EN BANC

[G.R. No. L-12163. March 4, 1959.] PAZ FORES, petitioner, vs. IRENEO MIRANDA, respondent. Alberto O. Villaraza for petitioner. Almazan & Ereneta for respondent. SYLLABUS 1.PUBLIC UTILITIES; SALE OF PUBLIC SERVICE VEHICLE; APPROVAL OF PUBLIC SERVICE COMMISSION; REASON. Transfer of a Public Service Commission, is not effective and binding in so far as the responsibility of the grantee under the franchise in relation to the public is concerned. The provisions of Section 20 of the Public Service Act are clear and prohibit the sale, alienation, lease, of an operator's property, franchise , certificates, privileges or rights, or any part thereof without approval or authorization of the Public Service Commission. The law was designed primarily for the protection of the public interest; and until the approval of the Public Service Commission is obtained, the vehicle is in contemplation of law, still under the service of the owner or operation standing in the records of the Commission to which the public has a right to rely upon. 2.STATUTORY CONSTRUCTION; PROVISION OF SECTION 20 (Z) PUBLIC SERVICE ACT INTERPRETED.--The proviso contained in Section 20 (Z) of the Public Service Act, to the effect that nothing therein shall be construed "to prevent the transaction from being negotiated or completed before its approval", means only that the sale without the required approval is still valid and binding between the parties. (Montoya vs. Ignacio 50 Off. Gaz., No. 1, p. 108). the phrase "in ordinary course of its business" found in the other proviso "or to prevent the sale, alienation, or lease by any public service of any of its property," could not have been intended to include the sale of the vehicle itself but at most may refer only to such property that can be conceivably disposed of by the carrier in the ordinary course of its business, like junked equipment or spare parts. 3.DAMAGES; ACTUAL DAMAGES; ATTORNEY'S FEES INCLUDED IN THE CONCEPT; AWARD BY COURT OF APPEALS MOTU PROPRIO. Although the Court of First Instance did not provide for attorney's fees in the sum of P3,000 and no appeal to the Court of Appeals was interposed on the point, it was not an error for the Court of Appeals to award them motu propio because attorney's fees

are included in the concept of actual damages under the Civil Code and may be awarded whenever the court deems it just and equitable. 4.ID.; MORAL DAMAGES NOT RECOVERABLE IN ACTION ON BREACH OF CONTRACT OF TRANSPROTATION. Moral damages are generally not recoverable in damage actions predicated on a breach of contract of transportation in view or the provisions of Articles 2218 and 2220 of the new Civil Code. 5.ID.; ID.; EXCEPTION IN CASE OF DEATH OF PASSENGER. The exception to the basic rule of damages is a mishap resulting in the death of a passenger, in which case Article 1764 makes the common carrier expressly subject to the rule of Art. 2206, of the Civil Code that entitles the spouse, descendants and ascendants of the deceased passenger to "demand moral damages for mental anguish by reason of the death of the deceased." (Necesito vs. Paras G. R. No. L-10605, Resolution on motion to reconsider, Sept. 11, 1958). 6.ID.; ID.; NO DEATH; PROOF OF MALICE OR BAD FAITH REQUIRED. Where the injured passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. The mere carelessness of the carrier's driver does not per se constitute or justify an inference of malice or bad faith on the part of the carrier. 7.ID.; ID.; NEGLIGENCE; NOT CARRIER'S BAD FAITH. While it is true that negligence may be occasionally so gross as to amount to malice, that fact must be shown in evidence. A carrier's bad faith is not to be lightly inferred from a mere finding that the contract was breached through negligence of the carrier's employees. 8.ID.; ID.; FAILURE TO TRANSPORT PASSENGERS SAFELY. The theory that carrier's violation of its engagement to safely transport the passenger involves a breach of the passenger's confidence, and therefore should be regarded as a breach of contract in bad faith, justifying recovery of moral damages, under Article 2220 of the New Code is untenable, for under it the carrier would always be deemed in bad faith in every case its obligation to the passenger is infringed and it would never be accountable for simple negligence while under Article 1756 of the Civil Code the presumption is that common carriers acted negligently and not maliciously, and Article 1762 speaks of negligence of the common carrier. 9.ID.; CARRIERS; ACTIONS FOR BREACH OF CONTRACT; WHEN PRESUMPTION OR CARRIER'S LIABILITY ARISES. An action for breach of contract imposes on the carrier a presumption of liability upon mere proof of injury of the passenger; the latter does not have to establish the fault of the carrier, or of his employees, and the burden is placed on the carrier to prove that it was due to an unforeseen event or to force majeure (Congco vs. Manila Railroad Co. 38 Phil., 768, 777.) Morever, the carrier, unlike in suits for quasi-delict may not escape liability by proving that it has exercised due diligence in the selection and supervision of its

employees. (Art. 1759 New Civil Code, Cangco vs. Manila Railroad Co. Supra; Prado vs. Manila Electric Co., 51 Phil., 900)

DECISION

REYES, J.B.L., J :
p

Defendant-petitioner Paz Fores brings this petition for review of the decision of the Court of Appeals (C. A. Case No. 1437-R) awarding to the plaintiff-respondent Ireneo Miranda the sums of P5,000 by way of actual damages and counsel fees, and P10,000 as moral damages, with costs. Respondent was one of the passengers on a jeepney driven by Eugenio Luga. While the vehicle was descending the Sta. Mesa bridge at an excessive rate of speed, the driver lost control thereof, causing it to swerve and to hit the bridge wall. The accident occurred on the morning of March 22, 1953. Five of the passengers were injured, including the respondent who suffered a fracture of the upper right humerus. He was taken to the National Orthopedic Hospital for treatment, and later was subjected to a series of operations; the first on May 23, 1953, when wire loops were wound around the broken bones and screwed into place; a second, effected to insert a metal splint, and a third one to remove such splint. At the time of the trial, it appears that respondent had not yet recovered the use of his right arm. The driver was charged with serious physical injuries through reckless imprudence, and upon interposing a plea of guilty was sentenced accordingly. The contention that the evidence did not sufficiently establish the identity of the vehicle as that belonging to the petitioner was rejected by the appellate court which found, among other things, that it carried plate No. TPU-1163, series of 1952, Quezon City, registered in the name of Paz Fores, (appellant herein) and that the vehicle even had the name of "Dona Paz" painted below its windshield. No evidence to the contrary was introduced by the petitioner, who relied on an attack upon the credibility of the two policemen who went to the scene of the incident. A point to be further remarked is petitioner's contention that on March 21, 1953, or one day before the accident happened, she allegedly sold the passenger jeep that was involved therein to a certain Carmen Sackerman. The initial problem raised by the petitioner in this appeal may be formulated thus "Is the approval of the Public Service Commission necessary for the sale of a public service vehicle even without conveying therewith the authority to operate the same?" Assuming the dubious sale to be a fact, the Court of Appeals answered the query in the affirmative. The ruling should be upheld. Section 20 of the Public Service Act (Commonwealth Act No. 146) provides:

"SEC. 20.Subject to established limitations and saving provisions to the contrary, it shall be unlawful for any public service or for the owner, lessee or operation thereof, without the previous approval and authority of the Commission previously had (g)To sell, alienate, mortgage, encumber or lease its property, franchises, certificates, privileges, or rights, or any part thereof; or merge or consolidate its property, franchises, privileges or rights, or any part thereof, with those of any other public service. The approval herein required shall be given, after notice to the public and after hearing the persons interested at a public hearing, if it be shown that there are just and reasonable grounds for making the mortgage or encumbrance, for liabilities of more than one year maturity, or the sale, alienation, lease, merger, or consolidation to be approved and the same are not detrimental to the public interest, and in case of a sale, the date on which the same is to be consummated shall be fixed in the order or approval: Provided, however, That nothing herein contained shall be construed to prevent the transaction from being negotiated or completed before its approval or to prevent the sale, alienation, or lease by any public service of any of its property in the ordinary course of its business."

Interpreting the effects of this particular provision of law, we have held in the recent cases of Montoya vs. Ignacio, * 50 Off. Gaz. No. 1, p. 108; Timbol vs. Osias, et al., G. R. No. L-7547, April 30, 1955, and Medina vs. Cresencia, 99 Phil, 506; 52 Off. Gaz. No. 10, p. 4606, that a transfer contemplated by the law, if made without the requisite approval of the Public Service Commission, is not effective and binding in so far as the responsibility of the grantee under the franchise in relation to the public is concerned. Petitioner assails case, contending that in those cases, the operator, the operator did not convey, by lease or by sale, the vehicle independently of his rights under the franchise. This line of reasoning does not find support in the law. The provisions of the statute are clear and property, franchise, certificate, privileges or rights, or any part thereof of the owner or operator of the public service without approval or authorization of the Public Service Commission. The law was designed primarily for the protection of the public interest; and until the approval of the Public Service Commission is obtained the vehicle is, in contemplation of law, still under the service of the owner or operator standing in the records of the Commission which the public has a right to rely upon. The proviso contained in the aforequoted law, to the effect that nothing therein shall be construed "to prevent the transaction from being negotiated or completed before its approval", means only that the sale without the required approval is still valid and binding between the parties (Montoya vs. Ignacio, supra). The phrase "in the ordinary course of its business" found in the other proviso "or to prevent the sale, alienation, or lease by any public service of any of its property". as correctly observed by the lower court, could not have been intended to include the sale of the vehicle itself, but at most may refer only to such property that may be conceivably disposed

or by the carrier in the ordinary course of its business, like junked equipment or spare parts. The case of Indalecio de Torres vs. Visente Ona (63 Phil., 594,597) is enlightening; and there, it was held:
"Under the law, the Public Service Commission has not only general supervision and regulation of, but also full jurisdiction and control over all public utilities including the property, equipment and facilities used, and the property rights and franchises enjoyed by every individual and company engaged in the performance of a public service in the sense this phrase is used in the Public Service Act or Act No. 3108). By virtue of the provisions of said Act, motor vehicles used in the performance of a service, as the transportation of freight from one point to another, have to this date been considered and they cannot but be so considered public service property; and, by reason of its own nature, a TH truck, which means that the operator thereof places it at the disposal of anybody who is willing to pay a rental for its use, when he desires to transfer or carry his effects, merchandise or any other cargo from one place to another, is necessarily a public service property." (Emphasis supplied)

Of course, this Court has held in the case of Bachrach Motor Co. vs. Zamboanga Transportation Co., 52 Phil., 244, that there may be a nunc pro tunc authorization which had the effect of having the approval retroact to the date of the transfer; but such outcome cannot prejudice rights intervening in the meantime. It appears that no such approval was given by the Commission before the accident occurred. The P10,000 actual damages awarded by the Court of First Instance of Manila were reduced by the Court of Appeals to only P2,000, on the ground that a review of the records failed to disclose a sufficient basis for the trial court's appraisal, since the only evidence presented on this point consisted of respondent's bare statement that his expenses and loss of income amounted to P20,000. On the other hand, "it cannot be denied," the lower court said, "that appellee (respondent ) did incur expenses." It is well to note further that respondent was a painter by profession and a professor of Fine Arts, so that the amount of P2,000 awarded cannot be said to be excessive (see Arts. 2224 and 2225, Civil Code of the Philippines). The attorney's fees in the sum of P3,000 also awarded to the respondent are assailed on the ground that the Court of First Instance did not provide for the same, and since no appeal was interposed by said respondent, it was allegedly error for the Court of Appeals to award them motu proprio. Petitioner fails to note that attorney's fees are included in the concept of actual damaged under the Civil Code and may be awarded whenever the court deems it just and equitable (Art. 2208, Civil Code of the Philippines). We see no reason to alter these awards. Anent the moral damages ordered to be paid to the respondent, the same must be discarded. We have repeatedly ruled (Cachero vs. Manila Yellow Taxicab Co. Inc. 101 Phil., 523; 54 Off. Gaz., [26], 6599; Necesito, et al vs. Paras, 104 Phil., 75; 56

Off. Gaz., [23] 4023, that moral damages are not recoverable in damage actions predicated on a breach of the contract of transportation, in view of Articles 2219 and 2220 of the new Civil Code, which provide as follows:
"ART. 2219.Moral damages may be recovered in the following and analogous cases: (1)A criminal offense resulting in physical injuries; (2)Quasi-delicts causing physical injuries; xxx xxx xxx ART. 2220.Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstance, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith."

By contrasting the provisions of these two articles it immediately becomes apparent that: (a)In case of breach of contract (including one of transportation) proof of bad faith or fraud (dolus), i.e., wanton or deliberately injurious conduct, is essential to justify an award of moral damages; and (b)That a breach of contract can not be considered included in the description term "analogous cases" used in Art. 2219; not only because Art. 2220 specifically provides for the damages that are caused by contractual breach, but because the definition of quasi-delict in Act. 2176 of the Code expressly excludes the cases where there is a "preexisting contractual relation between the parties."
"ART. 2176.Whoever by act or omission caused damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pro-existing contractual relation between the parties, is called a quasi-delict and is governed by the provision of this Chapter."

The exception to the basic rule of damages now under consideration is a mishap resulting in the death of a passenger, in which case Article 1764 makes the common carrier expressly subject to the rule of Art. 2206, that entitles the spouse, descendants and ascendants of the deceased passenger to "demand moral damages for mental anguish by reason of the death of the deceased" (Necesito vs. Paras, 104 Phil., 84, Resolution on motion to reconsider, September 11, 1958). But the exceptional rule of Art. 1764 makes it all the more evident that where the injured passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. We think it is clear that the mere carelessness of the carrier's driver does not per se constitute or justify an inference of malice or bad faith on the part of the carrier; and in the case at bar there is no other evidence of such malice to support the award of moral damages for breach of contract, therefore, without proof of bad faith or malice on the part of the defendant, as required by Art. 2220, would be

to violate the clear provisions of the law, and constitute unwarranted judicial legislation. The Court of Appeals has invoked our ruling in Castro vs. Acro Taxicab Co., R. G. No. 49155, December 14, 1948 and Layda vs. Court of Appeals, 90 Phil., 724; but these doctrines were predicated upon our former law of damages, before judicial discretion in fixing them became limited by the express provisions of the new Civil Code (previously quoted). Hence, the aforesaid rulings are now inapplicable. Upon the other hand, the advantageous position of a party suing a carrier for breach of the contract of transportation explains, to some extent, the limitation imposed by the new Code on the amount of the recovery. The action for breach of contract imposes on the defendant carrier a presumption of liability upon mere proof of injury to the passenger; that latter is relieved from the duty to establish the fault of the carrier, or of his employees, and the burden is placed on the carrier to prove the it was due to an unforeseen event or to force majeure (Cangco vs. Manila Railroad Co., 38 Phil., 768 777). Moreover, the carrier, unlike in suits for quasi-delict, may not escape liability by proving that it has exercised due diligence in the selection and supervision of its employees (Art. 1759, new Civil Code; Cangco vs. Manila Railroad Co., supra; Prado vs. Manila Electric Co., 51 Phil., 900). The difference in conditions, defenses and proof, as well as the codal concept of quasi-delict as essentially extra contractual negligence, compel us to differentiate between action ex contractu, and actions quasi ex delicto, and prevent us from viewing the action for breach of contract as simultaneously embodying an action on tort. Neither liability under Art. 103 of the Revised Penal Code, since the responsibility is not alleged to be subsidiary, nor is there on record any averment or proof that the driver of appellant was insolvent. In fact, he is not even made a party to the suit. It is also suggested that a carrier's violation of its engagement to safety transport the passenger involves a breach of the passenger's confidence, and therefore should be regarded as a breach of contract in bad faith, justifying recovery of moral damages under Art. 2220. This theory is untenable, for under it the carrier would always be deemed in bad faith, in every case its obligation to the passenger is infringed, and it would be never accountable for simple negligence; while under the law (Art. 1756) the presumption is that common carriers acted negligently (and not maliciously), and Art. 1762 speaks of negligence of the common carrier.
"ART. 1756.In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless the prove that they observed extraordinary diligence as prescribed in article 1733 and 1755." "ART. 1762.The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, it the proximate cause thereof is

the negligence of the common carrier, but the amount of damages shall be equitably reduced."

The distinction between fraud, bad faith or malice in the sense of deliberate or wanton wrong doing and negligence (as mere carelessness) is too fundamental in our law to be ignored (Arts. 1170-1172); their consequences being clearly differentiated by the Code.
"ART. 2201.In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequence of the breach of the obligation, and which the parties have foreseen or could have reasonable foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the nonperformance of the obligation."

It is to be presumed, in the absence of statutory provision to the contrary, that this difference was in the mind of the lawmakers when in Art. 2220 they limited recovery of moral damages to breaches of contract in bad faith. It is true that negligence may be occasionally so gross as to amount to malice; but that fact must be shown in evidence, from a mere finding that the contract was breached through negligence of the carrier's employees. In view of the foregoing considerations, the decision of the Court of Appeals is modified by eliminating the award of P5.000.00 by way of moral damages (Court of Appeals Resolution of May 5, 1957). In all other respects, the judgment is affirmed. No costs in this instance. So ordered.

SECOND DIVISION
[G.R. No. 133179. March 27, 2008.] ALLIED BANKING CORPORATION, petitioner, vs. LIM SIO WAN, METROPOLITAN BANK AND TRUST CO., and PRODUCERS BANK, respondents.

DECISION

VELASCO, JR., J :
p

To ingratiate themselves to their valued depositors, some banks at times bend over backwards that they unwittingly expose themselves to great risks. The Case This Petition for Review on Certiorari under Rule 45 seeks to reverse the Court of Appeals' (CA's) Decision promulgated on March 18, 1998 1 in CA-G.R. CV No. 46290 entitled Lim Sio Wan v. Allied Banking Corporation, et al. The CA Decision modified the Decision dated November 15, 1993 2 of the Regional Trial Court (RTC), Branch 63 in Makati City rendered in Civil Case No. 6757.
cCaEDA

The Facts The facts as found by the RTC and affirmed by the CA are as follows: On November 14, 1983, respondent Lim Sio Wan deposited with petitioner Allied Banking Corporation (Allied) at its Quintin Paredes Branch in Manila a money market placement of PhP1,152,597.35 for a term of 31 days to mature on December 15, 1983, 3 as evidenced by Provisional Receipt No. 1356 dated November 14, 1983. 4 On December 5, 1983, a person claiming to be Lim Sio Wan called up Cristina So, an officer of Allied, and instructed the latter to pre-terminate Lim Sio Wan's money market placement, to issue a manager's check representing the proceeds of the placement, and to give the check to one Deborah Dee Santos who would pick up the check. 5 Lim Sio Wan described the appearance of Santos so that So could easily identify her. 6 Later, Santos arrived at the bank and signed the application form for a manager's check to be issued. 7 The bank issued Manager's Check No. 035669 for PhP1,158,648.49, representing the proceeds of Lim Sio Wan's money market placement in the name of Lim Sio Wan, as payee. 8 The check was cross-checked "For Payee's Account Only" and given to Santos. 9 Thereafter, the manager's check was deposited in the account of Filipinas Cement Corporation (FCC) at respondent Metropolitan Bank and Trust Co. (Metrobank), 10 with the forged signature of Lim Sio Wan as indorser. 11 Earlier, on September 21, 1983, FCC had deposited a money market placement for PhP2 million with respondent Producers Bank. Santos was the money market trader assigned to handle FCC's account. 12 Such deposit is evidenced by Official Receipt No. 317568 13 and a Letter dated September 21, 1983 of Santos addressed to Angie Lazo of FCC, acknowledging receipt of the placement. 14 The placement matured on October 25, 1983 and was rolled-over until December 5, 1983 as evidenced by a Letter dated October 25, 1983. 15 When the placement matured, FCC demanded the payment of the proceeds of

the placement. 16 On December 5, 1983, the same date that So received the phone call instructing her to pre-terminate Lim Sio Wan's placement, the manager's check in the name of Lim Sio Wan was deposited in the account of FCC, purportedly representing the proceeds of FCC's money market placement with Producers Bank. 17 In other words, the Allied check was deposited with Metrobank in the account of FCC as Producers Bank's payment of its obligation to FCC. To clear the check and in compliance with the requirements of the Philippine Clearing House Corporation (PCHC) Rules and Regulations, Metrobank stamped a guaranty on the check, which reads: "All prior endorsements and/or lack of endorsement guaranteed." 18 The check was sent to Allied through the PCHC. Upon the presentment of the check, Allied funded the check even without checking the authenticity of Lim Sio Wan's purported indorsement. Thus, the amount on the face of the check was credited to the account of FCC. 19 On December 9, 1983, Lim Sio Wan deposited with Allied a second money market placement to mature on January 9, 1984. 20 On December 14, 1983, upon the maturity date of the first money market placement, Lim Sio Wan went to Allied to withdraw it. 21 She was then informed that the placement had been pre-terminated upon her instructions. She denied giving any instructions and receiving the proceeds thereof. She desisted from further complaints when she was assured by the bank's manager that her money would be recovered. 22 When Lim Sio Wan's second placement matured on January 9, 1984, So called Lim Sio Wan to ask for the latter's instructions on the second placement. Lim Sio Wan instructed So to roll-over the placement for another 30 days. 23 On January 24, 1984, Lim Sio Wan, realizing that the promise that her money would be recovered would not materialize, sent a demand letter to Allied asking for the payment of the first placement. 24 Allied refused to pay Lim Sio Wan, claiming that the latter had authorized the pre-termination of the placement and its subsequent release to Santos. 25 Consequently, Lim Sio Wan filed with the RTC a Complaint dated February 13, 1984 26 docketed as Civil Case No. 6757 against Allied to recover the proceeds of her first money market placement. Sometime in February 1984, she withdrew her second placement from Allied.
DSHcTC

Allied filed a third party complaint 27 against Metrobank and Santos. In turn, Metrobank filed a fourth party complaint 28 against FCC. FCC for its part filed a fifth party complaint 29 against Producers Bank. Summonses were duly served upon all the parties except for Santos, who was no longer connected with Producers Bank. 30

On May 15, 1984, or more than six (6) months after funding the check, Allied informed Metrobank that the signature on the check was forged. 31 Thus, Metrobank withheld the amount represented by the check from FCC. Later on, Metrobank agreed to release the amount to FCC after the latter executed an Undertaking, promising to indemnify Metrobank in case it was made to reimburse the amount. 32 Lim Sio Wan thereafter filed an amended complaint to include Metrobank as a partydefendant, along with Allied. 33 The RTC admitted the amended complaint despite the opposition of Metrobank. 34 Consequently, Allied's third party complaint against Metrobank was converted into a cross-claim and the latter's fourth party complaint against FCC was converted into a third party complaint. 35 After trial, the RTC issued its Decision, holding as follows:
WHEREFORE, judgment is hereby rendered as follows: 1.Ordering defendant Allied Banking Corporation to pay plaintiff the amount of P1,158,648.49 plus 12% interest per annum from March 16, 1984 until fully paid; 2.Ordering defendant Allied Bank to pay plaintiff the amount of P100,000.00 by way of moral damages; 3.Ordering defendant Allied Bank to pay plaintiff the amount of P173,792.20 by way of attorney's fees; and, 4.Ordering defendant Allied Bank to pay the costs of suit.
aTcIAS

Defendant Allied Bank's cross-claim against defendant Metrobank is DISMISSED. Likewise defendant Metrobank's third-party complaint as against Filipinas Cement Corporation is DISMISSED. Filipinas Cement Corporation's fourth-party complaint against Producer's Bank is also DISMISSED. SO ORDERED. 36

The Decision of the Court of Appeals Allied appealed to the CA, which in turn issued the assailed Decision on March 18, 1998, modifying the RTC Decision, as follows:

WHEREFORE, premises considered, the decision appealed from is MODIFIED. Judgment is rendered ordering and sentencing defendant-appellant Allied Banking Corporation to pay sixty (60%) percent and defendant-appellee Metropolitan Bank and Trust Company forty (40%) of the amount of P1,158,648.49 plus 12% interest per annum from March 16, 1984 until fully paid. The moral damages, attorney's fees and costs of suit adjudged shall likewise be paid by defendant-appellant Allied Banking Corporation and defendant-appellee Metropolitan Bank and Trust Company in the same proportion of 60-40. Except as thus modified, the decision appealed from is AFFIRMED.
HcSDIE

SO ORDERED. 37

Hence, Allied filed the instant petition. The Issues Allied raises the following issues for our consideration:
The Honorable Court of Appeals erred in holding that Lim Sio Wan did not authorize [Allied] to pre-terminate the initial placement and to deliver the check to Deborah Santos. The Honorable Court of Appeals erred in absolving Producers Bank of any liability for the reimbursement of amount adjudged demandable. The Honorable Court of Appeals erred in holding [Allied] liable to the extent of 60% of amount adjudged demandable in clear disregard to the ultimate liability of Metrobank as guarantor of all endorsement on the check, it being the collecting bank. 38

The petition is partly meritorious.

SAEHaC

A Question of Fact Allied questions the finding of both the trial and appellate courts that Allied was not authorized to release the proceeds of Lim Sio Wan's money market placement to Santos. Allied clearly raises a question of fact. When the CA affirms the findings of fact of the RTC, the factual findings of both courts are binding on this Court. 39 We also agree with the CA when it said that it could not disturb the trial court's findings on the credibility of witness So inasmuch as it was the trial court that heard the witness and had the opportunity to observe closely her deportment and manner of testifying. Unless the trial court had plainly overlooked facts of substance or value, which, if

considered, might affect the result of the case, 40 we find it best to defer to the trial court on matters pertaining to credibility of witnesses. Additionally, this Court has held that the matter of negligence is also a factual question. 41 Thus, the finding of the RTC, affirmed by the CA, that the respective parties were negligent in the exercise of their obligations is also conclusive upon this Court.
ACETIa

The Liability of the Parties As to the liability of the parties, we find that Allied is liable to Lim Sio Wan. Fundamental and familiar is the doctrine that the relationship between a bank and a client is one of debtor-creditor. Articles 1953 and 1980 of the Civil Code provide:
Art. 1953.A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality. Art. 1980.Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan.
CEDScA

Thus, we have ruled in a line of cases that a bank deposit is in the nature of a simple loan or mutuum. 42 More succinctly, in Citibank, N.A. (Formerly First National City Bank) v. Sabeniano, this Court ruled that a money market placement is a simple loan or mutuum. 43 Further, we defined a money market in Cebu International Finance Corporation v. Court of Appeals, as follows:
[A] money market is a market dealing in standardized short-term credit instruments (involving large amounts) where lenders and borrowers do not deal directly with each other but through a middle man or dealer in open market. In a money market transaction, the investor is a lender who loans his money to a borrower through a middleman or dealer. In the case at bar, the money market transaction between the petitioner and the private respondent is in the nature of a loan. 44

Lim Sio Wan, as creditor of the bank for her money market placement, is entitled to payment upon her request, or upon maturity of the placement, or until the bank is released from its obligation as debtor. Until any such event, the obligation of Allied to Lim Sio Wan remains unextinguished.

Art. 1231 of the Civil Code enumerates the instances when obligations are considered extinguished, thus:
Art. 1231.Obligations are extinguished: (1)By payment or performance; (2)By the loss of the thing due; (3)By the condonation or remission of the debt; (4)By the confusion or merger of the rights of creditor and debtor; (5)By compensation; (6)By novation.
HCISED

Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code. (Emphasis supplied.)

From the factual findings of the trial and appellate courts that Lim Sio Wan did not authorize the release of her money market placement to Santos and the bank had been negligent in so doing, there is no question that the obligation of Allied to pay Lim Sio Wan had not been extinguished. Art. 1240 of the Code states that "payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it." As commented by Arturo Tolentino:
Payment made by the debtor to a wrong party does not extinguish the obligation as to the creditor, if there is no fault or negligence which can be imputed to the latter. Even when the debtor acted in utmost good faith and by mistake as to the person of his creditor, or through error induced by the fraud of a third person, the payment to one who is not in fact his creditor, or authorized to receive such payment, is void, except as provided in Article 1241. Such payment does not prejudice the creditor, and accrual of interest is not suspended by it. 45 (Emphasis supplied.)

Since there was no effective payment of Lim Sio Wan's money market placement, the bank still has an obligation to pay her at six percent (6%) interest from March 16, 1984 until the payment thereof.
2005jur

We cannot, however, say outright that Allied is solely liable to Lim Sio Wan. Allied claims that Metrobank is the proximate cause of the loss of Lim Sio Wan's money. It points out that Metrobank guaranteed all prior indorsements inscribed on the manager's

check, and without Metrobank's guarantee, the present controversy would never have occurred. According to Allied:
Failure on the part of the collecting bank to ensure that the proceeds of the check is paid to the proper party is, aside from being an efficient intervening cause, also the last negligent act, . . . contributory to the injury caused in the present case, which thereby leads to the conclusion that it is the collecting bank, Metrobank that is the proximate cause of the alleged loss of the plaintiff in the instant case. 46

We are not persuaded. Proximate cause is "that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred." 47 Thus, there is an efficient supervening event if the event breaks the sequence leading from the cause to the ultimate result. To determine the proximate cause of a controversy, the question that needs to be asked is: If the event did not happen, would the injury have resulted? If the answer is NO, then the event is the proximate cause. In the instant case, Allied avers that even if it had not issued the check payment, the money represented by the check would still be lost because of Metrobank's negligence in indorsing the check without verifying the genuineness of the indorsement thereon. Section 66 in relation to Sec. 65 of the Negotiable Instruments Law provides:
Section 66.Liability of general indorser. Every indorser who indorses without qualification, warrants to all subsequent holders in due course; a)The matters and things mentioned in subdivisions (a), (b) and (c) of the next preceding section; and b)That the instrument is at the time of his indorsement valid and subsisting; And in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may be according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. Section 65.Warranty where negotiation by delivery, so forth. Every person negotiating an instrument by delivery or by a qualified indorsement, warrants:

a)That the instrument is genuine and in all respects what it purports to be; b)That he has a good title of it; c)That all prior parties had capacity to contract; d)That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless. But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee. The provisions of subdivision (c) of this section do not apply to persons negotiating public or corporation securities, other than bills and notes. (Emphasis supplied.)

The warranty "that the instrument is genuine and in all respects what it purports to be" covers all the defects in the instrument affecting the validity thereof, including a forged indorsement. Thus, the last indorser will be liable for the amount indicated in the negotiable instrument even if a previous indorsement was forged. We held in a line of cases that "a collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior indorsements, including the forged indorsement itself, and ultimately should be held liable therefor." 48 However, this general rule is subject to exceptions. One such exception is when the issuance of the check itself was attended with negligence. Thus, in the cases cited above where the collecting bank is generally held liable, in two of the cases where the checks were negligently issued, this Court held the institution issuing the check just as liable as or more liable than the collecting bank.
aSHAIC

In isolated cases where the checks were deposited in an account other than that of the payees on the strength of forged indorsements, we held the collecting bank solely liable for the whole amount of the checks involved for having indorsed the same. In Republic Bank v. Ebrada, 49 the check was properly issued by the Bureau of Treasury. While in Banco de Oro Savings and Mortgage Bank (Banco de Oro) v. Equitable Banking Corporation, 50 Banco de Oro admittedly issued the checks in the name of the correct payees. And in Traders Royal Bank v. Radio Philippines Network, Inc., 51 the checks were issued at the request of Radio Philippines Network, Inc. from Traders Royal Bank. However, in Bank of the Philippine Islands v. Court of Appeals, we said that the drawee bank is liable for 60% of the amount on the face of the negotiable instrument and the collecting bank is liable for 40%. We also noted the relative negligence exhibited by two banks, to wit:

Both banks were negligent in the selection and supervision of their employees resulting in the encashment of the forged checks by an impostor. Both banks were not able to overcome the presumption of negligence in the selection and supervision of their employees. It was the gross negligence of the employees of both banks which resulted in the fraud and the subsequent loss. While it is true that petitioner BPI's negligence may have been the proximate cause of the loss, respondent CBC's negligence contributed equally to the success of the impostor in encashing the proceeds of the forged checks. Under these circumstances, we apply Article 2179 of the Civil Code to the effect that while respondent CBC may recover its losses, such losses are subject to mitigation by the courts. (See Phoenix Construction Inc. v. Intermediate Appellate Courts, 148 SCRA 353 [1987]).
HDaACI

Considering the comparative negligence of the two (2) banks, we rule that the demands of substantial justice are satisfied by allocating the loss of P2,413,215.16 and the costs of the arbitration proceeding in the amount of P7,250.00 and the cost of litigation on a 60-40 ratio. 52

Similarly, we ruled in Associated Bank v. Court of Appeals that the issuing institution and the collecting bank should equally share the liability for the loss of amount represented by the checks concerned due to the negligence of both parties:

The Court finds as reasonable, the proportionate sharing of fifty percent-fifty percent (50%-50%). Due to the negligence of the Province of Tarlac in releasing the checks to an unauthorized person (Fausto Pangilinan), in allowing the retired hospital cashier to receive the checks for the payee hospital for a period close to three years and in not properly ascertaining why the retired hospital cashier was collecting checks for the payee hospital in addition to the hospital's real cashier, respondent Province contributed to the loss amounting to P203,300.00 and shall be liable to the PNB for fifty (50%) percent thereof. In effect, the Province of Tarlac can only recover fifty percent (50%) of P203,300.00 from PNB. The collecting bank, Associated Bank, shall be liable to PNB for fifty (50%) percent of P203,300.00. It is liable on its warranties as indorser of the checks which were deposited by Fausto Pangilinan, having guaranteed the genuineness of all prior indorsements, including that of the chief of the payee hospital, Dr. Adena Canlas. Associated Bank was also remiss in its duty to ascertain the genuineness of the payee's indorsement. 53

A reading of the facts of the two immediately preceding cases would reveal that the reason why the bank or institution which issued the check was held partially liable for the amount of the check was because of the negligence of these parties which resulted in the issuance of the checks.

In the instant case, the trial court correctly found Allied negligent in issuing the manager's check and in transmitting it to Santos without even a written authorization. 54 In fact, Allied did not even ask for the certificate evidencing the money market placement or call up Lim Sio Wan at her residence or office to confirm her instructions. Both actions could have prevented the whole fraudulent transaction from unfolding. Allied's negligence must be considered as the proximate cause of the resulting loss. To reiterate, had Allied exercised the diligence due from a financial institution, the check would not have been issued and no loss of funds would have resulted. In fact, there would have been no issuance of indorsement had there been no check in the first place. The liability of Allied, however, is concurrent with that of Metrobank as the last indorser of the check. When Metrobank indorsed the check in compliance with the PCHC Rules and Regulations 55 without verifying the authenticity of Lim Sio Wan's indorsement and when it accepted the check despite the fact that it was cross-checked payable to payee's account only, 56 its negligent and cavalier indorsement contributed to the easier release of Lim Sio Wan's money and perpetuation of the fraud. Given the relative participation of Allied and Metrobank to the instant case, both banks cannot be adjudged as equally liable. Hence, the 60:40 ratio of the liabilities of Allied and Metrobank, as ruled by the CA, must be upheld.
DEIHAa

FCC, having no participation in the negotiation of the check and in the forgery of Lim Sio Wan's indorsement, can raise the real defense of forgery as against both banks. 57 As to Producers Bank, Allied Bank's argument that Producers Bank must be held liable as employer of Santos under Art. 2180 of the Civil Code is erroneous. Art. 2180 pertains to the vicarious liability of an employer for quasi-delicts that an employee has committed. Such provision of law does not apply to civil liability arising from delict. One also cannot apply the principle of subsidiary liability in Art. 103 of the Revised Penal Code in the instant case. Such liability on the part of the employer for the civil aspect of the criminal act of the employee is based on the conviction of the employee for a crime. Here, there has been no conviction for any crime. As to the claim that there was unjust enrichment on the part of Producers Bank, the same is correct. Allied correctly claims in its petition that Producers Bank should reimburse Allied for whatever judgment that may be rendered against it pursuant to Art. 22 of the Civil Code, which provides: "Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just cause or legal ground, shall return the same to him." The above provision of law was clarified in Reyes v. Lim, where we ruled that "[t]here is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when

a person retains money or property of another against the fundamental principles of justice, equity and good conscience." 58 In Tamio v. Ticson, we further clarified the principle of unjust enrichment, thus: "Under Article 22 of the Civil Code, there is unjust enrichment when (1) a person is unjustly benefited, and (2) such benefit is derived at the expense of or with damages to another." 59 In the instant case, Lim Sio Wan's money market placement in Allied Bank was preterminated and withdrawn without her consent. Moreover, the proceeds of the placement were deposited in Producers Bank's account in Metrobank without any justification. In other words, there is no reason that the proceeds of Lim Sio Wans' placement should be deposited in FCC's account purportedly as payment for FCC's money market placement and interest in Producers Bank. With such payment, Producers Bank's indebtedness to FCC was extinguished, thereby benefitting the former. Clearly, Producers Bank was unjustly enriched at the expense of Lim Sio Wan. Based on the facts and circumstances of the case, Producers Bank should reimburse Allied and Metrobank for the amounts the two latter banks are ordered to pay Lim Sio Wan.
TCaAHI

It cannot be validly claimed that FCC, and not Producers Bank, should be considered as having been unjustly enriched. It must be remembered that FCC's money market placement with Producers Bank was already due and demandable; thus, Producers Bank's payment thereof was justified. FCC was entitled to such payment. As earlier stated, the fact that the indorsement on the check was forged cannot be raised against FCC which was not a part in any stage of the negotiation of the check. FCC was not unjustly enriched. From the facts of the instant case, we see that Santos could be the architect of the entire controversy. Unfortunately, since summons had not been served on Santos, the courts have not acquired jurisdiction over her. 60 We, therefore, cannot ascribe to her liability in the instant case. Clearly, Producers Bank must be held liable to Allied and Metrobank for the amount of the check plus 12% interest per annum, moral damages, attorney's fees, and costs of suit which Allied and Metrobank are adjudged to pay Lim Sio Wan based on a proportion of 60:40. WHEREFORE, the petition is PARTLY GRANTED. The March 18, 1998 CA Decision in CA-G.R. CV No. 46290 and the November 15, 1993 RTC Decision in Civil Case No. 6757 are AFFIRMED with MODIFICATION. Thus, the CA Decision is AFFIRMED, the fallo of which is reproduced, as follows:

WHEREFORE, premises considered, the decision appealed from is MODIFIED. Judgment is rendered ordering and sentencing defendant-appellant Allied Banking Corporation to pay sixty (60%) percent and defendant-appellee Metropolitan Bank and Trust Company forty (40%) of the amount of P1,158,648.49 plus 12% interest per annum from March 16, 1984 until fully paid. The moral damages, attorney's fees and costs of suit adjudged shall likewise be paid by defendant-appellant Allied Banking Corporation and defendant-appellee Metropolitan Bank and Trust Company in the same proportion of 60-40. Except as thus modified, the decision appealed from is AFFIRMED.
CaATDE

SO ORDERED.

Additionally and by way of MODIFICATION, Producers Bank is hereby ordered to pay Allied and Metrobank the aforementioned amounts. The liabilities of the parties are concurrent and independent of each other.
TACEDI

SO ORDERED.

EN BANC
[G.R. No. 108164. February 23, 1995.] FAR EAST BANK AND TRUST COMPANY, petitioner, vs. THE HONORABLE COURT OF APPEALS, LUIS A. LUNA and CLARITA S. LUNA, respondents. SYLLABUS 1.CIVIL LAW; DAMAGES; MORAL DAMAGES; WHEN MAY BE RECOVERED IN CASE OF CULPA CONTRACTUAL; RULE; CASE AT BAR. In culpa contractual, moral damages may be recovered where the defendant is shown to have acted in bad faith or with malice in the breach of the contract. Bad faith, in this context, includes gross, but not simple, negligence. Exceptionally, in contract of carriage, moral damages are also allowed in case of death of a passenger attributable to the fault (which is presumed) of the common carrier. Concededly, the bank was remiss in indeed neglecting to personally inform Luis of his own card's cancellation. Nothing in the findings of the trial court and the appellate court, however, can sufficiently indicate any deliberate intent on the part of FEBTC to cause harm to private respondents. Neither could FEBTC's negligence in failing to give personal notice to Luis be considered so gross as to amount to malice or bad faith. Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; it is different from the negative idea of

negligence in that malice or bad faith contemplates a state of mind affirmatively operating with furtive design or ill-will. Article 21 of the Code, it should be observed, contemplates a conscious act to cause harm. Thus, even if we are to assume that the provision could properly relate to a breach of contract, its application can be warranted only when the defendant's disregard of his contractual obligation is so deliberate as to approximate a degree of misconduct certainly no less worse than fraud or bad faith. Most importantly, Article 21 is a mere declaration of a general principle in human relations that clearly must, in any case, give way to the specific provision of Article 2220 of the Civil Code authorizing the grant of moral damages in culpa contractual solely when the breach is due to fraud or bad faith. 2.ID.; ID.; ID.; ID.; ID.; APPLICATION OF THE PROVISION ON QUASI-DELICT. The Court has not in the process overlooked another rule that a quasi-delict can be the cause for breaching a contract that might thereby permit the application of applicable principles on tort even where there is a pre-existing contract between the plaintiff and the defendant (Phil. Airlines vs. Court of Appeals, 106 SCRA 143; Singson vs. Bank of the Phil. Islands, 23 SCRA 1117; and Air France vs. Carrascoso, 18 SCRA 155). This doctrine, unfortunately, cannot improve private respondents' case for it can aptly govern only where the act or omission complained of would constitute an actionable tort independently of the contract. The test (whether a quasi-delict can be deemed to underlie the breach of a contract) can be stated thusly: Where, without a pre-existing contract between two parties, an act or omission can nonetheless amount to an actionable tort by itself, the fact that the parties are contractually bound is no bar to the application of quasidelict provisions to the case. Here, private respondents' damage claim is predicated solely on their contractual relationship; without such agreement, the act or omission complained of cannot by itself be held to stand as a separate cause of action or as an independent actionable tort. 3.ID.; ID.; EXEMPLARY OR CORRECTIVE DAMAGES; WHEN AVAILABLE. Exemplary or corrective damages, in turn, are intended to serve as an example or as correction for the public good in addition to moral, temperate, liquidated or compensatory damages (Art. 2229, Civil Code; see Prudenciado vs. Alliance Transport System, 148 SCRA 440; Lopez vs. Pan American World Airways, 16 SCRA 431). In criminal offenses, exemplary damages are imposed when the crime is committed with one or more aggravating circumstances (Art. 2230, Civil Code). In quasi-delicts, such damages are granted if the defendant is shown to have been so guilty of gross negligence as to approximate malice (See Art. 2231, Civil Code; CLLC E.G. Gochangco Workers Union vs. NLRC, 161 SCRA 655; Globe Mackay Cable and Radio Corp. vs. CA, 176 SCRA 778. In contracts and quasi-contracts, the court may award exemplary damages if the defendant is found to have acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner (Art. 2232, Civil Code; PNB vs. Gen. Acceptance and Finance Corp., 161 SCRA 449).

4.ID.; ID.; NOMINAL DAMAGES; WHEN AVAILABLE; APPLICATION IN CASE AT BAR. The bank's failure, even perhaps inadvertent, to honor its credit card issued to private respondent Luis should entitle him to recover a measure of damages sanctioned under Article 2221 of the Civil Code providing thusly: "Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him."

DECISION

VITUG, J :
p

Some time in October 1986, private respondent Luis A. Luna applied for, and was accorded, a FAREASTCARD issued by petitioner Far East Bank and Trust Company ("FEBTC") at its Pasig Branch. Upon his request, the bank also issued a supplemental card to private respondent Clarita S. Luna. In August 1988, Clarita lost her credit card. FEBTC was forthwith informed. In order to replace the lost card, Clarita submitted an affidavit of loss. In cases of this nature, the banks internal security procedures and policy would appear to be to meanwhile so record the lost card, along with the principal card, as a "Hot Card" or "Cancelled Card" in its master file. On 06 October 1988, Luis tendered a despedida lunch for a close friend, a Filipino-American, and another guest at the Bahia Rooftop Restaurant of the Hotel Intercontinental Manila. To pay for the lunch, Luis presented his FAREASTCARD to the attending waiter who promptly had it verified through a telephone call to the bank's Credit Card Department. Since the card was not honored, Luis was forced to pay in cash the bill amounting to P588.13. Naturally, Luis felt embarrassed by this incident. In a letter, dated 11 October 1988, private respondent Luis Luna, through counsel, demanded from FEBTC the payment of damages. Adrian V. Festejo, a vicepresident of the bank, expressed the bank's apologies to Luis. In his letter, dated 03 November 1988, Festejo, in part, said:
"In cases when a card is reported to our office as lost, FAREASTCARD undertakes the necessary action to avert its unauthorized use (such as tagging the card as hotlisted), as it is always our intention to protect our cardholders. "An investigation of your case however, revealed that FAREASTCARD failed to inform you about its security policy. Furthermore, an overzealous employee of the Bank's Credit Card Department did not consider the possibility that it

may have been you who was presenting the card at that time (for which reason, the unfortunate incident occurred)." 1

Festejo also sent a letter to the Manager of the Bahia Rooftop Restaurant to assure the latter that private respondents were "very valued clients" of FEBTC. William Anthony King, Food and Beverage Manager of the Intercontinental Hotel, wrote back to say that the credibility of private respondent had never been "in question." A copy of this reply was sent to Luis by Festejo. Still evidently feeling aggrieved, private respondents, on 05 December 1988, filed a complaint for damages with the Regional Trial Court ("RTC") of Pasig against FEBTC. On 30 March 1990, the RTC of Pasig, given the foregoing factual settings, rendered a decision ordering FEBTC to pay private respondents (a) P300,000.00 moral damages; (b) P50,000.00 exemplary damages; and (c) P20,000.00 attorney's fees. On appeal to the Court of Appeals, the appellate court affirmed the decision of the trial court. Its motion for reconsideration having been denied by the appellate court, FEBTC has come to this Court with this petition for review. There is merit in this appeal. In culpa contractual, moral damages may be recovered where the defendant is shown to have acted in bad faith or with malice in the breach of the contract. 2 The Civil Code provides:
"Art. 2220.Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith." (Emphasis supplied)
cdasia

Bad faith, in this context, includes gross, but not simple, negligence. 3 Exceptionally, in a contract of carriage, moral damages are also allowed in case of death of a passenger attributable to the fault (which is presumed 4 ) of the common carrier. 5 Concededly, the bank was remiss in indeed neglecting to personally inform Luis of his own cards cancellation. Nothing in the findings of the trial court and the appellate court, however, can sufficiently indicate any deliberate intent on the part of FEBTC to cause harm to private respondents. Neither could FEBTC's negligence in failing to give personal notice to Luis be considered so gross as to amount to malice or bad faith.
llcd

Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; it is different from the negative idea of

negligence in that malice or bad faith contemplates a state of mind affirmatively operating with furtive design or ill will. 6 We are not unaware of the previous rulings of this Court, such as in American Express International, Inc. vs. Intermediate Appellate Court (167 SCRA 209) and Bank of Philippine Islands vs. Intermediate Appellate Court (206 SCRA 408), sanctioning the application of Article 21, in relation to Article 2217 and Article 2219 7 of the Civil Code to a contractual breach similar to the case at bench. Article 21 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 of the Code, it should be observed, contemplates a conscious act to cause harm. Thus, even if we are to assume that the provision could properly relate to a breach of contract, its application can be warranted only when the defendant's disregard of his contractual obligation is so deliberate as to approximate a degree of misconduct certainly no less worse than fraud or bad faith. Most importantly, Article 21 is a mere declaration of a general principle in human relations that clearly must, in any case, give way to the specific provision of Article 2220 of the Civil Code authorizing the grant of moral damages in culpa contractual solely when the breach is due to fraud or bad faith. Mr. Justice Jose B.L. Reyes, in his ponencia in Fores vs. Miranda 8 explained with great clarity the predominance that we should give to Article 2220 in contractual relations; we quote:
"Anent the moral damages ordered to be paid to the respondent, the same must be discarded. We have repeatedly ruled (Cachero vs. Manila Yellow Taxicab Co. Inc., 101 Phil. 523; 54 Off. Gaz., [26], 6599; Necesito, et al. vs. Paras, 104 Phil., 75; 56 Off. Gaz., [23] 4023, that moral damages are not recoverable in damage actions predicated on a breach of the contract of transportation, in view of Articles 2219 and 2220 of the new Civil Code, which provide as follows:
cdasia

"'ART. 2219. Moral damages may be recovered in the following and analogous cases: '(1)A criminal offense resulting in physical injuries; '(2)Quasi-delicts causing physical injuries; xxx xxx xxx

'ART.2220.Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.' "By contrasting the provisions of these two articles it immediately becomes apparent that: "(a)In case of breach of contract (including one of transportation) proof of bad faith or fraud (dolus), i.e., wanton or deliberately injurious conduct, is essential to justify an award of moral damages; and "(b)That a breach of contract can not be considered included in the descriptive term 'analogous cases' used in Art. 2219; not only because Art. 2220 specifically provides for the damages that are caused contractual breach, but because the definition of quasidelict in Art. 2176 of the Code expressly excludes the cases where there is a 'pre-exisiting contractual relations between the parties.'
LexLib

"'Art. 2176.Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.' "The exception to the basic rule of damages now under consideration is a mishap resulting in the death of a passenger, in which case Article 1764 makes the common carrier expressly subject to the rule of Art. 2206, that entitles the spouse, descendants and ascendants of the deceased passenger to 'demand moral damages for mental anguish by reason of the death of the deceased' (Necesito vs. Paras, 104 Phil. 84, Resolution on Motion to Reconsider, September 11, 1958). But the exceptional rule of Art. 1764 makes it all the more evident that where the injured passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. We think it is clear that the mere carelessness of the carrier's driver does not per se constitute or justify an inference of malice or bad faith on the part of the carrier; and in the case at bar there is no other evidence of such malice to support the award of moral damages by the Court of Appeals. To award moral damages for breach of contract, therefore, without proof of bad faith or malice on the part of the defendant, as required by Art. 2220, would be to violate the clear provisions of the law, and constitute unwarranted judicial legislation. "xxx xxx xxx.

"The distinction between fraud, bad faith or malice in the sense of deliberate or wanton wrong doing and negligence (as mere carelessness) is too fundamental in our law to be ignored (Arts. 1170-1172); their consequences being clearly differentiated by the Code.
cdasia

"'ART. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. 'In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation." "It is to be presumed, in the absence of statutory provision to the contrary, that this difference was in the mind of the lawmakers when in Art. 2220 they limited recovery of moral damages to breaches of contract in bad faith. It is true that negligence may be occasionally so gross as to amount to malice; but the fact must be shown in evidence, and a carrier's bad faith is not to be lightly inferred from a mere finding that the contract was breached through negligence of the carriers employees."
LLphil

The Court has not in the process overlooked another rule that a quasi-delict can be the cause for breaching a contract that might thereby permit the application of applicable principles on tort 9 even where there is a pre-existing contract between the plaintiff and the defendant (Phil. Airlines vs. Court of Appeals, 106 SCRA 143; Singson vs. Bank of Phil. Islands, 23 SCRA 1117; and Air France vs. Carrascoso, 18 SCRA 155). This doctrine, unfortunately, cannot improve private respondents' case for it can aptly govern only where the act or omission complained of would constitute an actionable tort independently of the contract. The test (whether a quasi-delict can be deemed to underlie the breach of a contract) can be stated thusly: Where, without a pre-existing contract between two parties, an act or omission can nonetheless amount to an actionable tort by itself, the fact that the parties are contractually bound is no bar to the application of quasi-delict provisions to the case. Here, private respondents' damage claim is predicated solely on their contractual relationship; without such agreement, the act or omission complained of cannot by itself be held to stand as a separate cause of action or as an independent actionable tort.
cdll

The Court finds, therefore, the award of moral damages made by the court a quo, affirmed by the appellate court, to be inordinate and substantially devoid of legal basis. Exemplary or corrective damages, in turn, are intended to serve as an example or as correction for the public good in addition to moral, temperate, liquidated or compensatory damages (Art. 2229, Civil Code; see Prudenciado vs. Alliance

Transport System, 148 SCRA 440; Lopez vs. Pan American World Airways, 16 SCRA 431). In criminal offenses, exemplary damages are imposed when the crime is committed with one or more aggravating circumstances (Art. 2230, Civil Code). In quasi-delicts, such damages are granted if the defendant is shown to have been so guilty of gross negligence as to approximate malice (See Art. 2231, Civil Code; CLLC E.G. Gochangco Workers Union vs. NLRC, 161 SCRA 655; Globe Mackay Cable and Radio Corp. vs. CA, 176 SCRA 778. In contracts and quasi-contracts, the court may award exemplary damages if the defendant is found to have acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner (Art. 2232, Civil Code; PNB vs. Gen. Acceptance and Finance Corp., 161 SCRA 449).
cdasia

Given the above premises and the factual circumstances here obtaining, it would also be just as arduous to sustain the exemplary damages granted by the courts below (see De Leon vs. Court of Appeals, 165 SCRA 166). Nevertheless, the bank's failure, even perhaps inadvertent, to honor its credit card issued to private respondent Luis should entitle him to recover a measure of damages sanctioned under Article 2221 of the Civil Code providing thusly:
"Art. 2221.Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him."
llcd

Reasonable attorney's fees may be recovered where the court deems such recovery to be just and equitable (Art. 2208, Civil Code). We see no misuse of sound discretion on the part of the appellate court in allowing the award thereof by the trial court. WHEREFORE, the petition for review is given due course. The appealed decision is MODIFIED by deleting the award of moral and exemplary damages to private respondents; in its stead, petitioner is ordered to pay private respondent Luis A. Luna an amount of P5,000.00 by way of nominal damages. In all other respects, the appealed decision is AFFIRMED. No costs. SO ORDERED.

EN BANC
[G.R. No. L-21438. September 28, 1966.] AIR FRANCE, petitioner, vs. RAFAEL CARRASCOSO and THE HONORABLE COURT OF APPEALS, respondents.

Lichauco, Picazo & Agcaoili for petitioner. Bengzon, Villegas & Zarraga for respondent R. Carrascoso. SYLLABUS 1.JUDGMENT; FINDINGS OF FACT; REQUIREMENT OF LAW. Courts of justice are not burdened with the obligation to specify in the sentence every bit and piece of evidence presented by the parties upon the issues raised. The law solely insists that a decision state the "essential ultimate facts" upon which the court's conclusion is drawn. 2.ID.; ID.; ID.; APPEAL AND ERROR; FAILURE TO MAKE FINDINGS ON EVIDENCE AND CONTENTIONS OF ONE PARTY, EFFECT OF; DECISION NOT TO BE CLOGGED WITH DETAILS. The mere failure to make specific findings of fact on the evidence presented for the defense or to specify in the decision the contentions of the appellant and the reasons for refusing to believe them is not sufficient to hold the same contrary to the requirement of the law and the Constitution. There is no law that so requires. A decision is not to be clogged with details such that prolixity, if not confusion, may result. 3.ID.; ID.; ID.; FINDINGS OF FACT BY COURTS DEFINED. Findings of fact may be defined as the written statement of the ultimate facts as found by the court and essential to support the decision and judgment rendered thereon; they consist of the court's "conclusions with respect to the determinative facts on issue." 4.ID.; ID.; ID.; QUESTION OF LAW EXPLAINED. A question of law is "one which does not call for an examination of the probative value of the evidence presented by the parties." 5.PLEADING AND PRACTICE; APPEAL; WHAT MAY BE RAISED ON APPEAL FROM COURT OF APPEALS. It is not appropriately the business of the Supreme Court to alter the facts or to review the questions of fact because, by statute, only questions of law may be raised in an appeal by certiorari from a judgment of the Court of Appeals, which judgment is conclusive as to the facts. 6.ID.; ID.; EFFECT OF AFFIRMANCE BY COURT OF APPEALS OF TRIAL COURT'S DECISION. When the Court of Appeals affirms a judgment of the trial court, and the findings of fact of said appellate court are not in any way at war with those of the trial court, nor is said affirmance upon a ground or grounds different from those which were made the basis of the trial court's conclusions, such judgment of affirmance is (1) a determination by the Court of Appeals that the proceeding in the lower court was free from prejudicial error; (7) that all questions raised by the assignments of error and all

questions that might have been so raised have been finally adjudicated as free from all error. 7.ID.; COMPLAINT; SPECIFIC MENTION OF THE TERM "BAD FAITH" IN THE COMPLAINT NOT REQUIRED. Although there is no specific mention of the term bad faith in the complaint, the inference of bad faith may be drawn from the facts and circumstances set forth therein. 8. EVIDENCE; FINDING OF COURT OF APPEALS THAT RESPONDENT WAS ENTITLED TO A FIRST CLASS SEAT. The Court of Appeals properly found that a first class-ticket holder is entitled to first class seat, given the fact that seat availability in specific flights is therein confirmed; otherwise, an air passenger will be placed in the hollow of the hands of an airline, because it will always be easy for an airline to strike out the very stipulations in the ticket and say that there was verbal agreement to the contrary. If only to achieve stability in the relations between passenger and air carrier, adherence to the ticket so issued is desirable. 9.ID.; LACK OF SPECIFIC AVERMENT OF BAD FAITH CURED BY NOTICE TO DEFENDANT OF WHAT PLAINTIFF INTENDS TO PROVE AND BY EVIDENCE PRESENTED WITHOUT OBJECTION; AMENDMENT OF COMPLAINT TO CONFORM TO EVIDENCE UNNECESSARY. If there was lack of specific averment of bad faith in the complaint, such deficiency was cured by notice, right at the start of the trial, by plaintiff's counsel to defendant as to what plaintiff intended to prove: while in the plane in Bangkok, plaintiff was ousted by defendant's manager who gave his seat to a white man; and by evidence of bad faith in the fulfillment of the contract presented without objection on the part of the defendant. An amendment of the complaint to conform to the evidence is not even required. 10.ID.; ADMISSIBILITY OF TESTIMONY ON AN ENTRY IN A NOTEBOOK; TESTIMONY NOT COVERED BY BEST EVIDENCE RULE. The testimony of a witness that the purser made an entry in his notebook reading "First Class passenger was forced to go to the tourist class against his will and that the captain refused to intervene," is competent and admissible because the subject of the inquiry is not the entry but the ouster incident. It does not come within the prescription of the best evidence rule. 11.CONTRACT OF CARRIAGE; QUASI-DELICT; LIABILITY OF COMMON CARRIERS; CASE AT BAR. Neglect or malfeasance of the carrier's employees could give ground for an action for damages. Damages here are proper because the stress of respondent's action is placed upon his wrongful expulsion, which is a violation of a public duty by petitioner- aircarrier a case of quasi-delict. 12.ID.; ID.; ID.; AWARD OF MORAL DAMAGES FOR BREACH OF CONTRACT. Award of moral damages is proper, despite petitioner's argument that respondent's action is planted upon breach of contract, where the stress of the action is put on

wrongful expulsion, the contract having been averred only to establish the relation between the parties. 13.ID.; ID.; ID.; EMPLOYER IS RESPONSIBLE FOR TORTIOUS ACTS OF HIS EMPLOYEE; CASE AT BAR. The responsibility of an employer for the tortious act of his employees is well settled in law. (Art. 2130, Civil Code). Petitioner-aircarrier must answer for the willful, malevolent act of its manager. 14.ID.; ID.; ID.; LIABILITY FOR EXEMPLARY DAMAGES; POWER OF COURTS TO GRANT; CASE AT BAR. The Civil Code gives the court ample power to grant exemplary damages, the only condition being that defendant should have "acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." As the manner of ejectment of plaintiff from his first class seat fits into this legal precept, exemplary damages are well awarded, in addition to moral damages. 15.ID.; ID.; LIABILITY FOR ATTORNEY'S FEES; COURT DISCRETION WELL EXERCISED SHOULD NOT BE DISTURBED. The grant of exemplary damages justifies a similar judgment for attorney's fees. The court below felt that it is but just and equitable that attorney's fees be given and the Supreme Court does not intend to break faith with the tradition that discretion well-exercised as it is here should not be disturbed. 16.ID.; RIGHTS OF PASSENGERS. Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. So, any rude or discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier. (4 R. C. L-1174-1175). 17.ID.; BREACH OF CONTRACT MAY BE A TORT. Although the relation of passenger and carrier is contractual both in origin and nature, nevertheless, the act that breaks the contract may also be a tort. 18.WORDS AND PHRASES; BAD FAITH DEFINED. "Bad faith", as understood in law, contemplates a state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for ulterior purpose

DECISION

SANCHEZ, J :
p

The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael Carrascoso P25,000.00 by way of moral damages; P10,000.00 as exemplary damages; P393.20 representing the difference in fare between first class and tourist class for the portion of the trip Bangkok-Rome, these various amounts with interest at the legal rate, from the date of the filing of the complaint until paid; plus P3,000.00 for attorneys' fees; and the costs of suit. On appeal, 2 the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane ticket from P393.20 to P383.10, and voted to affirm the appealed decision "in all other respects", with costs against petitioner. The case is now before us for review on certiorari. The facts declared by the Court of Appeals as "fully supported by the evidence of record", are:
"Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes on March 30, 1958. On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine Air Lines, Inc., issued to plaintiff a 'first class' round trip airplane ticket from Manila to Rome. From Manila to Bangkok, plaintiff traveled in 'first class', but at Bangkok, the Manager of the defendant airline forced plaintiff to vacate the 'first class' seat that he was occupying because, in the words of the witness Ernesto G. Cuento, there was a 'white man', who, the Manager alleged, had a 'better right to the seat. When asked to vacate his 'first class' seat, the plaintiff, as was to be expected, refused, and told defendant's Manager that his seat would be taken over his dead body; a commotion ensued, and, according to said Ernesto G. Cuento, many of the Filipino passengers got nervous in the tourist class; when they found out that Mr. Carrascoso was having a hot discussion with the white man [manager], they came all across to Mr. Carrascoso and pacified Mr. Carrascoso to give his seat to the 'white man' (Transcript, p. 12, Hearing of May 26, 1959); and plaintiff reluctantly gave his 'first class' seat in the plane." 3

1.The thrust of the relief petitioner now seeks is that we review "all the findings" 4 of respondent Court of Appeals. Petitioner charges that respondent court failed to make complete findings of fact on all the issues properly laid before it. We are asked to consider facts favorable to petitioner, and then, to overturn the appellate court's decision.

Coming into focus is the constitutional mandate that "No decision shall be rendered by any court of record without expressing therein clearly and distinctly the facts and the law on which it is based". 5 This is echoed in the statutory demand that a judgment

determining the merits of the case shall state "clearly and distinctly the facts and the law on which it is based", 6 and that "Every decision of the Court of Appeals shall contain complete findings of fact on all issues properly raised before it." 7 A decision with absolutely nothing to support it is a nullity. It is open to direct attack. 8 The law, however, solely insists that a decision state the "essential ultimate facts" upon which the court's conclusion is drawn. 9 A court of justice is not hidebound to write in its decision every bit and piece of evidence 10 presented by one party and the other upon the issues raised. Neither is it to be burdened with the obligation "to specify in the sentence the facts" which a party "considered as proved". 11 This is but a part of the mental process from which the Court draws the essential ultimate facts. A decision is not to be so clogged with details such that prolixity, if not confusion, may result. So long as the decision of the Court of Appeals contains the necessary facts to warrant its conclusions, it is no error for said court to withhold therefrom "any specific finding of facts with respect to the evidence for the defense". Because, as this Court well observed, "There is no law that so requires". 12 Indeed, "the mere failure to specify (in the decision) the contentions of the appellant and the reasons for refusing to believe them is not sufficient to hold the same contrary to the requirements of the provisions of law and the Constitution". It is in this setting that in Manigque, it was held that the mere fact that the findings "were based entirely on the evidence for the prosecution without taking into consideration or even mentioning the appellant's side in the controversy as shown by his own testimony", would not vitiate the judgment. 13 If the court did not recite in the decision the testimony of each witness for, or each item of evidence presented by, the defeated party, it does not mean that the court has overlooked such testimony or such item of evidence. 14 At any rate, the legal presumptions are that official duty has been regularly performed, and that all the matters within an issue in a case were laid before the court and passed upon by it.
15

Findings of fact, which the Court of Appeals is required to make, may be defined as "the written statement of the ultimate facts as found by the court . . . and essential to support the decision and judgment rendered thereon". 16 They consist of the court's "conclusions with respect to the determinative facts in issue" 17 A question of law, upon the other hand, has been declared as "one which does not call for an examination of the probative value of the evidence presented by the parties." 18 2.By statute, "only questions of law may be raised" in an appeal by certiorari from a judgment of the Court of Appeals 19 That judgment is conclusive as to the facts. It is not appropriately the business of this Court to alter the facts or to review the questions of fact. 20 With these guideposts, we now face the problem of whether the findings of fact of the Court of Appeals support its judgment.

3.Was Carrascoso entitled to the first class seat he claims? It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a first class ticket. But petitioner asserts that said ticket did not represent the true and complete intent and agreement of the parties; that said respondent knew that he did not have confirmed reservations for first class on any specific flight, although he had tourist class protection; that, accordingly, the issuance of a first class ticket was no guarantee that he would have a first class ride, but that such would depend upon the availability of first class seats. These are matters which petitioner has thoroughly presented and discussed in its brief before the Court of Appeals under its third assignment of error, which reads: "The trial court erred in finding that plaintiff had confirmed reservations for, and a right to, first class seats on the 'definite' segments of his journey, particularly that from Saigon to Beirut." 21 And, the Court of Appeals disposed of this contention thus:
"Defendant seems to capitalize on the argument that the issuance of a first-class ticket was no guarantee that the passenger to whom the same had been issued, would be accommodated in the first-class compartment, for as in the case of plaintiff he had yet to make arrangements upon arrival at every station for the necessary first class reservation. We are not impressed by such a reasoning. We cannot understand how a reputable firm like defendant airplane company could have the indiscretion to give out ticket it never meant to honor at all. It received the corresponding amount in payment of first-class tickets end yet it allowed the passenger to be at the mercy of its employees. It is more in keeping with the ordinary course of business that the company should know whether or not the tickets it issues are to be honored or not." 22

Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's contention, thus:
"On the fact that plaintiff paid for, and was issued a 'First class ticket, there can be no question. Apart from his testimony, see plaintiffs Exhibits 'A', 'A-1' 'B', 'B-1', 'B-2', 'C' and 'C-1', and defendant's own witness, Rafael Altonaga, confirmed plaintiff's testimony and testified as follows: Q.In these tickets there are marks 'O.K.' From what you know, what does this O.K. mean? A.That the space is confirmed. Q.Confirmed for first class?

A.Yes, 'first class'. (Transcript, p. 169) xxx xxx xxx "Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga that although plaintiff paid for, and was issued a 'first class' airplane ticket, the ticket was subject to confirmation in Hongkong. The court cannot give credit to the testimony of said witnesses. Oral evidence cannot prevail over written evidence, and plaintiff's Exhibits 'A', 'A1', 'B', 'B-1', 'C' and 'C- 1' belie the testimony of said witnesses, and clearly show that the plaintiff was issued, and paid for, a first class ticket without any reservation whatever. Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that the reservation for a 'first class' accommodation for the plaintiff was confirmed. The court cannot believe that after such confirmation ,defendant had a verbal understanding with plaintiff that the 'first class' ticket issued to him by defendant would be subject to confirmation in Hongkong." 23

We have heretofore adverted to the fact that except for a slight difference of a few pesos in the amount refunded on Carrascoso's ticket, the decision of the Court of First Instance was affirmed by the Court of Appeals in all other respects. We hold the view that such a judgment of affirmance has merged the judgment of the lower court. 24 Implicit in that affirmance is a determination by the Court of Appeals that the proceeding in the Court of First Instance was free from prejudicial error and that 'all questions raised by the assignments of error and all questions that might have been so raised are to be regarded as finally adjudicated against the appellant". So also, the judgment affirmed "must be regarded as free from all error" 25 We reached this policy construction because nothing in the decision of the Court of Appeals on this point would suggest that its findings of fact are in any way at war with those of the trial court. Nor was said affirmance by the Court of Appeals upon a ground or grounds different from those which were made the basis of the conclusions of the trial court. 26 If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat, notwithstanding the fact that seat availability in specific flights is therein confirmed, then an air passenger is placed in the hollow of the hands of an airline. What security then can a passenger have? It will always be an easy matter for an airline aided by its employees, to strike out the very stipulations in the ticket, and say that there was a verbal agreement to the contrary. What if the passenger had a schedule to fulfill? We have long learned that, as a rule, a written document speaks a uniform language; that spoken word could be notoriously unreliable. If only to achieve stability in the relations between passenger and air carrier, adherence to the ticket so issued is desirable. Such is the case here. The lower courts refused to believe the oral evidence intended to defeat the covenants in the ticket.

The foregoing are the considerations which point to the conclusion that there are facts upon which the Court of Appeals predicated the finding that respondent Carrascoso had a first class ticket and was entitled to a first class seat at Bangkok, which is a stopover in the Saigon to Beirut leg of the flight, 27 We perceive no "welter of distortions by the Court of Appeals of petitioner's statement of its position", as charged by petitioner. 28 Nor do we subscribe to petitioners accusation that respondent Carrascoso "surreptitiously took a first class seat to provoke an issue". 29 And this because, as petitioner states, Carrascoso went to see the Manager at his office in Bangkok "to confirm my seat and because from Saigon I was told again to see the Manager. 30 Why, then, was he allowed to take a first class seat in the plane at Bangkok, if he had no seat? Or, if another had a better right to the seat? 4.Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim is that Carrascoso's action is planted upon breach of contract; that to authorize an award for moral damages there must be an averment of fraud or bad faith; 31 and that the decision of the Court of Appeals fails to make a finding of bad faith. The pivotal allegations in the complaint bearing on this issue are:

"3.That . . . plaintiff entered into a contract of air carriage with the Philippine Air Lines for a valuable consideration, the latter acting as general agents for and in behalf of the defendant, under which aid contract, plaintiff was entitled to, as defendant agreed to furnish plaintiff, First Class passage on defendant's plane during the entire duration of plaintiff's tour of Europe with Hongkong as starting point up to and until plaintiff's return trip to Manila, . . . 4.That during the first two legs of the trip from Hongkong to Saigon and from Saigon to Bangkok, defendant furnished to the plaintiff First Class accommodation but only after protestations, arguments and/or insistence were made by the plaintiff with defendant's employees. 5.That finally, defendant failed to provide First Class passage, but instead furnished plaintiff only Tourist Class accommodations from Bangkok to Teheran and/or Casablanca, . . . the plaintiff has been compelled by defendant's employees to leave the First Class accommodation berths at Bangkok after he was already seated. 6.That consequently, the plaintiff, desiring no repetition of the inconvenience and embarrassments brought by defendant's breach of contract was forced to take a Pan American World Airways plane on his return trip from Madrid to Manila. 32 xxx xxx xxx

2.That likewise, as a result of defendant's failure to furnish First Class accommodations aforesaid, plaintiff suffered inconveniences, embarrassments, and humiliations, thereby causing plaintiff mental anguish, serious anxiety, wounded feelings, social humiliation, and the like injury, resulting in moral damages in the amount of P30,000.00." 33 xxx xxx xxx

The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish plaintiff a first class passage covering, amongst others, the Bangkok-Teheran leg; Second, That said contract was breached when petitioner failed to furnish first class transportation at Bangkok; and Third, That there was bad faith when petitioner's employee compelled Carrascoso to leave his first class accommodation berth "after he was already seated" and to take a seat in the tourist class, by reason of which he suffered inconvenience, embarrassments and humiliations, thereby causing him mental anguish, serious anxiety, wounded feelings and social humiliation, resulting in moral damages. It is true that there is no specific mention of the term bad faith in the complaint. But, the inference of bad faith is there; it may be drawn from the facts and circumstances set forth therein. 34 The contract was averred to establish the relation between the parties. But the stress of the action is put on wrongful expulsion. Quite apart from the foregoing is that (a) right at the start of the trial, respondent's counsel placed petitioner on guard on what Carrascoso intended to prove: That while sitting in the plane in Bangkok, Carrascoso was ousted by petitioner's manager who gave his seat to a white man; 35 and (b) evidence of bad faith in the fulfillment of the contract was presented without objection on the part of the petitioner. It is, therefore, unnecessary to inquire as to whether or not there is sufficient averment in the complaint to justify an award for moral damages. Deficiency in the complaint, if any, was cured by the evidence. An amendment thereof to conform to the evidence is not even required. 36 On the question of bad faith, the Court of Appeals declared:
"That the plaintiff was forced out of his seat in the first class compartment of the plane belonging to the defendant Air France while at Bangkok, and was transferred to the tourist class not only without his consent but against his will, has been sufficiently established by plaintiff in his testimony before the court, corroborated by the corresponding entry made by the purser of the plane in his notebook which notation reads as follows: 'First-class passenger was forced to go to the tourist class against his will and that the captain refused to intervene', and by the testimony of an eye-witness Ernesto G. Cuento, who was a copassenger. The captain of the plane who was asked by the manager of defendant company at Bangkok to intervene even refused to do so. It is noteworthy that no one on behalf of defendant ever contradicted or denied

this evidence for the plaintiff. It could have been easy for defendant to present its manager at Bangkok to testify at the trial of the case, or yet to secure his deposition; but defendant did neither. 37

The Court of Appeals further stated

"Neither is there evidence as to whether or ,not a prior reservation was made by the white man. Hence, if the employees of the defendant at Bangkok sold a firstclass ticket to him when all the seats had already been taken, surely the plaintiff should not have been picked out as the one to suffer the consequences and to be subjected to the humiliation and indignity of being ejected from his seat in the presence of others. Instead of explaining to the white man the improvidence committed by defendant's employees, the manager adopted the more drastic step of ousting the plaintiff who was then safely ensconced in his rightful seat. We are strengthened in our belief that this probably was what happened there, by the testimony of defendant's witness Rafael Altonaga who, when asked to explain the meaning of the letters 'O.K., appearing on the tickets of plaintiff, said that 'the space is confirmed' for first class. Likewise, Zenaida Faustino, another witness for defendant, who was the chief of the Reservation Office of defendant, testified as follows: 'Q.How does the person in the ticket-issuing office know what reservation the passenger has arranged with you? A.They call us up by phone and ask for the confirmation.' (t.s.n., p. 247, June 19, 1959)

In this connection, we quote with approval what the trial Judge has said on this point:
'Why did the, using the words of witness Ernesto G. Cuento, 'white man' have a 'better right' to the seat occupied by Mr. Carrascoso? The record is silent. The defendant airline did not prove 'any better', nay, any right on the part of the 'white man' to the 'First class' seat that the plaintiff was occupying and for which he paid and was issued a corresponding 'first class' ticket. 'If there was a justified reason for the action of the defendant's Manager in Bangkok, the defendant could have easily proven it by having taken the testimony of the said Manager by deposition, but defendant did not do so; the presumption is that evidence willfully suppressed would be adverse if produced [Sec. 69, par. (e) Rules of Court]; and, under the circumstances, the Court is constrained to find, as it does find, that the Manager of the defendant airline in Bangkok not merely asked but threatened the plaintiff to throw him out of the plane if he did not give up his 'first class' seat because the said Manager wanted to accommodate using the words of the witness Ernesto G. Cuento, the 'white man'." 38

It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not use the term "bad faith". But can it be doubted that the recital of facts therein points to bad faith? The manager not only prevented Carrascoso from enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist class compartment just to give way to another passenger whose right thereto has not been established. Certainly, this is bad faith. Unless, of course, bad faith has assumed a meaning different from what is understood in law. For, "bad faith" contemplates a "state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for ulterior purposes." 39 And if the foregoing were not yet sufficient, there is the express finding of bad faith in the judgment of the Court of First Instance, thus:
"The evidence shows that defendant violated its contract of transportation with plaintiff in bad faith, with the aggravating circumstances that defendant's Manager in Bangkok went to the extent of threatening the plaintiff in the presence of many passengers to have him thrown out of the airplane to give the 'first class' seat that he was occupying to, again using the words of witness Ernesto G. Cuento, a 'white man' whom he (defendant's Manager) wished to accommodate, and the defendant has not proven that this 'white man' had any 'better right' to occupy the 'first class' seat that the plaintiff was occupying, duly paid for, and for which the corresponding 'first class' ticket was issued by the defendant to him." 40

5.The responsibility of an employer for the tortuous act of its employees-need not be essayed. It is well settled in law. 41 For the willful malevolent act of petitioner's manager, petitioner's his employer, must answer. Article 21 of the Civil Code says:
"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."

In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the provisions of Article 2219 (10), Civil Code, moral damages are recoverable. 42 6.A contract to transport passengers is quite different in kind and degree from any other contractual relation. 43 And this, because of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action for damages.

Passengers do not contract merely for transportation. They have a light to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. So it is, that any rude or discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier.
44

Thus, "Where a steamship company 45 had accepted a passenger's check, it was a breach of contract and a tort, giving a right of action for its agent in the presence of third persons to falsely notify her that the check was worthless and demand payment under threat of ejection, though the language used was not insulting and she was not ejected. 46 And this, because, altho the relation of passenger and carrier is "contractual both in origin and nature" nevertheless "the act that breaks the contract may be also a tort". 47 And in another case, "Where a passenger on a railroad train, when the conductor came to collect his fare, tendered him the cash fare to a point where the train was scheduled not to stop, and told him that as soon as the train reached such point he would pay the cash fare from that point to destination, there was nothing in the conduct of the passenger which justified the conductor in using insulting language to him, as by calling him a lunatic," 48 and the Supreme Court of South Carolina there held the carrier liable for the mental suffering of said passenger. Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's action as we have said, is placed upon his wrongful expulsion. This is a violation of public duty by the petitioner-air carrier a case of quasi-delict. Damages are proper. 7.Petitioner draws our attention to respondent Carrascoso's testimony, thus
"Q.You mentioned about an attendant. Who is that attendant and purser? A.When we left already that was already in the trip I could not help it. So one of the flight attendants approached me and requested from me my ticket and I said, What for? and she said, 'We will note that you were transferred to the tourist class'. I said, 'Nothing of that kind. That is tantamount to accepting my transfer.' And I also said, You are not going to note anything there because I am protesting to this transfer. Q.Was she able to note it?

A.No, because I did not give my ticket. Q.About that purser? A.Well, the seats there are so close that you feel uncomfortable and you don't have enough leg room, I stood up and I went to the pantry that was next to me and the purser was there. He told me, 'I have recorded the incident in my notebook.' He read it and translated it to me because it was recorded in French 'First class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene.' MR. VALTE I move to strike out the last part of the testimony of the witness because the best evidence would be the notes. Your Honor. COURT I will allow that as part of his testimony." 49

Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his notebooks reading "First class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene" is predicated upon evidence [Carrascoso's testimony above] which is incompetent. We do not think so. The subject of inquiry is not the entry, but the ouster incident. Testimony of the entry does not come within the proscription of the best evidence rule. Such testimony is admissible. 49 Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact of the startling occurrence was still fresh and continued to be felt. The excitement had not as yet died down. Statements then, in this environment, are admissible as part of the res gestae. 50 For, they grow "out of the nervous excitement and mental and physical condition of the declarant". 51 The utterance of the purser regarding his entry in the notebook was spontaneous, and related to the circumstances of the ouster incident. Its trustworthiness has been guaranteed. 52 It thus escapes the operation of the hearsay rule. It forms part of the res gestae. At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It would have been an easy matter for petitioner to have contradicted Carrascoso's testimony. If it were really true that no such entry was made, the deposition of the purser could have cleared up the matter. We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence.

8.Exemplary damages are well awarded. The Civil Code gives the Court ample power to grant exemplary damages in contracts and quasi-contracts. The only condition is that defendant should have "acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner". 53 The manner of ejectment of respondent Carrascoso from his first class seat fits into this legal precept. And this, in addition to moral damages. 54 9.The right to attorneys' fees is fully established. The grant of exemplary damages justifies a similar judgment for attorneys' fees. The least that can be said is that the courts below felt that it is but just and equitable that attorneys' fees be given. 55 We do not intend to break faith with the tradition that discretion well exercised as it was here should not be disturbed. 10.Questioned as excessive are the amounts decreed by both the trial court and the Court of Appeals, thus: P25,000.00 as moral damages; P10,000.00, by way of exemplary damages, and P3,000.00 as attorney's fees. The task of fixing these amounts is primarily with the trial-court. 56 The Court of Appeals did not interfere with the same. The dictates of good sense suggest that we give our imprimatur thereto. Because, the facts and circumstances point to the reasonableness thereof. 57 On balance, we say that the judgment of the Court of Appeals does not suffer from reversible error. We accordingly vote to affirm the same. Costs against petitioner. So ordered. Concepcion, C.J., Reyes J.B.L., Barrera, Dizon, Regala, Makalintal, Zaldivar and Castro, JJ., concur. Bengzon, J.P., J., did not take part.

SECOND DIVISION
[G.R. No. 84698. February 4, 1992.] PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, JUAN D. LIM, BENJAMIN P. PAULINO, ANTONIO M. MAGTALAS, COL. PEDRO SACRO, AND LT. M. SORIANO, petitioners, vs. COURT OF APPEALS, HON. REGINA ORDOEZ-BENITEZ, in her capacity as Presiding Judge of Branch 47, Regional Trial Court, Manila, SEGUNDA R. BAUTISTA, and ARSENIA D. BAUTISTA, respondents. Balgos and Perez for petitioners.

Collantes, Ramirez & Associates for private respondents. SYLLABUS 1.CIVIL LAW; QUASI-DELICTS; DOCTRINE OF IN LOCO PARENTIS. Article 2180, in conjunction with Article 2176 of the Civil Code, establishes the rule in in loco parentis. This Court discussed this doctrine in the afore-cited cases of Exconde, (101 Phil. 843) Mendoza, (101 Phil. 414), Palisoc (G.R. No. L-29025, 4 October, 1971, 41 SCRA 548) and, more recently, in Amadora vs. Court of Appeals, (G.R. No. L-47745, 15 April 1988, 160 SCRA 315). In all such cases, it had been stressed that the law (Article 2180) plainly provides that the damage should have been caused or inflicted by pupils or students of the educational institution sought to be held liable for the acts of its pupils or students while in its custody. 2.ID.; OBLIGATIONS AND CONTRACTS; CONTRACTS RESULTING IN BILATERAL OBLIGATIONS ESTABLISHED WHEN ACADEMIC INSTITUTION ACCEPTS STUDENTS FOR ENROLLMENT. When an academic institution accepts students for enrollment, there is established a contract between them, resulting in bilateral obligations which both parties are bound to comply with. For its part, the school undertakes to provide the student with an education that would presumably suffice to equip him with the necessary tools and skills to pursue higher education or a profession. On the other hand, the student covenants to abide by the school's academic requirements and observe its rules and regulations. Institutions of learning must also meet the implicit or "built-in" obligation of providing their students with an atmosphere that promotes or assists in attaining its primary undertaking of imparting knowledge. Certainly, no student can absorb the intricacies of physics or higher mathematics or explore the realm of the arts and other sciences when bullets are flying or grenades exploding in the air or where there looms around the school premises a constant threat to life and limb. Necessarily, the school must ensure that adequate steps are taken to maintain peace and order within the campus premises and to prevent the breakdown thereof. 3.ID.; QUASI-DELICTS; OBLIGATIONS ARISING FROM QUASI-DELICTS OR TORTS ARISE ONLY BETWEEN PARTIES NOT BOUND BY CONTRACT. Because the circumstances of the present case evince a contractual relation between the PSBA and Carlitos Bautista, the rules on quasi-delict do not really govern. A perusal of Article 2176 shows that obligations arising from quasi-delicts or tort, also known as extra-contractual obligations, arise only between parties not otherwise bound by contract, whether express or implied. 4.ID.; ID.; VIEW THAT LIABILITY FROM TORT MAY EXIST EVEN IF THERE IS A CONTRACT. In Air France vs. Carroscoso (124 Phil. 722), the private respondent was awarded damages for his unwarranted expulsion from a first-class seat aboard the

petitioner airline. It is noted, however, that the Court referred to the petitioner-airline's liability as one arising from tort, not one arising from a contract of carriage. In effect, Air France is authority for the view that liability from tort may exist even if there is a contract, for the act that breaks the contract may be also a tort. (Austro-America S.S. Co. vs. Thomas, 248 Fed. 231). 5.ID.; ID.; AN ACT WHICH BREACHES A CONTRACT IN BAD FAITH AND IN VIOLATION OF ART. 21 CONSTITUTES QUASI-DELICT. Air France penalized the racist policy of the airline which emboldened the petitioner's employee to forcibly oust the private respondent to cater to the comfort of a white man who allegedly "had a better right to the seat." In Austro-American, supra, the public embarrassment caused to the passenger was the justification for the Circuit Court of Appeals, (Second Circuit), to award damages to the latter. From the foregoing, it can be concluded that should the act which breaches a contract be done in bad faith and be violative of Article 21, then there is a cause to view the act as constituting a quasi-delict. 6.ID.; ID.; CONTRACTUAL RELATION, A CONDITION SINE QUA NON TO SCHOOL'S LIABILITY. A contractual relation is a condition sine qua non to the school's liability. The negligence of the school cannot exist independently on the contract, unless the negligence occurs under the circumstances set out in Article 21 of the Civil Code. 7.ID.; ID.; ID.; SCHOOL MAY STILL AVOID LIABILITY BY PROVING THAT THE BREACH OF CONTRACTUAL OBLIGATION TO STUDENTS WAS NOT DUE TO ITS NEGLIGENCE. Conceptually a school, like a common carrier, cannot be an insurer of its students against all risks. It would not be equitable to expect of schools to anticipate all types of violent trespass upon their premises, for notwithstanding the security measures installed, the same may still fail against an individual or group determined to carry out a nefarious deed inside school premises and environs. Should this be the case, the school may still avoid liability by proving that the breach of its contractual obligation to the students was not due to its negligence. 8.ID.; ID.; NEGLIGENCE; DEFINED. Negligence is statutorily defined to be the omission of that degree of diligence which is required by the nature of the obligation and corresponding to the circumstances of persons, time and place.

DECISION

PADILLA, J :
p

A stabbing incident on 30 August 1985 which caused the death of Carlitos Bautista while on the second-floor premises of the Philippine School of Business Administration (PSBA) prompted the parents of the deceased to file suit in the Regional Trial Court of Manila (Branch 47) presided over by Judge (now Court of Appeals justice) Regina Ordoez-Benitez, for damages against the said PSBA and its corporate officers. At the time of his death, Carlitos was enrolled in the third year commerce course at the PSBA. It was established that his assailants were not members of the schools academic community but were elements from outside the school. Specifically, the suit impleaded the PSBA and the following school authorities: Juan D. Lim (President), Benjamin P. Paulino (Vice-President), Antonio M. Magtalas (Treasurer/Cashier), Col. Pedro Sacro (Chief of Security) and a Lt. M. Soriano (Assistant Chief of Security). Substantially, the plaintiffs (now private respondents) sought to adjudge them liable for the victim's untimely demise due to their alleged negligence, recklessness and lack of security precautions, means and methods before, during and after the attack on the victim. During the proceedings a quo, Lt. M. Soriano terminated his relationship with the other petitioners by resigning from his position in the school. Defendants a quo (now petitioners) sought to have the suit dismissed, alleging that since they are presumably sued under Article 2180 of the Civil Code, the complaint states no cause of action against them, as jurisprudence on the subject is to the effect that academic institutions, such as the PSBA, are beyond the ambit of the rule in the afore-stated article. The respondent trial court, however, overruled petitioners' contention and thru an order dated 8 December 1987, denied their motion to dismiss. A subsequent motion for reconsideration was similarly dealt with by an order dated 25 January 1988. Petitioners then assailed the trial court's dispositions before the respondent appellate court which, in a decision * promulgated on 10 June 1988, affirmed the trial court's orders. On 22 August 1988, the respondent appellate court resolved to deny the petitioners' motion for reconsideration. Hence, this petition. At the outset, it is to be observed that the respondent appellate court primarily anchored its decision on the law of quasi-delicts, as enunciated in Articles 2176 and 2180 of the Civil Code. 1 Pertinent portions of the appellate court's now assailed ruling state:
"Article 2180 (formerly Article 1903) of the Civil Code is an adoptation from the old Spanish Civil Code. The comments of Manresa and learned authorities on its meaning should give way to present day changes. The law is not fixed and flexible (sic); it must be dynamic. In fact, the greatest value and significance of law as a rule of conduct in (sic) its flexibility to adopt to changing social conditions and its capacity to meet the new challenges of progress. Construed in the light of modern day educational systems, Article 2180 cannot be construed in its narrow concept as held in the old case of Exconde vs.

Capuno 2 and Mercado vs. Court of Appeals 3 ; hence, the ruling in the Palisoc 4 case that it should apply to all kinds of educational institutions, academic or vocational. At any rate, the law holds the teachers and heads of the school staff liable unless they relieve themselves of such liability pursuant to the last paragraph of Article 2180 by 'proving that they observed all the diligence to prevent damage.' This can only be done at a trial on the merits of the case." 5

While we agree with the respondent appellate court that the motion to dismiss the complaint was correctly denied and the complaint should be tried on the merits, we do not however agree with the premises of the appellate court's ruling. Article 2180, in conjunction with Article 2176 of the Civil Code, establishes the rule of in loco parentis. This Court discussed this doctrine in the afore-cited cases of Exconde, Mendoza, Palisoc and, more recently, in Amadora vs. Court of Appeals. 6 In all such cases, it had been stressed that the law (Article 2180) plainly provides that the damage should have been caused or inflicted by pupils or students of the educational institution sought to be held liable for the acts of its pupils or students while in its custody. However, this material situation does not exist in the present case for, as earlier indicated, the assailants of Carlitos were not students of the PSBA, for whose acts the school could be made liable.

However, does the appellate court's failure to consider such material facts mean the exculpation of the petitioners from liability? It does not necessarily follow. When an academic institution accepts students for enrollment, there is established a contract between them, resulting in bilateral obligations which both parties are bound to comply with. 7 For its part, the school undertakes to provide the student with an education that would presumably suffice to equip him with the necessary tools and skills to pursue higher education or a profession. On the other hand, the student covenants to abide by the school's academic requirements and observe its rules and regulations. Institutions of learning must also meet the implicit or "built-in" obligation of providing their students with an atmosphere that promotes or assists in attaining its primary undertaking of imparting knowledge. Certainly, no student can absorb the intricacies of physics or higher mathematics or explore the realm of the arts and other sciences when bullets are flying or grenades exploding in the air or where there looms around the school premises a constant threat to life and limb. Necessarily, the school must ensure that adequate steps are taken to maintain peace and order within the campus premises and to prevent the breakdown thereof.

Because the circumstances of the present case evince a contractual relation between the PSBA and Carlitos Bautista, the rules on quasi-delict do not really govern. 8 A perusal of Article 2176 shows that obligations arising from quasi-delicts or tort, also known as extra-contractual obligations, arise only between parties not otherwise bound by contract, whether express or implied. However, this impression has not prevented this Court from determining the existence of a tort even when there obtains a contract. In Air France vs. Carroscoso (124 Phil. 722), the private respondent was awarded damages for his unwarranted expulsion from a first-class seat aboard the petitioner airline. It is noted, however, that the Court referred to the petitioner-airline's liability as one arising from tort, not one arising from a contract of carriage. In effect, Air France is authority for the view that liability from tort may exist even if there is a contract, for the act that breaks the contract may be also a tort. (Austro-America S.S. Co. vs. Thomas, 248 Fed. 231). This view was not all that revolutionary, for even as early as 1918, this Court was already of a similar mind. In Cangco vs. Manila Railroad (38 Phil. 780), Mr. Justice Fisher elucidated thus:
"The field of non-contractual obligation is much more broader than that of contractual obligation, comprising, as it does, the whole extent of juridical human relations. These two fields, figuratively speaking, concentric; that is to say, the mere fact that a person is bound to another by contract does not relieve him from extra-contractual liability to such person. When such a contractual relation exists the obligor may break the contract under such conditions that the same act which constitutes a breach of the contract would have constituted the source of an extra-contractual obligation had no contract existed between the parties."

Immediately what comes to mind is the chapter of the Civil Code on Human Relations, particularly Article 21, which provides:
"Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage." (emphasis supplied)

Air France penalized the racist policy of the airline which emboldened the petitioner's employee to forcibly oust the private respondent to cater to the comfort of a white man who allegedly "had a better right to the seat." In Austro-American, supra, the public embarrassment caused to the passenger was the justification for the Circuit Court of Appeals, (Second Circuit), to award damages to the latter. From the foregoing, it can be concluded that should the act which breaches a contract be done in bad faith and be violative of Article 21, then there is a cause to view the act as constituting a quasi-delict. In the circumstances obtaining in the case at bar, however, there is, as yet, no finding that the contract between the school and Bautista had been breached thru the former's

negligence in providing proper security measures. This would be for the trial court to determine. And, even if there be a finding of negligence, the same could give rise generally to a breach of contractual obligation only. Using the test of Cangco, supra, the negligence of the school would not be relevant absent a contract. In fact, that negligence becomes material only because of the contractual relation between PSBA and Bautista. In other words, a contractual relation is a condition sine qua non to the school's liability. The negligence of the school cannot exist independently on the contract, unless the negligence occurs under the circumstances set out in Article 21 of the Civil Code. This Court is not unmindful of the attendant difficulties posed by the obligation of schools, above-mentioned, for conceptually a school, like a common carrier, cannot be an insurer of its students against all risks. This is specially true in the populous student communities of the so-called "university belt" in Manila where there have been reported several incidents ranging from gang wars to other forms of hooliganism. It would not be equitable to expect of schools to anticipate all types of violent trespass upon their premises, for notwithstanding the security measures installed, the same may still fail against an individual or group determined to carry out a nefarious deed inside school premises and environs. Should this be the case, the school may still avoid liability by proving that the breach of its contractual obligation to the students was not due to its negligence, here statutorily defined to be the omission of that degree of diligence which is required by the nature of the obligation and corresponding to the circumstances of persons, time and place. 9 As the proceedings a quo have yet to commence on the substance of the private respondents' complaint, the record is bereft of all the material facts. Obviously, at this stage, only the trial court can make such a determination from the evidence still to unfold. WHEREFORE, the foregoing premises considered, the petition is DENIED. The Court of origin (RTC, Manila, Br. 47) is hereby ordered to continue proceedings consistent with this ruling of the Court. Costs against the petitioners. SO ORDERED.

SECOND DIVISION
[G.R. No. 122039. May 31, 2000.] VICENTE CALALAS, petitioner, vs. COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and FRANCISCO SALVA, respondents. Leo B. Diocos for petitioner.

Enrique S. Empleo for E.J. Sunga. Eduardo T. Sedillo for F. Salva. SYNOPSIS Sunga filed a complaint for damages against Calalas, alleging violation of the contract of carriage by the former in failing to exercise the diligence required of him as a common carrier. Calalas, on the other hand, filed a third-party complaint against Francisco Salva, the owner of the Isuzu truck that bumped their passenger jeepney. The lower court rendered judgment against Salva as third-party defendant and absolved Calalas of liability, holding that it was the driver of the Isuzu truck who was responsible for the accident. It took cognizance of another case (Civil Case No. 3490), filed by Calalas against Salva and Verena for quasi-delict, in which Branch 37 of the same court held Salva and his driver Verena jointly liable to Calalas for the damage to his jeepney. On appeal, the Court of Appeals reversed the ruling of the lower court on the ground that Sunga's cause of action was based on a contract of carriage, not quasi-delict, and that the common carrier failed to exercise the diligence required under the Civil Code. The appellate court dismissed the third-party complaint against Salva and adjudged Calalas liable for damages to Sunga. Hence, this petition. It is immaterial that the proximate cause of the collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of contract. In the case at bar, upon the happening of the accident, the presumption of negligence at once arose, and it became the duty of petitioner to prove that he had observed extraordinary diligence in the care of his passengers. The fact that Sunga was seated in an "extension seat" placed her in a peril greater than that to which the other passengers were exposed. Therefore, not only was petitioner unable to overcome the presumption of negligence imposed on him for the injury sustained by Sunga, but also, the evidence showed he was actually negligent in transporting passengers. The decision of the Court of Appeals was, affirmed, with the modification that the award of moral damages was deleted. SYLLABUS 1.CIVIL LAW; TORTS AND DAMAGES; QUASI-DELICT AND BREACH OF CONTRACT; DISTINGUISHED; CASE AT BAR. The issue in Civil Case No. 3490 was whether Salva and his driver Verena were liable for quasi-delict for the damage caused to petitioner's jeepney. On the other hand, the issue in this case is whether petitioner is liable on his contract of carriage. The first, quasi-delict, also known as culpa aquiliana or culpa extra contractual, has as its source the negligence of the tortfeasor.

The second, breach of contract or culpa contractual, is premised upon the negligence in the performance of a contractual obligation. Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the basis of the action, whereas in breach of contract, the action can be prosecuted merely by proving the existence of the contract and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination. In case of death or injuries to passengers, Art. 1756 of the Civil Code provides that common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of proof. 2.ID.; ID.; ID.; DOCTRINE OF PROXIMATE CAUSE; NOT APPLICABLE IN ACTIONS INVOLVING BREACH OF CONTRACT; RATIONALE. The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers. 3.ID.; ID.; ID.; CASO FORTUITO; DEFINED; REQUIREMENTS THEREOF. A caso fortuito is an event which could not be foreseen, or which, though foreseen, was inevitable. This requires that the following requirements be present: (a) the cause of the breach is independent of the debtor's will; (b) the event is unforeseeable or unavoidable; (c) the event is such as to render it impossible for the debtor to fulfill his obligation in a normal manner, and (d) the debtor did not take part in causing the injury to the creditor. Petitioner should have foreseen the danger of parking his jeepney with its body protruding two meters into the highway. 4.ID.; DAMAGES; MORAL DAMAGES; WHEN IT MAY BE RECOVERED. As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items enumerated under Art. 2219 of the Civil Code. As an exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as provided in Art. 1764, in relation to Art. 2206 (3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Art. 2220.
SCDaET

DECISION

MENDOZA, J :
p

This is a petition for review on certiorari of the decision 1 of the Court of Appeals, dated March 31, 1991, reversing the contrary decision of the Regional Trial Court, Branch 36, Dumaguete City, and awarding damages instead to private respondent Eliza Jujeurche Sunga as plaintiff in an action for breach of contract of carriage.
prLL

The facts, as found by the Court of Appeals, are as follows: At 10 o'clock in the morning of August 23, 1989, private respondent Eliza Jujeurche G. Sunga, then a college freshman majoring in Physical Education at the Siliman University, took a passenger jeepney owned and operated by petitioner Vicente Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was given by the conductor an "extension seat," a wooden stool at the back of the door at the rear end of the vehicle. On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a passenger off. As she was seated at the rear of the vehicle, Sunga gave way to the outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio Verena and owned by Francisco Salva bumped the left rear portion of the jeepney. As a result, Sunga was injured. She sustained a fracture of the "distal third of the left tibia-fibula with severe necrosis of the underlying skin." Closed reduction of the fracture, long leg circular casting, and case wedging were done under sedation. Her confinement in the hospital lasted from August 23 to September 7, 1989. Her attending physician, Dr. Danilo V. Oligario, an orthopedic surgeon, certified she would remain on a cast for a period of three months and would have to ambulate in crutches during said period.
dctai

On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging violation of the contract of carriage by the former in failing to exercise the diligence required of him as a common carrier. Calalas, on the other hand, filed a third-party complaint against Francisco Salva, the owner of the Isuzu truck. The lower court rendered judgment, against Salva as third-party defendant and absolved Calalas of liability, holding that it was the driver of the Isuzu truck who was responsible for the accident. It took cognizance of another case (Civil Case No. 3490), filed by Calalas against Salva and Verena, for quasi-delict, in which Branch 37 of the same court held Salva and his driver Verena jointly liable to Calalas for the damage to his jeepney. On appeal to the Court of Appeals, the ruling of the lower court was reversed on the ground that Sunga's cause of action was based on a contract of carriage, not quasi-delict, and that the common carrier failed to exercise the diligence required under the Civil Code. The appellate court dismissed the third-party complaint against Salva and adjudged Calalas liable for damages to Sunga. The dispositive portion of its decision reads:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another one is entered ordering defendant-appellee Vicente Calalas to pay plaintiff-appellant: (1)P50,000.00 as actual and compensatory damages; (2)P50,000.00 as moral damages; (3)P10,000.00 as attorney's fees; and (4)P1,000.00 as expenses of litigation; and (5)to pay the costs. SO ORDERED.

Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that the negligence of Verena was the proximate cause of the accident negates his liability and that to rule otherwise would be to make the common carrier an insurer of the safety of its passengers. He contends that the bumping of the jeepney by the truck owned by Salva was a caso fortuito. Petitioner further assails the award of moral damages to Sunga on the ground that it is not supported by evidence.
prLL

The petition has no merit. The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver and the owner of the truck liable for quasi-delict ignores the fact that she was never a party to that case and, therefore, the principle of res judicata does not apply. Nor are the issues in Civil Case No. 3490 and in the present case the same. The issue in Civil Case No. 3490 was whether Salva and his driver Verena were liable for quasi-delict for the damage caused to petitioner's jeepney. On the other hand, the issue in this case is whether petitioner is liable on his contract of carriage. The first, quasi-delict, also known as culpa aquiliana or culpa extra contractual, has as its source the negligence of the tortfeasor. The second, breach of contract or culpa contractual, is premised upon the negligence in the performance of a contractual obligation.

Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the basis of the action, whereas in breach of contract, the action can be prosecuted merely by proving the existence of the contract and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination. 2 In case of death or injuries to passengers, Art. 1756 of the Civil Code provides that

common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of proof. There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva and his driver Verena liable for the damage to petitioner's jeepney, should be binding on Sunga. It is immaterial that the proximate cause of the collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers. It provides:
llcd

ARTICLE 1733.Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1746, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles 1755 and 1756.
LLjur

ARTICLE 1755.A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. ARTICLE 1756.In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed by Articles 1733 and 1755.

In the case at bar, upon the happening of the accident, the presumption of negligence at once arose, and it became the duty of petitioner to prove that he had to observe extraordinary diligence in the care of his passengers. Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all

the circumstances" as required by Art. 1755? We do not think so. Several factors militate against petitioner's contention. First, as found by the Court of Appeals, the jeepney was not properly parked, its rear portion being exposed about two meters from the broad shoulders of the highway, and facing the middle of the highway in a diagonal angle. This is a violation of the R.A. No. 4136, as amended, or the Land Transportation and Traffic Code, which provides:
SECTION 54.Obstruction of Traffic. No person shall drive his motor vehicle in such a manner as to obstruct or impede the passage of any vehicle, nor, while discharging or taking on passengers or loading or unloading freight, obstruct the free passage of other vehicles on the highway.
LLpr

Second, it is undisputed that petitioner's driver took in more passengers than the allowed seating capacity of the jeepney, a violation of 32(a) of the same law. It provides:
Exceeding registered capacity. No person operating any motor vehicle shall allow more passengers or more freight or cargo in his vehicle than its registered capacity.

The fact that Sunga was seated in an "extension seat" placed her in a peril greater than that to which the other passengers were exposed. Therefore, not only was petitioner unable to overcome the presumption of negligence imposed on him for the injury sustained by Sunga, but also, the evidence shows he was actually negligent in transporting passengers. We find it hard to give serious thought to petitioner's contention that Sunga's taking an "extension seat" amounted to an implied assumption of risk. It is akin to arguing that the injuries to the many victims of the tragedies in our seas should not be compensated merely because those passengers assumed a greater risk of drowning by boarding an overloaded ferry. This is also true of petitioner's contention that the jeepney being bumped while it was improperly parked constitutes caso fortuito. A caso fortuito is an event which could not be foreseen, or which, though foreseen, was inevitable. 3 This requires that the following requirements be present: (a) the cause of the breach is independent of the debtor's will; (b) the event is unforeseeable or unavoidable; (c) the event is such as to render it impossible for the debtor to fulfill his obligation in a normal manner, and (d) the debtor did not take part in causing the injury to the creditor. 4 Petitioner should have foreseen the danger of parking his jeepney with its body protruding two meters into the highway.
dctai

Finally, petitioner challenges the award of moral damages alleging that it is excessive and without basis in law. We find this contention well taken. In awarding moral damages, the Court of Appeals stated:

Plaintiff-appellant at the time of the accident was a first-year college student in that school year 1989-1990 at the Siliman University, majoring in Physical Education. Because of the injury, she was not able to enroll in the second semester of that school year. She testified that she had no more intention of continuing with her schooling, because she could not walk and decided not to pursue her degree, major in Physical Education "because of my leg which has a defect already." Plaintiff-appellant likewise testified that even while she was under confinement, she cried in pain because of her injured left foot. As a result of her injury, the Orthopedic Surgeon also certified that she has "residual bowing of the fracture side." She likewise decided not to further pursue Physical Education as her major subject, because "my left leg . . . has a defect already."
LLphil

Those are her physical pains and moral sufferings, the inevitable bedfellows of the injuries that she suffered. Under Article 2219 of the Civil Code, she is entitled to recover moral damages in the sum of P50,000.00, which is fair, just and reasonable.

As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items enumerated under Art. 2219 of the Civil Code. 5 As an exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as provided in Art. 1764, in relation to Art. 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Art. 2220. 6 In this case, there is no legal basis for awarding moral damages since there was no factual finding by the appellate court that petitioner acted in bad faith in the performance of the contract of carriage. Sunga's contention that petitioner's admission in open court that the driver of the jeepney failed to assist her in going to a nearby hospital cannot be construed as an admission of bad faith. The fact that it was the driver of the Isuzu truck who took her to the hospital does not imply that petitioner was utterly indifferent to the plight of his injured passenger. If at all, it is merely implied recognition by Verena that he was the one at fault for the accident.
LLpr

WHEREFORE, the decision of the Court of Appeals, dated March 31, 1995, and its resolution, dated September 11, 1995, are AFFIRMED, with the MODIFICATION that the award of moral damages is DELETED. SO ORDERED.

EN BANC
[G.R. No. L-12219. March 15, 1918.]

AMADO PICART, plaintiff-appellant, vs. FRANK SMITH, jr., defendant-appellee. Alejo Mabanag for appellant. G. E. Campbell for appellee. SYLLABUS 1.NEGLIGENCE; CRITERION FOR DETERMINING EXISTENCE OF NEGLIGENCE. The test for determining whether a person is negligent in doing an act whereby injury or damage results to the person or property of another is this: Would a prudent man, in the position of the person to whom negligence is attributed, foresee harm to the person injured as a reasonable consequence of the course about to be pursued. If so, the law imposes a duty on the actor to refrain from that course or to take precaution against its mischievous results, and the failure to do so constitutes negligence. Reasonable foresight of harm, followed by the ignoring of the admonition born of this prevision, is the constitutive fact in negligence. 2.ID.; CONTRIBUTORY NEGLIGENCE; SUCCESSIVE NEGLIGENT ACTS. Where both parties are guilty of negligence, but the negligent act of one succeeds that of the other by an appreciable interval of time, the one who has the last reasonable opportunity to avoid the impending harm and fails to do so is chargeable with the consequences, without reference to the prior negligence of the other party. 3.ID.; ID.; CASE AT BAR. The plaintiff was riding a pony on a bridge. Seeing an automobile ahead he improperly pulled his horse over to the railing on the right. The driver of the automobile, however, guided his car toward the plaintiff without diminution of speed until he was only a few feet away. He then turned to the right but passed so closely to the horse that the latter being frightened, jumped around and was killed by the passing car. Held: That although the plaintiff was guilty of negligence in being on the wrong side of the bridge, the defendant was nevertheless civilly liable for the legal damages resulting from the collision, as he had a fair opportunity to avoid the accident after he realized the situation created by the negligence of the plaintiff and failed to avail himself of that opportunity; while the plaintiff could by no means then place himself in a position of greater safety.

DECISION

STREET, J :
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In this action the plaintiff, Amado Picart, seeks to recover of the defendant, Frank Smith, jr., the sum of P31,100, as damages alleged to have been caused by an automobile driven by the defendant. From a judgment of the Court of First Instance of the Province of La Union absolving the defendant from liability the plaintiff has appealed. The occurrence which gave rise to the institution of this action took place on December 12, 1912, on the Carlatan Bridge, at San Fernando, La Union. It appears that upon the occasion in question the plaintiff was riding on his pony over said bridge. Before he had gotten half way across, the defendant approached from the opposite direction in an automobile, going at the rate of about ten or twelve miles per hour. As the defendant neared the bridge he saw a horseman on it and blew his horn to give warning of his approach. He continued his course and after he had taken the bridge he gave two more successive blasts, as it appeared to him that the man on horseback before him was not observing the rule of the road. The plaintiff, it appears, saw the automobile coming and heard the warning signals. However, being perturbed by the novelty of the apparition or the rapidity of the approach, he pulled the pony closely up against the railing on the right side of the bridge instead of going to the left. He says that the reason he did this was that he thought he did not have sufficient time to get over to the other side. The bridge is shown to have a length of about 75 meters and a width of 4.08 meters. As the automobile approached, the defendant guided it toward his left, that being the proper side of the road for the machine. In so doing the defendant assumed that the horseman would move to the other side. The pony had not as yet exhibited fright, and the rider had made no sign for the automobile to stop. Seeing that the pony was apparently quiet, the defendant, instead of veering to the right while yet some distance away or slowing down, continued to approach directly toward the horse without diminution of speed. When he had gotten quite near, there being then no possibility of the horse getting across to the other side, the defendant quickly turned his car sufficiently to the right to escape hitting the horse alongside of the railing where it was then standing; but in so doing the automobile passed in such close proximity to the animal that it became frightened and turned its body across the bridge with its head toward the railing. In so doing, it was struck on the hock of the left hind leg by the flange of the car and the limb was broken. The horse fell and its rider was thrown off with some violence. From the evidence adduced in the case we believe that when the accident occurred the free space where the pony stood between the automobile and the railing of the bridge was probably less than one and one half meters. As a result of its injuries the horse died. The plaintiff received contusions which caused temporary unconsciousness and required medical attention for several days. The question presented for decision is whether or not the defendant in maneuvering his car in the manner above described was guilty of negligence such as gives rise to a civil obligation to repair the damage done; and we are of the opinion that he is so liable. As the defendant started across the bridge, he had the right to

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

Applying this test to the conduct of the defendant in the present case we think that negligence is clearly established. A prudent man, placed in the position of the defendant, would, in our opinion, have recognized that the course which he was pursuing was fraught with risk, and would therefore have foreseen harm to the horse and rider as a reasonable consequence of that course. Under these circumstances the law imposed on the defendant the duty to guard against the threatened harm. It goes without saying that the plaintiff himself was not free from fault, for he was guilty of antecedent negligence in planting himself on the wrong side of the road. But as we have already stated, the defendant was also negligent; and in such case the problem always is to discover which agent is immediately and directly responsible. It will be noted that the negligent acts of the two parties were not contemporaneous, since the negligence of the defendant succeeded the negligence of the plaintiff by an appreciable interval. Under these circumstances the law is that the person who has the last fair chance to avoid the impending harm and fails to do so is chargeable with the consequences, without reference to the prior negligence of the other party. The decision in the case of Rakes vs. Atlantic, Gulf and Pacific Co.(7 Phil. Rep., 359) should perhaps be mentioned in this connection. This Court there held that while contributory negligence on the part of the person injured did not constitute a bar to recover, it could be received in evidence to reduce the damages which would otherwise have been assessed wholly against the other party. The defendant company had there employed the plaintiff, a laborer, to assist in transporting iron rails from a barge in Manila harbor to the company's yards located not far away. The rails were conveyed upon cars which were hauled along a narrow track. At a certain spot near the water's edge the track gave way by reason of the combined effect of the weight of the car and the insecurity of the road bed. The car was in consequence upset; the rails slid off; and the plaintiff's leg was caught and broken. It appeared in evidence that the accident was due to the effects of a typhoon which had dislodged one of the supports of the track. The court found that the defendant company was negligent in having failed to repair the bed of the track and also that the plaintiff was, at the moment of the accident, guilty of contributory negligence in walking at the side of the car instead of being in front or behind. It was held that while the defendant was liable to the plaintiff by reason of its negligence in having failed to keep the track in proper repair, nevertheless the amount of the damages should be reduced on account of the contributory negligence of the plaintiff. As will be seen the defendant's negligence in that case consisted in an omission only. The liability of the company arose from its responsibility for the dangerous condition of its track. In a case like the one now before us, where the defendant was actually present and operating the automobile which caused the damage, we do not feel constrained to attempt to weigh the negligence of the respective parties in order to apportion the damage according to the degree of their relative fault. It is enough to say that the negligence of the defendant

was in this case the immediate and determining cause of the accident and that the antecedent negligence of the plaintiff was a more remote factor in the case. A point of minor importance in the case is indicated in the special defense pleaded in the defendant's answer, to the effect that the subject matter of the action had been previously adjudicated in the court of a justice of the peace. In this connection it appears that soon after the accident in question occurred, the plaintiff caused criminal proceedings to be instituted before a justice of the peace charging the defendant with the infliction of serious injuries (lesiones graves). At the preliminary investigation the defendant was discharged by the magistrate and the proceedings were dismissed. Conceding that the acquittal of the defendant at a trial upon the merits in a criminal prosecution for the offense mentioned would be res adjudicata upon the question of his civil liability arising from negligence a point upon which it is unnecessary to express an opinion the action of the justice of the peace in dismissing the criminal proceeding upon the preliminary hearing can have no such effect. (See U.S. vs. Banzuela and Banzuela, 31 Phil. Rep., 564.) From what has been said it results that the judgment of the lower court must be reversed, and judgment is here rendered that the plaintiff recover of the defendant the sum of two hundred pesos (P200), with costs of both instances. The sum here awarded is estimated to include the value of the horse, medical expenses of the plaintiff, the loss or damage occasioned to articles of his apparel, and lawful interest on the whole to the date of this recovery. The other damages claimed by the plaintiff are remote or otherwise of such characters as not to be recoverable. So ordered. Arellano, C.J., Torres, Carson, Araullo, Avancea, and Fisher, JJ., concur. Johnson, J., reserves his vote.

Separate Opinions
MALCOLM, J., concurring: After mature deliberation, I have finally decided to concur with the judgment in this case. I do so because of my understanding of the "last clear chance" rule of the law of negligence as particularly applied to automobile accidents. This rule cannot be invoked where the negligence of the plaintiff is concurrent with that of the defendant. Again, if a traveller when he reaches the point of collision is in a situation to extricate himself and avoid injury, his negligence at that point will prevent a recovery. But Justice Street finds as a fact that the negligent act of the defendant succeeded that of the plaintiff by an appreciable interval of time, and that at that moment the plaintiff had no opportunity to avoid the accident. consequently, the "last clear chance" rule is applicable. In other words, when a traveller has reached a point where he cannot extricate himself and vigilance on his part will not avert the injury, his negligence in reaching that position becomes the condition and not the proximate cause of the injury

and will not preclude a recovery. (Note especially Aiken vs. Metcalf [1917], 102 Atl., 330.)