TORTS AND DAMAGES

VI. VICARIOUS LIABILITY

A. POSSESSOR OF ANIMALS

Art. 2183. The possessor of an animal or whoever may make use of the same is responsible for the damage
which it may cause, although it may escape or be lost. This responsibility shall cease only in case the damage
should come from force majeure or from the fault of the person who has suffered damage.

G.R. No. 74431 November 6, 1989

PURITA MIRANDA VESTIL and AGUSTIN VESTIL, petitioners, vs. INTERMEDIATE APPELLATE COURT, DAVID UY
and TERESITA UY, respondents.

Little Theness Tan Uy was dead at the age of three. Her parents said she died because she was bitten by a dog
of the petitioners, but the latter denied this, claiming they had nothing to do with the dog. The Uys sued the
Vestils, who were sustained by the trial court. On appeal, the decision of the court a quo was reversed in favor
of the Uys. The Vestils are now before us. They ask us to set aside the judgment of the respondent court and
to reinstate that of the trial court.

On July 29, 1915, Theness was bitten by a dog while she was playing with a child of the petitioners in the
house of the late Vicente Miranda, the father of Purita Vestil, at F. Ramos Street in Cebu City. She was rushed
to the Cebu General Hospital, where she was treated for "multiple lacerated wounds on the forehead" 1 and
administered an anti-rabies vaccine by Dr. Antonio Tautjo. She was discharged after nine days but was
readmitted one week later due to "vomiting of saliva." 2 The following day, on August 15, 1975, the child died.
The cause of death was certified as broncho-pneumonia. 3

Seven months later, the Uys sued for damages, alleging that the Vestils were liable to them as the possessors
of "Andoy," the dog that bit and eventually killed their daughter. The Vestils rejected the charge, insisting that
the dog belonged to the deceased Vicente Miranda, that it was a tame animal, and that in any case no one had
witnessed it bite Theness. After trial, Judge Jose R. Ramolete of the Court of First Instance of Cebu sustained
the defendants and dismissed the complaint. 4

The respondent court arrived at a different conclusion when the case was appealed. 5 It found that the Vestils
were in possession of the house and the dog and so should be responsible under Article 2183 of the Civil Code
for the injuries caused by the dog. It also held that the child had died as a result of the dog bites and not for
causes independent thereof as submitted by the appellees. Accordingly, the Vestils were ordered to pay the
Uys damages in the amount of P30,000.00 for the death of Theness, P12,000.00 for medical and
hospitalization expenses, and P2,000.00 as attorney's fees.

In the proceedings now before us, Purita Vestil insists that she is not the owner of the house or of the dog left
by her father as his estate has not yet been partitioned and there are other heirs to the property. Pursuing the
logic of the Uys, she claims, even her sister living in Canada would be held responsible for the acts of the dog
simply because she is one of Miranda's heirs. However, that is hardly the point. What must be determined is
the possession of the dog that admittedly was staying in the house in question, regardless of the ownership of
the dog or of the house.

Article 2183 reads as follows:

 The possessor of an animal or whoever may make use of the same is responsible for the
damage which it may cause, although it may escape or be lost. 'This responsibility shall cease
only in case the damages should come from force majeure from the fault of the person who has
suffered damage.

Thus, in Afialda v. Hisole, 6 a person hired as caretaker of a carabao gored him to death and his heirs
thereupon sued the owner of the animal for damages. The complaint was dismissed on the ground that it was
the caretaker's duty to prevent the carabao from causing injury to any one, including himself.

Purita Vestil's testimony that she was not in possession of Miranda's house is hardly credible. She said that the
occupants of the house left by her father were related to him ("one way or the other") and maintained
themselves out of a common fund or by some kind of arrangement (on which, however, she did not elaborate
). 7 She mentioned as many as ten of such relatives who had stayed in the house at one time or another
although they did not appear to be close kin.8 She at least implied that they did not pay any rent, presumably
because of their relation with Vicente Miranda notwithstanding that she herself did not seem to know them
very well.

There is contrary evidence that the occupants of the house, were boarders (or more of boarders than
relatives) who paid the petitioners for providing them with meals and accommodations. It also appears that
Purita Vestil had hired a maid, Dolores Jumao-as, who did the cooking and cleaning in the said house for its
occupants. 9 Her mother, Pacita, who was a nursemaid of Purita herself, categorically declared that the
petitioners were maintaining boarders in the house where Theness was bitten by a dog.10 Another witness,
Marcial Lao, testified that he was indeed a boarder and that the Vestils were maintaining the house for
business purposes. 11 And although Purita denied paying the water bills for the house, the private respondents
submitted documentary evidence of her application for water connection with the Cebu Water District, which
strongly suggested that she was administering the house in question. 12

While it is true that she is not really the owner of the house, which was still part of Vicente Miranda's estate,
there is no doubt that she and her husband were its possessors at the time of the incident in question. She
was the only heir residing in Cebu City and the most logical person to take care of the property, which was
only six kilometers from her own house. 13 Moreover, there is evidence showing that she and her family
regularly went to the house, once or twice weekly, according to at least one witness, 14 and used it virtually as
a second house. Interestingly, her own daughter was playing in the house with Theness when the little girl was
bitten by the dog. 15 The dog itself remained in the house even after the death of Vicente Miranda in 1973 and
until 1975, when the incident in question occurred. It is also noteworthy that the petitioners offered to assist
the Uys with their hospitalization expenses although Purita said she knew them only casually. 16

The petitioners also argue that even assuming that they were the possessors of the dog that bit Theness there
was no clear showing that she died as a result thereof. On the contrary, the death certificate 17 declared that
she died of broncho-pneumonia, which had nothing to do with the dog bites for which she had been
previously hospitalized. The Court need not involve itself in an extended scientific discussion of the causal
connection between the dog bites and the certified cause of death except to note that, first, Theness
developed hydrophobia, a symptom of rabies, as a result of the dog bites, and second, that asphyxia broncho-
pneumonia, which ultimately caused her death, was a complication of rabies. That Theness became afraid of
water after she was bitten by the dog is established by the following testimony of Dr. Tautjo:

COURT: I think there was mention of rabies in the report in the second admission?
A: Now, the child was continuously vomiting just before I referred to Dr. Co earlier in the morning and
then the father, because the child was asking for water, the father tried to give the child water and this
 child went under the bed, she did not like to drink the water and there was fright in her eyeballs. For
this reason, because I was in danger there was rabies, I called Dr. Co.
Q: In other words, the child had hydrophobia?
A: Yes, sir. 18
As for the link between rabies and broncho-pneumonia, the doctor had the following to say under oath:
A: Now, as 1 said before, broncho-pneumonia can result from physical, chemical and bacterial means.
... It can be the result of infection, now, so if you have any other disease which can lower your
resistance you can also get pneumonia.
xxx xxx xxx
Q: Would you say that a person who has rabies may die of complication which is broncho-pneumonia?
A: Yes.
Q: For the record, I am manifesting that this book shown the witness is know as CURRENT DIANOSIS &
TREATMENT, 1968 by Henry Brainerd, Sheldon Margen and Milton Chaton. Now, I invite your
attention, doctor, to page 751 of this book under the title "Rabies." There is on this page, "Prognosis"
as a result of rabies and it says: Once the symptoms, have appeared death inevitably occurs after 2-3
days as a result of cardiac or respiratory failure or generalized paralysis. After a positive diagnosis of
rabies or after a bite by a suspected animal if the animal cannot be observed or if the bite is on the
head, give rabies vaccine (duck embryo). Do you believe in this statement?
A: Yes.
Q: Would you say therefore that persons who have rabies may die of respiratory failure which leave in
the form of bronco-pneumonia?

A: Broncho-pneumonia can be a complication of rabies. 19

On the strength of the foregoing testimony, the Court finds that the link between the dog bites and the
certified cause of death has beep satisfactorily established. We also reiterate our ruling in Sison v. Sun Life
Assurance Company of Canada, 20 that the death certificate is not conclusive proof of the cause of death but
only of the fact of death. Indeed, the evidence of the child's hydrophobia is sufficient to convince us that she
died because she was bitten by the dog even if the death certificate stated a different cause of death. The
petitioner's contention that they could not be expected to exercise remote control of the dog is not
acceptable. In fact, Article 2183 of the Civil Code holds the possessor liable even if the animal should "escape
or be lost" and so be removed from his control. And it does not matter either that, as the petitioners also
contend, the dog was tame and was merely provoked by the child into biting her. The law does not speak only
of vicious animals but covers even tame ones as long as they cause injury. As for the alleged provocation, the
petitioners forget that Theness was only three years old at the time she was attacked and can hardly be
faulted for whatever she might have done to the animal.

It is worth observing that the above defenses of the petitioners are an implied rejection of their original
posture that there was no proof that it was the dog in their father's house that bit Theness.

According to Manresa the obligation imposed by Article 2183 of the Civil Code is not based on the negligence
or on the presumed lack of vigilance of the possessor or user of the animal causing the damage. It is based on
natural equity and on the principle of social interest that he who possesses animals for his utility, pleasure or
service must answer for the damage which such animal may cause. 21
We sustain the findings of the Court of Appeals and approve the monetary awards except only as to the
medical and hospitalization expenses, which are reduced to P2,026.69, as prayed for in the complaint. While
there is no recompense that can bring back to the private respondents the child they have lost, their pain
should at least be assuaged by the civil damages to which they are entitled.

WHEREFORE, the challenged decision is AFFIRMED as above modified. The petition is DENIED, with costs
against the petitioners. It is so ordered.

B. THINGS THROWN OR FALLING FROM A BUILDING

Art. 2193. The head of a family that lives in a building or a part thereof, is responsible for damages caused by
things thrown or falling from the same.

GR No. L-47033 April 25, 1941

JOSE DINGCONG, appellant-appellant, vs. HALIM KANAAN, NASRI KANAAN, and MICHAEL KANAAN, engaged
in trading under the corporate name of "American Bazaar," appealed-appealed.

According to the decision of the Court of Appeals Court, the brothers Loreto Dingcong and Jose Dingcong are
co-recipients of the highs of the house of Emilia Saenz located in Jose Ma Street. Basa of the City of Iloilo,
where they established the Central Hotel, being the first the owner and the last her manager. The defendant
Francisco Echevarria occupies, by payment of P30 per month, the fourth No. 10 of said hotel. The plaintiffs in
turn stole the lows of this hotel where they had established their "American Bazaar" dedicated to the
purchase and sale of items and mentions. Towards eleven o'clock on the night of September 19, 1933,
Echevarria, when retiring to bed, carelessly left the tap he gave on an ordinary basin without draining. As the
pipes of the hotel at that time were in repair,

This action was presented by Halim Kanaan, Nasri Kanaan and Michael Kanaan on behalf of the name of the
"American Bazaar" against Loreto Dingcong, Jose Dingcong and Francisco Echevarria for damages caused to
the plaintiffs. The Jusgado dismissed the case regarding Loreto Dingcong for having passed away, and
condemned Francisco Echevarria, absolving Jose Dingcong. The plaintiffs appealed this decision as soon as it
acquits Jose dingcong. The Court of Appeals, revoking the decision of the Court of First Instance, declared Jose
Dingcong responsible and ordered him to pay the plaintiffs the amount of the damages and losses caused to
them as estimated by the Court. It is now presented before this Court, through certiorari , appeal of this
decision of the Court of Appeals.

Being Jose Dingcong co- manager and managerof the hotel, with full possession of the top of the house, must
answer for the damages caused by the things that were thrown or fell of the same (article 1910 of the Civil
Code). Francisco Echevarria was a guest of the hotel and was the one who, by his carelessness, by leaving the
tap open, allowed the water from the pipe to flow down the floor and seep into the ground, wetting the
plaintiffs' articles and merchandise. Jose Dingcong, on the other hand, did not practice the diligence of a good
family man to prevent these damages, even though he knew that they could be caused by being repaired at
the time, therefore, presuming that Echavarria could use the tap. provided a container with drain, and if only
put under it a basin that, when filled,

The decision appealed is confirmed, with the costs to the appellant.

C. DEATH/INJURIES IN THE COURSE OF EMPLOYMENT

Art. 1711. Owners of enterprises and other employers are obliged to pay compensation for the death of or
injuries to their laborers, workmen, mechanics or other employees, even though the event may have been
purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the
course of the employment. The employer is also liable for compensation if the employee contracts any illness
or disease caused by such employment or as the result of the nature of the employment. If the mishap was
due to the employee's own notorious negligence, or voluntary act, or drunkenness, the employer shall not be
liable for compensation. When the employee's lack of due care contributed to his death or injury, the
compensation shall be equitably reduced.

Art. 1712. If the death or injury is due to the negligence of a fellow worker, the latter and the employer shall
be solidarily liable for compensation. If afellow worker's intentional malicious act is the only cause of the
death or injury, the employer shall not be answerable, unless it should be shown that the latter did not
exercise due diligence in the selection or supervision of the plaintiff's fellow worker.

GR No. 36858, Mar 06, 1933

JUSTA AFABLE v. SINGER SEWING MACHINE COMPANY

This is an appeal by the plaintiffs from a decision of Judge Pedro Concepcion of the Court of First Instance of
Manila dismissing the complaint, without a special finding as to costs.
The appellants make the following assignments of error:
"I. El Juzgado a quo incurrio en error al considerar que los hechos probados por los demandantes caen
fuera de las disposiciones del articulo 2 de dicha Ley No. 3428 tal como ha sido enmendada por la Ley
No. 3812 de la Legislatura Filipina;
"II. Erro tambien al sobreseer de una manera definitiva la demanda;
"III. Incurrio finalmente en error al no conceder la compensacion reclamada en la demanda a que
tienen derecho los demandantes, segun las disposiciones de dicha Ley."

It appears from the evidence that Leopoldo Madlangbayan was a collector for the Singer Sewing Machine
Company in the district of San Francisco del Monte, outside of the limits of the City of Manila, and he was
supposed to be residing in his district according to the records of the company. His compensation was a
commission of eight per cent on all collections made by him. On the afternoon of Sunday, November 16, 1930,
Leopoldo Madlangbayan while riding a bicycle was run over and fatally injured at the corner of O'Donnell and
Zurbaran streets in the City of Manila by a truck driven by Vitaliano Sumoay. It appears that Madlangbayan
had moved to Teodora Alonso Street in Manila without notifying the company, and that at the time of his
death he was returning home after making some collections in San Francisco del Monte. According to the
practice of the company, if collectors made collections on Sunday they were required to deliver the amount
collected to the company the next morning.
On November 21, 1930, Vitaliano Sumoay, the driver of the truck which caused the death of Leopoldo
Madlangbayan, was convicted for the crime of homicide through reckless negligence, and was sentenced to
imprisonment for one year and one day, and to indemnify the heirs of Leopoldo Madlangbayan in the sum of
P1,000.
On February 19, 1931, the widow and children of Leopoldo Madlangbayan brought the present action to
recover from the defendant corporation under Act No. 3428, as amended by Act No. 3812, P100 for burial
expenses and P1,745.12 for compensation. Plaintiffs' complaint was subsequently amended, and they sought
to recover under sections 8 and 10 of Act No. 3428 fifty per cent of P16.78 for 208 weeks or P1,745.12, plus
P100 for burial expenses.
In its answer to the plaintiffs' last amended complaint, the defendant denied all the allegations thereof, and as
special defenses alleged that prior to the filing1 of this complaint the plaintiffs had obtained a judgment
against Vitaliano Sumoay for the damages caused by him; that Leopoldo Madlangbayan at the time that he
sustained the injuries resulting in his death was violating an ordinance of the City of Manila which prohibits
work on Sunday; and that Act No. 3428, as amended, is unconstitutional and void because it denies the
defendant the equal protection of the law, and impairs the obligation of the contract between the defendant
and Leopoldo Madlangbayan, and deprives the Courts of First Instance of their probate jurisdiction over the
estate of deceased persons and nullifies Chapters XXIX, XXX, XXXI, XXXII, XXXIII, and XXXIV of the Code of Civil
Procedure and related articles of the Civil Code.
As the deceased Leopoldo Madlangbayan was killed on November 16, 1930, and Act No. 3812 was not
approved until December 8, 1930, it is apparent that the law which is applicable is Act No. 3428, section 2 of
which reads as follows:
"When any employee receives a personal injury from any accident due to and in the pursuance of the
employment, or contracts any illness directly caused by such employment or the result of the nature of such
employment, his employer shall pay compensation in the sums and to the persons hereinafter specified."

The accident which caused the death of the employee was not due to and in pursuance of his employment. At
the time that he was run over by the truck Leopoldo Madlangbayan was not in the pursuance of his
employment with the defendant corporation, but was on his way home after he had finished his work for the
day and had left the territory where he was authorized to make collections for the defendant. The employer is
not an insurer "against all accidental injuries which might happen to an employee while in the course of the
employment", and as a general rule an employee is not entitled to recover from personal injuries resulting
from an accident that befalls him while going to or returning from his place of employment, because such an
accident does not arise out of and in the course of his employment.
The phrase "due to and in the pursuance of" used in section 2 of Act No. 3428 was changed in Act No. 3812 to
"arising out of and in the course of". Discussing this phrase, the Supreme Court of Illinois in the case of Mueller
Construction Co. vs. Industrial Board (283 Ill., 148; 118 N. E., 1028; 1 W. C. L., 943), said:
"The words 'arising out of' refer to the origin or cause of the accident, and are descriptive of its character,
while the words 'in the course of refer to the time, place, and circumstances under which the accident takes
place. (Fitzgerald vs. Clarke & Sons, 1 B. W. C. C, 197; Dietzen Co. vs. Industrial Board, 279 III., 11; 116 N. E,,
684.) By the use of these words it was not the intention of the legislature to make the employer an insurer
against all accidental injuries which might happen to an employee while in the course of the employment, but
only for such injuries arising from or growing out of the risks peculiar to the nature of the work in the scope of
the workman's employment or incidental to such employment, and accidents in which it is possible to trace
the injury to some risk or hazard to which the employee is exposed in a special degree by reason of such
employment. Risks to which all persons similarly situated are equally exposed and not traceable in some
special degree to the particular employment are excluded."

Although some courts have held otherwise, we think the better rule is as we have stated it. We do not of
course mean to imply that an employee can never recover for injuries suffered while on his way to 6r from
work. That depends on the nature of his employment. In the case at bar, if the deceased had been killed while
going from house to house in San Francisco del Monte in the pursuance of his employment, the plaintiffs
would undoubtedly have the right, prima facie, to recover.
The appellants cite the syllabus in Stacy's case (225 Mass., 174), in support of their contention, but an
examination of that case shows that it differs materially from the case at bar. Stacy was drowned by reason of
breaking through the ice of Colburn's Pond while on his way home from work. Up to the time of his death he
had been employed in the ice-house, in the work of storing ice which was cut from the pond. The ice-house
was situated at the southerly end of the pond and the deceased lived directly north from the ice-house, across
the pond. He followed the reasonable and customary way of leaving his employer's premises. The path around
the pond was not used in winter. He was on his employer's premises when he met his death and was leaving
those premises by a reasonable way. There was no other convenient way of going home. The pond was the
premises of his employer, under his employer's control. It was as a result of the working operations of his
employer that he met his death. The court said. "The finding that the pond was in the control of the employer
and that crossing over it upon the ice was the 'reasonable and customary way' for the deceased to reach his
home, and that he and other employees who lived in the same direction 'crossed by this way regularly',
warranted the further finding that the injury occurred in the course of the employment." The court added: "It
also could have been found that the death of the employee was due to his employment as a contributing
proximate cause, incidental to the nature of the work in which he was engaged. There was evidence from
which the board could have found that Stacy's death occurred by reason of the special hazard incident to the
work which it was his duty to perform." The court said that Stacy's case was clearly distinguishable from
Fumiciello's case (219 Mass., 488):
Fumiciello was employed by Lathrop & Shea, who were doing some contract work for the Boston & Albany
Railroad Company near Middlefield. He lived about one mile west where he was employed, and it was
necessary for him to pass over the tracks of the Boston & Albany Railroad Company to go from his work to his
home. While returning home at the close of the day's work, Fumiciello entered upon the railroad track where
he was struck by a train and killed. The question for decision was whether the injury arose out of and in the
course of his employment. The court said: "It is plain that if, as the record states, it was necessary for him to
pass over the railroad location, it formed no part of the employers' plant; nor was it in any way connected
therewith or in their control as was the common stairway used by employees in Sundine's Case, 218 Mass., 1.
The contract of employment did not provide for transportation or that the employee should be paid for the
time taken in going and returning to his place of employment, and when the day's work had ended the
employee was free to do as he pleased. If he had chosen to use the public ways and had been injured by a
defect or passing vehicle the administrator could not recover against the employer because there would be no
causal connection between the conditions of employment and the injuries suffered."
This subject is considered at length in Workmen's Compensation Law by Schneider, Second Edition, pp. 745 et
seq.
In the case at bar the deceased was going from work in his own conveyance.
"An employee quit work, mounted his motorcycle and started for home. When riding down the street he
collided with an automobile driven by another employee. He sustained injuries which resulted in his death. In
holding that the accident did not arise out of or in the course of the employment, the court said: 'To come
within the term "injury received in the course of employment" it must be shown that the injury originated in
the work, and, further, that it was received by the employee while engaged in or about the furtherance of the
affairs of the employer. If it be conceded that the injury originated in the work, it would still be necessary, in
our opinion, to show that the employee was engaged in the furtherance of his employer's business.'
(Indemnity Co. vs. Dinkins [Tex. Civ. App.], 211 S. W., 949 [1919]; 18 N. C. C. A., 1034; 4 W. C. L. J., 294; In
re Peter S. Winchester, 2nd A. R. U. S. C. C., 262; In re Julius Rosenberg, 2nd A. R. U. S. C. C., 263; Kirby Lumber
Co. vs. Scurlock, Tex. Civ. App-[1921], 229 S. W., 975.)"
"An employee who was paid by the hour was furnished a bicycle for his work, and while riding home one
evening on. the main road he was run into and killed by a motor lorry. It was held that, since it was no part of
his duty to ride home on the bicycle the accident did not arise in the course of his employment.
(Edwards vs. Wingham Agriculture & Imp. Co. [1913], W. C. & Ins. Rep., 642; 109 L. T. Rep., 50; 82 L. J. K. B.,
998; 6 B. W. C. C, 511; 4 N. C. C. A., 115; Cook vs. Owners of 'Montreal,' 108 L. T. Rep., 164; 29 T. L. Rep., 233; 6
B. W. C. C., 220 [1913], 4 N. C. C. A., 115.)"
"An employee had quit work and left the premises. He was sitting in his buggy waiting for his son, when the
horse took fright and ran away. It was held that the injury sustained in the runaway did not arise out of or in
the course of the employment. (In reMcCall, Ohio I. C. No. 121401, Nov. 4, 1915; Hilding vs. Dept. of Labor &
Ind. [Wash.], 298 Pac, 321 [1931].)"

Furthermore, it appears that the deceased had never notified the defendant corporation of his removal from
San Francisco del Monte to Manila, and that the company did not know that he was living in Manila on the day
of the accident; that the defendant company did not require its employees to work on Sunday, or furnish or
require its agents to use bicycles. These are additional reasons for holding that the accident was not due to
and in pursuance of the employment of the deceased. If the deceased saw fit to change his residence from San
Francisco del Monte to Manila and to make use of a bicycle in going back and forth, he did so at his own risk,
as the defendant company did not furnish him a bicycle or require him to use one; and if he made collections
on Sunday, he did not do so in pursuance of his employment, and his employer is not liable for any injury
sustained by him.
For the foregoing reasons, the decision appealed from is affirmed, with the costs against the appellants.
D. STRICT LIABILITY/PRODUCT LIABILITY

Article 50. Prohibition Against Deceptive Sales Acts or Practices. – A deceptive act or practice by a seller or
supplier in connection with a consumer transaction violates this Act whether it occurs before, during or after
the transaction. An act or practice shall be deemed deceptive whenever the producer, manufacturer, supplier
or seller, through concealment, false representation of fraudulent manipulation, induces a consumer to enter
into a sales or lease transaction of any consumer product or service.

Without limiting the scope of the above paragraph, the act or practice of a seller or supplier is deceptive when
it represents that:

a) a consumer product or service has the sponsorship, approval, performance, characteristics, ingredients,
accessories, uses, or benefits it does not have;

b) a consumer product or service is of a particular standard, quality, grade, style, or model when in fact it is
not;

c) a consumer product is new, original or unused, when in fact, it is in a deteriorated, altered, reconditioned,
reclaimed or second-hand state;

d) a consumer product or service is available to the consumer for a reason that is different from the fact;

e) a consumer product or service has been supplied in accordance with the previous representation when in
fact it is not;

f) a consumer product or service can be supplied in a quantity greater than the supplier intends;

g) a service, or repair of a consumer product is needed when in fact it is not;

h) a specific price advantage of a consumer product exists when in fact it does not;

i) the sales act or practice involves or does not involve a warranty, a disclaimer of warranties, particular
warranty terms or other rights, remedies or obligations if the indication is false; and

j) the seller or supplier has a sponsorship, approval, or affiliation he does not have.

Article 51. Deceptive Sales Act or Practices By Regulation. – The Department shall, after due notice and
hearing, promulgate regulations declaring as deceptive any sales act, practice or technique which is a
misrepresentation of facts other than these enumerated in Article 50.

Article 52. Unfair or Unconscionable Sales Act or Practice. – An unfair or unconscionable sales act or practice
by a seller or supplier in connection with a consumer transaction violates this Chapter whether it occurs
before, during or after the consumer transaction. An act or practice shall be deemed unfair or unconscionable
whenever the producer, manufacturer, distributor, supplier or seller, by taking advantage of the consumer's
physical or mental infirmity, ignorance, illiteracy, lack of time or the general conditions of the environment or
surroundings, induces the consumer to enter into a sales or lease transaction grossly inimical to the interests
of the consumer or grossly one-sided in favor of the producer, manufacturer, distributor, supplier or seller.

In determining whether an act or practice is unfair and unconscionable, the following circumstances shall be
considered:

a) that the producer, manufacturer, distributor, supplier or seller took advantage of the inability of the
consumer to reasonably protect his interest because of his inability to understand the language of an
agreement, or similar factors;

b) that when the consumer transaction was entered into, the price grossly exceeded the price at which similar
products or services were readily obtainable in similar transaction by like consumers;

c) that when the consumer transaction was entered into, the consumer was unable to receive a substantial
benefit from the subject of the transaction;

d) that when the consumer was entered into, the seller or supplier was aware that there was no reasonable
probability or payment of the obligation in full by the consumer; and

e) that the transaction that the seller or supplier induced the consumer to enter into was excessively one-
sided in favor of the seller or supplier.

Article 97. Liability for the Defective Products. – Any Filipino or foreign manufacturer, producer, and any
importer, shall be liable for redress, independently of fault, for damages caused to consumers by defects
resulting from design, manufacture, construction, assembly and erection, formulas and handling and making
up, presentation or packing of their products, as well as for the insufficient or inadequate information on the
use and hazards thereof.

A product is defective when it does not offer the safety rightfully expected of it, taking relevant circumstances
into consideration, including but not limited to:

a) presentation of product;
 b) use and hazards reasonably expected of it;

c) the time it was put into circulation.

A product is not considered defective because another better quality product has been placed in the market.

The manufacturer, builder, producer or importer shall not be held liable when it evidences:

a) that it did not place the product on the market;

b) that although it did place the product on the market such product has no defect;

c) that the consumer or a third party is solely at fault.

Article 99. Liability for Defective Services. – The service supplier is liable for redress, independently of fault,
for damages caused to consumers by defects relating to the rendering of the services, as well as for
insufficient or inadequate information on the fruition and hazards thereof.

The service is defective when it does not provide the safety the consumer may rightfully expect of it, taking
the relevant circumstances into consideration, including but not limited to:

a) the manner in which it is provided;

b) the result of hazards which may reasonably be expected of it;

c) the time when it was provided.

A service is not considered defective because of the use or introduction of new techniques.

The supplier of the services shall not be held liable when it is proven:

a) that there is no defect in the service rendered;

b) that the consumer or third party is solely at fault.

Article 106. Prohibition in Contractual Stipulation. – The stipulation in a contract of a clause preventing,
exonerating or reducing the obligation to indemnify for damages effected, as provided for in this and in the
preceding Articles, is hereby prohibited, if there is more than one person responsible for the cause of the
damage, they shall be jointly liable for the redress established in the pertinent provisions of this Act. However,
if the damage is caused by a component or part incorporated in the product or service, its manufacturer,
builder or importer and the person who incorporated the component or part are jointly liable.

Article 107. Penalties. – Any person who shall violate any provision of this Chapter or its implementing rules
and regulations with respect to any consumer product which is not food, cosmetic, or hazardous substance
shall upon conviction, be subject to a fine of not less than Five thousand pesos (P5,000.00) and by
imprisonment of not more than one (1) year or both upon the discretion of the court.
In case of juridical persons, the penalty shall be imposed upon its president, manager or head. If the offender
is an alien, he shall, after payment of fine and service of sentence, be deported without further deportation
proceedings.

G.R. No. 110295 October 18, 1993

COCA-COLA BOTTLERS PHILIPPINES, INC., vs.THE HONORABLE COURT OF APPEALS (Fifth Division) and MS.
LYDIA GERONIMO, respondents.

This case concerns the proprietress of a school canteen which had to close down as a consequence of the big
drop in its sales of soft drinks triggered by the discovery of foreign substances in certain beverages sold by it.
The interesting issue posed is whether the subsequent action for damages by the proprietress against the soft
drinks manufacturer should be treated as one for breach of implied warranty against hidden defects or
merchantability, as claimed by the manufacturer, the petitioner herein which must therefore be filed within
six months from the delivery of the thing sold pursuant to Article 1571 of the Civil Code, or one for quasi-
delict, as held by the public respondent, which can be filed within four years pursuant to Article 1146 of the
same Code.

On 7 May 1990, Lydia L. Geronimo, the herein private respondent, filed a complaint for damages against
petitioner with the Regional Trial Court (RTC) of Dagupan City. 1 The case was docketed as Civil Case No. D-
9629. She alleges in her complaint that she was the proprietress of Kindergarten Wonderland Canteen
docketed as located in Dagupan City, an enterprise engaged in the sale of soft drinks (including Coke and
Sprite) and other goods to the students of Kindergarten Wonderland and to the public; on or about 12 August
1989, some parents of the students complained to her that the Coke and Sprite soft drinks sold by her
contained fiber-like matter and other foreign substances or particles; he then went over her stock of
softdrinks and discovered the presence of some fiber-like substances in the contents of some unopened Coke
bottles and a plastic matter in the contents of an unopened Sprite bottle; she brought the said bottles to the
Regional Health Office of the Department of Health at San Fernando, La Union, for examination; subsequently,
she received a letter from the Department of Health informing her that the samples she submitted "are
adulterated;" as a consequence of the discovery of the foreign substances in the beverages, her sales of soft
drinks severely plummeted from the usual 10 cases per day to as low as 2 to 3 cases per day resulting in losses
of from P200.00 to P300.00 per day, and not long after that she had to lose shop on 12 December 1989; she
became jobless and destitute; she demanded from the petitioner the payment of damages but was rebuffed
by it. She prayed for judgment ordering the petitioner to pay her P5,000.00 as actual damages, P72,000.00 as
compensatory damages, P500,000.00 as moral damages, P10,000.00 as exemplary damages, the amount
equal to 30% of the damages awarded as attorney's fees, and the costs. 2

The petitioner moved to dismiss 3 the complaint on the grounds of failure to exhaust administrative remedies
and prescription. Anent the latter ground, the petitioner argued that since the complaint is for breach of
warranty under Article 1561 of the said Code. In her Comment 4 thereto, private respondent alleged that the
complaint is one for damages which does not involve an administrative action and that her cause of action is
based on an injury to plaintiff's right which can be brought within four years pursuant to Article 1146 of the
Civil Code; hence, the complaint was seasonably filed. Subsequent related pleadings were thereafter filed by
the parties. 5

In its Order of 23 January 1991, 6 the trial court granted the motion to dismiss. It ruled that the doctrine of
exhaustion of administrative remedies does not apply as the existing administrative remedy is not adequate. It
also stated that the complaint is based on a contract, and not on quasi-delict, as there exists pre-existing
contractual relation between the parties; thus, on the basis of Article 1571, in relation to Article 1562, the
complaint should have been filed within six months from the delivery of the thing sold.

Her motion for the reconsideration of the order having been denied by the trial court in its Order of 17 April
1991, 7the private respondent came to this Court via a petition for review on certiorari which we referred to
the public respondent "for proper determination and disposition. 8 The public respondent docketed the case
as CA-G.R. SP No. 25391.

In a decision promulgated on 28 January 1992, 9 the public respondent annulled the questioned orders of the
RTC and directed it to conduct further proceedings in Civil Case No. D-9629. In holding for the private
respondent, it ruled that:

Petitioner's complaint being one for quasi-delict, and not for breach of warranty as respondent
contends, the applicable prescriptive period is four years.

It should be stressed that the allegations in the complaint plainly show that it is an action or damages
arising from respondent's act of "recklessly and negligently manufacturing adulterated food items
intended to be sold or public consumption" (p. 25, rollo). It is truism in legal procedure that what
determines the nature of an action are the facts alleged in the complaint and those averred as a
defense in the defendant's answer (I Moran 126; Calo v. Roldan, 76 Phil. 445; Alger Electric, Inc. v. CA,
135 SCRA 340).

Secondly, despite the literal wording of Article 2176 of the Civil code, the existence of contractual
relations between the parties does not absolutely preclude an action by one against the other
forquasi-delict arising from negligence in the performance of a contract.

In Singson v. Court of Appeals (23 SCRA 1117), the Supreme Court ruled:

It has been repeatedly held: that the existence of a contract between the parties does not bar
the commission of a tort by the one against the other and the consequent recovery of damages
therefor
. . . . Thus in Air France vs. Carrascoso, . . . (it was held that) although the relation between a
passenger and a carrier is "contractual both in origin and in nature the act that breaks the
contract may also be a tort.

Significantly, in American jurisprudence, from which Our law on Sales was taken, the authorities are
one in saying that he availability of an action or breach of warranty does not bar an action for torts in a
sale of defective goods. 10

Its motion for the reconsideration of the decision having been denied by the public respondent in its
Resolution of 14 May 1993, 11 the petitioner took his recourse under Rule 45 of the Revised Rules of Court. It
alleges in its petition that:

I.
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE AND REVERSIBLE ERROR IN RULING THAT
ARTICLE 2176, THE GENERAL PROVISION ON QUASI-DELICTS, IS APPLICABLE IN THIS CASE WHEN THE
ALLEGATIONS OF THE COMPLAINT CLEARLY SHOW THAT PRIVATE RESPONDENT'S CAUSE OF ACTION IS
BASEDON BREACH OF A SELLER'S IMPLIED WARRANTIES UNDER OUR LAW ON SALES.
II.
 CORROLARILY, THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE AND REVERSIBLE ERROR IN
OVERRULING PETITIONER'S ARGUMENT THAT PRIVATE RESPONDENT'S CAUSE OF ACTION HAD
PRESCRIBED UNDER ARTICLE 1571 OF THE CIVIL CODE. 12

The petitioner insists that a cursory reading of the complaint will reveal that the primary legal basis for private
respondent's cause of action is not Article 2176 of the Civil Code on quasi-delict — for the complaint does not
ascribe any tortious or wrongful conduct on its part — but Articles 1561 and 1562 thereof on breach of a
seller's implied warranties under the law on sales. It contends the existence of a contractual relation between
the parties (arising from the contract of sale) bars the application of the law on quasi-delicts and that since
private respondent's cause of action arose from the breach of implied warranties, the complaint should have
been filed within six months room delivery of the soft drinks pursuant to Article 171 of the Civil Code.

In her Comment the private respondent argues that in case of breach of the seller's implied warranties, the
vendee may, under Article 1567 of the Civil Code, elect between withdrawing from the contract or demanding
a proportionate reduction of the price, with damages in either case. She asserts that Civil Case No. D-9629 is
neither an action for rescission nor for proportionate reduction of the price, but for damages arising from
a quasi-delict and that the public respondent was correct in ruling that the existence of a contract did not
preclude the action for quasi-delict. As to the issue of prescription, the private respondent insists that since
her cause of action is based on quasi-delict, the prescriptive period therefore is four (4) years in accordance
with Article 1144 of the Civil Code and thus the filing of the complaint was well within the said period.

We find no merit in the petition. The public respondent's conclusion that the cause of action in Civil Case No.
D-9629 is found on quasi-delict and that, therefore, pursuant to Article 1146 of the Civil Code, it prescribes in
four (4) years is supported by the allegations in the complaint, more particularly paragraph 12 thereof, which
makes reference to the reckless and negligent manufacture of "adulterated food items intended to be sold for
public consumption."

The vendee's remedies against a vendor with respect to the warranties against hidden defects of or
encumbrances upon the thing sold are not limited to those prescribed in Article 1567 of the Civil Code which
provides:

Art. 1567. In the case of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a proportionate reduction of the price, with damages
either
case. 13

The vendee may also ask for the annulment of the contract upon proof of error or fraud, in which case the
ordinary rule on obligations shall be applicable. 14 Under the law on obligations, responsibility arising from
fraud is demandable in all obligations and any waiver of an action for future fraud is void. Responsibility arising
from negligence is also demandable in any obligation, but such liability may be regulated by the courts,
according to the circumstances. 15 Those guilty of fraud, negligence, or delay in the performance of their
obligations and those who in any manner contravene the tenor thereof are liable for damages. 16

The vendor could likewise be liable for quasi-delict under Article 2176 of the Civil Code, and an action based
thereon may be brought by the vendee. While it may be true that the pre-existing contract between the
parties may, as a general rule, bar the applicability of the law on quasi-delict, the liability may itself be deemed
to arise from quasi-delict, i.e., the acts which breaks the contract may also be a quasi-delict. Thus, in Singson
vs. Bank of the Philippine Islands, 17 this Court stated:
 We have repeatedly held, however, that the existence of a contract between the parties does
not bar the commission of a tort by the one against the other and the consequent recovery of
damages therefor. 18 Indeed, this view has been, in effect, reiterated in a comparatively recent
case. Thus, in Air France vs. Carrascoso, 19 involving an airplane passenger who, despite hi first-
class ticket, had been illegally ousted from his first-class accommodation and compelled to take
a seat in the tourist compartment, was held entitled to recover damages from the air-carrier,
upon the ground of tort on the latter's part, for, although the relation between the passenger
and a carrier is "contractual both in origin and nature . . . the act that breaks the contract may
also be a tort.

Otherwise put, liability for quasi-delict may still exist despite the presence of contractual relations. 20

Under American law, the liabilities of a manufacturer or seller of injury-causing products may be based
on negligence, 21 breach of warranty, 22 tort, 23 or other grounds such as fraud, deceit, or
misrepresentation. 24 Quasi-delict, as defined in Article 2176 of the Civil Code, (which is known in
Spanish legal treaties as culpa aquiliana, culpa extra-contractual or cuasi-delitos) 25 is homologous but
not identical to tort under the common law, 26 which includes not only negligence, but also intentional
criminal acts, such as assault and battery, false imprisonment and deceit. 27

It must be made clear that our affirmance of the decision of the public respondent should by no means be
understood as suggesting that the private respondent's claims for moral damages have sufficient factual and
legal basis.

IN VIEW OF ALL THE FOREGOING, the instant petition is hereby DENIED for lack of merit, with costs against the
petitioner.

E. INTERFERENCE WITH CONTRACTUAL RELATIONS

Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the
other contracting party.

G.R. No. 120554 September 21, 1999

SO PING BUN, petitioner, vs. COURT OF APPEALS, TEK HUA ENTERPRISES CORP. and MANUEL C.
TIONG, respondents.

This petition for certiorari challenges the Decision 1 of the Court of Appeals dated October 10, 1994, and the
Resolution 2 dated June 5, 1995, in CA-G.R. CV No. 38784. The appellate court affirmed the decision of the
Regional Trial Court of Manila, Branch 35, except for the award of attorney's fees, as follows:

WHEREFORE, foregoing considered, the appeal of respondent-appellant So Ping Bun for lack of
merit is DISMISSED. The appealed decision dated April 20, 1992 of the court a quo is modified
by reducing the attorney's fees awarded to plaintiff Tek Hua Enterprising Corporation from
P500,000.00 to P200,000.00. 3

The facts are as follows:

In 1963, Tek Hua Trading Co, through its managing partner, So Pek Giok, entered into lease agreements with
lessor Dee C. Chuan & Sons Inc. (DCCSI). Subjects of four (4) lease contracts were premises located at Nos.
930, 930-Int., 924-B and 924-C, Soler Street, Binondo, Manila. Tek Hua used the areas to store its textiles. The
contracts each had a one-year term. They provided that should the lessee continue to occupy the premises
after the term, the lease shall be on a month-to-month basis.

When the contracts expired, the parties did not renew the contracts, but Tek Hua continued to occupy the
premises. In 1976, Tek Hua Trading Co. was dissolved. Later, the original members of Tek Hua Trading Co.
including Manuel C. Tiong, formed Tek Hua Enterprising Corp., herein respondent corporation.

So Pek Giok, managing partner of Tek Hua Trading, died in 1986. So Pek Giok's grandson, petitioner So Ping
Bun, occupied the warehouse for his own textile business, Trendsetter Marketing.

On August 1, 1989, lessor DCCSI sent letters addressed to Tek Hua Enterprises, informing the latter of the 25%
increase in rent effective September 1, 1989. The rent increase was later on reduced to 20% effective January
1, 1990, upon other lessees' demand. Again on December 1, 1990, the lessor implemented a 30% rent
increase. Enclosed in these letters were new lease contracts for signing. DCCSI warned that failure of the
lessee to accomplish the contracts shall be deemed as lack of interest on the lessee's part, and agreement to
the termination of the lease. Private respondents did not answer any of these letters. Still, the lease contracts
were not rescinded.

On March 1, 1991, private respondent Tiong sent a letter to petitioner which reads as follows:

March 1, 1991
Mr. So Ping Bun
930 Soler Street
Binondo, Manila
Dear Mr. So,
Due to my closed (sic) business associate (sic) for three decades with your late grandfather Mr. So Pek
Giok and late father, Mr. So Chong Bon, I allowed you temporarily to use the warehouse of Tek Hua
Enterprising Corp. for several years to generate your personal business.
Since I decided to go back into textile business, I need a warehouse immediately for my stocks.
Therefore, please be advised to vacate all your stocks in Tek Hua Enterprising Corp. Warehouse. You
are hereby given 14 days to vacate the premises unless you have good reasons that you have the right
to stay. Otherwise, I will be constrained to take measure to protect my interest.
Please give this urgent matter your preferential attention to avoid inconvenience on your part.
Very truly yours,
(Sgd) Manuel C. Tiong
MANUEL C. TIONG
President 4

Petitioner refused to vacate. On March 4, 1992, petitioner requested formal contracts of lease with DCCSI in
favor Trendsetter Marketing. So Ping Bun claimed that after the death of his grandfather, So Pek Giok, he had
been occupying the premises for his textile business and religiously paid rent. DCCSI acceded to petitioner's
request. The lease contracts in favor of Trendsetter were executed.

In the suit for injunction, private respondents pressed for the nullification of the lease contracts between
DCCSI and petitioner. They also claimed damages.

After trial, the trial court ruled:

WHEREFORE, judgment is rendered:

 1. Annulling the four Contracts of Lease (Exhibits A, A-1 to A-3, inclusive) all dated March 11,
1991, between defendant So Ping Bun, doing business under the name and style of
"Trendsetter Marketing", and defendant Dee C. Chuan & Sons, Inc. over the premises located at
Nos. 924-B, 924-C, 930 and 930, Int., respectively, Soler Street, Binondo Manila;

2. Making permanent the writ of preliminary injunction issued by this Court on June 21, 1991;

3. Ordering defendant So Ping Bun to pay the aggrieved party, plaintiff Tek Hua Enterprising
Corporation, the sum of P500,000.00, for attorney's fees;

4. Dismissing the complaint, insofar as plaintiff Manuel C. Tiong is concerned, and the
respective counterclaims of the defendant;

5. Ordering defendant So Ping Bun to pay the costs of this lawsuit;

This judgment is without prejudice to the rights of plaintiff Tek Hua Enterprising Corporation and
defendant Dee C. Chuan & Sons, Inc. to negotiate for the renewal of their lease contracts over the
premises located at Nos. 930, 930-Int., 924-B and 924-C Soler Street, Binondo, Manila, under such
terms and conditions as they agree upon, provided they are not contrary to law, public policy, public
order, and morals.

SO ORDERED. 5

Petitioner's motion for reconsideration of the above decision was denied.

On appeal by So Ping Bun, the Court of Appeals upheld the trial court. On motion for reconsideration, the
appellate court modified the decision by reducing the award of attorney's fees from five hundred thousand
(P500,000.00) pesos to two hundred thousand (P200,000.00) pesos.

Petitioner is now before the Court raising the following issues:

I. WHETHER THE APPELLATE COURT ERRED IN AFFIRMING THE TRIAL COURT'S DECISION FINDING SO
PING BUN GUILTY OF TORTUOUS INTERFERENCE OF CONTRACT?

II. WHETHER THE APPELLATE COURT ERRED IN AWARDING ATTORNEY'S FEES OF P200,000.00 IN FAVOR
OF PRIVATE RESPONDENTS.

The foregoing issues involve, essentially, the correct interpretation of the applicable law on tortuous conduct,
particularly unlawful interference with contract. We have to begin, obviously, with certain fundamental
principles on torts and damages.

Damage is the loss, hurt, or harm which results from injury, and damages are the recompense or
compensation awarded for the damage suffered. 6 One becomes liable in an action for damages for a
nontrespassory invasion of another's interest in the private use and enjoyment of asset if (a) the other has
property rights and privileges with respect to the use or enjoyment interfered with, (b) the invasion is
substantial, (c) the defendant's conduct is a legal cause of the invasion, and (d) the invasion is either
intentional and unreasonable or unintentional and actionable under general negligence rules. 7
The elements of tort interference are: (1) existence of a valid contract; (2) knowledge on the part of the third
person of the existence of contract; and (3) interference of the third person is without legal justification or
excuse. 8

A duty which the law of torts is concerned with is respect for the property of others, and a cause of action ex
delicto may be predicated upon an unlawful interference by one person of the enjoyment by the other of his
private
property.9 This may pertain to a situation where a third person induces a party to renege on or violate his
undertaking under a contract. In the case before us, petitioner's Trendsetter Marketing asked DCCSI to
execute lease contracts in its favor, and as a result petitioner deprived respondent corporation of the latter's
property right. Clearly, and as correctly viewed by the appellate court, the three elements of tort interference
above-mentioned are present in the instant case.

Authorities debate on whether interference may be justified where the defendant acts for the sole purpose of
furthering his own financial or economic interest. 10 One view is that, as a general rule, justification for
interfering with the business relations of another exists where the actor's motive is to benefit himself. Such
justification does not exist where his sole motive is to cause harm to the other. Added to this, some
authorities believe that it is not necessary that the interferer's interest outweigh that of the party whose rights
are invaded, and that an individual acts under an economic interest that is substantial, not merely de minimis,
such that wrongful and malicious motives are negatived, for he acts in self-protection. 11 Moreover
justification for protecting one's financial position should not be made to depend on a comparison of his
economic interest in the subject matter with that of others. 12 It is sufficient if the impetus of his conduct lies
in a proper business interest rather than in wrongful motives. 13

As early as Gilchrist vs. Cuddy, 14 we held that where there was no malice in the interference of a contract, and
the impulse behind one's conduct lies in a proper business interest rather than in wrongful motives, a party
cannot be a malicious interferer. Where the alleged interferer is financially interested, and such interest
motivates his conduct, it cannot be said that he is an officious or malicious intermeddler. 15

In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the warehouse to his
enterprise at the expense of respondent corporation. Though petitioner took interest in the property of
respondent corporation and benefited from it, nothing on record imputes deliberate wrongful motives or
malice on him.

Sec. 1314 of the Civil Code categorically provides also that, "Any third person who induces another to violate
his contract shall be liable for damages to the other contracting party." Petitioner argues that damage is an
essential element of tort interference, and since the trial court and the appellate court ruled that private
respondents were not entitled to actual, moral or exemplary damages, it follows that he ought to be absolved
of any liability, including attorney's fees.

It is true that the lower courts did not award damages, but this was only because the extent of damages was
not quantifiable. We had a similar situation in Gilchrist, where it was difficult or impossible to determine the
extent of damage and there was nothing on record to serve as basis thereof. In that case we refrained from
awarding damages. We believe the same conclusion applies in this case.

While we do not encourage tort interferers seeking their economic interest to intrude into existing contracts
at the expense of others, however, we find that the conduct herein complained of did not transcend the limits
forbidding an obligatory award for damages in the absence of any malice. The business desire is there to make
some gain to the detriment of the contracting parties. Lack of malice, however, precludes damages. But it
does not relieve petitioner of the legal liability for entering into contracts and causing breach of existing ones.
The respondent appellate court correctly confirmed the permanent injunction and nullification of the lease
contracts between DCCSI and Trendsetter Marketing, without awarding damages. The injunction saved the
respondents from further damage or injury caused by petitioner's interference.

Lastly, the recovery of attorney's fees in the concept of actual or compensatory damages, is allowed under the
circumstances provided for in Article 2208 of the Civil Code. 16 One such occasion is when the defendant's act
or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his
interest. 17 But we have consistently held that the award of considerable damages should have clear factual
and legal bases. 18 In connection with attorney's fees, the award should be commensurate to the benefits that
would have been derived from a favorable judgment. Settled is the rule that fairness of the award of damages
by the trial court calls for appellate review such that the award if far too excessive can be reduced. 19 This
ruling applies with equal force on the award of attorney's fees. In a long line of cases we said, "It is not sound
policy to place in penalty on the right to litigate. To compel the defeated party to pay the fees of counsel for
his successful opponent would throw wide open the door of temptation to the opposing party and his counsel
to swell the fees to undue proportions."20

Considering that the respondent corporation's lease contract, at the time when the cause of action accrued,
ran only on a month-to-month basis whence before it was on a yearly basis, we find even the reduced amount
of attorney's fees ordered by the Court of Appeals still exorbitant in the light of prevailing
jurisprudence. 21Consequently, the amount of two hundred thousand (P200,000.00) awarded by respondent
appellate court should be reduced to one hundred thousand (P100,000.00) pesos as the reasonable award or
attorney's fees in favor of private respondent corporation.

WHEREFORE, the petition is hereby DENIED. The assailed Decision and Resolution of the Court of Appeals in
CA-G.R. CV No. 38784 are hereby AFFIRMED, with MODIFICATION that the award of attorney's fees is reduced
from two hundred thousand (P200,000.00) to one hundred thousand (P100,000.00) pesos. No pronouncement
as to costs.1âwphi1.nêt

SO ORDERED.

ALLAN C. GO, doing business under the G.R. No. 164703

name and style ACG Express Liner,
Petitioner,

- versus -

MORTIMER F. CORDERO,
Respondent.
x-----------------------------------------x

MORTIMER F. CORDERO, G.R. No. 164747

Petitioner,
Present:

- versus - PUNO, C.J., Chairperson,

CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
ALLAN C. GO, doing business VILLARAMA, JR., JJ.
underthe name and style ACG Express Liner,
FELIPE M. LANDICHO and VINCENT D. Promulgated:
TECSON,
Respondents. May 4, 2010
x-----------------------------------------------------------------------------------------x
For review is the Decision[1] dated March 16, 2004 as modified by the Resolution[2] dated July 22, 2004 of the
Court of Appeals (CA) in CA-G.R. CV No. 69113, which affirmed with modifications the Decision[3] dated May
31, 2000 of the Regional Trial Court (RTC) of Quezon City, Branch 85 in Civil Case No. 98-35332.

The factual antecedents:

Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation (Pamana),

ventured into the business of marketing inter-island passenger vessels. After contacting various overseas fast
ferry manufacturers from all over the world, he came to meet Tony Robinson, an Australian national based
in Brisbane,Australia, who is the Managing Director of Aluminium Fast Ferries Australia (AFFA).

Between June and August 1997, Robinson signed documents appointing Cordero as the exclusive distributor of
AFFA catamaran and other fast ferry vessels in the Philippines. As such exclusive distributor, Cordero offered
for sale to prospective buyers the 25-meter Aluminium Passenger catamaran known as the SEACAT 25.[4]

After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C. Go who is the owner/operator
of ACG Express Liner of Cebu City, a single proprietorship, Cordero was able to close a deal for the purchase of
two (2) SEACAT 25 as evidenced by the Memorandum of Agreement dated August 7, 1997.[5]Accordingly, the
parties executed Shipbuilding Contract No. 7825 for one (1) high-speed catamaran (SEACAT 25) for the price of
US$1,465,512.00.[6] Per agreement between Robinson and Cordero, the latter shall receive commissions
totalling US$328,742.00, or 22.43% of the purchase price, from the sale of each vessel. [7]

Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia, and on one (1) occasion even
accompanied Go and his family and Landicho, to monitor the progress of the building of the vessel. He
shouldered all the expenses for airfare, food, hotel accommodations, transportation and entertainment during
these trips. He also spent for long distance telephone calls to communicate regularly with Robinson, Go,
Tecson and Landicho.

However, Cordero later discovered that Go was dealing directly with Robinson when he was informed by
Dennis Padua of Wartsila Philippines that Go was canvassing for a second catamaran engine from their
company which provided the ship engine for the first SEACAT 25. Padua told Cordero that Go instructed him to
fax the requested quotation of the second engine to the Park Royal Hotel in Brisbane where Go was then
staying. Cordero tried to contact Go and Landicho to confirm the matter but they were nowhere to be found,
while Robinson refused to answer his calls. Cordero immediately flew to Brisbane to clarify matters with
Robinson, only to find out that Go and Landicho were already there in Brisbane negotiating for the sale of the
second SEACAT 25. Despite repeated follow-up calls, no explanation was given by Robinson, Go, Landicho and
Tecson who even made Cordero believe there would be no further sale between AFFA and ACG Express Liner.
In a handwritten letter dated June 24, 1998, Cordero informed Go that such act of dealing directly with
Robinson violated his exclusive distributorship and demanded that they respect the same, without prejudice
to legal action against him and Robinson should they fail to heed the same. [8] Corderos lawyer, Atty. Ernesto A.
Tabujara, Jr. of ACCRA law firm, also wrote ACG Express Liner assailing the fraudulent actuations and
misrepresentations committed by Go in connivance with his lawyers (Landicho and Tecson) in breach of
Corderos exclusive distributorship appointment.[9]

Having been apprised of Corderos demand letter, Thyne & Macartney, the lawyer of AFFA and Robinson, faxed
a letter to ACCRA law firm asserting that the appointment of Cordero as AFFAs distributor was for the purpose
of one (1) transaction only, that is, the purchase of a high-speed catamaran vessel by ACG Express Liner in
August 1997. The letter further stated that Cordero was offered the exclusive distributorship, the terms of
which were contained in a draft agreement which Cordero allegedly failed to return to AFFA within a
reasonable time, and which offer is already being revoked by AFFA.[10]

As to the response of Go, Landicho and Tecson to his demand letter, Cordero testified before the trial court
that on the same day, Landicho, acting on behalf of Go, talked to him over the telephone and offered to
amicably settle their dispute. Tecson and Landicho offered to convince Go to honor his exclusive
distributorship with AFFA and to purchase all vessels for ACG Express Liner through him for the next three (3)
years. In an effort to amicably settle the matter, Landicho, acting in behalf of Go, set up a meeting with
Cordero on June 29, 1998 between 9:30 p.m. to 10:30 p.m. at the Mactan Island Resort Hotel lobby. On said
date, however, only Landicho and Tecson came and no reason was given for Gos absence. Tecson and
Landicho proposed that they will convince Go to pay him US$1,500,000.00 on the condition that they will get a
cut of 20%. And so it was agreed between him, Landicho and Tecson that the latter would give him a weekly
status report and that the matter will be settled in three (3) to four (4) weeks and neither party will file an
action against each other until a final report on the proposed settlement. No such report was made by either
Tecson or Landicho who, it turned out, had no intention to do so and were just buying time as the catamaran
vessel was due to arrive from Australia. Cordero then filed a complaint with the Bureau of Customs (BOC) to
prohibit the entry of SEACAT 25 from Australia based on misdeclaration and undervaluation. Consequently, an
Alert Order was issued by Acting BOC Commissioner Nelson Tan for the vessel which in fact arrived on July 17,
1998. Cordero claimed that Go and Robinson had conspired to undervalue the vessel by around
US$500,000.00.[11]

On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to hold Robinson, Go, Tecson and
Landicho liable jointly and solidarily for conniving and conspiring together in violating his exclusive
distributorship in bad faith and wanton disregard of his rights, thus depriving him of his due commissions
(balance of unpaid commission from the sale of the first vessel in the amount of US$31,522.01 and unpaid
commission for the sale of the second vessel in the amount of US$328,742.00) and causing him actual, moral
and exemplary damages, including P800,000.00 representing expenses for airplane travel to Australia,
telecommunications bills and entertainment, on account of AFFAs untimely cancellation of the exclusive
distributorship agreement. Cordero also prayed for the award of moral and exemplary damages, as well as
attorneys fees and litigation expenses.[12]
Robinson filed a motion to dismiss grounded on lack of jurisdiction over his person and failure to state a cause
of action, asserting that there was no act committed in violation of the distributorship agreement. Said motion
was denied by the trial court on December 20, 1999. Robinson was likewise declared in default for failure to
file his answer within the period granted by the trial court. [13] As for Go and Tecson, their motion to dismiss
based on failure to state a cause of action was likewise denied by the trial court on February 26,
1999.[14] Subsequently, they filed their Answer denying that they have anything to do with the termination by
AFFA of Corderos authority as exclusive distributor in the Philippines. On the contrary, they averred it was
Cordero who stopped communicating with Go in connection with the purchase of the first vessel from AFFA
and was not doing his part in making progress status reports and airing the clients grievances to his principal,
AFFA, such that Go engaged the services of Landicho to fly to Australia and attend to the documents needed
for shipment of the vessel to the Philippines. As to the inquiry for the Philippine price for a Wartsila ship
engine for AFFAs other on-going vessel construction, this was merely requested by Robinson but which
Cordero misinterpreted as indication that Go was buying a second vessel. Moreover, Landicho and Tecson had
no transaction whatsoever with Cordero who had no document to show any such shipbuilding contract. As to
the supposed meeting to settle their dispute, this was due to the malicious demand of Cordero to be given
US$3,000,000 as otherwise he will expose in the media the alleged undervaluation of the vessel with the
BOC. In any case, Cordero no longer had cause of action for his commission for the sale of the second vessel
under the memorandum of agreement dated August 7, 1997 considering the termination of his authority by
AFFAs lawyers on June 26, 1998.[15]

Pre-trial was reset twice to afford the parties opportunity to reach a settlement. However, on motion filed by
Cordero through counsel, the trial court reconsidered the resetting of the pre-trial to another date for the
third time as requested by Go, Tecson and Landicho, in view of the latters failure to appear at the pre-trial
conference on January 7, 2000 despite due notice. The trial court further confirmed that said defendants
misled the trial court in moving for continuance during the pre-trial conference held on December 10, 1999,
purportedly to go abroad for the holiday season when in truth a Hold-Departure Order had been issued
against them.[16] Accordingly, plaintiff Cordero was allowed to present his evidence ex parte.

Corderos testimony regarding his transaction with defendants Go, Landicho and Tecson, and the latters offer
of settlement, was corroborated by his counsel who also took the witness stand. Further, documentary
evidence including photographs taken of the June 29, 1998 meeting with Landicho, Tecson and Atty. Tabujara
at Shangri-las Mactan Island Resort, photographs taken in Brisbane showing Cordero, Go with his family,
Robinson and Landicho, and also various documents, communications, vouchers and bank transmittals were
presented to prove that: (1) Cordero was properly authorized and actually transacted in behalf of AFFA as
exclusive distributor in the Philippines; (2) Cordero spent considerable sums of money in pursuance of the
contract with Go and ACG Express Liner; and (3) AFFA through Robinson paid Cordero his commissions from
each scheduled payment made by Go for the first SEACAT 25 purchased from AFFA pursuant to Shipbuilding
Contract No. 7825.[17]

On May 31, 2000, the trial court rendered its decision, the dispositive portion of which reads as follows:
 WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of Plaintiff and
against defendants Allan C. Go, Tony Robinson, Felipe Landicho, and Vincent Tecson. As prayed for,
defendants are hereby ordered to pay Plaintiff jointly and solidarily, the following:

1. On the First Cause of Action, the sum total of SIXTEEN MILLION TWO HUNDRED NINETY ONE
THOUSAND THREE HUNDRED FIFTY TWO AND FORTY THREE CENTAVOS (P16,291,352.43) as
actual damages with legal interest from 25 June 1998 until fully paid;

2. On the Second Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as moral
damages;

3. On the Third Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as exemplary
damages; and

4. On the Fourth Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as attorneys
fees;

Costs against the defendants.

SO ORDERED.[18]

Go, Robinson, Landicho and Tecson filed a motion for new trial, claiming that they have been unduly
prejudiced by the negligence of their counsel who was allegedly unaware that the pre-trial conference on
January 28, 2000 did not push through for the reason that Cordero was then allowed to present his
evidence ex-parte, as he had assumed that the said ex-parte hearing was being conducted only against
Robinson who was earlier declared in default.[19] In its Order dated July 28, 2000, the trial court denied the
motion for new trial.[20] In the same order, Corderos motion for execution pending appeal was
granted. Defendants moved to reconsider the said order insofar as it granted the motion for execution
pending appeal.[21] On August 8, 2000, they filed a notice of appeal.[22]

On August 18, 2000, the trial court denied the motion for reconsideration and on August 21, 2000, the writ of
execution pending appeal was issued.[23] Meanwhile, the notice of appeal was denied for failure to pay the
appellate court docket fee within the prescribed period.[24] Defendants filed a motion for reconsideration and
to transmit the case records to the CA.[25]

On September 29, 2000, the CA issued a temporary restraining order at the instance of defendants in the
certiorari case they filed with said court docketed as CA-G.R. SP No. 60354 questioning the execution orders
issued by the trial court. Consequently, as requested by the defendants, the trial court recalled and set aside
its November 6, 2000 Order granting the ex-parte motion for release of garnished funds, cancelled the
scheduled public auction sale of levied real properties, and denied the ex-parte Motion for Break-Open Order
and Ex-Parte Motion for Encashment of Check filed by Cordero.[26] On November 29, 2000, the trial court
reconsidered its Order dated August 21, 2000 denying due course to the notice of appeal and forthwith
directed the transmittal of the records to the CA.[27]
On January 29, 2001, the CA rendered judgment granting the petition for certiorari in CA-G.R. SP No. 60354
and setting aside the trial courts orders of execution pending appeal. Cordero appealed the said judgment in a
petition for review filed with this Court which was eventually denied under our Decision dated September 17,
2002.[28]

On March 16, 2004, the CA in CA-G.R. CV No. 69113 affirmed the trial court (1) in allowing Cordero to
present his evidence ex-parte after the unjustified failure of appellants (Go, Tecson and Landicho) to appear at
the pre-trial conference despite due notice; (2) in finding that it was Cordero and not Pamana who was
appointed by AFFA as the exclusive distributor in the Philippines of its SEACAT 25 and other fast ferry vessels,
which is not limited to the sale of one (1) such catamaran to Go on August 7, 1997; and (3) in finding that
Cordero is entitled to a commission per vessel sold for AFFA through his efforts in the amount equivalent to
22.43% of the price of each vessel or US$328,742.00, and with payments of US$297,219.91 having been made
to Cordero, there remained a balance of US$31,522.09 still due to him. The CA sustained the trial court in
ruling that Cordero is entitled to damages for the breach of his exclusive distributorship agreement with
AFFA. However, it held that Cordero is entitled only to commission for the sale of the first catamaran obtained
through his efforts with the remaining unpaid sum of US$31,522.09 or P1,355,449.90 (on the basis of
US$1.00=P43.00 rate) with interest at 6% per annum from the time of the filing of the complaint until the
same is fully paid. As to the P800,000.00 representing expenses incurred by Cordero for transportation, phone
bills, entertainment, food and lodging, the CA declared there was no basis for such award, the same being the
logical and necessary consequences of the exclusive distributorship agreement which are normal in the field of
sales and distribution, and the expenditures having redounded to the benefit of the distributor (Cordero).

On the amounts awarded by the trial court as moral and exemplary damages, as well as attorneys fees,
the CA reduced the same to P500,000.00, P300,000.00 and P50,000.00, respectively. Appellants were held
solidarily liable pursuant to the provisions of Article 1207 in relation to Articles 19, 20, 21 and 22 of the New
Civil Code. The CA further ruled that no error was committed by the trial court in denying their motion for new
trial, which said court found to be pro forma and did not raise any substantial matter as to warrant the
conduct of another trial.

By Resolution dated July 22, 2004, the CA denied the motions for reconsideration respectively filed by
the appellants and appellee, and affirmed the Decision dated March 16, 2004 with the sole modification that
the legal interest of 6% per annum shall start to run from June 24, 1998 until the finality of the decision, and
the rate of 12% interest per annum shall apply once the decision becomes final and executory until the
judgment has been satisfied.

The case before us is a consolidation of the petitions for review under Rule 45 separately filed by Go
(G.R. No. 164703) and Cordero (G.R. No. 164747) in which petitioners raised the following arguments:

G.R. No. 164703

(Petitioner Go)

I. THE HONORABLE COURT OF APPEALS DISREGARDED THE RULES OF COURT AND PERTINENT
JURISPRUDENCE AND ACTED WITH GRAVE ABUSE OF DISCRETION IN NOT RULING THAT
 THE RESPONDENT IS NOT THE REAL PARTY-IN-INTEREST AND IN NOT DISMISSING THE
INSTANT CASE ON THE GROUND OF LACK OF CAUSE OF ACTION;

II. THE HONORABLE COURT OF APPEALS IGNORED THE LAW AND JURISPRUDENCE AND ACTED
WITH GRAVE ABUSE OF DISCRETION IN HOLDING HEREIN PETITIONER RESPONSIBLE FOR
THE BREACH IN THE ALLEGED EXCLUSIVE DISTRIBUTORSHIP AGREEMENT WITH
ALUMINIUM FAST FERRIES AUSTRALIA;

III. THE HONORABLE APPELLATE COURT MISAPPLIED THE LAW AND ACTED WITH GRAVE ABUSE
OF DISCRETION IN FINDING PETITIONER LIABLE IN SOLIDUM WITH THE CO-DEFENDANTS
WITH RESPECT TO THE CLAIMS OF RESPONDENT;

IV. THE HONORABLE COURT OF APPEALS MISAPPLIED LAW AND JURISPRUDENCE AND GRAVELY
ABUSED ITS DISCRETION WHEN IT FOUND PETITIONER LIABLE FOR UNPAID
COMMISSIONS, DAMAGES, ATTORNEYS FEES, AND LITIGATION EXPENSES; and

V. THE HONORABLE APPELLATE COURT ACTED CONTRARY TO LAW AND JURISPRUDENCE AND
GRAVELY ABUSED ITS DISCRETION WHEN IT EFFECTIVELY DEPRIVED HEREIN PETITIONER
OF HIS RIGHT TO DUE PROCESS BY AFFIRMING THE LOWER COURTS DENIAL OF
PETITIONERS MOTION FOR NEW TRIAL.[29]

G.R. No. 164747

(Petitioner Cordero)

I.

THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE JUDGMENT OF THE TRIAL COURT
AWARDING PETITIONER ACTUAL DAMAGES FOR HIS COMMISSION FOR THE SALE OF THE
SECOND VESSEL, SINCE THERE IS SUFFICIENT EVIDENCE ON RECORD WHICH PROVES THAT
THERE WAS A SECOND SALE OF A VESSEL.

A. THE MEMORANDUM OF AGREEMENT DATED 7 AUGUST 1997 PROVIDES THAT

RESPONDENT GO WAS CONTRACTUALLY BOUND TO BUY TWO (2) VESSELS FROM
AFFA.

B. RESPONDENT GOS POSITION PAPER AND COUNTER-AFFIDAVIT/POSITION PAPER

THAT WERE FILED BEFORE THE BUREAU OF CUSTOMS, ADMITS UNDER OATH THAT
HE HAD INDEED PURCHASED A SECOND VESSEL FROM AFFA.

C. RESPONDENTS ADMITTED IN THEIR PRE-TRIAL BRIEF THAT THEY HAD PURCHASED

A SECOND VESSEL.
II.
 THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER IS NOT ENTITLED TO HIS
COMMISSIONS FOR THE PURCHASE OF A SECOND VESSEL, SINCE IT WAS PETITIONERS EFFORTS
WHICH ACTUALLY FACILITATED AND SET-UP THE TRANSACTION FOR RESPONDENTS.

III.

THE COURT OF APPEALS ERRED IN NOT IMPOSING THE PROPER LEGAL INTEREST RATE ON
RESPONDENTS UNPAID OBLIGATION WHICH SHOULD BE TWELVE PERCENT (12%) FROM THE
TIME OF THE BREACH OF THE OBLIGATION.

IV.

THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE ORIGINAL AMOUNT OF

CONSEQUENTIAL DAMAGES AWARDED TO PETITIONER BY THE TRIAL COURT CONSIDERING THE
BAD FAITH AND FRAUDULENT CONDUCT OF RESPONDENTS IN MISAPPROPRIATING THE MONEY
OF PETITIONER.[30]

The controversy boils down to two (2) main issues: (1) whether petitioner Cordero has the legal personality to
sue the respondents for breach of contract; and (2) whether the respondents may be held liable for damages
to Cordero for his unpaid commissions and termination of his exclusive distributorship appointment by the
principal, AFFA.

I. Real Party-in-Interest

First, on the issue of whether the case had been filed by the real party-in-interest as required by Section 2,
Rule 3 of the Rules of Court, which defines such party as the one (1) to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. The purposes of this provision are: 1) to
prevent the prosecution of actions by persons without any right, title or interest in the case; 2) to require that
the actual party entitled to legal relief be the one to prosecute the action; 3) to avoid a multiplicity of suits;
and 4) to discourage litigation and keep it within certain bounds, pursuant to sound public policy. [31] A case is
dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-in-interest, hence
grounded on failure to state a cause of action.[32]

On this issue, we agree with the CA in ruling that it was Cordero and not Pamana who is the exclusive
distributor of AFFA in the Philippines as shown by the Certification dated June 1, 1997 issued by Tony
Robinson.[33] Petitioner Go mentions the following documents also signed by respondent Robinson which state
that Pamana Marketing Corporation represented by Mr. Mortimer F. Cordero was actually the exclusive
distributor: (1) letter dated 1 June 1997[34]; (2) certification dated 5 August 1997[35]; and (3) letter dated 5
August 1997 addressed to petitioner Cordero concerning commissions to be paid to Pamana Marketing
Corporation.[36] Such apparent inconsistency in naming AFFAs exclusive distributor in the Philippines is of no
moment. For all intents and purposes, Robinson and AFFA dealt only with Cordero who alone made decisions
in the performance of the exclusive distributorship, as with other clients to whom he had similarly offered
AFFAs fast ferry vessels.Moreover, the stipulated commissions from each progress payments made by Go
were directly paid by Robinson to Cordero.[37] Respondents Landicho and Tecson were only too aware of
Corderos authority as the person who was appointed and acted as exclusive distributor of AFFA, which can be
gleaned from their act of immediately furnishing him with copies of bank transmittals everytime Go remits
payment to Robinson, who in turn transfers a portion of funds received to the bank account of Cordero in the
Philippines as his commission. Out of these partial payments of his commission, Cordero would still give
Landicho and Tecson their respective commission, or cuts from his own commission. Respondents Landicho
and Tecson failed to refute the evidence submitted by Cordero consisting of receipts signed by them. Said
amounts were apart from the earlier expenses shouldered by Cordero for Landichos airline tickets,
transportation, food and hotel accommodations for the trip to Australia.[38]

Moreover, petitioner Go, Landicho and Tecson never raised petitioner Corderos lack of personality to sue on
behalf of Pamana,[39] and did so only before the CA when they contended that it is Pamana and not Cordero,
who was appointed and acted as exclusive distributor for AFFA. [40] It was Robinson who argued in support of
his motion to dismiss that as far as said defendant is concerned, the real party plaintiff appears to be Pamana,
against the real party defendant which is AFFA.[41] As already mentioned, the trial court denied the motion to
dismiss filed by Robinson.

We find no error committed by the trial court in overruling Robinsons objection over the improper
resort to summons by publication upon a foreign national like him and in an action in personam,
notwithstanding that he raised it in a special appearance specifically raising the issue of lack of jurisdiction
over his person. Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, while
jurisdiction over the defendants in a civil case is acquired either through the service of summons upon them in
the manner required by law or through their voluntary appearance in court and their submission to its
authority.[42] A party who makes a special appearance in court challenging the jurisdiction of said court based
on the ground of invalid service of summons is not deemed to have submitted himself to the jurisdiction of
the court.[43]

In this case, however, although the Motion to Dismiss filed by Robinson specifically stated as one (1) of
the grounds the lack of personal jurisdiction, it must be noted that he had earlier filed a Motion for Time to file
an appropriate responsive pleading even beyond the time provided in the summons by publication. [44] Such
motion did not state that it was a conditional appearance entered to question the regularity of the service of
summons, but an appearance submitting to the jurisdiction of the court by acknowledging the summons by
publication issued by the court and praying for additional time to file a responsive pleading. Consequently,
Robinson having acknowledged the summons by publication and also having invoked the jurisdiction of the
trial court to secure affirmative relief in his motion for additional time, he effectively submitted voluntarily to
the trial courts jurisdiction. He is now estopped from asserting otherwise, even before this Court.[45]

II. Breach of Exclusive Distributorship,

Contractual Interference and
Respondents Liability for Damages

In Yu v. Court of Appeals,[46] this Court ruled that the right to perform an exclusive distributorship
agreement and to reap the profits resulting from such performance are proprietary rights which a party may
protect. Thus, injunction is the appropriate remedy to prevent a wrongful interference with contracts
by strangersto such contracts where the legal remedy is insufficient and the resulting injury is irreparable. In
that case, the former dealer of the same goods purchased the merchandise from the manufacturer
in England through a trading firm in West Germany and sold these in the Philippines. We held that the rights
granted to the petitioner under the exclusive distributorship agreement may not be diminished nor rendered
illusory by the expedient act of utilizing or interposing a person or firm to obtain goods for which the exclusive
distributorship was conceptualized, at the expense of the sole authorized distributor. [47]

In the case at bar, it was established that petitioner Cordero was not paid the balance of his
commission by respondent Robinson. From the time petitioner Go and respondent Landicho directly dealt
with respondent Robinson in Brisbane, and ceased communicating through petitioner Cordero as the exclusive
distributor of AFFA in the Philippines, Cordero was no longer informed of payments remitted to AFFA in
Brisbane. In other words, Cordero had clearly been cut off from the transaction until the arrival of the first
SEACAT 25 which was sold through his efforts. When Cordero complained to Go, Robinson, Landicho and
Tecson about their acts prejudicial to his rights and demanded that they respect his exclusive distributorship,
Go simply let his lawyers led by Landicho and Tecson handle the matter and tried to settle it by promising to
pay a certain amount and to purchase high-speed catamarans through Cordero. However, Cordero was not
paid anything and worse, AFFA through its lawyer in Australia even terminated his exclusive dealership
insisting that his services were engaged for only one (1) transaction, that is, the purchase of the first SEACAT
25 in August 1997.

Petitioner Go argues that unlike in Yu v. Court of Appeals[48] there is no conclusive proof adduced by
petitioner Cordero that they actually purchased a second SEACAT 25 directly from AFFA and hence there was
no violation of the exclusive distributorship agreement. Further, he contends that the CA gravely abused its
discretion in holding them solidarily liable to Cordero, relying on Articles 1207, 19 and 21 of the Civil
Code despite absence of evidence, documentary or testimonial, showing that they conspired to defeat the
very purpose of the exclusive distributorship agreement.[49]

We find that contrary to the claims of petitioner Cordero, there was indeed no sufficient evidence that
respondents actually purchased a second SEACAT 25 directly from AFFA. But this circumstance will not absolve
respondents from liability for invading Corderos rights under the exclusive distributorship. Respondents clearly
acted in bad faith in bypassing Cordero as they completed the remaining payments to AFFA without advising
him and furnishing him with copies of the bank transmittals as they previously did, and directly dealt with
AFFA through Robinson regarding arrangements for the arrival of the first SEACAT 25 in Manila and
negotiations for the purchase of the second vessel pursuant to the Memorandum of Agreement which
Cordero signed in behalf of AFFA. As a result of respondents actuations, Cordero incurred losses as he was not
paid the balance of his commission from the sale of the first vessel and his exclusive distributorship revoked by
AFFA.

Petitioner Go contends that the trial and appellate courts erred in holding them solidarily liable for
Corderos unpaid commission, which is the sole obligation of the principal AFFA. It was Robinson on behalf of
AFFA who, in the letter dated August 5, 1997 addressed to Cordero, undertook to pay commission payments
to Pamana on a staggered progress payment plan in the form of percentage of the commission per
payment. AFFA explicitly committed that it will, upon receipt of progress payments, pay to Pamana their full
commission by telegraphic transfer to an account nominated by Pamana within one to two days of [AFFA]
receiving such payments.[50] Petitioner Go further maintains that he had not in any way violated or caused the
termination of the exclusive distributorship agreement between Cordero and AFFA; he had also paid in full the
first and only vessel he purchased from AFFA.[51]

While it is true that a third person cannot possibly be sued for breach of contract because only parties
can breach contractual provisions, a contracting party may sue a third person not for breach but for inducing
another to commit such breach.

Article 1314 of the Civil Code provides:

Art. 1314. Any third person who induces another to violate his contract shall be liable
for damages to the other contracting party.

The elements of tort interference are: (1) existence of a valid contract; (2) knowledge on the part of the third
person of the existence of a contract; and (3) interference of the third person is without legal justification. [52]

The presence of the first and second elements is not disputed. Through the letters issued by Robinson
attesting that Cordero is the exclusive distributor of AFFA in the Philippines, respondents were clearly aware
of the contract between Cordero and AFFA represented by Robinson. In fact, evidence on record showed that
respondents initially dealt with and recognized Cordero as such exclusive dealer of AFFA high-speed
catamaran vessels in the Philippines. In that capacity as exclusive distributor, petitioner Go entered into the
Memorandum of Agreement and Shipbuilding Contract No. 7825 with Cordero in behalf of AFFA.

As to the third element, our ruling in the case of So Ping Bun v. Court of Appeals[53] is instructive, to wit:

A duty which the law of torts is concerned with is respect for the property of others, and a
cause of action ex delicto may be predicated upon an unlawful interference by one person of
the enjoyment by the other of his private property. This may pertain to a situation where a
third person induces a party to renege on or violate his undertaking under a contract. In the
case before us, petitioners Trendsetter Marketing asked DCCSI to execute lease contracts in its
favor, and as a result petitioner deprived respondent corporation of the latters property
right.Clearly, and as correctly viewed by the appellate court, the three elements of tort
interference above-mentioned are present in the instant case.

Authorities debate on whether interference may be justified where the defendant acts for
the sole purpose of furthering his own financial or economic interest. One view is that, as a
general rule, justification for interfering with the business relations of another exists where the
actors motive is to benefit himself. Such justification does not exist where his sole motive is to
cause harm to the other. Added to this, some authorities believe that it is not necessary that
the interferers interest outweigh that of the party whose rights are invaded, and that an
individual acts under an economic interest that is substantial, not merely de minimis, such that
wrongful and malicious motives are negatived, for he acts in self-protection. Moreover,
justification for protecting ones financial position should not be made to depend on a
 comparison of his economic interest in the subject matter with that of others. It is sufficient if
the impetus of his conduct lies in a proper business interest rather than in wrongful motives.

As early as Gilchrist vs. Cuddy, we held that where there was no malice in the
interference of a contract, and the impulse behind ones conduct lies in a proper business
interest rather than in wrongful motives, a party cannot be a malicious interferer. Where the
alleged interferer is financially interested, and such interest motivates his conduct, it cannot be
said that he is an officious or malicious intermeddler.

In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the
warehouse to his enterprise at the expense of respondent corporation. Though petitioner took
interest in the property of respondent corporation and benefited from it, nothing on record
imputes deliberate wrongful motives or malice in him.

xxx

While we do not encourage tort interferers seeking their economic interest to intrude into
existing contracts at the expense of others, however, we find that the conduct herein
complained of did not transcend the limits forbidding an obligatory award for damages in the
absence of any malice. The business desire is there to make some gain to the detriment of the
contracting parties. Lack of malice, however, precludes damages. But it does not relieve
petitioner of the legal liability for entering into contracts and causing breach of existing
ones. The respondent appellate court correctly confirmed the permanent injunction and
nullification of the lease contracts between DCCSI and Trendsetter Marketing, without
awarding damages. The injunction saved the respondents from further damage or injury caused
by petitioners interference.[54] [EMPHASIS SUPPLIED.]

Malice connotes ill will or spite, and speaks not in response to duty. It implies an intention to
do ulterior and unjustifiable harm. Malice is bad faith or bad motive.[55] In the case of Lagon v. Court
of Appeals,[56] we held that to sustain a case for tortuous interference, the defendant must have acted
with malice or must have been driven by purely impure reasons to injure the plaintiff; in other words,
his act of interference cannot be justified. We further explained that the word induce refers to
situations where a person causes another to choose one course of conduct by persuasion or
intimidation. As to the allegation of private respondent in said case that petitioner induced the heirs of
the late Bai Tonina Sepi to sell the property to petitioner despite an alleged renewal of the original
lease contract with the deceased landowner, we ruled as follows:

Assuming ex gratia argumenti that petitioner knew of the contract, such knowledge alone was
not sufficient to make him liable for tortuous interference. x x x

Furthermore, the records do not support the allegation of private respondent that
petitioner induced the heirs of Bai Tonina Sepi to sell the property to him. The word induce refers to
situations where a person causes another to choose one course of conduct by persuasion or
intimidation. The records show that the decision of the heirs of the late Bai Tonina Sepi to sell the
property was completely of their own volition and that petitioner did absolutely nothing to influence
their judgment. Private respondent himself did not proffer any evidence to support his claim.In short,
even assuming that private respondent was able to prove the renewal of his lease contract with Bai
Tonina Sepi, the fact was that he was unable to prove malice or bad faith on the part of petitioner in
purchasing the property. Therefore, the claim of tortuous interference was never established.[57]
In their Answer, respondents denied having anything to do with the unpaid balance of the commission due to
Cordero and the eventual termination of his exclusive distributorship by AFFA. They gave a different version
of the events that transpired following the signing of Shipbuilding Contract No. 7825. According to them,
several builder-competitors still entered the picture after the said contract for the purchase of one (1) SEACAT
25 was sent to Brisbane in July 1997 for authentication, adding that the contract was to be effective on August
7, 1997, the time when their funds was to become available. Go admitted he called the attention of AFFA if it
can compete with the prices of other builders, and upon mutual agreement, AFFA agreed to give them a
discounted price under the following terms and conditions: (1) that the contract price be lowered; (2) that Go
will obtain another vessel; (3) that to secure compliance of such conditions, Go must make an advance
payment for the building of the second vessel; and (4) that the payment scheme formerly agreed upon as
stipulated in the first contract shall still be the basis and used as the guiding factor in remitting money for the
building of the first vessel. This led to the signing of another contract superseding the first one (1), still to be
dated 07 August 1997. Attached to the answer were photocopies of the second contract stating a lower
purchase price (US$1,150,000.00) and facsimile transmission of AFFA to Go confirming the transaction.[58]

As to the cessation of communication with Cordero, Go averred it was Cordero who was nowhere to be
contacted at the time the shipbuilding progress did not turn good as promised, and it was always Landicho
and Tecson who, after several attempts, were able to locate him only to obtain unsatisfactory reports such
that it was Go who would still call up Robinson regarding any progress status report, lacking documents for
MARINA, etc., and go to Australia for ocular inspection. Hence, in May 1998 on the scheduled launching of
the ship in Australia, Go engaged the services of Landicho who went to Australia to see to it that all
documents needed for the shipment of the vessel to the Philippines would be in order. It was also during this
time that Robinsons request for inquiry on the Philippine price of a Wartsila engine for AFFAs then on-going
vessel construction, was misinterpreted by Cordero as indicating that Go was buying a second vessel. [59]

We find these allegations unconvincing and a mere afterthought as these were the very same averments
contained in the Position Paper for the Importer dated October 9, 1998, which was submitted by Go on
behalf of ACG Express Liner in connection with the complaint-affidavit filed by Cordero before the BOC-SGS
Appeals Committee relative to the shipment valuation of the first SEACAT 25 purchased from AFFA. [60] It
appears that the purported second contract superseding the original Shipbuilding Contract No. 7825 and
stating a lower price of US$1,150,000.00 (not US$1,465,512.00) was only presented before the BOC to show
that the vessel imported into the Philippines was not undervalued by almost US$500,000.00. Cordero
vehemently denied there was such modification of the contract and accused respondents of resorting to
falsified documents, including the facsimile transmission of AFFA supposedly confirming the said sale for only
US$1,150,000.00.Incidentally, another document filed in said BOC case, the Counter-Affidavit/Position Paper
for the Importer dated November 16, 1998,[61] states in paragraph 8 under the Antecedent facts thereof, that
--

8. As elsewhere stated, the total remittances made by herein Importer to

AFFA does not alone represent the purchase price for Seacat 25. It includes
advance payment for the acquisition of another vessel as part of the deal
due to the discounted price.[62]
which even gives credence to the claim of Cordero that respondents negotiated for the sale of the second
vessel and that the nonpayment of the remaining two (2) instalments of his commission for the sale of the
first SEACAT 25 was a result of Go and Landichos directly dealing with Robinson, obviously to obtain a lower
price for the second vessel at the expense of Cordero.

The act of Go, Landicho and Tecson in inducing Robinson and AFFA to enter into another contract
directly with ACG Express Liner to obtain a lower price for the second vessel resulted in AFFAs breach of its
contractual obligation to pay in full the commission due to Cordero and unceremonious termination of
Corderos appointment as exclusive distributor. Following our pronouncement in Gilchrist v. Cuddy (supra),
such act may not be deemed malicious if impelled by a proper business interest rather than in wrongful
motives. The attendant circumstances, however, demonstrated that respondents transgressed the bounds of
permissible financial interest to benefit themselves at the expense of Cordero. Respondents furtively went
directly to Robinson after Cordero had worked hard to close the deal for them to purchase from AFFA two (2)
SEACAT 25, closely monitored the progress of building the first vessel sold, attended to their concerns and
spent no measly sum for the trip to Australia with Go, Landicho and Gos family members. But what is
appalling is the fact that even as Go, Landicho and Tecson secretly negotiated with Robinson for the purchase
of a second vessel, Landicho and Tecson continued to demand and receive from Cordero their commission or
cut from Corderos earned commission from the sale of the first SEACAT 25.

Cordero was practically excluded from the transaction when Go, Robinson, Tecson and Landicho
suddenly ceased communicating with him, without giving him any explanation. While there was nothing
objectionable in negotiating for a lower price in the second purchase of SEACAT 25, which is not prohibited by
the Memorandum of Agreement, Go, Robinson, Tecson and Landicho clearly connived not only in ensuring
that Cordero would have no participation in the contract for sale of the second SEACAT 25, but also that
Cordero would not be paid the balance of his commission from the sale of the first SEACAT 25. This, despite
their knowledge that it was commission already earned by and due to Cordero. Thus, the trial and appellate
courts correctly ruled that the actuations of Go, Robinson, Tecson and Landicho were without legal
justification and intended solely to prejudice Cordero.

The existence of malice, ill will or bad faith is a factual matter. As a rule, findings of fact of the trial
court, when affirmed by the appellate court, are conclusive on this Court.[63] We see no compelling reason to
reverse the findings of the RTC and the CA that respondents acted in bad faith and in utter disregard of the
rights of Cordero under the exclusive distributorship agreement.

The failure of Robinson, Go, Tecson and Landico to act with fairness, honesty and good faith in
securing better terms for the purchase of high-speed catamarans from AFFA, to the prejudice of Cordero as
the duly appointed exclusive distributor, is further proscribed by Article 19 of the Civil Code:

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.

As we have expounded in another case:

 Elsewhere, we explained that when a right is exercised in a manner which does not conform
with the norms enshrined in Article 19 and results in damage to another, a legal wrong is
thereby committed for which the wrongdoer must be responsible. The object of this article,
therefore, is to set certain standards which must be observed not only in the exercise of ones
rights but also in the performance of ones duties. These standards are the following: act with
justice, give everyone his due and observe honesty and good faith. Its antithesis, necessarily, is
any act evincing bad faith or intent to injure. Its elements are the following: (1) There is a legal
right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring
another. When Article 19 is violated, an action for damages is proper under Articles 20 or 21 of
the Civil Code. Article 20 pertains to damages arising from a violation of law x x x. Article 21, on
the other hand, states:

Art. 21. Any person who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the latter
for the damage.

Article 21 refers to acts contra bonus mores and has the following elements: (1) There is an act
which is legal; (2) but which is contrary to morals, good custom, public order, or public policy;
and (3) it is done with intent to injure.

A common theme runs through Articles 19 and 21, and that is, the act complained of must
be intentional.[64]

Petitioner Gos argument that he, Landicho and Tecson cannot be held liable solidarily with Robinson
for actual, moral and exemplary damages, as well as attorneys fees awarded to Cordero since no law or
contract provided for solidary obligation in these cases, is equally bereft of merit. Conformably with Article
2194 of the Civil Code, the responsibility of two or more persons who are liable for the quasi-delict is
solidary.[65] In Lafarge Cement Philippines, Inc. v. Continental Cement Corporation,[66] we held:

[O]bligations arising from tort are, by their nature, always solidary. We have assiduously
maintained this legal principle as early as 1912 in Worcester v. Ocampo, in which we held:

x x x The difficulty in the contention of the appellants is that they fail to recognize
that the basis of the present action is tort. They fail to recognize the universal doctrine
that each joint tort feasor is not only individually liable for the tort in which he
participates, but is also jointly liable with his tort feasors. x x x

It may be stated as a general rule that joint tort feasors are all the persons who
command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet
the commission of a tort, or who approve of it after it is done, if done for their
benefit. They are each liable as principals, to the same extent and in the same manner
as if they had performed the wrongful act themselves. x x x

Joint tort feasors are jointly and severally liable for the tort which they commit. The
persons injured may sue all of them or any number less than all. Each is liable for the
whole damages caused by all, and all together are jointly liable for the whole damage. It is
no defense for one sued alone, that the others who participated in the wrongful act are
not joined with him as defendants; nor is it any excuse for him that his participation in the
tort was insignificant as compared to that of the others. x x x
 Joint tort feasors are not liable pro rata. The damages can not be apportioned
among them, except among themselves. They cannot insist upon an apportionment, for
the purpose of each paying an aliquot part. They are jointly and severally liable for the
whole amount. x x x

A payment in full for the damage done, by one of the joint tort feasors, of course
satisfies any claim which might exist against the others. There can be but satisfaction. The
release of one of the joint tort feasors by agreement generally operates to discharge all. x
xx

Of course, the court during trial may find that some of the alleged tort feasors are
liable and that others are not liable. The courts may release some for lack of evidence
while condemning others of the alleged tort feasors. And this is true even though they are
charged jointly and severally.[67] [EMPHASIS SUPPLIED.]

The rule is that the defendant found guilty of interference with contractual relations cannot be held
liable for more than the amount for which the party who was inducted to break the contract can be held
liable.[68] Respondents Go, Landicho and Tecson were therefore correctly held liable for the balance of
petitioner Corderos commission from the sale of the first SEACAT 25, in the amount of US$31,522.09 or its
peso equivalent, which AFFA/Robinson did not pay in violation of the exclusive distributorship agreement,
with interest at the rate of 6% per annum from June 24, 1998 until the same is fully paid.

Respondents having acted in bad faith, moral damages may be recovered under Article 2219 of
the Civil Code.[69] On the other hand, the requirements of an award of exemplary damages are: (1) they may
be imposed by way of example in addition to compensatory damages, and only after the claimants right to
them has been established; (2) that they cannot be recovered as a matter of right, their determination
depending upon the amount of compensatory damages that may be awarded to the claimant; and (3) the act
must be accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent manner. [70] The
award of exemplary damages is thus in order. However, we find the sums awarded by the trial court as moral
and exemplary damages as reduced by the CA, still excessive under the circumstances.
Moral damages are meant to compensate and alleviate the physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injuries
unjustly caused. Although incapable of pecuniary estimation, the amount must somehow be proportional to
and in approximation of the suffering inflicted. Moral damages are not punitive in nature and were never
intended to enrich the claimant at the expense of the defendant. There is no hard-and-fast rule in determining
what would be a fair and reasonable amount of moral damages, since each case must be governed by its own
peculiar facts. Trial courts are given discretion in determining the amount, with the limitation that it should
not be palpably and scandalously excessive. Indeed, it must be commensurate to the loss or injury suffered.[71]
We believe that the amounts of P300,000.00 and P200,000.00 as moral and exemplary damages,
respectively, would be sufficient and reasonable. Because exemplary damages are awarded, attorneys fees
may also be awarded in consonance with Article 2208 (1).[72] We affirm the appellate courts award of
attorneys fees in the amount of P50,000.00.
WHEREFORE, the petitions are DENIED. The Decision dated March 16, 2004 as modified by the
Resolution dated July 22, 2004 of the Court of Appeals in CA-G.R. CV No. 69113 are
hereby AFFIRMED with MODIFICATION in that the awards of moral and exemplary damages are hereby
reduced to P300,000.00 and P200,000.00, respectively.
With costs against the petitioner in G.R. No. 164703.

F. PRESUMPTION OF NEGLIGENCE

Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any traffic regulation.

Art. 2188. There is prima facie presumption of negligence on the part of the defendant if the death or injury
results from his possession of dangerous weapons or substances, such as firearms and poison, except when
the possession or use thereof is indispensable in his occupation or business.

Art. 2190. The proprietor of a building or structure is responsible for the damages resulting from its total or
partial collapse, if it should be due to the lack of necessary repairs.

Art. 2191. Proprietors shall also be responsible for damages caused:

(1) By the explosion of machinery which has not been taken care of with due diligence, and the inflammation
of explosive substances which have not been kept in a safe and adequate place;
(2) By excessive smoke, which may be harmful to persons or property;
(3) By the falling of trees situated at or near highways or lanes, if not caused by force majeure;
(4) By emanations from tubes, canals, sewers or deposits of infectious matter, constructed without
precautions suitable to the place.

Art. 2192. If damage referred to in the two preceding articles should be the result of any defect in the
construction mentioned in Article 1723, the third person suffering damages may proceed only against the
engineer or architect or contractor in accordance with said article, within the period therein fixed.

Art. 2193. The head of a family that lives in a building or a part thereof, is responsible for damages caused by
things thrown or falling from the same.