AV E L I N O C A S U PA N A N a n d R O B E R TO C A P I T U L O ,
petitioners, vs. MARIO LLAVORE LAROYA, respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari to set aside the
Resolution[1] dated December 28, 1999 dismissing the petition for
certiorari and the Resolution[2] dated August 24, 2000 denying
the motion for reconsideration, both issued by the Regional Trial
Court of Capas, Tarlac, Branch 66, in Special Civil Action No. 17-
C (99).
The Facts
Two vehicles, one driven by respondent Mario Llavore Laroya
(Laroya for brevity) and the other owned by petitioner Roberto
Capitulo (Capitulo for brevity) and driven by petitioner Avelino
Casupanan (Casupanan for brevity), figured in an accident. As a
result, two cases were filed with the Municipal Circuit Trial Court
(MCTC for brevity) of Capas, Tarlac. Laroya filed a criminal case
against Casupanan for reckless imprudence resulting in damage
to property, docketed as Criminal Case No. 002-99. On the other
hand, Casupanan and Capitulo filed a civil case against Laroya
for quasi-delict, docketed as Civil Case No. 2089.
When the civil case was filed, the criminal case was then at its
preliminary investigation stage. Laroya, defendant in the civil
case, filed a motion to dismiss the civil case on the ground of
forum-shopping considering the pendency of the criminal case.
The MCTC granted the motion in the Order of March 26, 1999
and dismissed the civil case.
On Motion for Reconsideration, Casupanan and Capitulo insisted
that the civil case is a separate civil action which can proceed
independently of the criminal case. The MCTC denied the motion
for reconsideration in the Order of May 7, 1999. Casupanan and
Capitulo filed a petition for certiorari under Rule 65 before the
Regional Trial Court (Capas RTC for brevity) of Capas, Tarlac,
Branch 66,[3] assailing the MCTCs Order of dismissal.
The Trial Courts Ruling
The Capas RTC rendered judgment on December 28, 1999
dismissing the petition for certiorari for lack of merit. The Capas
RTC ruled that the order of dismissal issued by the MCTC is a
final order which disposes of the case and therefore the proper
remedy should have been an appeal. The Capas RTC further held
that a special civil action for certiorari is not a substitute for a lost
appeal. Finally, the Capas RTC declared that even on the premise
that the MCTC erred in dismissing the civil case, such error is a
pure error of judgment and not an abuse of discretion.
Casupanan and Capitulo filed a Motion for Reconsideration but
the Capas RTC denied the same in the Resolution of August 24,
2000.
Hence, this petition.
The Issue
The petition premises the legal issue in this wise:
In a certain vehicular accident involving two parties, each one of
them may think and believe that the accident was caused by the
fault of the other. x x x [T]he first party, believing himself to be the
aggrieved party, opted to file a criminal case for reckless
imprudence against the second party. On the other hand, the
second party, together with his operator, believing themselves to
be the real aggrieved parties, opted in turn to file a civil case for
quasi-delict against the first party who is the very private
complainant in the criminal case.[4]
Thus, the issue raised is whether an accused in a pending
criminal case for reckless imprudence can validly file,
simultaneously and independently, a separate civil action for
quasi-delict against the private complainant in the criminal case.
The Courts Ruling
Casupanan and Capitulo assert that Civil Case No. 2089, which
the MCTC dismissed on the ground of forum-shopping,
constitutes a counterclaim in the criminal case. Casupanan and
Capitulo argue that if the accused in a criminal case has a
counterclaim against the private complainant, he may file the
counterclaim in a separate civil action at the proper time. They
contend that an action on quasi-delict is different from an action
resulting from the crime of reckless imprudence, and an accused
in a criminal case can be an aggrieved party in a civil case arising
from the same incident. They maintain that under Articles 31 and
2176 of the Civil Code, the civil case can proceed independently
of the criminal action. Finally, they point out that Casupanan was
not the only one who filed the independent civil action based on
quasi-delict but also Capitulo, the owner-operator of the vehicle,
who was not a party in the criminal case.
In his Comment, Laroya claims that the petition is fatally defective
as it does not state the real antecedents. Laroya further alleges
that Casupanan and Capitulo forfeited their right to question the
order of dismissal when they failed to avail of the proper remedy
of appeal. Laroya argues that there is no question of law to be
resolved as the order of dismissal is already final and a petition for
certiorari is not a substitute for a lapsed appeal.
In their Reply, Casupanan and Capitulo contend that the petition
raises the legal question of whether there is forum-shopping since
they filed only one action - the independent civil action for quasi-
delict against Laroya.
Nature of the Order of Dismissal
The MCTC dismissed the civil action for quasi-delict on the
ground of forum-shopping under Supreme Court Administrative
Circular No. 04-94. The MCTC did not state in its order of
dismissal[5] that the dismissal was with prejudice. Under the
Administrative Circular, the order of dismissal is without prejudice
to refiling the complaint, unless the order of dismissal expressly
states it is with prejudice.[6] Absent a declaration that the
dismissal is with prejudice, the same is deemed without prejudice.
Thus, the MCTCs dismissal, being silent on the matter, is a
dismissal without prejudice.
Section 1 of Rule 41[7] provides that an order dismissing an
action without prejudice is not appealable. The remedy of the
aggrieved party is to file a special civil action under Rule 65.
Section 1 of Rule 41 expressly states that where the judgment or
final order is not appealable, the aggrieved party may file an
appropriate special civil action under Rule 65. Clearly, the Capas
RTCs order dismissing the petition for certiorari, on the ground
that the proper remedy is an ordinary appeal, is erroneous.
Forum-Shopping
The essence of forum-shopping is the filing of multiple suits
involving the same parties for the same cause of action, either
simultaneously or successively, to secure a favorable judgment.[8]
Forum-shopping is present when in the two or more cases
pending, there is identity of parties, rights of action and reliefs
sought.[9] However, there is no forum-shopping in the instant
case because the law and the rules expressly allow the filing of a
separate civil action which can proceed independently of the
criminal action.
Laroya filed the criminal case for reckless imprudence resulting in
damage to property based on the Revised Penal Code while
Casupanan and Capitulo filed the civil action for damages based
on Article 2176 of the Civil Code. Although these two actions
arose from the same act or omission, they have different causes
of action. The criminal case is based on culpa criminal punishable
under the Revised Penal Code while the civil case is based on
culpa aquiliana actionable under Articles 2176 and 2177 of the
Civil Code. These articles on culpa aquiliana read:
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.
Art. 2177. Responsibility for fault or negligence under the
preceding article is entirely separate and distinct from the civil
liability arising from negligence under the Penal Code. But the
plaintiff cannot recover damages twice for the same act or
omission of the defendant.
Any aggrieved person can invoke these articles provided he
proves, by preponderance of evidence, that he has suffered
damage because of the fault or negligence of another. Either the
private complainant or the accused can file a separate civil action
under these articles. There is nothing in the law or rules that state
only the private complainant in a criminal case may invoke these
articles.
Moreover, paragraph 6, Section 1, Rule 111 of the 2000 Rules on
Criminal Procedure (2000 Rules for brevity) expressly requires the
accused to litigate his counterclaim in a separate civil action, to
wit:
SECTION 1. Institution of criminal and civil actions. (a) x x x.
No counterclaim, cross-claim or third-party complaint may be filed
by the accused in the criminal case, but any cause of action which
could have been the subject thereof may be litigated in a separate
civil action. (Emphasis supplied)
Since the present Rules require the accused in a criminal action
to file his counterclaim in a separate civil action, there can be no
forum-shopping if the accused files such separate civil action.
Filing of a separate civil action
Section 1, Rule 111 of the 1985 Rules on Criminal Procedure
(1985 Rules for brevity), as amended in 1988, allowed the filing of
a separate civil action independently of the criminal action
provided the offended party reserved the right to file such civil
action. Unless the offended party reserved the civil action before
the presentation of the evidence for the prosecution, all civil
actions arising from the same act or omission were deemed
impliedly instituted in the criminal case. These civil actions
referred to the recovery of civil liability ex-delicto, the recovery of
damages for quasi-delict, and the recovery of damages for
violation of Articles 32, 33 and 34 of the Civil Code on Human
Relations.
Thus, to file a separate and independent civil action for quasi-
delict under the 1985 Rules, the offended party had to reserve in
the criminal action the right to bring such action. Otherwise, such
civil action was deemed impliedly instituted in the criminal action.
Section 1, Rule 111 of the 1985 Rules provided as follows:
Section 1. Institution of criminal and civil actions. When a criminal
action is instituted, the civil action for the recovery of civil liability
is impliedly instituted with the criminal action, unless the offended
party waives the action, reserves his right to institute it separately,
or institutes the civil action prior to the criminal action.
Such civil action includes recovery of indemnity under the Revised
Penal Code, and damages under Articles 32, 33, 34 and 2176 of
the Civil Code of the Philippines arising from the same act or
omission of the accused.
A waiver of any of the civil actions extinguishes the others. The
institution of, or the reservation of the right to file, any of said civil
actions separately waives the others.
The reservation of the right to institute the separate civil actions
shall be made before the prosecution starts to present its
evidence and under circumstances affording the offended party a
reasonable opportunity to make such reservation.
In no case may the offended party recover damages twice for the
same act or omission of the accused.
x x x. (Emphasis supplied)
Section 1, Rule 111 of the 1985 Rules was amended on
December 1, 2000 and now provides as follows:
SECTION 1. Institution of criminal and civil actions. (a) When a
criminal action is instituted, the civil action for the recovery of civil
liability arising from the offense charged shall be deemed
instituted with the criminal action unless the offended party waives
the civil action, reserves the right to institute it separately or
institutes the civil action prior to the criminal action.

The reservation of the right to institute separately the civil action
shall be made before the prosecution starts presenting its
evidence and under circumstances affording the offended party a
reasonable opportunity to make such reservation.
xxx
(b) x x x
Where the civil action has been filed separately and trial thereof
has not yet commenced, it may be consolidated with the criminal
action upon application with the court trying the latter case. If the
application is granted, the trial of both actions shall proceed in
accordance with section 2 of this rule governing consolidation of
the civil and criminal actions. (Emphasis supplied)
Under Section 1 of the present Rule 111, what is deemed
instituted with the criminal action is only the action to recover civil
liability arising from the crime or ex-delicto. All the other civil
actions under Articles 32, 33, 34 and 2176 of the Civil Code are
no longer deemed instituted, and may be filed separately and
prosecuted independently even without any reservation in the
criminal action. The failure to make a reservation in the criminal
action is not a waiver of the right to file a separate and
independent civil action based on these articles of the Civil Code.
The prescriptive period on the civil actions based on these articles
of the Civil Code continues to run even with the filing of the
criminal action. Verily, the civil actions based on these articles of
the Civil Code are separate, distinct and independent of the civil
action deemed instituted in the criminal action.[10]
Under the present Rule 111, the offended party is still given the
option to file a separate civil action to recover civil liability ex-
delicto by reserving such right in the criminal action before the
prosecution presents its evidence. Also, the offended party is
deemed to make such reservation if he files a separate civil action
before filing the criminal action. If the civil action to recover civil
liability ex-delicto is filed separately but its trial has not yet
commenced, the civil action may be consolidated with the criminal
action. The consolidation under this Rule does not apply to
separate civil actions arising from the same act or omission filed
under Articles 32, 33, 34 and 2176 of the Civil Code.[11]
Suspension of the Separate Civil Action
Under Section 2, Rule 111 of the amended 1985 Rules, a
separate civil action, if reserved in the criminal action, could not
be filed until after final judgment was rendered in the criminal
action. If the separate civil action was filed before the
commencement of the criminal action, the civil action, if still
pending, was suspended upon the filing of the criminal action until
final judgment was rendered in the criminal action. This rule
applied only to the separate civil action filed to recover liability ex-
delicto. The rule did not apply to independent civil actions based
on Articles 32, 33, 34 and 2176 of the Civil Code, which could
proceed independently regardless of the filing of the criminal
action.
The amended provision of Section 2, Rule 111 of the 2000 Rules
continues this procedure, to wit:
SEC. 2. When separate civil action is suspended. After the
criminal action has been commenced, the separate civil action
arising therefrom cannot be instituted until final judgment has
been entered in the criminal action.
If the criminal action is filed after the said civil action has already
been instituted, the latter shall be suspended in whatever stage it
may be found before judgment on the merits. The suspension
shall last until final judgment is rendered in the criminal action.
Nevertheless, before judgment on the merits is rendered in the
civil action, the same may, upon motion of the offended party, be
consolidated with the criminal action in the court trying the
criminal action. In case of consolidation, the evidence already
adduced in the civil action shall be deemed automatically
reproduced in the criminal action without prejudice to the right of
the prosecution to cross-examine the witnesses presented by the
offended party in the criminal case and of the parties to present
additional evidence. The consolidated criminal and civil actions
shall be tried and decided jointly.
During the pendency of the criminal action, the running of the
period of prescription of the civil action which cannot be instituted
separately or whose proceeding has been suspended shall be
tolled.
x x x. (Emphasis supplied)
Thus, Section 2, Rule 111 of the present Rules did not change the
rule that the separate civil action, filed to recover damages ex-
delicto, is suspended upon the filing of the criminal action. Section
2 of the present Rule 111 also prohibits the filing, after
commencement of the criminal action, of a separate civil action to
recover damages ex-delicto.
When civil action may proceed independently
The crucial question now is whether Casupanan and Capitulo,
who are not the offended parties in the criminal case, can file a
separate civil action against the offended party in the criminal
case. Section 3, Rule 111 of the 2000 Rules provides as follows:
SEC 3. When civil action may proceed independently. - In the
cases provided in Articles 32, 33, 34 and 2176 of the Civil Code of
the Philippines, the independent civil action may be brought by
the offended party. It shall proceed independently of the criminal
action and shall require only a preponderance of evidence. In no
case, however, may the offended party recover damages twice for
the same act or omission charged in the criminal action.
(Emphasis supplied)
Section 3 of the present Rule 111, like its counterpart in the
amended 1985 Rules, expressly allows the offended party to bring
an independent civil action under Articles 32, 33, 34 and 2176 of
the Civil Code. As stated in Section 3 of the present Rule 111, this
civil action shall proceed independently of the criminal action and
shall require only a preponderance of evidence. In no case,
however, may the offended party recover damages twice for the
same act or omission charged in the criminal action.
There is no question that the offended party in the criminal action
can file an independent civil action for quasi-delict against the
accused. Section 3 of the present Rule 111 expressly states that
the offended party may bring such an action but the offended
party may not recover damages twice for the same act or
omission charged in the criminal action. Clearly, Section 3 of Rule
111 refers to the offended party in the criminal action, not to the
accused.
Casupanan and Capitulo, however, invoke the ruling in Cabaero
vs. Cantos[12] where the Court held that the accused therein
could validly institute a separate civil action for quasi-delict
against the private complainant in the criminal case. In Cabaero,
the accused in the criminal case filed his Answer with
Counterclaim for malicious prosecution. At that time the Court
noted the absence of clear-cut rules governing the prosecution on
impliedly instituted civil actions and the necessary consequences
and implications thereof. Thus, the Court ruled that the trial court
should confine itself to the criminal aspect of the case and
disregard any counterclaim for civil liability. The Court further ruled
that the accused may file a separate civil case against the
offended party after the criminal case is terminated and/or in
accordance with the new Rules which may be promulgated. The
Court explained that a cross-claim, counterclaim or third-party
complaint on the civil aspect will only unnecessarily complicate
the proceedings and delay the resolution of the criminal case.
Paragraph 6, Section 1 of the present Rule 111 was incorporated
in the 2000 Rules precisely to address the lacuna mentioned in
Cabaero. Under this provision, the accused is barred from filing a
counterclaim, cross-claim or third-party complaint in the criminal
case. However, the same provision states that any cause of action
which could have been the subject (of the counterclaim, cross-
claim or third-party complaint) may be litigated in a separate civil
action. The present Rule 111 mandates the accused to file his
counterclaim in a separate civil action which shall proceed
independently of the criminal action, even as the civil action of the
offended party is litigated in the criminal action.
Conclusion
Under Section 1 of the present Rule 111, the independent civil
action in Articles 32, 33, 34 and 2176 of the Civil Code is not
deemed instituted with the criminal action but may be filed
separately by the offended party even without reservation. The
commencement of the criminal action does not suspend the
prosecution of the independent civil action under these articles of
the Civil Code. The suspension in Section 2 of the present Rule
111 refers only to the civil action arising from the crime, if such
civil action is reserved or filed before the commencement of the
criminal action.
Thus, the offended party can file two separate suits for the same
act or omission. The first a criminal case where the civil action to
recover civil liability ex-delicto is deemed instituted, and the other
a civil case for quasi-delict - without violating the rule on non-
forum shopping. The two cases can proceed simultaneously and
independently of each other. The commencement or prosecution
of the criminal action will not suspend the civil action for quasi-
delict. The only limitation is that the offended party cannot recover
damages twice for the same act or omission of the defendant. In
most cases, the offended party will have no reason to file a
second civil action since he cannot recover damages twice for the
same act or omission of the accused. In some instances, the
accused may be insolvent, necessitating the filing of another case
against his employer or guardians.
Similarly, the accused can file a civil action for quasi-delict for the
same act or omission he is accused of in the criminal case. This is
expressly allowed in paragraph 6, Section 1 of the present Rule
111 which states that the counterclaim of the accused may be
litigated in a separate civil action. This is only fair for two reasons.
First, the accused is prohibited from setting up any counterclaim
in the civil aspect that is deemed instituted in the criminal case.
The accused is therefore forced to litigate separately his
counterclaim against the offended party. If the accused does not
file a separate civil action for quasi-delict, the prescriptive period
may set in since the period continues to run until the civil action
for quasi-delict is filed.
Second, the accused, who is presumed innocent, has a right to
invoke Article 2177 of the Civil Code, in the same way that the
offended party can avail of this remedy which is independent of
the criminal action. To disallow the accused from filing a separate
civil action for quasi-delict, while refusing to recognize his
counterclaim in the criminal case, is to deny him due process of
law, access to the courts, and equal protection of the law.
Thus, the civil action based on quasi-delict filed separately by
Casupanan and Capitulo is proper. The order of dismissal by the
MCTC of Civil Case No. 2089 on the ground of forum-shopping is
erroneous.
We make this ruling aware of the possibility that the decision of
the trial court in the criminal case may vary with the decision of
the trial court in the independent civil action. This possibility has
always been recognized ever since the Civil Code introduced in
1950 the concept of an independent civil action under Articles 32,
33, 34 and 2176 of the Code. But the law itself, in Article 31 of the
Code, expressly provides that the independent civil action may
proceed independently of the criminal proceedings and regardless
of the result of the latter. In Azucena vs. Potenciano,[13] the Court
declared:
x x x. There can indeed be no other logical conclusion than this,
for to subordinate the civil action contemplated in the said articles
to the result of the criminal prosecution whether it be conviction or
acquittal would render meaningless the independent character of
the civil action and the clear injunction in Article 31 that this action
'may proceed independently of the criminal proceedings and
regardless of the result of the latter.
More than half a century has passed since the Civil Code
introduced the concept of a civil action separate and independent
from the criminal action although arising from the same act or
omission. The Court, however, has yet to encounter a case of
conflicting and irreconcilable decisions of trial courts, one hearing
the criminal case and the other the civil action for quasi-delict. The
fear of conflicting and irreconcilable decisions may be more
apparent than real. In any event, there are sufficient remedies
under the Rules of Court to deal with such remote possibilities.
One final point. The Revised Rules on Criminal Procedure took
effect on December 1, 2000 while the MCTC issued the order of
dismissal on December 28, 1999 or before the amendment of the
rules. The Revised Rules on Criminal Procedure must be given
retroactive effect considering the well-settled rule that -

x x x statutes regulating the procedure of the court will be

construed as applicable to actions pending and undetermined at
the time of their passage. Procedural laws are retroactive in that
sense and to that extent.[14]

WHEREFORE, the petition for review on certiorari is hereby

GRANTED. The Resolutions dated December 28, 1999 and
August 24, 2000 in Special Civil Action No. 17-C (99) are
ANNULLED and Civil Case No. 2089 is REINSTATED.

SO ORDERED.
G.R. No. 210148 December 8, 2014
ANTONIO L. DALURAYA, Petitioner,
vs.
MARLA OLIVA, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2
dated June 28, 2013 and the Resolution3 dated November 22,
2013 rendered by the Court of Appeals (CA) in CA-G.R. SP No.
125113 finding petitioner Antonio L. Daluraya (Daluraya) civilly
liable for the death of Marina Arabit Oliva (Marina Oliva) despite
having been acquitted for Reckless Imprudence Resulting in
Homicide on the ground of insufficiency of evidence.
The Facts
On January 4, 2006, Daluraya was charged in an Information4 for
Reckless Imprudence Resulting in Homicide in connection with
the death5 of Marina Oliva. Records reveal that sometime in the
afternoon of January 3, 2006, Marina Oliva was crossing the
street when a Nissan Vanette, bearing plate number UPN-172
and traversing EDSA near the Quezon Avenue flyover in Quezon
City, ran her over.6 While Marina Oliva was rushed to the hospital
to receive medical attention,she eventually died, prompting her
daughter, herein respondent Marla Oliva (Marla), to file a criminal
case for Reckless Imprudence Resulting in Homicide against
Daluraya, the purported driver of the vehicle.7
During the proceedings, the prosecution presented as witness
Shem Serrano (Serrano), an eye-witness to the incident, who
testified that on said date, he saw a woman crossing EDSA
heading towards the island near the flyover and that the latter was
bumped by a Nissan Vanette bearing plate number UPN-172. The
prosecution also offered the testimonies of (a) Marla, who testified
as to the civil damages sustained by her family as a result of her
mothers death; (b) Dr. Paul Ortiz (Dr. Ortiz), who presented his
findings on the autopsy conducted upon the body of Marina Oliva;
and (c) Police Senior Inspector Lauro Gomez (PSI Gomez), who
conducted the investigation following the incident and claimed that
Marina Oliva was hit by the vehicle being driven by Daluraya,
albeit he did not witness the incident.8
After the prosecution rested its case, Daluraya filed an Urgent
Motion to Dismiss (demurrer)9 asserting, inter alia, that he was
not positively identified by any of the prosecution witnesses as the
driver of the vehicle that hit the victim, and that there was no clear
and competent evidence of how the incident transpired.10
The MeTC Ruling
In an Order11 dated May 24, 2010, the Metropolitan Trial Court of
Quezon City, Branch 38 (MeTC) granted Dalurayas demurrer and
dismissed the case for insufficiency of evidence. It found that the
testimonies of the prosecution witnesses were wanting in material
details and that they failed to sufficiently establish that Daluraya
committed the crime imputed upon him.12 Deconstructing the
testimonies of the prosecution witnesses individually, the MeTC
found that: (a) Marla merely testified on the damages sustained
by her family but she failed to identify Daluraya as the driver of the
vehicle that hit her mother; (b) Serrano also did not identify
Daluraya as the driver of the said vehicle; (c) Dr. Ortiz merely
testified on the autopsy results; and (d) PSI Gomez, while he did
investigate the incident, likewise declared thathe did not witness
the same.13
Marla moved for reconsideration,14 which the MeTC denied in an
Order15 dated November 4, 2010, clarifying that the grant of
Dalurayas demurrer had the effect of an acquittal and that
reconsideration of its Order granting Dalurayas demurrer would
violate the latters right against double jeopardy.16 With respect to
the civil aspect of the case, the MeTC likewise denied the same,
holding that no civil liability can be awarded absent any evidence
proving that Daluraya was the person responsible for Marina
Olivas demise.17
Aggrieved, Marla appealed18 to the Regional Trial Court of
Quezon City, Branch 76 (RTC), insisting that the MeTC failed to
make any finding as to the civil liability of Daluraya,19 which
finding was not precluded by the dismissal of the criminal aspect
of the case.
The RTC Ruling
In a Decision20 dated September 8, 2011, the RTC dismissed the
appeal and affirmed the MeTCs ruling,declaring that "the act from
which the criminal responsibility may spring did not at all exist."21
Marla filed a motion for reconsideration22 which, although filed
beyond the reglementary period, was nonetheless accepted.
However, the RTC found the same without merit and thus,
sustained the factual findings and rulings of the MeTC in its
Order23 dated May 10, 2012. Dissatisfied, Marla elevated the
case to the CA via petition for review, maintaining that Daluraya
must be held civilly liable.
The CA Ruling
In a Decision24 dated June 28, 2013, the CA granted the petition
and reversed the RTC Decision, ordering Daluraya to pay Marla
the amounts of P152,547.00 as actual damages, P50,000.00 as
civil indemnity, and P50,000.00 as moral damages.25 In so ruling,
the CA held that the MeTCs Order showed that Dalurayas
acquittal was based on the fact that the prosecution failed to
prove his guilt beyond reasonable doubt. As such, Daluraya was
not exonerated from civil liability.26
Moreover, the CA considered the following pieces of evidence to
support its finding that Daluraya must be held civilly liable: (a) the
inadmissible sworn statement executed by Daluraya where he
admitted that he drove the subject vehicle which hit Marina Oliva;
(b) the conclusion derived from Serranos testimony that the
woman he saw crossing the street who was hit by a Nissan
Vanette with plate number UPN-172, and the victim who
eventually died, are one and the same; (c) the Philippine National
Police Referral Letter of one Police Chief Inspector Virgilio Pereda
identifying Daluraya as the suspectin the case of Reckless
Imprudence Resulting in Homicide involving the death of Marina
Oliva, and stating that he brought the victim to the Quezon City
General Hospital for treatment but was declared dead on arrival;
and (d) the subject vehicle was registered in the name of
Dalurayas aunt, Gloria Zilmar,27 who authorized him to claim the
vehicle from the MeTC.28
Daluraya filed a motion for reconsideration,29 which the CA
denied in a Resolution30 dated November 22, 2013,hence, this
petition.
The Issue Before the Court
The sole issue advanced for the Courts resolution is whether or
not the CA was correct in finding Daluraya civilly liable for Marina
Olivas death despite his acquittal in the criminal case for
Reckless Imprudence Resulting in Homicide on the ground of
insufficiency of evidence.
The Courts Ruling
The petition is meritorious.
Every person criminally liable for a felony is also civilly liable. The
acquittal of an accused of the crime charged, however, does not
necessarily extinguish his civil liability.31 In Manantan v. CA,32
the Court expounded on the two kinds of acquittal recognized by
our law and their concomitant effects on the civil liability of the
accused, as follows:
Our law recognizes two kinds of acquittal, with different effects on
the civil liability of the accused. First is an acquittal on the ground
that the accused is not the author of the actor omission
complained of. This instance closes the door to civil liability, for a
person who has been found to be not the perpetrator of any act or
omission cannot and can never be held liable for such act or
omission. There being no delict, civil liability ex delictois out of the
question, and the civil action, if any, which may be instituted must
be based on grounds other than the delict complained of. This is
the situation contemplated inRule 111 of the Rules of Court. The
second instance is an acquittal based on reasonable doubt on the
guilt of the accused. In this case, even if the guilt of the accused
has not been satisfactorily established, he is not exempt from civil
liability which may be proved by preponderance of evidence only.
33
In Dayap v. Sendiong,34 the Court explained further:
The acquittal of the accused does not automatically preclude a
judgment against him on the civil aspect of the case.1wphi1 The
extinction of the penal action does not carry with it the extinction
of the civil liability where: (a) the acquittal is based on reasonable
doubt as only preponderance of evidence is required; (b) the court
declares that the liability of the accused is only civil; and (c) the
civil liability of the accused does not arise from or is not based
upon the crime of which the accused is acquitted. However, the
civil action based on delictmay be deemed extinguished if there is
a finding on the final judgment in the criminal action that the act or
omission from which the civil liability may arise did not exist or
where the accused did not commit the acts or omission imputed to
him.
Thus, if demurrer is granted and the accused is acquitted by the
court, the accused has the right to adduce evidence on the civil
aspect of the case unless the court also declares that the act or
omission from which the civil liability may arise did not exist. This
is because when the accused files a demurrer to evidence, he has
not yet adduced evidence both on the criminal and civil aspects of
the case. The only evidence on record is the evidence for the
prosecution. What the trial court should do is issue an order or
partial judgment granting the demurrer to evidence and acquitting
the accused, and set the case for continuation of trial for the
accused to adduce evidence on the civil aspect of the case and
for the private complainant to adduce evidence by way of rebuttal.
Thereafter, the court shall render judgment on the civil aspect of
the case.35
(Emphases supplied)
In case of an acquittal, the Rules of Court requires that the
judgment state "whether the evidence of the prosecution
absolutely failed to prove the guilt of the accused or merely failed
to prove his guilt beyond reasonable doubt. In either case, the
judgment shall determine if the act or omission from which the
civil liability might arise did not exist."36
A punctilious examination of the MeTCs Order, which the RTC
sustained, will show that Dalurayas acquittal was based on the
conclusion that the act or omission from which the civil liability
may arise did not exist, given that the prosecution was not able to
establish that he was the author of the crime imputed against him.
Such conclusion is clear and categorical when the MeTC declared
that "the testimonies of the prosecution witnesses are wanting in
material details and they did not sufficiently establish that the
accused precisely committed the crime charged against him."37
Furthermore, when Marla sought reconsideration of the MeTCs
Order acquitting Daluraya, said court reiterated and firmly clarified
that "the prosecution was not able to establish that the accused
was the driver of the Nissan Vanette which bumped Marina
Oliva"38 and that "there is no competent evidence on hand which
proves that the accused was the person responsible for the death
of Marina Oliva."39
Clearly, therefore, the CA erred in construing the findings of the
MeTC, as affirmed by the RTC, that Dalurayas acquittal was
anchored on reasonable doubt, which would necessarily call for a
remand of the case to the court a quo for the reception of
Dalurayas evidence on the civil aspect.1wphi1 Records disclose
that Dalurayas acquittal was based on the fact that "the act or
omission from which the civil liability may arise did not exist" in
view of the failure of the prosecution to sufficiently establish that
he was the author of the crime ascribed against him.
Consequently, his civil liability should be deemed as non-existent
by the nature of such acquittal.
WHEREFORE, the petition is GRANTED. The Decision dated
June 28, 2013 and the Resolution dated November 22, 2013 of
the Court of Appeals in CA-G.R. SP No. 125113 are hereby
REVERSED and SET ASIDE. The Decision dated September
8,2011 and the Order dated May 10, 2012 of the Regional Trial
Court of Quezon City, Branch 76 are REINSTATED.
G.R. No. 160110 June 18, 2014
MARIANO C. MENDOZA and ELVIRA LIM, Petitioners,
vs.
SPOUSES LEONORA J. GOMEZ and GABRIEL V. GOMEZ,
Respondents.
DECISION
PEREZ, J.:
Assailed in the present appeal by certiorari is the Decision1 dated
29 September 2003 of the Special Fourth Division of the Court of
Appeals (CA) in CA-G.R. CV No. 71877, which affirmed with
modification the Decision2 dated 31 January 2001 of the Regional
Trial Court (RTC), Branch 172, Valenzuela City in Civil Case No.
5352-V-97, and which effectively allowed the award of actual,
moral, and exemplary damages, as well as attorney's fees and
costs of the suit in favor of respondent Spouses Leonora and
Gabriel Gomez (respondents).
Antecedent Facts
On 7 March 1997, an Isuzu Elf truck (Isuzu truck) with plate
number UAW 582,3 owned by respondent Leonora J. Gomez
(Leonora)4 and driven by Antenojenes Perez (Perez),5 was hit by
a Mayamy Transportation bus (Mayamy bus) with temporary plate
number 1376-1280,6 registered under the name of petitioner
Elvira Lim (Lim)7 and driven by petitioner Mariano C. Mendoza
(Mendoza).8
Owing to the incident, an Information for reckless imprudence
resulting in damage to property and multiple physical injuries was
filed against Mendoza.9 Mendoza, however, eluded arrest, thus,
respondents filed a separate complaint for damages against
Mendoza and Lim, seeking actual damages, compensation for
lost income, moral damages, exemplary damages, attorneys fees
and costs of the suit.10 This was docketed as Civil Case No.
5352-V-97.
According to PO1 Melchor F. Rosales (PO1 Rosales),
investigating officer of the case, at around 5:30 a.m., the Isuzu
truck, coming from Katipunan Road and heading towards E.
Rodriguez, Sr. Avenue, was travelling along the downward portion
of Boni Serrano Avenue when, upon reaching the corner of
Riviera Street, fronting St. Ignatius Village, its left front portion
was hit by the Mayamy bus.11 According to PO1 Rosales, the
Mayamy bus, while traversing the opposite lane, intruded on the
lane occupied by the Isuzu truck.12
PO1 Rosales also reported that Mendoza tried to escape by
speeding away, but he was apprehended in Katipunan Road
corner C. P. Garcia Avenue by one Traffic Enforcer Galante and a
security guard of St. Ignatius Village.13
As a result of the incident, Perez,as well as the helpers on board
the Isuzu truck, namely Melchor V. Anla (Anla), Romeo J. Banca
(Banca), and Jimmy Repisada (Repisada), sustained injuries
necessitating medical treatment amounting to P11,267.35,which
amount was shouldered by respondents. Moreover, the Isuzu
truck sustained extensive damages on its cowl, chassis, lights and
steering wheel, amounting to P142,757.40.14
Additionally, respondents averred that the mishap deprived them
of a daily income of P1,000.00. Engaged in the business of buying
plastic scraps and delivering them to recycling plants,
respondents claimed that the Isuzu truck was vital in the
furtherance of their business.
For their part, petitioners capitalized on the issue of ownership of
the bus in question. Respondents argued that although the
registered owner was Lim, the actual owner of the bus was SPO1
Cirilo Enriquez (Enriquez), who had the bus attached with
Mayamy Transportation Company (Mayamy Transport) under the
so-called "kabit system." Respondents then impleaded both Lim
and Enriquez.
Petitioners, on the other hand, presented Teresita Gutierrez
(Gutierrez), whose testimony was offered to prove that Mayamy
Bus or Mayamy Transport is a business name registered under
her name, and that such business is a sole proprietorship. Such
was presented by petitioners to rebut the allegation of
respondents that Mayamy Transport is a corporation;15 and to
show, moreover, that although Gutierrez is the sole proprietor of
Mayamy Transport, she was not impleaded by respondents in the
case at bar.16
After weighing the evidence, the RTC found Mendoza liable for
direct personal negligence under Article 2176 of the Civil Code,
and it also found Lim vicariously liable under Article 2180 of the
same Code.
As regards Lim, the RTC relied on the Certificate of Registration
issued by the Land Transportation Office on 9 December 199617
in concluding that she is the registered owner of the bus in
question. Although actually owned by Enriquez, following the
established principle in transportation law, Lim, as the registered
owner, is the one who can be held liable.
Thus, the RTC disposed of the case as follows:
WHEREFORE, judgment is hereby rendered in favor of the
[respondents] and against the [petitioners]:
1. Ordering the [petitioners] except Enriquez to pay [respondents],
jointly and severally, the costs of repair of the damaged vehicle in
the amount of P142,757.40;
2. Ordering the defendants except Enriquez to pay [respondents],
jointly and severally, the amount of P1,000.00 per day from March
7, 1997 up to November 1997 representing the unrealized income
of the [respondents] when the incident transpired up to the time
the damaged Isuzu truck was repaired;
3. Ordering the [petitioners] except Enriquez to pay [respondents],
jointly and severally, the amount of P100,000.00 as moral
damages, plus a separate amount of P50,000.00 as exemplary
damages;
4. Ordering the [petitioners] except Enriquez to pay [respondents],
jointly and severally, the amount of P50,000.00 as attorneys fees;
5. Ordering the [petitioners] except Enriquez to pay [respondents]
the costs of suit.18
Displeased, petitioners appealed to the CA, which appeal was
docketed as CA-G.R. CV No. 71877. After evaluating the
damages awarded by the RTC, such were affirmed by the CA with
the exception of the award of unrealized income which the CA
ordered deleted, viz:
WHEREFORE, premises considered, the appeal is PARTLY
GRANTED. The judgment of the Regional Trial Court of
Valenzuela City, Branch 172 dated January 31, 2001, is
MODIFIED, in that the award of P1,000.00 per day from March
1997 up to November 1997 representing unrealized income is
DELETED. The award of P142,757.40 for the cost of repair of the
damaged vehicle, the award of P100,000.00 as moral damages,
the award of P50,000.00 as exemplary damages, the award of
P50,000.00 as attorneys fees and the costs of the suit are hereby
MAINTAINED.19
The Present Petition
Unsatisfied with the CA ruling, petitioners filed an appeal by
certiorari before the Court, raising the following issues:20
1. The court a quo has decided questions of substance in a way
not in accord with law or with the applicable decisions of the
Supreme Court when it awarded:
a. Moral damages in spite of the fact that the [respondents] cause
of action is clearly based on quasi-delict and [respondents] did not
sustain physical injuries to be entitled thereto pursuant to Article
2219 (2) of the New Civil Code and pertinent decisions of the
Supreme Court to that effect. The court a quo erroneously
concluded that the driver acted in bad faith and erroneously
applied the provision of Article 21 of the same code to justify the
award for bad faith is not consistent with quasi-delict which is
founded on fault or negligence.
b. Exemplary damages in spite of the fact that there is no finding
that the vehicular accident was due to petitioner-drivers gross
negligence to be entitled thereto pursuant to Article 2231 of the
New Civil Code and pertinent decisions of the Supreme Court to
that effect. The factual basis of the court a quo that "the act of the
driver of the bus in attempting to escape after causing the
accident in wanton disregard of the consequences of his negligent
act is such gross negligence that justifies an award of exemplary
damages" is an act after the fact which is not within the
contemplation of Article 2231 of the New Civil Code.
c. Attorneys fees in spite of the fact that the assailed decisions of
the trial court and the court a quo are bereft with jurisdictions for
the award of attorneys fees pursuant to the pertinent decisions of
the Supreme Court on the matter and provision Article 2208 of the
New Civil Code. The court a quo erroneously applied the decision
of the Supreme Court in Baas, Jr. vs. Court of Appeals, 325
SCRA 259.
The Courts Ruling
The petition is partially meritorious.
Respondents anchor their claim for damages on Mendozas
negligence, banking on Article 2176 of the Civil Code, to wit:
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.
In impleading Lim, on the other hand, respondents invoke the
latters vicarious liability as espoused in Article 2180 of the same
Code:
The obligation imposed by Article 2176 is demandable not only for
ones own acts or omissions, but also for those of persons for
whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business of industry.
The first question to address, then, is whether or not Mendozas
negligence was duly proven. Negligence is defined as the failure
to observe for the protection of the interests of another person,
that degree of care, precaution and vigilance which the
circumstances justly demand, whereby such other person suffers
injury.21
As found by the RTC, and affirmed by the CA, Mendoza was
negligent in driving the subject Mayamy bus, as demonstrated by
the fact that, at the time of the collision, the bus intruded on the
lane intended for the Isuzu truck. Having encroached on the
opposite lane, Mendoza was clearly in violation of traffic laws.
Article2185 of the Civil Code provides that unless there is proof to
the contrary, it is presumed that a person driving a motor vehicle
has been negligent if at the time of the mishap, he was violating
any traffic regulation. In the case at bar, Mendozas violation of
traffic laws was the proximate cause of the harm.
Proximate cause is defined as that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening
cause, produces the injury, and without which the result would not
have occurred. And more comprehensively, the proximate legal
cause is that acting first and producing the injury, either
immediately or by setting other events in motion, all constituting a
natural and continuous chain of events, each having a close
causal connection with its immediate predecessor, the final event
in the chain immediately effecting the injury as a natural and
probable result of the cause which first acted, under such
circumstances that the person responsible for the first event
should, as an ordinary prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default
that an injury to some person might probably result therefrom.22
The evidence on record shows that before the collision, the Isuzu
truck was in its rightful lane, and was even at a stop, having been
flagged down by a security guard of St. Ignatius Village.23 The
mishap occurred when the Mayamy bus, travelling at a fast speed
as shown by the impact of the collision, and going in the opposite
direction as that of the Isuzu truck, encroached on the lane
rightfully occupied by said Isuzu truck, and caused the latter to
spin, injuring Perez, Anla, Banca, and Repisada, and considerably
damaging the Isuzu truck.
Having settled the fact of Mendozas negligence, then, the next
question that confronts us is who may beheld liable. According to
Manresa, liability for personal acts and omissions is founded on
that indisputable principle of justice recognized by all legislations
that when a person by his act or omission causes damage or
prejudice to another, a juridical relation is created by virtue of
which the injured person acquires a right to be indemnified and
the person causing the damage is charged with the corresponding
duty of repairing the damage. The reason for this is found in the
obvious truth that man should subordinate his acts to the precepts
of prudence and if he fails to observe them and causes damage to
another, he must repair the damage.24 His negligence having
caused the damage, Mendoza is certainly liable to repair said
damage.
Additionally, Mendozas employer may also be held liable under
the doctrine of vicarious liability or imputed negligence. Under
such doctrine, a person who has not committed the act or
omission which caused damage or injury to another may
nevertheless be held civilly liable to the latter either directly or
subsidiarily under certain circumstances.25 In our jurisdiction,
vicarious liability or imputed negligence is embodied in Article
2180 of the Civil Code and the basis for damages in the action
under said article is the direct and primary negligence of the
employer in the selection or supervision, or both, of his employee.
26
In the case at bar, who is deemed as Mendozas employer? Is it
Enriquez, the actual owner of the bus or Lim, the registered owner
of the bus?
In Filcar Transport Services v. Espinas,27 we held that the
registered owner is deemed the employer of the negligent driver,
and is thus vicariously liable under Article 2176, in relation to
Article 2180, of the Civil Code. Citing Equitable Leasing
Corporation v. Suyom,28 the Court ruled that in so far as third
persons are concerned, the registered owner of the motor vehicle
is the employer of the negligent driver, and the actual employer is
considered merely as an agent of such owner. Thus, whether
there is an employer-employee relationship between the
registered owner and the driver is irrelevant in determining the
liability of the registered owner who the law holds primarily and
directly responsible for any accident, injury or death caused by the
operation of the vehicle in the streets and highways.29
As early as Erezo v. Jepte,30 the Court, speaking through Justice
Alejo Labrador summarized the justification for holding the
registered owner directly liable, to wit:
x x x The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or
injury is caused by the vehicles on the public highways,
responsibility therefore can be fixed on a definite individual, the
registered owner. Instances are numerous where vehicle running
on public highways caused accidents or injuries to pedestrians or
other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall
these circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages
or injuries caused on public highways.
"One of the principal purposes of motor vehicles legislation is
identification of the vehicle and of the operator, in case of
accident; and another is that the knowledge that means of
detection are always available may act as a deterrent from lax
observance of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these statutes, it is
subordinate at the last to the primary purpose of rendering it
certain that the violator of the law or of the rules of safety shall not
escape because of lack of means to discover him." The purpose
of the statute is thwarted, and the displayed number becomes a
"snare and delusion," if courts will entertain such defenses as that
put forward by appellee in this case. No responsible person or
corporation could be held liable for the most outrageous acts of
negligence, if they should be allowed to place a "middleman"
between them and the public, and escape liability by the manner
in which they recompense their servants.31
Generally, when an injury is caused by the negligence of a
servant or employee, there instantly arises a presumption of law
that there was negligence on the part of the master or employer
either in the selection of the servant or employee (culpa in
eligiendo) or in the supervision over him after the selection (culpa
vigilando), or both. The presumption is juris tantum and not juris et
de jure; consequently, it may be rebutted. Accordingly, the general
rule is that if the employer shows to the satisfaction of the court
that in the selection and supervision of his employee he has
exercised the care and diligence of a good father of a family, the
presumption is overcome and he is relieved of liability.32
However, with the enactment of the motor vehicle registration law,
the defenses available under Article 2180 of the Civil Code - that
the employee acts beyond the scope of his assigned task or that it
exercised the due diligence of a good father of a family to prevent
damage are no longer available to the registered owner of the
motor vehicle, because the motor vehicle registration law, to a
certain extent, modified Article 2180.33
As such, there can be no other conclusion but to hold Lim
vicariously liable with Mendoza.
This does not mean, however, that Lim is left without any recourse
against Enriquez and Mendoza. Under the civil law principle of
unjust enrichment, the registered owner of the motor vehicle has a
right to be indemnified by the actual employer of the driver; and
under Article 2181 of the Civil Code, whoever pays for the
damage caused by his dependents or employees may recover
from the latter what he has paid or delivered in satisfaction of the
claim.
Having identified the persons liable, our next question is what may
be awarded.
Actual or Compensatory Damages. Actual or compensatory
damages are those awarded in satisfaction of, or in recompense
for, loss or injury sustained. They simply make good or replace
the loss caused by the wrong.34
Article 2202 of the Civil Code provides that in crimes and quasi
delicts, the defendant shall be liable for all damages which are the
natural and probable consequences of the act or omission
complained of. It is not necessary that such damages have been
foreseen or could have reasonably been foreseen by the
defendant. Article 2199 of the same Code, however, sets the
limitation that, except as provided by law or by stipulation, one is
entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. As such, to warrant an
award of actual or compensatory damages, the claimant must
prove that the damage sustained is the natural and probable
consequences of the negligent act and, moreover, the claimant
must adequately prove the amount of such damage.
In the case at bar, the RTC, basing on the receipts submitted by
respondents and which receipts petitioners had the opportunity to
examine, found that the total repairs on the Isuzu truck amounted
to P142,757.40, and that the full hospitalization and medical
expenses of Perez, Anla, Banca, and Repisada amounted to
P11,267.35. As such, these are the amounts that respondents are
entitled to as actual and compensatory damages.
Although respondents alleged in their complaint that the damage
to their Isuzu truck caused them the loss of a daily income of
P1,000.00, such claim was not duly substantiated by any
evidence on record, and thus cannot be awarded in their favor.
Moral Damages. Moral damages are awarded to enable the
injured party to obtain means, diversions or amusements that will
serve to alleviate the moral suffering he has undergone, by
reason of the defendant's culpable action.35
In prayers for moral damages, however, recovery is more an
exception rather than the rule. Moral damages are not meant to
be punitive but are designed to compensate and alleviate the
physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar harm unjustly caused to a person. To be
entitled to such an award, the claimant must satisfactorily prove
that he has suffered damages and that the injury causing it has
sprung from any of the cases listed in Articles 2219 and 2220 of
the Civil Code. Moreover, the damages must be shown to be the
proximate result of a wrongful act or omission. The claimant must
thus establish the factual basis of the damages and its causal tie
with the acts of the defendant.36
In fine, an award of moral damages calls for the presentation of 1)
evidence of besmirched reputation or physical, mental or
psychological suffering sustained by the claimant; 2)a culpable act
or omission factually established; 3) proof that the wrongful act or
omission of the defendant is the proximate cause of the damages
sustained by the claimant; and 4) the proof that the act is
predicated on any of the instances expressed or envisioned by
Article 2219 and Article 2220 of the Civil Code.37
A review of the complaint and the transcript of stenographic notes
yields the pronouncement that respondents neither alleged nor
offered any evidence of besmirched reputation or physical, mental
or psychological suffering incurred by them. All that Leonora and
her counsel had to say on the matter of damages other than
actual or compensatory damages is this:38
Q: Did you ever spend covering attorneys fees?
A: Yes, sir. P50,000.00.
Q: Aside from the actual damage that you have mentioned x x x,
how much more would you like this Court to award you by way of
moral damages?
A: P100,000.00, sir.
Q: How about exemplary damages?
A: P50,000.00, sir.
Q: What happened to you, what did you feel when the defendants
failed to immediately repair your vehicle that was damaged
Madam Witness?
A: I have incurred expenses and I was forced to apply for a loan,
sir.
In Kierulf v. CA,39 we observed that this Court cannot remind the
bench and the bar often enough that in order that moral damages
may be awarded, there must be pleading and proof of moral
suffering, mental anguish, fright and the like. Citing Francisco v.
GSIS,40 the Court held that there must be clear testimony on the
anguish and other forms of mental suffering. Thus, if the plaintiff
fails to take the witness stand and testify as to his social
humiliation, wounded feelings and anxiety, moral damages cannot
be awarded.
Moreover, respondents were not able to show that their claim
properly falls under Articles 2219 and 2220 of the Civil Code.
Respondents cannot rely on Article 2219 (2) of the Civil Code
which allows moral damages in quasi-delicts causing physical
injuries because in physical injuries, moral damages are
recoverable only by the injured party,41 and in the case at bar,
herein respondents were not the ones who were actually injured.
In B.F. Metal (Corp.) v. Sps. Lomotan, et al.,42 the Court, in a
claim for damages based on quasi-delict causing physical injuries,
similarly disallowed an award of moral damages to the owners of
the damaged vehicle, when neither of them figured in the accident
and sustained injuries.
Neither can respondents rely on Article 21 of the Civil Code as the
RTC erroneously did. Article 21 deals with acts contra bonus
mores, and has the following elements: (1) There is an act which
is legal; (2) but which is contrary to morals, good custom, public
order, or public policy; (3) and it is done with intent to injure.43 In
the present case, it can hardly be said that Mendozas negligent
driving and violation of traffic laws are legal acts. Moreover, it was
not proven that Mendoza intended to injure Perez, et al. Thus,
Article 21 finds no application to the case at bar. All in all, we find
that the RTC and the CA erred in granting moral damages to
respondents. Exemplary Damages. Article 2229 of the Civil Code
provides that exemplary or corrective damages are imposed, by
way of example or correction for the public good, in addition to
moral, temperate, liquidated or compensatory damages. Article
2231 of the same Code further states that in quasi-delicts,
exemplary damages may be granted if the defendant acted with
gross negligence.
Our jurisprudence sets certain conditions when exemplary
damages may be awarded: First, they may be imposed by way of
example or correction only in addition, among others, to
compensatory damages, and cannot be recovered as a matter of
right, their determination depending upon the amount of
compensatory damages that may be awarded to the claimant.
Second, the claimant must first establish his right to moral,
temperate, liquidated or compensatory damages. Third, the
wrongful act must be accompanied by bad faith, and the award
would be allowed only if the guilty party acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner.44
In motor vehicle accident cases, exemplary damages may be
awarded where the defendants misconduct is so flagrant as to
transcend simple negligence and be tantamount to positive or
affirmative misconduct rather than passive or negative
misconduct. In characterizing the requisite positive misconduct
which will support a claim for punitive damages, the courts have
used such descriptive terms as willful, wanton, grossly negligent,
reckless, or malicious, either alone or in combination.45
Gross negligence is the absence of care or diligence as to amount
to a reckless disregard of the safety of persons or property. It
evinces a thoughtless disregard of consequences without exerting
any effort to avoid them.46
In the case at bar, having established respondents right to
compensatory damages, exemplary damages are also in order,
given the fact that Mendoza was grossly negligent in driving the
Mayamy bus. His act of intruding or encroaching on the lane
rightfully occupied by the Isuzu truck shows his reckless disregard
for safety.
In Bao v. Bachelor Express, Inc., et al.,47 where an erring bus, in
the process of overtaking a jeepney, also encroached on the
opposite lane, and consequently collided with a dump truck, the
Court held the driver of the bus grossly negligent and affirmed the
award of exemplary damages. Attorneys Fees. Article 2208 of the
Civil Code enumerates the instances when attorneys fees may be
recovered:
Art. 2208. In the absence of stipulation, attorneys fees and
expenses of litigation, other than judicial costs, cannot be
recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to protect
his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding
against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiffs valid and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers,
laborers and skilled workers;
(8) In actions for indemnity under workmens compensation and
employers liability laws;
(9) In a separate civil action to recover civil liability arising from a
crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable
that attorneys fees and expenses of litigation should be
recovered;
In all cases, the attorneys fees and expenses of litigation must be
reasonable.
From the very opening sentence of Article 2208 of the Civil Code,
it is clearly intended to retain the award of attorneys fees as the
exception in our law, as the general rule remains that attorneys
fees are not recoverable in the absence of a stipulation thereto,
the reason being that it is not sound policy to set a premium on
the right to litigate.48
As such, in Spouses Agustin v. CA,49 we held that, the award of
attorneys fees being an exception rather than the general rule, it
is necessary for the court to make findings of facts and law that
would bring the case within the exception and justify the grant of
such award. Thus, the reason for the award of attorneys fees
must be stated in the text of the courts decision; otherwise, if it is
stated only in the dispositive portion of the decision, the same
must be disallowed on appeal.
In the case at bar, the RTC Decision had nil discussion on the
propriety of attorneys fees, and it merely awarded such in the
dispositive. The CA Decision, on the other hand, merely stated
that the award of attorneys fees is merited as such is allowed
when exemplary damages are awarded.50 Following established
jurisprudence,51 however, the CA should have disallowed on
appeal said award of attorneys fees as the RTC failed to
substantiate said award. Costs of suit. The Rules of Court provide
that, generally, costs shall be allowed to the prevailing party as a
matter of course, thus:52
Section 1. Costs ordinarily follow results of suit.- Unless otherwise
provided in these rules, costs shall be allowed to the prevailing
party as a matter of course, but the court shall have power, for
special reasons, to adjudge that either party shall pay the costs of
an action, or that the same be divided, as may be equitable. No
costs shall be allowed against the Republic of the Philippines,
unless otherwise provided by law.
In the present case, the award of costs of suit to respondents, as
the prevailing party, is in order. Interests.1wphi1 Interest by way
of damages has been defined as interest allowed in actions for
breach of contractor tort for the unlawful detention of money
already due. This type of interest is frequently called "moratory
interest." Interest as a part of damage, is allowed, not by
application of arbitrary rules, but as a result of the justice of the
individual case and as compensation to the injured party.53
The legal provision on interests in quasi-delicts is Article 2211 of
the Civil Code which provides that in crimes and quasi-delicts,
interest as part of the damage, may, in a proper case, be
adjudicated in the discretion of the court.
Generally, interest is allowed as a matter of right for failure to pay
liquidated claims when due.54 For unliquidated claims, however,
Article 2213 of the Civil Code provides that interest cannot be
recovered upon unliquidated claims or damages, except when the
demand can be established with reasonable certainty.
In the case at bar, although the award of exemplary damages is
unliquidated in the sense that petitioners cannot know for sure,
before judgment, the exact amount that they are required to pay
to respondents, the award of actual or compensatory damages,
however, such as the truck repairs and medical expenses, is
arguably liquidated in that they can be measured against a
reasonably certain standard.55 Moreover, justice would seem to
require that the delay in paying for past losses which can be made
reasonably certain should be compensated through an award of
interest.56
WHEREFORE, premises considered, the Court Resolves to
PARTIALLY GRANT the appeal by certiorari, as follows:
1) DECLARE Mariano Mendoza and Elvira Lim solidarily liable to
respondent Spouses Leonora and Gabriel Gomez;
2) MAINTAIN the award of actual or compensatory damages in
the amount of P142,757.40 for the repair of the Isuzu Elf truck,
with legal interest beginning 31 January 2001 until fully paid;
3) GRANT additional actual or compensatory damages in the
amount of P11,267.35 for the medical expenses shouldered by
respondent Spouses Leonora and Gabriel Gomez, with legal
interest beginning 31 January 2001 until fully paid;
4) DELETE the award of moral damages;
5) MAINTAIN the award of exemplary damages at P50,000.00;

6) DELETE the award of attorney's fees; and

7) MAINTAIN the award of costs of suit.

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.
PADILLA, J.:
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 school's 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 disposition 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
adoption 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 system, 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 he 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. Carrascoso (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 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:
 determined to carry out a nefarious deed inside school premises
Any person who wilfully causes loss or injury to another in a and environs. Should this be the case, the school may still avoid
manner that is contrary to morals, good custom or public policy liability by proving that the breach of its contractual obligation to
shall compensate the latter for the damage. (emphasis supplied). the students was not due to its negligence, here statutorily defined
to be the omission of that degree of diligence which is required by
Air France penalized the racist policy of the airline which the nature of the obligation and corresponding to the
emboldened the petitioner's employee to forcibly oust the private circumstances of persons, time and place. 9
respondent to cater to the comfort of a white man who allegedly
"had a better right to the seat." In Austro-American, supra, the As the proceedings a quo have yet to commence on the
public embarrassment caused to the passenger was the substance of the private respondents' complaint, the record is
justification for the Circuit Court of Appeals, (Second Circuit), to bereft of all the material facts. Obviously, at this stage, only the
award damages to the latter. From the foregoing, it can be trial court can make such a determination from the evidence still
concluded that should the act which breaches a contract be done to unfold.
in bad faith and be violative of Article 21, then there is a cause to
view the act as constituting a quasi-delict. WHEREFORE, the foregoing premises considered, the petition is
DENIED. The court of origin (RTC, Manila, Br. 47) is hereby
In the circumstances obtaining in the case at bar, however, there ordered to continue proceedings consistent with this ruling of the
is, as yet, no finding that the contract between the school and Court. Costs against the petitioners.
Bautista had been breached thru the former's negligence in
providing proper security measures. This would be for the trial SO ORDERED.
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 of 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
G.R. No. L-47745 April 15, 1988
JOSE S. AMADORA, LORETA A. AMADORA, JOSE A.
AMADORA JR., NORMA A. YLAYA PANTALEON A.
AMADORA, JOSE A. AMADORA III, LUCY A. AMADORA,
ROSALINDA A. AMADORA, PERFECTO A. AMADORA,
SERREC A. AMADORA, VICENTE A. AMADORA and MARIA
TISCALINA A. AMADORA, petitioners
vs.
HONORABLE COURT OF APPEALS, COLEGIO DE SAN
JOSE-RECOLETOS, VICTOR LLUCH SERGIO P. DLMASO JR.,
CELESTINO DICON, ANIANO ABELLANA, PABLITO DAFFON
thru his parents and natural guardians, MR. and MRS.
NICANOR GUMBAN, and ROLANDO VALENCIA, thru his
guardian, A. FRANCISCO ALONSO, respondents.
Jose S. Amadora & Associates for petitioners.
Padilla Law Office for respondents.
CRUZ, J.:
Like any prospective graduate, Alfredo Amadora was looking
forward to the commencement exercises where he would ascend
the stage and in the presence of his relatives and friends receive
his high school diploma. These ceremonies were scheduled on
April 16, 1972. As it turned out, though, fate would intervene and
deny him that awaited experience. On April 13, 1972, while they
were in the auditorium of their school, the Colegio de San Jose-
Recoletos, a classmate, Pablito Damon, fired a gun that mortally
hit Alfredo, ending all his expectations and his life as well. The
victim was only seventeen years old. 1
Daffon was convicted of homicide thru reckless imprudence . 2
Additionally, the herein petitioners, as the victim's parents, filed a
civil action for damages under Article 2180 of the Civil Code
against the Colegio de San Jose-Recoletos, its rector the high
school principal, the dean of boys, and the physics teacher,
together with Daffon and two other students, through their
respective parents. The complaint against the students was later
dropped. After trial, the Court of First Instance of Cebu held the
remaining defendants liable to the plaintiffs in the sum of
P294,984.00, representing death compensation, loss of earning
capacity, costs of litigation, funeral expenses, moral damages,
exemplary damages, and attorney's fees . 3 On appeal to the
respondent court, however, the decision was reversed and all the
defendants were completely absolved . 4
In its decision, which is now the subject of this petition for
certiorari under Rule 45 of the Rules of Court, the respondent
court found that Article 2180 was not applicable as the Colegio de
San Jose-Recoletos was not a school of arts and trades but an
academic institution of learning. It also held that the students were
not in the custody of the school at the time of the incident as the
semester had already ended, that there was no clear identification
of the fatal gun and that in any event the defendant, had
exercised the necessary diligence in preventing the injury. 5
The basic undisputed facts are that Alfredo Amadora went to the
San Jose-Recoletos on April 13, 1972, and while in its auditorium
was shot to death by Pablito Daffon, a classmate. On the
implications and consequences of these facts, the parties sharply
disagree.
The petitioners contend that their son was in the school to show
his physics experiment as a prerequisite to his graduation; hence,
he was then under the custody of the private respondents. The
private respondents submit that Alfredo Amadora had gone to the
school only for the purpose of submitting his physics report and
that he was no longer in their custody because the semester had
already ended.
There is also the question of the identity of the gun used which
the petitioners consider important because of an earlier incident
which they claim underscores the negligence of the school and at
least one of the private respondents. It is not denied by the
respondents that on April 7, 1972, Sergio Damaso, Jr., the dean of
boys, confiscated from Jose Gumban an unlicensed pistol but
later returned it to him without making a report to the principal or
taking any further action . 6 As Gumban was one of the
companions of Daffon when the latter fired the gun that killed
Alfredo, the petitioners contend that this was the same pistol that
had been confiscated from Gumban and that their son would not
have been killed if it had not been returned by Damaso. The
respondents say, however, that there is no proof that the gun was
the same firearm that killed Alfredo.
Resolution of all these disagreements will depend on the
interpretation of Article 2180 which, as it happens, is invoked by
both parties in support of their conflicting positions. The pertinent
part of this article reads as follows:
Lastly, teachers or heads of establishments of arts and trades
shall be liable for damages caused by their pupils and students or
apprentices so long as they remain in their custody.
Three cases have so far been decided by the Court in connection
with the above-quoted provision, to wit: Exconde v. Capuno 7
Mercado v. Court of Appeals, 8 and Palisoc v. Brillantes. 9 These
will be briefly reviewed in this opinion for a better resolution of the
case at bar.
In the Exconde Case, Dante Capuno, a student of the Balintawak
Elementary School and a Boy Scout, attended a Rizal Day parade
on instructions of the city school supervisor. After the parade, the
boy boarded a jeep, took over its wheel and drove it so recklessly
that it turned turtle, resulting in the death of two of its passengers.
Dante was found guilty of double homicide with reckless
imprudence. In the separate civil action flied against them, his
father was held solidarily liable with him in damages under Article
1903 (now Article 2180) of the Civil Code for the tort committed by
the 15-year old boy.
This decision, which was penned by Justice Bautista Angelo on
June 29,1957, exculpated the school in an obiter dictum (as it was
not a party to the case) on the ground that it was riot a school of
arts and trades. Justice J.B.L. Reyes, with whom Justices Sabino
Padilla and Alex Reyes concurred, dissented, arguing that it was
the school authorities who should be held liable Liability under this
rule, he said, was imposed on (1) teachers in general; and (2)
heads of schools of arts and trades in particular. The modifying
clause "of establishments of arts and trades" should apply only to
"heads" and not "teachers."
Exconde was reiterated in the Mercado Case, and with an
elaboration. A student cut a classmate with a razor blade during
recess time at the Lourdes Catholic School in Quezon City, and
the parents of the victim sued the culprits parents for damages.
Through Justice Labrador, the Court declared in another obiter (as
the school itself had also not been sued that the school was not
liable because it was not an establishment of arts and trades.
Moreover, the custody requirement had not been proved as this
"contemplates a situation where the student lives and boards with
the teacher, such that the control, direction and influences on the
pupil supersede those of the parents." Justice J.B.L. Reyes did
not take part but the other members of the court concurred in this
decision promulgated on May 30, 1960.
In Palisoc vs. Brillantes, decided on October 4, 1971, a 16-year
old student was killed by a classmate with fist blows in the
laboratory of the Manila Technical Institute. Although the
wrongdoer who was already of age was not boarding in the
school, the head thereof and the teacher in charge were held
solidarily liable with him. The Court declared through Justice
Teehankee:
The phrase used in the cited article "so long as (the students)
remain in their custody" means the protective and supervisory
custody that the school and its heads and teachers exercise over
the pupils and students for as long as they are at attendance in
the school, including recess time. There is nothing in the law that
requires that for such liability to attach, the pupil or student who
commits the tortious act must live and board in the school, as
erroneously held by the lower court, and the dicta in Mercado (as
well as in Exconde) on which it relied, must now be deemed to
have been set aside by the present decision.
This decision was concurred in by five other members, 10
including Justice J.B.L. Reyes, who stressed, in answer to the
dissenting opinion, that even students already of age were
covered by the provision since they were equally in the custody of
the school and subject to its discipline. Dissenting with three
others, 11 Justice Makalintal was for retaining the custody
interpretation in Mercado and submitted that the rule should apply
only to torts committed by students not yet of age as the school
would be acting only in loco parentis.
In a footnote, Justice Teehankee said he agreed with Justice
Reyes' dissent in the Exconde Case but added that "since the
school involved at bar is a non-academic school, the question as
to the applicability of the cited codal provision to academic
institutions will have to await another case wherein it may properly
be raised."
This is the case.
Unlike in Exconde and Mercado, the Colegio de San Jose-
Recoletos has been directly impleaded and is sought to be held
liable under Article 2180; and unlike in Palisoc, it is not a school of
arts and trades but an academic institution of learning. The parties
herein have also directly raised the question of whether or not
Article 2180 covers even establishments which are technically not
schools of arts and trades, and, if so, when the offending student
is supposed to be "in its custody."
After an exhaustive examination of the problem, the Court has
come to the conclusion that the provision in question should apply
to all schools, academic as well as non-academic. Where the
school is academic rather than technical or vocational in nature,
responsibility for the tort committed by the student will attach to
the teacher in charge of such student, following the first part of the
provision. This is the general rule. In the case of establishments of
arts and trades, it is the head thereof, and only he, who shall be
held liable as an exception to the general rule. In other words,
teachers in general shall be liable for the acts of their students
except where the school is technical in nature, in which case it is
the head thereof who shall be answerable. Following the canon of
reddendo singula singulis "teachers" should apply to the words
"pupils and students" and "heads of establishments of arts and
trades" to the word "apprentices."
The Court thus conforms to the dissenting opinion expressed by
Justice J.B.L. Reyes in Exconde where he said in part:
I can see no sound reason for limiting Art. 1903 of the Old Civil
Code to teachers of arts and trades and not to academic ones.
What substantial difference is there between them insofar as
concerns the proper supervision and vice over their pupils? It
cannot be seriously contended that an academic teacher is
exempt from the duty of watching that his pupils do not commit a
tort to the detriment of third Persons, so long as they are in a
position to exercise authority and Supervision over the pupil. In
my opinion, in the phrase "teachers or heads of establishments of
arts and trades" used in Art. 1903 of the old Civil Code, the words
"arts and trades" does not qualify "teachers" but only "heads of
establishments." The phrase is only an updated version of the
equivalent terms "preceptores y artesanos" used in the Italian and
French Civil Codes.
If, as conceded by all commentators, the basis of the presumption
of negligence of Art. 1903 in some culpa in vigilando that the
parents, teachers, etc. are supposed to have incurred in the
exercise of their authority, it would seem clear that where the
parent places the child under the effective authority of the teacher,
the latter, and not the parent, should be the one answerable for
the torts committed while under his custody, for the very reason/
that the parent is not supposed to interfere with the discipline of
the school nor with the authority and supervision of the teacher
while the child is under instruction. And if there is no authority,
there can be no responsibility.
There is really no substantial distinction between the academic
and the non-academic schools insofar as torts committed by their
students are concerned. The same vigilance is expected from the
teacher over the students under his control and supervision,
whatever the nature of the school where he is teaching. The
suggestion in the Exconde and Mercado Cases is that the
provision would make the teacher or even the head of the school
of arts and trades liable for an injury caused by any student in its
custody but if that same tort were committed in an academic
school, no liability would attach to the teacher or the school head.
All other circumstances being the same, the teacher or the head
of the academic school would be absolved whereas the teacher
and the head of the non-academic school would be held liable,
and simply because the latter is a school of arts and trades.
The Court cannot see why different degrees of vigilance should
be exercised by the school authorities on the basis only of the
nature of their respective schools. There does not seem to be any
plausible reason for relaxing that vigilance simply because the
school is academic in nature and for increasing such vigilance
where the school is non-academic. Notably, the injury subject of
liability is caused by the student and not by the school itself nor is
it a result of the operations of the school or its equipment. The
injury contemplated may be caused by any student regardless of
the school where he is registered. The teacher certainly should
not be able to excuse himself by simply showing that he is
teaching in an academic school where, on the other hand, the
head would be held liable if the school were non-academic.
These questions, though, may be asked: If the teacher of the
academic school is to be held answerable for the torts committed
by his students, why is it the head of the school only who is held
liable where the injury is caused in a school of arts and trades?
And in the case of the academic or non- technical school, why not
apply the rule also to the head thereof instead of imposing the
liability only on the teacher?
The reason for the disparity can be traced to the fact that
historically the head of the school of arts and trades exercised a
closer tutelage over his pupils than the head of the academic
school. The old schools of arts and trades were engaged in the
training of artisans apprenticed to their master who personally and
directly instructed them on the technique and secrets of their craft.
The head of the school of arts and trades was such a master and
so was personally involved in the task of teaching his students,
who usually even boarded with him and so came under his
constant control, supervision and influence. By contrast, the head
of the academic school was not as involved with his students and
exercised only administrative duties over the teachers who were
the persons directly dealing with the students. The head of the
academic school had then (as now) only a vicarious relationship
with the students. Consequently, while he could not be directly
faulted for the acts of the students, the head of the school of arts
and trades, because of his closer ties with them, could be so
blamed.
It is conceded that the distinction no longer obtains at present in
view of the expansion of the schools of arts and trades, the
consequent increase in their enrollment, and the corresponding
diminution of the direct and personal contract of their heads with
the students. Article 2180, however, remains unchanged. In its
present state, the provision must be interpreted by the Court
according to its clear and original mandate until the legislature,
taking into account the charges in the situation subject to be
regulated, sees fit to enact the necessary amendment.
The other matter to be resolved is the duration of the
responsibility of the teacher or the head of the school of arts and
trades over the students. Is such responsibility co-extensive with
the period when the student is actually undergoing studies during
the school term, as contended by the respondents and impliedly
admitted by the petitioners themselves?
From a reading of the provision under examination, it is clear that
while the custody requirement, to repeat Palisoc v. Brillantes,
does not mean that the student must be boarding with the school
authorities, it does signify that the student should be within the
control and under the influence of the school authorities at the
time of the occurrence of the injury. This does not necessarily
mean that such, custody be co-terminous with the semester,
beginning with the start of classes and ending upon the close
thereof, and excluding the time before or after such period, such
as the period of registration, and in the case of graduating
students, the period before the commencement exercises. In the
view of the Court, the student is in the custody of the school
authorities as long as he is under the control and influence of the
school and within its premises, whether the semester has not yet
begun or has already ended.
It is too tenuous to argue that the student comes under the
discipline of the school only upon the start of classes
notwithstanding that before that day he has already registered
and thus placed himself under its rules. Neither should such
discipline be deemed ended upon the last day of classes
notwithstanding that there may still be certain requisites to be
satisfied for completion of the course, such as submission of
reports, term papers, clearances and the like. During such
periods, the student is still subject to the disciplinary authority of
the school and cannot consider himself released altogether from
observance of its rules.
As long as it can be shown that the student is in the school
premises in pursuance of a legitimate student objective, in the
exercise of a legitimate student right, and even in the enjoyment
of a legitimate student right, and even in the enjoyment of a
legitimate student privilege, the responsibility of the school
authorities over the student continues. Indeed, even if the student
should be doing nothing more than relaxing in the campus in the
company of his classmates and friends and enjoying the
ambience and atmosphere of the school, he is still within the
custody and subject to the discipline of the school authorities
under the provisions of Article 2180.
During all these occasions, it is obviously the teacher-in-charge
who must answer for his students' torts, in practically the same
way that the parents are responsible for the child when he is in
their custody. The teacher-in-charge is the one designated by the
dean, principal, or other administrative superior to exercise
supervision over the pupils in the specific classes or sections to
which they are assigned. It is not necessary that at the time of the
injury, the teacher be physically present and in a position to
prevent it. Custody does not connote immediate and actual
physical control but refers more to the influence exerted on the
child and the discipline instilled in him as a result of such
influence. Thus, for the injuries caused by the student, the teacher
and not the parent shag be held responsible if the tort was
committed within the premises of the school at any time when its
authority could be validly exercised over him.
In any event, it should be noted that the liability imposed by this
article is supposed to fall directly on the teacher or the head of the
school of arts and trades and not on the school itself. If at all, the
school, whatever its nature, may be held to answer for the acts of
its teachers or even of the head thereof under the general
principle of respondeat superior, but then it may exculpate itself
from liability by proof that it had exercised the diligence of a bonus
paterfamilias.
Such defense is, of course, also available to the teacher or the
head of the school of arts and trades directly held to answer for
the tort committed by the student. As long as the defendant can
show that he had taken the necessary precautions to prevent the
injury complained of, he can exonerate himself from the liability
imposed by Article 2180, which also states that:
The responsibility treated of in this article shall cease when the
Persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damages.
In this connection, it should be observed that the teacher will be
held liable not only when he is acting in loco parentis for the law
does not require that the offending student be of minority age.
Unlike the parent, who wig be liable only if his child is still a minor,
the teacher is held answerable by the law for the act of the
student under him regardless of the student's age. Thus, in the
Palisoc Case, liability attached to the teacher and the head of the
technical school although the wrongdoer was already of age. In
this sense, Article 2180 treats the parent more favorably than the
teacher.
The Court is not unmindful of the apprehensions expressed by
Justice Makalintal in his dissenting opinion in Palisoc that the
school may be unduly exposed to liability under this article in view
of the increasing activism among the students that is likely to
cause violence and resulting injuries in the school premises. That
is a valid fear, to be sure. Nevertheless, it should be repeated
that, under the present ruling, it is not the school that will be held
directly liable. Moreover, the defense of due diligence is available
to it in case it is sought to be held answerable as principal for the
acts or omission of its head or the teacher in its employ.
The school can show that it exercised proper measures in
selecting the head or its teachers and the appropriate supervision
over them in the custody and instruction of the pupils pursuant to
its rules and regulations for the maintenance of discipline among
them. In almost all cases now, in fact, these measures are
effected through the assistance of an adequate security force to
help the teacher physically enforce those rules upon the students.
Ms should bolster the claim of the school that it has taken
adequate steps to prevent any injury that may be committed by its
students.
A fortiori, the teacher himself may invoke this defense as it would
otherwise be unfair to hold him directly answerable for the
damage caused by his students as long as they are in the school
premises and presumably under his influence. In this respect, the
Court is disposed not to expect from the teacher the same
measure of responsibility imposed on the parent for their influence
over the child is not equal in degree. Obviously, the parent can
expect more obedience from the child because the latter's
dependence on him is greater than on the teacher. It need not be
stressed that such dependence includes the child's support and
sustenance whereas submission to the teacher's influence,
besides being coterminous with the period of custody is usually
enforced only because of the students' desire to pass the course.
The parent can instill more las discipline on the child than the
teacher and so should be held to a greater accountability than the
teacher for the tort committed by the child.
And if it is also considered that under the article in question, the
teacher or the head of the school of arts and trades is responsible
for the damage caused by the student or apprentice even if he is
already of age and therefore less tractable than the minor
then there should all the more be justification to require from the
school authorities less accountability as long as they can prove
reasonable diligence in preventing the injury. After all, if the parent
himself is no longer liable for the student's acts because he has
reached majority age and so is no longer under the former's
control, there is then all the more reason for leniency in assessing
the teacher's responsibility for the acts of the student.
Applying the foregoing considerations, the Court has arrived at
the following conclusions:
1. At the time Alfredo Amadora was fatally shot, he was still
in the custody of the authorities of Colegio de San Jose-Recoletos
notwithstanding that the fourth year classes had formally ended. It
was immaterial if he was in the school auditorium to finish his
physics experiment or merely to submit his physics report for what
is important is that he was there for a legitimate purpose. As
previously observed, even the mere savoring of the company of
his friends in the premises of the school is a legitimate purpose
that would have also brought him in the custody of the school
authorities.
2. The rector, the high school principal and the dean of boys
cannot be held liable because none of them was the teacher-in-
charge as previously defined. Each of them was exercising only a
general authority over the student body and not the direct control
and influence exerted by the teacher placed in charge of particular
classes or sections and thus immediately involved in its discipline.
The evidence of the parties does not disclose who the teacher-in-
charge of the offending student was. The mere fact that Alfredo
Amadora had gone to school that day in connection with his
physics report did not necessarily make the physics teacher,
respondent Celestino Dicon, the teacher-in-charge of Alfredo's
killer.
3. At any rate, assuming that he was the teacher-in-charge,
there is no showing that Dicon was negligent in enforcing
discipline upon Daffon or that he had waived observance of the
rules and regulations of the school or condoned their non-
observance. His absence when the tragedy happened cannot be
considered against him because he was not supposed or required
to report to school on that day. And while it is true that the
offending student was still in the custody of the teacher-in-charge
even if the latter was physically absent when the tort was
committed, it has not been established that it was caused by his
laxness in enforcing discipline upon the student. On the contrary,
the private respondents have proved that they had exercised due
diligence, through the enforcement of the school regulations, in
maintaining that discipline.
4. In the absence of a teacher-in-charge, it is probably the
dean of boys who should be held liable especially in view of the
unrefuted evidence that he had earlier confiscated an unlicensed
gun from one of the students and returned the same later to him
without taking disciplinary action or reporting the matter to higher
authorities. While this was clearly negligence on his part, for
which he deserves sanctions from the school, it does not
necessarily link him to the shooting of Amador as it has not been
shown that he confiscated and returned pistol was the gun that
killed the petitioners' son.

5. Finally, as previously observed, the Colegio de San Jose-

Recoletos cannot be held directly liable under the article because
only the teacher or the head of the school of arts and trades is
made responsible for the damage caused by the student or
apprentice. Neither can it be held to answer for the tort committed
by any of the other private respondents for none of them has been
found to have been charged with the custody of the offending
student or has been remiss in the discharge of his duties in
connection with such custody.

In sum, the Court finds under the facts as disclosed by the record
and in the light of the principles herein announced that none of the
respondents is liable for the injury inflicted by Pablito Damon on
Alfredo Amadora that resulted in the latter's death at the
auditorium of the Colegio de San Jose-Recoletos on April 13,
1972. While we deeply sympathize with the petitioners over the
loss of their son under the tragic circumstances here related, we
nevertheless are unable to extend them the material relief they
seek, as a balm to their grief, under the law they have invoked.

WHEREFORE, the petition is DENIED, without any

pronouncement as to costs. It is so ordered.
SOCIAL SECURITY SYSTEM, petitioner,
vs.
MOONWALK DEVELOPMENT & HOUSING CORPORATION,
ROSITA U. ALBERTO, ROSITA U. ALBERTO, JMA HOUSE,
INC., MILAGROS SANCHEZ SANTIAGO, in her capacity as
Register of Deeds for the Province of Cavite, ARTURO
SOLITO, in his capacity as Register of Deeds for Metro
M a n i l a D i s t r i c t I V, M a k a t i , M e t r o M a n i l a a n d t h e
INTERMEDIATE APPELLATE COURT, respondents.
The Solicitor General for petitioner.
K.V. Faylona & Associates for private respondents.
DECISION
CAMPOS, JR., J p:
Before Us is a petition for review on certiorari of decision 1 of the
then Intermediate Appellate Court affirming in toto the decision of
the former Court of First Instance of Rizal, Seventh Judicial
District, Branch XXIX, Pasay City.
The facts as found by the Appellate Court are as follows:
"On February 20, 1980, the Social Security System, SSS for
brevity, filed a complaint in the Court of First Instance of Rizal
against Moonwalk Development & Housing Corporation,
Moonwalk for short, alleging that the former had committed an
error in failing to compute the 12% interest due on delayed
payments on the loan of Moonwalk resulting in a chain of
errors in the application of payments made by Moonwalk and, in
an unpaid balance on the principal loan agreement in the amount
of P7,053.77 and, also in not reflecting in its statement or account
an unpaid balance on the said penalties for delayed payments in
the amount of P7,517,178.21 as of October 10, 1979.
Moonwalk answered denying SSS' claims and asserting that SSS
had the opportunity to ascertain the truth but failed to do so.
The trial court set the case for pre-trial at which pre-trial
conference, the court issued an order giving both parties thirty
(30) days within which to submit a stipulation of facts.
The Order of October 6, 1980 dismissing the complaint followed
the submission by the parties on September 19, 1980 of the
following stipulation of Facts:
"1. On October 6, 1971, plaintiff approved the application of
defendant Moonwalk for an interim loan in the amount of THIRTY
MILLION PESOS (P30,000,000.00) for the purpose of developing
and constructing a housing project in the provinces of Rizal and
Cavite;
"2. Out of the approved loan of THIRTY MILLION PESOS
(P30,000,000.00), the sum of P9,595,000.00 was released to
defendant Moonwalk as of November 28, 1973;
"3. A third Amended Deed of First Mortgage was executed on
December 18, 1973 Annex `D' providing for restructuring of the
payment of the released amount of P9,595,000.00.
"4. Defendants Rosita U. Alberto and Rosita U. Alberto,
mother and daughter respectively, under paragraph 5 of the
aforesaid Third Amended Deed of First Mortgage substituted
Associated Construction and Surveys Corporation, Philippine
Model Homes Development Corporation, Mariano Z. Velarde and
Eusebio T. Ramos, as solidary obligors;
"5. On July 23, 1974, after considering additional releases in
the amount of P2,659,700.00, made to defendant Moonwalk,
defendant Moonwalk delivered to the plaintiff a promissory note
for TWELVE MILLION TWO HUNDRED FIFTY FOUR
THOUSAND SEVEN HUNDRED PESOS (P12,254,700.00)
Annex `E', signed by Eusebio T. Ramos, and the said Rosita U.
Alberto and Rosita U. Alberto;
"6. Moonwalk made a total payment of P23,657,901.84 to
SSS for the loan principal of P12,254,700.00 released to it. The
last payment made by Moonwalk in the amount of
P15,004,905.74 were based on the Statement of Account, Annex
"F" prepared by plaintiff SSS for defendant;
"7. After settlement of the account stated in Annex 'F' plaintiff
issued to defendant Moonwalk the Release of Mortgage for
Moonwalk's mortgaged properties in Cavite and Rizal, Annexes
'G' and 'H' on October 9, 1979 and October 11, 1979 respectively.
"8. In letters to defendant Moonwalk, dated November 28,
1979 and followed up by another letter dated December 17, 1979,
plaintiff alleged that it committed an honest mistake in releasing
defendant.
"9. In a letter dated December 21, 1979, defendant's counsel
told plaintiff that it had completely paid its obligations to SSS;
"10. The genuineness and due execution of the documents
marked as Annex (sic) 'A' to 'O' inclusive, of the Complaint and
the letter dated December 21, 1979 of the defendant's counsel to
the plaintiff are admitted.
"Manila for Pasay City, September 2, 1980." 2
On October 6, 1990, the trial court issued an order dismissing the
complaint on the ground that the obligation was already
extinguished by the payment by Moonwalk of its indebtedness to
SSS and by the latter's act of cancelling the real estate mortgages
executed in its favor by defendant Moonwalk. The Motion for
Reconsideration filed by SSS with the trial court was likewise
dismissed by the latter.
These orders were appealed to the Intermediate Appellate Court.
Respondent Court reduced the errors assigned by the SSS into
this issue: ". . . are defendants-appellees, namely, Moonwalk
Development and Housing Corporation, Rosita U. Alberto, Rosita
U. Alberto, JMA House, Inc. still liable for the unpaid penalties as
claimed by plaintiff-appellant or is their obligation extinguished?" 3
As We have stated earlier, the respondent Court held that
Moonwalk's obligation was extinguished and affirmed the trial
court.
Hence, this Petition wherein SSS raises the following grounds for
review:
"First, in concluding that the penalties due from Moonwalk are
"deemed waived and/or barred," the appellate court disregarded
the basic tenet that waiver of a right must be express, made in a
clear and unequivocal manner. There is no evidence in the case
at bar to show that SSS made a clear, positive waiver of the
penalties, made with full knowledge of the circumstances.
Second, it misconstrued the ruling that SSS funds are trust funds,
and SSS, being a mere trustee, cannot perform acts affecting the
same, including condonation of penalties, that would diminish
property rights of the owners and beneficiaries thereof. (United
Christian Missionary Society v. Social Security Commission, 30
SCRA 982, 988 [1969]).
Third, it ignored the fact that penalty at the rate of 12% p.a. is not
inequitable.
Fourth, it ignored the principle that equity will cancel a release on
the ground of mistake of fact." 4
The same problem which confronted the respondent court is
presented before Us: Is the penalty demandable even after the
extinguishment of the principal obligation?
The former Intermediate Appellate Court, through Justice Eduard
P. Caguioa, held in the negative. It reasoned, thus:
"2. As we have explained under No. 1, contrary to what the
plaintiff-appellant states in its Brief, what is sought to be
recovered in this case is not the 12% interest on the loan but the
12% penalty for failure to pay on time the amortization. What is
sought to be enforced therefore is the penal clause of the contract
entered into between the parties.
Now, what is a penal clause. A penal clause has been defined as
"an accessory obligation which the parties attach to a principal
obligation for the purpose of insuring the performance thereof by
imposing on the debtor a special presentation (generally
consisting in the payment of a sum of money) in case the
obligation is not fulfilled or is irregularly or inadequately fulfilled" (3
Castan 8th Ed. p. 118).
Now an accessory obligation has been defined as that attached to
a principal obligation in order to complete the same or take its
place in the case of breach (4 Puig Pea Part 1 p. 76). Note
therefore that an accessory obligation is dependent for its
existence on the existence of a principal obligation. A principal
obligation may exist without an accessory obligation but an
accessory obligation cannot exist without a principal obligation.
For example, the contract of mortgage is an accessory obligation
to enforce the performance of the main obligation of
indebtedness. An indebtedness can exist without the mortgage
but a mortgage cannot exist without the indebtedness, which is
the principal obligation. In the present case, the principal
obligation is the loan between the parties. The accessory
obligation of a penal clause is to enforce the main obligation of
payment of the loan. If therefore the principal obligation does not
exist the penalty being accessory cannot exist.
Now then when is the penalty demandable? A penalty is
demandable in case of non performance or late performance of
the main obligation. In other words in order that the penalty may
arise there must be a breach of the obligation either by total or
partial non fulfillment or there is non fulfillment in point of time
which is called mora or delay. The debtor therefore violates the
obligation in point of time if there is mora or delay. Now, there is
no mora or delay unless there is a demand. It is noteworthy that in
the present case during all the period when the principal
obligation was still subsisting, although there were late
amortizations there was no demand made by the creditor, plaintiff-
appellant for the payment of the penalty. Therefore up to the time
of the letter of plaintiff-appellant there was no demand for the
payment of the penalty, hence the debtor was no in mora in the
payment of the penalty.
However, on October 1, 1979, plaintiff-appellant issued its
statement of account (Exhibit F) showing the total obligation of
Moonwalk as P15,004,905.74, and forthwith demanded payment
from defendant-appellee. Because of the demand for payment,
Moonwalk made several payments on September 29, October 9
and 19, 1979 respectively, all in all totalling P15,004,905.74 which
was a complete payment of its obligation as stated in Exhibit F.
Because of this payment the obligation of Moonwalk was
considered extinguished, and pursuant to said extinguishment,
the real estate mortgages given by Moonwalk were released on
October 9, 1979 and October 10, 1979 (Exhibits G and H). For all
purposes therefore the principal obligation of defendant-appellee
was deemed extinguished as well as the accessory obligation of
real estate mortgage; and that is the reason for the release of all
the Real Estate Mortgages on October 9 and 10, 1979
respectively.
Now, besides the Real Estate Mortgages, the penal clause which
is also an accessory obligation must also be deemed extinguished
considering that the principal obligation was considered
extinguished, and the penal clause being an accessory obligation.
That being the case, the demand for payment of the penal clause
made by plaintiff-appellant in its demand letter dated November
28, 1979 and its follow up letter dated December 17, 1979 (which
parenthetically are the only demands for payment of the penalties)
are therefore ineffective as there was nothing to demand. It would
be otherwise, if the demand for the payment of the penalty was
made prior to the extinguishment of the obligation because then
the obligation of Moonwalk would consist of: 1) the principal
obligation 2) the interest of 12% on the principal obligation and 3)
the penalty of 12% for late payment for after demand, Moonwalk
would be in mora and therefore liable for the penalty.
Let it be emphasized that at the time of the demand made in the
letters of November 28, 1979 and December 17, 1979 as far as
the penalty is concerned, the defendant-appellee was not in
default since there was no mora prior to the demand. That being
the case, therefore, the demand made after the extinguishment of
the principal obligation which carried with it the extinguishment of
the penal clause being merely an accessory obligation, was an
exercise in futility.
3. At the time of the payment made of the full obligation on
October 10, 1979 together with the 12% interest by defendant-
appellee Moonwalk, its obligation was extinguished. It being
extinguished, there was no more need for the penal clause. Now,
it is to be noted that penalty at anytime can be modified by the
Court. Even substantial performance under Art. 1234 authorizes
the Court to consider it as complete performance minus damages.
Now, Art, 1229 Civil Code of the Philippines provides:
"ART. 1229. The judge shall equitably reduce the penalty when
the principal obligation has been partly or irregularly complied with
by the debtor. Even if there has been no performance, the penalty
may also be reduced by the courts if it is iniquitous or
unconscionable."
If the penalty can be reduced after the principal obligation has
been partly or irregularly complied with by the debtor, which is
nonetheless a breach of the obligation, with more reason the
penal clause is not demandable when full obligation has been
complied with since in that case there is no breach of the
obligation. In the present case, there has been as yet no demand
for payment of the penalty at the time of the extinguishment of the
obligation, hence there was likewise an extinguishment of the
penalty.
Let Us emphasize that the obligation of defendant-appellee was
fully complied with by the debtor, that is, the amount loaned
together with the 12% interest has been fully paid by the appellee.
That being so, there is no basis for demanding the penal clause
since the obligation has been extinguished. Here there has been
a waiver of the penal clause as it was not demanded before the
full obligation was fully paid and extinguished. Again, emphasis
must be made on the fact that plaintiff-appellant has not lost
anything under the contract since in got back in full the amount
loan (sic) as well as the interest thereof. The same thing would
have happened if the obligation was paid on time, for then the
penal clause, under the terms of the contract would not apply.
Payment of the penalty does not mean gain or loss of plaintiff-
appellant since it is merely for the purpose of enforcing the
performance of the main obligation has been fully complied with
and extinguished, the penal clause has lost its raison d' entre." 5
We find no reason to depart from the appellate court's decision.
We, however, advance the following reasons for the denial of this
petition.
Article 1226 of the Civil Code provides:
"Art. 1226. In obligations with a penal clause, he penalty shall
substitute the indemnity for damages and the payment of interests
in case of noncompliance, if there is no stipulation to the contrary.
Nevertheless, damages shall be paid if the obligor refuses to pay
the penalty or is guilty of fraud in the fulfillment of the obligation.
The penalty may be enforced only when it is demandable in
accordance with the provisions of this Code." (Emphasis Ours.)
A penal clause is an accessory undertaking to assume greater
liability in case of breach. 6 It has a double function: (1) to provide
for liquidated damages, and (2) to strengthen the coercive force of
the obligation by the threat of greater responsibility in the event of
breach. 7 From the foregoing, it is clear that a penal clause is
intended to prevent the obligor from defaulting in the performance
of his obligation. Thus, if there should be default, the penalty may
be enforced. One commentator of the Civil Code wrote:
"Now when is the penalty deemed demandable in accordance
with the provisions of the Civil Code? We must make a distinction
between a positive and a negative obligation. With regard to
obligations which are positive (to give and to do), the penalty is
demandable when the debtor is in mora; hence, the necessity of
demand by the debtor unless the same is excused . . ." 8
When does delay arise? Under the Civil Code, delay begins from
the time the obligee judicially or extrajudicially demands from the
obligor the performance of the obligation.
"Art. 1169. Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation."
There are only three instances when demand is not necessary to
render the obligor in default. These are the following:

"(1) When the obligation or the law expressly so declares;
(2) When from the nature and the circumstances of the
obligation it appears that the designation of the time when the
thing is to be delivered or the service is to be rendered was a
controlling motive for the establishment of the contract; or
(3) When the demand would be useless, as when the obligor
has rendered it beyond his power to perform." 9
This case does not fall within any of the established exceptions.
Hence, despite the provision in the promissory note that "(a)ll
amortization payments shall be made every first five (5) days of
the calendar month until the principal and interest on the loan or
any portion thereof actually released has been fully paid," 10
petitioner is not excused from making a demand. It has been
established that at the time of payment of the full obligation,
private respondent Moonwalk has long been delinquent in
meeting its monthly arrears and in paying the full amount of the
loan itself as the obligation matured sometime in January, 1977.
But mere delinquency in payment does not necessarily mean
delay in the legal concept. To be in default ". . . is different from
mere delay in the grammatical sense, because it involves the
beginning of a special condition or status which has its own
peculiar effects or results." 11 In order that the debtor may be in
default it is necessary that the following requisites be present: (1)
that the obligation be demandable and already liquidated; (2) that
the debtor delays performance; and (3) that the creditor requires
the performance judicially and extrajudicially. 12 Default generally
begins from the moment the creditor demands the performance of
the obligation. 13
Nowhere in this case did it appear that SSS demanded from
Moonwalk the payment of its monthly amortizations. Neither did it
show that petitioner demanded the payment of the stipulated
penalty upon the failure of Moonwalk to meet its monthly
amortization. What the complaint itself showed was that SSS tried
to enforce the obligation sometime in September, 1977 by
foreclosing the real estate mortgages executed by Moonwalk in
favor of SSS. But this foreclosure did not push through upon
Moonwalk's requests and promises to pay in full. The next
demand for payment happened on October 1, 1979 when SSS
issued a Statement of Account to Moonwalk. And in accordance
with said statement, Moonwalk paid its loan in full. What is clear,
therefore, is that Moonwalk was never in default because SSS
never compelled performance. Though it tried to foreclose the
mortgages, SSS itself desisted from doing so upon the entreaties
of Moonwalk. If the Statement of Account could properly be
considered as demand for payment, the demand was complied
with on time. Hence, no delay occurred and there was, therefore,
no occasion when the penalty became demandable and
enforceable. Since there was no default in the performance of the
main obligation payment of the loan SSS was never entitled
to recover any penalty, not at the time it made the Statement of
Account and certainly, not after the extinguishment of the principal
obligation because then, all the more that SSS had no reason to
ask for the penalties. Thus, there could never be any occasion for
waiver or even mistake in the application for payment because
there was nothing for SSS to waive as its right to enforce the
penalty did not arise.
SSS, however, in buttressing its claim that it never waived the
penalties, argued that the funds it held were trust funds and as
trustee, the petitioner could not perform acts affecting the funds
that would diminish property rights of the owners and beneficiaries
thereof. To support its claim, SSS cited the case of United
Christian Missionary Society v. Social Security Commission. 14
We looked into the case and found out that it is not applicable to
the present case as it dealt not with the right of the SSS to collect
penalties which were provided for in contracts which it entered
into but with its right to collect premiums and its duty to collect the
penalty for delayed payment or non-payment of premiums. The
Supreme Court, in that case, stated:
"No discretion or alternative is granted respondent Commission in
the enforcement of the law's mandate that the employer who fails
to comply with his legal obligation to remit the premiums to the
System within the prescribed period shall pay a penalty of three
(3%) per month. The prescribed penalty is evidently of a punitive
character, provided by the legislature to assure that employers do
not take lightly the State's exercise of the police power in the the level of a private person. Hence, the rules on contract
implementation of the Republic's declared policy "to develop, applicable to private parties are applicable to it. The argument
establish gradually and perfect a social security system which therefore that the Social Security Commission cannot waive or
shall be suitable to the needs of the people throughout the condone the penalties which was applied in the United Christian
Philippines and (to) provide protection to employers against the Missionary Society cannot apply in this case. First, because what
hazards of disability, sickness, old age and death . . ." was not paid were installments on a loan but premiums required
by law to be paid by the parties covered by the Social Security
Thus, We agree with the decision of the respondent court on the Act. Secondly, what is sought to be condoned or waived are
matter which We quote, to wit: penalties not imposed by law for failure to remit premiums
required by law, but a penalty for non payment provided for by the
"Note that the above case refers to the condonation of the penalty agreement of the parties in the contract between them . . ." 15
for the non remittance of the premium which is provided for by
Section 22(a) of the Social Security Act . . . In other words, what WHEREFORE, in view of the foregoing, the petition is
was sought to be condoned was the penalty provided for by law DISMISSED and the decision of the respondent court is
for non remittance of premium for coverage under the Social AFFIRMED. LLpr
Security Act.
SO ORDERED.
The case at bar does not refer to any penalty provided for by law
nor does it refer to the non remittance of premium. The case at
bar refers to a contract of loan entered into between plaintiff and
defendant Moonwalk Development and Housing Corporation.
Note, therefore, that no provision of law is involved in this case,
nor is there any penalty imposed by law nor a case about non-
remittance of premium required by law. The present case refers to
a contract of loan payable in installments not provided for by law
but by agreement of the parties. Therefore, the ratio decidendi of
the case of United Christian Missionary Society vs. Social
Security Commission which plaintiff-appellant relies is not
applicable in this case; clearly, the Social Security Commission,
which is a creature of the Social Security Act cannot condone a
mandatory provision of law providing for the payment of premiums
and for penalties for non remittance. The life of the Social Security
Act is in the premiums because these are the funds from which
the Social Security Act gets the money for its purposes and the
non-remittance of the premiums is penalized not by the Social
Security Commission but by law.

xxx xxx xxx

It is admitted that when a government created corporation enters

into a contract with private party concerning a loan, it descends to
SOLAR HARVEST, INC., Petitioner - versus - DAVAO
CORRUGATED CARTON CORPORATION, Respondent.
G.R. No. 176868
Present:
CARPIO, J.,
Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.
Promulgated:
July 26, 2010
DECISION
NACHURA, J.:
Petitioner seeks a review of the Court of Appeals (CA) Decision[1]
dated September 21, 2006 and Resolution[2] dated February 23,
2007, which denied petitioners motion for reconsideration. The
assailed Decision denied petitioners claim for reimbursement for
the amount it paid to respondent for the manufacture of
corrugated carton boxes.
The case arose from the following antecedents:
In the first quarter of 1998, petitioner, Solar Harvest, Inc., entered
into an agreement with respondent, Davao Corrugated Carton
Corporation, for the purchase of corrugated carton boxes,
specifically designed for petitioners business of exporting fresh
bananas, at US$1.10 each. The agreement was not reduced into
writing. To get the production underway, petitioner deposited, on
March 31, 1998, US$40,150.00 in respondents US Dollar Savings
Account with Westmont Bank, as full payment for the ordered
boxes.
Despite such payment, petitioner did not receive any boxes from
respondent. On January 3, 2001, petitioner wrote a demand letter
for reimbursement of the amount paid.[3] On February 19, 2001,
respondent replied that the boxes had been completed as early as
April 3, 1998 and that petitioner failed to pick them up from the
formers warehouse 30 days from completion, as agreed upon.
Respondent mentioned that petitioner even placed an additional
order of 24,000 boxes, out of which, 14,000 had been
manufactured without any advanced payment from petitioner.
Respondent then demanded petitioner to remove the boxes from
the factory and to pay the balance of US$15,400.00 for the
additional boxes and P132,000.00 as storage fee.
On August 17, 2001, petitioner filed a Complaint for sum of money
and damages against respondent. The Complaint averred that the
parties agreed that the boxes will be delivered within 30 days from
payment but respondent failed to manufacture and deliver the
boxes within such time. It further alleged
6. That repeated follow-up was made by the plaintiff for the
immediate production of the ordered boxes, but every time,
defendant [would] only show samples of boxes and ma[k]e
repeated promises to deliver the said ordered boxes.
7. That because of the failure of the defendant to deliver the
ordered boxes, plaintiff ha[d] to cancel the same and demand
payment and/or refund from the defendant but the latter refused to
pay and/or refund the US$40,150.00 payment made by the former
for the ordered boxes.[4]
In its Answer with Counterclaim,[5] respondent insisted that, as
early as April 3, 1998, it had already completed production of the
36,500 boxes, contrary to petitioners allegation. According to
respondent, petitioner, in fact, made an additional order of 24,000
boxes, out of which, 14,000 had been completed without waiting
for petitioners payment. Respondent stated that petitioner was to
pick up the boxes at the factory as agreed upon, but petitioner
failed to do so. Respondent averred that, on October 8, 1998,
petitioners representative, Bobby Que (Que), went to the factory
and saw that the boxes were ready for pick up. On February 20,
1999, Que visited the factory again and supposedly advised
respondent to sell the boxes as rejects to recoup the cost of the
unpaid 14,000 boxes, because petitioners transaction to ship
bananas to China did not materialize. Respondent claimed that
the boxes were occupying warehouse space and that petitioner
should be made to pay storage fee at P60.00 per square meter for
every month from April 1998. As counterclaim, respondent prayed
that judgment be rendered ordering petitioner to pay $15,400.00,
plus interest, moral and exemplary damages, attorneys fees, and
costs of the suit.
In reply, petitioner denied that it made a second order of 24,000
boxes and that respondent already completed the initial order of
36,500 boxes and 14,000 boxes out of the second order. It
maintained that
respondent only manufactured a sample of the ordered boxes and
that respondent could not have produced 14,000 boxes without
the required pre-payments.[6]
During trial, petitioner presented Que as its sole witness. Que
testified that he ordered the boxes from respondent and deposited
the money in respondents account.[7] He specifically stated that,
when he visited respondents factory, he saw that the boxes had
no print of petitioners logo.[8] A few months later, he followed-up
the order and was told that the company had full production, and
thus, was promised that production of the order would be rushed.
He told respondent that it should indeed rush production because
the need for the boxes was urgent. Thereafter, he asked his
partner, Alfred Ong, to cancel the order because it was already
late for them to meet their commitment to ship the bananas to
China.[9] On cross-examination, Que further testified that China
Zero Food, the Chinese company that ordered the bananas, was
sending a ship to Davao to get the bananas, but since there were
no cartons, the ship could not proceed. He said that, at that time,
bananas from Tagum Agricultural Development Corporation
(TADECO) were already there. He denied that petitioner made an
additional order of 24,000 boxes. He explained that it took three
years to refer the matter to counsel because respondent promised
to pay.[10]
For respondent, Bienvenido Estanislao (Estanislao) testified that
he met Que in Davao in October 1998 to inspect the boxes and
that the latter got samples of them. In February 2000, they
inspected the boxes again and Que got more samples. Estanislao
said that petitioner did not pick up the boxes because the ship did
not arrive.[11] Jaime Tan (Tan), president of respondent, also
testified that his company finished production of the 36,500 boxes
on April 3, 1998 and that petitioner made a second order of
24,000 boxes. He said that the agreement was for respondent to
produce the boxes and for petitioner to pick them up from the
warehouse.[12] He also said that the reason why petitioner did not
pick up the boxes was that the ship that was to carry the bananas
did not arrive.[13] According to him, during the last visit of Que
and Estanislao, he asked them to withdraw the boxes immediately
because they were occupying a big space in his plant, but they,
instead, told him to sell the cartons as rejects. He was able to sell
5,000 boxes at P20.00 each for a total of P100,000.00. They then
told him to apply the said amount to the unpaid balance.
In its March 2, 2004 Decision, the Regional Trial Court (RTC)
ruled that respondent did not commit any breach of faith that
would justify rescission of the contract and the consequent
reimbursement of the amount paid by petitioner. The RTC said
that respondent was able to produce the ordered boxes but
petitioner failed to obtain possession thereof because its ship did
not arrive. It thus dismissed the complaint and respondents
counterclaims, disposing as follows:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of defendant and against the plaintiff and,
accordingly, plaintiffs complaint is hereby ordered DISMISSED
without pronouncement as to cost. Defendants counterclaims are
similarly dismissed for lack of merit.
SO ORDERED.[14]
Petitioner filed a notice of appeal with the CA.
On September 21, 2006, the CA denied the appeal for lack of
merit.[15] The appellate court held that petitioner failed to
discharge its burden of proving what it claimed to be the parties
agreement with respect to the delivery of the boxes. According to
the CA, it was unthinkable that, over a period of more than two
years, petitioner did not even demand for the delivery of the
boxes. The CA added that even assuming that the agreement was
for respondent to deliver the boxes, respondent would not be
liable for breach of contract as petitioner had not yet demanded
from it the delivery of the boxes.[16]
Petitioner moved for reconsideration,[17] but the motion was
denied by the CA in its Resolution of February 23, 2007.[18]
In this petition, petitioner insists that respondent did not
completely manufacture the boxes and that it was respondent
which was obliged to deliver the boxes to TADECO.
We find no reversible error in the assailed Decision that would
justify the grant of this petition.
Petitioners claim for reimbursement is actually one for rescission
(or resolution) of contract under Article 1191 of the Civil Code,
which reads:
Art. 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles
1385 and 1388 and the Mortgage Law.
The right to rescind a contract arises once the other party defaults
in the performance of his obligation. In determining when default
occurs, Art. 1191 should be taken in conjunction with Art. 1169 of
the same law, which provides:
Art. 1169. Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in
order that delay may exist:
(1) When the obligation or the law expressly so declares;
or
(2) When from the nature and the circumstances of the
obligation it appears that the designation of the time when the
thing is to be delivered or the service is to be rendered was a
controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor
has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other
does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins.
In reciprocal obligations, as in a contract of sale, the general rule
is that the fulfillment of the parties respective obligations should
be simultaneous. Hence, no demand is generally necessary
because, once a party fulfills his obligation and the other party
does not fulfill his, the latter automatically incurs in delay. But
when different dates for performance of the obligations are fixed,
the default for each obligation must be determined by the rules
given in the first paragraph of the present article,[19] that is, the
other party would incur in delay only from the moment the other
party demands fulfillment of the formers obligation. Thus, even in
reciprocal obligations, if the period for the fulfillment of the
obligation is fixed, demand upon the obligee is still necessary
before the obligor can be considered in default and before a
cause of action for rescission will accrue.
Evident from the records and even from the allegations in the
complaint was the lack of demand by petitioner upon respondent
to fulfill its obligation to manufacture and deliver the boxes. The
Complaint only alleged that petitioner made a follow-up upon
respondent, which, however, would not qualify as a demand for
the fulfillment of the obligation. Petitioners witness also testified
that they made a follow-up of the boxes, but not a demand. Note
is taken of the fact that, with respect to their claim for
reimbursement, the Complaint alleged and the witness testified
that a demand letter was sent to respondent. Without a previous
demand for the fulfillment of the obligation, petitioner would not
have a cause of action for rescission against respondent as the
latter would not yet be considered in breach of its contractual
obligation.
Even assuming that a demand had been previously made before
filing the present case, petitioners claim for reimbursement would
still fail, as the circumstances would show that respondent was
not guilty of breach of contract.
The existence of a breach of contract is a factual matter not
usually reviewed in a petition for review under Rule 45.[20] The
Court, in petitions for review, limits its inquiry only to questions of
law. After all, it is not a trier of facts, and findings of fact made by
the trial court, especially when reiterated by the CA, must be
given great respect if not considered as final.[21] In dealing with
this petition, we will not veer away from this doctrine and will thus
sustain the factual findings of the CA, which we find to be
adequately supported by the evidence on record.
As correctly observed by the CA, aside from the pictures of the
finished boxes and the production report thereof, there is ample
showing that the boxes had already been manufactured by
respondent. There is the testimony of Estanislao who
accompanied Que to the factory, attesting that, during their first
visit to the company, they saw the pile of petitioners boxes and
Que took samples thereof. Que, petitioners witness, himself
confirmed this incident. He testified that Tan pointed the boxes to
him and that he got a sample and saw that it was blank. Ques
absolute assertion that the boxes were not manufactured is,
therefore, implausible and suspicious.
In fact, we note that respondents counsel manifested in court,
during trial, that his client was willing to shoulder expenses for a
representative of the court to visit the plant and see the boxes.[22]
Had it been true that the boxes were not yet completed,
respondent would not have been so bold as to challenge the court
to conduct an ocular inspection of their warehouse. Even in its
Comment to this petition, respondent prays that petitioner be
ordered to remove the boxes from its factory site,[23] which could
only mean that the boxes are, up to the present, still in
respondents premises.
We also believe that the agreement between the parties was for
petitioner to pick up the boxes from respondents warehouse,
contrary to petitioners allegation. Thus, it was due to petitioners
fault that the boxes were not delivered to TADECO.
Petitioner had the burden to prove that the agreement was, in
fact, for respondent to deliver the boxes within 30 days from
payment, as alleged in the Complaint. Its sole witness, Que, was
not even competent to testify on the terms of the agreement and,
therefore, we cannot give much credence to his testimony. It
appeared from the testimony of Que that he did not personally
place the order with Tan, thus:
Q. No, my question is, you went to Davao City and placed your
order there?
A. I made a phone call.
Q. You made a phone call to Mr. Tan?
A. The first time, the first call to Mr. Alf[re]d Ong. Alfred Ong has a
contact with Mr. Tan.
Q. So, your first statement that you were the one who placed the
order is not true?
A. Thats true. The Solar Harvest made a contact with Mr. Tan and
I deposited the money in the bank.
Q. You said a while ago [t]hat you were the one who called Mr.
Tan and placed the order for 36,500 boxes, isnt it?
A. First time it was Mr. Alfred Ong.
Q. It was Mr. Ong who placed the order[,] not you?
A. Yes, sir.[24]
Q. Is it not a fact that the cartons were ordered through Mr.
Bienvenido Estanislao?
A. Yes, sir.[25]
Moreover, assuming that respondent was obliged to deliver the
boxes, it could not have complied with such obligation. Que,
insisting that the boxes had not been manufactured, admitted that
he did not give respondent the authority to deliver the boxes to
TADECO:
Q. Did you give authority to Mr. Tan to deliver these boxes to
TADECO?
A. No, sir. As I have said, before the delivery, we must have to
check the carton, the quantity and quality. But I have not seen a
single carton.

Q. Are you trying to impress upon the [c]ourt that it is only after
the boxes are completed, will you give authority to Mr. Tan to
deliver the boxes to TADECO[?]
A. Sir, because when I checked the plant, I have not seen any
carton. I asked Mr. Tan to rush the carton but not[26]

Q. Did you give any authority for Mr. Tan to deliver these boxes to
TADECO?
A. Because I have not seen any of my carton.

Q. You dont have any authority yet given to Mr. Tan?

A. None, your Honor.[27]

Surely, without such authority, TADECO would not have allowed

respondent to deposit the boxes within its premises.

In sum, the Court finds that petitioner failed to establish a cause of

action for rescission, the evidence having shown that respondent
did not commit any breach of its contractual obligation. As
previously stated, the subject boxes are still within respondents
premises. To put a rest to this dispute, we therefore relieve
respondent from the burden of having to keep the boxes within its
premises and, consequently, give it the right to dispose of them,
after petitioner is given a period of time within which to remove
them from the premises.

WHEREFORE, premises considered, the petition is DENIED. The

Court of Appeals Decision dated September 21, 2006 and
Resolution dated February 23, 2007 are AFFIRMED. In addition,
petitioner is given a period of 30 days from notice within which to
cause the removal of the 36,500
boxes from respondents warehouse. After the lapse of said period
and petitioner fails to effect such removal, respondent shall have
the right to dispose of the boxes in any manner it may deem fit.

SO ORDERED.