiorari is not available in this case, because the
petitioner is protected by the attachment bond, and that he has a plain, speedy, and adequate
remedy by appeal. This suggestion seems to be sufficiently answered in the case of Rocha &
Co. vs. Crossfield and Figueras (6 Phil. Rep., 355), already referred to, and the earlier case
there cited. The remedy by appeal is not sufficiently speedy to meet the exigencies of the case.
An attachment is extremely violent, and its abuse may often result in the infliction of damage
which could never be repaired by any pecuniary award at the final hearing. To postpone the
granting of the writ in such a case until the final hearing and to compel the petitioner to bring
the case here upon appeal merely in order to correct the action of the trial court in the matter of
allowing the attachment would seem both unjust and unnecessary.
Passing to the problem propounded in the second question it may be observed that,
upon general principles, recognized both in the civil and common law, money lost in gaming
and voluntarily paid by the loser to the winner can not, in the absence of statute, be recovered in
a civil action. But Act No. 1757 of the Philippine Commission, which defines and penalizes
several forms of gambling, contains numerous provisions recognizing the right to recover
money lost in gambling or in the playing of certain games (sees. 6, 7, 8, 9, 11). The original
complaint in the action in the Court of First Instance is not clear as to the particular section of
Act No. 1757 under which the action is brought, but it is alleged that the money was lost at
gambling, banking, and percentage game in which the defendant was banker. It must therefore
be assumed that the action is based upon the right of recovery given in section 7 of said Act,
which declares that an action may be brought against the banker by any person losing money at
a banking or percentage game.
Is this a cause of action arising upon contract, "express or implied," as this term is used
infection 412 of the Code of Civil Procedure? To begin the discussion, the English version of
the Code of Civil Procedure is controlling (sec. 15, Admin. Code, ed. of 1917). Furthermore, it
is universally admitted to be proper in the interpretation of any statute, to consider its historical
antecedents and its jurisprudential sources. The Code of Civil Procedure, as is well known, is
an American contribution to Philippine legislation. It therefore speaks the language of the
common-law and for the most part reflects its ideas. When the draftsman of this Code used the
expression "contract, express or implied," he used a phrase that has been long current among
writers on American and English law; and it is therefore appropriate to resort to that system of
law to discover the meaning which the legislator intended to convey by those terms. We remark
in passing that the expression "contrato tacito," used in the official translation of the Code of
Civil Procedure as the Spanish equivalent of "implied contract," does not appear to render the
full sense of the English expression.
The English contract law, so far as relates to simple contracts (i. e. contracts not
evidenced by a sealed instrument or a judicial record), is planted upon two foundations, which
are supplied by two very different conceptions of legal liability. These two conceptions are
revealed in the ideas respectively underlying (1) the common-law debt and (2) the assumptual
promise. In the early and formative stages of the common-law the only simple contract of
which the courts took account was the real contract or contract re, in which the contractual duty
imposed by law arises upon the delivery of a chattel, as in the mutuum, commodatum,
depositum, and the like; and the purely consensual agreements of the Roman Law found no
congenial place in the early common law system.
 In course of time the idea underlying the contract re was extended so as to include all
cases where there was something of value passing from one person to another under such
circumstance as to constitute a justa causa debendi. The obligation thereby created was a debt.
The constitutive element in this obligation is found in the fact that the debtor has received
something from the creditor, which he is bound by the obligation of law to return or pay for.
From an early day this element was denominated the quid pro quo, an ungainly phrase coined
by Mediaeval Latinity. The quid pro quo was primarily a material or pyhsical object, and it
constituted the recompense or equivalent acquired by the debtor. Upon the passage of the quid
pro quo from one party to the other, the law imposed that real contractual duty peculiar to the
debt. No one conversant with the early history of the English law would ever conceive of the
debt as an obligation created by promise. It is the legal duty to pay or deliver a sum certain of
money or an ascertainable quantity of ponderable or measurable chattels.
The ordinary debt, as already stated, originates in a contract in which a quid pro quo
passes to the debtor at the time of the creation of the debt, but the term is equally applicable to
duties imposed by custom, or statute, or by judgment of a court.
The existence of a debt supposes one person to have possession of a thing (res) which
he owes and hence ought to turn over the owner. This obligation is the oldest conception of
contract with which the common law is familiar; and notwithstanding the centuries that have
rolled over Westminster Hall that conception remains as one of the fundamental bases of the
common-law contract.
Near the end of the fifteenth century there was evolved in England a new conception of
contractual liability, which embodied the idea of obligation resulting from promise and which
found expression in the common law assumpsit, or parol promise supported by a consideration.
The application of this novel conception had the effect of greatly extending the field of
contractual liability and by this means rights of action came to be recognized which had been
unknown before. The action of assumpsit which was the instrument for giving effect to this
obligation was found to be a useful remedy; and presently this action came to be used for the
enforcement of common-law debts. The result was to give to our contract law the superficial
appearance of being based more or lees exclusively upon the notion of the obligation of
promise.
An idea is widely entertained to the effect that all simple contracts recognized in the
common-law system are referable to a single category. They all have their roots, so many of us
imagine, in one general notion of obligation; and of course the obligation of promise is
supposed to supply this general notion, being considered a sort of menstruum in which all other
forms of contractual obligation have been dissolved. This is a mistake. The idea of contractual
duty embodied in the debt, which was the first conception of contract liability revealed in th.e
common law, has remained, although it was destined to be in a measure obscured by the more
modern conception of obligation resulting from promise.
What has been said is intended to exhibit the fact that the duty to pay or deliver a sum
certain of money or an ascertainable quantity of ponderable or measurable chattels which is
indicated by the term debt has ever been recognized, in the common-law system, as a true
contract, regardless of the source of the duty or the manner in which it is created whether
derived from custom, statute or some consensual transaction depending upon the voluntary acts
of the parties. The form of contract known as the "debt" is of most ancient lineage; and when
reference is had to historical antecedents, the right of the debt to be classed as a contract cannot
be questioned. Indeed when the new form of engagement consisting of the parol promise
supported by a consideration first appeared, it was looked upon as an upstart and its right to be
considered a true contract was questioned. It was long customary to refer to it exclusively as an
assumpsit, agreement, undertaking, or parol promise, in fact anything but a contract. Only in
time did the new form of engagement attain the dignity of being classed among true contracts.
The term "implied contract" takes us into the shadowy domain of those obligations the
theoretical classification of which has engaged the attention of scholars from the time of Gaius
until our own day and has been a source of as much difficulty to the civilian as to the common-
law jurist. Here we are concerned with those acts which make one person debtor to another
without there having intervened between them any true agreement tending to produce a legal
bond (vinculum juris). Of late years some American and English legal writers have adopted the
term quasi-contract as descriptive of these obligations or some of them; but the expression more
commonly used is "implied contract."
Upon examination of these obligations, from the view point of the common-law
jurisprudence, it will be found that they fall readily into two divisions, according as they bear
an analogy to the common-law debt or to the common-law assumpsit. To exhibit the scope of
these different classes of obligations is here impracticable. It is only necessary in this
connection to observe that the most conspicuous division is that which comprises duties in the
nature of debt. The characteristic feature of these obligations is that upon certain states of fact
the law imposes an obligation to pay a sum certain of money; and it is characteristic of this
obligation that the money in respect to which the duty is raised is conceived as being the
equivalent of something taken or detained under circumstances giving rise to the duty to return
or compensate therefor. The proposition that no one shall be allowed to enrich himself unduly
at the expense of another embodies the general principle here lying at the basis of obligation.
The right to recover money improperly paid (repetition de lo indebido) is also recognized as
belonging to this class of duties.
It will be observed that according to the Civil Code (article 1089) obligations are
supposed to be derived either from (1) the law, (2) contracts and quasi-contracts, (3) illicit acts
and omissions, or (4) acts in which some sort of blame or negligence is present. This
enumeration of the sources of obligations supposes that the quasi-contractual obligation and the
obligation imposed by law are of different types. The learned Italian jurist, Jorge Giorgi,
criticises this assumption and says that the classification embodied in the code is theoretically
erroneous. His conclusion is that one or the other of these categories should have been
suppressed and merged in the other. (Giorgi, Teoria de Uts Obligaciones, Spanish ed., vol. 5
arts. 5, 7, 9.) The validity of this criticism is, we think, self-evident; and it is of interest to note
that the common law makes no distinction between the two sources of liability. The obligations
which in the Code are indicated as quasi-contracts, as well as those arising ex lege, are in the
common law system merged into the category of obligations imposed by law, and all are
denominated implied contracts.
Many refinements, more or less illusory, have been attempted by various writers in
distinguishing different sorts of implied contracts, as, for example, the contract implied as of
fact and the contract implied as of law (or constructive contract). No explanation of these
distinctions will be here attempted. Suffice it to say that the term "contract, express or implied"
is used by common-law jurists to include all purely personal obligations other than those which
have their source in delict, or tort. As to these it may be said that, generally speaking, the law
does not impose a contractual duty upon a wrongdoer to compensate for injury done. It is true
that in certain situations where a wrongdoer unjustly acquires something at the expense of
another, the law imposes on him a duty to surrender his unjust acquisitions, and the injured
party may here elect to sue upon this contractual duty instead of suing upon the tort; but even
here the distinction between the two liabilities, in contract and in tort, is never lost to sight; and
it is always recognized that the liability arising out of the tort is delictual and not of a
contractual or quasi-contractual nature.
In the case now under consideration the duty of the defendant to refund the money
which he won from the plaintiff at gaming is a duty imposed by statute. It therefore arises ex
lege. Furthermore, it is a duty to return a certain sum which had passed from the plaintiff to the
defendant. By all the criteria which the common law supplies, this is a duty in the nature of debt
and is properly classified as an implied contract. It is well-settled by the English authorities that
money lost in gambling or by lottery, if recoverable at all, can be recovered by the loser in an
action of indebitatus assumpsit for money had and received. (Clarke vs. Johnson, Lofft, 759;
Mason vs. Waite, 17 Mass., 560; Burnham vs. Fisher, 25 Vt., 514.) This means that in the
common law the duty to return money won in this way is an implied contract, or quasi-contract.
It is no argument to say in reply to this that the obligation here recognized is called an
implied contract merely because the remedy commonly used in suing upon ordinary contracts
can be here used, or that the law adopted the fiction of a promise in order to bring the obligation
within the scope of the action of assumpsit. Such statements fail to express the true import of
the phenomenon. Before the remedy was the idea; and the use of the remedy could not have
been approved if it had not been for historical antecedents which made the recognition of this
remedy at once logical and proper. Furthermore, it should not be forgotten that the question is
not how this duty came to be recognized in the common law as a contractual duty but what sort
of obligation did the author of the Code of Civil Procedure intend to describe when he used the
term implied contract in section 412.
In what has been said we have assumed that the obligation which is at the foundation of
the original action in the court below is not a quasi-contract, when judged by the principles of
the civil law. A few observations will show that this assumption is not by any means free from
doubt. The obligation in question certainly does not fall under the definition of either of the two
quasi-contracts which are made the subject of special treatment in the Civil Code, for it does
not arise from a licit act as contemplated in article 1887 and the money was not paid under error
as contemplated in article 1895. The obligation is clearly a creation of the positive law a
circumstance which brings it within the purview of article 1090, in relation with article 1089;
and it is also derived from an illicit act, namely, the playing of a prohibited game. It is thus seen
that the provisions of the Civil Code which might be consulted with a view to the correct
theoretical classification of this obligation are unsatisfactory and confusing.
The two obligations treated in the chapter devoted to quasi-contracts in the Civil Code
are: (1) The obligation incident to the officious management of the affairs of other persons
(gestion de negocios ajenos) and (2) the recovery of what has been improperly paid (cobro de lo
indebido). That the authors of the Civil Code selected these two obligations for special
treatment does not signify an intention to deny the possibility of the existence of other quasi-
contractual obligations. As is well said by the commentator Manresa.
"The number of the quasi-contracts may be indefinite as may be the number of lawful
facts, the generations of the said obligations; but the Code, just as we shall see further on, in the
impracticableness of enumerating or including them all in a methodical and orderly
classification, has concerned itself with two only namely, the management of the affairs of
other persons and the recovery of things improperly paid without attempting by this to exclude
the others." (Manresa, 2d ed., vol. 12, p. 549.)
It would indeed have been surprising if the authors of the Code, in the light of the
jurisprudence of more than a thousand years, should have arbitrarily assumed to limit the quasi-
contracts to two obligations. The author from whom we have just quoted further observes that
the two obligations in question were selected for special treatment in the Code not only because
they were the most conspicuous of the quasi-contracts, but because they had not been the
subject of consideration in other parts of the Code. (Opus citat., p. 550.)
It is well recognized among civilian jurists that the quasi-contractual obligations cover
a wide range. The Italian jurist, Jorge Giorgi, to whom we have already referred, considers
under this head, among other obligations, the following: payments made upon a future
consideration which is not realized, or upon an existing consideration which fails; payments
wrongfully made upon a consideration which is contrary to law, or opposed to public policy;
and payments made upon a vicious consideration or obtained by illicit means (Giorgi, Teoria de
las Obligaciones, vol. 5, art. 130.)
In permitting the recovery of money lost at play, Act No. 1757 has introduced
modifications in the application of articles 1798,1801, and 1305 of the Civil Code. The first two
of these articles relate to gambling contracts, while article 1305 treats of the nullity of contracts
proceeding from a vicious or illicit consideration. Taking all these provisions together, it must
be apparent that the obligation to return money lost at play has a decided affinity to contractual
obligations; and we believe that it could, without violence to the doctrines of the civil law, be
held that such obligations is an innominate quasi-contract. It is, however, unnecessary to place
the decision on this ground.
From what has been said it follows that in our opinion the cause of action stated in the
complaint in the court below is based on a contract, express or implied, and is therefore of such
nature that the court had authority to issue the writ of attachment. The application for the writ
of certiorari must therefore be denied and the proceedings dismissed. So ordered.
G.R. No. L-4089 January 12, 1909
ARTURO PELAYO, plaintiff-appellant,
vs.
MARCELO LAURON, ET AL., defendants-appellees.
J.H. Junquera, for appellant.
Filemon Sotto, for appellee.
TORRES, J.:
On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a complaint
against Marcelo Lauron and Juana Abella setting forth that on or about the 13th of October of
said year, at night, the plaintiff was called to the house of the defendants, situated in San
Nicolas, and that upon arrival he was requested by them to render medical assistance to their
daughter-in-law who was about to give birth to a child; that therefore, and after consultation
with the attending physician, Dr. Escaño, it was found necessary, on account of the difficult
birth, to remove the fetus by means of forceps which operation was performed by the plaintiff,
who also had to remove the afterbirth, in which services he was occupied until the following
morning, and that afterwards, on the same day, he visited the patient several times; that the just
and equitable value of the services rendered by him was P500, which the defendants refuse to
pay without alleging any good reason therefor; that for said reason he prayed that the judgment
be entered in his favor as against the defendants, or any of them, for the sum of P500 and costs,
together with any other relief that might be deemed proper.
In answer to the complaint counsel for the defendants denied all of the allegation therein
contained and alleged as a special defense, that their daughter-in-law had died in consequence
of the said childbirth, and that when she was alive she lived with her husband independently
and in a separate house without any relation whatever with them, and that, if on the day when
she gave birth she was in the house of the defendants, her stay their was accidental and due to
fortuitous circumstances; therefore, he prayed that the defendants be absolved of the complaint
with costs against the plaintiff.
The plaintiff demurred to the above answer, and the court below sustained the demurrer,
directing the defendants, on the 23rd of January, 1907, to amend their answer. In compliance
with this order the defendants presented, on the same date, their amended answer, denying each
and every one of the allegations contained in the complaint, and requesting that the same be
dismissed with costs.
As a result of the evidence adduced by both parties, judgment was entered by the court below
on the 5th of April, 1907, whereby the defendants were absolved from the former complaint, on
account of the lack of sufficient evidence to establish a right of action against the defendants,
with costs against the plaintiff, who excepted to the said judgment and in addition moved for a
new trial on the ground that the judgment was contrary to law; the motion was overruled and
the plaintiff excepted and in due course presented the corresponding bill of exceptions. The
motion of the defendants requesting that the declaration contained in the judgment that the
defendants had demanded therefrom, for the reason that, according to the evidence, no such
request had been made, was also denied, and to the decision the defendants excepted.
Assuming that it is a real fact of knowledge by the defendants that the plaintiff, by virtue of
having been sent for by the former, attended a physician and rendered professional services to a
daughter-in-law of the said defendants during a difficult and laborious childbirth, in order to
decide the claim of the said physician regarding the recovery of his fees, it becomes necessary
to decide who is bound to pay the bill, whether the father and mother-in-law of the patient, or
the husband of the latter.
According to article 1089 of the Civil Code, obligations are created by law, by contracts, by
quasi-contracts, and by illicit acts and omissions or by those in which any kind of fault or
negligence occurs.
Obligations arising from law are not presumed. Those expressly determined in the code or in
special laws, etc., are the only demandable ones. Obligations arising from contracts have legal
force between the contracting parties and must be fulfilled in accordance with their stipulations.
(Arts. 1090 and 1091.)
The rendering of medical assistance in case of illness is comprised among the mutual
obligations to which the spouses are bound by way of mutual support. (Arts. 142 and 143.)
If every obligation consists in giving, doing or not doing something (art. 1088), and spouses are
mutually bound to support each other, there can be no question but that, when either of them by
reason of illness should be in need of medical assistance, the other is under the unavoidable
obligation to furnish the necessary services of a physician in order that health may be restored,
and he or she may be freed from the sickness by which life is jeopardized; the party bound to
furnish such support is therefore liable for all expenses, including the fees of the medical expert
for his professional services. This liability originates from the above-cited mutual obligation
which the law has expressly established between the married couple.
In the face of the above legal precepts it is unquestionable that the person bound to pay the fees
due to the plaintiff for the professional services that he rendered to the daughter-in-law of the
defendants during her childbirth, is the husband of the patient and not her father and mother- in-
law, the defendants herein. The fact that it was not the husband who called the plaintiff and
requested his assistance for his wife is no bar to the fulfillment of the said obligation, as the
defendants, in view of the imminent danger, to which the life of the patient was at that moment
exposed, considered that medical assistance was urgently needed, and the obligation of the
husband to furnish his wife in the indispensable services of a physician at such critical moments
is specially established by the law, as has been seen, and compliance therewith is unavoidable;
therefore, the plaintiff, who believes that he is entitled to recover his fees, must direct his action
against the husband who is under obligation to furnish medical assistance to his lawful wife in
such an emergency.
From the foregoing it may readily be understood that it was improper to have brought an action
against the defendants simply because they were the parties who called the plaintiff and
requested him to assist the patient during her difficult confinement, and also, possibly, because
they were her father and mother-in-law and the sickness occurred in their house. The
defendants were not, nor are they now, under any obligation by virtue of any legal provision, to
pay the fees claimed, nor in consequence of any contract entered into between them and the
plaintiff from which such obligation might have arisen.
In applying the provisions of the Civil Code in an action for support, the supreme court of
Spain, while recognizing the validity and efficiency of a contract to furnish support wherein a
person bound himself to support another who was not his relative, established the rule that the
law does impose the obligation to pay for the support of a stranger, but as the liability arose out
of a contract, the stipulations of the agreement must be held. (Decision of May 11, 1897.)
Within the meaning of the law, the father and mother-in-law are strangers with respect to the
obligation that devolves upon the husband to provide support, among which is the furnishing of
medical assistance to his wife at the time of her confinement; and, on the other hand, it does not
appear that a contract existed between the defendants and the plaintiff physician, for which
reason it is obvious that the former can not be compelled to pay fees which they are under no
liability to pay because it does not appear that they consented to bind themselves.
The foregoing suffices to demonstrate that the first and second errors assigned to the judgment
below are unfounded, because, if the plaintiff has no right of action against the defendants, it is
needless to declare whether or not the use of forceps is a surgical operation.
Therefore, in view of the consideration hereinbefore set forth, it is our opinion that the
judgment appealed from should be affirmed with the costs against the appellant. So ordered.
SECOND DIVISION
[G.R. No. 154259. February 28, 2005]
NIKKO HOTEL MANILA GARDEN and RUBY LIM, petitioners, vs. ROBERTO
REYES, a.k.a. AMAY BISAYA, respondent.
DECISION
CHICO-NAZARIO, J.:
In this petition for review on certiorari, petitioners Nikko Hotel Manila Garden (Hotel
Nikko)[1] and Ruby Lim assail the Decision[2] of the Court of Appeals dated 26 November 2001
reversing the Decision[3] of the Regional Trial Court (RTC) of Quezon City, Branch 104, as
well as the Resolution[4] of the Court of Appeals dated 09 July 2002 which denied petitioners
motion for reconsideration.
The cause of action before the trial court was one for damages brought under the human
relations provisions of the New Civil Code. Plaintiff thereat (respondent herein) Roberto Reyes,
more popularly known by the screen name Amay Bisaya, alleged that at around 6:00 oclock in
the evening of 13 October 1994, while he was having coffee at the lobby of Hotel Nikko,[5] he
was spotted by his friend of several years, Dr. Violeta Filart, who then approached him. [6] Mrs.
Filart invited him to join her in a party at the hotels penthouse in celebration of the natal day of
the hotels manager, Mr. Masakazu Tsuruoka.[7] Mr. Reyes asked if she could vouch for him for
which she replied: of course.[8] Mr. Reyes then went up with the party of Dr. Filart carrying the
basket of fruits which was the latters present for the celebrant.[9] At the penthouse, they first had
their picture taken with the celebrant after which Mr. Reyes sat with the party of Dr.
Filart.[10] After a couple of hours, when the buffet dinner was ready, Mr. Reyes lined-up at the
buffet table but, to his great shock, shame and embarrassment, he was stopped by petitioner
herein, Ruby Lim, who claimed to speak for Hotel Nikko as Executive Secretary thereof.[11] In a
loud voice and within the presence and hearing of the other guests who were making a queue at
the buffet table, Ruby Lim told him to leave the party (huwag ka nang kumain, hindi ka
imbitado, bumaba ka na lang).[12] Mr. Reyes tried to explain that he was invited by Dr.
Filart.[13] Dr. Filart, who was within hearing distance, however, completely ignored him thus
adding to his shame and humiliation.[14] Not long after, while he was still recovering from the
traumatic experience, a Makati policeman approached and asked him to step out of the
hotel.[15] Like a common criminal, he was escorted out of the party by the
policeman.[16] Claiming damages, Mr. Reyes asked for One Million Pesos actual damages, One
Million Pesos moral and/or exemplary damages and Two Hundred Thousand Pesos attorneys
fees.[17]
Ruby Lim, for her part, admitted having asked Mr. Reyes to leave the party but not under
the ignominious circumstance painted by the latter. Ms. Lim narrated that she was the Hotels
Executive Secretary for the past twenty (20) years.[18] One of her functions included organizing
the birthday party of the hotels former General Manager, Mr. Tsuruoka.[19] The year 1994 was
no different. For Mr. Tsuruokas party, Ms. Lim generated an exclusive guest list and extended
invitations accordingly.[20] The guest list was limited to approximately sixty (60) of Mr.
Tsuruokas closest friends and some hotel employees and that Mr. Reyes was not one of those
invited.[21] At the party, Ms. Lim first noticed Mr. Reyes at the bar counter ordering a
drink.[22] Mindful of Mr. Tsuruokas wishes to keep the party intimate, Ms. Lim approached Mr.
Boy Miller, the captain waiter, to inquire as to the presence of Mr. Reyes who was not
invited.[23] Mr. Miller replied that he saw Mr. Reyes with the group of Dr. Filart. [24] As Dr.
Filart was engaged in conversation with another guest and as Ms. Lim did not want to interrupt,
she inquired instead from the sister of Dr. Filart, Ms. Zenaida Fruto, who told her that Dr. Filart
did not invite Mr. Reyes.[25] Ms. Lim then requested Ms. Fruto to tell Mr. Reyes to leave the
party as he was not invited.[26] Mr. Reyes, however, lingered prompting Ms. Lim to inquire
from Ms. Fruto who said that Mr. Reyes did not want to leave. [27] When Ms. Lim turned
around, she saw Mr. Reyes conversing with a Captain Batung whom she later
approached.[28] Believing that Captain Batung and Mr. Reyes knew each other, Ms. Lim
requested from him the same favor from Ms. Fruto, i.e., for Captain Batung to tell Mr. Reyes to
leave the party as he was not invited.[29] Still, Mr. Reyes lingered. When Ms. Lim spotted Mr.
Reyes by the buffet table, she decided to speak to him herself as there were no other guests in
the immediate vicinity.[30] However, as Mr. Reyes was already helping himself to the food, she
decided to wait.[31] When Mr. Reyes went to a corner and started to eat, Ms. Lim approached
him and said: alam ninyo, hindo ho kayo dapat nandito. Pero total nakakuha na ho kayo ng
pagkain, ubusin na lang ninyo at pagkatapos kung pwede lang po umalis na kayo.[32] She then
turned around trusting that Mr. Reyes would show enough decency to leave, but to her surprise,
he began screaming and making a big scene, and even threatened to dump food on her.[33]
Dr. Violeta Filart, the third defendant in the complaint before the lower court, also gave
her version of the story to the effect that she never invited Mr. Reyes to the party. [34] According
to her, it was Mr. Reyes who volunteered to carry the basket of fruits intended for the celebrant
as he was likewise going to take the elevator, not to the penthouse but to Altitude 49. [35] When
they reached the penthouse, she reminded Mr. Reyes to go down as he was not properly dressed
and was not invited.[36] All the while, she thought that Mr. Reyes already left the place, but she
later saw him at the bar talking to Col. Batung.[37] Then there was a commotion and she saw
Mr. Reyes shouting.[38] She ignored Mr. Reyes.[39] She was embarrassed and did not want the
celebrant to think that she invited him.[40]
After trial on the merits, the court a quo dismissed the complaint,[41] giving more credence
to the testimony of Ms. Lim that she was discreet in asking Mr. Reyes to leave the party. The
trial court likewise ratiocinated that Mr. Reyes assumed the risk of being thrown out of the
party as he was uninvited:
Plaintiff had no business being at the party because he was not a guest of Mr. Tsuruoka, the
birthday celebrant. He assumed the risk of being asked to leave for attending a party to which
he was not invited by the host. Damages are pecuniary consequences which the law imposes for
the breach of some duty or the violation of some right. Thus, no recovery can be had against
defendants Nikko Hotel and Ruby Lim because he himself was at fault (Garciano v. Court of
Appeals, 212 SCRA 436). He knew that it was not the party of defendant Violeta Filart even if
she allowed him to join her and took responsibility for his attendance at the party. His action
against defendants Nikko Hotel and Ruby Lim must therefore fail.[42]
On appeal, the Court of Appeals reversed the ruling of the trial court as it found more
commanding of belief the testimony of Mr. Reyes that Ms. Lim ordered him to leave in a loud
voice within hearing distance of several guests:
In putting appellant in a very embarrassing situation, telling him that he should not finish his
food and to leave the place within the hearing distance of other guests is an act which is
contrary to morals, good customs . . ., for which appellees should compensate the appellant for
the damage suffered by the latter as a consequence therefore (Art. 21, New Civil Code). The
liability arises from the acts which are in themselves legal or not prohibited, but contrary to
morals or good customs. Conversely, even in the exercise of a formal right, [one] cannot with
impunity intentionally cause damage to another in a manner contrary to morals or good
customs.[43]
The Court of Appeals likewise ruled that the actuation of Ms. Lim in approaching several
people to inquire into the presence of Mr. Reyes exposed the latter to ridicule and was uncalled
for as she should have approached Dr. Filart first and both of them should have talked to Mr.
Reyes in private:
Said acts of appellee Lim are uncalled for. What should have been done by appellee Lim was to
approach appellee Mrs. Filart and together they should have told appellant Reyes in private that
the latter should leave the party as the celebrant only wanted close friends around. It is
necessary that Mrs. Filart be the one to approach appellant because it was she who invited
appellant in that occasion. Were it not for Mrs. Filarts invitation, appellant could not have
suffered such humiliation. For that, appellee Filart is equally liable.
...
The acts of [appellee] Lim are causes of action which are predicated upon mere rudeness or
lack of consideration of one person, which calls not only protection of human dignity but
respect of such dignity. Under Article 20 of the Civil Code, every person who violates this duty
becomes liable for damages, especially if said acts were attended by malice or bad faith. Bad
faith does not simply connote bad judgment or simple negligence. It imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty to
some motive or interest or ill-will that partakes of the nature of fraud (Cojuangco, Jr. v. CA, et
al., 309 SCRA 603).[44]
Consequently, the Court of Appeals imposed upon Hotel Nikko, Ruby Lim and Dr.
Violeta Filart the solidary obligation to pay Mr. Reyes (1) exemplary damages in the amount of
Two Hundred Thousand Pesos (P200,000); (2) moral damages in the amount of Two Hundred
Thousand Pesos (P200,000); and (3) attorneys fees in the amount of Ten Thousand Pesos
(P10,000).[45] On motion for reconsideration, the Court of Appeals affirmed its earlier decision
as the argument raised in the motion had been amply discussed and passed upon in the decision
sought to be reconsidered.[46]
Thus, the instant petition for review. Hotel Nikko and Ruby Lim contend that the Court of
Appeals seriously erred in
I.
NOT APPLYING THE DOCTRINE OF VOLENTI NON FIT INJURIA CONSIDERING
THAT BY ITS OWN FINDINGS, AMAY BISAYA WAS A GATE-CRASHER
II.
HOLDING HOTEL NIKKO AND RUBY LIM JOINTLY AND SEVERALLY LIABLE
WITH DR. FILART FOR DAMAGES SINCE BY ITS OWN RULING, AMAY BISAYA
COULD NOT HAVE SUFFERED SUCH HUMILIATION, WERE IT NOT FOR DR.
FILARTS INVITATION
III.
DEPARTING FROM THE FINDINGS OF FACT OF THE TRIAL COURT AS REGARDS
THE CIRCUMSTANCES THAT ALLEGEDLY CAUSED THE HUMILIATION OF AMAY
BISAYA
IV.
IN CONCLUDING THAT AMAY BISAYA WAS TREATED UNJUSTLY BECAUSE OF
HIS POVERTY, CONSIDERING THAT THIS WAS NEVER AN ISSUE AND NO
EVIDENCE WAS PRESENTED IN THIS REGARD
V.
IN FAILING TO PASS UPON THE ISSUE ON THE DEFECTS OF THE APPELLANTS
BRIEF, THEREBY DEPARTING FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS
Petitioners Lim and Hotel Nikko contend that pursuant to the doctrine of volenti non fit
injuria, they cannot be made liable for damages as respondent Reyes assumed the risk of being
asked to leave (and being embarrassed and humiliated in the process) as he was a gate-crasher.
The doctrine of volenti non fit injuria (to which a person assents is not esteemed in law as
injury[47]) refers to self-inflicted injury[48] or to the consent to injury[49] which precludes the
recovery of damages by one who has knowingly and voluntarily exposed himself to danger,
even if he is not negligent in doing so.[50] As formulated by petitioners, however, this doctrine
does not find application to the case at bar because even if respondent Reyes assumed the risk
of being asked to leave the party, petitioners, under Articles 19 and 21 of the New Civil Code,
were still under obligation to treat him fairly in order not to expose him to unnecessary ridicule
and shame.
Thus, the threshold issue is whether or not Ruby Lim acted abusively in asking Roberto
Reyes, a.k.a. Amay Bisaya, to leave the party where he was not invited by the celebrant thereof
thereby becoming liable under Articles 19 and 21 of the Civil Code. Parenthetically, and if
Ruby Lim were so liable, whether or not Hotel Nikko, as her employer, is solidarily liable with
her.
As the trial court and the appellate court reached divergent and irreconcilable conclusions
concerning the same facts and evidence of the case, this Court is left without choice but to use
its latent power to review such findings of facts. Indeed, the general rule is that we are not a
trier of facts as our jurisdiction is limited to reviewing and revising errors of law.[51] One of the
exceptions to this general rule, however, obtains herein as the findings of the Court of Appeals
are contrary to those of the trial court.[52] The lower court ruled that Ms. Lim did not abuse her
right to ask Mr. Reyes to leave the party as she talked to him politely and discreetly. The
appellate court, on the other hand, held that Ms. Lim is liable for damages as she needlessly
embarrassed Mr. Reyes by telling him not to finish his food and to leave the place within
hearing distance of the other guests. Both courts, however, were in agreement that it was Dr.
Filarts invitation that brought Mr. Reyes to the party.
The consequential question then is: Which version is credible?
From an in depth review of the evidence, we find more credible the lower courts findings
of fact.
First, let us put things in the proper perspective.
 We are dealing with a formal party in a posh, five-star hotel,[53] for-invitation-only, thrown
for the hotels former Manager, a Japanese national. Then came a person who was clearly
uninvited (by the celebrant)[54] and who could not just disappear into the crowd as his face is
known by many, being an actor. While he was already spotted by the organizer of the party,
Ms. Lim, the very person who generated the guest list, it did not yet appear that the celebrant
was aware of his presence. Ms. Lim, mindful of the celebrants instruction to keep the party
intimate, would naturally want to get rid of the gate-crasher in the most hush-hush manner in
order not to call attention to a glitch in an otherwise seamless affair and, in the process, risk the
displeasure of the celebrant, her former boss. To unnecessarily call attention to the presence of
Mr. Reyes would certainly reflect badly on Ms. Lims ability to follow the instructions of the
celebrant to invite only his close friends and some of the hotels personnel. Mr. Reyes, upon
whom the burden rests to prove that indeed Ms. Lim loudly and rudely ordered him to leave,
could not offer any satisfactory explanation why Ms. Lim would do that and risk ruining a
formal and intimate affair. On the contrary, Mr. Reyes, on cross-examination, had unwittingly
sealed his fate by admitting that when Ms. Lim talked to him, she was very close. Close enough
for him to kiss:
Q: And, Mr. Reyes, you testified that Miss Lim approached you while you were at the
buffet table? How close was she when she approached you?
A: Very close because we nearly kissed each other.
Q: And yet, she shouted for you to go down? She was that close and she shouted?
A: Yes. She said, wag kang kumain, hindi ka imbitado dito, bumaba ka na lang.
Q: So, you are testifying that she did this in a loud voice?
...
A: Yes. If it is not loud, it will not be heard by many.[55]
In the absence of any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and
expose him to ridicule and shame, it is highly unlikely that she would shout at him from a very
close distance. Ms. Lim having been in the hotel business for twenty years wherein being polite
and discreet are virtues to be emulated, the testimony of Mr. Reyes that she acted to the
contrary does not inspire belief and is indeed incredible. Thus, the lower court was correct in
observing that
Considering the closeness of defendant Lim to plaintiff when the request for the latter to leave
the party was made such that they nearly kissed each other, the request was meant to be heard
by him only and there could have been no intention on her part to cause embarrassment to him.
It was plaintiffs reaction to the request that must have made the other guests aware of what
transpired between them. . .
Had plaintiff simply left the party as requested, there was no need for the police to take him
out.[56]
Moreover, another problem with Mr. Reyess version of the story is that it is unsupported.
It is a basic rule in civil cases that he who alleges proves. Mr. Reyes, however, had not
presented any witness to back his story up. All his witnesses Danny Rodinas, Pepito Guerrero
and Alexander Silva - proved only that it was Dr. Filart who invited him to the party.[57]
Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to which he was
not invited, cannot be made liable to pay for damages under Articles 19 and 21 of the Civil
Code. Necessarily, neither can her employer, Hotel Nikko, be held liable as its liability springs
from that of its employee.[58]
Article 19, known to contain what is commonly referred to as the principle of abuse of
rights,[59] is not a panacea for all human hurts and social grievances. Article 19 states:
Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good faith.
Elsewhere, we explained that when a right is exercised in a manner which does not conform
with the norms enshrined in Article 19 and results in damage to another, a legal wrong is
thereby committed for which the wrongdoer must be responsible.[60] The object of this article,
therefore, is to set certain standards which must be observed not only in the exercise of ones
rights but also in the performance of ones duties.[61] These standards are the following: act with
justice, give everyone his due and observe honesty and good faith.[62] Its antithesis, necessarily,
is any act evincing bad faith or intent to injure. Its elements are the following: (1) There is a
legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or
injuring another.[63] When Article 19 is violated, an action for damages is proper under Articles
20 or 21 of the Civil Code. Article 20 pertains to damages arising from a violation of
law[64] which does not obtain herein as Ms. Lim was perfectly within her right to ask Mr. Reyes
to leave. Article 21, on the other hand, states:
Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary
to morals, good customs or public policy shall compensate the latter for the damage.
Article 21[65] refers to acts contra bonus mores and has the following elements: (1) There is an
act which is legal; (2) but which is contrary to morals, good custom, public order, or public
policy; and (3) it is done with intentto injure.[66]
A common theme runs through Articles 19 and 21,[67] and that is, the act complained of
must be intentional.[68]
 As applied to herein case and as earlier discussed, Mr. Reyes has not shown that Ms. Lim
was driven by animosity against him. These two people did not know each other personally
before the evening of 13 October 1994, thus, Mr. Reyes had nothing to offer for an explanation
for Ms. Lims alleged abusive conduct except the statement that Ms. Lim, being single at 44
years old, had a very strong bias and prejudice against (Mr. Reyes) possibly influenced by her
associates in her work at the hotel with foreign businessmen. [69] The lameness of this argument
need not be belabored. Suffice it to say that a complaint based on Articles 19 and 21 of the
Civil Code must necessarily fail if it has nothing to recommend it but innuendos and
conjectures.
All told, and as far as Ms. Lim and Hotel Nikko are concerned, any damage which Mr.
Reyes might have suffered through Ms. Lims exercise of a legitimate right done within the
bounds of propriety and good faith, must be his to bear alone.
WHEREFORE, premises considered, the petition filed by Ruby Lim and Nikko Hotel
Manila Garden is GRANTED. The Decision of the Court of Appeals dated 26 November 2001
and its Resolution dated 09 July 2002 are hereby REVERSED and SET ASIDE. The Decision
of the Regional Trial Court of Quezon City, Branch 104, dated 26 April 1999 is hereby
AFFIRMED. No costs.

Parenthetically, the manner by which Ms. Lim asked Mr. Reyes to leave was likewise SO ORDERED.
acceptable and humane under the circumstances. In this regard, we cannot put our imprimatur
on the appellate courts declaration that Ms. Lims act of personally approaching Mr. Reyes
(without first verifying from Mrs. Filart if indeed she invited Mr. Reyes) gave rise to a cause of
action predicated upon mere rudeness or lack of consideration of one person, which calls not
only protection of human dignity but respect of such dignity.[70] Without proof of any ill-motive
on her part, Ms. Lims act of by-passing Mrs. Filart cannot amount to abusive conduct especially
because she did inquire from Mrs. Filarts companion who told her that Mrs. Filart did not invite
Mr. Reyes.[71] If at all, Ms. Lim is guilty only of bad judgment which, if done with good
intentions, cannot amount to bad faith.
Not being liable for both actual and moral damages, neither can petitioners Lim and Hotel
Nikko be made answerable for exemplary damages[72] especially for the reason stated by the
Court of Appeals. The Court of Appeals held

Not a few of the rich people treat the poor with contempt because of the latters lowly station in
life. This has to be limited somewhere. In a democracy, such a limit must be established. Social
equality is not sought by the legal provisions under consideration, but due regard for decency
and propriety (Code Commission, pp. 33-34). And by way of example or correction for public
good and to avert further commission of such acts, exemplary damages should be imposed
upon appellees.[73]

The fundamental fallacy in the above-quoted findings is that it runs counter with the very facts
of the case and the evidence on hand. It is not disputed that at the time of the incident in
question, Mr. Reyes was an actor of long standing; a co-host of a radio program over DZRH; a
Board Member of the Music Singer Composer (MUSICO) chaired by popular singer Imelda
Papin; a showbiz Coordinator of Citizen Crime Watch; and 1992 official candidate of the KBL
Party for Governor of Bohol; and an awardee of a number of humanitarian organizations of the
Philippines.[74] During his direct examination on rebuttal, Mr. Reyes stressed that he had
income[75] and nowhere did he say otherwise. On the other hand, the records are bereft of any
information as to the social and economic standing of petitioner Ruby Lim. Consequently, the
conclusion reached by the appellate court cannot withstand scrutiny as it is without basis.
 FIRST DIVISION
[G.R. No. 143363. February 6, 2002]
ST. MARYS ACADEMY, petitioner, vs. WILLIAM CARPITANOS and LUCIA S.
CARPITANOS, GUADA DANIEL, JAMES DANIEL II, JAMES
DANIEL, SR., and VIVENCIO VILLANUEVA, respondents.
DECISION
PARDO, J.:
The Case
The case is an appeal via certiorari from the decision of the Court of Appeals as well
[1]
as the resolution denying reconsideration, holding petitioner liable for damages arising
from an accident that resulted in the death of a student who had joined a campaign to visit
the public schools in Dipolog City to solicit enrollment.
The Facts
The facts, as found by the Court of Appeals, are as follows:
Claiming damages for the death of their only son, Sherwin Carpitanos, spouses William
Carpitanos and Lucia Carpitanos filed on June 9, 1995 a case against James Daniel II and
his parents, James Daniel Sr. and Guada Daniel, the vehicle owner, Vivencio Villanueva
and St. Marys Academy before the Regional Trial Court of Dipolog City.
On 20 February 1997, Branch 6 of the Regional Trial Court of Dipolog City rendered its
decision the dispositive portion of which reads as follows:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in the following
manner:
1. Defendant St. Marys Academy of Dipolog City, is hereby ordered to pay plaintiffs
William Carpitanos and Luisa Carpitanos, the following sums of money:
a. FIFTY THOUSAND PESOS (P50,000.00) indemnity for the loss of life of Sherwin S.
Carpitanos;
b. FORTY THOUSAND PESOS (P40,000.00) actual damages incurred by plaintiffs for
burial and related expenses;
c. TEN THOUSAND PESOS (P10,000.00) for attorneys fees;
d. FIVE HUNDRED THOUSAND PESOS (P500,000.00) for moral damages; and to pay
costs.
2. Their liability being only subsidiary, defendants James Daniel, Sr. and Guada Daniel are
hereby ordered to pay herein plaintiffs the amount of damages above-stated in the event of
insolvency of principal obligor St. Marys Academy of Dipolog City;
3. Defendant James Daniel II, being a minor at the time of the commission of the tort and
who was under special parental authority of defendant St. Marys Academy, is ABSOLVED
from paying the above-stated damages, same being adjudged against defendants St. Marys
Academy, and subsidiarily, against his parents;
4. Defendant Vivencio Villanueva is hereby ABSOLVED of any liability. His counterclaim
not being in order as earlier discussed in this decision, is hereby DISMISSED.
IT IS SO ORDERED. (Decision, pp. 32-33; Records, pp. 205-206).
From the records it appears that from 13 to 20 February 1995, defendant-appellant St.
Marys Academy of Dipolog City conducted an enrollment drive for the school year 1995-
1996. A facet of the enrollment campaign was the visitation of schools from where
prospective enrollees were studying. As a student of St. Marys Academy, Sherwin
Carpitanos was part of the campaigning group. Accordingly, on the fateful day, Sherwin,
along with other high school students were riding in a Mitsubishi jeep owned by defendant
Vivencio Villanueva on their way to Larayan Elementary School,
Larayan, Dapitan City. The jeep was driven by James Daniel II then 15 years old and a
student of the same school. Allegedly, the latter drove the jeep in a reckless manner and as
a result the jeep turned turtle.
Sherwin Carpitanos died as a result of the injuries he sustained from the accident. [2]
In due time, petitioner St. Marys academy appealed the decision to the Court of
Appeals. [3]
 On February 29, 2000, the Court of Appeals promulgated a decision reducing the
actual damages to P25,000.00 but otherwise affirming the decision a quo, in toto. [4]
On February 29, 2000, petitioner St. Marys Academy filed a motion for
reconsideration of the decision. However, on May 22, 2000, the Court of Appeals denied
the motion. [5]
Hence, this appeal. [6]
The Issues
1) Whether the Court of Appeals erred in holding the petitioner liable for damages for the death of
Sherwin Carpitanos.
2) Whether the Court of Appeals erred in affirming the award of moral damages against the petitioner.
The Courts Ruling
We reverse the decision of the Court of Appeals.
The Court of Appeals held petitioner St. Marys Academy liable for the death of
Sherwin Carpitanos under Articles 218 and 219 of the Family Code, pointing out that
[7] [8]
petitioner was negligent in allowing a minor to drive and in not having a teacher
accompany the minor students in the jeep.
Under Article 218 of the Family Code, the following shall have special parental
authority over a minor child while under their supervision, instruction or custody: (1) the
school, its administrators and teachers; or (2) the individual, entity or institution engaged in
child care. This special parental authority and responsibility applies to all authorized
activities, whether inside or outside the premises of the school, entity or institution. Thus,
such authority and responsibility applies to field trips, excursions and other affairs of the
pupils and students outside the school premises whenever authorized by the school or its
teachers.[9]
Under Article 219 of the Family Code, if the person under custody is a minor, those
exercising special parental authority are principally and solidarily liable for damages
caused by the acts or omissions of the unemancipated minor while under their supervision,
instruction, or custody. [10]
However, for petitioner to be liable, there must be a finding that the act or omission
considered as negligent was the proximate cause of the injury caused because the
negligence must have a causal connection to the accident. [11]
In order that there may be a recovery for an injury, however, it must be shown that the
injury for which recovery is sought must be the legitimate consequence of the wrong done;
the connection between the negligence and the injury must be a direct and natural sequence
of events, unbroken by intervening efficient causes. In other words, the negligence must be
the proximate cause of the injury. For, negligence, no matter in what it consists, cannot
create a right of action unless it is the proximate cause of the injury complained of. And the
proximate cause of an injury is that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury, and without which the
result would not have occurred.[12]
In this case, the respondents failed to show that the negligence of petitioner was the
proximate cause of the death of the victim.
Respondents Daniel spouses and Villanueva admitted that the immediate cause of the
accident was not the negligence of petitioner or the reckless driving of James Daniel II, but
the detachment of the steering wheel guide of the jeep.
In their comment to the petition, respondents Daniel spouses and Villanueva admitted
the documentary exhibits establishing that the cause of the accident was the detachment of
the steering wheel guide of the jeep.Hence, the cause of the accident was not the
recklessness of James Daniel II but the mechanical defect in the jeep of Vivencio
Villanueva. Respondents, including the spouses Carpitanos, parents of the deceased
Sherwin Carpitanos, did not dispute the report and testimony of the traffic investigator who
stated that the cause of the accident was the detachment of the steering wheel guide that
caused the jeep to turn turtle.
Significantly, respondents did not present any evidence to show that the proximate
cause of the accident was the negligence of the school authorities, or the reckless driving of
James Daniel II. Hence, the respondents reliance on Article 219 of the Family Code that
those given the authority and responsibility under the preceding Article shall be principally
and solidarily liable for damages caused by acts or omissions of the unemancipated minor
was unfounded.
Further, there was no evidence that petitioner school allowed the minor James Daniel
II to drive the jeep of respondent Vivencio Villanueva. It was Ched Villanueva, grandson
of respondent Vivencio Villanueva, who had possession and control of the jeep. He was
driving the vehicle and he allowed James Daniel II, a minor, to drive the jeep at the time of
the accident.
 Hence, liability for the accident, whether caused by the negligence of the minor driver The Fallo
or mechanical detachment of the steering wheel guide of the jeep, must be pinned on the
minors parents primarily. The negligence of petitioner St. Marys Academy was only a
remote cause of the accident. Between the remote cause and the injury, there intervened the WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of
negligence of the minors parents or the detachment of the steering wheel guide of the jeep. Appeals and that of the trial court. The Court remands the case to the trial court for
[18] [19]

determination of the liability of defendants, excluding petitioner St. Marys

The proximate cause of an injury is that cause, which, in natural and continuous sequence, Academy, Dipolog City.
unbroken by any efficient intervening cause, produces the injury, and without which the No costs.
result would not have occurred.[13]
SO ORDERED.
Considering that the negligence of the minor driver or the detachment of the steering
wheel guide of the jeep owned by respondent Villanueva was an event over which
petitioner St. Marys Academy had no control, and which was the proximate cause of the
accident, petitioner may not be held liable for the death resulting from such accident.
Consequently, we find that petitioner likewise cannot be held liable for moral damages
in the amount of P500,000.00 awarded by the trial court and affirmed by the Court of
Appeals.
Though incapable of pecuniary computation, moral damages may be recovered if they
are the proximate result of the defendants wrongful act or omission. In this case, the
[14]

proximate cause of the accident was not attributable to petitioner.

For the reason that petitioner was not directly liable for the accident, the decision of
the Court of Appeals ordering petitioner to pay death indemnity to respondent Carpitanos
must be deleted. Moreover, the grant of attorneys fees as part of damages is the exception
rather than the rule. The power of the court to award attorneys fees under Article 2208 of
[15]

the Civil Code demands factual, legal and equitable justification. Thus, the grant of
[16]

attorneys fees against the petitioner is likewise deleted.

Incidentally, there was no question that the registered owner of the vehicle was
respondent Villanueva. He never denied and in fact admitted this fact. We have held that
the registered owner of any vehicle, even if not used for public service, would primarily be
responsible to the public or to third persons for injuries caused the latter while the vehicle
was being driven on the highways or streets. Hence, with the overwhelming evidence
[17]

presented by petitioner and the respondent Daniel spouses that the accident occurred
because of the detachment of the steering wheel guide of the jeep, it is not the school, but
the registered owner of the vehicle who shall be held responsible for damages for the death
of Sherwin Carpitanos.