Makati Stock Exchange v. Campos, G.R. NO. 138814 II.

II. THE GRANT OF THE IPO ALLOCATIONS IN FAVOR OF RESPONDENT WAS A MERE
This is a Petition for Review on Certiorari under Rule 45 seeking the reversal of the ACCOMMODATION GIVEN TO HIM BY THE BOARD OF [DIRECTORS] OF THE
Decision[2] dated 11 February 1997 and Resolution dated 18 May 1999 of the Court of MAKATI STOCK EXCHANGE, INC.
Appeals in CA-G.R. SP No. 38455.
The facts of the case are as follows: III. THE COURT OF APPEALS ERRED IN HOLDING THAT THE SEC EN BANC
SEC Case No. 02-94-4678 was instituted on 10 February 1994 by respondent COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
Miguel V. Campos, who filed with the Securities, Investigation and Clearing Department JURISDICTION WHEN IT MADE AN EXTENDED INQUIRY AND PROCEEDED TO MAKE
(SICD) of the Securities and Exchange Commission (SEC), a Petition against herein A DETERMINATION AS TO THE TRUTH OF RESPONDENTS ALLEGATIONS IN HIS
petitioners Makati Stock Exchange, Inc. (MKSE) and MKSE directors, Ma. Vivian PETITION AND USED AS BASIS THE EVIDENCE ADDUCED DURING THE HEARING ON
Yuchengco, Adolfo M. Duarte, Myron C. Papa, Norberto C. Nazareno, George Uy-Tioco, THE APPLICATION FOR THE WRIT OF PRELIMINARY INJUNCTION TO DETERMINE THE
Antonio A, Lopa, Ramon B. Arnaiz, Luis J.L. Virata, and Antonio Garcia, Jr. Respondent, in EXISTENCE OR VALIDITY OF A STATED CAUSE OF ACTION.
said Petition, sought: (1) the nullification of the Resolution dated 3 June 1993 of the MKSE
Board of Directors, which allegedly deprived him of his right to participate equally in the IV. IPO ALLOCATIONS GRANTED TO BROKERS ARE NOT TO BE BOUGHT BY THE
allocation of Initial Public Offerings (IPO) of corporations registered with MKSE; (2) the BROKERS FOR THEMSELVES BUT ARE TO BE DISTRIBUTED TO THE INVESTING
delivery of the IPO shares he was allegedly deprived of, for which he would pay IPO PUBLIC. HENCE, RESPONDENTS CLAIM FOR DAMAGES IS ILLUSORY AND HIS
prices; and (3) the payment of P2 million as moral damages, P1 million as exemplary PETITION A NUISANCE SUIT.[3]
damages, and P500,000.00 as attorneys fees and litigation expenses.
On 14 February 1994, the SICD issued an Order granting respondents prayer for On 18 September 2001, counsel for respondent manifested to this Court that his
the issuance of a Temporary Restraining Order to enjoin petitioners from implementing or client died on 7 May 2001. In a Resolution dated 24 October 2001, the Court directed the
enforcing the 3 June 1993 Resolution of the MKSE Board of Directors. substitution of respondent by his surviving spouse, Julia Ortigas vda. deCampos.
The SICD subsequently issued another Order on 10 March 1994 granting
respondents application for a Writ of Preliminary Injunction, to continuously enjoin, during Petitioners want this Court to affirm the dismissal by the SEC en banc of
the pendency of SEC Case No. 02-94-4678, the implementation or enforcement of the respondents Petition in SEC Case No. 02-94-4678 for failure to state a cause of action. On
MKSE Board Resolution in question. Petitioners assailed this SICD Order dated 10 March the other hand, respondent insists on the sufficiency of his Petition and seeks the
1994 in a Petition for Certiorari filed with the SEC en banc, docketed as SEC-EB No. 393. continuation of the proceedings before the SICD.
On 11 March 1994, petitioners filed a Motion to Dismiss respondents Petition in
SEC Case No. 02-94-4678, based on the following grounds: (1) the Petition became moot A cause of action is the act or omission by which a party violates a right of
due to the cancellation of the license of MKSE; (2) the SICD had no jurisdiction over the another.[4] A complaint states a cause of action where it contains three essential elements
Petition; and (3) the Petition failed to state a cause of action. of a cause of action, namely: (1) the legal right of the plaintiff, (2) the correlative
The SICD denied petitioners Motion to Dismiss in an Order dated 4 May obligation of the defendant, and (3) the act or omission of the defendant in violation of
1994. Petitioners again challenged the 4 May 1994 Order of SICD before the SEC en said legal right. If these elements are absent, the complaint becomes vulnerable to
banc through another Petition for Certiorari, docketed as SEC-EB No. 403. dismissal on the ground of failure to state a cause of action.
In an Order dated 31 May 1995 in SEC-EB No. 393, the SEC en banc nullified the
10 March 1994 Order of SICD in SEC Case No. 02-94-4678 granting a Writ of Preliminary If a defendant moves to dismiss the complaint on the ground of lack of cause
Injunction in favor of respondent. Likewise, in an Order dated 14 August 1995 in SEC-EB of action, he is regarded as having hypothetically admitted all the averments thereof. The
No. 403, the SEC en banc annulled the 4 May 1994 Order of SICD in SEC Case No. 02-94- test of sufficiency of the facts found in a complaint as constituting a cause of action is
4678 denying petitioners Motion to Dismiss, and accordingly ordered the dismissal of whether or not admitting the facts alleged, the court can render a valid judgment upon
respondents Petition before the SICD. the same in accordance with the prayer thereof. The hypothetical admission extends to
Respondent filed a Petition for Certiorari with the Court of Appeals assailing the the relevant and material facts well pleaded in the complaint and inferences fairly
Orders of the SEC en banc dated 31 May 1995 and 14 August 1995 in SEC-EB No. 393 and deducible therefrom. Hence, if the allegations in the complaint furnish sufficient basis by
SEC-EB No. 403, respectively. Respondents Petition before the appellate court was which the complaint can be maintained, the same should not be dismissed regardless of
docketed as CA-G.R. SP No. 38455. the defense that may be assessed by the defendant.[5]
On 11 February 1997, the Court of Appeals promulgated its Decision in CA-G.R. Given the foregoing, the issue of whether respondents Petition in SEC Case No.
SP No. 38455, granting respondents Petition for Certiorari, thus: 02-94-4678 sufficiently states a cause of action may be alternatively stated as whether,
WHEREFORE, the petition in so far as it prays for annulment of the hypothetically admitting to be true the allegations in respondents Petition in SEC Case No.
Orders dated May 31, 1995 and August 14, 1995 in SEC-EB Case Nos. 393 and 403 02-94-4678, the SICD may render a valid judgment in accordance with the prayer of said
is GRANTED. The said orders are hereby rendered null and void and set aside. Petition.
Petitioners filed a Motion for Reconsideration of the foregoing Decision but it was
denied by the Court of Appeals in a Resolution dated 18 May 1999. A reading of the exact text of respondents Petition in SEC Case No. 02-94-4678
Hence, the present Petition for Review raising the following arguments: is, therefore, unavoidable. Pertinent portions of the said Petition reads:
I. THE SEC EN BANC DID NOT COMMIT GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION WHEN IT DISMISSED THE PETITION FILED BY 7. In recognition of petitioners invaluable services, the general membership of
RESPONDENT BECAUSE ON ITS FACE, IT FAILED TO STATE A CAUSE OF ACTION. respondent corporation [MKSE] passed a resolution sometime in 1989 amending
its Articles of Incorporation, to include the following provision therein:
ELEVENTH WHEREAS, Mr. Miguel Campos is the only surviving 13. The collective act of the individual respondents in
incorporator of the Makati Stock Exchange, Inc. who has maintained depriving petitioner of his right to a share in the IPOs for the
his membership; aforementioned reason, is unjust, dishonest and done in bad faith,
causing petitioner substantial financial damage.[6]
WHEREAS, he has unselfishly served the Exchange in various capacities,
as governor from 1977 to the present and as President from 1972 to There is no question that the Petition in SEC Case No. 02-94-4678 asserts a right in
1976 and again as President from 1988 to the present; favor of respondent, particularly, respondents alleged right to subscribe to the IPOs of
corporations listed in the stock market at their offering prices; and stipulates the
WHEREAS, such dedicated service and leadership which has correlative obligation of petitioners to respect respondents right, specifically, by
contributed to the advancement and well being not only of the continuing to allow respondent to subscribe to the IPOs of corporations listed in the stock
Exchange and its members but also to the Securities industry, needs to market at their offering prices.
be recognized and appreciated;
However, the terms right and obligation in respondents Petition are not magic
WHEREAS, as such, the Board of Governors in its meeting held on words that would automatically lead to the conclusion that such Petition sufficiently states
February 09, 1989 has correspondingly adopted a resolution a cause of action. Right and obligation are legal terms with specific legal
recognizing his valuable service to the Exchange, reward the same, meaning. A right is a claim or title to an interest in anything whatsoever that is enforceable
and preserve for posterity such recognition by proposing a resolution by law.[7] An obligation is defined in the Civil Code as a juridical necessity to give, to do
to the membership body which would make him as Chairman Emeritus or not to do.[8] For every right enjoyed by any person, there is a corresponding obligation
for life and install in the Exchange premises a commemorative bronze on the part of another person to respect such right. Thus, Justice J.B.L. Reyes offers[9] the
plaque in his honor; definition given by Arias Ramos as a more complete definition:

NOW, THEREFORE, for and in consideration of the above premises, the An obligation is a juridical relation whereby a person (called the
position of the Chairman Emeritus to be occupied by Mr. Miguel creditor) may demand from another (called the debtor) the observance of a
Campos during his lifetime and irregardless of his continued determinative conduct (the giving, doing or not doing), and in case of breach,
membership in the Exchange with the Privilege to attend all may demand satisfaction from the assets of the latter.
membership meetings as well as the meetings of the Board of
Governors of the Exchange, is hereby created. The Civil Code enumerates the sources of obligations:

8. Hence, to this day, petitioner is not only an active member of the respondent Art. 1157. Obligations arise from:
corporation, but its Chairman Emeritus as well. (1) Law;
(2) Contracts;
9. Correspondingly, at all times material to this petition, as an active member (3) Quasi-contracts;
and Chairman Emeritus of respondent corporation, petitioner has always (4) Acts or omissions punished by law; and
enjoyed the right given to all the other members to participate equally in the (5) Quasi-delicts.
Initial Public Offerings (IPOs for brevity) of corporations.
Therefore, an obligation imposed on a person, and the corresponding right
10. IPOs are shares of corporations offered for sale to the public, prior to the listing granted to another, must be rooted in at least one of these five sources. The mere
in the trading floor of the countrys two stock exchanges. Normally, Twenty Five assertion of a right and claim of an obligation in an initiatory pleading, whether a
Percent (25%) of these shares are divided equally between the two stock Complaint or Petition, without identifying the basis or source thereof, is merely
exchanges which in turn divide these equally among their members, who pay a conclusion of fact and law. A pleading should state the ultimate facts essential to the
therefor at the offering price. rights of action or defense asserted, as distinguished from mere conclusions of
fact or conclusions of law.[10] Thus, a Complaint or Petition filed by a person claiming a
11. However, on June 3, 1993, during a meeting of the Board of Directors of right to the Office of the President of this Republic, but without stating the source of his
respondent-corporation, individual respondents passed a resolution to stop purported right, cannot be said to have sufficiently stated a cause of action. Also, a
giving petitioner the IPOs he is entitled to, based on the ground that these shares person claiming to be the owner of a parcel of land cannot merely state that he has a
were allegedly benefiting Gerardo O. Lanuza, Jr., who these individual right to the ownership thereof, but must likewise assert in the Complaint either a mode of
respondents wanted to get even with, for having filed cases before the Securities acquisition of ownership or at least a certificate of title in his name.
and Exchange (SEC) for their disqualification as member of the Board of
Directors of respondent corporation. In the case at bar, although the Petition in SEC Case No. 02-94-4678 does allege
respondents right to subscribe to the IPOs of corporations listed in the stock market at their
12. Hence, from June 3, 1993 up to the present time, petitioner has been offering prices, and petitioners obligation to continue respecting and observing
deprived of his right to subscribe to the IPOs of corporations listing in the stock such right, the Petition utterly failed to lay down the source or basis of respondents right
market at their offering prices. and/or petitioners obligation.
 Respondent merely quoted in his Petition the MKSE Board Resolution, passed With the dismissal of respondents Petition in SEC Case No. 02-94-4678, there is no
sometime in 1989, granting him the position of Chairman Emeritus of MKSE for more need for this Court to resolve the propriety of the issuance by SCID of a writ of
life. However, there is nothing in the said Petition from which the Court can deduce that preliminary injunction in said case.
respondent, by virtue of his position as Chairman Emeritus of MKSE, was granted by law,
contract, or any other legal source, the right to subscribe to the IPOs of corporations listed WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated
in the stock market at their offering prices. 11 February 1997 and its Resolution dated 18 May 1999 in CA-G.R. SP No. 38455
are REVERSED and SET ASIDE. The Orders dated 31 May 1995 and 14 August 1995 of the
A meticulous review of the Petition reveals that the allocation of IPO shares was Securities and Exchange Commission en banc in SEC-EB Case No. 393 and No. 403,
merely alleged to have been done in accord with a practice normally observed by the respectively, are hereby reinstated. No pronouncement as to costs.
members of the stock exchange, to wit:
SPOUSES CELEDONIO MANZANILLA and DOLORES FUERTE, and INES
IPOs are shares of corporations offered for sale to the public, prior to CARPIO, petitioners, vs. HON. COURT OF APPEALS and JUSTINA CAMPO, respondents.
their listing in the trading floor of the countrys two stock
exchanges. Normally, Twenty-Five Percent (25%) of these shares are MEDIALDEA, J.:
divided equally between the two stock exchanges which in turn divide This is a petition for review on certiorari of the decision (pp. 111-118, Rollo) of the
these equally among their members, who pay therefor at the offering Intermediate Appellate Court, now Court of Appeals, in AC-G.R. CV No. 00925 entitled
price.[11] (Emphasis supplied) "Justina Campo, Plaintiff-Appellee, versus Sps. Celedonio Manzanilla and Dolores Fuerte,
and Ines Carpio, Defendants-Appellants", which affirmed the decision (pp. 55-56, Rollo)
A practice or custom is, as a general rule, not a source of a legally demandable of the Court of First Instance of Rizal, Branch IX, Quezon City, now Regional Trial Court of
or enforceable right.[12] Indeed, in labor cases, benefits which were voluntarily given by Quezon City, in Civil Case No. Q-28061.
the employer, and which have ripened into company practice, are considered as rights The facts of the case are not disputed.
that cannot be diminished by the employer.[13] Nevertheless, even in such cases, the In 1963, spouses Celedonio and Dolores Manzanilla (spouses Manzanilla) sold on
source of the employees right is not custom, but ultimately, the law, since Article 100 of installment an undivided one-half portion of their residential house and lot covered by
the Labor Code explicitly prohibits elimination or diminution of benefits. TCT No. 59223 and located at No. 12, Casiana St., Santol, Quezon City. At the time of the
sale, the said property was mortgaged to the Government Service Insurance System
There is no such law in this case that converts the practice of allocating IPO (GSIS), which fact was known to the vendees, spouses Magdaleno and Justina Campo.
shares to MKSE members, for subscription at their offering prices, into an enforceable or The Campo spouses took possession of the premises upon payment of the first installment
demandable right. Thus, even if it is hypothetically admitted that normally, twenty five on April 17, 1963 and up to the present. Some payments (Exhibits "A" to "A-1") were made
percent (25%) of the IPOs are divided equally between the two stock exchanges -- which, to petitioners while some were made directly to GSIS (Exhibits "A-10" to "A-29").
in turn, divide their respective allocation equally among their members, including the On May 17, 1965, the GSIS filed its application to foreclose the mortgage on the property
Chairman Emeritus, who pay for IPO shares at the offering price -- the Court cannot grant for failure of the Manzanilla spouses to pay their monthly amortizations.
respondents prayer for damages which allegedly resulted from the MKSE Board Resolution On October 11, 1965, the property was sold at public auction where GSIS was the highest
dated 3 June 1993 deviating from said practice by no longer allocating any shares to bidder.
respondent. Two months before the expiration of the period to redeem or on August 31, 1966, the
Manzanilla spouses executed a Deed of Absolute Sale (Exhibit "D") of the undivided one
Accordingly, the instant Petition should be granted. The Petition in SEC Case No. half portion of their property in favor of the Campo spouses.
02-94-4678 should be dismissed for failure to state a cause of action. It does not matter Upon the expiration of the period to redeem without the Manzanilla spouses exercising
that the SEC en banc, in its Order dated 14 August 1995 in SEC-EB No. 403, overstepped their right of redemption, title to the property was consolidated in favor of the GSIS and a
its bounds by not limiting itself to the issue of whether respondents Petition before the SICD new title (TCT No. 135031) issued in its name.
sufficiently stated a cause of action. The SEC en banc may have been mistaken in In January 1969, the Manzanilla spouses made representations and succeeded in re-
considering extraneous evidence in granting petitioners Motion to Dismiss, but its acquiring the property from the GSIS. Upon full payment of the purchase price, an
discussion thereof are merely superfluous and obiter dictum. In the main, the SEC en Absolute Deed of Sale was executed by GSIS in favor of the Manzanilla spouses. Upon
banc did correctly dismiss the Petition in SEC Case No. 02-94-4678 for its failure to state the registration thereof on March 19, 1973, a new certificate of title (TCT No. 188293) in the
basis for respondents alleged right, to wit: name of the Manzanilla spouses was issued by the Register of Deeds of Quezon City.
On May 14, 1973, the Manzanilla spouses mortgaged the property to the Biñan Rural Bank.
Private respondent Campos has failed to establish the basis or On September 7, 1973, petitioner Ines Carpio purchased the property from the Manzanilla
authority for his alleged right to participate equally in the IPO allocations of the spouses and agreed to assume the mortgage in favor of Biñan Rural Bank.
Exchange. He cited paragraph 11 of the amended articles of incorporation of On November 12, 1973, private respondent Justina Campo registered her adverse claim
the Exchange in support of his position but a careful reading of the said provision over TCT No. 188293 with the Register of Deeds of Quezon City.
shows nothing therein that would bear out his claim. The provision merely On October 3, 1977, petitioner Ines Carpio filed an ejectment case against private
created the position of chairman emeritus of the Exchange but it mentioned respondent Justina Campo in Civil Case No. 31350, with the City Court of Quezon City.
nothing about conferring upon the occupant thereof the right to receive IPO On July 31, 1979, private respondent Justina Campo (already a widow) filed a complaint
allocations.[14] (pp. 26-30, Rollo) for quieting of title against the Manzanilla spouses and Ines Carpio with
the Court of First Instance of Rizal, Branch IX, Quezon City, now the Regional Trial Court of
Quezon City and docketed as Civil Case No. Q-28061, praying among others, for the
issuance to her of a certificate of title over the undivided one-half portion of the property this condition of the property at the time of the sale, private respondents were forewarned
in question. Civil Case No. Q-28061 is the subject of this appeal. of the consequences of their transaction with the petitioners.
After trial, a decision promulgated on September 30, 1982 was rendered in favor of the There is also no basis to conclude that petitioners deliberately allowed the loan to lapse
herein private respondent, Justina Campo. The dispositive portion of the decision reads: and the mortgage to be foreclosed. No specific act or series of acts were presented and
WHEREFORE, premises considered, judgment is rendered in favor of the plaintiff Justina C. proven from which it could be safely concluded that the failure of petitioners to pay off
Campo and the defendants and/or all persons claiming rights under them are ordered their loan was deliberate. They explained that their financial condition prevented them
to desist from exercising rights or ownerships over the half-portion of the plaintiff. The from dutifully complying with their obligations to the GSIS. In a display of their good faith
mortgage of the property to the Biñan Rural Bank is hereby cancelled in so far as the half- and fair dealing after the property was foreclosed, the petitioners, realizing the imminent
portion is concerned and accordingly, the sale of defendant Ines Carpio regarding the loss of the said property, even granted the private respondent the right to redeem it from
half portion of the plaintiff is hereby considered null and void. The defendants, spouses the GSIS. This right was granted in the Deed of Absolute Sale executed by petitioners in
Celedonio and Dolores Manzanilla are ordered to surrender their owner's duplicate copy favor of the Campo spouses. Moreover, it was also stipulated that private respondent
of TCT No. 188293 to the Register of Deeds of Quezon City for its cancellation in order that recognized the superior lien of GSIS on the property and agreed to be bound by the terms
a new certificate of title could be issued in favor of the plaintiff Justina C. Campo with and conditions of the mortgage. These stipulations were all contained in the Deed, as
regards to her half-portion and to execute such document as is necessary to effect said follows:
transfer. . . . the VENDORS do hereby covenant and agree with the VENDEES that they are lawfully
SO ORDERED. (p. 56, Rollo) seized in fee of said premises and that they have a perfect right to convey the same and
The decision was appealed by petitioners, spouses Manzanilla and Ines Carpio, to the that they will warrant and forever defend the same unto the said vendees, their heirs and
Intermediate Appellate Court, now Court of Appeals, which affirmed the said decision of assigns against the lawful claim of all persons whomsoever, subject to the mortgage lien
the trial court. Petitioners' Motion For Reconsideration filed with the Court of Appeals was in favor of the Government Service Insurance System aforementioned.
denied on July 16, 1986. Hence, this petition for review under Rule 45 of the Rules of Court That the VENDEES recognize the superior lien of the Government Service Insurance System
on the following issues: (GSIS) and agree to be bound by the terms and conditions thereof, . . .
1. WHETHER OR NOT A BUYER OF ONE-HALF PORTION OF A MORTGAGED PROPERTY WITH That the VENDORS likewise agree that in the event the mortgagee, Government Service
FULL KNOWLEDGE OF SAID MORTGAGE, MAY DEMAND RECONVEYANCE FROM THE Insurance System should foreclose the mortgage on the said property, the herein
SELLER/MORTGAGOR WHO WAS ABLE TO BUY SAID PROPERTY FROM THE MORTGAGEE VENDEES, Spouses Magdaleno Campo and Justina Cabuag, their heirs or assigns, shall
AFTER IT WAS LEGALLY FORECLOSED AND OWNERSHIP DULY CONSOLIDATED IN THE NAME have the right to redeem or otherwise deal with the Government Service Insurance
OF THE MORTGAGEE, UNDER THE DOCTRINE OF IMPLIED TRUST. System (GSIS) in connection with this property. Vendees agree that vendors may
2. WHETHER OR NOT A PURCHASER OF REAL PROPERTY IS BOUND TO GO BEYOND THE TITLE repurchase the property within the time provided by law. (pp. 74-75, Rollo)
THEREOF IN DETERMINING THE REAL STATUS OF SAID PROPERTY TO BE CONSIDERED A BUYER In view of the failure of either the Manzanilla spouses or the Campo spouses to redeem
IN GOOD FAITH. the property from GSIS, title to the property was consolidated in the name of GSIS. The
3. WHETHER OR NOT PRIVATE RESPONDENT IS GUILTY OF LACHES (p. 12, Rollo). new title cancelled the old title in the name of the Manzanilla spouses. GSIS at this point
The main issue to be resolved in this case is whether, under the facts stated, petitioners had a clean title free from any lien in favor of any person including that of the Campo
Manzanillas are under any legal duty to reconvey the undivided one-half portion of the spouses.
property to private respondent Justina Campo. If it were true that petitioners deliberately allowed the loan to lapse and the mortgage to
It is petitioners' contention that a buyer of one-half portion of a mortgaged property who, be foreclosed, We do not see how these circumstances can be utilized by them to their
at the time of the sale had full knowledge of the existence of the mortgage, has no legal advantage. There was no guarantee that petitioners would be able to redeem the
right to demand reconveyance from the seller/mortgagor who was able to buy said property in the event the mortgage thereon was foreclosed as in fact they failed to
property from the mortgagee after it was legally foreclosed and ownership duly redeem because they had no money. On the other hand, had they opted to eventually
consolidated in the name of the latter. exercise their right of redemption after foreclosure, they would be under a legal duty to
Private respondent, on the other hand contends that petitioners committed fraud upon convey one-half portion thereof sold to the Campo spouses because by then, title to the
them (Campo spouses) by deliberately allowing the loan to lapse, the mortgage to be property would still be in their name. Either way, petitioners were bound to lose either the
foreclosed and the subsequent reacquisition of the same after the expiration of the entire property in case of failure to redeem or the one-half portion thereof sold to private
period of redemption without exercising their right of redemption. Upon the re-acquisition respondent in the case of redemption. Further, should petitioners let the period of
by the Manzanillas of the whole property from GSIS, they are considered trustees of an redemption lapse without exercising the right of redemption, as what happened in this
implied trust in favor of private respondent Campo. case, there was no guarantee that the same could be re-acquired by them from GSIS nor
Both the court a quo and respondent appellate court share the view of private would GSIS be under any legal duty to resell the property to them.
respondent. Both courts believe that petitioners exercised fraud upon the Campo spouses There may be a moral duty on the part of petitioners to convey the one-half portion of
when they bought back the whole property believing that as the GSIS acquired absolute the property previously sold to private respondents. However, they are under no legal
ownership and title to the property private respondent can no longer be entitled to the obligation to do so. Hence, the action to quiet title filed by private respondent must fail.
same. Justice is done according to law. As a rule, equity follows the law. There may be a moral
The petition is impressed with merit. obligation, often regarded as an equitable consideration (meaning compassion), but if
There is no sufficient basis for the trial court to conclude that herein petitioners acted in there is no enforceable legal duty, the action must fail although the disadvantaged party
bad faith in their dealings with the Campo spouses. The latter had full knowledge of the deserves commiseration or sympathy.
existing mortgage of the whole property in favor of GSIS prior to the sale of the one-half The choice between what is legally just and what is morally just, when these two options
portion to them. There is also no showing that as one of the considerations of the sale, do not coincide, is explained by Justice Moreland in Vales vs. Villa, 35 Phil. 769, 788 where
herein petitioners undertook to release the property from the mortgage at all costs. With he said:
Courts operate not because one person has been defeated or overcome by another, On September 24, 1973, the bank gave Remolado up to ten o'clock in the morning
but because he has been defeated or overcome illegally. Men may do foolish things, of October 31, 1973, or 37 days, within which to repurchase (not redeem since the period
make ridiculous contracts, use miserable judgment, and lose money by them — indeed, of redemption had expired) the property (Exh. I-1; 32, Record on Appeal). The bank did
all they have in the world; but not for that alone can the law intervene and restore. There not specify the price.
must be in addition, a violation of law, the commission of what the law knows as an On October 26, 1973 Remolado and her daughter, Patrocinio Gomez, promised to pay
actionable wrong before the courts are authorized to lay hold of the situation and the bank P33,000 on October 31 for the repurchase of the property (Exh. X or 9; 64, Record
remedy it. (Rural Bank of Paranaque, Inc. vs. Remolado, 62051, March 18, 1985) (135 SCRA on Appeal).
409, 412) Exhibits 1-1 and X do not evidence any perfected repurchase agreemi6nt. Even if it is
In the questioned decision, respondent appellate court ruled that an implied trust exists assumed that the bank's commitment to resell the property was accepted by Remolado,
in favor of private respondents. We do not agree. Article 1456 of the New Civil Code on that option was not supported by a consideration distinct from the price (Art. 1479, Civil
implied trust has no application in the case at bar. Article 1456 provides: Code). Lacking such consideration, the option is void (Southwestern Sugar & Molasses
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by Co. vs. Atlantic Gulf & Pacific Company, 97 Phil. 249).
force of law, considered a trustee of an implied trust for the benefit of the person from Contrary to her promise, Remolado did not repurchase the property on October 31, Five
whom the property comes. days later, or on November 5, Remolado and her daughter delivered P33,000 rash to the
There was no mistake nor fraud on the part of petitioners when the subject property was bank's assistant manager as repurchase price. The amount was returned to them the next
re-acquired from the GSIS. The fact that they previously sold one-half portion thereof has day, November 6, 1973 (Exh. V, W and 11). The assistant manager had no intention of
no more significance in this re-acquisition. Private respondent's right over the one-half receiving the money. It was just left with her by Remolado (Exh. 10; 42, Record on Appeal).
portion was obliterated when absolute ownership and title passed on to the GSIS after At that time, the bank was no longer willing to allow the repurchase.
the foreclosure sale. The property as held by GSIS had a clean title. The property that was On that day, November 6, Remolado filed an action to compel the bank to reconvey the
passed on to petitioners retained that quality of title. property to her for P25,491.96 plus interest and other charges and to pay P35,000 as
As regards the rights of private respondent Ines Carpio, she is a buyer in good faith and damages. The repurchase price was not consigned. A notice of lis pendens was
for value. There was no showing that at the time of the sale to her of the subject property, registered.
she knew of any lien on the property except the mortgage in favor of the Biñan Rural On November 15, the bank sold the property to Pilar Aysip for P50,000. A new title was
Bank. No other lien was annotated on the certificate of title. She is also not required by issued to Aysip with an annotation of lis pendens (Exh. P and 12; 649, Record on Appeal).
law to go beyond what appears on the face of the title. When there is nothing on the The trial court ordered the bank to return the property to Remolado upon payment of the
certificate of title to indicate any cloud or vice in the ownership of the property or any redemption price of P25,491.96 plus interest and other bank charges and to pay her
encumbrances thereon, the purchaser is not to explore further than what the Torrens Title P15,000 as damages. The Appellate Court affirmed the judgment. The bank appealed to
upon its face indicates in quest for any hidden defect or inchoate right thereof (NGA v. this Court. It contends that Remolado had no more right of redemption and, therefore,
IAC, G.R. No. 68741, January 28, 1988). no cause of action against the bank.
ACCORDINGLY, the petition is GRANTED. The appealed decision of the Court of Appeals We hold that the trial court and the Appellate Court erred in ordering the reconveyance
is hereby REVERSED. Civil Case No. Q-28061 for quieting of title is hereby DISMISSED. of the property, There was no binding agreement for its repurchase. Even on the
SO ORDERED. assumption that the bank should be bound by its commitment to allow repurchase on or
before October 31, 1973, still Remolado had no cause of action because she did not
RURAL BANK OF PARARAQUE, INC., petitioner, vs. ISIDRA REMOLADO and COURT OF repurchase the property on that date.
APPEALS, respondents. Justice is done according to law. As a rule, equity follows the law. There may be a moral
obligation, often regarded as an equitable consideration (meaning compassion), but if
AQUINO, J.: there is no enforceable legal duty, the action must fail although the disadvantaged party
This case is about the repurchase of mortgage property after the period of redemption deserves commiseration or sympathy.
and had expired. Isidra Remolado, 64, a widow, and resident of Makati, Rizal, owned a The choice between what is legally just and what is morally just, when these two options
lot with an area of 308 square meters, with a bungalow thereon, which was leased to do not coincide, is explained by Justice Moreland in Vales vs. Villa, 35 Phfl. 769, 788 where
Beatriz Cabagnot (86-7, record on Appeal). he said:
The lot is located at 41 Molave Street, United Parañaque, Rizal. In 1966 she mortgaged it Courts operate not because one person has been defeated or overcome by another,
to the Rural Bank of Parañaque, Inc. as security for a loan of P15,000. She paid the loan. but because he has been defeated or overcome illegally. Men may do foolish things,
On April 17, 1971 she mortgaged it again to the bank. She eventually secured loans make ridiculous contracts, use miserable judgment, and lose money by them-indeed, all
totalling P18,000 (Exh. At D). the loans become overdue. The bank foreclosed the they have in the world; but not for that alone can the law intervene and restore. There
mortagage on July 21, 1972 and bought the property at the foreclosure sale for must be, in addition, a violation of law, the commission of what the law knows as
P22,192.70. The one-year period of redemption was to expire on August 21, 1973. an actionable wrong before the courts are authorized to lay hold of the situation and
On August 8, 1973 the bank advised Remolado that she had until August 23 to redeem remedy it.
the property (Exh. U or 6; 53, Record on Appeal). On August 9, 1973 or 14 days before the In the instant case, the bank acted within its legal rights when it refused to give Remolado
expiration of the one-year redemption period, the bank gave her a statement showing any extension to repurchase after October 31, 1973. It had given her about two years to
that she should pay P25,491.96 for the redemption of the property on August 23 (Exh. liquidate her obligation. She failed to do so.
F). No redemption was made on that date. WHEREFORE, the Appellate Court's judgment is reversed and set aside. The complaint and
On September 3, 1973 the bank consolidated its ownership over the property (Exh. H). counterclaim are dismissed. The notice of lis pendens is cancelled. No costs.
Remolado's title was cancelled. A new title, TCT No. 418737, was issued to the bank on SO ORDERED.
September 5 (Exh. 0).
G.R. No. L-48889 May 11, 1989 This Court had ruled in a similar case that –
DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner, vs. ... when a debt is already barred by prescription, it cannot be enforced by the creditor.
THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch of the Court of First But a new contract recognizing and assuming the prescribed debt would be valid and
Instance of Iloilo and SPOUSES PATRICIO CONFESOR and JOVITA enforceable ... . 1
VILLAFUERTE, respondents. Thus, it has been held —
Where, therefore, a party acknowledges the correctness of a debt and promises to pay
The issue posed in this petition for review on certiorari is the validity of a promissory note it after the same has prescribed and with full knowledge of the prescription he thereby
which was executed in consideration of a previous promissory note the enforcement of waives the benefit of prescription. 2
which had been barred by prescription. This is not a mere case of acknowledgment of a debt that has prescribed but a new
On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an promise to pay the debt. The consideration of the new promissory note is the pre-existing
agricultural loan from the Agricultural and Industrial Bank (AIB), now the Development of obligation under the first promissory note. The statutory limitation bars the remedy but
the Philippines (DBP), in the sum of P2,000.00, Philippine Currency, as evidenced by a does not discharge the debt.
promissory note of said date whereby they bound themselves jointly and severally to pay A new express promise to pay a debt barred ... will take the case from the operation of
the account in ten (10) equal yearly amortizations. As the obligation remained the statute of limitations as this proceeds upon the ground that as a statutory limitation
outstanding and unpaid even after the lapse of the aforesaid ten-year period, Confesor, merely bars the remedy and does not discharge the debt, there is something more than
who was by then a member of the Congress of the Philippines, executed a second a mere moral obligation to support a promise, to wit a – pre-existing debt which is a
promissory note on April 11, 1961 expressly acknowledging said loan and promising to pay sufficient consideration for the new the new promise; upon this sufficient consideration
the same on or before June 15, 1961. The new promissory note reads as follows — constitutes, in fact, a new cause of action. 3
I hereby promise to pay the amount covered by my promissory note on or before June ... It is this new promise, either made in express terms or deduced from an
15, 1961. Upon my failure to do so, I hereby agree to the foreclosure of my mortgage. It is acknowledgement as a legal implication, which is to be regarded as reanimating the old
understood that if I can secure a certificate of indebtedness from the government of my promise, or as imparting vitality to the remedy (which by lapse of time had become
back pay I will be allowed to pay the amount out of it. extinct) and thus enabling the creditor to recover upon his original contract. 4
Said spouses not having paid the obligation on the specified date, the DBP filed a However, the court a quo held that in signing the promissory note alone, respondent
complaint dated September 11, 1970 in the City Court of Iloilo City against the spouses Confesor cannot thereby bind his wife, respondent Jovita Villafuerte, citing Article 166 of
for the payment of the loan. the New Civil Code which provides:
After trial on the merits a decision was rendered by the inferior court on December 27, Art. 166. Unless the wife has been declared a non compos mentis or a spend thrift, or is
1976, the dispositive part of which reads as follows: under civil interdiction or is confined in a leprosarium, the husband cannot alienate or
WHEREFORE, premises considered, this Court renders judgment, ordering the defendants encumber any real property of the conjugal partnership without, the wife's consent. If she
Patricio Confesor and Jovita Villafuerte Confesor to pay the plaintiff Development Bank ay compel her to refuses unreasonably to give her consent, the court m grant the same.
of the Philippines, jointly and severally, (a) the sum of P5,760.96 plus additional daily We disagree. Under Article 165 of the Civil Code, the husband is the administrator of the
interest of P l.04 from September 17, 1970, the date Complaint was filed, until said amount conjugal partnership. As such administrator, all debts and obligations contracted by the
is paid; (b) the sum of P576.00 equivalent to ten (10%) of the total claim by way of husband for the benefit of the conjugal partnership, are chargeable to the conjugal
attorney's fees and incidental expenses plus interest at the legal rate as of September partnership. 5 No doubt, in this case, respondent Confesor signed the second promissory
17,1970, until fully paid; and (c) the costs of the suit. note for the benefit of the conjugal partnership. Hence the conjugal partnership is liable
Defendants-spouses appealed therefrom to the Court of First Instance of Iloilo wherein in for this obligation.
due course a decision was rendered on April 28, 1978 reversing the appealed decision WHEREFORE, the decision subject of the petition is reversed and set aside and another
and dismissing the complaint and counter-claim with costs against the plaintiff. decision is hereby rendered reinstating the decision of the City Court of Iloilo City of
A motion for reconsideration of said decision filed by plaintiff was denied in an order of December 27, 1976, without pronouncement as to costs in this instance. This decision is
August 10, 1978. Hence this petition wherein petitioner alleges that the decision of immediately executory and no motion for extension of time to file motion for
respondent judge is contrary to law and runs counter to decisions of this Court when reconsideration shall be granted.
respondent judge (a) refused to recognize the law that the right to prescription may be
renounced or waived; and (b) that in signing the second promissory note respondent G.R. No. 109125 December 2, 1994
Patricio Confesor can bind the conjugal partnership; or otherwise said respondent ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners, vs.
became liable in his personal capacity. The petition is impressed with merit. The right to THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT
prescription may be waived or renounced. Article 1112 of Civil Code provides: CORPORATION, respondents..
Art. 1112. Persons with capacity to alienate property may renounce prescription already Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04
obtained, but not the right to prescribe in the future. December 1991, in CA-G.R. SP No. 26345 setting aside and declaring without force and
Prescription is deemed to have been tacitly renounced when the renunciation results effect the orders of execution of the trial court, dated 30 August 1991 and 27 September
from acts which imply the abandonment of the right acquired. 1991, in Civil Case No. 87-41058.
There is no doubt that prescription has set in as to the first promissory note of February 10, The antecedents are recited in good detail by the appellate court thusly:
1940. However, when respondent Confesor executed the second promissory note on April On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by
11, 1961 whereby he promised to pay the amount covered by the previous promissory Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and
note on or before June 15, 1961, and upon failure to do so, agreed to the foreclosure of Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil Case No. 87-41058,
the mortgage, said respondent thereby effectively and expressly renounced and waived alleging, among others, that plaintiffs are tenants or lessees of residential and commercial
his right to the prescription of the action covering the first promissory note. spaces owned by defendants described as Nos. 630-638 Ongpin Street, Binondo, Manila;
that they have occupied said spaces since 1935 and have been religiously paying the the property in question to herein petitioner Buen Realty and Development Corporation,
rental and complying with all the conditions of the lease contract; that on several subject to the following terms and conditions:
occasions before October 9, 1986, defendants informed plaintiffs that they are offering 1. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15,000,000.00),
to sell the premises and are giving them priority to acquire the same; that during the receipt of which in full is hereby acknowledged, the VENDORS hereby sells, transfers and
negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a conveys for and in favor of the VENDEE, his heirs, executors, administrators or assigns, the
counter offer of P5-million; that plaintiffs thereafter asked the defendants to put their offer above-described property with all the improvements found therein including all the rights
in writing to which request defendants acceded; that in reply to defendant's letter, and interest in the said property free from all liens and encumbrances of whatever nature,
plaintiffs wrote them on October 24, 1986 asking that they specify the terms and except the pending ejectment proceeding;
conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent 2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the transfer
another letter dated January 28, 1987 with the same request; that since defendants failed of title in his favor and other expenses incidental to the sale of above-described property
to specify the terms and conditions of the offer to sell and because of information including capital gains tax and accrued real estate taxes.
received that defendants were about to sell the property, plaintiffs were compelled to As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng
file the complaint to compel defendants to sell the property to them. spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name of
Defendants filed their answer denying the material allegations of the complaint and petitioner on December 3, 1990.
interposing a special defense of lack of cause of action. On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the
After the issues were joined, defendants filed a motion for summary judgment which was lessees demanding that the latter vacate the premises.
granted by the lower court. The trial court found that defendants' offer to sell was never On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought the
accepted by the plaintiffs for the reason that the parties did not agree upon the terms property subject to the notice of lis pendens regarding Civil Case No. 87-41058 annotated
and conditions of the proposed sale, hence, there was no contract of sale at all. on TCT No. 105254/T-881 in the name of the Cu Unjiengs.
Nonetheless, the lower court ruled that should the defendants subsequently offer their The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case
property for sale at a price of P11-million or below, plaintiffs will have the right of first No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No. 21123.
refusal. Thus the dispositive portion of the decision states: On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as
WHEREFORE, judgment is hereby rendered in favor of the defendants and against the follows:
plaintiffs summarily dismissing the complaint subject to the aforementioned condition that Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty.
if the defendants subsequently decide to offer their property for sale for a purchase price Antonio Albano. Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented
of Eleven Million Pesos or lower, then the plaintiffs has the option to purchase the property by Atty. Vicente Sison and Atty. Anacleto Magno respectively were duly notified in today's
or of first refusal, otherwise, defendants need not offer the property to the plaintiffs if the consideration of the motion as evidenced by the rubber stamp and signatures upon the
purchase price is higher than Eleven Million Pesos. copy of the Motion for Execution.
SO ORDERED. The gist of the motion is that the Decision of the Court dated September 21, 1990 as
Aggrieved by the decision, plaintiffs appealed to this Court in modified by the Court of Appeals in its decision in CA G.R. CV-21123, and elevated to the
CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned by Supreme Court upon the petition for review and that the same was denied by the highest
Justice Segundino G. Chua and concurred in by Justices Vicente V. Mendoza and tribunal in its resolution dated May 6, 1991 in G.R. No.
Fernando A. Santiago), this Court affirmed with modification the lower court's judgment, L-97276, had now become final and executory. As a consequence, there was an Entry of
holding: Judgment by the Supreme Court as of June 6, 1991, stating that the aforesaid modified
In resume, there was no meeting of the minds between the parties concerning the sale decision had already become final and executory.
of the property. Absent such requirement, the claim for specific performance will not lie. It is the observation of the Court that this property in dispute was the subject of the Notice
Appellants' demand for actual, moral and exemplary damages will likewise fail as there of Lis Pendens and that the modified decision of this Court promulgated by the Court of
exists no justifiable ground for its award. Summary judgment for defendants was properly Appeals which had become final to the effect that should the defendants decide to offer
granted. Courts may render summary judgment when there is no genuine issue as to any the property for sale for a price of P11 Million or lower, and considering the mercurial and
material fact and the moving party is entitled to a judgment as a matter of law (Garcia uncertain forces in our market economy today, the same right of first refusal to herein
vs. Court of Appeals, 176 SCRA 815). All requisites obtaining, the decision of the court a plaintiffs/appellants in the event that the subject property is sold for a price in excess of
quo is legally justifiable. Eleven Million pesos or more.
WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby WHEREFORE, defendants are hereby ordered to execute the necessary Deed of Sale of
AFFIRMED, but subject to the following modification: The court a quo in the aforestated the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go
decision gave the plaintiffs-appellants the right of first refusal only if the property is sold for for the consideration of P15 Million pesos in recognition of plaintiffs' right of first refusal and
a purchase price of Eleven Million pesos or lower; however, considering the mercurial and that a new Transfer Certificate of Title be issued in favor of the buyer.
uncertain forces in our market economy today. We find no reason not to grant the same All previous transactions involving the same property notwithstanding the issuance of
right of first refusal to herein appellants in the event that the subject property is sold for a another title to Buen Realty Corporation, is hereby set aside as having been executed in
price in excess of Eleven Million pesos. No pronouncement as to costs. bad faith.
SO ORDERED. SO ORDERED.
The decision of this Court was brought to the Supreme Court by petition for review On September 22, 1991 respondent Judge issued another order, the dispositive portion of
on certiorari. The Supreme Court denied the appeal on May 6, 1991 "for insufficiency in which reads:
form and substances" (Annex H, Petition). WHEREFORE, let there be Writ of Execution issue in the above-entitled case directing the
On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Deputy Sheriff Ramon Enriquez of this Court to implement said Writ of Execution ordering
Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D, Petition) transferring the defendants among others to comply with the aforesaid Order of this Court within a
period of one (1) week from receipt of this Order and for defendants to execute the A contract of sale may be absolute or conditional.
necessary Deed of Sale of the property in litigation in favor of the plaintiffs Ang Yu When the sale is not absolute but conditional, such as in a "Contract to Sell" where
Asuncion, Keh Tiong and Arthur Go for the consideration of P15,000,000.00 and ordering invariably the ownership of the thing sold is retained until the fulfillment of a positive
the Register of Deeds of the City of Manila, to cancel and set aside the title already issued suspensive condition (normally, the full payment of the purchase price), the breach of
in favor of Buen Realty Corporation which was previously executed between the latter the condition will prevent the obligation to convey title from acquiring an obligatory
and defendants and to register the new title in favor of the aforesaid plaintiffs Ang Yu force.2 In Dignos vs. Court of Appeals (158 SCRA 375), we have said that, although
Asuncion, Keh Tiong and Arthur Go. denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is
SO ORDERED. devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated,
On the same day, September 27, 1991 the corresponding writ of execution (Annex C, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon
Petition) was issued.1 actual or constructive delivery (e.g., by the execution of a public document) of the
On 04 December 1991, the appellate court, on appeal to it by private respondent, set property sold. Where the condition is imposed upon the perfection of the contract itself,
aside and declared without force and effect the above questioned orders of the court a the failure of the condition would prevent such perfection.3 If the condition is imposed on
quo. the obligation of a party which is not fulfilled, the other party may either waive the
In this petition for review on certiorari, petitioners contend that Buen Realty can be held condition or refuse to proceed with the sale (Art. 1545, Civil Code).4
bound by the writ of execution by virtue of the notice of lis pendens, carried over on TCT An unconditional mutual promise to buy and sell, as long as the object is made
No. 195816 issued in the name of Buen Realty, at the time of the latter's purchase of the determinate and the price is fixed, can be obligatory on the parties, and compliance
property on 15 November 1991 from the Cu Unjiengs. therewith may accordingly be exacted.5
We affirm the decision of the appellate court. An accepted unilateral promise which specifies the thing to be sold and the price to
A not too recent development in real estate transactions is the adoption of such be paid, when coupled with a valuable consideration distinct and separate from the
arrangements as the right of first refusal, a purchase option and a contract to sell. For price, is what may properly be termed a perfected contract of option. This contract is
ready reference, we might point out some fundamental precepts that may find some legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the
relevance to this discussion. Civil Code, viz:
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The Art. 1479. . . .
obligation is constituted upon the concurrence of the essential elements thereof, viz: (a) An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
The vinculum juris or juridical tie which is the efficient cause established by the various binding upon the promissor if the promise is supported by a consideration distinct from the
sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) price. (1451a)6
the object which is the prestation or conduct; required to be observed (to give, to do or Observe, however, that the option is not the contract of sale itself.7 The optionee has the
not to do); and (c) the subject-persons who, viewed from the demandability of the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is
obligation, are the active (obligee) and the passive (obligor) subjects. accepted before a breach of the option, a bilateral promise to sell and to buy ensues
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a and both parties are then reciprocally bound to comply with their respective
meeting of minds between two persons whereby one binds himself, with respect to the undertakings.8
other, to give something or to render some service (Art. 1305, Civil Code). A contract Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect
undergoes various stages that include its negotiation or preparation, its perfection and, promise (policitacion) is merely an offer. Public advertisements or solicitations and the like
finally, its consummation. Negotiation covers the period from the time the prospective are ordinarily construed as mere invitations to make offers or only as proposals. These
contracting parties indicate interest in the contract to the time the contract is concluded relations, until a contract is perfected, are not considered binding commitments. Thus, at
(perfected). The perfection of the contract takes place upon the concurrence of the any time prior to the perfection of the contract, either negotiating party may stop the
essential elements thereof. A contract which is consensual as to perfection is so negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective
established upon a mere meeting of minds, i.e., the concurrence of offer and immediately after its manifestation, such as by its mailing and not necessarily when the
acceptance, on the object and on the cause thereof. A contract which requires, in offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is given
addition to the above, the delivery of the object of the agreement, as in a pledge to the offeree within which to accept the offer, the following rules generally govern:
or commodatum, is commonly referred to as a real contract. In a solemn contract, (1) If the period is not itself founded upon or supported by a consideration, the offeror is
compliance with certain formalities prescribed by law, such as in a donation of real still free and has the right to withdraw the offer before its acceptance, or, if an
property, is essential in order to make the act valid, the prescribed form being thereby an acceptance has been made, before the offeror's coming to know of such fact, by
essential element thereof. The stage of consummation begins when the parties perform communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins,
their respective undertakings under the contract culminating in the extinguishment Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a unilateral promise
thereof. to sell under Art. 1479, modifying the previous decision in South Western Sugar vs. Atlantic
Until the contract is perfected, it cannot, as an independent source of obligation, serve Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Parañaque, Inc., vs.
as a binding juridical relation. In sales, particularly, to which the topic for discussion about Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw,
the case at bench belongs, the contract is perfected when a person, called the seller, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a
obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right damage claim under Article 19 of the Civil Code which ordains that "every person must,
to another, called the buyer, over which the latter agrees. Article 1458 of the Civil Code in the exercise of his rights and in the performance of his duties, act with justice, give
provides: everyone his due, and observe honesty and good faith."
Art. 1458. By the contract of sale one of the contracting parties obligates himself to (2) If the period has a separate consideration, a contract of "option" is
transfer the ownership of and to deliver a determinate thing, and the other to pay therefor deemed perfected, and it would be a breach of that contract to withdraw the offer
a price certain in money or its equivalent. during the agreed period. The option, however, is an independent contract by itself, and
it is to be distinguished from the projected main agreement (subject matter of the option) lessees, or the fixing of the price of the sale, or the cancellation of title in the name of
which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs. IAC, 143
before its acceptance (exercise of the option) by the optionee-offeree, the latter may SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).
not sue for specific performance on the proposed contract ("object" of the option) since It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have
it has failed to reach its own stage of perfection. The optioner-offeror, however, renders decreed at the time the execution of any deed of sale between the Cu Unjiengs and
himself liable for damages for breach of the option. In these cases, care should be taken petitioners.
of the real nature of the consideration given, for if, in fact, it has been intended to be part WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned
of the consideration for the main contract with a right of withdrawal on the part of the Orders, dated 30 August 1991 and 27 September 1991, of the court a quo. Costs against
optionee, the main contract could be deemed perfected; a similar instance would be petitioners.
an "earnest money" in a contract of sale that can evidence its perfection (Art. 1482, Civil
Code). G.R. Nos. 156547-51 February 4, 2008
In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. MARIANO UN OCAMPO III, petitioner,
Needless to point out, it cannot be deemed a perfected contract of sale under Article vs.
1458 of the Civil Code. Neither can the right of first refusal, understood in its normal PEOPLE OF THE PHILIPPINES, respondent.
concept, per se be brought within the purview of an option under the second paragraph X -------------------------------------------------------------------------------------- X
of Article 1479, aforequoted, or possibly of an offer under Article 13199 of the same Code. G.R. Nos. 156384-85 February 4, 2008
An option or an offer would require, among other things,10 a clear certainty on both the ANDRES S. FLORES, petitioner,
object and the cause or consideration of the envisioned contract. In a right of first refusal, vs.
while the object might be made determinate, the exercise of the right, however, would PEOPLE OF THE PHILIPPINES, respondent.
be dependent not only on the grantor's eventual intention to enter into a binding juridical These are consolidated petitions for review on certiorari1 of the Sandiganbayan’s
relation with another but also on terms, including the price, that obviously are yet to be Decision promulgated on March 8, 2002 and its Resolution promulgated on January 6,
later firmed up. Prior thereto, it can at best be so described as merely belonging to a class 2003.
of preparatory juridical relations governed not by contracts (since the essential elements The Decision and Resolution of the Sandiganbayan held petitioners Mariano Un Ocampo
to establish the vinculum juris would still be indefinite and inconclusive) but by, among III and Andres S. Flores guilty of malversation of public funds in Crim. Case Nos. 16794 and
other laws of general application, the pertinent scattered provisions of the Civil Code on 16795.
human conduct. The facts are as follows:
Even on the premise that such right of first refusal has been decreed under a final During the incumbency of President Corazon C. Aquino, Tarlac Province was chosen as
judgment, like here, its breach cannot justify correspondingly an issuance of a writ of one of the four provinces that would serve as a test case on decentralization of local
execution under a judgment that merely recognizes its existence, nor would it sanction government administration.
an action for specific performance without thereby negating the indispensable element For this purpose, the Department of Budget and Management (DBM) released National
of consensuality in the perfection of contracts.11 It is not to say, however, that the right of Aid for Local Government Units (NALGU) funds in the total amount of P100 million to the
first refusal would be inconsequential for, such as already intimated above, an unjustified Province of Tarlac. The NALGU is a fund set aside in the General Appropriations Act to
disregard thereof, given, for instance, the circumstances expressed in Article 1912 of the assist local governments in their various projects and services. The distribution of this fund
Civil Code, can warrant a recovery for damages. is entirely vested with the Secretary of the DBM.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a Petitioner Ocampo, provincial governor of Tarlac from February 22, 1988 up to June 30,
"right of first refusal" in favor of petitioners. The consequence of such a declaration entails 1992, loaned out P56.6 million of the P100 million to the Lingkod Tarlac Foundation, Inc.
no more than what has heretofore been said. In fine, if, as it is here so conveyed to us, (LTFI) for the implementation of various livelihood projects. The loan was made pursuant
petitioners are aggrieved by the failure of private respondents to honor the right of first to a Memorandum of Agreement (MOA) entered into by the Province of Tarlac,
refusal, the remedy is not a writ of execution on the judgment, since there is none to represented by petitioner Ocampo, and LTFI, represented by petitioner Flores, on August
execute, but an action for damages in a proper forum for the purpose. 8, 1988.
Furthermore, whether private respondent Buen Realty Development Corporation, the LTFI is a private non-stock corporation with petitioner Ocampo as its first chairperson and
alleged purchaser of the property, has acted in good faith or bad faith and whether or petitioner Andres S. Flores as its executive director. The Sandiganbayan, in its Resolution
not it should, in any case, be considered bound to respect the registration of the lis dated January 6, 2000, admitted the annexes2submitted by petitioner Ocampo, which
pendens in Civil Case No. 87-41058 are matters that must be independently addressed in annexes proved that petitioner Ocampo resigned as chairperson and trustee of the LTFI
appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87- prior to August 8, 1988, the date when petitioner Ocampo and LTFI entered into the MOA.
41058, cannot be held subject to the writ of execution issued by respondent Judge, let How the P56.6 million released to LTFI was utilized became the subject matter of 25
alone ousted from the ownership and possession of the property, without first being duly criminal cases. In a Resolution in G.R. Nos. 103754-78 dated October 22, 1992,3 this Court
afforded its day in court. quashed 19 of the 25 Informations filed against petitioner Ocampo. The Fifth Division of
We are also unable to agree with petitioners that the Court of Appeals has erred in the Sandiganbayan dismissed one case4 on demurrer to evidence. In its Decision
holding that the writ of execution varies the terms of the judgment in Civil Case No. 87- promulgated on March 8, 2002, the Fifth Division of the Sandiganbayan dismissed two5 of
41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has five criminal cases for malversation of public funds against petitioners. On motion for
observed: reconsideration, the Sandiganbayan dismissed one6 more case in a Resolution
Finally, the questioned writ of execution is in variance with the decision of the trial court promulgated on January 6, 2003. The two remaining cases are the subject matters in the
as modified by this Court. As already stated, there was nothing in said decision 13 that instant consolidated petitions.
decreed the execution of a deed of sale between the Cu Unjiengs and respondent The Informations of the remaining two cases filed on May 28, 1991 state:
Crim. Case No. 16794 (5) Another account (PNB S/A No. 490-555744-6) was opened by "LTFI by Andres Flores,"
That on or about the periods between November 2, 1988 to February 27, 1989, or this time with PNB, intended solely for the purchase of the machines;
sometime subsequent thereto, in the Province of Tarlac, Philippines and within the (6) A check in the amount of P3,395,000.00 dated February 27, 1989, was remitted for the
jurisdiction of this Honorable Court, accused Mariano Un Ocampo III, then the Governor payment of the machines;
of the province of Tarlac and at the same time President-Chairman of the Board of (7) This amount, together with the P5,465,000.00 placed on the personal account of
Trustees of the Lingkod Tarlac Foundation, Inc. (LTFI), a private entity, having received by William Uy and/or Andres Flores, made up the cost of he machines or a total
reason of his position, public funds amounting to more than Fifty Two Million Pesos of P8,860,000.00 as recorded in the books of LTFI;
(P52,000,000) x x x from the National Aid for Local Government Unit (NALGU) funds, which (8) To the PNB account was added a total of P4,332,261.00 deposited on different dates
he is accountable by reason of his official duties, did then and there with intent to defraud from March 6 to April 17, 1989 which funds came from S/A No. 26127;
the government aforethought release out of the aforesaid funds thru the said LTFI, the (9) Thus, the total amount on deposit with PNB was P7,727,261.00 plus interest;
amount of EIGHT MILLION EIGHT HUNDRED SIXTY THOUSAND PESOS (P8,860,000) x x x for (10) Of this amount, P7,679,530.52 was used for the opening of the LC (for the payment of
the payment of the importation of Juki Embroidery Machines which actually cost SEVEN the machines) leaving a balance of P47,730,48.00 plus interest;
MILLION SIX HUNDRED SEVENTY NINE THOUSAND FIVE HUNDRED THIRTY PESOS AND FIFTY (11) Between the amount listed in the books of the corporation (P8,860,000) and the
TWO CENTAVOS (P7,679,530.52) x x x thereby leaving a balance of P1,180,463.48 which amount of the LC (P7,679,530), a discrepancy of P1,180,496.48 existed.
ought to have been returned, but far from returning the said amount, accused Mariano (12) Between the total amount deposited in PNB S/A No. 490-555744-6 (P7,727,261.00) and
Un Ocampo III, in connivance with his co-accused, Andres S. Flores and William Uy wilfully, the total amount withdrawn from the account for the payment of the machines
unlawfully and feloniously misapply, misappropriate and convert for their own personal (P7,679,530.52), a balance of P47,730.48 remained. This balance (plus interest), in the
use and benefit the said amount resulting to the damage and prejudice of the amount of P58,000.00, was later withdrawn upon authorization of accused Flores.8
government in the aforesaid sum of One Million One Hundred Eighty Thousand Four Petitioner Ocampo did not testify regarding the subject cases on the ground that he was
Hundred Sixty Three Pesos and Forty Eight Centavos (P1,180,463.48). not competent to testify on the disbursements made by LTFI but only as to the receipt of
CONTRARY TO LAW. the NALGU funds from the government.
Crim. Case No. 16795 The Sandiganbayan declared that petitioner Ocampo as governor of Tarlac, who
That on or about the periods between November 2, 1988 to February 27, 1989, or personally received the NALGU funds from the DBM and thereafter released some of
sometime subsequent thereto, in the Province of Tarlac, Philippines and within the them to the LTFI, was duty bound to put up regular and effective measures for the
jurisdiction of this Honorable Court, accused Mariano Un Ocampo III, then the Governor monitoring of the projects approved by him.
of the province of Tarlac, and at the same time President-Chairman of the Board of According to the Sandiganbayan, Sec. 203(t) of the Local Government Code obligated
Trustees of the Lingkod Tarlac Foundation, Inc. (LTFI), a private entity, having received by provincial governors to "adopt measures to safeguard all the lands, buildings, records,
reason of his position, public funds amounting to more than Fifty Two Million Pesos monies, credits and other property rights of the province." However, petitioner Ocampo,
(P52,000,000.00) x x x from the National Aid for Local Government Unit (NALGU) Funds, as governor of Tarlac, neglected to set up safeguards for the proper handling of the
which he is accountable by reason of his official duties, caused the withdrawal by co- NALGU funds in the hands of LTFI which resulted in the disappearance of P1,132,739
accused Andres S. Flores on April 28, 1989, then Executive Officer, LTFI, from the PHILIPPINE and P58,000 of the said funds. The Sandiganbayan held:
NATIONAL BANK LTFI account the sum of FIFTY EIGHT THOUSAND PESOS (P58,000.00), For such gross and inexcusable negligence, accused is liable for malversation. In so ruling,
portion of the said NALGU funds deposited by LTFI under Account No. 490-555744, both we are guided by the oft-repeated principle that malversation may be committed
accused conniving and confederating with one another, with intent to gain and to through a positive act of misappropriation of public funds or passively though negligence
defraud the government, did then and there, wilfully, unlawfully and feloniously by allowing another to commit such misappropriation (Cabello vs. Sandiganbayan, 197
misappropriate, misapply and convert the same to their own personal use and benefit to SCRA 94 [1991]). Although accused was charged with willful malversation, he can validly
the damage and prejudice of the government in the aforesaid amount of P58,000.00, be convicted of malversation through negligence where the evidence sustains the latter
Philippine Currency. mode of committing the offense (Cabello, supra).9
CONTRARY TO LAW.7 Further, the Sandiganbayan stated that under Sec. 203(f) of the Local Government Code
The Prosecution relied mainly on an audit conducted by the Commission on Audit on LTFI of 1983,10 the provincial governor, as chief executive of the provincial government, has
from February 12, 1990 up to April 2, 1990. The audit covered the period from July 1, 1988 the power to "represent the province in all its business transactions and sign on its behalf
to December 31, 1989 and was confined to the examination of the loans granted by the all bonds, contracts and obligations and other official documents made in accordance
Provincial Government of Tarlac for the implementation of its Rural Industrialization Can with law or ordinance."
Happen Program. The result of the audit was embodied in Special Audit Report No. 90- Sec. 2 (c) of Rule XI11 of the Rules and Regulations Implementing the Local Government
91, offered as Exhibit "B" by the prosecution. Code of 1983 provides that the local chief executive of a local government unit shall
According to the Sandiganbayan, the money trail with respect to the two cases, as "[r]epresent the respective local units in all their business transactions and sign on its behalf
proven by the prosecution, is as follows: all bonds, contracts and obligations and other official documents made in accordance
(1) Accused Ocampo released P11.5 Million to LTFI, P7,023,836.00 of which was intended with law or ordinance." Sec. 2 of Rule VI12 states that "[t]he power to sue, to acquire and
for the purchase of 400 embroidery machines; convey real or personal property, and to enter into contracts shall be exercised by the
(2) The total amount released was deposited by LTFI to the Rural Bank of Tarlac, Inc.; local chief executive upon authority of the Sanggunian concerned." Thus, the
(3) Within two (2) months from the deposit, a total of P5,465,000.00 was withdrawn and Sandiganbayan declared that since the required authority from the Sangguniang
given to William Uy (LTFI’s broker for the importation of the machines); Panlalawigan was not shown to have been obtained by petitioner Ocampo, the MOA is
(4) This amount (P5,465,000) was thereafter deposited to the personal account of "Willam ineffective as far as the Province of Tarlac is concerned.
Uy and/or Andres Flores" under S/A No. 26127; Petitioner Flores, as executive director of LTFI, was charged with malversation of public
funds in connivance with a public officer. However, the Sandiganbayan found that there
was no conspiracy between the petitioners, and held petitioner Flores guilty of For Crim. Case No. 16794, accused Mariano Un Ocampo III and Andres S. Flores are
malversation through his independent acts under Art. 222 of the Revised Penal hereby found GUILTY beyond reasonable doubt of the crime of Malversation of Public
Code,13since the purpose of Art. 222 is to extend the provisions of the Penal Code on Funds and are sentenced to suffer the indeterminate penalty of (10) years, and one (1)
malversation to private individuals. According to the Sandiganbayan, petitioner Flores day of prision mayor, as minimum, to eighteen (18) years, eight (8) months and one (1)
bound himself, as a signatory of the MOA representing LTFI, to receive NALGU funds from day of reclusion temporal as maximum and to pay a fine of one million one hundred
the province of Tarlac. In such capacity, he had charge of these funds. thirty-two thousand seven hundred thirty-nine pesos (P1,132,739.00). They shall also suffer
In Crim. Case No. 16794, petitioner Flores was found to have charge of missing NALGU the penalty of perpetual special disqualification. Costs against the accused.
funds deposited in his personal account in the amount of P1,132,739, which formed part For Crim. Case No. 16795, accused Mariano Un Ocampo III and Andres S. Flores are
of the discrepancy of the actual cost of the embroidery machines and the NALGU funds hereby found GUILTY beyond reasonable doubt of the crime of Malversation of Public
released for payment of the said machines. Funds and are sentenced to suffer the indeterminate penalty of (10) years, and one (1)
In defense, petitioner Flores claimed that the broker for the importation of the machines day of prision mayor, as minimum, to eighteen (18) years, eight (8) months and one (1)
made an initial payment to the supplier of the machines, which initial payment would day of reclusion temporal as maximum and to pay a fine of fifty-eight thousand pesos
explain the discrepancy between the reported cost as stated in the books of the (P58,000.00). They shall also suffer the penalty of perpetual special disqualification. Costs
corporation and the letter of credit. However, the Sandiganbayan stated that the against the accused.
explanation was hearsay as the broker was not presented in court, and there was no For Crim. Case No. 16796, on ground that the crime was not committed by the accused,
proof of the initial payment. accused Mariano Un Ocampo III and Andres S. Flores are hereby ACQUITTED of the crime
In Crim. Case No. 16795, the Sandiganbayan held that petitioner Flores’ failure to explain charged. The surety bonds posted by them for their provisional liberty are cancelled.
the purpose of the withdrawal on April 28, 1989 of P58,000 upon his authorization, For Crim. Case No. 16802, on ground of reasonable doubt, accused Mariano Un Ocampo
considering that he was in charge of the PNB savings account, made him liable for III and Andres S. Flores are hereby ACQUITTED of the crime charged. The surety bonds
malversation of public funds. posted by them for their provisional liberty are cancelled.
Petitioners presented five documents to show that LTFI’s obligations to the Province of SO ORDERED.14
Tarlac, in the amount of P56.6 million, have been extinguished. The documents are as Petitioners separately filed a motion for reconsideration of the Decision.
follows: In a Resolution promulgated on January 6, 2003, the Sandiganbayan reconsidered its
1) The Tripartite Memorandum of Agreement (TMOA) dated May 23, 1990 executed by Decision in Crim. Case No. 16787, and acquitted petitioners of the crime charged. In that
the Province of Tarlac, LTFI and the Barangay Unity for Industrial and Leadership case, the prosecution alleged that P5 million of the NALGU funds loaned to LTFI were
Development (BUILD) Foundation whereby the liability of LTFI in favor of the Province of placed in time deposits with the Rural Bank of Tarlac and earned a total interest
Tarlac was transferred and assumed by BUILD in the total amount of P40 million. of P116,932.77, of which amount only P50,000.00 was recorded in the books of LTFI. The
2) Resolution No. 76 of the Sangguniang Panlalawigan of Tarlac dated April 5, 1990 unrecorded interest of P66,932.77 was said to have been withdrawn from December 27,
showing that the authority of petitioner Ocampo in entering into the TMOA was with prior 1988 to February 2, 1989 and allegedly malversed by petitioners. The Sandiganbayan held
approval of the Sangguniang Panlalawigan. that as this Court has already labeled the subject agreement as one of loan, the said
3) A Deed of Assignment between Tarlac and LTFI whereby the latter assigned its loan "interest are private funds, hence, not the proper subject for malversation of public funds."
portfolios (including interests and certificates of time deposit), the Juki embroidery Thus, petitioners were acquitted in Crim. Case No. 16787.
machines and other assignable documents to the Province of Tarlac in the total amount Petitioners thereafter filed their respective petitions, which were consolidated by the
of P16,618,403. Court in a Resolution dated February 20, 2006.
4) Resolution No. 199 of the Sangguniang Panlalawigan of Tarlac dated October 18, 1990 The pertinent issues raised by petitioners may be summarized as follows:
authorizing petitioner Ocampo to enter into the Deed of Assignment with LTFI. 1) Whether or not petitioners Ocampo and Flores are guilty of the crime of malversation
5) A certified photocopy of a document dated June 16, 1992 issued by the OIC provincial of public funds under Art. 217 and Art. 220 respectively of the Revised Penal Code;
treasurer of Tarlac whereby the treasurer affirmed the existence of the above documents. 2) Whether or not the Sandiganbayan erred in holding that the MOA is void and did not
The Sandiganbayan declared that the documents showing the extinguishment of LTFI’s bind the Province of Tarlac on the ground that the MOA was entered into by petitioner
obligations to the Province of Tarlace do not mitigate the liability of petitioners since the Ocampo without authority from the Sangguniang Panlalawigan in violation of the Local
crime is consummated as of asportation, akin to the taking of another’s property in theft. Government Code of 1983.
It held that the return of the amount malversed is neither an exempting circumstance nor First Issue: Whether or not petitioners Ocampo and Flores are guilty of the crime of
a ground for extinguishing the criminal liability of petitioners. malversation of public funds under Art. 217 and Art. 220 respectively of the Revised Penal
On March 8, 2002, the Fifth Division of the Sandiganbayan rendered a Decision acquitting Code?
petitioners of the crime of malversation of public funds in Crim. Case Nos. 16796 and Crucial to the resolution of the first issue is the nature of the transaction entered into by
16802, but finding them guilty of the crime in Crim. Case Nos. 16787, 16794 and 16795. The the Province of Tarlac and LTFI.
dispositive portion of the Decision reads: Petitioners claim that in the instant cases, the public funds alleged to have been
WHEREFORE, premises considered, accused Mariano Un Ocampo III and Andres S. Flores malversed were loaned by the Province of Tarlac to LTFI per the MOA; hence, LTFI
are hereby found GUILTY beyond reasonable doubt of the crime of malversation of Public acquired ownership of the funds which thus shed their public character and became
Funds under Crim. Case No. 16787 and are sentenced to suffer the indeterminate penalty private funds.
of (10) years, and one (1) day of prision mayor, as minimum, to eighteen (18) years, eight Petitioner Ocampo also asserts that the Sandiganbayan impliedly ruled that the funds
(8) months and one (1) day of reclusion temporal as maximum and to pay a fine of sixty- were private in character and owned by LTFI when it ruled in Crim. Case No. 16787 that
six thousand nine hundred thirty-two pesos and seventy centavos (P66,932.70). They shall since this Court has already labeled the subject agreement as one of loan, the interests
also suffer the penalty of perpetual special disqualification. Costs against the accused. from the loan are private funds; hence, not the proper subject for malversation of public
funds. Having declared the interests earned by the funds loaned to LTFI as private funds, SUCCESSORS AND ASSIGNEES
the Sandiganbayan should have also declared the funds loaned as private. Except as may be mutually agreed in writing, neither party can assign, sublet, or
Petitioners’ arguments are meritorious. transfer its interest or duties under this Agreement.
The MOA states: ARTICLE VII
WHEREAS, the First Party [the Provincial Government of Tarlac], in order to vigorously TERMS OF THE AGREEMENT
pursue its livelihood program for rural development, has identified the need to establish a This Agreement shall exist for as long as the Program exists or any extension
RICH (Rural Industrialization Can Happen) Program; thereof.
WHEREAS, the First Party now realizes the effectivity and efficiency of designating a IN WITNESS WHEREOF, the Parties have hereunto set their hands on this 8th day of
professional private non-profit organization to implement the various livelihood projects August, 1988 in Tarlac, Tarlac.
under the RICH Program;
LINGKOD TARLAC FOUNDATION PROVINCE OF TARLAC
WHEREAS, the Second Party [Lingkod Tarlac Foundation], has represented that it has the Second Party First Party
technical expertise required by the First Party in the implementation of the various (Signed) (Signed)
livelihood projects under the RICH Program; ANDRES S, FLORES MARIANO UN OCAMPO III
WHEREAS, the First Party desires to engage the Second Party and the latter agrees as the Executive Director Governor
implementing arm of the Provincial Government for its livelihood projects;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Parties CONCURRED IN BY:
hereby agree as follows: (Signed)
GUILLERMO N. CARAGUE
ARTICLE I
Secretary of Budget & Management
UNDERTAKINGS OF THE FIRST PARTY
1. The First Party shall provide all the data and information as may be required by [the] The MOA shows that LTFI is "allowed to borrow funds directly from the Provincial
Second Party in the implementation of the RICH Program; Government to fund Lingkod Tarlac Foundation projects provided the projects are
ARTICLE III livelihood projects under the Rural Industrialization Can Happen Program." Moreover, the
DESCRIPTION OF THE PRIORITY PROJECTS agreement stipulates under the "Conditions for Release of Funds" that the Province of
A. Program For Lease Purchase Agreements on equipment, machineries, buildings and Tarlac "shall release in lump sum the appropriate funds for the approved projects covered
structures: by individual loan documents upon signing of the respective loan agreement...."15
B. Direct Lending Pogram: In Crim. Case No. 16794, the fund alleged to have been malversed in the amount
Under this scheme, the Lingkod Tarlac Foundation shall engage in direct lending of P1,180,496.48 represents the discrepancy of the cost of the Juki embroidery machines
operations to proponents of livelihood activities under the Rural Industrialization as listed in the books of LTFI and the amount actually paid to open the letter of credit for
Can Happen (RICH PROGRAM) at variable interest rates and loan conditions the payment of the machines. In the books of LTFI, the cost of the Juki embroidery
depending on the viability and nature of the livelihood projects availing of the machines was listed as P8,860,000, while the amount paid to open the letter of credit for
loan. the payment of the machines was P7,679,530.52. Petitioner Flores was held liable only up
C. Direct Borrowing by Lingkod Tarlac Foundation: to the amount of P1,132,739.
The Lingkod Tarlac Foundation shall be allowed to borrow funds directly from the In Crim. Case No. 16795, the fund alleged to have been malversed in the amount
Provincial government to fund Lingkod Tarlac Foundation projects provided the of P58,000 is the money left (P47,730) in PNB S/A No. 490-555744-6 after the withdrawal of
projects are livelihood projects under the Rural Industrialization Can Happen the purchase price of the Juki embroidery machines, plus interest. The amount of P58,000
(RICH Program). was withdrawn upon the authorization of petitioner Flores. The withdrawal was neither
D. Other project financing schemes that may be developed for the RICH Program. reflected as deposit in the bank accounts of LTFI nor spent by it.
ARTICLE IV In both cases, the money trail proven by the prosecution shows that the subject funds or
CONDITIONS FOR RELEASE OF FUNDS the money used for the purchase of the Juki embroidery machines came from the release
The First Party shall release in lump sum the appropriate funds for the approved of the Province of Tarlac through petitioner Ocampo of NALGU funds in the amount
projects covered by individual loan documents upon signing of [the] respective loan of P11.5 million to LTFI on October 24, 1988. The release of the funds was covered by a
agreement and approval of the Commission on Audit. loan document in accordance with the MOA which states that the Province of Tarlac
ARTICLE V "shall release in lump sum the appropriate funds for the approved projects covered
TERMS OF REPAYMENT by individual loan documents upon signing of the respective loan agreement...."
1. The Second Party shall repay the First Party only the total amount of capital without The Report on the Special Audit of LTFI16 stated:
interest in consideration of the following: . . . For the period July 1988 to December 1989, LTFI received a total of P56.6
a) The Second Party shall shoulder all its operating expenses. million which consisted of six releases and covered by individual loan
b) The Second Party shall not charge the Province any management fees or agreements, as follows:
whatever fees. Date Amount
c) The Second Party shall, whenever necessary, assure the
beneficiaries of the project interests and management fees at rates 08 30 88 P7, 000, 000
lower than the commercial financial rates. 10 24 88 11,500, 000
2. The terms of repayment shall be based on the projects’ ability to pay without
sacrificing on the projects viability. 12 08 88 1,500, 000
ARTICLE VI
 02 22 89 4,000, 000 There can be no malversation of public funds by petitioner Ocampo in the instant cases
since the loan of P11.5 million transferred ownership and custody of the funds, which
04 12 89 18,000, 000 included the sum of money allegedly malversed, to LTFI for which Ocampo could no
06 14 89 12,718, 403 longer be held accountable. Thus, contrary to the allegation of the Office of the Special
Prosecutor, petitioner Ocampo cannot be held culpable for malversation committed
Total P56,618, 403 through negligence in adopting measures to safeguard the money of the Province of
xxx Tarlac, since the same were neither in his custody nor was he accountable therefor after
On October 24, 1988, the Provincial Government of Tarlac approved and released an the loan to LTFI.
amount of P11,500,000 to Lingkod Tarlac Foundation, Inc. (LTFI) for the Rural Thus, petitioner Flores, as the executive director of LTFI, cannot also be held liable for
Industrialization Can Happen (RICH) Program. Of the amount released, P7,023,836 was malversation of public funds in a contract of loan which transferred ownership of the funds
intended for the purchase of 400 sets embroidery machines for the Embroidery Skills to LTFI making them private in character. Liwanag v. Court of Appeals22 held:
Training Project.17 . . . in a contract of loan once the money is received by the debtor, ownership over the
Based on the foregoing, it is clear that the funds released by the Province of Tarlac, same is transferred. Being the owner, the borrower can dispose of it for whatever purpose
including the money allegedly malversed by petitioners in Crim. Case Nos. 16794 and he may deem proper.
16795, were in the nature of a loan to LTFI. The Sandiganbayan erred when it stated that the intention of the parties was for the funds
Art. 1953 of the Civil Code provides that "[a] person who receives a loan of money or any to remain public, citing the MOA which allegedly provided, thus:
other fungible thing acquires the ownership thereof, and is bound to pay to the creditor The Province shall have the right to have access to all resources and records of either
an equal amount of the same kind and quality." LTF[I] or BUILD and may conduct COA examination or audit on any or all matter affecting
Hence, petitioner Ocampo correctly argued that the NALGU funds shed their public the loans or assets covered by this agreement and funds from the Province of Tarlac.
character when they were lent to LTFI as it acquired ownership of the funds with an A review of the MOA did not show the presence of such provision. But the cited provision
obligation to repay the Province of Tarlac the amount borrowed. The relationship is contained in the TMOA, which was later entered into by the Province of Tarlac, LTFI and
between the Province of Tarlac and the LTFI is that of a creditor and debtor. Failure to BUILD, whereby LTFI transferred part of its obligation to BUILD.
pay the indebtedness would give rise to a collection suit. What is controlling in the instant cases is that the parties entered into a contract of loan
The Sandiganbayan convicted petitioner Ocampo of malversation of public funds under for each release of NALGU funds. The second release on October 24, 1988 included the
Art. 217 of the Revised Penal Code for his "gross and inexcusable negligence" in not setting subject funds in controversy. By virtue of the contract of loan, ownership of the subject
up safeguards in accordance with Sec. 203(t) of the Local Government Code 18 for the funds was transferred to LTFI making them private in character, and therefore not subject
proper handling of the NALGU funds in the hands of LTFI which resulted in the of the instant cases of malversation of public funds.
disappearance of P1,132,739 allegedly malversed in Crim. Case No. 16794 and the The Court notes that the obligation of LTFI to repay the NALGU Funds of P56,618,403
disappearance of P58,000 in Crim. Case No. 16795. obtained by it from the Province of Tarlac pursuant to the MOA was extinguished as
In his petition, petitioner Ocampo states that he made sure that proper safeguards were follows:
in place within LTFI to ensure the proper handling of NALGU funds by LTFI. On August 5, (1) BUILD assumed LTFI’s principal loan of P40 million;
1988, before the Province of Tarlac and LTFI entered into the MOA, LTFI’s Articles of (2) LTFI ceded, transferred and assigned to the Province of Tarlac all the rights and
Incorporation were amended to add the following: interests of LTFI in certain loans including interests, certificate of time deposit and certain
TENTH: That no part of the net income of the Foundation shall inure to the benefit of any Juki embroidery machines in the total amount of P16,618,403.
member of the Foundation and that at least seventy percent (70%) of the funds shall be Second Issue: Whether or not the Sandiganbayan erred in holding that the MOA is void
used for the projects and not more than thirty percent (30%) of said funds shall be used and did not bind the Province of Tarlac on the ground that the MOA was entered into by
for administrative purposes. petitioner Ocampo without authority from the Sangguniang Panlalawigan in violation of
Petitioner Ocampo argues that since he had resigned from LTFI both as chairperson and the Local Government Code of 1983?
as trustee on June 22, 1988, he ceased to become accountable for the handling of the In its Resolution dated January 6, 2003, the Sandiganbayan concedes that the
NALGU funds after the same were loaned to LTFI pursuant to the MOA dated August 8, transaction between the Province of Tarlac through petitioner Ocampo and the LTFI was
1988. Consequently, he may not be held criminally liable for disbursements made by LTFI one of loan. However, it stated that since Ocampo was not authorized by
since he had nothing to do with its operations after his resignation. the Sangguniang Panlalawigan to enter into the MOA as required by the Local
Malversation may be committed by appropriating public funds or property; by taking or Government Code of 1983, the MOA did not bind the province nor did it give any benefits
misappropriating the same; by consenting, or through abandonment or negligence, by to the LTFI because a void contract has no effect whatsoever.
permitting any other person to take such public funds or property; or by being otherwise Petitioner Ocampo alleges that he had ample authority to enter into the MOA for the
guilty of the misappropriation or malversation of such funds or property.19 following reasons:
The essential elements common to all acts of malversation under Art. 217 of the Revised 1) NALGU funds received by the Province of Tarlac came straight from the national
Penal Code20 are: government and were intended for a specific purpose, that is, the implementation of
(a) That the offender be a public officer; various livelihood projects in the Province of Tarlac, as evidenced by the exchange of
(b) That he had the custody or control of funds or property by reason of the duties of his correspondence between him (petitioner Ocampo) and DBM Secretary Guillermo N.
office; Carague.23
(c) That those funds or property were public funds or property for which he was 2) On July 15, 1988, the DBM released a revolving fund for the implementation of various
accountable; livelihood projects in the Province of Tarlac under Advice Allotment No. BCS-0183-88-
(d) That he appropriated, took, misappropriated or consented or, through abandonment 301.24 In August 1988, he (petitioner Ocampo) informed the DBM that the Province of
or negligence, permitted another person to take them.21 Tarlac had designated LTFI as the implementing arm for its livelihood projects, and
requested authority to extend loans to LTFI, which request was approved by the DBM G.R. No. 183204 January 13, 2014
Secretary.25 THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner, vs.
3) The DBM’s approval of petitioner Ocampo’s request constituted the authority of ANA GRACE ROSALES AND YO YUK TO, Respondents.
petitioner Ocampo to enter into the MOA with LTFI. Bank deposits, which are in the nature of a simple loan or mutuum,1 must be paid upon
4) DBM also approved and concurred with the terms of the MOA as evidenced by the demand by the depositor.2
DBM Secretary’s signature on the MOA. This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the April 2,
Petitioner Ocampo also asserts that Sec. 203(f) of the Local Government Code of 2008 Decision4 and the May 30, 2008 Resolution5 of he Court of Appeals CA) in CA-G.R.
1983,26 which authorized the provincial governor to enter into business transactions on CV No. 89086.
behalf of the province, did not expressly require the concurrence of the provincial board Factual Antecedents
unlike its counterpart provision in the Local Government Code of 1991.27 Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation duly
Further, petitioner Ocampo states that in any case, the lack of authority of one who enters organized and existing under the laws of the Philippines.6 Respondent Ana Grace Rosales
into a contract in the name of another does not render the contract void under Art. 1409 (Rosales) is the owner of China Golden Bridge Travel Services,7 a travel
of the Civil Code,28 as ruled by the Sandiganbayan, but only unenforceable under Art. agency.8 Respondent Yo Yuk To is the mother of respondent Rosales.9
1403(1) of the Civil Code. He points out that unenforceable contracts are susceptible of In 2000, respondents opened a Joint Peso Account10 with petitioner’s Pritil-Tondo
ratification, and in this case, the Provincial Board of Tarlac can be deemed to have Branch.11 As of August 4, 2004, respondents’ Joint Peso Account showed a balance of
ratified the MOA when it passed the following resolutions: ₱2,515,693.52.12
(1) Resolution No. 76, which confirmed and ratified the TMOA among the Province of In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese
Tarlac, LTFI and the BUILD, whereby the liability of LTFI in favor of the Province of Tarlac in National applying for a retiree’s visa from the Philippine Leisure and Retirement Authority
the total amount of P40 million was transferred to and assumed by BUILD;29 and (PLRA), to petitioner’s branch in Escolta to open a savings account, as required by the
(2) Resolution No. 199, which authorized petitioner Ocampo to sign the Deed of PLRA.13 Since Liu Chiu Fang could speak only in Mandarin, respondent Rosales acted as
Assignment between the Province of Tarlac and LTFI, whereby LTFI assigned loans, sewing an interpreter for her.14
machines and other assignable documents in favor of the Province of Tarlac to settle the On March 3, 2003, respondents opened with petitioner’s Pritil-Tondo Branch a Joint Dollar
balance of its obligation in the amount of P16,618,403.00. 30 Account15 with an initial deposit of US$14,000.00.16
The Court holds that since petitioner Ocampo was not duly authorized by On July 31, 2003, petitioner issued a "Hold Out" order against respondents’ accounts.17
the Sangguniang Panlalawigan to enter into the MOA, the agreement is an On September 3, 2003, petitioner, through its Special Audit Department Head Antonio
unenforceable contract under Sec. 1403 of the Civil Code: Ivan Aguirre, filed before the Office of the Prosecutor of Manila a criminal case for Estafa
Art. 403. The following contracts are unenforceable, unless they are ratified: through False Pretences, Misrepresentation, Deceit, and Use of Falsified Documents,
(1) Those entered into in the name of another person by one who has been given no docketed as I.S. No. 03I-25014,18 against respondent Rosales.19 Petitioner accused
authority or legal representation, or who has acted beyond his powers; x x x. respondent Rosales and an unidentified woman as the ones responsible for the
Unenforceable contracts are governed by the following provisions of the Civil Code: unauthorized and fraudulent withdrawal of US$75,000.00 from Liu Chiu Fang’s dollar
Art. 1404. Unauthorized contracts are governed by article 1317 and the principles of account with petitioner’s Escolta Branch.20Petitioner alleged that on February 5, 2003, its
agency in Title X of this Book. branch in Escolta received from the PLRA a Withdrawal Clearance for the dollar account
Art. 1317. No one may contract in the name of another without being authorized by the of Liu Chiu Fang;21 that in the afternoon of the same day, respondent Rosales went to
latter, or unless he has by law or right to represent him. petitioner’s Escolta Branch to inform its Branch Head, Celia A. Gutierrez (Gutierrez), that
A contract entered into in the name of another by one who has no authority or legal Liu Chiu Fang was going to withdraw her dollar deposits in cash;22 that Gutierrez told
representation, or who has acted beyond his powers, shall be unenforceable, unless it is respondent Rosales to come back the following day because the bank did not have
ratified, expressly or impliedly, by the person on whose behalf it has been executed, enough dollars;23 that on February 6, 2003, respondent Rosales accompanied an
before it is revoked by the other contracting party.31 unidentified impostor of Liu Chiu Fang to the bank;24 that the impostor was able to
The Court finds that the MOA has been impliedly ratified by the Sangguniang withdraw Liu Chiu Fang’s dollar deposit in the amount of US$75,000.00;25 that on March 3,
Panlalawigan as it has not directly impugned the validity of the MOA despite knowledge 2003, respondents opened a dollar account with petitioner; and that the bank later
of this controversy. Implied ratification is also shown by the following acts: discovered that the serial numbers of the dollar notes deposited by respondents in the
1) The Sangguniang Panlalawigan subsequently recognized the transfer of liabilities of LTFI amount of US$11,800.00 were the same as those withdrawn by the impostor.26
in favor of the Province of Tarlac to BUILD in the amount of P40 million contained in a Respondent Rosales, however, denied taking part in the fraudulent and unauthorized
TMOA.32 withdrawal from the dollar account of Liu Chiu Fang.27 Respondent Rosales claimed that
2) It authorized petitioner Ocampo to sign in behalf of the Province of Tarlac the Deed of she did not go to the bank on February 5, 2003.28Neither did she inform Gutierrez that Liu
Assignment entered into by the Province of Tarlac and LTFI33 which extinguished the Chiu Fang was going to close her account.29 Respondent Rosales further claimed that
remaining loan obligations of LTFI obtained under the MOA. after Liu Chiu Fang opened an account with petitioner, she lost track of her.30 Respondent
WHEREFORE, the consolidated petitions are GRANTED. The Decision of the Sandiganbayan Rosales’ version of the events that transpired thereafter is as follows:
promulgated on March 8, 2002 and its Resolution promulgated on January 6, 2003 are SET On February 6, 2003, she received a call from Gutierrez informing her that Liu Chiu Fang
ASIDE. Petitioner Mariano Un Ocampo III and petitioner Andres S. Flores are was at the bank to close her account.31 At noon of the same day, respondent Rosales
hereby ACQUITTED of the crime of malversation of public funds in Crim. Case Nos. 16794 went to the bank to make a transaction.32 While she was transacting with the teller, she
and 16795. caught a glimpse of a woman seated at the desk of the Branch Operating Officer,
Melinda Perez (Perez).33 After completing her transaction, respondent Rosales
approached Perez who informed her that Liu Chiu Fang had closed her account and
had already left.34 Perez then gave a copy of the Withdrawal Clearance issued by the
PLRA to respondent Rosales.35 On June 16, 2003, respondent Rosales received a call from Petitioner sought reconsideration but the same was denied by the CA in its May 30, 2008
Liu Chiu Fang inquiring about the extension of her PLRA Visa and her dollar account.36 It Resolution.62
was only then that Liu Chiu Fang found out that her account had been closed without Issues
her knowledge.37 Respondent Rosales then went to the bank to inform Gutierrez and Hence, this recourse by petitioner raising the following issues:
Perez of the unauthorized withdrawal.38 On June 23, 2003, respondent Rosales and Liu A. THE [CA] ERRED IN RULING THAT THE "HOLD-OUT" PROVISION IN THE
Chiu Fang went to the PLRA Office, where they were informed that the Withdrawal APPLICATION AND AGREEMENT FOR DEPOSIT ACCOUNT DOES NOT APPLY IN THIS
Clearance was issued on the basis of a Special Power of Attorney (SPA) executed by Liu CASE.
Chiu Fang in favor of a certain Richard So.39 Liu Chiu Fang, however, denied executing B. THE [CA] ERRED WHEN IT RULED THAT PETITIONER’S EMPLOYEES WERE
the SPA.40 The following day, respondent Rosales, Liu Chiu Fang, Gutierrez, and Perez met NEGLIGENT IN RELEASING LIU CHIU FANG’S FUNDS.
at the PLRA Office to discuss the unauthorized withdrawal.41 During the conference, the C. THE [CA] ERRED IN AFFIRMING THE AWARD OF MORAL DAMAGES, EXEMPLARY
bank officers assured Liu Chiu Fang that the money would be returned to her.42 DAMAGES, AND ATTORNEY’S FEES.63
On December 15, 2003, the Office of the City Prosecutor of Manila issued a Resolution Petitioner’s Arguments
dismissing the criminal case for lack of probable cause.43 Unfazed, petitioner moved for Petitioner contends that the CA erred in not applying the "Hold Out" clause stipulated in
reconsideration. the Application and Agreement for Deposit Account.64 It posits that the said clause
On September 10, 2004, respondents filed before the Regional Trial Court (RTC) of Manila applies to any and all kinds of obligation as it does not distinguish between obligations
a Complaint44 for Breach of Obligation and Contract with Damages, docketed as Civil arising ex contractu or ex delictu.65 Petitioner also contends that the fraud committed by
Case No. 04110895 and raffled to Branch 21, against petitioner. Respondents alleged that respondent Rosales was clearly established by evidence;66 thus, it was justified in issuing
they attempted several times to withdraw their deposits but were unable to because the "Hold-Out" order.67 Petitioner likewise denies that its employees were negligent in
petitioner had placed their accounts under "Hold Out" status.45 No explanation, however, releasing the dollars.68 It claims that it was the deception employed by respondent
was given by petitioner as to why it issued the "Hold Out" order.46 Thus, they prayed that Rosales that caused petitioner’s employees to release Liu Chiu Fang’s funds to the
the "Hold Out" order be lifted and that they be allowed to withdraw their deposits.47 They impostor.69
likewise prayed for actual, moral, and exemplary damages, as well as attorney’s fees.48 Lastly, petitioner puts in issue the award of moral and exemplary damages and attorney’s
Petitioner alleged that respondents have no cause of action because it has a valid reason fees. It insists that respondents failed to prove that it acted in bad faith or in a wanton,
for issuing the "Hold Out" order.49 It averred that due to the fraudulent scheme of fraudulent, oppressive or malevolent manner.70
respondent Rosales, it was compelled to reimburse Liu Chiu Fang the amount of Respondents’ Arguments
US$75,000.0050 and to file a criminal complaint for Estafa against respondent Rosales.51 Respondents, on the other hand, argue that there is no legal basis for petitioner to
While the case for breach of contract was being tried, the City Prosecutor of Manila issued withhold their deposits because they have no monetary obligation to petitioner.71 They
a Resolution dated February 18, 2005, reversing the dismissal of the criminal insist that petitioner miserably failed to prove its accusations against respondent
complaint.52 An Information, docketed as Criminal Case No. 05-236103,53 was then filed Rosales.72 In fact, no documentary evidence was presented to show that respondent
charging respondent Rosales with Estafa before Branch 14 of the RTC of Manila.54 Rosales participated in the unauthorized withdrawal.73 They also question the fact that
Ruling of the Regional Trial Court the list of the serial numbers of the dollar notes fraudulently withdrawn on February 6, 2003,
On January 15, 2007, the RTC rendered a Decision55 finding petitioner liable for damages was not signed or acknowledged by the alleged impostor.74Respondents likewise
for breach of contract.56The RTC ruled that it is the duty of petitioner to release the deposit maintain that what was established during the trial was the negligence of petitioner’s
to respondents as the act of withdrawal of a bank deposit is an act of demand by the employees as they allowed the withdrawal of the funds without properly verifying the
creditor.57 The RTC also said that the recourse of petitioner is against its negligent identity of the depositor.75Furthermore, respondents contend that their deposits are in the
employees and not against respondents.58 The dispositive portion of the Decision reads: nature of a loan; thus, petitioner had the obligation to return the deposits to them upon
WHEREFORE, premises considered, judgment is hereby rendered ordering [petitioner] demand.76 Failing to do so makes petitioner liable to pay respondents moral and
METROPOLITAN BANK & TRUST COMPANY to allow [respondents] ANA GRACE ROSALES exemplary damages, as well as attorney’s fees.77
and YO YUK TO to withdraw their Savings and Time Deposits with the agreed interest, Our Ruling
actual damages of ₱50,000.00, moral damages of ₱50,000.00, exemplary damages of The Petition is bereft of merit.
₱30,000.00 and 10% of the amount due [respondents] as and for attorney’s fees plus the At the outset, the relevant issues in this case are (1) whether petitioner breached its
cost of suit. contract with respondents, and (2) if so, whether it is liable for damages. The issue of
The counterclaim of [petitioner] is hereby DISMISSED for lack of merit. whether petitioner’s employees were negligent in allowing the withdrawal of Liu Chiu
SO ORDERED.59 Fang’s dollar deposits has no bearing in the resolution of this case. Thus, we find no need
Ruling of the Court of Appeals to discuss the same.
Aggrieved, petitioner appealed to the CA. The "Hold Out" clause does not apply
On April 2, 2008, the CA affirmed the ruling of the RTC but deleted the award of actual to the instant case.
damages because "the basis for [respondents’] claim for such damages is the Petitioner claims that it did not breach its contract with respondents because it has a valid
professional fee that they paid to their legal counsel for [respondent] Rosales’ defense reason for issuing the "Hold Out" order. Petitioner anchors its right to withhold respondents’
against the criminal complaint of [petitioner] for estafa before the Office of the City deposits on the Application and Agreement for Deposit Account, which reads:
Prosecutor of Manila and not this case."60 Thus, the CA disposed of the case in this wise: Authority to Withhold, Sell and/or Set Off:
WHEREFORE, premises considered, the Decision dated January 15, 2007 of the RTC, The Bank is hereby authorized to withhold as security for any and all obligations with the
Branch 21, Manila in Civil Case No. 04-110895 is AFFIRMED with MODIFICATION that the Bank, all monies, properties or securities of the Depositor now in or which may hereafter
award of actual damages to [respondents] Rosales and Yo Yuk To is hereby DELETED. come into the possession or under the control of the Bank, whether left with the Bank for
SO ORDERED.61 safekeeping or otherwise, or coming into the hands of the Bank in any way, for so much
thereof as will be sufficient to pay any or all obligations incurred by Depositor under the therefore "treat the accounts of its depositors with meticulous care and always to have in
Account or by reason of any other transactions between the same parties now existing mind the fiduciary nature of its relationship with them."89 For failing to do this, an award of
or hereafter contracted, to sell in any public or private sale any of such properties or exemplary damages is justified to set an example.
securities of Depositor, and to apply the proceeds to the payment of any Depositor’s The award of attorney's fees is likewise proper pursuant to paragraph 1, Article 2208 90 of
obligations heretofore mentioned. the Civil Code.
xxxx In closing, it must be stressed that while we recognize that petitioner has the right to
JOINT ACCOUNT protect itself from fraud or suspicions of fraud, the exercise of his right should be done
xxxx within the bounds of the law and in accordance with due process, and not in bad faith
The Bank may, at any time in its discretion and with or without notice to all of the or in a wanton disregard of its contractual obligation to respondents.
Depositors, assert a lien on any balance of the Account and apply all or any part thereof WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and the May
against any indebtedness, matured or unmatured, that may then be owing to the Bank 30, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED.
by any or all of the Depositors. It is understood that if said indebtedness is only owing from SO ORDERED.
any of the Depositors, then this provision constitutes the consent by all of the depositors G.R. No. L-13602 April 6, 1918
to have the Account answer for the said indebtedness to the extent of the equal share LEUNG BEN, plaintiff, vs. P. J. O'BRIEN, JAMES A OSTRAND and GEO. R. HARVEY, judges of
of the debtor in the amount credited to the Account.78 First Instance of city of Manila,defendants.
Petitioner’s reliance on the "Hold Out" clause in the Application and Agreement for This is an application for a writ of certiorari, the purpose of which is to quash an
Deposit Account is misplaced. attachment issued from the Court of First Instance of the City of Manila under
The "Hold Out" clause applies only if there is a valid and existing obligation arising from circumstances hereinbelow stated.
any of the sources of obligation enumerated in Article 115779 of the Civil Code, to wit: law, Upon December 12, 1917, an action was instituted in the Court of First Instance of the city
contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show of Manila by P. J. O'Brien to recover of Leung Ben the sum of P15,000 alleged to have
that respondents have an obligation to it under any law, contract, quasi-contract, delict, been lost by the plaintiff to the defendant in a series of gambling, banking and
or quasi-delict. And although a criminal case was filed by petitioner against respondent percentage games conducted ruing the two or three months prior to the institution of the
Rosales, this is not enough reason for petitioner to issue a "Hold Out" order as the case is suit. In his verified complaint the plaintiff asked for an attachment, under section 424, and
still pending and no final judgment of conviction has been rendered against respondent 412 (1) of the Code of Civil Procedure, against the property of the defendant, on the
Rosales. In fact, it is significant to note that at the time petitioner issued the "Hold Out" ground that the latter was about to depart from the Philippine islands with intent to
order, the criminal complaint had not yet been filed. Thus, considering that respondent defraud his creditors. This attachment was issued; and acting under the authority thereof,
Rosales is not liable under any of the five sources of obligation, there was no legal basis the sheriff attached the sum of P15,000 which had been deposited by the defendant with
for petitioner to issue the "Hold Out" order. Accordingly, we agree with the findings of the the International Banking Corporation.
RTC and the CA that the "Hold Out" clause does not apply in the instant case. The defendant thereupon appeared by his attorney and moved the court to quash the
In view of the foregoing, we find that petitioner is guilty of breach of contract when it attachment. Said motion having dismissed in the Court of First Instance, the petitioner,
unjustifiably refused to release respondents’ deposit despite demand. Having breached Leung Ben, the defendant in that action, presented to this court, upon January 8, 1918 his
its contract with respondents, petitioner is liable for damages. petition for the writ of certiorari directed against P. J. O'Brien and the judges of the Court
Respondents are entitled to moral and of First Instance of the city of Manila whose names are mentioned in the caption hereof.
exemplary damages and attorney’s fees.1âwphi1 The prayer is that the Honorable James A. Ostrand, as the judge having cognizance of
In cases of breach of contract, moral damages may be recovered only if the defendant the action in said court be required to certify the record to this court for review and that
acted fraudulently or in bad faith,80 or is "guilty of gross negligence amounting to bad the order of attachment which had been issued should be revoked and discharged. with
faith, or in wanton disregard of his contractual obligations."81 costs. Upon the filing of said petition in this court the usual order was entered requiring the
In this case, a review of the circumstances surrounding the issuance of the "Hold Out" defendants to show cause why the writ should not issue. The response of the defendants,
order reveals that petitioner issued the "Hold Out" order in bad faith. First of all, the order in the nature of a demurrer, was filed upon January 21, 1918; and the matter is now heard
was issued without any legal basis. Second, petitioner did not inform respondents of the upon the pleadings thus presented.
reason for the "Hold Out."82 Third, the order was issued prior to the filing of the criminal The provision of law under which this attachment was issued requires that there should be
complaint. Records show that the "Hold Out" order was issued on July 31, 2003,83 while the accuse of action arising upon contract, express or implied. The contention of the
criminal complaint was filed only on September 3, 2003.84 All these taken together lead us petitioner is that the statutory action to recover money lost at gaming is that the statutory
to conclude that petitioner acted in bad faith when it breached its contract with action to recover money lost at gaming is no such an action as is contemplated in this
respondents. As we see it then, respondents are entitled to moral damages. provision, and he therefore insists that the original complaint shows on its face that the
As to the award of exemplary damages, Article 222985 of the Civil Code provides that remedy of attachment is not available in aid thereof; that the Court of First Instance acted
exemplary damages may be imposed "by way of example or correction for the public in excess of its jurisdiction in granting the writ of attachment; that the petitioner has no
good, in addition to the moral, temperate, liquidated or compensatory damages." They plain, speedy, and adequate remedy by appeal or otherwise; and that consequently the
are awarded only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or writ of certiorari supplies the appropriate remedy for his relief.
malevolent manner.86 The case presents the two following questions of law, either of which, if decided
In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless, unfavorably to the petitioner, will be fatal to his application:
oppressive or malevolent manner when it refused to release the deposits of respondents (1) Supposing that the Court of First Instance has granted an attachment for which there
without any legal basis. We need not belabor the fact that the banking industry is is no statutory authority, can this court entertain the present petition and grant the desired
impressed with public interest.87 As such, "the highest degree of diligence is expected, relief?
and high standards of integrity and performance are even required of it." 88 It must
(2) Is the statutory obligation to restore money won at gaming an obligation arising from show a cause of action some sort; and when the statue declares that the attachment
"contract, express or implied?" may issue in an action arising upon contract, the express or implied, it announces a
We are of the opinion that the answer to the first question should be in the affirmative. criterion which may be determined from an inspection of the language of the complaint.
Under section 514 of the Code of Civil Procedure the Supreme Court has original The determination of this question is purely a matter of law. On the other hand, when the
jurisdiction by the writ of certiorari over the proceedings of Courts of First Instance, stature declares that an attachment may be issued when the defendant is about to
wherever said courts have exceeded their jurisdiction and there is no plaint, speedy, and depart from the Islands, a criterion is announced which is wholly foreign to the cause of
adequate remedy. In the same section, it is further declared that the proceedings in the action; and the determination of it may involve a disputed question of fact which must
Supreme Court in such cases hall be as prescribed for Courts of First Instance in section be decided by the court. In making this determination, the court obviously acts within its
217-221, inclusive, of said Code. This Supreme Court, so far as applicable, the provisions powers; and it would be idle to suppose that the writ of certiorari would be available to
contained in those section to the same extent as if they had been reproduced verbatim reverse the action of a Court of First Instance in determining the sufficiency of the proof
immediately after section 514. Turning to section 217, we find that, in defining the on such a disputed point, and in granting or refusing the attachment accordingly.
conditions under which certiorari can be maintained in a Court of First Instance We should not be understood, in anything that has been said, as intending to infringe the
substantially the same language is used as is the same remedy can be maintained in the doctrine enunciated by this court in Herrera vs. Barretto and Joaquin (25 Phil. Rep., 245),
Supreme Court of First Instance, substantially the same language is used as is found in when properly applied. It was there held that we would not, upon application for a writ
section 514 relative to the conditions under which the same remedy can be maintained of certiorari, dissolve an interlocutory mandatory injunction that had been issued in a
in the Supreme Court, namely, when the inferior tribunal has exceeded its jurisdiction and Court of First Instance as an incident in an action of mandamus. The issuance of an
there is no appeal, nor any plain, speedy and adequate remedy. In using these interlocutory injunction depends upon conditions essentially different from those involved
expressions the author of the Code of Civil Procedure merely adopted the language in the issuance of an attachment. The injunction is designed primarily for the prevention
which, in American jurisdictions at least, had long ago reached the stage of stereotyped of irreparable injury and the use of the remedy is in a great measure dependent upon the
formula. exercise of discretion. Generally, it may be said that the exercise of the injunctive powers
In section 220 of the same Code, we have a provision relative to the final proceedings is inherent in judicial authority; and ordinarily it would be impossible to distinguish between
in certiorari, and herein it is stated that the court shall determine whether the inferior the jurisdiction of the court in the main litigation and its jurisdiction to grant an interlocutory
tribunal has regularly pursued its authority it shall give judgment either affirming annulling, injunction, for the latter is involved in the former. That the writ of certiorari can not be used
or modifying the proceedings below, as the law requires. The expression, has not regularly to reverse an order denying a motion for a preliminary injunction is of course not to cavil.
pursued its authority as here used, is suggestive, and we think it should be construed in (Somes vs. Crossfield and Molina, 8 Phil. Rep., 284.)
connection with the other expressions have exceeded their jurisdiction, as used in section But it will be said that the writ of certiorari is not available in this cae, because the
514, and has exceeded their jurisdiction as used in section 217. Taking the three together, petitioner is protected by the attachment bond, and that he has a plain, speedy, and
it results in our opinion that any irregular exercise of juridical power by a Court of First adequate remedy appeal. This suggestion seems to be sufficiently answered in the case
Instance, in excess of its lawful jurisdiction, is remediable by the writ of certiorari, provided of Rocha & Co vs. Crossfield and Figueras (6 Phil. Rep., 355), already referred to, and the
there is no other plain, speedy, and adequate remedy; and in order to make out a case earlier case there cited. The remedy by appeal is not sufficiently speedy to meet the
for the granting of the writ it is not necessary that the court should have acted in the exigencies of the case. An attachment is extremely violent, and its abuse may often result
matter without any jurisdiction whatever. Indeed the repeated use of expression excess in infliction of damage which could never be repaired by any pecuniary award at the
of jurisdiction shows that the lawmaker contemplated the situation where a court, having final hearing. To postpone the granting of the writ in such a case until the final hearing
jurisdiction should irregularly transcend its authority as well as the situation where the court and to compel the petitioner to bring the case here upon appeal merely in order to
is totally devoid of lawful power. correct the action of the trial court in the matter of allowing the attachment would seem
It may be observed in this connection that the word jurisdiction as used in attachment both unjust and unnecessary.
cases, has reference not only to the authority of the court to entertain the principal action Passing to the problem propounded in the second question it may be observed that,
but also to its authority to issue the attachment, as dependent upon the existence of the upon general principles,. recognize both the civil and common law, money lost in gaming
statutory ground. (6 C. J., 89.) This distinction between jurisdiction to issue the attachment and voluntarily paid by the loser to the winner can not in the absence of statue, be
as an ancillary remedy incident to the principal litigation is of importance; as a court's recovered in a civil action. But Act No. 1757 of the Philippine Commission, which defines
jurisdiction over the main action may be complete, and yet it may lack authority to grant and penalizes several forms of gambling, contains numerous provisions recognizing the
an attachment as ancillary to such action. This distinction between jurisdiction over the right to recover money lost in gambling or in the playing of certain games (secs. 6, 7, 8, 9,
ancillary has been recognized by this court in connection with actions involving the 11). The original complaint in the action in the Court of First Instance is not clear as to the
appointment of a receiver. Thus in Rocha & Co. vs. Crossfield and Figueras (6 Phil. Rep., particular section of Act No. 1757 under which the action is brought, but it is alleged that
355), a receiver had been appointed without legal justification. It was held that the order the money was lost at gambling, banking, and percentage game in which the defendant
making the appointment was beyond the jurisdiction of the court; and though the court was banker. It must therefore be assumed that the action is based upon the right of
admittedly had jurisdiction of the main cause, the order was vacated by this court upon recovery given in Section 7 of said Act, which declares that an action may be brought
application a writ of certiorari. (See Blanco vs. Ambler, 3 Phil. Rep., 358, Blanco vs. Ambler against the banker by any person losing money at a banking or percentage game.
and McMicking 3 Phil. Rep., 735, Yangco vs. Rohde, 1 Phil. Rep., 404.) Is this a cause arising upon contract, express or implied, as this term is used in section 412
By parity of reasoning it must follow that when a court issues a writ of attachment for which of the Code of Civil Procedure? To begin the discussion, the English version of the Code
there is no statutory authority, it is acting irregularly and in excess of its jurisdiction, in the of Civil Procedure is controlling (sec. 15, Admin. Code, ed. of 1917). Furthermore it is
sense necessary to justify the Supreme Court in granting relief by the writ of certiorari. In universally admitted to be proper in the interpretation of any statute, to consider its
applying this proposition it is of course necessary to take account of the difference historical antecedents and its juris prudential sources. The Code of Civil Procedure, as is
between a ground of attachment based on the nature of the action and a ground of well known, is an American contribution to Philippine legislation. It therefore speaks the
attachment based on the acts or the conditions of the defendant. Every complaint must language of the common-law and for the most part reflects its ideas. When the draftsman
of this Code used the expression contract, express or implied, he used a phrase that has What has been said is intended to exhibit the fact that the duty to pay or deliver a sum
been long current among writers on American and English law; and it is therefore certain of money or an ascertainable quantity of ponderable or measurable chattles —
appropriate to resort to that system of law to discover the appropriate to resort to that which is indicated by them debt — has ever been recognized, in the common-law
system of law to discover the meaning which the legislator intended to convey by those system, as a true contract, regardless, of the source of the duty or the manner in which it
meaning which the legislator intended to convey by those terms. We remark in passing is create — whether derived from custom, statue or some consensual transaction
that the expression contrato tracito, used in the official translation of the Code of Civil depending upon the voluntary acts of the parties. the form of contract known as the debt
Procedure as the Spanish equivalent of implied contract, does not appear to render the is of the most ancient lineage; and when reference is had to historical antecedents, the
full sense of the English expression. right of the debt to be classed as a contract cannot be questioned. Indeed when the
The English contract law, so far as relates to simple contracts is planted upon two new form of engagement consisting of the parol promise supported by a consideration
foundations, which are supplied by two very different conceptions of legal liability. These first appeared, it was looked upon as an upstart and its right to be considered a true
two conceptions are revealed in the ideas respectively underlying (1) the common- law contract was questioned. It was long customary to refer to it exclusively as an assumpsit,
debt and (2) the assumptual promise. In the early and formative stages of the common- agreement, undertaking, or parol promise, in fact anything but a contract. Only in time
law the only simple contract of which the courts took account was the real contract or did the new form of engagement attain the dignity of being classed among true
contract re, in which the contractual duty imposed by law arises upon the delivery of a contract.
chattle, as in the mutuum, commodatum, depositum, and the like; and the purely The term implied takers us into shadowy domain of those obligations the theoretical
consensual agreements of the Roman Law found no congenial place in the early classification of which has engaged the attention of scholars from the time of Gaius until
common law system. our own day and has been a source of as much difficulty to the civilian as to the common-
In course of time the idea underlying the contract re was extended so as to include from law jurist. There we are concerned with those acts which make one person debtor to
one person to another under such circumstances as to constitute a justa cuas debendi. another without there having intervened between them any true agreement tending to
The obligation thereby created was a debt. The constitutive element in this litigation is produce a legal bond (vinculum juris). Of late years some American and English writers
found in the fact that the debtor has received something from the creditor, which he is have adopted the term quasi-contract as descriptive of these obligations or some of
bound by the obligation of law to return or pay for. From an early day this element was them; but the expression more commonly used is implied contract.
denominated the quid pro quo, an ungainly phrase coined by Mediaeval Latinity. Upon examination of these obligations, from the view point of the common-law
The quid pro quo was primarily a materials or physical object, and its constituted the jurisprudence, it will be found that they fall readily into two divisions according as they
recompense or equivalent acquired by the debtor. Upon the passage of the quid pro bear an analogy to the common-law debt or to the common law assumpsit. To exhibit
quo from one party to the other, the law imposed that real contractual duty peculiar to the scope of these different classes of obligations is here impracticable. It is only necessary
the debt. No one conversant with the early history of English law would ever conceive of in this connection to observe that the most conspicuous division is that which comprises
the debt as an obligation created by promise. It is the legal duty to pay or deliver a sum duties in the nature of debt. The characteristic feature of these obligations is that upon
certain of money or an ascertainable quantity of ponderable or measurable chattles. certain states of fact the law imposes an obligation to pay a sum certain of money; and
The ordinary debt, as already stated, originates in a contract in which a quid pro it is characteristic of this obligation that the money in respect to which the duty is raised is
quo passes to the debtor at the time of the creation of the debt, but the term is equally conceived as being equivalent of something taken or detained under circumstances
applicable to duties imposed by custom or statute, or by judgment of a court. giving rise to the duty to return or compensate therefore. The proposition that no one shall
The existence of a debt supposes one person to have possession of thing (res) which be allowed to enrich himself unduly at the expense of another embodies the general
he owes and hence ought to turn over the owner. This obligation is the oldest conception principle here lying at the basis of obligation. The right to recover money improperly paid
of contract with which the common law is familiar; and notwithstanding the centuries that (repeticion de lo indebido) is also recognized as belong to this class of duties.
have rolled over Westminster Hall that conception remains as one of the fundamental It will observed that according to the Civil Code obligations are supposed to be derived
bases of the common-law contract. either from (1) the law, (2) contracts and quasi-contracts, (3) illicit acts and omission, or
Near the end of the fifteenth century there was evolved in England a new conception of (4) acts in which some sort ob lame or negligence is present. This enumeration of sources
contractual liability, which embodied the idea of obligation resulting from promise and of obligations and the obligation imposed by law are different types. The learned Italian
which found expression in the common law assumpsit, or parol promise supported by a jurist, Jorge Giorgi, criticises this assumption and says that the classification embodied in
consideration. The application of this novel conception had the effect of greatly the code is theoretically erroneous. His conclusion is that one or the other of these
extending the filed of contractual liability and by this means rights of action came to be categories should have been suppressed and merged in the other. (Giorgi, Teoria de las
recognized which had been unknown before. The action of assumpsit which was the Obligaciones, Spanish ed., vol. 5 arts. 5, 7, 9.) The validity of this criticism is, we thin, self-
instrument for giving effect to this obligation was found to be a useful remedy; and evident; and it is of interest to note that the common law makes no distinction between
presently this action came to be used for the enforcement of common-law debts. The the two sources of liability. The obligations which in the Code are indicated as quasi-
result was to give to our contract law the superficial appearance of being based more contracts, as well as those arising ex lege, are in the common la system, merged into the
or less exclusively upon the notion of the obligation of promise. category of obligations imposed by law, and all are denominated implied contracts.
An idea is widely entertained to the effect that all simple contracts recognized in the Many refinements, more or less illusory, have been attempted by various writers in
common-law system are referable to a singly category. They all have their roots, so many distinguishing different sorts of implied contracts, as for example, the contract implied as
of us imagine, in one general notion of obligation; and of course the obligation of promise of fact and the contract implied as of law. No explanation of these distinctions will be
is supposed to supply this general notion, being considered a sort of menstruum in which here attempted. Suffice it to say that the term contract, express or implied, is used to by
all other forms of contractual obligation have been dissolved. This a mistake. The idea of common-law jurists to include all purely personal obligations other than those which have
contractual duty embodied in the debt which was the first conception of contract liability their source in delict, or tort. As to these it may be said that, generally speaking, the law
revealed in the common law, has remained, although it was detained to be in a measure does not impose a contractual duty upon a wrongdoer to compensate for injury done. It
obscured by the more modern conception of obligation resulting from promise. is true that in certain situations where a wrongdoer unjustly acquired something at the
expense of another, the law imposes on him a duty to surrender his unjust acquisitions, because they had not been the subject of consideration in other parts of the Code. (Opus
and the injured party may here elect to sue upon this contractual duty instead of suing citat., 550.)
upon the tort; but even here the distinction between the two liabilities, in contract and in It is well recognized among civilian jurists that the quasi- contractual obligations cover a
tort, is never lost to sight; and it is always recognized that the liability arising out of the tort wide range. The Italian jurist, Jorge Giorgi, to whom we have already referred, considers
is delictual and not of a contractual or quasi-contractual nature. under this head, among other obligations, the following: payments made upon a future
In the case now under consideration the duty of the defendant to refund the money consideration which is not realized or upon an existing consideration which fails; payments
which he won from the plaintiff at gaming is a duty imposed by statute. It therefore wrongfully made upon a consideration which is contrary to law, or opposed to public
arises ex lege. Furthermore, it is a duty to return a certain sum which had passed from the policy; and payments made upon a vicious consideration or obtained by illicit means
plaintiff to the defendant. By all the criteria which the common law supplies, this a duty in (Giorgi, Teoria de las Obligaciones, vol. 5, art. 130.)
the nature of debt and is properly classified as an implied contract. It is well- settled by Im permitting the recovery of money lost at play, Act No. 1757 has introduced
the English authorities that money lost in gambling or by lottery, if recoverable at all, can modifications in the application of articles 1798, 180`, and 1305 of the Civil Code. The first
be recovered by the loser in an action of indebitatus assumpsit for money had and two of these articles relate to gambling contracts, while article 1305 treats of the nullity of
received. (Clarke vs. Johnson. Lofft, 759; Mason vs. Waite, 17 Mass., 560; Burnham vs. contracts proceeding from a vicious or illicit consideration. Taking all these provisions
Fisher, 25 Vt., 514.) This means that in the common law the duty to return money won in together, it must be apparent that the obligation to return money lost at play has a
this way is an implied contract, or quasi-contract. decided affinity to contractual obligations; and we believe that it could, without violence
It is no argument to say in reply to this that the obligation here recognized is called an to the doctrines of the civil law, be held that such obligations is an innominate quasi-
implied contract merely because the remedy commonly used in suing upon ordinary contract. It is, however, unnecessary to place the decision on this ground.
contract can be here used, or that the law adopted the fiction of promise in order to From what has been said it follows that in our opinion the cause of action stated in the
bring the obligation within the scope of the action of assumpsit. Such statements fail to complaints in the court below is based on a contract, express or implied and is therefore
express the true import of the phenomenon. Before the remedy was the idea; and the of such nature that the court had authority to issue writ of attachment. The application
use of the remedy could not have been approved if it had not been for historical for the writ of certiorari must therefore be denied and the proceedings dismissed. So
antecedents which made the recognition of this remedy at one logical and proper. ordered.
Furthermore, it should not be forgotten that the question is not how this duty but what sort G.R. No. L-4089 January 12, 1909
of obligation did the author of the Code of Civil Procedure intend to describe when he ARTURO PELAYO, plaintiff-appellant, vs.
sued the term implied contract in section 412. MARCELO LAURON, ET AL., defendants-appellees.
In what has been said we have assumed that the obligation which is at the foundation of On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a
the original action in the court below is not a quasi-contract, when judge by the principles complaint against Marcelo Lauron and Juana Abella setting forth that on or about the
of the civil law. A few observations will show that this assumption is not by any means free 13th of October of said year, at night, the plaintiff was called to the house of the
from doubt. The obligation in question certainly does not fall under the definition of either defendants, situated in San Nicolas, and that upon arrival he was requested by them to
of the two-quasi- contracts which are made the subject of special treatment in the Civil render medical assistance to their daughter-in-law who was about to give birth to a child;
Code, for its does not arise from a licit act as contemplated in article 1895. The obligation that therefore, and after consultation with the attending physician, Dr. Escaño, it was
is clearly a creation of the positive law — a circumstance which brings it within the purview found necessary, on account of the difficult birth, to remove the fetus by means of forceps
of article 1090, in relation with article, 1089; and it is also derived from an illicit act, namely, which operation was performed by the plaintiff, who also had to remove the afterbirth, in
the playing of a prohibited game. It is thus seen that the provisions of the Civil Code which which services he was occupied until the following morning, and that afterwards, on the
might be consulted with a view to the correct theoretical classification of this obligation same day, he visited the patient several times; that the just and equitable value of the
are unsatisfactory and confusing. services rendered by him was P500, which the defendants refuse to pay without alleging
The two obligations treated in the chapter devoted to quasi-contracts in the Civil Code any good reason therefor; that for said reason he prayed that the judgment be entered
are (1) the obligation incident to the officious management of the affairs of other person in his favor as against the defendants, or any of them, for the sum of P500 and costs,
(gestion de negocios ajenos) and (2) the recovery of what has been improperly paid together with any other relief that might be deemed proper.
(cabro de lo indebido). That the authors of the Civil Code selected these two obligations In answer to the complaint counsel for the defendants denied all of the allegation therein
for special treatment does not signify an intention to deny the possibility of the existence contained and alleged as a special defense, that their daughter-in-law had died in
of other quasi-contractual obligations. As is well said by the commentator Manresa. consequence of the said childbirth, and that when she was alive she lived with her
The number of the quasi-contracts may be indefinite as may be the number of husband independently and in a separate house without any relation whatever with
lawful facts, the generations of the said obligations; but the Code, just as we them, and that, if on the day when she gave birth she was in the house of the defendants,
shall see further on, in the impracticableness of enumerating or including them her stay their was accidental and due to fortuitous circumstances; therefore, he prayed
all in a methodical and orderly classification, has concerned itself with two only that the defendants be absolved of the complaint with costs against the plaintiff.
— namely, the management of the affairs of other person and the recovery of The plaintiff demurred to the above answer, and the court below sustained the demurrer,
things improperly paid — without attempting by this to exclude the others. directing the defendants, on the 23rd of January, 1907, to amend their answer. In
(Manresa, 2d ed., vol. 12, p. 549.) compliance with this order the defendants presented, on the same date, their amended
It would indeed have been surprising if the authors of the Code, in the light of the answer, denying each and every one of the allegations contained in the complaint, and
jurisprudence of more than a thousand years, should have arbitrarily assumed to limit the requesting that the same be dismissed with costs.
quasi-contract to two obligations. The author from whom we have just quoted further As a result of the evidence adduced by both parties, judgment was entered by the court
observes that the two obligations in question were selected for special treatment in the below on the 5th of April, 1907, whereby the defendants were absolved from the former
Code not only because they were the most conspicuous of the quasi-contracts, but complaint, on account of the lack of sufficient evidence to establish a right of action
against the defendants, with costs against the plaintiff, who excepted to the said
judgment and in addition moved for a new trial on the ground that the judgment was as the liability arose out of a contract, the stipulations of the agreement must be held.
contrary to law; the motion was overruled and the plaintiff excepted and in due course (Decision of May 11, 1897.)
presented the corresponding bill of exceptions. The motion of the defendants requesting Within the meaning of the law, the father and mother-in-law are strangers with respect to
that the declaration contained in the judgment that the defendants had demanded the obligation that devolves upon the husband to provide support, among which is the
therefrom, for the reason that, according to the evidence, no such request had been furnishing of medical assistance to his wife at the time of her confinement; and, on the
made, was also denied, and to the decision the defendants excepted. other hand, it does not appear that a contract existed between the defendants and the
Assuming that it is a real fact of knowledge by the defendants that the plaintiff, by virtue plaintiff physician, for which reason it is obvious that the former can not be compelled to
of having been sent for by the former, attended a physician and rendered professional pay fees which they are under no liability to pay because it does not appear that they
services to a daughter-in-law of the said defendants during a difficult and laborious consented to bind themselves.
childbirth, in order to decide the claim of the said physician regarding the recovery of his The foregoing suffices to demonstrate that the first and second errors assigned to the
fees, it becomes necessary to decide who is bound to pay the bill, whether the father judgment below are unfounded, because, if the plaintiff has no right of action against
and mother-in-law of the patient, or the husband of the latter. the defendants, it is needless to declare whether or not the use of forceps is a surgical
According to article 1089 of the Civil Code, obligations are created by law, by contracts, operation.
by quasi-contracts, and by illicit acts and omissions or by those in which any kind of fault Therefore, in view of the consideration hereinbefore set forth, it is our opinion that the
or negligence occurs. judgment appealed from should be affirmed with the costs against the appellant. So
Obligations arising from law are not presumed. Those expressly determined in the code or ordered.
in special laws, etc., are the only demandable ones. Obligations arising from contracts [G.R. No. 154259. February 28, 2005]
have legal force between the contracting parties and must be fulfilled in accordance NIKKO HOTEL MANILA GARDEN and RUBY LIM, petitioners, vs. ROBERTO REYES, a.k.a. AMAY
with their stipulations. (Arts. 1090 and 1091.) BISAYA, respondent.
The rendering of medical assistance in case of illness is comprised among the mutual In this petition for review on certiorari, petitioners Nikko Hotel Manila Garden (Hotel
obligations to which the spouses are bound by way of mutual support. (Arts. 142 and 143.) Nikko)[1] and Ruby Lim assail the Decision[2] of the Court of Appeals dated 26 November
If every obligation consists in giving, doing or not doing something (art. 1088), and spouses 2001 reversing the Decision[3] of the Regional Trial Court (RTC) of Quezon City, Branch 104,
are mutually bound to support each other, there can be no question but that, when either as well as the Resolution[4] of the Court of Appeals dated 09 July 2002 which denied
of them by reason of illness should be in need of medical assistance, the other is under petitioners motion for reconsideration.
the unavoidable obligation to furnish the necessary services of a physician in order that The cause of action before the trial court was one for damages brought under the
health may be restored, and he or she may be freed from the sickness by which life is human relations provisions of the New Civil Code. Plaintiff thereat (respondent herein)
jeopardized; the party bound to furnish such support is therefore liable for all expenses, Roberto Reyes, more popularly known by the screen name Amay Bisaya, alleged that at
including the fees of the medical expert for his professional services. This liability originates around 6:00 oclock in the evening of 13 October 1994, while he was having coffee at the
from the above-cited mutual obligation which the law has expressly established between lobby of Hotel Nikko,[5] he was spotted by his friend of several years, Dr. Violeta Filart, who
the married couple. then approached him.[6] Mrs. Filart invited him to join her in a party at the hotels penthouse
In the face of the above legal precepts it is unquestionable that the person bound to pay in celebration of the natal day of the hotels manager, Mr. Masakazu Tsuruoka.[7] Mr. Reyes
the fees due to the plaintiff for the professional services that he rendered to the daughter- asked if she could vouch for him for which she replied: of course.[8] Mr. Reyes then went
in-law of the defendants during her childbirth, is the husband of the patient and not her up with the party of Dr. Filart carrying the basket of fruits which was the latters present for
father and mother- in-law, the defendants herein. The fact that it was not the husband the celebrant.[9] At the penthouse, they first had their picture taken with the celebrant
who called the plaintiff and requested his assistance for his wife is no bar to the fulfillment after which Mr. Reyes sat with the party of Dr. Filart.[10] After a couple of hours, when the
of the said obligation, as the defendants, in view of the imminent danger, to which the buffet dinner was ready, Mr. Reyes lined-up at the buffet table but, to his great shock,
life of the patient was at that moment exposed, considered that medical assistance was shame and embarrassment, he was stopped by petitioner herein, Ruby Lim, who claimed
urgently needed, and the obligation of the husband to furnish his wife in the indispensable to speak for Hotel Nikko as Executive Secretary thereof.[11] In a loud voice and within the
services of a physician at such critical moments is specially established by the law, as has presence and hearing of the other guests who were making a queue at the buffet table,
been seen, and compliance therewith is unavoidable; therefore, the plaintiff, who Ruby Lim told him to leave the party (huwag ka nang kumain, hindi ka imbitado, bumaba
believes that he is entitled to recover his fees, must direct his action against the husband ka na lang).[12] Mr. Reyes tried to explain that he was invited by Dr. Filart.[13] Dr. Filart, who
who is under obligation to furnish medical assistance to his lawful wife in such an was within hearing distance, however, completely ignored him thus adding to his shame
emergency. and humiliation.[14] Not long after, while he was still recovering from the traumatic
From the foregoing it may readily be understood that it was improper to have brought an experience, a Makati policeman approached and asked him to step out of the
action against the defendants simply because they were the parties who called the hotel.[15] Like a common criminal, he was escorted out of the party by the
plaintiff and requested him to assist the patient during her difficult confinement, and also, policeman.[16]Claiming damages, Mr. Reyes asked for One Million Pesos actual damages,
possibly, because they were her father and mother-in-law and the sickness occurred in One Million Pesos moral and/or exemplary damages and Two Hundred Thousand Pesos
their house. The defendants were not, nor are they now, under any obligation by virtue of attorneys fees.[17]
any legal provision, to pay the fees claimed, nor in consequence of any contract entered Ruby Lim, for her part, admitted having asked Mr. Reyes to leave the party but not
into between them and the plaintiff from which such obligation might have arisen. under the ignominious circumstance painted by the latter. Ms. Lim narrated that she was
In applying the provisions of the Civil Code in an action for support, the supreme court of the Hotels Executive Secretary for the past twenty (20) years.[18] One of her functions
Spain, while recognizing the validity and efficiency of a contract to furnish support included organizing the birthday party of the hotels former General Manager, Mr.
wherein a person bound himself to support another who was not his relative, established Tsuruoka.[19] The year 1994 was no different. For Mr. Tsuruokas party, Ms. Lim generated an
the rule that the law does impose the obligation to pay for the support of a stranger, but exclusive guest list and extended invitations accordingly.[20] The guest list was limited to
approximately sixty (60) of Mr. Tsuruokas closest friends and some hotel employees and
that Mr. Reyes was not one of those invited.[21] At the party, Ms. Lim first noticed Mr. Reyes The Court of Appeals likewise ruled that the actuation of Ms. Lim in approaching several
at the bar counter ordering a drink.[22] Mindful of Mr. Tsuruokas wishes to keep the party people to inquire into the presence of Mr. Reyes exposed the latter to ridicule and was
intimate, Ms. Lim approached Mr. Boy Miller, the captain waiter, to inquire as to the uncalled for as she should have approached Dr. Filart first and both of them should have
presence of Mr. Reyes who was not invited.[23] Mr. Miller replied that he saw Mr. Reyes with talked to Mr. Reyes in private:
the group of Dr. Filart.[24] As Dr. Filart was engaged in conversation with another guest and Said acts of appellee Lim are uncalled for. What should have been done by appellee Lim
as Ms. Lim did not want to interrupt, she inquired instead from the sister of Dr. Filart, Ms. was to approach appellee Mrs. Filart and together they should have told appellant Reyes
Zenaida Fruto, who told her that Dr. Filart did not invite Mr. Reyes.[25] Ms. Lim then in private that the latter should leave the party as the celebrant only wanted close friends
requested Ms. Fruto to tell Mr. Reyes to leave the party as he was not invited.[26] Mr. Reyes, around. It is necessary that Mrs. Filart be the one to approach appellant because it was
however, lingered prompting Ms. Lim to inquire from Ms. Fruto who said that Mr. Reyes did she who invited appellant in that occasion. Were it not for Mrs. Filarts invitation, appellant
not want to leave.[27] When Ms. Lim turned around, she saw Mr. Reyes conversing with a could not have suffered such humiliation. For that, appellee Filart is equally liable.
Captain Batung whom she later approached.[28] Believing that Captain Batung and Mr. ...
Reyes knew each other, Ms. Lim requested from him the same favor from Ms. Fruto, i.e., The acts of [appellee] Lim are causes of action which are predicated upon mere
for Captain Batung to tell Mr. Reyes to leave the party as he was not invited. [29] Still, Mr. rudeness or lack of consideration of one person, which calls not only protection of human
Reyes lingered. When Ms. Lim spotted Mr. Reyes by the buffet table, she decided to speak dignity but respect of such dignity. Under Article 20 of the Civil Code, every person who
to him herself as there were no other guests in the immediate vicinity.[30] However, as Mr. violates this duty becomes liable for damages, especially if said acts were attended by
Reyes was already helping himself to the food, she decided to wait.[31] When Mr. Reyes malice or bad faith. Bad faith does not simply connote bad judgment or simple
went to a corner and started to eat, Ms. Lim approached him and said: alam ninyo, hindo negligence. It imports a dishonest purpose or some moral obliquity and conscious doing
ho kayo dapat nandito. Pero total nakakuha na ho kayo ng pagkain, ubusin na lang of a wrong, a breach of a known duty to some motive or interest or ill-will that partakes of
ninyo at pagkatapos kung pwede lang po umalis na kayo.[32] She then turned around the nature of fraud (Cojuangco, Jr. v. CA, et al., 309 SCRA 603).[44]
trusting that Mr. Reyes would show enough decency to leave, but to her surprise, he Consequently, the Court of Appeals imposed upon Hotel Nikko, Ruby Lim and Dr.
began screaming and making a big scene, and even threatened to dump food on her.[33] Violeta Filart the solidary obligation to pay Mr. Reyes (1) exemplary damages in the
Dr. Violeta Filart, the third defendant in the complaint before the lower court, also amount of Two Hundred Thousand Pesos (P200,000); (2) moral damages in the amount of
gave her version of the story to the effect that she never invited Mr. Reyes to the Two Hundred Thousand Pesos (P200,000); and (3) attorneys fees in the amount of Ten
party.[34] According to her, it was Mr. Reyes who volunteered to carry the basket of fruits Thousand Pesos (P10,000).[45] On motion for reconsideration, the Court of Appeals
intended for the celebrant as he was likewise going to take the elevator, not to the affirmed its earlier decision as the argument raised in the motion had been amply
penthouse but to Altitude 49.[35] When they reached the penthouse, she reminded Mr. discussed and passed upon in the decision sought to be reconsidered.[46]
Reyes to go down as he was not properly dressed and was not invited.[36] All the while, Thus, the instant petition for review. Hotel Nikko and Ruby Lim contend that the Court
she thought that Mr. Reyes already left the place, but she later saw him at the bar talking of Appeals seriously erred in
to Col. Batung.[37] Then there was a commotion and she saw Mr. Reyes shouting.[38] She I. NOT APPLYING THE DOCTRINE OF VOLENTI NON FIT INJURIA CONSIDERING THAT BY ITS
ignored Mr. Reyes.[39] She was embarrassed and did not want the celebrant to think that OWN FINDINGS, AMAY BISAYA WAS A GATE-CRASHER
she invited him.[40] II. HOLDING HOTEL NIKKO AND RUBY LIM JOINTLY AND SEVERALLY LIABLE WITH DR. FILART
After trial on the merits, the court a quo dismissed the complaint,[41] giving more FOR DAMAGES SINCE BY ITS OWN RULING, AMAY BISAYA COULD NOT HAVE SUFFERED
credence to the testimony of Ms. Lim that she was discreet in asking Mr. Reyes to leave SUCH HUMILIATION, WERE IT NOT FOR DR. FILARTS INVITATION
the party. The trial court likewise ratiocinated that Mr. Reyes assumed the risk of being III. DEPARTING FROM THE FINDINGS OF FACT OF THE TRIAL COURT AS REGARDS THE
thrown out of the party as he was uninvited: CIRCUMSTANCES THAT ALLEGEDLY CAUSED THE HUMILIATION OF AMAY BISAYA
Plaintiff had no business being at the party because he was not a guest of Mr. Tsuruoka, IV. IN CONCLUDING THAT AMAY BISAYA WAS TREATED UNJUSTLY BECAUSE OF HIS POVERTY,
the birthday celebrant. He assumed the risk of being asked to leave for attending a party CONSIDERING THAT THIS WAS NEVER AN ISSUE AND NO EVIDENCE WAS PRESENTED IN THIS
to which he was not invited by the host. Damages are pecuniary consequences which REGARD
the law imposes for the breach of some duty or the violation of some right. Thus, no V. IN FAILING TO PASS UPON THE ISSUE ON THE DEFECTS OF THE APPELLANTS BRIEF, THEREBY
recovery can be had against defendants Nikko Hotel and Ruby Lim because he himself DEPARTING FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS
was at fault (Garciano v. Court of Appeals, 212 SCRA 436). He knew that it was not the Petitioners Lim and Hotel Nikko contend that pursuant to the doctrine of volenti non
party of defendant Violeta Filart even if she allowed him to join her and took responsibility fit injuria, they cannot be made liable for damages as respondent Reyes assumed the risk
for his attendance at the party. His action against defendants Nikko Hotel and Ruby Lim of being asked to leave (and being embarrassed and humiliated in the process) as he
must therefore fail.[42] was a gate-crasher.
On appeal, the Court of Appeals reversed the ruling of the trial court as it found The doctrine of volenti non fit injuria (to which a person assents is not esteemed in
more commanding of belief the testimony of Mr. Reyes that Ms. Lim ordered him to leave law as injury[47]) refers to self-inflicted injury[48] or to the consent to injury[49] which precludes
in a loud voice within hearing distance of several guests: the recovery of damages by one who has knowingly and voluntarily exposed himself to
In putting appellant in a very embarrassing situation, telling him that he should not finish danger, even if he is not negligent in doing so.[50] As formulated by petitioners, however,
his food and to leave the place within the hearing distance of other guests is an act which this doctrine does not find application to the case at bar because even if respondent
is contrary to morals, good customs . . ., for which appellees should compensate the Reyes assumed the risk of being asked to leave the party, petitioners, under Articles 19
appellant for the damage suffered by the latter as a consequence therefore (Art. 21, and 21 of the New Civil Code, were still under obligation to treat him fairly in order not to
New Civil Code). The liability arises from the acts which are in themselves legal or not expose him to unnecessary ridicule and shame.
prohibited, but contrary to morals or good customs. Conversely, even in the exercise of a Thus, the threshold issue is whether or not Ruby Lim acted abusively in asking Roberto
formal right, [one] cannot with impunity intentionally cause damage to another in a Reyes, a.k.a. Amay Bisaya, to leave the party where he was not invited by the celebrant
manner contrary to morals or good customs.[43] thereof thereby becoming liable under Articles 19 and 21 of the Civil Code.
Parenthetically, and if Ruby Lim were so liable, whether or not Hotel Nikko, as her embarrassment to him. It was plaintiffs reaction to the request that must have made the
employer, is solidarily liable with her. other guests aware of what transpired between them. . .
As the trial court and the appellate court reached divergent and irreconcilable Had plaintiff simply left the party as requested, there was no need for the police to take
conclusions concerning the same facts and evidence of the case, this Court is left without him out.[56]
choice but to use its latent power to review such findings of facts. Indeed, the general Moreover, another problem with Mr. Reyess version of the story is that it is
rule is that we are not a trier of facts as our jurisdiction is limited to reviewing and revising unsupported. It is a basic rule in civil cases that he who alleges proves. Mr. Reyes, however,
errors of law.[51] One of the exceptions to this general rule, however, obtains herein as the had not presented any witness to back his story up. All his witnesses Danny Rodinas, Pepito
findings of the Court of Appeals are contrary to those of the trial court.[52] The lower court Guerrero and Alexander Silva - proved only that it was Dr. Filart who invited him to the
ruled that Ms. Lim did not abuse her right to ask Mr. Reyes to leave the party as she talked party.[57]
to him politely and discreetly. The appellate court, on the other hand, held that Ms. Lim is Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to which he
liable for damages as she needlessly embarrassed Mr. Reyes by telling him not to finish his was not invited, cannot be made liable to pay for damages under Articles 19 and 21 of
food and to leave the place within hearing distance of the other guests. Both courts, the Civil Code. Necessarily, neither can her employer, Hotel Nikko, be held liable as its
however, were in agreement that it was Dr. Filarts invitation that brought Mr. Reyes to the liability springs from that of its employee.[58]
party. Article 19, known to contain what is commonly referred to as the principle of abuse
The consequential question then is: Which version is credible? of rights,[59] is not a panacea for all human hurts and social grievances. Article 19 states:
From an in depth review of the evidence, we find more credible the lower courts Art. 19. Every person must, in the exercise of his rights and in the performance of his duties,
findings of fact. act with justice, give everyone his due, and observe honesty and good faith.
First, let us put things in the proper perspective. Elsewhere, we explained that when a right is exercised in a manner which does not
We are dealing with a formal party in a posh, five-star hotel,[53] for-invitation-only, conform with the norms enshrined in Article 19 and results in damage to another, a legal
thrown for the hotels former Manager, a Japanese national. Then came a person who wrong is thereby committed for which the wrongdoer must be responsible.[60] The object
was clearly uninvited (by the celebrant)[54] and who could not just disappear into the of this article, therefore, is to set certain standards which must be observed not only in the
crowd as his face is known by many, being an actor. While he was already spotted by exercise of ones rights but also in the performance of ones duties.[61] These standards are
the organizer of the party, Ms. Lim, the very person who generated the guest list, it did not the following: act with justice, give everyone his due and observe honesty and good
yet appear that the celebrant was aware of his presence. Ms. Lim, mindful of the faith.[62] Its antithesis, necessarily, is any act evincing bad faith or intent to injure. Its
celebrants instruction to keep the party intimate, would naturally want to get rid of the elements are the following: (1) There is a legal right or duty; (2) which is exercised in bad
gate-crasher in the most hush-hush manner in order not to call attention to a glitch in an faith; (3) for the sole intent of prejudicing or injuring another.[63] When Article 19 is violated,
otherwise seamless affair and, in the process, risk the displeasure of the celebrant, her an action for damages is proper under Articles 20 or 21 of the Civil Code. Article 20
former boss. To unnecessarily call attention to the presence of Mr. Reyes would certainly pertains to damages arising from a violation of law [64] which does not obtain herein as Ms.
reflect badly on Ms. Lims ability to follow the instructions of the celebrant to invite only his Lim was perfectly within her right to ask Mr. Reyes to leave. Article 21, on the other hand,
close friends and some of the hotels personnel. Mr. Reyes, upon whom the burden rests states:
to prove that indeed Ms. Lim loudly and rudely ordered him to leave, could not offer any Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary
satisfactory explanation why Ms. Lim would do that and risk ruining a formal and intimate to morals, good customs or public policy shall compensate the latter for the damage.
affair. On the contrary, Mr. Reyes, on cross-examination, had unwittingly sealed his fate Article 21[65] refers to acts contra bonus mores and has the following elements: (1) There is
by admitting that when Ms. Lim talked to him, she was very close. Close enough for him an act which is legal; (2) but which is contrary to morals, good custom, public order, or
to kiss: public policy; and (3) it is done with intent to injure.[66]
Q: And, Mr. Reyes, you testified that Miss Lim approached you while you were A common theme runs through Articles 19 and 21,[67] and that is, the act
at the buffet table? How close was she when she approached you? complained of must be intentional.[68]
A: Very close because we nearly kissed each other. As applied to herein case and as earlier discussed, Mr. Reyes has not shown that Ms.
Q: And yet, she shouted for you to go down? She was that close and she Lim was driven by animosity against him. These two people did not know each other
shouted? personally before the evening of 13 October 1994, thus, Mr. Reyes had nothing to offer for
A: Yes. She said, wag kang kumain, hindi ka imbitado dito, bumaba ka na an explanation for Ms. Lims alleged abusive conduct except the statement that Ms. Lim,
lang. being single at 44 years old, had a very strong bias and prejudice against (Mr. Reyes)
Q: So, you are testifying that she did this in a loud voice? possibly influenced by her associates in her work at the hotel with foreign
... businessmen.[69]The lameness of this argument need not be belabored. Suffice it to say
A: Yes. If it is not loud, it will not be heard by many.[55] that a complaint based on Articles 19 and 21 of the Civil Code must necessarily fail if it
In the absence of any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and has nothing to recommend it but innuendos and conjectures.
expose him to ridicule and shame, it is highly unlikely that she would shout at him from a Parenthetically, the manner by which Ms. Lim asked Mr. Reyes to leave was likewise
very close distance. Ms. Lim having been in the hotel business for twenty years wherein acceptable and humane under the circumstances. In this regard, we cannot put our
being polite and discreet are virtues to be emulated, the testimony of Mr. Reyes that she imprimatur on the appellate courts declaration that Ms. Lims act of personally
acted to the contrary does not inspire belief and is indeed incredible. Thus, the lower court approaching Mr. Reyes (without first verifying from Mrs. Filart if indeed she invited Mr.
was correct in observing that Reyes) gave rise to a cause of action predicated upon mere rudeness or lack of
Considering the closeness of defendant Lim to plaintiff when the request for the latter to consideration of one person, which calls not only protection of human dignity but respect
leave the party was made such that they nearly kissed each other, the request was meant of such dignity.[70]Without proof of any ill-motive on her part, Ms. Lims act of by-passing
to be heard by him only and there could have been no intention on her part to cause Mrs. Filart cannot amount to abusive conduct especially because she did inquire from
Mrs. Filarts companion who told her that Mrs. Filart did not invite Mr. Reyes.[71] If at all, Ms.
Lim is guilty only of bad judgment which, if done with good intentions, cannot amount to b. FORTY THOUSAND PESOS (P40,000.00) actual damages incurred by plaintiffs for
bad faith. burial and related expenses;
Not being liable for both actual and moral damages, neither can petitioners Lim c. TEN THOUSAND PESOS (P10,000.00) for attorneys fees;
and Hotel Nikko be made answerable for exemplary damages[72] especially for the d. FIVE HUNDRED THOUSAND PESOS (P500,000.00) for moral damages; and to pay
reason stated by the Court of Appeals. The Court of Appeals held costs.
Not a few of the rich people treat the poor with contempt because of the latters lowly 2. Their liability being only subsidiary, defendants James Daniel, Sr. and Guada Daniel are
station in life. This has to be limited somewhere. In a democracy, such a limit must be hereby ordered to pay herein plaintiffs the amount of damages above-stated in the
established. Social equality is not sought by the legal provisions under consideration, but event of insolvency of principal obligor St. Marys Academy of Dipolog City;
due regard for decency and propriety (Code Commission, pp. 33-34). And by way of 3. Defendant James Daniel II, being a minor at the time of the commission of the tort and
example or correction for public good and to avert further commission of such acts, who was under special parental authority of defendant St. Marys Academy, is ABSOLVED
exemplary damages should be imposed upon appellees.[73] from paying the above-stated damages, same being adjudged against defendants St.
The fundamental fallacy in the above-quoted findings is that it runs counter with the very Marys Academy, and subsidiarily, against his parents;
facts of the case and the evidence on hand. It is not disputed that at the time of the 4. Defendant Vivencio Villanueva is hereby ABSOLVED of any liability. His counterclaim
incident in question, Mr. Reyes was an actor of long standing; a co-host of a radio not being in order as earlier discussed in this decision, is hereby DISMISSED.
program over DZRH; a Board Member of the Music Singer Composer (MUSICO) chaired IT IS SO ORDERED. (Decision, pp. 32-33; Records, pp. 205-206).
by popular singer Imelda Papin; a showbiz Coordinator of Citizen Crime Watch; and 1992 From the records it appears that from 13 to 20 February 1995, defendant-appellant St.
official candidate of the KBL Party for Governor of Bohol; and an awardee of a number Marys Academy of Dipolog City conducted an enrollment drive for the school year 1995-
of humanitarian organizations of the Philippines.[74] During his direct examination on 1996. A facet of the enrollment campaign was the visitation of schools from where
rebuttal, Mr. Reyes stressed that he had income[75] and nowhere did he say otherwise. On prospective enrollees were studying. As a student of St. Marys Academy, Sherwin
the other hand, the records are bereft of any information as to the social and economic Carpitanos was part of the campaigning group. Accordingly, on the fateful day, Sherwin,
standing of petitioner Ruby Lim. Consequently, the conclusion reached by the appellate along with other high school students were riding in a Mitsubishi jeep owned by defendant
court cannot withstand scrutiny as it is without basis. Vivencio Villanueva on their way to Larayan Elementary School,
All told, and as far as Ms. Lim and Hotel Nikko are concerned, any damage which Larayan, Dapitan City. The jeep was driven by James Daniel II then 15 years old and a
Mr. Reyes might have suffered through Ms. Lims exercise of a legitimate right done within student of the same school. Allegedly, the latter drove the jeep in a reckless manner and
the bounds of propriety and good faith, must be his to bear alone. as a result the jeep turned turtle.
WHEREFORE, premises considered, the petition filed by Ruby Lim and Nikko Hotel Sherwin Carpitanos died as a result of the injuries he sustained from the accident.[2]
Manila Garden is GRANTED. The Decision of the Court of Appeals dated 26 November In due time, petitioner St. Marys academy appealed the decision to the Court of
2001 and its Resolution dated 09 July 2002 are hereby REVERSED and SET ASIDE. The Appeals.[3]
Decision of the Regional Trial Court of Quezon City, Branch 104, dated 26 April 1999 is On February 29, 2000, the Court of Appeals promulgated a decision reducing the
hereby AFFIRMED. No costs. actual damages to P25,000.00 but otherwise affirming the decision a quo, in toto.[4]
On February 29, 2000, petitioner St. Marys Academy filed a motion for
[G.R. No. 143363. February 6, 2002] reconsideration of the decision. However, on May 22, 2000, the Court of Appeals denied
ST. MARYS ACADEMY, petitioner, vs. WILLIAM CARPITANOS and LUCIA S. CARPITANOS, the motion.[5]
GUADA DANIEL, JAMES DANIEL II, JAMES DANIEL, SR., and VIVENCIO Hence, this appeal.[6]
VILLANUEVA, respondents. The Issues
The Case 1) Whether the Court of Appeals erred in holding the petitioner liable for
The case is an appeal via certiorari from the decision[1] of the Court of Appeals as damages for the death of Sherwin Carpitanos.
well as the resolution denying reconsideration, holding petitioner liable for damages 2) Whether the Court of Appeals erred in affirming the award of moral
arising from an accident that resulted in the death of a student who had joined a damages against the petitioner.
campaign to visit the public schools in Dipolog City to solicit enrollment. The Courts Ruling
The Facts We reverse the decision of the Court of Appeals.
The facts, as found by the Court of Appeals, are as follows: The Court of Appeals held petitioner St. Marys Academy liable for the death of
Claiming damages for the death of their only son, Sherwin Carpitanos, spouses William Sherwin Carpitanos under Articles 218[7] and 219[8] of the Family Code, pointing out that
Carpitanos and Lucia Carpitanos filed on June 9, 1995 a case against James Daniel II and petitioner was negligent in allowing a minor to drive and in not having a teacher
his parents, James Daniel Sr. and Guada Daniel, the vehicle owner, Vivencio Villanueva accompany the minor students in the jeep.
and St. Marys Academy before the Regional Trial Court of Dipolog City. Under Article 218 of the Family Code, the following shall have special parental
On 20 February 1997, Branch 6 of the Regional Trial Court of Dipolog City rendered its authority over a minor child while under their supervision, instruction or custody: (1) the
decision the dispositive portion of which reads as follows: school, its administrators and teachers; or (2) the individual, entity or institution engaged
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in the following in child care. This special parental authority and responsibility applies to all authorized
manner: activities, whether inside or outside the premises of the school, entity or institution. Thus,
1. Defendant St. Marys Academy of Dipolog City, is hereby ordered to pay plaintiffs such authority and responsibility applies to field trips, excursions and other affairs of the
William Carpitanos and Luisa Carpitanos, the following sums of money: pupils and students outside the school premises whenever authorized by the school or its
a. FIFTY THOUSAND PESOS (P50,000.00) indemnity for the loss of life of Sherwin S. teachers.[9]
Carpitanos; Under Article 219 of the Family Code, if the person under custody is a minor, those
exercising special parental authority are principally and solidarily liable for damages
caused by the acts or omissions of the unemancipated minor while under their Though incapable of pecuniary computation, moral damages may be recovered
supervision, instruction, or custody.[10] if they are the proximate result of the defendants wrongful act or omission.[14] In this case,
However, for petitioner to be liable, there must be a finding that the act or omission the proximate cause of the accident was not attributable to petitioner.
considered as negligent was the proximate cause of the injury caused because the For the reason that petitioner was not directly liable for the accident, the decision
negligence must have a causal connection to the accident.[11] of the Court of Appeals ordering petitioner to pay death indemnity to respondent
In order that there may be a recovery for an injury, however, it must be shown that the Carpitanos must be deleted. Moreover, the grant of attorneys fees as part of damages is
injury for which recovery is sought must be the legitimate consequence of the wrong the exception rather than the rule.[15] The power of the court to award attorneys fees
done; the connection between the negligence and the injury must be a direct and under Article 2208 of the Civil Code demands factual, legal and equitable
natural sequence of events, unbroken by intervening efficient causes. In other words, the justification.[16] Thus, the grant of attorneys fees against the petitioner is likewise deleted.
negligence must be the proximate cause of the injury. For, negligence, no matter in what Incidentally, there was no question that the registered owner of the vehicle was
it consists, cannot create a right of action unless it is the proximate cause of the injury respondent Villanueva. He never denied and in fact admitted this fact. We have held
complained of. And the proximate cause of an injury is that cause, which, in natural and that the registered owner of any vehicle, even if not used for public service, would
continuous sequence, unbroken by any efficient intervening cause, produces the injury, primarily be responsible to the public or to third persons for injuries caused the latter while
and without which the result would not have occurred.[12] the vehicle was being driven on the highways or streets.[17] Hence, with the overwhelming
In this case, the respondents failed to show that the negligence of petitioner was evidence presented by petitioner and the respondent Daniel spouses that the accident
the proximate cause of the death of the victim. occurred because of the detachment of the steering wheel guide of the jeep, it is not
Respondents Daniel spouses and Villanueva admitted that the immediate cause of the school, but the registered owner of the vehicle who shall be held responsible for
the accident was not the negligence of petitioner or the reckless driving of James Daniel damages for the death of Sherwin Carpitanos.
II, but the detachment of the steering wheel guide of the jeep. The Fallo
In their comment to the petition, respondents Daniel spouses and Villanueva WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of
admitted the documentary exhibits establishing that the cause of the accident was the Appeals[18] and that of the trial court.[19] The Court remands the case to the trial court for
detachment of the steering wheel guide of the jeep. Hence, the cause of the accident determination of the liability of defendants, excluding petitioner St. Marys
was not the recklessness of James Daniel II but the mechanical defect in the jeep of Academy, Dipolog City.
Vivencio Villanueva. Respondents, including the spouses Carpitanos, parents of the No costs.
deceased Sherwin Carpitanos, did not dispute the report and testimony of the traffic SO ORDERED.
investigator who stated that the cause of the accident was the detachment of the
steering wheel guide that caused the jeep to turn turtle. Guanio v. Makati Shangri-la Hotel
Significantly, respondents did not present any evidence to show that the proximate For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna
cause of the accident was the negligence of the school authorities, or the reckless driving Hernandez-Guanio (petitioners) booked at the Shangri-la Hotel Makati (the hotel).
of James Daniel II. Hence, the respondents reliance on Article 219 of the Family Code that
those given the authority and responsibility under the preceding Article shall be principally Prior to the event, Makati Shangri-La Hotel & Resort, Inc. (respondent) scheduled an initial
and solidarily liable for damages caused by acts or omissions of the unemancipated food tasting. Petitioners claim that they requested the hotel to prepare for seven persons
minor was unfounded. ─ the two of them, their respective parents, and the wedding coordinator. At the
Further, there was no evidence that petitioner school allowed the minor James scheduled food tasting, however, respondent prepared for only six.
Daniel II to drive the jeep of respondent Vivencio Villanueva. It was Ched Villanueva,
grandson of respondent Vivencio Villanueva, who had possession and control of the Petitioners initially chose a set menu which included black cod, king prawns and angel
jeep. He was driving the vehicle and he allowed James Daniel II, a minor, to drive the hair pasta with wild mushroom sauce for the main course which cost P1,000.00 per person.
jeep at the time of the accident. They were, however, given an option in which salmon, instead of king prawns, would be
Hence, liability for the accident, whether caused by the negligence of the minor in the menu at P950.00 per person. They in fact partook of the salmon.
driver or mechanical detachment of the steering wheel guide of the jeep, must be pinned
on the minors parents primarily. The negligence of petitioner St. Marys Academy was only Three days before the event, a final food tasting took place. Petitioners aver that the
a remote cause of the accident. Between the remote cause and the injury, there salmon served was half the size of what they were served during the initial food tasting;
intervened the negligence of the minors parents or the detachment of the steering wheel and when queried about it, the hotel quoted a much higher price (P1,200.00) for the size
guide of the jeep. that was initially served to them. The parties eventually agreed on a final price ─ P1,150
The proximate cause of an injury is that cause, which, in natural and continuous per person.
sequence, unbroken by any efficient intervening cause, produces the injury, and without
which the result would not have occurred.[13] A day before the event or on July 27, 2001, the parties finalized and forged their
Considering that the negligence of the minor driver or the detachment of the contract.[1]
steering wheel guide of the jeep owned by respondent Villanueva was an event over
which petitioner St. Marys Academy had no control, and which was the proximate cause Petitioners claim that during the reception, respondents representatives,
of the accident, petitioner may not be held liable for the death resulting from such Catering Director Bea Marquez and Sales Manager Tessa Alvarez, did not show up
accident. despite their assurance that they would; their guests complained of the delay in the
Consequently, we find that petitioner likewise cannot be held liable for moral service of the dinner; certain items listed in the published menu were unavailable; the
damages in the amount of P500,000.00 awarded by the trial court and affirmed by the hotels waiters were rude and unapologetic when confronted about the delay; and
Court of Appeals. despite Alvarezs promise that there would be no charge for the extension of the reception
beyond 12:00 midnight, they were billed and paid P8,000 per hour for the three-hour Indeed, we feel as strongly as you do that the services you received
extension of the event up to 4:00 A.M. the next day. were unacceptable and definitely not up to our standards. We understand that
it is our job to provide excellent service and in this instance, we have fallen short
Petitioners further claim that they brought wine and liquor in accordance with their open of your expectations. We ask you please to accept our profound apologies for
bar arrangement, but these were not served to the guests who were forced to pay for causing such discomfort and annoyance. [4] (underscoring supplied)
their drinks.
The trial court observed that from the tenor of the letter . . . the defendant[-herein
Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc. respondent] admits that the services the plaintiff[-herein petitioners] received were
(respondent) and received an apologetic reply from Krister Svensson, the hotels Executive unacceptable and definitely not up to their standards.[5]
Assistant Manager in charge of Food and Beverage. They nevertheless filed a
complaint for breach of contract and damages before the Regional Trial Court (RTC) On appeal, the Court of Appeals, by Decision of July 27, 2009,[6] reversed the trial courts
of Makati City. decision, it holding that the proximate cause of petitioners injury was an unexpected
increase in their guests:
In its Answer, respondent claimed that petitioners requested a combination of
king prawns and salmon, hence, the price was increased to P1,200.00 per person, but x x x Hence, the alleged damage or injury brought about by the confusion,
discounted at P1,150.00; that contrary to petitioners claim, Marquez and Alvarez were inconvenience and disarray during the wedding reception may not be
present during the event, albeit they were not permanently stationed thereat as there attributed to defendant-appellant Shangri-la.
were three other hotel functions; that while there was a delay in the service of the meals,
the same was occasioned by the sudden increase of guests to 470 from the guaranteed We find that the said proximate cause, which is entirely attributable to plaintiffs-
expected minimum number of guests of 350 to a maximum of 380, as stated in the appellants, set the chain of events which resulted in the alleged
Banquet Event Order (BEO);[2] and that Isaac Albacea, Banquet Service Director, in fact inconveniences, to the plaintiffs-appellants. Given the circumstances that
relayed the delay in the service of the meals to petitioner Luigis father, Gil Guanio. obtained, only the Sps. Guanio may bear whatever consequential damages
that they may have allegedly suffered.[7] (underscoring supplied)
Respecting the belated service of meals to some guests, respondent attributed it to the
insistence of petitioners wedding coordinator that certain guests be served first. Petitioners motion for reconsideration having been denied by Resolution of November 18,
2009, the present petition for review was filed.
On Svenssons letter, respondent, denying it as an admission of liability, claimed that it was
meant to maintain goodwill to its customers. The Court finds that since petitioners complaint arose from a contract, the doctrine of
proximate cause finds no application to it:
By Decision of August 17, 2006, Branch 148 of the Makati RTC rendered judgment in favor The doctrine of proximate cause is applicable only in actions for quasi-
of petitioners, disposing as follows: delicts, not in actions involving breach of contract. x x x The doctrine is a device
for imputing liability to a person where there is no relation between him and
WHEREFORE, premises considered, judgment is hereby rendered in favor of the another party. In such a case, the obligation is created by law itself. But, where
plaintiffs and against the defendant ordering the defendants to pay the plaintiff there is a pre-existing contractual relation between the parties, it is the parties
the following: themselves who create the obligation, and the function of the law is merely to
regulate the relation thus created.[8] (emphasis and underscoring supplied)
1) The amount of P350,000.00 by way of actual damages;
2) The amount of P250,000.00 for and as moral damages; What applies in the present case is Article 1170 of the Civil Code which reads:
3) The amount of P100,000.00 as exemplary damages;
4) The amount of P100,000.00 for and as attorneys fees. Art. 1170. Those who in the performance of their obligations are guilty
of fraud, negligence or delay, and those who in any manner contravene the
With costs against the defendant. tenor thereof, are liable for damages.

SO ORDERED.[3]
RCPI v. Verchez, et al. [9] enlightens:
In finding for petitioners, the trial court relied heavily on the letter of Svensson In culpa contractual x x x the mere proof of the existence of the
which is partly quoted below: contract and the failure of its compliance justify, prima facie, a corresponding
right of relief. The law, recognizing the obligatory force of contracts, will not
Upon receiving your comments on our service rendered during your reception permit a party to be set free from liability for any kind of misperformance of the
here with us, we are in fact, very distressed. Right from minor issues pappadums contractual undertaking or a contravention of the tenor thereof. A breach
served in the soup instead of the creutons, lack of valet parkers, hard rolls being upon the contract confers upon the injured party a valid cause for recovering
too hard till a major one slow service, rude and arrogant waiters, we have that which may have been lost or suffered. The remedy serves to preserve the
disappointed you in all means. interests of the promissee that may include his expectation interest, which is his
interest in having the benefit of his bargain by being put in as good a position
as he would have been in had the contract been performed, or his reliance
interest, which is his interest in being reimbursed for loss caused by reliance on Kalalo v. Luz holds:[12]
the contract by being put in as good a position as he would have been in had
the contract not been made; or his restitution interest, which is his interest in Statements which are not estoppels nor judicial admissions have no quality of
having restored to him any benefit that he has conferred on the other conclusiveness, and an opponent whose admissions have been offered against
party. Indeed, agreements can accomplish little, either for their makers or for him may offer any evidence which serves as an explanation for his former
society, unless they are made the basis for action. The effect of every infraction assertion of what he now denies as a fact.
is to create a new duty, that is, to make RECOMPENSE to the one who has been
injured by the failure of another to observe his contractual obligation unless he Respondents Catering Director, Bea Marquez, explained the hotels
can show extenuating circumstances, like proof of his exercise of due procedure on receiving and processing complaints, viz:
diligence x x x or of the attendance of fortuitous event, to excuse him from his
ensuing liability. (emphasis and underscoring in the original; capitalization ATTY. CALMA:
supplied) Q You mentioned that the letter indicates an acknowledgement of the concern
and that there was-the first letter there was an acknowledgment of the
The pertinent provisions of the Banquet and Meeting Services Contract concern and an apology, not necessarily indicating that such or
between the parties read: admitting fault?
A Yes.
4.3 The ENGAGER shall be billed in accordance with the prescribed Q Is this the letter that you are referring to?
rate for the minimum guaranteed number of persons contracted for, regardless If I may, Your Honor, that was the letter dated August 4, 2001, previously marked
of under attendance or non-appearance of the expected number of guests, as plaintiffs exhibits, Your Honor. What is the procedure of the hotel with
except where the ENGAGER cancels the Function in accordance with its Letter respect to customer concern?
of Confirmation with the HOTEL. Should the attendance exceed the minimum A Upon receipt of the concern from the guest or client, we acknowledge
guaranteed attendance, the ENGAGER shall also be billed at the actual rate receipt of such concern, and as part of procedure in service industry
per cover in excess of the minimum guaranteed attendance. particularly Makati Shangri-la we apologize for whatever
inconvenience but at the same time saying, that of course, we would
4.5. The ENGAGER must inform the HOTEL at least forty eight (48) hours go through certain investigation and get back to them for the
before the scheduled date and time of the Function of any change in the feedback with whatever concern they may have.
minimum guaranteed covers. In the absence of such notice, paragraph 4.3 shall Q Your Honor, I just like at this point mark the exhibits, Your Honor, the letter dated
apply in the event of under attendance. In case the actual number of August 4, 2001 identified by the witness, Your Honor, to be marked as
attendees exceed the minimum guaranteed number by ten percent (10%), the Exhibit 14 and the signature of Mr. Krister Svensson be marked as Exhibit
HOTEL shall not in any way be held liable for any damage or 14-A.[13]
inconvenience which may be caused thereby. The ENGAGER shall also xxxx
undertake to advise the guests of the situation and take positive steps to remedy Q In your opinion, you just mentioned that there is a procedure that the hotel
the same.[10](emphasis, italics and underscoring supplied) follows with respect to the complaint, in your opinion was this
procedure followed in this particular concern?
Breach of contract is defined as the failure without legal reason to comply with A Yes, maam.
the terms of a contract. It is also defined as the [f]ailure, without legal excuse, to Q What makes you say that this procedure was followed?
perform any promise which forms the whole or part of the contract. A As I mentioned earlier, we proved that we did acknowledge the concern of
the client in this case and we did emphatize from the client and
[11]The appellate court, and even the trial court, observed that petitioners were apologized, and at the same time got back to them in whatever
remiss in their obligation to inform respondent of the change in the expected investigation we have.
number of guests. The observation is reflected in the records of the Q You said that you apologized, what did you apologize for?
case. Petitioners failure to discharge such obligation thus excused, as the A Well, first of all it is a standard that we apologize, right? Being in the service
above-quoted paragraph 4.5 of the parties contract provide, respondent from industry, it is a practice that we apologize if there is any
liability for any damage or inconvenience occasioned thereby. inconvenience, so the purpose for apologizing is mainly to show
empathy and to ensure the client that we are hearing them out and
As for petitioners claim that respondent departed from its verbal agreement that we will do a better investigation and it is not in any way that we
with petitioners, the same fails, given that the written contract which the parties entered are admitting any fault.[14] (underscoring supplied)
into the day before the event, being the law between them.
To the Court, the foregoing explanation of the hotels Banquet Director
Respecting the letter of Svensson on which the trial court heavily relied as overcomes any presumption of admission of breach which Svenssons letter might have
admission of respondents liability but which the appellate court brushed aside, the Court conveyed.
finds the appellate courts stance in order. It is not uncommon in the hotel industry to The exculpatory clause notwithstanding, the Court notes that respondent could
receive comments, criticisms or feedback on the service it delivers. It is also customary for have managed the situation better, it being held in high esteem in the hotel and service
hotel management to try to smooth ruffled feathers to preserve goodwill among its industry. Given respondents vast experience, it is safe to presume that this is not its first
clientele. encounter with booked events exceeding the guaranteed cover. It is not audacious to
expect that certain measures have been placed in case this predicament crops up. That equivalent to twelve (12%) of their basic monthly salary as of December 31,
regardless of these measures, respondent still received complaints as in the present case, 2000.
does not amuse. c) Effective January 1, 2002, all employees on regular status and within the
Respondent admitted that three hotel functions coincided with petitioners bargaining unit on or before said date shall be granted a salary increase
reception. To the Court, the delay in service might have been avoided or minimized if equivalent to eleven percent (11%) of their basic monthly salary as of
respondent exercised prescience in scheduling events. No less than quality service should December 31, 2001.
be delivered especially in events which possibility of repetition is close to nil. Petitioners
are not expected to get married twice in their lifetimes. The wage salary increase of the first year of this Agreement shall be over and
In the present petition, under considerations of equity, the Court deems it just to above the wage/salary increase, including the wage distortion adjustment,
award the amount of P50,000.00 by way of nominal damages to petitioners, for the granted by the COMPANY on November 1, 1999 as per Wage Order No. NCR-
discomfiture that they were subjected to during to the event.[15] The Court recognizes that 07.
every person is entitled to respect of his dignity, personality, privacy and peace of
mind.[16] Respondents lack of prudence is an affront to this right. The wage/salary increases for the years 2001 and 2002 shall be deemed
inclusive of the mandated minimum wage increases under future Wage Orders,
WHEREFORE, the Court of Appeals Decision dated July 27, 2009 that may be issued after Wage Order No. NCR-07, and shall be considered as
is PARTIALLY REVERSED. Respondent is, in light of the foregoing discussion, ORDERED to pay correction of any wage distortion that may have been brought about by the
the amount of P50,000.00 to petitioners by way of nominal damages. said future Wage Orders. Thus the wage/salary increases in 2001 and 2002 shall
be deemed as compliance to future wage orders after Wage Order No. NCR-
TSPI, Inc. v. TSPOC Employees Union 07.
The path towards industrial peace is a two-way street. Fundamental fairness and
protection to labor should always govern dealings between labor and management. Consequently, on January 1, 2000, all the regular rank-and-file employees of
Seemingly conflicting provisions should be harmonized to arrive at an interpretation that TSPIC received a 10% increase in their salary. Accordingly, the following nine (9)
is within the parameters of the law, compassionate to labor, yet, fair to management. respondents (first group) who were already regular employees received the said increase
in their salary: Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice
In this Petition for Review on Certiorari under Rule 45, petitioner TSPIC Corporation (TSPIC) Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, and Rachel Novillas.[9]
seeks to annul and set aside the October 22, 2003 Decision [5] and April 23, 2004
Resolution[6] of the Court of Appeals (CA) in CA-G.R. SP No. 68616, which affirmed the The CBA also provided that employees who acquire regular employment status
September 13, 2001 Decision[7] of Accredited Voluntary Arbitrator Josephus B. Jimenez in within the year but after the effectivity of a particular salary increase shall receive a
National Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57. proportionate part of the increase upon attainment of their regular status. Sec. 2 of the
CBA provides:
TSPIC is engaged in the business of designing, manufacturing, and marketing integrated
circuits to serve the communication, automotive, data processing, and aerospace SECTION 2. Regularization Increase.A covered daily paid employee who
industries. Respondent TSPIC Employees Union (FFW) (Union), on the other hand, is the acquires regular status within the year subsequent to the effectivity of a
registered bargaining agent of the rank-and-file employees of TSPIC. The respondents, particular salary/wage increase mentioned in Section 1 above shall be granted
Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico a salary/wage increase in proportionate basis as follows:
Alipit, Glen Batula, Ser John Hernandez, Rachel Novillas, Nimfa Anilao, Rose Subardiaga,
Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Regularization Period Equivalent Increase
Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, - 1st Quarter 100%
Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, are all members - 2nd Quarter 75%
of the Union. - 3rd Quarter 50%
- 4th Quarter 25%
In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA)[8] for
the years 2000 to 2004. The CBA included a provision on yearly salary increases starting Thus, a daily paid employee who becomes a regular employee covered by this
January 2000 until January 2002. Section 1, Article X of the CBA provides, as follows: Agreement only on May 1, 2000, i.e., during the second quarter and subsequent
to the January 1, 2000 wage increase under this Agreement, will be entitled to
Section 1. Salary/ Wage Increases.Employees covered by this Agreement shall a wage increase equivalent to seventy-five percent (75%) of ten percent (10%)
be granted salary/wage increases as follows: of his basic pay. In the same manner, an employee who acquires regular status
on December 1, 2000 will be entitled to a salary increase equivalent to twenty-
a) Effective January 1, 2000, all employees on regular status and within the five percent (25%) of ten percent (10%) of his last basic pay.
bargaining unit on or before said date shall be granted a salary increase
equivalent to ten percent (10%) of their basic monthly salary as of On the other hand, any monthly-paid employee who acquires regular status
December 31, 1999. within the term of the Agreement shall be granted regularization increase
b) Effective January 1, 2001, all employees on regular status and within the equivalent to 10% of his regular basic salary.
bargaining unit on or before said date shall be granted a salary increase
 Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, P991.98 for nine months) to P450.58 a month (or P4,055.22 for nine
National Capital Region, issued Wage Order No. NCR-08[10] (WO No. 8) which raised the months), as well as corresponding monthly entitlements after 30
daily minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000. September 2001, plus legal interests until full payment,
Conformably, the wages of 17 probationary employees, namely: Nimfa Anilao, Rose
Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie 3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well
Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa as corresponding monthly entitlements after 30 September 2001, plus
Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette legal interest until full payment,
Dulay (second group), were increased to PhP 250.00 effective November 1, 2000.
4) Attorneys fees equal to 10% of all the above monetary awards.
On various dates during the last quarter of 2000, the above named 17
employees attained regular employment[11] and received 25% of 10% of their salaries as The claim for exemplary damages is denied for want of factual basis.
granted under the provision on regularization increase under Article X, Sec. 2 of the CBA.
The parties are hereby directed to comply with their joint voluntary
In January 2001, TSPIC implemented the new wage rates as mandated by the commitment to abide by this Award and thus, submit to this Office jointly, a
CBA. As a result, the nine employees (first group), who were senior to the above-listed written proof of voluntary compliance with this DECISION within ten (10) days
recently regularized employees, received less wages. after the finality hereof.

On January 19, 2001, a few weeks after the salary increase for the year 2001 became SO ORDERED.[14]
effective, TSPICs Human Resources Department notified 24 employees,[12] namely: Maria
Fe Flores, Janice Olaguir, Rachel Novillas, Fe Capistrano, Jerico Alipit, Amy Durias, Glen
Batula, Claire Evelyn Velez, Ser John Hernandez, Nimfa Anilao, Rose Subardiaga, Valerie TSPIC filed a Motion for Reconsideration which was denied in a Resolution
Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, dated November 21, 2001.
Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida
Comullo, and Marie Ann Delos Santos, that due to an error in the automated payroll Aggrieved, TSPIC filed before the CA a petition for review under Rule 43
system, they were overpaid and the overpayment would be deducted from their salaries docketed as CA-G.R. SP No. 68616. The appellate court, through its October 22, 2003
in a staggered basis, starting February 2001. TSPIC explained that the correction of the Decision, dismissed the petition and affirmed in toto the decision of the voluntary
erroneous computation was based on the crediting provision of Sec. 1, Art. X of the CBA. arbitrator. The CA declared TSPICs computation allowing PhP 287 as daily wages to the
The Union, on the other hand, asserted that there was no error and the newly regularized employees to be correct, noting that the computation conformed to
deduction of the alleged overpayment from employees constituted diminution of pay. WO No. 8 and the provisions of the CBA. According to the CA, TSPIC failed to convince
The issue was brought to the grievance machinery, but TSPIC and the Union failed to the appellate court that the deduction was a result of a system error in the automated
reach an agreement. payroll system. The CA explained that when WO No. 8 took effect on November 1, 2000,
the concerned employees were still probationary employees who were receiving the
Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on minimum wage of PhP 223.50. The CA said that effective November 1, 2000, said
the solitary issue of whether or not the acts of the management in making deductions employees should have received the minimum wage of PhP 250. The CA held that when
from the salaries of the affected employees constituted diminution of pay. respondents became regular employees on November 29, 2000, they should be allowed
the salary increase granted them under the CBA at the rate of 25% of 10% of their basic
On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the salary for the year 2000; thereafter, the 12% increase for the year 2001 and the 10%
unilateral deduction made by TSPIC violated Art. 100[13] of the Labor Code. increase for the year 2002 should also be made applicable to them.[15]
The fallo reads: TSPIC filed a Motion for Reconsideration which was denied by the CA in its April 23,
2004 Resolution.
WHEREFORE, in the light of the law on the matter and on the facts
adduced in evidence, judgment is hereby rendered in favor of the Union and TSPIC filed the instant petition which raises this sole issue for our resolution: Does the TSPICs
the named individual employees and against the company, thereby ordering decision to deduct the alleged overpayment from the salaries of the affected members
the [TSPIC] to pay as follows: of the Union constitute diminution of benefits in violation of the Labor Code?

1) to the sixteen (16) newly regularized employees named above, the TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and
amount of P12,642.24 a month or a total of P113,780.16 for nine (9) affirmed by the CA, was flawed, inasmuch as it completely disregarded the crediting
months or P7,111.26 for each of them as well as an additional provision contained in the last paragraph of Sec. 1, Art. X of the CBA.
P12,642.24 (for all), or P790.14 (for each), for every month after 30
September 2001, until full payment, with legal interests for every month We find TSPICs contention meritorious.
of delay;
A Collective Bargaining Agreement is the law between the parties
2) to the nine (9) who were hired earlier than the sixteen (16); also named
above, their respective amount of entitlements, according to the
Unions correct computation, ranging from P110.22 per month (or
 It is familiar and fundamental doctrine in labor law that the CBA is the law of contracts that conflicting provisions should be harmonized to give effect to
between the parties and they are obliged to comply with its provisions.[16] We said so all.[21] Likewise, when general and specific provisions are inconsistent, the specific
in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda: provision shall be paramount to and govern the general provision.[22] Thus, it may be
reasonably concluded that TSPIC granted the salary increases under the condition that
A collective bargaining agreement or CBA refers to the any wage order that may be subsequently issued shall be credited against the previously
negotiated contract between a legitimate labor organization and the granted increase. The intention of the parties is clear: As long as an employee is qualified
employer concerning wages, hours of work and all other terms and to receive the 12% increase in salary, the employee shall be granted the increase; and as
conditions of employment in a bargaining unit. As in all contracts, the long as an employee is granted the 12% increase, the amount shall be credited against
parties in a CBA may establish such stipulations, clauses, terms and any wage order issued after WO No. 7.
conditions as they may deem convenient provided these are not
contrary to law, morals, good customs, public order or public policy. Respondents should not be allowed to receive benefits from the CBA while avoiding the
Thus, where the CBA is clear and unambiguous, it becomes the law counterpart crediting provision. They have received their regularization increases under
between the parties and compliance therewith is mandated by the Art. X, Sec. 2 of the CBA and the yearly increase for the year 2001. They should not then
express policy of the law. [17] be allowed to avoid the crediting provision which is an accompanying condition.

Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt Respondents attained regular employment status before January 1, 2001. WO
upon the intention of the contracting parties, the literal meaning of their stipulations shall No. 8, increasing the minimum wage, was issued after WO No. 7. Thus, respondents
control.[18] However, sometimes, as in this case, though the provisions of the CBA seem rightfully received the 12% salary increase for the year 2001 granted in the CBA; and
clear and unambiguous, the parties sometimes arrive at conflicting interpretations. Here, consequently, TSPIC rightfully credited that 12% increase against the increase granted by
TSPIC wants to credit the increase granted by WO No. 8 to the increase granted under WO No. 8.
the CBA. According to TSPIC, it is specifically provided in the CBA that the salary/wage
increase for the year 2001 shall be deemed inclusive of the mandated minimum wage Proper formula for computing the salaries for the year 2001
increases under future wage orders that may be issued after Wage Order No. 7.
The Union, on the other hand, insists that the crediting provision of the CBA finds no Thus, the proper computation of the salaries of individual respondents is as
application in the present case, since at the time WO No. 8 was issued, the probationary follows:
employees (second group) were not yet covered by the CBA, particularly by its crediting
provision. (1) With regard to the first group of respondents who attained regular
As a general rule, in the interpretation of a contract, the intention of the parties employment status before the effectivity of WO No. 8, the computation is as follows:
is to be pursued.[19] Littera necat spiritus vivificat. An instrument must be interpreted
according to the intention of the parties. It is the duty of the courts to place a practical For respondents Jerico Alipit and Glen Batula:[23]
and realistic construction upon it, giving due consideration to the context in which it is
negotiated and the purpose which it is intended to serve.[20] Absurd and illogical Wage rate before WO No. 8... PhP 234.67
interpretations should also be avoided. Considering that the parties have unequivocally Increase due to WO No. 8
agreed to substitute the benefits granted under the CBA with those granted under wage setting the minimum wage at PhP 250. 15.33
orders, the agreement must prevail and be given full effect. Total Salary upon effectivity of WO No. 8. PhP 250.00
Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that,
effective January 1, 2001, all employees on regular status and within the bargaining unit Increase for 2001 (12% of 2000 salary)........... PhP 30.00
on or before said date shall be granted a salary increase equivalent to twelve (12%) of Less the wage increase under WO No. 8. 15.33
their basic monthly salary as of December 31, 2000. The 12% salary increase is granted to Total difference between the wage increase
all employees who (1) are regular employees and (2) are within the bargaining unit. for 2001 and the increase granted under WO No. 8.. PhP 14.67
Wage rate by December 2000..... PhP 250.00
Second paragraph of (c) provides that the salary increase for the year 2000 shall not Plus total difference between the wage increase for 2001
include the increase in salary granted under WO No. 7 and the correction of the wage and the increase granted under WO No. 8.. 14.67
distortion for November 1999. Total (Wage rate range beginning January 1, 2001) PhP 264.67
The last paragraph, on the other hand, states the specific condition that the wage/salary For respondents Ser John Hernandez and Rachel Novillas:[24]
increases for the years 2001 and 2002 shall be deemed inclusive of the mandated
minimum wage increases under future wage orders, that may be issued after WO No. 7, Wage rate range before WO No. 8.PhP 234.68
and shall be considered as correction of the wage distortions that may be brought about Increase due to WO No. 8
by the said future wage orders. Thus, the wage/salary increases in 2001 and 2002 shall be setting the minimum wage at PhP 250.. 15.32
deemed as compliance to future wage orders after WO No. 7. Total Salary upon effectivity of WO No. 8... PhP 250.00

Paragraph (b) is a general provision which allows a salary increase to all those Increase for 2001 (12% of 2000 salary) PhP 30.00
who are qualified. It, however, clashes with the last paragraph which specifically states Less the wage increase under WO No. 8.. 15.32
that the salary increases for the years 2001 and 2002 shall be deemed inclusive of wage Total difference between the wage increase
increases subsequent to those granted under WO No. 7. It is a familiar rule in interpretation for 2001 and the increase granted under WO No. 8. PhP 14.68
 Wage rate before Wage Order.. 223.50
Wage rate by December 2000......... PhP 250.00 Wage Increase. PhP 26.50
Plus total difference between the wage increase for 2001
and the increase granted under WO No. 8.. 14.68 Upon attainment of regular employment status, the employees salaries were
Total (Wage rate range beginning January 1, 2001) .. PhP 264.68 increased by 25% of 10% of their basic salaries, as provided for in Sec. 2, Art. X of the CBA,
thus resulting in a further increase of PhP 6.25, for a total of PhP 256.25, computed as
For respondents Amy Durias, Claire Evelyn Velez, and Janice Olaguir:[25] follows:

Wage rate range before WO No. 8.. PhP 240.26 Wage rate after WO No. 8. PhP 250.00
Increase due to WO No. 8 Regularization increase (25 % of 10% of basic salary). 6.25
setting the minimum wage at PhP 250 9.74 Total (Salary for the end of year 2000).. PhP 256.25
Total Salary upon effectivity of WO No. 8. PhP 250.00
To compute for the increase in wage rates for the year 2001, get the increase of
Increase for 2001 (12% of 2000 salary). PhP 30.00 12% of the employees salaries as of December 31, 2000; then subtract from that amount,
Less the wage increase under WO No. 8 9.74 the amount increased in salaries as granted under WO No. 8 in accordance with the
Total difference between the wage increase for 2001 crediting provision of the CBA, to arrive at the increase in salaries for the year 2001 of the
and the increase granted under WO No. 8.. PhP 20.26 recently regularized employees. Add the result to their salaries as of December 31, 2000 to
get the proper salary beginning January 1, 2001, thus:
Wage rate by December 2000. PhP 250.00
Plus total difference between the wage increase for 2001 Increase for 2001 (12% of 2000 salary)... PhP 30.75
and the increase granted under WO No. 8.. 20.26 Less the wage increase under WO No. 8. 26.50
Total (Wage rate range beginning January 1, 2001).. PhP 270.26 Difference between the wage increase
for 2001 and the increase granted under WO No. 8.... PhP 4.25

For respondents Ma. Fe Flores and Fe Capistrano:[26] Wage rate after regularization increase... PhP 256.25
Plus total difference between the wage increase and
Wage rate range before WO No. 8 PhP 245.85 the increase granted under WO No. 8. 4.25
Increase due to WO No. 8 Total (Wage rate beginning January 1, 2001). PhP 260.50
setting the minimum wage at PhP 250.. 4.15 With these computations, the crediting provision of the CBA is put in effect, and the wage
Total Salary upon effectivity of WO No. 8... PhP 250.00 distortion between the first and second group of employees is cured. The first group of
Increase for 2001 (12% of 2000 salary). PhP 30.00 employees who attained regular employment status before the implementation of WO
Less the wage increase under WO No. 8........... 4.15 No. 8 is entitled to receive, starting January 1, 2001, a daily wage rate within the range of
Total difference between the wage increase for 2001 PhP 264.67 to PhP 275.85, depending on their wage rate before the implementation of
and the increase granted under WO No. 8. PhP 25.85 WO No. 8. The second group that attained regular employment status after the
implementation of WO No. 8 is entitled to receive a daily wage rate of PhP 260.50
Wage rate by December 2000. PhP 250.00 starting January 1, 2001.
Plus total difference between the wage increase for 2001
and the increase granted under WO No. 8.. 25.85 Diminution of benefits

Total (Wage rate range beginning January 1, 2001).. PhP 275.85 TSPIC also maintains that charging the overpayments made to the 16
respondents through staggered deductions from their salaries does not constitute
diminution of benefits.
(2) With regard to the second group of employees, who attained regular
employment status after the implementation of WO No. 8, namely: Nimfa Anilao, Rose We agree with TSPIC.
Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie
Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Diminution of benefits is the unilateral withdrawal by the employer of benefits
Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, already enjoyed by the employees. There is diminution of benefits when it is shown that:
the proper computation of the salaries for the year 2001, in accordance with the CBA, is (1) the grant or benefit is founded on a policy or has ripened into a practice over a long
as follows: period; (2) the practice is consistent and deliberate; (3) the practice is not due to error in
the construction or application of a doubtful or difficult question of law; and (4) the
Compute the increase in salary after the implementation of WO No. 8 by subtracting the diminution or discontinuance is done unilaterally by the employer.[27]
minimum wage before WO No. 8 from the minimum wage per the wage order to arrive
at the wage increase, thus: As correctly pointed out by TSPIC, the overpayment of its employees was a result of an
error. This error was immediately rectified by TSPIC upon its discovery. We have ruled
Minimum Wage per Wage Order.. PhP 250.00 before that an erroneously granted benefit may be withdrawn without violating the
prohibition against non-diminution of benefits. We ruled in Globe-Mackay Cable and Janice Nebre 260.5 26 12 81,276.00
Radio Corp. v. NLRC: Nia Andrade 260.5 26 12 81,276.00
Catherine Yaba 260.5 26 12 81,276.00
Absent clear administrative guidelines, Petitioner Corporation cannot Diomedisa Erni 260.5 26 12 81,276.00
be faulted for erroneous application of the law. Payment may be said Mario Salmorin 260.5 26 12 81,276.00
to have been made by reason of a mistake in the construction or
Loida Camullo 260.5 26 12 81,276.00
application of a doubtful or difficult question of law. (Article 2155, in
relation to Article 2154 of the Civil Code). Since it is a past error that is Marie Ann 260.5 26 12 81,276.00
being corrected, no vested right may be said to have arisen nor any Delos Santos
diminution of benefit under Article 100 of the Labor Code may be said Juanita Yana 260.5 26 12 81,276.00
to have resulted by virtue of the correction.[28] Suzette Dulay 260.5 26 12 81,276.00
Jerico Alipit 264.67 26 12 82,577.04
Glen Batula 264.67 26 12 82,577.04
Here, no vested right accrued to individual respondents when TSPIC corrected Ser John Hernandez 264.68 26 12 82,580.16
its error by crediting the salary increase for the year 2001 against the salary increase Rachel Novillas 264.68 26 12 82,580.16
granted under WO No. 8, all in accordance with the CBA. Amy Durias 270.26 26 12 84,321.12
Claire Evelyn Velez 270.26 26 12 84,321.12
Hence, any amount given to the employees in excess of what they were entitled
Janice Olaguir 270.26 26 12 84,321.12
to, as computed above, may be legally deducted by TSPIC from the employees
salaries. It was also compassionate and fair that TSPIC deducted the overpayment in Maria Fe Flores 275.85 26 12 86,065.20
installments over a period of 12 months starting from the date of the initial deduction to Fe Capistrano 275.85 26 12 86,065.20
lessen the burden on the overpaid employees. TSPIC, in turn, must refund to
individual respondents any amount deducted from their salaries which was in excess of
what TSPIC is legally allowed to deduct from the salaries based on the computations The award for attorneys fees of ten percent (10%) of the total award
discussed in this Decision. is MAINTAINED.

As a last word, it should be reiterated that though it is the states responsibility to [G.R. No. 156109. November 18, 2004]
afford protection to labor, this policy should not be used as an instrument to oppress KHRISTINE REA M. REGINO, Assisted and Represented by ARMANDO REGINO, petitioner,
management and capital.[29] In resolving disputes between labor and capital, fairness vs. PANGASINAN COLLEGES OF SCIENCE AND TECHNOLOGY, RACHELLE A.
and justice should always prevail. We ruled in Norkis Union v. Norkis Trading that in the GAMUROT and ELISSA BALADAD, respondents.
resolution of labor cases, we have always been guided by the State policy enshrined in Upon enrolment, students and their school enter upon a reciprocal contract. The
the Constitution: social justice and protection of the working class.Social justice does not, students agree to abide by the standards of academic performance and codes of
however, mandate that every dispute should be automatically decided in favor of conduct, issued usually in the form of manuals that are distributed to the enrollees at the
labor. In any case, justice is to be granted to the deserving and dispensed in the light of start of the school term. Further, the school informs them of the itemized fees they are
the established facts and the applicable law and doctrine.[30] expected to pay. Consequently, it cannot, after the enrolment of a student, vary the
terms of the contract. It cannot require fees other than those it specified upon enrolment.
WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor The Case
Arbitrator in National Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57 Before the Court is a Petition for Review under Rule 45,[1] seeking to nullify the July
and the October 22, 2003 CA Decision in CA-G.R. SP No. 68616 are 12, 2002[2] and the November 22, 2002[3] Orders of the Regional Trial Court (RTC) of
hereby AFFIRMED with MODIFICATION. TSPIC is hereby ORDERED to pay respondents their Urdaneta City, Pangasinan (Branch 48) in Civil Case No. U-7541. The decretal portion of
salary increases in accordance with this Decision, as follows: the first assailed Order reads:
WHEREFORE, the Court GRANTS the instant motion to
No. of No. of dismiss for lack of cause of action.[4]
Name of Employee Daily Wage Working Days Months in a Total Salary for The second challenged Order denied petitioners Motion for Reconsideration.
Rate in a Month Year 2001 The Facts
Nimfa Anilao 260.5 26 12 81,276.00 Petitioner Khristine Rea M. Regino was a first year computer science student at
Respondent Pangasinan Colleges of Science and Technology (PCST). Reared in a poor
Rose Subardiaga 260.5 26 12 81,276.00
family, Regino went to college mainly through the financial support of her relatives. During
Valerie Carbon 260.5 26 12 81,276.00
the second semester of school year 2001-2002, she enrolled in logic and statistics subjects
Olivia Edroso 260.5 26 12 81,276.00 under Respondents Rachelle A. Gamurot and Elissa Baladad, respectively, as teachers.
Maricris Donaire 260.5 26 12 81,276.00 In February 2002, PCST held a fund raising campaign dubbed the Rave Party and
Analyn Azarcon 260.5 26 12 81,276.00 Dance Revolution, the proceeds of which were to go to the construction of the schools
Rosalie Ramirez 260.5 26 12 81,276.00 tennis and volleyball courts. Each student was required to pay for two tickets at the price
Julieta Rosete 260.5 26 12 81,276.00 of P100 each. The project was allegedly implemented by recompensing students who
purchased tickets with additional points in their test scores; those who refused to pay were First Issue:
denied the opportunity to take the final examinations. Exhaustion of Administrative Remedies
Financially strapped and prohibited by her religion from attending dance parties Respondents anchored their Motion to Dismiss on petitioners alleged failure to
and celebrations, Regino refused to pay for the tickets. On March 14 and March 15, 2002, exhaust administrative remedies before resorting to the RTC. According to them, the
the scheduled dates of the final examinations in logic and statistics, her teachers -- determination of the controversy hinge on the validity, the wisdom and the propriety of
Respondents Rachelle A. Gamurot and Elissa Baladad -- allegedly disallowed her from PCSTs academic policy. Thus, the Complaint should have been lodged in the CHED, the
taking the tests. According to petitioner, Gamurot made her sit out her logic class while administrative body tasked under Republic Act No. 7722 to implement the state policy to
her classmates were taking their examinations. The next day, Baladad, after announcing protect, foster and promote the right of all citizens to affordable quality education at all
to the entire class that she was not permitting petitioner and another student to take their levels and to take appropriate steps to ensure that education is accessible to all.[10]
statistics examinations for failing to pay for their tickets, allegedly ejected them from the Petitioner counters that the doctrine finds no relevance to the present case since
classroom. Petitioners pleas ostensibly went unheeded by Gamurot and Baladad, who she is praying for damages, a remedy beyond the domain of the CHED and well within
unrelentingly defended their positions as compliance with PCSTs policy. the jurisdiction of the courts.[11]
On April 25, 2002, petitioner filed, as a pauper litigant, a Complaint[5] for damages Petitioner is correct. First, the doctrine of exhaustion of administrative remedies has
against PCST, Gamurot and Baladad. In her Complaint, she prayed for P500,000 as no bearing on the present case. In Factoran Jr. v. CA,[12] the Court had occasion to
nominal damages; P500,000 as moral damages; at least P1,000,000 as exemplary elucidate on the rationale behind this doctrine:
damages; P250,000 as actual damages; plus the costs of litigation and attorneys fees. The doctrine of exhaustion of administrative remedies is
On May 30, 2002, respondents filed a Motion to Dismiss[6] on the ground of petitioners basic. Courts, for reasons of law, comity, and convenience, should not
failure to exhaust administrative remedies. According to respondents, the question raised entertain suits unless the available administrative remedies have first
involved the determination of the wisdom of an administrative policy of the PCST; hence, been resorted to and the proper authorities have been given the
the case should have been initiated before the proper administrative body, the appropriate opportunity to act and correct their alleged errors, if any,
Commission of Higher Education (CHED). committed in the administrative forum. x x x.[13]
In her Comment to respondents Motion, petitioner argued that prior exhaustion of Petitioner is not asking for the reversal of the policies of PCST. Neither is she
administrative remedies was unnecessary, because her action was not administrative in demanding it to allow her to take her final examinations; she was already enrolled in
nature, but one purely for damages arising from respondents breach of the laws on another educational institution. A reversal of the acts complained of would not
human relations. As such, jurisdiction lay with the courts. adequately redress her grievances; under the circumstances, the consequences of
On July 12, 2002, the RTC dismissed the Complaint for lack of cause of action. respondents acts could no longer be undone or rectified.
Ruling of the Regional Trial Court Second, exhaustion of administrative remedies is applicable when there is
In granting respondents Motion to Dismiss, the trial court noted that the instant competence on the part of the administrative body to act upon the matter complained
controversy involved a higher institution of learning, two of its faculty members and one of.[14] Administrative agencies are not courts; they are neither part of the judicial system,
of its students. It added that Section 54 of the Education Act of 1982 vested in the nor are they deemed judicial tribunals.[15] Specifically, the CHED does not have the power
Commission on Higher Education (CHED) the supervision and regulation of tertiary to award damages.[16] Hence, petitioner could not have commenced her case before
schools. Thus, it ruled that the CHED, not the courts, had jurisdiction over the controversy.[7] the Commission.
In its dispositive portion, the assailed Order dismissed the Complaint for lack of cause Third, the exhaustion doctrine admits of exceptions, one of which arises when the
of action without, however, explaining this ground. issue is purely legal and well within the jurisdiction of the trial court.[17] Petitioners action for
Aggrieved, petitioner filed the present Petition on pure questions of law.[8] damages inevitably calls for the application and the interpretation of the Civil Code, a
Issues function that falls within the jurisdiction of the courts.[18]
In her Memorandum, petitioner raises the following issues for our consideration: Second Issue:
Whether or not the principle of exhaustion of administrative remedies applies in a civil Cause of Action
action exclusively for damages based on violation of the human relation provisions of the Sufficient Causes of Action Stated
Civil Code, filed by a student against her former school. in the Allegations in the Complaint
Whether or not there is a need for prior declaration of invalidity of a certain school As a rule, every complaint must sufficiently allege a cause of action; failure to do so
administrative policy by the Commission on Higher Education (CHED) before a former warrants its dismissal.[19] A complaint is said to assert a sufficient cause of action if,
student can successfully maintain an action exclusively for damages in regular courts. admitting what appears solely on its face to be correct, the plaintiff would be entitled to
Whether or not the Commission on Higher Education (CHED) has exclusive original the relief prayed for. Assuming the facts that are alleged to be true, the court should be
jurisdiction over actions for damages based upon violation of the Civil Code provisions on able to render a valid judgment in accordance with the prayer in the complaint.[20]
human relations filed by a student against the school.[9] A motion to dismiss based on lack of cause of action hypothetically admits the truth
All of the foregoing point to one issue -- whether the doctrine of exhaustion of of the alleged facts. In their Motion to Dismiss, respondents did not dispute any of
administrative remedies is applicable. The Court, however, sees a second issue which, petitioners allegations, and they admitted that x x x the crux of plaintiffs cause of action
though not expressly raised by petitioner, was impliedly contained in her Petition: whether is the determination of whether or not the assessment of P100 per ticket is excessive or
the Complaint stated sufficient cause(s) of action. oppressive.[21] They thereby premised their prayer for dismissal on the Complaints alleged
The Courts Ruling failure to state a cause of action. Thus, a reexamination of the Complaint is in order.
The Petition is meritorious. The Complaint contains the following factual allegations:
10. In the second week of February 2002, defendant Rachelle A. Gamurot, in
connivance with PCST, forced plaintiff and her classmates to buy
or take two tickets each, x x x;
 11. Plaintiff and many of her classmates objected to the forced distribution education sufficient to enable them to pursue higher education or a profession. On the
and selling of tickets to them but the said defendant warned other hand, the students agree to abide by the academic requirements of the school
them that if they refused [to] take or pay the price of the two and to observe its rules and regulations.[27]
tickets they would not be allowed at all to take the final The terms of the school-student contract are defined at the moment of its inception
examinations; -- upon enrolment of the student. Standards of academic performance and the code of
12. As if to add insult to injury, defendant Rachelle A. Gamurot bribed students behavior and discipline are usually set forth in manuals distributed to new students at the
with additional fifty points or so in their test score in her subject start of every school year. Further, schools inform prospective enrollees the amount of fees
just to unjustly influence and compel them into taking the tickets; and the terms of payment.
13. Despite the students refusal, they were forced to take the tickets because In practice, students are normally required to make a down payment upon
[of] defendant Rachelle A. Gamurots coercion and act of enrollment, with the balance to be paid before every preliminary, midterm and final
intimidation, but still many of them including the plaintiff did not examination. Their failure to pay their financial obligation is regarded as a valid ground
attend the dance party imposed upon them by defendants PCST for the school to deny them the opportunity to take these examinations.
and Rachelle A. Gamurot; The foregoing practice does not merely ensure compliance with financial
14. Plaintiff was not able to pay the price of her own two tickets because aside obligations; it also underlines the importance of major examinations. Failure to take a
form the fact that she could not afford to pay them it is also major examination is usually fatal to the students promotion to the next grade or to
against her religious practice as a member of a certain religious graduation. Examination results form a significant basis for their final grades. These tests
congregation to be attending dance parties and celebrations; are usually a primary and an indispensable requisite to their elevation to the next
15. On March 14, 2002, before defendant Rachelle A. Gamurot gave her class educational level and, ultimately, to their completion of a course.
its final examination in the subject Logic she warned that students Education is not a measurable commodity. It is not possible to determine who is
who had not paid the tickets would not be allowed to participate better educated than another. Nevertheless, a students grades are an accepted
in the examination, for which threat and intimidation many approximation of what would otherwise be an intangible product of countless hours of
students were eventually forced to make payments: study. The importance of grades cannot be discounted in a setting where education is
16. Because plaintiff could not afford to pay, defendant Rachelle A. Gamurot generally the gate pass to employment opportunities and better life; such grades are
inhumanly made plaintiff sit out the class but the defendant did often the means by which a prospective employer measures whether a job applicant has
not allow her to take her final examination in Logic; acquired the necessary tools or skills for a particular profession or trade.
17. On March 15, 2002 just before the giving of the final examination in the Thus, students expect that upon their payment of tuition fees, satisfaction of the set
subject Statistics, defendant Elissa Baladad, in connivance with academic standards, completion of academic requirements and observance of school
defendants Rachelle A. Gamurot and PCST, announced in the rules and regulations, the school would reward them by recognizing their completion of
classroom that she was not allowing plaintiff and another student the course enrolled in.
to take the examination for their failure and refusal to pay the The obligation on the part of the school has been established in Magtibay v.
price of the tickets, and thenceforth she ejected plaintiff and the Garcia,[28] Licup v. University of San Carlos[29] and Ateneo de Manila University v.
other student from the classroom; Garcia,[30] in which the Court held that, barring any violation of the rules on the part of
18. Plaintiff pleaded for a chance to take the examination but all defendants the students, an institution of higher learning has a contractual obligation to afford its
could say was that the prohibition to give the examinations to students a fair opportunity to complete the course they seek to pursue.
non-paying students was an administrative decision; We recognize the need of a school to fund its facilities and to meet astronomical
19. Plaintiff has already paid her tuition fees and other obligations in the school; operating costs; this is a reality in running it. Crystal v. Cebu International School[31] upheld
20. That the above-cited incident was not a first since PCST also did another the imposition by respondent school of a land purchase deposit in the amount of P50,000
forced distribution of tickets to its students in the first semester of per student to be used for the purchase of a piece of land and for the construction of
school year 2001-2002; x x x [22] new buildings and other facilities x x x which the school would transfer [to] and occupy
The foregoing allegations show two causes of action; first, breach of contract; after the expiration of its lease contract over its present site.
and second, liability for tort. The amount was refundable after the student graduated or left the school. After
Reciprocity of the noting that the imposition of the fee was made only after prior consultation and approval
School-Student Contract by the parents of the students, the Court held that the school committed no actionable
In Alcuaz v. PSBA,[23] the Court characterized the relationship between the school wrong in refusing to admit the children of the petitioners therein for their failure to pay the
and the student as a contract, in which a student, once admitted by the school is land purchase deposit and the 2.5 percent monthly surcharge thereon.
considered enrolled for one semester.[24] Two years later, in Non v. Dames II,[25] the Court In the present case, PCST imposed the assailed revenue-raising measure belatedly,
modified the termination of contract theory in Alcuaz by holding that the contractual in the middle of the semester. It exacted the dance party fee as a condition for the
relationship between the school and the student is not only semestral in duration, but for students taking the final examinations, and ultimately for its recognition of their ability to
the entire period the latter are expected to complete it.[26] Except for the variance in the finish a course. The fee, however, was not part of the school-student contract entered
period during which the contractual relationship is considered to subsist, both Alcuaz and into at the start of the school year. Hence, it could not be unilaterally imposed to the
Non were unanimous in characterizing the school-student relationship as contractual in prejudice of the enrollees.
nature. Such contract is by no means an ordinary one. In Non, we stressed that the school-
The school-student relationship is also reciprocal. Thus, it has consequences student contract is imbued with public interest, considering the high priority given by the
appurtenant to and inherent in all contracts of such kind -- it gives rise to bilateral or Constitution to education and the grant to the State of supervisory and regulatory powers
reciprocal rights and obligations. The school undertakes to provide students with
over all educational institutions.[32] Sections 5 (1) and (3) of Article XIV of the 1987 Carrascoso (124 Phil. 722), the private respondent was awarded damages for
Constitution provide: his unwarranted expulsion from a first-class seat aboard the petitioner airline. It
The State shall protect and promote the right of all citizens is noted, however, that the Court referred to the petitioner-airlines liability as one
to quality education at all levels and shall take appropriate steps to arising from tort, not one arising form a contract of carriage. In effect, Air
make such declaration accessible to all. France is authority for the view that liability from tort may exist even if there is a
Every student has a right to select a profession or course of contract, for the act that breaks the contract may be also a tort. x x x This view
study, subject to fair, reasonable and equitable admission and was not all that revolutionary, for even as early as 1918, this Court was already
academic requirements. of a similar mind. In Cangco v. Manila Railroad (38 Phil. 780), Mr. Justice Fisher
The same state policy resonates in Section 9(2) of BP 232, otherwise known as the elucidated thus: x x x. When such a contractual relation exists the obligor may
Education Act of 1982: break the contract under such conditions that the same act which constitutes
Section 9. Rights of Students in School. In addition to other a breach of the contract would have constituted the source of an extra-
rights, and subject to the limitations prescribed by law and contractual obligation had no contract existed between the parties.
regulations, students and pupils in all schools shall enjoy the following Immediately what comes to mind is the chapter of the Civil Code on Human
rights: Relations, particularly Article 21 x x x.[35]
xxxxxxxxx Academic Freedom
(2) The right to freely choose their field In their Memorandum, respondents harp on their right to academic freedom. We
of study subject to existing curricula and to are not impressed. According to present jurisprudence, academic freedom
continue their course therein up to encompasses the independence of an academic institution to determine for itself (1) who
graduation, except in cases of academic may teach, (2) what may be taught, (3) how it shall teach, and (4) who may be admitted
deficiency, or violation of disciplinary to study.[36] In Garcia v. the Faculty Admission Committee, Loyola School of
regulations. Theology,[37] the Court upheld the respondent therein when it denied a female students
Liability for Tort admission to theological studies in a seminary for prospective priests. The Court defined
In her Complaint, petitioner also charged that private respondents inhumanly the freedom of an academic institution thus: to decide for itself aims and objectives and
punish students x x x by reason only of their poverty, religious practice or lowly station in how best to attain them x x x free from outside coercion or interference save possibly
life, which inculcated upon [petitioner] the feelings of guilt, disgrace and when overriding public welfare calls for some restraint.[38]
unworthiness;[33] as a result of such punishment, she was allegedly unable to finish any of In Tangonan v. Pao,[39] the Court upheld, in the name of academic freedom, the
her subjects for the second semester of that school year and had to lag behind in her right of the school to refuse readmission of a nursing student who had been enrolled on
studies by a full year. The acts of respondents supposedly caused her extreme humiliation, probation, and who had failed her nursing subjects. These instances notwithstanding, the
mental agony and demoralization of unimaginable proportions in violation of Articles 19, Court has emphasized that once a school has, in the name of academic freedom, set its
21 and 26 of the Civil Code. These provisions of the law state thus: standards, these should be meticulously observed and should not be used to discriminate
Article 19. Every person must, in the exercise of his rights and in the performance of his against certain students.[40] After accepting them upon enrollment, the school cannot
duties, act with justice, give everyone his due, and observe honesty and good faith. renege on its contractual obligation on grounds other than those made known to, and
Article 21. Any person who wilfully causes loss or injury to another in a manner that is accepted by, students at the start of the school year.
contrary to morals, good customs or public policy shall compensate the latter for the In sum, the Court holds that the Complaint alleges sufficient causes of action against
damage. respondents, and that it should not have been summarily dismissed. Needless to say, the
Article 26. Every person shall respect the dignity, personality, privacy and peace of mind Court is not holding respondents liable for the acts complained of. That will have to be
of his neighbors and other persons. The following and similar acts, though they may not ruled upon in due course by the court a quo.
constitute a criminal offense, shall produce a cause of action for damages, prevention WHEREFORE, the Petition is hereby GRANTED, and the assailed Orders REVERSED. The
and other relief: trial court is DIRECTED to reinstate the Complaint and, with all deliberate speed, to
(1) Prying into the privacy of anothers residence; continue the proceedings in Civil Case No. U-7541. No costs.
(2) Meddling with or disturbing the private life or family relations of
another; [G.R. No. 134284. December 1, 2000]
(3) Intriguing to cause another to be alienated from his friends; AYALA CORPORATION, petitioner, vs. ROSA-DIANA REALTY AND
(4) Vexing or humiliating another on account of his beliefs, lowly DEVELOPMENT CORPORATION, respondent.
station in life, place of birth, physical defect, or other personal Before us is a petition for review on certiorari seeking the reversal of a decision
condition. rendered by the Court of Appeals in C.A. G.R. C.V. No. 4598 entitled, Ayala Corporation
Generally, liability for tort arises only between parties not otherwise bound by a vs. Rosa-Diana Realty and Development Corporation, dismissing Ayala Corporations
contract. An academic institution, however, may be held liable for tort even if it has an petition for lack of merit.
existing contract with its students, since the act that violated the contract may also be a The facts of the case are not in dispute:
tort. We ruled thus in PSBA vs. CA,[34] from which we quote: Petitioner Ayala Corporation (hereinafter referred to as Ayala) was the registered
x x x A perusal of Article 2176 [of the Civil Code] shows that obligations arising owner of a parcel of land located in Alfaro Street, Salcedo Village, Makati City with an
from quasi-delicts or tort, also known as extra-contractual obligations, arise only area of 840 square meters, more or less and covered by Transfer Certificate of Title (TCT)
between parties not otherwise bound by contract, whether express or implied. No. 233435 of the Register of Deeds of Rizal.
However, this impression has not prevented this Court from determining the On April 20, 1976, Ayala sold the lot to Manuel Sy married to Vilma Po and Sy Ka
existence of a tort even when there obtains a contract. In Air France v. Kieng married to Rosa Chan. The Deed of Sale executed between Ayala and the buyers
contained Special Conditions of Sale and Deed Restrictions. Among the Special We agree with respondent court that the notice of lis pendens is not proper in this
Conditions of Sale were: instance. The case before the trial court is a personal action since the cause of action
a) the vendees shall build on the lot and submit the building plans to the thereof arises primarily from the alleged violation of the Deed of Restrictions.
vendor before September 30, 1976 for the latters approval In the meantime, Ayala completed its presentation of evidence before the trial
b) the construction of the building shall start on or before March 30, 1977 and court. Rosa-Diana filed a Demurrer to Evidence averring that Ayala failed to establish its
completed before 1979. Before such completion, neither the deed of sale right to the relief sought inasmuch as (a) Ayala admittedly does not enforce the deed
shall be registered nor the title released even if the purchase price shall restrictions uniformly and strictly (b) Ayala has lost its right/power to enforce the restrictions
have been fully paid due to its own acts and omissions; and (c) the deed restrictions are no longer valid and
c) there shall be no resale of the property effective against lot buyers in Ayalas controlled subdivision.
The Deed Restrictions, on the other hand, contained the stipulation that the gross The trial court sustained Rosa-Dianas Demurrer to Evidence saying that Ayala was
floor area of the building to be constructed shall not be more than five (5) times the lot guilty of abandonment and/or estoppel due to its failure to enforce the terms of deed of
area and the total height shall not exceed forty two (42) meters. The restrictions were to restrictions and special conditions of sale against Manuel Sy and Sy Ka Kieng. The trial
expire in the year 2025. court noted that notwithstanding the violation of the special conditions of sale, Manuel
Manuel Sy and Sy Ka Kieng failed to construct the building in violation of the Special Sy and Sy Ka Kieng were able to transfer the title to Rosa-Diana with the approval of
Conditions of Sale. Notwithstanding the violation, Manuel Sy and Sy Ka Kieng, in April Ayala. The trial court added that Ayalas failure to enforce the restrictions with respect to
1989, were able to sell the lot to respondent Rosa-Diana Realty and Development Trafalgar, Shellhouse, Eurovilla, LPL Plaza, Parc Regent, LPL Mansion and Leronville which
Corporation (hereinafter referred to as Rosa-Diana) with Ayalas approval. As a are located within Salcedo Village, shows that Ayala discriminated against those which it
consideration for Ayala to release the Certificate of Title of the subject property, Rosa- wants to have the obligation enforced. The trial court then concluded that for Ayala to
Diana, on July 27, 1989 executed an Undertaking promising to abide by said special discriminately choose which obligor would be made to follow certain conditions and
conditions of sale executed between Ayala and the original vendees. Upon the which should not, did not seem fair and legal.
submission of the Undertaking, together with the building plans for a condominium The Court of Appeals affirmed the ruling of the trial court saying that the appeal is
project, known as The Peak, Ayala released title to the lot, thereby enabling Rosa-Diana sealed by the doctrine of the law of the case in C.A. G.R. S.P. No. 29157 where it was
to register the deed of sale in its favor and obtain Certificate of Title No. 165720 in its stated that
name. The title carried as encumbrances the special conditions of sale and the deed ]x x x Ayala is barred from enforcing the Deed of Restrictions in question pursuant to the
restrictions. Rosa-Dianas building plans as approved by Ayala were subject to strict doctrine of waiver and estoppel. Under the terms of the deed of sale, the vendee Sy Ka
compliance of cautionary notices appearing on the building plans and to the restrictions Kieng assumed faithful compliance with the special conditions of sale and with the
encumbering the Lot regarding the use and occupancy of the same. Salcedo Village Deed of Restrictions. One of the conditions was that a building would be
Thereafter, Rosa-Diana submitted to the building official of Makati another set of constructed within one year. However, Sy Ka Kieng failed to construct the building as
building plans for The Peak which were substantially different from those that it earlier required under the Deed of Sale. Ayala did nothing to enforce the terms of the contract.
submitted to Ayala for approval. While the building plans which Rosa-Diana submitted to In fact, it even agreed to the sale of the lot by Sy Ka Kieng in favor of petitioner Realty in
Ayala for approval envisioned a 24-meter high, seven (7) storey condominium project 1989 or thirteen (13) years later. We, therefore, see no justifiable reason for Ayala to
with a gross floor area of 3,968.56 square meters, the building plans which Rosa-Diana attempt to enforce the terms of the conditions of sale against the petitioner.
submitted to the building official of Makati, contemplated a 91.65 meter high, 38 storey xxx
condominium building with a gross floor area of 23,305.09 square meters.[1] Needless to The Court of Appeals also cited C.A. G.R. C.V. No. 46488 entitled, Ayala Corporation
say, while the first set of building plans complied with the deed restrictions, the latter set vs. Ray Burton Development Corporation which relied on C.A. G.R. S.P. No. 29157 in ruling
exceeded the same. that Ayala is barred from enforcing the deed restrictions in dispute. Upon a motion for
During the construction of Rosa-Dianas condominium project, Ayala filed an action reconsideration filed by herein petitioner, the Court of Appeals clarified that the citation
with the Regional Trial Court (RTC) of Makati, Branch 139 for specific performance, with of the decision in Ayala Corporation vs. Ray Burton Development Corporation, C.A. G.R.
application for a writ of preliminary injunction/temporary restraining order against Rosa- C.V. No. 46488, February 27, 1996, was made not because said decision is res judicata to
Diana Realty seeking to compel the latter to comply with the contractual obligations the case at bar but rather because it is precedential under the doctrine of stare decisis.
under the deed of restrictions annotated on its title as well as with the building plans it Upon denial of said motion for reconsideration, Ayala filed the present appeal.
submitted to the latter. In the alternative, Ayala prayed for rescission of the sale of the Ayala contends that the pronouncement of the Court of Appeals in C.A. G.R. S.P.
subject lot to Rosa- Diana Realty. No. 29157 that it is estopped from enforcing the deed restrictions is merely obiter
The lower court denied Ayalas prayer for injunctive relief, thus enabling Rosa-Diana dicta inasmuch as the only issue raised in the aforesaid case was the propriety of a lis
to complete the construction of the building. Undeterred, Ayala tried to cause the pendensannotation on Rosa-Dianas certificate of title.
annotation of a notice of lis pendens on Rosa-Dianas title. The Register of Deeds of Ayala avers that Rosa-Diana presented no evidence whatsoever on Ayalas
Makati, however, refused registration of the notice of lis pendens on the ground that the supposed waiver or estoppel in C.A. G.R. S.P. No. 29157. Ayala likewise pointed out that
case pending before the trial court, being an action for specific performance and/or at the time C.A. G.R. S.P. No. 29157 was on appeal, the issues of the validity and continued
rescission, is an action in personam which does not involve the title, use or possession of viability of the deed of restrictions and their enforceability by Ayala were joined and then
the property.[2] The Land Registration Authority (LRA) reversed the ruling of the Register of being tried before the trial court.
Deeds saying that an action for specific performance or rescission may be classified as a Petitioners assignment of errors in the present appeal may essentially be summarized
proceeding of any kind in court directly affecting title to the land or the use or occupation as follows:
thereof for which a notice of lis pendens may be held proper.[3] The decision of the LRA, I. The Court of Appeals acted in a manner not in accord with law and the
however, was overturned by the Court of Appeals in C.A. G.R. S.P. No. 29157. In G.R. No. applicable decisions of the Supreme Court in holding that the doctrine of
112774, We affirmed the ruling of the CA on February 16, 1994 saying the law of the case, or stare decisis, operated to dismiss Ayalas appeal.
 II. The Court of Appeals erred as a matter of law and departed from the issues essential to the decision but may also include expressions of opinion which are not
accepted and usual course of judicial proceedings when it failed to necessary to support the decision reached by the court. Mere dicta are not binding
expressly pass upon the specific errors assigned in Ayalas appeal. under the doctrine of stare decisis.[11]
A discussion on the distinctions between law of the case, stare decisis and obiter While the Court of Appeals did not err in ruling that the present petition is not barred
dicta is in order. by C.A. G.R. C.V. No. 46488 entitled Ayala Corporation vs. Ray Burton Development Inc.
The doctrine of the law of the case has certain affinities with, but is clearly under the doctrine of res judicata, neither, however, can the latter case be cited as
distinguishable from, the doctrines of res judicata and stare decisis, principally on the precedential under the doctrine of stare decisis. It must be pointed out that at the time
ground that the rule of the law of the case operates only in the particular case and only the assailed decision was rendered, C.A. G.R. C.V. No. 46488 was on appeal with this
as a rule of policy and not as one of law.[4] At variance with the doctrine of stare decisis, Court. Significantly, in the decision We have rendered in Ayala Corporation vs. Ray Burton
the ruling adhered to in the particular case under the doctrine of the law of the Development Corporation[12] which became final and executory on July 5, 1999 we have
case need not be followed as a precedent in subsequent litigation between other clearly stated that An examination of the decision in the said Rosa-Diana case reveals
parties, neither by the appellate court which made the decision followed on a that the sole issue raised before the appellate court was the propriety of the lis
subsequent appeal in the same case, nor by any other court. The ruling covered by the pendensannotation. However, the appellate court went beyond the sole issue and made
doctrine of the law of the case is adhered to in the single case where it arises, but is not factual findings bereft of any basis in the record to inappropriately rule that AYALA is in
carried into other cases as a precedent.[5] On the other hand, under the doctrine of stare estoppel and has waived its right to enforce the subject restrictions. Such ruling was
decisis, once a point of law has been established by the court, that point of law will, immaterial to the resolution of the issue of the propriety of the annotation of the lis
generally, be followed by the same court and by all courts of lower rank in subsequent pendens. The finding of estoppel was thus improper and made in excess of jurisdiction.
cases where the same legal issue is raised.[6] Stare decisis proceeds from the first principle Coming now to the merits of the case, petitioner avers that the Court of Appeals
of justice that, absent powerful countervailing considerations, like cases ought to be departed from the usual course of judicial proceedings when it failed to expressly pass
decided alike.[7] upon the specific errors assigned in its appeal. Petitioner
The Court of Appeals, in ruling against petitioner Ayala Corporation stated that the reiterates its contention that the trialcourts findings that Ayala has waived its right to
appeal is sealed by the doctrine of the law of the case, referring to G.R. No. 112774 enforce the deed of restrictions is not supported by law and evidence.
entitled Ayala Corporation, petitioner vs. Court of Appeals, et al., respondents. The Court We find merit in the petition.
of Appeals likewise made reference to C.A. G.R. C.V. No. 46488 entitled, Ayala It is basic that findings of fact of the trial court and the Court of Appeals are
Corporation vs. Ray Burton Development Corporation, Inc. in ruling against petitioner conclusive upon the Supreme Court when supported by substantial evidence.[13] We are
saying that it is jurisprudential under the doctrine of stare decisis. constrained, however, to review the trial courts findings of fact, which the Court of
It must be pointed out that the only issue that was raised before the Court of Appeals Appeals chose not to pass upon, inasmuch as there is ample evidence on record to show
in C.A. G.R. S.P. No. 29157 was whether or not the annotation of lis pendens is proper. The that certain facts were overlooked which would affect the disposition of the case.
Court of Appeals, in its decision, in fact stated the principal issue to be resolved is:whether In its assailed decision of February 4, 1994, the trial court, ruled in favor of respondent
or not an action for specific performance, or in the alternative, rescission of deed of sale Rosa-Diana Realty on the ground that Ayala had not acted fairly when it did not institute
to enforce the deed of restrictions governing the use of property, is a real or personal an action against the original vendees despite the latters violation of the Special
action, or one that affects title thereto and its use or occupation thereof."[8] Conditions of Sale but chose instead to file an action against herein respondent Rosa-
In the aforesaid decision, the Court of Appeals even justified the cancellation of the Diana. The trial court added that although the 38 storey building of Rosa-Diana is beyond
notice of lis pendens on the ground that Ayala had ample protection should it succeed the total height restriction, it was not violative of the National Building Code. According
in proving its allegations regarding the violation of the deed of restrictions, without unduly to the trial court the construction of the 38 storey building known as The Peak has not
curtailing the right of the petitioner to fully enjoy its property in the meantime that there is been shown to have been prohibited by law and neither is it against public policy.
as yet no decision by the trial court.[9] It bears emphasis that as complainant, Ayala had the prerogative to initiate an
From the foregoing, it is clear that the Court of Appeals was aware that the issue as action against violators of the deed restrictions. That Rosa-Diana had acted in bad faith
to whether petitioner is estopped from enforcing the deed of restrictions has yet to be is manifested by the fact that it submitted two sets of building plans, one which was in
resolved by the trial court. Though it did make a pronouncement that the petitioner is conformity with the deed restrictions submitted to Ayala and MACEA, and the other,
estopped from enforcing the deed of restrictions, it also mentioned at the same time that which exceeded the height requirement in the deed restrictions to the Makati building
this particular issue has yet to be resolved by the trial court. Notably, upon appeal to this official for the purpose of procuring a building permit from the latter. Moreover, the
Court, We have affirmed the ruling of the Court of Appeals only as regards the particular violation of the deed restrictions committed by respondent can hardly be denominated
issue of the propriety of the cancellation of the notice of lis pendens. as a minor violation. It should be pointed out that the original building plan which was
We see no reason then, how the law of the case or stare decisis can be held to be submitted to and approved by petitioner Ayala Corporation, envisioned a twenty four
applicable in the case at bench. If at all, the pronouncement made by the Court of (24) meter high, seven (7) storey condominium whereas the respondents building plan
Appeals that petitioner Ayala is barred from enforcing the deed of restrictions can only which was submitted to and approved by the building official of Makati is that of a thirty
be considered as obiter dicta. As earlier mentioned, the only issue before the Court of eight (38) storey, 91.65 meters high, building. At present, the Peak building of respondent
Appeals at the time was the propriety of the annotation of the lis pendens. The additional which actually stands at 133.65 meters with a total gross floor area of 23,305.09 square
pronouncement of the Court of Appeals that Ayala is estopped from enforcing the deed meters, seriously violates the dimensions indicated in the building plans submitted by
of restrictions even as it recognized that this said issue is being tried before the trial court Rosa-Diana to petitioner Ayala for approval inasmuch as the Peak building exceeds the
was not necessary to dispose of the issue as to the propriety of the annotation of the lis approved height limit by about 109 meters and the allowable gross floor area under the
pendens. A dictum is an opinion of a judge which does not embody the resolution or applicable deed restrictions by about 19,105 square meters. Clearly, there was a gross
determination of the court, and made without argument, or full consideration of the point, violation of the deed restrictions and evident bad faith by the respondent.
not the proffered deliberate opinion of the judge himself.[10] It is not necessarily limited to
 It may not be amiss to mention that the deed restrictions were revised in a general were no longer enforceable and that it never intended to be bound by the Undertaking
membership meeting of the association of lot owners in Makati Central Business District signed by its President and Chairman. We reiterate that contractual obligations have the
the Makati Commercial Estate Association, Inc. (MACEA) whereby direct height force of law between parties and unless the same are contrary to public policy morals
restrictions were abolished in lieu of floor area limits. Respondent, however, did not vote and good customs, they must be complied by the parties in good faith.
for the approval of this revision during the General Membership meeting which was held Petitioner, in its Petition, prays that judgment be rendered:
on July 11, 1990 at the Manila Polo Club Pavilion, Makati, Metro Manila and again on July a) ordering Rosa-Diana Realty and Development Corporation to comply with
12, 1990 at the Hotel Mandarin Oriental, Makati, Metro Manila. Hence, respondent its contractual obligations in the construction of the Peak by removing, or
continues to be bound by the original deed restrictions applicable to Lot 7, Block 1 and closing down and prohibiting Rosa-Diana from using, selling, leasing or
annotated on its title to said lot. In any event, assuming arguendo that respondent voted otherwise disposing of, the portions of areas thereof constructed beyond
for the approval of direct height restrictions in lieu of floor area limits, the total floor area or in excess of the approved height, as shown by the building plans
of its Peak building would still be violative of the floor area limits to the extent of about submitted to, and approved by, Ayala, including any other portion of the
9,865 square meters of allowable floor area under the MACEA revised restrictions. building constructed not in accordance with the said building plans,
Respondent Rosa-Diana avers that there is nothing illegal or unlawful in the building during the effectivity of the Deed Restrictions;
plans which it used in the construction of the Peak condominium inasmuch as it bears b) Alternatively, in the event specific performance has become impossible:
the imprimatur of the building official of Makati, who is tasked to determine whether (1)Ordering the cancellation and rescission of the April 20, 1976
building and construction plans are in accordance with the law, notably, the National Deed of Sale by Ayala in favor of the original vendees thereof
Building Code. as well as the subsequent Deed of Sale executed by such
Respondent Rosa-Diana, however, misses the point inasmuch as it has freely original vendees in favor of Rosa-Diana, and ordering Rosa-
consented to be bound by the deed restrictions when it entered into a contract of sale Diana to return to Ayala Lot 7, Block 1 of Salcedo Village;
with spouses Manuel Sy and Sy Ka Kieng. While respondent claims that it was under the (2)ordering the cancellation of Transfer Certificate of Title No.
impression that the deed restrictions were no longer being enforced by Ayala, the 165720 (in the name of Rosa-Diana) and directing the office of
Undertaking[14] it executed belies this same claim. In said Undertaking, respondent the Register of Deeds of Makati to issue a new title over the lot
agreed to construct and complete the construction of the house on said lot as required in the name of Ayala; and
under the special condition of sale. Respondent likewise bound itself to abide and comply (3)ordering Rosa-Diana to pay Ayala attorneys fees in the amount
with x x x the condition of the rescission of the sale by Ayala Land, Inc. on the grounds of P500,000.00, exemplary damages in the amount of
therein stated x x x. P5,000,000.00 and the costs of suit.
Contractual obligations between parties have the force of law between them and It must be noted that during the trial respondent Rosa-Diana was able to complete
absent any allegation that the same are contrary to law, morals, good customs, public the construction of The Peak as a building with a height of thirty eight (38) floors or 133.65
order or public policy, they must be complied with in good faith. Hence, Article 1159 of meters and with a total gross floor area of 23,305.09 square meters. Having been
the New Civil Code provides completed for a number of years already, it would be reasonable to assume that it is now
Obligations arising from contracts have the force of law between the contracting parties fully tenanted. Consequently, the remedy of specific performance by respondent is no
and should be complied with in good faith. longer feasible. However, neither can we grant petitioners prayer for the cancellation
Respondent Rosa-Diana insists that the trial court had already ruled that the and rescission of the April 20, 1976 Deed of Sale by petitioner Ayala in favor of the original
Undertaking executed by its Chairman and President cannot validly bind Rosa-Diana and vendees thereof as well as the subsequent Deed of Sale executed by the original
hence, it should not be held bound by the deed restrictions. vendees in favor of respondent Rosa-Diana inasmuch as the original vendees were not
We agree with petitioner Ayalas observation that respondent Rosa-Dianas special even made parties in the case at bar. Moreover, petitioner Ayala, having agreed to the
and affirmative defenses before the trial court never mentioned any allegation that its resale of the property by the original vendees, spouses Manuel Sy and Sy Ka Kieng, to
president and chairman were not authorized to execute the Undertaking. It was respondent Rosa-Diana despite the failure of Manuel Sy and Sy Ka Kieng to comply with
inappropriate therefore for the trial court to rule that in the absence of any authority or their obligation to construct a building within one year from April 20, 1976, has effectively
confirmation from the Board of Directors of respondent Rosa-Diana, its Chairman and the waived its right to rescind the sale of the subject lot to the original vendees.
President cannot validly enter into an undertaking relative to the construction of the Faced with the same question as to the proper remedy available to petitioner in the
building on the lot within one year from July 27, 1989 and in accordance with the deed case of Ayala Corporation vs. Ray Burton Development Inc., a case which is on all fours
restrictions. Curiously, while the trial court stated that it cannot be presumed that the with the case at bench, we ruled therein that the party guilty of violating the deed
Chairman and the President can validly bind respondent Rosa-Diana to enter into the restrictions may only be held alternatively liable for substitute performance of its
aforesaid Undertaking in the absence of any authority or confirmation from the Board of obligation, that is, for the payment of damages. In the aforesaid case it was observed
Directors, the trial court held that the ordinary presumption of regularity of business that the Consolidated and Revised Deed Restrictions (CRDR) imposed development
transactions is applicable as regards the Deed of Sale which was executed by Manuel Sy charges on constructions which exceed the estimated Gross Limits permitted under the
and Sy Ka Kieng and respondent Rosa-Diana. In the light of the fact that respondent original Deed Restrictions but which are within the limits of the CRDRs.
Rosa-Diana never alleged in its Answer that its president and chairman were not The pertinent portion of the Deed of Restrictions reads:
authorized to execute the Undertaking, the aforesaid ruling of the trial court is without 3. DEVELOPMENT CHARGE
factual and legal basis and surprising to say the least. For any building construction within the Gross Floor Area limits defined under Paragraphs
The fact alone that respondent Rosa-Diana conveniently prepared two sets of C-2.1 to C-2.4 above, but which will result in a Gross Floor Area exceeding certain
building plans - with one set which fully conformed to the Deed Restrictions and another standards defined in Paragraphs C-3.1-C below, the OWNER shall pay MACEA, prior to
in gross violation of the same - should have cautioned the trial court to conclude that the construction of any new building, a DEVELOPMENT CHARGE as a contribution to a
respondent Rosa-Diana was under the erroneous impression that the Deed Restrictions
trust fund to be administered by MACEA. This trust fund shall be used to improve facilities WHEREFORE, the assailed Decision of the Court of Appeals dated December 4, 1997
and utilities in Makati Central District. and its Resolution dated June 19, 1998 , C.A. G.R. C.V. No. 4598, are REVERSED and SET
3.1. The amount of the development charge that shall be due from the OWNER shall be ASIDE. In lieu thereof, judgment is rendered
computed as follows: a) ordering respondent Rosa-Diana Realty and Development Corporation to
DEVELOPMENT CHARGE = A x (B-C-D) pay development charges as computed under the provisions of the
where: consolidated and Revised Deed Restrictions currently in force; and
A is equal to the Area Assessment which shall be set at Five Hundred Pesos (P500.00) until b) ordering respondent Rosa-Diana Realty and Development Corporation to
December 31,1990. Each January 1st thereafter, such amount shall increase by ten pay petitioner Ayala Corporation exemplary damages in the sum of
percent (10%) over the Area Assessment charged in the immediately preceding year; P2,500,000.00, attorneys fees in the sum of P250,000.00 and the costs of the
provided that beginning 1995 and at the end of every successive five-year period suit.
thereafter, the increase in the Area Assessment shall be reviewed and adjusted by the SO ORDERED.
VENDOR to correspond to the accumulated increase in the construction cost index
during the immediately preceding five years as based on the weighted average of [G.R. No. 146807. May 9, 2002]
wholesale price and wage indices of the National Census and Statistics Office and the PADCOM CONDOMINIUM CORPORATION, petitioner, vs. ORTIGAS CENTER ASSOCIATION,
Bureau of Labor Statistics. INC., respondent.
B - is equal to the Gross Floor Area of the completed or expanded building in square DECISION
meters. DAVIDE, JR., C.J.:
C - is equal to the estimated Gross Floor Area permitted under the original deed Challenged in this case is the 30 June 2000 decision[1] of the Court of Appeals in CA-
restrictions, derived by multiplying the lot area by the effective original FAR shown below G.R. CV No. 60099, reversing and setting aside the 1 September 1997 decision[2] of the
for each location. Regional Trial Court of Pasig City, Branch 264, in Civil Case No. 63801.[3]
We then ruled in the aforesaid case that the development charges are a fair Petitioner Padcom Condominium Corporation (hereafter PADCOM) owns and
measure of compensatory damages which therein respondent Ray Burton Development manages the Padilla Office Condominium Building (PADCOM Building) located at
Inc. is liable to Ayala Corporation. The dispositive portion of the decision in the said case Emerald Avenue, Ortigas Center, Pasig City. The land on which the building stands was
which is squarely applicable to the case at bar, reads as follows: originally acquired from the Ortigas & Company, Limited Partnership (OCLP), by Tierra
WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated Development Corporation (TDC) under a Deed of Sale dated 4 September 1974. Among
February 27, 1996, in CA-G.R. C.V. No. 46488, and its Resolution dated October 7, 1996 the terms and conditions in the deed of sale was the requirement that the transferee and
are hereby REVERSED and SET ASIDE, and in lieu thereof, judgment is hereby rendered its successor-in-interest must become members of an association for realty owners and
finding that: long-term lessees in the area later known as the Ortigas Center. Subsequently, the said
(1) The Deed Restrictions are valid and petitioner AYALA is not estopped from lot, together with improvements thereon, was conveyed by TDC in favor of PADCOM in a
enforcing them against lot owners who have not yet adopted the Deed of Transfer dated 25 February 1975.[4]
Consolidated and Revised Deed Restrictions. In 1982, respondent Ortigas Center Association, Inc. (hereafter the Association) was
(2) Having admitted that the Consolidated and Revised Deed Restrictions are organized to advance the interests and promote the general welfare of the real estate
the applicable Deed Restrictions to Ray Burton Development owners and long-term lessees of lots in the Ortigas Center. It sought the collection of
Corporation, RBDC should be, and is bound by the same. membership dues in the amount of two thousand seven hundred twenty-four pesos and
(3) Considering that Ray Burton Development Corporations Trafalgar plaza forty centavos (P2,724.40) per month from PADCOM. The corporate books showed that
exceeds the floor area limits of the Deed Restrictions, RBDC is hereby PADCOM owed the Association P639,961.47, representing membership dues, interests
ordered to pay development charges as computed under the and penalty charges from April 1983 to June 1993.[5] The letters exchanged between the
provisions of the consolidated and Revised Deed Restrictions currently parties through the years showed repeated demands for payment, requests for
in force. extensions of payment, and even a settlement scheme proposed by PADCOM in
(4) Ray Burton Development corporation is further ordered to pay AYALA September 1990.
exemplary damages in the amount of P2,500,000.00 attorneys fees in In view of PADCOMs failure and refusal to pay its arrears in monthly dues, including
the amount of P250,000.00. interests and penalties thereon, the Association filed a complaint for collection of sum of
SO ORDERED. money before the trial court below, which was docketed as Civil Case No. 63801. The
There is no reason why the same rule should not be followed in the case at bar, the Association averred that purchasers of lands within the Ortigas Center complex from
remedies of specific performance and/or rescission prayed for by petitioner no longer OCLP are obligated under their contracts of sale to become members of the
being feasible. In accordance with the peculiar circumstances of the case at bar, the Association. This obligation was allegedly passed on to PADCOM when it bought the lot
development charges would certainly be a fair measure of compensatory damages to from TDC, its predecessor-in-interest.[6]
petitioner Ayala. In its answer, PADCOM contended that it is a non-stock, non-profit association, and
Exemplary damages in the sum of P2,500,000.00 as prayed for by petitioner are also for it to become a special member of the Association, it should first apply for and be
in order inasmuch as respondent Rosa-Diana was in evident bad faith when it submitted accepted for membership by the latters Board of Directors. No automatic membership
a set of building plans in conformity with the deed restrictions to petitioner Ayala for the was apparently contemplated in the Associations By-laws. PADCOM added that it could
sole purpose of obtaining title to the property, but only to prepare and later on submit not be compelled to become a member without violating its right to freedom of
another set of building plans which are in gross violation of the Deed association. And since it was not a member of the Association, it was not liable for
Restrictions. Petitioner Ayala is likewise entitled to an award of attorneys fees in the sum membership dues, interests and penalties.[7]
of P250,000.00.
 During the trial, the Association presented its accountant as lone witness to prove dues since there is no board resolution defining and prescribing how much should be
that PADCOM was, indeed, one of its members and, as such, did not pay its membership paid.
dues. For its part, the Association claims that the Deed of Sale between OCLP and TDC
PADCOM, on the other hand, did not present its evidence; instead it filed a motion clearly stipulates automatic membership for the owners of lots in the Ortigas Center,
to dismiss by way of demurrer to evidence. It alleged that the facts established by the including their successors-in-interest. The filing of applications and acceptance thereof
Association showed no right to the relief prayed for. It claimed that the provisions of the by the Board of Directors of the Association are, therefore, mere formalities that can be
Associations By-laws and the Deed of Transfer did not contemplate automatic dispensed with or waived. The provisions of the Associations By-laws cannot in any
membership. Rather, the owner or long-term lessee becomes a member of the manner alter or modify the automatic membership clause imposed on a property owner
Association only after applying with and being accepted by its Board of by virtue of an annotation of encumbrance on his title.
Directors. Assuming further that PADCOM was a member of the Association, the latter The Association likewise asserts that membership therein requires the payment of
failed to show that the collection of monthly dues was a valid corporate act duly certain amounts for its operations and activities, as may be authorized by its Board of
authorized by a proper resolution of the Associations Board of Directors.[8] Directors. The membership dues are for the common expenses of the homeowners for
After due consideration of the issues raised in the motion to dismiss, the trial court necessary services.
rendered a decision dismissing the complaint.[9] After a careful examination of the records of this case, the Court sees no reason to
The Association appealed the case to the Court of Appeals, which docketed the disturb the assailed decision. The petition should be denied.
appeal as CA-G.R. CV No. 60099. In its decision[10] of 30 June 2000, the Court of Appeals Section 44 of Presidential Decree No. 1529[11] mandates that:
reversed and set aside the trial courts dismissal of Civil Case No. 63801, and decreed as SEC. 44. Statutory liens affecting title. Every registered owner receiving a certificate of title
follows: in pursuance of a decree of registration, and every subsequent purchaser of registered
WHEREFORE, the appealed decision dated September 1, 1997 land taking a certificate of title for value and in good faith, shall hold the same free from
is REVERSED and SET ASIDE and, in lieu thereof, a new one is entered ordering the all encumbrances except those noted on said certificate and any of the following
appellee (PADCOM) to pay the appellant (the Association) the following: encumbrances which may be subsisting, namely: xxx
1) P639,961.47 as and for membership dues in arrears inclusive of earned interests and Under the Torrens system of registration, claims and liens of whatever character,
penalties; and except those mentioned by law, existing against the land binds the holder of the title and
2) P25,000.00 as and for attorneys fees. the whole world.[12]
Costs against the appellees. It is undisputed that when the land in question was bought by PADCOMs
SO ORDERED. predecessor-in-interest, TDC, from OCLP, the sale bound TDC to comply with paragraph
The Court of Appeals justified its ruling by declaring that PADCOM automatically (G) of the covenants, conditions and restrictions of the Deed of Sale, which reads as
became a member of the Association when the land was sold to TDC. The intent to pass follows:[13]
the obligation to prospective transferees was evident from the annotation of the same G. AUTOMATIC MEMBERSHIP WITH THE ASSOCIATION:
clause at the back of the Transfer Certificate of Title covering the lot. Despite disavowal The owner of this lot, its successor-in-interest hereby binds himself to become a member
of membership, PADCOMs membership in the Association was evident from these facts: of the ASSOCIATION which will be formed by and among purchasers, fully paid up Lot
(1) PADCOM was included in the Associations list of bona fide members as of 30 March BUYERS, Building Owners and the COMPANY in respect to COMPANY OWNED LOTS.
1995; (2) Narciso Padilla, PADCOMs President, was one of the Associations incorporators; The OWNER of this lot shall abide by such rules and regulations that shall be laid down by
and (3) having received the demands for payment, PADCOM not only acknowledged the ASSOCIATION in the interest of security, maintenance, beautification and general
them, but asked for and was granted repeated extensions, and even proposed a scheme welfare of the OFFICE BUILDING zone. The ASSOCIATION when organized shall also,
for the settlement of its obligation. The Court of Appeals also ruled that PADCOM cannot among others, provide for and collect assessments which shall constitute a lien on the
evade payment of its obligation to the Association without violating equitable principles property, junior only to liens of the Government for taxes.
underlying quasi-contracts. Being covered by the Associations avowed purpose to Evidently, it was agreed by the parties that dues shall be collected from an
promote the interests and welfare of its members, PADCOM cannot be allowed to automatic member and such fees or assessments shall be a lien on the property.
expediently deny and avoid the obligation arising from such membership. This stipulation was likewise annotated at the back of Transfer Certificate of Title No.
Dissatisfied with the adverse judgment of the Court of Appeals, PADCOM filed the 457308 issued to TDC.[14] And when the latter sold the lot to PADCOM on 25 February 1975,
petition for review in this case. It raises the sole issue of whether it can be compelled to the Deed of Transfer expressly stated:[15]
join the association pursuant to the provision on automatic membership appearing as a NOW, THEREFORE, for and in consideration of the foregoing premises, the DEVELOPER, by
condition in the Deed of Sale of 04 September 1974 and the annotation thereof on these presents, cedes, transfers and conveys unto the CORPORATION the above-
Transfer Certificate of Title No. 457308. described parcel of land evidenced by Transfer Certificate of Title No. 457308, as well as
PADCOM contends that it cannot be compelled to be a member of the Association the Common and Limited Common Areas of the Condominium project mentioned and
solely by virtue of the automatic membership clause that appears on the title of the described in the Master Deed with Declaration of Restrictions (Annex A hereof), free from
property and the Deed of Transfer. In 1975, when it bought the land, the Association was all liens and encumbrances, except those already annotated at the back of said Transfer
still inexistent. Therefore, the provision on automatic membership was anticipatory in Certificate of Title No. 457308, xxx
nature, subject to the actual formation of the Association and the subsequent formulation This is so because any lien annotated on previous certificates of title should be
of its implementing rules. incorporated in or carried over to the new transfer certificates of title. Such lien is
PADCOM likewise maintains that the Associations By-laws requires an application inseparable from the property as it is a right in rem, a burden on the property whoever its
for membership. Since it never sought membership, the Court of Appeals erred in owner may be. It subsists notwithstanding a change in ownership; in short, the personality
concluding that it was a member of the Association by implication. Aside from the lack of the owner is disregarded.[16] As emphasized earlier, the provision on automatic
of evidence proving such membership, the Association has no basis to collect monthly membership was annotated in the Certificate of Title and made a condition in the Deed
of Transfer in favor of PADCOM. Consequently, it is bound by and must comply with the do unto others what he would want others to do unto him under the same
covenant. circumstances.[19]
Moreover, Article 1311 of the Civil Code provides that contracts take effect As resident and lot owner in the Ortigas area, PADCOM was definitely benefited by
between the parties, their assigns and heirs. Since PADCOM is the successor-in-interest of the Associations acts and activities to promote the interests and welfare of those who
TDC, it follows that the stipulation on automatic membership with the Association is also acquire property therein or benefit from the acts or activities of the Association.
binding on the former. Finally, PADCOMs argument that the collection of monthly dues has no basis since
We are not persuaded by PADCOMs contention that the By-laws of the Association there was no board resolution defining how much fees are to be imposed deserves scant
requires application for membership and acceptance thereof by the Board of consideration. Suffice it is to say that PADCOM never protested upon receipt of the earlier
Directors. Section 2 of the By-laws[17] reads: demands for payment of membership dues. In fact, by proposing a scheme to pay its
Section 2. Regular Members. Upon acceptance by the Board of Directors of Ortigas obligation, PADCOM cannot belatedly question the Associations authority to assess and
Center Association, Inc., all real estate owners, or long-term lessees of lots within the collect the fees in accordance with the total land area owned or occupied by the
boundaries of the Association as defined in the Articles of Incorporation become regular members, which finds support in a resolution dated 6 November 1982 of the Associations
members, provided, however that the long-term lessees of a lot or lots in said area shall incorporating directors[20] and Section 2 of its By-laws.[21]
be considered as the regular members in lieu of the owners of the same. Likewise, regular WHEREFORE, the petition is hereby DENIED for lack of merit.
membership in the Association automatically ceases upon the cessation of a member to Costs against petitioner.
be an owner or long-term lessee of real estate in the area. SO ORDERED.
A lessee shall be considered a long-term lessee if his lease is in writing and for a period of
two (2) years or more. Membership of a long-term lessee in the Association shall be co- Southern Philippines Power Corp. v. Commissioner of Internal Revenue
terminus with his legal possession (or his lease) of the lot/s in the area. Upon the lessees The case is about the sufficiency of sales invoices and receipts, which do not have the
cessation of membership in the Association, the owner shall automatically succeed the words zero-rated imprinted on them, to evidence zero-rated transactions, a requirement
lessee as member thereat. in taxpayers claim for tax credit or refund.
As lot owner, PADCOM is a regular member of the Association. No application for
membership is necessary. If at all, acceptance by the Board of Directors is a ministerial The Facts and the Case
function considering that PADCOM is deemed to be a regular member upon the
acquisition of the lot pursuant to the automatic membership clause annotated in the Petitioner Southern Philippines Power Corporation (SPP), a power company that
Certificate of Title of the property and the Deed of Transfer. generates and sells electricity to the National Power Corporation (NPC), applied with the
Neither are we convinced by PADCOMs contention that the automatic Bureau of Internal Revenue (BIR) for zero-rating of its transactions under Section 108(B)(3)
membership clause is a violation of its freedom of association. PADCOM was never forced of the National Internal Revenue Code (NIRC). The BIR approved the application for
to join the association. It could have avoided such membership by not buying the land taxable years 1999 and 2000.
from TDC. Nobody forced it to buy the land when it bought the building with the
annotation of the condition or lien on the Certificate of Title thereof and accepted the On June 20, 2000 SPP filed a claim with respondent Commissioner of Internal
Deed. PADCOM voluntarily agreed to be bound by and respect the condition, and thus Revenue (CIR) for a P5,083,371.57 tax credit or refund for 1999. On July 13, 2001 SPP filed
to join the Association. a second claim of P6,221,078.44 in tax credit or refund for 2000. The amounts represented
In addition, under the principle of estoppel, PADCOM is barred from disclaiming unutilized input VAT attributable to SPPs zero-rated sale of electricity to NPC.
membership in the Association. In estoppel, a person, who by his act or conduct has On September 29, 2001, before the lapse of the two-year prescriptive period for such
induced another to act in a particular manner, is barred from adopting an inconsistent actions, SPP filed with the Court of Tax Appeals (CTA) Second Division a petition for review
position, attitude or course of conduct that thereby causes loss or injury to another.[18] covering its claims for refund or tax credit. The petition claimed only the aggregate
We agree with the Court of Appeals conclusion from the facts or circumstances it amount of P8,636,126.75 which covered the last two quarters of 1999 and the four
enumerated in its decision and enumerated above that PADCOM is, indeed, a regular quarters in 2000.
member of the Association. These facts and circumstances are sufficient grounds to
apply the doctrine of estoppel against PADCOM. In his Comment on the petition, the CIR maintained that SPP is not entitled to tax credit or
Having ruled that PADCOM is a member of the Association, it is obligated to pay its refund since (a) the BIR was still examining SPPs claims for the same; (b) SPP failed to
dues incidental thereto. Article 1159 of the Civil Code mandates: substantiate its payment of input VAT; (c) its right to claim refund already prescribed, and
Art. 1159. Obligations arising from contracts have the force of law between the (d) SPP has not shown compliance with Section 204(c) in relation to Section 229 of the
contracting parties and should be complied with in good faith. NIRC as amended and Revenue Regulation (RR) 5-87 as amended by RR 3-88.
Assuming in gratis argumenti that PADCOM is not a member of the Association, it
cannot evade payment without violating the equitable principles underlying quasi- In a Decision dated April 26, 2006, the Second Division[1] denied SPPs claims, holding that
contracts. Article 2142 of the Civil Code provides: its zero-rated official receipts did not correspond to the quarterly VAT returns, bearing a
Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of difference of P800,107,956.61. Those receipts only support the amount
quasi-contract to the end that no one shall be unjustly enriched or benefited at the of P118,945,643.88. Further, these receipts do not bear the words zero-rated in violation of
expense of another. RR 7-95. The Second Division denied SPPs motion for reconsideration on August 15, 2006.
Generally, it may be said that a quasi-contract is based on the presumed will or
intent of the obligor dictated by equity and by the principles of absolute justice. Examples On appeal, the CTA En Banc affirmed the Second Divisions decision dated July 31,
of these principles are: (1) it is presumed that a person agrees to that which will benefit 2007.[2] The CTA En Banc rejected SPPs contention that its sales invoices reflected the
him; (2) nobody wants to enrich himself unjustly at the expense of another; or (3) one must words zero-rated, pointing out that it is on the official receipts that the law requires the
printing of such words. Moreover, SPP did not report in the corresponding quarterly VAT But NIRC Section 110 (A.1) provides that the input tax subject of tax refund is to
return the sales subject of its zero-rated receipts. The CTA En Banc denied SPPs motion for be evidenced by a VAT invoice or official receipt issued in accordance with Section
reconsideration on September 19, 2007. 113. Section 113 has been amended by Republic Act (R.A.) 9337 but it is the unamended
The Issues Presented version that covers the period when the transactions in this case took place. It reads:

The case presents the following issues: Section 113. Invoicing and Accounting Requirements for VAT-
Registered Persons.
1. Whether or not the CTA En Banc correctly rejected the invoices that SPP
presented and, thus, ruled that it failed to prove the zero-rated or effectively zero-rated A. Invoicing Requirements. A VAT-registered person shall, for
sales that it made; every sale, issue an invoice or receipt. In addition to the information
required under Section 237, the following information shall be
2. Whether or not the CTA En Banc correctly ruled that the words BIR-VAT Zero indicated in the invoice or receipt:
Rate Application Number 419.2000 imprinted on SPPs invoices did not comply with RR 7-
95; (1) A statement that the seller is a VAT-registered person,
followed by his taxpayers identification number (TIN); and
3. Whether or not the CTA En Banc correctly held that SPP should have declared (2) The total amount which the purchaser pays or is obligated
its zero-rated sales in its VAT returns for the subject period of the claim; and to pay to the seller with the indication that such amount includes the
value-added tax. (Emphasis supplied)
4. Whether or not the CTA En Banc correctly ruled that SPP was not entitled to a
tax refund or credit. The above does not distinguish between an invoice and a receipt when used
as evidence of a zero-rated transaction. Consequently, the CTA should have accepted
The Courts Rulings either or both of these documents as evidence of SPPs zero-rated transactions.

One and Two. The Court reiterated in San Roque Power Corporation v. Section 237 of the NIRC also makes no distinction between receipts and invoices
Commissioner of Internal Revenue[3] the following criteria governing claims for refund or as evidence of a commercial transaction:
tax credit under Section 112(A) of the NIRC:
SEC. 237. Issuance of Receipts or Sales or Commercial
(1) The taxpayer is VAT-registered; Invoices. All persons subject to an internal revenue tax shall, for each
(2) The taxpayer is engaged in zero-rated or effectively zero-rated sale or transfer of merchandise or for services rendered valued at
sales; Twenty-five pesos (P25.00) or more, issue duly registered receipts or
(3) The input taxes are due or paid; sales or commercial invoices, prepared at least in duplicate, showing
(4) The input taxes are not transitional input taxes; the date of transaction, quantity, unit cost and description of
(5) The input taxes have not been applied against output taxes during merchandise or nature of service: Provided, however, That in the case
and in the succeeding quarters; of sales, receipts or transfers in the amount of One hundred pesos
(6) The input taxes claimed are attributable to zero-rated or effectively (P100.00) or more, or regardless of the amount, where the sale or
zero-rated sales; transfer is made by a person liable to value-added tax to another
(7) For zero-rated sales under Section 106(A)(2)(1) and (2); 106(B); and person also liable to value-added tax; or where the receipt is issued to
108(B)(1) and (2), the acceptable foreign currency cover payment made as rentals, commissions, compensations or fees,
exchange proceeds have been duly accounted for in receipts or invoices shall be issued which shall show the name, business
accordance with BSP rules and regulations; style, if any, and address of the purchaser, customer or client: Provided,
(8) Where there are both zero-rated or effectively zero-rated sales and further, That where the purchaser is a VAT-registered person, in addition
taxable or exempt sales, and the input taxes cannot be to the information herein required, the invoice or receipt shall further
directly and entirely attributable to any of these sales, the show the Taxpayer Identification Number (TIN) of the purchaser.
input taxes shall be proportionately allocated on the basis of
sales volume; and The original of each receipt or invoice shall be issued to the
(9) The claim is filed within two years after the close of the taxable purchaser, customer or client at the time the transaction is effected,
quarter when such sales were made. who, if engaged in business or in the exercise of profession, shall keep
and preserve the same in his place of business for a period of three (3)
While acknowledging that SPPs sale of electricity to NPC is a zero-rated transaction,[4] the years from the close of the taxable year in which such invoice or
CTA En Banc ruled that SPP failed to establish that it made zero-rated sales. True, SPP receipt was issued, while the duplicate shall be kept and preserved by
submitted official receipts and sales invoices stamped with the words BIR VAT Zero-Rate the issuer, also in his place of business, for a like period.
Application Number 419.2000 but the CTA En Banc held that these were not sufficient to
prove the fact of sale. The Commissioner may, in meritorious cases, exempt any
person subject to internal revenue tax from compliance with the
provisions of this Section. (Emphasis supplied)
The Court held in Seaoil Petroleum Corporation v. Autocorp Group[5] that business forms Five. The CTA denied SPPs claim outright for failure to establish the existence of
like sales invoices are recognized in the commercial world as valid between the parties zero-rated sales, disregarding SPPs sales invoices and receipts which evidence them. That
and serve as memorials of their business transactions. And such documents have court did not delve into the question of SPPs compliance with the other requisites
probative value. provided under Section 112 of the NIRC.

Three. The CTA also did not accept SPPs official receipts due to the absence of Consequently, even as the Court holds that SPPs sales invoices and receipts
the words zero-rated on it. The omission, said that court, made the receipts non-compliant would be sufficient to prove its zero-rated transactions, the case has to be remanded to
with RR 7-95, specifically Section 4.108.1. But Section 4.108.1 requires the printing of the the CTA for determination of whether or not SPP has complied with the other requisites
words zero-rated only on invoices, not on official receipts: mentioned. Such matter involves questions of fact and entails the need to examine the
records. The Court is not a trier of facts and the competence needed for examining the
Section 4.108-1. Invoicing Requirements. All VAT-registered relevant accounting books or records is undoubtedly with the CTA.
persons shall, for every sale or lease of goods or properties or services, WHEREFORE, the Court GRANTS the petition, SETS ASIDE the Court of Tax
issue duly registered receipts or sales or commercial invoices which Appeals En Banc decision dated July 31, 2007 and resolution dated September 19, 2007,
must show: and REMANDS the case to the Court of Tax Appeals Second Division for further hearing as
1. The name, TIN and address of seller; stated above.
2. Date of transaction;
3. Quantity, unit cost and description of merchandise or G.R. No. 184823 October 6, 2010
nature of service; COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs.
4. The name, TIN, business style, if any, and address of the AICHI FORGING COMPANY OF ASIA, INC., Respondent.
VAT-registered purchaser, customer or client; A taxpayer is entitled to a refund either by authority of a statute expressly granting such
5. The word "zero-rated" imprinted on the invoice covering right, privilege, or incentive in his favor, or under the principle of solutio indebiti requiring
zero-rated sales; and the return of taxes erroneously or illegally collected. In both cases, a taxpayer must prove
6. The invoice value or consideration. not only his entitlement to a refund but also his compliance with the procedural due
process as non-observance of the prescriptive periods within which to file the
x x x x (Emphasis supplied) administrative and the judicial claims would result in the denial of his claim.
This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to set aside
Actually, it is R.A. 9337 that in 2005 required the printing of the words zero-rated on the July 30, 2008 Decision1 and the October 6, 2008 Resolution2 of the Court of Tax
receipts. But, since the receipts and invoices in this case cover sales made from 1999 to Appeals (CTA) En Banc.
2000, what applies is Section 4.108.1 above which refers only to invoices. Factual Antecedents
Respondent Aichi Forging Company of Asia, Inc., a corporation duly organized and
A claim for tax credit or refund, arising out of zero-rated transactions, is essentially based existing under the laws of the Republic of the Philippines, is engaged in the
on excess payment. In zero-rating a transaction, the purpose is not to benefit the person manufacturing, producing, and processing of steel and its by-products.3 It is registered
legally liable to pay the tax, like SPP, but to relieve exempt entities like NPC which supplies with the Bureau of Internal Revenue (BIR) as a Value-Added Tax (VAT) entity4 and its
electricity to factories, offices, and homes, from having to shoulder the tax burden that products, "close impression die steel forgings" and "tool and dies," are registered with the
ultimately would be passed to the public. Board of Investments (BOI) as a pioneer status.5
On September 30, 2004, respondent filed a claim for refund/credit of input VAT for the
The principle of solutio indebiti should govern this case since the BIR received period July 1, 2002 to September 30, 2002 in the total amount of ₱3,891,123.82 with the
something that it was not entitled to. Thus, it has to return the same. The government petitioner Commissioner of Internal Revenue (CIR), through the Department of Finance
should not use technicalities to hold on to money that does not belong to it.[6]Only a (DOF) One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center.6
preponderance of evidence is needed to grant a claim for tax refund based on excess Proceedings before the Second Division of the CTA
payment.[7] On even date, respondent filed a Petition for Review 7 with the CTA for the refund/credit
of the same input VAT. The case was docketed as CTA Case No. 7065 and was raffled to
Notably, SPP does no other business except sell the power it produces to NPC, the Second Division of the CTA.
a fact that the CIR did not contest in the parties joint stipulation of facts.[8] Consequently, In the Petition for Review, respondent alleged that for the period July 1, 2002 to September
the likelihood that SPP would claim input taxes paid on purchases attributed to sales that 30, 2002, it generated and recorded zero-rated sales in the amount of
are not zero-rated is close to nil. ₱131,791,399.00,8 which was paid pursuant to Section 106(A) (2) (a) (1), (2) and (3) of the
Four. The Court finds that SPP failed to indicate its zero-rated sales in its VAT returns. But this National Internal Revenue Code of 1997 (NIRC);9 that for the said period, it incurred and
is not sufficient reason to deny it its claim for tax credit or refund when there are other paid input VAT amounting to ₱3,912,088.14 from purchases and importation attributable
documents from which the CTA can determine the veracity of SPPs claim. to its zero-rated sales;10and that in its application for refund/credit filed with the DOF One-
Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, it only claimed the
Of course, such failure if partaking of a criminal act under Section 255 of the NIRC could amount of ₱3,891,123.82.11
warrant the criminal prosecution of the responsible person or persons. But the omission In response, petitioner filed his Answer12 raising the following special and affirmative
does not furnish ground for the outright denial of the claim for tax credit or refund if such defenses, to wit:
claim is in fact justified.
 4. Petitioner’s alleged claim for refund is subject to administrative investigation Output VAT Due 610,984.20
by the Bureau; Excess Creditable Input VAT ₱ 3,239,119.25
5. Petitioner must prove that it paid VAT input taxes for the period in question;
6. Petitioner must prove that its sales are export sales contemplated under WHEREFORE, premises considered, the present Petition for Review is PARTIALLY GRANTED.
Sections 106(A) (2) (a), and 108(B) (1) of the Tax Code of 1997; Accordingly, respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT
7. Petitioner must prove that the claim was filed within the two (2) year period CERTIFICATE in favor of petitioner [in] the reduced amount of THREE MILLION TWO
prescribed in Section 229 of the Tax Code; HUNDRED THIRTY NINE THOUSAND ONE HUNDRED NINETEEN AND 25/100 PESOS
8. In an action for refund, the burden of proof is on the taxpayer to establish its (₱3,239,119.25), representing the unutilized input VAT incurred for the months of July to
right to refund, and failure to sustain the burden is fatal to the claim for refund; September 2002.
and SO ORDERED.14
9. Claims for refund are construed strictly against the claimant for the same Dissatisfied with the above-quoted Decision, petitioner filed a Motion for Partial
partake of the nature of exemption from taxation.13 Reconsideration,15 insisting that the administrative and the judicial claims were filed
Trial ensued, after which, on January 4, 2008, the Second Division of the CTA rendered a beyond the two-year period to claim a tax refund/credit provided for under Sections
Decision partially granting respondent’s claim for refund/credit. Pertinent portions of the 112(A) and 229 of the NIRC. He reasoned that since the year 2004 was a leap year, the
Decision read: filing of the claim for tax refund/credit on September 30, 2004 was beyond the two-year
For a VAT registered entity whose sales are zero-rated, to validly claim a refund, Section period, which expired on September 29, 2004.16 He cited as basis Article 13 of the Civil
112 (A) of the NIRC of 1997, as amended, provides: Code,17 which provides that when the law speaks of a year, it is equivalent to 365 days.
SEC. 112. Refunds or Tax Credits of Input Tax. – In addition, petitioner argued that the simultaneous filing of the administrative and the
(A) Zero-rated or Effectively Zero-rated Sales. – Any VAT-registered person, whose sales judicial claims contravenes Sections 112 and 229 of the NIRC.18 According to the
are zero-rated or effectively zero-rated may, within two (2) years after the close of the petitioner, a prior filing of an administrative claim is a "condition precedent" 19 before a
taxable quarter when the sales were made, apply for the issuance of a tax credit judicial claim can be filed. He explained that the rationale of such requirement rests not
certificate or refund of creditable input tax due or paid attributable to such sales, except only on the doctrine of exhaustion of administrative remedies but also on the fact that
transitional input tax, to the extent that such input tax has not been applied against the CTA is an appellate body which exercises the power of judicial review over
output tax: x x x administrative actions of the BIR. 20
Pursuant to the above provision, petitioner must comply with the following requisites: (1) The Second Division of the CTA, however, denied petitioner’s Motion for Partial
the taxpayer is engaged in sales which are zero-rated or effectively zero-rated; (2) the Reconsideration for lack of merit. Petitioner thus elevated the matter to the CTA En
taxpayer is VAT-registered; (3) the claim must be filed within two years after the close of Banc via a Petition for Review.21
the taxable quarter when such sales were made; and (4) the creditable input tax due or Ruling of the CTA En Banc
paid must be attributable to such sales, except the transitional input tax, to the extent On July 30, 2008, the CTA En Banc affirmed the Second Division’s Decision allowing the
that such input tax has not been applied against the output tax. partial tax refund/credit in favor of respondent. However, as to the reckoning point for
The Court finds that the first three requirements have been complied [with] by petitioner. counting the two-year period, the CTA En Banc ruled:
With regard to the first requisite, the evidence presented by petitioner, such as the Sales Petitioner argues that the administrative and judicial claims were filed beyond the period
Invoices (Exhibits "II" to "II-262," "JJ" to "JJ-431," "KK" to "KK-394" and "LL") shows that it is allowed by law and hence, the honorable Court has no jurisdiction over the same. In
engaged in sales which are zero-rated. addition, petitioner further contends that respondent's filing of the administrative and
The second requisite has likewise been complied with. The Certificate of Registration with judicial [claims] effectively eliminates the authority of the honorable Court to exercise
OCN 1RC0000148499 (Exhibit "C") with the BIR proves that petitioner is a registered VAT jurisdiction over the judicial claim.
taxpayer. We are not persuaded.
In compliance with the third requisite, petitioner filed its administrative claim for refund on Section 114 of the 1997 NIRC, and We quote, to wit:
September 30, 2004 (Exhibit "N") and the present Petition for Review on September 30, SEC. 114. Return and Payment of Value-added Tax. –
2004, both within the two (2) year prescriptive period from the close of the taxable quarter (A) In General. – Every person liable to pay the value-added tax imposed under this Title
when the sales were made, which is from September 30, 2002. shall file a quarterly return of the amount of his gross sales or receipts within twenty-five
As regards, the fourth requirement, the Court finds that there are some documents and (25) days following the close of each taxable quarter prescribed for each taxpayer:
claims of petitioner that are baseless and have not been satisfactorily substantiated. Provided, however, That VAT-registered persons shall pay the value-added tax on a
xxxx monthly basis.
In sum, petitioner has sufficiently proved that it is entitled to a refund or issuance of a tax [x x x x ]
credit certificate representing unutilized excess input VAT payments for the period July 1, Based on the above-stated provision, a taxpayer has twenty five (25) days from the close
2002 to September 30, 2002, which are attributable to its zero-rated sales for the same of each taxable quarter within which to file a quarterly return of the amount of his gross
period, but in the reduced amount of ₱3,239,119.25, computed as follows: sales or receipts. In the case at bar, the taxable quarter involved was for the period of
Amount of Claimed Input VAT ₱ 3,891,123.82 July 1, 2002 to September 30, 2002. Applying Section 114 of the 1997 NIRC, respondent
Less: has until October 25, 2002 within which to file its quarterly return for its gross sales or receipts
Exceptions as found by the ICPA 41,020.37 [with] which it complied when it filed its VAT Quarterly Return on October 20, 2002.
In relation to this, the reckoning of the two-year period provided under Section 229 of the
Net Creditable Input VAT ₱ 3,850,103.45 1997 NIRC should start from the payment of tax subject claim for refund. As stated above,
Less: respondent filed its VAT Return for the taxable third quarter of 2002 on October 20, 2002.
Thus, respondent's administrative and judicial claims for refund filed on September 30, 4970236 and BIR Form No. 1914 for the third quarter of 2002,37 which were filed with the
2004 were filed on time because AICHI has until October 20, 2004 within which to file its DOF, were attached as Annexes "M" and "N," respectively, to the Petition for Review filed
claim for refund. with the CTA.38 Respondent further contends that the non-observance of the 120-day
In addition, We do not agree with the petitioner's contention that the 1997 NIRC requires period given to the CIR to act on the claim for tax refund/credit in Section 112(D) is not
the previous filing of an administrative claim for refund prior to the judicial claim. This fatal because what is important is that both claims are filed within the two-year
should not be the case as the law does not prohibit the simultaneous filing of the prescriptive period.39 In support thereof, respondent cites Commissioner of Internal
administrative and judicial claims for refund. What is controlling is that both claims for Revenue v. Victorias Milling Co., Inc.40 where it was ruled that "[i]f, however, the [CIR] takes
refund must be filed within the two-year prescriptive period. time in deciding the claim, and the period of two years is about to end, the suit or
In sum, the Court En Banc finds no cogent justification to disturb the findings and proceeding must be started in the [CTA] before the end of the two-year period without
conclusion spelled out in the assailed January 4, 2008 Decision and March 13, 2008 awaiting the decision of the [CIR]."41 Lastly, respondent argues that even if the period had
Resolution of the CTA Second Division. What the instant petition seeks is for the Court En already lapsed, it may be suspended for reasons of equity considering that it is not a
Banc to view and appreciate the evidence in their own perspective of things, which jurisdictional requirement.42
unfortunately had already been considered and passed upon. Our Ruling
WHEREFORE, the instant Petition for Review is hereby DENIED DUE COURSE and DISMISSED The petition has merit.
for lack of merit. Accordingly, the January 4, 2008 Decision and March 13, 2008 Resolution Unutilized input VAT must be claimed within two years after the close of the taxable
of the CTA Second Division in CTA Case No. 7065 entitled, "AICHI Forging Company of quarter when the sales were made
Asia, Inc. petitioner vs. Commissioner of Internal Revenue, respondent" are hereby In computing the two-year prescriptive period for claiming a refund/credit of unutilized
AFFIRMED in toto. input VAT, the Second Division of the CTA applied Section 112(A) of the NIRC, which
SO ORDERED.22 states:
Petitioner sought reconsideration but the CTA En Banc denied23 his Motion for SEC. 112. Refunds or Tax Credits of Input Tax. –
Reconsideration. (A) Zero-rated or Effectively Zero-rated Sales – Any VAT-registered person, whose sales are
Issue zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable
Hence, the present recourse where petitioner interposes the issue of whether quarter when the sales were made, apply for the issuance of a tax credit certificate or
respondent’s judicial and administrative claims for tax refund/credit were filed within the refund of creditable input tax due or paid attributable to such sales, except transitional
two-year prescriptive period provided in Sections 112(A) and 229 of input tax, to the extent that such input tax has not been applied against output tax:
the NIRC.24 Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2)
Petitioner’s Arguments and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange
Petitioner maintains that respondent’s administrative and judicial claims for tax proceeds thereof had been duly accounted for in accordance with the rules and
refund/credit were filed in violation of Sections 112(A) and 229 of the NIRC. 25 He posits regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the
that pursuant to Article 13 of the Civil Code,26 since the year 2004 was a leap year, the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or
filing of the claim for tax refund/credit on September 30, 2004 was beyond the two-year exempt sale of goods or properties or services, and the amount of creditable input tax
period, which expired on September 29, 2004.27 due or paid cannot be directly and entirely attributed to any one of the transactions, it
Petitioner further argues that the CTA En Banc erred in applying Section 114(A) of the NIRC shall be allocated proportionately on the basis of the volume of sales. (Emphasis
in determining the start of the two-year period as the said provision pertains to the supplied.)
compliance requirements in the payment of VAT.28 He asserts that it is Section 112, The CTA En Banc, on the other hand, took into consideration Sections 114 and 229 of the
paragraph (A), of the same Code that should apply because it specifically provides for NIRC, which read:
the period within which a claim for tax refund/ credit should be made.29 SEC. 114. Return and Payment of Value-Added Tax. –
Petitioner likewise puts in issue the fact that the administrative claim with the BIR and the (A) In General. – Every person liable to pay the value-added tax imposed under this Title
judicial claim with the CTA were filed on the same day.30 He opines that the simultaneous shall file a quarterly return of the amount of his gross sales or receipts within twenty-five
filing of the administrative and the judicial claims contravenes Section 229 of the NIRC, (25) days following the close of each taxable quarter prescribed for each taxpayer:
which requires the prior filing of an administrative claim.31 He insists that such procedural Provided, however, That VAT-registered persons shall pay the value-added tax on a
requirement is based on the doctrine of exhaustion of administrative remedies and the monthly basis.
fact that the CTA is an appellate body exercising judicial review over administrative Any person, whose registration has been cancelled in accordance with Section 236, shall
actions of the CIR.32 file a return and pay the tax due thereon within twenty-five (25) days from the date of
Respondent’s Arguments cancellation of registration: Provided, That only one consolidated return shall be filed by
For its part, respondent claims that it is entitled to a refund/credit of its unutilized input VAT the taxpayer for his principal place of business or head office and all branches.
for the period July 1, 2002 to September 30, 2002 as a matter of right because it has xxxx
substantially complied with all the requirements provided by law.33 Respondent likewise SEC. 229. Recovery of tax erroneously or illegally collected. –
defends the CTA En Banc in applying Section 114(A) of the NIRC in computing the No suit or proceeding shall be maintained in any court for the recovery of any national
prescriptive period for the claim for tax refund/credit. Respondent believes that Section internal revenue tax hereafter alleged to have been erroneously or illegally assessed or
112(A) of the NIRC must be read together with Section 114(A) of the same Code.34 collected, or of any penalty claimed to have been collected without authority, or of any
As to the alleged simultaneous filing of its administrative and judicial claims, respondent sum alleged to have been excessively or in any manner wrongfully collected, until a claim
contends that it first filed an administrative claim with the One-Stop Shop Inter-Agency for refund or credit has been duly filed with the Commissioner; but such suit or proceeding
Tax Credit and Duty Drawback Center of the DOF before it filed a judicial claim with the may be maintained, whether or not such tax, penalty or sum has been paid under protest
CTA.35 To prove this, respondent points out that its Claimant Information Sheet No. or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years excessively or in any manner wrongfully collected without authority, or of any sum alleged
from the date of payment of the tax or penalty regardless of any supervening cause that to have been excessively or in any manner wrongfully collected, until a claim for refund
may arise after payment: Provided, however, That the Commissioner may, even without or credit has been duly filed with the Commissioner; but such suit or proceeding may be
written claim therefor, refund or credit any tax, where on the face of the return upon maintained, whether or not such tax, penalty, or sum has been paid under protest or
which payment was made, such payment appears clearly to have been erroneously duress.
paid. (Emphasis supplied.) In any case, no such suit or proceeding shall be filed after the expiration of two (2) years
Hence, the CTA En Banc ruled that the reckoning of the two-year period for filing a claim from the date of payment of the tax or penalty regardless of any supervening cause that
for refund/credit of unutilized input VAT should start from the date of payment of tax and may arise after payment: Provided, however, That the Commissioner may, even without
not from the close of the taxable quarter when the sales were made.43 a written claim therefor, refund or credit any tax, where on the face of the return upon
The pivotal question of when to reckon the running of the two-year prescriptive period, which payment was made, such payment appears clearly to have been erroneously
however, has already been resolved in Commissioner of Internal Revenue v. Mirant paid.
Pagbilao Corporation,44 where we ruled that Section 112(A) of the NIRC is the applicable Notably, the above provisions also set a two-year prescriptive period, reckoned from date
provision in determining the start of the two-year period for claiming a refund/credit of of payment of the tax or penalty, for the filing of a claim of refund or tax credit. Notably
unutilized input VAT, and that Sections 204(C) and 229 of the NIRC are inapplicable as too, both provisions apply only to instances of erroneous payment or illegal collection of
"both provisions apply only to instances of erroneous payment or illegal collection of internal revenue taxes.
internal revenue taxes."45 We explained that: MPC’s creditable input VAT not erroneously paid
The above proviso [Section 112 (A) of the NIRC] clearly provides in no uncertain terms For perspective, under Sec. 105 of the NIRC, creditable input VAT is an indirect tax which
that unutilized input VAT payments not otherwise used for any internal revenue tax due can be shifted or passed on to the buyer, transferee, or lessee of the goods, properties,
the taxpayer must be claimed within two years reckoned from the close of the taxable or services of the taxpayer. The fact that the subsequent sale or transaction involves a
quarter when the relevant sales were made pertaining to the input VAT regardless of wholly-tax exempt client, resulting in a zero-rated or effectively zero-rated transaction,
whether said tax was paid or not. As the CA aptly puts it, albeit it erroneously applied the does not, standing alone, deprive the taxpayer of its right to a refund for any unutilized
aforequoted Sec. 112 (A), "[P]rescriptive period commences from the close of the taxable creditable input VAT, albeit the erroneous, illegal, or wrongful payment angle does not
quarter when the sales were made and not from the time the input VAT was paid nor from enter the equation.
the time the official receipt was issued." Thus, when a zero-rated VAT taxpayer pays its xxxx
input VAT a year after the pertinent transaction, said taxpayer only has a year to file a Considering the foregoing discussion, it is clear that Sec. 112 (A) of the NIRC, providing a
claim for refund or tax credit of the unutilized creditable input VAT. The reckoning frame two-year prescriptive period reckoned from the close of the taxable quarter when the
would always be the end of the quarter when the pertinent sales or transaction was relevant sales or transactions were made pertaining to the creditable input VAT, applies
made, regardless when the input VAT was paid. Be that as it may, and given that the last to the instant case, and not to the other actions which refer to erroneous payment of
creditable input VAT due for the period covering the progress billing of September 6, 1996 taxes.46 (Emphasis supplied.)
is the third quarter of 1996 ending on September 30, 1996, any claim for unutilized In view of the foregoing, we find that the CTA En Banc erroneously applied Sections
creditable input VAT refund or tax credit for said quarter prescribed two years after 114(A) and 229 of the NIRC in computing the two-year prescriptive period for claiming
September 30, 1996 or, to be precise, on September 30, 1998. Consequently, MPC’s claim refund/credit of unutilized input VAT. To be clear, Section 112 of the NIRC is the pertinent
for refund or tax credit filed on December 10, 1999 had already prescribed. provision for the refund/credit of input VAT. Thus, the two-year period should be reckoned
Reckoning for prescriptive period under from the close of the taxable quarter when the sales were made.
Secs. 204(C) and 229 of the NIRC inapplicable The administrative claim was timely filed
To be sure, MPC cannot avail itself of the provisions of either Sec. 204(C) or 229 of the NIRC Bearing this in mind, we shall now proceed to determine whether the administrative claim
which, for the purpose of refund, prescribes a different starting point for the two-year was timely filed.
prescriptive limit for the filing of a claim therefor. Secs. 204(C) and 229 respectively Relying on Article 13 of the Civil Code,47 which provides that a year is equivalent to 365
provide: days, and taking into account the fact that the year 2004 was a leap year, petitioner
Sec. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit submits that the two-year period to file a claim for tax refund/ credit for the period July 1,
Taxes. – The Commissioner may – 2002 to September 30, 2002 expired on September 29, 2004.48
xxxx We do not agree.
(c) Credit or refund taxes erroneously or illegally received or penalties imposed without In Commissioner of Internal Revenue v. Primetown Property Group, Inc.,49 we said that as
authority, refund the value of internal revenue stamps when they are returned in good between the Civil Code, which provides that a year is equivalent to 365 days, and the
condition by the purchaser, and, in his discretion, redeem or change unused stamps that Administrative Code of 1987, which states that a year is composed of 12 calendar months,
have been rendered unfit for use and refund their value upon proof of destruction. No it is the latter that must prevail following the legal maxim, Lex posteriori derogat
credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing priori.50 Thus:
with the Commissioner a claim for credit or refund within two (2) years after the payment Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative
of the tax or penalty: Provided, however, That a return filed showing an overpayment shall Code of 1987 deal with the same subject matter – the computation of legal periods.
be considered as a written claim for credit or refund. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a
xxxx leap year. Under the Administrative Code of 1987, however, a year is composed of 12
Sec. 229. Recovery of Tax Erroneously or Illegally Collected. – No suit or proceeding shall calendar months. Needless to state, under the Administrative Code of 1987, the number
be maintained in any court for the recovery of any national internal revenue tax hereafter of days is irrelevant.
alleged to have been erroneously or illegally assessed or collected, or of any penalty There obviously exists a manifest incompatibility in the manner of
claimed to have been collected without authority, of any sum alleged to have been
computing legal periods under the Civil Code and the Administrative Code of 1987. For are constrained to deny respondent’s claim for tax refund/credit for having been filed in
this reason, we hold that Section 31, Chapter VIII, Book I of the Administrative Code of violation of Section 112(D) of the NIRC, which provides that:
1987, being the more recent law, governs the computation of legal periods. Lex posteriori SEC. 112. Refunds or Tax Credits of Input Tax. –
derogat priori. xxxx
Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, (D) Period within which Refund or Tax Credit of Input Taxes shall be Made. – In proper
the two-year prescriptive period (reckoned from the time respondent filed its final cases, the Commissioner shall grant a refund or issue the tax credit certificate for
adjusted return on April 14, 1998) consisted of 24 calendar months, computed as follows: creditable input taxes within one hundred twenty (120) days from the date of submission
Year 1 1st calendar month April 15, 1998 to May 14, 1998 of complete documents in support of the application filed in accordance with
Subsections (A) and (B) hereof.
2nd calendar month May 15, 1998 to June 14, 1998 In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the
part of the Commissioner to act on the application within the period prescribed above,
3rd calendar month June 15, 1998 to July 14, 1998
the taxpayer affected may, within thirty (30) days from the receipt of the decision denying
4th calendar month July 15, 1998 to August 14, 1998 the claim or after the expiration of the one hundred twenty day-period, appeal the
decision or the unacted claim with the Court of Tax Appeals. (Emphasis supplied.)
5th calendar month August 15, 1998 to September 14, 1998 Section 112(D) of the NIRC clearly provides that the CIR has "120 days, from the date of
the submission of the complete documents in support of the application [for tax
6th calendar month September 15, 1998 to October 14, 1998
refund/credit]," within which to grant or deny the claim. In case of full or partial denial by
7th calendar month October 15, 1998 to November 14, 1998 the CIR, the taxpayer’s recourse is to file an appeal before the CTA within 30 days from
receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act
8th calendar month November 15, 1998 to December 14, 1998 on the application for tax refund/credit, the remedy of the taxpayer is to appeal the
9th calendar month December 15, 1998 to January 14, 1999
inaction of the CIR to CTA within 30 days.
In this case, the administrative and the judicial claims were simultaneously filed on
10th calendar month January 15, 1999 to February 14, 1999 September 30, 2004. Obviously, respondent did not wait for the decision of the CIR or the
lapse of the 120-day period. For this reason, we find the filing of the judicial claim with the
11th calendar month February 15, 1999 to March 14, 1999 CTA premature.
12th calendar month March 15, 1999 to April 14, 1999 Respondent’s assertion that the non-observance of the 120-day period is not fatal to the
filing of a judicial claim as long as both the administrative and the judicial claims are filed
Year 2 13th calendar month April 15, 1999 to May 14, 1999 within the two-year prescriptive period52 has no legal basis.
There is nothing in Section 112 of the NIRC to support respondent’s view. Subsection (A)
14th calendar month May 15, 1999 to June 14, 1999
of the said provision states that "any VAT-registered person, whose sales are zero-rated or
15th calendar month June 15, 1999 to July 14, 1999 effectively zero-rated may, within two years after the close of the taxable quarter when
the sales were made, apply for the issuance of a tax credit certificate or refund of
16th calendar month July 15, 1999 to August 14, 1999 creditable input tax due or paid attributable to such sales." The phrase "within two (2)
years x x x apply for the issuance of a tax credit certificate or refund" refers to applications
17th calendar month August 15, 1999 to September 14, 1999
for refund/credit filed with the CIR and not to appeals made to the CTA. This is apparent
18th calendar month September 15, 1999 to October 14, 1999 in the first paragraph of subsection (D) of the same provision, which states that the CIR
has "120 days from the submission of complete documents in support of the application
19th calendar month October 15, 1999 to November 14, 1999 filed in accordance with Subsections (A) and (B)" within which to decide on the claim.
In fact, applying the two-year period to judicial claims would render nugatory Section
20th calendar month November 15, 1999 to December 14, 1999
112(D) of the NIRC, which already provides for a specific period within which a taxpayer
21st calendar month December 15, 1999 to January 14, 2000 should appeal the decision or inaction of the CIR. The second paragraph of Section
112(D) of the NIRC envisions two scenarios: (1) when a decision is issued by the CIR before
22nd calendar month January 15, 2000 to February 14, 2000 the lapse of the 120-day period; and (2) when no decision is made after the 120-day
23rd calendar month February 15, 2000 to March 14, 2000 period. In both instances, the taxpayer has 30 days within which to file an appeal with the
CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA.
24th calendar month March 15, 2000 to April 14, 2000 With regard to Commissioner of Internal Revenue v. Victorias Milling, Co., Inc.53 relied
We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last upon by respondent, we find the same inapplicable as the tax provision involved in that
day of the 24th calendar month from the day respondent filed its final adjusted return. case is Section 306, now Section 229 of the NIRC. And as already discussed, Section 229
Hence, it was filed within the reglementary period.51 does not apply to refunds/credits of input VAT, such as the instant case.
Applying this to the present case, the two-year period to file a claim for tax refund/credit In fine, the premature filing of respondent’s claim for refund/credit of input VAT before
for the period July 1, 2002 to September 30, 2002 expired on September 30, 2004. Hence, the CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA.
respondent’s administrative claim was timely filed. WHEREFORE, the Petition is hereby GRANTED. The assailed July 30, 2008 Decision and the
The filing of the judicial claim was premature October 6, 2008 Resolution of the Court of Tax Appeals are hereby REVERSED and SET
However, notwithstanding the timely filing of the administrative claim, we ASIDE. The Court of Tax Appeals Second Division is DIRECTED to dismiss CTA Case No. 7065
for having been prematurely filed.
[G.R. No. 152317. November 10, 2004] 1992, the date the amount was received by defendant-appellee Victoria
VICTORIA MOREO-LENTFER,* GUNTER LENTFER and JOHN CRAIGIE YOUNG CROSS, Moreno-Lentfer; and
petitioners, vs. HANS JURGEN WOLFF, respondent. 3. The case against defendant-appellee Rodrigo Dimayacyac is dismissed.
DECISION SO ORDERED.[12]
QUISUMBING, J.: Hence, the instant petition raising the following issues:
For review on certiorari are the Decision[1] dated June 14, 2001, 1) DOES ARTICLE 1238 OF THE NEW CIVIL CODE APPLY IN THE CASE AT BAR? [13]
and Resolution[2] dated February 22, 2002, of the Court of Appeals in CA-G.R. CV No. 2) DOES THE PRINCIPLE OF SOLUTIO INDEBITI UNDER ARTICLE 2154 OF THE NEW
48272. The decision reversed the judgment[3] of the Regional Trial Court of Calapan City, CIVIL CODE, THE PRINCIPLE OF JUSTICE AND EQUITY, APPLY IN THE CASE AT
Oriental Mindoro, Branch 39, in Civil Case No. R-4219. BAR?[14]
The facts are as follows: Article 1238 of the New Civil Code provides:
The petitioners are Gunter Lentfer, a German citizen; his Filipina wife, Victoria Moreo- ART. 1238. Payment made by a third person who does not intend to be reimbursed by the
Lentfer; and John Craigie Young Cross, an Australian citizen, all residing in Sabang, Puerto debtor is deemed to be a donation, which requires the debtors consent. But the payment
Galera, Oriental Mindoro. Respondent Hans Jurgen Wolff is a German citizen, residing in is in any case valid as to the creditor who has accepted it.
San Lorenzo Village, Makati City. Petitioners posit that in a contract of sale, the seller is the creditor, who in this case is
Petitioners alleged that with respondent, on March 6, 1992, they engaged the Cross, and the buyer is the debtor, namely Moreo-Lentfer in this case. Respondent is the
notarial services of Atty. Rodrigo C. Dimayacyac for: (1) the sale of a beach house owned third person who paid the consideration on behalf of Moreo-Lentfer, the debtor.
by petitioner Cross in Sabang, Puerto Galera, Oriental Mindoro, and (2) the assignment of Petitioners insist that respondent did not intend to be reimbursed for said payment and
Cross contract of lease on the land where the house stood. The sale of the beach house debtor Moreo-Lentfer consented to it. Thus, by virtue of Article 1238, payment by
and the assignment of the lease right would be in the name of petitioner Victoria Moreo- respondent is considered a donation.
Lentfer, but the total consideration of 220,000 Deutschmarks (DM) would be paid by Respondent counters that Article 1238 bears no relevance to the case since it
respondent Hans Jurgen Wolff. A promissory note was executed by said respondent in applies only to contracts of loan where payment is made by a third person to a creditor
favor of petitioner Cross. in favor of a debtor of a previously incurred obligation. The instant case, in contrast,
According to respondent, however, the Lentfer spouses were his confidants who involves a contract of sale where no real creditor-debtor relationship exists between the
held in trust for him, a time deposit account in the amount of DM 200,000 [4] at Solid Bank parties. Further, respondent argues his conduct never at any time intimated any intention
Corporation. Apprised of his interest to own a house along a beach, the Lentfer couple to donate in favor of petitioner Moreo-Lentfer.
urged him to buy petitioner Cross beach house and lease rights in Puerto Galera. Moreover, respondent contends that the alleged donation is void for non-
Respondent agreed and through a bank-to-bank transaction, he paid Cross the amount compliance with the formal requirements set by law. Citing Article 748[15] of the New Civil
of DM 221,700[5] as total consideration for the sale and assignment of the lease rights. Code, respondent avers that since the amount involved exceeds P5,000, both the
However, Cross, Moreo-Lentfer and Atty. Dimayacyac surreptitiously executed a deed of donation and its acceptance must be in writing for the donation to be valid. Respondent
sale whereby the beach house was made to appear as sold to Moreo-Lentfer for further says there was no simultaneous delivery of the money as required by Art. 748 for
only P100,000.[6] The assignment of the lease right was likewise made in favor of Moreo- instances of oral donation. Respondent also calls our attention to the sudden change in
Lentfer.[7] Upon learning of this, respondent filed a Complaint docketed as Civil Case No. petitioners theory. Previously, before the Court of Appeals, the petitioners claimed that
R-4219 with the lower court for annulment of sale and reconveyance of property with what was donated were the subject properties. But before this Court, they insist that what
damages and prayer for a writ of attachment. was actually donated was the money used in the purchase of subject properties.
After trial, the court a quo dismissed the complaint for failure to establish a cause of On this point, we find petitioners stance without merit. Article 1238 of the New Civil
action, thus: Code is not applicable in this case.
ACCORDINGLY, judgment is hereby rendered in favor of the defendants and against the Trying to apply Art. 1238 to the instant case is like forcing a square peg into a round
plaintiff, dismissing the complaint for the reason that plaintiff has not established a cause hole. The absence of intention to be reimbursed, the qualifying circumstance in Art. 1238,
of action against the defendants with costs against the plaintiff. is negated by the facts of this case. Respondents acts contradict any intention to donate
SO ORDERED.[8] the properties to petitioner Moreo-Lentfer. When respondent learned that the sale of the
Aggrieved, respondent appealed to the Court of Appeals.[9] beach house and assignment of the lease right were in favor of Victoria Moreo-Lentfer,
But in its Decision[10] dated June 14, 2001, the appellate court reversed the decision he immediately filed a complaint for annulment of the sale and reconveyance of the
of the trial court, thus: property with damages and prayer for a writ of attachment. Respondent Moreo-Lentfer
WHEREFORE, the judgment appealed from is hereby REVERSED and a new one is hereby at that time claimed the beach house, together with the lease right, was donated to her.
rendered, as follows: Noteworthy, she had changed her theory, to say that it was only the money used in the
1. Defendants-appellees spouses Genter[11] and Victoria Moreno-Lentfer and purchase that was donated to her. But in any event, respondent actually stayed in the
John Craigie Young Cross are jointly and severally held liable to pay beach house in the concept of an owner and shouldered the expenses for its
plaintiff-appellant the amount of 220,000.00 DM German Currency or its maintenance and repair amounting to P200,000 for the entire period of his stay for ten
present peso equivalent plus legal interest starting from March 8, 1993, the weeks. Moreover, the appellate court found that respondent is not related or even close
date of the last final demand letter; to the Lentfer spouses. Obviously, respondent had trusted the Lentfer spouses to keep a
2. The above defendants-appellees are jointly and severally held liable to pay time deposit account for him with Solid Bank for the purpose of making the purchase of
plaintiff-appellant the amount of P200,000.00 Philippine Currency, the cited properties.
representing the amount of expenses incurred in the repairs and Petitioner Moreo-Lentfers claim of either cash or property donation rings hollow. A
maintenance of the property plus legal interest starting from October 28, donation is a simple act of liberality where a person gives freely of a thing or right in favor
of another, who accepts it.[16] But when a large amount of money is involved, equivalent
to P3,297,800, based on the exchange rate in the year 1992, we are constrained to take -particularly the spouses Gunter Lentfer and Victoria Moreo-Lentfer--are hereby ORDERED
the petitioners claim of liberality of the donor with more than a grain of salt. to:
Petitioners could not brush aside the fact that a donation must comply with the 1. RECONVEY to respondent Hans Jurgen Wolff the beach house and the lease
mandatory formal requirements set forth by law for its validity. Since the subject of right over the land on which it is situated; and
donation is the purchase money, Art. 748 of the New Civil Code is applicable. 2. PAY respondent Wolff nominal damages in the amount of P50,000.00.
Accordingly, the donation of money equivalent to P3,297,800 as well as its acceptance Costs against petitioners.
should have been in writing. It was not. Hence, the donation is invalid for non-compliance SO ORDERED.
with the formal requisites prescribed by law.
Anent the second issue, petitioners insist that since the deed of sale in favor of [G.R. No. 132076. July 22, 2003]
Moreo-Lentfer was neither identified or marked nor formally offered in evidence, the ROBERTO U. GENOVA, petitioner, vs. LEVITA DE CASTRO, respondent.
same cannot be given any evidentiary value. They add that since it was not annulled, it [G.R. No. 140989. July 22, 2003]
remains valid and binding. Hence, petitioners argue, the principle of solutio indebiti under ROBERTO U. GENOVA, petitioner, vs. LEVITA DE CASTRO and THE HONORABLE COURT OF
Article 2154[17] of the New Civil Code should be the applicable provision in the resolution APPEALS, respondents.
of this controversy. If so, the parties unjustly enriched would be liable to the other party These are consolidated petitions for review of the decisions of Court of Appeals in
who suffered thereby by being correspondingly injured or damaged. CA-G.R. SP Nos. 41521 and 48422.[1]
The quasi-contract of solutio indebiti harks back to the ancient principle that no one Petitioner was the owner of a parcel of land located in Sta. Ana, Manila, containing
shall enrich himself unjustly at the expense of another.[18] It applies where (1) a payment an area of 399.6 square meters and registered in his name under Transfer Certificate of
is made when there exists no binding relation between the payor, who has no duty to Title No. 172539 of the Register of Deeds of Manila. Sometime in 1989, petitioner ventured
pay, and the person who received the payment, and (2) the payment is made through into the business of movie production. In order to finance his film project, he obtained a
mistake, and not through liberality or some other cause.[19] loan from respondent Levita de Castro for P1,000,000.00 with interest thereon at the rate
In the instant case, records show that a bank-to-bank payment was made by of 5% per annum. By way of security for the loan, and as required by respondent,
respondent Wolff to petitioner Cross in favor of co-petitioner Moreo-Lentfer. Respondent petitioner turned over his owners duplicate certificate of title and signed blank sheets of
was under no duty to make such payment for the benefit of Moreo-Lentfer. There was no paper with the understanding that their Deed of Mortgage will be printed
binding relation between respondent and the beneficiary, Moreo-Lentfer. The payment thereon. Meanwhile, petitioner remained in possession of the property.
was clearly a mistake. Since Moreo-Lentfer received something when there was no right It appears that previously, petitioner had obtained a loan from the United Coconut
to demand it, she had an obligation to return it.[20] Planters Bank secured by a real estate mortgage over the subject property. He defaulted
Following Article 22[21] of the New Civil Code, two conditions must concur to declare in the payment of his obligations, whereupon the bank caused the extrajudicial
that a person has unjustly enriched himself or herself, namely: (a) a person is unjustly foreclosure of the mortgage and purchased the property as the highest bidder at the
benefited, and (b) such benefit is derived at the expense of or to the damage of sale at public auction.
another.[22] Subsequently, respondent redeemed the property from UCPB and caused the
We are convinced petitioner Moreo-Lentfer had been unjustly enriched at the cancellation of TCT No. 172539 on the strength of a purported deed of sale from
expense of respondent. She acquired the properties through deceit, fraud and abuse of petitioner. It turned out that instead of printing a Deed of Mortgage on the blank sheets
confidence. The principle of justice and equity does not work in her favor but in favor of of paper which petitioner had earlier signed, respondent caused to be printed thereon
respondent Wolff. Whatever she may have received by mistake from and at the expense an Absolute Deed of Sale of a Registered Land in her favor. Thus, respondent obtained
of respondent should thus be returned to the latter, if the demands of justice are to be TCT No. 194123 in her name.[2]
served. G.R. No. 140989
The Court of Appeals held that respondent was not entitled to the reconveyance Petitioner filed against respondent an action for Reformation of Contract,
of the properties because, inter alia, of the express prohibition under the Reconveyance and Damages with the Regional Trial Court of Manila, Branch 25, which
Constitution[23] that non-Filipino citizens cannot acquire land in the Philippines. We note, was docketed as Civil Case No. 90-54611. In the course of the proceedings, the parties
however, that subject properties consist of a beach house and the lease right over the entered into a Compromise Agreement whereby they stipulated as follows:
land where the beach house stands. The constitutional prohibition against aliens from 1. Plaintiff [petitioner herein] acknowledges defendants [respondent herein] having
owning land in the Philippines has no actual bearing in this case. A clear distinction exists redeemed the property in question on November 12, 1991, subject of the Certificate of
between the ownership of a piece of land and the mere lease of the land where the Sale dated September 29, 1990, and inscribed on the title thereof (TCT No. 194123 ind.)
foreigners house stands. Thus, we see no legal reason why reconveyance could not be on November 12, 1990 under Entry No. 2422 in favor of UCPB Savings Bank.
allowed. 2. Defendant has hereby acceded to the request of plaintiff to re-sell to him the property
Since reconveyance is the proper remedy, respondents expenses for the in question within a period of four (4) months from date of approval hereof at the agreed
maintenance and repair of the beach house is for his own account as owner thereof. It repurchase price corresponding to the total original purchase price of One Million and
need not be an issue for now. Sixty Thousand (P1,060,000.00) pesos, plus five (5%) percent agreed monthly interest to the
However, we deem it just and equitable under the circumstances to award tune of Fifty Three Thousand (P53,000.00) pesos, commencing from December 23, 1989,
respondent nominal damages in the amount of P50,000,[24] pursuant to Articles up to the time when plaintiff has finally exercised his right to buy back the property within
2221[25] and 2222[26] of the New Civil Code, since respondents property right has been the period stipulated above.
invaded through defraudation and abuse of confidence committed by petitioners. 3. Plaintiff likewise has agreed to reimburse the defendants redemption payment of Three
WHEREFORE, the petition is hereby DENIED. The assailed Decision, dated June 14, Hundred Ninety Two Thousand and Eight Hundred (P392,800.00) pesos, to UCPB Savings
2001 and Resolution dated February 22, 2002, of the Court of Appeals in CA-G.R. CV No. Bank plus legal bank rate of interest accrued thereon and payments made
48272 reversing the lower courts judgment are AFFIRMED with MODIFICATION. Petitioners- corresponding to insurance premium in the total sum of EIGHTY ONE THOUSAND THREE
HUNDRED NINETY SIX AND FIFTY NINE CENTAVOS (P81,396.59) PESOS; subject however, to IV. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE
presentation of supporting pertinent receipt. COURT A QUOS ORDER DENYING RESPONDENT DE CASTROS MOTION
4. As regards realty tax and transfer tax payments made by the defendant necessary for FOR ISSUANCE OF WRIT OF EXECUTION AS WELL AS THE ORDER
the transfer of TCT No. 172539 in her name, plaintiff has further agreed to reimburse DENYING SAID RESPONDENTS SUBSEQUENT MOTION FOR
defendant the fixed amount of One Hundred Fifty Five Thousand (P155,000.00) pesos, to RECONSIDERATION OF THE ABOVE-MENTIONED COURT A
be added to the repurchase price of the subject property. QUOS ORDER.[9]
5. Finally, defendant hereby recognized payment made by plaintiff on May 11, 1990 in More specifically, petitioner contends that the compromise agreement approved
the amount of One Million Two Hundred Thousand (Y1,200,000.00) yen, subject, however, by the lower court partook of the nature of a pacto de retro sale. He argues that he may
to the prevailing conversion in Philippine Pesos; still pay even after the lapse of the four-month period agreed upon as long as no demand
6. In the event plaintiff fails to repurchase back the subject property within the period for rescission of the contract has been made upon him either judicially or by notarial act,
stipulated herein, he shall be deemed therefor to have irrevocably waived any further citing Article 1592 of the Civil Code which states:
right, claim, or interest to the subject property in question and, thereafter, defendant shall In the sale of immovable property, even though it may have been stipulated that upon
be entitled to a Writ of Execution issued ex-parte to oust or eject plaintiff and all persons failure to pay the price at the time agreed upon the rescission of the contract shall of right
claiming right under him from the house built on the said property as well as from its take place, the vendee may pay, even after the expiration of the period, as long as no
premises. demand for rescission of the contract has been made upon him either judicially or by
7. By virtue of the agreement, the parties hereto authorized the Register of Deeds for the notarial act. After the demand, the court may grant him a new term.
City of Manila to cancel or delete any and/or all annotations or liens and encumbrances Petitioner also claims that the tender and consignation of the remaining balance of
on TCT No. 194123 ind., including, but not limited to the lis pendens caused to be inscribed the purchase price before any demand for rescission was made constituted valid
by the plaintiff which affect and/or involve the parties hereto.[3] payment. He points out that the amount he was not able to pay within the stipulated
The Compromise Agreement was approved by the trial court in a decision dated period represented unconscionable interests on the loan, the imposition of which is
June 8, 1992.[4] contrary to public policy. Should reconveyance of the property be no longer feasible,
Under the Compromise Agreement, petitioner was obligated to pay respondent the petitioner prayed that the amount which he had paid to the respondent be returned to
total amount of P3,332,196.59. He was able to pay only the sum of P2,287,000.00 within him based on the principle of solutio indebiti.
the four-month stipulated period. Thereafter, he tendered payment of the remaining G.R. No. 132076
balance of P1,045,196.59, but respondent refused to accept the same. On March 13, On October 2, 1995, respondent filed a complaint for unlawful detainer against
1996, petitioner consigned with the trial court a check for the amount of the said petitioner before the Metropolitan Trial Court of Manila, Branch 15, which was docketed
remaining balance. as Civil Case No. 149540-CV. On March 21, 1996, a judgment was rendered in favor of
Respondent filed a motion for the issuance of a writ of execution of the compromise respondent as follows:
judgment dated June 8, 1992 on the ground that petitioner failed to pay the stipulated WHEREFORE, judgment is hereby rendered in favor of the plaintiff [respondent herein] as
amount in full within the period agreed upon in the compromise agreement.[5] In an Order against defendant [petitioner herein] ordering the latter and all persons claiming right
dated March 4, 1998, the trial court denied the motion, upon a finding that the principal under him to vacate and turn over the possession of the premises to the plaintiff; ordering
obligation had already been paid by petitioner and the unpaid balance represented the the defendant to pay the amount of P40,000.00 as reasonable compensation of the
interest on the loan.[6] Respondent filed a motion for reconsideration, which was denied premises from he time of demand to vacate until such time that defendant shall have
in an Order dated May 15, 1998.[7] finally vacated the premises; ordering defendant to pay plaintiff the sum of P10,000.00 as
Hence, respondent filed a petition for certiorari with the Court of Appeals, which and for attorneys fees, plus costs of suit.
was docketed as CA-G.R. SP No. 48422. The petition was granted by the appellate SO ORDERED.[10]
court. The trial court was directed to issue the writ of execution prayed for by Petitioner appealed the decision to the Regional Trial Court of Manila, Branch 31,
respondent.[8] where it was docketed as Civil Case No. 96-78041. On July 12, 1996, the Regional Trial
Petitioner thus filed the instant petition for review, which was docketed as G.R. No. Court rendered judgment reversing the decision of the Metropolitan Trial Court and
140989, based on the following assignment of errors: dismissed the ejectment case pending the outcome of Civil Case No. 90-54611 (the
I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT reformation case).[11]
PETITIONER FAILED TO REPURCHASE THE SUBJECT PROPERTY FROM Respondent filed a petition for review of the above decision before the Court of
RESPONDENT DE CASTRO IN ACCORDANCE WITH THE COMPROMISE Appeals, which reversed the decision of the Regional Trial Court[12] on the ground that
AGREEMENT BETWEEN THE PARTIES. inferior courts are not divested of jurisdiction over the unlawful detainer case when the
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE defendant sets up a claim of ownership over the litigated property.[13]
CONSIGNATION MADE BY PETITIONER WITH THE REGIONAL TRIAL Hence, the instant petition for review, raising the following assignment of errors:
COURT OF THE REMAINING BALANCE OF THE AGREED REPURCHASE 1. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT
PRICE WAS INVALID. OVERLOOKED THE FACT THAT CIVIL CASE NO. 90-54611 FOR
III. EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THE JUDICIALLY REFORMATION, RECONVEYANCE AND DAMAGES FILED BY PETITIONER
SANCTIONED COMPROMISE AGREEMENT BETWEEN PETITIONER AND HEREIN WAS ALREADY FINAL AND EXECUTORY, THUS, BARRING THE
RESPONDENT DE CASTRO WAS NOT COMPLIED WITH TO THE LETTER, THE INSTANT ACTION OF PRIVATE RESPONDENT ON THE GROUND OF RES
HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT JUDICATA AND FORUM SHOPPING;
THERE WAS NO SUBSTANTIAL COMPLIANCE THEREOF BY SAID 2. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT FAILED TO
PETITIONER OF HIS OBLIGATION UNDER THE SAME. APPRECIATE THAT PETITIONER IS THE REAL AND TRUE OWNER OF THE
PROPERTY SUBJECT MATTER.[14]
 Petitioner argues that the judgment by compromise in the reconveyance case was (3) it must be a judgment or order on the merits; and (4) there must be, between the two
a final judgment which barred the ejectment case filed by the respondent on the ground cases, identity of parties, subject matter and causes of action.[22]
of res judicata and forum shopping. Here, while the first three conditions are present and there was identity of parties,
Both petitions lack merit. there is no identity of causes of action in the reformation case, on the one hand, and the
A compromise is an agreement between two or more persons who, for preventing ejectment case, on the other hand. In determining the question of the identity of causes
or putting an end to a lawsuit, adjust their respective positions by mutual consent in the of action, the following test is as a rule sufficient: Would the same evidence support and
way they feel they can live with. Reciprocal concessions are the very heart and life of establish both the present and the former cause of action?[23] It is clear that the evidence
every compromise agreement, where each party approximates and concedes in the petitioner needed to sustain his complaint for reformation is different from the proofs he
hope of gaining balance by the danger of losing. It is, in essence, a contract.[15] must present in support of his defense in the action for unlawful detainer. In the action for
A compromise is binding and has the force of law between the parties, unless the reformation, the issue to be resolved is whether the agreement was attended by
consent of a party is vitiated such as by mistake, fraud, violence, intimidation or undue fraud. Thus, he should present evidence to prove the true intent of the parties in entering
influence or when there is forgery, or if the terms of the settlement are so palpably into the mortgage agreement. He should also prove that there was fraud in the transfer
unconscionable.[16] of title to the property to respondent. On the other hand, the ejectment suit involved the
Under the compromise agreement executed between the parties, petitioner bound issue of possession only.
himself to pay respondent the aggregate amount of P3,332,196.59 as consideration for Moreover, petitioners violation of the terms of the compromise judgment gave rise
the reconveyance to him of the property.[17] However, he failed to pay the said amount to a new cause of action on the part of respondent, i.e., the right to enforce the terms
in full within the four-month period stipulated in the compromise agreement, counted thereof. When she failed to obtain this by mere motion filed with the trial court, she was
from the date of approval thereof by the trial court. Thus, the provision contained in constrained to institute the proper suit for ejectment. The filing of a separate case based
paragraph 6 of the compromise agreement came into play, to wit: on a cause of action that arises from the application or violation of a compromise
6. In the event plaintiff fails to repurchase back the subject property within the period agreement is not barred by res judicata in the first action.[24]
stipulated herein, he shall be deemed therefor to have irrevocably waived any further Petitioner also argues that the payments he has made to respondent must be
right, claim, or interest to the subject property in question and, thereafter, defendant shall returned based on the principle of solutio indebiti under Article 2154 of the Civil
be entitled to a Writ of Execution issued ex-parte to oust or eject plaintiff and all persons Code. There is solutio indebiti where: (1) payment is made when there exists no binding
claiming right under him from the house built on the said property as well as from its relation between the payor, who has no duty to pay, and the person who received the
premises.[18] payment; and (2) the payment is made through mistake, and not through liberality or
Petitioner argues that he should be allowed to pay the remaining balance even some other cause.[25] The quasi-contract of solutio indebiti is based on the ancient
after the lapse of the four-month stipulated period considering that pursuant to Article principle that no one shall enrich himself unjustly at the expense of another.[26]
1592 of the Civil Code, a judicial or notarial act was necessary before the respondent Article 2154 of the Civil Code provides:
may unilaterally rescind the contract of sale. If something is received when there is no right to demand it, and it was unduly delivered
The argument is misplaced. through mistake, the obligation to return it arises.
In the case at bar, the judicial compromise specifically provided for the relief that The first element of solutio indebiti is lacking. There can be no mistaken payment in
the parties may resort to in case of breach. More particularly, it states that respondent this case because petitioner made payments to respondent pursuant to an agreement
shall have the right to file a motion for the issuance of a writ of execution to eject petitioner to repurchase the property. Hence, the principle of solutio indebiti finds no application in
from the property in case he fails to pay his obligations in full within the stipulated this case.
period. On the other hand, petitioner agreed to waive any further right, claim or interest This notwithstanding, petitioner is entitled to a refund of what he had paid based on
to the subject property. equitable grounds. We find it iniquitous for the respondent to forfeit both petitioners land
Indeed, it has been held in a number of cases that in the event of breach or default and hard-earned money. In Trinidad v. Intermediate Appellate Court,[27] this Court, in the
by one party to a judicial compromise in the performance of his obligations, the remedy exercise of equity jurisdiction, refused to strictly enforce the stipulation of the parties, thus:
of the aggrieved party is to move for the execution of the compromise judgment.[19] Thus: xxx Given such circumstances, the Court feels and so holds that the above-quoted
Even more than a contract which may be enforced by ordinary action for specific stipulation should not be strictly enforced, to justify the rescission of the contract. To make
performance, the compromise agreement is part and parcel of the judgment, and may her forfeit the payments already made by her and at the same time return the property
therefore be enforced as such by a writ of execution. to the private respondents for standing up to what she considered her right would, in our
Finally, when the terms of an amicable settlement are violated, as in the case at bar, the view, be unfair and unconscionable. Justice demands that we moderate the harsh
remedy of the aggrieved party is to move for its execution. [20] effects of the stipulation. Accordingly, in the exercise of our equity jurisdiction, we hereby
Therefore, respondent availed of the proper remedy when she filed with the court rule that the Contract of Conditional Sale shall be maintained between the parties except
that rendered the compromise judgment a motion for the execution of the that the petitioner shall not return the house to the private respondents. However, she will
same. Conversely, petitioner has no choice but to abide by the consequences of his have to pay them the balance of the purchase price in the sum of P52,500.00, with 12%
failure to perform his obligation under the agreement. annual interest from July 1, 1972, until full payment.
Petitioner likewise contends that respondent was guilty of forum shopping. The test Also, in Ramos, et al. v. Court of Appeals, et al.,[28] it was held that although the
to determine whether a party violated the rule against forum shopping is whether the contract of sale between Herminio Ramos and Lydia Celestino should be voided for being
elements of litis pendentia are present, or whether a final judgment in one case will contrary to public policy, we deemed it equitable to allow private respondent therein to
amount to res judicata in another.[21] Accordingly, there is res judicata where the recover what she had paid for the land with legal interest thereon commencing from the
following four essential conditions concur, viz: (1) there must be a final judgment or order; date of the filing of the complaint.
(2) the court rendering it must have jurisdiction over the subject matter and the parties; In one case,[29] we even ordered the Government to refund the overpayment of
franchise taxes to a taxpayer despite its non-compliance with the requisites before suit
could be maintained for the recovery thereof, based on moral and equitable grounds. Significantly, the supplemental agreement adopted those provisions of the construction
From a moral standpoint, it was ruled that the Government would be enriching itself at contract which it did not specifically discuss or provide for.10 Among those carried over
the expense of the taxpayer, viz: was the designation of GEMM Construction Corporation (GEMM) as the project's
xxx Legally speaking, the decision of the Tax Court is therefore correct, being in construction manager.11
accordance with law. However, ones conscience does not and cannot rest easy on this Petitioner started working on the project in February 1994.
strict application of the law, considering the special circumstances that surround this On June 30, 1994, respondent executed a deed of sale12 (covering 114 condominium
case. xxx units and 20 parking slots of the MPT collectively valued by the parties
Hence, in the exercise of equity jurisdiction, the compromise agreement between at P112,416,716.88)13 in favor of petitioner pursuant to the "full-swapping" payment
the parties should be maintained but respondent should be made to return the amount provision of the supplemental agreement.
of P2,287,000.00 to petitioner. The Regional Trial Court of Manila, Branch 25 is ordered to Shortly thereafter, petitioner sold some of its units to third persons.14
return the check in the amount of P1,045,196.59 which was consigned by the petitioner. In September 1995, respondent engaged the services of Integratech, Inc. (ITI), an
WHEREFORE, the consolidated petitions are PARTLY GRANTED. The decision of the engineering consultancy firm, to evaluate the progress of the project.15 In its September
Court of Appeals in CA-G.R. SP No. 41521, which reversed the decision of the Regional 7, 1995 report,16 ITI informed respondent that petitioner, at that point, had only
Trial Court of Manila, Branch 31 in Civil Case No. 96-78041 dismissing the action for unlawful accomplished 31.89% of the project (or was 11 months and six days behind schedule).17
detainer pending the outcome of the reformation case, is AFFIRMED. The decision of the Meanwhile, petitioner and respondent were discussing the possibility of the latter’s take
Court of Appeals in CA-G.R. SP No. 48422, which directed the Regional Trial Court of over of the project’s supervision. Despite ongoing negotiations, respondent did not obtain
Manila, Branch 25, in Civil Case No. 90-54611, to order the execution of the compromise petitioner’s consent in hiring ITI as the project’s construction manager. Neither did it inform
judgment, is AFFIRMED with the MODIFICATION that respondent is ordered to REFUND to petitioner of ITI’s September 7, 1995 report.
petitioner the sum of P2,287,000.00. The Regional Trial Court of Manila, Branch 25, is also On October 12, 1995, petitioner sought to confirm respondent's plan to take over the
ordered to RETURN the check which was consigned by the petitioner in the amount of project.18 Its letter stated:
P1,045,196.59. The mutual agreement arrived at sometime in the last week of August 1995 for
SO ORDERED. [respondent] to take over the construction supervision of the balance of the
[project] from [petitioner's] [e]ngineering staff and complete [the] same by
G.R. No. 158768 February 12, 2008 December 31, 1995 as promised by [petitioner's] engineer.
TITAN-IKEDA CONSTRUCTION & DEVELOPMENT CORPORATION, petitioner, The [petitioner's] accomplished works as of this date of [t]ake over is of
vs. acceptable quality in materials and workmanship.
PRIMETOWN PROPERTY GROUP, INC., respondent. This mutual agreement on the take over should not be misconstrued in any other
DECISION way except that the take over is part of the long range plan of [respondent] that
CORONA, J.: [petitioner], in the spirit of cooperation, agreed to hand over the construction
This petition for review on certiorari 1 seeks to set aside the decision of the Court of Appeals supervision to [respondent] as requested. (emphasis supplied)19
(CA) in CA-G.R. CV No. 613532 and its resolution3 denying reconsideration. Engineers Antonio Co, general construction manager of respondent, and Luzon Y.
In 1992, respondent Primetown Property Group, Inc. awarded the contract for the Tablante, project manager of petitioner, signed the letter.
structural works4 of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda Integratech’s (ITI’s) Report
Construction and Development Corporation.5 The parties formalized their agreement in In its September 7, 1995 report, ITI estimated that petitioner should have accomplished
a construction contract6 dated February 4, 1993.7 48.71% of the project as of the October 12, 1995 takeover date.20 Petitioner repudiated
Upon the completion of MPT's structural works, respondent awarded the P130,000,000 this figure21 but qualifiedly admitted that it did not finish the project.22 Records showed
contract for the tower's architectural works8 (project) to petitioner. Thus, on January 31, that respondent did not merely take over the supervision of the project but took full
1994, the parties executed a supplemental agreement.9 The salient portions thereof were: control thereof.23
1. the [project] shall cover the scope of work of the detailed construction bid Petitioner consequently conducted an inventory.24 On the basis thereof, petitioner
plans and specifications and bid documents dated 28 September 1993, demanded from respondent the payment of its balance amounting to P1,779,744.85.25
attached and forming an integral part hereof as Annex A. On February 19, 1996, petitioner sent a second letter to respondent
2. the contract price for the said works shall be P130 million. demanding P2,023,876.25. This new figure included the cost of materials (P244,331.40)
3. the payment terms shall be "full swapping" or full payment in condominium petitioner advanced from December 5, 1995 to January 26, 1996.26
units. The condominium units earmarked for the [petitioner] are shown in the On November 22, 1996, petitioner demanded from respondent the delivery of MPT's
attached Annex B. management certificate27 and the keys to the condominium units and the payment of its
4. the [respondent] shall transfer and surrender to [petitioner] the condominium (respondent's) balance.28
units abovestated in accordance with the following schedule: Because respondent ignored petitioner's demand, petitioner, on December 9, 1996, filed
(a) 80% of units — upon posting and acceptance by [respondent] of a complaint for specific performance29 in the Housing and Land Use Regulatory Board
the performance bond [and] (HLURB).
(b) 20% or remaining balance — upon completion of the project as While the complaint for specific performance was pending in the HLURB, respondent sent
provided in the construction contract and simultaneous with the a demand letter to petitioner asking it to reimburse the actual costs incurred in finishing
posting by [petitioner] of the reglementary guarantee bond. the project (or P69,785,923.47).30 In view of the pendency of the HLURB case, petitioner
5. the contract period shall be fifteen (15) months reckoned from the release of did not heed respondent's demands.
the condominium certificates of title (CCTs) covering eighty percent (80%) of On April 29, 1997, the HLURB rendered a decision in favor of petitioner.31 It ruled that the
the units transferable to [petitioner] as aforesaid[.] instrument executed on June 30, 1994 was a deed of absolute sale because the
conveyance of the condominium units and parking slots was not subject to any We grant the petition.
condition.32 Thus, it ordered respondent to issue MPT’s management certificate and to Review of Conflicting Factual Findings
deliver the keys to the condominium units to petitioner.33 Respondent did not appeal this As a general rule, only questions of law may be raised in a petition for review on certiorari.
decision. Consequently, a writ of execution was issued upon its finality.34 Factual issues are entertained only in exceptional cases such as where the findings of fact
Undaunted by the finality of the HLURB decision, respondent filed a complaint for of the CA and the trial court are conflicting.49
collection of sum of money35against petitioner in the Regional Trial Court (RTC) of Makati Here, a glaring contradiction exists between the factual findings of the RTC and the CA.
City, Branch 58 on July 2, 1997. It prayed for the reimbursement of the value of the The trial court found that respondent contributed to the project's delay because it
project’s unfinished portion amounting to P66,677,000.36 belatedly communicated the modifications and failed to deliver the necessary materials
During trial, the RTC found that because respondent modified the MPT's architectural on time. The CA, however, found that petitioner incurred delay in the performance of its
design, petitioner had to adjust the scope of work.37 Moreover, respondent belatedly obligation. It relied on ITI's report which stated that petitioner had accomplished only
informed petitioner of those modifications. It also failed to deliver the concrete mix and 48.71% of the project as of October 12, 1995.
rebars according to schedule. For this reason, petitioner was not responsible for the January 31, 1994 Supplemental Agreement Was Extinguished
project's delay.38 The trial court thus allowed petitioner to set-off respondent's other A contract is a meeting of the minds between two persons whereby one binds himself,
outstanding liabilities with respondent’s excess payment in the project.39 It concluded with respect to the other, to give something or to render some service.50 This case involved
that respondent owed petitioner P2,023,876.25.40 In addition, because respondent two contracts entered into by the parties with regard to the project.
refused to deliver the keys to the condominium units and the management certificate to The parties first entered into a contract for a piece of work51 when they executed the
petitioner, the RTC found that petitioner lost rental income amounting to supplemental agreement. Petitioner as contractor bound itself to execute the project for
US$1,665,260.41 The dispositive portion of the RTC decision stated: respondent, the owner/developer, in consideration of a price certain (P130,000,000). The
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered dismissing supplemental agreement was reciprocal in nature because the obligation of respondent
[respondent's] [c]omplaint for lack of merit. On the other hand, finding to pay the entire contract price depended on the obligation of petitioner to complete
preponderance of evidence to sustain [petitioner's] counterclaim, judgment is the project (and vice versa).
hereby rendered in favor of [petitioner] ordering [respondent] to pay the former: Thereafter, the parties entered into a second contract. They agreed to extinguish the
1. The unpaid balance of the consideration for [petitioner's] services in [the supplemental agreement as evidenced by the October 12, 1995 letter-agreement which
project] in the amount of P2,023,867.25 with legal interest from the date of was duly acknowledged by their respective representatives.52
demand until fully paid; While the October 12, 1995 letter-agreement stated that respondent was to take over
2. Compensatory damages in the amount of US$1,665,260 or its peso equivalent merely the supervision of the project, it actually took over the whole project itself. In fact,
at the current foreign exchange rate representing lost rental income due only respondent subsequently hired two contractors in petitioner's stead.53 Moreover,
as of July 1997 and the accrued lost earnings from then on until the date of petitioner's project engineer at site only monitored the progress of architectural works
actual payment, with legal interest from the date of demand until fully paid; and undertaken in its condominium units.54 Petitioner never objected to this arrangement;
3. Attorney's fees in the amount of P100,000 as acceptance fee, P1,000 hence, it voluntarily surrendered its participation in the project. Moreover, it judicially
appearance fee per hearing and 25% of the total amount awarded to admitted in its answer that respondent took over the entire project, not merely its
[petitioner]. supervision, pursuant to its (respondent’s) long-range plans.55
With costs against the [respondent]. Because the parties agreed to extinguish the supplemental agreement, they were no
SO ORDERED.42 longer required to fully perform their respective obligations. Petitioner was relieved of its
Respondent appealed the RTC decision to the CA.43 The appellate court found that obligation to complete the project while respondent was freed of its obligation to pay
respondent fully performed its obligation when it executed the June 30, 1994 deed of the entire contract price. However, respondent, by executing the June 30, 1994 deed of
absolute sale in favor of petitioner.44 Moreover, ITI's report clearly established that absolute sale, was deemed to have paid P112,416,716.88. Nevertheless, because
petitioner had completed only 48.71% of the project as of October 12, 1995, the takeover petitioner applied part of what it received to respondent’s outstanding liabilities, 56 it
date. Not only did it incur delay in the performance of its obligation but petitioner also admitted overpayment.
failed to finish the project. The CA ruled that respondent was entitled to recover the value Because petitioner acknowledged that it had been overpaid, it was obliged to return the
of the unfinished portion of the project under the principle of unjust enrichment.45 Thus: excess to respondent. Embodying the principle of solutio indebiti, Article 2154 of the Civil
WHEREFORE, the appealed decision is REVERSED and a new one entered Code provides:
dismissing [petitioner's] counterclaims of P2,023,867.25 representing unpaid Article 2154. If something is received when there is no right to demand it and it
balance for [its] services in [the project]; US$1,665,260 as accrued lost earnings, was unduly delivered through mistake, the obligation to return it arises.
and attorney's fees. [Petitioner] is hereby ordered to return to [respondent] the For the extra-contractual obligation of solutio indebiti to arise, the following requisites must
amount of P66,677,000 representing the value of unfinished [portion of the be proven:
project], plus legal interest thereon until fully paid. Upon payment by [petitioner] 1. the absence of a right to collect the excess sums and
of the aforementioned amount, [respondent] is hereby ordered to deliver the 2. the payment was made by mistake.57
keys and [m]anagement [c]ertificate of the [Makati Prime Tower] paid to With regard to the first requisite, because the supplemental agreement had been
[petitioner] as consideration for the [project].46 extinguished by the mutual agreement of the parties, petitioner became entitled only to
Petitioner moved for reconsideration but it was denied. Hence, this petition. the cost of services it actually rendered (i.e., that fraction of the project cost in proportion
Petitioner contends that the CA erred in giving weight to ITI's report because the project to the percentage of its actual accomplishment in the project). It was not entitled to the
evaluation was commissioned only by respondent,47 in disregard of industry practice. excess (or extent of overpayment).
Project evaluations are agreed upon by the parties and conducted by a disinterested On the second requisite, Article 2163 of the Civil Code provides:
third party.48
 Article 2163. It is presumed that there was a mistake in the payment if something scheduled work program, [RESPONDENT] should notify [PETITIONER] in writing to
which had never been due or had already been paid was delivered; but, he accelerate the work and reduce, if not erase, slippage. If after the lapse of sixty
from whom the return is claimed may prove that the delivery was made out of (60) days from receipt of such notice, [PETITIONER] fails to rectify the delay or
liberality or for any other just cause. (emphasis supplied) slippage, [RESPONDENT] shall have the right to terminate this contract except in
In this instance, respondent paid part of the contract price under the assumption that cases where the same was caused by force majeure. "FORCE MAJEURE" as
petitioner would complete the project within the stipulated period. However, after the contemplated herein, and in determination of delay includes, but is not limited
supplemental agreement was extinguished, petitioner ceased working on the project. to, typhoon, flood, earthquake, coup d'etat, rebellion, sedition, transport strike,
Therefore, the compensation petitioner received in excess of the cost of its actual stoppage of work, mass public action that prevents workers from reporting for
accomplishment as of October 12, 1995 was never due. The condominium units and work, and such other causes beyond [PETITIONER'S] control.66 (emphasis
parking slots corresponding to the said excess were mistakenly delivered by respondent supplied)
and were therefore not due to petitioner. xxx xxx xxx
Stated simply, respondent erroneously delivered excess units to petitioner and the latter, Respondent never sent petitioner a written demand asking it to accelerate work on the
pursuant to Article 2154, was obliged to the return them to respondent.58 Article 2160 of project and reduce, if not eliminate, slippage. If delay had truly been the reason why
the Civil Code provides: respondent took over the project, it would have sent a written demand as required by
Article 2160. He who in good faith accepts an undue payment of a thing certain the construction contract. Moreover, according to the October 12, 1995 letter-
and determinate shall only be responsible for the impairment or loss of the same agreement, respondent took over the project for the sole reason that such move was part
or its accessories and accessions insofar as he has thereby been benefited. If he of its (respondent's) long-term plan.
has alienated it, he shall return the price or assign the action to collect the sum. Respondent, on the other hand, relied on ITI's September 7, 1995 report. The construction
One who receives payment by mistake in good faith is, as a general rule, only liable to contract named GEMM, not ITI, as construction manager.67 Because petitioner did not
return the thing delivered.59 If he benefited therefrom, he is also liable for the impairment consent to the change of the designated construction manager, ITI's September 7, 1995
or loss of the thing delivered and its accessories and accessions.60 If he sold the thing report could not bind it.
delivered, he should either deliver the proceeds of the sale or assign the action to collect In view of the foregoing, we hold that petitioner did not incur delay in the performance
to the other party.61 of its obligation.
The situation is, however, complicated by the following facts: Recovery Of Additional Costs Resulting From Changes
a) the basis of the valuation (P112,416,716.99) of the condominium units and The supplemental agreement was a contract for a stipulated price.68 In such contracts,
parking slots covered by the June 30, 1994 deed of sale is unknown; the recovery of additional costs (incurred due to changes in plans or specifications) is
b) the percentage of petitioner's actual accomplishment in the project has not governed by Article 1724 of the Civil Code.
been determined and Article 1724. The contractor who undertakes to build a structure or any other
c) the records of this case do not show the actual number of condominium units work for a stipulated price, in conformity with plans and specifications agreed
and parking slots sold by petitioners. upon with the landowner, can neither withdraw from the contract nor demand
Because this Court is not a trier of facts, the determination of these matters should be an increase in the price on account of higher cost of labor or materials, save
remanded to the RTC for reception of further evidence. when there has been a change in plans and specifications, provided:
The RTC must first determine the percentage of the project petitioner actually completed 1. such change has been authorized by the proprietor in writing; and
and its proportionate cost.62 This will be the amount due to petitioner. Thereafter, based 2. the additional price to be paid to the contractor has been determined in
on the stipulated valuation in the June 30, 1994 deed of sale, the RTC shall determine how writing by both parties.
many condominium units and parking slots correspond to the amount due to petitioner. In Powton Conglomerate, Inc. v. Agcolicol,69 we reiterated that a claim for the cost of
It will only be the management certificate and the keys to these units that petitioner will additional work arising from changes in the scope of work can only be allowed upon the:
be entitled to. The remaining units, having been mistakenly delivered by respondent, will 1. written authority from the developer/owner ordering/allowing the changes in
therefore be the subject of solutio indebiti. work; and
What exactly must petitioner give back to respondent? Under Article 2160 in relation to 2. written agreement of parties with regard to the increase in cost (or price) due
Article 2154, it should return to respondent the condominium units and parking slots in to the change in work or design modification. 70
excess of the value of its actual accomplishment (i.e., the amount due to it) as of October Furthermore:
12, 1995. If these properties include units and/or slots already sold to third persons, Compliance with the two requisites of Article 1724, a specific provision
petitioner shall deliver the proceeds of the sale thereof or assign the actions for collection governing additional works, is a condition precedent of the recovery. The
to respondent as required by Article 2160. absence of one or the other bars the recovery of additional costs. Neither the
Delay In The Completion Of The Project authority for the changes made nor the additional price to be paid therefor may
Mora or delay is the failure to perform the obligation in due time because of dolo (malice) be proved by any other evidence for purposes of recovery.71 (emphasis
or culpa (negligence).63 A debtor is deemed to have violated his obligation to the supplied)
creditor from the time the latter makes a demand. Once the creditor makes a demand, Petitioner submitted neither one. In addition, petitioner’s project coordinator Estellita
the debtor incurs mora or delay.64 Garcia testified that respondent never approved any change order.72 Thus, under Article
The construction contract65 provided a procedure for protesting delay: 1724 and pursuant to our ruling in Powton Conglomerate, Inc., petitioner cannot recover
Article XIV the cost it incurred in effecting the design modifications. A contractor who fails to secure
DELAYS AND ABANDONMENT the owner or developer's written authority to changes in the work or written assent to the
15.1. If at any time during the effectivity of this contract, [PETITIONER] shall incur additional cost to be incurred cannot invoke the principle of unjust enrichment.73
unreasonable delay or slippages of more than fifteen percent (15%) of the Recovery Of Compensatory Damages
Indemnification for damages comprehends not only the loss suffered (actual damages Relations Commission (NLRC) on March 24, 1987 and docketed as NLRC-NCR Certified
or damnum emergens) but also the claimant's lost profits (compensatory damages Case No. 0466.[3]
or lucrum cessans). For compensatory damages to be awarded, it is necessary to prove On September 2, 1988, the NLRC rendered a decision in the foregoing case in favor
the actual amount of the alleged loss by preponderance of evidence.74 of the employees, awarding them holiday pay differential, mid-year bonus differential,
The RTC awarded compensatory damages based on the rental pool rates submitted by and year-end bonus differential.[4] The NLRC, acting on a motion for the issuance of a writ
petitioner75 and on the premise that all those units would have been leased had of execution filed by private respondent as counsel for petitioner union, raffled the case
respondent only finished the project by December 31, 1995.76 However, other than bare to Labor Arbiter Oswald Lorenzo.[5]
assertions, petitioner submitted no proof that the rental pool was in fact able to lease out However, pending the hearing of the application for the writ of execution, TRB
the units. We thus hold that the "losses" sustained by petitioner were merely speculative challenged the decision of the NLRC before the Supreme Court. The Court, in its decision
and there was no basis for the award. promulgated on August 30, 1990,[6] modified the decision of the NLRC by deleting the
Remand Of Other Claims award of mid-year and year-end bonus differentials while affirming the award of holiday
Since respondent did not repudiate petitioner's other claims stated in the inventory 77 in pay differential.[7]
the RTC and CA, it is estopped from questioning the validity thereof.78 However, because The bank voluntarily complied with such final judgment and determined the holiday
some of petitioner's claims have been disallowed, we remand the records of this case to pay differential to be in the amount of P175,794.32. Petitioner never contested the
the RTC for the computation of respondent's liability.79 amount thus found by TRB.[8] The latter duly paid its concerned employees their respective
WHEREFORE, the petition is hereby GRANTED. entitlement in said sum through their payroll.[9]
The March 15, 2002 decision and May 29, 2003 resolution of the Court of Appeals in CA- After private respondent received the above decision of the Supreme Court on
G.R. CV No. 61353 and the August 5, 1998 decision of the Regional Trial Court, Branch 58, September 18, 1990,[10] he notified the petitioner union, the TRB management and the
Makati City in Civil Case No. 97-1501 are hereby SET ASIDE. New judgment is entered: NLRC of his right to exercise and enforce his attorneys lien over the award of holiday pay
1. ordering petitioner Titan-Ikeda Construction and Development Corporation to return to differential through a letter dated October 8, 1990.[11]
respondent Primetown Property Group, Inc. the condominium units and parking slots Thereafter, on July 2, 1991, private respondent filed a motion before Labor Arbiter
corresponding to the payment made in excess of the proportionate (project) cost of its Lorenzo for the determination of his attorneys fees, praying that ten percent (10%) of the
actual accomplishment as of October 12, 1995, subject to its (petitioner’s) allowable total award for holiday pay differential computed by TRB at P175,794.32, or the amount
claims as stated in the inventory and of P17,579.43, be declared as his attorneys fees, and that petitioner union be ordered to
2. dismissing petitioner Titan-Ikeda Construction and Development Corporation’s claims pay and remit said amount to him.[12]
for the cost of additional work (or change order) and damages. The TRB management manifested before the labor arbiter that they did not wish to
The records of this case are remanded to the Regional Trial Court of Makati City, Branch oppose or comment on private respondents motion as the claim was directed against
58 for: the union,[13] while petitioner union filed a comment and opposition to said motion on July
1. the reception of additional evidence to determine 15, 1991.[14] After considering the position of the parties, the labor arbiter issued an
(a) the percentage of the architectural work actually completed by petitioner order[15] on November 26, 1991 granting the motion of private respondent, as follows:
Titan-Ikeda Construction and Development Corporation as of October 12, 1995 WHEREFORE, premises considered, it is hereby ordered that the TRADERS ROYAL BANK
on the Makati Prime Tower and EMPLOYEES UNION with offices at Kanlaon Towers, Roxas Boulevard is hereby ordered (sic)
(b) the number of condominium units and parking slots sold by petitioner Titan- to pay without delay the attorneys fees due the movant law firm, E.N.A. CRUZ and
Ikeda Construction and Development Corporation to third persons; ASSOCIATES the amount of P17,574.43 or ten (10%) per cent of the P175,794.32 awarded
2. the computation of petitioner Titan-Ikeda Construction and Development by the Supreme Court to the members of the former.
Corporation's actual liability to respondent Primetown Property Group, Inc. or This constrained petitioner to file an appeal with the NLRC on December 27, 1991, seeking
vice-versa, and the determination of imposable interests and/or penalties, if a reversal of that order.[16]
any. On October 19, 1994, the First Division of the NLRC promulgated a resolution
SO ORDERED. affirming the order of the labor arbiter.[17] The motion for reconsideration filed by petitioner
was denied by the NLRC in a resolution dated May 23, 1995,[18] hence the petition at bar.
[G.R. No. 120592. March 14, 1997] Petitioner maintains that the NLRC committed grave abuse of discretion amounting
TRADERS ROYAL BANK EMPLOYEES UNION-INDEPENDENT, petitioner, vs. NATIONAL LABOR to lack of jurisdiction in upholding the award of attorneys fees in the amount of P17,574.43,
RELATIONS COMMISSION and EMMANUEL NOEL A. CRUZ, respondents. or ten percent (10%) of the P175,794.32 granted as holiday pay differential to its members,
DECISION in violation of the retainer agreement; and that the challenged resolution of the NLRC is
REGALADO, J.: null and void,[19] for the reasons hereunder stated.
Petitioner Traders Royal Bank Employees Union and private respondent Atty. Although petitioner union concedes that the NLRC has jurisdiction to decide claims
Emmanuel Noel A. Cruz, head of the E.N.A. Cruz and Associates law firm, entered into a for attorneys fees, it contends that the award for attorneys fees should have been
retainer agreement on February 26, 1987 whereby the former obligated itself to pay the incorporated in the main case and not after the Supreme Court had already reviewed
latter a monthly retainer fee of P3,000.00 in consideration of the law firms undertaking to and passed upon the decision of the NLRC. Since the claim for attorneys fees by private
render the services enumerated in their contract.[1] Parenthetically, said retainer respondent was neither taken up nor approved by the Supreme Court, no attorneys fees
agreement was terminated by the union on April 4, 1990.[2] should have been allowed by the NLRC.
During the existence of that agreement, petitioner union referred to private Thus, petitioner posits that the NLRC acted without jurisdiction in making the award
respondent the claims of its members for holiday, mid-year and year-end bonuses against of attorneys fees, as said act constituted a modification of a final and executory
their employer, Traders Royal Bank (TRB). After the appropriate complaint was filed by judgment of the Supreme Court which did not award attorneys fees. It then cited
private respondent, the case was certified by the Secretary of Labor to the National Labor
decisions of the Court declaring that a decision which has become final and executory While a claim for attorneys fees may be filed before the judgment is rendered, the
can no longer be altered or modified even by the court which rendered the same. determination as to the propriety of the fees or as to the amount thereof will have to be
On the other hand, private respondent maintains that his motion to determine held in abeyance until the main case from which the lawyers claim for attorneys fees may
attorneys fees was just an incident of the main case where petitioner was awarded its arise has become final. Otherwise, the determination to be made by the courts will be
money claims. The grant of attorneys fees was the consequence of his exercise of his premature.[24] Of course, a petition for attorneys fees may be filed before the judgment
attorneys lien. Such lien resulted from and corresponds to the services he rendered in the in favor of the client is satisfied or the proceeds thereof delivered to the client.[25]
action wherein the favorable judgment was obtained. To include the award of the It is apparent from the foregoing discussion that a lawyer has two options as to when
attorneys fees in the main case presupposes that the fees will be paid by TRB to the to file his claim for professional fees. Hence, private respondent was well within his rights
adverse party. All that the non-inclusion of attorneys fees in the award means is that the when he made his claim and waited for the finality of the judgment for holiday pay
Supreme Court did not order TRB to pay the opposing party attorneys fees in the concept differential, instead of filing it ahead of the awards complete resolution. To declare that
of damages. He is not therefore precluded from filing his motion to have his own a lawyer may file a claim for fees in the same action only before the judgment is reviewed
professional fees adjudicated. by a higher tribunal would deprive him of his aforestated options and render ineffective
In view of the substance of the arguments submitted by petitioner and private the foregoing pronouncements of this Court.
respondent on this score, it appears necessary to explain and consequently clarify the Assailing the rulings of the labor arbiter and the NLRC, petitioner union insists that it
nature of the attorneys fees subject of this petition, in order to dissipate the apparent is not guilty of unjust enrichment because all attorneys fees due to private respondent
confusion between and the conflicting views of the parties. were covered by the retainer fee of P3,000.00 which it has been regularly paying to
There are two commonly accepted concepts of attorneys fees, the so-called private respondent under their retainer agreement. To be entitled to the additional
ordinary and extraordinary.[20] In its ordinary concept, an attorneys fee is the reasonable attorneys fees as provided in Part D (Special Billings) of the agreement, it avers that there
compensation paid to a lawyer by his client for the legal services he has rendered to the must be a separate mutual agreement between the union and the law firm prior to the
latter.The basis of this compensation is the fact of his employment by and his agreement performance of the additional services by the latter. Since there was no agreement as to
with the client. the payment of the additional attorneys fees, then it is considered waived.
In its extraordinary concept, an attorneys fee is an indemnity for damages ordered En contra, private respondent contends that a retainer fee is not the attorneys fees
by the court to be paid by the losing party in a litigation. The basis of this is any of the contemplated for and commensurate to the services he rendered to petitioner. He
cases provided by law where such award can be made, such as those authorized asserts that although there was no express agreement as to the amount of his fees for
in Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they services rendered in the case for recovery of differential pay, Article 111 of the Labor
have agreed that the award shall pertain to the lawyer as additional compensation or as Code supplants this omission by providing for an award of ten percent (10%) of a money
part thereof. judgment in a labor case as attorneys fees.
It is the first type of attorneys fees which private respondent demanded before the It is elementary that an attorney is entitled to have and receive a just and
labor arbiter. Also, the present controversy stems from petitioners apparent misperception reasonable compensation for services performed at the special instance and request of
that the NLRC has jurisdiction over claims for attorneys fees only before its judgment is his client. As long as the lawyer was in good faith and honestly trying to represent and
reviewed and ruled upon by the Supreme Court, and that thereafter the former may no serve the interests of the client, he should have a reasonable compensation for such
longer entertain claims for attorneys fees. services.[26] It will thus be appropriate, at this juncture, to determine if private respondent
It will be noted that no claim for attorneys fees was filed by private respondent is entitled to an additional remuneration under the retainer agreement[27] entered into by
before the NLRC when it acted on the money claims of petitioner, nor before the Supreme him and petitioner.
Court when it reviewed the decision of the NLRC. It was only after the High Tribunal The parties subscribed therein to the following stipulations:
modified the judgment of the NLRC awarding the differentials that private respondent xxx
filed his claim before the NLRC for a percentage thereof as attorneys fees. The Law Firm shall handle cases and extend legal services under the parameters
It would obviously have been impossible, if not improper, for the NLRC in the first of the following terms and conditions:
instance and for the Supreme Court thereafter to make an award for attorneys fees when A. GENERAL SERVICES
no claim therefor was pending before them. Courts generally rule only on issues and 1. Assurance that an Associate of the Law Firm shall be designated
claims presented to them for adjudication. Accordingly, when the labor arbiter ordered and be available on a day-to-day basis depending on the
the payment of attorneys fees, he did not in any way modify the judgment of the Supreme Unions needs;
Court. 2. Legal consultation, advice and render opinion on any actual
As an adjunctive episode of the action for the recovery of bonus differentials in and/or anticipatory situation confronting any matter within the
NLRC-NCR Certified Case No. 0466, private respondents present claim for attorneys fees clients normal course of business;
may be filed before the NLRC even though or, better stated, especially after its earlier 3. Proper documentation and notarization of any or all transactions
decision had been reviewed and partially affirmed. It is well settled that a claim for entered into by the Union in its day-to-day course of business;
attorneys fees may be asserted either in the very action in which the services of a lawyer 4. Review all contracts, deeds, agreements or any other legal
had been rendered or in a separate action.[21] document to which the union is a party signatory thereto but
With respect to the first situation, the remedy for recovering attorneys fees as an prepared or caused to be prepared by any other third party;
incident of the main action may be availed of only when something is due to the 5. Represent the Union in any case wherein the Union is a party
client.[22] Attorneys fees cannot be determined until after the main litigation has been litigant in any court of law or quasi-judicial body subject to
decided and the subject of the recovery is at the disposition of the court. The issue over certain fees as qualified hereinafter;
attorneys fees only arises when something has been recovered from which the fee is to 6. Lia(i)se with and/or follow-up any pending application or any
be paid.[23] papers with any government agency and/or any private
 institution which is directly related to any legal matter referred to The difference between a compensation for a commitment to render legal services
the Law Firm. and a remuneration for legal services actually rendered can better be appreciated with
B. SPECIAL LEGAL SERVICES a discussion of the two kinds of retainer fees a client may pay his lawyer. These are a
1. Documentation of any contract and other legal general retainer, or a retaining fee, and a special retainer.[28]
instrument/documents arising and/or required by your Union A general retainer, or retaining fee, is the fee paid to a lawyer to secure his future
which do not fall under the category of its ordinary course of services as general counsel for any ordinary legal problem that may arise in the routinary
business activity but requires a special, exhaustive or detailed business of the client and referred to him for legal action. The future services of the lawyer
study and preparation; are secured and committed to the retaining client. For this, the client pays the lawyer a
2. Conduct or undertake researches and/or studies on special fixed retainer fee which could be monthly or otherwise, depending upon their
projects of the Union; arrangement. The fees are paid whether or not there are cases referred to the lawyer. The
3. Render active and actual participation or assistance in reason for the remuneration is that the lawyer is deprived of the opportunity of rendering
conference table negotiations with TRB management or any services for a fee to the opposing party or other parties. In fine, it is a compensation for
other third person(s), juridical or natural, wherein the presence of lost opportunities.
counsel is not for mere consultation except CBA negotiations A special retainer is a fee for a specific case handled or special service rendered
which shall be subject to a specific agreement (pursuant to PD by the lawyer for a client. A client may have several cases demanding special or
1391 and in relation to BP 130 & 227); individual attention. If for every case there is a separate and independent contract for
4. Preparation of Position Paper(s), Memoranda or any other attorneys fees, each fee is considered a special retainer.
pleading for and in behalf of the Union; As to the first kind of fee, the Court has had the occasion to expound on its concept
5. Prosecution or defense of any case instituted by or against the in Hilado vs. David[29] in this wise:
Union; and, There is in legal practice what is called a retaining fee, the purpose of which stems from
6. Represent any member of the Union in any proceeding provided the realization that the attorney is disabled from acting as counsel for the other side after
that the particular member must give his/her assent and that he has given professional advice to the opposite party, even if he should decline to
prior consent be granted by the principal officers. Further, the perform the contemplated services on behalf of the latter. It is to prevent undue hardship
member must conform to the rules and policies of the Law Firm. on the attorney resulting from the rigid observance of the rule that a separate and
C. FEE STRUCTURE independent fee for consultation and advice was conceived and authorized. A retaining
In consideration of our commitment to render the services enumerated above fee is a preliminary fee given to an attorney or counsel to insure and secure his future
when required or necessary, your Union shall pay a monthly retainer fee of THREE services, and induce him to act for the client. It is intended to remunerate counsel for
THOUSAND PESOS (PHP 3,000.00), payable in advance on or before the fifth day being deprived, by being retained by one party, of the opportunity of rendering services
of every month. to the other and of receiving pay from him, and the payment of such fee, in the absence
An Appearance Fee which shall be negotiable on a case-to-case basis. of an express understanding to the contrary, is neither made nor received in payment of
Any and all Attorneys Fees collected from the adverse party by virtue of a the services contemplated; its payment has no relation to the obligation of the client to
successful litigation shall belong exclusively to the Law Firm. pay his attorney for the services for which he has retained him to perform. (Emphasis
It is further understood that the foregoing shall be without prejudice to our claim supplied).
for reimbursement of all out-of-pocket expenses covering filing fees, Evidently, the P3,000.00 monthly fee provided in the retainer agreement between
transportation, publication costs, expenses covering reproduction or the union and the law firm refers to a general retainer, or a retaining fee, as said monthly
authentication of documents related to any matter referred to the Law Firm or fee covers only the law firms pledge, or as expressly stated therein, its commitment to
that which redound to the benefit of the Union. render the legal services enumerated. The fee is not payment for private respondents
D. SPECIAL BILLINGS execution or performance of the services listed in the contract, subject to some particular
In the event that the Union avails of the services duly enumerated in Title B, the qualifications or permutations stated there.
Union shall pay the Law Firm an amount mutually agreed upon PRIOR to the Generally speaking, where the employment of an attorney is under an express valid
performance of such services. The sum agreed upon shall be based on actual contract fixing the compensation for the attorney, such contract is conclusive as to the
time and effort spent by the counsel in relation to the importance and amount of compensation.[30] We cannot, however, apply the foregoing rule in the instant
magnitude of the matter referred to by the Union. However, charges may petition and treat the fixed fee of P3,000.00 as full and sufficient consideration for private
be WAIVED by the Law Firm if it finds that time and efforts expended on the respondents services, as petitioner would have it.
particular services are inconsequential but such right of waiver is duly reserved We have already shown that the P3,000.00 is independent and different from the
for the Law Firm. compensation which private respondent should receive in payment for his services. While
xxx petitioner and private respondent were able to fix a fee for the latters promise to extend
The provisions of the above contract are clear and need no further interpretation; services, they were not able to come into agreement as to the law firms actual
all that is required to be done in the instant controversy is its application. The P3,000.00 performance of services in favor of the union. Hence, the retainer agreement cannot
which petitioner pays monthly to private respondent does not cover the services the latter control the measure of remuneration for private respondents services.
actually rendered before the labor arbiter and the NLRC in behalf of the former. As We, therefore, cannot favorably consider the suggestion of petitioner that private
stipulated in Part C of the agreement, the monthly fee is intended merely as a respondent had already waived his right to charge additional fees because of their failure
consideration for the law firms commitment to render the services enumerated in Part A to come to an agreement as to its payment.
(General Services) and Part B (Special Legal Services) of the retainer agreement. Firstly, there is no showing that private respondent unequivocally opted to waive the
additional charges in consonance with Part D of the agreement. Secondly, the prompt
actions taken by private respondent, i.e., serving notice of charging lien and filing of In any case, whether there is an agreement or not, the courts can fix a reasonable
motion to determine attorneys fees, belie any intention on his part to renounce his right compensation which lawyers should receive for their professional services.[37] However,
to compensation for prosecuting the labor case instituted by the union. And, lastly, to the value of private respondents legal services should not be established on the basis of
adopt such theory of petitioner may frustrate private respondents right to attorneys fees, Article 111 of the Labor Code alone. Said article provides:
as the former may simply and unreasonably refuse to enter into any special agreement ART. 111. Attorneys fees. - (a) In cases of unlawful withholding of wages the culpable party
with the latter and conveniently claim later that the law firm had relinquished its right may be assessed attorneys fees equivalent to ten percent of the amount of the wages
because of the absence of the same. recovered.
The fact that petitioner and private respondent failed to reach a meeting of the xxx
minds with regard to the payment of professional fees for special services will not absolve The implementing provision[38] of the foregoing article further states:
the former of civil liability for the corresponding remuneration therefor in favor of the latter. Sec. 11. Attorneys fees. - Attorneys fees in any judicial or administrative proceedings for
Obligations do not emanate only from contracts.[31] One of the sources of extra- the recovery of wages shall not exceed 10% of the amount awarded. The fees may be
contractual obligations found in our Civil Code is the quasi-contract premised on the deducted from the total amount due the winning party.
Roman maxim that nemo cum alterius detrimento locupletari protest. As embodied in our In the first place, the fees mentioned here are the extraordinary attorneys fees
law,[32]certain lawful, voluntary and unilateral acts give rise to the juridical relation of recoverable as indemnity for damages sustained by and payable to the prevailing
quasi-contract to the end that no one shall be unjustly enriched or benefited at the part. In the second place, the ten percent (10%) attorneys fees provided for in Article 111
expense of another. of the Labor Code and Section 11, Rule VIII, Book III of the Implementing Rules is the
A quasi-contract between the parties in the case at bar arose from private maximum of the award that may thus be granted.[39] Article 111 thus fixes only the limit on
respondents lawful, voluntary and unilateral prosecution of petitioners cause without the amount of attorneys fees the victorious party may recover in any judicial or
awaiting the latters consent and approval. Petitioner cannot deny that it did benefit from administrative proceedings and it does not even prevent the NLRC from fixing an amount
private respondents efforts as the law firm was able to obtain an award of holiday pay lower than the ten percent (10%) ceiling prescribed by the article when circumstances
differential in favor of the union. It cannot even hide behind the cloak of the monthly warrant it.[40]
retainer of P3,000.00 paid to private respondent because, as demonstrated earlier, The measure of compensation for private respondents services as against his client
private respondents actual rendition of legal services is not compensable merely by said should properly be addressed by the rule of quantum meruit long adopted in this
amount. jurisdiction. Quantum meruit, meaning as much as he deserves, is used as the basis for
Private respondent is entitled to an additional remuneration for pursuing legal action determining the lawyers professional fees in the absence of a contract,[41] but
in the interest of petitioner before the labor arbiter and the NLRC, on top of the P3,000.00 recoverable by him from his client.
retainer fee he received monthly from petitioner. The law firms services are decidedly Where a lawyer is employed without a price for his services being agreed upon, the
worth more than such basic fee in the retainer agreement. Thus, in Part C thereof on Fee courts shall fix the amount on quantum meruit basis. In such a case, he would be entitled
Structure, it is even provided that all attorneys fees collected from the adverse party by to receive what he merits for his services.[42]
virtue of a successful litigation shall belong exclusively to private respondent, aside from It is essential for the proper operation of the principle that there is an acceptance
petitioners liability for appearance fees and reimbursement of the items of costs and of the benefits by one sought to be charged for the services rendered under
expenses enumerated therein. circumstances as reasonably to notify him that the lawyer performing the task was
A quasi-contract is based on the presumed will or intent of the obligor dictated by expecting to be paid compensation therefor. The doctrine of quantum meruit is a device
equity and by the principles of absolute justice. Some of these principles are: (1) It is to prevent undue enrichment based on the equitable postulate that it is unjust for a
presumed that a person agrees to that which will benefit him; (2) Nobody wants to enrich person to retain benefit without paying for it.[43]
himself unjustly at the expense of another; and (3) We must do unto others what we want Over the years and through numerous decisions, this Court has laid down guidelines
them to do unto us under the same circumstances.[33] in ascertaining the real worth of a lawyers services. These factors are now codified in Rule
As early as 1903, we allowed the payment of reasonable professional fees to an 20.01, Canon 20 of the Code of Professional Responsibility and should be considered in
interpreter, notwithstanding the lack of understanding with his client as to his fixing a reasonable compensation for services rendered by a lawyer on the basis
remuneration, on the basis of quasi-contract.[34] Hence, it is not necessary that the parties of quantum meruit. These are: (a) the time spent and the extent of services rendered or
agree on a definite fee for the special services rendered by private respondent in order required; (b) the novelty and difficulty of the questions involved; (c) the importance of
that petitioner may be obligated to pay compensation to the former. Equity and fair play the subject matter; (d) the skill demanded; (e) the probability of losing other employment
dictate that petitioner should pay the same after it accepted, availed itself of, and as a result of acceptance of the proffered case; (f) the customary charges for similar
benefited from private respondents services. services and the schedule of fees of the IBP chapter to which the lawyer belongs; (g) the
We are not unaware of the old ruling that a person who had no knowledge of, nor amount involved in the controversy and the benefits resulting to the client from the
consented to, or protested against the lawyers representation may not be held liable for services; (h) the contingency or certainty of compensation; (i) the character of the
attorneys fees even though he benefited from the lawyers services.[35] But this doctrine employment, whether occasional or established; and (j) the professional standing of the
may not be applied in the present case as petitioner did not object to private lawyer.
respondents appearance before the NLRC in the case for differentials. Here, then, is the flaw we find in the award for attorneys fees in favor of private
Viewed from another aspect, since it is claimed that petitioner obtained respondent. Instead of adopting the above guidelines, the labor arbiter forthwith but
respondents legal services and assistance regarding its claims against the bank, only they erroneously set the amount of attorneys fees on the basis of Article 111 of the Labor
did not enter into a special contract regarding the compensation therefor, there is at Code. He completely relied on the operation of Article 111 when he fixed the amount of
least the innominate contract of facio ut des (I do that you may give).[36] This rule of law, attorneys fees at P17,574.43.[44] Observe the conclusion stated in his order.[45]
likewise founded on the principle against unjust enrichment, would also warrant payment xxx
for the services of private respondent which proved beneficial to petitioners members.
FIRST. Art. 111 of the Labor Code, as amended, clearly declares movants right to a ten USA (Star Kist). As part of their agreement, Mata makes advances for the crew's medical
(10%) per cent of the award due its client. In addition, this right to ten (10%) per cent expenses, National Seaman's Board fees, Seaman's Welfare fund, and standby fees and
attorneys fees is supplemented by Sec. 111, Rule VIII, Book III of the Omnibus Rules for the crew's basic personal needs. Subsequently, Mata sends monthly billings to its
Implementing the Labor Code, as amended. foreign principal Star Kist, which in turn reimburses Mata by sending a telegraphic transfer
xxx through banks for credit to the latter's account.
As already stated, Article 111 of the Labor Code regulates the amount recoverable Against this background, on February 21, 1975, Security Pacific National Bank (SEPAC) of
as attorneys fees in the nature of damages sustained by and awarded to the prevailing Los Angeles which had an agency arrangement with Philippine National Bank (PNB),
party. It may not be used therefore, as the lone standard in fixing the exact amount transmitted a cable message to the International Department of PNB to pay the amount
payable to the lawyer by his client for the legal services he rendered. Also, while it limits of US$14,000 to Mata by crediting the latter's account with the Insular Bank of Asia and
the maximum allowable amount of attorneys fees, it does not direct the instantaneous America (IBAA), per order of Star Kist. Upon receipt of this cabled message on February
and automatic award of attorneys fees in such maximum limit. 24, 1975, PNB's International Department noticed an error and sent a service message to
It, therefore, behooves the adjudicator in questions and circumstances similar to SEPAC Bank. The latter replied with instructions that the amount of US$14,000 should only
those in the case at bar, involving a conflict between lawyer and client, to observe the be for US$1,400.
above guidelines in cases calling for the operation of the principles of quasi- On the basis of the cable message dated February 24, 1975 Cashier's Check No. 269522
contract and quantum meruit, and to conduct a hearing for the proper determination of in the amount of US$1,400 (P9,772.95) representing reimbursement from Star Kist, was
attorneys fees. The criteria found in the Code of Professional Responsibility are to be issued by the Star Kist for the account of Mata on February 25, 1975 through the Insular
considered, and not disregarded, in assessing the proper amount. Here, the records do Bank of Asia and America (IBAA).
not reveal that the parties were duly heard by the labor arbiter on the matter and for the However, fourteen days after or on March 11, 1975, PNB effected another payment
resolution of private respondents fees. through Cashier's Check No. 270271 in the amount of US$14,000 (P97,878.60) purporting
It is axiomatic that the reasonableness of attorneys fees is a question of to be another transmittal of reimbursement from Star Kist, private respondent's foreign
fact.[46] Ordinarily, therefore, we would have remanded this case for further reception of principal.
evidence as to the extent and value of the services rendered by private respondent to Six years later, or more specifically, on May 13, 1981, PNB requested Mata for refund of
petitioner.However, so as not to needlessly prolong the resolution of a comparatively US$14,000 (P97,878.60) after it discovered its error in effecting the second payment.
simple controversy, we deem it just and equitable to fix in the present recourse a On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000 against
reasonable amount of attorneys fees in favor of private respondent. For that purpose, we Mata arguing that based on a constructive trust under Article 1456 of the Civil Code, it
have duly taken into account the accepted guidelines therefor and so much of the has a right to recover the said amount it erroneously credited to respondent Mata.1
pertinent data as are extant in the records of this case which are assistive in that After trial, the Regional Trial Court of Manila rendered judgment dismissing the complaint
regard. On such premises and in the exercise of our sound discretion, we hold that the ruling that the instant case falls squarely under Article 2154 on solutio indebiti and not
amount of P10,000.00 is a reasonable and fair compensation for the legal services under Article 1456 on constructive trust. The lower court ruled out constructive trust,
rendered by private respondent to petitioner before the labor arbiter and the NLRC. applying strictly the technical definition of a trust as "a right of property, real or personal,
WHEREFORE, the impugned resolution of respondent National Labor Relations held by one party for the benefit of another; that there is a fiduciary relation between a
Commission affirming the order of the labor arbiter is MODIFIED, and petitioner is hereby trustee and a cestui que trust as regards certain property, real, personal, money or choses
ORDERED to pay the amount of TEN THOUSAND PESOS (P10,000.00) as attorneys fees to in action."2
private respondent for the latters legal services rendered to the former. In affirming the lower court, the appellate court added in its opinion that under Article
SO ORDERED. 2154 on solutio indebiti, the person who makes the payment is the one who commits the
mistake vis-a-vis the recipient who is unaware of such a mistake.3 Consequently, recipient
G.R. No. 97995 January 21, 1993 is duty bound to return the amount paid by mistake. But the appellate court concluded
PHILIPPINE NATIONAL BANK, petitioner, vs. that petitioner's demand for the return of US$14,000 cannot prosper because its cause of
COURT OF APPEALS AND B.P. MATA AND CO., INC., respondents. action had already prescribed under Article 1145, paragraph 2 of the Civil Code which
Roland A. Niedo for petitioner. states:
Benjamin C. Santos Law Office for respondent. The following actions must be commenced within six years:
xxx xxx xxx
ROMERO, J.: (2) Upon a quasi-contract.
Rarely is this Court confronted with a case calling for the delineation in broad strokes of This is because petitioner's complaint was filed only on February 4, 1982, almost
the distinctions between such closely allied concepts as the quasi-contract called "solutio seven years after March 11, 1975 when petitioner mistakenly made payment to
indebiti" under the venerable Spanish Civil Code and the species of implied trust private respondent.
denominated "constructive trusts," commonly regarded as of Anglo-American origin. Hence, the instant petition for certiorari proceeding seeking to annul the decision of the
Such a case is the one presented to us now which has highlighted more of the affinity appellate court on the basis that Mata's obligation to return US$14,000 is governed, in the
and less of the dissimilarity between the two concepts as to lead the legal scholar into alternative, by either Article 1456 on constructive trust or Article 2154 of the Civil Code on
the error of interchanging the two. Presented below are the factual circumstances that quasi-contract.4
brought into juxtaposition the twin institutions of the Civil Law quasi-contract and the Article 1456 of the Civil Code provides:
Anglo-American trust. If property is acquired through mistake or fraud, the person obtaining
Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation engaged in it is, by force of law, considered a trustee of an implied trust for the
providing goods and services to shipping companies. Since 1966, it has acted as a benefit of the person from whom the property comes.
manning or crewing agent for several foreign firms, one of which is Star Kist Foods, Inc., On the other hand, Article 2154 states:
 If something is received when there is no right to demand it, and it was from lawful, voluntary and unilateral acts of another may not be unjustly enriched at the
unduly delivered through mistake, the obligation to return it arises. expense of another.
Petitioner naturally opts for an interpretation under constructive trust as its action filed on Undoubtedly, the instant case fulfills the indispensable requisites of solutio indebiti as
February 4, 1982 can still prosper, as it is well within the prescriptive period of ten (10) years defined in Article 2154 that something (in this case money) has been received when there
as provided by Article 1144, paragraph 2 of the Civil Code.5 was no right to demand it and (2) the same was unduly delivered through mistake. There
If it is to be construed as a case of payment by mistake or solutio indebiti, then the is a presumption that there was a mistake in the payment "if something which had never
prescriptive period for quasi-contracts of six years applies, as provided by Article 1145. As been due or had already been paid was delivered; but he from whom the return is
pointed out by the appellate court, petitioner's cause of action thereunder shall have claimed may prove that the delivery was made out of liberality or for any other just
prescribed, having been brought almost seven years after the cause of action accrued. cause."18
However, even assuming that the instant case constitutes a constructive trust and In the case at bar, a payment in the corrected amount of US$1,400 through Cashier's
prescription has not set in, the present action has already been barred by laches. Check No. 269522 had already been made by PNB for the account of Mata on February
To recall, trusts are either express or implied. While express trusts are created by the 25, 1975. Strangely, however, fourteen days later, PNB effected another payment through
intention of the trustor or of the parties, implied trusts come into being by operation of Cashier's Check No. 270271 in the amount of US$14,000, this time purporting to be another
law.6 Implied trusts are those which, without being expressed, are deducible from the transmittal of reimbursement from Star Kist, private respondent's foreign principal.
nature of the transaction as matters of intent or which are superinduced on the While the principle of undue enrichment or solutio indebiti, is not new, having been
transaction by operation of law as matters of equity, independently of the particular incorporated in the subject on quasi-contracts in Title XVI of Book IV of the Spanish Civil
intention of the parties.7 Code entitled "Obligations incurred without contract," 19the chapter on Trusts is fairly
In turn, implied trusts are subdivided into resulting and constructive trusts.8 A resulting trust recent, having been introduced by the Code Commission in 1949. Although the concept
is a trust raised by implication of law and presumed always to have been contemplated of trusts is nowhere to be found in the Spanish Civil Code, the framers of our present Civil
by the parties, the intention of which is found in the nature of the transaction, but not Code incorporated implied trusts, which includes constructive trusts, on top of quasi-
expressed in the deed or instrument of conveyance.9 Examples of resulting trusts are contracts, both of which embody the principle of equity above strict legalism.20
found in Articles 1448 to 1455 of the Civil Code.10 On the other hand, a constructive trust In analyzing the law on trusts, it would be instructive to refer to Anglo-American
is one not created by words either expressly or impliedly, but by construction of equity in jurisprudence on the subject. Under American Law, a court of equity does not consider a
order to satisfy the demands of justice. An example of a constructive trust is Article 1456 constructive trustee for all purposes as though he were in reality a trustee; although it will
quoted above.11 force him to return the property, it will not impose upon him the numerous fiduciary
A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense 12 for in obligations ordinarily demanded from a trustee of an express trust.21 It must be borne in
a typical trust, confidence is reposed in one person who is named a trustee for the benefit mind that in an express trust, the trustee has active duties of management while in a
of another who is called the cestui que trust, respecting property which is held by the constructive trust, the duty is merely to surrender the property.
trustee for the benefit of the cestui que trust.13 A constructive trust, unlike an express trust, Still applying American case law, quasi-contractual obligations give rise to a personal
does not emanate from, or generate a fiduciary relation. While in an express trust, a liability ordinarily enforceable by an action at law, while constructive trusts are
beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive enforceable by a proceeding in equity to compel the defendant to surrender specific
trust, there is neither a promise nor any fiduciary relation to speak of and the so-called property. To be sure, the distinction is more procedural than substantive.22
trustee neither accepts any trust nor intends holding the property for the beneficiary.14 Further reflection on these concepts reveals that a constructive "trust" is as much a
In the case at bar, Mata, in receiving the US$14,000 in its account through IBAA, had no misnomer as a "quasi-contract," so far removed are they from trusts and contracts proper,
intent of holding the same for a supposed beneficiary or cestui que trust, namely PNB. But respectively. In the case of a constructive trust, as in the case of quasi-contract, a
under Article 1456, the law construes a trust, namely a constructive trust, for the benefit of relationship is "forced" by operation of law upon the parties, not because of any intention
the person from whom the property comes, in this case PNB, for reasons of justice and on their part but in order to prevent unjust enrichment, thus giving rise to certain
equity. obligations not within the contemplation of the parties.23
At this juncture, a historical note on the codal provisions on trust and quasi-contracts is in Although we are not quite in accord with the opinion that "the trusts known to American
order. and English equity jurisprudence are derived from the fidei commissa of the Roman
Originally, under the Spanish Civil Code, there were only two kinds of quasi Law,"24 it is safe to state that their roots are firmly grounded on such Civil Law principles
contracts: negotiorum gestio and solutio indebiti. But the Code Commission, mindful of are expressed in the Latin maxim, "Nemo cum alterius detrimento locupletari
the position of the eminent Spanish jurist, Manresa, that "the number of quasi contracts potest," 25 particularly the concept of constructive trust.
may be indefinite," added Section 3 entitled "Other Quasi-Contracts."15 Returning to the instant case, while petitioner may indeed opt to avail of an action to
Moreover, even as Article 2142 of the Civil Code defines a quasi-contract, the succeeding enforce a constructive trust or the quasi-contract of solutio indebiti, it has been deprived
article provides that: "The provisions for quasi-contracts in this Chapter do not exclude of a choice, for prescription has effectively blocked quasi-contract as an alternative,
other quasi-contracts which may come within the purview of the preceding article."16 leaving only constructive trust as the feasible option.
Indubitably, the Civil Code does not confine itself exclusively to the quasi-contracts Petitioner argues that the lower and appellate courts cannot indulge in semantics by
enumerated from Articles 2144 to 2175 but is open to the possibility that, absent a pre- holding that in Article 1456 the recipient commits the mistake while in Article 2154, the
existing relationship, there being neither crime nor quasi-delict, a quasi-contractual recipient commits no mistake. 26 On the other hand, private respondent, invoking the
relation may be forced upon the parties to avoid a case of unjust enrichment.17 There appellate court's reasoning, would impress upon us that under Article 1456, there can be
being no express consent, in the sense of a meeting of minds between the parties, there no mutual mistake. Consequently, private respondent contends that the case at bar is
is no contract to speak of. However, in view of the peculiar circumstances or factual one of solutio indebiti and not a constructive trust.
environment, consent is presumed to the end that a recipient of benefits or favors resulting We agree with petitioner's stand that under Article 1456, the law does not make any
distinction since mutual mistake is a possibility on either side — on the side of either the
grantor or the grantee.27 Thus, it was error to conclude that in a constructive trust, only the
person obtaining the property commits a mistake. This is because it is also possible that a Thus, PAGCOR paid the amount due to Acesite minus the
grantor, like PNB in the case at hand, may commit the mistake. P30,152,892.02 VAT while the latter paid the VAT to the
Proceeding now to the issue of whether or not petitioner may still claim the US$14,000 it Commissioner of Internal Revenue [hereafter, CIR] as it feared
erroneously paid private respondent under a constructive trust, we rule in the negative. the legal consequences of non-payment of the tax. However,
Although we are aware that only seven (7) years lapsed after petitioner erroneously Acesite belatedly arrived at the conclusion that its transaction
credited private respondent with the said amount and that under Article 1144, petitioner with PAGCOR was subject to zero rate as it was rendered to a
is well within the prescriptive period for the enforcement of a constructive or implied trust, tax-exempt entity. On 21 May 1998, Acesite filed an
we rule that petitioner's claim cannot prosper since it is already barred by laches. It is a administrative claim for refund with the CIR but the latter failed
well-settled rule now that an action to enforce an implied trust, whether resulting or to resolve the same. Thus on 29 May 1998, Acesite filed a
constructive, may be barred not only by prescription but also by laches.28 petition with the Court of Tax Appeals [hereafter, CTA] which
While prescription is concerned with the fact of delay, laches deals with the effect of was decided in this wise:
unreasonable delay.29 It is amazing that it took petitioner almost seven years before it
discovered that it had erroneously paid private respondent. Petitioner would attribute its As earlier stated, Petitioner is subject to zero
mistake to the heavy volume of international transactions handled by the Cable and percent tax pursuant to Section 102 (b)(3) [now
Remittance Division of the International Department of PNB. Such specious reasoning is 106(A)(C)] insofar as its gross income from rentals
not persuasive. It is unbelievable for a bank, and a government bank at that, which and sales to PAGCOR, a tax exempt entity by virtue
regularly publishes its balanced financial statements annually or more frequently, by the of a special law. Accordingly, the amounts of
quarter, to notice its error only seven years later. As a universal bank with worldwide P21,413,026.78 and P8,739,865.24, representing the
operations, PNB cannot afford to commit such costly mistakes. Moreover, as between 10% EVAT on its sales of food and services and gross
parties where negligence is imputable to one and not to the other, the former must rentals, respectively from PAGCOR shall, as a matter
perforce bear the consequences of its neglect. Hence, petitioner should bear the cost of of course, be refunded to the petitioner for having
its own negligence. been inadvertently remitted to the respondent.
WHEREFORE, the decision of the Court of Appeals dismissing petitioner's claim against
private respondent is AFFIRMED. Thus, taking into consideration the prescribed
portion of Petitioners claim for refund of P98,743.40,
Commisioner of Internal Revenue v. Acesite (Philippines) Hotel Corporation, G.R. No. and considering further the principle of solutio
147295, February 16, 2007 indebiti which requires the return of what has been
The Case delivered through mistake, Respondent must refund
to the Petitioner the amount of P30,054,148.64
Before us is a Petition for Review on Certiorari [1] under Rule 45 of the Rules of computed as follows:
Court, assailing the November 17, 2000 Decision[2] of the Court of Appeals (CA) in CA-G.R.
SP No. 56816, which affirmed the January 3, 2000 Decision[3] of the Court of Tax Appeals Total amount per claim 30,152,892.02
(CTA) in CTA Case No. 5645 entitled Acesite (Philippines) Hotel Corporation v. The Less Prescribed amount (Exhs A, X, & X-20)
Commissioner of Internal Revenue for Refund of VAT Payments. January 1996 P 2,199.94
February 1996 26,205.04
March 1996 70,338.42 98,743.40
P30,054,148.64
The Facts vvvvvvvvvvvvv
WHEREFORE, in view of all the foregoing, the
The facts as found by the appellate court are undisputed, thus: instant Petition for Review is partially GRANTED. The
Respondent is hereby ORDERED to REFUND to the
Acesite is the owner and operator of the Holiday Inn Manila petitioner the amount of THIRTY MILLION FIFTY FOUR
Pavilion Hotel along United Nations Avenue in Manila. It leases THOUSAND ONE HUNDRED FORTY EIGHT PESOS AND
6,768.53 square meters of the hotels premises to the Philippine SIXTY FOUR CENTAVOS (P30,054,148.64)
Amusement and Gaming Corporation [hereafter, PAGCOR] immediately.
for casino operations. It also caters food and beverages to
PAGCORs casino patrons through the hotels restaurant SO ORDERED.[4]
outlets. For the period January (sic) 96 to April 1997, Acesite
incurred VAT amounting to P30,152,892.02 from its rental
income and sale of food and beverages to PAGCOR during
said period. Acesite tried to shift the said taxes to PAGCOR by
incorporating it in the amount assessed to PAGCOR but the
latter refused to pay the taxes on account of its tax exempt
status.
The Ruling of the Court of Appeals operator has any contractual relationship in connection with
the operations of the casino(s) authorized to be conducted
Upon appeal by petitioner, the CA affirmed in toto the decision of the CTA under this Franchise and to those receiving compensation or
holding that PAGCOR was not only exempt from direct taxes but was also exempt from other remuneration from the Corporation or operator as a result
indirect taxes like the VAT and consequently, the transactions between respondent of essential facilities furnished and/or technical services
Acesite and PAGCOR were effectively zero-rated because they involved the rendition of rendered to the Corporation or operator. (Emphasis supplied.)
services to an entity exempt from indirect taxes. Thus, the CA affirmed the CTAs
determination by ruling that respondent Acesite was entitled to a refund of PhP Petitioner contends that the above tax exemption refers only to PAGCORs direct
30,054,148.64 from petitioner. tax liability and not to indirect taxes, like the VAT.

The Issues We disagree.

Hence, we have the instant petition with the following issues: (1) whether A close scrutiny of the above provisos clearly gives PAGCOR a blanket
PAGCORs tax exemption privilege includes the indirect tax of VAT to entitle Acesite to exemption to taxes with no distinction on whether the taxes are direct or indirect. We are
zero percent (0%) VAT rate; and (2) whether the zero percent (0%) VAT rate under then one with the CA ruling that PAGCOR is also exempt from indirect taxes, like VAT, as follows:
Section 102 (b)(3) of the Tax Code (now Section 108 (B)(3) of the Tax Code of 1997) legally
applies to Acesite. Under the above provision [Section 13 (2) (b) of P.D. 1869], the
term Corporation or operator refers to PAGCOR. Although the
The petition is devoid of merit. law does not specifically mention PAGCORs exemption from
indirect taxes, PAGCOR is undoubtedly exempt from such
In resolving the first issue on whether PAGCORs tax exemption privilege includes taxes because the law exempts from taxes persons or entities
the indirect tax of VAT to entitle Acesite to zero percent (0%) VAT rate, we answer in the contracting with PAGCOR in casino operations. Although,
affirmative. We will however discuss both issues together. differently worded, the provision clearly exempts PAGCOR
from indirect taxes. In fact, it goes one step further by granting
PAGCOR is exempt from payment of indirect taxes tax exempt status to persons dealing with PAGCOR in casino
operations. The unmistakable conclusion is that PAGCOR is not
It is undisputed that P.D. 1869, the charter creating PAGCOR, grants the latter liable for the P30,152,892.02 VAT and neither is Acesite as the
an exemption from the payment of taxes. Section 13 of P.D. 1869 pertinently provides: latter is effectively subject to zero percent rate under Sec. 108
B (3). R.A. 8424. (Emphasis supplied.)
Sec. 13. Exemptions.

xxxx Indeed, by extending the exemption to entities or individuals dealing with

PAGCOR, the legislature clearly granted exemption also from indirect taxes. It must be
(2) Income and other taxes. (a) Franchise Holder: No tax noted that the indirect tax of VAT, as in the instant case, can be shifted or passed to the
of any kind or form, income or otherwise, as well as fees, buyer, transferee, or lessee of the goods, properties, or services subject to VAT. Thus, by
charges or levies of whatever nature, whether National or extending the tax exemption to entities or individuals dealing with PAGCOR in casino
Local, shall be assessed and collected under this Franchise operations, it is exempting PAGCOR from being liable to indirect taxes.
from the Corporation; nor shall any form of tax or charge attach
in any way to the earnings of the Corporation, except a The manner of charging VAT does not make PAGCOR liable to said tax
Franchise Tax of five (5%) percent of the gross revenue or
earnings derived by the Corporation from its operation under It is true that VAT can either be incorporated in the value of the goods,
this Franchise. Such tax shall be due and payable quarterly to properties, or services sold or leased, in which case it is computed as 1/11 of such value,
the National Government and shall be in lieu of all kinds of or charged as an additional 10% to the value. Verily, the seller or lessor has the option to
taxes, levies, fees or assessments of any kind, nature or follow either way in charging its clients and customer. In the instant case, Acesite followed
description, levied, established or collected by any municipal, the latter method, that is, charging an additional 10% of the gross sales and rentals. Be
provincial, or national government authority. that as it may, the use of either method, and in particular, the first method, does not
denigrate the fact that PAGCOR is exempt from an indirect tax, like VAT.
xxxx
VAT exemption extends to Acesite
(b) Others: The exemptions herein granted for earnings
derived from the operations conducted under the franchise Thus, while it was proper for PAGCOR not to pay the 10% VAT charged by
specifically from the payment of any tax, income or otherwise, Acesite, the latter is not liable for the payment of it as it is exempt in this particular
as well as any form of charges, fees or levies, shall inure to the transaction by operation of law to pay the indirect tax. Such exemption falls within the
benefit of and extend to corporation(s), association(s), former Section 102 (b) (3) of the 1977 Tax Code, as amended (now Sec. 108 [b] [3] of R.A.
agency(ies), or individual(s) with whom the Corporation or 8424), which provides:
 Section 102. Value-added tax on sale of services (a) Rate and Art. 2142. Certain lawful, voluntary, and unilateral acts give rise
base of tax There shall be levied, assessed and collected, a to the juridical relation of quasi-contract to the end that no one
value-added tax equivalent to 10% of gross receipts derived by shall be unjustly enriched or benefited at the expense of
any person engaged in the sale of services x x x; Provided, that another.
the following services performed in the Philippines by VAT-
registered persons shall be subject to 0%. Art. 2154. If something is received when there is no right to
demand it, and it was unduly delivered through mistake, the
xxxx obligation to return it arises.

(b) Transactions subject to zero percent (0%) rated. When money is paid to another under the influence of a mistake of fact, that is
to say, on the mistaken supposition of the existence of a specific fact, where it would not
xxxx have been known that the fact was otherwise, it may be recovered. The ground upon
which the right of recovery rests is that money paid through misapprehension of facts
(3) Services rendered to persons or entities whose exemption belongs in equity and in good conscience to the person who paid it.[9]
under special laws or international agreements to which the
Philippines is a signatory effectively subjects the supply of such The Government comes within the scope of solutio indebiti principle as elucidated
services to zero (0%) rate (emphasis supplied). in Commissioner of Internal Revenue v. Firemans Fund Insurance Company, where we
held that: Enshrined in the basic legal principles is the time-honored doctrine that no
The rationale for the exemption from indirect taxes provided for in P.D. 1869 and person shall unjustly enrich himself at the expense of another. It goes without saying that
the extension of such exemption to entities or individuals dealing with PAGCOR in casino the Government is not exempted from the application of this doctrine.[10]
operations are best elucidated from the 1987 case of Commissioner of Internal Revenue
v. John Gotamco & Sons, Inc.,[5] where the absolute tax exemption of the World Health Action for refund strictly construed; Acesite discharged the
Organization (WHO) upon an international agreement was upheld. We held in said case burden of proof
that the exemption of contractee WHO should be implemented to mean that the entity
or person exempt is the contractor itself who constructed the building owned by Since an action for a tax refund partakes of the nature of an exemption, which
contractee WHO, and such does not violate the rule that tax exemptions are personal cannot be allowed unless granted in the most explicit and categorical language, it is
because the manifest intention of the agreement is to exempt the contractor so that no strictly construed against the claimant who must discharge such burden
contractors tax may be shifted to the contractee WHO. Thus, the proviso in P.D. 1869, convincingly.[11] In the instant case, respondent Acesite had discharged this burden as
extending the exemption to entities or individuals dealing with PAGCOR in casino found by the CTA and the CA. Indeed, the records show that Acesite proved its actual
operations, is clearly to proscribe any indirect tax, like VAT, that may be shifted to VAT payments subject to refund, as attested to by an independent Certified Public
PAGCOR. Accountant who was duly commissioned by the CTA. On the other hand, petitioner never
disputed nor contested respondents testimonial and documentary evidence. In fact,
Acesite paid VAT by mistake petitioner never presented any evidence on its behalf.

Considering the foregoing discussion, there are undoubtedly erroneous One final word. The BIR must release the refund to respondent without any
payments of the VAT pertaining to the effectively zero-rate transactions between Acesite unreasonable delay. Indeed, fair dealing is expected by our taxpayers from the BIR and
and PAGCOR. Verily, Acesite has clearly shown that it paid the subject taxes under a this duty demands that the BIR should refund without any unreasonable delay what it has
mistake of fact, that is, when it was not aware that the transactions it had with PAGCOR erroneously collected.[12]
were zero-rated at the time it made the payments. In UST Cooperative Store v. City of
Manila,[6] we explained that there is erroneous payment of taxes when a taxpayer pays WHEREFORE, the petition is DENIED for lack of merit and the November 17,
under a mistake of fact, as for the instance in a case where he is not aware of an existing 2000 Decision of the CA is hereby AFFIRMED. No costs.
exemption in his favor at the time the payment was made.[7] Such payment is held to be
not voluntary and, therefore, can be recovered or refunded.[8] G.R. NO. 192105 December 9, 2013
ANTONIO LOCSIN, II, Petitioner,
Moreover, it must be noted that aside from not raising the issue of Acesites vs.
compliance with pertinent Revenue Regulations on exemptions during the proceedings MEKENI FOOD CORPORATION, Respondent.
in the CTA, it cannot be gainsaid that Acesite should have done so as it paid the VAT DECISION
under a mistake of fact. Hence, petitioners argument on this point is utterly tenuous. DEL CASTILLO, J.:
In the absence of specific terms and conditions governing a car plan agreement
Solutio indebiti applies to the Government between the employer and employe former may not retain the installment payments
made by the latter on the car plan and treat them as rents for the use of the service
Tax refunds are based on the principle of quasi-contract or solutio indebiti and vehicle, in the event that the employee ceases his employment and is unable to
the pertinent laws governing this principle are found in Arts. 2142 and 2154 of the Civil complete the installment payments on the vehicle. The underlying reason is that the
Code, which provide, thus: service vehicle was precisely used in the former' s business; any personal benefit obtained
by the employee from its use is merely incidental. This Petition for Review All other claims are dismissed for lack of merit.
on Certiorari1 assails the January 27, 2010 Decision2 of the Court of Appeals (CA) in CA- SO ORDERED.11 The NLRC held that petitioner’s amortization payments on his service
G.R. SP No. 109550, as well as its April 23, 2010 Resolution 3 denying petitioner’s Motion for vehicle amounting to ₱112,500.00 should be reimbursed; if not, unjust enrichment would
Partial Reconsideration.4 result, as the vehicle remained in the possession and ownership of Mekeni.
Factual Antecedents On October 30, 2007, Labor Arbiter Cresencio G. Ramos rendered a Decision,7 decreeing
In February 2004, respondent Mekeni Food Corporation(Mekeni)–a Philippine company as follows:
engaged in food manufacturing and meat processing –offered petitioner Antonio Locsin WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered directing
II the position of Regional Sales Manager to over see Mekeni’s National Capital Region respondents to turn-over to complainant x x xthe subject vehicle upon the said
Supermarket/Food Service and South Luzon operations. In addition to a compensation complainant’s payment to them of the sum of ₱100,435.84.
and benefit package, Mekeni offered petitioner a car plan, under which one-half of the SO ORDERED.8
cost of the vehicle is to be paid by the company and the other half to be deducted from Ruling of the National Labor Relations Commission
petitioner’s salary. Mekeni’s offer was contained in an Offer Sheet5 which was presented On appeal,9 the Labor Arbiter’s Decision was reversedin a February 27, 2009 Decision10of
to petitioner. the NLRC, thus:
Petitioner began his stint as Mekeni Regional Sales Manager on March 17, 2004. To be WHEREFORE, premises considered, the appeal is hereby Granted. The assailed Decision
able to effectively cover his appointed sales territory, Mekeni furnished petitioner with a dated October 30, 2007 is hereby REVERSED and SET ASIDE and a new one entered
used Honda Civic car valued at ₱280,000.00, which used to be the service vehicle of ordering respondent-appellee Mekeni Food Corporation to pay complainant-appellee
petitioner’s immediate supervisor. Petitioner paid for his 50% share through salary the following:
deductions of ₱5,000.00 each month. 1.Unpaid Salary in the amount of ₱12,511.45;
Subsequently, Locsin resigned effective February 25, 2006. By then, a total of ₱112,500.00 2.Unpaid sick leave/vacation leave pay in the amount of ₱14,789.15;
had been deducted from his monthly salary and applied as part of the employee’s share 3.Unpaid commission in the amount of ₱9,780.00; and
in the car plan. Mekeni supposedly put in an equivalent amount as its share under the car 4.Reimbursement of complainant’s payment under the car plan agreement in
plan. In his resignation letter, petitioner made an offer to purchase his service vehicle by the amount of ₱112,500.00; and
paying the outstanding balance thereon. The parties negotiated, but could not agree on 5.The equivalent share of the company as part of the complainant’s benefit
the terms of the proposed purchase. Petitioner thus returned the vehicle to Mekeni on under the car plan 50/50 sharing amounting to ₱112,500.00.
May 2, 2006. Respondent-Appellee Mekeni Food Corporation is hereby authorized to deduct the sum
Petitioner made personal and written follow-ups regarding his unpaid salaries, of ₱4,736.50 representing complainant-appellant’s cash advance from his total monetary
commissions, benefits, and offer to purchase his service vehicle. Mekeni replied that the award.
company car plan benefit applied only to employees who have been with the company All other claims are dismissed for lack of merit.
for five years; for this reason, the balance that petitioner should pay on his service vehicle SO ORDERED.11
stood at ₱116,380.00 if he opts to purchase the same. The NLRC held that petitioner’s amortization payments on his service vehicle amounting
On May 3, 2007, petitioner filed against Mekeni and/or its President, Prudencio S. Garcia, to ₱112,500.00 should be reimbursed; if not, unjust enrichment would result, as the vehicle
a Complaint6for the recovery of monetary claims consisting of unpaid salaries, remained in the possession and ownership of Mekeni.
commissions, sick/vacation leave benefits, and recovery of monthly salary deductions In addition, the employer’s share in the monthly car plan payments should likewise be
which were earmarked for his cost-sharing in the car plan. The case was docketed in the awarded to petitioner because it forms part of the latter’s benefits under the car plan. It
National Labor Relations Commission(NLRC), National Capital Region(NCR), Quezon City held further that Mekeni’s claim that the company car plan benefit applied only to
as NLRC NCR CASE NO. 00-05-04139-07. employees who have been with the company for five years has not been substantiated
On October 30, 2007, Labor Arbiter Cresencio G. Ramos rendered a Decision,7 decreeing by its evidence, in which case the car plan agreement should be construed in petitioner’s
as follows: WHEREFORE, in the light of the foregoing premises, judgment is hereby favor. Mekeni moved to reconsider, but in an April 30, 2009 Resolution,12 the NLRC
rendered directing respondents to turn-over to complainant x x x the subject vehicle upon sustained its original findings.
the said complainant’s payment to them of the sum of ₱100,435.84.SO ORDERED.8 Ruling Ruling of the Court of Appeals
of the National Labor Relations Commission On appeal,9 the Labor Arbiter’s Decision was Mekeni filed a Petition for Certiorari 13 with the CA assailing the NLRC’s February 27, 2009
reversed in a February 27, 2009 Decision10 of the NLRC, thus: WHEREFORE, premises Decision, saying that the NLRC committed grave abuse of discretion in holding it liable to
considered, the appeal is hereby Granted. The assailed Decision dated October 30, 2007 petitioner as it had no jurisdiction to resolve petitioner’s claims, which are civil in nature.
is hereby REVERSED and SET ASIDE and a new one entered ordering respondent-appellee On January 27, 2010, the CA issued the assailed Decision, decreeing as follows:
Mekeni Food Corporation to pay complainant-appellee the following: WHEREFORE, the petition for certiorari is GRANTED. The Decision of the National Labor
1.Unpaid Salary in the amount of ₱12,511.45; Relations Commission dated 27 February 2009, in NLRC NCR Case No. 00-05-04139-07, and
2.Unpaid sick leave/vacation leave pay in the amount of ₱14,789.15; its Resolution dated 30 April 2009 denying reconsideration thereof, are MODIFIED in that
3.Unpaid commission in the amount of ₱9,780.00; and the reimbursement of Locsin’s payment under the car plan in the amount of ₱112,500.00,
4.Reimbursement of complainant’s payment under the car plan agreement in and the payment to him of Mekeni’s 50% share in the amount of ₱112,500.00 are DELETED.
the amount of ₱112,500.00; and The rest of the decision is AFFIRMED.
5.The equivalent share of the company as part of the complainant’s benefit SO ORDERED.14
under the car plan 50/50 sharing amounting to ₱112,500.00. In arriving at the above conclusion, the CA held that the NLRC possessed jurisdiction over
Respondent-Appellee Mekeni Food Corporation is hereby authorized to deduct the sum petitioner’s claims, including the amounts he paid under the car plan, since his Complaint
of ₱4,736.50 representing complainant-appellant’s cash advance from his total monetary against Mekeni is one for the payment of salaries and employee benefits. With regard to
award.
the car plan arrangement, the CA applied the ruling in Elisco Tool Manufacturing Petitioner claims that the car plan was in fact more beneficial to Mekeni than to him;
Corporation v. Court of Appeals,15 where it was held that – besides, he did not choose to avail of it, as it was simply imposed upon him. He concludes
First. Petitioner does not deny that private respondent Rolando Lantan acquired the that it is only just that his payments should be refunded and returned to him.
vehicle in question under a car plan for executives of the Elizalde group of companies. Petitioner thus prays for the reversal of the assailed CA Decision and Resolution, and that
Under a typical car plan, the company advances the purchase price of a car to be paid the Court reinstate the NLRC’s February 27, 2009 Decision.
back by the employee through monthly deductions from his salary. The company retains Respondent’s Arguments
ownership of the motor vehicle until it shall have been fully paid for. However, retention In its Comment,22 Mekeni argues that the Petition does not raise questions of law, but
of registration of the car in the company’s name is only a form of a lien on the vehicle in merely of fact, which thus requires the Court to review anew issues already passed upon
the event that the employee would abscond before he has fully paid for it. There are also by the CA – an unauthorized exercise given that the Supreme Court is not a trier of facts,
stipulations in car plan agreements to the effect that should the employment of the nor is it its function to analyze or weigh the evidence of the parties all over again.23 It adds
employee concerned be terminated before all installments are fully paid, the vehicle will that the issue regarding the car plan and the conclusions of the CA drawn from the
be taken by the employer and all installments paid shall be considered rentals per evidence on record are questions of fact.
agreement.16 Mekeni asserts further that the service vehicle was merely a loan which had to be paid
In the absence of evidence as to the stipulations of the car plan arrangement between through the monthly salary deductions.If it is not allowed to recover on the loan, this would
Mekeni and petitioner, the CA treated petitioner’s monthly contributions in the total constitute unjust enrichment on the part of petitioner.
amount of ₱112,500.00 as rentals for the use of his service vehicle for the duration of his Our Ruling
employment with Mekeni. The appellate court applied Articles 1484-1486 of the Civil The Petition is partially granted.
Code,17 and added that the installments paid by petitioner should not be returned to him To begin with, the Court notes that Mekeni did not file a similar petition questioning the
inasmuch as the amounts are not unconscionable. It made the following CA Decision; thus, it is deemed to have accepted what was decreed. The only issue that
pronouncement: must be resolved in this Petition, then, is whether petitioner is entitled to a refund of all the
Having used the car in question for the duration of his employment, it is but fair that all of amounts applied to the cost of the service vehicle under the car plan.
Locsin’s payments be considered as rentals therefor which may be forfeited by Mekeni. When the conclusions of the CA are grounded entirely on speculation, surmises and
Therefore, Mekeni has no obligation to return these payments to Locsin. Conversely, conjectures, or when the inferences made by it are manifestly mistaken or absurd, its
Mekeni has no right to demand the payment of the balance of the purchase price from findings are subject to review by this Court.24
Locsin since the latter has already surrendered possession of the vehicle.18 From the evidence on record, it is seen that the Mekeni car plan offered to petitioner was
Moreover, the CA held that petitioner cannot recover Mekeni’s corresponding share in subject to no other term or condition than that Mekeni shall cover one-half of its value,
the purchase price of the service vehicle, as this would constitute unjust enrichment on and petitioner shall in turn pay the other half through deductions from his monthly
the part of petitioner at Mekeni’s expense. salary.Mekeni has not shown, by documentary evidence or otherwise, that there are
The CA affirmed the NLRC judgment in all other respects. Petitioner filed his Motion for other terms and conditions governing its car plan agreement with petitioner. There is no
Partial Reconsideration,19but the CA denied the same in its April 23, 2010 Resolution. evidence to suggest that if petitioner failed to completely cover one-half of the cost of
Thus, petitioner filed the instant Petition; Mekeni, on the other hand, took no further action. the vehicle, then all the deductions from his salary going to the cost of the vehicle will be
Issue treated as rentals for his use thereof while working with Mekeni, and shall not be refunded.
Petitioner raises the following solitary issue: Indeed, there is no such stipulation or arrangement between them. Thus, the CA’s
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS ERRED IN NOT CONSIDERING reliance on Elisco Toolis without basis, and its conclusions arrived at in the questioned
THE CAR PLAN PRIVILEGE AS PART OF THE COMPENSATION PACKAGE OFFERED TO decision are manifestly mistaken. To repeat what was said in Elisco Tool –
PETITIONER AT THE INCEPTION OF HIS EMPLOYMENT AND INSTEAD LIKENED IT TO A CAR First. Petitioner does not deny that private respondent Rolando Lantan acquired the
LOAN ON INSTALLMENT, IN SPITE OF THE ABSENCE OF EVIDENCE ONRECORD.20 vehicle in question under a car plan for executives of the Elizalde group of companies.
Petitioner’s Arguments Under a typical car plan, the company advances the purchase price of a car to be paid
In his Petition and Reply,21 petitioner mainly argues that the CA erred in treating his back by the employee through monthly deductions from his salary. The company retains
monthly contributions to the car plan, totaling ₱112,500.00, as rentals for the use of his ownership of the motor vehicle until it shall have been fully paid for. However, retention
service vehicle during his employment; the car plan which he availed ofwasa benefit and of registration of the car in the company’s name is only a form of a lien on the vehicle in
it formed part of the package of economic benefits granted to him when he was hired the event that the employee would abscond before he has fully paid for it. There are also
as Regional Sales Manager. Petitioner submits that this is shown by the Offer Sheet which stipulations in car plan agreements to the effect that should the employment of the
was shown to him and which became the basis for his decision to accept the offer and employee concerned be terminated before all installments are fully paid, the vehicle will
work for Mekeni. be taken by the employer and all installments paid shall be considered rentals per
Petitioner adds that the absence of documentary or other evidence showing the terms agreement.25 (Emphasis supplied)
and conditions of the Mekeni company car plan cannot justify a reliance on Mekeni’s It was made clear in the above pronouncement that installments made on the car plan
self-serving claimsthat the full terms thereof applied only to employees who have been may be treated as rentals only when there is an express stipulation in the car plan
with the company for at least five years; in the absence of evidence, doubts should be agreement to such effect. It was therefore patent error for the appellate court to assume
resolved in his favor pursuant to the policy of the law that affords protection to labor, as that, even in the absence of express stipulation, petitioner’s payments on the car plan
well asthe principle that all doubts shouldbe construed to its benefit. may be considered as rentals which need not be returned.
Finally, petitioner submits that the ruling in the Elisco Tool casecannot apply to his case Indeed, the Court cannot allow that payments made on the car plan should be forfeited
because the car plan subject of the said case involved a car loan, which his car plan by Mekeni and treated simply as rentals for petitioner’s use of the company service
benefit was not; it was part of his compensation package, and the vehicle was an vehicle. Nor may they be retained by it as purported loan payments, as it would have this
important component of his work which required constant and uninterrupted mobility. Court believe. In the first place, there is precisely no stipulation to such effect in their
agreement. Secondly, it may not be said that the car plan arrangement between the principles of justice, equity and good conscience." The principle of unjust enrichment
parties was a benefit that the petitioner enjoyed; on the contrary, it wasan absolute requires two conditions: (1) that a person is benefited without a valid basis or justification,
necessity in Mekeni’s business operations, which benefit edit to the fullest extent: without and (2) that such benefit is derived at the expense of another. The main objective of the
the service vehicle, petitioner would have been unable to rapidly cover the vast sales principle against unjust enrichment is to prevent one from enriching himself at the expense
territory assigned to him, and sales or marketing of Mekeni’s products could not have of another without just cause or consideration. x x x28
been booked or made fast enough to move Mekeni’s inventory. Poor sales, inability to WHEREFORE, the Petition is GRANTED IN PART. The assailed January 27, 2010 Decision and
market Mekeni’s products, a high rate of product spoil age resulting from stagnant April 23, 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 109550 are MODIFIED,
inventory, and poor monitoring of the sales territory are the necessary consequences of in that respondent Mekeni Food Corporation is hereby ordered to REFUND petitioner
lack of mobility. Without a service vehicle, petitioner would have been placed at the Antonio Locsin II's payments under the car plan agreement in the total amount
mercy of inefficient and unreliable public transportation; his official schedule would have of₱112,500.00.
been dependent on the arrival and departure times of buses or jeeps, not to mention the Thus, except for the counterpart or equivalent share of Mekeni Food Corporation in the
availability of seats in them. Clearly, without a service vehicle, Mekeni’s business could car plan agreement amounting to ₱112,500.00, which is DELETED, the February 27, 2009
only prosper at a snail’s pace, if not completely paralyzed. Its cost of doing business would Decision of the National Labor Relations Commission is affirmed in all respects.
be higher as well. The Court expressed just such a view in the past. Thus – SO ORDERED.
In the case at bar, the disallowance of the subject car plan benefits would hamper the
officials in the performance of their functions to promote and develop trade which G.R. No. 183984 April 13, 2011
requires mobility in the performance of official business. Indeed, the car plan benefits are ARTURO SARTE FLORES, Petitioner,
supportive of the implementation of the objectives and mission of the agency relative to vs.
the nature of its operation and responsive to the exigencies of the service.26 (Emphasis SPOUSES ENRICO L. LINDO, JR. and EDNA C. LINDO, Respondents.
supplied) Any benefit or privilege enjoyed by petitioner from using the service vehicle was DECISION
merely incidental and insignificant, because for the most part the vehicle was under CARPIO, J.:
Mekeni’s control and supervision. Free and complete disposal is given to the petitioner The Case
only after the vehicle’s cost is covered or paid in full. Until then, the vehicle remains at the Before the Court is a petition for review 1 assailing the 30 May 2008 Decision2 and the 4
beck and call of Mekeni. Given the vast territory petitioner had to cover to be able to August 2008 Resolution3 of the Court of Appeals in CA-G.R. SP No. 94003.
perform his work effectively and generate business for his employer, the service vehicle The Antecedent Facts
was an absolute necessity, or else Mekeni’s business would suffer adversely. Thus, it is clear The facts, as gleaned from the Court of Appeals’ Decision, are as follows:
that while petitioner was paying for half of the vehicle’s value, Mekeni was reaping the On 31 October 1995, Edna Lindo (Edna) obtained a loan from Arturo Flores (petitioner)
full benefits from the use thereof. amounting to ₱400,000 payable on 1 December 1995 with 3% compounded monthly
In light of the foregoing, it is unfair to deny petitioner a refund of all his contributions to the interest and 3% surcharge in case of late payment. To secure the loan, Edna executed a
car plan.1âwphi1 Under Article 22 of the Civil Code, "[e]very person who through an act Deed of Real Estate Mortgage4 (the Deed) covering a property in the name of Edna and
of performance by another, or any other means, acquires or comes into possession of her husband Enrico (Enrico) Lindo, Jr. (collectively, respondents). Edna also signed a
something at the expense of the latter without just or legal ground, shall return the same Promissory Note5and the Deed for herself and for Enrico as his attorney-in-fact.
to him." Article 214227of the same Code likewise clarifies that there are certain lawful, Edna issued three checks as partial payments for the loan. All checks were dishonored for
voluntary and unilateral acts which give rise to the juridical relation of quasi-contract, to insufficiency of funds, prompting petitioner to file a Complaint for Foreclosure of
the end that no one shall be unjustly enriched or benefited at the expense of another. In Mortgage with Damages against respondents. The case was raffled to the Regional Trial
the absence of specific terms and conditions governing the car plan arrangement Court of Manila, Branch 33 (RTC, Branch 33) and docketed as Civil Case No. 00-97942.
between the petitioner and Mekeni, a quasi-contractual relation was created between In its 30 September 2003 Decision,6 the RTC, Branch 33 ruled that petitioner was not
them. Consequently, Mekeni may not enrich itself by charging petitioner for the use of its entitled to judicial foreclosure of the mortgage. The RTC, Branch 33 found that the Deed
vehicle which is otherwise absolutely necessaryto the full and effective promotion of its was executed by Edna without the consent and authority of Enrico. The RTC, Branch 33
business. It may not, under the claim that petitioner’s payments constitute rents for the noted that the Deed was executed on 31 October 1995 while the Special Power of
use of the company vehicle, refuse to refund what petitioner had paid, for the reasons Attorney (SPA) executed by Enrico was only dated 4 November 1995.
that the car plan did not carry such a condition; the subject vehicle is an old car that is The RTC, Branch 33 further ruled that petitioner was not precluded from recovering the
substantially, if not fully, depreciated; the car plan arrangement benefited Mekeni for the loan from Edna as he could file a personal action against her. However, the RTC, Branch
most part; and any personal benefit obtained by petitioner from using the vehicle was 33 ruled that it had no jurisdiction over the personal action which should be filed in the
merely incidental. place where the plaintiff or the defendant resides in accordance with Section 2, Rule 4
Conversely, petitioner cannot recover the monetary value of Mekeni’s counterpart of the Revised Rules on Civil Procedure.
contribution to the cost of the vehicle; that is not property or money that belongs to him, Petitioner filed a motion for reconsideration. In its Order7 dated 8 January 2004, the RTC,
nor was it intended to be given to him in lieu of the car plan. In other words, Mekeni’s Branch 33 denied the motion for lack of merit.
share of the vehicle’s cost was not part of petitioner’s compensation package. To start On 8 September 2004, petitioner filed a Complaint for Sum of Money with Damages
with, the vehicle is an asset that belonged to Mekeni. Just as Mekeni is unjustly enriched against respondents. It was raffled to Branch 42 (RTC, Branch 42) of the Regional Trial
by failing to refund petitioner’s payments, so should petitioner not be awarded the value Court of Manila, and docketed as Civil Case No. 04-110858.
of Mekeni’s counter part contribution to the car plan, as this would unjustly enrich him at Respondents filed their Answer with Affirmative Defenses and Counterclaims where they
Mekeni’s expense. admitted the loan but stated that it only amounted to ₱340,000. Respondents further
There is unjust enrichment ''when a person unjustly retains a benefit to the loss of another, alleged that Enrico was not a party to the loan because it was contracted by Edna
or when a person retains money or property of another against the fundamental without Enrico’s signature. Respondents prayed for the dismissal of the case on the
grounds of improper venue, res judicata and forum-shopping, invoking the Decision of x x x in the absence of express statutory provisions, a mortgage creditor may institute
the RTC, Branch 33. On 7 March 2005, respondents also filed a Motion to Dismiss on the against the mortgage debtor either a personal action for debt or a real action to
grounds of res judicata and lack of cause of action. foreclose the mortgage. In other words, he may pursue either of the two remedies, but
The Decision of the Trial Court not both. By such election, his cause of action can by no means be impaired, for each of
On 22 July 2005, the RTC, Branch 42 issued an Order8 denying the motion to dismiss. The the two remedies is complete in itself. Thus, an election to bring a personal action will
RTC, Branch 42 ruled that res judicata will not apply to rights, claims or demands which, leave open to him all the properties of the debtor for attachment and execution, even
although growing out of the same subject matter, constitute separate or distinct causes including the mortgaged property itself. And, if he waives such personal action and
of action and were not put in issue in the former action. Respondents filed a motion for pursues his remedy against the mortgaged property, an unsatisfied judgment thereon
reconsideration. In its Order9 dated 8 February 2006, the RTC, Branch 42 denied would still give him the right to sue for deficiency judgment, in which case, all the
respondents’ motion. The RTC, Branch 42 ruled that the RTC, Branch 33 expressly stated properties of the defendant, other than the mortgaged property, are again open to him
that its decision did not mean that petitioner could no longer recover the loan petitioner for the satisfaction of the deficiency. In either case, his remedy is complete, his cause of
extended to Edna. action undiminished, and any advantages attendant to the pursuit of one or the other
Respondents filed a Petition for Certiorari and Mandamus with Prayer for a Writ of remedy are purely accidental and are all under his right of election. On the other hand,
Preliminary Injunction and/or Temporary Restraining Order before the Court of Appeals. a rule that would authorize the plaintiff to bring a personal action against the debtor and
The Decision of the Court of Appeals simultaneously or successively another action against the mortgaged property, would
In its 30 May 2008 Decision, the Court of Appeals set aside the 22 July 2005 and 8 February result not only in multiplicity of suits so offensive to justice (Soriano v. Enriques, 24 Phil. 584)
2006 Orders of the RTC, Branch 42 for having been issued with grave abuse of discretion. and obnoxious to law and equity (Osorio v. San Agustin, 25 Phil. 404), but also in subjecting
The Court of Appeals ruled that while the general rule is that a motion to dismiss is the defendant to the vexation of being sued in the place of his residence or of the
interlocutory and not appealable, the rule admits of exceptions. The Court of Appeals residence of the plaintiff, and then again in the place where the property lies.15
ruled that the RTC, Branch 42 acted with grave abuse of discretion in denying The Court has ruled that if a creditor is allowed to file his separate complaints
respondents’ motion to dismiss. simultaneously or successively, one to recover his credit and another to foreclose his
The Court of Appeals ruled that under Section 3, Rule 2 of the 1997 Rules of Civil Procedure, mortgage, he will, in effect, be authorized plural redress for a single breach of contract
a party may not institute more than one suit for a single cause of action. If two or more at so much costs to the court and with so much vexation and oppressiveness to the
suits are instituted on the basis of the same cause of action, the filing of one on a judgment debtor.16
upon the merits in any one is available ground for the dismissal of the others. The Court of In this case, however, there are circumstances that the Court takes into consideration.
Appeals ruled that on a nonpayment of a note secured by a mortgage, the creditor has Petitioner filed an action for foreclosure of mortgage. The RTC, Branch 33 ruled that
a single cause of action against the debtor, that is recovery of the credit with execution petitioner was not entitled to judicial foreclosure because the Deed of Real Estate
of the suit. Thus, the creditor may institute two alternative remedies: either a personal Mortgage was executed without Enrico’s consent. The RTC, Branch 33 stated:
action for the collection of debt or a real action to foreclose the mortgage, but not both. All these circumstances certainly conspired against the plaintiff who has the burden of
The Court of Appeals ruled that petitioner had only one cause of action against Edna for proving his cause of action. On the other hand, said circumstances tend to support the
her failure to pay her obligation and he could not split the single cause of action by filing claim of defendant Edna Lindo that her husband did not consent to the mortgage of their
separately a foreclosure proceeding and a collection case. By filing a petition for conjugal property and that the loan application was her personal decision.
foreclosure of the real estate mortgage, the Court of Appeals held that petitioner had Accordingly, since the Deed of Real Estate Mortgage was executed by defendant Edna
already waived his personal action to recover the amount covered by the promissory Lindo lacks the consent or authority of her husband Enrico Lindo, the Deed of Real Estate
note. Mortgage is void pursuant to Article 96 of the Family Code.
Petitioner filed a motion for reconsideration. In its 4 August 2008 Resolution, the Court of This does not mean, however, that the plaintiff cannot recover the ₱400,000 loan plus
Appeals denied the motion. interest which he extended to defendant Edna Lindo. He can institute a personal action
Hence, the petition before this Court. against the defendant for the amount due which should be filed in the place where the
The Issue plaintiff resides, or where the defendant or any of the principal defendants resides at the
The sole issue in this case is whether the Court of Appeals committed a reversible error in election of the plaintiff in accordance with Section 2, Rule 4 of the Revised Rules on Civil
dismissing the complaint for collection of sum of money on the ground of multiplicity of Procedure. This Court has no jurisdiction to try such personal action.17
suits. Edna did not deny before the RTC, Branch 33 that she obtained the loan. She claimed,
The Ruling of this Court however, that her husband did not give his consent and that he was not aware of the
The petition has merit. transaction.18 Hence, the RTC, Branch 33 held that petitioner could still recover the
The rule is that a mortgage-creditor has a single cause of action against a mortgagor- amount due from Edna through a personal action over which it had no jurisdiction.
debtor, that is, to recover the debt.10 The mortgage-creditor has the option of either filing Edna also filed an action for declaratory relief before the RTC, Branch 93 of San Pedro
a personal action for collection of sum of money or instituting a real action to foreclose Laguna (RTC, Branch 93), which ruled:
on the mortgage security.11 An election of the first bars recourse to the second, otherwise At issue in this case is the validity of the promissory note and the Real Estate Mortgage
there would be multiplicity of suits in which the debtor would be tossed from one venue executed by Edna Lindo without the consent of her husband.
to another depending on the location of the mortgaged properties and the residence of The real estate mortgage executed by petition Edna Lindo over their conjugal property is
the parties.12 undoubtedly an act of strict dominion and must be consented to by her husband to be
The two remedies are alternative and each remedy is complete by itself.13 If the effective. In the instant case, the real estate mortgage, absent the authority or consent
mortgagee opts to foreclose the real estate mortgage, he waives the action for the of the husband, is necessarily void. Indeed, the real estate mortgage is this case was
collection of the debt, and vice versa.14 The Court explained: executed on October 31, 1995 and the subsequent special power of attorney dated
November 4, 1995 cannot be made to retroact to October 31, 1995 to validate the mortgage. The Court ruled that the remedies are alternative and not cumulative and held
mortgage previously made by petitioner. that the filing of a criminal action for violation of Batas Pambansa Blg. 22 was in effect a
The liability of Edna Lindo on the principal contract of the loan however subsists collection suit or a suit for the recovery of the mortgage-debt.21 In that case, however,
notwithstanding the illegality of the mortgage. Indeed, where a mortgage is not valid, the this Court pro hac vice, ruled that respondents could still be held liable for the balance of
principal obligation which it guarantees is not thereby rendered null and void. That the loan, applying the principle that no person may unjustly enrich himself at the expense
obligation matures and becomes demandable in accordance with the stipulation of another.22
pertaining to it. Under the foregoing circumstances, what is lost is merely the right to The principle of unjust enrichment is provided under Article 22 of the Civil Code which
foreclose the mortgage as a special remedy for satisfying or settling the indebtedness provides:
which is the principal obligation. In case of nullity, the mortgage deed remains as Art. 22. Every person who through an act of performance by another, or any other means,
evidence or proof of a personal obligation of the debtor and the amount due to the acquires or comes into possession of something at the expense of the latter without just
creditor may be enforced in an ordinary action. or legal ground, shall return the same to him.
In view of the foregoing, judgment is hereby rendered declaring the deed of real estate There is unjust enrichment "when a person unjustly retains a benefit to the loss of another,
mortgage as void in the absence of the authority or consent of petitioner’s spouse therein. or when a person retains money or property of another against the fundamental
The liability of petitioner on the principal contract of loan however subsists principles of justice, equity and good conscience."23 The principle of unjust enrichment
notwithstanding the illegality of the real estate mortgage.19 requires two conditions: (1) that a person is benefited without a valid basis or justification,
The RTC, Branch 93 also ruled that Edna’s liability is not affected by the illegality of the real and (2) that such benefit is derived at the expense of another.241avvphi1
estate mortgage. The main objective of the principle against unjust enrichment is to prevent one from
Both the RTC, Branch 33 and the RTC, Branch 93 misapplied the rules. enriching himself at the expense of another without just cause or consideration.25 The
Article 124 of the Family Code provides: principle is applicable in this case considering that Edna admitted obtaining a loan from
Art. 124. The administration and enjoyment of the conjugal partnership property shall petitioners, and the same has not been fully paid without just cause. The Deed was
belong to both spouses jointly. In case of disagreement, the husband’s decision shall declared void erroneously at the instance of Edna, first when she raised it as a defense
prevail, subject to recourse to the court by the wife for proper remedy, which must be before the RTC, Branch 33 and second, when she filed an action for declaratory relief
availed of within five years from the date of contract implementing such decision. before the RTC, Branch 93. Petitioner could not be expected to ask the RTC, Branch 33
In the event that one spouse is incapacitated or otherwise unable to participate in the for an alternative remedy, as what the Court of Appeals ruled that he should have done,
administration of the conjugal properties, the other spouse may assume sole powers of because the RTC, Branch 33 already stated that it had no jurisdiction over any personal
administration. These powers do not include disposition or encumbrance without action that petitioner might have against Edna.
authority of the court or the written consent of the other spouse. In the absence of such Considering the circumstances of this case, the principle against unjust enrichment, being
authority or consent the disposition or encumbrance shall be void. However, the a substantive law, should prevail over the procedural rule on multiplicity of suits. The Court
transaction shall be construed as a continuing offer on the part of the consenting spouse of Appeals, in the assailed decision, found that Edna admitted the loan, except that she
and the third person, and may be perfected as a binding contract upon the acceptance claimed it only amounted to ₱340,000. Edna should not be allowed to unjustly enrich
by the other spouse or authorization by the court before the offer is withdrawn by either or herself because of the erroneous decisions of the two trial courts when she questioned
both offerors. (Emphasis supplied) the validity of the Deed. Moreover, Edna still has an opportunity to submit her defenses
Article 124 of the Family Code of which applies to conjugal partnership property, is a before the RTC, Branch 42 on her claim as to the amount of her indebtedness.
reproduction of Article 96 of the Family Code which applies to community property. WHEREFORE, the 30 May 2008 Decision and the 4 August 2008 Resolution of the Court of
Both Article 96 and Article 127 of the Family Code provide that the powers do not include Appeals in CA-G.R. SP No. 94003 are SET ASIDE. The Regional Trial Court of Manila, Branch
disposition or encumbrance without the written consent of the other spouse. Any 42 is directed to proceed with the trial of Civil Case No. 04-110858.
disposition or encumbrance without the written consent shall be void. However, both
provisions also state that "the transaction shall be construed as a continuing offer on the G.R. No. L-23749 April 29, 1977
part of the consenting spouse and the third person, and may be perfected as a binding FAUSTINO CRUZ, plaintiff-appellant,
contract upon the acceptance by the other spouse x x x before the offer is withdrawn by vs.
either or both offerors." J. M. TUASON & COMPANY, INC., and GREGORIO ARANETA, INC., defendants-appellees.
In this case, the Promissory Note and the Deed of Real Estate Mortgage were executed
on 31 October 1995. The Special Power of Attorney was executed on 4 November BARREDO, J.:
1995. The execution of the SPA is the acceptance by the other spouse that perfected the Appeal from the order dated August 13, 1964 of the Court of First Instance of Quezon City
continuing offer as a binding contract between the parties, making the Deed of Real in Civil Case No. Q-7751, Faustino Cruz vs. J.M. Tuason & Co., Inc., and Gregorio Araneta,
Estate Mortgage a valid contract. Inc., dismissing the complaint of appellant Cruz for the recovery of improvements he has
However, as the Court of Appeals noted, petitioner allowed the decisions of the RTC, made on appellees' land and to compel appellees to convey to him 3,000 square meters
Branch 33 and the RTC, Branch 93 to become final and executory without asking the of land on three grounds: (1) failure of the complaint to state a cause of action; (2) the
courts for an alternative relief. The Court of Appeals stated that petitioner merely relied cause of action of plaintiff is unenforceable under the Statute of Frauds; and (3) the
on the declarations of these courts that he could file a separate personal action and thus action of the plaintiff has already prescribed.
failed to observe the rules and settled jurisprudence on multiplicity of suits, closing Actually, a perusal of plaintiff-appellant's complaint below shows that he alleged two
petitioner’s avenue for recovery of the loan. separate causes of action, namely: (1) that upon request of the Deudors (the family of
Nevertheless, petitioner still has a remedy under the law. Telesforo Deudor who laid claim on the land in question on the strength of an "informacion
In Chieng v. Santos,20 this Court ruled that a mortgage-creditor may institute against the posesoria" ) plaintiff made permanent improvements valued at P30,400.00 on said land
mortgage-debtor either a personal action for debt or a real action to foreclose the having an area of more or less 20 quinones and for which he also incurred expenses in
the amount of P7,781.74, and since defendants-appellees are being benefited by said of the plaintiff; and that said improvements constitute a lien or charge of the property
improvements, he is entitled to reimbursement from them of said amounts and (2) that in itself
1952, defendants availed of plaintiff's services as an intermediary with the Deudors to work On the issue that the complaint insofar as it claims the reimbursement for the services
for the amicable settlement of Civil Case No. Q-135, then pending also in the Court of First rendered and expenses incurred by the plaintiff, states no cause of action, the Court is of
Instance of Quezon City, and involving 50 quinones of land, of Which the 20 quinones the opinion that the same is well-founded. It is found that the defendants are not parties
aforementioned form part, and notwithstanding his having performed his services, as in to the supposed express contract entered into by and between the plaintiff and the
fact, a compromise agreement entered into on March 16, 1963 between the Deudors Deudors for the clearing and improvement of the 50 quinones. Furthermore in order that
and the defendants was approved by the court, the latter have refused to convey to him the alleged improvement may be considered a lien or charge on the property, the same
the 3,000 square meters of land occupied by him, (a part of the 20 quinones above) which should have been made in good faith and under the mistake as to the title. The Court
said defendants had promised to do "within ten years from and after date of signing of can take judicial notice of the fact that the tract of land supposedly improved by the
the compromise agreement", as consideration for his services. plaintiff had been registered way back in 1914 in the name of the predecessors-in-interest
Within the Period allowed by the rules, the defendants filed separate motions to dismiss of defendant J. M. Tuason & Co., Inc. This fact is confirmed in the decision rendered by
alleging three Identical grounds: (1) As regards that improvements made by plaintiff, that the Supreme Court on July 31, 1956 in Case G. R. No. L-5079 entitled J.M. Tuason & Co.
the complaint states no cause of action, the agreement regarding the same having been Inc. vs. Geronimo Santiago, et al., Such being the case, the plaintiff cannot claim good
made by plaintiff with the Deudors and not with the defendants, hence the theory of faith and mistake as to the title of the land.
plaintiff based on Article 2142 of the Code on unjust enrichment is untenable; and (2) On the issue of statute of fraud, the Court believes that same is applicable to the instant
anent the alleged agreement about plaintiffs services as intermediary in consideration of case. The allegation in par. 12 of the complaint states that the defendants promised and
which, defendants promised to convey to him 3,000 square meters of land, that the same agreed to cede, transfer and convey unto the plaintiff the 3,000 square meters of land in
is unenforceable under the Statute of Frauds, there being nothing in writing about it, and, consideration of certain services to be rendered then. it is clear that the alleged
in any event, (3) that the action of plaintiff to compel such conveyance has already agreement involves an interest in real property. Under the provisions of See. 2(e) of Article
prescribed. 1403 of the Civil Code, such agreement is not enforceable as it is not in writing and
Plaintiff opposed the motion, insisting that Article 2142 of the applicable to his case; that subscribed by the party charged.
the Statute of Frauds cannot be invoked by defendants, not only because Article 1403 of On the issue of statute of limitations, the Court holds that the plaintiff's action has
the Civil Code refers only to "sale of real property or of an interest therein" and not to prescribed. It is alleged in par. 11 of the complaint that, sometime in 1952, the defendants
promises to convey real property like the one supposedly promised by defendants to him, approached the plaintiff to prevail upon the Deudors to enter to a compromise
but also because, he, the plaintiff has already performed his part of the agreement, agreement in Civil Case No. Q-135 and allied cases. Furthermore, par. 13 and 14 of the
hence the agreement has already been partly executed and not merely executory within complaint alleged that the plaintiff acted as emissary of both parties in conveying their
the contemplation of the Statute; and that his action has not prescribed for the reason respective proposals and couter-proposals until the final settlement was effected on
that defendants had ten years to comply and only after the said ten years did his cause March 16, 1953 and approved by Court on April 11, 1953. In the present action, which was
of action accrue, that is, ten years after March 16, 1963, the date of the approval of the instituted on January 24, 1964, the plaintiff is seeking to enforce the supposed agreement
compromise agreement, and his complaint was filed on January 24, 1964. entered into between him and the defendants in 1952, which was already prescribed.
Ruling on the motion to dismiss, the trial court issued the herein impugned order of August WHEREFORE, the plaintiffs complaint is hereby ordered DISMISSED without
13, 1964: pronouncement as to costs.
In the motion, dated January 31, 1964, defendant Gregorio Araneta, Inc. prayed that the SO ORDERED. (Pp. 65-69, Rec. on Appeal,)
complaint against it be dismissed on the ground that (1) the claim on which the action is On August 22, 1964, plaintiff's counsel filed a motion for reconsideration dated August 20,
founded is unenforceable under the provision of the Statute of Frauds; and (2) the 1964 as follows:
plaintiff's action, if any has already prescribed. In the other motion of February 11, 1964, Plaintiff through undersigned counsel and to this Honorable Court, respectfully moves to
defendant J. M. Tuason & Co., Inc. sought the dismissal of the plaintiffs complaint on the reconsider its Order bearing date of 13 August 1964, on the following grounds:
ground that it states no cause of action and on the Identical grounds stated in the motion 1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION AGAINST DEFENDANTS IN
to dismiss of defendant Gregorio Araneta, Inc. The said motions are duly opposed by the SO FAR AS PLAINTIFF'S CLAIM PAYMENT OF SERVICES AND REIMBURSEMENT OF HIS
plaintiff. EXPENSES, IS CONCERNED;
From the allegations of the complaint, it appears that, by virtue of an agreement arrived II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS., THE SAME HAS NOT
at in 1948 by the plaintiff and the Deudors, the former assisted the latter in clearing, PRESCRIBED AND THE STATUTE OF FRAUDS IS NOT APPLICABLE THERETO;
improving, subdividing and selling the large tract of land consisting of 50 quinones ARGUMENT
covered by the informacion posesoria in the name of the late Telesforo Deudor and Plaintiff's complaint contains two (2) causes of action — the first being an action for sum
incurred expenses, which are valued approximately at P38,400.00 and P7,781.74, of money in the amount of P7,781.74 representing actual expenses and P38,400.00 as
respectively; and, for the reasons that said improvements are being used and enjoyed by reasonable compensation for services in improving the 50 quinones now in the possession
the defendants, the plaintiff is seeking the reimbursement for the services and expenses of defendants. The second cause of action deals with the 3,000 sq. ms. which defendants
stated above from the defendants. have agreed to transfer into Plaintiff for services rendered in effecting the compromise
Defendant J. M. Tuason & Co., Inc. claimed that, insofar as the plaintiffs claim for the between the Deudors and defendants;
reimbursement of the amounts of P38,400.00 and P7,781.74 is concerned, it is not a privy Under its order of August 3, 1964, this Honorable Court dismissed the claim for sum of
to the plaintiff's agreement to assist the Deudors n improving the 50 quinones. On the money on the ground that the complaint does not state a cause of action against
other hand, the plaintiff countered that, by holding and utilizing the improvements defendants. We respectfully submit:
introduced by him, the defendants are unjustly enriching and benefiting at the expense
1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION AGAINST DEFENDANTS IN agree to cede, transfer and convey unto the plaintiff, 3,000 square meters of land in
SO FAR AS PLAINTIFF'S CLAIM FOR PAYMENT OF SERVICES AND REIMBURSEMENT OF HIS consideration of certain services to be rendered then. It is clear that the alleged
EXPENSES IS CONCERNED. agreement involves an interest in real property. Under the provisions of Sec. 2(e) of Article
Said this Honorable Court (at p. 2, Order): 1403 of the Civil Code, such agreement is not enforceable as it is not in writing and
ORDER subscribed by the party charged.
xxx xxx xxx To bring this issue in sharper focus, shall reproduce not only paragraph 12 of the complaint
On the issue that the complaint, in so far as it claims the reimbursement for the services but also the other pertinent paragraphs therein contained. Paragraph 12 states thus:
rendered and expenses incurred by the plaintiff, states no cause of action, the Court is of COMPLAINT
the opinion that the same is well-founded. It is found that the defendants are not parties xxx xxx xxx
to the supposed express contract entered into by and between the plaintiff and the 12). That plaintiff conferred with the aforesaid representatives of defendants several times
Deudors for the clearing and improvement of the 50 quinones. Furthermore, in order that and on these occasions, the latter promised and agreed to cede, transfer and convey
the alleged improvement may he considered a lien or charge on the property, the same unto plaintiff the 3,000 sq. ms. (now known as Lots 16-B, 17 and 18) which plaintiff was then
should have been made in good faith and under the mistake as to title. The Court can occupying and continues to occupy as of this writing, for and in consideration of the
take judicial notice of the fact that the tract of land supposedly improved by the plaintiff following conditions:
had been registered way back in 1914 in the name of the predecessors-in-interest of (a) That plaintiff succeed in convincing the DEUDORS to enter into a compromise
defendant J. M. Tuason & Co., Inc. This fact is confirmed in the decision rendered by the agreement and that such agreement be actually entered into by and between the
Supreme Court on July 31, 1956 in case G. R. No. L-5079 entitled 'J M. Tuason & Co., Inc. DEUDORS and defendant companies;
vs, Geronimo Santiago, et al.' Such being the case, the plaintiff cannot claim good faith (b) That as of date of signing the compromise agreement, plaintiff shall be the owner of
and mistake as to the title of the land. the 3,000 sq. ms. but the documents evidencing his title over this property shall be
The position of this Honorable Court (supra) is that the complaint does not state a cause executed and delivered by defendants to plaintiff within ten (10) years from and after
of action in so far as the claim for services and expenses is concerned because the date of signing of the compromise agreement;
contract for the improvement of the properties was solely between the Deudors and (c) That plaintiff shall, without any monetary expense of his part, assist in clearing the 20
plaintiff, and defendants are not privies to it. Now, plaintiff's theory is that defendants are quinones of its occupants;
nonetheless liable since they are utilizing and enjoying the benefit's of said improvements. 13). That in order to effect a compromise between the parties. plaintiff not only as well
Thus under paragraph 16 of "he complaint, it is alleged: acted as emissary of both parties in conveying their respective proposals and counter-
(16) That the services and personal expenses of plaintiff mentioned in paragraph 7 hereof proposals until succeeded in convinzing the DEUDORS to settle with defendants
were rendered and in fact paid by him to improve, as they in fact resulted in considerable amicably. Thus, on March 16, 1953, a Compromise Agreement was entered into by and
improvement of the 50 quinones, and defendants being now in possession of and utilizing between the DEUDORS and the defendant companies; and on April 11, 1953, this
said improvements should reimburse and pay plaintiff for such services and expenses. agreement was approved by this Honorable Court;
Plaintiff's cause of action is premised inter alia, on the theory of unjust enrichment under 14). That in order to comply with his other obligations under his agreement with defendant
Article 2142 of the civil Code: companies, plaintiff had to confer with the occupants of the property, exposing himself
ART. 2142. Certain lawful voluntary and unilateral acts give rise to the juridical relation of to physical harm, convincing said occupants to leave the premises and to refrain from
quasi-contract to the end that no one shill be unjustly enriched or benefited at the resorting to physical violence in resisting defendants' demands to vacate;
expense of another. That plaintiff further assisted defendants' employees in the actual demolition and
In like vein, Article 19 of the same Code enjoins that: transferof all the houses within the perimeter of the 20 quinones until the end of 1955, when
ART. 19. Every person must, in the exercise of his rights and in the performance of his duties, said area was totally cleared and the houses transferred to another area designated by
act with justice, give every-one his due and observe honesty and good faith. the defendants as 'Capt. Cruz Block' in Masambong, Quezon City. (Pars. 12, 13 and 14,
We respectfully draw the attention of this Honorable Court to the fact that ARTICLE 2142 Complaint; Emphasis supplied)
(SUPRA) DEALS WITH QUASI-CONTRACTS or situations WHERE THERE IS NO CONTRACT From the foregoing, it is clear then the agreement between the parties mentioned in
BETWEEN THE PARTIES TO THE ACTION. Further, as we can readily see from the title thereof paragraph 12 (supra) of the complaint has already been fully EXECUTED ON ONE PART,
(Title XVII), that the Same bears the designation 'EXTRA CONTRACTUAL OBLIGATIONS' or namely by the plaintiff. Regarding the applicability of the statute of frauds (Art. 1403, Civil
obligations which do not arise from contracts. While it is true that there was no agreement Code), it has been uniformly held that the statute of frauds IS APPLICABLE ONLY TO
between plaintiff and defendants herein for the improvement of the 50 quinones since EXECUTORY CONTRACTS BUT NOT WHERE THE CONTRACT HAS BEEN PARTLY EXECUTED:
the latter are presently enjoying and utilizing the benefits brought about through plaintiff's SAME ACTION TO ENFORCE. — The statute of frauds has been uniformly interpreted to be
labor and expenses, defendants should pay and reimburse him therefor under the applicable to executory and not to completed or contracts. Performance of the
principle that 'no one may enrich himself at the expense of another.' In this posture, the contracts takes it out of the operation of the statute. ...
complaint states a cause of action against the defendants. The statute of the frauds is not applicable to contracts which are either totally or partially
II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS. THE SAME HAS NOT performed, on the theory that there is a wide field for the commission of frauds in
PRESCRIBED AND THE STATUTE OF FRAUDS IS NOT APPLICABLE THERETO. executory contracts which can only be prevented by requiring them to be in writing, a
The Statute of Frauds is CLEARLY inapplicable to this case: facts which is reduced to a minimum in executed contracts because the intention of the
At page 2 of this Honorable Court's order dated 13 August 1964, the Court ruled as follows: parties becomes apparent buy their execution and execution, in mots cases, concluded
ORDER the right the parties. ... The partial performance may be proved by either documentary
xxx xxx xxx or oral evidence. (At pp. 564-565, Tolentino's Civil Code of the Philippines, Vol. IV, 1962 Ed.;
On the issue of statute of fraud, the Court believes that same is applicable to the instant Emphasis supplied).
Case, The allegation in par. 12 of the complaint states that the defendants promised and
Authorities in support of the foregoing rule are legion. Thus Mr. Justice Moran in his the 3,000 sq. ms. As long as the 10 years period has not expired, plaintiff had no right to
'Comments on the Rules of Court', Vol. III, 1974 Ed., at p. 167, states: compel defendants to execute the document and the latter were under no obligation
2 THE STATUTE OF FRAUDS IS APPLICABLE ONLY TO EXECUTORY CONTRACTS: CONTRACTS to do so. Now, this 10-year period elapsed on March 16, 1963. THEN and ONLY THEN does
WHICH ARE EITHER TOTALLY OR PARTIALLY PERFORMED ARE WITHOUT THE STATUE. The plaintiff's cause of action plaintiff on March 17, 1963. Thus, under paragraph 15, of the
statute of frauds is applicable only to executory contracts. It is neither applicable to complaint (supra) plaintiff made demands upon defendants for the execution of the
executed contracts nor to contracts partially performed. The reason is simple. In deed 'in or about the middle of 1963.
executory contracts there is a wide field for fraud because unless they be in writing there Since the contract now sought to be enforced was not reduced to writing, plaintiff's
is no palpable evidence of the intention of the contracting parties. The statute has been cause of action expires on March 16, 1969 or six years from March 16, 1963 WHEN THE
enacted to prevent fraud. On the other hand the commission of fraud in executed CAUSE OF ACTION ACCRUED (Art. 1145, Civil Code).
contracts is reduced to minimum in executed contracts because (1) the intention of the In this posture, we gain respectfully submit that this Honorable Court erred in holding that
parties is made apparent by the execution and (2) execution concludes, in most cases, plaintiff's action has prescribed.
the rights of the parties. (Emphasis supplied) PRAYER
Under paragraphs 13 and 14 of the complaint (supra) one can readily see that the plaintiff WHEREFORE, it is respectfully prayed that " Honorable Court reconsider its Order dated
has fulfilled ALL his obligation under the agreement between him defendants concerning August 13, 1964; and issue another order denying the motions to dismiss of defendants G.
the 3,000 sq. ms. over which the latter had agreed to execute the proper documents of Araneta, Inc. and J. M. Tuason Co. Inc. for lack of merit. (Pp. 70-85, Record on Appeal.)
transfer. This fact is further projected in paragraph 15 of the complaint where plaintiff Defendants filed an opposition on the main ground that "the arguments adduced by the
states; plaintiff are merely reiterations of his arguments contained in his Rejoinder to Reply and
15). That in or about the middle of 1963, after all the conditions stated in paragraph 12 Opposition, which have not only been refuted in herein defendant's Motion to Dismiss and
hereof had been fulfilled and fully complied with, plaintiff demanded of said defendants Reply but already passed upon by this Honorable Court."
that they execute the Deed of Conveyance in his favor and deliver the title certificate in On September 7, 1964, the trial court denied the motion for reconsiderations thus:
his name, over the 3,000 sq. ms. but defendants failed and refused and continue to fail After considering the plaintiff's Motion for Reconsideration of August 20, 1964 and it
and refuse to heed his demands. (par. 15, complaint; Emphasis supplied). appearing that the grounds relied upon in said motion are mere repetition of those
In view of the foregoing, we respectfully submit that this Honorable court erred in holding already resolved and discussed by this Court in the order of August 13, 1964, the instant
that the statute of frauds is applicable to plaintiff's claim over the 3,000 sq. ms. There motion is hereby denied and the findings and conclusions arrived at by the Court in its
having been full performance of the contract on plaintiff's part, the same takes this case order of August 13, 1964 are hereby reiterated and affirmed.
out of the context of said statute. SO ORDERED. (Page 90, Rec. on Appeal.)
Plaintiff's Cause of Action had NOT Prescribed: Under date of September 24, 1964, plaintiff filed his record on appeal.
With all due respect to this Honorable court, we also submit that the Court committed In his brief, appellant poses and discusses the following assignments of error:
error in holding that this action has prescribed: I. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT ON THE GROUND THAT
ORDER APPELLANT'S CLAIM OVER THE 3,000 SQ. MS. IS ALLEGEDLY UNENFORCEABLE UNDER THE
xxx xxx xxx STATUTE OF FRAUDS;
On the issue of the statute of limitations, the Court holds that the plaintiff's action has II. THAT THE COURT A QUO FURTHER COMMITTED ERROR IN DISMISSING APPELLANT'S
prescribed. It is alleged in par. III of the complaint that, sometime in 1952, the defendants COMPLAINT ON THE GROUND THAT HIS CLAIM OVER THE 3,000 SQ. MS. IS ALLEGEDLY
approached the plaintiff to prevail upon the Deudors to enter into a compromise BARRED BY THE STATUTE OF LIMITATIONS; and
agreement in Civil Case No. Q-135 and allied cases. Furthermore, pars. 13 and 14 of the III. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT FOR FAILURE TO STATE A
complaint alleged that plaintiff acted as emissary of both parties in conveying their CAUSE OF ACTION IN SO FAR AS APPELLANT'S CLAIM FOR REIMBURSEMENT OF EXPENSES
respective proposals and counter-proposals until the final settlement was affected on AND FOR SERVICES RENDERED IN THE IMPROVEMENT OF THE FIFTY (50) QUINONES IS
March 16, 1953 and approved by the Court on April 11, 1953. In the present actin, which CONCERNED.
was instituted on January 24, 1964, the plaintiff is seeking to enforce the supposed We agree with appellant that the Statute of Frauds was erroneously applied by the trial
agreement entered into between him and the defendants in 1952, which has already court. It is elementary that the Statute refers to specific kinds of transactions and that it
proscribed. (at p. 3, Order). cannot apply to any that is not enumerated therein. And the only agreements or
The present action has not prescribed, especially when we consider carefully the terms contracts covered thereby are the following:
of the agreement between plaintiff and the defendants. First, we must draw the attention (1) Those entered into in the name of another person by one who has been given no
of this Honorable Court to the fact that this is an action to compel defendants to execute authority or legal representation, or who has acted beyond his powers;
a Deed of Conveyance over the 3,000 sq. ms. subject of their agreement. In paragraph (2) Those do not comply with the Statute of Frauds as set forth in this number, In the
12 of the complaint, the terms and conditions of the contract between the parties are following cases an agreement hereafter made shall be unenforceable by action, unless
spelled out. Paragraph 12 (b) of the complaint states: the same, or some note or memorandum thereof, be in writing, and subscribed by the
(b) That as of date of signing the compromise agreement, plaintiff shall be the owner of party charged, or by his agent; evidence, therefore, of the agreement cannot be
the 3,000 sq. ms. but the documents evidencing his title over this property shall be received without the writing, or a secondary evidence of its contents:
executed and delivered by defendants to plaintiff within ten (10) years from and after (a) An agreement that by its terms is not to be performed within a year from the making
date of signing of the compromise agreement. (Emphasis supplied). thereof;
The compromise agreement between defendants and the Deudors which was conclude (b) A special promise to answer for the debt, default, or miscarriage of another;
through the efforts of plaintiff, was signed on 16 March 1953. Therefore, the defendants (c) An agreement made in consideration of marriage, other than a mutual promise to
had ten (10) years signed on 16 March 1953. Therefore, the defendants had ten (10) years marry;
from said date within which to execute the deed of conveyance in favor of plaintiff over
(d) An agreement for the sale of goods, chattels or things in action, at a price not less action should be against the latter, who in turn may, if there is any ground therefor, seek
than five hundred pesos, unless the buyer accept and receive part of such goods and relief against the party benefited. It is essential that the act by which the defendant is
chattels, or the evidences, or some of them of such things in action, or pay at the time benefited must have been voluntary and unilateral on the part of the plaintiff. As one
some part of the purchase money; but when a sale is made by auction and entry is made distinguished civilian puts it, "The act is voluntary. because the actor in quasi-contracts is
by the auctioneer in his sales book, at the time of the sale, of the amount and kind of not bound by any pre-existing obligation to act. It is unilateral, because it arises from the
property sold, terms of sale, price, names of the purchasers and person on whose account sole will of the actor who is not previously bound by any reciprocal or bilateral agreement.
the sale is made, it is a sufficient memorandum: The reason why the law creates a juridical relations and imposes certain obligation is to
(e) An agreement for the leasing for a longer period than one year, or for the sale of real prevent a situation where a person is able to benefit or take advantage of such lawful,
property or of an interest therein: voluntary and unilateral acts at the expense of said actor." (Ambrosio Padilla, Civil Law,
(f) a representation as to the credit of a third person. Vol. VI, p. 748, 1969 ed.) In the case at bar, since appellant has a clearer and more direct
(3) Those where both parties are incapable of giving consent to a contract. (Art. 1403, recourse against the Deudors with whom he had entered into an agreement regarding
civil Code.) the improvements and expenditures made by him on the land of appellees. it Cannot be
In the instant case, what appellant is trying to enforce is the delivery to him of 3,000 square said, in the sense contemplated in Article 2142, that appellees have been enriched at
meters of land which he claims defendants promised to do in consideration of his services the expense of appellant.
as mediator or intermediary in effecting a compromise of the civil action, Civil Case No. In the ultimate. therefore, Our holding above that appellant's first two assignments of error
135, between the defendants and the Deudors. In no sense may such alleged contract are well taken cannot save the day for him. Aside from his having no cause of action
be considered as being a "sale of real property or of any interest therein." Indeed, not all against appellees, there is one plain error of omission. We have found in the order of the
dealings involving interest in real property come under the Statute. trial court which is as good a ground as any other for Us to terminate this case favorably
Moreover, appellant's complaint clearly alleges that he has already fulfilled his part of the to appellees. In said order Which We have quoted in full earlier in this opinion, the trial
bargains to induce the Deudors to amicably settle their differences with defendants as, court ruled that "the grounds relied upon in said motion are mere repetitions of those
in fact, on March 16, 1963, through his efforts, a compromise agreement between these already resolved and discussed by this Court in the order of August 13, 1964", an
parties was approved by the court. In other words, the agreement in question has already observation which We fully share. Virtually, therefore. appellant's motion for
been partially consummated, and is no longer merely executory. And it is likewise a reconsideration was ruled to be pro-forma. Indeed, a cursory reading of the record on
fundamental principle governing the application of the Statute that the contract in appeal reveals that appellant's motion for reconsideration above-quoted contained
dispute should be purely executory on the part of both parties thereto. exactly the same arguments and manner of discussion as his February 6, 1964 "Opposition
We cannot, however, escape taking judicial notice, in relation to the compromise to Motion to Dismiss" of defendant Gregorio Araneta, Inc. ((pp. 17-25, Rec. on Appeal) as
agreement relied upon by appellant, that in several cases We have decided, We have well as his February 17, 1964 "Opposition to Motion to Dismiss of Defendant J. M. Tuason &
declared the same rescinded and of no effect. In J. M. Tuason & Co., Inc. vs. Bienvenido Co." (pp. 33-45, Rec. on Appeal and his February 29, 1964 "Rejoinder to Reply Oil
Sanvictores, 4 SCRA 123, the Court held: Defendant J. M. Tuason & Co." (pp. 52-64, Rec. on Appeal) We cannot see anything in
It is also worthy of note that the compromise between Deudors and Tuason, upon which said motion for reconsideration that is substantially different from the above oppositions
Sanvictores predicates his right to buy the lot he occupies, has been validly rescinded and rejoinder he had previously submitted and which the trial court had already
and set aside, as recognized by this Court in its decision in G.R. No. L-13768, Deudor vs. considered when it rendered its main order of dismissal. Consequently, appellant's motion
Tuason, promulgated on May 30, 1961. for reconsideration did not suspend his period for appeal. (Estrada vs. Sto. Domingo, 28
We repeated this observation in J.M. Tuason & Co., Inc. vs. Teodosio Macalindong, 6 SCRA 890, 905-6.) And as this point was covered by appellees' "Opposition to Motion for
SCRA 938. Thus, viewed from what would be the ultimate conclusion of appellant's case, Reconsideration" (pp. 8689), hence, within the frame of the issues below, it is within the
We entertain grave doubts as to whether or not he can successfully maintain his alleged ambit of Our authority as the Supreme Court to consider the same here even if it is not
cause of action against defendants, considering that the compromise agreement that discussed in the briefs of the parties. (Insular Life Assurance Co., Ltd. Employees
he invokes did not actually materialize and defendants have not benefited therefrom, Association-NATU vs. Insular Life Assurance Co., Ltd. [Resolution en banc of March 10, 1977
not to mention the undisputed fact that, as pointed out by appellees, appellant's other in G. R. No. L-25291).
attempt to secure the same 3,000 square meters via the judicial enforcement of the Now, the impugned main order was issued on August 13, 1964, while the appeal was
compromise agreement in which they were supposed to be reserved for him has already made on September 24, 1964 or 42 days later. Clearly, this is beyond the 30-day
been repudiated by the courts. (pp. 5-7. Brief of Appellee Gregorio Araneta, Inc.) reglementary period for appeal. Hence, the subject order of dismissal was already final
As regards appellant's third assignment of error, We hold that the allegations in his and executory when appellant filed his appeal.
complaint do not sufficiently Appellants' reliance. on Article 2142 of Civil Code is WHEREFORE, the appeal of Faustino Cruz in this case is dismissed. No costs.
misplaced. Said article provides:
Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi- G.R. No. 102007 September 2, 1994
contract to the end that no one shall be unjustly enriched or benefited at the expense of PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROGELIO BAYOTAS y
another. CORDOVA, accused-appellant.
From the very language of this provision, it is obvious that a presumed qauasi-contract ROMERO, J.:
cannot emerge as against one party when the subject mater thereof is already covered In Criminal Case No. C-3217 filed before Branch 16, RTC Roxas City, Rogelio Bayotas y
by an existing contract with another party. Predicated on the principle that no one should Cordova was charged with Rape and eventually convicted thereof on June 19, 1991 in
be allowed to unjustly enrich himself at the expense of another, Article 2124 creates the a decision penned by Judge Manuel E. Autajay. Pending appeal of his conviction,
legal fiction of a quasi-contract precisely because of the absence of any actual Bayotas died on February 4, 1992 at
agreement between the parties concerned. Corollarily, if the one who claims having the National Bilibid Hospital due to cardio respiratory arrest secondary to hepatic
enriched somebody has done so pursuant to a contract with a third party, his cause of encephalopathy secondary to hipato carcinoma gastric malingering. Consequently, the
Supreme Court in its Resolution of May 20, 1992 dismissed the criminal aspect of the not the felony upon which the civil action might arise exists," for the simple reason that
appeal. However, it required the Solicitor General to file its comment with regard to "there is no party defendant." (I Kapunan, Revised Penal Code, Annotated, p. 421.
Bayotas' civil liability arising from his commission of the offense charged. Senator Francisco holds the same view. Francisco, Revised Penal Code, Book One, 2nd
In his comment, the Solicitor General expressed his view that the death of accused- ed., pp. 859-860)
appellant did not extinguish his civil liability as a result of his commission of the offense The legal import of the term "final judgment" is similarly reflected in the Revised Penal
charged. The Solicitor General, relying on the case of People v. Sendaydiego 1 insists that Code. Articles 72 and 78 of that legal body mention the term "final judgment" in the sense
the appeal should still be resolved for the purpose of reviewing his conviction by the lower that it is already enforceable. This also brings to mind Section 7, Rule 116 of the Rules of
court on which the civil liability is based. Court which states that a judgment in a criminal case becomes final "after the lapse of
Counsel for the accused-appellant, on the other hand, opposed the view of the Solicitor the period for perfecting an appeal or when the sentence has been partially or totally
General arguing that the death of the accused while judgment of conviction is pending satisfied or served, or the defendant has expressly waived in writing his right to appeal."
appeal extinguishes both his criminal and civil penalties. In support of his position, said By fair intendment, the legal precepts and opinions here collected funnel down to one
counsel invoked the ruling of the Court of Appeals in People v. Castillo and positive conclusion: The term final judgment employed in the Revised Penal Code means
Ocfemia 2 which held that the civil obligation in a criminal case takes root in the criminal judgment beyond recall. Really, as long as a judgment has not become executory, it
liability and, therefore, civil liability is extinguished if accused should die before final cannot be truthfully said that defendant is definitely guilty of the felony charged against
judgment is rendered. him.
We are thus confronted with a single issue: Does death of the accused pending appeal Not that the meaning thus given to final judgment is without reason. For where, as in this
of his conviction extinguish his civil liability? case, the right to institute a separate civil action is not reserved, the decision to be
In the aforementioned case of People v. Castillo, this issue was settled in the affirmative. rendered must, of necessity, cover "both the criminal and the civil aspects of the
This same issue posed therein was phrased thus: Does the death of Alfredo Castillo affect case." People vs. Yusico (November 9, 1942), 2 O.G., No. 100, p. 964. See also: People
both his criminal responsibility and his civil liability as a consequence of the alleged crime? vs. Moll, 68 Phil., 626, 634; Francisco, Criminal Procedure, 1958 ed., Vol. I, pp. 234, 236.
It resolved this issue thru the following disquisition: Correctly, Judge Kapunan observed that as "the civil action is based solely on the felony
Article 89 of the Revised Penal Code is the controlling statute. It reads, in part: committed and of which the offender might be found guilty, the death of the offender
Art. 89. How criminal liability is totally extinguished. — Criminal liability is totally extinguishes the civil liability." I Kapunan, Revised Penal Code, Annotated, supra.
extinguished: Here is the situation obtaining in the present case: Castillo's criminal liability is out. His civil
1. By the death of the convict, as to the personal penalties; and as to the liability is sought to be enforced by reason of that criminal liability. But then, if we dismiss,
pecuniary penalties liability therefor is extinguished only when the death of the as we must, the criminal action and let the civil aspect remain, we will be faced with the
offender occurs before final judgment; anomalous situation whereby we will be called upon to clamp civil liability in a case where
With reference to Castillo's criminal liability, there is no question. The law is plain. Statutory the source thereof — criminal liability — does not exist. And, as was well stated in Bautista,
construction is unnecessary. Said liability is extinguished. et al. vs. Estrella, et al., CA-G.R.
The civil liability, however, poses a problem. Such liability is extinguished only when the No. 19226-R, September 1, 1958, "no party can be found and held criminally liable in a
death of the offender occurs before final judgment. Saddled upon us is the task of civil suit," which solely would remain if we are to divorce it from the criminal proceeding."
ascertaining the legal import of the term "final judgment." Is it final judgment as This ruling of the Court of Appeals in the Castillo case 3 was adopted by the Supreme
contradistinguished from an interlocutory order? Or, is it a judgment which is final and Court in the cases of People of the Philippines v. Bonifacio Alison, et al., 4 People of the
executory? Philippines v. Jaime Jose, et al. 5 and People of the Philippines v. Satorre 6 by dismissing
We go to the genesis of the law. The legal precept contained in Article 89 of the Revised the appeal in view of the death of the accused pending appeal of said cases.
Penal Code heretofore transcribed is lifted from Article 132 of the Spanish El Codigo Penal As held by then Supreme Court Justice Fernando in the Alison case:
de 1870 which, in part, recites: The death of accused-appellant Bonifacio Alison having been established, and
La responsabilidad penal se extingue. considering that there is as yet no final judgment in view of the pendency of the appeal,
1. Por la muerte del reo en cuanto a las penas personales siempre, y respecto the criminal and civil liability of the said accused-appellant Alison was extinguished by his
a las pecuniarias, solo cuando a su fallecimiento no hubiere recaido sentencia death (Art. 89, Revised Penal Code; Reyes' Criminal Law, 1971 Rev. Ed., p. 717, citing
firme. People v. Castillo and Ofemia C.A., 56 O.G. 4045); consequently, the case against him
xxx xxx xxx should be dismissed.
The code of 1870 . . . it will be observed employs the term "sentencia firme." What is On the other hand, this Court in the subsequent cases of Buenaventura Belamala
"sentencia firme" under the old statute? v. Marcelino Polinar 7 and Lamberto Torrijos v. The Honorable Court of Appeals 8 ruled
XXVIII Enciclopedia Juridica Española, p. 473, furnishes the ready answer: It says: differently. In the former, the issue decided by this court was: Whether the civil liability of
SENTENCIA FIRME. La sentencia que adquiere la fuerza de las definitivas por no haberse one accused of physical injuries who died before final judgment is extinguished by his
utilizado por las partes litigantes recurso alguno contra ella dentro de los terminos y plazos demise to the extent of barring any claim therefore against his estate. It was the
legales concedidos al efecto. contention of the administrator-appellant therein that the death of the accused prior to
"Sentencia firme" really should be understood as one which is definite. Because, it is only final judgment extinguished all criminal and civil liabilities resulting from the offense, in view
when judgment is such that, as Medina y Maranon puts it, the crime is confirmed — "en of Article 89, paragraph 1 of the Revised Penal Code. However, this court ruled therein:
condena determinada;" or, in the words of Groizard, the guilt of the accused becomes We see no merit in the plea that the civil liability has been extinguished, in view of the
— "una verdad legal." Prior thereto, should the accused die, according to Viada, "no hay provisions of the Civil Code of the Philippines of 1950 (Rep. Act No. 386) that became
legalmente, en tal caso, ni reo, ni delito, ni responsabilidad criminal de ninguna clase." operative eighteen years after the revised Penal Code. As pointed out by the Court
And, as Judge Kapunan well explained, when a defendant dies before judgment below, Article 33 of the Civil Code establishes a civil action for damages on account of
becomes executory, "there cannot be any determination by final judgment whether or physical injuries, entirely separate and distinct from the criminal action.
Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for damages, The claim of complainant Province of Pangasinan for the civil liability survived
entirely separate and distinct from the criminal action, may be brought by the injured Sendaydiego because his death occurred after final judgment was rendered by the
party. Such civil action shall proceed independently of the criminal prosecution, and shall Court of First Instance of Pangasinan, which convicted him of three complex crimes of
require only a preponderance of evidence. malversation through falsification and ordered him to indemnify the Province in the total
Assuming that for lack of express reservation, Belamala's civil action for damages was to sum of P61,048.23 (should be P57,048.23).
be considered instituted together with the criminal action still, since both proceedings The civil action for the civil liability is deemed impliedly instituted with the criminal action
were terminated without final adjudication, the civil action of the offended party under in the absence of express waiver or its reservation in a separate action (Sec. 1, Rule 111
Article 33 may yet be enforced separately. of the Rules of Court). The civil action for the civil liability is separate and distinct from the
In Torrijos, the Supreme Court held that: criminal action (People and Manuel vs. Coloma, 105 Phil. 1287; Roa vs. De la Cruz, 107
xxx xxx xxx Phil. 8).
It should be stressed that the extinction of civil liability follows the extinction of the criminal When the action is for the recovery of money and the defendant dies before final
liability under Article 89, only when the civil liability arises from the criminal act as its only judgment in the Court of First Instance, it shall be dismissed to be prosecuted in the
basis. Stated differently, where the civil liability does not exist independently of the criminal manner especially provided in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the Rules of
responsibility, the extinction of the latter by death, ipso facto extinguishes the Court).
former, provided, of course, that death supervenes before final judgment. The said The implication is that, if the defendant dies after a money judgment had been rendered
principle does not apply in instant case wherein the civil liability springs neither solely nor against him by the Court of First Instance, the action survives him. It may be continued on
originally from the crime itself but from a civil contract of purchase and sale. (Emphasis appeal (Torrijos vs. Court of Appeals, L-40336, October 24, 1975; 67 SCRA 394).
ours) The accountable public officer may still be civilly liable for the funds improperly disbursed
xxx xxx xxx although he has no criminal liability (U.S. vs. Elvina, 24 Phil. 230; Philippine National Bank
In the above case, the court was convinced that the civil liability of the accused who was vs. Tugab, 66 Phil. 583).
charged with estafa could likewise trace its genesis to Articles 19, 20 and 21 of the Civil In view of the foregoing, notwithstanding the dismissal of the appeal of the deceased
Code since said accused had swindled the first and second vendees of the property Sendaydiego insofar as his criminal liability is concerned, the Court Resolved to continue
subject matter of the contract of sale. It therefore concluded: "Consequently, while the exercising appellate jurisdiction over his possible civil liability for the money claims of the
death of the accused herein extinguished his criminal liability including fine, his civil liability Province of Pangasinan arising from the alleged criminal acts complained of, as if no
based on the laws of human relations remains." criminal case had been instituted against him, thus making applicable, in determining his
Thus it allowed the appeal to proceed with respect to the civil liability of the accused, civil liability, Article 30 of the Civil Code . . . and, for that purpose, his counsel is directed
notwithstanding the extinction of his criminal liability due to his death pending appeal of to inform this Court within ten (10) days of the names and addresses of the decedent's
his conviction. heirs or whether or not his estate is under administration and has a duly appointed judicial
To further justify its decision to allow the civil liability to survive, the court relied on the administrator. Said heirs or administrator will be substituted for the deceased insofar as the
following ratiocination: Since Section 21, Rule 3 of the Rules of Court 9 requires the dismissal civil action for the civil liability is concerned (Secs. 16 and 17, Rule 3, Rules of Court).
of all money claims against the defendant whose death occurred prior to the final Succeeding cases 11 raising the identical issue have maintained adherence to our ruling
judgment of the Court of First Instance (CFI), then it can be inferred that actions for in Sendaydiego; in other words, they were a reaffirmance of our abandonment of the
recovery of money may continue to be heard on appeal, when the death of the settled rule that a civil liability solely anchored on the criminal (civil liability ex delicto) is
defendant supervenes after the CFI had rendered its judgment. In such case, explained extinguished upon dismissal of the entire appeal due to the demise of the accused.
this tribunal, "the name of the offended party shall be included in the title of the case as But was it judicious to have abandoned this old ruling? A re-examination of our decision
plaintiff-appellee and the legal representative or the heirs of the deceased-accused in Sendaydiego impels us to revert to the old ruling.
should be substituted as defendants-appellants." To restate our resolution of July 8, 1977 in Sendaydiego: The resolution of the civil action
It is, thus, evident that as jurisprudence evolved from Castillo to Torrijos, the rule established impliedly instituted in the criminal action can proceed irrespective of the latter's extinction
was that the survival of the civil liability depends on whether the same can be predicated due to death of the accused pending appeal of his conviction, pursuant to Article 30 of
on sources of obligations other than delict. Stated differently, the claim for civil liability is the Civil Code and Section 21, Rule 3 of the Revised Rules of Court.
also extinguished together with the criminal action if it were solely based thereon, i.e., civil Article 30 of the Civil Code provides:
liability ex delicto. When a separate civil action is brought to demand civil liability arising from a criminal
However, the Supreme Court in People v. Sendaydiego, et al. 10 departed from this long- offense, and no criminal proceedings are instituted during the pendency of the civil case,
established principle of law. In this case, accused Sendaydiego was charged with and a preponderance of evidence shall likewise be sufficient to prove the act complained of.
convicted by the lower court of malversation thru falsification of public documents. Clearly, the text of Article 30 could not possibly lend support to the ruling in Sendaydiego.
Sendaydiego's death supervened during the pendency of the appeal of his conviction. Nowhere in its text is there a grant of authority to continue exercising appellate jurisdiction
This court in an unprecedented move resolved to dismiss Sendaydiego's appeal but only over the accused's civil liability ex delicto when his death supervenes during appeal.
to the extent of his criminal liability. His civil liability was allowed to survive although it was What Article 30 recognizes is an alternative and separate civil action which may be
clear that such claim thereon was exclusively dependent on the criminal action already brought to demand civil liability arising from a criminal offense independently of any
extinguished. The legal import of such decision was for the court to continue exercising criminal action. In the event that no criminal proceedings are instituted during the
appellate jurisdiction over the entire appeal, passing upon the correctness of pendency of said civil case, the quantum of evidence needed to prove the criminal act
Sendaydiego's conviction despite dismissal of the criminal action, for the purpose of will have to be that which is compatible with civil liability and that is, preponderance of
determining if he is civilly liable. In doing so, this Court issued a Resolution of July 8, 1977 evidence and not proof of guilt beyond reasonable doubt. Citing or invoking Article 30
stating thus: to justify the survival of the civil action despite extinction of the criminal would in effect
merely beg the question of whether civil liability ex delicto survives upon extinction of the
criminal action due to death of the accused during appeal of his conviction. This is civil action instituted therein for recovery of civil liability ex delicto is ipso
because whether asserted in facto extinguished, grounded as it is on the criminal.
the criminal action or in a separate civil action, civil liability ex delicto is extinguished by Section 21, Rule 3 of the Rules of Court was also invoked to serve as another basis for
the death of the accused while his conviction is on appeal. Article 89 of the Revised Penal the Sendaydiego resolution of July 8, 1977. In citing Sec. 21, Rule 3 of the Rules of Court,
Code is clear on this matter: the Court made the inference that civil actions of the type involved
Art. 89. How criminal liability is totally extinguished. — Criminal liability is in Sendaydiego consist of money claims, the recovery of which may be continued on
totally extinguished: appeal if defendant dies pending appeal of his conviction by holding his estate liable
1. By the death of the convict, as to the personal penalties; and as to therefor. Hence, the Court's conclusion:
pecuniary penalties, liability therefor is extinguished only when the "When the action is for the recovery of money" "and the defendant dies before final
death of the offender occurs before final judgment; judgment in the court of First Instance, it shall be dismissed to be prosecuted in the manner
xxx xxx xxx especially provided" in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the Rules of Court).
However, the ruling in Sendaydiego deviated from the expressed intent of Article 89. It The implication is that, if the defendant dies after a money judgment had been rendered
allowed claims for civil liability ex delicto to survive by ipso facto treating the civil action against him by the Court of First Instance, the action survives him. It may be continued on
impliedly instituted with the criminal, as one filed under Article 30, as though no criminal appeal.
proceedings had been filed but merely a separate civil action. This had the effect of Sadly, reliance on this provision of law is misplaced. From the standpoint of procedural
converting such claims from one which is dependent on the outcome of the criminal law, this course taken in Sendaydiego cannot be sanctioned. As correctly observed by
action to an entirely new and separate one, the prosecution of which does not even Justice Regalado:
necessitate the filing of criminal proceedings. 12 One would be hard put to pinpoint the I do not, however, agree with the justification advanced in
statutory authority for such a transformation. It is to be borne in mind that in recovering both Torrijos and Sendaydiego which, relying on the provisions of Section 21, Rule 3 of the
civil liability ex delicto, the same has perforce to be determined in the criminal action, Rules of Court, drew the strained implication therefrom that where the civil liability
rooted as it is in the court's pronouncement of the guilt or innocence of the accused. This instituted together with the criminal liabilities had already passed beyond the judgment
is but to render fealty to the intendment of Article 100 of the Revised Penal Code which of the then Court of First Instance (now the Regional Trial Court), the Court of Appeals can
provides that "every person criminally liable for a felony is also civilly liable." In such cases, continue to exercise appellate jurisdiction thereover despite the extinguishment of the
extinction of the criminal action due to death of the accused pending appeal inevitably component criminal liability of the deceased. This pronouncement, which has been
signifies the concomitant extinction of the civil liability. Mors Omnia Solvi. Death dissolves followed in the Court's judgments subsequent and consonant
all things. to Torrijos and Sendaydiego, should be set aside and abandoned as being clearly
In sum, in pursuing recovery of civil liability arising from crime, the final determination of erroneous and unjustifiable.
the criminal liability is a condition precedent to the prosecution of the civil action, such Said Section 21 of Rule 3 is a rule of civil procedure in ordinary civil actions. There is neither
that when the criminal action is extinguished by the demise of accused-appellant authority nor justification for its application in criminal procedure to civil actions instituted
pending appeal thereof, said civil action cannot survive. The claim for civil liability springs together with and as part of criminal actions. Nor is there any authority in law for the
out of and is dependent upon facts which, if true, would constitute a crime. Such civil summary conversion from the latter category of an ordinary civil action upon the death
liability is an inevitable consequence of the criminal liability and is to be declared and of the offender. . . .
enforced in the criminal proceeding. This is to be distinguished from that which is Moreover, the civil action impliedly instituted in a criminal proceeding for recovery of civil
contemplated under Article 30 of the Civil Code which refers to the institution of a liability ex delicto can hardly be categorized as an ordinary money claim such as that
separate civil action that does not draw its life from a criminal proceeding. The referred to in Sec. 21, Rule 3 enforceable before the estate of the deceased accused.
Sendaydiego resolution of July 8, 1977, however, failed to take note of this fundamental Ordinary money claims referred to in Section 21, Rule 3 must be viewed in light of the
distinction when it allowed the survival of the civil action for the recovery of civil liability ex provisions of Section 5, Rule 86 involving claims against the estate, which
delicto by treating the same as a separate civil action referred to under Article 30. Surely, in Sendaydiego was held liable for Sendaydiego's civil liability. "What are contemplated
it will take more than just a summary judicial pronouncement to authorize the conversion in Section 21 of Rule 3, in relation to Section 5 of Rule 86, 14 are contractual money claims
of said civil action to an independent one such as that contemplated under Article 30. while the claims involved in civil liability ex delicto may include even the restitution of
Ironically however, the main decision in Sendaydiego did not apply Article 30, the personal or real property." 15 Section 5, Rule 86 provides an exclusive enumeration of what
resolution of July 8, 1977 notwithstanding. Thus, it was held in the main decision: claims may be filed against the estate. These are: funeral expenses, expenses for the last
Sendaydiego's appeal will be resolved only for the purpose of showing illness, judgments for money and claim arising from contracts, expressed or implied. It is
his criminal liability which is the basis of the civil liability for which his clear that money claims arising from delict do not form part of this exclusive enumeration.
estate would be liable. 13 Hence, there could be no legal basis in (1) treating a civil action ex delicto as an ordinary
In other words, the Court, in resolving the issue of his civil liability, concomitantly made a contractual money claim referred to in Section 21, Rule 3 of the Rules of Court and (2)
determination on whether Sendaydiego, on the basis of evidenced adduced, was allowing it to survive by filing a claim therefor before the estate of the deceased accused.
indeed guilty beyond reasonable doubt of committing the offense charged. Thus, it Rather, it should be extinguished upon extinction of the criminal action engendered by
upheld Sendaydiego's conviction and pronounced the same as the source of his civil the death of the accused pending finality of his conviction.
liability. Consequently, although Article 30 was not applied in the final determination of Accordingly, we rule: if the private offended party, upon extinction of the civil liability ex
Sendaydiego's civil liability, there was a reopening of the criminal action already delicto desires to recover damages from the same act or omission complained of, he
extinguished which served as basis for Sendaydiego's civil liability. We reiterate: Upon must subject to Section 1, Rule 111 16 (1985 Rules on Criminal Procedure as amended) file
death of the accused pending appeal of his conviction, the criminal action is a separate civil action, this time predicated not on the felony previously charged but on
extinguished inasmuch as there is no longer a defendant to stand as the accused; the other sources of obligation. The source of obligation upon which the separate civil action
is premised determines against whom the same shall be enforced.
If the same act or omission complained of also arises from quasi-delict or may, by G.R. No. 168539 March 25, 2014
provision of law, result in an injury to person or property (real or personal), the separate PEOPLE OF THE PHILIPPINES, Petitioner, vs. HENRY T. GO, Respondent.
civil action must be filed against the executor or administrator 17 of the estate of the Before the Court is a petition for review on certiorari assailing the Resolution1 of the Third
accused pursuant to Sec. 1, Rule 87 of the Rules of Court: Division2 of the Sandiganbayan (SB) dated June 2, 2005 which quashed the Information
Sec. 1. Actions which may and which may not be brought against executor or filed against herein respondent for alleged violation of Section 3 (g) of Republic Act No.
administrator. — No action upon a claim for the recovery of money or debt or interest 3019 (R.A. 3019), otherwise known as the Anti-Graft and Corrupt Practices Act.
thereon shall be commenced against the executor or administrator; but actions to The Information filed against respondent is an offshoot of this Court's Decision3 in Agan, Jr.
recover real or personal property, or an interest therein, from the estate, or to enforce a v. Philippine International Air Terminals Co., Inc. which nullified the various contracts
lien thereon, and actions to recover damages for an injury to person or property, real or awarded by the Government, through the Department of Transportation and
personal, may be commenced against him. Communications (DOTC), to Philippine Air Terminals, Co., Inc. (PIATCO) for the
This is in consonance with our ruling in Belamala 18 where we held that, in recovering construction, operation and maintenance of the Ninoy Aquino International Airport
damages for injury to persons thru an independent civil action based on Article 33 of the International Passenger Terminal III (NAIA IPT III). Subsequent to the above Decision, a
Civil Code, the same must be filed against the executor or administrator of the estate of certain Ma. Cecilia L. Pesayco filed a complaint with the Office of the Ombudsman
deceased accused and not against the estate under Sec. 5, Rule 86 because this rule against several individuals for alleged violation of R.A. 3019. Among those charged was
explicitly limits the claim to those for funeral expenses, expenses for the last sickness of the herein respondent, who was then the Chairman and President of PIATCO, for having
decedent, judgment for money and claims arising from contract, express or implied. supposedly conspired with then DOTC Secretary Arturo Enrile (Secretary Enrile) in entering
Contractual money claims, we stressed, refers only topurely personal obligations other into a contract which is grossly and manifestly disadvantageous to the government.
than those which have their source in delict or tort. On September 16, 2004, the Office of the Deputy Ombudsman for Luzon found probable
Conversely, if the same act or omission complained of also arises from contract, the cause to indict, among others, herein respondent for violation of Section 3(g) of R.A. 3019.
separate civil action must be filed against the estate of the accused, pursuant to Sec. 5, While there was likewise a finding of probable cause against Secretary Enrile, he was no
Rule 86 of the Rules of Court. longer indicted because he died prior to the issuance of the resolution finding probable
From this lengthy disquisition, we summarize our ruling herein: cause.
1. Death of the accused pending appeal of his conviction extinguishes his criminal liability Thus, in an Information dated January 13, 2005, respondent was charged before the SB
as well as the civil liability based solely thereon. As opined by Justice Regalado, in this as follows:
regard, "the death of the accused prior to final judgment terminates his criminal liability On or about July 12, 1997, or sometime prior or subsequent thereto, in Pasay City, Metro
and only the civil liability directly arising from and based solely on the offense Manila, Philippines and within the jurisdiction of this Honorable Court, the late ARTURO
committed, i.e., civil liability ex delicto in senso strictiore." ENRILE, then Secretary of the Department of Transportation and Communications (DOTC),
2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if committing the offense in relation to his office and taking advantage of the same, in
the same may also be predicated on a source of obligation other than delict. 19 Article conspiracy with accused, HENRY T. GO, Chairman and President of the Philippine
1157 of the Civil Code enumerates these other sources of obligation from which the civil International Air Terminals, Co., Inc. (PIATCO), did then and there, willfully, unlawfully and
liability may arise as a result of the same act or omission: criminally enter into a Concession Agreement, after the project for the construction of the
a) Law 20 Ninoy Aquino International Airport International Passenger Terminal III (NAIA IPT III) was
b) Contracts awarded to Paircargo Consortium/PIATCO, which Concession Agreement substantially
c) Quasi-contracts amended the draft Concession Agreement covering the construction of the NAIA IPT III
d) . . . under Republic Act 6957, as amended by Republic Act 7718 (BOT law), specifically the
e) Quasi-delicts provision on Public Utility Revenues, as well as the assumption by the government of the
3. Where the civil liability survives, as explained in Number 2 above, an action for recovery liabilities of PIATCO in the event of the latter's default under Article IV, Section 4.04 (b) and
therefor may be pursued but only by way of filing a separate civil action and subject to (c) in relation to Article 1.06 of the Concession Agreement, which terms are more
Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as amended. This separate beneficial to PIATCO while manifestly and grossly disadvantageous to the government of
civil action may be enforced either against the executor/administrator or the estate of the Republic of the Philippines.4
the accused, depending on the source of obligation upon which the same is based as The case was docketed as Criminal Case No. 28090.
explained above. On March 10, 2005, the SB issued an Order, to wit:
4. Finally, the private offended party need not fear a forfeiture of his right to file this The prosecution is given a period of ten (10) days from today within which to show cause
separate civil action by prescription, in cases where during the prosecution of the criminal why this case should not be dismissed for lack of jurisdiction over the person of the
action and prior to its extinction, the private-offended party instituted together therewith accused considering that the accused is a private person and the public official Arturo
the civil action. In such case, the statute of limitations on the civil liability is deemed Enrile, his alleged co-conspirator, is already deceased, and not an accused in this case.5
interrupted during the pendency of the criminal case, conformably with provisions of The prosecution complied with the above Order contending that the SB has already
Article 1155 21 of the Civil Code, that should thereby avoid any apprehension on a acquired jurisdiction over the person of respondent by reason of his voluntary
possible privation of right by prescription. 22 appearance, when he filed a motion for consolidation and when he posted bail. The
Applying this set of rules to the case at bench, we hold that the death of appellant prosecution also argued that the SB has exclusive jurisdiction over respondent's case,
Bayotas extinguished his criminal liability and the civil liability based solely on the act even if he is a private person, because he was alleged to have conspired with a public
complained of, i.e., rape. Consequently, the appeal is hereby dismissed without officer.6
qualification. On April 28, 2005, respondent filed a Motion to Quash7 the Information filed against him
WHEREFORE, the appeal of the late Rogelio Bayotas is DISMISSED with costs de oficio. on the ground that the operative facts adduced therein do not constitute an offense
under Section 3(g) of R.A. 3019. Respondent, citing the show cause order of the SB, also
contended that, independently of the deceased Secretary Enrile, the public officer with Respondent contends that by reason of the death of Secretary Enrile, there is no public
whom he was alleged to have conspired, respondent, who is not a public officer nor was officer who was charged in the Information and, as such, prosecution against respondent
capacitated by any official authority as a government agent, may not be prosecuted for may not prosper.
violation of Section 3(g) of R.A. 3019. The Court is not persuaded.
The prosecution filed its Opposition.8 It is true that by reason of Secretary Enrile's death, there is no longer any public officer with
On June 2, 2005, the SB issued its assailed Resolution, pertinent portions of which read thus: whom respondent can be charged for violation of R.A. 3019. It does not mean, however,
Acting on the Motion to Quash filed by accused Henry T. Go dated April 22, 2005, and it that the allegation of conspiracy between them can no longer be proved or that their
appearing that Henry T. Go, the lone accused in this case is a private person and his alleged conspiracy is already expunged. The only thing extinguished by the death of
alleged co-conspirator-public official was already deceased long before this case was Secretary Enrile is his criminal liability. His death did not extinguish the crime nor did it
filed in court, for lack of jurisdiction over the person of the accused, the Court grants the remove the basis of the charge of conspiracy between him and private respondent.
Motion to Quash and the Information filed in this case is hereby ordered quashed and Stated differently, the death of Secretary Enrile does not mean that there was no public
dismissed.9 officer who allegedly violated Section 3 (g) of R.A. 3019. In fact, the Office of the Deputy
Hence, the instant petition raising the following issues, to wit: Ombudsman for Luzon found probable cause to indict Secretary Enrile for infringement
I of Sections 3 (e) and (g) of R.A. 3019.14 Were it not for his death, he should have been
WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND DECIDED A QUESTION OF charged.
SUBSTANCE IN A MANNER NOT IN ACCORD WITH LAW OR APPLICABLE JURISPRUDENCE IN The requirement before a private person may be indicted for violation of Section 3(g) of
GRANTING THE DEMURRER TO EVIDENCE AND IN DISMISSING CRIMINAL CASE NO. 28090 R.A. 3019, among others, is that such private person must be alleged to have acted in
ON THE GROUND THAT IT HAS NO JURISDICTION OVER THE PERSON OF RESPONDENT GO. conspiracy with a public officer. The law, however, does not require that such person
II must, in all instances, be indicted together with the public officer. If circumstances exist
WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND DECIDED A QUESTION OF where the public officer may no longer be charged in court, as in the present case where
SUBSTANCE IN A MANNER NOT IN ACCORD WITH LAW OR APPLICABLE JURISPRUDENCE, IN the public officer has already died, the private person may be indicted alone.
RULING THAT IT HAS NO JURISDICTION OVER THE PERSON OF RESPONDENT GO DESPITE THE Indeed, it is not necessary to join all alleged co-conspirators in an indictment for
IRREFUTABLE FACT THAT HE HAS ALREADY POSTED BAIL FOR HIS PROVISIONAL LIBERTY conspiracy.15 If two or more persons enter into a conspiracy, any act done by any of them
III pursuant to the agreement is, in contemplation of law, the act of each of them and they
WHETHER OR NOT THE COURT A QUO GRAVELY ERRED WHEN, IN COMPLETE DISREGARD are jointly responsible therefor.16 This means that everything said, written or done by any
OF THE EQUAL PROTECTION CLAUSE OF THE CONSTITUTION, IT QUASHED THE INFORMATION of the conspirators in execution or furtherance of the common purpose is deemed to
AND DISMISSED CRIMINAL CASE NO. 2809010 have been said, done, or written by each of them and it makes no difference whether
The Court finds the petition meritorious. the actual actor is alive or dead, sane or insane at the time of trial.17 The death of one of
Section 3 (g) of R.A. 3019 provides: two or more conspirators does not prevent the conviction of the survivor or
Sec. 3. Corrupt practices of public officers. – In addition to acts or omissions of public survivors.18 Thus, this Court held that:
officers already penalized by existing law, the following shall constitute corrupt practices x x x [a] conspiracy is in its nature a joint offense. One person cannot conspire alone. The
of any public officer and are hereby declared to be unlawful: crime depends upon the joint act or intent of two or more persons. Yet, it does not follow
xxxx that one person cannot be convicted of conspiracy. So long as the acquittal or death of
(g) Entering, on behalf of the Government, into any contract or transaction manifestly a co-conspirator does not remove the bases of a charge for conspiracy, one defendant
and grossly disadvantageous to the same, whether or not the public officer profited or may be found guilty of the offense.19
will profit thereby. The Court agrees with petitioner's contention that, as alleged in the Information filed
The elements of the above provision are: against respondent, which is deemed hypothetically admitted in the latter's Motion to
(1) that the accused is a public officer; Quash, he (respondent) conspired with Secretary Enrile in violating Section 3 (g) of R.A.
(2) that he entered into a contract or transaction on behalf of the government; 3019 and that in conspiracy, the act of one is the act of all. Hence, the criminal liability
and incurred by a co-conspirator is also incurred by the other co-conspirators.
(3) that such contract or transaction is grossly and manifestly disadvantageous Moreover, the Court agrees with petitioner that the avowed policy of the State and the
to the government.11 legislative intent to repress "acts of public officers and private persons alike, which
At the outset, it bears to reiterate the settled rule that private persons, when acting in constitute graft or corrupt practices,"20 would be frustrated if the death of a public officer
conspiracy with public officers, may be indicted and, if found guilty, held liable for the would bar the prosecution of a private person who conspired with such public officer in
pertinent offenses under Section 3 of R.A. 3019, in consonance with the avowed policy of violating the Anti-Graft Law.
the anti-graft law to repress certain acts of public officers and private persons alike In this regard, this Court's disquisition in the early case of People v. Peralta 21 as to the
constituting graft or corrupt practices act or which may lead thereto.12 This is the nature of and the principles governing conspiracy, as construed under Philippine
controlling doctrine as enunciated by this Court in previous cases, among which is a case jurisdiction, is instructive, to wit:
involving herein private respondent.13 x x x A conspiracy exists when two or more persons come to an agreement concerning
The only question that needs to be settled in the present petition is whether herein the commission of a felony and decide to commit it. Generally, conspiracy is not a crime
respondent, a private person, may be indicted for conspiracy in violating Section 3(g) of except when the law specifically provides a penalty therefor as in treason, rebellion and
R.A. 3019 even if the public officer, with whom he was alleged to have conspired, has sedition. The crime of conspiracy known to the common law is not an indictable offense
died prior to the filing of the Information. in the Philippines. An agreement to commit a crime is a reprehensible act from the view-
point of morality, but as long as the conspirators do not perform overt acts in furtherance
of their malevolent design, the sovereignty of the State is not outraged and the tranquility with the late Secretary Enrile in violating the same Section 3 (g) of R.A. 3019 by allegedly
of the public remains undisturbed. entering into another agreement (Side Agreement) which is separate from the
However, when in resolute execution of a common scheme, a felony is committed by Concession Agreement subject of the present case. The case was docketed as Criminal
two or more malefactors, the existence of a conspiracy assumes pivotal importance in Case No. 28091. Here, the SB, through a Resolution, granted respondent's motion to quash
the determination of the liability of the perpetrators. In stressing the significance of the Information on the ground that the SB has no jurisdiction over the person of
conspiracy in criminal law, this Court in U.S. vs. Infante and Barreto opined that respondent. The prosecution questioned the said SB Resolution before this Court via a
While it is true that the penalties cannot be imposed for the mere act of conspiring to petition for review on certiorari. The petition was docketed as G.R. No. 168919. In a minute
commit a crime unless the statute specifically prescribes a penalty therefor, nevertheless resolution dated August 31, 2005, this Court denied the petition finding no reversible error
the existence of a conspiracy to commit a crime is in many cases a fact of vital on the part of the SB. This Resolution became final and executory on January 11, 2006.
importance, when considered together with the other evidence of record, in establishing Respondent now argues that this Court's resolution in G.R. No. 168919 should be applied
the existence, of the consummated crime and its commission by the conspirators. in the instant case.
Once an express or implied conspiracy is proved, all of the conspirators are liable as co- The Court does not agree. Respondent should be reminded that prior to this Court's ruling
principals regardless of the extent and character of their respective active participation in G.R. No. 168919, he already posted bail for his provisional liberty. In fact, he even filed
in the commission of the crime or crimes perpetrated in furtherance of the conspiracy a Motion for Consolidation26 in Criminal Case No. 28091. The Court agrees with petitioner's
because in contemplation of law the act of one is the act of all. The foregoing rule is contention that private respondent's act of posting bail and filing his Motion for
anchored on the sound principle that "when two or more persons unite to accomplish a Consolidation vests the SB with jurisdiction over his person. The rule is well settled that the
criminal object, whether through the physical volition of one, or all, proceeding severally act of an accused in posting bail or in filing motions seeking affirmative relief is tantamount
or collectively, each individual whose evil will actively contributes to the wrong-doing is in to submission of his person to the jurisdiction of the court.27
law responsible for the whole, the same as though performed by himself alone." Although Thus, it has been held that:
it is axiomatic that no one is liable for acts other than his own, "when two or more persons When a defendant in a criminal case is brought before a competent court by virtue of a
agree or conspire to commit a crime, each is responsible for all the acts of the others, warrant of arrest or otherwise, in order to avoid the submission of his body to the jurisdiction
done in furtherance of the agreement or conspiracy." The imposition of collective liability of the court he must raise the question of the court’s jurisdiction over his person at the very
upon the conspirators is clearly explained in one case where this Court held that x x x it is earliest opportunity. If he gives bail, demurs to the complaint or files any dilatory plea or
impossible to graduate the separate liability of each (conspirator) without taking into pleads to the merits, he thereby gives the court jurisdiction over his person. (State ex rel.
consideration the close and inseparable relation of each of them with the criminal act, John Brown vs. Fitzgerald, 51 Minn., 534)
for the commission of which they all acted by common agreement x x x. The crime must xxxx
therefore in view of the solidarity of the act and intent which existed between the x x x As ruled in La Naval Drug vs. CA [236 SCRA 78, 86]:
accused, be regarded as the act of the band or party created by them, and they are all "[L]ack of jurisdiction over the person of the defendant may be waived either expressly or
equally responsible x x x impliedly. When a defendant voluntarily appears, he is deemed to have submitted himself
Verily, the moment it is established that the malefactors conspired and confederated in to the jurisdiction of the court. If he so wishes not to waive this defense, he must do so
the commission of the felony proved, collective liability of the accused conspirators seasonably by motion for the purpose of objecting to the jurisdiction of the court;
attaches by reason of the conspiracy, and the court shall not speculate nor even otherwise, he shall be deemed to have submitted himself to that jurisdiction."
investigate as to the actual degree of participation of each of the perpetrators present Moreover, "[w]here the appearance is by motion for the purpose of objecting to the
at the scene of the crime. Of course, as to any conspirator who was remote from the situs jurisdiction of the court over the person, it must be for the sole and separate purpose of
of aggression, he could be drawn within the enveloping ambit of the conspiracy if it be objecting to said jurisdiction. If the appearance is for any other purpose, the defendant
proved that through his moral ascendancy over the rest of the conspirators the latter were is deemed to have submitted himself to the jurisdiction of the court. Such an appearance
moved or impelled to carry out the conspiracy. gives the court jurisdiction over the person."
In fine, the convergence of the wills of the conspirators in the scheming and execution of Verily, petitioner’s participation in the proceedings before the Sandiganbayan was not
the crime amply justifies the imputation to all of them the act of any one of them. It is in confined to his opposition to the issuance of a warrant of arrest but also covered other
this light that conspiracy is generally viewed not as a separate indictable offense, but a matters which called for respondent court’s exercise of its jurisdiction. Petitioner may not
rule for collectivizing criminal liability. be heard now to deny said court’s jurisdiction over him. x x x.28
xxxx In the instant case, respondent did not make any special appearance to question the
x x x A time-honored rule in the corpus of our jurisprudence is that once conspiracy is jurisdiction of the SB over his person prior to his posting of bail and filing his Motion for
proved, all of the conspirators who acted in furtherance of the common design are liable Consolidation. In fact, his Motion to Quash the Information in Criminal Case No. 28090 only
as co-principals. This rule of collective criminal liability emanates from the ensnaring came after the SB issued an Order requiring the prosecution to show cause why the case
nature of conspiracy. The concerted action of the conspirators in consummating their should not be dismissed for lack of jurisdiction over his person.
common purpose is a patent display of their evil partnership, and for the consequences As a recapitulation, it would not be amiss to point out that the instant case involves a
of such criminal enterprise they must be held solidarily liable.22 contract entered into by public officers representing the government. More importantly,
This is not to say, however, that private respondent should be found guilty of conspiring the SB is a special criminal court which has exclusive original jurisdiction in all cases
with Secretary Enrile. It is settled that the absence or presence of conspiracy is factual in involving violations of R.A. 3019 committed by certain public officers, as enumerated in
nature and involves evidentiary matters.23 Hence, the allegation of conspiracy against P.D. 1606 as amended by R.A. 8249. This includes private individuals who are charged as
respondent is better left ventilated before the trial court during trial, where respondent co-principals, accomplices or accessories with the said public officers. In the instant case,
can adduce evidence to prove or disprove its presence. respondent is being charged for violation of Section 3(g) of R.A. 3019, in conspiracy with
Respondent claims in his Manifestation and Motion24 as well as in his Urgent Motion to then Secretary Enrile. Ideally, under the law, both respondent and Secretary Enrile should
Resolve25 that in a different case, he was likewise indicted before the SB for conspiracy have been charged before and tried jointly by the Sandiganbayan. However, by reason
of the death of the latter, this can no longer be done. Nonetheless, for reasons already Penal Code. Prescinding therefrom, they contend that there must first be a judgment of
discussed, it does not follow that the SB is already divested of its jurisdiction over the person conviction against their driver as a condition sine qua non to hold them liable. Ergo, since
of and the case involving herein respondent. To rule otherwise would mean that the the driver died during the pendency of the criminal action, the sine qua non condition for
power of a court to decide a case would no longer be based on the law defining its their subsidiary liability was not fulfilled, hence the of lack of cause of action on the part
jurisdiction but on other factors, such as the death of one of the alleged offenders. of the plaintiffs. They further argue that since the plaintiffs did not make a reservation to
Lastly, the issues raised in the present petition involve matters which are mere incidents in institute a separate action for damages when the criminal case was filed, the damage
the main case and the main case has already been pending for over nine (9) years. Thus, suit in question is thereby deemed instituted with the criminal action. which was already
a referral of the case to the Regional Trial Court would further delay the resolution of the dismissed.
main case and it would, by no means, promote respondent's right to a speedy trial and In an Order dated September 4, 2001,6 the trial court denied the motion to dismiss for lack
a speedy disposition of his case. of merit and set the case for pre-trial. With their motion for reconsideration having been
WHEREFORE, the petition is GRANTED. The Resolution of the Sandiganbayan dated June denied by the same court in its subsequent order7 of September 26, 2001, the petitioners
2, 2005, granting respondent's Motion to Quash, is hereby REVERSED and SET ASIDE. The then went on certiorari to the CA in CA-G.R. SP No. 67600, imputing grave abuse of
Sandiganbayan is forthwith DIRECTED to proceed with deliberate dispatch in the discretion on the part of the trial judge in refusing to dismiss the basic complaint for
disposition of Criminal Case No. 28090. damages in Civil Case No. 99-10845.
In the herein assailed decision8 dated April 25, 2003, the CA denied the petition and
G.R. No. 158995 September 26, 2006 upheld the trial court. Partly says the CA in its challenged issuance:
L.G. FOODS CORPORATION and VICTORINO GABOR, Vice-President and General xxx xxx xxx
Manager, petitioners, vs. HON. PHILADELFA B. PAGAPONG-AGRAVIADOR, in her capacity It is clear that the complaint neither represents nor implies that the responsibility
as Presiding Judge of Regional Trial Court, Branch 43, Bacolod City, and SPS. FLORENTINO charged was the petitioner's subsidiary liability under Art. 103, Revised Penal
and THERESA VALLEJERA, respondents. Code. As pointed out [by the trial court] in the Order of September 4, 2001,
the complaint does not even allege the basic elements for such a liability, like
Assailed and sought to be set aside in this petition for review on certiorari is the the conviction of the accused employee and his insolvency. Truly enough, a civil
Decision1 dated April 25, 2003 of the Court of Appeals (CA), as reiterated in its Resolution action to enforce subsidiary liability separate and distinct from the criminal
of July 10, 2003,2 in CA-G.R. SP No. 67600, affirming an earlier Order of the Regional Trial action is even unnecessary.
Court (RTC) of Bacolod City, Branch 43, which denied the petitioners' motion to dismiss in xxx xxx xxx
Civil Case No. 99-10845, an action for damages arising from a vehicular accident thereat Specifically, Civil Case No. 99-10845 exacts responsibility for fault or negligence
instituted by the herein private respondents - the spouses Florentino Vallejera and Theresa under Art. 2176, Civil Code, which is entirely separate and distinct from the civil
Vallejera - against the petitioners. liability arising from negligence under the Revised Penal Code. Verily, therefore,
The antecedent facts may be briefly stated as follows: the liability under Art. 2180, Civil Code, is direct and immediate, and not
On February 26, 1996, Charles Vallereja, a 7-year old son of the spouses Florentino conditioned upon prior recourse against the negligent employee or prior
Vallejera and Theresa Vallejera, was hit by a Ford Fiera van owned by the petitioners and showing of the latter's insolvency. (Underscoring in the original.)
driven at the time by their employee, Vincent Norman Yeneza y Ferrer. Charles died as a In time, the petitioners moved for a reconsideration but their motion was denied by the
result of the accident. CA in its resolution9 of July 10, 2003. Hence, the petitioners' present recourse on their
In time, an Information for Reckless Imprudence Resulting to Homicide was filed against submission that the appellate court committed reversible error in upholding the trial
the driver before the Municipal Trial Court in Cities (MTCC), Bacolod City, docketed as court's denial of their motion to dismiss.
Criminal Case No. 67787, entitled People of the Philippines v. Vincent Norman Yeneza. We DENY.
Unfortunately, before the trial could be concluded, the accused driver committed As the Court sees it, the sole issue for resolution is whether the spouses Vallejeras' cause of
suicide, evidently bothered by conscience and remorse. On account thereof, the MTCC, action in Civil Case No. 99-10845 is founded on Article 103 of the Revised Penal Code, as
in its order of September 30, 1998, dismissed the criminal case. maintained by the petitioners, or derived from Article 218010 of the Civil Code, as ruled by
On June 23, 1999, in the RTC of Bacolod City, the spouses Vallejera filed a complaint3 for the two courts below.
damages against the petitioners as employers of the deceased driver, basically alleging It thus behooves us to examine the allegations of the complaint for damages in Civil Case
that as such employers, they failed to exercise due diligence in the selection and No. 99-10845. That complaint alleged, inter alia, as follows:
supervision of their employees. Thereat docketed as Civil Case No. 99-10845, the xxx xxx xxx
complaint was raffled to Branch 43 of the court. 3. That defendant [LG Food Corporation] is the registered owner of a Ford Fiera Van with
In their Answer with Compulsory Counterclaim,4 the petitioners as defendants denied Plate No. NMS 881 and employer sometime February of 1996 of one Vincent Norman
liability for the death of the Vallejeras' 7-year old son, claiming that they had exercised Yeneza y Ferrer, a salesman of said corporation;
the required due diligence in the selection and supervision of their employees, including 4. That sometime February 26, 1996 at around 2:00 P.M. at Rosario St., Bacolod City, the
the deceased driver. They thus prayed in their Answer for the dismissal of the complaint minor son of said plaintiffs [now respondents], Charles Vallejera, 7 years old, was hit and
for lack of cause of action on the part of the Vallejera couple. bumped by above-described vehicle then driven by said employee, Vincent Norman
During pre-trial, the defendant petitioners insisted that their dismissal prayer be resolved. Yeneza y Ferrer;
Hence, the trial court required them to file within ten days a memorandum of authorities 5. That the mishap was due to the gross fault and negligence of defendant's employee,
supportive of their position. who drove said vehicle, recklessly, negligently and at a high speed without regard to
Instead, however, of the required memorandum of authorities, the defendant petitioners traffic condition and safety of other road users and likewise to the fault and negligence
filed a Motion to Dismiss, principally arguing that the complaint is basically a "claim for of the owner employer, herein defendants LG Food Corporation who failed to exercise
subsidiary liability against an employer" under the provision of Article 1035 of the Revised
due diligence in the selection and supervision of his employee, Vincent Norman Yeneza Article 116119 of the Civil Code provides that civil obligation arising from criminal offenses
y Ferrer; shall be governed by penal laws subject to the provision of Article 217720 and of the
6. That as a result of said incident, plaintiffs' son suffered multiple body injuries which led pertinent provision of Chapter 2, Preliminary Title on Human Relation, and of Title XVIII of
to his untimely demise on that very day; this Book, regulating damages. Plainly, Article 2177 provides for the alternative remedies
7. That a criminal case was filed against the defendant's employee, docketed as Criminal the plaintiff may choose from in case the obligation has the possibility of arising indirectly
Case No. 67787, (earlier filed as Crim. Case No. 96-17570 before RTC) before MTC-Branch from the delict/crime or directly from quasi-delict/tort. The choice is with the plaintiff who
III, entitled "People v. Yeneza" for "Reckless Imprudence resulting to Homicide," but the makes known his cause of action in his initiatory pleading or complaint,21 and not with the
same was dismissed because pending litigation, then remorse-stricken [accused] defendant who can not ask for the dismissal of the plaintiff's cause of action or lack of it
committed suicide; based on the defendant's perception that the plaintiff should have opted to file a claim
xxx xxx xxx under Article 103 of the Revised Penal Code.
8. That the injuries and complications as well as the resultant death suffered by the late Under Article 2180 of the Civil Code, the liability of the employer is direct or immediate. It
minor Charles Vallejera were due to the negligence and imprudence of defendant's is not conditioned upon prior recourse against the negligent employee and a prior
employee; showing of insolvency of such employee.22
9. That defendant LG Foods Corporation is civilly liable for the negligence/imprudence of Here, the complaint sufficiently alleged that the death of the couple's minor son was
its employee since it failed to exercise the necessary diligence required of a good father caused by the negligent act of the petitioners' driver; and that the petitioners themselves
of the family in the selection and supervision of his employee, Vincent Norman Yeneza y were civilly liable for the negligence of their driver for failing "to exercise the necessary
Ferrer which diligence if exercised, would have prevented said incident. (Bracketed diligence required of a good father of the family in the selection and supervision of [their]
words and emphasis ours.) employee, the driver, which diligence, if exercised, would have prevented said
Nothing in the foregoing allegations suggests, even remotely, that the herein petitioners accident."
are being made to account for their subsidiary liability under Article 103 of the Revised Had the respondent spouses elected to sue the petitioners based on Article 103 of the
Penal Code. As correctly pointed out by the trial court in its order of September 4, 2001 Revised Penal Code, they would have alleged that the guilt of the driver had been
denying the petitioners' Motion to Dismiss, the complaint did not even aver the basic proven beyond reasonable doubt; that such accused driver is insolvent; that it is the
elements for the subsidiary liability of an employer under Article 103 of the Revised Penal subsidiary liability of the defendant petitioners as employers to pay for the damage done
Code, such as the prior conviction of the driver in the criminal case filed against him nor by their employee (driver) based on the principle that every person criminally liable is also
his insolvency. civilly liable.23 Since there was no conviction in the criminal case against the driver,
Admittedly, the complaint did not explicitly state that plaintiff Vallejeras were suing the precisely because death intervened prior to the termination of the criminal proceedings,
defendant petitioners for damages based on quasi-delict. Clear it is, however, from the the spouses' recourse was, therefore, to sue the petitioners for their direct and primary
allegations of the complaint that quasi-delict was their choice of remedy against the liability based on quasi-delict.
petitioners. To stress, the plaintiff spouses alleged in their complaint gross fault and Besides, it is worthy to note that the petitioners, in their Answer with Compulsory Counter-
negligence on the part of the driver and the failure of the petitioners, as employers, to Claim,24 repeatedly made mention of Article 2180 of the Civil Code and anchored their
exercise due diligence in the selection and supervision of their employees. The spouses defense on their allegation that "they had exercised due diligence in the selection and
further alleged that the petitioners are civilly liable for the negligence/imprudence of their supervision of [their] employees." The Court views this defense as an admission that indeed
driver since they failed to exercise the necessary diligence required of a good father of the petitioners acknowledged the private respondents' cause of action as one for quasi-
the family in the selection and supervision of their employees, which diligence, if delict under Article 2180 of the Civil Code.
exercised, could have prevented the vehicular accident that resulted to the death of All told, Civil Case No. 99-10845 is a negligence suit brought under Article 2176 - Civil Code
their 7-year old son. to recover damages primarily from the petitioners as employers responsible for their
Section 2, Rule 2, of the 1997 Rules of Civil Procedure defines cause of action as the "act negligent driver pursuant to Article 2180 of the Civil Code. The obligation imposed by
or omission by which a party violates the right of another." Such act or omission gives rise Article 2176 is demandable not only for one's own acts or omissions, but also for those of
to an obligation which may come from law, contracts, quasi contracts, delicts or quasi- persons for whom one is responsible. Thus, the employer is liable for damages caused by
delicts.11 his employees and household helpers acting within the scope of their assigned tasks, even
Corollarily, an act or omission causing damage to another may give rise to two separate though the former is not engaged in any business or industry.
civil liabilities on the part of the offender, i.e., 1) civil liability ex delicto;12 and 2) Citing Maniago v. CA,25 petitioner would argue that Civil Case No. 99-10845 should have
independent civil liabilities, such as those (a) not arising from an act or omission been dismissed for failure of the respondent spouses to make a reservation to institute a
complained of as felony (e.g., culpa contractual or obligations arising from law;13 the separate civil action for damages when the criminal case against the driver was filed.
intentional torts;14 and culpa aquiliana15); or (b) where the injured party is granted a right The argument is specious.
to file an action independent and distinct from the criminal action.16 Either of these two To start with, the petitioners' reliance on Maniago is obviously misplaced. There, the civil
possible liabilities may be enforced against the offender.17 case was filed while the criminal case against the employee was still pending. Here, the
Stated otherwise, victims of negligence or their heirs have a choice between an action criminal case against the employee driver was prematurely terminated due to his death.
to enforce the civil liability arising from culpa criminal under Article 100 of the Revised Precisely, Civil Case No. 99-10845 was filed by the respondent spouses because no
Penal Code, and an action for quasi-delict (culpa aquiliana) under Articles 2176 to 2194 remedy can be obtained by them against the petitioners with the dismissal of the criminal
of the Civil Code. If, as here, the action chosen is for quasi-delict, the plaintiff may hold case against their driver during the pendency thereof.
the employer liable for the negligent act of its employee, subject to the employer's The circumstance that no reservation to institute a separate civil action for damages was
defense of exercise of the diligence of a good father of the family. On the other hand, if made when the criminal case was filed is of no moment for the simple reason that the
the action chosen is for culpa criminal, the plaintiff can hold the employer subsidiarily criminal case was dismissed without any pronouncement having been made therein. In
liable only upon proof of prior conviction of its employee.18 reality, therefor, it is as if there was no criminal case to speak of in the first place. And for
the petitioners to insist for the conviction of their driver as a condition sine qua non to hold At Paseo de Zamboanga, BBB, accused-appellant, Macky, and Jun met with
them liable for damages is to ask for the impossible. AAA, a certain CCC (allegedly another recruit) and Arlene (allegedly AAAs employer).
IN VIEW WHEREOF, the instant petition is DENIED for lack of merit. Then at 7:00 p.m. of that same day, they all proceeded to the wharf, where they met
accused Franz and a certain Cristy, who was also allegedly invited by accused-appellant
People v. Nurfrashir Hashim, 13 June 2012 to work in Malaysia.
On appeal is the Decision[1] of the Court of Appeals (CA) in CA-G.R. CR-HC No. Thereafter, AAA, BBB, CCC, Cristy, Macky and Jun boarded the M/V Grand
00644-MIN promulgated on 20 July 2010, which affirmed the conviction of herein Flora and were given pieces of paper containing a name. Franz, accused-appellant
accused-appellant Bernadette Pansacala a.k.a Neneng Awid, together with co- Bernadette and a certain Titing did not board the boat. Accused-appellant informed
accused Nurfrasir Hashim y Saraban a.k.a Franz/Frans, Makdul Jamad y Bukin a.k.a. private complainants and their companions that she and Franz would follow and bring
Macky, a certain Tas and a certain Jun for the crime of illegal recruitment as defined their passports. We quote the Decision of the CA to describe the journey of the group
under Section 6 in relation to Section 7(b) of Republic Act. No. (R.A.) 8042 or the Migrant after boarding the M/V Flora bound for Bongao, Tawi-Tawi, at 10:00 p.m.:[4]
Workers and Overseas Filipinos Act of 1995. On June 14, 2003, they (BBB, AAA, CCC, Cristy, accused
The Facts Macky) and Jun disembarked at Bongao, Tawi-Tawi, and then they
On 10 March 2004, accused-appellant was charged as follows:[2] proceeded to Sitangkai, Tawi-Tawi where they stayed for two days. On
That on or about June 11, 2003 and for sometime prior or June 16, 2003, they went to Pundohan, which is a terminal going to
subsequent thereto, in the City of Zamboanga, Philippines, and within Lahad Datu, Sabah, Malaysia.
the jurisdiction of this Honorable Court, the above-named accused, On June 17, 2003, at 6:00 oclock [sic] in the morning[,] they
conspiring and confederating together, mutually aiding and assisting arrived at Lahad Datu and soon thenafter [sic] they boarded a van
with one another without having previously obtained from the going to Samporna, Malaysia where they met accused Mackys cousin
Philippine Overseas Employment Administration, license or authority to named Pat. They waited at Samporna until 5:00 oclock [sic] in the
engage in the recruitment and deployment of overseas workers, did afternoon when accused Franz and Tash[,] who was allegedly their
then and there willfully [sic], unlawfully and feloniously, illegally recruit financier[,] arrived. Accused Franz then distributed to AAA, BBB, CCC
for a promised employment abroad particularly in Brunei and and Cristy their respective passports.
Malaysia, thus causing and prompting the persons of BBB and AAA[3] to Thereafter, they boarded a bus going to Kota Kinabalu,
apply which employment however did not materialize because in truth Malaysia, and they arrived thereat at 7:00 oclock [sic] in the morning
and in fact, the promised employment is non-existent, in flagrant of June 18, 2003. Later, they boarded again a bus going to Minumpo,
violation of the above-mentioned law and causing damage and Malaysia and then a barge going to Labuan, Malaysia where they
prejudice to said complainants; further, the commission of the above stayed at a hotel [the Classic Hotel] for three nights or from the night
stated offense tantamount to economic sabotage in that the same of June 18, 2003 until June 20, 2003.
was committed by a syndicate. On June 21, 2003, accused Franz instructed BBB, AAA, CCC
Only accused-appellant and Nurfrasir Hashim y Saraban were arrested, and and Cristy to wear sexy clothes because they were going to meet their
both entered a plea of not guilty when arraigned. supposed boss named Bunso at Cape Imperial located at Labuan,
Private complainants AAA and BBB, Police Chief Inspector Ronald Aonuevo, Malaysia.
and police officers Edmond Ranel Villareal and Renato Rabuya dela Pea were presented When they arrived at Cape Imperial, accused Macky and
by the prosecution to prove the following: Jun talked to Bunso but they failed to reach an agreement on the
On 10 June 2003, accused-appellant approached AAA, who was then doing purported compensation of the four girls. So, accused Macky and Jun
her job as a waitress at a stall in Paseo de Zamboanga, Buenavista, Zamboanga City, to brought the girls to Golden Lotus Barber Salon (Salon for brevity) where
encourage AAA to work in Malaysia, as accused-appellant knew certain persons who the latter were introduced to a certain person named Mommy Cindy,
would soon be leaving for that country. the alleged owner of the salon, and their purported manager Hako
who was called Mommy Susan.
On the next day, 11 June 2003, private complainant BBB was at her house in The prosecution also alleged that while the group was staying at the Classic
Talon-talon Loop, Zamboanga City, when accused-appellant paid her a visit and invited Hotel in Labuan, BBB was forced on numerous occasions to have sexual intercourse with
her to work as a saleslady in Brunei. After being assured that the prospective employment Franz at his bidding, even in the presence of other people. She followed his orders for fear
was above board and that she would be well compensated, BBB accepted the that he would inflict physical harm on her.
invitation. At first, private complainants were not aware of the circumstances surrounding
The day after, accused-appellant, together with co-accused Makdul their employment at the Golden Lotus. It was only after they agreed to stay there for
Amad y Bukin a.k.a. Macky (Macky) and a certain Jun, returned to the house of employment that they were forced to become sex workers to earn money and pay off
BBB. Accused-appellant informed BBB that the latter would be escorted to Malaysia by the debts they incurred from their travel from Zamboanga City to Labuan, Malaysia.
the two men, and that they would meet the next day at 1:00 p.m. at Plaza Pershing, Thus, from 21 June 2003 to 13 July 2003, AAA and BBB worked as prostituted
Zamboanga City. women. Each of the girls would be booked to a customer for the whole night for 300
On 13 June 2003, BBB, Macky and Jun met as planned. They proceeded to Ringgit at a certain hotel near the Golden Lotus. Meanwhile, during the day, they would
Shop-O-Rama, where they met with co-accused Nurfrasir Hashim, a.k.a. Franz (Franz), be hired by customers for a short time for 150 Ringgit in one of the rooms of the Golden
who assured BBB that she would be easily hired because of her beauty and height. They Lotus. The girls were told that they would be made to pay a fine of 150 Ringgit if they
then agreed to meet at 3:00 p.m. that same day at Paseo de Zamboanga. refused to have sexual intercourse with the customers.
 On 12 July 2003, BBB had a customer who was a law enforcer at Kota Kinabalu, In the present appeal, instead of filing a supplemental brief, both accused-
Malaysia. She sought his help for her return to the Philippines, and he agreed. appellant and the Office of the Solicitor General opted to adopt their respective Briefs
The following day, on 13 July 2003, the Golden Lotus was raided by the filed with the CA.
Immigration Officers of Kota Kinabalu, Malaysia, and the prostituted Filipino women, The appeal is unmeritorious.
including AAA and BBB, were detained at the Balay Polis (Police Department) in Labuan To be convicted of the crime of illegal recruitment committed by a syndicate,
until all the women were deported to the Philippines. the following elements must occur:[9]
The defense, on the other hand, presented three witnesses: accused-appellant 1. The accused have no valid license or authority required by law to enable
Bernadette, her common-law partner Majujie Jailya Misuari, and co-accused Franz. them to lawfully engage in the recruitment and placement of workers.
According to accused-appellant, she and BBB were friends and neighbors in 2. The accused engaged in this activity of recruitment and placement by
Talon-talon, Zamboanga City. Sometime in April 2003, when asked by BBB why accused- actually recruiting, deploying and transporting.
appellant returned to the Philippines from Malaysia, the latter said that she had been 3. Illegal recruitment was committed by three persons conspiring and
made a prostituted woman in Malaysia. confederating with one another.
Accused-appellant denied having offered BBB a job in Malaysia, a denial As to the first element, accused-appellant admitted that she did not have a
corroborated by Majujie Jailya Misuari. Accused-appellant also denied knowing AAA and valid license to recruit persons for overseas employment, consistent with her defense that
Franz. She claimed that she only met AAA when the latter, together with BBB, visited her she did not engage in the recruitment of persons for employment.
in jail and offered to withdraw the case if accused-appellant would give them money. Anent the second element, both victims, AAA and BBB, narrated in great detail
Co-accused Franz merely denied knowing AAA, BBB or accused-appellant. how they were induced by accused-appellant to accept an employment opportunity,
On 27 June 2008, after trial on the merits, the Regional Trial Court (RTC) of and how they were successfully transported from Zamboanga City to Malaysia where
Zamboanga City rendered a Decision,[5] the dispositive portion of which states:[6] they eventually worked as prostituted women.
WHEREFORE, the Court finds both accused NURFRASIR On the third element, accused-appellant posits that the prosecution failed to
HASHIM y SARABAN a.k.a FRANZ/FRAS and BERNADETTE PANSACALA prove that there were more than two persons involved in the alleged crime of illegal
a.k.a NENENG AWID GUILTY BEYOND REASONABLE DOUBT of the crime recruitment, since the trial court held only two of the accused liable for the crime. The
of ILLEGAL RECRUITMENT defined under Section 6 and penalized under prosecution, she alleges, failed to establish that the other accused Macky, Jun, and Tas
Section 7(b) of Republic Act No. 8042 otherwise known as the Migrant also had no license or authority to recruit workers for overseas employment.
Workers and Overseas Filipinos Act of 1995, as principals by direct In the recent case People v. Lalli,[10] we affirmed the trial courts findings in which
participation, committed by a syndicate, against BBB and AAA, 2 of the 3 accused were convicted of illegal recruitment committed by a syndicate, even
and SENTENCES each of said accused to suffer the penalty of LIFE though the third accused was at-large. In so ruling, we took note of the fact that the
IMPRISONMENT and to pay a fine of ₱1,000,000.00 each;[7] to pay each victim would not have been able to go to Malaysia were it not for the concerted efforts
of the above victims ₱50,000.00 as moral damages; ₱300,000.00 as of the three accused. We held thus:
exemplary damages, and to pay the costs. Flight in criminal law is the evading of the course of justice by
SO ORDERED. voluntarily withdrawing oneself in order to avoid arrest or detention or
The trial court considered that, in the course of the trial, the prosecution and the the institution or continuance of criminal proceedings. The
defense had entered into a stipulation that neither accused-appellant Bernadette nor unexplained flight of an accused person may as a general rule be
Franz had a license or an authority to recruit or deploy workers for overseas employment. taken into consideration as evidence having a tendency to establish
Moreover, the trial court found that the crime was committed in conspiracy by his guilt. Clearly, in this case, the flight of accused Relampagos, who is
the accused and other persons. It painstakingly enumerated the overt acts of the still at-large, shows an indication of guilt in the crimes he has been
accused-appellant showing her direct participation in the commission of the crime. These charged.
acts included inducing AAA and BBB to work in Malaysia; introducing Macky, Jun and It is clear that through the concerted efforts of Aringoy, Lalli
Franz to the victims; and escorting them to the wharf, where the victims boarded the and Relampagos, Lolita was recruited and deployed to Malaysia to
vessel that took them away from their families and their country and brought them to work as a prostitute. Such conspiracy among Aringoy, Lalli and
Malaysia, where heretofore unbeknownst to them they were made to work as prostituted Relampagos could be deduced from the manner in which the crime
women. was perpetrated each of the accused played a pivotal role in
It further held that the credible and positive testimonies of the witnesses for the perpetrating the crime of illegal recruitment, and evinced a joint
prosecution prevailed over those of the defense of mere denial, absent any showing that common purpose and design, concerted action and community of
the witnesses for the prosecution had any ill motive to falsely testify and implicate the interest.
accused in the commission of the crime charged. For these reasons, this Court affirms the CA Decision, affirming
On appeal, the CA affirmed the findings of fact of the trial court in the formers the RTC Decision, declaring accused Ronnie Aringoy y Masion and
assailed Decision, but modified the award of damages, to wit:[8] Hadja Jarma Lalli y Purih guilty beyond reasonable doubt of the crime
WHEREFORE, the Appeal is DISMISSED. The assailed Decision of illegal recruitment committed by a syndicate in Criminal Case No.
dated June 27, 2008 of the Regional Trial Court, Branch 16 of 21930, with a penalty of life imprisonment and a fine of ₱500,000
Zamboanga City in Criminal Case No. 19921 is AFFIRMED with imposed on each of the accused. (Emphasis supplied.)
MODIFICATION that the amount of exemplary damages in favor of the In the case at bar, the prosecution was similarly able to establish that accused-
private complainants be reduced to ₱25,000.00 each. appellant Bernadette and Franz were not the only ones who had conspired to bring the
SO ORDERED. victims to Malaysia. It was also able to establish at the very least, through the credible
testimonies of the witnesses, that (1) Jun and Macky were the escorts of the women to
Malaysia; (2) a certain Tash was their financier; (3) a certain Bunso negotiated with Macky (5) Illegal or arbitrary detention or arrest;
for the price the former would pay for the expenses incurred in transporting the victims to (6) Illegal search;
Malaysia; and (4) Mommy Cindy owned the prostitution house where the victims worked. (7) Libel, slander or any other form of defamation;
The concerted efforts of all these persons resulted in the oppression of the victims. (8) Malicious prosecution;
Clearly, it was established beyond reasonable doubt that accused-appellant, (9) Acts mentioned in Article 309;
together with at least two other persons, came to an agreement to commit the felony (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29,
and decided to commit it. It is not necessary to show that two or more persons met 30, 32, 34, and 35.
together and entered into an explicit agreement laying down the details of how an The parents of the female seduced, abducted, raped, or
unlawful scheme or objective is to be carried out. Conspiracy may be deduced from the abused, referred to in No. 3 of this article, may also recover moral
mode and manner in which the offense was perpetrated; or from the acts of the accused damages.
evincing a joint or common purpose and design, concerted action and community of The spouse, descendants, ascendants, and brothers and
interest.[11] sisters may bring the action mentioned in No. 9 of this article, in the
Findings of fact of the CA, when they affirm those of the trial court, are binding order named.
on this Court, unless the findings of the trial and the appellate courts are palpably The criminal case of Trafficking in Persons as a Prostitute is an
unsupported by the evidence on record, or unless the judgment itself is based on a analogous case to the crimes of seduction, abduction, rape, or other
misapprehension of facts.[12] lascivious acts. In fact, it is worse. To be trafficked as a prostitute without
Likewise, we have time and again ruled that mere denial cannot prevail over ones consent and to be sexually violated four to five times a day by
the positive testimony of a witness. A mere denial, just like an alibi, is a self-serving negative different strangers is horrendous and atrocious. There is no doubt that
evidence, which cannot be accorded greater evidentiary weight than the declarations Lolita experienced physical suffering, mental anguish, fright, serious
of credible witnesses who testify on affirmative matters. As between a categorical anxiety, besmirched reputation, wounded feelings, moral shock, and
testimony that has the ring of truth on the one hand and a bare denial on the other, the social humiliation when she was trafficked as a prostitute in
former is generally held to prevail.[13] Malaysia. Since the crime of Trafficking in Persons was aggravated,
We, however, find it proper to modify the amount of moral and exemplary being committed by a syndicate, the award of exemplary damages is
damages awarded by the CA. likewise justified. (Emphasis supplied.)
On 12 May 2003, Congress passed R.A. 9208 or the Anti-Trafficking in Persons Act. We find no legal impediment to increasing the award of moral and exemplary
This law was approved on 26 May 2003. Ironically, only a few days after, private damages in the case at bar. Neither is there any logical reason why we should
complainants found themselves in a situation that this law had sought to prevent. differentiate between the victims herein and those in that case, when the circumstances
In Lalli, we increased the amount of moral and exemplary damages from are frighteningly similar. To do so would be to say that we discriminate one from the other,
₱50,000 to ₱500,000 and from ₱50,000 to ₱100,000, respectively, having convicted the when all of these women have been the victims of unscrupulous people who capitalized
accused therein of the crime of trafficking in persons. In so doing, we said: on the poverty of others. While it is true that accused-appellant was not tried and
The Civil Code describes moral damages in Article 2217: convicted of the crime of trafficking in persons, this Court based its award of damages
Art. 2217. Moral damages include physical suffering, mental anguish, on the Civil Code, and not on the Anti-Trafficking in Persons Act, as clearly explained
fright, serious anxiety, besmirched reputation, wounded feelings, moral in Lalli.
shock, social humiliation, and similar injury. Though incapable of WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals in
pecuniary computation, moral damages may be recovered if they are CA-G.R. CR-HC No. 00644-MIN dated 20 July 2010 is hereby AFFIRMED with
the proximate result of the defendant's wrongful act for omission. MODIFICATIONS. Accused-appellant Bernadette Pansacala a.k.a. Neneng Awid
Exemplary damages, on the other hand, are awarded in is ORDERED to pay AAA and BBB the sum of ₱500,000 each as moral damages and
addition to the payment of moral damages, by way of example or ₱100,000 each as exemplary damages and to pay the costs.
correction for the public good, as stated in the Civil Code: SO ORDERED.
Art. 2229. Exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral, Abellana v. People, 17 August 2011
temperate, liquidated or compensatory damages. The only issue that confronts this Court is whether petitioner Felixberto A. Abellana could
Art. 2230. In criminal offenses, exemplary damages as a part of the civil still be held civilly liable notwithstanding his acquittal.
liability may be imposed when the crime was committed with one or
more aggravating circumstances. Such damages are separate and Assailed before this Court are the February 22, 2006 Decision[1] of the Court of Appeals
distinct from fines and shall be paid to the offended party. (CA) in CA-G.R. SP No. 78644 and its August 15, 2006 Resolution[2] denying the motion for
The payment of ₱500,000 as moral damages and ₱100,000 as reconsideration thereto. The assailed CA Decision set aside the May 21, 2003 Decision[3] of the
exemplary damages for the crime of Trafficking in Persons as a Prostitute finds Regional Trial Court (RTC) of Cebu City, Branch 13, in Criminal Case No. CBU-51385 and acquitted
basis in Article 2219 of the Civil Code, which states: the petitioner of the crime of falsification of public document by a private individual because the
Art. 2219. Moral damages may be recovered in the following and Information charged him with a different offense which is estafa through falsification of a public
analogous cases: document.[4] However, the CA still adjudged him civilly liable.[5]
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
Factual Antecedents an indeterminate penalty of TWO (2) YEARS and FOUR (4) MONTHS of Prision
Correccional, as minimum, to SIX (6)YEARS, as maximum.
In 1985, petitioner extended a loan to private respondents spouses Diaga and Saapia
Alonto (spouses Alonto),[6] secured by a Deed of Real Estate Mortgage over Lot Nos. 6471 and 6472 He is directed to institute reconveyance proceedings to restore ownership and
located in Cebu City.[7] Subsequently, or in 1987, petitioner prepared a Deed of Absolute Sale possession of the real properties in question in favor of private
conveying said lots to him. The Deed of Absolute Sale was signed by spouses Alonto complainants. After private complainants shall have acquired full ownership
in Manila. However, it was notarized in Cebu City allegedly without the spouses Alonto appearing and possession of the aforementioned properties, they are directed to pay the
before the notary public.[8] Thereafter, petitioner caused the transfer of the titles to his name and accused the sum of P130,000.00 [with] legal interest thereon reckoned from
sold the lots to third persons. the time this case was instituted.

On August 12, 1999,[9] an Information[10] was filed charging petitioner with Estafa through Should the accused fail to restore full ownership and possession in favor of the
Falsification of Public Document, the accusatory portion of which reads: private complainants [of] the real properties in question within a period of six
(6) months from the time this decision becomes final and executory, he is
That on or about the 9th day of July, 1987, in the City of Cebu, directed to pay said complainants the sum of P1,103,000.00 representing the
Philippines, and within the jurisdiction of this Honorable Court, the said accused, total value of the properties of the private complainants.
with deliberate intent, and with intent to defraud, did then and there falsify a
public document consisting of a Deed of Absolute Sale of a parcel of land He is likewise directed to pay private complainants the following:
consisting of 803 square meters executed before Notary Public Gines N.
Abellana per Doc. No. 383, Page No. 77, Book No. XXIII, Series of 1987 of the 1. P15,000.00 for nominal damages;
latters Notarial Register showing that spouses Saapia B. Alonto and Diaga 2. P20,000.00 for attorneys fees;
Alonto sold their parcel of land located at Pardo, Cebu City, for a 3. P50,000.00 as and for litigation expenses;
consideration of P130,000.00 in favor of accused by imitating, counterfeiting, 4. P30,000.00 as and for exemplary damages;
signing or [causing] to be imitated or counterfeited the signature[s] of spouses
Saapia B. Alonto and Diaga Alonto above their typewritten names in said plus the cost of this suit.
document as vendor[s], when in truth and in fact as the accused very well
knew that spouses Saapia B. Alonto and Diaga Alonto did not sell their SO ORDERED.[16]
aforestated descri[b]ed property and that the signature[s] appearing in said
document are not their signature[s], thus causing it to appear that spouses Ruling of the Court of Appeals
Saapia B. Alonto and Diaga Alonto participated in the execution of said On appeal, petitioner raised the issue of whether an accused who was acquitted of the crime
document when they did not so participate[. Once] said document was charged may nevertheless be convicted of another crime or offense not specifically charged and
falsified, accused did then and there cause the transfer of the titles of said land alleged and which is not necessarily included in the crime or offense charged. The CA, in its Decision
to his name using the said falsified document, to the damage and prejudice dated February 22, 2006, ruled in the negative.[17] It held that petitioner who was charged with and
of spouses Saapia B. Alonto and Diaga Alonto in the amount of P130,000.00, arraigned for estafa through falsification of public document under Article 171(1) of the RPC could
the value of the land . not be convicted of Falsification of Public Document by a Private Individual under Article 172(1) in
CONTRARY TO LAW.[11] relation to Article 171(2). The CA observed that the falsification committed in Article 171(1) requires
the counterfeiting of any handwriting, signature or rubric while the falsification in Article 171(2) occurs
During arraignment, petitioner entered a plea of not guilty.[12] After the termination of the pre-trial when the offender caused it to appear in a document that a person participated in an act or
conference, trial ensued. proceeding when in fact such person did not so participate. Thus, the CA opined that the
conviction of the petitioner for an offense not alleged in the Information or one not necessarily
Ruling of the Regional Trial Court included in the offense charged violated his constitutional right to be informed of the nature and
In its Decision dated May 21, 2003, the RTC noted that the main issue for resolution was whether cause of the accusation against him.[18] Nonetheless, the CA affirmed the trial courts finding with
petitioner committed the crime of estafa through falsification of public document.[13] Based on the respect to petitioners civil liability. The dispositive portion of the CAs February 22, 2006 Decision reads
evidence presented by both parties, the trial court found that petitioner did not intend to defraud as follows:
the spouses Alonto; that after the latter failed to pay their obligation, petitioner prepared a Deed of
Absolute Sale which the spouses Alonto actually signed; but that the Deed of Absolute Sale was WHEREFORE, premises considered, We resolve to set aside the Decision dated
notarized without the spouses Alonto personally appearing before the notary public. From these, May 21, 2003 of the Regional Trial Court, 7th Judicial Region, Branch
the trial court concluded that petitioner can only be held guilty of Falsification of a Public Document 13, Cebu City only insofar as it found the petitioner guilty of a crime that is
by a private individual under Article 172(1)[14] in relation to Article 171(2)[15] of the Revised Penal Code different from that charged in the Information. The civil liability determinations
(RPC) and not estafa through falsification of public document as charged in the Information. are affirmed.
The dispositive portion of the RTC Decision reads: SO ORDERED.[19]
Petitioner filed a motion for reconsideration which was denied in the Resolution dated
WHEREFORE, judgment is hereby rendered finding the accused Felixberto August 15, 2006.
Abellana GUILTY of the crime of falsification of public document by private
individuals under Article 172 of the Revised Penal Code and sentences him to
 Hence, petitioner comes before us through the present Petition for Review Second, even assuming that the spouses Alonto did not personally appear before the
on Certiorari raising the lone issue of whether he could still be held civilly liable notwithstanding his notary public for the notarization of the Deed of Absolute Sale, the same does not necessarily nullify
acquittal by the trial court and the CA. or render void ab initio the parties transaction.[27] Such non-appearance is not sufficient to
overcome the presumption of the truthfulness of the statements contained in the deed. To
Our Ruling overcome the presumption, there must be sufficient, clear and convincing evidence as to exclude
all reasonable controversy as to the falsity of the [deed]. In the absence of such proof, the deed
The petition is meritorious. must be upheld.[28] And since the defective notarization does not ipso facto invalidate the Deed of
Absolute Sale, the transfer of said properties from spouses Alonto to petitioner remains valid. Hence,
It is an established rule in criminal procedure that a judgment of acquittal shall state whether the when on the basis of said Deed of Absolute Sale, petitioner caused the cancellation of spouses
evidence of the prosecution absolutely failed to prove the guilt of the accused or merely failed to Alontos title and the issuance of new ones under his name, and thereafter sold the same to third
prove his guilt beyond reasonable doubt.[20] In either case, the judgment shall determine if the act persons, no damage resulted to the spouses Alonto.
or omission from which the civil liability might arise did not exist.[21] When the exoneration is merely
due to the failure to prove the guilt of the accused beyond reasonable doubt, the court should Moreover, we cannot sustain the alternative sentence imposed upon the petitioner, to wit: to
award the civil liability in favor of the offended party in the same criminal action.[22] In other words, institute an action for the recovery of the properties of spouses Alonto or to pay them actual and
the extinction of the penal action does not carry with it the extinction of civil liability unless the other kinds of damages. First, it has absolutely no basis in view of the trial courts finding that the
extinction proceeds from a declaration in a final judgment that the fact from which the civil [liability] signatures of the spouses Alonto in the Deed of Absolute Sale are genuine and not forged. Second,
might arise did not exist.[23] [s]entences should not be in the alternative. There is nothing in the law which permits courts to
impose sentences in the alternative.[29] While a judge has the discretion of imposing one or another
Here, the CA set aside the trial courts Decision because it convicted petitioner of an offense different penalty, he cannot impose both in the alternative.[30] He must fix positively and with certainty the
from or not included in the crime charged in the Information. To recall, petitioner was charged with particular penalty.[31]
estafa through falsification of public document. However, the RTC found that the spouses Alonto
actually signed the document although they did not personally appear before the notary public In view of the above discussion, there is therefore absolutely no basis for the trial court and the CA
for its notarization. Hence, the RTC instead convicted petitioner of falsification of public document. to hold petitioner civilly liable to restore ownership and possession of the subject properties to the
On appeal, the CA held that petitioners conviction cannot be sustained because it infringed on his spouses Alonto or to pay them P1,103,000.00 representing the value of the properties and to pay
right to be informed of the nature and cause of the accusation against him.[24] The CA, however, them nominal damages, exemplary damages, attorneys fees and litigation expenses.
found no reversible error on the civil liability of petitioner as determined by the trial court and thus WHEREFORE, the petition is GRANTED. The February 22, 2006 Decision of the Court of Appeals in CA-
sustained the same.[25] G.R. SP No. 78644 and its August 15, 2006 Resolution are AFFIRMED insofar as they set aside the
conviction of the petitioner for the crime of falsification of public document. The portion which
We do not agree. affirmed the imposition of civil liabilities on the petitioner, i.e., the restoration of ownership and
In Banal v. Tadeo, Jr.,[26] we elucidated on the civil liability of the accused despite his exoneration in possession, the payment of P1,103,000.00 representing the value of the property, and the payment
this wise: of nominal and exemplary damages, attorneys fees and litigation expenses, is DELETED for lack of
factual and legal basis.
While an act or omission is felonious because it is punishable by law, it gives rise SO ORDERED.
to civil liability not so much because it is a crime but because it caused
damage to another. Viewing things pragmatically, we can readily see that G.R. No. 74761 November 6, 1990
what gives rise to the civil liability is really the obligation and moral duty of NATIVIDAD V. ANDAMO and EMMANUEL R. ANDAMO, petitioners,
everyone to repair or make whole the damage caused to another by reason vs.
of his own act or omission, done intentionally or negligently, whether or not the INTERMEDIATE APPELLATE COURT (First Civil Cases Division) and MISSIONARIES OF OUR
same be punishable by law. x x x LADY OF LA SALETTE, INC., respondents.
Lope E. Adriano for petitioners.
Padilla Law Office for private respondent.
Simply stated, civil liability arises when one, by reason of his own act or omission, done
intentionally or negligently, causes damage to another. Hence, for petitioner to be civilly liable to FERNAN, C.J.:
spouses Alonto, it must be proven that the acts he committed had caused damage to the spouses. The pivotal issue in this petition for certiorari, prohibition and mandamus is whether a
corporation, which has built through its agents, waterpaths, water conductors and
Based on the records of the case, we find that the acts allegedly committed by the contrivances within its land, thereby causing inundation and damage to an adjacent
petitioner did not cause any damage to spouses Alonto. land, can be held civilly liable for damages under Articles 2176 and 2177 of the Civil Code
on quasi-delicts such that the resulting civil case can proceed independently of the
First, the Information charged petitioner with fraudulently making it appear that the criminal case.
spouses Alonto affixed their signatures in the Deed of Absolute Sale thereby facilitating the transfer The antecedent facts are as follows:
of the subject properties in his favor. However, after the presentation of the parties respective Petitioner spouses Emmanuel and Natividad Andamo are the owners of a parcel of land
evidence, the trial court found that the charge was without basis as the spouses Alonto indeed situated in Biga (Biluso) Silang, Cavite which is adjacent to that of private respondent,
signed the document and that their signatures were genuine and not forged. Missionaries of Our Lady of La Salette, Inc., a religious corporation.
Within the land of respondent corporation, waterpaths and contrivances, including an
artificial lake, were constructed, which allegedly inundated and eroded petitioners' land,
caused a young man to drown, damaged petitioners' crops and plants, washed away defendant to the cemented mouth of a big canal, also constructed by defendant, which
costly fences, endangered the lives of petitioners and their laborers during rainy and runs northward towards a big hole or opening which was also built by defendant thru the
stormy seasons, and exposed plants and other improvements to destruction. lower portion of its concrete hollow-blocks fence which separates the land of plaintiffs
In July 1982, petitioners instituted a criminal action, docketed as Criminal Case No. TG- from that of defendant (and which serves as the exit-point of the floodwater coming from
907-82, before the Regional Trial Court of Cavite, Branch 4 (Tagaytay City), against Efren the land of defendant, and at the same time, the entrance-point of the same floodwater
Musngi, Orlando Sapuay and Rutillo Mallillin, officers and directors of herein respondent to the land of plaintiffs, year after year, during rainy or stormy seasons.
corporation, for destruction by means of inundation under Article 324 of the Revised Penal 5) That moreover, on the middle-left portion of its land just beside the land of plaintiffs,
Code. defendant also constructed an artificial lake, the base of which is soil, which utilizes the
Subsequently, on February 22, 1983, petitioners filed another action against respondent water being channeled thereto from its water system thru inter-connected galvanized
corporation, this time a civil case, docketed as Civil Case No. TG-748, for damages with iron pipes (No. 2) and complimented by rain water during rainy or stormy seasons, so
prayer for the issuance of a writ of preliminary injunction before the same court. 1 much so that the water below it seeps into, and the excess water above it inundates,
On March 11, 1983, respondent corporation filed its answer to the complaint and portions of the adjoining land of plaintiffs.
opposition to the issuance of a writ of preliminary injunction. Hearings were conducted 6) That as a result of the inundation brought about by defendant's aforementioned water
including ocular inspections on the land. However, on April 26, 1984, the trial court, acting conductors, contrivances and manipulators, a young man was drowned to death, while
on respondent corporation's motion to dismiss or suspend the civil action, issued an herein plaintiffs suffered and will continue to suffer, as follows:
order suspending further hearings in Civil Case No, TG-748 until after judgment in the a) Portions of the land of plaintiffs were eroded and converted to deep, wide and long
related Criminal Case No. TG-907-82. canals, such that the same can no longer be planted to any crop or plant.
Resolving respondent corporation's motion to dismiss filed on June 22, 1984, the trial court b) Costly fences constructed by plaintiffs were, on several occasions, washed away.
issued on August 27, 1984 the disputed order dismissing Civil Case No. TG-748 for lack of c) During rainy and stormy seasons the lives of plaintiffs and their laborers are always in
jurisdiction, as the criminal case which was instituted ahead of the civil case was still danger.
unresolved. Said order was anchored on the provision of Section 3 (a), Rule III of the Rules d) Plants and other improvements on other portions of the land of plaintiffs are exposed
of Court which provides that "criminal and civil actions arising from the same offense may to destruction. ... 10
be instituted separately, but after the criminal action has been commenced the civil A careful examination of the aforequoted complaint shows that the civil action is one
action cannot be instituted until final judgment has been rendered in the criminal under Articles 2176 and 2177 of the Civil Code on quasi-delicts. All the elements of a quasi-
action." 2 delict are present, to wit: (a) damages suffered by the plaintiff, (b) fault or negligence of
Petitioners appealed from that order to the Intermediate Appellate Court. 3 the defendant, or some other person for whose acts he must respond; and (c) the
On February 17, 1986, respondent Appellate Court, First Civil Cases Division, promulgated connection of cause and effect between the fault or negligence of the defendant and
a decision 4 affirming the questioned order of the trial court. 5 A motion for the damages incurred by the plaintiff. 11
reconsideration filed by petitioners was denied by the Appellate Court in its resolution Clearly, from petitioner's complaint, the waterpaths and contrivances built by respondent
dated May 19, 1986. 6 corporation are alleged to have inundated the land of petitioners. There is therefore, an
Directly at issue is the propriety of the dismissal of Civil Case No. TG-748 in accordance assertion of a causal connection between the act of building these waterpaths and the
with Section 3 (a) of Rule 111 of the Rules of Court. Petitioners contend that the trial court damage sustained by petitioners. Such action if proven constitutes fault or negligence
and the Appellate Court erred in dismissing Civil Case No. TG-748 since it is predicated on which may be the basis for the recovery of damages.
a quasi-delict. Petitioners have raised a valid point. In the case of Samson vs. Dionisio, 12 the Court applied Article 1902, now Article 2176 of
It is axiomatic that the nature of an action filed in court is determined by the facts alleged the Civil Code and held that "any person who without due authority constructs a bank or
in the complaint as constituting the cause of action. 7 The purpose of an action or suit and dike, stopping the flow or communication between a creek or a lake and a river, thereby
the law to govern it, including the period of prescription, is to be determined not by the causing loss and damages to a third party who, like the rest of the residents, is entitled to
claim of the party filing the action, made in his argument or brief, but rather by the the use and enjoyment of the stream or lake, shall be liable to the payment of an
complaint itself, its allegations and prayer for relief. 8 The nature of an action is not indemnity for loss and damages to the injured party.
necessarily determined or controlled by its title or heading but the body of the pleading While the property involved in the cited case belonged to the public domain and the
or complaint itself. To avoid possible denial of substantial justice due to legal property subject of the instant case is privately owned, the fact remains that petitioners'
technicalities, pleadings as well as remedial laws should be liberally construed so that the complaint sufficiently alleges that petitioners have sustained and will continue to sustain
litigants may have ample opportunity to prove their respective claims. 9 damage due to the waterpaths and contrivances built by respondent corporation.
Quoted hereunder are the pertinent portions of petitioners' complaint in Civil Case No. Indeed, the recitals of the complaint, the alleged presence of damage to the petitioners,
TG-748: the act or omission of respondent corporation supposedly constituting fault or
4) That within defendant's land, likewise located at Biga (Biluso), Silang, Cavite, adjacent negligence, and the causal connection between the act and the damage, with no pre-
on the right side of the aforesaid land of plaintiffs, defendant constructed waterpaths existing contractual obligation between the parties make a clear case of a quasi
starting from the middle-right portion thereof leading to a big hole or opening, also delict or culpa aquiliana.
constructed by defendant, thru the lower portion of its concrete hollow-blocks fence It must be stressed that the use of one's property is not without limitations. Article 431 of
situated on the right side of its cemented gate fronting the provincial highway, and the Civil Code provides that "the owner of a thing cannot make use thereof in such a
connected by defendant to a man height inter-connected cement culverts which were manner as to injure the rights of a third person." SIC UTERE TUO UT ALIENUM NON LAEDAS.
also constructed and lain by defendant cross-wise beneath the tip of the said cemented Moreover, adjoining landowners have mutual and reciprocal duties which require that
gate, the left-end of the said inter-connected culverts again connected by defendant to each must use his own land in a reasonable manner so as not to infringe upon the rights
a big hole or opening thru the lower portion of the same concrete hollowblocks fence on and interests of others. Although we recognize the right of an owner to build structures on
the left side of the said cemented gate, which hole or opening is likewise connected by his land, such structures must be so constructed and maintained using all reasonable care
so that they cannot be dangerous to adjoining landowners and can withstand the usual the hearing of the case with dispatch. This decision is immediately executory. Costs
and expected forces of nature. If the structures cause injury or damage to an adjoining against respondent corporation.
landowner or a third person, the latter can claim indemnification for the injury or damage SO ORDERED.
suffered.
Article 2176 of the Civil Code imposes a civil liability on a person for damage caused by G.R. No. L-48006 July 8, 1942
his act or omission constituting fault or negligence, thus: FAUSTO BARREDO, petitioner, vs. SEVERINO GARCIA and TIMOTEA ALMARIO, respondents.
Article 2176. Whoever by act or omission causes damage to another, BOCOBO, J.:
there being fault or negligence, is obliged to pay for the damage This case comes up from the Court of Appeals which held the petitioner herein, Fausto
done. Such fault or negligence, if there is no pre-existing contractual Barredo, liable in damages for the death of Faustino Garcia caused by the negligence
relation between the parties, is called a quasi-delict and is governed of Pedro Fontanilla, a taxi driver employed by said Fausto Barredo.
by the provisions of this chapter. At about half past one in the morning of May 3, 1936, on the road between Malabon and
Article 2176, whenever it refers to "fault or negligence", covers not only acts "not Navotas, Province of Rizal, there was a head-on collision between a taxi of the Malate
punishable by law" but also acts criminal in character, whether intentional and voluntary Taxicab driven by Pedro Fontanilla and a carretela guided by Pedro Dimapalis. The
or negligent. Consequently, a separate civil action lies against the offender in a criminal carretela was overturned, and one of its passengers, 16-year-old boy Faustino Garcia,
act, whether or not he is criminally prosecuted and found guilty or acquitted, provided suffered injuries from which he died two days later. A criminal action was filed against
that the offended party is not allowed, (if the tortfeasor is actually charged also Fontanilla in the Court of First Instance of Rizal, and he was convicted and sentenced to
criminally), to recover damages on both scores, and would be entitled in such eventuality an indeterminate sentence of one year and one day to two years of prision correccional.
only to the bigger award of the two, assuming the awards made in the two cases vary. 13 The court in the criminal case granted the petition that the right to bring a separate civil
The distinctness of quasi-delicta is shown in Article 2177 of the Civil Code, which states: action be reserved. The Court of Appeals affirmed the sentence of the lower court in the
Article 2177. Responsibility for fault or negligence under the preceding criminal case. Severino Garcia and Timotea Almario, parents of the deceased on March
article is entirely separate and distinct from the civil liability arising from 7, 1939, brought an action in the Court of First Instance of Manila against Fausto Barredo
negligence under the Penal Code. But the plaintiff cannot recover as the sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla. On July 8,
damages twice for the same act or omission of the defendant. 1939, the Court of First Instance of Manila awarded damages in favor of the plaintiffs for
According to the Report of the Code Commission "the foregoing provision though at first P2,000 plus legal interest from the date of the complaint. This decision was modified by
sight startling, is not so novel or extraordinary when we consider the exact nature of the Court of Appeals by reducing the damages to P1,000 with legal interest from the time
criminal and civil negligence. The former is a violation of the criminal law, while the latter the action was instituted. It is undisputed that Fontanilla 's negligence was the cause of
is a distinct and independent negligence, which is a "culpa aquiliana" or quasi-delict, of the mishap, as he was driving on the wrong side of the road, and at high speed. As to
ancient origin, having always had its own foundation and individuality, separate from Barredo's responsibility, the Court of Appeals found:
criminal negligence. Such distinction between criminal negligence and "culpa extra- ... It is admitted that defendant is Fontanilla's employer. There is proof that he
contractual" or "cuasi-delito" has been sustained by decisions of the Supreme Court of exercised the diligence of a good father of a family to prevent damage. (See
Spain ... 14 p. 22, appellant's brief.) In fact it is shown he was careless in employing Fontanilla
In the case of Castillo vs. Court of Appeals, 15 this Court held that a quasi-delict or culpa who had been caught several times for violation of the Automobile Law and
aquiliana is a separate legal institution under the Civil Code with a substantivity all its own, speeding (Exhibit A) — violation which appeared in the records of the Bureau of
and individuality that is entirely apart and independent from a delict or crime — a Public Works available to be public and to himself. Therefore, he must indemnify
distinction exists between the civil liability arising from a crime and the responsibility for plaintiffs under the provisions of article 1903 of the Civil Code.
quasi-delicts or culpa extra-contractual. The same negligence causing damages may The main theory of the defense is that the liability of Fausto Barredo is governed by the
produce civil liability arising from a crime under the Penal Code, or create an action for Revised Penal Code; hence, his liability is only subsidiary, and as there has been no civil
quasi-delicts or culpa extra-contractual under the Civil Code. Therefore, the acquittal or action against Pedro Fontanilla, the person criminally liable, Barredo cannot be held
conviction in the criminal case is entirely irrelevant in the civil case, unless, of course, in responsible in the case. The petitioner's brief states on page 10:
the event of an acquittal where the court has declared that the fact from which the civil ... The Court of Appeals holds that the petitioner is being sued for his failure to
action arose did not exist, in which case the extinction of the criminal liability would carry exercise all the diligence of a good father of a family in the selection and
with it the extinction of the civil liability. supervision of Pedro Fontanilla to prevent damages suffered by the respondents.
In Azucena vs. Potenciano, 16 the Court declared that in quasi-delicts, "(t)he civil action is In other words, The Court of Appeals insists on applying in the case article 1903
entirely independent of the criminal case according to Articles 33 and 2177 of the Civil of the Civil Code. Article 1903 of the Civil Code is found in Chapter II, Title 16,
Code. There can be no logical conclusion than this, for to subordinate the civil action Book IV of the Civil Code. This fact makes said article to a civil liability arising from
contemplated in the said articles to the result of the criminal prosecution — whether it be a crime as in the case at bar simply because Chapter II of Title 16 of Book IV of
conviction or acquittal — would render meaningless the independent character of the the Civil Code, in the precise words of article 1903 of the Civil Code itself, is
civil action and the clear injunction in Article 31, that his action may proceed applicable only to "those (obligations) arising from wrongful or negligent acts or
independently of the criminal proceedings and regardless of the result of the latter." commission not punishable by law.
WHEREFORE, the assailed decision dated February 17, 1986 of the then Intermediate The gist of the decision of the Court of Appeals is expressed thus:
Appellate Court affirming the order of dismissal of the Regional Trial Court of Cavite, ... We cannot agree to the defendant's contention. The liability sought to be
Branch 18 (Tagaytay City) dated August 17, 1984 is hereby REVERSED and SET ASIDE. The imposed upon him in this action is not a civil obligation arising from a felony or a
trial court is ordered to reinstate Civil Case No. TG-748 entitled "Natividad V. Andamo and misdemeanor (the crime of Pedro Fontanilla,), but an obligation imposed in
Emmanuel R. Andamo vs. Missionaries of Our Lady of La Salette Inc." and to proceed with article 1903 of the Civil Code by reason of his negligence in the selection or
supervision of his servant or employee.
The pivotal question in this case is whether the plaintiffs may bring this separate civil action ART. 100. Civil liability of a person guilty of felony. — Every person criminally liable
against Fausto Barredo, thus making him primarily and directly, responsible under article for a felony is also civilly liable.
1903 of the Civil Code as an employer of Pedro Fontanilla. The defendant maintains that ART. 101. Rules regarding civil liability in certain cases. — The exemption from
Fontanilla's negligence being punishable by the Penal Code, his (defendant's) liability as criminal liability established in subdivisions 1, 2, 3, 5, and 6 of article 12 and in
an employer is only subsidiary, according to said Penal code, but Fontanilla has not been subdivision 4 of article 11 of this Code does not include exemption from civil
sued in a civil action and his property has not been exhausted. To decide the main issue, liability, which shall be enforced to the following rules:
we must cut through the tangle that has, in the minds of many confused and jumbled First. In cases of subdivision, 1, 2 and 3 of article 12 the civil liability for acts
together delitos and cuasi delitos, or crimes under the Penal Code and fault or committed by any imbecile or insane person, and by a person under nine years
negligence under articles 1902-1910 of the Civil Code. This should be done, because of age, or by one over nine but under fifteen years of age, who has acted
justice may be lost in a labyrinth, unless principles and remedies are distinctly envisaged. without discernment shall devolve upon those having such person under their
Fortunately, we are aided in our inquiry by the luminous presentation of the perplexing legal authority or control, unless it appears that there was no fault or negligence
subject by renown jurists and we are likewise guided by the decisions of this Court in on their part.
previous cases as well as by the solemn clarity of the consideration in several sentences Should there be no person having such insane, imbecile or minor under his
of the Supreme Tribunal of Spain. authority, legal guardianship, or control, or if such person be insolvent, said
Authorities support the proposition that a quasi-delict or "culpa aquiliana " is a separate insane, imbecile, or minor shall respond with their own property, excepting
legal institution under the Civil Code with a substantivity all its own, and individuality that property exempt from execution, in accordance with the civil law.
is entirely apart and independent from delict or crime. Upon this principle and on the Second. In cases falling within subdivision 4 of article 11, the person for whose
wording and spirit article 1903 of the Civil Code, the primary and direct responsibility of benefit the harm has been prevented shall be civilly liable in proportion to the
employers may be safely anchored. benefit which they may have received.
The pertinent provisions of the Civil Code and Revised Penal Code are as follows: The courts shall determine, in their sound discretion, the proportionate amount for which
CIVIL CODE each one shall be liable.
ART. 1089 Obligations arise from law, from contracts and quasi-contracts, and When the respective shares can not be equitably determined, even approximately, or
from acts and omissions which are unlawful or in which any kind of fault or when the liability also attaches to the Government, or to the majority of the inhabitants
negligence intervenes. of the town, and, in all events, whenever the damage has been caused with the consent
xxx xxx xxx of the authorities or their agents, indemnification shall be made in the manner prescribed
ART. 1092. Civil obligations arising from felonies or misdemeanors shall be by special laws or regulations.
governed by the provisions of the Penal Code. Third. In cases falling within subdivisions 5 and 6 of article 12, the persons using violence or
ART. 1093. Those which are derived from acts or omissions in which fault or causing the fear shall be primarily liable and secondarily, or, if there be no such persons,
negligence, not punishable by law, intervenes shall be subject to the provisions those doing the act shall be liable, saving always to the latter that part of their property
of Chapter II, Title XVI of this book. exempt from execution.
xxx xxx xxx ART. 102. Subsidiary civil liability of innkeepers, tavern keepers and proprietors of
ART 1902. Any person who by an act or omission causes damage to another by establishment. — In default of persons criminally liable, innkeepers, tavern
his fault or negligence shall be liable for the damage so done. keepers, and any other persons or corporation shall be civilly liable for crimes
ART. 1903. The obligation imposed by the next preceding article is enforcible, committed in their establishments, in all cases where a violation of municipal
not only for personal acts and omissions, but also for those of persons for whom ordinances or some general or special police regulation shall have been
another is responsible. committed by them or their employees.
The father and in, case of his death or incapacity, the mother, are liable for any Innkeepers are also subsidiarily liable for the restitution of goods taken by
damages caused by the minor children who live with them. robbery or theft within their houses lodging therein, or the person, or for the
Guardians are liable for damages done by minors or incapacitated persons payment of the value thereof, provided that such guests shall have notified in
subject to their authority and living with them. advance the innkeeper himself, or the person representing him, of the deposit
Owners or directors of an establishment or business are equally liable for any of such goods within the inn; and shall furthermore have followed the directions
damages caused by their employees while engaged in the branch of the which such innkeeper or his representative may have given them with respect
service in which employed, or on occasion of the performance of their duties. to the care of and vigilance over such goods. No liability shall attach in case of
The State is subject to the same liability when it acts through a special agent, robbery with violence against or intimidation against or intimidation of persons
but not if the damage shall have been caused by the official upon whom unless committed by the innkeeper's employees.
properly devolved the duty of doing the act performed, in which case the ART. 103. Subsidiary civil liability of other persons. — The subsidiary liability
provisions of the next preceding article shall be applicable. established in the next preceding article shall also apply to employers, teachers,
Finally, teachers or directors of arts trades are liable for any damages caused persons, and corporations engaged in any kind of industry for felonies
by their pupils or apprentices while they are under their custody. committed by their servants, pupils, workmen, apprentices, or employees in the
The liability imposed by this article shall cease in case the persons mentioned discharge of their duties.
therein prove that they are exercised all the diligence of a good father of a xxx xxx xxx
family to prevent the damage. ART. 365. Imprudence and negligence. — Any person who, by reckless
ART. 1904. Any person who pays for damage caused by his employees may imprudence, shall commit any act which, had it been intentional, would
recover from the latter what he may have paid. constitute a grave felony, shall suffer the penalty of arresto mayor in its maximum
REVISED PENAL CODE period to prision correccional in its minimum period; if it would have constituted
 a less grave felony, the penalty of arresto mayor in its minimum and medium no case carries with it any criminal responsibility, and another which is a
periods shall be imposed. necessary consequence of the penal liability as a result of every felony or
Any person who, by simple imprudence or negligence, shall commit an act misdemeanor."
which would otherwise constitute a grave felony, shall suffer the penalty Maura, an outstanding authority, was consulted on the following case: There had been a
of arresto mayor in its medium and maximum periods; if it would have collision between two trains belonging respectively to the Ferrocarril Cantabrico and the
constituted a less serious felony, the penalty of arresto mayor in its minimum Ferrocarril del Norte. An employee of the latter had been prosecuted in a criminal case,
period shall be imposed." in which the company had been made a party as subsidiarily responsible in civil
It will thus be seen that while the terms of articles 1902 of the Civil Code seem to be broad damages. The employee had been acquitted in the criminal case, and the employer,
enough to cover the driver's negligence in the instant case, nevertheless article 1093 the Ferrocarril del Norte, had also been exonerated. The question asked was whether the
limits cuasi-delitos to acts or omissions "not punishable by law." But inasmuch as article 365 Ferrocarril Cantabrico could still bring a civil action for damages against the Ferrocarril
of the Revised Penal Code punishes not only reckless but even simple imprudence or del Norte. Maura's opinion was in the affirmative, stating in part (Maura, Dictamenes, Vol.
negligence, the fault or negligence under article 1902 of the Civil Code has apparently 6, pp. 511-513):
been crowded out. It is this overlapping that makes the "confusion worse confounded." As things are, apropos of the reality pure and simple of the facts, it seems less tenable that
However, a closer study shows that such a concurrence of scope in regard to negligent there should be res judicata with regard to the civil obligation for damages on account
acts does not destroy the distinction between the civil liability arising from a crime and of the losses caused by the collision of the trains. The title upon which the action for
the responsibility for cuasi-delitos or culpa extra-contractual. The same negligent act reparation is based cannot be confused with the civil responsibilities born of a crime,
causing damages may produce civil liability arising from a crime under article 100 of the because there exists in the latter, whatever each nature, a culpa surrounded with
Revised Penal Code, or create an action for cuasi-delito or culpa extra- aggravating aspects which give rise to penal measures that are more or less severe. The
contractual under articles 1902-1910 of the Civil Code. injury caused by a felony or misdemeanor upon civil rights requires restitutions,
The individuality of cuasi-delito or culpa extra-contractual looms clear and unmistakable. reparations, or indemnifications which, like the penalty itself, affect public order; for this
This legal institution is of ancient lineage, one of its early ancestors being the Lex Aquilia in reason, they are ordinarily entrusted to the office of the prosecuting attorney; and it is
the Roman Law. In fact, in Spanish legal terminology, this responsibility is often referred to clear that if by this means the losses and damages are repaired, the injured party no
as culpa aquiliana. The Partidas also contributed to the genealogy of the present fault or longer desires to seek another relief; but this coincidence of effects does not eliminate
negligence under the Civil Code; for instance, Law 6, Title 15, of Partida 7, says: "Tenudo the peculiar nature of civil actions to ask for indemnity.
es de fazer emienda, porque, como quier que el non fizo a sabiendas en daño al otro, Such civil actions in the present case (without referring to contractual faults which are not
pero acaescio por su culpa." pertinent and belong to another scope) are derived, according to article 1902 of the Civil
The distinctive nature of cuasi-delitos survives in the Civil Code. According to article 1089, Code, from every act or omission causing losses and damages in which culpa or
one of the five sources of obligations is this legal institution of cuasi-delito or culpa extra- negligence intervenes. It is unimportant that such actions are every day filed before the
contractual: "los actos . . . en que intervenga cualquier genero de culpa o negligencia." civil courts without the criminal courts interfering therewith. Articles 18 to 21 and 121 to 128
Then article 1093 provides that this kind of obligation shall be governed by Chapter II of of the Penal Code, bearing in mind the spirit and the social and political purposes of that
Title XVI of Book IV, meaning articles 1902-0910. This portion of the Civil Code is exclusively Code, develop and regulate the matter of civil responsibilities arising from a crime,
devoted to the legal institution of culpa aquiliana. separately from the regime under common law, of culpa which is known as aquiliana, in
Some of the differences between crimes under the Penal Code and the culpa accordance with legislative precedent of the Corpus Juris. It would be unwarranted to
aquiliana or cuasi-delito under the Civil Code are: make a detailed comparison between the former provisions and that regarding the
1. That crimes affect the public interest, while cuasi-delitos are only of private concern. obligation to indemnify on account of civil culpa; but it is pertinent and necessary to point
2. That, consequently, the Penal Code punishes or corrects the criminal act, while the Civil out to one of such differences.
Code, by means of indemnification, merely repairs the damage. Articles 20 and 21 of the Penal Code, after distriburing in their own way the civil
3. That delicts are not as broad as quasi-delicts, because the former are punished only if responsibilities among those who, for different reasons, are guilty of felony or
there is a penal law clearly covering them, while the latter, cuasi-delitos, include all acts misdemeanor, make such civil responsibilities applicable to enterprises and
in which "any king of fault or negligence intervenes." However, it should be noted that not establishments for which the guilty parties render service, but with subsidiary character,
all violations of the penal law produce civil responsibility, such as begging in that is to say, according to the wording of the Penal Code, in default of those who are
contravention of ordinances, violation of the game laws, infraction of the rules of traffic criminally responsible. In this regard, the Civil Code does not coincide because article
when nobody is hurt. (See Colin and Capitant, "Curso Elemental de Derecho Civil," Vol. 3, 1903 says: "The obligation imposed by the next preceding article is demandable, not only
p. 728.) for personal acts and omissions, but also for those of persons for whom another is
Let us now ascertain what some jurists say on the separate existence of quasi-delicts and responsible." Among the persons enumerated are the subordinates and employees of
the employer's primary and direct liability under article 1903 of the Civil Code. establishments or enterprises, either for acts during their service or on the occasion of their
Dorado Montero in his essay on "Responsibilidad" in the "Enciclopedia Juridica Española" functions. It is for this reason that it happens, and it is so observed in judicial decisions, that
(Vol. XXVII, p. 414) says: the companies or enterprises, after taking part in the criminal cases because of their
El concepto juridico de la responsabilidad civil abarca diversos aspectos y subsidiary civil responsibility by reason of the crime, are sued and
comprende a diferentes personas. Asi, existe una responsabilidad civil sentenced directly and separately with regard to the obligation, before the civil courts.
propiamente dicha, que en ningun casl lleva aparejada responsabilidad Seeing that the title of this obligation is different, and the separation between punitive
criminal alguna, y otra que es consecuencia indeclinable de la penal que nace justice and the civil courts being a true postulate of our judicial system, so that they have
de todo delito o falta." different fundamental norms in different codes, as well as different modes of procedure,
The juridical concept of civil responsibility has various aspects and comprises and inasmuch as the Compaña del Ferrocarril Cantabrico has abstained from taking part
different persons. Thus, there is a civil responsibility, properly speaking, which in in the criminal case and has reserved the right to exercise its actions, it seems undeniable
that the action for indemnification for the losses and damages caused to it by the collision by the "compañia Electric Madrileña de Traccion." The conductor was prosecuted in a
was not sub judice before the Tribunal del Jurado, nor was it the subject of a sentence, criminal case but he was acquitted. Thereupon, the widow filed a civil action against the
but it remained intact when the decision of March 21 was rendered. Even if the verdict street car company, paying for damages in the amount of 15,000 pesetas. The lower court
had not been that of acquittal, it has already been shown that such action had been awarded damages; so the company appealed to the Supreme Tribunal, alleging
legitimately reserved till after the criminal prosecution; but because of the declaration of violation of articles 1902 and 1903 of the Civil Code because by final judgment the non-
the non-existence of the felony and the non-existence of the responsibility arising from the existence of fault or negligence had been declared. The Supreme Court of Spain
crime, which was the sole subject matter upon which the Tribunal del Jurado had dismissed the appeal, saying:
jurisdiction, there is greater reason for the civil obligation ex lege, and it becomes clearer Considering that the first ground of the appeal is based on the mistaken supposition that
that the action for its enforcement remain intact and is not res judicata. the trial court, in sentencing the Compañia Madrileña to the payment of the damage
Laurent, a jurist who has written a monumental work on the French Civil Code, on which caused by the death of Ramon Lafuente Izquierdo, disregards the value and juridical
the Spanish Civil Code is largely based and whose provisions on cuasi-delito or culpa effects of the sentence of acquittal rendered in the criminal case instituted on account
extra-contractual are similar to those of the Spanish Civil Code, says, referring to article of the same act, when it is a fact that the two jurisdictions had taken cognizance of the
1384 of the French Civil Code which corresponds to article 1903, Spanish Civil Code: same act in its different aspects, and as the criminal jurisdiction declared within the limits
The action can be brought directly against the person responsible (for another), without of its authority that the act in question did not constitute a felony because there was no
including the author of the act. The action against the principal is accessory in the sense grave carelessness or negligence, and this being the only basis of acquittal, it does no
that it implies the existence of a prejudicial act committed by the employee, but it is not exclude the co-existence of fault or negligence which is not qualified, and is a source of
subsidiary in the sense that it can not be instituted till after the judgment against the author civil obligations according to article 1902 of the Civil Code, affecting, in accordance with
of the act or at least, that it is subsidiary to the principal action; the action for responsibility article 1903, among other persons, the managers of establishments or enterprises by
(of the employer) is in itself a principal action. (Laurent, Principles of French Civil Law, reason of the damages caused by employees under certain conditions, it is manifest
Spanish translation, Vol. 20, pp. 734-735.) that the civil jurisdiccion in taking cognizance of the same act in this latter aspect and in
Amandi, in his "Cuestionario del Codigo Civil Reformado" (Vol. 4, pp. 429, 430), declares ordering the company, appellant herein, to pay an indemnity for the damage caused
that the responsibility of the employer is principal and not subsidiary. He writes: by one of its employees, far from violating said legal provisions, in relation with article 116
Question No. 1. Is the responsibility declared in article 1903 for the acts or omissions of of the Law of Criminal Procedure, strictly followed the same, without invading attributes
those persons for who one is responsible, subsidiary or principal? In order to answer this which are beyond its own jurisdiction, and without in any way contradicting the decision
question it is necessary to know, in the first place, on what the legal provision is based. Is in that cause. (Emphasis supplied.)
it true that there is a responsibility for the fault of another person? It seems so at first sight; It will be noted, as to the case just cited:
but such assertion would be contrary to justice and to the universal maxim that all faults First. That the conductor was not sued in a civil case, either separately or with the street
are personal, and that everyone is liable for those faults that can be imputed to him. The car company. This is precisely what happens in the present case: the driver, Fontanilla,
responsibility in question is imposed on the occasion of a crime or fault, but not because has not been sued in a civil action, either alone or with his employer.
of the same, but because of the cuasi-delito, that is to say, the imprudence or negligence Second. That the conductor had been acquitted of grave criminal negligence, but the
of the father, guardian, proprietor or manager of the establishment, of the teacher, etc. Supreme Tribunal of Spain said that this did not exclude the co-existence of fault or
Whenever anyone of the persons enumerated in the article referred to (minors, negligence, which is not qualified, on the part of the conductor, under article 1902 of the
incapacitated persons, employees, apprentices) causes any damage, the law presumes Civil Code. In the present case, the taxi driver was found guilty of criminal negligence, so
that the father, guardian, teacher, etc. have committed an act of negligence in not that if he had even sued for his civil responsibility arising from the crime, he would have
preventing or avoiding the damage. It is this fault that is condemned by the law. It is, been held primarily liable for civil damages, and Barredo would have been held
therefore, only apparent that there is a responsibility for the act of another; in reality the subsidiarily liable for the same. But the plaintiffs are directly suing Barredo, on his primary
responsibility exacted is for one's own act. The idea that such responsibility is subsidiary is, responsibility because of his own presumed negligence — which he did not overcome —
therefore, completely inadmissible. under article 1903. Thus, there were two liabilities of Barredo: first, the subsidiary one
That is to say, one is not responsible for the acts of others, because one is liable only for because of the civil liability of the taxi driver arising from the latter's criminal negligence;
his own faults, this being the doctrine of article 1902; but, by exception, one is liable for and, second, Barredo's primary liability as an employer under article 1903. The plaintiffs
the acts of those persons with whom there is a bond or tie which gives rise to the were free to choose which course to take, and they preferred the second remedy. In so
responsibility. Is this responsibility direct or subsidiary? In the order of the penal law, the doing, they were acting within their rights. It might be observed in passing, that the plaintiff
Penal Code distinguishes between minors and incapacitated persons on the one hand, choose the more expeditious and effective method of relief, because Fontanilla was
and other persons on the other, declaring that the responsibility for the former is direct either in prison, or had just been released, and besides, he was probably without property
(article 19), and for the latter, subsidiary (articles 20 and 21); but in the scheme of the civil which might be seized in enforcing any judgment against him for damages.
law, in the case of article 1903, the responsibility should be understood as direct, Third. That inasmuch as in the above sentence of October 21, 1910, the employer was
according to the tenor of that articles, for precisely it imposes responsibility "for the acts held liable civilly, notwithstanding the acquittal of the employee (the conductor) in a
of those persons for whom one should be responsible." previous criminal case, with greater reason should Barredo, the employer in the case at
Coming now to the sentences of the Supreme Tribunal of Spain, that court has upheld the bar, be held liable for damages in a civil suit filed against him because his taxi driver had
principles above set forth: that a quasi-delict or culpa extra-contractual is a separate been convicted. The degree of negligence of the conductor in the Spanish case cited
and distinct legal institution, independent from the civil responsibility arising from criminal was less than that of the taxi driver, Fontanilla, because the former was acquitted in the
liability, and that an employer is, under article 1903 of the Civil Code, primarily and directly previous criminal case while the latter was found guilty of criminal negligence and was
responsible for the negligent acts of his employee. sentenced to an indeterminate sentence of one year and one day to two years of prision
One of the most important of those Spanish decisions is that of October 21, 1910. In that correccional.
case, Ramon Lafuente died as the result of having been run over by a street car owned (See also Sentence of February 19, 1902, which is similar to the one above quoted.)
In the Sentence of the Supreme Court of Spain, dated February 14, 1919, an action was xxx xxx xxx
brought against a railroad company for damages because the station agent, employed "Owners or directors of an establishment or enterprise are equally liable for the
by the company, had unjustly and fraudulently, refused to deliver certain articles damages caused by their employees in the service of the branches in which the
consigned to the plaintiff. The Supreme Court of Spain held that this action was properly latter may be employed or in the performance of their duties.
under article 1902 of the Civil Code, the court saying: xxx xxx xxx
Considering that the sentence, in question recognizes, in virtue of the facts which it "The liability referred to in this article shall cease when the persons mentioned
declares, in relation to the evidence in the case: (1) that the invoice issued by the railroad therein prove that they employed all the diligence of a good father of a family
company in favor of the plaintiff contemplated that the empty receptacles referred to in to avoid the damage."
the complaint should be returned to the consignors with wines and liquors; (2) that when As an answer to the argument urged in this particular action it may be sufficient to point
the said merchandise reached their destination, their delivery to the consignee was out that nowhere in our general statutes is the employer penalized for failure to provide
refused by the station agent without justification and with fraudulent intent, and (3) that or maintain safe appliances for his workmen. His obligation therefore is one 'not punished
the lack of delivery of these goods when they were demanded by the plaintiff caused by the laws' and falls under civil rather than criminal jurisprudence. But the answer may
him losses and damages of considerable importance, as he was a wholesale vendor of be a broader one. We should be reluctant, under any conditions, to adopt a forced
wines and liquors and he failed to realize the profits when he was unable to fill the orders construction of these scientific codes, such as is proposed by the defendant, that would
sent to him by the consignors of the receptacles: rob some of these articles of effect, would shut out litigants against their will from the civil
Considering that upon this basis there is need of upholding the four assignments of error, courts, would make the assertion of their rights dependent upon the selection for
as the original complaint did not contain any cause of action arising from non-fulfillment prosecution of the proper criminal offender, and render recovery doubtful by reason of
of a contract of transportation, because the action was not based on the delay of the the strict rules of proof prevailing in criminal actions. Even if these articles had always stood
goods nor on any contractual relation between the parties litigant and, therefore, article alone, such a construction would be unnecessary, but clear light is thrown upon their
371 of the Code of Commerce, on which the decision appealed from is based, is not meaning by the provisions of the Law of Criminal Procedure of Spain (Ley de
applicable; but it limits to asking for reparation for losses and damages produced on the Enjuiciamiento Criminal), which, though never in actual force in these Islands, was
patrimony of the plaintiff on account of the unjustified and fraudulent refusal of the carrier formerly given a suppletory or explanatory effect. Under article 111 of this law, both
to deliver the goods consigned to the plaintiff as stated by the sentence, and the carrier's classes of action, civil and criminal, might be prosecuted jointly or separately, but while
responsibility is clearly laid down in article 1902 of the Civil Code which binds, in virtue of the penal action was pending the civil was suspended. According to article 112, the
the next article, the defendant company, because the latter is connected with the penal action once started, the civil remedy should be sought therewith, unless it had been
person who caused the damage by relations of economic character and by waived by the party injured or been expressly reserved by him for civil proceedings for the
administrative hierarchy. (Emphasis supplied.) future. If the civil action alone was prosecuted, arising out of a crime that could be
The above case is pertinent because it shows that the same act may come under both enforced only on private complaint, the penal action thereunder should be extinguished.
the Penal Code and the Civil Code. In that case, the action of the agent was unjustified These provisions are in harmony with those of articles 23 and 133 of our Penal Code on
and fraudulent and therefore could have been the subject of a criminal action. And yet, the same subject.
it was held to be also a proper subject of a civil action under article 1902 of the Civil Code. An examination of this topic might be carried much further, but the citation of these
It is also to be noted that it was the employer and not the employee who was being sued. articles suffices to show that the civil liability was not intended to be merged in the criminal
Let us now examine the cases previously decided by this Court. nor even to be suspended thereby, except as expressly provided in the law. Where an
In the leading case of Rakes vs. Atlantic Gulf and Pacific Co. (7 Phil., 359, 362-365 [year individual is civilly liable for a negligent act or omission, it is not required that the injured
1907]), the trial court awarded damages to the plaintiff, a laborer of the defendant, party should seek out a third person criminally liable whose prosecution must be a
because the latter had negligently failed to repair a tramway in consequence of which condition precedent to the enforcement of the civil right.
the rails slid off while iron was being transported, and caught the plaintiff whose leg was Under article 20 of the Penal Code the responsibility of an employer may be regarded as
broken. This Court held: subsidiary in respect of criminal actions against his employees only while they are in
It is contended by the defendant, as its first defense to the action that the necessary process of prosecution, or in so far as they determine the existence of the criminal act
conclusion from these collated laws is that the remedy for injuries through negligence lies from which liability arises, and his obligation under the civil law and its enforcement in the
only in a criminal action in which the official criminally responsible must be made primarily civil courts is not barred thereby unless by the election of the injured person. Inasmuch as
liable and his employer held only subsidiarily to him. According to this theory the plaintiff no criminal proceeding had been instituted, growing our of the accident in question, the
should have procured the arrest of the representative of the company accountable for provisions of the Penal Code can not affect this action. This construction renders it
not repairing the track, and on his prosecution a suitable fine should have been imposed, unnecessary to finally determine here whether this subsidiary civil liability in penal actions
payable primarily by him and secondarily by his employer. has survived the laws that fully regulated it or has been abrogated by the American civil
This reasoning misconceived the plan of the Spanish codes upon this subject. Article 1093 and criminal procedure now in force in the Philippines.
of the Civil Code makes obligations arising from faults or negligence not punished by the The difficulty in construing the articles of the code above cited in this case appears from
law, subject to the provisions of Chapter II of Title XVI. Section 1902 of that chapter reads: the briefs before us to have arisen from the interpretation of the words of article 1093,
"A person who by an act or omission causes damage to another when there is "fault or negligence not punished by law," as applied to the comprehensive definition of
fault or negligence shall be obliged to repair the damage so done. offenses in articles 568 and 590 of the Penal Code. It has been shown that the liability of
"SEC. 1903. The obligation imposed by the preceeding article is demandable, an employer arising out of his relation to his employee who is the offender is not to be
not only for personal acts and omissions, but also for those of the persons for regarded as derived from negligence punished by the law, within the meaning of articles
whom they should be responsible. 1902 and 1093. More than this, however, it cannot be said to fall within the class of acts
"The father, and on his death or incapacity, the mother, is liable for the damages unpunished by the law, the consequence of which are regulated by articles 1902 and
caused by the minors who live with them. 1903 of the Civil Code. The acts to which these articles are applicable are understood to
be those not growing out of pre-existing duties of the parties to one another. But where contributory negligence, and allowed the parents P1,000 in damages from J. V. House
relations already formed give rise to duties, whether springing from contract or quasi who at the time of the tragic occurrence was the holder of the franchise for the electric
contract, then breaches of those duties are subject to articles 1101, 1103, and 1104 of the plant. This Court said in part:
same code. A typical application of this distinction may be found in the consequences Although the trial judge made the findings of fact hereinbefore outlined, he nevertheless
of a railway accident due to defective machinery supplied by the employer. His liability was led to order the dismissal of the action because of the contributory negligence of the
to his employee would arise out of the contract of employment, that to the passengers plaintiffs. It is from this point that a majority of the court depart from the stand taken by
out of the contract for passage, while that to the injured bystander would originate in the the trial judge. The mother and her child had a perfect right to be on the principal street
negligent act itself. of Tacloban, Leyte, on the evening when the religious procession was held. There was
In Manzanares vs. Moreta, 38 Phil., 821 (year 1918), the mother of the 8 of 9-year-old child nothing abnormal in allowing the child to run along a few paces in advance of the
Salvador Bona brought a civil action against Moreta to recover damages resulting from mother. No one could foresee the coincidence of an automobile appearing and of a
the death of the child, who had been run over by an automobile driven and managed frightened child running and falling into a ditch filled with hot water. The doctrine
by the defendant. The trial court rendered judgment requiring the defendant to pay the announced in the much debated case of Rakes vs. Atlantic Gulf and Pacific Co. ([1907]),
plaintiff the sum of P1,000 as indemnity: This Court in affirming the judgment, said in part: 7 Phil., 359), still rule. Article 1902 of the Civil Code must again be enforced. The
If it were true that the defendant, in coming from the southern part of Solana Street, had contributory negligence of the child and her mother, if any, does not operate as a bar to
to stop his auto before crossing Real Street, because he had met vehicles which were recovery, but in its strictest sense could only result in reduction of the damages.
going along the latter street or were coming from the opposite direction along Solana It is most significant that in the case just cited, this Court specifically applied article 1902
Street, it is to be believed that, when he again started to run his auto across said Real of the Civil Code. It is thus that although J. V. House could have been criminally
Street and to continue its way along Solana Street northward, he should have adjusted prosecuted for reckless or simple negligence and not only punished but also made civilly
the speed of the auto which he was operating until he had fully crossed Real Street and liable because of his criminal negligence, nevertheless this Court awarded damages in
had completely reached a clear way on Solana Street. But, as the child was run over by an independent civil action for fault or negligence under article 1902 of the Civil Code.
the auto precisely at the entrance of Solana Street, this accident could not have In Bahia vs. Litonjua and Leynes (30 Phil., 624 [year 1915), the action was for damages for
occurred if the auto had been running at a slow speed, aside from the fact that the the death of the plaintiff's daughter alleged to have been caused by the negligence of
defendant, at the moment of crossing Real Street and entering Solana Street, in a the servant in driving an automobile over the child. It appeared that the cause of the
northward direction, could have seen the child in the act of crossing the latter street from mishap was a defect in the steering gear. The defendant Leynes had rented the
the sidewalk on the right to that on the left, and if the accident had occurred in such a automobile from the International Garage of Manila, to be used by him in carrying
way that after the automobile had run over the body of the child, and the child's body passengers during the fiesta of Tuy, Batangas. Leynes was ordered by the lower court to
had already been stretched out on the ground, the automobile still moved along a pay P1,000 as damages to the plaintiff. On appeal this Court reversed the judgment as to
distance of about 2 meters, this circumstance shows the fact that the automobile entered Leynes on the ground that he had shown that the exercised the care of a good father of
Solana Street from Real Street, at a high speed without the defendant having blown the a family, thus overcoming the presumption of negligence under article 1903. This Court
horn. If these precautions had been taken by the defendant, the deplorable accident said:
which caused the death of the child would not have occurred. As to selection, the defendant has clearly shown that he exercised the care and diligence
It will be noticed that the defendant in the above case could have been prosecuted in of a good father of a family. He obtained the machine from a reputable garage and it
a criminal case because his negligence causing the death of the child was punishable was, so far as appeared, in good condition. The workmen were likewise selected from a
by the Penal Code. Here is therefore a clear instance of the same act of negligence standard garage, were duly licensed by the Government in their particular calling, and
being a proper subject-matter either of a criminal action with its consequent civil liability apparently thoroughly competent. The machine had been used but a few hours when
arising from a crime or of an entirely separate and independent civil action for fault or the accident occurred and it is clear from the evidence that the defendant had no
negligence under article 1902 of the Civil Code. Thus, in this jurisdiction, the separate notice, either actual or constructive, of the defective condition of the steering gear.
individually of a cuasi-delito or culpa aquiliana under the Civil Code has been fully and The legal aspect of the case was discussed by this Court thus:
clearly recognized, even with regard to a negligent act for which the wrongdoer could Article 1903 of the Civil Code not only establishes liability in cases of negligence, but also
have been prosecuted and convicted in a criminal case and for which, after such a provides when the liability shall cease. It says:
conviction, he could have been sued for this civil liability arising from his crime. "The liability referred to in this article shall cease when the persons mentioned
Years later (in 1930) this Court had another occasion to apply the same doctrine. In Bernal therein prove that they employed all the diligence of a good father of a family
and Enverso vs. House and Tacloban Electric & Ice Plant, Ltd., 54 Phil., 327, the parents of to avoid the damage."
the five-year-old child, Purificacion Bernal, brought a civil action to recover damages for From this article two things are apparent: (1) That when an injury is caused by the
the child's death as a result of burns caused by the fault and negligence of the negligence of a servant or employee there instantly arises a presumption of law that there
defendants. On the evening of April 10, 1925, the Good Friday procession was held in was negligence on the part of the matter or employer either in the selection of the servant
Tacloban, Leyte. Fortunata Enverso with her daughter Purificacion Bernal had come from or employee, or in supervision over him after the selection, or both; and (2) that
another municipality to attend the same. After the procession the mother and the presumption is juris tantum and not juris et de jure, and consequently, may be rebutted. It
daughter with two others were passing along Gran Capitan Street in front of the offices follows necessarily that if the employer shows to the satisfaction of the court that in
of the Tacloban Electric & Ice Plant, Ltd., owned by defendants J. V. House, when an selection and supervision he has exercised the care and diligence of a good father of a
automobile appeared from the opposite direction. The little girl, who was slightly ahead family, the presumption is overcome and he is relieve from liability.
of the rest, was so frightened by the automobile that she turned to run, but unfortunately This theory bases the responsibility of the master ultimately on his own negligence and not
she fell into the street gutter where hot water from the electric plant was flowing. The child on that of his servant.
died that same night from the burns. The trial courts dismissed the action because of the The doctrine of the case just cited was followed by this Court in Cerf vs. Medel (33 Phil., 37
contributory negligence of the plaintiffs. But this Court held, on appeal, that there was no [year 1915]). In the latter case, the complaint alleged that the defendant's servant had
so negligently driven an automobile, which was operated by defendant as a public act or omission not punishable by law. Accordingly, the civil obligation
vehicle, that said automobile struck and damaged the plaintiff's motorcycle. This Court, connected up with the Penal Code and not with article 1903 of the Civil Code.
applying article 1903 and following the rule in Bahia vs. Litonjua and Leynes, said in part In other words, the Penal Code affirms its jurisdiction while the Civil Code
(p. 41) that: negatives its jurisdiction. This is a case of criminal negligence out of which civil
The master is liable for the negligent acts of his servant where he is the owner or liability arises and not a case of civil negligence.
director of a business or enterprise and the negligent acts are committed while xxx xxx xxx
the servant is engaged in his master's employment as such owner. Our deduction, therefore, is that the case relates to the Penal Code and not to
Another case which followed the decision in Bahia vs. Litonjua and Leynes was Cuison vs. the Civil Code. Indeed, as pointed out by the trial judge, any different ruling
Norton & Harrison Co., 55 Phil., 18 (year 1930). The latter case was an action for damages would permit the master to escape scot-free by simply alleging and proving that
brought by Cuison for the death of his seven-year-old son Moises. The little boy was on his the master had exercised all diligence in the selection and training of its servants
way to school with his sister Marciana. Some large pieces of lumber fell from a truck and to prevent the damage. That would be a good defense to a strictly civil action,
pinned the boy underneath, instantly killing him. Two youths, Telesforo Binoya and but might or might not be to a civil action either as a part of or predicated on
Francisco Bautista, who were working for Ora, an employee of defendant Norton & conviction for a crime or misdemeanor. (By way of parenthesis, it may be said
Harrison Co., pleaded guilty to the crime of homicide through reckless negligence and further that the statements here made are offered to meet the argument
were sentenced accordingly. This Court, applying articles 1902 and 1903, held: advanced during our deliberations to the effect that article 0902 of the Civil
The basis of civil law liability is not respondent superior but the relationship Code should be disregarded and codal articles 1093 and 1903 applied.)
of pater familias. This theory bases the liability of the master ultimately on his own It is not clear how the above case could support the defendant's proposition, because
negligence and not on that of his servant. (Bahia vs.Litonjua and Leynes [1915], the Court of Appeals based its decision in the present case on the defendant's primary
30 Phil., 624; Cangco vs. Manila Railroad Co. [1918], 38 Phil., 768.) responsibility under article 1903 of the Civil Code and not on his subsidiary liability arising
In Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Co., 55 Phil., 517 (year 1930) the from Fontanilla's criminal negligence. In other words, the case of City of Manila vs. Manila
plaintiff brought an action for damages for the demolition of its wharf, which had been Electric Co., supra, is predicated on an entirely different theory, which is the subsidiary
struck by the steamer Helen C belonging to the defendant. This Court held (p. 526): liability of an employer arising from a criminal act of his employee, whereas the
The evidence shows that Captain Lasa at the time the plaintiff's wharf collapsed foundation of the decision of the Court of Appeals in the present case is the employer's
was a duly licensed captain, authorized to navigate and direct a vessel of any primary liability under article 1903 of the Civil Code. We have already seen that this is a
tonnage, and that the appellee contracted his services because of his proper and independent remedy.
reputation as a captain, according to F. C. Cadwallader. This being so, we are Arambulo vs. Manila Electric Co. (55 Phil., 75), is another case invoked by the defendant.
of the opinion that the presumption of liability against the defendant has been A motorman in the employ of the Manila Electric Company had been convicted o
overcome by the exercise of the care and diligence of a good father of a family homicide by simple negligence and sentenced, among other things, to pay the heirs of
in selecting Captain Lasa, in accordance with the doctrines laid down by this the deceased the sum of P1,000. An action was then brought to enforce the subsidiary
court in the cases cited above, and the defendant is therefore absolved from liability of the defendant as employer under the Penal Code. The defendant attempted
all liability. to show that it had exercised the diligence of a good father of a family in selecting the
It is, therefore, seen that the defendant's theory about his secondary liability is negatived motorman, and therefore claimed exemption from civil liability. But this Court held:
by the six cases above set forth. He is, on the authority of these cases, primarily and In view of the foregoing considerations, we are of opinion and so hold, (1) that
directly responsible in damages under article 1903, in relation to article 1902, of the Civil the exemption from civil liability established in article 1903 of the Civil Code for
Code. all who have acted with the diligence of a good father of a family, is not
Let us now take up the Philippine decisions relied upon by the defendant. We study applicable to the subsidiary civil liability provided in article 20 of the Penal Code.
first, City of Manila vs. Manila Electric Co., 52 Phil., 586 (year 1928). A collision between a The above case is also extraneous to the theory of the defendant in the instant case,
truck of the City of Manila and a street car of the Manila Electric Co. took place on June because the action there had for its purpose the enforcement of the defendant's
8, 1925. The truck was damaged in the amount of P1,788.27. Sixto Eustaquio, the subsidiary liability under the Penal Code, while in the case at bar, the plaintiff's cause of
motorman, was prosecuted for the crime of damage to property and slight injuries action is based on the defendant's primary and direct responsibility under article 1903 of
through reckless imprudence. He was found guilty and sentenced to pay a fine of P900, the Civil Code. In fact, the above case destroys the defendant's contention because that
to indemnify the City of Manila for P1,788.27, with subsidiary imprisonment in case of decision illustrates the principle that the employer's primary responsibility under article
insolvency. Unable to collect the indemnity from Eustaquio, the City of Manila filed an 1903 of the Civil Code is different in character from his subsidiary liability under the Penal
action against the Manila Electric Company to obtain payment, claiming that the Code.
defendant was subsidiarily liable. The main defense was that the defendant had In trying to apply the two cases just referred to, counsel for the defendant has failed to
exercised the diligence of a good father of a family to prevent the damage. The lower recognize the distinction between civil liability arising from a crime, which is governed by
court rendered judgment in favor of the plaintiff. This Court held, in part, that this case the Penal Code, and the responsibility for cuasi-delito or culpa aquiliana under the Civil
was governed by the Penal Code, saying: Code, and has likewise failed to give the importance to the latter type of civil action.
With this preliminary point out of the way, there is no escaping the conclusion The defendant-petitioner also cites Francisco vs. Onrubia (46 Phil., 327). That case need
that the provisions of the Penal Code govern. The Penal Code in easily not be set forth. Suffice it to say that the question involved was also civil liability arising
understandable language authorizes the determination of subsidiary liability. from a crime. Hence, it is as inapplicable as the two cases above discussed.
The Civil Code negatives its application by providing that civil obligations arising The foregoing authorities clearly demonstrate the separate individuality of cuasi-
from crimes or misdemeanors shall be governed by the provisions of the Penal delitos or culpa aquiliana under the Civil Code. Specifically they show that there is a
Code. The conviction of the motorman was a misdemeanor falling under article distinction between civil liability arising from criminal negligence (governed by the Penal
604 of the Penal Code. The act of the motorman was not a wrongful or negligent Code) and responsibility for fault or negligence under articles 1902 to 1910 of the Civil
Code, and that the same negligent act may produce either a civil liability arising from a before third persons the employer and employee "vienen a ser como una sola
crime under the Penal Code, or a separate responsibility for fault or negligence under personalidad, por refundicion de la del dependiente en la de quien le emplea y utiliza."
articles 1902 to 1910 of the Civil Code. Still more concretely, the authorities above cited ("become as one personality by the merging of the person of the employee in that of him
render it inescapable to conclude that the employer — in this case the defendant- who employs and utilizes him.") All these observations acquire a peculiar force and
petitioner — is primarily and directly liable under article 1903 of the Civil Code. significance when it comes to motor accidents, and there is need of stressing and
The legal provisions, authors, and cases already invoked should ordinarily be sufficient to accentuating the responsibility of owners of motor vehicles.
dispose of this case. But inasmuch as we are announcing doctrines that have been little Fourthly, because of the broad sweep of the provisions of both the Penal Code and the
understood in the past, it might not be inappropriate to indicate their foundations. Civil Code on this subject, which has given rise to the overlapping or concurrence of
Firstly, the Revised Penal Code in article 365 punishes not only reckless but also simple spheres already discussed, and for lack of understanding of the character and efficacy
negligence. If we were to hold that articles 1902 to 1910 of the Civil Code refer only to of the action for culpa aquiliana, there has grown up a common practice to seek
fault or negligence not punished by law, according to the literal import of article 1093 of damages only by virtue of the civil responsibility arising from a crime, forgetting that there
the Civil Code, the legal institution of culpa aquiliana would have very little scope and is another remedy, which is by invoking articles 1902-1910 of the Civil Code. Although this
application in actual life. Death or injury to persons and damage to property through any habitual method is allowed by our laws, it has nevertheless rendered practically useless
degree of negligence — even the slightest — would have to be indemnified only through and nugatory the more expeditious and effective remedy based on culpa
the principle of civil liability arising from a crime. In such a state of affairs, what sphere aquiliana or culpa extra-contractual. In the present case, we are asked to help
would remain for cuasi-delito or culpa aquiliana? We are loath to impute to the lawmaker perpetuate this usual course. But we believe it is high time we pointed out to the harm
any intention to bring about a situation so absurd and anomalous. Nor are we, in the done by such practice and to restore the principle of responsibility for fault or negligence
interpretation of the laws, disposed to uphold the letter that killeth rather than the spirit under articles 1902 et seq. of the Civil Code to its full rigor. It is high time we caused the
that giveth life. We will not use the literal meaning of the law to smother and render almost stream of quasi-delict or culpa aquiliana to flow on its own natural channel, so that its
lifeless a principle of such ancient origin and such full-grown development as culpa waters may no longer be diverted into that of a crime under the Penal Code. This will, it is
aquiliana or cuasi-delito, which is conserved and made enduring in articles 1902 to 1910 believed, make for the better safeguarding of private rights because it re-establishes an
of the Spanish Civil Code. ancient and additional remedy, and for the further reason that an independent civil
Secondly, to find the accused guilty in a criminal case, proof of guilt beyond reasonable action, not depending on the issues, limitations and results of a criminal prosecution, and
doubt is required, while in a civil case, preponderance of evidence is sufficient to make entirely directed by the party wronged or his counsel, is more likely to secure adequate
the defendant pay in damages. There are numerous cases of criminal negligence which and efficacious redress.
can not be shown beyond reasonable doubt, but can be proved by a preponderance In view of the foregoing, the judgment of the Court of Appeals should be and is hereby
of evidence. In such cases, the defendant can and should be made responsible in a civil affirmed, with costs against the defendant-petitioner.
action under articles 1902 to 1910 of the Civil Code. Otherwise, there would be many Yulo, C.J., Moran, Ozaeta and Paras, JJ., concur.
instances of unvindicated civil wrongs. Ubi jus ibi remedium.
Thirdly, to hold that there is only one way to make defendant's liability effective, and that Del Carmen, Jr. v. Geronimo Bacoy, 25 April 2012
is, to sue the driver and exhaust his (the latter's) property first, would be tantamount to In this Petition for Review on Certiorari,[1] the registered owner of a motor vehicle challenges the
compelling the plaintiff to follow a devious and cumbersome method of obtaining relief. Decision[2] dated July 11, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 67764 which held
True, there is such a remedy under our laws, but there is also a more expeditious way, him liable for damages to the heirs of the victims who were run over by the said vehicle.
which is based on the primary and direct responsibility of the defendant under article
1903 of the Civil Code. Our view of the law is more likely to facilitate remedy for civil Factual Antecedents
wrongs, because the procedure indicated by the defendant is wasteful and productive
of delay, it being a matter of common knowledge that professional drivers of taxis and At dawn on New Years Day of 1993, Emilia Bacoy Monsalud (Emilia), along with her spouse
similar public conveyance usually do not have sufficient means with which to pay Leonardo Monsalud, Sr. and their daughter Glenda Monsalud, were on their way home from a
damages. Why, then, should the plaintiff be required in all cases to go through this Christmas party they attended in Poblacion, Sominot, Zamboanga Del Sur. Upon
roundabout, unnecessary, and probably useless procedure? In construing the laws, courts reaching Purok Paglaom in Sominot, they were run over by a Fuso passenger jeep bearing plate
have endeavored to shorten and facilitate the pathways of right and justice. number UV-PEK-600 that was being driven by Allan Maglasang (Allan). The jeep was registered in
At this juncture, it should be said that the primary and direct responsibility of employers the name of petitioner Oscar del Carmen, Jr. (Oscar Jr.) and used as a public utility vehicle plying
and their presumed negligence are principles calculated to protect society. Workmen the Molave, Zamboanga del Sur to Sominot, Zamboanga del Sur and vice versa route.
and employees should be carefully chosen and supervised in order to avoid injury to the
public. It is the masters or employers who principally reap the profits resulting from the Because of the unfortunate incident, Criminal Case No. 93-10347[3] for Reckless
services of these servants and employees. It is but right that they should guarantee the Imprudence Resulting in Multiple Homicide was filed against Allan before the Regional Trial Court of
latter's careful conduct for the personnel and patrimonial safety of others. As Theilhard Molave, Zamboanga del Sur, Branch 23. In a Decision dated March 13, 1997, said court declared
has said, "they should reproach themselves, at least, some for their weakness, others for Allan guilty beyond reasonable doubt of the crime charged.[4]
their poor selection and all for their negligence." And according to Manresa, "It is much
more equitable and just that such responsibility should fall upon the principal or director During the pendency of said criminal case, Emilias father, Geronimo Bacoy (Geronimo),
who could have chosen a careful and prudent employee, and not upon the injured in behalf of the six minor children[5] of the Monsaluds, filed Civil Case No. 96-20219,[6] an independent
person who could not exercise such selection and who used such employee because of civil action for damages based on culpa aquiliana. Aside from Allan, also impleaded therein were
his confidence in the principal or director." (Vol. 12, p. 622, 2nd Ed.) Many jurists also base his alleged employers, namely, the spouses Oscar del Carmen, Sr. (Oscar Sr.) and Norma del
this primary responsibility of the employer on the principle of representation of the Carmen (Spouses del Carmen) and the registered owner of the jeep, their son Oscar Jr. Geronimo
principal by the agent. Thus, Oyuelos says in the work already cited (Vol. 7, p. 747) that prayed for the reimbursement of funeral and burial expenses, as well as the award of attorneys fees,
moral and exemplary damages resulting from the death of the three victims, and loss of net income care and foresight constitute negligence making the registered owner of the vehicle civilly liable for
earnings of Emilia who was employed as a public school teacher at the time of her death.[7] the damage caused by the same.

Defendants refused to assume civil liability for the victims deaths. Oscar Sr. averred that The RTC disposed of the case as follows:
the Monsaluds have no cause of action against them because he and his wife do not own the jeep
and that they were never the employers of Allan.[8] For his part, Oscar Jr. claimed to be a victim Wherefore, judgment is hereby entered in favor of the plaintiffs and
himself. He alleged that Allan and his friends[9] stole his jeep while it was parked beside his drivers against the defendants Allan Maglasang and Oscar del Carmen, Jr. ordering
rented house to take it for a joyride. Both he and a vehicle mechanic testified that the subject jeep
can easily be started by mere pushing sans the ignition key. The vehicles engine shall then run but 1. Defendant ALLAN MAGLASANG to pay the plaintiffs, and in case of
without any headlights on.[10] And implying that this was the manner by which the vehicle was insolvency, for defendant OSCAR DEL CARMEN, JR., to pay the plaintiffs,
illegally taken, Oscar Jr. submitted as part of his documentary evidence the statements[11] of Jemar the following sums:
Alarcon (Jemar) and Benjamin Andujar (Benjamin). The two, who were with Allan in the jeep at the
time of the accident, declared before the investigating officer that during said time, the vehicles a. P73,112.00 for their funeral and burial expenses;
headlights were off. Because of this allegation, Oscar Jr. even filed before the same trial court a b. P1,000,000.00 moral damages for the death of the late Emilia
carnapping case against Allan and his companions docketed as Criminal Case No. 93- Monsalud;
10380.[12] The case was, however, dismissed for insufficiency of evidence.[13] c. P250,000.00 moral damages for the death of the late Leonardo
Monsalud, Sr.;
Oscar Jr. clarified that Allan was his jeep conductor and that it was the latters brother, d. P250,000.00 moral damages for the death of the late Glenda
Rodrigo Maglasang (Rodrigo), who was employed as the driver.[14] In any event, Allans employment Monsalud;
as conductor was already severed before the mishap occurred on January 1, 1993 since he served e. P40, 000.00, for exemplary damages;
as such conductor only from the first week of December until December 14, 1992.[15] In support of f. P20,000.00 attorneys fees; and
this, Oscar Jr. presented as witnesses Faustino Sismundo (Faustino) and Cresencio Junior Baobao g. The cost of this proceedings.
(Cresencio). Faustino, a resident of Molave, testified that when he boarded the jeep heading to
Sominot on December 31, 1992, it was Cresencio who was the conductor. He also believed that 2. The dismissal of the complaint as against the spouses OSCAR DEL
Crecencio started to work as such at around December 15 or 16, 1992.[16] Cresencio, for his part, CARMEN SR. and NORMA DEL CARMEN.
testified that he worked as Oscar Jr.s conductor from December 15, 1992 to January 1, 1993 and
that Rodrigo was his driver.[17] He stated that upon learning that the jeep figured in an accident, he SO ORDERED.[23]
never bothered to verify the news. Instead, he went to Midsalip to work there as a conductor for his
brothers vehicle, thereby terminating his employment with Oscar Jr.[18]
Oscar Jr. moved for reconsideration[24] contending that the provision on vicarious liability
Oscar Jr. likewise testified that it was routinary that after a days trip, the jeep would be of the employer under Article 2180 of the Civil Code[25] requires the existence of employer-
parked beside Rodrigos rented house[19] for the next early-morning operation. employee relationship and that the employee was acting within the scope of his employment
when the tort occurred. He stressed that even assuming that Allan was his employee, he was hired
Geronimo, on the other hand, averred that Allan was still Oscar Jr.s employee subsequent not as a driver but as a conductor. Hence, Allan acted beyond the scope of his employment when
to December 14, 1992. To prove this, he presented as witnesses Saturnino Jumawan (Saturnino) and he drove the jeep.
Jose Navarro (Jose). Saturnino testified that he would pay his fare to Allan every time he would
board the jeep in going to Molave and that the last time he rode the subject vehicle was on Oscar Jr. also stressed that the fact that the jeep was running without its headlights on at
December 23, 1992. He also claimed that immediately before January 1, 1993, Rodrigo and Allan the time of the accident indubitably shows that the same was stolen. He further alleged that the
used to park the jeep at the yard of his house.[20] Jose likewise attested that Allan was still the jeep jeep could not have been taken by only one person. As Rodrigo declared in Criminal Case No. 93-
conductor during the said period as he had ridden the jeep many times in mid-December of 10380 (carnapping case), based on his experience, the jeep cannot be pushed by only one person
1992.[21] but by at least five people in order for it to start. This was due to the vehicles mass and the deep
canal which separates the parking area from the curved road that was obstructed by a house.[26]
Ruling of the Regional Trial Court
Setting aside its earlier decision, the lower court in its Order[27] dated June 21, 2000 granted
In its Decision[22] dated April 17, 2000, the RTC exculpated the spouses del Carmen from the Motion for Reconsideration and absolved Oscar Jr. from civil liability. It cited Article 103 of the
civil liability for insufficiency of evidence. However, their son Oscar Jr. was held civilly liable in a Revised Penal Code which provides that for an employer to be subsidiarily liable for the criminal acts
subsidiary capacity. The RTC anchored its ruling primarily on the principle of res ipsa loquitur, i.e., that of his employee, the latter should have committed the same in the discharge of his duties. The court
a presumption of negligence on the part of a defendant may be inferred if the thing that caused agreed with Oscar Jr. that this condition is wanting in Allans case as he was not acting in the
an injury is shown to be under his management and that in the ordinary course of things, the discharge of his duties as a conductor when he drove the jeep.
accident would not have happened had there been an exercise of care. Said court ratiocinated The court also declared the doctrine of res ipsa loquitur inapplicable since the property
that Oscar Jr., as the registered owner of the jeep, managed and controlled the same through his owner cannot be made responsible for the damages caused by his property by reason of the
driver Rodrigo, in whose house the jeep was usually parked. Since both Oscar Jr. and Rodrigo were criminal acts of another. It then adjudged that only Allan should bear the consequences of his
well aware that the jeep could easily be started by a mere push even without the ignition key, they criminal acts. Thus:
should have taken the necessary precaution to prevent the vehicle from being used by
unauthorized persons like Allan. The RTC thus concluded that such lack of proper precaution, due WHEREFORE, premises considered, the MOTION FOR
 RECONSIDERATION is granted, and defendant OSCAR DEL CARMEN JR. is 3. Moral damages in the amount of Fifty Thousand Pesos
hereby absolved from all civil liability arising from the felonious acts of (P50,000.00) each for the death of the Monsaluds or for a total amount of One
convicted accused ALLAN MAGLASANG. Hundred Fifty Thousand Pesos (P150,000.00);

IT IS SO ORDERED.[28] 4. Exemplary damages of Forty Thousand Pesos (P40,000.00).

Geronimo appealed. No pronouncement as to costs.

Ruling of the Court of Appeals SO ORDERED. [32]

In its July 11, 2006 Decision,[29] the CA granted the appeal.
Issues
In resolving the case, the CA first determined the preliminary issue of whether there was
an employer-employee relationship between Oscar Jr. and Allan at the time of the accident. It As a result of the adverse judgment, Oscar Jr. filed this Petition for Review
ruled in the affirmative and gave more credence to the testimonies of Geronimos witnesses than to on Certiorari alleging that the CA erred in:
those of Oscar Jr.s witnesses, Faustino and Cresencio. The CA ratiocinated that unlike the witness
presented by Geronimo, Faustino never resided in Poblacion and thus has limited knowledge of the 1. x x x basing its conclusions and findings on speculations, surmises
place. His testimony was also unreliable considering that he only rode the subject jeep and conjectures; misapprehension of facts which are in conflict with
twice[30] during the last two weeks of December 1992. As regards Cresencios testimony, the the findings of the trial court;
appellate court found it puzzling why he appeared to have acted uninterested upon learning that
the jeep was the subject of an accident when it was his bread and butter. Said court likewise 2. x x x declaring a question of substance not in accord with law
considered questionable Oscar Jr.s asseveration that Cresencio replaced Allan as conductor when and with the applicable decisions of the Supreme Court;
Cresencio testified that he replaced a certain Sumagang Jr.[31]
3. x x x departing from the regular course of the judicial
With regard to the main issue, the CA adjudged Oscar Jr. liable to the heirs of the victims proceedings in the disposition of the appeal and [in going] beyond
based on the principle that the registered owner of a vehicle is directly and primarily responsible for the issues of the case.[33]
the injuries or death of third parties caused by the operation of such vehicle. It disbelieved Oscar Jr.s
defense that the jeep was stolen not only because the carnapping case filed against Allan and his
companions was dismissed but also because, given the circumstances, Oscar Jr. is deemed to Oscar Jr. points out that the CA failed to consider the RTCs ruling in its June 21, 2000 Order
have given Allan the implied permission to use the subject vehicle. To support its conclusion, the CA which was in accord with Article 2180 of the Civil Code, i.e., that the tort committed by an
cited the following circumstances: siblings Rodrigo and Allan were both employees assigned to the employee should have been done within the scope of his assigned tasks for an employer to be held
said jeep; after a days work, said vehicle would be parked just beside Rodrigos house where Allan liable under culpa aquiliana. However, the CA never touched upon this matter even if it was glaring
also lived; the jeep could easily be started even without the use of an ignition key; the said parking that Allans driving the subject vehicle was not within the scope of his previous employment as
area was not fenced or secured to prevent the unauthorized use of the vehicle which can be conductor. Moreover, Oscar Jr. insists that his jeep was stolen and stresses that the liability of a
started even without the ignition key. registered owner of a vehicle as to third persons, as well as the doctrine of res ipsa loquitur, should
not apply to him. He asserts that although Allan and his companions were not found to have
The dispositive portion of the CA Decision reads: committed the crime of carnapping beyond reasonable doubt, it was nevertheless established
that the jeep was illicitly taken by them from a well secured area. This is considering that the vehicle
WHEREFORE, premises considered, the instant appeal is was running without its headlights on at the time of the accident, a proof that it was started without
GRANTED. The assailed Order dated 21 June 2000 of the Regional Trial Court the ignition key.
(Branch 23), Molave, Zamboanga del Sur, in Civil Case No. 96-20,219 is SET
ASIDE and a new one is hereby entered. OSCAR DEL CARMEN, Jr. and ALLAN Our Ruling
MAGLASANG are held primarily liable, jointly and severally, to pay plaintiffs-
appellants: Petitioners own evidence casts
doubt on his claim that his jeep was
1. Civil indemnity for the death of Emilia Bacoy Monsalud, Leonardo stolen by Allan and his alleged
Monsalud Sr., and Glenda Monsalud in the amount of Fifty thousand pesos cohorts. Negligence is presumed
(P50,000.00) each or for the total amount of One hundred fifty thousand pesos under the doctrine of res ipsa
(P150,000.00); loquitur.

2. Temperate damages in the amount of Twenty-five Thousand Oscar Jr.s core defense to release him from responsibility for the death of the Monsaluds is that his
Pesos (P25,000.00) each for the death of Emilia Monsalud, Leonardo Monsalud jeep was stolen. He highlights that the unauthorized taking of the jeep from the parking area was
Sr., and Glenda Monsalud (collectively the Monsaluds) or for the total amount indeed carried out by the clandestine and concerted efforts of Allan and his five companions,
of Seventy-five thousand pesos (P75,000.00); notwithstanding the obstacles surrounding the parking area and the weight of the jeep.
 Notably, the carnapping case filed against Allan and his group was already dismissed by A: Yes Sir, I was not there.[38]
the RTC for insufficiency of evidence. But even in this civil case and as correctly concluded by the
CA, the evidentiary standard of preponderance of evidence required was likewise not met to
Furthermore, Oscar Jr. acknowledged the dismissal of the carnapping case, thus:
support Oscar Jr.s claim that his jeep was unlawfully taken.
Q: Now, there was a case filed against Allan Maglasang and [his] x x x co-accused x x x [n]amely:
Two of Allans co-accused in the carnapping case, Jemar and Benjamin, declared Benjamin Andojar, Dioscoro Sol, Joven Orot, [Jemar Azarcon] and [Arniel] Rizada, for
before the police that when Allan invited them to ride with him, he was already driving the jeep: carnapping. Is that correct?
A: Yes Sir.
04. Q- On that night, on or about 11:30 oclock on December 31, 1992, where were you?
A- I went to the disco near [the] Public Market[,] Sominot, Zamboanga del Sur. Q: That case was filed by you because you alleged that on December 31, 1992, your jeep was
carnapped by Allan Maglasang and his co-accused, the said mentioned, is that correct?
05. Q- While you were in disco place, do you know if there was an incident [that] A: Yes Sir.
happened?
A- No sir but when I was in the disco place, at about 3:30 at dawn more or less[,] January 1, Q: You testified on the case in Aurora, is that correct?
1993, Allan Maglasang arrived driving the jeep and he invited me to ride A: Yes, Sir.
together with Benjamin Andujar, Dioscoro Sol, Arniel Rezada and Joven Orot.[34]
Q: And you could well remember that this representation is the counsel of the co-accused of Allan
04. Q- On that night, on or about 9:00 oclock in the evening more or less on December 31, Maglasang, is that correct?
1992, where were you? A: Yes Sir.
A- I went to the disco at [the] Public Market[,] Sominot, Zamboanga del Sur.
05. Q- While you were in the disco place, do you know if there was an incident [that] Q: And that case for carnapping was dismissed, is that correct?
happened? A: Yes Sir.
A- No, sir, but when I was in the disco place, at about 3:30 at dawn more or less[,] January
1, 1993, Allan Maglasang arrive[d] driving the jeep and he invited me to ride Q: Even the case of Allan Maglasang, was also dismissed, is that correct
together with Jemar Alarcon, Dioscoro Sol, Arniel Rizada and Joven Orot.[35] A: Yes Sir.

Q: Because there was no sufficient evidence to establish that the jeep was carnapped, is that correct?
There were six accused in the carnapping case. If Jemar and Benjamin were fetched by Allan who
A: Yes Sir.[39]
was driving the jeep, this would mean that only three men pushed the jeep contrary to Rodrigos
testimony in Criminal Case No. 93-10380 that it has to be pushed by at least five people so that it
While Oscar Jr. highlights that the headlights were not on to support his claim that his jeep
could start without the ignition key.
was stolen, this circumstance by itself will not prove that it really was stolen. The reason why the
headlights were not on at the time of the accident was not sufficiently established during the
On direct examination,[36] Oscar Jr. was asked as to what Rodrigo, his driver who had informed him
trial. Besides, the fact that the headlights were not on cannot be exclusively attributed to the lack
about the accident on January 1, 1993 at around 7:00 a.m., turned over to him after the incident, viz:
of ignition key in starting the jeep as there may be other possibilities such as electrical problems,
Q: When Rodrigo Maglasang, your driver informed you about the accident, what did he
broken headlights, or that they were simply turned off.
carry with him if any and turned over to you?
A: The OR (Official Receipt) and the CR (Certificate of Registration) Sir. Hence, sans the testimony of witnesses and other relevant evidence to support the
defense of unauthorized taking, we cannot subscribe to Oscar Jr.s claim that his jeep was stolen. The
Q: How about the key of the vehicle? evidence on record brings forth more questions than clear-cut answers.
A: It was not turned over, Sir.[37]
Oscar Jr. alleges that the presumption of negligence under the doctrine of res ipsa loquitur (literally,
Assuming arguendo that Allan stole the jeep by having the same pushed by a group, the ignition the thing speaks for itself) should not have been applied because he was vigilant in securing his
key should then be with Rodrigo as he was entrusted with the jeeps possession. Thus, at the time vehicle. He claims that the jeep was parked in a well secured area not remote to the watchful
Rodrigo faced his employer hours after the incident, it is reasonable to expect that the driver should senses of its driver Rodrigo.
have also returned the key to the operator together with the Official Receipt and Certificate of
Registration. Notably, Rodrigo did not do so and instead, the key was allegedly handed over to the Under the doctrine of res ipsa loquitur, [w]here the thing that caused the injury
police for reasons unexplained and not available from the records. Interestingly, Oscar Jr. never complained of is shown to be under the management of the defendant or his servants; and the
presented Rodrigo as his witness. Neither was he able to attest on cross-examination that Allan really accident, in the ordinary course of things, would not happen if those who had management or
stole the jeep by pushing or that the key was handed over to him by Rodrigo: control used proper care, it affords reasonable evidence in the absence of a sufficient, reasonable
and logical explanation by defendant that the accident arose from or was caused by the
Q: On December 31, 1992, you did not know that it was Rodrigo Maglasang who gave the key to Allan
Maglasang. Is that correct?
defendants want of care.[40] Res ipsa loquitur is merely evidentiary, a mode of proof, or a mere
A: I was not there. So, I do not know but he had an affidavit to show that he turned it over to the police. procedural convenience, since it furnishes a substitute for, and relieves a plaintiff of, the burden of
Q: What I was asking you is that, [o]n the night of December 31, 1992, when it was driven by Allan producing a specific proof of negligence.[41] It recognizes that parties may establish prima
Maglasang, you did not know that the key was voluntarily given by Rodrigo Maglasang to facie negligence without direct proof, thus, it allows the principle to substitute for specific proof of
Allan Maglasang? negligence. It permits the plaintiff to present along with proof of the accident, enough of the
A: I was not there. attending circumstances to invoke the doctrine, create an inference or presumption of negligence
and thereby place on the defendant the burden of proving that there was no negligence on his
Q: So, you could not testify on that, is that correct?
part.[42] The doctrine is based partly on the theory that the defendant in charge of the instrumentality vehicles, i.e., that the registered owner of any vehicle, even if not used for public service, would
which causes the injury either knows the cause of the accident or has the best opportunity of primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle
ascertaining it while the plaintiff has no such knowledge, and is therefore compelled to allege was being driven on the highways or streets.[46] We have already ratiocinated that:
negligence in general terms.[43]
The main aim of motor vehicle registration is to identify the owner so that if any accident
The requisites of the doctrine of res ipsa loquitur as established by jurisprudence are as happens, or that any damage or injury is caused by the vehicle on the public highways,
follows: responsibility therefor can be fixed on a definite individual, the registered owner. Instances
are numerous where vehicles running on public highways caused accidents or injuries to
1) the accident is of a kind which does not ordinarily occur unless someone is negligent; pedestrians or other vehicles without positive identification of the owner or drivers, or with
very scant means of identification. It is to forestall these circumstances, so inconvenient or
2) the cause of the injury was under the exclusive control of the person in charge and prejudicial to the public, that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages or injuries caused on
3) the injury suffered must not have been due to any voluntary action or contribution on public highways.[47]
the part of the person injured.[44]
Absent the circumstance of unauthorized use[48] or that the subject vehicle was
stolen[49] which are valid defenses available to a registered owner, Oscar Jr. cannot escape liability
The above requisites are all present in this case. First, no person just for quasi-delict resulting from his jeeps use.
walking along the road would suddenly be sideswiped and run over by an on-rushing vehicle
unless the one in charge of the said vehicle had been negligent. Second, the jeep which caused All told and considering that the amounts of damages awarded are in accordance with
the injury was under the exclusive control of Oscar Jr. as its owner. When Oscar Jr. entrusted the prevailing jurisprudence, the Court concurs with the findings of the CA and sustains the awards
ignition key to Rodrigo, he had the power to instruct him with regard to the specific restrictions of the made. In addition, pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,[50] an interest of six
jeeps use, including who or who may not drive it. As he is aware that the jeep may run without the percent (6%) per annum on the amounts awarded shall be imposed, computed from the time the
ignition key, he also has the responsibility to park it safely and securely and to instruct his driver judgment of the RTC is rendered on April 17, 2000 and twelve percent (12%) per annum on such
Rodrigo to observe the same precaution. Lastly, there was no showing that the death of the victims amount upon finality of this Decision until the payment thereof.
was due to any voluntary action or contribution on their part.
The aforementioned requisites having been met, there now arises a presumption of WHEREFORE, premises considered, the instant petition is DENIED. The Decision dated July
negligence against Oscar Jr. which he could have overcome by evidence that he exercised due 11, 2006 of the Court of Appeals in CA-G.R. CV No. 67764 is hereby AFFIRMED with
care and diligence in preventing strangers from using his jeep. Unfortunately, he failed to do so. further MODIFICATION that an interest of six percent (6%) per annum on the amounts awarded shall
be imposed, computed from the time the judgment of the Regional Trial Court, Branch 23, Molave,
What this Court instead finds worthy of credence is the CAs conclusion that Oscar Jr. Zamboanga del Sur is rendered on April 17, 2000 and twelve percent (12%) per annum on such
gave his implied permission for Allan to use the jeep. This is in view of Oscar Jr.s failure to provide solid amount upon finality of this Decision until the payment thereof.
proof that he ensured that the parking area is well secured and that he had expressly imposed
restrictions as to the use of the jeep when he entrusted the same to his driver Rodrigo. As fittingly Philippine Hawk Corporation v. Lee, 16 February 2010
inferred by the CA, the jeep could have been endorsed to Allan by his brother Rodrigo since as This is a Petition for Review on Certiorari[1] of the Decision of the Court of Appeals
already mentioned, Oscar Jr. did not give Rodrigo any specific and strict instructions on matters in CA-G.R. CV No. 70860, promulgated on August 17, 2004, affirming with modification the
regarding its use. Rodrigo therefore is deemed to have been given the absolute discretion as to the Decision of the Regional Trial Court (RTC) of Quezon City, Branch 102, dated March 16,
vehicles operation, including the discretion to allow his brother Allan to use it. 2001, in Civil Case No. Q-91-9191, ordering petitioner Philippine Hawk Corporation and
Margarito Avila to jointly and severally pay respondent Vivian Tan Lee damages as a result
The operator on record of a vehicle of a vehicular accident.
is primarily responsible to third
persons for the deaths or injuries The facts are as follows:
consequent to its operation, On March 15, 2005, respondent Vivian Tan Lee filed before the RTC of Quezon
regardless of whether the employee City a Complaint[2] against petitioner Philippine Hawk Corporation and defendant
drove the registered owners vehicle Margarito Avila for damages based on quasi-delict, arising from a vehicular accident that
in connection with his employment. occurred on March 17, 1991 in Barangay Buensoceso, Gumaca, Quezon. The accident
resulted in the death of respondents husband, Silvino Tan, and caused respondent
Without disputing the factual finding of the CA that Allan was still his physical injuries.
employee at the time of the accident, a finding which we see no reason to disturb, Oscar Jr.
contends that Allan drove the jeep in his private capacity and thus, an employers vicarious liability On June 18, 1992, respondent filed an Amended Complaint,[3] in her own behalf
for the employees fault under Article 2180 of the Civil Code cannot apply to him. and in behalf of her children, in the civil case for damages against petitioner. Respondent
sought the payment of indemnity for the death of Silvino Tan, moral andexemplary
The contention is no longer novel. In Aguilar Sr. v. Commercial Savings Bank,[45] the car of damages, funeral and interment expenses, medical and hospitalization expenses, the
therein respondent bank caused the death of Conrado Aguilar, Jr. while being driven by its assistant cost of the motorcycles repair, attorneys fees, and other just and equitable reliefs.
vice president. Despite Article 2180, we still held the bank liable for damages for the accident as
said provision should defer to the settled doctrine concerning accidents involving registered motor
 The accident involved a motorcycle, a passenger jeep, and a bus with Body revenue. They also had a copra business, which gave them an income of P3,000.00 a
No. 119. The bus was owned by petitioner Philippine Hawk Corporation, and was then month or P36,000.00 a year.[11]
being driven by Margarito Avila.
Ernest Ovial, the driver of the passenger jeep involved in the accident, testified
In its Answer,[4] petitioner denied liability for the vehicular accident, alleging that that in the afternoon of March 17, 1991, his jeep was parked on the left side of the highway
the immediate and proximate cause of the accident was the recklessness or lack of near the Pasumbal Machine Shop. He did not notice the motorcycle before the accident.
caution of Silvino Tan. Petitioner asserted that it exercised the diligence of a good father But he saw the bus dragging the motorcycle along the highway, and then the bus
of the family in the selection and supervision of its employees, including Margarito Avila. bumped his jeep and sped away.[12]

On March 25, 1993, the trial court issued a Pre-trial Order[5] stating that the parties For the defense, Margarito Avila, the driver of petitioners bus, testified that on
manifested that there was no possibility of amicable settlement between them. However, March 17, 1999, at about 4:30 p.m., he was driving his bus at 60 kilometers per hour on
they agreed to stipulate on the following facts: the Maharlika Highway. When they were at Barangay Buensoceso, Gumaca, Quezon, a
motorcycle ran from his left side of the highway, and as the bus came near, the
1. On March 17, 1991, in Bgy. Buensoceso, Gumaca, Quezon, motorcycle crossed the path of the bus, and so he turned the bus to the right. He heard
plaintiff Vivian Lee Tan and her husband Silvino Tan, while on a loud banging sound. From his side mirror, he saw that the motorcycle turned turtle
board a motorcycle with [P]late No. DA-5480 driven by the latter, (bumaliktad). He did not stop to help out of fear for his life, but drove on and surrendered
and a Metro Bus with [P]late No. NXR-262 driven by Margarito to the police. He denied that he bumped the motorcycle.[13]
Avila, were involved in an accident;
2. As a result of the accident, Silvino Tan died on the spot while Avila further testified that he had previously been involved in sideswiping
plaintiff Vivian Lee Tan suffered physical injuries which incidents, but he forgot how many times.[14]
necessitated medical attention and hospitalization;
3. The deceased Silvino Tan is survived by his wife, plaintiff Vivian Lee Rodolfo Ilagan, the bus conductor, testified that the motorcycle bumped the
Tan and four children, three of whom are now residents of the left side of the bus that was running at 40 kilometers per hour.[15]
United States; and
4. Defendant Margarito Avila is an employee of defendant Domingo S. Sisperes, operations officer of petitioner, testified that, like their other
Philippine Hawk.[6] drivers, Avila was subjected to and passed the following requirements:

(1) Submission of NBI clearance;

The parties also agreed on the following issues: (2) Certification from his previous employer that he had no bad record;
(3) Physical examination to determine his fitness to drive;
(4) Test of his driving ability, particularly his defensive skill; and
1. Whether or not the proximate cause of the accident causing (5) Review of his driving skill every six months.[16]
physical injuries upon the plaintiff Vivian Lee Tan and resulting in
the death of the latters husband was the recklessness and
negligence of Margarito Avila or the deceased Silvino Tan; and Efren Delantar, a Barangay Kagawad in Buensoceso, Gumaca, Quezon,
2. Whether or not defendant Philippine Hawk Transport Corporation testified that the bus was running on the highway on a straight path when a motorcycle,
exercised the diligence of a good father of the family in the with a woman behind its driver, suddenly emerged from the left side of the road from a
selection and supervision of its driver Margarito Avila.[7] machine shop. The motorcycle crossed the highway in a zigzag manner and bumped the
side of the bus.[17]

Respondent testified that on March 17, 1991, she was riding on their motorcycle In its Decision dated March 16, 2001, the trial court rendered judgment against
in tandem with her husband, who was on the wheel, at a place after a Caltex gasoline petitioner and defendant Margarito Avila, the dispositive portion of which reads:
station in Barangay Buensoceso, Gumaca, Quezon on the way to Lopez, Quezon. They
came from the Pasumbal Machine Shop, where they inquired about the repair of their ACCORDINGLY, MARGARITO AVILA is adjudged guilty of
tanker. They were on a stop position at the side of the highway; and when they were simple negligence, and judgment is hereby rendered in favor of the
about to make a turn, she saw a bus running at fast speed comingtoward them, and then plaintiff Vivian Lee Tan and h[er] husbands heirs ordering the
the bus hit a jeep parked on the roadside, and their motorcycle as well. She lost defendants Philippine Hawk Corporation and Margarito Avila to pay
consciousness and was brought to the hospital in Gumaca, Quezon, where she was them jointly and solidarily the sum of P745,575.00 representing loss of
confined for a week. She was later transferred to St. Lukes Hospital in Quezon City, earnings and actual damages plus P50,000.00 as moral damages.[18]
Manila. She suffered a fracture on her left chest, her left arm became swollen, she felt
pain in her bones, and had high blood pressure.[8]
Respondents husband died due to the vehicular accident. The immediate The trial court found that before the collision, the motorcycle was on the left side
cause of his death was massive cerebral hemorrhage.[9] of the road, just as the passenger jeep was. Prior to the accident, the motorcycle was in
Respondent further testified that her husband was leasing[10] and operating a a running position moving toward the right side of the highway. The trial court agreed with
Caltex gasoline station in Gumaca, Quezon that yielded one million pesos a year in the bus driver that the motorcycle was moving ahead of the bus from the left side of the
road toward the right side of the road, but disagreed that the motorcycle crossed the Petitioner seeks a review of the factual findings of the trial court, which were
path of the bus while the bus was running on the right side of the road.[19] sustained by the Court of Appeals, that petitioners driver was negligent in driving the bus,
which caused physical injuries to respondent and the death of respondents husband.
The trial court held that if the bus were on the right side of the highway, and The rule is settled that the findings of the trial court, especially when affirmed by
Margarito Avila turned his bus to the right in an attempt to avoid hitting the motorcyle, the Court of Appeals, are conclusive on this Court when supported by the evidence on
then the bus would not have hit the passenger jeep, which was then parked on the left record.[24] The Court has carefully reviewed the records of this case, and found no cogent
side of the road. The fact that the bus also hit the passenger jeep showed that the bus reason to disturb the findings of the trial court, thus:
must have been running from the right lane to the left lane of the highway, which caused The Court agree[s] with the bus driver Margarito that the motorcycle
the collision with the motorcycle and the passenger jeep parked on the left side of the was moving ahead of the bus towards the right side from the left side of the
road. The trial court stated that since Avila saw the motorcycle before the collision, he road, but disagrees with him that it crossed the path of the bus while the bus
should have stepped on the brakes and slowed down, but he just maintained his speed was running on the right side of the highway.
and veered to the left.[20] The trial court found Margarito Avila guilty of simple negligence.
If the bus were on the right side of the highway and Margarito turned
The trial court held petitioner bus company liable for failing to exercise the his bus to the right in an attempt to avoid hitting it, then the bus would not have
diligence of a good father of the family in the selection and supervision of Avila, having hit the passenger jeep vehicle which was then parked on the left side of the
failed to sufficiently inculcate in him discipline and correct behavior on the road.[21] road. The fact that the bus hit the jeep too, shows that the bus must have been
running to the left lane of the highway from right to the left, that the collision
On appeal, the Court of Appeals affirmed the decision of the trial court with between it and the parked jeep and the moving rightways cycle became
modification in the award of damages. The dispositive portion of the decision reads: inevitable. Besides, Margarito said he saw the motorcycle before the collision
ahead of the bus; that being so, an extra-cautious public utility driver should
WHEREFORE, foregoing premises considered, the appeal is DENIED. The have stepped on his brakes and slowed down. Here, the bus never slowed
assailed decision dated March 16, 2001 is hereby AFFIRMED with down, it simply maintained its highway speed and veered to the left. This is
MODIFICATION. Appellants Philippine Hawk and Avila are hereby ordered to negligence indeed.[25]
pay jointly and severally appellee the following amount: (a) P168,019.55 as
actual damages; (b) P10,000.00 as temperate damages; (c) P100,000.00 as Petitioner contends that the Court of Appeals was mistaken in stating that the
moral damages; (d) P590,000.00 as unearned income; and (e) P50,000.00 as civil bus driver saw respondents motorcycle about 15 meters away before the collision,
indemnity.[22] because the said distance, as testified to by its witness Efren Delantar Ong, was Ongs
distance from the bus, and not the distance of the bus from the motorcycle. Petitioner
Petitioner filed this petition, raising the following issues: asserts that this mistaken assumption of the Court of Appeals made it conclude that the
bus driver, Margarito Avila, had the last clear chance to avoid the accident, which was
1) The Court of Appeals committed grave abuse of discretion amounting to lack of the basis for the conclusion that Avila was guilty of simple negligence.
jurisdiction in passing upon an issue, which had not been raised on appeal, and
which had, therefore, attained finality, in total disregard of the doctrine laid down by A review of the records showed that it was petitioners witness, Efren Delantar
this Court in Abubakar v. Abubakar, G.R. No. 134622, October 22, 1999. Ong, who was about 15 meters away from the bus when he saw the vehicular
accident.[26] Nevertheless, this fact does not affect the finding of the trial court that
2) The Court of Appeals committed reversible error in its finding that the petitioners bus petitioners bus driver, Margarito Avila, was guilty of simple negligence as affirmed by the
driver saw the motorcycle of private respondent executing a U-turn on the highway appellate court. Foreseeability is the fundamental test of negligence.[27] To be negligent,
about fifteen (15) meters away and thereafter held that the Doctrine of Last Clear a defendant must have acted or failed to act in such a way that an ordinary reasonable
was applicable to the instant case. This was a palpable error for the simple reason man would have realized that certain interests of certain persons were unreasonably
that the aforesaid distance was the distance of the witness to the bus and not the subjected to a general but definite class of risks.[28]
distance of the bus to the respondents motorcycle, as clearly borne out by the
records. In this case, the bus driver, who was driving on the right side of the road, already
saw the motorcycle on the left side of the road before the collision. However, he did not
3) The Court of Appeals committed reversible error in awarding damages in total take the necessary precaution to slow down, but drove on and bumped the motorcycle,
disregard of the established doctrine laid down in Danao v. Court of Appeals, 154 and also the passenger jeep parked on the left side of the road, showing that the bus was
SCRA 447 and Viron Transportation Co., Inc. v. Delos Santos, G.R. No. 138296, negligent in veering to the left lane, causing it to hit the motorcycle and the passenger
November 22, 2000.[23] jeep.

In short, the issues raised by petitioner are: (1) whether or not negligence may Whenever an employees negligence causes damage or injury to another, there
be attributed to petitioners driver, and whether negligence on his part was the proximate instantly arises a presumption that the employer failed to exercise the due diligence of a
cause of the accident, resulting in the death of Silvino Tan and causing physical injuries good father of the family in the selection or supervision of its employees.[29]To avoid liability
to respondent; (2) whether or not petitioner is liable to respondent for damages; and (3) for a quasi-delict committed by his employee, an employer must overcome the
whether or not the damages awarded by respondent Court of Appeals are proper. presumption by presenting convincing proof that he exercised the care and diligence of
a good father of a family in the selection and supervision of his employee.[30]
 The Court upholds the finding of the trial court and the Court of Appeals that In this case for damages based on quasi-delict, the trial court awarded
petitioner is liable to respondent, since it failed to exercise the diligence of a good father respondent the sum of P745,575.00, representing loss of earning capacity (P590,000.00)
of the family in the selection and supervision of its bus driver, Margarito Avila, for having and actual damages (P155,575.00 for funeral expenses), plus P50,000.00 as moral
failed to sufficiently inculcate in him discipline and correct behavior on the road. Indeed, damages. On appeal to the Court of Appeals, petitioner assigned as error the award of
petitioners tests were concentrated on the ability to drive and physical fitness to do so. It damages by the trial court on the ground that it was based merely on suppositions and
also did not know that Avila had been previously involved in sideswiping incidents. surmises, not the admissions made by respondent during the trial.
As regards the issue on the damages awarded, petitioner contends that it was
the only one that appealed the decision of the trial court with respect to the award of In its Decision, the Court of Appeals sustained the award by the trial court for loss
actual and moral damages; hence, the Court of Appeals erred in awarding other kinds of earning capacity of the deceased Silvino Tan, moral damages for his death, and
of damages in favor of respondent, who did not appeal from the trial courts decision. actual damages, although the amount of the latter award was modified.

Petitioners contention is unmeritorious. The indemnity for loss of earning capacity of the deceased is provided for by
Article 2206 of the Civil Code.[34] Compensation of this nature is awarded not for loss of
Section 8, Rule 51 of the 1997 Rules of Civil Procedure provides: earnings, but for loss of capacity to earn money.[35]

SEC. 8. Questions that may be decided. -- No error which As a rule, documentary evidence should be presented to substantiate the claim
does not affect the jurisdiction over the subject matter or the validity for damages for loss of earning capacity.[36] By way of exception, damages for loss of
of the judgment appealed from or the proceedings therein will be earning capacity may be awarded despite the absence of documentary evidence
considered unless stated in the assignment of errors, or closely related when: (1) the deceased is self-employed and earning less than the minimum wage under
to or dependent on an assigned error and properly argued in the brief, current labor laws, in which case, judicial notice may be taken of the fact that in the
save as the court pass upon plain errors and clerical errors. deceased's line of work no documentary evidence is available; or (2) the deceased is
employed as a daily wage worker earning less than the minimum wage under current
labor laws.[37]
Philippine National Bank v. Rabat[31] cited the book[32] of Justice Florenz D.
Regalado to explain the section above, thus: In this case, the records show that respondents husband was leasing and
operating a Caltex gasoline station in Gumaca, Quezon. Respondent testified that her
In his book, Mr. Justice Florenz D. Regalado commented on this section, husband earned an annual income of one million pesos. Respondent presented in
thus: evidence a Certificate of Creditable Income Tax Withheld at Source for the Year
1. Sec. 8, which is an amendment of the former Sec. 7 of this Rule, now 1990,[38] which showed that respondents husband earned a gross income of P950,988.43
includes some substantial changes in the rules on assignment of errors. The basic in 1990. It is reasonable to use the Certificate and respondents testimony as bases for fixing
procedural rule is that only errors claimed and assigned by a party will be the gross annual income of the deceased at one million pesos before respondents
considered by the court, except errors affecting its jurisdiction over the subject husband died on March 17, 1999. However, no documentary evidence was presented
matter. To this exception has now been added errors affecting the validity of regarding the income derived from their copra business; hence, the testimony of
the judgment appealed from or the proceedings therein. respondent as regards such income cannot be considered.
Also, even if the error complained of by a party is not expressly stated
in his assignment of errors but the same is closely related to or dependent on an In the computation of loss of earning capacity, only net earnings, not gross
assigned error and properly argued in his brief, such error may now be earnings, are to be considered; that is, the total of the earnings less expenses necessary
considered by the court. These changes are of jurisprudential origin. for the creation of such earnings or income, less living and other incidental expenses.[39] In
2. The procedure in the Supreme Court being generally the same as the absence of documentary evidence, it is reasonable to peg necessary expenses for
that in the Court of Appeals, unless otherwise indicated (see Secs. 2 and 4, Rule the lease and operation of the gasoline station at 80 percent of the gross income, and
56), it has been held that the latter is clothed with ample authority to review peg living expenses at 50 percent of the net income (gross income less necessary
matters, even if they are not assigned as errors on appeal, if it finds that their expenses).
consideration is necessary in arriving at a just decision of the case. Also, an
unassigned error closely related to an error properly assigned (PCIB vs. CA, et In this case, the computation for loss of earning capacity is as follows:
al., L-34931, Mar. 18, 1988), or upon which the determination of the question
raised by error properly assigned is dependent, will be considered by the Net Earning = Life Expectancy x Gross Annual Income Reasonable and
appellate court notwithstanding the failure to assign it as error (Ortigas, Jr. vs. Capacity [2/3 (80-age at the (GAI) Necessary
Lufthansa German Airlines, L-28773, June 30, 1975; Soco vs. Militante, et al., G.R. time of death)] Expenses
No. 58961, June 28, 1983). (80% of GAI)
It may also be observed that under Sec. 8 of this Rule, the appellate X = [2/3 (80-65)] x P1,000,000.00 - P800,000.00
court is authorized to consider a plain error, although it was not specifically X = 2/3 (15) x P200,000.00 - P100,000.00
assigned by the appellant (Dilag vs. Heirs of Resurreccion, 76 Phil. 649), otherwise (Living Expenses)
it would be sacrificing substance for technicalities.[33] X = 30/3 x P100,000.00

X = 10 x P100,000.00
 X = P1,000,000.00 Tan: (a) civil indemnity in the amount of Fifty Thousand Pesos (P50,000.00); (b) actual
The Court of Appeals also awarded actual damages for the expenses incurred damages in the amount of One Hundred Twenty-Seven Thousand One Hundred Ninety-
in connection with the death, wake, and interment of respondents husband in the Two Pesos and Eighty-Five Centavos ( P127,192.85); (c) moral damages in the amount
amount of P154,575.30, and the medical expenses of respondent in the amount of Eighty Thousand Pesos (P80,000.00); (d) indemnity for loss of earning capacity in the
of P168,019.55. amount of One Million Pesos (P1,000,000.00); and (e) temperate damages in the amount
of Ten Thousand Pesos (P10,000.00).
Actual damages must be substantiated by documentary evidence, such as
receipts, in order to prove expenses incurred as a result of the death of the victim [40] or Dy Teban v. Ching, 543 SCRA 560
the physical injuries sustained by the victim. A review of the valid receipts submitted in THE vehicular collision resulting in damages and injuries in this case could have
evidence showed that the funeral and related expenses amounted only been avoided if the stalled prime mover with trailer were parked properly and equipped
to P114,948.60, while the medical expenses of respondent amounted only with an early warning device. It is high time We sounded the call for strict enforcement of
to P12,244.25, yielding a total of P127,192.85 in actual damages. the law and regulation on traffic and vehicle registration. Panahon na para mahigpit na
ipatupad ang batas at regulasyon sa trapiko at pagpapatala ng sasakyan.
Moreover, the Court of Appeals correctly sustained the award of moral
damages in the amount of P50,000.00 for the death of respondents husband. Moral Before Us is a petition for review on certiorari of the Decision[1] of the Court of
damages are not intended to enrich a plaintiff at the expense of the defendant.[41] They Appeals (CA) modifying that[2] of the Regional Trial Court (RTC) in
are awarded to allow the plaintiff to obtain means, diversions or amusements that will Butuan City finding private respondents Liberty Forest, Inc. and Cresilito Limbaga liable to
serve to alleviate the moral suffering he/she has undergone due to the defendants petitioner Dy Teban Trading, Inc. for damages.
culpable action and must, perforce, be proportional to the suffering inflicted.[42]
Facts
In addition, the Court of Appeals correctly awarded temperate damages in the
amount of P10,000.00 for the damage caused on respondents motorcycle. Under Art. On July 4, 1995, at around 4:45 a.m., Rogelio Ortiz, with helper Romeo
2224 of the Civil Code, temperate damages may be recovered when the court finds that Catamora, was driving a Nissan van owned by petitioner Dy Teban Trading, Inc. along
some pecuniary loss has been suffered but its amount cannot, from the nature of the the National Highway in Barangay Sumilihon, Butuan City, going to Surigao City. They
case, be proved with certainty. The cost of the repair of the motorcycle was prayed for were delivering commercial ice to nearby barangays and municipalities. A Joana Paula
by respondent in her Complaint. However, the evidence presented was merely a job passenger bus was cruising on the opposite lane towards the van. In between the two
estimate[43] of the cost of the motorcycles repair amounting to P17, 829.00. The Court of vehicles was a parked prime mover with a trailer, owned by private respondent Liberty
Appeals aptly held that there was no doubt that the damage caused on the motorcycle Forest, Inc.[3]
was due to the negligence of petitioners driver. In the absence of competent proof of
the actual damage caused on the motorcycle or the actual cost of its repair, the award The night before, at around 10:00 p.m., the prime mover with trailer suffered a
of temperate damages by the appellate court in the amount of P10,000.00 was tire blowout. The driver, private respondent Cresilito Limbaga, parked the prime mover
reasonable under the circumstances.[44] askew occupying a substantial portion of the national highway, on the lane of the
passenger bus. He parked the prime mover with trailer at the shoulder of the road with
The Court of Appeals also correctly awarded respondent moral damages for the left wheels still on the cemented highway and the right wheels on the sand and gravel
the physical injuries she sustained due to the vehicular accident. Under Art. 2219 of the shoulder of the highway.[4] The prime mover was not equipped with triangular, collapsible
Civil Code,[45] moral damages may be recovered in quasi-delicts causing physical injuries. reflectorized plates, the early warning device required under Letter of Instruction No.
However, the award of P50,000.00 should be reduced to P30,000.00 in accordance with 229. As substitute, Limbaga placed a banana trunk with leaves on the front and the rear
prevailing jurisprudence.[46] portion of the prime mover to warn incoming motorists. It is alleged that Limbaga likewise
placed kerosene lighted tin cans on the front and rear of the trailer.[5]
Further, the Court of Appeals correctly awarded respondent civil indemnity for
the death of her husband, which has been fixed by current jurisprudence To avoid hitting the parked prime mover occupying its lane, the incoming
at P50,000.00.[47] The award is proper under Art. 2206 of the Civil Code.[48] passenger bus swerved to the right, onto the lane of the approaching Nissan van. Ortiz
saw two bright and glaring headlights and the approaching passenger bus. He pumped
In fine, the Court of Appeals correctly awarded civil indemnity for the death of his break slowly, swerved to the left to avoid the oncoming bus but the van hit the front
respondents husband, temperate damages, and moral damages for the physical injuries of the stationary prime mover. The passenger bus hit the rear of the prime mover.[6]
sustained by respondent in addition to the damages granted by the trial court to
respondent. The trial court overlooked awarding the additional damages, which were Ortiz and Catamora only suffered minor injuries. The Nissan van, however,
prayed for by respondent in her Amended Complaint. The appellate court is clothed with became inoperable as a result of the incident. After the collision, SPO4 Teofilo Pame
ample authority to review matters, even if they are not assigned as errors in the appeal, if conducted an investigation and submitted a police traffic incident investigation report.[7]
it finds that their consideration is necessary in arriving at a just decision of the case.[49]
On October 31, 1995, petitioner Nissan van owner filed a complaint for
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated damages[8] against private respondents prime mover owner and driver with
August 17, 2004 in CA-G.R. CV No. 70860 is the RTC in Butuan City. The Joana Paula passenger bus was not impleaded as defendant
hereby AFFIRMED with MODIFICATION. Petitioner Philippine Hawk Corporation and in the complaint.
Margarito Avila are hereby ordered to pay jointly and severally respondent Vivian Lee
RTC Disposition Defendant Liberty Forest, Inc. did not exercise the diligence of a good father of
a family in managing and running its business. The evidence on record shows
On August 7, 2001, the RTC rendered a decision in favor of petitioner Dy Teban Trading, that it failed to provide its prime mover and trailer with the required early
Inc. with a fallo reading: warning devices with reflectors and it did not keep proper maintenance and
condition of the prime mover and the trailer. The circumstances show that the
WHEREFORE, judgment is hereby rendered directing, ordaining and trailer were provided with wornout tires and with only one (1) piece of spare
ordering: tire. The pictures marked Exhibit 3 and 4 show that two (2) flat tires suffered by
the trailer and these two (2) tires were attached to one of the two (2) I-beams
a) That defendants Liberty Forest, Inc. and Cresilito M. Limbaga pay, or axles attached to the rear of the trailer which axle is very near but behind the
jointly and solidarily, plaintiff Dy Teban Trading, Inc. the amounts other axle and with the location of the 2 I-beams, it would have the other I-beam
of P279,832.00 as actual and compensatory that would have suffered the flat tires as it has to bear the brunt of weight of the
damages, P30,000.00 as attorneys fees and P5,000.00 as D-8 bulldozer. The bulldozer was not loaded directly above the two (2) I-beams
expenses of litigation; as 2 I-beams, as a pair, were attached at the far rear end of the trailer.
b) That all money claims of plaintiff Rogelio C. Ortiz are dismissed;
c) That defendant Jose Ching is absolved from any civil liability or the However, defendant Jose Ching should be absolved of any liability as there is
case against him dismissed; no showing that he is the manager or CEO of defendant Liberty Forest, Inc.
d) That the counterclaim of all the defendants is dismissed; and Although in the answer, it is admitted that he is an officer of the defendant
e) That defendants Liberty Forest, Inc. and Cresilito M. Limbaga to pay, corporation, but it is not clarified what kind of position he is holding, as he could
jointly and solidarily, the costs. be an officer as one of the members of the Board of Directors or a cashier and
treasurer of the corporation. Witness Limbaga in his testimony mentioned a
SO ORDERED.[9] certain Boy Ching as the Manager but it was never clarified whether or not Boy
Ching and defendant Jose Ching is one and the same person.[10]
The RTC held that the proximate cause of the three-way vehicular collision was
improper parking of the prime mover on the national highway and the absence of an Private respondents appealed to the CA.
early warning device on the vehicle, thus:
CA Disposition
The court finds that the proximate cause of the incidents is the
negligence and carelessness attributable to the defendants. When the trailer On August 28, 2003, the CA reversed the RTC decision, disposing as follows:
being pulled by the prime mover suffered two (2) flat tires at Sumilihon, the prime
mover and trailer were parked haphazardly, as the right tires of the prime mover WHEREFORE, premises considered, the decision dated August 7,
were the only ones on the sand and gravel shoulder of the highway while the 2001 of the Regional Trial Court, Branch 2, Butuan City in Civil Case No.
left tires and all the tires of the trailer were on the cemented pavement of the 4360 is hereby PARTLY MODIFIED by absolving the defendants-
highway, occupying almost the whole of the right lane on the direction the appellants/appellees of any liability to plaintiffs-appellants/appellees
prime mover and trailer were traveling. The statement of Limbaga that he could by reason of the incident on July 4, 1995.
not park the prime mover and trailer deeper into the sand and gravel shoulder
of the highway to his right because there were banana plants is contradicted The dismissal of the case against Jose Ching, the counterclaim of
by the picture marked Exhibit F. The picture shows that there was ample space defendants-appellants/appellees and the money claim of Rogelio
on the shoulder. If defendant Limbaga was careful and prudent enough, he Ortiz STANDS.
should have the prime mover and trailer traveled more distance forward so that
the bodies of the prime mover and trailer would be far more on the shoulder SO ORDERED.[11]
rather than on the cemented highway when they were parked. x x x The court
has some doubts on the statement of witness-driver Limbaga that there were In partly reversing or partly modifying the RTC decision, the CA held that the
banana trunks with leaves and lighted tin cans with crude oil placed 3 strides in proximate cause of the vehicular collision was the failure of the Nissan van to give way or
front of the prime mover and behind the trailer because the testimonies of yield to the right of way of the passenger bus, thus:
witnesses Rogelio C. Ortiz, driver of the ice van, Romeo D. Catamora, helper of
the ice van, and Police Traffic Investigator SPO3 Teofilo M. Pame show that there It was stated that the Joana Paula bus in trying to avoid a head-on collision with the truck,
were no banana trunks with leaves and lighted tin cans at the scene of the sideswept the parked trailer loaded with bulldozer.
incident. But even assuming that there were banana trunks with leaves but they
were placed close to the prime mover and trailer as they were placed 3 strides Evidently, the driver of the Joana Paula bus was aware of the presence on its
away which to the mind of the court is equivalent approximately to 3 meters lane of the parked trailer with bulldozer. For this reason, it proceeded to occupy
and with this distance, approaching vehicles would have no sufficient time and what was left of its lane and part of the opposite lane. The truck occupying the
space to make a complete stop, especially if the vehicles are heavy and opposite lane failed to give way or yield the right of way to the oncoming bus
loaded. If there were lighted tin cans, it was not explained by the defendants by proceeding with the same speed. The two vehicles were, in effect, trying to
why the driver, especially driver witness Ortiz, did not see them. beat each other in occupying a single lane. The bus was the first to occupy the
said lane but upon realizing that the truck refused to give way or yield the right
of way, the bus, as a precaution, geared to its right where the trailer was
parked. Unfortunately, the bus miscalculated its distance from the parked trailer x x x Col. Dela Cruz and Romano testified that they did not see any
and its rear right side hit the protruding blade of the bulldozer then on the top of early warning device at the scene of the accident. They were referring
the parked trailer. The impact of the collision on its right rear side with the blade to the triangular reflectorized plates in red and yellow issued by the
of the bulldozer threw the bus further to the opposite lane, landing its rear portion Land Transportation Office. However, the evidence shows that
on the shoulder of the opposite lane. Recontique and Ecala placed a kerosene lamp or torch at the edge
of the road, near the rear portion of the truck to serve as an early
xxxx warning device. This substantially complies with Section 34(g) of the
Land Transportation and Traffic Code x x x
Facts of the case reveal that when Ortiz, the driver of the truck, failed to give
the Joana Paula bus the space on the road it needed, the latter vehicle Baliwags argument that the kerosene lamp or torch does not
scraped its rear right side on the protruded bulldozer blade and the impact substantially comply with the law is untenable. The aforequoted law
threw the bus directly on the path of the oncoming truck.This made plaintiffs- clearly allows the use not only of an early warning device of the
appellants/appellees conclude that the Joana Paula bus occupied its lane triangular reflectorized plates variety but also parking lights or flares
which forced Ortiz, the driver of the truck, to swerve to its left and ram the front visible one hundred meters away. x x x.
of the parked trailer.
This Court holds that the defendants-appellants/appellees were not negligent in
xxxx parking the trailer on the scene of the accident. It would have been different if
there was only one flat tire and defendant-appellant/appellee Limbaga failed
The trailer was parked because its two (2) rear-left tires were blown out. With a to change the same and left immediately.
bulldozer on top of the trailer and two (2) busted tires, it would be dangerous
and quite impossible for the trailer to further park on the graveled shoulder of As such, defendants-appellants/appellees are not liable for the damages
the road. To do so will cause the flat car to tilt and may cause the bulldozer to suffered by plaintiffs-appellants/appellees. Whatever damage plaintiffs-
fall from where it was mounted. In fact, it appeared that the driver of the trailer appellants/appellees suffered, they alone must bear them.[14]
tried its best to park on the graveled shoulder since the right-front tires were on
the graveled shoulder of the road. Issues

The lower court erred in stating that the Joana Paula bus swerved to the left of Petitioner raises two issues[15] for Our consideration, to wit:
the truck because it did not see the parked trailer due to lack of warning sign of
danger of any kind that can be seen from a distance. The damage suffered by I. THE HONORABLE COURT OF APPEALS, WITHOUT ANY AVAILABLE CONCRETE
the Joana Paula bus belied this assessment.As stated before, the Joana Paula EVIDENCE, ERRONEOUSLY DETERMINED THAT THERE WERE EARLY WARNING
bus, with the intention of passing first which it did, first approached the space DEVICES PLACED IN FRONT OF THE DEFENDANT-APPELLANTS/APPELLEES
beside the parked trailer, veered too close to the parked trailer thereby hitting TRUCK AND FLAT CAR TO WARN PLAINTIFF-APPELLANT/APPELLEE ROGELIO ORTIZ
its rear right side on the protruding bulldozer blade. Since the damage was on OF THEIR PRESENCE.
the rear right most of the bus, it was clearly on the space which was wide
enough for a single passing vehicle but not sufficient for two (2) passing II. WITH DUE RESPECT, IT IS HIGH TIME TO ENFORCE THE LAW ON EARLY WARNING
vehicles. The bus was thrown right to the path of the truck by the impact of the DEVICES IN THE PUBLIC INTEREST.
collision of its rear right side with the bulldozer blade.[12]
Our Ruling

The CA disagreed with the RTC that the prime mover did not have an early warning The petition is meritorious.
device. The appellate court accepted the claim of private respondent that Limbaga
placed kerosene lighted tin cans on the front and rear of the trailer which, in Baliwag The meat of the petition is whether or not the prime mover is liable for the
Transit, Inc. v. Court of Appeals,[13] may act as substitute early warning device. The CA damages suffered by the Nissan van. The RTC ruled in the affirmative holding that the
stated: proximate cause of the vehicular collision was the negligence of Limbaga in parking the
prime mover on the national highway without an early warning device on the vehicle. The
Likewise, it was incorrect for the lower court to state that there was no warning CA reversed the RTC decision, holding that the proximate cause of the collision was the
sign of danger of any kind, most probably referring to the absence of the negligence of Ortiz in not yielding to the right of way of the passenger bus.
triangular reflectorized plates. The police sketch clearly indicated the stack of
banana leaves placed at the rear of the parked trailer. The trailers driver testified Article 2176 of the Civil Code provides that whoever by act or omission causes
that they placed kerosene lighted tin can at the back of the parked trailer. damage to another, there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual relation between
A pair of triangular reflectorized plates is not the only early warning device the parties, is called a quasi-delict. To sustain a claim based on quasi-delict, the following
allowed by law. The Supreme Court (in Baliwag Transit, Inc. v. Court of requisites must concur: (a) damage suffered by plaintiff; (b) fault or negligence of
Appeals) held that:
defendant; and (c) connection of cause and effect between the fault or negligence of x x x The statement of Limbaga that he could not park the prime mover and
defendant and the damage incurred by plaintiff.[16] trailer deeper into the sand and gravel shoulder of the highway to his right
because there were banana plants is contradicted by the picture marked
There is no dispute that the Nissan van suffered damage. That is borne by the records and Exhibit F. The picture shows that there was ample space on the shoulder. If
conceded by the parties. The outstanding issues are negligence and proximate cause. defendant Limbaga was careful and prudent enough, he should have the
Tersely put, the twin issues are: (a) whether or not prime mover driver Limbaga was prime mover and trailer traveled more distance forward so that the bodies of
negligent in parking the vehicle; and (b) whether or not his negligence was the proximate the prime mover and trailer would be far more on the shoulder rather than on
cause of the damage to the Nissan van. the cemented highway when they were parked. Although at the time of the
incident, it was about 4:45 in the morning and it was drizzling but there is showing
Limbaga was negligent in that it was pitch dark that whoever travels along the highway must be extra
parking the prime mover on the careful. If the Joana Paula bus swerved to the lane on which the Nissan ice van
national highway; he failed to was properly traveling, as prescribed by Traffic Rules and Regulations, it is
prevent or minimize the risk to because the driver of the bus did not see at a distance the parked prime mover
oncoming motorists. and trailer on the bus proper lane because there was no warning signs of danger
of any kind that can be seen from a distance.[19]
Negligence is defined as the failure to observe for the protection of the interests
of another person that degree of care, precaution, and vigilance which the Limbaga also failed to take proper steps to minimize the risk posed by the improperly
circumstances justly demand, whereby such other person suffers injury.[17] The Supreme parked prime mover. He did not immediately inform his employer, private respondent
Court stated the test of negligence in the landmark case Picart v. Smith[18] as follows: Liberty Forest, Inc., that the prime mover suffered two tire blowouts and that he could not
have them fixed because he had only one spare tire. Instead of calling for help, Limbaga
The test by which to determine the existence or negligence in a took it upon himself to simply place banana leaves on the front and rear of the prime
particular case may be stated as follows: Did the defendant in doing the mover to serve as warning to oncoming motorists. Worse, Limbaga slept on the prime
alleged negligent act use that reasonable care and caution which an ordinary mover instead of standing guard beside the vehicle. By his own account, Limbaga was
person would have used in the same situation? If not, then he is guilty of sleeping on the prime mover at the time of the collision and that he was only awakened
negligence. The law here in effect adopts the standard supposed to be by the impact of the Nissan van and the passenger bus on the prime mover.[20]
supplied by the imaginary conduct of the discreet paterfamilias of the Roman
law. The existence of negligence in a given case is not determined by reference Limbaga also admitted on cross-examination that it was his first time to drive the
to the personal judgment of the actor in the situation before him. The law prime mover with trailer loaded with a D-8 caterpillar bulldozer.[21] We find that private
considers what would be reckless, blameworthy, or negligent in the man of respondent Liberty Forest, Inc. was utterly negligent in allowing a novice driver, like
ordinary intelligence and prudence and determines liability by Limbaga, to operate a vehicle, such as a truck loaded with a bulldozer, which required
that. (Underscoring supplied) highly specialized driving skills. Respondent employer clearly failed to properly supervise
Limbaga in driving the prime mover.
The test of negligence is objective. We measure the act or omission of the
tortfeasor with that of an ordinary reasonable person in the same situation. The test, as The RTC noted that private respondent Liberty Forest, Inc. also failed to keep the
applied to this case, is whether Limbaga, in parking the prime mover, used that prime mover in proper condition at the time of the collision. The prime mover had worn
reasonable care and caution which an ordinary reasonable person would have used in out tires. It was only equipped with one spare tire. It was for this reason that Limbaga was
the same situation. unable to change the two blown out tires because he had only one spare. The bulldozer
was not even loaded properly on the prime mover, which caused the tire blowouts.
We find that Limbaga was utterly negligent in parking the prime mover askew
on the right side of the national highway. The vehicle occupied a substantial portion of All told, We agree with the RTC that private respondent Limbaga was negligent
the national road on the lane of the passenger bus. It was parked at the shoulder of the in parking the prime mover on the national highway. Private respondent Liberty Forest,
road with its left wheels still on the cemented highway and the right wheels on the sand Inc. was also negligent in failing to supervise Limbaga and in ensuring that the prime
and gravel shoulder of the highway. It is common sense that the skewed parking of the mover was in proper condition.
prime mover on the national road posed a serious risk to oncoming motorists. It was
incumbent upon Limbaga to take some measures to prevent that risk, or at least minimize The case of Baliwag Transit, Inc.
it. v. Court of Appeals is
inapplicable; Limbaga did not
We are unable to agree with the CA conclusion it would have been dangerous and quite put lighted kerosene tin cans on
impossible to further park the prime mover on the graveled shoulder of the road because the front and rear of the prime
the prime mover may tilt and the bulldozer may fall off. The photographs taken after the mover.
incident show that it could have been possible for Limbaga to park the prime mover
completely on the shoulder of the national road without risk to oncoming motorists. We Anent the absence of an early warning device on the prime mover, the CA
agree with the RTC observation on this point, thus: erred in accepting the bare testimony of Limbaga that he placed kerosene lighted tin
cans on the front and rear of the prime mover. The evidence on records belies such
claim. The CA reliance on Baliwag Transit, Inc. v. Court of Appeals[22] as authority for the
proposition that kerosene lighted tin cans may act as substitute early warning device is party will not be allowed to introduce evidence to attack jointly or rather
misplaced. the same, paragraph 5 states, warning device consisting of 3 banana
trunks, banana items and leaves were filed. He can be cross-examined in
First, the traffic incident report did not mention any lighted tin cans on the prime the point, Your Honor.
mover or within the immediate vicinity of the accident. Only banana leaves were placed
on the prime mover. The report reads: COURT:
Q. Put that on record that as far as this tin cans are concerned, the
VIII RESULT OF INVESTIGATION: A Joana Paula Bus, with Body No. 7788, with Plate plaintiffs are interposing continuing objections. But the Court will
No. LVA-137, driven by one Temestocles Relova v. Antero, of legal age, married allow the question.[25]
and a resident of San Roque, Kitcharao, Agusan del Norte, while traveling along
the National Highway, coming from the east going to the west direction, as it
moves along the way and upon reaching Brgy. Sumilihon, Butuan City to evade We thus agree with the RTC that Limbaga did not place lighted tin cans on the
bumping to the approaching Nissan Ice Van with Plate No. PNT-247, driven by front and rear of the prime mover. We give more credence to the traffic incident report
one Rogelio Cortez y Ceneza. As the result, the Joana Paula Bus accidentally and the testimony of SPO4 Pame that only banana leaves were placed on the
busideswept (sic) to the parked Prime Mover with Trailer loaded with vehicle. Baliwag Transit, Inc. v. Court of Appeals[26] thus finds no application to the case
Bulldozer without early warning device, instead placing only dry banana leaves at bar.
three (3) meters at the rear portion of the Trailer, while failure to place at the
front portion, and the said vehicle occupied the whole lane. As the result, the The skewed parking of the prime
Joana Paula Bus hit to the left edge blade of the Bulldozer. Thus, causing the mover was the proximate cause
said bus swept to the narrow shouldering, removing the rear four (4) wheels of the collision.
including the differential and injuring the above-stated twelve (12) passengers
and damaged to the right side fender above the rear wheel. Thus, causing Proximate cause is defined as that cause, which, in natural and continuous
damage on it. While the Nissan Ice Van in evading, accidentally swerved to the sequence, unbroken by any efficient intervening cause, produces the injury, and without
left lane and accidentally bumped to the front bumper of the parked Prime which the result would not have occurred. More comprehensively, proximate cause is
Mover with Trailer loaded with Bulldozer. Thus, causing heavy damage to said that cause acting first and producing the injury, either immediately or by setting other
Nissan Ice Van including the cargoes of the said van.[23] events in motion, all constituting a natural and continuous chain of events, each having
a close causal connection with its immediate predecessor, the final event in the chain
Second, SPO4 Pame, who investigated the collision, testified[24] that only immediately effecting the injury as natural and probable result of the cause which first
banana leaves were placed on the front and rear of the prime mover. He did not see any acted, under such circumstances that the person responsible for the first event should, as
lighted tin cans in the immediate vicinity of the collision. an ordinarily prudent and intelligent person, have reasonable ground to expect at the
moment of his act or default that an injury to some person might probably result
Third, the claim of Limbaga that he placed lighted tin cans on the front and rear therefrom.[27]
of the prime mover belatedly surfaced only during his direct examination. No allegation
to this effect was made by private respondents in their Answer to the complaint for There is no exact mathematical formula to determine proximate cause. It is based upon
damages. Petitioners counsel promptly objected to the testimony of Limbaga, thus: mixed considerations of logic, common sense, policy and precedent.[28] Plaintiff must,
however, establish a sufficient link between the act or omission and the damage or
ATTY. ROSALES: injury. That link must not be remote or far-fetched; otherwise, no liability will attach. The
Q. Now you mentioned about placing some word signs in front and at the rear damage or injury must be a natural and probable result of the act or omission. In the
of the prime mover with trailer, will you please describe to us what this word precedent-setting Vda. de Bataclan v. Medina,[29] this Court discussed the necessary link
signs are? that must be established between the act or omission and the damage or injury, viz.:
A. We placed a piece of cloth on tin cans and filled them with crude oil. And
these tin cans were lighted and they are like torches. These two lights or
torches were placed in front and at the rear side of the prime mover with It may be that ordinarily, when a passenger bus overturns, and pins
trailer. After each torch, we placed banana trunk. The banana trunk is down a passenger, merely causing him physical injuries, if through some event,
placed between the two (2) torches and the prime mover, both on the unexpected and extraordinary, the overturned bus is set on fire, say, by lightning,
rear and on the front portion of the prime mover. or if some highwaymen after looting the vehicle sets it on fire, and the passenger
is burned to death, one might still contend that the proximate cause of his death
Q. How far was the lighted tin cans with wick placed in front of the prime mover. was the fire and not the overturning of the vehicle. But in the present case and
under the circumstances obtaining in the same, we do not hesitate to hold that
ATTY. ASIS: the proximate cause of the death of Bataclan was the overturning of the bus,
At this point, we will be objecting to questions particularly referring to the alleged this for the reason that when the vehicle turned not only on its side but
tin cans as some of the warning-sign devices, considering that there is no completely on its back, the leaking of the gasoline from the tank was not
allegation to that effect in the answer of the defendants. The answer was unnatural or unexpected; that the coming of the men with a lighted torch was
just limited to the numbers 4 & 5 of the answer.And, therefore, if we follow in response to the call for help, made not only by the passengers, but most
the rule of the binding effect of an allegation in the complaint, then the probably, by the driver and the conductor themselves, and that because it was
very dark (about 2:30 in the morning), the rescuers had to carry a light with them; We believe, secondly, that the truck drivers negligence far from being
and coming as they did from a rural area where lanterns and flashlights were a passive and static condition was rather an indispensable and efficient
not available, they had to use a torch, the most handy and available; and what cause. The collision between the dump truck and the private respondents car
was more natural than that said rescuers should innocently approach the would in all probability not have occurred had the dump truck not been parked
overturned vehicle to extend the aid and effect the rescue requested from askew without any warning lights or reflector devices. The improper parking of
them. In other words, the coming of the men with the torch was to be expected the dump truck created an unreasonable risk of injury for anyone driving
and was natural sequence of the overturning of the bus, the trapping of some down General Lacuna Street and for having so created this risk, the truck driver
of its passengers bus, the trapping of some of its passengers and the call for must be held responsible. In our view, Dionisios negligence, although later in
outside help. point of time than the truck drivers negligence and, therefore, closer to the
accident, was not an efficient intervening or independent cause. What the
The ruling in Bataclan has been repeatedly cited in subsequent cases as Petitioner describes as an intervening cause was no more than a foreseeable
authority for the proposition that the damage or injury must be a natural or probable result consequence of the risk created by the negligent manner in which the truck
of the act or omission. Here, We agree with the RTC that the damage caused to the driver had parked the dump truck. In other words, the petitioner truck driver
Nissan van was a natural and probable result of the improper parking of the prime mover owed a duty to private respondent Dionisio and others similarly situated not to
with trailer. As discussed, the skewed parking of the prime mover posed a serious risk to impose upon them the very risk the truck driver had created. Dionisios
oncoming motorists. Limbaga failed to prevent or minimize that risk. The skewed parking negligence was not of an independent and overpowering nature as to cut, as
of the prime mover triggered the series of events that led to the collision, particularly the it were, the chain of causation in fact between the improper parking of the
swerving of the passenger bus and the Nissan van. dump truck and the accident, nor to sever the juris vinculum of liability. x x
x (Underscoring supplied)
Private respondents Liberty Forest, Inc. and Limbaga are liable for all damages
that resulted from the skewed parking of the prime mover. Their liability includes those We cannot rule on the
damages resulting from precautionary measures taken by other motorist in trying to avoid proportionate or contributory
collision with the parked prime mover. As We see it, the passenger bus swerved to the liability of the passenger bus, if
right, onto the lane any, because it was not a party
of the Nissan van, to avoid colliding with the improperly parked prime mover. The driver to the case; joint tortfeasors are
of the Nissan van, Ortiz, reacted swiftly by swerving to the left, onto the lane of the solidarily liable.
passenger bus, hitting the parked prime mover. Ortiz obviously would not have swerved if
not for the passenger bus abruptly occupying his vans lane. The passenger bus, in turn, The CA also faults the passenger bus for the vehicular collision. The appellate
would not have swerved to the lane of the Nissan van if not for the prime mover court noted that the passenger bus was aware of the presence of the prime mover on its
improperly parked on its lane. The skewed parking is the proximate cause of the damage lane, but it still proceeded to occupy the lane of the Nissan van. The passenger bus also
to the Nissan van. miscalculated its distance from the prime mover when it hit the vehicle.

In Phoenix Construction, Inc. v. Intermediate Appellate Court,[30] this Court held We cannot definitively rule on the proportionate or contributory liability of the
that a similar vehicular collision was caused by the skewed parking of a dump truck on Joana Paula passenger bus vis--vis the prime mover because it was not a party to the
the national road, thus: complaint for damages. Due process dictates that the passenger bus must be given an
opportunity to present its own version of events before it can be held liable. Any
The conclusion we draw from the factual circumstances outlined contributory or proportionate liability of the passenger bus must be litigated in a separate
above is that private respondent Dionisio was negligent the night of the action, barring any defense of prescription or laches. Insofar as petitioner is concerned,
accident. He was hurrying home that night and driving faster than he should the proximate cause of the collision was the improper parking of the prime mover. It was
have been. Worse, he extinguished his headlights at or near the intersection of the improper parking of the prime mover which set in motion the series of events that led
General Lacuna and General Santos Streets and thus did not see the dump to the vehicular collision.
truck that was parked askew and sticking out onto the road lane.
Even granting that the passenger bus was at fault, its fault will not necessarily
Nonetheless, we agree with the Court of First Instance and the absolve private respondents from liability. If at fault, the passenger bus will be a joint
Intermediate Appellate Court that the legal and proximate cause of the tortfeasor along with private respondents. The liability of joint tortfeasors is joint and
accident and of Dionisios injuries was the wrongful or negligent manner in which solidary. This means that petitioner may hold either of them liable for damages from the
the dump truck was parked in other words, the negligence of petitioner collision. In Philippine National Construction Corporation v. Court of Appeals,[31] this Court
Carbonel. That there was a reasonable relationship between petitioner held:
Carbonels negligence on the one hand and the accident and respondents
injuries on the other hand, is quite clear. Put in a slightly different manner, the According to the great weight of authority, where the concurrent or
collision of Dionisios car with the dump truck was a natural and foreseeable successive negligent acts or omission of two or more persons, although acting
consequence of the truck drivers negligence. independently of each other, are, in combination, the direct and proximate
cause of a single injury to a third person and it is impossible to determine in what
xxxx proportion each contributed to the injury, either is responsible for the whole
injury, even though his act alone might not have caused the entire injury, or the We also note a failure of implementation of basic safety standards, particularly
same damage might have resulted from the acts of the other tort-feasor x x x. the law on early warning devices. This applies even more to trucks and big vehicles, which
are prone to mechanical breakdown on the national highway. The law, as crafted,
In Far Eastern Shipping Company v. Court of Appeals, the Court declared that requires vehicles to be equipped with triangular reflectorized plates.[32] Vehicles without
the liability of joint tortfeasors is joint and solidary, to wit: the required early warning devices are ineligible for registration.[33] Vehicle owners may
also be arrested and fined for non-compliance with the law.[34]
It may be said, as a general rule, that negligence in order to render a
person liable need not be the sole cause of an injury. It is sufficient that his The Land Transportation Office (LTO) owes a duty to the public to ensure that all vehicles
negligence, concurring with one or more efficient causes other than plaintiffs, is on the road meet basic and minimum safety features, including that of early warning
the proximate cause of the injury. Accordingly, where several causes combine devices. It is most unfortunate that We still see dilapidated and rundown vehicles on the
to produce injuries, a person is not relieved from liability because he is road with substandard safety features. These vehicles not only pose a hazard to the safety
responsible for only one of them, it being sufficient that the negligence of the of their occupants but that of other motorists. The prime mover truck in this case should
person charged with injury is an efficient cause without which the injury would not have been granted registration because it failed to comply with the minimum safety
not have resulted to as great an extent, and that such cause is not attributable features required for vehicles on the road.
to the person injured. It is no defense to one of the concurrent tortfeasors that
the injury would not have resulted from his negligence alone, without the It is, indeed, time for traffic enforcement agencies and the LTO to strictly enforce
negligence or wrongful acts of the other concurrent tortfeasors. Where several all pertinent laws and regulations within their mandate.
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 WHEREFORE, the petition is GRANTED. The Court of Appeals decision dated August 28,
to all or any of the causes and recovery may be had against any or all of the 2003 is hereby SET ASIDE. The RTC decision dated August 7, 2001 is REINSTATED IN FULL.
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 Safeguard Security v. Tangco, 511 SCRA 67
to the injured person was not the same. No actors negligence ceases to be a Before us is a petition for review on certiorari filed by Safeguard Security Agency,
proximate cause merely because it does not exceed the negligence of other Inc. (Safeguard) and Admer Pajarillo (Pajarillo) assailing the Decision[1] dated July 16,
actors. Each wrongdoer is responsible for the entire result and is liable as though 2004 and the Resolution[2] dated October 20, 2004 issued by the Court of Appeals (CA) in
his acts were the sole cause of the injury. CA-G.R. CV No. 77462.
On November 3, 1997, at about 2:50 p.m.,
There is no contribution between joint tortfeasors whose liability is Evangeline Tangco (Evangeline) went to Ecology Bank, Katipunan Branch, Quezon City,
solidary since both of them are liable for the total damage. Where the to renew her time deposit per advise of the banks cashier as she would sign a specimen
concurrent or successive negligent acts or omissions of two or more persons, card. Evangeline, a duly licensed firearm holder with corresponding permit to carry the
although acting independently, are in combination with the direct and same outside her residence, approached security guard Pajarillo, who was stationed
proximate cause of a single injury to a third person, it is impossible to determine outside the bank, and pulled out her firearm from her bag to deposit the same for
in what proportion each contributed to the injury and either of them is safekeeping. Suddenly, Pajarillo shot Evangeline with his service shotgun hitting her in the
responsible for the whole injury. Where their concurring negligence resulted in abdomen instantly causing her death.
injury or damage to a third party, they become joint tortfeasors and are solidarily
liable for the resulting damage under Article 2194 of the Civil Lauro Tangco, Evangelines husband, together with his six minor children (respondents)
Code. (Underscoring supplied) filed with the Regional Trial Court (RTC) of Quezon City, a criminal case of Homicide
against Pajarillo, docketed as Criminal Case No. 0-97-73806 and assigned to Branch
All told, all the elements of quasi delict have been proven by clear and convincing 78. Respondents reserved their right to file a separate civil action in the said criminal
evidence. The CA erred in absolving private respondents from liability for the vehicular case. The RTC of Quezon City subsequently convicted Pajarillo of Homicide in its Decision
collision. dated January 19, 2000.[3] On appeal to the CA, the RTC decision was affirmed with
modification as to the penalty in a Decision[4] dated July 31, 2000. Entry of Judgment was
Final Note made on August 25, 2001.

It is lamentable that the vehicular collision in this case could have been easily Meanwhile, on January 14, 1998, respondents filed with RTC, Branch
avoided by following basic traffic rules and regulations and road safety standards. In 273, Marikina City, a complaint[5] for damages against Pajarillo for negligently shooting
hindsight, private respondent Limbaga could have prevented the three-way vehicular Evangeline and against Safeguard for failing to observe the diligence of a good father of
collision if he had properly parked the prime mover on the shoulder of the national a family to prevent the damage committed by its security guard. Respondents prayed
road. The improper parking of vehicles, most especially along the national highways, for actual, moral and exemplary damages and attorneys fees.
poses a serious and unnecessary risk to the lives and limbs of other motorists and
passengers. Drivers owe a duty of care to follow basic traffic rules and regulations and to In their Answer,[6] petitioners denied the material allegations in the complaint
observe road safety standards. They owe that duty not only for their own safety, but also and alleged that Safeguard exercised the diligence of a good father of a family in the
for that of other motorists. We can prevent most vehicular accidents by simply following selection and supervision of Pajarillo; that Evangelines death was not due
basic traffic rules and regulations. to Pajarillos negligence as the latter acted only in self-defense. Petitioners set up a
compulsory counterclaim for moral damages and attorneys fees.
 Trial thereafter ensued. On January 10, 2003, the RTC rendered its
Decision,[7] the dispositive portion of which reads: In finding that Safeguard is only subsidiarily liable, the CA held that the
applicable provisions are not Article 2180 in relation to Article 2176 of the Civil Code,
WHEREFORE, judgment is hereby rendered in favor of the on quasi-delicts, but the provisions on civil liability arising from felonies under the Revised
plaintiffs, the heirs of Evangeline Tangco, and against Penal Code; that since Pajarillo had been found guilty of Homicide in a final
defendants Admer Pajarillo and Safeguard Security Agency, Inc. and executory judgment and is said to be serving sentence in Muntinlupa, he must be
ordering said defendants to pay the plaintiffs, jointly and severally, the adjudged civilly liable under the provisions of Article 100 of the Revised Penal Code since
following: the civil liability recoverable in the criminal action is one solely dependent upon
conviction, because said liability arises from the offense charged and no other; that this
1. ONE HUNDRED FIFTY SEVEN THOUSAND FOUR is also the civil liability that is deemed extinguished with the extinction of the penal liability
HUNDRED THIRTY PESOS (P157,430.00), as actual with a pronouncement that the fact from which the civil action might proceed does not
damages exist; that unlike in civil liability arising from quasi-delict, the defense of diligence of a good
2. FIFTY THOUSAND PESOS (P50,000.00) as death father of a family in the employment and supervision of employees is inapplicable and
indemnity; irrelevant in civil liabilities based on crimes or ex-delicto; that Article 103 of the Revised
3. ONE MILLION PESOS (P1,000,000.00), as moral Penal Code provides that the liability of an employer for the civil liability of their employees
damages; is only subsidiary, not joint or solidary.
4. THREE HUNDRED THOUSAND PESOS (P300,000.00),
as exemplary damages; Petitioners filed their Motion for Reconsideration which the CA denied in a
5. THIRTY THOUSAND PESOS (P30,000.00), as Resolution dated October 20, 2004.
attorneys fees; and
6. costs of suit. Hence, the instant Petition for Review on Certiorari with the following assignment
of errors, to wit:
For lack of merit, defendants counterclaim is hereby
DISMISSED. The Honorable Court of Appeals gravely erred in finding
petitioner Pajarillo liable to respondents for the payment of damages and other
SO ORDERED. [8] money claims.

The RTC found respondents to be entitled to damages. It The Honorable Court of Appeals gravely erred when it applied Article
rejected Pajarillos claim that he merely acted in self-defense. It gave no credence 103 of the Revised Penal Code in holding petitioner Safeguard solidarily [sic]
to Pajarillos bare claim that Evangeline was seen roaming around the area prior to the liable with petitioner Pajarillo for the payment of damages and other money
shooting incident since Pajarillo had not made such report to the head office and the claims.
police authorities. The RTC further ruled that being the guard on duty, the situation
demanded that he should have exercised proper prudence and necessary care by The Honorable Court of Appeals gravely erred in failing to find that
asking Evangeline for him to ascertain the matter instead of shooting her instantly; petitioner Safeguard Security Agency, Inc. exercised due diligence in the
that Pajarillo had already been convicted of Homicide in Criminal Case No. 0-97-73806; selection and supervision of its employees, hence, should be excused from any
and that he also failed to proffer proof negating liability in the instant case. liability.[10]

The RTC also found Safeguard as employer of Pajarillo to be jointly and severally The issues for resolution are whether (1) Pajarillo is guilty of negligence in shooting
liable with Pajarillo. It ruled that while it may be conceded that Safeguard had perhaps Evangeline; and (2) Safeguard should be held solidarily liable for the damages awarded
exercised care in the selection of its employees, particularly of Pajarillo, there was no to respondents.
sufficient evidence to show that Safeguard exercised the diligence of a good father of a Safeguard insists that the claim for damages by respondents is based
family in the supervision of its employee; that Safeguards evidence simply showed that it on culpa aquiliana under Article 2176[11] of the Civil Code, in which case, its liability is
required its guards to attend trainings and seminars which is not the supervision jointly and severally with Pajarillo. However, since it has established that it had exercised
contemplated under the law; that supervision includes not only the issuance of due diligence in the selection and supervision of Pajarillo, it should be exonerated from
regulations and instructions designed for the protection of persons and property, for the civil liability.
guidance of their servants and employees, but also the duty to see to it that such
regulations and instructions are faithfully complied with. We will first resolve whether the CA correctly held that respondents, in filing a
Petitioners appealed the RTC decision to the CA. On July 16, 2004, the CA issued separate civil action against petitioners are limited to the recovery of damages arising
its assailed Decision, the dispositive portion of which reads: from a crime or delict, in which case the liability of Safeguard as employer under Articles
102 and 103 of the Revised Penal Code[12] is subsidiary and the defense of due diligence
IN VIEW OF ALL THE FOREGOING, the appealed decision is in the selection and supervision of employee is not available to it.
hereby AFFIRMED, with the modification that Safeguard Security
Agency, Inc.s civil liability in this case is only subsidiary under Art. The CA erred in ruling that the liability of Safeguard is only subsidiary.
103 of the Revised Penal Code. No pronouncement as to costs.[9]
 The law at the time the complaint for damages was filed is Rule 111 of the 1985 without exercising necessary caution/care, and in idiotic manner, with
Rules on Criminal Procedure, as amended, to wit: the use of his shotgun, fired and burst bullets upon Evangeline
M. Tangco, killing her instantly. x x x

SECTION 1. Institution of criminal and civil actions. - When a 16. That defendants, being employer and the employee are
criminal action is instituted, the civil action for the recovery of civil jointly and severally liable for the death of Evangeline M. Tangco.[16]

liability is impliedly instituted with the criminal action, unless the Thus, a reading of respondents complaint shows that the latter are invoking their right to
offended party waives the civil action, reserves his right to institute it recover damages against Safeguard for their vicarious responsibility for the injury caused
separately, or institutes the civil action prior to the criminal action. by Pajarillos act of shooting and killing Evangeline under Article 2176, Civil Code which
Such civil action includes recovery of indemnity under the provides:
Revised Penal Code, and damages under Articles 32, 33, 34, and 2176
of the Civil Code of the Philippines arising from the same act or ARTICLE 2176. Whoever by act or omission causes damage to another,
omission of the accused. there being fault or negligence, is obliged to pay for the damage done. Such
fault or negligence, if there is no pre-existing contractual relation between the
Respondents reserved the right to file a separate civil action and in fact filed the parties is called a quasi-delict and is governed by the provisions of this Chapter.
same on January 14, 1998.
The scope of Article 2176 is not limited to acts or omissions resulting from
The CA found that the source of damages in the instant case must be the crime negligence. In Dulay v. Court of Appeals,[17] we held:
of homicide, for which he had already been found guilty of and serving sentence thereof, x x x Well-entrenched is the doctrine that Article 2176 covers not only
thus must be governed by the Revised Penal Code. acts committed with negligence, but also acts which are voluntary and
intentional. As far back as the definitive case of Elcano v. Hill (77 SCRA 98 [1977]),
We do not agree. this Court already held that:
"x x x Article 2176, where it refers to "fault or negligence," covers not
An act or omission causing damage to another may give rise to two separate only acts "not punishable by law" but also acts criminal in character, whether
civil liabilities on the part of the offender, i.e., (1) civil liability ex delicto, under Article 100 intentional and voluntary or negligent. Consequently, a separate civil action lies
of the Revised Penal Code; and (2) independent civil liabilities, such as those (a) not against the offender in a criminal act, whether or not he is criminally prosecuted
arising from an act or omission complained of as a felony, e.g., culpa contractual or and found guilty or acquitted, provided that the offended party is not allowed,
obligations arising from law under Article 31 of the Civil Code, intentional torts under if he is actually charged also criminally, to recover damages on both scores,
Articles 32 and 34, and culpa aquiliana under Article 2176 of the Civil Code; or (b) where and would be entitled in such eventuality only to the bigger award of the two,
the injured party is granted a right to file an action independent and distinct from the assuming the awards made in the two cases vary. In other words, the extinction
criminal action under Article 33 of the Civil Code. Either of these liabilities may be of civil liability referred to in Par. (e) of Section 3, Rule 111, refers exclusively to
enforced against the offender subject to the caveat under Article 2177 of the Civil Code civil liability founded on Article 100 of the Revised Penal Code, whereas the civil
that the offended party cannot recover damages twice for the same act or omission or liability for the same act considered as quasi-delict only and not as a crime is
under both causes.[13] not extinguished even by a declaration in the criminal case that the criminal act
charged has not happened or has not been committed by the accused. Briefly
It is important to determine the nature of respondents cause of action. The stated, We here hold, in reiteration of Garcia, that culpa aquilianaincludes
nature of a cause of action is determined by the facts alleged in the complaint as voluntary and negligent acts which may be punishable by law." (Emphasis
constituting the cause of action.[14] The purpose of an action or suit and the law to govern supplied)
it is to be determined not by the claim of the party filing the action, made in his argument
or brief, but rather by the complaint itself, its allegations and prayer for relief.[15]
The civil action filed by respondents was not derived from the criminal liability
The pertinent portions of the complaint read: of Pajarillo in the criminal case but one based on culpa aquiliana or quasi-delict which is
separate and distinct from the civil liability arising from crime.[18] The source of the
7. That Defendant Admer A. Pajarillo was the guard assigned obligation sought to be enforced in the civil case is a quasi-delict not an act or omission
and posted in the Ecology Bank Katipunan Branch, Quezon City, who punishable by law.
was employed and under employment of Safeguard Security Agency,
Inc. hence there is employer-employee relationship between co- In Bermudez v. Melencio-Herrera,[19] where the issue involved was whether the
defendants. civil action filed by plaintiff-appellants is founded on crime or on quasi-delict, we held:

The Safeguard Security Agency, Inc. failed to observe the diligence of x x x The trial court treated the case as an action based on a crime in
a good father of a family to prevent damage to herein plaintiffs. view of the reservation made by the offended party in the criminal case
(Criminal Case No. 92944), also pending before the court, to file a separate civil
8. That defendant Admer Pajarillo upon seeing action. Said the trial court:
Evangeline Tangco, who brought her firearm out of her bag, suddenly
 It would appear that plaintiffs instituted this action on the assumption conclusion; and (9) when the findings of fact of the CA are premised on the absence of
that defendant Pontino's negligence in the accident of May 10, evidence and are contradicted by the evidence on record. [24]
1969 constituted a quasi-delict. The Court cannot accept the validity of that
assumption. In Criminal Case No. 92944 of this Court, plaintiffs had already A thorough review of the records of the case fails to show any cogent reason
appeared as complainants. While that case was pending, the offended parties for us to deviate from the factual finding of the trial court and affirmed by the CA that
reserved the right to institute a separate civil action. If, in a criminal case, the petitioner Pajarillo was guilty of negligence in shooting Evangeline.
right to file a separate civil action for damages is reserved, such civil action is to
be based on crime and not on tort. That was the ruling in Joaquin vs. Aniceto, L- Respondents evidence established that Evangelines purpose in going to the
18719, Oct. 31, 1964. bank was to renew her time deposit.[25] On the other hand, Pajarillo claims that
Evangeline drew a gun from her bag and aimed the same at him, thus, acting
We do not agree. The doctrine in the case cited by the trial court is instinctively, he shot her in self-defense.
inapplicable to the instant case x x x.
xxxx Pajarillo testified that when Evangeline aimed the gun at him at a distance of
In cases of negligence, the injured party or his heirs has the choice about one meter or one arms length[26] he stepped backward, loaded the chamber of
between an action to enforce the civil liability arising from crime under Article his gun and shot her.[27] It is however unimaginable that petitioner Pajarillo could still make
100 of the Revised Penal Code and an action for quasi-delict under Article 2176- such movements if indeed the gun was already pointed at him. Any movement could
2194 of the Civil Code. If a party chooses the latter, he may hold the have prompted Evangeline to pull the trigger to shoot him.
employer solidarily liable for the negligent act of his employee, subject to the
employer's defense of exercise of the diligence of a good father of the family. Petitioner Pajarillo would like to justify his action in shooting Evangeline on
In the case at bar, the action filed by appellant was an action for his mere apprehension that Evangeline will stage a bank robbery. However, such claim is
damages based on quasi-delict. The fact that appellants reserved their right in befuddled by his own testimony. Pajarillo testified that prior to the incident, he saw
the criminal case to file an independent civil action did not preclude them from Evangeline roaming under the fly over which was about 10 meters away from the
choosing to file a civil action for quasi-delict.[20] (Emphasis supplied) bank[28] and saw her talking to a man thereat;[29] that she left the man under the fly-over,
crossed the street and approached the bank. However, except for the bare testimony
Although the judgment in the criminal case finding Pajarillo guilty of Homicide is of Pajarillo, the records do not show that indeed Evangeline was seen roaming near the
already final and executory, such judgment has no relevance or importance to this vicinity of the bank and acting suspiciously prior to the shooting incident. In fact, there is
case.[21] It would have been entirely different if respondents cause of action was for no evidence that Pajarillo called the attention of his head guard or the banks branch
damages arising from a delict, in which case the CA is correct in finding Safeguard to be manager regarding his concerns or that he reported the same to the police authorities
only subsidiary liable pursuant to Article 103 of the Revised Penal Code.[22] whose outpost is just about 15 meters from the bank.
Moreover, if Evangeline was already roaming the vicinity of the bank, she could
As clearly shown by the allegations in the complaint, respondents cause of have already apprised herself that Pajarillo, who was posted outside the bank, was armed
action is based on quasi-delict. Under Article 2180 of the Civil Code, when the injury is with a shotgun; that there were two guards inside the bank[30] manning the entrance
caused by the negligence of the employee, there instantly arises a presumption of law door. Thus, it is quite incredible that if she really had a companion, she would leave him
that there was negligence on the part of the master or the employer either in the selection under the fly-over which is 10 meters far from the bank and stage a bank robbery all by
of the servant or employee, or in the supervision over him after selection or both. The herself without a back-up. In fact, she would have known, after surveying the area,
liability of the employer under Article 2180 is direct and immediate. Therefore, it is that aiming her gun at Pajarillo would not ensure entrance to the bank as there were
incumbent upon petitioners to prove that they exercised the diligence of a good father guards manning the entrance door.
of a family in the selection and supervision of their employee.
Evidence, to be believed, must not only proceed from the mouth of a credible
We must first resolve the issue of whether Pajarillo was negligent in shooting witness, but it must be credible in itself such as the common experience and observation
Evangeline. of mankind can approve as probable under the circumstances. We have no test of the
truth of human testimony, except its conformity to our knowledge, observation and
The issue of negligence is factual in nature. Whether a person is negligent or not experience. Whatever is repugnant to these belongs to the miraculous and is outside
is a question of fact, which, as a general rule, we cannot pass upon in a petition for review judicial cognizance.[31]
on certiorari, as our jurisdiction is limited to reviewing errors of law.[23]Generally, factual
findings of the trial court, affirmed by the CA, are final and conclusive and may not be That Evangeline just wanted to deposit her gun before entering the bank and
reviewed on appeal. The established exceptions are: (1) when the inference made is was actually in the act of pulling her gun from her bag when petitioner Pajarillo recklessly
manifestly mistaken, absurd or impossible; (2) when there is grave abuse of discretion; (3) shot her, finds support from the contentions raised in petitioners petition for review where
when the findings are grounded entirely on speculations, surmises or conjectures; (4) they argued that when Evangeline approached the bank, she was seen pulling a gun
when the judgment of the CA is based on misapprehension of facts; (5) when the findings from inside her bag and petitioner Pajarillo who was suddenly beset by fear and
of fact are conflicting; (6) when the CA, in making its findings, went beyond the issues of perceived the act as a dangerous threat, shot and killed the deceased out of pure
the case and the same is contrary to the admissions of both appellant and appellee; (7) instinct;[32] that the act of drawing a gun is a threatening act, regardless of whether or not
when the findings of fact are conclusions without citation of specific evidence on which the gun was intended to be used against petitioner Pajarillo;[33] that the fear that was
they are based; (8) when the CA manifestly overlooked certain relevant facts not created in the mind of petitioner Pajarillo as he saw EvangelineTangco drawing a gun
disputed by the parties and which, if properly considered, would justify a different
from her purse was suddenly very real and the former merely reacted out of pure self- The responsibility treated of in this article shall cease when the
preservation.[34] persons herein mentioned prove that they observed all the diligence
of a good father of a family to prevent damage.
Considering that unlawful aggression on the part of Evangeline is
absent, Pajarillos claim of self-defense cannot be accepted specially when such claim As the employer of Pajarillo, Safeguard is primarily and solidarily liable for
was uncorroborated by any separate competent evidence other than his testimony the quasi-delict committed by the former. Safeguard is presumed to be negligent in the
which was even doubtful. Pajarillos apprehension that Evangeline will shoot him to stage selection and supervision of his employee by operation of law. This presumption may be
a bank robbery has no basis at all. It is therefore clear that the alleged threat of bank overcome only by satisfactorily showing that the employer exercised the care and the
robbery was just a figment of Pajarillos imagination which caused such unfounded diligence of a good father of a family in the selection and the supervision of its employee.
unlawful aggression on his part.
In the selection of prospective employees, employers are required to examine
Petitioners argue that Evangeline was guilty of contributory negligence. them as to their qualifications, experience, and service records.[35] On the other
Although she was a licensed firearm holder, she had no business bringing the gun in such hand, due diligence in the supervision of employees includes the formulation of suitable
establishment where people would react instinctively upon seeing the gun; that had rules and regulations for the guidance of employees and the issuance of proper
Evangeline been prudent, she could have warned Pajarillo before drawing the gun and instructions intended for the protection of the public and persons with whom the
did not conduct herself with suspicion by roaming outside the vicinity of the bank; that employer has relations through his or its employees and the imposition of necessary
she should not have held the gun with the nozzle pointed at Pajarillo who mistook the act disciplinary measures upon employees in case of breach or as may be warranted to
as hold up or robbery. ensure the performance of acts indispensable to the business of and beneficial to their
employer. To this, we add that actual implementation and monitoring of consistent
We are not persuaded. compliance with said rules should be the constant concern of the employer, acting
through dependable supervisors who should regularly report on their supervisory
As we have earlier held, Pajarillo failed to substantiate his claim that Evangeline functions.[36] To establish these factors in a trial involving the issue of vicarious liability,
was seen roaming outside the vicinity of the bank and acting suspiciously prior to the employers must submit concrete proof, including documentary evidence.
shooting incident. Evangelines death was merely due to Pajarillos negligence in shooting
her on his imagined threat that Evangeline will rob the bank. We agree with the RTCs finding that Safeguard had exercised the diligence in
the selection of Pajarillo since the record shows that Pajarillo underwent a psychological
Safeguard contends that it cannot be jointly held liable since it had adequately and neuro-psychiatric evaluation conducted by the St. Martin de Porres Center where no
shown that it had exercised the diligence required in the selection and supervision of its psychoses ideations were noted, submitted a certification on the Pre-licensing training
employees. It claims that it had required the guards to undergo the necessary training course for security guards, as well as police and NBI clearances.
and to submit the requisite qualifications and credentials which even the RTC found to
have been complied with; that the RTC erroneously found that it did not exercise the The RTC did not err in ruling that Safeguard fell short of the diligence required in
diligence required in the supervision of its employee. Safeguard further claims that it the supervision of its employee, particularly Pajarillo. In this case, while Safeguard
conducts monitoring of the activities of its personnel, wherein supervisors are assigned to presented Capt. James Camero, its Director for Operations, who testified on the issuance
routinely check the activities of the security guards which include among others, whether of company rules and regulations, such as the Guidelines of Guards Who Will Be Assigned
or not they are in their proper post and with proper equipment, as well as regular To Banks,[37] Weapons Training,[38] Safeguard Training Center Marksmanship Training
evaluations of the employees performances; that the fact that Pajarillo loaded his firearm Lesson Plan,[39] Disciplinary/Corrective Sanctions,[40] it had also been established
contrary to Safeguards operating procedure is not sufficient basis to say that Safeguard during Cameros cross-examination that Pajarillo was not aware of such rules and
had failed its duty of proper supervision; that it was likewise error to say that Safeguard regulations.[41] Notwithstanding Cameros clarification on his re-direct examination that
was negligent in seeing to it that the procedures and policies were not properly these company rules and regulations are lesson plans as a basis of guidelines of the
implemented by reason of one unfortunate event. instructors during classroom instructions and not necessary to give students copy of the
same,[42] the records do not show that Pajarillo had attended such classroom instructions.
We are not convinced. The records also failed to show that there was adequate training and continuous
evaluation of the security guards performance. Pajarillo had only attended an in-service
Article 2180 of the Civil Code provides: training on March 1, 1997 conducted by Toyota Sta. Rosa, his first assignment as security
guard of Safeguard, which was in collaboration with Safeguard. It was established that
Art. 2180. The obligation imposed by Article 2176 is demandable not the concept of such training was purely on security of equipments to be guarded and
only for ones own acts or omissions, but also for those of persons for whom one protection of the life of the employees.[43]
is responsible.
It had not been established that after Pajarillos training in Toyota, Safeguard
Employers shall be liable for the damages caused by their employees had ever conducted further training of Pajarillo when he was later assigned to guard a
and household helpers acting within the scope of their assigned tasks, even bank which has a different nature of business with that of Toyota. In fact, Pajarillotestified
though the former are not engaged in any business or industry. that being on duty in a bank is different from being on duty in a factory since a bank is a
very sensitive area.[44]
xxxx
 Moreover, considering his reactions to Evangelines act of just depositing her [G.R. No. 144274. September 20, 2004]
firearm for safekeeping, i.e., of immediately shooting her, confirms that there was no NOSTRADAMUS VILLANUEVA petitioner, vs. PRISCILLA R. DOMINGO and LEANDRO LUIS R.
training or seminar given on how to handle bank clients and on human psychology. DOMINGO, respondents.
This is a petition to review the decision[1] of the Court of Appeals in CA-G.R. CV No.
Furthermore, while Safeguard would like to show that there were inspectors who 52203 affirming in turn the decision of the trial court finding petitioner liable to respondent
go around the bank two times a day to see the daily performance of the security guards for damages. The dispositive portion read:
assigned therein, there was no record ever presented of such daily inspections. In fact, if WHEREFORE, the appealed decision is hereby AFFIRMED except the award of attorneys
there was really such inspection made, the alleged suspicious act of Evangeline could fees including appearance fees which is DELETED.
have been taken noticed and reported. SO ORDERED.[2]
The facts of the case, as summarized by the Court of Appeals, are as follows:
Turning now to the award of damages, we find that the award of actual [Respondent] Priscilla R. Domingo is the registered owner of a silver Mitsubishi Lancer Car
damages in the amount P157,430.00 which were the expenses incurred by respondents model 1980 bearing plate No. NDW 781 91 with [co-respondent] Leandro Luis R. Domingo
in connection with the burial of Evangeline were supported by receipts. The award as authorized driver. [Petitioner] Nostradamus Villanueva was then the registered owner
of P50,000.00 as civil indemnity for the death of Evangeline is likewise in order. of a green Mitsubishi Lancer bearing Plate No. PHK 201 91.
On 22 October 1991 at about 9:45 in the evening, following a green traffic light,
As to the award of moral damages, Article 2206 of the Civil Code provides that [respondent] Priscilla Domingos silver Lancer car with Plate No. NDW 781 91 then driven
the spouse, legitimate children and illegitimate descendants and ascendants of the by [co-respondent] Leandro Luis R. Domingo was cruising along the middle lane of South
deceased may demand moral damages for mental anguish by reason of the death of Superhighway at moderate speed from north to south. Suddenly, a green Mitsubishi
the deceased. Moral damages are awarded to enable the injured party to obtain Lancer with plate No. PHK 201 91 driven by Renato Dela Cruz Ocfemia darted from Vito
means, diversions or amusements that will serve to alleviate the moral suffering he/she Cruz Street towards the South Superhighway directly into the path of NDW 781 91 thereby
has undergone, by reason of the defendants culpable action. Its award is aimed at hitting and bumping its left front portion. As a result of the impact, NDW 781 91 hit two (2)
restoration, as much as possible, of the spiritual status quo ante; thus it must be parked vehicles at the roadside, the second hitting another parked car in front of it.
proportionate to the suffering inflicted.[45] The intensity of the pain experienced by the Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N. Acido,
relatives of the victim is proportionate to the intensity of affection for him and bears no Renato dela Cruz Ocfemia was driving with expired license and positive for alcoholic
relation whatsoever with the wealth or means of the offender.[46] breath. Hence, Manila Assistant City Prosecutor Oscar A. Pascua recommended the filing
of information for reckless imprudence resulting to (sic) damage to property and physical
In this case, respondents testified as to their moral suffering caused by injuries.
Evangelines death was so sudden causing respondent Lauro to lose a wife and a mother The original complaint was amended twice: first, impleading Auto Palace Car Exchange
to six children who were all minors at the time of her death. In People v. Teehankee, as commercial agent and/or buyer-seller and second, impleading Albert Jaucian as
Jr.,[47] we awarded one million pesos as moral damages to the heirs of a seventeen-year- principal defendant doing business under the name and style of Auto Palace Car
old girl who was murdered. In Metro Manila Transit Corporation v. Court of Appeals,[48] we Exchange.
likewise awarded the amount of one million pesos as moral damages to the parents of a Except for Ocfemia, all the defendants filed separate answers to the complaint.
third year high school student and who was also their youngest child who died in a [Petitioner] Nostradamus Villanueva claimed that he was no longer the owner of the car
vehicular accident since the girls death left a void in their lives. Hence, we hold that the at the time of the mishap because it was swapped with a Pajero owned by Albert
respondents are also entitled to the amount of one million pesos as Evangelines death Jaucian/Auto Palace Car Exchange. For her part, Linda Gonzales declared that her
left a void in the lives of her husband and minor children as they were deprived of her presence at the scene of the accident was upon the request of the actual owner of the
love and care by her untimely demise. Mitsubishi Lancer (PHK 201 91) [Albert Jaucian] for whom she had been working as
agent/seller. On the other hand, Auto Palace Car Exchange represented by Albert
We likewise uphold the award of exemplary damages in the amount Jaucian claimed that he was not the registered owner of the car. Moreover, it could not
of P300,000.00. Under Article 2229 of the Civil Code, exemplary damages are imposed by be held subsidiary liable as employer of Ocfemia because the latter was off-duty as utility
way of example or correction for the public good, in addition to moral, temperate, employee at the time of the incident. Neither was Ocfemia performing a duty related to
liquidated or compensatory damages.[49] It is awarded as a deterrent to socially his employment.[3]
deleterious actions. In quasi-delict, exemplary damages may be granted if the After trial, the trial court found petitioner liable and ordered him to pay respondent
defendant acted with gross negligence.[50] actual, moral and exemplary damages plus appearance and attorneys fees:
WHEREFORE, judgment is hereby rendered for the plaintiffs, ordering Nostradamus
Pursuant to Article 2208 of the Civil Code, attorney's fees may be recovered Villanueva to pay the amount of P99,580 as actual damages, P25,000.00 as moral
when, as in the instant case, exemplary damages are awarded. Hence, we affirm the damages, P25,000.00 as exemplary damages and attorneys fees in the amount
award of attorney's fees in the amount of P30,000.00. of P10,000.00 plus appearance fees of P500.00 per hearing with legal interest counted
WHEREFORE, the petition for review is DENIED. The Decision dated July 16, 2004 of from the date of judgment. In conformity with the law on equity and in accordance with
the Court of Appeals is AFFIRMED with MODIFICATION that the civil liability of petitioner the ruling in First Malayan Lending and Finance Corporation vs. Court of Appeals (supra),
Safeguard Security Agency, Inc. is SOLIDARY and PRIMARY under Article 2180 of the Civil Albert Jaucian is hereby ordered to indemnify Nostradamus Villanueva for whatever
Code. amount the latter is hereby ordered to pay under the judgment.
SO ORDERED.[4]
 The CA upheld the trial courts decision but deleted the award for appearance and registered owner. Instances are numerous where vehicles running on public highways
attorneys fees because the justification for the grant was not stated in the body of the caused accidents or injuries to pedestrians or other vehicles without positive identification
decision. Thus, this petition for review which raises a singular issue: of the owner or drivers, or with very scant means of identification. It is to forestall these
MAY THE REGISTERED OWNER OF A MOTOR VEHICLE BE HELD LIABLE FOR DAMAGES circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
ARISING FROM A VEHICULAR ACCIDENT INVOLVING HIS MOTOR VEHICLE WHILE BEING registration is primarily ordained, in the interest of the determination of persons responsible
OPERATED BY THE EMPLOYEE OF ITS BUYER WITHOUT THE LATTERS CONSENT AND for damages or injuries caused on public highways:
KNOWLEDGE?[5] One of the principal purposes of motor vehicles legislation is identification of the vehicle
Yes. and of the operator, in case of accident; and another is that the knowledge that means
We have consistently ruled that the registered owner of any vehicle is directly and of detection are always available may act as a deterrent from lax observance of the law
primarily responsible to the public and third persons while it is being operated.[6] The and of the rules of conservative and safe operation. Whatever purpose there may be in
rationale behind such doctrine was explained way back in 1957 in Erezo vs. Jepte[7]: these statutes, it is subordinate at the last to the primary purpose of rendering it certain
The principle upon which this doctrine is based is that in dealing with vehicles registered that the violator of the law or of the rules of safety shall not escape because of lack of
under the Public Service Law, the public has the right to assume or presume that the means to discover him. The purpose of the statute is thwarted, and the displayed number
registered owner is the actual owner thereof, for it would be difficult for the public to becomes a share and delusion, if courts would entertain such defenses as that put
enforce the actions that they may have for injuries caused to them by the vehicles being forward by appellee in this case. No responsible person or corporation could be held
negligently operated if the public should be required to prove who the actual owner is. liable for the most outrageous acts of negligence, if they should be allowed to pace a
How would the public or third persons know against whom to enforce their rights in case middleman between them and the public, and escape liability by the manner in which
of subsequent transfers of the vehicles? We do not imply by his doctrine, however, that they recompense servants. (King vs. Brenham Automobile Co., Inc. 145 S.W. 278, 279.)
the registered owner may not recover whatever amount he had paid by virtue of his With the above policy in mind, the question that defendant-appellant poses is: should not
liability to third persons from the person to whom he had actually sold, assigned or the registered owner be allowed at the trial to prove who the actual and real owner is,
conveyed the vehicle. and in accordance with such proof escape or evade responsibility by and lay the same
Under the same principle the registered owner of any vehicle, even if not used for a public on the person actually owning the vehicle? We hold with the trial court that the law does
service, should primarily be responsible to the public or to third persons for injuries caused not allow him to do so; the law, with its aim and policy in mind, does not relieve him directly
the latter while the vehicle is being driven on the highways or streets. The members of the of the responsibility that the law fixes and places upon him as an incident or consequence
Court are in agreement that the defendant-appellant should be held liable to plaintiff- of registration. Were a registered owner allowed to evade responsibility by proving who
appellee for the injuries occasioned to the latter because of the negligence of the driver, the supposed transferee or owner is, it would be easy for him, by collusion with others or
even if the defendant-appellant was no longer the owner of the vehicle at the time of otherwise, to escape said responsibility and transfer the same to an indefinite person, or
the damage because he had previously sold it to another. What is the legal basis for his to one who possesses no property with which to respond financially for the damage or
(defendant-appellants) liability? injury done. A victim of recklessness on the public highways is usually without means to
There is a presumption that the owner of the guilty vehicle is the defendant-appellant as discover or identify the person actually causing the injury or damage. He has no means
he is the registered owner in the Motor Vehicles Office. Should he not be allowed to prove other than by a recourse to the registration in the Motor Vehicles Office to determine who
the truth, that he had sold it to another and thus shift the responsibility for the injury to the is the owner. The protection that the law aims to extend to him would become illusory
real and actual owner? The defendant holds the affirmative of this proposition; the trial were the registered owner given the opportunity to escape liability by disproving his
court held the negative. ownership. If the policy of the law is to be enforced and carried out, the registered owner
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may should not be allowed to prove the contrary to the prejudice of the person injured, that
be used or operated upon any public highway unless the same is property registered. It is, to prove that a third person or another has become the owner, so that he may thereby
has been stated that the system of licensing and the requirement that each machine be relieved of the responsibility to the injured person.
must carry a registration number, conspicuously displayed, is one of the precautions taken The above policy and application of the law may appear quite harsh and would seem
to reduce the danger of injury to pedestrians and other travelers from the careless to conflict with truth and justice. We do not think it is so. A registered owner who has
management of automobiles. And to furnish a means of ascertaining the identity of already sold or transferred a vehicle has the recourse to a third-party complaint, in the
persons violating the laws and ordinances, regulating the speed and operation of same action brought against him to recover for the damage or injury done, against the
machines upon the highways (2 R.C.L. 1176). Not only are vehicles to be registered and vendee or transferee of the vehicle. The inconvenience of the suit is no justification for
that no motor vehicles are to be used or operated without being properly registered for relieving him of liability; said inconvenience is the price he pays for failure to comply with
the current year, but that dealers in motor vehicles shall furnish thee Motor Vehicles Office the registration that the law demands and requires.
a report showing the name and address of each purchaser of motor vehicle during the In synthesis, we hold that the registered owner, the defendant-appellant herein, is
previous month and the manufacturers serial number and motor number. (Section 5(c), primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but
Act No. 3992, as amended.) he (defendant-appellant) has a right to be indemnified by the real or actual owner of the
Registration is required not to make said registration the operative act by which ownership amount that he may be required to pay as damage for the injury caused to the plaintiff-
in vehicles is transferred, as in land registration cases, because the administrative appellant.[8]
proceeding of registration does not bear any essential relation to the contract of sale Petitioner insists that he is not liable for damages since the driver of the vehicle at
between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the the time of the accident was not an authorized driver of the new (actual) owner of the
use and operation of the vehicle upon any public highway (section 5 [a], Act No. 3992, vehicle. He claims that the ruling in First Malayan Leasing and Finance Corporation vs.
as amended). The main aim of motor vehicle registration is to identify the owner so that if CA[9]implies that to hold the registered owner liable for damages, the driver of the vehicle
any accident happens, or that any damage or injury is caused by the vehicle on the must have been authorized, allowed and permitted by its actual owner to operate and
public highways, responsibility therefore can be fixed on a definite individual, the
drive it. Thus, if the vehicle is driven without the knowledge and consent of the actual liable for the acts of his employee Ocfemia. Thus, there is no reason to apply
owner, then the registered owner cannot be held liable for damages. the Duavit ruling to this case.
He further argues that this was the underlying theory behind Duavit vs. The ruling in First Malayan has been reiterated in BA Finance Corporation vs.
CA[10] wherein the court absolved the registered owner from liability after finding that the CA[13] and more recently in Aguilar, Sr. vs. Commercial Savings Bank.[14] In BA Finance, we
vehicle was virtually stolen from the owners garage by a person who was neither held the registered owner liable even if, at the time of the accident, the vehicle was
authorized nor employed by the owner. Petitioner concludes that the ruling in Duavit and leased by another party and was driven by the lessees employee. In Aguilar, the
not the one in First Malayan should be applicable to him. registered owner-bank answered for damages for the accident even if the vehicle was
Petitioners argument lacks merit. Whether the driver is authorized or not by the being driven by the Vice-President of the Bank in his private capacity and not as an officer
actual owner is irrelevant to determining the liability of the registered owner who the law of the Bank, as claimed by the Bank. We find no reason to deviate from these decisions.
holds primarily and directly responsible for any accident, injury or death caused by the The main purpose of vehicle registration is the easy identification of the owner who
operation of the vehicle in the streets and highways. To require the driver of the vehicle can be held responsible for any accident, damage or injury caused by the vehicle. Easy
to be authorized by the actual owner before the registered owner can be held identification prevents inconvenience and prejudice to a third party injured by one who
accountable is to defeat the very purpose why motor vehicle legislations are enacted in is unknown or unidentified. To allow a registered owner to escape liability by claiming that
the first place. the driver was not authorized by the new (actual) owner results in the public detriment
Furthermore, there is nothing in First Malayan which even remotely suggests that the the law seeks to avoid.
driver must be authorized before the registered owner can be held accountable. In First Finally, the issue of whether or not the driver of the vehicle during the accident was
Malayan, the registered owner, First Malayan Corporation, was held liable for damages authorized is not at all relevant to determining the liability of the registered owner. This
arising from the accident even if the vehicle involved was already owned by another must be so if we are to comply with the rationale and principle behind the registration
party: requirement under the motor vehicle law.
This Court has consistently ruled that regardless of who the actual owner is of a motor WHEREFORE, the petition is hereby DENIED. The January 26, 2000 decision of the
vehicle might be, the registered owner is the operator of the same with respect to the Court of Appeals is AFFIRMED.
public and third persons, and as such, directly and primarily responsible for the SO ORDERED.
consequences of its operation. In contemplation of law, the owner/operator of record is
the employer of the driver, the actual operator and employer being considered merely [G.R. No. 122039. May 31, 2000]
as his agent (MYC-Agro-Industrial Corporation vs. Vda. de Caldo, 132 SCRA 10, citing VICENTE CALALAS, petitioner, vs. COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and
Vargas vs. Langcay, 6 SCRA 174; Tamayo vs. Aquino, 105 Phil. 949). FRANCISCO SALVA, respondents.
We believe that it is immaterial whether or not the driver was actually employed by the This is a petition for review on certiorari of the decision[1] of the Court of Appeals, dated
operator of record. It is even not necessary to prove who the actual owner of the vehicle March 31, 1991, reversing the contrary decision of the Regional Trial Court, Branch 36,
and the employer of the driver is. Granting that, in this case, the father of the driver is the Dumaguete City, and awarding damages instead to private respondent Eliza Jujeurche
actual owner and that he is the actual employer, following the well-settled principle that Sunga as plaintiff in an action for breach of contract of carriage.
the operator of record continues to be the operator of the vehicle in contemplation of The facts, as found by the Court of Appeals, are as follows:
law, as regards the public and third person, and as such is responsible for the At 10 oclock in the morning of August 23, 1989, private respondent Eliza Jujeurche G.
consequences incident to its operation, we must hold and consider such owner-operator Sunga, then a college freshman majoring in Physical Education at the Siliman University,
of record as the employer, in contemplation of law, of the driver. And, to give effect to took a passenger jeepney owned and operated by petitioner Vicente Calalas. As the
this policy of law as enunciated in the above cited decisions of this Court, we must now jeepney was filled to capacity of about 24 passengers, Sunga was given by the
extend the same and consider the actual operator and employer as the agent of the conductor an "extension seat," a wooden stool at the back of the door at the rear end of
operator of record.[11] the vehicle. Sclaw
Contrary to petitioners position, the First Malayan ruling is applicable to him since On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a
the case involves the same set of facts ― the registered owner had previously sold the passenger off. As she was seated at the rear of the vehicle, Sunga gave way to the
vehicle to someone else and was being driven by an employee of the new (actual) outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio Verena
owner. Duavit is inapplicable since the vehicle there was not transferred to another; the and owned by Francisco Salva bumped the left rear portion of the jeepney. As a result,
registered and the actual owner was one and the same person. Besides, in Duavit, the Sunga was injured. She sustained a fracture of the "distal third of the left tibia-fibula with
defense of the registered owner, Gilberto Duavit, was that the vehicle was practically severe necrosis of the underlying skin." Closed reduction of the fracture, long leg circular
stolen from his garage by Oscar Sabiano, as affirmed by the latter: casting, and case wedging were done under sedation. Her confinement in the hospital
Defendant Sabiano, in his testimony, categorically admitted that he took the jeep from lasted from August 23 to September 7, 1989. Her attending physician, Dr. Danilo V.
the garage of defendant Duavit without the consent and authority of the latter. He Oligario, an orthopedic surgeon, certified she would remain on a cast for a period of three
testified further that Duavit even filed charges against him for the theft of the jeep but months and would have to ambulate in crutches during said period.
which Duavit did not push through as his (Sabianos) parents apologized to Duavit on his On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging
behalf.[12] violation of the contract of carriage by the former in failing to exercise the diligence
As correctly pointed out by the CA, the Duavit ruling is not applicable to petitioners required of him as a common carrier. Calalas, on the other hand, filed a third-party
case since the circumstance of unauthorized use was not present. He in fact voluntarily complaint against Francisco Salva, the owner of the Isuzu truck. Korte
delivered his car to Albert Jaucian as part of the downpayment for a vehicle he The lower court rendered judgment against Salva as third-party defendant and absolved
purchased from Jaucian. Thus, he could not claim that the vehicle was stolen from him Calalas of liability, holding that it was the driver of the Isuzu truck who was responsible for
since he voluntarily ceded possession thereof to Jaucian. It was the latter, as the new the accident. It took cognizance of another case (Civil Case No. 3490), filed by Calalas
(actual) owner, who could have raised the defense of theft to prove that he was not against Salva and Verena, for quasi-delict, in which Branch 37 of the same court held
Salva and his driver Verena jointly liable to Calalas for the damage to his Art. 1733. Common carriers, from the nature of their business and for reasons of public
jeepney. Rtcspped policy, are bound to observe extraordinary diligence in the vigilance over the goods and
On appeal to the Court of Appeals, the ruling of the lower court was reversed on the for the safety of the passengers transported by them, according to all the circumstances
ground that Sungas cause of action was based on a contract of carriage, not quasi- of each case.
delict, and that the common carrier failed to exercise the diligence required under the Such extraordinary diligence in the vigilance over the goods is further expressed in articles
Civil Code. The appellate court dismissed the third-party complaint against Salva and 1734, 1735, and 1746, Nos. 5,6, and 7, while the extraordinary diligence for the safety of
adjudged Calalas liable for damages to Sunga. The dispositive portion of its decision the passengers is further set forth in articles 1755 and 1756.
reads: Art. 1755. A common carrier is bound to carry the passengers safely as far as human care
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another and foresight can provide, using the utmost diligence of very cautious persons, with due
one is entered ordering defendant-appellee Vicente Calalas to pay plaintiff-appellant: regard for all the circumstances.
(1) P50,000.00 as actual and compensatory damages; Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to
(2) P50,000.00 as moral damages; have been at fault or to have acted negligently, unless they prove that they observed
(3) P10,000.00 as attorneys fees; and extraordinary diligence as prescribed by articles 1733 and 1755.
(4) P1,000.00 as expenses of litigation; and In the case at bar, upon the happening of the accident, the presumption of negligence
(5) to pay the costs. at once arose, and it became the duty of petitioner to prove that he had to observe
SO ORDERED. extraordinary diligence in the care of his passengers. Scslx
Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that the Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight
negligence of Verena was the proximate cause of the accident negates his liability and could provide, using the utmost diligence of very cautious persons, with due regard for all
that to rule otherwise would be to make the common carrier an insurer of the safety of its the circumstances" as required by Art. 1755? We do not think so. Several factors militate
passengers. He contends that the bumping of the jeepney by the truck owned by Salva against petitioners contention. Slx
was a caso fortuito. Petitioner further assails the award of moral damages to Sunga on First, as found by the Court of Appeals, the jeepney was not properly parked, its rear
the ground that it is not supported by evidence. Sdaadsc portion being exposed about two meters from the broad shoulders of the highway, and
The petition has no merit. facing the middle of the highway in a diagonal angle. This is a violation of the R.A. No.
The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver 4136, as amended, or the Land Transportation and Traffic Code, which provides:
and the owner of the truck liable for quasi-delict ignores the fact that she was never a Sec. 54. Obstruction of Traffic. - No person shall drive his motor vehicle
party to that case and, therefore, the principle of res judicata does not apply. Missdaa in such a manner as to obstruct or impede the passage of any vehicle,
Nor are the issues in Civil Case No. 3490 and in the present case the same. The issue in nor, while discharging or taking on passengers or loading or unloading
Civil Case No. 3490 was whether Salva and his driver Verena were liable for quasi-delict freight, obstruct the free passage of other vehicles on the highway.
for the damage caused to petitioners jeepney. On the other hand, the issue in this case Second, it is undisputed that petitioners driver took in more passengers than the allowed
is whether petitioner is liable on his contract of carriage. The first, quasi-delict, also known seating capacity of the jeepney, a violation of 32(a) of the same law. It provides: Mesm
as culpa aquiliana or culpa extra contractual, has as its source the negligence of the Exceeding registered capacity. - No person operating any motor
tortfeasor. The second, breach of contract or culpa contractual, is premised upon the vehicle shall allow more passengers or more freight or cargo in his
negligence in the performance of a contractual obligation. vehicle than its registered capacity.
Consequently, in quasi-delict, the negligence or fault should be clearly established The fact that Sunga was seated in an "extension seat" placed her in a peril greater than
because it is the basis of the action, whereas in breach of contract, the action can be that to which the other passengers were exposed. Therefore, not only was petitioner
prosecuted merely by proving the existence of the contract and the fact that the obligor, unable to overcome the presumption of negligence imposed on him for the injury
in this case the common carrier, failed to transport his passenger safely to his sustained by Sunga, but also, the evidence shows he was actually negligent in
destination.[2] In case of death or injuries to passengers, Art. 1756 of the Civil Code transporting passengers. Calrky
provides that common carriers are presumed to have been at fault or to have acted We find it hard to give serious thought to petitioners contention that Sungas taking an
negligently unless they prove that they observed extraordinary diligence as defined in "extension seat" amounted to an implied assumption of risk. It is akin to arguing that the
Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the injuries to the many victims of the tragedies in our seas should not be compensated
burden of proof. Slxmis merely because those passengers assumed a greater risk of drowning by boarding an
There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva overloaded ferry. This is also true of petitioners contention that the jeepney being bumped
and his driver Verena liable for the damage to petitioners jeepney, should be binding on while it was improperly parked constitutes caso fortuito. A caso fortuito is an event which
Sunga. It is immaterial that the proximate cause of the collision between the jeepney and could not be foreseen, or which, though foreseen, was inevitable.[3] This requires that the
the truck was the negligence of the truck driver. The doctrine of proximate cause is following requirements be present: (a) the cause of the breach is independent of the
applicable only in actions for quasi-delict, not in actions involving breach of contract. The debtors will; (b) the event is unforeseeable or unavoidable; (c) the event is such as to
doctrine is a device for imputing liability to a person where there is no relation between render it impossible for the debtor to fulfill his obligation in a normal manner, and (d) the
him and another party. In such a case, the obligation is created by law itself. But, where debtor did not take part in causing the injury to the creditor.[4] Petitioner should have
there is a pre-existing contractual relation between the parties, it is the parties themselves foreseen the danger of parking his jeepney with its body protruding two meters into the
who create the obligation, and the function of the law is merely to regulate the relation highway. Kycalr
thus created. Insofar as contracts of carriage are concerned, some aspects regulated by Finally, petitioner challenges the award of moral damages alleging that it is excessive and
the Civil Code are those respecting the diligence required of common carriers with without basis in law. We find this contention well taken.
regard to the safety of passengers as well as the presumption of negligence in cases of In awarding moral damages, the Court of Appeals stated: Kyle
death or injury to passengers. It provides: Slxsc
Plaintiff-appellant at the time of the accident was a first-year college student in that machine. In so doing the defendant assumed that the horseman would move to the other
school year 1989-1990 at the Silliman University, majoring in Physical Education. Because side. The pony had not as yet exhibited fright, and the rider had made no sign for the
of the injury, she was not able to enroll in the second semester of that school year. She automobile to stop. Seeing that the pony was apparently quiet, the defendant, instead
testified that she had no more intention of continuing with her schooling, because she of veering to the right while yet some distance away or slowing down, continued to
could not walk and decided not to pursue her degree, major in Physical Education approach directly toward the horse without diminution of speed. When he had gotten
"because of my leg which has a defect already." quite near, there being then no possibility of the horse getting across to the other side, the
Plaintiff-appellant likewise testified that even while she was under confinement, she cried defendant quickly turned his car sufficiently to the right to escape hitting the horse
in pain because of her injured left foot. As a result of her injury, the Orthopedic Surgeon alongside of the railing where it as then standing; but in so doing the automobile passed
also certified that she has "residual bowing of the fracture side." She likewise decided not in such close proximity to the animal that it became frightened and turned its body across
to further pursue Physical Education as her major subject, because "my left leg x x x has a the bridge with its head toward the railing. In so doing, it as struck on the hock of the left
defect already." hind leg by the flange of the car and the limb was broken. The horse fell and its rider was
Those are her physical pains and moral sufferings, the inevitable bedfellows of the injuries thrown off with some violence. From the evidence adduced in the case we believe that
that she suffered. Under Article 2219 of the Civil Code, she is entitled to recover moral when the accident occurred the free space where the pony stood between the
damages in the sum of P50,000.00, which is fair, just and reasonable. automobile and the railing of the bridge was probably less than one and one half meters.
As a general rule, moral damages are not recoverable in actions for damages As a result of its injuries the horse died. The plaintiff received contusions which caused
predicated on a breach of contract for it is not one of the items enumerated under Art. temporary unconsciousness and required medical attention for several days.
2219 of the Civil Code.[5] As an exception, such damages are recoverable: (1) in cases in The question presented for decision is whether or not the defendant in maneuvering his
which the mishap results in the death of a passenger, as provided in Art. 1764, in relation car in the manner above described was guilty of negligence such as gives rise to a civil
to Art. 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud obligation to repair the damage done; and we are of the opinion that he is so liable. As
or bad faith, as provided in Art. 2220.[6] the defendant started across the bridge, he had the right to assume that the horse and
In this case, there is no legal basis for awarding moral damages since there was no factual the rider would pass over to the proper side; but as he moved toward the center of the
finding by the appellate court that petitioner acted in bad faith in the performance of bridge it was demonstrated to his eyes that this would not be done; and he must in a
the contract of carriage. Sungas contention that petitioners admission in open court that moment have perceived that it was too late for the horse to cross with safety in front of
the driver of the jeepney failed to assist her in going to a nearby hospital cannot be the moving vehicle. In the nature of things this change of situation occurred while the
construed as an admission of bad faith. The fact that it was the driver of the Isuzu truck automobile was yet some distance away; and from this moment it was not longer within
who took her to the hospital does not imply that petitioner was utterly indifferent to the the power of the plaintiff to escape being run down by going to a place of greater safety.
plight of his injured passenger. If at all, it is merely implied recognition by Verena that he The control of the situation had then passed entirely to the defendant; and it was his duty
was the one at fault for the accident. Exsm either to bring his car to an immediate stop or, seeing that there were no other persons
WHEREFORE, the decision of the Court of Appeals, dated March 31, 1995, and its on the bridge, to take the other side and pass sufficiently far away from the horse to avoid
resolution, dated September 11, 1995, are AFFIRMED, with the MODIFICATION that the the danger of collision. Instead of doing this, the defendant ran straight on until he was
award of moral damages is DELETED. almost upon the horse. He was, we think, deceived into doing this by the fact that the
SO ORDERED. horse had not yet exhibited fright. But in view of the known nature of horses, there was an
appreciable risk that, if the animal in question was unacquainted with automobiles, he
G.R. No. L-12219 March 15, 1918 might get exited and jump under the conditions which here confronted him. When the
AMADO PICART, plaintiff-appellant, vs. FRANK SMITH, JR., defendant-appellee. defendant exposed the horse and rider to this danger he was, in our opinion, negligent in
In this action the plaintiff, Amado Picart, seeks to recover of the defendant, Frank Smith, the eye of the law.
jr., the sum of P31,000, as damages alleged to have been caused by an automobile The test by which to determine the existence of negligence in a particular case may be
driven by the defendant. From a judgment of the Court of First Instance of the Province stated as follows: Did the defendant in doing the alleged negligent act use that person
of La Union absolving the defendant from liability the plaintiff has appealed. would have used in the same situation? If not, then he is guilty of negligence. The law here
The occurrence which gave rise to the institution of this action took place on December in effect adopts the standard supposed to be supplied by the imaginary conduct of the
12, 1912, on the Carlatan Bridge, at San Fernando, La Union. It appears that upon the discreet paterfamilias of the Roman law. The existence of negligence in a given case is
occasion in question the plaintiff was riding on his pony over said bridge. Before he had not determined by reference to the personal judgment of the actor in the situation before
gotten half way across, the defendant approached from the opposite direction in an him. The law considers what would be reckless, blameworthy, or negligent in the man of
automobile, going at the rate of about ten or twelve miles per hour. As the defendant ordinary intelligence and prudence and determines liability by that.
neared the bridge he saw a horseman on it and blew his horn to give warning of his The question as to what would constitute the conduct of a prudent man in a given
approach. He continued his course and after he had taken the bridge he gave two more situation must of course be always determined in the light of human experience and in
successive blasts, as it appeared to him that the man on horseback before him was not view of the facts involved in the particular case. Abstract speculations cannot here be of
observing the rule of the road. much value but this much can be profitably said: Reasonable men govern their conduct
The plaintiff, it appears, saw the automobile coming and heard the warning signals. by the circumstances which are before them or known to them. They are not, and are
However, being perturbed by the novelty of the apparition or the rapidity of the not supposed to be, omniscient of the future. Hence they can be expected to take care
approach, he pulled the pony closely up against the railing on the right side of the bridge only when there is something before them to suggest or warn of danger. Could a prudent
instead of going to the left. He says that the reason he did this was that he thought he did man, in the case under consideration, foresee harm as a result of the course actually
not have sufficient time to get over to the other side. The bridge is shown to have a length pursued? If so, it was the duty of the actor to take precautions to guard against that harm.
of about 75 meters and a width of 4.80 meters. As the automobile approached, the Reasonable foresight of harm, followed by ignoring of the suggestion born of this prevision,
defendant guided it toward his left, that being the proper side of the road for the is always necessary before negligence can be held to exist. Stated in these terms, the
proper criterion for determining the existence of negligence in a given case is this: opinion -- the action of the justice of the peace in dismissing the criminal proceeding
Conduct is said to be negligent when a prudent man in the position of the tortfeasor upon the preliminary hearing can have no effect. (See U. S. vs. Banzuela and Banzuela,
would have foreseen that an effect harmful to another was sufficiently probable to 31 Phil. Rep., 564.)
warrant his foregoing conduct or guarding against its consequences. From what has been said it results that the judgment of the lower court must be reversed,
Applying this test to the conduct of the defendant in the present case we think that and judgment is her rendered that the plaintiff recover of the defendant the sum of two
negligence is clearly established. A prudent man, placed in the position of the defendant, hundred pesos (P200), with costs of other instances. The sum here awarded is estimated
would in our opinion, have recognized that the course which he was pursuing was fraught to include the value of the horse, medical expenses of the plaintiff, the loss or damage
with risk, and would therefore have foreseen harm to the horse and the rider as occasioned to articles of his apparel, and lawful interest on the whole to the date of this
reasonable consequence of that course. Under these circumstances the law imposed on recovery. The other damages claimed by the plaintiff are remote or otherwise of such
the defendant the duty to guard against the threatened harm. character as not to be recoverable. So ordered.
It goes without saying that the plaintiff himself was not free from fault, for he was guilty of
antecedent negligence in planting himself on the wrong side of the road. But as we have
already stated, the defendant was also negligent; and in such case the problem always
is to discover which agent is immediately and directly responsible. It will be noted that the
negligent acts of the two parties were not contemporaneous, since the negligence of
the defendant succeeded the negligence of the plaintiff by an appreciable interval.
Under these circumstances the law is that the person who has the last fair chance to
avoid the impending harm and fails to do so is chargeable with the consequences,
without reference to the prior negligence of the other party.
The decision in the case of Rkes vs. Atlantic, Gulf and Pacific Co. (7 Phil. Rep., 359) should
perhaps be mentioned in this connection. This Court there held that while contributory
negligence on the part of the person injured did not constitute a bar to recovery, it could
be received in evidence to reduce the damages which would otherwise have been
assessed wholly against the other party. The defendant company had there employed
the plaintiff, as a laborer, to assist in transporting iron rails from a barge in Manila harbor
to the company's yards located not far away. The rails were conveyed upon cars which
were hauled along a narrow track. At certain spot near the water's edge the track gave
way by reason of the combined effect of the weight of the car and the insecurity of the
road bed. The car was in consequence upset; the rails slid off; and the plaintiff's leg was
caught and broken. It appeared in evidence that the accident was due to the effects of
the typhoon which had dislodged one of the supports of the track. The court found that
the defendant company was negligent in having failed to repair the bed of the track and
also that the plaintiff was, at the moment of the accident, guilty of contributory
negligence in walking at the side of the car instead of being in front or behind. It was held
that while the defendant was liable to the plaintiff by reason of its negligence in having
failed to keep the track in proper repair nevertheless the amount of the damages should
be reduced on account of the contributory negligence in the plaintiff. As will be seen the
defendant's negligence in that case consisted in an omission only. The liability of the
company arose from its responsibility for the dangerous condition of its track. In a case
like the one now before us, where the defendant was actually present and operating the
automobile which caused the damage, we do not feel constrained to attempt to weigh
the negligence of the respective parties in order to apportion the damage according to
the degree of their relative fault. It is enough to say that the negligence of the defendant
was in this case the immediate and determining cause of the accident and that the
antecedent negligence of the plaintiff was a more remote factor in the case.
A point of minor importance in the case is indicated in the special defense pleaded in
the defendant's answer, to the effect that the subject matter of the action had been
previously adjudicated in the court of a justice of the peace. In this connection it appears
that soon after the accident in question occurred, the plaintiff caused criminal
proceedings to be instituted before a justice of the peace charging the defendant with
the infliction of serious injuries (lesiones graves). At the preliminary investigation the
defendant was discharged by the magistrate and the proceedings were dismissed.
Conceding that the acquittal of the defendant at the trial upon the merits in a criminal
prosecution for the offense mentioned would be res adjudicata upon the question of his
civil liability arising from negligence -- a point upon which it is unnecessary to express an