Fgu Insurance

SUPREME COURT REPORTS ANNOTATED
FGU Insurance Corporation vs. Court of Appeals
G.R. No. 118889. March 23, 1998.*
FGU INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, FILCAR TRANSPORT,

INC., and FORTUNE INSURANCE CORPORATION, respondents.
Civil Law; Damages; Quasi-Delict; Requisites to sustain a claim for damages based on quasi-delict.To
sustain a claim based thereon, the following requisites must concur: (a) damage suffered by the plaintiff;
(b) fault or negligence of the defendant; and, (c) connection of cause and effect between the fault or
negligence of the defendant and the damage incurred by the plaintiff.
Same; Same; Same; Court agrees with respondent court that petitioner failed to prove the existence of the
second requisite, i.e., fault or negligence of defendant FILCAR.We agree with respondent court that
petitioner failed to prove the existence of the second requisite, i.e., fault or negligence of defendant
FILCAR, because only the fault or negligence of Dahl-Jensen was sufficiently established, not that of
FILCAR. It should be noted that the damage caused on the vehicle of Soriano was brought about by the
circumstance that DahlJensen swerved to the right while the vehicle that he was driving was at the center
lane. It is plain that the negligence was solely attributable to Dahl-Jensen thus making the damage
suffered by the other vehicle his personal liability. Respondent FILCAR did not have any participation
therein.
PETITION for review of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
FGU Insurance Corporation vs. Court of Appeals
BELLOSILLO, J.:
For damages suffered by a third party, may an action based on quasi-delict prosper against a rent-a-car
company and, consequently, its insurer for fault or negligence of the car lessee in driving the rented
vehicle?
This was a two-car collision at dawn. At around 3 oclock of 21 April 1987, two (2) vehicles, both
Mitsubishi Colt Lancers, cruising northward along Epifanio de los Santos Avenue, Mandaluyong City,
figured in a traffic accident. The car owned by Lydia F. Soriano was being driven at the outer lane of the
highway by Benjamin Jacildone, while the other car, owned by respondent FILCAR Transport, Inc.
(FILCAR), and driven by Peter Dahl-Jensen as lessee, was at the center lane, left of the other vehicle.
Upon approaching the corner of Pioneer Street, the car owned by FILCAR swerved to the right hitting the
left side of the car of Soriano. At that time Dahl-Jensen, a Danish tourist, did not possess a Philippine
drivers license.
As a consequence, petitioner FGU Insurance Corporation, in view of its insurance contract with Soriano,
paid the latter P25,382.20. By way of subrogation, it sued Dahl-Jensen and respondent FILCAR as well
as respondent Fortune Insurance delict before the Regional Trial Court of Makati City.
Unfortunately, summons was not served on Dahl-Jensen since he was no longer staying at his given
address; in fact, upon motion of petitioner, he was dropped from the complaint.
On 30 July 1991 the trial court dismissed the case for failure of petitioner to substantiate its claim of
subrogation.
On 31 January 1995 respondent Court of Appeals affirmed the ruling of the trial court although based
on another ground, i.e., only the fault or negligence of Dahl-Jensen was sufficiently proved but not that of
respondent FILCAR. In other words, petitioner failed to establish its cause of action for sum of money
based on quasi-delict.
In this appeal, petitioner insists that respondents are liable on the strength of the ruling in MYC-Agro-
Industrial Corporation v. Vda. de Caldo5 that the registered owner of a vehicle is liable for damages
suffered by third persons although the vehicle is leased to another.
We find no reversible error committed by respondent court in upholding the dismissal of petitioners
complaint. The pertinent provision is Art. 2176 of the Civil Code which states: 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 x x x x
To sustain a claim based thereon, the following requisites must concur: (a) damage suffered by the
plaintiff; (b) fault or negligence of the defendant; and, (c) connection of cause and damage incurred by the
plaintiff.
We agree with respondent court that petitioner failed to prove the existence of the second requisite, i.e.,
fault or negligence of defendant FILCAR, because only the fault or negligence of Dahl-Jensen was
sufficiently established, not that of FILCAR. It should be noted that the damage caused on the vehicle of
Soriano was brought about by the circumstance that Dahl-Jensen swerved to the right while the vehicle
that he was driving was at the center lane. It is plain that the negligence was solely attributable to Dahl-
Jensen thus making the damage suffered by the other vehicle his personal liability. Respondent FILCAR
did not have any participation therein.
Article 2180 of the same Code which deals also with quasi delict provides:
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.
The father and, in case of his death or incapacity, the mother, are responsible for the damages
caused by the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons who are under
their authority and live in their company.
The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on the
occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.
The State is responsible in like manner when it acts through a special agent; but not when the
damage has been caused by the is provided in article 2176 shall be applicable.
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.
The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage.
The liability imposed by Art. 2180 arises by virtue of a presumption juris tantum of negligence on the
part of the persons made responsible thereunder, derived from their failure to exercise due care and
vigilance over the acts of subordinates to prevent them from causing damage. Yet, as correctly observed
by respondent court, Art. 2180 is hardly applicable because none of the circumstances mentioned therein
obtains in the case under consideration. Respondent FILCAR being engaged in a rent-a-car business was
only the owner of the car leased to Dahl-Jensen. As such, there was no vinculum juris between them as
employer and employee. Respondent FILCAR cannot in any way be responsible for the negligent act of
Dahl-Jensen, the former not being an employer of the latter.
We now correlate par. 5 of Art. 2180 with Art. 2184 of the same Code which provides: In motor
vehicle mishap, the owner is solidarily liable with his driver, if the former, who was in the vehicle,
could have by the use of due diligence, prevented the misfortune x x x x If the owner was not in the
motor vehicle, the provisions of article 2180 are applicable. Obviously, this provision of Art. 2184 is
neither applicable because of the absence of master-driver relationship between respondent FILCAR and
Dahl-Jensen. Clearly, petitioner has no cause of action against respondent FILCAR on the basis of quasi-
delict; logically, its claim against respondent FORTUNE can neither prosper.
Petitioners insistence on MYC-Agro-Industrial Corporation is rooted in a misapprehension of our ruling

therein. In that case, the negligent and reckless operation of the truck owned by petitioner corporation
caused injuries to several persons and damage to property. Intending to exculpate itself from liability, the
corporation raised the defense that at the time of the collision it had no more control over the vehicle as it
was leased to another; and, that the driver was not its employee but of the lessee. The trial court was not
persuaded as it found that the true nature of the alleged lease contract was nothing more than a disguise
effected by the corporation to relieve itself of the burdens and responsibilities of an employer. We upheld
this finding and affirmed the declaration of joint and several liability of the corporation with its driver.
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals dated 31 January
1995 sustaining the dismissal of petitioners complaint by the trial court is AFFIRMED. Costs
against petitioner.
SO ORDERED.
G.R. No. 122445. November 18, 1997.*
DR. NINEVETCH CRUZ, petitioner, vs. COURT OF APPEALS and LYDIA UMALI, respondents.
Physicians; Medical Malpractice; Criminal Law; Reckless Imprudence; Elements.This Court, however,
holds differently and finds the foregoing circumstances insufficient to sustain a judgment of conviction
against the petitioner for the crime of reckless imprudence resulting in homicide. The elements of reckless
imprudence are: (1) that the offender does or fails to do an act; (2) that the doing or the failure to do that
act is voluntary; (3) that it be without malice; (4) that material damage results from the reckless
imprudence; and (5) that there is inexcusable lack of precaution on the part of the offender, taking into
consideration his employment or occupation, degree of intelligence, physical condition, and other
circumstances regarding persons, time and place.
Same; Same; Same; Evidence; Witnesses; Expert Testimony; Whether or not a physician has committed
an inexcusable lack of precaution in the treatment of his patient is to be determined according to the
standard of care observed by other members of the profession in good standing under similar
circumstances bearing in mind the advanced state of the profession at the time of treatment or the present
state of medical science; Inasmuch as the causes of the injuries involved in malpractice actions are
determinable only in the light of scientific knowledge, it has been recognized that exp ert testimony is
usually necessary to support the conclusion as to causation.Whether or not a physician has committed
an inexcusable lack of precaution in the treatment of his patient is to be determined according to the
standard of care observed by other members of the profession in good standing under similar
circumstances bearing in mind the advanced state of the profession at the time of treatment or the present
state of medical science. In the recent case of Leonila Garcia-Rueda v. Wilfred L. Pascasio, et al., this
Court stated that in accepting a case, a doctor in effect represents that, having the needed training and skill
possessed by physicians and surgeons practicing in the same field, he will employ such training, care and
skill in the treatment of his patients. He therefore has a duty to use at least the same level of care that any
other reasonably competent doctor would use to treat a condition under the same circumstances. It is in
this aspect of medical malpractice that expert testimony is essential to establish not only the standard of
care of the profession but also that the physicians conduct in the treatment and care falls below such
standard. Further, inasmuch as the causes of the injuries involved in malpractice actions are determinable
only in the light of scientific knowledge, it has been recognized that expert testimony is usually necessary
to support the conclusion as to causation.
Same; Same; Same; Same; Same; Same; While it may be true that certain circumstances pointed out by
the courts below seemed beyond cavil to constitute reckless imprudence on the part of the surgeon, such
conclusion is still best arrived at not through the educated surmises nor conjectures of laymen, including
judges, but by the unquestionable knowledge of expert witnesses. For whether a physician or surgeon has
exercised the requisite degree of skill and care in the treatment of his patient is, in the generality of cases,
a matter of expert opinion.All three courts below bewail the inadequacy of the facilities of the clinic
and its untidiness; the lack of provisions such as blood, oxygen, and certain medicines; the failure to
subject the patient to a cardio-pulmonary test prior to the operation; the omission of any form of blood
typing before transfusion; and even the subsequent transfer of Lydia to the San Pablo Hospital and the
reoperation performed on her by the petitioner. But while it may be true that the circumstances pointed
about by the courts below seemed beyond cavil to constitute reckless imprudence on the part of the
surgeon, this conclusion is still best arrived at not through the educated surmises nor conjectures of
laymen, including judges, but by the unquestionable knowledge of expert witnesses. For whether a
physician or surgeon has exercised the requisite degree of skill and care in the treatment of his patient is,
in the generality of cases, a matter of expert opinion. The deference of courts to the expert opinion of
qualified physicians stems from its realization that the latter possess unusual technical skills which
laymen in most instances are incapable of intelligently evaluating. Expert testimony should have been
offered to prove that the circumstances cited by the courts below are constitutive of conduct falling below
the standard of care employed by other physicians in good standing when performing the same operation.
It must be remembered that when the qualifications of a physician are admitted, as in the instant case,
there is an inevitable presumption that in proper cases he takes the necessary precaution and employs the
best of his knowledge and skill in attending to his clients, unless the contrary is sufficiently established.
This presumption is rebuttable by expert opinion which is so sadly lacking in the case at bench.
Same; Same; Same; Same; Burden of Proof; In litigations involving medical negligence, the plaintiff has
the burden of establishing the defendants negligence and for a reasonable conclusion of negligence, there
must be proof of breach of duty on the part of the surgeon as well as a causal connection of such breach
and the resulting death of his patient.In litigations involving medical negligence, the plaintiff has the
burden of establishing appellants negligence and for a reasonable conclusion of negligence, there must be
proof of breach of duty on the part of the surgeon as well as a causal connection of such breach and the
resulting death of his patient. In Chan Lugay v. St. Lukes Hospital, Inc., where the attending physician
was absolved of liability for the death of the complainants wife and newborn baby, this Court held that:
In order that there may be a recovery for an injury, however, it must be shown that the injury for which
recovery is sought must be the legitimate consequence of the wrong done; the connection between the
negligence and the injury must be a direct and natural sequence of events, unbroken by intervening
efficient causes. In other words, the negligence must be the proximate cause of the injury. For,
negligence, no matter in what it consists, cannot create a right of action unless it is the proximate cause
of the injury complained of. And the proximate cause of an injury is that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which
the result would not have occurred. (Italics supplied.)
Same; Same; Same; Evidence; Damages; While a conviction of a crime requires proof beyond reasonable
doubt, only a preponderance of evidence is required to establish civil liability, thus, even as the Court was
not able to render a sentence of conviction for insufficiency of evidence, the Court is not blind to the
reckless and imprudent manner in which the surgeon carried out her duties.Nevertheless, this Court
finds the petitioner civilly liable for the death of Lydia Umali, for while a conviction of a crime requires
proof beyond reasonable doubt, only a preponderance of evidence is required to establish civil liability.
The petitioner is a doctor in whose hands a patient puts his life and limb. For insufficiency of evidence
this Court was not able to render a sentence of conviction but it is not blind to the reckless and imprudent
manner in which the petitioner carried out her duties. A precious life has been lost and the circumstances
leading thereto exacerbated the grief of those left behind. The heirs of the deceased continue to feel the
loss of their mother up to the present time and this Court is aware that no amount of compassion and
commiseration nor words of bereavement can suffice to assuage the sorrow felt for the loss of a loved
one. Certainly, the award of moral and exemplary damages in favor of the heirs of Lydia Umali are proper
in the instant case.
FRANCISCO, J.:
Doctors are protected by a special rule of law. They are not guarantors of care. They do not even warrant
a good result. They are not insurers against mishaps or unusual consequences. Furthermore they are not
liable for honest mistakes of judgment . . .1
The present case against petitioner is in the nature of a medical malpractice suit, which in simplest terms
is the type of claim which a victim has available to him or her to redress a wrong committed by a medical
professional which has caused bodily harm. In this jurisdiction, however, such claims are most often
brought as a civil action for damages under Article 2176 of the Civil Code, and in some instances, as a
criminal case under Article 365 of the Revised Penal Code
________________
3 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.
4 Art. 365. Imprudence and Negligence. Any person who, by reckless imprudence, shall commit any act
which, had it been intentional, would constitute a grave felony, shall suffer the penalty of arresto mayor in
its maximum period to prision correccional in its medium period; if it would have constituted a less grave
felony, the with which the civil action for damages is impliedly instituted. It is via the latter type of action
that the heirs of the deceased sought redress for the petitioners alleged imprudence and negligence in
treating the deceased thereby caus-
_______________
penalty of arresto mayor in its minimum and medium periods shall be imposed; if it would have
constituted a light felony, the penalty, of arresto menor in its maximum period shall be imposed.
Any person who, by simple imprudence or negligence, shall commit an act which would otherwise
constitute a grave felony, shall suffer the penalty of arresto mayor in its medium and maximum
periods; if it would have constituted a less serious felony, the penalty of arresto mayor in its
minimum period shall be imposed.
When the execution of the act covered by this article shall have only resulted in damage to the
property of another, the offender shall be punished by a fine ranging from an amount equal to the
value of said damages to three times such value, but which shall in no case be less than twenty-five
pesos.
A fine not exceeding two hundred-pesos and censure shall be imposed upon any person who, by
simple imprudence or negligence, shall cause some wrong which, if done maliciously, would have
constituted a light felony.
In the imposition of these penalties, the courts shall exercise their sound discretion, without regard to the
rules prescribed in article sixty-four.
The provisions contained in this article shall not be applicable:
1. When the penalty provided for the offense is equal to or lower than those provided in the first two
paragraphs of this article, in which case the courts shall impose the penalty next lower in degree than that
which should be imposed, in the period which they may deem proper to apply.
2. When, by imprudence or negligence and with violation of the Automobile Law, the death of a person
shall be caused, in which case the defendant shall be punished by prision correccional in its medium and
the maximum periods.
Reckless imprudence consists in voluntarily, but without malice, doing or failing to do an act from which
material damage results by reason of inexcusable lack of precaution on the part of the person performing
or failing to perform such act, taking into consideration his employment or occupation, degree of
intelligence, physical condition and other circumstances regarding persons, time and place.
194
194
Cruz vs. Court of Appeals
ing her death. The petitioner and one Dr. Lina Ercillo who was the attending anaesthesiologist during the
operation of the deceased were charged with reckless imprudence and negligence resulting to (sic)
homicide in an information which reads:
That on or about March 23, 1991, in the City of San Pablo, Republic of the Philippines and within the
jurisdiction of this Honorable Court, the accused abovenamed, being then the attending anaesthesiologist
and surgeon, respectively, did then and there, in a negligence (sic), careless, imprudent, and incompetent
manner, and failing to supply or store sufficient provisions and facilities necessary to meet any and all
exigencies apt to arise before, during and/or after a surgical operation causing by such negligence,
carelessness, imprudence, and incompetence, and causing by such failure, including the lack of
preparation and foresight needed to avert a tragedy, the untimely death of said Lydia Umali on the day
following said surgical operation.5
Trial ensued after both the petitioner and Dr. Lina Ercillo pleaded not guilty to the above-mentioned
charge. On March 4, 1994, the Municipal Trial Court in Cities (MTCC) of San Pablo City rendered a
decision, the dispositive portion of which is hereunder quoted as follows:
WHEREFORE, the court finds the accused Dra. Lina Ercillo not guilty of the offense charged for
insufficiency of evidence while her co-accused Dra. Ninevetch Cruz is hereby held responsible for the
death of Lydia Umali on March 24, 1991, and therefore guilty under Art. 365 of the Revised Penal Code,
and she is hereby sentenced to suffer the penalty of 2 months and 1 day imprisonment of arresto mayor
with costs.6
________________
Simple imprudence consists in the lack of precaution displayed in those cases in which the damage
impending to be caused is not immediate nor the danger clearly manifest.
The penalty next higher in degree to those provided for in this article shall be imposed upon the offender
who fails to lend on the spot to the injured parties such help as may be in his hands to give.
The petitioner appealed her conviction to the Regional Trial Court (RTC) which affirmed in toto the
decision of the MTCC7 prompting the petitioner to file a petition for review with the Court of Appeals
but to no avail. Hence this petition for review on certiorari assailing the decision promulgated by the
Court of Appeals on October 24, 1995 affirming petitioners conviction with modification that she is
further directed to pay the heirs of Lydia Umali P50,000.00 as indemnity for her death.8
In substance, the petition brought before this Court raises the issue of whether or not petitioners
conviction of the crime of reckless imprudence resulting in homicide, arising from an alleged
medical malpractice, is supported by the evidence on record.
First the antecedent facts.
On March 22, 1991, prosecution witness, Rowena Umali De Ocampo, accompanied her mother to the
Perpetual Help Clinic and General Hospital situated in Balagtas Street, San Pablo City, Laguna. They
arrived at the said hospital at around 4:30 in the afternoon of the same day. Prior to March 22, 1991,
Lydia was examined by the petitioner who found a myoma10 in her uterus, and scheduled her for a
hysterectomy operation on March 23, 1991. Rowena and her mother slept in the clinic on the evening of
March 22, 1991 as the latter was to be operated on the next day at 1:00 oclock in the afternoon.
According to Rowena, she noticed that the clinic was untidy and the window and the floor were very
dusty prompting her to ask the attendant for a rag to wipe the window and the floor with. Because of the
untidy state of the clinic, Rowena tried to persuade her mother not to proceed with the operation. The
following day, before her mother was wheeled into the operating room, Rowena asked the petitioner if the
operation could be postponed. The petitioner called Lydia into her office and the two had a conversation.
Lydia then informed Rowena that the petitioner told her that she must be operated on as scheduled.
Rowena and her other relatives, namely her husband, her sister and two aunts waited outside the operating
room while Lydia underwent operation. While they were waiting, Dr. Ercillo went out of the operating
room and instructed them to buy tagamet ampules which Rowenas sister immediately bought. About one
hour had passed when Dr. Ercillo came out again this time to ask them to buy blood for Lydia. They
bought type A blood from the St. Gerald Blood Bank and the same was brought by the attendant into
the operating room. After the lapse of a few hours, the petitioner informed them that the operation was
finished. The operating staff then went inside the petitioners clinic to take their snacks. some thirty
minutes after, Lydia was brought out of the operating room in a stretcher and the petitioner asked Rowena
and the other relatives to buy additional blood for Lydia. Unfortunately, they were not able to comply
with petitioners order as there was no more type A blood available in the blood bank. Thereafter, a
person arrived to donate blood which was later transfused to Lydia. Rowena then noticed her mother, who
was attached to an oxygen tank, gasping for breath. Apparently the oxygen supply had run out and
Rowenas husband together with the driver of the accused had to go to the San Pablo District Hospital to
get oxygen. Lydia was given the fresh supply of oxygen as soon as it arrived. But at around 10:00 oclock
P.M. she went into shock and her blood pressure dropped to 60/50. Lydias unstable condition
necessitated her transfer to the San Pablo District Hospital so she could be connected to a respirator and
further examined. The transfer to the San Pablo District Hospital was without the prior consent of
Rowena nor of the other relatives present who found out about the intended transfer only when an
ambulance arrived to take Lydia to the San Pablo District Hospital. Rowena and her other relatives then
boarded a tricycle and followed the ambulance.
Upon Lydias arrival at the San Pablo District Hospital, she was wheeled into the operating room and the
petitioner and Dr. Ercillo re-operated on her because there was blood oozing from the abdominal incision.
The attending physicians summoned Dr. Bartolome Angeles, head of the Obstetrics and Gynecology
Department of San Pablo District Hospital. However, when Dr. Angeles arrived, Lydia was already in
shock and possibly dead as her blood pressure was already o/o. Dr. Agneles then informed petitioner and
Dr. Ercillo that there was nothing he could do to help save the patient. While the petitioner was closing
the abdominal wall, the patient died. Thus, on March 24, 1991, at 3:00 oclock in the morning, Lydia
Umali was pronounced dead. Her death certificate states shock as the immediate cause of death and
Disseminated Intravascular Coagulation (DIC) as the antecedent cause.
In convicting the petitioner, the MTCC found the following circumstances as sufficient basis to conclude
that she was indeed negligent in the performance of the operation:
x x x, the clinic was untidy, there was lack of provision like blood and oxygen to prepare for any
contingency that might happen during the operation. The manner and the fact that the patient was brought
to the San Pablo District Hospital for reoperation indicates that there was something wrong in the manner
in which Dra. Cruz conducted the operation. There was no showing that before the operation, accused
Dra. Cruz had conducted a cardio pulmonary clearance or any typing of the blood of the patient. It was
(sic) said in medical parlance that the the abdomen of the person is a temple of surprises because you
do not know the whole thing the moment it was open (sic) and surgeon must be prepared for any
eventuality thereof. The patient (sic) chart which is a public document was not presented because it is
only there that we could determine the condition of the patient before the surgery. The court also noticed
in Exh. F-1 that the sister of the deceased wished to postpone the operation but the patient was
prevailed upon by Dra. Cruz to proceed with the surgery. The court finds that Lydia Umali died because
of the negligence and carelessness of the surgeon Dra. Ninevetch Cruz because of loss of blood during the
operation of the deceased for evident unpreparedness and for lack of skill, the reason why the patient was
brought for operation at the San Pablo City District Hospital. As such, the surgeon should answer for such
negligence. With respect to Dra. Lina Ercillo, the anaesthesiologist, there is no evidence to indicate that
she should be held jointly liable with Dra. Cruz who actually did the operation.
The RTC reiterated the abovementioned findings of the MTCC and upheld the latters declaration of
incompetency, negligence and lack of foresight and skill of appellant (herein petitioner) in handling the
subject patient before and after the operation. And likewise affirming the petitioners conviction, the
Court of Appeals echoed similar observations, thus:
x x x.
This Court, however, holds differently and finds the foregoing circumstances insufficient to sustain a
judgment of conviction against the petitioner for the crime of reckless imprudence resulting in homicide.
The elements of reckless imprudence are: (1) that the offender does or fails to do an act; (2) that the
doing or the failure to do that act is voluntary; (3) that it be without malice; (4) that material
damage results from the reckless imprudence; and (5) that there is inexcusable lack of precaution
on the part of the offender, taking into consideration his employment or occupation, degree of
intelligence, physical condition, and other circumstances regarding persons, time and place.
Whether or not a physician has committed an inexcusable lack of precaution in the treatment of
his patient is to be determined according to the standard of care observed by other members of the
profession in good standing under similar circumstances bearing in mind the advanced state of the
profession at the time of treatment or the present state of medical science. In the recent case of Leonila
Garcia-Rueda v. Wilfred L. Pascasio, et al., this Court stated that in accepting a case, a doctor in effect
represents that, having the needed training and skill possessed by physicians and surgeons practicing in
the same field, he will employ such training, care and skill in the treatment of his patients. He therefore
has a duty to use at least the same level of care that any other reasonably competent doctor would use to
treat a condition under the same circumstances. It is in this aspect of medical malpractice that expert
testimony is essential to establish not only the standard of care of the profession but also that the
physicians conduct in the treatment and care falls below such standard. Further, inasmuch as the causes
of the injuries involved in malpractice actions are determinable only in the light of scientific knowledge,
it has been recognized that expert testimony is usually necessary to support the conclusion as to causation.
All three courts below bewail the inadequacy of the facilities of the clinic and its untidiness; the lack of
provisions such as blood, oxygen, and certain medicines; the failure to subject the patient to a cardio-
pulmonary test prior to the operation; the omission of any form of blood typing before transfusion; and
even the subsequent transfer of Lydia to the San Pablo Hospital and the reoperation performed on her by
the petitioner. But while it may be true that the circumstances pointed out by the courts below seemed
beyond cavil to constitute reckless imprudence on the part of the surgeon, this conclusion is still best
arrived at not through the educated surmises nor conjectures of laymen, including judges, but by the
unquestionable knowledge of expert witnesses. For whether a physician or surgeon has exercised the
requisite degree of skill and care in the treatment of his patient is, in the generality of cases, a matter of
expert opinion. The deference of courts to the expert opinion of qualified physicians stems from its
realization that the latter possess unusual technical skills which laymen in most instances are incapable of
intelligently evaluating. Expert testimony should have been offered to prove that the circumstances cited
by the courts below are constitutive of conduct falling below the standard of care employed by other
physicians in good standing when performing the same operation. It must be remembered that when the
qualifications of a physician are admitted, as in the instant case, there is an inevitable presumption that in
proper cases he takes the necessary precaution and employs the best of his knowledge and skill in
attending to his clients, unless the contrary is sufficiently established. This presumption is rebuttable by
expert opinion which is so sadly lacking in the case at bench.
Even granting arguendo that the inadequacy of the facilities and untidiness of the clinic; the lack of
provisions; the failure to conduct pre-operation tests on the patient; and the subsequent transfer of Lydia
to the San Pablo Hospital and the reoperation performed on her by the petitioner do indicate, even without
expert testimony, that petitioner was recklessly imprudent in the exercise of her duties as a surgeon, no
cogent proof exists that any of these circumstances caused petitioners death. Thus, the absence of
the fourth element of reckless imprudence: that the injury to the person or property was a
consequence of the reckless imprudence.
In litigations involving medical negligence, the plaintiff has the burden of establishing appellants
negligence and for a reasonable conclusion of negligence, there must be proof of breach of duty on the
part of the surgeon as well as a causal connection of such breach and the resulting death of his patient. In
Chan Lugay v. St. Lukes Hospital, Inc., where the attending physician was absolved of liability for the
death of the complainants wife and newborn baby, this Court held that:
In order that there may be a recovery for an injury, however, it must be shown that the injury for which
recovery is sought must be the legitimate consequence of the wrong done; the connection between the
negligence and the injury must be a direct and natural sequence of events, unbroken by intervening
efficient causes. In other words, the negligence must be the proximate cause of the injury. For,
negligence, no matter in what it consists, cannot create a right of action unless it is the proximate cause
of the injury complained of. And the proximate cause of an injury is that cause, which, in natural
and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and
without which the result would not have occurred.
On the other hand, the findings of all three doctors do not preclude the probability that DIC caused the
hemorrhage and consequently, Lydias death. DIC which is a clotting defect creates a serious bleeding
tendency and when massive DIC occurs as a complication of surgery leaving raw surface, major
hemorrhage occurs. And as testified to by defense witness, Dr. Bu C. Castro, hemorrhage due to DIC
cannot be prevented, it will happen to anyone, anytime.43 He testified further:
This Court has no recourse but to rely on the expert testimonies rendered by both prosecution and defense
witnesses that substantiate rather than contradict petitioners allegation that the cause of Lydias death was
DIC which, as attested to by an expert witness, cannot be attributed to the petitioners fault or negligence.
The probability that Lydias death was caused by DIC was unrebutted during trial and has engendered in
the mind of this Court a reasonable doubt as to the petitioners guilt. Thus, her acquittal of the crime of
reckless imprudence resulting in homicide. While we condole with the family of Lydia Umali, our hands
are bound by the dictates of justice and fair dealing which hold inviolable the right of an accused to be
presumed innocent until proven guilty beyond reasonable doubt. Nevertheless, this Court finds the
petitioner civilly liable for the death of Lydia Umali, for while a conviction of a crime requires proof
beyond reasonable doubt, only a preponderance of evidence is required to establish civil liability.
The petitioner is a doctor in whose hands a patient puts his life and limb. For insufficiency of
evidence this Court was not able to render a sentence of conviction but it is not blind to the reckless
and imprudent manner in which the petitioner carried out her duties. A precious life has been lost
and the circumstances leading thereto exacerbated the grief of those left behind. The heirs of the
deceased continue to feel the loss of their mother up to the present time and this Court is aware that
no amount of compassion and commiseration nor words of bereavement can suffice to assuage the
sorrow felt for the loss of a loved one. Certainly, the award of moral and exemplary damages in favor of
the heirs of Lydia Umali are proper in the instant case.
WHEREFORE, premises considered, petitioner DR. NINEVETCH CRUZ is hereby ACQUITTED of the
crime of reckless imprudence resulting in homicide but is ordered to pay the heirs of the deceased Lydia
Umali the amount of FIFTY THOUSAND PESOS (P50,000.00) as civil liability, ONE HUNDRED
THOUSAND PESOS (P100,000.00) as moral damages, and FIFTY THOUSAND PESOS (P50,000.00)
as exemplary damages.
Batal vs. San Pedro
G.R. No. 164601. September 27, 2006.*
SPOUSES ERLINDA BATAL AND FRANK BATAL, petitioners, vs. SPOUSES LUZ SAN PEDRO
AND KENICHIRO TOMINAGA, respondents.
Civil Law; Negligence; Culpa or negligence, may be understood in two different senses: either as culpa
aquiliana or culpa contractual.Culpa, or negligence, may be understood in two different senses: either
as culpa aquiliana, which is the wrongful or negligent act or omission which creates a vinculum juris and
gives rise to an obligation between two persons not formally bound by any other obligation, or as culpa
contractual, which is the fault or negligence incident in the performance of an obligation which already
existed, and which increases the liability from such already existing obligation. Culpa aquiliana is
governed by Article 2176 of the Civil Code and the immediately following Articles; while culpa
contractual is governed by Articles 1170 to 1174 of the same Code.
AUSTRIA-MARTINEZ, J.:
This case originated from an action for damages filed with the RTC by Spouses Luz San Pedro and
Kenichiro Tominaga (respondents) against Spouses Erlinda Batal and Frank Batal (petitioners) for failure
to exercise due care and diligence by the latter in the preparation of a survey which formed the basis for
the construction of a perimeter fence that was later discovered to have encroached on a right of way.
The facts of the case, as found by the RTC and summarized by the CA, are as follows:
The spouses Luz San Pedro (Luz) and Kenichiro Tominaga (Kenichiro) are the owners of a parcel of
land, on which their house was erected, described as Lot 1509-C-3 with an area of 700 square meters
situated in Barangay Malis, Guiguinto, Bulacan. Said property was acquired by them from one Guillermo
Narciso.
The spouses Luz and Kenichiro then contracted the services of Frank Batal (Frank) who represented
himself as a surveyor to conduct a survey of their lot for the sum of P6,500.00. As Luz and Kenichiro
wanted to enclose their property, they again procured the services of Frank for an additional fee of
P1,500.00 in order to determine the exact boundaries of the same by which they will base the construction
of their perimeter fence.
Consequently, Frank placed concrete monuments marked P.S. on all corners of the lot which were used as
guides by Luz and Kenichiro in erecting a concrete fence measuring about eight (8) feet in height and cost
them P250,000.00 to build.
Sometime in 1996, a complaint was lodged against Luz and Kenichiro before the barangay on the ground
that the northern portion of their fence allegedly encroached upon a designated right-of-way known as Lot
1509-D. Upon verification with another surveyor, Luz and Kenichiro found that their wall indeed
overlapped the adjoining lot. They also discovered that it was not Frank but his wife Erlinda Batal
(Erlinda), who is a licensed geodetic engineer.
During their confrontations before the barangay, Frank admitted that he made a mistake and offered to
share in the expenses for the demolition and reconstruction of the questioned portion of Luz and
Kenichiros fence. He however failed to deliver on his word, thus the filing of the instant suit.
In their defense, the defendants-spouses Frank and Erlinda Batal submitted that Frank never represented
himself to be a licensed geodetic engineer. It was Erlinda who supervised her husbands work and that the
house and lot of plaintiffs, Luz and Kenichiro, were already fenced even before they were contracted to
do a resurvey of the same and the laying out of the concrete monuments. The spouses Frank and Erlinda
also refuted the spouses Luzs and Kenichiros allegation of negligence and averred that the subject
complaint was instituted to harass them.
On May 31, 2001, the RTC rendered its Decision, WHEREFORE, judgment is hereby rendered in favor
of plaintiffs and against defendants,
Regarding the issue whether the petitioners failed to exercise due care and diligence in the conduct of
the resurvey which eventually caused damage to the respondents, the RTC held:
As against the bare and self-serving denials of the [petitioners], the testimony of [respondent] Luz San
Pedro that she constructed the encroaching perimeter fence in question using as guide the cyclone
concrete monuments marked P.S. that were installed by [petitioner] Frank Batal and his survey team, is
more credible. As testified to by [respondent] Luz San Pedro, she proceeded with the construction of the
perimeter fence in question upon assurance given by [petitioner] Frank Batal that she could already do so
as there were already concrete monuments placed on the boundaries of her property x x x.
xxxx
It does not matter that the location plan dated May 3, 1992 (Exhibit B) was later approved by the
DENR, as it is quite apparent that the mistake committed by [petitioner] Frank Batal pertains to the wrong
locations of the concrete monuments that he placed on the subject property and which were used or relied
upon by the [respondents] in putting up the fence in question. Such mistake or negligence happened
because quite obviously the installation of said concrete monuments was without the needed supervision
of [respondent] Erlinda Batal, the one truly qualified to supervise the same. x x x x
x x x x5
The RTC found that indeed the perimeter fence constructed by the respondents encroached on the right-
of-way in question; that the preponderance of evidence supports the finding that the encroachment was
caused by the negligence of the petitioners; that, in particular, respondents constructed the fence based on
the concrete cyclone monuments that were installed by petitioner Frank Batal and after he gave his
assurance that they can proceed accordingly; that the negligence in the installation of the monuments was
due to the fact that petitioner Erlinda Batal, the one truly qualified, did not provide the needed supervision
over the work; and, lastly, that the testimonies of the petitioners on the whole were not credible.
The petitioners appealed to the CA. On September 29, 2003, the CA rendered its Decision affirming the
RTC decision in its entirety.
In concurring with the findings of the RTC, the CA in addition held that the petitioners cannot claim that
the error of the construction of the fence was due to the unilateral act of respondents in building the same
without their consent, since the former gave their word that the arrangement of the monuments of title
accurately reflected the boundaries of the lot; and that, as a result, the northern portion of the fence had to
be demolished and rebuilt in order to correct the error.
The petition must fail.
The Court will not weigh the evidence all over again unless there is a showing that the findings of the
lower court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of
discretion.12 The petitioners failed to demonstrate this point. On the contrary, the finding of the courts a
quo that the damage caused to the respondents was due to petitioners negligence is sufficiently supported
by the evidence on record. For these reasons, the petitioner's contentions bear no import.
Culpa, or negligence, may be understood in two different senses: either as culpa aquiliana, which is
the wrongful or negligent act or omission which creates a vinculum juris and gives rise to an
obligation between two persons not formally bound by any other obligation, or as culpa contractual,
which is the fault or negligence incident in the performance of an obligation which already existed,
and which increases the liability from such already existing obligation. Culpa aquiliana is governed
by Article 2176 of the Civil Code and the immediately following Articles; while culpa contractual is
governed by Articles 1170 to 1174 of the same Code.14
Articles 1170 and 1173 provide:
ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of the persons, of the
time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2202,
paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the performance, that which
is expected of a good father of a family shall be required.
In the present case, it is clear that the petitioners, in carrying out their contractual obligations, failed to
exercise the requisite diligence in the placement of the markings for the concrete perimeter fence that was
later constructed. The placement of the markings had been done solely by petitioner Frank Batal who is
not a geodetic engineer. It was later discovered that it was not he but his wife, petitioner Erlinda Batal,
who is the licensed geodetic engineer and who is, therefore, the one qualified to do the work. Petitioner
Frank Batals installation of the concrete cyclone monuments had been done without the adequate
supervision of his wife, Erlinda. As a result, the placement of the monuments did not accurately reflect
the dimensions of the lot. The respondents, upon assurance given by petitioner Frank Batal that they could
proceed with the construction of the perimeter fence by relying on the purported accuracy of the
placement of the monuments, erected their fence which turned out to encroach on an adjacent easement.
Because of the encroachment, the respondents had to demolish and reconstruct the fence and, thus,
suffered damages.
The Court affirms and adopts the findings of the CA, to wit:
Records show that the services of the [petitioners] Frank and Erlinda were initially contracted to
segregate Luz and Kenichiros property from its adjoining lots. When the [respondent] spouses Luz and
Kenichiro planned to fence the segregated lot, they again commissioned [petitioners] Frank and Erlinda to
conduct a resurvey in order to determine the precise boundaries of their property upon which they will
base the construction of their fence. It was also shown that in the course of the resurvey, Frank caused the
installation of monuments of title on the four (4) corners of Luz and Kenichiros property and that he
instructed them to just follow the same in building their fence.
[Petitioners] Frank and Erlinda cannot thus validly claim that the error in the construction of the northern
portion of the fence was due to the spouses Luz and Kenichiros act of building the same without their
consent. This is considering that the former led the latter to believe the purported accuracy of the resurvey
and exactness of the lots boundaries based on the monuments of title which they installed.
It has been ruled that [A] party, having performed affirmative acts upon which another person based his
subsequent actions, cannot thereafter refute his acts or renege on the effects of the same, to the prejudice
of the latter. (Pureza v. Court of Appeals, 290 SCRA 110 [1998])
The foregoing clearly supports the findings of the RTC that the spouses Batal committed a mistake in the
conduct of their business that led to the encroachment of plaintiffs-appellees fence on the adjoining alley-
lot. As a result, the northern portion ha[d] to be torn down and rebuilt in order to correct the error in its
original construction. The defendants-appellants cannot be excused from the effects of their actions in the
survey of plaintiffsappellees lot.
We therefore concur with the findings of the RTC holding defendantsappellants liable for damages in the
case at bar. Findings of fact made by the trial court is entitled to great weight and respect. (Lopez v.
Court of Appeals, 322 SCRA 686 [2000])15
Being guilty of a breach of their contract, petitioners are liable for damages suffered by the
respondents in accordance with Articles 1170 and 2201 of the Civil Code,16 which state:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay and
those who in any manner contravene the tenor thereof are liable for damages
Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is
liable shall be those that are the natural and probable consequences of the breach of the obligation, and
which the parties have foreseen or could have reasonably foreseen at the time the obligation was
constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages
which may be reasonably attributed to the non-performance of the obligation.
Thus, the Court agrees with the CAs affirmance of the findings of the RTC on the matter of damages, to
wit:
On the other hand, there is no legal or factual bases for the claim of the plaintiffs for moral or exemplary
damages as there was no showing at all that defendants acted with malice or in bad faith.
In a long line of cases, we have consistently ruled that in the absence of a wrongful act or omission or of
fraud or bad faith, moral damages cannot be awarded. (R & B Surety Insurance Co. v. Intermediate Court
of Appeals, 129 SCRA 736 [1984]; Guita v. Court of Appeals, 139 SCRA 576 [1985]).17
WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the Court of
Appeals are AFFIRMED.
Costs against petitioners.
SO ORDERED.
G.R. No. 188288.January 16, 2012.*
SPOUSES FERNANDO and LOURDES VILORIA, petitioners, vs. CONTINENTAL AIRLINES, INC.,
respondent.
Civil Law; Agency; Essential Elements of Agency.In Rallos v. Felix Go Chan & Sons Realty
Corporation, 81 SCRA 251 (1978), this Court explained the nature of an agency and spelled out the
essential elements thereof: Out of the above given principles, sprung the creation and acceptance of the
relationship of agency whereby one party, called the principal (mandante), authorizes another, called the
agent (mandatario), to act for and in his behalf in transactions with third persons. The essential elements
of agency are: (1) there is consent, express or implied of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative
and not for himself, and (4) the agent acts within the scope of his authority. Agency is basically personal,
representative, and derivative in nature. The authority of the agent to act emanates from the powers
granted to him by his principal; his act is the act of the principal if done within the scope of the authority.
Qui facit per alium facit se. He who acts through another acts himself.
Same; Same; Sale and Agency, Distinguished.The distinctions between a sale and an agency are
not difficult to discern and this Court, as early as 1970, had already formulated the guidelines that would
aid in differentiating the two (2) contracts. In Commissioner of Internal Revenue v. Constantino, 31
SCRA 779 (1970), this Court extrapolated that the primordial differentiating consideration between the
two (2) contracts is the transfer of ownership or title over the property subject of the contract. In an
agency, the principal retains ownership and control over the property and the agent merely acts on the
principals behalf and under his instructions in furtherance of the objectives for which the agency was
established. On the other hand, the contract is clearly a sale if the parties intended that the delivery of the
property will effect a relinquishment of title, control and ownership in such a way that the recipient may
do with the property as he pleases.
_______________
* SECOND DIVISION.
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Viloria vs. Continental Airlines, Inc.
Same; Common Carriers; Quasi-delicts; Air Transportation; Vicarious Liability; An airline company is not
completely exonerated from any liability for the tort committed by its agents employees.An airline
company is not completely exonerated from any liability for the tort committed by its agents employees.
A prior determination of the nature of the passengers cause of action is necessary. If the passengers
cause of action against the airline company is premised on culpa aquiliana or quasi-delict for a tort
committed by the employee of the airline companys agent, there must be an independent showing that
the airline company was at fault or negligent or has contributed to the negligence or tortuous conduct
committed by the employee of its agent. The mere fact that the employee of the airline companys agent
has committed a tort is not sufficient to hold the airline company liable. There is no vinculum juris
between the airline company and its agents employees and the contractual relationship between the
airline company and its agent does not operate to create a juridical tie between the airline company and its
agents employees. Article 2180 of the Civil Code does not make the principal vicariously liable for the
tort committed by its agents employees and the principal-agency relationship per se does not make the
principal a party to such tort; hence, the need to prove the principals own fault or negligence.
Same; Same; Same; Same; In an action based on a breach of contract of carriage, the aggrieved party does
not have to prove that the common carrier was at fault or was negligent. All that he has to prove is the
existence of the contract and the fact of its non-performance by the carrier.If the passengers cause of
action for damages against the airline company is based on contractual breach or culpa contractual, it is
not necessary that there be evidence of the airline companys fault or negligence. As this Court previously
stated in China Air Lines and reiterated in Air France vs. Gillego, 638 SCRA 472 (2010), in an action
based on a breach of contract of carriage, the aggrieved party does not have to prove that the common
carrier was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of
its non-performance by the carrier.
Same; Contracts; Voidable Contracts; Fraud; Prescription; If the consent of the contracting parties was
obtained through fraud, the contract is considered voidable and may be annulled within four (4)
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59
years from the time of the discovery of the fraud.Article 1390, in relation to Article 1391 of the Civil
Code, provides that if the consent of the contracting parties was obtained through fraud, the contract is
considered voidable and may be annulled within four (4) years from the time of the discovery of the
fraud. Once a contract is annulled, the parties are obliged under Article 1398 of the same Code to restore
to each other the things subject matter of the contract, including their fruits and interest.
Same; Same; Same; Same; There is fraud when, through insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them, he would not have
agreed to.Under Article 1338 of the Civil Code, there is fraud when, through insidious words or
machinations of one of the contracting parties, the other is induced to enter into a contract which, without
them, he would not have agreed to. In order that fraud may vitiate consent, it must be the causal (dolo
causante), not merely the incidental (dolo incidente), inducement to the making of the contract. In
Samson v. Court of Appeals, 238 SCRA 397 (1994), causal fraud was defined as a deception employed
by one party prior to or simultaneous to the contract in order to secure the consent of the other. Also,
fraud must be serious and its existence must be established by clear and convincing evidence.
Same; Same; Same; Voidable contracts may be ratified expressly or impliedly. Implied ratification may
take diverse forms, such as by silence or acquiescence; by acts showing approval or adoption of the
contract; or by acceptance and retention of benefits flowing therefrom.Ratification of a voidable
contract is defined under Article 1393 of the Civil Code as follows: Art. 1393. Ratification may be
effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the
reason which renders the contract voidable and such reason having ceased, the person who has a right to
invoke it should execute an act which necessarily implies an intention to waive his right. Implied
ratification may take diverse forms, such as by silence or acquiescence; by acts showing approval or
adoption of the contract; or by acceptance and retention of benefits flowing therefrom.
Same; Same; Same; A party cannot rely on the contract and claim rights or obligations under it and at the
same time impugn its existence or validity.Annulment under Article 1390 of the Civil
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Code and rescission under Article 1191 are two (2) inconsistent remedies. In resolution, all the elements
to make the contract valid are present; in annulment, one of the essential elements to a formation of a
contract, which is consent, is absent. In resolution, the defect is in the consummation stage of the contract
when the parties are in the process of performing their respective obligations; in annulment, the defect is
already present at the time of the negotiation and perfection stages of the contract. Accordingly, by
pursuing the remedy of rescission under Article 1191, the Vilorias had impliedly admitted the validity of
the subject contracts, forfeiting their right to demand their annulment. A party cannot rely on the contract
and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed,
litigants are enjoined from taking inconsistent positions.
Same; Common Carriers; As a common carrier whose business is imbued with public interest, the
exercise of extraordinary diligence requires the airline company to inform all of its passengers of all the
terms and conditions governing their contract of carriage.Contrary to CAIs claim, that the subject
tickets are non-transferable cannot be implied from a plain reading of the provision printed on the subject
tickets stating that [t]o the extent not in conflict with the foregoing carriage and other services performed
by each carrier are subject to: (a) provisions contained in this ticket, x x x (iii) carriers conditions of
carriage and related regulations which are made part hereof (and are available on application at the offices
of carrier) x x x. As a common carrier whose business is imbued with public interest, the exercise of
extraordinary diligence requires CAI to inform Spouses Viloria, or all of its passengers for that matter, of
all the terms and conditions governing their contract of carriage. CAI is proscribed from taking advantage
of any ambiguity in the contract of carriage to impute knowledge on its passengers of and demand
compliance with a certain condition or undertaking that is not clearly stipulated. Since the prohibition on
transferability is not written on the face of the subject tickets and CAI failed to inform Spouses Viloria
thereof, CAI cannot refuse to apply the value of Lourdes ticket as payment for Fernandos purchase of a
new ticket.
Same; Contracts; Rescission; The general rule is that rescission of a contract will not be permitted for a
slight or casual breach, but only for such substantial and fundamental violations as would defeat the very
object of the parties in making the agreement.The right to
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rescind a contract for non-performance of its stipulations is not absolute. The general rule is that
rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial
and fundamental violations as would defeat the very object of the parties in making the agreement.
Whether a breach is substantial is largely determined by the attendant circumstances.
Remedial Law; Evidence; Newspaper Clippings; Hearsay Evidence Rule; Newspaper clippings are
hearsay if they were offered for the purpose of proving the truth of the matter alleged.The only
evidence the petitioners presented to prove that the price of a round trip ticket between Manila and Los
Angeles at that time was only $856.00 is a newspaper advertisement for another airline company, which is
inadmissible for being hearsay evidence, twice removed. Newspaper clippings are hearsay if they were
offered for the purpose of proving the truth of the matter alleged. As ruled in Feria v. Court of Appeals,
325 SCRA 525 (2000): [N]ewspaper articles amount to hearsay evidence, twice removed and are
therefore not only inadmissible but without any probative value at all whether objected to or not, unless
offered for a purpose other than proving the truth of the matter asserted. In this case, the news article is
admissible only as evidence that such publication does exist with the tenor of the news therein stated.
PETITION for review on certiorari of a decision of the Court of Appeals.
Quasha, Ancheta, Pea & Nolasco for petitioners.
Quisumbing, Torres for respondent.
REYES,J.:
This is a petition for review under Rule 45 of the Rules of Court from the January 30, 2009 Decision1 of
the Special
_______________
1 Penned by Associate Justice Monina Arevalo-Zenarosa, with Associate Justices Isaias P. Dicdican and
Ramon M. Bato, Jr., concurring; Rollo, pp. 42-54.
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Thirteenth Division of the Court of Appeals (CA) in CA-G.R. CV No. 88586 entitled Spouses Fernando
and Lourdes Viloria v. Continental Airlines, Inc., the dispositive portion of which states:
WHEREFORE, the Decision of the Regional Trial Court, Branch 74, dated 03 April 2006, awarding
US$800.00 or its peso equivalent at the time of payment, plus legal rate of interest from 21 July 1997
until fully paid, [P]100,000.00 as moral damages, [P]50,000.00 as exemplary damages, [P]40,000.00 as
attorneys fees and costs of suit to plaintiffs-appellees is hereby REVERSED and SET ASIDE.
Defendant-appellants counterclaim is DENIED.
Costs against plaintiffs-appellees.
SO ORDERED.2
On April 3, 2006, the Regional Trial Court of Antipolo City, Branch 74 (RTC) rendered a Decision, giving
due course to the complaint for sum of money and damages filed by petitioners Fernando Viloria
(Fernando) and Lourdes Viloria (Lourdes), collectively called Spouses Viloria, against respondent
Continental Airlines, Inc. (CAI). As culled from the records, below are the facts giving rise to such
complaint.
On or about July 21, 1997 and while in the United States, Fernando purchased for himself and his wife,
Lourdes, two (2) round trip airline tickets from San Diego, California to Newark, New Jersey on board
Continental Airlines. Fernando purchased the tickets at US$400.00 each from a travel agency called
Holiday Travel and was attended to by a certain Margaret Mager (Mager). According to Spouses
Viloria, Fernando agreed to buy the said tickets after Mager informed them that there were no available
seats at Amtrak, an intercity passenger train service provider in the United States. Per the tickets, Spouses
Viloria were scheduled to leave for New-
_______________
2 Id., at p. 53.
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ark on August 13, 1997 and return to San Diego on August 21, 1997.
Subsequently, Fernando requested Mager to reschedule their flight to Newark to an earlier date or August
6, 1997. Mager informed him that flights to Newark via Continental Airlines were already fully booked
and offered the alternative of a round trip flight via Frontier Air. Since flying with Frontier Air called for a
higher fare of US$526.00 per passenger and would mean traveling by night, Fernando opted to request for
a refund. Mager, however, denied his request as the subject tickets are non-refundable and the only option
that Continental Airlines can offer is the re-issuance of new tickets within one (1) year from the date the
subject tickets were issued. Fernando decided to reserve two (2) seats with Frontier Air.
As he was having second thoughts on traveling via Frontier Air, Fernando went to the Greyhound Station
where he saw an Amtrak station nearby. Fernando made inquiries and was told that there are seats
available and he can travel on Amtrak anytime and any day he pleased. Fernando then purchased two (2)
tickets for Washington, D.C.
From Amtrak, Fernando went to Holiday Travel and confronted Mager with the Amtrak tickets, telling her
that she had misled them into buying the Continental Airlines tickets by misrepresenting that Amtrak was
already fully booked. Fernando reiterated his demand for a refund but Mager was firm in her position that
the subject tickets are non-refundable.
Upon returning to the Philippines, Fernando sent a letter to CAI on February 11, 1998, demanding a
refund and alleging that Mager had deluded them into purchasing the subject tickets.3
_______________
3 Id., at p. 64.
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In a letter dated February 24, 1998, Continental Micronesia informed Fernando that his complaint had
been referred to the Customer Refund Services of Continental Airlines at Houston, Texas.4
In a letter dated March 24, 1998, Continental Micronesia denied Fernandos request for a refund and
advised him that he may take the subject tickets to any Continental ticketing location for the re-issuance
of new tickets within two (2) years from the date they were issued. Continental Micronesia informed
Fernando that the subject tickets may be used as a form of payment for the purchase of another
Continental ticket, albeit with a re-issuance fee.5
On June 17, 1999, Fernando went to Continentals ticketing office at Ayala Avenue, Makati City to have
the subject tickets replaced by a single round trip ticket to Los Angeles, California under his name.
Therein, Fernando was informed that Lourdes ticket was non-transferable, thus, cannot be used for the
purchase of a ticket in his favor. He was also informed that a round trip ticket to Los Angeles was
US$1,867.40 so he would have to pay what will not be covered by the value of his San Diego to Newark
round trip ticket.
In a letter dated June 21, 1999, Fernando demanded for the refund of the subject tickets as he no longer
wished to have them replaced. In addition to the dubious circumstances under which the subject tickets
were issued, Fernando claimed that CAIs act of charging him with US$1,867.40 for a round trip ticket to
Los Angeles, which other airlines priced at US$856.00, and refusal to allow him to use Lourdes ticket,
breached its undertaking under its March 24, 1998 letter.6
On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying that CAI be ordered to
refund the money they used in the purchase of the subject tickets with legal
_______________
4 Id., at p. 65.
5 Id., at p. 67.
6 Id., at p. 68.
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65
interest from July 21, 1997 and to pay P1,000,000.00 as moral damages, P500,000.00 as exemplary
damages and P250,000.00 as attorneys fees.7
CAI interposed the following defenses: (a) Spouses Viloria have no right to ask for a refund as the subject
tickets are non-refundable; (b) Fernando cannot insist on using the ticket in Lourdes name for the
purchase of a round trip ticket to Los Angeles since the same is non-transferable; (c) as Mager is not a
CAI employee, CAI is not liable for any of her acts; (d) CAI, its employees and agents did not act in bad
faith as to entitle Spouses Viloria to moral and exemplary damages and attorneys fees. CAI also invoked
the following clause printed on the subject tickets:
3.To the extent not in conflict with the foregoing carriage and other services performed by each carrier
are subject to: (i) provisions contained in this ticket, (ii) applicable tariffs, (iii) carriers conditions of
carriage and related regulations which are made part hereof (and are available on application at the offices
of carrier), except in transportation between a place in the United States or Canada and any place outside
thereof to which tariffs in force in those countries apply.8
According to CAI, one of the conditions attached to their contract of carriage is the non-transferability
and non-refundability of the subject tickets.
The RTCs Ruling
Following a full-blown trial, the RTC rendered its April 3, 2006 Decision, holding that Spouses Viloria
are entitled to a refund in view of Magers misrepresentation in obtaining their consent in the purchase of
the subject tickets.9 The relevant portion of the April 3, 2006 Decision states:
_______________
7 Id., at pp. 69-76.
8 Id., at p. 80.
9 Id., at pp. 77-85.
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66
Continental Airlines agent Ms. Mager was in bad faith when she was less candid and diligent in
presenting to plaintiffs spouses their booking options. Plaintiff Fernando clearly wanted to travel via
AMTRAK, but defendants agent misled him into purchasing Continental Airlines tickets instead on the
fraudulent misrepresentation that Amtrak was fully booked. In fact, defendant Airline did not specifically
denied (sic) this allegation.
Plainly, plaintiffs spouses, particularly plaintiff Fernando, were tricked into buying Continental Airline
tickets on Ms. Magers misleading misrepresentations. Continental Airlines agent Ms. Mager further
relied on and exploited plaintiff Fernandos need and told him that they must book a flight immediately or
risk not being able to travel at all on the couples preferred date. Unfortunately, plaintiffs spouses fell prey
to the airlines and its agents unethical tactics for baiting trusting customers.10
Citing Articles 1868 and 1869 of the Civil Code, the RTC ruled that Mager is CAIs agent, hence, bound
by her bad faith and misrepresentation. As far as the RTC is concerned, there is no issue as to whether
Mager was CAIs agent in view of CAIs implied recognition of her status as such in its March 24, 1998
letter.
The act of a travel agent or agency being involved here, the following are the pertinent New Civil Code
provisions on agency:
Art.1868.By the contract of agency a person binds himself to render some service or to do something
in representation or on behalf of another, with the consent or authority of the latter.
Art.1869.Agency may be express, or implied from the acts of the principal, from his silence or lack of
action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without
authority.
Agency may be oral, unless the law requires a specific form.
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10 Id., at p. 84.
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As its very name implies, a travel agency binds itself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. This court takes judicial
notice of the common services rendered by travel agencies that represent themselves as such, specifically
the reservation and booking of local and foreign tours as well as the issuance of airline tickets for a
commission or fee.
The services rendered by Ms. Mager of Holiday Travel agency to the plaintiff spouses on July 21, 1997
were no different from those offered in any other travel agency. Defendant airline impliedly if not
expressly acknowledged its principal-agent relationship with Ms. Mager by its offer in the letter dated
March 24, 1998an obvious attempt to assuage plaintiffs spouses hurt feelings.11
Furthermore, the RTC ruled that CAI acted in bad faith in reneging on its undertaking to replace the
subject tickets within two (2) years from their date of issue when it charged Fernando with the amount of
US$1,867.40 for a round trip ticket to Los Angeles and when it refused to allow Fernando to use Lourdes
ticket. Specifically:
Tickets may be reissued for up to two years from the original date of issue. When defendant airline still
charged plaintiffs spouses US$1,867.40 or more than double the then going rate of US$856.00 for the
unused tickets when the same were presented within two (2) years from date of issue, defendant airline
exhibited callous treatment of passengers.12
The Appellate Courts Ruling
On appeal, the CA reversed the RTCs April 3, 2006 Decision, holding that CAI cannot be held liable for
Magers act in the absence of any proof that a principal-agent relationship existed between CAI and
Holiday Travel. According to the CA, Spouses Viloria, who have the burden of proof to establish the fact
of agency, failed to present evidence demonstrat-
_______________
11 Id., at p. 83.
12 Id., at p. 84.
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68
ing that Holiday Travel is CAIs agent. Furthermore, contrary to Spouses Vilorias claim, the contractual
relationship between Holiday Travel and CAI is not an agency but that of a sale.
Plaintiffs-appellees assert that Mager was a sub-agent of Holiday Travel who was in turn a ticketing
agent of Holiday Travel who was in turn a ticketing agent of Continental Airlines. Proceeding from this
premise, they contend that Continental Airlines should be held liable for the acts of Mager. The trial court
held the same view.
We do not agree. By the contract of agency, a person binds him/herself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter. The
elements of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative
and not for him/herself; and (4) the agent acts within the scope of his/her authority. As the basis of agency
is representation, there must be, on the part of the principal, an actual intention to appoint, an intention
naturally inferable from the principals words or actions. In the same manner, there must be an intention
on the part of the agent to accept the appointment and act upon it. Absent such mutual intent, there is
generally no agency. It is likewise a settled rule that persons dealing with an assumed agent are bound at
their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the
nature and extent of authority, and in case either is controverted, the burden of proof is upon them to
establish it. Agency is never presumed, neither is it created by the mere use of the word in a trade or
business name. We have perused the evidence and documents so far presented. We find nothing except
bare allegations of plaintiffs-appellees that Mager/Holiday Travel was acting in behalf of Continental
Airlines. From all sides of legal prism, the transaction in issue was simply a contract of sale, wherein
Holiday Travel buys airline tickets from Continental Airlines and then, through its employees, Mager
included, sells it at a premium to clients.13
_______________
13 Id., at pp. 50-51.
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The CA also ruled that refund is not available to Spouses Viloria as the word non-refundable was
clearly printed on the face of the subject tickets, which constitute their contract with CAI. Therefore, the
grant of their prayer for a refund would violate the proscription against impairment of contracts.
Finally, the CA held that CAI did not act in bad faith when they charged Spouses Viloria with the higher
amount of US$1,867.40 for a round trip ticket to Los Angeles. According to the CA, there is no
compulsion for CAI to charge the lower amount of US$856.00, which Spouses Viloria claim to be the fee
charged by other airlines. The matter of fixing the prices for its services is CAIs prerogative, which
Spouses Viloria cannot intervene. In particular:
It is within the respective rights of persons owning and/or operating business entities to peg the premium
of the services and items which they provide at a price which they deem fit, no matter how expensive or
exhorbitant said price may seem vis--vis those of the competing companies. The Spouses Viloria may
not intervene with the business judgment of Continental Airlines.14
The Petitioners Case

In this Petition, this Court is being asked to review the findings and conclusions of the CA, as the latters
reversal of the RTCs April 3, 2006 Decision allegedly lacks factual and legal bases. Spouses Viloria
claim that CAI acted in bad faith when it required them to pay a higher amount for a round trip ticket to
Los Angeles considering CAIs undertaking to re-issue new tickets to them within the period stated in
their March 24, 1998 letter. CAI likewise acted in bad faith when it disallowed Fernando to use Lourdes
ticket to purchase a round trip to Los Angeles given that there is nothing in Lourdes ticket indicating that
it is non-transferable. As a
_______________
14 Id., at p. 52.
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70
common carrier, it is CAIs duty to inform its passengers of the terms and conditions of their contract and
passengers cannot be bound by such terms and conditions which they are not made aware of. Also, the
subject contract of carriage is a contract of adhesion; therefore, any ambiguities should be construed
against CAI. Notably, the petitioners are no longer questioning the validity of the subject contracts and
limited its claim for a refund on CAIs alleged breach of its undertaking in its March 24, 1998 letter.
The Respondents Case
In its Comment, CAI claimed that Spouses Vilorias allegation of bad faith is negated by its willingness to
issue new tickets to them and to credit the value of the subject tickets against the value of the new ticket
Fernando requested. CAI argued that Spouses Vilorias sole basis to claim that the price at which CAI was
willing to issue the new tickets is unconscionable is a piece of hearsay evidencean advertisement
appearing on a newspaper stating that airfares from Manila to Los Angeles or San Francisco cost
US$818.00.15 Also, the advertisement pertains to airfares in September 2000 and not to airfares
prevailing in June 1999, the time when Fernando asked CAI to apply the value of the subject tickets for
the purchase of a new one.16 CAI likewise argued that it did not undertake to protect Spouses Viloria
from any changes or fluctuations in the prices of airline tickets and its only obligation was to apply the
value of the subject tickets to the purchase of the newly issued tickets.
With respect to Spouses Vilorias claim that they are not aware of CAIs restrictions on the subject tickets
and that the terms and conditions that are printed on them are ambiguous, CAI denies any ambiguity and
alleged that its representative informed Fernando that the subject tickets are non-
_______________
15 Id., at p. 214.
16 Id., at p. 215.
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71
transferable when he applied for the issuance of a new ticket. On the other hand, the word non-
refundable clearly appears on the face of the subject tickets.
CAI also denies that it is bound by the acts of Holiday Travel and Mager and that no principal-agency
relationship exists between them. As an independent contractor, Holiday Travel was without capacity to
bind CAI.
Issues
To determine the propriety of disturbing the CAs January 30, 2009 Decision and whether Spouses Viloria
have the right to the reliefs they prayed for, this Court deems it necessary to resolve the following issues:
a.Does a principal-agent relationship exist between CAI and Holiday Travel?
b.Assuming that an agency relationship exists between CAI and Holiday Travel, is CAI bound by the
acts of Holiday Travels agents and employees such as Mager?
c.Assuming that CAI is bound by the acts of Holiday Travels agents and employees, can the
representation of Mager as to unavailability of seats at Amtrak be considered fraudulent as to vitiate the
consent of Spouse Viloria in the purchase of the subject tickets?
d.Is CAI justified in insisting that the subject tickets are non-transferable and non-refundable?
e.Is CAI justified in pegging a different price for the round trip ticket to Los Angeles requested by
Fernando?
f.Alternatively, did CAI act in bad faith or renege its obligation to Spouses Viloria to apply the value of
the subject tickets in the purchase of new ones when it refused to allow Fernando to use Lourdes ticket
and in charging a higher price for a round trip ticket to Los Angeles?
72
72
This Courts Ruling
I.A principal-agent relationship
exists between CAI and Holiday
Travel.
With respect to the first issue, which is a question of fact that would require this Court to review and re-
examine the evidence presented by the parties below, this Court takes exception to the general rule that
the CAs findings of fact are conclusive upon Us and our jurisdiction is limited to the review of questions
of law. It is well-settled to the point of being axiomatic that this Court is authorized to resolve questions
of fact if confronted with contrasting factual findings of the trial court and appellate court and if the
findings of the CA are contradicted by the evidence on record.17
According to the CA, agency is never presumed and that he who alleges that it exists has the burden of
proof. Spouses Viloria, on whose shoulders such burden rests, presented evidence that fell short of
indubitably demonstrating the existence of such agency.
We disagree. The CA failed to consider undisputed facts, discrediting CAIs denial that Holiday Travel is
one of its agents. Furthermore, in erroneously characterizing the contractual relationship between CAI
and Holiday Travel as a contract of sale, the CA failed to apply the fundamental civil law principles
governing agency and differentiating it from sale.
In Rallos v. Felix Go Chan & Sons Realty Corporation,18 this Court explained the nature of an agency
and spelled out the essential elements thereof:
_______________
17 See Heirs of Jose Lim v. Lim, G.R. No. 172690, March 3, 2010, 614 SCRA 141, 147; Ontimare, Jr. v.
Spouses Elep, G.R. No. 159224, January 20, 2006, 479 SCRA 257, 265.
18 171 Phil. 222; 81 SCRA 251 (1978).
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73

Out of the above given principles, sprung the creation and acceptance of the relationship of agency
whereby one party, called the principal (mandante), authorizes another, called the agent (mandatario), to
act for and in his behalf in transactions with third persons. The essential elements of agency are: (1) there
is consent, express or implied of the parties to establish the relationship; (2) the object is the execution of
a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself, and
(4) the agent acts within the scope of his authority.
Agency is basically personal, representative, and derivative in nature. The authority of the agent to act
emanates from the powers granted to him by his principal; his act is the act of the principal if done within
the scope of the authority. Qui facit per alium facit se. He who acts through another acts himself.19
Contrary to the findings of the CA, all the elements of an agency exist in this case. The first and second
elements are present as CAI does not deny that it concluded an agreement with Holiday Travel, whereby
Holiday Travel would enter into contracts of carriage with third persons on CAIs behalf. The third
element is also present as it is undisputed that Holiday Travel merely acted in a representative capacity
and it is CAI and not Holiday Travel who is bound by the contracts of carriage entered into by Holiday
Travel on its behalf. The fourth element is also present considering that CAI has not made any allegation
that Holiday Travel exceeded the authority that was granted to it. In fact, CAI consistently maintains the
validity of the contracts of carriage that Holiday Travel executed with Spouses Viloria and that Mager was
not guilty of any fraudulent misrepresentation. That CAI
_______________
19 Id., at pp. 226-227; p. 259, citing Articles 1868 and 1881, New Civil Code; 11 Manresa 422-423; 4
Sanchez Roman 478, 2nd Ed.; 25 Scaevola, 243, 262; Tolentino, Comments, Civil Code of the
Philippines, p. 340, vol. 5, 1959 Ed., Columbia University Club v. Higgins, D.C.N.Y., 23 f. Supp. 572,
574; Valentine Oil Co. v. Young, 109 P. 2d 180, 185; 74 C.J.S. 4; Valentine Oil Co. v. Powers, 59 N.W. 2d
160, 163, 157 Neb. 87; Purnell v. City of Florence, 175 So. 417, 27 Ala. App. 516; Stroman Motor Co. v.
Brown; 243 P. 133, 126 Ok. 36.
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74
admits the authority of Holiday Travel to enter into contracts of carriage on its behalf is easily discernible
from its February 24, 1998 and March 24, 1998 letters, where it impliedly recognized the validity of the
contracts entered into by Holiday Travel with Spouses Viloria. When Fernando informed CAI that it was
Holiday Travel who issued to them the subject tickets, CAI did not deny that Holiday Travel is its
authorized agent.
Prior to Spouses Vilorias filing of a complaint against it, CAI never refuted that it gave Holiday Travel
the power and authority to conclude contracts of carriage on its behalf. As clearly extant from the records,
CAI recognized the validity of the contracts of carriage that Holiday Travel entered into with Spouses
Viloria and considered itself bound with Spouses Viloria by the terms and conditions thereof; and this
constitutes an unequivocal testament to Holiday Travels authority to act as its agent. This Court cannot
therefore allow CAI to take an altogether different position and deny that Holiday Travel is its agent
without condoning or giving imprimatur to whatever damage or prejudice that may result from such
denial or retraction to Spouses Viloria, who relied on good faith on CAIs acts in recognition of Holiday
Travels authority. Estoppel is primarily based on the doctrine of good faith and the avoidance of harm
that will befall an innocent party due to its injurious reliance, the failure to apply it in this case would
result in gross travesty of justice.20 Estoppel bars CAI from making such denial.
As categorically provided under Article 1869 of the Civil Code, [a]gency may be express, or implied
from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority.
_______________
20 Philippine Airlines, Inc. v. Court of Appeals, 325 Phil. 303, 323; 255 SCRA 48, 66 (1996).
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75
Considering that the fundamental hallmarks of an agency are present, this Court finds it rather peculiar
that the CA had branded the contractual relationship between CAI and Holiday Travel as one of sale. The
distinctions between a sale and an agency are not difficult to discern and this Court, as early as 1970, had
already formulated the guidelines that would aid in differentiating the two (2) contracts. In Commissioner
of Internal Revenue v. Constantino,21 this Court extrapolated that the primordial differentiating
consideration between the two (2) contracts is the transfer of ownership or title over the property subject
of the contract. In an agency, the principal retains ownership and control over the property and the agent
merely acts on the principals behalf and under his instructions in furtherance of the objectives for which
the agency was established. On the other hand, the contract is clearly a sale if the parties intended that the
delivery of the property will effect a relinquishment of title, control and ownership in such a way that the
recipient may do with the property as he pleases.
Since the company retained ownership of the goods, even as it delivered possession unto the dealer for
resale to customers, the price and terms of which were subject to the companys control, the relationship
between the company and the dealer is one of agency, tested under the following criterion:
The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to
the establishment of rules by the application of which this difficulty may be solved. The decisions say the
transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such
transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as
a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale,
the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his
property, but as the property of the principal, who remains the owner and has the right to control sales,
_______________
21 G.R. No. L-25926, February 27, 1970, 31 SCRA 779.
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fix the price, and terms, demand and receive the proceeds less the agents commission upon sales made. 1
Mechem on Sales, Sec. 43; 1 Mechem on Agency, Sec. 48; Williston on Sales, 1; Tiedeman on Sales, 1.
(Salisbury v. Brooks, 94 SE 117, 118-119)22
As to how the CA have arrived at the conclusion that the contract between CAI and Holiday Travel is a
sale is certainly confounding, considering that CAI is the one bound by the contracts of carriage
embodied by the tickets being sold by Holiday Travel on its behalf. It is undisputed that CAI and not
Holiday Travel who is the party to the contracts of carriage executed by Holiday Travel with third persons
who desire to travel via Continental Airlines, and this conclusively indicates the existence of a principal-
agent relationship. That the principal is bound by all the obligations contracted by the agent within the
scope of the authority granted to him is clearly provided under Article 1910 of the Civil Code and this
constitutes the very notion of agency.
II.In actions based on quasi-delict, a
principal can only be held liable for the
tort committed by its agents employees
if it has been established by preponder-
ance of evidence that the principal was
also at fault or negligent or that the
principal exercise control and supervi-
sion over them.
Considering that Holiday Travel is CAIs agent, does it necessarily follow that CAI is liable for the fault
or negligence of Holiday Travels employees? Citing China Air Lines, Ltd. v. Court of Appeals, et al.,23
CAI argues that it cannot be held liable for the actions of the employee of its ticketing agent in the
absence of an employer-employee relationship.
_______________
22 Id., at p. 785.
23 264 Phil. 15; 185 SCRA 449 (1990).
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An examination of this Courts pronouncements in China Air Lines will reveal that an airline company is
not completely exonerated from any liability for the tort committed by its agents employees. A prior
determination of the nature of the passengers cause of action is necessary. If the passengers cause of
action against the airline company is premised on culpa aquiliana or quasi-delict for a tort committed by
the employee of the airline companys agent, there must be an independent showing that the airline
company was at fault or negligent or has contributed to the negligence or tortuous conduct committed by
the employee of its agent. The mere fact that the employee of the airline companys agent has committed
a tort is not sufficient to hold the airline company liable. There is no vinculum juris between the airline
company and its agents employees and the contractual relationship between the airline company and its
agent does not operate to create a juridical tie between the airline company and its agents employees.
Article 2180 of the Civil Code does not make the principal vicariously liable for the tort committed by its
agents employees and the principal-agency relationship per se does not make the principal a party to such
tort; hence, the need to prove the principals own fault or negligence.
On the other hand, if the passengers cause of action for damages against the airline company is based on
contractual breach or culpa contractual, it is not necessary that there be evidence of the airline companys
fault or negligence. As this Court previously stated in China Air Lines and reiterated in Air France vs.
Gillego,24 in an action based on a breach of contract of carriage, the aggrieved party does not have to
prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of
the contract and the fact of its non-performance by the carrier.
Spouses Vilorias cause of action on the basis of Magers alleged fraudulent misrepresentation is clearly
one of tort or
_______________
24 G.R. No. 165266, December 15, 2010, 638 SCRA 472.
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78
quasi-delict, there being no pre-existing contractual relationship between them. Therefore, it was
incumbent upon Spouses Viloria to prove that CAI was equally at fault.
However, the records are devoid of any evidence by which CAIs alleged liability can be substantiated.
Apart from their claim that CAI must be held liable for Magers supposed fraud because Holiday Travel is
CAIs agent, Spouses Viloria did not present evidence that CAI was a party or had contributed to Magers
complained act either by instructing or authorizing Holiday Travel and Mager to issue the said
misrepresentation.
It may seem unjust at first glance that CAI would consider Spouses Viloria bound by the terms and
conditions of the subject contracts, which Mager entered into with them on CAIs behalf, in order to deny
Spouses Vilorias request for a refund or Fernandos use of Lourdes ticket for the re-issuance of a new
one, and simultaneously claim that they are not bound by Magers supposed misrepresentation for
purposes of avoiding Spouses Vilorias claim for damages and maintaining the validity of the subject
contracts. It may likewise be argued that CAI cannot deny liability as it benefited from Magers acts,
which were performed in compliance with Holiday Travels obligations as CAIs agent.
However, a persons vicarious liability is anchored on his possession of control, whether absolute or
limited, on the tortfeasor. Without such control, there is nothing which could justify extending the liability
to a person other than the one who committed the tort. As this Court explained in Cangco v. Manila
Railroad Co.:25
With respect to extra-contractual obligation arising from negligence, whether of act or omission, it is
competent for the legislature to electand our Legislature has so electedto limit such liability to cases
in which the person upon whom such an obli-
_______________
25 38 Phil. 768 (1918).
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gation is imposed is morally culpable or, on the contrary, for reasons of public policy, to extend that
liability, without regard to the lack of moral culpability, so as to include responsibility for the negligence
of those persons whose acts or omissions are imputable, by a legal fiction, to others who are in a position
to exercise an absolute or limited control over them. The legislature which adopted our Civil Code has
elected to limit extra-contractual liabilitywith certain well-defined exceptionsto cases in which moral
culpability can be directly imputed to the persons to be charged. This moral responsibility may consist in
having failed to exercise due care in ones own acts, or in having failed to exercise due care in the
selection and control of ones agent or servants, or in the control of persons who, by reasons of their
status, occupy a position of dependency with respect to the person made liable for their conduct.26
(emphasis supplied)
It is incumbent upon Spouses Viloria to prove that CAI exercised control or supervision over Mager by
preponderant evidence. The existence of control or supervision cannot be presumed and CAI is under no
obligation to prove its denial or nugatory assertion. Citing Belen v. Belen,27 this Court ruled in Jayme v.
Apostol,28 that:
In Belen v. Belen, this Court ruled that it was enough for defendant to deny an alleged employment
relationship. The defendant is under no obligation to prove the negative averment. This Court said:
It is an old and well-settled rule of the courts that the burden of proving the action is upon the plaintiff,
and that if he fails satisfactorily to show the facts upon which he bases his claim, the defendant is under
no obligation to prove his exceptions. This [rule] is in harmony with the provisions of Section 297 of the
Code of Civil Procedure holding that each party must prove his own affirmative allegations, etc.29
(citations omitted)
_______________
26 Id., at pp. 775-776.
27 13 Phil. 202 (1909).
28 G.R. No. 163609, November 27, 2008, 572 SCRA 41.
29 Id., at pp. 51-52.
80
80
Therefore, without a modicum of evidence that CAI exercised control over Holiday Travels employees or
that CAI was equally at fault, no liability can be imposed on CAI for Magers supposed
misrepresentation.
III.Even on the assumption that CAI
may be held liable for the acts of Mager,
still, Spouses Viloria are not entitled to a
refund. Magers statement cannot be con-
sidered a causal fraud that would justify
the annulment of the subject contracts
that would oblige CAI to indemnify
Spouses Viloria and return the money
they paid for the subject tickets.
Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the contracting
parties was obtained through fraud, the contract is considered voidable and may be annulled within four
(4) years from the time of the discovery of the fraud. Once a contract is annulled, the parties are obliged
under Article 1398 of the same Code to restore to each other the things subject matter of the contract,
including their fruits and interest.
On the basis of the foregoing and given the allegation of Spouses Viloria that Fernandos consent to the
subject contracts was supposedly secured by Mager through fraudulent means, it is plainly apparent that
their demand for a refund is tantamount to seeking for an annulment of the subject contracts on the
ground of vitiated consent.
Whether the subject contracts are annullable, this Court is required to determine whether Magers alleged
misrepresentation constitutes causal fraud. Similar to the dispute on the existence of an agency, whether
fraud attended the execution of a contract is factual in nature and this Court, as discussed above, may
scrutinize the records if the findings of the CA are contrary to those of the RTC.
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Under Article 1338 of the Civil Code, there is fraud when, through insidious words or machinations of
one of the contracting parties, the other is induced to enter into a contract which, without them, he would
not have agreed to. In order that fraud may vitiate consent, it must be the causal (dolo causante), not
merely the incidental (dolo incidente), inducement to the making of the contract.30 In Samson v. Court of
Appeals,31 causal fraud was defined as a deception employed by one party prior to or simultaneous to
the contract in order to secure the consent of the other.32
Also, fraud must be serious and its existence must be established by clear and convincing evidence. As
ruled by this Court in Sierra v. Hon. Court of Appeals, et al.,33 mere preponderance of evidence is not
adequate:
Fraud must also be discounted, for according to the Civil Code:
Art.1338.There is fraud when, through insidious words or machinations of one of the contracting
parties, the other is induced to enter into a contract which without them, he would not have agreed to.
Art.1344.In order that fraud may make a contract voidable, it should be serious and should not have
been employed by both contracting parties.
To quote Tolentino again, the misrepresentation constituting the fraud must be established by full, clear,
and convincing evidence, and not merely by a preponderance thereof. The deceit must be serious. The
fraud is serious when it is sufficient to impress, or to lead an ordinarily prudent person into error; that
which cannot deceive a prudent person cannot be a ground for nullity. The circum-
_______________
30 See Tongson v. Emergency Pawnshop Bula, Inc., G.R. No. 167874, 15 January 2010, 610 SCRA 150,
159, citing Woodhouse v. Halili, 93 Phil 526, 537 (1953).
31 G.R. No. 108245, November 25, 1994, 238 SCRA 397.
32 Id., at p. 404.
33 G.R. No. 90270, July 24, 1992, 211 SCRA 785.
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82
stances of each case should be considered, taking into account the personal conditions of the victim.34
After meticulously poring over the records, this Court finds that the fraud alleged by Spouses Viloria has
not been satisfactorily established as causal in nature to warrant the annulment of the subject contracts. In
fact, Spouses Viloria failed to prove by clear and convincing evidence that Magers statement was
fraudulent. Specifically, Spouses Viloria failed to prove that (a) there were indeed available seats at
Amtrak for a trip to New Jersey on August 13, 1997 at the time they spoke with Mager on July 21, 1997;
(b) Mager knew about this; and (c) that she purposely informed them otherwise.
This Court finds the only proof of Magers alleged fraud, which is Fernandos testimony that an Amtrak
had assured him of the perennial availability of seats at Amtrak, to be wanting. As CAI correctly pointed
out and as Fernando admitted, it was possible that during the intervening period of three (3) weeks from
the time Fernando purchased the subject tickets to the time he talked to said Amtrak employee, other
passengers may have cancelled their bookings and reservations with Amtrak, making it possible for
Amtrak to accommodate them. Indeed, the existence of fraud cannot be proved by mere speculations and
conjectures. Fraud is never lightly inferred; it is good faith that is. Under the Rules of Court, it is
presumed that a person is innocent of crime or wrong and that private transactions have been fair and
regular.35 Spouses Viloria failed to overcome this presumption.
_______________
34 Id., at p. 793, citing Tolentino, Commentaries on the Civil Code, Vol. 4, pp. 508, 514.
35 Trinidad v. Intermediate Appellate Court, G.R. No. 65922, December 3, 1991, 204 SCRA 524, 530,
citing Rule 131, Sections 5(a) and 5(p).
83
VOL. 663, JANUARY 16, 2012
83
IV.Assuming the contrary, Spouses
Viloria are nevertheless deemed to
have ratified the subject contracts.
Even assuming that Magers representation is causal fraud, the subject contracts have been impliedly
ratified when Spouses Viloria decided to exercise their right to use the subject tickets for the purchase of
new ones. Under Article 1392 of the Civil Code, ratification extinguishes the action to annul a voidable
contract.
Ratification of a voidable contract is defined under Article 1393 of the Civil Code as follows:
Art.1393.Ratification may be effected expressly or tacitly. It is understood that there is a tacit

ratification if, with knowledge of the reason which renders the contract voidable and such reason having
ceased, the person who has a right to invoke it should execute an act which necessarily implies an
intention to waive his right.
Implied ratification may take diverse forms, such as by silence or acquiescence; by acts showing approval
or adoption of the contract; or by acceptance and retention of benefits flowing therefrom.36
Simultaneous with their demand for a refund on the ground of Fernandos vitiated consent, Spouses
Viloria likewise asked for a refund based on CAIs supposed bad faith in reneging on its undertaking to
replace the subject tickets with a round trip ticket from Manila to Los Angeles.
In doing so, Spouses Viloria are actually asking for a rescission of the subject contracts based on
contractual breach. Resolution, the action referred to in Article 1191, is based on the defendants breach of
faith, a violation of the reciprocity
_______________
36 Acua v. Batac Producers Coop. Mktg. Ass., 126 Phil. 896, 902; 20 SCRA 526, 533 (1967).
84
84
between the parties37 and in Solar Harvest, Inc. v. Davao Corrugated Carton Corporation,38 this Court
ruled that a claim for a reimbursement in view of the other partys failure to comply with his obligations
under the contract is one for rescission or resolution.
However, annulment under Article 1390 of the Civil Code and rescission under Article 1191 are two (2)
inconsistent remedies. In resolution, all the elements to make the contract valid are present; in annulment,
one of the essential elements to a formation of a contract, which is consent, is absent. In resolution, the
defect is in the consummation stage of the contract when the parties are in the process of performing their
respective obligations; in annulment, the defect is already present at the time of the negotiation and
perfection stages of the contract. Accordingly, by pursuing the remedy of rescission under Article 1191,
the Vilorias had impliedly admitted the validity of the subject contracts, forfeiting their right to demand
their annulment. A party cannot rely on the contract and claim rights or obligations under it and at the
same time impugn its existence or validity. Indeed, litigants are enjoined from taking inconsistent
positions.39
V.Contracts cannot be rescinded
for a slight or casual breach.
CAI cannot insist on the non-
transferability of the subject tickets.
Considering that the subject contracts are not annullable on the ground of vitiated consent, the next
question is: Do Spouses Viloria have the right to rescind the contract on the
_______________
37 Heirs of Sofia Quirong, v. Development Bank of the Philippines, G.R. No. 173441, December 3, 2009,
606 SCRA 543, 550.
38 G.R. No. 176868, July 26, 2010, 625 SCRA 448.

39 Gonzales v. Climax Mining Ltd., 492 Phil. 682, 697; 452 SCRA 607, 625 (2005).
85
VOL. 663, JANUARY 16, 2012
85
ground of CAIs supposed breach of its undertaking to issue new tickets upon surrender of the subject
tickets?
Article 1191, as presently worded, states:
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 fulfilment 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.
According to Spouses Viloria, CAI acted in bad faith and breached the subject contracts when it refused
to apply the value of Lourdes ticket for Fernandos purchase of a round trip ticket to Los Angeles and in
requiring him to pay an amount higher than the price fixed by other airline companies.
In its March 24, 1998 letter, CAI stated that non-refundable tickets may be used as a form of payment
toward the purchase of another Continental ticket for $75.00, per ticket, reissue fee ($50.00, per ticket, for
tickets purchased prior to October 30, 1997).
Clearly, there is nothing in the above-quoted section of CAIs letter from which the restriction on the non-
transferability of the subject tickets can be inferred. In fact, the words used by CAI in its letter supports
the position of Spouses Viloria, that each of them can use the ticket under their name for the purchase of
new tickets whether for themselves or for some other person.
86
86

Moreover, as CAI admitted, it was only when Fernando had expressed his interest to use the subject
tickets for the purchase of a round trip ticket between Manila and Los Angeles that he was informed that
he cannot use the ticket in Lourdes name as payment.
Contrary to CAIs claim, that the subject tickets are non-transferable cannot be implied from a plain
reading of the provision printed on the subject tickets stating that [t]o the extent not in conflict with the
foregoing carriage and other services performed by each carrier are subject to: (a) provisions contained in
this ticket, x x x (iii) carriers conditions of carriage and related regulations which are made part hereof
(and are available on application at the offices of carrier) x x x. As a common carrier whose business is
imbued with public interest, the exercise of extraordinary diligence requires CAI to inform Spouses
Viloria, or all of its passengers for that matter, of all the terms and conditions governing their contract of
carriage. CAI is proscribed from taking advantage of any ambiguity in the contract of carriage to impute
knowledge on its passengers of and demand compliance with a certain condition or undertaking that is not
clearly stipulated. Since the prohibition on transferability is not written on the face of the subject tickets
and CAI failed to inform Spouses Viloria thereof, CAI cannot refuse to apply the value of Lourdes ticket
as payment for Fernandos purchase of a new ticket.
CAIs refusal to accept Lourdes ticket
for the purchase of a new ticket for
Fernando is only a casual breach.
Nonetheless, the right to rescind a contract for non-performance of its stipulations is not absolute. The
general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for
such substantial and fundamental violations as would defeat the very object of the
87
VOL. 663, JANUARY 16, 2012
87
parties in making the agreement.40 Whether a breach is substantial is largely determined by the attendant
circumstances.41
While CAIs refusal to allow Fernando to use the value of Lourdes ticket as payment for the purchase of
a new ticket is unjustified as the non-transferability of the subject tickets was not clearly stipulated, it
cannot, however be considered substantial. The endorsability of the subject tickets is not an essential part
of the underlying contracts and CAIs failure to comply is not essential to its fulfillment of its undertaking
to issue new tickets upon Spouses Vilorias surrender of the subject tickets. This Court takes note of
CAIs willingness to perform its principal obligation and this is to apply the price of the ticket in
Fernandos name to the price of the round trip ticket between Manila and Los Angeles. CAI was likewise
willing to accept the ticket in Lourdes name as full or partial payment as the case may be for the purchase
of any ticket, albeit under her name and for her exclusive use. In other words, CAIs willingness to
comply with its undertaking under its March 24, 1998 cannot be doubted, albeit tainted with its erroneous
insistence that Lourdes ticket is non-transferable.
Moreover, Spouses Vilorias demand for rescission cannot prosper as CAI cannot be solely faulted for the
fact that their agreement failed to consummate and no new ticket was issued to Fernando. Spouses Viloria
have no right to insist that a single round trip ticket between Manila and Los Angeles should be priced at
around $856.00 and refuse to pay the difference between the price of the subject tickets and the amount
fixed by CAI. The petitioners failed to allege, much
_______________
40 See Barredo v. Leao, G.R. No. 156627, June 4, 2004, 431 SCRA 106, 115.
41 See Central Bank of the Philippines v. Spouses Bichara, 385 Phil. 553, 565; 328 SCRA 807, 818
(2000), citing Vermen Realty Development Corporation v. Court of Appeals, et al., 224 SCRA 549, 555
(1993).
88
88
less prove, that CAI had obliged itself to issue to them tickets for any flight anywhere in the world upon
their surrender of the subject tickets. In its March 24, 1998 letter, it was clearly stated that [n]on-
refundable tickets may be used as a form of payment toward the purchase of another Continental
ticket42 and there is nothing in it suggesting that CAI had obliged itself to protect Spouses Viloria from
any fluctuation in the prices of tickets or that the surrender of the subject tickets will be considered as full
payment for any ticket that the petitioners intend to buy regardless of actual price and destination. The CA
was correct in holding that it is CAIs right and exclusive prerogative to fix the prices for its services and
it may not be compelled to observe and maintain the prices of other airline companies.43
The conflict as to the endorsability of the subject tickets is an altogether different matter, which does not
preclude CAI from fixing the price of a round trip ticket between Manila and Los Angeles in an amount it
deems proper and which does not provide Spouses Viloria an excuse not to pay such price, albeit subject
to a reduction coming from the value of the subject tickets. It cannot be denied that Spouses Viloria had
the concomitant obligation to pay whatever is not covered by the value of the subject tickets whether or
not the subject tickets are transferable or not.
There is also no showing that Spouses Viloria were discriminated against in bad faith by being charged
with a higher rate. The only evidence the petitioners presented to prove that the price of a round trip ticket
between Manila and Los Angeles at that time was only $856.00 is a newspaper advertisement for another
airline company, which is inadmissible for being hearsay evidence, twice removed. Newspaper
clippings are hearsay if they were offered for the purpose of
_______________
42 Rollo, p. 67.
43 Id., at p. 52.
89
VOL. 663, JANUARY 16, 2012
89
proving the truth of the matter alleged. As ruled in Feria v. Court of Appeals:44
[N]ewspaper articles amount to hearsay evidence, twice removed and are therefore not only
inadmissible but without any probative value at all whether objected to or not, unless offered for a
purpose other than proving the truth of the matter asserted. In this case, the news article is admissible only
as evidence that such publication does exist with the tenor of the news therein stated.45 (citations
omitted)
The records of this case demonstrate that both parties were equally in default; hence, none of them can
seek judicial redress for the cancellation or resolution of the subject contracts and they are therefore
bound to their respective obligations thereunder. As the 1st sentence of Article 1192 provides:
Art.1192.In case both parties have committed a breach of the obligation, the liability of the first
infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first
violated the contract, the same shall be deemed extinguished, and each shall bear his own damages.
(emphasis supplied)
Therefore, CAIs liability for damages for its refusal to accept Lourdes ticket for the purchase of
Fernandos round trip ticket is offset by Spouses Vilorias liability for their refusal to pay the amount,
which is not covered by the subject tickets. Moreover, the contract between them remains, hence, CAI is
duty bound to issue new tickets for a destination chosen by Spouses Viloria upon their surrender of the
subject tickets and Spouses Viloria are obliged to pay whatever amount is not covered by the value of the
subject tickets.
This Court made a similar ruling in Central Bank of the Philippines v. Court of Appeals.46 Thus:
_______________
44 382 Phil. 412; 325 SCRA 525 (2000).

45 Id., at p. 423; p. 536.
46 223 Phil. 266; 139 SCRA 46 (1985).
90
90
Since both parties were in default in the performance of their respective reciprocal obligations, that is,
Island Savings Bank failed to comply with its obligation to furnish the entire loan and Sulpicio M.
Tolentino failed to comply with his obligation to pay his P17,000.00 debt within 3 years as stipulated,
they are both liable for damages.
Article 1192 of the Civil Code provides that in case both parties have committed a breach of their
reciprocal obligations, the liability of the first infractor shall be equitably tempered by the courts. WE rule
that the liability of Island Savings Bank for damages in not furnishing the entire loan is offset by the
liability of Sulpicio M. Tolentino for damages, in the form of penalties and surcharges, for not paying his
overdue P17,000.00 debt. x x x.47
Another consideration that militates against the propriety of holding CAI liable for moral damages is the
absence of a showing that the latter acted fraudulently and in bad faith. Article 2220 of the Civil Code
requires evidence of bad faith and fraud and moral damages are generally not recoverable in culpa
contractual except when bad faith had been proven.48 The award of exemplary damages is likewise not
warranted. Apart from the requirement that the defendant acted in a wanton, oppressive and malevolent
manner, the claimant must prove his entitlement to moral damages.49
WHEREFORE, premises considered, the instant Petition is DENIED.
SO ORDERED.
Carpio (Chairperson), Perez, Sereno and Perlas-Bernabe,** JJ., concur.
_______________
47 Id., at pp. 276-277; pp. 55-56.
48 See Yobido v. Court of Appeals, 346 Phil. 1, 13; 281 SCRA 1, 11 (1997).
49 Mahinay v. Atty. Velasquez, Jr., 464 Phil. 146, 150; 419 SCRA 118, 122 (2004).
** Additional Member in lieu of Associate Justice Arturo D. Brion per Special Order No. 1174 dated
January 9, 2012.
91
VOL. 663, JANUARY 16, 2012
91
Petition denied.
Notes.Although initially, the burden of proof was with the passenger to prove that there was a breach of
contract of carriage, the burden of evidence shifted to the airline when the former adduced sufficient
evidence to prove the facts he had allegedat that point, the airline had the burden of going forward to
controvert Chiongs prima facie case, the burden of evidence to establish its claim. (Northwest Airlines,
Inc. vs. Chiong, 543 SCRA 308 [2008])
Article 1874 of the Civil Code requires a written authority before an agent can sell an immovable
property, likewise, a special power of attorney is necessary to enter into any contract by which the
ownership of an immovable is transmitted or acquired for a valuable consideration. (Alcantara vs. Nido,
618 SCRA 333 [2010])
Where the cause of action against the driver was based on delict, it is error to hold the employer jointly
and severally liable with him, based on quasi-delict under Articles 2176 and 2180 of the Civil Code
these legal provisions pertain to the vicarious liability of an employer for quasi-delicts that an employee
has committed and do not apply to civil liability arising from delict; If at all, the employers liability may
only be subsidiary. (Calang vs. People, 626 SCRA 679 [2010])
o0o Viloria vs. Continental Airlines, Inc., 663 SCRA 57, G.R. No. 188288 January 16, 2012
Where the accused were charged with separate crimes of carnapping and murder, they cannot be
convicted of the qualified carnapping constitutive of the various crimes alleged in the two informations
without running afoul of the constitutional right to be informed of the nature and cause of the accusation
against them. (People vs. Ubaldo, 342 SCRA 338 [2000])
o0o
G.R. No. 179337.April 30, 2008.*
JOSEPH SALUDAGA, petitioner, vs. FAR EASTERN UNIVERSITY and EDILBERTO C. DE JESUS
in his capacity as President of FEU, respondents.
Colleges and Universities; Obligations and Contracts; Where a student is enrolled in an educational
institution, there is created a contractual obligation between the two partiesthe student is obliged to
comply with the rules and regulations of the school while the latter, as a learning institution, is mandated
to impart knowledge and equip its students with the necessary skills to pursue higher education or a
profession, as well as to ensure and take adequate steps to maintain peace and order within the campus.
It is undisputed that petitioner was enrolled as a sophomore law student in respondent FEU. As such,
there was created a contractual obligation between the two parties. On petitioners part, he was obliged to
comply with the rules and regulations of the school. On the other hand, respondent FEU, as a learning
institution is mandated to impart knowledge and equip its students with the necessary skills to pursue
higher education or a profession. At the same time, it is obliged to ensure and take adequate steps to
maintain peace and order within the campus. It is settled that in culpa contractual, the mere proof of the
existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of
relief. In the instant case, we find that, when
_______________
* THIRD DIVISION.
742
742
Saludaga vs. Far Eastern University
petitioner was shot inside the campus by no less the security guard who was hired to maintain peace and
secure the premises, there is a prima facie showing that respondents failed to comply with its obligation to
provide a safe and secure environment to its students.
Same; Same; Security Guards; A learning institution should not be allowed to completely relinquish or
abdicate security matters in its premises to the security agency it hiredto do so would result to
contracting away its inherent obligation to ensure a safe learning environment for its students.
Respondents also failed to show that they undertook steps to ascertain and confirm that the security
guards assigned to them actually possess the qualifications required in the Security Service Agreement. It
was not proven that they examined the clearances, psychiatric test results, 201 files, and other vital
documents enumerated in its contract with Galaxy. Total reliance on the security agency about these
matters or failure to check the papers stating the qualifications of the guards is negligence on the part of
respondents. A learning institution should not be allowed to completely relinquish or abdicate security
matters in its premises to the security agency it hired. To do so would result to contracting away its
inherent obligation to ensure a safe learning environment for its students.
Same; Same; Force Majeure; An act of God cannot be invoked to protect a person who has failed to take
steps to forestall the possible adverse consequences of such a loss.Respondents defense of force
majeure must fail. In order for force majeure to be considered, respondents must show that no negligence
or misconduct was committed that may have occasioned the loss. An act of God cannot be invoked to
protect a person who has failed to take steps to forestall the possible adverse consequences of such a loss.
Ones negligence may have concurred with an act of God in producing damage and injury to another;
nonetheless, showing that the immediate or proximate cause of the damage or injury was a fortuitous
event would not exempt one from liability. When the effect is found to be partly the result of a persons
participationwhether by active intervention, neglect or failure to actthe whole occurrence is
humanized and removed from the rules applicable to acts of God.
Same; Same; Negligence; For breach of contract due to negligence in providing a safe learning
environment, an educational institution is liable to petitioner for damages.Article 1170 of the Civil
743
VOL. 553, APRIL 30, 2008
743
Code provides that those who are negligent in the performance of their obligations are liable for damages.
Accordingly, for breach of contract due to negligence in providing a safe learning environment,
respondent FEU is liable to petitioner for damages. It is essential in the award of damages that the
claimant must have satisfactorily proven during the trial the existence of the factual basis of the damages
and its causal connection to defendants acts. In the instant case, it was established that petitioner spent
P35,298.25 for his hospitalization and other medical expenses. While the trial court correctly imposed
interest on said amount, however, the case at bar involves an obligation arising from a contract and not a
loan or forbearance of money. As such, the proper rate of legal interest is six percent (6%) per annum of
the amount demanded. Such interest shall continue to run from the filing of the complaint until the
finality of this Decision. After this Decision becomes final and executory, the applicable rate shall be
twelve percent (12%) per annum until its satisfaction.
Same; Same; Same; Damages; Trial courts must guard against the award of exorbitant damages; they
should exercise balanced, restrained and measured objectivity to avoid suspicion that it was due to
passion, prejudice, or corruption on the part of the trial court.As regards the award of moral damages,
there is no hard and fast rule in the determination of what would be a fair amount of moral damages since
each case must be governed by its own peculiar circumstances. The testimony of petitioner about his
physical suffering, mental anguish, fright, serious anxiety, and moral shock resulting from the shooting
incident justify the award of moral damages. However, moral damages are in the category of an award
designed to compensate the claimant for actual injury suffered and not to impose a penalty on the
wrongdoer. The award is not meant to enrich the complainant at the expense of the defendant, but to
enable the injured party to obtain means, diversion, or amusements that will serve to obviate the moral
suffering he has undergone. It is aimed at the restoration, within the limits of the possible, of the spiritual
status quo ante, and should be proportionate to the suffering inflicted. Trial courts must then guard against
the award of exorbitant damages; they should exercise balanced, restrained and measured objectivity to
avoid suspicion that it was due to passion, prejudice, or corruption on the part of the trial court. We deem
it just and reason-
744
744
able under the circumstances to award petitioner moral damages in the amount of P100,000.00.
Same; Same; Same; Same; Corporation Law; A corporation is invested by law with a personality separate
and distinct from those of the persons composing it, such that, save for certain exceptions, corporate
officers who entered into contracts in behalf of the corporation cannot be held personally liable for the
liabilities of the latter.We note that the trial court held respondent De Jesus solidarily liable with
respondent FEU. In Powton Conglomerate, Inc. v. Agcolicol, 400 SCRA 523 (2003), we held that: [A]
corporation is invested by law with a personality separate and distinct from those of the persons
composing it, such that, save for certain exceptions, corporate officers who entered into contracts in
behalf of the corporation cannot be held personally liable for the liabilities of the latter. Personal liability
of a corporate director, trustee or officer along (although not necessarily) with the corporation may so
validly attach, as a rule, only when(1) he assents to a patently unlawful act of the corporation, or when
he is guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest
resulting in damages to the corporation, its stockholders or other persons; (2) he consents to the issuance
of watered down stocks or who, having knowledge thereof, does not forthwith file with the corporate
secretary his written objection thereto; (3) he agrees to hold himself personally and solidarily liable with
the corporation; or (4) he is made by a specific provision of law personally answerable for his corporate
action. None of the foregoing exceptions was established in the instant case; hence, respondent De Jesus
should not be held solidarily liable with respondent FEU.
Same; Labor Law; Security Guards; Where the security agency recruits, hires and assigns the works of its
watchmen or security guards to a client, the employer of such guards or watchmen is such agency, and not
the client, since the latter has no hand in selecting the security guardsthe duty to observe the diligence
of a good father of a family cannot be demanded from the said client.We agree with the findings of the
Court of Appeals that respondents cannot be held liable for damages under Art. 2180 of the Civil Code
because respondents are not the employers of Rosete. The latter was employed by Galaxy. The
instructions issued by respondents Security Consultant to Galaxy and its security guards are ordinarily no
more than re-
745
VOL. 553, APRIL 30, 2008
745

quests commonly envisaged in the contract for services entered into by a principal and a security agency.
They cannot be construed as the element of control as to treat respondents as the employers of Rosete. As
held in Mercury Drug Corporation v. Libunao, 434 SCRA 404 (2004): In Soliman, Jr. v. Tuazon, 209
SCRA 47 (1992), we held that where the security agency recruits, hires and assigns the works of its
watchmen or security guards to a client, the employer of such guards or watchmen is such agency, and not
the client, since the latter has no hand in selecting the security guards. Thus, the duty to observe the
diligence of a good father of a family cannot be demanded from the said client.
Actions; Pleadings and Practice; Third-Party Complaints; The third-party complaint is a procedural
device whereby a third party who is neither a party nor privy to the act or deed complained of by the
plaintiff, may be brought into the case with leave of court, by the defendant, who acts as third-party
plaintiff to enforce against such third-party defendant a right for contribution, indemnity, subrogation or
any other relief, in respect of the plaintiffs claim.We now come to respondents Third Party Claim
against Galaxy. In Firestone Tire and Rubber Company of the Philippines v. Tempongko, 27 SCRA 418
(1969), we held that: The third-party complaint is, therefore, a procedural device whereby a third party
who is neither a party nor privy to the act or deed complained of by the plaintiff, may be brought into the
case with leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-
party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the
plaintiffs claim. The third-party complaint is actually independent of and separate and distinct from the
plaintiffs complaint. Were it not for this provision of the Rules of Court, it would have to be filed
independently and separately from the original complaint by the defendant against the third-party. But the
Rules permit defendant to bring in a third-party defendant or so to speak, to litigate his separate cause of
action in respect of plaintiffs claim against a third-party in the original and principal case with the object
of avoiding circuitry of action and unnecessary proliferation of law suits and of disposing expeditiously in
one litigation the entire subject matter arising from one particular set of facts.
Same; Same; Same; Security Guards; For acts of negligence and for having supplied an educational
institution with an unquali-
746
746
fied security guard, which resulted in the latters breach of obligation to its student, it is proper to hold the
security agency liable to the client for such damages equivalent to the amounts awarded to the student.
Respondents and Galaxy were able to litigate their respective claims and defenses in the course of the trial
of petitioners complaint. Evidence duly supports the findings of the trial court that Galaxy is negligent
not only in the selection of its employees but also in their supervision. Indeed, no administrative sanction
was imposed against Rosete despite the shooting incident; moreover, he was even allowed to go on leave
of absence which led eventually to his disappearance. Galaxy also failed to monitor petitioners condition
or extend the necessary assistance, other than the P5,000.00 initially given to petitioner. Galaxy and
Imperial failed to make good their pledge to reimburse petitioners medical expenses. For these acts of
negligence and for having supplied respondent FEU with an unqualified security guard, which resulted to
the latters breach of obligation to petitioner, it is proper to hold Galaxy liable to respondent FEU for such
damages equivalent to the above-mentioned amounts awarded to petitioner.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
Cacho & Chua Law Offices for petitioner.
Antonio H. Abad & Associates for respondents.
YNARES-SANTIAGO,J.:
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the June 29, 2007
Decision2 of the Court of Appeals in CA-G.R. CV No. 87050, nullifying and setting aside the November
10, 2004 Decision3 of the Regional
_______________
1 Rollo, pp. 3-33.
2 Id., at pp. 38-62; penned by Associate Justice Mariano C. Del Castillo and concurred in by Associate
Justices Arcangelita Romilla-Lontok and Romeo F. Barza.
3 Id., at pp. 67-75; penned by Judge Alejandro G. Bijasa.
747
VOL. 553, APRIL 30, 2008
747
Trial Court of Manila, Branch 2, in Civil Case No. 98-89483 and dismissing the complaint filed by
petitioner; as well as its August 23, 2007 Resolution4 denying the Motion for Reconsideration.5
The antecedent facts are as follows:
Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern University (FEU)
when he was shot by Alejandro Rosete (Rosete), one of the security guards on duty at the school premises
on August 18, 1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes Medical Foundation (FEU-NRMF)
due to the wound he sustained.6 Meanwhile, Rosete was brought to the police station where he explained
that the shooting was accidental. He was eventually released considering that no formal complaint was
filed against him.
Petitioner thereafter filed a complaint for damages against respondents on the ground that they breached
their obligation to provide students with a safe and secure environment and an atmosphere conducive to
learning. Respondents, in turn, filed a Third-Party Complaint7 against Galaxy Development and
Management Corporation (Galaxy), the agency contracted by respondent FEU to provide security
services within its premises and Mariano D. Imperial (Imperial), Galaxys President, to indemnify them
for whatever would be adjudged in favor of petitioner, if any; and to pay attorneys fees and cost of the
suit. On the other hand, Galaxy and Imperial filed a Fourth-Party Complaint against AFP General
Insurance.8
On November 10, 2004, the trial court rendered a decision in favor of petitioner, the dispositive portion of
which reads:
WHEREFORE, from the foregoing, judgment is hereby rendered ordering:
_______________
4 Id., at pp. 64-65.
5 Id., at pp. 160-177.
6 Id., at p. 188.
7 Records, Vol. I, pp. 136-139.
8 Id., at pp. 287-290.
748
748
1.FEU and Edilberto de Jesus, in his capacity as president of FEU to pay jointly and severally Joseph
Saludaga the amount of P35,298.25 for actual damages with 12% interest per annum from the filing of the
complaint until fully paid; moral damages of P300,000.00, exemplary damages of P500,000.00, attorneys
fees of P100,000.00 and cost of the suit;
2.Galaxy Management and Development Corp. and its president, Col. Mariano Imperial to indemnify
jointly and severally 3rd party plaintiffs (FEU and Edilberto de Jesus in his capacity as President of FEU)
for the above-mentioned amounts;
3.And the 4th party complaint is dismissed for lack of cause of action. No pronouncement as to costs.
SO ORDERED.9
Respondents appealed to the Court of Appeals which rendered the assailed Decision, the decretal portion
of which provides, viz.:
WHEREFORE, the appeal is hereby GRANTED. The Decision dated November 10, 2004 is hereby
REVERSED and SET ASIDE. The complaint filed by Joseph Saludaga against appellant Far Eastern
University and its President in Civil Case No. 98-89483 is DISMISSED.
SO ORDERED.10
Petitioner filed a Motion for Reconsideration which was denied; hence, the instant petition based on the
following grounds:
THE COURT OF APPEALS SERIOUSLY ERRED IN MANNER CONTRARY TO LAW AND

JURISPRUDENCE IN RULING THAT:
5.1.THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;
_______________
9 Rollo, pp. 74-75.
10 Id., at p. 61.
749
VOL. 553, APRIL 30, 2008
749
5.2.RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR THE INJURY RESULTING FROM
A GUNSHOT WOUND SUFFERED BY THE PETITIONER FROM THE HANDS OF NO LESS
THAN THEIR OWN SECURITY GUARD IN VIOLATION OF THEIR BUILT-IN CONTRACTUAL
OBLIGATION TO PETITIONER, BEING THEIR LAW STUDENT AT THAT TIME, TO PROVIDE
HIM WITH A SAFE AND SECURE EDUCATIONAL ENVIRONMENT;
5.3.SECURITY GUARD, ALEJANDRO ROSETE, WHO SHOT PETITIONER WHILE HE WAS

WALKING ON HIS WAY TO THE LAW LIBRARY OF RESPONDENT FEU IS NOT THEIR
EMPLOYEE BY VIRTUE OF THE CONTRACT FOR SECURITY SERVICES BETWEEN GALAXY
AND FEU NOTWITHSTANDING THE FACT THAT PETITIONER, NOT BEING A PARTY TO IT, IS
NOT BOUND BY THE SAME UNDER THE PRINCIPLE OF RELATIVITY OF CONTRACTS; and
5.4.RESPONDENT EXERCISED DUE DILIGENCE IN SELECTING GALAXY AS THE AGENCY
WHICH WOULD PROVIDE SECURITY SERVICES WITHIN THE PREMISES OF RESPONDENT
FEU.11
Petitioner is suing respondents for damages based on the alleged breach of student-school contract for a
safe learning environment. The pertinent portions of petitioners Complaint read:
6.0.At the time of plaintiffs confinement, the defendants or any of their representative did not bother to
visit and inquire about his condition. This abject indifference on the part of the defendants continued even
after plaintiff was discharged from the hospital when not even a word of consolation was heard from
them. Plaintiff waited for more than one (1) year for the defendants to perform their moral obligation but
the wait was fruitless. This indifference and total lack of concern of defendants served to exacerbate
plaintiffs miserable condition.
xxxx
_______________
11 Id., at pp. 13-14.
750
750
11.0.Defendants are responsible for ensuring the safety of its students while the latter are within the
University premises. And that should anything untoward happens to any of its students while they are
within the Universitys premises shall be the responsibility of the defendants. In this case, defendants,
despite being legally and morally bound, miserably failed to protect plaintiff from injury and thereafter, to
mitigate and compensate plaintiff for said injury;
12.0.When plaintiff enrolled with defendant FEU, a contract was entered into between them. Under this
contract, defendants are supposed to ensure that adequate steps are taken to provide an atmosphere
conducive to study and ensure the safety of the plaintiff while inside defendant FEUs premises. In the
instant case, the latter breached this contract when defendant allowed harm to befall upon the plaintiff
when he was shot at by, of all people, their security guard who was tasked to maintain peace inside the
campus.12
In Philippine School of Business Administration v. Court of Appeals,13 we held that:
When an academic institution accepts students for enrollment, there is established a contract between
them, resulting in bilateral obligations which both parties are bound to comply with. For its part, the
school undertakes to provide the student with an education that would presumably suffice to equip him
with the necessary tools and skills to pursue higher education or a profession. On the other hand, the
student covenants to abide by the schools 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
_______________
12 Records, Vol. I, pp. 1-6.
13 G.R. No. 84698, February 4, 1992, 205 SCRA 729.
751
VOL. 553, APRIL 30, 2008
751
adequate steps are taken to maintain peace and order within the campus premises and to prevent the
breakdown thereof.14
It is undisputed that petitioner was enrolled as a sophomore law student in respondent FEU. As such,
there was created a contractual obligation between the two parties. On petitioners part, he was obliged to
comply with the rules and regulations of the school. On the other hand, respondent FEU, as a learning
institution is mandated to impart knowledge and equip its students with the necessary skills to pursue
higher education or a profession. At the same time, it is obliged to ensure and take adequate steps to
maintain peace and order within the campus.
It is settled that in culpa contractual, the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.15 In the instant case, we find that, when
petitioner was shot inside the campus by no less the security guard who was hired to maintain peace and
secure the premises, there is a prima facie showing that respondents failed to comply with its obligation to
provide a safe and secure environment to its students.
In order to avoid liability, however, respondents aver that the shooting incident was a fortuitous event
because they could not have reasonably foreseen nor avoided the accident caused by Rosete as he was not
their employee;16 and that they complied with their obligation to ensure a safe learning environment for
their students by having exercised due diligence in selecting the security services of Galaxy.
After a thorough review of the records, we find that respondents failed to discharge the burden of proving
that they exercised due diligence in providing a safe learning environment for their students. They failed
to prove that they en-
_______________
14 Id., at pp. 733-734.
15 FGU Insurance Corporation v. G.P. Sarmiento Trucking Corporation, 435 Phil. 333, 341; 386 SCRA
312, 320 (2002).
16 Records, Vol. 1, pp. 76-86.
752
752
sured that the guards assigned in the campus met the requirements stipulated in the Security Service
Agreement. Indeed, certain documents about Galaxy were presented during trial; however, no evidence as
to the qualifications of Rosete as a security guard for the university was offered.
Respondents also failed to show that they undertook steps to ascertain and confirm that the security
guards assigned to them actually possess the qualifications required in the Security Service Agreement. It
was not proven that they examined the clearances, psychiatric test results, 201 files, and other vital
documents enumerated in its contract with Galaxy. Total reliance on the security agency about these
matters or failure to check the papers stating the qualifications of the guards is negligence on the part of
respondents. A learning institution should not be allowed to completely relinquish or abdicate security
matters in its premises to the security agency it hired. To do so would result to contracting away its
inherent obligation to ensure a safe learning environment for its students.
Consequently, respondents defense of force majeure must fail. In order for force majeure to be
considered, respondents must show that no negligence or misconduct was committed that may have
occasioned the loss. An act of God cannot be invoked to protect a person who has failed to take steps to
forestall the possible adverse consequences of such a loss. Ones negligence may have concurred with an
act of God in producing damage and injury to another; nonetheless, showing that the immediate or
proximate cause of the damage or injury was a fortuitous event would not exempt one from liability.
When the effect is found to be partly the result of a persons participationwhether by active
intervention, neglect or failure to actthe whole occurrence is humanized and removed from the rules
applicable to acts of God.17
_______________
17 Mindex Resources Development v. Morillo, 428 Phil. 934, 944; 379 SCRA 144, 153 (2002).
753
VOL. 553, APRIL 30, 2008
753
Article 1170 of the Civil Code provides that those who are negligent in the performance of their
obligations are liable for damages. Accordingly, for breach of contract due to negligence in providing a
safe learning environment, respondent FEU is liable to petitioner for damages. It is essential in the award
of damages that the claimant must have satisfactorily proven during the trial the existence of the factual
basis of the damages and its causal connection to defendants acts.18
In the instant case, it was established that petitioner spent P35,298.25 for his hospitalization and other
medical expenses.19 While the trial court correctly imposed interest on said amount, however, the case at
bar involves an obligation arising from a contract and not a loan or forbearance of money. As such, the
proper rate of legal interest is six percent (6%) per annum of the amount demanded. Such interest shall
continue to run from the filing of the complaint until the finality of this Decision.20 After this Decision
becomes final and executory, the applicable rate shall be twelve percent (12%) per annum until its
satisfaction.
The other expenses being claimed by petitioner, such as transportation expenses and those incurred in
hiring a personal assistant while recuperating were however not duly supported by receipts.21 In the
absence thereof, no actual damages may be awarded. Nonetheless, temperate damages under Art. 2224 of
the Civil Code may be recovered where it has been shown that the claimant suffered some pecuniary loss
but the amount thereof cannot be proved with certainty. Hence, the amount of P20,000.00 as temperate
damages is awarded to petitioner.
_______________
18 Roque, Jr. v. Torres, G.R. No. 157632, December 6, 2006, 510 SCRA 336, 348.
19 TSN, September 20, 1999, pp. 20-21; Records, Vol. I, pp. 316-322; Records, Vol. II, p. 597.
20 Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78, 95-
97.
21 TSN, September 27, 1999, pp. 5, 9.
754
754
As regards the award of moral damages, there is no hard and fast rule in the determination of what would
be a fair amount of moral damages since each case must be governed by its own peculiar
circumstances.22 The testimony of petitioner about his physical suffering, mental anguish, fright, serious
anxiety, and moral shock resulting from the shooting incident23 justify the award of moral damages.
However, moral damages are in the category of an award designed to compensate the claimant for actual
injury suffered and not to impose a penalty on the wrongdoer. The award is not meant to enrich the
complainant at the expense of the defendant, but to enable the injured party to obtain means, diversion, or
amusements that will serve to obviate the moral suffering he has undergone. It is aimed at the restoration,
within the limits of the possible, of the spiritual status quo ante, and should be proportionate to the
suffering inflicted. Trial courts must then guard against the award of exorbitant damages; they should
exercise balanced, restrained and measured objectivity to avoid suspicion that it was due to passion,
prejudice, or corruption on the part of the trial court.24 We deem it just and reasonable under the
circumstances to award petitioner moral damages in the amount of P100,000.00.
Likewise, attorneys fees and litigation expenses in the amount of P50,000.00 as part of damages is
reasonable in view of Article 2208 of the Civil Code.25 However, the award of
_______________
22 Roque v. Torres, supra note 18 at p. 349.
23 TSN, September 20, 1999, pp. 10, 12-13; September 27, 1999, pp. 3, 5-9.
24 ABS-CBN Broadcasting Corporation v. Court of Appeals, 361 Phil. 499, 529-530; 301 SCRA 572, 602
(1999).
25 Civil Code, Art. 2208:
In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be
recovered, except:
755
VOL. 553, APRIL 30, 2008
755

exemplary damages is deleted considering the absence of proof that respondents acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
We note that the trial court held respondent De Jesus solidarily liable with respondent FEU. In Powton
Conglomerate, Inc. v. Agcolicol,26 we held that:
[A] corporation is invested by law with a personality separate and distinct from those of the persons
composing it, such that, save for certain exceptions, corporate officers who entered into contracts in
behalf of the corporation cannot be held personally liable for the liabilities of the latter. Personal liability
of a corporate director, trustee or officer along (although not necessarily) with the corporation may so
validly attach, as a rule, only when(1) he assents to a patently unlawful act of the corporation, or when
he is guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest
resulting in damages to the corporation, its stockholders or other persons; (2) he consents to the issuance
of watered down stocks or who, having knowledge thereof, does not forthwith file with the corporate
secretary his written objection thereto; (3) he agrees to hold himself personally and solidarily liable with
the corporation; or (4) he is made by a specific provision of law personally answerable for his corporate
action.27
None of the foregoing exceptions was established in the instant case; hence, respondent De Jesus should
not be held solidarily liable with respondent FEU.
Incidentally, although the main cause of action in the instant case is the breach of the school-student
contract, petitioner, in the alternative, also holds respondents vicariously liable under Article 2180 of the
Civil Code, which provides:
_______________
(2) when the defendants act or omission has compelled the plaintiff to litigate with third persons or to
incur expenses to protect his interest;
26 448 Phil. 643; 400 SCRA 523 (2003).
27 Id., at p. 656; pp. 531-532.
756
756
Art.2180.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 or industry.
xxxx
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to prevent damage.
We agree with the findings of the Court of Appeals that respondents cannot be held liable for damages
under Art. 2180 of the Civil Code because respondents are not the employers of Rosete. The latter was
employed by Galaxy. The instructions issued by respondents Security Consultant to Galaxy and its
security guards are ordinarily no more than requests commonly envisaged in the contract for services
entered into by a principal and a security agency. They cannot be construed as the element of control as to
treat respondents as the employers of Rosete.28
As held in Mercury Drug Corporation v. Libunao:29
In Soliman, Jr. v. Tuazon,30 we held that where the security agency recruits, hires and assigns the works
of its watchmen or security guards to a client, the employer of such guards or watchmen is such agency,
and not the client, since the latter has no hand in selecting the security guards. Thus, the duty to observe
the diligence of a good father of a family cannot be demanded from the said client:
[I]t is settled in our jurisdiction that where the security agency, as here, recruits, hires and assigns the
work of its watchmen or security guards, the agency is the employer of
_______________
28 Records, Vol. I, pp. 43-55 (FEU) and pp. 56-68 (Galaxy).
29 G.R. No. 144458, July 14, 2004, 434 SCRA 404.
30 G.R. No. 66207, May 18, 1992, 209 SCRA 47.
757
VOL. 553, APRIL 30, 2008
757
such guards or watchmen. Liability for illegal or harmful acts committed by the security guards attaches
to the employer agency, and not to the clients or customers of such agency. As a general rule, a client or
customer of a security agency has no hand in selecting who among the pool of security guards or
watchmen employed by the agency shall be assigned to it; the duty to observe the diligence of a good
father of a family in the selection of the guards cannot, in the ordinary course of events, be demanded
from the client whose premises or property are protected by the security guards.
xxxx
The fact that a client company may give instructions or directions to the security guards assigned to it,
does not, by itself, render the client responsible as an employer of the security guards concerned and
liable for their wrongful acts or omissions.31
We now come to respondents Third Party Claim against Galaxy. In Firestone Tire and Rubber Company
of the Philippines v. Tempongko,32 we held that:
The third-party complaint is, therefore, a procedural device whereby a third party who is neither a party
nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of
court, by the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a
right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiffs claim. The
third-party complaint is actually independent of and separate and distinct from the plaintiffs complaint.
Were it not for this provision of the Rules of Court, it would have to be filed independently and separately
from the original complaint by the defendant against the third-party. But the Rules permit defendant to
bring in a third-party defendant or so to speak, to litigate his separate cause of action in respect of
plaintiffs claim against a third-party in the original and principal case with the object of avoiding
circuitry of action and unnecessary proliferation of law suits and of
_______________
31 Mercury Drug Corporation v. Libunao, supra at pp. 414-418.
32 137 Phil. 239; 27 SCRA 418 (1969).
758
758
disposing expeditiously in one litigation the entire subject matter arising from one particular set of
facts.33
Respondents and Galaxy were able to litigate their respective claims and defenses in the course of the trial
of petitioners complaint. Evidence duly supports the findings of the trial court that Galaxy is negligent
not only in the selection of its employees but also in their supervision. Indeed, no administrative sanction
was imposed against Rosete despite the shooting incident; moreover, he was even allowed to go on leave
of absence which led eventually to his disappearance.34 Galaxy also failed to monitor petitioners
condition or extend the necessary assistance, other than the P5,000.00 initially given to petitioner. Galaxy
and Imperial failed to make good their pledge to reimburse petitioners medical expenses.
For these acts of negligence and for having supplied respondent FEU with an unqualified security guard,
which resulted to the latters breach of obligation to petitioner, it is proper to hold Galaxy liable to
respondent FEU for such damages equivalent to the above-mentioned amounts awarded to petitioner.
Unlike respondent De Jesus, we deem Imperial to be solidarily liable with Galaxy for being grossly
negligent in directing the affairs of the security agency. It was Imperial who assured petitioner that his
medical expenses will be shouldered by Galaxy but said representations were not fulfilled because they
presumed that petitioner and his family were no longer interested in filing a formal complaint against
them.35
WHEREFORE, the petition is GRANTED. The June 29, 2007 Decision of the Court of Appeals in CA-
G.R. CV No. 87050 nullifying the Decision of the trial court and dismissing the complaint as well as the
August 23, 2007 Resolution denying the Motion for Reconsideration are REVERSED and SET
_______________
33 Id., at pp. 243-244; pp. 422-423.
34 Rollo, p. 74.
35 Records, Vol. I, p. 330.
759
VOL. 553, APRIL 30, 2008
759
ASIDE. The Decision of the Regional Trial Court of Manila, Branch 2, in Civil Case No. 98-89483
finding respondent FEU liable for damages for breach of its obligation to provide students with a safe and
secure learning atmosphere, is AFFIRMED with the following MODIFICATIONS:
a.respondent Far Eastern University (FEU) is ORDERED to pay petitioner actual damages in the
amount of P35,298.25, plus 6% interest per annum from the filing of the complaint until the finality of
this Decision. After this decision becomes final and executory, the applicable rate shall be twelve percent
(12%) per annum until its satisfaction;
b.respondent FEU is also ORDERED to pay petitioner temperate damages in the amount of
P20,000.00; moral damages in the amount of P100,000.00; and attorneys fees and litigation expenses in
the amount of P50,000.00;
c.the award of exemplary damages is DELETED.
The Complaint against respondent Edilberto C. De Jesus is DISMISSED. The counterclaims of

respondents are likewise DISMISSED.
Galaxy Development and Management Corporation (Galaxy) and its president, Mariano D. Imperial are
ORDERED to jointly and severally pay respondent FEU damages equivalent to the above-mentioned
amounts awarded to petitioner.
SO ORDERED.
Austria-Martinez, Chico-Nazario, Nachura and Reyes, JJ., concur.
Petition granted, judgment and resolution reversed and set aside.
Notes.A school principal is tasked to see to the maintenance of the school grounds and safety of the
children within the school and its premises. (Capili vs. Cardaa, 506 SCRA 569 [2006])
760
760
The term chartered institution includes the state universities and colleges and the monetary authority of
the State. (Gumaru vs. Quirino State College, 525 SCRA 412 [2007])
o0o
Copyright 2017 Central Book Supply, Inc. All rights reserved. Saludaga vs. Far Eastern University, 553
SCRA 741, G.R. No. 179337 April 30, 2008

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SUPREME COURT REPORTS ANNOTATED

FGU Insurance Corporation vs. Court of Appeals

G.R. No. 118889. March 23, 1998.*

FGU INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, FILCAR TRANSPORT,

PETITION for review of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

FGU Insurance Corporation vs. Court of Appeals

Petitioners insistence on MYC-Agro-Industrial Corporation is rooted in a misapprehension of our ruling

SUPREME COURT REPORTS ANNOTATED

Cruz vs. Court of Appeals

First the antecedent facts.

Batal vs. San Pedro

G.R. No. 164601. September 27, 2006.*

The petition must fail.

Articles 1170 and 1173 provide:

Costs against petitioners.

G.R. No. 188288.January 16, 2012.*

SUPREME COURT REPORTS ANNOTATED

Viloria vs. Continental Airlines, Inc.

VOL. 663, JANUARY 16, 2012

SUPREME COURT REPORTS ANNOTATED

Viloria vs. Continental Airlines, Inc.

VOL. 663, JANUARY 16, 2012

Viloria vs. Continental Airlines, Inc.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Quasha, Ancheta, Pea & Nolasco for petitioners.

Quisumbing, Torres for respondent.

SUPREME COURT REPORTS ANNOTATED

Viloria vs. Continental Airlines, Inc.

Defendant-appellants counterclaim is DENIED.

Costs against plaintiffs-appellees.

VOL. 663, JANUARY 16, 2012

Viloria vs. Continental Airlines, Inc.

SUPREME COURT REPORTS ANNOTATED

Viloria vs. Continental Airlines, Inc.

VOL. 663, JANUARY 16, 2012

The RTCs Ruling

7 Id., at pp. 69-76.

9 Id., at pp. 77-85.

SUPREME COURT REPORTS ANNOTATED

Viloria vs. Continental Airlines, Inc.

Agency may be oral, unless the law requires a specific form.

VOL. 663, JANUARY 16, 2012

Viloria vs. Continental Airlines, Inc.

The Appellate Courts Ruling

SUPREME COURT REPORTS ANNOTATED

Viloria vs. Continental Airlines, Inc.

13 Id., at pp. 50-51.

VOL. 663, JANUARY 16, 2012

Viloria vs. Continental Airlines, Inc.

The Petitioners Case

SUPREME COURT REPORTS ANNOTATED

Viloria vs. Continental Airlines, Inc.

The Respondents Case

VOL. 663, JANUARY 16, 2012

Viloria vs. Continental Airlines, Inc.

a.Does a principal-agent relationship exist between CAI and Holiday Travel?

Viloria vs. Continental Airlines, Inc.

This Courts Ruling

I.A principal-agent relationship

exists between CAI and Holiday

18 171 Phil. 222; 81 SCRA 251 (1978).

VOL. 663, JANUARY 16, 2012