PHILIPPINE BANK OF COMMERCE, now absorbed by PHILIPPINE COMMERCIAL

INTERNATIONAL BANK, ROGELIO LACSON, DIGNA DE LEON, MARIA ANGELITA

PASCUAL, et al., petitioners, vs. THE COURT OF APPEALS, ROMMEL'S
MARKETING CORP., represented by ROMEO LIPANA, its President & General
Manager, respondents
G.R. No. 97626

Challenged in this petition for review is the Decision dated February 28, 1991 rendered
by public respondent Court of Appeals which affirmed the Decision dated November 15,
1985 of the Regional Trial Court, National Capital Judicial Region, Branch CLX (160),
Pasig City, in Civil Case No. 27288 entitled "Rommel's Marketing Corporation, etc. v.
Philippine Bank of Commerce, now absorbed by Philippine Commercial and Industrial
Bank."
The case stemmed from a complaint filed by the private respondent Rommel's
Marketing Corporation (RMC for brevity), represented by its President and General
Manager Romeo Lipana, to recover from the former Philippine Bank of Commerce (PBC
for brevity), now absorbed by the Philippine Commercial International Bank, the sum of
P304,979.74 representing various deposits it had made in its current account with said
bank but which were not credited to its account, and were instead deposited to the
account of one Bienvenido Cotas, allegedly due to the gross and inexcusable
negligence of the petitioner bank.
RMC maintained two (2) separate current accounts, Current Account Nos. 53-01980-3
and 53-01748-7, with the Pasig Branch of PBC in connection with its business of selling
appliances.
In the ordinary and usual course of banking operations, current account deposits are
accepted by the bank on the basis of deposit slips prepared and signed by the
depositor, or the latter's agent or representative, who indicates therein the current
account number to which the deposit is to be credited, the name of the depositor or
current account holder, the date of the deposit, and the amount of the deposit either in
cash or checks. The deposit slip has an upper portion or stub, which is detached and
given to the depositor or his agent; the lower portion is retained by the bank. In some
instances, however, the deposit slips are prepared in duplicate by the depositor. The
original of the deposit slip is retained by the bank, while the duplicate copy is returned or
given to the depositor.
From May 5, 1975 to July 16, 1976, petitioner Romeo Lipana claims to have entrusted
RMC funds in the form of cash totalling P304,979.74 to his secretary, Irene Yabut, for
the purpose of depositing said funds in the current accounts of RMC with PBC. It turned
out, however, that these deposits, on all occasions, were not credited to RMC's account
but were instead deposited to Account No. 53-01734-7 of Yabut's husband, Bienvenido
Cotas who likewise maintains an account with the same bank. During this period,
petitioner bank had, however, been regularly furnishing private respondent with monthly
statements showing its current accounts balances. Unfortunately, it had never been the
practice of Romeo Lipana to check these monthly statements of account reposing
complete trust and confidence on petitioner bank.
Irene Yabut's modus operandi is far from complicated. She would accomplish two (2)
copies of the deposit slip, an original and a duplicate. The original showed the name of
her husband as depositor and his current account number. On the duplicate copy was
written the account number of her husband but the name of the account holder was left
blank. PBC's teller, Azucena Mabayad, would, however, validate and stamp both the
original and the duplicate of these deposit slips retaining only the original copy despite
the lack of information on the duplicate slip. The second copy was kept by Irene Yabut
allegedly for record purposes. After validation, Yabut would then fill up the name of
RMC in the space left blank in the duplicate copy and change the account number
written thereon, which is that of her husband's, and make it appear to be RMC's account
number, i.e., C.A. No. 53-01980-3. With the daily remittance records also prepared by
Ms. Yabut and submitted to private respondent RMC together with the validated
duplicate slips with the latter's name and account number, she made her company
believe that all the while the amounts she deposited were being credited to its account
when, in truth and in fact, they were being deposited by her and credited by the
petitioner bank in the account of Cotas. This went on in a span of more than one (1)
year without private respondent's knowledge.
Upon discovery of the loss of its funds, RMC demanded from petitioner bank the return
of its money, but as its demand went unheeded, it filed a collection suit before the
Regional Trial Court of Pasig, Branch 160. The trial court found petitioner bank
negligent and ruled as follows:
WHEREFORE, judgment is hereby rendered sentencing defendant Philippine
Bank of Commerce, now absorbed by defendant Philippine Commercial &
Industrial Bank, and defendant Azucena Mabayad to pay the plaintiff, jointly and
severally, and without prejudice to any criminal action which may be instituted if
found warranted:
1. The sum of P304,979.72, representing plaintiffs lost deposit, plus interest
thereon at the legal rate from the filing of the complaint;
2. A sum equivalent to 14% thereof, as exemplary damages;
3. A sum equivalent to 25% of the total amount due, as and for attorney's fees;
and
4. Costs.
 Defendants' counterclaim is hereby dismissed for lack of merit.
On appeal, the appellate court affirmed the foregoing decision with modifications, viz:
WHEREFORE, the decision appealed from herein is MODIFIED in the sense that the
awards of exemplary damages and attorney's fees specified therein are eliminated and
instead, appellants are ordered to pay plaintiff, in addition to the principal sum of
P304,979.74 representing plaintiff's lost deposit plus legal interest thereon from the filing
of the complaint, P25,000.00 attorney's fees and costs in the lower court as well as in
this Court.
Hence, this petition anchored on the following grounds:
1) The proximate cause of the loss is the negligence of respondent Rommel Marketing
Corporation and Romeo Lipana in entrusting cash to a dishonest employee.
2) The failure of respondent Rommel Marketing Corporation to cross-check the bank's
statements of account with its own records during the entire period of more than one (1)
year is the proximate cause of the commission of subsequent frauds and
misappropriation committed by Ms. Irene Yabut.
3) The duplicate copies of the deposit slips presented by respondent Rommel Marketing
Corporation are falsified and are not proof that the amounts appearing thereon were
deposited to respondent Rommel Marketing Corporation's account with the bank,
4) The duplicate copies of the deposit slips were used by Ms. Irene Yabut to cover up
her fraudulent acts against respondent Rommel Marketing Corporation, and not as
records of deposits she made with the bank.
The petition has no merit.

Simply put, the main issue posited before us is: What is the proximate cause of the loss,
to the tune of P304,979.74, suffered by the private respondent RMC — petitioner bank's
negligence or that of private respondent's?
Petitioners submit that the proximate cause of the loss is the negligence of respondent
RMC and Romeo Lipana in entrusting cash to a dishonest employee in the person of
Ms. Irene Yabut. According to them, it was impossible for the bank to know that the
money deposited by Ms. Irene Yabut belong to RMC; neither was the bank forewarned
by RMC that Yabut will be depositing cash to its account. Thus, it was impossible for the
bank to know the fraudulent design of Yabut considering that her husband, Bienvenido
Cotas, also maintained an account with the bank. For the bank to inquire into the
ownership of the cash deposited by Ms. Irene Yabut would be irregular. Otherwise
stated, it was RMC's negligence in entrusting cash to a dishonest employee which
provided Ms. Irene Yabut the opportunity to defraud RMC. Private respondent, on the
other hand, maintains that the proximate cause of the loss was the negligent act of the
bank, thru its teller Ms. Azucena Mabayad, in validating the deposit slips, both original
and duplicate, presented by Ms. Yabut to Ms. Mabayad, notwithstanding the fact that
one of the deposit slips was not completely accomplished.
We sustain the private respondent.
Our law on quasi-delicts states:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is
no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
There are three elements of a quasi-delict: (a) damages suffered by the plaintiff; (b) fault
or negligence of the defendant, or some other person for whose acts he must respond;
and (c) the connection of cause and effect between the fault or negligence of the
defendant and the damages incurred by the plaintiff.
In the case at bench, there is no dispute as to the damage suffered by the private
respondent (plaintiff in the trial court) RMC in the amount of P304,979.74. It is in
ascribing fault or negligence which caused the damage where the parties point to each
other as the culprit.
Negligence is the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the
doing of something which a prudent and reasonable man would do. The seventy-eight
(78)-year-old, yet still relevant, case of Picart v. Smith, provides the test by which to
determine the existence of negligence in a particular case which may be stated as
follows: Did the defendant in doing the alleged negligent act use that reasonable care
and caution which an ordinarily prudent person would have used in the same situation?
If not, then he is guilty of negligence. The law here in effect adopts the standard
supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the
Roman law. The existence of negligence in a given case is not determined by reference
to the personal judgment of the actor in the situation before him. The law considers
what would be reckless, blameworthy, or negligent in the man of ordinary intelligence
and prudence and determines liability by that.
Applying the above test, it appears that the bank's teller, Ms. Azucena Mabayad, was
negligent in validating, officially stamping and signing all the deposit slips prepared and
presented by Ms. Yabut, despite the glaring fact that the duplicate copy was not
completely accomplished contrary to the self-imposed procedure of the bank with
respect to the proper validation of deposit slips, original or duplicate, as testified to by
Ms. Mabayad herself, thus:
Q: Now, as teller of PCIB, Pasig Branch, will you please tell us Mrs. Mabayad your
important duties and functions?
A: I accept current and savings deposits from depositors and encashments.
Q: Now in the handling of current account deposits of bank clients, could you tell us the
procedure you follow?
A: The client or depositor or the authorized representative prepares a deposit slip by
filling up the deposit slip with the name, the account number, the date, the cash
breakdown, if it is deposited for cash, and the check number, the amount and then he
signs the deposit slip.
Q: Now, how many deposit slips do you normally require in accomplishing current
account deposit, Mrs. Mabayad?
A: The bank requires only one copy of the deposit although some of our clients prepare
the deposit slip in duplicate.
Q: Now in accomplishing current account deposits from your clients, what do you issue
to the depositor to evidence the deposit made?
A: We issue or we give to the clients the depositor's stub as a receipt of the deposit.
Q: And who prepares the deposit slip?
A: The depositor or the authorized representative sir?
Q: Where does the depositor's stub comes (sic) from Mrs. Mabayad, is it with the
deposit slip?
A: The depositor's stub is connected with the deposit slip or the bank's copy. In a
deposit slip, the upper portion is the depositor's stub and the lower portion is the bank's
copy, and you can detach the bank's copy from the depositor's stub by tearing it sir.
Q: Now what do you do upon presentment of the deposit slip by the depositor or the
depositor's authorized representative?
A: We see to it that the deposit slip9 is properly accomplished and then we count the
money and then we tally it with the deposit slip sir.
Q: Now is the depositor's stub which you issued to your clients validated?
A: Yes, sir. [Emphasis ours]
Clearly, Ms. Mabayad failed to observe this very important procedure. The fact that the
duplicate slip was not compulsorily required by the bank in accepting deposits should
not relieve the petitioner bank of responsibility. The odd circumstance alone that such
duplicate copy lacked one vital information — that of the name of the account holder —
should have already put Ms. Mabayad on guard. Rather than readily validating the
incomplete duplicate copy, she should have proceeded more cautiously by being more
probing as to the true reason why the name of the account holder in the duplicate slip
was left blank while that in the original was filled up. She should not have been so naive
in accepting hook, line and sinker the too shallow excuse of Ms. Irene Yabut to the
effect that since the duplicate copy was only for her personal record, she would simply
fill up the blank space later on. A "reasonable man of ordinary prudence" would not
have given credence to such explanation and would have insisted that the space left
blank be filled up as a condition for validation. Unfortunately, this was not how bank
teller Mabayad proceeded thus resulting in huge losses to the private respondent.

Negligence here lies not only on the part of Ms. Mabayad but also on the part of the
bank itself in its lackadaisical selection and supervision of Ms. Mabayad. This was
exemplified in the testimony of Mr. Romeo Bonifacio, then Manager of the Pasig Branch
of the petitioner bank and now its Vice-President, to the effect that, while he ordered the
investigation of the incident, he never came to know that blank deposit slips were
validated in total disregard of the bank's validation procedures, viz:
Q: Did he ever tell you that one of your cashiers affixed the stamp mark of the bank on
the deposit slips and they validated the same with the machine, the fact that those
deposit slips were unfilled up, is there any report similar to that?
A: No, it was not the cashier but the teller.
Q: The teller validated the blank deposit slip?
A: No it was not reported.
Q: You did not know that any one in the bank tellers or cashiers validated the blank
deposit slip?
A: I am not aware of that.
Q: It is only now that you are aware of that?
A: Yes, sir.
Prescinding from the above, public respondent Court of Appeals aptly observed:
xxx xxx xxx
It was in fact only when he testified in this case in February, 1983, or after the lapse of
more than seven (7) years counted from the period when the funds in question were
deposited in plaintiff's accounts (May, 1975 to July, 1976) that bank manager Bonifacio
admittedly became aware of the practice of his teller Mabayad of validating blank
deposit slips. Undoubtedly, this is gross, wanton, and inexcusable negligence in the
appellant bank's supervision of its employees.
It was this negligence of Ms. Azucena Mabayad, coupled by the negligence of the
petitioner bank in the selection and supervision of its bank teller, which was the
proximate cause of the loss suffered by the private respondent, and not the latter's act
of entrusting cash to a dishonest employee, as insisted by the petitioners.
Proximate cause is determined on the facts of each case upon mixed considerations of
logic, common sense, policy and precedent. Vda. de Bataclan v. Medina, reiterated in
the case of Bank of the Phil. Islands v. Court of Appeals, defines proximate cause as
"that cause, which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not have
occurred. . . ." In this case, absent the act of Ms. Mabayad in negligently validating the
incomplete duplicate copy of the deposit slip, Ms. Irene Yabut would not have the facility
with which to perpetrate her fraudulent scheme with impunity. Apropos, once again, is
the pronouncement made by the respondent appellate court, to wit:
. . . . Even if Yabut had the fraudulent intention to misappropriate the funds entrusted to
her by plaintiff, she would not have been able to deposit those funds in her husband's
current account, and then make plaintiff believe that it was in the latter's accounts
wherein she had deposited them, had it not been for bank teller Mabayad's aforesaid
gross and reckless negligence. The latter's negligence was thus the proximate,
immediate and efficient cause that brought about the loss claimed by plaintiff in this
case, and the failure of plaintiff to discover the same soon enough by failing to scrutinize
the monthly statements of account being sent to it by appellant bank could not have
prevented the fraud and misappropriation which Irene Yabut had already completed
when she deposited plaintiff's money to the account of her husband instead of to the
latter's accounts.
Furthermore, under the doctrine of "last clear chance" (also referred to, at times as
"supervening negligence" or as "discovered peril"), petitioner bank was indeed the
culpable party. This doctrine, in essence, states that where both parties are negligent,
but the negligent act of one is appreciably later in time than that of the other, or when it
is impossible to determine whose fault or negligence should be attributed to the
incident, the one who had the last clear opportunity to avoid the impending harm and
failed to do so is chargeable with the consequences thereof. Stated differently, the rule
would also mean that an antecedent negligence of a person does not preclude the
recovery of damages for the supervening negligence of, or bar a defense against
liability sought by another, if the latter, who had the last fair chance, could have avoided
the impending harm by the exercise of due diligence. Here, assuming that private
respondent RMC was negligent in entrusting cash to a dishonest employee, thus
providing the latter with the opportunity to defraud the company, as advanced by the
petitioner, yet it cannot be denied that the petitioner bank, thru its teller, had the last
clear opportunity to avert the injury incurred by its client, simply by faithfully observing
their self-imposed validation procedure.
At this juncture, it is worth to discuss the degree of diligence ought to be exercised by
banks in dealing with their clients.
The New Civil Code provides:
Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place. When negligence shows bad
faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required.
(1104a)
In the case of banks, however, the degree of diligence required is more than that of a
good father of a family. Considering the fiduciary nature of their relationship with their
depositors, banks are duty bound to treat the accounts of their clients with the highest
degree of care.
As elucidated in Simex International (Manila), Inc. v. Court of Appeals, in every case,
the depositor expects the bank to treat his account with the utmost fidelity, whether such
account consists only of a few hundred pesos or of millions. The bank must record
every single transaction accurately, down to the last centavo, and as promptly as
possible. This has to be done if the account is to reflect at any given time the amount of
money the depositor can dispose as he sees fit, confident that the bank will deliver it as
and to whomever he directs. A blunder on the part of the bank, such as the failure to
duly credit him his deposits as soon as they are made, can cause the depositor not a
little embarrassment if not financial loss and perhaps even civil and criminal litigation.
The point is that as a business affected with public interest and because of the nature of
its functions, the bank is under obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of their relationship. In the
case before us, it is apparent that the petitioner bank was remiss in that duty and
violated that relationship.
Petitioners nevertheless aver that the failure of respondent RMC to cross-check the
bank's statements of account with its own records during the entire period of more than
one (1) year is the proximate cause of the commission of subsequent frauds and
misappropriation committed by Ms. Irene Yabut.
We do not agree.
While it is true that had private respondent checked the monthly statements of account
sent by the petitioner bank to RMC, the latter would have discovered the loss early on,
such cannot be used by the petitioners to escape liability. This omission on the part of
the private respondent does not change the fact that were it not for the wanton and
reckless negligence of the petitioners' employee in validating the incomplete duplicate
deposit slips presented by Ms. Irene Yabut, the loss would not have occurred.
Considering, however, that the fraud was committed in a span of more than one (1) year
covering various deposits, common human experience dictates that the same would not
have been possible without any form of collusion between Ms. Yabut and bank teller
Mabayad. Ms. Mabayad was negligent in the performance of her duties as bank teller
nonetheless. Thus, the petitioners are entitled to claim reimbursement from her for
whatever they shall be ordered to pay in this case.
The foregoing notwithstanding, it cannot be denied that, indeed, private respondent was
likewise negligent in not checking its monthly statements of account. Had it done so, the
company would have been alerted to the series of frauds being committed against RMC
by its secretary. The damage would definitely not have ballooned to such an amount if
only RMC, particularly Romeo Lipana, had exercised even a little vigilance in their
financial affairs. This omission by RMC amounts to contributory negligence which shall
mitigate the damages that may be awarded to the private respondent under Article
2179 of the New Civil Code, to wit:
. . . When the plaintiff's own negligence was the immediate and proximate cause of his
injury, he cannot recover damages. But if his negligence was only contributory, the
immediate and proximate cause of the injury being the defendant's lack of due care, the
plaintiff may recover damages, but the courts shall mitigate the damages to be
awarded.
In view of this, we believe that the demands of substantial justice are satisfied by
allocating the damage on a 60-40 ratio. Thus, 40% of the damage awarded by the
respondent appellate court, except the award of P25,000.00 attorney's fees, shall be
borne by private respondent RMC; only the balance of 60% needs to be paid by the
petitioners. The award of attorney's fees shall be borne exclusively by the petitioners.

WHEREFORE, the decision of the respondent Court of Appeals is modified by reducing

the amount of actual damages private respondent is entitled to by 40%. Petitioners may
recover from Ms. Azucena Mabayad the amount they would pay the private respondent.
Private respondent shall have recourse against Ms. Irene Yabut. In all other respects,
the appellate court's decision is AFFIRMED.
Proportionate costs.

SO ORDERED.
 SMITH BELL DODWELL SHIPPING AGENCY CORPORATION, petitioner, vs.
CATALINO BORJA and INTERNATIONAL TO WAGE AND TRAvNSPORT
CORPORATION, respondents
G.R. No. 143008

The owner or the person in possession and control of a vessel is liable for all natural
and proximate damages caused to persons and property by reason of negligence in its
management or navigation. The liability for the loss of the earning capacity of the
deceased is fixed by taking into account the net income of the victim at the time of death
-- of the incident in this case -- and that persons probable life expectancy.

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
challenging the March 6, 2000 Decision and the April 25, 2000 Resolution of the Court
of Appeals (CA) in CA-GR CV No. 57470. The assailed Decision disposed as follows:
WHEREFORE, premises considered, the instant appeal is hereby DENIED. The
questioned decision of the lower court is hereby AFFIRMED in toto. No pronouncement
as to costs. Reconsideration was denied in the assailed Resolution.

The facts of the case are set forth by the CA as follows:

It appears that on September 23, 1987, Smith Bell [herein petitioner] filed a written
request with the Bureau of Customs for the attendance of the latters inspection team on
vessel M/T King Family which was due to arrive at the port of Manila on September 24,
1987. Said vessel contained 750 metric tons of alkyl benzene and methyl methacrylate
monomer.
On the same day, Supervising Customs Inspector Manuel Ma. D. Nalgan instructed
[Respondent Catalino Borja] to board said vessel and perform his duties as inspector
upon the vessels arrival until its departure. At that time, [Borja] was a customs inspector
of the Bureau of Customs receiving a salary of P31,188.25 per annum.
"At about 11 oclock in the morning on September 24, 1987, while M/T King Family was
unloading chemicals unto two (2) barges [--] ITTC 101 and CLC-1002 [--] owned by
[Respondent] ITTC, a sudden explosion occurred setting the vessels afire. Upon
hearing the explosion, [Borja], who was at that time inside the cabin preparing reports,
ran outside to check what happened. Again, another explosion was heard.
Seeing the fire and fearing for his life, [Borja] hurriedly jumped over board to save
himself. However, the [water] [was] likewise on fire due mainly to the spilled chemicals.
Despite the tremendous heat, [Borja] swam his way for one (1) hour until he was
rescued by the people living in the squatters area and sent to San Juan De Dios
Hospital.
After weeks of intensive care at the hospital, his attending physician diagnosed [Borja]
to be permanently disabled due to the incident. [Borja] made demands against Smith
Bell and ITTC for the damages caused by the explosion. However, both denied liabilities
and attributed to each other negligence.

The trial court (RTC) ruled in favor of Respondent Borja and held petitioner liable for
damages and loss of income. The RTC disposed as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering [Petitioner]
Smith Bell Dodwell [S]hipping Agency Corporation to pay [Borja]:
1. The amount of P495,360.00 as actual damages for loss of earning capacity:
2. The amount of P100,000.00 for moral damages; and
3. The amount of P50,000.00 for and as reasonable attorneys fees.
The cross-claim of [Petitioner] Smith Bell Dodwell Shipping Agency Corporation against
co-defendant International Towage and Transport Corporation and the latters
counterclaim against [Borja] and cross-claim with compulsory counterclaim against
Smith Bell are hereby ordered dismissed.

Ruling of the Court of Appeals

Affirming the trial court, the CA rejected the plea of petitioner that it be exonerated from
liability for Respondent Borjas injuries. Contrary to the claim of petitioner that no
physical evidence was shown to prove that the explosion had originated from its vessel,
the CA held that the fire had originated from M/T King Family. This conclusion was
amply supported by the testimonies of Borja and Eulogio Laurente (the eyewitness of
International Towage and Transport Corporation or ITTC) as well as by the investigation
conducted by the Special Board of Marine Inquiry and affirmed by the secretary of the
Department of National Defense. On the other hand, the RTC, which the CA sustained,
had not given probative value to the evidence of petitioner, whose sole eyewitness had
not shown up for cross-examination.
Hence, this Petition.

In its Memorandum, petitioner raises the following issues:

1. Whether petitioner should be held liable for the injuries of Respondent Catalino Borja.
2. Whether Respondent ITTC should be held liable for the injuries of Respondent
Catalino Borja.
3. Assuming without admitting that Respondent Catalino Borja is entitled to damages,
whether Respondent Borja is entitled to the amount of damages awarded to him by the
trial court.
Simply put, these issues can be summed up in these two questions: (1) Who, if any, is
liable for Borjas injuries? (2) What is the proper amount of liability?

This Courts Ruling

The Petition is partly meritorious.

First Issue:
Responsibility for Injuries
Petitioner avers that both lower courts labored under a misapprehension of the facts. It
claims that the documents adduced in the RTC conclusively revealed that the explosion
that caused the fire on M/T King Family had originated from the barge ITTC-101, a
conclusion based on three grounds. First, the Survey Report (Exh. 10) dated October
21, 1987 submitted by the Admiral Surveyors and Adjusters, Inc., showed that no part of
M/T King Family sustained any sharp or violent damage that would otherwise be
observed if indeed an explosion had occurred on it. On the other hand, the fact that the
vessel sustained cracks on its shell plating was noted in two Survey Reports from
Greutzman Divers Underwater Specialist, dated October 6, 1987 (Exh. 11), and during
the underwater inspection on the sunken barge ITTC-101.
Second, external fire damage on the hull of M/T King Family indicated that the fire had
started from outside the vessel and from ITTC-101. The port side of the vessel to which
the ITTC barge was tied was completely gutted by fire, while the starboard side to which
the barge CLC-1002 was tied sustained only slight fire damage.
Third, testimonial evidence proved that the explosion came from the barge of the ITTC
and not from its vessel. Security Guard Vivencio Estrella testified that he had seen the
sudden explosion of monomer on the barge with fire that went up to about 60 meters.
Third Mate Choi Seong Hwan and Second Mate Nam Bang Choun of M/T King Family
narrated that while they were discharging the chemicals, they saw and heard an
explosion from the barge ITTC-101. Chief Security Guard Reynaldo Patron, in turn,
testified that he was 7 to 10 meters away from the barge when he heard the explosion
from the port side of M/T King Family and saw the barge already on fire.
We are not persuaded. Both the RTC and the CA ruled that the fire and the explosion
had originated from petitioners vessel. Said the trial court:
The attempts of [Petitioner] Smith Bell to shift the blame on x x x ITTC were all for
naught. First, the testimony of its alleged eyewitness was stricken off the record for his
failure to appear for cross-examination (p. 361, Record). Second, the documents
offered to prove that the fire originated from barge ITTC-101 were all denied admission
by the [c]ourt for being, in effect, hearsay (pp. 335 and 362). x x x Thus, there is nothing
in the record to support [petitioners] contention that the fire and explosion originated
from barge ITTC-101.
We find no cogent reason to overturn these factual findings. Nothing is more settled in
jurisprudence than that this Court is bound by the factual findings of the Court of
Appeals when these are supported by substantial evidence and are not under any of the
exceptions in Fuentes v. Court of Appeals; more so, when such findings affirm those of
the trial court. Verily, this Court reviews only issues of law.
Negligence is conduct that creates undue risk of harm to another. It is the failure to
observe that degree of care, precaution and vigilance that the circumstances justly
demand, whereby that other person suffers injury. Petitioners vessel was carrying
chemical cargo -- alkyl benzene and methyl methacrylate monomer. While knowing that
their vessel was carrying dangerous inflammable chemicals, its officers and crew failed
to take all the necessary precautions to prevent an accident. Petitioner was, therefore,
negligent.
The three elements of quasi delict are: (a) damages suffered by the plaintiff, (b) fault or
negligence of the defendant, and (c) the connection of cause and effect between the
fault or negligence of the defendant and the damages inflicted on the plaintiff. All these
elements were established in this case. Knowing fully well that it was carrying
dangerous chemicals, petitioner was negligent in not taking all the necessary
precautions in transporting the cargo.
As a result of the fire and the explosion during the unloading of the chemicals from
petitioners vessel, Respondent Borja suffered the following damage: and injuries: (1)
chemical burns of the face and arms; (2) inhalation of fumes from burning chemicals; (3)
exposure to the elements [while] floating in sea water for about three (3) hours; (4)
homonymous hemianopsia or blurring of the right eye [which was of] possible toxic
origin; and (5) [c]erebral infract with neo-vascularization, left occipital region with right
sided headache and the blurring of vision of right eye.
Hence, the owner or the person in possession and control of a vessel and the vessel
are liable for all natural and proximate damage caused to persons and property by
reason of negligent management or navigation.

Second Issue:
Amount of Liability
Petitioner insists that Borja is not entitled to the full amount of damages awarded by the
lower courts. It disputes the use of his gross earning as basis for the computation of the
award for loss of earning capacity. Both courts, in computing the value of such loss,
used the remaining years of the victim as a government employee and the amount he
had been receiving per annum at the time of the incident.
Counsel for Respondent Borja, on the other hand, claims that petitioner had no cause to
complain, because the miscomputation had ironically been in its favor. The multiplier
used in the computation was erroneously based on the remaining years in government
service, instead of the life expectancy, of the victim. Borjas counsel also points out that
the award was based on the formers meager salary in 1987, or about 23 years ago
when the foreign exchange was still P14 to $1. Hence, the questioned award is
consistent with the primary purpose of giving what is just, moral and legally due the
victim as the aggrieved party.
Both parties have a point. In determining the reasonableness of the damages awarded
under Article 1764 in conjunction with Article 2206 of the Civil Code, the factors to be
considered are: (1) life expectancy (considering the health of the victim and the mortality
table which is deemed conclusive) and loss of earning capacity; (b) pecuniary loss, loss
of support and service; and (c) moral and mental sufferings. The loss of earning
capacity is based mainly on the number of years remaining in the persons expected life
span. In turn, this number is the basis of the damages that shall be computed and the
rate at which the loss sustained by the heirs shall be fixed.
The formula for the computation of loss of earning capacity is as follows:
Net earning capacity = Life expectancy x [Gross Annual Income – Living
Expenses (50% of gross annual income)], where life expectancy = 2/3 (80 - the age
of the deceased).
Petitioner is correct in arguing that it is net income (or gross income less living
expenses) which is to be used in the computation of the award for loss of income. Villa
Rey Transit v. Court of Appeals explained that the amount recoverable is not the loss of
the entire earning, but rather the loss of that portion of the earnings which the
beneficiary would have received. Hence, in fixing the amount of the said damages, the
necessary expenses of the deceased should be deducted from his earnings.
In other words, only net earnings, not gross earnings, are to be considered; that is, the
total of the earnings less expenses necessary in the creation of such earnings or
income, less living and other incidental expenses. When there is no showing that the
living expenses constituted a smaller percentage of the gross income, we fix the living
expenses at half of the gross income. To hold that one would have used only a small
part of the income, with the larger part going to the support of ones children, would be
conjectural and unreasonable.
Counsel for Respondent Borja is also correct in saying that life expectancy should not
be based on the retirement age of government employees, which is pegged at 65. In
Negros Navigation Co, Inc. v. CA, the Court resolved that in calculating the life
expectancy of an individual for the purpose of determining loss of earning capacity
under Article 2206(1) of the Civil Code, it is assumed that the deceased would have
earned income even after retirement from a particular job.
Respondent Borja should not be situated differently just because he was a government
employee. Private employees, given the retirement packages provided by their
companies, usually retire earlier than government employees; yet, the life expectancy of
the former is not pegged at 65 years.
Petitioner avers that Respondent Borja died nine years after the incident and, hence, his
life expectancy of 80 years should yield to the reality that he was only 59 when he
actually died.
We disagree. The Court uses the American Experience/Expectancy Table of Mortality
or the Actuarial or Combined Experience Table of Mortality, which consistently pegs the
life span of the average Filipino at 80 years, from which it extrapolates the estimated
income to be earned by the deceased had he or she not been killed.
Respondent Borjas demise earlier than the estimated life span is of no moment. For
purposes of determining loss of earning capacity, life expectancy remains at 80.
Otherwise, the computation of loss of earning capacity will never become final, being
always subject to the eventuality of the victims death. The computation should not
change even if Borja lived beyond 80 years. Fair is fair.
Based on the foregoing discussion, the award for loss of earning capacity should be
computed as follows:
Loss of earning = [2 (80-50)] x [(P2,752x12)-16,512]
capacity 3
= P330,240
Having been duly proven, the moral damages and attorneys fees awarded are justified
under the Civil Codes Article 2219, paragraph 2; and Article 2208, paragraph 11,
respectively.
WHEREFORE, the Petition is PARTLY GRANTED. The assailed Decision is
AFFIRMED with the following MODIFICATIONS: petitioner is ordered to pay the heirs of
the victim damages in the amount of P320,240 as loss of earning capacity, moral
damages in the amount of P100,000, plus another P50,000 as attorneys fees. Costs
against petitioner. SO ORDERED.
 AMADO PICART, plaintiff-appellant, vs. FRANK SMITH, JR., defendant-appellee.
G.R. No. L-12219
In this action the plaintiff, Amado Picart, seeks to recover of the defendant, Frank Smith,
jr., the sum of P31,000, as damages alleged to have been caused by an automobile
driven by the defendant. From a judgment of the Court of First Instance of the Province
of La Union absolving the defendant from liability the plaintiff has appealed.

The occurrence which gave rise to the institution of this action took place on December
12, 1912, on the Carlatan Bridge, at San Fernando, La Union. It appears that upon the
occasion in question the plaintiff was riding on his pony over said bridge. Before he had
gotten half way across, the defendant approached from the opposite direction in an
automobile, going at the rate of about ten or twelve miles per hour. As the defendant
neared the bridge he saw a horseman on it and blew his horn to give warning of his
approach. He continued his course and after he had taken the bridge he gave two more
successive blasts, as it appeared to him that the man on horseback before him was not
observing the rule of the road.

The plaintiff, it appears, saw the automobile coming and heard the warning signals.
However, being perturbed by the novelty of the apparition or the rapidity of the
approach, he pulled the pony closely up against the railing on the right side of the bridge
instead of going to the left. He says that the reason he did this was that he thought he
did not have sufficient time to get over to the other side. The bridge is shown to have a
length of about 75 meters and a width of 4.80 meters. As the automobile approached,
the defendant guided it toward his left, that being the proper side of the road for the
machine. In so doing the defendant assumed that the horseman would move to the
other side. The pony had not as yet exhibited fright, and the rider had made no sign for
the automobile to stop. Seeing that the pony was apparently quiet, the defendant,
instead of veering to the right while yet some distance away or slowing down, continued
to approach directly toward the horse without diminution of speed. When he had gotten
quite near, there being then no possibility of the horse getting across to the other side,
the defendant quickly turned his car sufficiently to the right to escape hitting the horse
alongside of the railing where it as then standing; but in so doing the automobile passed
in such close proximity to the animal that it became frightened and turned its body
across the bridge with its head toward the railing. In so doing, it as struck on the hock of
the left hind leg by the flange of the car and the limb was broken. The horse fell and its
rider was thrown off with some violence. From the evidence adduced in the case we
believe that when the accident occurred the free space where the pony stood between
the automobile and the railing of the bridge was probably less than one and one half
meters. As a result of its injuries the horse died. The plaintiff received contusions which
caused temporary unconsciousness and required medical attention for several days.

The question presented for decision is whether or not the defendant in maneuvering his
car in the manner above described was guilty of negligence such as gives rise to a civil
obligation to repair the damage done; and we are of the opinion that he is so liable. As
the defendant started across the bridge, he had the right to assume that the horse and
the rider would pass over to the proper side; but as he moved toward the center of the
bridge it was demonstrated to his eyes that this would not be done; and he must in a
moment have perceived that it was too late for the horse to cross with safety in front of
the moving vehicle. In the nature of things this change of situation occurred while the
automobile was yet some distance away; and from this moment it was not longer within
the power of the plaintiff to escape being run down by going to a place of greater safety.
The control of the situation had then passed entirely to the defendant; and it was his
duty either to bring his car to an immediate stop or, seeing that there were no other
persons on the bridge, to take the other side and pass sufficiently far away from the
horse to avoid the danger of collision. Instead of doing this, the defendant ran straight
on until he was almost upon the horse. He was, we think, deceived into doing this by the
fact that the horse had not yet exhibited fright. But in view of the known nature of
horses, there was an appreciable risk that, if the animal in question was unacquainted
with automobiles, he might get exited and jump under the conditions which here
confronted him. When the defendant exposed the horse and rider to this danger he was,
in our opinion, negligent in the eye of the law.
The test by which to determine the existence of negligence in a particular case may be
stated as follows: Did the defendant in doing the alleged negligent act use that person
would have used in the same situation? If not, then he is guilty of negligence. The law
here in effect adopts the standard supposed to be supplied by the imaginary conduct of
the discreet paterfamilias of the Roman law. The existence of negligence in a given
case is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and prudence and determines liability by
that.
The question as to what would constitute the conduct of a prudent man in a given
situation must of course be always determined in the light of human experience and in
view of the facts involved in the particular case. Abstract speculations cannot here be of
much value but this much can be profitably said: Reasonable men govern their conduct
by the circumstances which are before them or known to them. They are not, and are
not supposed to be, omniscient of the future. Hence they can be expected to take care
only when there is something before them to suggest or warn of danger. Could a
prudent man, in the case under consideration, foresee harm as a result of the course
actually pursued? If so, it was the duty of the actor to take precautions to guard against
that harm. Reasonable foresight of harm, followed by ignoring of the suggestion born of
this prevision, is always necessary before negligence can be held to exist. Stated in
these terms, the proper criterion for determining the existence of negligence in a given
case is this: Conduct is said to be negligent when a prudent man in the position of the
tortfeasor would have foreseen that an effect harmful to another was sufficiently
probable to warrant his foregoing conduct or guarding against its consequences.

Applying this test to the conduct of the defendant in the present case we think that
negligence is clearly established. A prudent man, placed in the position of the
defendant, would in our opinion, have recognized that the course which he was
pursuing was fraught with risk, and would therefore have foreseen harm to the horse
and the rider as reasonable consequence of that course. Under these circumstances
the law imposed on the defendant the duty to guard against the threatened harm.

It goes without saying that the plaintiff himself was not free from fault, for he was guilty
of antecedent negligence in planting himself on the wrong side of the road. But as we
have already stated, the defendant was also negligent; and in such case the problem
always is to discover which agent is immediately and directly responsible. It will be
noted that the negligent acts of the two parties were not contemporaneous, since the
negligence of the defendant succeeded the negligence of the plaintiff by an appreciable
interval. Under these circumstances the law is that the person who has the last fair
chance to avoid the impending harm and fails to do so is chargeable with the
consequences, without reference to the prior negligence of the other party.

The decision in the case of Rkes vs. Atlantic, Gulf and Pacific Co. (7 Phil. Rep., 359)
should perhaps be mentioned in this connection. This Court there held that while
contributory negligence on the part of the person injured did not constitute a bar to
recovery, it could be received in evidence to reduce the damages which would
otherwise have been assessed wholly against the other party. The defendant company
had there employed the plaintiff, as a laborer, to assist in transporting iron rails from a
barge in Manila harbor to the company's yards located not far away. The rails were
conveyed upon cars which were hauled along a narrow track. At certain spot near the
water's edge the track gave way by reason of the combined effect of the weight of the
car and the insecurity of the road bed. The car was in consequence upset; the rails slid
off; and the plaintiff's leg was caught and broken. It appeared in evidence that the
accident was due to the effects of the typhoon which had dislodged one of the supports
of the track. The court found that the defendant company was negligent in having failed
to repair the bed of the track and also that the plaintiff was, at the moment of the
accident, guilty of contributory negligence in walking at the side of the car instead of
being in front or behind. It was held that while the defendant was liable to the plaintiff by
reason of its negligence in having failed to keep the track in proper repair nevertheless
the amount of the damages should be reduced on account of the contributory
negligence in the plaintiff. As will be seen the defendant's negligence in that case
consisted in an omission only. The liability of the company arose from its responsibility
for the dangerous condition of its track. In a case like the one now before us, where the
defendant was actually present and operating the automobile which caused the
damage, we do not feel constrained to attempt to weigh the negligence of the respective
parties in order to apportion the damage according to the degree of their relative fault. It
is enough to say that the negligence of the defendant was in this case the immediate
and determining cause of the accident and that the antecedent negligence of the
plaintiff was a more remote factor in the case.

A point of minor importance in the case is indicated in the special defense pleaded in
the defendant's answer, to the effect that the subject matter of the action had been
previously adjudicated in the court of a justice of the peace. In this connection it appears
that soon after the accident in question occurred, the plaintiff caused criminal
proceedings to be instituted before a justice of the peace charging the defendant with
the infliction of serious injuries (lesiones graves). At the preliminary investigation the
defendant was discharged by the magistrate and the proceedings were dismissed.
Conceding that the acquittal of the defendant at the trial upon the merits in a criminal
prosecution for the offense mentioned would be res adjudicata upon the question of his
civil liability arising from negligence -- a point upon which it is unnecessary to express
an opinion -- the action of the justice of the peace in dismissing the criminal proceeding
upon the preliminary hearing can have no effect.
From what has been said it results that the judgment of the lower court must be
reversed, and judgment is her rendered that the plaintiff recover of the defendant the
sum of two hundred pesos (P200), with costs of other instances. The sum here awarded
is estimated to include the value of the horse, medical expenses of the plaintiff, the loss
or damage occasioned to articles of his apparel, and lawful interest on the whole to the
date of this recovery. The other damages claimed by the plaintiff are remote or
otherwise of such character as not to be recoverable. So ordered.
 EQUITABLE BANKING CORPORATION, Petitioner, - versus - SPECIAL STEEL
PRODUCTS, INC. and AUGUSTO L. PARDO, Respondents.
G.R. No. 175350
A crossed check with the notation account payee only can only be deposited in the
named payees account. It is gross negligence for a bank to ignore this rule solely on the
basis of a third partys oral representations of having a good title thereto.

Before the Court is a Petition for Review on Certiorari of the October 13, 2006 Decision
of the Court of Appeals (CA) in CA-G.R. CV No. 62425. The dispositive portion of the
assailed Decision reads:
WHEREFORE, premises considered, the May 4, 1998 Decision of the Regional Trial
Court of Pasig City, Branch 168, in Civil Case No. 63561, is hereby AFFIRMED. SO
ORDERED.
Respondent Special Steel Products, Inc. (SSPI) is a private domestic corporation selling
steel products. Its co-respondent Augusto L. Pardo (Pardo) is SSPIs President and
majority stockholder.
International Copra Export Corporation (Interco) is its regular customer.
Jose Isidoro Uy, alias Jolly Uy (Uy), is an Interco employee, in charge of the purchasing
department, and the son-in-law of its majority stockholder.
Petitioner Equitable Banking Corporation (Equitable or bank) is a private domestic
corporation engaged in banking and is the depository bank of Interco and of Uy.

In 1991, SSPI sold welding electrodes to Interco, as evidenced by the following sales
invoices:
Sales Invoice No. 65042 dated February 14, 1991 for P325,976.34
Sales Invoice No. 65842 dated April 11, 1991 for P345,412.80
Sales Invoice No. 65843 dated April 11, 1991 for P313,845.84

The due dates for these invoices were March 16, 1991 (for the first sales invoice) and
May 11, 1991 (for the others). The invoices provided that Interco would pay interest at
the rate of 36% per annum in case of delay.

In payment for the above welding electrodes, Interco issued three checks payable to the
order of SSPI on July 10, 1991, July 16, 1991, and July 29, 1991. Each check was
crossed with the notation account payee only and was drawn against Equitable. The
records do not identify the signatory for these three checks, or explain how Uy, Intercos
purchasing officer, came into possession of these checks.
The records only disclose that Uy presented each crossed check to Equitable on the
day of its issuance and claimed that he had good title thereto. He demanded the deposit
of the checks in his personal accounts in Equitable, Account No. 18841-2 and Account
No. 03474-0.

Equitable acceded to Uys demands on the assumption that Uy, as the son-in-law of
Intercos majority stockholder, was acting pursuant to Intercos orders. The bank also
relied on Uys status as a valued client. Thus, Equitable accepted the checks for deposit
in Uys personal accounts and stamped ALL PRIOR ENDORSEMENT AND/OR LACK
OF ENDORSEMENT GUARANTEED on their dorsal portion. Uy promptly withdrew the
proceeds of the checks.

In October 1991, SSPI reminded Interco of the unpaid welding electrodes, amounting to
P985,234.98. It reiterated its demand on January 14, 1992. SSPI explained its
immediate need for payment as it was experiencing some financial crisis of its own.
Interco replied that it had already issued three checks payable to SSPI and drawn
against Equitable. SSPI denied receipt of these checks.
On August 6, 1992, SSPI requested information from Equitable regarding the three
checks. The bank refused to give any information invoking the confidentiality of
deposits.

The records do not disclose the circumstances surrounding Intercos and SSPIs
eventual discovery of Uys scheme. Nevertheless, it was determined that Uy, not SSPI,
received the proceeds of the three checks that were payable to SSPI. Thus, on June 30,
1993 (twenty-three months after the issuance of the three checks), Interco finally paid
the value of the three checks to SSPI, plus a portion of the accrued interests. Interco
refused to pay the entire accrued interest of P767,345.64 on the ground that it was not
responsible for the delay. Thus, SSPI was unable to collect P437,040.35 (at the
contracted rate of 36% per annum) in interest income.

SSPI and its president, Pardo, filed a complaint for damages with application for a writ
of preliminary attachment against Uy and Equitable Bank. The complaint alleged that
the three crossed checks, all payable to the order of SSPI and with the notation account
payee only, could be deposited and encashed by SSPI only. However, due to Uys
fraudulent representations, and Equitables indispensable connivance or gross
negligence, the restrictive nature of the checks was ignored and the checks were
deposited in Uys account. Had the defendants not diverted the three checks in July
1991, the plaintiffs could have used them in their business and earned money from
them. Thus, the plaintiffs prayed for an award of actual damages consisting of the
unrealized interest income from the proceeds of the checks for the two-year period that
the defendants withheld the proceeds from them (from July 1991 up to June 1993.

In his personal capacity, Pardo claimed an award of P3 million as moral damages from
the defendants. He allegedly suffered hypertension, anxiety, and sleepless nights for
fear that the government would charge him for tax evasion or money laundering. He
maintained that defendants actions amounted to money laundering and that it unfairly
implicated his company in the scheme. As for his fear of tax evasion, Pardo explained
that the Bureau of Internal Revenue might notice a discrepancy between the financial
reports of Interco (which might have reported the checks as SSPIs income in 1991) and
those of SSPI (which reported the income only in 1993). Since Uy and Equitable were
responsible for Pardos worries, they should compensate him jointly and severally
therefor.

SSPI and Pardo also prayed for exemplary damages and attorneys fees.

In support of their application for preliminary attachment, the plaintiffs alleged that the
defendants are guilty of fraud in incurring the obligation upon which the action was
brought and that there is no sufficient security for the claim sought to be enforced in this
action.

The trial court granted plaintiffs application. It issued the writ of preliminary attachment
on September 20, 1993, upon the filing of plaintiffs bond for P500,000.00. The sheriff
served and implemented the writ against the personal properties of both defendants.

Upon Equitables motion and filing of a counter-bond, however, the trial court eventually
discharged the attachment against it.

Equitable then argued for the dismissal of the complaint for lack of cause of action. It
maintained that interest income is due only when it is expressly stipulated in writing.
Since Equitable and SSPI did not enter into any contract, Equitable is not liable for
damages, in the form of unobtained interest income, to SSPI. Moreover, SSPIs
acceptance of Intercos payment on the sales invoices is a waiver or extinction of SSPIs
cause of action based on the three checks.
Equitable further argued that it is not liable to SSPI because it accepted the three
crossed checks in good faith. Equitable averred that, due to Uys close relations with the
drawer of the checks, the bank had basis to assume that the drawer authorized Uy to
countermand the original order stated in the check (that it can only be deposited in the
named payees account). Since only Uy is responsible for the fraudulent conversion of
the checks, he should reimburse Equitable for any amounts that it may be made liable
to plaintiffs.

The bank counter-claimed that SSPI is liable to it in damages for the wrongful and
malicious attachment of Equitables personal properties. The bank maintained that SSPI
knew that the allegation of fraud against the bank is a falsehood. Further, the bank is
financially capable to meet the plaintiffs claim should the latter receive a favorable
judgment. SSPI was aware that the preliminary attachment against the bank was
unnecessary, and intended only to humiliate or destroy the banks reputation.

Meanwhile, Uy answered that the checks were negotiated to him; that he is a holder for
value of the checks and that he has a good title thereto. He did not, however, explain
how he obtained the checks, from whom he obtained his title, and the value for which
he received them. During trial, Uy did not present any evidence but adopted Equitables
evidence as his own.

Ruling of the Regional Trial Court

The RTC clarified that SSPIs cause of action against Uy and Equitable is for
quasi-delict. SSPI is not seeking to enforce payment on the undelivered checks from the
defendants, but to recover the damage that it sustained from the wrongful non-delivery
of the checks.

The crossed checks belonged solely to the payee named therein, SSPI. Since
SSPI did not authorize anyone to receive payment in its behalf, Uy clearly had no title to
the checks and Equitable had no right to accept the said checks from Uy. Equitable was
negligent in permitting Uy to deposit the checks in his account without verifying Uys
right to endorse the crossed checks. The court reiterated that banks have the duty to
scrutinize the checks deposited with it, for a determination of their genuineness and
regularity. The law holds banks to a high standard because banks hold themselves out
to the public as experts in the field. Thus, the trial court found Equitables explanation
regarding Uys close relations with the drawer unacceptable.

Uys conversion of the checks and Equitables negligence make them liable to
compensate SSPI for the actual damage it sustained. This damage consists of the
income that SSPI failed to realize during the delay. The trial court then equated this
unrealized income with the interest income that SSPI failed to collect from Interco. Thus,
it ordered Uy and Equitable to pay, jointly and severally, the amount of P437,040.35 to
SSPI as actual damages.

It also ordered the defendants to pay exemplary damages of P500,000.00,

attorneys fees amounting to P200,000.00, as well as costs of suit.
The trial court likewise found merit in Pardos claim for moral damages. It found
that Pardo suffered anxiety, sleepless nights, and hypertension in fear that he would
face criminal prosecution. The trial court awarded Pardo the amount of P3 million in
moral damages.

The dispositive portion of the trial courts Decision reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs Special Steel
Products, Inc., and Augusto L. Pardo and against defendants Equitable Banking
Corporation [and] Jose Isidoro Uy, alias Jolly Uy, ordering defendants to jointly and
severally pay plaintiffs the following:
1. P437,040.35 as actual damages;
2. P3,000,000.00 as moral damages to Augusto L. Pardo;
3. P500,000.00 as exemplary damages;
4. P200,000.00 as attorneys fees; and
5. Costs of suit.
Defendant EBCs counterclaim is hereby DISMISSED for lack of factual and legal basis.

Likewise, the crossclaim filed by defendant EBC against defendant Jose Isidoro Uy and
the crossclaim filed by defendant Jose Isidoro Uy against defendant EBC are hereby
DISMISSED for lack of factual and legal basis. SO ORDERED.
Pasig City, May 4, 1998
The trial court denied Equitables motion for reconsideration in its Order dated
November 19, 1998.
Only Equitable appealed to the CA, reiterating its defenses below.

Appealed Ruling of the Court of Appeals

The appellate court found no merit in Equitables appeal.
It affirmed the trial courts ruling that SSPI had a cause of action for quasi-delict
against Equitable. The CA noted that the three checks presented by Uy to Equitable
were crossed checks, and strictly made payable to SSPI only. This means that the
checks could only be deposited in the account of the named payee. Thus, the CA found
that Equitable had the responsibility of ensuring that the crossed checks are deposited
in SSPIs account only. Equitable violated this duty when it allowed the deposit of the
crossed checks in Uys account.

The CA found factual and legal basis to affirm the trial courts award of moral
damages in favor of Pardo.

It likewise affirmed the award of exemplary damages and attorneys fees in favor
of SSPI.

Issues:
1. Whether SSPI has a cause of action against Equitable for quasi-delict;
2. Whether SSPI can recover, as actual damages, the stipulated 36% per annum
interest from Equitable;
3. Whether speculative fears and imagined scenarios, which cause sleepless
nights, may be the basis for the award of moral damages; and
4. Whether the attachment of Equitables personal properties was wrongful.

Our Ruling
SSPIs cause of action
This case involves a complaint for damages based on quasi-delict. SSPI asserts
that it did not receive prompt payment from Interco in July 1991 because of Uys wilful
and illegal conversion of the checks payable to SSPI, and of Equitables gross
negligence, which facilitated Uys actions. The combined actions of the defendants
deprived SSPI of interest income on the said moneys from July 1991 until June 1993.
Thus, SSPI claims damages in the form of interest income for the said period from the
parties who wilfully or negligently withheld its money from it.

Equitable argues that SSPI cannot assert a right against the bank based on the
undelivered checks. It cites provisions from the Negotiable Instruments Law and the
case of Development Bank of Rizal v. Sima Wei to argue that a payee, who did not
receive the check, cannot require the drawee bank to pay it the sum stated on the
checks.

Equitables argument is misplaced and beside the point. SSPIs cause of action is
not based on the three checks. SSPI does not ask Equitable or Uy to deliver to it the
proceeds of the checks as the rightful payee. SSPI does not assert a right based on the
undelivered checks or for breach of contract. Instead, it asserts a cause of action based
on quasi-delict. A quasi-delict is an act or omission, there being fault or negligence,
which causes damage to another. Quasi-delicts exist even without a contractual relation
between the parties. The courts below correctly ruled that SSPI has a cause of action
for quasi-delict against Equitable.

The checks that Interco issued in favor of SSPI were all crossed, made payable
to SSPIs order, and contained the notation account payee only. This creates a
reasonable expectation that the payee alone would receive the proceeds of the checks
and that diversion of the checks would be averted. This expectation arises from the
accepted banking practice that crossed checks are intended for deposit in the named
payees account only and no other. At the very least, the nature of crossed checks
should place a bank on notice that it should exercise more caution or expend more than
a cursory inquiry, to ascertain whether the payee on the check has authorized the
holder to deposit the same in a different account. It is well to remember that [t]he
banking system has become an indispensable institution in the modern world and plays
a vital role in the economic life of every civilized society. Whether as mere passive
entities for the safe-keeping and saving of money or as active instruments of business
and commerce, banks have attained an [sic] ubiquitous presence among the people,
who have come to regard them with respect and even gratitude and, above all, trust and
confidence. In this connection, it is important that banks should guard against injury
attributable to negligence or bad faith on its part. As repeatedly emphasized, since the
banking business is impressed with public interest, the trust and confidence of the
public in it is of paramount importance. Consequently, the highest degree of diligence is
expected, and high standards of integrity and performance are required of it.

Equitable did not observe the required degree of diligence expected of a banking
institution under the existing factual circumstances.

The fact that a person, other than the named payee of the crossed check, was
presenting it for deposit should have put the bank on guard. It should have verified if the
payee (SSPI) authorized the holder (Uy) to present the same in its behalf, or indorsed it
to him. Considering however, that the named payee does not have an account with
Equitable (hence, the latter has no specimen signature of SSPI by which to judge the
genuineness of its indorsement to Uy), the bank knowingly assumed the risk of relying
solely on Uys word that he had a good title to the three checks. Such misplaced reliance
on empty words is tantamount to gross negligence, which is the absence of or failure to
exercise even slight care or diligence, or the entire absence of care, evincing a
thoughtless disregard of consequences without exerting any effort to avoid them.
 Equitable contends that its knowledge that Uy is the son-in-law of the majority
stockholder of the drawer, Interco, made it safe to assume that the drawer authorized
Uy to countermand the order appearing on the check. In other words, Equitable
theorizes that Interco reconsidered its original order and decided to give the proceeds of
the checks to Uy. That the bank arrived at this conclusion without anything on the face
of the checks to support it is demonstrative of its lack of caution. It is troubling that
Equitable proceeded with the transaction based only on its knowledge that Uy had close
relations with Interco. The bank did not even make inquiries with the drawer, Interco
(whom the bank considered a valued client), to verify Uys representation. The banking
system is placed in peril when bankers act out of blind faith and empty promises,
without requiring proof of the assertions and without making the appropriate inquiries.
Had it only exercised due diligence, Equitable could have saved both Interco and the
named payee, SSPI, from the trouble that the banks mislaid trust wrought for them.

Equitables pretension that there is nothing under the circumstances that

rendered Uys title to the checks questionable is outrageous. These are crossed checks,
whose manner of discharge, in banking practice, is restrictive and specific. Uys name
does not appear anywhere on the crossed checks. Equitable, not knowing the named
payee on the check, had no way of verifying for itself the alleged genuineness of the
indorsement to Uy. The checks bear nothing on their face that supports the belief that
the drawer gave the checks to Uy. Uys relationship to Intercos majority stockholder will
not justify disregarding what is clearly ordered on the checks.

Actual damages
For its role in the conversion of the checks, which deprived SSPI of the use thereof,
Equitable is solidarily liable with Uy to compensate SSPI for the damages it suffered.

Among the compensable damages are actual damages, which encompass the
value of the loss sustained by the plaintiff, and the profits that the plaintiff failed to
obtain. Interest payments, which SSPI claims, fall under the second category of actual
damages.

SSPI computed its claim for interest payments based on the interest rate
stipulated in its contract with Interco. It explained that the stipulated interest rate is the
actual interest income it had failed to obtain from Interco due to the defendants tortious
conduct.
The Court finds the application of the stipulated interest rate erroneous.
 SSPI did not recover interest payments at the stipulated rate from Interco
because it agreed that the delay was not Intercos fault, but that of the defendants. If that
is the case, then Interco is not in delay (at least not after issuance of the checks) and
the stipulated interest payments in their contract did not become operational. If Interco
is not liable to pay for the 36% per annum interest rate, then SSPI did not lose that
income. SSPI cannot lose something that it was not entitled to in the first place. Thus,
SSPIs claim that it was entitled to interest income at the rate stipulated in its contract
with Interco, as a measure of its actual damage, is fallacious.

More importantly, the provisions of a contract generally take effect only among
the parties, their assigns and heirs. SSPI cannot invoke the contractual stipulation on
interest payments against Equitable because it is neither a party to the contract, nor an
assignee or an heir to the contracting parties.

Nevertheless, it is clear that defendants actions deprived SSPI of the present use
of its money for a period of two years. SSPI is therefore entitled to obtain from the
tortfeasors the profits that it failed to obtain from July 1991 to June 1993. SSPI should
recover interest at the legal rate of 6% per annum, this being an award for damages
based on quasi-delict and not for a loan or forbearance of money.

Moral damages
Both the trial and appellate courts awarded Pardo P3 million in moral damages.
Pardo claimed that he was frightened, anguished, and seriously anxious that the
government would prosecute him for money laundering and tax evasion because of
defendants actions. In other words, he was worried about the repercussions that
defendants actions would have on him.

Equitable argues that Pardos fears are all imagined and should not be
compensated. The bank points out that none of Pardos fears panned out.
Moral damages are recoverable only when they are the proximate result of the
defendants wrongful act or omission. Both the trial and appellate courts found that
Pardo indeed suffered as a result of the diversion of the three checks. It does not matter
that the things he was worried and anxious about did not eventually materialize. It is
rare for a person, who is beset with mounting problems, to sift through his emotions and
distinguish which fears or anxieties he should or should not bother with. So long as the
injured partys moral sufferings are the result of the defendants actions, he may recover
moral damages.
 The Court, however, finds the award of P3 million excessive. Moral damages are
given not to punish the defendant but only to give the plaintiff the means to assuage his
sufferings with diversions and recreation. We find that the award of P50,000.00 as
moral damages is reasonable under the circumstances.

Equitable to recover amounts from Uy

Equitable then insists on the allowance of their cross-claim against Uy. The bank
argues that it was Uy who was enriched by the entire scheme and should reimburse
Equitable for whatever amounts the Court might order it to pay in damages to SSPI.

Equitable is correct. There is unjust enrichment when (1) a person is unjustly

benefited, and (2) such benefit is derived at the expense of or with damages to another.
In the instant case, the fraudulent scheme concocted by Uy allowed him to improperly
receive the proceeds of the three crossed checks and enjoy the profits from these
proceeds during the entire time that it was withheld from SSPI. Equitable, through its
gross negligence and mislaid trust on Uy, became an unwitting instrument in Uys
scheme. Equitables fault renders it solidarily liable with Uy, insofar as respondents are
concerned. Nevertheless, as between Equitable and Uy, Equitable should be allowed to
recover from Uy whatever amounts Equitable may be made to pay under the judgment.
It is clear that Equitable did not profit in Uys scheme. Disallowing Equitables cross-claim
against Uy is tantamount to allowing Uy to unjustly enrich himself at the expense of
Equitable. For this reason, the Court allows Equitables cross-claim against Uy.

Preliminary attachment
Equitable next assails as error the trial courts dismissal of its counter-claim for
wrongful preliminary attachment. It maintains that, contrary to SSPIs allegation in its
application for the writ, there is no showing whatsoever that Equitable was guilty of
fraud in allowing Uy to deposit the checks. Thus, the trial court should not have issued
the writ of preliminary attachment in favor of SSPI. The wrongful attachment compelled
Equitable to incur expenses for a counter-bond, amounting to P30,204.26, and caused it
to sustain damage, amounting to P5 million, to its goodwill and business credit.

SSPI submitted the following affidavit in support of its application for a writ of
preliminary attachment:

I, Augusto L. Pardo, of legal age, under oath hereby depose and declare:
1. I am one of the plaintiffs in the above-entitled case; the other plaintiff is our family
corporation, Special Steel Products, Inc., of which I am the president and majority
stockholder; I caused the preparation of the foregoing Complaint, the allegations of
which I have read, and which I hereby affirm to be true and correct out of my own
personal knowledge;
2. The corporation and I have a sufficient cause of action against defendants Isidoro Uy
alias Jolly Uy and Equitable Banking Corporation, who are guilty of fraud in incurring the
obligation upon which this action is brought, as particularly alleged in the Complaint,
which allegations I hereby adopt and reproduce herein;
3.There is no sufficient security for our claim in this action and that the amount due us is
as much as the sum for which the order is granted above all legal counterclaims;
4. We are ready and able to put up a bond executed to the defendants in an amount to
be fixed by the Court[,] conditioned on the payment of all costs[,] which may be
adjudged to defendants[,] and all damages[,] which they may sustain by reason of the
attachment of the court, should [the court] finally adjudge that we are not entitled
thereto.

The complaint (to which the supporting affidavit refers) cites the following factual
circumstances to justify SSPIs application:
6. x x x Yet, notwithstanding the fact that SPECIAL STEEL did not open an account
with EQUITABLE BANK as already alleged, thru its connivance with defendant UY in
his fraudulent scheme to defraud SPECIAL STEEL, or at least thru its gross negligence
EQUITABLE BANK consented to or allowed the opening of Account No. 18841-2 at its
head office and Account No. 03474-0 at its Ermita Branch in the name of SPECIAL
STEEL without the latters knowledge, let alone authority or consent, but obviously on
the bases of spurious or falsified documents submitted by UY or under his authority,
which documents EQUITABLE BANK did not bother to verify or check their authenticity
with SPECIAL STEEL.
xxxx
9. On August 6, 1992, plaintiffs, thru counsel, wrote EQUITABLE BANK about the
fraudulent transactions involving the aforesaid checks, which could not have been
perpetrated without its indispensable participation and cooperation, or gross negligence,
and therein solicited its cooperation in securing information as to the anomalous and
irregular opening of the false accounts maintained in SPECIAL STEELs name, but
EQUITABLE BANK malevolently shirking from its responsibility to prevent the further
perpetration of fraud, conveniently, albeit unjustifiably, invoked the confidentiality of the
deposits and refused to give any information, and accordingly denied SPECIAL STEELs
valid request, thereby knowingly shielding the identity of the ma[le]factors involved [in]
the unlawful and fraudulent transactions.
The above affidavit and the allegations of the complaint are bereft of specific and
definite allegations of fraud against Equitable that would justify the attachment of its
properties. In fact, SSPI admits its uncertainty whether Equitables participation in the
transactions involved fraud or was a result of its negligence. Despite such uncertainty
with respect to Equitables participation, SSPI applied for and obtained a preliminary
attachment of Equitables properties on the ground of fraud. We believe that such
preliminary attachment was wrongful. [A] writ of preliminary attachment is too harsh a
provisional remedy to be issued based on mere abstractions of fraud. Rather, the rules
require that for the writ to issue, there must be a recitation of clear and concrete factual
circumstances manifesting that the debtor practiced fraud upon the creditor at the time
of the execution of their agreement in that said debtor had a preconceived plan or
intention not to pay the creditor. No proof was adduced tending to show that Equitable
had a preconceived plan not to pay SSPI or had knowingly participated in Uys scheme.

That the plaintiffs eventually obtained a judgment in their favor does not detract from the
wrongfulness of the preliminary attachment. While the evidence warrants [a] judgment
in favor of [the] applicant, the proofs may nevertheless also establish that said
applicants proffered ground for attachment was inexistent or specious, and hence, the
writ should not have issued at all x x x.

For such wrongful preliminary attachment, plaintiffs may be held liable for damages.
However, Equitable is entitled only to such damages as its evidence would allow, for the
wrongfulness of an attachment does not automatically warrant the award of damages.
The debtor still has the burden of proving the nature and extent of the injury that it
suffered by reason of the wrongful attachment.

The Court has gone over the records and found that Equitable has duly proved
its claim for, and is entitled to recover, actual damages. In order to lift the wrongful
attachment of Equitables properties, the bank was compelled to pay the total amount of
P30,204.26 in premiums for a counter-bond. However, Equitable failed to prove that it
sustained damage to its goodwill and business credit in consequence of the alleged
wrongful attachment. There was no proof of Equitables contention that respondents
actions caused it public embarrassment and a bank run.

WHEREFORE, premises considered, the Petition is PARTIALLY GRANTED. The

assailed October 13, 2006 Decision of the Court of Appeals in CA-G.R. CV No. 62425 is
MODIFIED by:
1. REDUCING the award of actual damages to respondents to the rate of 6% per annum
of the value of the three checks from July 1991 to June 1993 or a period of twenty-three
months;
2. REDUCING the award of moral damages in favor of Augusto L. Pardo from
P3,000,000.00 to P 50,000.00; and
3. REVERSING the dismissal of Equitable Banking Corporations cross-claim against Jose
Isidoro Uy, alias Jolly Uy. Jolly Uy is hereby ORDERED to REIMBURSE Equitable Banking
Corporation the amounts that the latter will pay to respondents.

Additionally, the Court hereby REVERSES the dismissal of Equitable Banking Corporations
counterclaim for damages against Special Steel Products, Inc. This Court ORDERS Special
Steel Products, Inc. to PAY Equitable Banking Corporation actual damages in the total
amount of P30,204.36, for the wrongful preliminary attachment of its properties.

The rest of the assailed Decision is AFFIRMED.

SO ORDERED.
ANTONIO FRANCISCO, substituted by his heirs: NELIA E.S. FRANCISCO, EMILIA
F. BERTIZ, REBECCA E.S. FRANCISCO, ANTONIO E.S. FRANCISCO, JR.,
SOCORRO F. FONTANILLA, and JOVITO E.S. FRANCISCO, Petitioners,
- versus -CHEMICAL BULK CARRIERS, INCORPORATED, Respondent.
G.R. No. 193577
This is a petition for review of the 31 May 2010 Decision and 31 August 2010
Resolution of the Court of Appeals in CA G.R. CV No. 63591. In its 31 May 2010
Decision, the Court of Appeals set aside the 21 August 1998 Decision of the Regional
Trial of Pasig City, Branch 71 (trial court), and ordered petitioner Antonio Francisco
(Francisco) to pay respondent Chemical Bulk Carriers, Incorporated (CBCI) P1,119,905
as actual damages. In its 31 August 2010 Resolution, the Court of Appeals denied
Franciscos motion for reconsideration.

Since 1965, Francisco was the owner and manager of a Caltex station in Teresa, Rizal.
Sometime in March 1993, four persons, including Gregorio Bacsa (Bacsa), came to
Franciscos Caltex station and introduced themselves as employees of
CBCI. Bacsa offered to sell to Francisco a certain quantity of CBCIs diesel fuel.
After checking Bacsas identification card, Francisco agreed to purchase CBCIs diesel
fuel. Francisco imposed the following conditions for the purchase: (1) that Petron
Corporation (Petron) should deliver the diesel fuel to Francisco at his business address
which should be properly indicated in Petrons invoice; (2) that the delivery tank is
sealed; and (3) that Bacsa should issue a separate receipt to Francisco.

The deliveries started on 5 April 1993 and lasted for ten months, or up to 25 January
1994. There were 17 deliveries to Francisco and all his conditions were complied with.
In February 1996, CBCI sent a demand letter to Francisco regarding the diesel fuel
delivered to him but which had been paid for by CBCI. CBCI demanded that Francisco
pay CBCI P1,053,527 for the diesel fuel or CBCI would file a complaint against him in
court. Francisco rejected CBCIs demand.
On 16 April 1996, CBCI filed a complaint for sum of money and damages against
Francisco and other unnamed defendants. According to CBCI, Petron, on various dates,
sold diesel fuel to CBCI but these were delivered to and received by Francisco.
Francisco then sold the diesel fuel to third persons from whom he received payment.
CBCI alleged that Francisco acquired possession of the diesel fuel without authority
from CBCI and deprived CBCI of the use of the diesel fuel it had paid for. CBCI
demanded payment from Francisco but he refused to pay. CBCI argued that Francisco
should have known that since only Petron, Shell and Caltex are authorized to sell and
distribute petroleum products in the Philippines, the diesel fuel came from illegitimate, if
not illegal or criminal, acts. CBCI asserted that Francisco violated Articles
19, 20, 21, and 22 of the Civil Code and that he should be held liable. In the alternative,
CBCI claimed that Francisco, in receiving CBCIs diesel fuel, entered into
an innominate contract of do ut des (I give and you give) with CBCI for which Francisco
is obligated to pay CBCI P1,119,905, the value of the diesel fuel. CBCI also prayed for
exemplary damages, attorneys fees and other expenses of litigation.
On 20 May 1996, Francisco filed a Motion to Dismiss on the ground of forum shopping.
CBCI filed its Opposition. In an Order dated 15 November 1996, the trial court denied
Franciscos motion.
Thereafter, Francisco filed his Answer. Francisco explained that he operates the Caltex
station with the help of his family because, in February 1978, he completely lost his
eyesight due to sickness. Francisco claimed that he asked Jovito, his son, to look into
and verify the identity of Bacsa, who introduced himself as a radio operator and
confidential secretary of a certain Mr. Inawat (Inawat), CBCIs manager for operations.
Francisco said he was satisfied with the proof presented by Bacsa. When asked to
explain why CBCI was selling its fuel, Bacsa allegedly replied that CBCI was in
immediate need of cash for the salary of its daily paid workers and for petty cash.
Francisco maintained that Bacsa assured him that the diesel fuel was not stolen
property and that CBCI enjoyed a big credit line with Petron. Francisco agreed to
purchase the diesel fuel offered by Bacsa on the following conditions:
1) Defendant [Francisco] will not accept any delivery if it is not company (Petron)
delivered, with his name and address as shipping point properly printed and
indicated in the invoice of Petron, and that the product on the delivery tank is
sealed; [and]
2) Although the original invoice is sufficient evidence of delivery and payment,
under ordinary course of business, defendant still required Mr. Bacsa to issue a
separate receipt duly signed by him acknowledging receipt of the amount stated
in the invoice, for and in behalf of CBCI.
During the first delivery on 5 April 1993, Francisco asked one of his sons to verify
whether the delivery trucks tank was properly sealed and whether Petron issued the
invoice. Francisco said all his conditions were complied with. There were 17 deliveries
made from 5 April 1993 to 25 January 1994 and each delivery was for 10,000 liters of
diesel fuel at P65,865. Francisco maintained that he acquired the diesel fuel in good
faith and for value. Francisco also filed a counterclaim for exemplary damages, moral
damages and attorneys fees.
In its 21 August 1998 Decision, the trial court ruled in Franciscos favor and dismissed
CBCIs complaint. The dispositive portion of the trial courts 21 August 1998 Decision
reads:
WHEREFORE, Judgment is hereby rendered:
1. Dismissing the complaint dated March 13, 1996 with costs.
2. Ordering plaintiff (CBCI), on the counterclaim, to pay defendant the amount
of P100,000.00 as moral damages and P50,000.00 as and by way of attorneys
fees. SO ORDERED.
CBCI appealed to the Court of Appeals. CBCI argued that Francisco acquired the diesel
fuel from Petron without legal ground because Bacsa was not authorized to deliver and
sell CBCIs diesel fuel. CBCI added that Francisco acted in bad faith because he should
have inquired further whether Bacsas sale of CBCIs diesel fuel was legitimate.
In its 31 May 2010 Decision, the Court of Appeals set aside the trial courts 21 August
1998 Decision and ruled in CBCIs favor. The dispositive portion of the Court of Appeals
31 May 2010 Decision reads:
IN VIEW OF THE FOREGOING, the assailed decision is hereby REVERSED
and SET ASIDE. Antonio Francisco is ordered to pay Chemical Bulk Carriers,
Incorporated the amount of P1,119,905.00 as actual damages. SO ORDERED.
On 15 January 2001, Francisco died. Franciscos heirs, namely: Nelia E.S. Francisco,
Emilia F. Bertiz, Rebecca E.S. Francisco, Antonio E.S. Francisco, Jr., Socorro
F. Fontanilla, and Jovito E.S. Francisco (heirs of Francisco) filed a motion for
substitution. The heirs of Francisco also filed a motion for reconsideration. In its 31
August 2010 Resolution, the Court of Appeals granted the motion for substitution but
denied the motion for reconsideration.
Hence, this petition.

The Ruling of the Trial Court

The trial court ruled that Francisco was not liable for damages in favor of CBCI because
the 17 deliveries were covered by original and genuine invoices. The trial court declared
that Bacsa, as confidential secretary of Inawat, was CBCIs authorized representative
who received Franciscos full payment for the diesel fuel. The trial court stated that
if Bacsa was not authorized, CBCI should have sued Bacsa and not Francisco. The trial
court also considered Francisco a buyer in good faith who paid in full for the
merchandise without notice that some other person had a right to or interest in such
diesel fuel. The trial court pointed out that good faith affords protection to a purchaser
for value. Finally, since CBCI was bound by the acts of Bacsa, the trial court ruled that
CBCI is liable to pay damages to Francisco.

The Ruling of the Court of Appeals

The Court of Appeals set aside the trial courts 21 August 1998 Decision and ruled
that Bacsas act of selling the diesel fuel to Francisco was his personal act and, even
if Bacsa connived with Inawat, the sale does not bind CBCI.
The Court of Appeals declared that since Francisco had been in the business of selling
petroleum products for a considerable number of years, his blindness was not a
hindrance for him to transact business with other people. With his condition and
experience, Francisco should have verified whether CBCI was indeed selling diesel fuel
and if it had given Bacsa authority to do so. Moreover, the Court of Appeals stated that
Francisco cannot feign good faith since he had doubts as to the authority of Bacsa yet
he did not seek confirmation from CBCI and contented himself with an improvised
receipt. Franciscos failure to verify Bacsas authority showed that he had an ulterior
motive. The receipts issued by Bacsa also showed his lack of authority because it was
on a plain sheet of bond paper with no letterhead or any indication that it came from
CBCI. The Court of Appeals ruled that Francisco cannot invoke estoppel because he
was at fault for choosing to ignore the tell-tale signs of petroleum diversion and for not
exercising prudence.
The Court of Appeals also ruled that CBCI was unlawfully deprived of the diesel fuel
which, as indicated in the invoices, CBCI had already paid for. Therefore, CBCI had the
right to recover the diesel fuel or its value from Francisco. Since the diesel fuel can no
longer be returned, the Court of Appeals ordered Francisco to give back the actual
amount paid by CBCI for the diesel fuel.

The heirs of Francisco raise the following issues:

I. WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT
DEFENDANT ANTONIO FRANCISCO EXERCISED THE REQUIRED
DILIGENCE OF A BLIND PERSON IN THE CONDUCT OF HIS BUSINESS; and
II. WHETHER ON THE BASIS OF THE FACTUAL FINDINGS OF THE COURT
OF APPEALS AND THE TRIAL COURT AND ADMITTED FACTS, IT CAN BE
CONCLUDED THAT THE PLAINTIFF APPROVED EXPRESSLY OR TACITLY
THE TRANSACTIONS.

The petition has no merit.

The heirs of Francisco argue that the Court of Appeals erred when it ruled that
Francisco was liable to CBCI because he failed to exercise the diligence of a good
father of a family when he bought the diesel fuel. They argue that since Francisco was
blind, the standard of conduct that was required of him was that of a reasonable person
under like disability. Moreover, they insist that Francisco exercised due care in
purchasing the diesel fuel by doing the following: (1) Francisco asked his son to check
the identity of Bacsa; (2) Francisco required direct delivery from Petron; (3) Francisco
required that he be named as the consignee in the invoice; and (4) Francisco required
separate receipts from Bacsa to evidence actual payment.
Standard of conduct is the level of expected conduct that is required by the nature of the
obligation and corresponding to the circumstances of the person, time and place. The
most common standard of conduct is that of a good father of a family or that of a
reasonably prudent person. To determine the diligence which must be required of all
persons, we use as basis the abstract average standard corresponding to a normal
orderly person.
However, one who is physically disabled is required to use the same degree of care that
a reasonably careful person who has the same physical disability would use. Physical
handicaps and infirmities, such as blindness or deafness, are treated as part of the
circumstances under which a reasonable person must act. Thus, the standard of
conduct for a blind person becomes that of a reasonable person who is blind.
We note that Francisco, despite being blind, had been managing and operating the
Caltex station for 15 years and this was not a hindrance for him to transact business
until this time. In this instance, however, we rule that Francisco failed to exercise the
standard of conduct expected of a reasonable person who is blind. First, Francisco
merely relied on the identification card of Bacsa to determine if he was authorized by
CBCI. Francisco did not do any other background check on the identity and authority
of Bacsa. Second, Francisco already expressed his misgivings about the diesel fuel,
fearing that they might be stolen property, yet he did not verify with CBCI the authority
of Bacsa to sell the diesel fuel. Third, Francisco relied on the receipts issued
by Bacsa which were typewritten on a half sheet of plain bond paper. If Francisco
exercised reasonable diligence, he should have asked for an official receipt issued by
CBCI. Fourth, the delivery to Francisco, as indicated in Petrons invoice, does not show
that CBCI authorized Bacsa to sell the diesel fuel to Francisco. Clearly, Francisco failed
to exercise the standard of conduct expected of a reasonable person who is blind.

Express or Tacit Approval of the Transaction

The heirs of Francisco argue that CBCI approved expressly or tacitly the transactions.
According to them, there was apparent authority for Bacsa to enter into the transactions.
They argue that even if the agent has exceeded his authority, the principal
is solidarily liable with the agent if the former allowed the later to act as though he had
full powers. They insist CBCI was not unlawfully deprived of its property
because Inawat gave Bacsa the authority to sell the diesel fuel and that CBCI is bound
by such action. Lastly, they argue that CBCI should be considered in estoppel for failure
to act during the ten month period that deliveries were being made to Francisco.
The general principle is that a seller without title cannot transfer a better title than he
has. Only the owner of the goods or one authorized by the owner to sell can transfer
title to the buyer. Therefore, a person can sell only what he owns or is authorized to sell
and the buyer can, as a consequence, acquire no more than what the seller can legally
transfer.
Moreover, the owner of the goods who has been unlawfully deprived of it may recover it
even from a purchaser in good faith. Thus, the purchaser of property which has been
stolen from the owner has been held to acquire no title to it even though he purchased
for value and in good faith.
The exception from the general principle is the doctrine of estoppel where the owner of
the goods is precluded from denying the sellers authority to sell. But in order that there
may be estoppel, the owner must, by word or conduct, have caused or allowed it to
appear that title or authority to sell is with the seller and the buyer must have been
misled to his damage.
In this case, it is clear that Bacsa was not the owner of the diesel fuel. Francisco was
aware of this but he claimed that Bacsa was authorized by CBCI to sell the diesel fuel.
However, Franciscos claim that Bacsa was authorized is not supported by any evidence
except his self-serving testimony. First, Francisco did not even confirm with CBCI if it
was indeed selling its diesel fuel since it is not one of the oil companies known in the
market to be selling petroleum products. This fact alone should have put Francisco on
guard. Second, it does not appear that CBCI, by some direct and equivocal act, has
clothed Bacsa with the indicia of ownership or apparent authority to sell CBCIs diesel
fuel. Francisco did not state if the identification card presented by Bacsa indicated that
he was CBCIs agent or a mere employee. Third, the receipt issued by Bacsa was
typewritten on a half sheet of plain bond paper. There was no letterhead or any
indication that it came from CBCI. We agree with the Court of Appeals that this was a
personal receipt issued by Bacsa and not an official receipt issued by CBCI.
Consequently, CBCI is not precluded by its conduct from denying Bacsas authority to
sell. CBCI did not hold out Bacsa or allow Bacsa to appear as the owner or one with
apparent authority to dispose of the diesel fuel.
Clearly, Bacsa cannot transfer title to Francisco as Bacsa was not the owner of the
diesel fuel nor was he authorized by CBCI to sell its diesel fuel. CBCI did not commit
any act to clothe Bacsa with apparent authority to sell the diesel fuel that would have
misled Francisco. Francisco, therefore, did not acquire any title over the diesel fuel.
Since CBCI was unlawfully deprived of its property, it may recover from Francisco, even
if Francisco pleads good faith.
WHEREFORE, we DENY the petition. We AFFIRM the 31 May 2010 Decision and 31
August 2010 Resolution of the Court of Appeals.SO ORDERED.
 MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. Petitioner, - versus -
PHOENIX ASSURANCE VELASCO, JR., COMPANY OF NEW YORK/ LEONARDO
DE CASTRO,** and MCGEE & CO., INC., Respondent.
G.R. No. 162467
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure of the 29 October 2003 Decision of the Court of Appeals and the 26
February 2004 Resolution of the same court denying petitioners motion for
reconsideration.
The facts of the case are not disputed.
Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao Terminal
and Brokerage Service, Inc. (Mindanao Terminal), a stevedoring company, to load and
stow a shipment of 146,288 cartons of fresh green Philippine bananas and 15,202
cartons of fresh pineapples belonging to Del Monte Fresh Produce International, Inc.
(Del Monte Produce) into the cargo hold of the vessel M/V Mistrau. The vessel was
docked at the port of Davao City and the goods were to be transported by it to the port
of Inchon, Korea in favor of consignee Taegu Industries, Inc. Del Monte Produce
insured the shipment under an open cargo policy with private respondent Phoenix
Assurance Company of New
York (Phoenix), a non-life insurance company, and private respondent McGee &
Co. Inc. (McGee), the underwriting manager/agent of Phoenix.
Mindanao Terminal loaded and stowed the cargoes aboard the M/V Mistrau. The vessel
set sail from the port of Davao City and arrived at the port of Inchon, Korea. It was then
discovered upon discharge that some of the cargo was in bad condition. The Marine
Cargo Damage Surveyor of Incok Loss and Average Adjuster of Korea, through its
representative Byeong Yong Ahn (Byeong), surveyed the extent of the damage of the
shipment. In a survey report, it was stated that 16,069 cartons of the banana shipment
and 2,185 cartons of the pineapple shipment were so damaged that they no longer had
commercial value.
Del Monte Produce filed a claim under the open cargo policy for the damages to its
shipment. McGees Marine Claims Insurance Adjuster evaluated the claim and
recommended that payment in the amount of $210,266.43 be made. A check for the
recommended amount was sent to Del Monte Produce; the latter then issued a
subrogation receipt to Phoenix and McGee.
Phoenix and McGee instituted an action for damages against Mindanao Terminal in the
Regional Trial Court (RTC) of Davao City, Branch 12. After trial, the RTC, in a decision
dated 20 October 1999, held that the only participation of Mindanao Terminal was to
load the cargoes on board the M/V Mistrau under the direction and supervision of the
ships officers, who would not have accepted the cargoes on board the vessel and
signed the foremans report unless they were properly arranged and tightly secured to
withstand voyage across the open seas. Accordingly, Mindanao Terminal cannot be
held liable for whatever happened to the cargoes after it had loaded and stowed them.
Moreover, citing the survey report, it was found by the RTC that the cargoes were
damaged on account of a typhoon which M/V Mistrau had encountered during the
voyage. It was further held that Phoenix and McGee had no cause of action against
Mindanao Terminal because the latter, whose services were contracted by Del Monte, a
distinct corporation from Del Monte Produce, had no contract with the assured Del
Monte Produce. The RTC dismissed the complaint and awarded the counterclaim of
Mindanao Terminal in the amount of P83,945.80 as actual damages and P100,000.00
as attorneys fees. The actual damages were awarded as reimbursement for the
expenses incurred by Mindanao Terminals lawyer in attending the hearings in the case
wherein he had to travel all the way from Metro Manila to Davao City.
Phoenix and McGee appealed to the Court of Appeals. The appellate court
reversed and set aside the decision of the RTC in its 29 October 2003 decision. The
same court ordered Mindanao Terminal to pay Phoenix and McGee the total amount of
$210,265.45 plus legal interest from the filing of the complaint until fully paid and
attorneys fees of 20% of the claim. It sustained Phoenixs and McGees argument that
the damage in the cargoes was the result of improper stowage by Mindanao Terminal. It
imposed on Mindanao Terminal, as the stevedore of the cargo, the duty to exercise
extraordinary diligence in loading and stowing the cargoes. It further held that even with
the absence of a contractual relationship between Mindanao Terminal and Del Monte
Produce, the cause of action of Phoenix and McGee could be based on quasi-delict
under Article 2176 of the Civil Code.
Mindanao Terminal filed a motion for reconsideration, which the Court of Appeals
denied in its 26 February 2004 resolution. Hence, the present petition for review.
Mindanao Terminal raises two issues in the case at bar, namely: whether it was
careless and negligent in the loading and stowage of the cargoes onboard M/V
Mistrau making it liable for damages; and, whether Phoenix and McGee has a cause of
action against Mindanao Terminal under Article 2176 of the Civil Code on quasi-delict.
To resolve the petition, three questions have to be answered: first, whether Phoenix and
McGee have a cause of action against Mindanao Terminal; second, whether Mindanao
Terminal, as a stevedoring company, is under obligation to observe the same
extraordinary degree of diligence in the conduct of its business as required by law for
common carriers and warehousemen; and third, whether Mindanao Terminal observed
the degree of diligence required by law of a stevedoring company.
We agree with the Court of Appeals that the complaint filed by Phoenix and
McGee against Mindanao Terminal, from which the present case has arisen, states a
cause of action. The present action is based on quasi-delict, arising from the negligent
and careless loading and stowing of the cargoes belonging to Del Monte Produce. Even
assuming that both Phoenix and McGee have only been subrogated in the rights of Del
Monte Produce, who is not a party to the contract of service between Mindanao
Terminal and Del Monte, still the insurance carriers may have a cause of action in light
of the Courts consistent ruling that the act that breaks the contract may be also a tort. In
fine, a liability for tort may arise even under a contract, where tort is that which breaches
the contract. In the present case, Phoenix and McGee are not suing for damages for
injuries arising from the breach of the contract of service but from the alleged negligent
manner by which Mindanao Terminal handled the cargoes belonging to Del Monte
Produce. Despite the absence of contractual relationship between Del Monte Produce
and Mindanao Terminal, the allegation of negligence on the part of the defendant
should be sufficient to establish a cause of action arising from quasi-delict.
The resolution of the two remaining issues is determinative of the ultimate result of this
case.
Article 1173 of the Civil Code is very clear that if the law or contract does not
state the degree of diligence which is to be observed in the performance of an obligation
then that which is expected of a good father of a family or ordinary diligence shall be
required. Mindanao Terminal, a stevedoring company which was charged with the
loading and stowing the cargoes of Del Monte Produce aboard M/V Mistrau, had acted
merely as a labor provider in the case at bar. There is no specific provision of law that
imposes a higher degree of diligence than ordinary diligence for a stevedoring company
or one who is charged only with the loading and stowing of cargoes. It was neither
alleged nor proven by Phoenix and McGee that Mindanao Terminal was bound by
contractual stipulation to observe a higher degree of diligence than that required of a
good father of a family. We therefore conclude that following Article 1173, Mindanao
Terminal was required to observe ordinary diligence only in loading and stowing the
cargoes of Del Monte Produce aboard M/V Mistrau.
The Court of Appeals erred when it cited the case of Summa Insurance
Corporation v. CA and Port Service Inc. in imposing a higher degree of diligence, on
Mindanao Terminal in loading and stowing the cargoes. The case of Summa Insurance
Corporation v. CA, which involved the issue of whether an arrastre operator is legally
liable for the loss of a shipment in its custody and the extent of its liability, is inapplicable
to the factual circumstances of the case at bar. Therein, a vessel owned by the National
Galleon Shipping Corporation (NGSC) arrived at Pier 3, South Harbor, Manila, carrying
a shipment consigned to the order of Caterpillar Far East Ltd. with Semirara Coal
Corporation (Semirara) as "notify party." The shipment, including a bundle of PC 8 U
blades, was discharged from the vessel to the custody of the private respondent, the
exclusive arrastre operator at the South Harbor. Accordingly, three good-order cargo
receipts were issued by NGSC, duly signed by the ship's checker and a representative
of private respondent. When Semirara inspected the shipment at house, it discovered
that the bundle of PC8U blades was missing. From those facts, the Court observed:
x x x The relationship therefore between the consignee and the arrastre
operator must be examined. This relationship is much akin to that existing
between the consignee or owner of shipped goods and the common carrier, or
that between a depositor and a warehouseman. In the performance of its
obligations, an arrastre operator should observe the same degree of
diligence as that required of a common carrier and a warehouseman as
enunciated under Article 1733 of the Civil Code and Section 3(b) of the
Warehouse Receipts Law, respectively. Being the custodian of the goods
discharged from a vessel, an arrastre operator's duty is to take good care
of the goods and to turn them over to the party entitled to their possession.
(Emphasis supplied)
There is a distinction between an arrastre and a stevedore. Arrastre, a Spanish word
which refers to hauling of cargo, comprehends the handling of cargo on the wharf or
between the establishment of the consignee or shipper and the ship's tackle. The
responsibility of the arrastre operator lasts until the delivery of the cargo to the
consignee. The service is usually performed by longshoremen. On the other hand,
stevedoringrefers to the handling of the cargo in the holds of the vessel or between the
ship's tackle and the holds of the vessel. The responsibility of the stevedore ends upon
the loading and stowing of the cargo in the vessel.
It is not disputed that Mindanao Terminal was performing purely stevedoring
function while the private respondent in the Summa case was performing arrastre
function. In the present case, Mindanao Terminal, as a stevedore, was only charged
with the loading and stowing of the cargoes from the pier to the ships cargo hold; it was
never the custodian of the shipment of Del Monte Produce. A stevedore is not a
common carrier for it does not transport goods or passengers; it is not akin to a
warehouseman for it does not store goods for profit. The loading and stowing of cargoes
would not have a far reaching public ramification as that of a common carrier and a
warehouseman; the public is adequately protected by our laws on contract and on
quasi-delict. The public policy considerations in legally imposing upon a common carrier
or a warehouseman a higher degree of diligence is not present in a stevedoring outfit
which mainly provides labor in loading and stowing of cargoes for its clients.
In the third issue, Phoenix and McGee failed to prove by preponderance of
evidence that Mindanao Terminal had acted negligently. Where the evidence on an
issue of fact is in equipoise or there is any doubt on which side the evidence
preponderates the party having the burden of proof fails upon that issue. That is to say,
if the evidence touching a disputed fact is equally balanced, or if it does not produce a
just, rational belief of its existence, or if it leaves the mind in a state of perplexity, the
party holding the affirmative as to such fact must fail.
We adopt the findings of the RTC, which are not disputed by Phoenix and
McGee. The Court of Appeals did not make any new findings of fact when it reversed
the decision of the trial court. The only participation of Mindanao Terminal was to load
the cargoes on board M/V Mistrau. It was not disputed by Phoenix and McGee that the
materials, such as ropes, pallets, and cardboards, used in lashing and rigging the
cargoes were all provided by M/V Mistrau and these materials meets industry standard.
It was further established that Mindanao Terminal loaded and stowed the
cargoes of Del Monte Produce aboard the M/V Mistrau in accordance with the stowage
plan, a guide for the area assignments of the goods in the vessels hold, prepared by Del
Monte Produce and the officers of M/V Mistrau. The loading and stowing was done
under the direction and supervision of the ship officers. The vessels officer would order
the closing of the hatches only if the loading was done correctly after a final
inspection. The said ship officers would not have accepted the cargoes on board the
vessel if they were not properly arranged and tightly secured to withstand the voyage in
open seas. They would order the stevedore to rectify any error in its loading and
stowing. A foremans report, as proof of work done on board the vessel, was prepared
by the checkers of Mindanao Terminal and concurred in by the Chief Officer of M/V
Mistrau after they were satisfied that the cargoes were properly loaded.
Phoenix and McGee relied heavily on the deposition of Byeong Yong Ahn and on the
survey report of the damage to the cargoes. Byeong, whose testimony was refreshed by
the survey report, found that the cause of the damage was improper stowage due to the
manner the cargoes were arranged such that there were no spaces between cartons,
the use of cardboards as support system, and the use of small rope to tie the cartons
together but not by the negligent conduct of Mindanao Terminal in loading and stowing
the cargoes. As admitted by Phoenix and McGee in their Comment before us, the latter
is merely a stevedoring company which was tasked by Del Monte to load and stow the
shipments of fresh banana and pineapple of Del Monte Produce aboard the M/V
Mistrau. How and where it should load and stow a shipment in a vessel is wholly
dependent on the shipper and the officers of the vessel. In other words, the work of the
stevedore was under the supervision of the shipper and officers of the vessel. Even the
materials used for stowage, such as ropes, pallets, and cardboards, are provided for by
the vessel. Even the survey report found that it was because of the boisterous stormy
weather due to the typhoon Seth, as encountered by M/V Mistrau during its voyage,
which caused the shipments in the cargo hold to collapse, shift and bruise in extensive
extent. Even the deposition of Byeong was not supported by the conclusion in the
survey report that:
CAUSE OF DAMAGE
xxx
From the above facts and our survey results, we are of the opinion that
damage occurred aboard the carrying vessel during sea transit, being
caused by ships heavy rolling and pitching under boisterous weather
while proceeding from 1600 hrs on 7 October to 0700 hrs
on 12 October, 1994 as described in the sea protest.
As it is clear that Mindanao Terminal had duly exercised the required degree
of diligence in loading and stowing the cargoes, which is the ordinary
diligence of a good father of a family, the grant of the petition is in order.

However, the Court finds no basis for the award of attorneys fees in favor of petitioner.
None of the circumstances enumerated in Article 2208 of the Civil Code exists. The
present case is clearly not an unfounded civil action against the plaintiff as there is no
showing that it was instituted for the mere purpose of vexation or injury. It is not sound
public policy to set a premium to the right to litigate where such right is exercised in
good faith, even if erroneously. Likewise, the RTC erred in awarding P83,945.80 actual
damages to Mindanao Terminal. Although actual expenses were incurred by Mindanao
Terminal in relation to the trial of this case in Davao City, the lawyer of Mindanao
Terminal incurred expenses for plane fare, hotel accommodations and food, as well as
other miscellaneous expenses, as he attended the trials coming all the way from Manila.
But there is no showing that Phoenix and McGee made a false claim against Mindanao
Terminal resulting in the protracted trial of the case necessitating the incurrence of
expenditures.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-
G.R. CV No. 66121 is SET ASIDE and the decision of
the Regional Trial Court of Davao City, Branch 12 in Civil Case No. 25,311.97 is
hereby REINSTATED MINUS the awards of P100,000.00 as attorneys fees
and P83,945.80 as actual damages. SO ORDERED.
 THE CONSOLIDATED BANK and TRUST CORPORATION, petitioner, vs. COURT
OF APPEALS and L.C. DIAZ and COMPANY, CPAs, respondents.

Before us is a petition for review of the Decision of the Court of Appeals dated 27
October 1998 and its Resolution dated 11 May 1999. The assailed decision reversed
the Decision of the Regional Trial Court of Manila, Branch 8, absolving petitioner
Consolidated Bank and Trust Corporation, now known as Solidbank Corporation
(Solidbank), of any liability. The questioned resolution of the appellate court denied the
motion for reconsideration of Solidbank but modified the decision by deleting the award
of exemplary damages, attorneys fees, expenses of litigation and cost of suit.

Solidbank is a domestic banking corporation organized and existing under

Philippine laws. Private respondent L.C. Diaz and Company, CPAs (L.C. Diaz), is a
professional partnership engaged in the practice of accounting.
Sometime in March 1976, L.C. Diaz opened a savings account with Solidbank,
designated as Savings Account No. S/A 200-16872-6.
On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya (Macaraya),
filled up a savings (cash) deposit slip for P990 and a savings (checks) deposit slip
for P50. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre (Calapre), to
deposit the money with Solidbank. Macaraya also gave Calapre the Solidbank
passbook.
Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and
the passbook. The teller acknowledged receipt of the deposit by returning to Calapre
the duplicate copies of the two deposit slips. Teller No. 6 stamped the deposit slips with
the words DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE. Since the
transaction took time and Calapre had to make another deposit for L.C. Diaz with Allied
Bank, he left the passbook with Solidbank. Calapre then went to Allied Bank. When
Calapre returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that
somebody got the passbook. Calapre went back to L.C. Diaz and reported the incident
to Macaraya.
Macaraya immediately prepared a deposit slip in duplicate copies with a check
of P200,000. Macaraya, together with Calapre, went to Solidbank and presented to
Teller No. 6 the deposit slip and check. The teller stamped the words DUPLICATE and
SAVING TELLER 6 SOLIDBANK HEAD OFFICE on the duplicate copy of the deposit
slip. When Macaraya asked for the passbook, Teller No. 6 told Macaraya that someone
got the passbook but she could not remember to whom she gave the passbook. When
Macaraya asked Teller No. 6 if Calapre got the passbook, Teller No. 6 answered that
someone shorter than Calapre got the passbook. Calapre was then standing beside
Macaraya.
Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for the
deposit of a check for P90,000 drawn on Philippine Banking Corporation (PBC). This
PBC check of L.C. Diaz was a check that it had long closed. PBC subsequently
dishonored the check because of insufficient funds and because the signature in the
check differed from PBCs specimen signature. Failing to get back the passbook,
Macaraya went back to her office and reported the matter to the Personnel Manager of
L.C. Diaz, Emmanuel Alvarez.
The following day, 15 August 1991, L.C. Diaz through its Chief Executive Officer,
Luis C. Diaz (Diaz), called up Solidbank to stop any transaction using the same
passbook until L.C. Diaz could open a new account. On the same day, Diaz formally
wrote Solidbank to make the same request. It was also on the same day that L.C. Diaz
learned of the unauthorized withdrawal the day before, 14 August 1991, of P300,000
from its savings account. The withdrawal slip for the P300,000 bore the signatures of
the authorized signatories of L.C. Diaz, namely Diaz and Rustico L. Murillo. The
signatories, however, denied signing the withdrawal slip. A certain Noel Tamayo
received the P300,000.
In an Information dated 5 September 1991, L.C. Diaz charged its messenger,
Emerano Ilagan (Ilagan) and one Roscon Verdazola with Estafa through Falsification of
Commercial Document. The Regional Trial Court of Manila dismissed the criminal case
after the City Prosecutor filed a Motion to Dismiss on 4 August 1992.
On 24 August 1992, L.C. Diaz through its counsel demanded from Solidbank the
return of its money. Solidbank refused.
On 25 August 1992, L.C. Diaz filed a Complaint for Recovery of a Sum of Money
against Solidbank with the Regional Trial Court of Manila, Branch 8. After trial, the trial
court rendered on 28 December 1994 a decision absolving Solidbank and dismissing
the complaint.
L.C. Diaz then appealed to the Court of Appeals. On 27 October 1998, the Court of
Appeals issued its Decision reversing the decision of the trial court.
On 11 May 1999, the Court of Appeals issued its Resolution denying the motion for
reconsideration of Solidbank. The appellate court, however, modified its decision by
deleting the award of exemplary damages and attorneys fees.

The Ruling of the Trial Court

In absolving Solidbank, the trial court applied the rules on savings account written
on the passbook. The rules state that possession of this book shall raise the
presumption of ownership and any payment or payments made by the bank upon the
production of the said book and entry therein of the withdrawal shall have the same
effect as if made to the depositor personally.
At the time of the withdrawal, a certain Noel Tamayo was not only in possession of
the passbook, he also presented a withdrawal slip with the signatures of the authorized
signatories of L.C. Diaz. The specimen signatures of these persons were in the
signature cards. The teller stamped the withdrawal slip with the words Saving Teller No.
5. The teller then passed on the withdrawal slip to Genere Manuel (Manuel) for
authentication. Manuel verified the signatures on the withdrawal slip. The withdrawal
slip was then given to another officer who compared the signatures on the withdrawal
slip with the specimen on the signature cards. The trial court concluded that Solidbank
acted with care and observed the rules on savings account when it allowed the
withdrawal of P300,000 from the savings account of L.C. Diaz.
The trial court pointed out that the burden of proof now shifted to L.C. Diaz to prove
that the signatures on the withdrawal slip were forged. The trial court admonished L.C.
Diaz for not offering in evidence the National Bureau of Investigation (NBI) report on the
authenticity of the signatures on the withdrawal slip for P300,000. The trial court
believed that L.C. Diaz did not offer this evidence because it is derogatory to its action.
Another provision of the rules on savings account states that the depositor must
keep the passbook under lock and key. When another person presents the passbook
for withdrawal prior to Solidbanks receipt of the notice of loss of the passbook, that
person is considered as the owner of the passbook. The trial court ruled that the
passbook presented during the questioned transaction was now out of the lock and key
and presumptively ready for a business transaction.
Solidbank did not have any participation in the custody and care of the passbook.
The trial court believed that Solidbanks act of allowing the withdrawal of P300,000 was
not the direct and proximate cause of the loss. The trial court held that L.C. Diazs
negligence caused the unauthorized withdrawal. Three facts establish L.C. Diazs
negligence: (1) the possession of the passbook by a person other than the depositor
L.C. Diaz; (2) the presentation of a signed withdrawal receipt by an unauthorized
person; and (3) the possession by an unauthorized person of a PBC check long closed
by L.C. Diaz, which check was deposited on the day of the fraudulent withdrawal.
The trial court debunked L.C. Diazs contention that Solidbank did not follow the
precautionary procedures observed by the two parties whenever L.C. Diaz withdrew
significant amounts from its account. L.C. Diaz claimed that a letter must accompany
withdrawals of more than P20,000. The letter must request Solidbank to allow the
withdrawal and convert the amount to a managers check. The bearer must also have a
letter authorizing him to withdraw the same amount. Another person driving a car must
accompany the bearer so that he would not walk from Solidbank to the office in making
the withdrawal. The trial court pointed out that L.C. Diaz disregarded these precautions
in its past withdrawal. On 16 July 1991, L.C. Diaz withdrew P82,554 without any
separate letter of authorization or any communication with Solidbank that the money be
converted into a managers check.
The trial court further justified the dismissal of the complaint by holding that the case
was a last ditch effort of L.C. Diaz to recover P300,000 after the dismissal of the
criminal case against Ilagan.
The dispositive portion of the decision of the trial court reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered DISMISSING the
complaint.
The Court further renders judgment in favor of defendant bank pursuant to its
counterclaim the amount of Thirty Thousand Pesos (P30,000.00) as attorneys fees.
With costs against plaintiff.
SO ORDERED.

The Ruling of the Court of Appeals

The Court of Appeals ruled that Solidbanks negligence was the proximate cause of
the unauthorized withdrawal of P300,000 from the savings account of L.C. Diaz. The
appellate court reached this conclusion after applying the provision of the Civil Code on
quasi-delict, to wit:
Article 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this chapter.
The appellate court held that the three elements of a quasi-delict are present in this
case, namely: (a) damages suffered by the plaintiff; (b) fault or negligence of the
defendant, or some other person for whose acts he must respond; and (c) the
connection of cause and effect between the fault or negligence of the defendant and the
damage incurred by the plaintiff.
The Court of Appeals pointed out that the teller of Solidbank who received the
withdrawal slip for P300,000 allowed the withdrawal without making the necessary
inquiry. The appellate court stated that the teller, who was not presented by Solidbank
during trial, should have called up the depositor because the money to be withdrawn
was a significant amount. Had the teller called up L.C. Diaz, Solidbank would have
known that the withdrawal was unauthorized. The teller did not even verify the identity of
the impostor who made the withdrawal. Thus, the appellate court found Solidbank liable
for its negligence in the selection and supervision of its employees.
The appellate court ruled that while L.C. Diaz was also negligent in entrusting its
deposits to its messenger and its messenger in leaving the passbook with the
teller, Solidbank could not escape liability because of the doctrine of last clear chance.
Solidbank could have averted the injury suffered by L.C. Diaz had it called up L.C. Diaz
to verify the withdrawal.
The appellate court ruled that the degree of diligence required from Solidbank is
more than that of a good father of a family. The business and functions of banks are
affected with public interest. Banks are obligated to treat the accounts of their
depositors with meticulous care, always having in mind the fiduciary nature of their
relationship with their clients. The Court of Appeals found Solidbank remiss in its duty,
violating its fiduciary relationship with L.C. Diaz.
The dispositive portion of the decision of the Court of Appeals reads:
WHEREFORE, premises considered, the decision appealed from is hereby REVERSED
and a new one entered.
1. Ordering defendant-appellee Consolidated Bank and Trust Corporation to
pay plaintiff-appellant the sum of Three Hundred Thousand Pesos
(P300,000.00), with interest thereon at the rate of 12% per annum from
the date of filing of the complaint until paid, the sum of P20,000.00 as
exemplary damages, and P20,000.00 as attorneys fees and expenses of
litigation as well as the cost of suit; and
2. Ordering the dismissal of defendant-appellees counterclaim in the amount
of P30,000.00 as attorneys fees. SO ORDERED.
Acting on the motion for reconsideration of Solidbank, the appellate court affirmed its
decision but modified the award of damages. The appellate court deleted the award of
exemplary damages and attorneys fees. Invoking Article 2231 of the Civil Code, the
appellate court ruled that exemplary damages could be granted if the defendant acted
with gross negligence. Since Solidbank was guilty of simple negligence only, the award
of exemplary damages was not justified. Consequently, the award of attorneys fees was
also disallowed pursuant to Article 2208 of the Civil Code. The expenses of litigation
and cost of suit were also not imposed on Solidbank.
The dispositive portion of the Resolution reads as follows:
WHEREFORE, foregoing considered, our decision dated October 27, 1998 is affirmed
with modification by deleting the award of exemplary damages and attorneys fees,
expenses of litigation and cost of suit. SO ORDERED.

Hence, this petition

Solidbank seeks the review of the decision and resolution of the Court of Appeals on
these grounds:
 I. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER
BANK SHOULD SUFFER THE LOSS BECAUSE ITS TELLER SHOULD
HAVE FIRST CALLED PRIVATE RESPONDENT BY TELEPHONE
BEFORE IT ALLOWED THE WITHDRAWAL OF P300,000.00 TO
RESPONDENTS MESSENGER EMERANO ILAGAN, SINCE THERE IS
NO AGREEMENT BETWEEN THE PARTIES IN THE OPERATION OF
THE SAVINGS ACCOUNT, NOR IS THERE ANY BANKING LAW, WHICH
MANDATES THAT A BANK TELLER SHOULD FIRST CALL UP THE
DEPOSITOR BEFORE ALLOWING A WITHDRAWAL OF A BIG AMOUNT
IN A SAVINGS ACCOUNT.
II. THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF LAST
CLEAR CHANCE AND IN HOLDING THAT PETITIONER BANKS TELLER
HAD THE LAST OPPORTUNITY TO WITHHOLD THE WITHDRAWAL
WHEN IT IS UNDISPUTED THAT THE TWO SIGNATURES OF
RESPONDENT ON THE WITHDRAWAL SLIP ARE GENUINE AND
PRIVATE RESPONDENTS PASSBOOK WAS DULY PRESENTED, AND
CONTRARIWISE RESPONDENT WAS NEGLIGENT IN THE SELECTION
AND SUPERVISION OF ITS MESSENGER EMERANO ILAGAN, AND IN
THE SAFEKEEPING OF ITS CHECKS AND OTHER FINANCIAL
DOCUMENTS.
III. THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE INSTANT
CASE IS A LAST DITCH EFFORT OF PRIVATE RESPONDENT TO
RECOVER ITS P300,000.00 AFTER FAILING IN ITS EFFORTS TO
RECOVER THE SAME FROM ITS EMPLOYEE EMERANO ILAGAN.
IV. THE COURT OF APPEALS ERRED IN NOT MITIGATING THE DAMAGES
AWARDED AGAINST PETITIONER UNDER ARTICLE 2197 OF THE CIVIL
CODE, NOTWITHSTANDING ITS FINDING THAT PETITIONER BANKS
NEGLIGENCE WAS ONLY CONTRIBUTORY.

The Ruling of the Court

The petition is partly meritorious.

Solidbanks Fiduciary Duty under the Law

The rulings of the trial court and the Court of Appeals conflict on the application of
the law. The trial court pinned the liability on L.C. Diaz based on the provisions of the
rules on savings account, a recognition of the contractual relationship between
Solidbank and L.C. Diaz, the latter being a depositor of the former. On the other hand,
the Court of Appeals applied the law on quasi-delict to determine who between the two
parties was ultimately negligent.The law on quasi-delict or culpa aquiliana is generally
applicable when there is no pre-existing contractual relationship between the parties.
We hold that Solidbank is liable for breach of contract due to negligence, or culpa
contractual.
The contract between the bank and its depositor is governed by the provisions of
the Civil Code on simple loan. Article 1980 of the Civil Code expressly provides that x x
x savings x x x deposits of money in banks and similar institutions shall be governed by
the provisions concerning simple loan.There is a debtor-creditor relationship between
the bank and its depositor. The bank is the debtor and the depositor is the creditor. The
depositor lends the bank money and the bank agrees to pay the depositor on
demand. The savings deposit agreement between the bank and the depositor is the
contract that determines the rights and obligations of the parties.
The law imposes on banks high standards in view of the fiduciary nature of
banking. Section 2 of Republic Act No. 8791 (RA 8791), which took effect on 13 June
2000, declares that the State recognizes the fiduciary nature of banking that requires
high standards of integrity and performance.This new provision in the general banking
law, introduced in 2000, is a statutory affirmation of Supreme Court decisions, starting
with the 1990 case of Simex International v. Court of Appeals, holding that the bank
is under obligation to treat the accounts of its depositors with meticulous care, always
having in mind the fiduciary nature of their relationship.
This fiduciary relationship means that the banks obligation to observe high
standards of integrity and performance is deemed written into every deposit agreement
between a bank and its depositor. The fiduciary nature of banking requires banks to
assume a degree of diligence higher than that of a good father of a family. Article 1172
of the Civil Code states that the degree of diligence required of an obligor is that
prescribed by law or contract, and absent such stipulation then the diligence of a good
father of a family. Section 2 of RA 8791 prescribes the statutory diligence required from
banks that banks must observe high standards of integrity and performance in servicing
their depositors. Although RA 8791 took effect almost nine years after the unauthorized
withdrawal of the P300,000 from L.C. Diazs savings account, jurisprudence at the time
of the withdrawal already imposed on banks the same high standard of diligence
required under RA No. 8791.
However, the fiduciary nature of a bank-depositor relationship does not convert the
contract between the bank and its depositors from a simple loan to a trust agreement,
whether express or implied. Failure by the bank to pay the depositor is failure to pay a
simple loan, and not a breach of trust. The law simply imposes on the bank a higher
standard of integrity and performance in complying with its obligations under the
contract of simple loan, beyond those required of non-bank debtors under a similar
contract of simple loan.
The fiduciary nature of banking does not convert a simple loan into a trust
agreement because banks do not accept deposits to enrich depositors but to earn
money for themselves. The law allows banks to offer the lowest possible interest rate to
depositors while charging the highest possible interest rate on their own borrowers. The
interest spread or differential belongs to the bank and not to the depositors who are
not cestui que trust of banks. If depositors are cestui que trust of banks, then the
interest spread or income belongs to the depositors, a situation that Congress certainly
did not intend in enacting Section 2 of RA 8791.

Solidbanks Breach of its Contractual Obligation

Article 1172 of the Civil Code provides that responsibility arising from negligence in
the performance of every kind of obligation is demandable. For breach of the savings
deposit agreement due to negligence, or culpa contractual, the bank is liable to its
depositor.
Calapre left the passbook with Solidbank because the transaction took time and he
had to go to Allied Bank for another transaction. The passbook was still in the hands of
the employees of Solidbank for the processing of the deposit when Calapre left
Solidbank. Solidbanks rules on savings account require that the deposit book should be
carefully guarded by the depositor and kept under lock and key, if possible. When the
passbook is in the possession of Solidbanks tellers during withdrawals, the law imposes
on Solidbank and its tellers an even higher degree of diligence in safeguarding the
passbook.
Likewise, Solidbanks tellers must exercise a high degree of diligence in insuring that
they return the passbook only to the depositor or his authorized representative. The
tellers know, or should know, that the rules on savings account provide that any person
in possession of the passbook is presumptively its owner. If the tellers give the
passbook to the wrong person, they would be clothing that person presumptive
ownership of the passbook, facilitating unauthorized withdrawals by that person. For
failing to return the
passbook to Calapre, the authorized representative of L.C. Diaz, Solidbank and Teller
No. 6 presumptively failed to observe such high degree of diligence in safeguarding the
passbook, and in insuring its return to the party authorized to receive the same.
In culpa contractual, once the plaintiff proves a breach of contract, there is a
presumption that the defendant was at fault or negligent. The burden is on the
defendant to prove that he was not at fault or negligent. In contrast, in culpa
aquiliana the plaintiff has the burden of proving that the defendant was negligent. In the
present case, L.C. Diaz has established that Solidbank breached its contractual
obligation to return the passbook only to the authorized representative of L.C.
Diaz. There is thus a presumption that Solidbank was at fault and its teller was negligent
in not returning the passbook to Calapre.The burden was on Solidbank to prove that
there was no negligence on its part or its employees.
Solidbank failed to discharge its burden. Solidbank did not present to the trial court
Teller No. 6, the teller with whom Calapre left the passbook and who was supposed to
return the passbook to him. The record does not indicate that Teller No. 6 verified the
identity of the person who retrieved the passbook. Solidbank also failed to adduce in
evidence its standard procedure in verifying the identity of the person retrieving the
passbook, if there is such a procedure, and that Teller No. 6 implemented this
procedure in the present case.
Solidbank is bound by the negligence of its employees under the principle
of respondeat superior or command responsibility. The defense of exercising the
required diligence in the selection and supervision of employees is not a complete
defense in culpa contractual, unlike in culpa aquiliana.
The bank must not only exercise high standards of integrity and performance, it
must also insure that its employees do likewise because this is the only way to insure
that the bank will comply with its fiduciary duty. Solidbank failed to present the teller who
had the duty to return to Calapre the passbook, and thus failed to prove that this teller
exercised the high standards of integrity and performance required of Solidbanks
employees.

Proximate Cause of the Unauthorized Withdrawal

Another point of disagreement between the trial and appellate courts is the
proximate cause of the unauthorized withdrawal. The trial court believed that L.C. Diazs
negligence in not securing its passbook under lock and key was the proximate cause
that allowed the impostor to withdraw the P300,000.For the appellate court, the
proximate cause was the tellers negligence in processing the withdrawal without first
verifying with L.C. Diaz. We do not agree with either court.
Proximate cause is that cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury and without which the
result would not have occurred. Proximate cause is determined by the facts of each
case upon mixed considerations of logic, common sense, policy and precedent.
L.C. Diaz was not at fault that the passbook landed in the hands of the
impostor. Solidbank was in possession of the passbook while it was processing the
deposit. After completion of the transaction, Solidbank had the contractual obligation to
return the passbook only to Calapre, the authorized representative of L.C.
Diaz. Solidbank failed to fulfill its contractual obligation because it gave the passbook to
another person.
Solidbanks failure to return the passbook to Calapre made possible the withdrawal
of the P300,000 by the impostor who took possession of the passbook. Under
Solidbanks rules on savings account, mere possession of the passbook raises the
presumption of ownership. It was the negligent act of Solidbanks Teller No. 6 that gave
the impostor presumptive ownership of the passbook. Had the passbook not fallen into
the hands of the impostor, the loss of P300,000 would not have happened. Thus, the
proximate cause of the unauthorized withdrawal was Solidbanks negligence in not
returning the passbook to Calapre.
We do not subscribe to the appellate courts theory that the proximate cause of the
unauthorized withdrawal was the tellers failure to call up L.C. Diaz to verify the
withdrawal. Solidbank did not have the duty to call up L.C. Diaz to confirm the
withdrawal. There is no arrangement between Solidbank and L.C. Diaz to this
effect. Even the agreement between Solidbank and L.C. Diaz pertaining to measures
that the parties must observe whenever withdrawals of large amounts are made does
not direct Solidbank to call up L.C. Diaz.
There is no law mandating banks to call up their clients whenever their
representatives withdraw significant amounts from their accounts. L.C. Diaz therefore
had the burden to prove that it is the usual practice of Solidbank to call up its clients to
verify a withdrawal of a large amount of money. L.C. Diaz failed to do so.
Teller No. 5 who processed the withdrawal could not have been put on guard to
verify the withdrawal. Prior to the withdrawal of P300,000, the impostor deposited with
Teller No. 6 the P90,000 PBC check, which later bounced. The impostor apparently
deposited a large amount of money to deflect suspicion from the withdrawal of a much
bigger amount of money. The appellate court thus erred when it imposed on Solidbank
the duty to call up L.C. Diaz to confirm the withdrawal when no law requires this from
banks and when the teller had no reason to be suspicious of the transaction.
Solidbank continues to foist the defense that Ilagan made the withdrawal. Solidbank
claims that since Ilagan was also a messenger of L.C. Diaz, he was familiar with its
teller so that there was no more need for the teller to verify the withdrawal. Solidbank
relies on the following statements in the Booking and Information Sheet of Emerano
Ilagan:
xxx Ilagan also had with him (before the withdrawal) a forged check of PBC and
indicated the amount of P90,000 which he deposited in favor of L.C. Diaz and
Company. After successfully withdrawing this large sum of money, accused Ilagan gave
alias Rey (Noel Tamayo) his share of the loot. Ilagan then hired a taxicab in the amount
of P1,000 to transport him (Ilagan) to his home province at Bauan, Batangas. Ilagan
extravagantly and lavishly spent his money but a big part of his loot was wasted in
cockfight and horse racing. Ilagan was apprehended and meekly admitted his
guilt. (Emphasis supplied.)
L.C. Diaz refutes Solidbanks contention by pointing out that the person who
withdrew the P300,000 was a certain Noel Tamayo. Both the trial and appellate courts
stated that this Noel Tamayo presented the passbook with the withdrawal slip.
We uphold the finding of the trial and appellate courts that a certain Noel Tamayo
withdrew the P300,000. The Court is not a trier of facts. We find no justifiable reason to
reverse the factual finding of the trial court and the Court of Appeals. The tellers who
processed the deposit of the P90,000 check and the withdrawal of the P300,000 were
not presented during trial to substantiate Solidbanks claim that Ilagan deposited the
check and made the questioned withdrawal. Moreover, the entry quoted by Solidbank
does not categorically state that Ilagan presented the withdrawal slip and the passbook.

Doctrine of Last Clear Chance

The doctrine of last clear chance states that where both parties are negligent but
the negligent act of one is appreciably later than that of the other, or where it is
impossible to determine whose fault or negligence caused the loss, the one who had
the last clear opportunity to avoid the loss but failed to do so, is chargeable with the
loss. Stated differently, the antecedent negligence of the plaintiff does not preclude him
from recovering damages caused by the supervening negligence of the defendant, who
had the last fair chance to prevent the impending harm by the exercise of due diligence.
We do not apply the doctrine of last clear chance to the present case. Solidbank is liable
for breach of contract due to negligence in the performance of its contractual obligation
to L.C. Diaz. This is a case of culpa contractual, where neither the contributory
negligence of the plaintiff nor his last clear chance to avoid the loss, would exonerate
the defendant from liability. Such contributory negligence or last clear chance by the
plaintiff merely serves to reduce the recovery of damages by the plaintiff but does not
exculpate the defendant from his breach of contract.

Mitigated Damages
Under Article 1172, liability (for culpa contractual) may be regulated by the courts,
according to the circumstances. This means that if the defendant exercised the proper
diligence in the selection and supervision of its employee, or if the plaintiff was guilty of
contributory negligence, then the courts may reduce the award of damages. In this
case, L.C. Diaz was guilty of contributory negligence in allowing a withdrawal slip signed
by its authorized signatories to fall into the hands of an impostor. Thus, the liability of
Solidbank should be reduced.
 In Philippine Bank of Commerce v. Court of Appeals, where the Court held the
depositor guilty of contributory negligence, we allocated the damages between the
depositor and the bank on a 40-60 ratio. Applying the same ruling to this case, we hold
that L.C. Diaz must shoulder 40% of the actual damages awarded by the appellate
court. Solidbank must pay the other 60% of the actual damages.

WHEREFORE, the decision of the Court of Appeals

is AFFIRMED with MODIFICATION. Petitioner Solidbank Corporation shall pay private
respondent L.C. Diaz and Company, CPAs only 60% of the actual damages awarded by
the Court of Appeals. The remaining 40% of the actual damages shall be borne by
private respondent L.C. Diaz and Company, CPAs. Proportionate costs.

SO ORDERED.
 METRO MANILA TRANSIT CORPORATION, Petitioner, v. THE COURT OF
APPEALS and NENITA CUSTODIO, Respondents

1. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT; BY THE TRIAL COURT; MAY

BE REVIEWED BY THE COURT OF APPEALS. — At this juncture, it suffice to note
that factual findings of the trial court may be reversed by the Court of Appeals, which is
vested by law with the power to review both legal and factual issues, if on the evidence
of record, it appears that the trial court may have been mistaken particularly in the
appreciation of evidence, which is within the domain of the Court of Appeals.

2. ID.; ID.; ID.; BY THE COURT OF APPEALS; RULE AND EXCEPTIONS;

APPLICATION IN CASE AT BAR. — The general rule laid down in a plethora of cases
is that such findings of fact by the Court of Appeals are conclusive upon and beyond the
power of review of the Supreme Court. However, it is now well-settled that while the
findings of fact of the Court of Appeals are entitled to great respect, and even finality at
times, that rule is not inflexible and is subject to well established exceptions, to wit: (1)
when the conclusion is a finding grounded entirely on speculation, surmises and
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible;
(3) where there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the
Court of Appeals, in making its findings, went beyond the issues of the case and the
same are contrary to the admissions of both appellant and appellee; (7) when the
findings of the Court of Appeals are contrary to those of the trial court; (8) when the
findings of the fact are conclusions without citation of specific evidence on which they
are based; (9) when the facts set forth in the petition, as well as in the petitioner’s main
and reply briefs, are not disputed by the respondents; and (10) when the findings of fact
of the Court of Appeals are premised on the supposed absence of evidence and are
contradicted by the evidence on record. When, as in this case, the findings of the Court
of Appeals and the trial court are contrary to each other, this court may scrutinize the
evidence on record, in order to arrive at a correct finding based thereon.

3. ID.; ID.; BURDEN OF PROOF; REST UPON THE PARTY WHO MADE AN
AFFIRMATIVE ASSERTION. — It is procedurally required for each party in a case to
prove his own affirmative assertion by the degree of evidence required by law. In civil
cases, the degree of evidence required of a party in order to support his claim is
preponderance of evidence, or that evidence adduced by one party which is more
conclusive and credible than that of the other party. It is, therefore, incumbent on the
plaintiff who is claiming a right to prove his case. Corollarily, defendant must likewise
prove its own allegation to buttress its claim that it is not liable. (Stronghold Insurance
Company, Inc. v. Court of Appeals, Et Al., 173 SCRA 619 [1989]) In fine, the party,
whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of
presenting at the trial such amount of evidence required by law to obtain a favorable
judgment. It is entirely within each of the parties’ discretion, consonant with the theory of
the case it or he seeks to advance and subject to such procedural strategy followed
thereby, to present all available evidence at its or his disposal in the manner which may
be deemed necessary and beneficial to prove its or his position, provided only that the
same shall measure up to the quantum of evidence required by law. In making proof in
its or his case, it is paramount that the best and most complete evidence be formally
entered.

4. ID.; ID.; ID.; ID.; OBSERVANCE OF THE DILIGENCE OF A GOOD FATHER OF A

FAMILY, AS A DEFENSE; NOT ESTABLISHED IN CASE AT BAR. — While there is no
rule which requires that testimonial evidence, to hold sway, must be corroborated by
documentary evidence, or even object evidence for that matter, inasmuch as the
witnesses’ testimonies dwelt on mere generalities, we cannot consider the same as
sufficiently persuasive proof that there was observance of due diligence in the selection
and supervision of employees. Petitioner’s attempt to prove its diligentissimi patris
familias in the selection and supervision of employees through oral evidence must fail
as it was unable to buttress the same with any other evidence, object or documentary,
which might obviate the apparent biased nature of the testimony. Whether or not the
diligence of a good father of a family has been observed by petitioner is a matter of
proof which under the circumstances in the case at bar has not been clearly
established. It is not felt by the Court that there is enough evidence on record as would
overturn the presumption of negligence, and for failure to submit all evidence within its
control, assuming the putative existence thereof, petitioner MMTC must suffer the
consequences of its own inaction and indifference. Due diligence in the supervision of
employees, includes the formulation of suitable rules and regulations for the guidance of
employees and the issuance of proper instructions intended for the protection of the
public and persons with whom the employer has relations through his or its employees
and the imposition of necessary disciplinary measures upon employees in case of
breach or as may be warranted to ensure the performance of acts indispensable to the
business of and beneficial to their employer. (Filamer Christian Institute v. Intermediate
Appellate Court, Et Al., 212 SCRA 637 [1992]) To this, we add that actual
implementation and monitoring of consistent compliance with said rules should be the
constant concern of the employer, acting through dependable supervisors who should
regularly report on their supervisory functions. In order that the defense of due diligence
in the selection and supervision of employees may be deemed sufficient and plausible,
it is not enough to emptily invoke the existence of said company guidelines and policies
on hiring and supervision. As the negligence of the employee gives rise to the
presumption of negligence on the part of the employer, the latter has the burden of
proving that it has been diligent not only in the selection of employees but also in the
actual supervision of their work. The mere allegation of the existence of hiring
procedures and supervisory policies, without anything more, is decidedly not sufficient
to overcome such presumption. We emphatically reiterate our holding, as a warning to
all employees, that" (t)he mere formulation of various company policies on safety
without showing that they were being complied with is not sufficient to exempt petitioner
from liability arising from negligence of its employees. It is incumbent upon petitioner to
show that in recruiting and employing the erring driver the recruitment procedures and
company policies on efficiency and safety were followed." (Pantranco North Express,
Inc. v. Baesa, 179 384 [1989]. See also Franco, Et. Al. v. Intermediate Appellate Court,
Et Al., 178 SCRA 31 [1989]) Paying lip-service to these injunctions or merely going
through the motions of compliance therewith will warrant stern sanctions from the Court.

5. CIVIL LAW; QUASI-DELICT; ELEMENTS. — The case at bar is clearly within the
coverage of Articles 2176 and 2177, in relation to Article 2180 of the Civil Code
provisions on quasi-delicts, as all the elements thereof are present, to wit: (1) damages
suffered by the plaintiff, (2) fault or negligence of the defendant or some other person
for whose act he must respond, and (3) the connection of cause and effect between
fault or negligence of the defendant and the damages incurred by plaintiff.

6. ID.; ID.; LIABILITY OF EMPLOYER; DEFENSE AVAILABLE; CASE AT BAR. —

Whether or not engaged in any business or industry, the employer under Article 2180 is
liable for torts committed by his employees within the scope of their assigned tasks. But,
it is necessary first to establish the employment relationship. Once this is done, the
plaintiff must show, to hold the employer liable, that the employee was acting within the
scope of his assigned task when the tort complained of was committed. It is only then
that the defendant, as employer, may find it necessary to interpose the defense of due
diligence in the selection and supervision of employees. The diligence of a good father
of a family required to be observed by employers to prevent damages under Article
2180 refers to due diligence in the selection and supervision of employees in order to
protect the public. With the allegation and subsequent proof of negligence against the
defendant driver and of an employer-employee relation between him and his co-
defendant MMTC in this instance, the case is undoubtedly based on a quasi-delict
under Article 2180. When the employee causes damage due to his own negligence
while performing his own duties, there arises the juris tantum presumption that the
employer is negligent, rebuttable only by proof of observance of the diligence of a good
father of a family. For failure to rebut such legal presumption of negligence in the
selection and supervision of employees, the employer is likewise responsible for
damages, the basis of the liability being the relationship of pater familias or on the
employer’s own negligence. As early as the case of Gutierrez v. Gutierrez, (56 Phil. 177
[1931]) and thereafter, we have consistently held that where the injury is due to the
concurrent negligence of the drivers of the colliding vehicles, the drivers and owners of
the said vehicles shall be primarily, directly and solidarily liable for damages and it is
immaterial that one action is based on quasi-delict and the other on culpa contractual,
as the solidarity of the obligation is justified by the very nature thereof. (Art. 1207, Civil
Code) It should be borne in mind that the legal obligation of employers to observe due
diligence in the selection and supervision of employees is not to be considered as an
empty play of words or a mere formalism, as appears to be the fashion of the times,
since the non-observance thereof actually becomes the basis of their vicarious liability
under Article 2180.

This appeal calls for a review of the legal validity and sufficiency of petitioner’s
invocation of due diligence in the selection and supervision of employees as its defense
against liability resulting from a vehicular collision. With the facility by which such a
defense can be contrived and our country having reputedly the highest traffic accident
rate in its geographical region, it is indeed high time for us to once again address this
matter which poses not only a litigation issue for the courts but affects the very safety of
our streets.

The facts of the case at bar are recounted for us by respondent court, thus —
"At about six o’clock in the morning of August 28, 1979, plaintiff-appellant Nenita
Custodio boarded as a paying passenger a public utility jeepney with plate No. D7 305
PUJ Pilipinas 1979, then driven by defendant Agudo Calebag and owned by his co-
defendant Victorino Lamayo, bound for her work at Dynetics Incorporated located in
Bicutan, Taguig, Metro Manila, where she then worked as a machine operator earning
P16.25 a day. While the passenger jeepney was travelling at (a) fast clip along DBP
Avenue, Bicutan, Taguig, Metro Manila another fast moving vehicle, a Metro Manila
Transit Corp. (MMTC, for short) bus bearing plate no. 3Z 307 PUB (Philippines) ‘79
driven by defendant Godofredo C. Leonardo was negotiating Honeydew Road, Bicutan,
Taguig, Metro Manila bound for its terminal at Bicutan. As both vehicles approached the
intersection of DBP Avenue and Honeydew Road they failed to slow down and slacken
their speed; neither did they blow their horns to warn approaching vehicles. As a
consequence, a collision between them occurred, the passenger jeepney ramming the
left side portion of the MMTC bus. The collision impact caused plaintiff-appellant Nenita
Custodio to hit the front windshield of the passenger jeepney and (she) was thrown out
therefrom, falling onto the pavement unconscious with serious physical injuries. She
was brought to the Medical City Hospital where she regained consciousness only after
one (1) week. Thereat, she was confined for twenty-four (24) days, and as a
consequence, she was unable to work for three and one half months (3 1/2)." A
complaint for damages was filed by herein private respondent, who being then a minor
was assisted by her parents, against all of therein named defendants following their
refusal to pay the expenses incurred by the former as a result of the collision.
Said defendants denied all the material allegations in the complaint and pointed an
accusing finger at each other as being the party at fault. Further, herein petitioner Metro
Manila Transit Corporation (MMTC), a government-owned corporation and one of the
defendants in the court a quo, along with its driver, Godofredo Leonardo, contrarily
averred in its answer with cross-claim and counterclaim that the MMTC bus was driven
in a prudent and careful manner by driver Leonardo and that it was the passenger
jeepney which was driven recklessly considering that it hit the left middle portion of the
MMTC bus, and that it was defendant Lamayo, the owner of the jeepney and employer
of driver Calebag, who failed to exercise due diligence in the selection and supervision
of employees and should thus be held solidarily liable for damages caused to the
MMTC bus through the fault and negligence of its employees.

Defendant Victorino Lamayo, for his part, alleged in his answer with cross-claim and
counterclaim that the damages suffered by therein plaintiff should be borne by
defendants MMTC and its driver, Godofredo Leonardo, because the latter’s negligence
was the sole and proximate cause of the accident and that MMTC failed to exercise due
diligence in the selection and supervision of its employees.

By order of the trial court, defendant Calebag was declared in default for failure to file an
answer. Thereafter, as no amicable settlement was reached during the pre-trial
conference, trial on the merits ensued with the opposing parties presenting their
respective witnesses and documentary evidence.

Herein private respondent Nenita Custodio, along with her parents, were presented as
witnesses for the prosecution. In addition, Dr. Edgardo del Mundo, the attending
physician, testified on the cause, nature and extent of the injuries she sustained as a
result of the vehicular mishap. On the other hand, defendant MMTC presented as
witnesses Godofredo Leonardo, Christian Bautista and Milagros Garbo. Defendant
Lamayo, however, failed to present any witness.

Milagros Garbo testified that, as a training officer of MMTC, she was in charge of the
selection of the company’s bus drivers, conducting for this purpose a series of training
programs and examinations. According to her, new applicants for job openings at
MMTC are preliminarily required to submit certain documents such as National Bureau
of Investigation (NBI) clearance, birth or residence certificate, ID pictures, certificate or
diploma of highest educational attainment, professional driver’s license, and work
experience certification. Re-entry applicants, aside from the foregoing requirements, are
additionally supposed to submit company clearance for shortages and damages and
revenue performance for the preceding year. Upon satisfactory compliance with said
requisites, applicants are recommended for and subjected to a preliminary interview,
followed by a record check to find out whether they are included in the list of
undesirable employees given by other companies.

Thereafter, she continued, if an applicant is found to be acceptable, a final interview by

the Chief Supervisor is scheduled and followed by a training program which consists of
seminars and actual driving and psycho-physical tests and X-ray examinations. The
seminars, which last for a total of eighteen (18) days, include familiarization with
assigned routes, existing traffic rules and regulations, Constabulary Highway Patrol
Group (CHPG) seminar on defensive driving, preventive maintenance, proper vehicle
handling, interpersonal relationship and administrative rules on discipline and on-the-job
training. Upon completion of all the seminars and tests, a final clearance is issued, an
employment contract is executed and the driver is ready to report for duty.

MMTC’s Transport Supervisor, Christian Bautista, testified that it was his duty to monitor
the daily operation of buses in the field, to countercheck the dispatcher on duty prior to
the operation of the buses in the morning and to see to it that the bus crew follow written
guidelines of the company, which include seeing to it that its employees are in proper
uniform, briefed in traffic rules and regulations before the start of duty, fit to drive and, in
general, follow other rules and regulations of the Bureau of Land Transportation as well
as of the company.

The reorganized trial court, in its decision of August 1, 1989, found both drivers of the
colliding vehicles concurrently negligent for non-observance of appropriate traffic rules
and regulations and for failure to take the usual precautions when approaching an
intersection. As joint tortfeasors, both drivers, as well as defendant Lamayo, were held
solidarily liable for damages sustained by plaintiff Custodio. Defendant MMTC, on the
bases of the evidence presented was, however, absolved from liability for the accident
on the ground that it was not only careful and diligent in choosing and screening
applicants for job openings but was also strict and diligent in supervising its employees
by seeing to it that its employees were in proper uniforms, briefed in traffic rules and
regulations before the start of duty, and that it checked its employees to determine
whether or not they were positive for alcohol and followed other rules and regulations
and guidelines of the Bureau of Land Transportation and of the company.

The trial court accordingly ruled:

"WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered dismissing
the complaint against the Metro Manila Transit Corporation and ordering defendants
Agudo P. Calebag, Victorino Lamayo and Godofredo C. Leonardo to pay plaintiffs,
jointly and severally, the following:
a) the sum of P10,000.00 by way of medical expenses;
b) the sum of P5,000.00 by way of expenses of litigation;
c) the sum of P15,000.00 by way of moral damages;
d) the sum of P2,672.00 by way of loss of earnings;
e) the sum of P5,000.00 by way of exemplary damages;
f) the sum of P6,000.00 by way of attorney’s fees; and
g) costs of suit. SO ORDERED."

Plaintiff’s motion to have that portion of the trial court’s decision absolving MMTC from
liability reconsidered having been denied for lack of merit, an appeal was filed by her
with respondent appellate court. After consideration of the appropriate pleadings on
appeal and finding the appeal meritorious, the Court of Appeals modified the trial court’s
decision by holding MMTC solidarily liable with the other defendants for the damages
awarded by the trial court because of their concurrent negligence, concluding that while
there is no hard and fast rule as to what constitutes sufficient evidence to prove that an
employer has exercised the due diligence required of it in the selection and supervision
of its employees, based on the quantum of evidence adduced the said appellate court
was not disposed to say that MMTC had exercised the diligence required of a good
father of a family in the selection and supervision of its driver, Godofredo Leonardo.

The Court of Appeals was resolute in its conclusion and denied the motions for
reconsideration of appellee Custodio and appellant MMTC in a resolution dated
February 17, 1982, thus prompting MMTC to file the instant petition invoking the review
powers of this Court over the decision of the Court of Appeals, raising as issues for
resolution whether or not (1) the documentary evidence to support the positive
testimonies of witnesses Garbo and Bautista are still necessary; (2) the testimonies of
witnesses Garbo and Bautista may still be disturbed on appeal; and (3) the evidence
presented during the trial with respect to the proof of due diligence of petitioner MMTC
in the selection and supervision of its employees, particularly driver Leonardo, is
sufficient.

Prefatorily, private respondent questions the timeliness of the filing of the petition at bar
in view of the procedural stricture that the timely perfection of an appeal is both a
mandatory and jurisdictional requirement. This is a legitimate concern on the part of
private respondent and presents an opportune occasion to once again clarify this point
as there appears to be some confusion in the application of the rules and interpretative
rulings regarding the computation of reglementary periods at the stage of
theproceedings.chanroblesvirtualawlibrary The records of this case reveal that the
decision of respondent Court of Appeals, dated October 31, 1991, was received by
MMTC on November 18, 1991 and it seasonably filed a motion for the reconsideration
thereof on November 28, 1991. Said motion for reconsideration was denied by
respondent court in its resolution dated February 17, 1992, which in turn was received
by MMTC on March 9, 1992. Therefore, it had, pursuant to Section 1, Rule 45 of the
Rules of Court, fifteen (15) days therefrom or up to March 24, 1992 within which to file a
petition for review on certiorari. Anticipating, however, that it may not be able to file said
petition before the lapse of the reglementary period therefor, MMTC filed a motion on
March 19, 1992 for an extension of thirty (30) days to file the present petition, with proof
of service of copies thereof to respondent court and the adverse parties. The Court
granted said motion, with the extended period to be counted from the expiration of the
reglementary period. Consequently, private respondent had thirty (30) days from March
24, 1992 within which to file its petition, or up to April 23, 1992, and the eventual filing of
said petition on April 14, 1992 was well within the period granted by the Court.

We digress to reiterate, in view of erroneous submissions that we continue to receive,

that in the case of a petition for review on certiorari from a decision rendered by the
Court of Appeals, Section 1, Rule 45 of the Rules of Court, which has long since been
clarified in Lacsamana v. The Hon. Second Special Cases Division of the Intermediate
Appellate Court, Et Al., allows the same to be filed "within fifteen (15) days from notice
of judgment or of the denial of the motion for reconsideration filed in due time, and
paying at the same time the corresponding docket fee." In other words, in the event a
motion for reconsideration is filed and denied, the period of fifteen (15) days begins to
run all over again from notice of the denial resolution. Otherwise put, if a motion for
reconsideration is filed, the reglementary period within which to appeal the decision of
the Court of Appeals to the Supreme Court is reckoned from the date the party who
intends to appeal received the order denying the motion for reconsideration.
Furthermore, a motion for extension of time to file a petition for review may be filed with
this Court within said reglementary period, paying at the same time the corresponding
docket fee.

1. The first two issues raised by petitioner shall be correlatively discussed in view of
their interrelation.
In its present petition, MMTC insists that the oral testimonies of its employees who were
presented as witnesses in its behalf sufficiently prove, even without the presentation of
documentary evidence, that driver Leonardo had complied with all the hiring and
clearance requirements and had undergone all trainings, tests and examinations
preparatory to actual employment, and that said positive testimonies spell out the rigid
procedure for screening of job applicants and the supervision of its employees in the
field. It underscored the fact that it had indeed complied with the measure of diligence in
the selection and supervision of its employees as enunciated in Campo, Et. Al. v.
Camarote, Et. Al. requiring an employer, in the exercise of the diligence of a good father
of a family, to carefully examine the applicant for employment as to his qualifications,
experience and record service, and not merely be satisfied with the possession of a
professional driver’s license.

It goes on to say that since the testimonies of these witnesses were allegedly neither
discredited nor impeached by the adverse party, they should be believed and not
arbitrarily disregarded or rejected nor disturbed on appeal. It assiduously argues that
inasmuch as there is no law requiring that facts alleged by petitioner be established by
documentary evidence, the probative force and weight of their testimonies should not be
discredited with the further note that the lower court having passed upon the relevancy
of the oral testimonies and considered the same as unrebutted, its consideration should
no longer be disturbed on appeal.

Private respondent, on the other hand, retorts that the factual findings of respondent
court are conclusive upon the High Court which cannot be burdened with the task of
analyzing and weighing the evidence all over again.
At this juncture, it suffices to note that factual findings of the trial court may be reversed
by the Court of Appeals, which is vested by law with the power to review both legal and
factual issues, if on the evidence of record, it appears that the trial court may have been
mistaken, particularly in the appreciation of evidence, which is within the domain of the
Court of Appeals. The general rule laid down in a plethora of cases is that such findings
of fact by the Court of Appeals are conclusive upon and beyond the power of review of
the Supreme Court. However, it is now well-settled that while the findings of fact of the
Court of Appeals are entitled to great respect, and even finality at times, that rule is not
inflexible and is subject to well established exceptions, to wit: (1) when the conclusion is
a finding grounded entirely on speculation, surmises and conjectures; (2) when the
inference made is manifestly mistaken, absurd or impossible; (3) where there is grave
abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5)
when the findings of fact are conflicting; (6) when the Court of Appeals, in making its
findings, went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee; (7) when the findings of the Court of
Appeals are contrary to those of the trial court; (8) when the findings of fact are
conclusions without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition, as well as in the petitioner’s main and reply briefs, are not
disputed by the respondents; and (10) when the findings of fact of the Court of Appeals
are premised on the supposed absence of evidence and are contradicted by the
evidence on record.

When, as in this case, the findings of the Court of Appeals and the trial court are
contrary to each other, this court may scrutinize the evidence on record, in order to
arrive at a correct finding based thereon.

A perusal of the same shows that since there is no dispute as to the finding of
concurrent negligence on the part of the defendant Calebag, the driver of the passenger
jeepney, and co-defendant Leonardo, the bus driver of petitioner MMTC, both of whom
were solidarily held liable with defendant Lamayo, the owner of the jeepney, we are
spared the necessity of determining the sufficiency of evidence establishing the fact of
negligence. The contrariety is in the findings of the two lower courts, and which is the
subject of this present controversy, with regard to the liability of MMTC as employer of
one the erring drivers.

The trial court, in absolving MMTC from liability ruled that —

"On the question as to whether defendant MMTC was successful in proving its defense
that indeed it had exercised the due diligence of a good father of a family in the
selection and supervision of defendant Leonardo, this Court finds that based on the
evidence presented during the trial, defendant MMTC was able to prove that it was not
only careful and diligent in choosing and screening applicants for job openings but also
strict (and) diligent in supervising its employees by seeing to it that its employees were
in proper uniforms, briefed in traffic rules and regulations before the start of duty,
checked employees to determine whether they were positive for alcohol and followed
other rules and regulations and guidelines of the Bureau of Land Transportation as well
as its company. Having successfully proven such defense, defendant MMTC, therefore,
cannot be held liable for the accident.

"Having reached this conclusion, the Court now holds that defendant MMTC be totally
absolved from liability and that the complaint against it be dismissed . . ."
whereas respondent court was of the opinion that — "It is surprising though that witness
Milagros Garbo did not testify nor present any evidence that defendant-appellee’s
driver, defendant Godofredo Leonardo has complied with or has undergone all
clearances and trainings she referred to. The clearances, result of seminars and tests
which Godofredo Leonardo submitted and complied with, if any, were not presented in
court despite the fact that they are obviously in the possession and control of defendant-
appellee. Instead, it resorted to generalities. This Court has ruled that due diligence in
(the) selection and supervision of employee(s) are not proved by mere testimonies to
the effect that its applicant has complied with all the company requirements before one
is admitted as an employee but without proof thereof.
"On the part of Christian Bautista, the transport supervisor of defendant-appellee, he
testified that it is his duty to monitor the operation of buses in the field; to countercheck
the dispatchers duty prior to the operation of the buses in the morning; to see to it that
bus crew follows written guidelines of the company (t.s.n., April 29, 1988, 00 4-5), but
when asked to present in court the alleged written guidelines of the company he merely
stated that he brought with him a ‘wrong document’ and defendant-appellee’s counsel
asked for reservation to present such written guidelines in the next hearing but the
same was (sic) never presented in court."

A thorough and scrupulous review of the records of this case reveals that the conclusion
of respondent Court of Appeals is more firmly grounded on jurisprudence and amply
supported by the evidence of record than that of the court below.

It is procedurally required for each party in a case to prove his own affirmative assertion
by the degree of evidence required by law. In civil cases, the degree of evidence
required of a party in order to support his claim is preponderance of evidence, or that
evidence adduced by one party which is more conclusive and credible than that of the
other party. It is therefore, incumbent on the plaintiff who is claiming a right to prove his
case. Corollarily, defendant must likewise prove its own allegation to buttress its claim
that it is not liable.
In fine, the party, whether plaintiff or defendant, who asserts the affirmative of the issue
has the burden of presenting at the trial such amount of evidence required by law to
obtain a favorable judgment. It is entirely within each of the parties discretion,
consonant with the theory of the case it or he seeks to advance and subject to such
procedural strategy followed thereby, to present all available evidence at its or his
disposal in the manner which may be deemed necessary and beneficial to prove its or
his position, provided only that the same shall measure up to the quantum of evidence
required by law. In making proof in its or his case, it is paramount that the best and most
complete evidence be formally entered.

Coming now to the case at bar, while there is no rule which requires that testimonial
evidence, to hold sway, must be corroborated by documentary evidence, or even object
evidence for that matter, inasmuch as the witnesses’ testimonies dwelt on mere
generalities, we cannot consider the same as sufficiently persuasive proof that there
was observance of due diligence in the selection and supervision of employees.
Petitioner’s attempt to prove its diligentissimi patris familias in the selection and
supervision of employees through oral evidence must fail as it was unable to buttress
the same with any other evidence, object or documentary, which might obviate the
apparent biased nature of the testimony.

Our view that the evidence for petitioner MMTC falls short of the required evidentiary
quantum as would convincingly and undoubtedly prove its observance of the diligence
of a good father of a family has its precursor in the underlying rationale pronounced in
the earlier case of Central Taxicab Corp. v. Ex-Meralco Employees Transportation Co.,
Et Al., set amidst an almost identical factual setting, where we held that:
". . . This witness spoke of an ‘affidavit of experience’ which a driver-applicant must
accomplish before he is employed by the company, a written ‘time schedule’ for each
bus, and a record of the inspections and thorough checks pertaining to each bus before
it leaves the car barn; yet no attempt was ever made to present in evidence any of
these documents, despite the fact that they were obviously in the possession and
control of the defendant company.
x x x"Albert also testified that he kept records of the preliminary and final tests
given him as well as a record of the qualifications and experience of each of the drivers
of the company. It is rather strange, therefore, that he failed to produce in court the all
important record of Roberto, the driver involved in this case.

"The failure of the defendant company to produce in court any ‘record’ or other
documentary proof tending to establish that it had exercised all the diligence of a good
father of a family in the selection and supervision of its drivers and buses,
notwithstanding the calls therefor by both the trial court and the opposing counsel,
argues strongly against its pretensions.

"We are fully aware that there is no hard-and-fast rule on the quantum of evidence
needed to prove due observance of all the diligence of a good father of a family as
would constitute a valid defense to the legal presumption of negligence on the part of an
employer or master whose employee has by his negligence, caused damage to
another. xxx (R)educing the testimony of Albert to its proper proportions, we do not
have enough thrustworthy evidence left to go by. We are of the considered opinion,
therefore, that the believable evidence on the degree of case and diligence that has
been exercised in the selection and supervision of Roberto Leon y Salazar, is not legally
sufficient to overcome the presumption of negligence against the defendant company."

Whether or not the diligence of a good father of a family has been observed by
petitioner is a matter of proof which under the circumstances in the case at bar has not
been clearly established. It is not felt by the Court that there is enough evidence on
record as would overturn the presumption of negligence, and for failure to submit all
evidence within its control, assuming the putative existence thereof, petitioner MMTC
must suffer the consequences of its own inaction and indifference.cralawnad

2. In any event, we do not find the evidence presented by petitioner sufficiently

convincing to prove the diligence of a good father of a family, which for an employer
doctrinally translates into its observance of due diligence in the selection and
supervision of its employees but which mandate, to use an oft-quoted phrase, is more
often honored in the breach than in the observance.

Petitioner attempted to essay in detail the company’s procedure for screening job
applicants and supervising its employees in the field, through the testimonies of
Milagros Garbo, as its training officer, and Christian Bautista, as its transport supervisor,
both of whom naturally and expectedly testified for MMTC. It then concluded with its
sweeping pontifications that "thus, there is no doubt that considering the nature of the
business of petitioner, it would not let any applicant-drivers to be (sic) admitted without
undergoing the rigid selection and training process with the end (in) view of protecting
the public in general and its passengers in particular; . . . thus, there is no doubt that
applicant had fully complied with the said requirements otherwise Garbo should not
have allowed him to undertake the next set of requirements . . . and the training
conducted consisting of seminars and actual driving tests were satisfactory otherwise
he should have not been allowed to drive the subject vehicle."

These statements strike us as both presumptuous and in the nature of petitio principii,
couched in generalities and shorn of any supporting evidence to boost their verity. As
earlier observed, respondent court could not but express surprise, and thereby its
incredulity, that witness Garbo neither testified nor presented any evidence that driver
Leonardo had complied with or had undergone all the clearances and trainings she took
pains to recite and enumerate. The supposed clearances, results of seminars and tests
which Leonardo allegedly submitted and complied with were never presented in court
despite the fact that, if true, then they were obviously in the possession and control of
petitioner.

The case at bar is clearly within the coverage of Articles 2176 and 2177, in relation to
Article 2180, of the Civil Code provisions on quasi-delicts, as all the elements thereof
are present, to wit: (1) damages suffered by the plaintiff, (2) fault or negligence of the
defendant or some other person for whose act he must respond, and (3) the connection
of cause and effect between fault or negligence of the defendant and the damages
incurred by plaintiff. It is to be noted that petitioner was originally sued as employer of
driver Leonardo under Article 2180, the pertinent parts of which provide that:
"The obligation imposed by article 2176 is demandable not only for one’s own acts or
omissions, but also for those of persons for whom one is responsible.
x x x
"Employers shall be liable for damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry.
x x x
"The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage."
The basis of the employer’s vicarious liability has been explained under this
ratiocination: "The responsibility imposed by this article arises by virtue of a presumption
juris tantum of negligence on the part of the persons made responsible under the article,
derived from their failure to exercise due care and vigilance over the acts of
subordinates to prevent them from causing damage. Negligence is imputed to them by
law, unless they prove the contrary. Thus, the last paragraph of the article says that
such responsibility ceases if it is proved that the persons who might be held responsible
under it exercised the diligence of a good father of a family (diligentissimi patris familias)
to prevent damage. It is clear, therefore, that it is not representation, nor interest, nor
even the necessity of having somebody else answer for the damages caused by the
persons devoid of personality, but it is the non-performance of certain duties of
precaution and prudence imposed upon the persons who become responsible by civil
bond uniting the actor to them, which forms the foundation of such responsibility."

The above rule is, of course, applicable only where there is an employer-employee
relationship, although it is not necessary that the employer be engaged in business or
industry. Whether or not engaged in any business or industry, the employer under
Article 2180 is liable for torts committed by his employees within the scope of their
assigned tasks. But, it is necessary first to establish the employment relationship. Once
this is done, the plaintiff must show, to hold the employer liable, that the employee was
acting within the scope of his assigned task when the tort complained of was committed.
It is only then that the defendant, as employer, may find it necessary to interpose the
defense of due diligence in the selection and supervision of employees. The diligence of
a good father of a family required to be observed by employers to prevent damages
under Article 2180 refers to due diligence in the selection and supervision of employees
in order to protect the public.
With the allegation and subsequent proof of negligence against the defendant driver
and of an employer-employee relation between him and his co-defendant MMTC in this
instance, the case is undoubtedly based on a quasi-delict under Article 2180. When the
employee causes damage due to his own negligence while performing his own duties,
there arises the juris tantum presumption that the employer is negligent, rebuttable only
by proof of observance of the diligence of a good father of a family. For failure to rebut
such legal presumption of negligence in the selection and supervision of employees, the
employer is likewise responsible for damages, the basis of the liability being the
relationship of pater familias or on the employer’s own negligence.

As early as the case of Gutierrez v. Gutierrez, and thereafter, we have consistently held
that where the injury is due to the concurrent negligence of the drivers of the colliding
vehicles, the drivers and owners of the said vehicles shall be primarily, directly and
solidarily liable for damages and it is immaterial that one action is based on quasi-delict
and the other on culpa contractual, as the solidarity of the obligation is justified by the
very nature thereof.
It should be borne in mind that the legal obligation of employers to observe due
diligence in the selection and supervision of employees is not to be considered as an
empty play of words or a mere formalism, as appears to be the fashion of the times,
since the non-observance thereof actually becomes the basis of their vicarious liability
under Article 2180.
On the matter of selection of employees, Cambo v. Camarote, supra, lays down this
admonition.
". . .. In order that the owner of a vehicle may be considered as having exercised all
diligence of a good father of a family, he should not have been satisfied with the mere
possession of a professional driver’s license; he should have carefully examined the
applicant for employment as to his qualifications, his experience and record of service.
These steps appellant failed to observe; he has therefore, failed to exercise all due
diligence required of a good father of a family in the choice or selection of driver."

Due diligence in the supervision of employees, on the other hand, includes the
formulation of suitable rules and regulations for the guidance of employees and the
issuance of proper instructions intended for the protection of the public and persons with
whom the employer has relations through his or its employees and the imposition of
necessary disciplinary measures upon employees in case of breach or as may be
warranted to ensure the performance of acts indispensable to the business of and
beneficial to their employer. To this, we add that actual implementation and monitoring
of consistent compliance with said rules should be the constant concern of the
employer, acting through dependable supervisors who should regularly report on their
supervisory functions.

In order that the defense of due diligence in the selection and supervision of employees
may be deemed sufficient and plausible, it is not enough to emptily invoke the existence
of said company guidelines and policies on hiring and supervision. As the negligence of
the employee gives rise to the presumption of negligence on the part of the employer,
the latter has the burden of proving that it has been diligent not only in the selection of
employees but also in the actual supervision of their work. The mere allegation of the
existence of hiring procedures and supervisory policies, without anything more, is
decidedly not sufficient to overcome such presumption.

We emphatically reiterate our holding, as a warning to all employers, that" (t)he mere
formulation of various company policies on safety without showing that they were being
complied with is not sufficient to exempt petitioner from liability arising from negligence
of its employees. It is incumbent upon petitioner to show that in recruiting and
employing the erring driver the recruitment procedures and company policies on
efficiency and safety were followed." Paying lip-service to these injunctions or merely
going through the motions of compliance therewith will warrant stern sanctions from the
Court.

These obligations, imposed by the law and public policy in the interests and for the
safety of the commuting public, herein petitioner failed to perform. Respondent court
was definitely correct in ruling that." . . due diligence in the selection and supervision of
employee (sic) not proved by mere testimonies to the effect that its applicant has
complied with all the company requirements before one is admitted as an employee but
without proof thereof." It is further a distressing commentary on petitioner that it is a
government-owned public utility, maintained by public funds, and organized for the
public welfare.

The Court feels it is necessary to once again stress the following rationale behind these
all-important statutory and jurisprudential mandates, for it has been observed that
despite its pronouncement in Kapalaran Bus Line v. Coronado, Et Al., supra, there has
been little improvement in the transport situation in the country:
"In requiring the highest possible degree of diligence from common carriers and creating
a presumption of negligence against them, the law compels them to curb the
recklessness of their drivers. While the immediate beneficiaries of the standard of
extraordinary diligence are, of course, the passengers and owners of the cargo carried
by a common carrier, they are not the only persons that the law seeks to benefit. For if
common carriers carefully observe the statutory standard of extraordinary diligence in
respect of their own passengers, they cannot help but simultaneously benefit
pedestrians and the owners and passengers of other vehicles who are equally entitled
to the safe and convenient use of our roads and highways. The law seeks to stop and
prevent the slaughter and maiming of people (whether passengers or not) and the
destruction of property (whether freight or not) on our highways by buses, the very size
and power of which seem often to inflame the minds of their drivers. . . .."

Finally, we believe that respondent court acted in the exercise of sound discretion when
it affirmed the trial court’s award, without requiring the payment of interest thereon as an
item of damages just because of delay in the determination thereof, especially since
private respondent did not specifically pray therefor in her complaint. Article 2211 of the
Civil Code provides that in quasi-delicts, interest as a part of the damages may be
awarded in the discretion of the court, and not as a matter of right. We do not perceive
that there have been intentional dilatory maneuvers or any special circumstances which
would justify that additional award and, consequently, we find no reason to disturb said
ruling.
WHEREFORE, the impugned decision of respondent Court of Appeals is hereby
AFFIRMED. SO ORDERED.
 HERMANA R. CEREZO, petitioner, vs. DAVID TUAZON, respondent.

This is a petition for review on certiorari to annul the Resolution dated 21 October
1999 of the Court of Appeals in CA-G.R. SP No. 53572, as well as its Resolution
dated 20 January 2000 denying the motion for reconsideration. The Court of Appeals
denied the petition for annulment of the Decisiondated 30 May 1995 rendered by
the Regional Trial Court of Angeles City, Branch 56 (trial court), in Civil Case No.
7415. The trial court ordered petitioner Hermana R. Cerezo (Mrs. Cerezo) to pay
respondent David Tuazon (Tuazon) actual damages, loss of earnings, moral damages,
and costs of suit.

Around noontime of 26 June 1993, a Country Bus Lines passenger bus with plate
number NYA 241 collided with a tricycle bearing plate number TC RV 126
along Captain M. Palo Street, Sta. Ines, Mabalacat, Pampanga. On 1 October 1993,
tricycle driver Tuazon filed a complaint for damages against Mrs. Cerezo, as owner of
the bus line, her husband Attorney Juan Cerezo (Atty. Cerezo), and bus driver Danilo A.
Foronda (Foronda). The complaint alleged that:
At the time of the incident, plaintiff [Tuazon] was in his proper lane when the second-
named defendant [Foronda], being then the driver and person in charge of the Country
Bus with plate number NYA 241, did then and there willfully, unlawfully, and feloniously
operate the said motor vehicle in a negligent, careless, and imprudent manner without
due regard to traffic rules and regulations, there being a Slow Down sign near the scene
of the incident, and without taking the necessary precaution to prevent loss of lives or
injuries, his negligence, carelessness and imprudence resulted to severe damage to the
tricycle and serious physical injuries to plaintiff thus making him unable to walk and
becoming disabled, with his thumb and middle finger on the left hand being cut[.]
On 1 October 1993, Tuazon filed a motion to litigate as a pauper. Subsequently, the trial
court issued summons against Atty. Cerezo and Mrs. Cerezo (the Cerezo spouses) at
the Makati address stated in the complaint. However, the summons was returned
unserved on 10 November 1993 as the Cerezo spouses no longer held office nor
resided in Makati. On 18 April 1994, the trial court issued alias summons against the
Cerezo spouses at their address in Barangay Sta. Maria, Camiling, Tarlac. The alias
summons and a copy of the complaint were finally served on 20 April 1994 at the office
of Atty. Cerezo, who was then working as Tarlac Provincial Prosecutor. Atty. Cerezo
reacted angrily on learning of the service of summons upon his person. Atty. Cerezo
allegedly told Sheriff William Canlas: Punyeta, ano ang gusto mong mangyari? Gusto
mong hindi ka makalabas ng buhay dito? Teritoryo ko ito. Wala ka sa teritoryo mo.
The records show that the Cerezo spouses participated in the proceedings before the
trial court. The Cerezo spouses filed a comment with motion for bill of particulars
dated 29 April 1994 and a reply to opposition to comment with motion dated 13 June
1994. On 1 August 1994, the trial court issued an order directing the Cerezo spouses to
file a comment to the opposition to the bill of particulars. Atty. Elpidio B. Valera (Atty.
Valera) of Valera and Valera Law Offices appeared on behalf of the Cerezo spouses.
On 29 August 1994, Atty. Valera filed an urgent ex-parte motion praying for the
resolution of Tuazons motion to litigate as a pauper and for the issuance of new
summons on the Cerezo spouses to satisfy proper service in accordance with the Rules
of Court.

On 30 August 1994, the trial court issued an order resolving Tuazons motion to litigate
as a pauper and the Cerezo spouses urgent ex-parte motion.The order reads:
At the hearing on August 30, 1994, the plaintiff [Tuazon] testified that he is presently
jobless; that at the time of the filing of this case, his son who is working in Malaysia
helps him and sends him once in a while P300.00 a month, and that he does not have
any real property. Attached to the Motion to Litigate as Pauper are his Affidavit that he is
unemployed; a Certification by the Barangay Captain of his poblacion that his income is
not enough for his familys subsistence; and a Certification by the Office of the Municipal
Assessor that he has no landholding in the Municipality of Mabalacat, Province of
Pampanga.

The Court is satisfied from the unrebutted testimony of the plaintiff that he is entitled to
prosecute his complaint in this case as a pauper under existing rules.
On the other hand, the Court denies the prayer in the Appearance and Urgent Ex-Parte
Motion requiring new summons to be served to the defendants. The Court is of the
opinion that any infirmity in the service of the summons to the defendant before plaintiff
was allowed to prosecute his complaint in this case as a pauper has been cured by this
Order.
If within 15 days from receipt of this Order, the defendants do not question on appeal
this Order of this Court, the Court shall proceed to resolve the Motion for Bill of
Particulars.
On 27 September 1994, the Cerezo spouses filed an urgent ex-parte motion for
reconsideration. The trial court denied the motion for reconsideration.
On 14 November 1994, the trial court issued an order directing the Cerezo spouses
to file their answer within fifteen days from receipt of the order.The Cerezo spouses did
not file an answer. On 27 January 1995, Tuazon filed a motion to declare the Cerezo
spouses in default. On 6 February 1995, the trial court issued an order declaring the
Cerezo spouses in default and authorizing Tuazon to present his evidence.
On 30 May 1995, after considering Tuazons testimonial and documentary evidence,
the trial court ruled in Tuazons favor. The trial court made no pronouncement on
Forondas liability because there was no service of summons on him. The trial court did
not hold Atty. Cerezo liable as Tuazon failed to show that Mrs. Cerezos business
benefited the family, pursuant to Article 121(3) of the Family Code. The trial court held
Mrs. Cerezo solely liable for the damages sustained by Tuazon arising from the
negligence of Mrs. Cerezos employee, pursuant to Article 2180 of the Civil Code. The
dispositive portion of the trial courts decision reads:
WHEREFORE, judgment is hereby rendered ordering the defendant Hermana
Cerezo to pay the plaintiff:
a) For Actual Damages
1) Expenses for operation and medical
Treatment - P69,485.35
2) Cost of repair of the tricycle - 39,921.00
b) For loss of earnings - 43,300.00
c) For moral damages - 20,000.00
d) And to pay the cost of the suit.
The docket fees and other expenses in the filing of this suit shall be lien on
whatever judgment may be rendered in favor of the plaintiff.SO ORDERED.

Mrs. Cerezo received a copy of the decision on 25 June 1995. On 10 July 1995, Mrs.
Cerezo filed before the trial court a petition for relief from judgment on the grounds of
fraud, mistake or excusable negligence. Testifying before the trial court, both Mrs.
Cerezo and Atty. Valera denied receipt of notices of hearings and of orders of the
court. Atty. Valera added that he received no notice before or during the 8 May
1995 elections, when he was a senatorial candidate for the KBL Party, and very busy,
using his office and residence as Party National Headquarters. Atty. Valera claimed that
he was able to read the decision of the trial court only after Mrs. Cerezo sent him a
copy.

Tuazon did not testify but presented documentary evidence to prove the participation of
the Cerezo spouses in the case. Tuazon presented the following exhibits:
Exhibit 1 - Sheriffs return and summons;
Exhibit 1-A - Alias summons dated April 20, 1994;
Exhibit 2 - Comment with Motion;
Exhibit 3 - Minutes of the hearing held on August 1, 1994;
 Exhibit 3-A - Signature of defendants counsel;
Exhibit 4 - Minutes of the hearing held on August 30, 1994;
Exhibit 4-A - Signature of the defendants counsel;
Exhibit 5 - Appearance and Urgent Ex-Parte Motion;
Exhibit 6 - Order dated November 14, 1994;
Exhibit 6-A - Postal certification dated January 13, 1995;
Exhibit 7 - Order dated February [illegible];
Exhibit 7-A - Courts return slip addressed to Atty. Elpidio
Valera;
Exhibit 7-B - Courts return slip addressed to Spouses Juan
and Hermana Cerezo;
Exhibit 8 - Decision dated May [30], 1995
Exhibit 8-A - Courts return slip addressed to defendant Hermana
Cerezo;
Exhibit 8-B - Courts return slip addressed to defendants counsel,
Atty. Elpidio Valera;
Exhibit 9 - Order dated September 21, 1995;
Exhibit 9-A - Second Page of Exhibit 9;
Exhibit 9-B - Third page of Exhibit 9;
Exhibit 9-C - Fourth page of Exhibit 9;
Exhibit 9-D - Courts return slip addressed to Atty. Elpidio Valera;
and
Exhibit 9-E - Courts return slip addressed to plaintiffs counsel,
Atty. Norman Dick de Guzman.

On 4 March 1998, the trial court issued an order denying the petition for relief from
judgment. The trial court stated that having received the decision on 25 June 1995, the
Cerezo spouses should have filed a notice of appeal instead of resorting to a petition for
relief from judgment. The trial court refused to grant relief from judgment because the
Cerezo spouses could have availed of the remedy of appeal. Moreover, the Cerezo
spouses not only failed to prove fraud, accident, mistake or excusable negligence by
conclusive evidence, they also failed to prove that they had a good and substantial
defense. The trial court noted that the Cerezo spouses failed to appeal because they
relied on an expected settlement of the case.

The Cerezo spouses subsequently filed before the Court of Appeals a petition
for certiorari under Section 1 of Rule 65. The petition was docketed as CA-G.R. SP No.
48132. The petition questioned whether the trial court acquired jurisdiction over the
case considering there was no service of summons on Foronda, whom the Cerezo
spouses claimed was an indispensable party. In a resolution dated 21 January 1999,
the Court of Appeals denied the petition for certiorari and affirmed the trial courts order
denying the petition for relief from judgment. The Court of Appeals declared that the
Cerezo spouses failure to file an answer was due to their own negligence, considering
that they continued to participate in the proceedings without filing an answer. There was
also nothing in the records to show that the Cerezo spouses actually offered a
reasonable settlement to Tuazon. The Court of Appeals also denied Cerezo spouses
motion for reconsideration for lack of merit.

The Cerezo spouses filed before this Court a petition for review on certiorari under Rule
45. Atty. Cerezo himself signed the petition, docketed as G.R. No. 137593. On 13 April
1999, this Court rendered a resolution denying the petition for review on certiorari for
failure to attach an affidavit of service of copies of the petition to the Court of Appeals
and to the adverse parties. Even if the petition complied with this requirement, the Court
would still have denied the petition as the Cerezo spouses failed to show that the Court
of Appeals committed a reversible error. The Courts resolution was entered in the Book
of Entries and Judgments when it became final and executory on 28 June 1999.

Undaunted, the Cerezo spouses filed before the Court of Appeals on 6 July 1999 a
petition for annulment of judgmentunder Rule 47 with prayer for restraining order. Atty.
Valera and Atty. Dionisio S. Daga (Atty. Daga) represented Mrs. Cerezo in the petition,
docketed as CA-G.R. SP No. 53572. The petition prayed for the annulment of the 30
May 1995 decision of the trial court and for the issuance of a writ of preliminary
injunction enjoining execution of the trial courts decision pending resolution of the
petition.

The Court of Appeals denied the petition for annulment of judgment in a resolution
dated 21 October 1999. The resolution reads in part:
In this case, records show that the petitioner previously filed with the lower court a
Petition for Relief from Judgment on the ground that they were wrongfully declared in
default while waiting for an amicable settlement of the complaint for damages. The
court a quo correctly ruled that such petition is without merit. The defendant spouses
admit that during the initial hearing they appeared before the court and even mentioned
the need for an amicable settlement. Thus, the lower court acquired jurisdiction over the
defendant spouses.
Therefore, petitioner having availed of a petition for relief, the remedy of an annulment
of judgment is no longer available. The proper action for the petitioner is to appeal the
order of the lower court denying the petition for relief.
Wherefore, the instant petition could not be given due course and should accordingly be
dismissed. SO ORDERED.

On 20 January 2000, the Court of Appeals denied the Cerezo spouses motion for
reconsideration. The Court of Appeals stated:
A distinction should be made between a courts jurisdiction over a person and its
jurisdiction over the subject matter of a case. The former is acquired by the proper
service of summons or by the parties voluntary appearance; while the latter is conferred
by law.

Resolving the matter of jurisdiction over the subject matter, Section 19(1) of B[atas]
P[ambansa] 129 provides that Regional Trial Courts shall exercise exclusive original
jurisdiction in all civil actions in which the subject of the litigation is incapable of
pecuniary estimation. Thus it was proper for the lower court to decide the instant case
for damages.
Unlike jurisdiction over the subject matter of a case which is absolute and conferred by
law; any defects [sic] in the acquisition of jurisdiction over a person (i.e., improper filing
of civil complaint or improper service of summons) may be waived by the voluntary
appearance of parties.

The lower court admits the fact that no summons was served on defendant
Foronda. Thus, jurisdiction over the person of defendant Foronda was not acquired, for
which reason he was not held liable in this case. However, it has been proven that
jurisdiction over the other defendants was validly acquired by the court a quo.
The defendant spouses admit to having appeared in the initial hearings and in the
hearing for plaintiffs motion to litigate as a pauper. They even mentioned conferences
where attempts were made to reach an amicable settlement with plaintiff. However, the
possibility of amicable settlement is not a good and substantial defense which will
warrant the granting of said petition.
xxx
Assuming arguendo that private respondent failed to reserve his right to institute a
separate action for damages in the criminal action, the petitioner cannot now raise such
issue and question the lower courts jurisdiction because petitioner and her husband
have waived such right by voluntarily appearing in the civil case for damages.Therefore,
the findings and the decision of the lower court may bind them.
Records show that the petitioner previously filed with the lower court a Petition for Relief
from Judgment on the ground that they were wrongfully declared in default while waiting
for an amicable settlement of the complaint for damages. The court a quo correctly
ruled that such petition is without merit, jurisdiction having been acquired by the
voluntary appearance of defendant spouses.
Once again, it bears stressing that having availed of a petition for relief, the remedy of
annulment of judgment is no longer available.
Based on the foregoing, the motion for reconsideration could not be given due course
and is hereby DENIED. SO ORDERED.

The Issues
On 7 February 2000, Mrs. Cerezo, this time with Atty. Daga alone representing her,
filed the present petition for review on certiorari before this Court.Mrs. Cerezo claims
that:
1. In dismissing the Petition for Annulment of Judgment, the Court of Appeals
assumes that the issues raised in the petition for annulment is based on
extrinsic fraud related to the denied petition for relief notwithstanding that the
grounds relied upon involves questions of lack of jurisdiction.
2. In dismissing the Petition for Annulment, the Court of Appeals disregarded
the allegation that the lower court[s] findings of negligence against
defendant-driver Danilo Foronda [whom] the lower court did not summon is
null and void for want of due process and consequently, such findings of
negligence which is [sic] null and void cannot become the basis of the lower
court to adjudge petitioner-employer liable for civil damages.
3. In dismissing the Petition for Annulment, the Court of Appeals ignored the
allegation that defendant-driver Danilo A. Foronda whose negligence is the
main issue is an indispensable party whose presence is compulsory but
[whom] the lower court did not summon.
4. In dismissing the Petition for Annulment, the Court of Appeals ruled that
assuming arguendo that private respondent failed to reserve his right to
institute a separate action for damages in the criminal action, the petitioner
cannot now raise such issue and question the lower courts jurisdiction
because petitioner [has] waived such right by voluntarily appearing in the civil
case for damages notwithstanding that lack of jurisdiction cannot be waived.

The Courts Ruling

The petition has no merit. As the issues are interrelated, we shall discuss them jointly.
Remedies Available to a Party Declared in Default
An examination of the records of the entire proceedings shows that three lawyers
filed and signed pleadings on behalf of Mrs. Cerezo, namely, Atty. Daga, Atty. Valera,
and Atty. Cerezo. Despite their number, Mrs. Cerezos counsels failed to avail of the
proper remedies. It is either by sheer ignorance or by malicious manipulation of legal
technicalities that they have managed to delay the disposition of the present case, to
the detriment of pauper litigant Tuazon.

Mrs. Cerezo claims she did not receive any copy of the order declaring the Cerezo
spouses in default. Mrs. Cerezo asserts that she only came to know of the default order
on 25 June 1995, when she received a copy of the decision. On 10 July 1995, Mrs.
Cerezo filed before the trial court a petition for relief from judgment under Rule 38,
alleging fraud, mistake, or excusable negligence as grounds. On 4 March 1998, the trial
court denied Mrs. Cerezos petition for relief from judgment. The trial court stated that
Mrs. Cerezo could have availed of appeal as a remedy and that she failed to prove that
the judgment was entered through fraud, accident, mistake, or excusable
negligence. Mrs. Cerezo then filed before the Court of Appeals a petition
for certiorari under Section 1 of Rule 65 assailing the denial of the petition for relief from
judgment. On 21 January 1999, the Court of Appeals dismissed Mrs. Cerezos
petition. On 24 February 1999, the appellate court denied Mrs. Cerezos motion for
reconsideration. On 11 March 1999, Mrs. Cerezo filed before this Court a petition for
review on certiorari under Rule 45, questioning the denial of the petition for relief from
judgment. We denied the petition and our resolution became final and executory on 28
June 1999.

On 6 July 1999, a mere eight days after our resolution became final and executory,
Mrs. Cerezo filed before the Court of Appeals a petition for annulment of the judgment
of the trial court under Rule 47. Meanwhile, on 25 August 1999, the trial court issued
over the objection of Mrs. Cerezo an order of execution of the judgment in Civil Case
No. 7415. On 21 October 1999, the Court of Appeals dismissed the petition for
annulment of judgment.On 20 January 2000, the Court of Appeals denied Mrs. Cerezos
motion for reconsideration. On 7 February 2000, Mrs. Cerezo filed the present petition
for review on certiorari under Rule 45 challenging the dismissal of her petition for
annulment of judgment.
Lina v. Court of Appeals enumerates the remedies available to a party declared in
default:
a) The defendant in default may, at any time after discovery thereof and before
judgment, file a motion under oath to set aside the order of default on the
 ground that his failure to answer was due to fraud, accident, mistake or
excusable negligence, and that he has a meritorious defense (Sec. 3, Rule
18 [now Sec. 3(b), Rule 9]);
b) If the judgment has already been rendered when the defendant discovered
the default, but before the same has become final and executory, he may file
a motion for new trial under Section 1 (a) of Rule 37;
c) If the defendant discovered the default after the judgment has become final
and executory, he may file a petition for relief under Section 2 [now Section
1] of Rule 38; and
d) He may also appeal from the judgment rendered against him as contrary to
the evidence or to the law, even if no petition to set aside the order of default
has been presented by him (Sec. 2, Rule 41). (Emphasis added)

Moreover, a petition for certiorari to declare the nullity of a judgment by default is also
available if the trial court improperly declared a party in default, or even if the trial court
properly declared a party in default, if grave abuse of discretion attended such
declaration.
Mrs. Cerezo admitted that she received a copy of the trial courts decision on 25
June 1995. Based on this admission, Mrs. Cerezo had at least three remedies at her
disposal: an appeal, a motion for new trial, or a petition for certiorari.
Mrs. Cerezo could have appealed under Rule 41 from the default judgment within
15 days from notice of the judgment. She could have availed of the power of the Court
of Appeals to try cases and conduct hearings, receive evidence, and perform all acts
necessary to resolve factual issues raised in cases falling within its appellate
jurisdiction.
Mrs. Cerezo also had the option to file under Rule 37 a motion for new trial within
the period for taking an appeal. If the trial court grants a new trial, the original judgment
is vacated, and the action will stand for trial de novo. The recorded evidence taken in
the former trial, as far as the same is material and competent to establish the issues,
shall be used at the new trial without retaking the same.
Mrs. Cerezo also had the alternative of filing under Rule 65 a petition
for certiorari assailing the order of default within 60 days from notice of the judgment. An
order of default is interlocutory, and an aggrieved party may file an appropriate special
civil action under Rule 65. In a petition for certiorari, the appellate court may declare
void both the order of default and the judgment of default.
Clearly, Mrs. Cerezo had every opportunity to avail of these remedies within the
reglementary periods provided under the Rules of Court. However, Mrs. Cerezo opted
to file a petition for relief from judgment, which is available only in exceptional
cases. A petition for relief from judgment should be filed within the reglementary period
of 60 days from knowledge of judgment and six months from entry of judgment,
pursuant to Rule 38 of the Rules of Civil Procedure. Tuason v. Court of
Appeals explained the nature of a petition for relief from judgment:
When a party has another remedy available to him, which may either be a motion for
new trial or appeal from an adverse decision of the trial court, and he was not prevented
by fraud, accident, mistake or excusable negligence from filing such motion or taking
such appeal, he cannot avail himself of this petition. Indeed, relief will not be granted to
a party who seeks avoidance from the effects of the judgment when the loss of the
remedy at law was due to his own negligence; otherwise the petition for relief can be
used to revive the right to appeal which has been lost thru inexcusable negligence.

Evidently, there was no fraud, accident, mistake, or excusable negligence that

prevented Mrs. Cerezo from filing an appeal, a motion for new trial or a petition
for certiorari. It was error for her to avail of a petition for relief from judgment.
After our resolution denying Mrs. Cerezos petition for relief became final and
executory, Mrs. Cerezo, in her last ditch attempt to evade liability, filed before the Court
of Appeals a petition for annulment of the judgment of the trial court. Annulment is
available only on the grounds of extrinsic fraud and lack of jurisdiction. If based on
extrinsic fraud, a party must file the petition within four years from its discovery, and if
based on lack of jurisdiction, before laches or estoppel bars the petition. Extrinsic fraud
is not a valid ground if such fraud was used as a ground, or could have been used as a
ground, in a motion for new trial or petition for relief from judgment.
Mrs. Cerezo insists that lack of jurisdiction, not extrinsic fraud, was her ground for
filing the petition for annulment of judgment. However, a party may avail of the remedy
of annulment of judgment under Rule 47 only if the ordinary remedies of new trial,
appeal, petition for relief from judgment, or other appropriate remedies are no longer
available through no fault of the party. Mrs. Cerezo could have availed of a new trial or
appeal but through her own fault she erroneously availed of the remedy of a petition for
relief, which was denied with finality. Thus, Mrs. Cerezo may no longer avail of the
remedy of annulment.
In any event, the trial court clearly acquired jurisdiction over Mrs. Cerezos
person. Mrs. Cerezo actively participated in the proceedings before the trial court,
submitting herself to the jurisdiction of the trial court. The defense of lack of jurisdiction
fails in light of her active participation in the trial court proceedings. Estoppel or laches
may also bar lack of jurisdiction as a ground for nullity especially if raised for the first
time on appeal by a party who participated in the proceedings before the trial court, as
what happened in this case.
 For these reasons, the present petition should be dismissed for utter lack of
merit. The extraordinary action to annul a final judgment is restricted to the grounds
specified in the rules. The reason for the restriction is to prevent this extraordinary
action from being used by a losing party to make a complete farce of a duly
promulgated decision that has long become final and executory. There would be no end
to litigation if parties who have unsuccessfully availed of any of the appropriate
remedies or lost them through their fault could still bring an action for annulment of
judgment.Nevertheless, we shall discuss the issues raised in the present petition to
clear any doubt about the correctness of the decision of the trial court.

Mrs. Cerezos Liability and the Trial Courts Acquisition of Jurisdiction

Mrs. Cerezo contends that the basis of the present petition for annulment is lack of
jurisdiction. Mrs. Cerezo asserts that the trial court could not validly render judgment
since it failed to acquire jurisdiction over Foronda. Mrs. Cerezo points out that there was
no service of summons on Foronda.Moreover, Tuazon failed to reserve his right to
institute a separate civil action for damages in the criminal action. Such contention
betrays a faulty foundation. Mrs. Cerezos contention proceeds from the point of view of
criminal law and not of civil law, while the basis of the present action of Tuazon is quasi-
delict under the Civil Code, not delict under the Revised Penal Code.
The same negligent act may produce civil liability arising from a delict under Article
103 of the Revised Penal Code, or may give rise to an action for a quasi-delict under
Article 2180 of the Civil Code. An aggrieved party may choose between the two
remedies. An action based on a quasi-delict may proceed independently from the
criminal action. There is, however, a distinction between civil liability arising from a delict
and civil liability arising from a quasi-delict. The choice of remedy, whether to sue for a
delict or a quasi-delict, affects the procedural and jurisdictional issues of the action.
Tuazon chose to file an action for damages based on a quasi-delict. In his complaint,
Tuazon alleged that Mrs. Cerezo, without exercising due care and diligence in the
supervision and management of her employees and buses, hired Foronda as her
driver. Tuazon became disabled because of Forondas recklessness, gross negligence
and imprudence, aggravated by Mrs. Cerezos lack of due care and diligence in the
selection and supervision of her employees, particularly Foronda.

The trial court thus found Mrs. Cerezo liable under Article 2180 of the Civil Code. Article
2180 states in part:
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry.
 Contrary to Mrs. Cerezos assertion, Foronda is not an indispensable party to the
case. An indispensable party is one whose interest is affected by the courts action in the
litigation, and without whom no final resolution of the case is possible. However, Mrs.
Cerezos liability as an employer in an action for a quasi-delict is not only solidary, it is
also primary and direct. Foronda is not an indispensable party to the final resolution of
Tuazons action for damages against Mrs. Cerezo.
The responsibility of two or more persons who are liable for a quasi-delict is
solidary. Where there is a solidary obligation on the part of debtors, as in this case,
each debtor is liable for the entire obligation. Hence, each debtor is liable to pay for the
entire obligation in full. There is no merger or renunciation of rights, but only mutual
representation. Where the obligation of the parties is solidary, either of the parties is
indispensable, and the other is not even a necessary party because complete relief is
available from either. Therefore, jurisdiction over Foronda is not even necessary as
Tuazon may collect damages from Mrs. Cerezo alone.

Moreover, an employers liability based on a quasi-delict is primary and direct, while the
employers liability based on a delict is merely subsidiary.The words primary and direct,
as contrasted with subsidiary, refer to the remedy provided by law for enforcing the
obligation rather than to the character and limits of the obligation. Although liability
under Article 2180 originates from the negligent act of the employee, the aggrieved
party may sue the employer directly. When an employee causes damage, the law
presumes that the employer has himself committed an act of negligence in not
preventing or avoiding the damage. This is the fault that the law condemns. While the
employer is civilly liable in a subsidiary capacity for the employees criminal negligence,
the employer is also civilly liable directly and separately for his own civil negligence in
failing to exercise due diligence in selecting and supervising his employee. The idea
that the employers liability is solely subsidiary is wrong.
The action can be brought directly against the person responsible (for another), without
including the author of the act. The action against the principal is accessory in the sense
that it implies the existence of a prejudicial act committed by the employee, but it is not
subsidiary in the sense that it can not be instituted till after the judgment against the
author of the act or at least, that it is subsidiary to the principal action; the action for
responsibility (of the employer) is in itself a principal action.

Thus, there is no need in this case for the trial court to acquire jurisdiction over
Foronda. The trial courts acquisition of jurisdiction over Mrs. Cerezo is sufficient to
dispose of the present case on the merits.
‘
In contrast, an action based on a delict seeks to enforce the subsidiary liability of the
employer for the criminal negligence of the employee as provided in Article 103 of the
Revised Penal Code. To hold the employer liable in a subsidiary capacity under a delict,
the aggrieved party must initiate a criminal action where the employees delict and
corresponding primary liability are established. If the present action proceeds from a
delict, then the trial courts jurisdiction over Foronda is necessary. However, the present
action is clearly for the quasi-delict of Mrs. Cerezo and not for the delict of Foronda.

The Cerezo spouses contention that summons be served anew on them is untenable in
light of their participation in the trial court proceedings. To uphold the Cerezo spouses
contention would make a fetish of a technicality. Moreover, any irregularity in the service
of summons that might have vitiated the trial courts jurisdiction over the persons of the
Cerezo spouses was deemed waived when the Cerezo spouses filed a petition for relief
from judgment.

We hold that the trial court had jurisdiction and was competent to decide the case in
favor of Tuazon and against Mrs. Cerezo even in the absence of Foronda. Contrary to
Mrs. Cerezos contention, Foronda is not an indispensable party to the present case. It is
not even necessary for Tuazon to reserve the filing of a separate civil action because he
opted to file a civil action for damages against Mrs. Cerezo who is primarily and directly
liable for her own civil negligence. The words of Justice Jorge Bocobo in Barredo v.
Garcia still hold true today as much as it did in 1942:
x x x [T]o hold that there is only one way to make defendants liability effective, and that
is, to sue the driver and exhaust his (the latters) property first, would be tantamount to
compelling the plaintiff to follow a devious and cumbersome method of obtaining
relief. True, there is such a remedy under our laws, but there is also a more expeditious
way, which is based on the primary and direct responsibility of the defendant under
article [2180] of the Civil Code. Our view of the law is more likely to facilitate remedy for
civil wrongs, because the procedure indicated by the defendant is wasteful and
productive of delay, it being a matter of common knowledge that professional drivers of
taxis and other similar public conveyances do not have sufficient means with which to
pay damages. Why, then, should the plaintiff be required in all cases to go through this
roundabout, unnecessary, and probably useless procedure? In construing the laws,
courts have endeavored to shorten and facilitate the pathways of right and justice.

Interest at the rate of 6% per annum is due on the amount of damages adjudged by the
trial court. The 6% per annum interest shall commence from 30 May 1995, the date of
the decision of the trial court. Upon finality of this decision, interest at 12% per annum,
in lieu of 6% per annum, is due on the amount of damages adjudged by the trial court
until full payment.

WHEREFORE, we DENY the instant petition for review. The Resolution dated 21
October 1999 of the Court of Appeals in CA-G.R. SP No. 53572, as well as its
Resolution dated 20 January 2000 denying the motion for reconsideration,
is AFFIRMED with the MODIFICATION that the amount due shall earn legal interest at
6% per annum computed from 30 May 1995, the date of the trial courts decision. Upon
finality of this decision, the amount due shall earn interest at 12% per annum, in lieu of
6% per annum, until full payment.

SO ORDERED.
 MACARIO TAMARGO, CELSO TAMARGO and AURELIA TAMARGO, petitioners,
vs. HON. COURT OF APPEALS, THE HON. ARISTON L. RUBIO, RTC Judge,
Branch 20, Vigan, Ilocos Sur; VICTOR BUNDOC; and CLARA BUNDOC,
respondents.
G.R. No. 85044
On 20 October 1982, Adelberto Bundoc, then a minor of 10 years of age, shot Jennifer
Tamargo with an air rifle causing injuries which resulted in her death. Accordingly, a civil
complaint for damages was filed with the Regional Trial Court, Branch 20, Vigan, Ilocos
Sur, docketed as Civil Case No. 3457-V, by petitioner Macario Tamargo, Jennifer's
adopting parent, and petitioner spouses Celso and Aurelia Tamargo, Jennifer's natural
parents against respondent spouses Victor and Clara Bundoc, Adelberto's natural
parents with whom he was living at the time of the tragic incident. In addition to this
case for damages, a criminal information or Homicide through Reckless Imprudence
was filed [Criminal Case No. 1722-V] against Adelberto Bundoc. Adelberto, however,
was acquitted and exempted from criminal liability on the ground that he bad acted
without discernment.

Prior to the incident, or on 10 December 1981, the spouses Sabas and Felisa Rapisura
had filed a petition to adopt the minor Adelberto Bundoc in Special Proceedings No.
0373-T before the then Court of First Instance of Ilocos Sur. This petition for adoption
was grunted on, 18 November 1982, that is, after Adelberto had shot and killed Jennifer.

In their Answer, respondent spouses Bundoc, Adelberto's natural parents, reciting the
result of the foregoing petition for adoption, claimed that not they, but rather the
adopting parents, namely the spouses Sabas and Felisa Rapisura, were indispensable
parties to the action since parental authority had shifted to the adopting parents from the
moment the successful petition for adoption was filed.
Petitioners in their Reply contended that since Adelberto Bundoc was then actually
living with his natural parents, parental authority had not ceased nor been relinquished
by the mere filing and granting of a petition for adoption.
The trial court on 3 December 1987 dismissed petitioners' complaint, ruling that
respondent natural parents of Adelberto indeed were not indispensable parties to the
action.

Petitioners received a copy of the trial court's Decision on 7 December 1987. Within the
15-day reglementary period, or on 14 December 1987, petitioners filed a motion for
reconsideration followed by a supplemental motion for reconsideration on 15 January
1988. It appearing, however, that the motions failed to comply with Sections 4 and 5 of
Rule 15 of the Revised Rules of Court — that notice of the motion shall be given to all
parties concerned at least three (3) days before the hearing of said motion; and that
said notice shall state the time and place of hearing — both motions were denied by the
trial court in an Order dated 18 April 1988. On 28 April 1988, petitioners filed a notice of
appeal. In its Order dated 6 June 1988, the trial court dismissed the notice at appeal,
this time ruling that the notice had been filed beyond the 15-day reglementary period
ending 22 December 1987.

Petitioners went to the Court of Appeals on a petition for mandamus and certiorari
questioning the trial court's Decision dated 3 December 1987 and the Orders dated 18
April 1988 and 6 June 1988, The Court of Appeals dismissed the petition, ruling that
petitioners had lost their right to appeal.

In the present Petition for Review, petitioners once again contend that respondent
spouses Bundoc are the indispensable parties to the action for damages caused by the
acts of their minor child, Adelberto Bundoc. Resolution of this Petition hinges on the
following issues: (1) whether or not petitioners, notwithstanding loss of their right to
appeal, may still file the instant Petition; conversely, whether the Court may still take
cognizance of the case even through petitioners' appeal had been filed out of time; and
(2) whether or not the effects of adoption, insofar as parental authority is concerned
may be given retroactive effect so as to make the adopting parents the indispensable
parties in a damage case filed against their adopted child, for acts committed by the
latter, when actual custody was yet lodged with the biological parents.

1. It will be recalled that, petitioners' motion (and supplemental motion) for

reconsideration filed before the trial court, not having complied with the requirements of
Section 13, Rule 41, and Section 4, Rule 15, of the Revised Rules of Court, were
considered pro forma and hence did not interrupt and suspend the reglementary period
to appeal: the trial court held that the motions, not having contained a notice of time and
place of hearing, had become useless pieces of paper which did not interrupt the
reglementary period. As in fact repeatedly held by this Court, what is mandatory is the
service of the motion on the opposing counsel indicating the time and place of hearing.

In view, however, of the nature of the issue raised in the instant. Petition, and in order
that substantial justice may be served, the Court, invoking its right to suspend the
application of technical rules to prevent manifest injustice, elects to treat the notice of
appeal as having been seasonably filed before the trial court, and the motion (and
supplemental motion) for reconsideration filed by petitioner in the trial court as having
interrupted the reglementary period for appeal. As the Court held in Gregorio v. Court of
Appeals: Dismissal of appeal; purely on technical grounds is frowned upon where the
policy of the courts is to encourage hearings of appeal on their merits. The rules of
procedure ought not be applied in a very rigid technical sense, rules of procedure are
used only to help secure not override, substantial justice. if d technical and rigid
enforcement of the rules is made their aim would be defeated.

2. It is not disputed that Adelberto Bundoc's voluntary act of shooting Jennifer

Tamargo with an air rifle gave rise to a cause of action on quasi-delict against him. As
Article 2176 of the Civil Code provides:
Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasi-
delict . . .
Upon the other hand, the law imposes civil liability upon the father and, in case of his
death or incapacity, the mother, for any damages that may be caused by a minor child
who lives with them. Article 2180 of the Civil Code reads:
The obligation imposed by article 2176 is demandable not only for one's own acts
or omissions, but also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the
damages caused by the minor children who live in their company.
xxx xxx xxx
The responsibility treated of in this Article shall cease when the person herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage.

This principle of parental liability is a species of what is frequently designated as

vicarious liability, or the doctrine of "imputed negligence" under Anglo-American tort law,
where a person is not only liable for torts committed by himself, but also for torts
committed by others with whom he has a certain relationship and for whom he is
responsible. Thus, parental liability is made a natural or logical consequence of the
duties and responsibilities of parents — their parental authority — which includes the
instructing, controlling and disciplining of the child. The basis for the doctrine of
vicarious liability was explained by the Court in Cangco v. Manila Railroad Co. in the
following terms: With respect to extra-contractual obligation arising from negligence,
whether of act or omission, it is competent for the legislature to elect — and our
Legislature has so elected — to limit such liability to cases in which the person upon
whom such an obligation is imposed is morally culpable or, on the contrary, for reasons
of public policy. to extend that liability, without regard to the lack of moral culpability, so
as to include responsibility for the negligence of those persons whose acts or omissions
are imputable, by a legal fiction, to others who are in a position to exercise an absolute
or limited control over them. The legislature which adopted our Civil Code has elected to
limit extra-contractual liability — with certain well-defined exceptions — to cases in
which moral culpability can be directly imputed to the persons to be charged. This moral
responsibility may consist in having failed to exercise due care in one's own acts, or in
having failed to exercise due care in the selection and control of one's agent or
servants, or in the control of persons who, by reasons of their status, occupy a position
of dependency with respect to the person made liable for their conduct.

The civil liability imposed upon parents for the torts of their minor children living with
them, may be seen to be based upon the parental authority vested by the Civil Code
upon such parents. The civil law assumes that when an unemancipated child living with
its parents commits a tortious acts, the parents were negligent in the performance of
their legal and natural duty closely to supervise the child who is in their custody and
control. Parental liability is, in other words, anchored upon parental authority coupled
with presumed parental dereliction in the discharge of the duties accompanying such
authority. The parental dereliction is, of course, only presumed and the presumption can
be overtuned under Article 2180 of the Civil Code by proof that the parents had
exercised all the diligence of a good father of a family to prevent the damage.

In the instant case, the shooting of Jennifer by Adelberto with an air rifle occured when
parental authority was still lodged in respondent Bundoc spouses, the natural parents of
the minor Adelberto. It would thus follow that the natural parents who had then actual
custody of the minor Adelberto, are the indispensable parties to the suit for damages.

The natural parents of Adelberto, however, stoutly maintain that because a decree of
adoption was issued by the adoption court in favor of the Rapisura spouses, parental
authority was vested in the latter as adopting parents as of the time of the filing of the
petition for adoption that is, before Adelberto had shot Jennifer which an air rifle. The
Bundoc spouses contend that they were therefore free of any parental responsibility for
Adelberto's allegedly tortious conduct.

Respondent Bundoc spouses rely on Article 36 of the Child and Youth Welfare Code 8
which reads as follows:
Art. 36.Decree of Adoption. — If, after considering the report of the Department
of Social Welfare or duly licensed child placement agency and the evidence
 submitted before it, the court is satisfied that the petitioner is qualified to
maintain, care for, and educate the child, that the trial custody period has been
completed, and that the best interests of the child will be promoted by the
adoption, a decree of adoption shall be entered, which shall be effective he date
the original petition was filed. The decree shall state the name by which the child
is thenceforth to be known. (Emphasis supplied)
The Bundoc spouses further argue that the above Article 36 should be read in relation
to Article 39 of the same Code:
Art. 39. Effect of Adoption. — The adoption shall:
xxx xxx xxx
(2) Dissolve the authority vested in the natural parents, except where the
adopter is the spouse of the surviving natural parent;
xxx xxx xxx
(Emphasis supplied)
and urge that their Parental authority must be deemed to have been dissolved as of the
time the Petition for adoption was filed.
The Court is not persuaded. As earlier noted, under the Civil Code, the basis of parental
liability for the torts of a minor child is the relationship existing between the parents and
the minor child living with them and over whom, the law presumes, the parents exercise
supervision and control. Article 58 of the Child and Youth Welfare Code, re-enacted this
rule:
Article 58 Torts — Parents and guardians are responsible for the damage
caused by the child under their parental authority in accordance with the civil
Code.
Article 221 of the Family Code of the Philippines 9 has similarly insisted upon the
requisite that the child, doer of the tortious act, shall have beer in the actual custody of
the parents sought to be held liable for the ensuing damage:
Art. 221. Parents and other persons exercising parental authority shall be civilly
liable for the injuries and damages caused by the acts or omissions of their
unemancipated children living in their company and under their parental authority
subject to the appropriate defenses provided by law.
We do not believe that parental authority is properly regarded as having been
retroactively transferred to and vested in the adopting parents, the Rapisura spouses, at
the time the air rifle shooting happened. We do not consider that retroactive effect may
be giver to the decree of adoption so as to impose a liability upon the adopting parents
accruing at a time when adopting parents had no actual or physically custody over the
adopted child. Retroactive affect may perhaps be given to the granting of the petition for
adoption where such is essential to permit the accrual of some benefit or advantage in
favor of the adopted child. In the instant case, however, to hold that parental authority
had been retroactively lodged in the Rapisura spouses so as to burden them with
liability for a tortious act that they could not have foreseen and which they could not
have prevented (since they were at the time in the United States and had no physical
custody over the child Adelberto) would be unfair and unconscionable. Such a result,
moreover, would be inconsistent with the philosophical and policy basis underlying the
doctrine of vicarious liability. Put a little differently, no presumption of parental
dereliction on the part of the adopting parents, the Rapisura spouses, could have arisen
since Adelberto was not in fact subject to their control at the time the tort was
committed.
Article 35 of the Child and Youth Welfare Code fortifies the conclusion reached above.
Article 35 provides as follows:
Art. 35. Trial Custody. — No petition for adoption shall be finally granted
unless and until the adopting parents are given by the courts a supervised trial
custody period of at least six months to assess their adjustment and emotional
readiness for the legal union. During the period of trial custody, parental authority
shall be vested in the adopting parents.
Under the above Article 35, parental authority is provisionally vested in the adopting
parents during the period of trial custody, i.e., before the issuance of a decree of
adoption, precisely because the adopting parents are given actual custody of the child
during such trial period. In the instant case, the trial custody period either had not yet
begun or bad already been completed at the time of the air rifle shooting; in any case,
actual custody of Adelberto was then with his natural parents, not the adopting parents.

Accordingly, we conclude that respondent Bundoc spouses, Adelberto's natural parents,

were indispensable parties to the suit for damages brought by petitioners, and that the
dismissal by the trial court of petitioners' complaint, the indispensable parties being
already before the court, constituted grave abuse of discretion amounting to lack or
excess of jurisdiction.

WHEREFORE, premises considered, the Petition for Review is hereby GRANTED DUE
COURSE and the Decision of the Court of Appeals dated 6 September 1988, in C.A.-
G.R. No. SP-15016 is hereby REVERSED and SET ASIDE. Petitioners' complaint filed
before the trial court is hereby REINSTATED and this case is REMANDED to that court
for further proceedings consistent with this Decision. Costs against respondent Bundoc
spouses. This Decision is immediately executory. SO ORDERED.
 CASTILEX INDUSTRIAL CORPORATION, petitioner, vs. VICENTE VASQUEZ, JR.
and LUISA SO VASQUEZ, and CEBU DOCTORS' HOSPITAL, INC., respondents.
G.R. No. 132266

The pivotal issue in this petition is whether an employer may be held vicariously liable
for the death resulting from the negligent operation by a managerial employee of a
company-issued vehicle.

The antecedents, as succinctly summarized by the Court of Appeals, are as follows:

On 28 August 1988, at around 1:30 to 2:00 in the morning, Romeo So Vasquez, was
driving a Honda motorcycle around Fuente Osmeña Rotunda. He was traveling counter-
clockwise, (the normal flow of traffic in a rotunda) but without any protective helmet or
goggles. He was also only carrying a Student's Permit to Drive at the time. Upon the
other hand, Benjamin Abad [was a] manager of Appellant Castilex Industrial
Corporation, registered owner [of] a Toyota Hi-Lux Pick-up with plate no. GBW-794. On
the same date and time, Abad drove the said company car out of a parking lot but
instead of going around the Osmeña rotunda he made a short cut against [the] flow of
the traffic in proceeding to his route to General Maxilom St. or to Belvic St.
In the process, the motorcycle of Vasquez and the pick-up of Abad collided with each
other causing severe injuries to the former. Abad stopped his vehicle and brought
Vasquez to the Southern Islands Hospital and later to the Cebu Doctor's Hospital.

On September 5, 1988, Vasquez died at the Cebu Doctor's Hospital. It was there that
Abad signed an acknowledgment of Responsible Party (Exhibit K) wherein he agreed to
pay whatever hospital bills, professional fees and other incidental charges Vasquez may
incur.
After the police authorities had conducted the investigation of the accident, a Criminal
Case was filed against Abad but which was subsequently dismissed for failure to
prosecute. So, the present action for damages was commenced by Vicente Vasquez,
Jr. and Luisa So Vasquez, parents of the deceased Romeo So Vasquez, against Jose
Benjamin Abad and Castilex Industrial Corporation. In the same action, Cebu Doctor's
Hospital intervened to collect unpaid balance for the medical expense given to Romeo
So Vasquez.

The trial court ruled in favor of private respondents Vicente and Luisa Vasquez and
ordered Jose Benjamin Abad (hereafter ABAD) and petitioner Castilex Industrial
Corporation (hereafter CASTILEX) to pay jointly and solidarily (1) Spouses Vasquez,
the amounts of P8,000.00 for burial expenses; P50,000.00 as moral damages;
P10,000.00 as attorney's fees; and P778,752.00 for loss of earning capacity; and (2)
Cebu Doctor's Hospital, the sum of P50,927.83 for unpaid medical and hospital bills at
3% monthly interest from 27 July 1989 until fully paid, plus the costs of litigation.
CASTILEX and ABAD separately appealed the decision.
In its decision of 21 May 1997, the Court of Appeals affirmed the ruling of the trial court
holding ABAD and CASTILEX liable but held that the liability of the latter is "only
vicarious and not solidary" with the former. It reduced the award of damages
representing loss of earning capacity from P778,752.00 to P214,156.80; and the
interest on the hospital and medical bills, from 3% per month to 12% per annum from 5
September 1988 until fully paid.
Upon CASTILEX's motion for reconsideration, the Court of Appeals modified its decision
by (1) reducing the award of moral damages from P50,000 to P30,000 in view of the
deceased's contributory negligence; (b) deleting the award of attorney's fees for lack of
evidence; and (c) reducing the interest on hospital and medical bills to 6% per annum
from 5 September 1988 until fully paid.

Hence, CASTILEX filed the instant petition contending that the Court of Appeals erred in
(1) applying to the case the fifth paragraph of Article 2180 of the Civil Code, instead of
the fourth paragraph thereof; (2) that as a managerial employee, ABAD was deemed to
have been always acting within the scope of his assigned task even outside office hours
because he was using a vehicle issued to him by petitioner; and (3) ruling that petitioner
had the burden to prove that the employee was not acting within the scope of his
assigned task.
Jose Benjamin ABAD merely adopted the statement of facts of petitioner which holds
fast on the theory of negligence on the part of the deceased.

On the other hand, respondents Spouses Vasquez argue that their son's death was
caused by the negligence of petitioner's employee who was driving a vehicle issued by
petitioner and who was on his way home from overtime work for petitioner; and that
petitioner is thus liable for the resulting injury and subsequent death of their son on the
basis of the fifth paragraph of Article 2180. Even if the fourth paragraph of Article 2180
were applied, petitioner cannot escape liability therefor. They moreover argue that the
Court of Appeals erred in reducing the amount of compensatory damages when the
award made by the trial court was borne both by evidence adduced during the trial
regarding deceased's wages and by jurisprudence on life expectancy. Moreover, they
point out that the petition is procedurally not acceptable on the following grounds: (1)
lack of an explanation for serving the petition upon the Court of Appeals by registered
mail, as required under Section 11, Rule 13 of the Rules of Civil Procedure; and (2) lack
of a statement of the dates of the expiration of the original reglementary period and of
the filing of the motion for extension of time to file a petition for review.

For its part, respondent Cebu Doctor's Hospital maintains that petitioner CASTILEX is
indeed vicariously liable for the injuries and subsequent death of Romeo Vasquez
caused by ABAD, who was on his way home from taking snacks after doing overtime
work for petitioner. Although the incident occurred when ABAD was not working
anymore "the inescapable fact remains that said employee would not have been
situated at such time and place had he not been required by petitioner to do overtime
work." Moreover, since petitioner adopted the evidence adduced by ABAD, it cannot, as
the latter's employer, inveigle itself from the ambit of liability, and is thus estopped by
the records of the case, which it failed to refute.

We shall first address the issue raised by the private respondents regarding some
alleged procedural lapses in the petition.
Private respondent's contention of petitioner's violation of Section 11 of Rule 13 and
Section 4 of Rule 45 of the 1997 Rules of Civil Procedure holds no water.
Sec. 11 of Rule 13 provides:
Sec. 11. Priorities in modes of services and filing. — Whenever practicable,
the service and filing of pleadings and other papers shall be done personally.
Except with respect to papers emanating from the court, a resort to other modes
must be accompanied by a written explanation why the service or filing was not
done personally. A violation of this Rule may be cause to consider the paper as
not filed.
The explanation why service of a copy of the petition upon the Court of Appeals was
done by registered mail is found on Page 28 of the petition. Thus, there has been
compliance with the aforequoted provision.

As regards the allegation of violation of the material data rule under Section 4 of Rule
45, the same is unfounded. The material dates required to be stated in the petition are
the following: (1) the date of receipt of the judgment or final order or resolution subject
of the petition; (2) the date of filing of a motion for new trial or reconsideration, if any;
and (3) the date of receipt of the notice of the denial of the motion. Contrary to private
respondent's claim, the petition need not indicate the dates of the expiration of the
original reglementary period and the filing of a motion for extension of time to file the
petition. At any rate, aside from the material dates required under Section 4 of Rule 45,
petitioner CASTILEX also stated in the first page of the petition the date it filed the
motion for extension of time to file the petition.
Now on the merits of the case.
The negligence of ABAD is not an issue at this instance. Petitioner CASTILEX
presumes said negligence but claims that it is not vicariously liable for the injuries and
subsequent death caused by ABAD.

Petitioner contends that the fifth paragraph of Article 2180 of the Civil Code should only
apply to instances where the employer is not engaged in business or industry. Since it is
engaged in the business of manufacturing and selling furniture it is therefore not
covered by said provision. Instead, the fourth paragraph should apply.
Petitioner's interpretation of the fifth paragraph is not accurate. The phrase "even
though the former are not engaged in any business or industry" found in the fifth
paragraph should be interpreted to mean that it is not necessary for the employer to be
engaged in any business or industry to be liable for the negligence of his employee who
is acting within the scope of his assigned task.
A distinction must be made between the two provisions to determine what is applicable.
Both provisions apply to employers: the fourth paragraph, to owners and managers of
an establishment or enterprise; and the fifth paragraph, to employers in general,
whether or not engaged in any business or industry. The fourth paragraph covers
negligent acts of employees committed either in the service of the branches or on the
occasion of their functions, while the fifth paragraph encompasses negligent acts of
employees acting within the scope of their assigned task. The latter is an expansion of
the former in both employer coverage and acts included. Negligent acts of employees,
whether or not the employer is engaged in a business or industry, are covered so long
as they were acting within the scope of their assigned task, even though committed
neither in the service of the branches nor on the occasion of their functions. For,
admittedly, employees oftentimes wear different hats. They perform functions which are
beyond their office, title or designation but which, nevertheless, are still within the call of
duty.

This court has applied the fifth paragraph to cases where the employer was engaged in
a business or industry such as truck operators6 and banks. The Court of Appeals
cannot, therefore, be faulted in applying the said paragraph of Article 2180 of the Civil
Code to this case.

Under the fifth paragraph of Article 2180, whether or not engaged in any business or
industry, an employer is liable for the torts committed by employees within the scope of
his assigned tasks. But it is necessary to establish the employer-employee relationship;
once this is done, the plaintiff must show, to hold the employer liable, that the employee
was acting within the scope of his assigned task when the tort complained of was
committed. It is only then that the employer may find it necessary to interpose the
defense of due diligence in the selection and supervision of the employee.
It is undisputed that ABAD was a Production Manager of petitioner CASTILEX at the
time of the tort occurrence. As to whether he was acting within the scope of his
assigned task is a question of fact, which the court a quo and the Court of Appeals
resolved in the affirmative.

Well-entrenched in our jurisprudence is the rule that the factual findings of the Court of
Appeals are entitled to great respect, and even finality at times. This rule is, however,
subject to exceptions such as when the conclusion is grounded on speculations,
surmises, or conjectures. Such exception obtain in the present case to warrant review
by this Court of the finding of the Court of Appeals that since ABAD was driving
petitioner's vehicle he was acting within the scope of his duties as a manager.
Before we pass upon the issue of whether ABAD was performing acts within the range
of his employment, we shall first take up the other reason invoked by the Court of
Appeals in holding petitioner CASTILEX vicariously liable for ABAD's negligence, i.e.,
that the petitioner did not present evidence that ABAD was not acting within the scope
of his assigned tasks at the time of the motor vehicle mishap. Contrary to the ruling of
the Court of Appeals, it was not incumbent upon the petitioner to prove the same. It was
enough for petitioner CASTILEX to deny that ABAD was acting within the scope of his
duties; petitioner was not under obligation to prove this negative averment. Ei incumbit
probatio qui dicit, non qui negat (He who asserts, not he who denies, must prove). The
Court has consistently applied the ancient rule that if the plaintiff, upon whom rests the
burden of proving his cause of action, fails to show in a satisfactory manner facts which
he bases his claim, the defendant is under no obligation to prove his exception or
defense.

Now on the issue of whether the private respondents have sufficiently established that
ABAD was acting within the scope of his assigned tasks.
ABAD, who was presented as a hostile witness, testified that at the time of the incident,
he was driving a company-issued vehicle, registered under the name of petitioner. He
was then leaving the restaurant where he had some snacks and had a chat with his
friends after having done overtime work for the petitioner.
No absolutely hard and fast rule can be stated which will furnish the complete answer to
the problem of whether at a given moment, an employee is engaged in his employer's
business in the operation of a motor vehicle, so as to fix liability upon the employer
because of the employee's action or inaction; but rather, the result varies with each
state of facts.

In Filamer Christian Institute v. Intermediate Appellant Court, this Court had the
occasion to hold that acts done within the scope of the employee's assigned tasks
includes "any act done by an employee in furtherance of the interests of the employer or
for the account of the employer at the time of the infliction of the injury or damages."
The court a quo and the Court of Appeals were one in holding that the driving by a
manager of a company-issued vehicle is within the scope of his assigned tasks
regardless of the time and circumstances.

We do not agree. The mere fact that ABAD was using a service vehicle at the time of
the injurious incident is not of itself sufficient to charge petitioner with liability for the
negligent operation of said vehicle unless it appears that he was operating the vehicle
within the course or scope of his employment.

The following are principles in American Jurisprudence on the employer's liability for the
injuries inflicted by the negligence of an employee in the use of an employer's motor
vehicle:

I. Operation of Employer's Motor Vehicle in Going to or from Meals

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

II. Operation of Employer's Vehicle in Going to or from Work

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

III. Use of Employer's Vehicle Outside Regular Working Hours

An employer who loans his motor vehicle to an employee for the latter's personal use
outside of regular working hours is generally not liable for the employee's negligent
operation of the vehicle during the period of permissive use, even where the employer
contemplates that a regularly assigned motor vehicle will be used by the employee for
personal as well as business purposes and there is some incidental benefit to the
employer. Even where the employee's personal purpose in using the vehicle has been
accomplished and he has started the return trip to his house where the vehicle is
normally kept, it has been held that he has not resumed his employment, and the
employer is not liable for the employee's negligent operation of the vehicle during the
return trip.
The foregoing principles and jurisprudence are applicable in our jurisdiction albeit based
on the doctrine of respondent superior, not on the principle of bonus pater familias as in
ours. Whether the fault or negligence of the employee is conclusive on his employer as
in American law or jurisprudence, or merely gives rise to the presumption juris tantum of
negligence on the part of the employer as in ours, it is indispensable that the employee
was acting in his employer's business or within the scope of his assigned task.
In the case at bar, it is undisputed that ABAD did some overtime work at the petitioner's
office, which was located in Cabangcalan, Mandaue City. Thereafter, he went to
Goldie's Restaurant in Fuente Osmeña, Cebu City, which is about seven kilometers
away from petitioner's place of business. A witness for the private respondents, a
sidewalk vendor, testified that Fuente Osmeña is a "lively place" even at dawn because
Goldie's Restaurant and Back Street were still open and people were drinking thereat.
Moreover, prostitutes, pimps, and drug addicts littered the place.
At the Goldie's Restaurant, ABAD took some snacks and had a chat with friends. It was
when ABAD was leaving the restaurant that the incident in question occurred. That
same witness for the private respondents testified that at the time of the vehicular
accident, ABAD was with a woman in his car, who then shouted: "Daddy, Daddy!" This
woman could not have been ABAD's daughter, for ABAD was only 29 years old at the
time.
To the mind of this Court, ABAD was engaged in affairs of his own or was carrying out a
personal purpose not in line with his duties at the time he figured in a vehicular accident.
It was then about 2:00 a.m. of 28 August 1988, way beyond the normal working hours.
ABAD's working day had ended; his overtime work had already been completed. His
being at a place which, as petitioner put it, was known as a "haven for prostitutes,
pimps, and drug pushers and addicts," had no connection to petitioner's business;
neither had it any relation to his duties as a manager. Rather, using his service vehicle
even for personal purposes was a form of a fringe benefit or one of the perks attached
to his position.
Since there is paucity of evidence that ABAD was acting within the scope of the
functions entrusted to him, petitioner CASTILEX had no duty to show that it exercised
the diligence of a good father of a family in providing ABAD with a service vehicle. Thus,
justice and equity require that petitioner be relieved of vicarious liability for the
consequences of the negligence of ABAD in driving its vehicle.

WHEREFORE, the petition is GRANTED, and the appealed decision and resolution of
the Court of Appeals is AFFIRMED with the modification that petitioner Castilex
Industrial Corporation be absolved of any liability for the damages caused by its
employee, Jose Benjamin Abad. SO ORDERED.
 ERNESTO MARTIN, petitioner, vs. HON. COURT OF APPEALS and MANILA
ELECTRIC COMPANY, respondents.
G.R. No. 82248

This case turns on the proper application of the familiar rule that he who alleges must
prove his allegation.

Ernesto Martin was the owner of a private car bearing license plate No. NPA-930. At
around 2 o'clock in the morning of May 11, 1982, while being driven by Nestor Martin, it
crashed into a Meralco electric post on Valley Golf Road, in Antipolo, Rizal. The car was
wrecked and the pole severely damaged. Meralco subsequently demanded reparation
from Ernesto Martin, but the demand was rejected. It thereupon sued him for damages
in the Regional Trial Court of Pasig, alleging inter alia that he was liable to it in the sum
of P17,352.00 plus attorney's fees and litigation costs as the employer of Nestor Martin.
The petitioner's main defense was that Nestor Martin was not his employee.

After the plaintiff had rested, the defendant moved to dismiss the complaint on the
ground that no evidence had been adduced to show that Nestor Martin was his
employee. The motion was denied. The case was considered submitted for decision
with the express waiver by the defendant of his right to present his own evidence. The
defendant thus did not rebut the plaintiff's allegation that he was Nestor Martin's
employer.

In the decision dated August 27, 1985, Judge Eutropio Migriño held in favor of the
plaintiff, awarding him the amount claimed, with 12% interest, and P4,000.00 attorney's
fees, plus costs. The decision was seasonably elevated to the Court of Appeals, which
affirmed it in toto on February 22, 1988, prompting this petition for review.
The petition has merit.

It is important to stress that the complaint for damages was filed by the private
respondent against only Ernesto Martin as alleged employer of Nestor Martin, the driver
of the car at the time of the accident. Nestor Martin was not impleaded. The action was
based on tort under Article 2180 of the Civil Code, providing in part that:
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry.
The above rule is applicable only if there is an employer-employee relationship although
it is not necessary that the employer be engaged in any business or industry. It differs in
this sense from Article 103 of the Revised Penal Code, which requires that the employer
be engaged in an industry to be subsidiarily liable for the felony committed by his
employee in the course of his employment.

Whether or not engaged in any business or industry, the employer under Article 2180 is
liable for the torts committed by his employees within the scope of their assigned task.
But it is necessary first to establish the employment relationship. Once this is done, the
plaintiff must show, to hold the employer liable, that the employee was acting within the
scope of his assigned task when the tort complained of was committed. It is only then
that the defendant, as employer, may find it necessary to interpose the defense of due
diligence in the selection and supervision of the employee as allowed in that article.

In the case at bar, no evidence whatsoever was adduced by the plaintiff to show that
the defendant was the employer of Nestor Martin at the time of the accident. The trial
court merely presumed the existence of the employer-employee relationship and held
that the petitioner had not refuted that presumption. It noted that although the defendant
alleged that he was not Nestor Martin's employer, "he did not present any proof to
substantiate his allegation."

As the trial court put it:

There is no need to stretch one's imagination to realize that a car owner entrusts his
vehicle only to his driver or to anyone whom he allows to drive it. Since neither plaintiff
nor defendant has presented any evidence on the status of Nestor Martin, the Court
presumes that he was at the time of the incident, an employee of the defendant. It is
elementary that he who makes an allegation is required to prove the same. Defendant
alleges that Nestor Martin was not his employee but he did not present any proof to
substantiate his allegation. While it is true plaintiff did not present evidence on its
allegation that Nestor Martin was defendant's employee, the Court believes and so
holds, that there was no need for such evidence. As above adverted to, the Court can
proceed on the presumption that one who drives the motor vehicle is an employee of
the owner thereof.

A presumption is defined as an inference as to the existence of a fact not actually

known, arising from its usual connection with another which is known, or a conjecture
based on past experience as to what course human affairs ordinarily take. It is either a
presumption juris, or of law, or a presumption hominis, or of fact.
There is no law directing the deduction made by the courts below from the particular
facts presented to them by the parties. Such deduction is not among the conclusive
presumptions under Section 2 or the disputable presumptions under Section 3 of Rule
131 of the Rules of Court. In other words, it is not a presumption juris.

Neither is it a presumption hominis, which is a reasonable deduction from the facts

proved without an express direction of law to that effect. The facts proved, or not
denied, viz., the ownership of the car and the circumstances of the accident, are not
enough bases for the inference that the petitioner is the employer of Nestor Martin.

In the modern urban society, most male persons know how to drive and do not have to
employ others to drive for them unless this is needed for business reasons. Many
cannot afford this luxury, and even if they could, may consider it an unnecessary
expense and inconvenience. In the present case, the more plausible assumption is that
Nestor Martin is a close relative of Ernesto Martin and on the date in question borrowed
the car for some private purpose. Nestor would probably not have been accommodated
if he were a mere employee for employees do not usually enjoy the use of their
employer's car at two o'clock in the morning.

As the employment relationship between Ernesto Martin and Nestor Martin could not be
presumed, it was necessary for the plaintiff to establish it by evidence. Meralco had the
burden of proof, or the duty "to present evidence on the fact in issue necessary to
establish his claim" as required by Rule 131, Section 1 of the Revised Rules of Court.
Failure to do this was fatal to its action.

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

The case of Amor v. Soberano, a Court of Appeals decision not elevated to this Court,
was misapplied by the respondent court in support of the petitioner's position. The
vehicle involved in that case was a six-by-six truck, which reasonably raised the factual
presumption that it was engaged in business and that its driver was employed by the
owner of the vehicle. The case at bar involves a private vehicle as its license plate
indicates. No evidence was ever offered that it was being used for business purposes or
that, in any case, its driver at the time of the accident was an employee of the petitioner.

It is worth mentioning in this connection that in Filamer Christian Institute v. Court of

Appeals, the owner of the jeep involved in the accident was absolved from liability when
it was shown that the driver of the vehicle was not employed as such by the latter but
was a "working scholar" as that term is defined by the Omnibus Rules Implementing the
Labor Code. He was assigned to janitorial duties. Evidence was introduced to establish
the employment relationship but it failed nonetheless to hold the owner responsible.
Significantly, no similar evidence was even presented in the case at bar, the private
respondent merely relying on its mere allegation that Nestor Martin was the petitioner's
employee. Allegation is not synonymous with proof.

The above observations make it unnecessary to examine the question of the driver's
alleged negligence or the lack of diligence on the part of the petitioner in the selection
and supervision of his employee. These questions have not arisen because the
employment relationship contemplated in Article 1860 of the Civil Code has not been
established.

WHEREFORE, the petition is GRANTED. The decision of the respondent court is

REVERSED, and Civil Case No. 48045 in the Regional Trial Court of Pasig, Branch
151, is DISMISSED, with costs against the respondent. It is so ordered.
 GILBERTO M. DUAVIT, petitioner, vs. THE HON. COURT OF APPEALS, Acting
through the Third Division, as Public Respondent, and ANTONIO SARMIENTO,
SR. & VIRGILIO CATUAR respondents.
G.R. No. 82318

This petition raises the sole issue of whether or not the owner of a private vehicle which
figured in an accident can be held liable under Article 2180 of the Civil Code when the
said vehicle was neither driven by an employee of the owner nor taken with the consent
of the latter.

The facts are summarized in the contested decision, as follows:

From the evidence adduced by the plaintiffs, consisting of the testimonies of witnesses
Virgilio Catuar, Antonio Sarmiento, Jr., Ruperto Catuar, Jr. and Norberto Bernarte it
appears that on July 28, 1971 plaintiffs Antonio Sarmiento, Sr. and Virgilio Catuar were
aboard a jeep with plate number 77-99-F-I Manila, 1971, owned by plaintiff, Ruperto
Catuar was driving the said jeep on Ortigas Avenue, San Juan, Rizal; that plaintiff's
jeep, at the time, was running moderately at 20 to 35 kilometers per hour and while
approaching Roosevelt Avenue, Virgilio Catuar slowed down; that suddenly, another
jeep with plate number 99-97-F-J Manila 1971 driven by defendant Oscar Sabiniano hit
and bumped plaintiff's jeep on the portion near the left rear wheel, and as a result of the
impact plaintiff's jeep fell on its right and skidded by about 30 yards; that as a result
plaintiffs jeep was damaged, particularly the windshield, the differential, the part near
the left rear wheel and the top cover of the jeep; that plaintiff Virgilio Catuar was thrown
to the middle of the road; his wrist was broken and he sustained contusions on the
head; that likewise plaintiff Antonio Sarmiento, Sr. was trapped inside the fallen jeep,
and one of his legs was fractured.

Evidence also shows that the plaintiff Virgilio Catuar spent a total of P2,464.00 for
repairs of the jeep, as shown by the receipts of payment of labor and spare parts (Exhs.
H to H-7 Plaintiffs likewise tried to prove that plaintiff Virgilio Catuar, immediately after
the accident was taken to Immaculate Concepcion Hospital, and then was transferred to
the National Orthopedic Hospital; that while plaintiff Catuar was not confined in the
hospital, his wrist was in a plaster cast for a period of one month, and the contusions on
his head were under treatment for about two (2) weeks; that for hospitalization,
medicine and allied expenses, plaintiff Catuar spent P5,000.00.

Evidence also shows that as a result of the incident, plaintiff Antonio Sarmiento, Sr.
sustained injuries on his leg; that at first, he was taken to the National Orthopedic
Hospital (Exh. K but later he was confined at the Makati Medical Center from July 29, to
August 29, 1971 and then from September 15 to 25, 1971; that his leg was in a plaster
cast for a period of eight (8) months; and that for hospitalization and medical
attendance, plaintiff Antonio Sarmiento, Sr. spent no less than P13,785.25 as evidenced
by receipts in his possession. (Exhs. N to N-1).

Proofs were adduced also to show that plaintiff Antonio sarmiento Sr. is employed as
Assistant Accountant of the Canlubang Sugar Estate with a salary of P1,200.00 a
month; that as sideline he also works as accountant of United Haulers Inc. with a salary
of P500.00 a month; and that as a result of this incident, plaintiff Sarmiento was unable
to perform his normal work for a period of at least 8 months. On the other hand,
evidence shows that the other plaintiff Virgilio Catuar is a Chief Clerk in Canlubang
Sugar Estate with a salary of P500.00 a month, and as a result of the incident, he was
incapacitated to work for a period of one (1) month.

The plaintiffs have filed this case both against Oscar Sabiniano as driver, and against
Gualberto Duavit as owner of the jeep.

Defendant Gualberto Duavit, while admitting ownership of the other jeep (Plate No. 99-
07-F-J Manila, 1971), denied that the other defendant (Oscar Sabiniano) was his
employee. Duavit claimed that he has not been an employer of defendant Oscar
Sabiniano at any time up to the present.

On the other hand documentary and testimonial evidence show that defendant Oscar
Sabiniano was an employee of the Board of Liquidators from November 14, 1966 up to
January 4, 1973 (Annex A of Answer).

Defendant Sabiniano, in his testimony, categorically admitted that he took the jeep from
the garage of defendant Duavit without the consent or authority of the latter (TSN,
September 7, 1978, p. 8). He testified further, that Duavit even filed charges against him
for theft of the jeep, but which Duavit did not push through as his (Sabiniano's) parents
apologized to Duavit on his behalf.

Defendant Oscar Sabiniano, on the other hand in an attempt to exculpate himself from
liability, makes it appear that he was taking all necessary precaution while driving and
the accident occurred due to the negligence of Virgilio Catuar. Sabiniano claims that it
was plaintiffs vehicle which hit and bumped their jeep. (Reno, pp. 21-23)
The trial court found Oscar Sabiniano negligent in driving the vehicle but found no
employer-employee relationship between him and the petitioner because the latter was
then a government employee and he took the vehicle without the authority and consent
of the owner. The petitioner was, thus, absolved from liability under Article 2180 of the
Civil Code.

The private respondents appealed the case.

On January 7, 1988, the Court of Appeals rendered the questioned decision holding the
petitioner jointly and severally liable with Sabiniano. The appellate court in part ruled:

We cannot go along with appellee's argument. It will be seen that in Vargas v. Langcay,
supra, it was held that it is immaterial whether or not the driver was actually employed
by the operator of record or registered owner, and it is even not necessary to prove who
the actual owner of the vehicle and who the employer of the driver is. When the
Supreme Court ruled, thus: 'We must hold and consider such owner-operator of record
(registered owner) as the employer in contemplation of law, of the driver,' it cannot be
construed other than that the registered owner is the employer of the driver in
contemplation of law. It is a conclusive presumption of fact and law, and is not subject to
rebuttal of proof to the contrary. Otherwise, as stated in the decision, we quote:

The purpose of the principles evolved by the decisions in these matters will be defeated
and thwarted if we entertain the argument of petitioner that she is not liable because the
actual owner and employer was established by the evidence. . . .

Along the same vein, the defendant-appellee Gualberto Duavit cannot be allowed to
prove that the driver Sabiniano was not his employee at the time of the vehicular
accident.

The ruling laid down in Amar V. Soberano (1966), 63 O.G. 6850, by this Court to the
effect that the burden of proving the non-existence of an employer-employee
relationship is upon the defendant and this he must do by a satisfactory preponderance
of evidence, has to defer to the doctrines evolved by the Supreme Court in cases of
damages arising from vehicular mishaps involving registered motor vehicle. (See
Tugade v. Court of Appeals, 85 SCRA 226, 230). (Rollo, pp. 26-27)

The appellate court also denied the petitioner's motion for reconsideration. Hence, this
petition.
The petitioner contends that the respondent appellate court committed grave abuse of
discretion in holding him jointly and severally liable with Sabiniano in spite of the
absence of an employer-employee relationship between them and despite the fact that
the petitioner's jeep was taken out of his garage and was driven by Sabiniano without
his consent.

As early as in 1939, we have ruled that an owner of a vehicle cannot be held liable for
an accident involving the said vehicle if the same was driven without his consent or
knowledge and by a person not employed by him. Thus, in Duquillo v. Bayot (67 Phil.
131-133-134) [1939] we said:

Under the facts established, the defendant cannot be held liable for anything. At the
time of the accident, James McGurk was driving the truck, and he was not an employee
of the defendant, nor did he have anything to do with the latter's business; neither the
defendant nor Father Ayson, who was in charge of her business, consented to have any
of her trucks driven on the day of the accident, as it was a holy day, and much less by a
chauffeur who was not in charge of driving it; the use of the defendant's truck in the
circumstances indicated was done without her consent or knowledge; it may, therefore,
be said, that there was not the remotest contractual relation between the deceased Pio
Duquillo and the defendant. It necessarily follows from all this that articles 1101 and
following of the Civil Code, cited by the appellant, have no application in this case, and,
therefore, the errors attributed to the inferior court are without basis.

The Court upholds the above ruling as still relevant and better applicable to present day
circumstances.

The respondent court's misplaced reliance on the cases of Erezo v. Jepte (102 Phil. 103
[1957] and Vargas v. Langcay (6 SCRA 174 [1962]) cannot be sustained. In the Erezo
case, Jepte, the registered owner of the truck which collided with a taxicab, and which
resulted in the killing of Erezo, claimed that at the time of the accident, the truck
belonged to the Port Brokerage in an arrangement with the corporation but the same
was not known to the Motor Vehicles Office. This Court sustained the trial court's ruling
that since Jepte represented himself to be the owner of the truck and the Motor Vehicles
Office, relying on his representation, registered the vehicle in his name, the Government
and all persons affected by the representation had the right to rely on his declaration of
ownership and registration. Thus, even if Jepte were not the owner of the truck at the
time of the accident, he was still held liable for the death of Erezo significantly, the driver
of the truck was fully authorized to drive it.
Likewise, in the Vargas case, just before the accident occurred Vargas had sold her
jeepney to a third person, so that at the time of the accident she was no longer the
owner of the jeepney. This court, nevertheless, affirmed Vargas' liability since she failed
to surrender to the Motor Vehicles Office the corresponding AC plates in violation of the
Revised Motor Vehicle Law and Commonwealth Act No. 146. We further ruled that the
operator of record continues to be the operator of the vehicle in contemplation of law, as
regards the public and third persons, and as such is responsible for the consequences
incident to its operator. The vehicle involved was a public utility jeepney for hire. In such
cases, the law does not only require the surrender of the AC plates but orders the
vendor operator to stop the operation of the jeepney as a form of public transportation
until the matter is reported to the authorities.

As can be seen, the circumstances of the above cases are entirely different from those
in the present case. Herein petitioner does not deny ownership of the vehicle involved in
tire mishap but completely denies having employed the driver Sabiniano or even having
authorized the latter to drive his jeep. The jeep was virtually stolen from the petitioner's
garage. To hold, therefore, the petitioner liable for the accident caused by the
negligence of Sabiniano who was neither his driver nor employee would be absurd as it
would be like holding liable the owner of a stolen vehicle for an accident caused by the
person who stole such vehicle. In this regard, we cannot ignore the many cases of
vehicles forcibly taken from their owners at gunpoint or stolen from garages and parking
areas and the instances of service station attendants or mechanics of auto repair shops
using, without the owner's consent, vehicles entrusted to them for servicing or repair.

We cannot blindly apply absolute rules based on precedents whose facts do not jibe
four square with pending cases. Every case must be determined on its own peculiar
factual circumstances. Where, as in this case, the records of the petition fail to indicate
the slightest indicia of an employer-employee relationship between the owner and the
erring driver or any consent given by the owner for the vehicle's use, we cannot hold the
owner liable.

We, therefore, find that the respondent appellate court committed reversible error in
holding the petitioner jointly and severally liable with Sabiniano to the private
respondent.

WHEREFORE, the petition is GRANTED and the decision and resolution appealed from
are hereby ANNULLED and SET ASIDE. The decision of the then Court of First
Instance (now Regional Trial Court) of Laguna, 8th Judicial District, Branch 6, dated
July 30, 1981 is REINSTATED.

SO ORDERED.
 SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, petitioners, vs.
HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION
ADMINISTRATION, respondents
NATIONAL IRRIGATION ADMINISTRATION, appellant, vs. SPOUSES JOSE
FONTANILLA and VIRGINIA FONTANILLA, appellees
G.R. Nos. L-55963 & 61045

In its Motion for Reconsideration1 of the Court's Second Division decision in G.R. No.
55963 and G.R. No. 61045, the National Irrigation Administration (NIA, for brevity),
through the Solicitor General, maintains that, on the strength of Presidential Decree No.
552 (which amended certain provisions of Republic Act 3601, the law creating the NIA)
and the case of Angat River Irrigation System, et al. vs. Angat River Workers' Union, et
al., 102 Phil. 790 "the NIA does not perform solely and primarily proprietary functions
but is an agency of the government tasked with governmental functions, and is
therefore not liable for the tortious act of its driver Hugo Garcia, who was not its special
agent."

Although the majority opinion in the cited case of Angat System declares that the Angat
System (like the NIA) exercised a governmental function because the nature of the
powers and functions of said agency does not show that it was intended to "bring to the
Government any special corporate benefit or pecuniary profit," there is a strong
dissenting opinion penned by then Associate Justice and later Chief Justice Roberto
Concepcion and concurred in by then Associate Justice J.B.L. Reyes which held the
contrary view that the Angat River System is a government entity exercising proprietary
functions. To buttress said stand, the former Chief Justice cited some authorities which
will be useful in the proper resolution of this case.

Quoting from said dissenting opinion which cited McQuillin's The Law of Municipal
Corporations, 3rd ed., Vol. 18, pp. 423424:

In undertaking to supply water at price, municipality is not performing governmental

function but is engaged in trade, and is liable first as private company would be for any
negligence in laying out of its pipes, in keeping them in repair, or in furnishing potable
water through them. Harvard Furniture Co., Inc. vs. City of Cambridge, 320 Mass. 227,
68 N.E. (2d) 684.
Municipality in contracting to provide water supply acts under its proprietary power and
not under its legislative, public or governmental powers. Farmers' State Bank vs.
Conrad, 100 Mont. 415,47 P. (2d) 853.

In this connection, the opinion is that irrigation districts in the United States are basically
identical to our irrigation systems under Act No. 2152. Because of such similarity, it is
found appropriate to consider certain doctrines from American jurisprudence, which are
as follows, to wit:

An irrigation district is a public quasi corporation, organized, however, to conduct a

business for the private benefit of the owners of land within its limits. They are members
of the corporation, control its affairs, and alone are benefited by its operations. It is, in
the administration of its business, the owner of its system in a proprietary rather than a
public capacity, and must assume and bear the burdens of proprietary ownership.
(Nampa vs. Nampa & M. Irrig. Dist. 19 Idaho, 779,115 Pac. 979)

. . . the plaintiff sought damages for injuries to crops on his land during 1923, 1924,
1925, and 1926, caused by water seeping, percolating, and escaping from the
defendant's canal. The defendant contended that irrigation districts were agencies of the
state, and were, therefore, not liable for the negligent construction or operation of their
canals or ditches. The court, after a careful review of the authorities defining an
irrigation district, conceded that such a quasi public corporation possessed some
governmental powers and exercised some governmental functions, but held that the
construction and operation of its irrigation canals and ditches was a proprietary rather
than a governmental function, and hence the district was responsible in damages for the
negligent construction or operation of its canal system. (69 A.L.R., p. 1233)

It may not be amiss to state at this point that the functions of government have been
classified into governmental or constituent and proprietary or ministrant. The former
involves the exercise of sovereignty and considered as compulsory; the latter connotes
merely the exercise of proprietary functions and thus considered as optional. The
Solicitor General argues that the reasons presented by P.D. 552 for the existence of the
NIA (the WHEREAS clauses of said decree) indubitably reveal that the responsibility
vested in said agency concerns public welfare and public benefit, and is therefore an
exercise of sovereignty. On the contrary, We agree with the former Chief Justice
Concepcion in saying that the same purpose such as public benefit and public welfare
may be found in the operation of certain enterprises (those engaged in the supply of
electric power, or in supplying telegraphic, telephonic, and radio communication, or in
the production and distribution of prime necessities, etc.) yet it is certain that the
functions performed by such enterprises are basically proprietary in nature. Thus, as
held in Holderbaum vs. Hidalgo County Water Improvement District (297 S.W. 865, aff'd
in 11 S.W. [2d] 506) — cited in the dissenting opinion by Justice Concepcion:

. . . Primarily, a water improvement district is in no better position than a city is when

exercising its purely local powers and duties. Its general purposes are not essentially
public in their nature, but are only incidentally so; those purposes may be likened to
those of a city which is operating a waterworks system, or an irrigation system. . . . A
water improvement district can do nothing, it has and furnishes no facilities, for the
administration of the sovereign government. Its officers have no power or authority to
exercise any of the functions of the general government, or to enforce any of the laws of
the state or any of its other subdivisions, or collect taxes other than those assessed by
the district. They have no more power or authority than that of the officers of a private
corporation organized for like purposes. As a practical matter, the primary objects and
purposes of such district are of a purely local nature, for the district is created and
operated for the sole benefit of its own members, and an analysis of those objects and
purposes discloses that they directly benefit only the landowners who reside within and
whose lands form a part of the district, to the exclusion of all other residents therein. It is
true, of course, that the state and the general public are greatly benefited by the proper
operation of the district, and to that extent its objects and accomplishments are public in
their nature, but this characteristic is only incidental to the primary and chief object of
the corporation, which is the irrigation of lands forming a part of the district. It is obvious,
then, that the purposes and duties of such districts do not come within the definition of
public rights, purposes, and duties which would entitle the district to the exemption
raised by the common law as a protection to corporations having a purely public
purpose and performing essentially public duties.

Of equal importance is the case of National Waterworks and Sewerage Authority

(NAWASA) vs. NWSA Consolidated Unions, 11 SCRA 766, which propounds the thesis
that "the NAWASA is not an agency performing governmental functions; rather it
performs proprietary functions . . . ." The functions of providing water supply and
sewerage service are regarded as mere optional functions of government even though
the service rendered caters to the community as a whole and the goal is for the general
interest of society. The business of furnishing water supply and sewerage service, as
held in the case of Metropolitan Water District vs. Court of Industrial Relations, et al., 91
Phil. 840, "may for all practical purposes be likened to an industry engaged in by coal
companies, gas companies, power plants, ice plants, and the like." Withal, it has been
enunciated that "although the State may regulate the service and rates of water plants
owned and operated by municipalities, such property is not employed for governmental
purposes and in the ownership and operation thereof the municipality acts in its
proprietary capacity, free from legislative interference." (1 McQuillin, p. 683)

Like the NAWASA, the National Irrigation Administration was not created for purposes
of local government. While it may be true that the NIA was essentially a service agency
of the government aimed at promoting public interest and public welfare, such fact does
not make the NIA essentially and purely a "government-function" corporation. NIA was
created for the purpose of "constructing, improving, rehabilitating, and administering all
national irrigation systems in the Philippines, including all communal and pump irrigation
projects." Certainly, the state and the community as a whole are largely benefited by the
services the agency renders, but these functions are only incidental to the principal aim
of the agency, which is the irrigation of lands.

We must not lose sight of the fact that the NIA is a government agency invested with a
corporate personality separate and distinct from the government, thus is governed by
the Corporation Law. Section 1 of Republic Act No. 3601 provides:

Sec. 1. Name and Domicile — A body corporate is hereby created which shall be known
as the National Irrigation Administration. . . . which shall be organized immediately after
the approval of this Act. It shall have its principal seat of business in the City of Manila
and shall have representatives in all provinces, for the proper conduct of its business.
(Emphasis for emphasis).

Besides, Section 2, subsection b of P.D. 552 provides that:

(b) To charge and collect from the beneficiaries of the water from all irrigation
systems constructed by or under its administration, such fees or administration
charges as may be necessary to cover the cost of operation, maintenance and
insurance, and to recover the cost of construction within a reasonable period of
time to the extent consistent with government policy; to recover funds or portions
thereof expended for the construction and/or rehabilitation of communal irrigation
systems which funds shall accrue to a special fund for irrigation development
under section 2 hereof;
Unpaid irrigation fees or administration charges shall be preferred liens first,
upon the land benefited, and then on the crops raised thereon, which liens shall
have preference over all other liens except for taxes on the land, and such
preferred liens shall not be removed until all fees or administration charges are
 paid or the property is levied upon and sold by the National Irrigation
Administration for the satisfaction thereof. . . .

The same section also provides that NIA may sue and be sued in court. Thus,
b) . . . Judicial actions for the collection of unpaid irrigation fees or charges,
drainage fees or other charges which the National Irrigation Administration is
authorized to impose and collect, shall henceforth be governed by the provisions
of the Rules of Court of the Philippines for similar actions, the provisions of other
laws to the contrary notwithstanding.
xxx xxx xxx
(e) ....
xxx xxx xxx
All actions for the recovery of compensation and damages against the National
Irrigation Administration under paragraphs (1), (2), and (3) hereof, shall be filed with a
competent court within five (5) years from the date of entry of the land or destruction of
the improvements or crops, after which period, the right of possession and/or ownership
of the National Irrigation Administration shall be considered vested and absolute. All
other actions for the recovery of compensation and damages to private property and
improvements occasioned by the construction, operation and maintenance of irrigation
facilities and other hydraulic structures under the administration of the National Irrigation
Administration, which have accrued ten (10) or more years prior to the approval of this
decree are deemed to have prescribed and are barred forever.

It has its own assets and liabilities. It also has corporate powers to be exercised by a
Board of Directors. To quote Section 2, subsection (f):
(f) . . . and to transact such business, as are directly or indirectly necessary,
incidental or conducive to the attainment of the above powers and objectives,
including the power to establish and maintain subsidiaries, and in general, to
exercise all the powers of a corporation under the Corporation Law, insofar as
they are not inconsistent with the provisions of this Act. (Emphasis supplied).
On the basis of the foregoing considerations, We conclude that the National Irrigation
Administration is a government agency with a juridical personality separate and distinct
from the government. It is not a mere agency of the government but a corporate body
performing proprietary functions. Therefore, it may be held liable for the damages
caused by the negligent act of its driver who was not its special agent.
ACCORDINGLY, the Motion for Reconsideration dated January 26, 1990 is DENIED
WITH FINALITY. The decision of this Court in G.R. No. 55963 and G.R. No. 61045
dated December 1, 1989 is hereby AFFIRMED.
SEA COMMERCIAL COMPANY, INC., petitioner, vs. THE HONORABLE COURT OF
APPEALS, JAMANDRE INDUSTRIES, INC. and TIRSO JAMANDRE, respondents
G.R. No. 122823

In this petition for review by certiorari, SEA Commercial Company, Inc. (SEACOM)
assails the decision of the Court of Appeals in CA-G.R. CV NO. 31263 affirming in toto
the decision of the Regional Trial Court of Manila, Branch 5, in Civil Case No. 122391,
in favor of Jamandre Industries, Inc. (JII) et al., the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the defendant and
against the plaintiff, ordering the plaintiff:
1) To pay defendant the sum of P66,156.15 (minus 18,843.85) with legal interest
thereon, from the date of the filing of the counterclaim until fully paid;
2) To pay defendant P2,000.00 as moral and exemplary damages;
3) To pay attorneys fees in the sum of P10,000.00; and
4) To pay the costs of this suit. SO ORDERED.
SEACOM is a corporation engaged in the business of selling and distributing
agricultural machinery, products and equipment. On September 20, 1966, SEACOM
and JII entered into a dealership agreement whereby SEACOM appointed JII as its
exclusive dealer in the City and Province of Iloilo TirsoJamandre executed a suretyship
agreement binding himself jointly and severally with JII to pay for all obligations of JII to
SEACOM. The agreement was subsequently amended to include Capiz in the territorial
coverage and to make the dealership agreement on a non-exclusive basis[3]. In the
course of the business relationship arising from the dealership agreement, JII allegedly
incurred a balance of P18,843.85 for unpaid deliveries, and SEACOM brought action to
recover said amount plus interest and attorneys fees.
JII filed an Answer denying the obligation and interposing a counterclaim for damages
representing unrealized profits when JII sold to the Farm System Development
Corporation (FSDC) twenty one (21) units of Mitsubishi power tillers. In the
counterclaim, JII alleged that as a dealer in Capiz, JII contracted to sell in 1977 twenty-
four (24) units of Mitsubishi power tillers to a group of farmers to be financed by said
corporation, which fact JII allegedly made known to petitioner, but the latter taking
advantage of said information and in bad faith, went directly to FSDC and dealt with it
and sold twenty one (21) units of said tractors, thereby depriving JII of unrealized profit
of eighty-five thousand four hundred fifteen and 61/100 pesos (P85,415.61).
The trial court rendered its decision on January 24, 1990 ordering JII to pay SEACOM
the amount of Eighteen Thousand Eight Hundred Forty Three and 85/100 (P18,843.85)
representing its outstanding obligation. The trial court likewise granted JIIs counterclaim
for unrealized profits, and for moral and exemplary damages and attorney fees as
above quoted.

SEACOM appealed the decision on the counterclaim.

The Court of Appeals held that while there exists no agency relationship between
SEACOM and JII, SEACOM is liable for damages and unrealized profits to JII.
This Court, however, is convinced that with or without the existence of an agency
relationship between appellant SEACOM and appellee JII and notwithstanding the error
committed by the lower court in finding that an agency relationship existed between
appellant and defendant corporation the former is liable for the unrealized profits which
the latter could have gained had not appellant unjustly stepped in and in bad faith
unethically intervened.
It should be emphasized that the very purpose of the dealership agreement is for
SEACOM to have JII as its dealer to sell its products in the provinces of Capiz and Iloilo.
In view of this agreement, the second assigned error that the lower court erred in
holding that appellant learned of the FSDC transaction from defendant JII is clearly
immaterial and devoid of merit. The fact that the dealership is on a non-exclusive basis
does not entitle appellant SEACOM to join the fray as against its dealer. To do so, is to
violate the norms of conduct enjoined by Art. 19 of the Civil Code. By virtue of such
agreement, the competition in the market as regards the sale of farm equipment shall
be between JII, as the dealer of SEACOM and other companies, not as against
SEACOM itself. However, SEACOM, not satisfied with the presence of its dealer JII in
the market, joined the competition even as the against the latter and, therefore,
changed the scenario of the competition thereby rendering inutile the dealership
agreement which they entered into the manifest prejudice of JII. Hence, the trial court
was correct when it applied Art. 19 of the Civil Code in the case at bar in that appellant
SEACOM acted in bad faith when it competed with its own dealer as regards the sale of
farm machineries, thereby depriving appellee JII of the opportunity to gain a clear profit
of P85,000.00 and affirmed the judgment appealed from in toto.

Hence this petition for review on certiorari, which submits the following reasons for the
allowance thereof:
THE RESPONDENT COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE
IN A WAY NOT IN ACCORDANCE WITH LAW AND JURISPRUDENCE,
CONSIDERING THAT:
A. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING
THAT PETITIONER IS LIABLE TO PAY DAMAGES AND UNREALIZED
 PROFITS TO THE PRIVATE RESPONDENTS DESPITE THE FACT THAT
NO AGENCY RELATIONSHIP EXISTS BETWEEN THEM.
B. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING
THAT PETITIONER ACTED IN BAD FAITH AGAINST THE PRIVATE
RESPONDENT CORPORATION DESPITE THE FACT THAT SAID RULING
IS CONTRARY TO THE EVIDENCE ON RECORD.
C. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING
THAT THE NON-EXCLUSIVITY CLAUSE IN THE DEALERSHIP
AGREEMENT EXECUTED BETWEEN THE PETITIONER AND PRIVATE
RESPONDENT CORPORATION PRECLUDES THE PETITIONER FROM
COMPETING WITH THE PRIVATE RESPONDENT CORPORATION.
D. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING
THAT PRIVATE RESPONDENT IS ENTITLED TO UNREALIZED PROFITS,
MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES

Petitioner SEACOM disputes the conclusion of the Court of Appeals that despite the
fact that no agency relationship existed between the parties, the SEACOM is still liable
in damages and unrealized profits for the reason that it acted in bad faith. Petitioner
SEACOM invokes the non-exclusivity clause in the dealership agreement and claims
that the transaction with FSDC was concluded pursuant to a public bidding and not on
the basis of alleged information it received from private respondent TirsoJamandre.
Moreover, petitioner SEACOM claims that it did not underprice its products during the
public bidding wherein both SEACOM and JII participated. Petitioner also disputes the
award of moral damages to JII which is a corporation, in the absence of any evidence
that the said corporation had a good reputation which was debased.

Private respondents in their comment, contends that the four assigned errors raise
mixed questions of fact and law and are therefore beyond the jurisdiction of the
Supreme Court which may take cognizance of only questions of law. The assigned
errors were also refuted to secure affirmance of the appealed decision. JII maintains
that the bidding set by FSDC on March 24, 1997 was scheduled after the demonstration
conducted by JII, and after JII informed SEACOM about the preference of the farmers to
buy Mitsubishi tillers. JII further rebuts the SEACOMs contention that the transaction
with FSDC was pursuant to a public bidding with full disclosure to the public and private
respondent JII considering that JII had nothing to do with the list of 37 bidders and
cannot be bound by the listing made by SEACOMs employee; moreover, JII did not
participate in the bidding not having been informed about it. Furthermore, the price at
which SEACOM sold to FSDC was lower than the price it gave to JII. Also, even if the
dealership agreement was not exclusive, it was breached when petitioner in bad faith
sold directly to FSDC with whom JII had previously offered the subject farm equipment.
With respect to the awards of moral and exemplary damages, JII seeks an affirmation of
the ruling of the Court of Appeals justifying the awards.
SEACOM filed Reply defending the jurisdiction of this Court over the instant petition
since the decision of the Court of Appeals was based on a misapprehension of facts.
SEACOM insists that FSDCs purchase was made pursuant to a public bidding, and
even if SEACOM did not participate thereon, JII would not necessarily have closed the
deal since thirty seven (37) bidders participated. SEACOM contends that no evidence
was presented to prove that the bidding was a fraudulent scheme of SEACOM and
FSDC. SEACOM further controverts JIIs contention that JII did not take part in the
bidding as TirsoJamandre was one of the bidders and that SEACOM underpriced its
products to entice FSDC to buy directly from it. In fine, JII is not entitled to the award of
unrealized profits and damages.
In its Rejoinder, private respondents insist that there is an agency relationship, citing the
evidence showing that credit memos and not cash vouchers were issued to JII by
SEACOM for every delivery from November 26, 1976 to December 24, 1978. Private
respondents maintain that SEACOM torpedoed the emerging deal between JII and
FSDC after being informed about it by JII by dealing directly with FSDC at a lower price
and after betraying JII, SEACOM would cover up the deceit by conniving with FSDC to
post up a sham public bidding.
SEACOMs sur-rejoinder contains basically a reiteration of its contention in previous
pleadings. Additionally, it is contended that private respondents are barred from
questioning in their Rejoinder, the finding of the Court of Appeals that there is no
agency relationship between the parties since this matter was not raised as error in their
comment.

The core issue is whether SEACOM acted in bad faith when it competed with its own
dealer as regards the sale of farm machineries to FSDC.
Both the trial court and the Court of Appeals held affirmatively; the trial court found that
JII was an agent of SEACOM and the act of SEACOM in dealing directly with FSDC
was unfair and unjust to its agent, and that there was fraud in the transaction between
FSDC and SEACOM to the prejudice of JII. On the other hand, the Court of Appeals
ruled that there was no agency relationship between the parties but SEACOM is
nevertheless liable in damages for having acted in bad faith when it competed with its
own dealer in the sale of the farm machineries to FSDC. Both courts invoke as basis for
the award Article 19 of the Civil Code which reads as follows:
"Art. 19. Every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due and observe honesty and good faith.
The principle of abuse of rights stated in the above article, departs from the classical
theory that he who uses a right injures no one. The modern tendency is to depart from
the classical and traditional theory, and to grant indemnity for damages in cases where
there is an abuse of rights, even when the act is not illicit.
Article 19 was intended to expand the concept of torts by granting adequate legal
remedy for the untold number of moral wrongs which is impossible for human foresight
to provide specifically in statutory law. If mere fault or negligence in ones acts can make
him liable for damages for injury caused thereby, with more reason should abuse or bad
faith make him liable. The absence of good faith is essential to abuse of right. Good
faith is an honest intention to abstain from taking any unconscientious advantage of
another, even through the forms or technicalities of the law, together with an absence of
all information or belief of fact which would render the transaction unconscientious. In
business relations, it means good faith as understood by men of affairs.
While Article 19 may have been intended as a mere declaration of principle, the cardinal
law on human conduct expressed in said article has given rise to certain rules, e.g. that
where a person exercises his rights but does so arbitrarily or unjustly or performs his
duties in a manner that is not in keeping with honesty and good faith, he opens himself
to liability.The elements of an abuse of rights under Article 19 are: (1) there is a legal
right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or
injuring another.
The issue whether JII is entitled to recovery on its counterclaim for unrealized profit in
the twenty one (21) units of Mitsubishi power tillers sold by SEACOM to FSDC was
resolved by the trial court in favor of JII on the basis of documentary evidence showing
that (1) JII has informed SEACOM as early as February 1977 of the promotions
undertaken by JII for the sale of 24 contracted units to FSDC and in connection
therewith, requested a 50% discount to make the price competitive, and to increase the
warranty period for eight months to one year. In said letter Jamandre clarified that they
were not amenable to SEACOMs offering directly to FSDC and to be only given the
usual overriding commission as we have considerable investments on this transaction.
(2) In response, the general sales manager of SEACOM declined to give the requested
50% discount and offered a less 30% less 10% up to end March xxx on cash before
delivery basis, granted the requested extension of the warranty period and stated that
we are glad to note that you have quite a number of units pending with the FSDC.
The trial court ruled that with said information, SEACOM dealt directly with FSDC and
offered its units at a lower price, leaving FSDC no choice but to accept the said offer of
(SEACOM).
In affirming the judgment of the of the trial court, the Court of Appeals held that by virtue
of the dealership agreement the competition in the market as regards the sale of farm
equipment shall be between JII, as the dealer of SEACOM, and other companies, not
as against SEACOM itself, the Court stated:

However, SEACOM not satisfied with the presence of its dealer JII in the market, joined
the competition even as against the latter, and thereby changed the scenario of the
competition thereby rendering inutile the dealership agreement which they entered into
to the manifest prejudice of JII. Hence the trial court trial court was correct when it
applied Art. 19 of the Civil Code in the case at bar in that appellant SEACOM acted in
bad faith when it competed with its own dealer as regards the sale of farm machineries,
thereby depriving appellee JII of the opportunity to gain a clear profit of P85,000.00.
We find no cogent reason to overturn the factual finding of the two courts that SEACOM
joined the bidding for the sale of the farm equipment after it was informed that JII was
already promoting the sales of said equipment to the FSDC. Moreover, the conclusion
of the trial court that the SEACOM offered FSDC a lower price than the price offered by
JII to FSDC is supported by the evidence: the price offered by JII to FSDC is P27,167
per unit but the prices at which SEACOM sold to FSDC were at P22,867.00 for Model
CT 83-2, P21,093.50 for model CT 83-E, and P18,979.25 for model CT 534. The fact
that SEACOM may have offered to JII, in lieu of a requested 50% discount, a discount
effectively translating to 37% of the list price and actually sold to FSDC at 35% less than
the list price does not detract from the fact that by participating in the bidding of FSDC, it
actually competed with its own dealer who had earlier conducted demonstrations and
promoted its own products for the sale of the very same equipment, Exh. N for the
plaintiff confirms that both SEACOM and Jamandre participated in the bidding.
However, the SEACOM was awarded the contract directly from Manila. The testimony
of TirsoJamandre that JII was the sole representative of SEACOM in the local
demonstrations to convince the farmers and cooperative officers to accept the
Mitsubishi brand of equipment in preference to other brands, was unrebutted by
SEACOM.

Clearly, the bad faith of SEACOM was established. By appointing as a dealer of its
agricultural equipment, SEACOM recognized the role and undertaking of JII to promote
and sell said equipment. Under the dealership agreement, JII was to act as a
middleman to sell SEACOMs products, in its area of operations, i.e. Iloilo and Capiz
provinces, to the exclusion of other places, to send its men to Manila for training on
repair, servicing and installation of the items to be handled by it, and to comply with
other personnel and vehicle requirements intended for the benefit of the dealership.
After being informed of the demonstrations JII had conducted to promote the sales of
SEACOM equipment, including the operations at JIIs expense conducted for five
months, and the approval of its facilities (service and parts) by FSDC,SEACOM
participated in the bidding for the said equipment at a lower price, placing itself in direct
competition with its own dealer. The actuations of SEACOM are tainted by bad faith.
Even if the dealership agreement was amended to make it on a non-exclusive basis,
SEACOM may not exercise its right unjustly or in a manner that is not in keeping with
honesty or good faith; otherwise it opens itself to liability under the abuse of right rule
embodied in Article 19 of the Civil Code above-quoted. This provision, together with the
succeeding article on human relation, was intended to embody certain basic principles
that are to be observed for the rightful relationship between human beings and for the
stability of the social order. What is sought to be written into the law is the pervading
principle of equity and justice above strict legalism.

We accordingly resolve to affirm the award for unrealized profits. The Court of Appeals
noted that the trial court failed to specify to which the two appellees the award for moral
and exemplary damages is granted. However, in view of the fact that moral damages
are not as a general rule granted to a corporation, and that TirsoJamandre was the one
who testified on his feeling very aggrieved and on his mental anguish and sleepless
nights thinking of how SEACOM dealt with us behind (our) backs, the award should go
to defendant Jamandre, President of JII.

WHEREFORE, the judgment appealed from is AFFIRMED with the modification that the
award of P2,000.00 in moral and exemplary damages shall be paid to defendant Tirso
Jamandre. Costs against appellant. SO ORDERED
 APOLONIO TANJANCO, petitioner, vs. COURT OF APPEALS, respondents
G.R. No. L-18630

Appeal from a decision of the Court of Appeals (in its Case No. 27210-R) revoking an
order of the Court of First Instance of Rizal (in Civil Case No. Q-4797) dismissing
appellant's action for support and damages.
The essential allegations of the complaint are to the effect that, from December, 1957,
the defendant (appellee herein), ApolonioTanjanco, courted the plaintiff, Araceli Santos,
both being of adult age; that "defendant expressed and professed his undying love and
affection for plaintiff who also in due time reciprocated the tender feelings"; that in
consideration of defendant's promise of marriage plaintiff consented and acceded to
defendant's pleas for carnal knowledge; that regularly until December 1959, through his
protestations of love and promises of marriage, defendant succeeded in having carnal
access to plaintiff, as a result of which the latter conceived a child; that due to her
pregnant condition, to avoid embarrassment and social humiliation, plaintiff had to
resign her job as secretary in IBM Philippines, Inc., where she was receiving P230.00 a
month; that thereby plaintiff became unable to support herself and her baby; that due to
defendant's refusal to marry plaintiff, as promised, the latter suffered mental anguish,
besmirched reputation, wounded feelings, moral shock, and social humiliation. The
prayer was for a decree compelling the defendant to recognize the unborn child that
plaintiff was bearing; to pay her not less than P430.00 a month for her support and that
of her baby, plus P100,000.00 in moral and exemplary damages, plus P10,000.00
attorney's fees.

Upon defendant's motion to dismiss, the court of first instance dismissed the complaint
for failure to state a cause of action.
Plaintiff Santos duly appealed to the Court of Appeals, and the latter ultimately decided
the case, holding with the lower court that no cause of action was shown to compel
recognition of a child as yet unborn, nor for its support, but decreed that the complaint
did state a cause of action for damages, premised on Article 21 of the Civil Code of the
Philippines, prescribing as follows:
ART. 21. Any person who wilfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the
latter for the damage.

The Court of Appeals, therefore, entered judgment setting aside the dismissal and
directing the court of origin to proceed with the case.
Defendant, in turn, appealed to this Court, pleading that actions for breach of a promise
to marry are not permissible in this jurisdiction, and invoking the rulings of this Court in
Estopa vs. Piansay, L-14733, September 30, 1960; Hermosisima vs. Court of Appeals,
L-14628, January 29, 1962; and De Jesus vs. SyQuia, 58 Phil. 886.

We find this appeal meritorious.

In holding that the complaint stated a cause of action for damages, under Article 21
above mentioned, the Court of Appeals relied upon and quoted from the memorandum
submitted by the Code Commission to the Legislature in 1949 to support the original
draft of the Civil Code. Referring to Article 23 of the draft (now Article 21 of the Code),
the Commission stated:
But the Code Commission has gone farther than the sphere of wrongs defined or
determined by positive law. Fully sensible that there are countless gaps in the
statutes, which leave so many victims of moral wrongs helpless, even though
they have actually suffered material and moral injury, the Commission has
deemed it necessary, in the interest of justice, to incorporate in the proposed
Civil Code the following rule:
"ART. 23. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage."

An example will illustrate the purview of the foregoing norm: "A" seduces the nineteen-
year old daughter of "X". A promise of marriage either has not been made, or can not be
proved. The girl becomes pregnant. Under the present laws, there is no crime, as the
girl is above eighteen years of age. Neither can any civil action for breach of promise of
marriage be filed. Therefore, though the grievous moral wrong has been committed, and
though the girl and her family have suffered incalculable moral damage, she and her
parents cannot bring any action for damages. But under the proposed article, she and
her parents would have such a right of action.

The Court of Appeals seems to have overlooked that the example set forth in the Code
Commission's memorandum refers to a tort upon a minor who has been seduced. The
essential feature is seduction, that in law is more than mere sexual intercourse, or a
breach of a promise of marriage; it connotes essentially the idea of deceit, enticement,
superior power or abuse of confidence on the part of the seducer to which the woman
has yielded (U.S. vs. Buenaventura, 27 Phil. 121; U.S. vs. Arlante, 9 Phil. 595).
It has been ruled in the Buenaventura case (supra) that — To constitute seduction there
must in all cases be some sufficient promise or inducement and the woman must yield
because of the promise or other inducement. If she consents merely from carnal lust
and the intercourse is from mutual desire, there is no seduction (43 Cent. Dig. tit.
Seduction, par. 56). She must be induced to depart from the path of virtue by the use of
some species of arts, persuasions and wiles, which are calculated to have and do have
that effect, and which result in her ultimately submitting her person to the sexual
embraces of her seducer (27 Phil. 123).
And in American Jurisprudence we find:
On the other hand, in an action by the woman, the enticement, persuasion or deception
is the essence of the injury; and a mere proof of intercourse is insufficient to warrant a
recover.
Accordingly it is not seduction where the willingness arises out of sexual desire or
curiosity of the female, and the defendant merely affords her the needed opportunity for
the commission of the act. It has been emphasized that to allow a recovery in all such
cases would tend to the demoralization of the female sex, and would be a reward for
unchastity by which a class of adventuresses would be swift to profit." (47 Am. Jur. 662)

Bearing these principles in mind, let us examine the complaint. The material allegations
there are as follows:
I. That the plaintiff is of legal age, single, and residing at 56 South E. Diliman, Quezon
City, while defendant is also of legal age, single and residing at 525 Padre Faura,
Manila, where he may be served with summons;
II. That the plaintiff and the defendant became acquainted with each other sometime in
December, 1957 and soon thereafter, the defendant started visiting and courting the
plaintiff;
III. That the defendant's visits were regular and frequent and in due time the defendant
expressed and professed his undying love and affection for the plaintiff who also in due
time reciprocated the tender feelings;
IV. That in the course of their engagement, the plaintiff and the defendant as are wont of
young people in love had frequent outings and dates, became very close and intimate to
each other and sometime in July, 1958, in consideration of the defendant's promises of
marriage, the plaintiff consented and acceded to the former's earnest and repeated
pleas to have carnal knowledge with him;
V. That subsequent thereto and regularly until about July, 1959 except for a short period
in December, 1958 when the defendant was out of the country, the defendant through
his protestations of love and promises of marriage succeeded in having carnal
knowledge with the plaintiff;
VI. That as a result of their intimate relationship, the plaintiff started conceiving which
was confirmed by a doctor sometime in July, 1959;
VII. That upon being certain of her pregnant condition, the plaintiff informed the
defendant and pleaded with him to make good his promises of marriage, but instead of
honoring his promises and righting his wrong, the defendant stopped and refrained from
seeing the plaintiff since about July, 1959 has not visited the plaintiff and to all intents
and purposes has broken their engagement and his promises.

Over and above the partisan allegations, the facts stand out that for one whole year,
from 1958 to 1959, the plaintiff-appellee, a woman of adult age, maintained intimate
sexual relations with appellant, with repeated acts of intercourse. Such conduct is
incompatible with the idea of seduction. Plainly there is here voluntariness and mutual
passion; for had the appellant been deceived, had she surrendered exclusively because
of the deceit, artful persuasions and wiles of the defendant, she would not have again
yielded to his embraces, much less for one year, without exacting early fulfillment of the
alleged promises of marriage, and would have cut chart all sexual relations upon finding
that defendant did not intend to fulfill his promises. Hence, we conclude that no case is
made under Article 21 of the Civil Code, and no other cause of action being alleged, no
error was committed by the Court of First Instance in dismissing the complaint.
Of course, the dismissal must be understood as without prejudice to whatever actions
may correspond to the child of the plaintiff against the defendant-appellant, if any. On
that point, this Court makes no pronouncement, since the child's own rights are not here
involved.

FOR THE FOREGOING REASONS, the decision of the Court of Appeals is reversed,
and that of the Court of First Instance is affirmed. No costs.
CITY OF MANILA, petitioner, vs. GENARO N. TEOTICO and COURT OF APPEALS,
respondents.
G.R. No. L-23052

Appeal by certiorari from a decision of the Court of Appeals.

On January 27, 1958, at about 8:00 p.m., Genaro N. Teotico was at the corner of the
Old Luneta and P. Burgos Avenue, Manila, within a "loading and unloading" zone,
waiting for a jeepney to take him down town. After waiting for about five minutes, he
managed to hail a jeepney that came along to a stop. As he stepped down from the
curb to board the jeepney, and took a few steps, he fell inside an uncovered and
unlighted catch basin or manhole on P. Burgos Avenue. Due to the fall, his head hit the
rim of the manhole breaking his eyeglasses and causing broken pieces thereof to pierce
his left eyelid. As blood flowed therefrom, impairing his vision, several persons came to
his assistance and pulled him out of the manhole. One of them brought Teotico to the
Philippine General Hospital, where his injuries were treated, after which he was taken
home. In addition to the lacerated wound in his left upper eyelid, Teotico suffered
contusions on the left thigh, the left upper arm, the right leg and the upper lip apart from
an abrasion on the right infra-patella region. These injuries and the allergic eruption
caused by anti-tetanus injections administered to him in the hospital, required further
medical treatment by a private practitioner who charged therefor P1,400.00.
As a consequence of the foregoing occurrence, Teotico filed, with the Court of First
Instance of Manila, a complaint — which was, subsequently, amended — for damages
against the City of Manila, its mayor, city engineer, city health officer, city treasurer and
chief of police. As stated in the decision of the trial court, and quoted with approval by
the Court of Appeals.

At the time of the incident, plaintiff was a practicing public accountant, a businessman
and a professor at the University of the East. He held responsible positions in various
business firms like the Philippine Merchandising Co., the A.U. Valencia and Co., the
Silver Swan Manufacturing Company and the Sincere Packing Corporation. He was
also associated with several civic organizations such as the WackWack Golf Club, the
Chamber of Commerce of the Philippines, Y's Men Club of Manila and the Knights of
Rizal. As a result of the incident, plaintiff was prevented from engaging in his customary
occupation for twenty days. Plaintiff has lost a daily income of about P50.00 during his
incapacity to work. Because of the incident, he was subjected to humiliation and ridicule
by his business associates and friends. During the period of his treatment, plaintiff was
under constant fear and anxiety for the welfare of his minor children since he was their
only support. Due to the filing of this case, plaintiff has obligated himself to pay his
counsel the sum of P2,000.00.

On the other hand, the defense presented evidence, oral and documentary, to prove
that the Storm Drain Section, Office of the City Engineer of Manila, received a report of
the uncovered condition of a catchbasin at the corner of P. Burgos and Old Luneta
Streets, Manila, on January 24, 1958, but the same was covered on the same day
(Exhibit 4); that again the iron cover of the same catch basin was reported missing on
January 30, 1958, but the said cover was replaced the next day (Exhibit 5); that the
Office of the City Engineer never received any report to the effect that the catchbasin in
question was not covered between January 25 and 29, 1968; that it has always been a
policy of the said office, which is charged with the duty of installation, repair and care of
storm drains in the City of Manila, that whenever a report is received from whatever
source of the loss of a catchbasin cover, the matter is immediately attended to, either by
immediately replacing the missing cover or covering the catchbasin with steel matting
that because of the lucrative scrap iron business then prevailing, stealing of iron
catchbasin covers was rampant; that the Office of the City Engineer has filed complaints
in court resulting from theft of said iron covers; that in order to prevent such thefts, the
city government has changed the position and layout of catchbasins in the City by
constructing them under the sidewalks with concrete cement covers and openings on
the side of the gutter; and that these changes had been undertaken by the city from
time to time whenever funds were available.
After appropriate proceedings the Court of First Instance of Manila rendered the
aforementioned decision sustaining the theory of the defendants and dismissing the
amended complaint, without costs.

On appeal taken by plaintiff, this decision was affirmed by the Court of Appeals, except
insofar as the City of Manila is concerned, which was sentenced to pay damages in the
aggregate sum of P6,750.00. 1 Hence, this appeal by the City of Manila.
The first issue raised by the latter is whether the present case is governed by Section 4
of Republic Act No. 409 (Charter of the City of Manila) reading:
The city shall not be liable or held for damages or injuries to persons or property arising
from the failure of the Mayor, the Municipal Board, or any other city officer, to enforce
the provisions of this chapter, or any other law or ordinance, or from negligence of said
Mayor, Municipal Board, or other officers while enforcing or attempting to enforce said
provisions.or by Article 2189 of the Civil Code of the Philippines which provides:
Provinces, cities and municipalities shall be liable for damages for the death of, or
injuries suffered by, any person by reason of defective conditions of road, streets,
bridges, public buildings, and other public works under their control or supervision.

Manila maintains that the former provision should prevail over the latter, because
Republic Act 409, is a special law, intended exclusively for the City of Manila, whereas
the Civil Code is a general law, applicable to the entire Philippines.
The Court of Appeals, however, applied the Civil Code, and, we think, correctly. It is true
that, insofar as its territorial application is concerned, Republic Act No. 409 is a special
law and the Civil Code a general legislation; but, as regards the subject-matter of the
provisions above quoted, Section 4 of Republic Act 409 establishes a general rule
regulating the liability of the City of Manila for: "damages or injury to persons or property
arising from the failure of" city officers "to enforce the provisions of" said Act "or any
other law or ordinance, or from negligence" of the city "Mayor, Municipal Board, or other
officers while enforcing or attempting to enforce said provisions." Upon the other hand,
Article 2189 of the Civil Code constitutes a particular prescription making "provinces,
cities and municipalities . . . liable for damages for the death of, or injury suffered by any
person by reason" — specifically — "of the defective condition of roads, streets,
bridges, public buildings, and other-public works under their control or supervision." In
other words, said section 4 refers to liability arising from negligence, in general,
regardless of the object thereof, whereas Article 2189 governs liability due to "defective
streets," in particular. Since the present action is based upon the alleged defective
condition of a road, said Article 2189 is decisive thereon.
It is urged that the City of Manila cannot be held liable to Teotico for damages: 1)
because the accident involving him took place in a national highway; and 2) because
the City of Manila has not been negligent in connection therewith.
As regards the first issue, we note that it is based upon an allegation of fact not made in
the answer of the City. Moreover, Teotico alleged in his complaint, as well as in his
amended complaint, that his injuries were due to the defective condition of a street
which is "under the supervision and control" of the City. In its answer to the amended
complaint, the City, in turn, alleged that "the streets aforementioned were and have
been constantly kept in good condition and regularly inspected and the storm drains and
manholes thereof covered by the defendant City and the officers concerned" who "have
been ever vigilant and zealous in the performance of their respective functions and
duties as imposed upon them by law." Thus, the City had, in effect, admitted that P.
Burgos Avenue was and is under its control and supervision.
Moreover, the assertion to the effect that said Avenue is a national highway was made,
for the first time, in its motion for reconsideration of the decision of the Court of Appeals.
Such assertion raised, therefore, a question of fact, which had not been put in issue in
the trial court, and cannot be set up, for the first time, on appeal, much less after the
rendition of the decision of the appellate court, in a motion for the reconsideration
thereof.
At any rate, under Article 2189 of the Civil Code, it is not necessary for the liability
therein established to attach that the defective roads or streets belong to the province,
city or municipality from which responsibility is exacted. What said article requires is that
the province, city or municipality have either "control or supervision" over said street or
road. Even if P. Burgos Avenue were, therefore, a national highway, this circumstance
would not necessarily detract from its "control or supervision" by the City of Manila,
under Republic Act 409. In fact Section 18(x) thereof provides:
Sec. 18.Legislative powers. — The Municipal Board shall have the following
legislative powers:
x xxxxxxxx
(x) Subject to the provisions of existing law to provide for the laying out,
construction and improvement, and to regulate the use of streets, avenues,
alleys, sidewalks, wharves, piers, parks, cemeteries, and other public places; to
provide for lighting, cleaning, and sprinkling of streets and public places; . . . to
provide for the inspection of, fix the license fees for and regulate the openings in
the same for the laying of gas, water, sewer and other pipes, the building and
repair of tunnels, sewers, and drains, and all structures in and under the same
and the erecting of poles and the stringing of wires therein; to provide for and
regulate cross-works, curbs, and gutters therein, . . . to regulate traffic and sales
upon the streets and other public places; to provide for the abatement of
nuisances in the same and punish the authors or owners thereof; to provide for
the construction and maintenance, and regulate the use, of bridges, viaducts and
culverts; to prohibit and regulate ball playing, kite-flying, hoop rolling, and other
amusements which may annoy persons using the streets and public places, or
frighten horses or other animals; to regulate the speed of horses and other
animals, motor and other vehicles, cars, and locomotives within the limits of the
city; to regulate the lights used on all vehicles, cars, and locomotives; . . . to
provide for and change the location, grade, and crossing of railroads, and compel
any such railroad to raise or lower its tracks to conform to such provisions or
changes; and to require railroad companies to fence their property, or any part
thereof, to provide suitable protection against injury to persons or property, and
to construct and repair ditches, drains, sewers, and culverts along and under
their tracks, so that the natural drainage of the streets and adjacent property shall
not be obstructed.
This authority has been neither withdrawn nor restricted by Republic Act No. 917 and
Executive Order No. 113, dated May 2, 1955, upon which the City relies. Said Act
governs the disposition or appropriation of the highway funds and the giving of aid to
provinces, chartered cities and municipalities in the construction of roads and streets
within their respective boundaries, and Executive Order No. 113 merely implements the
provisions of said Republic Act No. 917, concerning the disposition and appropriation of
the highway funds. Moreover, it provides that "the construction, maintenance and
improvement of national primary, national secondary and national aid provincial and city
roads shall be accomplished by the Highway District Engineers and Highway City
Engineers under the supervision of the Commissioner of Public Highways and shall be
financed from such appropriations as may be authorized by the Republic of the
Philippines in annual or special appropriation Acts."
Then, again, the determination of whether or not P. Burgos Avenue is under the control
or supervision of the City of Manila and whether the latter is guilty of negligence, in
connection with the maintenance of said road, which were decided by the Court of
Appeals in the affirmative, is one of fact, and the findings of said Court thereon are not
subject to our review.

WHEREFORE, the decision appealed from should be as it is hereby affirmed, with costs
against the City of Manila. It is so ordered.
UNIVERSITY OF THE EAST, petitioner, vs. ROMEO A. JADER, respondent.
G.R. No. 132344

May an educational institution be held liable for damages for misleading a student into
believing that the latter had satisfied all the requirements for graduation when such is
not the case? This is the issue in the instant petition for review premised on the
following undisputed facts as summarized by the trial court and adopted by the Court of
Appeals (CA),1 to wit:
Plaintiff was enrolled in the defendants' College of Law from 1984 up to 1988. In the first
semester of his last year (School year 1987-1988), he failed to take the regular final
examination in Practice Court I for which he was given an incomplete grade (Exhibits
"2", also Exhibit "H"). He enrolled for the second semester as fourth year law student
(Exhibit "A") and on February 1, 1988 he filed an application for the removal of the
incomplete grade given him by Professor Carlos Ortega (Exhibits "H-2", also Exhibit "2")
which was approved by Dean CeledonioTiongson after payment of the required fee. He
took the examination on March 28, 1988. On May 30, 1988, Professor Carlos Ortega
submitted his grade. It was a grade of five (5). (Exhibits "H-4", also Exhibits "2-L", "2-
N").

In the meantime, the Dean and the Faculty Members of the College of Law met to
deliberate on who among the fourth year students should be allowed to graduate. The
plaintiff's name appeared in the Tentative List of Candidates for graduation for the
Degree of Bachelor of Laws (LL.B) as of Second Semester (1987-1988) with the
following annotation:
JADER ROMEO A.
Def. Conflict of Laws — x-1-87-88, Practice Court I Inc., 1-87-88 C-1 to submit transcript
with S.O. (Exhibits "3", "3-C-1", "3-C-2").
The 35th Investitures & Commencement Ceremonies for the candidates of Bachelor of
Laws was scheduled on the 16th of April 1988 at 3:00 o'clock in the afternoon, and in
the invitation for that occasion the name of the plaintiff appeared as one of the
candidates. (Exhibits "B", "B-6", "B-6-A"). At the foot of the list of the names of the
candidates there appeared however the following annotation:
This is a tentative list Degrees will be conferred upon these candidates who
satisfactorily complete requirements as stated in the University Bulletin and as approved
of the Department of Education, Culture and Sports (Exhibit "B-7-A").
The plaintiff attended the investiture ceremonies at F. dela Cruz Quadrangle, U.E.,
Recto Campus, during the program of which he went up the stage when his name was
called, escorted by her (sic) mother and his eldest brother who assisted in placing the
Hood, and his Tassel was turned from left to right, and he was thereafter handed by
Dean Celedonio a rolled white sheet of paper symbolical of the Law Diploma. His
relatives took pictures of the occasion (Exhibits "C" to "C-6", "D-3" to "D-11").
He tendered a blow-out that evening which was attended by neighbors, friends and
relatives who wished him good luck in the forthcoming bar examination. There were
pictures taken too during the blow-out (Exhibits "D" to "D-1").
He thereafter prepared himself for the bar examination. He took a leave of absence
without pay from his job from April 20, 1988 to September 30, 1988 (Exhibit "G") and
enrolled at the pre-bar review class in Far Eastern University. (Exhibits "F" to "F-2").
Having learned of the deficiency he dropped his review class and was not able to take
the bar examination.

Consequently, respondent sued petitioner for damages alleging that he suffered moral
shock, mental anguish, serious anxiety, besmirched reputation, wounded feelings and
sleepless nights when he was not able to take the 1988 bar examinations arising from
the latter's negligence. He prayed for an award of moral and exemplary damages,
unrealized income, attorney's fees, and costs of suit.
In its answer with counterclaim, petitioner denied liability arguing mainly that it never led
respondent to believe that he completed the requirements for a Bachelor of Laws
degree when his name was included in the tentative list of graduating students. After
trial, the lower court rendered judgment as follows:
WHEREFORE, in view of the foregoing judgment is hereby rendered in favor of
the plaintiff and against the defendant ordering the latter to pay plaintiff the sum
of THIRTY FIVE THOUSAND FOUR HUNDRED SEVENTY PESOS
(P35,470.00) with legal rate of interest from the filing of the complaint until fully
paid, the amount of FIVE THOUSAND PESOS (P5,000.00) as attorney's fees
and the cost of suit.
Defendant's counterclaim is, for lack of merit, hereby dismissed. SO ORDERED.
which on appeal by both parties was affirmed by the Court of Appeals (CA) with
modification. The dispositive portion of the CA decision reads:
WHEREFORE, in the light of the foregoing, the lower Court's Decision is hereby
AFFIRMED with the MODIFICATION that defendant-appellee, in addition to the
sum adjudged by the lower court in favor of plaintiff-appellant, is also ORDERED
to pay plaintiff-appellant the amount of FIFTY THOUSAND (P50,000.00) PESOS
for moral damages. Costs against defendant-appellee. SO ORDERED.

Upon the denial of its motion for reconsideration, petitioner UE elevated the case to this
Court on a petition for review under Rule 45 of the Rules of Court, arguing that it has no
liability to respondent Romeo A. Jader, considering that the proximate and immediate
cause of the alleged damages incurred by the latter arose out of his own negligence in
not verifying from the professor concerned the result of his removal exam.
The petition lacks merit.
When a student is enrolled in any educational or learning institution, a contract of
education is entered into between said institution and the student. The professors,
teachers or instructors hired by the school are considered merely as agents and
administrators tasked to perform the school's commitment under the contract. Since the
contracting parties are the school and the student, the latter is not duty-bound to deal
with the former's agents, such as the professors with respect to the status or result of
his grades, although nothing prevents either professors or students from sharing with
each other such information. The Court takes judicial notice of the traditional practice in
educational institutions wherein the professor directly furnishes his/her students their
grades. It is the contractual obligation of the school to timely inform and furnish
sufficient notice and information to each and every student as to whether he or she had
already complied with all the requirements for the conferment of a degree or whether
they would be included among those who will graduate. Although commencement
exercises are but a formal ceremony, it nonetheless is not an ordinary occasion, since
such ceremony is the educational institution's way of announcing to the whole world that
the students included in the list of those who will be conferred a degree during the
baccalaureate ceremony have satisfied all the requirements for such degree. Prior or
subsequent to the ceremony, the school has the obligation to promptly inform the
student of any problem involving the latter's grades and performance and also most
importantly, of the procedures for remedying the same.

Petitioner, in belatedly informing respondent of the result of the removal examination,

particularly at a time when he had already commenced preparing for the bar exams,
cannot be said to have acted in good faith. Absence of good faith must be sufficiently
established for a successful prosecution by the aggrieved party in a suit for abuse of
right under Article 19 of the Civil Code. Good faith connotes an honest intention to
abstain from taking undue advantage of another, even though the forms and
technicalities of the law, together with the absence of all information or belief of facts,
would render the transaction unconscientious.5 It is the school that has access to those
information and it is only the school that can compel its professors to act and comply
with its rules, regulations and policies with respect to the computation and the prompt
submission of grades. Students do not exercise control, much less influence, over the
way an educational institution should run its affairs, particularly in disciplining its
professors and teachers and ensuring their compliance with the school's rules and
orders. Being the party that hired them, it is the school that exercises general
supervision and exclusive control over the professors with respect to the submission of
reports involving the students' standing. Exclusive control means that no other person or
entity had any control over the instrumentality which caused the damage or injury.
The college dean is the senior officer responsible for the operation of an academic
program, enforcement of rules and regulations, and the supervision of faculty and
student services. He must see to it that his own professors and teachers, regardless of
their status or position outside of the university, must comply with the rules set by the
latter. The negligent act of a professor who fails to observe the rules of the school, for
instance by not promptly submitting a student's grade, is not only imputable to the
professor but is an act of the school, being his employer.

Considering further, that the institution of learning involved herein is a university which
is engaged in legal education, it should have practiced what it inculcates in its students,
more specifically the principle of good dealings enshrined in Articles 19 and 20 of the
Civil Code which states:
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith.
Art. 20. Every person who, contrary to law, wilfully or negligently causes
damage to another, shall indemnify the latter for the same.
Art. 19 was intended to expand the concept of torts by granting adequate legal remedy
for the untold number of moral wrongs which is impossible for human foresight to
provide specifically in statutory law. In civilized society, men must be able to assume
that others will do them no intended injury — that others will commit no internal
aggressions upon them; that their fellowmen, when they act affirmatively will do so with
due care which the ordinary understanding and moral sense of the community exacts
and that those with whom they deal in the general course of society will act in good
faith. The ultimate thing in the theory of liability is justifiable reliance under conditions of
civilized society. Schools and professors cannot just take students for granted and be
indifferent to them, for without the latter, the former are useless.
Educational institutions are duty-bound to inform the students of their academic status
and not wait for the latter to inquire from the former. The conscious indifference of a
person to the rights or welfare of the person/persons who may be affected by his act or
omission can support a claim for damages. Want of care to the conscious disregard of
civil obligations coupled with a conscious knowledge of the cause naturally calculated to
produce them would make the erring party liable.Petitioner ought to have known that
time was of the essence in the performance of its obligation to inform respondent of his
grade. It cannot feign ignorance that respondent will not prepare himself for the bar
exams since that is precisely the immediate concern after graduation of an LL.B.
graduate. It failed to act seasonably. Petitioner cannot just give out its student's grades
at any time because a student has to comply with certain deadlines set by the Supreme
Court on the submission of requirements for taking the bar. Petitioner's liability arose
from its failure to promptly inform respondent of the result of an examination and in
misleading the latter into believing that he had satisfied all requirements for the course.
Worth quoting is the following disquisition of the respondent court:
It is apparent from the testimony of Dean Tiongson that defendant-appellee University
had been informed during the deliberation that the professor in Practice Court I gave
plaintiff-appellant a failing grade. Yet, defendant-appellee still did not inform plaintiff-
appellant of his failure to complete the requirements for the degree nor did they remove
his name from the tentative list of candidates for graduation. Worse, defendant-appellee
university, despite the knowledge that plaintiff-appellant failed in Practice Court I, again
included plaintiff-appellant's name in the "tentative list of candidates for graduation
which was prepared after the deliberation and which became the basis for the
commencement rites program. Dean Tiongson reasons out that plaintiff-appellant's
name was allowed to remain in the tentative list of candidates for graduation in the hope
that the latter would still be able to remedy the situation in the remaining few days
before graduation day. Dean Tiongson, however, did not explain how plaintiff appellant
Jader could have done something to complete his deficiency if defendant-appellee
university did not exert any effort to inform plaintiff-appellant of his failing grade in
Practice Court I.

Petitioner cannot pass on its blame to the professors to justify its own negligence that
led to the delayed relay of information to respondent. When one of two innocent parties
must suffer, he through whose agency the loss occurred must bear it. The modern
tendency is to grant indemnity for damages in cases where there is abuse of right, even
when the act is not illicit. If mere fault or negligence in one's acts can make him liable for
damages for injury caused thereby, with more reason should abuse or bad faith make
him liable. A person should be protected only when he acts in the legitimate exercise of
his right, that is, when he acts with prudence and in good faith, but not when he acts
with negligence or abuse.

However, while petitioner was guilty of negligence and thus liable to respondent for the
latter's actual damages, we hold that respondent should not have been awarded moral
damages. We do not agree with the Court of Appeals' findings that respondent suffered
shock, trauma and pain when he was informed that he could not graduate and will not
be allowed to take the bar examinations. At the very least, it behooved on respondent to
verify for himself whether he has completed all necessary requirements to be eligible for
the bar examinations. As a senior law student, respondent should have been
responsible enough to ensure that all his affairs, specifically those pertaining to his
academic achievement, are in order. Given these considerations, we fail to see how
respondent could have suffered untold embarrassment in attending the graduation rites,
enrolling in the bar review classes and not being able to take the bar exams. If
respondent was indeed humiliated by his failure to take the bar, he brought this upon
himself by not verifying if he has satisfied all the requirements including his school
records, before preparing himself for the bar examination. Certainly, taking the bar
examinations does not only entail a mental preparation on the subjects thereof; there
are also prerequisites of documentation and submission of requirements which the
prospective examinee must meet.
WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED with
MODIFICATION. Petitioner is ORDERED to PAY respondent the sum of Thirty-five
Thousand Four Hundred Seventy Pesos (P35,470.00), with legal interest of 6% per
annum computed from the date of filing of the complaint until fully paid; the amount of
Five Thousand Pesos (P5,000.00) as attorney's fees; and the costs of the suit. The
award of moral damages is DELEIED.
SO ORDERED.
 GASHEMSHOOKATBAKSH, petitioner, vs. HON. COURT OF APPEALS and
MARILOU T. GONZALES, respondents.
G.R. No. 97336

This is an appeal by certiorari under Rule 45 of the Rules of Court seeking to review
and set aside the Decision of the respondent Court of Appeals in CA-G.R. CV No.
24256 which affirmed in toto the 16 October 1939 Decision of Branch 38 (Lingayen) of
the Regional Trial Court (RTC) of Pangasinan in Civil Case No. 16503. Presented is the
issue of whether or not damages may be recovered for a breach of promise to marry on
the basis of Article 21 of the Civil Code of the Philippines.

The antecedents of this case are not complicated:

On 27 October 1987, private respondent, without the assistance of counsel, filed with
the aforesaid trial court a complaint for damages against the petitioner for the alleged
violation of their agreement to get married. She alleges in said complaint that: she is
twenty-two (22) years old, single, Filipino and a pretty lass of good moral character and
reputation duly respected in her community; petitioner, on the other hand, is an Iranian
citizen residing at the Lozano Apartments, Guilig, Dagupan City, and is an exchange
student taking a medical course at the Lyceum Northwestern Colleges in Dagupan City;
before 20 August 1987, the latter courted and proposed to marry her; she accepted his
love on the condition that they would get married; they therefore agreed to get married
after the end of the school semester, which was in October of that year; petitioner then
visited the private respondent's parents in Bañaga, Bugallon, Pangasinan to secure
their approval to the marriage; sometime in 20 August 1987, the petitioner forced her to
live with him in the Lozano Apartments; she was a virgin before she began living with
him; a week before the filing of the complaint, petitioner's attitude towards her started to
change; he maltreated and threatened to kill her; as a result of such maltreatment, she
sustained injuries; during a confrontation with a representative of the barangay captain
of Guilig a day before the filing of the complaint, petitioner repudiated their marriage
agreement and asked her not to live with him anymore and; the petitioner is already
married to someone living in Bacolod City. Private respondent then prayed for judgment
ordering the petitioner to pay her damages in the amount of not less than P45,000.00,
reimbursement for actual expenses amounting to P600.00, attorney's fees and costs,
and granting her such other relief and remedies as may be just and equitable. The
complaint was docketed as Civil Case No. 16503.

In his Answer with Counterclaim, petitioner admitted only the personal circumstances of
the parties as averred in the complaint and denied the rest of the allegations either for
lack of knowledge or information sufficient to form a belief as to the truth thereof or
because the true facts are those alleged as his Special and Affirmative Defenses. He
thus claimed that he never proposed marriage to or agreed to be married with the
private respondent; he neither sought the consent and approval of her parents nor
forced her to live in his apartment; he did not maltreat her, but only told her to stop
coming to his place because he discovered that she had deceived him by stealing his
money and passport; and finally, no confrontation took place with a representative of the
barangay captain. Insisting, in his Counterclaim, that the complaint is baseless and
unfounded and that as a result thereof, he was unnecessarily dragged into court and
compelled to incur expenses, and has suffered mental anxiety and a besmirched
reputation, he prayed for an award of P5,000.00 for miscellaneous expenses and
P25,000.00 as moral damages.

After conducting a pre-trial on 25 January 1988, the trial court issued a Pre-Trial
Order embodying the stipulated facts which the parties had agreed upon, to wit:
1. That the plaintiff is single and resident (sic) of Bañaga, Bugallon, Pangasinan,
while the defendant is single, Iranian citizen and resident (sic) of Lozano Apartment,
Guilig, Dagupan City since September 1, 1987 up to the present;
2. That the defendant is presently studying at Lyceum Northwestern, Dagupan City,
College of Medicine, second year medicine proper;
3. That the plaintiff is (sic) an employee at Mabuhay Luncheonette , Fernandez
Avenue, Dagupan City since July, 1986 up to the present and a (sic) high school
graduate;
4. That the parties happened to know each other when the manager of the Mabuhay
Luncheonette, JohhnyRabino introduced the defendant to the plaintiff on August 3,
1986.

After trial on the merits, the lower court, applying Article 21 of the Civil Code, rendered
on 16 October 1989 a decision favoring the private respondent. The petitioner was thus
ordered to pay the latter damages and attorney's fees; the dispositive portion of the
decision reads:
IN THE LIGHT of the foregoing consideration, judgment is hereby rendered in favor
of the plaintiff and against the defendant.
1. Condemning (sic) the defendant to pay the plaintiff the sum of twenty thousand
(P20,000.00) pesos as moral damages.
2. Condemning further the defendant to play the plaintiff the sum of three thousand
(P3,000.00) pesos as atty's fees and two thousand (P2,000.00) pesos at (sic)
litigation expenses and to pay the costs.
 3. All other claims are denied.

The decision is anchored on the trial court's findings and conclusions that (a) petitioner
and private respondent were lovers, (b) private respondent is not a woman of loose
morals or questionable virtue who readily submits to sexual advances, (c) petitioner,
through machinations, deceit and false pretenses, promised to marry private
respondent, d) because of his persuasive promise to marry her, she allowed herself to
be deflowered by him, (e) by reason of that deceitful promise, private respondent and
her parents — in accordance with Filipino customs and traditions — made some
preparations for the wedding that was to be held at the end of October 1987 by looking
for pigs and chickens, inviting friends and relatives and contracting sponsors, (f)
petitioner did not fulfill his promise to marry her and (g) such acts of the petitioner, who
is a foreigner and who has abused Philippine hospitality, have offended our sense of
morality, good customs, culture and traditions. The trial court gave full credit to the
private respondent's testimony because, inter alia, she would not have had the temerity
and courage to come to court and expose her honor and reputation to public scrutiny
and ridicule if her claim was false.

The above findings and conclusions were culled from the detailed summary of the
evidence for the private respondent in the foregoing decision, digested by the
respondent Court as follows:
According to plaintiff, who claimed that she was a virgin at the time and that she
never had a boyfriend before, defendant started courting her just a few days after
they first met. He later proposed marriage to her several times and she accepted his
love as well as his proposal of marriage on August 20, 1987, on which same day he
went with her to her hometown of Bañaga, Bugallon, Pangasinan, as he wanted to
meet her parents and inform them of their relationship and their intention to get
married. The photographs Exhs. "A" to "E" (and their submarkings) of defendant with
members of plaintiff's family or with plaintiff, were taken that day. Also on that
occasion, defendant told plaintiffs parents and brothers and sisters that he intended
to marry her during the semestral break in October, 1987, and because plaintiff's
parents thought he was good and trusted him, they agreed to his proposal for him to
marry their daughter, and they likewise allowed him to stay in their house and sleep
with plaintiff during the few days that they were in Bugallon. When plaintiff and
defendant later returned to Dagupan City, they continued to live together in
defendant's apartment. However, in the early days of October, 1987, defendant
would tie plaintiff's hands and feet while he went to school, and he even gave her
medicine at 4 o'clock in the morning that made her sleep the whole day and night
 until the following day. As a result of this live-in relationship, plaintiff became
pregnant, but defendant gave her some medicine to abort the fetus. Still plaintiff
continued to live with defendant and kept reminding him of his promise to marry her
until he told her that he could not do so because he was already married to a girl in
Bacolod City. That was the time plaintiff left defendant, went home to her parents,
and thereafter consulted a lawyer who accompanied her to the barangay captain in
Dagupan City. Plaintiff, her lawyer, her godmother, and a barangay tanod sent by the
barangay captain went to talk to defendant to still convince him to marry plaintiff, but
defendant insisted that he could not do so because he was already married to a girl
in Bacolod City, although the truth, as stipulated by the parties at the pre-trial, is that
defendant is still single.
Plaintiff's father, a tricycle driver, also claimed that after defendant had informed them
of his desire to marry Marilou, he already looked for sponsors for the wedding,
started preparing for the reception by looking for pigs and chickens, and even already
invited many relatives and friends to the forthcoming wedding.

Petitioner appealed the trial court's decision to the respondent Court of Appeals which
docketed the case as CA-G.R. CV No. 24256. In his Brief, he contended that the trial
court erred (a) in not dismissing the case for lack of factual and legal basis and (b) in
ordering him to pay moral damages, attorney's fees, litigation expenses and costs.
On 18 February 1991, respondent Court promulgated the challenged
decision affirming in toto the trial court's ruling of 16 October 1989. In sustaining the
trial court's findings of fact, respondent Court made the following analysis:
First of all, plaintiff, then only 21 years old when she met defendant who was already
29 years old at the time, does not appear to be a girl of loose morals. It is
uncontradicted that she was a virgin prior to her unfortunate experience with
defendant and never had boyfriend. She is, as described by the lower court, a barrio
lass "not used and accustomed to trend of modern urban life", and certainly would
(sic) not have allowed "herself to be deflowered by the defendant if there was no
persuasive promise made by the defendant to marry her." In fact, we agree with the
lower court that plaintiff and defendant must have been sweethearts or so the plaintiff
must have thought because of the deception of defendant, for otherwise, she would
not have allowed herself to be photographed with defendant in public in so (sic)
loving and tender poses as those depicted in the pictures Exhs. "D" and "E". We
cannot believe, therefore, defendant's pretense that plaintiff was a nobody to him
except a waitress at the restaurant where he usually ate. Defendant in fact admitted
that he went to plaintiff's hometown of Bañaga, Bugallon, Pangasinan, at least thrice;
at (sic) the town fiesta on February 27, 1987 (p. 54, tsn May 18, 1988), at (sic) a
beach party together with the manager and employees of the Mabuhay Luncheonette
on March 3, 1987 (p. 50, tsn id.), and on April 1, 1987 when he allegedly talked to
plaintiff's mother who told him to marry her daughter (pp. 55-56, tsn id.). Would
defendant have left Dagupan City where he was involved in the serious study of
medicine to go to plaintiff's hometown in Bañaga, Bugallon, unless there was (sic)
some kind of special relationship between them? And this special relationship must
indeed have led to defendant's insincere proposal of marriage to plaintiff,
communicated not only to her but also to her parents, and (sic) MaritesRabino, the
owner of the restaurant where plaintiff was working and where defendant first
proposed marriage to her, also knew of this love affair and defendant's proposal of
marriage to plaintiff, which she declared was the reason why plaintiff resigned from
her job at the restaurant after she had accepted defendant's proposal (pp. 6-7, tsn
March 7, 1988).
Upon the other hand, appellant does not appear to be a man of good moral character
and must think so low and have so little respect and regard for Filipino women that he
openly admitted that when he studied in Bacolod City for several years where he
finished his B.S. Biology before he came to Dagupan City to study medicine, he had
a common-law wife in Bacolod City. In other words, he also lived with another woman
in Bacolod City but did not marry that woman, just like what he did to plaintiff. It is not
surprising, then, that he felt so little compunction or remorse in pretending to love and
promising to marry plaintiff, a young, innocent, trustful country girl, in order to satisfy
his lust on her and then concluded:
In sum, we are strongly convinced and so hold that it was defendant-appellant's
fraudulent and deceptive protestations of love for and promise to marry plaintiff that
made her surrender her virtue and womanhood to him and to live with him on the
honest and sincere belief that he would keep said promise, and it was likewise these
(sic) fraud and deception on appellant's part that made plaintiff's parents agree to
their daughter's living-in with him preparatory to their supposed marriage.And as
these acts of appellant are palpably and undoubtedly against morals, good customs,
and public policy, and are even gravely and deeply derogatory and insulting to our
women, coming as they do from a foreigner who has been enjoying the hospitality of
our people and taking advantage of the opportunity to study in one of our institutions
of learning, defendant-appellant should indeed be made, under Art.21 of the Civil
Code of the Philippines, to compensate for the moral damages and injury that he had
caused plaintiff, as the lower court ordered him to do in its decision in this case.
Unfazed by his second defeat, petitioner filed the instant petition on 26 March 1991; he
raises therein the single issue of whether or not Article 21 of the Civil Code applies to
the case at bar.

It is petitioner's thesis that said Article 21 is not applicable because he had not
committed any moral wrong or injury or violated any good custom or public policy; he
has not professed love or proposed marriage to the private respondent; and he has
never maltreated her. He criticizes the trial court for liberally invoking Filipino customs,
traditions and culture, and ignoring the fact that since he is a foreigner, he is not
conversant with such Filipino customs, traditions and culture. As an Iranian Moslem, he
is not familiar with Catholic and Christian ways. He stresses that even if he had made a
promise to marry, the subsequent failure to fulfill the same is excusable or tolerable
because of his Moslem upbringing; he then alludes to the Muslim Code which
purportedly allows a Muslim to take four (4) wives and concludes that on the basis
thereof, the trial court erred in ruling that he does not posses good moral
character.Moreover, his controversial "common law life" is now his legal wife as their
marriage had been solemnized in civil ceremonies in the Iranian Embassy. As to his
unlawful cohabitation with the private respondent, petitioner claims that even if
responsibility could be pinned on him for the live-in relationship, the private respondent
should also be faulted for consenting to an illicit arrangement. Finally, petitioner
asseverates that even if it was to be assumed arguendo that he had professed his love
to the private respondent and had also promised to marry her, such acts would not be
actionable in view of the special circumstances of the case. The mere breach of
promise is not actionable.

On 26 August 1991, after the private respondent had filed her Comment to the petition
and the petitioner had filed his Reply thereto, this Court gave due course to the petition
and required the parties to submit their respective Memoranda, which they
subsequently complied with.

As may be gleaned from the foregoing summation of the petitioner's arguments in

support of his thesis, it is clear that questions of fact, which boil down to the issue of the
credibility of witnesses, are also raised. It is the rule in this jurisdiction that appellate
courts will not disturb the trial court's findings as to the credibility of witnesses, the latter
court having heard the witnesses and having had the opportunity to observe closely
their deportment and manner of testifying, unless the trial court had plainly overlooked
facts of substance or value which, if considered, might affect the result of the case.
Petitioner has miserably failed to convince Us that both the appellate and trial courts
had overlooked any fact of substance or values which could alter the result of the case.
Equally settled is the rule that only questions of law may be raised in a petition for
review on certiorari under Rule 45 of the Rules of Court. It is not the function of this
Court to analyze or weigh all over again the evidence introduced by the parties before
the lower court. There are, however, recognized exceptions to this rule. Thus, in Medina
vs.Asistio, Jr., this Court took the time, again, to enumerate these exceptions:
xxxxxxxxx
(1) When the conclusion is a finding grounded entirely on speculation, surmises or
conjectures (Joaquin v. Navarro, 93 Phil. 257 [1953]);
(2) When the inference made is manifestly mistaken, absurb or impossible (Luna v.
Linatok, 74 Phil. 15 [1942]);
(3) Where there is a grave abuse of discretion (Buyco v. People, 95 Phil. 453 [1955]);
(4) When the judgment is based on a misapprehension of facts (Cruz v. Sosing,
L-4875, Nov. 27, 1953);
(5) When the findings of fact are conflicting (Casica v. Villaseca, L-9590 Ap. 30, 1957;
unrep.)
(6) When the Court of Appeals, in making its findings, went beyond the issues of the
case and the same is contrary to the admissions of both appellate and appellee
(Evangelista v. Alto Surety and Insurance Co., 103 Phil. 401 [1958]);
(7) The findings of the Court of Appeals are contrary to those of the trial court (Garcia v.
Court of Appeals, 33 SCRA 622 [1970]; Sacay v. Sandiganbayan, 142 SCRA 593
[1986]);
(8) When the findings of fact are conclusions without citation of specific evidence on
which they are based (Ibid.,);
(9) When the facts set forth in the petition as well as in the petitioners main and reply
briefs are not disputed by the respondents (Ibid.,); and
(10) The finding of fact of the Court of Appeals is premised on the supposed absence of
evidence and is contradicted by the evidence on record (Salazar v. Gutierrez, 33 SCRA
242 [1970]).
Petitioner has not endeavored to joint out to Us the existence of any of the above
quoted exceptions in this case. Consequently, the factual findings of the trial and
appellate courts must be respected.
And now to the legal issue.

The existing rule is that a breach of promise to marry per se is not an actionable
wrong. Congress deliberately eliminated from the draft of the New Civil Code the
provisions that would have made it so. The reason therefor is set forth in the report of
the Senate Committees on the Proposed Civil Code, from which We quote:
The elimination of this chapter is proposed. That breach of promise to marry is not
actionable has been definitely decided in the case of De Jesus vs. Syquia. The
history of breach of promise suits in the United States and in England has shown that
no other action lends itself more readily to abuse by designing women and
unscrupulous men. It is this experience which has led to the abolition of rights of
action in the so-called Heart Balm suits in many of the American states. . . .
This notwithstanding, the said Code contains a provision, Article 21, which is designed
to expand the concept of torts or quasi-delict in this jurisdiction by granting adequate
legal remedy for the untold number of moral wrongs which is impossible for human
foresight to specifically enumerate and punish in the statute books.
As the Code Commission itself stated in its Report:
But the Code Commission had gone farther than the sphere of wrongs defined or
determined by positive law. Fully sensible that there are countless gaps in the
statutes, which leave so many victims of moral wrongs helpless, even though they
have actually suffered material and moral injury, the Commission has deemed it
necessary, in the interest of justice, to incorporate in the proposed Civil Code the
following rule:
Art. 23. Any person who wilfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage.
An example will illustrate the purview of the foregoing norm: "A" seduces the
nineteen-year old daughter of "X". A promise of marriage either has not been made,
or can not be proved. The girl becomes pregnant. Under the present laws, there is no
crime, as the girl is above nineteen years of age. Neither can any civil action for
breach of promise of marriage be filed. Therefore, though the grievous moral wrong
has been committed, and though the girl and family have suffered incalculable moral
damage, she and her parents cannot bring action for damages. But under the
proposed article, she and her parents would have such a right of action.
Thus at one stroke, the legislator, if the forgoing rule is approved, would vouchsafe
adequate legal remedy for that untold number of moral wrongs which it is impossible
for human foresight to provide for specifically in the statutes.
Article 2176 of the Civil Code, which defines a quasi-delict thus:
Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there
is no pre-existing contractual relation between the parties, is called a quasi-delict and
is governed by the provisions of this Chapter.
 is limited to negligent acts or omissions and excludes the notion of willfulness or
intent. Quasi-delict, known in Spanish legal treatises as culpa aquiliana, is a civil law
concept while torts is an Anglo-American or common law concept. Torts is much
broader than culpa aquiliana because it includes not only negligence, but
international criminal acts as well such as assault and battery, false imprisonment
and deceit. In the general scheme of the Philippine legal system envisioned by the
Commission responsible for drafting the New Civil Code, intentional and malicious
acts, with certain exceptions, are to be governed by the Revised Penal Code while
negligent acts or omissions are to be covered by Article 2176 of the Civil Code. In
between these opposite spectrums are injurious acts which, in the absence of Article
21, would have been beyond redress. Thus, Article 21 fills that vacuum. It is even
postulated that together with Articles 19 and 20 of the Civil Code, Article 21 has
greatly broadened the scope of the law on civil wrongs; it has become much more
supple and adaptable than the Anglo-American law on torts.

In the light of the above laudable purpose of Article 21, We are of the opinion, and so
hold, that where a man's promise to marry is in fact the proximate cause of the
acceptance of his love by a woman and his representation to fulfill that promise
thereafter becomes the proximate cause of the giving of herself unto him in a sexual
congress, proof that he had, in reality, no intention of marrying her and that the promise
was only a subtle scheme or deceptive device to entice or inveigle her to accept him
and to obtain her consent to the sexual act, could justify the award of damages pursuant
to Article 21 not because of such promise to marry but because of the fraud and deceit
behind it and the willful injury to her honor and reputation which followed thereafter. It is
essential, however, that such injury should have been committed in a manner contrary
to morals, good customs or public policy.

In the instant case, respondent Court found that it was the petitioner's "fraudulent and
deceptive protestations of love for and promise to marry plaintiff that made her
surrender her virtue and womanhood to him and to live with him on the honest and
sincere belief that he would keep said promise, and it was likewise these fraud and
deception on appellant's part that made plaintiff's parents agree to their daughter's
living-in with him preparatory to their supposed marriage." In short, the private
respondent surrendered her virginity, the cherished possession of every single Filipina,
not because of lust but because of moral seduction — the kind illustrated by the Code
Commission in its example earlier adverted to. The petitioner could not be held liable for
criminal seduction punished under either Article 337 or Article 338 of the Revised Penal
Code because the private respondent was above eighteen (18) years of age at the time
of the seduction.

Prior decisions of this Court clearly suggest that Article 21 may be applied in a breach of
promise to marry where the woman is a victim of moral seduction. Thus,
in Hermosisima vs. Court of Appeals, this Court denied recovery of damages to the
woman because:
. . . we find ourselves unable to say that petitioner is morally guilty of seduction, not
only because he is approximately ten (10) years younger than the complainant —
who was around thirty-six (36) years of age, and as highly enlightened as a former
high school teacher and a life insurance agent are supposed to be — when she
became intimate with petitioner, then a mere apprentice pilot, but, also, because the
court of first instance found that, complainant "surrendered herself" to petitioner
because, "overwhelmed by her love" for him, she "wanted to bind" him by having a
fruit of their engagement even before they had the benefit of clergy.

In Tanjanco vs. Court of Appeals, while this Court likewise hinted at possible recovery if
there had been moral seduction, recovery was eventually denied because We were not
convinced that such seduction existed. The following enlightening disquisition and
conclusion were made in the said case:
The Court of Appeals seem to have overlooked that the example set forth in the
Code Commission's memorandum refers to a tort upon a minor who had
been seduced. The essential feature is seduction, that in law is more than mere
sexual intercourse, or a breach of a promise of marriage; it connotes essentially the
idea of deceit, enticement, superior power or abuse of confidence on the part of the
seducer to which the woman has yielded (U.S. vs. Buenaventura, 27 Phil. 121; U.S.
vs. Arlante, 9 Phil. 595).
It has been ruled in the Buenaventura case (supra) that — To constitute seduction
there must in all cases be some sufficient promise or inducement and the woman
must yield because of the promise or other inducement. If she consents merely from
carnal lust and the intercourse is from mutual desire, there is no seduction (43 Cent.
Dig. tit. Seduction, par. 56) She must be induced to depart from the path of virtue by
the use of some species of arts, persuasions and wiles, which are calculated to have
and do have that effect, and which result in her person to ultimately submitting her
person to the sexual embraces of her seducer (27 Phil. 123).
And in American Jurisprudence we find:
 On the other hand, in an action by the woman, the enticement, persuasion or
deception is the essence of the injury; and a mere proof of intercourse is insufficient
to warrant a recovery.
Accordingly it is not seduction where the willingness arises out of sexual desire of
curiosity of the female, and the defendant merely affords her the needed opportunity
for the commission of the act. It has been emphasized that to allow a recovery in all
such cases would tend to the demoralization of the female sex, and would be a
reward for unchastity by which a class of adventuresses would be swift to profit. (47
Am. Jur. 662)
xxxxxxxxx
Over and above the partisan allegations, the fact stand out that for one whole year,
from 1958 to 1959, the plaintiff-appellee, a woman of adult age, maintain intimate
sexual relations with appellant, with repeated acts of intercourse. Such conduct is
incompatible with the idea of seduction. Plainly there is here voluntariness and
mutual passion; for had the appellant been deceived, had she surrendered
exclusively because of the deceit, artful persuasions and wiles of the defendant, she
would not have again yielded to his embraces, much less for one year, without
exacting early fulfillment of the alleged promises of marriage, and would have cut
short all sexual relations upon finding that defendant did not intend to fulfill his
defendant did not intend to fulfill his promise. Hence, we conclude that no case is
made under article 21 of the Civil Code, and no other cause of action being alleged,
no error was committed by the Court of First Instance in dismissing the complaint.
In his annotations on the Civil Code, Associate Justice Edgardo L. Paras, who recently
retired from this Court, opined that in a breach of promise to marry where there had
been carnal knowledge, moral damages may be recovered:
. . . if there be criminal or moral seduction, but not if the intercourse was due to
mutual lust. (Hermosisima vs. Court of Appeals,
L-14628, Sept. 30, 1960; Estopa vs. Piansay, Jr., L-14733, Sept. 30, 1960; Batarra
vs. Marcos, 7 Phil. 56 (sic); Beatriz Galang vs. Court of Appeals, et al., L-17248, Jan.
29, 1962). (In other words, if the CAUSE be the promise to marry, and the EFFECT
be the carnal knowledge, there is a chance that there was criminal or moral
seduction, hence recovery of moral damages will prosper. If it be the other way
around, there can be no recovery of moral damages, because here mutual lust has
intervened). . . .
together with "ACTUAL damages, should there be any, such as the expenses for the
wedding presentations (See Domalagon v. Bolifer, 33 Phil. 471).

Senator Arturo M. Tolentino is also of the same persuasion:

 It is submitted that the rule in Batarra vs. Marcos, still subsists, notwithstanding the
incorporation of the present article in the Code. The example given by the Code
Commission is correct, if there was seduction, not necessarily in the legal sense, but
in the vulgar sense of deception. But when the sexual act is accomplished without
any deceit or qualifying circumstance of abuse of authority or influence, but the
woman, already of age, has knowingly given herself to a man, it cannot be said that
there is an injury which can be the basis for indemnity.
But so long as there is fraud, which is characterized by willfulness (sic), the action
lies. The court, however, must weigh the degree of fraud, if it is sufficient to deceive
the woman under the circumstances, because an act which would deceive a girl
sixteen years of age may not constitute deceit as to an experienced woman thirty
years of age. But so long as there is a wrongful act and a resulting injury, there
should be civil liability, even if the act is not punishable under the criminal law and
there should have been an acquittal or dismissal of the criminal case for that reason.

We are unable to agree with the petitioner's alternative proposition to the effect that
granting, for argument's sake, that he did promise to marry the private respondent, the
latter is nevertheless also at fault. According to him, both parties are in pari delicto;
hence, pursuant to Article 1412(1) of the Civil Code and the doctrine laid down
in Batarra vs. Marcos, the private respondent cannot recover damages from the
petitioner. The latter even goes as far as stating that if the private respondent had
"sustained any injury or damage in their relationship, it is primarily because of her own
doing, for:
. . . She is also interested in the petitioner as the latter will become a doctor sooner or
later. Take notice that she is a plain high school graduate and a mere employee . . .
(Annex "C") or a waitress (TSN, p. 51, January 25, 1988) in a luncheonette and
without doubt, is in need of a man who can give her economic security. Her family is
in dire need of financial assistance. (TSN, pp. 51-53, May 18, 1988).And this
predicament prompted her to accept a proposition that may have been offered by the
petitioner.

These statements reveal the true character and motive of the petitioner. It is clear that
he harbors a condescending, if not sarcastic, regard for the private respondent on
account of the latter's ignoble birth, inferior educational background, poverty and, as
perceived by him, dishonorable employment. Obviously then, from the very beginning,
he was not at all moved by good faith and an honest motive. Marrying with a woman so
circumstances could not have even remotely occurred to him. Thus, his profession of
love and promise to marry were empty words directly intended to fool, dupe, entice,
beguile and deceive the poor woman into believing that indeed, he loved her and would
want her to be his life's partner. His was nothing but pure lust which he wanted satisfied
by a Filipina who honestly believed that by accepting his proffer of love and proposal of
marriage, she would be able to enjoy a life of ease and security. Petitioner clearly
violated the Filipino's concept of morality and brazenly defied the traditional respect
Filipinos have for their women. It can even be said that the petitioner committed such
deplorable acts in blatant disregard of Article 19 of the Civil Code which directs every
person to act with justice, give everyone his due and observe honesty and good faith in
the exercise of his rights and in the performance of his obligations.
No foreigner must be allowed to make a mockery of our laws, customs and traditions.
The pari delicto rule does not apply in this case for while indeed, the private respondent
may not have been impelled by the purest of intentions, she eventually submitted to the
petitioner in sexual congress not out of lust, but because of moral seduction. In fact, it is
apparent that she had qualms of conscience about the entire episode for as soon as
she found out that the petitioner was not going to marry her after all, she left him. She is
not, therefore, in pari delicto with the petitioner. Pari delicto means "in equal fault; in a
similar offense or crime; equal in guilt or in legal fault." At most, it could be conceded
that she is merely in delicto.
Equity often interferes for the relief of the less guilty of the parties, where his
transgression has been brought about by the imposition of undue influence of the
party on whom the burden of the original wrong principally rests, or where his
consent to the transaction was itself procured by
fraud.
In Mangayao vs. Lasud, We declared:
Appellants likewise stress that both parties being at fault, there should be no action
by one against the other (Art. 1412, New Civil Code). This rule, however, has been
interpreted as applicable only where the fault on both sides is, more or less,
equivalent. It does not apply where one party is literate or intelligent and the other
one is not. (c.f. Bough vs. Cantiveros, 40 Phil. 209).

We should stress, however, that while We find for the private respondent, let it not be
said that this Court condones the deplorable behavior of her parents in letting her and
the petitioner stay together in the same room in their house after giving approval to their
marriage. It is the solemn duty of parents to protect the honor of their daughters and
infuse upon them the higher values of morality and dignity.

WHEREFORE, finding no reversible error in the challenged decision, the instant petition
is hereby DENIED, with costs against the petitioner.
SO ORDERED.
 ALBENSON ENTERPRISES CORP., JESSE YAP, AND BENJAMIN
MENDIONA, petitioners, vs. THE COURT OF APPEALS AND EUGENIO S.
BALTAO, respondents.
G.R. No. 88694

This petition assails the decision of respondent Court of Appeals in

CA-GR CV No. 14948 entitled "Eugenio S. Baltao, plaintiff-appellee vs. Albenson
Enterprises Corporation, et al, defendants-appellants", which modified the judgment of
the Regional Trial Court of Quezon City, Branch XCVIII in Civil Case No. Q-40920 and
ordered petitioner to pay private respondent, among others, the sum of P500,000.00 as
moral damages and attorney's fees in the amount of P50,000.00.
The facts are not disputed.
In September, October, and November 1980, petitioner Albenson Enterprises
Corporation (Albenson for short) delivered to Guaranteed Industries, Inc. (Guaranteed
for short) located at 3267 V. Mapa Street, Sta. Mesa, Manila, the mild steel plates which
the latter ordered. As part payment thereof, Albenson was given Pacific Banking
Corporation Check No. 136361 in the amount of P2,575.00 and drawn against the
account of E.L. Woodworks (Rollo, p. 148).
When presented for payment, the check was dishonored for the reason "Account
Closed." Thereafter, petitioner Albenson, through counsel, traced the origin of the
dishonored check. From the records of the Securities and Exchange Commission
(SEC), Albenson discovered that the president of Guaranteed, the recipient of the
unpaid mild steel plates, was one "Eugenio S. Baltao." Upon further inquiry, Albenson
was informed by the Ministry of Trade and Industry that E.L. Woodworks, a single
proprietorship business, was registered in the name of one "Eugenio Baltao". In
addition, upon verification with the drawee bank, Pacific Banking Corporation, Albenson
was advised that the signature appearing on the subject check belonged to one
"Eugenio Baltao."
After obtaining the foregoing information, Albenson, through counsel, made an
extrajudicial demand upon private respondent Eugenio S. Baltao, president of
Guaranteed, to replace and/or make good the dishonored check.
Respondent Baltao, through counsel, denied that he issued the check, or that the
signature appearing thereon is his. He further alleged that Guaranteed was a defunct
entity and hence, could not have transacted business with Albenson.
On February 14, 1983, Albenson filed with the Office of the Provincial Fiscal of Rizal a
complaint against Eugenio S. Baltao for violation of Batas PambansaBilang 22.
Submitted to support said charges was an affidavit of petitioner Benjamin Mendiona, an
employee of Albenson. In said affidavit, the above-mentioned circumstances were
stated.
It appears, however, that private respondent has a namesake, his son Eugenio Baltao
III, who manages a business establishment, E.L. Woodworks, on the ground floor of the
Baltao Building, 3267 V. Mapa Street, Sta. Mesa, Manila, the very same business
address of Guaranteed.
On September 5, 1983, Assistant Fiscal Ricardo Sumaway filed an information against
Eugenio S. Baltao for Violation of Batas PambansaBilang 22. In filing said information,
Fiscal Sumaway claimed that he had given Eugenio S. Baltao opportunity to submit
controverting evidence, but the latter failed to do so and therefore, was deemed to have
waived his right.
Respondent Baltao, claiming ignorance of the complaint against him, immediately filed
with the Provincial Fiscal of Rizal a motion for reinvestigation, alleging that it was not
true that he had been given an opportunity to be heard in the preliminary investigation
conducted by Fiscal Sumaway, and that he never had any dealings with Albenson or
Benjamin Mendiona, consequently, the check for which he has been accused of having
issued without funds was not issued by him and the signature in said check was not his.
On January 30, 1984, Provincial Fiscal Mauro M. Castro of Rizal reversed the finding of
Fiscal Sumaway and exonerated respondent Baltao. He also instructed the Trial Fiscal
to move for dismissal of the information filed against Eugenio S. Baltao. Fiscal Castro
found that the signature in PBC Check No. 136361 is not the signature of Eugenio S.
Baltao. He also found that there is no showing in the records of the preliminary
investigation that Eugenio S. Baltao actually received notice of the said investigation.
Fiscal Castro then castigated Fiscal Sumaway for failing to exercise care and prudence
in the performance of his duties, thereby causing injustice to respondent who was not
properly notified of the complaint against him and of the requirement to submit his
counter evidence.
Because of the alleged unjust filing of a criminal case against him for allegedly issuing a
check which bounced in violation of Batas PambansaBilang 22 for a measly amount of
P2,575.00, respondent Baltao filed before the Regional Trial Court of Quezon City a
complaint for damages against herein petitioners Albenson Enterprises, Jesse Yap, its
owner, and Benjamin Mendiona, its employee.
In its decision, the lower court observed that "the check is drawn against the account of
"E.L. Woodworks," not of Guaranteed Industries of which plaintiff used to be President.
Guaranteed Industries had been inactive and had ceased to exist as a corporation since
1975. . . . . The possibility is that it was with Gene Baltao or Eugenio Baltao III, a son of
plaintiff who had a business on the ground floor of Baltao Building located on V.
MapaStreet, that the defendants may have been dealing with . . . ." (Rollo, pp. 41-42).
The dispositive portion of the trial court 's decision reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendants ordering the latter to pay plaintiff jointly and severally:
1. actual or compensatory damages of P133,350.00;
2. moral damages of P1,000,000.00 (1 million pesos);
3. exemplary damages of P200,000.00;
4. attorney's fees of P100,000.00;
5 costs.
Defendants' counterclaim against plaintiff and claim for damages against
Mercantile Insurance Co. on the bond for the issuance of the writ of attachment at
the instance of plaintiff are hereby dismissed for lack of merit. (Rollo, pp. 38-39).
On appeal, respondent court modified the trial court's decision as follows:
WHEREFORE, the decision appealed from is MODIFIED by reducing the moral
damages awarded therein from P1,000,000.00 to P500,000.00 and the attorney's
fees from P100,000.00 to P50,000.00, said decision being hereby affirmed in all its
other aspects. With costs against appellants. (Rollo, pp. 50-51)
Dissatisfied with the above ruling, petitioners Albenson Enterprises Corp., Jesse Yap,
and Benjamin Mendiona filed the instant Petition, alleging that the appellate court erred
in:
1. Concluding that private respondent's cause of action is not one based on
malicious prosecution but one for abuse of rights under Article 21 of the Civil Code
notwithstanding the fact that the basis of a civil action for malicious prosecution is
Article 2219 in relation to Article 21 or Article 2176 of the Civil Code . . . .
2. Concluding that "hitting at and in effect maligning (private respondent) with an
unjust criminal case was, without more, a plain case of abuse of rights by
misdirection" and "was therefore, actionable by itself," and which "became
inordinately blatant and grossly aggravated when . . . (private respondent) was
deprived of his basic right to notice and a fair hearing in the so-called preliminary
investigation . . . . "
3. Concluding that petitioner's "actuations in this case were coldly deliberate and
calculated", no evidence having been adduced to support such a sweeping
statement.
4. Holding the petitioner corporation, petitioner Yap and petitioner Mendiona jointly
and severally liable without sufficient basis in law and in fact.
5. Awarding respondents —
5.1. P133,350.00 as actual or compensatory damages, even in the absence
of sufficient evidence to show that such was actually suffered.
 5.2. P500,000.00 as moral damages considering that the evidence in this
connection merely involved private respondent's alleged celebrated status as
a businessman, there being no showing that the act complained of adversely
affected private respondent's reputation or that it resulted to material loss.
5.3. P200,000.00 as exemplary damages despite the fact that petitioners
were duly advised by counsel of their legal recourse.
5.4. P50,000.00 as attorney's fees, no evidence having been adduced to
justify such an award (Rollo, pp. 4-6).
Petitioners contend that the civil case filed in the lower court was one for malicious
prosecution. Citing the case of Madera vs. Lopez (102 SCRA 700 [1981]), they assert
that the absence of malice on their part absolves them from any liability for malicious
prosecution. Private respondent, on the other hand, anchored his complaint for
Damages on Articles 19, 20, and 21 ** of the Civil Code.
Article 19, known to contain what is commonly referred to as the principle of abuse of
rights, sets certain standards which may be observed not only in the exercise of one's
rights but also in the performance of one's duties. These standards are the following: to
act with justice; to give everyone his due; and to observe honesty and good faith. The
law, therefore, recognizes the primordial limitation on all rights: that in their exercise, the
norms of human conduct set forth in Article 19 must be observed. A right, though by
itself legal because recognized or granted by law as such, may nevertheless become
the source of some illegality. When a right is exercised in a manner which does not
conform with the norms enshrined in Article 19 and results in damage to another, a legal
wrong is thereby committed for which the wrongdoer must be held responsible.
Although the requirements of each provision is different, these three (3) articles are all
related to each other. As the eminentCivilist Senator Arturo Tolentino puts it: "With this
article (Article 21), combined with articles 19 and 20, the scope of our law on civil
wrongs has been very greatly broadened; it has become much more supple and
adaptable than the Anglo-American law on torts. It is now difficult to conceive of any
malevolent exercise of a right which could not be checked by the application of these
articles" (Tolentino, 1 Civil Code of the Philippines 72).
There is however, no hard and fast rule which can be applied to determine whether or
not the principle of abuse of rights may be invoked. The question of whether or not the
principle of abuse of rights has been violated, resulting in damages under Articles 20
and 21 or other applicable provision of law, depends on the circumstances of each
case. (Globe Mackay Cable and Radio Corporation vs. Court of Appeals, 176 SCRA
778 [1989]).
The elements of an abuse of right under Article 19 are the following: (1) There is a legal
right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or
injuring another. Article 20 speaks of the general sanction for all other provisions of law
which do not especially provide for their own sanction (Tolentino, supra, p. 71). Thus,
anyone who, whether willfully or negligently, in the exercise of his legal right or duty,
causes damage to another, shall indemnify his victim for injuries suffered thereby.
Article 21 deals with acts contra bonus mores, and has the following elements: 1) There
is an act which is legal; 2) but which is contrary to morals, good custom, public order, or
public policy; 3) and it is done with intent to injure.
Thus, under any of these three (3) provisions of law, an act which causes injury to
another may be made the basis for an award of damages.
There is a common element under Articles 19 and 21, and that is, the act must be
intentional. However, Article 20 does not distinguish: the act may be done either
"willfully", or "negligently". The trial court as well as the respondent appellate court
mistakenly lumped these three (3) articles together, and cited the same as the bases for
the award of damages in the civil complaint filed against petitioners, thus:
With the foregoing legal provisions (Articles 19, 20, and 21) in focus, there is not
much difficulty in ascertaining the means by which appellants' first assigned error
should be resolved, given the admitted fact that when there was an attempt to
collect the amount of P2,575.00, the defendants were explicitly warned that
plaintiff Eugenio S. Baltao is not the Eugenio Baltao defendants had been dealing
with (supra, p. 5). When the defendants nevertheless insisted and persisted in
filing a case — a criminal case no less — against plaintiff, said defendants ran
afoul of the legal provisions (Articles 19, 20, and 21 of the Civil Code) cited by the
lower court and heretofore quoted (supra).
Defendants, not having been paid the amount of P2,575.00, certainly had the right
to complain. But that right is limited by certain constraints. Beyond that limit is the
area of excess, of abuse of rights. (Rollo, pp.
44-45).
Assuming, arguendo, that all the three (3) articles, together and not independently of
each one, could be validly made the bases for an award of damages based on the
principle of "abuse of right", under the circumstances, We see no cogent reason for
such an award of damages to be made in favor of private respondent.
Certainly, petitioners could not be said to have violated the aforestated principle of
abuse of right. What prompted petitioners to file the case for violation of Batas
PambansaBilang 22 against private respondent was their failure to collect the amount of
P2,575.00 due on a bounced check which they honestly believed was issued to them by
private respondent. Petitioners had conducted inquiries regarding the origin of the
check, and yielded the following results: from the records of the Securities and
Exchange Commission, it was discovered that the President of Guaranteed (the
recipient of the unpaid mild steel plates), was one "Eugenio S. Baltao"; an inquiry with
the Ministry of Trade and Industry revealed that E.L. Woodworks, against whose
account the check was drawn, was registered in the name of one "Eugenio Baltao";
verification with the drawee bank, the Pacific Banking Corporation, revealed that the
signature appearing on the check belonged to one "Eugenio Baltao".
In a letter dated December 16, 1983, counsel for petitioners wrote private respondent
demanding that he make good the amount of the check. Counsel for private respondent
wrote back and denied, among others, that private respondent ever transacted business
with Albenson Enterprises Corporation; that he ever issued the check in question.
Private respondent's counsel even went further: he made a warning to defendants to
check the veracity of their claim. It is pivotal to note at this juncture that in this same
letter, if indeed private respondent wanted to clear himself from the baseless accusation
made against his person, he should have made mention of the fact that there are three
(3) persons with the same name, i.e.: Eugenio Baltao, Sr., Eugenio S. Baltao, Jr.
(private respondent), and Eugenio Baltao III (private respondent's son, who as it turned
out later, was the issuer of the check). He, however, failed to do this. The last two
Baltaos were doing business in the same building — Baltao Building — located at 3267
V. Mapa Street, Sta. Mesa, Manila. The mild steel plates were ordered in the name of
Guaranteed of which respondent Eugenio S. Baltao is the president and delivered to
Guaranteed at Baltao building. Thus, petitioners had every reason to believe that the
Eugenio Baltao who issued the bouncing check is respondent Eugenio S. Baltao when
their counsel wrote respondent to make good the amount of the check and upon refusal,
filed the complaint for violation of BP Blg. 22.
Private respondent, however, did nothing to clarify the case of mistaken identity at first
hand. Instead, private respondent waited in ambush and thereafter pounced on the
hapless petitioners at a time he thought was propitious by filing an action for damages.
The Court will not countenance this devious scheme.
The criminal complaint filed against private respondent after the latter refused to make
good the amount of the bouncing check despite demand was a sincere attempt on the
part of petitioners to find the best possible means by which they could collect the sum of
money due them. A person who has not been paid an obligation owed to him will
naturally seek ways to compel the debtor to pay him. It was normal for petitioners to find
means to make the issuer of the check pay the amount thereof. In the absence of a
wrongful act or omission or of fraud or bad faith, moral damages cannot be awarded
and that the adverse result of an action does not per se make the action wrongful and
subject the actor to the payment of damages, for the law could not have meant to
impose a penalty on the right to litigate (Rubio vs. Court of Appeals, 141 SCRA 488
[1986]).
In the case at bar, private respondent does not deny that the mild steel plates were
ordered by and delivered to Guaranteed at Baltao building and as part payment thereof,
the bouncing check was issued by one Eugenio Baltao. Neither had private respondent
conveyed to petitioner that there are two Eugenio Baltaos conducting business in the
same building — he and his son Eugenio Baltao III. Considering that Guaranteed, which
received the goods in payment of which the bouncing check was issued is owned by
respondent, petitioner acted in good faith and probable cause in filing the complaint
before the provincial fiscal.
To constitute malicious prosecution, there must be proof that the prosecution was
prompted by a sinister design to vex and humiliate a person, and that it was initiated
deliberately by the defendant knowing that his charges were false and groundless.
Concededly, the mere act of submitting a case to the authorities for prosecution does
not make one liable for malicious prosecution. (Manila Gas Corporation vs. Court of
Appeals, 100 SCRA 602 [1980]). Still, private respondent argues that liability under
Articles 19, 20, and 21 of the Civil Code is so encompassing that it likewise includes
liability for damages for malicious prosecution under Article 2219 (8). True, a civil action
for damages for malicious prosecution is allowed under the New Civil Code, more
specifically Articles 19, 20, 26, 29, 32, 33, 35, and 2219 (8) thereof. In order that such a
case can prosper, however, the following three (3) elements must be present, to wit: (1)
The fact of the prosecution and the further fact that the defendant was himself the
prosecutor, and that the action was finally terminated with an acquittal; (2) That in
bringing the action, the prosecutor acted without probable cause; (3) The prosecutor
was actuated or impelled by legal malice (Lao vs. Court of Appeals, 199 SCRA 58,
[1991]).
Thus, a party injured by the filing of a court case against him, even if he is later on
absolved, may file a case for damages grounded either on the principle of abuse of
rights, or on malicious prosecution. As earlier stated, a complaint for damages based on
malicious prosecution will prosper only if the three (3) elements aforecited are shown to
exist. In the case at bar, the second and third elements were not shown to exist. It is
well-settled that one cannot be held liable for maliciously instituting a prosecution where
one has acted with probable cause. "Probable cause is the existence of such facts and
circumstances as would excite the belief, in a reasonable mind, acting on the facts
within the knowledge of the prosecutor, that the person charged was guilty of the crime
for which he was prosecuted. In other words, a suit will lie only in cases where a legal
prosecution has been carried on without probable cause. The reason for this rule is that
it would be a very great discouragement to public justice, if prosecutors, who had
tolerable ground of suspicion, were liable to be sued at law when their indictment
miscarried" (Que vs. Intermediate Appellate Court, 169 SCRA 137 [1989]).
The presence of probable cause signifies, as a legal consequence, the absence of
malice. In the instant case, it is evident that petitioners were not motivated by malicious
intent or by sinister design to unduly harass private respondent, but only by a well-
founded anxiety to protect their rights when they filed the criminal complaint against
private respondent.
To constitute malicious prosecution, there must be proof that the prosecution was
prompted by a sinister design to vex and humiliate a person, that it was initiated
deliberately by the defendant knowing that his charges were false and groundless.
Concededly, the mere act of submitting a case to the authorities for prosecution
does not make one liable for malicious prosecution. Proof and motive that the
institution of the action was prompted by a sinister design to vex and humiliate a
person must be clearly and preponderantly established to entitle the victims to
damages (Ibid.).
In the case at bar, there is no proof of a sinister design on the part of petitioners to vex
or humiliate private respondent by instituting the criminal case against him. While
petitioners may have been negligent to some extent in determining the liability of private
respondent for the dishonored check, the same is not so gross or reckless as to amount
to bad faith warranting an award of damages.
The root of the controversy in this case is founded on a case of mistaken identity. It is
possible that with a more assiduous investigation, petitioners would have eventually
discovered that private respondent Eugenio S. Baltao is not the "Eugenio Baltao"
responsible for the dishonored check. However, the record shows that petitioners did
exert considerable effort in order to determine the liability of private respondent. Their
investigation pointed to private respondent as the "Eugenio Baltao" who issued and
signed the dishonored check as the president of the debtor-corporation Guaranteed
Enterprises. Their error in proceeding against the wrong individual was obviously in the
nature of an innocent mistake, and cannot be characterized as having been committed
in bad faith. This error could have been discovered if respondent had submitted his
counter-affidavit before investigating fiscal Sumaway and was immediately rectified by
Provincial Fiscal Mauro Castro upon discovery thereof, i.e., during the reinvestigation
resulting in the dismissal of the complaint.
Furthermore, the adverse result of an action does not per se make the act wrongful and
subject the actor to the payment of moral damages. The law could not have meant to
impose a penalty on the right to litigate, such right is so precious that moral damages
may not be charged on those who may even exercise it erroneously. And an adverse
decision does not ipso facto justify the award of attorney's fees to the winning party
(Garcia vs. Gonzales, 183 SCRA 72 [1990]).
Thus, an award of damages and attorney's fees is unwarranted where the action was
filed in good faith. If damage results from a person's exercising his legal rights, it
is damnum absque injuria (Ilocos Norte Electric Company vs. Court of Appeals, 179
SCRA 5 [1989]).
Coming now to the claim of private respondent for actual or compensatory damages,
the records show that the same was based solely on his allegations without proof to
substantiate the same. He did not present proof of the cost of the medical treatment
which he claimed to have undergone as a result of the nervous breakdown he suffered,
nor did he present proof of the actual loss to his business caused by the unjust litigation
against him. In determining actual damages, the court cannot rely on speculation,
conjectures or guesswork as to the amount. Without the actual proof of loss, the award
of actual damages becomes erroneous (Guilatco vs. City of Dagupan, 171 SCRA 382
[1989]).
Actual and compensatory damages are those recoverable because of pecuniary loss —
in business, trade, property, profession, job or occupation — and the same must be
proved, otherwise, if the proof is flimsy and unsubstantiated, no damages will be given
(Rubio vs. Court of Appeals, 141 SCRA 488 [1986]). For these reasons, it was gravely
erroneous for respondent court to have affirmed the award of actual damages in favor of
private respondent in the absence of proof thereof.
Where there is no evidence of the other party having acted in wanton, fraudulent or
reckless, or oppressive manner, neither may exemplary damages be awarded (Dee
Hua Liong Electrical Equipment Corporation vs. Reyes, 145 SCRA 488 [1986]).
As to the award of attorney's fees, it is well-settled that the same is the exception rather
than the general rule. Needless to say, the award of attorney's fees must be disallowed
where the award of exemplary damages is eliminated (Article 2208, Civil Code; Agustin
vs. Court of Appeals, 186 SCRA 375 [1990]). Moreover, in view of the fact that there
was no malicious prosecution against private respondent, attorney's fees cannot be
awarded him on that ground.
In the final analysis, there is no proof or showing that petitioners acted maliciously or in
bad faith in the filing of the case against private respondent. Consequently, in the
absence of proof of fraud and bad faith committed by petitioners, they cannot be held
liable for damages (Escritor, Jr. vs. Intermediate Appellate Court, 155 SCRA 577
[1987]). No damages can be awarded in the instant case, whether based on the
principle of abuse of rights, or for malicious prosecution. The questioned judgment in
the instant case attests to the propensity of trial judges to award damages without basis.
Lower courts are hereby cautioned anew against awarding unconscionable sums as
damages without bases therefor.
WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals in
C.A. G.R. C.V. No. 14948 dated May 13, 1989, is hereby REVERSED and SET ASIDE.
Costs against respondent Baltao.
SO ORDERED.
MVRS PUBLICATIONS, INC., MARS C. LACONSAY, MYLA C. AGUJA and
AGUSTINO G. BINEGAS, JR., petitioners, vs. ISLAMIC DA'WAH COUNCIL OF
THE PHILIPPINES, INC., ABDUL-RAHMAN R.T. LINZAG, IBRAHIM F.P.
ARCILLA, ABDUL RASHID DE GUZMAN, AL-FARED DA SILVA and
IBRAHIM B.A. JUNIO, respondents
G.R. No. 135306

VOLTAIRE'S PONTIFICAL VERSE bestirs once again the basic liberties to free speech
and free press - liberties that belong as well, if not more, to those who question, who do
not conform, who differ. For the ultimate good which we all strive to achieve for
ourselves and our posterity can better be reached by a free exchange of ideas, where
the best test of truth is the power of the thought to get itself accepted in the competition
of the free market - not just the ideas we desire, but including those thoughts we
despise.

ISLAMIC DA'WAH COUNCIL OF THE PHILIPPINES, INC., a local federation of

more than seventy (70) Muslim religious organizations, and individual Muslims
ABDULRAHMAN R.T. LINZAG, IBRAHIM F.P. ARCILLA, ABDUL RASHID DE
GUZMAN, AL-FARED DA SILVA and IBRAHIM B.A. JUNIO, filed in the Regional Trial
Court of Manila a complaint for damages in their own behalf and as a class suit in behalf
of the Muslim members nationwide against MVRS PUBLICATIONS, INC., MARS C.
LACONSAY, MYLA C. AGUJA and AGUSTINO G. BINEGAS, JR., arising from an
article published in the 1 August 1992 issue of Bulgar, a daily tabloid. The article reads:
"ALAM BA NINYO?
Na ang mga baboy at kahit anong uri ng hayop sa Mindanao ay hindi kinakain ng
mga Muslim?
Para sa kanila ang mga ito ay isang sagradong bagay. Hindi nila ito kailangang
kainin kahit na sila pa ay magutom at mawalan ng ulam sa tuwing sila ay kakain.
Ginagawa nila itong Diyos at sinasamba pa nila ito sa tuwing araw ng kanilang
pangingilin lalung-lalo na sa araw na tinatawag nilang Ramadan."
The complaint alleged that the libelous statement was insulting and damaging to the
Muslims; that these words alluding to the pig as the God of the Muslims was not only
published out of sheer ignorance but with intent to hurt the feelings, cast insult and
disparage the Muslims and Islam, as a religion in this country, in violation of law, public
policy, good morals and human relations; that on account of these libelous
words Bulgar insulted not only the Muslims in the Philippines but the entire Muslim
world, especially every Muslim individual in non-Muslim countries.

MVRS PUBLICATIONS, INC., and AGUSTINO G. BINEGAS, JR., in their defense,

contended that the article did not mention respondents as the object of the article and
therefore were not entitled to damages; and, that the article was merely an expression
of belief or opinion and was published without malice nor intention to cause damage,
prejudice or injury to Muslims.
On 30 June 1995 the trial court dismissed the complaint holding that the plaintiffs
failed to establish their cause of action since the persons allegedly defamed by the
article were not specifically identified -It must be noted that the persons allegedly
defamed, the herein plaintiffs, were not identified with specificity. The subject article was
directed at the Muslims without mentioning or identifying the herein plaintiffs x xxx It is
thus apparent that the alleged libelous article refers to the larger collectivity of Muslims
for which the readers of the libel could not readily identify the personalities of the
persons defamed. Hence, it is difficult for an individual Muslim member to prove that the
defamatory remarks apply to him. The evidence presented in this case failed to
convince this court that, indeed, the defamatory remarks really applied to the herein
plaintiffs.

On 27 August 1998 the Court of Appeals reversed the decision of the trial court. It
opined that it was "clear from the disputed article that the defamation was directed to all
adherents of the Islamic faith. It stated that pigs were sacred and idolized as god by
members of the Muslim religion. This libelous imputation undeniably applied to the
plaintiff-appellants who are Muslims sharing the same religious beliefs." It added that
the suit for damages was a "class suit" and that ISLAMIC DA'WAH COUNCIL OF THE
PHILIPPINES, INC.'s religious status as a Muslim umbrella organization gave it the
requisite personality to sue and protect the interests of all Muslims.

Hence, the instant petition for review assailing the findings of the appellate court (a)
on the existence of the elements of libel, (b) the right of respondents to institute the
class suit, and, (c) the liability of petitioners for moral damages, exemplary damages,
attorney's fees and costs of suit.

Defamation, which includes libel and slander, means the offense of injuring a
person's character, fame or reputation through false and malicious statements. It is that
which tends to injure reputation or to diminish the esteem, respect, good will or
confidence in the plaintiff or to excite derogatory feelings or opinions about the
plaintiff. It is the publication of anything which is injurious to the good name or reputation
of another or tends to bring him into disrepute. Defamation is an invasion of a relational
interest since it involves the opinion which others in the community may have, or tend to
have, of the plaintiff.

It must be stressed that words which are merely insulting are not actionable as libel
or slander per se, and mere words of general abuse however opprobrious, ill-natured, or
vexatious, whether written or spoken, do not constitute a basis for an action for
defamation in the absence of an allegation for special damages. The fact that the
language is offensive to the plaintiff does not make it actionable by itself.

Declarations made about a large class of people cannot be interpreted to advert to

an identified or identifiable individual. Absent circumstances specifically pointing or
alluding to a particular member of a class, no member of such class has a right of
action without at all impairing the equally demanding right of free speech and
expression, as well as of the press, under the Bill of Rights. Thus, in Newsweek, Inc. v.
Intermediate Appellate Court, we dismissed a complaint for libel against Newsweek,
Inc., on the ground that private respondents failed to state a cause of action since they
made no allegation in the complaint that anything contained in the article complained of
specifically referred to any of them. Private respondents, incorporated associations of
sugarcane planters in Negros Occidental claiming to have 8,500 members and several
individual members, filed a class action suit for damages in behalf of all sugarcane
planters in Negros Occidental. The complaint filed in the Court of First Instance of
Bacolod City alleged that Newsweek, Inc., committed libel against them by the
publication of the article "Island of Fear" in its weekly newsmagazine allegedly depicting
Negros Province as a place dominated by wealthy landowners and sugar planters who
not only exploited the impoverished and underpaid sugarcane workers but also
brutalized and killed them with impunity. Private respondents alleged that the article
showed a deliberate and malicious use of falsehood, slanted presentation and/or
misrepresentation of facts intended to put the sugarcane planters in a bad light, expose
them to public ridicule, discredit and humiliation in the Philippines and abroad, and
make them the objects of hatred, contempt and hostility of their agricultural workers and
of the public in general. We ratiocinated - x xx where the defamation is alleged to have
been directed at a group or class, it is essential that the statement must be so sweeping
or all-embracing as to apply to every individual in that group or class, or sufficiently
specific so that each individual in the class or group can prove that the defamatory
statement specifically pointed to him, so that he can bring the action separately, if need
be x xxx The case at bar is not a class suit. It is not a case where one or more may sue
for the benefit of all, or where the representation of class interest affected by the
judgment or decree is indispensable to make each member of the class an actual
party. We have here a case where each of the plaintiffs has a separate and distinct
reputation in the community. They do not have a common or general interest in the
subject matter of the controversy.

In the present case, there was no fairly identifiable person who was allegedly
injured by the Bulgar article. Since the persons allegedly defamed could not be
identifiable, private respondents have no individual causes of action; hence, they cannot
sue for a class allegedly disparaged. Private respondents must have a cause of action
in common with the class to which they belong to in order for the case to prosper.

An individual Muslim has a reputation that is personal, separate and distinct in the
community. Each Muslim, as part of the larger Muslim community in the Philippines of
over five (5) million people, belongs to a different trade and profession; each has a
varying interest and a divergent political and religious view -some may be conservative,
others liberal. A Muslim may find the article dishonorable, even blasphemous; others
may find it as an opportunity to strengthen their faith and educate the non-believers and
the "infidels." There is no injury to the reputation of the individual Muslims who
constitute this community that can give rise to an action for group libel. Each reputation
is personal in character to every person. Together, the Muslims do not have a single
common reputation that will give them a common or general interest in the subject
matter of the controversy.

In Arcand v. The Evening Call Publishing Company, the United States Court of
Appeals held that one guiding principle of group libel is that defamation of a large group
does not give rise to a cause of action on the part of an individual unless it can be
shown that he is the target of the defamatory matter.

The rule on libel has been restrictive. In an American case, a person had allegedly
committed libel against all persons of the Jewish religion. The Court held that there
could be no libel against an extensive community in common law. In an English case,
where libel consisted of allegations of immorality in a Catholic nunnery, the Court
considered that if the libel were on the whole Roman Catholic Church generally, then
the defendant must be absolved. With regard to the largest sectors in society, including
religious groups, it may be generally concluded that no criminal action at the behest of
the state, or civil action on behalf of the individual, will lie.
 In another case, the plaintiffs claimed that all Muslims, numbering more than 600
million, were defamed by the airing of a national television broadcast of a film depicting
the public execution of a Saudi Arabian princess accused of adultery, and alleging that
such film was "insulting and defamatory" to the Islamic religion. The United States
District Court of the Northern District of California concluded that the plaintiffs' prayer for
$20 Billion in damages arising from "an international conspiracy to insult, ridicule,
discredit and abuse followers of Islam throughout the world, Arabs and the Kingdom of
Saudi Arabia" bordered on the "frivolous," ruling that the plaintiffs had failed to
demonstrate an actionable claim for defamation. The California Court stressed that the
aim of the law on defamation was to protect individuals; a group may be sufficiently
large that a statement concerning it could not defame individual group members.

Philip Wittenberg, in his book "Dangerous Words: A Guide to the Law of

Libel," discusses the inappropriateness of any action for tortious libel involving large
groups, and provides a succinct illustration: There are groupings which may be finite
enough so that a description of the body is a description of the members. Here the
problem is merely one of evaluation. Is the description of the member implicit in the
description of the body, or is there a possibility that a description of the body may
consist of a variety of persons, those included within the charge, and those excluded
from it?
A general charge that the lawyers in the city are shysters would obviously not be a
charge that all of the lawyers were shysters. A charge that the lawyers in a local point in
a great city, such as Times Square in New York City, were shysters would obviously not
include all of the lawyers who practiced in that district; but a statement that all of the
lawyers who practiced in a particular building in that district were shysters would be a
specific charge, so that any lawyer having an office within that building could sue.

If the group is a very large one, then the alleged libelous statement is considered to
have no application to anyone in particular, since one might as well defame all
mankind. Not only does the group as such have no action; the plaintiff does not
establish any personal reference to himself. At present, modern societal groups are
both numerous and complex. The same principle follows with these groups: as the size
of these groups increases, the chances for members of such groups to recover
damages on tortious libel become elusive. This principle is said to embrace two (2)
important public policies: first, where the group referred to is large, the courts presume
that no reasonable reader would take the statements as so literally applying to each
individual member; and second, the limitation on liability would satisfactorily safeguard
freedom of speech and expression, as well as of the press, effecting a sound
compromise between the conflicting fundamental interests involved in libel cases.

In the instant case, the Muslim community is too vast as to readily ascertain who
among the Muslims were particularly defamed. The size of the group renders the
reference as indeterminate and generic as a similar attack on Catholics, Protestants,
Buddhists or Mormons would do. The word "Muslim" is descriptive of those who are
believers of Islam, a religion divided into varying sects, such as the Sunnites, the
Shiites, the Kharijites, the Sufis and others based upon political and theological
distinctions. "Muslim" is a name which describes only a general segment of the
Philippine population, comprising a heterogeneous body whose construction is not so
well defined as to render it impossible for any representative identification.

The Christian religion in the Philippines is likewise divided into different sects:
Catholic, Baptist, Episcopalian, Presbyterian, Lutheran, and other groups the essence
of which may lie in an inspired charlatan, whose temple may be a corner house in the
fringes of the countryside. As with the Christian religion, so it is with other religions that
represent the nation's culturally diverse people and minister to each one's spiritual
needs. The Muslim population may be divided into smaller groups with varying agenda,
from the prayerful conservative to the passionately radical. These divisions in the
Muslim population may still be too large and ambiguous to provide a reasonable
inference to any personality who can bring a case in an action for libel.

The foregoing are in essence the same view scholarly expressed by Mr. Justice
Reynato S. Puno in the course of the deliberations in this case. We extensively
reproduce hereunder his comprehensive and penetrating discussion on group libel -
Defamation is made up of the twin torts of libel and slander the one being, in general,
written, while the other in general is oral. In either form, defamation is an invasion of the
interest in reputation and good name. This is a relational interest since it involves the
opinion others in the community may have, or tend to have of the plaintiff.
The law of defamation protects the interest in reputation the interest in acquiring,
retaining and enjoying ones reputation as good as ones character and conduct warrant.
The mere fact that the plaintiffs feelings and sensibilities have been offended is not
enough to create a cause of action for defamation. Defamation requires that something
be communicated to a third person that may affect the opinion others may have of the
plaintiff. The unprivileged communication must be shown of a statement that would tend
to hurt plaintiffs reputation, to impair plaintiffs standing in the community.
Although the gist of an action for defamation is an injury to reputation, the focus of a
defamation action is upon the allegedly defamatory statement itself and its predictable
effect upon third persons. A statement is ordinarily considered defamatory if it tend[s] to
expose one to public hatred, shame, obloquy, contumely, odium, contempt, ridicule,
aversion, ostracism, degradation or disgrace The Restatement of Torts defines a
defamatory statement as one that tends to so harm the reputation of another as to lower
him in the estimation of the community or to deter third persons from associating or
dealing with him.
Consequently as a prerequisite to recovery, it is necessary for the plaintiff to prove as
part of his prima facie case that the defendant (1) published a statement that was (2)
defamatory (3) of and concerning the plaintiff.
The rule in libel is that the action must be brought by the person against whom the
defamatory charge has been made. In the American jurisdiction, no action lies by a third
person for damages suffered by reason of defamation of another person, even though
the plaintiff suffers some injury therefrom. For recovery in defamation cases, it is
necessary that the publication be of and concerning the plaintiff. Even when a
publication may be clearly defamatory as to somebody, if the words have no personal
application to the plaintiff, they are not actionable by him. If no one is identified, there
can be no libel because no ones reputation has been injured x xxx
In fine, in order for one to maintain an action for an alleged defamatory statement, it
must appear that the plaintiff is the person with reference to whom the statement was
made. This principle is of vital importance in cases where a group or class is defamed
since, usually, the larger the collective, the more difficult it is for an individual member to
show that he was the person at whom the defamation was directed.
If the defamatory statements were directed at a small, restricted group of persons, they
applied to any member of the group, and an individual member could maintain an action
for defamation. When the defamatory language was used toward a small group or class,
including every member, it has been held that the defamatory language referred to each
member so that each could maintain an action. This small group or class may be a jury,
persons engaged in certain businesses, professions or employments, a restricted
subdivision of a particular class, a society, a football team, a family, small groups of
union officials, a board of public officers, or engineers of a particular company.
In contrast, if defamatory words are used broadly in respect to a large class or group of
persons, and there is nothing that points, or by proper colloquium or innuendo can be
made to apply, to a particular member of the class or group, no member has a right of
action for libel or slander. Where the defamatory matter had no special, personal
application and was so general that no individual damages could be presumed,
and where the class referred to was so numerous that great vexation and oppression
might grow out of the multiplicity of suits, no private action could be maintained. This
rule has been applied to defamatory publications concerning groups or classes of
persons engaged in a particular business, profession or employment, directed at
associations or groups of association officials, and to those directed at miscellaneous
groups or classes of persons.
Distinguishing a small group-which if defamed entitles all its members to sue from a
large group which if defamed entitles no one to sue is not always so simple. Some
authorities have noted that in cases permitting recovery, the group generally has twenty
five (25) or fewer members. However, there is usually no articulated limit on size. Suits
have been permitted by members of fairly large groups when some distinguishing
characteristic of the individual or group increases the likelihood that the statement could
be interpreted to apply individually. For example, a single player on the 60 to 70 man
Oklahoma University football team was permitted to sue when a writer accused the
entire team of taking amphetamines to hop up its performance; the individual was a
fullback, i.e., a significant position on the team and had played in all but two of the
teams games.
A prime consideration, therefore, is the public perception of the size of the group and
whether a statement will be interpreted to refer to every member. The more organized
and cohesive a group, the easier it is to tar all its members with the same brush and the
more likely a court will permit a suit from an individual even if the group includes more
than twenty five (25) members. At some point, however, increasing size may be seen
todilute the harm to individuals and any resulting injury will fall beneath the threshold for
a viable lawsuit.
x xxx There are many other groupings of men than those that are contained within the
foregoing group classifications. There are all the religions of the world, there are all the
political and ideological beliefs; there are the many colors of the human race. Group
defamation has been a fertile and dangerous weapon of attack on various racial,
religious and political minorities. Some states, therefore, have passed statutes to
prevent concerted efforts to harass minority groups in the United States by making it a
crime to circulate insidious rumors against racial and religious groups. Thus far, any civil
remedy for such broadside defamation has been lacking.
There have been numerous attempts by individual members to seek redress in the
courts for libel on these groups, but very few have succeeded because it felt that the
groups are too large and poorly defined to support a finding that the plaintiff was singled
out for personal attack x xxx (citations omitted).

Our conclusion therefore is that the statements published by petitioners in the

instant case did not specifically identify nor refer to any particular individuals who were
purportedly the subject of the alleged libelous publication. Respondents can scarcely
claim to having been singled out for social censure pointedly resulting in damages.
A contrary view is expressed that what is involved in the present case is an
intentional tortious act causing mental distress and not an action for libel. That opinion
invokes Chaplinsky v. New Hampshire where the U.S. Supreme Court held that words
heaping extreme profanity, intended merely to incite hostility, hatred or violence, have
no social value and do not enjoy constitutional protection; and Beauharnais v.
Illinois where it was also ruled that hate speech which denigrates a group of persons
identified by their religion, race or ethnic origin defames that group and the law may
validly prohibit such speech on the same ground as defamation of an individual.
We do not agree to the contrary view articulated in the immediately preceeding
paragraph. Primarily, an "emotional distress" tort action is personal in nature, i.e., it is a
civil action filed by an individual to assuage the injuries to his emotional tranquility due
to personal attacks on his character. It has no application in the instant case since no
particular individual was identified in the disputed article of Bulgar. Also, the purported
damage caused by the article, assuming there was any, falls under the principle
of relational harm - which includes harm to social relationships in the community in the
form of defamation; as distinguished from the principle of reactive harm - which includes
injuries to individual emotional tranquility in the form of an infliction of emotional
distress. In their complaint, respondents clearly asserted an alleged harm to the
standing of Muslims in the community, especially to their activities in propagating their
faith in Metro Manila and in other non-Muslim communities in the country. It is thus
beyond cavil that the present case falls within the application of the relational
harm principle of tort actions for defamation, rather than the reactive harm principle on
which the concept of emotional distress properly belongs.

Moreover, under the Second Restatement of the Law, to recover for the intentional
infliction of emotional distress the plaintiff must show that: (a) The conduct of the
defendant was intentional or in reckless disregard of the plaintiff; (b) The conduct was
extreme and outrageous; (c) There was a causal connection between the defendant's
conduct and the plaintiff's mental distress; and, (d) The plaintiff's mental distress was
extreme and severe.
"Extreme and outrageous conduct" means conduct that is so outrageous in
character, and so extreme in degree, as to go beyond all possible bounds of decency,
and to be regarded as atrocious, and utterly intolerable in civilized society. The
defendant's actions must have been so terrifying as naturally to humiliate, embarrass or
frighten the plaintiff. Generally, conduct will be found to be actionable where the
recitation of the facts to an average member of the community would arouse his
resentment against the actor, and lead him or her to exclaim, "Outrageous!" as his or
her reaction.
"Emotional distress" means any highly unpleasant mental reaction such as extreme
grief, shame, humiliation, embarrassment, anger, disappointment, worry, nausea,
mental suffering and anguish, shock, fright, horror, and chagrin. "Severe emotional
distress," in some jurisdictions, refers to any type of severe and disabling emotional or
mental condition which may be generally recognized and diagnosed by professionals
trained to do so, including posttraumatic stress disorder, neurosis, psychosis, chronic
depression, or phobia. The plaintiff is required to show, among other things, that he or
she has suffered emotional distress so severe that no reasonable person could be
expected to endure it; severity of the distress is an element of the cause of action, not
simply a matter of damages.

Any party seeking recovery for mental anguish must prove more than mere worry,
anxiety, vexation, embarrassment, or anger. Liability does not arise from mere insults,
indignities, threats, annoyances, petty expressions, or other trivialities. In determining
whether the tort of outrage had been committed, a plaintiff is necessarily expected and
required to be hardened to a certain amount of criticism, rough language, and to
occasional acts and words that are definitely inconsiderate and unkind; the mere fact
that the actor knows that the other will regard the conduct as insulting, or will have his
feelings hurt, is not enough.

Hustler Magazine v. Falwell illustrates the test case of a civil action for damages on
intentional infliction of emotional distress. A parody appeared in Hustler magazine
featuring the American fundamentalist preacher and evangelist Reverend Jerry Falwell
depicting him in an inebriated state having an incestuous sexual liaison with his mother
in an outhouse. Falwell sued Hustler and its publisher Larry Flynt for damages. The
United States District Court for the Western District of Virginia ruled that the parody was
not libelous, because no reasonable reader would have understood it as a factual
assertion that Falwell engaged in the act described. The jury, however, awarded
$200,000 in damages on a separate count of "intentional infliction of emotional
distress," a cause of action that did not require a false statement of fact to be made. The
United States Supreme Court in a unanimous decision overturned the jury verdict of the
Virginia Court and held that Reverend Falwell may not recover for intentional infliction of
emotional distress. It was argued that the material might be deemed outrageous and
may have been intended to cause severe emotional distress, but these circumstances
were not sufficient to overcome the free speech rights guaranteed under the First
Amendment of the United States Constitution. Simply stated, an intentional tort causing
emotional distress must necessarily give way to the fundamental right to free speech.

It must be observed that although Falwell was regarded by the U.S. High Court as a
"public figure," he was an individual particularly singled out or identified in the parody
appearing on Hustler magazine. Also, the emotional distress allegedly suffered by
Reverend Falwell involved a reactive interest - an emotional response to the parody
which supposedly injured his psychological well-being.

Verily, our position is clear that the conduct of petitioners was not extreme or
outrageous. Neither was the emotional distress allegedly suffered by respondents so
severe that no reasonable person could be expected to endure it. There is no evidence
on record that points to that result.

Professor William Prosser, views tort actions on intentional infliction of emotional

distress in this manner - There is virtually unanimous agreement that such ordinary
defendants are not liable for mere insult, indignity, annoyance, or even threats, where
the case is lacking in other circumstances of aggravation. The reasons are not far to
seek. Our manners, and with them our law, have not yet progressed to the point where
we are able to afford a remedy in the form of tort damages for all intended mental
disturbance. Liability of course cannot be extended to every trivial indignity x xxx The
plaintiff must necessarily be expected and required to be hardened to a certain amount
of rough language, and to acts that are definitely inconsiderate and unkind x xx The
plaintiff cannot recover merely because of hurt feelings.
Professor Calvert Magruder reinforces Prosser with this succinct observation, viz:
There is no occasion for the law to intervene in every case where someones feelings
are hurt. There must still be freedom to express an unflattering opinion, and some
safety valve must be left through which irascible tempers may blow off relatively
harmless steam.

Thus, it is evident that even American courts are reluctant to adopt a rule of recovery for
emotional harm that would "open up a wide vista of litigation in the field of bad
manners," an area in which a "toughening of the mental hide" was thought to be a more
appropriate remedy. Perhaps of greater concern were the questions of causation, proof,
and the ability to accurately assess damages for emotional harm, each of which
continues to concern courts today.
In this connection, the doctrines in Chaplinsky and Beauharnais had largely been
superseded by subsequent First Amendment doctrines. Back in simpler times in the
history of free expression the Supreme Court appeared to espouse a theory, known as
the Two-Class Theory, that treated certain types of expression as taboo forms of
speech, beneath the dignity of the First Amendment.The most celebrated statement of
this view was expressed in Chaplinsky:
There are certain well-defined and narrowly limited classes of speech, the prevention
and punishment of which have never been thought to raise any Constitutional
problem. These include the lewd and obscene, the profane, the libelous, and the
insulting or fighting words those which by their very utterance inflict injury or tend to
incite an immediate breach of the peace. It has been well observed that such utterances
are no essential part of any exposition of ideas, and are of such slight social value as a
step to truth that any benefit that may be derived from them is clearly outweighed by the
social interest in order and morality.

Today, however, the theory is no longer viable; modern First Amendment principles
have passed it by. American courts no longer accept the view that speech may be
proscribed merely because it is "lewd," "profane," "insulting" or otherwise vulgar
or offensive. Cohen v. California is illustrative: Paul Robert Cohen wore a jacket
bearing the words "Fuck the Draft" in a Los Angeles courthouse in April 1968, which
caused his eventual arrest. Cohen was convicted for violating a California statute
prohibiting any person from "disturb[ing] the peace x xx by offensive conduct." The U.S.
Supreme Court conceded that Cohen's expletive contained in his jacket was "vulgar,"
but it concluded that his speech was nonetheless protected by the right to free
speech. It was neither considered an "incitement" to illegal action nor "obscenity." It did
not constitute insulting or "fighting" words for it had not been directed at a person who
was likely to retaliate or at someone who could not avoid the message. In other words,
no one was present in the Los Angeles courthouse who would have regarded Cohen's
speech as a direct personal insult, nor was there any danger of reactive violence
against him.

No specific individual was targeted in the allegedly defamatory words printed on

Cohen's jacket. The conviction could only be justified by Californias desire to exercise
the broad power in preserving the cleanliness of discourse in the public sphere, which
the U.S. Supreme Court refused to grant to the State, holding that no objective
distinctions can be made between vulgar and nonvulgar speech, and that the emotive
elements of speech are just as essential in the exercise of this right as the purely
cognitive. As Mr. Justice Harlan so eloquently wrote: "[O]ne mans vulgarity is another
mans lyric x xx words are often chosen as much for their emotive as their cognitive
force." With Cohen, the U.S. Supreme Court finally laid the constitutional foundation for
judicial protection of provocative and potentially offensive speech.

Similarly, libelous speech is no longer outside the First Amendment

protection. Only one small piece of the Two-Class Theory in Chaplinsky survives
- U.S. courts continue to treat "obscene" speech as not within the protection of
the First Amendment at all. With respect to the "fighting words" doctrine, while it
remains alive it was modified by the current rigorous clear and present danger
test. Thus, in Cohen the U.S. Supreme Court in applying the test held that there was no
showing that Cohen's jacket bearing the words "Fuck the Draft" had threatened to
provoke imminent violence; and that protecting the sensibilities of onlookers was not
sufficiently compelling interest to restrain Cohen's speech.

Beauharnais, which closely followed the Chaplinsky doctrine, suffered the same fate
as Chaplinsky. Indeed, when Beauharnais was decided in 1952, the Two-Class
Theory was still flourishing.While concededly the U.S. High Tribunal did not formally
abandon Beauharnais, the seminal shifts in U.S. constitutional jurisprudence
substantially undercut Beauharnais and seriously undermined what is left of its vitality
as a precedent. Among the cases that dealt a crushing impact on Beauharnais and
rendered it almost certainly a dead letter case law are Brandenburg v. Ohio, and,
again, Cohen v. California. These decisions recognize a much narrower set of
permissible grounds for restricting speech than did Beauharnais.

In Brandenburg, appellant who was a leader of the Ku Klux Klan was convicted
under the Ohio Criminal Syndicalism Statute for advocating the necessity, duty and
propriety of crime, sabotage, violence, or unlawful methods of terrorism as a means of
accomplishing industrial or political reforms; and for voluntarily assembling with a group
formed to teach or advocate the doctrines of criminal syndicalism. Appellant challenged
the statute and was sustained by the U.S. Supreme Court, holding that the advocacy of
illegal action becomes punishable only if such advocacy is directed to inciting or
producing imminent lawless action and is likely to incite or produce such action. Except
in unusual instances, Brandenburg protects the advocacy of lawlessness as long as
such speech is not translated into action.

The importance of the Brandenburg ruling cannot be overemphasized. Prof.

Smollaaffirmed that "Brandenburg must be understood as overruling Beauharnais
and eliminating the possibility of treating group libel under the same First
Amendment standards as individual libel." It may well be considered as one of the
lynchpins of the modern doctrine of free speech, which seeks to give special protection
to politically relevant speech.

In any case, respondents' lack of cause of action cannot be cured by the filing of a
class suit. As correctly pointed out by Mr. Justice Jose C. Vitug during the
deliberations, "an element of a class suit is the adequacy of representation. In
determining the question of fair and adequate representation of members of a class, the
court must consider (a) whether the interest of the named party is coextensive with the
interest of the other members of the class; (b) the proportion of those made parties as it
so bears to the total membership of the class; and, (c) any other factor bearing on the
ability of the named party to speak for the rest of the class.

The rules require that courts must make sure that the persons intervening should be
sufficiently numerous to fully protect the interests of all concerned. In the present
controversy, Islamic Dawah Council of the Philippines, Inc., seeks in effect to assert the
interests not only of the Muslims in the Philippines but of the whole Muslim world as
well. Private respondents obviously lack the sufficiency of numbers to represent such a
global group; neither have they been able to demonstrate the identity of their interests
with those they seek to represent. Unless it can be shown that there can be a safe
guaranty that those absent will be adequately represented by those present, a class
suit, given its magnitude in this instance, would be unavailing."

Likewise on the matter of damages, we agree that "moral damages may be

recovered only if the plaintiff is able to satisfactorily prove the existence of the factual
basis for the damages and its causal connection with the acts complained of, and so it
must be, as moral damages although incapable of pecuniary estimation are designed
not to impose a penalty but to compensate for injury sustained and actual damages
suffered. Exemplary damages, on the other hand, may only be awarded if claimant is
able to establish his right to moral, temperate, liquidated or compensatory
damages. Unfortunately, neither of the requirements to sustain an award for either of
these damages would appear to have been adequately established by respondents."

In a pluralistic society like the Philippines where misinformation about another

individual's religion is as commonplace as self-appointed critics of government, it would
be more appropriate to respect the fair criticism of religious principles, including those
which may be outrageously appalling, immensely erroneous, or those couched as fairly
informative comments. The greater danger in our society is the possibility that it may
encourage the frequency of suits among religious fundamentalists, whether Christian,
Muslim, Hindu, Buddhist, Jewish, or others. This would unnecessarily make the civil
courts a battleground to assert their spiritual ideas, and advance their respective
religious agenda.

It need not be stressed that this Court has no power to determine which is proper
religious conduct or belief; neither does it have the authority to rule on the merits of one
religion over another, nor declare which belief to uphold or cast asunder, for the validity
of religious beliefs or values are outside the sphere of the judiciary. Such matters are
better left for the religious authorities to address what is rightfully within their doctrine
and realm of influence. Courts must be viewpoint-neutral when it comes to religious
matters if only to affirm the neutrality principle of free speech rights under modern
jurisprudence where "[a]ll ideas are treated equal in the eyes of the First Amendment -
even those ideas that are universally condemned and run counter to constitutional
principles." Under the right to free speech, "there is no such thing as a false
idea. However pernicious an opinion may seem, we depend for its correction not on the
conscience of judges and juries but on the competition of other
ideas." Denying certiorari and affirming the appellate court decision would surely create
a chilling effect on the constitutional guarantees of freedom of speech, of expression,
and of the press.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals
dated 27 August 1998 is REVERSED and SET ASIDE, and the Decision of the RTC-Br.
4, Manila, dismissing the complaint for lack of merit, is REINSTATED and
AFFIRMED. No pronouncement as to costs. SO ORDERED.
 QUEZON CITY GOVERNMENT and Engineer RAMIR J. TIAMZON, Petitioners, -
versus FULGENCIODACARA, Respondent
G.R. No. 150304

The review of cases under Rule 45 of the Rules of Court is limited to errors of law.
Unless there is a showing that the findings of the lower court are totally devoid of
support or are glaringly erroneous, this Court will not analyze or weigh evidence all over
again. Under the circumstance, the factual findings and conclusions of the Court of
Appeals affirming those of the trial courts will be conclusive upon the Supreme Court.
Furthermore, well-entrenched is the rule that points of law, theories, issues and
arguments not brought to the attention of the trial court cannot be raised for the first time
on appeal or certiorari. Finally, this Court reiterates the principle that moral damages are
designed to compensate the claimant for actual injury suffered, not to impose a penalty
on the wrongdoer. Hence, absent any definite finding as to what they consist of, the
alleged moral damages suffered would become a penalty rather than a compensation
for actual injury suffered.

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the
February 21, 2001 Decision and the October 9, 2001 Resolution of the Court of Appeals
(CA) in CA-GR CV No. 29392. The challenged Decision disposed as follows:
WHEREFORE, premises considered, the Decision dated June 29, 1990 in
Civil Case No. Q-88-233 should be AFFIRMED, with costs against the
appellants.
The assailed Resolution denied petitioners Motion for Reconsideration.

The CA summarized the facts in this manner:

Sometime on February 28, 1988 at about 1:00 A.M., FulgencioDacara, Jr., son of
Fulgencio P. Dacara, Sr. and owner of 87 Toyota Corolla 4-door Sedan with
Plate No. 877 (sic), while driving the said vehicle, rammed into a pile of
earth/street diggings found at Matahimik St., Quezon City, which was then being
repaired by the Quezon City government. As a result, Dacarra (sic), Jr. allegedly
sustained bodily injuries and the vehicle suffered extensive damage for it turned
turtle when it hit the pile of earth.

Indemnification was sought from the city government (Record, p. 22), which
however, yielded negative results. Consequently, Fulgencio P. Dacara
(hereinafter referred to as FULGENCIO), for and in behalf of his minor son, Jr.,
filed a Complaint (Record, p. 1) for damages against the Quezon City and Engr.
RamirTiamzon, as defendants, before the Regional Trial Court, National Capital
Judicial Region, Branch 101, Quezon City, docketed as Civil Case No. Q-88-
233.FULGENCIO prayed that the amount of not less than P20,000.00 actual or
compensatory damages, P150,000.00 moral damages, P30,000.00 exemplary
damages, and P20,000.00attorneys fees and costs of the suit be awarded to him.

In an Answer with Affirmative and/or Special Defenses (Record, p. 11),

defendants admitted the occurrence of the incident but alleged that the subject
diggings was provided with a moun[d] of soil and barricaded with reflectorized
traffic paint with sticks placed before or after it which was visible during the
incident on February 28, 1988 at 1:00 A.M. In short, defendants claimed that they
exercised due care by providing the area of the diggings all necessary measures
to avoid accident. Hence, the reason why FulgencioDacara, Jr. fell into the
diggings was precisely because of the latters negligence and failure to exercise
due care.

After trial on the merits, the Regional Trial Court (RTC), Branch 101, Quezon City,
rendered its Decision dated June 29, 1990. The evidence proffered by the complainant
(herein respondent) was found to be sufficient proof of the negligence of herein
petitioners. Under Article 2189 of the Civil Code, the latter were held liable as follows:
WHEREFORE, premises above considered, based on the quantum of
evidence presented by the plaintiff which tilts in their favor elucidating the
negligent acts of the city government together with its employees when
considered in the light of Article 2189, judgment is hereby rendered
ordering the defendants to indemnify the plaintiff the sum of twenty
thousand pesos as actual/compensatory damages, P10,000.00 as moral
damages, P5,000.00 as exemplary damages, P10,000.00 as attorneys
fees and other costs of suit.
In their appeal to the CA, petitioners maintained that they had observed due diligence
and care in installing preventive warning devices, and that it was in fact the plaintiff who
had failed to exercise prudence by driving too fast to avoid the diggings. Moreover, the
lower court allegedly erred in using Article 2189 of the Civil Code, which supposedly
applied only to liability for the death or injuries suffered by a person, not for damage to
property.

Ruling of the Court of Appeals

The CA agreed with the RTCs finding that petitioners negligence was the proximate
cause of the damage suffered by respondent. Noting the failure of petitioners to present
evidence to support their contention that precautionary measures had indeed been
observed, it ruled thus:
x xx. Sadly, the evidence indicates that [petitioners] failed to show that they
placed sufficient and adequate precautionary signs at Matahimik Street to
minimize or prevent the dangers to life and limb under the circumstances.
Contrary to the testimony of the witnesses for the [petitioners], namely Engr.
RamirTiamzon, Ernesto Landrito and Eduardo Castillo, that there were signs,
gasera which was buried so that its light could not be blown off by the wind and
barricade, none was ever presented to stress and prove the sufficiency and
adequacy of said contention.
Further upholding the trial courts finding of negligence on the part of herein
petitioners, the CA gave this opinion:

x xx.As observed by the trial court, the negligence of [petitioners] was clear
based on the investigation report of Pfc. William P. Villafranca stating to the
effect that the subject vehicle rammed into a pile of earth from a deep excavation
thereat without any warning devi[c]e whatsoever and as a consequence thereof,
Dacara, Jr. lost control of his driven car and finally turned-turtle causing
substantial damage to the same. As a defense against liability on the basis of
quasi-delict, one must have exercised the diligence of a good father of a family
which [petitioners] failed to establish in the instant case.
Whether Article 2189 is applicable to cases in which there has been no death or
physical injury, the CA ruled in the affirmative:
x xx. More importantly, we find it illogical to limit the liability to death or personal
injury only as argued by appellants in the case at bar applying the foregoing
provisions. For, injury is an act that damages, harms or hurts and mean in
common as the act or result of inflicting on a person or thing something that
causes loss, pain, distress, or impairment. Injury is the most comprehensive,
applying to an act or result involving an impairment or destruction of right, health,
freedom, soundness, or loss of something of value.

Hence, this Petition.

Petitioners raise the following issues for our consideration:
1. The Honorable Court of Appeals decided a question of law/substance contrary to
applicable law and jurisprudence when it affirmed the award of moral damage suit (sic)
the amount of P10,000.00.
2. The Honorable Court of Appeals decided a question of law/substance contrary to
applicable law and jurisprudence when it affirmed the award of exemplary damage sin
(sic) the amount of P5,000.00 and attorneys fee in the [a]mount of P10,000.00.
3. The Honorable Court of Appeals gravely erred and/;or (sic) had acted with grave
abuse of discretion amounting to lack and/or excess of jurisdiction when it refused to
hold that respondents son in the person of FulgencioDacara, Jr. was negligent at the
time of incident.
Because the issues regarding the liability of petitioners for moral and exemplary
damages presuppose that their negligence caused the vehicular accident, we first
resolve the question of negligence or the proximate cause of the incident.

The Court’s Ruling

The Petition is partly meritorious.

First Issue:Negligence
Maintaining that they were not negligent, petitioners insist that they placed all the
necessary precautionary signs to alert the public of a roadside construction. They argue
that the driver (FulgencioDacara Jr.) of respondents car was overspeeding, and that his
own negligence was therefore the sole cause of the incident.

Proximate cause is defined as any cause that produces injury in a natural and
continuous sequence, unbroken by any efficient intervening cause, such that the result
would not have occurred otherwise. Proximate cause is determined from the facts of
each case, upon a combined consideration of logic, common sense, policy and
precedent.
What really caused the subject vehicle to turn turtle is a factual issue that this Court
cannot pass upon, absent any whimsical or capricious exercise of judgment by the
lower courts or an ample showing that they lacked any basis for their conclusions. The
unanimity of the CA and the trial court in their factual ascertainment that petitioners
negligence was the proximate cause of the accident bars us from supplanting their
findings and substituting these with our own. The function of this Court is limited to the
review of the appellate courts alleged errors of law. It is not required to weigh all over
again the factual evidence already considered in the proceedings below. Petitioners
have not shown that they are entitled to an exception to this rule. They have not
sufficiently demonstrated any special circumstances to justify a factual review.

That the negligence of petitioners was the proximate cause of the accident was aptly
discussed in the lower courts finding, which we quote:
 Facts obtaining in this case are crystal clear that the accident of February
28, 1988 which caused almost the life and limb of FulgencioDacara, Jr.
when his car turned turtle was the existence of a pile of earth from a
digging done relative to the base failure at Matahimik Street nary a lighting
device or a reflectorized barricade or sign perhaps which could have
served as an adequate warning to motorist especially during the thick of
the night where darkness is pervasive.
Contrary to the testimony of the witnesses for the defense that there were
signs, gaserawhich was buried so that its light could not be blown off by
the wind and barricade, none was ever presented to stress the point that
sufficient and adequate precautionary signs were placed at Matahimik
Street. If indeed signs were placed thereat, how then could it be explained
that according to the report even of the policeman which for clarity is
quoted again, none was found at the scene of the accident.
x xxxxxxxx
Negligence of a person whether natural or juridical over a particular set of
events is transfixed by the attending circumstances so that the greater the
danger known or reasonably anticipated, the greater is the degree of care
required to be observed.
x xxxxxxxx
The provisions of Article 2189 of the New Civil Code capsulizes the
responsibility of the city government relative to the maintenance of roads
and bridges since it exercises the control and supervision over the same.
Failure of the defendant to comply with the statutory provision found in the
subject-article is tantamount to negligence per se which renders the City
government liable. Harsh application of the law ensues as a result thereof
but the state assumed the responsibility for the maintenance and repair of
the roads and bridges and neither exception nor exculpation from liability
would deem just and equitable. (Emphasis supplied)
Petitioners belatedly point out that Fulgencio Jr. was driving at the speed of 60
kilometers per hour (kph) when he met the accident. This speed was allegedly well
above the maximum limit of 30 kph allowed on city streets with light traffic, when not
designated through streets, as provided under the Land Transportation and Traffic Code
(Republic Act 4136). Thus, petitioners assert that Fulgencio Jr., having violated a traffic
regulation, should be presumed negligent pursuant to Article 2185 of the Civil Code.
 These matters were, however, not raised by petitioners at any time during the
trial. It is evident from the records that they brought up for the first time the matter of
violation of RA 4136 in their Motion for Reconsideration of the CA Decision dated
February 21, 2001. It is too late in the day for them to raise this new issue. It is well-
settled that points of law, theories or arguments not brought out in the original
proceedings cannot be considered on review or appeal. To consider their belatedly
raised arguments at this stage of the proceedings would trample on the basic principles
of fair play, justice, and due process.

Indeed, both the trial and the appellate courts findings, which are amply
substantiated by the evidence on record, clearly point to petitioners negligence as the
proximate cause of the damages suffered by respondents car. No adequate reason has
been given to overturn this factual conclusion.

Second Issue:Moral Damages

Petitioners argue that moral damages are recoverable only in the instances specified in
Article 2219 of the Civil Code. Although the instant case is an action for quasi-delict,
petitioners contend that moral damages are not recoverable, because no evidence of
physical injury were presented before the trial court.

To award moral damages, a court must be satisfied with proof of the following
requisites: (1) an injury -- whether physical, mental, or psychological -- clearly sustained
by the claimant; (2) a culpable act or omission factually established; (3) a wrongful act
or omission of the defendant as the proximate cause of the injury sustained by the
claimant; and (4) the award of damages predicated on any of the cases stated in Article
2219.

Article 2219(2) specifically allows moral damages to be recovered for quasi-

delicts, provided that the act or omission caused physical injuries. There can be no
recovery of moral damages unless the quasi-delict resulted in physical injury. This rule
was enunciated in Malonzo v. Galang as follows:
x xx. Besides, Article 2219 specifically mentions quasi-delicts
causing physical injuries, as an instance when moral damages may be
allowed, thereby implying that all other quasi-delicts not resulting in
physical injuries are excluded, excepting of course, the special torts
referred to in Art. 309 (par. 9, Art. 2219) and in Arts. 21, 26, 27, 28, 29, 30,
32, 34 and 35 on the chapter on human relations (par. 10, Art. 2219).
In the present case, the Complaint alleged that respondents son Fulgencio Jr. sustained
physical injuries. The son testified that he suffered a deep cut on his left arm when the
car overturned after hitting a pile of earth that had been left in the open without any
warning device whatsoever.

It is apparent from the Decisions of the trial and the appellate courts, however, that no
other evidence (such as a medical certificate or proof of medical expenses) was
presented to prove FulgencioJr.s bare assertion of physical injury. Thus, there was no
credible proof that would justify an award of moral damages based on Article 2219(2) of
the Civil Code.

Moreover, the Decisions are conspicuously silent with respect to the claim of
respondent that his moral sufferings were due to the negligence of petitioners. The
Decision of the trial court, which summarizes the testimony of respondents four
witnesses, makes no mention of any statement regarding moral suffering, such as
mental anguish, besmirched reputation, wounded feelings, social humiliation and the
like.

Moral damages are not punitive in nature, but are designed to compensate and alleviate
in some way the physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury unjustly
inflicted on a person. Intended for the restoration of the psychological or
emotional status quo ante, the award of moral damages is designed to compensate
emotional injury suffered, not to impose a penalty on the wrongdoer.

For the court to arrive upon a judicious approximation of emotional or moral injury,
competent and substantial proof of the suffering experienced must be laid before it.
Essential to this approximation are definite findings as to what the supposed moral
damages suffered consisted of; otherwise, such damages would become a penalty
rather than a compensation for actual injury suffered.

Furthermore, well-settled is the rule that moral damages cannot be awarded -- whether
in a civil or a criminal case -- in the absence of proof of physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation, or similar injury. The award of moral damages must be solidly
anchored on a definite showing that respondent actually experienced emotional and
mental sufferings. Mere allegations do not suffice; they must be substantiated by clear
and convincing proof.

Third Issue:Exemplary Damages

Petitioners argue that exemplary damages and attorneys fees are not recoverable.
Allegedly, the RTC and the CA did not find that petitioners were guilty of gross
negligence in the performance of their duty and responsibilities.

Exemplary damages cannot be recovered as a matter of right. While granting them is

subject to the discretion of the court, they can be awarded only after claimants have
shown their entitlement to moral, temperate or compensatory damages. In the case
before us, respondent sufficiently proved before the courts a quothat petitioners
negligence was the proximate cause of the incident, thereby establishing his right to
actual or compensatory damages. He has adduced adequate proof to justify his claim
for the damages caused his car. The question that remains, therefore, is whether
exemplary damages may be awarded in addition to compensatory damages.

Article 2231 of the Civil Code mandates that in cases of quasi-delicts, exemplary
damages may be recovered if the defendant acted with gross negligence. Gross
negligence means such utter want of care as to raise a presumption that the persons at
fault must have been conscious of the probable consequences of their carelessness,
and that they must have nevertheless been indifferent (or worse) to the danger of injury
to the person or property of others. The negligence must amount to a reckless disregard
for the safety of persons or property. Such a circumstance obtains in the instant case.

A finding of gross negligence can be discerned from the Decisions of both the CA and
the trial court. We quote from the RTC Decision:
Sad to state that the City Government through its instrumentalities have
(sic) failed to show the modicum of responsibility, much less, care
expected of them (sic) by the constituents of this City. It is even more
deplorable that it was a case of a street digging in a side street which
caused the accident in the so-called premier city.

The CA reiterated the finding of the trial court that petitioners negligence was clear,
considering that there was no warning device whatsoever at the excavation site.

The facts of the case show a complete disregard by petitioners of any adverse
consequence of their failure to install even a single warning device at the area under
renovation. Considering further that the street was dimly lit, the need for adequate
precautionary measures was even greater. By carrying on the road diggings without any
warning or barricade, petitioners demonstrated a wanton disregard for public safety.
Indeed, the February 28, 1988 incident was bound to happen due to their gross
negligence. It is clear that under the circumstances, there is sufficient factual basis for a
finding of gross negligence on their part.

Article 2229 of the Civil Code provides that exemplary damages may be imposed by
way of example or correction for the public good. The award of these damages is meant
to be a deterrent to socially deleterious actions. Public policy requires such imposition to
suppress wanton acts of an offender. It must be emphasized that local governments
and their employees should be responsible not only for the maintenance of roads and
streets, but also for the safety of the public. Thus, they must secure construction areas
with adequate precautionary measures.

Not only is the work of petitioners impressed with public interest; their very existence is
justified only by public service. Hence, local governments have the paramount
responsibility of keeping the interests of the public foremost in their agenda. For these
reasons, it is most disturbing to note that the present petitioners are the very parties
responsible for endangering the public through such a rash and reckless act.

WHEREFORE, the Petition is hereby PARTLY GRANTED. The Decision of the Court of
Appeals is AFFIRMED, with the MODIFICATION that the award of moral damages
is DELETED. No costs.

SO ORDERED.