Republic of the Philippines On December 13, 1979, the lower court rendered its
SUPREME COURT Decision 1 based on the compromise agreement submitted by the
Manila
SECOND DIVISION
G.R. No. L-55138 September 28, 1984
ERNESTO V. RONQUILLO, petitioner, 
vs.
HONORABLE COURT OF APPEALS AND ANTONIO P.
SO, respondents.
Gloria A. Fortun for petitioner.
Roselino Reyes Isler for respondents.
CUEVAS, J.:
This is a petition to review the Resolution dated June 30, 1980 of the
then Court of Appeals (now the Intermediate Appellate Court) in CA-
G.R. No. SP-10573, entitled "Ernesto V. Ronquillo versus the Hon.
Florellana Castro-Bartolome, etc." and the Order of said court dated
August 20, 1980, denying petitioner's motion for reconsideration of
the above resolution.
Petitioner Ernesto V. Ronquillo was one of four (4) defendants in
Civil Case No. 33958 of the then Court of First Instance of Rizal (now
the Regional Trial Court), Branch XV filed by private respondent
Antonio P. So, on July 23, 1979, for the collection of the sum of
P17,498.98 plus attorney's fees and costs. The other defendants
were Offshore Catertrade Inc., Johnny Tan and Pilar Tan. The
amount of P117,498.98 sought to be collected represents the value
of the checks issued by said defendants in payment for foodstuffs
delivered to and received by them. The said checks were dishonored
by the drawee bank.
parties, the pertinent portion of which reads as follows:
1. Plaintiff agrees to reduce its total claim of
P117,498-95 to only P11,000 .00 and defendants
agree to acknowledge the validity of such claim and
further bind themselves to initially pay out of the total
indebtedness of P10,000.00 the amount of
P55,000.00 on or before December 24, 1979, the
balance of P55,000.00, defendants individually and
jointly agree to pay within a period of six months
from January 1980, or before June 30, 1980;
(Emphasis supplied)
xxx xxx xxx
4. That both parties agree that failure on the part of
either party to comply with the foregoing terms and
conditions, the innocent party will be entitled to an
execution of the decision based on this compromise
agreement and the defaulting party agrees and hold
themselves to reimburse the innocent party for
attorney's fees, execution fees and other fees
related with the execution.
xxx xxx xxx
On December 26, 1979, herein private respondent (then plaintiff filed
a Motion for Execution on the ground that defendants failed to make
the initial payment of P55,000.00 on or before December 24, 1979
as provided in the Decision. Said motion for execution was opposed
by herein petitioner (as one of the defendants) contending that his
inability to make the payment was due to private respondent's own
act of making himself scarce and inaccessible on December 24,
1979. Petitioner then prayed that private respondent be ordered to
accept his payment in the amount of P13,750.00. 2
1
During the hearing of the Motion for Execution and the Opposition
thereto on January 16, 1980, petitioner, as one of the four
defendants, tendered the amount of P13,750.00, as his prorata
share in the P55,000.00 initial payment. Another defendant, Pilar P.
Tan, offered to pay the same amount. Because private respondent
refused to accept their payments, demanding from them the full initial
installment of P 55,000.00, petitioner and Pilar Tan instead deposited
the said amount with the Clerk of Court. The amount deposited was
subsequently withdrawn by private respondent. 3
On the same day, January 16, 1980, the lower court ordered the
issuance of a writ of execution for the balance of the initial amount
payable, against the other two defendants, Offshore Catertrade Inc.
and Johnny Tan 4 who did not pay their shares.
On January 22, 1980, private respondent moved for the
reconsideration and/or modification of the aforesaid Order of
execution and prayed instead for the "execution of the decision in its
entirety against all defendants, jointly and severally." 5 Petitioner
opposed the said motion arguing that under the decision of the lower
court being executed which has already become final, the liability of
the four (4) defendants was not expressly declared to be solidary,
consequently each defendant is obliged to pay only his own pro-rata
or 1/4 of the amount due and payable.
On March 17, 1980, the lower court issued an Order reading as
follows:
ORDER
Regardless of whatever the compromise agreement
has intended the payment whether jointly or
individually, or jointly and severally, the fact is that
only P27,500.00 has been paid. There appears to be
a non-payment in accordance with the compromise
agreement of the amount of P27,500.00 on or before
December 24, 1979. The parties are reminded that
the payment is condition sine qua non to the lifting of
the preliminary attachment and the execution of an
affidavit of desistance.
WHEREFORE, let writ of execution issue as prayed
for
On March 17, 1980, petitioner moved for the reconsideration of the
above order, and the same was set for hearing on March 25,1980.
Meanwhile, or more specifically on March 19, 1980, a writ of
execution was issued for the satisfaction of the sum of P82,500.00
as against the properties of the defendants (including petitioner),
"singly or jointly hable." 6
On March 20, 1980, Special Sheriff Eulogio C. Juanson of Rizal,
issued a notice of sheriff's sale, for the sale of certain furnitures and
appliances found in petitioner's residence to satisfy the sum of
P82,500.00. The public sale was scheduled for April 2, 1980 at 10:00
a.m. 7
Petitioner's motion for reconsideration of the Order of Execution
dated March 17, 1980 which was set for hearing on March 25, 1980,
was upon motion of private respondent reset to April 2, 1980 at 8:30
a.m. Realizing the actual threat to property rights poised by the re-
setting of the hearing of s motion for reconsideration for April 2, 1980
at 8:30 a.m. such that if his motion for reconsideration would be
denied he would have no more time to obtain a writ from the
appellate court to stop the scheduled public sale of his personal
properties at 10:00 a.m. of the same day, April 2, 1980, petitioner
filed on March 26, 1980 a petition for certiorari and prohibition with
the then Court of Appeals (CA-G.R. No. SP-10573), praying at the
same time for the issuance of a restraining order to stop the public
sale. He raised the question of the validity of the order of execution,
the writ of execution and the notice of public sale of his properties to
satisfy fully the entire unpaid obligation payable by all of the four (4)
defendants, when the lower court's decision based on the
compromise agreement did not specifically state the liability of the
four (4) defendants to be solidary.
2
On April 2, 1980, the lower court denied petitioner's motion for
reconsideration but the scheduled public sale in that same day did
not proceed in view of the pendency of a certiorari proceeding before
the then Court of Appeals.
On June 30, 1980, the said court issued a Resolution, the pertinent
portion of which reads as follows:
This Court, however, finds the present petition to
have been filed prematurely. The rule is that before
a petition for certiorari can be brought against an
order of a lower court, all remedies available in that
court must first be exhausted. In the case at bar,
herein petitioner filed a petition without waiting for a
resolution of the Court on the motion for
reconsideration, which could have been favorable to
the petitioner. The fact that the hearing of the motion
for reconsideration had been reset on the same day
the public sale was to take place is of no moment
since the motion for reconsideration of the Order of
March 17, 1980 having been seasonably filed, the
scheduled public sale should be suspended.
Moreover, when the defendants, including herein
petitioner, defaulted in their obligation based on the
compromise agreement, private respondent had
become entitled to move for an execution of the
decision based on the said agreement.
WHEREFORE, the instant petition for certiorari and
prohibition with preliminary injunction is hereby
denied due course. The restraining order issued in
our resolution dated April 9, 1980 is hereby lifted
without pronouncement as to costs.
SO ORDERED.
Petitioner moved to reconsider the aforesaid Resolution alleging that
on April 2, 1980, the lower court had already denied the motion
referred to and consequently, the legal issues being raised in the
petition were already "ripe" for determination. 8 The said motion was
however denied by the Court of Appeals in its Resolution dated
August 20, 1980.
Hence, this petition for review, petitioner contending that the Court of
Appeals erred in
(a) declaring as premature, and in denying due course to the petition
to restrain implementation of a writ of execution issued at variance
with the final decision of the lower court filed barely four (4) days
before the scheduled public sale of the attached movable properties;
(b) denying reconsideration of the Resolution of June 30, 1980,
which declared as premature the filing of the petition, although there
is proof on record that as of April 2, 1980, the motion referred to was
already denied by the lower court and there was no more motion
pending therein;
(c) failing to resolve the legal issues raised in the petition and in not
declaring the liabilities of the defendants, under the final decision of
the lower court, to be only joint;
(d) not holding the lower court's order of execution dated March 17,
1980, the writ of execution and the notice of sheriff's sale, executing
the lower court's decision against "all defendants, singly and jointly",
to be at variance with the lower court's final decision which did not
provide for solidary obligation; and
(e) not declaring as invalid and unlawful the threatened execution, as
against the properties of petitioner who had paid his pro-rata share of
the adjudged obligation, of the total unpaid amount payable by his
joint co-defendants.
The foregoing assigned errors maybe synthesized into the more
important issues of —
1. Was the filing of a petition for certiorari before the then Court of
Appeals against the Order of Execution issued by the lower court,
3
dated March 17, 1980, proper, despite the pendency of a motion for
reconsideration of the same questioned Order?
2. What is the nature of the liability of the defendants (including
petitioner), was it merely joint, or was it several or solidary?
Anent the first issue raised, suffice it to state that while as a general
rule, a motion for reconsideration should precede recourse to
certiorari in order to give the trial court an opportunity to correct the
error that it may have committed, the said rule is not absolutes 9 and
may be dispensed with in instances where the filing of a motion for
reconsideration would serve no useful purpose, such as when the
motion for reconsideration would raise the same point stated in the
motion 10 or where the error is patent for the order is
void 11 or where the relief is extremely urgent, as in cases where
execution had already been ordered 12 where the issue raised is
one purely of law. 13
In the case at bar, the records show that not only was a writ of
execution issued but petitioner's properties were already scheduled
to be sold at public auction on April 2, 1980 at 10:00 a.m. The
records likewise show that petitioner's motion for reconsideration of
the questioned Order of Execution was filed on March 17, 1980 and
was set for hearing on March 25, 1980 at 8:30 a.m., but upon motion
of private respondent, the hearing was reset to April 2, 1980 at 8:30
a.m., the very same clay when petitioner's properties were to be sold
at public auction. Needless to state that under the circumstances,
petitioner was faced with imminent danger of his properties being
immediately sold the moment his motion for reconsideration is
denied. Plainly, urgency prompted recourse to the Court of Appeals
and the adequate and speedy remedy for petitioner under the
situation was to file a petition for certiorari with prayer for restraining
order to stop the sale. For him to wait until after the hearing of the
motion for reconsideration on April 2, 1980 before taking recourse to
the appellate court may already be too late since without a
restraining order, the public sale can proceed at 10:00 that morning.
In fact, the said motion was already denied by the lower court in its
order dated April 2, 1980 and were it not for the pendency of the
petition with the Court of Appeals and the restraining order issued
thereafter, the public sale scheduled that very same morning could
have proceeded.
The other issue raised refers to the nature of the liability of petitioner,
as one of the defendants in Civil Case No. 33958, that is whether or
not he is liable jointly or solidarily.
In this regard, Article 1207 and 1208 of the Civil Code provides —
Art. 1207. The concurrence of two or more debtors
in one and the same obligation does not imply that
each one of the former has a right to demand, or that
each one of the latter is bound to render, entire
compliance with the prestation. Then is a solidary
liability only when the obligation expressly so states,
or when the law or the nature of the obligation
requires solidarity.
Art. 1208. If from the law,or the nature or the
wording of the obligation to which the preceding
article refers the contrary does not appear, the credit
or debt shall be presumed to be divided into as
many equal shares as there are creditors and
debtors, the credits or debts being considered
distinct from one another, subject to the Rules of
Court governing the multiplicity of quits.
The decision of the lower court based on the parties' compromise
agreement, provides:
1. Plaintiff agrees to reduce its total claim of
P117,498.95 to only P110,000.00 and defendants
agree to acknowledge the validity of such claim and
further bind themselves to initially pay out of the total
indebtedness of P110,000.00, the amount of
P5,000.00 on or before December 24, 1979, the
balance of P55,000.00, defendants individually and
jointly agree to pay within a period of six months
4
 from January 1980 or before June 30, 1980.
(Emphasis supply)
Clearly then, by the express term of the compromise agreement and
the decision based upon it, the defendants obligated themselves to
pay their obligation "individually and jointly".
The term "individually" has the same meaning as "collectively",
"separately", "distinctively", respectively or "severally". An agreement
to be "individually liable" undoubtedly creates a several
obligation, 14 and a "several obligation is one by which one
individual binds himself to perform the whole obligation. 15
In the case of Parot vs. Gemora 16 We therein ruled that "the
phrase juntos or separadamente  or in the promissory note is an
express statement making each of the persons who signed
it individually liable for the payment of the fun amount of the
obligation contained therein." Likewise in Un Pak Leung vs.
Negorra 17 We held that "in the absence of a finding of facts that the
defendants made themselves individually hable for the debt incurred
they are each liable only for one-half of said amount
The obligation in the case at bar being described as "individually and
jointly", the same is therefore enforceable against one of the
numerous obligors.
IN VIEW OF THE FOREGOING CONSIDERATIONS, the instant
petition is hereby DISMISSED. Cost against petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-36413 September 26, 1988
MALAYAN INSURANCE CO., INC., petitioner, 
vs.
THE HON. COURT OF APPEALS (THIRD DIVISION) MARTIN C.
VALLEJOS, SIO CHOY, SAN LEON RICE MILL, INC. and
PANGASINAN TRANSPORTATION CO., INC., respondents.
Freqillana Jr. for petitioner.
B.F. Estrella & Associates for respondent Martin Vallejos.
Vicente Erfe Law Office for respondent Pangasinan Transportation
Co., Inc.
Nemesio Callanta for respondent Sio Choy and San Leon Rice Mill,
Inc.
PADILLA, J.:
Review on certiorari  of the judgment * of the respondent appellate
court in CA-G.R. No. 47319-R, dated 22 February 1973, which
affirmed, with some modifications, the decision, ** dated 27 April
1970, rendered in Civil Case No. U-2021 of the Court of First
Instance of Pangasinan.
The antecedent facts of the case are as follows:
On 29 March 1967, herein petitioner, Malayan Insurance Co., Inc.,
issued in favor of private respondent Sio Choy Private Car
Comprehensive Policy No. MRO/PV-15753, effective from 18 April
1967 to 18 April 1968, covering a Willys jeep with Motor No. ET-
03023 Serial No. 351672, and Plate No. J-21536, Quezon City,
1967. The insurance coverage was for "own damage" not to exceed
P600.00 and "third-party liability" in the amount of P20,000.00.
During the effectivity of said insurance policy, and more particularly
on 19 December 1967, at about 3:30 o'clock in the afternoon, the
5
insured jeep, while being driven by one Juan P. Campollo an
employee of the respondent San Leon Rice Mill, Inc., collided with a
passenger bus belonging to the respondent Pangasinan
Transportation Co., Inc. (PANTRANCO, for short) at the national
highway in Barrio San Pedro, Rosales, Pangasinan, causing damage
to the insured vehicle and injuries to the driver, Juan P. Campollo,
and the respondent Martin C. Vallejos, who was riding in the ill-fated
jeep.
As a result, Martin C. Vallejos filed an action for damages against
Sio Choy, Malayan Insurance Co., Inc. and the PANTRANCO before
the Court of First Instance of Pangasinan, which was docketed as
Civil Case No. U-2021. He prayed therein that the defendants be
ordered to pay him, jointly and severally, the amount of P15,000.00,
as reimbursement for medical and hospital expenses; P6,000.00, for
lost income; P51,000.00 as actual, moral and compensatory
damages; and P5,000.00, for attorney's fees.
Answering, PANTRANCO claimed that the jeep of Sio Choy was
then operated at an excessive speed and bumped the PANTRANCO
bus which had moved to, and stopped at, the shoulder of the
highway in order to avoid the jeep; and that it had observed the
diligence of a good father of a family to prevent damage, especially
in the selection and supervision of its employees and in the
maintenance of its motor vehicles. It prayed that it be absolved from
any and all liability.
Defendant Sio Choy and the petitioner insurance company, in their
answer, also denied liability to the plaintiff, claiming that the fault in
the accident was solely imputable to the PANTRANCO.
Sio Choy, however, later filed a separate answer with a cross-claim
against the herein petitioner wherein he alleged that he had actually
paid the plaintiff, Martin C. Vallejos, the amount of P5,000.00 for
hospitalization and other expenses, and, in his cross-claim against
the herein petitioner, he alleged that the petitioner had issued in his
favor a private car comprehensive policy wherein the insurance
company obligated itself to indemnify Sio Choy, as insured, for the
damage to his motor vehicle, as well as for any liability to third
persons arising out of any accident during the effectivity of such
insurance contract, which policy was in full force and effect when the
vehicular accident complained of occurred. He prayed that he be
reimbursed by the insurance company for the amount that he may be
ordered to pay.
Also later, the herein petitioner sought, and was granted, leave to file
a third-party complaint against the San Leon Rice Mill, Inc. for the
reason that the person driving the jeep of Sio Choy, at the time of the
accident, was an employee of the San Leon Rice Mill, Inc.
performing his duties within the scope of his assigned task, and not
an employee of Sio Choy; and that, as the San Leon Rice Mill, Inc. is
the employer of the deceased driver, Juan P. Campollo, it should be
liable for the acts of its employee, pursuant to Art. 2180 of the Civil
Code. The herein petitioner prayed that judgment be rendered
against the San Leon Rice Mill, Inc., making it liable for the amounts
claimed by the plaintiff and/or ordering said San Leon Rice Mill, Inc.
to reimburse and indemnify the petitioner for any sum that it may be
ordered to pay the plaintiff.
After trial, judgment was rendered as follows:
WHEREFORE, in view of the foregoing findings of
this Court judgment is hereby rendered in favor of
the plaintiff and against Sio Choy and Malayan
Insurance Co., Inc., and third-party defendant San
Leon Rice Mill, Inc., as follows:
(a) P4,103 as actual damages;
(b) P18,000.00 representing the unearned income of
plaintiff Martin C. Vallejos for the period of three (3)
years;
(c) P5,000.00 as moral damages;
(d) P2,000.00 as attomey's fees or the total of
P29,103.00, plus costs.
6
 The above-named parties against whom this
judgment is rendered are hereby held jointly and
severally liable. With respect, however, to Malayan
Insurance Co., Inc., its liability will be up to only
P20,000.00.
As no satisfactory proof of cost of damage to its bus
was presented by defendant Pantranco, no award
should be made in its favor. Its counter-claim for
attorney's fees is also dismissed for not being
proved. 1
On appeal, the respondent Court of Appeals affirmed the judgment
of the trial court that Sio Choy, the San Leon Rice Mill, Inc. and the
Malayan Insurance Co., Inc. are jointly and severally liable for the
damages awarded to the plaintiff Martin C. Vallejos. It ruled,
however, that the San Leon Rice Mill, Inc. has no obligation to
indemnify or reimburse the petitioner insurance company for
whatever amount it has been ordered to pay on its policy, since the
San Leon Rice Mill, Inc. is not a privy to the contract of insurance
between Sio Choy and the insurance company. 2
Hence, the present recourse by petitioner insurance company.
The petitioner prays for the reversal of the appellate court's
judgment, or, in the alternative, to order the San Leon Rice Mill, Inc.
to reimburse petitioner any amount, in excess of one-half (1/2) of the
entire amount of damages, petitioner may be ordered to pay jointly
and severally with Sio Choy.
The Court, acting upon the petition, gave due course to the same,
but "only insofar as it concerns the alleged liability of respondent San
Leon Rice Mill, Inc. to petitioner, it being understood that no other
aspect of the decision of the Court of Appeals shall be reviewed,
hence, execution may already issue in favor of respondent Martin C.
Vallejos against the respondents, without prejudice to the
determination of whether or not petitioner shall be entitled to
reimbursement by respondent San Leon Rice Mill, Inc. for the whole
or part of whatever the former may pay on the P20,000.00 it has
been adjudged to pay respondent Vallejos." 3
However, in order to determine the alleged liability of respondent
San Leon Rice Mill, Inc. to petitioner, it is important to determine first
the nature or basis of the liability of petitioner to respondent Vallejos,
as compared to that of respondents Sio Choy and San Leon Rice
Mill, Inc.
Therefore, the two (2) principal issues to be resolved are (1) whether
the trial court, as upheld by the Court of Appeals, was correct in
holding petitioner and respondents Sio Choy and San Leon Rice Mill,
Inc. "solidarily liable" to respondent Vallejos; and (2) whether
petitioner is entitled to be reimbursed by respondent San Leon Rice
Mill, Inc. for whatever amount petitioner has been adjudged to pay
respondent Vallejos on its insurance policy.
As to the first issue, it is noted that the trial court found, as affirmed
by the appellate court, that petitioner and respondents Sio Choy and
San Leon Rice Mill, Inc. are jointly and severally liable to respondent
Vallejos.
We do not agree with the aforesaid ruling. We hold instead that it is
only respondents Sio Choy and San Leon Rice Mill, Inc, (to the
exclusion of the petitioner) that are solidarily liable to respondent
Vallejos for the damages awarded to Vallejos.
It must be observed that respondent Sio Choy is made liable to said
plaintiff as owner of the ill-fated Willys jeep, pursuant to Article 2184
of the Civil Code which provides:
Art. 2184. In motor vehicle mishaps, the owner is
solidarily liable with his driver, if the former, who was
in the vehicle, could have, by the use of due
diligence, prevented the misfortune it is disputably
presumed that a driver was negligent, if he had been
found guilty of reckless driving or violating traffic
regulations at least twice within the next preceding
two months.
7
 If the owner was not in the motor vehicle, the
provisions of article 2180 are applicable.
On the other hand, it is noted that the basis of liability of respondent
San Leon Rice Mill, Inc. to plaintiff Vallejos, the former being the
employer of the driver of the Willys jeep at the time of the motor
vehicle mishap, is Article 2180 of the Civil Code which reads:
Art. 2180. The obligation imposed by article 2176 is
demandable not only for one's own acts or
omissions, but also for those of persons for whom
one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by
their employees and household helpers acting within
the scope of their assigned tasks, even though the
former are not engaged ill any business or industry.
xxx xxx xxx
The responsibility treated in this article shall cease
when the persons herein mentioned proved that they
observed all the diligence of a good father of a family
to prevent damage.
It thus appears that respondents Sio Choy and San Leon Rice Mill,
Inc. are the principal tortfeasors who are primarily liable to
respondent Vallejos. The law states that the responsibility of two or
more persons who are liable for a quasi-delict is solidarily.4
On the other hand, the basis of petitioner's liability is its insurance
contract with respondent Sio Choy. If petitioner is adjudged to pay
respondent Vallejos in the amount of not more than P20,000.00, this
is on account of its being the insurer of respondent Sio Choy under
the third party liability clause included in the private car
comprehensive policy existing between petitioner and respondent
Sio Choy at the time of the complained vehicular accident.
In Guingon vs. Del Monte, 5 a passenger of a jeepney had just
alighted therefrom, when he was bumped by another passenger
jeepney. He died as a result thereof. In the damage suit filed by the
heirs of said passenger against the driver and owner of the jeepney
at fault as well as against the insurance company which insured the
latter jeepney against third party liability, the trial court, affirmed by
this Court, adjudged the owner and the driver of the jeepney at fault
jointly and severally liable to the heirs of the victim in the total
amount of P9,572.95 as damages and attorney's fees; while the
insurance company was sentenced to pay the heirs the amount of
P5,500.00 which was to be applied as partial satisfaction of the
judgment rendered against said owner and driver of the jeepney.
Thus, in said Guingon case, it was only the owner and the driver of
the jeepney at fault, not including the insurance company, who were
held solidarily liable to the heirs of the victim.
While it is true that where the insurance contract provides for
indemnity against liability to third persons, such third persons can
directly sue the insurer, 6 however, the direct liability of the insurer
under indemnity contracts against third party liability does not mean
that the insurer can be held solidarily liable with the insured and/or
the other parties found at fault. The liability of the insurer is based on
contract; that of the insured is based on tort.
In the case at bar, petitioner as insurer of Sio Choy, is liable to
respondent Vallejos, but it cannot, as incorrectly held by the trial
court, be made "solidarily" liable with the two principal tortfeasors
namely respondents Sio Choy and San Leon Rice Mill, Inc. For if
petitioner-insurer were solidarily liable with said two (2) respondents
by reason of the indemnity contract against third party liability-under
which an insurer can be directly sued by a third party — this will
result in a violation of the principles underlying solidary obligation
and insurance contracts.
In solidary obligation, the creditor may enforce the entire obligation
against one of the solidary debtors. 7 On the other hand, insurance is
8
defined as "a contract whereby one undertakes for a consideration to
indemnify another against loss, damage, or liability arising from an
unknown or contingent event." 8
In the case at bar, the trial court held petitioner together with
respondents Sio Choy and San Leon Rice Mills Inc. solidarily liable
to respondent Vallejos for a total amount of P29,103.00, with the
qualification that petitioner's liability is only up to P20,000.00. In the
context of a solidary obligation, petitioner may be compelled by
respondent Vallejos to pay the entire obligation of P29,013.00,
notwithstanding the qualification made by the trial court. But, how
can petitioner be obliged to pay the entire obligation when the
amount stated in its insurance policy with respondent Sio Choy for
indemnity against third party liability is only P20,000.00? Moreover,
the qualification made in the decision of the trial court to the effect
that petitioner is sentenced to pay up to P20,000.00 only when the
obligation to pay P29,103.00 is made solidary, is an evident breach
of the concept of a solidary obligation. Thus, We hold that the trial
court, as upheld by the Court of Appeals, erred in holding petitioner,
solidarily liable with respondents Sio Choy and San Leon Rice Mill,
Inc. to respondent Vallejos.
As to the second issue, the Court of Appeals, in affirming the
decision of the trial court, ruled that petitioner is not entitled to be
reimbursed by respondent San Leon Rice Mill, Inc. on the ground
that said respondent is not privy to the contract of insurance existing
between petitioner and respondent Sio Choy. We disagree.
The appellate court overlooked the principle of subrogation in
insurance contracts. Thus —
... Subrogation is a normal incident of indemnity
insurance (Aetna L. Ins. Co. vs. Moses, 287 U.S.
530, 77 L. ed. 477). Upon payment of the loss, the
insurer is entitled to be subrogated pro tanto to any
right of action which the insured may have against
the third person whose negligence or wrongful act
caused the loss (44 Am. Jur. 2nd 745, citing
Standard Marine Ins. Co. vs. Scottish Metropolitan
Assurance Co., 283 U.S. 284, 75 L. ed. 1037).
The right of subrogation is of the highest equity. The
loss in the first instance is that of the insured but
after reimbursement or compensation, it becomes
the loss of the insurer (44 Am. Jur. 2d, 746, note 16,
citing Newcomb vs. Cincinnati Ins. Co., 22 Ohio St.
382).
Although many policies including policies in the
standard form, now provide for subrogation, and
thus determine the rights of the insurer in this
respect, the equitable right of subrogation as the
legal effect of payment inures to the insurer without
any formal assignment or any express stipulation to
that effect in the policy" (44 Am. Jur. 2nd 746).
Stated otherwise, when the insurance company pays
for the loss, such payment operates as an equitable
assignment to the insurer of the property and all
remedies which the insured may have for the
recovery thereof. That right is not dependent upon ,
nor does it grow out of any privity of
contract (emphasis supplied) or upon written
assignment of claim, and payment to the insured
makes the insurer assignee in equity (Shambley v.
Jobe-Blackley Plumbing and Heating Co., 264 N.C.
456, 142 SE 2d 18). 9
It follows, therefore, that petitioner, upon paying respondent Vallejos
the amount of riot exceeding P20,000.00, shall become the subrogee
of the insured, the respondent Sio Choy; as such, it is subrogated to
whatever rights the latter has against respondent San Leon Rice Mill,
Inc. Article 1217 of the Civil Code gives to a solidary debtor who has
paid the entire obligation the right to be reimbursed by his co-debtors
for the share which corresponds to each.
Art. 1217. Payment made by one of the solidary
debtors extinguishes the obligation. If two or more
9
 solidary debtors offer to pay, the creditor may
choose which offer to accept.
He who made the payment may claim from his co-
debtors only the share which corresponds to each,
with the interest for the payment already made. If the
payment is made before the debt is due, no interest
for the intervening period may be demanded.
xxx xxx xxx
In accordance with Article 1217, petitioner, upon payment to
respondent Vallejos and thereby becoming the subrogee of solidary
debtor Sio Choy, is entitled to reimbursement from respondent San
Leon Rice Mill, Inc.
To recapitulate then: We hold that only respondents Sio Choy and
San Leon Rice Mill, Inc. are solidarily liable to the respondent Martin
C. Vallejos for the amount of P29,103.00. Vallejos may enforce the
entire obligation on only one of said solidary debtors. If Sio Choy as
solidary debtor is made to pay for the entire obligation (P29,103.00)
and petitioner, as insurer of Sio Choy, is compelled to pay
P20,000.00 of said entire obligation, petitioner would be entitled, as
subrogee of Sio Choy as against San Leon Rice Mills, Inc., to be
reimbursed by the latter in the amount of P14,551.50 (which is 1/2 of
P29,103.00 )
WHEREFORE, the petition is GRANTED. The decision of the trial
court, as affirmed by the Court of Appeals, is hereby AFFIRMED,
with the modification above-mentioned. Without pronouncement as
to costs.
SO ORDERED.
Melencio-Herrera (Chairperson), Paras, Sarmiento and Regalado,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-28046 May 16, 1983
PHILIPPINE NATIONAL BANK, plaintiff-appellant, 
vs.
INDEPENDENT PLANTERS ASSOCIATION, INC., ANTONIO
DIMAYUGA, DELFIN FAJARDO, CEFERINO VALENCIA, MOISES
CARANDANG, LUCIANO CASTILLO, AURELIO VALENCIA,
LAURO LEVISTE, GAVINO GONZALES, LOPE GEVANA and
BONIFACIO LAUREANA, defendants-appellees.
Basa, Ilao, del Rosario Diaz for plaintiff-appellant.
Laurel Law Office for Dimayuga.
Tomas Yumol for Fajardo, defendant-appellee.
PLANA, J.:
Appeal by the Philippine National Bank (PNB) from the Order of the
defunct Court of First Instance of Manila (Branch XX) in its Civil Case
No. 46741 dismissing PNB's complaint against several solidary
debtors for the collection of a sum of money on the ground that one
of the defendants (Ceferino Valencia) died during the pendency of
the case (i.e., after the plaintiff had presented its evidence) and
therefore the complaint, being a money claim based on contract,
should be prosecuted in the testate or intestate proceeding for the
settlement of the estate of the deceased defendant pursuant to
Section 6 of Rule 86 of the Rules of Court which reads:
10
 SEC. 6. Solidary obligation of decedent.— the
obligation of the decedent is solidary with another
debtor, the claim shall be filed against the decedent
as if he were the only debtor, without prejudice to the
right of the estate to recover contribution from the
other debtor. In a joint obligation of the decedent, the
claim shall be confined to the portion belonging to
him.
The appellant assails the order of dismissal, invoking its right of
recourse against one, some or all of its solidary debtors under Article
1216 of the Civil Code —
ART. 1216. The creditor may proceed against any
one of the solidary debtors or some or all of them
simultaneously. The demand made against one of
them shall not be an obstacle to those which may
subsequently be directed against the others, so long
as the debt has not been fully collected.
The sole issue thus raised is whether in an action for collection of a
sum of money based on contract against all the solidary debtors, the
death of one defendant deprives the court of jurisdiction to proceed
with the case against the surviving defendants.
It is now settled that the quoted Article 1216 grants the creditor the
substantive right to seek satisfaction of his credit from one, some or
all of his solidary debtors, as he deems fit or convenient for the
protection of his interests; and if, after instituting a collection suit
based on contract against some or all of them and, during its
pendency, one of the defendants dies, the court retains jurisdiction to
continue the proceedings and decide the case in respect of the
surviving defendants. Thus in Manila Surety & Fidelity Co., Inc. vs.
Villarama et al., 107 Phil. 891 at 897, this Court ruled:
Construing Section 698 of the Code of Civil
Procedure from whence the aforequoted provision
(Sec. 6, Rule 86) was taken, this Court held that
where two persons are bound in solidum for the
same debt and one of them dies, the whole
indebtedness can be proved against the estate of
the latter, the decedent's liability being absolute and
primary; and if the claim is not presented within the
time provided by the rules, the same will be
barred as against the estate. It is evident from the
foregoing that Section 6 of Rule 87 (now Rule 86)
provides the procedure should the creditor desire to
go against the deceased debtor, but there is
certainly nothing in the said provision making
compliance with such procedure a condition
precedent before an ordinary action against the
surviving solidary debtors, should the creditor
choose to demand payment from the latter, could be
entertained to the extent that failure to observe the
same would deprive the court jurisdiction to take
cognizance of the action against the surviving
debtors. Upon the other hand, the Civil Code
expressly allows the creditor to proceed against any
one of the solidary debtors or some or all of them
simultaneously. There is, therefore, nothing improper
in the creditor's filing of an action against the
surviving solidary debtors alone, instead of instituting
a proceeding for the settlement of the estate of the
deceased debtor wherein his claim could be filed.
Similarly, in PNB vs. Asuncion, 80 SCRA 321 at 323-324, this Court,
speaking thru Mr. Justice Makasiar, reiterated the doctrine.
A cursory perusal of Section 6, Rule
86 of the Revised Rules of Court
reveals that nothing therein prevents
a creditor from proceeding against
the surviving solidary debtors. Said
provision merely sets up the
procedure in enforcing collection in
case a creditor chooses to pursue
his claim against the estate of the
deceased solidary, debtor.
11
It is crystal clear that Article 1216 of Section 6, Rule 86 of the Revised
the New Civil Code is the applicable Rules of Court cannot be made to
provision in this matter. Said prevail over Article 1216 of the New
provision gives the creditor the right Civil Code, the former being merely
to 'proceed against anyone of the procedural, while the latter,
solidary debtors or some or all of substantive.
them simultaneously.' The choice is
undoubtedly left to the solidary, WHEREFORE the appealed order of dismissal of the court a quo in
creditor to determine against whom its Civil Case No. 46741 is hereby set aside in respect of the
he will enforce collection. In case of surviving defendants; and the case is remanded to the
the death of one of the solidary corresponding Regional Trial Court for proceedings. proceedings. No
debtors, he (the creditor) may, if he costs.
so chooses, proceed against the
surviving solidary debtors without SO ORDERED.
necessity of filing a claim in the
estate of the deceased debtors. It is
not mandatory for him to have the Teehankee (Acta. C.J.), Escolin **  Vasquez and Gutierrez, Jr., JJ.,
case dismissed against the concur.
surviving debtors and file its claim in
the estate of the deceased solidary Republic of the Philippines
debtor . . . Supreme Court
Manila
As correctly argued by petitioner, if  
Section 6, Rule 86 of the Revised  
Rules of Court were applied literally,  
Article 1216 of the New Civil Code  
would, in effect, be repealed since THIRD DIVISION
under the Rules of Court, petitioner  
has no choice but to proceed  
against the estate of Manuel ROLITO CALANG and PHILTRANCO G.R. No. 190696
Barredo only. Obviously, this SERVICE ENTERPRISES, INC.,  
provision diminishes the Bank's right Petitioners, Present:
under the New Civil, Code to    
proceed against any one, some or   CARPIO MORALES, J., Chairpers
all of the solidary debtors. Such a -         versus - BRION,
construction is not sanctioned by the   BERSAMIN,
*
principle, which is too well settled to   ABAD, and
require citation, that a substantive PEOPLE OF THE PHILIPPINES, VILLARAMA, JR., JJ.
law cannot be amended by a Respondent. -- -  
procedural rule. Otherwise stared, Promulgated:

12
  
 
August 3, 2010
x-----------------------------------------------------------------------------------------x The prosecution charged Calang with multiple homicide, multiple
 
RESOLUTION serious physical injuries and damage to property thru reckless
  imprudence before the Regional Trial Court (RTC), Branch
BRION, J.:
31, Calbayog City. The RTC, in its decision dated May 21, 2001,
 
found Calang guilty beyond reasonable doubt of reckless
We resolve the motion for reconsideration filed by the
imprudence resulting to multiple homicide, multiple physical injuries
petitioners, Philtranco Service Enterprises, Inc. (Philtranco) and
and damage to property, and sentenced him to suffer an
Rolito Calang, to challenge our Resolution of February 17, 2010. Our
indeterminate penalty of thirty days of arresto menor, as minimum, to
assailed Resolution denied the petition for review on certiorari for
four years and two months of prision correccional, as maximum. The
failure to show any reversible error sufficient to warrant the exercise
RTC ordered Calang and Philtranco, jointly and severally, to
of this Courts discretionary appellate jurisdiction.
pay P50,000.00 as death indemnity to the heirs of
 
Armando; P50,000.00 as death indemnity to the heirs of Mabansag;
Antecedent Facts
and P90,083.93 as actual damages to the private complainants.
At around 2:00 p.m. of April 22, 1989, Rolito Calang was driving
 
Philtranco Bus No. 7001, owned by Philtranco along Daang
The petitioners appealed the RTC decision to the Court of
Maharlika Highway in Barangay Lambao, Sta. Margarita, Samar
Appeals (CA), docketed as CA-G.R. CR No. 25522. The CA, in its
when its rear left side hit the front left portion of a Sarao jeep coming
decision dated November 20, 2009, affirmed the RTC
from the opposite direction. As a result of the collision, Cresencio
decision in toto. The CA ruled that petitioner Calang failed to
Pinohermoso, the jeeps driver, lost control of the vehicle, and
exercise due care and precaution in driving the Philtranco
bumped and killed Jose Mabansag, a bystander who was standing
bus. According to the CA, various eyewitnesses testified that the bus
along the highways shoulder. The jeep turned turtle three (3) times
was traveling fast and encroached into the opposite lane when it
before finally stopping at about 25 meters from the point of impact.
evaded a pushcart that was on the side of the road. In addition, he
Two of the jeeps passengers, Armando Nablo and an unidentified
failed to slacken his speed, despite admitting that he had already
woman, were instantly killed, while the other passengers sustained
seen the jeep coming from the opposite direction when it was still
serious physical injuries.
half a kilometer away. The CA further ruled that Calang

13
demonstrated a reckless attitude when he drove the bus, despite
knowing that it was suffering from loose compression, hence, not
roadworthy.
 
The CA added that the RTC correctly held Philtranco jointly and
severally liable with petitioner Calang, for failing to prove that it had
exercised the diligence of a good father of the family to prevent the
accident.
The petitioners filed with this Court a petition for review
on certiorari. In our Resolution dated February 17, 2010, we denied
the petition for failure to sufficiently show any reversible error in the
assailed decision to warrant the exercise of this Courts discretionary
appellate jurisdiction.
 
The Motion for Reconsideration
 
In the present motion for reconsideration, the petitioners
claim that there was no basis to hold Philtranco jointly and severally
liable with Calang because the former was not a party in
the criminal case (for multiple homicide with multiple serious physical
injuries and damage to property thru reckless imprudence) before
the RTC.
The petitioners likewise maintain that the courts below
overlooked several relevant facts, supported by documentary
exhibits, which, if considered, would have shown that Calang was
not negligent, such as the affidavit and testimony of witness
Celestina Cabriga; the testimony of witness Rodrigo Bocaycay; the
traffic accident sketch and report; and the jeepneys registration
receipt. The petitioners also insist that the jeeps driver had the last
clear chance to avoid the collision.
 
We partly grant the motion.
 
 
 
Liability of Calang
 
We see no reason to overturn the lower courts finding on
Calangs culpability. The finding of negligence on his part by the trial
court, affirmed by the CA, is a question of fact that we cannot pass
upon without going into factual matters touching on the finding of
negligence. In petitions for review on certiorari under Rule 45 of the
Revised Rules of Court, this Court is limited to reviewing only errors
of law, not of fact, unless the factual findings complained of are
devoid of support by the evidence on record, or the assailed
judgment is based on a misapprehension of facts.
Liability of Philtranco
 
14

We, however, hold that the RTC and the CA both erred in
holding Philtranco jointly and severally liable with Calang. We
emphasize that Calang was charged criminally before the RTC.
Undisputedly, Philtranco was not a direct party in this case. Since the
cause of action against Calang was based on delict, both the RTC
and the CA erred in holding Philtranco jointly and severally liable with
Calang, based on quasi-delict under Articles 2176 [1] and 2180[2] of the
Civil Code. Articles 2176 and 2180 of the Civil Code pertain to the
vicarious liability of an employer for quasi-delicts that an employee
has committed. Such provision of law does not apply to civil liability
arising from delict.
 
If at all, Philtrancos liability may only be subsidiary. Article
102 of the Revised Penal Code states the subsidiary civil liabilities of
innkeepers, tavernkeepers and proprietors of establishments, as
follows:
In default of the persons criminally liable,
innkeepers, tavernkeepers, and any other persons
or corporations shall be civilly liable for crimes
committed in their establishments, in all cases where
a violation of municipal ordinances or some general
or special police regulations shall have been
committed by them or their employees.
Innkeepers are also subsidiary liable for the
restitution of goods taken by robbery or theft within
their houses from guests lodging therein, or for the
payment of the value thereof, provided that such
guests shall have notified in advance the innkeeper
himself, or the person representing him, of the
deposit of such goods within the inn; and shall
furthermore have followed the directions which such
innkeeper or his representative may have given
them with respect to the care of and vigilance over
such goods. No liability shall attach in case of
robbery with violence against or intimidation of
persons unless committed by the innkeepers
employees.
 
The foregoing subsidiary liability applies to employers,
according to Article 103 of the Revised Penal Code, which reads:
 
The subsidiary liability established in the
next preceding article shall also apply to employers,
teachers, persons, and corporations engaged in any
kind of industry for felonies committed by their
servants, pupils, workmen, apprentices, or
employees in the discharge of their duties.
The provisions of the Revised Penal Code on
subsidiary liability Articles 102 and 103 are deemed written into the
judgments in cases to which they are applicable. Thus, in the
dispositive portion of its decision, the trial court need not expressly
pronounce the subsidiary liability of the employer.[3] Nonetheless,
before the employers subsidiary liability is enforced, adequate
evidence must exist establishing that (1) they are indeed the
employers of the convicted employees; (2) they are engaged in
some kind of industry; (3) the crime was committed by the
employees in the discharge of their duties; and (4) the execution
against the latter has not been satisfied due to insolvency. The
determination of these conditions may be done in the same criminal
15

action in which the employees liability, criminal and civil, has been
pronounced, in a hearing set for that precise purpose, with due
notice to the employer, as part of the proceedings for the execution
of the judgment.[4]
 
WHEREFORE, we PARTLY GRANT the present motion.
Assailed in this petition for review on certiorari1 are the
Decision2 dated November 16, 2011 and the Resolution3 dated
December 10, 2012 of the Court of Appeals (CA) in CA-G.R. CV No.
94693 which affirmed the Decision4 dated August 25, 2009 of the
Regional Trial Court of Makati City, Branch 142 (RTC) in Civil Case
No. 03-1452 holding, inter alia, petitioner Ruks Konsult and
Construction (Ruks) and respondent Transworld Media Ads, Inc.
(Transworld) jointly and severally liable to respondent Adworld Sign
and Advertising Corporation (Adworld) for damages.cralawred

The Court of Appeals decision that affirmed in toto the RTC decision, The Facts
finding Rolito Calang guilty beyond reasonable doubt of reckless
The instant case arose from a complaint for damages filed by
imprudence resulting in multiple homicide, multiple serious physical Adworld against Transworld and Comark International Corporation
(Comark) before the RTC.5 In the complaint, Adworld alleged that it
injuries and damage to property, is AFFIRMED, with is the owner of a 75 ft. x 60 ft. billboard structure located at EDSA
the MODIFICATION that Philtrancos liability should only be Tulay, Guadalupe, Barangka Mandaluyong, which was misaligned
and its foundation impaired when, on August 11, 2003, the adjacent
subsidiary. No costs. billboard structure owned by Transworld and used by Comark
  collapsed and crashed against it. Resultantly, on August 19, 2003,
Adworld sent Transworld and Comark a letter demanding payment
SO ORDERED. for the repairs of its billboard as well as loss of rental income. On
August 29, 2003, Transworld sent its reply, admitting the damage
  caused by its billboard structure on Adworld’s billboard, but
ARTURO D. BRION nevertheless, refused and failed to pay the amounts demanded by
Associate Justice Adworld. As Adworld’s final demand letter also went unheeded, it
was constrained to file the instant complaint, praying for damages in
FIRST DIVISION the aggregate amount of P474,204.00, comprised of P281,204.00 for
materials, P72,000.00 for labor, and P121,000.00 for indemnity for
G.R. No. 204866, January 21, 2015 loss of income.6chanRoblesvirtualLawlibrary

RUKS KONSULT AND CONSTRUCTION, Petitioner, v. ADWORLD In its Answer with Counterclaim, Transworld averred that the
SIGN AND ADVERTISING CORPORATION* AND TRANSWORLD collapse of its billboard structure was due to extraordinarily strong
MEDIA ADS, INC., Respondents. winds that occurred instantly and unexpectedly, and maintained that
the damage caused to Adworld’s billboard structure was hardly
noticeable. Transworld likewise filed a Third-Party Complaint against
DECISION Ruks, the company which built the collapsed billboard structure in
the former’s favor. It was alleged therein that the structure
PERLAS-BERNABE, J.: constructed by Ruks had a weak and poor foundation not suited for
billboards, thus, prone to collapse, and as such, Ruks should

16
ultimately be held liable for the damages caused to Adworld’s
billboard structure.7chanRoblesvirtualLawlibrary
For its part, Comark denied liability for the damages caused to
Adworld’s billboard structure, maintaining that it does not have any
interest on Transworld’s collapsed billboard structure as it only
contracted the use of the same. In this relation, Comark prayed for
exemplary damages from Transworld for unreasonably including it as
a party-defendant in the complaint.8chanRoblesvirtualLawlibrary
Lastly, Ruks admitted that it entered into a contract with Transworld
for the construction of the latter’s billboard structure, but denied
liability for the damages caused by its collapse. It contended that
when Transworld hired its services, there was already an existing
foundation for the billboard and that it merely finished the structure
according to the terms and conditions of its contract with the
latter.9chanRoblesvirtualLawlibrary
The RTC Ruling
In a Decision10 dated August 25, 2009, the RTC ultimately ruled in
Adworld’s favor, and accordingly, declared, inter alia, Transworld
and Ruks jointly and severally liable to Adworld in the amount of
P474,204.00 as actual damages, with legal interest from the date of
the filing of the complaint until full payment thereof, plus attorney’s
fees in the amount of P50,000.00.11chanRoblesvirtualLawlibrary
The RTC found both Transworld and Ruks negligent in the
construction of the collapsed billboard as they knew that the
foundation supporting the same was weak and would pose danger to
the safety of the motorists and the other adjacent properties, such as
Adworld’s billboard, and yet, they did not do anything to remedy the
situation.12 In particular, the RTC explained that Transworld was
made aware by Ruks that the initial construction of the lower
structure of its billboard did not have the proper foundation and
would require additional columns and pedestals to support the
structure. Notwithstanding, however, Ruks proceeded with the
construction of the billboard’s upper structure and merely assumed
that Transworld would reinforce its lower structure.13 The RTC then
concluded that these negligent acts were the direct and proximate
cause of the damages suffered by Adworld’s
billboard.14chanRoblesvirtualLawlibrary
Aggrieved, both Transworld and Ruks appealed to the CA. In a
Resolution dated February 3, 2011, the CA dismissed Transworld’s
appeal for its failure to file an appellant’s brief on time. 15 Transworld
elevated its case before the Court, docketed as G.R. No.
197601.16 However, in a Resolution17 dated November 23, 2011, the
Court declared the case closed and terminated for failure of
Transworld to file the intended petition for review on certiorari within
the extended reglementary period. Subsequently, the Court issued
an Entry of Judgment18 dated February 22, 2012 in G.R. No. 197601
declaring the Court’s November 23, 2011 Resolution  final and
executory.
The CA Ruling
In a Decision19 dated November 16, 2011, the CA denied Ruks’s
appeal and affirmed the ruling of the RTC. It adhered to the RTC’s
finding of negligence on the part of Transworld and Ruks which
brought about the damage to Adworld’s billboard. It found that
Transworld failed to ensure that Ruks will comply with the approved
plans and specifications of the structure, and that Ruks continued to
install and finish the billboard structure despite the knowledge that
there were no adequate columns to support the
same.20chanRoblesvirtualLawlibrary
Dissatisfied, Ruks moved for reconsideration,21 which was, however,
denied in a Resolution22 dated December 10, 2012, hence, this
petition.
On the other hand, Transworld filed another appeal before the Court,
docketed as G.R. No. 205120.23However, the Court denied outright
Transworld’s petition in a Resolution24 dated April 15, 2013, holding
that the same was already bound by the dismissal of its petition filed
in G.R. No. 197601.
The Issue Before the Court
The primordial issue for the Court’s resolution is whether or not the
17
CA correctly affirmed the ruling of the RTC declaring Ruks jointly and
severally liable with Transworld for damages sustained by Adworld.
The Court’s Ruling
The petition is without merit.
At the outset, it must be stressed that factual findings of the RTC,
when affirmed by the CA, are entitled to great weight by the Court
and are deemed final and conclusive when supported by the
evidence on record.25 Absent any exceptions to this rule – such as
when it is established that the trial court ignored, overlooked,
misconstrued, or misinterpreted cogent facts and circumstances that,
if considered, would change the outcome of the case 26 – such
findings must stand.
After a judicious perusal of the records, the Court sees no cogent
reason to deviate from the findings of the RTC and the CA and their
uniform conclusion that both Transworld and Ruks committed acts
resulting in the collapse of the former’s billboard, which in turn,
caused damage to the adjacent billboard of Adworld.
Jurisprudence defines negligence as the omission to do something
which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the
doing of something which a prudent and reasonable man would not
do.27 It is the failure to observe for the protection of the interest of
another person that degree of care, precaution, and vigilance which
the circumstances justly demand, whereby such other person suffers
injury.28chanRoblesvirtualLawlibrary
In this case, the CA correctly affirmed the RTC’s finding that
Transworld’s initial construction of its billboard’s lower structure
without the proper foundation, and that of Ruks’s finishing its upper
structure and just merely assuming that Transworld would reinforce
the weak foundation are the two (2) successive acts which were the
direct and proximate cause of the damages sustained by Adworld.
Worse, both Transworld and Ruks were fully aware that the
foundation for the former’s billboard was weak; yet, neither of them
took any positive step to reinforce the same. They merely relied on
each other’s word that repairs would be done to such foundation, but
none was done at all. Clearly, the foregoing circumstances show that
both Transworld and Ruks are guilty of negligence in the
construction of the former’s billboard, and perforce, should be held
liable for its collapse and the resulting damage to Adworld’s billboard
structure. As joint tortfeasors, therefore, they are solidarily liable to
Adworld. Verily, “[j]oint tortfeasors are those who command,
instigate, promote, encourage, advise, countenance, cooperate in,
aid or abet the commission of a tort, or approve of it after it is done, if
done for their benefit. They are also referred to as those who act
together in committing wrong or whose acts, if independent of each
other, unite in causing a single injury. Under Article 2194 29 of the Civil
Code, joint tortfeasors are solidarily liable for the resulting damage.
In other words, joint tortfeasors are each liable as principals, to the
same extent and in the same manner as if they had performed the
wrongful act themselves.”30 The Court’s pronouncement in People v.
Velasco31 is instructive on this matter, to
wit:32chanRoblesvirtualLawlibrary
Where several causes producing an injury are concurrent and
each is an efficient cause without which the injury would not
have happened, the injury may be attributed to all or any of the
causes and recovery may be had against any or all of the
responsible persons although under the circumstances of the case,
it may appear that one of them was more culpable, and that the duty
owed by them to the injured person was not same. No actor’s
negligence ceases to be a proximate cause merely because it does
not exceed the negligence of other actors. Each wrongdoer is
responsible for the entire result and is liable as though his acts were
the sole cause of the injury.
There is no contribution between joint [tortfeasors] whose liability is
solidary since both of them are liable for the total damage. Where
the concurrent or successive negligent acts or omissions of
two or more persons, although acting independently, are in
combination the direct and proximate cause of a single injury to
a third person, it is impossible to determine in what proportion
each contributed to the injury and either of them is responsible
for the whole injury. x x x. (Emphases and underscoring supplied)
18

In conclusion, the CA correctly affirmed the ruling of the RTC
declaring Ruks jointly and severally liable with Transworld for
damages sustained by Adworld.chanrobleslaw
WHEREFORE, the petition is DENIED. The Decision dated
November 16, 2011 and the Resolution dated December 10, 2012 of
the Court of Appeals in CA-G.R. CV No. 94693 are
hereby AFFIRMED.
SO ORDERED.cralawlawlibrary
G.R. No. 194121
TORRES-MADRID BROKERAGE, INC., Petitioner  following day was a Sunday. Thus, BMT scheduled the delivery on
vs.
FEB MITSUI MARINE INSURANCE CO., INC. and BENJAMIN P.
MANALAST AS, doing business under the name of BMT
TRUCKING SERVICES, Respondents
DECISION
BRION, J.:
We resolve the petition for review on certiorari  challenging the Court
of Appeals' (CA)  October 14, 2010 decision in CA-G.R. CV No.
91829.1
The CA affirmed the Regional Trial Court's (RTC)  decision in Civil
Case No. 01-1596, and found petitioner Torres-Madrid Brokerage,
Inc. (TMBI) and respondent Benjamin P. Manalastas jointly and
solidarily liable to respondent FEB Mitsui Marine Insurance Co.,
Inc. (Mitsui)  for damages from the loss of transported cargo.
Antecedents
On October 7, 2000, a shipment of various electronic goods from
Thailand and Malaysia arrived at the Port of Manila for Sony
Philippines, Inc. (Sony). Previous to the arrival, Sony had engaged
the services of TMBI to facilitate, process, withdraw, and deliver  the
shipment from the port to its warehouse in Biñan, Laguna. 2
TMBI – who did not own any delivery trucks – subcontracted the
services of Benjamin Manalastas’ company, BMT Trucking
Services (BMT), to transport the shipment from the port to the Biñan
warehouse.3 Incidentally, TMBI notified Sony who had no objections
to the arrangement.4
Four BMT trucks picked up the shipment from the port at about 11:00
a.m. of October 7, 2000. However, BMT could not immediately
undertake the delivery because of the truck ban and because the
October 9, 2000.
In the early morning of October 9, 2000, the four trucks left BMT’s
garage for Laguna.5 However, only three trucks arrived at Sony’s
Biñan warehouse.
At around 12:00 noon, the truck driven by Rufo Reynaldo
Lapesura (NSF-391)  was found abandoned along the Diversion
Road in Filinvest, Alabang, Muntinlupa City.6 Both the driver and the
shipment were missing.
Later that evening, BMT’s Operations Manager Melchor Manalastas
informed Victor Torres, TMBI’s General Manager, of the
development.7 They went to Muntinlupa together to inspect the truck
and to report the matter to the police.8
Victor Torres also filed a complaint with the National Bureau of
Investigation (NBI)  against Lapesura for "hijacking."9The complaint
resulted in a recommendation by the NBI to the Manila City
Prosecutor’s Office to prosecute Lapesura for qualified theft. 10
TMBI notified Sony of the loss through a letter dated October 10,
2000.11 It also sent BMT a letter dated March 29, 2001, demanding
19
payment for the lost shipment. BMT refused to pay, insisting that the
goods were "hijacked."
In the meantime, Sony filed an insurance claim with the Mitsui, the
insurer of the goods. After evaluating the merits of the claim, Mitsui
paid Sony PHP7,293,386.23 corresponding to the value of the lost
goods.12
After being subrogated to Sony’s rights, Mitsui sent TMBI a demand
letter dated August 30, 2001 for payment of the lost goods. TMBI
refused to pay Mitsui’s claim. As a result, Mitsui filed a complaint
against TMBI on November 6, 2001,
TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of
BMT, as a third-party defendant. TMBI alleged that BMT’s driver,
Lapesura, was responsible for the theft/hijacking of the lost cargo
and claimed BMT’s negligence as the proximate cause of the loss.
TMBI prayed that in the event it is held liable to Mitsui for the loss, it
should be reimbursed by BMT.
At the trial, it was revealed that BMT and TMBI have been doing
business with each other since the early 80’s. It also came out that
there had been a previous hijacking incident involving Sony’s cargo
in 1997, but neither Sony nor its insurer filed a complaint against
BMT or TMBI.13
On August 5, 2008, the RTC found TMBI and Benjamin Manalastas
jointly and solidarily liable to pay Mitsui PHP 7,293,386.23 as actual
damages, attorney’s fees equivalent to 25% of the amount claimed,
and the costs of the suit.14 The RTC held that TMBI and Manalastas
were common carriers and had acted negligently.
Both TMBI and BMT appealed the RTC’s verdict.
TMBI denied that it was a common carrier required to
exercise extraordinary  diligence. It maintains that it exercised the
diligence of a good father of a family and should be absolved of
liability because the truck was "hijacked" and this was a fortuitous
event.
BMT claimed that it had exercised extraordinary diligence over the
lost shipment, and argued as well that the loss resulted from a
fortuitous event.
On October 14, 2010, the CA affirmed the RTC’s decision but
reduced the award of attorney’s fees to PHP 200,000.
The CA held: (1) that "hijacking" is not necessarily a fortuitous event
because the term refers to the general stealing of cargo during
transit;15 (2) that TMBI is a common carrier engaged in the business
of transporting goods for the general public for a fee; 16 (3) even if the
"hijacking" were a fortuitous event, TMBI’s failure to observe
extraordinary diligence in overseeing the cargo and adopting security
measures rendered it liable for the loss;17 and (4) even if TMBI had
not been negligent in the handling, transport and the delivery of the
shipment, TMBI still breached its contractual obligation to Sony when
it failed to deliver the shipment.18
TMBI disagreed with the CA’s ruling and filed the present petition on
December 3, 2010.
The Arguments
TMBI’s Petition
TMBI insists that the hijacking of the truck was a fortuitous event. It
contests the CA’s finding that neither force nor intimidation was used
in the taking of the cargo. Considering Lapesura was never found,
the Court should not discount the possibility that he was a victim
rather than a perpetrator.19
TMBI denies being a common carrier because it does not own a
single truck to transport its shipment and it does not offer transport
services to the public for compensation.20 It emphasizes that Sony
knew TMBI did not have its own vehicles and would subcontract the
delivery to a third-party.
20
Further, TMBI now insists that the service it offered was limited to the
processing of paperwork attendant to the entry of Sony’s goods. It
denies that delivery of the shipment was a part of its obligation. 21
TMBI solely blames BMT as it had full control and custody of the
cargo when it was lost.22 BMT, as a common carrier, is presumed
negligent and should be responsible for the loss.
BMT’s Comment
BMT insists that it observed the required standard of care. 23 Like the
petitioner, BMT maintains that the hijacking was a fortuitous event –
a force majeure –  that exonerates it from liability.24 It points out that
Lapesura has never been seen again and his fate remains a
mystery. BMT likewise argues that the loss of the cargo necessarily
showed that the taking was with the use of force or intimidation. 25
If there was any attendant negligence, BMT points the finger on
TMBI who failed to send a representative to accompany the
shipment.26 BMT further blamed TMBI for the latter’s failure to adopt
security measures to protect Sony’s cargo.27
Mitsui’s Comment
Mitsui counters that neither TMBI nor BMT alleged or proved during
the trial that the taking of the cargo was accompanied with grave or
irresistible threat, violence, or force.28 Hence, the incident cannot be
considered "force majeure" and TMBI remains liable for breach of
contract.
Mitsui emphasizes that TMBI’s theory – that force or intimidation
must have been used because Lapesura was never found – was
only raised for the first time before this Court.29 It also discredits the
theory as a mere conjecture for lack of supporting evidence.
Mitsui adopts the CA’s reasons to conclude that TMBI is a common
carrier. It also points out Victor Torres’ admission during the trial that
TMBI’s brokerage service includes the eventual delivery of the cargo
to the consignee.30
Mitsui invokes as well the legal presumption of negligence against
TMBI, pointing out that TMBI simply entrusted the cargo to BMT
without adopting any security measures despite: (1) a previous
hijacking incident when TMBI lost Sony’s cargo; and (2) TMBI’s
knowledge that the cargo was worth more than 10 million pesos. 31
Mitsui affirms that TMBI breached the contract of carriage through its
negligent handling of the cargo, resulting in its loss.
The Court’s Ruling
A brokerage may be considered a
common carrier if it also undertakes to
deliver the goods for its customers
Common carriers are persons, corporations, firms or associations
engaged in the business of transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services
to the public.32 By the nature of their business and for reasons of
public policy, they are bound to observe extraordinary diligence in
the vigilance over the goods and in the safety of their passengers. 33
In A.F. Sanchez Brokerage Inc. v. Court of Appeals,34we held that a
customs broker – whose principal business is the preparation of the
correct customs declaration and the proper shipping documents – is
still considered a common carrier if it also undertakes to deliver the
goods for its customers. The law does not distinguish between one
whose principal business activity is the carrying of goods and one
who undertakes this task only as an ancillary activity.35 This ruling
has been reiterated in Schmitz Transport & Brokerage Corp. v.
Transport Venture, Inc.,36Loadmasters Customs Services, Inc. v.
Glodel Brokerage Corporation,37and Westwind Shipping Corporation
v. UCPB General Insurance Co., Inc.38
Despite TMBI’s present denials, we find that the delivery of the
goods is an integral, albeit ancillary, part of its brokerage services.
21
TMBI admitted that it was contracted to facilitate, process, and clear
the shipments from the customs authorities, withdraw them from the
pier, then transport and deliver them to Sony’s warehouse in
Laguna.39
Further, TMBI’s General Manager Victor Torres described the nature
of its services as follows:
ATTY. VIRTUDAZO: Could you please tell the court what is the
nature of the business of [TMBI]?
Witness MR. Victor Torres of Torres Madrid: We are engaged in
customs brokerage business. We acquire the release documents
from the Bureau of Customs and eventually deliver the cargoes to
the consignee’s warehouse and we are engaged in that kind of
business, sir.40
That TMBI does not own trucks and has to subcontract the delivery
of its clients’ goods, is immaterial. As long as an entity holds itself to
the public for the transport of goods as a business, it is considered a
common carrier regardless of whether it owns the vehicle used or
has to actually hire one.41
Lastly, TMBI’s customs brokerage services – including the
transport/delivery of the cargo – are available to anyone willing to
pay its fees. Given these circumstances, we find it undeniable that
TMBI is a common carrier.
Consequently, TMBI should be held responsible for the loss,
destruction, or deterioration of the goods it transports unless it
results from:
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act of omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.42
For all other cases - such as theft or robbery – a common carrier is
presumed to have been at fault or to have acted negligently, unless it
can prove that it observed extraordinary diligence.43
Simply put, the theft or the robbery of the goods is not considered a
fortuitous event or a force majeure. Nevertheless, a common carrier
may absolve itself of liability for a resulting loss: (1) if it proves that it
exercised extraordinary diligence in transporting and safekeeping
the goods;44 or (2) if it stipulated with the shipper/owner of the goods
to limit its liability for the loss, destruction, or deterioration of the
goods to a degree less than extraordinary diligence.45
However, a stipulation diminishing or dispensing with the common
carrier’s liability for acts committed by thieves or robbers who do not
act with grave or irresistible threat, violence, or force is void under
Article 1745 of the Civil Code for being contrary to public
policy.46 Jurisprudence, too, has expanded Article 1734’s five
exemptions. De Guzman v. Court of Appeals47 interpreted Article
1745 to mean that a robbery attended by "grave or irresistible threat,
violence or force" is a fortuitous event that absolves the common
carrier from liability.
In the present case, the shipper, Sony, engaged the services of
TMBI, a common carrier, to facilitate the release of its shipment and
deliver the goods to its warehouse. In turn, TMBI subcontracted a
portion of its obligation – the delivery of the cargo – to another
common carrier, BMT.
Despite the subcontract, TMBI remained responsible for the cargo.
Under Article 1736, a common carrier’s extraordinary responsibility
over the shipper’s goods lasts from the time these goods are
unconditionally placed in the possession of, and received by, the
carrier for transportation, until they are delivered, actually or
constructively, by the carrier to the consignee.48
22
That the cargo disappeared during transit while under the custody of
BMT – TMBI’s subcontractor – did not diminish nor terminate TMBI’s
responsibility over the cargo. Article 1735 of the Civil Code presumes
that it was at fault.
Instead of showing that it had acted with extraordinary
diligence, TMBI simply argued that it was not a common carrier
bound to observe extraordinary diligence. Its failure to successfully
establish this premise carries with it the presumption of fault or
negligence, thus rendering it liable to Sony/Mitsui for breach of
contract.
Specifically, TMBI’s current theory – that the hijacking was attended
by force or intimidation – is untenable.
First, TMBI alleged in its Third Party Complaint against BMT that
Lapesura was responsible for hijacking the shipment.49 Further,
Victor Torres filed a criminal complaint against Lapesura with the
NBI.50 These actions constitute direct and binding admissions that
Lapesura stole the cargo. Justice and fair play dictate that TMBI
should not be allowed to change its legal theory on appeal.
Second, neither TMBI nor BMT succeeded in substantiating this
theory through evidence. Thus, the theory remained an unsupported
allegation no better than speculations and conjectures. The CA
therefore correctly disregarded the defense of force majeure.
TMBI and BMT are not solidarily liable
to Mitsui
We disagree with the lower courts’ ruling that TMBI and BMT are
solidarily liable to Mitsui for the loss as joint tortfeasors. The ruling
was based on Article 2194 of the Civil Code:
Art. 2194. The responsibility of two or more persons who are liable
for quasi-delict is solidary.
Notably, TMBI’s liability to Mitsui does not stem from a quasi-delict
(culpa aquiliana) but from its breach of contract (culpa contractual).
The tie that binds TMBI with Mitsui is contractual, albeit one that
passed on to Mitsui as a result of TMBI’s contract of carriage with
Sony to which Mitsui had been subrogated as an insurer who had
paid Sony’s insurance claim. The legal reality that results from this
contractual tie precludes the application of quasi-delict based Article
2194.
A third party may recover from a
common carrier for quasi-delict but must
prove actual negligence
We likewise disagree with the finding that BMT is directly liable to
Sony/Mitsui for the loss of the cargo. While it is undisputed that the
cargo was lost under the actual custody of BMT (whose employee is
the primary suspect in the hijacking or robbery of the shipment), no
direct contractual relationship existed between Sony/Mitsui and BMT.
If at all, Sony/Mitsui’s cause of action against BMT could only arise
from quasi-delict, as a third party suffering damage from the action of
another due to the latter’s fault or negligence, pursuant to Article
2176 of the Civil Code.51
We have repeatedly distinguished between an action for breach of
contract (culpa contractual) and an action for quasi-delict (culpa
aquiliana).
In culpa contractual,  the plaintiff only needs to establish the
existence of the contract and the obligor’s failure to perform his
obligation. It is not necessary for the plaintiff to prove or even allege
that the obligor’s non-compliance was due to fault or negligence
because Article 1735 already presumes that the common carrier is
negligent. The common carrier can only free itself from liability by
proving that it observed extraordinary diligence. It cannot discharge
this liability by shifting the blame on its agents or servants. 52
On the other hand, the plaintiff in culpa aquiliana  must clearly
establish the defendant’s fault or negligence because this is the very
basis of the action.53 Moreover, if the injury to the plaintiff resulted
23
from the act or omission of the defendant’s employee or servant, the
defendant may absolve himself by proving that he observed the
diligence of a good father of a family to prevent the damage. 54
In the present case, Mitsui’s action is solely premised on TMBI’s
breach of contract. Mitsui did not even sue BMT, much less prove
any negligence on its part. If BMT has entered the picture at all, it is
because TMBI sued it for reimbursement for the liability that TMBI
might incur from its contract of carriage with Sony/Mitsui.
Accordingly, there is no basis to directly hold BMT liable to Mitsui for
quasi-delict.
BMT is liable to TMBI for breach of their
contract of carriage
We do not hereby say that TMBI must absorb the loss. By
subcontracting the cargo delivery to BMT, TMBI entered into its own
contract of carriage with a fellow common carrier.
The cargo was lost after its transfer to BMT' s custody based on its
contract of carriage with TMBI. Following Article 1735, BMT is
presumed to be at fault. Since BMT failed to prove that it
observed extraordinary diligence in the performance of its obligation
to TMBI, it is liable to TMBI for breach of their contract of carriage.
In these lights, TMBI is liable to Sony (subrogated by Mitsui) for
breaching the contract of carriage. In tum, TMBI is entitled to
reimbursement from BMT due to the latter's own breach of its
contract of carriage with TMBI. The proverbial buck stops with BMT
who may either: (a) absorb the loss, or (b) proceed after its missing
driver, the suspected culprit, pursuant to Article 2181. 55
WHEREFORE, the Court hereby ORDERS petitioner TorresMadrid
Brokerage, Inc. to pay the respondent FEB Mitsui Marine Insurance
Co", Inc. the following:
a. Actual damages in the amount of PHP 7,293,386.23 plus legal
interest from the time the complaint was filed until it is fully paid;
b. Attorney's foes in the amount of PHP 200,000.00; and
c. Costs of suit.
Respondent Benjamin P. Manalastas is in
turn ORDERED to REIMBURSE Torres-Madrid Brokerage, Inc. of
the above-mentioned amounts.
SO ORDERED.
ARTURO D. BRION
Associate Justice
January 11, 2016
G.R. No. 167615
SPOUSES ALEXANDER AND JULIE LAM, Doing Business
Under the Name and Style "COLORKWIK LABORATORIES"
AND "COLORKWIK PHOTO SUPPLY", Petitioners, 
vs.
KODAK PHILIPPINES, LTD., Respondent.
DECISION
LEONEN, J.:
This is a Petition for Review on Certiorari filed on April 20, 2005
assailing the March 30, 2005 Decision1 and September 9, 2005
Amended Decision2 of the Court of Appeals, which modified the
February 26, 1999 Decision3 of the Regional Trial Court by reducing
the amount of damages awarded to petitioners Spouses Alexander
and Julie Lam (Lam Spouses).4 The Lam Spouses argue that
respondent Kodak Philippines, Ltd.’s breach of their contract of sale
entitles them to damages more than the amount awarded by the
Court of Appeals.5
I
24
On January 8, 1992, the Lam Spouses and Kodak Philippines, Ltd.
entered into an agreement (Letter Agreement) for the sale of three
(3) units of the Kodak Minilab System 22XL6 (Minilab Equipment) in
the amount of ₱1,796,000.00 per unit,7 with the following terms:
This confirms our verbal agreement for Kodak Phils., Ltd. To provide
Colorkwik Laboratories, Inc. with three (3) units Kodak Minilab
System 22XL . . . for your proposed outlets in Rizal Avenue (Manila),
Tagum (Davao del Norte), and your existing Multicolor photo counter
in Cotabato City under the following terms and conditions:
1. Said Minilab Equipment packages will avail a total of 19%
multiple order discount based on prevailing equipment price
provided said equipment packages will be purchased not
later than June 30, 1992.
2. 19% Multiple Order Discount shall be applied in the form
of merchandise and delivered in advance immediately after
signing of the contract.
* Also includes start-up packages worth P61,000.00.
3. NO DOWNPAYMENT.
4. Minilab Equipment Package shall be payable in 48
monthly installments at THIRTY FIVE THOUSAND PESOS
(P35,000.00) inclusive of 24% interest rate for the first 12
months; the balance shall be re-amortized for the remaining
36 months and the prevailing interest shall be applied.
5. Prevailing price of Kodak Minilab System 22XL as of
January 8, 1992 is at ONE MILLION SEVEN HUNDRED
NINETY SIX THOUSAND PESOS.
6. Price is subject to change without prior notice.
*Secured with PDCs; 1st monthly amortization due 45 days
after installation[.]8
On January 15, 1992, Kodak Philippines, Ltd. delivered one (1) unit
of the Minilab Equipment in Tagum, Davao Province. 9 The delivered
unit was installed by Noritsu representatives on March 9, 1992. 10 The
Lam Spouses issued postdated checks amounting to ₱35,000.00
each for 12 months as payment for the first delivered unit, with the
first check due on March 31, 1992.11
The Lam Spouses requested that Kodak Philippines, Ltd. not
negotiate the check dated March 31, 1992 allegedly due to
insufficiency of funds.12 The same request was made for the check
due on April 30, 1992. However, both checks were negotiated by
Kodak Philippines, Ltd. and were honored by the depository
bank.13 The 10 other checks were subsequently dishonored after the
Lam Spouses ordered the depository bank to stop payment. 14
Kodak Philippines, Ltd. canceled the sale and demanded that the
Lam Spouses return the unit it delivered together with its
accessories.15 The Lam Spouses ignored the demand but also
rescinded the contract through the letter dated November 18, 1992
on account of Kodak Philippines, Ltd.’s failure to deliver the two (2)
remaining Minilab Equipment units.16
On November 25, 1992, Kodak Philippines, Ltd. filed a Complaint for
replevin and/or recovery of sum of money. The case was raffled to
Branch 61 of the Regional Trial Court, Makati City.17 The Summons
and a copy of Kodak Philippines, Ltd.’s Complaint was personally
served on the Lam Spouses.18
The Lam Spouses failed to appear during the pre-trial conference
and submit their pre-trial brief despite being given
extensions.19 Thus, on July 30, 1993, they were declared in
default.20 Kodak Philippines, Ltd. presented evidence ex-parte.21 The
trial court issued the Decision in favor of Kodak Philippines, Ltd.
ordering the seizure of the Minilab Equipment, which included the
lone delivered unit, its standard accessories, and a separate
generator set.22 Based on this Decision, Kodak Philippines, Ltd. was
able to obtain a writ of seizure on December 16, 1992 for the Minilab
Equipment installed at the Lam Spouses’ outlet in Tagum, Davao
Province.23 The writ was enforced on December 21, 1992, and
25
Kodak Philippines, Ltd. gained possession of the Minilab Equipment
unit, accessories, and the generator set.24
The Lam Spouses then filed before the Court of Appeals a Petition to
Set Aside the Orders issued by the trial court dated July 30, 1993
and August 13, 1993. These Orders were subsequently set aside by
the Court of Appeals Ninth Division, and the case was remanded to
the trial court for pre-trial.25
On September 12, 1995, an Urgent Motion for Inhibition was filed
against Judge Fernando V. Gorospe, Jr.,26 who had issued the writ of
seizure.27 The ground for the motion for inhibition was not provided.
Nevertheless, Judge Fernando V. Gorospe Jr. inhibited himself, and
the case was reassigned to Branch 65 of the Regional Trial Court,
Makati City on October 3, 1995.28
In the Decision dated February 26, 1999, the Regional Trial Court
found that Kodak Philippines, Ltd. defaulted in the performance of its
obligation under its Letter Agreement with the Lam Spouses. 29 It held
that Kodak Philippines, Ltd.’s failure to deliver two (2) out of the three
(3) units of the Minilab Equipment caused the Lam Spouses to stop
paying for the rest of the installments.30 The trial court noted that
while the Letter Agreement did not specify a period within which the
delivery of all units was to be made, the Civil Code provides
"reasonable time" as the standard period for compliance:
The second paragraph of Article 1521 of the Civil Code provides:
Where by a contract of sale the seller is bound to send the goods to
the buyer, but no time for sending them is fixed, the seller is bound to
send them within a reasonable time.
What constitutes reasonable time is dependent on the circumstances
availing both on the part of the seller and the buyer. In this case,
delivery of the first unit was made five (5) days after the date of the
agreement. Delivery of the other two (2) units, however, was never
made despite the lapse of at least three (3) months. 31
Kodak Philippines, Ltd. failed to give a sufficient explanation for its
failure to deliver all three (3) purchased units within a reasonable
time.32
The trial court found:
Kodak would have the court believe that it did not deliver the other
two (2) units due to the failure of defendants to make good the
installments subsequent to the second. The court is not convinced.
First of all, there should have been simultaneous delivery on account
of the circumstances surrounding the transaction. . . . Even after the
first delivery . . . no delivery was made despite repeated demands
from the defendants and despite the fact no installments were due.
Then in March and in April (three and four months respectively from
the date of the agreement and the first delivery) when the
installments due were both honored, still no delivery was made.
Second, although it might be said that Kodak was testing the waters
with just one delivery - determining first defendants’ capacity to pay -
it was not at liberty to do so. It is implicit in the letter agreement that
delivery within a reasonable time was of the essence and failure to
so deliver within a reasonable time and despite demand would
render the vendor in default.
....
Third, at least two (2) checks were honored. If indeed Kodak refused
delivery on account of defendants’ inability to pay, non-delivery
during the two (2) months that payments were honored is
unjustified.33
Nevertheless, the trial court also ruled that when the Lam Spouses
accepted delivery of the first unit, they became liable for the fair
value of the goods received:
On the other hand, defendants accepted delivery of one (1) unit.
Under Article 1522 of the Civil Code, in the event the buyer accepts
incomplete delivery and uses the goods so delivered, not then
knowing that there would not be any further delivery by the seller, the
26
buyer shall be liable only for the fair value to him of the goods
received. In other words, the buyer is still liable for the value of the
property received. Defendants were under obligation to pay the
amount of the unit. Failure of delivery of the other units did not
thereby give unto them the right to suspend payment on the unit
delivered. Indeed, in incomplete deliveries, the buyer has the remedy
of refusing payment unless delivery is first made. In this case though,
payment for the two undelivered units have not even commenced;
the installments made were for only one (1) unit.
Hence, Kodak is right to retrieve the unit delivered. 34
The Lam Spouses were under obligation to pay for the amount of
one unit, and the failure to deliver the remaining units did not give
them the right to suspend payment for the unit already
delivered.35 However, the trial court held that since Kodak
Philippines, Ltd. had elected to cancel the sale and retrieve the
delivered unit, it could no longer seek payment for any deterioration
that the unit may have suffered while under the custody of the Lam
Spouses.36
As to the generator set, the trial court ruled that Kodak Philippines,
Ltd. attempted to mislead the court by claiming that it had delivered
the generator set with its accessories to the Lam Spouses, when the
evidence showed that the Lam Spouses had purchased it from
Davao Ken Trading, not from Kodak Philippines, Ltd. 37 Thus, the
generator set that Kodak Philippines, Ltd. wrongfully took from the
Lam Spouses should be replaced.38
The dispositive portion of the Regional Trial Court Decision reads:
PREMISES CONSIDERED, the case is hereby dismissed. Plaintiff is
ordered to pay the following:
1) PHP 130,000.00 representing the amount of the generator
set, plus legal interest at 12% per annum from December
1992 until fully paid; and
2) PHP 1,300,000.00 as actual expenses in the renovation of
the Tagum, Davao and Rizal Ave., Manila outlets.
SO ORDERED.39
On March 31, 1999, the Lam Spouses filed their Notice of Partial
Appeal, raising as an issue the Regional Trial Court’s failure to order
Kodak Philippines, Ltd. to pay: (1) ₱2,040,000 in actual damages; (2)
₱50,000,000 in moral damages; (3) ₱20,000,000 in exemplary
damages; (4) ₱353,000 in attorney’s fees; and (5) ₱300,000 as
litigation expenses.40 The Lam Spouses did not appeal the Regional
Trial Court’s award for the generator set and the renovation
expenses.41
Kodak Philippines, Ltd. also filed an appeal. However, the Court of
Appeals42 dismissed it on December 16, 2002 for Kodak Philippines,
Ltd.’s failure to file its appellant’s brief, without prejudice to the
continuation of the Lam Spouses’ appeal.43 The Court of Appeals’
December 16, 2002 Resolution denying Kodak Philippines, Ltd.’s
appeal became final and executory on January 4, 2003. 44
In the Decision45 dated March 30, 2005, the Court of Appeals Special
Fourteenth Division modified the February 26, 1999 Decision of the
Regional Trial Court:
WHEREFORE, PREMISES CONSIDERED, the Assailed Decision
dated 26 February 1999 of the Regional Trial Court, Branch 65 in
Civil Case No. 92-3442 is hereby MODIFIED. Plaintiff-appellant is
ordered to pay the following:
1. P130,000.00 representing the amount of the generator
set, plus legal interest at 12% per annum from December
1992 until fully paid; and
2. P440,000.00 as actual damages;
3. P25,000.00 as moral damages; and
27
 4. P50,000.00 as exemplary damages.
SO ORDERED.46 (Emphasis supplied)
The Court of Appeals agreed with the trial court’s Decision, but
extensively discussed the basis for the modification of the dispositive
portion.
The Court of Appeals ruled that the Letter Agreement executed by
the parties showed that their obligations were susceptible of partial
performance. Under Article 1225 of the New Civil Code, their
obligations are divisible:
In determining the divisibility of an obligation, the following factors
may be considered, to wit: (1) the will or intention of the parties,
which may be expressed or presumed; (2) the objective or purpose
of the stipulated prestation; (3) the nature of the thing; and (4)
provisions of law affecting the prestation.
Applying the foregoing factors to this case, We found that the
intention of the parties is to be bound separately for each Minilab
Equipment to be delivered as shown by the separate purchase price
for each of the item, by the acceptance of Sps. Lam of separate
deliveries for the first Minilab Equipment and for those of the
remaining two and the separate payment arrangements for each of
the equipment. Under this premise, Sps. Lam shall be liable for the
entire amount of the purchase price of the Minilab
Equipment delivered considering that Kodak had already completely
fulfilled its obligation to deliver the same. . . .
Third, it is also evident that the contract is one that is severable in
character as demonstrated by the separate purchase price for each
of the minilab equipment.  "If the part to be performed by one party
consists in several distinct and separate items and the price is
apportioned to each of them, the contract will generally be held to be
severable. In such case, each distinct stipulation relating to a
separate subject matter will be treated as a separate
contract." Considering this, Kodak's breach of its obligation to deliver
the other two (2) equipment cannot bar its recovery for the full
payment of the equipment already delivered. As far as Kodak is
concerned, it had already fully complied with its separable obligation
to deliver the first unit of Minilab Equipment.47 (Emphasis supplied)
The Court of Appeals held that the issuance of a writ of replevin is
proper insofar as the delivered Minilab Equipment unit and its
standard accessories are concerned, since Kodak Philippines, Ltd.
had the right to possess it:48
The purchase price of said equipment is P1,796,000.00 which, under
the agreement is payable with forty eight (48) monthly amortization.
It is undisputed that Sps. Lam made payments which amounted to
Two Hundred Seventy Thousand Pesos (P270,000.00) through the
following checks: Metrobank Check Nos. 00892620 and 00892621
dated 31 March 1992 and 30 April 1992 respectively in the amount of
Thirty Five Thousand Pesos (P35,000.00) each, and BPI Family
Check dated 31 July 1992 amounting to Two Hundred Thousand
Pesos (P200,000.00). This being the case, Sps. Lam are still liable to
Kodak in the amount of One Million Five Hundred Twenty Six
Thousand Pesos (P1,526,000.00), which is payable in several
monthly amortization, pursuant to the Letter Agreement. However,
Sps. Lam admitted that sometime in May 1992, they had already
ordered their drawee bank to stop the payment on all the other
checks they had issued to Kodak as payment for the Minilab
Equipment delivered to them. Clearly then, Kodak ha[d] the right to
repossess the said equipment, through this replevin suit. Sps. Lam
cannot excuse themselves from paying in full the purchase price of
the equipment delivered to them on account of Kodak’s breach of the
contract to deliver the other two (2) Minilab Equipment, as
contemplated in the Letter Agreement.49(Emphasis supplied)
Echoing the ruling of the trial court, the Court of Appeals held that
the liability of the Lam Spouses to pay the remaining balance for the
first delivered unit is based on the second sentence of Article 1592 of
the New Civil Code.50 The Lam Spouses’ receipt and use of the
Minilab Equipment before they knew that Kodak Philippines, Ltd.
would not deliver the two (2) remaining units has made them liable
for the unpaid portion of the purchase price.51
28
The Court of Appeals noted that Kodak Philippines, Ltd. sought the
rescission of its contract with the Lam Spouses in the letter dated
October 14, 1992.52 The rescission was based on Article 1191 of the
New Civil Code, which provides: "The power to rescind obligations is
implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him."53 In its letter, Kodak
Philippines, Ltd. demanded that the Lam Spouses surrender the lone
delivered unit of Minilab Equipment along with its standard
accessories.54
The Court of Appeals likewise noted that the Lam Spouses
rescinded the contract through its letter dated November 18, 1992 on
account of Kodak Philippines, Inc.’s breach of the parties’ agreement
to deliver the two (2) remaining units.55
As a result of this rescission under Article 1191, the Court of Appeals
ruled that "both parties must be restored to their original situation, as
far as practicable, as if the contract was never entered into." 56 The
Court of Appeals ratiocinated that Article 1191 had the effect of
extinguishing the obligatory relation as if one was never created: 57
To rescind is to declare a contract void in its inception and to put an
end to it as though it never were. It is not merely to terminate it and
to release parties from further obligations to each other but abrogate
it from the beginning and restore parties to relative positions which
they would have occupied had no contract been made. 58
The Lam Spouses were ordered to relinquish possession of the
Minilab Equipment unit and its standard accessories, while Kodak
Philippines, Ltd. was ordered to return the amount of ₱270,000.00,
tendered by the Lam Spouses as partial payment.59
As to the actual damages sought by the parties, the Court of Appeals
found that the Lam Spouses were able to substantiate the following:
Incentive fee paid to Mr. Ruales in the amount of P100,000.00; the
rider to the contract of lease which made the Sps. Lam liable, by way
of advance payment, in the amount of P40,000.00, the same being
intended for the repair of the flooring of the leased premises; and
lastly, the payment of P300,000.00, as compromise agreement for
the pre-termination of the contract of lease with Ruales. 60
The total amount is ₱440,000.00. The Court of Appeals found that all
other claims made by the Lam Spouses were not supported by
evidence, either through official receipts or check payments. 61
As regards the generator set improperly seized from Kodak
Philippines, Ltd. on the basis of the writ of replevin, the Court of
Appeals found that there was no basis for the Lam Spouses’ claim
for reasonable rental of ₱5,000.00. It held that the trial court’s award
of 12% interest, in addition to the cost of the generator set in the
amount of ₱130,000.00, is sufficient compensation for whatever
damage the Lam Spouses suffered on account of its improper
seizure.62
The Court of Appeals also ruled on the Lam Spouses’ entitlement to
moral and exemplary damages, as well as attorney’s fees and
litigation expenses:
In seeking recovery of the Minilab Equipment, Kodak cannot be
considered to have manifested bad faith and malevolence because
as earlier ruled upon, it was well within its right to do the same.
However, with respect to the seizure of the generator set, where
Kodak misrepresented to the court a quo  its alleged right over the
said item, Kodak’s bad faith and abuse of judicial processes become
self-evident. Considering the off-setting circumstances attendant, the
amount of P25,000.00 by way of moral damages is considered
sufficient.
In addition, so as to serve as an example to the public that an
application for replevin should not be accompanied by any false
claims and misrepresentation, the amount of P50,000.00 by way of
exemplary damages should be pegged against Kodak.
With respect to the attorney’s fees and litigation expenses, We find
that there is no basis to award Sps. Lam the amount sought for. 63
29
Kodak Philippines, Ltd. moved for reconsideration of the Court of
Appeals Decision, but it was denied for lack of merit.64 However, the
Court of Appeals noted that the Lam Spouses’ Opposition correctly
pointed out that the additional award of ₱270,000.00 made by the
trial court was not mentioned in the decretal portion of the March 30,
2005 Decision:
Going over the Decision, specifically page 12 thereof, the Court
noted that, in addition to the amount of Two Hundred Seventy
Thousand (P270,000.00) which plaintiff-appellant should return to
the defendantsappellants, the Court also ruled that defendants-
appellants should, in turn, relinquish possession of the Minilab
Equipment and the standard accessories to plaintiff-appellant.
Inadvertently, these material items were not mentioned in the
decretal portion of the Decision. Hence, the proper correction should
herein be made.65
The Lam Spouses filed this Petition for Review on April 14, 2005. On
the other hand, Kodak Philippines, Ltd. filed its Motion for
Reconsideration66 before the Court of Appeals on April 22, 2005.
While the Petition for Review on Certiorari filed by the Lam Spouses
was pending before this court, the Court of Appeals Special
Fourteenth Division, acting on Kodak Philippines, Ltd.’s Motion for
Reconsideration, issued the Amended Decision67 dated September
9, 2005. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, this Court resolved that:
A. Plaintiff-appellant’s Motion for Reconsideration is
hereby DENIED for lack of merit.
B. The decretal portion of the 30 March 2005 Decision
should now read as follows:
"WHEREFORE, PREMISES CONSIDERED, the Assailed Decision
dated 26 February 1999 of the Regional Trial Court, Branch 65 in
Civil Cases No. 92-3442 is hereby MODIFIED. Plaintiff-appellant is
ordered to pay the following:
a. P270,000.00 representing the partial payment made on
the Minilab equipment.
b. P130,000.00 representing the amount of the generator
set, plus legal interest at 12% per annum from December
1992 until fully paid;
c. P440,000.00 as actual damages;
d. P25,000.00 as moral damages; and
e. P50,000.00 as exemplary damages.
Upon the other hand, defendants-appellants are hereby ordered to
return to plaintiff-appellant the Minilab equipment and the standard
accessories delivered by plaintiff-appellant.
SO ORDERED."
SO ORDERED.68 (Emphasis in the original)
Upon receiving the Amended Decision of the Court of Appeals,
Kodak Philippines, Ltd. filed a Motion for Extension of Time to File an
Appeal by Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure before this court.69
This was docketed as G.R. No. 169639. In the Motion for
Consolidation dated November 2, 2005, the Lam Spouses moved
that G.R. No. 167615 and G.R. No. 169639 be consolidated since
both involved the same parties, issues, transactions, and essential
facts and circumstances.70
In the Resolution dated November 16, 2005, this court noted the
Lam Spouses’ September 23 and September 30, 2005
Manifestations praying that the Court of Appeals’ September 9, 2005
Amended Decision be considered in the resolution of the Petition for
Review on Certiorari.71 It also granted the Lam Spouses’ Motion for
Consolidation.72
30
In the Resolution73 dated September 20, 2006, this court
deconsolidated G.R No. 167615 from G.R. No. 169639 and declared
G.R. No. 169639 closed and terminated since Kodak Philippines,
Ltd. failed to file its Petition for Review.
II
We resolve the following issues:
First, whether the contract between petitioners Spouses Alexander
and Julie Lam and respondent Kodak Philippines, Ltd. pertained to
obligations that are severable, divisible, and susceptible of partial
performance under Article 1225 of the New Civil Code; and
Second, upon rescission of the contract, what the parties are entitled
to under Article 1190 and Article 1522 of the New Civil Code.
Petitioners argue that the Letter Agreement it executed with
respondent for three (3) Minilab Equipment units was not severable,
divisible, and susceptible of partial performance. Respondent’s
recovery of the delivered unit was unjustified.74
Petitioners assert that the obligations of the parties were not
susceptible of partial performance since the Letter Agreement was
for a package deal consisting of three (3) units.75 For the delivery of
these units, petitioners were obliged to pay 48 monthly payments,
the total of which constituted one debt.76 Having relied on
respondent’s assurance that the three units would be delivered at the
same time, petitioners simultaneously rented and renovated three
stores in anticipation of simultaneous operations.77 Petitioners argue
that the divisibility of the object does not necessarily determine the
divisibility of the obligation since the latter is tested against its
susceptibility to a partial performance.78 They argue that even if the
object is susceptible of separate deliveries, the transaction is
indivisible if the parties intended the realization of all parts of the
agreed obligation.79
Petitioners support the claim that it was the parties’ intention to have
an indivisible agreement by asserting that the payments they made
to respondent were intended to be applied to the whole package of
three units.80 The postdated checks were also intended as initial
payment for the whole package.81 The separate purchase price for
each item was merely intended to particularize the unit prices, not to
negate the indivisible nature of their transaction.82 As to the issue of
delivery, petitioners claim that their acceptance of separate deliveries
of the units was solely due to the constraints faced by respondent,
who had sole control over delivery matters.83
With the obligation being indivisible, petitioners argue that
respondent’s failure to comply with its obligation to deliver the two (2)
remaining Minilab Equipment units amounted to a breach. Petitioners
claim that the breach entitled them to the remedy of rescission and
damages under Article 1191 of the New Civil Code.84
Petitioners also argue that they are entitled to moral damages more
than the ₱50,000.00 awarded by the Court of Appeals since
respondent’s wrongful act of accusing them of non-payment of their
obligations caused them sleepless nights, mental anguish, and
wounded feelings.85 They further claim that, to serve as an example
for the public good, they are entitled to exemplary damages as
respondent, in making false allegations, acted in evident bad faith
and in a wanton, oppressive, capricious, and malevolent manner. 86
Petitioners also assert that they are entitled to attorney’s fees and
litigation expenses under Article 2208 of the New Civil Code since
respondent’s act of bringing a suit against them was baseless and
malicious. This prompted them to engage the services of a lawyer. 87
Respondent argues that the parties’ Letter Agreement contained
divisible obligations susceptible of partial performance as defined by
Article 1225 of the New Civil Code.88 In respondent’s view, it was the
intention of the parties to be bound separately for each individually
priced Minilab Equipment unit to be delivered to different outlets: 89
The three (3) Minilab Equipment are intended by petitioners LAM for
install[a]tion at their Tagum, Davao del Norte, Sta. Cruz, Manila and
Cotabato City outlets. Each of these units [is] independent from one
another, as many of them may perform its own job without the other.
31
Clearly the objective or purpose of the prestation, the obligation is
divisible.
The nature of each unit of the three (3) Minilab Equipment is such
that one can perform its own functions, without awaiting for the other
units to perform and complete its job. So much so, the nature of the
object of the Letter Agreement is susceptible of partial performance,
thus the obligation is divisible.90
With the contract being severable in character, respondent argues
that it performed its obligation when it delivered one unit of the
Minilab Equipment.91 Since each unit could perform on its own, there
was no need to await the delivery of the other units to complete its
job.92 Respondent then is of the view that when petitioners ordered
the depository bank to stop payment of the issued checks covering
the first delivered unit, they violated their obligations under the Letter
Agreement since respondent was already entitled to full payment. 93
Respondent also argues that petitioners benefited from the use of
the Minilab Equipment for 10 months—from March to December
1992— despite having paid only two (2) monthly
installments.94 Respondent avers that the two monthly installments
amounting to ₱70,000.00 should be the subject of an offset against
the amount the Court of Appeals awarded to petitioners. 95
Respondent further avers that petitioners have no basis for claiming
damages since the seizure and recovery of the Minilab Equipment
was not in bad faith and respondent was well within its right. 96
III
The Letter Agreement contained an indivisible obligation.
Both parties rely on the Letter Agreement97 as basis of their
respective obligations. Written by respondent’s Jeffrey T. Go and
Antonio V. Mines and addressed to petitioner Alexander Lam, the
Letter Agreement contemplated a "package deal" involving three (3)
units of the Kodak Minilab System 22XL, with the following terms and
conditions:
This confirms our verbal agreement for Kodak Phils., Ltd. to provide
Colorkwik Laboratories, Inc. with three (3) units Kodak Minilab
System 22XL . . . for your proposed outlets in Rizal Avenue (Manila),
Tagum (Davao del Norte), and your existing Multicolor photo counter
in Cotabato City under the following terms and conditions:
1. Said Minilab Equipment packages will avail a total of 19%
multiple order discount based on prevailing equipment price
provided said equipment packages will be purchased not
later than June 30, 1992.
2. 19% Multiple Order Discount shall be applied in the form
of merchandise and delivered in advance immediately after
signing of the contract.
* Also includes start-up packages worth P61,000.00.
3. NO DOWNPAYMENT.
4. Minilab Equipment Package shall be payable in 48
monthly installments at THIRTY FIVE THOUSAND PESOS
(P35,000.00) inclusive of 24% interest rate for the first 12
months; the balance shall be re-amortized for the remaining
36 months and the prevailing interest shall be applied.
5. Prevailing price of Kodak Minilab System 22XL as of
January 8, 1992 is at ONE MILLION SEVEN HUNDRED
NINETY SIX THOUSAND PESOS.
6. Price is subject to change without prior notice.
*Secured with PDCs; 1st monthly amortization due 45 days
after installation[.]98
Based on the foregoing, the intention of the parties is for there to be
a single transaction covering all three (3) units of the Minilab
Equipment. Respondent’s obligation was to deliver all products
32
purchased under a "package," and, in turn, petitioners’ obligation
was to pay for the total purchase price, payable in installments.
The intention of the parties to bind themselves to an indivisible
obligation can be further discerned through their direct acts in
relation to the package deal. There was only one agreement
covering all three (3) units of the Minilab Equipment and their
accessories. The Letter Agreement specified only one purpose for
the buyer, which was to obtain these units for three different outlets.
If the intention of the parties were to have a divisible contract, then
separate agreements could have been made for each Minilab
Equipment unit instead of covering all three in one package deal.
Furthermore, the 19% multiple order discount as contained in the
Letter Agreement was applied to all three acquired units. 99 The "no
downpayment" term contained in the Letter Agreement was also
applicable to all the Minilab Equipment units. Lastly, the fourth clause
of the Letter Agreement clearly referred to the object of the contract
as "Minilab Equipment Package."
In ruling that the contract between the parties intended to cover
divisible obligations, the Court of Appeals highlighted: (a) the
separate purchase price of each item; (b) petitioners’ acceptance of
separate deliveries of the units; and (c) the separate payment
arrangements for each unit.100 However, through the specified terms
and conditions, the tenor of the Letter Agreement indicated an
intention for a single transaction. This intent must prevail even
though the articles involved are physically separable and capable of
being paid for and delivered individually, consistent with the New
Civil Code:
Article 1225. For the purposes of the preceding articles, obligations
to give definite things and those which are not susceptible of partial
performance shall be deemed to be indivisible.
When the obligation has for its object the execution of a certain
number of days of work, the accomplishment of work by metrical
units, or analogous things which by their nature are susceptible of
partial performance, it shall be divisible.
However, even though the object or service may be physically
divisible, an obligation is indivisible if so provided by law or intended
by the parties.  (Emphasis supplied)
In Nazareno v. Court of Appeals,101 the indivisibility of an obligation is
tested against whether it can be the subject of partial performance:
An obligation is indivisible when it cannot be validly performed in
parts, whatever may be the nature of the thing which is the object
thereof. The indivisibility refers to the prestation and not to the object
thereof.  In the present case, the Deed of Sale of January 29, 1970
supposedly conveyed the six lots to Natividad. The obligation is
clearly indivisible because the performance of the contract cannot be
done in parts, otherwise the value of what is transferred is
diminished. Petitioners are therefore mistaken in basing the
indivisibility of a contract on the number of obligors. 102 (Emphasis
supplied, citation omitted)
There is no indication in the Letter Agreement that the units
petitioners ordered were covered by three (3) separate transactions.
The factors considered by the Court of Appeals are mere incidents of
the execution of the obligation, which is to deliver three units of the
Minilab Equipment on the part of respondent and payment for all
three on the part of petitioners. The intention to create an indivisible
contract is apparent from the benefits that the Letter Agreement
afforded to both parties. Petitioners were given the 19% discount on
account of a multiple order, with the discount being equally
applicable to all units that they sought to acquire. The provision on
"no downpayment" was also applicable to all units. Respondent, in
turn, was entitled to payment of all three Minilab Equipment units,
payable by installments.
IV
With both parties opting for rescission of the contract under Article
1191, the Court of Appeals correctly ordered for restitution.
The contract between the parties is one of sale, where one party
obligates himself or herself to transfer the ownership and deliver a
33
determinate thing, while the other pays a certain price in money or its
equivalent.103 A contract of sale is perfected upon the meeting of
minds as to the object and the price, and the parties may reciprocally
demand the performance of their respective obligations from that
point on.104
The Court of Appeals correctly noted that respondent had rescinded
the parties’ Letter Agreement through the letter dated October 14,
1992.105 It likewise noted petitioners’ rescission through the letter
dated November 18, 1992.106This rescission from both parties is
founded on Article 1191 of the New Civil Code:
The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent
upon him.
The injured party may choose between the fulfilment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfilment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
Rescission under Article 1191 has the effect of mutual
restitution.107 In Velarde v. Court of Appeals:108
Rescission abrogates the contract from its inception and requires a
mutual restitution of benefits received.
....
Rescission creates the obligation to return the object of the contract.
It can be carried out only when the one who demands rescission can
return whatever he may be obliged to restore. To rescind is to
declare a contract void at its inception and to put an end to it as
though it never was. It is not merely to terminate it and release the
parties from further obligations to each other, but to abrogate it from
the beginning and restore the parties to their relative positions as if
no contract has been made.109 (Emphasis supplied, citations omitted)
The Court of Appeals correctly ruled that both parties must be
restored to their original situation as far as practicable, as if the
contract was never entered into. Petitioners must relinquish
possession of the delivered Minilab Equipment unit and accessories,
while respondent must return the amount tendered by petitioners as
partial payment for the unit received. Further, respondent cannot
claim that the two (2) monthly installments should be offset against
the amount awarded by the Court of Appeals to petitioners because
the effect of rescission under Article 1191 is to bring the parties back
to their original positions before the contract was entered into. Also
in Velarde:
As discussed earlier, the breach committed by petitioners was the
nonperformance of a reciprocal obligation, not a violation of the
terms and conditions of the mortgage contract. Therefore, the
automatic rescission and forfeiture of payment clauses stipulated in
the contract does not apply. Instead, Civil Code provisions shall
govern and regulate the resolution of this controversy.
Considering that the rescission of the contract is based on Article
1191 of the Civil Code, mutual restitution is required to bring back
the parties to their original situation prior to the inception of the
contract. Accordingly, the initial payment of ₱800,000 and the
corresponding mortgage payments in the amounts of ₱27,225,
₱23,000 and ₱23,925 (totaling ₱874,150.00) advanced by
petitioners should be returned by private respondents, lest the latter
unjustly enrich themselves at the expense of the
former.110 (Emphasis supplied)
When rescission is sought under Article 1191 of the Civil Code, it
need not be judicially invoked because the power to resolve is
implied in reciprocal obligations.111 The right to resolve allows an
injured party to minimize the damages he or she may suffer on
account of the other party’s failure to perform what is incumbent
upon him or her.112 When a party fails to comply with his or her
obligation, the other party’s right to resolve the contract is
34
triggered.113 The resolution immediately produces legal effects if the
non-performing party does not question the resolution. 114 Court
intervention only becomes necessary when the party who allegedly
failed to comply with his or her obligation disputes the resolution of
the contract.115 Since both parties in this case have exercised their
right to resolve under Article 1191, there is no need for a judicial
decree before the resolution produces effects.
V documentary evidence.121 Petitioners failed to show any reason why
The issue of damages is a factual one. A petition for review on
certiorari under Rule 45 shall only pertain to questions of law. 116 It is
not the duty of this court to re-evaluate the evidence adduced before
the lower courts.117Furthermore, unless the petition clearly shows
that there is grave abuse of discretion, the findings of fact of the trial
court as affirmed by the Court of Appeals are conclusive upon this
court.118 In Lorzano v. Tabayag, Jr.:119
For a question to be one of law, the same must not involve an
examination of the probative value of the evidence presented by the
litigants or any of them. The resolution of the issue must rest solely
on what the law provides on the given set of circumstances. Once it
is clear that the issue invites a review of the evidence presented, the
question posed is one of fact.
....
For the same reason, we would ordinarily disregard the petitioner’s
allegation as to the propriety of the award of moral damages and
attorney’s fees in favor of the respondent as it is a question of fact.
Thus, questions on whether or not there was a preponderance of
evidence to justify the award of damages or whether or not there
was a causal connection between the given set of facts and the
damage suffered by the private complainant or whether or not the
act from which civil liability might arise exists are questions of fact.
Essentially, the petitioner is questioning the award of moral damages
and attorney’s fees in favor of the respondent as the same is
supposedly not fully supported by evidence. However, in the final
analysis, the question of whether the said award is fully supported by
evidence is a factual question as it would necessitate whether the
evidence adduced in support of the same has any probative value.
For a question to be one of law, it must involve no examination of the
probative value of the evidence presented by the litigants or any of
them.120 (Emphasis supplied, citations omitted)
The damages awarded by the Court of Appeals were supported by
the factual determination of the Court of Appeals must be reviewed,
especially in light of their failure to produce receipts or check
payments to support their other claim for actual damages. 122
Furthermore, the actual damages amounting to ₱2,040,000.00 being
sought by petitioners123 must be tempered on account of their own
failure to pay the rest of the installments for the delivered unit. This
failure on their part is a breach of their obligation, for which the
liability of respondent, for its failure to deliver the remaining units,
shall be equitably tempered on account of Article 1192 of the New
Civil Code.124 In Central Bank of the Philippines v. Court of
Appeals:125
Since both parties were in default in the performance of their
respective reciprocal obligations, that is, Island Savings Bank failed
to comply with its obligation to furnish the entire loan and Sulpicio M.
Tolentino failed to comply with his obligation to pay his ₱17,000.00
debt within 3 years as stipulated, they are both liable for damages.
Article 1192 of the Civil Code provides that in case both parties have
committed a breach of their reciprocal obligations, the liability of the
first infractor shall be equitably tempered by the courts. WE rule that
the liability of Island Savings Bank for damages in not furnishing the
entire loan is offset by the liability of Sulpicio M. Tolentino for
damages, in the form of penalties and surcharges, for not paying his
overdue ₱17,000.00 debt. The liability of Sulpicio M. Tolentino for
interest on his ₱17,000.00 debt shall not be included in offsetting the
liabilities of both parties. Since Sulpicio M. Tolentino derived some
benefit for his use of the ₱17,000.00, it is just that he should account
for the interest thereon.126 (Emphasis supplied)
35
The award for moral and exemplary damages also appears to be (b) P130,000.00, representing the amount of the generator
sufficient. Moral damages are granted to alleviate the moral suffering set, plus legal interest at 12% .per annum from December
suffered by a party due to an act of another, but it is not intended to 1992 until fully paid;
enrich the victim at the defendant’s expense.127 It is not meant to
punish the culpable party and, therefore, must always be reasonable (c) P440,000.00 as actual damages;
vis-a-vis the injury caused.128 Exemplary damages, on the other
hand, are awarded when the injurious act is attended by bad (d) P25,000.00 as moral damages;
faith.129 In this case, respondent was found to have misrepresented
its right over the generator set that was seized. As such, it is properly
liable for exemplary damages as an example to the public. 130 (e) P50,000.00 as exemplary damages; and

However, the dispositive portion of the Court of Appeals Amended (f) P20,000.00 as attorney's fees.
Decision dated September 9, 2005 must be modified to include the
recovery of attorney’s fees and costs of suit in favor of petitioners. Petitioners are ordered to return the Kodak Minilab System 22XL unit
In Sunbanun v. Go:131 and its standard accessories to respondent.

Furthermore, we affirm the award of exemplary damages and SO ORDERED.

attorney’s fees. Exemplary damages may be awarded when a
wrongful act is accompanied by bad faith or when the defendant MARVIC M.V.F. LEONEN
acted in a wanton, fraudulent, reckless, oppressive, or malevolent Associate Justice
manner which would justify an award of exemplary damages under
Article 2232 of the Civil Code. Since the award of exemplary Republic of the Philippines
damages is proper in this case, attorney’s fees and cost of the suit SUPREME COURT
may also be recovered as provided under Article 2208 of the Civil Manila
Code.132 (Emphasis supplied, citation omitted)
EN BANC
Based on the amount awarded for moral and exemplary damages, it
is reasonable to award petitioners ₱20,000.00 as attorney’s fees.
G.R. No. L-28497             November 6, 1928
WHEREFORE, the Petition is DENIED. The Amended Decision
THE BACHRACH MOTOR CO., INC., plaintiff-appellee, 
dated September 9, 2005 is AFFIRMED with
vs.
MODIFICATION. Respondent Kodak Philippines, Ltd. is ordered to
FAUSTINO ESPIRITU, defendant-appellant.
pay petitioners Alexander and Julie Lam:

------------------------------
(a) P270,000.00, representing the partial payment made on
the Minilab Equipment;
G.R. No. L-28498             November 6, 1928

36
THE BACHRACH MOTOR CO., INC., plaintiff-appellee,  In both sales it was agreed that 12 per cent interest would be paid
vs.
FAUSTINO ESPIRITU, defendant-appellant, and  and in case of non-payment of the total debt upon its maturity, 25 per
ROSARIO ESPIRITU, intervenor-appellant.
Ernesto Zaragoza and Simeon Ramos for defendant-appellant.  In addition to the mortagage deeds referred to, which the defendant
Benito Soliven and Jose Varela Calderon for intervenor-appellant.  executed in favor of the plaintiff, the defendant at the same time also
B. Francisco for appellee.
AVANCEÑA, C. J.:
These two cases, Nos. 28497 and 28948, were tried together.
It appears, in connection with case 28497; that on July 28, 1925 the
defendant Faustino Espiritu purchased of the plaintiff corporation a
two-ton White truck for P11,983.50, paying P1,000 down to apply on
account of this price, and obligating himself to pay the remaining
P10,983.50 within the periods agreed upon. To secure the payment
of this sum, the defendants mortgaged the said truck purchased and,
besides, three others, two of which are numbered 77197 and 92744
respectively, and all of the White make (Exhibit A). These two trucks
had been purchased from the same plaintiff and were fully paid for
by the defendant and his brother Rosario Espiritu. The defendant
failed to pay P10,477.82 of the price secured by this mortgage.
In connection with case 28498, it appears that on February 18, 1925
the defendant bought a one-ton White truck of the plaintiff
corporation for the sum of P7,136.50, and after having deducted the
P500 cash payment and the 12 per cent annual interest on the
unpaid principal, obligated himself to make payment of this sum
within the periods agreed upon. To secure this payment the
defendant mortgaged to the plaintiff corporation the said truck
purchased and two others, numbered 77197 and 92744,
respectively, the same that were mortgaged in the purchase of the
other truck referred to in the other case. The defendant failed to pay
P4,208.28 of this sum.
upon the unpaid portion of the price at the executon of the contracts,
cent thereon, as penalty.
signed a promissory note solidarily with his brother Rosario Espiritu
for the several sums secured by the two mortgages (Exhibits B and
D).
Rosario Espiritu appeared in these two cases as intervenor, alleging
to be the exclusive owner of the two White trucks Nos. 77197 and
92744, which appear to have been mortgaged by the defendants to
the plaintiff. lawphi1.net
While these two cases were pending in the lower court the
mortgaged trucks were sold by virtue of the mortgage, all of them
together bringing in, after deducting the sheriff's fees and
transportation charges to Manila, the net sum of P3,269.58.
The judgment appealed from ordered the defendants and the
intervenor to pay plaintiff in case 28497 the sum of P7,732.09 with
interest at the rate of 12 per cent per annum from May 1, 1926 until
fully paid, and 25 per cent thereof in addition as penalty. In case
28498, the trial court ordered the defendant and the intervenor to pay
plaintiff the sum of P4,208.28 with interest at 12 per cent per annum
from December 1, 1925 until fully paid, and 25 per cent thereon as
penalty.
The appellants contend that trucks 77197 and 92744 were not
mortgaged, because, when the defendant signed the mortgage
deeds these trucks were not included in those documents, and were
only put in later, without defendant's knowledge. But there is positive
proof that they were included at the time the defendant signed these
documents. Besides, there were presented two of defendant's letters
to Hidalgo, an employee of the plaintiff's written a few days before
the transaction, acquiescing in the inclusion of all his White trucks
already paid for, in the mortgage (Exhibit H-I).
37
Appellants also alleged that on February 4, 1925, the defendant sold
his rights in said trucks Nos. 77197 and 92744 to the intervenor, and
that as the latter did not sign the mortgage deeds, such trucks
cannot be considered as mortgaged. But the evidence shows that
while the intervenor Rosario Espiritu did not sign the two mortgage
deeds (Exhibits A and C), yet, together with the defendants Faustino
Espiritu, he signed the two promissory notes (Exhibits B and D)
secured by these two mortgages. All these instruments were
executed at the same time, and when the trucks 77197 and 92744
were included in the mortgages, the intervenor Rosario Espiritu was
aware of it and consented to such inclusion. These facts are
supported by the testimony of Bachrach, manager of the plaintiff
corporation, of Agustin Ramirez, who witnessed the execution of all
these documents, and of Angel Hidalgo, who witnessed the
execution of Exhibits B and D.
We do not find the statement of the intervenor Rosario Espiritu that
he did not sign promissory notes Exhibits B and C to be sufficient to
overthrow this evidence. A comparison of his genuine signature on
Exhibit AA with those appearing on promissory notes B and C,
convinces us that the latter are his signatures. And such is our
conclusion, notwithstanding the evidence presented to establish that
on the date when Exhibits B appears to have been signed, that is
July 25, 1925, the intervenor was in Batac, Ilocos Norte, many miles
away from Manila. And the fact that on the 24th of said month of
July, the plaintiff sent some truck accessory parts by rail to Ilocos for
the intervenor does not necessarily prove that the latter could not
have been in Manila on the 25th of that month.
In view of his conclusion that the intervenor signed the promissory
notes secured by trucks 77197 and 92744 and consented to the
mortgage of the same, it is immaterial whether he was or was not the
exclusive owner thereof.
It is finally contended that the 25 per cent penalty upon the debt, in
addition to the interest of 12 per cent per annum, makes the contract
usurious. Such a contention is not well founded. Article 1152 of the
Civil Code permits the agreement upon a penalty apart from the
interest. Should there be such an agreemnet, the penalty, as was
held in the case of Lopez vs. Hernaez (32 Phil., 631), does not
include the interest, and which may be demamded separetely.
According to this, the penalty is not to be added to the interest for the
determination of whether the interest exceeds the rate fixed by the
law, since said rate was fixed only for the interest. But considering
that the obligation was partly performed, and making use of the
power given to the court by article 1154 of the Civil Code, this
penalty is reduced to 10 per cent of the unpaid debt.
With the sole modification that instead of 25 per cent upon the sum
owed, the defendants need pay only 10 per cent thereon as penalty,
the judgment appealed from is affired in all other respects without
special pronouncement as to costs. So ordered.
Malcolm, Villamor, Ostrand, Romualdez and Villa-Real, JJ., concur.
epublic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-41093 October 30, 1978
ROBES-FRANCISCO REALTY & DEVELOPMENT
CORPORATION, petitioner, 
vs.
COURT OF FIRST INSTANCE OF RIZAL (BRANCH XXXIV), and
LOLITA MILLAN, respondents.
Purugganan & Bersamin for petitioner.
Salvador N. Beltran for respondent.
MUÑOZ PALMA, J.:
38
This is a direct appeal on questions of law from a decision of the
Court of First Instance of Rizal, Branch XXXIV, presided by the
Honorable Bernardo P. Pardo, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered
commanding the defendant to register the deed of
absolute sale it had executed in favor of plaintiff with
the Register of Deeds of Caloocan City and secure
the corresponding title in the name of plaintiff within
ten (10) days after finality of this decision; if, for any
reason, this not possible, defendant is hereby
sentenced to pay plaintiff the sum of P5,193.63 with
interest at 4% per annum from June 22, 1972 until
fully paid.
In either case, defendant is sentenced to pay plaintiff
nominal damages in the amount of P20,000.00 plus
attorney's fee in the amount of P5,000.00 and costs.
SO ORDERED.
Caloocan City, February 11, 1975. (rollo, p. 21)
Petitioner corporation questions the award for nominal damages of
P20,000.00 and attorney's fee of P5,000.00 which are allegedly
excessive and unjustified.
In the Court's resolution of October 20, 1975, We gave due course to
the Petition only as regards the portion of the decision awarding
nominal damages. 1
The following incidents are not in dispute:
In May 1962 Robes-Francisco Realty & Development Corporation,
now petitioner, agreed to sell to private respondent Lolita Millan for
and in consideration of the sum of P3,864.00, payable in
installments, a parcel of land containing an area of approximately
276 square meters, situated in Barrio Camarin, Caloocan City,
known as Lot No. 20, Block No. 11 of its Franville Subdivision. 2
Millan complied with her obligation under the contract and paid the
installments stipulated therein, the final payment having been made
on December 22, 1971. The vendee made a total payment of
P5,193.63 including interests and expenses for registration of title. 3
Thereafter, Lolita Millan made repeated demands upon the
corporation for the execution of the final deed of sale and the
issuance to her of the transfer certificate of title over the lot. On
March 2, 1973, the parties executed a deed of absolute sale of the
aforementioned parcel of land. The deed of absolute sale contained,
among others, this particular provision:
That the VENDOR further warrants that the transfer
certificate of title of the above-described parcel of
land shall be transferred in the name of the VENDEE
within the period of six (6) months from the date of
full payment and in case the VENDOR fails to issue
said transfer certificate of title, it shall bear the
obligation to refund to the VENDEE the total amount
already paid for, plus an interest at the rate of 4%
per annum. (record on appeal, p. 9)
Notwithstanding the lapse of the above-mentioned stipulated period
of six (6) months, the corporation failed to cause the issuance of the
corresponding transfer certificate of title over the lot sold to Millan,
hence, the latter filed on August 14, 1974 a complaint for specific
performance and damages against Robes-Francisco Realty &
Development Corporation in the Court of First Instance of Rizal,
Branch XXXIV, Caloocan City, docketed therein as Civil Case No. C-
3268. 4
The complaint prayed for judgment (1) ordering the reformation of
the deed of absolute sale; (2) ordering the defendant to deliver to
plaintiff the certificate of title over the lot free from any lien or
encumbrance; or, should this be not possible, to pay plaintiff the
value of the lot which should not be less than P27,600.00 (allegedly
39
the present estimated value of the lot); and (3) ordering the
defendant to pay plaintiff damages, corrective and actual in the sum
of P15 000.00. 5
The corporation in its answer prayed that the complaint be dismissed
alleging that the deed of absolute sale was voluntarily executed
between the parties and the interest of the plaintiff was amply
protected by the provision in said contract for payment of interest at
4% per annum of the total amount paid, for the delay in the issuance
of the title. 6
At the pretrial conference the parties agreed to submit the case for
decision on the pleadings after defendant further made certain
admissions of facts not contained in its answer. 7
Finding that the realty corporation failed to cause the issuance of the
corresponding transfer certificate of title because the parcel of land
conveyed to Millan was included among other properties of the
corporation mortgaged to the GSIS to secure an obligation of P10
million and that the owner's duplicate certificate of title of the
subdivision was in the possession of the Government Service
Insurance System (GSIS), the trial court, on February 11, 1975,
rendered judgment the dispositive portion of which is quoted in
pages 1 and 2 of this Decision. We hold that the trial court did not err
in awarding nominal damages; however, the circumstances of the
case warrant a reduction of the amount of P20,000.00 granted to
private respondent Millan.
There can be no dispute in this case under the pleadings and the
admitted facts that petitioner corporation was guilty of delay,
amounting to nonperformance of its obligation, in issuing the transfer
certificate of title to vendee Millan who had fully paid up her
installments on the lot bought by her. Article 170 of the Civil Code
expressly provides that those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and those who in
any manner contravene the tenor thereof, are liable for damages.
Petitioner contends that the deed of absolute sale executed between
the parties stipulates that should the vendor fail to issue the transfer
certificate of title within six months from the date of full payment, it
shall refund to the vendee the total amount paid for with interest at
the rate of 4% per annum, hence, the vendee is bound by the terms
of the provision and cannot recover more than what is agreed upon.
Presumably, petitioner in invoking Article 1226 of the Civil Code
which provides that in obligations with a penal clause, the penalty
shall substitute the indemnity for damages and the payment of
interests in case of noncompliance, if there is no stipulation to the
contrary.
The foregoing argument of petitioner is totally devoid of merit. We
would agree with petitioner if the clause in question were to be
considered as a penal clause. Nevertheless, for very obvious
reasons, said clause does not convey any penalty, for even without
it, pursuant to Article 2209 of the Civil Code, the vendee would be
entitled to recover the amount paid by her with legal rate of interest
which is even more than the 4% provided for in the clause. 7-A
It is therefore inconceivable that the aforecited provision in the deed
of sale is a penal clause which will preclude an award of damages to
the vendee Millan. In fact the clause is so worded as to work to the
advantage of petitioner corporation.
Unfortunately, the vendee, now private respondent, submitted her
case below without presenting evidence on the actual damages
suffered by her as a result of the nonperformance of petitioner's
obligation under the deed of sale. Nonetheless, the facts show that
the right of the vendee to acquire title to the lot bought by her was
violated by petitioner and this entitles her at the very least to nominal
damages.
The pertinent provisions of our Civil Code follow:
Art. 2221. Nominal damages are adjudicated in
order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by
him.
40
 Art. 2222. The court may award nominal damages in
every obligation arising from any source enumerated
in article 1157, or in every case where any property
right has been invaded.
Under the foregoing provisions nominal damages are not intended
for indemnification of loss suffered but for the vindication or
recognition of a right violated or invaded. They are recoverable
where some injury has been done the amount of which the evidence
fails to show, the assessment of damages being left to the discretion
of the court according to the circumstances of the case. 8
It is true as petitioner claims that under American jurisprudence
nominal damages by their very nature are small sums fixed by the
court without regard to the extent of the harm done to the injured
party.
It is generally held that a nominal damage is a
substantial claim, if based upon the violation of a
legal right; in such case, the law presumes a
damage, although actual or compensatory damages
are not proven; in truth nominal damages are
damages in name only and not in fact, and are
allowed, not as an equivalent of a wrong inflicted,
but simply in recogniton of the existence of a
technical injury. (Fouraker v. Kidd Springs Boating
and Fishing Club, 65 S. W. 2d 796-797, citing 17
C.J. 720, and a number of authorities).9
In this jurisdiction, in Vda. de Medina, et al. v. Cresencia, et al. 1956,
which was an action for damages arising out of a vehicular accident,
this Court had occasion to eliminate an award of P10,000.00
imposed by way of nominal damages, the Court stating inter alia that
the amount cannot, in common sense, be demeed "nominal". 10
In a subsequent case, viz: Northwest Airlines, Inc. v. Nicolas L.
Cuenca, 1965, this Court, however, through then Justice Roberto
Concepcion who later became Chief Justice of this Court, sustained
an award of P20,000.00 as nominal damages in favor of respnodent
Cuenca. The Court there found special reasons for considering
P20,000.00 as "nominal". Cuenca who was the holder of a first class
ticket from Manila to Tokyo was rudely compelled by an agent of
petitioner Airlines to move to the tourist class notwithstanding its
knowledge that Cuenca as Commissioner of Public Highways of the
Republic of the Philippines was travelling in his official capacity as a
delegate of the country to a conference in Tokyo." 11
Actually, as explained in the Court's decision in Northwest Airlines,
there is no conflict between that case and Medina, for in the latter,
the P10,000.00 award for nominal damages was eliminated
principally because the aggrieved party had already been awarded
P6,000.00 as compensatory damages, P30,000.00 as moral
damages and P10,000.00 as exemplary damages, and "nominal
damages cannot coexist with compensatory damages," while in the
case of Commissioner Cuenca, no such compensatory, moral, or
exemplary damages were granted to the latter. 12
At any rate, the circumstances of a particular case will determine
whether or not the amount assessed as nominal damages is within
the scope or intent of the law, more particularly, Article 2221 of the
Civil Code.
In the situation now before Us, We are of the view that the  amount of
P20,000.00 is excessive. The admitted fact that petitioner
corporation failed to convey a transfer certificate of title to
respondent Millan because the subdivision property was mortgaged
to the GSIS does not in itself show that there was bad faith or fraud.
Bad faith is not to be presumed. Moreover, there was the expectation
of the vendor that arrangements were possible for the GSIS to make
partial releases of the subdivision lots from the overall real estate
mortgage. It was simply unfortunate that petitioner did not succeed in
that regard.
For that reason We cannot agree with respondent Millan Chat the
P20,000.00 award may be considered in the nature of exemplary
damages.
41
In case of breach of contract, exemplary damages may be awarded
if the guilty party acted in wanton, fraudulent, reckless, oppressive or
malevolent manner. 13 Furthermore, exemplary or corrective
damages are to be imposed by way of example or correction for the
public good, only if the injured party has shown that he is entitled to
recover moral, temperate or compensatory damages."
Here, respondent Millan did not submit below any evidence to prove
that she suffered actual or compensatory damages. 14
To conclude, We hold that the sum of Ten Thousand Pesos
(P10,000.00) by way of nominal damages is fair and just under the
following circumstances, viz: respondent Millan bought the lot from
petitioner in May, 1962, and paid in full her installments on
December 22, 1971, but it was only on March 2, 1973, that a deed of
absolute sale was executed in her favor, and notwithstanding the
lapse of almost three years since she made her last payment,
petitioner still failed to convey the corresponding transfer certificate
of title to Millan who accordingly was compelled to file the instant
complaint in August of 1974.
PREMISES CONSIDERED, We modify the decision of the trial court
and reduce the nominal damages to Ten Thousand Pesos
(P10,000.00). In all other respects the aforesaid decision stands.
Without pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez and Guerrero, JJ.,
concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-26339 December 14, 1979
MARIANO C. PAMINTUAN, petitioner-appellant, 
vs.
COURT OF APPEALS and YU PING KUN CO., INC., respondent-
appellees.
V. E. del Rosario & Associates for appellant.
Sangco & Sangalang for private respondent.
AQUINO, J.:
This case is about the recovery compensatory, damages for breach
of a contract of sale in addition to liquidated damages.
Mariano C. Pamintuan appealed from the judgment of the Court of
Appeals wherein he was ordered to deliver to Yu Ping Kun Co., Inc.
certain plastic sheetings and, if he could not do so, to pay the latter
P100,559.28 as damages with six percent interest from the date of
the filing of the complaint. The facts and the findings of the Court of
Appeals are as follows:
In 1960, Pamintuan was the holder of a barter license wherein he
was authorized to export to Japan one thousand metric tons of white
flint corn valued at forty-seven thousand United States dollars in
exchange for a collateral importation of plastic sheetings of an
equivalent value.
By virtue of that license, he entered into an agreement to ship his
corn to Tokyo Menka Kaisha, Ltd. of Osaka, Japan in exchange for
plastic sheetings. He contracted to sell the plastic sheetings to Yu
Ping Kun Co., Inc. for two hundred sixty-five thousand five hundred
fifty pesos. The company undertook to open an irrevocable domestic
letter of credit for that amount in favor of Pamintuan.
42
It was further agreed that Pamintuan would deliver the plastic
sheetings to the company at its bodegas in Manila or suburbs
directly from the piers "within one month upon arrival of" the carrying
vessels. Any violation of the contract of sale would entitle the
aggreived party to collect from the offending party liquidated
damages in the sum of ten thousand pesos (Exh. A).
On July 28, 1960, the company received a copy of the letter from the
Manila branch of Toyo Menka Kaisha, Ltd. confirming the
acceptance by Japanese suppliers of firm offers for the consignment
to Pamintuan of plastic sheetings valued at forty-seven thousand
dollars. Acting on that information, the company lost no time in
securing in favor of Pamintuan an irrevocable letter of credit for two
hundred sixty-five thousand five hundred fifty pesos.
Pamintuan was apprised by the bank on August 1, 1960 of that letter
of credit which made reference to the delivery to Yu Ping Kun Co.,
Inc. on or before October 31, 1960 of 336, 360 yards of plastic
sheetings (p. 21, Record on Appeal).
On September 27 and 30 and October 4, 1960, the Japanese
suppliers shipped to Pamintuan, through Toyo Menka Kaisha, Ltd.,
the plastic sheetings in four shipments to wit: (1) Firm Offer No. 327
for 50,000 yards valued at $9,000; (2) Firm Offer No. 328 for 70,000
yards valued at $8,050; (3) Firm Offers Nos. 329 and 343 for
175,000 and 18,440 yards valued at $22,445 and $2,305,
respectively, and (4) Firm Offer No. 330 for 26,000 yards valued at
$5,200, or a total of 339,440 yards with an aggregate value of
$47,000 (pp. 4-5 and 239-40, Record on Appeal).
The plastic sheetings arrived in Manila and were received by
Pamintuan. Out of the shipments, Pamintuan delivered to the
company's warehouse only the following quantities of plastic
sheetings:
November 11, 1960 — 140 cases, size 48 inches by
50 yards. November 14, 1960 — 258 cases out of
352 cases. November 15, 1960 — 11 cases out of
352 cases. November 15, 1960 — 10 cases out of
100 cases. November 15, 1960 — 30 cases out of
100 cases.
Pamintuan withheld delivery of (1) 50 cases of plastic sheetings
containing 26,000 yards valued at $5,200; (2) 37 cases containing
18,440 yards valued at $2,305; (3) 60 cases containing 30,000 yards
valued at $5,400 and (4) 83 cases containing 40,850 yards valued at
$5,236.97. While the plastic sheetings were arriving in Manila,
Pamintuan informed the president of Yu Ping Kun Co., Inc. that he
was in dire need of cash with which to pay his obligations to the
Philippine National Bank. Inasmuch as the computation of the prices
of each delivery would allegedly be a long process, Pamintuan
requested that he be paid immediately.
Consequently, Pamintuan and the president of the company, Benito
Y.C. Espiritu, agreed to fix the price of the plastic sheetings at
P0.782 a yard, regardless of the kind, quality or actual invoice value
thereof. The parties arrived at that figure by dividing the total price of
P265,550 by 339,440 yards, the aggregate quantity of the
shipments.
After Pamintuan had delivered 224,150 yards of sheetings of interior
quality valued at P163,.047.87, he refused to deliver the remainder
of the shipments with a total value of P102,502.13 which were
covered by (i) Firm Offer No. 330, containing 26,000 yards valued at
P29,380; (2) Firm Offer No. 343, containing 18,440 yards valued at
P13,023.25; (3) Firm Offer No. 217, containing 30,000 yards valued
at P30,510 and (4) Firm Offer No. 329 containing 40,850 yards
valued at P29,588.88 (See pp. 243-2, Record on Appeal).
As justification for his refusal, Pamintuan said that the company
failed to comply with the conditions of the contract and that it was
novated with respect to the price.
On December 2, 1960, the company filed its amended complaint for
damages against Pamintuan. After trial, the lower court rendered the
judgment mentioned above but including moral damages.
43
The unrealized profits awarded as damages in the trial court's
decision were computed as follows (pp. 248-9, Record on Appeal):
(1) 26,000 yards with a contract price of Pl.13 per
yard and a selling price at the time of delivery of
Pl.75 a yard...........................................................
P16,120.00
(2) 18,000 yards with a contract price of P0.7062 per
yard and selling price of Pl.20 per yard at the time of
delivery......................................... 9,105.67
(3) 30,000 yards with a contract price of Pl.017 per
yard and a selling price of Pl.70 per yard. 20,490.00
(4) 40,850 yards with a contract price of P0.7247 per
yard and a selling price of P1.25 a yard at the time of
delivery.............................................. 21,458.50 Tota
l unrealized profits....................... P67,174.17
The overpayment of P12,282.26 made to Pamintuan by Yu Ping Kun
Co., Inc. for the 224,150 yards, which the trial court regarded as an
item of damages suffered by the company, was computed as follows
(p. 71, Record on Appeal):
Liquidation value of 224,150 yards at P0.7822 a yard
..............................................................................
P175,330.13
Actual peso value of 224,150 yards as per firm offers
or as per
contract............................................163,047.87
Overpayment..............................................................
.. P 12,282.26
To these two items of damages (P67,174.17 as unrealized profits
and P12,282.26 as overpayment), the trial court added (a) P10,000
as stipulated liquidated damages, (b) P10,000 as moral damages, (c)
Pl,102.85 as premium paid by the company on the bond of
P102,502.13 for the issuance of the writ of preliminary attachment
and (d) P10,000 as attorney's fees, or total damages of
P110,559.28) p. 250, Record on Appeal). The Court of Appeals
affirmed that judgment with the modification that the moral damages
were disallowed (Resolution of June 29, 1966).
Pamintuan appealed. The Court of Appeals in its decision of March
18, 1966 found that the contract of sale between Pamintuan and the
company was partly consummated. The company fulfilled its
obligation to obtain the Japanese suppliers' confirmation of their
acceptance of firm offers totalling $47,000. Pamintuan reaped certain
benefits from the contract. Hence, he is estopped to repudiate it;
otherwise, he would unjustly enrich himself at the expense of the
company.
The Court of Appeals found that the writ of attachment was properly
issued. It also found that Pamintuan was guilty of fraud because (1)
he was able to make the company agree to change the manner of
paying the price by falsely alleging that there was a delay in
obtaining confirmation of the suppliers' acceptance of the offer to
buy; (2) he caused the plastic sheetings to be deposited in the
bonded warehouse of his brother and then required his brother to
make him Pamintuan), his attorney-in-fact so that he could control
the disposal of the goods; (3) Pamintuan, as attorney-in-fact of the
warehouseman, endorsed to the customs broker the warehouse
receipts covering the plastic sheetings withheld by him and (4) he
overpriced the plastic sheetings which he delivered to the company.
The Court of Appeals described Pamintuan as a man "who, after
having succeeded in getting another to accommodate him by
agreeing to liquidate his deliveries on the basis of P0.7822 per yard,
irrespective of invoice value, on the pretense that he would deliver
what in the first place he ought to deliver anyway, when he knew all
the while that he had no such intention, and in the process delivered
only the poorer or cheaper kind or those which he had
predetermined to deliver and did not conceal in his brother's name
and thus deceived the unwary party into overpaying him the sum of
P 1 2,282.26 for the said deliveries, and would thereafter refuse to
44
make any further delivery in flagrant violation of his plighted word,
would now ask us to sanction his actuation" (pp. 61-62, Rollo).
The main contention of appellant Pamintuan is that the buyer, Yu
Ping Kun Co., Inc., is entitled to recover only liquidated damages.
That contention is based on the stipulation "that any violation of the
provisions of this contract (of sale) shall entitle the aggrieved party to
collect from the offending party liquidated damages in the sum of
P10,000 ".
Pamintuan relies on the rule that a penalty and liquidated damages
are the same (Lambert vs. Fox 26 Phil. 588); that "in obligations with
a penal clause, the penalty shall substitute the indemnity for
damages and the payment of interests in case of non-compliance, if
there is no stipulation to the contrary " (1st sentence of Art. 1226,
Civil Code) and, it is argued, there is no such stipulation to the
contrary in this case and that "liquidated damages are those agreed
upon by the parties to a contract, to be paid in case of breach
thereof" (Art. 2226, Civil Code).
We hold that appellant's contention cannot be sustained because the
second sentence of article 1226 itself provides that I nevertheless,
damages shall be paid if the obligor ... is guilty of fraud in the
fulfillment of the obligation". "Responsibility arising from fraud is
demandable in all obligations" (Art. 1171, Civil Code). "In case of
fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for an damages which may be reasonably attributed to
the non-performance of the obligation" (Ibid, art. 2201).
The trial court and the Court of Appeals found that Pamintuan was
guilty of fraud because he did not make a complete delivery of the
plastic sheetings and he overpriced the same. That factual finding is
conclusive upon this Court.
There is no justification for the Civil Code to make an apparent
distinction between penalty and liquidated damages because the
settled rule is that there is no difference between penalty and
liquidated damages insofar as legal results are concerned and that
either may be recovered without the necessity of proving actual
damages and both may be reduced when proper (Arts. 1229, 2216
and 2227, Civil Code. See observations of Justice J.B.L. Reyes,
cited in 4 Tolentino's Civil Code, p. 251).
Castan Tobeñas notes that the penal clause in an obligation has
three functions: "1. Una funcion coercitiva o de garantia, consistente
en estimular al deudor al complimiento de la obligacion principal,
ante la amenaza de tener que pagar la pena. 2. Una
funcion liquidadora del daño, o sea la de evaluar por anticipado los
perjuicios que habria de ocasionar al acreedor el incumplimiento o
cumplimiento inadecuado de la obligacion. 3. Una
funcion estrictamente penal, consistente en sancionar o castigar
dicho incumplimiento o cumplimiento inadecuado, atribuyendole
consecuencias mas onerosas para el deudor que las que
normalmente lleva aparejadas la infraccion contractual. " (3 Derecho
Civil Espanol, 9th Ed., p. 128).
The penalty clause is strictly penal or cumulative in character and
does not partake of the nature of liquidated damages (pena
sustitutiva) when the parties agree "que el acreedor podra pedir, en
el supuesto incumplimiento o mero retardo de la obligacion principal,
ademas de la pena, los danos y perjuicios. Se habla en este caso
de pena cumulativa, a differencia de aquellos otros ordinarios, en
que la pena es sustitutiva de la reparacion ordinaria." (Ibid, Castan
Tobenas, p. 130).
After a conscientious consideration of the facts of the case, as found
by Court of Appeals and the trial court, and after reflecting on
the/tenor of the stipulation for liquidated damages herein, the true
nature of which is not easy to categorize, we further hold that justice
would be adequately done in this case by allowing Yu Ping Kun Co.,
Inc. to recover only the actual damages proven and not to award to it
the stipulated liquidated damages of ten thousand pesos for any
breach of the contract. The proven damages supersede the
stipulated liquidated damages.
This view finds support in the opinion of Manresa (whose comments
were the bases of the new matter found in article 1226, not found in
article 1152 of the old Civil Code) that in case of fraud the difference
45
between the proven damages and the stipulated penalty may be
recovered (Vol. 8, part. 1, Codigo Civil, 5th Ed., 1950, p. 483).

Hence, the damages recoverable by the firm would amount to ninety

thousand five hundred fifty-nine pesos and twenty-eight centavos
(P90,559.28), with six percent interest a year from the filing of the
complaint.

With that modification the judgment of the Court of Appeals is

affirmed in all respects. No costs in this instance.

SO ORDERED.

Barredo, Concepcion, Jr., and Santos, JJ., concur.

Abad Santos, J., concur in the result.

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