make a reservation to file a separate civil action in the

Case Title: George (Culhi) Hambon v. Court of Appeals and corresponding criminal case.
Valentino U. Carantes​ 2.​ Whether a strict interpretation of Rule 111, Section 1,
G.R. No.: 122150​ which affects a party’s right, should be permitted when
Date: March 17, 2003​ it may diminish or modify substantive rights contrary to
Ponente: Austria-Martinez, J. law.

FACTS: RULING:
Petitioner George Hambon filed a complaint for damages on The Supreme Court affirmed the decision of the Court of
June 6, 1989, against Valentino Carantes, who had allegedly Appeals and dismissed the petition. The Court emphasized that,
caused injuries to him in a vehicular accident on December 9, according to Rule 111, Section 1 of the Rules of Court, the civil
1985. The respondent claimed that a criminal case for serious action for damages arising from the same act as the criminal
physical injuries had been filed earlier on January 8, 1986, but case must be either reserved or filed separately before the
was dismissed on March 23, 1987, due to the petitioner's lack criminal action is instituted. Since the petitioner did not make
of interest, and that this dismissal included both criminal and such a reservation, his civil case was deemed to be implicitly
civil liabilities. filed with the criminal case, and thus, its dismissal carried with
it the dismissal of the civil action.
The Regional Trial Court ruled in favor of the petitioner,
awarding damages. On appeal, the Court of Appeals reversed The Court held that the requirement for reservation of a
the trial court’s decision, stating that since the petitioner failed separate civil action does not infringe upon substantive rights.
to reserve his right to file a separate civil case under Rule 111, It is a procedural rule designed to streamline judicial
Section 1 of the Rules of Court, the dismissal of the criminal proceedings and avoid unnecessary multiplicity of suits. Even
case also led to the dismissal of the civil action for damages. though the petitioner referred to the Abellana case, which ruled
that a reservation is not always necessary, the Court pointed out
ISSUE: that the 1988 amendment to Rule 111 specifically mandated
such a reservation, making it a condition for the civil case to
1.​ Whether a civil case for damages based on an
proceed independently of the criminal case.
independent civil action under Articles 32, 33, 34, and
2176 of the Civil Code can be dismissed for failure to

1
DISPOSITION:

The petition was denied, and the decision of the Court of

Appeals was affirmed.

Concurring Justices: Bellosillo, Mendoza, Quisumbing,

Callejo, Sr.

2
Timeline of the case George (Culhi) Hambon v. Court of official legal process beginning against Carantes for
Appeals and Valentino U. Carantes, G.R. No. 122150 causing injuries to Hambon in the accident.
○​ The petition for damages is intertwined with the
Preliminary Events: criminal case as Rule 111 of the Rules of
Court allows a civil case to be instituted
1.​ December 9, 1985:​
alongside or in conjunction with the criminal
Accident occurs when Valentino Carantes, while
case, unless the party involved decides to file it
driving his truck, bumps George Hambon (petitioner).
separately.
As a result of the collision, George Hambon sustains
injuries, which leads to medical treatments and other
damages. This incident becomes the basis for both
criminal and civil cases. Dismissal of Criminal Case:
2.​ Early Days After the Accident:​
Hambon receives medical treatment for the injuries 4.​ March 23, 1987:​
sustained. It is unclear from the documents when The Municipal Trial Court of Tuba, Benguet
exactly he was discharged from the hospital, but it is provisionally dismisses the criminal case for
certain that his injuries were significant enough to Reckless Imprudence Resulting in Serious Physical
warrant the filing of a criminal complaint for serious Injuries.
physical injuries. ○​ The reason for the dismissal was stated as the
petitioner’s lack of interest in pursuing the
case.
○​ The dismissal of the case applies to both the
Criminal Case Initiation: criminal liability of Carantes and the civil
liability arising from the same event, effectively
3.​ January 8, 1986:​
terminating both.
George Hambon files a criminal complaint for
5.​ The provisional nature of the dismissal is noted, as the
Serious Physical Injuries through Reckless Imprudence
case was dismissed before the prosecution could even
against Valentino Carantes in the Municipal Trial
begin presenting evidence. Despite being described as
Court of Tuba, Benguet. This complaint marks the
provisional, the dismissal had the effect of depriving
Hambon of the ability to proceed with the civil

3
 action, as the Court of Appeals later treated it as an
acquittal.​
Note: The concept of provisional dismissal implies that Trial Court Decision:
the case can be revived, but it also results in the loss of
6.​ December 18, 1991:​
the right to seek civil damages if no reservation is
The Regional Trial Court of Baguio renders its
made, as the civil claim is deemed implanted within
decision in favor of George Hambon. The court rules
the criminal case.
that the civil case for damages is not barred by the
dismissal of the criminal case and grants the following:
○​ Actual Damages: P60,000 for hospitalization
Petitioner Files Civil Case for Damages: and medical expenses; P10,000 for native
rituals.
5.​ June 6, 1989:​ ○​ Moral Damages: P10,000.
The petitioner, George Hambon, files a civil case for ○​ Exemplary Damages: P5,000.
damages against Valentino Carantes before the ○​ Attorney’s Fees: P5,000.
Regional Trial Court (RTC) of Baguio (Branch 6). 7.​ Key Legal Point:
The complaint for damages (Civil Case No. 1761-R) ○​ The Regional Trial Court held that the
claims recovery for: dismissal of the criminal case (for lack of
○​ Medical expenses related to the injury. prosecution) did not bar the civil action for
○​ Other damages incurred due to the accident. damages because the civil claim had been filed
6.​ Important Legal Point: separately. The court found that no reservation
○​ The civil case is filed separately and was necessary in this case, contrary to the
independently without any prior reservation procedural rule in Rule 111.
under Rule 111, Section 1 of the Rules of
Court.
○​ Rule 111 requires that, for a civil action to be
pursued separately, the party must make an Appeal to the Court of Appeals:
express reservation to file the civil case if the
7.​ March 8, 1995:​
civil liability is based on the same facts as the
The Court of Appeals reverses the decision of the trial
criminal case.

4
 court, dismissing Civil Case No. 1761-R. The appellate Certiorari under Rule 45 of the Rules of Court,
court holds that: challenging the decision of the Court of Appeals. The
○​ Since George Hambon did not make a key issues raised include:
reservation to file a separate civil action, the ○​ Whether the civil case for damages can be
civil action was deemed impliedly instituted dismissed for failure to make a reservation
with the criminal case. under Rule 111 when the criminal case arising
○​ The provisional dismissal of the criminal case from the same incident was provisionally
(for lack of prosecution) carried the same effect dismissed.
as an acquittal, and thus, both the criminal and ○​ Whether the strict interpretation of Rule 111,
civil cases should be dismissed. Section 1 infringes upon the substantive rights
○​ The Court of Appeals emphasizes that the of a party, thus diminishing, modifying, or
dismissal of the criminal case led to the amending the rights provided by the substantive
implied dismissal of any civil action that was law.
deemed to have been filed with it. 9.​ Petitioner’s Legal Argument:
8.​ Key Legal Point: ○​ The petitioner invokes the Abellana v. Marave
○​ The Court of Appeals adopted a strict case, where the Supreme Court ruled that a
interpretation of Rule 111, arguing that the civil action for damages can be filed and
failure to reserve the civil action before filing it proceed independently of the criminal case even
led to its automatic dismissal once the criminal without reservation.
case was dismissed. The court contended that ○​ The petitioner asserts that the requirement for
the dismissal of the criminal case was reservation as mandated by Rule 111 is an
tantamount to an acquittal, thus extinguishing unnecessary procedural burden that infringes
both the criminal and civil claims. upon the substantive right of the petitioner to
seek damages.

Petitioner Files Petition for Review on Certiorari:

8.​ Petition for Review:​

George Hambon files a Petition for Review on

5
Supreme Court Decision: The Court further notes that this rule applies even when the
dismissal of the criminal case is provisional, since the civil
10.​March 17, 2003:​ action depends on the reservation and not the outcome of the
The Supreme Court renders its decision, denying the criminal case.
petition and affirming the decision of the Court of
Appeals. The Court provides the following reasoning:
●​ Rule 111, Section 1 explicitly requires that the civil
action arising from a criminal act must be reserved or Conclusion:
filed separately. The reservation is mandatory, and
●​ The petition for review was denied, and the decision
failure to make such a reservation results in the implied
of the Court of Appeals to dismiss the civil case for
institution of the civil action alongside the criminal
damages was affirmed.
case.
●​ The ruling reinforces the principle that the reservation
●​ The Court distinguishes the Abellana case, noting that
of the civil action is an absolute procedural
the 1988 amendment to Rule 111 requires a
requirement for the civil action to proceed separately
reservation. Thus, under the amended rule, a separate
from the criminal action.
civil action cannot proceed unless reservation is
made. Concurring Justices: Bellosillo, Mendoza, Quisumbing,
Callejo, Sr.
Key Legal Points:

●​ The reservation requirement is not a violation of

substantive rights, as it is a procedural rule designed to
ensure orderly procedure, avoid multiplicity of suits,
and prevent judicial delays.
●​ The petitioner’s failure to make the reservation before
filing the civil case means that the civil action was
deemed impliedly filed with the criminal case.
Therefore, once the criminal case was dismissed, the
civil action was likewise dismissed.

6
The case George (Culhi) Hambon v. Court of Appeals and 2. The Role of Civil Actions in Obligations:
Valentino U. Carantes is relevant to the subject of
Obligations and Contracts because it involves the The case involves a civil action for damages filed by Hambon
enforcement of a civil obligation arising from an accident to seek compensation for the injury. The claim was based on
where one party (Carantes) caused harm to another (Hambon). the civil liability arising from the reckless act of Carantes. The
This is a classic example of a tort—a civil wrong that leads to obligation here is the responsibility to compensate for the
a legal obligation to pay damages. damages, which can be enforced through a civil suit.

1. Civil Liability Arising from a Tort (Quasi-Delict): In the context of Obligations and Contracts, the court is
dealing with the obligation of Carantes to pay for damages
In the case, Valentino Carantes was held responsible for the under Article 2176 of the Civil Code, which states that anyone
injuries that George Hambon sustained due to the accident. who causes damage to another, whether by negligence or other
The legal concept here is tort liability, also known as wrongful acts, is obliged to compensate the injured party.
quasi-delict in the Civil Code of the Philippines. A quasi-delict
occurs when a person commits an act (e.g., reckless driving) ●​ Obligation to make restitution: This case highlights
that causes harm to another, even if there is no prior agreement the principle that a person who causes harm has an
or contract between them. obligation to restore the other party to their previous
condition (as much as possible), typically through
●​ Tort liability (Quasi-delict): Carantes owed a duty to monetary compensation for physical harm, medical
act with care while driving. His failure to do so caused expenses, and other related costs.
damage to Hambon, resulting in a civil obligation for
Carantes to compensate Hambon for the harm caused. 3. Reservation of Civil Action (Rule 111, Section 1):
This is where the concept of obligation comes
The procedural aspect of this case involves the reservation of
in—Carantes is legally required to fulfill an obligation
a civil action in connection with a criminal case. According to
to repair the harm caused by his actions.
Rule 111, when someone files a criminal case (like reckless
imprudence resulting in injuries), they must either reserve the
right to file a separate civil case or have the civil claim
impliedly included in the criminal case.

7
 ●​ Reservation of civil action: Hambon did not make the
necessary reservation to pursue the civil claim for
damages separately from the criminal case. This Summary of the Case’s Relevance to Obligations and
procedural requirement is important in Obligations Contracts:
and Contracts because it regulates how and when civil
obligations, like the duty to pay damages, can be ●​ Tort Liability (Quasi-Delict): Carantes had an
enforced in court. The failure to reserve the civil obligation to compensate Hambon for the injuries he
action resulted in the dismissal of the damages claim caused in the accident. This is the basis for the civil
when the criminal case was dismissed, which shows obligation.
how procedural rules in enforcing obligations can ●​ Civil Damages: The case centers on the civil obligation
impact the outcome of a case. to pay damages (medical expenses, moral damages,
etc.) due to harm caused by wrongful acts.
4. Impact on the Civil Rights of the Injured Party: ●​ Reservation of Civil Action: The case underscores the
importance of procedural rules in ensuring that civil
From an obligations perspective, the case emphasizes the obligations can be enforced. Hambon’s failure to
importance of the injured party's rights in seeking redress for reserve his civil action caused the dismissal of his
harm done. When a tort occurs, the injured party (Hambon) is case, even though he had a valid claim under
entitled to claim compensation for damages. This is a Obligations and Contracts.
substantive right that is based on the principle that harm ●​ Enforcement of Civil Rights: The case illustrates how
caused by a person's negligence or wrongful act creates an legal obligations for damages are tied to procedural
obligation to make restitution. rights and how failing to follow certain procedures can
affect the enforceability of substantive rights.
However, the case also illustrates how procedural issues—like
the failure to reserve the civil action—can affect the The case teaches us that when someone causes harm to another
enforcement of these rights. The Court of Appeals and person (like in an accident), they have an obligation to
Supreme Court stressed that procedural requirements, such as compensate the injured party. However, even if the injured
reserving the right to file a separate civil action in criminal person has a right to compensation, they must follow certain
cases, are necessary to ensure that obligations to pay for legal steps (like reserving the right to file a civil case in the
damages are properly enforced. right way) to enforce that right. If they don't, they might lose
the chance to get compensated, even if they deserve it.

8
Case Digest: G.R. No. 179337 (Saludaga v. Far Eastern 2.​ Can the incident be considered a fortuitous event that
University) exempts FEU from liability?

Facts: Ruling: The Supreme Court granted the petition, reversing the
CA's decision and affirming the trial court's ruling with
●​ Joseph Saludaga, a sophomore law student at Far modifications.
Eastern University (FEU), was accidentally shot on
August 18, 1996, by Alejandro Rosete, an FEU-hired Held:
security guard, within university premises.
●​ Saludaga filed a complaint for damages, claiming FEU 1.​ Contractual Liability: FEU was held liable for breach
failed in its contractual obligation to ensure a safe of its obligation to ensure a safe and secure learning
learning environment. environment. The Supreme Court emphasized that an
●​ FEU filed a third-party complaint against Galaxy academic institution has an implicit duty to maintain
Development and Management Corporation, the peace and security on its premises, which is part of its
security agency it contracted, seeking indemnification. contractual obligation with students.
Galaxy filed a fourth-party complaint against AFP 2.​ Fortuitous Event Defense: The Court rejected FEU’s
General Insurance. claim that the shooting incident was a fortuitous event.
●​ The trial court ruled in favor of Saludaga, holding FEU FEU failed to prove due diligence in ensuring the
liable for damages and requiring Galaxy to indemnify qualifications of Rosete, the security guard, as required
FEU. under the Security Service Agreement with Galaxy.
●​ On appeal, the Court of Appeals (CA) reversed the Negligence was evident as FEU relied entirely on
decision, dismissing Saludaga’s complaint. The CA Galaxy without verifying the qualifications or
held that the incident was a fortuitous event, and FEU compliance with the contract.
exercised due diligence in hiring Galaxy.
Damages Awarded:
Issue:
1.​ Actual Damages: ₱35,298.25 with 6% annual interest
1.​ Is FEU liable for breach of its contractual obligation to from the filing of the complaint until the decision
provide a safe learning environment? becomes final and 12% interest thereafter until
satisfaction.

9
 2.​ Temperate Damages: ₱20,000.
3.​ Moral Damages: ₱100,000.
4.​ Attorney’s Fees and Litigation Expenses: ₱50,000.
5.​ The award for exemplary damages was deleted due to
the absence of wanton, fraudulent, or reckless conduct
by FEU.

Third-Party and Fourth-Party Claims:

●​ Galaxy and its president, Mariano D. Imperial, were

held jointly and severally liable to indemnify FEU for
the damages awarded to Saludaga.
●​ Imperial was found grossly negligent in supervising
Galaxy’s operations and was directly liable.

Key Principle: Educational institutions must provide a safe

environment for students as part of their contractual
obligations. They cannot fully delegate this duty to third-party
contractors and must exercise due diligence in ensuring
compliance. Failure to do so negates the defense of a fortuitous
event and results in liability for damages.

10
Timeline of the case G.R. No. 179337 (Saludaga v. FEU) ■​ Rosete was taken into police custody but
was released without a formal complaint
Timeline of Events filed against him.

1. Background and Context of the Incident 2. Filing of the Complaint

●​ August 18, 1996: ●​ 1998:

○​ Time of Incident: Joseph Saludaga, a ○​ Complaint by Saludaga:
sophomore law student of FEU, was walking to ■​ Saludaga filed a civil suit for damages
the university's law library when he was shot. against FEU and its president, Edilberto
○​ Location: The shooting occurred inside the C. De Jesus.
campus premises. ■​ Grounds for the complaint:
○​ Security Guard's Account: ■​ FEU breached its contractual
■​ Alejandro Rosete, a security guard obligation to provide a safe and
employed by Galaxy Development and secure learning environment.
Management Corporation, claimed the ■​ The harm caused was
shooting was accidental. exacerbated by FEU’s alleged
■​ The firearm discharged unexpectedly indifference during Saludaga’s
while Rosete was supposedly performing hospitalization and recovery. No
his duties. representatives from FEU visited
■​ No immediate administrative action was him or offered assistance.
taken against Rosete by Galaxy, despite ○​ Third-Party Complaint by FEU:
the seriousness of the incident. ■​ FEU impleaded Galaxy Development
○​ Aftermath of the Shooting: and its President, Mariano Imperial,
■​ Saludaga was rushed to the asserting that Galaxy should indemnify
FEU-Nicanor Reyes Medical Foundation FEU for any damages awarded to
(FEU-NRMF) for treatment. Saludaga.

11
 ■​ FEU cited its reliance on Galaxy to hire ○​ Rosete was not an employee of FEU, absolving
and manage qualified security personnel. them of direct liability under Article 2180 of the
○​ Fourth-Party Complaint by Galaxy: Civil Code.
■​ Galaxy filed a claim against AFP ●​ By Galaxy:
General Insurance, seeking liability ○​ Galaxy denied negligence, asserting that the
coverage for any damages that may arise incident was purely accidental.
from the case. ○​ It argued that any liability should be shifted to
its insurer, AFP General Insurance.

3. Arguments Raised in the Trial Court

4. Decision of the Regional Trial Court (RTC)
●​ By Saludaga:
○​ The student-university relationship established a ●​ November 10, 2004:
contractual obligation, which included ensuring ○​ Findings:
student safety. ■​ FEU breached its contractual duty to
○​ FEU's failure to provide a safe environment ensure a safe and conducive learning
constituted a breach of that contract. environment.
○​ The physical, mental, and emotional trauma ■​ The court held that the act of employing
suffered by Saludaga warranted compensation. Galaxy as an independent contractor did
○​ The lack of any proactive measures from FEU not absolve FEU from its obligations to
post-incident worsened the harm. its students.
●​ By FEU: ■​ Galaxy and Imperial were negligent in
○​ The shooting was a fortuitous event beyond its hiring and supervising Rosete.
control. ■​ The lack of administrative action or
○​ FEU argued it exercised due diligence in investigation against Rosete
selecting Galaxy, an independent contractor, to demonstrated gross negligence.​
handle campus security. ​
​

12
 ○​ Damages Awarded: ■​ Rosete was not FEU's employee; hence,
■​ To Saludaga: vicarious liability under Article 2180 did
■​ Actual damages: PHP 35,298.25. not apply.
■​ Moral damages: PHP ○​ Effect: FEU was absolved of liability, and no
300,000.00. damages were awarded to Saludaga.
■​ Exemplary damages: PHP ●​ August 23, 2007:
500,000.00. ○​ The Court of Appeals denied Saludaga’s motion
■​ Attorney's fees: PHP 100,000.00. for reconsideration.
■​ Indemnification:
■​ Galaxy and Imperial were
ordered to indemnify FEU for all
6. Petition for Review on Certiorari to the Supreme Court
amounts awarded to Saludaga.
●​ Grounds Raised by Saludaga:
○​ The appellate court erred in finding the shooting
5. Appeal to the Court of Appeals to be a fortuitous event.
○​ FEU breached its contractual obligation to
●​ June 29, 2007: provide safety.
○​ Ruling: ○​ The principle of relativity of contracts did not
■​ The RTC’s decision was reversed, and exempt FEU from liability arising from its
Saludaga’s complaint was dismissed. failure to monitor Galaxy.
○​ Key Points: ○​ FEU did not exercise due diligence in ensuring
■​ The shooting incident was classified as a that Galaxy complied with its contractual
fortuitous event, beyond the control of obligations.
FEU.
■​ FEU was deemed to have exercised due
diligence in selecting Galaxy as its
security provider.

13
7. Supreme Court Decision liability, as he was not directly
involved in the negligent acts.
●​ April 30, 2008: ■​ Indemnification:
○​ Findings: ■​ Galaxy and Imperial were held
■​ Breach of Contract by FEU: jointly and severally liable to
■​ FEU had a contractual duty to indemnify FEU for all amounts
provide a safe and secure awarded to Saludaga.
learning environment, which it ■​ Imperial’s gross negligence in
failed to fulfill. supervising Galaxy justified his
■​ The university did not adequately personal liability.
monitor Galaxy's compliance ○​ Modified Awards:
with the security agreement, ■​ Actual damages: PHP 35,298.25 (6%
including vetting Rosete’s interest annually; 12% after finality).
qualifications. ■​ Moral damages: PHP 100,000.00.
■​ Negligence of Galaxy: ■​ Temperate damages: PHP 20,000.00.
■​ Galaxy was negligent in hiring ■​ Attorney’s fees: PHP 50,000.00.
and supervising Rosete. ■​ Exemplary damages were deleted.
■​ No administrative actions were
taken against Rosete
post-incident, and he was even
allowed to go on leave, leading Additional Legal Points Highlighted
to his disappearance.
■​ No Exemplary Damages: ●​ Contractual Obligations of Educational Institutions:
■​ No evidence of bad faith or ○​ Schools have an inherent obligation to provide a
malice by FEU warranted the safe learning environment, even when
award of exemplary damages. outsourcing services.
■​ Corporate Liability: ●​ Force Majeure Defense:
■​ FEU President Edilberto De ○​ A fortuitous event defense fails if the defendant
Jesus was absolved of personal is negligent or if the harm could have been
foreseen and prevented.

14
●​ Liability of Independent Contractors:
○​ While Galaxy was an independent contractor, its
negligence directly contributed to FEU’s failure
to meet its obligations.
●​ Diligence in Hiring:
○​ Institutions cannot rely solely on independent
contractors without ensuring proper vetting and
compliance with agreements.

15
The case of Saludaga v. Far Eastern University (G.R. No. ●​ In this case:
179337) is highly relevant to the subject of Obligations and ○​ FEU breached its obligation when it failed to
Contracts because it deals with key legal principles regarding provide a safe environment for its students, as
contractual obligations, breach of contract, and the evidenced by the shooting incident involving its
responsibilities arising from agreements. contracted security guard.
○​ Although FEU hired Galaxy, an independent
security agency, it was still responsible for
ensuring that Galaxy and its guards met the
1. The Concept of a Contract and Its Obligations necessary standards to maintain safety.
●​ A contract is an agreement between two or more
parties that creates obligations that must be fulfilled. In
this case: 3. Built-In Obligation of Good Faith and Diligence
○​ When Joseph Saludaga enrolled at FEU, a
student-university contract was formed. ●​ Every contract carries an implied obligation for parties
○​ Under this contract, FEU agreed to provide not to act in good faith and to exercise diligence in
only education but also a safe and secure fulfilling their duties.
environmentconducive to learning. ●​ For schools like FEU, this means going beyond merely
●​ This contract created mutual obligations: hiring a security agency. They must:
○​ FEU was responsible for ensuring safety within ○​ Ensure the agency is reliable.
the school premises. ○​ Verify that the guards assigned to the campus
○​ Saludaga, as a student, was expected to comply are qualified, trained, and capable of performing
with the university's rules and regulations. their duties.
●​ FEU’s failure to monitor Galaxy and the qualifications
of its guard (Rosete) showed negligence, which led to
the shooting.
2. Breach of Contract

●​ A breach of contract happens when one party fails to

fulfill their agreed-upon obligations.

16
4. Fortuitous Events and Liability Explanation

●​ In contracts, parties are generally not held liable for Think of it like this:
fortuitous events—unforeseeable, unavoidable events
beyond human control (e.g., natural disasters). ●​ If you hire a babysitter to care for your child, you’re
●​ However, a fortuitous event defense fails if: still responsible for ensuring they’re qualified and
○​ The harm could have been foreseen. reliable. If the babysitter harms the child because they
○​ The party was negligent. were careless or unfit for the job, you can’t just say,
●​ The Supreme Court ruled that the shooting was not a “It’s not my fault because I hired someone else.” You
fortuitous event because: still have a responsibility to check their background and
○​ It could have been prevented had FEU exercised make sure they can do the job.
proper diligence in monitoring Galaxy and its ●​ Similarly, FEU hired Galaxy to handle campus security,
personnel. but they didn’t properly check whether Galaxy’s
guards, like Rosete, were fit to protect students. When
something went wrong, FEU couldn’t avoid liability by
pointing fingers at Galaxy.
5. Relativity of Contracts

●​ Under the principle of relativity of contracts, a

contract binds only the parties to it (e.g., FEU and Key Lessons from the Case
Saludaga).
●​ However, even though Galaxy was an independent 1.​ Obligations Arising from Contracts:
contractor, FEU could not pass off all responsibility for ○​ Schools have a built-in obligation to provide
student safety. As the contracting party, FEU was still safe environments for students.
accountable for ensuring Galaxy fulfilled its duties 2.​ Diligence in Fulfilling Obligations:
under their agreement. ○​ Parties cannot rely solely on contractors; they
must monitor and ensure performance.​
​
​

17
 3.​ Breach and Consequences:
○​ A failure to fulfill contractual obligations can
lead to damages, as in this case where FEU was
held liable for the harm caused to Saludaga.

In essence, this case is a real-world example of how contracts

work, what happens when obligations are not met, and how
principles like diligence, breach, and liability play out in law. It
underscores the importance of responsibility in fulfilling
contracts and ensuring the safety and well-being of those
affected by them.

18
Case Digest: G.R. No. L-9671, Isaac vs. A.L. Ammen common carriers under Articles 1733, 1755, and 1756
Transportation Co., Inc., August 23, 1957 of the Civil Code. A carrier is presumed at fault in
passenger injuries unless it proves extraordinary
Facts: Cesar L. Isaac, a paying passenger, boarded Bus No. 31 diligence.
of A.L. Ammen Transportation Co., Inc., traveling from Ligao, 2.​ Findings of the Trial Court: Evidence showed that the
Albay, to Pili, Camarines Sur. En route, the bus collided with a bus driver acted prudently by steering to the extreme
pick-up vehicle. The collision severed Isaac's left arm, which right to avoid the collision. The pick-up was speeding
fell inside the bus. Isaac incurred significant medical expenses and veered into the wrong lane. The Court ruled that the
and suffered permanent disability. He sued the bus company driver's actions, considering the emergency, met the
for damages, alleging negligence and failure to observe standard of extraordinary diligence.
extraordinary diligence. 3.​ Contributory Negligence: Isaac was found
contributorily negligent for placing his arm outside the
The defendant argued that the collision was caused by the
window, which directly caused his injury. While
pick-up driver's negligence and that Isaac contributed to his
contributory negligence does not exempt carriers from
injury by resting his arm on the window sill with part
liability, it justifies a reduction in damages.
protruding outside. The trial court ruled that the defendant’s
4.​ Presumption of Fault Rebutted: The bus driver’s
driver was not negligent, attributing the accident to the pick-up
response to the emergency, which included swerving
driver's fault and dismissing Isaac’s complaint.
and maintaining caution, rebutted the presumption of
Issue: Was A.L. Ammen Transportation Co., Inc. liable for negligence.
Isaac’s injuries under its contractual obligation as a common
Disposition: The Court dismissed Isaac’s appeal, affirming the
carrier?
trial court's decision with costs against the appellant.
Ruling: The Supreme Court affirmed the trial court's decision,
holding that A.L. Ammen Transportation Co., Inc. was not
liable.

Ratio:

1.​ Diligence of Common Carriers: The Court

highlighted the extraordinary diligence required of

19
Timeline: Isaac vs. A.L. Ammen Transportation Co., Inc. ○​ Pre-Collision Details:
(G.R. No. L-9671) ■​ The bus traveled through Matacong,
Polangui, Albay, slowing down at a
Background and Context school zone, which demonstrated
compliance with traffic safety rules. The
●​ Defendant’s Operations and Business Model:
bus was operating at a moderate speed,
○​ A.L. Ammen Transportation Co., Inc. operated
contrary to claims of overspeeding.
several passenger transport lines in the Bicol
■​ The road conditions included a pile of
region. Its buses provided regular services
gravel on the right side, which was
between major cities, including Legaspi City
present along the rampart of the road.
(Albay) and Naga City (Camarines Sur).
This gravel became relevant during the
○​ Bus No. 31, involved in the accident, was part
accident as the bus driver swerved
of this route and known for carrying both local
toward it to avoid the collision.
commuters and long-distance passengers.
○​ The Collision:
Events Leading to the Collision ■​ A pick-up vehicle, traveling at high
speed, veered into the bus’s lane.
●​ May 31, 1951: Witnesses described the pick-up’s
○​ Boarding: behavior as reckless, deviating from its
■​ Plaintiff, Cesar L. Isaac, boarded Bus designated lane without proper caution.
No. 31 at Ligao, Albay. He was a paying ■​ The bus driver responded immediately,
passenger, traveling to Pili, Camarines swerving to the extreme right. He
Sur. The exact time of his boarding and maneuvered the bus onto the gravel pile,
departure was not detailed but occurred with the front and rear wheels crossing
during regular operational hours. onto it.
■​ Upon boarding, Isaac seated himself on ■​ Despite these efforts, the pick-up struck
the left side of the bus. He rested his left the rear left side of the bus. The impact
arm on the window sill, leaving his caused Isaac’s protruding arm to be
elbow protruding outside the window.​ severed completely, with the severed
limb falling inside the bus.

20
Immediate Aftermath of the Accident considerable sum at the time. The defendant
covered some hospital bills but not other
●​ Isaac’s Condition: ancillary costs.
○​ Isaac suffered severe blood loss and was in
critical condition immediately following the Plaintiff’s Allegations and Legal Claims
collision. The severance of his arm left him at
significant risk of death due to shock and ●​ Primary Legal Argument:
hemorrhage. ○​ Isaac alleged that A.L. Ammen Transportation
○​ Other passengers aboard the bus sustained no Co., Inc. failed in its obligation as a common
significant injuries, highlighting that Isaac was carrier to ensure his safety during transport. He
the sole victim. claimed this failure constituted a breach of the
●​ Emergency Medical Assistance: contract of carriage (culpa contractual).
○​ Isaac was rushed to a hospital in Iriga, ○​ He emphasized that common carriers are
Camarines Sur. Medical staff performed obligated to exercise extraordinary diligence to
emergency blood transfusions to stabilize him. prevent injuries to passengers and cited multiple
Despite their efforts, his left arm could not be precedents to support his case.
saved, leaving him permanently disabled. ●​ Damages Sought:
○​ PHP 5,000 for past and future medical
Post-Incident Medical Treatment treatment.
○​ PHP 3,000 for the cost of an artificial arm.
●​ Extended Hospitalization and Expenses: ○​ PHP 6,000 for immediate loss of earnings due to
○​ After four days in Iriga, Isaac was transferred to his disability.
a hospital in Tabaco, Albay, where he remained ○​ PHP 75,000 for diminution of earning capacity,
for three months undergoing intensive treatment considering his permanent disability.
and rehabilitation. ○​ PHP 50,000 as moral damages for the physical
○​ Following this, he was admitted to the and emotional distress caused by the injury.
Orthopedic Hospital for surgery, where he ○​ PHP 10,000 in attorney’s fees and litigation
stayed an additional two months. costs.
○​ His medical expenses, excluding those covered ○​ Total claim: PHP 149,000.
by the defendant, totaled PHP 623.40—a

21
Defendant’s Position and Counterarguments ●​ Contributory Negligence:
○​ Isaac’s decision to place his arm outside the
●​ Defense Strategy: window was deemed negligent. The court
○​ The defendant asserted that the collision was an acknowledged that this action significantly
unavoidable accident caused solely by the contributed to the injury, which might have been
negligence of the pick-up driver. avoided had he not done so.
○​ The bus driver, it argued, acted with ○​ Other passengers on the bus did not suffer
extraordinary diligence by swerving onto the injuries, further underscoring Isaac’s
gravel and attempting to avoid the collision. contributory negligence.
●​ Contributory Negligence: ●​ Decision:
○​ The defendant also highlighted that Isaac ○​ The trial court dismissed Isaac’s complaint,
contributed to his injury by resting his arm on ruling that the defendant was not liable for
the window sill with his elbow protruding damages. Costs were charged against the
outside the bus. plaintiff.
○​ This act was described as negligence per se, as it
directly led to the injury. Appeal to the Supreme Court

Trial Court Findings ●​ Appellant’s Arguments:

○​ Isaac argued that the bus driver acted
●​ Analysis of Negligence: negligently by failing to stop the vehicle when
○​ The trial court found no fault on the part of the the pick-up was first observed.
bus driver. Evidence indicated that the driver ○​ He contended that the bus company breached its
took all reasonable steps to avoid the collision, contractual obligation to transport him safely
including swerving to the extreme right and and relied on the legal presumption of
climbing onto the gravel. negligence under Articles 1733, 1755, and 1756
○​ The pick-up vehicle was determined to be of the Civil Code.
speeding and operating recklessly, veering out ●​ Appellee’s Defense:
of its lane.​ ○​ The defendant reiterated that the pick-up
​ driver’s actions caused the collision and that the
bus driver acted with extraordinary diligence.

22
 ○​ They maintained that Isaac’s contributory ●​ Final Judgment:
negligence weakened his claims. ○​ The Supreme Court affirmed the dismissal of
the case, imposing costs on Isaac.
Supreme Court Decision

●​ Ruling:​
The Supreme Court upheld the trial court’s decision,
affirming the dismissal of Isaac’s complaint.
●​ Legal Analysis:
○​ Extraordinary Diligence:
■​ The Court emphasized that common
carriers must observe extraordinary
diligence to ensure passenger safety.
■​ The evidence demonstrated that the bus
driver acted prudently in an emergency
and did all that could be reasonably
expected to avoid the collision.
○​ Contributory Negligence:
■​ Isaac’s protrusion of his arm outside the
window significantly contributed to his
injury. The Court held this to be
negligence per se.
○​ Emergency Doctrine:
■​ The Court recognized that the driver’s
response to the emergency situation was
reasonable. Sudden emergencies do not
require the same calm judgment as
ordinary circumstances.​
​

23
The case of Isaac vs. A.L. Ammen Transportation Co., Inc. 3.​ Negligence and Presumption of Fault:
is deeply relevant to the subject of Obligations and Contracts ○​ Under the law, a carrier is presumed at fault if a
because it revolves around the legal obligations of common passenger is injured. But this presumption can
carriers and their contractual duty to safely transport be rebutted if the carrier proves that it did
passengers. everything possible to prevent harm.
○​ In this case, the bus company successfully
argued that the accident was caused by the
Key Concepts in Obligations and Contracts negligence of the pick-up driver, not their own.
They demonstrated that their driver acted
1.​ Contractual Obligations: diligently, even swerving to avoid the collision.
○​ When Isaac bought his bus ticket, he entered 4.​ Contributory Negligence:
into a contract of carriage with A.L. Ammen ○​ Isaac’s act of resting his arm outside the window
Transportation Co. The bus company, as a contributed to his injury. This is called
common carrier, promised to transport him contributory negligence—when the injured
safely to his destination. person’s own actions partly cause the harm they
○​ This contract obligated the bus company to suffer.
exercise extraordinary diligence, meaning they ○​ The court acknowledged that while the bus
had to do everything humanly possible to ensure company still has obligations, Isaac’s negligence
the safety of their passengers. reduced the likelihood of the bus company
2.​ Breach of Contract: being held fully accountable.
○​ If the bus company failed to fulfill its obligation
to safely transport Isaac, it would be considered
a breach of the contract of carriage.
○​ However, the law does not automatically hold a Relevance to Obligations and Contracts
carrier responsible just because an accident
occurred. The carrier must be proven negligent, This case illustrates several key principles in obligations and
meaning they failed to act with extraordinary contracts:
care.​
1.​ Obligations of Common Carriers:​
Common carriers, like bus companies, have a special

24
 duty to exercise extraordinary diligence because they
deal with public safety. Their contracts with passengers
are not just about transportation—they involve a In Summary
heightened responsibility.
2.​ Culpa Contractual (Breach of Contract): Think of this case as a simple deal: Isaac paid the bus company
○​ The case revolves around whether the bus to get him safely to his destination. That’s the agreement. But
company failed in its contractual obligation to accidents happen. Here’s what the court asked:
provide a safe journey.
1.​ Did the bus company do everything possible to prevent
○​ The decision highlights that even in contractual
the accident? If yes, it’s not their fault.
obligations, the law balances the expectations of
2.​ Did Isaac do something that made his injury worse? If
both parties. A carrier isn’t automatically at
yes, he also shares responsibility.
fault for every accident—it must be shown that
it was negligent. The court decided that the bus company kept its end of the deal
3.​ Defenses Against Liability: because its driver acted carefully during the accident. However,
○​ The bus company used two defenses:​ Isaac failed to take care of himself by sticking his arm outside
(a) The accident was caused by the pick-up the window, which played a big role in his injury.
driver (not their own negligence).​
(b) Isaac’s contributory negligence (his arm
outside the window) also caused the injury.
○​ These defenses are important because they show Why It’s Important for Obligations and Contracts
how a party in a contract can limit or avoid
This case teaches us that:
liability when unforeseen events or the other
party’s actions contribute to the harm. ●​ A contract is not just about money changing hands—it’s
4.​ Law Governing Contracts: about meeting specific obligations.
○​ Articles 1733, 1755, and 1756 of the Civil Code ●​ Even when one party has a special duty (like the bus
are specific to obligations of common carriers. company’s extraordinary diligence), it’s not
They emphasize that extraordinary diligence is absolute—they can defend themselves if they acted
required in transport contracts, and failing this responsibly.
standard can lead to liability.

25
 ●​ The law looks at fairness: if the other party (like Isaac)
also made mistakes, they can’t demand full
compensation.

In essence, the case highlights how obligations in contracts are

interpreted and applied in real-life situations, especially in
cases involving accidents and damages.

26
Case Digest: Dr. Genevieve L. Huang v. Philippine Hoteliers, Ratio Decidendi:
Inc., Dusit Thani Public Co., Ltd., and First Lepanto Taisho
Insurance Corporation 1.​ Negligence: The Court found no evidence of
negligence by the hotel. The lights at the swimming
Case Reference: G.R. No. 180440, December 5, 2012 pool area were left on until 10:00 PM as part of
standard operating procedure. Dr. Huang herself
Facts: On June 11, 1995, Dr. Genevieve Huang sustained a admitted lifting the folding countertop, which caused it
head injury at the swimming pool area of Dusit Thani Hotel to fall on her head. There was no proof that the incident
after a folding wooden countertop fell on her head. Dr. Huang occurred due to any act or omission by the hotel or its
claimed the accident occurred because the hotel staff employees.
negligently turned off all the lights and locked the main door of 2.​ Application of Doctrines:
the swimming pool area. She alleged that the hotel staff failed ○​ Res ipsa loquitur was inapplicable as the injury
to provide adequate medical assistance following the incident. was not caused solely by the hotel's
management or control. Dr. Huang’s own action
Dr. Huang filed a complaint for damages, citing gross
of lifting the countertop directly contributed to
negligence on the part of the hotel. The trial court dismissed
the incident.
the case, finding no evidence to substantiate her claims of
○​ Respondeat superior did not apply as there was
negligence. The Court of Appeals affirmed the trial court’s
no negligence on the part of the hotel's
decision.
employees.
Issues: 3.​ Medical Assistance: The hotel provided medical
assistance, including an ice pack and a cream. Dr.
1.​ Whether the respondents were negligent in maintaining Huang declined further treatment and refused to sign a
the safety of the hotel premises. waiver. The Court found no failure on the part of the
2.​ Whether the doctrines of res ipsa loquitur and hotel to address her medical needs.
respondeat superior apply. 4.​ Causation: Dr. Huang’s pre-existing medical
3.​ Whether Dr. Huang was entitled to damages. conditions and lack of corroborating evidence failed to
establish a causal link between the accident and her
Ruling: The Supreme Court denied the petition and upheld the alleged permanent injuries.
decisions of the lower courts.

27
Disposition: The Supreme Court ruled that Dr. Huang’s own
negligence was the proximate cause of the accident, and the
hotel and its employees were not liable for damages. The
petition was dismissed, and the lower court's rulings were
affirmed.

28
Timeline of Dr. Genevieve L. Huang v. Philippine Hoteliers, 4.​ June 11, 1995, Shortly After:
Inc., Dusit Thani Public Co., Ltd., and First Lepanto Taisho ○​ Dr. Huang spotted a telephone behind the
Insurance Corporation (G.R. No. 180440) lifeguard’s counter. To access it, she lifted a
hinged wooden countertop, which unexpectedly
fell and struck her head.
○​ The force caused a hematoma, knocking Dr.
Incident and Immediate Aftermath
Huang to the ground and leaving her
1.​ June 11, 1995, 5:00 PM:​ disoriented.
Dr. Genevieve Huang, a dermatologist, joined her 5.​ June 11, 1995, Immediately After the Incident:
friend, Delia Goldberg, a registered guest at Dusit ○​ Delia used the phone to call the hotel operator
Thani Hotel, for a swim. The swimming pool area was and report the incident. Hotel staff took
part of the hotel facilities, which displayed a notice approximately 20–30 minutes to unlock the
indicating operating hours of 7:00 AM to 7:00 PM. main entrance door of the pool area.
2.​ June 11, 1995, 7:00 PM:​ ○​ Nurse Pearlie Benedicto-Lipana and two
A pool attendant informed Dr. Huang and Delia that the chambermaids arrived with a medical kit. They
pool area was closing. They proceeded to the adjacent applied an ice pack to Dr. Huang’s head and
shower room to bathe and change, despite knowing the offered additional assistance, which Dr. Huang
pool's closing time. declined.
3.​ June 11, 1995, 7:30–7:40 PM: 6.​ June 11, 1995, at the Coffee Shop:
○​ Upon exiting the shower room, Dr. Huang and ○​ Dr. Huang requested to rest at the hotel coffee
Delia discovered the pool area was in complete shop and demanded the presence of the hotel
darkness, with no staff present. The main physician.
entrance door was locked. ○​ Dr. Violeta Dalumpines, the hotel physician,
○​ Dr. Huang reassured Delia, who was becoming arrived but prioritized presenting a waiver to Dr.
anxious. Dr. Huang decided to search for a Huang, stating that the hotel would only provide
telephone within the area, assuming the pool further medical care if she signed it. Dr. Huang
attendants would not return.​ refused and noted her objections on the waiver.
​ ○​ Dr. Huang left the hotel shortly after without
receiving further assistance.

29
 7.​ June 11–14, 1995: 12.​November 1995:
○​ Dr. Huang experienced severe dizziness, ●​ Dr. Huang traveled to the United States for further
persistent headaches, and stomach discomfort. medical evaluation at Mount Sinai Hospital. She
These symptoms disrupted her work as a consulted Dr. Gerald Steinberg and Dr. Joel Dokson,
dermatologist and caused sleepless nights. who confirmed diagnoses of
post-traumatic/post-concussion cephalgias and
neuralgia. They recommended physical therapy and
pain management medication.
Medical Consultations and Findings
13.​1996:
8.​ June 15, 1995: ●​ Ophthalmologist Dr. Victor Lopez diagnosed Dr. Huang
○​ Dr. Huang consulted neurologist Dr. Perry with posterior vitreous detachment in her right eye,
Noble at Makati Medical Center. He causing "floaters." Dr. Lopez deemed the condition
recommended X-ray and MRI scans. permanent.
9.​ August 23, 1995: 14.​May 15, 1996:
○​ An MRI report revealed scattered ●​ Neuro-surgeon Dr. Leopoldo P. Pardo, Jr. provided a
intraparenchymal contusions in several regions comprehensive diagnosis:
of Dr. Huang’s brain, including the left middle ○​ Cerebral concussion and contusion
and posterior temporal lobe. The findings ○​ Post-traumatic epilepsy
suggested trauma-induced brain injuries. ○​ Post-concussion syndrome
10.​September 1995: ○​ Minimal brain dysfunction
●​ Neurologist Dr. Ofelia Adapon conducted an EEG, ○​ Chronic recurrent cervical sprain
which showed abnormalities compatible with a seizure ●​ Dr. Pardo confirmed that Dr. Huang’s injuries
disorder. Dr. Adapon diagnosed permanent brain significantly impacted her ability to practice as a
damage and prescribed medication. dermatologist.
11.​October 1995: 15.​1996–1999:
●​ Another EEG confirmed Dr. Huang’s diagnosis of ●​ Dr. Huang continued to experience chronic symptoms,
post-traumatic epilepsy. The tests noted "sharp waves including memory loss, severe pain, and difficulty
bilaterally, more pronounced on the left."​ concentrating. She consulted neurologist Dr. Martesio

30
 Perez, who identified post-traumatic syndrome but ○​ Dr. Huang’s pre-existing conditions likely
found no objective neurologic abnormalities. contributed to her symptoms.
19.​August 9, 2007:
●​ The Court of Appeals affirmed the RTC ruling,
emphasizing:
Demand for Damages
○​ Dr. Huang admitted knowing the pool’s closing
16.​October 25, 1995: time but chose to remain beyond operating
●​ Dr. Huang, through counsel, sent a demand letter to hours.
Philippine Hoteliers, Inc. and Dusit Thani Public Co., ○​ The hotel nurse and physician extended
Ltd., seeking compensation of at least PHP 100,000,000 assistance, but Dr. Huang refused further care.
for loss of earnings and permanent injuries. The ○​ Dr. Huang failed to prove that her injuries were
demand went unheeded. solely attributable to the incident.
20.​November 5, 2007:
●​ The Court of Appeals denied Dr. Huang’s Motion for
Reconsideration.
Legal Proceedings 21.​December 5, 2012:
●​ The Supreme Court affirmed the lower court rulings,
17.​August 28, 1996:
concluding that:
●​ Dr. Huang filed a Complaint for Damages in the
○​ Dr. Huang’s own negligence was the proximate
Regional Trial Court (RTC) of Makati City, alleging
cause of her injury.
gross negligence on the part of the hotel. She sought
○​ The doctrines of res ipsa loquitur and
compensation for actual, moral, and exemplary
respondeat superior did not apply.
damages, as well as attorney’s fees.
○​ No contractual relationship existed between Dr.
18.​February 21, 2006:
Huang and the hotel, as she was merely an
●​ The RTC dismissed the complaint, finding:
invitee of a registered guest.
○​ No evidence substantiated Dr. Huang’s claims
that the pool area was completely dark or that
the hotel failed to provide medical assistance.
○​ The injury was caused by Dr. Huang’s own
actions in lifting the countertop.

31
Additional Details from the Court’s Rulings

●​ Burden of Proof:​
The courts highlighted that Dr. Huang’s allegations
were not corroborated by her companion, Delia. Dr.
Huang also failed to present direct evidence linking her
injuries to the hotel’s negligence.
●​ Medical Evidence:​
Testimonies from Dr. Huang’s physicians were deemed
hearsay because the doctors themselves were not
presented in court. The court noted that her symptoms
could have resulted from pre-existing conditions.
●​ Hotel’s Operations:​
Testimony from the hotel staff confirmed that pool
lights remained on until 10:00 PM for housekeeping
and security. A nearby gym provided additional
illumination.
●​ Proximate Cause:​
The courts ruled that Dr. Huang’s action of lifting the
countertop directly caused her injury, absolving the
hotel of liability.

32
The case of Dr. Genevieve L. Huang v. Philippine Hoteliers, 2. Quasi-Delict or Tort:
Inc. has a direct connection to the subject of Obligations and
Contracts because it involves legal questions about the Even without a contract, the law recognizes that individuals or
responsibilities of parties in contractual and extra-contractual entities have a general obligation not to harm others (this is
relationships. the concept of quasi-delict under Article 2176 of the Civil
Code). Dr. Huang's complaint was rooted in the claim that the
hotel acted negligently, causing her injury. However, the courts
found:
1. No Contractual Relationship:
●​ The hotel fulfilled its duty of care by keeping the pool
In the case, Dr. Huang argued that the hotel (through its area lit until 10 PM and responding promptly after the
owners) was contractually obligated to ensure her safety incident.
because she was using its swimming pool facilities. However, ●​ Dr. Huang’s own actions (lifting the countertop) were
the courts ruled that no contractual relationship existed the proximate cause of her injury.
between Dr. Huang and the hotel because:
This highlights the distinction in Obligations and Contracts
●​ She was not a registered guest of the hotel. between obligations arising from contracts and those arising
●​ She was merely an invitee of her friend, Delia, who was from quasi-delicts. While contracts impose specific duties
the hotel’s guest. based on agreement, quasi-delicts impose general duties to act
with reasonable care.
This demonstrates the principle in Obligations and Contracts
that a contractual obligation arises only when there is a clear
agreement or relationship between the parties. Since Dr. Huang
was not a paying guest or party to any agreement with the 3. Change in Legal Theory:
hotel, no contractual obligation to ensure her safety existed.
Dr. Huang attempted to argue that the hotel had an implied
contract to ensure her safety as a guest. However, the courts
ruled that she could not change her legal theory from
quasi-delict (negligence) to breach of contract after the trial

33
began. This reflects a key principle in Obligations and d. Obligation to Prove Negligence:
Contracts: consistency in legal arguments.
●​ In obligations arising from quasi-delicts, the plaintiff
(in this case, Dr. Huang) must present clear evidence of
the defendant’s negligence. Failing to do so, as seen
4. Key Lessons in Obligations and Contracts: here, weakens the claim.

a. Contracts Must Be Clear:

●​ If Dr. Huang were a registered guest of the hotel, there In Summary:

would likely have been a contractual obligation to
ensure her safety. Hotels have a duty under contracts This case teaches that:
with guests to provide safe facilities and proper care.
●​ In this case, the absence of a formal agreement between 1.​ You can only demand something from another person
Dr. Huang and the hotel meant that no such obligation or business if you have a clear agreement or if their
existed. negligence directly harmed you.
2.​ If you are not part of a formal contract (like being a
b. Fault and Negligence Matter in Quasi-Delicts: paying hotel guest), the other party is only responsible
for general safety, not specific promises.
●​ Obligations can also arise from negligence. For 3.​ Accidents don’t always mean someone is at fault. To
example, if the hotel had carelessly left hazards in the hold someone liable, you must prove they acted
pool area or failed to assist Dr. Huang, it could have carelessly, and their carelessness caused your injury.
been held liable under quasi-delict principles. 4.​ Always present strong evidence to back up your claims,
especially in cases involving negligence.
c. Proximate Cause is Critical:
In the study of Obligations and Contracts, this case serves as an
●​ The courts determined that the immediate cause of Dr.
example of how obligations can arise from different sources,
Huang’s injury was her own action of lifting the
like contracts or quasi-delicts, and how courts analyze these
countertop. This underscores that liability in
issues based on evidence and legal principles.
quasi-delicts depends on proving that the
defendant’s negligence directly caused the damage.

34
Case Digest: CBK Power Company Limited vs. Ruling:
Commissioner of Internal Revenue
The Supreme Court denied the petition.
G.R. Nos. 198729-30, January 15, 2014
1.​ Administrative Claim Filing Period:​
Facts: Under Section 112(A) of the NIRC, the two-year
prescriptive period for filing a refund claim begins after
CBK Power Company Limited (CBK) operates hydroelectric the close of the taxable quarter when the sales were
power plants in Laguna, Philippines. It sold electricity to the made. CBK's administrative claims for the first to third
National Power Corporation (NPC) under an approved VAT quarters of 2005 were timely filed.
zero-rating for the period January to October 2005. CBK filed 2.​ Judicial Claim Filing Period:​
administrative claims for unutilized input VAT attributable to Section 112(D) of the NIRC provides a mandatory
zero-rated sales for the first three quarters of 2005 with the 120-day period for the BIR to act on the administrative
Bureau of Internal Revenue (BIR). Due to the BIR's inaction, claim. If the BIR fails to act within 120 days, the
CBK sought relief from the Court of Tax Appeals (CTA). taxpayer must appeal to the CTA within 30 days. Both
periods are jurisdictional.​
The CTA Special Second Division partly granted CBK's claims
CBK's judicial claims were filed after the expiration of
for the second and third quarters of 2005 but denied the first
the 120+30-day periods. Specifically:
quarter claim for being time-barred. On appeal, the CTA En
○​ For the first quarter of 2005, the judicial claim
Banc dismissed all claims, holding that CBK failed to comply
was filed 426 days late.
with mandatory filing periods under the National Internal
○​ For the second and third quarters, the judicial
Revenue Code (NIRC).
claims were similarly delayed.
Issue: 3.​ Application of Jurisprudence:​
The Court applied the rulings in Commissioner of
Whether CBK timely filed its judicial claim for refund of Internal Revenue v. Aichi Forging Company of Asia,
unutilized input VAT under Section 112 of the NIRC. Inc. and San Roque Power Corporation. These cases
emphasized the mandatory nature of the 120+30-day
periods for refund claims.​

35
 4.​ Arguments of Equitable Estoppel and Solutio
Indebiti:​
CBK argued that BIR Ruling No. DA-489-03, which
allowed premature judicial claims, should apply.
However, the Court held that the ruling applied only to
premature filings, not late filings like CBK's. The
principle of solutio indebiti was also deemed
inapplicable because the VAT payments were not made
by mistake.

Disposition:

The petition was denied. CBK lost its right to a refund due to
non-compliance with the mandatory prescriptive periods for
judicial claims under the NIRC.

Key Takeaways:

●​ Refund claims under Section 112 of the NIRC must

strictly observe the 120-day waiting period and the
30-day period for judicial appeals.
●​ BIR Rulings cannot excuse late filings unless explicitly
applicable.
●​ Tax refunds are strictly construed against taxpayers.
Compliance with statutory requirements is crucial.

36
Timeline of CBK Power Company Limited vs. services (capital and non-capital goods), which remain
Commissioner of Internal Revenue (G.R. Nos. 198729-30) unutilized due to the zero-rated nature of its sales.

2004

●​ December 29, 2004:​ ●​ First Quarter of 2005:

CBK Power Company Limited (CBK), a company ○​ CBK generates zero-rated sales to NPC and
engaged in the operation, maintenance, and incurs input VAT from purchases required for
management of hydroelectric power plants and related its operations.
facilities in Laguna, Philippines, files an Application ○​ The end of the taxable quarter marks the start of
for VAT Zero-Rateunder Section 108(B)(3) of the the two-year prescriptive period for filing an
National Internal Revenue Code (NIRC) of 1997, as administrative claim for input VAT refunds.
amended. ●​ Second Quarter of 2005:
○​ CBK’s application is approved by the BIR, ○​ CBK continues its operations with effectively
entitling its sales to the National Power zero-rated sales, accumulating more input VAT.
Corporation (NPC) from January 1, 2005, to ●​ Third Quarter of 2005:
October 31, 2005, to effectively zero-rated ○​ CBK generates additional zero-rated sales to
VAT status. NPC and incurs further unutilized input VAT on
○​ The approval is based on NPC’s status as an its operational purchases.
entity exempted from taxes, including VAT,
under its special charter. Consequently, CBK
becomes eligible for a refund of unutilized input
●​ June 30, 2005:
VAT attributable to zero-rated sales to NPC.
○​ CBK files its administrative claim with BIR
2005 for a refund of unutilized input VAT for the
first quarter of 2005.
●​ January to October 2005:​ ○​ This filing is well within the two-year
CBK supplies electricity to NPC under the approved prescriptive period under Section 112(A) of the
VAT zero-rating status. This results in the accumulation NIRC.​
of input VAT from CBK’s purchases of goods and

37
 ●​ September 15, 2005: the two-year period under Section
○​ CBK submits its administrative claim with 112(A) had already lapsed.
BIR for the refund of input VAT for the second ■​ Second and Third Quarters of 2005:
quarter of 2005. The claims are found timely filed, and
●​ October 28, 2005: the CTA grants a partial refund.
○​ CBK files its administrative claim for a refund ○​ The refund is reduced to ₱27,170,123.36,
of input VAT related to the third quarter of representing the verified portion of unutilized
2005. input VAT related to zero-rated sales.
●​ July 6, 2010:
2007 ○​ Both CBK and the CIR file Motions for Partial
Reconsideration, challenging portions of the
●​ April 18, 2007:
CTA’s ruling.
○​ With no action from the Commissioner of
○​ The CTA denies both motions, maintaining its
Internal Revenue (CIR) on its claims, CBK files
initial decision.
a Petition for Review with the Court of Tax
Appeals (CTA) Special Second Division. 2011
○​ The petition challenges the BIR’s inaction and
seeks a refund of input VAT related to all three ●​ June 27, 2011:
quarters of 2005. ○​ On appeal, the CTA En Banc issues a Decision,
reversing the Special Second Division’s ruling.
2010 ○​ It applies Commissioner of Internal Revenue v.
Aichi Forging Company of Asia, Inc. (2010),
●​ March 3, 2010:
which clarified the mandatory 120+30-day
○​ The CTA Special Second Division issues a
period for filing judicial claims:
Decision, applying the rules established in
■​ A taxpayer must:
Commissioner of Internal Revenue v. Mirant
■​ Wait 120 days for the CIR to act
Pagbilao Corporation (2008).
on an administrative claim; and
○​ Key findings:
■​ File a judicial claim within 30
■​ First Quarter of 2005: The judicial
days of the lapse of the 120-day
claim is dismissed for being filed late, as
period.

38
 ■​ Findings: 3.​ Arguments and Findings:
■​ CBK’s judicial claims for the ○​ BIR Ruling No. DA-489-03:
second and third quarters of ■​ The ruling allowed premature filings,
2005 were filed belatedly. not late filings. Thus, CBK cannot
■​ The CTA dismisses all claims. invoke its protection.
●​ September 16, 2011: ○​ Solutio Indebiti:
○​ CBK files a Motion for Reconsideration, ■​ This principle (undue payment) does not
arguing that the rules set in Aichi should not be apply because VAT payments were
applied retroactively and that BIR Ruling No. properly made, not in error.
DA-489-03 (which allowed premature judicial ○​ Equity and Refunds:
claims) was applicable at the time of filing. ■​ Tax refunds are strictly construed against
○​ The CTA En Banc denies the motion. taxpayers. Compliance with procedural
requirements is mandatory.
2014 4.​ Final Decision:
○​ CBK’s judicial claims were dismissed for
●​ January 15, 2014:
non-compliance with jurisdictional
○​ The Supreme Court issues its Decision, ruling
requirements.
as follows:
1.​ Administrative Claims:
○​ CBK timely filed administrative claims for all
quarters of 2005 in compliance with Section Final Ruling Summary
112(A).
2.​ Judicial Claims: ●​ Decision Date: January 15, 2014
○​ CBK failed to comply with the 120+30-day ●​ Supreme Court Ruling:
rule under Section 112(D). ○​ CBK Power Company Limited timely filed its
■​ First Quarter of 2005: Judicial claim administrative claims for input VAT refunds
was filed 426 days late. for the first, second, and third quarters of
■​ Second and Third Quarters of 2005: 2005 under Section 112(A) of the National
Judicial claims were also filed beyond Internal Revenue Code (NIRC).
the prescriptive period.

39
 ○​ CBK failed to comply with the mandatory ○​ Failure to comply with procedural timelines
120+30-day rule under Section 112(D) of the results in the loss of the taxpayer’s right to
NIRC for filing judicial claims: claim refunds.
■​ First Quarter of 2005: Judicial claim ○​ Tax refund privileges are statutory and require
filed 426 days late. strict adherence to procedural conditions.
■​ Second and Third Quarters of 2005: ●​ Final Outcome:
Judicial claims also filed after the ○​ CBK’s judicial claims for tax refunds were
expiration of the prescriptive period. denied, and the dismissal of the claims by the
●​ Arguments Rejected by the Court: Court of Tax Appeals (CTA) was upheld.
○​ BIR Ruling No. DA-489-03: ○​ The decision underscored the importance of
■​ This ruling only applied to premature strict compliance with procedural rules in
judicial filings (failure to wait for the tax-related cases.
120-day period) and not late filings, as
was the case with CBK.
○​ Solutio Indebiti:
■​ The principle of undue payment did not
apply since CBK’s VAT payments were
made correctly at the time and not
through mistake.
○​ Equity:
■​ Tax refunds, like tax exemptions, are
strictly construed against taxpayers.
Procedural requirements, including
timelines, cannot be waived or
disregarded in favor of equitable
arguments.
●​ Key Takeaways from the Ruling:
○​ The 120+30-day period for judicial claims is
mandatory and jurisdictional.

40
The case of CBK Power Company Limited vs. entitlement depends on fulfilling specific
Commissioner of Internal Revenue is relevant to the subject conditions.
of Obligations and Contracts because it deals with the ■​ CBK’s right to a tax refund was
enforcement of legal obligations, compliance with statutory conditional on its compliance with the
requirements, and the consequences of failing to meet procedural timelines under the NIRC.
contractual or legal conditions. ■​ When CBK failed to meet the deadlines,
it lost its right to the refund, much like a
party in a contract would lose its rights if
it failed to meet a condition precedent (a
Key Relationship and Relevance condition that must be satisfied before a
party gains a benefit).
1.​ Obligations Defined by Law:
3.​ Strict Compliance with Conditions:
○​ In obligations and contracts, obligations are
○​ Obligations and contracts emphasize that
duties imposed either by agreement (contracts)
conditions attached to a right or benefit must be
or by law. In this case, CBK Power was legally
strictly complied with.
obligated to comply with the tax rules and
■​ In this case, the Supreme Court ruled
timelines set by the National Internal Revenue
that CBK’s failure to comply with the
Code (NIRC). These rules are akin to terms in a
120+30-day filing rule was a violation of
contract, where failure to comply leads to
a condition required to enforce its claim.
specific consequences.
This is comparable to failing to fulfill a
○​ CBK’s obligation was to file its refund claims
contractual obligation, such as delivering
within strict deadlines (120+30 days), as
goods or services on time, which can
required by law. This reflects the principle that
result in the loss of contractual rights.
obligations imposed by law must be strictly
4.​ Legal Remedies and Consequences of Breach:
followed, similar to how contractual terms bind
○​ The case shows how legal remedies (e.g., filing
the parties.
claims) can be affected by non-compliance with
2.​ Conditional Obligations:
procedural obligations.
○​ The case also illustrates the concept of
■​ In obligations and contracts, when a
conditional obligations, where a party's
party breaches an obligation, it often

41
 loses the right to claim remedies.
Similarly, CBK’s failure to file its
judicial claims on time was treated as a Explanation
breach of its statutory obligations, and
its claims were dismissed. Imagine you’re renting a house and your lease agreement says
5.​ Quasi-Contracts and Tax Obligations: you must pay rent by the 5th of each month. If you don’t pay
○​ The principle of solutio indebiti (undue on time, your landlord has the right to cancel the lease or
payment) discussed in the case is rooted in the charge a penalty. This is similar to CBK’s case: they had a
idea of quasi-contracts, which arise not from deadline (like paying rent) to file their tax refund claims. When
an agreement but from equitable considerations they missed the deadline, they lost their right to claim the
to prevent unjust enrichment. refund, just as you might lose the right to stay in the house if
■​ CBK argued that its payment of input you breach your lease.
VAT was akin to undue payment, but the
This case teaches us the importance of following the rules and
Court rejected this, stating that its
timelines set by law or agreements. Whether in contracts or tax
payments were correct at the time they
obligations, conditions must be met, or you risk losing your
were made. This reinforces the principle
rights. It also highlights that you can’t rely on fairness (equity)
in obligations and contracts that
to save you when you fail to meet a legal obligation, especially
quasi-contracts only arise when no valid
if the law clearly states otherwise.
obligation exists.
6.​ Equity vs. Legal Rules: In essence, the case demonstrates that obligations imposed by
○​ In obligations and contracts, equity may law are just as binding as those created by contracts, and
sometimes supplement the law, but it cannot compliance is crucial to enforce any claims or rights.
override explicit legal provisions.
■​ CBK argued for the application of equity
to allow its refund despite missing
deadlines. The Court ruled that statutory
rules must prevail over equitable
arguments, emphasizing the primacy of
compliance with legal obligations.

42
Case Title: Romulo Abrogar and Erlinda Abrogar v. Cosmos Issues:
Bottling Company and Intergames, Inc.​
Citation: G.R. No. 164749, March 15, 2017​ 1.​ Was Intergames negligent in organizing the marathon,
Court: Supreme Court, Third Division​ and was such negligence the proximate cause of
Ponente: Justice Bersamin Rommel's death?
2.​ Is Cosmos jointly liable with Intergames as the event
sponsor?
3.​ Can the doctrine of assumption of risk bar recovery for
Facts: Rommel’s death?
4.​ Are damages for loss of earning capacity, moral
1.​ Rommel Abrogar, an 18-year-old participant in the "1st damages, and exemplary damages recoverable?
Pop Cola Junior Marathon" organized by Intergames,
Inc. and sponsored by Cosmos Bottling Company, was
fatally injured when a jeepney struck him during the
event. Ruling:
2.​ The Abrogar parents sued both Intergames and Cosmos,
alleging negligence in failing to block traffic or ensure The Supreme Court partly granted the appeal, reinstating
adequate safety measures along the marathon route. Intergames' liability while absolving Cosmos.
3.​ The RTC ruled in favor of the Abrogars, finding both
Cosmos and Intergames jointly and severally liable.
4.​ The Court of Appeals (CA) reversed the RTC's
Ratio Decidendi:
decision, absolving both respondents of liability and
holding that the negligence of the jeepney driver was 1.​ Negligence of Intergames:
the proximate cause of Rommel's death. ○​ The Court found that Intergames failed to
exercise due diligence in ensuring the safety of
participants, particularly by allowing the race to
proceed alongside vehicular traffic without
blocking off the route.
○​ Despite its reliance on volunteers and
cooperating agencies, Intergames did not

43
 adequately coordinate or instruct them to Disposition:
minimize risks.
○​ The negligence of Intergames was the proximate The complaint against Cosmos Bottling Company was
cause of Rommel’s death, as the risks of dismissed. Intergames, Inc., however, was held liable for
vehicular accidents were foreseeable and damages arising from its negligence.
preventable through proper measures.
2.​ Liability of Cosmos:
○​ Cosmos’ role was limited to sponsorship and
financial assistance.
○​ The Court found no evidence that Cosmos
participated in the planning or management of
the event.
○​ Hence, Cosmos was not liable for the death.
3.​ Doctrine of Assumption of Risk:
○​ The waiver signed by Rommel was deemed
invalid as it attempted to absolve Intergames
from liability arising from negligence, which is
contrary to public policy.
○​ The risks inherent in a marathon, such as fatigue
or stumbling, differ from risks posed by
negligent road management.
4.​ Damages:
○​ The Court affirmed the recovery of damages for
actual expenses and moral injuries, but denied
compensation for loss of earning capacity as
Rommel was a minor and had no proven earning
potential at the time of his death.

44
Timeline for the case Romulo Abrogar and Erlinda Abrogar Mariano Marcos Avenue, citing the
v. Cosmos Bottling Company and Intergames, Inc. importance of maintaining access for
residents of nearby villages.
Pre-Marathon Events ■​ Intergames decided to proceed despite
the inability to secure a traffic-free route,
1.​ Planning Stage (Before June 15, 1980):
citing past marathons in the same area
○​ Cosmos Bottling Company sponsored the "1st
without major incidents.
Pop Cola Junior Marathon" to promote its
2.​ Participant Registration:
product, Pop Cola.
○​ Participants aged 14 to 18 were eligible to join
○​ Intergames, Inc. took on the role of organizer
the marathon. Rommel Abrogar, an 18-year-old
and plotted a 10-kilometer route starting at the
student, registered.
Interim Batasang Pambansa, passing through
○​ Intergames required participants to:
public streets, and ending at Quezon Memorial
■​ Submit a waiver acknowledging risks.
Circle.
■​ Present a medical certificate.
○​ Preparations by Intergames:
■​ Secure parental consent if underage.
■​ Conducted an ocular inspection of the
○​ A briefing was conducted for participants,
route.
where the route and safety measures were
■​ Sought permits from the Northern Police
discussed. Rommel and his parents were
District and Quezon City officials.
informed that vehicular traffic would not be
■​ Coordinated with agencies such as
blocked.
barangay tanods, Boy Scouts, CAT
members, and traffic enforcers.
■​ Partnered with medical teams from
Camp Aguinaldo and the Ospital ng The Marathon Day (June 15, 1980)
Bagong Lipunan.
■​ Set up water stations and directional 3.​ Event Start:
signage along the route. ○​ The marathon commenced at the Batasang
○​ Safety Concerns Not Addressed: Pambansa premises. Each participant was given
■​ The Northern Police District denied a an official number.
request to block traffic along Don

45
 ○​ Volunteers and cooperating agencies were Post-Accident Legal Proceedings
deployed along the route. However:
■​ Marshals and traffic enforcers were 6.​ Filing of Complaint (October 28, 1980):
insufficiently briefed. ○​ The Abrogar family filed a lawsuit against
■​ Coordination among volunteers was Cosmos and Intergames, citing negligence in
loose, with no formal action plan or ensuring the safety of participants.
system in place. ○​ Allegations included:
4.​ Accident Details: ■​ Failure to block off the marathon route
○​ Rommel was running along Don Mariano from vehicular traffic.
Marcos Avenue, near the Philippine Atomic ■​ Insufficient safety measures, including
Energy Commission Building. lack of barriers and inadequate marshals.
○​ A jeepney, recklessly racing a minibus, struck ○​ Cosmos claimed it was merely a sponsor with
Rommel while attempting to overtake another no operational involvement.
vehicle. ○​ Intergames argued it had implemented
○​ Rommel suffered severe head injuries and was reasonable precautions and that the jeepney
rushed to Ospital ng Bagong Lipunan, where he driver's actions were the sole proximate cause.
later succumbed to his injuries. 7.​ Regional Trial Court Proceedings and Ruling (May
5.​ Aftermath of the Accident: 10, 1991):
○​ A criminal case was filed against the jeepney ○​ The RTC held that Intergames failed to meet the
driver, who was found negligent. standard of care required of a "good father of a
○​ The Abrogar family declined the accident family."
insurance proceeds provided by Intergames, ○​ Findings against Intergames:
instead pursuing legal action. ■​ Marshals and volunteers were
inadequately prepared.
■​ The route’s proximity to vehicular traffic
posed foreseeable risks.
○​ Cosmos was found jointly liable, as it benefited
from the event’s promotional activities.
○​ Damages Awarded:

46
 ■​ Actual damages: PHP 28,061.63. Supreme Court Proceedings
■​ Moral damages: PHP 100,000.
■​ Exemplary damages: PHP 50,000. 9.​ Supreme Court Review (March 15, 2017):
■​ Attorney’s fees: PHP 17,806.16. ○​ The Supreme Court reviewed the case due to
conflicting findings by the RTC and CA.
○​ Findings on Negligence:
■​ Intergames’ reliance on volunteers
Appeal to the Court of Appeals without proper coordination and training
was inadequate.
8.​ Court of Appeals Decision (March 10, 2004):
■​ Failure to block traffic or reroute
○​ The CA overturned the RTC’s decision,
vehicles along Don Mariano Marcos
absolving both Cosmos and Intergames of
Avenue directly contributed to the
liability.
accident.
○​ Key findings:
■​ The chosen route was unsuitable for a
■​ Intergames took sufficient precautions
junior marathon involving minors.
by deploying marshals and medical
○​ Cosmos was absolved of liability, as its role was
teams.
limited to sponsorship.
■​ The doctrine of assumption of risk
10.​Ruling on Damages:
applied, as Rommel voluntarily joined
○​ Intergames was held liable for damages due to
the marathon, aware of the risks.
its negligence.
■​ Cosmos had no operational control over
○​ The Court upheld awards for actual and moral
the marathon, as its involvement was
damages.
limited to financial sponsorship.
○​ Claims for loss of earning capacity were denied,
■​ The jeepney driver’s recklessness was
as Rommel was a student with no established
deemed the proximate cause of the
income potential.
accident.

47
Expanded Notes

●​ Coordination Failures by Intergames:

○​ Meetings with cooperating agencies were
sporadic and lacked follow-ups.
○​ No rehearsals or dry runs were conducted to
simulate race-day conditions.
○​ The organizer assumed volunteers’ experience
in prior races negated the need for detailed
instructions.
●​ Legal Principles Applied:
○​ Negligence: Defined as the failure to act with
the care expected of a reasonably prudent
person under the circumstances.
○​ Assumption of Risk: While valid for inherent
risks in marathons (e.g., exhaustion or
heatstroke), it did not absolve Intergames of
liability for preventable vehicular accidents.
○​ Proximate Cause: Intergames’ negligence set
in motion foreseeable risks, making it the
proximate cause despite the jeepney driver’s
intervening negligence.

48
The case Romulo Abrogar and Erlinda Abrogar v. Cosmos 2.​ Nature and Scope of Contracts:
Bottling Company and Intergames, Inc. relates to the subject of ○​ The case also examines the sponsorship
Obligations and Contracts because it highlights key agreement between Cosmos and Intergames.
principles of obligations arising from negligence and the scope Cosmos argued it was merely a financial
of contractual relationships. sponsor and had no operational control over the
marathon. The Court agreed, emphasizing that a
contract defines the scope of each party’s
obligations.
Key Connections to Obligations and Contracts ○​ This shows that contracts are binding only on
the parties who enter them. Even though
1.​ Obligations Arising from Negligence
Cosmos benefited from the event through
(Quasi-Delicts):
publicity, it could not be held liable because it
○​ The case centers on the idea that a person or
did not assume operational responsibilities in its
entity has a duty to act with care to avoid
contract with Intergames.
causing harm to others.
3.​ Effect of Waivers:
○​ Intergames, as the marathon organizer, had an
○​ Participants like Rommel were required to sign
obligation to ensure the safety of the
a waiver acknowledging the risks of joining the
participants. This obligation did not arise from a
marathon. However, the Court ruled that
formal contract with Rommel but from the
waivers cannot exempt organizers from liability
general legal duty to act as a "good father of a
for gross negligence or failure to fulfill basic
family" (a principle in the Civil Code referring
safety obligations.
to a reasonably careful and prudent person).
○​ This highlights that waivers or contracts that
○​ When Intergames failed to block traffic and
violate public policy (e.g., by absolving
adequately coordinate safety measures, it
someone of liability for avoidable harm) are
breached this obligation, leading to Rommel’s
invalid.
tragic accident. This failure is an example of
negligence, which creates liability even without
a direct contract.​
​

49
Relevance in Real Life hand, are powerful tools for defining responsibilities and
limiting liability—but they cannot be used to escape basic legal
This case is highly relevant for understanding how obligations duties, like ensuring safety.
and contracts work in real-world situations:
For students of Obligations and Contracts, this case
●​ Organizers and Liability:​ emphasizes:
When someone organizes an event, they have a duty to
ensure the safety of participants, even if there’s no ●​ The importance of acting prudently and responsibly in
direct contractual relationship. Negligence can lead to any undertaking.
legal liability, which is why careful planning and risk ●​ The role of contracts in allocating responsibilities and
management are essential. liabilities.
●​ Contracts Define Responsibilities:​ ●​ The limits of waivers and the protection of public
Sponsors or partners in a project are only responsible interest over contractual agreements.
for what their contract specifies. For instance, Cosmos
could not be held liable because its contract limited its By analyzing this case, you see how legal principles apply to
role to financial sponsorship, showing the importance protect individuals from harm while balancing the freedom to
of clearly defining roles in agreements. enter into contracts. This balance ensures fairness in
●​ Limits of Waivers:​ relationships and accountability in actions.
Waivers cannot be used to avoid responsibility for harm
caused by negligence. Organizers must still take
reasonable steps to ensure safety, as courts prioritize
public welfare over overly broad waivers.

Expounding the Lesson

The case teaches that obligations are not always based on

contracts; they can arise from basic principles of fairness and
care (what lawyers call "quasi-delicts"). Contracts, on the other

50
Case Digest: Orient Freight International, Inc. v. Ruling:
Keihin-Everett Forwarding Company, Inc.
The Supreme Court denied the petition and upheld the
G.R. No. 191937 | August 9, 2017 | Second Division rulings of the lower courts.

Facts: 1.​ No Quasi-Delict Liability:​

The Court clarified that negligence in this case arises
Keihin-Everett Forwarding Company, Inc. (Keihin-Everett) from a pre-existing contractual obligation under the
subcontracted Orient Freight International, Inc. (Orient Freight) service agreement. Under Philippine law, a quasi-delict
for its trucking services under a service agreement. On April requires no pre-existing contract between parties. Here,
17, 2002, a truck carrying Matsushita Communication the negligence is classified as "culpa contractual,"
Industrial Corporation’s shipment was intercepted by the governed by Articles 1170 to 1174 of the Civil Code.
police. The incident was initially reported by Orient Freight as 2.​ Negligence Established:​
a simple mechanical breakdown, but subsequent investigations The Court affirmed that Orient Freight was negligent in
revealed pilferage of goods worth $34,226.14. failing to promptly and adequately investigate and
disclose the true nature of the hijacking incident. Orient
Keihin-Everett relied on Orient Freight’s reports but later
Freight’s insufficient diligence led to Matsushita's loss
discovered the true extent of the incident through independent
of trust in Keihin-Everett, causing the latter’s income
investigation. Matsushita terminated its brokerage contract
losses.
with Keihin-Everett due to a loss of trust, citing negligence and
3.​ Damages for Lost Income:​
fraud. Keihin-Everett then sought damages for lost income
The trial court awarded Keihin-Everett ₱1,666,667 in
caused by the termination, claiming Orient Freight's failure to
lost income, reduced from its original claim based on its
report the incident properly was the proximate cause.
financial statements, as well as ₱50,000 for attorney's
Issues: fees. This computation was deemed proper, as the
damages resulted from the natural and probable
1.​ Whether the negligence of Orient Freight constitutes a consequences of Orient Freight’s negligence.
quasi-delict under Article 2176 of the Civil Code.
2.​ Whether Orient Freight is liable for damages for
Keihin-Everett’s lost income due to Matsushita's
contract termination.

51
Ratio Decidendi:

Negligence arising from a contractual obligation is governed

by contractual principles and not by quasi-delict provisions. A
breach of contract entitles the injured party to recover damages
that are the natural and foreseeable consequences of such
breach, provided they are proven with reasonable certainty.

Disposition:

Petition denied. The decisions of the Court of Appeals and

Regional Trial Court affirming Orient Freight’s liability were
upheld.

52
Timeline of Orient Freight International, Inc. v. ●​ December 31, 2001
Keihin-Everett Forwarding Company, Inc. ○​ Expiration of Initial Agreement:
■​ The initial Trucking Service Agreement
G.R. No. 191937 | August 9, 2017 between Keihin-Everett and Matsushita
expired.
■​ Matsushita and Keihin-Everett then
Background and Agreements: entered into a new In-House Brokerage
Service Agreement, which primarily
●​ October 16, 2001 covered Matsushita’s Philippine
○​ Contract Formation: Economic Zone Authority export
■​ Keihin-Everett Forwarding Company, operations.
Inc. (Keihin-Everett) entered into a ○​ Continuity in Subcontracting:
Trucking Service Agreement with ■​ Despite the change in agreements,
Matsushita Communication Industrial Keihin-Everett retained Orient Freight as
Corporation of the Philippines a subcontractor for trucking services.
(Matsushita) to provide trucking ■​ Orient Freight's Subcontract: Orient
services for Matsushita’s logistical Freight, in turn, subcontracted a portion
needs, including the transport of goods of its responsibilities to Schmitz
to export facilities. Transport and Brokerage
■​ Subcontract: To fulfill its obligations Corporation.
under this agreement, Keihin-Everett
subcontracted trucking operations to
Orient Freight International, Inc.
Incident Timeline:
(Orient Freight) through a separate
Trucking Service Agreement executed ●​ April 17, 2002
on the same day.​ ○​ Transport of Shipment:
​ ■​ A truck carrying a shipment of video
​ monitors and CCTV systems owned by

53
 Matsushita was being transported under ■​ The truck was impounded for
Orient Freight’s supervision. further investigation.
■​ The shipment consisted of 218 cartons ■​ Driver Cudas evaded capture and
valued at $34,226.14. became the subject of a police
○​ Reported Breakdown: manhunt.
■​ Driver’s Claim:
■​ Driver Ricky Cudas reported to
Orient Freight (via truck helper
Post-Incident Developments:
Rubelito Aquino) that the truck
had experienced mechanical ●​ April 19, 2002
trouble in Paco Street, Manila. ○​ Tabloid Publication:
■​ Aquino called Orient Freight and ■​ A news column in the tabloid newspaper
was allegedly instructed to wait Tempo reported the incident, describing
for assistance. it as a hijacking involving a stolen truck
○​ Truck Missing: carrying Matsushita's shipment.
■​ Following Aquino's call, the truck went ■​ The report caused alarm within
missing, prompting Orient Freight to Matsushita’s management.
contact the driver. ○​ Contact by Matsushita:
■​ Driver Fleeing: The driver, Cudas, fled ■​ Matsushita’s Sales Manager, Salud
and became untraceable. Rizada, called Keihin-Everett to inquire
○​ Police Involvement: about the tabloid report.
■​ The truck was intercepted later that day ●​ April 20, 2002
by the Caloocan City police along C3 ○​ Meeting:
Road near Dagat-Dagatan Avenue, ■​ Matsushita and Keihin-Everett met with
Caloocan City. Orient Freight to clarify the situation.
■​ Circumstances: ■​ Initial Explanation:
■​ Police found the truck under ■​ Orient Freight reported that the
suspicious conditions, outside its incident involved a mere
expected route.

54
 mechanical breakdown and Keihin-Everett's Independent Investigation:
towing of the truck.
■​ It claimed the issue had been ●​ May 15, 2002
resolved promptly and that the ○​ Police Report Findings:
shipment was delivered without ■​ Keihin-Everett obtained the police report
delay. from the Caloocan City Police Station.
●​ April 22, 2002 ■​ The report revealed:
○​ Formal Written Explanation: ■​ Cudas staged the mechanical
■​ Orient Freight reiterated its claim in a breakdown as a ploy to
letter addressed to Matsushita, orchestrate the truck's theft.
dismissing the tabloid report as ■​ The truck’s presence at the police
exaggerated and asserting that the station was due to interception
situation was under control. after it veered off its route.
●​ May 8, 2002 ■​ Aquino’s statements corroborated
○​ Discovery in Yokohama: the suspicious circumstances
■​ When the shipment arrived in leading to the truck’s
Yokohama, Japan, it was discovered that impounding.
10 pallets (218 cartons) of the cargo ■​ Keihin-Everett confronted Orient Freight
were missing. with these findings.
■​ Matsushita confirmed the pilferage and ○​ Orient Freight’s Admission:
began questioning the reliability of ■​ Orient Freight admitted that its earlier
Keihin-Everett and its subcontractor, report was incorrect and acknowledged
Orient Freight. the loss of the shipment.
■​ The company maintained that it acted in
good faith based on the initial
information from its employees.

55
Termination of Agreement by Matsushita: ●​ Orient Freight’s Refusal:
○​ Denied liability, arguing that the termination
●​ June 6, 2002 was Matsushita’s independent decision
○​ Matsushita’s Official Termination: unrelated to any negligence on its part.
■​ Matsushita terminated its In-House
Brokerage Service Agreement with
Keihin-Everett, effective July 1, 2002.
■​ Grounds for Termination: Filing of Complaint:
■​ Loss of confidence due to
●​ October 24, 2002
Keihin-Everett’s failure to
○​ Civil Complaint:
disclose the incident accurately.
■​ Keihin-Everett filed a complaint for
■​ Described the nondisclosure as
damages in the RTC, Branch 10,
fraudulent and reflecting gross
Manila (Civil Case No. 02-105018).
negligence.
■​ Allegations:
■​ Matsushita sought to protect its
■​ Orient Freight's negligence,
corporate integrity and reputation.
misrepresentation, and failure to
properly investigate and disclose
the facts caused Matsushita's
Demand for Compensation: termination of the agreement.
■​ Reliefs Sought:
●​ September 16, 2002 ■​ ₱2,500,000 in lost income.
○​ Demand Letter: ■​ Exemplary damages, attorney’s
■​ Keihin-Everett sent a demand letter to fees, and litigation expenses.
Orient Freight, seeking ₱2,500,000 as ●​ December 20, 2002
indemnity for lost income resulting from ○​ Orient Freight’s Answer:
the termination of Matsushita’s contract.​ ■​ Claimed good faith in its handling of the
​ incident.
​

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 ■​ Argued that the amount claimed by Appeal to the Court of Appeals (CA):
Keihin-Everett was inflated and
unsupported by financial records. ●​ January 21, 2010
○​ CA Decision:
■​ Affirmed RTC findings, emphasizing
Orient Freight’s negligence in:
Trial and Lower Court Decisions: ■​ Failing to report accurately.
■​ Withholding critical information
●​ February 27, 2008
despite evidence suggesting
○​ RTC Decision:
otherwise.
■​ Held Orient Freight liable for
●​ April 21, 2010
negligence.
○​ CA Resolution:
■​ Findings:
■​ Denied Orient Freight’s motion for
■​ Orient Freight failed to conduct a
reconsideration.
thorough investigation and
misled Keihin-Everett and
Matsushita regarding the
incident. Supreme Court Proceedings:
■​ This negligence caused
Matsushita’s loss of trust in ●​ June 9, 2010
Keihin-Everett and subsequent ○​ Petition for Certiorari:
termination of the agreement. ■​ Orient Freight questioned the application
■​ Awards: of Article 2176 of the Civil Code
■​ ₱1,666,667 as actual damages (quasi-delict).
(adjusted from the claimed ■​ Contended that damages were
₱2,500,000). improperly computed.
■​ ₱50,000 for attorney’s fees. ●​ August 9, 2017
○​ SC Decision:
■​ Denied the petition.​

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 ■​ Rulings:
■​ Negligence arose from
contractual obligations (culpa
contractual), not quasi-delict.
■​ Damages were awarded based on
foreseeability of harm caused by
Orient Freight’s negligence.

Final Awards and Disposition:

●​ Actual Damages: ₱1,666,667

●​ Attorney’s Fees: ₱50,000
●​ Disposition: Petition denied; lower court rulings
affirmed.

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